Pillar 3 Disclosure

Update as at

30 June 2020

Pillar 3 Disclosure

Update as at

30 June 2020

4

Banca Monte dei Paschi di Siena SpA

Company Head Office in Siena, Piazza Salimbeni 3, www.mps.it

Recorded in the Arezzo-Siena Company Register - Registration no. and tax code 00884060526 MPS VAT Group - VAT no. 01483500524

Member of the Italian Interbank Deposit Protection Fund. Bank Register no. 5274

Parent Company of the Monte dei Paschi di Siena Banking Group, registered with the Banking Groups Register

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Index

Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

Own Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

Capital requirements, liquidity ratios and leverage . . . . . . . . . . . . . . . . . . 22

Credit Risk. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36

Credit Risk: general disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . 36

Credit Risk: Standard approach. . . . . . . . . . . . . . . . . . . . . . . . . . 40

Credit Risk: use of the AIRB approach . . . . . . . . . . . . . . . . . . . . . .44

Credit Risk: credit quality . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57

Credit Risk: use of risk mitigation techniques. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72

Counterparty Risk. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76

Market Risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86

Operational Risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92

Liquidity Ratios. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95

Leverage Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96

Declaration of the Financial Reporting Officer . . . . . . . . . . . . . . . . . . . . 98

List of Tables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

99

Appendix 1 - Summary of Information published in line with CRR requirements. . . . . 102

Appendix 2 - Details of Information provided in

compliance with EBA Guidelines GL 2016/11. . . . . . . . . . . . . . . . . . . . 103

Appendix 3 - Details of Information provided in

compliance with EBA Guidelines GL 2018/01. . . . . . . . . . . . . . . . . . . . 104

Appendix 4 - Details of Information provided in compliance

with EBA Guidelines GL 2018/10.. . . . . . . . . . . . . . . . . . . . . . . . 104

Appendix 5 - Details of Information provided in

compliance with EBA Guidelines GL 2020/07. . . . . . . . . . . . . . . . . . . . 104

Contacts .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106

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Introduction

7

Introduction

The New Regulations for the Prudential Supervision of banks and banking groups entered into force as of 1 January 2014.

The regulations aim to align national requirements with the changes introduced to the International regulatory framework, following reforms in the Basel Committee agreements (Basel 3), particularly the European Union's New Regulatory and Institutional Framework for Banking Supervision.

In particular, the contents of the "Basel 3 framework" have been adopted within the EU through two capital requirement rules:

  • CRR - Capital Requirements Regulation (EU) 575/2013 of the European Parliament and Council of 26 June 2013 regarding prudential requirements for credit institutions and investment firms, which amends Regulation (EU) 648/2012;
  • CRD IV - Capital Requirements of the European Parliament and Council of

26 June 2013 on access to the activity of credit institutions and the prudential supervision of credit institutions and investment firms, amending Directive 2002/87/EC and repealing Directives 2006/48/EC and 2006/49/EC.

The current regulatory package includes application criteria, set out in the Regulatory Technical Standards (RTS) and Implementing Technical Standards (ITS)

adopted by the European Commission, upon the proposal of the European Supervisory Authorities.

At national level, the new harmonized framework has been implemented by Bank of Italy with Circular No 285 of 17 December 2013 and subsequent updates

  • Supervisory Provisions for Banks, which contains the prudential supervision regulations applicable to Italian banks and banking groups, reviewed and updated to adjust the internal regulations to the new elements of the international regulatory framework, with special reference to the new regulatory and institutional structure of banking supervision of the European Union and taking into account the needs detected while supervising banks and other intermediaries.
    The current regulatory framework aims to improve the ability of banks to absorb shocks arising from financial and economic stress, whatever the source, improve risk management and governance and strengthen the bank's transparency and disclosures, while taking into account developments from the financial crisis.

The Basel Committee has maintained a three Pillars-based approach which was at the basis of the previous capital accord known as "Basel 2", but has integrated and strengthened it to increase the quantity and

G R U P P O M O N T E P A S C H I

Introduction

8

quality of banks' capital base and introduce countercyclical supervisory tools as well as new standards for liquidity risk management and financial deleveraging.

More specifically, Pillar 3 was designed on the notion that Market Discipline can be harnessed to reinforce capital regulation to promote stability and soundness in banks and financial systems.

Pillar 3, therefore, aims to complement the minimum capital requirements (Pillar 1) and supervisory review process (Pillar 2) by developing a set of transparent disclosure requirements which will allow market participants to have access to key, fully comprehensive and reliable information on capital adequacy, risk exposures and risk identification, measurement and management processes.

Public Disclosure (Pillar3) is now governed directly by European Regulation no. 575/2013 of 26 June 2013 of the European Parliament and Council, Part 8 and Part 10, Title I, Chapter 3 (hereinafter referred to as "The Regulations" or "CRR").

Under the new regulations, the CRR requires banks to publish information at least on an annual basis along with their financial statements and to evaluate the need to publish some or all disclosures more frequently than once a year depending on their specific activities. Institutions are to assess the possible need for more frequent disclosure of items of information laid down in Article 437 (Own Funds), and Article 438

(Capital Requirements), and information on risk exposure and other items prone to rapid change.

The EBA (European Banking Authority) subsequently issued its guidelines (EBA/ GL/2014/14 of 23-12-2014), on the need to publish information more frequently than once a year.

In view of the above regulations and in the interest of transparency and continuity, the Group publishes summary information on its Own Funds, Capital Requirements and Leverage in its quarterly reports, providing further information on exposures subject to internal models in its half-year report.

In December 2016, the European Banking Association (EBA) published its Guidelines on disclosure requirements under Part Eight of the Capital Requirement Regulation (CRR), providing financial institutions with specifications on the information requested in specific articles of Part Eight of the CRR. The EBA has also integrated the outcomes as expected from the aforementioned guidelines, by issuing the LCR Guidelines from art. 435, CRR of June 2017 and the reports guidelines in accordance with the law of Art. 473 bis, CRR of January 2018 on transitional arrangements aimed at lessening the impact of the introduction of the IFRS9 on own funds, by introducing additional informational requisites.

Subsequent to the public consultation process launched in April, in December 2018 the EBA published the final version of the

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Introduction

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document "Guidelines on disclosures of non- performing and forborne exposures" (EBA/ GL/2018/10), effective as of 31 December 2019 (in line with the "Guidelines for banks on non-performing loans", published by the ECB in March 2017) and aimed at promoting consistency in NPL disclosure requirements.

Lastly, on 2 June 2020, the EBA published its Guidelines on reporting and disclosure of exposures subject to measures applied in response to the COVID-19 crisis (EBA/ GL/2020/07).

The current document, therefore, provides an update as at 30 June 2020 of quantitative information deemed most significant by the Group and, in particular, the quantitative information on Own Funds, Capital requirements, the Leverage Ratio, Credit and Counterparty risk's exposures and the use of risk mitigation techniques.

For additional information not contained in this document, particularly regarding the general, organizational and methodological aspects relating to the different types of risk, please refer to the Annual Report as at 31 December 2019. Further information on the Group's risk profile, pursuant to Art. 434 of the CRR, is also published in the Consolidated Half-year Report as at 30 June 2020, the Report on Corporate Governance and the Compensation Report.

The current update introduces the information templates required by the Basel 3 framework and also reports values as at 31

December 2019.

Pillar 3 Disclosure is prepared at consolidated level by the Parent Company.

Unless otherwise indicated, all the amounts in this report are stated in TEUR (thousand Euros).

The Montepaschi Group regularly publishes its Pillar 3 disclosure on its website at: english.mps.it/investors.

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Own Funds

10

Own Funds

Own

funds, an element of Pillar 1,

are

calculated according to Basel 3

rules

implemented in Europe throug

a comprehensive body of regulations, consisting of the Capital Requirements Regulation (CRR), European Regulation No. 575/2013, and related integrations, by the Capital Requirements Directive (CRD IV), by Regulatory Technical Standards and Implementing Technical Standards issued by the EBA, and by supervisory instructions issued by Bank of Italy (specifically, Circular nos. 285 and 286). The introduction of a new regulatory framework is subject to a transition period that extends the full application of the rules to 2019 (2022 for the phase-out of certain capital instruments) and during which the new rules will be applied in an increasing proportion.

Own funds, calculated according to the transitional arrangements in force, differ from the net equity book value since prudential regulations aim to protect the quality of assets and reduce any potential volatility caused by the application of IAS/IFRS. The items that constitute own funds, therefore, must be fully available to the Group so that they may be used to cover risks and losses without any restrictions. Institutions are, in fact, required to demonstrate the quality and quantity of own funds in compliance with applicable European legislation.

Own funds are made up of Tier 1 capital

(T1), in turn consisting of Common Equity Tier 1 (CET1) and of Additional Tier 1 (AT1), and of Tier 2 (T2).

For a detailed description of the items included in Own Funds (CET1, AT1, T2) whether relating to transitional or final requirements, please refer to the Pillar 3 Report as at 31 December 2019.

On 1 January 2018, the new accounting standard IFRS 9 "Financial Instruments", which replaces IAS 39 (on the classification and evaluation of financial assets and liabilities), came into effect. In January 2018, the Montepaschi Group, availing itself of the option provided for by Regulation UE 2395/2017, has communicated to the competent supervisory authorities the intention to apply the IFRS9 transitional arrangements aimed at mitigating the impact on the own funds linked to the introduction of the new accounting standards. Such transitional regime, applicable from 1 January 2018 to 31 December 2022, under Article 473a, Regulation (UE) No 575/2013, allows the isolation of the CET1 through a mechanism of gradual introduction of the IFRS 9 impact relative to the amendments carried out during FTA. In particular, coherently with the diminution of the equity linked to the major rectifications arisen from the application of the impairment model introduced by the IFRS 9, it is allowed to be included, as positive element, a decreasing

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progressive quota of the increased reserves for attended credit losses in the Common Equity Tier 1, according to the following percentages:

  • 95% during the period from 1 January
    2018 to 31 December 2018
  • 85% during the period from 1 January
    2019 to 31 December 2019
  • 70% during the period from 1 January
    2020 to 31 December 2020
  • 50% during the period from 1 January
    2021 to 31 December 2021
  • 25% during the period from 1 January
    2022 to 31 December 2022.

On 26 June 2020, Regulation (EU) 2020/873 was published in the Official Journal of the European Union, amending the CRR and CRR II regulations, in order to adjust the prudential regulation framework to the requirements linked to the COVID-19 emergency. The Regulation introduces, inter alia, measures to relax the capital requirements applicable as of 27 June 2020, such as changing the IFRS 9 transitional provisions, which allows banks to sterilise the capital impacts associated with the increase in credit value adjustments recognised in the period 2020-2024 with respect to 1 January 2020 for stage 1 and 2 portfolios. In particular, the Regulation provides for the re-introduction into common equity Tier 1 capital of a progressively decreasing share of the effect of the higher adjustments, equal to

100% in 2020 and 2021, 75% in 2022, 50% in 2023 and 25% in 2024. In addition, banks are allowed to re-introduce within CET 1 capital any increase in value adjustments recognized at 1 January 2020 with respect to 1 January 2018 for exposures classified in stages 1 and 2 (progressively decreasing until 2022; that is, 95% in 2018, 85% in 2019, 70% in 2020, 50% in 2021 and 25% in 2022).

For the purposes of the calculation of minimum capital requirements for credit risk, starting from 30 June 2020, the Montepaschi Group, has availed itself of the option set out in paragraph 7bis of Article 473bis, which allows institution to replace the rescaling of all exposure values that are reduced by ECL provisions with a standard risk weight of 100% to be assigned to the amounts added back to CET1 capital.

On 26 June 2020, BMPS, availing itself of the option provided for by Article 648 of CRR, as amended by Regulation (EU) 2020/873, has communicated to the competent supervisory authorities the intention to apply, at consolidated and individual level, the prudential filter relating to the OCI reserve on government bonds to attenuate the negative impact of the levels of volatility in the financial markets and the debt of central administrations on regulatory capital. The temporary treatment, applicable in the period from 1 January 2020 to 31 December 2022, allows banks to exclude from common equity Tier 1 capital the

G R U P P O M O N T E P A S C H I

Own Funds

12

progressively decreasing amount of unrealised profits and losses accumulated starting from 31 December 2019, accounted for in the financial statement item "Changes in the fair value of debt instruments measured at fair value through other comprehensive income", with reference to exposures to central administrations, provided such exposures are not classified as non-performing financial assets. Institutions shall apply the following percentages:

  • 100% during the period from 1 January
    2020 to 31 December 2020;
  • 70% during the period from 1 January
    2021 to 31 December 2021;
  • 40% during the period from 1 January
    2022 to 31 December 2022.

The following table is based on the templates from Implementing Regulation (EU) no. 1423 of 20 December 2013, which lays out the implementing technical standards for disclosure of own fund requirements for institutions according to Regulation (EU) no. 575/2013 of the European Parliament and of the Council. In particular, Annex

  1. of the Regulation contains a specific template for publication of the main features of equity instruments. The table provides a description of instruments issued by the Bank and eligible for calculation within Tier 2 Capital.

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MAIN FEATURES OF THE INSTRUMENT (*)

  1. Issuer
  2. Unique identifier (e.g., CUSIP, ISIN or Bloomberg identifier for private placement)
  3. Governing law(s) of the instrument
    Regulatory treatment
  4. Current treatment taking into account, where applicable, transitional CRR rules
  5. Post-transitionalCRR rules
  6. Eligible at solo/(sub-)consolidated/solo&(sub-)consolidated
  7. Instrument type
  8. Amount recognised in regulatory capital or eligible liabilities (currency in million)
  9. Nominal amount of instrument (currency in million)

9a Issue price

9b Redemption price

  1. Accounting classification
  2. Original date of issuance
  3. Perpetual or dated
  4. Original maturity date
  5. Issuer call subject to prior supervisory approval
  6. Optional call date, contingent call dates and redemption amount
  7. Subsequent call dates, if applicable
    Coupons / dividends
  8. Fixed or floating dividend/coupon
  9. Coupon rate and any related index
  10. Existence of a dividend stopper

20a Fully discretionary, partially discretionary or mandatory (in terms of timing) 20b Fully discretionary, partially discretionary or mandatory (in terms of amount)

  1. Existence of step up or other incentive to redeem
  2. Cumulative or Noncumulative
  3. Convertible or non-convertible
  4. If convertible, conversion trigger(s)
  5. If convertible, fully or partially
  6. If convertible, conversion rate
  7. If convertible, mandatory or optional conversion
  8. If convertible, specify instrument type convertible into
  9. If convertible, specify issuer of instrument it converts into
  10. Write-downfeatures
  11. If write-down,write-down trigger(s)
  12. If write-down, full or partial
  13. If write-down, permanent or temporary
  14. If temporary write-down, description of write-up mechanism
  15. Position in subordination hierarchy in liquidation
    (specify instrument type immediately senior to instrument)
  16. Non-complianttransitioned features
  17. If yes, specify non-compliant features

Banca Monte dei Paschi di Siena S.p.A.

XS1752894292

English law except for subordination and "Statutory Loss Absorption Powers" conditions which are governed by Italian law

Tier 2 capital Tier 2 capital

Individual entity and consolidated

Tier 2 instrument pursuant to Art. 63 CRR 750 750 100,00 100,00

Liability - amortised cost 18/01/18

On maturity 18/01/28 Yes

Issuer's optional call on 18/01/2023 (the "Issuer Call Date") at par, plus accrued interests. Upon occurrence of a "Capital Event" or for tax reasons at par, plus accrued interests.

N/A

Fixed rate p.a. with reset after 5 years

5.375% till 18/01/2023, thereafter 5y eur mid swap rate +5.005% No

Mandatory

Mandatory No Non-cumulativeNon-convertible N/A

N/A

N/A

N/A

N/A

N/A

No

N/A

N/A

N/A

N/A

Senior

No

N/A

(*)"N/A" if the question is not applicable.

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Own Funds

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MAIN FEATURES OF THE INSTRUMENT (*)

  1. Issuer
  2. Unique identifier (e.g., CUSIP, ISIN or Bloomberg identifier for private placement)
  3. Governing law(s) of the instrument
    Regulatory treatment
  4. Current treatment taking into account, where applicable, transitional CRR rules
  5. Post-transitionalCRR rules
  6. Eligible at solo/(sub-)consolidated/solo&(sub-)consolidated
  7. Instrument type
  8. Amount recognised in regulatory capital or eligible liabilities (currency in million)
  9. Nominal amount of instrument (currency in million)

9a Issue price

9b Redemption price

  1. Accounting classification
  2. Original date of issuance
  3. Perpetual or dated
  4. Original maturity date
  5. Issuer call subject to prior supervisory approval
  6. Optional call date, contingent call dates and redemption amount
  7. Subsequent call dates, if applicable
    Coupons / dividends
  8. Fixed or floating dividend/coupon
  9. Coupon rate and any related index
  10. Existence of a dividend stopper

20a Fully discretionary, partially discretionary or mandatory (in terms of timing) 20b Fully discretionary, partially discretionary or mandatory (in terms of amount)

  1. Existence of step up or other incentive to redeem
  2. Cumulative or Noncumulative
  3. Convertible or non-convertible
  4. If convertible, conversion trigger(s)
  5. If convertible, fully or partially
  6. If convertible, conversion rate
  7. If convertible, mandatory or optional conversion
  8. If convertible, specify instrument type convertible into
  9. If convertible, specify issuer of instrument it converts into
  10. Write-downfeatures
  11. If write-down,write-down trigger(s)
  12. If write-down, full or partial
  13. If write-down, permanent or temporary
  14. If temporary write-down, description of write-up mechanism
  15. Position in subordination hierarchy in liquidation (specify instrument type immediately senior to instrument)
  16. Non-complianttransitioned features
  17. If yes, specify non-compliant features

Banca Monte dei Paschi di Siena S.p.A.

XS2031926731

English law except for subordination and "Statutory Loss Absorption Powers" conditions which are governed by Italian law

Tier 2 capital Tier 2 capital

Individual entity and consolidated

Tier 2 instrument pursuant to Art. 63 CRR 300 300 100,00 100,00

Liability - amortised cost 23/07/19

On maturity 23/07/29 Yes

Upon occurrence of a "Capital Event" or for tax reasons at par, plus accrued interests. N/A

Fixed rate p.a. 10,500% No Mandatory Mandatory No Non-cumulativeNon-convertible N/A

N/A

N/A

N/A

N/A

N/A

No

N/A

N/A

N/A

N/A

Senior

No

N/A

(*)"N/A" if the question is not applicable.

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MAIN FEATURES OF THE INSTRUMENT (*)

  1. Issuer
  2. Unique identifier (e.g., CUSIP, ISIN or Bloomberg identifier for private placement)
  3. Governing law(s) of the instrument
    Regulatory treatment
  4. Current treatment taking into account, where applicable, transitional CRR rules
  5. Post-transitionalCRR rules
  6. Eligible at solo/(sub-)consolidated/solo&(sub-)consolidated
  7. Instrument type
  8. Amount recognised in regulatory capital or eligible liabilities (currency in million)
  9. Nominal amount of instrument (currency in million)

9a Issue price

9b Redemption price

  1. Accounting classification
  2. Original date of issuance
  3. Perpetual or dated
  4. Original maturity date
  5. Issuer call subject to prior supervisory approval
  6. Optional call date, contingent call dates and redemption amount
  7. Subsequent call dates, if applicable
    Coupons / dividends
  8. Fixed or floating dividend/coupon
  9. Coupon rate and any related index
  10. Existence of a dividend stopper

20a Fully discretionary, partially discretionary or mandatory (in terms of timing) 20b Fully discretionary, partially discretionary or mandatory (in terms of amount)

  1. Existence of step up or other incentive to redeem
  2. Cumulative or Noncumulative
  3. Convertible or non-convertible
  4. If convertible, conversion trigger(s)
  5. If convertible, fully or partially
  6. If convertible, conversion rate
  7. If convertible, mandatory or optional conversion
  8. If convertible, specify instrument type convertible into
  9. If convertible, specify issuer of instrument it converts into
  10. Write-downfeatures
  11. If write-down,write-down trigger(s)
  12. If write-down, full or partial
  13. If write-down, permanent or temporary
  14. If temporary write-down, description of write-up mechanism
  15. Position in subordination hierarchy in liquidation (specify instrument type immediately senior to instrument)
  16. Non-complianttransitioned features
  17. If yes, specify non-compliant features

Banca Monte dei Paschi di Siena S.p.A.

XS2106849727

English law except for subordination and "Statutory Loss Absorption Powers" conditions which are governed by Italian law

Tier 2 capital Tier 2 capital

Individual entity and consolidated

Tier 2 instrument pursuant to Art. 63 CRR 400 400 100,00 100,00

Liability - amortised cost 22/01/20

On maturity 22/01/30 Yes

Issuer's optional call on 18/01/2023 (the "Issuer Call Date") at par, plus accrued interests. Upon occurrence of a "Capital Event" or for tax reasons at par, plus accrued interests.

N/A

Fixed rate p.a. with reset after 5 years

8,000% till 22/01/2025, thereafter 5y eur mid swap rate +8,149% No

Mandatory

Mandatory No Non-cumulativeNon-convertible N/A

N/A

N/A

N/A

N/A

N/A

No

N/A

N/A

N/A

N/A

Senior

No

N/A

(*)"N/A" if the question is not applicable.

Here follows the Own Funds quantitative information exposed according to the general model for the publication of the information on the Own Funds (Annex IV of the Rule of Execution (UE) No 1423/2013 if the European Committee), with the application

of the transitional regime IFRS 9 and of the other transitional arrangements in force. Moreover, the comparison with 31 December 2019 is brought according to the rules in force on 31 December 2019.

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Own Funds

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Own Funds disclosure template

Common Equity Tier 1: instruments and reserves

Jun-2020

Dec-2019

1

Capital instruments and the related share premium accounts

10,328,618

10,328,618

of which: Paid up capital instruments

10,328,618

10,328,618

2

Retained earnings

-1,768,045

-734,190

3

Accumulated other comprehensive income (and other reserves, to include unrealised gain

215

31,411

and losses under the applicable accounting standards)

3a

Funds for general banking risk

-

-

4

Amount of qualifying items referred to in Article 484 (3) and the related share premiun

-

-

account subkect to phase out from CET1

5

Minority Interests (amount allowed in consolidated CET1)

-

-

5a

Independently reviewed interim profits net of any foreseeable change or dividend

-1,088,711

-1,033,011

6

Common Equity Tier 1 (CET1) capital before regulatory adjustments

7,472,077

8,592,829

Common Equity Tier 1 (CET1) capital: regulatory adjustments

7

Additional value adjustments (negative amount)

-41,257

-47,063

8

Intangible assets (net of related tax liability) (negative amount)

-236,424

-225,209

Deferred tax assets that rely on future probability excluding those arising from temporary

10

differences (net of related tax liability where the conditions in Article 38 (3) are met)

-122,754

-344,817

(negative amount)

  1. Fair value reserves related to gains or losses on cash flow hedges
  2. Negative amounts resulting from the calculation of expected loss amounts
  3. Any increase in equity that results from securitised assets (negative amount)
  4. Gains or losses on liabilities valued at fair value resullting from changes in own credit standing
  5. Defined-benefitpension fund assets
  6. Direct and indirect holdings by an institution of own CET1 instruments (negative amount) Holdings of the CET1 instruments of financial sector entitites where those entities have
  7. reciprocal cross holdings with the institution designed to inflate artificially the own funds of the institution (negative amount)
    Direct and indirect holdings by the institution of the CET1 instruments of financial sector
  8. entities where the institution does not have a significant investment in those entities (amount above the 10% threshold and net of eligible short positions) (negarive amount)
    Direct, indirect and synthetic holdings by the institution of the CET1 instruments of
  9. financial sector entitites where the institution has a significant investment in those entities (amount above 10% threshold and net the eligible short positions) (negative amount)

20a Exposure amount of the following items which quality for a RW of 1250%, where the institution opts for the deduction alternative

20b of which: qualifying holdings outside the financial sector (negative amount)

20c of which: securitisation positions (negative amount)

20d of which: free deliveries (negative amount)

  1. Deferred tax assets arising from temporary differences (amount above 10% threshold, net of related tax liability where the conditions in 38 (3) are met) (negative amount)
  2. Amount exceeding the 15% threshold (negative amount)
  3. of which: direct and indirect holdings by the institution of the CET1 instruments of financial sector entites where the institution has a significatn investment in those entitites

25 of which: deferred tax assets arising from temporary differences

25a Losses for the current financial year (negative amount)

26b Amount to be deducted from or added to Common Equity Tier 1 capital with regard to additional filters and deductions required pre CRR 1

  1. Qualifying AT1 deductions that exceed the AT1 capital of the institution (negative amount)
  2. Total regulatory adjustments to Common equity Tier 1 (CET1)
  3. Common Equity Tier 1 (CET1) Capital

-1,306

-1,328

-

-

-

-

-37,582

-39,486

-

-

-313,710

-313,710

-

-

-

-

-133,262

-22,414

-

-

-

-

-

-

-

-

-

-

-

-149,715

-

-90,039

-

-59,676

-

-

1,138,086

1,171,237

-

-

251,791

27,495

7,723,868

8,620,324

1Such item includes IFRS 9 transitional adjustments for 1,129,452 /thousand (1,169,984 /thousand as of 31/12/2019), and Regulatory adjustments to unrealised gains and losses pursuant to Articles 467 and 468 for 8,634 /thousand.

