On 4 May 1864, Napoleon III signed Societe Generale’s founding decree. Founded by a group of industrialists and financiers driven by the ideals of progress, the Bank’s mission has always been “to promote the development of trade and industry in France”.

Since its beginnings, Societe Generale has worked to modernise the economy, following the model of a diversified bank at the cutting edge of financial innovation. Its retail banking branch network grew rapidly throughout the French territory, increasing from 46 to 1,500 branches between 1870 and 1940. During the interwar period, the Bank became the leading French credit institution in terms of deposits.

At the same time, Societe Generale began to build its international reach by financing infrastructure essential to the economic development of a number of countries in Latin America, Europe and North Africa. This expansion was accompanied by the establishment of an International Retail Banking network. In 1871, the Bank opened its London branch. On the eve of World War I, Societe Generale had a presence in 14 countries, either directly or through one of its subsidiaries. This network was then expanded by opening branches in New York, Buenos Aires, Abidjan and Dakar, and by acquiring stakes in financial institutions in Central Europe.

Societe Generale was nationalised by law on 2 December 1945 and played an active role in financing the reconstruction of France. The Bank thrived during the prosperous post-war decades and contributed to the increased use of banking techniques by launching innovative products for businesses, including medium-term discountable credit and lease financing agreements, for which it held the position of market leader.

Societe Generale demonstrated its ability to adapt to a new environment by taking advantage of the banking reforms that followed the French Debré laws of 1966-1967. While continuing to support the businesses it partnered, the Group lost no time in focusing its business on individual clients. In this way, it supported the emergence of a consumer society by diversifying the credit and savings products it offered private households.

In June 1987, Societe Generale was privatised with a successful stock market launch and shares offered to Group staff. The Group developed a universal banking strategy, in particular through its Corporate and Investment Banking activities, to support the worldwide development of its customers. In France, it expanded its networks by founding Fimatex in 1995, which later became Boursorama, now France’s leading online bank, and by acquiring Crédit du Nord in 1997. Internationally, it established itself in Central and Eastern Europe through Komerční banka in the Czech Republic and BRD in Romania while consolidating its growth in Africa in Morocco, Côte d’Ivoire Senegal and Cameroon, among other countries. Building on the professionalism of its teams and the relationship of confidence developed with its clients, the Bank continues its process of transformation by adopting a sustainable growth strategy driven by its core values of team spirit, innovation, responsibility and commitment.

In January 2023, the Group announced the creation of its new retail bank in France, SG, following the merger of its two retail banking networks in France, Societe Generale and Crédit du Nord, in order to offer its customers greater proximity, responsiveness, expertise and responsibility.

Today, the Group has more than 117,000 members of staff⁽¹⁾ active in 66 countries. Firmly focused on the future by helping clients bring their projects to life, Societe Generale is committed to the two major revolutions of digital technology and environmental transition and social change to support its clients, have a positive impact on the world and embody the bank of the 21^st century. Drawing on nearly 160 years of expertise at the service of its clients and the sustainable development of economies, the Societe Generale Group defined its purpose as “Building together, with our clients, a better and sustainable future through responsible and innovative financial solutions”.

Societe Generale is one of the leading European financial services groups. Based on a diversified and integrated banking model, the Group combines financial strength and proven expertise in innovation with a strategy of sustainable growth. Committed to the positive transformations of the world’s societies and economies, Societe Generale and its teams seek to build, day after day, together with its clients, a better and sustainable future through responsible and innovative financial solutions.

Active in the real economy for over 150 years, anchored solidly in Europe and connected to the rest of the world, Societe Generale employs over 117,000 members of staff⁽¹⁾ in 66 countries and supports on a daily basis 25 million individual clients, businesses and institutional investors⁽²⁾ around the world by offering a wide range of advisory services and tailored financial solutions. The Group is built on three complementary core businesses:

Societe Generale follows a strategy of responsible growth, fully integrating its CSR engagements and commitments to all its stakeholders: clients, staff, investors, suppliers, regulators, supervisors and representatives from civil society. The Group seeks to respect the cultures and environment of all the countries where it operates.

The Group has an agile organisation based on 14 Business Units (business lines and regions) and 10 Service Units (support and control functions) to encourage innovation and synergies, and best meet the evolving requirements and behaviours of its clients. In a European banking sector undergoing radical industrial change, the Group enters a new phase of its development and transformation.

Additional information on the Group’s organisation and key figures is provided below and on pages 10 and following.

Societe Generale is included in the principal socially responsible investment indices: DJSI Europe, FTSE4Good (Global and Europe), Bloomberg Gender-Equality Index, Refinitiv Diversity and Inclusion Index, Euronext Vigeo (Europe and Eurozone), STOXX Global ESG Leaders indices and MSCI Low Carbon Leaders Index (World and Europe).

The Societe Generale Group has built a solid diversified banking model suited to the needs of its 25 million corporate, institutional and individual clients. It is structured around three complementary and diversified businesses, all benefiting from strong market positions:

In the Retail Banking businesses, the Group focuses on development in European markets selected for their growth potential (France, the Czech Republic and Romania) and Africa where it has an historic presence, refined understanding of the markets and top-tier positions. In International Financial Services, Societe Generale relies on franchises benefiting from leadership positions worldwide. As part of the Group’s prime focus on developing its mobility franchises, it announced ALD’s plan to acquire LeasePlan. In the Global Banking and Investor Solutions businesses, the Group provides high value-added solutions to its clients in the EMEA region, the US and Asia. Focused on Europe yet boasting a global network, the Societe Generale Group capitalises on leadership positions driven by cross-business synergies to create value for stakeholders. The Group leverages its diversified model to meet the needs of its corporate and professional clients, as well as its individual clients.

2022 marked a decisive stage for the Group, which was able to deliver very strong commercial performances in all its businesses amid a complex and uncertain economic and financial environment, staying on track to meet its 2025 targets for profitable and sustainable growth. This positive momentum was borne out by solid commercial and financial performances across the board, driven by a record result in Financing & Adivisory, Global Markets and ALD, strong growth in International Retail Banking, Financial Services, and in Private Banking and a solid resilience from French Retail Banking. These performances bear out the Group’s extensive efforts over several years to strengthen the inherent quality of its businesses, improve operational efficiency and manage risk. It successfully passed key milestones in a number of other strategic projects, in particular:

The Group also finalised in May 2022 the effective and orderly withdrawal from Russia following the disposal of Rosbank and its Russian insurance subsidiaries.

The Group continued to pursue its selective scarce resource allocation strategy and its focus on achieving the optimal region/offer/client mix, and confirmed its strong resolve to keep costs firmly under control. The adjustments it has made are designed to mark out high-margin growth businesses that enjoy strong commercial franchises and create value for the Group.

Organic growth will continue to be accelerated by unlocking internal synergies not only within each business but also between businesses. This will entail greater cooperation between Private Banking and the Retail Banking networks, cooperation along the entire Investor Services chain, cooperation between the Insurance business and the French and International Retail Banking networks, and cooperation between regions and Global Transaction Banking’s activities, among others.

One of the Group’s priorities is to push further ahead with its commercial development, focusing on quality of service, added value and innovation to ensure client satisfaction. Its goal is to become a trusted partner for its clients, making sound use of its digital capabilities to provide them with responsible and innovative financial solutions. To this end, the Group is pursuing various digital transformation and operational efficiency initiatives.

Fully aware of its role in the functioning of the economy, the Group has placed specific strategic importance on its environmental, social and governance commitments.

Environmental and social issues represent society’s greatest challenges this century – challenges that have been accentuated by geopolitical tensions and the pandemic.

Profound societal change is called for, involving substantial adjustments to how we produce and consume. This will inevitably give rise to a number of difficulties and constraints, but Société Générale also sees business opportunities in these transformations by contributing to the financing of the fair and inclusive environmental transition. According to the International Energy Agency, achieving NZE by 2030 will call for almost USD 4,000 billion in investments each year, an unprecedented amount for such a limited timeframe.

If it is to meet its stakeholders’ expectations and help its clients address these challenges, the Group needs to press on with its own transformation, making environmental and social issues a key factor in its decision-making processes and offering its clients financing and investment solutions adapted to their new needs. With this in mind, Societe Generale is training its teams on the transition challenges specific to each sector and developing a more holistic approach to how it analyses both financial and non-financial risk. The Group wants to do more than simply offer financial advice. It has put together teams with expert knowledge of the issues relevant to its major corporate clients’ value chains and established international cross-business working groups to identify emerging ESG standards and come up with ways to meet them. And of course, to ensure the transition is fair and inclusive, the financial system also needs to take care of disadvantaged populations, offering them solutions suited to their situation.

These Corporate Social Responsibility (CSR) challenges are central to Societe Generale’s strategy.

Committed to supporting its clients, the Bank has made CSR a core component of all of its businesses, viewing it as an opportunity to innovate and become more sustainable. In response to this new environment and the challenges it brings, and in keeping with the Group’s values and what its stakeholders expect from it – based on the findings of the materiality survey carried out in 2021 (see Chapter 5, page 336) – Societe Generale has reaffirmed its CSR ambition for 2025, placing the focus on four main priorities.

Of these, two form the framework for responsible banking:

The other two guide positive changes in connection with the Group’s activities:

The Group has upped its commitments to keep pace with its ongoing transformation: a EUR 300 billion contribution to sustainable finance by 2025, a 50% reduction in its CO₂ emissions by 2030 (compared with 2019 levels) and ESG training for all staff.

Through its geographic presence, the diversity of its businesses and its responsible engagement, Societe Generale also contributes towards the UN’s Sustainable Development Goals (SDGs) (for more information, see https://www.un.org/sustainabledevelopment/sustainable-development-goals/). This can be clearly seen in the four core themes of its CSR ambition:

The CSR ambition permeates all Group businesses:

Societe Generale continues to foster a group-wide culture of responsibility and to strengthen its internal control framework, especially its Compliance operations, to meet the banking industry’s highest standards. It has also completed the rollout of its Culture & Conduct programme, embedding rules of conduct and strong shared values throughout the entire organisation.

Last, the Group is determined to press ahead with its stringent and disciplined approach to capital allocation and risk management – maintaining credit portfolio quality, keeping up its efforts on operational risk control and compliance.

In line with its strategy of fully addressing its clients’ needs and taking into account the new, more demanding regulatory environment, the Group’s focus will remain on optimising its consumption of scarce capital and liquidity resources and maintaining a highly disciplined approach to costs and risk management.

Outlook

In 2022, the Board of Directors of Societe Generale decided to propose Slawomir Krupa as director to shareholders to replace Frédéric Oudéa at the General Meeting on 23 May 2023. Once elected, Slawomir Krupa will be appointed Chief Executive Officer by the Board of Directors.

The Group has set the following financial targets for 2023:

Looking further out, the Group is fully on track to achieving its strategic milestones and has set targets for profitable and sustainable growth out to 2025 with:

The Board of Directors decided its distribution policy which corresponds to an equivalent of EUR 2.25 per share⁽²⁾. A cash dividend of EUR 1.70 will be proposed at the General Meeting of Shareholders on 23 May 2023. The dividend will be detached on 30 May 2023 and paid out on 1 June 2023.

The Group is also planning to launch a share buyback programme for a total of arond EUR 440 million, i.e., equivalent to EUR 0.55 per share. The rollout of the programme is subject to the usual approval by the ECB.

In light of the strong financial performance in 2022 and an exceptional year, this distribution level fairly remunerates shareholders and further strengthens the Group CET1 ratio.

French Retail Banking

The French Retail Banking business has made sweeping changes to its model in response to rapidly evolving client behaviours and demand for ever greater convenience, expertise and customised products and services. The pace of this transformation has picked up since 2020, with two major strategic initiatives: the merger of Crédit du Nord and Societe Generale, and moves to ramp up growth at Boursorama. These initiatives are designed to cement the Group’s winning combination of a fully online banking model coupled with a network banking model offering both digital and human expertise – a combination that stands out in the French market.

The Group saw the Crédit du Nord-Societe Generale merger through to completion in 2022, with 1 January 2023 marking its legal entry into effect. The resulting new retail banking entity has been branded SG. The IT migration of all Crédit du Nord branches to Societe Generale’s system is scheduled for the first half of 2023, with branch mergers and back office changes due to take place progressively as of the second half of 2023 and through to 2025.

SG aims to become a leading banking partner for its 10 million clients within the French market and has set its sights on being among the Top 3 French banks for client satisfaction.

It has introduced a new relationship model, designed to improve the quality of service it provides to its individual, professional and corporate clients and establish SG as a leading operator in the French market for savings, insurance and first-rate solutions addressing corporates and professionals alike.

SG promises its clients convenience, responsiveness, expertise and responsibility. It will be:

From a financial perspective, the merger will unlock considerable cost synergies. The cost to income ratio of Franch Retail Banking is expected to range between 67% and 69% in 2025 and the return on normative equity (RONE) under Basel IV is targeted at around 10% in 2025.

French Retail Banking also plans to build on its existing growth drivers. Specifically, this means:

In Wealth Management, Private Banking is moving forward with its strategy of operating in open architecture, distributing savings solutions to clients throughout its network. By offering investment and asset management solutions through partnerships with external asset managers, Societe Generale gives its savers access to the best investment expertise in France and internationally, while at the same time responding to their growing demand for socially responsible investment. The Wealth & Investment Solutions business within Private Banking focuses primarily on structuring savings, asset management and investment solutions for the Group’s private banking and retail banking networks, as well as providing structured asset management solutions for its Global Markets clients.

