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Euroclear Bank SA/NV
Investor Presentation
June 2018
2
Disclaimer
NOT FOR DISTRIBUTION TO OR USE BY ANY U.S. PERSON OR ANY PERSON IN THE U.S., ITS TERRITORIES OR POSSESSIONS
THIS DISCLAIMER MUST BE READ BEFORE CONTINUING
This presentation is not a prospectus or offering memorandum and investors should not subscribe for or purchase any securities referred to in this presentation except on the basis of information in the
prospectus. The information, statements and opinions expressed in this presentation (the “Content”) do not constitute and shall not be deemed to constitute: (i) any offer, invitation or inducement to sell a
security or engage in investment, financial or other similar activity; or (ii) a solicitation of an offer to buy any security; or (iii) any recommendation or advice in relation to any investment, financial or other
decision. Persons considering making any investment or financial decision should contact their qualified financial adviser.
The Content contains financial information regarding the businesses and assets of the Euroclear plc and its subsidiaries (the “Group’’) and Euroclear Bank SA/NV (the “Issuer”). Such financial information may
not have been audited, reviewed or verified by any independent accounting firm. The Content includes certain financial metrics which constitute alternative performance measures (“APMs”), which are not
defined or specified in the applicable financial reporting framework, the generally accepted accounting principles of Belgium (“Belgian GAAP”). The APMs, as defined by the Issuer, may not be comparable to
similarly titled financial measures as presented by other companies. Further, these APMs should not be considered as alternatives to profit after tax, operating profit or other performance measures derived in
accordance with Belgian GAAP or as an alternative to cash flow from operating activities as a measure of the Group or the Issuer’s activity.
The Content may include forward looking statements, in particular, in relation to future events, growth, future financial performance, plans, strategies, expectations, aims, prospects, competitive environment,
regulation and supply and demand. Words such as “anticipates”, “believes”, “estimates”, “expects”, “intends”, “plans”, “projects”, “may” and similar expressions are used to identify these forward-looking
statements. Such forward looking statements contain inherent risks and uncertainties and actual outcomes may differ materially from those expressed or implied in the forward looking statements. To the
maximum extent permitted by law, no warranty or representation (express or implied) including, but not limited to, accuracy or completeness is made in relation to the Content, including, but not limited to, any
projections or statements about the prospects of the Group or the Issuer. Any forward-looking statement contained in this presentation speaks only as of the date of this presentation. The Issuer makes no
commitment to update Content and expressly disclaims, to the extent lawful, liability for any errors or omissions in it. This presentation is confidential and is being submitted to selected recipients only and may
not be reproduced (in whole or in part), distributed or transmitted to any other person without the prior written consent of the Issuer. The Content is not directed at, or intended for distribution to, or use by any
person or entity where such distribution or use is restricted by law or regulation. Persons into whose possession the Content comes should inform themselves about and observe any such restrictions. In
particular this presentation is not intended for distribution in the United States or to U.S. persons (as defined in Regulation S) under the United States Securities Act of 1933, as amended. In the United Kingdom
this presentation is being made only to and is directed only at persons who have professional experience in matters relating to investments who fall within Article 19(1) of the Financial Services and Markets Act
2000 (Financial Promotion) Order 2005 (the “Order”) and other persons to whom it may otherwise lawfully be communicated in accordance with the Order. In Belgium, this presentation is being made only to
and is directed only at qualified investors within the meaning of Article 10 of the Belgian Law of 16 June 2006 on the public offering and the admission to trading on a regulated market of investments
instruments. Past performance, historic financial information and/or historic distributions should not be taken as an indication of current or future performance, results or distributions
3
Executive Summary
Credit rating
• Issuer ratings: AA/AA+ (S&P/Fitch)
• Expected Senior Preferred (Unsecured) Notes ratings: AA/AA+
(S&P/Fitch)
Business overview
• Established in 1968, the Group is a leading central securities
depository providing post-trade services
• Euroclear Bank, an indirect subsidiary of Euroclear plc, is directly
controlled by Euroclear SA/NV and represents around 68% of
Euroclear’s operating income
• It is the credit institution of the Group and performs the
International Central Securities Depositary (ICSD) role
• Euroclear Bank provides settlement and related securities
services for cross-border transactions involving domestic and
international bonds, equities, derivatives and investment funds
• The Issuer offers securities settlement, funds order processing,
asset servicing (including full custody and tax services) and asset
optimisation through securities lending and borrowing, money
transfer and integrated collateral management services
Terms of the offering
• Offering size: €[1bn] dual tranche issued by Euroclear Bank
