Société Générale / Risk Report - Pillar III

15 OTHER RISKS EQUITY RISKS

Unrealised gains and losses related to changes in fair value, since the end of the previous year are recognised in: net income statement “Net gains and losses on financial p transactions” for equity investment classified into Financial assets at fair value through profit or loss; and other comprehensive income “Unrealised gains or losses without p subsequent recycling in the income statement” for equity investment classified into Financial assets at fair value through other comprehensive income. For investments in listed shares, the fair value is estimated based on the stock price at closing date. For investment in unlisted shares, fair value can be estimated based on one or more of the following methods: quantitative method such as Discounted Cash Flows (DCF), p Discounted Dividend Model (DDM); pro rata share of the entity's net assets; p recent transactions identified on the entity’s share (stake acquired p by third party, valuation assessed by experts);

recent transactions identified on entities from the same sector p (earnings or NAV multiples, etc.). Dividends received from equity investment are recognised in the net income statement “Net gains and losses on financial transactions”. In the event of a disposal, gains and losses resulting from a change in fair value occurring since the end of the previous year are recognised in: net income statement “Net gains and losses on financial p transactions” for equity investment classified into Financial assets at fair value through profit or loss; and other comprehensive income “Unrealised gains or losses without p subsequent recycling in the income statement” for equity investment classified into Financial assets at fair value through other comprehensive income. Gains and losses on equity investment disposals are transferred to Reserves in the subsequent accounting period following the disposal.

TABLE 110: NET GAINS AND LOSSES ON BANKING BOOK SHARES AND EQUITIES

31.12.2019

31.12.2018

(In EURm)

Gains and losses on the sale of shares and equity

388

651

Net gains/losses on banking book

33

80

Regulatory capital requirements

Furthermore, if they are not deducted from equity capital, material investments in the capital of finance companies are assigned a

To calculate the risk-weighted assets under Basel 3, the Group applies the simple risk weighting method for the majority of its non-trading equity portfolio. Shares in private equity companies are assigned a risk-weighting coefficient of 190%, shares in listed companies a coefficient of 290%, and shares in unlisted companies, including the holdings in our insurance subsidiaries, a coefficient of 370%.

weighting coefficient of 250%.

As at 31 December 2019, the Group’s risk-weighted assets relating to its non-trading equity portfolio, and its corresponding capital requirements, were as follows:

TABLE 111: CAPITAL REQUIREMENTS RELATING TO BANKING BOOK SHARES AND EQUITIES (1)

(In EURm)

31.12.2019

31.12.2018

Exposure at default

Risk-weighted assets

Capital requirements

Exposure at default

Risk-weighted assets

Capital requirements

Equities & holdings

Approach Standard Simple approach Standard Simple approach Simple approach

Weighting

Private equity

150%

-

-

-

11

16

1

190% 250%

185 503

352

28

197 943

375

30

Private equity

Financial securities

1,257

101

2,357

189

Listed shares

290%

38

111

9

18

52

4

Unlisted shares and insurance

370%

5,297

19,599

1,568

3,987

14,751

1,180

TOTAL

6,023

21,318

1,705

5,155

17,551

1,404

Excluding cash investments (1)

223

| SOCIETE GENERALE GROUP | PILLAR 3 - 2020