5.4 Capital ratios Inhoudsopgave Voorwoord Bestuursverslag Corporate governance Consolidated Financial Statements Company Financial Statements Pillar 3 risks the bank is exposed to. By assuming a higher confidence level (99.99%) than is used for regulatory capital (99.90%), economic capital is generally more prudent than regulatory capital. A broad spectrum of risks is measured consistently to gain an understanding of these risks and to enable a rational assessment of risk against return. We use a series of models to assess the risks incurred by Rabobank Group.These include credit, transfer, operational, business, interest rate and market risks. Market risk breaks down into trading book, private equity, currency, real estate and residual value risks. From 1 January 2017 the EC framework will be replaced with a so-called Regulatory Capital Plus (RC+) framework. Reflecting changing regulatory requirements and similar developments in the industry, the new framework will be based on regulatory capital, but it will reserve additional capital for those risks where Rabobank takes a more conservative approach. The Economic Capital decreased to 26.0 (2015:26.7) billion. The decrease was mainly due to the impairment of Achmea. Figure 2: Economic Capital by risk category. Economic capital by risk type at year-end 2016 V Credit and transfer risk I Operational and business risk Interest rate and market risk I Other risks Qualifying capital The available qualifying capital of 52.9 (2015:49.5) billion, the bank retains to compensate for potential losses, was above the level of the total external and internal capital requirements. This buffer underlines the financial solidity of Rabobank Group. The CRR and CRD IVjointly constitute the European implementation of the Basel capital and liquidity agreement of 2010. CRR provides CET1 deductible items such as intangible non-current assets, deferred tax assets and the Internal Ratings Based (IRB) shortfall.These adjustments will be phased in gradually during the period 2014-2018. The fully loaded Common Equity Tier 1 ratio was 13.5% on 31 December 2016. Fully loaded is the CET1 ratio where based on all CRR (CRD IV) regulation being fully applied. In line with the regulatory requirements various adjustments in capital will be phased in during the coming years in the CET1 capital. Therefore, the current CET1-ratio is higher than the fully loaded CET1-ratio. The Tier 1 instruments that were issued by Rabobank before 2014 do not meet the new requirements of the CRR. For these instruments, grandfathering is applicable. This means that these instruments will, in line with the regulatory requirements, gradually be phased out of equity. In 2016, theTier 1 ratio increased by 1.2 percentage points to 17.6% (16.4%), mainly due to the issuance of the 1.25 billion CRR compliant capital securities in April 2016 and the higher CET1 capital. As a result of the issue of Tier 2 capital, the capital ratio rose by 0.9 percentage points to 25.0% (23.2%). Table 7: Capital ratios. Capital ratios At 31 December 2016 At 1 January 2016 At 31 December 2015 Risk Weighted Exposure Amount 211,226 212,768 213,092 Total Common Equity Tier 1 capital 29,618 27,767 28,754 Total Tier 1 capital 37,079 33,629 35,052 Total qualifying capital 52,873 48,208 49,455 Common Equity Tier 1 ratio 14.0% 13.1% 13.5% Tier 1 ratio 17.6% 15.8% 16.4% Capital ratio 25.0% 22.7% 23.2% edtf9 Rabobank's capital objectives are based on the CRR (CRD IV) and bail-in legislation, peer group analyses and market expectations. In setting these objectives, we have taken into account the maximum Systemic Risk Buffer of 3% and bail-in legislation from Europe. Rabobank has been designated as a Dutch SIFI and not a global SIFI. DNB has imposed Rabobank (and the other major Dutch banks) the maximum buffer of 3%. This buffer will be phased in between 2016 and 2019. 54% 20% 18% 8% 323 5. Capital management

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Jaarverslagen Rabobank | 2016 | | pagina 324