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