NATIXIS_REGISTRATION_DOCUMENT_2017

3 RISKS AND CAPITAL ADEQUACY

Overall interest rate, liquidity and structural foreign exchange risks

STRUCTURAL FOREIGN 3.9.3 EXCHANGE RISK

are predominantly housed in Treasury portfolios subject to ongoingmanagementof interest rate risk. Accountingtreatment of the hedging system is in accordance with international accountingstandards. Overall interest rate risk 3.9.4.2 management system (Data certified by the Statutory Auditors in accordance with IFRS 7) This risk is measured in terms of the sensitivity of a portfolio's economicvalue by bp on the yield curve and by currency.For the largest portfolios it is controlled through limits approved and monitored by the Market Risk Committee,chaired by the CEO. In accordancewith the French MinisterialOrder of November 3, 2014, an overall limit was also defined and approved by the Boardof Directors. The TreasuryDepartment,which centralizesmost positions,also performs yield curve distortion stress tests which are also governedby limits. These stress tests aim to estimate potential economic losses in the event of extrememarket configurations.They are performed daily in the managementsystems and were defined to account for differentiatedor non-differentiatedshocks on the IBOR, OIS, deposit and repo curves with steepening and/or translation scenarios. The Risk division calculates indicators and monitors limits daily for Treasury and monthly for ALM operations and credit subsidiaries. The Bank’s interest rate risk monitoringframework is based on economic sensitivity measures subject to an overall limit. It is supplementedby two other measurementsthat are periodically reported to the Group as part of the overall interest rate risk monitoringconsolidationprocess:interestrate gapmeasurements (fixed-rateassets-liabilities)and measurementsof NII sensitivityto interestrate variations.

(Data certified by the Statutory Auditors in accordance with IFRS 7)

Targets and policy 3.9.3.1 Given the presenceof risk-weightedassets in foreign currencies (mostlyUSD), the aim of Natixis’ structuralforeign exchangerisk policy is to protectthe CommonEquityTier 1ratio (CET 1) against exchange rate fluctuations. To this end, it establishes a “structural” foreign-exchange position that is restated for translation adjustmentswhen it purchases foreign currencies to fund strategiclong-termnet investmentsin foreignentities,while non-strategicnet investmentsin local currenciesare fundedwith loans. Monitoring system 3.9.3.2 The CET 1 ratio’s sensitivity to exchange rate fluctuations is regularlyassessedby the ALMCommittee.

OVERALL INTEREST RATE RISK 3.9.4

General policy 3.9.4.1 (Data certified by the Statutory Auditors in accordance with IFRS 7) Natixis’ policy for managingoverall interest rate risk is not aimed at structurally holding directional interest rate positions in the bankingbook over the long term. Barring exceptions, fixed-rate financial assets and liabilities are returned against bank offered rates via interest rate swaps and

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Natixis Registration Document 2017