Société Générale / Risk Report - Pillar III

6 CREDIT AND COUNTERPARTY CREDIT RISK RISK MEASUREMENT AND INTERNAL RATINGS

TABLE 23: SOCIETE GENERALE’S INTERNAL RATING SCALE AND INDICATIVE CORRESPONDING SCALES OF RATING AGENCIES

Indicative equivalent FitchRatings

Indicative equivalent Moody’s

Indicative equivalent S&P

Probability of Default (one year)

Counterparty internal rating

1 2 3 4 5 6 7

AAA

AAA

AAA

0.01%

AA+ à AA-

AA1 à AA3

AA+ à AA-

[0.01% -0.03%] [0.03% -0.06%] [0.13% -0.50%] [1.10% -3.26%] [4.61% -11.42%] [14.33% -27.25%]

A+ à A-

A1 à A3

A+ à A-

BBB+ à BBB-

BAA1 à BAA3

BBB+ à BBB-

BB+ à BB-

BA1 à BA3

BB+ à BB-

B+ à B-

B1 à B3

B+ à B-

CCC+ à CCC-

CAA1 à CAA3

CCC+ à CCC-

8,9 and 10

CC and below

CA and below

CC and below

100.00%

LGD MODELS The Loss Given Default (LGD) is an economic loss that is measured by taking into account all parameters pertaining to the transaction, as well as the fees incurred for recovering the receivable in the event of a counterparty default. The models used to estimate the Loss Given Default (LGD) excluding retail clients are applied by regulatory sub-portfolios, type of asset, size and location of the transaction or of the counterparty, depending on whether or not collateral has been posted, and the nature thereof if applicable. This makes it possible to define homogeneous risk pools,

particularly in terms of recovery, procedures and the legal environment. These estimates are founded on statistics when the number of loans in default is sufficient. In such circumstances, they are based on recovery data observed over a long period. When the number of defaults is insufficient, the estimate is revised or determined by an expert. CREDIT CONVERSION FACTOR (CCF) MODELS For its off-balance sheet exposures, the Group is authorised to use the internal approach for “Term loan with drawing period” products and revolving credit lines.

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PILLAR 3 - 2020 | SOCIETE GENERALE GROUP |