BPCE_PILLAR_III_2017

9 LIQUIDITY, INTEREST RATE AND FOREIGN EXCHANGE RISKS Liquidity risk management policy

For medium and long-term funding requirements (more than one year), in additionto deposits from customersof the Banque Populaire and Caisse d’Epargne network, which are the primary source of funding, the Group also issues bonds throughtwo mainoperators: BPCE, either directly as BPCE or through BPCE SFH, which issues ● legal covered bonds ( obligations de financement de l’habitat – “OH”), a category of secured bond backed by French legislation;and Compagniede FinancementFoncier, a subsidiary of Crédit Foncier, ● which issues covered bonds known as obligations foncières (OF), also backedby French legislation. Note that BPCE is also responsible for the medium and long-term funding activities of Natixis, which is no longer a regular market issuer, and Crédit Foncier. BPCE has short-term funding programs (certificates of deposit, Euro Commercial Paper and US Commercial Paper) and medium- and long-term funding programs (Medium Term Notes (or MTN), Euro Medium Term Notes (or EMTN), US MTN, AUD MTN and a securitized bond program, backed by the home loans of the Banque Populaireand Caisse d’Epargne network). All Group assets and liabilitiesare subject to internalliquiditypricing, whose guidelines are decided by the Group’s Asset and Liability

Management Committee and aim to take into account changes in market liquidity costs and asset/liability matching.

CENTRALIZED COLLATERAL MANAGEMENT Collateral managementis one of the key componentsof the Group’s liquidity management system. This management is based on the following principles: the central institution defines the collateral management ● indicators. These indicators are monitored by the Group’s ALM Committee; investment- and management-relateddecisions are made by the ● entities and subsidiaries following rules set out by the central institution; entity collateral is pooled with the central institutionwith the aim ● of improving oversight and operationality of collateral management. For entities with a 3G Pool (Natixis, SCF, BRED, Crédit Coopératif, Banque Palatine), each entity is responsible for its own collateral. Nonetheless, these entities cannot directly participate in ECB refinancing operations without prior approval from the central institution.

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Risk Report Pillar III 2017