NATIXIS // 2021 Universal Registration Document

3 RISK FACTORS, RISK MANAGEMENT AND PILLAR III Risk management

When Natixis uses the intermediary services of a broker, the limit on the initial margin is added to the other limits that Natixis may have on this counterparty. New requests for the establishment of thresholds as well as their annual reviews are validated by the credit Committee according to Natixis’ credit decision-making process. Compliance with the thresholds is monitored daily by the Credit Risk Monitoring Department, which also updates the thresholds in the credit risk monitoring tool and produces a monthly exposure dashboardwith the CCPs. In addition, in the event of breachesnoted, the department communicatesthis information in the weekly reports on market breaches and in the monthly breach Committee. These limits are integrated into the systemic risk sensitivities of the bank, in particular for major risks and concentrations. Commitment monitoring 3.2.4.10 framework (Data certified by the Statutory Auditors in accordance withIFRS 7) Concentration risk and monitoring: Concentration risk by group of counterparties is primarily managed by the major regulatory risks system. The regulation relating to the control of large exposures is intended to avoid excessive concentration of risks on the same set of related counterpartiessuch that it is likely that if one of them were to encounter financial difficulties, the others would also experience financing or repayment difficulties. The aggregate of risks to a single beneficiary may not exceed 25% of the institution’s total equity. Natixis is below the concentration thresholds set by the regulations since the internal rules set limit exposure to a group of clients to a maximumof 10% of its equity. The monitoring of country and geographic concentration risk is based on global limits that are reviewed annually. The risk of sectoral concentration in the main sectors is controlled via the aforementioned global policy in paragraph 3.2.4.2. The operational limits encompass all financing transactions involving counterparties in the corresponding sector. Measuring and monitoring systems Natixis’ commitmentsare measured and monitored on a daily basis using dedicated consolidation systems. An IT system enables comprehensive consolidation of limits and credit exposures across 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 line heads with reports analyzing Natixis’ risks: trend analyses, indicators, stress test results, etc. Credit risk supervision is based on: the accountability of the business lines; V various second-level control actions conducted by the Credit Risk V Department of the Risk division (e.g. rating and limit checks, etc.).

Mitigating counterparty risk Natixis reduces its exposure to counterparty risk using three measures: setting up a frameworkagreementwith its counterpartiesenabling V full termination-netting,where possible. One of the main objectives of a framework agreement is the ability of the parties to terminate all outstanding transactions in the event of default by one of the parties. The master agreement defines the methodology for valuing the underlying transactionsand determininga final closing amount by offsetting all hedged transactions. The close-out netting mechanism reduces the credit risk vis-à-vis the otheprarty. The most widely used framework agreement for over-the-counter derivatives transactions is that of the International Swaps and Derivatives Association (ISDA) or, in the case of over-the-counter transactions under French law, that of the Fédération Bancaire Française (FBF); the addition to these framework agreements, of a collateral V agreement defining the implementation of a collateral exchange that fluctuates according to the valuation of the portfolios of transactions with the counterparties concerned. The guarantee mechanismmitigatescredit risk and potential losses on derivatives transactions resulting frommarket fluctuations.Collateral can take the form of cash or securities (e.g. government bonds) that are exchanged between the two parties after a margin call. The parties may add or modify the characteristics of the collateral exchange, by varying the type of eligible collateral, the frequency of margin calls, the threshold or the minimum transfer amount. The Variation Margin (VM) was introduced to comply with margin requirements for derivatives that are not subject to mandatory clearing under the European Market Infrastructure Regulation (“European Market Infrastructure Regulation” [EMIR]). Indeed, the margin requirements under EMIR require the relevant counterparties to exchange a margin on their OTC derivative contracts that are not cleared by a central counterparty (“CCP”). The regulation imposes two types of margin: the variation margin (VM), which hedges the current credit V exposure resulting from fluctuations in market value, the initial margin (IM) which covers the potential future credit V exposure for the period between the last exchange of VM and the liquidation of the positions following the default of the counterparty. Unlike VM, IM must be separated and cannot be reused; the use of clearing houses. The latter, by substituting for their V members, bear most of the counterparty risks. To do this they use an initial margin and variation margin call system. Use of clearing houses (CCP) Netting is used by Natixis as part of the usual counterparty risk mitigation framework for its market activities (repo, derivatives) in accordance with EMIR and Dodd-Frank Act regulations. Natixis only deals directly or indirectly with approved bodies with which it has signed appropriate legal documentationand which have a minimum internal rating of A (A- for brokers). The clearing activity benefits from a specific framework and is accompanied by the establishment of specific thresholds on initial margin and default funds when Natixis is a member of the house.

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NATIXIS UNIVERSAL REGISTRATION DOCUMENT 2021