308 2019 Universal registration document and annual financial report - BNP PARIBAS
5 risks and CaPital adequaCy Pillar 3
5
Capital management and capital adequacy
Capital planning is based on the most recent actual and estimated financial data available at the time. These data are used to project future capital requirements, in particular by factoring in the Group s goal of maintaining a first-class credit rating to protect its origination capability, its business development targets and anticipated regulatory changes.
Capital planning consists of comparing the capital ratio targets defined by the Group with future projected capital requirements, then testing their robustness in a stressed macroeconomic environment.
Notification of SREP results The results of the SREP process are notified annually to BNP Paribas s Executive Management by the ECB. The notification of SREP results for 2019 was dated on 10 December 2019.
The SREP decision comprises two items: a requirement known as the Pillar 2 requirement , and a non-public guidance called Pillar 2 guidance . Following the ECB s notification of the outcome of the
2019 annual SREP, the Common Equity Tier 1 (CET1) capital Pillar 2 requirement for the Group for 2020 is unchanged at 1.25%. This requirement must be covered, in full, by CET1 capital.
Overall capital requirements The Group s CET1 ratio, Tier 1 ratio and total capital ratio must satisfy at all times the following requirements corresponding to the limits of applicable distribution restrictions (Maximum Distributable Amount MDA):
■ the minimum CET1 ratio, Tier 1 ratio and total capital ratio, respectively, in accordance with article 92 (1) points a), b) and c) of the CRR;
■ the Pillar 2 requirement;
■ the Combined buffer requirement defined in article 128 (6) of CRD 4, as transposed into the respective national laws.
2019 2020
CET1: Minimum requirements (Pillar 1) 4.50% 4.50%
Pillar 2 requirement(*) 1.25% 1.25%
Combined Buffer Requirement 4.17% 4.35%
of which capital conservation buffer 2.50% 2.50%
of which G-SIBs buffer 1.50% 1.50%
of which countercyclical capital buffer(**) 0.17% 0.35%
OVERALL CET1 CAPITAL REQUIREMENT 9.92% 10.10%
Tier 1: Minimum requirement (Pillar 1) 6.00% 6.00%
Pillar 2 requirement(*) 1.25% 1.25%
Combined Buffer Requirement 4.17% 4.35%
OVERALL TIER 1 CAPITAL REQUIREMENT 11.42% 11.60%
Total capital: Minimum requirement (Pillar 1) 8.00% 8.00%
Pillar 2 requirement(*) 1.25% 1.25%
Combined Buffer Requirement 4.17% 4.35%
OVERALL TOTAL CAPITAL REQUIREMENT 13.42% 13.60%
(*) Only the Pillar 2 requirement is made public. (**) Countercyclical capital buffer as at 31 December 2019 and 31 December 2020.
The CET1 capital requirement is 9.92% at 31 December 2019 and 10.10% at 31 December 2020 (excluding Pillar 2 guidance), in view of the capital conservation buffer at 2.5%, a G-SIBs buffer at 1.5%, the gradual activation of the countercyclical buffer in certain countries and a Pillar 2 requirement at 1.25%.
With a CET1 capital ratio of 12.1% as at 31 December 2019, BNP Paribas is above the minimum requirement applicable for 2019, as notified in the SREP. Compared to 31 December 2018, the CET1 ratio was up 30 basis points as at 31 December 2019, an increase due to:
■ the 2019 net income excluding exceptional other non operating items, after taking into account a 50% dividend pay-out ratio (+60 bp);
■ the impact of the new IFRS 16 accounting standard (-10 bp)
■ the increase in risk-weighted assets at constant change net of the impact of securitisation (-40 bp);
■ the net impact of disposals and acquisitions (SBI Life, deconsolidation of the residual stake in this subsidiary, Prime Brokerage) as well as the partial impairment of BancWest s goodwill (+20 bp);
■ other effects (including currency effect) have a limited impact on the ratio.
BNP Paribas ratios are monitored and managed centrally, on a consolidated basis. Where a French or international entity is required to comply with banking regulations at its own level, its ratios are also monitored and managed directly by the entity (see paragraph Capital management at local level).
➤ TABLE 20: OVERALL CAPITAL REQUIREMENTS
