2020 Universal registration document and annual financial report - BNP PARIBAS344

5 risks and CaPital adequaCy Pillar 3

5

Credit risk

5.4 Credit risk

Credit risk is the consequence resulting from the likelihood that a borrower or counterparty will fail to meet its obligations in accordance with agreed terms. The probability of default and the expected recovery on the loan or receivable in the event of default are key components of the credit quality assessment.

EXPOSURE TO CREDIT RISK

The following table shows the gross exposure of all of the BNP Paribas Group s assets exposed to credit risk. The banking book securitisation positions as well as derivatives and repurchase agreements exposed to counterparty risk are excluded from this section and presented in section 5.5 and 5.6, respectively.

In accordance with the EBA s guidelines published in December 2016 on the revised Pillar 3, equity exposures under the standardised approach and using the simple weighting method are included in this section.

The main differences between the carrying amounts of the prudential balance sheet and the risk exposure amounts used for regulatory purposes are presented in Table 12 in the Scope of Application section of section 5.2.

These gross exposure amounts do not take into account guarantee and collateral received by the Group in its normal credit risk management operations (see section Credit risk mitigation techniques).

➤ TABLE 25: CREDIT RISK EXPOSURE BY ASSET CLASS AND APPROACH

Exposure In millions of euros

31 December 2020 31 December 2019 Variation

IRB approach

Standardised approach(*)

Simple weighting

method Total IRB

approach Standardised

approach(*)

Simple weighting

method Total Total

Total - excluding

foreign exchange

effect

Central governments and central banks 429,083 44,053 - 473,137 270,355 41,454 - 311,809 161,327 168,155

Corporates 602,043 140,265 - 742,308 553,272 144,388 - 697,660 44,648 70,518

Institutions(**) 53,740 26,696 - 80,437 58,137 23,266 - 81,403 (967) 1,776

Retail 284,356 173,760 - 458,117 273,493 187,116 - 460,609 (2,492) 5,821

Equity - 781 17,002 17,783 - 997 16,887 17,884 (100) (11)

Other items(***) 578 28,010 - 28,588 459 28,314 - 28,773 (185) 367

TOTAL 1,369,802 413,566 17,002 1,800,369 1,155,716 425,536 16,887 1,598,139 202,230 246,627

(*) In the following paragraphs, standardised credit risk exposures are reported according to the regulatory standardised classification. (**) Institutions asset class comprises credit institutions and investment firms, including those recognised in other countries. It also includes some exposures

to regional and local authorities, public sector agencies and multilateral development banks that are not treated as central government authorities. (***) Other items include tangible assets, accrued income and residual values.

Exposure related to loan acquisitions on the secondary market in 2020 only accounts for a marginal amount.