NATIXIS - Universal registration document and financial report 2019

FINANCIAL DATA Statutory Auditors’ report on the consolidated financial statements

Assessment of complex financial instruments Risk identified and main judgments As part of its capital markets activities within the Corporate & Investment Banking division, the Natixis Group holds on its balance sheet a significant portion of financial instruments recognized at fair value. Different approaches are used to determine market value depending on the nature and complexity of the instruments: use of directly observable quoted prices (instruments classified in Level 1 of the fair value hierarchy), valuation models with inputs that are mostly observable (instruments classified in Level 2) and valuation models with inputs that are mostly non-observable (instruments classified in Level 3). In the case of complex financial instruments, particularly those in Level 3 and some in Level 2 of the fair value hierarchy, these approaches may include a significant amount of judgment given: The use of internal valuation models; V The use of valuation inputs unobservable on the market; V Additional valuation adjustments made, to reflect certain market, V counterparty or liquidity risks. We considered the assessment of complex financial instruments to be a key audit matter due to the material nature of the exposures and the use of judgment in determining fair value.

Our audit approach We examined the internal control procedures and systems for the identification, valuation, recognition and classification of complex financial instruments, in particular those classified in Levels 2 and 3. We tested the key controls that we deemed relevant to our audit, including those relating to: the validation and periodic review, by the Risk division, of valuation V models and related adjustments; the independent verification of valuation inputs; V the determination of the main valuation adjustments; V the documentation and periodic review of the observability criteria V used to classify complex financial instruments in the fair value hierarchy. We carried out these checks with the assistance of our valuation experts, with whom we also carried out independent valuations by examining, on a sample basis, the assumptions, methodologies and market inputs of the valuation models used to estimate the main valuation adjustments at December 31, 2019. We also examined, on a sample basis, any variances in margin calls with Natixis’ market counterparties, which helped us assess the appropriateness of the valuations. We also assessed the information presented in detail in the notes to the consolidated financial statements and required by IFRS 7 concerning financial instruments at December 31, 2019.

At December 31, 2019, Level 2 financial instruments represented assets of €172,948 million and liabilities of €183,926 million. At December 31, 2019, Level 3 financial instruments represented assets of €7,060 million and liabilities of €12,075 million. For more details, please refer to Notes 6.6, 6.23 and 8.5 to the consolidated financial statements.

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NATIXIS UNIVERSAL REGISTRATION DOCUMENT 2019