MARKET RISK Market risk reflects the risk of losses in the value of financial instruments resulting from changes in market parameters such as exchange rates, interest rates, securities prices, derivatives and other assets. The system for supervising client transactions and proprietary trading is based on first-level control of market operators and the risk department (Risk and Permanent Control Department) of CFM Indosuez Wealth. In this context, this department's main tasks are: • Daily monitoring of compliance with the limits granted to the bank's clients; • Daily monitoring of compliance with the limits set by the Group on own-account transactions (Value-At-Risk, Sensitivities); • Daily monitoring of counterparty risks on market transactions; • Monitoring of atypical or unauthorised transactions; • Organising a monthly market committee meeting at which risk monitoring metrics are presented. Exposure During the 2023 financial year, few limits were exceeded and these were quickly rectified. In addition, the level of market RWAs is lower than in 2022, standing at €1,5m at 31/12/2023, with an alert threshold of €45m. Lastly, the HQLA portfolio amounted to €31m, compared with €23m at 31/12/2022. LIQUIDITY AND FUNDING RISK Liquidity and interest rate risks were monitored and managed in particular by the Treasury Committees held on 7 March, 3 May, 13 September and 14 December 2023 and the ALM Committees held on 27 March, 28 June, 21 September and 20 December, in accordance with Group guidelines and as described in the annual internal control report and its first appendix. There are no major changes to be noted for the 2023 financial year in their monitoring methodology. In addition, ratios and thresholds have been respected in a context of rising interest rates. Details of liquidity and funding risk exposure are provided in Note 3.4 to the consolidated financial statements. Credit risk management mechanisms Guarantees received and collateral Collateral is created by pledging assets held in the Bank's books (bonds, shares, other securities, deposits) that meet certain specific conditions (approved, liquid, continuously valued, pledged in favour of the Bank, rating, etc.), by taking out bank guarantees, life insurance policies assigned or delegated in favour of the Bank (provided that the underlying assets are eligible for pledge value). The collateral value of pledged financial instruments is defined according to the level of liquidity, volatility, issuer quality (S&P rating, Moody's), risk profile, etc. Equity securities subject to collateral value must also be listed on approved stock exchanges and indices (excluding the second market, open market or new market). In addition, rules governing the diversification and concentration of collateral must be complied with. Monitoring process The risk measurement and monitoring system is based on a minimum annual review of facilities granted, a quarterly sensitive business committee meeting and daily monitoring of compliance with limits. This monitoring of counterparty risk (compliance with limits, monitoring of collateral, etc.) is carried out at a second level by the Credit Risk Manager, who checks it and reports to General Management. Exposure The level of provisioning for credit risk remains limited and well covered due to the nature of the investments, the type and rate of coverage of the guarantees which allow for recovery through the possible use of collateral. As a result, the amount provisioned at 31 December 2023 was €7.15 m, compared to €6m in 2022, €6.4m at the end of 2021 and €8.6m in 2020. Balance sheet outstandings on CDL loans, although rising slightly, remain under control at €23.7m in 2023, compared with €17.2m in 2022, €10.4m in 2021 and €12.7m in 2020, representing less than 1% of balance sheet outstandings of €3.2bn, compared with €3.8bn in 2022, €3.7bn in 2021 and €3.3bn in 2020. As most of our exposures are backed by collateral, capital requirements are limited and the riskweighted assets allocated to credit risk are lower than the risk appetite set for the bank’s activity. CFM Indosuez Wealth Management 46
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