BPCE - 2019 Universal Registration Document

FINANCIAL REPORT

IFRS CONSOLIDATED FINANCIAL STATEMENTS OF GROUPE BPCE AS AT DECEMBER 31, 2019

5.13

PROVISIONS

Accounting principles Provisions other than those relating to employee benefit commitments and similar, regulated home savings products, off-balance sheet commitments, and insurance policies mainly consist of provisions for restructuring, claims and litigation, fines and penalties, and tax risks (excluding income tax). Provisions are liabilities for which the timing or amount is uncertain, but can be reliably estimated. They correspond to current obligations (legal or implicit), resulting from a past event, and for which an outflow of funds will probably be necessary to settle them. The amount recognized in provisions is the best estimate of the expense required to extinguish the present commitment at the balance sheet date. Provisions are discounted when the impact of discounting is material. Changes in provisions are recognized in the income statement on the lines corresponding to the nature of the future expenditure. Provisions on regulated home savings products Regulated home savings accounts (Comptes d’Epargne Logement – CEL) and regulated home savings plans (Plans d’Epargne Logement – PEL) are retail products marketed in France governed by the 1965 law on home savings plans and accounts, and subsequent implementing decrees. Regulated home savings products generate two types of commitments for the Group: a commitment to provide a loan to the customer in the • future at a rate set on inception of the contract (for PEL products) or at a rate contingent upon the savings phase (for CEL products);

a commitment to pay interest on the savings in the future • at a rate set on inception of the contract for an indefinite period (for PEL products) or at a rate set on a half-yearly basis according to an indexing formula regulated by law (for CEL products). Commitments with potentially unfavorable consequences for the Group are measured for each generation of regulated home savings plans and for all regulated home savings accounts. The risks associated with these commitments are covered by a provision determined using a risk-weighted asset base. at-risk saving deposit outstandings correspond to the • uncertain future level of savings for plans in existence at the date the provision is calculated. This is estimated on a statistical basis for each future period taking account of historical investor behavior patterns, and corresponds to the difference between the probable outstandings and the minimum expected outstandings; at-risk loans correspond to the loan outstandings granted • but not yet due at the calculation date plus statistically probable loan outstandings based on historical customer behavior patterns as well as earned and future rights relating to regulated home savings accounts and plans. The commitments are estimated using the Monte Carlo method in order to reflect the uncertainty of future interest rate trends and their impact on customer behavior models and at-risk outstandings. On this basis, a provision is recorded for a given generation of contracts in the event of a situation liable to be detrimental for the Group, with no netting between generations. The provision is recognized under liabilities in the balance sheet and changes are recorded in net interest income and expenses.

5

Reversals unused

Other changes (1)

12/31/2018

Increase

Use

12/31/2019

in millions of euros

Provisions for employee benefit commitments (2)

2,090

204 115 139 573

(198) (213)

(166)

255 (13)

2,184

409

(38)

261

Provisions for restructuring costs (3)

Legal and tax risks (4)

1,702

(26) (18)

(131) (495)

(381)

1,302

Loan and guarantee commitments (5)

654 661

(4)

710 579

Provisions for regulated home savings products

19

(3) 34

(99)

Other operating provisions TOTAL PROVISIONS

1,059 6,575

245

(171)

(47)

1,120

1,295 6,156 Other changes include, in particular, the revaluation differences in respect of post-employment defined-benefit (+€224 million before tax) and the reclassification of provisions for (1) legal and tax risks to Tax Liabilities pursuant to the application at January 1, 2019 of IFRIC 23 (-€418 million) and foreign exchange rate adjustments (+€24 million). o/w €2,028 million for post-employment defined-benefit plans and other long-term employee benefits (see Note 8.2.1). (2) At December 31, 2019, provisions for restructuring costs notably included: (3) €191 million for the voluntary redundancy plan initiated at Crédit Foncier group; • €20 million for the employment protection plan for BPCE International; • €11 million for the COFACE plan. • (425) (1,100) (190)

Provisions for legal and tax risks included €551 million for the exposure on the Madoff fraud. (4) Provisions for credit losses on loan and guarantee commitments given are detailed in Note 7.1.3. (5)

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UNIVERSAL REGISTRATION DOCUMENT 2019 | GROUPE BPCE