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

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Annual Reports Rabobank | 2010 | | pagina 61