Société Générale / Risk Report - Pillar III

3 RISKMANAGEMENT ORGANISATION

RISK MAPPING FRAMEWORK AND STRESS TESTS

liquidity stress tests; the survival horizon of one of these stresses - is identified as a financial target, the operational risk assessment under stress uses scenario - analyses and loss modelling to calibrate the Group’s capital need for operational risk purposes and allows a better understanding of the exposure to operational losses, including the exposure to unusual and severe losses which are not present historically, insurance stress tests support the process of defining risk - appetite for the Insurance Business Unit, which relies on minimum profitability objectives and an SCR coverage ratio under the benchmark scenario and under a stress scenario; Furthermore, the Insurance Business Line also uses the results of its stress tests to develop its hedging policy, the allocation of its assets and its dividend distribution policy;

reverse stress tests, for both Risk Appetite and the Recovery Plan. p The impact of these stress tests is defined in principle, typically using a solvency ratio or liquidity indicator disruption point (reflecting a serious threat to the bank). The hypothetical scenarios leading to this disruption point are then recreated to determine whether new vulnerabilities appear. Along with the internal stress test exercises, the Group is part of a selection of European banks that participate in the large-scale international stress tests supervised by the European Banking Authority and the European Central Bank. In particular, the Group is also taking part in a review of the scenarios being defined for 2020 by Banque de France and the European Banking Authority with respect to the risk posed by climate change.

DEFINITION OF “CENTRAL” AND “STRESSED” ECONOMIC SCENARIOS Central scenario

Stressed scenario The severity of the stress scenario is quantified through a GDP degradation compared to the central scenario, observed on a historical recession taken as reference. This degradation ismaintained from one exercise to another to ensure severityconstant.

It is developed on the basis of a series of observed factors, including the recent economic situation and trends in economic policy (budgetary, monetary, exchange rate policy). Based on these observed factors, economists determine the most likely trajectory for the economic and financial variables over a given time frame.

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PILLAR 3 - 2020 | SOCIETE GENERALE GROUP |