Introduction to €GCPlus €GCPlus Taking secured financing to the next level Olivier de Schaetzen – Alexandre Gautier – Nicolas Vincent Euroclear Collateral Conference Tuesday, 13 May 2014

The partners and the product The post trade partners Banque de France As initial sponsor of the product LCH.Clearnet Is the largest clearing house for fixed income trades and repos in Europe. More than €280 Bn of transactions managed on a daily basis on those transactions Over 80 participants Euroclear Is the largest collateral house in Europe with over €850bn collateral managed daily for commercial banks, investment banks, central banks, corporate and asset managers Over 250 participants

An innovative solution Secured euro cash funding with standardized baskets of collateral Anonymous trading with netting exposure by LCH.Clearnet SA, offering robust risk and default management Embedded within a fully interoperable collateral system between Euroclear Bank and Euroclear France / ESES giving you access to a large counterparty base Full re-use possible in triparty collateral management with market counterparties and Eurosystem Optimum liquidity management DVP settlement throughout the chain

€GCPlus Clearing participants The value chain €GCPlus Clearing participants Electronic platforms ICAP, MTS, Tullet Prebon Trading Anonymous cash-driven trading via e-platforms Trading of two baskets covering a large set of ECB-eligible securities LCH.Clearnet Clearing Intermediation of the CCP reducing the regulatory capital cost Exposure netting at clearing level AutoSelect Euroclear Bank/ESES Euroclear Collateral Management / Settlement custody Automated collateral management provided by Euroclear in a truly interoperable collateral management environment Full possibility of collateral re-use Optimum liquidity management: DVP settlement throughout the chain National Banks (Banque de France...) Central Bank Refinancing with Eurosystem and, initially, with Banque de France Expansion to other central banks is ongoing

Product features €GCPlus Repo rate Fixed Maximum term 367 days Minimum term Same day Maximum forward start 10 days Repo rate accrual convention Exact/360 Repo interest paid Return date Minimum contract size €1 million Order books BrokerTec MTS Tullett Prebon

Trading platforms Access to €GCPlus Trading platforms offer treasurers and repo desks Anonymous trading Open architecture Order-driven marketplace with price transparency Deep liquidity pool Fully automated end-to-end post trade processing Daily web reports (public & private) of trading data

LCH.Clearnet brings: LCH.Clearnet SA LCH.Clearnet SA guarantees Register trades upon confirmation by the platform Novation of trades and calculation of a Net position exposure per basket Live reporting through the whole process Robust risk management and low regulatory capital cost LCH.Clearnet SA guarantees The return of the collateral to the cash borrower The reimbursement of the cash to the cash lender The payment of the Triparty Repo Interest based upon the nominal value of the repo to the cash lender

Euroclear brings: Triparty interoperability Cash borrowers will settle against LCH.Clearnet using their main collateral account, irrespective of the location of the counterparty’s collateral account All transactions settle DVP Substitutions are executed across the two settlement platforms LCH.Clearnet SA Collateral Management System (CMS) 4 scenarios for net settlement across the two platforms Euroclear Bank ESES Scenario 3 CG LCH C CT Scenario 1 CT LCH C CG Scenario 2 Scenario 4 8

Settlement (DVP) - Target2 €GCPlus trading day Central European Time (CET) < 6:00 8:00 9:00 10:00 11:00 12:00 13:00 14:00 15:00 16:00 18:30 Start of Day CCP End of Day CCP Trading platforms Trading LCH.Clearnet Trade collection Same Day net positions Next day net position Euroclear collateral Management 2:00 3:15 4:30 6:00 7:00 8:00 9:00 10:00 11:00 12:00 12:45 13:30 14:25 15:30 16:30 17:45 18:20 Euroclear Bank Settlement Euroclear France Settlement (DVP) - Target2 FoP Daily Margin Payment Intraday Margin Payment LCH.Clearnet

Triparty intra-operability ESES foreign debt extension of scope Collateral eligibility Assets are ECB-eligible Held by Euroclear Bank through ECB-eligible links Relayed link between ESES and Euroclear Bank is ECB-eligible Today Belgium (NBB-SSS) Euroclear Bank (XS) France (EF) Germany (CBF) Italy (Monte Titoli) The Netherlands (EN) In 2014 Austria (OeKB) Greece (BoG) Ireland Further Finland (EFI) Portugal (Interbolsa) Spain (Iberclear)

Eligibility criteria be managed by Euroclear to ensure liquidity Two liquid collateral baskets Baskets based on liquid income instruments eligible for Eurosystem’s monetary operations Basket 1 – LCHC EURO-GCPLUS LCR EQUIVALENT XS0708254148 Basket 2 – LCHC EURO-GCPLUS ECB RESTRICTED XS0708254817 High Quality Liquid Assets ECB liquidity classes L1A, L1B, L1C Issuance rating higher than A- (govies) AA- (other) Larger spectrum of ECB eligible assets ECB liquidity classes L1A, L1B, L1C, L1D Issuance rating higher than BBB- Eligibility criteria be managed by Euroclear to ensure liquidity Concentration limits for optimum diversification LCH.Clearnet Risk Management using purpose-built credit scoring tools

