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Caisse des Dépôts adopts its prudential model
Governance - 13 January 2012
The Caisse des Dépôts’ prudential model was adopted by its Supervisory Board on 12 January 2012, on its CEO and Chairman’s proposal of and after the approval of the French Prudential Supervisory Authority (ACP). The Supervisory Board also set the amount of Caisse des Dépôts' equity capital.
In accordance with legal and regulatory provisions1, the new model, specific to Caisse des Dépôts, reflects the specific nature of the institution, in particular its role as a long-term investor.
The prudential model adopted by Caisse des Dépôts applies to both the general section and the savings funds section, while taking into account the business model and management objectives of each. It covers all the main risks: loss of share portfolio value, liquidity risk, interest rate risk, credit risk on portfolio securities and on loans granted, real estate risk, foreign exchange risk and operational risk; in the case of the general section, it also covers subsidiary and shareholding risk.
The resulting modelling of risk and of working capital requirements is designed primarily to ensure a very high level of financial security, consistent with the tasks devolved upon Caisse des Dépôts. The model is intended to cover all Caisse des Dépôts Group entities on terms appropriate to the nature of their activities.
Caisse des Dépôts is a long-term investor and, as such, must avoid procyclical investment behaviour and be in a position to weather business and financial cycles without sudden shifts in its investment policy. The prudential model adopted by the Supervisory Board measures the solvency and soundness of Caisse des Dépôts over a horizon of several years.
Depending on the business cycle and market fluctuations, the model applying to the general section authorises variations in capital available within a solvency corridor bracketed between a target amount at the top of the cycle, a surveillance threshold and a minimum amount. The minimum solvency threshold, calculated as per the prudential model, is invariably significantly higher than the regulatory baseline.
In keeping with the degree of security required of Caisse des Dépôts, the equity capital of the general section, estimated at end 2011 and calculated as per the prudential model, amounted to 1.5 times the minimum threshold and more than double a regulatory baseline such as Basel II.
For Michel Bouvard, President of the Supervisory Board, “the prudential model we have established follows the general principles established in October 2011. It reflects the essence of Caisse des Dépôts and the unique nature of its governance, under the protection of the French Parliament. Thanks to the prudential model, Caisse des Dépôts now has clearly established margins for manoeuvre that should enable the Group to carry out its public interest missions enshrined in law, maintain its investments in growth and grasp opportunities to develop its assets with selectivity, performance and transparency over the long term”.
According to Augustin de Romanet, CEO and Chairman of Caisse des Dépôts, “on many issues, this prudential model is even stricter than banking regulation requires. It corresponds to the task devolved upon Caisse des Dépôts of investing in the economy for the long term and providing total security for the funds entrusted to its management. It will be integrated into all our management tools and into the definition of our investment strategy, right through to the drafting of letters of intent”.
1 Law n°2008-776 of 4 August 2008 and decrees of 9 March 2009 and 27 April 2010
