BPCE_PILLAR_III_2017

14 APPENDICES Glossary

Key technical terms

An appraisal by a financial rating agency (Fitch Ratings, Moody’s, Standard & Poor’s) of the creditworthinessof an issuer (company,governmentor other public entity) or a transaction(bond issue, securitization, coveredbond).The ratinghas a direct impact on thecost of raisingcapital A portionof a loan issued in the form of an exchangeablesecurity.For a given issue, a bond grants the same debt claims on the issuer for the same nominal value, the issuer being a company, a public sectorentity or agovernment Pillar I sets minimumrequirementsfor capital. It aims to ensure that banking institutionshold sufficient capital to provide a minimum level of coverage for their credit risk, market risks and operational risk. The bank canuse standardizedor advancedmethods tocalculateits capital requirement Pillar II establishes a process ofprudentialsupervision thatcomplementsand strengthens Pillar I. It consistsof: an analysis bythe bank of all of its risks,includingthose alreadycoveredby Pillar I; - an estimateby the bank ofthe capital requirement for theserisks; - a comparison by the banking supervisor of its own analysis of the bank’s risk profile with the - analysis conducted by the bank, in order to adapt its choice of prudential measures where applicable,which may take the form of capital requirementsexceedingthe minimum requirements or any other appropriate technique Pillar III is concerned with establishing market discipline through a series of reporting requirements. These requirements– both qualitativeand quantitative– are intendedto improvefinancialtransparency in the assessment ofrisk exposure,risk assessment procedures and capital adequacy Ratio of Common Equity Tier 1 (CET1) capital to risk-weightedassets. The CET1 ratio is a solvency indicatorused in theBasel IIIprudential accords Tier 1 capital divided by exposures, which consist of assets and off-balance sheet items, after restatementsof derivatives,funding transactionsand items deducted from capital. Its main goal is to serve as a supplementaryrisk measurement for capital requirements The securitization of an exposure that is already securitized, where the risk associated with an underlyingpool of exposuresis tranchedand at least one of the underlyingexposuresis a securitization position The risk of loss from the inability of clients, issuers or other counterparties to honor their financial commitments. Credit risk includescounterparty riskrelatedto markettransactions and securitization The risk of loss of value on financial instruments resulting from changes in market inputs, from the volatility ofthese inputsor from thecorrelations between these inputs Risks of losses or penalties due to failed internal procedures or systems, human error or external events The risk of losses or impairment on assets arising from changes in interest rates or exchange rates. Structural interest rate and exchange rate risks are associated with commercial activities and proprietarytransactions The risk that a bank will be unable to honor its payment commitmentsas they fall due and replace funds when they are withdrawn An agreement between two counterpartiesto exchange different assets, or revenues from different assets, untila given date

Rating

Bond

Pillar I

Pillar II

Pillar III

CommonEquity Tier 1ratio

Leverage ratio

Capitalor totalcapitaladequacy ratio Ratio of total capital (Tier 1and 2) to risk-weightedassets(RWA).

Resecuritization

Credit and counterparty risk

Marketrisks

Operational risk

Structuralinterestrate and exchange rate risk

Liquidityrisk

Swap

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Risk Report Pillar III 2017