BPCE_REGISTRATION_DOCUMENT_2017

3 RISK REPORT

Capital management and capital adequacy

TRANSITION FROM THE STATUTORY BALANCE SHEET TO LEVERAGE RATIO EXPOSURE ➡

in millions of euros

12/31/2017 1,259,850

12/31/2016 1,235,240

TOTALCONSOLIDATEDASSETS AS PERPUBLISHED FINANCIALSTATEMENTS Adjustment for investments in banking, financial,insurance or commercial entitiesthat are consolidated for accounting purposes butoutsidethe scopeof regulatory consolidation Adjustment for fiduciaryassetsrecognized on thebalancesheet pursuantto the operative accountingframework butexcluded from the leverageratio exposure measure

(99,239)

(88,774)

-

-

Adjustmentsfor derivative financial instruments Adjustment for securities financingtransactions ( i.e.

(36,598) (13,400)

(59,513) (7,332)

reposand similar secured lending)

Adjustment for off-balance sheet items ( i.e. conversion tocreditequivalentamounts of off-balance sheetexposures)

73,177 (6,377)

74,010 (7,520)

Other adjustments

LEVERAGE RATIOEXPOSURE 1,146,111 Without applying the phase-inmeasuresand without includingsubordinateddebt issues which have become ineligible,Groupe BPCE’s leverage ratio stoodat 5.1% at December 31, 2017 compared with 4.9% at December 31, 2016. 1,177,414

(ICAAP) and the Internal Liquidity Adequacy Assessment Process (ILAAP); an assessmentof the institution’sgovernance,business model and ● information system. Based on the conclusionsof the SREP carried out by the ECB in 2017, Groupe BPCE must maintain a phased-in consolidated Common Equity Tier1 ratio of 8.625%as from January 1, 2018,including: 1.5% in respect of Pillar II requirements (excluding Pillar II ● guidance); 1.875%in respect of the capital conservation buffer; ● 0.75% in respect of the buffer for global systemically important ● banks (G-SIB buffer). The total capital requirement has been set at 12.125% (excluding Pillar II guidance). With a Common Equity Tier 1 ratio of 15.3% at end-2017 (with phase-in measures), Groupe BPCE has exceeded the specific capital requirements setby the ECB. As regards the internal capital adequacy assessment under Pillar II, the principlesdefined in the ICAAP/ILAAPguidelinespublishedby the ECB in February 2017 were applied as of this year in Groupe BPCE’s ICAAP. The assessment is thus carried out using two different approaches: a “normative”approach aimed at measuringthe impact of internal ● stress tests within three years of the initial Pillar I regulatory position; an “economic” approach aimed at identifying, quantifying and ● hedging risks using internal capital over the short term (one year) and using internal methodologies.The methodologiesdevelopedby Groupe BPCE provide a better assessment of risks that are already covered under Pillar I, and also an additional assessment of risks that arenot covered by Pillar I. The results obtained using these two approaches confirmed the Group’s financial soundness and no capital buffer is necessary in addition tothe existing regulatorybuffers.

Financial conglomerate ratio As an institution exercising banking and insurance activities, Groupe BPCE is also required to comply with a financial conglomerateratio. This ratio is determined by comparing the financial conglomerate’s total capital against all the regulatory capital requirements for its banking and insurance activities. The financial conglomerateratio demonstratesthat the institution’s prudential capital sufficiently covers the total regulatory capital requirementsfor its banking activities (in accordancewith the CRR) and insurance activities, based on the solvency margin established under Solvency1. The calculation of surplus capital is based on the statutory scope. Insurance company capital requirements,determinedfor the banking capital adequacy ratio by weighting the equity-method value, are replaced with capital requirements based on the solvency margin. Capital requirements within the banking scope are determined by multiplying risk-weightedassets by the rate in force under Pillar II, i.e. 11.25% at December 31, 2017 versus 9.75% at December 31, 2016. At December 31, 2017, Groupe BPCE’s surplus capital amounted to € 27 billion. SUPERVISORY REVIEW AND EVALUATION PROCESS SREP-ICAAP process As the supervisory authority under Pillar II, the ECB conducts an annual assessment of banking institutions. This assessment, referred to as the Supervisory Review and Evaluation Process (SREP), is primarily based onthe following: an evaluation based on information taken from prudential reports; ● documentationestablishedby each bankinginstitution,includingin ● particular the Internal Capital Adequacy Assessment Process

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Registration document 2017

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