BPCE - 2020 Universal Registration Document

FINANCIAL REPORT

BPCE PARENT COMPANY ANNUAL FINANCIAL STATEMENTS

2.5

PRINCIPLES APPLICABLE TO BANKING

The basic method for valuing accounting entries is the historical cost method and all balance sheet items are presented, as appropriate, net of amortization, provisions and allowances for impairment. Specific accounting principles are presented in the Notes to which they refer. 2.4 Preparation of the financial statements requires to make estimates and assumptions in certain areas with regard to uncertain future events. These estimates are based on the judgment of the individuals preparing these financial statements and the information available at the balance sheet date. Actual future results may differ from these estimates. With respect to the financial statements for the period ended December 31, 2020 in particular, accounting estimates requiring assumptions were mainly used for the following measurements: the value of financial instruments determined on the basis of • valuation techniques, including the value in use of investments in associates; provisions recognized as liabilities on the balance sheet; • calculations related to the cost of pensions and future • employee benefits. Uncertainties arising from the Covid-19 crisis are described in Note 1.5. USE OF ESTIMATES AND JUDGMENTS

RESOLUTION MECHANISMS The terms and conditions governing the establishment of the deposit and resolution guarantee fund were amended by the Ministerial Order of October 27, 2015. For the Guarantee Fund in respect of cash, collateral and securities deposits, the cumulative amount of contributions made by the Group represented a non-material amount. Contributions (which are non-refundable in the event of a voluntary withdrawal of authorization) had no material impact on BPCE’s financial statements. Contributions paid in the form of partner or association certificates and cash security deposits recognized as assets in the balance sheet were not material. The resolution fund was set up in 2015 in accordance with European directive 2014/59/EU (Bank Recovery and Resolution directive), which established a framework for the recovery and resolution of banks and investment firms, i.e. European Regulation 806/2014 (Single Resolution Mechanism (SRM) Regulation). As of 2016, it became the Single Resolution Fund (SRF), formed by the Member States participating in the Single Supervisory Mechanism (SSM). The SRF is a financing mechanism available to the resolution authority (Single Resolution Board) for the implementation of resolution procedures. The Single Resolution Board set the level of contributions for 2020 in accordance with Delegated Regulation 2015/63 and Implementing Regulation 2015/81 supplementing the BRRD on ex-ante contributions to bank resolution financing mechanisms. The amount of contributions made available for the fiscal year totaled €60.5 million, of which €51.4 million recognized as an expense and €9.1 million in cash security deposits recognizedas assets in the balance sheet (15% of funds in cash security deposits). The cumulativeamount of contributionsrecognizedas assets on the balance sheet totaled €41 million at December 31, 2020.

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Note 3

Information on the income statement

3.1

INTEREST AND SIMILAR INCOME AND EXPENSES

Accounting principles Interest and similar commissionincome is recognizedon a rata basis. For the fiscal year 2020, the negative interest is presentedas follows: a negative interest on an asset is presented as an interest • expense in NBI; a negative interest on a liability is presented as interest • income in NBI. For the fiscal year December 31,2019, negative interest was presented net of positive interest on financial assets and liabilities, respectively.

Commissions and fees related to granting or acquiring a loan are treated as additional interest amortized over the effective life of the loan, on a pro rata basis according to the outstanding amount due. The portion of income receivedduring the year from bonds or negotiable debt securities is also recognized. The same applies to perpetual deeply subordinatednotes that meet the definition of a Tier 1 regulatory capital instrument. The Group considers that these revenuesare effectivelysimilar in nature to interest.

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UNIVERSAL REGISTRATION DOCUMENT 2020 | GROUPE BPCE