Credit risk
Bad debt costs
Value adjustments
Prudent credit policy, embedding credit risk management
Credit risk is defined as the risk that the bank will suffer economic losses because a counter
party cannot fulfil its financial or other contractual obligations arising from a credit contract.
Credit is any legal relationship on the basis of which Rabobank, in its capacity as a bank, has
or could have a claim against a debtor as a result of providing a product. In addition to loans
and facilities (committed or uncommitted), credit as a generic term also includes guarantees,
letters of credit, derivatives and the like. Rabobank Group has a robust framework of policies
and processes in place to measure, manage and mitigate credit risks.
Rabobank Group's prudent policy for accepting new clients is characterised by careful
assessment of clients and their ability to repay any credit that is granted. As a result, the loan
portfolio has a relatively low risk profile. Rabobank Group aims to have long-term relationships
with clients that are beneficial for both the client and the bank. Approval of larger credit
applications is decided on by committees. A structure consisting of various committee levels
has been established, with the competent committee being determined by the amount of
the credit application. The Executive Board itself decides on the largest credit applications.
Rabobank Group has three Policy Credit Committees (PCCs): the Rabobank Group PCC,
the Rabobank International PCC and the Member Banks PCC.The Rabobank Group PCC
establishes the credit policy at group level. Within this framework, the group entities define
and establish their own credit policies. In this context, the Member Banks PCC is responsible
for domestic retail banking, and the Rabobank International PCC for wholesale banking and
international retail banking. In the Rabobank Group PCC, the Executive Board is represented
by three members. This committee is chaired by the CFO, as are the Rabobank International
PCC and the Member Banks PCC. For the rest, the PCCs are composed of representatives of
Rabobank Group's most senior management levels.
With regard to corporate loans, a key concept in Rabobank Group's policy for accepting
new clients is the 'know your customer' principle, which means that loans are only granted
to corporate clients whose management, including their integrity and expertise, is known
and considered acceptable by Rabobank Group. In addition, Rabobank Group is thoroughly
familiar with the industry in which its clients operate enabling it to adequately assess the
financial performance of its clients.
Corporate social responsibility (CSR) implies responsible financing, and, accordingly,
corporate responsibility guidelines also apply to the lending process.
in basis points of average private sector lending 2010 2009
Domestic retail banking 13 26
Wholesale banking and international retail banking 64 105
Leasing 90 132
Real estate 36 14
Rabobank Group 29 48
in millions of euros 2010 2009
Domestic retail banking
358
721
Wholesale banking and international retail banking
597
940
Leasing
214
300
Real estate
63
22
Other
2
-24
Rabobank Group
1,234
1,959
60
Annual Report 2010 Rabobank Group