BPCE - 2019 RISK REPORT Pillar III

RISK MANAGEMENT SYSTEM

RISK APPETITE

Risk appetite framework and groupwide implementation

The risk appetite framework is based on a master document providing a qualitative and quantitative description of the risks that Groupe BPCE is willing to assume, and describing the governance and operating guidelines in effect. The implementation of the risk appetite framework is centered on four key components: (i) the definition of groupwide standards, (ii) the existence of a set of limits in line with those defined by regulations, (iii) the distribution of expertise and responsibilities between the entities and the central institution and (iv) the operation of the governance process within the Group and the different entities, enabling the efficient and resilient application of the risk appetite framework. The Group’s risk appetite framework is regularly updated and is centered on a series of successive limits associated with separate respective authorization levels, i.e.: an observation limit which, if breached, calls for BPCE • Management Board members to decide either to require the

breach to be corrected or to allow the transaction to go ahead on an exceptional basis; a resilience limit which, if breached, exposes the Group to • potential business continuity and/or stability risk. Any such breach must be reported to the BPCE Supervisory Board and addressed by a specific action plan validated by the Board; an extreme limit in conjunction with the Group’s resolution • and recovery plan which, if breached, could jeopardize the Group’s very survival. This extreme limit concerns certain indicators adopted in respect of the Group’s risk appetite. A quarterly dashboard is prepared by the Group’s Risk division, for the purpose of regularly and extensively monitoring all risk indicators and reporting to the supervisory body or/and any committee thereof. The risk appetite framework is adapted by the entities for consistent group-wide implementation.

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Robust financial strength

Groupe BPCE enjoys high liquidity and solvency levels: in terms of solvency, the Group is able to absorb, if need be, • the occurrence of a risk at entity or Group level; in terms of liquidity, the Group has a significant reserve • consisting of cash and securities enabling it meet regulatory requirements, pass stress tests and access central bank unconventional financing mechanisms. It also has a sufficient

amount of high-quality liquid assets eligible for market funding mechanisms and those offered by the European Central Bank. The Group ensures the robustness of this system by conducting comprehensive stress tests on a regular basis, with the aim of verifying the Group’s potential resilience, particularly in the event of a major crisis.

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RISK REPORT PILLAR III 2019 | GROUPE BPCE