BPCE - 2018 Risk report / Pillar III

CAPITAL MANAGEMENT AND CAPITAL ADEQUACY Regulatory framework

hybrid debt instruments eligible to be included in capital under - Basel II, and which are no longer eligible under the new regulation, may under certain conditions be eligible for the grandfatheringclause. In accordance with this clause, they are gradually excluded over an eight-year period, with a 10% decrease each year. Since January 1, 2018, 40% of all such

instruments declared at December

31, 2013 have been

recognized,then 30% in 2019 and so forth in subsequentyears. The unrecognizedshare may be included in the lower equity tier

if it meets the relevant criteria.

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Credit institutionsmust comply with prudential requirements,which are based onthree pillars that form an indivisible whole:

Pillar I Pillar I sets minimumrequirementsfor capital. It aims to ensure that banking institutionshold sufficient capital to provide a minimumlevel of coverage for their credit risk, market risk and operational risk. The bank can use standardized or advanced methods to calculate its capital requirement.

REVIEW OF MINIMUM CAPITAL REQUIREMENTS UNDER PILLAR I ➡

2014

2015

2016

2017

2018 From 2019

Minimum regulatorycapital requirements CommonEquity Tier 1 (CET1)

4.0% 4.5% 4.5% 4.5% 4.5% 4.5% 5.5% 6.0% 6.0% 6.0% 6.0% 6.0% 8.0% 8.0% 8.0% 8.0% 8.0% 8.0%

Total Tier 1capital (T1 = CET1 + AT1)

Regulatory capital (T1+ T2) Additionalrequirements Capitalconservation buffer

0.625% 1.250% 1.875% 2.5% 0.25% 0.50% 0.75% 1.0% 0.625% 1.250% 1.875% 2.5%

G-SIB buffer applicable to Groupe BPCE  (1)

Maximum countercyclicalbuffer applicableto GroupeBPCE  (2) Maximumtotal capital requirements for Groupe BPCE CommonEquity Tier 1 (CET1)

4.0% 4.5% 6.0% 7.5% 9.0% 10.5% 5.5% 6.0% 7.5% 9.0% 10.5% 12.0% 8.0% 8.0% 9.5% 11.0% 12.5% 14.0%

Total Tier 1capital (T1 = CET1 + AT1)

Regulatory capital (T1+ T2)

G-SIBbuffer:buffer for globalsystemicallyimportantbanks. (1) The countercyclicalbuffer is calculatedquarterly.It was virtuallynil in 2018,as GroupeBPCE’sactivitiesare mainlycarriedout in Franceor in countrieswhichhaveset this bufferat 0%. (2)

Pillar II

Pillar II establishes a process of prudential supervision that complements and strengthens Pillar I. It consistsof: an analysis by the bank of all of its risks, including those already ● covered by Pillar I; an estimateby the bank of the capital requirement for these risks; ●

a comparisonby the banking supervisor of its own analysis of the ● bank’s risk profile with the analysis conductedby the bank, in order to adapt its choice of prudentialmeasureswhere applicable,which may take the form of capital requirementsexceedingthe minimum requirements or any other appropriate technique. For fiscal year 2018, the total capital ratio in force for Groupe BPCE under Pillar II (P2R) was 9.5%, plus a 1.875% capital conservation buffer and a0.75% G-SIB buffer.

Pillar III

The purpose of Pillar III is to establishmarket discipline through a series of reporting requirements.These requirements– both qualitativeand quantitative – are intended to improve financial transparency in the assessment of risk exposure, risk assessment procedures and capital adequacy.

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Risk Report Pillar III 2018