2020 Universal registration document and annual financial report - BNP PARIBAS406

5 risks and CaPital adequaCy Pillar 3

5

Securitisation in the banking book

The financing structures thus put in place are accompanied by liquidity lines and, where appropriate, by the granting of guarantees by the Group, which are subject to a capital requirement. Commitments and positions retained or acquired by BNP Paribas on securitisation programmes as sponsor, amounted to EUR 22.8 billion at 31 December 2020.

Short-term refinancing

At 31 December 2020, two consolidated multiseller conduits (Starbird and Matchpoint) were sponsored by the Group. These conduits, by seeking refinancing on the local short-term commercial paper market, are able to provide CIB clients, large corporates and institutions with an attractive financing solution in exchange for some of their assets (trade receivables, commercial and industrial loans, finance leases for automobiles or various equipment, credit card receivables, etc.).

BNP Paribas provides each of these conduits with a liquidity line which amounted to EUR 21.4 billion at 31 December 2020, compared with EUR 20.4 billion at 31 December 2019.

Medium/long-term refinancing

In Europe and North America, the BNP Paribas Group s structuring platform provides financing solutions to its clients, based on products

adapted to current conditions in terms of risk and liquidity. Altogether, the facilities granted by the Group through these transactions amounted to EUR 1.4 billion at 31 December 2020, compared with EUR 1.8 billion at 31 December 2019.

SECURITISATION AS INVESTOR The securitisation positions of BNP Paribas as an investor amounted to EUR 9.0 billion at 31 December 2020, stable compared with EUR 8.9 billion at 31 December 2019.

Investments made by the Group in third-party securitisation transactions are mainly concentrated in Capital markets, a joint-venture between Corporate Banking and Global Market with an exposure of EUR 8.2 billion at 31 December 2020 compared to EUR 7.9 billion at 31 December 2019. Capital Markets is involved in setting up, then financing and hedging (as a swap supplier) structured asset financing operations initiated by its clients, including mainly institutions, large companies or private equity platforms.

Investor securitisation exposures also include historical positions within the BNP Paribas Fortis entity managed in run-off. This portfolio, housed in the Corporate Center, amounted to EUR 0.8 billion at 31 December 2020 compared with EUR 1.0 billion at 31 December 2019.

ACCOUNTING METHODS [Audited]

(See note 1 to the consolidated financial statements Summary of significant accounting policies applied by the Group).

The accounting classification of securitisation positions in the banking book is shown in Table 11: Prudential balance sheet by risk type (EU LI1-B).

Securitisation positions classified as Financial assets at amortised cost are measured using the method described in note 1.e.1 to the financial statements: the effective interest rate used to recognise interest income is measured on the basis of an expected cash flow model. From the outset, these positions are subject to an impairment calculation for expected credit risk losses (see note 1.e.5).

Securitisation positions classified on an accounting basis as Financial assets at fair value through equity are measured using the method described in note 1.e.2 to the financial statements. Changes in fair value determined according to the principles listed in note 1.e.10 to the financial statements (excluding revenue recognised using the effective interest method) are presented in a specific subsection of shareholders equity along with expected credit risk losses calculated using the methods described in note 1.e.5 to the financial statements. Upon disposal, amounts previously recognised in recyclable equity are transferred to the profit and loss account.

Securitisation positions classified on an accounting basis as Financial instruments at fair value through profit or loss are measured using the method described in note 1.e.7 to the financial statements.

Proceeds from the sale of securitisation positions are recognised in accordance with rules for the category of origin of positions sold.

Synthetic securitisations in the form of credit derivatives (credit default swaps) or guarantees received follow accounting rules appertaining respectively:

■ to trading portfolio derivatives. These are measured at fair value through profit or loss (see note 1.e.7 to the financial statements);

■ to financial guarantees received, which cannot be considered as forming an integral part of secured assets. If it is virtually certain that a loss caused by a defaulting debtor will be offset by the guarantor, the guarantee is then recognised as a reimbursement asset (right to reimbursement for expected credit losses) and expected credit losses on the asset are, at the same time, recognised in profit or loss. The overall impact in terms of profit or loss is the same as if the guarantee had been recognised in the measurement of expected credit losses, with the difference that the guarantee received is shown as a reimbursement asset rather than as a reduction in the expected credit losses on the asset.

ACCOUNTING METHODS