Inhoudsopgave Voorwoord Bestuursverslag Corporate governance Consolidated Financial Statements Company Financial Statements Pillar 3 6.2.2 Troubled debt Past due, non-performing loans, impairments and loan impairment allowances For the purpose of reporting, Rabobank distinguishes several types of troubled loans, like for example: Past due loans: Interest, repayments or overdrafts on a loan have been due for payment for more than one day. Non-performing loans: Loans that at least satisfy one of the following criteria. Material exposures which are more than 90 days past due or the debtor is assessed as unlikely to pay its credit obligations in full without realisation of collateral, regardless of the existence of any past due amount or the number of days past due. Impaired loans: Inflow criteria for impaired loans are equal to non-performing loans. Cured (returned to performing): A facility is returned to performing (cured) when all exit criteria for non-performing are met. Within Rabobank, the Basel II default definitions are used for identifying a loan impairment allowance. However, exit criteria for forborne non-performing exposure are stricter than for impaired exposure. Furthermore, recovered forborne non- performing exposure is bound by more rigorous inflow criteria and can be labelled as non-performing exposure once more, even if the impaired criteria are not being met. Loan impairment allowances After a loan has been granted, continuous credit management takes place. New financial and non-financial information is assessed. The bank ascertains whether the client complies with the agreement made and whether it can be expected that this will be the case in the future. If this is expected not to be the case, credit management is stepped up, monitoring becomes more frequent, and a closer eye is kept on credit terms. Guidance is provided by a special department for larger and more complex loans: Financial Restructuring Recovery (FR&R). If it is likely that a debtor will be unable to pay the amounts owed to Rabobank in accordance with the contractual obligations, this will give rise to an impairment (impaired loan). If necessary, an allowance is formed that is charged to income. The loan impairment allowance consists of three components: Specific allowance: For individual impaired loans a specific allowance is determined. The size of the specific allowance is the difference between the carrying amount and the recoverable amount, which is the present value of the expected cash flows, including amounts recoverable under guarantees, collateral and unencumbered assets, discounted at the original effective interest rate of the loans. If a loan is not collectible it is written-off from the allowance. Specific provisioning for every change that impacts the P&L by 7.5 or more is dealt with by the Provisioning Committee. Collective allowance: In addition to the assessment of individual loans, for retail exposures a collective assessment is made if it is not economically justified to recognise the loss on an individual basis. In these cases the collective assessment is made based on homogenous groups of loans with a similar risk profile with the purpose of identifying the need to recognise a loan impairment allowance. IBNR (Incurred But Not Reported): For exposures in the portfolio that are impaired, but not yet recognised as such a general allowance is taken. This allowance is taken because there is always a mismatch period between an event causing a default of a client and the moment the bank becomes aware of the default. The allowance will be determined based on Expected Loss (EL) data resulting from the Economic Capital models. Specific and collective loan losses for the period comprise actual losses on loans minus recoveries. Recoveries regard written-back amounts from actual losses in previous years. Expected Loss data for provisioning Expected Loss is a key risk component for determining the bank's general and collective provisions. EL parameters are used to determine general and collective allowances, adjusted in conformity with IFRS rules.The outcome is benchmarked with an alternative methodology, which uses historical provisioning data. One-obligor principle For exposures that, under Basel regulations, qualify as corporate exposures, exposure is measured at client group level, in line with the one-obligor principle as defined by Rabobank. The one-obligor principle implicates that the total of the approved exposure limit(s) of a debtor is combined with the exposure limits of the other debtors of the same client group within all entities. The client group of debtors includes debtors belonging to an economic unity in which legal entities and companies are organisationally connected, as well as majority shareholders of that economic unity. Concentration risk Rabobank applies concentration risk mitigation on, for example, asset classes, sector and country level. For its asset classes Rabobank has determined a risk appetite, expressed in exposure, percentage of defaults and loan impairment charges. Furthermore, exposure limits are set on a sector and country level as well. Single name concentrations are limited on exposure and loss at default (LAD) and are monitored closely. 334 Rabobank Jaarverslag 2016

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Jaarverslagen Rabobank | 2016 | | pagina 335