NATIXIS_PILLAR_III_2017_EN

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

Oversight of the leverage ratio 9.2.6.3 Under the French Ministerial Order of November 3, 2014 on internal control by companies in the banking, payment services and investment services sector subject to the supervision of the ACPR, the companies in question are required to set overall limits and establish policies and processes to detect, manage and monitor excessive leverage risk. Accordingly, Natixis established: a governance system under the authority of the ALM a Committee, chaired by the CEO, for managing and monitoring excessive leverage risk ( see section 9.1 ); a dedicated risk policy for excessive leverage risk; notably, the a ALM Committee decided on early adoption of a target leverage ratio well above the 3% minimum requirement currently recommended by the Basel Committee, in keeping with the Bank’s transformation strategy towards an asset-light model, as advocated by the New Frontier plan; an overall limit and an alert threshold applied to Natixis’ a leverage ratio, proposed by the ALM Committee and approved by the Risk Committee. In accordance with the operational oversight established by the Financial Management Department in partnership with the business lines, Natixis successfully achieved its target leverage ratio. This target ratio is higher than the regulatory requirement, which will enter into force in Europe on a still-unknown date. As such, Natixis maintained a leverage ratio of above 4% in 2017. As in 2016, management and oversight of this ratio were achieved by setting constraints for activities (such as repos and securities lending transactions, derivative contracts, etc.) that are not RWA-intensive but are balance sheet-intensive.

HQLA assets reported in the LCR numerator also include unencumbered HQLA securities temporarily carried by the Capital markets activities. These securities are not considered as part of the ringfenced liquidity reserve and are not meant to be held over the long term. The outstanding amount and composition of these portfolios may vary considerably from one reporting date to the next, as prices fluctuate. However, they can be monetized on the repo and securities borrowing/lending market, and this monetization may be forced in the event the Group liquidity-stressed BCP is activated and executed. In addition to these buffers, the aim of the internal policy governing the investment of residual surplus liquidity is to reserve this liquidity for the deposit facility to ensure its continuous availability; accordingly, this surplus liquidity is also included in the amount of assets reported in the LCR numerator. Oversight of the short-term liquidity 9.2.6.2 ratio In June 2013, Natixis established a governance system for the management of the LCR ( see section 9.2.5 ), having set an LCR limit higher than 100% from the end of 2013 (greater than the regulatory requirements in force). The oversight of the LCR is part of a Groupe BPCE framework under the aegis of the BPCE Group Finance division. Natixis’ LCR hedging is organized in close cooperation with BPCE and is managed by the Joint Refinancing Pool, acting with the authorization of the Financial Management Department on the basis of its forecasts. Within this framework, the strategy for the Natixis scope aims to hedge the LCR above 100% with a safety buffer of around €5 billion in order to deal with any last-minute contingencies, through BPCE adjustments. The structural over-hedge of the Group's LCR above the 100% threshold for a 80% regulatory limit at end-2017, is borne by BPCE.

TABLE 55 (LR1): COMPARISON OF ACCOUNTING EXPOSURES AND LEVERAGE EXPOSURES R

(in millions of euros) Description

12.31.2017

12.31.2016

9

1 Total consolidated assets reported in the financial statements

519,987

527,860

2 Adjustment for investments in banking, financial, insurance or commercial entities that are consolidated for accounting purposes but outside the scope of regulatory consolidation 3 (Adjustment for fiduciary assets recognized on the balance sheet pursuant to the operative accounting framework but excluded from the leverage ratio exposure measurement, in accordance with Article 429 (13) of regulation (EU) No. 575/2013 “CRR”) 4 Adjustments for derivative financial instruments 5 Adjustment for securities financing transactions (repurchase transactions and other types of collateralized loans) 6 Adjustment for off-balance sheet items (i.e. conversion of off-balance sheet exposures to credit equivalent amounts)

(94,937)

(85,135)

(29,265)

(38,832)

(19,927)

(20,183)

36,079

37,038

7 Other adjustments

(15,661)

(19,129)

8 LEVERAGE RATIO EXPOSURE* *o/w exposure related to affiliates

396,276 47,251 349,025

401,619 50,540 351,079

*Excluding exposure related to affiliates

115

NATIXIS Risk report Pillar III 2017