Inhoudsopgave Voorwoord Bestuursverslag Corporate governance
Consolidated Financial Statements Company Financial Statements Pillar 3
on the creditworthiness of a customer. Any such effects are
however regarded as credit risk rather than interest rate risk.
9.2.1 Non-trading Interest Rate Risk framework
Rabobank accepts a certain level of interest rate risk in the
banking environment, because this can be a major source of
earnings and economic value, but at the same time it seeks
to avoid any material unexpected swings in earnings and
economic value caused by interest rate movements.Therefore,
the Executive Board, under the supervision of the Supervisory
Board, determines the interest rate risk appetite and the
corresponding limits on an annual basis. Reports on the actual
exposure to interest rate risk in the banking environment are
submitted to the responsible Asset Liability Management and
Risk Management Committees on a monthly basis.The actual
exposure is also periodically, (i.e. on a quarterly basis), reported
to the supervisory authorities. The various treasury departments
within the bank are in charge of the operational management
of the exposure to interest rate risk in the banking environment.
They manage that exposure through hedging transactions.
The extent and timing of any hedging is, among other factors,
dependent on the view on future interest rates and the
expected movements in the size and the composition of the
balance sheet. Rabobank entities have limited freedom to make
their own choices within the set constraints.
9.2.2 Risk measurement
Rabobank uses three standard measures:
1. Equity at Risk (EatR);
2. Basis Point Value (BPV) or the delta of equity (total and per
maturity); and
3 Income at Risk (latR);
to control and manage the interest rate risk in the banking
environment arising from changes in the level of interest rates.
The delta per maturity or the delta profile is used to control
and manage the risk of changes in the shape of the yield curve,
which shows the yield per maturity.These measures are also
used to express the Risk Appetite of Rabobank.
In addition to the three standard measures of interest rate risk
in the banking environment, Rabobank regularly analyses the
effect of one or more macroeconomic scenarios on its earnings
and economic value. The results of this analysis are important
for integrated interest rate risk management purposes and
are included in reports to senior management. Furthermore,
the amount of capital required to compensate forthe effect
of unfavourable interest rate developments on the books in
the banking environment is calculated on the basis of both
historical scenarios and scenarios based on the opinions
of experts.
Risk Appetite and developments related to EatR and BPV
of equity
The key measure used by Rabobank to manage interest rate risk
from the perspective of economic value is the EatR. The EatR
shows the percentage decline in the economic value of equity if
interest rates rise by 1 percentage point. For 2016, the Executive
Board determined a risk appetite with a lower limit of 0% and
an upper limit of 6%.
Table 49: EatR.
EatR
31-Dec-2016 31-Dec-2015
Equity at Risk 1.4% 2.4%
In the first half of 2016, the EatR decreased from 2.4% to 1.1%
due to the fall in market interest rates and model adjustments
regarding mortgage prepayments and on-demand savings
deposits. During the course of 2016, the upward pressure on
the EatR, caused by mortgage extensions and customers' shift
in preference towards longer fixed interest periods, was largely
hedged by entering into payer swaps leading to an EatR of
1.4% by year end.
In addition to the EatR, Rabobank uses the BPV or delta of
equity to control and manage interest rate risk from the
perspective of value. The BPV of equity shows the change in
the economic value of equity if all interest rates in the money
and capital markets were to rise by 1 basis point (or 0.01 of
a percentage point).The application of the delta profile is
designed to control and manage the risk of changes in the
shape of the yield curve from the perspective of value. For each
individual maturity, the delta profile represents the change
in the economic value of equity as a result ofa 1 -basis point
increase in the market interest rate for the maturity concerned.
Risk Appetite and developments relating to latR
The key measure used by Rabobank to manage interest rate risk
from an earnings perspective is the latR.The latR is the largest
deviation in negative terms of the expected net interest income
in the next 12 months as a result ofa gradual rise in all interest
rates in this period by 2 percentage points and ofa gradual
decline in all interest rates in this period by 2 percentage points.
The limit for this measure was 500 in 2016.The latR analysis
does not take account of active management intervention, but
it does take account of the changes in prepayment and savings
behaviour of customers associated with this interest rate
development and of changes to the pricing policy for savings
products.
357 9. Market risk
