Société Générale / Risk Report - Pillar III

10 STRUCTURAL INTEREST RATE AND EXCHANGE RATE RISKS STRUCTURAL INTEREST RATE RISK

TABLE 100: SENSITIVITY OF THE GROUP'S VALUE TO A +10 BP INTEREST RATE VARIATION

Total

(In EURm)

Amount of sensitivity (31.12.2019)

(54)

Amount of sensitivity (31.12.2018)

29

The Group analyses the sensitivity of the net interest margin to changes in market interest rates through stress tests on the Group's net interest margin under constant balance sheet and under forward balance sheet assumptions. The measurement of the sensitivity of the net interest margin to a three-year horizon in different configurations of the yield curve is used by the Group to monitor the interest rate risk on a perimeter of significant entities. The balance sheet in a dynamic approach evolves according to the amortisation of the stock and the renewals of operations on the basis of the outstanding amounts booked at the closing date . The sensitivity of the Group's net interest margin over the next three following full years is low. In the event of a parallel rise in the yield curve of +10 bp, it is positive and represents less than 1% of net banking income. The sensitivity of the net interest margin is mainly due to the impact on: customer deposits: generally low or non-interest-bearing, with p customer rates only partially impacted by interest rate changes, their margin is mainly the result of the replacement rate;

new credit loan production. p The sensitivity of the margin on the stock of customer transactions results from the renewal of matured tranches of deposit replacements and the residual sensitivity of the balance sheet to interest rate changes. French Retail Banking's activities in France and abroad are favorably exposed by a rise in interest rates over the first three years enabling them to replace their deposits at higher rates, with the margin on loans in stock remaining stable. However, this increase in margin is partially offset by higher refinancing costs. Retail Banking activities are unfavourably exposed to the decrease in rates as their deposits are then replaced at lower rates and the margin on loans in stock decreases due to early repayments. This decline in margin was partially offset by higher production margins on new loans (the decline in customer lending rates is not as rapid as the decrease in interest rate curves) and by lower refinancing costs. Calculations are based on the aggregate estimates as at 31 December of consolidated entities of the Group.

TABLE 101: SENSITIVITY OF THE GROUP’S INTEREST MARGIN

31.12.2019

31.03.2019

(In EURm)

Parallel increase in interest rates of 10 bp Year 1

9

60

Year 2 Year 3

48

60 64

115

Parallel decrease in interest rates of 10 bp Year 1

(15)

(21)

Year 2 Year 3

(56)

(104) (132)

(122)

192

PILLAR 3 - 2020 | SOCIETE GENERALE GROUP |