BPCE - Risk Report - Pillar III 2020

CREDIT RISKS

CREDIT RISK MITIGATION TECHNIQUES

Division of risks

The division of risks is a credit risk mitigation technique. It is reflected in the individual or topical limit systems and helps reduce each institution’s sensitivity to risks considered either individually or sectorally to be too significant to carry in the event of major incidents.

Risk supervision activities may be implemented to reduce exposure to a given risk if it is deemed too high. They also contribute to effective division of risks.

Guarantors

The Banque Populaire network has historically used professionals and Mutual Guarantee Companies (such as SOCAMAs, which guarantee loans to craftsmen) to secure its loans, in addition to the real guarantees used. For loans to individual customers, it also turns to CASDEN Banque Populaire (and primarily its Parnasse Garanties structure) to back loans to all civil servants, to Crédit Logement and increasingly to Compagnie Européenne de Garanties et de Cautions (CEGC, a subsidiary of BPCE SA). For home loans, the Caisse d’Epargne network mainly calls on CEGC, FGAS ( Fonds de garantie à l’accession sociale à la propriété ) and, to a lesser extent, Crédit Logement (a financial institution and a subsidiary of most of the main French banking networks). These institutions specialize in the provision of guarantees for bank loans (predominantly home loans). FGAS offers guarantees from the French government for secured loans. Loans covered by FGAS guarantees granted before December 31, 2006 are given a 0% risk weigh, and loans covered by guarantees granted after that date have a risk weight of 15%. Crédit Logement has a long-term rating in 2020 of Aa3 from Moody’s, with a stable outlook.

For their home loans, the Banque Populaire and Caisse d’Epargne networks also use several mutual insurers, such as MGEN, Mutuelle de la Gendarmerie, etc. For professional and corporate customers, the entire Group still uses Banque Publique d’Investissement, while calling on the European Investment Fund or European Investment Bank for guarantee packages in order to substantially reduce credit risk. In some cases, organizations such as Auxiga are used for the seizure of inventory and the transfer of its ownership to the bank as collateral for commitments made in the event of financial hardships. Finally, on an occasional basis, Natixis purchases credit insurance for certain transactions and in some circumstances, from private (SCOR) or public (Coface, Hermes, other sovereign agencies) reinsurance companies, while also making use of Credit Default Swaps (CDS). In light of the Covid crisis, the French government allowed its guarantee to be used within the scope of the State-guaranteed loans granted. Groupe BPCE used this option. Credit derivatives serving as currency or interest rate hedges are entrusted to approved clearing houses in Europe or the US for Natixis operations in this country.

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RISK REPORT PILLAR III 2020 | GROUPE BPCE