BPCE - 2018 Risk report / Pillar III

CAPITAL MANAGEMENT AND CAPITAL ADEQUACY Management of capital adequacy

an assessmentof the institution’sgovernance,business model and ● information system. Based on the conclusionsof the SREP carried out by the ECB in 2018, Groupe BPCE must maintain a consolidated Common Equity Tier 1 ratio of 9.75% as from March 1, 2019,including: 1.75% in respect of Pillar II requirements (excluding Pillar II ● guidance); 2.50% inrespectof the capital conservation buffer; ● 1.00% in respect of the buffer for global systemically important ● banks (G-SIB buffer). The corresponding total capital requirement will be 13.25% (excludingPillar II guidance). In addition to these buffers, over the course of 2019, the counter-cyclical buffer will be determined according to the distributionof Group risks by country and regulationsin force in each country. With a Common Equity Tier 1 ratio of 15.8% at end-2018 (with phase-in measures), Groupe BPCE has exceeded the specific capital requirements setby the ECB. Outlook As at December 31, 2018, Groupe BPCE had already achieved the targets set for the Common Equity Tier 1 ratio (> 15.5%) and TLAC ratio (> 21.5%) in the 2018-2020strategic plan. Even so, the Group as a whole will remain focused on continuously improving its financial strength in2019. The Group was added back to the list of G-SIBs (Global Systemically ImportantBanks) inNovember2018, with effect in2020. MREL – TLAC The regulatory framework for bank resolution and bail-in was stabilized in 2015. New complementary indicators for capital adequacy and leverage ratios will be implemented via the Minimum Requirement for own funds and Eligible Liabilities (MREL) and Total Loss AbsorbingCapacity (TLAC). Groupe BPCE has already established internal oversight of these indicators. The MREL (Minimum Requirement for own funds and Eligible Liabilities) ratio was introduced by the BRRD. Senior unsecured debt

As regards the internal capital adequacy assessment under Pillar II, the principlesdefined in the ICAAP/ILAAPguidelinespublishedby the ECB in February 2018 were applied as of this year in Groupe BPCE’s ICAAP. The assessment is thus carried out using two different approaches: a “normative”approach aimed at measuringthe impact of internal ● stress tests within three years of the initial Pillar I regulatory position; an “economic” approach aimed at identifying, quantifying and ● hedging risks using internal capital over the short term (one year) and using internal methodologies.The methodologiesdevelopedby Groupe BPCE provide a better assessment of risks that are already covered under Pillar I, and also an additional assessment of risks that arenot covered by Pillar I. The results obtained using these two approaches confirmed the Group’s financial soundness and no capital buffer is necessary in addition tothe existing regulatorybuffers. with a maturity of more than one year and the Group’s own funds make up the numerator of the MREL ratio. In November 2015, the Single Resolution Board published a provisional methodology for setting the MREL requirement under the current regulatory framework. This methodology sets the MREL requirement based on risk-weighted assets equal to double the sum of total capital requirements, including buffers, minus 125 basis points. The Single Resolution Board set Groupe BPCE’s MREL requirementin 2018. The Group currently meets this requirement, and in fact exceeds it; accordingly, it is not required tomodify or increase its issuance plan. Draft changes to the MREL regulatory framework and introduction of the TLAC ratio in Europe The regulatory text is currently being finalized and should be published in 2019. It will introduce the transposition of the TLAC principles, which the Group expects to meet without being required to modify its issuance plan, as it has already adequatelyprepared to satisfy its requirements.

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Risk Report Pillar III 2018