Structured credit exposure
Structured credit exposure rating distribution
Country risk
at year-end 2012, in billions of euros
0.1 0.1
at year-end 2012, in
CDO/CLO and other
corporate exposures
Non-subprime RMBS
Commercial real estate 7 AAA
ABSCDO
Other ABS Below A
because the fair value of the underlying investments has dropped or because other insured
investments could lead to claims for payments against these insurers. When measuring the
economic counterparty risk, time aspects and the credit quality of the investments have been
taken into consideration. As the vast majority of the counterparty risk has been provided for,
further downgrades have only a limited impact. Changes in fair values and provisions had no
adverse consequences for earnings from structured credit exposures in the year under review.
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 will
all be unable to fulfil their obligations owing to the same cause, 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 their own country to creditors in other countries. 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
collateral 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 requirement 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 24.6 (28.1) billion at year-end
2012. The net transfer risk before provisions for non-OECD countries amounted to EUR 10.7
(12.4) billion at year-end 2012, which corresponds to 1.4% (1.7%) of total assets.
57 High level of creditworthiness: risk management
