Despite the CRR impact as of 1 January 2014, the CET 1 ratio rose by 0.1 of a percentage point
in 2014 to 13.6% (13.5%) due to an increase in the CET 1 capital.The rise in CET 1 capital in 2014
was mainly due to the addition of profits.
The tier 1 instruments issued by Rabobank prior to 2014 do not meet the new requirements in
the CRR. Under the regulation, these instruments will gradually count to a lesser extent as capital.
Due to the issue of tier 2 capital, the capital ratio rose by 1.5 percentage points to 21.3% (19.8%).
Bail-in buffer
New regulation means that in the future it will be easier to shift losses onto the creditors of a
bank if the bank in question gets into difficulties. This process is known as a bail-in of creditors.
Rabobank wishes to mitigate this risk as far as possible by holding a large buffer of equity
and subordinated debt that will be called upon in the first instance. Only after this will non-
subordinated creditors whose claims are not covered by collateral have to contribute.
This so-called bail-in buffer consists of retained earnings, other reserves, Rabobank Certificates,
hybrid and subordinated debt instruments and other debt instruments (the so-called Senior
Contingent Notes).The bail-in buffer increased in 2014 from EUR 48.0 billion to EUR 51.3 billion.
This corresponds to approximately 24% (23%) of the risk-weighted assets. The increase in this
buffer is mainly due to the issuance of subordinated tier 2 paper in 2014.
Bail-in buffer
in billions of euros
31-Dec-14
31-Dec-13
Retained earnings and other reserves
24.9
24.6
Rabobank Certificates
5.9
5.8
Hybrid capital instruments
7.6
8.6
Subordinated debt
11.7
7.8
Senior Contingent Notes
1.2
1.2
Bail-in buffer
51.3
48.0
Risk-weighted assets
211.9
210.8
Bail-in buffer/risk-weighted assets
24.2%
22.8%
Capital requirements
at year-end 2014, in billions of euros
Regulatory Economic Qualifying
capital capital capital
v
Other risks
Operational and business risk
Interest rate and market risk
Credit and transfer risk
Regulatory capital, the external capital requirement
At year-end 2014, the regulatory capital or external capital requirement of Rabobank Group
amounted to EUR 16.9 (16.9) billion. 87% of the total regulatory capital concerns credit and
transfer risk, 11 relates to operational risk and 2% to market risk. Due to the CRR (CRD IV) taking
effect, the regulatory capital declined by EUR 0.2 billion. The decline was due to a reduction in
the capital for credit risk, that was partially offset by an increase in the capital for market risk.
The regulatory capital also rose by EUR 0.4 billion due to a higher capital requirement for
operational risk. The calculation for operational risk has been brought in line with Rabobank's
risk profile by means of an adjustment and optimisation of the model. The capital for credit risk
fell by EUR 0.5 billion, mainly due to the sale of Bank BGZ.
Rabobank Group calculates the regulatory capital for credit risk for virtually its entire loan
portfolio on the basis of the Advanced Internal Rating Approach approved by the prudential
supervisor.The Standardised Approach is applied, in consultation with the supervisor, to
portfolios with relatively limited exposure and to a few smaller foreign portfolios that are not
suited to the Advanced Internal Rating Approach. Operational risk is measured using the
internal model approved by the supervisor that is based on the Advanced Measurement
Approach. Regarding market risk, Rabobank has obtained permission from the supervisor to
calculate the general and specific position risk using its own internal Value at Risk (VaR) models,
based on the rules of the Capital Adequacy Directive II (CAD II).
49
Rock-solid bank: performance
