2020 Universal registration document and annual financial report - BNP PARIBAS276

4 Consolidated finanCial statements for the year ended 31 deCemBer 2020

4

Statutory Auditors report on the consolidated financial statements

Technical reserves of insurance companies (See Notes 1.f.3, 1.o and 4.j to the consolidated financial statements)

Description of risk How our audit addressed this risk

At the year-end, a liability adequacy test is performed for BNP Paribas insurance activities.

The purpose of this test is to ensure that liabilities in respect of insurance contracts and investment contracts with discretionary profit-sharing are adequate in light of current estimates of the future cash flows to be generated by those contracts.

If the test indicates that the carrying amount of insurance liabilities is inadequate in relation to the estimated future cash flows, the total amount of the potential losses is recognised in profit or loss.

At 31 December 2020, total technical insurance reserves and other liabilities amounted to EUR 241 billion.

The test performed at 31 December 2020 confirmed that the carrying amount of the reserves was sufficient.

We deemed the implementation of the liability adequacy test for the Savings business to be a key audit matter because it is based on actuarial models, modelling options and guarantees which are specific to BNP Paribas and requires management to exercise judgement to determine certain key assumptions (e.g., discount rate, return on assets, surrender rate or fees). This test s sensitivity to estimates, which have been particularly high in past years due to low rates, is accentuated by the Covid-19 crisis, which has created strong volatility in share value and contributed to pushing rates down.

Based on a sample, we assessed the amount of net future cash flows used in the calculation, in particular by:

■ assessing the validity of the data on asset portfolios and contracts used as a starting point for the modelling exercise;

■ identifying the main changes made to the actuarial models, assessing the relevance of said changes and obtaining an understanding of their impact on the result of the test;

■ analysing differences in the models results between 2019 and 2020 based on analyses prepared by BNP Paribas. We verified that the most material differences were justified by changes in the portfolio, the assumptions or the models;

■ examining the results of the sensitivity analyses performed by BNP Paribas, notably those concerning rate assumptions and their consistency with market rates since the start of the Covid-19 crisis.

■ In addition, we examined the disclosures in the notes to the financial statements with respect to insurance liabilities.

Specific verifications

As required by legal and regulatory provisions and in accordance with professional standards applicable in France, we have also verified the information pertaining to the Group presented in the Board of directors management report.

We have no matters to report as to its fair presentation and its consistency with the consolidated financial statements.

We attest that the management report includes the consolidated non-financial information statement required under article L.225-102-1 of the French Commercial Code. However, in accordance with article L.823-10 of the French Commercial Code, we have not verified the fair presentation and consistency with the consolidated financial statements of the information given in that statement, which will be the subject of a report by an independent third party.

Other verifications and information pursuant to legal and regulatory requirements

Presentation of the consolidated financial statements included in the annual financial report Pursuant to paragraph III of article 222-3 of the AMF s General Regulations, the Company s management informed us of its decision to postpone the application of the single electronic reporting format, as defined by European Delegated Regulation No. 2019/815 of 17 December 2018, to reporting periods beginning on or after 1 January 2021. Accordingly, this report does not contain a conclusion on the compliance of the presentation of the consolidated financial statements included in the annual financial report referred to in paragraph I of article L.451-1-2 of the French Monetary and Financial Code (Code monétaire et financier) with this format.

Appointment of the Statutory Auditors

We were appointed Statutory Auditors of BNP Paribas SA by the Annual General Meetings held on 23 May 2006 for Deloitte & Associés, 26 May 1994 for PricewaterhouseCoopers Audit and 23 May 2000 for Mazars.

At 31 December 2020, Deloitte & Associés, PricewaterhouseCoopers Audit and Mazars were in the fifteenth, the twenty-seventh and the twenty-first consecutive year of their engagement, respectively

Responsibilities of management and those charged with governance for the consolidated financial statements

Management is responsible for preparing consolidated financial statements giving a true and fair view in accordance with International Financial Reporting Standards as adopted by the European Union and for implementing the internal control procedures it deems necessary for the preparation of consolidated financial statements that are free of material misstatement, whether due to fraud or error. In preparing the consolidated financial statements, management is responsible for assessing the Company s ability to continue as a going concern, disclosing, as applicable, matters related to going concern, and using the going concern basis of accounting, unless it expects to liquidate the Company or to cease operations.