BPCE - 2019 Universal Registration Document

FINANCIAL REPORT

STATUTORY AUDITORS’ REPORT ON THE CONSOLIDATED FINANCIAL STATEMENTS

EMPHASIS OF MATTER Without qualifying the opinion expressed above, we draw your attention to the accounting changes related to first-time application of IFRS 16 (Leases) and interpretation IFRIC 23 (Uncertainty over income tax treatments) as described in Note 2.2 to the consolidated financial statements. JUSTIFICATION OF ASSESSMENTS - KEY AUDIT MATTERS In accordance with the requirements of Articles L. 823-9 and R. 823-7 of the French Commercial Code ( Code de commerce ) relating to the justification of our assessments, we inform you of the key audit matters relating to risks of material misstatement that, in our professional judgment, were of most significance in our audit of the consolidated financial statements of the current period, as well as how we addressed those risks. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, approved under the circumstances described above, and in forming our opinion thereon, and we do not provide a separate opinion on specific items of the consolidated financial statements. Impairment of loans and receivables (stages 1, 2 and 3) Risk identified and main judgments

The Groupe BPCE SA is exposed to credit and counterparty risks. These risks result from the inability of one of its clients or counterparties to honor their financial commitments, in particular, covering their loan activities. In accordance with the “impairment” aspect of IFRS 9, your Group records impairments and provisions intended to cover expected (Stages 1 and 2 loans) or proven (Stage 3 loan) losses. Impairment for expected losses (Stages 1 and 2) is mainly determined based on models developed by BPCE integrating different inputs (probability of default, loss rate in the event of default, PD, LGD forward-looking information…), in addition to, if necessary, sectoral-based charges based on local specificities. Loan outstandings having a proven counterparty risk (Stage 3) are mainly impaired on an individual basis. These impairments are assessed by Management depending on estimated future recoverable cash flows for each loan concerned. We considered the identification and assessment of credit risk to be a key audit matter given that the provisions resulting therefrom represent significant estimates for the preparation of the accounts and requires Management to exercise judgment with respect to classifying the loan outstandings in the different stages, determining the Stage 1 and 2 impairment calculation inputs and methods and the assessment of the amount of provisioning for Stage 3 loan outstandings on an individual basis.

In particular, in the context of the low cost of risk maintained by the Group on its main market, we considered the assessment of the appropriateness of the level of credit risk hedging by provisions and the amount of related cost of risk to be a key audit matter for fiscal year 2019. Exposures to credit and counterparty risk on which IFRS 9 impairments are calculated represent approximately 40% of total assets of Groupe BPCE SA at December 31, 2019 (40% and €310 billion of gross outstandings only for loans and receivables). The impairment on outstanding and related loans amounts to €3.4 billion of which €0.2 billion for Stage 1, €0.3 billion for Stage 2, €2.5 billion for Stage 3 and €0.4 billion for POCI. The cost of risk for fiscal year 2019 amounts to €0.5 billion. For more information on accounting principles and exposures, please see Notes 5.5 and 7.1 to the consolidated financial statements.

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UNIVERSAL REGISTRATION DOCUMENT 2019 | GROUPE BPCE