NATIXIS - Universal registration document and financial report 2019

3 RISK FACTORS, RISK MANAGEMENT AND PILLAR III Risk management

the Head of the Joint Refinancing Pool, and the Head of Financial Management of Natixis and his BPCE counterpart. The indicators are: A static interest rate gap calculation: to check the (banking) V balance sheet’s exposure to interest rate risk. Sensitivity of economic value calculations: to measure changes in V this value according to scenarios defined by the EBA. Changes in net interest income calculations: to calculate the V sensitivity of net interest income. The limits of these calculations are validated by an Asset/Liability Management Committee. The calculations are performed by the Finance Department, and the limits are monitored by the MARPL department within the Risk Supervision Division. Complementing this system is a set of operational interest rate risk calculations (interest rate sensitivity and stress tests) which are managed daily by the MARPL department, and monthly for balance sheet management operations and credit subsidiaries. Quantitative disclosures (Data certified by the Statutory Auditors in accordance with IFRS 7) Interest rate gap indicators factor in all asset and liability positions and variable-rate positions until the next interest reset date: they compare the amount of liability exposures to the amount of asset exposures using the same interest rate index and over different maturities. The maturity schedule is determined statically. The interest rate gap indicator is calculated quarterly.

Overall interest rate risk 3.2.7.4 General policy (Data certified by the Statutory Auditors in accordance with IFRS 7) Natixis’ policy for managing overall interest rate risk is not aimed at structurally holding directional interest rate positions in the banking book over the long term. Barring exceptions, fixed-rate financial assets and liabilities are returned against bank offered rates via interest rate swaps and are predominantly housed in Treasury portfolios subject to ongoing management of interest rate risk. Accounting treatment of the hedging system is in accordance with international accounting standards. Overall interest rate risk management system (Data certified by the Statutory Auditors in accordance with IFRS 7) In 2019 the system for measuring and monitoring interest rate risk was adapted to factor in the new july 2018 guidelines of the European Banking Authority (EBA), “EBA-GL-2018-02”. It dovetails with the implementation of the IRRBB framework within Groupe BPCE, and includes calculations and limits that are adapted to Natixis’ prudential banking scope. The interest rate risk of Natixis’ banking portfolio is managed and monitored under the authority of the Asset/Liability Management Committee (ALM Committee), which is chaired by the Chief Executive Officer and attended by the members of the Senior Management Committee in charge of Finance, Risk Supervision Division and the Corporate & Investment Banking division, as well as

Interest rate gap by maturity at December 31, 2019

Maturity (in millions of euros)

1 year

3 years

5 years

7 years

Interest rate gap (fixed-rate)

464

75

(198)

(68)

Natixis analyzes the sensitivity of net interest income ( ∆ NII) to changes in market interest rates using NII stress tests. At December 31, 2019, the sensitivity of the Bank’s NII to changes in interest rates was as follows:

Sensitivity of economic value and net interest income (IRRBB — Table B)

Stress tests are calculated using the progressive regulatory floor approach as well as the multi-currency aggregation method as per the EBA Guidelines of July 2018. The sensitivity presented below relating to NII is that of the first year.

Δ EVE

Δ NII

Period (in millions of euros)

31/12/2019

31/12/2019

Parallel upward shift

12

124

Parallel downward shift

(12)

(79)

Steepening

(125)

Flattening

74 73

Rise in short rates

Fall in short rates

(103)

Maximum Period

31/12/2019

Tier-1 capital

13,311

The sensitivity of Natixis’ NII to interest rate variations under various stress scenarios in 2019 was relatively low and stable. In the event of a parallel upward shift of +200 bps in the yield curves, sensitivity was positive and represented less than 1.5% of CET1. In the event of a parallel downward shift of -200 bps in the yield curves, sensitivity was negative and represented less than 1% of the CET1.

Given its nature, overall interest rate risk is a marginal risk for Natixis and calls for no special comments. The stress scenarios set by the European Banking Authority (200 bps parallel upward or downward shift in yield curves, steepening, flattening, rise or fall in short rates with a progressive floor) would lead to a variation of -€125 million in the economic value of the banking book (using the EBA’s currency offsetting rules) based on the yield curve steepening scenario at December 31, 2019.

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NATIXIS UNIVERSAL REGISTRATION DOCUMENT 2019