2012 Registration document and annual financial report - BNP Paribas

5RISKSAND CAPITAL ADEQUACYCredit riskMost of the mortgage exposures concern the French Retail Bankingbusiness, Belgian Retail Banking, Luxembourg Retail Banking andBNP Paribas Personal Finance. Mortgages are issued according to strictand well-defined procedures. The low average Loss Given Default levelreflects the guarantees put in place when the mortgages were granted.Most of the revolving exposures and other exposures relate to consumerloans subsidiaries that have a wide range of customers in terms of creditquality and a lower level of guarantees.For the scope under the IRB Approach, the Group believes that publishinga comparison between Expected Losses (EL) at one year and realised costof risk (as requested by article 384-4 i. of the Regulation) is not relevantfor the following reasons:■ risk parameters used to calculate Expected Loss (EL) at a one-yearhorizon according to Basel committee principles, displayed in theprevious tables, are statistical estimates through the cycle;■ realised losses, on the other hand, refer to the past period, thereforeat a particular point in time.CREDIT RISK: STANDARDISED APPROACHFor exposures in the standardised approach, BNP Paribas uses theexternal ratings assigned by Standard & Poor’s, Moody’s and FitchRatings. These ratings are mapped into equivalent credit quality levels asrequired by the regulation framework in accordance with the instructionsissued by the French banking supervisor (Autorité de Contrôle Prudentiel).➤ FIGURE 6: BREAKDOWN OF CORPORATE (*) EXPOSUREBY WEIGHTING IN THE STANDARDISED APPROACH% of exposure5When there is no directly applicable external rating, the issuer’s seniorunsecured rating may, if available, be obtained from external databasesand used for risk-weighting purposes in some cases.At 31 December 2012 standardised approach exposure represents 32%of the BNP Paribas Group’s total gross exposures, compared with 30%at 31 December 2011. The main entities that used the standardisedapproach at 31 December 2012 are BNL, BancWest, BNP Paribas PersonalFinance (consumer finance outside Western Europe and all mortgagelending), BNP Paribas Leasing Solutions (BPLS), TEB and others emergingcountry subsidiaries, private banking entities, and Banque de la Postein Belgium.80%70%60%50%40%31 December 2012 31 December 201120%CORPORATE PORTFOLIO [A udited]The opposite chart shows a breakdown by credit rating of performingloans and commitments in the Corporate book (exposure classes:corporates, central governments and central banks, institutions) for allthe Group’s business lines, measured using the standardised approach.This exposure represented EUR 188 billion of the gross credit risk at31 December 2012 compared with EUR 197 billion at 31 December 2011.10%0%[0;10%] ]10;20%]]20;50%]]50;100%](*) The Corporate book shown in the chart above includes centralgovernments and central banks, institutions and corporates.> 100%2622012 Registration document and annual financial report - BNP PARIBAS