BPCE_REGISTRATION_DOCUMENT_2017

RISK REPORT Capital management and capital adequacy

Changes in Groupe BPCE’s capital adequacy in 2017 Groupe BPCE’s capital adequacy was strengthenedduring 2017: the Common Equity Tier 1 ratio, which takes into account phase-in measures set out in CRR/CRD IV, was 15.3% at December 31, 2017, improving onthe ratio of 14.1% at December 31, 2016. The CommonEquity Tier 1 ratio improvedby 120 basis points in 2017, on the backof: the € 3.7 billion rise in Common Equity Tier 1, driven by retained ● earnings; the strict management of risk-weighted assets, which totaled ● € 386 billion at December 31, 2017, down € 4.6 billion compared with December31, 2016. In addition, acquisitions carried out by Natixis had a limited impact on the Group’s ratio in 2017, with an impact of around -4 basis points on the Common Equity Tier 1 ratio for the acquisition of Investors Mutual Limited and around -3 basis points for the acquisition of 60% of Dalenys. At December 31, 2017, the Tier 1 ratio stood at 15.4%, representing an increase compared with December 31, 2016. Finally, the total capital ratio stood at 19.2% at December 31, 2017, as no Tier 2 issues were carried out during the fiscal year. Excluding the CRR/CRD IV phase-in measures, the Common Equity Tier 1 ratio was 15.4% at December 31, 2017 versus 14.2% at December31, 2016. Groupe BPCE capital adequacy management policy Capital and total loss absorbing capacity (TLAC) objectives are determined according to Groupe BPCE’s target ratings, in line with prudential constraints. Capital adequacy management is therefore subject to a high management buffer which not only greatly exceeds prudential constraints on capital adequacy ratios, but is also well below the trigger for the MaximumDistribution Amount. Capital and TLAC management is thus less sensitive to prudential changes (e.g. not dependenton G-SIB classification).As a result, the Group very predominantlybuilds its total loss absorbingcapacityfrom

CET1 and additionally from TLAC-eligibledebt (mainly Tier 2 capital and senior non-preferred debt). Moreover, taking a “single point of entry” (SPE) approach,BPCE issues this TLAC-eligible debt. Finally, in addition to TLAC, Groupe BPCE carries debt eligible for bail-in, the majority of which is acceptedfor the calculationof MREL when deemedby the supervisoryauthorityto have a high capacityfor activation:by that definition,senior preferred debt issued by BPCE is eligiblefor MREL, with GroupeBPCE leavingthe possibilityof meeting MREL requirements open, beyond its total loss absorbing capacity, with any“bail-inable”debt instrument. The Group implemented action plans in 2017 aimed specifically at ensuringthe capital adequacyof its networksand its subsidiaries.For example, BPCE granted redeemable subordinated loans to CASDEN Banque Populaire ( € 140 million) and Banque Palatine ( € 50 million) and subscribedfor two perpetualdeeply subordinatednotes issued by Natixis ($500 million each). Leverage ratio The main purposeof the leverageratio is to serve as an additionalrisk measurement for determining regulatory capital requirements. Article 429 of the CRR, which sets forth the calculationmethod for the leverageratio, was amendedby CommissionDelegatedregulation (EU) 2015/62 of October10, 2014. The leverage ratio has been subject to mandatory disclosure since January 1, 2015, with a gradual implementationtimetable. The ratio has been under review by the supervisory authority since 2014 and will not be officially implementeduntil CRR II comes into force, i.e. not before 2019. The leverage ratio is determined by dividing Tier 1 capital by exposures, which consist of assets and off-balance sheet items, restated to account for derivatives, repo transactions and items deducted from capital. The minimum leverage ratio requirement is currently set at 3%. Groupe BPCE’s leverage ratio, as calculated under the rules of CommissionDelegated regulation No. 2015/62 of October 10, 2014, was 5.1%at December31, 2017 based onphased-inTier 1 capital. Capital allocation measures and capital adequacy supervision

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Registration document 2017