NATIXIS - Universal registration document and financial report 2019

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

B – Reserves and operational management of ratios Operational liquidity reserves From an operational standpoint, Natixis has two liquidity reserves that contribute to BPCE Group’s reserves: a reserve of liquid assets eligible for central bank collateralized V refinancing operations to secure intra-day settlements; this relatively stable reserve is made up of central bank loans and securities, and is located in Paris (about €4 billion in the 3G Pool) and New York ($2.3 billion at the FRB discount window); a liquidity reserve established in advance to meet a liquidity crisis V similar to the one simulated by the LCR; the amount of this reserve ranges from €20 billion to €30 billion and is mainly reinvested with the ECB, the US Federal Reserve and, since August 2019, the BoJ. Since 2015, a portion of assets in this reserve has been under “dedicated” management in special portfolios, with an allocation strategy focused on the list of financial instruments considered as Level 1 and Level 2 HQLA as defined by LCR regulations in force. The liquidity of the portfolios (mainly subject to delegated management by Natixis Ostrum and managed directly under a Natixis mandate since 2017) and the assets reinvested with central banks ensure the reserve can be mobilized immediately if needed. HQLA assets reported in the LCR numerator also include unencumbered HQLA securities temporarily carried by the Capital Markets activities. These securities are not considered as part of the ringfenced liquidity reserve and are not meant to be held over the long term. The outstanding amount and composition of these portfolios may vary considerably from one reporting date to the next, as prices fluctuate. However, they can be monetized on the repo and securities borrowing/lending market, and this monetization may be forced in the event the Group liquidity-stressed BCP is activated and executed. In addition to these buffers, the aim of the internal policy governing the investment of residual surplus liquidity is either to reserve this liquidity for the deposit facility to ensure its continuous availability, with the result that this surplus liquidity is also included in the amount of assets reported in the LCR numerator, or to give it to the central institution.

Oversight of the short-term liquidity ratio In June 2013, Natixis established a governance system for the management of the LCR, notably setting an LCR limit higher than 100% from the end of 2013 (greater than the regulatory requirements in force). The oversight of the LCR is part of a BPCE Group framework under the aegis of the BPCE Group Finance division. Natixis’ LCR hedging is organized in close cooperation with BPCE and is managed by the Joint Refinancing Pool, acting with theauthorization of the Financial Management Department on the basis of its forecasts. Within this framework, the strategy for the Natixis scope aims to hedge the LCR above 100% with a safety buffer of around €5 billion in order to deal with any last-minute contingencies, through BPCE adjustments. The structural over-hedge of the Group’s LCR above the 100% threshold (regulatory limit), is borne by BPCE. Monitoring of rating trigger clauses In the event the Bank’s external credit rating is downgraded, it may be required to provide additional collateral to investors under agreements that include rating triggers. In particular, in calculating the liquidity coverage ratio (LCR), the amounts of these additional cash outflows and additional collateral requirements are measured. These amounts comprise the payment the bank would have to make within 30 calendar days in the event its credit rating were downgraded by as much as three notches. Compensation policy 3.3.6 The compensation policy items required in respect of Regulation (EU) 575-2013 (CRR) are provided in Chapter 2 of the present universal registration document.

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NATIXIS UNIVERSAL REGISTRATION DOCUMENT 2019