Stress tests
CFO
Group Risk
Management
Credit Risk
Management
Interest Rate Risk,
Market Risk
Liquidity Risk
Credit
Committees
(individual
credit decisions)
Credit Risk
Management
(policy and
portfolio overview)
Risk Model
Validation
Methodologies
Operational
Risk
Economic Capital
Portfolio
Management
- protecting Rabobank's financial soundness: risks need to be controlled in order to limit the
impact of potential adverse events on equity and financial results. Risk appetite must be
proportional to available capital. An economic capital framework has been developed to
quantify this;
- protecting Rabobank's reputation: reputation is of paramount importance in banking,
and it needs to be managed prudently;
- risk transparency: identifying all risks is essential in order to obtain proper insight into
Rabobank Group's positions. Risks must be weighed as accurately as possible to enable
sound commercial decisions to be made;
- management accountability: each division of Rabobank Group is individually accountable
for its results as well as for the risks associated with its operations. A balance must be struck
between risk and return, and this must of course comply with the relevant risk limits;
- independent risk control: this is the structured process of identifying, measuring, monitoring
and reporting risk. In order to ensure integrity, the risk management departments operate
independently of the commercial activities.
These principles are embedded in the risk policy throughout Rabobank Group.
Risk appetite
Rabobank has formulated a bank-wide risk appetite. This describes the overall risk that
Rabobank believes is acceptable for its operations. As part of this, Rabobank follows a risk
strategy that is designed to ensure its continuity as a going concern and is aimed at protecting
profits and profit growth, maintaining sound balance sheet ratios and protecting its identity
and reputation. This risk appetite has been defined in detail by setting limits, among
other things.
Stress tests are an essential part of the risk management framework. They are used to determine
the impact that extreme but plausible events could have on Rabobank. In 2010, various internal
scenarios and several external scenarios, provided by regulators such as the European Banking
Authority and DNB, were developed for Rabobank Group. This set of scenarios was transposed
first into macro-economic consequences and subsequently into the impact on the bank.
The impact that each scenario has on the bank's statement of income, equity and solvency
was considered separately. The results of the scenario testing were subsequently reported to,
and discussed with, the Executive Board and the Supervisory Board. In addition to the stress
testing activities for the Group, stress scenarios have also been developed for the bank's
portfolios and sub-portfolios.
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Risk management