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Own Funds: Additional Tier 1 (AT1) capital

Additional Tier 1 (AT1) capital: instruments

  1. Capital instruments and the related share premium accounts
  2. of which: classified as equity under applicable accounting standards
  3. of which: classified as liablilities under applicable accounting standards
  4. Amount of qualifying items referred to in Article 484 (4) and the related share premium accounts subject to phase out from AT1
  5. Qualifying Tier 1 capital included in consolidated AT1 capital (including minority interests not included in row 5) issued by subsidiaries and held by third parties
  6. of which: instruments issued by subsidiaries subject to phase out
  7. Additional Tier 1 (AT1) capital before regulatory adjustments

Additional Tier 1 (AT1) capital: regulatory adjustments

Jun-2020

Dec-2019

-

-

-

-

-

-

-

-

-

-

-

-

-

-

37

Direct and indirect holdings by an institution of own AT1 instruments (negative amount)

-

-

Holdings of the AT1 instruments of financial sector entities where those entitites have

38

reciprocal cross holdings with the institution designed to inflate artificially the own funds

-

-

of the institution (negative amount)

Direct and indirect holdings of the AT1 instruments of financial sector entities where the

39

institution does not have a significant investment in those entities (amount above the 10%

-

-

threshold and net of eligible short positions) (negative amount)

Direct and indirect holdings of the AT1 instruments of financial sector entities where the

40

institution has a significant investment in those entities (amount above the 10% threshold

-

-

and net of eligible short positions) (negative amount)

42

Qualifying T2 deductions that exceed the T2 capital of the institution (negative amount)

-

-

43

Total regulatory adjustments to Additional Tier 1 (AT1) capital

-

-

44

Additional Tier 1 (AT1) capital

-

-

45

Tier 1 capital (T1 = CET1 + AT1)

7,723,868

8,620,324

G R U P P O M O N T E P A S C H I

Own Funds

18

Own Funds: Tier 2 (T2) capital

Tier 2 (T2) capital: instruments and provisions

Jun-2020

Dec-2019

46

Capital instruments and the realted share premium accounts

1,450,000

1,050,000

47

Amopunt of qualifying items referred to in Articole 484 (5) and the related share premium

-

-

accounts subject to phase out from T2

Qualifying own funds instruments included in consolidated T2 capital (including minority

48

interests and AT1 instruments not included in rows 5 or 34) issued by subsidiaries and held by

-

-

third parties

49

of which: instruments issued by subsidiaries subject to phase out

-

-

50

Credit risk adjustments

160,730

169,999

51

Tier 2 (T2) capital before regulatory adjustments

1,610,730

1,219,999

Tier 2 (T2) capital: regulatory adjustments

52

Direct and indirect holdings by an institution of own T2 instruments and subordinated loans

-

-

(negative amount)

Holdings iof the T2 instruments and subordinated loans of financial sector entitites where those

53

entitites have recirpocal cross holdings with the institution designed to inflate artificialli the own

-

-

funds of the institution (negative amount)

Direct and indirect holdings of the T2 instruments and subordinated loans of financial sector

54

entitites where the institution does not have a significant investment in those entities (amount

-

-

above 10% threshdol and net of eligible short positions) (negative amount)

Direct and indrect holdings by the institution of the T2 instruments and subordinated loans fo

55

financial sector entitites where the institution has a significant investment in those entities (net

-65,861

-65,663

eligible of short positions)

Residual amounts deducted from Tier 2 capital with regard to deduction from Common Equity

Tier 1 capital during the transitional period pursuant to article 472 of Regulation (EU) No.

-

-

575/2013

of whichi: Losses for the current year

-

-

of which: Significant financial instruments

-

-

of which: Not Significant financial instruments

-

-

of which: outstanding amount related to the excess of expected

-

-

losses with respect to adjustments for IRB positions

of which: unrealised gains

-

-

57

Total regulatory adjustments to Tier 2 (T2) capital

-65,861

-65,663

58

Tier 2 (T2) capital

1,544,869

1,154,336

59

Total Capital (TC= T1+T2)

9,268,738

9,774,660

60

Total Risk Weighted Assets

57,799,860

58,559,094

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Own Funds: Capital ratios and buffers

Capital ratios and buffer

  1. Common Equity Tier 1 (as a percentage of risk exposure amount)
  2. Tier 1 (as a percentage of risk exposure amount)
  3. Total capital (as a percentage of risk exposure amount)
    Institution specific buffer requirement (CET1 requirement in accordance with article 92
  4. (1) (a) plus capital conservation and countercyclical buffer requirements, plus systemic risk buffer, plus the systemically important institution buffer (G-SII or O-SII buffer), expressed as a percentage of risk exposure amount)
  5. of which: capital conservation buffer requirement
  6. of which: countercyclical buffer requirement
  7. of which: systemic risk buffer requirement

67a

of which: Global Systemically Important Institution (G-SII) or Other Systemically

Important Institution (O-SII) buffer

68 Common Equity Tier 1 available to meet buffers (as a percentage of risk exposure amount) 2

Amounts below the thresholds for deduction (before risk weighting)

Direct and indirect holdings of the capital of financial sector entities where the

  1. institution does not have a significant investment in those entities (amount below 10% threshold and net of eligible short positions)
    Direct and indirect holdings by the institution of the CET 1 instruments of financial
  2. sector entities where the institution has a significant investment in those entities (amount below 10% threshold and net of eligible short positions)

75 Deferred tax assets arising from temporary differences (amount below 10% threshold, net of related tax liability where the conditions in Article 38 (3) are met)

Applicable caps on the inclusion of provisions in Tier 2

  1. Credit risk adjustments included in T2 in respect of exposures subject to standardized approach (prior to the application of the cap)
  2. Cap on inclusion of credit risk adjustments in T2 under standardised approach
  3. Credit risk adjustments included in T2 in respect of exposures subject to sIRB approach (prior to the application of the cap)
  4. Cap on inclusion of credit risk adjustments in T2 under IRB approach

Capital instruments subject to phase-out arrangements (only 1 Jan 2014 and 1 Jan 2022)

  1. Current cap on CET1 instruments subject to phase out arrangements
  2. Amount excluded from CET1 due to cap (excess mover cap after redemptions and maturities)
  3. Current cap on AT1 instruments subject to phase out arrangements
  4. Amount excluded from AT1 due to cap
    (excess over cap after redemptions and maturities)
  5. Current cap on T2 instruments subject to phase out arrangements
  6. Amount excluded from T2 due to cap
    (excess over cap after redemptions and maturities)

Jun-2020Dec-2019

13.36% 14.72%

13.36% 14.72%

16.04% 16.69%

7.13% 7.01%

2.500% 2.500%

0.001% 0.011%

--

0.13%-

7.36% 8.69%

161,683 162,340

671,904 762,122

302,626 505,115

--

--

824,594 490,751

160,730 169,999

--

--

--

--

--

--

2 Tier 1 capital available for reserves is calculated as the difference between the Common Equity Tier 1 and the requirement referring to Tier 1 capital for the portion covered by Common Equity Tier 1 Capital and Tier total capital components, expressed as a percentage of risk exposure amount.

G R U P P O M O N T E P A S C H I

Own Funds

20

Reconciliation of shareholders' equity and the Common Equity Tier 1

Items

Jun-2020

Dec-2019

Group Equity

7,158,368

8,279,119

Minority Equity

1,371

1,770

Net Assets of the Balance Sheet

7,159,739

8,280,889

Net Assets after distribution to shareholders

7,159,739

8,280,889

Adjustments for instruments computable in AT1 or T2

- Capital share computable in AT1

-

-

- Minority interests computable

-1,371

-1,770

- Own shares included in the regulatory adjustments

-

-313,710

- Other components non computable in regime

-1,306

-1,328

Common Equity Tier 1 (CET1) before the regulatory adjustments

7,157,061

8,277,791

Regulatory adjustments (including adjustments of the transitional period)

566,807

342,533

Common Equity Tier 1 (CET1) net of regulatory adjustments

7,723,868

8,620,324

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Full reconciliation of the components of Common Equity Tier 1, Additional Tier 1 and Tier 2 capital, as well as the filters and deductions applied to the institution's own funds and the balance sheet of the financial statements

Items

Financial

Prudential

Information

Relevant amount

See Table

(Euro th)

Statement

Statement

about

for the purpose

"Own Funds

differences

of Own Funds

Disclosure

Template"

Assets

70 Equity investments

953,920

1,008,600

54,680

-182,373

8, 18, 19, 23

of which: implicit goodwill

49,112

49,112

-

-49,112

8

100 Intangible assets

187,313

187,313

8

of which: goodwill

7,900

7,900

-

-187,313

8

of which: other intangible assets

179,413

179,413

-

-7,900

8

110 Tax assets

2,193,131

2,193,131

-

-179,413

10, 21, 25

of which: tax assets that rely on future profitability and do not

arise from temporary differences net of the related

135,675

135,675

10

deferred tax liability

Liabilities and Shareholders' Equity

Financial liabilities measured at amortised cost - c) debts

10 securities issued

12,009,431

12,009,431

-

1,450,000

32, 33, 46, 52

30 Financial liabilities designated at fair value

240,655

240,655

-

-

33

120 Valuation reserves

35,203

35,203

-

7,747

3, 11

of which: FVOCI

103,663

103,663

-

-

3 (FVOCI)

of which: CFH

1,306

1,306

-

-1,306

3(CFH),11

of which: legally-required revaluations

9,053

9,053

-

9,053

3(rival)

of which: other

-78,820

-78,820

-

-

3(other)

150 Reserves

-1,803,033

-1,803,033

-

-1,776,883

2, 3

160 Share premium reserve

-

-

-

-

-

170 Share Capital

10,328,618

10,328,618

-

10,328,618

1, 2, 31

180 Treasury shares

-313,710

-313,710

-

-313,710

16

200 Profit/loss for the period

-1,088,711

-1,088,711

-

-1,088,711

5a, 25a

Fair value gains and losses arising from the institution's own credit

-

-

-

-37,582

14

risk related to derivative liabilities

Value adjustments due to the

-

-

-

-41,257

7

requirements for prudent valuation

IRB Shortfall of credit risk adjustments to expected losses

-

-

-

-

12

IRB Excess of provisions over expected losses eligible

-

-

-

160,730

50

Filter on double tax realignment

-

-

-

-

26b

Filter for IAS 39 and IFRS 9

-

-

-

1,138,086

26b

Direct and indirect holdings of the AT1 instruments of

financial sector entities where the institution does not

-

-

-

-

39

have a significant investment in those entities

Direct and indirect holdings of Tier 2

instruments of financial sector entities where the institution

-

-

-

-65,861

54, 55

has a significant investment

Indirect investments

-

-

-

-

-

Total Own Funds

-

-

-

9,268,738

-

The information was summarized according to the methodology described in Annex I of the Implementing Regulation (EU)

No. 1423/2013 which establishes technical standards implementation with regard to the disclosure on Own Funds.

G R U P P O M O N T E P A S C H I

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22

Capital requirements

For additional information not contained in this document, particularly regarding risk management objective and policies, capital and liquidity adequacy, please refer to the Pillar 3 disclosure report as at 31 December 2019.

Capital requirements

The reference for quantification of capital requirements is the prudential legislation, which sets under Pillar 1, a minimum regulatory capital requirement in terms of CET1, Tier 1 and Total Capital in relation to the Risk Weighted Assets (RWA) for credit, market and operational risk.

These coefficients, set by the CRR (Art. 92), are the following: a CET1 ratio of at least 4.5%, a Tier 1 ratio of at least 6% and a Total Capital ratio of at least 8% of the Group's total risk exposure. Additionally, Banks are also required to hold the following buffers against Pillar 1 risks. In addition to maintaining these minimum requirements against Pillar 1 risk, there is a further Core Equity Tier 1 component against Pillar 2 risk, established following the CRD IV and the national legislation transposing the European directives, as well as the following buffers:

  • Capital conservation buffer ("CCB") aimed at conserving the minimum level of regulatory capital during difficult periods

in the market, through the allocation of high quality capital in periods in which there are no market tensions.

  • Countercyclical capital buffer ("CCB") aimed at protecting the banking sector in phases of excessive growth in loans. The buffer provides for the accumulation of CET1 capital during phases of rapid growth in the credit cycle, which can then be used to absorb losses in the downward phase of the cycle. As opposed to the Capital Conservation Buffer, the Countercyclical buffer is imposed only during periods of loan growth and it is calculated according to CRD IV provisions by the competent national authorities;
  • a non-cyclical systemic risk or macroprudential buffer to be set by the Member States and currently not yet determined by the Bank of Italy.
  • A G-SII capital buffer for global

systematically important banks and

a O-SII capital buffer for other systematically important institutions

  • impose higher capital requirements on those entities that may determine spillover effects on the international or domestic financial system.

The combination of these buffers determines the combined buffer requirement (CBR).

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In addition to maintaining the minimum capital requirements against Pillar 1 risk and the above mentioned buffers, there is an additional The Pillar 2 Requirement (P2R, which applies in addition to, and covers risks which are underestimated or not covered by, the minimum capital requirement (known as Pillar 1). The P2R is determined via the Supervisory Review and Evaluation Process (SREP). P2Rs are binding and, together with the Pillar 1 Requirement, determine the Total SREP Capital Requirement ("TSCR"). The capital demand resulting from the SREP also includes the Pillar 2 Guidance (P2G), which indicates to banks the adequate level of capital to be maintained to provide a sufficient buffer to withstand stressed situations.

Please note that failure to comply with the Pillar 2 Guidance (P2G) requirement is not equivalent to failure to comply with capital requirements; however, in the case of a reduction of capital below the level that includes the P2G requirement, BMPS will need to promptly disclose the reasons for non-observance to the Supervisory Authority, which will evaluate and communicate any measures on a case by case basis.

Capital adequacy

As a result of the conclusion of the SREP conducted with reference to the figures as at 31 December 2018 and taking into account the information received after that date, with the submission on 10 December 2019 of the

2019 SREP Decision, the ECB asked the Parent Company to comply with a CET1 ratio of at least 4.5%, a Tier 1 ratio of at least 6% and a Total capital Ratio of at least 8% of the Group's total risk exposure.

In addition to maintaining these minimum requirements against Pillar 1 risks, there is an additional Pillar 2 requirement (P2R) of 3%, unchanged from 2019, to be held entirely in the form of CET1 capital.

According to this decision, in 2020 the Group must fulfil a Total SREP Capital Requirement (TSCR) of 11% on a consolidated basis, with a minimum requirement of 7.5% and 9% in terms of CET1 capital and Tier 1 capital, respectively. In terms of CBR:

  • 2.50% Capital Conservation Buffer;
  • 0.001% Countercyclical Capital Buffer;
  • 0.13% O-SII Buffer.

Note that, on 30 November 2019, Bank of Italy identified MPS Group as a systematically important institution in Italy for 2020 and therefore, starting from 1 January 2020, MPS Group is required to maintain a capital reserve of 0.13% (0.19% from 1 January 2021 and 0.25% from 1 January 2022).

The CBR is therefore equal to 2.63%.

The overall minimum requirement in terms of Total Capital Ratio is 13.63%, while the overall minimum requirement in terms of CET1 ratio is 8.82%.

In consideration of the potential impacts on the activities of significant banks linked to the spread of COVID-19, on 8 April

G R U P P O M O N T E P A S C H I

Capital requirements

24

2020 the ECB communicated to the Parent Company the modification, effective from 12 March 2020, of the 2019 SREP Decision, with reference to the composition of the additional Pillar 2 capital requirement.

In particular, the additional Pillar II capital requirement to be held in the form of CET1 must be met by at least 56.25% Common Equity Tier 1 (CET1) and at least 75% by Tier 1 Equity (Tier 1). Accordingly, the Group must meet the following requirements at the consolidated level as at 30 June 2020:

Capital adequacy indicators

CET 1

Tier 1

Total

as of 30 June 2020

Ratio

Ratio

Capital

Ratio

Pillar I minimum Requirements (art. 92 CRR)

4.50%

6.00%

8.00%

TSCR (P1R+P2R)

6.19%

8.25%

11.00%

Combined Buffer Requirement (CBR)

2.63%

2.63%

2.63%

OCR (TSCR+CBR)

8.82%

10.88%

13.63%

Capital ratios

13.36%

13.36%

16.04%

TSCR - Total SREP Capital Requirement

P2R - Pillar 2 Requirement

CBR - Combined Buffer Requirement

OCR - Overall Capital Requirement

As of 30 June 2020, the Bank had a CET 1

ratio of 13.36%, higher than the minimum

requirements set. Likewise, the Tier 1 ratio

and the Total Capital ratio equal to 13.36%

and 16.04% are higher than the minimum

requirements established.

With regard to Pillar II Capital Guidance, the

ECB expects the Parent Company to adapt,

on a consolidated basis, to a requirement

of 1.3%, to be fully met with Common

Equity Tier 1 capital in addition to the

overall capital requirement (OCR)(not only

in terms of CET1 capital, as defined in the

previous decision). It should be noted that

as at 30 June 2020 the Group complies with the Pillar 2 Guidance.

For additional information on the Group's risk profile in the context of the Covid-19 outbreak, please refer to the Interim Report on operations as at 30 June 2020, with specific reference to regulatory and supervisory interventions, MPS Group initiatives within the context of the COVID-19 pandemic, business continuity, and disclosure on risk.

Countercyclical Capital Buffer

As of 30 June 2020, the Montepaschi Group is required to hold a countercyclical capital buffer of EUR 578.0. This buffer, as established by Article 130 of the CRD IV, is equal to the total risk exposure amount

(expressed in terms of risk-weighted

assets) multiplied by the institution's specific countercyclical rate, which, for the Montepaschi Group, stands at 0.001%. The latter is equal to the weighted average

of

the

countercyclical

rates

applicable

in

the

countries where

the

Institution

has exposures. Each Member State, in accordance with article 130, paragraph 1 of Directive 2013/36/UE of the European Parliament and Council (CRD), shall require institutions to maintain an institution- specific countercyclical capital buffer against exposures to their own Country and establish the related countercyclical buffer rate. In particular, the Bank of Italy has set the countercyclical buffer rate for exposures to

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25

Italian counterparties at 0% for 2019 and the second quarter of 2020. As far as the other credit exposures are concerned, the Group uses the rates established by the competent authorities of the State in order to calculate its own indicator. As of 30 June 2020, only the competent authorities of Bulgaria, Hong Kong, Lithuania, Luxembourg, Norway, Czech Republic and Slovakia, among the countries to which the Group has relevant exposures for the purpose of calculating

the countercyclical buffer, have established a non-zero countercyclical capital buffer rate. The Montepaschi Group holds 95.8% of relevant exposures to Italy, which has a 0% rate, for the purpose of calculating the countercyclical buffer. Reported below are the main items of calculation of the countercyclical capital buffer, presented in the standard format shown in table 2, Attachment I of Commission Delegated Regulation (EU) 1555/2015.

Amount of institution-specific countercyclical buffer

Jun-20

10

Total risk exposure amount (RWA)

57,799,860

20

Specific countercyclical coefficient of the institution

0.001%

30

Specific countercyclical capital buffer requirement of the institution

578.0

G R U P P O M O N T E P A S C H I

Capital requirements

26

The table below provides details on the

June 2020 and 31 December 2019.

Group's various capital requirements as at 30

Capital requirements and Regulatory capital ratios

Regulatory Capital Requirements

Jun-20

Dec-19

Credit and Counterparty Risk

3,492,786

3,618,890

Standardised Approach

1,338,591

1,340,481

Advanced IRB Approach

2,154,195

2,278,409

Market Risks

212,727

211,703

Standardised Approach

212,727

211,703

Internal Models

-

-

Operational Risk

884,032

825,620

Foundation Approach

7,307

7,743

Standardised Approach

-

-

Advanced Approach

876,726

817,877

CVA Risk

34,443

28,515

Originary Exposure Method (OEM)

-

-

Standardised Approach

34,443

28,515

Advanced Approach

-

-

Concentration Risk

-

-

Settlement Risk

-

-

Regulatory Capital Requirements

4,623,989

4,684,728

Risk Weighted Assets

57,799,860

58,559,094

CET1 Capital Ratio

13.36%

14.72%

Tier1 Capital Ratio

13.36%

14.72%

Total Capital Ratio

16.04%

16.69%

Report on IFRS 9

Having opted for the adoption of the transitional arrangements, the Group, under the EBA Guidelines GL 2018/01, is required to provide a comparison between own funds, risk-weighted assets, capital and leverage ratios, with and without the application

of the IFRS9 transitional arrangements or equal losses on credits. Here follows the required information, according to the specified informative model in the Annex I of EBA Guidelines GL 2018/01 on uniform disclosure requirements of IFRS9.

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EU IFRS 9 - Comparison of institutions' own funds and capital and leverage ratios with and without the application of transitional arrangements for IFRS 9 or analogous ECLs

Available capital (amounts)

  1. Common Equity Tier 1 (CET1) capital
  2. Common Equity Tier 1 (CET1) capital as if IFRS 9 or analogous ECLs transitional arrangements had not been applied
  3. Tier 1 capital
  4. Tier 1 capital as if IFRS 9 or analogous ECLs transitional arrangements had not been applied
  5. Total capital
  6. Total capital as if IFRS 9 or analogous ECLs transitional arrangements had not been applied
    Risk-weighted assets (amounts)
  7. Total risk-weighted assets
  8. Total risk-weighted assets as if IFRS 9 or analogous ECLs transitional arrangements had not been applied
    Capital Ratios
  9. Common Equity Tier 1 (as a percentage of risk exposure amount)
  1. Common Equity Tier 1 (as a percentage of risk exposure amount) as if IFRS 9 or analogous ECLs tran- sitional arrangements had not been applied
  2. Tier 1 (as a percentage of risk exposure amount)
  3. Tier 1 (as a percentage of risk exposure amount) as if IFRS 9 or analogous ECLs transitional arran- gements had not been applied
  4. Total capital (as a percentage of risk exposure amount)
  5. Total capital (as a percentage of risk exposure amount) as if IFRS 9 or analogous ECLs transitional arrangements had not been applied
    Leverage ratio
  6. Leverage ratio total exposure measure
  7. Leverage ratio
  8. Leverage ratio as if IFRS 9 or analogous ECLs transitional arrangements had not been applied

a

b

c

d

Jun-20

Mar-20

Dec-19

Sep-19

7,723,868 8,049,172 8,620,324 8,596,789

6,594,351 7,013,684 7,450,340 7,327,907

7,723,868 8,049,172 8,620,324 8,596,789

6,594,351 7,013,684 7,450,340 7,327,907

9,268,738 9,604,658 9,774,660 9,751,013

8,139,221 8,569,170 8,604,676 8,482,131

57,799,860 59,257,978 58,559,094 58,217,402

58,063,032 59,350,924 58,634,894 58,041,854

13.36% 13.58% 14.72% 14.77%

11.36% 11.82% 12.71% 12.63%

13.36% 13.58% 14.72% 14.77%

11.36% 11.82% 12.71% 12.63%

16.04% 16.21% 16.69% 16.75%

14.02% 14.44% 14.68% 14.61%

156,278,504 148,953,773 141,097,698 140,537,131

4.94% 5.40% 6.11% 6.12%

4.25% 4.72% 5.29% 5.23%

The application of the IFRS 9 fully loaded without considering the impact deriving from the cohesion with the transitional regime expected from 2018, would have entailed a reduction of 200bp and 202 bp respectively of CET1 ratio and total capital ratio. Such coefficients would have resulted in 11.36% (instead of 13.36% transitional

arrangements) and 14.02% (instead of 16.04%).

IFRS 9 fully loaded application would have entailed a total CET1 decrease of about EUR 1.0 bn linked to major provisions implemented during FTA on IRB credit exposure.

G R U P P O M O N T E P A S C H I

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28

Report on Temporary treatment of unrealised gains and losses measured at fair value through other comprehensive income in view of the COVID-19 pandemic

Having opted for the adoption of the transitional arrangements, the Group, under Regulation (EU) 2020/837 of 24 June 2020, is required to provide the amounts of own funds, Common Equity Tier 1 capital and Tier 1 capital, the total capital ratio, the Common Equity Tier 1 capital ratio, the Tier 1 capital ratio, and the leverage ratio they would have in case they were not to apply the temporaty treatment in accordance with Article 468 of the above-mentioned

Regulation. In particular, Total capital as if the temporary treatment of unrealised gains and losses measured at fair value through OCI in accordance with Article 468 of the CRR had not been applied would be equal to 9,260,104 /thousand, while the CET1 capital and Tier 1 capital would be equal to 7,715,235 /thousand. The coefficients would have resulted in 16.01% (instead of 16.04% - with the temporaty prudential filter) and 13.34% (instead of 13.36%) in terms of Total capital ratio, CET1 ratio and Tier1 ratio, respectively.

The leverage ratio calculated pursuant to Article 468 of Regulation (EU) 2020/873, is equal to 4.937%.

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As to the definition of regulatory capital requirements, in June 2008 the Montepaschi Group was authorised to use the Advanced Internal Rating Based (AIRB) models for the measurement of capital requirements against credit risk in the retail and corporate portfolios and the Advanced Measurement Approach (AMA) for operational risk. The AIRB model's scope of application currently includes the Parent Company Banca MPS, MPS Capital Services Banca per le Imprese and MPS Leasing & Factoring, for the regulatory portfolios "Retail Exposures" and "Exposures to corporates". For the remaining portfolios and Group entities, capital requirements against Credit Risk are calculated using the standard approach. Capital requirements against Counterparty

Risk are calculated independently of the portfolio. More specifically, the Market value method is applied for OTC derivatives and the comprehensive approach for the treatment of financial collateral is used for repos, sell-buy backs and security lending.

Capital requirements against CVA Risk are calculated according to the standard approach.

Capital requirements for Operational Risk are calculated almost completely according to the AMA - Advanced Measurement Approach. The standardized approach is used for the remaining part of the scope.

Capital requirements in relation to Market Risk are instead calculated for all Group entities by adopting the standard approach.

