The basis point sensitivity is a measure of the change in the value of positions if there is a parallel
increase in the yield curve of 1 basis point (i.e. 0.01 percentage point).The basis point sensitivity
table below shows the sensitivity to changes in the yield curves for the major currencies.
The basis point sensitivity amounted to EUR 0.5 million positive as at year-end. The basis point
sensitivity remained well within the set limit of EUR 2.5 million during the reporting year.
Basis point sensitivity
in millions of euros
31-Dec-14
Euro
0.6
US dollar
-0.3
British pound
0.2
Other
0.0
Total
0.5
The event risk, which is measured by performing sensitivity analyses and stress tests, was also
well within the set limit of EUR 200 million during the reporting year.
Interest rate risk in the banking environment
Rabobank considers transforming amounts and maturities of money as a major source of
earnings and economic value.To meet the needs of its customers, the bank also offers options
and products including options. This exposes the bank to interest rate risk in the banking
environment. Interest rate risk in the banking environment is the risk that the profit and/or
economic value of banking books, investment books and capital books will be negatively
affected by movements in money and capital market interest rates. Interest rate risk at
Rabobank is caused mainly by four factors.
Maturity mismatches between loans and funds entrusted. Rabobank provides mortgages and
commercial loans with long fixed-interest terms. These are partly funded by savings placed
with the bank by customers, credit balances held by customers in payment and current
accounts and by funding obtained from professional parties in the money and capital
markets.
Quotation risk, the majority of homebuyers to whom a mortgage proposal has been made,
receive the lower of the rate offered in the proposal and the rate at the time the loan is taken
out is applied for.
Prepayment risk. Customers wishing to repay their loans early are not required to pay an early
redemption fee in all cases.
Withdrawal risk. A large proportion of the customer credit balances in current accounts,
payment accounts and savings accounts is callable on demand.
Customer behaviour is an important determining factor with respect to interest rate risk in the
banking environment. It is actually the most important differentiating factor between interest
rate risk in the banking environment and interest rate risk in the trading environment. The risk
that customers incur as a result of an increase in their financial obligations due to movements
in interest rates does not affect the extent to which Rabobank is exposed to interest rate risk,
however it may lead to a situation in which the bank has to deal with a higher level of credit risk.
Risk management framework
Rabobank accepts a certain degree of interest rate risk in the banking environment because this
is a fundamental part of banking, but at the same time the bank strives to avoid material
unexpected fluctuations in its earnings and economic value resulting from interest rate
movements. The Executive Board, acting under the supervision of the Supervisory Board,
accordingly establishes the appetite for interest rate risk and the corresponding interest rate risk
Rock-solid bank: risk management
