2018 REGISTRATION DOCUMENT AND ANNUAL FINANCIAL REPORT

2018 Registration document and annual fi nancial report - BNP PARIBAS308

5 RISKS AND CAPITAL ADEQUACY PILLAR 3

Capital management and capital adequacy

➤ TABLE 12: TRANSITION FROM CONSOLIDATED EQUITY TO COMMON EQUITY TIER 1 (CET1) CAPITAL [Audited]

In millions of euros

31 December 2018 1 January 2018

Phased- in Transitional

arrangements(*) Phased- in Transitional

arrangements(*)

Consolidated equity 105,619 - 104,403 -

Undated Super Subordinated Notes ineligible in CET1 (8,240) - (8,182) -

Proposed distribution of dividends (3,768) - (3,769) -

Ineligible minority interests (2,362) - (2,180) 482

Changes in the fair value of hedging instruments recognised directly in equity (825) - (1,140) -

Changes in the value of fi nancial assets and reclassifi ed loans and receivables recognised directly in equity - - (223) (223)

Additional value adjustments linked to prudent valuation requirements (892) - (715)

Goodwill and other intangible assets (12,162) - (12,817)

Net deferred tax assets arising from tax loss carry-forwards (527) 98 (529) 309

Negative amounts resulting from the calculation of expected losses (242) - (247) 9

Other prudential adjustments (372) - (133) 33

COMMON EQUITY TIER 1 (CET1) CAPITAL 76,230 98 74,467 610

(*) Amounts subject to pre-regulation treatment or prescribed residual amount of Regulation (EU) No. 575/2013.

Additional Tier 1 capital

Additional Tier 1 capital is mainly composed of subordinated debt instruments with the following characteristics:

■ they are perpetual and include no redemption incentive;

■ they are not held by the bank, its subsidiaries or any company in which the Group holds 20% or more of the capital;

■ they have a capacity to absorb losses;

■ they may include a buy back option, fi ve years after the issue date at the earliest, exercisable at the issuer s discretion(1);

■ remuneration arises from distributable elements that may be cancelled, with no requirements for the bank.

This category is also composed of non-eligible minority reserves in common equity within their limit of eligibility.

Authorisations to redeem additional Tier 1 own capital instruments are deducted from this category.

Tier 2 capital

Tier 2 capital is comprised of subordinated debt with no buy back incentive, as well as non-eligible minority reserves in Tier 1 capital within their limit of eligibility. A prudential discount is applied to the subordinated debt with less than fi ve years of residual maturity.

Prudential deductions from Tier 2 capital primarily concern:

■ Tier 2 capital components in signifi cant fi nancial entities;

■ Tier 2 own capital instruments buy back authorisations.

Transitional arrangements

Under CRR, the calculation methods introduced by fully loaded Basel 3 can be implemented gradually until 2022. European Central Bank Regulation 2016/445 of 14 March 2016 and the ACPR s instructions for the calculation of the prudential ratios , updated annually, lay down the percentages to be applied to fi lters and prudential deductions. The main items subject to these transitional arrangements are subordinated debt, restatements of minority interest reserves, deferred tax, unrealised gains on securities classifi ed at fair value through equity and investment holdings in Tier 2 instruments of other fi nancial sector entities.

Subordinated debt issued prior to 31 December 2012, which is non- eligible under full Basel 3 but eligible under prior regulations, can be recognised degressively as Tier 1 or Tier 2 capital, depending on its previous eligibility (grandfathered debt).

(1) Subject to authorisation by the supervisor.