Last, the Group continues to support the development of its online bank. Boursorama offers its clients a broad and diversified range of online banking services, an efficient model and an unbroken 15-year record as the lowest-cost bank on the market⁽¹⁾, resulting in excellent client satisfaction and recommendation scores.

Over 2022, Boursorama increased its lead on the French market, acquiring more than 1.4 million net new clients, bringing its total client base to over 4.7 million by the end of the year. It also finalised its partnership agreement with ING, resulting in around two-thirds of ING’s eligible clients transferring to Boursorama, bringing with them some EUR 9 billion in outstandings (half of which was in life-insurance savings).

The Group has confirmed its goal of onboarding an increasing number of clients at Boursorama and has set a target of more than 5.5 million customers by end-2023.

International Retail Banking and Financial Services

International Retail Banking and Financial Services is a profitable growth driver for the Group thanks to its leading positions in high-potential markets, its operational efficiency and digital transformation initiatives, and its ability to unlock synergies with other Group activities. These businesses have undergone a major transformation over the last few years to fully refocus the portfolio, introduce a more optimised model and improve the underlying risk profile. This last point has been illustrated by their orderly pull-out from Russia in response to the worsening conflict in Ukraine. As the conflict escalated, the Group decided to divest Rosbank and its Russian insurance subsidiaries – a transaction completed in May 2022.

International Retail Banking activities are mainly located in regions outside the eurozone. They benefit from positive long-term growth fundamentals and the current uptick in interest rates, despite the prevailing economic uncertainty in those regions due to high inflation. This uncertainty has not affected the Group’s plans for its international banking activities – it intends to press on with its strategy of consolidating leadership positions and pursuing responsible growth in Europe and Africa. Its capacity to meet client needs, coupled with its innovative, unique and efficient platforms, will serve it well in this undertaking:

As part of the Grow with Africa programme developed in partnership with a panel of international and local partners, Societe Generale has announced several sustainable growth initiatives to foster positive transformation across the continent. Accordingly, the Group is concentrating on providing multidimensional support to African SMEs, funding infrastructure, supporting the energy transition and developing innovative financing solutions.

Financial Services and Insurance enjoy competitive positions and strong profitability, in particular with ALD and Insurance, both of which benefit from robust growth potential. All Financial Services and Insurance businesses are continuing to roll out their programmes to innovate and transform their operational model:

Societe Generale also plans to continue moving forward with its strategy of unlocking synergies between the activities of the various businesses in this division and elsewhere within the Group, with Private Banking and the regional Corporate and Investment Banking platforms, by developing its commercial banking services such as trade finance, cash management, payment services and factoring, and by further developing its bancassurance model.

Global Banking and Investor Solutions

In 2022, Global Banking and Investor Solutions (GBIS) pushed further ahead with initiatives rolled out since 2021 with respect to its five strategic pillars - balancing its business mix, bringing down its profitability threshold, reducing its idiosyncratic risk profile, increasing its share of CSR-native businesses and expanding the reach of its digitalisation.

Global Banking and Investor Solutions stands on strong foundations: it has built up a solid and stable diversified client base, high value-added product franchises and and recognised sector expertise backed by a global network. GBIS serves the financing and investment requirements of large and diversified client base spanning corporates, financial institutions and public-sector entities. Having undergone considerable transformation in recent years – reducing its breakeven point, de-risking the Global Markets business and adjusting the balance between its businesses – GBIS is now focused on delivering value to all its stakeholders through sustainable and profitable growth.

Its growth strategy reflects where the opportunities for economic growth currently reside, i.e., increased financing needs for infrastructure and the energy transition, greater investment in private debt and the growing demand for savings solutions. At the same time, Global Banking and Investor Solutions is gradually and methodically recalibrating its businesses, particularly Global Markets and Financing and Advisory, making targeted capital allocations to growth initiatives for particular client segments, businesses and regions. In particular, the plans to form a joint venture in cash equities with AllianceBernstein, announced in November 2022, will bring further diversification to the Group’s investment banking activities and offer its large clients premier strategic expertise and insights.

The Group is therefore maintaining its unrelenting focus on:

RECENT DEVELOPMENTS AND MACROECONOMIC AND REGULATORY OUTLOOK

The uncertainty unleashed by the war in Ukraine continues to run rife and is fuelling supply chain disruptions in both goods and services, especially for energy and foodstuffs. In Europe, gas supply problems may continue even beyond 2023, with knock-on effects on electricity prices. A harsh winter and a decision by Russia to completely shut off the gas taps could make gas rationing a reality.

The coming quarters should see the remaining pandemic-related restrictions in China gradually lifted. Worldwide, the pandemic risk persists, however, necessitating investment in prevention and vaccines. But in emerging countries, this investment is likely to fall short of requirements, meaning that pandemic-related risks will continue to weigh on the global growth outlook.

Economic activity has slowed due to inflation and the resulting cost-of-living crisis, as well as economic policy tightening. Job markets and household savings are nonetheless holding up well in the more advanced economies, which should enable them to avoid slipping into deep recession. Technical recessions, on the other hand, are to be expected in both the US and Germany over 2023. We are likely to see a greater number of bankruptcy filings under the combined effects of the economic slowdown, tightening of financial conditions and higher debt levels.

Looking beyond 2023, rising interest rates will hamper the recovery. Although rates appear to have peaked, the lag effects of monetary tightening will continue to feed through to the economy. Financial conditions will also be affected by central banks continuing (the case of the Fed) or starting (the case of the ECB) to shrink their balance sheets.

Last, geopolitical divisions will remain a structural drag on global trade and capital flows.

In light of this, the Group’s baseline scenario is for global growth of 2.2% in 2023 after 3.1% in 2022. Looking forward beyond 2023, recovery will continue to be damped by a higher interest environment.

The 2022 regulatory landscape was marked by the specific measures taken in response to Russia’s invasion of Ukraine: successive waves of unprecedented sanctions, aid packages for refugees and companies affected by the war, and debate over how to reform hard-hit European energy markets.

In addition to these measures prompted by the prevailing economic conditions, progress was also made in 2022 on a number of structural regulatory projects designed to strengthen the prudential framework, support environmental and digital transitions, protect consumers and develop European capital markets:

Uncertainty prevails over the timetable for rolling out this reform in the main non-EU jurisdictions, which is not expected to coincide with the Basel timetable of 1 January 2025;

The EU also introduced requirements for banks to be more thorough in addressing their exposure to climate and sustainability risks and more transparent about disclosing ESG risks in their prudential publications. The ECB conducted climate stress tests in 2022 and the Commission now includes ESG risks when reviewing the prudential framework. Starting in 2023, credit institutions will have to publish detailed information on their exposure to climate risks. The European Parliament made the prudential treatment of significant GHG-emitting assets part of the CRD6/CRR3 proposal implementing the Basel Accords, pre-empting the conclusions of the European Banking Authority (EBA) on the issue, expected in 2023.

With other national and international initiatives fast multiplying, the question of how the EU’s legislation will interact with measures introduced outside its borders is more relevant than ever. The EU will want to reassert its role as pioneer in the field and avoid any distortion of competition with non-EU operators;

In the wake of its targeted consultation, the Commission is expected to soon announce proposals on open finance, which will feed into fundamental discussions surrounding payments and retail banking (such as on the European Payment Initiative and how to generalise instant payments faster). The PSD2 evaluation and the ECB’s proposal for a central bank digital currency – both slated for the first half of 2023 – will be key steps in this respect;

French Retail Banking (RBDF) offers a wide range of products and services suited to the needs of a diversified base of individual and professional clients, businesses, non-profit associations and local authorities. It leverages on synergies with the Group’s specialised businesses, in particular the Insurance, the Private Banking or the Corporate & Investment Banking businesses. Accordingly, French Retail Banking distributes insurance products of Sogecap and Sogessur, subsidiaries which are part of the International Retail Banking and Financial Services’ division.

Relying on the know-how of its teams and an efficient multichannel network, the pooling of best practices, and the optimisation and digitalisation of processes, Retail Banking France combines the strength of three complementary brands: Societe Generale (a leading French bank that has housed Private Banking since January 2022) and Crédit du Nord (a group of regional banks) which are pushing further ahead with a transformational project to merge their networks, and Boursorama Banque, a key online banking operator.

In 2022, average life insurance outstandings reached EUR 120 billion, compared with EUR 119 billion in 2021.

The networks continue to support the economy and support their clients with their financing projects. Average loan outstandings of the networks rose from EUR 238 billion in 2021 to EUR 247 billion in 2022. At the same time and in a context of an intense competition, deposit collection generated a loan-to-deposit ratio of 85.2% in 2022, down 1.1 points compared to 2021.

*  Average quarterly outstandings.

Societe Generale network

The Societe Generale network offers solutions tailored to the needs of its 6.7 million individual clients as well as almost 420,000 professional clients, non-profit associations and corporate clients, representing EUR 180 billion in outstanding deposits and EUR 159 billion in outstanding loans in 2022.

To achieve this, the network leverages three major strengths:

Societe Generale continued to expand its network and increase its service offering in 2022 in response to its clients’ requirements and with a view to enhancing customer satisfaction. These efforts focused notably on promoting the increased use of electronic signatures for professionals and in the short-term credit and MLT credit markets. Societe Generale broadened its commercial offering dedicated to TPEs and modified its lending services (on the application and decision for MLT loans), supported by training sessions and a change management programme.

Last, Societe Generale has made sustainable development the linchpin of its strategy by not only ensuring that its direct environmental impact is controlled through actions to reduce its waste and carbon footprint but by also developing an offer to support its clients in their own energy transition: in 2022, Societe Generale and Crédit du Nord launched a comprehensive support framework for companies, SMEs, associations and local authorities to enable them to develop a more sustainable model. They furnish new advisory and financing solutions in conjunction with top-name partners. Irrespective of their profile, the Bank also offers to measure clients’ greenhouse gas emissions, in partnership with Carbo.

Crédit du Nord network

The Crédit du Nord group consists of nine regional banks – Courtois, Kolb, Laydernier, Nuger, Rhône-Alpes, Société Marseillaise de Crédit, Tarneaud, Société de Banque Monaco and Crédit du Nord – and an investment services provider, the brokerage firm Gilbert Dupont.

Crédit du Nord entities are characterised by a large degree of autonomy in managing their activities, which is chiefly expressed by rapid decision-making and responsiveness to client demands.

The quality and strength of the results of the Crédit du Nord group have been recognised by the market and are confirmed by the long-term A- rating attributed by Fitch.

Crédit du Nord serves 1.6 million individual clients⁽¹⁾, 210,200 professional clients and non-profit associations and 46,400 corporate and institutional clients. In 2022, its average outstanding deposits totalled EUR 58 billion, compared with EUR 57 billion in 2021, while average loan outstandings stood at EUR 55 billion, compared with EUR 52 billion in 2021.

Merger of the France networks

In December 2020, Société Générale and Crédit du Nord expressed their intention to merge their two networks to create a new retail bank with the aim of serving 10 million clients and ranking among the Top 3 for customer satisfaction.

The plan focuses on four main strategic planks:

In 2022, several key milestones were achieved to create the new retail bank in France:

On 1 January 2023, Societe Generale Group carried out the legal merger of its two French Societe Generale and Crédit du Nord retail banking networks. SG will henceforth become the Group’s new retail bank in France.

Crédit du Nord’s IT system will initially be migrated in two stages to Societe Generale’s information system during the first quarter of 2023. Agency pooling will commence in the second half of 2023 and the initial phase will involve 150 batchings (30%). Some 80% of the link-ups will be performed by the end of 2024, with the remaining 20% finalised by the end of 2025.

Boursorama

Boursorama is a subsidiary of Societe Generale and a pioneer and leader in France for its three main businesses: online banking, brokerage and online financial information at boursorama.com, ranked No. 1 for economic and stock market news. An online bank accessible to all, without any revenue or financial wealth prerequisites, Boursorama’s promise is the same as it was when it was first created, i.e. simplify clients’ lives at the most competitive price and furnish the best service possible to boost their purchasing power.

At end-2022, Boursorama served nearly 4.7 million clients – a 41% increase in the space of a year alone. This rapid growth has been matched by an increase of more than EUR 15 billion in the bank’s outstandings over the period (over EUR 66 billion at end-December 2022, including EUR 16 billion in loans, EUR 13 billion in current accounts and EUR 37 billion in savings and share securities) which demonstrates the appeal of its fully online model based on client independence and a comprehensive range of 43 banking products and services, rounded out by 1,000 functionalities with automated processes.

The year 2022 was dominated by the i) a record client acquisition with 1.5 million new clients, on top of a substantial 20% drop in the client acquisition cost, ii) the successful integration of ING’s former clients (around 300,000 new clients and almost EUR 9 billion in outstandings, of which half covers life insurance savings, and iii) over and above its successful regular banking offer, it is committed to clients, providing a wide range of products and services, such as:

Boursorama was voted the least expensive bank for the 15^th consecutive year (source: Le Monde/Panorabanque 2022), best bank for students and young working adults (Selectra 2022) and France’s preferred bank for digital banking (source: Opinionway 2022). The online bank was ranked No. 1 on app stores, with a rating of 4.9/5 on iOS and 4.8/5 on GooglePlay. It boasts a Net Promoter Score of +35 for the sector (source: Bain and Company, January 2022).

Launched over 20 years ago, its online portal, www.boursorama.com, is consistently ranked the No. 1 website for financial and receives 50 million visits a month (Source ACPM – September 2022).

