BPCE - 2019 RISK REPORT Pillar III

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Contents	2
Communication policy and structure of the Pillar III report	5
1. KEY FIGURES	7
1.1 Types of risk	10
1.2 Regulatory changes	11
Risk Reduction Measures (“Banking Package”)	11
Transposition of Basel IV	11
2. RISK FACTORS	13
Credit and counterparty risks	14
Financial risks	15
Insurance risks	17
Non-financial risks	18
Strategic, business and ecosystem risks	19
Regulatory risks	21
3. RISK MANAGEMENT SYSTEM	25
3.1 Adequacy of risk management systems	26
3.2 Risk appetite	26
Risk appetite guidelines	26
Risk appetite framework and groupwide implementation	27
Robust financial strength	27
Summary of Groupe BPCE’s risk profile in 2019	28
Emerging risks	29
3.3 Risk management	30
Governance of risk management	30
Organization of risk management	30
Risk governance at Group institutions	31
Coordination of business line functions	32
Consolidated risk oversight	33
Risk and compliance culture	34
Macro-level risk mapping – Group institutions	35
Stress testing system	36
3.4 Internal control	37
Permanent control system	38
Periodic Control (Level 3)	38
Structure of integrated control functions	40
Internal Control Coordination Committee	41
3.5 Recovery Plan	42
4. CAPITAL MANAGEMENT AND CAPITAL ADEQUACY	43
4.1 Regulatory framework	44
Pillar I	45
Pillar II	45
Pillar III	45
4.2 Scope of application	46
Regulatory scope	46
4.3 Composition of regulatory capital	48
Regulatory capital	48
Common Equity Tier 1 (CET1)	49
Additional Tier 1 (AT1) capital	50
Tier 2 capital	50
4.4 Regulatory capital requirements and risk-weighted assets	51
4.5 Management of capital adequacy	53
Regulatory capital and capital ratios	53
Supervisory Review and Evaluation Process	55
Outlook	55
4.6 Detailed quantitative disclosures	57
5. CREDIT RISKS	77
5.1 Credit risk management	78
Credit policy	78
Rating policy	78
Credit risk governance	78
Credit risk supervision system	80
Quality assessment of loan outstandings and impairment policy	82
Forbearance, performing and non-performing exposures	83
5.2 Risk measurement and internal ratings	84
Current situation	84
Rating system	84
Internal rating system governance	85
Model development process	85
Review of internal ratings-based models	86
Model mapping	86
5.3 Credit risk mitigation techniques	90
Definition of guarantees	90
Accounting recognition under the standardized or IRB approach	90
Conditions for the recognition of guarantees	90
Division of risks	91
Guarantors	91
Concentration of collateral volumes	91
Valuation and management of collateral comprising real guarantees	92
5.4 Quantitative disclosures	93
Credit risk exposure	93
Provisions and impairments	96
Non-impaired loans showing past due balances	97
Restructured loans	98
Non-performing and forborne exposures	99
5.5 Detailed quantitative disclosures	102
Credit risk – General disclosures	103
6. COUNTERPARTY RISK	137
6.1 Counterparty risk management	138
Measuring counterparty risk	138
Counterparty risk mitigation techniques	138
6.2 Quantitative disclosures	139
6.3 Detailed quantitative disclosures	140
7. SECURITIZATION TRANSACTIONS	153
7.1 Regulatory framework and accounting methods	154
Regulatory framework and accounting methods	154
Accounting methods	154
Terminology	156
7.2 Securitization management at Groupe BPCE	157
7.3 Quantitative disclosures	158
Breakdown of exposures and risk-weighted assets	158
Breakdown by rating	159
7.4 Detailed quantitative disclosures	161
Banking book	161
Trading book	166
8. MARKET RISKS	169
8.1 Market risk policy	170
8.2 Market risk management	171
Risk monitoring	171
8.3 Market risk measurement methods	173
Sensitivities	173
VaR	173
Stress tests	174
Independent price verification	174
8.4 Quantitative disclosures	175
Groupe BPCE VaR	175
Stress test results	176
Risk-weighted assets and capital requirements	177
8.5 Detailed quantitative disclosures	178
Breakdown of market risk-weighted assets by approach	178
Detailed disclosures on Natixis market risks	178
9. LIQUIDITY, INTEREST RATE AND FOREIGN EXCHANGE RISKS	183
9.1 Governance and structure	184
9.2 Liquidity risk management policy	185
Objectives and policies	185
Operational management	185
Liquidity risk mitigation policy	186
9.3 Quantitative disclosures	187
Customer loan-to-deposit ratio	188
Funding strategy and conditions in 2019	189
9.4 Management of structural interest rate risk	190
Objectives and policies	190
Interest rate risk oversight and management system	190
Quantitative disclosures	190
9.5 Management of structural foreign exchange risk	191
Foreign exchange risk oversight and management system	191
Quantitative disclosures	191
9.6 Detailed quantitative disclosures on liquidity risk	192
Groupe BPCE cash balance sheet	192
10. LEGAL RISKS	197
10.1 Legal and arbitration proceedings – BPCE	198
Check imaging exchange (échange image chèques) commissions	198
10.2 Legal and arbitration proceedings – Natixis	199
Madoff fraud	199
Criminal complaint coordinated by ADAM	199
MMR claim	200
Union Mutualiste Retraite	200
Securitization in the United States	200
EDA Selcodis	200
MPS Foundation	201
Formula funds	201
Société Wallonne du Logement	201
SFF/Contango Trading SA	201
Lucchini Spa	201
Competition Authority – Natixis Intertitres et Natixis	202
Bucephalus Capital Limited – Darius Capital Partners	202
BCE/Natixis Wealth Management Luxembourg	202
AMF/NAM Finance	202
AMF/NIM International	202
10.3 Dependency	203
11. NON-COMPLIANCE AND SECURITY RISKS	205
11.1 Compliance	207
Organization	207
Measurement and supervision of non-compliance risk	207
Product governance and supervision	207
Customer protection	208
French Banking Separation and Regulation Act (SRAB)	208
Insurance compliance	209
11.2 Financial security	210
Organization	210
11.3 Business continuity	211
Organization	211
11.4 Information System Security (ISS)	212
Organization	212
12. OPERATIONAL RISKS	215
Organization	216
Incident and loss data collection	217
Operational risk oversight	217
Incident alert procedure	218
Operational risk measurement	218
Operational risk mitigation techniques	218
Insurance risks	219
Natixis Assurances	219
Coface	220
CEGC	221
13. CLIMATE RISK	223
Highlights and strategic objectives	225
14. REMUNERATION POLICY	227
15. APPENDICES	229
15.1 Index to Pillar III report tables	230
15.2 Pillar III cross-reference table	232
15.3 EDTF Cross-Reference Table	233
15.4 Glossary	234

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