(“Issuer”)
- A €[500]mm, Euro denominated, 2-year floating rate
Senior Preferred (Unsecured) Notes
- A €[500]mm, Euro denominated, 5-year fixed rate
Senior Preferred (Unsecured) Notes
Transaction rationale
• The Central Securities Depositories Regulation (CSDR) requires
Euroclear Bank, as CSD-banking service provider, to mitigate
liquidity risks by using “Qualifying Liquidity Sources” (QLS) to
support its day-to-day business as well as to handle stress
scenarios
• In this context, Euroclear Bank will use the net proceeds of the
proposed new issue primarily to improve its liquidity position by
increasing its QLS. The net proceeds of the Notes may also be
used as an alternative, and in some cases, a substitute, to the
existing liquidity sources which are available to Euroclear Bank
• With a EMTN programme size of €5bn, Euroclear Bank plans to
issue up to €2.5bn of debt in total in 2018 including both public
and private placements
• The proceeds of the issuance will be re-invested in very safe
assets in line with financial risk policies of the bank to minimise
credit and market risks
Content
4
The Group and Euroclear Bank
Euroclear Bank strategy
Euroclear Bank financial performance
Liquidity and capital management
Transaction overview
Overview of Euroclear Group
(*) Central Securities Depository, (**) International Central Securities Depository
6 CSDs*
serving 7 markets
Euroclear Belgium
Euroclear Finland
Euroclear France
Euroclear Netherlands
Euroclear Sweden
Euroclear UK & Ireland
+
1 ICSD**
Euroclear Bank
Gateway to the world
5
• Trusted provider and leader in post-trade services to the
global financial markets
• Founded 50 years ago
• Mission to assist our diversified client base to:
- Ensure securities transactions are processed safely and
efficiently
- Reduce complexity, lower costs and mitigate risks
• Open and resilient financial market infrastructure operating
under strong regulatory oversight
• Double-A rating: AA/AA+ (S&P/Fitch) for Euroclear Bank and
AA-/AA (S&P/Fitch) for Euroclear Investments SA, the interim
group holding company of the Group
Focus on Euroclear Bank
Operating income:
Euroclear Bank representing the bulk of the Group
operating income
Euroclear Bank is the only credit institution in the Group and acts as an ICSD which provides multi-currency settlement in
commercial bank money and related securities services for transactions involving domestic and international bonds, equities and
investment funds and other financial instruments
Euroclear Bank
Other
Euroclear operating
entities
68%
32%
6
• Euroclear Bank serves a wide range of international clients,
which are mostly banks, custodians, broker-dealers and central
banks
• Euroclear Bank offers to those major financial institutions a single
access point to international and domestic securities. It
provides the following services and sub-services:
- securities settlement (equities and debt)
- funds order processing
- asset servicing, including full custody and tax services
- asset optimisation through securities lending and
borrowing, money transfer and integrated collateral
management services
• Euroclear Bank services over 1.5 million securities on its platform,
covering almost all markets in the Eurozone and other key
markets around the world
Euroclear Investments SAS&P: AA-/A-1+
Fitch: AA/F1+
7
Euroclear Bank in the Group
(*) DTTC Euroclear Global
Collateral Limited
Euroclear plc
Shareholders125 shareholders 84.11%
Sicovam Holding 15.89%
Euroclear
Bank SA/NVS&P: AA/A-1+
Fitch: AA+/F1+
CSDs
Directly supervised activity by
National Bank of Belgium and
other local regulators
Euroclear SA/NV
100% - LUX
CH
100%
(FR, BE, NL, UK, F, S)
100% (- 1 share)
(BE)
Con
so
lida
ted o
ve
rsig
ht b
y th
e N
atio
nal B
an
k o
fB
elg
ium
Other entities• Euroclear Properties
France SA
• Euroclear Re
• Calar Belgium
DEGCL*
50%
UK
Bond
investors
Issuing entity
Other entities• EMX Company Limited
• EISL
• EMSL
• Taskize
• Quantessence
Euroclear Bank
SA/NV Representative
offices: Beijing, Dubai,
Frankfurt, Singapore, NY
Euroclear
Bank SA/NV
Poland Branch
Euroclear
Bank SA/NV
Japan Branch
Euroclear
Bank SA/NV
HK Branch
100% (- 1 share) - BE
Not directly regulated
by National Bank of Belgium
8
Euroclear Bank,
an industry-leading provider of financial market infrastructure
• Post-trade industry leader with €12.8 trillion
assets under custody (end 2017)
• We offer a global service:
- To clients in over 120 countries
- In 16 languages
- Across 50 major markets
- In 50 settlement currencies
• Our international client franchise includes:
- Over 2,000 clients
- Over 100 central banks
- 90% of the world’s 50 largest banks
• Robust regulatory framework as a financial market
infrastructure, with high levels of capitalization and
strong credit ratings
Euroclear Bank Key figures (end 2017)
Source: Euroclear Bank 2017 financial Statements
€498 trillion
€12.8 trillion
95 million
13%
9
Euroclear Bank performance highlights
2
4
5
3
1 Leading operator in global post-trade sector, ideally positioned
to benefit from changing operating and regulatoryenvironment
2017 financial performance above expectations, underpinned
by strong business metrics driving positive revenuegrowth
Increased investment levels in regulatory-driven cyber security
and growth initiatives, with cost base expected to stabilise in 2018
Resilient, stable and well-diversified business
Disciplined risk management framework with resilient riskprofile,
solid capitalisation and liquidity position
Euroclear Bank’s leadership team
Referenced from Fitch report on Euroclear Bank (September 2017)
“Risk controls are very strong and investments in risk management, including cyber resilience, are a management priority.
