NATIXIS_PILLAR_III_2017_EN

GOVERNANCE AND RISK MANAGEMENT ORGANIZATION Risk factors

RISKS RELATED TO 2.6.2

fall from their current historically high levels, and the impact could be exacerbated if the correction is particularly rapid or if broad groups of market participants withdraw assets from share-based products at the same time. Credit markets and the value of fixed income assets could be adversely affected if interest rates were to rise sharply as the European Central Bank, the Federal Reserve Bank and other central banks begin to scale back the extraordinary support measures they put in place in response to recent adverse economic conditions. Commodity prices could be impacted by unpredictable geopolitical factors in regions such as the Middle East and Russia. More generally, increased volatility of financial markets could adversely affect Natixis’ trading and investment positions in the debt, currency, commodity and equity markets, as well as its positions in other investments. Severe market disruptions and extreme market volatility have occurred in recent years and may occur again in the future, which could result in significant losses for Natixis’ capital markets activities. Such losses may extend to a broad range of trading and hedging products, including swaps, forward and future contracts, options and structured products. Volatility of financial markets makes it difficult to predict trends and implement effective trading strategies; it also increases the risk of losses from net long positions when prices decline and, conversely, from net short positions when prices rise. Such losses, if significant, could have an adverse effect on Natixis’ results of operations and financial condition. It is difficult to predict when economic or market downturns will occur, and which markets will be most significantly impacted. If economic or market conditions in France or elsewhere in Europe, or global markets more generally, were to deteriorate or become more volatile, Natixis’ operations could be disrupted, and its business, results of operations and financial condition could be adversely affected. During periods of low interest rates, Natixis may be unable to lower its funding costs sufficiently to offset reduced income from lending at such rates. Low interest rates may also negatively affect the profitability of the insurance activities of Natixis because insurance affiliates may not be able to generate an investment return sufficient to cover amounts paid out on certain of their insurance products. Low interest rates may also adversely affect commissions charged by Natixis asset management affiliates on money market and other fixed income products. Furthermore, if market interest rates were to rise in the future, a portfolio featuring significant amounts of lower interest rate loans and fixed income securities as a result of an extended period of low interest rates would be expected to decline in value at a time when Natixis’ cost of funding could increase. If Natixis’ hedging strategies are ineffective or provide only a partial hedge against such a change in value, Natixis could incur losses. An economic environment characterized by sustained low interest rates could adversely affect the profitability and financial condition of Natixis

MACROECONOMIC CONDITIONS AND REGULATORY DEVELOPMENTS

Adverse market or economic conditions may negatively affect the net revenues, profitability and financial condition of Natixis The businesses of Natixis are sensitive to changes in the financial markets and more generally to economic conditions in France, Europe and the rest of the world. Economic conditions in the markets where Natixis operates could in particular have some or all of the following impacts: adverse economic conditions could affect the business and a operations of Natixis’ customers, resulting in an increased rate of default on loans and receivables; a decline in market prices of bonds, shares and commodities a could impact many of the businesses of Natixis, including in particular trading, investment banking and asset management revenues; macro-economic policies adopted in response to actual or a anticipated economic conditions could have unintended effects, and are likely to impact market parameters such as interest rates and foreign exchange rates, which in turn could affect the businesses of Natixis that are most exposed to market risk; perceived favorable economic conditions generally or in a specific business sectors could result in asset price bubbles, which could in turn exacerbate the impact of corrections when conditions become less favorable; a significant economic disruption (such as the global financial a crisis of 2008 or the European sovereign debt crisis of 2011) could have a severe impact on all the activities of Natixis, particularly if the disruption is characterized by an absence of market liquidity that makes it difficult to sell certain categories of assets at their estimated market value or at all. The principal markets in which Natixis is active are currently experiencing generally favorable economic conditions. There can be no assurance, however, that such conditions will continue. European markets may be affected by a number of factors, including continuing uncertainty regarding the commercial and other relationships between the United Kingdom and the European Union resulting from the decision of the United Kingdom to leave the European Union. Markets in the United States may be affected by recently enacted tax reforms or by a tendency towards political stalemate, which has resulted in government shutdowns and affected credit and currency markets. Asian markets could be impacted by factors such as slower than expected economic growth rates in China or by geopolitical tensions on the Korean peninsula. Share prices could

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NATIXIS Risk report Pillar III 2017