Risk in non-OECD countries (in millions of euros)
-
-
-
Country risk
With respect to country risk, a distinction is made between collective debtor risk and transfer
risk. Collective debtor risk is the risk that a large number of debtors in a particular country are
unable to fulfil their obligations owing to the same reason e.g. war, political or social unrest,
natural disasters, or government policy that fails to create macro-economic and financial
stability. Transfer risk relates to the possibility of foreign governments placing restrictions on
funds transfers from debtors in that country to creditors abroad. Rabobank Group uses a
country limit system to manage collective debtor risk and transfer risk. After careful review,
relevant countries are given an internal country risk rating, after which general limits and
transfer limits are set. Transfer limits are introduced based on the net transfer risk, which is
defined as total loans granted less loans granted in local currency, guarantees, other coverage
obtained to cover transfer risk and a deduction related to the reduced weighting of specific
products. The limits are allocated to the offices, which are themselves responsible for the day-
to-day monitoring of loans that have been granted and for reporting on this to Group Risk
Management. At Rabobank Group level, the country risk outstanding, including the additional
capital requirement for transfer risk, is reported every quarter to the Rabobank Nederland
Balance Sheet and Risk Management Committee and the Country Limit Committee.
Since concerns about the euro increased, the outstanding country risk, including the sovereign
risk for relevant countries, has been reported on a monthly basis. Special Basel II parameters,
specifically EATE (Exposure AtTransfer Event), PTE (Probability ofTransfer Event) and LGTE (Loss
Given Transfer Event), are used to calculate the additional capital requirements for transfer risk.
These calculations are made in accordance with internal guidelines and cover all countries
where transfer risk is relevant.
The collective debtor risk for non-OECD countries stood at EUR 28.1 (23.8) billion at year-end
2011The net transfer risk before provisions for non-OECD countries amounted to EUR 12.4
(9.3) billion at year-end 2011, i.e. 1.7% (1.4%) of total assets.
Regions
Economic country risk (excluding derivatives)9
Europe
921
Africa
609
Latin
America
12,286
Asia/
Pacific
14,275
Total
28,091
31 December 2011
In of balance
sheet total
3.8%
Risk mitigating components:
- local currency exposure
114
95
6,306
3,967
10,482
- third party coverage of country risk
215
333
776
1,373
2,696
- deduction for transactions with lower risk
84
895
1,502
2,481
Net country risk before provisions
593
97
4,310
7,434
12,433
1.7%
In of total
allowance
Total provisions for economic country risk
197
116
313
9.7%
Rabobank Group's exposure to government bonds issued by GIIPS countries was EUR 349
million at year-end 2011We also have limited exposure to Greek and Portuguese state-
guaranteed bonds.The Portuguese state-guaranteed bonds were repaid in February 2012.
9 Total assets, plus guarantees issued The bonds issued by financial institutions in the countries referred to are mainly Spanish
and unused committed credit facilities. secured bonds. The issuing institution has provided additional security.
48
Annual Report 2011 Rabobank Group