Management teams have a high degree of depth and relevant expertise for the bank specialized business. Euroclear Bank has a
strong corporate culture with high risk awareness”
Frederic Hannequart
Chairman
Valerie Urbain
Chief Executive Officer
Didier Boonen
Chief Financial Officer
Pierre Slechten
Chief Operating Officer
Paul Hurd
Head of Banking
Peter Sneyers
Chief Risk Officer
10
Content
11
The Group and Euroclear Bank
Euroclear Bank strategy
Euroclear Bank financial performance
Liquidity and capital management
Transaction overview
Our vision:
remain a leading partner to participants in global capital markets
Consistent strategy, building on client focus and our business expertise
Continue to strengthen our well-established European Core
One-stop shop providing safe and efficient post-trade sector services
• Settlement, Safekeeping, Assetservicing
Expand growth initiatives
Enhancing liquidity in cash, collateral and financing markets
• Collateral management solutions
• Funds servicing
• Global Reach: International markets
Support & benefit from Euroclear group innovation initiatives
Innovation to bring new efficiency and trading opportunities to capital markets
• FinTech partnerships to support core business
• Data services and solutions
12
Main activities
Establishing a gateway to pan-European securities in central bank money
- Asset Servicing, Funds and Collateral Management services
- Rely on group Single CSD service offering, providing access to T2S for international investors
Continued investment in our European presence to maintain safe and efficient capital markets
- Investing to implement CSD Regulations
- Enhancing Cyber security resilience
- Ensure continuity of services post Brexit
Euroclear
BankESES
Our activity:
well-established, resilient European core
Settlement, Safekeeping, Asset servicing
Issuance & settlement
- Fast, efficient, low risk processing of securities
- Direct access to the broadest range of investors across
multiple jurisdictions
- Leader in automation and delivery-versus-payment
settlement which ensures that cash and securities are
exchanged simultaneously
- Remunerated via a fee per instruction
Asset servicing
- Covers all steps in the life cycle of a security
- From distribution of a new issue to timely and accurate
custody-related services
- Automates complex corporate actions while improving
efficiency and reducing risks
- Remunerated via yearly fee based on asset value
13
Our business model:
providing credit to market participants to facilitate settlement
14
Amount of credit granted is
dependent on EB’s credit
assessment of client and
quality of collateral posted
Amount of credit granted in a
particular currency is dependent
on EB’s ability to generate
liquidity in that currency through
committed facilities
• Euroclear Bank provides credit to participants to facilitate cross currency and cross border settlement supported by a single pool of client
pledged collateral
Expand growth initiatives (1/2)
15
Collateral management solutions
We support clients in meeting evolving regulatory demands. From East to West, we connect Global CollateralPools,
providing a diversified range of innovative Collateral Management Solutions
• OTC derivatives: continue to support clients as they transition to new regulatoryregime
• DTCC-Euroclear Global Collateral Ltd: launched Inventory Management Service; moving to client onboarding stage
• Collateral outstanding +6% to €0.6 trillion, benefiting from innovative and diversified productoffering
Fund servicing
Euroclear Bank routed over 2.5 million funds orders through the platforms in 2017
• Single access point to cross-border, offshore and domesticfunds
• Expanding network of funds markets with links to over 900 fund administrators
• Automated trade and post-trade processing solutions for order routing, settlement and assetservicing
International ETF structure growth benefits from rise of passivemanagement
• Integral part of the industry: approximately 40% of European ETF industry is now international
• Innovation continues: ETF asset class increasingly used for collateral managementpurposes
Source: Euroclear Bank 2015-2017 financial statements
Expand growth initiatives (2/2)
16
Global Reach: International markets
Euroclear connects domestic markets to global investors through ‘Euroclearability’:
• Assisting governments in developing capital market practices to meet
global investor requirements
• Strong traction in Latin America: Chile and Peru became ‘Euroclearable’
Argentina issued further ‘Euroclearable’ sovereign bonds after returning to
capital markets in 2016
• Continue to work with growth economies, including China, to connect to Euroclear
and increase breadth of domestic securities available through our CSDlinks
