BPCE - Risk Report - Pillar III 2020

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LIQUIDITY, INTEREST RATE AND FOREIGN EXCHANGE RISKS

LIQUIDITY RISK MANAGEMENT POLICY

CENTRALIZED COLLATERAL MANAGEMENT In its liquidity management policy, Groupe BPCE attaches great importance to the management and optimization of its collateral. Non-negotiable debt securities (in particular loans originated by the networks) and negotiable debt securities (financial securities, etc.) that are eligible for a funding arrangement, whether central bank funding ( via the 3G pool) or Group funding (covered bonds, securitization, etc.) are classified as collateral. Three key principles are implemented: centralized management of the entities’ collateral by the • central institution in order to improve oversight and operationality of collateral management. For entities with a 3G Pool (Natixis, Compagnie de Financement Foncier, 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; a definition of investment and management rules by the • central institution, with the entities enjoying autonomy in their decision-making in accordance with Group standards; a set of indicators relating to the monitoring of collateral • determined at Group level and monitored by the Group’s Asset and Liability Management Committee. Collateral management with respect to non-negotiable debt securities is based on a dedicated information system that makes it possible to identify the receivables and identify their eligibility for the various existing arrangements. A significant portion of these receivables is intended to be secured in order to meet the liquidity reserve requirements as set by the Group, particularly with regard to the stress tests conducted periodically. The unsecured portion is available to carry out funding operations in the market, either in the form of sales of receivables or in the form of mobilization of receivables. Groupe BPCE has developed a strong expertise in this area, which has enabled it to structure innovative refinancing mechanisms, thus increasing its ability to diversify its sources of fund-raising from investors.

It should be noted that BPCE is also responsible for the MLT funding activities of Natixis (in addition to the aforementioned structured private placements), which no longer carries out public issues on the markets. BPCE has short-term funding programs governed by French law (NEU CP), UK law (Euro Commercial Paper) and New York State law (US Commercial Paper), and MLT funding programs governed by French law (EMTN and Neu MTN), New York State law (US MTN), Japanese law (Samurai) and New South Wales law (AUD MTN). Lastly, the Group is also able to conduct market securitization transactions (ABS), primarily via RMBS with residential home loans issued by the Banque Populaire and Caisse d’Epargne networks. INTERNAL LIQUIDITY PRICING The centralization of the Group’s refinancing involves the implementation of liquidity circulation principles within the Group and the rules for pricing this liquidity so that liquidity can circulate in the best possible way between the Group’s entities. The principles are validated by the Group’s Asset and Liability Management Committee and implemented by the Group’s Treasury and Central Bank Collateral Management team. The system is designed to ensure the transparency and consistency of internal prices, guaranteeing fluid liquidity management between the Group’s institutions. In addition to this internal liquidity pricing system, an internal disposal rate system has been developed so that each of the Group’s assets and liabilities can be assigned an internal liquidity price. Here again, the principles are decided by the Group’s Asset and Liability Management Committee. The respective changes in the liquidity costs of customer deposits and market resources are taken into account in order to ensure the balanced and profitable development of all activities in the Group’s various business lines.

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RISK REPORT PILLAR III 2020 | GROUPE BPCE

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