2872019 Universal registration document and annual financial report - BNP PARIBAS

5risks and CaPital adequaCy Pillar 3

5

Annual risk survey

Nations Principles for Responsible Banking, which commits it to align its strategy with the Paris Agreement and the Sustainable Development Goals (SDGs). Its objective in 2020 is to provide EUR 185 billion in financing to sectors contributing to the SDGs. It is enhancing its support for the energy and environmental transition by deciding , for example, to reduce its outstanding loans to thermal coal companies to zero by 2030 in the European Union and 2040 in the rest of the world, and by raising its target for supporting renewable energy development by EUR 18 billion by 2021. These measures (and any future ones along similar lines) may in certain cases adversely affect the BNP Paribas Group s results in the relevant sectors.

7.2 The BNP Paribas Group may experience difficulties integrating acquired companies and may be unable to realize the benefits expected from its acquisitions

The BNP Paribas Group makes acquisitions on a regular basis. For example, the BNP Paribas Group s most recent major acquisition was of substantially all of the activities of Raiffeisen Bank Polska ( Core Bank ) in Poland, which was completed on 31 October 2018; such activities were subsequently merged with BGZ BNP Paribas. Integrating acquired businesses is a long and complex process, which entailed, in 2019, the Group incurred EUR 311 million in restructuring costs, the integration of Raffeisen Bank Polska as well as the discontinuation or restructuring of certain businesses (in particular, BNP Paribas Suisse in 2019). Successful integration and the realization of synergies require, among other things, proper coordination of business development and marketing efforts, retention of key members of management, policies for effective recruitment and training as well as the ability to adapt information and computer systems. Any difficulties encountered in combining operations could result in higher integration costs and lower savings or revenues than expected. There will accordingly be uncertainty as to the extent to which anticipated synergies will be achieved and the timing of their realization. Moreover, the integration of the BNP Paribas Group s existing operations with those of the acquired operations could interfere with its respective businesses and divert management s attention from other aspects of the BNP Paribas Group s business, which could have a negative impact on the BNP Paribas Group s business and results. In some cases, moreover, disputes relating to acquisitions may have an adverse impact on the integration process or have other adverse consequences, including financial ones.

Although the BNP Paribas Group undertakes an in-depth analysis of the companies it plans to acquire, such analyses often cannot be complete or exhaustive. As a result, the BNP Paribas Group may increase its exposure to doubtful or troubled assets and incur greater risks as a result of its acquisitions, particularly in cases in which it was unable to conduct comprehensive due diligence prior to the acquisition.

See paragraph Acquisitions and partnerships in section 3.5 and section 8.5 Investments.

7.3 The BNP Paribas Group s current environment may be affected by the intense competition amongst banking and non-banking operators, which could adversely affect the BNP Paribas Group s revenues and profitability

Competition is intense in all of the BNP Paribas Group s primary business areas in France and the other countries in which it conducts a substantial portion of its business, including other European countries and the United States. Competition in the banking industry could intensify as a result of consolidation in the financial services area, as a result of the presence of new players in the payment and the financing services area or the development of crowdfunding platforms, as well as the continuing evolution of consumer habits in the banking sector. While the BNP Paribas Group has launched initiatives in these areas, such as the debut of Hello bank! and its acquisition of Nickel, competitors subject to less extensive regulatory requirements or to less strict capital requirements (e.g. debt funds, shadow banks), or benefiting from economies of scale, data synergies, technological innovation (e.g. internet and mobile operators, digital platforms, fintechs), or free access to customer financial data could be more competitive by offering lower prices and more innovative services to address the new needs of consumers. In addition, new payment systems and crypto-currencies, such as Bitcoin, and new technology that facilitate transaction processes, such as blockchain, have developed in recent years. While it is difficult to predict the effects of these emerging technologies as well as any applicable regulations, their use could nevertheless reduce the BNP Paribas Group s market share or secure investments that otherwise would have used technology used by more established financial institutions, such as the BNP Paribas Group. If the BNP Paribas Group is unable to respond to the competitive environment in France or in its other major markets by offering more attractive, innovative and profitable product and service solutions than those offered by current competitors or new entrants, it may lose market share in key areas of its business or incur losses on some or all of its activities. In addition, downturns in the economies of its principal markets could add to the competitive pressure, through, for example, increased price pressure and lower business volumes for the BNP Paribas Group and its competitors (the results of the BNP Paribas Group s various business lines in 2019 are described in the press release presenting the 2019 results, published on 5 February 2020). It is also possible that the imposition of more stringent requirements (particularly capital requirements and business restrictions) on large or systemically significant financial institutions, could lead to distortions in competition in a manner adverse to large private-sector institutions such as the BNP Paribas Group.

7.4 The BNP Paribas Group could experience business disruption and losses due to climate change risks such as transition risks, physical risks or liability risks

The BNP Paribas Group is exposed to risks related to climate change, either directly through its own operations or indirectly through its financing and investment activities. There are two main types of risks related to climate change: (i) transition risks, which result from changes in the behaviour of economic and financial actors in response to the implementation of energy policies or technological changes; (ii) physical risks, which result from the direct impact of climate change on people and property through extreme weather events or long-term risks such