NATIXIS_REGISTRATION_DOCUMENT_2017

3 RISKS AND CAPITAL ADEQUACY Capital management and capital adequacy

Capital management and capital 3.4 adequacy

REGULATORY FRAMEWORK 3.4.1

regulatory capital requirements for each institution in accordance with their risks and internal governance and oversightsystems; Pillar III: requires institutions to disclose several items a highlightingthe level of risks incurred,capital adequacyand the adequacy of their management. This mechanism was considerably enhanced in 2016 with the publication of new guidelinesby the EBA. Finally, as of November 2014, the European Central Bank is directly responsible for supervising significant European banks. The implementation of this new supervisory framework continued in 2016. Drawing on the Supervision Review and Evaluation Process (SREP), the ECB is setting ratio levels for each institution to observe. Each institution under its purview is assigneda Pillar 2Requirement(P2R) as well as Pillar 2Guidance (P2G). As a result of the SREP 2017 process, Natixis must observe a phased-inCET1 ratio of 8.375% in 2018, 2% of which in respect of Pillar II (excluding P2G) and 1.875% in respect of the capital conservationbuffer. These items do not include the level of the contracyclical capital buffer, which was very low at December 31,2017, and the measurementof which is based on exposures to countries applying non-zero contracyclical capital buffers.

Since January 1, 2014, the Capital Requirements Directive (CRD) IV and the Capital Requirements Regulation (CRR) have appliedBasel 3 regulationsin Europewith immediateeffect. The CRD IV was enacted into French law by the French Ministerial Order of November 3,2014. This regulatory framework, aimed at reinforcing the financial strengthof bankinginstitutions,has resultedin: a stricter definition of the capital items eligible to meet a regulatorycapitalrequirements; reinforced regulatory capital requirements, in particular for a counterpartyrisk on derivatives; higher ratios to observe,specificallyregardingCET1 capital and a capitalbuffers: a capital conservation buffer, which will have to represent j 2.5%of total risk exposuresby 2019, a contracyclical capital buffer, i.e. the average of the j contracyclicalcapital buffer of each country in which Natixis holds risk exposures, weighted by the amount of said exposures.The rate appliedin France is 0%, a systemic risk buffer, i.e. an additional requirement for j global systemicallyimportantbanks (G-SIBs), such as BPCE. Natixis is not subjectto this buffer, in addition, other mechanismshave been introduced,including a mechanisms to limit dividend payouts, interest on Additional Tier One (AT1) subordinated debt and variable compensation (MaximumDistributableAmount,or MDA). All of these new provisions were accompanied by a phase-in mechanism, with the aim of gradually implementing the new requirements. As under Basel 2, the Basel 3 regulatory provisions are divided into three pillars: Pillar I: a set of rules defining the measurementof risks and a capital based on various possiblemethodologiesand minimum observablerequirements; Pillar II: a mechanism governing the role of the banking a supervisory authorities, allowing them to define specific

PRUDENTIAL CONSOLIDATION 3.4.2 SCOPE

In accordance with Article 19 of the CRR, the regulatory consolidation scope is established based on the following principles: Entities, excluding insurance companies, that are fully consolidated or consolidated under the equity method in the statutory consolidation scope (see 2017 Natixis registration document, Note 17 of Chapter 5) are included in the regulatory consolidation scope; the Group’s insurance companies are accounted for under the equity method in the regulatory consolidationscope.

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Natixis Registration Document 2017