BPCE_REGISTRATION_DOCUMENT_2017

3 RISK REPORT Counterparty risk

CVA The valuation of financial instruments traded over-the-counter by Groupe BPCE with external counterparties in its capital markets businesses (mainly Natixis) and ALM management activities include credit valuation adjustments. The CVA is an adjustment to the valuation of the trading book aimed at factoring in counterparty credit risks. It thus reflects the expectationof loss in fair value terms on the existing exposure to a counterparty due to the potential positive value of the contract, the counterparty’s probability of default and the estimated recovery rate. The level of the CVA varies according to changes in exposure to existing counterparty risk and in the counterparty’s credit rating, which may trigger changes in the CDS spread used to determine probabilityof default.

Specific wrong-way risk is subject to a specific capital requirement (Article 291.5 of the European regulation of June 26, 2013 on prudential requirementsfor credit institutionsand investmentfirms), while general wrong-way risk is assessed using the WWR stress scenarios defined foreach asset class. In the event the Bank’s external credit rating is downgraded,it may be required to provide additional collateral to investors under agreements that include rating triggers. In particular, in calculating the liquidity coverage ratio (LCR), the amounts of these additional cash outflowsand additionalsurety requirementsare measured.These amounts comprise the payment the bank would have to make within 30 calendardays in the event its credit ratingwere downgradedby as much as threenotches.

3.6.2

Quantitative disclosures

BREAKDOWN OF GROSS COUNTERPARTY RISK EXPOSURES BY ASSET CLASS (EXCLUDING OTHER ASSETS) ➡ AND METHOD Information provided in respect of IFRS 7

12/31/2017

12/31/2016

Standardized

IRB

Total

Total

Exposure

EAD RWA Exposure

EAD RWA Exposure

Exposure

EAD

RWA

in millions of euros Central banks and other sovereign exposures Central administrations Public sectorand similarentities Financialinstitutions

-

-

-

4,086 4,086

91

4,086

2,860 2,860

182

138

138

-

2,145 2,110

13

2,283

2,296 2,260

13

904

904 199

146

146

1

1,050

1,249 1,249

237

21,394 19,828 1,073

20,165 20,165 3,386 14,546 14,505 4,379

41,559

35,218 34,150 7,399 17,072 17,070 6,103

Corporates

3,452

760 549

17,998

Retail customers

4

4

5

3

3

1

7

12

12

12

Equities

-

-

-

-

-

-

-

Securitization

0

0

0

1,489 1,489 285 42,579 42,503 8,156

1,489

2,517 2,517

388

TOTAL

25,892 21,634 1,827

68,471

61,224 60,118 14,333

The majorityof counterpartyrisk is carried by the “Financial institutions”asset class (61%of exposures).

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Registration document 2017