BPCE - 2020 Universal Registration Document

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FINANCIAL REPORT

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

units of UCITS for which the fund has not published a recent • NAV at the valuation date, or for which there is a lock-up period or any other constraint calling for a significant adjustment to available market prices (NAV, etc .) in respect of the low liquidity observed for such shares; issued debt instruments designated at fair value are classified • as Level 3 when the underlying derivatives are classified as Level 3. The associated “issuer credit risk” is regarded as observable and it is therefore classified as Level 2; CDS contracted with credit enhancers (monoline insurers), for • which the valuation model used to measure write-downs is similar to the Credit Valuation Adjustment (CVA) used for counterparty risk. The model also takes into account the expected amortization of exposures and the counterparty spread implicit in market data; plain vanilla derivatives are also classified as Level 3 fair value • when exposure is beyond the liquidity horizon determined by underlying currencies or by volatility surface ( e.g. certain foreign currency options and volatility caps/floors). In accordance with the Ministerial Order of February 20, 2007, as amended by the Order of November 23, 2011 on capital requirements for credit institutions and investment companies and pursuant to the European Regulation of June 26, 2013 (CRR) on the Basel III requirements, for each of the models used, a description of crisis simulations applied is provided in Chapter 3 “Risk Management”.

Under IFRS 9, day one profit should be recognized only if it is generated by a change in the factors that market participants would consider in setting a price, i.e. only if the model and parameters input into the valuation are observable. If the selected valuation model is not recognized by current market practices, or if one of the inputs significantly affecting the instrument’s valuation is not observable, the trading profit on the trade date cannot be recognized immediately in the income statement. It is taken to income on a straight-line basis over the life of the transaction or until the date the inputs become observable. Any losses incurred at the trade date are immediately recognized in income. As of December 31, 2020, given the health crisis, BPCE conducted an exhaustive review of its portfolio. At December 31,2020, instruments for which the recognition of day one profit/loss has been deferred mainly included: multi-underlying structured equity and index products; • mono-underlying structured products indexed to sponsored • indexes; synthetic loans; • options on funds (multi-assets and mutual funds); • structured fixed income products; • securitization swaps. • These instruments are almost all located at Natixis.

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UNIVERSAL REGISTRATION DOCUMENT 2020 | GROUPE BPCE

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