Support & benefit from the Group’s innovation initiatives
Data & Information Solutions
Data and insights: new revenue growth opportunities to complement our core value proposition
• Euroclear Information Solutions aims to provide clients with insights to manage liquidity in a smart way
• Differentiated client offering by combining data offering with existing Euroclear solutions
Regulatory reforms are changing the landscape
in trading and post-trading activities in Europe
• Having adapted its links to all CSD's using the T2S platform, Euroclear Bank is making headway in its ambition to become the gateway to
European markets connected to T2S. In tandem with ESES (Euroclear Settlement of Euronext-zone Securities), Euroclear bank partnered
closely with a pilot client to develop this solution which went live towards end of 2017, and has already seen several large market participant
subscribe to our solution in 2017 and early 2018
• Euroclear Bank is well advanced with CSDR implementation. The company continues dialogue with regulator to complete authorisation
process
• Well positioned to take advantage of business opportunities resulting from EU regulations that reinforce the role of financial market infrastructures
• Definitions of CSD
activities of commercial
bank money settlement
• Capital & liquidity
• Dematerialisation
• T+2 settlement
• Settlement Discipline
• Allowing EU CSDs to
compete on a consistent
regulatory playing field
• CSD passport
• Freedom of choice
for issuers
• Single Settlement System for “euro” Central Bank Money DVP settlement
• Settlement and Corporate Actions
• Market practices
• CSDs incentivised tomove ‘up the value chain’
• Recovery & Resolution regimes for banks/FMIs
• MREL and bail-in
• Basel III, CRDIV/CRR(LCR, Leverage, NSFR)
• Capital Markets Union (integration of Europe’s capital markets)
• MiFIR/EMIR access between trading venues, CCPs and CSDs
• Securities Financing Transaction Regulation (Transparency)
Other
regulations
EU CSD
Regulation
Target 2
Securities
Financial stability
Safety
Cross-border efficiency
Harmonisation
EU Single Market
Competition
Consolidation
17
Content
18
The Group and Euroclear Bank
Euroclear Bank strategy
Euroclear Bank financial performance
Liquidity and capital management
Transaction overview
Revenue growth underpinned
by strong operational performance
Source: Euroclear Bank 2015-2017 Financial statements
Securities held in custody€ trillion equivalent, year-end
Average daily collateral outstanding€ trillion equivalent
+1%
Value and volume of securities
transactions settled€ trillion equivalent, year-end
+6%
+10%
19
• Securities held in custody rose by 1% to €12.8 trillion between 2016 and 2017
• Significant increase in value (10%) and volume (13%) of securities transactions netted in 2017 compared to 2016
• Average daily collateral in 2017 reached €0.6 trillion (6% increase) compared to 2016
+13%
20
Financial performance in 2017 ahead of expectations
Source: Euroclear Bank 2015-2017 Financial statements
(1) Net interest income means interest and similar income less Interest and similar charges
(2) Net commissions income means commissions received less commissions paid
(3) Operating income means the sum of net interest and similar income, income from variable-income securities, net commissions income and profit from financial operations
(4) Provisions and depreciation means the sum of captions VIII., IX., X., XI. and XII. on page 15 of Euroclear Bank financial statements 2017
(5) Other operating profit/loss means the caption XIV less XV on page 15 of Euroclear Bank financial statement 2017
• Better than expected 2017 financial performance, with strong revenue figures
• Net interest income increased by 29% compared to last year to € 194 million mainly as a result of higher USD interest rate margins
• General administrative expenses grew to €506 million, an 11% increase reflecting material Cyber security and regulatory investments
• Profit for the year before taxes was €339 million, 165% higher compared to last year
• Excluding the one-off compensation payment to Euroclear plc in 2016 and the gain realised on the sale of Calar Belgium equity stake in 2017 together
with the recognition, use and write-back of provisions for the early retirement plan in 2016 and 2017, the profit before taxes reached 17% higher
compared to previous year
(1)
(2)
(3)
(4)
(5)
€ million 2016 FY 2017 FY Y-o-Y
Net interest income 151 194 29%
Income from variable-income securities 1 1 10%
Net commissions income 597 618 5%
Profit from financial operations 9 9 -7%
Operating income 751 822 9%
General administrative expenses -457 -506 11%
Provisions and depreciation -12 1 -110%
Other operating profit/loss(-) -33 -11 -67%
Current profit before taxes 249 306 23%
Exceptional income 0 33 n.a.