Boursorama generally attracts young clients – the average age is 35 – who are city dwellers, who work and who are financially stable. The average client outstanding is over EUR 15,000 (savings and loans). The acquisition of private banking clients continues to rise despite the rapid acceleration in growth. Boursorama has also pursued optimisation efforts and registered a decrease of almost 20% of IT costs per client and a 30% increase in the number of clients by employees.

Societe Generale Private Banking

Societe Generale Private Banking has an extensive foothold in Europe and offers global financial engineering and wealth management solutions, in addition to global expertise in structured products, hedge funds, mutual funds, private equity funds and real estate investment solutions. It also offers clients access to the capital markets.

Since January 2014 and in conjunction with the French Retail Banking core business, Societe Generale Private Banking has extensively modified its relationship banking model in France by extending its services to all individual customers with more than EUR 500,000 in their accounts. These customers reap the benefit of close-hand service provided by 80 regional franchises and the know-how of Private Banking’s expert teams.

Societe Generale Private Banking’s offering is available from three main centres: SGPB France, SGPB Europe (Luxembourg, Monaco and Switzerland) and Kleinwort Hambros (London, Jersey, Guernsey and Gibraltar). At the end of 2022, Private Banking held EUR 147 billion in assets under management.

Following the disposal of Lyxor at the end of 2021, the decision was made to house the following wealth management subsidiaries in Societe Generale Private Banking: SG 29 Haussmann⁽¹⁾ (France) et SGPWM⁽²⁾ (Luxembourg) and to also combine in its ranks Global Markets’ structured fund activity, in addition to a number of UCITS/bonds supervisory and selection teams. Societe Generale Private Banking took advantage of the occasion to create a fourth Wealth Investment Services centre of expertise, bringing together these management and structuring skills (Investment Management Services) with the Market Solutions teams, thereby becoming a genuine one-stop shop that houses unique expertise within the Group to design investment and open-architecture solutions.

Societe Generale Private Banking was singled out for eight prizes at the 2022 Global Private Banking Innovations Awards.

Kleinwort Hambros was awarded the Excellence in Employee Engagement prize at the 2022 Private Banker International Global Wealth Awards.

Definitions and details of methods used are provided on page 41 and following.

Information followed by an asterisk (*) is indicated as adjusted for changes in Group structure and at constant exchange rates.

The reconciliation of reported and underlying data is provided on page 42.

ANALYSIS OF THE CONSOLIDATED INCOME STATEMENT

Net banking income

Underlying net banking income grew strongly in 2022 at +9.3% (+10.2%*) vs. 2021, driven by historical highs in Financing & Advisory, Global Markets and ALD, sharp growth in Private Banking and International Retail Banking and a solid performance by French Retail Banking.

French Retail Banking revenues grew +4.1% vs. 2021 fuelled notably by robust service fee growth and a very solid showing by Private Banking.

International Retail Banking & Financial Services’ revenues rose +12.4% (+17.9%*) vs. 2021, driven by a record performance at ALD and strong growth at International Retail Banking whose revenues grew +11.5%* vs. 2021. Financial Services’ net banking income was significantly higher by +35.8%* vs. 2021, while Insurance net banking income increased by +6.5%* vs. 2021.

Global Banking & Investor Solutions’ revenues were up +14.3% (+12.9%*) vs. 2021. Global Markets & Investor Services’ revenues posted an +18.7% increase in revenues (14.1%*) vs. 2021, while Financing & Advisory activities increased by +15.2% (+10.7%*) vs. 2021.

Operating expenses

In 2022, operating expenses totalled EUR 18,630 million on a reported basis and EUR 17,991 million on an underlying basis (restated for transformation costs), i.e., an increase of +4.5% vs. 2021 (on an underlying basis).

The rise can be mainly attributed to the EUR 864 million contribution to the Single Resolution Fund, which increased by EUR 278 million, currency effects, notably in US dollars, and a rise in the variable components of employee remuneration associated with higher revenues.

Underlying gross operating income increased by +18.9% to EUR 10,068 million in 2022, while the underlying cost to income ratio (excluding the Single Resolution Fund) posted a 3.4 point improvement to 61.0% (vs. 64.4% in 2021).

Excluding the Single Resolution Fund, the underlying cost to income ratio is expected to range between 66% and 68% in 2023, based notably on normalised revenues in Global Markets.

Cost of risk

Over the full year, the cost of risk amounted to 28 basis points, landing below the guidance of between 30 and 35 basis points.

Offshore exposure to Russia was reduced to EUR 1.8 billion of EAD (Exposure At Default) at 31 December 2022, i.e., a decrease of around -45% since 31 December 2021. Exposure at risk on this portfolio is estimated at less than EUR 0.6 billion, compared with less than EUR 1 billion for the previous quarter. Total associated provisions stood at EUR 427 million at end-December 2022. Moreover, at end-December 2022, the Group’s residual exposure to Rosbank amounted to less than EUR 0.1 billion, corresponding mainly to guarantees and letters of credit.

The Group’s provisions on performing loans amounted to EUR 3,769 million at end-December, an increase of EUR 414 million in 2022.

The non-performing loans ratio amounted to 2.8%⁽¹⁾ at 31 December 2022, down 10 basis points vs. 31 December 2021. The gross coverage ratio on doubtful loans for the Group stood at 48%⁽²⁾ at 31 December 2022.

The cost of risk in 2023 is expected to range between 30 and 35 basis points.

Operating income

Operating income totalled EUR 7,782 million in 2022 compared with EUR 7,508 million in 2021. Underlying operating income came to EUR 8,421 million compared with EUR 7,770 million in 2021.

Net profits or losses from other assets

Net profits or losses from other assets totalled EUR -3,290 million in 2022, of which a EUR -3.3 billion accounting loss from the disposal of Rosbank and insurance activities in Russia recognised in H1 22.

Net income

Societe Generale applies a comprehensive approach to incorporating CSR considerations into its range of products and services. In addition to this broad framework, Societe Generale’s Corporate Social Responsibility efforts are concentrated in two main areas: the environmental transition and contributing to local communities. As a long-standing leader in energy, the Group has made the energy transition a priority in support for its clients. Societe Generale also plays a major role in economic development and has put sustainable development of local communities as the No. 2 priority in its action plans.

The Bank strives to help its clients on their pathway to a just, green and inclusive transition, in line with its own commitments. Sustainability is an integral part of the products and services offered to all the Group’s clients and extends not only to financing and investment products, but also to financial services. By placing sustainability high on the agenda, the Group aims to meet the increasing demand from stakeholders around the world, whether clients, corporates, investors or individuals, for banking with a positive impact on the economy and society overall.

To monitor its positive impact and support for its clients, the Group developed a standard several years ago to measure the distribution of its Sustainable and Positive Impact Finance offer – SPIF* (see Glossary, page 688) products for lending to the economy and companies, together with a range of Sustainable and Positive Investment (SPI* (see Glossary, page 688). The SPIF and SPI standards and the data collection scope have been revised to reflect changes in the Group. These amendments are presented in the Methodology note, page 354.

Above and beyond its commitment to clients, the Group is determined to set the example in how it conducts its business to be an exemplary financial company. In other words, Societe Generale aims to be a responsible employer and to act ethically and responsibly at all times.

To make the changes needed in today’s rapidly-changing environment, the Group launched “Building Together”, a programme to reinvent our businesses. The three core themes are:

To underpin this approach, a specific programme was introduced to step up operational implementation of the transformation: ESG by Design. Its main aims are to:

The environmental transition and contributing to local communities are the Group’s two top strategic priorities for 2025 and the springboard for our positive transformation efforts. Societe Generale’s actions are aimed at ensuring the sustainability of its own business activities and at helping clients move towards a greener and more sustainable future.

Building on an improved product offering, and having achieved our target contribution to the energy transition ahead of schedule (EUR 157 billion at the end of 2021 vs. an initial target of EUR 120 billion in the period 2019–2023), Societe Generale has set a new target of a EUR 300 billion contribution to sustainable finance (SPIF) between 2022 and 2025, applicable to all business lines for both environmental and social issues. The Group’s contribution at end-2022 was EUR 100 billion, or one-third of the target.

2.4.1.1  Supporting clients in their environmental transition

Urgent action is required to tackle climate change and rethink how we produce and consume resources. With this in mind, the banking business has to change to meet new client needs. Alive to the challenge, the Group plans to incorporate ESG considerations right from the start when it analyses what clients need. Drawing on its network of partner start-ups, Societe Generale also seeks to weave an ecosystem to offer the very latest innovations to its clients. Lastly, the Group has pressed further ahead with its drive to align its credit portfolios with trajectories that are compatible with 1.5°C scenarios.

STEPPING UP SUPPORT FOR CLIENTS

The Bank forged ahead with developing sustainable solutions in 2022. Keenly aware of the extent of the challenges involved in the environmental transition, the Group offers solutions that are more than just financial and involve including ESG factors in the client journey right from the analysis of need stage. The new range of advisory solutions for corporate clients aims to:

The Group encourages the emergence of new environmental transition champions and puts out new product offerings to cater to financing small-scale projects and biodiversity-friendly solutions.

BUILDING AN ECOSYSTEM TO SEED INNOVATION

The Global Markets Incubator has been working with start-ups and entrepreneurs to turn their innovative ideas into market-ready solutions since 2018. The Incubator has also upped its support for Fintechs. Start-ups working on positive-impact solutions are invited to submit applications for the Incubator’s fifth round in 2022. Successful applicants will have access to the Bank’s experts in fields from capital markets to financing activities and private banking to nudge them to the next stage of their development – with the support of the Group. Societe Generale strives to forge strong partnerships with the start-ups selected for the programme to speed up development and bring innovative solutions to market to meet the sustainability goals of its corporate clients, financial institutions and private investors, as well as its own CSR ambitions.

The Group invested in Impak Finance, an impact rating agency, to provide ESG data and intelligence to start-ups so they can measure their CSR performance. Komercni banca, a subsidiary of the Group in the Czech Republic, acquired ESG consulting firm Enviros to grow its environmental transition advisory offer.

Looking more specifically at biodiversity, the Group joined forces with Ecotree to develop commercial offerings that promote meaningful CSR action by promoting reforestation to protect biodiversity. These partnerships were instrumental in the introduction this year of an investment product that contributes to the preservation of biodiversity.

Turning to sustainable mobility, ALD Automotive, the Group’s leasing subsidiary, took a stake in the capital of Skipr, an all-in-one corporate mobility solution for companies that want to offer options to their staff, for example, to choose a flexible and sustainable mobility budget instead of a company car. The mobility business and its associated costs are tracked using a dedicated centralised management platform. This new partnership will combine cutting-edge technology with deep mobility expertise, helping companies move towards more flexible, efficient and cost-effective sustainable mobility options.

Last, Societe Generale also partners with crowdfunding platform Lumo for energy infrastructure projects to offer opportunities for its retail customers to help finance the energy transition, and with Carbo, an app to measure – and cut – their carbon footprint.

ALIGNING PORTFOLIOS WITH TRAJECTORIES COMPATIBLE WITH 1.5°C SCENARIOS

By joining the UNEP-FI Net-Zero Banking Alliance in 2021, the Group undertook to align its portfolios with trajectories aiming for carbon neutrality by 2050 (limiting global warming to 1.5°C), setting itself targets for 2030 (or sooner) and 2050, giving priority to its most GHG-intensive sectors. On top of its previous targets for thermal coal sectors (pledging to fully withdraw from the sector by 2030 for OECD countries and by 2040 elsewhere) and the shipping industry, Societe Generale has raised the bar with bolder and more ambitious targets for the oil and gas production sectors and financing of power generation. After implementing solid measures, including withdrawing from onshore Reserve Based Lending activities in the US, the Group raised its exposure target to -20% by 2025 vs. 2019 (from the previous -10% by 2025). What is more, it has set a new target for 2030 (vs. 2019) for a 30% reduction in absolute carbon emissions related to end use of oil and gas production. As regards power generation, the Group now has a stricter target for CO₂ emissions intensity of 125g of CO₂ per kWh by 2030 compared to the previous 2030 target of 163g of CO₂ per kWh.

Societe Generale’s efforts have been applauded: the Bank was acclaimed for its global leadership in sustainable finance, winning Outstanding Leadership in Sustainable Finance from Global Finance and World’s Best Bank Transition Strategy - 2022 for its energy transition strategy from Euromoney.

2.4.1.2  Making a positive impact on local communities

Putting its client-centric values into practice, the Group is focusing on making a positive impact on local communities. It gets in behind social and economic transformation at local level by financing infrastructure projects – especial social infrastructure – and supporting SMEs and entrepreneurs. Through its car leasing subsidiary, the Group’s ambition is to be at the forefront of the transition to sustainable mobility. Societe Generale is also expanding its social and inclusive range of products and services, particularly in Africa, where its presence dates back over a long period. This commitment to sustainable development on the African continent features regularly on award lists: the Bank received no fewer than 17 accolades at the 2022 EMEA Finance magazine African Banking Awards.

INFRASTRUCTURE FINANCING

For Societe Generale, infrastructure financing is a key driver of sustainable regional development. Support for infrastructure projects will improve access to health, education and digital technologies, while also helping to create more sustainable mobility, namely public transport.

Backed by our acknowledged expertise, we lay special emphasis on developing digital cohesion, strong and resilient health and education infrastructure, and access to sustainable transport and public services both locally and internationally. Through the combined impact of innovation and agility, the Bank offers finance solutions tailored to the needs of developers, public bodies and infrastructure funds to step up and meet the myriad challenges of shifts in technologies and its uses, and the vital imperative of progressing the energy transition and the move to more sustainable models.

