NATIXIS_PILLAR_III_2017_EN

OVERALL INTEREST RATE, LIQUIDITY AND STRUCTURAL FOREIGN EXCHANGE RISKS Management of liquidity and funding risk

Management of liquidity 9.2 and funding risk

TARGETS AND POLICY 9.2.1 

help diversify the sources of funding raised by Groupe BPCE a (by geographic area, product and counterparty); and specifically to promote inflows of non-financial resources.

Natixis is affiliated with the central institution of the Caisses d’Epargne and the Banques Populaires banks (BPCE), as defined by the French Monetary and Financial Code. Article L.511-31 of the French Monetary and Financial Code stipulates that central institutions are credit institutions and, as such, they must oversee the cohesion of their network and ensure the proper operation of affiliated institutions and companies. To this end, they take any necessary measures notably to guarantee the liquidity and capital adequacy of all such institutions and companies as well as the network as a whole. In light of the commitments Groupe BPCE has made to the supervisory authorities to ensure and guarantee the liquidity of the bank as lender of last resort, Natixis remains under the supervisory authority of BPCE. This supervision is implemented through governance and an overall liquidity risk management and monitoring system that is adapted, shared and harmonized by all affiliates, and whose main guidelines have been set forth by Groupe BPCE’s ALM Committee. Natixis’ liquidity risk management policy is an integral part of the Group’s policy. It sets out to optimize Natixis’ activities within a clear, shared and standardized framework in terms of governance and ALM regulations, and in line with the Group’s risk constraints. Furthermore, since mid-2011, Natixis’ funding structure has relied on a Joint Refinancing Pool shared by Natixis and BPCE. Placed under the authority of the Group ALM Committee, this platform was implemented in order to secure the Group’s financing and optimize the management of collateral and allocation of liquidity within the Group in accordance with pre-defined rules, with the aim of limiting the use of market financing and reducing funding costs. In particular, responsibilities for debt issues are as follows: BPCE is in charge of Natixis’ medium and long-term funding for public and private sector senior or subordinated vanilla funding transactions; Natixis is the MLT issuer for Groupe BPCE in all structured private sector refinancing transactions. The purpose of the overall liquidity risk management policy is to: ensure that Natixis meets its loan commitments while a ensuring that its funding needs and maturity transformation are in line with the Group’s short- and medium-term refinancing capacities; optimize funding costs within established risk constraints to a help reach profitability targets; observe the internal limits set in close cooperation with BPCE a and adapted to the Group’s ability to meet Natixis’ ultimate liquidity needs; comply with national and international regulations; a

MONITORING SYSTEM 9.2.2

Liquidity risk is controlled, managed and monitored as follows: management of each business line’s funding needs: to a manage the bank’s funding needs, liquidity budgets are allocated for each business line as part of the budgetary procedure and approved by the ALM Committee. Consumption is monitored weekly for Corporate and Investment Banking business lines and monthly for other business lines; management of the bank’s contribution to Groupe BPCE’s net a market footprint: the objective is to match the liquidity allocation system with the Group’s strategic ambitions and operational oversight; supervision of short-term maturity transformation, which is a measured using liquidity gaps. This indicator is produced daily for a 365-day period in one-day intervals for all parent company transactions, including some subsidiaries. It is subject to four permanent limits approved by the ALM Committee and monitored daily, on overnight market exposure at opening, on the 60-day, 150-day and 330-day static liquidity gaps; supervision of medium-term maturity transformation, which is a performed using coverage ratios that are defined by maturity tranche, such as the ratio of assets that have not yet matured to liabilities that have not yet matured. These ratios are calculated for long-term cash assets, credit subsidiaries housing medium-term activities, and for Natixis on a consolidated basis, and are restricted by the minimum coverage ratios approved by the ALM Committee and monitored monthly. Furthermore, in compliance with regulations and within the framework of the bank’s risk appetite, since 2015 Natixis has set up governance as well as a global limit and an alert threshold applied specifically to a coverage ratio, proposed by the ALM Committee and validated by the Board of Directors; supervision of the bank's contribution to the short-, medium- a and long-term transformation of Groupe BPCE. This is measured on the basis of Natixis’ consolidated liquidity gaps subject to limits at 60 days, 5 months, 11 months and 5 years. These indicators are produced on a monthly basis; simulations of liquidity stress scenarios: the purpose of these a scenarios is to measure the Group’s ability to continue meeting its commitments and operating in the event of a liquidity crisis. Natixis periodically simulates its contribution to the Group’s stress results based on different crisis scenarios (systemic, specific, combined, etc.) and different levels of intensity (moderate, strong, extreme, etc.) over one-, two- and three-month periods for which assumptions are set by BPCE;

9

109

NATIXIS Risk report Pillar III 2017