European Covered bonds : the French Flair…

1. European Covered bonds : the French Flair… Stockholm Thursday, March 29, 2007

2. History • 1767 : Introduction in Prussia (Landschaften) • 1900 : Codification of the modern Pfandbriefe market (“Hypotehkenbankgesetz”) • 1988 : European UCITS Directive: Definition of “Covered Bonds” • The issuer must be a credit institution • The issuance of covered bonds has to be governed by a special legal framework • The issuance of covered bond must be subject to special prudential public supervision • The set of eligible cover assets must be defined by law • The cover assets pool must provide sufficient collateral to cover bondholder claims throughout the whole term of covered bond • Bondholders must have priority claim on the cover assets pool in case of default of the issuer • 1999 : Enforcement of the French Law • For over 200 years, no defaults have been documented

3. bn 1998 bn 1998 1995 1997 1995 1999 1997 1993 Globalisation of the covered bond market Legislation in countries of the EU/EEA/CH European credit institutions liquidity gap 1999

4. Legislation in countries of the EU/EEA/CH 19 Legislation in future EU member and further countries in 2000 2006 2004 4 1998 Concrete legislation in preparation 4 2003 2002 1998 1995 Legislation under consideration 2 2004 1997 1995 1999 2005 1997 2004 2005 2003 2006 1993 bn 2007 2006 A strong predominance of specific domestic legislations 23 bn 29 2007 2004 Structured covered bonds 2007

5. The French flair…. • As of today, three existing « Société de Crédit Foncier »: • And 2 structured Bonds models Mixed assets: Public/Mortgage Outstanding €64bn 2006 issuance €17.2bn 2007 plan €20/25bn Public sector/Local authorities assets Outstanding €48bn 2006 issuance €12.1bn 2007 plan €16 bn Mortgage assets via RMBS senior tranches Outstanding €14bn 2006 issuance €2.5bn 2007 plan €3 bn Assets: Mortgage Outstanding €26bn 2006 issuance €7.2bn Structured covered bonds Obligations foncières Assets: Mortgage Outstanding €4.5bn 2006 issuance €2.5bn 2007 plan €5/6 bn

6. The French model has proven its robustness • Performance against the others covered bonds assets classes • The OFs are the most expensive notes among European bonds • Strong stability in credit crisis or market volatility contexts • German banking crisis • Flight to quality paper in case of credit crisis (GM) • US and UK structured bonds suffered from US sub-prime market turmoil

7. The French Legal Framework: the best survivor • Exclusive purpose of SCF • Geographical zone of the eligible assets: EEA countries, Specialisation • Permanent mandatory over-collateralization • Bankruptcy remoteness from the parent company and a legal Privilège Protection 1999 No ALM Position • Satisfactory level of congruence of rate • Satisfactory level of congruence of maturities Strong Controls • Contrôleur spécifique (special external auditor) + Commission Bancaire Legal Auditors • Rating Agencies

8. the French Legal Framework: a Darwinian model Enlargement of eligible assets (both public sector loans and mortgage / guaranteed housing loans to USA, Canada, Japan and Switzerland Globalization 2001 The transfer of receivables (including future receivables) on public debtors to an SCF is enforceable against third parties "notwithstanding the opening of insolvency proceedings against the originator". Structured Public Finance 2003 • The law will change soon with the implementation of the "equity capital" directive (revised EC directive 2000/12), as the implementation text further extends • the definition of eligible public receivables to all types of "exposures to or guaranteed by" public entities. • and the share of guaranteed housing loans raise from 20 to 35% of SCF 2006 Diversifcation of issuers and assets

9. A covered bond along UCITS directive definition

10. Annex

11. European Covered Bonds Mix (1/3)

12. European Covered Bonds Mix (2/3)

13. European Covered Bonds Mix (3/3)

14. Disclaimer This document has been prepared by Société Générale for information purposes only. Société Générale does not guarantee the accuracy or completeness of information which is contained in this document and which is stated to have been obtained from or is based upon statistical services or other third party sources.