324 2019 Universal registration document and annual financial report - BNP PARIBAS

5 risks and CaPital adequaCy Pillar 3

5

Credit risk

TRENDS IN CREDIT RISK EXPOSURE The EUR 44 billion increase in credit risk exposure (excluding Other items and Equities), excluding foreign exchange effects, in 2019, is due mainly to the Bank s current business activity. Currency effects had a significant influence on the increased exposure (+EUR 11 billion) under the combined effect of the appreciation of the U.S. dollar (+EUR 7 billion) and the pound sterling (+EUR 3 billion). Excluding these currency effects, the main changes by exposure class are the following:

■ the EUR 39 billion increase in corporate exposures was driven mainly by CIB (+EUR 31 billion), primarily in Europe (+EUR 20 billion) and to a lesser extent in Asia and the United States, and by Domestic Markets (+EUR 10 billion), mainly in France;

■ the EUR 10 billion increase in Retail exposures stemmed, on the one hand, from the increase in mortgage loans in France, Belgium and Luxembourg and, on the other, from the expansion of Personal Finance partnerships.

APPROACHES USED TO CALCULATE CAPITAL REQUIREMENTS BNP Paribas has opted for the most advanced approaches allowed under Basel 3. In accordance with the European Directive and its transposition into French law, in 2007 the supervisor authorised the Group to use internal models to calculate capital requirements starting on 1 January 2008.

For credit risk, the share of exposures under the IRBA approach is 72% as at 31 December 2019, compared with 71% 31 December 2018. This significant scope includes in particular Corporate and Institutional Banking (CIB), French Retail Banking (FRB), BNL SpA, a part of the BNP Paribas Personal Finance business (consumer loan book) and the entities BNP Paribas Fortis and BGL BNP Paribas. The main models used by the Fortis Group, which prior to its acquisition had been authorised by its banking supervisor to use the advanced approach, converged to Group methodologies (with the exception of those concerning retail customers). The IRBA scope nevertheless excludes certain entities such as those of the BancWest sub-group and subsidiaries in emerging countries.

Within the scope of equity exposures, the Group has mainly opted for the simple weighting method.

➤ FIGURE 6: CREDIT RISK EXPOSURE BY APPROACH

at 31 December 2019

27% Standardised approach

1% Simple weighting method

72% IRB approach

Total : EUR 1,598 billion

at 31 December 2018

28% Standardised approach

1% Simple weighting method

71% IRB approach

Total : EUR 1,544 billion