In France, for example, the Group is involved in financing 25 fibre projects with leading private operators to connect 16 million households and companies. All in all, Group financing for access to IT infrastructure in 2022 amounted to EUR 830 million (+20% vs. 2021).

In Africa, Societe Generale merges local (around 60 experts) and global expertise behind major projects with a positive impact on the continent. It partners with leading development banks, investment funds and international consulting firms to build out and deploy its range of services. The target for the period 2021–2025 is a 20% increase in the Group’s structured finance commitments in Africa. At end-2022, these commitments are estimated to be EUR 13.8 million, an increase of 12% vs. 2021.

In total, Societe Generale has committed nearly EUR 4 billion to social infrastructure financing.

SUPPORTING LOCAL OPERATORS, SMES AND ENTREPRENEURS

The Group gives priority to developing local economies through its support for SMEs and entrepreneurs. In tandem with setting up its new retail bank in France, Societe Generale launched a specific new resource for this client segment which entails new advisory and financing solutions offered together with its leading partners. The main components of this offer are:

On the international stage, the Group’s objective is to double its credit exposure to African SMEs between 2020 and 2025. In 2022, the figure totalled EUR 430 million.

AT THE CUTTING EDGE OF SUSTAINABLE MOBILITY

Societe Generale subsidiary ALD Automotive (ALD) is a European leader in long-term vehicle lease solutions, with sustainable mobility as the linchpin of its strategy. Sustainable mobility is not just about vehicle technology, it’s also about transforming how we use transport and how to meet new expectations. In its 2025 growth plan, ALD sets specific targets for increasing the share of electric vehicles⁽¹⁾ in new vehicle deliveries to at least 30% by 2025 and 50% by 2030. At 31 December 2022, it was 27%. ALD is also investing in new shared, on-demand or multimodal mobility solutions. Take ALD Move, a mobility-as-a-service app: users can tap into daily advice on the best options for their travel needs (car, public transport, bike) and manage their “mobility budget”.

BUILDING A SOCIAL AND INCLUSIVE RANGE OF PRODUCTS AND SERVICES

Under its financial inclusion policy, Societe Generale supports innovative approaches to sustainable economic development that combine environmental and societal performance, by supporting the development of microfinance operators, in France and abroad. It also offers tailored products and services for students, customers in financial difficulty or those looking for more autonomy as part of its drive for more inclusive finance. In France, it also offers services for customers in a financially precarious position so they have access to appropriate banking services for their situation.

MICROFINANCE

The Group has worked in partnership with ADIE (a non-profit promoting the right to economic initiative) since 2006 to support microfinance throughout both metropolitan and overseas France. Credit lines provided in partnership with ADIE totalled EUR 18.2 million at the close of the year, vs. EUR 18.3 million at 31 December 2021.

Back in 2005, faced with the extent of the need for microfinance and its emergence in Africa, Societe Generale made the decision to support the sector and, through its intermediary, to help boost the local bank penetration rate for local people, micro-enterprises and SMEs with no access to traditional banks. Acting on its pledge to double lending to microfinance organisations by 2022, the Group met its target with EUR 120 million outstanding at the close of 2022.

INCLUSIVE BANKING

In France, Societe Generale renewed its partnership with Bpifrance, offering loans to students who have no income and nobody to act as guarantor for them. Once again in 2022, the Group was the top distributor of Bpifrance student loans with a total of EUR 61 million paid out (from a budget of EUR 70 million).

Kapsul was introduced in 2022. This is a new inclusive tool intended for customers who want to be independent and manage on a budget. Available online or in-branch, the account costs EUR 2 per month. There are no income conditions and no other account charges. Account holders can make payments from anywhere in the world and can also get an international Visa card with insurance and assistance cover. At 31 December 2022, 5,622 customers had signed up for a Kapsul account (+9% vs. 2021).

VULNERABLE CUSTOMERS

The Groupe provides a free package of basic banking services in France. Customers can sign up to Généris, a banking services package designed to help them manage their finances for just EUR 1 a month, down from EUR 3 previously . At the end of 2022, Généris had 55,355 customers (55,831 at the end of 2021). Societe Generale is keenly aware of the needs of vulnerable customers and provides specific budget simulation tools and budget management advice. Its customer service teams also receive special training.

Societe Generale launches its first acceleration programme dedicated to startups linked to Trade Finance, Cash Management, Factoring, and Cash Clearing & Correspondent Banking activities.

The Group, a partner of many startups, is launching a new call for projects to improve the customer experience in the transaction banking sector, by increasing the performance and productivity of its activities. With the new “Payment & Transaction Banking Accelerator” (P&T BAX), Societe Generale aims to repeat the successful experience of the previous four Global Markets Incubator initiatives that have enabled startups to emerge and develop in partnership with Societe Generale.

The P&T BAX programme is a unique opportunity for entrepreneurs to convert innovative ideas into market-ready solutions and to gain valuable exposure to the industry. The proposed solutions may be related to data, client communication interfaces, CSR and the fight against fraud, amongst other topics. The selected startups will have access to Societe Generale’s expertise, with the opportunity to present their solutions and services to real-life business environments.

“In a constantly changing environment, Societe Generale’s payment & transaction banking activities are accelerating their digital transformation thanks to their ability to collaborate with startups. By combining our respective expertise and cultures, we are resolutely accompanying our customers into the world of tomorrow”, commented Alexandre Maymat, Head of Global Transaction & Payment Services at Societe Generale.

“Being innovative and pioneering is part of Societe Generale’s DNA. With the Payments & Transaction Banking Accelerator, we are taking a strong role in supporting the startup ecosystem and in transforming transaction banking activities”, added Claire Calmejane, Chief Innovation Officer for Societe Generale Group.

The main changes to the consolidation scope at 31 December 2022 compared with the scope applicable at the closing date of 31 December 2021 is as follows:

- a reduction in the Group’s total balance sheet of EUR 16 billion, mainly including a decrease in Customer loans at amortised cost of EUR 10 billion and a decrease in Customer deposits of EUR 13 billion,

- a capital loss on the disposal, reported under Net income/expense from other assets in 2022, of EUR -3.3 billion before tax. The loss includes a translation difference reclassified into income for EUR -0.5 billion, which was the cumulated amount at 18 May after an increase of EUR 0.5 billion on back of ruble appreciation between 1 January 2022 and the date of the disposal.

The objective of the Group’s financial policy is to optimise the use of shareholders’ equity in order to maximise short- and long-term return for shareholders, while maintaining a level of capital ratios (Common Equity Tier 1, Tier 1 and Total Capital ratios) consistent with the market status of Societe Generale and the Group’s target rating.

Since 2010, the Group has launched a major realignment programme, strengthening capital and focusing on the rigorous management of scarce resources (capital and liquidity) and proactive risk management in order to apply the regulatory changes related to the implementation of new “Basel 3” regulations.

Group shareholders’ equity totalled EUR 66.5 billion at 31 December 2022. Net asset value per share was EUR 70.50 and net tangible asset value per share was EUR 62.34 using the new methodology disclosed in Chapter 2 of this Universal Registration Document, on page 45. Book capital includes EUR 10.0 billion in deeply subordinated notes.

At 31 December 2022, Societe Generale possessed, directly or indirectly, 48.7 million Societe Generale shares, representing 5.73% of the capital (excluding shares held for trading purposes).

Under the liquidity contract implemented on 22 August 2011 with an external investment services provider, Societe Generale acquired 734,806 shares in 2022 for a value of EUR 19.7 million and sold 768,306 shares for a value of EUR 20.8 million. For the record, the liquidity contract was temporarily suspended from 8 August to 31 December 2022 throughout the share buyback period.

The information concerning the Group’s capital and shareholding structure is available in Chapter 7 of this Universal Registration Document, page 635 and following.

The group maintained a targeted acquisition and disposal policy, in line with its strategy focused on its core businesses and the management of scarce resources.

Ongoing investments will be financed using the Group’s usual sources of funding.

The gross book value of Societe Generale Group’s tangible operating fixed assets amounted to EUR 47.2 billion at 31 December 2022. The figure comprises land and buildings (EUR 5.2 billion), the right of use (EUR 3.2 billion), assets leased by specialised financing companies (EUR 32.9 billion) and other tangible assets (EUR 5.9 billion).

The net book value of tangible operating assets and investment property amounted to EUR 30.2 billion, representing only 2% of the consolidated balance sheet at 31 December 2022.

Accordingly, due to the nature of Societe Generale’s activities, property and equipment are not material at Group level.

None.

Since the end of the last financial period, no significant change in the financial performance of the Group occurred other than those described in the present Universal Registration Document filed with the AMF on 13 March 2023.

The article L.511-45 of the Monetary and Financial Code modified by Order No. 2014-158 of 20 February, 2014, require credit institutions to communicate information about the locations and activities of their entities included in their consolidation scope, in each State or territory.

Société Générale publishes below the information relative to staff and the financial information by countries or territories.

The list of locations is published in the Note 8.5 of the notes to the consolidated financial statements.

Purpose

The Board of Directors reviewed the Bank’s purpose in 2019 following the introduction of French Act No. 2019-486 on 22 May 2019, referred to as the Pacte Law, the aim of which is to provide action plans for innovation, business growth and transformation. The Board defined the new purpose as “Building together, with our clients, a better and sustainable future through responsible and innovative financial solutions”. From a formal standpoint, the Board decided not to include the purpose in the By-laws. However, at its Extraordinary General Meeting of 2020, Societe Generale modified its By-laws to specify that the Board of Directors determines the strategic focus of the Company’s activity and ensures that it is implemented according to its corporate interests, by taking into account environmental and social responsibility considerations (see Chapter 5). In May 2021, the first sentence of the preamble of the Board of Directors’ internal rules was also modified to take account of this change.

Presentation of the organisation

At 1 January 2023

The composition of the Board of Directors is presented on pages 74 and following of this report on corporate governance. The internal rules of the Board of Directors, which define the Board of Directors’ powers, are provided in Chapter 7 of this Universal Registration Document, on pages 650 and following. The Board of Directors’ work is presented on pages 92-94.

The composition of General Management and of the Management Committee is presented in the corresponding sections of this report (see pages 105-107 and 109).

The tasks of the supervisory committees are described on page 108.

The powers of the Board of Directors and of its various committees, along with the committees’ activity reports, are presented on pages 89 and following, and notably cover:

Information regarding the non-voting Director's role and a report on his activities appear on pages 72, 79, 93 and 104.

Organisation of the governance

On 15 January 2015, the Board of Directors decided that, in accordance with Article L. 511-58 of the French Monetary and Financial Code (Code monétaire et financier), the offices of Chairman and Chief Executive Officer would be separated following the General Meeting of 19 May 2015. At that date, Lorenzo Bini Smaghi became Chairman of the Board of Directors, and Frédéric Oudéa remained Chief Executive Officer. On 21 May 2019, the Board of Directors decided to renew the term of office of Frédéric Oudéa as Chief Executive Officer for a further four-year term after his term of office as Director was renewed at the General Meeting of 21 May 2019.

Lorenzo Bini Smaghi was reappointed Chairman of the Board of Directors on 17 May 2022.

Frédéric Oudéa is assisted by two Deputy Chief Executive Officers whose terms of office were renewed on 21 May 2019, until the expiration of Frédéric Oudéa’s term of office. The Chief Executive Officer and the two Deputy Chief Executive Officers are assisted by two Deputy General Managers who are not corporate officers.

On 17 January 2022, Frédéric Oudéa, the Chief Executive Officer, took direct control of supervising the Risk and Compliance functions, in addition to the Inspection and Audit, Finance, Corporate Secretary Departments, and the Human Resources and Communication Departments. On 1 January 2023, he took over responsibility for Resources & Digital Transformation, the IT Function and innovation, and the Information System.

On 17 January 2022, Diony Lebot became responsible for overseeing all ESG policies and their effective incorporation into the strategic trajectories adopted by the Group’s business units and functions. She also supervises the specialised financial services (ALD and SGEF) and insurance activities.

Philippe Aymerich is Deputy Chief Executive Officer in charge of French and International Retail Banking activities.

Statement of the corporate governance regime

Societe Generale refers to the AFEP-MEDEF Corporate Governance Code for listed companies (hereinafter the “AFEP-MEDEF Code”). The document is available on the www.hcge.fr website. In accordance with the “comply or explain” principle, Societe Generale states that it applies all recommendations from the AFEP-MEDEF Code.

An amended set of internal rules amended on 2 August 2022 (hereinafter referred to as the “internal rules”) governs the functioning of the Board of Directors and its committees. The Company’s internal rules and By-laws appear in the Universal Registration Document (see Chapter 7).

ERNST & YOUNG et Autres
Tour First
TSA 1444492037
Paris-La Défense Cedex
S.A.S. à capital variable
438 476 913 R.C.S. Nanterre

DELOITTE & ASSOCIÉS
6, place de la Pyramide
92908 Paris-La Défense Cedex
S.A.S. au capital de € 2.188.160
572 028 041 R.C.S. Nanterre

SOCIETE GENERALE
Société Anonyme
17, cours Valmy
92972 Paris-La Défense

Annual General Meeting held to approve the financial statements for the year ended December 31, 2022

This is a translation into English of the statutory auditors’ report on related-party agreements that is issued in French and it is provided solely for the convenience of English-speaking users.

This report on related-party agreements should be read in conjunction, and construed in accordance with, French law and professional auditing standards applicable in France. It should be understood that the agreements reported are only those provided by the French Commercial Code (Code de commerce) and that the report does not apply to those related-party transactions described in IAS 24 or other equivalent accounting standards.

