NATIXIS - 2018 Registration document and annual financial report

5 FINANCIAL DATA

Consolidated financial statements and notes

Data ranges unobservable among relevant level 3 products Equity / USDEUR correlation: [(8)%, 50.7%] Equity / fixed-income correlation: [5%, 47%] USDEUR / IR correlation: [24%; 28%] - Fixed income/Credit correlation: [(20)%] - Credit vol.: Structured by maturity ([2Y: [20%; 75%], 5Y: [20%; 60%], 10Y: [20%; 33%]) Stock/stock correlation: [5.2 to 93.17]

Main types of products comprising Level 3 within the instrument class Long (15Y) callable range accrual note on several asset classes (equity+forex+fixed income)

Valuation techniques used

Main unobservable data

Instrument class

Hybrid equity/fixed income/forex (FX) derivatives

Hybrid model coupling an equity diffusion, a FX diffusion and a fixed income diffusion

Correlation parameters (equity-FX, equity-fixed income, fixed income-FX)

Hybrid fixed income/credit derivatives

Long (15Y) callable range accrual note on fixed income and credit (default event)

Hybrid model coupling a fixed income diffusion and a credit diffusion

Correlation inputs (interest rate-credit and volatility-credit)

Equity derivatives

Multi-underlying payoffs with long maturities

Model for valuing volatility options incorporating correlation between assets

Correlation inputs

depending on in their liquidity horizons, determined by underlying currencies. At December 31, 2017, the net impact on the balance sheet of foreign currency options transferred to Level 3 was €226 million in liabilities (see Note 8.5.3) . The income statement was not impacted. Instruments affected by the financial crisis CDS contracted with credit enhancers (monoline insurers) a) Since December 31, 2015, the valuation model used to measure write-downs on CDS contracted with monoline insurers has moved more in line, in terms of method, with the adjustment made for counterparty risk (Credit Valuation Adjustment—CVA). It also takes account of the expected depreciation of exposures and the counterparty spread implied from the market data. Other instruments not exposed to US housing risk measured b) by Natixis using a valuation model The section below describes the underlying principles used to value assets resulting from securitization transactions for which no market prices could be identified and which were therefore measured using valuation models: Trust Preferred Securities (TruPS) CDOs a The valuation model is based on projected future cash flows and default rates determined according to a statistical approach that deduces the default probability of banks according to their financial ratios. For other sectors, default rates are estimated

Natixis’ policy on transfers between fair value levels Transfers between fair value levels are reviewed and validated by ad hoc Committees of representatives of various functions, particularly Finance, Risk and Business Lines. The Committee considers various indicators of market activity and liquidity as described in the General Principles. A review is undertaken for any instrument that ceases to meet these criteria or once again complies with the criteria. Transfers to and from Level 3 are subject to validation. At December 31, 2018, as explained in the key events, a portfolio of derivatives in Asia underwent a transfer to Level 3 in the fair value hierarchy. For the record, these are products which are indexed to the worst performance of an underlying basket of shares (indices and shares) that allow investors to receive enhanced periodic coupons in return for a risk of loss of capital at maturity, with the possibility that the product may expire early. The outstandings in question have a fair value recorded on the asset side of the balance sheet of €130 million at December 31, 2018. The bearish market in Asia revealed the limitations of the business model associated with these products and led to the supplementing of the reserve mechanism by introducing an additional reserve to allow for the model’s shortcomings. As this reserve requires judgment (specifically the anticipation of changes in market conditions, portfolio behavior, and so on), the valuation of the products to which it relates is no longer directly observable, and so the latter have been transferred to fair value Level 3 from Level 2, where they were classified previously, due to the unobservability of the parameters, the model used and the liquidity observed. At December 31, 2017, in accordance with this procedure, certain foreign currency options, along with volatility caps and floors, were transferred to Level 3 of the fair value hierarchy

considering the current ratings of assets. Private Finance Initiative CDS (PFI CDS) a

A valuation model was used, for Private Finance Initiative (PFI) CDS, which was based on an approach calibrated to the market prices of underlying PFI bonds and the use of a uniform collection rate. At December 31, 2018, Natixis no longer had any Private Finance Initiative CDS.

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Natixis Registration Document 2018