Inhoudsopgave Voorwoord Bestuursverslag Corporate governance
Consolidated Financial Statements Company Financial Statements Pillar 3
loan applications. The competent committee is chosen on
the basis of the size of the loan. Decisions on the largest loans
are made by the highest level committee, the Central Credit
Committee Rabobank Group (CCCRG).
The credit risk exposure relating to each individual borrower is
further restricted by the use of sub-limits to hedge amounts at
risk, not all of which are disclosed in the statement of financial
position, and the use of daily delivery risk limits for trading
items such as forward currency contracts. Most of the resulting
items are tested against the limits every day.
Once a loan has been granted, it is continually subject to credit
management as part of which new information, financial
and other, is reviewed.The credit limits are adjusted where
necessary. Rabobank obtains collateral or guarantees for the
majority of loans.
3.4.1 Derivatives
Rabobank sets strict limits for open positions, in amounts as
well as in terms. If ISDA (International Swaps and Derivatives
Association) standards apply or a master agreement including
equivalent terms has been concluded with the counterparty,
and if the jurisdiction of the counterparty permits offsetting,
the net open position is monitored and reported.This credit
risk is managed as part of the general lending limits for clients.
Where needed, Rabobank obtains collateral or other safeguards
to mitigate credit risks inherent in these transactions. The credit
risk exposure represents the current fair value of all open
derivative contracts showing a positive market value, taking
into account master netting agreements enforceable under law.
3.4.2 Collateral and credit management
Rabobank's credit risk exposure is partly mitigated by obtaining
collateral where necessary. The amount and nature of the
collateral required depends partly on the assessment of the
credit risk of the loan to the counterparty. Rabobank has
guidelines in place for the purpose of accepting and valuing
different types of collateral. The major types of collateral are:
Residential mortgage collateral;
Mortgage collateral on immovable property, pledges on
movable property, inventories and receivables, mainly for
business loans;
Cash and securities, mainly for securities lending activities
and reverse repurchase transactions.
The management monitors the market value of collateral
obtained and requires additional collateral where necessary.
Rabobank also uses credit derivatives to manage credit risks
and it further mitigates its exposure to credit risk by entering
into master netting arrangements with counterparties for
a significant volume of transactions. In general, master
netting arrangements do not lead to the offsetting of assets
and liabilities included in the statement of financial position
because transactions are usually settled gross.The credit risk is
limited by master netting arrangements, but only to the extent
that if an event or cancellation occurs, all amounts involving
the counterparty are frozen and settled net. The total credit risk
exposure from derivatives to which offsetting arrangements
apply is highly sensitive to the closure of new transactions,
the expiry of existing transactions and fluctuations in market
interest and exchange rates.
3.4.3 Off-balance-sheet financial instruments
The guarantees and standby letters of credit that Rabobank
provides to third parties in the event of a client being unable
to fulfil its obligations to these third parties, are also exposed
to credit risk. Documentary and commercial letters of credit
and written undertakings by Rabobank on behalf of clients
authorise third parties to draw bills against Rabobank up to
a fixed amount and subject to specific conditions. As these
transactions are secured by the delivery of the underlying
goods to which they relate, the risk exposure of such
an instrument is less than that of a direct loan.
Loan commitments are firm commitments to provide credit
under pre-specified terms and conditions and are included
in credit related contingent liabilities. Rabobank is exposed
to credit risk when it promises to grant loans.The amount
of any losses is likely to be less than the total of the unused
commitments because the commitments are made subject to
the clients meeting certain loan conditions. Rabobank monitors
the term to the expiry of loan commitments because long-term
commitments generally involve higher risk than short-term
commitments.
3.4.4 Forbearance
Rabobank has a policy for monitoring its forbearance portfolio
every quarter. This portfolio consists of the customers of
Rabobank for whom forbearance measures have been putin
place.The measures underthat name comprise concessions
to debtors facing or about to face difficulties in meeting their
financial commitments. A concession refers to either of the
following actions:
A modification of the previous terms and conditions of
a contract the debtor is unable to comply with due to its
financial difficulties ('bad debt') in order to allow for sufficient
debt serviceability. A modification that would not have been
granted had the debtor not been in financial difficulty.
A total or partial refinancing of a bad debt contract, which
would not have been granted had the debtor not been in
financial difficulty.
274 Rabobank Jaarverslag 2016
