BPCE - 2019 Universal Registration Document

5

FINANCIAL REPORT

BPCE PARENT COMPANY ANNUAL FINANCIAL STATEMENTS

3.7

OPERATING EXPENSES

Accounting principles Operating expenses include payroll costs (wages and salaries), employee profit-sharing and incentive schemes, social security charges and payroll taxes. Other administrative costs are also recorded, including other taxes and fees paid for external services.

Fiscal year 2019

Fiscal year 2018

in millions of euros

Wages and salaries

(187)

(132)

Pension costs and similar obligations* Other social security charges Employee incentive scheme Employee profit-sharing scheme

(44) (81) (20)

(18) (53) (17)

0

0

Payroll taxes

(34)

(26)

Total payroll costs

(366)

(246)

Taxes other than on income Other operating expenses

(6)

(2)

(558)

(515)

Rebilled expenses

587

571

Total other operating expenses

23

54

TOTAL

(343)

(192)

Including additions, utilizations, and reversals of provisions for employee benefit obligations (see Note 3.9.3). *

Operating expenses increased by €151 million in relation to 2018, primarily due to: payroll costs totaling €120 million, arising from staff transfers • resulting from BPCE’s integration of some Crédit Foncier teams and the creation of the Financial Solutions and Expertise division, which integrated employees from EuroTitres and members of the senior management team and IT department of the former Natixis Specialized Financial

Services business (see 1.3). The average headcount during the year, broken down by professional category, was as follows at December 31, 2019: 1,918 managerial staff and 268 non-managerial staff, making a total of 2,186 employees, compared with 1,465 managerial staff and 1,563

non-managerial staff at December 31, 2018;

operating expenses totaling €31 million, mostly related to • Groupe BPCE’s ongoing transformation projects.

3.8

COST OF RISK

Accounting principles “Cost of risk” includes only the cost related to credit risk (or counterparty risk). Credit risk is the existence of a potential loss related to the possibility of the counterparty defaulting on its obligations. The term “counterparty” refers to any legal entity that receives a loan or an off-balance sheet commitment, is party to a forward financial instrument or the issuer of a debt security. Cost of credit risk is calculated when the loan is classified as non-performing, i.e. when it is probable that the Group will not collect all or part of the sums owed under the terms of the commitments made by the counterparty in accordance with the initial contractual provisions, notwithstanding any guarantees or collateral. The credit risk is also measured when a credit risk is identified on performing loans showing a significant increase in credit risk since their initial recognition (see Notes 4.1, 4.2.1, and 4.3.1).

Cost of credit risk therefore consists of all the impairment charges and reversals related to receivables due from customers and banks, fixed-income securities held to maturity (if there is known to be a risk of default by the issuer), provisions for off-balance sheet commitments (excluding off-balance sheet financial instruments) as well as losses on irrecoverable loans and recoveries of bad debts written off. However, allocations to and reversals of provisions, losses on irrecoverable loans or recoveries of impaired loans relating to interest on non-performing loans and receivables for which provisioning is mandatory are classified under “Interest and similar income” and “Other banking income” in the income statement. For trading securities, available-for-sale securities, equity securities available for sale in the medium term and forward financial instruments, cost of counterparty risk is recognized directly in the items recording the gains and losses on these portfolios, except where there is a known risk of default by the counterparty and may effectively be isolated and where changes in counterparty risk provisions are therefore recorded in cost of risk.

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UNIVERSAL REGISTRATION DOCUMENT 2019 | GROUPE BPCE

www.groupebpce.com