Risks
Credit risk
A heightened sense of cost awareness is a must in this current economic climate, but pressure
on costs has an often negative effect on risk, particularly in the area of compliance. That is why
Risk Management focused heavily in 2012 on the impact of future regulatory requirements
such as Basel lll/CRD/CRR IV, FATCA, the framework recovery plan, the Volcker/Vickers rules
and the Dodd-Frank Act. These regulations will have far-reaching implications for the banking
landscape and they require business processes and models to become more stringent.
Complying with the rules places ever greater demands on our management, employees
and IT budgets, especially in these times of cost awareness and austerity.
The current market environment is weighing down the value of residential and commercial
real estate. The housing market and commercial real estate have Rabobank's constant
attention, with specific focus being placed on the accurate assessment of the value of
commercial properties.
New technology and technological developments offer new opportunities for interaction
with customers and can help bring about efficiency improvements by making services more
effective and affordable. The pace of change is ever faster. The introduction of new services
will offer opportunities, but will also lead to behavioural changes in our customers that result
in new risks such as cybercrime.
Prudent credit policy, embedding credit risk management
Credit risk is the risk that the bank will suffer economic losses because a counterparty cannot
fulfil its contractual or other financial obligations arising from a credit contract. Credit is any
legal relationship on the basis of which Rabobank, in its capacity as a bank, has or could have
a claim against a debtor as a result of providing a product. In addition to loans and facilities
(committed or uncommitted), credit used as a generic term also includes guarantees, letters
of credit, derivatives and the like. Rabobank Group has a robust framework of policies and
processes in place to measure, manage and mitigate credit risks.
Rabobank Group has three Credit Policy Committees (CPCs): the Rabobank Group CPC,
the Rabobank International CPC, and the Member Banks CPC. The Rabobank Group CPC
determines the credit risk policy at group level. Within this framework, the group entities
define and establish their own credit policies. In this context, the Member Banks CPC is
responsible for domestic retail banking, and the Rabobank International CPC for wholesale
banking and international retail banking. In the Rabobank Group CPC, the Executive Board is
represented by three members. This committee is chaired by the CFO, as are the Rabobank
International CPC and Member Banks CPC. For the rest, the CPCs are composed of
representatives of Rabobank Group's most senior management levels.
Rabobank Group's prudent policy for accepting new clients is typified by careful assessment
of clients and their ability to repay any credit that is granted (ability to continue as a going
concern). As a result, the loan portfolio has an acceptable risk profile even in less than
favourable economic circumstances. Rabobank Group aims to have long-term relationships
with clients that are beneficial for both the client and the bank. Approval of larger credit
applications is decided on by committees. A structure consisting of various committee levels
has been established, with the competent committee being determined by the amount of
the credit application. The Executive Board itself decides on the largest credit applications.
With regard to corporate loans, a key concept in Rabobank Group's policy for accepting new
clients is the 'know your customer' principle, which means that loans are only granted to
corporate clients if Rabobank Group believes their management has integrity and expertise.
In addition, Rabobank Group closely monitors developments in the business sectors in
which its clients operate and can properly assess the financial performance of its clients.
Sustainable business practices imply responsible financing and, accordingly, sustainability
guidelines also apply to the lending process.
53 High level of creditworthiness: risk management