Exceptional charges -121 0 -100%
Profit for the year before taxes 128 339 165%
Taxes on profit -43 -97 127%
Profit of the year 85 242 184%
Adjusted operating profit before tax 258 301 17%
Adjusted profit of the year 174 204 17%
21
Increasing operating margin thanks to strong operating income
• Operating Income increased in 2017 by 9% compared to 2016
• Adjusted Operating Margin in 2017 reached about 37% or 2% above last year
• Adjusted Operating Profit before Tax increased by 17% in comparison to 2016, reflecting higher net interest and commission income which more
than offsets the increase of general administrative expenses reported end 2017
Adjusted operating profit before tax€ million
Operating income
and adjusted operating margin€ million
938
890 34.6%
33.0%
2013 2014
Business Income
359.2326.1
2013 2014
232258
301
0
50
100
150
200
250
300
350
2015 2016 2017
Adjusted Operating profit before tax
2015 2016 2017
Source: Euroclear Bank 2015-2017 financial statements
Resilient underlying RoE and RoA
22
Adjusted return on equity (RoE)
%
• Adjusted RoE and RoA higher than last year, demonstrating resilience with regards to capital requirements as a Financial Market Infrastructure
supported by strong Issuer credit ratings
Adjusted return on asset (RoA)basis points
11.4% 11.7%12.5%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
2015 2016 2017
Chart Title
Source: Euroclear Bank 2015-2017 financial statements
55
79
95
0
10
20
30
40
50
60
70
80
90
100
2015 2016 2017
Chart Title
Euroclear Bank Balance Sheet
23
• Balance sheet remains very liquid with short maturities
• End 2017, assets are mainly driven by clients’ deposits which are contained at reasonable levels in view of Euroclear Bank’s capital base
Source: Euroclear Bank 2015-2017 financial statements
€ million 2015 2016 2017
Government securities eligible for refinancing at the central bank 1,343 1,430 3,043
Amounts receivable from credit institutions 13,485 13,983 11,661
Amounts receivable from customers 3,969 3,350 2,536
Bond and other fixed-income securities 810 1,169 2,007
Financial fixed assets 31 31 8
Tangible fixed assets 3 3 5
Other assets 16 18 25
Deferred charges and accrued income 100 143 128
Total assets 19,756 20,128 19,413
Amounts payable to credit institutions 12,958 13,897 13,788
Amounts payable to customers 5,105 4,416 3,623
Other amounts payable 160 163 270
Accrued charges and deferred income 82 105 112
Provisions and deffered fiscal charges 6 15 13
Shareholder's equity 1,447 1,532 1,606
Total liabilities 19,756 20,128 19,413
Content
24
The Group and Euroclear Bank
Euroclear Bank strategy
Euroclear Bank financial performance
Liquidity and capital management
Transaction overview
25
Rationale for strong issuer credit rating:
1. Projected cash flow ratios remain consistent with minimal financial risk profile
assessment
2. Euroclear Bank will maintain its:
• Low risk profile
• Satisfactory underlying profitability
• Strong capitalisation
• Leading position in its business
3. Strong capacity to service the debt issue
Rating agencyEuroclear Bank
(“The Issuer”) ratingsNew senior preferred/non preferred
issue ratings (expected)Euroclear Investments
ratings
S&P AA / A-1+ AA/AA- AA- / A-1+
Fitch AA+ / F1+ AA+/AA AA / F1+
Referenced from Fitch report on Euroclear Bank (October 2016)
“The bank franchise is sufficiently strong and diversified to generatesound
profitability while maintaining their current low riskprofile”
Referenced from S&P report on Euroclear Bank (November 2017)
“Strong risk-management controls and track record of very low losses arising
from operational and credit risks.”
