BPCE - 2019 Universal Registration Document

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RISK REPORT

LIQUIDITY, INTEREST RATE AND FOREIGN EXCHANGE RISKS

directly as BPCE for subordinated debt issues (Additional • Tier 1 and Tier 2), senior non-preferred debt and vanilla senior preferred debt issues, in multiple currencies, with the main currencies being the EUR, USD, JPY, AUD and GBP; or as BPCE SFH, the Group’s main issuer of covered bonds; • this issuer, operated by BPCE, specializes in obligations de financement de l’habitat (OH), a category of secured bond guaranteed by French legislation (backed by residential home loans in France). Groupe BPCE works with two other highly specialized operators to round out its MLT funding sources: Natixis for structured senior preferred debt issues (private • placements only) under the Natixis name, and for covered bonds under German law (backed by commercial real estate loans) under the Natixis Pfandbriefbank AG name; Crédit Foncier for covered bonds, known as obligations • foncières (OF), under the Compagnie de Financement Foncier (a subsidiary of Crédit Foncier) name; OFs are a category of covered bond based on French legislation (backed by public sector loans and assets, in line with the new positioning decided in 2018 for this Group issuer, bearing in mind that the collateral still includes residential home loans in France previously manufactured by Crédit Foncier). It should be noted that BPCE is also responsible for the MLT funding activities of Natixis (in addition to the aforementioned structured private placements), which no longer carries out public issues on the markets. BPCE has short-term funding programs governed by French law (NEU CP), UK law (Euro Commercial Paper) and New York State law (US Commercial Paper), and MLT funding programs governed by French law (EMTN and Neu MTN), New York State law (US MTN), Japanese law (Samurai) and New South Wales law (AUD MTN). Lastly, the Group is also able to conduct market securitization transactions (ABS), primarily via RMBS with residential home loans issued by the Banque Populaire and Caisse d’Epargne networks. All Group assets and liabilities are subject to internal liquidity pricing. The guidelines of this pricing policy are decided by the Group’s Asset and Liability Management Committee and aim to reflect changes in the costs of liquidity, customer deposits and market funding, and in asset/liability matching. CENTRALIZED COLLATERAL MANAGEMENT Collateral management is one of the key components of the Group’s liquidity management system. It is based on the following principles: the central institution defines the collateral management • indicators. These indicators are monitored by the Group’s ALM Committee; investment- and management-related decisions are made by • the entities and subsidiaries following rules set out by the central institution;

in the long term, it involves monitoring the institution’s • maturity transformation level. Consequently, BPCE has defined a set of indicators and limits: one-day and one-week liquidity gap indicators measure the • Group’s very short-term funding requirements. These gaps are subject to Group and individual entity limits; stress scenarios measure the Group’s ability to meet its • commitments and continue its regular commercial activities during a crisis depending on short-term funding volumes, medium- and long-term debt maturities and liquidity reserves. Internal stress test indicators are aimed at ensuring short-term liquidity security beyond the one-month horizon required by regulations. These stress tests, based on bank- and/or market-specific scenarios, are broken down into various levels of stress in order to forecast the impact on the Group’s liquidity position; the customer loan/deposit ratio is a relative measurement of • the Group’s autonomy with respect to the financial markets; the Group’s market footprint measures its overall dependence • to date on bond and money market funding. The contribution of the institutions to this coverage is managed by a liquidity budget system. These budgets are reviewed on an annual basis and govern the maximum liquidity consumption for each entity in line with the Group’s budget process; the liquidity gap, which compares the amount of remaining • liabilities with remaining assets over a ten-year period, enables the Group to manage medium- and long-term debt maturities and anticipate its funding requirements. It is governed by Group and individual entity limits; measurement of resource diversification, allowing the Group • to avoid excessive dependence on a single creditor; the pricing policy, which ensures the performance of liquidity • allocation. The definition of these indicators and any associated limits is covered in a body of consolidated standards that is reviewed and validated by the decision-making bodies of the Group and its institutions. CENTRALIZED FUNDING MANAGEMENT The Financial Management division organizes, coordinates and supervises the funding of Groupe BPCE on the markets. The short-term funding of Groupe BPCE is carried out by the Single Treasury and Central Bank Collateral Management team, created following the merger of BPCE and Natixis’ cash management teams. This integrated treasury team is capable of managing the Group’s cash position more efficiently, particularly during a credit crunch. The Group has access to short-term market funding through its two main issuers: BPCE and its subsidiary Natixis. For medium and long-term funding requirements (more than one year), in addition to deposits from customers of the Banque Populaire and Caisse d’Epargne networks, which are the primary source of funding, the Group also issues bonds on the financial markets with BPCE as principal operator, offering the broadest range of bonds to investors:

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UNIVERSAL REGISTRATION DOCUMENT 2019 | GROUPE BPCE

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