6.5 Country risk Inhoudsopgave Voorwoord Bestuursverslag Corporate governance Consolidated Financial Statements Company Financial Statements Pillar 3 6.4.2 Commercial real estate The commercial real estate market showed healthy signs throughout 2016. Improving economic fundamentals like GDP- growth and increasing employment led to more demand from end-users, especially in logistic real estate and retail.The supply of vacant buildings continues to decrease largely as a result of transformation and conversions of vacant buildings. Also low levels of new developments contribute to more balance in the supply-demand ratios. In prime areas, a shortage of good quality buildings rises and results in more demand for new buildings. Rental prices remain under pressure in areas outside the core locations of the large cities. The investment market continues to show substantial activity, both from domestic and international investors. Low interest rates and limited returns on other investment segments are stimulating investments in real estate. Most real estate segments are popular among investors. Yields tighten at prime locations, but also non-core segments can provide attractive returns. Rabobank's commercial real estate portfolio in the Netherlands was historically managed by FGH Bank and the local Rabobanks. In 2015, it was announced that FGH Bank would be integrated into Rabobank, consolidating all knowledge, expertise and network in the field of commercial real estate financing within both FGH Bank and Rabobank. In view of this, In November 2016, Rabo Real Estate Finance was launched. At EUR -28 million (EUR 164 million) in 2016, specific loan impairment charges for the combined domestic Rabobank commercial real estate portfolio were negative, confirming the ongoing stabilization of the quality of the portfolio. Nearly the entire commercial real estate portfolio outside the Netherlands is provided by ACC Loan Management. This portfolio is being gradually scaled down. In 2016 there was a small release of the loan impairment allowance. With respect to country risk, a distinction is made between collective debtor risk and transfer risk. Collective debtor risk is the riskthata large number of debtors in a particular country will all be unable to fulfil their obligations owing to the same cause, (e.g. war, political or social unrest, natural disasters, or government policy that fails to create macro-economic and financial stability). Transfer risk is the risk that payments in non-local currency could in any way be hindered or prohibited due to insufficient availability of non-local currency financial resources (economic transfer risk), and/or to unwillingness of the government (political transfer risk) to permit the non-local currency outflow of financial resources. Rabobank uses a country limit system to manage collective debtor risk and transfer risk. After careful review, relevant countries are given an internal country risk rating, after which, general limits and transfer limits are set.Transfer limits are introduced based on the net transfer risk, which is defined as total loans granted less loans granted in local currency, guarantees, other collateral obtained to cover transfer risk and a deduction related to the reduced weighting of specific products.The limits are allocated to the offices, which are themselves responsible for the day-to-day monitoring of loans that have been granted and for reporting on this to Risk Management. At Rabobank Group level, the country risk outstanding is reported every quarter to the Risk Management Committee (RMC Group) and the Country Limit Committee (CLC). Special Basel II parameters, specifically EATE (Exposure at Transfer Event), PTE (Probability ofTransfer Event) and LGTE (Loss Given Transfer Event), are used to calculate the additional capital requirement for transfer risk. These calculations are made in accordance with internal guidelines and cover all countries where transfer risk is relevant. Based on the concept of country of ultimate risk, the collective debtor risk for non-industrial non-OECD countries stood at 28.4 (2015:24.7) billion at year-end 2016.The net ultimate transfer risk before allowances for these countries amounted to 17.5 (2015:15.4) billion at year-end 2016, which corresponds to 2.6% (2015: 2.3%) of total assets. Total assets were 662.6 (2015: 678.8) billion. The total allowance for ultimate country risk amounted to 471 (2015: 346), which corresponds to 6.2% (2015:4.1 of the total allowance of 7,542 (2015:8,478). 341 6. Credit Risk

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Jaarverslagen Rabobank | 2016 | | pagina 342