NATIXIS_REGISTRATION_DOCUMENT_2017

FINANCIAL DATA Consolidated financial statements and notes

Main types of products comprising Level 3 within the instrument class Payoffs as Target Volatility strategy and CPPI on Mutual Funds

Data ranges unobservable among relevant level 3 products Fund correlation - Interest rates: -40% to 25%

Instrument class

Valuation techniques used

Main unobservable data

Fund-based derivatives

The approach used is a hybrid model coupling the local volatility-type multi-underlying equity model with a one-factor Heath-Jarrow-Morton (HJM1F) interest rate model Hybrid fixed income/forex options valuation model

Fund data

Hybrid fixed income/forex derivatives

Long-term PRDC/PRDKO/TARN

Correlation between foreign exchange rates and interest rates as well as long-term volatility levels Correlation parameters (equity-FX, equity-fixed income, fixed income-FX) Correlation inputs (interest rate-credit and volatility-credit)

AUDJPY/USDJPY correlation: 15% -50% Long-Term volatility: 8% to 15% - EQ/FX = [20%, 50%] - EQ/IR = [30%, 50%] - FX/IR = [20%, 30%] - Fixed income/Credit correlation: [-13%, 3%] - Credit vol.: Structured by maturity

Hybrid derivative instruments Equity/Fixed Income/Forex (FX)

Long (15Y) callable range accrual note on several asset classes (equity+forex+fixed income) Long (15Y) callable range accrual note on fixed income and credit (default event)

Hybrid model coupling an equity diffusion, an FX diffusion and a fixed income diffusion

Hybrid fixed income/credit

Hybrid model coupling a fixed income diffusion and a credit diffusion

5

([2Y, 200%], [5Y, 60%], [10Y, 51%])

Equity derivatives

Multi-underlying payoffs with long maturities

Model for valuing volatility options incorporating correlation between assets

Correlation inputs Stock/stock

correlation: 18.4 to 92.13 As all transactions including this kind of data are back-to-back derivatives, this item, which justifies the level-3 classification, is (a) fully hedged.

It also takes account of the expected depreciationof exposures and the counterpartyspread impliedfrom the marketdata. The method used for determining provisions for contracts with CDPCs (Credit Derivatives Product Companies) was refined by applyinga transparency-basedapproachto the underlyingassets, based on an estimateof exposureat the time of default,with the PD and LGD based on the tranche’smaturity. A stress factor of 1.2 was applied to the probabilities of default thus determined for the underlyings, based on a recovery rate of 27%. Counterparties are associated with a probability of default whenever the losses resulting from the calculation exceed the CDPC’snet availableassets. As CDPCpositionsreachedmaturityin 2017, reservespreviously recorded (adjusted reserve and general reserve) using the above-mentionedmethodwere fully reversed. Other instruments not exposed to US housing risk measured b) by Natixis using a valuation model The section below describes the underlying principles used to value assets resulting from securitizationtransactionsfor which no market prices could be identified and which were therefore measuredusing valuationmodels: CLOs At December 31,2017, Natixis no longer held any CLO positions valued using a scoring model. This scoring model defining the level of risk associatedwith certain structureswas appliedbased on a seriesof criteria. Trust Preferred Securities (TruPS) CDOs The valuationmodel is based on projectedfuture cash flows and default rates determinedaccording to a statistical approach that deduces the default probability of banks according to their financial ratios. For other sectors, default rates are estimated consideringthe currentratingsof assets.

Natixis’ policy on transfers between fair value levels Transfersbetweenfair value levels are reviewedand validatedby ad hoc Committees of representatives of various functions, particularly Finance, Risk and Business Lines. The Committee considers various indicators of market activity and liquidity as describedin the GeneralPrinciples. A review is undertaken for any instrument that ceases to meet these criteria or once again complieswith the criteria. Transfers to and fromLevel 3are subjectto validation. At December 31, 2017, in accordance with this procedure, certain foreign currency options, along with volatility caps and floors, were transferred to Level 3 of the fair value hierarchy dependingon in their liquidityhorizons,determinedby underlying currencies. At December 31, 2017, the net impact on the balance sheet of foreign currency options transferredto Level 3 was €226 million in liabiliti es (see Notes 6.7.5.2and 6.18 .2). The incomestatementwas not impacted. Pursuantto this procedure,multi-underlyingequity productswith residualmaturityof betweenfour and five yearswere transferred to Level 3 of the fair value hierarchy during 2016 (see Note 6.7.5.2) . Instruments affected by the financial crisis CDS contracted with credit enhancers (monoline insurers a) and CDPCs) Since December 31,2015, the valuationmodel used to measure write-downs on CDS contracted with monoline insurers has moved more in line, in terms of method, with the adjustment made for counterpartyrisk (Credit Valuation Adjustment– CVA).

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Natixis Registration Document 2017