Société Générale / Risk Report - Pillar III

11 LIQUIDITY RISK

LIQUIDITY RESERVE

LIQUIDITY RESERVE 11.5

The Group’s liquidity reserve encompasses cash at central banks and assets that can be used to cover liquidity outflows under a stress scenario. The reserve assets are available, i.e . not used in guarantee or as collateral on any transaction. They are included in the reserve after applying a haircut to reflect their expected valuation under stress. The Group’s liquidity reserve contains assets that can be freely transferred within the Group or used to cover subsidiaries’ liquidity outflows in the event of a crisis: non-transferable excess cash (according to the regulatory ratio definition) in subsidiaries is therefore not included in

transactions; these include government bonds, corporate bonds and equities listed on major indices (after haircuts). These HQLAs meet the eligibility criteria for the LCR, according to the most recent standards known and published by regulators. The haircuts applied to HQLA securities are in line with those indicated in the most recent known texts on determining the numerator of the LCR; non-HQLA Group assets that are central bank-eligible, including p receivables as well as covered bonds and securitisations of Group receivables held by the Group. The composition of the liquidity reserve is reviewed regularly by a special committee comprising the Finance Division, the Risk Division and the Management of the Global Markets Business Unit, and is adjusted by authorisation of the Finance Committee.

the Group’s liquidity reserve. The liquidity reserve includes: central bank deposits, excluding mandatory reserves; p

High-Quality Liquid Assets (HQLAs), which are securities that can be p quickly monetised on the market via sale or repurchase

TABLE 106: LIQUIDITY RESERVE

31.12.2019

31.12.2018

(In EURbn)

Central bank deposits (excluding mandatory reserves)

88

82

HQLA securities available and transferable on the market (after haircut)

81 21

73 17

Other available central bank-eligible assets (after haircut)

TOTAL

190

172

REGULATORY RATIOS 11.6

The Basel Committee recommends the international implementation of two standard ratios with harmonised parameters to regulate bank liquidity risk profiles: the Liquidity Coverage Ratio (LCR) aims to ensure that banks hold p sufficient liquid assets or cash to survive a significant stress scenario combining a market crisis and a specific crisis and lasting for one month; the Net Stable Funding Ratio (NSFR) is a transformation ratio which p compares funding needs with stable resources over a one-year period. The transposition of Basel 3 into European Union law under CRD4 and CRR1 was published on 27 June 2013. The French transposition was published in the French Official Journal ( Journal officiel ) on 5 November 2014. The LCR definition was finalised, on the basis of technical standards issued by the EBA, through a Delegated Act of the European Commission on 10 October 2014. The LCR entered into force at European level on 1 October 2015. The text has been updated by a Delegated Act which will enter into force on 30 April 2020. The corresponding minimum requirement was set at 100% from 1 January 2018.

The NSFR requierement is included in the CRR2 as publisehd in June 2019. It will enter into force in June 2021. The required level will stand at 100%. Societe Generale is actively continuing its work on transposing the European prudential legislation (or the Basel text when the European transposition has not yet been finalised) and on translating it into management standards within the Group. The Group manages its liquidity risk through the LCR and liquidity gaps, under stress and under normal conditions of activity, accumulated (all currencies combined) and by currencies. And this, by making sure at any time that the liquidity is transferable among the main currencies. Since the implementation of the European regulatory LCR requirement in October 2015, Societe Generale’s LCR has consistently stood at over 100%. The LCR was 119% at end 2019 (vs. 129% at end 2018). The LCR regulatory requirement must be respected by the Group in all currencies but it is also reported in the major currency in USD. The LCR in USD of the Group was lower than 100% in average over 2019.

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PILLAR 3 - 2020 | SOCIETE GENERALE GROUP |