To the Annual General Meeting of Société Générale,

In our capacity as statutory auditors of your Company, we hereby report to you on related-party agreements.

The terms of our engagement require us to inform you, based on information provided to us, the principal terms and conditions of those agreements brought to our attention or which we may have discovered during the course of our audit, as well as the reasons justifying why they benefit the Company, without expressing an opinion on their usefulness and appropriateness or identifying other such agreements, if any. It is your responsibility, pursuant to Article R. 225-31 of the French Commercial Code (Code de commerce), to assess the relevance of these agreements prior to their approval.

Our role is also to provide you with the information stipulated in Article R. 225-31 of the French Commercial Code (Code de commerce) relating to the continuation of the implementation during the year ended December 31, 2022, of the agreements previously approved by the Annual General Meeting.

We conducted the procedures we deemed necessary in accordance with the professional guidelines of the French Institute of Statutory Auditors (Compagnie nationale des commissaires aux comptes) relating to this engagement.

Agreements submitted to the approval of the annual general meeting

We hereby inform you that we have not been notified of any agreements that were authorized and entered into during the year ended December 31, 2022, to be submitted to the approval of the Annual General Meeting in accordance with Article L. 225-38 of the French Commercial Code (Code de commerce).

Agreements previously approved by the annual general meeting

We hereby inform you that we have not been notified of any agreement previously approved by the Annual General Meeting whose implementation continued during the year ended December 31, 2022.

Paris-La Défense, March 13, 2023

The Statutory Auditors

ERNST & YOUNG et Autres

Micha Missakian Vincent ROTY

Deloitte & Associés

Jean-Marc MICKELER Maud MONIN

The solvency and leverage prudential ratios, as well as the amounts of regulatory capital and RWA featured here take into account the IFRS 9 phasing (fully-loaded CET1 ratio of 13.34% at end 2022, the phasing effect being +17 bps) and the effects of the ECB’s Covid-19 transitional measures ending on 31 December 2022.

This section identifies the main risk factors that the Group estimates could have a significant effect on its business, profitability, solvency or access to financing.

As part of its internal risk management, Societe Generale has updated its risk typology. For the purposes of this section, these different types of risks have been grouped into six main categories (4.1 to 4.1.6), in accordance with Article 16 of the Regulation (EU) 2017/1129, also known as “Prospectus 3” regulation of 14 June 2017, according to the main risk factors that the Group believes could impact the risk categories. Risk factors are presented based on an evaluation of their materiality, with the most material risks indicated first within each category.

The diagram below illustrates how the categories of risks identified in the risk typology have been grouped into the six categories and which risk factors principally impact them.

4.1.1.1 The global economic and financial context, geopolitical tensions, as well as the market environment in which the Group operates, may adversely affect its activities, financial position and results of operations.

As a global financial institution, the Group’s activities are sensitive to changes in financial markets and economic conditions generally in Europe, the United States and elsewhere around the world. The Group generates 49% of its business in France (in terms of net banking income for the financial year ended 31 December 2022), 32% in Europe, 7% in the Americas and 12% in the rest of the world. The Group could face significant deteriorations in market and economic conditions resulting from, in particular, crises affecting capital or credit markets, liquidity constraints, regional or global recessions and fluctuations in commodity prices (notably oil and natural gas). Other factors could explain such deteriorations, such as variations in currency exchange rates or interest rates, inflation or deflation, rating downgrades, restructuring or defaults of sovereign or private debt, or adverse geopolitical events (including acts of terrorism and military conflicts). In addition, the Covid-19 crisis continues to have an impact mainly in China, where the so-called “Zero Covid” policy has begun to be relaxed. Such events, which can develop quickly and whose effects may not have been anticipated and hedged, could affect the Group’s operating environment for short or extended periods and have a material adverse effect on its financial position, cost of risk and results of operations.

The economic and financial environment is exposed to intensifying geopolitical risks. The war in Ukraine which began in February 2022 has led to high tensions between Russia and Western countries, with significant impacts on global growth, energy and raw materials prices, as well as on a humanitarian level. The economic and financial sanctions imposed by a large number of countries, particularly in Europe and the United States, against Russia and Belarus could significantly affect operators with direct or indirect links to Russia, with a material impact on the Group’s risks (credit and counterparty, market, reputation, compliance, legal, operational, etc.). The Group will continue to analyse in real time the global impact of this crisis and to take all necessary measures to comply with applicable regulations.

In Asia, US-China relations are fraught with trade tensions and the risk of technological fractures.

After a long period of low interest rates, the current inflationary environment is leading the major central banks to raise rates. The entire economy will need to adapt to a context of higher interest rates. In addition to the impact on the valuation of equities, interest rate-sensitive sectors such as real estate will have to adjust. The US Federal Reserve and the European Central Bank (ECB) are expected to continue to tighten monetary conditions in the first half of 2023 before taking a break as inflation recedes according to our predictions. In the meantime, inflation in the US and Europe continues to impact the price of services, food and energy.

This crisis could generate strong volatility on the financial markets and a significant drop in the price of certain financial assets, potentially leading to payment defaults, with consequences that are difficult to anticipate for the Group. In France, after the long period of low interest rates which fostered an upturn of the housing market, a reversal of activity in this area could have an adverse effect on the Group’s asset value and on business, by decreasing demand for loans and resulting in higher rates of non-performing loans. More generally, the higher interest rates environment in a context where public and private debts have tended to increase is an additional source of risk.

Considering the uncertainty generated by this situation, both in terms of duration and scale, these disruptions could persist throughout 2023 and have a significant impact on the activity and profitability of certain Group counterparties.

Against the backdrop of the continuing war in Ukraine, the reduction in Russian gas imports and the introduction of an embargo on Russian oil on 5 December 2022, the European energy sector is facing a more difficult and uncertain situation. Gas prices have risen and remain highly volatile. A total halt in Russian gas supplies combined with a post-Covid-19 economic recovery in China could lead to a further spike in gas prices, affecting European economic growth.

In the longer term, the energy transition to a “low-carbon economy” could adversely affect fossil energy producers, energy-intensive sectors of activity and the countries that depend on them.

With regard to financial markets, in the context of Brexit, the topic of non-equivalence of clearing houses (central counterparties, or CCPs) remains a point of vigilance, with possible impacts on financial stability, notably in Europe, and therefore on the Group’s business. In addition, capital markets (including foreign exchange activity) and securities trading activities in emerging markets may be more volatile than those in developed markets and may also be vulnerable to certain specific risks, such as political instability and currency volatility. These elements could negatively impact the Group’s activity and results of operations.

On the mobility market, due to the shortage of new car supply, demand for used vehicles has risen, pushing up resale prices sharply. As a result, ALD has recorded a historically high result on used vehicle sales for the past year. The Group is exposed to a potential loss in a financial year from (i) resale of vehicles related to leases which expire during the period whose resale value is lower than their net carrying amount and (ii) additional impairment during the lease period if residual value drops below contractual residual value. Future sales and estimated losses are impacted by external factors such as macroeconomic conditions, government policies, tax and environmental regulations, consumer preferences, new vehicle prices, etc. The Group anticipates for 2023 that supply chains may not return to normal immediately, which could support the resale prices of used vehicles.

The Group’s results are therefore exposed to the economic, financial, political and geopolitical conditions of the main markets in which the Group operates.

4.1.1.2 The Group’s failure to achieve its strategic and financial objectives disclosed to the market could have an adverse effect on its business, results of operations and the value of its financial instruments.

The Group is fully on track to achieving its strategic milestones and has set targets for profitable and sustainable growth out to 2025 with:

More precisely, the Group’s “Vision 2025” project anticipates the merger between the Retail Banking network of Societe Generale in France and Crédit du Nord. Although this project has been designed to achieve controlled execution, the merger could have a short-term material adverse effect on the Group’s business, financial position and costs. System reconciliations could undergo delays, thereby postponing part of the expected merger benefits. The project could lead to some staff departures, requiring replacements and training efforts which could potentially generate additional costs. The merger could also lead to the departure of some of the Group’s customers, resulting in loss of revenue. The legal and regulatory aspects of the transaction could prompt delays and additional costs.

Following ALD’s announcement on 6 January 2022 of its plan to acquire LeasePlan, Societe Generale and ALD announced on 22 April 2022 the signing of a framework agreement, with the aim of creating a global leader in mobility solutions. The acquisition is notably subject to receiving certain regulatory approvals and to the performance of other standard conditions precedent.

The Group also announced in November 2022 the signing of a letter of intent with AllianceBernstein to combine the equity research and execution businesses in a joint venture to create a leading global franchise in these activities. This announcement was followed by the signature of an acquisition agreement in early February 2023.

The conclusion of final agreements on these strategic transactions depends on several stakeholders and, accordingly, is subject to a degree of uncertainty. The inability to close on the transactions would not have an immediate impact on the Group’s activity, but could potentially weigh on the share price, at least temporarily.

Societe Generale has placed Environmental, Social and Governance (ESG) at the heart of its strategy in order to contribute to positive transformations in the environment and the development of local regions. In this respect, the Group has made a certain number of commitments (see Chapter 2, page 46 and following and Chapter 5, page 291 and following). Failure to comply with these commitments, and those that the Group may make in the future, could harm its reputation. Furthermore, the rollout of these commitments may have an impact on the Group’s business model. Last, failure to make specific commitments could also generate reputation and strategic risk.

The Group may face execution risk on these strategic projects, which are to be carried out simultaneously. Any difficulty encountered during the process of integrating the activities (particularly from a human resources standpoint) is likely to generate higher integration costs and lower-than-anticipated savings, synergies and benefits. Moreover, the process of integrating the acquired operational businesses into the Group could disrupt the operations of one or more of its subsidiaries and divert General Management’s attention, which could have a negative impact on the Group’s business and results.

4.1.1.3 The Group is subject to an extended regulatory framework in each of the countries in which it operates and changes to this regulatory framework could have a negative effect on the Group’s businesses, financial position and costs, as well as on the financial and economic environment in which it operates.

The Group is subject to the laws of the jurisdictions in which it operates. This includes French, European and US legislation as well as other local laws in light of the Group’s cross-border activities, among other factors. The application of existing laws and the implementation of future legislation require significant resources that could affect the Group’s performance. In addition, possible failure to compliance with laws could lead to fines, damage to the Group’s reputation, force the suspension of its operations or, in extreme cases, the withdrawal of operating licences.

Among the laws that could have a significant influence on the Group:

The Group is also subject to complex tax rules in the countries where it operates. Changes in applicable tax rules, uncertainty regarding the interpretation of certain evolutions or their effects may have a negative impact on the Group’s business, financial position and costs.

Moreover, as an international bank that handles transactions with US persons, denominated in US dollars, or involving US financial institutions, the Group is subject to US regulations relating in particular to compliance with economic sanctions, the fight against corruption and market abuse. More generally, in the context of agreements with US and French authorities, the Group largely implemented, through a dedicated programme and a specific organisation, corrective actions to address identified deficiencies and strengthen its compliance programme. In the event of a failure to comply with relevant US regulations, or a breach of the Group’s commitments under these agreements, the Group could be exposed to the risk of (i) administrative sanctions, including fines, suspension of access to US markets, and even withdrawals of banking licences, (ii) criminal proceedings, and (iii) damage to its reputation.

4.1.1.4 Increased competition from banking and non-banking operators could have an adverse effect on the Group’s business and results, both in its French domestic market and internationally.

Due to its international activity, the Group faces intense competition in the international and local markets in which it operates, whether from banking or non-banking actors. As such, the Group is exposed to the risk of not being able to maintain or develop its market share in its various activities. This competition may also lead to pressure on margins, which would be detrimental to the profitability of the Group’s activities.

Consolidation in the financial services industry could result in the competitors benefiting from greater capital, resources and an ability to offer a broader range of financial services. In France and in the other main markets where the Group operates, the presence of major domestic banking and financial actors, as well as new market participants (notably neo-banks and online financial services providers), has increased competition for virtually all products and services offered by the Group. New market participants such as “fintechs” and new services that are automated, scalable and based on new technologies (such as blockchain) are developing rapidly and are fundamentally changing the relationship between consumers and financial services providers, as well as the function of traditional retail bank networks. Competition with these new actors could be exacerbated by the emergence of substitutes for central bank currency (crypto-currencies, digital central bank currency, etc.), which themselves carry risks.

Moreover, competition is also enhanced by the emergence of non-banking actors that, in some cases, may benefit from a regulatory framework that is more flexible and in particular less demanding in terms of equity capital requirements.

To address these challenges, the Group has implemented a strategy, in particular with regard to the development of digital technologies and the establishment of commercial or equity partnerships with these new actors (such as Lumo, the platform offering green investments, or Shine, the neobank for professionals). In this context, additional investments may be necessary for the Group to be able to offer new innovative services and to be competitive with these new actors. This intensification of competition could, however, adversely affect the Group’s business and results, both on the French market and internationally.

4.1.1.5 Environmental, social and governance (ESG) risks, in particular related to climate change, could have an impact on the Group’s activities, results and financial situation in the short-, medium- and long-term.

Environmental, social and governance (ESG) risks are defined as risks stemming from the current or prospective impacts of ESG factors on counterparties or invested assets of financial institutions. ESG risks are seen as aggravating factors to the traditional categories of risks (credit risks, counterparty risks, market risks, structural risks (including liquidity and funding risks), operational risks, reputational risks, compliance risks and risks related to insurance activities) and are likely to impact the Group’s activities, results and financial position in the short, medium and long-term.

