BPCE - 2019 RISK REPORT Pillar III

4

CAPITAL MANAGEMENT AND CAPITAL ADEQUACY

MANAGEMENT OF CAPITAL ADEQUACY

The Single Resolution Board set the Group’s MREL requirement in January 2020 (equivalent to 24.2% of risk-weighted assets at end-2017), which has now been met with room to spare. As a result, the Group does not need to modify or increase its issuance program. CAPITAL ALLOCATION MEASURES AND CAPITAL ADEQUACY SUPERVISION The Group implemented action plans over the course of 2019 aimed specifically at ensuring the capital adequacy of its networks and its subsidiaries. BPCE subscribed for a capital increase by Banque Palatine (€150 million) and a Tier 2 issue by Oney Bank (€33 million).

requirements. CRR Article 429, which sets forth the calculation method for the leverage ratio, was amended by Commission Delegated Regulation (EU) 2015/62 of October 10, 2014. The leverage ratio has been subject to mandatory disclosure since January 1, 2015. The ratio has been under review by the supervisory authority since 2014 and will not be officially implemented until CRR II comes into force, i.e. not before 2021. The leverage ratio is determined by dividing Tier 1 capital by exposures, which consist of assets and off-balance sheet items, restated to account for derivatives, securities financing transactions and items deducted from capital. The minimum leverage ratio requirement is currently set at 3%. Groupe BPCE’s leverage ratio, as calculated under the rules of Commission Delegated Regulation No. 2015/62 of October 10, 2014, was 5.3% at December 31, 2019 based on phased-in Tier 1 capital.

LEVERAGE RATIO

The main purpose of the leverage ratio is to serve as an additional risk measurement for determining regulatory capital

TABLE 11 – TRANSITION FROM THE STATUTORY BALANCE SHEET TO LEVERAGE RATIO EXPOSURE

12/31/2019 1,338,064

12/31/2018 1,273,926

in millions of euros

TOTAL CONSOLIDATED ASSETS AS PER PUBLISHED FINANCIAL STATEMENTS

Adjustment for investments in banking, financial, insurance or commercial entities that are consolidated for accounting purposes, but outside the scope of regulatory consolidation Adjustment for fiduciary assets recognized on the balance sheet pursuant to the operative accounting framework but excluded from the leverage ratio exposure measure Adjustments for derivative financial instruments

(112,925)

(105,014)

(38,028) (15,071)

(33,528) (20,356)

Adjustment for securities financing transactions ( i.e. repos and similar secured lending)

Adjustment for off-balance sheet items ( i.e. conversion to credit equivalent amounts of off-balance sheet exposures)

79,830 (6,722)

74,055 (5,672)

Other adjustments

LEVERAGE RATIO EXPOSURE

1,245,148

1,183,411

Without applying the phase-in measures (except for the 10% deduction of deferred tax assets on tax loss carryforwards) and without taking into account subordinated debt issues not eligible as additional Tier 1 capital, Groupe BPCE leverage ratio came to 5.3% at December 31, 2019 versus 5.3% at December 31, 2018. FINANCIAL CONGLOMERATE RATIO As an institution exercising banking and insurance activities, Groupe BPCE is also required to comply with a financial conglomerate ratio. This ratio is determined by comparing the financial conglomerate’s total capital against all the regulatory capital requirements for its banking and insurance activities. The financial conglomerate ratio demonstrates that the institution’s prudential capital sufficiently covers the total regulatory capital requirements for its banking activities (in

accordance with CRR) and insurance activities, based on the solvency margin established under Solvency 2. The calculation of surplus capital is based on the statutory scope. Insurance company capital requirements, determined for the banking capital adequacy ratio by weighting the equity-method value, are replaced with capital requirements based on the solvency margin. Capital requirements within the banking scope are determined by multiplying risk-weighted assets by the rate in force under Pillar II, i.e. 13.48% at December 31, 2019 versus 12.13% at December 31, 2018. Groupe BPCE expects to take into account the positive effect of the Decree of 24 December 2019 on life insurance surplus capital. At December 31, 2019, Groupe BPCE’s surplus capital amounted to €21 billion.

52

RISK REPORT PILLAR III 2019 | GROUPE BPCE

www.groupebpce.com