2018 Registration document and annual fi nancial report - BNP PARIBAS 421

5RISKS AND CAPITAL ADEQUACY PILLAR 3

5

Liquidity risk

The Group s LCR stood at 117% on average monthly during 2018, which is a liquidity surplus of EUR 41 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 298 billion on average monthly in 2018, and mainly consisted of central bank deposits (63% of the buffer) and government and sovereign bonds (30%). 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 89 ) and the regulatory reserve. The liquid assets recognised by the prudential regulation must be immediately available to the Group.

Cash outfl ows under the thirty -day liquidity stress scenario amounted to EUR 256 billion on average during 2018, a large part of which corresponds to thirty -day deposit outfl ow assumptions of EUR 229 billion. Reciprocally, cash infl ows on loans under the thirty -day liquidity regulatory stress scenario amounted to EUR 56 billion.

Cash flows on financing transactions and collateralised loans representing repurchase agreements and securities exchanges, recorded a net outfl ow of EUR 3 billion on average in 2018, given the regulatory haircuts applied to collateral. Flows linked to derivative instruments and regulatory stress tests recorded a net outfl ow of EUR 14 billion after netting of cash outfl ows (EUR 27 billion) and infl ows (EUR 13 billion). Lastly, the drawdown assumptions on fi nancing commitments amounted to EUR 35 billion.

On a moving average over the last twelve monthly measurements, the Group s LCR has remained stable. Stocks of liquid assets are managed to cover variations in net cash outfl ows while maintaining surplus liquidity at all times. This stood at between EUR 40 and 43 billion over the fully loaded coverage ratio for net cash outfl ows. Levels of liquid assets varied symmetrically in line with cash outfl ows on non-operating deposits. This phenomenon refl ects 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.

The Group s regulatory intelligence includes monitoring of all anticipated developments with respect to liquidity and long-term funding, and, specifi cally, participation in discussions with the regulators, in particular work to review the corpus of CRD IV texts initiated by the European Commission, providing for the introduction of a one-year structural liquidity ratio (Net Stable Funding Ratio NSFR), the implementation being scheduled in 2021.

SCHEDULE OF THE BANK S PRUDENTIAL BALANCE SHEET [Audited] This schedule presents cash fl ows according to contractual payment dates within the prudential scope (in line with the rules defi ned for the liquidity ratio).

The securities in the trading book listed at fair value through profi t 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 fi nancial instruments listed at fair value through profi t 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 fi nal 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 fi nal maturity date.