CPs / CDs Markets and STEP Brussels – 4 October 2007 Belgian National Bank Franck HEBEISEN STEP Market Committee

Liquidity crisis, reminder

August vicious cycle Money Market Funds valuation, diminishes Investors want their cash back and sell parts Market assets value plunge Money Market Funds sell assets

Banks focus on liquidity, spread Euribor / EONIA Swap OIS takes off… Source : Bloomberg

Spread evolution against EONIA OIS SWAP 15 FEB 07 / 21SEP07

Spread evolution against Euribor 15 FEB 07 / 21SEP07

Markets sizes evolution, December 06, September 07

CPs CDs : US and Europe outstanding issues, in Bn equiv. 31Dec 06 21Sep 07 Source : Fed / DealogicCPWare datas / Banque de France

CPs CDs : Europe outstanding issues, in Bn equiv.

CPs CDs: domestic markets prominent on 10

Issuers typology

Credit Split

Did we learn something?

Changes Liquidity no longer goes without saying ECB collateral eligibility is in the mood Real time market information gains value Transparency on market (outstanding, free and easy access to information, …) is a bigger concern, for issuers and for investor

What STEP can bring? Transparency : –Exhaustive and independent source on ECP / ECD, biggest short term paper in Europe, missing on non STEP programmes at present –Objective information delivered to market participants, same level of treatment no matter on which market the papers is issued and how it is placed in the market (dealer or direct)

What STEP can bring? Transparency : –Commitment from issuer to follow rules which are disclosed in the market convention and same for all issuers, no matter on which market, –Standardization sets a same playing level field amongst market participants

What STEP can bring? Liquidity: –Access for numerous of ECP / ECD programmes to ECB eligibility Efficiency: –Standardization of information, allows credit analysts to focus more on the credit than on the documentation format –Standardization lowers access costs

What STEP does not pretend to bring Quality of credit : –STEP is a label of standardization and transparency, there no criteria on credit quality, which is left to market participant appreciation. ECB eligibility in all cases : –Programmes have to fulfill other criteria (new global note for ECP ECD programmes), type of issuers (no banks … for the moment), credit quality A under the meaning of ECB rules, country of the issuer …

STEP info memo : legally weaker than non labeled programme? No : no special legal features on STEP info memo –Legal external counsel : as for any Info Memo, the issuer is free to use internal or external law firm assistance for the setting up of its programme and to mention it or not in the info memo. There is no market standard obligation on this matter. –Standard Info Memo disclaimer clause for dealers used on short term papers market (see next page) is not linked to STEP label.

Extract of standard disclaimer clause on short term papers (ECP – ECD, French CP – CD, …) programmes Neither the Arranger nor any Dealer has independently verified the information contained in the Information Memorandum. Accordingly, no representation or warranty or undertaking (express or implied) is made, and no responsibility or liability is accepted by the Arranger or the Dealers as to the authenticity, origin, validity, accuracy or completeness of, or any errors in or omissions from, any information or statement contained in theInformation Memorandum or in or from any accompanying or subsequent material or presentation. The information contained in the Information Memorandum is not and should not be construed as a recommendation by the Arranger, the Dealers, the Issuer[ or the Guarantor] that any recipient should purchase Notes. Each such recipient must make and shall be deemed to have made its own independent assessment and investigation of the financial condition, affairs and creditworthiness of the Issuer[ and the Guarantor] and of the Programme as it may deem necessary and must base any investment decision upon such independent assessment and investigation and not on the Information Memorandum. Neither the Arranger nor any Dealer undertakes to review the business or financial condition or affairs of the Issuer[ or the Guarantor] during the life of the Programme, nor undertakes to advise any recipient of the Information Memorandum of any information or change in such information coming to the Arranger's or any Dealer's attention.

Future of STEP? Investors and issuers interest for transparency and independency Will depend on valuation by issuers and investors of ECB eligibility Will depend on quality of marketing of the label by market participants Will depend on continuing support of sponsors (linked to previous issues)