Euroclear Bank SA/NV Investor Presentation June 2018 Disclaimer - - PowerPoint PPT Presentation

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

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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

• ptimisation 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

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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

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• 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

• perating 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%

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• 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
• ptimisation

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 SA

S&P: AA-/A-1+ Fitch:AA/F1+

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Euroclear Bank in the Group

(*) DTTC Euroclear Global Collateral Limited

Euroclear plc Shareholders

125 shareholders 84.11% Sicovam Holding 15.89%

Euroclear Bank SA/NV

S&P: AA/A-1+ Fitch: AA+/F1+

CSDs

Directly supervised activity by National Bank of Belgium and

• ther local regulators

Euroclear SA/NV

100% - LUX CH 100% (FR, BE, NL, UK, F, S) 100% (- 1 share) (BE)

Consolidated oversight by the National Bank of Belgium

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

• ffices: 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

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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:
• T
• 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

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Content

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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 corebusiness
• Data services and solutions

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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 Bank ESES

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 securitiesare 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

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Our business model: providing credit to market participants to facilitate settlement

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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

• n 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)

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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)

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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 Euroclearsolutions

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 to

move ‘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

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Content

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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%

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• 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%

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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 33 n.a. Exceptional charges

• 121
• 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%

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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 359.2 326.1 2013 2014

232 258 301 2015 2016 2017 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 creditratings

Adjusted return on asset (RoA)

basis points

11.4% 11.7% 12.5% 2015 2016 2017

Source: Euroclear Bank 2015-2017 financial statements

55 79 95 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

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The Group and Euroclear Bank Euroclear Bank strategy Euroclear Bank financial performance Liquidity and capital management Transaction overview

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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 agency EuroclearBank (“The Issuer”) ratings New 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

• n-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

• ff

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

• f

contracts, conflicts

• f

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

• perational

risks at very high confidence levels, combining internal loss history and external loss data

• Implementation
• f

Lean management philosophy in 2008-2009 (together with other measures) reduced operational risks Risk Weighted Assets:

• perational risk & loss history

Source: Euroclear plc consolidated figures as of year-end 2017, Pillar 3 disclosure 2015-2016 27

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%)

Totalassets RWA credit risk

28

• 5

10 15 20 25 2015 2016 2017

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%

Bonds & other fixed income securities as of Dec. 2017 Residual duration Geographical breakdown

Bonds and other fixed-income securities Government securities eligible for refinancing at the central bank

2 , 7 3 , 4 3

ancial assets portfolio

r f i x e d

• i

n c

• m

e s e c u r i t i e s r i t i e s e l i g i b l e f

• r

r e f i n a n c

2,007 3,043

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

32

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

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The Group and Euroclear Bank Euroclear Bank strategy Euroclear Bank financial performance Liquidity and capital management Transaction overview

35

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
• n

“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

36

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

• n

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

37

• 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 38

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 incosts
• 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

39

Paul Hurd

Head of Banking T + 32 2 326 4395 Paul.Hurd@euroclear.com

Baudhuin Douxchamps

Head of Corporate Finance T + 32 2 326 94 70 baudhuin.douxchamps@euroclear.com

Herve Foyan Djoudom

Head of Treasury T + 32 2 326 3237 herve.foyandjoudom@euroclear.com www.euroclear.com

Didier Boonen

Chief Financial Officer T + 32 2 326 9315 Didier.Boonen@euroclear.com