Margining Simulation of margin calculation Collateral Giver Collateral Taker 100 million cash 105 million collateral (5% Haircut) Initial Margin: Max (IM – HC,0) HC: 5,025,662 IM calculation : 4,156,642 ACM + CPC+TRI 44,444.44 debit Total Margin Requirement 100 million cash 105 million collateral (5% Haircut) Initial Margin HC + IM 5,025,662 debit (HC) 4,156,642 debit (Vol.) ACM + CPC+TRI 116,303.88 debit Total Margin requirement 9,298,609.06 debit

Default Management Overview Other Clearing Services €GC+ Clearing Service Minimum Deposit + Defaulter Margin (Total Initial Margin + Triparty Interest Repo Margin + Concentration Risk Margin +Sovereign Risk Margin + Wrong Way Risk Margin) Defaulter’s Mutualised Default Fund contribution Up to 25% of EMIR/EBA minimum LCH.C SA Net Capital Requirement shared across all services (amount & allocation methodology to be confirmed) Non-defaulters mutualised €GC+ contribution Defaulter Margin Default Fund Replenishment/Assessment of €GC+ Default Fund Funded Capital LCH. Clearnet SA Capital Service Continuity Assessment Assessment/Service Continuity/Close-out Loss distribution & close-out€ GC+ services

Integration within standard Triparty Collateral Management All operations managed by AutoSelect Collateral selection Collateral movements Margin management Collateral optimisation Optimum liquidity management Access to all re-use functionalities LCH.Clearnet SA Collateral Management System (CMS) Euroclear Bank ESES Scenario 3 CP CG LCH C CT BdF Scenario 1 CP CT LCH C CG Scenario 2 Scenario 4

How to get started? Criteria Membership Criteria Fixed Income membership criteria for LCH.Clearnet SA (e.g. Equity capital of €100mn for ICM) Key Clearing Member requirements (LCH.Clearnet SA) Contribution to the segregated default fund (EUR: 2.5mn min., depending on the size of activity) Extension of existing membership Triparty agreement with Euroclear and the selection of a reference CSD Collateral management instructions processed under POA granted to LCH.Clearnet SA End-to-end scripted testing Register with one of the electronic trading platforms (MTS, ICAP, Tullet Prebon)

How to get started? Euroclear AutoSelect Participants account setup Account structure Euroclear AutoSelect Participants account setup Taker and Giver accounts in Euroclear Bank or ESES, with pledge facility to BDF (ESES only) ‘Cross Taker’ dedicated account for Euroclear Bank participants to allow cross border instructions LCH.Clearnet SA account setup in Euroclear Bank and in ESES Taker, Giver, Cross Taker (EB only) accounts Margin account in Target2 or a cash clearer Default accounts and liquidation accounts

LCH.Clearnet SA process Onboarding LCH.Clearnet SA process Euroclear process Initiate the triparty €GCPlus subscription: contact your account manager Complete €GCPlus testing forms: triparty testing account, connectivity forms Sign the €GCPlus subscription form Complete the collateral profile form (annexes) for EB or ESES and interoperability Complete Italian tax certification documentation Testing Go Live Initiate the membership process Complete Main Application* file Complete €GCPlus Configuration form Submission by Credit Risk Management Committee (CRMC) Testing Approval by Credit Risk Management Committee (CRMC) Sign and return all Membership Agreements and other required documentation Go Live * Main Application file is not applicable for existing clearing members

Why trading €GCPlus? Key benefits Available through leading trading platforms Robust CCP services and risk management by LCH.Clearnet SA Fully embedded in Euroclear collateral management system Full re-use capacity in triparty collateral management, including refinancing with Banque de France Fully interoperable model between Euroclear Bank and Euroclear France giving you access to ALL Euroclear Bank and Euroclear France (ESES) counterparties DVP settlement with real transfer of collateral Optimum liquidity management

Contacts Company Contact details LCH.Clearnet Nicolas Vincent, Head of Fixed Income +33 (0) 1 70 37 6709 nicolas.vincent@lchclearnet.com Nigel de Jong, Group Head of Fixed Income Client Management, Marketing & Sales +44 (0) 20 7426 7273 nigel.dejong@lchclearnet.com Philippe Scavizzi, Head of Business Development +33 (0) 1 70 37 6721 philippe.scavizzi@lchclearnet.com Euroclear Bank Olivier de Schaetzen, Product Sales Specialist +32 2 326 28 84 olivier.deschaetzen@euroclear.com Your Relationship Manager, Commercial Division MTS Amanda Butavand +44 207 7974 246 amanda.butavand@mtsmarkets.com Gabriele Frediani +44 207 7971 170 gabriele.frediani@mtsmarkets.com BrokerTec Europe Dermot Doherty +44 207 0005 805 Dermot.Doherty@icap.com Tullet Prebon Graham Martin +44 207 200 7308 GrMartin@tullettprebon.com