Strengthening capital ratios
Our output and impact
We are delivering on our promises
Rabobank has set target capital ratios to remain a rock-solid bank. We determine these targets in part
by the expected impact of new regulations, which will increase capital requirements. Risk weighting
of assets and the subsequent required absolute amount of capital are expected to increase, which wil
also affect our targets. Our objective, in anticipation of these regulations, is to maintain the common
equity tier 1 (CET1) ratio at a minimum of 14% and the total capital ratio at a minimum of 25% by
the end of 2020. We have already made great strides in increasing our capital ratios. Year-end 2016,
the CET1 ratio (the CET1 capital as a percentage of risk-weighted assets) increased by 0.5 percentage
points to 14.0% and the fully loaded CET1 ratio increased by 1.5 percentage points to 13.5%. The total
capital ratio - the qualifying capital related to the risk-weighted assets - improved by 1.8 percentage
points to 25.0%.
Contents Foreword Management report Corporate governance Consolidated Financial Statements Company Financial Statements Pillar 3
The retention of the 2016 net profit (after payments on capital
instruments and Rabobank Certificates) as well as balance
sheet reduction measures had a positive influence on the
capital ratios, while the phasing-in of Capital Requirements
Regulations had a negative impact on the CET1 ratio.
The CET1 ratio gained 0.3 percentage points from the inclusion
of 2016 profit, while the sale of Athlon Car Lease also added
approximately 0.4 percentage points to Rabobank's CET1 ratio.
These developments more than offset the phasing-in effect of
the CRD IV on 1 January 2016, which had a negative influence
of 0.4 percentage points on the CET1 ratio.
Development of the CET 1 ratio
in 2016
0.2 14.0
31-12 CRR Profit Sale Other 31-12
2015 phase minus Athlon 2016
in dividend
The same factors that strengthened the CET1 ratio also improved
the total capital ratio, as did the April issue of additional tier 1
instruments and the July issue of tier 2 instruments.
O Read more about the development of the capital ratios.
Capital strategy
Strong capital and liquidity buffers are key drivers of financial
solidity. These buffers are vital prerequisites to maintaining
a high credit rating and good access to professional funding
in the capital markets. Rabobank's capital buffer consists of
retained earnings, Rabobank Certificates, additional tier 1 capital
and tier 2 capital.
Retained earnings
The appropriation of net profit after deducting payments on
Rabobank Certificates and hybrid capital instruments, as well
as payments to other non-controlling interests, increases the
share of retained earnings. While Rabobank does not seek to
maximise profit, improving earnings capacity is important for
ensuring continuity and financial soundness.
Rabobank Certificates
Rabobank Certificates are deeply subordinated instruments
which qualify as common equity tier 1 capital. They are
listed on Euronext Amsterdam. In 2016, the closing price
fluctuated between 105.48% (lowest price on 11 February2016
50 Rabobank Annual Report 2016
