2020 Universal registration document and annual financial report - BNP PARIBAS372

5 risks and CaPital adequaCy Pillar 3

5

Credit risk

INTERNAL RATING SYSTEM SPECIFIC TO RETAIL CUSTOMERS Retail customers are characterised by a high degree of granularity, small unit volumes and a standard risk profile.

The majority of retail borrowers are assigned a behavioural score which serves as a basis to determine the probability of default and, for each transaction, the Global Recovery Rate (GRR) and exposure at default (EAD). These parameters are calculated every month on the basis of the most up-to-date information. They are supplemented by different scores that are made available to the commercial function. The latter has no involvement in determining risk parameters. These methods are used consistently for all retail customers. The general principles of the rating system are set out in the Rating System paragraph in the section Credit Risk Management Policy.

Scoring techniques are used to assign retail customers to risk groups presenting the same default risk characteristics. This also applies to the other credit risk parameters: EAD and LGD.

The chart below shows a breakdown by PD range of non-defaulted loans and commitments in the retail book for all the Group s business lines, measured using the internal ratings-based approach (see Table 26: Indicative mapping of internal counterparty rating with agency rating scale and average PD).

This exposure to non-defaulted loans represents EUR 275 billion at 31 December 2020, an increase compared with EUR 264 billion at 31 December 2019.

➤ FIGURE 9: IRBA EXPOSURE BY PD RANGE RETAIL PORTFOLIO

PD range (%)10 to < 1002.5 to < 100.75 to < 2.500.50 to < 0.750.25 to < 0.500.15 to < 0.250.00 to < 0.15

0%

5%

10%

15%

20%

25%

30%

35%

40%

% of exposure 31 December 2020 31 December 2019