BPCE_PILLAR_III_2017

SECURITIZATION TRANSACTIONS Regulatory framework and accounting methods

When a financial asset is derecognized in full, a gain or loss on disposal is recognized in the income statement, reflecting the difference between the carrying amount of the asset and the considerationreceived, correctedwhere applicablefor any unrealized profit or loss that would have previously been recognized directly in equity. Given the relatively low value of the assets in question and relative infrequency of securitization transactions, assets pending securitization continue to be recognized in their original portfolio. Specifically, they continue to be recognized under “Loans and receivables” when that is their original category. Terminology Conventionalsecuritization: this consists of the transfer to investors of financial assets such as loans or receivables, transforming these loans into financialsecuritiesissued on the capital market via special purpose vehicles. Synthetic securitization: in a synthetictransaction,ownershipof the asset is not transferredbut the risk is transferredthrough a financial instrument, i.e. the credit derivative. Resecuritization: a securitizationin which the credit risk associated with a portfolio of underlying assets is divided into tranches and for which at least one of the underlying asset exposures is a securitization position. Tranche: a fraction of the credit risk set out contractuallyand which is associatedwith an exposureor exposures. Securitization position: exposure to a securitization transaction or arrangement.

For synthetic securitizationtransactions,assets are not derecognized as long as the institution retains control over them. The assets continue to be recognized in accordance with their original classificationand valuationmethod. Any impairmentof said assets is reviewed if riskis transferred. Consolidation or non-consolidation of securitization vehicles is analyzed in accordance with IFRS 10 based on the institution’s ties with the vehicle. These principles are described in Note 3 “Consolidationprinciples and methods” to the consolidatedfinancial statements.

Liquidity line: the securitizationposition resulting from a financing agreement aimed at ensuring the punctuality of payment flows to investors. Originator: either an entity which, on its own or through affiliates, was directly or indirectly involved in the original agreement which created the obligations of the debtor or potential debtor and which gave rise to the securitization transaction or arrangement; or an entity that purchases a third party’s on-balancesheet exposures and then securitizes them. Sponsor: an entity, other than the originator, that establishes and manages an asset-backed commercial paper program, or other securitization operation or arrangement that securitizes exposures purchased from third-party entities. Investor: the Group’s position when it holds securitizationpositions in which it has invested, but in which it does not act as originatoror sponsor. These are mainly tranches acquired in programs initiated or managed by external banks.

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Risk Report Pillar III 2017