The Group is thus exposed to environmental risks, and in particular climate change risks through certain of its financing, investment and service activities. Concerning climate risks, a distinction is made between (i) physical risk, with a direct impact on entities, people and property stemming from climate change and the multiplication of extreme weather events; and (ii) transition risk, which results from the process of transitioning to a low-carbon economy, such as regulatory or technological disruptions or changes in consumer preferences.

The Group could be exposed to physical risk resulting from a deterioration in the credit quality of its counterparties whose activity could be negatively impacted by extreme climatic events or long-term gradual changes in climate, and through a decrease in the value of collateral received (particularly in the context of real estate financing in the absence of guarantee mechanisms provided by specialised financing companies).

Beyond the risks related to climate change, risks more generally related to environmental degradation (such as the risk of loss of biodiversity) are also aggravating factors to the Group’s risks. The Group could notably be exposed to credit risk on a portion of its portfolio, linked to lower profitability of some of its counterparties due, for example, to increasing legal and operating costs (for instance due to the implementation of new environmental standards).

In addition, the Group is exposed to social risks, related for example to non-compliance by some of its counterparties with labour rights or workplace health and safety issues, which may trigger or aggravate reputational and credit risks for the Group.

Similarly, risks relating to governance of the Group’s counterparties and stakeholders (suppliers, service providers, etc.), such as an inadequate management of environmental and social issues, could generate credit and reputational risks for the Group.

Beyond the risks related to its counterparties or invested assets, the Group could also be exposed to risks related to its own activities. Therefore, the Group is exposed to physical climate risk with respect to its ability to maintain its services in geographical areas impacted by extreme events (floods, etc.).

The Group also remains exposed to specific social and governance risks, relating for example to the operational cost of implementation of regulations related to labour laws and the management of its human resources.

All of these risks could have an impact on the Group’s business, results and reputation in the short, medium and long term.

4.1.1.6 The Group is subject to regulations relating to resolution procedures, which could have an adverse effect on its business and the value of its financial instruments.

The BRRD and Regulation (EU) No. 806/2014 of the European Parliament and of the Council of the European Union of 15 July 2014 (the Single Resolution Mechanism, or “SRM”) define a European Union-wide framework for the recovery and resolution of credit institutions and investment firms. The BRRD provides the authorities with a set of tools to intervene early and quickly enough in an institution considered to be failing so as to ensure the continuity of the institution’s essential financial and economic functions while reducing the impact of the failure of an institution on the economy and the financial system (including the exposure of taxpayers to the consequences of the failure). Under the SRM Regulation, a centralised resolution authority is established and entrusted to the SRB and national resolution authorities.

The powers granted to the resolution authority under the BRRD and the SRM Regulations include write-down/conversion powers to ensure that capital instruments and eligible liabilities absorb the Group’s losses and recapitalise it in accordance with an established order of priority (the “Bail-in Tool”). Subject to certain exceptions, losses are borne first by the shareholders and then by the holders of additional Tier 1 and Tier 2 capital instruments, then by the non-preferred senior debt holders and finally by the senior preferred debt holders, all in the order of their claims in a normal insolvency proceeding. The conditions for resolution provided by the French Monetary and Financial Code implementing the BRRD are deemed to be met if: (i) the resolution authority or the competent supervisory authority determines that the institution is failing or likely to fail; (ii) there is no reasonable perspective that any measure other than a resolution measure could prevent the failure within a reasonable timeframe; and (iii) a resolution measure is necessary to achieve the resolutions’ objectives (in particular, ensuring the continuity of critical functions, avoiding a significant negative effect on the financial system, protecting public funds by minimising the recourse to extraordinary public financial support, and protecting customers’ funds and assets) and the winding up of the institution under normal insolvency proceedings would not meet these objectives to the same extent.

The resolution authority could also, independently of a resolution measure or in combination with a resolution measure, proceed with the write-down or conversion of all or part of the Group’s capital instruments (including subordinated debt instruments) into equity if it determines that the Group will no longer be viable unless it exercises this write-down or conversion power or if the Group requires extraordinary public financial support (except where the extraordinary public financial support is provided in the form defined in Article L. 613-48 III, paragraph 3 of the French Monetary and Financial Code).

The Bail-in Tool could result in the write-down or conversion of capital instruments in whole or in part into ordinary shares or other ownership instruments.

In addition to the Bail-in Tool, the BRRD provides the resolution authority with broader powers to implement other resolution measures with respect to institutions that meet the resolution requirements, which may include (without limitation) the sale of the institution’s business segments, the establishment of a bridge institution, the split of assets, the replacement or substitution of the institution as debtor of debt securities, changing the terms of the debt securities (including changing the maturity and/or amount of interest payable and/or the imposition of a temporary suspension of payments), the dismissal of management, the appointment of a provisional administrator and the suspension of the listing and admission to trading of financial instruments.

Before taking any resolution action, including the implementation of the Bail-in Tool, or exercising the power to write down or convert relevant capital instruments, the resolution authority must ensure that a fair, prudent and realistic valuation of the institution’s assets and liabilities is made by a third party independent of any public authority.

The application of any measure under the French implementing provisions of the BRRD or any suggestion of such application to the Group could have a material adverse effect on the Group’s ability to meet its obligations under its financial instrument and, as a result, holders of these securities could lose their entire investment.

In addition, if the Group’s financial condition deteriorates, the existence of the Bail-in Tool or the exercise of write-down or conversion powers or any other resolution tool by the resolution authority (independently of or in combination with a resolution) if it determines that Societe Generale or the Group will no longer be viable could result in a more rapid decline in the value of the Group’s financial instruments than in the absence of such powers.

Risk appetite is defined as the level of risk that the Group is prepared to accept to achieve its strategic and financial goals.

Principles governing risk appetite

The Group’s ambition is to push ahead with sustainable development based on a diversified and balanced banking model with a strong European anchor and a targeted global presence in selected areas of strong business expertise. The Group also wishes to maintain long-term relationships with its clients built on the mutual confidence deserved and to meet the expectations of all of its stakeholders by providing them with responsible and innovative financial solutions.

This is reflected in:

A robust financial strength profile

The Group seeks to achieve sustainable profitability, relying on a robust financial profile consistent with its diversified banking model, by:

Credit risk (including concentration effects)

Credit risk appetite is managed through a system of credit policies, risk limits and pricing policies.

When it takes on credit risk, the Group focuses on medium- and long-term client relationships, targeting both clients with which the Bank has an established relationship of trust and prospects representing profitable business development potential over the mid-term.

Acceptance of any credit commitment is based on in-depth client knowledge and a thorough understanding of the purpose of the transaction.

In particular, concerning the underwriting risk, the Group, mainly through GLBA, makes a steadfast commitment to transactions at a guaranteed price as debt financing arranger, prior to syndicating them to other banking syndicates and institutional investors. If market conditions deteriorate or markets close while the placement is under way, these transactions may create a major over-concentration risk (or losses, if the transaction placement requires selling below the initial price).

The Group limits the cumulative amount of approved underwriting or underwriting positions in order to limit its risk in the event of a prolonged closure of the debt markets.

In a credit transaction, risk acceptability is based first on the borrower’s ability to meet its commitments, in particular through the cash flows which will allow the repayment of the debt. For medium and long-term operations, the funding duration must remain compatible with the economic life of the financed asset and the visibility horizon of the borrower’s cash flow.

Security interests are sought to reduce the risk of loss in the event of a counterparty defaulting on its obligations, but may not, except in exceptional cases, constitute the sole justification for taking the risk. Security interests are assessed with prudent value haircuts and paying special attention to their actual enforceability.

Complex transactions or those with a specific risk profile are handled by specialised teams within the Group with the required skills and expertise.

The Group seeks risk diversification by controlling concentration risk and maintaining a risk allocation policy through risk sharing with other financial partners (banks or guarantors).

Counterparty ratings are a key criterion of the credit policy and serve as the basis for the credit approval authority grid used in both the commercial and risk functions. The rating framework relies on internal models. Special attention is paid to timely updating of ratings (which, in any event, are subject to annual review)⁽¹⁾.

The risk measure of the credit portfolio is based primarily on the Basel parameters that are used to calibrate the capital need. As such, the Group relies for the internal rating of counterparties on Balois models allowing the assessment of credit quality, supplemented for “non-retail” counterparties, by expert judgment. These measures are complemented by an internal stress-sized risk assessment, either at the global portfolio level or at the sub-portfolio level, linking risk measures and rating migration to macro-economic variables most often to say expert. In addition, the calculation of expected losses under the provisions of IFRS 9, used to determine the level of impairment on healthy outstandings, provides additional insight into assessing portfolio risk.

In consultation with the Risk Department, the businesses implement, most of the time, pricing policies that are differentiated according to the level of risk of counterparties and transactions. The purpose of pricing a transaction is to ensure acceptable profitability, in line with the objectives of ROE (Return on Equity) of the business or entity, after taking into account the cost of the risk of the transaction in question. The pricing of an operation can nevertheless be adapted in certain cases to take into account the overall profitability and the potential customer relationship development. The intrinsic profitability of products and customer segments is subject to periodic analysis in order to adapt to changes in the economic and competitive environment.

Proactive management of counterparties whose situation has deteriorated is key to containing the risk of final loss in the event of counterparty failure. As such, the Group has put in place rigorous procedures for monitoring non retail counterparties and/or for closer monitoring of retail counterparties whose risk profiles are deteriorating. In addition, the businesses and entities, in conjunction with the Risk and Finance Departments, and through collaborators specialising in recovery and litigation, work together to effectively protect the Bank’s interests in the event of default.

MEASURES TO MANAGE ESG RISK FACTORS

Concerning ESG risks (Environmental, Social & Governance), the assessment and management of the impact of ESG risk factors on credit risk is based in particular on the establishment of exclusion lists, portfolio alignment indicators (oil and gas and electricity production for example) and sensitivity analyses (in particular transition risk via the CCVI or Corporate Climate Vulnerability Index).

In general, credit granting policies must comply with the criteria defined within the framework of the Group’s Social and Environmental Responsibility (CSR) policy, which is broken down through:

Risks related to climate change (physical and transition risks), which are an aggravating factor in the types of risks facing the Bank must be taken into account in risk assessment processes. An assessment of climate vulnerability (particularly in terms of transition risk) must be provided by the Business Unit for certain specific sectors and may have an impact on the internal rating so that it incorporates the client’s adaptation strategy (See also section 4.13 “Environmental, social and governance risks” of this Universal Registration Document).

Counterparty credit risk

The future value of exposure to a counterparty as well as its credit quality are uncertain and variable over time, both of which are affected by changes in market parameters. Thus, counterparty credit risk management is based on a combination of several types of indicators:

Market risk

The Group’s market activities are carried out as part of a business development strategy primarily focused on meeting client requirements through a full range of products and solutions.

Market risk is managed through a set of limits for several indicators (such as stress tests, Value at Risk (VaR) and stressed Value at Risk (SVaR), “Sensitivity” and “Nominal” indicators). These indicators are governed by a series of limits proposed by the business lines and approved by the Risk Division during the course of a discussion-based process.

The choice of limits and their calibration reflect qualitatively and quantitatively the fixing of the Group’s appetite for market risks. A regular review of these frameworks also enables risks to be tightly controlled according to changing market conditions with, for example, a temporary reduction of limits in case of a deterioration. Warning thresholds are also in place to prevent the possible occurrence of overstays.

Limits are set at different sub-levels of the Group, thereby cascading down the Group’s risk appetite from an operational standpoint within its organisation.

Within these limits, the Global Stress Test limits on market activities and the Market Stress Test limits play a pivotal role in determining the Group’s market risk appetite; in fact, these indicators cover all operations and the main market risk factors as well as risks associated with a severe market crisis which helps limit the total amount of risk and takes account of any diversification effects.

Non financial risks (including compliance risk)

Non-financial risks are defined as non-compliance risk, risk of inappropriate conduct, IT risk, cybersecurity risk, other operational risks, including operational risk associated with credit risk, market risk, model risk, liquidity and financing, structural and rate risk. These risks can lead to financial losses.

Governance and a methodology have been put in place for the scope of non-financial risks.

As a general rule, the Group has no appetite for operational risk or for non-compliance risk. Furthermore, the Group maintains a zero-tolerance policy on incidents severe enough to potentially inflict serious harm to its image, jeopardise its results or the trust displayed by customers and employees, disrupt the continuity of critical operations or call into question its strategic focus.

The Group underscores that it has is no or very low tolerance for operational risk involving the following:

Structural interest rate and exchange rate risks, risk to employee commitments

The Group measures and strictly controls structural risks. The mechanism whereby rate risk, foreign exchange risk and the risk on pension/long-service obligations is controlled is based on sensitivity or stress limits which are broken down within the various businesses (entities and business lines).

There are four main types of risk: rate level risk, curve risk book, optional risk (arising from automatic options and behavioral options) and basis risk, related to the impact of relative changes in interest rates indices. The Group’s structural interest rate risk management primarily relies on the sensitivity of Net Present Value (“NPV”) of fixed-rate residual positions (excesses or shortfalls) to interest rate changes according to several interest rate scenarios. The limits are established either by the Board of Directors or by the Finance Committee, at the Business Unit/Service Unit and Group levels. Furthermore, the Group measures and controls the sensitivity of its net interest margin (“NIM”) on different horizons.

