BPCE - Risk Report - Pillar III 2020

LIQUIDITY, INTEREST RATE AND FOREIGN EXCHANGE RISKS

QUANTITATIVE DISCLOSURES

Quantitative disclosures 9.3

The liquidity reserve includes deposits with central banks, LCR transforming illiquid assets into securities that can be mobilized securities, which are securities recognized as eligible for the with the Central Bank.

liquidity buffer within the meaning of European prudential regulations, and available securities and receivables eligible for central bank refinancing. For this last item, the securitization of loans is one of the means to increase eligible assets by

The liquidity reserve thus created guarantees compliance with the LCR (HQLA – see details below) and hedges the liquidity risk measured under the stress approach described above.

The table below presents changes in the liquidity reserve:

BPCE43 – LIQUIDITY RESERVES

12/31/2020

12/31/2019

in billions of euros

Cash placed with central banks

146

69 66 96

LCR securities

56

Assets eligible for central bank funding

105 307

TOTAL

231

On December 31, 2020, liquidity reserves covered 246% of the Group’s short-term funding and the short-term maturities of MLT debt (€125 billion on December 31, 2020 compared with €148 billion on December 31, 2019). The coverage ratio was 155% on December 31, 2019. The very significant increase in the liquidity reserve in 2020 reflects the change in Groupe BPCE’s liquidity situation against the very particular background of the health crisis and the impact generated both on customer behavior and in terms of the ECB’s response regarding monetary policy. Accordingly, the amount of customer deposits, particularly households, increased significantly during the fiscal year (see change in the Customer loan-to-deposit ratio) at a faster pace than the production of loans, thus generating an increase in available liquidity. At the same time, the European Central Bank eased the conditions for access to its refinancing by broadening the eligibility criteria for assets that can be used as collateral. Adopted by the Board of Governors on April 7, 2020, all of the collateral easing measures broadened the scope of this mechanism, both by reducing the levels of haircuts applied to eligible receivables and by

increasing the scope of eligible receivables. This is notably the case for state-guaranteed loans (SGLs), whose eligibility as a mobilizable asset with the Central Bank has been recognized, thus enabling Groupe BPCE – one of the main distributors of SGLs on the French banking market – to declare these loans as eligible central bank assets. The various expansion measures thus contributed to increasing the amount of central bank eligible assets, even when the amount mobilized with the central bank increased significantly in 2020 following the A liquidity gap arises from a mismatch between assets and liabilities with different maturity dates, as viewed at a static point in time. It measures the projection of the Group’s liquidity position over a given period of time on the basis of contractual maturities supplemented by customer behavioral modeling to define an “economic” repayment schedule for deposits without contractual maturities (sight deposits, savings accounts, etc.) and to complete the contractual approach by estimating the volume of future early repayments for loans and deposits with a maturity agreed by contract. Group’s use of TLTRO3 operations.

9

BPCE44 – LIQUIDITY GAPS

01/01/2021 to 12/31/2021

01/01/2022 to 12/31/2024

01/01/2025 to 12/31/2028

in billions of euros

Liquidity gap

85.0

64.2

29.5

The projected liquidity position shows a structural liquidity surplus over the analysis horizon, with a clear increase compared to the same measure carried out at the end of 2019.

This change is partly due to the increase in customer deposits, which, although mainly consisting of products without a contractual maturity date, benefit from a medium-term outflow rule.

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RISK REPORT PILLAR III 2020 | GROUPE BPCE