NATIXIS - Universal registration document and financial report 2019

RISK FACTORS, RISK MANAGEMENT AND PILLAR III Basel 3 Pillar III disclosures

Basel 3 Pillar III disclosures 3.3

All of these new provisions were accompanied by a phase-in mechanism, with the aim of gradually implementing the new requirements. As under Basel 2, the Basel 3 regulatory provisions are divided into three pillars: Pillar I: a set of rules defining the measurement of risks and capital V based on various possible methodologies and minimum observable requirements; Pillar II: a mechanism governing the role of the banking supervisory V authorities, allowing them to define specific regulatory capital requirements for each institution in accordance with their risks and internal governance and oversight systems; Pillar III: requires institutions to disclose a large number of items V highlighting the level of risks incurred, capital adequacy and the adequacy of their management. This mechanism was considerably enhanced in 2016 with the publication of new guidelines by the EBA. Finally, as of November 2014, the European Central Bank is directly responsible for supervising significant European banks. The implementation of this new supervisory framework has continued since then. Drawing on the Supervision Review and Evaluation Process (SREP), the ECB is setting ratio levels for each institution to observe. Each institution under its purview is assigned a Pillar 2 Requirement (P2R) as well as Pillar 2 Guidance (P2G). As a result of the SREP process, Natixis must observe a CET1 ratio of 9.2% in 2019, 2% of which in respect of Pillar II (excluding P2G) and 2.5% in respect of the capital conservation buffer, and 0.2% in respect of the countercyclical capital buffer (in 2018, the phased-in CET1 ratio required was 8.44%, of which 1.875% in respect of the capital conservation buffer). 3.3.1.2 In accordance with Article 19 of the CRR, the regulatory consolidation scope is established based on the following principles: Entities, excluding insurance companies, that are fully consolidated or consolidated under the equity method in the statutory consolidation scope (see — Note 19 of Chapter 5.1) are included in the regulatory consolidation scope; the Group’s insurance companies are accounted for under the equity method in the regulatory consolidation scope. Prudential consolidation scope

Capital management 3.3.1 and capital adequacy Regulation (EU) No. 575/2013 of the European Parliament and Council of June 26, 2013 (Capital Requirement Regulation or CRR) requires reporting companies (notably lending institutions and investment firms) to publish quantitative and qualitative information on their risk management activities. The framework in place to manage Natixis’ risks and risk exposure is described in this section and in the “Risks Management” section of this registration document. Natixis has chosen to provide information in respect of Pillar III disclosures in a separate section to that on risk factors and risk management in order to single out items concerning regulatory publication requirements. 3.3.1.1 Since January 1, 2014, the Capital Requirements Directive (CRD) IV and the Capital Requirements Regulation (CRR) have applied Basel 3 regulations in Europe. The CRD IV was enacted into French law by the French Ministerial Order of November 3, 2014. This regulatory framework, aimed at reinforcing the financial strength of banking institutions, has resulted in: a stricter definition of the capital items eligible to meet regulatory V capital requirements; reinforced regulatory capital requirements, in particular for V counterparty risk on derivatives; higher ratios to observe, specifically regarding CET1 capital and V capital buffers: a capital conservation buffer, which represents 2.5% of total risk V exposures, a countercyclical capital buffer, i.e. the average of the V countercyclical capital buffer of each country in which Natixis holds risk exposures, weighted by the amount of said exposures. The rate applied in France in 2019 is 0.25%, a systemic risk buffer, i.e. an additional requirement for global V systemically important banks (G-SIBs), such as BPCE. Natixis is not subject to this buffer; in addition, other mechanisms have been introduced, including V mechanisms to limit dividend payouts, interest on Additional Tier One (AT1) subordinated debt and variable compensation (Maximum Distributable Amount, or MDA). Regulatory framework

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NATIXIS UNIVERSAL REGISTRATION DOCUMENT 2019