NATIXIS // 2021 Universal Registration Document

RISK FACTORS, RISK MANAGEMENT AND PILLAR III Risk management

The collateral is adjusted for its volatility and type. Collections on collateral are estimated quarterly or annually on the basis of conservative valuations and haircuts and take into account the actual enforcement of such collateral in times of economic slowdown. Depending on their nature, collateral guarantees must meet the following specific eligibility criteria: non-financial guarantee: the eligibility of personal guarantees V depends on the quality of the guarantor and must fulfill several conditions: represent a direct claim on the guarantor and refer to specific V exposures, be irrevocable and unconditional, V if the counterparty defaults, the bank can take legal action V against the guarantor within the permitted time frame to settle payment arrears under the legal document governing the transaction, the guarantee is an obligation secured by a legal document that V establishes the guarantor’s liability, the guarantor covers all types of payments to be made by the V borrower in question; financial guarantee: eligibility is determined by the relevant legal V framework, the nature of the guarantee (financial collateral, real collateralor netting agreement), borrower and liquidity. It must be valued at least once a year and meet several conditions: all the legal documents are binding on all parties and are legally V valid in all relevant jurisdictions, the bank has the right to realize or take ownership of the V collateral in case of default, insolvency or bankruptcy, there is no material positive link between the quality of the V counterparty credit and the value of the collateral, the asset must be liquid and its value sufficiently stable over V time for its realization to be certain. In terms of monitoring, collateral and netting agreements are: analyzed, when a loan application is approved or reviewed, V to ascertain the suitability of the instrument or guarantee provided as well as any associated improvement in risk quality; checked, processedand documentedbased on standard contracts V or contracts approved by the Legal Department; subject to registration and monitoring procedures in the risk V administration and management systems. Similarly, providers of sureties (via signature guarantees, CDS or private credit insurance) are examined, rated and monitored, as with debtors. Natixis may take steps to reduce commitments in order to lower concentration risk by counterparty, sector and geographic area. Concentration risk is rounded out with an analysis, based on stress test methodologies (migration of ratings according to macroeconomic scenarios). Natixis may buy credit-default swaps and enter into synthetic securitizationtransactionsin order to reduce all or part of the credit risk exposure attached to some assets by transferringthe risk to the market. Natixis bears the counterpartyrisk attached to the credit-default swap sellers, which are generally OECD banks. Transactions with non-bank third parties are fully collateralized in cash. These transactions are subject to decision-makingand monitoring procedures that apply to derivative transactions.

Model by asset class Interest rate/currency distribution model Basis interest rate/currency distribution model Equity distribution model Commodity futures distribution model

Credit distribution model Inflation distribution model

Credit and counterparty risk 3.2.4.9 mitigation techniques (Data certified by the Statutory Auditors in accordance with IFRS 7) Credit risk mitigation is a technique for mitigating the credit risk incurred by the bank in the event of partial or total counterparty default. Credit risk mitigation (ARC) techniques are taken into account in the calculation of prudential capital requirements subject to their eligibility (compliance with the various criteria provided for by European Parliament and Council Regulation No. 575/2013 found in the bank’s internal documentation). They include the recognition of netting agreements, collateral (assets given as collateral) and personal sureties (first demand guarantees, sureties, credit derivatives). For information, the criteria used to offset transactions on Natixis’ balance sheet are described in Note 7.3 “Offsetting of financial assets and liabilities” in Section 5.1 - Consolidated financial statements and notes. The ARCs are entered into dedicated applications and fed into the regulatory calculation tool. They must be taken into account in accordance with the recommendations of the prudential texts. The eligibility of guarantees is subject to control points defined throughout the grantingprocess of an operationup to the calculation of the resulting capital requirements. Natixis uses a number of credit risk mitigation techniques, including netting agreements, personal guarantees, asset guarantees or the use of credit-default swaps (CDS) for hedging purposes. Credit risk mitigation techniques involve two types ogfuarantee: non-financial or personal collateral: V one or more guarantors commit to pay the creditor in the event of borrower default. It includes personal guarantees, on-demand guarantees and credit derivatives; financial or real collateral, or secured loans: V the creditor is granted real security rights to one or more assets belonging to the borrower or guarantor. Forms of collateral include cash deposits, securities, commodities (such as gold), real estate assets, mortgage-backed securities, life insurance policy pledges. Collateral eligibility is governed by the following process: vetting by the Legal Department of the documents relating to the V collateral and the enforceability of the collateral; validation by the Risk division. V In accordance with regulatory provisions, the bank performs the valuation of guarantees, periodically reviews these valuations and carries out any necessary adjustments.

3

129

www.natixis.com

NATIXIS UNIVERSAL REGISTRATION DOCUMENT 2021