BPCE_PILLAR_III_2017

CAPITAL MANAGEMENT AND CAPITAL ADEQUACY Regulatory framework

hybrid debt instruments eligible to be included in capital under - Basel II, and which are no longer eligible under the new regulation, may under certain conditions be eligible for the grandfatheringclause. In accordance with this clause, they are gradually excluded over an eight-year period, with a 10% decrease each year. In 2017, 50% of all such instruments

reported at December 31, 2013 were recognized, 40% will be recognized in 2018 and so forth in subsequent years. The unrecognizedshare may be included in the lower equity tier if it

meets therelevant criteria.

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Credit institutionsmust comply with prudential requirements,which are based onthree pillars that form an indivisible whole:

Pillar I Pillar I sets minimumrequirementsfor capital. It aims to ensure that banking institutionshold sufficient capital to provide a minimumlevel of coverage for their credit risk, market risk and operational risk. The bank can use standardized or advanced methods to calculate its capital requirement. REVIEW OF MINIMUM CAPITAL REQUIREMENTS UNDER PILLAR I ➡

2014

2015

2016

2017

2018

From 2019

Minimum regulatory capitalrequirements CommonEquity Tier 1 (CET1)

4.0% 4.5% 4.5% 4.5% 4.5% 5.5% 6.0% 6.0% 6.0% 6.0% 8.0% 8.0% 8.0% 8.0% 8.0%

4.5% 6.0% 8.0% 2.5% 1.0% 2.5%

Total Tier 1capital (T1 = CET1 + AT1)

Regulatory capital (T1+ T2) Additionalrequirements Capitalconservation buffer

0.625% 1.250% 1.875% 0.25% 0.50% 0.75% 0.625% 1.250% 1.875%

G-SIB buffer applicable to Groupe BPCE (1)

Maximum countercyclicalbuffer applicableto GroupeBPCE (2) Maximumtotal capital requirements for Groupe BPCE Common Equity Tier 1 (CET1)

4.0% 4.5% 6.0% 7.5% 9.0% 5.5% 6.0% 7.5% 9.0% 10.5% 8.0% 8.0% 9.5% 11.0% 12.5%

10.5% 12.0%

Total Tier 1capital (T1 = CET1 + AT1)

Regulatory capital (T1+ T2) 14.0% G-SIBbuffer:buffer for globalsystemicallyimportantbanks,G-SIBbuffermaintainedfollowingGroupeBPCE’sremovalfrom the G-SIB list at end-2017.Consequently,GroupeBPCEwill no longerbe (1) subjectto the G-SIBbufferas fromJanuary 1,2019,but will continueto observean equivalentD-SIBbuffer. The countercyclicalbuffer is calculatedquarterly.It was virtuallynil in 2017,as GroupeBPCE’sactivitiesare mainlycarriedout in Franceor in countrieswhichhaveset this bufferat 0%. (2)

Pillar II

Pillar II establishes a process of prudential supervision that complements and strengthens Pillar I. It consistsof: an analysis by the bank of all of its risks, including those already ● covered by Pillar I; an estimateby the bank of the capital requirement for these risks; ●

comparison by the banking supervisor of its own analysis of the ● bank’s risk profile with the analysis conductedby the bank, in order to adapt its choice of prudentialmeasureswhere applicable,which may take the form of capital requirementsexceedingthe minimum requirements or any other appropriate technique. For fiscal year 2017, the total capital ratio in force for Groupe BPCE under Pillar II was 9.5%, excluding the capital conservation buffer and the G-SIB buffer. This ratio remains unchangedfor 2018.

Pillar III The purpose of Pillar III is to establishmarket discipline through a series of reporting requirements.These requirements– both qualitativeand quantitative – are intended to improve financial transparency in the assessment of risk exposure, risk assessment procedures and capital adequacy.

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Risk Report Pillar III 2017