G R U P P O M O N T E P A S C H I

Capital requirements

30

The following table provides a general

requirements.

overview of the total RWAs and capital

EU OV1 - Overviews of RWAs

RWA

Capital requirements

Jun-20

Mar-20

Jun-20

Mar-20

1

Credit risk (excluding CCR)

39,881,702

41,360,902

3,190,536

3,308,872

Article 438(c)(d)

2

Of which the standardised approach

13,371,808

13,076,032

1,069,745

1,046,083

Article 438(c)(d)

3

Of which the foundation IRB (FIRB) approach

-

-

-

-

Article 438(c)(d)

4

Of which the advanced IRB (AIRB) approach

26,509,894

28,284,870

2,120,792

2,262,790

Article 438(d)

5

Of which equity IRB under the simple risk-weighted

-

-

-

-

approach or the IMA

Article 107 Article 438(c)(d)

6

CCR

1,832,874

1,817,585

146,630

145,407

Article 438(c)(d)

7

Of which mark to market

755,370

757,530

60,430

60,602

Article 438(c)(d)

8

Of which original exposure

-

-

-

-

9

Of which the standardised approach

-

-

-

-

10

Of which internal model method (IMM)

-

-

-

-

Article 438(c)(d)

11

Of which risk exposure amount for contributions to

4,149

17,846

332

1,428

the default fund of a CCP

Article 438(c)(d)

12

Of which CVA

430,543

383,616

34,443

30,689

Article 438(e)

13

Settlement risk

-

-

-

-

Article 449(o)(i)

14

Securitisation exposures in the banking book (after the cap)

172,582

207,170

13,807

16,574

15

Of which SEC-IRBA approach

139,046

167,634

11,124

13,411

16

Of which SEC-ERBA approach

13,877

14,194

1,110

1,136

17

Of which SEC-SA approach

19,659

25,342

1,573

2,027

18

Of which 1250% deduction

-

-

-

-

Article 438(e)

19

Of which standardised approach

2,659,088

2,795,075

212,727

223,606

20

Of which the standardised approach

2,659,088

2,795,075

212,727

223,606

21

Of which IMA

-

-

-

Article 438(e)

22

Large exposures

-

-

-

-

Article 438(f)

23

Operational risk

11,050,406

10,379,222

884,032

830,338

24

Of which basic indicator approach

91,332

96,790

7,307

7,743

25

Of which standardised approach

-

-

-

-

26

Of which advanced measurement approach

10,959,074

10,282,432

876,726

822,595

Article 437(2), Article 48 and

27

Amounts below the thresholds for deduction

2,203,208

2,698,023

176,257

215,842

Article 60

(subject to 250% risk weight)

Article 500

28

Floor adjustment

-

-

-

-

29

Total

57,799,860

59,257,978

4,623,989

4,740,638

The sum of rows 1,6 (excluding row 12), 14 and 27 is consistent with the item of total credit and counterparty risk of tables "Capital requirements for Credit and Counterparty Risk". Row 6(consistent with table EU CCR1), in addition to rows 7,8,9,10,11, and 12, includes the amount related to the financial collateral comprehensive method (for SFTs) equal to 642,812 of RWA as of 30/06/2020.

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Further information on exposures (non- weighted amounts) and RWAs (weighted amounts), are reported:

  • for exposures subject to the standard approach - Credit Risk in Section "Credit Risk: Standard approach" (which also contains the amounts of off-balance sheet

transactions after weighting by credit conversion factors - CCF);

  • for exposures subject to internal credit risk models in section "Credit Risk: use of the AIRB approach";
  • for exposures subject to the Counterparty Risk in specific section.

G R U P P O M O N T E P A S C H I

Capital requirements

32

As of 30 June 2020, RWAs recorded a decrease due to lower RWAs relating to credit and counterparty risk resulting to a significant extent from the application of the amendments introduced by Regulation (EU) 2020/873 of 24 June 2020, particularly with reference to the calculation of the supporting

factor relating to loans to small and medium enterprises, and higher RWAs relating to market risk, essentially due to exchange rate risk. and operational risk, mainly attributable to the effetcs of provisions on NPL disposal and updates to the scenario analysis carried out in the first half of 2020.

Capital requirements for Credit and Counterparty Risk

Jun-20

Dec-19

Requirements

Requirements

Standard Approach

Standard Approach Total

1,338,591

1,340,481

of which: Counterparty Risk

89,575

85,139

IRB Approach

IRB Approach Total

2,154,195

2,278,409

of which: Counterparty Risk

22,280

19,374

Total

3,492,786

3,618,890

of which: Counterparty Risk

111,855

104,512

The capital requirement for Counterparty Risk amounts to 111,855 /thousand and has been calculated on both the Trading Portfolio and the Banking Book. The requirement, summarised by methodology in

the table above, is reported in the individual regulatory portfolios of the Standard Apporach and the AIRB Approach in the table below.

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Capital requirements for Credit and Counterparty Risk

Standard Approach

Jun-20

Dec-19

Exposures to central governments or central banks

111,941

139,689

Exposures to regional governments or local authorities

24,750

24,657

Exposures to public sector entities

30,640

28,966

Exposures to multilateral development banks

-

-

Exposures to International organisations

-

-

Exposures to institutions

158,071

161,965

Exposures to Corporates

296,256

266,280

Retail exposures

36,938

47,422

Exposures secured by mortgages on immovable property

36,187

44,566

Exposures in default

32,778

36,424

Exposures associated with high risk

32,148

39,754

Exposures in the form of covered bonds

6,893

6,843

Exposures to institutions and corporates with

-

-

a short-term credit assessment

Exposures to collective investments undertaking

13,091

18,362

Equity exposures

162,600

179,493

Other exposures

393,283

344,224

Securitization positions *

2,683

712

Exposures to Central Counterparties in the form of pre-funded

332

1,123

contributions to the guarantee fund

Total standardised approach

1,338,591

1,340,481

AIRB Approach

Exposures to or secured by corporates:

1,435,602

1,578,584

- SMEs

596,123

717,067

- Other companies

728,944

740,363

- Specialized lending

110,535

121,154

Retail exposures:

707,470

688,067

- secured by real estate: SMEs

159,022

148,355

- secured by real estate: Individuals

304,998

292,365

- Qualifying revolving

450

597

- Other retail exposures: SMEs

221,468

223,332

- Other retail exposures: Individuals

21,532

23,418

Securitization positions **

11,124

11,757

Total AIRB approach

2,154,195

2,278,409

Total Credit and Counterparty Risk

3,492,786

3,618,890

  • Securitization positions subject to Standard approach include securitizations under the SEC-ERBA and SEC-SA.
  • Securitization positions subject to AIRB approach include securitizations under the SEC-IRBA.

Below is a breakdown of capital requirements for Credit and Counterparty Risk (IRB method) - Specialised Lending - slotting

criteria, for Market Risk and Operational Risk.

G R U P P O M O N T E P A S C H I

Capital requirements

34

Capital requirements for Credit and Counterparty Risk (IRB methods) - Specialised lending - slotting criteria

Risk Weight

Jun-20

Dec-19

Category 1 -

50%

668

118

Category 1 -

70% equal to or greater than 2.5 years

12,633

9,787

Category 2 -

70% less than 2.5 years

12,974

7,502

Category 2 -

90%

56,777

68,762

Category 3

-

115%

25,143

27,213

Category 4

-

250%

2,341

7,771

Category 5

-

0%

-

-

Total

110,535

121,154

Capital requirements for Market Risk

Standardised Approach

Jun-20

Dec-19

Position risk on debt instruments

153,264

125,313

Position risk on equity

28,046

45,442

Foreign exchange risk

10,724

14,451

Commodities risk

13,551

9,960

CIU Risk

7,142

16,536

Total standardised approach

212,727

211,703

Internal models

Total internal models

-

-

Total Market Risks

212,727

211,703

The capital requirement included in Marekt Risk for securitisaiton positions in the Regulatory Trading Portfolio amount 21,631 (expressed in thousands of Euros) as of 30/06/2020.

Capital requirements for Operational Risk

Requirements by approach

Jun-20

Dec-19

Foundation approach

7,307

7,743

Standardised approach

-

-

Advanced Measurement approach

876,726

817,877

Total Operational Risk

884,032

825,620

The following table shows the main changes Risk under the IRB approach.

in RWA and capital requirements for Credit

EU CR8 - RWA flow statements of Credit Risk exposures under the IRB approach

a

b

RWA amounts

Capital requirements

1

RWAs as of 31/03/2020

28,284,870

2,262,790

9

RWAs as of 30/06/2020

26,509,894

2,120,792

The amounts are net of the counterparty risk component. The values correspond to the row 4 of the EU OV1 table.

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Details on the impact on RWAs in terms of the authorisation granted to entities not to deduct instruments of own funds held in a

financial entity in which the entities hold a significant investment are provided below.

EU INS1 - Non-deducted participations in insurance undertakings

Jun-20

Holdings of own funds instruments of a financial sector entity where the

institution has a significant investment not deducted from own funds673,012 (before risk-weighting)

Total RWAs

1,682,530

G R U P P O M O N T E P A S C H I

Credit Risk

36

Credit Risk

Credit Risk: general disclosure

The MPS group gives special attention to the management and the measurement of Credit Risk, which represents the greatest risk to which the Group is exposed, accounting for approximately 76% of total capital requirements. The main objective of the Credit Risk Management function is to promote a culture of "responsible lending" within the Group and pursue a sustainable growth in lending transactions that is in line with risk appetite and value creation. The Group's strategies in the area of risk management are aimed at limiting the economic impact from defaulting loans and containing the cost of credit. The credit risk management function is involved in defining credit policy guidelines by identifying the customer segments with greater opportunities from risk-return perspective, promoting risk diversification, limiting the concentration of risk exposure in single business groups/sectors and geographical areas. The function also defines the supports available to Credit disbursement strategies. The use and allocation of ratings is crucial, since they are the synthetic measurement of a customer's creditworthiness both during the loan disbursement and monitoring processes. This forms the basis of the preliminary procedure that is followed as a loan proposal is processed and then subsequently monitored. The assignment of a rating to

each borrower means that borrowers can be classified into actual levels of risk and that both an overall or broken-down objective assessment of risk components may be made; this system, therefore, provides the basis of information for supporting both strategic decisions and the ordinary management of risk positions. Credit policy guidelines are thus provided by the sales network according to customer segments, rating categories, business sector, Regional Area, loan type and types of collateral used. In addition, operational guidelines are structured into quantitative and qualitative objectives to develop and reclassify the loan portfolio, according to business sector and regional units. The Credit Risk Management function is also involved in the monitoring phase and verifies that the Network Structures achieve their goals of credit quality and alignment with established benchmarks, identifying the appropriate remedial actions to be implemented, reviewing objectives and, on a more general level, analysing trends in the quality of the loan portfolio in terms of market/product/customer segment and related causes. For a detailed description of the tasks of the Credit Risk function, please refer to Chapter 1 of the Pillar 3 Report as of 31 December 2019.

As concerns capital requirements, for credit risks the Group uses the Advanced Internal

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Rating Based (AIRB) method with reference to the "Retail exposures" and "Exposures to corporates" regulatory portfolios. The scope of application of the AIRB method currently includes the Parent Company Banca MPS, MPS Capital Services Banca per le Imprese and MPS Leasing & Factoring. For the remaining portfolios and Group entities,

capital requirements relative to credit risks are calculated according to the standard method.

RWAs by credit risk show a prevalence of exposures treated under the advanced approach (62%) over those subject to the Standard Approach (38%).

Credit Risk's RWAs by approach

62%

Standard

A(IRB) / F(IRB) Approach

38%

An analysis by type of exposure reveals that 70.9% of Credit Risk refers to the Corporate and Retail portfolios. The remaining 29.1%

is mainly concentrated in the Public Sector and Institutions (9.3%).

RWAs by type pf exposure

0.4% 12.8%

4.7%

Corporate_AIRB+Std

0.9%

Retail_AIRB+Std

1.0%

Public Sector and Institutions*

9.3%

Exposures Secured by Real Estate Property

Default Exposures

Equity Exposures

Securitization Positions

21.3%

49.6%

Other**

  • Includes the following portfolios: Central Governments or Central Banks, Regional Governments or Local Authorities, Public sector entities, Multilateral Development Banks, International Organisations, and Institutions.
  • Includes the following portfolios: Exposures associated with a particularly high risk, Exposures in the form of covered bonds, Exposures to institutions and corporates with a short-term credit assessment, Exposures to CIUs, Exposures to Central Counterparties in the form of pre-funded contributions to the guarantee fund, Other exposures.

G R U P P O M O N T E P A S C H I

Credit Risk

38

The following table shows a breakdown of exposures and RWAs by approach (Standard/ AIRB) and by regulatory portfolio. In compliance with regulatory standards, in the case of the standard approach, the EAD value corresponds to the value of the exposure, which takes account of the prudential filters, risk mitigation techniques and credit conversion factors. In the case of the Internal Ratings Based Approach, the EAD value reported corresponds to the

"Exposure At Default" calculated according to the rules of prudential supervision and therefore expressed gross of value adjustments and without the impacts from risk mitigation techniques which, in the case of exposures subject to an internal models- based approach, are directly included in the weighting factor applied. Instead, the EAD value takes into account the credit conversion factors for guarantees issued and commitments to disburse funds.

EAD and RWA overview between Credit Risk and Counterparty Risk

Jun-20

Dec-19

EAD

RWA

EAD

RWA

 EAD

 RWA

Standard Approach

Total standard approach

62,649,072

16,732,383

56,119,352

16,747,111

6,529,720

-14,728

of which: Counterparty Risk

3,759,642

1,119,682

3,301,542

1,064,236

458,099

55,446

IRB approach

Total IRB approach

74,757,442

26,927,441

75,048,349

28,480,112

-290,906

-1,552,672

of which: Counterparty Risk

682,295

278,500

759,357

242,170

-77,063

36,331

Total

137,406,514

43,659,823

131,167,701

45,227,223

6,238,813

-1,567,400

of which: Counterparty Risk

4,441,936

1,398,182

4,060,900

1,306,406

381,037

91,776

The following table shows a breakdown of AIRB) and by regulatory portfolio.

exposures and RWAs by approach (Standard/

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Exposure and RWA Distribution of Credit and Counterparty Risk

Regulatory portfolios

Jun-20

Dec-19

Standardised approach

EAD

RWA

EAD

RWA

Exposures to central governments or central banks

36,071,854

1,399,267

29,868,127

1,746,118

Exposures to regional governments or local authorities

1,549,688

309,371

1,542,472

308,211

Exposures to public sector entities

498,316

382,996

403,830

362,070

Exposures to multilateral development banks

73,586

-

111,402

-

Exposures to International organisations

-

-

-

-

Exposures to institutions

9,716,404

1,975,890

9,568,602

2,024,563

Exposures to corporates

3,938,276

3,703,205

3,467,782

3,328,505

Retail exposures

659,662

461,726

858,019

592,771

Exposures secured by mortgages on immovable property

1,194,352

452,340

1,477,102

557,071

Exposures in default

367,895

409,727

424,348

455,305

Exposures associated with high risk

267,898

401,848

331,285

496,928

Exposures in the form of covered bonds

713,091

86,158

705,148

85,542

Exposures to institutions and corporates

-

-

-

-

with a short-term credit assessment

Exposures to collective investments undertakings

163,634

163,634

229,524

229,524

Equity exposures

1,029,963

2,032,502

1,115,714

2,243,660

Other exposures

6,303,804

4,916,035

6,015,995

4,302,804

Securitization positions *

100,649

33,536

8,898

8,898

Exposures to Central Counterparties in the form

-

4,149

-

14,039

of pre-funded contributions to the guarantee fund

Total standardised approach

62,649,072

16,732,383

56,128,250

16,756,009

AIRB approach

Exposures to or secured by corporates:

31,318,358

17,945,023

31,169,669

19,732,305

- SMEs

16,390,002

7,451,537

16,731,364

8,963,341

- Other companies

13,169,558

9,111,800

12,613,289

9,254,542

- Specialized lending

1,758,797

1,381,686

1,825,016

1,514,422

Retail exposures:

43,372,035

8,843,372

43,783,366

8,600,843

- secured by real estate: SMEs

5,728,543

1,987,773

5,801,907

1,854,434

- secured by real estate: Individuals

28,137,360

3,812,474

27,907,035

3,654,559

- Qualifying revolving

72,709

5,621

93,584

7,469

- Other retail exposures: SMEs

7,827,793

2,768,353

8,252,376

2,791,655

- Other retail exposures: Individuals

1,605,629

269,151

1,728,465

292,725

- Securitization positions **

67,050

139,046

95,314

146,964

Total AIRB approach

74,757,442

26,927,441

75,048,349

28,480,112

Total Credit and Counterparty Risk

137,406,514

43,659,823

131,176,599

45,236,121

  • Securitization positions subject to Standard approach include securitizations under the SEC-ERBA and SEC-SA.
  • Securitization positions subject to AIRB approach include securitizations under the SEC-IRBA.

G R U P P O M O N T E P A S C H I

Credit Risk

40

Credit Risk: Standard approach

Quantitative disclosure

The table below shows the details of the banking Group's exposures subject to Credit Risk - standard approach, determined according to the rules of Prudential Supervision and including the effects from risk mitigation techniques (netting agreements, guarantees, etc.).

The quantitative disclosures in this Section complement those provided in section "Use of risk mitigation techniques". In fact, each regulatory portfolio provided for by regulations under the standard approach is broken down as follows:

  • amount of on- and off-balance exposures, "without" the risk mitigation (Exposure before CRM), which does not take into account the decrease in exposure arising

from the application of collateral and guarantees; in the case of guarantees, which transfer risk in respect of the guaranteed portion, reference is made to the guarantor's regulatory portfolios and weightings, while as to the residual exposure, reference is made to the guaranteed party's information;

  • amount of the same exposures "with" the risk mitigation effect (Exposure after CRM), i.e. net of the guarantees mentioned in the previous point, thus the difference between exposures "with" and "without" credit risk mitigation represents the amount of approved collateral, disclosed also in section "Use of risk mitigation techniques".

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Standard approach: Ante and Post CRM Exposure Value

Jun-20

Dec-19

Ante CRM

Post CRM

Credit Risk

Ante CRM

Post CRM

Credit Risk

Regulatory Portfolio (Standard Approach)

Mitigation

Mitigation

Exposure

Exposure

Exposure

Exposure

Techniques

Techniques

Exposures to central governments or central banks

36,233,119

36,233,119

-

29,994,417

29,994,417

0

Exposures to regional governments or local authorities

2,806,758

2,806,758

-

2,302,900

2,302,900

-

Exposures to public sector entities

694,931

680,034

-14,897

654,231

639,387

-14,844

Exposures to multilateral development banks

88,586

88,586

-

126,402

126,402

-

Exposures to international organisations

-

-

-

-

-

-

Exposures to institutions

60,352,296

12,528,910

-47,823,386

40,996,762

12,406,244

-28,590,518

Exposures to corporates

6,254,415

5,653,527

-600,889

5,962,470

5,305,353

-657,117

Retail exposures

1,561,771

1,539,248

-22,523

1,888,520

1,852,477

-36,043

Exposures secured by mortgages on immovable property

1,206,024

1,205,009

-1,015

1,482,948

1,482,928

-20

Exposures in default

560,185

557,328

-2,857

618,177

612,426

-5,751

Exposures associated with particularly high risk

280,703

280,115

-588

370,168

367,909

-2,258

Exposures in the form of covered bonds

713,091

713,091

-

705,148

705,148

-

Exposures to institutions and corporates with

-

-

-

-

-

-

a short-term credit assessment

Exposures to collective investments undertakings

314,983

168,928

-146,055

444,617

303,701

-140,916

Equity exposures

1,029,963

1,029,963

-

1,115,714

1,115,714

-

Other exposures

6,303,804

6,303,804

-

6,016,015

6,016,015

-

Items representing securitization positions

167,699

167,699

-

8,898

8,898

-

Exposures to Central Counterparties in the form of pre-funded

-

-

-

-

-

-

contributions to the guarantee fund

Total

118,568,328

69,956,118

-48,612,210

92,687,387

63,239,920

-29,447,468

The table shows the Group's exposures reported by regulatory exposure classes and also contains off-balance sheet exposures relating to guarantees and commitments before the application of credit conversion factors (CCF).

G R U P P O M O N T E P A S C H I

Credit Risk

42

As of 30 June 2020, the total amount of exposures deducted from Funds came to EUR 321.9 million. The exposures reported in the table "Standard approach: Distribution in classes of creditworthiness (EAD post CRM)" also include the off balance- sheet exposures relating to guarantees and commitments (including undrawn credit lines) subsequent to the application of the Credit Conversion Factors (CFFs) required

by prudential regulations. The off-balance sheet exposures in relation to guarantees and commitments are disclosed side by side with the counterparty weighting factor. The exposure value shown in the tables of this section is stated net of adjustments in accordance with the prudential regulations. Reported below are the Post CRM exposures broken down by weighting factor.

Standard approach: Distribution in classes of creditworthiness (EAD post CRM)

Classes of credit worthiness (Weighting Factors)

Regulatory Portfolio

0%

Until

35%

50%

70% - 100%

150%

225% - 250%

370%

1250%

Total

(Standardised approach)

20%

as at 30/06/20

Exposures to central governments or central banks

34,974,639

-

-

20,404

868,539

-

208,271

-

-

36,071,854

Exposures to regional governments or local authorities

-

1,549,688

-

-

-

-

-

-

-

1,549,688

Exposures to public sector entities

2,769

140,689

-

-

354,858

-

-

-

-

498,316

Exposures to multilateral development banks

73,586

-

-

-

-

-

-

-

-

73,586

Exposures to international organisations

-

-

-

-

-

-

-

-

-

-

Exposures to institutions

41,680

7,534,253

-

1,864,908

275,563

-

-

-

-

9,716,404

Exposures to corporates

-

38,711

-

109,658

3,749,276

40,631

-

-

-

3,938,276

Retail exposures

-

-

1,649

-

658,013

-

-

-

-

659,662

Exposures secured by mortgages on immovable property

-

-

787,994

406,358

-

-

-

-

-

1,194,352

Exposures in default

-

-

-

-

284,231

83,664

-

-

-

367,895

Exposures associated with particularly high risk

-

-

-

-

-

267,898

-

-

-

267,898

Exposures in the form of covered bonds

-

710,075

-

3,016

-

-

-

-

-

713,091

Exposures to institutions and corporates

-

-

-

-

-

-

-

-

-

-

with a short-term credit assessment

Exposures to collective investments undertaking

-

-

-

-

163,634

-

-

-

-

163,634

Equity exposures

-

-

-

-

361,603

-

668,359

-

-

1,029,963

Other exposures

758,448

789,147

-

370

4,751,476

4,363

-

-

-

6,303,804

Exposures to Central Counterparties in the

-

-

-

-

-

-

-

-

-

-

form of pre-funded contributions to the guarantee fund

Total as at 30/06/2020

35,851,123

10,762,562

789,644

2,404,714

11,467,194

396,556

876,630

-

-

62,548,423

Total as at 31/12/2019

29,660,453 11,056,877 1,048,931

2,058,145

10,806,091

445,682

1,052,072

-

-

56,128,250

The table shows the Group's exposures reported by regulatory exposure classes and also contains off-balance sheet exposures relating to guarantees and commitments post application of credit conversion factors (CCF).

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43

EU CR5 - Standard approach

Exposures

Classes of credit worthiness (Weighting Factors)

Total

Without

classes

2%

4% 10% 20%

35%

50% 70% 75% 100% 150% 225 - 250%

rating

0%

370% 1250% Deducted

1

Central governments

-

-

-

-

-

20,404

or central banks

34,974,185

2

Regional governments

-

-

-

-

1,537,089

-

-

or local authorities

3

Public sector

2,769

-

-

-

140,687

-

-

entities

Multilateral

4

development

73,586

-

-

-

-

-

-

banks

5

International

-

-

-

-

-

-

-

organisations

6

Institutions

41,680

2,266,441

71,486

-

3,179,264

-

468,690

7

Corporates

-

-

-

-

38,711

-

109,658

8

Retail

-

-

-

-

-

1,649

-

9

Secured by mortgages

-

-

-

-

-

787,994

406,358

on immovable property

10

Exposures in default

-

-

-

-

-

-

-

11

Higher-risk categories

-

-

-

-

-

-

-

12

Covered bonds

-

-

-

573,654

136,421

-

3,016

Institutions and

13

corporates with a

-

-

-

-

-

-

-

short-term

credit assessment

Collective

14

investment

-

-

-

-

-

-

-

undertakings

15

Equity

-

-

-

-

-

-

-

16

Other items

758,448

-

-

-

789,147

-

370

17

Total as at

35,850,669

2,266,441

71,486

573,654

5,821,318

789,644

1,008,496

30/06/2020

18

Total as at

29,659,620

1,783,766

50,121

563,893

6,808,269

1,048,931

914,753

31/12/2019

-

-

865,986

-

208,271

-

-

122,754

36,068,846

-

-

-

-

-

-

-

-

1,537,089

-

-

-

348,598

-

-

-

-

492,054

-

-

-

-

-

-

-

-

73,586

-

-

-

-

-

-

-

-

-

-

-

-

262,477

-

-

-

-

6,290,038

-

-

-

3,501,366

40,631

-

-

-

3,690,366

-

-

657,886

-

-

-

-

-

659,535

-

-

-

-

-

-

-

-

1,194,352

-

-

-

284,210

79,806

-

-

-

364,016

-

-

-

-

267,898

-

-

-

267,898

-

-

-

-

-

-

-

-

713,091

-

-

-

-

-

-

-

-

-

-

-

-

104,143

-

-

-

-

104,143

-

-

-

361,603

-

668,359

-

-

133,262

1,029,963

-

-

-

4,751,476

4,363

-

-

-

6,303,804

-

-

657,886

10,479,859

392,699

876,630

-

-

256,015

58,788,782

-

-

858,019

9,632,764

445,677

1,052,072

-

-

516,945

52,817,883

-

The exposure shown in the table does not include the counterparty credit risk (CCR). The deducted items include exposures required to be deducted in accordance with Part Two of the CRR.

