BPCE - 2020 Universal Registration Document

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RISK FACTORS & RISK MANAGEMENT

RISK MANAGEMENT SYSTEM

EMERGING RISKS Groupe BPCE places great importance on anticipating and managing emerging risks in today’s constantly changing environment. To this end, a prospective analysis identifying the risks that could impact the Group is carried out every six months and presented to the Risk and ComplianceCommittee, followed by the Board’s Risk Committee. The global Covid-19 pandemicand the lockdowns implemented in most countries in the spring and autumn led to a violent and sudden contraction of the economies. This crisis, whose duration and intensity are still very uncertain, has profoundly changed the environment in which the Group’s activities are carried out. It has greatly increased the intensity of the shocks caused by the various types of risk affecting our businesses lines. A massive vaccination campaign is being implemented to cover this pandemic risk. There now appears to be a predominant risk of future deterioration in the Group’s credit portfolios. The impact of the health crisis, which is particularly strong in certain sectors, the increase in corporate debt to cope with it, in particular through state-guaranteed loans, as well as the expected rise in unemployment despite furlough schemes, appear to drive the future deterioration in the Group’s exposure and an inevitable and potentially significant increase in the cost of risk. GOVERNANCE OF RISK MANAGEMENT Risk management is governed by two main bodies at Group level: the Supervisory Board, which is supported by the Board’s Risk Committee, and the ExecutiveManagementCommittee, of which the Head of Risk Management is a member. Chaired by the Chairman of the Management Board, the Group Risk and Compliance Committee, an umbrella committee, sets the broad outlines of the risk policy and examines issues related to non-financial risks (specifically those related to banking, insurance and investment service compliance, and to financial security), annually reviews the risk appetite system, and approves a prospective risk analysis twice a year. Risk management 6.3.3

Low-to-negative interest rates have had a continuous adverse impact on the profitability of commercial banking activities, due to the predominanceof fixed-rate home loans and life insurance activities. The international geopolitical environment is an ongoing source of concern, with various geopolitical tensions continuing to weigh on general economic conditions and fueling uncertainties. As the economy and financial services have grown increasingly digitized, banks have had to remain constantly vigilant against cyber threats. The sophistication of cyber attacks and potential vulnerability of their IS systems are both major risks for Groupe BPCE, in conjunction with the expectations of the regulatory authority. Groupe BPCE is acutely aware of the changes in the regulatory environment, particularly in terms of new standards on provisions and guidelines on non-performing loans, and particularly the new definition of default and the finalization of Basel III. Climate change and social responsibilityare increasinglycovered in the risk management policy. Lastly, operational risks are receiving close attention, notably with the application of crisis management systems when necessary. monitor and manage risks, pursuant to the Ministerial Order of November 3, 2014 on internal control. They ensure that the risk management system is effective, complete and consistent, and that risk-taking is consistent with the guidelines for the business (particularly targets and resources of the Group and its institutions). These duties are formalized in Groupe BPCE’s Internal Control Charter, an umbrella charter. It is based on the two charters of the control functions, namely the Internal Audit Charter and the Group Risk, Compliance and Permanent Control Charter. The various departments of the Group Risk division are involved in all risks (credit, financial, operational, climate and non-banking investments) by acting on: the risk policy and the resulting standards; • permanent monitoring and control; • coordination. •

ORGANIZATION OF RISK MANAGEMENT

Groupe BPCE’s Risk division and Corporate Secretary’s Office – in charge of compliance and permanent control – measure,

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UNIVERSAL REGISTRATION DOCUMENT 2020 | GROUPE BPCE

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