BPCE - 2020 Universal Registration Document

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CAPITAL MANAGEMENT AND CAPITAL ADEQUACY RISK FACTORS & RISK MANAGEMENT

ADDITIONAL TIER 1 (AT1) CAPITAL Additional Tier 1 capital includes: subordinated instruments issued in compliance with the • restrictive eligibility criteria set forth by CRR Article 52;

additional paid-in capital related to these instruments. • Deductions comprise equity interests in eligible banking, financial and insurance institutions, according to the rules on allowances for these holdings.

CHANGES IN AT1 CAPITAL

AT1 capital

in millions of euros

12/31/2019 Redemptions

23

- - -

Issues

Foreign exchange effect Phase-in adjustments

(15)

12/31/2020

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TIER 2 CAPITAL Tier 2 capital consists of: subordinated instruments issued in compliance with the • restrictive eligibility criteria set forth by CRR Article 63; additional paid-in capital related to Tier 2 items; •

the amount arising from provisions in excess of expected • losses (in this calculation, performing loans are clearly separated from loans in default). Deductions comprise equity interests in eligible banking, financial and insurance institutions, according to the rules on allowances for these holdings.

CHANGES IN TIER 2 CAPITAL

Tier 2 capital

in millions of euros

12/31/2019

13,309 (1,741) (1,275)

Redemption of subordinated notes

Prudential haircut

New subordinated note issues

-

Phase-in deductions and adjustments

(447) (589) 9,257

Foreign exchange effect

12/31/2020

Regulatory capital requirements and risk-weighted assets 6.4.4

In accordance with regulation No. 575/2013 (CRR) of the European Parliament, credit risk exposure can be measured using two approaches: the “standardized” approach, based on external credit ratings • and specific risk weightings according to Basel exposure classes; the “internal ratings based” (IRB) approach, based on the • financial institution’s internal ratings system, broken down into two categories: the Foundation IRB approach – banks use only their – probability of default estimates for this approach,

the Advanced IRB approach – banks use all their internal – component estimates for this approach, i.e. probability of default, loss given default, exposure at default and maturity. The methodology applied for IRB approaches is described in greater detail in section 5 “Credit risk.” In addition to requirementsrelated to counterparty risk in market transactions, the regulation of June 26, 2013 provides for the calculation of an additional charge to hedge against the risk of loss associated with counterparty credit risk (CCR). Capital requirements for the Credit Valuation Adjustment (CVA) are determined using the Standardized Approach.

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UNIVERSAL REGISTRATION DOCUMENT 2020 | GROUPE BPCE

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