BPCE - 2018 Risk report / Pillar III

8 MARKET RISKS

Market risk measurement methods

hypothetical scenarios which consist in simulating changes in - market conditions in all activities on the basis of plausible assumptions concerning the dissemination of an initial shock. These shocks are based on scenarios defined according to economic criteria (real estate crisis, economic crisis, etc.), geopolitical considerations (terrorist attacks in Europe, toppling of a regime in the Middle East, etc.) or other factors (bird flu, etc.). Six theoretical stress tests have been in place since 2010; banking book stress tests are calibratedover a longer period (three ● months) inline with the banking book’smanagementperiods:

a bond stress test calibrated using a mixed hypothetical-historic - approach which reproduces a stress on European sovereigns (similarto the 2011 crisis), a bond stress test calibrated using a mixed hypothetical-historic - approachwhich reproducesa stress on corporates(similar to the 2008 crisis), an equity stress test calibrated over the 2011 historic period, - applied to equity investments for the purpose of the liquidity reserve. The various stress tests are subject to limits adapted by each institution, which are monitored through recurring controls and regular reports.

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Risk Report Pillar III 2018