OTC Derivatives Execution and Central Clearing Forum dd November 2010

2 Background LCH.Clearnet Group Ltd:  The world’s leading independent central counterparty  Owned 83% by users and 17% by exchanges  Operates a constrained profit model  The largest and most experienced global clearer of OTC markets  Clears for major international trading platforms and exchanges

3 LCH.Clearnet: Regulation, Recognition and Oversight LCH.Clearnet Group Limited (Incorporated in UK) Holding Company Operating Entities Regulated as a Compagnie financière by the Commission bancaire (France) Regulated as a Recognised Clearing House by the UK Financial Services Authority and as a Derivatives Clearing Organization by the US Commodity Futures Trading Commission. Payment systems overseen by the Bank of England. LCH.Clearnet Limited Location - London (Incorporated in UK) LCH.Clearnet SA Location - Paris (Incorporated in France, with branches in Amsterdam, Brussels and Porto) Regulated as a Credit Institution and Clearing House by a Regulatory College consisting of the market regulators and central banks from the jurisdictions of France, Netherlands, Belgium, Portugal. LCH.Clearnet Limited is the SwapClear service provider. It is:  Regulated as a Derivatives Clearing Organization by the US Commodity Futures Trading Commission (CFTC)  Regulated as a Recognised Clearing House by the UK Financial Services Authority (FSA) LCH.Clearnet Limited is the SwapClear service provider. It is:  Regulated as a Derivatives Clearing Organization by the US Commodity Futures Trading Commission (CFTC)  Regulated as a Recognised Clearing House by the UK Financial Services Authority (FSA)

4 SwapClear: Members Current Clearing Members  Bank of America NA*  Banca IMI S.p.A.*  Banco Santander SA  Barclays Bank PLC*  BNP Paribas*  Credit Agricole*  Credit Suisse International*  Credit Suisse Securities (Europe) Limited  Citibank NA*  Commerzbank AG  Deutsche Bank AG*  Dexia Bank Belgium  Goldman Sachs Bank USA*  Goldman Sachs International*  HSBC Bank plc*  HSBC France  HSBC Bank USA, NA  Hongkong Shanghai Banking Corporation Limited  ING Bank NV  JP Morgan Chase Bank NA*  Merrill Lynch International Bank Limited*  Mizuho Capital Markets Corporation  Morgan Stanley Capital Services, Inc*  Natixis SA  Nomura International PLC  Nomura Global Financial Products Inc*  Rabobank International  Royal Bank of Canada  The Royal Bank of Scotland PLC*  Royal Bank of Scotland NV  Standard Chartered Bank  Société Générale*  UBS AG*  Unicredit Bank AG * Offers SwapClear Client Clearing 34 Clearing Members clearing for 52 Dealers (August 2010)

5 OTC IRS Cleared By SwapClear  Global leader in Interest Rate Swaps clearing  Established in September 1999  Outstanding notional of $246 trillion (end October 2010)  Largest OTC IRS product range of any Clearing House, globally  RCH regulated by the FSA in the UK  DCO regulated by the CFTC in the USA

6 SwapClear: Product Range  Clears over 40% of all OTC IRS  Offers buy-side clearing facilities  Opening hours for trade registration: 07:30- 22:00 GMT/BST (17.00 EST)  T+0 Clearing  Trade Compression for Inter-dealer trades  Trade Backloading – Legacy IRS portfolios can be cleared  All ISDA day count fractions and business day conventions  1m-12m floating reset frequencies Enhancements planned for 2011 Current State  Forward Rate Agreements  Expansion of Currency set  Additional products TBD e.g.  Swaptions, etc. Tenor, Index-style and Currencies 0-2yrs (OIS-style)CHF, EUR, GBP, USD 0-10yrs (LIBOR-style) DKK, HKD, NOK, NZD, PLN, ZAR 0-30yrs (LIBOR-style)AUD, CAD, CHF, JPY, SEK 0-50yrs (LIBOR-style)EUR, GBP, USD Product Types Plain Vanilla Swaps Constant Notional Compounding Swaps Single Currency Basis Swaps Zero Coupon Swaps Overnight Index Swaps

7 LCH.Clearnet Default Protections: Approx $3 bn in Guarantee Membership Criteria Variation Margin Initial Margin Defaulter’s own Default Fund Contribution LCH.Clearnet’s capital & reserves to £20mm Remaining Default Fund (currently £600m) SwapClear Undertaking (£50mm per SwapClear Member) Replenishment of LCH.Clearnet’s Capital Additional Protection  intra-day margin calls  margin multipliers applied based on either: o liquidity risk o concentration risk

8 Margin Methodology: Variation Margin Variation Margin Represents the current value of the portfolio Net Present Value derived intraday; based on market standard valuation techniques Currency portfolios revalued according to the LCH.Clearnet yield curve  Margin charged/paid out in the currency of obligation  Price Alignment Interest (PAI) applied/charged to Variation Margin balance  Interest paid /received on total NPV of LCH.Clearnet positions;  Rate is OIS in currency of payable / receivable Variation Margin

9 Margin Methodology: Initial Margin Initial Margin Protection Designed to cover worst case losses based on historical scenarios from the past five years  Represents the amount required to close out a full portfolio without loss  Calculated on a Portfolio basis, using a filtered historical simulation value at risk (VAR) method  Historical simulation uses rolling 1,200 days of historical data.  Historical simulation applies a relative shift to the yield curve  Correlation effects recognised across currency portfolios & maturities  Backtested against a 99.7% confidence interval Initial Margin

10 SwapClear – US & UK contacts Phillip Atkinson Senior Manager SwapClear Sales & Marketing +44 (0) Kim Short SwapClear Sales & Marketing +44 (0) London Office LCH.Clearnet Limited Aldgate House 33 Aldgate High Street London, EC3N 1EA UK Andrew McGuire Vice President SwapClear Sales & Marketing, U.S Eddie Watts Senior Country Advisor New York Office LCH.Clearnet Limited 14 Wall Street 4 th Floor, Suite 4G New York, NY USA

11 Disclaimer The contents of this document are a broad overview of the SwapClear Client Clearing Service and have been provided to you for information purposes only. Nothing in this document should be considered to be legal advice. There is no substitute for analysing the Regulations, Rules and Procedures of LCH.Clearnet as well as the other transaction documentation. Accordingly, clients may not rely upon the contents of this document and should seek their own independent legal advice. The information and any opinion contained in this document, does not constitute investment advice or a personal recommendation with respect to any applicable securities or other financial instruments. This document has not been prepared for a specific client and accordingly no reliance should be placed on it. Nothing in this document should be taken as a public offer under any applicable legislation or an offer to sell or to buy any applicable securities or financial instruments. Your notice is drawn to the Notice to End Users of SwapClear Client Clearing Services at Copyright © LCH.Clearnet Limited All rights reserved. No part of this document may be copied, whether by photographic or any other means, without the prior written consent of LCH.Clearnet Limited. SwapClear is a registered trademark of LCH.Clearnet Limited