BPCE - Risk Report - Pillar III 2020

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Communication policy and structure of the Pillar III report3
1. KEY FIGURES5
1.1 Types of risk8
1.2 Regulatory changes9
2020 : A flexible regulatory framework and resilient banks despite the crisis9
2021 : A year of transition9
Is the Banking Union being challenged?9
2. RISK FACTORS11
Strategic, business and ecosystem risks12
Credit and counterparty risks16
Financial risks17
Insurance risks19
Non-financial risks20
Regulatory risks22
3. RISK MANAGEMENT SYSTEM25
3.1 Adequacy of risk management systems26
3.2 Risk appetite26
Risk appetite guidelines26
Risk appetite framework and groupwide implementation27
Robust financial strength27
Summary of Groupe BPCE’s risk profile in 202028
Emerging risks29
3.3 Risk management30
Governance of risk management30
Organization of risk management30
Risk governance at Group institutions31
Risk governance32
Risk and compliance culture33
Macro-level risk mapping - Group institutions34
Consolidated risk oversight35
Stress testing system35
3.4 Internal control36
Permanent control system36
Periodic Control (Level 3)37
Structure of integrated control functions39
Internal Control Coordination Committee40
3.5 Recovery Plan40
4. CAPITAL MANAGEMENT AND CAPITAL ADEQUACY41
4.1 Regulatory framework42
Pilier I43
Pilier II43
Pilier III43
4.2 Scope of application44
Regulatory scope44
4.3 Composition of regulatory capital46
Regulatory capital46
Common Equity Tier 1 (CET1)47
Additional Tier 1 (AT1) capital48
Tier 2 capital48
4.4 Regulatory capital requirements and risk-weighted assets49
4.5 Management of capital adequacy51
Regulatory capital and capital ratios51
Supervisory Review and Evaluation Process53
Outlook53
4.6 Detailed quantitative disclosures55
5. CREDIT RISKS77
Foreword78
Background information78
Credit risk measures implemented since the start of the crisis78
5.1 Credit riskmanagement79
Credit policy79
Rating policy79
Credit risk governance79
Credit risk supervision system81
Quality assessment of loan outstandings and impairment policy83
Forbearance, performing and non-performing exposures86
5.2 Risk measurement and internal ratings87
Current situation87
Rating system87
Internal rating system governance88
Model development process88
Review of internal ratings-based models89
Model mapping89
5.3 Credit risk mitigation techniques94
Definition of guarantees94
Accounting recognition under the standardized or IRB approach94
Conditions for the recognition of guarantees94
Division of risks95
Guarantors95
Concentration of collateral volumes96
Valuation and management of collateral comprising real guarantees96
5.4 Quantitative disclosures97
Credit risk exposure97
Provisions and impairments100
Non-impaired loans showing past due balances101
Restructured loans102
Non-performing and forborne exposures103
Loans and advances subject to legislative and non-legislative moratoria108
5.5 Detailed quantitative disclosures110
Credit risk – General disclosures111
6. COUNTERPARTY RISK145
6.1 Counterparty risk management146
Measuring counterparty risk146
Counterparty risk mitigation techniques146
6.2 Quantitative disclosures147
6.3 Detailed quantitative disclosures148
7. SECURITIZATION TRANSACTIONS161
7.1 Regulatory framework and accounting methods162
Regulatory framework162
Accounting methods163
Terminology164
7.2 Securitization management at Groupe BPCE165
7.3 Quantitative disclosures166
Breakdown of exposures and risk-weighted assets166
Breakdown by rating167
7.4 Detailed quantitative disclosures169
Banking book169
Trading book172
8. MARKET RISKS173
8.1 Market risk policy174
8.2 Market risk management175
Risk monitoring176
8.3 Market risk measurement methods177
Sensitivities177
VaR177
Stress tests178
Independent price verification178
8.4 Quantitative disclosures179
Groupe BPCE VaR179
Trading book stress test results180
Risk-weighted assets and capital requirements181
8.5 Detailed quantitative disclosures182
Breakdown of market risk-weighted assets by approach182
Detailed disclosures on Natixis market risks182
9. LIQUIDITY, INTEREST RATE AND FOREIGN EXCHANGE RISKS187
9.1 Governance and structure188
9.2 Liquidity risk management policy189
Objectives and policies189
Oversight and monitoring of liquidity risk190
9.3 Quantitative disclosures193
Customer loan-to-deposit ratio194
Funding strategy and conditions in 2020195
9.4 Management of structural interest rate risk197
Objectives and policies197
Interest rate risk oversight and management system197
Quantitative disclosures197
9.5 Management of structural foreign exchange risk199
Foreign exchange risk oversight and management system199
Quantitative disclosures199
9.6 Detailed quantitative disclosures on liquidity200
Groupe BPCE cash balance sheet200
10. LEGAL RISKS205
10.1 Legal and arbitration proceedings – BPCE206
Check imaging exchange (échange image chèques) commissions206
10.2 Legal and arbitration proceedings – Natixis207
Madoff fraud207
Criminal complaint coordinated by ADAM208
MMRclaim208
Securitization in the United States208
EDA Selcodis208
MPS Foundation209
Formula funds209
Société Wallonne du Logement209
SFF/Contango Trading SA209
Lucchini Spa210
Competition Authority – Natixis Intertitres et Natixis210
Bucephalus Capital Limited – Darius Capital Partners210
European Government Bonds Antitrust Litigation210
Disputes involving the set-off of receivables211
10.3 Dependency212
11. NON-COMPLIANCE AND SECURITY RISKS213
11.1 Compliance215
Organization215
Customer protection216
French Banking Separation and Regulation Act (SRAB)217
11.2 Financial security218
Organization218
11.3 Business continuity219
Organization219
11.4 Information System Security (ISS)220
Organization220
12. OPERATIONAL RISKS221
Organization222
Incident and loss data collection223
Operational risk oversight223
Incident alert procedure224
Operational risk measurement224
Operational risk mitigation techniques225
13. INSURANCE, ASSET MANAGEMENT, FINANCIAL CONGLOMERATE RISKS227
Organization228
Insurance risks228
Asset Management risks228
Additional monitoring of the financial conglomerate229
Activities in 2020230
Natixis Assurances231
Coface232
CEGC233
14. CLIMATE RISKS235
14.1 Governance and structure236
14.2 Acceleration of the integration of a section dedicated to climate risks and Environmental, Social and Governance (ESG) criteria237
Credit risks237
Financial risks238
Macro-risk mapping238
Creation of a tool for identifying asset exposure to physical climate risks238
14.3 Awareness and training239
Awareness/training239
Creation of a sector and its coordination239
Participation in market meetings and commitments240
14.4 Regulatory environment241
Resistance test241
Use of European taxonomy242
15. REMUNERATION POLICY243
16. APPENDICES245
16.1 Index to Pillar III report tables246
16.2 Pillar III cross-reference table249
16.3 Glossary250

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