2018 Registration document and annual fi nancial report - BNP PARIBAS418
5 RISKS AND CAPITAL ADEQUACY PILLAR 3
5
Liquidity risk
To meet the TLAC requirement of 22% in 2022 and to prepare for future MREL requirements, in 2019 the Group plans to issue EUR 14 billion of non-preferred senior debt , subject to market conditions. The Group had completed half of its issue programme as at 31 January 2019.
A s a reminder, the main characteristics of these debt instruments are:
■ issuance under EMTN and US MTN programmes;
■ non preferred senior notes (pursuant to article L.613-30-3-I-4 of the French Monetary and Financial Code);
■ non-structured debt(1);
■ initial maturity of more than one year;
■ subject to conversion or depreciation before senior preferred debt but after subordinated debt;
■ documentation mandatorily stating that this debt belongs to the new statutory category.
MLT secured wholesale funding [Audited]
MLT secured wholesale funding is measured by separating out assets representing securities and loans. Funding obtained from central banks is not included in the table below.
(1) Decree No. 2018-710 of 3 August 2018 specifi es the conditions in which a security, a receivable, an instrument or a right is considered as non-structured under 613-30-3 I-4° of the French Monetary and Financial Code.
➤ TABLE 88 : MLT SECURED WHOLESALE FUNDING [Audited]
In billions of euros
31 December 2018 31 December 2017
Collateral used(*) Funding raised(**) Collateral used(*) Funding raised(**)
Loans and receivables 35.4 28.9 35.6 28.2
Securities 0.9 0.8 1.5 1.3
TOTAL 36.3 29.7 37.1 29.6
(*) Amounts gross of haircuts. (**) Amounts net of haircuts.
MLT secured wholesale funding (outside of monetary policy) represents 18.7% of total MLT wholesale funding in 2018 (19.7% in 2017). The Bank carefully manages its proportion of secured funding and the associated overcollateralisation in order to protect creditors holding unsecured debt.
Medium- to long-term liquidity position [Audited]
The medium-to long-term liquidity positions are measured regularly at Group level by entity and by currency to evaluate the medium-to long- term resources and uses. To this end, each balance sheet item is given a maturity in an economic approach using models and conventions offered by the ALM Treasury and reviewed by the RISK Function, or a regulatory approach by applying standardised weightings of the Net Stable Funding Ratio as anticipated for its application in Europe. For example, despite their immediate availability, the current accounts of retail customers and those linked with corporates cash management activities have always remained highly stable, even through the most severe fi nancial crises, thus constituting stable medium- to long-term funding sources in both an economic and a regulatory approach.
Stress tests and liquidity reserve [Audited]
Liquidity stress tests are performed regularly on various maturities (one day to twelve months) based on market factors and/or factors specifi c to the Group and using different scenarios: idiosyncratic (i.e. specifi c to BNP Paribas), systemic crisis (affecting fi nancial institutions), and combined crisis scenarios.
For each crisis scenario considered, borrowings and liabilities are expected to only partially renew, while loan amortisations are expected to be replaced by new loans to protect the commercial franchise, off- balance sheet fi nancing commitments are expected to be used, and market assets are expected to lose their market liquidity. Commitment renewal and utilisation are differentiated in intensity and in time, based on client type (individuals, small and medium enterprises, corporates, fi nancial institutions, etc.) and/or the type of underlying for secured borrowings and loans (repos/reverse repos). Stress scenarios also cover calls for additional collateral (e.g. increased margin calls for collateralised derivatives, impact of rating trigger clauses).
The liquidity reserve consists of Group assets held by ALM Treasury and the capital market businesses. The liquidity reserve comprises:
■ deposits with central banks;
■ available assets that can be immediately sold on the market or through repurchase agreements (bonds or shares);
■ available securities and receivables that can be refi nanced with central banks (e.g. through securitisation, transforming less liquid assets into liquid or available assets) (see section 5.5 Proprietary Securitisation (originator)).
