Stricter regulation
The Dutch Banking Association (NVB) has encouraged self-regulation by the banking sector
with the introduction of its Banking Code. Rabobank already acted in accordance with the
spirit of the code to a great extent.
Prompted by the credit crisis and the failure of self-regulation, the Basel Committee on
Banking Supervision has looked at how banks are currently regulated. On balance, it seems
likely that rules relating to solvency and liquidity will become considerably stricter. Rabobank
Group has traditionally had a strong position in both these areas. However, extra efforts will
be required in order to maintain this position in relation to new standards, since Rabobank
Group aspires to maintain its high creditworthiness even when standards governing banking
operations change.
Limited economic recovery
The economic circumstances in which banks operate reached a low point in 2009. Following a
period during which losses on investment portfolios had to be written off due to the credit crisis,
banks are now forced to form relatively substantial provisions for their loan portfolios owing to
the economic crisis.This latter tendency is also visible in trends in bad debt costs at Rabobank.
The economy is expected to show some signs of recovery in 2010. However, the need to cut
government spending drastically will limit economic growth in the next few years. The steps
that are expected to be necessary to boost banks' balance sheets and improve solvency and
liquidity will restrict the extent to which banks will be able to lend in the coming years, and as
a consequence the extent to which the economy can recover will also be limited.
Changing social environment
As far as corporate social responsibility is concerned, civil society organisations and the media
are more vigilant than ever, raising questions, demanding transparency, entering into dialogues
and conducting campaigns. Key issues that have been discussed concern remuneration policy,
diversity, animal welfare, the arms industry and the role played by banks in relation to new
forms of energy. Rabobank has opted for engagement, joining forces with clients to look for
ways in which its business operations, nature, the environment and social justice can be
brought into balance. Here, the aim of Rabobank Group is to be one of the world's leading
sustainable banks.
Greater strategic focus
The opportunities for expansion open to Rabobank Group have become more restricted than
ever before. In view of developments, Rabobank Group is increasing its strategic focus on its
core activities. These centre on the operations of the local Rabobanks, which are at the heart
of the organisation and perform the primary task of providing customer value to members
and clients. Rabobank Group will continue to closely monitor any developments.
The bank's strategic starting points are its cooperative identity, its ambition to become
the Dutch market leader in all-finance services and an international food and agri bank, the
retention of a high credit rating, and high standards in respect of CSR policy. It has therefore
set the following core objectives:
- become the Dutch all-finance market leader (or retain this position, as appropriate);
- build on its position as the world's leading international food and agri bank;
- achieve greater commercial synergy with subsidiaries.
Since Rabobank Group needs an adequate tier 1 ratio and stable profit growth in order to
maintain its high credit rating and be able to serve members and clients on an ongoing basis,
it has set the following long-term financial targets:
- a tier 1 ratio of at least 12.5%;
- a minimum return on equity of 8%;
- 10% net profit growth.
Adjusting the target return on equity from 10% to 8% is in keeping with the increase in our
capital position that we wanted to bring about since 2008, the anticipated lower growth in
lending, and the shift towards activities with a more moderate risk/return profile.
10
Report 2009 Rabobank Group
