LIBOR/EURIBOR
Currency risk
The Operational Risk Committee is responsible for defining operational risk policy and its
parameters at group level. In addition, Group Risk Management reports on developments in
group-wide operational risks once every quarter. Within the group entities, risk management
committees have been establishes to identify, manage and monitor, among other things,
the operational risks, including business continuity and fraud risks, of the relevant entity.
Furthermore, product approval committees have been established at various levels within
the bank. These committees provide an additional safeguard as regards 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 take 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 and the Audit,
Compliance 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.
Rabobank has received subpoenas and requests for documents and information from various
regulatory agencies and competition and criminal authorities in, inter alia, the Netherlands,
the United Kingdom, the United States ('U.S.'), Japan, Hong Kong, Singapore, and Switzerland.
The documents and information are requested as part of ongoing investigations conducted
by the relevant agencies and authorities and concern the London Interbank Offered Rate
('LIBOR') submission processes for various currencies and the Euro Interbank Offered Rate
('EURIBOR') submission process. Rabobank was at various times a member of eight of the ten
LIBOR panels and the EURIBOR panel, and is a member of the LIBOR panels for three
currencies: Pound Sterling ('GBP'), U.S. Dollar ('USD') and Euro ('EUR'). Rabobank was never a
member of the Tokyo Interbank Offered Rate ('TIBOR') panel. Rabobank is cooperating fully
with the investigations.
Rabobank, along with other panel banks, has been named as a defendant in a number of
putative class action lawsuits and private individual civil suits pending in the U.S. that assert
federal and state claims relating to USD LIBOR, Japanese Yen LIBOR ('JPY LIBOR'), TIBOR, and
EURIBOR. Rabobank believes the civil complaints filed to date and naming Rabobank as a
defendant to be without merit and intends to defend them vigorously.
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 0.8 (1.3) million at year-end 2012. 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.
62 Annual Report 2012 Rabobank Group
