Operational risk
In 2010, the Value at Risk fluctuated between EUR 9 million and EUR 18 million, the average
being EUR 14 million.This means that a maximum loss of EUR 18 million can be expected on a
single day under normal circumstances, subject to a confidence level of 97.5%. Under this
calculation method, the Value at Risk is based on both historical market trends and the
positions taken. The fall in the Value at Risk compared with 2009 was due in part to
improvements in the calculation methods and changes in positions, books and activities.
20
14.
6
4
2
0
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Value at Risk can be broken down into a number of components, the most important of which
are changes in interest rates and credit spreads. Opposite positions in different books offset
each other to a certain degree, resulting in a diversification benefit and reducing the total risk.
At year-end 2010, the consolidated Value at Risk was EUR 16.0 million.
Breakdown of Value at Risk
(in millions of euros) 31-Dec-10
Credit spread 4.5
Currency 0.5
Equities 1.3
Interest rate 16.5
Commodities 0.6
Diversification -7.4
Total 16.0
Besides Value at Risk, other risk indicators are also important for measuring market risk.
For example, the BPV indicates the change in the value of positions if there is a parallel
increase in the yield curve of one basis point. The table below shows these positions for
each key currency.
Basis point value
(in millions of euros) 31-Dec-10
Furo -0.5
US dollar -0.2
Pound sterling -0.2
Australian dollar -0.2
Japanese yen -0.1
Other -0.2
Rabobank follows the Basel II definition of operational risk, which is the risk of losses caused
by inadequate or failing internal processes, people or systems or by external events. It includes
legal and reputation risks, but not strategic business risks. Rabobank Group operates within
the frameworks of the Basel II Advanced Measurement Approach as regards measuring and
managing operational risk.