To monitor and control the translation risk, Rabobank Group uses an interrelated dual-track approach to
protect its capital position. The strategy is to hedge the non-euro net investments in foreign entities on
the one hand, and to immunise the capital ratios against the effects of exchange rate movements on the
other. The latter is done via the components of the qualifying capital that do not form part of the
reserves, in particular Trust Preferred Securities, which are part of Tier I capital. These were issued a few
years ago, and in such a way as to ensure that the currency composition of the qualifying capital
corresponded with that of the risk-weighted assets. This'natural hedge'was realised by issuing theTrust
Preferred Securities in US dollars (USD 3,250 million), Australian dollars (AUD 500 million) and pounds
sterling (GBP 350 million).
64
Rabobank Group Annual Report 2008
