BPCE_REGISTRATION_DOCUMENT_2017

ADDITIONAL INFORMATION Glossary

Key technical terms

Contract in which two parties to a derivative (financialcontract, securities lending, repurchase agreement) agree to n ttheir reciprocal debts arising fromthesecontracts; in thatcase,settlement of these debts concerns onlya netbalance,particularly in the eventof default or termination. Under a masternetting agreement,his mechanism is appliedtomultiple transactions An equitysecurity issued by a corporation, representing a certificate of ownership andentitlingtheholder (the “shareholder”) to a proportional share in the distribution of any profits or netassets,aswellas a voting right at theAnnualGeneral Shareholders’ Meeting An organization thatspecializes in assessing the creditworthiness of issuers of debtsecurities, i.e. theirability tohonor their commitments (repaymentof principal and interestwithin thecontractualperiod) Levelof risk,expressed throughquantitative or qualitative criteria, by type of risk andbusiness line,thattheGroupis prepared to accept given its strategy. Therisk appetite exercise is one of thekey strategic oversight tools available to theGroup’s management team Approach used to determine capital requirements forcreditrisk under Pillar I of Basel II. In this approach, therisk weightings used in thecapital calculation are determined by theregulator A supervisory framework aimed at better anticipating and limiting the risksborneby credit institutions. It focuseson banks’ credit risk, market risk and operational risk. ThetermsdraftedbytheBaselCommitteewere adopted in Europe through a European directive and havebeen applicable in France sinceJanuary 1,2008 Changes in the supervisory framework for banks, incorporating the lessons drawn from the2007-2008 financial crisis, meant to complement the Basel IIaccordsby enhancing the qualityandquantity of theminimum capital requirements applicable to financial institutions.Basel III also establishesminimum requirements for liquidityriskmanagement (quantitative ratios), defines measures aimed at limitingprocyclicality in thefinancialsystem(capitalbuffers that varyaccording to theeconomic cycle) and reinforcesrequirements for financial institutions deemed to be systemically important (see Acronyms) Directive2013/36/EU (CRD IV)andregulation (EU)No. 575/2013 (CRR),which transpose Basel II in Europe. In conjunction with theEBA’s(EuropeanBankingAuthority) technicalstandards, they define European regulations for thecapital, major risk, leverageandliquidityratios A ratio indicating the portionof net banking income usedto cover operating expenses (the company’s operating costs). It is calculated by dividing operatingcostsby netbanking income A transferableassetor guarantee pledged tosecure reimbursement on a loan in theventtheborrower fails tomeetits paymentobligations The percentage by which a security’s market valueis reduced to reflectits valuein a stressed environment (counterparty risk or market stress) A financialsecurity or financialcontract whose valuechanges based on the valueof an underlying asset, which may be either financial(equities,bonds,currencies, etc.) or non-financial (commodities, agricultural products, etc.) in nature. This c ange may coincide with a multipliereffect (leverage effect). Derivatives cantaketheformof eithersecurities (warrants, certificates, structured EMTNs, etc.) or contracts (forwards, options,waps, etc.). Exchange-traded derivativescontractsare called futures A financialproductwhoseunderlying asset isa credit obligation or debtsecurity (bond). The purpose of thecr dit derivative is to transfercredit riskwithouttransferring theasset itself for hedging purposes. One of the mostcommon forms of credit derivatives is the credit default swap (CDS) Core capital including the financial institution’s consolidated shareholders’ quity minus regulatory deductions Supplementary capital mainly consisting of subordinated securities minus regulatory deductions The price thatwould be receivedto sellan asset or paid to transfera liability in a standard arm’s length ransaction between market participants at the measurement date. Fair value is therefore based on theexitprice In a banking context, liquidityrefers toa bank’s ability to coverits short-termcommitments. Liquidity also refers tothe degree to whichan asset can be quickly bought orsold on a market without a substantial reduction i value An appraisal by a financial rating agency (Fitch Ratings, Moody’s, Standard & Poor’s) of the creditworthiness of an issuer (company,government or other public entity) or a transaction (bond issue, securitization, covered bond). The rating has direct impact on the costof raising capital A portionof a loan issued in theformof anexchangeable security. For a given issue, a bondgrants thesamedebtclaims on the issuer forthesamenominalvalue, the issuer being a company, a public sector entity or a government Pillar I setsminimum requirements forcapital. It aims to ensure thatbanking institutionsholdsufficientcapital toprovidea minimum level of coverage fortheircredit risk,market riskandoperational risk. The bankcanusestandardized or advanced methods to calculate its capital requirement Pillar IIestablishesa processof prudentialsupervision that complements andstrengthensPillar I. It consists of: an analysisby thebankof all of its risks, including those already covered by Pillar I; - an estimateby thebankof thecapital requirement for theserisks; - a comparison by the banking supervisor of its own a alysisof thebank’s risk profile withtheanalysisconductedbythe - bank, in order to adapt itschoice of prudential measureswhere applicable, whichmay taketheformof capital requirements exceeding theminimum requirements or any other appropriate technique

Netting agreement

Share

Rating agency

Risk appetite

Standardized approach

Basel II (the Basel Accords)

Basel III (the Basel Accords)

“Bank acting as originator”See securitization “Bank acting as sponsor”See securitization “Bank acting as investor”See securitization Capital requirement

The amount of capital that banks are required to hold, i.e. 8%of risk-weighted assets (RWA)

CRD IV/CRR

Cost/income ratio

Collateral

Haircut

Derivative

Credit derivative Gross exposure

Exposure before the impact of provisions, adjustments and riskmitigationtechniques

Tier 1capital Tier 2 capital

Fair value

Liquidity

Rating

Bond

Pillar I

Pillar II

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Registration document 2017