Contents Management report
Economic capital by group entity
at year-end 2015
Domestic retail banking 38%
Wholesale banking and
international retail banking 29%
I Leasing 8%
I Real estate 5%
Other 20%
Economic capital by risk category
at year-end 2015
Credit and transfer risk 54%
Operational and business risk 19%
I Interest rate and market risk 17%
H Other risks 10%
Corporate governance Consolidated financial statements Financial statements Pillar 3
Bail-in buffer
Amounts in billions of euros
31-12-2015
31-12-2014
Retained earnings and other reserves
25.7
24.9
Rabobank Certificates
5.9
5.9
Hybrid capital instruments
9.1
7.6
Subordinated liabilities
15.5
11.9
Senior Contingent Notes
1.3
1.2
Bail-in buffer
57.5
51.5
Risk-weighted assets
213.1
211.9
Bail-in buffer/risk-weighted assets
27.0%
24.3%
Regulatory capital, the external capital requirement
At year-end 2015, the regulatory capital or external capital requirement of Rabobank
Group amounted to EUR 17.0 (16.9) billion, with 86% concerning credit and transfer
risk, 12% related to operational risk and 2% to market risk. The regulatory capital
increased by EUR 0.1 billion. The main reason for this slight increase was an increase in
the required capital for operational risk.
Rabobank Group calculates the regulatory capital for credit risk for virtually its entire
loan portfolio based on the advanced IRB approach approved by the prudential
supervisor.The Standardised Approach is applied, in consultation with the supervisor,
to portfolios with relatively limited exposure and to a few smaller foreign portfolios
that are not suited to the advanced IRB. Operational risk is measured using the
supervisor-approved internal model that is based on the Advanced Measurement
Approach. Regarding market risk, Rabobank has obtained permission from the
supervisor to calculate the general and specific position risk using its own internal
Value at Risk (VaR) models, based on the CRR.
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 tangible 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, business, interest-rate and market risk. Market risk breaks down
into trading book, private equity, currency, real estate and residual value risk.
The economic capital rose to EUR 26.7 (23.4) billion in 2015.This increase was
mainly caused by eliminating the diversification between the risk categories.
The developments in the economic capital for credit risk, market risk and operational
risk are in line with the developments in the regulatory capital.
22 Rabobank Annual Report 2015
