BPCE - 2020 Universal Registration Document

5

FINANCIAL REPORT

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

The prepayment penalty is set in the contract, at a reasonable level (2% of the principal amount outstanding during the initial loan period, then 3%-6% of the principal amount outstanding during the repayment period). The terms and conditions for extending the loan are not set in advance but are established two to three months before the extension option expires, in line with market conditions. A State-guaranteed loan may not be covered by another collateral security or guarantee besides the state guarantee, with the exception of those granted pursuant to a ministerial order by the Minister of the Economy and Finance. The self-employed professional or business leader may request or be offered loan repayment insurance, but such insurance is not mandatory. In view of these features, the State-guaranteed loan meets the criteria of a basic lending arrangement (see Note 2.5.1). These loans are therefore recognized at amortized cost, because they are managed in a hold to collect business model (see Note 2.5.1). On subsequent balance sheet dates, they will be measured at amortized cost using the effective interest method. The state guarantee is considered to be an integral part of the terms of the loan and is taken into account when calculating impairment for expected credit losses. The guarantee fee paid to the governmentby the BPCE SA group on granting the loan is recorded in income over the initial term of the loan, using the effective interest method. The impact is recognized in net interest income. A State-guaranteedloan granted to a borrower considered to be non-performing on inception (Stage 3) is classified as a POCI (purchased or originated credit-impaired) asset. However, the grant of a State-guaranteed loan to a given counterparty is not in itself evidence of deterioration in risk, requiring a downgrade to Stage 2 or 3 of the other outstandings of this counterparty. At December 31, 2020, BPCE SA group had issued 1,697 State-guaranteed loans totaling €4 billion (1,664 of which had been disbursed as of December 31, for approximately€4 billion). Information on the segmentation of state-guaranteed loans under the scheme launched in response to the Covid-19 crisis is presented in the Credit risk section of Pillar 3. Loan repayment moratoria and other loan 1.5.1.2 restructuring Due to the Covid-19 crisis, the BPCE SA group offered to grant a range of concessions to its retailer, professional, SME and large corporate clients (including temporarily suspending repayents, revising repayment schedules or renegotiating loan terms), to help them address temporary cash flow difficulties caused by the crisis. GENERAL MEASURES When the lockdown was announced in France, the Group’s entities offered all their professional and SME customers in certain business sectors the possibility of postponing their loan repayments (principal and interest), for six months. Other general measures were subsequently applied in specific sectors, for example, a moratorium of up to twelve months on loan repayments for SMEs in the tourism, hotel and catering sectors. The terms of these moratoria observed the general moratorium provisions described in Article 10 of the EBA guidelines (EBA/GL/2020/02) published on April 2, 2020 and amended on December 2, 2020 (EBA/GL/2020/15).

In France, the market protocol has not been updated for the new EBA guidelines. In accordancewith these guidelines, the widespread granting of moratoria to counterpartiesnot experiencing financial difficulties before the Covid-19 crisis, without applying any specific conditions, is not in itself an indicator of a material increase in credit risk. As such, the implementationof a general moratorium to address temporary liquidity problems arising from the Covid-19 crisis does not automatically lead to loans classed as Stage 1 pre-crisis being downgraded to Stage 2 (or Stage 3 where the loss is more than 1% of the difference between net present value before and after restructuring). As of December31, 2020, BPCESA group had grantedsix-month moratoria for 126,105 loans representing €10,191 million (including €1,460 million granted to small and medium-sized enterprises).The moratoriummay be extendedto twelvemonths for businesses in the tourism, hotel and catering sectors. In addition, €162 million of loans that benefited from a moratorium are classified as Stage 3. More detailed information on the moratoria in the context of State-guaranteedschemes in response to the Covid-19 crisis is presented in the Credit Risk section of Pillar III. INDIVIDUAL MEASURES BPCE SA group also individually support its customers by granting various types of concessions (moratoria, rescheduling or other amendments to loan terms), with the terms and conditions established according to each customer’s individual situation. When granting such a concession, a specific analysis is performed to verify whether the borrower shows evidence of financial difficulties on that date. In the presence of such an indicator, the outstandings are downgraded to Stage 2 (or Stage 3 when the loss is greater than 1% of the difference between the net present value before restructuring and the net present value after restructuring), which results in an adjustment to its provisioning level. Moratoria granted by the Group’s banks are generally charged at the loan’s initial interest rate, meaning that interest continues to accrue during the moratorium.At the end of the moratorium,this interest is added to the loan principal and repaid over the remaining term of the loan (which is extended due to the moratorium). In this case, the moratoriumdoes not imply a loss of cash flow for the bank. No income statement impact is therefore to be recognized. In practice, the granting of a moratorium does not lead to the loan’s derecognitioninsofar as it does not significantly affect the net economic value tohfe loan. 1.5.2.1 For 2020, BPCE SA group's cost of credit risk amounted to €1,204 million, a significant increase compared to 2019, mainly due to the increase in expected credit losses in the year due to the Covid-19 crisis. The health crisis has heavily impacted the economy, with major repercussions for many sectors. Owing to the exceptional circumstances and uncertainties, Groupe BPCE used various communicationsfrom ESMA, the EBA, the ECB and the IASB as guidance when determining expected credit losses in the context of the Covid-19 crisis. IMPACT ON THE USE OF ESTIMATES 1.5.2 Credit risk impairment

400

UNIVERSAL REGISTRATION DOCUMENT 2020 | GROUPE BPCE

www.groupebpce.com