ANNUAL GENERAL MEETING, 20 MAY 2014 including the global markets business. Every year, the Board of Directors sets the level of risk appetite for Societe Generale. Every fortnight, a risk committee meets which includes everyone on the Executive Committee. And every day, the top executives receive a market risk report covering the whole of the Group. Some banks are again launching substantial capital increases. Could this movement spread across Europe? French banking groups are not expected to be affected, as their Common Equity Tier 1 solvency ratios are at satisfactory levels, in most cases above 10%. Most of the banks that have been raising funds today are doing so because of their particular situations, specifically insufficient solvency ratios. This is the case for small banks in Italy, where the ECB is currently scrutinising their balance sheets. THE GROUP asking is whether the fact that there might have been a lack of internal control would justify this loss no longer, in the future, being deductible in our books. The government put this very question to the State Council in May 2011, i.e. after the affair came to light. The State Council ruled that “a lack of internal control does not seem to provide any grounds for refusing the deduction of losses which were booked normally”. The only exception would be if managers had knowingly accepted to run such risks by a complete lack of scrutiny and control over the employee’s activities. However, at no time were Societe Generale’s managers accused of wrongdoing in the case by the Banking Commission in its penalty ruling. We therefore take the view that there is no doubt about the taxdeductibility of this loss. 8 | LETTER TO SHAREHOLDERS_2014 Do the online payment systems launched by the leading web companies pose a threat to the Group? Societe Generale has to respond to new customer expectations and profit from new technologies. Last summer, we launched a new SMS money transfer solution in France and a secure e-wallet for online purchases, in partnership with BNP Paribas and the Banque Postale. We also tested a contactless payment system for mobile phones in Strasbourg and other research projects are under way elsewhere in Europe. In Africa, we are working on SMS payments, an e-wallet and cardless ATM withdrawals using a code sent by SMS. The Group, then, continues to innovate and plans to continue along this line. Who, in the Group’s management, has a detailed understanding of the risk run by global markets? With the support of the Risk Department, which is independent, the Chairman and CEO and the CFO are directly involved in oversight of the corporate and investment banking activities, CONTINUES TO INNOVATE AND PLANS TO CONTINUE ALONG THIS LINE
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