Inhoudsopgave Voorwoord Bestuursverslag Corporate governance
Examples include postponements of repayments and
extensions of the term of a facility. The rationale for the focus on
this portfolio derives from the concerns of European regulators
about the deterioration of the quality of the portfolio; it is feared
that forbearance measures might camouflage this deterioration
of the portfolio as debtors are able to meet their financial
obligations for longer periods as a result of the concessions.
The identification of forbearance measures for the corporate
portfolio is based on the current Loan Quality Classification
framework, with forbearance measures only applying to the
classified portfolio. If forbearance measures are applied to
a debtor, the debtor falls, by definition, under the supervision of
the Special Asset Management department. Lastly, items in the
forbearance category must be reported for up to two years after
their recovery from 'non-performing'to 'performing'.This period
of two years is referred to as 'Forborne under probation'.
For the accounting policy regarding derecognition of
financial assets please refer to section 2.9 'Securitisations
and (de)recognition of financial assets and liabilities'.
3.5 Currency risk in the banking environment
Currency risk is the risk that the bank's financial result and/
or economic value will be negatively affected by changes in
exchange rates.
Rabobank is exposed to the effect of fluctuations in exchange
rates on its financial position and cash flows. In the trading
environment, currency risk, like other market risks, is managed
on the basis ofValue at Risk (VaR) limits set by the Executive
Board. In the banking environment, there is a currency risk in
the banking books and a translation risk.
Currency risk in the banking books is the risk that manifests
itself at the moment receivables and liabilities are not covered,
due to which currency fluctuations may have a negative impact
on the financial results of the bank. Rabobank's policy is to fully
hedge the material currency risk on the banking books.
Translation risk becomes evident when the bank's consolidated
balance sheet and results are prepared, whereby all items in
foreign currencies must be valued in euros.This makes the
financial data sensitive to exchange rate fluctuations. Translation
risk manifests itself in two different ways within Rabobank:
Exchange rate fluctuations can potentially affect the value of
consolidated entities of which the functional currencies are
not euros.
Exchange rate fluctuations may affect the solvency ratios
of Rabobank as a result of differences in the exchange rate
composition of the capital and the risk-weighted assets.
Translation risk and currency risks in the banking books are
monitored and managed on the basis of a policy which serves
the prime purpose of protecting the Common Equity Tier 1 ratio
against the adverse effects of exchange rate volatility.
Consolidated Financial Statements Company Financial Statements Pillar 3
3.6 Interest rate risk in the banking environment
'Interest rate risk in the banking environment' refers to the risk
that the financial results and/or the economic value of the
banking book are adversely affected by changes in market
interest rates.
Interest rate risk at Rabobank arises as a result of repricing
and maturity mismatches between loans and funding,
and optionality in client products. Customer behaviour is
an important determining factor with respect to interest rate
risk in the banking environment. The modelling of customer
behaviour is therefore one of the core elements of the interest
rate risk framework. There are behavioural models in place
for mortgage prepayments, savings accounts and current
accounts. Movements in interest rates may also affect the
creditworthiness of customers. Higher interest rates might
for example lead to higher borrowing costs and, hence, have
a negative impact on the creditworthiness of a customer.
Any such effects are however regarded as credit risk rather than
interest rate risk.
Rabobank accepts a certain amount of interest rate risk in the
banking environment; this is a fundamental part of banking.
But at the same time the bank also aims to avoid unexpected
material fluctuations in the financial result and the economic
value as a result of interest rate fluctuations. The Executive
Board, overseen by the Supervisory Board, therefore annually
approves the interest rate risk appetite and the corresponding
interest rate risk limits.
At group level, Rabobank's interest rate risk is managed by
the Asset and Liability Committee Rabobank Group chaired
by the Chief Financial Officer. The Treasury is responsible for
implementing the decisions of this committee, while Risk
Management is responsible for measuring and reporting the
interest rate risk position.
The definition used for managing interest rate risk varies from
the IFRS definition of equity. For interest rate risk management,
the economic value of equity is defined as the present value
of the assets less the present value of the liabilities together
with the present value of the off-balance-sheet items.Through
the use of hedge accounting and because a large proportion
of the balance sheet is carried at amortised cost (in IFRS terms)
and (except from the inherent counterparty risk) is therefore not
exposed to value changes, the effects of the value changes on
IFRS capital will largely impact only interest income.
275 Notes to the company financial statements
