BPCE - 2018 Registration document

5 FINANCIAL REPORT

IFRS Consolidated Financial Statements of Groupe BPCE as at December 31, 2018

Fair value hedges mainly consist of interest rate swaps that protect fixed-rate financial instruments against changes in fair value attributable to changes in market rates of interest. They transform fixed-rate assets or liabilities into floating-rate instruments. Fair value macro-hedges are used to manage the overall interest rate risk position, in particular to hedge: fixed-rate loan portfolios; ● demand deposits; ● PEL home savings deposits; ● the inflation component of Livret A passbook savings accounts. ● Fair value micro-hedges are notably used to hedge: fixed-rate liabilities; ● fixed-rate liquidity reserve securities and inflation-indexed ● securities. Cash flow hedges fix or control the variability of cash flows arising from floating-rate instruments. Cash flow hedging is also used to manage the overall interest rate risk position. Cash flow hedges are mainly used to: hedge floating-rate liabilities; ●

hedge the risk of changes in value of future cash flows on ● liabilities; provide macro-hedging of variable-rate assets. ● The main causes of ineffective hedging are related to: ineffective dual-curve valuations: the value of collateralized ● derivatives (with margin calls yielding EONIA) is based on the EONIA discount curve, while the value of the hedged component of items covered by fair value hedges is calculated using a Euribor discount curve; the time value of options; ● over-hedging for asset-based testing of macro-hedges (notional ● amounts of hedging derivatives higher than the nominal amount of the hedged items, in particular where prepayments on the hedged items were higher than expected); credit value adjustments and debit value adjustments linked to ● credit risk and own credit risk on derivatives; differences in interest rate fixing dates between the hedged item ● and the hedge. The notional amounts of derivative instruments are merely an indication of the volume of the Group’s business in financial instruments and do not reflect the market risks associated with such instruments.

12/31/2018

01/01/2018

Notional amount 469,588 14,340 483,928

Positive fair value

Negative fair value

Notional amount 650,878 11,888 662,765

Positive fair value*

Negative fair value

in millions of euros

Interest rate derivatives Currency derivatives Forward transactions Interest rate derivatives Fair value hedges Interest rate derivatives Equity derivatives Currency derivatives Forward transactions Interest rate derivatives Options

6,799

10,422

8,499

11,292

582

1,974

775

2,161

7,381

12,396

9,274

13,453

4,327 4,327

14 14

15 15

4,756 4,756

18 18

8 8

488,255 27,615

7,395

12,412

667,522 39,238

9,293

13,461

156

378

177

671

197

18,641 46,256

606 762

798

7,489

320 497

593

1,177

46,925

1,264

97 97

2 2

1 1

121 121

3 3

Options

Cash flow hedges Credit derivatives

46,353

764

1,178

47,046

500

1,264

128

TOTAL HEDGING INSTRUMENTS

534,608

8,160

13,589

714,696

9,793

14,725

An adjustment of -€16 million was recognized in relation to the amount published at December 31, 2017 following a change in calculation method. *

All hedging derivatives are included in “Hedging derivatives” in balance sheet assets and liabilities.

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Registration document 2018