NATIXIS_REGISTRATION_DOCUMENT_2017

RISKS AND CAPITAL ADEQUACY Governance and risk management system

Legal risk Legal risk is defined in French regulationas the risk of any legal disputewith a third party, arising from an inaccuracy,omissionor deficiencythat may be attributableto the Company’soperations. Other risks Insurance business-relatedrisk: insurance risk is the risk to profits of any differencebetween expected and incurred claims. Dependingon the Insurance product in question, the risk varies according to macroeconomic changes, changes in customer behavior, changes in public healthcare policy, pandemics, accidents and natural disasters (such as earthquakes, industrial accidentsor acts of terrorismor war). Strategic risk is the risk inherent to the strategy chosen or resultingfromNatixis'inabilityto implementits strategy. Climate risk is the increased vulnerability of businesses to variations in climate indices (temperature, rainfall, wind, snow, etc.). Environmental and social risks: Natixis’ environmental and social risks arise from the operations of the clients and companiesin whichNatixis invests.

The scenarios proposed by Economic Research team are approved by Natixis' Senior Managementand are translated as levels or shocks to economic and financial variables, such as GDP, inflation, employment and unemployment, interest and exchangerates, and commodityprices, over a three-yearperiod. These variables are factored into projection models used by Natixis to apply stress to the various aggregates of the income statement,risk-weightedassetsand equity. One scenariofor 2017 suggestedan economicallyfragile 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 balanceof paymentsin 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 secondarymarket, weak profitabilityof financialindustryplayers,risk linked to the sustainabilityof public and privatedebt accordingto countriesand 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 economicvariables,or on internalhistoricaldata. The results of the stress tests are submittedfor approval by the Senior Management Committee and presented to the Risk Committeeof 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 (Groupshare),net revenuesand CommonEquityTier 1. Regulatory stress tests Regulatorystress tests comply with the ad hoc requirementsof the ECB, the EBA and any other supervisor: the last regulatory exercise was performed in 2016 using the methodology publishedby EBA for the ECB. Specific stress tests The specific stress test exercises performedby the Natixis Risk division are detailed in the dedicated sections of this document (namely with regard to the credit stress tests detailed in Section 3.5, Subsection 3.5.7 “Commitment monitoring framework", as well as the market stress tests detailed in Section 3.7, subsection 3.7.3 “Methodology for measuring marketrisk").

3

STRESS TESTS 3.3.5

Natixis has developed a comprehensivestress test mechanism to dynamicallymonitorand managerisks. The set is an integral part of the risk management framework and contributes to Natixis’ capital and regulatory requirements planningprocess. Natixis’stresstest mechanismis structuredas follows: global internaland externalexercises; a

periodicregulatoryexercises; a specificexercisesby scope. a

Global internal stress tests The purpose of global internal stress tests is to assess the impact of a central scenarioand of stressedscenarioson Natixis' incomestatement,risk-weightedassetsand equity.

117

Natixis Registration Document 2017