BPCE - 2018 Registration document

RISK REPORT Market risks

RISK MONITORING Information provided in respect of IFRS 7

All limits (operational indicators, VaR, and stress tests) are monitored daily by each institution’s Risk Management division. Any limit breaches must be reported and, where applicable, are subject to a Management decision concerning the position in question (close, hedge, hold, etc.). These supervisory mechanisms also have operational limits and resilience thresholds that determine the Group’s risk appetite for trading operations. Banking book risk is monitored by asset class: bonds, securitizations, private equity and UCITS. The bond portfolio is monitored monthly through the supervision of credit risk (limit per issuer) and market risk (stress test limit). The Group’s single treasury and central bank collateral management pool is subject to daily monitoring of risks and economic results for all of its activities, which are mainly related to the banking book. In particular, a 99% 1-day Monte Carlo VaR is calculated and analyzed by risk factor. Compliance with operational limits in terms of sensitivity to interest rates, both overall and by time buckets, as well as by counterparty, is monitored daily. Supervision of this activity also includes specific stress scenarios as well as exposure limits per operator (for both individual and cumulative transactions processed per day).

The Risk, Compliance and Permanent Control division (DRCCP) is responsible for the permanent control of market activities across Groupe BPCE, which is subject to regular review by the Group Market Risk Committee. Within the scope of the trading book, market risk is monitored daily by measuring Group Value at Risk (VaR) and performing global and historic stress tests. Groupe BPCE uses the proprietary VaR calculation system developed by Natixis. This system provides a tool for the measurement, monitoring and control of market risk at the consolidated level and for each company in the Caisse d’Epargne and Banque Populaire networks and the BPCE subsidiaries, on a daily basis and taking account of correlations between the various portfolios. There are certain distinctive characteristics of Groupe BPCE that must be considered, in particular: for Natixis: given the significance of its capital market activities, ● Natixis’ risk management system is specifically tailored to this entity; for the Banque Populaire network: only BRED Banque Populaire has ● a capital markets business. It monitors the financial transactions carried out by the Banque Populaire network trading floor and Finance division daily, using 99% 1-day value-at-risk, sensitivity, volume and stress scenario indicators; for Banque Palatine: daily monitoring of trading book activities is ● based on supervision by the DRCCP of 99% 1-day value-at-risk, stress tests and compliance with regulatory limits.

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Registration document 2018