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6.6 Equities in the banking book
Contents Foreword Management report Corporate governance Consolidated Financial Statements Company Financial Statements Pillar 3
Table 35: Ultimate risk in non-industrial non-OECD countries.
Ultimate risk in non-industrial non-OECD countries
31-Dec-2016
Regions
Europe
Africa
Latin America
Asia/Pacific
Total
As of total assets
Ultimate country risk (exclusive of derivatives)1
844
602
11,956
14,964
28,366
4.3
- of which in local currency exposure
178
7
7,090
3,574
10,848
Net ultimate country risk before allowance
666
596
4,866
11,390
17,518
2.6
As
of total allowance
Total allowance for ultimate country risk
10
192
268
471
6.2
31-Dec-2015
Regions
Europe
Africa
Latin America
Asia/Pacific
Total
As of total assets
Ultimate country risk (exclusive of derivatives)1
818
466
10,335
13,123
24,742
3.7%
- of which in local currency exposure
148
178
5,604
3,377
9,307
Net ultimate country risk before allowance
670
288
4,731
9,746
15,435
2.3%
As
of total allowance
Total allowance for ultimate country risk
10
144
191
346
4.1%
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.
Since the failed coup attempt in July 2016 a more restrictive
country risk policy towards Turkey was introduced and
monitoring has been intensified.
Total exposure value at 31 December 2016 of equities in
banking books amounted to 4,021, resulting in a capital
requirement of 821.
Table 36 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
1 Total assets after third party coverage, plus guarantees issued and
unused committed credit facilities.
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, and 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 36: Overview of equities in the banking book.
Equity overview
Exposure
value
Risk-
weighted
exposure
amount
Capital
requirement
Cumulative
unrealised
gains/losses
Gains/
losses
realised in
the period
Investment
portfolio
1,894
4,612
369
68
17
Strategic
investment
2,128
5,651
452
187
62
Total
4,021
10,263
821
255
79
Of the exposure value 946 relates to private equity exposures in
sufficiently diversified portfolios (190% risk weight), 2,563 relates
to exposures in significant financial institutions (250% risk
weight), 211 relates to exchange traded equity exposures (290%
risk weight) and 301 to all other equity exposures (370%
risk weight).
338 Rabobank Annual Report 2016