BPCE - 2018 Registration document

FINANCIAL REPORT IFRS Consolidated Financial Statements of BPCE SA group as at December 31, 2018

NET GAINS OR LOSSES ON FINANCIAL INSTRUMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS 4.3

Accounting principles This item includes gains and losses (including the related interest) on financial assets and liabilities classified as held for trading or designated at fair value through profit or loss. “Gains and losses on hedging transactions” include gains and losses arising from the revaluation of derivatives used as fair value hedges, as well as gains and losses from the revaluation of the hedged item in the same manner, the revaluation at fair value of the macro-hedged portfolio and the ineffective portion of cash flow hedges.

Fiscal year 2018

in millions of euros

Gains and losses on financial instruments mandatorily recognized at fair value through profit or loss (1) Gains and losses on financial instruments designated at fair value through profit or loss

300

1,377

Gains and losses on financial assets designated at fair value through profit or loss - Gains and losses on financial liabilities designated at fair value through profit or loss -

20

1,357 (149)

Gains and losses on hedging transactions (2) Ineffective portion of cash flow hedges (CFH) - Ineffective portion of fair value hedges (FVH) - Changes in fair value of fair value hedges

19

(168)

(12)

Changes in fair value of hedged items

(158)

Gains and losses on foreign exchange transactions

184

TOTAL NET GAINS AND LOSSES ON FINANCIAL INSTRUMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS

1,712

5

In 2018, “Gains and losses on financial instruments mandatorily recognized at fair value through profit or loss” included: (1) impairment on the fair value of CDS entered into with monolines: a €40 million reduction in outstanding impairment was recorded in 2018, taking total outstanding impairment at December 31, ● 2018 to €23 million; the change in the fair value of derivatives, in the amount of -€28 million, due to the difference in impairment for counterparty risk (Credit Valuation Adjustment – CVA), in the amount of ● +€30 million due to the consideration of non-performance risk in the valuation of derivative financial liabilities (Debit Valuation Adjustment – DVA), and in the amount of -€15 million due to the inclusion of an adjustment for funding costs (Funding Valuation Adjustment – FVA); over 2018, a net expense of €86 million was recorded for the portfolio of products in Asia referred to in the key events. The additional reserves set aside for this portfolio amounted to ● €173 million, at December 31, 2018. “Gains and losses on hedging transactions” consist mainly of gains and losses recorded in the event of over-hedging in interest rate macro-hedging transactions, for -€149 million at December 31, (2) 2018, in light of the partial declassification of hedging relationships or due to the measured ineffectiveness. This over-hedging is caused mainly by the significant volume of loan renegotiations or prepayments observed in the current low interest rate environment.

Figures for 2017 under IAS 39

Fiscal year 2017

in millions of euros

Gains and losses on financial instruments held for trading (1)

2,515

Gains and losses on financial instruments designated at fair value through profit or loss

426

Gains and losses on hedging transactions Ineffective portion of fair value hedges - Ineffective portion of cash flow hedges -

(123) (130)

7

Gains and losses on foreign exchange transactions

(18)

TOTAL NET GAINS OR LOSSES ON FINANCIAL INSTRUMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS

2,800

In 2017, “Gains and losses on financial instruments held for trading” included: (1) impairment taken against the fair value of CDS entered into with monoline insurers (see Note 10), which led to a decrease of €7 million (excluding foreign exchange effect) in accumulated ● impairment in 2017, bringing accumulated impairment to €63 million at December 31, 2017; a reversal of the full portfolio-based provision recorded on exposures in respect of CDPCs (Credit Derivative Product Companies) was recorded in 2017 in the amount of €1 million; ● the change in the fair value of derivatives, in the amount of +€95 million, due to the difference in impairment for counterparty risk (Credit Valuation Adjustment – CVA), in the amount of ● –€55 million due to the consideration of non-performance risk in the valuation of derivative financial liabilities (Debit Valuation Adjustment – DVA), and in the amount of +€25 million due to the inclusion of an adjustment for funding costs (Funding Valuation Adjustment – FVA).

441

Registration document 2018