Groupe Renault - 2019 Universal Registration Document

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RISK FACTORS GROUPE RENAULT

Risks related to products

Policy for granting loans Customers who request financing are systematically scored for the Retail scope and almost systematically for the Enterprise scope. This facilitates an initial assessment of the file as part of the decision-making process. In addition to the operational process, the acceptance criteria are regularly updated based on the default rate and profitability analysis, which is based on the probability of default and loss in the event of default. The principles for identifying clients and beneficial owners as part of anti-money laundering and terrorist financing procedures are applied each time. Recovery The management of financing and its recovery are monitored in-depth. Subsidiary performance in terms of recovery efficiency is analyzed in the context of monthly risk reporting and is presented to the corporate by the subsidiaries at monthly or bi-monthly committee meetings depending on the significance of the country. The methods or strategies used for the recovery of outstanding or default loans are adjusted based on customer type and the difficulties encountered. The statistical models used in particular in the calculation of regulatory requirements allow a monthly update of the probability of default measured at the time of the grant, through the integration of the customer’s payment behavior. Using the same customer information, recovery scores have been introduced in Spain, South Korea and Brazil to detect at-risk profiles and make the process more efficient. As part of the new guidelines on the definition of default published by the EBA (European Banking Authority) in September 2016 and applicable in 2021, RCI Banque is studying new strategies and recovery practices in order to reduce the number of customers going into default. Dealer network risk management The policy to prevent credit risks within the network aims to ensure that objectives relating to the cost of risks, fixed as part of each country’s budget process are met. The Network Financing department establishes the risk control procedures centrally. For each subsidiary, network customers are monitored on a daily basis using short-term indicators, which, together with long-term indicators, allows any issues that might present a risk of partial or total non-recovery of the debt to be identified upstream. Customers who are identified as at risk are classed as supervised, pre-alert or alert and are reviewed by the subsidiaries’ Risk Committees. In terms of the network, all counterparties are systematically scored. All of the sections that constitute the rating, or the rating itself, are integrated into the key operational processes for acceptance, management and monitoring of activity and risks. The provisioning of the network financing business is based on the categorization of the counterparties, individually by examining target impairment indicators. Moreover, the probabilities of default and expected losses from “Basel” tasks for the G5 countries (France, Spain, Germany, UK and Italy) are used in the provisioning system.

1.6.3.3 Credit risks Risk factors

Credit risk relates to the risk of losses due to the incapacity of RCI Banque customers to fulfill the terms of a contract signed with the Company. Credit risk is closely linked to macro-economic factors. Management procedures and principles RCI Banque uses advanced scoring systems and external databases, when this information is available, to evaluate the capacity of retail and business customers to fulfill their commitments. It also uses an internal rating system to evaluate lending to dealers. RCI Banque is constantly adjusting its acceptance policy to reflect the conditions of the economic environment. The Group has detailed management procedures that it applies in all relevant countries and which notably include debt recovery processes. Management of customer risks The customer credit risk prevention policy aims to ensure that the cost of risk objectives fixed as part of the budgetary process for each country and each of its main markets (new and second-hand vehicles for retail customers, and companies excluding dealer networks) are met. The acceptance criteria are adjusted and the tools (scores and other rules) are regularly optimized for this purpose. The methods or strategies used for the recovery of outstanding or default loans are also adjusted based on customer type and the difficulties encountered. The contract may therefore be terminated prematurely when there is a risk that the loan may not be recovered in the very short-term.

COST OF RISK ON AVERAGE PERFORMING ASSETS (including country risk)

0.37%

0.33%

0.33%

0.31%

0.11%

2019

2015

2016

2017

2018

NB: ratio of losses recognized or provisioned during the financial year following default by borrowers to average loans outstanding across the whole portfolio.

114 GROUPE RENAULT I UNIVERSAL REGISTRATION DOCUMENT 2019

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