2018 Registration document and annual fi nancial report - BNP PARIBAS 193
4CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018
4
Notes to the fi nancial statements
Macro-economic scenarios The three macroeconomic scenarios correspond to:
■ a baseline scenario which describes the most likely path of the economy over the projection horizon. This scenario is updated on a quarterly basis. It is designed by Group Economic Research in collaboration with various experts within the Group. Projections are provided for key markets of the Group, through main macro-economic variables (GDP and its components, unemployment rate, consumer prices, interest rates, foreign exchange rates, oil prices, real estate prices ) which are drivers for risk parameter models used downstream in the credit stress testing process;
■ an adverse scenario which describes the impact of the materialisation of some of the risks weighing on the baseline scenario, resulting in a much less favourable economic path. The starting point is a shock on GDP. This shock on GDP is applied with variable magnitudes,
but simultaneously among economies when the crisis considered is a global contemporaneous crisis. These assumptions are broadly consistent with those proposed by the regulators. Other variables (unemployment, infl ation, interest rate) are deducted on the basis of econometric relationships and expert judgment ;
■ a favourable scenario which refl ects the impact of the materialisation of some of the upside risks for the economy, resulting in a much more favourable economic path. To achieve an unbiased estimation of provisions, the favourable scenario is designed in such a way that the probability of the shock on GDP growth (on average over the cycle) is equal to the probability of the corresponding shock in the adverse scenario. The magnitude of favourable GDP shocks generally corresponds to 80%-95% of the magnitude of adverse GDP shocks. Other variables (unemployment, infl ation, interest rate) are deducted in the same way as in the adverse scenario.
➤ COST OF CREDIT RISK FOR THE PERIOD
In millions of euros Year to 31 Dec. 2018
IFRS 9 & IFRS 15 Year to 31 Dec. 2017
IAS 39
Net allowances to impairment (2,490) (2,852)
Recoveries on loans and receivables previously written off 483 537
Losses on irrecoverable loans (757) (592)
TOTAL COST OF RISK FOR THE PERIOD (2,764) (2,907)
➤ COST OF RISK FOR THE PERIOD BY ACCOUNTING CATEGORIES AND ASSET TYPE
In millions of euros Year to 31 Dec. 2018
IFRS 9 & IFRS 15 Year to 31 Dec. 2017
IAS 39
Cash and balances at central banks (5) -
Financial instruments at fair value through profi t or loss (32) 13
Financial assets at fair value through equity(1) (12) (101)
Financial assets at amortised cost (2,690) (2,792)
Loans and receivables(2) (2,648) (2,852)
Debt securities(3) (42) 60
Other assets (5) (9)
Financing and guarantee commitments and other items (20) (18)
TOTAL COST OF RISK FOR THE PERIOD (2,764) (2,907)
Cost of risk on unimpaired assets and commitments 195 182
of which stage 1 (155)
of which stage 2 350
Cost of risk on impaired assets and commitments stage 3 (2,959) (3,089)
(1) 2017 fi gures represent the cost of risk related to fi xed-income available-for-sale fi nancial assets. (2) 2017 fi gures represent the cost of risk related to loans and receivables to credit institutions and customers. (3) 2017 fi gures represent the cost of risk related to securities classifi ed in loans and receivables and to held-to-maturity fi nancial assets.
