Société Générale / Risk Report - Pillar III

11 LIQUIDITY RISK

GOVERNANCE AND ORGANISATION

Liquidity risk is defined as the risk of not being able to meet cash flow or collateral requirements when they fall due and at a reasonable price.

GOVERNANCE AND ORGANISATION 11.1

The principles and standards that are applicable to the management of liquidity risk are defined by the Group’s governing bodies, whose duties in the area of liquidity are listed below: the Board of Directors: p establishes the level of liquidity risk tolerance as part of the - Group’s Risk Appetite exercise, including the time period during which the Group can operate under conditions of stress (“survival horizon”), meets regularly (at least quarterly) to examine the Group’s - liquidity risk situation; the Group Executive Committee: p sets budget targets in terms of liquidity based on proposals from - the Group Finance Division, allocates liquidity to the businesses and Group Treasury based - on proposals from the Group Finance Division; the Finance Committee is responsible for monitoring structural p risks and managing scarce resources. As such, it: meets every six weeks, under the chairmanship of the Chief - Executive Officer or of a Deputy Chief Executive Officer, with the representatives of the Risk Division, Finance Division and of the businesses, oversees and validates the limits set for structural liquidity risk, - regularly monitors compliance with the budget and liquidity - trajectory, takes decisions, if necessary, on the implementation of - corrective measures, takes decisions, if necessary, on methodology issues regarding - liquidity risk management, examines regulatory changes and their impacts. - The businesses are responsible for managing liquidity risk within their scope and are directly supervised by the Group Finance Division. They must ensure compliance with the regulatory requirements applicable to the entities falling within their scope of supervision. The Group Finance Division manages and monitors liquidity risk through three separate departments, in compliance with the principle of separation between risk steering, execution and control functions: the Strategic and Financial Steering Department, responsible for: p

establishing the Group’s financial trajectory, in line with its - strategic targets, regulatory requirements and market expectations, proposing and monitoring the businesses’ budget trajectories, - monitoring the regulatory environment and developing liquidity - steering standards for the businesses; the Balance Sheet and Global Treasury Management Department, p responsible for: implementing the Group’s short-term and long-term funding - plans (including the management of intraday liquidity risk), supervising and coordinating the Group’s Treasury functions, - monitoring the market and bringing its operational expertise - when it comes to establishing Group liquidity steering objectives and allocating liquidity to businesses, managing the collateral used in refinancing operations (central - banks, covered bonds, securitisation, secured funding), and monitoring the liquidity reserve, managing the Group’s central funding department - (management of liquidity and equity within the Group), including the internal liquidity charts, developing and implementing the Contingency Funding Plan in - the event of Group liquidity shortage; the ALM Department (Asset and Liability Management) is in p particular charged with: supervising and controlling structural risks (interest rate, - exchange rate and liquidity) to which the Group is exposed, controlling the structural risk models and their compliance with - the Group’s rules and methodologies, as well as monitoring compliance with risk limits and management practices within the Group’s Business Units and entities. Second-level supervision of the ALM models used within the Group and of the associated risk framework is conducted by a dedicated team within the Market Risk Department of the Risk Division. Accordingly, this team validates the methodological principles, parameters and backtests of liquidity models. It analyses proposals from the Finance Division and from the Business Units regarding risk indicators, stress test scenarios as well as liquidity and funding risk frameworks. It also conducts second-level controls of compliance with the risk limits defined under such a framework.

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PILLAR 3 - 2020 | SOCIETE GENERALE GROUP |