2018 Registration document and annual fi nancial report - BNP PARIBAS312
5 RISKS AND CAPITAL ADEQUACY PILLAR 3
5
Capital management and capital adequacy
The Group s total risk-weighted assets amounted to EUR 647.0 billion at 31 December 2018 compared with EUR 634.7 billion at 1 January 2018. At 31 December 2018, risk- weighted assets calculated using the internal model represented 54% of the Group s risk- weighted assets.
The breakdown of risk-weighted assets by risk type is presented in the various appropriate sections.
Amounts below the thresholds for prudential capital deduction are assets weighted at 250% pursuant to article 48 of Regulation (EU) No. 575/2013. These include:
■ credit or fi nancial institutions consolidated under the equity method, except for insurance entities consolidated under the equity method in the prudential scope, which are weighted using the simple weighting method;
■ signifi cant fi nancial interests in credit or fi nancial institutions in which the Group holds a stake of more than 10%;
■ deferred tax assets that rely on future profi tability and arise from temporary differences.
Settlement risk is defi ned in article 378 of Regulation (EU) N o. 575/2013 as the risk of loss of value related to a delay in the settlement of securities transactions. As at 31 December 2018, the risk-weighted assets with respect to this risk are insignifi cant for the Group at EUR 12 million.
RISK-WEIGHTED ASSETS MOVEMENTS IN 2018 The change in risk-weighted assets can be broken down into the following effects:
■ asset size effect: impact stemming from the variation in exposures (EAD);
■ asset quality effect: impact stemming from the change in risk parameters (Probability of Default, Loss Given Default for the internal r atings b ased approach, and risk weighting for the standardised approach, etc.);
■ model update effect: impact stemming from changes in the use of internal models (introduction of a new model, deployment on a new exposure scope, annual recalibration or review of risk parameters, application of add-ons, etc.);
■ methodology and policy effect: impact stemming from changes in methodology and the establishment of new regulatory requirements having an impact on the calculation of risk-weighted assets;
■ acquisition and disposal effect: impact stemming from changes in the scope of consolidation;
■ currency effect: impact stemming from fl uctuations in foreign exchange rates on exposures.
The main explanations for the changes in 2018 can be found hereunder and details are provided in the appropriate sections.
➤ TABLE 17: RISK-WEIGHTED ASSETS MOVEMENTS BY KEY DRIVER
RWAs In millions of euros
1 January 2018
Key driver
Total Variation
31 December 2018Asset size
Asset quality
Model updates
Methodology and policy
Acquisitions and disposals Currency Other
Credit risk 504,298 25,489 (30,056) 3,484 2,278 (2,475) 977 (144) (446) 503,851 Counterparty credit risk 26,736 262 (731) (66) 375 11 (14) 71 (92) 26,634
Settlement risk 1 - - - - - - 11 11 12 Banking book securitisation positions 3,378 565 535 2,560 - 5 63 (64) 3,663 7,040
Market risk 16,666 1,415 1 1,168 - - - 698 3,282 19,948
Operational risk 66,515 199 211 6,341 - (256) - (62) 6,432 72,947
Amounts below the thresholds for deduction (subject to 250% risk weight) 17,106 (1,076) 0 - - 520 0 19 (537) 16,569
TOTAL 634,699 26,855 (30,041) 13,486 2,653 (2,196) 1,026 518 12,301 647,001
Below are the main reasons behind the EUR 12 billion increase in risk- weighted assets in 2018:
■ an increase related to business activity of EUR 27 billion characterised by the sharp rise in credit risk (+EUR 25 billion);
■ an improvement in asset-quality of -EUR 30 billion primarily from credit risk, with improvement in risk parameters and the implementation of three securitisation programmes;
■ an increase of EUR 13 billion related to the updating of the models, including EUR 6 billion from the effect of raising the risk-weighted assets related to the operational risk to the standardised approach level;
