Risk management
Banking means deliberately taking well-considered risks. Rabobank
Group pursues a prudent risk policy which entails a modest risk
profile. In 2006, great progress was made in the further
implementation of the new Basel II accord, which is to come into
force for the Rabobank Group on 1 January 2008. In addition to
these external capital requirements, the internal capital
requirement, 'economic capital, will be the principal indicator in
terms of risk management and capital allocation.
Risk management organisation
Principles of risk management
Risk management is performed at various levels within
Rabobank Group. Under the supervision of the Supervisory
Board and advised by the Balance sheet and Risk
Management Committee Rabobank Group (BRMC-RG)
as well as the Credit Policy Committee Rabobank Group
(KBC-RG), the Executive Board determines the risk strategy,
policy principles and limits.
The Supervisory Board regularly reviews the exposure
of Rabobank Group's activities and portfolio. The Chief
Financial Officer, who is also a member of the Executive
Board, is responsible for the implementation of the risk
policy within the Group. Risk management at Rabobank
Group is performed especially within the Group Risk
Management and Credit Risk Management directorates.
Group Risk Management is responsible for the policy
regarding interest rate, liquidity, market, currency and
operational risk, as well as for the credit risk policy at
portfolio level. Credit Risk Management is responsible for
the policy for accepting new clients in terms of credit risk at
the individual customer level. In addition, independent risk
control departments within the Group entities monitor the
risks that are relevant for the entity in question.
The primary objective of risk management is to protect
Rabobank Group's financial strength. Risk management is
based on the following principles:
- Protecting the Group's financial strength: Rabobank Group
controls risks in order to limit the impact of potential
adverse events on both its capital and its financial results.
The risk appetite must be proportional to the available
capital. An economic capital framework has been
developed to quantify this.
- Protecting the Group's reputation: reputation is essential
for the proper performance of a banker's profession and
needs to be diligently preserved.
68 Rabobank Group Annual Report 2006
