BPCE - 2018 Registration document

RISK REPORT Liquidity, interest rate and foreign exchange risks

Consequently, BPCE has defined a set of indicators and limits: one-day and one-week liquidity gap indicators measure the Group’s ● very short-term funding requirements. These gaps are subject to Group and individual entity limits; stress scenarios measure the Group’s ability to meet its ● commitments and continue its regular commercial activities during a crisis depending on short-term funding volumes, medium- and long-term debt maturities and liquidity reserves. Internal stress test indicators are aimed at ensuring short-term liquidity security beyond the one-month horizon required by regulations. These stress tests, based on bank- and/or market-specific scenarios, are broken down into various levels of stress in order to forecast the impact on the Group’s liquidity position. Adaptation of liquidity stress rules to all business lines takes assumptions unique to each activity into account; the customer loan/deposit ratio is a relative measurement of the ● Group’s autonomy with respect to the financial markets; the Group’s market footprint measures its overall dependence to ● date on bond and money market funding. The contribution of the institutions to this coverage is managed by a liquidity budget system. These budgets are reviewed on an annual basis and govern the maximum liquidity consumption for each entity in line with the Group’s budget process; the liquidity gap, which compares the amount of remaining ● liabilities with remaining assets over a ten-year period, enables the Group to manage medium- and long-term debt maturities and anticipate its funding requirements. It is governed by Group and individual entity limits; measurement of resource diversification, allowing the Group to ● avoid excessive dependence on a single creditor; the pricing policy, which ensures the performance of liquidity ● allocation. The definition of these indicators and any associated limits is covered in a body of consolidated standards that is reviewed and validated by the decision-making bodies of the Group and its institutions. Centralized funding management The Group Finance division organizes, coordinates and supervises the funding of Groupe BPCE on the markets. The short-term funding of Groupe BPCE is carried out by a single treasury and central bank collateral management team, created following the merger of the BPCE and Natixis cash management teams. This integrated treasury team is capable of managing the

Group’s cash position more efficiently, particularly during a credit crunch. The Group has access to short-term market funding through its two main issuers: BPCE and its subsidiary Natixis. For medium and long-term funding requirements (more than one year), in addition to deposits from Banque Populaire and Caisse d’Epargne network customers, which are the primary source of funding, the Group also issues bonds through two main operators: BPCE, either directly as BPCE or through BPCE SFH, which issues ● legal covered bonds ( obligations de financement de l’habitat – OH), a category of secured bond backed by French legislation; and Compagnie de Financement Foncier, a subsidiary of Crédit Foncier, ● which issues covered bonds known as obligations foncières (OF), also backed by French legislation. Note that BPCE is also responsible for the medium and long-term funding activities of Natixis, which no longer carries out public issues on the markets, and Crédit Foncier. BPCE has short-term funding programs (short-term notes, Euro Commercial Paper and US Commercial Paper) and MLT funding programs (Medium-Term Notes (MTNs), Euro Medium-Term Notes (EMTNs), US MTNs, AUD MTNs and a covered bond program backed by Banque Populaire and Caisse d'Epargne home loans). All Group assets and liabilities are subject to internal liquidity pricing, whose guidelines are decided by the Group’s Asset and Liability Management Committee and aim to reflect changes in market liquidity costs and asset/liability matching. Centralized collateral management Collateral management is one of the key components of the Group’s liquidity management system. It is based on the following principles: the central institution defines the collateral management ● indicators. These indicators are monitored by the Group’s ALM Committee; investment- and management-related decisions are made by the ● entities and subsidiaries following rules set out by the central institution; entity collateral is pooled with the central institution with the aim ● of improving oversight and operationality of collateral management. For entities with a 3G Pool (Natixis, SCF, BRED, Crédit Coopératif, Banque Palatine), each entity is responsible for its own collateral. Nonetheless, these entities cannot directly participate in ECB refinancing operations without prior approval from the central institution.

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Registration document 2018