BPCE - 2019 Universal Registration Document

MARKET RISKS RISK REPORT

Market risks 6.8

6.8.1

Market risk policy

For banking book activities, investment policies at Group level are defined and reviewed centrally for Group institutions with market risk activities. The risk management framework related to this activity is defined in accordance with investment policies and is reviewed annually.

Risk policies governing market transactions are defined by the Risk Management divisions of institutions with trading activities. These policies are based on a qualitative and forward-looking perspective.

Market risk management 6.8.2

preparing the consolidated dashboard for the various • decision-making bodies. In addition, the Risk division coordinates the market risk management process by organizing national market risk days, regular audio sessions or theme-based working groups. HIGHLIGHTS In the ever-changing regulatory environment of 2019, the Risk division carried out several major operational projects for the Group: performance of internal stress tests (ICAAP and SRB); • creation of a Group valuation team, in charge of harmonizing • and rolling out standardized valuation processes across the Group; enhancement of the control system with greater cooperation • between Market Risks and Accounting in the interest of improving the reliability and completeness of scopes of risk monitored and levels of fair value; review of the supervision of banking book activities (in • accordance with the Group investment policy) and stress test indicators defined by asset class; the IT and function-oriented project on “financial risks” was • continued, aimed at revising the architecture of market risk monitoring systems with the ultimate goal of pooling IT resources with Natixis. As a result: production times for market risk indicators were reduced, – particularly those associated with the banking book, the scope of production for market risk indicators was – expanded to include economic indicators for counterparty risk, a project was initiated to establish Group-level XVA – calculations using a consistent methodology in a single software tool. RISK MONITORING Information provided in the respect of IFRS 7 The Risk division is responsible for monitoring the risks associated with all Groupe BPCE capital market activities, subject to regular review by the Group Market Risk Committee.

The Risk division works in the areas of risk measurement, definition and oversight of limits, and supervision of market risks. It is tasked with the following duties: Risk measurement: establishing the principles of market risk measurement, which • are then validated by the various appropriate Risk Management Committees; implementing the tools needed to measure risk on a • consolidated basis; producing risk measurements, including those corresponding • to operational market limits, or ensuring that they are produced as part of the risk management process; determining policies for adjusting values or delegating them to • the Risk Management divisions of the relevant institutions and centralizing the information; performing Level 2 validation of operating results and cash • valuation methods. Definition and oversight of limits: examining the limit framework and setting limits (global caps • and, where necessary, operational limits) adopted by the various appropriate Risk Management Committees, as part of the comprehensive risk management process; examining the list of authorized products for the relevant • institutions and the conditions to be observed, and submitting them for approval to the appropriate Market Risk Committee; examining requests for investments in financial products, or in • new capital market products or activities, by the relevant banking institutions via the New Market Product Committee; harmonizing processes used to manage trading book • allocations and medium- to long-term portfolios of the Banque Populaire and Caisse d’Epargne networks (indicators, definition of indicator limits, oversight and control process, and reporting standards). Market risk supervision: consolidating the mapping of Group market risks and • contributing to the macro-level mapping of Group and institution risks; performing or overseeing daily supervision of positions and • risks with respect to allocated limits (overall and operational limits) and established resilience thresholds, organizing the decision-making framework for limit breaches and performing or overseeing permanent supervision of limit breaches and their resolution;

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UNIVERSAL REGISTRATION DOCUMENT 2019 | GROUPE BPCE