NATIXIS - Universal registration document and financial report 2019

RISK FACTORS, RISK MANAGEMENT AND PILLAR III Risk management

Rating agencies assess the creditworthiness of available-for-sale units for investors. In general, securitizations have the following characteristics: they result in a material transfer of risk where the transaction is V originated by Natixis; payments made in the course of the transaction depend on the V performance of the underlying exposures; the subordination of tranches, defined by the transaction, V determines the distribution of losses over the term of the risk transfer. Market risk Market risk is the risk of loss in value caused by any adverse fluctuations in market parameters. These parameters notably include the prices of securities (bonds, equities) and raw materials, interest rates, prices derivative financial instruments and foreign exchange rates. Asset liquidity is an important component of market risk. In the event of insufficient or non-existent liquidity (for example, because of a reduced number of transactions, or a major imbalance in the supply and demand of certain assets), a financial instrument or any other tradable asset may not be able to be traded at its estimated value. The absence of liquidity may lead to reduced access to capital markets, unforeseen cash or capital requirements, or legal restrictions. Operational risk Operational risk is the risk of loss due to inadequate or failed internal processes, whether this is attributable to employees or information systems, or relate to external events with financial, regulatory, legal or reputational impacts. The Groupe BPCE Insurance Department is tasked with analyzing insurable operational risks and taking out appropriate insurance coverage. Natixis and its subsidiaries benefit from insurance policies pooled with Groupe BPCE against potentially significant consequences resulting from fraud, embezzlement and theft, operating losses or the incurring of Natixis’ civil liability or that of its subsidiaries or the employees for which it is responsible. Compliance risk Compliance risk is defined in French regulation as the risk of a legal, administrative or disciplinary penalty, accompanied by significant financial losses or reputational damage, that arises from a failure to comply with the provisions specific to banking and financial activities, whether these are stipulated by national or directly applicable European laws or regulations, or by instructions from executive managers, issued in accordance with the policies of the supervisory body. This risk is a sub-category of operational risk, by definition.

Risk Appetite Framework The risk appetite framework comprises two successive thresholds for each identified risk and selected indicator: a detection threshold, setting the risk exposure allocated to each V business line; and a limit set by the Board of Directors, stating the maximum risk V that, if exceeded, would pose a risk to Natixis’ business continuity and/or stability and would have to be reported immediately to the Board of Directors, BPCE and the ECB. This operational framework is applied by type of risk (credit and counterparty risk, market risk, liquidity and leverage risk, operational risk, solvency risk, etc.) and draws on Natixis’ pre-existing measuring and reporting systems. It is regularly reviewed, consolidated and presented to the Senior Management Committee and the Board of Directors’ Risk Committee. The risk appetite framework forms part of Natixis’ main processes, especially regarding: risk identification: every year risks are mapped to give an overview V of the risks to which Natixis is or could be exposed. With this approach it is possible to identify material risks, the indicators of which are included in the risk appetite framework; the budget process and overall stress tests. V In accordance with regulations concerning systemically important financial institutions, Groupe BPCE has drawn up a recovery and resolution plan (PRR). Risk typology 3.2.2.5 (Data certified by the Statutory Auditors in accordance with IFRS 7) Natixis is exposed to a set of risks inherent to its activities, which may change, particularly as a result of regulatory requirements. Credit and counterparty risk Credit risk is the risk of financial loss due to a debtor’s inability to honor its contractual obligations. Assessing the probability of default and, in such cases, how much we can expect to recover is a key component of measuring credit quality. Credit risk increases in periods of economic uncertainty, insofar as such conditions may lead to a higher rate of default. Counterparty risk is the risk of exposure to a counterparty defaulting on market transactions. Counterparty risk evolves as market parameters fluctuate. Natixis is exposed to these risks because of the transactions it executes with its customers (for example, over-the-counter derivatives [swaps, options, etc.], and repurchase agreements). Securitization risk Securitizations are transactions whereby credit risk inherent to a set of exposures is housed in special-purpose entities (generally a special-purpose entity (SPE) or “conduit”), which is then divided into tranches, usually for the purpose of selling them to investors. The SPE issues units that may in some cases be subscribed for directly by investors, or by a multi-seller conduit which refinances the purchases of its shares by issuing short-maturity notes (treasury notes or commercial paper).

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NATIXIS UNIVERSAL REGISTRATION DOCUMENT 2019

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