Economic capital by group entity
at year-end 2014
Economic capital, the internal capital requirement
In addition to regulatory capital, Rabobank Group uses an internal capital requirement based on
an economic capital framework. The main difference between this and the regulatory capital is
that our calculation of the economic capital takes account of all the material risks for which we
have to hold capital. We also assume a higher confidence level (99.99%) than is used for the
regulatory capital (99.90%). A broad spectrum of risks is measured consistently to gain an
understanding of these risks and to enable a rational weighing of risk against return. A series of
models has been developed to assess the risks incurred by Rabobank Group. These concern
credit, transfer, operational, interest-rate and market risk. Market risk breaks down into trading
book, private equity, currency, real estate and residual value risk.
v
Domestic retail banking
Wholesale banking and
international retail banking
Leasing
Real estate
Other
The economic capital increased to EUR 23.4 (23.2) billion, compared to year-end 2013.
The increase was mainly due to an increase in the capital requirement for operational risk.
The capital requirement for the participation in Achmea also rose as a result of a redevelopment
of the risk model. This increase was offset by a decline in credit risk due to the reduction of
non-core portfolios and a lower interest rate risk position. The capital requirement for market risk
remained virtually unchanged. The holding of additional capital for counterparty risk - Credit
Value Adjustment (CVA) - as a result of the CRR (CRD IV) taking effect was offset by the
reduction of non-core portfolios.
Economic capital by risk category
at year-end 2014
Qualifying capital
The available qualifying capital of EUR 45.1 (41.7) billion that the bank retains to compensate for
potential losses was well above the level of the total external and internal capital requirements.
This sizeable buffer underlines the financial solidity of Rabobank Group.
"\a"
Credit and transfer risk 57%
Operational and business risk 18%
Interest rate and market risk 16%
Other risks 9%
50 Annual Report 2014 Rabobank Group
