Economic capital
Economic capital by risk category
Economic capital by group entity
The RAROC ratio was calculated by
linking up net profit to average
economic capital for the year.
RAROC7
Economic capital
in billions of euros
2012
2011
31 -Dec-12
31-Dec-11
Domestic retail banking
16.3%
24.0%
9.1
7.2
Wholesale banking and international
retail banking
8.4%
10.3%
7.9
8.8
Asset management and investment
68.9%
7.4%
0.3
0.3
Leasing
27.6%
25.4%
1.3
1.3
Real estate
-12.8%
2.4%
1.8
1.7
Rabobank Group
9.0%
11.8%
24.3
22.8
Over and above regulatory capital, Rabobank Group uses an internal capital requirement
based on an economic capital framework. The key difference with regulatory capital is that
it makes allowance for any material risks and that it applies a higher confidence level for
economic capital (99.99%) than dictated for regulatory capital (99.90%). A broad spectrum of
risks is measured consistently to gain an understanding of those risks and to allow a rational
weighing of risk and return. A series of models has been developed to weigh the risks incurred
by Rabobank Group. These are credit, transfer, operational, interest rate and market risk.
Market risk breaks down into trading book, private equity, currency, property and residual
value risk. A separate risk model is used for the participation in Achmea.
Economic capital rose from EUR 22.8 billion in 2011 to EUR 24.3 billion in 2012. This increase
was primarily attributable to a change in interest rate risk modelling. The economic capital
for credit risk exposure was down on balance, with a rise as a result of the consolidation of
Friesland Bank being more than offset by portfolio movements and changes in the risk
assumptions at other divisions.
The available qualifying capital of EUR 42.4 (39.1billion that is being held to cover any
potential losses was well above total economic capital. This sizeable buffer underscores the
solidity of Rabobank Group.
at year-end 2012, in c
uat year-end 2012, in c,
Credit and transfer risk
Interest rate and
market risk
Operational and
business risk
Other risks
Domestic retail banking
Wholesale banking and
international retail banking
Real estate
Leasing
Asset management
Other
9 Financial developments