NATIXIS -2020 Universal Registration Document

5 FINANCIAL DATA

Consolidated financial statements and notes

Note 5

Accounting principles and valuation methods

For Natixis, the hold to collect model applies mainly to financing activities (excluding the loan syndicationactivity) carried out by the Corporate & Investment Banking business; hold to collect and sell model: a mixed business model under V which assets are managed with the objective of both receiving contractual cash flows and selling financial assets. In this model, financial assets aresold to achieve the purpose of the activity. Natixis applies the “hold to collect and sell” model primarily to portfolio management activities for securities in the liquidity reserve; other model: a model intended for other financial assets, V especially those held for trading, for which the collection of contractual cash flows is incidental. This business model applies to the loan syndication activity and the Capital Markets activities carried out by Corporate & Investment Banking. The SPPI test 5.1.2 A financial asset is considered as basic if its contractual terms give rise, on specific dates, to cash flows that are solely payments of principal and interest on the outstanding amount due. The “principal” amount is defined as the financial asset’s fair value at its acquisition date. “Interest” is the consideration for the time value of money and the credit risk incurredon the principal amount, as well as other risks such as liquidity risk, administrative costs and the profit margin. The instrument’s contractual terms must be taken into account to assess whether contractual cash flows are solely payments of principal and interest. All elements that may cast doubts as to whether only the time value of money is representedmust therefore be analyzed. For example: events that would change the amount and date of the cash flows; V For the borrower or lender, a contractual option permitting prepayment of financial instruments does not violate the SPPI test for contractual cash flows if the prepayment amount mainly represents the unpaid amounts of principal and interest and, if applicable, a reasonable additional compensation for the early termination of the contract. If a clear determinationcannot be made through qualitative analysis, quantitative analysis (a “benchmark test”) is carried out. This test involves comparing the contractual cash flows for the asset in question with the contractual cash flows of a benchmark asset. Basic financial assets (those that generate SPPI) are debt instruments such as fixed-rate loans, variable-rate loans without an interest rate tenor mismatch or that are not linked to a security or to a market index, and fixed-rate or variable-rate debt securities. the applicable interest rate features; V prepayment and extension options. V

5.1

Financial assets

(excluding derivatives) In accordance with IFRS 9 “Financial instruments”, on initial recognition, financial assets are recorded at amortized cost, at fair value through other comprehensive income, or at fair value through profit or loss. For debt instruments, the classificationdepends on the business model applicable to the instruments in question and the characteristics of their contractual cash flows (whether they represent Solely Payments of Principal and Interest [SPPI] onrot). Business model 5.1.1 The business model representsthe way in which Natixismanages its financial assets to produce cash flow and revenues. The entity must exercise judgment to determine the business model used. The choice of businessmodel must be made at a level which reflects the way in which groups of financial assets are managed collectively with a view to achieve a given economic objective. The business model is therefore not determined on an instrument by instrument basis, but rather at a higher level of aggregation, byportfolio. The choice of businessmodel must take into account all information regarding the manner in which cash flows were generated in the past, along with all other relevant information, for example: the way in which the performance of financial assets is assessed V and presented to the main executive officers; the risks that have an impact on the business model’s V performance, in particular the way in which these risks are managed; the way in which executive officers are paid (for example, if pay is V based on the fair value of assets under management or on the contractual cash flows received); hold to collect model: in this model, financial assets are held in V order to receive contractual cash flows over the life of the assets. This model, under which the concept of “holding” is relatively similar to holding to maturity, remains valid if sales are made under the following conditions: the disposals are due to an increase in credit risk, V the disposals occur just before maturity and at a price that V reflects the contractual cash flows that are still owed, other disposalsmay also be compatiblewith the “hold to collect” V model’s objectives if they are infrequent (even if their value is significant) or if their value is insignificantwhen consideredboth individually and overall (even if they are frequent). Natixis has establishedproceduresrequiring the reporting, prior analysis and regular monitoring of all major plans to sell financial assets held under the Hold to Collect model to ensure that the conditions required to classify assets under this businessmodel are met at all times. the frequency, volume and purpose of sales. V IFRS 9 provides for three business models:

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NATIXIS UNIVERSAL REGISTRATION DOCUMENT 2020