6. Credit Risk Credit risk is defined as the risk of the bank facing an economie loss because the bank's counterparties cannot fulfil their contractual obligations. Credit risk management within the bank is governed by the bank-wide central credit risk policy and further detailed in underlying specific credit risk policies.The primary responsibility for managing and monitoring credit risk lies with the business as the first line of defence. The business is required to identify, assess and manage, monitor and report potential weaknesses in the credit risk portfolios in line with the credit risk framework. Monitoring takes place on an ongoing basis to limit credit risk exposures to a level in line with the business line's risk appetite. In addition, risk in the credit portfolio is measured and monitored at bank-wide level and on entity level on a monthly basis and by quarterly and ad-hoc portfolio reporting and analysis, with specific attention to risk developments and concentrations. 6.7 Credit Risk management Inhoudsopgave Voorwoord Bestuursverslag Corporate governance Consolidated Financial Statements Company Financial Statements Pillar 3 Credit acceptance Rabobank's prudent credit acceptance policy is typified by careful assessment of customers and their ability to repay the loan that was issued (continuity perspective). As a result, the loan portfolio has an acceptable risk profile even in less than favourable economic circumstances. Rabobank aims to have long-term relationships with customers that are beneficial for both the client and the bank. An important starting point in acceptance policy for business loans is the 'know your customer' principle.This means that the bank only issues loans to business customers whose management Rabobank considers to be ethical and competent. In addition, Rabobank closely monitors developments in the business sectors in which its customers operate and can properly assess the financial performance of its customers. Corporate sustainability also means sustainable financing. Sustainability guidelines have been established for use in the credit process. Although credit is usually granted on the cash flow generating potential of the client or project, collateral will improve the position of the bank in case a client defaults. Collateral can be independent of the client's business and/or obtained from the client's business. Rabobank has outlined its policies for collateral valuation and management in the Global Standard Credit Risk Mitigation. Compliant to CRR 181 1 .(e) all (eligible) collateral is valued at market value or less than market value and the collateral value is monitored frequently. The collateral is sufficiently liquid and its value over time is sufficiently stable to provide appropriate credit protection. Within the Rabobank policy framework each type of collateral is addressed separately. The main types of collateral that are recognised by Rabobank are real estate, inventory (such as equipment, machinery, stock etc.), commodities, receivables and guarantees.The quality of the collateral is assessed in the initial credit request, and is evaluated within the credit revision process.The frequency of revaluation depends on the type of collateral and is in line with the requirements set in the CRR. The main types of guarantors are governments, local authorities, (central) banks and corporate entities. For institutions, insurance undertakings and export credit agencies, a minimum rating is required. Credit committees and credit approval Rabobank has various levels of credit committees. Very large loans are approved by the Central Credit Committee Rabobank Group (CCCRG), which is chaired by the CRO. Most loans are subject to approval by a lower level credit committee. The credit authority amounts are periodically reviewed and are higher at each higher level of credit committee. Entities have their own local credit committees which are organised along the lines of the committees at the central level.Their duties and responsibilities are clearly defined in a charter. In general, the Local Credit Committee is chaired by the general manager, with the head of credit risk management as vice-chairman. The charter also specifies the required members and regulates the proper representation by front office and credit risk management. Credit committee members are appointed 325 6. Credit Risk

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