BPCE - 2018 Registration document

RISK REPORT Summary of risks

Summary of risks 6.1

6.1.1

Types of risk

Given the diversity and developments in Groupe BPCE’s activities, risk management is centered on the following main categories: credit and counterparty risk (including country risk): risk of loss ● resulting from the inability of the Group’s customers, issuers or other counterparties to meet their financial commitments. Credit risk includes counterparty risk related to market transactions (replacement risk) and securitization activities. Moreover, credit risk may be exacerbated by concentration risk, resulting from high exposure to a given risk, to one or more counterparties, or to one or more groups of similar counterparties. country risk arises when an exposure is liable to be adversely ● affected by changes in the political, economic, social and financial conditions of the country of exposure; market risks: risk of loss in value of financial instruments resulting ● from changes in market inputs, from the volatility of these inputs or from the correlations between these inputs. Inputs include exchange rates, interest rates and prices of securities (equities, bonds), commodities, derivatives or any other assets, such as real estate assets; liquidity risk: risk that the Group cannot meet its cash requirements ● or collateral requirements when they fall due and at a reasonable cost; structural interest rate and foreign exchange risks: risk of loss in ● interest income or in the value of a fixed-rate structural position in the event of changes in interest rates and exchange rates. Structural interest rate and foreign exchange risks are associated with commercial activities and proprietary transactions;

legal risk: risk of legal, administrative or disciplinary sanction or ● material financial loss arising from a failure to comply with the provisions governing the Group’s activity; non-compliance risk: risk of a legal, administrative or disciplinary ● penalty, material financial loss or reputational risk arising from a failure to comply with the provisions specific to banking and financial activities (whether these are stipulated by directly applicable national or European laws or regulations), with professional or ethical standards, or instructions from the executive body, notably issued in accordance with the policies of the supervisory body; operational risk: risk of loss resulting from inadequacies or ● malfunctions attributable to procedures, employees and internal systems (including in particular information systems) or external events, including events with a low probability of occurrence, but with a risk of high loss; risk related to insurance activities: the Group is also exposed to a ● series of risks inherent to this business through its insurance subsidiaries or equity interests. In addition to asset-liability risk management (interest rate, valuation, counterparty and foreign exchange risks), these risks include pricing risk in respect of mortality risk premiums and structural risks related to life and non-life insurance activities, including pandemics, accidents and disasters (earthquakes, hurricanes, industrial accidents, terrorist acts or military conflicts); climate risk: the vulnerability of banking activities to climate ● change, where a distinction can be made between physical risk directly relating to climate change and transition risk associated with efforts to combat climate change.

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Registration document 2018