- - - - - - - - - Inhoudsopgave Bestuursverslag Corporate governance Quality assurance credit risk models Model governance edtf 17 The Model Governance Committee (MGC) has the responsibility to sign-off on credit risk models before implementation (for De Lage Landen (DLL) a separate arrangement on model validations is in place). Before MGC sign-off is requested, all models are validated by an independent Model Validation team. Implemented models are reviewed on at least an annual basis including back testing of predictions against realizations. Besides these internally reviewed risk models, there are some risk models that are periodically reviewed by external parties under supervision of the Model Validation team. The Model Validation team assesses model performance annually, based on statistical review complemented with an in-depth analysis of model risks arising from changes in model internal and external changes. For example, there can be relevant changes in internal model usage, business model, changes in external regulations and market conditions. This periodic validation aims to assess the quality of the model in terms of prudence, methodology, validity of key assumptions, fit-for-purpose and compliance.The overall conclusions on performance of the models are reported to the MGC with a recommendation to either extend the usage of the model, or to redevelop the model if necessary. If models are tested as non- prudent, the MGC is informed and decides on an appropriate capital add-on until the model is recalibrated to a prudent level. Model performance Table 11 provides an overview of number of risk models per portfolio that were tested 'to be recalibrated'during 2015 and the mitigating actions that are taken. The table only reports the models covering portfolios above 1 billion. Table 11Overview of risk model tested to be recalibrated. Portfolio Number of risk models Models tested 'to be recalibrated' Actions taken1 Retail NL-Mortgages 5 2 Retail NL-Consumer Finance 3 Retail NL - Business Lending 3 2 SME lending NL 5 1 Recalibration is ongoing Sovereigns and Institutions 7 Corporate Lending International 7 Rural and Retail country banking 6 2 Recalibration ongoing Commercial Real Estate 4 1 DLL 22 1 Add-ons are defined until recalibration is implemented. 338 Rabobank Jaarverslag 2015 Jaarrekening Rabobank Groep Jaarrekening Rabobank Model changes in 2015 The annual periodic validation of risk models may lead to the conclusion that improvements are needed to maintain their quality for risk management and capital calculation purposes. In 2015, Rabobank redeveloped the following models: The redevelopment of the PD and LGD models for mortgages in the Netherlands have been internally approved.The new models improve the use of client behaviour, revaluation of collateral, downturn LGD, and using information from defaulted exposures which are still in the workout process. The new models are submitted to the regulator for a material change process. The downturn methodology for the Dutch corporate clients has been redeveloped and internally approved. The new methodology takes into account the client and collateral specific risk drivers as well as the current situation of the economy. For the new methodology a material change process is currently ongoing. The LGD model for international corporate clients has been recalibrated. Credit risk reporting Credit risk reporting is based on the product administration systems and the rating systems, which hold PD, LGD and EAD information. Risk reporting is reconciled with financial reporting data both at entity and Group level. Risk Management compiles a quarterly Management Information Credit Risk (MICR) report on the developments in the credit portfolio, which is distributed among senior management. Key risk indicators in this quarterly credit risk report such as PD, EAD, LGD, EC and EL, are used to monitor developments within the portfolio. Furthermore, trends in bad debts costs, allowances for loan impairments, non-performing loans, number and amount of exposures are analysed by Special Accounts Management. Another important periodic report is the semi-annual provisioning report. Risk Management Credit (RM Credit) provides insight into the risk at portfolio level, in order to make it possible for Rabobank to optimize the balance between credit risk, capital usage and returns. RM Credit is a centre of competence for all credit activities in which risk-return considerations play a role. IRB and Standardised Approach exposures The following tables provide an overview of Rabobank's IRB exposures in terms of EAD. These exposures include outstandings, an estimate of the amount drawn from the unused part of credit facilities and the estimated interest payments in arrears in case of a default. Furthermore the risk- weighted exposure amount, the PD, the LGD and the exposure- weighted average risk weight are shown.

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Jaarverslagen Rabobank | 2015 | | pagina 339