BPCE_REGISTRATION_DOCUMENT_2017
RISK REPORT Summary of risks
Legislation and regulatory measures in response to the global financial crisis may materially impact Groupe BPCE and the financialand economic environment in which the Groupoperates Legislation and regulations have recently been enacted or proposed with a view to introducinga number of changes, some permanent,in the global financial environment. While the objective of these new measures is to avoid a recurrence of the global financial crisis, the impact of the new measures could substantially change, and may continue to change, the environment in which Groupe BPCE and other financial institutionsoperate. The measures that have been or may be adopted include more stringent capital and liquidity requirements for internationalized institutions or groups such as Groupe BPCE, taxes on financial transactions,limits or taxes on employees’variable pay over specified levels, limits on the types of activities that commercial banks can undertake (particularly proprietary trading and investment and ownershipin private equity funds and hedge funds), new ring-fencing requirementsrelating to certain activities,restrictionson the types of entities permitted to trade in swaps, restrictions on certain types of financial activities or products such as derivatives, the mandatory write-down or conversion into equity of certain debt instruments, enhanced resolution and recovery mechanisms, new risk-weighting methods (especiallyin insurancebusinesses),periodic stress tests and the creation of new regulatory bodies or the enhancement of resourcesused by existing regulatorybodies, includingthe transfer of certainsupervisory functions to the ECB. Someof these new measures are proposalscurrentlyunder discussion,which are subject to revision and interpretation,notablyto allownationalregulatorsto adapt them to each country’s framework. As a result of some of these measures,Groupe BPCE has reduced,and may further reduce, the size of certain activities in order to comply with the new requirements. These measures are also liable to raise compliance costs. This could cause revenues and consolidatedprofit to decline in the relevant business lines, sales to decline in certain activitiesand asset portfolios, and assetimpairment expenses. Some of these measures could also raise Groupe BPCE’s financing costs. For example,on 9 November2015, the FinancialStabilityBoard finalized international standards requiring systemically important banks to maintainlarge sums of loans subordinated(by law, contract or structure) to certain secured operating liabilities, such as guaranteed or insured deposits. The purpose of these requirements, relative to the “TLAC” (“total loss absorbing capacity”) ratio, is to ensure that losses are absorbed by shareholders or creditors (excluding creditors in respect of secured operating liabilities) and thus without calling onpublic funds. On 21 November 2017, the Financial Stability Board (“FSB”), in consultation with Basel Committee on Banking Supervision and nationalauthorities,has publishedthe 2017 list of global systemically important banks (“G-SIBs”).Groupe BPCE has been removedfrom this list and as a result is no longer classified as a G-SIB under the FSB assessmentframework.However,Groupe BPCE was also on the list of the Global Systemically Important Institutions (“G-SIIs”) and its removalfrom such list will come into effect only on 1st January2019. Groupe BPCE however does not intend to change the way it manages its capital and bail-in buffer requirements. On 23 November 2016, the European Commission issued several legislativeproposalsproposingto amend a number of key EU banking
directivesand regulations,includingthe CRD IV Directive,the CRD IV Regulation, the BRRD and the Single Resolution Mechanism Regulation (as these terms are defined below). If adopted, these legislative proposals would, among other things, give effect to the FSB TLAC Term Sheet and modify the requirementsapplicable to the “minimumrequirementfor own funds and eligible liabilities” (MREL). The implementationof the current texts and the new proposals, and their application to Groupe BPCE or the taking of any action thereunder is currently uncertain. The law n°2016-1691dated 9 December 2016 entered into force on 11 December 2016 created a priority between senior preferred securities and senior non-preferred securities (such as the Senior PreferredNotes and the Senior Non-PreferredNotes) issued by credit institutions and which rank senior to ordinary subordinated instruments. Moreover, the general political environmenthas evolved unfavorably for banks and the financial industry, resulting in additional pressure on the part of legislative and regulatory bodies to adopt more stringent regulatory measures, despite the fact that these measures may have adverse consequences on lending and other financial activities,and on the economy.Becauseof the continuinguncertainty surrounding the new legislative and regulatory measures, it is not possible to predictwhat impactthey will have onGroupe BPCE. Groupe BPCE is subject to significant regulation in France and in several other countries around the world where it operates; regulatory measures and changes could adversely affect Groupe BPCE’s businessand results GroupeBPCE entitiesare subjectto several supervisoryand regulatory schemes in the jurisdictions in which they operate. Non-compliance could lead to significantinterventionby regulatoryauthorities,fines, public reprimand, reputational damage, suspension of operations or, in extreme cases, withdrawalof their operating license. The financial services industry has experiencedincreasedscrutiny from a variety of regulatorsin recent years, as well as an increase in the penalties and fines sought by regulatoryauthorities,a trend that may pick up in the current financial environment. The business and results of Group entities may be materially impacted by the policies and actions of various regulatory authorities in France, other governments of the European Union, the United States, foreign governments and international organizations.Such constraintsmay limit the ability of Group BPCE entities to expand their businesses or conduct certain activities. The nature and impact of future changes in such policies and regulatory measures are unpredictable and are beyond Groupe BPCE’s control. Such changesmay include, but are not limited to, the following: the monetary, interest rate and other policies of central banks and ● regulatory authorities; general changes in government or regulatory policies liable to ● significantly influence investor decisions, in particular on Groupe BPCE’smarkets of operation; general changes in regulatory requirements,including in particular ● prudential rules governing regulatory capital adequacy as well as recovery and resolutionmechanisms;
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changes ininternalcontrol rules and procedures; ● changes inthe competitive environment and prices; ●
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Registration document 2017
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