Basis point sensitivity (BPS)
BIS ratio
Economic capital
Efficiency ratio
Equity at Risk
Hedge accounting
Hedge instrument
Joint venture
Leasing
Qualifying capital
Return on equity
Risk Adjusted Return on Capital (RAROC)
81 Rabobank Group Annual Report 2005
Glossary of terms
The absolute loss in the market value of equity from a parallel upward
shift of the interest rate curve by 1 basis point.
The ratio reflecting the health (solvency) of a bank. The higher the figure,
the more solid the position of the bank. The ratio is calculated as the
percentage of qualifying capital (Tier I and Tier II) to the risk-weighted
assets. The minimum BIS ratio required by external supervisory
authorities is 8.0.
The internal capital requirement for absorbing unexpected losses based
on a given confidence level and a given time frame (1 year). Rabobank
uses a confidence level of 99.99%, corresponding to the Triple A rating
awarded to the Bank.
Operating expenses as a percentage of income. This ratio reflects banking
productivity. The lower the percentage, the higher the efficiency.
The measure of long-term interest rate risk based on the percentage
change in the market value of reserves as a result of a 1% change in
the interest rate.
Recognising hedge items (positions of which the associated risk is
hedged by means of hedge transactions) and hedge instruments
according to the same accounting policies in the profit and loss account,
which creates matching.
Financial instrument use for hedging a hedge item's financial risk.
Income at Risk
This is the maximum amount of interest income lost (based on a
confidence level of 97.5%) in the next twelve months as a result of
the highest possible increase in the money market and capital market
interest rate.
Collaborative venture between two or more legally independent
companies.
An agreement under which the owner of an asset makes that asset
available to another party for a certain period in exchange for a set
lease charge.
The sum of core capital (Tier I) and supplementary capital (Tier II). Tier II
capital consists of the revaluation reserves, part of the subordinated
loans less the deductible items specified by the Dutch Central Bank.
Profit for the year as a percentage of equity at the end of the previous
year.
Net profit for the year divided by economic capital.
