NATIXIS_PILLAR_III_2017_EN

CREDIT RISK Credit risk monitoring framework

GENERAL PRINCIPLES OF APPROVAL 5.2.2

independent analyses carried out by the Risk division during a the loan approval review process; rating tools and methodologies providing standardized and a tailored assessments of counterparty risk, thereby making it possible to evaluate the probability of default within one year and the loss given default; information systems that give an overview of outstanding a loans and credit limits.

Natixis’ credit risk measurement and management procedures are based on: a standardized risk-taking process, structured via a system of a limit authorizations and decision-making Committees;

Credit risk monitoring framework 5.3

MEASURING AND MONITORING 5.3.1 SYSTEMS

It reviews all non-performing loans under watch that may give rise to provisions or adjustments to existing provisions, and decides on the amount of provisioning necessary. This Committee is organized by the Risk division and chaired by the Chief Executive Officer and assembles the Chief Risk Officer, members of the Senior Management Committee in charge of the businesses, the Accounting and Ratios division and the heads of the relevant support functions. It draws on a structure of preparatory committees that are jointly steered by the Risk division and each of the bank’s businesses. Collective provisions In addition to individual provisions, Natixis also sets aside provisions to cover country risk and sector risk. These collective provisions are based on groups of homogeneous assets and formed according to three criteria: ratings for loans to private individuals and professionals; a sector risk; a geographic risk for other counterparties (corporate, a sovereign, etc.). For the latter risks, the search for objective evidence of impairment is undertaken through analysis and close monitoring of business sectors and countries. Such evidence typically arises from a combination of micro or macroeconomic factors specific to the industry or country concerned. When necessary, an expert appraisal is sought to refine the results of this review. Sector provisions are determined at a quarterly meeting of the Sector Provision Committee, whose role is to decide, as appropriate, whether to recognize provisions for new sectors or reverse provisions for sectors for which provisions have previously been recognized, based on the market trends in each sector and on the market reviews.

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Natixis’ commitments are measured and monitored on a daily basis using dedicated consolidation systems. An IT system enables comprehensive consolidation of limits and credit exposures across a scope covering all of Natixis’ exposure to credit risk and most of that of its subsidiaries. The Risk division provides Senior Management and the bank’s business heads with reports analyzing Natixis’ risks: trend analyses, dashboards, stress test results, etc. Credit risk is supervised by making the various businesses accountable, and by various second-level control measures overseen by a dedicated Risk division team. As regards limit breaches, the dedicated monthly committee meeting analyzes changes in limit breaches using specific indicators (number, notional, duration, businesses concerned, etc.), and examines major breaches and monitors their correction. Cases showing deterioration in the level of risk are identified as they arise and reported immediately to the Risk division and the business concerned, in accordance with both the counterparty watch list, specific provisioning and alert procedures. They are then considered for the watch list, a decision which falls upon the Risk Department or the competent Credit Committee depending on the amount of exposure. Corporate & Investment Banking risks are monitored by the Restructuring and Special Affairs Department (DRAS), which intervenes in difficult cases where necessary. The Litigation Department handles collections of loans in litigation.

MONITORING OF NON-PERFORMING 5.3.2 AND DISPUTED LOANS MECHANISM

Individual provisions The Natixis Watch List and Provisions Committee meets once a quarter and covers all the bank’s businesses.

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NATIXIS Risk report Pillar III 2017

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