BPCE_REGISTRATION_DOCUMENT_2017

3 RISK REPORT

Capital management and capital adequacy

CHANGES IN AT1 CAPITAL ➡

in millions of euros

AT1 capital

12/31/2016 Redemptions

1,304 (1,063)

Issues

-

Foreign exchange effect Phase-inadjustments

43

164 448

12/31/2017

TIER 2 CAPITAL Tier 2 capitalconsistsof: subordinatedinstrumentsissued in compliancewith the restrictive ●

the amount arising from provisionsin excess of expected losses (in ● this calculation performing loans are clearly separated from loans in default). The following deductions are made: equity interests in eligible banking, financial and insurance ● institutions,accordingto the rules on allowancesfor these holdings and the phase-inperiod.

eligibility criteria set forth by Article63 of the CRR; additional paid-in capital related to Tier 2 items; ●

CHANGES IN TIER 2 CAPITAL ➡

in millions of euros

Tier 2 capital

12/31/2016

15,693

Redemptionof subordinatednotes

(29)

Prudential haircut

(335)

New subordinated note issues

0

Phase-indeductions and adjustments

161

Foreign exchange effect

(933)

12/31/2017

14,557

3.3.4

Regulatory capitalrequirements and risk-weighted assets

the Advanced IRB approach – banks use all their internal - componentestimatesfor this approach, i.e. probabilityof default, loss given default,exposureat default and maturity. The methodology applied for IRB approaches is described in greater detail insection5 “Creditrisk”. In addition to requirements related to counterparty risk in market transactions, the directive of June 26, 2013 provides for the calculation of an additional charge to hedge against the risk of loss associated with the counterparty’s credit quality. Capital requirements for the CVA (Credit Valuation Adjustment) are determinedusing the Standardized Approach.

In accordance with regulation No. 575/2013 (CRR) of the European Parliament, credit risk exposure can be measured using two approaches: the “standardized”approach, based on external credit ratings and ● specific risk weightingsaccordingto Basel categoriesof exposure; the “internal ratings based” (IRB) approach, based on the financial ● institution’s internal ratings system, broken down into two categories: the FoundationIRB approach– banks use only their probabilityof - default estimates forthis approach,

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Registration document 2017

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