Off-balance-sheet activities
Tier I ratio: 10.3
BIS ratio: 10.5
Change in accounting policy for pensions
Notes to the balance sheet
51
Development in capital and solvency ratios
Off-balance-sheet activities include guarantees, irrevocable facilities
and derivatives. At year-end, the amount of guarantees was EUR 7.7
(9.7) billion and the irrevocable facilities were EUR 27.2 (25.7) billion.
The notional value of the derivatives outstanding was EUR 1,700
(2,213) billion.The credit risk incurred on these instruments is com
parable to EUR 34.6 (29.9) billion in loans.
The Tier I ratio and the BIS ratio are the most common ratios used
in the financial world to measure solvency. The Tier I ratio expresses
the relationship between core capital and total risk-adjusted assets.
At 31 December 2002 the Tier I ratio stood at 10.3 (9.9).This is higher
than the long-term target of 10.The minimum requirement set by
the external supervisors is 4. The high solvency ratio is one of the
reasons for Rabobank Group's triple A rating by both Moody's and
Standard Poor's.
Total risk-adjusted items increased by EUR 13.0 billion to EUR 165.8
billion.This increase was largely due to the rise in lending.The Tier I
capital increased by EUR 2.0 billion to EUR 17.1 billion.
The BIS ratio is calculated by dividing the total of Tier I and Tier II
capital by the total of risk-adjusted assets.The BIS ratio came to 10.5
(10.2).This comfortably exceeds the minimum requirement set by
the external supervisors of 8.0.
(in EUR millions)
2002
2001
Tier I capital
17,071
15,092
Tier I ratio
10.3
9.9
Tier I and Tier II capital
17,414
15,542
BIS ratio
10.5
10.2
The Rabobank Group's financial statements for 2001 stated that a
change in the accounting policy for pensions would be implemen
ted with effect from 1 January 2002.The change concerns the
method of recognising pensions in the financial statements. It has
been decided that recognising pension charges on a cash basis of
accounting (with alternating repayment of pension contributions,
zero pension contributions or very high contributions) is no longer
suitable. It is not appropriate for short-term aspects of extremely
long-term pension agreements to have a substantial effect on annu
al results from one year to the next. In addition, the new method of
accounting for pensions in the financial statements is in line with the
approach adopted in other banks with international operations. The
effect of this kind of change in accounting policy is required to be
included in equity, with an adjustment of the comparative figures for
the previous year. On 1 January 2002, EUR 1.9 billion was charged to
equity. Under the new accounting policy, peaks in pension charges
will be a thing of the past as from 2002.
