Société Générale / Risk Report - Pillar III

7 SECURITISATION

SECURITISATIONS AND REGULATORY FRAMEWORK

SECURITISATIONS AND REGULATORY 7.1 FRAMEWORK

This section presents information on Societe Generale’s securitisation activities, acquired or carried out for proprietary purposes or for its customers. It describes the risks associated with these activities and the management of those risks. Finally, it contains quantitative information to describe these activities during 2019, as well as the capital requirements for the Group’s regulatory banking book and trading book within the scope defined by prudential regulations. As defined in prudential regulations, the term securitisation refers to a transaction or scheme, whereby the credit risk associated with an exposure or pool of exposures is divided into tranches, having the following characteristics: the transaction achieves significant risk transfer, in case of p origination; payments in the transaction or scheme are contingent on the p performance of the exposure or pool of exposures; subordination of some tranches determines the distribution of p losses during the ongoing life of the transaction or risk transfer scheme. As of 1 January 2019, securitisation positions initiated in 2019 are subject to the regulatory treatment defined in Regulation (EU) 2017/2401 amending Regulation (EU) No 575/2013 relating to the capital requirements applicable to credit institutions and to credit and

investment firms in Regulation (EU) 2017/2402 creating a general framework for securitisation as well as a specific framework for simple, transparent and standardised securitisations (STS). Regulation 2017/2401 presents a new hierarchy of methods for weighting securitisation positions (see § 7.6). The floor weighting rate has been raised from 7% to 15% (10% for STS securitisations). Regulation 2017/2402 defines the criteria for the identification of "simple, transparent and standardised" (STS) securitisations to which specific and lower capital charges are applicable. The text also specifies the authorisation procedure for third-party organisations that will be involved in ensuring compliance with requirements relating to STS securitisations. Otherwise, the rules for retention of risk by the transferor have also been maintained at 5%. In addition, the creation of a data repository for securitisation transactions will increase transparency in the market. Guidelines or Regulatory Technical Standards issued by the technical authorities, ESMA and the EBA, clarify some aspects of the new European regulations. Regarding securitisations initiated before 1 January 2019, banks continue to apply, until 31 December 2019, the rules in effect on 31 December 2018.

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PILLAR 3 - 2020 | SOCIETE GENERALE GROUP |