Société Générale / Risk Report - Pillar III

15 OTHER RISKS EQUITY RISKS

EQUITY RISKS 15.1

Investment strategies and purpose The Societe Generale Group’s exposure to its non-trading equity portfolio relates to several of the Bank’s activities and strategies. It includes equities and equity instruments, mutual fund units invested in equities, and holdings in the Group’s subsidiaries and affiliates which are not deducted from shareholders’ equity for the purpose of calculating solvency ratios. Generally speaking, due to their unfavourable treatment under regulatory capital, the Group’s future policy is to limit these investments. First, the Group has a portfolio of industrial holdings which mainly p reflect its historical or strategic relations with these companies; It also has some minority holdings in certain banks for strategic p purposes, with a view to developing its cooperation with these establishments; In addition, the equities that are not part of the trading book include p Group shares in small subsidiaries which are not included in its consolidation scope and which operate in France and abroad. This includes various investments and holdings that are ancillary to the Group’s main banking activities, particularly in French Retail Banking, Corporate and Investment Banking, and Securities Services (private equity activities in France, closely linked with banking networks, stock market bodies, brokerages, etc.); Lastly, Societe Generale and some of its subsidiaries may hold p equity investments related to their asset management activities (particularly seed capital for mutual funds promoted by Societe Generale), in France and abroad. Monitoring of banking book equity investments and holdings The portfolio of industrial holdings was significantly reduced in recent years, further to the disposal of non-strategic lines. It now includes only a limited number of investments. It is monitored on a monthly

basis by the Group’s Finance Division and, where necessary, value adjustments are recognised quarterly in accordance with the Group’s provisioning policy. The holdings that are ancillary to the Group’s banking activity are monitored on a quarterly basis by the Group’s Finance Division and, where necessary, value adjustments are recognised quarterly in accordance with the Group’s provisioning policy. Private equity activities in France are subject to dedicated governance and monitoring, within the budgets periodically reviewed by the Group’s General Management. Investment or disposal decisions take the financial aspects and the contribution to the Group’s activities into consideration (supporting customers in their development, cross-selling with flow activities, Corporate and Investment Banking, Private Banking, etc.). Valuation of banking book equities From an accounting perspective, Societe Generale’s exposure to equity investments that are not part of its trading book is classified within financial assets measured at fair value through net income or, using the option, at fair value through other comprehensive income (cf Note 3 to the consolidated financial statements included in the 2020 Universal Registration Document). The Societe Generale Group’s exposure to equity investments that are not part of the trading book is equal to their book value representative of a fair value based on a measure at mark to market or at mark to model. The following table presents these exposures at end-December 2019 and 2018, for both the accounting scope and the regulatory scope. Regulatory data cannot be reconciled with data from consolidated financial statements, specifically because the regulatory scope excludes equity investments held on behalf of clients by the Group’s insurance subsidiaries.

TABLE 109: SHARES AND EQUITIES IN THE BANKING BOOK

31.12.2019

31.12.2018

(In EURm)

Banking book - shares and other equity securities at fair value through profit or loss

2,492

1,996

Banking book - shares and other equity securities at fair value through other comprehensive income

16,304

13,976

Banking book - shares and other equity securities on banking book - Prudential scope (Exposure at default)

7,156 6,917

5,780 5,493

o.w shares and other equity securities at fair value through profit or loss

o.w. shares and other equity securities at fair value through other comprehensive income

239

287

222

PILLAR 3 - 2020 | SOCIETE GENERALE GROUP |