Société Générale / Risk report 2021 - Pillar 3 2020

6 CREDIT RISK RISK MEASUREMENT AND INTERNAL RATINGS PILLAR 3 - 2021 | SOCIETE GENERALE GROUP | 84 TABLE 29: SOCIETE GENERALE’S INTERNAL RATING SCALE AND INDICATIVE CORRESPONDING SCALES OF RATING AGENCIES Probability of Default range Counterparty internal rating Indicative Equivalent Standard & Poor’s Indicative equivalent Fitch Indicative Equivalent Moody’s Internal probability of Default (one year) 0.00 to < 0.25 1 AAA AAA Aaa 0.009% 2+ AA+ AA+ Aa1 0.014% 2 AA AA Aa2 0.020% 2- AA- AA- Aa3 0.026% 3+ A+ A+ A1 0.032% 3 A A A2 0.036% 3- A- A- A3 0.061% 4+ BBB+ BBB+ Baa1 0.130% 0.25 to < 0.50 4 BBB BBB Baa2 0.257% 0.50 to < 0.75 4- BBB- BBB- Baa3 0.501% 0.75 to < 2.50 5+ BB+ BB+ Ba1 1.100% 5 BB BB Ba2 2.125% 2.50 to < 10.00 5- BB- BB- Ba3 3.260% 6+ B+ B+ B1 4.612% 6 B B B2 7.761% 10.00 to < 100 6- B- B- B3 11.420% 7+ CCC+ CCC+ Caa1 14.328% 7 CCC CCC Caa2 20.441% 7- C/CC/CCC- CCC- Caa3 27.247% LGD MODELS The Loss Given Default (LGD) is an economic loss that is measured by taking into account all parameters pertaining to the transaction, as well as the fees incurred for recovering the receivable in the event of a counterparty default. The models used to estimate the Loss Given Default (LGD) excluding retail clients are applied by regulatory sub-portfolios, type of asset, size and location of the transaction or of the counterparty, depending on whether or not collateral has been posted, and the nature thereof if applicable. This makes it possible to define homogeneous risk pools, particularly in terms of recovery, procedures and the legal environment. These estimates are founded on statistics when the number of loans in default is sufficient. In such circumstances, they are based on recovery data observed over a long period. When the number of defaults is insufficient, the estimate is revised or determined by an expert. CREDIT CONVERSION FACTOR (CCF) MODELS For its off-balance sheet exposures, the Group is authorised to use the internal approach for “Term loan with drawing period” products and revolving credit lines.