Economic capital rose to EUR 22.8 (22.3) billion in 2011The interest rate risk was lower as a
result of our interest rate risk policy that entailed a significant drop in net interest rate positions.
This drop was cancelled out by an increase in credit risk due to developments in exchange
rates and growth in lending at wholesale banking and international retail banking. There was
also an increase in market risk. Rabobank developed a new market risk model that is in keeping
with the regulatory capital methodology dictated by CRD III.
Total economic capital was well below the available qualifying capital of EUR 39.1 (35.7) billion
that is being held to cover any potential losses.This sizeable buffer underscores the solidity of
Rabobank Group.
Financial reporting controls
Rabobank Group constantly seeks to improve its corporate governance and overall internal
controls, with the aim of achieving an open, transparent culture of accountability in respect
of policies and supervision, and keeping pace with leading international standards.
In this context, Rabobank Group has voluntarily implemented internal financial reporting
controls in a manner that is similar to how US-registered companies tend to apply Sarbanes-
Oxley 404. Rabobank Group is under no obligation to do this, since it is not registered with
the US Securities and Exchange Commission (SEC) and is therefore not subject to the related
regulations and oversight.
Rabobank Group believes that internal financial reporting controls increase the effectiveness
of such reporting and offer opportunities to identify and rectify any weaknesses at an earlier
stage. This improves the quality of Rabobank Group's financial reporting.
Internal controls
Rabobank Group uses internal controls to provide reasonable assurance that:
- transactions are recorded as necessary to permit the preparation of financial statements in
accordance with International Financial Reporting Standards as adopted by the European
Union, and that income and expenditures are recognised only if approved by the
management;
- any unauthorised acquisition, use or disposal of assets that could have a material effect on
the financial statements is prevented or detected.
Rabobank Group's internal control framework is based on the framework developed by the
Committee of Sponsoring Organizations of the Treadway Commission (COSO). As set out in the
Executive Board Responsibility Statement, the Executive Board has concluded that the internal
risk management and control systems are adequate and effective, and provide reasonable
assurance that the financial reporting is free of material misstatement.
10
Annual Report 2011 Rabobank Group