1. Shadow Banking Perspective from ALM Treasury Stéphane Denise Group ALM Deputy Head Tuesday 15th May 2012

2. What is Asset and Liability Management (ALM) Asset and Liability Management is, with Treasury, the ‘bank within the bank’ for liquidity risk management All liquidity demands and supplies from business lines are centralized to ALM Treasury through transfer mechanisms, including the cost of liquidity. Transfers are executed either analytically when within the same legal entity and with actual transactions when between different legal entity (branch, subsidiary…) ALM Treasury is in charge of managing the liquidity risk of the Group that results from imbalances from internal (business lines’) demands and supplies which are subject to limits. This is done through actual funding transactions: secured / unsecured, public / private… *The Clearing House: 2 November 2011

3. Agenda 3 1.A US retail bank perspective 2.A Group funding perspective 3.A few remarks on Shadow Banking

4. -4- Bank of the West Treasury is located in Walnut Creek

5. -5- Walnut Creek

6. A US retail bank *The Clearing House: 2 November 2011 AssetsLiabilities Investment Securities Small Business Loans Commercial Loans Income Property Loans Construction Loans Real Estate Loans Installment Loans Other Loans Leases Reserve Non Earning Assets 8.5 2.1 8.1 6.9 2.3 11.0 10.8 1.9 2.8 -0.5 9.4 Total63.3 Demand Deposits Checking Savings Money Market CDs Money Market Borrowings FHLB Advances Notes Equity 9.2 2.3 1.8 8.0 7.5 6.3 10.0 0.2 8.8 Total63.3 Non Costing Liabilities0.7 Wholesale CDs8.5

7. US Agencies Fannie Mae (3Q.11):mortgages = $2.9tn (http://www.fanniemae.com/ir/pdf/earnings/2011/q32011.pdf)http://www.fanniemae.com/ir/pdf/earnings/2011/q32011.pdf Freddie Mac (3Q.11):mortgages = $1.8tn (http://www.freddiemac.com/investors/er/pdf/10q_3q11.pdf)http://www.freddiemac.com/investors/er/pdf/10q_3q11.pdf Ginnie Mae (3Q.11):guaranteed securities =$1.6tn ( http://www.sifma.org/research/statistics.aspx ) http://www.sifma.org/research/statistics.aspx FHLB (3Q.11):advances + mortgages = $0.4tn (http://www.fhlb-of.com/ofweb_userWeb/resources/11Q3end.pdf)http://www.fhlb-of.com/ofweb_userWeb/resources/11Q3end.pdf This sums to$6.7tn This represents 46% of US GDP ($14.6tn) and 50% of US Mortgages ($13.5tn) that are financed by US Agencies, explicitely or implicitely guaranteed by US Government (http://www.federalreserve.gov/econresdata/releases/mortoutstand/current.htm)http://www.federalreserve.gov/econresdata/releases/mortoutstand/current.htm 7

8. Agenda 8 1.A US retail bank perspective 2.A Group funding perspective 3.A few remarks on Shadow Banking

9. Offer different investment instruments to fund the activities The need for ‘one issuer’ in a Group and the conflict with diversification requirements from investors Funding instruments diversification that could be qualified as ‘shadow banking’: Securitization Covered Bonds Repos ABCP Conduits Manage both the encumbrance and the cannibalisation issues *The Clearing House: 2 November 2011

10. Agenda 10 1.A US retail bank perspective 2.A Group wide perspective 3.A few remarks on Shadow Banking

11. Shadow Banking helps solving issues Demand for diversification Demand for “low risk” assets Should Central banks be considered shadow banks? Address global macroeconomic imbalances Pensions financing and ageing populations Mark-to-market pro-cyclicity *The Clearing House: 2 November 2011

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