Referenced from S&P report on Euroclear Bank (November 2017)
“Exceptional current liquidity position, aided by good cash flow generation and
on-balance-sheet liquid assets”
Strong credit ratings for both issuer and instrument
Euroclear Bank is committed to keep its strong AA ratings
One of the best rated issuer within the Financial Institutions space:
• EB benefits from ratings above the best rated European banks
Long Term issuer ratings Euroclear Bank BNP Paribas BPCE KBC Nordea ABN Amro
Moody’s / S&P / Fitch NR / AA / AA+ Aa3 / A / A+ A2 / A / A A1 / A / A Aa3 / AA- / AA- A1 / A / A+
Source: Moody’s, S&P and Fitch websites
Referenced from Fitch report on Euroclear Bank (January 2017)
“Strong management, very low risk appetite combined with stringent risk
controls, careful liquidity management and sound capitalisation”
Main risk identified in Euroclear Banks’ activities
Operational risk
Risk of loss resulting from inadequate or failed internal processes, people
and systems, or from external events. Includes custody risk, model risk,
fraud and cyber, business disruption, system failures as well as project risk
and accounting risk
Euroclear operates a robust group-wide operational risk management
framework that focuses on the identification, assessment, management,
monitoring and reporting of operational risks and issues
Banking risks
Credit risk
Risks arising from the default or failure of a participant or counterparty to
meet their agreed upon financial obligations to Euroclear
Liquidity risk
Risks arising from being unable to settle an obligation for full value when
due resulting from inappropriate and/or insufficient liquidity sources. This
could have an adverse effect on the Issuer’s results, financial conditions and
prospects
Market risk
Risks to Euroclear (on or off balance-sheet) positions arising from
movements in market prices. Market risk arises from possible changes in
foreign exchange rates, interest rates, equity or commodity prices
Credit risk is borne by Euroclear Bank as a single-purpose settlement bank,
which has operating exposures to participants and counterparties. Credit
risks are closely monitored both intra and inter day.
Liquidity is key to Euroclear Bank’s business model. We operate a robust
framework for managing intra and inter day operations with a high level of
preparedness for unexpected and/or significant liquidity shocks.
In addition, the primary purpose of the Issuer’s EMTN programme is to fund
the Issuer’s portfolio of assets that can generate same day liquidity
Euroclear Bank has a low level of market risk derived primarily from interest
rate and foreign exchange exposures resulting from investment of its capital
and future earnings. No trading activity takes place.
A hedging strategy is in place to mitigate this risk
Legal and compliance risk
Risks arising from applicable or new laws, changing regulatory environment
(for example with CSDR or BRRD which imposes MREL requirements upon
credit institutions), market rules and prescribed practices in all relevant
jurisdictions, enforceability of contracts, conflicts of laws between
jurisdictions
Our ethical and compliance framework aims to identify, monitor and manage
legal and compliance risks. The risk areas monitored include, inter alia,
fraud, market abuse and money laundering, and the risks arising from
upcoming regulations
Key risks* Mitigating actions
26
(*) See risk factors in the Issuer’s EMTN programme for more details
Group operational risks are managed tightly
• Low operational risk profile of Euroclear
Bank is demonstrated by its loss history, with
very few loss cases observed over the past 10
years
• Firm commitment, dedicated resources and
adequate insurance policies to ensure business
continuity and operational risk management
• Scenario analysis is used to assess
operational risks at very high confidence
levels, combining internal loss history and
external loss data
• Implementation of Lean management
philosophy in 2008-2009 (together with other
measures) reduced operational risks
Risk Weighted Assets:
operational risk & loss history
Source: Euroclear plc consolidated figures as of year-end 2017,
Pillar 3 disclosure 2015-2016 27
0
500
1,000
1,500
2,000
2,500
3,000
3,500
0.00%
0.50%
1.00%
1.50%
2.00%
2.50%
2015 2016 2017
RWA - operational risks (€ million)
Operational losses / operating profit before taxation (%)
• 3 data centres provide business continuity (2 synchronous data centres in France, 1 asynchronous data centre in Belgium enabling
same-day resumption of business critical services)
• 4 operational centres further support business continuity (2 operational centres in Belgium, 1 in Poland, 1 in Hong Kong)
Conservative approach to credit risk
Risk Weighted Assets: credit risk
€ billion
Clients credit exposures• Almost all credits to clients are extended on an intraday and
secured basis
• A large majority of secured credit is granted to investment grade
clients and is backed by investment grade collateral
• Unsecured credit only granted to exempt entities, in accordance
with regulation
Treasury credit exposures• Treasury exposures arise principally from cash balances left on
account by Euroclear Bank’s clients (c. €17.4 billion end 2017)
• The largest part of treasury exposure is engaged on an overnight
basis
• A significant degree of treasury activity conducted on a secured
basis
• The most part of treasury counterparts (secured & unsecured) is
investment grade and predominantly A- rated or better
As a result of our conservative risk profile and credit exposures, which are principally intraday and secured,
Risk Weighted Assets (RWA) only represent a very low fraction of total Euroclear Bank assets (<5%)
Total assets RWA credit risk
28
-
5
10
15
