2020 Universal registration document and annual financial report - BNP PARIBAS448

5 risks and CaPital adequaCy Pillar 3

5

Liquidity risk

■ non-structured debt(1);

■ initial maturity of more than one year;

■ subject to conversion or impairment before senior preferred debt but after subordinated debt;

■ documentation mandatorily stating that this debt belongs to the new statutory category.

MLT secured wholesale funding

MLT secured wholesale funding is measured by separating out assets representing securities and loans. Funding obtained from central banks is not included in the table below.

(1) Decree No. 2018-710 of 3 August 2018 specifies the conditions in which a security, a receivable, an instrument or a right is considered as non-structured under 613-30-3 I-4° of the French Monetary and Financial Code.

➤ TABLE 95: MLT SECURED WHOLESALE FUNDING

In millions of euros

31 December 2020 31 December 2019

Collateral used(*) Funding raised(**) Collateral used(*) Funding raised(**)

Loans and receivables 25,230 21,972 29,874 25,531

Securities 29 27 762 573

TOTAL 25,259 21,998 30,636 26,103

(*) Amounts gross of haircuts. (**) Amounts net of haircuts.

MLT secured wholesale funding (outside of monetary policy) represents 12.1% of total MLT wholesale funding in 2020 (14.8% in 2019). The Bank carefully manages its proportion of secured funding and the associated overcollateralisation in order to protect creditors holding unsecured debt.

Covered bonds and securitisation programmes are the main sources of the Group s secured financing. On average, covered bonds are over- collateralised by 114% and securitisation programmes by 113%.

Medium- to long-term liquidity position

The medium-to long-term liquidity positions are measured regularly at Group level by entity and by currency to evaluate the medium-to long-term resources and uses. To this end, each balance sheet item is given a maturity in an economic approach using models and conventions offered by the ALM Treasury and reviewed by the RISK Function, or a regulatory approach by applying standardised weightings of the Net Stable Funding Ratio (NSFR) as anticipated for the concerned perimeters. For example, despite their immediate availability, the current accounts of retail customers and those linked with corporates cash management activities always remain highly stable, even through the most severe financial crises, thus constituting stable medium- to long-term funding sources in both an economic and a regulatory approach.

Stress tests and liquidity reserve

Liquidity stress tests are performed regularly on various maturities (one day to twelve months) based on market factors and/or factors specific to the Group and using different scenarios: idiosyncratic (i.e. specific to BNP Paribas), systemic crisis (affecting financial institutions), and combined crisis scenarios.

For each crisis scenario considered, borrowings and liabilities are expected to only partially renew, while loan amortisations are expected to be replaced by new loans to protect the commercial franchise, off- balance sheet financing commitments are expected to be used, and market assets are expected to lose their market liquidity. Commitment renewal and utilisation are differentiated in intensity and in time, based on client type (individuals, small and medium enterprises, corporates, financial institutions, etc.) and/or the type of underlying for secured borrowings and loans (repos/reverse repos). Stress scenarios also cover calls for additional collateral (e.g. increased margin calls for collateralised derivatives, impact of rating trigger clauses).

The liquidity reserve consists of Group assets held by ALM Treasury and the capital market businesses. The liquidity reserve comprises:

■ deposits with central banks;

■ available assets that can be immediately sold on the market or through repurchase agreements (bonds or shares);

■ available securities and receivables that can be refinanced with central banks (e.g. through securitisation, transforming less liquid assets into liquid or available assets) (see section 5.5 Proprietary Securitisation (originator)).