hi
1 I I
1111
Equity
Equity
in billions of euros
35
Other minority interests
Hybrid capital
Rabobank Member Certificates
Retained earnings and
other reserves
2004 2005 2006 2007 2008
As a result of retained earnings, the issue of Capital
Securities and the increase in minority interests,
equity was 7% higher, at EUR 33.5 (31.4) billion.
Rabobank Group issued hybrid capital in the form of
Capital Securities in Pounds Sterling, Israeli shekels,
US dollars and Swiss francs. The consolidation of
Bank BGZ contributed to the increase in minority
interests.
At year-end, 60% of equity consisted of retained
earnings and other reserves, 19% of Rabobank
Member Certificates, 10% of hybrid capital and
11% of other minority interests.
External capital requirement
Since the implementation of the Basel II regulations,
Rabobank Group calculates the external capital
requirement for credit risk for virtually its entire
8 m loan portfolio on the basis of the advanced internal
rating approach endorsed by the Dutch Central
S Bank. For a few minor portfolios, the roll-out of
this approach is still ongoing and for these, the
standard approach is used. For operational risk,
the calculation is performed using an approved internal model. At year-end 2008, the external capital
requirement was EUR 19.0 (21.3) billion, 91% of which is associated with credit and transfer risk.
In addition, 7% is held for operational risk and 2% for market risk. The introduction of Basel II was an
important factor in the lower external capital requirement. The low risk profile of the loan portfolio,
combined with the available collateral, was the main cause.
Capital requirements
in billions of euros
at year-end 2008
Other
Operational and business risk
Interest rate and market risk
Credit and transfer risk
25
20
15
10
5
Economic capital as an internal capital requirement
RAROC
Economic capital
(in billions of euros)
2008
2007
31-Dec-08
31-Dec-07
Domestic retail banking
17.7%
17.3%
8.7
8.9
Wholesale banking and international retail banking
0.5%,
6.9%
6.2
4.7
Asset management and investment
0.8
0.6
Leasing
22.3%
24.2%
1.1
1.1
Real estate
1.7
1.4
Other activities 4.1 3.8
Total
12.5%
14.4%
22.3
20.5
Apart from its external capital requirement, Rabobank Group calculates an internal capital requirement
based on its economic capital framework. This framework is used for a more complete insight in all the
risks and to enable better balancing of risk and return. Within the economic capital, the bank, as befits
its triple A-status, presupposes a higher level of confidence (99.99%) than is required for Basel II (99.90%).
Economic capital
by Group entity at year-end 2008
Domestic retail banking 39%
Wholesale banking and
international retail banking 28%
Real estate 7%
Leasing 5%
Asset management and
investment 3%
Other activities 18%
Economic capital
by risk type at year-end 2008
Credit and transfer risk
57%
Operational and business risk
17%
Interest rate and market risk
16%
Other risks
10%
25
Report of the Executive Board
