5. Capital management
This section describes the capital management and Regulatory and Economic Capital requirements
of Rabobank.The CRR (CRD IV) framework defines capital requirements for banks as the absolute
minimum amount of capital required to cover the financial risks that a bank faces. For Pillar 1 this is
expressed in three major risk types: credit, operational and market risk.
5.7 Capital management
Inhoudsopgave Bestuursverslag Corporate governance Jaarrekening Rabobank Groep Jaarrekening Rabobank
Capital risk is the risk that a sub-optimal amount or quality of
capital is inefficiently deployed across the Group. Capital risk
appetite is set by the Board, reflecting the Group's strategic
plan, regulatory capital constraints and market expectations.
It is defined by a number of minimum capital ratios in normal
and stressed conditions. Rabobank has a capital management
framework including policies and procedures that are designed
to ensure that it operates within its risk appetite, continues to
comply with regulatory requirements and is positioned to meet
anticipated future changes to its capital requirements. Capital
is actively managed and regulatory ratios are a key factor in
Rabobank's planning process and stress analyses.The capital
plan is tested for capital adequacy using sensitivity analysis
and a range of stress scenarios covering adverse economic
conditions as well as other adverse factors that could impact
Rabobank. Rabobank maintains a Recovery Plan which sets out
a range of potential mitigating actions that could be taken in
response to a stress event.
The Executive Board has ultimate responsibility for ensuring that
Rabobank maintains the targeted minimum capital levels above
the minimum prudential capital levels as set by the European
Central Bank (ECB).
In the yearly Internal Capital Adequacy Assessment
Process (ICAAP), Rabobank assesses the capital adequacy
in the context of the current and foreseeable business and
environment where it operates in and the associated risk
exposures as part of the Supervisory Review and Evaluation
process.
Table 1 provides a reconciliation overview between the
qualifying capital and the accounting capital at 31 December
2015.
edtf io Table 1Reconciliation of qualifying capital with
IFRS capital.
The main differences are the regulatory and transitional
adjustments in qualifying capital following CRR, such as
intangibles, deferred tax assets, the Internal Ratings Based (IRB)
shortfall and the phasing out of non-eligible additional Tier 1
capital instruments. The Tier 2 subordinated debt is accounted
for as a liability under IFRS.Table 2 provides an overview of the
changes in the different qualifying capital components.
Qualifying
capital IFRS capital
Retained earnings 25,482 25,482
Expected dividends (126)
Rabobank certificates 5,949 5,949
Non-controlling interests 22 492
Reserves 224 224
Regulatory adjustments (5,539)
Transitional adjustments 2,742
Common Equity Tier 1 capital 28,754
Trust preferred securities lll-IV 1,131
Capital Securities 8,002
CRDIV compliant Capital Securities 1,488
Grandfathered instruments 6,373
Non-controlling interests 5
Regulatory adjustments (76)
Transitional adjustments (1,492)
Tier 1 capital 35,052
Subordinated debt 15,078
Non-controlling interests 6
Regulatory adjustments (85)
Transitional adjustments (596)
Total IFRS equity/qualifying capital 49,455 41,280
329 5. Capital management
