NATIXIS - Universal registration document and financial report 2019

3 RISK FACTORS, RISK MANAGEMENT AND PILLAR III Risk factors

Strengthen internal control requirements, which would require V investing heavily in human resources and materials for risk monitoring and compliance purposes. Amend the capital requirement framework and necessitate V investment in internal calculation models. For example, changes related to Basel regulations (especially the revised Basel 3) may require the calculation models for risk-weighted assets in certain activities to be reviewed. Strengthen requirements pertaining to personal data protection V and cybercrime, as they can lead to higher costs due to additional investments in the bank’s information system. Tighten regulations on technological innovations in payment V services and fintechs. Tighten regulations on trading platforms and central V counterparties (clearing houses) that could impact the operation of certain market activities (such as activities related to over-the-counter products). Require the bank to make a substantial financial contribution to V guarantee the stability of the European banking system and limit the impact of a bank failure on public finances and the real economy. In this changing legislative and regulatory environment, it is impossible to predict the impact these new measures will have on Natixis. Natixis is incurring, and could incur in the future, significant costs to update or develop programs to comply with these new legislative and regulatory measures, and to update or enhance its information systems in response to or in preparation for these measures. Despite its efforts, Natixis may also be unable to fully comply with all applicable legislation and regulations and could therefore be subject to financial or administrative penalties. Furthermore, the new legislative and regulatory measures may require Natixis to adapt its businesses, which could affect its results and financial position. Lastly, the new regulations may increase Natixis’ overall funding costs or require it to raise new capital at a time when it is costly or difficult to do so. Natixis’ ability to attract and retain qualified employees is critical to the success of its business and failure to do so may significantly affect its performance Natixis’ business model is based on expertise in various areas of business, which in turn requires qualified employees. A high turnover or the departure of talent could affect Natixis’ skills and know-how in key areas, which could reduce its business outlook and consequently affect its financial results. Natixis’ risk management system, which is based on the use of models, may fail and expose Natixis to unidentified or unforeseen risks, and could result in major losses Natixis’ risk management system, which is based on the use of models, may fail and expose Natixis to unidentified or unforeseen risks, possibly resulting in major losses. Risk management techniques which often use models may prove inadequate for certain types of risks. Certain rating or VaR measurement models (as defined in section 3.2.5.3) that Natixis uses to manage its risks are based on observed historical market behavior. To quantify its risk exposure, Natixis then conducts a

primarily statistical analysis of these observations (see section 3.2.5.4 for a detailed description of the risk management system) . The measurement metrics and tools used may provide inaccurate conclusions on future risk exposures, mainly because of factors that Natixis may not have anticipated or correctly assessed or taken into account in its statistical models, or because of unexpected and unprecedented market trends that could reduce its ability to manage its risks. Consequently, the losses borne by Natixis could prove far greater than those forecast using historical averages. Moreover, Natixis’ quantitative models do not incorporate all risks. For instance, part of the VaR measurement model is designed on the basis of positive interest-rate environment assumptions. In early 2016, because the interest rate environment for interest rate derivatives was negative, stressed VaR was overestimated by €5 million. Preventing risks linked to climate change could have a negative impact on the performance of Natixis’ activities that operate in sectors with a negative environmental and climate impact Natixis has committed to adhering to the Paris Agreement to limit global warming to below 2°C by the end of the century. Natixis has announced numerous initiatives to support the energy transition towards a low-carbon economy, and includes initiatives to reduce financing in sectors with a material climate impact. Accordingly, Natixis has committed to stop financing companies whose main activities include the exploration, production, transportation and storage of oil sands. Natixis has also committed to stop financing projects to explore and produce oil in the Arctic region. Lastly, in 2015 Natixis committed to stop financing the exploration, production, transportation and storage of coal, and includes companies for which these activities represent 50% of their business. In 2019, this percentage was lowered to 25%. In 2019 Natixis adopted Green Weighting Factor — a tool that uses a color scale to rate a loan book's exposure to climate risk. The aim is to encourage the lending businesses to favor clients and projects whose operations have a less harmful climate impact and at an identical credit risk. For a more detailed description of Natixis' CSR (corporate social responsibility) policy and commitments, see Chapter 6 (Non-financial performance report) of this universal registration document, as well as section 6.4 for a description of the management of environmental and social risks. A change in the business mix of Natixis’ lending activities in favor of transactions with a positive climate and environmental impact could have a negative impact on Natixis’ performance due to lost opportunities in sectors presenting a material environmental impact. Postponing this adjustment in its portfolios could negatively affect the credit quality. But keeping borrowers with a material climate impact in its loan book could have a negative impact on its credit quality should stricter regulations be imposed. Lastly, in December 2019 the EBA published its Sustainable Finance work plan which will be accompanied by more stringent regulations for the fight against global warming. These regulations may penalize activities with a material climate impact (directly via operational constraints for Natixis client or through higher carbon quota prices). They could also have a negative impact on some of Natixis’ activities, such as lending and investment in hydrocarbon sectors, commodities and transportation.

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NATIXIS UNIVERSAL REGISTRATION DOCUMENT 2019