Société Générale / Risk report 2021 - Pillar 3 2020

CONTENTS 3 1 GROUP CONCISE RISK STATEMENT Financial strength profile 1.1 4 Credit risk and counterparty credit risk 1.2 5 Operational risk 1.3 7 Market risk 1.4 8 Liquidity risk 1.5 9 Structural risks 1.6 9 Significant operations in 2020 1.7 9 11 2 RISK FACTORS Types of risks 2.1 12 Risk factors 2.2 13 25 3 RISK MANAGEMENT ORGANISATION Suitability of risk management systems 3.1 26 Risk appetite 3.2 26 Risk appetite – General framework 3.3 30 Risk management organisation 3.4 32 37 4 INTERNAL CONTROL FRAMEWORK Internal control 4.1 38 Control of the production and publication of 4.2 financial management information 41 45 5 CAPITAL MANAGEMENT AND ADEQUACY Regulatory framework 5.1 46 Capital management 5.2 47 Scope of application – Prudential scope 5.3 47 Regulatory capital 5.4 51 Risk-weighted assets and capital requirements 5.5 54 TLAC and MREL ratios 5.6 56 Leverage ratio 5.7 57 Large exposures ratio 5.8 58 Financial conglomerate ratio 5.9 58 Additional quantitative information on own 5.10 funds and capital adequacy 59 75 6 CREDIT RISK Credit risk monitoring and surveillance system 6.1 76 Credit risk hedging 6.2 78 New definition of default 6.3 79 Impairment 6.4 80 Risk measurement and internal ratings 6.5 82 Quantitative information 6.6 91 Additional quantitative information on credit risk 6.7 112 139 7 COUNTERPARTY CREDIT RISK Limit setting and framework monitoring 7.1 140 Mitigation of counterparty credit risk on market 7.2 operations 141 Counterparty credit risk measures 7.3 142 Quantitative Information 7.4 144 155 8 SECURITISATION Securitisations and regulatory framework 8.1 156 Accounting methods 8.2 157 Structured entities’ specific case 8.3 158 Management of securitisation risks 8.4 158 Societe Generale’s securitisation activities 8.5 160 Prudential treatment of securitisation positions 8.6 167 171 9 MARKET RISK Organisation of market risk management 9.1 172 Market risk monitoring process 9.2 173 Market risk main measures 9.3 174 Risk-weighted assets and capital requirements 9.4 181 Financial instruments valuation 9.5 183 Additional quantitative information on market 9.6 risk 184 187 10 OPERATIONAL RISK Organisation of operational risk management 10.1 188 Operational risk monitoring process 10.2 190 Operational risk measurement 10.3 192 Risk-weighted assets and capital requirements 10.4 194 Operational risk insurance 10.5 195 197 11 STRUCTURAL INTEREST RATE AND EXCHANGE RATE RISKS Organisation of the management of structural 11.1 interest rate and exchange rate risks 198 Structural interest rate risk 11.2 199 Structural exchange rate risk 11.3 201 203 12 LIQUIDITY RISK Objectives and guiding principles 12.1 204 Operational implementation 12.2 204 Governance 12.3 205 Asset encumbrance 12.4 206 Liquidity reserve 12.5 209 Regulatory ratios 12.6 209 Balance sheet schedule 12.7 211 215 13 COMPLIANCE RISK, LITIGATION Compliance 13.1 216 Litigation 13.2 222 223 14 MODEL RISK Model risk monitoring 14.1 224 225 15 RISK RELATED TO INSURANCE ACTIVITIES Management of insurance risks 15.1 226 Insurance risk modelling 15.2 226 227 16 OTHER RISKS Equity risks 16.1 228 Residual value risk 16.2 230 Strategic risks 16.3 230 Environmental and social risks 16.4 230 Conduct risk 16.5 231 233 17 APPENDICES Pillar 3 cross-reference table 17.1 234 Index of the tables in the Risk Report 17.2 235 Mapping table of exposure classes 17.3 238 Glossary 17.4 239