Furthermore, product approval committees have been established at various levels within the
bank. These committees provide an additional safeguard with respect to the quality of new
product and process launches, and changes in existing products and processes.
The group entities perform a Risk Control Self-Assessment on an annual basis. In doing so, they
identify key operational risks and implement mitigating measures if the risks are outside the
risk appetite. This process is initiated and coordinated by Group Risk Management and the
outcome is fed back at group level to the Operational Risk Committee. In addition, Group Risk
Management annually coordinates scenario analyses with senior managers throughout
Rabobank Group so as to gain an understanding of the Group's risk profile.
Various supervisory authorities in different jurisdictions are examining the daily setting of
interest rates known as LIBOR (London Interbank Offered Rate). Rabobank participated, as it is
still doing to date, in LIBOR panels for eight currencies.There are LIBOR panels for a total often
currencies. The examinations are aimed at the contributions various panel banks, which
include Rabobank, have made over the past years. The daily LIBOR interest rates were set on
the basis of these contributions from panel banks. To the extent known, the question is
investigated as to whether there have been attempts to manipulate these rates. Rabobank
cooperates fully to these investigations. Furthermore, Rabobank has been named as a
defendant in a number of civil proceedings in the United States that concern USD-LIBOR
interest rates. Rabobank is confident that the claims will be held unfounded and is conducting
its defence as such.
Currency risk
Currency risk is the risk of changes in income or equity as a result of currency exchange
movements. In currency risk management, a distinction is made between positions in trading
books and positions in banking books. In the trading books, currency risk is part of market risk
and is controlled using Value at Risk and other limits, as are other market risks. Value at risk for
currency risk in the trading books stood at EUR 1.3 million at year-end 2011. In the banking
books, the only risk is translation risk related to non-euro net investments in foreign entities
and hybrid capital instruments that are not denominated in euros. To monitor and manage
the translation risk, Rabobank Group uses a dual-track approach to protect its capital position.
The hedge strategy is to cover the risk associated with non-euro net investments in foreign
entities while protecting the capital ratios against the effects of exchange rate movements
wherever possible.
53
Strategic Framework High level of creditworthiness: risk management
