BPCE_REGISTRATION_DOCUMENT_2017

RISK REPORT Governance and risk management system

The DRCCP also conducts or coordinatescross-businessrisk analyses on the Group’s main portfolios or activities and, if needed, for the entities. It has also developed half-yearly forward-looking risk analyses aimed at identifying economic risk factors (known and emerging;international,nationaland regional),circumstantialthreats (regulations, etc.) and their potential impact on the Group. These prospective analyses are presented at Group Supervisory Board Risk Management Committee meetings. It develops internal credit risk measures targeting customer counterpartiesand transactions, used to make lending decisions, as well as portfolio-based risk measures (statistical collective provisions, etc.) and, when authorizedby the supervisorybody, for the calculationof credit risk-weightedassets. It reviewsand validatesrisk models developedinternally.Finally, it contributesto efforts to define internalcapital requirementsas well as internaland externalsolvency stress tests aimed at measuring the Group’s sensitivity to a series of risk factors and its resilience in the face of a severe shock, by determining impacts in terms of cost of risk. Activities in 2017 As part of its consolidated risk monitoring system, the Risk, Compliance and Permanent Control division has produced several cross-businessanalyses for various committees(UmbrellaCommittee, Risk Management Committee of the Supervisory Board, Supervisory Board): reinforcement of consolidated risk management by carrying out ● Groupe BPCE’s annual risk appetite review and developing an appropriate system of indicators and limits tracked operationally via the Group consolidated risk dashboard. A cross-business risk identificationand materiality definition system has been added to the Group’s consolidated risk monitoringsystem; the Group risk dashboard,a key risk supervisiontool, was subject to ● a comprehensivereview aimed at improving improve the coverage and granularity of risk analysis. Additional monthly oversight was also introduced; two forward-lookingrisk analyses, several in-depth and multi-risk ● analyses of loan books (mapping of oversight procedures, and analyses of SME, financial company and real estate professional loan books); contribution to the internal solvency stress test, particularly on ● estimating costof risk. The Risk, Complianceand PermanentControl division kept the credit risk models operational,in particular by rolling out a new model for corporatecustomersgeneratingrevenue of € 3 million to € 10 million.

Finally,2017 saw the launchby the supervisorybody of Target Review Internal Model(TRIM) audits. 9 in 2017, focusing particularlyon phase 2 (“impairment”).It also continued to implement Basel III/Basel IV regulatory requirements, especially throughimpact studiesregardingpotentialregulatory changes. The Group also continued making the transition to IFRS

COORDINATION OF PERMANENT CONTROLS

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Organization The DRCCP:

is responsible for Level 2 controls of certain processes used to ● prepare financial information and implements a Group Level 2 permanentrisk control systemcoveringmatters of governance,risk, organization, the work of the risk management and compliance functions, and the implementation of standards, norms and charters. The main role of the Permanent Control Coordination department is to coordinate the Group’s permanent control system; manages a Group-level permanent control tool (Pilcop) in close ● collaboration with the Group’s institutions; uses this tool to implement, centralize and use the Level 2 ● permanent controls carried out by the Risk, Compliance and PermanentControl divisions.The various Level 1 permanentcontrol standards are continuously updatedand enhanced. Activities in 2017 In 2017, the DRCCP carried out several structure-buildingprojects aimed at reinforcing theGroup’spermanentcontrol system. The structureof the PermanentControl Coordinationdepartmentwas adapted to bring it closer to the institutions and business lines, and the PermanentControl Coordination,Standardsand Analyses division was thus created. In terms of permanent controls standards, the Group’s permanent control system frameworkdocument– an operationaloffshoot of the internal control charter – was validated. In addition a sampling standard was introduced, calling for samples used in permanent controls to be both random and representative. The main permanent control forms in the Pilcop software tool were revised, with the aim of converging the Banque Populaire banks and the Caisses d’Epargne towards a single control framework and optimizingthe number of items covered by controls. The DRCCP also workedon the annualcontrol plan and the risk-based approach.

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Registration document 2017