AFD - 2018 Registration document

4

RISK MANAGEMENT

Basel III Pillar 3

❙ Capital adequacy

In millions of euros Total capital CET1 capital Tier 1 capital Tier 2 capital Eligible capital

7,179

6,131 6,971

208

3,126

Credit risk

2,876 1,551

Governments and central banks

Banks

514 630 181 129

Corporates

Equities

DVA

Market risk

13

Foreign currency net position < 2% of capital

-

Operational risk

108 108

Standard approach to operational risk

Capital surplus or deficit

4,052

Solvency ratio

18.37%

capital requirements and available capital and to evaluate their adequacy. AFD’s approach involves identifying all the material risks to which it is exposed according to a materiality threshold (updated every year) which measures impact on the solvency ratio. Each material risk is appropriately evaluated in terms of financial capital requirements and must be adequately covered by the available internal capital. The items of internal capital are measured on quality and must meet the risk profile of AFD and its economic model. AFD ensures that its internal capital will be able to remain above the legal requirement should a short or medium term adverse event occur. The updating of the ICAAP will be carried out in the first half of 2019 in order to take account of the conclusions of the 2018 CICID meeting and its inclusion in the AFD Group’s strategic orientations plan and business direction.

In 2017, AFD put in place a process for evaluating internal capital adequacy (ICAAP), in line with Section 2 of the European Directive 2013/36/EU. This process enables AFD Group to ensure that its capital is adequate to cover the material risks to which it is exposed, in terms of its activity, its economic model and its business plan. This process, approved by the Board of Directors at its meeting of 26 April 2017, applies to all entities within the prudential scope of consolidation of AFD Group (AFD, Proparco, etc.). As a monitoring process, the ICAAP is developed in line with the other key management processes such as the budget and financial planning procedures, the risk appetite framework and the preventative recovery plan. It is a cross-functional system which uses an economic approach complementary to the statutory approach to measure

❙ Weighted exposures (inmillions of euros)

Sovereigns and other institutions

Risk weighting

Banks Corporates

Equities

Total

0% 20% 50%

724

205

112

0 0

1,040 4,594

3,220

1,364 4,825

10

100% 150% 250%

14,677

7,249

468

27,219

767

35

501

1,092

2,395

0

0

704

704

TOTAL

19,387

6,428

7,872

2,264

35,951

74

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REGISTRATION DOCUMENT 2018