The risk committee structure will change with effect from 1 January 2015. In 2014 the Balance
Sheet Risk Management Committee (BRMC) acted as the advisory committee to the Executive
Board. From 2015, this committee will be divided into a Risk Management Committee (RMC)
and an Asset and Liability Management Committee (ALCO). Both committees include three
permanent Executive Board members and a mandate to take decisions on behalf of the
Executive Board within agreed frameworks.
Stress testing
EDTF 8 Stress testing is an important risk management tool that identifies potential risks and supports
the optimisation of capital and liquidity buffers. It enables the exploration of vulnerabilities in
business models whilst overcoming the limitations of risk models and historical data.
Stress tests are an essential part of the risk management framework at Rabobank. Stress tests
are used to measure the impact of extreme, yet plausible events. Where necessary, measures are
taken on the basis of the results of the stress tests that are in line with Rabobank's risk appetite.
Rabobank carries out various stress tests. In addition to Group-wide stress tests, tests are also
performed for specific portfolios (for instance, the mortgage portfolio and the real estate
portfolio) and risk types (for instance, liquidity risk and market risk).
The various scenarios take account of macroeconomic factors and non-macroeconomic factors.
The macroeconomic factors include growth, unemployment, inflation, interest rates, share
prices and real estate prices.
Rabobank successfully passed the external Group-wide ECB stress test carried out during the
reporting year, meaning that the bank's capital buffer is sound even in difficult economic test
conditions. The results of this stress test confirm the bank's strong capital position. An internal
Group-wide stress test will be carried out as part of the Supervisory Review and Evaluation
Process (SREP) in 2015.
Significant risks and developments
There is a strong interdependence between events in the environment of the bank and the
applicable risks.The risks do not occur in isolation but are interconnected and may even
mutually reinforce each other.
Rabobank conducts top-down and bottom-up risk analyses and various stress tests each year,
as part of a comprehensive assessment of the various risk categories. The top risks,
developments in the top risks and emerging risks are a subject of discussion in the Executive
Board and the Supervisory Board.
Rabobank risk analysis
There is no such thing as risk-free banking. Every day, Rabobank takes thoroughly considered
decisions on risk in its lending operations for instance, in entering into interest rate contracts
and in its other services. To manage material risks, risk and control processes are designed to
ensure that the risks incurred remain within the bank's defined risk appetite and that risk and
return are appropriately matched. Fundamental residual risks remain, however, which are:
84 Annual Report 2014 Rabobank Group