G R U P P O M O N T E P A S C H I

Credit Risk

44

Credit Risk: use of the AIRB approach

AIRB Authorization

With decree no. 647555 of 12 June 2008, the Bank of Italy authorised Montepaschi Group to use Advanced Internal Ratings Based (AIRB) systems to calculate the capital requirements for Credit Risk and Operational Risk. In particular, whereas the Montepaschi Group uses the standard approach ratios for Exposure at default (EAD) pending validation by the Supervisory Authorities, the Group is instead authorised to use:

  • Internal Probability of Default (PD) estimates, for the portfolio of exposures to corporates and retail exposures;
  • Internal Loss Given Default (LGD) estimates for the portfolio of exposures to corporates and retail exposures.

For portfolios other than those mentioned above, the standard approach is used. As for legal entities, the scope of application of the authorised approaches shall be the following:

  • AIRB: Banca Monte dei Paschi di Siena, MPS Capital Services, Banca Antonveneta, MPS Leasing & Factoring;
  • the remaining legal entities of the Montepaschi Group use the standard approach.

Quantitative information

The following table reports the Group's exposure to Credit Risk - AIRB, as of 30 June 2020 divided by classes of regulatory activities. The exposure values reported are determined according to prudential supervisory requirements and as such are inclusive of value adjustments and do not factor in the effects of risk mitigation techniques which, in the case of exposures subject to an internal models-based approach, are directly included in the risk-weighting factor applied. As for guarantees issued and commitments to disburse funds, the values reported take into account credit conversion factors. The exposure value reported in the table, therefore, shows the credit equivalent. Following are the values of Risk Weighted Assets (RWAs), Expected Loss (EL), and Actual Losses (AL) as at the end of June 2020. It is noted that the amount of value adjustments on general-purpose and special- purpose receivables relating to securitisation exposures are not included in the calculation of the Expected Loss Delta, as required by the CRR.

The nominal value in following tables show the exposure value before applying the credit conversion factor.

P I L L

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45

AIRB Approach: Summary of Exposures, RWAs, expected and actual losses

Jun-20

Regulatory Portfolio

EAD

RWA

EL

AL

Exposures to or secured by corporates:

31,318,358

17,945,023

3,220,286

3,808,134

- SMEs

16,390,002

7,451,537

2,334,727

2,807,209

- Other companies

13,169,558

9,111,800

758,707

868,591

- Specialized lending

1,758,797

1,381,686

126,852

132,334

Retail exposures:

43,372,035

8,843,372

2,480,703

2,717,449

- Secured by real estate: SMEs

5,728,543

1,987,773

661,803

601,665

- Secured by real estate: Individuals

28,137,360

3,812,474

524,592

538,940

- Qualifying revolving

72,709

5,621

326

648

- Other retail exposures: SMEs

7,827,793

2,768,353

1,076,915

1,291,190

- Other retail exposures: Individuals

1,605,629

269,151

217,067

285,007

Total as at 30/06/2020

74,690,393

26,788,395

5,700,988

6,525,583

Total as at 31/12/2019

75,048,349

28,480,112

5,931,480

6,422,232

Reported below is the breakdown by PD class, identified by the MPS Group to allow for a significant distinction to be made for

credit risk (see para. "Credit Risk: use of the AIRB approach") by Group exposures and regulatory portfolio.

G R U P P O M O N T E P A S C H I

Credit Risk

46

IRB Approach: Exposures, expected and actual losses distribution by regulatory portfolio and PD classes (except for Specialized lending)

Jun-20

Classes of

Corporates

Retail

AIRB Total

AIRB

AIRB

creditworthiness

Exposure

Exposure

Exposures

Total EL

Total AL

Class 01

Class 02

168,897

19,064

187,961

24

360

Class 03

132,197

69,058

201,255

42

314

Class 04

445,334

120,558

565,892

204

853

Class 05

821,469

7,404,515

8,225,985

1,710

2,382

Class 06

1,190,636

5,330,564

6,521,200

2,532

3,095

Class 07

2,482,457

3,864,578

6,347,035

4,935

11,220

Class 08

3,212,315

3,160,046

6,372,362

8,170

10,752

Class 09

2,850,750

4,606,456

7,457,206

13,238

16,381

Class 10

3,406,337

4,687,077

8,093,415

22,862

32,453

Class 11

2,766,931

2,612,179

5,379,110

26,506

42,447

Class 12

1,610,500

2,008,838

3,619,339

26,889

48,782

Class 13

2,600,476

1,972,969

4,573,445

59,378

145,822

Class 14

1,138,082

1,008,892

2,146,975

38,772

107,261

Class 15

484,505

528,735

1,013,241

28,594

63,669

Class 16

174,397

298,019

472,416

20,610

37,778

Class 17

120,656

131,834

252,490

14,719

23,014

Class 18

54,721

105,937

160,657

12,441

18,854

Class 19

95,005

67,585

162,590

21,896

23,985

Class 20

5,803,895

5,375,131

11,179,025

5,270,613

5,803,827

Total as at 30/06/2020

29,559,560

43,372,035

72,931,595

5,574,137

6,393,249

Totale as at 31/12/2019

29,344,652

43,783,366

73,128,019

5,794,829

6,275,021

P I L L

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47

The following table shows a breakdown by

divided by regulatory asset class:

PD band with quantitative details for the

- Specialized lending - slotting criteria;

Advanced IRB approach of the Portfolio

- SMEs;

"Exposures to or secured by corporates"

- Other companies.

EU CR10 - IRB (Specialized lending and equities)

Nominal

Exposure

Off-balance-

Value

Expected

Rating Class

sheet

RWA

Value

Value

adjustments

Loss

amount

Category 1 - 50%

16,698

16,695

180

8,347

34

-

Category 1 - 70% equal to or greater than 2.5 years

227,678

225,583

4,190

157,908

655

902

Category 2 -70% less than 2.5 years

353,187

231,676

159,794

162,173

375

927

Category 2 - 90%

874,508

788,574

173,167

709,717

5,351

6,309

Category 3

- 115%

284,482

273,289

25,715

314,282

12,755

7,652

Category 4

- 250%

11,709

11,703

6

29,258

844

936

Category 5

- 0%

214,943

211,277

7,224

-

112,319

110,126

Total as at 30/06/2020

1,983,206

1,758,797

370,275

1,381,686

132,334

126,852

Totale as at 31/12/2019

2,002,651

1,825,016

319,562

1,514,422

147,211

136,651

G R U P P O M O N T E P A S C H I

Credit Risk

48

EU CR6 - IRB approach: Exposures to or secured by corporates - SMEs

On-balance-

Nominal

Exposure

Revocable and

CCF%

Number

Weighted

Weighted

Average

Average

Value

Expected

RWA

Rating

sheet gross

Value

Value

Irrevocable

(Average)

of obligors

Average

Average

maturity

Risk

adjustments

Loss

Class

exposures

Margins

PD (%)

LGD (%)

Weight

%(RW%)

Class 01

Class 02

166,549

160,728

39,851

127,212

4.98%

122

0.03%

39.67%

2,26

7.32%

86

5

2,916

Class 03

303,763

291,797

73,447

231,444

5.66%

265

0.05%

41.73%

1,77

9.92%

96

15

7,286

Class 04

619,174

592,524

239,349

384,967

8.26%

584

0.09%

37.45%

2,50

15.24%

499

81

36,473

Class 05

810,931

773,927

333,843

476,545

7.65%

629

0.13%

38.77%

2,13

18.45%

777

168

61,597

Class 06

1,076,700

1,013,163

522,560

533,991

8.13%

841

0.20%

36.54%

2,35

22.68%

906

382

118,512

Class 07

1,915,691

1,827,563

1,017,914

901,021

10.14%

1,327

0.30%

38.36%

2,27

30.96%

5,155

1,171

315,102

Class 08

1,758,775

1,677,119

1,049,540

681,678

7.94%

1,251

0.46%

34.19%

2,80

36.07%

3,746

1,650

378,544

Class 09

1,989,525

1,882,675

1,226,659

720,330

8.93%

1,611

0.69%

34.92%

2,56

41.97%

5,421

2,956

514,783

Class 10

2,289,476

2,177,949

1,510,814

721,951

7.59%

1,877

1.05%

34.55%

2,70

49.19%

10,093

5,481

743,213

Class 11

2,293,459

2,179,865

1,655,362

583,320

10.08%

1,856

1.59%

32.59%

2,97

55.11%

15,778

8,577

912,326

Class 12

1,625,025

1,553,766

1,181,223

423,164

11.96%

1,441

2.42%

32.32%

2,80

59.06%

15,288

9,240

697,646

Class 13

1,879,956

1,825,464

1,492,290

415,881

19.89%

1,455

3.99%

33.03%

3,01

70.95%

59,424

19,664

1,058,749

Class 14

1,007,515

987,530

818,124

200,977

15.71%

756

6.31%

29.72%

3,42

74.34%

46,925

15,341

608,215

Class 15

500,946

488,213

418,801

81,302

14.63%

385

9.95%

28.25%

3,13

82.06%

22,462

11,771

343,670

Class 16

171,996

169,056

145,079

26,668

10.09%

186

16.03%

28.30%

3,47

99.65%

12,655

6,581

144,566

Class 17

126,565

123,701

117,857

6,690

12.64%

89

22.12%

29.50%

3,46

114.42%

10,833

7,690

134,857

Class 18

62,821

60,706

51,545

9,665

5.22%

50

31.63%

27.32%

3,86

113.14%

8,101

4,454

58,318

Class 19

77,568

76,986

69,573

8,681

14.61%

56

45.00%

30.95%

4,23

130.74%

11,282

9,691

90,960

Class 20

4,733,838

4,626,770

4,426,170

252,337

20.50%

2,634

100.00%

49.31%

1,81

27.65%

2,577,681

2,229,808

1,223,804

Total as at

23,410,272

22,489,502

16,390,002

6,787,825

9.74%

17,415

2.83%

33.79%

2,53

2,807,209

2,334,727

7,451,537

30/06/2020

Total as at

22,617,809

21,999,823

16,731,364

6,022,083

11.51%

17,630

2.65%

34.04%

2,83

2,744,080

2,421,943

8,963,341

31/12/2019

For reporting purposes, Unused Margin refer to issued guarantees and revocable and irrevocable commitments to disburse funds. The weighted average PD (%) and weighted average LDG (%) under Total does not include class 20.

P I L L

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Credit Risk

49

EU CR6 - IRB approach: Exposures to or secured by corporates - Other companies

On-balance-

Nominal

Exposure

Revocable and

CCF%

Number

Weighted

Weighted

Average

Average

Value

Expected

RWA

Rating

sheet gross

Value

Value

Irrevocable

(Average)

of obligors

Average

Average

maturity

Risk

adjustments

Loss

Class

exposures

Margins

PD (%)

LGD (%)

Weight

%(RW%)

Class 01

Class 02

467,664

467,664

129,046

448,441

24.49%

34

0.03%

44.50%

2,77

16.48%

215

17

21,264

Class 03

273,146

269,755

58,750

220,816

4.44%

68

0.05%

42.82%

1,64

14.31%

82

13

8,408

Class 04

639,541

636,670

205,985

485,992

11.38%

136

0.09%

43.26%

2,27

26.10%

168

80

53,757

Class 05

1,599,718

1,584,441

487,626

1,252,586

12.44%

205

0.13%

43.64%

1,82

29.66%

757

277

144,638

Class 06

1,555,373

1,540,827

668,076

1,019,413

14.39%

271

0.20%

43.07%

1,97

39.29%

967

576

262,467

Class 07

3,140,378

3,133,718

1,464,543

1,862,537

10.38%

501

0.30%

42.60%

2,11

49.11%

4,043

1,872

719,308

Class 08

4,060,719

4,025,724

2,162,775

2,286,130

18.51%

441

0.46%

39.47%

2,35

56.95%

4,165

3,926

1,231,799

Class 09

2,846,835

2,828,311

1,624,091

1,421,720

15.30%

451

0.69%

42.99%

1,80

72.02%

4,716

4,818

1,169,724

Class 10

3,140,276

3,113,206

1,895,524

1,497,481

18.68%

568

1.05%

42.61%

1,77

83.29%

10,905

8,480

1,578,752

Class 11

1,647,302

1,620,324

1,111,569

586,108

13.20%

388

1.59%

42.45%

1,92

97.74%

6,894

7,503

1,086,436

Class 12

661,631

652,163

429,278

254,206

12.32%

223

2.42%

41.51%

1,56

104.70%

4,264

4,313

449,449

Class 13

1,546,168

1,518,882

1,108,186

557,213

26.29%

266

3.99%

43.39%

2,01

136.02%

20,250

19,186

1,507,344

Class 14

410,145

408,530

319,958

131,165

32.47%

120

6.31%

30.07%

1,19

104.86%

11,599

6,072

335,505

Class 15

106,791

104,945

65,704

48,013

18.27%

53

9.95%

38.62%

1,73

151.46%

6,501

2,525

99,516

Class 16

36,205

36,205

29,318

9,586

28.15%

20

16.03%

39.97%

1,59

198.53%

2,047

1,878

58,206

Class 17

4,411

4,411

2,799

1,664

3.10%

10

22.12%

40.97%

1,23

200.45%

469

254

5,611

Class 18

3,540

3,540

3,175

728

49.96%

5

31.63%

46.95%

1,01

241.47%

206

472

7,667

Class 19

30,262

30,262

25,432

5,430

11.04%

8

45.00%

41.34%

1,15

216.33%

4,510

4,731

55,016

Class 20

1,766,138

1,765,229

1,377,724

568,904

31.89%

357

100.00%

49.97%

1,59

23.00%

785,829

691,717

316,934

Total as at

23,936,245

23,744,806

13,169,558

12,658,131

15.73%

4,125

1.39%

41.83%

1,93

868,591

758,707

9,111,800

30/06/2020

Total as at

23,709,546

23,671,114

12,613,289

13,206,316

15.39%

4,182

1.92%

41.37%

2,21

1,039,453

970,701

9,254,542

31/12/2019

For reporting purposes, Unused Margin refer to issued guarantees and revocable and irrevocable commitments to disburse funds. The weighted average PD (%) and weighted average LDG (%) under Total does not include class 20.

The following table shows a breakdown by

- Secured by real estate - SMEs,

PD band

with quantitative details for the

- Secured by real estate - Individuals,

advanced

IRB approach of the Portfolio

- Qualifying revolving,

"Retail Exposures" divided by regulatory

- Other retail exposures - SMEs,

asset class:

- Other retail exposures - Individuals.

G R U P P O M O N T E P A S C H I

Credit Risk

50

EU CR6 - IRB approach: Retail Exposures Secured by real estate - SMEs

On-balance-

Nominal

Exposure

Revocable and

CCF%

Number

Weighted

Weighted

Average

Average

Value

Expected

RWA

Rating

sheet gross

Value

Value

Irrevocable

(Average)

of obligors

Average

Average

maturity

Risk

adjustments

Loss

Class

exposures

Margins

PD (%)

LGD (%)

Weight

%(RW%)

Class 01

Class 02

1,267

1,267

1,267

-

0.00%

9

0.03%

17.97%

-

1.45%

1

0

18

Class 03

12,034

12,034

10,799

1,335

7.50%

50

0.05%

19.27%

-

2.27%

8

1

245

Class 04

25,177

24,767

21,182

4,800

25.29%

162

0.09%

19.38%

-

3.84%

13

4

814

Class 05

47,099

47,075

41,401

7,763

26.91%

315

0.13%

19.02%

-

5.04%

36

10

2,086

Class 06

94,426

93,061

87,363

5,862

2.80%

644

0.20%

19.41%

-

7.18%

87

34

6,269

Class 07

214,823

212,794

196,550

16,377

0.81%

1,426

0.30%

19.81%

-

9.86%

315

117

19,385

Class 08

316,738

315,676

287,307

28,888

1.80%

1,982

0.46%

19.87%

-

13.79%

516

263

39,624

Class 09

499,898

496,804

453,909

44,271

3.11%

3,268

0.69%

19.80%

-

18.24%

1,268

620

82,772

Class 10

726,801

722,915

648,625

75,051

1.01%

4,286

1.05%

20.10%

-

24.36%

2,721

1,369

157,995

Class 11

846,212

839,598

755,297

85,945

1.91%

5,021

1.59%

20.18%

-

31.62%

5,131

2,424

238,797

Class 12

698,549

690,201

615,500

75,842

1.50%

3,821

2.42%

20.31%

-

41.48%

7,418

3,025

255,283

Class 13

617,390

612,302

551,216

62,112

1.65%

3,062

3.99%

20.13%

-

53.88%

17,480

4,427

296,969

Class 14

355,763

350,141

311,259

38,897

0.04%

1,624

6.31%

20.43%

-

68.13%

11,952

4,013

212,048

Class 15

146,981

146,129

131,434

14,864

1.13%

655

9.95%

20.46%

-

83.56%

7,458

2,675

109,821

Class 16

101,132

100,642

90,025

10,769

1.41%

440

16.03%

20.61%

-

99.05%

6,076

2,974

89,168

Class 17

44,649

44,279

40,845

3,434

0.00%

207

22.12%

20.19%

-

103.97%

3,249

1,824

42,466

Class 18

38,081

37,893

32,103

5,790

0.00%

146

31.63%

19.90%

-

109.96%

3,013

2,021

35,300

Class 19

32,728

32,521

27,341

5,181

0.00%

126

45.00%

20.48%

-

98.90%

2,573

2,519

27,041

Class 20

1,447,505

1,441,341

1,425,120

19,686

17.60%

5,938

100.00%

41.75%

-

26.08%

532,352

633,484

371,670

Total as at

6,267,253

6,221,441

5,728,543

506,864

2.16%

33,182

3.25%

20.11%

0,00

601,665

661,803

1,987,773

30/06/2020

Total as at

5,866,130

5,829,220

5,801,907

44,269

37.34%

33,699

3.18%

19.82%

0,00

558,566

654,355

1,854,434

31/12/2019

For reporting purposes, Unused Margin refer to issued guarantees and revocable and irrevocable commitments to disburse funds. The weighted average PD (%) and weighted average LDG (%) under Total does not include class 20.

P I L L

A

R

3 J U

N E 2 0 2 0

Credit Risk

51

EU CR6 - IRB approach: Retail Exposures Secured by real estate - Individuals

On-balance-

Nominal

Exposure

Revocable and

CCF%

Number

Weighted

Weighted

Average

Average

Value

Expected

RWA

Rating

sheet gross

Value

Value

Irrevocable

(Average)

of obligors

Average

Average

maturity

Risk

adjustments

Loss

Class

exposures

Margins

PD (%)

LGD (%)

Weight

%(RW%)

Class 01

Class 02

-

-

-

-

0.00%

-

0.00%

0.00%

-

0.00%

-

-

-

Class 03

-

-

-

-

0.00%

-

0.00%

0.00%

-

0.00%

-

-

-

Class 04

-

-

-

-

0.00%

-

0.00%

0.00%

-

0.00%

-

-

-

Class 05

7,408,847

7,188,675

7,133,999

56,069

2.48%

84,924

0.13%

12.46%

-

3.84%

582

1,156

273,590

Class 06

5,462,318

4,959,602

4,892,959

66,962

0.48%

63,019

0.20%

13.05%

-

5.55%

675

1,277

271,601

Class 07

3,431,093

3,209,533

3,157,826

51,914

0.40%

40,013

0.30%

12.60%

-

7.22%

813

1,193

228,033

Class 08

2,507,727

2,345,784

2,296,126

50,341

1.36%

30,420

0.46%

12.53%

-

9.76%

908

1,324

224,192

Class 09

3,563,187

3,426,426

3,357,081

69,708

0.52%

44,802

0.69%

11.69%

-

12.09%

1,982

2,708

405,769

Class 10

3,238,482

3,159,438

3,097,655

61,878

0.15%

41,006

1.05%

11.38%

-

15.61%

3,350

3,700

483,548

Class 11

889,285

855,801

825,553

30,430

0.60%

10,980

1.59%

12.06%

-

21.64%

3,637

1,583

178,685

Class 12

486,469

470,269

449,875

20,810

2.00%

5,644

2.42%

12.04%

-

27.98%

3,772

1,310

125,889

Class 13

617,748

604,600

584,263

20,352

0.07%

7,123

3.99%

12.04%

-

37.27%

13,610

2,806

217,767

Class 14

249,687

244,075

232,060

12,015

0.00%

2,717

6.31%

11.74%

-

46.06%

5,941

1,719

106,882

Class 15

146,192

142,968

139,536

3,432

0.00%

1,663

9.95%

11.67%

-

56.05%

4,270

1,620

78,216

Class 16

92,954

91,204

89,409

1,796

0.06%

1,054

16.03%

11.38%

-

64.41%

3,083

1,631

57,586

Class 17

49,840

49,011

47,481

1,533

0.22%

577

22.12%

11.14%

-

67.60%

1,773

1,170

32,096

Class 18

45,131

44,400

41,787

2,613

0.00%

513

31.63%

12.71%

-

78.48%

1,745

1,680

32,794

Class 19

16,495

16,368

16,170

198

0.00%

228

45.00%

10.74%

-

60.80%

686

781

9,831

Class 20

1,803,193

1,796,204

1,775,580

20,659

0.17%

16,973

100.00%

23.41%

-

61.16%

492,113

498,933

1,085,993

Total as at

30,008,647

28,604,358

28,137,360

470,710

0.82%

351,656

0.82%

12.32%

0,00

538,940

524,592

3,812,474

30/06/2020

Total as at

29,150,505

27,916,297

27,907,035

13,044

41.65%

348,527

0.77%

12.28%

0,00

460,769

492,304

3,654,559

31/12/2019

For reporting purposes, Unused Margin refer to issued guarantees and revocable and irrevocable commitments to disburse funds. The weighted average PD (%) and weighted average LDG (%) under Total does not include class 20.

G R U P P O M O N T E P A S C H I

Credit Risk

52

EU CR6 - IRB approach: Qualifying revolving Retail Exposures

On-balance-

Nominal

Exposure

Revocable and

CCF%

Number

Weighted

Weighted

Average

Average

Value

Expected

RWA

Rating

sheet gross

Value

Value

Irrevocable

(Average)

of obligors

Average

Average

maturity

Risk

adjustments

Loss

Class

exposures

Margins

PD (%)

LGD (%)

Weight

%(RW%)

Class 01

Class 02

-

-

-

-

0.00%

-

0.00%

0.00%

-

0.00%

-

-

-

Class 03

-

-

-

-

0.00%

-

0.00%

0.00%

-

0.00%

-

-

-

Class 04

-

-

-

-

0.00%

-

0.00%

0.00%

-

0.00%

-

-

-

Class 05

41,121

41,121

18,890

22,231

0.00%

34,224

0.13%

21.40%

-

1.70%

7

5

321

Class 06

18,893

18,893

8,174

10,719

0.00%

14,674

0.20%

26.91%

-

3.04%

5

4

249

Class 07

25,105

25,105

9,998

15,107

0.00%

16,602

0.30%

22.02%

-

3.46%

9

7

346

Class 08

12,724

12,724

5,067

7,656

0.00%

7,193

0.46%

25.81%

-

5.71%

7

6

290

Class 09

14,496

14,496

6,790

7,707

0.00%

9,346

0.69%

22.70%

-

6.92%

18

11

470

Class 10

12,742

12,742

7,406

5,337

0.00%

9,441

1.05%

22.15%

-

9.33%

37

17

691

Class 11

7,782

7,782

5,078

2,704

0.00%

6,416

1.59%

22.69%

-

13.06%

45

18

663

Class 12

5,741

5,741

3,723

2,018

0.00%

4,840

2.42%

22.51%

-

17.60%

50

20

655

Class 13

3,074

3,074

2,170

905

0.00%

2,716

3.99%

24.33%

-

26.98%

40

21

585

Class 14

4,239

4,239

3,908

330

0.00%

4,465

6.31%

15.66%

-

23.47%

101

39

917

Class 15

623

623

350

273

0.00%

483

9.95%

23.68%

-

46.66%

17

8

163

Class 16

277

277

159

118

0.00%

227

16.03%

21.89%

-

55.28%

11

6

88

Class 17

201

201

49

152

0.00%

111

22.12%

24.27%

-

70.06%

4

3

34

Class 18

255

255

208

47

0.00%

314

31.63%

13.95%

-

44.46%

20

9

92

Class 19

262

262

123

140

0.00%

277

45.00%

14.35%

-

46.09%

16

8

56

Class 20

1,089

1,089

617

473

0.00%

1,046

100.00%

23.33%

-

0.00%

257

144

-

Total as at

148,624

148,624

72,709

75,915

0.00%

112,375

1.27%

22.52%

0,00

648

326

5,621

30/06/2020

Total as at

183,014

183,014

93,584

89,430

0.00%

120,397

1.31%

22.81%

0,00

657

365

7,469

31/12/2019

For reporting purposes, Unused Margin refer to issued guarantees and revocable and irrevocable commitments to disburse funds. The weighted average PD (%) and weighted average LDG (%) under Total does not include class 20.

