AFD // 2021 Universal Registration Document

RISK MANAGEMENT 4 Basel III Pillar 3

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 ɸ 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 ɸ 316 of Regulation (EU) no. ɸ 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 smoothed over three years.

of a securitisation exposure is possible. The criteria for classification as a securitisation, notably under subordination structure, are sought and, if necessary, trigger analyses on the prospecting as well as on the portfolio to date. In 2020, an investment transaction in a fund was reclassified as a securitisation in view of the conditions of the contract in question. This is an atypical transaction that was not intended to be a securitisation transaction and Proparco’s strategy to date is not to develop its investments in transactions qualifying a priori as securitisation. 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 30 ɸ September 2021 is €71.4M, primarily in dollars.

Capital requirements for operational risk AFD’s average net banking income (NBI) for the last three financial years is €851M. The capital requirement for operational risk is €128M (15% of average NBI).

2021

2020

2019

In thousands of euros

GDP – Smoothed 3-year average

850,758

749,792

756,286

Capital requirement ratio

15%

15%

15%

Capital requirement

127,614

112,469

113,443

4.2.4.4 Risk on equities and other financial instruments

4.2.4.5 Interest rate risk in the banking portfolio The Paragraph ɸ 4.1.1.4 on “Interest rate risk” describes this type of risk in detail. 4.2.4.6 Information on encumbered and unencumbered assets An asset is considered to be “encumbered”, or may be used contractually for the purpose of guaranteeing, acting as collateral for or enhancing a transaction from which it is inseparable. On the other hand, an “unencumbered” asset is one free of any restrictions of a legal, regulatory, contractual or any other nature, and free from the possibility of being liquidated, sold, transferred or assigned. AFD does not record any assets as encumbered apart from securities sold under repurchase agreements to the Banque de France for a nominal amount of €50.5M.

The methods for valuing and recording equity investments held by the Group are presented in Paragraph ɸ 6.2.3.2 of the financial statements and in the following notes thereto: Note ɸ 1 “Financial assets and liabilities at fair value through profit and loss” and Note ɸ 3 “Financial assets at fair value through other comprehensive income” (Paragraph ɸ 6.2.4.1). The accounting standards for equity-accounted equity investments are outlined in Paragraph ɸ 6.2.3.1.2 “Accounting principles and methods”. The summary table of equity investment exposure is provided in Paragraph ɸ 4.2.4.1.1.2. The amount of capital gains (losses) realised on disposals and liquidations during the period under review is presented in Notes ɸ 13 and ɸ 14 to the consolidated financial statements (Paragraph ɸ 6.2.4.2). Realised gains and losses are recorded as gains or losses on assets at fair value through profit and loss (Note ɸ 13) or at fair value through other comprehensive income (Note ɸ 14). Capital requirements for this category of risk equalled €211M based on a risk-weighted amount of €2,639M.

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2021 UNIVERSAL REGISTRATION DOCUMENT