10. Liquidity risk edtf is Liquidity risk is the risk that the bank will not be able to meet all of its (re)payment obligations on time, as well as the risk that the bank will not be able to fund increases in assets at a reasonable price, if at all. This could happen if, for instance, clients or professional counterparties suddenly withdraw more funds than expected, which cannot be absorbed by the bank's cash resources, by selling or pledging assets in the market or by borrowing funds from third parties. Maintaining sufficient cash resources and retaining the confidence of both professional market parties and retail clients have proved to be crucial in this respect over the past few years, as Rabobank kept good access to public money and the capital markets. 7 0.7 Liquidity risk management framework 10.2 Risk measurement Inhoudsopgave Bestuursverslag Corporate governance Jaarrekening Rabobank Groep Jaarrekening Rabobank Liquidity risk is a major risk type at Rabobank, which has to be managed carefully. Rabobank's policy is to finance non- liquid assets with stable funding, i.e. customer deposits and long-term wholesale funding. Responsibility for the day- to-day management of the liquidity position, the raising of professional funding on the money and capital market, and the management of the structural position lies within theTreasury department. Liquidity risk management is based on three pillars. The first pillar sets strict limits for the maximum cash outflow of wholesale funding.The expected cash inflows and outflows for the next twelve months are daily measured and reported. Limits have been set for these cash outflows, per currency and per location. Detailed plans (the contingency funding plans) have been drawn up for contingency funding to ensure the bank is prepared for potential crisis situations. Periodic operational tests are performed for these plans. A large and high quality buffer of liquid assets is maintained as a second pillar.These liquid assets otherthan central bank deposits can be used to be pledged to central banks, in repo transactions or be sold directly in the market as to generate liquidity immediately. The size and quality of the liquidity buffer is aligned with the risk Rabobank is exposed to resulting from its balance sheet. Additionally, Rabobank has (internally) securitised a portion of the loan portfolio, which is pledged to the central bank and can be used as backup source of liquidity. As these are retained securitisations, they are not shown in the consolidated balance sheet of Rabobank Group. The third pillar for managing liquidity risk is to have good credit ratings, high capital levels and a prudent funding policy. Key elements of this policy are to have a balanced diversification of funding sources by maturity, currency, investor, geography and market, to have a very high level of unsecured funding, and therefore a limited asset encumbrance and an active and consistent investor relations policy.This helps to ensure that Rabobank does not become overly dependent on any single source of funding. Liquidity position edtf 18 Rabobank's liquidity buffer remained robust in 2015. The total liquidity buffer at 31 December 2015 measured in 'High Quality Liquid Assets' (HQLA) was 98 (2014: 80) billion.The increase (in absolute terms) is a consequence of the increase in central bank deposits. Measured in terms of the 'Liquidity Coverage Ratio' (LCR) of 128% (2014:144%) and 'Net Stable Funding Ratio'(NSFR) of 116% (2014:115%), the liquidity position remained comfortably above current and future limits. Moreover, the available liquidity exceeded the minimum DNB requirement by an average of 23% (2014:26%). 373 10. Liquidity risk

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Jaarverslagen Rabobank | 2015 | | pagina 374