BPCE - 2020 Universal Registration Document

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FINANCIAL REPORT

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

MEASUREMENT AND MANAGEMENT OF CREDIT RISK Credit risk arises whenever a counterparty is unable to meet its payment obligations and may result from a reduction in credit quality or default by the counterparty. Commitments exposed to credit risk consist of existing or potential receivables and particularly loans, debt securities, equities, performance swaps, performance bonds, or confirmed or undrawn facilities. Credit risk management procedures and assessment methods, risk concentration, the quality of performing financial assets, and the analysis and breakdownof outstandingsare described in the risk management report. 7.1.4

GUARANTEES RECEIVED ON IFRS 9 IMPAIRED INSTRUMENTS The statement below shows the credit and counterparty risk exposure for all BPCE SAgroup’s financial assets. This exposure to credit risk (determinedwithout taking into account the impact of any unrecognized netting or collateral agreements) and to counterparty risk is based on the carrying amount of the financial assets. 7.1.5

Maximum exposure net of impairment

Maximum risk exposure

Impairment

Guarantees

in millions of euros

Debt securities at amortized cost

232

(161)

71

Loans and receivables due from banks at amortized cost Loans and receivables due from customers at amortized cost

31

(29)

2

8,306

(2,655)

5,650

4,542

Loan commitments

142 593

(10)

132 480

32

(113)

329

Guarantee commitments

TOTAL IMPAIRED FINANCIAL INSTRUMENTS (S3)

9,302

(2,968)

6,334

4,903

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. • 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 management of overall interest rate risk and foreign exchange risk is discussed in Chapter 6 “Risk Management –Liquidity, Interest Rate and ExchangeRate 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. INTEREST RATE RISK AND EXCHANGE 7.3 LIQUIDITY RISK

The policy followed by BPCE SA group 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

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UNIVERSAL REGISTRATION DOCUMENT 2020 | GROUPE BPCE

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