Liquidity Risk
Contents Foreword Management report Corporate governance
Consolidated Financial Statements
Company Financial Statements
Pillar 3
Liquidity risk is defined as a major risk type at Rabobank, which
has to be managed carefully. Rabobank's policy is to finance
client assets using stable funding, that is, funds entrusted by
customers and long-term wholesale funding. Responsibility
for the day-to-day management of the liquidity position, the
raising of professional funding on the money and capital
markets, and the management of the structural position lies
within the Treasury department.
Liquidity risk management is based on three pillars. The first
sets strict limits for the maximum outgoing cash flows for
different maturities within the wholesale banking business.
Rabobank measures and reports on a daily basis what incoming
and outgoing cash flows can be expected during the next
twelve months. Limits have been set for these outgoing cash
flows, including limits and controls per currency and location.
Detailed plans (the contingency funding plans) have been
drawn up for contingency funding to ensure the bank is
prepared for potential crisis situations. Periodic operational tests
are performed on these plans. The latest test took place at the
end of 2016.
The second pillar is to maintain a substantial high-quality
buffer of liquid assets. The third pillar for managing liquidity
risk is to have a solid credit rating, high capital levels and
a prudent funding policy. Rabobank takes various measures
to avoid becoming overly dependent on a single source of
funding. These measures include balanced diversification
of funding sources with respect to maturity, currencies,
investors, geography and markets, a high degree of unsecured
funding (and therefore limited asset encumbrance) and
an active and consistent investor relations policy.
Risk Developments
Rabobank aims to continually improve the risk management
function in the organisation. In 2016 the Rabobank has
appointed a Chief Risk Officer in the board separate from
the Chief Financial Officer and combined the directorates of
Compliance, Legal and Risk. Additionally a separate Risk Control
Framework department has been established. This was set up
within the standing organisation to further develop, implement
and maintain the Risk Control Framework (RCF). RCF includes
initiatives regarding organisation wide Risk and Control
Activities supported by one way of working, tooling, learning
programme and taxonomy for all OpRisk expertise areas.
In 2016, it was decided to overhaul the credit modelling
landscape of Rabobank (excluding DLL) in light of the
strategical framework objectives, increased use of data-
analytics, new regulation and new modelling techniques.
In the coming years, new models will be built for the different
portfolios of Rabobank.
During 2016 Rabobank has progressed with the implementation
of IFRS 9 towards the effectiveness date of 1 January 2018.
During 2017 we are planning a parallel-run as from July
2017 onwards.
Large and relevant events that took place within Rabobank in
2016 or before include:
SME Derivatives: Rabobank will follow the Uniform
Reassessment Framework proposed by the commission
for reassessing the quality of advice rendered on interest
rate derivatives in the SME market with respect to those
customers that fall within the definitions of the Framework.
Penalty interest on mortgages: An in-depth discussion has
taken place between the large Dutch banks, NVB and AFM
about the way banks calculate their loss on restructuring
of private mortgages ('oversluiten'). Rabobank is currently
following up on her internal evaluations of the process.
The Department of Justice is currently investigating alleged
omissions with regards to AML in North America.
All large incidents include analysis and lessons learned for
appropriate follow up.
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Rabobank Annual Report 2016
