NATIXIS -2020 Universal Registration Document

FINANCIAL DATA Consolidated financial statements and notes

In this case, fair value consists of a mid-market price and additional valuation adjustments determined according to the instruments in question and the associated risks. The mid-market price is obtained based on: the quoted price if the instrument is quoted on an active market. A V financial instrument is regarded as quoted on an active market if quoted prices are readily and regularly available from an exchange, dealer, broker, industry group, pricing service or regulatory agency, and those prices represent actual and regularly occurring transactions on an arm’s length basis on the main market or, failing that, the most advantageous market; if the market for a financial instrument is not active, fair value is V establishedusing valuation techniques. The techniquesused must maximize the use of relevant observable entry data and minimize the use of non-observableentry data. They may refer to observable data from recent transactions, the fair value of similar instruments, discounted cash flow analysis and option pricing models, proprietary models in the case of hybrid instruments or non-observable data when no pricing or market data areavailable. Additional valuation adjustments incorporate factors related to valuation uncertainties, such as market and credit risk premiums in order to account for the costs resulting from an exit transaction on the main market. Similarly, an assumptions-based Funding Value Adjustment (FVA), aiming to factor in the costs associated with the funding of future cash flows of uncollateralized derivatives or imperfectly collateralized derivatives, is also taken intoaccount. The main additional Funding Value Adjustments are as follows: Bid/ask adjustment – Liquidity risk This adjustment is the difference between the bid price and the ask price corresponding with the selling costs. It reflects the remuneration requested by a market player in respect of the risk of acquiring a position or of selling at a price proposed by another market player. Model uncertainty adjustment This adjustment takes into account the imperfections of the valuation techniquesused – in particular, the risk factors that are not considered, even when observable market inputs are available. This is the case where risks inherent to various instruments differ from those considered by the observable inputs used in valuation. Input uncertainty adjustment Observing certain prices or inputs used in valuation techniquesmay be difficult or the price or input may be too regularly unavailable to determine the selling price. Under these circumstances, an adjustment may be necessary to reflect the probability of different values being used for the same inputs when evaluating the fair value of the financial instrument adopted by the market participants.

Credit derivatives Credit derivatives used by Natixis are not considered as financial guaranteesbut as derivativesfalling within the scope of IAS 39. They are classified as assets or liabilities at fair value througphrofit or loss.

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Transactions

in foreign currencies The method used to account for assets and liabilities relating to foreign currency transactions entered into by Natixis depends upon whether the asset or liability in question is classified as a monetary or a non-monetary item. Monetary assets and liabilities denominatedin foreign currenciesare translated into the functional currency at the spot rate prevailing at the reporting date. Exchange differences resulting from this conversionare recognized in profit or loss. There are two exceptions to this rule: only the portion of the foreign exchange gains and losses V calculated based on the amortized cost of financial assets at fair value through other comprehensive income is recognized in income, the remainder being recognized in “Gains and losses recognized directly in equity”; foreign exchange gains and losses from monetary items V designated as cash flow hedges or part of a net investment in a foreign entity are recognized in “Gains and losses recognized directly in equity”. Non-monetary items denominated in foreign currencies and measured at historical cost are translated at the exchange rate on the transaction date (or the date of reclassification in equity for the perpetual deeply subordinated notes issued: see Note 12.3.1 ). Non-monetary items denominated in foreign currencies and measured at fair value are translated at the prevailing exchange rate at the end of the reportingperiod. Gains or losses on a non-monetary item (e.g., equity instruments)denominated in a foreign currency are recognizedas income if the asset is classifiedas “Financial assets at fair value through profit or loss” and in equity if the asset is classified as “Financial assets at fair value through other comprehensive income”, unless the financial asset is designatedas a hedged item in a fair value hedge, in which case foreign exchange gains and losses are recorded in income. General principles The fair value of an instrument (asset or liability) is the price that would be received to sell an asset or paid to transfer a liability in a standard arm’s length transaction between market participants at the measurement date. Fair value is therefore based on the exit price. The fair value of an instrument on initial recognition is normally the transaction price, i.e. the price paid to acquire the asset or received to assume the liability. In subsequentmeasurements, the estimated fair value of assets and liabilities must be based primarily on observable market data, while ensuring that all inputs used in the fair value calculation are consistent with the price that market participants would use in a transaction. Fair value 5.6 of financial instruments

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NATIXIS UNIVERSAL REGISTRATION DOCUMENT 2020