AFD_REGISTRATION_DOCUMENT_2017

4

RISK MANAGEMENT

BaselbIII pillarb3

CAPITAL ADEQUACY

In millions of euros Total capital

b

6,339

CET1 capital Tierb1bcapital Tierb2bcapital Eligible capital

5,619 6,339

b b b b b b b b b b b b b

0

b

3,085

Credit risk

2,873 1,395

Governments and central banks

Banks

607 696 175 105

Corporates

Equities

DVA

Market risk

0

Foreign currency net position < 2% of capital

-

Operational risk

106 106

Standard approach to operational risk

Capital surplus or deficit

b b

3,254

Solvency ratio

16.44%

Inb2017, 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 26bApril 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 capital requirements and available capital and to evaluate their adequacy. The capital adequacy evaluation conducted as part of the ICAAP is supplemented by (i) the capital management framework, (ii) the capital ratio projections, (iii) capital allocation and (iv) stress tests. 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 ICAAP for 2018 will be carried out in the second half of 2018 in order to take account of the conclusions of the CICID meeting of 8 February 2018, and its inclusion in the AFD Group’s strategic orientations plan. 4.2.3.3 BaselbIII ratios Because AFD does not hold speculative positions, market risk is limited to foreign-exchange risk, which is below the threshold set by (EU) Regulation 575/2013 on capital adequacy with regard to the market. AFD meets minimum capital requirements with a capital adequacy ratio of 16.44% at 31 December 2017 (16.82% at 31 December 2016). 4.2.3.4 Leverage ratio Since AFD’s status was changed to that of a financing company, it is no longer subject to this.

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REGISTRATION DOCUMENT 2017

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