BPCE - 2018 Registration document

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

Fair value hedges mainly consist of interest rate swaps that protect fixed-rate financial instruments against changes in fair value attributable to changes in market rates of interest. They transform fixed-rate assets or liabilities into floating-rate instruments. Fair value macro-hedges are used to manage the overall interest rate risk position, in particular to hedge: fixed-rate loan portfolios; ● demand deposits; ● PEL home savings deposits; ● the inflation component of Livret A passbook savings accounts. ● Fair value micro-hedges are notably used to hedge: fixed-rate liabilities; ● fixed-rate liquidity reserve securities and inflation-indexed ● securities. Cash flow hedges fix or control the variability of cash flows arising from floating-rate instruments. Cash flow hedging is also used to manage the overall interest rate risk position. Cash flow hedges are mainly used to: hedge floating-rate liabilities; ●

hedge the risk of changes in value of future cash flows on ● liabilities; provide macro-hedging of variable-rate assets. ● The main causes of ineffective hedging are related to: ineffective dual-curve valuations: the value of collateralized ● derivatives (with margin calls yielding EONIA) is based on the EONIA discount curve, while the value of the hedged component of items covered by fair value hedges is calculated using a Euribor discount curve; the time value of options; ● over-hedging for asset-based testing of macro-hedges (notional ● amounts of hedging derivatives higher than the nominal amount of the hedged items, in particular where prepayments on the hedged items were higher than expected); credit value adjustments and debit value adjustments linked to ● credit risk and own credit risk on derivatives; differences in interest rate fixing dates between the hedged item ● and the hedge. The notional amounts of derivative instruments are merely an indication of the volume of the Group’s business in financial instruments and do not reflect the market risks associated with such instruments.

12/31/2018

01/01/2018

Notional amount 361,086 13,674 374,760

Positive fair value

Negative fair value

Notional amount 547,307 11,505 558,812

Positive fair value*

Negative fair value

in millions of euros

5

Interest rate derivatives Currency derivatives Forward transactions Interest rate derivatives Fair value hedges Interest rate derivatives Equity derivatives Currency derivatives Forward transactions Cash flow hedges Options

5,906

6,373 1,958 8,331

7,472

6,986 2,161 9,147

583

769

6,489

8,241

3,108 3,108

7 7

2 2

6,811 6,811

10 10

8 8

377,868 19,471

6,496

8,333

565,623 19,394

8,251

9,155

58

256

42

309

198

15,137 34,608 34,608

599 657 657

769

1,703

317 359 359

536 845 845

1,025 1,025

21,295 21,295

Credit derivatives

128

TOTAL HEDGING INSTRUMENTS

412,476

7,153

9,358

587,046

8,610

10,000

An adjustment of -€4 million was recognized in relation to the amount published at December 31, 2017 following a change in calculation method. *

All hedging derivatives are included in “Hedging derivatives” in balance sheet assets and liabilities.

453

Registration document 2018