NATIXIS_PILLAR_III_2017_EN

2 GOVERNANCE AND RISK MANAGEMENT ORGANIZATION Risk appetite

Furthermore, the new Code of Conduct adopted by Natixis in December 2017 is an effective means of inculcating the risk culture as it defines the rules of conduct applicable to all employees, and encourages greater involvement and accountability. Four guiding principles serve as the building blocks of Natixis’ DNA and are adapted to each profession and function. The rules are divided into the following themes:

acting responsibly towards society; a protecting Natixis' and BPCE Group’s assets and reputation. a A Conduct Committee was also formed at the top-most level of the Bank and involves members of the Senior Management Committee. Lastly, Natixis’ compensation policy is structured to encourage the long-term commitment of the Company’s employees while ensuring the appropriate risk management.

being client-centric; a behaving ethically; a

Risk appetite 2.4

Natixis’ risk appetite is defined as the nature and the level of risk that the bank is willing to take within the bounds of its business model and strategy. It is consistent with Natixis’ strategic plan, budget process and business activities, and falls within BPCE’s general framework on risk appetite, comprising two components: the Risk Appetite Statement (RAS), which sets out, in 1. qualitative and quantitative terms, the risks that the bank is prepared to take; the Risk Appetite Framework (RAF), which describes the 2. interface between the organization’s key processes and the implementation of the governance that puts the RAS into action. Risk appetite is reviewed annually by Senior Management and approved by the Board of Directors after consultation by the Risk Committee. Natixis’ risk appetite principles result from the selection and control of the types of risks that the bank is prepared to take in pursuit of its business model, and ensure consistency between Natixis’ overarching strategic guidelines and its capacity to manage risks. The business model developed by Natixis is based on its recognized areas of expertise (corporate financing, market activities, Asset Management, Insurance, Services and Specialized Financing), responding to the needs of its clients and those of BPCE Group. The bank seeks sustainable and consistent profitability in balance with its consumption of scarce resources (capital, liquidity, balance sheet). It declines any engagement with activities that it does not master. Activities with high risk/profitability ratios are subject to strict selection and oversight. Market risk management in particular has a highly selective investment approach, coupled with limited tolerance for extreme risk, and very close monitoring. RISK APPETITE STATEMENT 2.4.1

Natixis incurs risks intrinsically as part of its Corporate & Investment Banking, Asset & Wealth Management, Insurance and Specialized Financial Services (SFS) activities: credit risk generated by Corporate & Investment Banking as a well as SFS lending activities is managed under specific risk policies adapted by business and subsidiary, concentration limits defined by counterparty, sector and country, and through extensive portfolio monitoring. Natixis ensures the selective management of issuance commitments through independent analyses and various credit committees. leverage and liquidity risk are included in Groupe BPCE's risk a framework. As BPCE provides a liquidity and capital adequacy guarantee, Natixis applies BPCE’s risk policies to its own organization. Specific targets that help manage scarce resources using a dedicated framework and management objectives have been defined for these risks. Natixis oversees the strategy to diversify its sources of financing as well as those of Groupe BPCE, and manages its solvency ratio to cope with stress situations. market risk is incurred from Natixis’ market activities within the a CIB, which aim to meet the needs of its clients with the exception of proprietary trading. This risk is managed according to a body of risk policies and specific qualitative and quantitative indicators. operational risk is intrinsic to all the Bank’s businesses and a functions and is managed using a shared data collection tool. The framework, which has been rolled out across the businesses and geographic regions, is used to map risks and implement corrective and preventive action plans accordingly. Natixis is committed to strictly observe the laws, regulations a and norms governing its activities, in France and internationally, in the realm of financial security (anti-money laundering, terrorism, corruption and fraud), compliance and client protection. Natixis’ most important asset is its reputation and its a relationship with its clients. Clients' interests are therefore put first and the bank – irrespective of the business activity, entity or geographic region – is dedicated to operating at the highest level of ethical standards, and in line with the best standards of transaction execution and security. Together with Groupe BPCE, Natixis closely monitors its reputation risk using indicators that combine an ex ante/ex post approach.

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NATIXIS Risk report Pillar III 2017

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