NATIXIS // 2021 Universal Registration Document

5 CONSOLIDATED FINANCIAL STATEMENTS AT DECEMBER 31, 2021 Consolidated financial statements and notes

CDS contracted with monoline insurers, for which the valuation V model used to measure write-downs has moved more in line, in terms of method, with the adjustment made for counterparty risk (Credit Valuation Adjustment – CVA). It also takes account of the expected depreciation of exposures and the counterparty spread implied from market data; plain vanilla derivatives are also classified as Level 3 in the fair V value hierarchy when exposure is beyond the liquidity horizon determined by underlying currencies or by volatility surface (e.g. certain foreign currency options and volatility caps/floors). In accordance with Regulation No. 2019/876 of May 20, 2019 (CRR II) amending European Regulation No. 575/2013 of June 26, 2013 (CRR) regarding the requirements of Pillar III, for each of the models used, a description of the crisis simulations applied and an ex-post control system (validation of the accuracy and consistency of internal models and modeling procedures) is given in Section 3.2.6 of Chapter 3 “Risk factors, risk management and Pillar III”. Under IFRS 9, day-one profit should be recognized only if it is generated by a change in the factors that market participants would consider in setting a price, i.e. only if the model and parameters input into the valuation are observable. If the selected valuation model is not recognized by current market practices, or if one of the inputs significantly affecting the instrument’s valuation is not observable, the trading profit on the trade date cannot be recognized immediately in the income statement. It is taken to income on a straight-line basis over the life of the transaction or until the date the inputs become observable. Any losses incurred at the trade date are immediately recognized in income. At December 31, 2021, instruments for which the recognition of day-one profit/loss has been deferred included: multiple equity and index underlying structured products; V mono-underlying structured products indexed to sponsored V indices; synthetic loans; V options on funds (multi-asset and mutual funds); V structured fixed-income products; V securitization swaps. V

c)

Level 3: Fair value measurement using

non-observable market data Level 3 comprises instruments measured using unrecognized models and/or models based on non-observable market data, where they are liable to materially impact the valuation. This mainly includes: unlisted shares whose fair value could not be determined using V observable inputs; Private Equity securities not listed on an active market, measured at V fair value with models commonly used by market participants, in accordance with International Private Equity Valuation (IPEV) standards, but which are sensitive to market fluctuations and whose fair value determination necessarily involves a judgment call. structured or representative of private placements, held by the V Insurance business line; hybrid interest rate and currency derivatives and credit derivatives V that are not classified in Level 2; loans in the syndication process for which there is no secondary V market price; loans in the securitization process for which fair value is V determined based on an expert appraisal; the loan trading activity for which the market is illiquid; V investment property whose fair value is obtained using a V multi-criteria approach based on the capitalization of rents at the market rate combined with a comparison with market transactions; instruments with a deferred day-one margin; V mutual fund units for which the fund has not published a recent V NAV at the valuation date, or for which there is a lock-up period or any other constraint calling for a significant adjustment to available market prices (NAV, etc.) given the low liquidity observed for such securities; debt issues measured under the fair value option which are V classified in Level 3 where the underlying derivatives are classified in Level 3. The associated “issuer credit risk” is deemed observable and thus classified in Level 2;

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NATIXIS UNIVERSAL REGISTRATION DOCUMENT 2021