4
I am confident that
R&R will be well
prepared by the time
Basel III c
ec 9
[9
What is your view on the
Basel III proposals and, specifically,
on liquidity reforms?
(9
introducing the net stable funding
ratio (NSFR) and leverage ratio
mean for Rabobank?
How should/will Rl apply
the liquidity requirements
as described in Basel III?
19
holding government bonds, taking
into account the sovereign debt
crisis? What are the alternatives?
Basel III is the third edition of
Basel banking regulations since
1988. History has shown that
Basel I and II were not watertight.
Will Basel III be any different?
A "I don't think that a regulation - by
definition - can be watertight, so Basel III
won't be either. Flowever, I do believe that
it'll be a step forward, and looking at the
amendments released in July and September,
it'll be better than Basel II. Flaving said that,
I don't think it will eliminate the possibility
of a systemic crisis. Risk culture within the
bank, strategy, risk appetite, governance
and holistic risk management are at least
as important as the regulatory ratios banks
need to maintain. Regulators look in principle
at these issues under Pillar II, but I believe that
this should get increased focus."
9
A "I studied econometrics at university,
which involves developing and applying
quantitative or statistical methods to the
study of economie principles. I joined
Rabobank in January 2009 as Global Head
of Risk Management Rl. The responsibility
involves credit risk, market risk and asset
liability management risk in all Rl business
lines. Prior to that, I spent 17 rewarding
years at ABN AMRO, where I worked in a
number of different functions, including
market risk management, structured finance
and, ultimately, heading balance sheet
management of the Group. I'm 42 years old,
married with two daughters, and when I'm
not spending time with my family, I enjoy
playing golf and exploring wine regions."
A "From a liquidity angle, until Basel III came
out there was no global Standard on liquidity
solutions, so clearly this is a very good
development. The liquidity coverage ratio is
similar to a ratio already in place at the Dutch
Central Bank, so that's not particularly an
issue for us. The main question mark we had
about the original Basel III proposals was over
the net stable funding ratio (NSFR).This NSFR
ratio should ensure that the liquidity which
can be generated by the assets is sufficiënt to
absorb assumed outflow of liabilities over a
one year horizon. Our concern was primarily
about the underlying and very stringent
assumptions used to calculate the NSFR ratio.
The requirement to comply with such a ratio
would have affected the way the bank was
able to carry out its primary functions. Given
the impact, it is unlikely that the ratios will
be implemented as proposed but we do
anticipate an NSFR ratio in some form. Clearly
the liquidity reforms will give much more
focus on the liability side of the balance sheet,
where stable funding sources - such as saving
accounts or long term issuance - will become
increasingly important."
A "We're particularly pleased that concerns
voiced by the banking sector have been taken
into account. The NSFR ratio will be revised
and the proposal won't be implemented
before 2018. Ifthe proposals had remained
in their original form, Rabobank would have
been forced to make some strategie choices
about how best to meet the targets the
Basel Committee had set. The softening of
the proposals have made it easierfor not
only Rabobank, but the entire sector, to take
time and adapt more gradually to the new
requirements."
A "We already have a liquidity framework and
governance model in place that surrounds
our liquidity requirements, and over the last
few years we've put much more focus on
increasing awareness on both the issue and the
cost of liquidity. The main objectives were to
ensure we priced the liquidity properly in our
loans to clients, centrally manage our liquidity
profile and create transparency of results.
Essentially, that step has now been taken
and implemented within Wholesale, while in
Rural Retail we still have a way to go. The MT
Rural Retail has this clearly on the agenda
and an ALM Rural Retail Working Group has
been established, in which we are making
strong progress, and I am confident that
R&R will be well prepared by the time Basel III
comes into effect."
A "Most of our current liquidity portfolio is
made up of government bonds, although we
only tend to invest in very secure countries,
such as the Netherlands, Germany, and so on.
Because a liquidity portfolio needs to be
relied on in an extreme situation - for
example when there's a crisis and you could
conceivably have a significant outflow of
funds over a short time period - the quality
and liquidity of the portfolio has to be
extremely high. Apart from government
bonds, there are only a few alternatives. One
is very short term high quality investments
like repo/securities lending, another option
is to place your money with a Central Bank,
although this is generally unattractive because
of the poor interest rates on offer."
A "I sleep soundly and very few things keep
me awake at night! In fact, what I particularly
enjoy about being part of Rabobank is
the opportunity l've been given to work
with professional colleagues, to continue
developing the risk organisation, and to help
take the risk management function forward
to an even higher level."*
ISSUE 25
Rl WORLD