6. Credit Risk Credit risk is defined as the risk of the bank facing an economie loss because the bank's counterparties cannot fulfil their contractual obligations. Credit risk management within the bank is governed by the bank-wide central credit risk policy and further detailed in underlying specific credit risk policies.The primary responsibility for managing and monitoring credit risk lies with the business as the first line of defence.The business is required to identify, assess and manage, monitor and report potential weaknesses in the credit risk portfolios in line with the credit risk framework. Monitoring takes place on an ongoing basis to limit credit risk exposures to a level in line with the business line's risk appetite. In addition, risk in the credit portfolio is measured and monitored at bank-wide level and on entity level on a monthly basis and by quarterly and ad-hoc portfolio reporting and analysis, with specific attention for risk developments and concentrations. 6.1 Credit risk management 6.2 Credit risk measurement Inhoudsopgave Bestuursverslag Corporate governance Jaarrekening Rabobank Groep Jaarrekening Rabobank Pillar 3 Credit committees and credit approval Rabobank has various levels of credit committees. Very large loans are approved by the Executive Board. Its judgement is based on the advice of the Central Credit Committee Rabobank Group. Most loans are subject to approval by a lower level credit committee.The credit authority amounts are periodically reviewed and are higher at each higher level of credit committee. Entities have their own local credit committees which are organised along the lines of the committees at the central level. Their duties and responsibilities are clearly defined in a charter. In general, the Local Credit Committee is chaired by the general manager, with the head of credit risk management as vice chairman. The charter also specifies the required members and regulates the proper representation by front office and credit risk management. Credit committee members are appointed by the management of the entity based on their position in the organisation, knowledge, experience and management responsibilities. Rabobank considers it as a priority that the credit committees are comprised of high level (senior) management representation with a significant level of experience in the respective credit area. The credit committees play a key role in ensuring consistency among Rabobank standards of credit analysis, compliance with the overall Rabobank credit policy and consistent use of the rating models. The credit policy sets the parameters and remit of each committee, including the maximum amount they are allowed to approve for limits or transactions. Policies are also in place which restrict or prohibit certain counterparty types or industries. As a rule, all counterparty limits and internal ratings are reviewed once a year (corporate clients) as a minimum. Where counterparties are assigned a low loan quality classification they are reviewed on a more frequent basis. Credit committees may request for more frequent reviews as well. Credit Risk Measurement Framework Internal credit models are used to estimate PD, LGD and EAD parameters. Rabobank uses different modelling methodologies for the different portfolios. Ranging from statistical models to expert-based models, taking into account quantitative and qualitative risk drivers.The credit risk parameters are used in the calculation of the capital requirements. Decisions which determine the level of credit risk that is accepted by Rabobank are not only based on quantitative information or model output. Also practical and conceptual limitations of metrics and models using a qualitative approach including expert judgment and critical analysis are taken into account. 336 Rabobank Jaarverslag 2015

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Jaarverslagen Rabobank | 2015 | | pagina 337