BPCE_REGISTRATION_DOCUMENT_2017

FINANCIAL REPORT BPCE parent company financial statements

Income and expenses related to forward and futures contracts used for hedging purposes or for managing overall interest rate risk are recognized in the income statement on a pro rata basis under “Interest and similar income” and “Interest and similar expenses”. Unrealized gainsand losses are not recognized. Gainsandlosseson contractsqualifiedas isolatedopenpositionsaretaken to incomeeither when the contractsare settledor over the life of the contract,depending onthetypeof instrument. Recognitionof unrealizedcapitalgainsor lossesis determinedbasedon the type of market involved (organized,other markets consideredas organized, or over the counter). For over-the-counteroptions (including transactions processed by a clearinghouse), a provisionis recordedfor unrealizedmark-to-market losses at year-end. Unrealized capital gains are not recognized. Instrumentstraded on organizedmarkets or other marketsconsidered as organized are continuously quoted and liquid enough to justify being marked to market. Contracts classified as specialized asset management contracts are measured after applying a discount to take account of the counterparty risk and the net present value of future management costs, if these valuationadjustmentsare material.Derivativesthat are traded with a counterpartythat is a member of Groupe BPCE’s share support mechanism(see Note 1.2.) are not subject to these valuation adjustments.Changesin value from one accountingperiod to another are recognizedimmediatelyin the incomestatementunder “Net gains or losses ontrading book transactions”. Balances on terminations r transfers are recognized as follows: balances on transactions classified under specialized asset ● managementor isolated open positionsare recognizedimmediately in income; for micro-hedging and macro-hedging transactions, balances are ● amortized over the remaining term of the initially hedged item or reported immediately in the incomestatement. Options The notional amount of the underlyingasset of an option or forward or futures contract is recognized by distinguishingbetween hedging contractsand contractstraded as part of capital marketransactions. For transactions involving interest rate, foreign exchange, or equity options, the premiumspaid or received are recognizedin a temporary account. At the end of the fiscal year, any options traded in an organizedor similar market are valued and recognizedin income. For over-the-counter(OTC) options, provisions are recognized for capital losses but unrealized capital gains are not recognized. When an option is sold, repurchased,or exercised, or when an option expires, the correspondingpremium is recognized immediately in income. Income and expenses for hedging instruments are recognized symmetricallywith those from the hedgeditem. Seller optionsare not eligible forclassification as macro-hedging instruments. Over-the-countermarketsmay be treated as organizedmarketswhen marketmakersensure continuousquotationswith spreadsthat reflect market practice or when the underlyingfinancial instrumentis itself quotedon an organized market.  Interest and similar commission income 2.3.10 Interest and similar commission income is recognized on a pro rata basis. The Group has chosen the following option to account for negative interest:

when income from an asset is negative,it is deductedfrom interest ● income inthe incomestatement; when income from a liability is positive,it is deductedfrom interest ● expenses inthe income statement. Commissions and fees related to granting or acquiring a loan are treated as additional interest amortized over the effective life of the loan, ona pro ratabasis according to the outstanding amount due. Other commission income is recognized according to the type of service providedas follows: commissions received for an ad hoc service are recognized on ● completion of the service; commissions received for an ongoing or discontinued service paid ● for throughseveral installmentsare recognizedover the period that the service isprovided.  Income from securities 2.3.11 Dividendsare recognizedwhen the right to receive paymenthas been decided by the competent body. They are recognized under “Income from variable-incomesecurities”. The portion of income received during the year from bonds or negotiable debt securities is also recognized. The same applies to perpetual deeply subordinated notes that meet the definition of a Tier-1 regulatory capital instrument. The Group considers that these revenues are effectively similarin nature to interest.  Income tax 2.3.12 As of 2010BPCEoptedto applytheprovisions of Article91 of theamended FrenchFinanceActfor2008whichextended thetaxconsolidation regimeto networks ofmutualbanks.Thisoption is modeled onthetaxconsolidation for mutualinsurersand takesinto accountconsolidation criterianot basedon ownership interest(the schemeis usuallyavailableif at least95%of the sharecapital of a subsidiary is owned by a parentcompany). As head of the Group, BPCE signed a tax consolidation agreement with membersof its group (includingthe 14 Banque Populairebanks, the 16 Caisses d’Epargne, and BPCE subsidiaries, including BPCE International,Crédit Foncier, Banque Palatine, BP Covered Bonds and BPCE SFH). In accordance with the terms of this agreement, BPCE recognizes a receivablefor the tax to be paid to it by the other membersof the tax consolidationgroup along with a payable correspondingto the tax to be paid to the tax authorities on behalf of the consolidationgroup. The incometax expensefor the period correspondsto the tax expense of BPCE in respect of 2017, corrected to reflect the impact of tax consolidationupon the Group. Contributions to banking resolution mechanisms 2.3.13 The procedure for financing the deposit and resolution guarantee fund had been changed by a Ministerial Order dated October 27, 2015. In 2016, the Autorité de contrôle prudentiel et de résolution (ACPR – French prudential supervisoryauthority for the banking and insurancesector), in decisionNo. 2016-C-51dated October 10, 2016, approved a method for calculating contributions to the deposit guarantee mechanism. For the Deposit Guarantee Fund, the cumulative amount of contributions made to the fund for deposit, collateral and securities guarantee mechanisms represented a non-materialamount.Contributions(which are non-refundablein the event of a voluntary withdrawal of approval to operate) had no material impact on BPCE financial statements. Contributionspaid in the form of partner or association certificates and cash security depositsrecognized asassets onthe balancesheet werenot material.

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Registration document 2017