Inhoudsopgave Voorwoord Bestuursverslag Corporate governance Per January 2016 the Income at Risk methodology was updated to accommodate interest rate scenarios to go negative until a floor of-0.5%, while in 2015 these downward scenarios were floored at 0%. For the EUR and USD interest rates this meant that the applied maximum shocks enlarged from -2 to -10 basis points and -20 to -75 basis points respectively. In the last quarter of 2016the increasing USD rates made room fora larger downward shock (i.e. -125 basis points) and consequently also led to an additional increase in the Income at Risk. In 2016 the EUR swap curve showed a downward parallel shift with a flattening tendency: the 3M Euribor rate and the 10 year swap rate dropped from -13bp to -32bp and 92bp to 54bp respectively. In general, a low interest rate environment accompanied by a flattening of the curve, is challenging for the profitability of the bank, especially the retail business in case of unchanging margins. Income at Risk in millions of euros 31 December 2016 31 December 2015 EUR interest rate 10 bp decline 2 bp decline 82 19 4.5.2 Equity at Risk The equity at risk (EatR) or duration of equity indicates by what percentage the economic value of equity will fall if the money market and capital market interest rates increase by one percentage point.The Executive Board has set a lower limit of 0% and an upper limit of 6% for this purpose. Additional limits apply for the basis point value (BPV) of equity and the delta profile (BPV per term point) for equity. In the first half of 2016, the EatR decreased from 2.4% to 1.1% due to the fall in market interest rates and model adjustments regarding mortgage prepayments and on-demand savings deposits. During the course of 2016, the upward pressure on the EatR, caused by mortgage extensions and customers' shift in preference towards longer fixed interest periods, was largely hedged by entering into payer swaps leading to an EatR of 1.4% by year end. Equity at Risk 31 December 2016 31 December 2015 1.4% 2.4% Consolidated Financial Statements Company Financial Statements Pillar 3 4.6 Market risk in the trading environment Market Risk arises from the risk of losses on trading book positions affected by movements in interest rates, equities, credit spreads, currencies and commodities.These movements have an impact on the value of the trading portfolios and could lead to losses. Risk positions acquired from clients can either be redistributed to other clients or managed through risk transformation (hedging).The trading desks are also acting as a market-maker for secondary markets (by providing liquidity and pricing) in interest rate derivatives and debt, including Rabobank Bonds and Rabobank Certificates. Market risk in the trading environment is monitored daily within the market risk framework, which is put in place to measure, monitor and manage market risk in the trading books. An important part of the framework is an appropriate system of limits and trading controls.The relevant risk appetite limits are translated into limits and trading controls at book level and are monitored on a daily basis by the market risk departments. Due to Rabobank's strategy of client risk redistribution, risk transformation (hedging) and the low secondary market activity, the real market risk exposure of the trading portfolio is well within the risk appetite boundaries. If limits are breached, remedial actions will be stipulated which decrease the chance of large actual losses. The risk position is reported to senior management and discussed in the various risk management committees each month. At consolidated level, the market risk appetite is represented by the Value at Risk (VaR), Interest Rate Delta and Event risk. The VaR indicates the maximum loss for a given confidence level and horizon under 'normal' market conditions, based on one year of historical market movements. Daily risk management uses a confidence level of 97.5% and a horizon of 1 day. Under this method, VaR is calculated on the basis of historical market movements and the positions taken. The table below presents the composition of the VaR. The VaR is divided into a number of components. A diversity advantage is achieved in this case by the opposing positions of various books which partially cancel each other out. In 2016, the VaR fluctuated between EUR 3.5 million and EUR 6.9 million, the average being EUR 4.4 mil lion. The VaR amounted to EUR 4.3 million on 31 December 2016. VaR has moved during the year with some fluctuations being driven by client related deals and volatility in the financial markets. 199 Notes to the consolidated financial statements

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Jaarverslagen Rabobank | 2016 | | pagina 200