Société Générale / Risk report 2021 - Pillar 3 2020

11 STRUCTURAL INTEREST RATE AND EXCHANGE RATE RISKS STRUCTURAL EXCHANGE RATE RISK | SOCIETE GENERALE GROUP | PILLAR 3 - 2021 201 STRUCTURAL EXCHANGE RATE RISK 11.3 Structural exchange rate risk, understood as resulting from all transactions that do not belong to the Trading Book, results from: exposures related to net investments abroad in foreign currencies, p i.e. in subsidiaries and branches. FX positions generated by an imperfect hedge are valued through other comprehensive income; net results related to activities made by entities in currencies that p are not their reporting currency. The Group’s policy is to make the CET1 ratio insensitive to fluctuations in exchange rates against the euro. As such: Group entities are asked to individually hedge the results related to p activities in currencies other than their reporting currency; the exposures related to net investments in foreign currencies and p the associated net results are partially hedged at central level. A position in each foreign currency generating RWA is intentionally maintained open by the Finance department at the Group CET1 ratio targeted level. Hedges are realised using cash lending and borrowing, forward and swap instruments in the subsidiaries’ currencies and accounted for as net investment hedges. For each currency, the difference between actual and target exposure is governed by limits validated by the Finance Committee and the Board of Directors (see Note 3.2.2 Hedging derivatives of Chapter 6 of the 2021 Universal Registration Document). TABLE 103: SENSITIVITY OF THE GROUP’S COMMON EQUITY TIER 1 RATIO TO A 10%CHANGE IN THE CURRENCY (IN BASIS POINTS) Impact of a 10% currency depreciation on the Common Equity Tier 1 ratio Impact of a 10% currency appreciation on the Common Equity Tier 1 ratio Currency 31.12.2020 31.12.2019 31.12.2020 31.12.2019 GNF (0.1) (0.1) 0.1 0.1 JPY 0.1 (0.2) (0.1) 0.2 KRW 0.2 (0.1) (0.2) 0.1 MAD 0.2 0.2 (0.2) (0.2) XPF 0.3 0.0 (0.3) (0.0) RUB 0.3 0.0 (0.3) 0.0 GBP 0.7 (0.1) (0.7) 0.1 XAF 0.7 0.4 (0.7) (0.4) USD 0.8 (0.2) (0.8) 0.2 Others 0.5 (0.9) (0.5) 0.9