Inhoudsopgave Voorwoord Bestuursverslag Corporate governance
Consolidated Financial Statements Company Financial Statements Pillar 3
The overview presented above, has been composed on the
basis of contractual information and does not represent the
actual behaviour of these financial instruments. However, this
is taken into account for the day-to-day management of the
liquidity risk. Customer savings are an example. Under contract,
these are payable on demand. Experience has shown that this
is a very stable source of long-term financing that Rabobank
has at its disposal. The regulations of the supervisory authority
also factor this in. On 31 December 2016, on the basis of
the liquidity criteria set by the Dutch Central Bank (DNB),
Rabobank had a substantial liquidity surplus.The average
liquidity surplus during 2016 was 32% (2015: 23%) of the
total 1-month liquidity requirement. On 31 December 2016,
the surplus was 30% (2015:25%).The European Commission
Delegated Act 'Liquidity Coverage Ratio' (DA LCR) became
a regulatory requirement as of October 1st 2015. With 130% as
per 31 December 2016, Rabobank complies with the minimum
100% requirement as set by the Dutch Central Bank (DNB).
The liquidity requirements to meet payments under financial
guarantees are considerably lower than the amount of the
liabilities because Rabobank does not generally expect that
third parties to such arrangements will draw funds.The total
outstanding amount in contractual obligations to provide credit
does not necessarily represent the future cash resource needs
of Rabobank because many of these obligations will lapse or
terminate without financing being required.
4.8 Operational risk
Rabobank defines operational risk as the risk of losses being
incurred as a result of inadequate or dysfunctional internal
processes, people and systems or as a result of external
trends and developments, including legal and reputational
risks. In measuring and managing operational risk, Rabobank
operates within the parameters of the most advanced Basel II
approach, the Advanced Measurement Approach, and follows
the 'three lines of defence model'as prescribed by the EBA.
The bank's operational risk policy is based on the principle
that the primary responsibility for managing operational risk
lies with the first line and that this must be integrated into
the strategic and day-to-day decision-making processes.
The purpose of operational risk management is to identify,
assess, mitigate and monitor the various types of operational
risk.The operational risk measurement supports those
responsible for operational risk prioritisation and deployment of
people and resources.
Within Rabobank Group, the departments involved in the
primary processes of the bank form the 'first line of defence'.
They are fully responsible for day-to-day risk acceptance and
for integrated risk management and mitigation within the
approved risk appetite. The Compliance, Legal and Risk(CLR)
functions together constitute the 'second line of defence'.
The second line functions have a monitoring role with regard
to all types of operational risk and they monitor the way in
which 'the first line of defence' manages these risks. In addition
and independently from the first line, they report on the risk
profile and appetite breaches to senior management and the
Executive Board. Internal Audit forms the 'third line of defence'.
At group level, the Risk Management Committee (RMC) is
responsible for formulating policy and setting parameters.
Compliance, Legal and Risk also report quarterly to the RMC
on changes in operational risks at group level. Delegated risk
management committees have been established within the
group's entities.Their responsibilities include monitoring all
operational risks at entity level (amongst others: Conduct risk,
continuity risk, Information Security risk, Fraud risk including the
legal and reputational impact thereof).
The annual risk management cycle consists of a group-wide
Scenario programme and Risk Self-Assessment that identifies
the more material operational risks of Rabobank Group.
After assessment, if and when risks fall outside the defined
risk appetite, mitigating measures are taken by first line and
monitored by second line.
4.9 Fair value of financial assets and liabilities
The following table shows the fair value of financial instruments,
recognised at amortised cost on the basis of the valuation
methods and assumptions detailed below.This table is included
because not all financial instruments are recognised at fair value
in the balance sheet. Fair value represents the price that would
have been received for the sale of an asset or that would have
been paid in order to transfer a liability in a standard transaction
conducted between market participants on the valuation date.
For fair value measurement Rabobank assumes that the
transaction to sell the asset or transfer the liability is conducted
in the principal market for the asset or liability. Alternatively, in
the most advantageous market if there is no principal market.
Market prices are not available for a large number of the
financial assets and liabilities that Rabobank holds or issues.
For financial instruments for which no market prices are
available, the fair values shown in the following table have
been estimated using the present value or the results of other
estimation and valuation methods, based on the market
conditions on the reporting date.The values produced
using these methods are highly sensitive to the underlying
assumptions used for the amounts as well as for the timing of
future cash flows, discount rates and possible market illiquidity.
The following methods and assumptions have been used.
Cash and balances at central banks.
The fair value of cash and balances at central banks is assumed
to be almost equal to their carrying amount.This assumption is
used for highly liquid investments and also for the short-term
component of all other financial assets and liabilities.
203 Notes to the consolidated financial statements