BPCE - 2018 Risk report / Pillar III

CREDIT RISK Risk measurement and internal ratings

LGD (LOSS GIVEN DEFAULT) MODELS ➡

Number of models

Exposure class Sovereigns, central governments and central banks

Portfolio

Description/Methodology

Sovereignsand affiliates

1 Expert criteriaincludingquantitativeand qualitative variables

Financial institutions

Banks

1 Expert criteriaincludingquantitativeand qualitative variables

Specialized lending (aircraft, real estate, etc.)

5 Modelsbased on estimatesof asset resale conditions or future cash flows

Other contracts (general,pre-exportfinancing,property investmentcompanies, etc.)

8 (o/w 3 NA)

Modelsbased on estimated losses, segmented bytype of contractand guarantee, or expertcriteria Modelsbasedon estimates ofasset resale conditions, segmentedby typeof asset financed Modelsbased on estimated losses, segmented bytype of contractand guarantee Modelsbased on estimated losses, segmented bytype of contractand guarantee Modelsbasedon estimates ofasset resale conditions, segmentedby typeof asset financed Modelsbased on estimated losses, segmented bytype of contract

5

Corporates

Lease financing

1

3 (o/w 1 NA)

Residential real estate

Other individualand professional customers

2

Lease financing

2

Retail

Revolvingloans

1

NA refers to modelsnot yet approvedfor the determinationof capitalrequirements. *

CCF/EAD (EXPOSURE AT DEFAULT) MODELS ➡

Number of models

Exposure class Sovereigns, central governments and central banks

Portfolio

Description/Methodology

Sovereignsand affiliates

1

Applicationof regulatory inputs

Financial institutions

Banks

1

Applicationof regulatory inputs

2 (o/w 1 NA) 3 (o/w 1 NA)

Corporates

All companies

Conversionfactors,segmented by typeof contract

Residential real estate

Conversionfactors,segmented by typeof contract

2 Conversionfactors and flat-ratevalues, segmented by type of contract

Other individualand professional customers

Retail

Revolvingloans

1

Conversionfactors,segmented by typeof contract

NS refers to non-standardizedmodelsused in determiningcapitalrequirements. *

Internal ratings-based approaches – retail customers For retail customers, Groupe BPCE has established standardized internal ratings-basedmethods and centralized ratings applications used to assess the credit quality of its loan books for better risk supervision.In the Banque Populaire and Caisse d’Epargne networks, they are also used to determinecapital requirementsaccordingto the AdvancedIRB method.

The probability of default of retail customers is modeled by the DRCCP, based in large part on the banking behavior of the counterparties. The models are segmented by type of customer, distinguishingbetweenindividualand professionalcustomers(with or without balance sheets) and according to products owned. The counterparties in each segment are automatically classified using statisticalmodels (usually logistic regressionmodels) into similar and statistically separate risk categories. Probability of default is estimated for each of these categories, based on the observation of average default rates over the longest period possible. These

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Risk Report Pillar III 2018