2020 Universal registration document and annual financial report - BNP PARIBAS 381

5risks and CaPital adequaCy Pillar 3

5

Credit risk

CREDIT RISK: EQUITIES UNDER THE SIMPLE WEIGHTING METHOD

EXPOSURE Exposures under the simple weighting method at 31 December 2020 amounted to EUR 17.0 billion, versus EUR 16.9 billion at 31 December 2019.

Scope

The shares held by the Group outside trading portfolios are securities conferring residual and subordinated rights on issuer s assets or income, or securities representing a similar economic nature . They encompass:

■ listed and unlisted shares, including shares in investment funds;

■ embedded options of convertible bonds, redeemable or exchangeable for shares;

■ equity options;

■ Super Subordinated Securities;

■ private funds commitments;

■ equity holdings hedge;

■ shares of consolidated entities using the equity method.

The scope of exposures processed according to the simple weighting method does not include the following items:

■ stakes higher than 10% in credit or financial institutions, mainly consolidated by the equity method or held as financial assets at fair value through equity, are exempt from the equity deduction, being weighted at a flat rate of 250% (exposure of EUR 3.9 billion at 31 December 2020 compared with EUR 3.1 billion at 31 December 2019);

■ asset value guarantees given to UCITS unit holders are weighted using the standardised approach (exposure of EUR 0.8 billion at 31 December 2020 compared with EUR 1.0 billion at 31 December 2019).

Accounting principles and valuation methods

Accounting principles and valuation methods are set out in note 1.e to the consolidated financial statements Financial assets and liabilities.

Total gains and losses

Total unrealised gains and losses recorded in shareholders equity are set out in note 4.c. to the consolidated financial statements Financial assets at fair value through equity.

RISK-WEIGHTED ASSETS The simple weighting method gives the following risk weights for the calculation of risk-weighted assets:

■ 190% for investments held for medium/long-term valuation purposes within the activity of the Principal Investments business, as well as private equity exposures in diversified portfolios in line with the Bank s business line activities;

■ 290% for exposures in the form of listed securities, including primarily investments related to the Bank s business line activities. In addition, some exposures relating to Principal Investments are also included in this category;

■ 370% for all other exposures in the form of equities, primarily including entities consolidated using the equity method (including the Group s insurance entities in the prudential scope that are included in the Table 42: Insurance undertakings (EU INS1)). Furthermore, this risk weight is also applied to unlisted investments in non-diversified portfolios.