AFD - 2019 Universal registration document

RISK MANAGEMENT

Basel III Pillar 3

The weightings applied by the Group for rated counterparties are as follows:

Weighting used to calculate risks

Lesser than or equal to

Rating Asset class

AAA to AA-

A+ to A- BBB+ to BBB- BB+ to BB-

B+ to B-

CCC+ Not rated

Sovereign

0%

20% 50% 50%

50% 50%

100% 100% 100%

100% 100% 150%

150% 150% 150%

100% 100% 100%

Banks

20% 20%

Corporates

100%

The application of weightings to AFD’s credit risk results in the following weighted exposures: ❙ Group credit risk: portfolio subject to the standardised approach, by risk segment ❙ Weighted exposures (inmillions of euros)

Sovereigns and other institutions

Total

Risk weighting

Banks

Corporates

Equities

0% 20% 50%

787

1,002 1,525 4,949

10 10

1,799 4,412

4

2,878

100% 150% 250%

17,053

7,330 1,056

530

29,863

1,275

252

1,534

4,117

0

838

838

TOTAL

21,993

7,728

8,406

2,902

41,029

4.2.4.1.3. Techniques for reducing credit risk To guarantee repayment of its loans to non-sovereign counterparties, AFD uses real securities (bank account pledges, receivables pledges, Daily assignments for its activities in French Overseas Departments and Collectivities, etc.) and personal sureties (joint sureties, first-demand guarantees, etc.). It also enters into payment mechanism agreements which give AFD priority access to the cash flow generated by the borrower’s activity. Specialist operations lawyers help AFD to structure its financing and, for counterparties based in a foreign country, they consult local lawyers on the legitimacy of the loan agreement and related agreements before the first payment is made.

Bank account pledges are subject to periodic valuation taken into account in provisioning. Moreover, AFD records exposure guaranteed by the French State on its balance sheet and off-balance sheet. In calculating its capital adequacy ratio, AFD recorded its exposure covered by eligible personal guarantees, which breaks down as follows: P €3,483M of balance sheet exposure that mainly consists of loans guaranteed by the French State and foreign governments; P €417M of off-balance sheet exposure consisting mainly of undisbursed amounts guaranteed by the French State and foreign governments.

91

UNIVERSAL REGISTRATION DOCUMENT 2019