NATIXIS_REGISTRATION_DOCUMENT_2017

RISKS AND CAPITAL ADEQUACY Governance and risk management system

RISK TYPOLOGY 3.3.4

leverage and liquidity risk are included in Groupe BPCE’s a framework.As BPCE provides a liquidity and capital adequacy guarantee, Natixis applies BPCE's risk policies to its own organization. These two risks give rise to specific objectives which contributeto the managementof scarce resourceswith a dedicated framework and management objectives. Natixis oversees the strategy to diversify its sources of financing as well as those of GroupeBPCE, and managesits solvencyratio in order to be able to copewith stresssituations; marketrisk is incurredfromNatixis’marketactivitieswithin the a CIB, which aim to meet the needs of its clients, with the exceptionof proprietarytrading.This risk is managedaccording to a body of risk policies and specific qualitative and quantitativeindicators; operationalrisk is intrinsic to all the Bank’s business lines and a functions and is managed using a shared data collection tool. The framework,which has been rolled out across the business lines and geographic regions, is used to map risks and implementcorrectiveand preventiveactionsplans accordingly; Natixis is committed to strictly observe the laws, regulations a and normsgoverningits activities,in Franceand 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. The interest of the client is therefore put first, and the bank – irrespectiveof the activity, entity or geographic region – is dedicated to operating at the highest level of ethical standards, and in line with the best standardsof transactionexecutionand security. Togetherwith GroupeBPCE, Natixis closelymonitorsits reputationrisk using indicatorsthat combinean ex-ante/ex-postapproach. Risk Appetite Framework For each identified risk and selected indicator, the risk appetite operatingmechanismrelies on two successivelevels: an overall limit setting the risk envelope allocated to the a businesslines; and a warning threshold on the maximum risk which, if a exceeded, would pose a risk to Natixis’ continuity and/or stability. This operationalframework is applied by type of risk (credit and concentration risk, market risk, liquidity and leverage risk, operational risk, solvency risk, etc.) and draws on Natixis’ preexistingmeasuringand reportingsystems. It is regularlyreviewedand consolidated,and is presentedto the Boardof Directors’Risk Committee. The risk appetite framework forms part of Natixis main processes,especiallyregarding: risk identification:every year risks are mapped in order to have a an overview of the risks to which Natixis is or could be exposed. With this approach it is possible to identify material risks, the indicators of which are included in the risk appetite framework; in the budgetprocessand overallstresstests. a In accordance with regulations concerning systemic financial institutions, Groupe BPCE has drawn up a recovery and resolutionplan (PRR).

(Data certified by the Statutory Auditors in accordance with IFRS7) Natixis is exposedto a set of risks inherentto its activities,which may change,particularlyas a result of regulatoryrequirements. Credit risk Credit risk is the risk of financialloss due to a debtor’sinabilityto honor its contractual obligations. Assessing the probability of a debtor’s inability to repay and, in this event, the projected recovery is a key component of measuring credit quality. The debtor may be a bank, an industrial or a commercialcompany,a sovereignState and its various entities, an investmentfund, or a natural person. Credit risk increases in periods of economic uncertainty,insofar as such conditionsmay lead to a higher rate of default. Credit risk affects lending operationsas well as other operations exposing Natixis to the risk of counterparty default, notably its tradingoperationsin financialinstrumentson Capitalmarketsand its settlement-deliveryoperations. Counterparty risk Counterparty risk on market transactions is a component of credit risk and represents a potential loss in the event of counterparty default. Counterparty risk evolves as market parametersfluctuate. Natixis is exposed to this risk because of the transactions it executes with its customers (for example, over-the-counter derivatives [swaps, options, etc.], securities lending and borrowing,and repurchaseagreements). Securitization risk Securitizationsare transactionsinvolving credit risk inherent in a set of exposures housed in special-purpose entities (usually a securitization fund or “conduit”), which is then divided into tranches, usually for the purpose of selling them to investors. The special-purposeentity (SPE) issues units that may in some cases be subscribedfor directly by investors,or by a multi-seller conduit which refinances the purchases of its shares by issuing short-maturitynotes (treasurynotes or commercialpaper). Rating agencies assess the creditworthiness of the units available-for-salefor investors. In general,securitizationshave the followingcharacteristics: they result in a materialtransferof risk wherethe transactionis a originatedby Natixis; paymentsmade in the courseof the transactiondependon the a performancesof the underlyingexposures; the subordination of tranches, defined by the transaction, a determinesthe distributionof losses over the term of the risk transfer.

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Natixis Registration Document 2017