NATIXIS_REGISTRATION_DOCUMENT_2017

FINANCIAL DATA Consolidated financial statements and notes

Reclassifications identified include: For financingportfolios:

from the current risk monitoring system and is adapted to the characteristics of the portfolios. Measurement of material impairmentwill take into account: for loans and financing and guarantee commitments:changes a to the counterparty’s rating between the grant date and the reporting date, the counterparty’sstatus within Natixis’ credit risk monitoring framework (including “forbearance” status), the non-technicalunpaid amount, and the internal rating of the sectoror countryto which the counterpartybelongs; for debt securities:IFRS 9 allows us to assume that the credit a risk of a financial instrumenthas not increasedmateriallysince its initial recognition if this risk is considered to be low at the end of the fiscal year. This provisioncould be applied to certain investmentgrade debt securities. For non-investmentgrade debt securities, criteria identical to those mentionedabove for loans and financing and guarantee commitmentswill be applied. To calculate impairment, Natixis will use regulatory capital requirementcalculationmodels and the projectionmodels used for regulatorystresstests. The impairmentcalculationmethodwill be based on three major parameters:probability of default (PD), loss given default (LGD) and exposure at default (EAD). Impairment losses will be the product of PD, LGD and EAD over the life of the instrument (Tier 2) or over a one-year horizon (Tier 1). Impairment loss calculationswill include a discountingfactor at the reportingdate based on the effective interestrate or an approximation of it. Specific adjustmentswill be made to factor in current conditions and forward-lookingmacroeconomicprojections.Measurements may therefore, in some cases, differ significantly from those used to calculate regulatory capital requirements due to the associated safety buffers and their “through-the-cycle” applicability,as neither of these elements are factored in when evaluating the parameters used to determine provisions under IFRS 9 in accordancewith the standard.Accordingly: IFRS 9 parameters will therefore aim to provide the most a accurate estimate of losses possible for accounting provision purposes, whereas prudential parameters will be more cautious for regulatory framework purposes. Several of these safetybufferswill be restated; IFRS 9 parametersmust allow losses to be estimateduntil the a contract’s maturity, whereas prudential parameters will be defined to estimate 12-month losses. 12-month parameters will thus be projectedover longertimescales. Parameters will be adjusted to suit the economic context by defining reasonable and justifiable economic scenariosmatched with their probability of occurrence. The projection mechanism will also draw on the budget process. Three economicscenarios (the base case budget scenario, along with optimistic and pessimistic views of this scenario), combined with their respective probabilities, will therefore be defined over a three-year time line. The scenarios and weightings will be defined using analysis produced by Natixis’ Economic Research departmentand management’sexpert judgment. The modelswhichwill be introducedto calculateimpairmentwill be developedor harmonizedcentrallyto ensurethat methodsare consistent throughout Natixis, Groupe BPCE and other entities, including Natixis Financement, depending on the type of exposuresin question.

repurchaseagreementsdesignatedunder the fair value option a through profit or loss under IAS 39 for the purpose of comprehensive management at fair value and subject to a trading businessmodel will be recognizedas “Financialassets at fair value throughprofit or loss”; repurchase agreements classified as loans and receivables a under IAS 39 and subject to a trading business model under IFRS 9 will be recognized as “Financial assets at fair value throughprofit or loss”. The vast majorityof financingand receivableswill continueto be classified and measured at amortized cost. Regarding these financing receivables, Natixis holds a portfolio of fixed income loans that bear a symmetrical repayment clause: Questions regardingthe interpretationof these clauses and whether or not these instrumentsshouldbe considered“basic”were referredto the IASB (International Accounting Standards Board) in December 2016.The amendmentwas publishedby the IASB on October 12,2017, and will be mandatoryas of January 1,2019. Natixis will apply it early, as of January 1,2018, as soon as the amendmenttext is adopted by the European Commission.This amendment opens up the possibility of categorizing these instrumentsas basic, thereby enablingthem to be recognizedat amortizedcost or in accordancewith the “holdto collectand sell” model providedthat they are held in a “hold to collect”business model under IFRS 9. For securitiesportfolios,reclassificationshouldmainlyrelate to: debt securitiesheld in the liquidityreserve,which under IAS 39 a were recognizedas available-for-saleassets and which, as they were held under a “hold to collect and sell” business model, will be reclassifiedas financial assets at fair value throughOCI recyclableto profit or loss; mutual fund and private equity investment fund units, except a for those in the insurance business, classified as equity instrumentsunder IAS 39 and recognizedas “Available-for-sale assets” or as “Financial assets under the fair value option”, that are considered under IFRS 9 as debt instruments with non-basic characteristicsand as a result will be recognized as “Financialassetsat fair value throughprofit or loss”; investmentsin associatesrecognizedas available-for-saleassets a under IAS 39which,as allowedunder a specialoptionprovided for by IFRS 9, will either be recognizedas “Financialassets at fair value through profit or loss” or as “Financialassets at fair value through OCI” (non-recyclable even in the event of disposal).Dividendscontinueto be recognizedin incomeonly if opting for the latter category. Reclassificationbetween financial assets at amortized cost and financial assets at fair value have a net impact on Natixis’ consolidated shareholders’ equity due to the difference in the method used to measure these assets. Nevertheless,as these reclassifications are limited or affect assets whose fair value does not vary significantlyfrom their value at cost due notably to the residual maturity of the transactions in question, these reclassificationsare not expected to have a material impact on Natixis’openingequityat January 1,2018. Regarding the implementation of new impairment provisions: Material impairment will mainly be measured using a combination of historical internal data, most of which comes

5

207

Natixis Registration Document 2017