NATIXIS -2020 Universal Registration Document

RISK FACTORS, RISK MANAGEMENT AND PILLAR III Risk management

In addition, reverse stress tests are used to identify the highest-risk scopes and market environments, as well as concentration and contagion links, while “ad hoc” stress tests are used to characterize any current event that could trigger major shifts in the market. Using plausible scenarios drawn from extremely adverse assumptionsof risk factors leading to the breach of a loss threshold, reverse stress tests allow Natixis to implement a risk monitoring and management tool, identify circumstances that may trigger such loss, and adapt the appropriate action plans where necessary. “Ad hoc” stress tests use expected market trends based on economic research that is translated into overall stress-test scenarios. They measure the banks resilience to major current events, and allow hedging strategies to be adapted accordingly. All stress test mechanisms are defined by the risk division, which is responsible for defining principles, methodology and calibration and scenario choices. The Stress Test Committee is responsible for the operational implementation of stress tests and meets on a monthly basis. The Committeeapproves work to be carried out, its workload and determines the annual IT budget. loss alerts by portfolio and aggregatedby business line, which 2) alert management and the risk division if losses reach a certain threshold over a given monthor on a cumulative basis since the beginning of the year. These thresholds are set by the Market Risk Committeeaccording to the characteristicsof each portfolio, past performance and budgetary targets; finally, the supervisory framework includes operational 3) indicators on an overall and/or by business basis, which focus on more directly observable criteria (sensitivity to changes in the underlying and to volatility, correlation, nominals, etc.).The limits of these qualitative and quantitative indicators are set in line with the VaR and stress test limits.

Independent valuation control The valuation of Natixis’ various market products forms part of the independent control system made up of dedicated procedures. In accordance with the provisions of IFRS 9, financial instruments are recognized at their fair value (see Chapter 5 for further information on fair value accounting methodologies) . Fair value determination is subject to a control procedure aimed at verifying that the valuation of financial instruments is determined and validated by an independent function in terms of prices and/or valuation models. Independent price verification Independent price verification is carried out by Market Risk’s IPV (Independent Price Verification) teams which, in line with the division’s policy, control the market inputs used in the valuation process for the bank’s transactions. The review of market inputs may lead to valuation adjustments recognized in economic results and the financial statement. IPV governance is based in particular on: a supervision mechanism overseen by various Committees V (Observability Committee, Market Inputs Committee, Valuation Committee, IPV Committee); a policy and set of procedures, explaining the validation and V escalation system; a set of weekly and monthly reports; V dedicated tools. V

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NATIXIS UNIVERSAL REGISTRATION DOCUMENT 2020