BPCE - Risk Report - Pillar III 2020

8

MARKET RISKS

MARKET RISK MANAGEMENT

Risk monitoring

The Risk division is responsible for monitoring the risks associated with all Groupe BPCE capital market activities, subject to regular review by the Group Market Risk Committee. Within the scope of the trading book, market risk is monitored daily by measuring Group Value at Risk (VaR) and performing global and historical stress tests. The proprietary VaR calculation system developed by Natixis is used by the Group. This system provides a tool for the measurement, monitoring and control of market risk at the consolidated level and for each institution, on a daily basis and taking account of correlations between the various portfolios. There are certain distinctive characteristics of Groupe BPCE that must be considered, in particular: for Natixis: given the size of its capital markets business, • Natixis’ risk management system is specifically tailored to this entity; for the Banque Populaire network: only BRED Banque • Populaire has a capital markets business. It monitors the financial transactions carried out by the Banque Populaire network trading floor and Finance division daily, using 99% 1-day Value at Risk, sensitivity, volume and stress scenario indicators; for Banque Palatine: daily monitoring of trading book activities • is based on the Risk division’s supervision of 99% 1-day Value at Risk, stress tests and compliance with regulatory limits.

All limits (operational indicators, VaR, and stress tests) are monitored daily by each institution’s Risk division. Any limit breaches must be reported and, where applicable, are subject to a Management decision concerning the position in question (close, hedge, hold, etc.). These supervisory mechanisms also have operational limits and resilience thresholds that determine the Group’s risk appetite for trading operations. Banking book risk is supervised and monitored by activity: liquidity reserves, illiquid assets (private equity, non-operational real estate), securitizations and liquid assets excluding liquidity reserves. Liquidity reserves and liquid assets excluding liquidity reserves are monitored monthly, mainly via stress test indicators. Illiquid assets and securitizations are monitored quarterly. The Group’s single treasury and central bank collateral management pool is subject to daily monitoring of risks and economic results for all of its activities, which are mainly related to the banking book.

176

RISK REPORT PILLAR III 2020 | GROUPE BPCE

www.groupebpce.com