NATIXIS_PILLAR_III_2017_EN

GOVERNANCE AND RISK MANAGEMENT ORGANIZATION Risk factors

Changes in the fair value of Natixis’ securities and derivatives portfolios and its own debt could have an impact on the carrying value of such assets and liabilities, and thus on its net income and shareholders’ equity The carrying values of Natixis’ securities and derivatives portfolios and certain other assets are adjusted as of each financial statement date. The valuation adjustments include a component that reflects the credit risk inherent in Natixis’ own debt. Most of the adjustments are made on the basis of changes in fair value of the assets or liabilities during an accounting period, with the changes recorded either in the income statement or directly in shareholders’ equity. Changes that are recorded in the income statement, to the extent not offset by opposite changes in the fair value of other assets, affect net revenues and, as a result, net income. In certain cases, fair value adjustments affect shareholders’ equity and, as a result, Natixis’ capital adequacy ratios. More generally, fair value adjustments may be required as a result of inherent uncertainty in the models and parameters used in the valuation of Natixis’ securities and derivatives portfolios. This is particularly true where securities or derivatives are complex or do not have publicly quoted market prices, and valuation is based on internally-generated or otherwise non-standard modeling that ultimately relies to some degree on Natixis’ estimates and judgement. Changes in accounting principles may have an impact on Natixis’ financial statements and capital ratios and result in additional costs Applicable accounting principles evolve and change over time, and Natixis’ financial statements and capital ratios are exposed to the risk of changes to such principles. For example, in July 2014, the International Accounting Standards Board published IFRS 9 “Financial Instruments,” which replaced IAS 39 as from January 1, 2018 after its adoption by the European Union. The standard amends and complements the rules on the classification and measurement of financial instruments. It includes a new impairment model based on expected credit losses (“ECL”), while the current model is based on provisions for incurred losses, and new rules on general hedge accounting. The new approach based on ECL could result in substantial additional impairment charges for Natixis and add volatility to its regulatory capital ratios, and the costs incurred by Natixis relating to the implementation of such norms may have a negative impact on its results of operations.

Natixis may generate lower revenues from brokerage and other fee-based businesses during market downturns A market downturn is likely to lower the volume of transactions that Natixis executes for its customers and in its capacity as a market maker, thus reducing net revenues from these transactions. In addition, asset management fees charged by Natixis to its customers are often based on the value or performance of the portfolios, so that any market downturn, legislative, regulatory or policy change or political or geopolitical event that reduces the value of the assets under management in such portfolios or increases the amount of redemptions would reduce Natixis’ revenues from its Asset & Wealth Management businesses. Independent of market changes, any under-performance of Natixis’ Asset Management business may result in a decrease in assets under management (in particular, as a result of mutual fund redemptions) and in lower fees, premiums and other portfolio management income earned by Natixis. Demand for asset management products could vary on the basis of a variety of factors, some of which are outside the control of Natixis Demand for asset management products and services, which represents a significant share of the overall net revenues and net income of Natixis, can be significantly affected by numerous factors beyond management’s control. Adverse developments can reduce the amount of new funds invested by Natixis’ clients, and can cause investors to withdraw assets from the funds and portfolios that Natixis manages. The factors beyond the control of Natixis that can significantly impact demand for its asset management products and services include the following elements: the macroeconomic climate, globally and, more specifically, in a the countries in which Natixis markets its products, which impacts the capacity of individuals to save money and to invest (directly or indirectly) in asset management products and which can also affect demand of institutional investors for these products; the level of equity markets globally and in the principal regions a in which Natixis’ products are distributed, which can impact the attractiveness of asset management products for investors and thus affect the level of investments in Natixis’ funds; the level of interest rates in financial markets generally, and a yield on products that compete with Natixis’ asset management products, such as bank savings deposits and bonds; tax incentives that favor other investment products; or a regulatory initiatives in the financial markets, which may provide a incentives to banks to distribute asset management products or, conversely, to seek to increase deposits at the expense of asset management products. Moreover, if Natixis is unable to maintain a satisfactory level of performance with respect to its asset management products, clients may withdraw funds or may decline to renew investment mandates.

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NATIXIS Risk report Pillar III 2017