On solid ground
ft i
lenges. Particularly in asset pricing. International valuation
standards of financial instruments like 'marked to market'
or 'fair value' are difficult to pin down and much more so in
volatile conditions. Banks are reluctant to publish write-offs.
The figure of total bank write-offs since last summer was esti-
mated by the Financial Times to reach between US$ 400 and
US$ 800 billion. Sub-prime exposure coupled with the asset
pricing uncertainties.well, it's only natural that the market
reacts with apprehension.
Global federal authorities are looking critically at the banking
industry. All the way down to fundamental questions on the
role of bonuses as incentives for overly risky financial innova-
tion. Central banks are not the only ones. Private investors
are keen to lay blame at the doorstep of financial institutions
they perceive as being responsible for their losses. Rising
interbank rates reflect the lack of trust between lending
institutions. Trust is at stake and money markets are drying
up. For both banks and consumers alike, the average cost of
borrowing is like a tide coming in.
The responsive trend is for banks to focus on improved risk
management practices, greater transparency and retrench-
ment to more narrowly defined cliënt bases. Risk pricing is
returning to sound levels. Clarity and focus are key in times
of turbulence. There's a process of reintermediation taking
place. That is, banks are putting assets back on the balance
sheets and closing the gap between asset risk and origina-
tion. The proverbial pendulum swings back. It's a natural
Cause Effect
- sub-prime mortgages - mistrust
- fundamental - volatility
market features
Change
- Capital shortages
- liquidity flight
Rabobank
Strengths:
-AAA
-solid Tier 1 capital
- cooperative foundation
- conservative ALM
- knowledge
process that serves as an inherent check on the stability and
health of financial markets.
In such cloudier waters, home market banks - nearby,
familiar and trusted institutions - are perceived as beacons
of strength. Rabobank is such a home market bank. We are
solidly grounded in a well-rooted and widespread coop
erative base of local banks. From this foundation, we have
spring boarded successful international operations in
Opportunities:
- Investor offering
- Client offering
issue 16 THE WORD
