3 Solvency and capital management Inhoudsopgave Voorwoord Bestuursverslag Corporate governance Consolidated Financial Statements Company Financial Statements Pillar 3 of Rabobank Certificates, Trust Preferred Securities, Capital Securities, Senior Contingent Notes and subordinated liabilities. The difference between the net change presented in the statement of cash flows and the change in cash and balances at central banks included in the statement of financial position is due to exchange differences. Rabobank aims to maintain a proper level of solvency. For this purpose a number of solvency ratios are utilised. The principal ratios are the common equity tier 1 ratio (CET1), the tier 1 ratio, the total capital ratio and the equity capital ratio. Rabobank uses its own internal objectives that extend beyond the minimum requirements of the supervisors. It takes market expectations and developments in legislation and regulations into account. Rabobank manages its solvency position based on policy documents. The solvency position and the objectives are periodically reviewed by the Risk Management Committee and the Asset Liability Committee of the Executive Board and the Supervisory Board. The'Capital Requirements Regulation (CRR)'and'Capital Requirements Directive IV (CRD IVj'together constitute the European implementation ofthe Basel Capital and Liquidity Accord of 2010.These rules, which became effective on 1 January 2014, are applied by Rabobank. Rabobank must comply with a number of minimum solvency positions as stipulated under law.The solvency position is determined on the basis of ratios.These ratios compare the qualifying capital (total capital ratio), the tier 1 capital (tier 1 ratio) and the core capital (common equity tier 1 ratio) with the total ofthe risk-adjusted assets. Effective 1 January 2014, the minimum required percentages are determined on the basis of CRD IV/CRR. The legal buffers below are applicable as from 2016.These buffers will gradually increase until the year 2019. Rabobank is already allowing for these changes in its capital planning.The table below shows the minimum legal buffers based on the planned final situation under CRD IV/CRR. Minimum capital buffer Total CET1 Tier 1 capital Risk-weighted assets are determined based on separate and distinct methods for each ofthe credit, operational and market risks. For credit risk purposes, the risk-weighted assets are determined in several ways dependent on the nature ofthe asset. For the majority of assets the risk weighting is determined by reference to internal ratings and a number of characteristics specific to the asset concerned. For off-balance sheet items the balance sheet equivalent is calculated firstly on the basis of internal conversion factors and the resulting equivalent amounts are then also assigned risk-weightings. For operational risk purposes, an Advanced Measurement Approach model is used to determine the amount of risk-weighted assets. In the market risk approach, the general market risk is hedged, as are the risks of open positions in foreign currencies, debt and equity instruments and commodities. The transitional CRR provisions have been reflected in the ratios set out below. Rabobank Group's ratios in millions of euros 2016 2015 Retained earnings 25,709 25,4822 Expected dividends (60) (126) Rabobank Certificates 5,948 5,949 Part of non-controlling interests treated as qualifying capital 25 23 Reserves 112 224 Deductions (3,302) (5,539) Transition guidance 1,186 2,741 Common Equity Tier 1 capital 29,618 28,754 Capital Securities 2,728 1,488 Grandfathered instruments 5,462 6,373 Non-controlling interests 5 5 Deductions (91) (76) Transition guidance (643) (1,492) Tier 1 capital 37,079 35,052 Part of subordinated liabilities treated as qualifying capital 16,094 15,078 Non-controlling interests 7 6 Deductions (99) (85) Transition guidance (208) (596) Qualifying capital 52,873 49,455 Risk-weighted assets 211,226 213,092 Common Equity Tier 1 ratio 14.0% 13.5% Tier 1 ratio 17.6% 16.4% Total capital ratio 25.0% 23.2% Equity capital ratio3 15.0% 14.7% 1 These buffers will phase in during the years 2016-2019. The countercyclical buffer is capped at a maximum of 2.5%. In most countries, including the Netherlands, the countercyclical buffer for 2016 has been set at 0%. Differs from the amount of retained earnings as reported in note 30 due to the prior year adjustment of 83 in the 2015 IFRS equity opening balance (see note 2.1) The equity/capital ratio is calculated by comparing the items retained earnings and Rabobank Certificates to the risk-weighted assets. Pillar 1 4.5% 6.0% 8.0% Pillar 2 1.75% 1.75% 1.75% Capital conservation buffer1 2016-2019 2.5% 2.5% 2.5% Systemic risk buffer1 2016-2019 3.0% 3.0% 3.0% Countercyclical buffer1 2016-2019 0% - 2.5% 192 Rabobank Jaarverslag 2016

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Jaarverslagen Rabobank | 2016 | | pagina 193