Société Générale / Risk Report - Pillar III

11 LIQUIDITY RISK

THE GROUP’S PRINCIPLES AND APPROACH TO LIQUIDITY RISK MANAGEMENT

THE GROUP’S PRINCIPLES AND APPROACH TO 11.2 LIQUIDITY RISKMANAGEMENT

The Group’s primary objective is to ensure the funding of its activities in the most cost-effective way by managing liquidity risk and adhering to regulatory constraints. The liquidity steering system provides a balance sheet framework based on an assets and liabilities target structure that is consistent with the risk appetite defined by the Board of Directors: the assets structure should allow the businesses to develop their p activities in a way that is liquidity-efficient and compatible with the targeted liabilities structure. This development must comply with the liquidity gaps defined at Group level (under static and stress scenarios) as well as regulatory requirements; the liabilities structure is based on the ability of the businesses to p collect financial resources from customers and the ability of the Group to raise sustainably financial resources on the markets, in accordance with its risk appetite. This steering system is based on measurement and supervision of the businesses’ liquidity gaps under reference and stress scenarios, their Group funding needs, the funds raised by the Group on the market, the assets that are eligible to liquidity buffers and the businesses’ contributions to regulatory ratios. Accordingly, the principles of liquidity management are as follows: The businesses must maintain low to nil static liquidity gaps 1. within the operating limits of their activities by using the Group’s Central Treasury, which can, if necessary, run an (anti-)transformation position and manage it within the framework of the established risk limits. Internal liquidity stress tests, established on the basis of a 2. scenario combining a market and a specific stress, are steered and controlled at Group level. They are used to ensure compliance with the survival horizon established by the Board of Directors and to calibrate liquidity reserves. They are accompanied by a Contingency Funding Plan that sets out measures to be taken in the event of a liquidity crisis. The set of businesses’ funding needs (short-term and long-term) 3. are determined on the basis of the development objectives for

the franchises and in line with the Group’s fund-raising targets and capabilities. A plan for long-term funding, which complements the resources 4. raised by the businesses, is designed to cover upcoming repayments and finance the growth of the businesses. It takes into account the Group’s investment capabilities and aims to optimise the cost of fund-raising while complying with limits in terms of market concentration. Diversification in terms of issuers and investor pools is also sought and managed. The Group’s short-term resources are adapted to the financing of 5. the businesses’ short-term needs over periods that are appropriate to their management and in line with market concentration limits. As outlined above, they are adjusted in light of the liquidity reserve on the asset side, based on the established stress survival horizon as well as on the Group’s LCR target (Liquidity Coverage Ratio). The Group’s liquidity steering ensures compliance with the 6. target regulatory ratios (LCR, NSFR, leverages), the BU contributions to these ratios being subject to supervision. Lastly, liquidity cost is passed on to businesses via the Group’s internal transfer pricing scheme. Funding allocated to the businesses is charged to the latter on the basis of scales that must reflect the liquidity cost for the Group. This system is designed to optimise the use of external financing sources by businesses and is used to monitor the equilibrium of balance sheet funding. The management of intra-group liquidity relies on a principle of centralisation of liquidity flows. The corporate central treasury is responsible for raising funding externally and providing liquidity to businesses on short term and long term maturities. There are only marginal flows between subsidiaries. In parallel, local excess cash is upstreamed to the central treasury, unless it triggers a breach of local constraints. Excess liquidity that cannot be transferred to the Group is subject to Group investment guidelines. Societe Generale has undertaken a specific review of its liquidity risks and believes that it is able to meet its upcoming maturities.

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| SOCIETE GENERALE GROUP | PILLAR 3 - 2020