SFIL Annual financial report 2018

1 I Management report 8 SFIL Annual Financial Report 2018 The SFIL Group successfully discharged its key responsibil‑ ities: •  financing, within a strictly defined framework, loans ini‑ tially granted by La Banque Postale to eligible (1) local gov‑ ernment entities and public hospitals via CAFFIL-issued obligations foncières ; •  refinancing large export credit contracts; •  SFIL’s provision of specialized services to La Banque Postale and CAFFIL to enable the system to function correctly; •  the continuation and near-completion, in line with the State’s public finances management objectives and SFIL’s strategic interests, of the program to reduce the sensitivity of certain (1) Eligibility within the meaning of the law on sociétés de crédit foncier , pursuant to which on-balance sheet hedging assets can be considered collateral for issued covered bonds. structured loans held on CAFFIL’s balance sheet when SFIL was created. The SFIL Group’s exceptional financing capacity, based on SFIL and CAFFIL’s issues, enabled it to fulfill these responsibilities. The diagram below describes the SFIL Group’s associated operating system. A more detailed diagram showing export credit refinancing is provided in section 2 below. General business environment Caisse Française de Financement Local Services Services Caisse Française de Financement Local credit process Financial markets French local public sector Refinancing in international markets and acquisition of the loans sold by LBP Issue of obligations foncières Actual sale of the loans Loans Granting of loans 4 3 2 1 Financing of loans and recognition on the balance sheet 3 4 Operational flow diagram of the system 1. The SFIL Group’s financing of public sector investments The local public sector financing activity involves CAFFIL acquiring from La Banque Postale loans that it has marketed. The loans in question are simple, being exclusively at fixed rates or with a single indexation (Euribor + margin) or two- phase structure (fixed rate then variable rate). Certain loans involve a staggered-release phase or benefit from a deferred start-date mechanism. The amounts in question range from EUR 40,000 to tens of millions of euros, while the maturi‑ ties are generally between 10 and 30 years. New loans are mostly repayment loans with an initial average life of around 9 years. This loan offer is intended for all types of local government entity throughout France, from the smallest municipalities to the largest inter-municipal or regional structures. In 2018, CAFFIL acquired EUR 3.4 billion in loans granted by La Banque Postale to the French local public sector (EUR 3.3 billion in 2017). Since the partnership began in 2013, CAFFIL has refinanced a total of EUR 15.6 billion in loans. 2. Refinancing export credits On May 5, 2015, the European Commission authorized SFIL to refinance large export credits. The Company’s operating procedure is as follows: •  In accordance with the principle of equal treatment, SFIL offers to take the place of commercial banks as lender of all or a part of the insured portion of export credits, thus allowing them to improve their own offers in terms of volume, term, and price. •  The export bank retains the risk on the uninsured por‑ tion and maintains the entire commercial relationship over the life of the transaction. •  The export loans acquired by SFIL are refinanced through a loan from its subsidiary CAFFIL, which benefits from the enhanced guarantee mechanism of Bpi France Assurance Export introduced by the 2012 finance law. This 100% guarantee by the French State is also irrevocable and unconditional. In this context, Bpifrance Assurance Export acts in the name, on behalf and under the control of the State.