BPCE - 2019 RISK REPORT Pillar III

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LIQUIDITY, INTEREST RATE AND FOREIGN EXCHANGE RISKS

LIQUIDITY RISK MANAGEMENT POLICY

For medium and long-term funding requirements (more than one year), in addition to deposits from customers of the Banque Populaire and Caisse d’Epargne networks, which are the primary source of funding, the Group also issues bonds on the financial markets with BPCE as principal operator, offering the broadest range of bonds to investors: directly as BPCE for subordinated debt issues (Additional • Tier 1 and Tier 2), senior non-preferred debt and vanilla senior preferred debt issues, in multiple currencies, with the main currencies being the EUR, USD, JPY, AUD and GBP; or as BPCE SFH, the Group’s main issuer of covered bonds; • this issuer, operated by BPCE, specializes in obligations de financement de l’habitat (OH), a category of secured bond guaranteed by French legislation (backed by residential home loans in France). Groupe BPCE works with two other highly specialized operators to round out its MLT funding sources: Natixis for structured senior preferred debt issues (private • placements only) under the Natixis name, and for covered bonds under German law (backed by commercial real estate loans) under the Natixis Pfandbriefbank AG name; Crédit Foncier for covered bonds, known as obligations • foncières (OF), under the Compagnie de Financement Foncier (a subsidiary of Crédit Foncier) name; OFs are a category of covered bond based on French legislation (backed by public sector loans and assets, in line with the new positioning decided in 2018 for this Group issuer, bearing in mind that the collateral still includes residential home loans in France previously manufactured by Crédit Foncier). It should be noted that BPCE is also responsible for the MLT funding activities of Natixis (in addition to the aforementioned structured private placements), which no longer carries out public issues on the markets. BPCE has short-term funding programs governed by French law (NEU CP), UK law (Euro Commercial Paper) and New York State

law (US Commercial Paper), and MLT funding programs governed by French law (EMTN and Neu MTN), New York State law (US MTN), Japanese law (Samurai) and New South Wales law (AUD MTN). Lastly, the Group is also able to conduct market securitization transactions (ABS), primarily via RMBS with residential home loans issued by the Banque Populaire and Caisse d’Epargne networks. All Group assets and liabilities are subject to internal liquidity pricing. The guidelines of this pricing policy are decided by the Group’s Asset and Liability Management Committee and aim to reflect changes in the costs of liquidity, customer deposits and market funding, and in asset/liability matching. CENTRALIZED COLLATERAL MANAGEMENT Collateral management is one of the key components of the Group’s liquidity management system. It is based on the following principles: the central institution defines the collateral management • indicators. These indicators are monitored by the Group’s ALM Committee; investment- and management-related decisions are made by • the entities and subsidiaries following rules set out by the central institution; the entities pool their collateral with the central institution in • order to improve oversight and operationality of collateral management. For entities with a 3G Pool (Natixis, Compagnie de Financement Foncier, BRED, Crédit Coopératif, Banque Palatine), each entity is responsible for its own collateral. Nonetheless, these entities cannot directly participate in ECB refinancing operations without prior approval from the central institution.

Liquidity risk mitigation policy

furthermore, in line with its business model, the Group also • ensures that the liquidity drawn from market resources is appropriately allocated to its constituent business lines; the Group also has an adequately calibrated and centralized • liquidity reserve at the central institution level, which can be promptly solicited to deal with any tensions that might arise. From a more general standpoint, the Group constantly monitors these risks via its stress testing system, which is supplemented by a Contingency Funding Plan (CFP) that identifies additional solutions.

Groupe BPCE maps out all liquidity risk factors applicable to the bank along with their associated materiality. This map forms the basis of its liquidity risk management framework. To keep track of its liquidity risks and define appropriate management and/or corrective actions, the Group has established a reliable, comprehensive and effective internal liquidity management and oversight system including a set of associated indicators and limits. given the importance of continuous market access, the Group • focuses in particular on diversifying its market footprint by geographic area and by counterparty type;

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RISK REPORT PILLAR III 2019 | GROUPE BPCE

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