P I L L

A

R

3 J U

N E 2 0 2 0

Credit Risk

53

EU CR6 - IRB approach: Other retail Exposures - SMEs

On-balance-

Nominal

Exposure

Revocable and

CCF%

Number

Weighted

Weighted

Average

Average

Value

Expected

RWA

Rating

sheet gross

Value

Value

Irrevocable

(Average)

of obligors

Average

Average

maturity

Risk

adjustments

Loss

Class

exposures

Margins

PD (%)

LGD (%)

Weight

%(RW%)

Class 01

Class 02

62,015

56,123

17,797

40,881

6.25%

495

0.03%

44.63%

-

3.79%

59

2

674

Class 03

200,848

189,146

58,259

135,957

3.73%

1,021

0.05%

43.73%

-

5.41%

127

13

3,150

Class 04

732,522

701,787

99,376

619,489

2.76%

10,698

0.09%

43.55%

-

8.48%

172

39

8,424

Class 05

423,909

390,435

129,145

274,983

4.98%

2,962

0.13%

43.08%

-

11.11%

186

72

14,343

Class 06

732,044

672,243

256,826

438,270

5.21%

5,405

0.20%

43.21%

-

15.00%

416

222

38,532

Class 07

1,003,624

912,440

385,439

566,514

6.97%

8,755

0.30%

42.98%

-

19.57%

802

497

75,422

Class 08

1,031,863

923,872

441,429

522,219

7.62%

10,610

0.46%

42.53%

-

25.60%

1,248

864

113,007

Class 09

1,386,262

1,237,065

642,455

638,749

6.91%

15,576

0.69%

42.68%

-

32.32%

2,617

1,892

207,644

Class 10

1,579,827

1,383,771

775,918

648,627

6.29%

19,878

1.05%

42.42%

-

39.20%

4,506

3,456

304,179

Class 11

1,776,381

1,553,668

882,014

732,979

8.37%

23,431

1.59%

41.96%

-

44.60%

9,205

5,885

393,345

Class 12

1,571,703

1,371,325

822,475

588,241

6.70%

21,615

2.42%

41.95%

-

49.45%

15,738

8,350

406,693

Class 13

1,330,259

1,153,931

745,751

440,865

7.41%

19,479

3.99%

41.88%

-

52.50%

31,552

12,462

391,483

Class 14

718,756

615,255

424,555

205,265

7.10%

14,623

6.31%

41.32%

-

53.83%

28,930

11,071

228,533

Class 15

342,786

297,674

222,036

91,391

17.24%

5,282

9.95%

40.68%

-

58.05%

21,821

8,988

128,896

Class 16

174,205

146,865

108,399

43,877

12.33%

3,133

16.03%

41.25%

-

71.30%

13,099

7,168

77,292

Class 17

61,275

51,122

39,888

12,508

10.18%

1,162

22.12%

40.72%

-

81.53%

6,377

3,593

32,520

Class 18

42,882

36,732

29,412

8,700

15.86%

1,446

31.63%

39.11%

-

87.03%

5,518

3,639

25,597

Class 19

30,986

26,831

21,392

5,755

5.49%

3,051

45.00%

40.77%

-

92.44%

4,545

3,925

19,775

Class 20

2,002,589

1,851,448

1,725,228

164,213

23.14%

49,321

100.00%

57.62%

-

17.32%

1,144,272

1,004,778

298,844

Total as at

15,204,737

13,571,731

7,827,793

6,179,481

6.61%

217,943

2.86%

42.19%

0,00

1,291,190

1,076,915

2,768,353

30/06/2020

Total as at

14,102,719

13,198,312

8,252,376

5,401,073

7.83%

216,898

2.79%

42.30%

0,00

1,195,810

1,058,065

2,791,655

31/12/2019

For reporting purposes, Unused Margin refer to issued guarantees and revocable and irrevocable commitments to disburse funds. The weighted average PD (%) and weighted average LDG (%) under Total does not include class 20.

G R U P P O M O N T E P A S C H I

Credit Risk

54

EU CR6 - IRB approach: Other retail Exposures - Individuals

On-balance-

Nominal

Exposure

Revocable and

CCF%

Number

Weighted

Weighted

Average

Average

Value

Expected

RWA

Rating

sheet gross

Value

Value

Irrevocable

(Average)

of obligors

Average

Average

maturity

Risk

adjustments

Loss

Class

exposures

Margins

PD (%)

LGD (%)

Weight

%(RW%)

Class 01

Class 02

-

-

-

-

0.00%

-

0.00%

0.00%

-

0.00%

-

-

-

Class 03

-

-

-

-

0.00%

-

0.00%

0.00%

-

0.00%

-

-

-

Class 04

15

15

-

15

0.00%

0

0.09%

0.00%

-

0.00%

-

-

-

Class 05

506,831

506,612

81,080

438,591

2.98%

81

0.13%

20.72%

-

6.59%

38

22

5,340

Class 06

209,542

209,223

85,241

135,674

8.62%

17

0.20%

21.92%

-

9.41%

40

37

8,023

Class 07

249,483

249,054

114,765

150,445

10.74%

28

0.30%

22.82%

-

12.79%

82

79

14,678

Class 08

233,279

232,034

130,118

120,816

15.64%

16

0.46%

23.00%

-

16.72%

161

138

21,753

Class 09

289,004

287,289

146,222

160,830

12.29%

25

0.69%

23.18%

-

21.00%

359

234

30,711

Class 10

283,962

282,450

157,473

138,251

9.60%

26

1.05%

21.64%

-

23.82%

841

358

37,515

Class 11

232,558

231,532

144,238

96,526

9.56%

23

1.59%

22.54%

-

28.86%

1,757

517

41,631

Class 12

172,627

171,837

117,266

59,875

8.86%

20

2.42%

22.23%

-

31.69%

2,252

631

37,160

Class 13

109,752

109,462

89,569

22,482

11.52%

12

3.99%

22.73%

-

34.80%

3,466

812

31,172

Class 14

44,765

44,354

37,110

8,050

10.01%

19

6.31%

22.13%

-

35.54%

1,812

518

13,190

Class 15

37,958

37,884

35,379

13,988

82.10%

4

9.95%

28.61%

-

50.83%

1,140

1,007

17,985

Class 16

11,416

11,408

10,027

1,582

12.70%

2

16.03%

23.13%

-

49.70%

806

372

4,983

Class 17

3,940

3,936

3,571

437

16.32%

1

22.12%

23.57%

-

57.94%

309

186

2,069

Class 18

2,675

2,675

2,426

418

40.39%

4

31.63%

21.73%

-

59.56%

250

167

1,445

Class 19

2,753

2,721

2,559

167

3.14%

11

45.00%

20.88%

-

58.44%

373

240

1,496

Class 20

461,489

460,525

448,585

14,136

15.54%

92

100.00%

44.97%

-

0.00%

271,323

211,749

-

Total as at

2,852,048

2,843,010

1,605,629

1,362,281

9.10%

379

1.97%

22.56%

0,00

285,007

217,067

269,151

30/06/2020

Total as at

2,989,626

2,985,141

1,728,465

1,389,308

9.52%

406

2.12%

22.85%

0,00

275,686

197,096

292,725

31/12/2019

For reporting purposes, Unused Margin refer to issued guarantees and revocable and irrevocable commitments to disburse funds. The weighted average PD (%) and weighted average LDG (%) under Total does not include class 20.

P I L L

A

R

3 J U

N E 2 0 2 0

Credit Risk

55

Exposures subject to the AIRB approach

broken down by geographical location

The Montepaschi Group operates almost exclusively in the domestic market. If the geographical location of the counterparties is considered, 100% of AIRB exposures are towards counterparties resident in Italy.

For the purposes of this disclosure and in accordance with Article 452 of the CRR, the relevant geographical location of credit exposures means exposures in the Member States in which the institution has been authorized and Member States or third countries in which institutions carry out activities through a branch or subsidiary. As far as credit risk is concerned, the Group is currently authorized to use internal estimates of PD, LGD parameters for portfolios of loans to locals counterparties (Corporate and Retail Exposures) of the main Italian subsidiaries of the Group, namely Banca Monte dei Paschi di Siena, MPS Capital Services and MPS Leasing & Factoring. The other foreign subsidiaries (MP Banque) adopt standard models and their exposures are included among those subject to Credit Risk - Standard approach. The Group also operates in Member States or third countries via foreign branches, whose operations focus on supporting the expansion of Italian businesses and investments abroad and in the major foreign financial markets. AIRB credit exposures (net of default) held by foreign branches amount to 0% and are

entirely towards local counterparties (with headquarters/residence or domicile in Italy). The exposures are towards counterparties that were assigned an internal PD and LGD estimate since they are already counterparties of Italian subsidiaries and are reported under the Parent Company Banca MPS for regulatory purposes. Accordingly, the values of the exposure-weighted average PD and LGD by geographical location coincide with those reported in the tables above which show the AIRB exposures of authorized Italian subsidiaries broken down by class of exposure. Reported below are the credit exposures subject to the AIRB approach (net of default) according to the definition of geographical location described above, i.e. by Member State in which the institution has been authorized (Italy) and by Member State or third country in which the institution operates through a branch.

G R U P P O M O N T E P A S C H I

Italy

Other EU

Countries

Exposures

Other not EU

to or secured

Countries

by corporates

Total as at

30/06/2020

Total as at

31/12/2019

Italy

Other EU

Countries Other not EU

Retail Countries exposures Total as at

30/06/2020

Total as at 31/12/2019

Credit Risk

56

IRB approach: Exposures to or secured by corporates - Geographic Segmentation

EAD

Incidence

Weighted

Weighted

RWA

EL

AL

Average PD

Average LGD

23,755,666

100.00%

2.12%

37.78%

15,022,599

171,909

312,290

-

-

-

-

-

-

-

-

-

-

-

-

-

-

23,755,666

100.00%

2.12%

37.78%

15,022,599

171,909

312,290

22,255,552

100.00%

2.42%

37.32%

16,177,128

182,268

258,658

IRB approach: Retail Exposures - Geographic Segmentation

EAD

Incidence

Weighted

Weighted

RWA

EL

AL

Average PD

Average LGD

37,996,904

100.00%

1.46%

18.33%

7,086,864

131,615

277,132

-

-

-

-

-

-

-

-

-

-

-

-

-

-

37,996,904

100.00%

1.46%

18.33%

7,086,864

131,615

277,132

38,505,432

100.00%

1.43%

18.60%

6,848,519

133,568

197,786

P I L L

A

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3 J U

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57

Credit Risk: credit quality

Quantitative information

The following table provide a comprehensive picture of the credit quality of the Group.

EU CR1-A - Credit quality of exposures by exposure class and instrument

a

b

c

d

e

f

Gross carrying values of:

Specific

General

Accumulated

Credit risk

adjustments charges

Defaulted

Non-defaulted

credit risk

credit risk

write-off

of the period

adjustments

adjustment

exposures

exposures

1

Central governments or central banks

-

-

-

2

Institutions

-

-

-

3

Corporates

4,836,361

42,510,156

3,675,800

4

Of which: SMEs

1,989,525

21,420,747

2,807,209

5

Of which: other corporates

2,846,835

21,089,409

868,591

6

Retail

5,752,848

48,728,461

2,717,449

7

Secured by real estate property

4,063,085

32,212,814

1,140,604

8

SMEs

499,898

5,767,354

601,665

9

Non-SMEs

3,563,187

26,445,460

538,940

10

Qualifying revolving

14,496

134,128

648

11

Other retail

1,675,266

16,381,519

1,576,197

12

SMEs

1,386,262

13,818,475

1,291,190

13

Non-SMEs

289,004

2,563,044

285,007

14

Equity

15

Total AIRB approach

10,589,208

91,238,617

6,393,249

-

16

Central governments or central banks

-

29,920,682

36,052

17

Regional governments or local authorities

-

2,778,988

3,446

18

Public sector entities

-

733,718

2,214

19

Multilateral development banks

-

88,589

3

20

International organisations

-

-

-

21

Institutions

-

59,112,251

4,368

22

Corporates

-

6,486,046

13,293

23

Of which: SMEs

1,392,048

2,792

24

Retail

-

1,635,683

8,043

25

Of which: SMEs

702,669

846

26

Secured by mortgages on immovable property

-

1,217,779

5,613

27

Of which: SMEs

283,801

2,807

28

Exposures in default

1,107,453

-

543,458

29

Items associated with particularly high risk

90,953

234,060

44,272

30

Covered bonds

-

713,657

566

31

Exposures to institutions and corporates with a short-

-

-

-

term credit assessment

32

Collective investments undertakings

-

315,353

370

33

Equity exposures

1,054

1,028,908

-

34

Other exposures

-

6,317,776

27,128

35

Total standardised approach

1,199,461

110,583,491

-

688,825

36

Total

11,788,669

201,822,108

6,393,249

688,825

37

Of which: Loans

126,568,166

6,353,065

682,450

38

Of which: Debt securities

39,992,896

34,495

1,524

39

Of which: Off-balance-sheet exposures

49,032,921

138,022

4,851

g

Net value (a+b-c-d)

-

-

43,670,717

20,603,062

23,067,654

51,763,860

35,135,295

5,665,588

29,469,707

147,976

16,480,588

13,913,547

2,567,041

-

95,434,577

29,884,630

2,775,542

731,503

88,586

-

59,107,883

6,472,754

1,389,256

1,627,640

701,823

1,212,166

280,994

563,995

280,742

713,091

-

314,983

1,029,963

6,290,648

111,094,127

206,528,704

119,532,651

39,956,876

48,890,048

The figures shown in the table under IRB approach do not include specialised lending-slotting criteria.

G R U P P O M O N T E P A S C H I

Credit Risk

58

Subsequent to the public consultation process launched in April, in December 2018 the EBA published the final version of the document "Guidelines on disclosures of non- performing and forborne exposures" (EBA/ GL/2018/10), effective as of 31 December 2019 (in line with the "Guidelines for

banks on non-performing loans", published by the ECB in March 2017) and aimed at promoting consistency in NPL disclosure requirements. This document has been taken into account in the preparation of the following tables.

Credit quality Credit quality of forborne exposures (Template 1 - EBA GL 2018/10)

a

b

c

d

e

f

g

h

Gross carrying amount/nominal amount

Accumulated impairment, accumulated negative

Collateral received and financial

of exposures with forbearance measures

changes in fair value due to credit risk and provisions

guarantees received on forborne exposures

Non-performing forborne

Of which collate-

ral and financial

Performing

On performing

On non-performing

guarantees received

forborne

Of which

Of which

forborne exposures

forborne exposures

on non-performing

exposures with forbe-

defaulted

impaired

arance measures

1

Loans and advances

1,817,997

4,190,321

4,190,321

3,954,438

-139,504

-1,725,191

3,260,164

2,012,286

2

Central banks

-

-

-

-

-

-

-

-

3

General governments

4,965

164

164

164

-65

-74

-

-

4

Credit institutions

-

-

-

-

-

-

-

-

5

Other financial corporations

43,298

111,371

111,371

55,685

-670

-68,366

76,059

34,963

6

Non-financial corporations

1,205,241

3,043,016

3,043,016

2,863,920

-111,743

-1,375,105

1,978,037

1,267,448

7

Households

564,493

1,035,770

1,035,770

1,034,669

-27,026

-281,647

1,206,068

709,875

8

Debt securities

225,478

2,052

2,052

-

-2

-2,052

-

-

9

Loan commitments given

52,188

61,940

61,940

61,940

-

-

36,139

14,877

10

Total

2,095,663

4,254,313

4,254,313

4,016,378

-139,507

-1,727,244

3,296,304

2,027,164

The figures shown in the table do not include the amounts relating to assets held for sale. Forborne exposures were not significantly affected by contract amendments granted by the Group to performing debtors as of 31 December 2019, in difficulty following the outbreak of the COVID-19 pandemic, as laid down by the specific indications published by the EBA.

P I L L

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59

Credit Quality of performing and non performing exposures by past due days (Template

3 - EBA GL 2018/10)

a

b

c

d

e

f

g

h

i

j

k

l

Gross carrying amount/nominal amount

Performing exposures

Non-performing exposures

Not past due

Past due

Unlikely to pay

Past due

Past due

Past due

Past due

Past due

Total

Total

that are not past

Past due

Of which

or past due

> 30 days

> 90 days

> 180 days

> 1 year

> 2 years

> 5 years

due or are past

> 7 years

defaulted

≤ 30 days

≤ 90 days

≤ 180 days

≤ 1 year

≤ 2 years

≤ 5 years

≤ 7 years

due ≤ 90 days

1

Loans and advances

81,748,240

81,005,368

742,872

11,374,150

1,979,336

346,079

805,672

1,208,537

2,941,318

2,187,303

1,905,906

11,374,150

2

Central banks

-

-

-

-

-

-

-

-

-

-

255,571

255,571

3

General governments

2,085,148

2,049,597

35,551

243,793

42,888

733

721

574

2,735

195,645

497

243,793

4

Credit institutions

4,193,829

4,175,846

17,983

4,666

-

-

1,494

-

3,172

-

-

4,666

5

Other financial corporations

8,540,646

8,540,348

298

172,996

50,271

3,184

14,479

45,925

33,690

8,004

17,443

172,996

6

Non-financial corporations

32,812,927

32,390,087

422,840

7,926,184

1,526,935

212,871

537,461

878,478

1,825,495

1,464,369

1,480,575

7,926,184

7

Of which SMEs

21,245,081

20,965,658

279,423

6,477,373

1,085,941

160,455

421,794

671,139

1,538,301

1,302,237

1,297,505

6,477,373

8

Households

33,860,119

33,593,919

266,200

3,026,512

359,242

129,291

251,518

283,560

1,076,226

519,285

407,391

3,026,512

9

Debt securities

16,618,175

16,535,766

82,410

33,284

14,584

-

-

-

18,700

-

-

33,284

10

Central banks

-

-

-

-

-

-

-

-

-

-

-

-

11

General governments

12,385,949

12,334,866

51,084

-

-

-

-

-

-

-

-

-

12

Credit institutions

1,302,868

1,276,777

26,091

-

-

-

-

-

-

-

-

-

13

Other financial corporations

2,500,701

2,500,701

-

18,700

-

-

-

-

18,700

-

-

18,700

14

Non-financial corporations

428,657

423,422

5,235

14,584

14,584

-

-

-

-

-

-

14,584

15

Off-balance-sheet exposures

46,367,756

1,224,853

1,224,853

16

Central banks

70

-

-

17

General governments

1,680,201

120,135

120,135

18

Credit institutions

2,094,329

9,815

9,815

19

Other financial corporations

15,183,189

5,741

5,741

20

Non-financial corporations

24,705,835

1,051,309

1,051,309

21

Households

2,704,132

37,854

37,854

22

Total

144,734,171

97,541,134

825,281

12,632,288

1,993,920

346,079

805,672

1,208,537

2,960,018

2,187,303

1,905,906

12,632,288

Exposures relating to Loans and Advances and to Debt Securities are represented by assets valued at amortised cost and by assets that must necessarily be valued at fair value. The figures shown in the table do not include the amounts relating to assets held for sale and debt securities and derivatives included in the item Financial assets held for trading. The gross NPL ratio, which is calculated as column (d) row (1) divided by the sum of column (d) row (1) plus column (a) row (1), is equal to 12.21%.

As of 30 June 2020, figures still include insolvency flows which do not fall within the initiatives implemented by the banking system to support business and households particularly affected by the economic crisis.

G R U P P O M O N T E P A S C H I

Credit Risk

60

Performing and non-performing exposures and related provisions (Template 4 - EBA

GL 2018/10)

a

b

c

d

e

f

g

h

i

j

h

l

m

n

o

Gross carrying amount/nominal amount

Accumulated impairment, accumulated negative changes

Collateral and financial

in fair value due to credit risk and provisions

guarantees received

Non-performing exposures

Accumulated

partial

On

On non-

Performing exposures - accumulated

- accumulated impairment,

Performing exposures

Non-performing exposures

write-off

performing

performing

impairment and provisions

accumulated negative changes in fair

exposures

exposures

value due to credit risk and provisions

Total

of which

of which

Total

of which

of which

Total

of which

of which

Total

of which

of which

STAGE 1

STAGE 2

STAGE 2

STAGE 3

STAGE 1

STAGE 2

STAGE 2

STAGE 3

1

Loans and advances

81,748,240

66,050,262

15,328,837

11,374,150

-

11,133,038

-635,224

-77,481

-557,710

-5,577,246

-

-5,411,877

-244,000

58,767,885

4,674,960

2

Central banks

255,571

20,001

-

-

-

-

-

-

-

-

-

-

-

-

-

3

General governments

2,085,148

2,013,797

71,351

243,793

-

243,793

-5,843

-3,708

-2,135

-118,467

-

-118,467

-4

154,972

68

4

Credit institutions

4,193,829

4,158,609

36,546

4,666

-

4,666

-2,047

-2,214

-186

-3,093

-

-3,093

-

1,021,465

-

5

Other financial corporations

8,540,646

8,430,317

127,781

172,996

-

117,310

-5,714

-2,536

-3,177

-113,124

-

-72,553

-202

7,054,524

47,629

6

Non-financial corporations

32,812,927

20,818,187

11,876,978

7,926,184

-

7,742,787

-497,713

-48,033

-449,680

-4,285,162

-

-4,160,857

-217,751

18,719,030

2,877,946

7

Of which SMEs

21,245,081

12,325,590

8,587,678

6,477,373

-

6,395,258

-410,916

-30,565

-379,622

-3,435,709

-

-3,349,229

-62,294

14,993,382

2,631,221

8

Households

33,860,119

30,609,350

3,216,181

3,026,512

-

3,024,483

-123,907

-20,990

-102,532

-1,057,401

-

-1,056,907

-26,043

31,817,893

1,749,317

9

Debt securities

16,618,175

16,164,011

20,045

33,284

-

12,532

-16,874

-16,116

-758

-31,891

-

-11,139

-

-

-

10

Central banks

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

11

General governments

12,385,949

12,334,861

-

-

-

-

-11,650

-11,650

-

-

-

-

-

-

-

12

Credit institutions

1,302,868

1,269,283

14,010

-

-

-

-3,241

-2,773

-469

-

-

-

-

-

-

13

Other financial corporations

2,500,701

2,290,879

-

18,700

-

-

-1,319

-1,319

-

-18,700

-

-

-

-

-

14

Non-financial corporations

428,657

268,988

6,035

14,584

-

12,532

-664

-374

-290

-13,191

-

-11,139

-

-

-

15

Off-balance-sheet exposures

46,367,756

41,762,801

2,628,960

1,224,853

-

1,221,992

28,065

11,608

16,457

124,553

-

124,553

21,983,319

252,640

16

Central banks

70

70

-

-

-

-

-

-

-

-

-

-

-

-

17

General governments

1,680,201

1,633,791

46,410

120,135

-

120,135

53

37

16

-

-

-

21,831

-

18

Credit institutions

2,094,329

2,043,117

23,876

9,815

-

9,815

1,410

1,219

191

-

-

-

3,784,162

-

19

Other financial corporations

15,183,189

13,345,687

25,585

5,741

-

5,741

534

438

96

239

-

239

12,256,769

1,348

20

Non-financial corporations

24,705,835

22,222,261

2,350,346

1,051,309

-

1,049,148

22,485

8,404

14,081

119,232

-

119,232

5,431,474

242,710

21

Households

2,704,132

2,517,875

182,743

37,854

-

37,153

3,582

1,509

2,073

5,083

-

5,083

489,083

8,583

22

Total

144,734,171

123,977,074

17,977,841

12,632,288

-

12,367,562

-624,034

-81,989

-542,011

-5,484,584

-

-5,298,463

-244,000

80,751,204

4,927,601

Exposures relating to Loans and Advances and Debt Securities are represented exclusively by assets valued at amortised cost. The total does not include off-balance sheet exposures. The figures shown in the table do not include amounts relating to assets held for sale and debt securities and derivatives included in the item Financial assets held for trading.

Following the outbreak of the COVID-19 pandemic, which has triggered an ongoing economic crisis and caused global and national economic forecasts to undergo important changes, the Group has updated its risk assessment tools and related losses. The forecast macroeconomic scenarios relating to the 2020-2022 period led to a significant change in exposures classified as "significant risk" (stage 2 - IFRS9) as well as an increase in adjustments on the entire portfolio and, in particolar, on non-performing loans deriving from the changed macroeconomic scenario due to the spread of the COVID-19 pandemic.

P I L L

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61

Quality of non-performing exposures by geography (Template 5 - EBA GL 2018/10)

a

b

c

d

e

Gross carrying/nominal amount

Of which: non-performing

Of which: subject

Accumulated

to impairment

impairment

Of which: defaulted

f

g

Provisions on

Accumulated negative

off-balancesheet

changes in fair value due

to credit risk on

commitments and

nonperforming

financial guarantees given

exposures

1

On-balance-sheet exposures

126,141,216

11,416,443

11,416,443

125,367,290

-6,084,733

-186,121

2

Abu dhabi

49,504

4

4

49,504

-141

0

3

Antigua and barbuda

321

0

0

321

-0

0

4

Albania

78

13

13

78

-9

0

5

Armenia

7,725

0

0

7,725

-0

0

6

Angola

0

0

0

0

-0

0

7

Argentina

4,882

132

132

4,882

-45

0

8

Austria

10,747

7

7

10,747

-13

0

9

Australia

6,412

8

8

6,412

-15

0

10

Azerbaijan

570

2

2

570

-2

0

11

Bosnia and herzegovina

389

0

0

389

-1

0

12

Barbados

0

0

0

0

0

0

13

Bangladesh

1,239

3

3

1,239

-4

0

14

Belgium

49,946

9,666

9,666

49,946

-1,994

0

15

Burkina faso

0

0

0

0

0

0

16

Bulgaria

656

5

5

656

-4

0

17

Bahrain

14

0

0

14

-0

0

18

Burundi

1

1

1

1

-0

0

19

Benin

557

0

0

557

-2

0

20

Bermuda

1,254

0

0

1,254

-3

0

21

Brunei darussalam

109

0

0

109

-0

0

22

Belize

0

0

0

0

0

0

23

Brazil

13,897

4

4

13,897

-57

0

24

Bahamas

0

0

0

0

-0

0

25

Botswana

0

0

0

0

-0

0

26

Belarus

17,486

0

0

17,486

-123

0

27

Canada

6,027

10

10

6,027

-19

0

28

Congo, democratic republic of

570

273

273

570

-82

0

29

Congo

1

0

0

1

-0

0

30

Switzerland

27,473

2,226

2,226

27,407

-688

0

31

Cote d'ivoire

1

1

1

1

-0

0

32

Chile

7,345

0

0

7,345

-59

0

33

Cameroon

36

36

36

36

-14

0

34

China

151,189

48

48

151,189

-917

0

35

Colombia

326

1

1

326

-2

0

36

Costa rica

685

0

0

685

-2

0

37

Cuba

25,790

12,181

12,181

25,790

-12,375

0

38

Cape verde

0

0

0

0

0

0

39

Curacao

0

0

0

0

0

0

40

Cyprus

289

30

30

289

-4

0

41

Czech republic

812

1

1

812

-2

0

42

Germany

416,100

1,690

1,690

416,100

-955

0

43

Djibouti

0

0

0

0

0

0

44

Denmark

1,318

5

5

1,318

-9

0

45

Dominican republic

4

0

0

4

-0

0

46

Algeria

12,963

2

2

12,963

-104

0

47

Ecuador

103

0

0

103

-0

0

48

Estonia

3

1

1

3

-1

0

49

Egypt

1,405

512

512

1,405

-326

0

50

Eritrea

1

1

1

1

-0

0

51

Spain

2,063,189

1,340

1,340

2,063,189

-1,317

0

52

Ethiopia

2

0

0

2

-0

0

53

Finland

193

0

0

193

-0

0

54

France

1,352,725

110,340

110,340

1,352,725

-56,628

0

55

Gabon

5

5

5

5

-4

0

56

United kingdom

3,205,322

11,306

11,306

3,205,322

-6,324

0

57

Georgia

1

0

0

1

-0

0

58

Guernsey, c.i.