The Group’s policy in terms of structural exchange rate risks consists of limiting as much as possible the sensitivity of its CET1 capital ratio to changes in exchange rates, so that the impact on the CET1 ratio of an appreciation or a depreciation of all currencies against the euro does not exceed a certain threshold in terms of bp by summing the absolute values of the impact of each currency.

Regarding risks to pension and long-service obligations, which are the Bank’s long-term obligations towards its employees, the amount of the provision is monitored for risk on the basis of a specific stress test and an attributed limit. The risk management policy has two main objectives: reduce risk by moving from defined-benefit plans to defined-contribution plans and optimise asset risk allocation (between hedge assets and performance assets) where allowed by regulatory and tax constraints.

Structural risk-liquidity and funding risk

Controlling liquidity risk is based primarily on:

Controlling financing risk is based on:

Model risk

The Group is committed to defining and deploying internal standards to reduce model risk on the basis of key principles, including the creation of three independent lines of defence, the proportionality of due diligence according to each model’s level of risk inherent, the consideration of the models’ entire lifecycle and the appropriateness of the approaches within the Group.

A wrong design, implementation, use or a non rigorous models monitoring can have two mains unfavorable consequences: an under estimation of equity based of models validated by Regulators and/or financial losses.

Risk model appetite is defined for the perimeter of this group of models: credit risk IRB and IFRS 9, market and counterparty risk, market product valuation, ALM, trading model, compliance and granting.

Risk related to insurance activities

The Group conducts Insurance activities (Life Insurance and Savings, Retirement savings, Property & Casualty Insurance, etc.) which exposes the Group to two major types of risks:

Investment risk

The Group has limited appetite for financial holdings, such as proprietary private equity transactions. The investments allowed are mainly related to:

Settlement/Delivery risk

The settlement-delivery risk on financial instruments arises when transactions (over-the-counter in cash or forward) give rise to a time lag (usually of a few hours) between the payment and the delivery of the underlying (securities, raw materials, foreign exchange, etc.) during their settlement.

The Group defines a risk appetite for delivery risk in relation to the quality of the counterparty (via its rating) with larger limits granted to counterparties in the investment grade category (IG).

Internal control is part of a strict regulatory framework applicable to all banking institutions.

In France, the conditions for conducting internal controls in banking institutions are defined in the Order of 3 November 2014, modified by the Order of 25 February 2021. This Order, which applies to all credit institutions and investment companies, defines the concept of internal control, together with a number of specific requirements relating to the assessment and management of the various risks inherent in the activities of the companies in question, and the procedures under which the supervisory body must assess and evaluate how the internal control is carried out.

The Basel Committee has defined four principles – independence, universality, impartiality, and sufficient resources – which underpin the internal control carried out by credit institutions.

The Board of Directors ensures that Societe Generale has a solid governance system and a clear organisation ensuring:

The Board tasks the Group’s General Management with rolling out the Group’s strategic guidelines to implement this set-up.

The Audit and Internal Control Committee is a Board of Directors’ Committee that is specifically responsible for preparing the decisions of the Board in respect of internal control supervision.

As such, General Management submits reports to the Audit and Internal Control Committee on the internal control of the Group. The Committee monitors the implementation of remediation plans when it considers the risk level to be justified.

Internal control is based on a body of standards and procedures.

All Societe Generale Group activities are governed by rules and procedures contained in a set of documents referred to collectively as the “Standard Guidelines”, compiled in the Societe Generale Code, which:

The Societe Generale Code groups together the standard guidelines which, in particular:

The Societe Generale Code has force of law within the Group and falls under the responsibility of the Group Corporate Secretary.

In addition to the Societe Generale Code, operating procedures specific to each Group activity are applied. The rules and procedures in force are designed to follow basic rules of internal control, such as:

Multiple and evolving by nature, risks are present in all business processes. Risk management and control systems are therefore key to the Bank’s ability to meet its targets.

The internal control system is represented by all methods which ensure that the operations carried out and the organisation and procedures implemented comply with:

Internal control in particular aims to:

The internal control system is based on five basic principles:

The internal control framework is based on the “three lines of defence” model, in accordance with the Basel Committee and European Banking Authority guidelines:

Operational management is responsible for risks, their prevention and their management (by putting in place first-level permanent control measures, amongst other things) and for implementing corrective or remedial actions in response to any deficiencies identified by controls and/or process steering;

Within the internal control framework, operational management is responsible for verifying the proper and continuous running of the risk security and management operation functions through the effective application of established standards, defined procedures, methods and requested controls.

Accordingly, these functions must provide the necessary expertise to define in their respective fields the controls and other means of risk management to be implemented by the first line of defence, and to ensure that they are effectively implemented; they conduct second-level permanent control over all of the Group’s risks, based in particular on the controls they have defined, as well as those defined, if necessary, by other expert functions (e.g. sourcing, legal, tax, human resources, information system security, etc.) and by the businesses;

The Chief Executive Officer is responsible for ensuring the overall consistency and effectiveness of the internal control system.

The purpose of the Group Internal Control Coordination Committee (GICCC) is to ensure the consistency and effectiveness of the Group’s internal control, in response in particular to the obligation laid down in Art. 16 of the amended French Order of 3 November 2014. The Committee is chaired by the Chief Executive Officer, or in his absence, by a Deputy General Manager or by the Deputy Chief Executive Officer tasked with supervising the area under review. When it meets, the CCCIG convenes the Manager responsible for Coordinating the Internal Control function, the Permanent Control function, the Managers of the second line of defence (CPLE and RISQ), the Representatives appointed by the Heads of DFIN and RESG (including the Global CISO), the Manager of the third line of defence (IGAD) and as observers, the Head of Operational Risks, as well as the Heads of the level 2 permanent control central teams (RISQ/CTL, CPLE/CTL, DFIN/CTL).

The Committee meets approximately 20 times a year to deal with cross-cutting topics, as well as the annual review of each BU/SU.

Its objectives are:

The organisation put in place at Group level to coordinate action by each of the various internal control functions is rolled out in each Business Unit (BU) and Service Unit (SU). All Group BUs and SUs have internal control coordination committees. These committees are chaired by the BU or SU manager and convene the managers of the competent permanent and internal audit control functions, as well as the representatives of the Manager of the Group’s internal control coordination function and the Group Heads of the control functions.

Permanent control system

The Group’s permanent control system comprises:

In 2018, General Management initiated a transformation programme of the Group’s permanent control system, which is under its direct supervision. Through a set of actions focusing on areas such as standards, methods, tools, procedures and training, the programme served to consolidate the control culture and optimise risk control, and thus helps to improve the quality and the reliability of services provided to our customers and partners. The programme was finalised and brought to an end in 2021, and the transfer of the long-term activities to operating teams was completed.

FIRST-LEVEL PERMANENT CONTROL

Permanent Level 1 controls, carried out on operations performed by BUs and the SUs, ensure the security and quality of transactions and the operations. These controls are defined as a set of provisions constantly implemented to ensure the regularity, validity, and security of the operations carried out at operational level.

The permanent Level 1 controls consist of:

Defined by a Group entity within its scope, Level 1 controls include controls (automated or manual) that are integrated into the processing of operations, proximity controls included in operating procedures, safety rules, etc. They are carried out in the course of their daily activities by agents directly in charge of an activity or by their managers. These controls aim to:

Permanent Level 1 controls are set by management and avoid, as far as possible, situations of self-assessment. They are defined in the procedures and must be traced without necessarily being formalised, e.g. preventive automated controls that reject transactions that do not comply with system-programmed rules.

In order to coordinate the operational risk management system and the permanent Level 1 control system, the BUs/SUs use a specific department called CORO (Controls & Operational Risks Office Department).

SECOND-LEVEL PERMANENT CONTROL

The permanent Level 2 control ensures that the Level 1 control works properly:

The permanent level 2 control, control of the controls, is carried out by teams independent of the operational.

These controls are performed centrally by dedicated teams within Risk Service Unit (RISQ/CTL), Compliance Service Unit (CPLE/CTL) and Finance Service Unit (DFIN/CTL) and locally by the second-level control teams within the BU/SUs or entities.

Internal audit

The Group’s Internal Audit function is delivered by the Service Unit Inspection and Internal Audit (“IGAD”), which brings together the Group’s Inspection and Internal Audit Departments. The Group’s Head of Inspection and Audit has a Group-wide responsibility for the internal audit function.

The Internal Audit function is part of the Group’s internal control set-up. It provides the third and last line of defence and performs internal audit controls. The third line of defense is strictly independent from the businesses and other lines of control.

The internal audit mandate performed by IGAD, defined in line with the IIA Standards (Institute of Internal Auditors), is an independent and objective activity that provides the Group with an assurance as to how effectively it is controlling its risks and operations, advises on improvements and contributes to the creation of added value. By carrying out this mandate, Inspection and Internal Audit help the Group to achieve its targets by evaluating systematically and methodically its processes for risk management, control and corporate governance and making recommendations to increase their efficiency.

IGAD’s internal audit mandate covers Societe Generale SA and all of the Group’s entities and business activities. All businesses, operations and processes without exceptions can be subject to an audit carried out by either Inspection or Internal Audit. That said, entities in which the Group holds a minority stake are excluded, even if the Group has a significant influence, except in cases where such a situation is likely to have a significant impact for the Group on its risk management.

Outsourced activities are also included in the scope of the mandate of IGAD as the Group’s internal audit function.

The Group Head of Inspection and Audit reports directly to the Group Chief Executive Officer.

The Chief Executive Officer meets with the Chairman of the Board of Directors on a regular basis. As mentioned in the Internal Rules of the Board, updated in August 2022, the Group Head of Inspection and Audit reports on the execution of the internal audit mandate to the Board of Directors on the basis of presentations made to the Group’s Audit and Internal Control Committee. He presents the Group’s audit and inspection plan, approved by the Chief Executive Officer, to the Board of Directors following its examination by the Group’s Audit and Internal Control Committee.

The Group Head of Inspection and Audit attends all meetings of the Board’s Audit and Internal Control Committee and on reguasiprovides the Committee a presentation of the activity of Internal Audit and General Inspection as well as on the status of implementation of recommendations issued both by IGAD and by supervisors (the ECB and the ACPR). He also attends all meetings of the Board’s Risk Committee. Both the Audit and Internal Cobntrol Committee and the Risk Committee are briefed by the Group Head of Inspection and Audit, possibly at his request.

As foreseen in the Internal Rules of the Board, if necessary, in the event of changes in the risks affecting or likely to affect the Company, the Group Head of Inspection and Audit may report to the Board of Directors, directly or through the Audit and Internal Committee, without referring to the Effective Senior Managers.

To perform its duties , the Group’s IGAD Service Unit is given adequate resources from a qualitative and quantitative point of view. The Group’s Inspection and Audit Service Unit has about 1,000 employees located at Head Office and within affiliates and branches (France and overseas).

The Service Unit IGAD operates as a hierarchically integrated division. General Inspection, based at Head Office, has a Group-wide mandate. The various Audit Departments are each in charge of a defined scope of businesses or risks. Whether they are based at Head Office or within entities (subsidiaries or branches), Audit Departments all report to the IGAD Service Unit. A matrix organisation allows to cover important transversal topics at Group level. Depending on resources and skills required, an audit mission can bring together auditors from different departments. IGAD may decide to send any audit team to carry out a mission within the Group.

General Inspection and Audit carry out their roles on the basis of missions. Beyond audit missions defined in the yearly plan, General Inspection can be called to perform analysis and study missions or contribute to due diligence work in cases of acquisitions or divestments of Group entities or activities. A specific framework is in place to monitor such work and ensure there are no conflict of interest.

General Inspection and Audit define their respective workplans on a risk-based approach. Internal Audit combines this approach with the requirement to comply with a five-year audit cycle and determines the frequency of review based on the risk level of the audited entities.

In 2022, General Inspection and Internal Audit continued to perform an independent follow-up on recommendations issued by supervisors (ECB, ACPR) with regular status updates presented - in coordination with the Group’s General Secretariat - to General management and the Board’s Audit and Internal Control Committee.

As required by international auditing standards, IGAD is subject to an external quality assessment. IGAD’s certification was maintained following a second certification by the certification institute of the IFACI (Institut Français de l’Audit et du Contrôle Interne – French branch of the IIA).

The context in 2022 allowed IGAD to resume business travel and on-site missions to a larger extent whilst maintaining remote auditing methods developed during the health crisis. Audit missions carried out in 2022 were split between all risk categories. Changes made to the audit plan during the year remained limited (reduction of 8% of man-days on audit missions with a total of 586 audit missions carried out this year), reflecting mainly the impact of a higher level of turnover in certain geographies and a shift in a number of projects initially planned to be subject to an audit. Such tensions also led to reschedule a few Inspection missions this year.

In 2022, IGAD initiated works required in response to recommendations issued by the European Central Bank and IFACI on the internal audit function. Such work pertained mainly to (i) governance, being IGAD’s internal governance, the set-up with regards to the interactions between the internal Audit function and the Group’s governance at General Management and Board of Directors’ level and the governance for the audit function at local level; (ii) the redesign, to be completed by end of 2024, of its independent risk assessment exercise and (iii) the introduction of a multi-year audit plan. The implementation of these action plans will remain a priority over 2023 and 2024 for the internal audit function. In addition, the restructuring of the audit recommendations issuance and monitoring process was initiated: all Business Units and Service Units will be engaged in the process, which will enable IGAD to focus its work on the most important risks, in line with a strategic goal to optimie the layering of controls within the Group’s internal control framework.

On the operational side, internal audit departments (i) further developed their ability to provide independent assurance on the performance of permanent control departments; (ii) reinforced their auditing methods on topics such as “conduct” or “ESG” and (iii) increased the use of data analytics in the audit missions.