20
25
2015 2016 2017
Total assets RWA credit risk
The proposed issuance will not materially change this profile as proceeds will be invested consistent with the current credit appetite
Liquidity risk and group cash flows
29
Financial assets portfolio: liquidity risk carefully managed
• According to investment policies, the cash of the Bank is invested in AA/AAA government or supranational, mainly EUR-denominated, ECB
eligible securities, with very short term maturities
• The proposed issuance proceeds will be invested consistant with this profile, except for potential longer durations to manage interest rate risk
Financial assets portfolio :
€5,050 million as of Dec. 2017€ million
Belgian public
issuers
25%
Foreign public
issuers
25%Belgian other
issuers
12%
Foreign other
issuers
38%
Chart TitleBonds & other fixed income securities as of Dec. 2017
Residual duration
Geographical
breakdown
2,007
3,043
Financial assets portfolio
Bonds and other fixed-income securities
Government securities eligible for refinancing at the central bank
2,007
3,043
Financial assets portfolio
Bonds and other fixed-income securities
Government securities eligible for refinancing at the central bank
2,0073,043
Source: Euroclear Bank 2015-2017 financial statements
Growing shareholder’s equity
Source: Euroclear Bank 2015-2017 financial statements
• Euroclear Bank continued to improve its shareholder’s equity in line with its financial policy framework
• As a result of the termination of the license agreement between Euroclear plc and Euroclear Bank and its related one-off compensation payment of
€121.2 million that decreased the 2016 results, Euroclear Bank retained the 2016 profits in full
• The proposed issuance is not forecast to have a material effect on this profile
Dividends paid up to shareholders€ million
Total shareholder’s equity at year end€ million
30
+5%
31
Euroclear Bank Industry-leading capital position
• As of December 2017, Euroclear Bank capital position was around five times the minimum CET1 capital required under CRD IV (including the O-
SII buffer and the capital conservationbuffer)
• Euroclear Bank consolidated has been designated by the NBB as a domestic systematically important institution and is required to satisfy a
Supervisory Review and Evaluation Process (SREP) capital requirement mostly linked to operational and credit risks. This requirement is larger
than average bank requirements (given the very low RWA density)
• Euroclear Bank capital ratios are expected to be maintained above 30%
• The proposed issuance is not forecast to have a material effect on this profile
Capital ratio and regulatory own funds
€ million
Euroclear Bank’s 2017 capital ratio
(*) Combined Capital conservation buffer (1.9%) and O-SII buffer (0.7%) reach about 2.6% on top of the SREP requirement (buffers applicable in 2017)
• Leverage ratio progressed in line with balance sheet and capital management targets and is expected to remain at levels in line with risk appetite post
debt issuance
• Liquidity ratios above requirements and expected to be positively influenced by the debt issuances out of the EMTN program
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Other capital & liquidity ratios above required levels
Liquidity ratios
%
805%
Leverage ratios
%
Recovery & Resolution regime applicable to Euroclear Bank
• The Bank Recovery and Resolution Directive (BRRD) may require Euroclear Bank as early as 2019 to meet Minimum
Requirement for own funds and Eligible Liabilities (MREL) that aim at facilitating recapitalisation of the Issuer in resolution
• While still not relevant today, the group estimated the MREL requirements applicable to Euroclear Bank and decided in March
2018 to issue out of Euroclear Investments SA €700 million (dual tranche transaction with €300 million senior unsecured 12-
years and €400 million Corporate Hybrid 30NC10)
• Such fund raising aimed at providing a €600 million stable and long term financial capacity to Euroclear Bank to meet
the core and permanent part of such requirements under BRRD
• In view of uncertainties about the final level of the MREL requirement that would apply to Euroclear Bank, the EMTN
program has been structured to give the possibility to the Issuer to issue MREL eligible Senior Non Preferred notes
• This optionality would provide Euroclear Bank the required flexibility to meet any requirement imposed by the relevant
regulatory authority in excess of the current level estimated by Euroclear
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Content
34
The Group and Euroclear Bank
Euroclear Bank strategy
Euroclear Bank financial performance
Liquidity and capital management
Transaction overview
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Secure all credit exposures
with sufficient and adequate
collateral
Ensure our ability to use
clients’ collateral in case of
default
Guarantee our capacity to
generate enough liquidity in
the right currency in day-to-
day and in stress
Run regular stress tests to confirm our ability to
cope with extreme but plausible situation
Reduce our credit and liquidity usage
• Prevent granting of unsecured credit,
except to exempt central banks
• Set a clear hierarchy of the collateral
quality
• Establish a strict collateral valuation
policy
• Set thresholds and limits on collateral
concentration
• Ensure sufficient collateral that is
readily available and convertible into
cash on a same-day basis
• Rely on “Qualifying liquidity
resources”)
• Be able to cope with the default of 2
top participants at family level
• Beyond aggregate level, be able to
handle exposures for each currency
• Segment currencies (relevant/non
relevant)
Run additional stress tests:
• Broader scope of scenarios (e.g.