0

0

0

0

0

0

59

Ghana

265

31

31

265

-21

0

G R U P P O M O N T E P A S C H I

Credit Risk

62

Quality of non-performing exposures by geography (Template 5 - EBA GL 2018/10)

a

b

c

d

e

Gross carrying/nominal amount

Of which: non-performing

Of which: subject

Accumulated

to impairment

impairment

Of which: defaulted

f

g

Provisions on

Accumulated negative

off-balancesheet

changes in fair value due

to credit risk on

commitments and

nonperforming

financial guarantees given

exposures

60

Gibraltar

0

0

0

0

-0

0

61

Gambia

0

0

0

0

-0

0

62

Guatemala

0

0

0

0

0

0

63

Greece

56

4

4

56

-3

0

64

Hong kong

13,745

1

1

13,745

-39

0

65

Kyrgyzstan

0

0

0

0

-0

0

66

Croatia

2,151

6

6

2,151

-19

0

67

Hungary

1,523

1

1

1,523

-8

0

68

Indonesia

3,450

520

520

3,450

-337

0

69

Ireland

29,223

126

126

29,223

-155

0

70

Israel

1,772

1

1

1,772

-1

0

71

Isle of man

0

0

0

0

-0

0

72

India

27,855

8

8

27,855

-88

0

73

Iraq

18,909

0

0

18,909

-0

0

74

Iran (islamic republic of)

41

4

4

41

-3

0

75

Iceland

567

0

0

567

-1

0

76

Italy

117,644,486

11,224,254

11,224,254

116,870,627

-5,971,122

-186,121

77

Jersey, c.i.

0

0

0

0

0

0

78

Jordan

37

4

4

37

-3

0

79

Japan

5,972

1

1

5,972

-7

0

80

Kenya

3,193

1

1

3,193

-8

0

81

Korea, republic of

1,982

3

3

1,982

-8

0

82

Kuwait

861

0

0

861

-6

0

83

Cayman islands

21,157

10,152

10,152

21,157

-9,242

0

84

Kazakhstan

7,642

1

1

7,642

-4

0

85

Lebanon

300

1

1

300

-0

0

86

Saint lucia

0

0

0

0

0

0

87

Liechtenstein

0

0

0

0

-0

0

88

Sri lanka

173

0

0

173

-0

0

89

Lithuania

413

1

1

413

-1

0

90

Luxembourg

186,650

5,819

5,819

186,650

-927

0

91

Latvia

296

0

0

296

-0

0

92

Libya

3

1

1

3

-1

0

93

Morocco

1,421

4

4

1,421

-7

0

94

Monaco

6,129

734

734

6,129

-131

0

95

Moldova, republic of

18

2

2

18

-1

0

96

Montenegro

95

0

0

95

-0

0

97

Madagascar

0

0

0

0

0

0

98

Marshall islands

0

0

0

0

0

0

99

Macedonia,the former yugoslav republ. of

1

1

1

1

-1

0

100

Myanmar

81

2

2

81

-2

0

101

Macao

125

0

0

125

-0

0

102

Mauritania

0

0

0

0

-0

0

103

Malta

755

1

1

755

-4

0

104

Mauritius

482

0

0

482

-21

0

105

Maldives

3,409

0

0

3,409

-9

0

106

Mexico

29,191

94

94

29,191

-107

0

107

Malaysia

1,981

3

3

1,981

-16

0

108

Mozambique

0

0

0

0

0

0

109

Nigeria

97

1

1

97

-1

0

110

Netherlands

102,486

580

580

102,486

-141

0

111

Norway

8,107

1

1

8,107

-7

0

P I L L

A

R

3 J U

N E 2 0 2 0

Credit Risk

63

Quality of non-performing exposures by geography (Template 5 - EBA GL 2018/10)

a

b

c

d

e

Gross carrying/nominal amount

Of which: non-performing

Of which: subject

Accumulated

to impairment

impairment

Of which: defaulted

f

g

Provisions on

Accumulated negative

off-balancesheet

changes in fair value due

to credit risk on

commitments and

nonperforming

financial guarantees given

exposures

112

Nepal

0

0

0

0

-0

0

113

New zealand

701

0

0

701

-1

0

114

Oman

329

0

0

329

-0

0

115

Panama

58

0

0

58

-0

0

116

Peru

795

1

1

795

-4

0

117

Philippines

7,395

1

1

7,395

-49

0

118

Pakistan

1,244

1

1

1,244

-1

0

119

Poland

1,787

3

3

1,787

-16

0

120

Puerto rico

0

0

0

0

-0

0

121

Palestinian territory, occupied

0

0

0

0

-0

0

122

Portugal

20,027

5

5

20,027

-8

0

123

Paraguay

537

0

0

537

-1

0

124

Qatar

15,351

1

1

15,351

-21

0

125

Reunion

329

0

0

329

-5

0

126

Romania

9,117

73

73

9,117

-51

0

127

Serbia

1,375

253

253

1,375

-34

0

128

Russian federation

35,088

142

142

35,088

-87

0

129

Rwanda

255

0

0

255

-0

0

130

Saudi Arabia

25,976

153

153

25,976

-238

0

131

Sudan

1

0

0

1

-0

0

132

Sweden

1,138

581

581

1,138

-110

0

133

Singapore

1,055

0

0

1,055

-5

0

134 Slovenia

3,711

29

29

3,711

-23

0

135

Slovakia

1,843

151

151

1,843

-42

0

136

San marino

2,180

152

152

2,180

-132

0

137

Yemen

2

2

2

2

-2

0

138

Suriname

31,485

0

0

31,485

-0

0

139

El salvador

0

0

0

0

-0

0

140

Syrian arab republic

0

0

0

0

-0

0

141

Chad

15

15

15

15

-1

0

142

Togo

1

1

1

1

-0

0

143

Thailand

1,174

0

0

1,174

-7

0

144

Turkmenistan

0

0

0

0

-0

0

145

Tunisia

1,861

13

13

1,861

-10

0

146

Turkey

35,414

1

1

35,414

-311

0

147

Taiwan

266

0

0

266

-1

0

148

Tanzania, united republic of

5,408

1

1

5,408

-16

0

149

Ukraine

17

12

12

17

-7

0

150

Uganda

95

0

0

95

-0

0

151

United states

255,433

10,526

10,526

255,433

-8,882

0

152

Uruguay

26

0

0

26

-0

0

153

Holy see (vatican city state)

3

0

0

3

-0

0

154

Venezuela

437

14

14

437

-8

0

155

Virgin islands, british

12,087

12,087

12,087

12,087

-9,914

0

156

Viet nam

1,829

0

0

1,829

-19

0

157

South africa

4,698

2

2

4,698

-27

0

158

Zambia

0

0

0

0

-0

0

159

Zimbabwe

0

0

0

0

-0

0

160

Other Countries

93,907

1

1

93,907

-5

0

G R U P P O M O N T E P A S C H I

Credit Risk

64

Quality of non-performing exposures by geography (Template 5 - EBA GL 2018/10)

a

b

c

d

e

f

g

Gross carrying/nominal amount

Provisions on

Accumulated negative

Of which: subject

Accumulated

off-balancesheet

changes in fair value due

Of which: non-performing

to credit risk on

to impairment

impairment

commitments and

nonperforming

Of which: defaulted

financial guarantees given

exposures

161

Off-balance-sheet exposures

45,758,769

1,224,853

1,224,853

152,618

162

Abu dhabi

72,340

-

-

15

163

Albania

1

0

0

0

164

Armenia

2,635

-

-

-

165

Argentina

2,127

0

0

0

166

Austria

6,303

-

-

1

167

Australia

18,214

0

0

0

168

Bosnia and herzegovina

227

-

-

0

169

Bangladesh

11,954

0

0

25

170

Belgium

134,586

-

-

6

171

Bulgaria

4,032

0

0

0

172

Bahrain

5,273

-

-

3

173

Benin

351

0

0

0

174

Brazil

30,987

-

-

5

175

Belarus

11,390

0

0

4

176

Canada

31,025

-

-

1

177

Switzerland

47,785

6

6

33

178

Cote d'ivoire

101

-

-

0

179

Chile

11,494

0

0

4

180

Cameroon

1

-

-

-

181

China

201,859

0

0

76

182

Colombia

7,109

-

-

1

183

Costa rica

9,000

0

0

3

184

Cuba

16,829

3,172

3,172

235

185

Cyprus

256

0

0

2

186

Czech republic

4,022

-

-

0

187

Germany

22,725

0

0

34

188

Denmark

11,309

-

-

0

189

Dominican republic

5

0

0

0

190

Algeria

28,633

18

18

227

191

Estonia

8,500

0

0

1

192

Egypt

12,481

-

-

21

193

Spain

22,491

0

0

5

194

Ethiopia

500

-

-

0

195

Finland

1

0

0

0

196

France

173,166

6,270

6,270

4

197

United kingdom

64,319

782

782

11

198

Ghana

178

-

-

0

199

Eritrea

17

0

0

0

200

Greece

331

-

-

0

201

Hong kong

26,285

0

0

1

202

Croatia

7,615

-

-

2

203

Hungary

4,046

0

0

0

204

Indonesia

30,035

-

-

2

205

Ireland

3,932

0

0

0

206

Israel

18,926

-

-

1

207

India

80,589

0

0

39

208

Iraq

3,057

-

-

-

209 Iran (islamic republic of)

10

0

0

0

210

Iceland

102

-

-

0

211

Italy

43,898,205

1,211,122

1,211,122

150,957

212

Jordan

1,285

-

-

1

P I L L

A

R

3 J U

N E 2 0 2 0

Credit Risk

65

Quality of non-performing exposures by geography (Template 5 - EBA GL 2018/10)

a

b

c

d

e

Gross carrying/nominal amount

Of which: non-performing

Of which: subject

Accumulated

to impairment

impairment

Of which: defaulted

f

g

Provisions on

Accumulated negative

off-balancesheet

changes in fair value due

to credit risk on

commitments and

nonperforming

financial guarantees given

exposures

213

Japan

16,902

0

0

1

214

Kenya

2,069

-

-

2

215

Korea, republic of

24,560

0

0

6

216

Kuwait

19,333

-

-

1

217

Kazakhstan

2,807

0

0

0

218

Lebanon

92

-

-

0

219

Liechtenstein

21

0

0

0

220

Sri lanka

1,846

-

-

0

221

Lithuania

1,723

0

0

0

222

Luxembourg

4,316

71

71

1

223

Latvia

1,024

0

0

0

224

Morocco

2,786

-

-

1

225

Monaco

3,052

0

0

0

226

Moldova, republic of

4

-

-

0

227

Montenegro

588

0

0

1

228

Macedonia,the former yugoslav republ. of

-

-

-

-

229

Mongolia

66

0

0

0

230

Macao

-

-

-

-

231

Malta

1,529

292

292

179

232

Mauritius

95

-

-

0

233

Maldives

2,531

0

0

0

234

Mexico

27,962

-

-

5

235

Malaysia

16,509

0

0

1

236

Nigeria

4,187

-

-

7

237

Netherlands

114,283

0

0

4

238

Norway

514

-

-

0

239

New zealand

2,784

0

0

0

240

Oman

11,235

-

-

3

241

Panama

1,048

0

0

2

242

Peru

11,090

-

-

1

243

Philippines

6,857

0

0

0

244

Pakistan

5,973

-

-

10

245

Poland

10,183

0

0

0

246

Palestinian territory, occupied

26

-

-

0

247

Portugal

12,227

0

0

1

248

Paraguay

2,828

-

-

0

249

Qatar

24,626

0

0

22

250

Romania

4,112

-

-

1

251

Serbia

167

0

0

0

252

Russian federation

37,752

3,120

3,120

10

253

Saudi Arabia

43,990

0

0

15

254

Sweden

9,029

1

1

1

255

Singapore

6,920

0

0

0

256

Slovenia

3,843

-

-

1

257

Slovakia

50

0

0

0

258

San marino

1,917

1

1

0

259

Senegal

3

0

0

0

260

Suriname

5,648

-

-

-

261

Syrian arab republic

300

0

0

0

262

Thailand

21,209

-

-

2

263

Tunisia

10,049

0

0

26

264

Turkey

89,508

-

-

564

G R U P P O M O N T E P A S C H I

Credit Risk

66

Quality of non-performing exposures by geography (Template 5 - EBA GL 2018/10)

a

b

c

d

e

Gross carrying/nominal amount

Of which: non-performing

Of which: subject

Accumulated

to impairment

impairment

Of which: defaulted

f

g

Provisions on

Accumulated negative

off-balancesheet

changes in fair value due

to credit risk on

commitments and

nonperforming

financial guarantees given

exposures

265

Taiwan

16,405

0

0

0

266

Tanzania, united republic of

1,471

-

-

11

267

Ukraine

200

0

0

0

268

United states

86,856

-

-

13

269

Uruguay

1,098

0

0

1

270

Venezuela

5

-

-

0

271

Viet nam

9,657

0

0

2

272

South africa

7,257

-

-

1

273

Other Countries

15,000

0

0

0

Total

171,899,984

12,641,296

12,641,296

125,367,290

-6,084,733

152,618

-186,121

Credit quality of loans and advances by industry (Template 6 - EBA GL 2018/10)

abc Gross carrying amount

Of which: non-performing

Of which: defaulted

d

e

f

Accumulated negative

Of which: loans and

Accumulated

changes in fair value due to

advances subject to

impairment

credit risk on

impairment

non-performing exposures

1

Agriculture, forestry and fishing

1,478,735

306,934

306,934

1,475,174

-149,291

-

2

Mining and quarrying

100,281

34,405

34,405

100,115

-14,439

-32

3

Manufacturing

11,371,425

1,608,655

1,608,655

11,202,462

-932,398

-42,824

4

Electricity, gas, steam and air conditioning supply

1,371,317

156,158

156,158

1,356,489

-135,910

-

5

Water supply

772,798

90,780

90,780

772,798

-72,824

-

6

Construction

4,725,307

1,823,639

1,823,639

4,692,624

-1,106,702

-24,893

7

Wholesale and retail trade

6,953,146

919,612

919,612

6,939,043

-587,149

-3,359

8

Transport and storage

1,552,868

366,211

366,211

1,552,868

-176,876

-

9

Accommodation and food service activities

2,045,218

423,254

423,254

2,034,073

-218,963

-9,876

10

Information and communication

812,126

81,472

81,472

812,126

-55,709

-

11

Financial and insurance activities

295,879

60,074

60,074

295,879

-55,323

-

12

Real estate activities

5,238,320

1,371,685

1,371,685

5,189,721

-730,422

-36,685

13

Professional, scientific and technical activities

1,312,790

235,269

235,269

1,304,212

-138,557

-6,635

14

Administrative and support service activities

1,098,019

226,786

226,786

1,098,019

-152,651

-

15

Public administration and defence, compulsory social security

10,009

2,269

2,269

10,009

-992

-

16

Education

35,266

3,482

3,482

35,266

-2,146

-

17

Human health services and social work activities

483,588

39,719

39,719

483,588

-26,536

-

18

Arts, entertainment and recreation

286,162

75,453

75,453

283,918

-46,257

-

19

Other services

795,857

100,325

100,325

795,857

-55,426

-

20

Total

40,739,110

7,926,184

7,926,184

40,434,239

-4,658,570

-124,304

As of 30 June 2020, "Manufacturing activities" posted an increase of 738m on non-performing loans. In the second quarter of 2020, the volumes of growth are mainly linked to the measures implemented by the Italian government to support companies' liquidity.

P I L L

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67

Changes in the stock of non-performing loans and advances Guidelines NPL (Template 8 - EBA GL 2018/10)

a

b

Gross carrying

Related net

accumulated

amount

recoveries

1

Initial stock

11,362,063

2

Inflows to non-performing portfolios

1,091,412

3

Outflows from non-performing portfolios

-1,079,325

4

Outflow to performing portfolio

-124,385

5

Outflow due to loan repayment, partial or total

-310,444

6

Outflow due to collateral liquidation

-71,465

56,072

7

Outflow due to taking possession of collateral

-

-

8

Outflow due to sale of instruments

-257,343

107,412

9

Outflow due to risk transfer

-

-

10

Outflow due to write-off

-123,526

11

Outflow due to other situations

-44,890

12

Outflow due to reclassification as held for sale

-147,273

13

Final stock

11,374,150

The figures shown in the table are represented only by assets valued at amortised cost the figures shown in the table do not include amounts relating to assets held for sale and to assets that must necessarily be valued at fair value.

G R U P P O M O N T E P A S C H I

Credit Risk

68

Foreclosed assets (Template 9 - EBA GL 2018/10)

a

b

Collateral obtained

by taking possession

Value at initial

Accumulated

recognition

negative changes

1

Property, plant and equipment (PP&E)

750

-

2

Other than PP&E

702,720

-447,167

3

Residential immovable property

62

-32

4

Commercial Immovable property

41,858

-16,976

5

Movable property (auto, shipping, etc.)

-

-

6

Equity and debt instruments

660,799

-430,159

7

Other

-

-

8

Total

703,470

-447,167

The reason behind the differences relating to foreclosures and repossessions probably lies in the 'operational block' of such activities, due to the longer periods of closure of offices and courts.

On 2 June 2020, the EBA published its Guidelines on reporting and disclosure of exposures subject to measures applied in response to the COVID-19 crisis (EBA/ GL/2020/07). These guidelines require that information be provided on:

  1. Loans and advances subject to moratoria on loan repayments applied in the light of the COVID-19 crisis, in accordance with EBA/GL/2020/02;
  1. Loans and advances subject to forbereance measures applied in the light of COVID-19 crisis;
  2. Newly originated loans and advances

subject to public guarantee schemes introduced in response to COVID-19 crisis.

This document has been taken into account in the preparation of the following tables.

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  1. Loans and advances subject to moratorium
  2. of which: Households
  3. of which: Collateralised by residential immovable property
  4. of which: Non-financial corporations
  5. of which: Small and Medium-sized Enterprises
  6. of which: Collateralised by commercial immo- vable property

Credit Risk

69

Information on loans and advances subject to legislative and non-legislative moratoria (Template 1 - EBA GL 2010/07)

Gross carrying amount

Accumulated impairment, accumulated negative changes in fair value due to credit risk

Gross carrying

amount

Performing

Non performing

In bonis

Deteriorate

Of which:

Of which:

Of which:

Of which:

Of which:

Of which:

Of which:

Of which:

Inflows to

exposures with

Instruments

exposures with

Unlikely to

exposures with

Instruments

exposures with

Unlikely to

non-

forbearance

with significant

forbearance

pay that are

forbearance

with significant

forbearance

pay that are

performing

measures

increase in credit

measures

not past-due

measures

increase in credit

measures

not past-due or

exposures

risk since initial

or past-due <=

risk since initial

past-due

recognition but not

90 days

recognition but not

<= 90 days

credit-impaired

credit-impaired

(Stage 2)

(Stage 2)

12,337,103

624,190

4,504,861

53,980

8,320

49,100

-199,418

-188,695

-10,722

-

5,369,414

194,367

1,041,711

30,870

5,225

28,027

-39,945

-35,738

-8,957

-31,199

-4,208

-994

-3,886

-

4,844,940

148,047

869,185

26,018

4,523

23,673

-30,102

-27,104

-5,273

-23,798

-2,998

-658

-2,732

-

6,967,689

429,823

3,463,150

23,109

3,095

21,073

-159,472

-152,958

-48,076

-139,351

-6,514

-1,033

-5,738

-

5,640,579

342,931

2,871,498

18,894

2,486

17,171

-126,769

-121,465

-35,357

-110,632

-5,304

-823

-4,628

-

3,082,774

265,978

1,685,024

9,044

1,471

8,952

-65,286

-63,880

-21,345

-60,519

-1,406

-231

-1,390

-

Measures applied mainly consist of rescheduling of payments related to payment su- spension.

Households accounts for 30% of the mo- ratoria, while Non-financial corporations and Institutions accounts for 66% and 4%, respectively. With regard to Non-financial corporations, the following industry sectors were the most affected by moratoria: real estate activities and construction (31% of

the total), manufacturing (22%), wholesale and retail sale (14%) and accommodation and food service activities (13%).

Economic losses are calculated according to the Delta Net Present Value apporach. This approach implies a substantial actuarial neu- trality, as envisaged in the "Cura Italia" de- cree.

G R U P P O M O N T E P A S C H I

Credit Risk

70

  1. Loans and advances for which moratorium was offered
  2. Loans and advances subject to moratorium (granted)
  3. of which: Households
  4. of which: Collateralised by residential immovable property
  5. of which: Non-financial corporations
  6. of which: Small and Medium-sized Enterprises
  7. of which: Collateralised by commercial immovable property

Breakdown of loans and advances subject to legislative and non-legislative moratoria by residual maturity of moratoria (Template 2 - EBA GL 2010/07)

Gross carrying amount

Number of obligors

Of which:

Of which:

Residual maturity of moratoria

<= 3 months

> 3 months

> 6 months

> 9 months

> 1 year

legislative moratoria

expired

<= 6 months

<= 9 months

<= 12 months

98,221

12,782,973

96,602

12,391,083

5,400,285

4,826

2,839,982

2,022,738

525,456

7,284

4,870,958

2,611,800

-

1,073

2,367,102

1,981,411

514,565

6,808

6,990,798

6,601,317

-

71,152

6,715,809

109,600

40,912

53,324

5,659,472

5,491,099

-

44,888

5,552,411

30,250

24,548

7,375

3,091,818

2,973,102

-

36,519

3,010,812

27,407

15,005

2,074

In March 2020, legislative measures were implemented to support business and households which faced liquidity shortages following the outbreak of the COVID-19 pandemic by payment suspension.

The "Cura Italia" decree (Law Decree n. 18/2020), converted into Law n. 27/2020 of 29 April 2020, includes suspension of payments until September 30, 2020.

In

addition,

the Group

has undertaken

a

series of

System-level

initiatives (in

particular by the ABI) which provide for the suspention (up to 12 months following the

Bank's initiatives) of the capital portion of loan repayment instalments.

In limited cases, due to particular difficulties in timely payment of their financial and other commitments, moratoria with a maturity of more than 12 months was granted. For this reason, at the reference date, most of the loans subject to suspension measures (77% of the total, 98% for SMEs) will resume the payment of the instalments within 6 months (94% of the total within 9 months).

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Information on newly originated loans and advances provided under newly applicable

public guarantee schemes introduced in response to COVID-19 crisis (Template 3 -

EBA GL 2010/07)

a

b

c

d

Gross carrying amount

Maximum amount of the

Gross carrying amount

guarantee that can be considered

of which: forborne

Public guarantees received

Inflows to non-performing exposures

1

Newly originated loans and advances subject to public guarantee schemes

1,225,821

-

820,267,49

-

2

of which: Households

321,808

-

3

of which: Collateralised by residential immovable property

-

-

4

of which: Non-financial corporations

904,013

-

820,267,49

-

5

of which: Small and Medium-sized Enterprises

622,445

-

6

of which: Collateralised by commercial immovable property

1,248

-

In March 2020, legislative measures were implemented to facilitate new liquidity to support companies temporarily in difficulty due to the ongoing pandemic by issuing public guarantees (SACE, Fund for SMEs, ISMEA) that applied to loans disbursed to Banks starting from March 2020.

On 7 June 2020, Law no. 40/2020, converting Law Decree no. 23/2020 ("Liquidity Decree"), was published in the

Official Gazette no. 143 and provides for debt consolidation initiatives that are not classified as forbereance measures.

Public guarantees schemes are not applied to non-performing loans originated prior the start of the financial crisis triggered by the COVID-19 pandemic.

As of 30 June 2020, disbursement of State- guaranteed loans involved new lending.

G R U P P O M O N T E P A S C H I

Credit Risk

72

Credit Risk: use of risk mitigation techniques

With reference to the retail and corporate loan portfolio, the Montepaschi Group does not apply any netting processes to the credit risk exposures with on- or off-balance sheet items with opposite sign. The Montepaschi Group adopts policies reducing counterparty risk with institutional counterparties, by entering into netting agreements according to the international ISDA and ISMA standards and related collateral agreements in relation to derivatives.

Management of collateral

The Montepaschi Group has fulfilled the obligations set out by EU Regulations (CRR 575/2013) for the purpose of recognition of risk mitigation effects produced by any existing collaterals securing the loan.

Quantitative information

The values shown below refer to the exposures of the banking group considered for credit risk purposes, Standard approach and IRB approach, secured by financial collaterals, personal guarantees and credit derivatives. The exposures taken into consideration are determined according to prudential supervisory regulations, net of any netting agreements. Therefore, the values do not include all types of guarantees; for example, exposures guaranteed by real estate to which preferential risk weights are

assigned by regulatory provisions and which are, therefore, directly reported in the same class, as shown in table "Standard approach: Distribution in classes of creditworthiness "EAD post CRM" and table "AIRB Approach: Summary of Exposures, RWAs, expected and actual losses". Collateral on transactions secured by real estate are for marginal additional collateral received on these types of transactions. The Montepaschi Group does not have credit exposures hedged with credit derivatives, which are valid for the purpose of risk mitigation techniques. It follows, therefore, that the values reported under Personal Guarantees and credit derivatives refer to collateral received in the form of personal guarantees.

