BPCE_REGISTRATION_DOCUMENT_2017

RISK REPORT Liquidity, interest rate and foreign exchange risks

Liquidity, interest rate and foreign 3.9 exchange risks

3.9.1

Governance and structure

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Information provided in respect of IFRS 7 Like all credit institutions, Groupe BPCE is exposed to structural liquidity, interest rate and foreign exchange risks. These risks are closely monitored by the Group and its institutions to secure immediate and future income, ensure that balance sheets are balanced and promote the Group’s development. Groupe BPCE’s Audit Committeeand SupervisoryBoard are consulted on general ALM policy and are informed of major decisions taken regarding liquidity, interest rate and foreign exchange risk management.The implementationof the chosenpolicy is entrustedto the Group Assetand Liability Management Committee. Each year, Groupe BPCE’s SupervisoryBoard validates the main lines of the ALM policy, i.e. the principlesof market risk measurementsand the degree of risk accepted.It also reviews the risk limit system each year. Each quarter, BPCE Group’s Audit Committee is informed of the Group’s position through management reports containing the main risk indicators. The Group Asset and LiabilityManagementCommittee,chairedby the President of BPCE’s Management Board, ensures the operational implementation of the defined policy, the management of the structure and the operation of the risk management system. This committee notably sets the rules and limits governing the Information provided in respect of IFRS 7 Structuralliquidity risk is defined as the risk of the Group not having sufficient funds to meet its commitments or to settle or offset a position due to market conditionswithin a specified period and at a reasonablecost. This could occur, for example,in the event of massive withdrawalsof customerdepositsor an overall crisis of confidenceon the markets. OBJECTIVES AND POLICIES The main aim of the Group’s liquidity risk managementsystem is to always be in a position to cope with a prolonged, highly intense liquidity crisis while keeping costs under control, promoting the balanced development of the business lines and complying with regulations inforce. To this end, the Group relies on threemechanisms: supervision of each business line’s liquidity consumption, ● predominantly by maintaining a balance between growth in the credit segment and customer deposit inflows; 3.9.2

management of the three major risk categories applicable at the consolidated level and to each institution, as well as the main guidelines in terms of funding policy, allocation of liquidity to the business lines and management of risk indicators. It regularly monitors the risk indicators and changes to the main structural balance sheet aggregatesof the Group and its main institutions. The structural liquidity, interest rate and foreign exchange risk managementpolicy is also jointly implementedby the asset/liability management function (oversight of funding plan implementation, managementof liquidity reserves, cash management,calculationand monitoring of the various risk indicators) and the Risk Management function (validation of the control framework, validation of models and agreements, controls of compliance with rules and limits). The Group Finance division and the Group Risk Managementdivision are responsible for adapting this frameworkto their respective functions. The adaptation of the operational management framework within each institutionis subject to validationby the Board of Directors,the Steering Board and/or the Supervisory Board. Dedicated operational committeeswithin each institution oversee the implementationof the funding strategy,asset and liabilitymanagementand managementof liquidity, interest rate and foreign exchange risks for the institution, in line with rules and limits set at the Group level. The Banque Populaire and Caisse d’Epargne network implement the risk managementsystemusing asharedasset/liabilitymanagementtool.

Liquidity risk management policy

centralizedfundingmanagementaimed primarilyat supervisingthe ● use of short-term funding, spreading out the maturity dates of medium- and long-term funds and diversifyingsources of liquidity; the establishment of liquidity reserves. ● In addition to these measures, a consistent set of indicators, limits and management rules are combined in a centralized framework of standards and rules. These indicators and rules allow for the measurement and consolidatedmanagementof liquidity risk.

OPERATIONAL MANAGEMENT Operational liquidity risk management

Liquidity risk is managedat the consolidatedGroup level and at each entity. Liquidity risk is assessed differently over the short,medium and long term: in the short term, it involves assessing an institution’s ability to ● withstanda crisis; in the medium term, liquidity is measured in terms of cash ● requirements;

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Registration document 2017