BPCE - 2018 Risk report / Pillar III

1 SUMMARY OF RISKS Regulatory changes

Call for Advice to the EBA On May 4, the European Commissionissued a Call for Advice to the EBA, seeking technical advice to assess the potential impact of the various elements of the Basel package of reforms on the European banking sector, determine any possible implementation challenges, and propose adjustments to inputs or methodologies ( e.g. on the application of the output floor or treatment of specialized lending) where applicable. In response, the EBA shall prepare a draft report in early 2019 and submit afinal report to theEuropeanCommission inJune 2019. To that end, the EBA called on banks to complete two surveys: a quantitative survey (June 2018) and a qualitative survey (January11, 2019). BPCE considersCRR3/CRD6(transpositionof Basel IV) and EDIS to be the priorities for 2019. There is a strong risk in France that the Governor of the Banque de Francewill recommenda 25-bp increasein the countercyclicalcapital buffer (to 50 bp) to the Economy Minister, applicable to all French exposures asfrom July 1, 2019.

In addition, the Financial Sector Assessment Process (FSAP) required by the IMF every five years was initiatedin June 2018 and will end in July 2019. The purpose of the process is to assess the strength and stability of the French financial system as a whole. The FSAP will be based on liquidity and solvency stress tests conducted on 7 French banks (including BPCE) using prudential data (COREP, FINREP, etc.) and public information. The IMF takes a top-down approach to stress tests. Banks are not asked to contributetechnically by way of additional reports. Interviews were held with the banks in December 2018 and on-site audits willbe performed inMarch 2019. Deliverables willbe discussed between March and July 2019. The report will then be submitted to the IMF Board for approval. The Directorate General of the French Treasury is in charge of coordinatingthe process between the French authorities. It plans to take the opportunity to promote the French legislative and supervisory framework.

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Risk Report Pillar III 2018