Measuring liquidity risk Several methods have been developed to measure and manage liquidity risk. Methods used include the CA/CL (core assets/core liabilities) method. This analysis is based on the cash flow schedule of all assets and liabilities. Using various time periods, a calculation is made of the assets, unused facilities and liabilities that are likely to appear on the balance sheet after running implied, carefully defined stress scenarios.These remaining assets and liabilities are defined as core assets and liabilities. The ratio of core assets to core liabilities is the liquidity ratio. Given the highly conservative weightings used, a ratio of less than 1.2 is considered adequate. In 2010, this was once again the case in the scenarios used.The Dutch regulator also provides extensive guidelines for measuring and reporting the liquidity position of Rabobank Group. According to these guidelines, the liquidity is more than adequate, with available liquidity exceeding the requirement by 40% on average. Senior unsecured funding by currency in 2010 Euro 47% US dollar 22% Pound Sterling 11% Australian dollar 7% Japanese yen 4% Other 9% Rating and funding For many years, Rabobank has been awarded the highest possible ratings by leading rating agencies such as Standard Poor's and Moody's. These ratings did not change in 2010. Fitch also ranks Rabobank among the banks with the highest ratings. Although 2010 was a very tense year on the capital markets, Rabobank Group once again managed to raise a record amount of long-term funding. Long-term bonds worth over EUR 40 billion were issued during 2010. An amount of EUR 1.25 billion was raised by issuing innovative Senior Contingent Notes; in addition, Rabo Extra Member Bonds were issued for an amount of EUR 900 million. The maturity profile of short-term funding was also lengthened at the wholesale banking division. Outstanding asset-backed commercial paper amounted to EUR 14.0 (15.3) billion at year-end 2010. Providing information to investors and financiers Rabobank attaches great importance to high-quality, transparent communication with institutional investors and other financiers and providers of capital. The Investor Relations department is responsible for supplying and explaining all relevant information requested by investors. On a global level, presentations are used to inform institutional investors, other financiers and providers of capital of financial developments at Rabobank Group. In addition, the department provides information on developments at Rabobank Group to institutional investors and providers of capital through a website set up specifically for this target group as well as through an electronic newsletter. Activities in this area were stepped up following the onset of the credit crunch because today, more than ever before, investors want to be certain that Rabobank continues to have a low risk profile. Market risk Market risk concerns changes in the value of the trading portfolio as a result of movements in market prices relating to interest rates, equities, credit spreads, currencies and certain commodities, among other things. Within Rabobank Group, most of the exposure to this risk is to be found at Rabobank International and Robeco. There are therefore specific market risk departments in place within these group entities that calculate and report market risk exposure on a daily basis. An appropriate system of limits has been developed to manage this risk. At a consolidated level, market risk is measured using Value at Risk (VaR). This measure, which is based on historical market developments for one year, indicates the maximum loss that Rabobank Group can suffer, subject to a specific confidence level, under 'normal' market conditions. In order to weigh the risk of'abnormal' market conditions as well, the effects of certain extreme events are calculated (event risk). To this end, both historical scenarios and hypothetical scenarios are analysed. Sensitivity analyses are also used. In the year under review, the outcome of these sensitivity analyses and stress tests did not exceed their set limit of EUR 150 million. 65 Risk management

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Annual Reports Rabobank | 2010 | | pagina 66