NATIXIS -2020 Universal Registration Document

3 RISK FACTORS, RISK MANAGEMENT AND PILLAR III Risk management

The second adverse scenario simulates tensions in the euro zone in 2021 and 2022, such as those observed in 2012 and 2013, related to the debt contracted by the member countries, following the health crisis experienced in 2020. In 2021, there is no economic improvement in the euro zone, unlike other main geographic areas. Southern euro zone countries, includingFrance, are suffering from a sharp rise in unemploymentand a further decline in GDP. Following the weakening of the euro and Brent prices, inflation is rising in the euro zone. An opposite scenario, used for the reverse stress test, is constructed from the sensitivity observed on the various components of Natixis in order to achieve a predefined target for the CET1 ratio. The outcome of this scenario is a downgraded version of the first adverse scenario, with more serious effects on equity and credit spreads. These projections are based on internal models, based on the sensitivities and trends observed in financial and economic variables, or on internal historical data. The results of the stress tests were approved by the Senior Management Committee and presented to the Risk Committee of the Board of Directors. They have been analyzed as part of the process of calculating Natixis’ solvency trajectory. This impact was measured in terms of net income group share, net revenues and Common Equity Tier 1. These tests help evaluate the areas where Natixis shows vulnerability or weakness and contribute to the establishment of adaptive or remedial measures. Furthermore,due to the uncertaintyof an economic recovery related to the coronavirus epidemic, in the second quarter of 2020, an additional assessmentof the P&L and solvency trajectoriesfor 2020 and 2021 was prepared based on three economic scenarios. A central scenariobased on the latest IMF forecasts, a secondmore downgraded central scenario with in particular a sharper decline in GDP and an adverse scenario: the central scenarios simulate an improvement in 2021 unlike the adverse scenario which shows no recovery. These trajectories were validated by the Executive Management Committee and presented to the ECB. Regulatory stress tests Regulatory stress tests comply with the ad hoc requirementsof the ECB, the EBA and any other supervisory body: the last regulatory exercise was performed in 2018 using the methodology published by EBA for the ECB. Natixis contributed to the exercise conducted for Groupe BPCE’s scope. In order to mitigate the effects of the COVID-19 health crisis, the stress test planned for 2020 was postponed to 2021 by the EBA, to allow the European banking sector to prioritize operational continuity. Specific stress tests The specific stress test exercises run by the Natixis Risk division are detailed in the dedicated sections of this document (and in particular the credit stress tests detailed in section 3.2.3, subsection 3.2.3.9“Commitmentmonitoring framework”, as well as the market stress tests detailed in section 3.2.5, subsection 3.2.5.3 “Market risk measurement methods”).

Other risks Insurance business-related risk is the risk to profits of any differencebetween expected and incurred claims. Dependingon the insurance product in question, the risk varies according to macroeconomic changes, changes in customer behavior, changes in public healthcare policy, pandemics, accidents and natural disasters (such as earthquakes, industrial accidents or acts of terrorism or war). Strategic risk is the risk inherent to the strategy chosen or resulting from Natixis’ inability to implement its strategy. Climate risk is the increased vulnerability of businesses to variations in climate indices (temperature, rainfall, wind, snow, etc.). It may be physical in nature (increase in extreme weather events) or related to environmental transition (new carbon regulations). Environmental and social risks arise from the operations of the clients and companies in which Natixis invests. Stress tests 3.2.2.6 Natixis has developed a comprehensive stress test mechanism to dynamically monitor and manage risks. The set is an integral part of the risk and financial management system and contributes to Natixis’ capital and regulatory requirements planning process. Natixis’ stress test mechanism is structured as follows: comprehensive internal and external exercises; V The purpose of comprehensiveinternal stress tests is to assess the impact of a baseline economic scenario and of stressed economic scenarios on a bank’s income statement, risk-weighted assets and equity. The scenarios proposed by the Economic Research team are discussed and approved at a Groupe BPCE Executive Management CommitteeMeeting and presented at a Natixis Senior Management Committee Meeting. They are converted into levels or shocks to economic and financial variables, such as GDP, inflation, employment and unemployment, interest and exchange rates, main stock market indice levels, and commodity prices, over a three-year period. These variables are factored into projection models used by Natixis to apply stress to the various aggregates on the income statement, risk-weighted assets and equity. The baseline scenario’s trajectory is derived from market consensus, forwards and futures. As part of the global internal stress tests conducted in 2020, the scenarios are designed using impact assumptions in years 2021 to 2023 with respect to the COVID-19 crisis. The first adverse scenario features an "L" shape economic recovery: the health crisis continues in 2021, followed by a limited recovery in the following years, without any significant improvement, due in particular to deflationary pressure in 2021 and 2022, before a gradual return to normal in 2023. periodic regulatory exercises; V specific exercises by scope. V Comprehensive internal stress tests

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NATIXIS UNIVERSAL REGISTRATION DOCUMENT 2020

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