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Credit risk mitigation techniques (Standard approach)

Jun-20

Dec-19

Regulatory Portfolio

Financial

Guarantees

Other

Financial

Guarantees

Other

and Credit

and Credit

(Standard Approach)

Collaterals

Guarantees

Collaterals

Guarantees

Derivatives

Derivatives

Exposures to central governments or central banks

-

-

-

-

-

-

Exposures to regional governments or local authorities

-

-

-

-

-

-

Exposures to public sector entities

14,897

36,890

-

14,844

41,650

-

Exposures to multilateral development banks

-

-

-

-

-

-

Exposures to international organisations

-

-

-

-

-

-

Exposures to institutions

47,823,386

-

-

28,590,518

-

-

Exposures to corporates

600,889

252,605

-

657,117

185,910

-

Retail exposures

22,523

65,870

-

36,043

55,202

-

Exposures secured by mortgages on immovable property

1,015

6,142

-

20

44,914

-

Exposures in default

2,857

3,810

-

5,751

3,619

-

Exposures associated with high risk

588

39

-

2,258

40

-

Exposures in the form of covered bonds

-

-

-

-

-

-

Exposures to institutions and corporates with a short-term credit assessment

-

-

-

-

-

-

Exposures to collective investments undertakings

146,055

-

-

140,916

-

-

Equity exposures

-

-

-

-

-

-

Other exposures

-

-

-

-

-

-

Securitization positions *

-

-2,067,331

-

-

-

-

Exposures to Central Counterparties in the form of

-

-

-

-

-

-

pre-funded contributions to the guarantee fund

Total standard approach

48,612,210

-1,701,975

-

29,447,468

331,335

-

*Regarding securitization positions, the entire amount without making distinction between methods is considered.

The column Financial Guarantees in the table above is a supplement to the Post CRM exposure reported in table "Standard approach: Ante and Post CRM Exposure Value" (values of exposures pre and post CRM), which shows the portion of exposure outstanding not covered by these collaterals. Please note that, pursuant to regulations, if the line-by-line method is applied, the collateral reduces risk exposure, whereas

personal guarantees (simplified approach) transfer the related risk to the regulatory portfolio of the guarantor; thus the representation of personal guarantees in the table above is broken down by collateralized exposure, whereas the same exposure, in line with the substitution principle, is shown in reference to the guarantor in table "Standard approach: Distribution in classes of creditworthiness (EAD post CRM)".

G R U P P O M O N T E P A S C H I

Credit Risk

74

Credit risk mitigation techniques (IRB approach)

Jun-20

Dec-19

Regulatory Portfolio

Financial

Guarantees

Other

Financial

Guarantees

Other

and Credit

and Credit

(IRB approach)

Collaterals

Guarantees

Collaterals

Guarantees

Derivatives

Derivatives

Exposures to or secured by corporates:

507,845

2,775,981

-

589,469

2,331,631

-

- SMEs

117,813

1,742,610

-

109,360

1,454,148

-

- Other companies

390,032

1,033,371

-

480,109

877,483

-

- Specialized Lending

-

-

-

-

-

-

Retail exposures:

206,498

1,909,020

-

240,654

3,070,887

-

- secured by real estate: SMEs

3,780

88,840

-

3,443

79,042

-

- secured by real estate: Individuals

3,785

1,407,923

-

3,593

1,235,727

-

- Qualifying revolving

-

-

-

-

-

-

- Other retail exposures: SMEs

128,057

2,450,321

-

145,820

1,728,817

-

- Other retail exposures: Individuals

70,876

29,267

-

87,798

27,301

-

Securitization positions *

-

-2,067,331

-

-

-

-

Total IRB approach

714,343

2,617,670

-

830,123

5,402,518

-

*Regarding securitization positions, the entire amount without making distinction between methods is considered.

The values reported in the table above are referred to all of the AIRB-scope exposures to businesses and consumers, backed by collaterals or personal guarantees. Exposures to Businesses or Consumers backed by mortgage collateral on real estate, for which

the Group adopts the AIRB approach, are not included in this table, as they have already been shown in the tables under the Section dedicated to the use of the AIRB method.

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The following table provides the extent of the use of CRM techniques; it shows all collateral, financial guarantees and credit derivatives used as credit risk mitigants for

EU CR3 - CRM Techniques - Overview

all secured exposures, irrespective of whether the standard approach or the IRB approach is used for RWA calculation.

a

b

c

d

e

Unsecured exposures

Secured exposures -

Exposures secured Exposures secured by Exposures guaranteed

- Accounting value

Accounting value

by real guarantees

personal guarantees

by credit derivatives

3

Total loans

156,286,455

50,242,248

49,326,553

915,695

4

Total debt securities

10,904,245

792,416

54,705

737,711

5

Total as at 30/06/2020

143,162,020

36,011,444

30,277,590

5,733,854

6

Of which defaulted

10,981,462

-2,725

37,080

-39,805

The following table shows the effect of all CRM techniques applied in accordance with Part Three, Title II, Chapter 4 of the CRR, including the financial collateral simple method and the financial collateral

comprehensive method in the application of Article 222 and Article 223 of the same regulation on standard approach capital requirements' calculations.

EU CR4 - Standard approach - Credit Risk Exposure and CRM effects

a

b

c

d

e

f

Exposures class

Exposures before CCF and CRM

Exposures before CCF and CRM

RWAs and RWA density

On-balance-sheet

Off-balance-sheet

On-balance-sheet

Off-balance-sheet

RWAs

RWA density

amount

amount

amount

amount

1

Central governments or central banks

29,787,129

94,494

35,997,412

71,434

1,396,714

3.87%

2

Regional governments or local authorities

1,346,745

1,416,198

1,375,117

161,972

306,851

19.96%

3

Public sector entities

477,662

247,580

446,616

45,438

376,735

76.56%

4

Multilateral development banks

73,586

15,000

73,586

-

-

0.00%

5

International organisations

-

-

-

-

-

0.00%

6

Institutions

5,667,268

15,180,902

5,767,119

522,920

1,179,209

18.75%

7

Corporates

3,293,738

2,360,697

3,088,863

601,503

3,456,909

93.67%

8

Retail

687,317

940,197

611,710

47,825

461,653

70.00%

9

Secured by mortgages on immovable property

1,198,002

14,164

1,190,846

3,507

452,340

37.87%

10

Exposures in default

361,824

198,293

355,542

8,474

403,919

110.96%

11

Higher-risk categories

257,830

22,912

257,203

10,695

401,848

150.00%

12

Covered bonds

713,091

-

713,091

-

86,158

12.08%

13

Institutions and corporates with a short-term

-

-

-

-

-

0.00%

credit assessment

14

collective investments undertakings

104,119

5,695

103,743

400

104,143

100.00%

15

Equity

1,029,687

276

1,029,687

276

2,032,502

197.34%

16

Other items

6,290,648

-

6,302,826

978

4,916,035

77.99%

17

Total as at 30/06/2020

51,288,645

20,496,406

57,313,358

1,475,423

15,575,016

26.49%

17

Total as exposure

71,785,050

58,788,782

17

Total as at 31/12/2019

46,621,928

12,000,266

51,584,799

1,233,011

15,668,836

29.67%

17

Total as exposure

58,622,194

52,817,810

G R U P P O M O N T E P A S C H I

Counterparty Risk

76

Counterparty Risk

Quantitative information

The following table provide a comprehensive view of the methods used to calculate CCR

regulatory requirements and the main parameters used within each method.

EU CCR1 - Analysis of CCR exposure by approach

a

b

c

d

e

f

g

Notional

Replacement

Potential

EEPE

Multiplier

EAD post

RWAs

cost/current

futurecredit

CRM

market value

exposure

1

Market value method

x

1,938,673

1,435,134

x

x

2,031,917

755,370

Financial collateral

9

comprehensive method

x

x

x

x

x

2,410,019

642,812

(for SFTs)

11

Total

x

1,938,673

1,435,134

x

x

4,441,936

1,398,182

The following table provide CVA regulatory

and advanced approaches).

calculations (with a breakdown by standard

EU CCR2 - CVA capital charge

Exposure value

RWAs

Total portfolios subject to the advanced method

-

-

(i) VaR component (including the 3× multiplier)

-

(ii) SVaR component (including the 3× multiplier)

-

All portfolios subject to the standardised method

609,100

430,543

Based on the original exposure method

-

-

Total subject to the CVA capital charge

609,100

430,543

The following table provide a breakdown

attributed according to the standard

of CCR exposures by portfolio (type of

approach).

counterparties) and by risk weight (riskiness

P I L L

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77

EU CCR3 - Standard approach - CCR exposures by regulatory portfolio and risk

Exposures

Classes of credit worthiness (Weighting Factors)

Total

Without

classes

0%

2%

4%

10%

20%

35%

50%

70%

75%

100%

150%

Others

rating

1

Central governments or central banks

454

-

-

-

-

-

-

-

-

2,553

-

-

3,007

-

2

Regional governments or local authorities

-

-

-

-

12,599

-

-

-

-

-

-

-

12,599

-

3

Public sector entities

-

-

-

-

2

-

-

-

-

6,260

-

-

6,262

-

4

Multilateral development banks

-

-

-

-

-

-

-

-

-

-

-

-

-

-

5

International organisations

-

-

-

-

-

-

-

-

-

-

-

-

-

-

6

Institutions

-

1,509,277

289,104

-

218,681

-

1,396,218

-

-

13,086

-

-

3,426,366

-

7

Corporates

-

-

-

-

-

-

0

-

-

247,910

-

-

247,910

-

8

Retail

-

-

-

-

-

-

-

-

127

-

-

-

127

-

9

Secured by mortgages on immovable

-

-

-

-

-

-

-

-

-

-

-

-

-

-

property

10

Exposures in default

-

-

-

-

-

-

-

-

-

22

3,857

-

3,879

-

11

Higher-risk categories

-

-

-

-

-

-

-

-

-

-

-

-

-

-

12

Covered bonds

-

-

-

-

-

-

-

-

-

-

-

-

-

-

13

Institutions and corporates with a short-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

term credit assessment

14

Collective investment undertakings

-

-

-

-

-

-

-

-

-

59,491

-

-

59,491

-

15

Equity

-

-

-

-

-

-

-

-

-

-

-

-

-

-

16

Other items

-

-

-

-

-

-

-

-

-

-

-

-

-

-

17 Total as at 30/06/2020

454

1,509,277

289,104

-

231,283

-

1,396,218

-

127

329,323

3,857

-

3,759,642

-

18 Total as at 31/12/2019

833

737,150

314,177

-

799,503

-

1,143,392

-

-

306,410

5

-

3,301,469

-

Template EU

CCR4

(EBA/GL/2016/11)

subject to AIRB approach broken down by

provides

information

on

CCR

exposures

portfolio and PD scale.

G R U P P O M O N T E P A S C H I

Counterparty Risk

78

EU CCR4 - IRB approach - CCR exposures by exposure class and PD scale: Total

a

b

c

d

e

f

g

Rating

Exposure

Exposure weighted

Number

Exposure weighted

Exposure weighted

RWEA

Density of risk weighted

Class

value

average PD (%)

of obligors

average LGD (%)

average maturity

exposure amount

Class 01

Class 02

1,198

0.03%

11

48.04%

4,21

296

24.74%

Class 03

524

0.05%

26

47.31%

2,52

81

15.40%

Class 04

1,915

0.09%

58

46.15%

2,06

396

20.66%

Class 05

5,300

0.13%

73

47.30%

2,35

1,800

33.96%

Class 06

9,085

0.20%

118

46.43%

3,31

4,513

49.68%

Class 07

17,452

0.30%

221

47.62%

3,27

10,723

61.44%

Class 08

271,652

0.46%

183

7.68%

4,71

35,906

13.22%

Class 09

42,854

0.69%

206

20.11%

1,57

14,741

34.40%

Class 10

45,160

1.05%

284

47.23%

2,70

43,917

97.25%

Class 11

35,131

1.59%

282

47.42%

3,99

38,875

110.66%

Class 12

12,853

2.42%

201

47.29%

3,05

14,590

113.52%

Class 13

40,660

3.99%

150

23.97%

1,66

25,781

63.41%

Class 14

78,740

6.31%

74

4.42%

0,38

9,861

12.52%

Class 15

1,742

9.95%

31

46.35%

2,73

2,471

141.87%

Class 16

209

16.03%

15

43.84%

2,97

233

111.48%

Class 17

85

22.12%

7

47.57%

1,92

151

178.65%

Class 18

210

31.63%

6

45.67%

4,98

318

151.28%

Class 19

703

45.00%

8

44.30%

1,82

1,462

208.04%

Class 20

34,683

100.00%

130

55.03%

1,08

1,488

4.29%

Total as at 30/06/2020

600,155

1.80%

2.084

18.54%

3,17

207,602

The weighted average PD (%) and weighted average LDG (%) under Total does not include class 20.

P I L L

A

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3 J U

N E 2 0 2 0

Counterparty Risk

79

EU CCR4 - IRB approach - CCR exposures by exposure class and PD scale: Exposures to or secured by corporates - SMEs

a

b

c

d

e

f

g

Rating

Exposure

Exposure weighted

Number

Exposure weighted

Exposure weighted

RWEA

Density of risk weighted

Class

value

average PD (%)

of obligors

average LGD (%)

average maturity

exposure amount

Class 01

Class 02

90

0.03%

4

47.92%

1,00

5

6.03%

Class 03

328

0.05%

12

47.54%

3,04

55

16.80%

Class 04

1,279

0.09%

30

45.82%

1,89

222

17.35%

Class 05

1,385

0.13%

39

46.31%

1,71

290

20.92%

Class 06

2,816

0.20%

45

45.44%

3,88

1,151

40.87%

Class 07

3,764

0.30%

88

47.08%

3,87

1,933

51.36%

Class 08

3,102

0.46%

66

47.04%

3,08

1,709

55.09%

Class 09

6,146

0.69%

101

47.02%

4,14

4,481

72.91%

Class 10

7,776

1.05%

99

46.21%

4,24

6,345

81.60%

Class 11

24,141

1.59%

112

47.44%

4,46

26,368

109.23%

Class 12

5,065

2.42%

69

46.72%

3,66

4,972

98.15%

Class 13

9,445

3.99%

56

47.71%

4,67

10,714

113.44%

Class 14

2,488

6.31%

25

45.44%

4,01

2,991

120.23%

Class 15

1,079

9.95%

15

46.87%

3,38

1,511

140.00%

Class 16

113

16.03%

6

44.30%

2,97

164

144.63%

Class 17

62

22.12%

2

47.81%

1,50

111

178.30%

Class 18

107

31.63%

2

45.94%

4,98

220

205.53%

Class 19

61

45.00%

2

45.33%

4,56

106

171.84%

Class 20

15,636

100.00%

41

52.58%

1,13

1,061

6.79%

Total as at 30/06/2020

84,885

2.02%

814

46.99%

3,56

64,410

The weighted average PD (%) and weighted average LDG (%) under Total does not include class 20.

G R U P P O M O N T E P A S C H I

Counterparty Risk

80

EU CCR4 - IRB approach - CCR exposures by exposure class and PD scale: Exposures to or secured by corporates - Other companies

a

b

c

d

e

f

g

Rating

Exposure

Exposure weighted

Number

Exposure weighted

Exposure weighted

RWEA

Density of risk weighted

Class

value

average PD (%)

of obligors

average LGD (%)

average maturity

exposure amount

Class 01

Class 02

1,089

0.03%

3

48.13%

4,48

290

26.63%

Class 03

154

0.05%

7

46.96%

1,42

23

15.03%

Class 04

536

0.09%

11

47.19%

2,45

165

30.85%

Class 05

3,751

0.13%

21

47.68%

2,59

1,490

39.71%

Class 06

6,110

0.20%

37

46.91%

3,06

3,335

54.59%

Class 07

12,714

0.30%

64

47.84%

3,10

8,581

67.50%

Class 08

267,794

0.46%

55

7.12%

4,74

33,979

12.69%

Class 09

35,552

0.69%

42

14.81%

1,09

9,903

27.85%

Class 10

35,586

1.05%

64

47.50%

2,37

36,798

103.40%

Class 11

9,417

1.59%

41

47.68%

2,81

11,769

124.98%

Class 12

6,456

2.42%

20

48.04%

2,57

8,907

137.97%

Class 13

30,163

3.99%

24

15.76%

0,66

14,467

47.96%

Class 14

74,926

6.31%

6

2.38%

0,22

6,131

8.18%

Class 15

440

9.95%

2

44.80%

1,44

814

185.05%

Class 16

-

16.03%

-

0.00%

-

-

0.00%

Class 17

10

22.12%

1

45.39%

4,51

28

280.55%

Class 18

-

31.63%

-

0.00%

-

-

0.00%

Class 19

533

45.00%

1

44.74%

1,50

1,260

236.22%

Class 20

3,223

100.00%

16

57.64%

1,05

260

8.07%

Total as at 30/06/2020

488,454

1.74%

415

13.89%

3,17

138,202

The weighted average PD (%) and weighted average LDG (%) under Total does not include class 20.

P I L L

A

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3 J U

N E 2 0 2 0

Counterparty Risk

81

EU CCR4 - IRB approach - CCR exposures by exposure class and PD scale: Exposures to or secured by corporates - Other retail exposures - SMEs

a

b

c

d

e

f

g

Rating

Exposure

Exposure weighted

Number

Exposure weighted

Exposure weighted

RWEA

Density of risk weighted

Class

value

average PD (%)

of obligors

average LGD (%)

average maturity

exposure amount

Class 01

Class 02

18

0.03%

4

43.40%

2,96

1

4.41%

Class 03

42

0.05%

7

46.79%

2,45

2

5.85%

Class 04

100

0.09%

17

44.78%

2,42

8

8.41%

Class 05

164

0.13%

13

47.05%

4,18

20

12.46%

Class 06

159

0.20%

36

45.55%

2,00

27

16.90%

Class 07

974

0.30%

69

46.76%

2,70

208

21.37%

Class 08

756

0.46%

62

46.29%

4,05

218

28.77%

Class 09

845

0.69%

62

45.22%

4,12

285

33.66%

Class 10

1,797

1.05%

121

46.21%

4,27

773

43.03%

Class 11

1,573

1.59%

129

45.54%

4,24

737

46.84%

Class 12

1,332

2.42%

112

45.82%

4,52

712

53.43%

Class 13

1,052

3.99%

70

46.20%

3,18

599

56.93%

Class 14

1,045

6.31%

42

47.24%

1,57

622

59.53%

Class 15

222

9.95%

14

46.93%

2,09

145

65.47%

Class 16

96

16.03%

9

43.30%

4,21

70

72.41%

Class 17

12

22.12%

4

48.09%

4,29

12

97.90%

Class 18

103

31.63%

4

45.39%

4,94

98

95.06%

Class 19

108

45.00%

5

41.55%

4,67

97

89.53%

Class 20

15,824

100.00%

73

56.92%

0,07

167

1.05%

Total as at 30/06/2020

26,224

3.06%

853

46.06%

1,49

4,801

The weighted average PD (%) and weighted average LDG (%) under Total does not include class 20.

G R U P P O M O N T E P A S C H I

Counterparty Risk

82

EU CCR4 - IRB approach - CCR exposures by exposure class and PD scale: Exposures to or secured by corporates - Other retail exposures - Individuals

a

b

c

d

e

f

g

Rating

Exposure

Exposure weighted

Number

Exposure weighted

Exposure weighted

RWEA

Density of risk weighted

Class

value

average PD (%)

of obligors

average LGD (%)

average maturity

exposure amount

Class 01

Class 02

-

0.03%

-

0.00%

-

-

0.00%

Class 03

-

0.05%

-

0.00%

-

-

0.00%

Class 04

-

0.09%

-

0.00%

-

-

0.00%

Class 05

-

0.13%

-

0.00%

-

-

0.00%

Class 06

-

0.20%

-

0.00%

-

-

0.00%

Class 07

-

0.30%

-

0.00%

-

-

0.00%

Class 08

-

0.46%

-

0.00%

-

-

0.00%

Class 09

310

0.69%

1

25.77%

1,00

72

23.35%

Class 10

-

1.05%

-

0.00%

-

-

0.00%

Class 11

-

1.59%

-

0.00%

-

-

0.00%

Class 12

-

2.42%

-

0.00%

-

-

0.00%

Class 13

-

3.99%

-

0.00%

-

-

0.00%

Class 14

281

6.31%

1

25.77%

1,00

116

41.39%

Class 15

-

9.95%

-

0.00%

-

-

0.00%

Class 16

-

16.03%

-

0.00%

-

-

0.00%

Class 17

-

22.12%

-

0.00%

-

-

0.00%

Class 18

-

31.63%

-

0.00%

-

-

0.00%

Class 19

-

45.00%

-

0.00%

-

-

0.00%

Class 20

-

100.00%

-

0.00%

-

-

0.00%

Total as at 30/06/2020

591

3.36%

2

25.77%

1,00

189

The weighted average PD (%) and weighted average LDG (%) under Total does not include class 20.

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83

Table EU CCR5-A shows the gross positive fair of the contracts, the advantages resulting from the netting agreements, the netted fair value and the net credit exposure of the Group to counterparty risk for derivative instruments. All the financial and credit derivatives traded over the counter (OTC) with any counterparty (institutional, corporate, retail counterparties etc.) are included in the table irrespective of the regulatory (trading and banking) portfolio

they belong to. In particular, the "gross positive fair value" corresponds to the book value of the above-mentioned contracts and is therefore inclusive of the netting agreements. The Nettings represent the gross positive fair value amount, which as a result of the agreements executed with the counterparties, is offset with negative value transactions. The net "netted fair value" indicates the positive fair value amount remaining after the nettings.

EU CCR5-A - Impact of netting and collateral held on exposure values

a

b

c

d

e

Gross positive

Netting benefits

Netted current

Collateral held

Net credit

fair value or net

credit exposure

exposure

carrying amount

1

Derivatives

6,743,408

-3,862,766

2,880,641

2,752,766

127,875

4

Total as at

6,743,408

-3,862,766

2,880,641

2,752,766

127,875

30/06/2020

The figures shown in the table are represented only by derivatives with netting agreements.

G R U P P O M O N T E P A S C H I

Counterparty Risk

84

The following table provide a breakdown of all types of collateral (cash, sovereign debt, corporate bonds, etc.) used by banks to

support or reduce CCR exposures related to derivative transactions or to SFTs.

EU CCR5-B - Composition of collateral for exposures to CCR

Jun-2020

Dec-2019

Real

Real

Real

Real

collateral

collaterals

collateral

collaterals

on SFT

on derivatives

on SFT

on derivatives

Standardised Approach

Integral Method

1,341,890

35,336,812

1,716,071

23,949,931

Simplified method

-

-

-

-

Standard total

1,341,890

35,336,812

1,716,071

23,949,931

AIRB Approach

Substitution principle

-

-

-

-

AIRB Total

-

-

-

-

Total

1,341,890

35,336,812

1,716,071

23,949,931

Table EU CCR6 shows the notional values of credit derivative contracts, by portfolio (banking and trading book) and the role played by the Montepaschi Group (buyer/ seller of protection).

It should be noted that as at the date of this document, the Group did not have any transactions in credit derivatives hedging loan book exposures.

EU CCR6 - Credit derivatives exposures

a

b

c

Credit derivative hedges

Other Credit derivatives

Notionals

Protection

Protection

bought

sold

Total rate of return swaps

-

-

3,866,003

Total rate of return swaps

-

-

Total notionals

-

-

3,866,003

Fair value

Positive Fair value positivo

-

-

8,680

Negative Fair value

-

-

151,435

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85

The following table provide a comprehensive picture of the institution's exposures to CCPs: in particular, the template includes

all types of exposures (due to operations, margins, and contributions to default funds) and related capital requirements.

EU CCR8 - Exposures to CCPs

Jun-2020

a

b

EAD post CRM

RWAs

1

Exposures to QCCPs (total)

×

41,750

2

Exposures for trades at QCCPs (excluding initial margin and default fund contributions); of which

1,798,381

41,750

3

(i) OTC derivatives

-

-

4

(ii) Exchange-traded derivatives

-

-

5

(iii) SFTs

935,488

18,710

6

(iv) Netting sets where cross-product netting has been approved

862,892

23,040

7

Segregated initial margin

549,927

×

8

Non-segregated initial margin

-

-

9

Prefunded default fund contributions

-

-

10

Alternative calculation of own funds requirements for exposures

×

-

11 Exposures to non-QCCPs (total)

×

  1. Exposures for trades at non-QCCPs (excluding initial margin and default fund contributions); of which
  2. (i) OTC derivatives
  3. (ii) Exchange-traded derivatives
  4. (iii) SFTs
  5. (iv) Netting sets where cross-product netting has been approved

17 Segregated initial margin

×

  1. Non-segregatedinitial margin
  2. Prefunded default fund contributions
  3. Unfunded default fund contributions

G R U P P O M O N T E P A S C H I

Market Risk

86

Market Risk

The Group's Regulatory Trading Portfolio (RTP), or Trading Book, is made up of all the Regulatory Trading Books managed by the Parent Bank (BMPS) and MPS Capital Services (MPSCS). The Trading Portfolios of the other subsidiaries are immune to market risk. Trading in derivatives, which are brokered on behalf of customers, calls for risk to be centralised at, and managed by, MPSC.

The market risks in the trading book of both the Parent Company and the other Group entities (which are relevant as independent market risk taking centres), are monitored in terms of Value-at-Risk (VaR) for operational purposes. The Group's Finance and Liquidity Committee is responsible for directing and coordinating the overall process of managing the Group's proprietary finance thereby ensuring that the management strategies of the various business units are consistent.

The Group's Trading Book is subject to daily monitoring and reporting by Financial Risk Officer Area of the Parent Company on the basis of proprietary systems. VaR for management purposes is calculated separately from the operating units, using the internal risk measurement model implemented by the Risk Management function in keeping with international best practices. However, the Group uses the standardised methodology in the area of market risks solely for reporting purposes.

