4232019 Universal registration document and annual financial report - BNP PARIBAS

5risks and CaPital adequaCy Pillar 3

5

Liquidity risk

The Group s LCR stood at 123% on average monthly during 2019, which is a liquidity surplus of EUR 58 billion compared with the fully loaded regulatory requirements.

After the application of the regulatory haircuts (weighted value), the Group s liquid assets amounted to EUR 313 billion on average monthly in 2019, and mainly consisted of central bank deposits (55% of the buffer) and government and sovereign bonds (34%). 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 92) 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 255 billion on average during 2019, a large part of which corresponds to thirty-day deposit outflow assumptions of EUR 242 billion. Reciprocally, cash inflows on loans under the thirty-day liquidity regulatory stress scenario amounted to EUR 61 billion.

Cash flows on financing transactions and collateralised loans representing repurchase agreements and securities exchanges recorded a net inflow of EUR 1 billion on average in 2019, given the regulatory haircuts applied to collateral. Flows linked to derivative instruments and regulatory stress tests recorded a net outflow of EUR 10 billion after netting of cash outflows (EUR 27 billion) and inflows (EUR 17 billion). Lastly, the drawdown assumptions on financing commitments amounted to EUR 38 billion.

On a moving average over the last twelve monthly measurements, the Group s LCR rose up to 123% in 2019 from 118% in 2018. Stocks of liquid assets are managed to cover variations in net cash outflows while maintaining surplus liquidity at all times. This stood at between EUR 45 and 58 billion over the fully loaded coverage ratio for net cash outflows. Levels of liquid assets increased faster than cash outflows. This phenomenon reflects essentially the variation in very short-term wholesale funding which is immediately placed in very liquid assets according to the sterilisation principle explained in the paragraph Sources of Wholesale Funding, to immunise the LCR from the volatility intrinsic to this type of funding.

Net Stable Funding Ratio NSFR

Regulation (EU) No. 2019/876 introduced a second regulatory ratio relating to liquidity risk, the Net Stable Funding Ratio NSFR, which will be the subject of a 100% minimum requirement from 28 June 2021. This ratio aims to ensure that all assets and medium- and long-term funding (with original maturity over one year) are well covered by funding sources which are also medium- and long-term.

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.