BPCE - Risk Report - Pillar III 2020

LIQUIDITY, INTEREST RATE AND FOREIGN EXCHANGE RISKS

LIQUIDITY RISK MANAGEMENT POLICY

Liquidity risk management policy 9.2

Liquidity risk is defined as the risk of the Group being unable to meet its commitments or to settle or offset a position, due to market conditions factors specific to Groupe BPCE, within a specified period and at a reasonable cost. It reflects the risk of not being able to meet net cash outflows over short- to long-term horizons. Liquidity risk is assessed differently over the short, medium- and long-term: in the short-term, it involves assessing an institution’s ability • to withstand a crisis; in the medium-term, liquidity is measured in terms of cash • requirements; in the long-term, it involves monitoring the institution’s • maturity transformation level. The liquidity management policy aims mainly to refinance all of the Group’s business lines in an optimal and sustainable manner. This mandate involves the following duties: ensure a sustainable refinancing plan at the best possible – price, making it possible to finance the Group’s various activities over a period consistent with the assets created; distribute this liquidity between the various business lines – and monitor its use and changes in liquidity levels; comply with regulatory ratios and internal constraints – resulting in particular from stress tests guaranteeing the sustainability of the Group’s business model refinancing plan, even in the event of a crisis. Objectives and policies

Liquidity risk is likely to materialize in the event of a decline in sources of financing that could be caused by a massive withdrawal of customer deposits or by problems in executing the annual financing plan following a widespread crisis of confidence on the markets or events specific to the Group. It could also be triggered by an increase in financing requirements due to an increase in drawdowns on loan commitments, an increase in margin calls or a higher collateral requirement. All liquidity risk factors are accurately mapped, updated annually and presented to the Group Asset Liability Management Committee. This mapping identifies the various risks as well as their level of materiality, assessed according to various criteria shared between the Asset and Liability and Risk divisions.

To this end, the Group relies on three mechanisms: centralized funding management aimed primarily at – supervising the use of short-term funding, spreading out the maturity dates of medium- and long-term funds and diversifying sources of liquidity; supervision of each business line’s liquidity consumption, – predominantly by maintaining a balance between growth in the credit segment and customer deposit inflows; the creation of liquidity reserves, both in cash and collateral, – in line with future liabilities and the targets set for securing the Group’s liquidity. These systems are managed and overseen by way of a consistent set of indicators, limits and management rules are combined in a centralized framework of standards and rules for the Group’s institutions, so as to ensure the measurement and consolidated management of liquidity risk.

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RISK REPORT PILLAR III 2020 | GROUPE BPCE