Audited I Since January 2014, Societe Generale has applied the Basel III regulations implemented in the European Union through a regulation and a directive (CRR and CRD4 respectively).

The general framework defined by Basel III is structured around three pillars:

Several amendments to European regulatory standards were adopted in May 2019 (CRR2/CRD5). The majority of these provisions entered into force in June 2021.

The amendments include:

With regard to the implementation of the market risk reform (FRTB), after the publication of the first revised standard in January 2016 and of the consultation in March 2018 on this subject, the Basel Committee published in January 2019 its final text: BCBS457. In March 2020, the Basel Committee announced a one-year delay in the implementation of FRTB (1 January 2023 instead of 1 January 2022 as originally planned in the January 2019 text).

The European FRTB calendar would be as follows:

In December 2017, the Group of Central Bank Governors and Heads of Supervision (GHOS), the Basel Committee’s oversight body, endorsed the regulatory reforms aiming to complete Basel 3.

A first version of the transposition text was published by the European Commission on 27 October 2021 (“CRR3 – CRD6”) and will serve as support for the European Trialogue where this version will be combined with the Council text published in November 2022 and the Parliament text. The trialogue is expected to be finalized in the summer of 2023. It will then have to be voted by Parliament to become applicable. .

These new rules, which were to take effect from 2022, have been postponed to January 2025 with an overall output floor: the risk-weighted assets (RWA) will be floored to a percentage of the standard method (credit, market and operational). The output floor level will increase gradually, from 50% in 2025 to 72.5% in 2030.▲

General principles

Audited I The risk approval process is based on the following main principles:

The business line assumes the burden of provisions and losses related to its credit decisions as the first line of defence. The Risk Department submits recommendations to CORISQ on the evolution of the granting policy, with limits on credit portfolios, for the countries, geographic areas, sectors, products or types of customers presenting high concentration risks. ▲

Governance

The main mission of the Risk Department is to draw up the document formalising and defining with the Finance Department the Group’s risk appetite, a mechanism aimed at defining the acceptable level of risk given the Group’s strategic objectives.

The Risk Department is responsible for implementing the system to manage and monitor risks, including cross-Group risks. The Risk Department exercises hierarchical and functional oversight of the Risk management function in charge of Group credit risk giving it a comprehensive view of all the Group’s credit risks.

The Risk Department helps define risk policies in light of each core business targets and the associated risk issues. It defines or approves the methods and procedures used to analyse, measure, approve and monitor risks and the risk IT system and makes sure these are appropriate to the core businesses’ needs. As second line of defence, various Risk Departments (for Retail Banking, Corporate and Investment Banking and Market activities) are also in charge of credit risk and as such responsible for the independent control as second line of defence. These consist in independently reviewing and comparing any credit application that exceeds the authority delegated to core businesses or local Risk Department teams. The Risk Department also assesses the quality of first-level credit reviews and takes any remedial action necessary.

The Risk Department also approves transactions and limits proposed by core business lines in respect of credit risk.

Finally, as part of its responsibilities as a second line of defence, the Risk Department carries out permanent controls of credit risks. As such, the Risk Department provides independent control as a second line of defence on the detection and monitoring of the overshoot resolution.

The monthly Risk Monitoring Report presented to CORISQ by the Risk Department comments among others on the evolution of the Group’s credit portfolio and ensures compliance with the guidelines. Changes in the credit portfolio, changes in credit policy validated by CORISQ and respect for the Group’s risk appetite are presented at least quarterly to the Risk Committee of the Board of Directors.

As part of the quarterly reporting to the Board of Directors and to the Risk Committee of the Board of Directors, an overview of the main credit risk metrics supplemented by details of the thresholds and limits where applicable is presented. The following metrics are in particular the subject of a presentation with a quarterly history: net cost of risk, NPL rate (non-performing loans), coverage rate, average credit quality of portfolios, outstanding corporates placed under surveillance (watchlist), supervision of corporate exposures by sector of activity, Grands Risques Réglementaires (major regulatory risk exposures), environmental indicators of portfolio alignment, etc.

A monthly version of the report intended for the Risk Committee of the Board of Directors also provides additional information at a Business Unit level or on certain financing activities. A summary of the thematic CORISQs is also presented.

As part of the monthly CORISQ reporting to General Management, a summary of the main credit files is presented. Thematic presentations also provide recurring clarifications on certain perimeters and activities: personal real estate loans, consumer credit, non-retail credit risk, sector limits, country risks, major regulatory risks (Grands Risques Réglementaires), environmental indicators of portfolio alignment, etc.

Specificities of retail portfolios

Audited I Individual and professional portfolio (retail portfolio) have specific features in terms of risk management. This management is based on a statistical approach and on the use of tools and methods in the industrialisation of processes.

STATISTICAL APPROACH

The retail portfolio is made up of a sum of exposures of low unit amounts, validated in a partially automated manner, which together constitute significant outstandings at Group level and therefore a high level of risk.

Given the high number and standardisation of retail clients commitments, aggregate monitoring is necessary at all levels of the Risk function in charge of credit risk. This mass monitoring of retail customer exposure is based on the use of a statistical risk approach and monitoring by homogeneous risk class.

In these circumstances, the risk monitoring system for the Retail portfolio cannot rely on the same procedures or the same tools as for corporates.

For instance, any change in marketing policy (shortening the probationary period for loyalty, delegation of lending decisions to brokers, increase in margins, etc.) can have a rapid and massive impact and must therefore be tracked by a system that allows all actors (i) to identify as quickly as possible where any deterioration in exposures is coming from and (ii) to take remedial action.

Even if the IFRS 9 standard authorises a collective approach and if the Group has a statistical approach on retail customers for the evaluation of the expected loss, the increase in risk for the purposes of the classification into stages is identified on an individual basis for this clientele. The available parameters (operating accounts and late payments) allow the assessment of the significant increase in credit risk at the level of individual exposures. The collective approach is currently only used in a very small number of instances within the Group.

IMPORTANCE OF TOOLS AND METHODS IN THE INDUSTRIALISATION OF PROCESSES

The Risk management function must support Business Units and subsidiary managers in managing their risks with an eye to:

Risk Department structures its supervision around the following four processes:

Monitoring individual concentration

Societe Generale complies with regulations governing large exposures (major regulatory risk exposure cap of 25% of equity). A more restrictive internal limit of 10% delegated by General Management (which can occasionally or permanently amend it) has been put in place. Since 1 July 2018, the High Council for Financial Stability has imposed on banks an exposure limit on the most indebted companies established in France at a maximum level of 5% of eligible equity.

Internal systems are implemented to identify and manage the risks of individual concentrations, particularly at granting of credit. For example, concentration thresholds, based on the internal rating of counterparties, are set by CORISQ and define the governance for validating the limits on individual concentrations. Exposures to groups of clients deemed significant by the Group are reviewed by the Large Exposure Committee chaired by the General Management. As part of the identification of its risks, the Group also carries out loss simulations by type of customer (on significant individual exposures that the Group could have).

The Group uses credit derivatives to reduce some exposures considered to be overly significant. Furthermore, the Group systematically seeks to mutualise risks with other banking partners, at origination or through secondary sales, to avoid keeping an excessive share in operations of large-scale companies.

Monitoring country risk

Country risk arises when an exposure (loan, security, guarantee or derivative) becomes susceptible to negative impact of the country for example from changing regulatory, political, economic, social and financial conditions.

Strictly speaking, the notion of country risk refers to political and non-transfer risk which covers the risk of non-payment resulting from either actions or measures taken by local government authorities (decision to prohibit the debtor from meeting its commitments, nationalisation, expropriation, non-convertibility, etc.), domestic events (riots, civil war, etc.) or external events (war, terrorism, etc.).

More broadly, a deterioration of the credit quality of the country, the Sovereign, or the conditions of activity in the country may result in a commercial risk, with in particular a deterioration of the credit quality of all counterparties in a given country due to a national economic or financial crisis, independently of each counterparty’s individual financial situation. This could be a macroeconomic shock (sharp slowdown in activity, systemic banking crisis, etc.), currency depreciation, or sovereign default on external debt potentially entailing other defaults.

Overall limits (except for SUIG – Sovereign Upper Investment Grade countries) and/or monitoring of exposures have been established for countries based on their internal ratings and governance indicators. The supervision is strengthened depending on the level of the country’s risk.

Country limits (and in some cases thresholds by country) are approved annually by General Management (or the Risk Department in specific situations). They can be revised downward at any time if the country’s situation deteriorates or is expected to deteriorate.

All Group exposures (securities, derivatives, loans and guarantees) are taken into account by this monitoring. The Country Risk methodology determines an initial risk country and a final risk country (after any guarantee-related effects), which is supervised using country limits or threshold (except for SUIG countries).

The procedure for putting a country on watch list is triggered in the event of deterioration in the country risk or anticipation of such a deterioration by the Risk Department.

Sector monitoring

The Group regularly reviews its entire credit portfolio through analyses by business sector. To do this, it relies on industry sector studies (including a one-year anticipation of sectoral risk) and on sectoral concentration analyses.

In addition, the Group periodically reviews its exposures to the portfolio segments presenting a specific risk profile, within the framework of CORISQs at Group level or at Business Unit level. These identified sectors or sub-portfolios are, where appropriate, subject to specific supervision through portfolio exposure limits and specific granting criteria. The limits are monitored either at General Management level or at Business Unit management level depending on the materiality and the level of risk of the portfolios.

As a complement, targeted sector-based research and business portfolio analyses may be requested by General Management, the Risk Department and/or the businesses, depending on current affairs. In that respect, certain sectors weakened in 2022 by the Russian-Ukrainian crisis and its effects have been subject to dedicated monitoring (for example, the electricity and gas supply sector in Europe).

Portfolios specifically monitored by the Group CORISQ include:

Credit stress tests

With the aim of identifying, monitoring and managing credit risk, the Risk Department works with the businesses to conduct a set of specific stress tests relating to a country, subsidiary or activity. These specific stress tests combine both recurring stress tests, conducted on those portfolios identified as structurally carrying risk, and ad hoc stress tests, designed to recognise emerging risks. Some of these stress tests are presented to CORISQ and used to determine how to frame the corresponding the activities concerned.

Credit risk stress tests complement the global analysis with a more granular approach and allow fine-tuning of the identification, assessment and operational management of risk, including concentration. They allow to calculate the expected credit losses on exposures which have undergone an event of default and on exposures which have not undergone an event of default, in accordance with the method prescribed in the standard IFRS 9. The perimeter covered may include counterparty credit risk on market activities when relevant.

4.6.1.1  Main principles

Audited I Counterparty credit risk is framed through a set of limits that reflect the Group’s appetite for risk.

Counterparty credit risk management mainly relies on dedicated first and second lines of defence as described below:

The fundamental principles of limit granting policy are:

These limits are subject to annual or ad hoc reviews depending on he needs and changing market conditions.

A dedicated team within the Risk Department is in charge of production, reporting and controls on risk metrics, namely:

In addition, a specific monitoring and approval process is implemented for the most sensitive counterparties or the most complex categories of financial instruments.

4.6.1.2  Comitology

While not a substitute for CORISQ or for the Risk Committee of the Board of Directors (see the section on Risk management governance), the Counterparty Credit Risk Committee (CCRC) closely monitors counterparty credit risk through:

This Committee, chaired by the Risk Department on a monthly basis, brings together representatives from the Market Activities and the Global Banking and Advisory Business Units, but also departments that, within the risk management function, are in charge of monitoring counterparty credit risks on market transactions and credit risk. The CCRC also provides an opinion on the changes to the risk frameworks within its authority. The CRCC also identifies key CCR topics that need to be escalated to the management.

4.6.1.3  Replacement risk

The Group frames the replacement risks by limits that are defined by credit analysts and validated by LoD2 based on the Group’s risk appetite.

The limits are defined at the level of each counterparty and then aggregated at the level of each client group, each category of counterparties and finally consolidated at the entire Societe Generale Group portfolio level.

The limits used for managing counterparty credit risk are:

The Group also considers other measures to monitor replacement risk:

4.6.1.4  CVA (Credit Valuation Adjustment) risk

In addition to the replacement risk, the CVA (Credit Valuation Adjustment) measures the adjustment of the value of the Group’s derivatives and repos portfolio in order to take into account the credit quality of the counterparties facing the Group (see section 4.6.3.2 “Credit Valuation Adjustment”).

Positions taken to hedge the volatility of the CVA (credit, interest rate or equity instruments) are monitored through:

The different indicators and the stress tests are monitored on the net amount (the sum of the CVA exposure and of their hedges).

4.6.1.5  Risk on central counterparties

Clearing of transactions is a common market practice for SG, notably in compliance with the EMIR (European Market Infrastructure Regulation) regulations in Europe and the DFA (Dodd-Frank Act) in the United States, which require that the most standardised over-the-counter transactions be compensated via clearing houses approved by the authorities and subject to prudential regulation.

As a member of the clearing houses with which it operates, the Group contributes to their risk management framework through deposits into the defaults funds, in addition to margin calls.

The counterparty credit risk stemming from the clearing of derivatives and repos with central counterparties (CCP) is subject to a specific framework on:

See table “EAD and RWA on central counterparties” of section 4.6.3.4 “Quantitative Information” for more information.

Main functions

Audited I Although primary responsibility for managing risk exposure relies on the front office managers, the supervision system comes under the Market Risk Department of the Risk Department, which is independent from the businesses.

The main missions of this department are: