BPCE - 2019 RISK REPORT Pillar III

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RISK MANAGEMENT SYSTEM

RISK APPETITE

Summary of Groupe BPCE’s risk profile in 2019

The following risks are incurred by the Group because of its business model:

Credit risk, generated by the Group’s predominant business (i.e. lending to individual and corporate customers), is governed by risk policies applied to all Group entities, concentration limits defined by counterparty, country and sector, and finally extensive oversight of loan books.

% OF RWA

• Cost of risk: €1.4bn (+5% vs. 2018)

• RWAs: €422bn (+7% vs. 2018)

The loan book has a balanced risk profile

• These exposures are predominantly based on the internal model approach ( 64% of risk-weighted assets).

CREDIT AND COUNTERPARTY RISKS

Gross exposures: €1,204bn , + 4.6% vs. 2018

• Average annual cost of risk: 19 bp (no change vs. 2018) • NPL/gross loan outstandings: 2.7%

88 %

• Coverage of NPL by provisions: 45.9%

Market risk indicators are monitored and analyzed at various position aggregation levels, giving an overview of total exposure and risk consumption by risk factor.

VaR and stress indicators held steady at low levels throughout 2019.

• RWAs: €12.9bn (+21% vs. 2018)

• VaR : €8.5m

• 55% of risk-weighted assets determined using the standardized approach

3 %

MARKET RISKS

• Hypothetical stress test at -€58m (for the worst case scenario: default by a bank) • Historical stress test at -€33m (for the worst case scenario: 2008 ABS & MBS corporate crisis)

Structural interest rate risk, associated in particular with fixed-rate home loans and regulated liabilities, is governed by groupwide standards and individual entity limits; liquidity risk is steered centrally by allocating budget-defined liquidity to round out customer deposits raised by the entities. In 2019, liquidity was maintained at a high level , providing the Group with significant coverage of stress scenarios .

STRUCTURAL ALM RISKS

• Coverage of short-term funding by liquidity reserve: 155%

• 12-month average LCR: 141%

Non-financial risks are non-compliance, fraud, information system security, reputational and misconduct risks, as well as other operational risks.

NON-FINANCIAL RISKS

9 %

• Operational risk-weighted assets: €39bn (+3% vs. 2018)

• 36% of operating losses were recorded under the “External fraud” Basel risk class.

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RISK REPORT PILLAR III 2019 | GROUPE BPCE

www.groupebpce.com

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