BPCE - 2018 Registration document

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

Debt instruments such as bonds or securitized transactions (ABS, CMBS, RMBS, cash CDOs) are considered impaired and are classified as Stage 3 when there is a known counterparty risk. The Group uses the same impairment indicators for Stage 3 debt securities as those used for individually assessing the impairment risk on loans and receivables, irrespective of the portfolio to which the debt securities are ultimately designated. For perpetual deeply subordinated notes that meet the definition of financial liabilities within the meaning of IAS 32, particular attention is also paid if, under certain conditions, the issuer may be unable to pay the coupon or extend the issue beyond the scheduled redemption date. Impairment for expected credit losses on Stage 3 financial assets is determined as the difference between the amortized cost and the recoverable amount of the receivable, i.e. the present value of estimated recoverable future cash flows, whether these cash flows come from the counterparty’s activity or from the potential activation of guarantees. For short-term assets (maturity of less than one year), there is no discounting of future cash flows. Impairment is determined globally, without distinguishing between interest and principal. Expected credit losses arising from Stage 3 off-balance sheet commitments are taken into account through provisions recognized on the liability side of the balance sheet. Specific impairment is calculated for each receivable on the basis of the maturity schedules determined based on historic recoveries for each category of receivable.

For the purposes of measuring expected credit losses, pledged assets and other credit enhancements that form an integral part of the contractual conditions of the instrument and that the entity does not recognize separately are taken into account in the estimate of expected cash flow shortfalls. For debt instruments recognized on the balance sheet in the financial assets at amortized cost category, impairment is recorded against the line on which the asset was initially shown for its net amount (regardless of whether the asset is S1, S2, or S3). Impairment charges and reversals are recognized in the income statement under “Cost of credit risk”. For debt instruments recognized on the balance sheet as financial assets at fair value through other comprehensive income, impairment is carried on the liabilities side of the balance sheet at the level of other comprehensive income recyclable to income, with a corresponding entry on the income statement under “Cost of credit risk” (regardless of whether the asset is S1, S2, or S3). For loan and financial guarantee commitments given, provisions are recorded on the liabilities side of the balance sheet under “Provisions” (irrespective of whether the commitment given is S1, S2, or S3). Additions to/reversals from provisions are recognized in the income statement under “Cost of credit risk”.

7.1.1.1 Financial assets at fair value through other comprehensive income recyclable to income by impairment Stage

5

12/31/2018

01/01/2018

Gross carrying amount

Impairment for credit losses

Impairment for credit losses

Carrying amount

Gross carrying amount

Carrying amount

in millions of euros

Financial assets at fair value through other comprehensive income (recyclable to income)

37,475 37,366

(67)

37,408 37,361

32,974 32,106

(57)

32,917 32,102

Stage 1 Stage 2 Stage 3

(5) (2)

(4)

30 79

28 19

787

(14) (39)

773

(60)

81

42

321

Registration document 2018