NATIXIS -2020 Universal Registration Document

3 RISK FACTORS, RISK MANAGEMENT AND PILLAR III Risk management

Commitment monitoring 3.2.3.9 framework (Data certified by the Statutory Auditors in accordance with IFRS 7) Measuring and monitoring systems Natixis’ commitmentsare measured and monitored on a daily basis using dedicated consolidation systems. An IT system enables comprehensiveconsolidationof limits and credit exposuresacross a scope covering all of Natixis’ exposure to credit risk and most of that of its subsidiaries. The risk division provides senior management and the Bank’s business heads with reports analyzing Natixis’ risks: trend analyses, various second-level control actions conducted by the Credit Risk V Department of the risk department (e.g. rating and limit checks, etc.). This supervision is based on a rigorous selection of loan applications, regular monitoring of counterpartiesand anticipationof their potential deterioration, notably through the “Credit Alert” system. This system is based on daily information sent to the analysts concerned (Front Office and risks) and covering: financial data (e.g. unfavorable change in equity or cash flow from V operations), market data (e.g. share price, external rating, CDS), and V events relating to the Company’s development (e.g. placing on a V watch list). It incorporates a growing number of indicators thereby making it possible to act in advance of a deteriorating situation (e.g. review of the file, switch to watch list or default). As regards limit breaches, the dedicated monthly Committee Meeting analyzes changes in limit breaches using specific indicators (number, notional, duration, businesses concerned, etc.), and examines major breaches and monitors their correction. Since the implementation of the new Europeanguidelineson default, Natixis has been sending BPCE its cases of unpaid bills, overdrafts, bankruptcy proceedings and forbearance on a daily basis and receives in return, after aggregation with the data reported by the other Group institutions, the status (sound, sensitive or default) applicable to all of its third parties. Exposures showing deterioration in the level of risk are identified as they arise and reported immediately to the risk division and the business concerned, in accordance with both the counterparty watchlist, specific provisioning and alert procedures. They are then placed on the watchlist, as decided by the risk division or the competent Credit Committee depending on the amount of exposure. Corporate & Investment Banking risks are monitored by the Restructuring and Special Affairs Department (DRAS), which intervenes in difficult and default cases where necessary. The litigation department handles collections of loans inlitigation. indicators, stress test results, etc. Credit risk supervision is based on: accountability of the business lines; V

Monitoring of non-performing and disputed loans and provisioning mechanism (Data certified by the Statutory Auditors in accordance withIFRS 7) Individual provisions The Natixis Watchlist and Provisions Committee meets once a quarter and covers all the bank’s businesses. It reviews all non-performingloans under watch that may give rise to provisionsor adjustments to existing provisions, and decides on the amount of provisioning necessary, based on the provision amounts submitted to it individually by the business lines, the Restructuring and Special Affairs Department and the risk division. This Committee is organized by the risk division and chaired by the Chief Executive Officer and assembles the chief risk officer, members of the Senior Management Committee in charge of the business lines and finance, the accounting and prudential ratios division and the heads of the relevant support functions. It draws on a structure of preparatory Committees that are jointly steered by the risk division and each of the bank’s busineslsines. Provisions for expected credit losses In addition to individual provisions, Natixis records provisions for expected credit losses (ECL) at initial recognition. These financial instruments are divided into three categories depending on the increase in credit risk observed since their initial recognition. An impairment charge is recorded on outstanding amounts in each category. Performing loans for which credit risk has increasedmaterially since initial recognition are classified in Stage 2 (S2). The impairment or the provision for credit risk is determined on the basis of the instrument’s expected credit losses at maturity (lifetime ECL). Measurements of an increase in credit risk resulting in S2 classification are based on a combination of quantitative and qualitative criteria. The quantitative criterion is based on the change in rating since initial recognition. Additional qualitative criteria are used to categorize as Stage 2 any contracts included on a non-S3 watchlist, undergoing adjustments due to financial hardship (forbearance) or more than 30 days past due. Additional criteria based on the sector rating and the level of country risk are alsoused. The sector and country rating process is centered on a Geo-Sector Committee comprising the finance division, the risk division and Corporate& Investment Banking representatives.The main objective of this Committee, established for the purpose of implementing IFRS 9, is to validate sector ratings as well as country and sovereign scores on a quarterly basis. These ratings then serve as a basis for calculating ECL. Sector ratings in particular are based on the results of the semi-annual economic environment reports. Stress tests The credit stress test system covers Natixis scopes subject to the A-IRB, F-IRB and standardized approaches. It is based on choosing scenarios that replicate plausible crisis situations and high degrees of severity, in keeping with market practices, while taking past events, market trends and the environment into account so that purely historical or theoretical scenarios are eliminated.

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NATIXIS UNIVERSAL REGISTRATION DOCUMENT 2020

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