NATIXIS_PILLAR_III_2017_EN

GOVERNANCE AND RISK MANAGEMENT ORGANIZATION Stress tests

Stress tests 2.7

Natixis has developed a comprehensive stress test mechanism to dynamically monitor and manage risks. The set is an integral part of the risk management framework and contributes to Natixis’ capital and regulatory requirements planning process. Natixis’ stress test mechanism is structured as follows: a global internal and external exercises; a

One scenario for 2017 suggested an economically fragile Europe and the breakup of the United Kingdom: European bank recapitalization, drop in the petrol price, the breakup of the United Kingdom with the independence of Scotland and a balance of payments in crisis. Another scenario drew on the main risks revealed by the 2016-2018 EBA scenario: an upturn in risk premiums amplified by lower liquidity on the secondary market, weak profitability of financial industry players, risk linked to the sustainability of public and private debt according to countries and risks linked to parallel financing. These projections are based on internal modeling which are either based on the sensitivities or trends observed in financial and economic variables, or on internal historical data. The results of the stress tests are submitted for approval by the Senior Management Committee and presented to the Risk Committee of the Board of Directors. They have been analyzed as part of building Natixis’ solvency trajectory. The impact was measured in terms of provisions for credit losses, net income (Group share), net revenues and Common Equity Tier 1. Regulatory stress tests Regulatory stress tests comply with the ad hoc requirements of the ECB, the EBA and any other supervisor: the last regulatory exercise was performed in 2016 using the methodology published by EBA for the ECB. Specific stress tests The specific stress test exercises performed by the Natixis Risk division are detailed in the dedicated sections of this document (namely with regard to the credit stress tests detailed in Chapter 5, Section 5.3 on the “Credit risk monitoring framework”, Section 5.3.3 on “Stress tests” and the market stress tests detailed in Chapter 8 “Market risk”, Section 8.3 on “Methodology for measuring market risk” and Section 8.3.4 on “Stress tests and operational indicators”).

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a periodic regulatory exercise; a a specific exercises by scope. a

Global internal stress tests The purpose of global internal stress tests is to assess the impact of a central scenario and of stressed scenarios on Natixis' income statement, risk-weighted assets and equity. The scenarios proposed by Economic Research team are approved by Natixis' Senior Management and are translated as levels or shocks to economic and financial variables, such as GDP, inflation, employment and unemployment, interest and exchange rates, and commodity prices, over a three-year period. These variables are factored into projection models used by Natixis to apply stress to the various aggregates of the income statement, risk-weighted assets and equity.

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NATIXIS Risk report Pillar III 2017