BPCE - 2018 Risk report / Pillar III

8 MARKET RISKS

Market risk management

for Natixis: given the significance of its capital market activities, ● Natixis’ risk management system is specifically tailored to this entity; for the Banque Populairenetwork:only BRED Banque Populairehas ● 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. All limits (operationalindicators,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 throughthe supervisionof 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 sensitivityto interest rates, both overall and by time buckets, as well as by counterparty,is monitoreddaily. Supervisionof this activityalso includes specific stress scenarios as well as exposure limits per operator (for both individual and cumulative transactions processed per day).

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Risk Report Pillar III 2018