NATIXIS -2020 Universal Registration Document

3 RISK FACTORS, RISK MANAGEMENT AND PILLAR III Risk management

Securitization 3.2.4 transactions General policy 3.2.4.1

External rating system 3.2.4.2 (Data certifiedby the Statutory Auditors in accordance with IFRS 7) Natixis relies on four external credit rating agencies, among others, for securitization transactions: Moody’s, DBRS, Fitch-IBCA and Standard & Poor’s. Securitization vehicles 3.2.4.3 Natixis acts as sponsor in ABCP-type securitization transactions through three vehicles, namely Versailles, Bleachers and Magenta. Of these vehicles, only two are consolidated in Natixis’ scope of regulatory consolidation: Versailles and Bleachers. For both vehicles, Natixis plays a predominant role in the selection and managementof acquired receivablesas well as the managementof the issuance program, thus giving it power over the conduits’ relevant activities and influence over the amount of their returns. In contrast, given that Natixis is not part of the governingbody holding the power to decide on Magenta’s relevant activities, this conduit is not consolidated in Natixis’ regulatory consolidation scope. 3.2.5.1 (Data certifiedby the Statutory Auditors in accordance with IFRS 7) The risk department, via the Market Risk Department, places great importance on the formal definition of all risk policies governing market transactions based on both a qualitative and forward-looking analysis. This approach is mainly based on the strategic review of global risk budgets, business targets and market trends and relies on a proactive early warning system for the most sensitive areas at risk. These market risk policies focus on a set of methodological principles in terms of risk monitoring and supervision and provide a matrix approach to businesses by asset class and management strategy. Market risk 3.2.5 Targets and policy Organization of market risk 3.2.5.2 management (Data certifiedby the Statutory Auditors in accordance with IFRS 7) Market risk control is based on a limit authorizationstructure that is overseen by the Global Risk Committee and in which the Market Risk Committee, chaired by the Chief Executive Officer or the delegated representative, plays an essential role. The risk department: defines risk measurement and fair value adjustment methods, V then submits them to the Market Risk Committee for validation; examines annual limit reviews (including risk appetite) and ad hoc V requests for modifications (VaR, stress tests, operational indicators, loss alerts); raises alerts for areas at risk relating to the business lines or to V Natixis’ senior management; is responsible for the daily analysis and measurement of risks, V daily reporting, and notifying front office and management of any breaches;

(Data certified by the Statutory Auditors in accordance with IFRS 7) Natixis is involved in securitization transactions under different roles: as an investor via financing transactions for its clients, via V derivative transactions and to a lesser extent via market-making activities on certain ABSs (in particular Asset-BackedCommercial Paper). Natixis mainly invests in senior assets with sound levels of collateral and spreads. Similarly, it applies a sector and geography-based diversification strategy for underlying assets; as a sponsor, i.e. on transactions for its clients to create and V manage ABS programs; as an originator, as part of its refinancing activities or through V synthetic securitization (whose objective is to transfer part of the credit risk of a portfolio of receivables to investors). This activity is conducted under Natixis’ general “Originate-to-Distribute” strategy. Natixis’ credit decision-making process is followed for all securitization transactions. Three criteria are used: amount, maturity and credit quality (including the rating [external if available]). For every structured arrangement subject to approval, a substantiated request and a description of the arrangement, collateral, seller/originator and the proposed tranching must be submitted, along with an analysis of the associated guarantees. A counter-analysis is then carried out by the risk division and, if necessary, a quantitative analysis of the portfolio’s default risks. Transactions are examined, and decisions are made based on all the loan application’s parameters, including the expected profit margin on the loan, the capital burn and compliancewith the current risk policy. Like vanilla finance transactions, securitization structures and transactionsare reviewed at least once a year, while transactionson the watchlist are re-examined at least once a quarter. Natixis manages the risks associated with securitization positions through two mechanisms. the first involves the daily identification of all rating downgrades V (where applicable) affecting Natixis’ securitization positions as well as the associated potential risks and, if necessary, deciding on an appropriate course of action; the second is based on the analysis of securitization positions V according to quantitative (resistance to portfolio downgradesand credit quality, rating if available, valuation) and qualitative criteria (analysis). With regard to activities recognized in the trading book, Natixis may hold securitization positions (secondary market), resulting from purchase and sale transactions with its clients. The activity is governed by a Volcker manual as well as a limit mandate, which specifies the types of risks borne, as well as their holding procedures. Natixis does not use the IAA (Basel Internal Assessment Approach) on its securitization positions.

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NATIXIS UNIVERSAL REGISTRATION DOCUMENT 2020

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