EatR
31-Dec-14
31-Dec-13
EatR
0.4%
2.3%
EatR decreased from 2.3% to 0.4% in 2014. The increase in EatR as a result of lending was very
limited. One of the reasons for this was the low level of new mortgages and business lending.
At the same time, the volume of tax-privileged blocked savings accounts with long fixed-
interest periods increased, which reduced the EatR.The decline in the EatR in 2014 was however
mainly due to the fall in market interest rates. This in turn led to a decline in quotation risk, and
increased the economic value of equity.
In addition to the EatR, Rabobank uses the BPV or delta of equity to control and manage
interest rate risk from the perspective of value. The BPV of equity shows the change in the
economic value of equity if all interest rates in the money and capital markets were to rise by
1 basis point (or 0.01 of a percentage point). The application of the delta profile is designed to
control and manage the risk of changes in the shape of the yield curve from the perspective of
value. For each individual maturity, the delta profile represents the change in the economic
value of equity as a result of a 1-basis point increase in the market interest rate for the maturity
concerned. Both the BPV of equity and the delta profile remained within the limits set in 2014.
Risk appetite and developments in relation to latR
The main measure used by Rabobank to manage interest rate risk from the earnings perspective
is the latR. The latR is the largest deviation in negative terms of the expected net interest
income in the next 12 months as a result of a gradual rise in all money and capital markets
interest rates in this period by 2 percentage points and of a gradual decline in all money and
capital markets interest rates in this period by 2 percentage points. The limit for this measure
was EUR 500 million in 2014.
The latR analysis does not take account of active management intervention, but it does take
account of the changes in repayment and savings behaviour of customers associated with this
interest rate development, and of changes to the pricing policy for savings products.
latR
31-Dec-14
31-Dec-13
2 basis points
10 basis points
Euro interest rates
decline
decline
latR in millions of euros
15
50
In 2014, Rabobank's net interest income was exposed to a decline in interest rates throughout
the year. The latR amounted to up to EUR 55 million (in May). On 31 December 2014 the latR
stood at just EUR 15 million. This low level was mainly due to the assumption that interbank
money market rates and swap rates cannot fall below 0%. As a result, the assumed decline in
euro interest rates as at 31 December was 2 basis points instead of 200 basis points. As at
31 December 2013 and in the first five months of 2014 this was still 10 basis points.
In order to estimate the potential effect on the result of movements in interest rates, some
other scenarios are calculated in addition to the two scenarios in which all market interest rates
rise or fall gradually by 2 percentage points, including a steepening and a flattening of the yield
curve. Over the whole of 2014, the potential effect of these scenarios on net interest income in
the next 12 months was more favourable than the potential effect of the scenario in which all
interest rates gradually decline by 2 percentage points.
97 Rock-solid bank: risk management
