BPCE_REGISTRATION_DOCUMENT_2017

3 RISK REPORT

Liquidity, interest rate and foreign exchange risks

in the long term, it involves monitoring the institution’s maturity ● transformation level. Consequently, BPCE hasdefineda set of indicators and limits: one-dayand one-weekliquiditygap indicatorsmeasurethe Group’s ● very short-term funding requirements. These gaps are subject to limits at both the Group level and withineach institution; stress scenarios measure the Group’s ability to meet its ● commitmentsand continue its regular commercialactivities during a crisis depending on short-term funding volumes, medium- and long-term debt maturities and liquidity reserves. This includes internalstress test indicatorsaimed at ensuringshort-termliquidity security beyond the one-month horizon required by regulations. These stress tests, based on bank- and/or market-specificscenarios, are broken down into various levels of stress in order to forecast the impact on the Group’s liquidity position.Adaptationof liquidity stress rules to all business lines takes assumptionsunique to each activity into account; the customer loan/deposit ratio is a relative measurement of the ● Group’s autonomy with respect to the financial markets; the Group’s market footprint measures its overall dependence to ● date on funds from bond and money markets. The contributionof the institutions to this coverage is managed by a liquidity budget system. These budgets are reviewed on an annual basis and govern the maximumliquidityconsumptionfor each entity in line with the Group’s budget process; the liquidity gap, which compares the amount of remaining ● liabilitieswith remainingassets over a ten-year period, enables the Group to manage medium- and long-term debt maturities and anticipate its funding requirements.It is governed by limits at the Group leveland within each institution; measurement of resource diversification, allowing the Group to ● avoid excessive dependence on a single creditor; the pricing policy, which ensures the performance of liquidity ● allocation. The definition of these indicators and any associated limits are included in a body of consolidated standards that is reviewed and validated by the decision-making bodies of the Group and its institutions. Centralized funding management The Group Finance division organizes, coordinatesand supervises the funding of Groupe BPCE in the markets. The short-term funding of Groupe BPCE is carried out by a single treasury and central bank collateral management team, created following the merger of BPCE and Natixis’ cash managementteams. This integrated treasury team is capable of managing the Group’s

cash positionmore efficiently,particularlyduring a credit crunch. The Group has access to short-termmarket funding through its two main issuers: BPCE and its subsidiary Natixis. For medium and long-term funding requirements (more than one year), in additionto deposits from customersof the Banque Populaire and Caisse d’Epargne network, which are the primary source of funding, the Group also issues bonds throughtwo mainoperators: BPCE, either directly as BPCE or through BPCE SFH, which issues ● legal covered bonds ( obligations de financement de l’habitat – “OH”), a category of secured bond backed by French legislation;and Compagniede FinancementFoncier, a subsidiary of Crédit Foncier, ● which issues covered bonds known as obligations foncières (OF), also backedby French legislation. Note that BPCE is also responsible for the medium and long-term funding activities of Natixis, which is no longer a regular market issuer, and Crédit Foncier. BPCE has short-term funding programs (certificates of deposit, Euro Commercial Paper and US Commercial Paper) and medium- and long-term funding programs (Medium Term Notes (or MTN), Euro Medium Term Notes (or EMTN), US MTN, AUD MTN and a securitized bond program, backed by the home loans of the Banque Populaireand Caisse d’Epargne network). All Group assets and liabilitiesare subject to internalliquiditypricing, whose guidelines are decided by the Group’s Asset and Liability Management Committee and aim to take into account changes in market liquidity costs and asset/liability matching. Centralized collateral management Collateral managementis one of the key componentsof the Group’s liquidity management system. This management is based on the following principles: the central institution defines the collateral management ● indicators. These indicators are monitored by the Group’s ALM Committee; investment- and management-relateddecisions are made by the ● entities and subsidiaries following rules set out by the central institution; entity collateral is pooled with the central institutionwith the aim ● of improving oversight and operationality of collateral management. For entities with a 3G Pool (Natixis, SCF, BRED, Crédit Coopératif, Banque Palatine), each entity is responsible for its own collateral. Nonetheless, these entities cannot directly participate in ECB refinancing operations without prior approval from the central institution.

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Registration document 2017