BPCE - 2020 Universal Registration Document

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RISK FACTORS & RISK MANAGEMENT

LIQUIDITY, INTEREST RATE AND FOREIGN EXCHANGE RISKS

Liquidity, interest rate and foreign exchange 6.9 risks

6.9.1

Governance and structure

Information provided in the respect of IFRS 7. Like all credit institutions, Groupe BPCE is exposed to structural liquidity, interest rate and foreign exchange risks. These risks are closely monitored by the Group and its institutions to secure immediate and future income, balance the balance sheets and promote the Group’s development. Groupe BPCE’s Audit Committee and Supervisory Board are consulted on general ALM policy and are informed of major decisions taken regarding liquidity, interest rate and foreign exchange risk management. The implementation of the chosen policy is entrusted to the Group Asset and Liability Management Committee. Each year, Groupe BPCE’s SupervisoryBoard validates the main lines of the ALM policy, i.e. the principles of market risk measurements and levels of risk tolerance. It also reviews the risk limit system each year. Each quarter, Groupe BPCE’s Audit Committee is informed of the Group’s position through management reports containing the main risk indicators. The Group Asset and Liability Management Committee, chaired by the Chairman of the BPCE Management Board, is responsible for the operational implementation of the defined policy. It meets every two months and its main duties are as follows: determine the Group’s general policy on liquidity and • transformation risk; examine the consolidated view of the structural risks of the • Group and its various entities, as well as changes in the balance sheet; Liquidity risk is defined as the risk of the Group being unable to meet its commitments or to settle or offset a position, due to market conditions factors specific to Groupe BPCE, within a specified period and at a reasonable cost. It reflects the risk of not being able to meet net cash outflows over short- to long-term horizons. Liquidity risk is assessed differently over the short, medium- and long-term: in the short-term, it involves assessing an institution’s ability • to withstand a crisis; in the medium-term, liquidity is measured in terms of cash • requirements; in the long-term, it involves monitoring the institution’s • maturity transformation level. Liquidity risk management policy 6.9.2

define the structural risk limits of the Group and the liquidity • pools and monitor them (with approval by the DRCCP); approve the allocation to liquidity pools and the limits; • monitor liquidity consumption at Group and liquiditypool level; • approve the Groupe BPCE’s global MLT and ST annual • refinancing program and monitor it overall; approve the investment and allocation criteria as well as the • desired overall profile of the Group’s liquidity reserve. The structural liquidity, interest rate and foreign exchange risk management policy is also jointly implemented by the Asset/Liability management division (oversight of funding plan implementation, management of liquidity reserves, cash management, calculation and monitoring of the various risk indicators) and the Risk division (validation of the control framework, validation of models and agreements, controls of compliance with rules and limits). The Group Financial Management division and the Group Risk division are responsible for adapting this framework to their respective functions. The adaptation of the operational management framework within each institution is subject to validation by the Board of Directors, the Steering Board and/or the Supervisory Board. Each institution has a special operational committee that oversees implementation of the funding strategy, Asset and Liability management and management of liquidity, interest rate and foreign exchange risks for the institution, in line with rules and limits set at Group level. The Banque Populaire and Caisse d’Epargne networks implement the risk management system using a shared Asset/Liability management tool.

Liquidity risk is likely to materialize in the event of a decline in sources of financing that could be caused by a massive withdrawal of customer deposits or by problems in executing the annual financing plan following a widespread crisis of confidence on the markets or events specific to the Group. It could also be triggered by an increase in financing requirements due to an increase in drawdowns on loan commitments, an increase in margin calls or a higher collateral requirement. All liquidity risk factors are accurately mapped, updated annually and presented to the Group Asset Liability Management Committee. This mapping identifies the various risks as well as their level of materiality, assessed according to various criteria shared between the Asset and Liability and Risk divisions.

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UNIVERSAL REGISTRATION DOCUMENT 2020 | GROUPE BPCE

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