Q U I N T E T P R I V A T E B A N K Pillar Ill: Report 2019 Quintet Private Bank (Europe) S.A. – Pillar 3 – 2019 Contents Glossary ................................................................................................................................................................. 5 Note to readers ...................................................................................................................................................... 6 Introduction ........................................................................................................................................................... 7 1. List of Subsidiaries & Associates ........................................................................................................... 9 2. Corporate governance & decision structure ......................................................................................... 9 2.1 Corporate Culture ............................................................................................................................ 9 2.1.1 Board & Executive Committees: structure and key governance principles................................... 9 Risk Management approach at Quintet ............................................................................................................... 12 3. Five lines of defence ........................................................................................................................... 12 4. Risk Control function .......................................................................................................................... 12 5. Risk Committees ................................................................................................................................. 14 5.1.1 Board Risk Committee ............................................................................................................... 14 5.1.2 Sub Risk Committees .................................................................................................................. 14 Own funds, capital adequacy & group solvency ................................................................................................... 16 6. Regulatory capital adequacy ............................................................................................................... 16 6.1 Own funds instruments .................................................................................................................. 16 6.2 Own funds figures .......................................................................................................................... 16 6.3 Capital requirements ...................................................................................................................... 16 6.4 Leverage ratio ................................................................................................................................. 17 6.5 Countercyclical buffer .................................................................................................................... 17 Internal own funds adequacy evaluation – Pillar II .............................................................................................. 17 Credit risk ............................................................................................................................................................. 18 7. Credit risk management. .................................................................................................................... 18 7.1 Business model and credit risk profile ............................................................................................ 18 7.2 Structure and organisation of credit risk management and control function. ................................ 18 8. Credit Risk Exposures .......................................................................................................................... 20 8.1 Methodology .................................................................................................................................. 20 8.2 Credit Risk Exposures Data ............................................................................................................. 22 9. Credit counterparty risk ...................................................................................................................... 25 9.1 Credit counterparty risk governance, policies….............................................................................. 25 9.2 Wrong-way risk .............................................................................................................................. 26 9.3 Credit counterparty risk exposures ................................................................................................ 26 2 Quintet Private Bank (Europe) S.A. – Pillar 3 – 2019 10. Defaulted exposures ........................................................................................................................... 27 11. Credit risk mitigation techniques ........................................................................................................ 31 11.1 Netting policies ............................................................................................................................... 31 11.2 Credit Risk Mitigation Data ............................................................................................................. 35 Market risk (trading risk) ...................................................................................................................................... 37 12. Strategies related to market risks ....................................................................................................... 37 12.1 Treasury.......................................................................................................................................... 37 12.2 Other activities inducing trading risk .............................................................................................. 38 13. Market risk management processes ................................................................................................... 39 14. Market risk governance ...................................................................................................................... 39 14.1 Lines of defence ............................................................................................................................. 39 14.2 Ownership of definitions and methodologies................................................................................. 40 Operational risk.................................................................................................................................................... 40 15. Governance of operational risk management .................................................................................... 40 15.1 Entities in charge of Operational Risk Management....................................................................... 40 15.1.1 Local Operational Risk Managers (LORMs)................................................................................. 41 15.1.2 Central Operational Risk Management (CORM) ......................................................................... 41 15.1.3 Group Operational Risk Control (GORC) ..................................................................................... 41 15.1.4 Group Products and Services Approval Committee ................................................................... 42 15.2 Operational risk identification ............................................................................................................. 42 15.2.4 Operational Risk Mitigation Techniques ..................................................................................... 42 16. Capital Requirements for Operational Risk ......................................................................................... 44 ALM risks .............................................................................................................................................................. 45 17. ALM strategies .................................................................................................................................... 45 17.1 Definition of ALM risks ................................................................................................................... 45 17.2 ALM strategies ................................................................................................................................ 45 18. ALM risks measurement ..................................................................................................................... 47 18.1 Interest rate risk ............................................................................................................................. 47 18.2 Foreign Exchange Risk .................................................................................................................... 50 18.3 Equity Risk ...................................................................................................................................... 50 18.4 Global ALM Risk .............................................................................................................................. 50 19. ALM Governance ................................................................................................................................ 50 Liquidity risk ........................................................................................................................................................