AFD - 2019 Universal registration document

RISK MANAGEMENT 4 Basel III Pillar 3

❙ Balance sheet exposure to credit risk covered by eligible personal sureties (guarantees)

Net unweighted exposure covered by a guarantee

Net weighted exposure covered by a guarantee

Mitigating techniques (guarantees)

Net weighted exposure after mitigating techniques

In millions of euros

Governments and central banks

682

462

-462 -667

0

Corporates Institutions

1,532

1,628

962 206

278

278

-72

Public sector entities

0

0

0

0

Local and regional governments

990

990

-44

947

TOTAL

3,483

3,360

-1,245

2,115

❙ Off-balance sheet exposure to credit risk covered by eligible personal sureties (guarantees)

Net unweighted exposure covered by a guarantee Before conversion factor

Net unweighted exposure covered by a guarantee Net weighted exposure covered by a guarantee After conversion factor

Net weighted exposure After

Mitigating techniques (guarantees)

mitigating techniques

In millions of euros

Governments and central banks

95

47

37

-37 -27

0

Corporates Institutions

303

180

180

153

19

10

10

-5

5 0

Local and regional governments

0

0

0

0

GRAND TOTAL

417

237

226

-69

158

4.2.4.2 Foreign exchange and market risk AFD does not have a speculative operations portfolio. However, it records in its trading book any non-deliverable or illiquid currency hedging instruments, forward hedging instruments and/or hedging instruments that have lost their hedging purpose. AFD’s positions were below the thresholds applicable to capital requirements for market risk. The Group’s overall net foreign-currency position subject to capital requirements at 31 Ǿ December Ǿ 2019 is €58M, primarily in dollars. 4.2.4.3 Operational risk Operational risk management within AFD Group (identifying and evaluating risks, rating risk management data, reporting, procedure for declaring operational incidents) is described in detail in Paragraph Ǿ 4.3.1 “Internal control and risk monitoring”. The measurement and management of operational risk is incorporated in the permanent control system. Operational risk assessment When calculating its regulatory capital requirements for operational risk, AFD Group uses the basic method, which relies on the basic indicator as defined in Article Ǿ 316 of Regulation (EU) no. Ǿ 575/2013 on prudential requirements for credit institutions and investment firms. Under the basic method, capital requirements for operational risk are equal to 15% of the average of the basic indicator (net banking income, excluding provisions and impairments) smoothed over three years.

4.2.4.1.4. Counterparty risk Counterparty risk relating to fi nancial activities

AFD uses derivatives to hedge interest rate and foreign exchange risks (see derivative exposure table above). Transactions are limited to counterparties that have signed framework agreements with French (AFB or FBF) or international (ISDA) bodies. AFD renegotiated collateral contracts with almost all of its active counterparties. These contracts are activated with no regard to rating and are triggered immediately and with no deductible upon reaching a certain threshold. AFD does not carry out credit derivative transactions. Limit system Counterparty risk on financial instruments is managed using a set of limits and management rules whose principles and main characteristics are set by the Board of Directors. The unitary approval limit is set for a counterparty based on the counterparty’s type, rating, capital and AFD’s capital. 4.2.4.1.5. Securitisation AFD has no securitisation activity.

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UNIVERSAL REGISTRATION DOCUMENT 2019

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