Contents Management report Corporate governance Consolidated financial statements Financial statements Pillar 3
Rabobank is a frequent and flexible issuer of short-term debt
securities and has seen a solid inflow of funds in the past
years, reflecting its good creditworthiness. In the past year, the
average remaining maturity of the short-term debt decreased
by one day to 90 days (2014: 91 days).
Additional contractual commitments in case of
a rating downgrade
In the event of a downgrade to Rabobank's credit rating, the
bank could be required to provide additional collateral or be
faced with an outflow of resources.The table below shows the
potential maximum outflow if the rating of Rabobank is lowered
by one, two or three notches.
These outflows are based on rating triggers that will be hit in
the event of a credit rating downgrade.
In this table a split has been made between funding, derivatives
and other instruments. Funding instruments include fixed-
term deposits, bonds, loans and professional funding with
rating triggers.Two important components within the
funding category presented here are funding from the
European Investment Bank (EIB) and Guaranteed Investment
Contracts (GIC) accounts. Derivative documentation can also
contain rating triggers on Rabobank that could potentially
result in additional liquidity risk for Rabobank. In some cases,
a rating trigger may have been agreed on services provided
to a client. For instance, a Letter of Credit or a guarantee
on behalf of a client granted by Rabobank may sometimes
contain a rating trigger.This means that, under certain
circumstances, the beneficiary of this guarantee may request
that the guaranteed sum be paid out if the Rabobank rating
drops. In that case, Rabobank has direct claim on the customer
for whom the guarantee was provided. This initial outflow is
recognised under'Other'.
Asset encumbrance
edtf 19 In certain cases, assets on the bank's balance sheet are
encumbered (encumbrance). An asset is considered
'encumbered' if it has been deposited or if it is part of
an arrangement intended to provide hedging or additional
security for a transaction. In that case, the asset requires
permission for withdrawal.
On 31 December 2015, EUR 631 (2014: EUR 55) billion of the
total balance sheet assets was encumbered.Total assets include
both on-balance assets and off-balance assets. Off-balance
assets mean: collateral received in, mainly, secured funding
transactions. The total encumbrance at the year-end 2015 was
9% (8%) of the total assets. The average encumbrance over
2015 was 8% (2014: 8%).The encumbered on-balance sheet
items were mainly due to the clearing of derivatives positions
and funding-related transactions, such as securitisations and
asset backed commercial paper, for which loans are placed
as collateral.
Operational risk
edtf 3i Rabobank defines operational risk as the risk of losses
incurred as a result of inadequate or dysfunctional
internal processes, people and systems, or as a result of external
trends and developments. Potential legal risks and reputational
risks are considered in the assessment and management of
operational risk.
In measuring and managing operational risks, Rabobank
uses the most advanced Basel II approach, the Advanced
Measurement Approach. Forthe management of operational
risks, Rabobank follows the 'three lines of defence model'as
prescribed by the EBA.
The bank's operational risk policy is based on the principle
that the primary responsibility for managing operational risk
lies with the first line and that this must be integrated into
the strategic and day-to-day decision-making processes.
The purpose of operational risk management is to identify,
measure, mitigate and monitor various types of operational
risks.The risk quantification process supports the management
responsible for prioritising the actions to be undertaken and the
allocation of people and resources.
Potential maximum outflow 31 -12-2015
in millions of euros
Funding Derivatives
Other
Total
Rating downgrade:
0 notch
57
97
154
1 notch
1,285 78
482
1,845
2 notch
488 1,153
3,078
4,719
3 notch
1,939 839
451
3,229
Total in case of
three notches
3,769 2,070
4,108
9,947
1 In conformity with the EBA asset encumbrance definition
99 Risk management
