BPCE - 2018 Registration document

6 RISK REPORT Credit risk

LGD (LOSS GIVEN DEFAULT) MODELS ➡

Number of models

Exposure class Sovereigns, central governments and central banks

Portfolio

Description/Methodology

Sovereigns and affiliates

1 Expert criteria including quantitative and qualitative variables

Financial institutions

Banks

1 Expert criteria including quantitative and qualitative variables

Specialized lending (aircraft, real estate, etc.)

5 Models based on estimates of asset resale conditions or future cash flows

Other contracts (general, pre-export financing, property investment companies, etc.)

8 (o/w 3 NA)

Models based on estimated losses, segmented by type of contract and guarantee, or expert criteria Models based on estimates of asset resale conditions, segmented by type of asset financed Models based on estimated losses, segmented by type of contract and guarantee Models based on estimated losses, segmented by type of contract and guarantee Models based on estimates of asset resale conditions, segmented by type of asset financed Models based on estimated losses, segmented by type of contract

Corporates

Lease financing

1

3 (o/w 1 NA)

Residential real estate

Other individual and professional customers

2

Lease financing

2

Retail

Revolving loans

1

NA refers to models not yet approved for the determination of capital requirements. *

CCF/EAD (EXPOSURE AT DEFAULT) MODELS ➡

Number of models

Exposure class Sovereigns, central governments and central banks

Portfolio

Description/Methodology

Sovereigns and affiliates

1

Application of regulatory inputs

Financial institutions

Banks

1

Application of regulatory inputs

2 (o/w 1 NA) 3 (o/w 1 NA)

Corporates

All companies

Conversion factors, segmented by type of contract

Residential real estate

Conversion factors, segmented by type of contract

2 Conversion factors and flat-rate values, segmented by type of contract

Other individual and professional customers

Retail

Revolving loans

1

Conversion factors, segmented by type of contract

NS refers to non-standardized models used in determining capital requirements. *

INTERNAL RATINGS-BASED APPROACHES – RETAIL CUSTOMERS For retail customers, Groupe BPCE has established standardized internal ratings-based methods and centralized ratings applications used to assess the credit quality of its loan books for better risk supervision. In the Banque Populaire and Caisse d’Epargne networks, they are also used to determine capital requirements according to the Advanced IRB method.

The Probability of Default of retail customers is modeled by the DRCCP, based in large part on the banking behavior of the counterparties. The models are segmented by type of customer, distinguishing between individual and professional customers (with or without balance sheets) and according to products owned. The counterparties in each segment are automatically classified using statistical models (usually logistic regression models) into similar and statistically separate risk categories. Probability of default is estimated for each of these categories, based on the observation of average default rates over the longest period possible. These estimates are systematically adjusted to factor in a safety buffer for the uncertainty of the estimates. Where past internal data do not cover a full economic cycle, an additional safety buffer is determined

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Registration document 2018