BPCE - 2019 RISK REPORT Pillar III

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RISK MANAGEMENT SYSTEM

ADEQUACY OF RISK MANAGEMENT SYSTEMS

Adequacy of risk management systems 3.1

The Group Risk and Compliance Committee, chaired by the Chairman of the Management Board, met four times in 2019 to review the adequacy of Groupe BPCE’s risk management systems, and validated the annual review of the Group’s risk policies. These systems cover all risks, as described in the Ministerial Order of November 3, 2014 on internal control.

Coverage of risks was found to be adequate, consistent with the risk appetite system validated by the BPCE Management Board and Supervisory Board, and related closely to the Group’s strategy and budget oversight.

Risk appetite 3.2

All risks are covered by mechanisms (centrally and at each institution) which, in line with the Group’s risk appetite and strategy, ensure the adequacy of its risk management systems. Groupe BPCE’s Supervisory Board unanimously approved the Group’s risk appetite framework: quantitative indicators,

resilience threshold for each indicator and associated governance. During its annual review, the Supervision Board examined the Group’s risk appetite in October 2019 and its deliberation was unanimously approved.

Risk appetite guidelines

As a decentralized and united cooperative group, Groupe BPCE structures its activity around share capital, held predominantly by the regional institutions, and centralized market funding, optimizing the resources allocated to the entities. Groupe BPCE: through its cooperative nature, is firmly committed to • generating recurring and resilient income for its cooperative shareholders and investors by offering the best service to its customers; must preserve the solvency, liquidity and reputation of each • Group entity – a duty assumed by the central institution through the oversight of consolidated risks, a risk policy and shared tools; consists of regional banks, which own the Group and its • subsidiaries. In addition to normal management operations, in the event of a crisis, solidarity mechanisms between Group entities ensure the circulation of capital and prevent the entities or the central institution from defaulting; focuses on the structural risks of its full-service banking • model, with a predominant retail banking component in France, while incorporating other business lines necessary to provide quality service to all of its customers; diversifies its exposures by developing certain activities in line • with its strategic plan:

development of the corporate and investment banking, – bancassurance and asset management businesses, international expansion (predominantly Corporate – & Investment Banking and Asset Management, with a more targeted approach for retail banking customers). Groupe BPCE’s risk appetite is defined as the level of risk it is willing to accept with the goal of increasing its profitability while maintaining solvency. This risk appetite must be aligned with the institution’s operating environment, strategy and business model, while making customer interests the top priority. In determining its risk appetite, Groupe BPCE aims to steer clear of any major pockets of concentration and to optimize capital allocation. In terms of risk profile, Groupe BPCE incurs risks intrinsically associated with its retail banking and corporate & investment banking activities. Changes to its business model are increasing exposure to some types of risks, particularly risks related to asset management and international businesses. Groupe BPCE does not conduct business unless it has the associated risks sufficiently under control, nor does it exercise proprietary trading activities. Activities with high risk-reward profiles are strictly controlled. In all activities, entities and regions of operation, the Group undertakes to meet the highest standards of ethics, conduct, best execution and transaction security.

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RISK REPORT PILLAR III 2019 | GROUPE BPCE

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