BPCE - 2018 Risk report / Pillar III

First page Table of contents Next page Last page
Communication policy and structure of the Pillar III report5
1. SUMMARY OF RISKS7
1.1 Types of risk8
1.2 Key figures9
1.3 Regulatory changes11
Review of Risk Reduction Measures (“Banking Package”)11
Investment Firms (IFs)11
Non-Performing Loans (NPLs)11
Call for Advice to the EBA12
1.4 Main risks and emerging risks13
Main risks13
Emerging risks13
1.5 Risk factors14
Credit and counterparty risks14
Financial risks15
Insurance risks17
Non-financial risks17
Strategic, business and ecosystem risks19
2. GENERAL STRUCTURE OF GROUPE BPCE’S INTERNAL CONTROL SYSTEM23
2.1 Participants in the control system24
Permanent Control by line management (Level 1)24
Permanent Control by dedicated entities (Level 2)24
2.2 Permanent and Periodic Control departments25
2.3 Structure of Groupe BPCE’s internal control system26
Internal Control Coordination Committee27
Group Risk Management and Compliance Committee: Umbrella Committee27
Committees specific to each department28
3. CAPITAL MANAGEMENT AND CAPITAL ADEQUACY29
3.1 Regulatory framework30
Pillar I31
Pillar II31
Pillar III31
3.2 Scope of application32
Regulatory scope32
3.3 Composition of regulatory capital34
Regulatory capital34
Common Equity Tier 1 (CET1)35
Additional Tier 1 (AT1) capital36
Tier 2 Capital36
3.4 Regulatory capital requirements and risk-weighted assets37
3.5 Management of capital adequacy39
Regulatory capital and capital ratios39
Outlook41
3.6 Detailed quantitative disclosures42
4. RISK GOVERNANCE AND MANAGEMENT SYSTEM65
4.1 Governance of risk management66
Groupe BPCE’s Risk, Compliance and Permanent Control division66
Risk and Compliance functions68
Governance and coordination68
Risk management and compliance culture69
4.2 Groupe BPCE’s risk management system72
Risk appetite72
Stress testing system73
Cross-business risk analysis74
Coordination of Permanent Controls74
4.3 Recovery Plan76
5. CREDIT RISK77
5.1 Credit risk management78
Credit risk governance78
Credit policy80
Rating policy80
Caps and limits80
Credit risk monitoring and supervision system81
Quality assessment of loan outstandings and impairment policy82
Forbearance, performing et non performing exposures84
5.2 Risk measurement and internal ratings85
Current situation85
Rating system86
Internal rating system governance86
Model development process86
Review of internal ratings-based models87
Model mapping87
5.3 Credit risk mitigation techniques93
Definition of guarantees93
Accounting recognition under the standardized or IRB approach93
Conditions for the recognition of guarantees93
Risk diversification93
Guarantors94
Concentration of collateral volumes94
Valuation and management of collateral comprising real guarantees95
5.4 Quantitative disclosures96
Exposure to credit and counterparty risks96
Provisions and impairments98
Non-impaired loans showing past due balances99
Restructured loans100
Non-performing and forborne exposures101
5.5 Detailed quantitative disclosures102
General quantitative disclosures on credit risk103
Credit quality112
Credit risk mitigation118
Credit risk – standardized approach120
Credit risk – internal model approach124
6. COUNTERPARTY RISK137
6.1 Counterparty risk management138
Measuring counterparty risk138
Counterparty risk mitigation techniques138
6.2 Quantitative disclosures140
6.3 Detailed quantitative disclosures142
7. SECURITIZATION TRANSACTIONS153
7.1 Regulatory framework and accounting methods154
Regulatory framework154
Accounting methods154
Terminology155
7.2 Securitization management at Groupe BPCE156
7.3 Quantitative disclosures157
Breakdown of exposures and risk-weighted assets157
Breakdown by rating158
7.4 Detailed quantitative disclosures160
Banking book160
8. MARKET RISKS165
8.1 Market risk policy166
8.2 Market risk management167
Organization167
Risk monitoring167
8.3 Market risk measurement methods169
Sensitivities169
VaR169
Stress tests169
8.4 Quantitative disclosures171
Groupe BPCE VaR171
Stress test results172
Risk-weighted assets and capital requirements173
8.5 Detailed quantitative disclosures174
Breakdown of market risk-weighted assets by approach174
Detailed disclosures on Natixis market risks174
9. LIQUIDITY, INTEREST RATE AND FOREIGN EXCHANGE RISKS179
9.1 Governance and structure180
9.2 Liquidity risk management policy181
Objectives and policies181
Operational management181
9.3 Quantitative disclosures183
Customer loan-to-deposit ratio184
Funding strategy and conditions in 2018185
9.4 Management of structural interest rate risk186
Objectives and policies186
Interest rate risk oversight and management system186
Quantitative disclosures186
9.5 Management of structural foreign exchange risk187
Foreign exchange risk oversight and management system187
Quantitative disclosures187
9.6 Detailed quantitative disclosures on liquidity risk188
Groupe BPCE cash balance sheet188
10. LEGAL RISKS193
10.1 Legal and arbitration proceedings – BPCE194
Check imaging exchange (échange image chèques) commissions194
10.2 Legal and arbitration proceedings – Natixis195
Madoff fraud195
Criminal complaints coordinated by ADAM195
MMR claim196
Union Mutualiste Retraite196
Securitization in the United States196
EDA – Selcodis196
MPS Foundation197
Formula funds197
Société Wallonne du Logement197
SFF/Contango Trading SA197
Lucchini Spa197
10.3 Dependency198
11. NON-COMPLIANCE, SECURITY AND OPERATIONAL RISKS199
11.1 Compliance201
Organization201
Measurement and supervision of non-compliance risk201
Product governance and supervision201
Customer protection201
Activities in 2018202
French Banking Separation and Regulation Act (SRAB)203
11.2 Financial security204
Organization204
Activities in 2018205
11.3 Business continuity206
Organization206
Activities in 2018206
11.4 Information System Security (ISS)207
Organization207
Activities in 2018207
11.5 Operational risks209
Organization209
Activities in 2018209
Incident and loss data collection210
Operational risk oversight211
Incident alert procedure211
Operational risk measurement212
Operational risk mitigation techniques213
11.6 Compliance and Risks – Insurance & Non-Banking Operations214
Insurance compliance and risks214
Additional supervision of financial conglomerates214
Asset management risks and compliance215
Activities in 2018215
11.7 Technical Insurance risks217
Natixis Assurances217
Coface218
CEGC219
12. CLIMATE RISKS221
12.1 Organization222
12.2 Activities in 2018 and strategic guidelines223
13. REMUNERATION POLICY225
14. APPENDICES227
14.1 Index to Pillar III Report tables228
14.2 Cross-reference table for the Pillar III Report230
14.3 EDTF cross-reference table231
14.4 Glossary232

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