Société Générale / Risk Report - Pillar III

5 CAPITAL MANAGEMENT AND ADEQUACY TLAC AND MREL RATIOS

TLAC AND MREL RATIOS 5.6

The Total Loss Absorbing Capacity (TLAC) requirement which applies to Societe Generale is 16% of RWA until 1 January 2022 and 18% of RWA thereafter, to which the conservation buffer of 2.5%, the G-SIB buffer of 1%, and the contracyclical buffer must be added. As at 31 December 2019, the global TLAC requirement was 19.78% of Group RWA. The TLAC rule also provides a minimum ratio of 6% of the leverage exposure in 2019 before reaching 6.75% of the leverage exposure starting from 1 January 2022. As at 31 December 2019, Societe Generale group had reached a TLAC ratio of 24.88% of RWA and 7.87% of leverage exposure.

The Minimum Requirement for own funds and Eligible Liabilities (MREL) has been applying to credit institutions and investment firms of the European Union since 2016. Contrary to the TLAC ratio, the MREL requirement is tailored to each institution and revised regularly by the resolution authority. Throughout 2019, Societe Generale group complied with its requirement of 8% of total own funds and liabilities, as required by its resolution authority, the Single Resolution Board.

TABLE 12: CALCULATION OF THE TLAC RATIO

31.12.2019

(In EURm)

Total of regulatory Own Funds

63,101 43,830

o/w Common Equity Tier 1 Capital (CET1)

o/w Additional Tier 1 Capital (AT1)

8,112

o/w Tier 2 Capital (T2)

11,159

Prudential Adjustments

944

Total of eligible Own Funds

64,045

Senior Non-Preferred Debts > 1 year

21,779

Total of Own Funds and eligible junior debts

85,825

Risk-Weighted Assets

345,010

Leverage Exposure

1,200,262

TLAC Ratio on Own Funds and eligible junior debts (% of RWA)

24.88%

Senior Preferred Debts (2.5%*RWA)

8,625

TOTAL OF OWN FUNDS AND ELIGIBLE DEBTS (JUNIOR DEBTS AND SENIOR PREFERRED DEBTS) TLAC Ratio on Total Own Funds and eligible debts (% of RWA) TLAC Ration on Total of Own Funds and eligible debts (% of Leverage Exposure)

94,450

27.38%

7.87% According to paragraph 3 of the article 72ter of the UE Reglementation n°2019/876, some of the senior preferred debts (that amounted to EUR 14.32 billion at 31 (*) December 2019) can be eligible within the limit of 2.5% of RWA.

As at 31 December 2019, the TLAC ratio on own funds and eligible junior debts was 24.88%. The ratio reached 27.38% with the option of Senior Preferred Debt limited to 2.5% of RWA. The TLAC ratio calculated as a percentage of the leverage exposure was 7.87%.

LEVERAGE RATIOMANAGEMENT 5.7

The Group calulates its leverage effect according to the CRR leverage ratio rules, as amended by the Delegated Act of 10 October 2014 and manages it according to the changes brought by CRR2 applicable from June 2021 (except those regarding G-SIBs expected to be applicable from January 2022). Managing the leverage ratio means both calibrating the amount of Tier 1 capital (the ratio’s numerator) and controlling the Group’s leverage exposure (the ratio’s denominator) to achieve the target ratio levels

that the Group sets for itself. To this end, the “leverage” exposure of the different businesses is under the Finance Division’s control. The Group aims to maintain a consolidated leverage ratio that is significantly higher than the 3.5% minimum in the Basel Committee’s recommendations. These recommandations are currently being transposed into CRR2, including a fraction of the systemic buffer which is applicable to the Group.

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