BPCE - 2019 Universal Registration Document

RISK REPORT

LIQUIDITY, INTEREST RATE AND FOREIGN EXCHANGE RISKS

Liquidity, interest rate and foreign exchange 6.9 risks

6.9.1

Governance and structure

Information provided in the respect of IFRS 7 Like all credit institutions, Groupe BPCE is exposed to structural liquidity, interest rate and foreign exchange risks. These risks are closely monitored by the Group and its institutions to secure immediate and future income, balance the balance sheets and promote the Group’s development. Groupe BPCE’s Audit Committee and Supervisory Board are consulted on general ALM policy and are informed of major decisions taken regarding liquidity, interest rate and foreign exchange risk management. The implementation of the chosen policy is entrusted to the Group Asset and Liability Management Committee. Each year, Groupe BPCE’s Supervisory Board validates the main lines of the ALM policy, i.e. the principles of market risk measurements and levels of risk tolerance. It also reviews the risk limit system each year. Each quarter, BPCE Group’s Audit Committee is informed of the Group’s position through management reports containing the main risk indicators. The Group Asset and Liability Management Committee, chaired by the Chairman of BPCE’s Management Board, is responsible for the operational implementation of the established policy, and for the management of the structure and operation of the risk management system. This committee notably sets the rules and limits governing the management of the three major risk Structural liquidity risk is defined as the risk of the Group not having sufficient funds to meet its commitments or to settle or offset a position due to market conditions within a specified period and at a reasonable cost. This could occur, for example, in the event of a run on the bank or a general crisis of confidence on the markets. OBJECTIVES AND POLICIES The main aim of the Group’s liquidity risk management system is to always be in a position to cope with a prolonged, highly intense liquidity crisis while keeping costs under control, promoting the balanced development of the business lines and complying with regulations in force. To this end, the Group relies on three mechanisms: supervision of each business line’s liquidity consumption, • predominantly by maintaining a balance between growth in the credit segment and customer deposit inflows; centralized funding management aimed primarily at • supervising the use of short-term funding, spreading out the Liquidity risk management policy 6.9.2

categories applicable at the consolidated level and to each institution, as well as the main guidelines in terms of funding policy, allocation of liquidity to the business lines and management of risk indicators. It regularly monitors the risk indicators and changes to the main structural balance sheet aggregates of the Group and its main institutions. The structural liquidity, interest rate and foreign exchange risk management policy is also jointly implemented by the Asset/Liability management function (oversight of funding plan implementation, management of liquidity reserves, cash management, calculation and monitoring of the various risk indicators) and the Risk Management function (validation of the control framework, validation of models and agreements, controls of compliance with rules and limits). The Group Financial Management division and the Group Risk Management division are responsible for adapting this framework to their respective functions. The adaptation of the operational management framework within each institution is subject to validation by the Board of Directors, the Steering Board and/or the Supervisory Board. Each institution has a special operational committee that oversees implementation of the funding strategy, Asset and Liability management and management of liquidity, interest rate and foreign exchange risks for the institution, in line with rules and limits set at Group level. The Banque Populaire and Caisse d’Epargne networks implement the risk management system using a shared Asset/Liability management tool.

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maturity dates of medium- and long-term funds and diversifying sources of liquidity; establishment of liquidity reserves. • In addition to these measures, a consistent set of indicators, limits and management rules are combined in a centralized framework of standards and rules. These indicators and rules allow for the measurement and consolidated management of liquidity risk.

OPERATIONAL MANAGEMENT OPERATIONAL LIQUIDITY RISK MANAGEMENT

Liquidity risk is managed at the consolidated Group level and at each entity. Liquidity risk is assessed differently over the short, medium and long term: in the short term, it involves assessing an institution’s ability • to withstand a crisis; in the medium term, liquidity is measured in terms of cash • requirements;

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UNIVERSAL REGISTRATION DOCUMENT 2019 | GROUPE BPCE