Société Générale / Risk Report - Pillar III

6 CREDIT AND COUNTERPARTY CREDIT RISK RISK MEASUREMENT AND INTERNAL RATINGS

MONITORING THE PERFORMANCE OF INTERNAL MODELS The performance level of the entire wholesale client credit system is measured by regular backtests that compare PD, LGD and CCF estimates with actual results by portfolio, thus making it possible to measure the prudence of the risk parameters used by the IRB approach. The results of backtests and remedial plans are presented to the Expert Committee for discussion and approval (see Governance of the modelling of risks, p. 83). These results justify the implementation of remedial plans if the system is deemed to be insufficiently prudent. The results presented above cover the entire Group portfolios including Private Banking since this year. Backtests compare the estimated probability of default (arithmetic mean weighted by

debtors) with the observed results (the historical annual default rate). The historical default rate was calculated on the basis of performing exposure over the period from 2007 to 2018. The level of prudence is generally considered to be fairly satisfactory and remained broadly stable compared with the previous year. The historical default rate continued to fall even further from previous year in 2019. Probability of default estimates are higher than the historical default rates for all Basel portfolios and for most ratings (which is considered to be conservative). Levels of prudence seen in the Large and Small and Medium Enterprises Basel portfolios were (relatively) high. It should also be noted that new internal models are being developed for some sizeable portfolios in order to comply with new regulatory requirements and to address the weaknesses identified in existing models.

TABLE 25: COMPARISON OF RISK PARAMETERS: ESTIMATED AND ACTUAL PD VALUES - WHOLESALE CLIENTS (CR9)

31.12.2019

Number of obligors

of which : new defaulted obligor in the year

Defaulted obligors over the year

Average historical annual default rate

Basel Portfolio

Weigthed average PD

Arithmetic average PD

End of previous year

End of the year

PD Range

TOTAL

0.1% 0.6%

645 542

729 529

1

- - - - - - - - - - - - - - - - - - - -

0.2% 0.0% 0.0% 0.0% 0.0% 0.3% 0.8% 3.6% 0.3% 0.2% 0.0% 0.1% 0.2% 0.4% 0.8% 3.8% 2.2% 0.2% 0.0% 0.1% 0.4% 1.1% 3.3% 12.7% 1.6% 0.1% 0.0% 0.2% 0.4% 1.1% 3.0% 0.3% 0.5% 0.4% 0.6% 1.4% 3.8% 10.7% 3.2% 13.7%

0.00 to < 0.15 0.15 to < 0.25 0.25 to < 0.50 0.50 to < 0.75 0.75 to < 2.50 2.50 to < 10.00 10.00 to < 100.00 0.00 to < 0.15 0.15 to < 0.25 0.25 to < 0.50 0.50 to < 0.75 0.75 to < 2.50 2.50 to < 10.00 10.00 to < 100.00 0.00 to < 0.15 0.15 to < 0.25 0.25 to < 0.50 0.50 to < 0.75 0.75 to < 2.50 2.50 to < 10.00 10.00 to < 100.00 0.00 to < 0.15 0.15 to < 0.25 0.25 to < 0.50 0.50 to < 0.75 0.75 to < 2.50 2.50 to < 10.00 10.00 to < 100.00 0.00 to < 0.15 0.15 to < 0.25 0.25 to < 0.50 0.50 to < 0.75 0.75 to < 2.50 2.50 to < 10.00 10.00 to < 100.00 TOTAL Total Total Total

0.0% 0.0% 0.3% 0.5% 1.7% 4.4% 0.0% 0.0% 0.3% 0.5% 1.6% 4.0% 0.1% 0.0% 0.3% 0.5% 1.5% 4.1% 0.1% 0.0% 0.3% 0.5% 1.5% 4.3% 0.1% 0.2% 0.3% 0.5% 1.5% 4.5%

0.0% 0.0% 0.3% 0.1% 1.5% 4.8%

- - - - -

-

-

20 16 21 31 15

17

SOVEREIGNS

112

20 38 13

1

11.8% 15.2%

-

0.2% 0.7% 4,230

5,582 4,251

6 1

0.0% 2,999

0.0% 0.3% 0.3% 1.6% 3.8%

-

-

- - - -

300 146 196 507

320 274 198 461

INSTITUTIONS

1 4

14.8% 16.4%

82

78

1.3% 2.3% 2,234

2,289

14

2

0.1% 0.0% 0.3% 0.5%

228

214

- - - -

-

-

159 304

171 322

SPECIALISED LENDING

1.6% 827

871

- -

4.4%

647

662

8 6

2

13.8% 14.5%

69

49

-

1.0% 3.1% 36,637

37,285

407

35

0.1% 8,069

7,591

5

- - - - -

0.0%

-

-

-

0.3% 2,489 0.4% 3,293 1.6% 8,373 4.3% 11,798

2,412 4,398 7,834

2 6

LARGE CORPORATES

31

12,240

227 136

25 10

15.3% 17.2% 2,615 3.1% 5.5% 99,378

2,810

97,833

2,609

404

0.1% 3,410 0.2% 1,072 0.3% 4,442 0.5% 7,770

3,591 2,245 5,740 6,022

3

-

11

4 3 3

SMALL AND MEDIMUM-SIZED COMPANIES

8 6

1.6% 28,273 21,265

26 20

4.4% 38,716

42,665 16,305

803

121 253

16.5% 18.2% 15,695

1,752

78

PILLAR 3 - 2020 | SOCIETE GENERALE GROUP |

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