RI IN SOLITARY SPLENDOUR
12
financial background
What'S NewS Issue 2 February 1997
What's in a name? Or a designation, like AAA? Rabobank presently stands alone
as the world's only private-sector bank to enjoy an unanimous and
unquestioned triple-A rating from all the leading credit review
agencies - Moody's, Standard Poor's, and IBCA of London. Why do we rate it
and just how important is it?
competitors. In practice, however, the
structural transformation of the banking
industry now means that the difference
between AAA and AA+ is relatively small
(if still fractionally important when
structuring derivative deals, for example).^
It is the steps down from AA to A, and on™
to BBB, that lead to significant shifts in
funding cost.
PERIODIC REVIEW
One pillar of the bank's strength has of
course been the fact that the local banks
have traditionally been heavily involved in
low-risk mortgage and agribusiness loans.
Now, of course, Rabobank International is
increasing its profile in trade, industrial
and service-related credits, as well as
derivative financial products on the
professional market, and this has
inevitably nudged risk levels somewhat
higher. Nevertheless, the bank's rating,
subject to periodic review and renewal,
has been consistently reaffirmed amid the
sea-change in the industry at large.
OVERALL CLIMATE
The rating procedure is quite involved. In
return for a fee, teams of specialists are
dispatched from the agencies for a
thorough-going study at the Rabobank
organization. They conduct in-depth
discussions about the bank's financial
TRIPLE A: HET
WORDT STIL AAN
P*® DE TOP.
UBS en Deutsche Bank
verloren onlangs hun plaats in de rating
top: niet alle drie top rating agency's,
Standard Poors, Moody's en IBCA, geven
hen nog de hoogste rating. Onze triple-A
rating staat voor onze kredietwaardigheid.
Een hoge rating zorgt er onder meer voor
dat wij ons tegen een lagere rente kunnen
funden.Ook bij het betreden van nieuwe
markten is deTriple A een pré, deuren gaan
sneller open.
In mid-January, the Union Bank of
Switzerland was downgraded to AA+ by
Standard &c Poor's amid a far-reaching
internal reorganization. Deutsche Bank
was downgraded to AA+ by Moody's only
a month before. Moreover, during the
period between 1989-93, virtually all the
leading UK, Japanese, and US banks
moved out of the AAA category. In light
of the profound transformation sweeping
through the entire banking industry some
analysts are starting to describe the
premium rating as an artifact from an
earlier time.
INSTANT CREDIBILITY
The question is not quite so simple as that.
Debt and equity ratings are the focus of
more attention than ever before as the
industrial and banking landscape grows
more competitive and complex and the
number of innovative funding instruments
proliferates. The rating agencies role as
'trusted intermediary' has thus - if
anything - been considerably enhanced.
'Fifteen years ago, when we arrived in
Christ van Roovert: 'one can't try to
maintain the rating at any
cost.
Manhattan as a relatively unknown
quantity on the New York scene,
obtaining a AAA rating gave us instant
credibility,' notes Christ van Roovert, who
runs the financial control department of
the Rabobank group. 'If anything, the
importance of the rating from this
perspective has increased, which is of
course beneficial at a time of our rapid
overseas expansion.'
LOWER RATES
Also important is the fact that certain
companies, institutions and funds are
legally obligated by their local supervisory
authorities to do business with none other
than AAA rated institutions - (although
merely one such rating will usually do). In
theory, possessing a AAA credit rating also
makes it possible for a bank to borrow in
the money markets at fractionally lower
rates than its relatively weaker
