3232019 Universal registration document and annual financial report - BNP PARIBAS

5risks and CaPital adequaCy Pillar 3

5

Credit risk

5.4 Credit risk

Credit risk is the consequence resulting from the likelihood that a borrower or counterparty will fail to meet its obligations in accordance with agreed terms. The probability of default and the expected recovery on the loan or receivable in the event of default are key components of the credit quality assessment.

EXPOSURE TO CREDIT RISK

The following table shows the gross exposure of all of the BNP Paribas Group s assets exposed to credit risk. The banking book securitisation positions as well as derivatives and repurchase agreements exposed to counterparty risk are excluded from this section and presented in section 5.5 and 5.6, respectively.

In accordance with the EBA s guidelines published in December 2016 on the revised Pillar 3, equity exposures under the standardised approach and using the simple weighting method are included in this section.

The main differences between the carrying amounts of the prudential balance sheet and the risk exposure amounts used for regulatory purposes are presented in Table 12 in the Scope of Application section of section 5.2.

These gross exposure amounts do not take into account guarantee and collateral received by the Group in its normal credit risk management operations (see section Credit risk mitigation techniques).

➤ TABLE 24: CREDIT RISK EXPOSURE BY ASSET CLASS AND APPROACH

Exposure In millions of euros

31 December 2019 31 December 2018 Variation

IRB approach

Standardised approach(*)

Simple weighting

method Total IRB

approach Standardised

approach(*)

Simple weighting

method Total Total

Total excluding

foreign exchange

effect

Central governments and central banks 270,355 41,454 - 311,809 284,811 40,579 - 325,390 (13,580) (15,948)

Corporates 553,272 144,388 - 697,660 504,405 146,722 - 651,127 46,533 39,415

Institutions(**) 58,137 23,266 - 81,403 46,859 23,490 - 70,350 11,054 10,405

Retail 273,493 187,116 - 460,609 263,561 186,027 - 449,589 11,021 10,056

Equity - 997 16,887 17,884 - 1,262 12,959 14,220 3,663 3,644

Other items(***) 459 28,314 - 28,773 833 32,013 - 32,846 (4,073) (4,238)

TOTAL 1,155,716 425,536 16,887 1,598,139 1,100,469 430,094 12,959 1,543,521 54,617 43,334

(*) In the following paragraphs, standardised credit risk exposures are reported according to the regulatory standardised classification. (**) Institutions asset class comprises credit institutions and investment firms, including those recognised in other countries. It also includes some exposures

to regional and local authorities, public sector agencies and multilateral development banks that are not treated as central government authorities. (***) Other non credit-obligation assets include tangible assets, accrued income and residual values.

Exposure related to loan acquisitions on the secondary market in 2019 only accounts for a marginal amount.