BPCE - 2019 Universal Registration Document

RISK REPORT

CAPITAL MANAGEMENT AND CAPITAL ADEQUACY

CHANGES IN GROUPE BPCE’S CAPITAL ADEQUACY IN 2019 The Common Equity Tier 1 ratio was 15.7% at December 31, 2019 versus 15.8% at December 31, 2018. Several non-recurring items impacted the Common Equity Tier 1 ratio in 2019: the implementation of IFRS 16 (-5 basis points); • the deduction, at the instruction of the supervisory authority, • of the portion of SRF and FGDR (deposit insurance and resolution fund) comprising irrevocable payment commitments (-14 basis points); the consolidation of the Natixis Factoring, Sureties • & Guarantees, Leasing, Consumer Finance and Securities Services business lines (-20 basis points); the acquisition of a 50.1% stake in Oney Bank by BPCE SA • (-12 basis points); the methodology impact related to the calculation of • risk-weighted assets associated with the funding of speculative real estate assets (-17 basis points). The change in the Common Equity Tier 1 ratio in 2019 can also be attributed to: the increase in Common Equity Tier 1 capital, driven in • particular by earnings taken to reserves (+74 basis points) and cooperative share inflows (+39 basis points); the increase in business risk-weighted assets (-74 basis • points). At December 31, 2019, the Tier 1 ratio came out at 15.7% and the total capital ratio at 18.8%, compared to 15.9% and 19.6%, respectively, at December 31, 2018. GROUPE BPCE CAPITAL ADEQUACY MANAGEMENT POLICY Capital and total loss absorbing capacity (TLAC) targets are determined according to Groupe BPCE’s target ratings, in line with prudential constraints. Capital adequacy management is therefore subject to a high management buffer which not only greatly exceeds prudential constraints on capital adequacy ratios, but is also well below the trigger for the Maximum Distribution Amount. Capital and TLAC management is thus less sensitive to prudential changes ( e.g. not dependent on G-SIB classification). As a result, the Group very predominantly builds its total loss absorbing capacity from CET1 and additionally from TLAC-eligible debt (mainly Tier 2 capital and senior non-preferred

debt). Moreover, taking a “single point of entry” (SPE) approach, BPCE also issues TLAC-eligible debt. Finally, in addition to TLAC, Groupe BPCE carries bail-inable debt, the majority of which is accepted for the calculation of MREL when deemed by the supervisory authority to have a high capacity for activation: by that definition, senior preferred debt issued by BPCE is eligible for MREL, with Groupe BPCE leaving the possibility of meeting MREL requirements open, beyond its total loss absorbing capacity, with any bail-inable debt instrument. 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. 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). LEVERAGE RATIO The main purpose of the leverage ratio is to serve as an additional risk measurement for determining regulatory capital 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. CAPITAL ALLOCATION MEASURES AND CAPITAL ADEQUACY SUPERVISION

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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

595

UNIVERSAL REGISTRATION DOCUMENT 2019 | GROUPE BPCE