BPCE - 2018 Risk report / Pillar III

5 CREDIT RISK

Credit risk management

These scenarios are defined using the same organization and whether they were subject to the IRB or the standardizedapproach governance as those defined for the budget process, requiring an for the calculation of risk-weighted assets. For unrated exposures annual review based on proposals from the Economic Research (insignificantfor GroupeBPCE), prudentvaluationrules are appliedby department and approval by the Executive ManagementCommittee. default,assigningthe lastrating on the scale before“at risk” status.

For consistencypurposes, the baseline scenario serves as the budget scenario. Two variants – an optimistic view and a pessimisticview – are also developedaround this scenario.The probabilityof occurrence of each scenario is reviewed on a quarterly basis by the Group’s Watch List and Provisions Committee. The inputs thus defined are used to measure expected credit losses for all rated exposures,

The IFRS 9 input validation process is fully aligned with the Group’s existing model validation process. Inputs are reviewed by an independentunit responsiblefor internal model validation,the unit’s conclusionsare then examined by the Group Models Committee,and subsequent recommendations followedup by the validation unit.

Forbearance, performing and non-performing exposures Forbearance results from the combination of a concession and financial hardship, and may involve performing or non-performing loans. Two types of concessions can be made when restructuring a loan (performingforborne exposures): a contractual modification,which is formalized through a rider or ● waiver;

The decision to downgrade a loan from the “performing forborne exposure” to the “non-performing forborne exposure” category is subject to a different set of rules than the rules for default (new concession or payment more than 30 days past due) and, like the decision to move a loan out of the “forborne” category, is subject to probationary periods. Forced restructuring, overindebtedness proceedings, or any kind of default as defined by the Group standard, which involves a forbearancemeasure as previouslydefined, results in classificationas a non-performing forborne exposure. Retail forborneexposuresare identifiedin the informationsystems.In addition, there is a guide for using expert opinion to identify forbearance exposures, particularly for short-, medium-, and long-termloans to non-retail counterparties.Permanentcontrols are performed onany non-retail forborne exposures. Disclosures on “forbearance, performing and non-performing exposures” are made in addition to disclosures on default and impairment.

refinancing, which is formalized by setting up a new loan ● agreementat the same time as or in the seven days preceding the

full or partial repayment of another loan agreement. Groupe BPCE recognizes financial hardship when: a payment has been past due for more than 30 ● payments pastdue for technical reasons); or

days (excluding

an overdraft authorization has been exceeded for more than ● 60 days in the three months preceding the rider or refinancing operation; a loan has been rated“at-risk”. ●

82

Risk Report Pillar III 2018