KBC planning a number of internal cost-savings

In light of the uncertainty on the financial markets and
deteriorating economic situation, KBC is planning to implement a
number of internal cost-savings. In so doing, the group aims to act
proactively to secure to the maximum extent its strong financial
position (with, from a European perspective, above-average liquidity
and solvency ratios) both now and going forward and thus safeguard
its independence in the long(er) term. The intention is not only to
improve the service provided to 12 million KBC customers and underpin
the future of 60 000 employees, but also to maintain confidence on
the financial markets and among shareholders.

Why now?
In 2008, the economic climate turned rapidly, inevitably impacting
the financial sector and KBC's results. Most economists expect 2009
to be a difficult year and a recessionary one at that. Such
exceptional circumstances call for exceptional measures.

Early in 2008, KBC already decided to freeze its cost budgets for
2008 at 95% or, in other words, to cut back proactively by 5%. Due to
the developments of recent months and the deteriorating economic
situation, KBC is currently looking at a number of additional
cost-savings and measures to be implemented proactively for 2009.

Principles and measures
KBC aims to deploy its staff and available resources in the most
efficient and sustainable way possible so that it can respond
optimally and with the maximum amount of flexibility to new
developments and the pace of its operational growth, and to the
current economic conditions. By doing so, KBC aims to remain a
dynamic and responsive international bancassurance group. As
announced when publishing its third-quarter results, KBC will examine
its operations outside its home markets and evaluate whether or not
they belong to its core activities, generate sufficient return or use
up too much capital. This will enable the group to continue to help
drive the economies of its home markets, in particular in the area of
lending to its core customers (individuals, the self-employed,
members of the liberal professions and SMEs).

The trend in expenses also requires considerable attention.
Throughout the group, all sorts of expenses will be examined to see
how cost-savings can be achieved in a considered manner, without
jeopardising income flows or affecting risk management.

However, the main expense for a major international group such as KBC
is its wage bill. The demand for staff and cost-saving and
efficiency-boosting measures will, throughout the group, be tailored
optimally to the needs of the local companies and markets to
safeguard the group's commercial dynamism.

KBC aims to navigate through the exceptional economic situation with
as many employees as possible on board. In Belgium, 2009 will see a
recruitment freeze and only a few (around a hundred, mainly ICT) jobs
are planned to replace staff leaving the company. Moreover, the
collective labour agreement on job security was recently extended to
the end of 2009, which, in the current turbulent times, offers KBC
staff in Belgium a major foothold. In addition, KBC is looking at the
variable components of its wage bill. In discussions with local
management, alternative measures are being worked out for the other
group companies, focusing on the specific situation. It is currently
too early to quantify the impact of any measures implemented.

As part of the group's policy of open and transparent communication,
this was already discussed at the works council meeting last week and
discussions will also be held with the social partners in the weeks
ahead. The employee representatives have demonstrated their
willingness to work constructively with management to find
sustainable and forward-looking solutions to exceptional challenges.


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