BPCE_REGISTRATION_DOCUMENT_2017

3 RISK REPORT Credit risk

RISK DIVERSIFICATION Risk diversification is one technique for mitigating credit risk. In practice, individual or topical limits are defined, thus reducing the bank’s sensitivity to risks deemed excessive, either individually or industry-wide,in the event of amajor incident. GUARANTORS The Banque Populairenetwork has historicallyused professionalsand Mutual Guarantee Companies (such as SOCAMAs, which guarantee loans to craftsmen), for its loans, in addition to the real guarantees used. For loans to individual customers, it also turns to CASDEN Banque Populaire to back loans to civil servants in the French national education system, Crédit Logement and increasingly Compagnie Européenne de Garanties et de Cautions (CEGC, a subsidiary of Natixis). For home loans, the Caisse d’Epargne network mainly uses the services of the CEGC, Fonds de garantie à l’accession sociale à la propriété (FGAS) and, to a lesser extent, Crédit Logement(a financial institution and a subsidiary of most of the main French banking networks). FGAS offers guarantees from the French government for secured loans. Loans with FGAS guarantees granted before December 31, 2006 are given a 0% weighting and loans with guarantees grantedafter that date have arisk weightingof 15%. Crédit Logementhas a long-termrating of Aa3 from Moody’s, with a stable outlook. For their home loans, the Banque Populaire and Caisse d’Epargne networks also use several mutual insurers, such as MGEN, Mutuelle de la Gendarmerie,etc. For professional and corporates, the entire Group still uses Banque Publique d’Investissement,while calling on the European Investment

Fund or EuropeanInvestmentBank for guaranteepackagesin order to substantiallyreduce credit risk. In some cases, organizationssuch as Auxiga are used for the seizure of inventory and the transfer of its ownership to the bank as collateral for commitments made in the event of financialhardships. Finally, on an occasionalbasis, Natixis purchasescredit insurance for certain transactionsand in some circumstances,from private (SCOR) or public (Coface, Hermes, other sovereign agencies) reinsurance companies, while alsomakinguse of CreditDefault Swaps (CDSs). VALUATION AND MANAGEMENT OF INSTRUMENTS COMPRISING REAL GUARANTEES Groupe BPCE has an automatic valuation tool for real-estate guarantees available to all its networks. Across the Banque Populaire network, in addition to real estate guarantees, the valuation tool also takes into account pledges of vehicles, materials and equipment, pleasure craft, and businessassets. The Caisse d’Epargne network uses the appraisal tool in all risk segments. Within the Group, guarantees from Mutual Guarantee Companies recognized as providers of sureties whose effect is equivalent to a mortgage guarantee by the supervisory body are subject to an insurance-type valuation. An enhanced Group valuation process was established to measure guarantees above certain amounts. The certification obtained by Crédit Foncier Expertise, a subsidiary of CFF, in this matter, strengthens the Group’s synergies. The Group is continuing its efforts to strengthen loan guarantees at its various institutions.Having already done so primarilyfor the retail customer segment, it is focusing on non-retail customers in order to improve the consistency of the recognition and valuation of guarantees withinthis segment.

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Registration document 2017

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