BPCE - 2020 Universal Registration Document

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RISK FACTORS & RISK MANAGEMENT

RISK MANAGEMENT SYSTEM

STRESS TESTING SYSTEM Groupe BPCE has been developing stress tests since 2011 that can be performed using the risk modules for Group strategic analysis purposes and regulatory purposes.

There are two types of stress tests: internal stress tests; • regulatory stress tests (including in particular the EBA’s 2018 stress test published on • November 2, 2018). Governance of the Group’s stress testing system is based on a comprehensive approach covering all Group entities, taking into consideration their specific characteristics, and covering the following risks: credit risk: change in cost of risk and risk-weighted assets; • securitization portfolio and counterparty risk: change in impairment and risk-weighted • assets; market risks: market shocks, change in securities portfolios and risk-weighted assets; • operational risks; • insurance risk. • Risks associated with sovereign exposures are addressed according to their accounting classification in market risk or credit risk.

The methodologies used to determine the projections are based on: the methodology stipulated by the ECB and the EBA for regulatory stress • tests. Internal methodologies facilitating the use of stress tests for risk oversight and management purposes, and in budget exercises.

Several scenarios are tested in order to assess all impacts: Scenario 1

Baseline scenario comprising the budget scenario Two severe yet plausible scenarios generating relevant information on the Group’s resilience capacity Two reverse scenarios: one for ICAAP and the other for theRecovery Plan (RP), based on areas of vulnerability and serving toinvestigate highly adverse conditions for the Group

Scenario 2

Scenario 3

Scenario 4 Specific scenarios for the Recovery Plan (RP) and therecovery and resolution options Models are used for each risk category to determine the impacts of scenarios on the various income statement items and capital requirements.

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UNIVERSAL REGISTRATION DOCUMENT 2020 | GROUPE BPCE

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