BPCE - Risk Report - Pillar III 2020

MARKET RISKS

MARKET RISK MANAGEMENT

Market risk management 8.2

The Risk division works in the areas of risk measurement, definition and oversight of limits, and supervision of market risks. It is tasked with the following duties: Risk measurement: establishing the principles of market risk measurement, which • are then validated by the various appropriate Risk Committees; implementing the tools needed to measure risk on a • consolidated basis; producing risk measurements, including those corresponding • to operational market limits, or ensuring that they are produced as part of the risk management process; determining policies for adjusting values or delegating them to • the Risk divisions of the relevant institutions and centralizing the information; performing Level 2 validation of operating results and cash • valuation methods. Definition and oversight of limits: examining the limit framework and setting limits (global caps • and, where necessary, operational limits) adopted by the various appropriate Risk Committees, as part of the comprehensive risk management process; examining the list of authorized products for the relevant • institutions and the conditions to be observed, and submitting them for approval to the appropriate Market Risk Committee; examining requests for investments in financial products, or in • new capital market products or activities, by the relevant banking institutions; harmonizing processes used to manage trading book • allocations and medium- to long-term portfolios of the Banque Populaire and Caisse d’Epargne networks (indicators, definition of indicator limits, oversight and control process, and reporting standards).

Market risk supervision: consolidating the mapping of Group market risks and • contributing to the macro-level mapping of Group and institution risks; performing or overseeing daily supervision of positions and • risks with respect to allocated limits (overall and operational limits) and established resilience thresholds, organizing the decision-making framework for limit breaches and performing or overseeing permanent supervision of limit breaches and their resolution; preparing the consolidated dashboard for the various • decision-making bodies. In addition, the Risk division coordinates the market risk management process by organizing national market risk days, regular audio sessions or theme-based working groups. In the ever-changing regulatory environment, the Risk division carried out several major operational projects for the Group: performance of internal and regulatory stress tests (ICAAP and • climate); the EBA 2020 exercise launched until the end of March 2020 was postponed to early 2021 in light of the Covid-19 crisis. Finalization of the Group system for allocating fair value levels in order to standardize the process at Group level; continuation of the implementation of XVA and counterparty • risk calculations for the Group scope using a uniform methodology in a single tool; completion of the Base of Positions project, which provided • the Group with a centralized tool for all of the Group’s financial transactions for monitoring financial risks; launch of work to ensure compliance with BCBS 239 at • departmental level with the aim of applying the principles to all financial risk processes.

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HIGHLIGHTS As part of the Covid-19 health crisis, the Risk division carried out for the Group: a valuation exercise of the Group’s private equity and real estate positions, aiming to anticipate the effects of the Covid-19 crisis on investment portfolios.

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RISK REPORT PILLAR III 2020 | GROUPE BPCE