BPCE - 2020 Universal Registration Document

RISK FACTORS & RISK MANAGEMENT

STRESS TESTS & METHODOLOGIES In a conglomerate approach, a global and integrated system of trajectories and stress tests has been developed. This system encompasses and is based on the three regulations Solvency II, Basel III and Financial Conglomerate. The application of common assumptions in these three dimensions provides a holistic view of the Group’s solvency. The Risk division is mainly responsible for: coordinating the Group’s approach to insurance sector stress • tests, in particular the Solvency II ORSAs; from the determination of the detailed financial assumptions common to the companies, to the analysis at Group level of the results and the formulation of recommendations; analysis of contagion mechanisms and regulatory interactions • (Solvency II (1) , Basel III, Financial Conglomerate). The Group’s insurancecompaniesare included in the bankingSTI (Internal Stress Tests) as part of the ICAAP (Internal Capital Adequacy Assessment Process) normative approach. The modeling includes: stressed insurance parameters (based on ORSA, Own Risk • and Solvency Assessment) in addition to the economic and financial parameters used by the Group;

the simulation of the SCR and MCR Solvency II ratios on the • basis of the ICAAP scenarios in order to objectify any stress capital requirements; the simulation of IFRS variables (Net income retained or • distributed, OCI, value and difference in equity method, etc.) impacting the bank solvency ratio in accordance with prudential specifications; fees and commissions paid by companies to distribution • payment networks, as well as those payable to the Group’s Asset Management players. CNP Assurances has been part of the Group’s ICAAP approach since the establishment of the Complementary Supervisory Committee (CSC CNP). As part of the ICAAP Economic Approach, the Risk division has developed an Economic Capital model for Participations Assurance risk (carry and step-in risk). Designed in coordination with the BPCE/Natixis Financial departments and the Risk division of the companies, the objective of this model is to reassess the bank capital consumed by insurance on an economic basis. It aims to enhance the joint managementof the risk/profitability ratio. In addition, the Risk division contributes to the Group’s work, and coordinatesor supervises the work of insurance companies, which have a quantitative or methodological dimension relating to bancassurance (actuarial methods, linking of insurance to EBA stress tests, etc.).

Activities in 2020

Financial Conglomerate

Stress Tests &Methodologies

Insurance

Asset Management

CNP Complementary Monitoring Committee- Coordination and analysis (risk monitoring; focus on Covid-19, climate risks, non-compliance risks, ORSA)

Group approach to stress tests Insurance - ORSA coordination + SII, BIII and Conglomerate dimensions

CEGC risk profile analysis

Production of Natixis IM risk monitoring indicators

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Group approach to stress tests Insurance - Analysis of major solvency risks and contagion mechanisms

Conglomerate equity surplus - Workshops to review the calculation methods at the various levels

Analysis of solvency ratios in view of the deteriorated market context

Studies on the use of liquidity tools by money market funds

Economic risk capital of Insurance Investments - Objective study of the insurance / banking correlation

Group Liquidity dependence on real estate risk (including surety / mortgage) - Coordination of the analysis

Estimates of the impact of Covid-19 market shocks on NIM results (Stress Tests)

Review of Risk Appetite Framework indicators

(1) The Risk division remains vigilant to changes in Solvency II regulations. A second revision covering a large part of directive 2009/138/EC (including Pillar I) is currently under discussion between the European Commission, EIOPA and the profession.

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UNIVERSAL REGISTRATION DOCUMENT 2020 | GROUPE BPCE