CFM Indosuez Wealth Management Annual Report 2022 136 Transition LIBOR GBP, CHF and JPY Following the actions taken in 2021 to renegotiate transactions indexed on indices that were no longer published or ceased to be representative on 31 December 2021, the Group finalised the operational migration of these contracts in the first half of 2022. In the second half, the Group focused its efforts on renegotiating the few remaining transactions using synthetic LIBOR. USD LIBOR transition: At Crédit Agricole Group level, work in H2 2022 focused largely on preparing for the transition from USD LIBOR. The identification of contracts and the definition of the strategy for their migration have been finalised: • Loans, credit lines and associated hedging instruments will be switched to an alternative index as a matter of priority through bilateral renegotiation; • It is anticipated that the majority of non-cleared derivatives covered by the ISDA protocol will be transitioned by activating the fallback clause on the disappearance of USD LIBOR, and customers who are not members of the protocol have been contacted with a view to initiating bilateral renegotiation. The clearing houses have confirmed that cleared derivatives will be transitioned in H1 2023; • Current accounts and other similar products will be migrated by updating their general terms and conditions; • For other asset classes, contracts will be migrated proactively or by activating the fallback clause. This transition will primarily affect the CACIB investment bank, the Group entity with the greatest exposure to USD LIBOR, and for which the transition of contract stocks has already begun. The operational migration of contracts is based on all the processes and tools previously developed for the transition of contracts indexed to IBOR rates, whose publication or non-representativeness will cease at the end of 2021. On 23 November, the UK's Financial Conduct Authority (FCA) launched a consultation aimed at proposing the implementation of a synthetic USD LIBOR for one-, three- and six-month tenors until the end of September 2024, bearing in mind that the US authorities have already approved the designation of statutory USD LIBOR replacement rates for contracts governed by US law. Transition of other indices (ICE SWAP RATE USD, MIFOR, SOR, THBFIX, CDOR, WIBOR): Excluding WIBOR, the transitions relate almost exclusively to investment banking, which has finalised the identification of clients and transactions. The inventory to be transitioned is very marginal compared with USD LIBOR and mainly concerns cleared derivatives. In the last quarter of 2022, the Polish securities regulator KNF published its roadmap for replacing the two benchmark indices WIBOR and WIBID with the WIRON index and a first version of its recommendations on OIS transactions and issuance. The main Crédit Agricole Group entities using WIBOR are CA Poland (retail banking) and CAL&F through CFM Indosuez Wealth EFL (leasing). Managing the risks associated with rate reform: The risks associated with the reform of interbank rates are essentially limited to USD LIBOR for the period up to June 2023. In addition to preparing and implementing the replacement of benchmark indices, the Group's work also focuses on managing and controlling the risks inherent in the transition from one benchmark to another, including financial, operational, legal and compliance risks, particularly those relating to customer protection (conduct risk). In order to ensure that accounting hedging relationships affected by this benchmark reform can be maintained despite uncertainties about the timing and methods of the transition from the current to the new interest rate indices, the IASB issued amendments to IAS 39, IFRS 9 and IFRS 7 in September 2019 which were adopted by the European Union on 15 January 2020. The Group applies these amendments as long as the uncertainties about the future of the indices will have an impact on the amounts and timing of the interest flows and therefore considers that all of its hedging contracts on the relevant indices can benefit from these amendments. Further amendments, published by the IASB in August 2020, supplement those published in 2019 and focus on the accounting consequences of replacing the old benchmark interest rates with other benchmarks following the reforms. These changes, known as "Phase 2", mainly concern changes in contractual cash flows. They allow entities not to derecognise or adjust the book value of financial instruments to reflect the changes required by the reform, but rather to update the effective interest rate to reflect the change in the alternative benchmark rate. With regard to hedge accounting, entities will not have to de-designate their hedging relationships when they make the changes required by the reform and subject to economic equivalence. On 31 December 2022, the breakdown by significant benchmark index of instruments based on the old benchmark rates and due to switch to the new rates before their maturity is as follows: Other LIBOR: (in millions of euros) LIBOR USD GBP, JPY and CHF Other indices Total financial assets excluding derivatives Total financial liabilities excluding derivatives Total notional 25 derivatives Deferred outstandings are those with a maturity date after the date on which the benchmark index ceases to be representative or is no longer representative. For USD LIBOR, for example, 30/06/2023 corresponds to the date on which the 1-month, 3-month, 6-month and 12-month tenors disappear or are no longer representative. For non-derivative financial instruments, the exposures correspond to the nominal value of the securities and the outstanding principal of the amortisable instruments.
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