2020 Universal registration document and annual financial report - BNP PARIBAS 451

5risks and CaPital adequaCy Pillar 3

5

Liquidity risk

The Group s LCR stood at 135% on average monthly during 2020, which is a liquidity surplus of EUR 105 billion compared with the regulatory requirements.

After the application of the regulatory haircuts (weighted value), the Group s liquid assets amounted to EUR 402 billion on average monthly in 2020, and mainly consisted of central bank deposits (68% of the buffer) and government and sovereign bonds (24%). Part of the securities which are eligible by central banks and provide access to liquidity are not recognised as liquid within the meaning of the European prudential regulation and are not included in the regulatory reserve. This is the main difference between the liquidity reserve (see Table 96) and the regulatory reserve. The liquid assets recognised by the prudential regulation must be immediately available to the Group.

Cash outflows under the thirty-day liquidity stress scenario amounted to EUR 298 billion on average during 2020, a large part of which corresponds to thirty-day deposit outflow assumptions of EUR 270 billion. Reciprocally, cash inflows on loans under the thirty-day liquidity regulatory stress scenario amounted to EUR 62 billion.

Cash flows on financing transactions and collateralised loans representing repurchase agreements and securities exchanges recorded a net inflow of EUR 90 billion on average in 2020, given the regulatory haircuts applied to collateral. Flows linked to derivative instruments and regulatory stress tests recorded a net outflow of EUR 18 billion after netting of cash outflows (EUR 43 billion) and inflows (EUR 25 billion). Lastly, the drawdown assumptions on financing commitments amounted to EUR 39 billion.

On a moving average over the last twelve monthly measurements, the Group s LCR rose up to 135% in 2020 from 123% in 2019. The stock of liquid assets is managed to cover variations in net cash outflows while maintaining surplus liquidity at all times. This stood at between EUR 60 and 105 billion over the fully loaded coverage ratio for net cash outflows. Levels of liquid assets increased faster than cash outflows, in particular due to the subscription to TLTRO III and the increase in customer deposits. Furthermore, the very short-term wholesale funding is immediately placed in very liquid assets according to the sterilisation principle to immunise the LCR from the volatility intrinsic to this type of funding (see paragraph Sources of Wholesale Funding).

Net Stable Funding Ratio NSFR

Regulation (EU) No. 2019/876 introduces a one-year structural liquidity ratio (Net Stable Funding Ratio NSFR), which will be the subject of a 100% minimum requirement from 28 June 2021. This standardised ratio aims to ensure that assets and financing commitments considered over one year are financed by resources over one year. The Group already complies with the future minimum NSFR requirement.

SCHEDULE OF THE BANK S PRUDENTIAL BALANCE SHEET This schedule presents cash flows according to contractual payment dates within the prudential scope (see Scope of application in section 5.2 Capital management and capital adequacy) in line with the rules defined for the liquidity ratio.

The securities in the trading book listed at fair value through profit or loss are presented with not determined maturities, as the securities contractual maturity is not representative of the Group s planned holding period. Likewise, derivative financial instruments listed at fair value through profit or loss, derivatives used for hedging purposes and remeasurement adjustments on interest-rate risk hedged portfolios are presented with not determined maturities.

In the following table and in the event of an early repayment option, the rules applied are the most conservative:

■ if the option is at the hands of both parties, the repayment date is the next contractual date for the exercise of the option;

■ if the option is at the hands of the counterparty, the date for the repayment of assets is the date of final maturity while that used for liabilities is the next contractual date for the exercise of the option;

■ if the option is at the hands of the Group, the repayment date is the next contractual date for the exercise of the option, for both assets and liabilities;

■ in the case of subordinated debt, the redemption date used is the final maturity date.