BPCE - 2020 Universal Registration Document

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FINANCIAL REPORT

IFRS CONSOLIDATED FINANCIAL STATEMENTS OF GROUPE BPCE AS AT DECEMBER 31, 2020

7.1.6

CREDIT RISK MITIGATION MECHANISMS: ASSETS OBTAINED BY TAKING POSSESSION OF COLLATERAL

The information provided in the risk management report required under IFRS 7 and relating to the management of market risk comprises: VaR for the Groupe BPCE scope; • the conclusions of the global stress tests. • INTEREST RATE RISK AND EXCHANGE 7.3 RATE RISK Interest rate risk is the risk that unfavorable changes in interest rates will adversely impact the Group’s annual results and net worth. Exchange rate risk is the risk of losses resulting from changes in exchange rates. The Group’s approach to the managementof overall interest rate risk and foreign exchange risk is discussed in Chapter 6 “Risk Management – Liquidity, Interest Rate and Exchange Rate Risks”. 7.4 Liquidity risk is the risk that the Group will be unable to honor its payment commitmentsas they fall due and replace funds when they are withdrawn. The funding procedures and liquidity risk management arrangements are disclosed in the risk management report. Disclosures relating to the management of liquidity risk required by IFRS 7 are provided in Chapter 6 “Risk Management – Liquidity, Interest Rate and Exchange Rate Risk”. LIQUIDITY RISK meeting the definition of plan assets, the amount of the provision is reduced by the fair value of these assets. The cost of defined-benefitplans recordedin expensesfor the period includes: the service cost (representing the rights acquired by beneficiaries over the period), the past service cost (revaluationdifferenceson actuarial liabilities followingan amendment or reduction in the plan), the net financial cost (effect of unwinding the discount on the net obligation for interest income generated by plan assets) and the effect of pension drawdowns. Revaluation differences on actuarial liabilities caused by changes in demographic and financial assumptions and past-experience effects are recorded in gains and losses recognized directly in other comprehensive income not recyclable to profit or loss. Other long-term employee benefits include awards • accruing to current employees and payable 12 months or more after the end of the period in which the employee renders the related service. They mainly include long-service awards and deferred variable remuneration payable in cash and not indexed to the share price.

The policy followed by Groupe BPCE entities is to sell assets obtained by taking possession of collateral as soon as possible. The amount of these assets was non-material at December 31, 2020.. 7.2 Market risk refers to the possibility of financial loss due to market trends, such as: interest rates: interest rate risk is the risk that the fair value or • future cash flows of a financial instrumentwill fluctuate due to changes in market rates of interest; exchange rates; • prices: market price risk is the risk of a potential loss resulting • from changes in market prices, whether they are caused by factors specific to the instrument or its issuer, or by factors affecting all market traded instruments. Variable-income securities, equity derivatives and commodity derivatives are exposed to this type of risk; and more generally, any market parameter involved in the • valuation of portfolios. Systems for the measurement and monitoring of market risks are presented in the risk management report. MARKET RISK

Note 8

Employee benefits and similar

Accounting principles There are four categories of employee benefits:

short-termemployee benefits such as wages, salaries, paid • annual leave, bonuses, and profit sharing and incentive schemes which are expected to be paid within 12 months of the end of the period in which the employee renders the service are recognized in expenses: post-employmentbenefits paid to retired staff break down • into two categories: defined-contribution plans and defined-benefit plans. Defined-contribution plans such as French national plans are those for which Groupe BPCE’s obligation is limited to payment of a contribution; there is no obligation for the employer regarding a certain level of benefits. Contributions paid into these plans are recognized as an expense for the period. Defined-benefitplans are those for which Groupe BPCE has undertaken to provide a given amount or level of benefits. Defined-benefit plans are subject to provisions calculated based on an actuarial assessment of the amount of the obligation, taking into account demographic and financial assumptions.When these plans are funded by external funds

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UNIVERSAL REGISTRATION DOCUMENT 2020 | GROUPE BPCE

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