2012 Registration document and annual financial report - BNP Paribas

RISKS AND CAPITAL ADEQUACYCredit risk5In millions of eurosUp to 90 daysBetween 90days and 180days31 December 2011Maturities of unimpaired past-due loans (*)Between 180days and1 yearMore than1 year TotalCentral governments and central banks 53 14 2 3 72Corporates 5,665 307 20 6 5,998Institutions 253 0 253Retail 6,400 182 2 4 6,588TOTAL STANDARDISED APPROACH 12,371 503 24 13 12,911Central governments and central banks 208 163 3 13 387Corporates 1,552 0 87 17 1,656Institutions 133 0 133Retail 2,780 36 5 1 2,822TOTAL IRB APPROACH 4,673 199 95 31 4,998TOTAL PRUDENTIAL SCOPE 17,044 702 119 44 17,909(*) Based on FINREP, gross exposure (balance sheet) before collateral or other security.CREDIT RISK MITIGATION TECHNIQUES5Credit risk mitigants (CRM) are taken into account according to theBasel 2 rules. In particular, their effect is assessed under conditionscharacteristic of an economic downturn. The CRM fall into two maincategories.Guarantees on the one hand, and collateral on the other hand.■ A guarantee (surety) is the commitment by a third party to replace theprimary obligor in the event of default. By extension, credit insuranceand credit derivatives (purchased protection) fall into this category;■ Collateral pledged to the Bank are used to secure timely performanceof a borrower’s financial obligations.For the scope under the IRB Approach, guarantees and collaterals aretaken into account, provided they are eligible, by decreasing the LossGiven Default (LGD) parameter that applies to the transactions of thebanking book.For the scope under the standardised approach, guarantees are takeninto account, provided they are eligible, by applying the more favourablerisk weight of the guarantor to a portion of the secured exposure adjustedfor currency and maturity mismatches. Collateral is taken into accountas a decrease in the exposure, after adjustment for any currency andmaturity mismatches.Guarantors are subject to the same rigorous credit risk assessmentprocess as primary obligors.The assessment of credit risk mitigating effect follows a methodology thatis approved for each activity and is used throughout the Group. In theCIB division, risk mitigation effects take account of possible correlationbetween the guarantor and the borrower (for example, whether theybelong to the same industry sector). Credit committees must approvethe mitigation effects attributed to each loan at inception and at eachsubsequent annual review.Collateral is divided into two categories: financial collateral and othercollateral:■ financial collateral consists of cash amounts (including gold), equities(listed or unlisted) and bonds;■ other collateral can take the form of real estate mortgage, pledge onvessel or aircraft, pledge on stock, assignment of contracts or anyother right with respect to an asset of the obligor.To be eligible, collaterals must fulfil the following conditions:■ the value of the collateral must not be highly correlated with the riskon the obligor (in particular, shares of the obligor are not eligible);■ the pledge must be documented;■ the Bank must be able to assess the value of the collateral securityunder economic downturn conditions;■ the Bank must have reasonable comfort in the potential appropriationand realisation of the asset concerned.2012 Registration document and annual financial report - BNP PARIBAS 267