BPCE - 2019 RISK REPORT Pillar III

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TYPES OF RISK KEY FIGURES

Types of risk 1.1

Risk macro-category

Definition

Credit and counterparty risks

Risk of loss resulting from the inability of clients, issuers or other counterparties to honor their financial commitments. It includes counterparty risk related to market transactions (replacement risk) and securitization activities. It can be exacerbated by concentration risk.

Financial risks Market risk •

Risk of loss in value of financial instruments resulting from changes in market inputs, from the volatility of these inputs or from the correlations between these inputs. Inputs include exchange rates, interest rates and prices of securities (equities, bonds), commodities, derivatives or any other assets, such as real estate assets. Risk that the Group cannot meet its cash requirements or collateral requirements when they fall due and at a reasonable cost. Risk of loss in interest income or in the value of a fixed-rate structural position in the event of changes in interest rates. Structural interest rate risks are associated with commercial activities and proprietary transactions. Risk associated with a decline in the creditworthiness of a specific issuer or a specific category of issuers. Risk of loss in interest income or in the value of a fixed-rate structural position in the event of changes in exchange rates. Structural interest rate and foreign exchange risks are associated with commercial activities and proprietary transactions. Risk of a legal, administrative or disciplinary penalty, material financial loss or reputational risk arising from a failure to comply with the provisions specific to banking and financial activities (whether these are stipulated by directly applicable national or European laws or regulations), with professional or ethical standards, or with instructions from the executive body, notably issued in accordance with the policies of the supervisory body. Risk of loss resulting from inadequacies or failures attributable to procedures, employees and internal systems (including in particular information systems) or external events, including events with a low probability of occurrence but with a risk of high loss. Risk, above and beyond management of asset-liability risks, associated with the pricing of mortality risk premiums and structural risks related to life and non-life insurance businesses, including pandemics, accidents and disasters (earthquakes, hurricanes, industrial accidents, terrorist acts and military conflicts). Risk that the company will be unable to honor its long-term commitments and/or ensure the continuity of its ordinary operations in the future. Vulnerability of banking activities to climate change, where a distinction can be made between physical risk directly relating to climate change and transition risk associated with efforts to combat climate change.

Liquidity risk •

Structural interest rate risk •

Credit spread risk •

Foreign exchange risk •

Non-financial risks Non-compliance risk •

Operational risk •

Insurance underwriting risks

Strategic business and ecosystem risks Solvency risk •

Climate risk •

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RISK REPORT PILLAR III 2019 | GROUPE BPCE

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