2020 Universal registration document and annual financial report - BNP PARIBAS334

5 risks and CaPital adequaCy Pillar 3

5

Capital management and capital adequacy

➤ Split of on-balance sheet exposures (excluding derivatives, SFTs and exempted exposures) (EU LRSpl)

In millions of euros 31 December 2020 31 December 2019

EU-1 Total on-balance sheet exposures (excluding derivatives, SFTs(*), and exempted exposures), of which: 1,421,626 1,446,123

EU-2 Trading book exposures 165,196 127,548

EU-3 Banking book exposures, of which: 1,256,430 1,318,575

EU-5 Exposures treated as sovereigns 198,774 296,629

EU-6 Exposures to regional governments, MDB, international organisations and PSE not treated as sovereigns 38,257 35,792

EU-7 Institutions 35,607 37,172

EU-8 Secured by mortgages of immovable properties 181,557 199,255

EU-9 Retail exposures 233,828 219,299

EU-10 Corporate 332,834 317,034

EU-11 Exposures in default 14,309 13,679

EU-12 Other exposures (e.g. equity, securitisations, and other non-credit obligation assets) 221,265 199,715

(*) Securities Financing Transactions: repurchase agreements and securities borrowing/lending. Pursuant to article R.511-16,1,4° of French Monetary and Financial Code, BNP Paribas s asset yield (i.e. net accounting income divided by the total balance

sheet on a consolidated basis) is 0.30% in 2020 compared to 0.40% in 2019.

CAPITAL MANAGEMENT [Audited]

To ensure the Group s sustainability, the Bank must maintain an adequate level of capital with respect to the risks to which it is exposed and its strategy. Capital is a rare and strategic resource, which requires stringent, clearly defined, rigorous management according to an approach, which takes account of the needs and demands of stakeholders, including shareholders, supervisors, creditors and depositors.

OBJECTIVES BNP Paribas capital management:

■ is governed by policies and procedures which make it possible to understand, document and supervise capital management practices throughout the Bank;

■ takes risk measurement into account to determine the use of the capital;

■ considers capital requirements and resources under normal operating conditions, as well as under situations of severe, but plausible stress;

■ presents a forward-looking vision of the Bank s capital adequacy to the Executive Management;

■ allocates the capital constraint to the business lines in keeping with their strategic objectives;

■ complies with the Internal Capital Adequacy Assessment Process (ICAAP) and is consistent with the Risk Appetite Framework;

■ is monitored by an appropriate governance.

CAPITAL MANAGEMENT AT CENTRAL LEVEL BNP Paribas capital management aims to ensure and verify that the Group has adequate capital to comply with the regulatory capital ratios, as well as specific requirements, for instance to operate as a Global Systemically Important Bank. To ensure its capital adequacy, the Group abides by the following principles:

■ maintaining the capital at an appropriate level in view of BNP Paribas activities, risk appetite, growth and strategic initiatives;

■ maintaining BNP Paribas capital at a level which complies with regulatory requirements;

■ keeping a balance between capital adequacy and return on capital;

■ meeting its obligations vis-à-vis creditors and counterparties, at each due date;

■ continuing to operate as a financial intermediary.

CAPITAL MANAGEMENT