6.6 Equities in the banking book
Management report
Corporate governance
Consolidated financial statements
Financial statements
Since concerns about the euro increased, the outstanding
country risk, including the sovereign risk for relevant countries,
has been reported on a monthly basis. Next to exposures to
Dutch, German and French government bonds, exposures to
government bonds issued by other European countries are
relatively low.
Already since the beginning of 2014 Rabobank has been
following a very restrictive country risk policy towards Russia.
Monitoring has been intensified. Exposure in Russia at year-end
2015 was very limited, mainly in trade and commodity financing
of Russian exports and to a lesser extent in leasing. Rabobank's
risks on Russia are considered to be acceptable.
Total exposure value at 31 December 2015 of equities in
banking books amounted to 5,309, resulting in a capital
requirement of 1,077.
Table 41 shows Rabobank's equity holdings outside the trading
book based on the purpose of the ownership. All equities in
the investment portfolio are stated at fair value.The evidence
of published price quotations in an active market is the best
evidence of fair value, and if they exist they are used to measure
the value of financial assets and financial liabilities. For equities
with no published price quotations, fair values are estimated
based on appropriate price/earnings ratios, adjusted to reflect
the specific circumstances of the respective issuers. Strategic
investments are recognised in accordance with the equity
method. With this method, Rabobank's share in the profit or loss
of an associate - subject to Rabobank's accounting policies -
(after the acquisition) is recognised in profit or loss, and its share
in the changes in reserves after the acquisition is recognised in
reserves. Any post-acquisition changes are taken to the cost of
the investment.
Table 41Overview of equities in the banking book
Equity overview
Cumulative
Gains/losses
Exposure
Risk-weighted
Capital
unrealised
realised in
value
exposure amount
requirement
gains/losses
the period
Investment portfolio
2,266
5,387
431
111
121
Strategic investment
3,043
8,078
646
187
14
Total
5,309
13,465
1,077
298
135
Of the exposure value 1,320 relates to private equity exposures
in sufficiently diversified portfolios (190% risk weight), 2,833 to
exposures in significant financial institutions (250% risk weight),
503 to exchange traded equity exposures (290% risk weight)
and 653 to all other equity exposures (370% risk weight).
346 Rabobank Annual Report 2015