High level of creditworthiness:
risk management
moderate risk profile.This is reflected, for instance, in our comfortable
liquidity position and our strong capital position. In the reporting year,
EUR 20 billion in long-term funding was raised. Savings deposits also
increased. In combination with the decrease in lending and short-term
funding, the dependence on wholesale funding was further reduced.
Despite this strong position, Rabobank Group remains susceptible to the
effects of the current economic situation. The economic developments
led to a further worsening of the risk profile of Rabobank Group's domestic
loan portfolio. Bad debt costs stood at 59 basis points of average private
sector lending.
General
www.rabobank.com/investorreiations Rabobank Group pursues a prudent risk policy aimed at maintaining a
Introduction
Risk management is an important core competence and function for any banking institution and
Rabobank Group is no exception. This chapter describes the principles underlying Rabobank's
risk management policy and how Rabobank organises its risk management. It discusses the risk
strategy and risk appetite and the principal risks for Rabobank Group, and then covers the specific
risks that Rabobank Group is faced with, i.e. credit risk, country risk, interest rate risk, liquidity risk,
market risk, currency risk and operational risk, including reputation and fraud risks. In addition,
the bank is exposed to other risks that may strongly affect earnings and equity, including risks
related to the banking environment, general economic conditions, government policies and
regulations. Both Rabobank itself and the Dutch Central Bank(DNB) have formulated standards
concerning Rabobank Group's organisation and control. Rabobank Group's organisation and
control are subject to the Dutch Financial Supervision Act, including subordinate legislation
based thereon, and regulations imposed by both DNB and the Netherlands Authority for the
Financial Markets (AFM) in their capacity as regulators. These legal and regulatory requirements
form Rabobank Group's framework for the design of the organisation and control of its activities.
The implications of future regulatory requirements, including the European Single Supervisory
Mechanism and Recovery and Resolution, were major focus areas in 2013, and will continue to
be in 2014.
Risk management principles
EDTF recommendation 6 An extensive system of limits and controls is in place to manage risk within Rabobank Group.
The primary objective of risk management is to protect Rabobank Group's financial robustness and
reputation. The risk policy is embedded throughout Rabobank Group by the following principles:
Protecting Rabobank's financial robustness: risks need to be managed in order to limit the
impact of adverse potential events on equity and earnings. Risk appetite must be proportional
to available capital. Risk appetite is defined annually. An internal framework has been
developed to quantify risks;
60 Annual Report 2013 Rabobank Group
