BPCE - 2020 Universal Registration Document

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FINANCIAL REPORT

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

Financial instruments of the retail banking business lines For financial instruments not measured at fair value on the balance sheet, fair value calculations are provided for information purposes and must only be interpreted as estimates. In most cases, the values indicated are not liable to be realized and generally may not be realized in practice. These fair values are thus only provided for information purposes in the notes to the financial statements. They are not indicators used in the interest of overseeing retail banking activities, for which the business model is mainly based on the collection of contractual cash flows. Consequently, the following simplified assumptions were used: The carrying amount of the assets and liabilities is deemed to be their fair value in certain cases. These notably include: short-term financial assets and liabilities (whose initial term is • one year or less) provided that sensitivity to interest-rate risk and credit risk is not material during the period; demand liabilities; • floating-rate loans and borrowings; • transactions in a regulated market (particularly regulated • savings products), whose prices are set by the public authorities. FAIR VALUE OF LOANS TO RETAIL CUSTOMERS The fair value of loans is measured using internal valuation models that discount future payments of recoverable capital and interest over the remaining loan term. Except in special cases, only the interest rate component is remeasured, as the credit margin is established at the outset and not subsequently remeasured. Prepayment options are factored into the model via an adjustment to loan repayment schedules. FAIR VALUE OF LOANS TO LARGE CORPORATES, LOCAL AUTHORITIES AND BANKS The fair value of loans is measured using internal valuation models that discount future payments of recoverable capital and interest over the remaining loan term. The interest rate component is remeasured, as is the credit risk component (where it is an observable piece of data used by customer relationshipmanagers). Failing that, the credit risk component is established at the outset and not subsequently remeasured, as with loans to retail customers. Prepayment options are factored into the model via an adjustment to loan repayment schedules. FAIR VALUE OF DEBT The fair value of fixed-rate debt owed to banks and customers with a term of over one year is deemed to be equal to the present value of future cash flows discounted at the interest rate observed at the balance sheet date. Own credit risk is not generally taken into account.

TRUST PREFERRED SECURITIES (TRUPS) CDOS In 2018, Trups CDOs were valued using a valuation model. The latter was based on projections of future cash flows and default rates determined using a statistical approach that deduced the probability of default of banking institutions on the basis of their financial ratios. For other sectors, default rates were estimated considering the current ratings of assets. As the number of contributions was sufficient, Trups CDOs were marked-to-market at December 31, 2019. Instruments not carried at fair value on the balance sheet IFRS 13 requires disclosure in the notes to the financial statements of the fair value, and the associated fair value levels, of all financial instruments carried at amortized cost, including loans. The valuation methods used to determine the fair value disclosed in the notes to the financial statements are described below. ASSETS AND LIABILITIES OF NATIXIS BUSINESS LINES, THE BPCE CASH MANAGEMENT POOL, AND THE CAISSES D’EPARGNE FINANCIAL PORTFOLIOS Credit and loans recognized at amortized cost and amounts payable under finance leases The fair value of these instruments is determinedby discounting future cash flows. The discount rate applied for a given loan is the rate at which the Group would grant a loan with similar characteristics to a similar counterparty at the reporting date. The interest rate and counterparty risk components are re-assessed. The fair value of repurchase agreements is calculated by discounting expected cash flows at the market rate on the closing date and adding a liquidity spread. If there is a quoted price that meets the criteria of IFRS 13, the quoted price is used. The fair value of loans with an initial term of less than one year is considered to be their carrying amount. This is generally the case for financial assets with a term of one year or less and current accounts. The correspondingreceivablesare classified in Level 2 of the fair value hierarchy. Loans and receivables granted to affiliates are also classified in Level 2. BORROWINGS AND SAVINGS At Natixis, the assessment of the fair value of securities borrowings and debts is based on the method of discounting future cash flows using inputs on the reporting date such as the interest rate curve of the underlyings and the spread at which Natixis lends or borrows. The fair value of debts maturing in less than one year is considered to be the carrying amount. In this situation, they are classified in Level 2 of the fair value hierarchy, as are debts payable to affiliates. The fair value of other amounts due to banks and customers with a term of over one year is deemed to be equal to the present value of future cash flows discounted at the interest rate observed at the balance sheet date, plus the own credit risk of Groupe BPCE. INVESTMENT PROPERTY RECOGNIZED AT COST The fair value of investment property (excluding investment property held by insurance companies) is determined using the rent capitalization method, which is widely used by real estate professionals. The capitalization rate applied to the property depends on a number of factors such as location, the quality and type of building, use, type of ownership, quality of lessee and characteristics of the lease, the interest rate and competition in the real estate market.

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UNIVERSAL REGISTRATION DOCUMENT 2020 | GROUPE BPCE

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