BPCE - 2019 RISK REPORT Pillar III

SECURITIZATION TRANSACTIONS

SECURITIZATION MANAGEMENT AT GROUPE BPCE

Securitization management at Groupe BPCE 7.2

Banking book EAD amounted to €16.5 billion at December 31, 2019 (up €0.4 billion year-on-year). The positions were mainly carried by Natixis (€12.1 billion), BPCE SA (€2.9 billion, positions arising from the transfer of a portfolio of home loan and public asset securitizations from Crédit Foncier in September 2014) and BRED (€1.4 billion). The EAD increase can primarily be attributed to: the business lines comprising Natixis’ roll-out plan • (+€0.8 billion), and particularly sponsoring (+€576 million), origination (+€152 million) and investment (+€76 million); the decrease in exposures comprising BPCE SA group’s • workout portfolio (-€382 billion); The workout portfolio exposures of the Corporate • & Investment Banking division (formerly GAPC – workout portfolio management, i.e. -€79 million) and BPCE are managed under a run-off method, whereby positions are gradually amortized but still managed (including disposals) in order to safeguard the Group’s interests by actively reducing positions under acceptable pricing conditions. Note: • Crédit Foncier’s securitization positions, which boast solid – credit quality, were sold to BPCE at their balance sheet value, with no impact on the Group’s consolidated financial statements (over 90% of the securitization portfolio was transferred to BPCE on September 25, 2014). These exposures are recognized in loans and receivables (“L&R”) and do not present a significant risk of loss on completion, as confirmed by the external audit carried out at the time of the transfer. This audit confirmed the robustness of the quarterly internal stress test carried out and the credit quality of the securitization portfolio, consisting predominantly of European Investment Grade RMBS; residual Natixis workout portfolio positions, transferred at – end-June 2014 to the Corporate & Investment Banking division, are managed on a run-off basis;

BRED also holds investments in securitization vehicles – outside Groupe BPCE in the form of debt securities amounting to €1.4 billion (+€107 million), mostly in the Consolidated Management of Investments (GCI) business line. This portfolio’s investment objective is to generate recurring income or unrealized capital. NJR is a GCI subsidiary that invests mainly in securitized assets eligible for Central Bank refinancing and in real estate. The various relevant portfolios are specially monitored by the entities and subsidiaries, and by the central institution. Depending on the scope involved, special management or steering committees regularly review the main positions and management strategies. The central institution’s Risk Division regularly reviews securitization exposures (quarterly mapping), changes in portfolio structure, risk-weighted assets and potential losses. Regular assessments of potential losses are discussed by the Umbrella Committee, as are disposal opportunities. At the same time, special purpose surveys are conducted by the teams on potential losses and changes in risk-weighted assets through internal stress scenarios (risk-weighted assets and loss on completion). Risk-weighted assets are monitored according to changes in ratings and impacts associated with methodology adjustments made by the rating agencies. In addition, performance is also monitored with the aim of anticipating rating changes and credit risk. RWA is calculated on the basis of ratings issued by authorized agencies, which rate the transactions in which the Group invests. Finally, the Risk division controls risks associated with at-risk securitization positions by identifying ratings downgrades and monitoring changes in exposures (valuation, detailed analysis). Major exposures are systematically submitted to the Group Watchlist and Provisions Committee, which meets quarterly to determine the appropriate level of provisioning.

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RISK REPORT PILLAR III 2019 | GROUPE BPCE