default of two major participants)
• Apply stress tests to each currency
considered as “relevant”
• CSD Regulation resulted in more requirements on how Euroclear Bank should manage credit
& liquidity risks
Rationale for the transaction:
additional regulatory requirements for Euroclear Bank
Rationale for the transaction:
focus on CSDR and QLS requirements
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EB’s own QLS
• Cash deposited at the NBB, at any other
Central Bank of issue and/or at a Creditworthy
Financial Institution
• Committed unsecured lines
• Unencumbered assets that can be monetised
same-day
• Treasury maturing deals
• Since EB must be able to handle the simultaneous
default of the two biggest clients, their exposure
must be secured with collateral that can be
monetised same-day
• To this respect, EB decided to impose a minimum
share of ECB eligible collateral to its clients
QLS through monetisation of clients’ collateral
(in case of default)
• For its liquidity needs in its business as usual, EB
relies on uncommitted facilities (e.g. cash
correspondents) which are not QLS according to
CSDR
• To be CSDR compliant, EB needs to make sure it
has enough QLS to back these uncommitted
facilities
• The Central Securities Depositories Regulation (CSDR) requires Euroclear Bank, as CSD-banking service provider, to mitigate liquidity risks by using
“Qualifying Liquidity Sources” (QLS) to support its day-to-day business as well as to handle stress scenarios
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• In the context of CSDR, Euroclear Bank will use the net proceeds of the projected new issue primarily to improve its
liquidity position by increasing its QLS
• The net proceeds of the Notes may also be used as an alternative, and in some cases, a substitute, to the existing QLS which
are made available to Euroclear Bank
• Under its newly established EMTN programme, Euroclear Bank plans to issue up to €2.5 billion of debt in total in 2018
including both public and private placements
For its first foray to the debt market, EB plans to issue a €[1 billion] dual tranche:
- A €[500]million, Euro denominated, 2-year floating rate Senior Preferred (Unsecured) Notes
- A €[500]million, Euro denominated, 5-year fixed rate Senior Preferred (Unsecured) Notes
• In addition to the EMTN issues planned, Euroclear Bank is also increasing its QLS via:
- The expected downstreaming of the parent company issuance by Euroclear Investments SA (March 2018) into
Euroclear Bank as loss absorbing debt
- Euroclear Bank aims at also establishing a Commercial Paper programme by the end of 2018
Rationale for the transaction:
boost Euroclear Bank’s QLS
Key features of the contemplated dual tranche transaction
Issuer Euroclear Bank SA/NV
Format* Senior Non Preferred Notes, Reg S, dematerialised
Issuer Ratings AA (stable) / AA+(stable)
Expected Issue Ratings [AA] / [AA+]
Currency EUR EUR
Amount 500,000,000 500,000,000
Maturity 2Y 5Y
Type of coupon Floating rate, Quarterly, Act/360 Fixed rate, Annually, Act/Act (ICMA)
Documentation Under the Issuer's Euro MTN Programme dated [X] June 2018
Target Market Manufacturer target market (MIFID II product governance) is eligible counterparties
and professional clients only (all distribution channels) - No PRIIPs KID
Denominations EUR 100,000 + EUR 100,000
Listing Irish Stock Exchange - Regulated market
Depositary National Bank of Belgium (X/N)
Law English Law
Joint-Bookrunners JPM / SGCIB
* See EMTN programme prospectus for more details
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Summary
Euroclear Bank's robust financial performance• 2017 results ahead of expectations despite planned investments in cyber, regulatory and innovation initiatives reflecting resilience of
businessmodel
• Operating model can absorb higher volumes of activity with limited increase in costs
• Conservative balance sheet and capital strategy reflected in our strong and stable ratings
Rationale for debt issuance in Euroclear Bank• In the context of CSDR, Euroclear Bank will use the net proceeds of the projected new issue primarily to improve its liquidity
position by increasing its QLS
• The net proceeds of the Notes may also be used as an alternative, and in some cases, a substitute, to the existing contingent
liquidity facilities (QLS) which are made available to Euroclear Bank
Additional considerations• Proceeds of the Notes will be re-invested in very safe assets, in line with the Financial risk policy of the Bank, to minimise credit and
market risks
• Possibility to issue MREL eligible instruments out of the program to secure compliance of the Bank with final resolution requirements
applicable
• Positive influence of the issuance on the liquidity ratios of the Bank with non material impact on capital ratios in view of re-
investment strategies reflecting Euroclear Bank’s risk appetite
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Paul Hurd
Head of Banking
T + 32 2 326 4395
Baudhuin Douxchamps
Head of Corporate Finance
T + 32 2 326 94 70
Herve Foyan Djoudom
Head of Treasury
T + 32 2 326 3237
www.euroclear.com
Didier Boonen
Chief Financial Officer
T + 32 2 326 9315