Operating limits for trading activities, defined and approved by the Parent Company in accordance with the Risk Appetite Framework, are expressed by level of delegated authority in terms of VaR, which is diversified by risk factors and portfolios, monthly and annual stop losses and Stress. Furthermore, the trading book's credit risk, in addition to being included in VaR computations and in the respective limits for the credit spread risk component, is also subject to specific operating limits for issuer and bond concentration risk which specify maximum notional amounts by type of guarantor and rating class.

The management reporting flow on market risks is periodically transmitted to the Management Risk Committee, the Group's Top Management and the Board of Directors of the Parent Company in a Risk Management Report, which keeps Executive Management and governing bodies up to date on the overall risk profile of the Group. The macro-categories of risk factors covered by the Internal Market Risk Model are IR, EQ, CO, FX and CS as described below:

  • IR: interest rates on all relevant curves, inflation curves and related volatilities;
  • EQ: share prices, indexes and relative volatilities;
  • CO: commodity prices and indexes;
  • FX: exchange rates and related volatilities;
  • CS: credit spread levels.

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VaR (or diversified or net VaR) is calculated and broken down daily for internal management purposes, even with respect to other dimensions of analysis:

  • organisational/management analysis of portfolios,
  • analysis by financial instrument,
  • analysis by risk family.

It is then possible to assess VaR along each combination of these dimensions in order to facilitate highly detailed analyses of events characterising the portfolios.

In particular, with reference to risk factors the following are identified: Interest Rate VaR (IR VaR), Equity VaR (EQ VaR), Commodity VaR (CO VaR), Forex VaR (FX VaR) and Credit Spread VaR (CS VaR). The algebraic sum of these items gives the so- called Gross VaR (or non-diversified VaR), which, when compared with diversified VaR, makes it possible to quantify the benefit of diversifying risk factors resulting from holding portfolios on asset class and risk factor allocations which are not perfectly correlated. This information can also be analysed along all the dimensions referenced above.

The model enables the production of diversified VaR metrics for the entire Group in order to get an integrated overview of all the effects of diversification that can be generated among the banks of the Group on account of the specific joint positioning of the various business units.

Moreover, scenario and stress-test analyses

are regularly conducted on various risk factors with different degrees of granularity across the entire tree structure of the Group's portfolios and for all categories of instruments analysed.

Stress tests are used to assess the bank's capacity to absorb large potential losses in extreme market situations, so as to identify the measures necessary to reduce the risk profile and preserve assets.

Stress tests are developed on the basis of discretionary and trend-based scenarios.

It should be noted that the VaR methodology described above is, for operational purposes, also applied to the portion of the Banking Book consisting of financial instruments that are similar to trading instruments (e.g. Equity instruments/Bonds held in portfolios, measured at fair value, classified as FVTPL and FVOCI, and in AC portfolios). The Group has implemented a backtesting procedure compliant with current regulations governing Market Risk as part of its own risk management system.

Backtesting refers to a series of tests conducted on VaR model results against day-to-day changes in the trading book value, with a view to assessing the model's forecasting capacity as regards the accuracy of risk metrics generated. If the model is robust, by periodically comparing the estimated daily VaR against daily trading losses from the previous day, the result should be that actual losses greater than the VaR occur with a frequency consistent with that defined by

G R U P P O M O N T E P A S C H I

Market Risk

88

the confidence level. Based on applicable regulatory provisions, the Financial Risk Officer Area considered it appropriate to apply the theoretical and actual backtesting methods and integrate these into the Group's management reporting system.

Each bank of the MPS Group which is relevant as a market risk-taking centre contributes to the generation of interest rate risk and price risk in the overall Trading Book.

With reference specifically to the Parent Company, the Finance, Treasury & Capital Management Area (FTCMA) within the CFO division is the Business Area in charge of trading. The Global Markets Division carries out trading activities for MPSCS.

MPSCS and, to a lesser extent, the Finance, Treasury & Capital Management Area (FTCMA hereinafter) manage a proprietary portfolio which takes trading positions on interest rates and credit. In general, interest rate positions are taken by purchasing or selling bonds, and by creating positions in listed derivatives (futures) and OTCs (IRS, swaptions). The FTCMA operates in the short-term portion of the main interest rate curves, mostly through bonds and listed derivatives.

With regard to credit risk in the trading book, the equity positions are generally managed through the purchase or sale of bonds issued by companies or by creating synthetic positions in derivatives. The activity is oriented to achieve a long or short

position on individual issuers, or a long or short exposure on specific commodities. The activity is carried out solely on the Bank's own behalf with objectives of absolute return and in compliance with other specific issuer and concentration risk limits.

The Business Area in charge of the Parent Company's trading activity with respect to price risk is the FTCMA which manages a proprietary portfolio and takes trading positions on equities, Stock Exchange indexes and commodities. In general, positions on equity securities are taken both through the purchase/sale of equities and through the positions created in listed derivatives (e.g. futures) and OTC (e.g. options). Trading is carried out exclusively on the Bank's own behalf, with objectives of absolute return, in compliance with the delegated limits of monthly and yearly VaR and stop loss.

For further information, please refer to the Notes to the Consolidated Financial

Statements 2019, Part E - Information on risks and hedging policies - Section 2.1 - Interest Rate Risk and Price Risk - Regulatory Trading Book.

During the first half 2020, the market risks of the Group's Regulatory Trading Book showed, in terms of VaR, a performance influenced by the subsidiary MPS Capital Services, mainly for own trading activities in the CS-IR segment (transactions in Italian government bonds and long futures) and, to a lesser extent, client-driven activities in the EQ segment (options and equity futures

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on the main market indices). The Parent Company's portfolio contribution to total VaR was negligible.

The first half of 2020 was heavily impacted by the crisis in the markets triggered by the outbreak of the COVID-19 pandemic, with particular effect on the VaR model due to the extreme variations recorded in most market parameters during March, predominantly affecting the primary dealer activities on Italian government bonds of the subsidiary MPS Capital Services.

In particular, the increase in the Italian Credit Spread in March caused a considerable increase in the VaR measure with the incorporation in the model of tail events represented by extreme and sudden increases on a daily basis in the yields of Italian government bonds in the short portion of the curve.

During the second quarter, with the attenuation of tensions on market parameters, the exposure to Italy credit spread risk by the subsidiary MPSCS reduced considerably, particularly in June. This contributed towards reducing the VaR for the quarter (EUR -3 mln, with a prevalent effect in May) and scrolling the time window of scenarios underlying the model, with the exit of the May-June 2018 Italy credit spread tail scenarios, triggered by the political crisis concerning the formation of the government.

G R U P P O M O N T E P A S C H I

Market Risk

90

MPS Group: Trading Book

VaR Breakdown by Risk Factor as at 30/06/2020

CS VaR; 62.1%

EQ VaR; 13.8%

IR VaR; 14.7%

FX VaR; 4.1%

CO VaR; 5.3%

MPS Group: Trading Book

VaR Breakdown by Bank as at 30/06/2020

VaR breakdown

A breakdown of VaR by risk factors shows that 62.1% of the Group's portfolio was allocated to credit-spread risk factors (CS VaR), 14.7% was absorbed by interest rate risk factors (IR VaR), 13.8% by equity risk factors (EQ VaR), 4.1% by foreign exchange risk factors (FX VaR), and the remaining 5.3% by commodity risk factors (CO VaR).

MPS Capital Services; 98.9%

Banca MPS; 1.1%

Group VaR

In the first half 2020, the Group's VaR in the Regulatory Trading Book ranged between a low of EUR 4.67 mln recorded on 22 June 2020 and a high of EUR 17.32 mln on 9 April 2020 with an average value registered of EUR 9.89 mln. The Regulatory Trading Book VaR as at 30 June 2020 amounted to EUR 5.47 mln.

With regard to the legal entities, MPS Capital Services accounted for 98.9 and the Parent Company for 1.1% of overall risk as at 30 June 2020.

MPS Group

VaR PNV 99% 1 day in EUR/mln

VaR

Date

End of Period

5.47

30/06/2020

Mn

4.67

22/06/2020

Max

11.32

09/04/2020

Average

9.89

The following chart shows the data Effective Backtesting of the internal model for Market

Risk, related to the Supervisory Trading Portfolio of the group.

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Market Risk

91

Two exceptions were recorded in the first half of 2020, concentrated in March, referring entirely by the risk exposure of the subsidiary MPSCS. These exceptions were recorded on 16 and 17 March, as a result of the extreme increase in volatility on the markets following the health emergency linked to the spread of the COVID-19 pandemic. The days past due recorded simultaneous tension scenarios on all the main risk factors,

with particular pressure in terms of P&L on the positions in Italian government securities (temporary widening of the Italian short- term credit spread, which for the most part had reversed by the end of the quarter due to effect of the ECB's new Quantitative Easing programme to cope with the economic emergency triggered by the pandemic) and on corporate and financial securities.

Quantitative information

The following table display the components standard approach for Market Risk. of own funds requirements under the

EU MR1 - Market Risk under the standard approach

Jun-20

a

b

RWA

Capital requirements

Prodotti diversi dalle opzioni

1

Interest rate risk (generic and specific)

1,622,152

129,772

2

Equity risk (generic and specific)

376,906

30,152

3

Exchange risk

128,126

10,250

4

Commodity risk

161,766

12,941

Options

5

Simplified Method

-

-

6

Delta-Plus Method

99,753

7,980

7

Scenario Method

-

-

8

Securitisation (specific risk)

270,385

21,631

9

Total

2,659,088

212,727

G R U P P O M O N T E P A S C H I

Operational Risk

92

Operational Risk

The Montepaschi Group has implemented an integrated risk management system on the basis of a governance model which involves all the companies of the Montepaschi Group included in the scope of application. The approach defines the standards, methods and instruments that make it possible to measure risk exposure and the effects of mitigation by business area.

The Montepaschi Group was authorized by the Bank of Italy on 12 June 2008 to use the internal advanced measurement approach (AMA) for the calculation of capital requirements for operational risks. The advanced model officially started operating on 1 January 2008. The first consolidated regulatory reporting on the basis of the model was prepared in relation to the results as at 30 June 2008.

All the domestic banking and financial components are incorporated in the scope of advanced measurement approach (AMA). For remaining components and foreign companies, the foundation model has been adopted.

Today's internal model coverage in terms of total banking income exceeds 95%. The advanced approach adopted by the Montepaschi Group is designed so as to homogeneously combine all the main qualitative and quantitative information (or data) sources (mixed LDA-Scenario model). The quantitative loss Distribution Approach

component is based on the statistical collection, analysis and modelling of internal and external historical loss data (Italian Database of Operational Losses, DIPO). The model includes calculation in relation to the 7 categories of events established by Basel 2 used as risk classes, with the adoption of Extreme Value Theory techniques. The estimated frequency of occurrence is based exclusively on internal data.

The qualitative component focuses on the evaluation of the risk profile of each unit and is based on the identification of relevant scenarios. In this framework, the companies are involved in process and risk identification, risk evaluation by process managers, identification of possible mitigation plans, discussion (in scenario-sharing sessions) of priorities and technical-economic feasibility of mitigation actions with the H.O. units.

Despite having insurance coverage to mitigate operational risk, the MPS Group does not use insurance for the mitigation of risk in the calculation of capital requirements since this has not yet been authorized by the supervisor. As of 30 June 2017, the Advanced Measurement Model was changed to increase the historical depth of internal loss data from 5 to 10 years and to introduce the scaling of external data in order to discourage unexpected requirement fluctuations.

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Operational Risk

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1

4

Copula

Diversified VaR

Expected Loss

Internal

Parameters

(joint simulation)

Deduction

Loss Data

- Empirical and Parametric

LDA

Parameters

Approach with EVT

External

Analysis

Integrated VaR

Net VAR

Data

- Frequency Analysis

LDA VaR

(gross)

LDA COMPONENT

VAR CALCULATION

Business Environment and Control Factor Assessment

5

Scenario

TopDown

2

VaR

Allocation

Business and Control Factor Information (BEICF)

3

Loss

Scenario

- Banca MPS

Assessment

Scenario

Scenario

- MPS Capital Services

Information

Construction

Assessment

Parameters

- MPS Leasing & Factoring

SCENARIO & BEICF COMPONENT

VAR ALLOCATION

Finally, the percentage breakdown of events and operational losses recorded in the first half of 2020 is reported, divided into the following risk classes:

  • Internal fraud: losses arising from unauthorised activities, fraud, embezzlement or violation of laws, regulations or corporate directives that involve at least one internal resource of the Group;
  • External fraud: losses due to fraud, embezzlement or violation of laws by subjects external to the Group;
  • Employment relationships and Occupational safety: losses arising from actions in breach of employment, occupational health and safety laws and agreements, payment of compensation for personal injury or episodes of discrimination

or failure to apply equal treatment;

  • Customers, products and operating practices: losses arising from non-fulfilment of professional obligations with customers or from the nature and characteristics of the product or service provided;
  • Property damage: losses arising from external events, including natural disasters, acts of terrorism or vandalism;
  • Business disruptions and system failures: losses due to business disruption or system failures or interruption;
  • Process management, execution and delivery: losses arising from operational and process management shortfalls, as well from transactions with business counterparties, vendors and suppliers.

G R U P P O M O N T E P A S C H I

Operational Risk

94

As at 30 June 2020, the number of operational risk events and the losses were down compared to December 2019.

The type of events with the greatest P&L impact refer to the violation of professional obligations towards customers (category

"Customers, products and operating practices": approximately 48% of the total) and employment relationships (category "employment relationships": 25% of the total).

Losses breakdown

Montepaschi Group - 30/06/2020

Internal Fraud: 0.3%

External Fraud: 3.2%

Employment Relationships: 25.3%

Customers, products and operating pratices: 48.3%

Property Damage: 4%

Business disruptions and system failures: <0.1%

Process management, execution and delivery: 18.8%

The Regulatory Requirement as at 30 June 2020 was up compared to December 2019, also due to the increase in the recorded operating losses. The breakdown of operational losses clearly differs from the

breakdown of capital in that the latter is calculated using a 10-year time series and the incidence of the unexpected loss component prevails.

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Liquidity Ratios

95

Liquidity Ratios

With reference to the liquidity indicators, Liquidity Coverage Ratio and the Net Stable Funding Ratio, the observation period by the Supervisory Authorities began in March 2014. As of October 2015, the minimum obligatory requirement for the Liquidity Coverage Ratio came into force, with a level

that gradually increases over the years (100% in 2018).

As regards the Net Stable Funding Ratio, EU legislation does not currently contemplate a regulatory limit.

G R U P P O M O N T E P A S C H I

Leverage Ratio

96

Leverage Ratio

In addition to the system of capital requirements aimed at covering credit, counterparty, market, operational, CVA and regulatory risks, it is expected

that the current regulatory framework will monitor a limit on leverage with a twofold purpose to limit the accumulation of debt within the banking industry so as to avoid destabilizing deleveraging process which may harm the financial system and the economy in general, and to strengthen the system of capital requirements associated with risk with a simple backstop measure that is not based on risk profile.

To this end, Circular no. 285 of 17 December 2013 of the Bank of Italy, "supervisory Provisions for banks" requires banks to calculates their leverage ratio.

As required by the Regulation EU 62/2015, the Leverage Ratio is calculated as a ratio between Tier1 and a denominator that is based on the non-risk weighted assets (including off-balance sheet exposures) calculated at the end of the quarter. The exposures must be reported net of the regulatory adjustments included in the calculation of T1 in order to avoid any double counting. At present, the minimum thresholds for the Leverage Ratio have not yet been established by the Supervisory Authorities. However, as of 1 January 2015, quarterly disclosure has become obligatory in addition to the disclosure requirement

already in force. Moreover, as provided for by Commission Implementing Regulation (EU) 2016/200 of 15 February 2016, banks publish this disclosure as of 16 February 2016, the date following this regulation's publication in the Official Journal of the European Union.

The Group's leverage ratio was 4.94% as of 30 June 2020. Using regulatory capital calculated by applying the rules established for full implementation, the ratio stands at 4.21%.

In accordance with public disclosure requirements, the data necessary for its calculation is provided below.

The templates used to report the information are those provided for by the ITS on Disclosure (see "EBA FINAL draft Implementing Technical Standards on disclosure of the leverage ratio under Article 451(2) of Regulation (EU) No 575/2013 (Capital Requirements Regulation - CRR)

  • Second submission following the EC's Delegated Act specifying the LR" -link) published by the EBA on 15/06/2015 and included in the Commission Implementing Regulation (EU) 2016/200 of 15 February 2016.
    The tables below show the financial leverage ratio as of 30 June 2020 as well as a breakdown of the total exposure measure in the main categories, as required by articles 451(1)(a), 451(1)(b) and 451(1)(c). The figures shown

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relate to the calculation of the leverage ratio according to applicable transitional provisions for reporting purposes.

The ratio is subject to a regulatory minimum threshold of 3% (the Basel Committee's reference value).

Leverage Ratio

Jun-20

Dec-19

Capital and total exposures

20

Tier 1 capital

7,723,868

8,620,324

21

Total exposures

156,278,504

141,097,698

Leverage ratio

22

Basel III leverage ratio

4.94%

6.11%

Process used to manage the risk of excessive leverage (in accordance with article 451(1) letter d) of the CRR)

The Group's Risk Appetite Framework (RAF) constitutes the basic risk management framework in the Montepaschi Group. The RAF is governed at Group level by a regulatory framework that establishes a system of governance, processes, tools and procedures for fully managing the Group's risk. Leverage risk is included in the RAF and is therefore subject to the control procedures

contained therein. The Leverage Ratio is one of the Key Risk Indicators monitored within the RAF for 2020. As of 30 June 2020, the Group recorded a decrease in the financial leverage indicator linked to the increase in Total exposures and to the decrease in Tier1 capital compared to 31/12/2019.

G R U P P O M O N T E P A S C H I

Declaration of the Financial Reporting Officer

98

Declaration of the Financial Reporting Officer

Pursuant to para. 2, article 154-bis of the Consolidated Law on Banking, the Financial Reporting Officer, Mr. Nicola Massimo Clarelli, declares that the accounting

information contained in this document corresponds to the underlying documentary evidence and accounting records.

Siena, 6 August 2020

Nicola Massimo Clarelli

Financial Reporting Officer

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List of Tables

Main features of the instrument. .

. . . . . . . . . . . . . . . . . .

. . . . . . . .

. 13

Main features of the instrument. .

. . . . . . . . . . . . . . . . . .

. . . . . . . .

. 14

Main features of the instrument. .

. . . . . . . . . . . . . . . . . .

. . . . . . . .

. 15

Transitional own funds disclosure template . .

. . . . . . . . . . . . . .

. . . . . . .

.

16

Own Funds: Additional Tier 1 (AT1) capital. .

. . . . . . . . . . . . .

. . . . . . . .

. 17

Own Funds: Tier 2 (T2) capital. .

. . . . . . . . . . . . . . . . . .

. . . . . . . .

. 18

Own Funds: Capital ratios and buffers.. . . . . . . . . . . . . . . . .

. . . . . . . .

19

Reconciliation of shareholders' equity and the Common Equity Tier 1 . .

. . .

. . . . . . . .

. 20

Full reconciliation of the components of Common Equity Tier 1,

Additional Tier 1 and Tier 2 capital, as well as the filters and deductions applied

to the institution's own funds and the balance sheet of the financial statements . .

. . . . . . . .

. 21

Amount of institution-specific countercyclical buffer. .

. . . . . . . . . .

. . . . . . . .

. 25

Capital requirements and Regulatory capital ratios.. . . . . . . . . . . . .

. . . . . . .

.

26

EU IFRS 9 - Comparison of institutions' own funds and capital and leverage ratios with and without the

application of transitional arrangements for IFRS 9 or analogous ECLs

. . . . . . . . . . . . .

. 27

EU OV1 - Overviews of RWAs. .

. . . . . . . . . . . . . . . . . . . . . . . . . .

. 30

Capital requirements for Credit and Counterparty Risk

. .

. . . . . . . . . . . . . . . . .

. 32

Capital requirements for Credit and Counterparty Risk

. .

. . . . . . . . . . . . . . . . .

. 33

Capital requirements for Credit and Counterparty Risk

(IRB methods) - Specialised lending - slotting criteria.

. . .

. . . . . . . . . . . . . . .

34

Capital requirements for Market Risk. . . .

. . . . . . . . . . . . .

. . . . . . . . .

34

Capital requirements for Operational Risk

. . . . . . . . . . . . . . . . . . . . . . . .

. 34

EU CR8 - RWA flow statements of Credit Risk exposures under the IRB approach .

. . . . . . .

. 34

EU INS1 - Non-deducted participations in insurance undertakings . .

. . . . . . . . . . . .

. 35

EAD and RWA overview between Credit Risk and Counterparty Risk.. . . . . . . . . . . . .

38

Exposure and RWA Distribution of Credit and Counterparty Risk . .

. . . . . . . . . . . .

.

39

Standard approach: Ante and Post CRM Exposure Value. .

. . . . . . . . . . . . . . . .

.

41

Standard approach: Distribution in classes of creditworthiness (EAD post CRM) . .

. . . . . . .

. 42

EU CR5 - Standard approach. .

. . . . . . . . . . . . . . . . . . . . . . . . . .

.

43

AIRB Approach: Summary of Exposures, RWAs, expected and actual losses . . . . . . .

. . . .

45

IRB Approach: Exposures, expected and actual losses distribution by regulatory portfolio and PD

classes (except for Specialized lending). .

. . . . . . . . . . . . . . . . . . . . . . .

.

46

EU CR10 - IRB (Specialized lending and equities) . .

. . . . . . . . . . . . . . . . . .

.

47

EU CR6 - IRB approach: Exposures to or secured by corporates - SMEs . . . . . . . . .

. . .

48

EU CR6 - IRB approach: Exposures to or secured by corporates - Other companies.

. . . . . . .

. 49

G R U P P O M O N T E P A S C H I

100

EU CR6 - IRB approach: Retail Exposures Secured by real estate - SMEs . . . . . . . . . . . . . 50

EU CR6 - IRB approach: Retail Exposures Secured by real estate - Individuals. . . . . . . . . . . 51

EU CR6 - IRB approach: Qualifying revolving Retail Exposures. . . . . . . . . . . . . . . . 52

EU CR6 - IRB approach: Other retail Exposures - SMEs . . . . . . . . . . . . . . . . . . . 53

EU CR6 - IRB approach: Other retail Exposures - Individuals . . . . . . . . . . . . . . . . . 54

IRB approach: Exposures to or secured by corporates - Geographic Segmentation . . . . . . . . .

56

IRB approach: Retail Exposures - Geographic Segmentation. . . . . . . . . . . . . . . . . . 56

EU CR1-A - Credit quality of exposures by exposure class and instrument. . . . . . . . . . . . 57

Credit quality Credit quality of forborne exposures (Template 1 - EBA GL 2018/10). . . . . . . . 58

Credit Quality of performing and non performing exposures by

past due days (Template 3 - EBA GL 2018/10). . . . . . . . . . . . . . . . . . . . . . . 59

Performing and non-performing exposures and related provisions (Template 4 - EBA GL 2018/10) . . . . 60

Quality of non-performing exposures by geography (Template 5 - EBA GL 2018/10).

. . . . . .

61

Quality of non-performing exposures by geography (Template 5 - EBA GL 2018/10).

. . . . . .

62

Quality of non-performing exposures by geography (Template 5 - EBA GL 2018/10).

. . . . . .

63

Quality of non-performing exposures by geography (Template 5 - EBA GL 2018/10).

. . . . . .

64

Quality of non-performing exposures by geography (Template 5 - EBA GL 2018/10).

. . . . . .

65

Quality of non-performing exposures by geography (Template 5 - EBA GL 2018/10).

. . . . . .

66

Credit quality of loans and advances by industry (Template 6 - EBA GL 2018/10). .

. . . . .

. .

66

Changes in the stock of non-performing loans and advances

Guidelines NPL (Template 8 - EBA GL 2018/10). . .

. . . . . . . . . . . . . . . . . .

67

Foreclosed assets (Template 9 - EBA GL 2018/10) . .

. . . . . . . . . . . . . . . . .

. .

68

Information on loans and advances subject to legislative

and non-legislative moratoria (Template 1 - EBA GL 2010/07). . . . . . . . . . . . . . . .

69

Breakdown of loans and advances subject to legislative and

non-legislative moratoria by residual maturity of moratoria (Template 2 - EBA GL 2010/07) . .

. .

. 70

Information on newly originated loans and advances provided under newly applicable public

guarantee schemes introduced in response to COVID-19 crisis (Template 3 - EBA GL 2010/07) .

. .

71

Credit risk mitigation techniques (Standard approach)

. . . . . . . . . . . . . . . . . . .

73

Credit risk mitigation techniques (IRB approach) . .

. . . . . . . . . . . . . . . . .

. .

. 74

EU CR3 - CRM Techniques - Overview. . . . . . . . . . . . . . . . . . . . . . . .

75

EU CR4 - Standard approach - Credit Risk Exposure and CRM effects. . . . . . . . . . .

. .

75

EU CCR1 - Analysis of CCR exposure by approach. . . . . . . . . . . . . . . . . .

. .

. 76

EU CCR2 - CVA capital charge . . . . . . . . . . . . . . . . . . . . . . . . . .

. .

76

EU CCR3 - Standard approach - CCR exposures by regulatory portfolio and risk. . . . . . .

. .

77

EU CCR4 - IRB approach - CCR exposures by exposure class and PD scale: Total. . . . . .

. . . .

78

EU CCR4 - IRB approach - CCR exposures by exposure class and PD scale:

Exposures to or secured by corporates - SMEs . . . . . . . . . . . . . . . . . . . . .

. .

79

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Banca Monte dei Paschi di Siena S.p.A. published this content on 21 August 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 21 August 2020 14:44:04 UTC