110 2019 Universal registration document and annual financial report - BNP PARIBAS

2 CorPorate GovernanCe and internal Control

2

Internal control

monitoring of these recommendations enables Group Finance to identify improvements to the accounting internal control system made within the consolidated entities, identify any cross-functional problems and, if necessary, revise the Group-level procedures and instructions.

For the Accounting channel, independent central control teams pass these tasks to the Finance Departments in the divisions/business lines, which supervise the entities closely and, if necessary, implement accounting controls geared to their specific situation.

Lastly, within the entities Finance Departments, the Group s accounting internal control principles have led to dedicated and independent accounting control teams or representatives, depending on the size of the entities, being set up. As such, the Group s established approach, in which the reporting production tasks are consolidated on regional platforms (improving the harmonisation of the reporting and control processes and increasing their efficiency for the entities concerned), also ensures that the accounting control teams are the appropriate size and have the necessary expertise. The main missions of these local teams are as follows:

■ providing a link between Finance and the back offices that sends data to the accounting system, for instance, by verifying that the back offices have the information they need for their accountancy work (e.g. training in the accounting tools provided; knowledge about the accounting structure, etc.);

■ implementing the second-level accounting controls within all entities within their scope. In a decentralised accounting framework, these controls complete the first level controls carried out by back offices, and particularly rely on accounting control tools that, for example, make it possible, in the case of each account, to identify the department responsible for its justification and control, to reconcile the balances recorded in the accounting system with the balances in the operational systems for each business, and to identify, justify and monitor the clearing of suspense accounts;

■ coordinating the elementary certification process (described below) requiring an entity s different departments to report on the controls that they have carried out;

■ to ensure that the accounting internal control system enables the entity s Finance Department to have sufficient oversight of the process of preparation of account summaries, and in particular over all the elements necessary for the Group s certification process (described below). To assist in achieving this objective, the tasks involved in accounts closure are formally defined. The use of tools to map the processes and associated risks and to document the checks as well as the coordination with other control channels contributes to improving the quality.

Internal Certification Process

At Group level Finance uses FACT (Finance Accounting Control Tool) for the internal certification of the quarterly data produced by each entity for the consolidation package; for the validation performed within the Finance Departments of divisions/business lines; and for the consolidation process for which the Group Reporting Department within Group Finance is responsible.

The Chief Financial Officer of each entity concerned certifies to Finance that:

■ the transmitted data have been prepared in accordance with the Group s norms and standards;

■ the accounting internal control system guarantees its quality and reliability.

The main certificate completed by fully consolidated entities reproduces the results of all of the major controls defined in the Group s accounting control plan, and leads to the determination of a rating for each entity. Entities consolidated by the equity method complete an appropriate certificate. Finally, non-consolidated entities are certified annually through a simplified procedure.

This internal certification process forms part of the Group s monitoring system for Internal control and enables Finance, which has the overall responsibility for the preparation and quality of the Group s consolidated financial statements, to be informed of any problems in the financial statements and to monitor the entities implementation of appropriate corrective measures. A report on this process is presented to Executive Management and to the Financial Statements Committee of the Board of directors at the close of the Group s quarterly consolidated accounts.

This certification system is also in place, in conjunction with the Risk Function, for the information included regulatory reporting on credit risk and the solvency ratio. Those contributing to the reports attest that they have complied with the standards and procedures and that the data used is of appropriate quality. They further describe the results of the controls carried out at the various stages of producing the reports.

On the same principles, a certification system is in place for the reporting of liquidity-related data. The various contributors report on the compliance of the data transmitted with the standards, and the results of key controls performed to ensure the quality of reporting.

At entity level In order to ensure the oversight of all the processes of preparation of accounting information at the level of each entity s Finance Department, Control & Certification recommends implementing an elementary certification (or sub-certification ) process for accounting data whenever the processing of transactions and the preparation of accounting and financial data are organised in a decentralised way that makes such a process necessary.

This is a process by which the providers of the information used to prepare accounting and financial data (e.g. middle office, back office, Human Resources, Risk, Suppliers Accounts, etc.) formally certify that the fundamental controls intended to ensure the reliability of the accounting and financial data under their responsibility function properly. The elementary certificates are sent to the local Finance Department, which analyses them in combination with the accounting controls that it exercises directly, prepares a summary report intended to be used to prepare the main certificate, and liaises with the various players in order to monitor points requiring attention.

The FACT application also makes it possible to automate this sub- certification process by providing entities with a dedicated environment in which they can directly manage the processes set up at their level.