Contents Introduction Management report Appendices Corporate governance Consolidated Financial Statements Company Financial Statements
countries, including the United States.The most relevant legal
and regulatory claims which could give rise to liability on the
part of Rabobank Group are described below. If it appears
necessary on the basis of the applicable reporting criteria,
provisions are made based on current information; similar types
of cases are grouped together and some cases may also consist
ofa number of claims. The estimated loss for each individual
case (for which it is possible to make a reliable estimate) is not
reported because Rabobank Group feels that information of this
type could be detrimental to the outcome of individual cases.
When determining which of the claims is more likely than not
(i.e. with a likelihood of over fifty percent) to lead to an outflow
of funds, Rabobank Group takes several factors into account.
These include (but are not limited to) the type of claim and the
underlying facts; the procedural process and history of each case;
rulings from legal and arbitration bodies; Rabobank Group's
experience and that of third parties in similar cases (if known);
previous settlement discussions, third-party settlements in
similar cases (where known); available indemnities; and the
advice and opinions of legal advisors and other experts.
The estimated potential losses and the existing provisions,
are based on the information available at the time and are
forthe main part subject to judgements and a number of
different assumptions, variables and known and unknown
uncertainties.These uncertainties may include the inaccuracy
or incompleteness of the information available to Rabobank
Group (especially in the early stages ofa case). In addition,
assumptions made by Rabobank Group about the future
rulings of legal or other instances or the likely actions or
attitudes of supervisory bodies or the parties opposing
Rabobank Group may turn out to be incorrect. Furthermore,
estimates of potential losses relating to the legal disputes
are often impossible to process using statistical or other
quantitative analysis instruments that are generally used to
make judgements and estimates. They are then subject to a still
greater level of uncertainly than many other areas where the
group needs to make judgements and estimates.
The group of cases for which Rabobank Group determines
that the risk of future outflows of funds is higher than fifty
percent varies over time, as do the number of cases for which
the bank can estimate the potential loss. In practice the end
results could turn out considerably higher or lower than the
estimates of potential losses in those cases where an estimate
was made. Rabobank Group can also sustain losses from legal
risks where the occurrence ofa loss may not be probable, but
is not improbable either, and for which no provisions have
been recognised. For those cases where (a) the possibility of
an outflow of funds is not probable but also not remote or (b)
the possibility of an outflow of funds is more likely than not
but the potential loss cannot be estimated reliably, a contingent
liability is shown.
Rabobank Group may settle legal cases or regulatory proceedings
or investigations before any fine is imposed or liability is
determined. Reasons for settling could include (i) the wish to
avoid costs and/or management effort at this level, (ii) to avoid
other adverse business consequences and/or (iii) pre-empt the
regulatory or reputational consequences of continuing with
disputes relating to liability, even if Rabobank Group believes it
has good arguments in its defense. Furthermore, Rabobank
Group may, for the same reasons, compensate third parties for
their losses, even in situations where Rabobank Group does not
believe that it is legally required to do so.
Interest rate derivatives
Rabobank concludes interest rate derivatives, such as interest
rate swaps, with Dutch business customers who wish to reduce
the interest rate risk associated with variable (e.g., Euribor-
indexed) loans. Such an interest rate swap protects customers
from rising variable interest rates and helps businesses to keep
their interest payments at an acceptable level. In March 2016
the Dutch Minister of Finance appointed an independent
committee which on 5 July 2016 published a recovery
framework (the Recovery Framework) on the reassessment of
Dutch SME interest rate derivatives. Rabobank announced its
decision to take part in the Recovery Framework on 7 July 2016.
The final version of the Recovery Framework was published
by the independent committee on 19 December 2016.
Implementation of the Recovery Framework is expected to be
finalised in 2018.
Rabobank is involved in civil proceedings in the Netherlands
relating to interest rate derivative instruments entered into
with Dutch business customers. The majority of these concern
individual cases. In addition, there is a collective action
regarding interest rate derivatives pending before the Court of
Appeal.These actions concern allegations relating to alleged
misconduct in connection with Rabobank's Euribor submissions
(as described below) and/or allegations of misinforming clients
with respect to interest rate derivatives. Rabobank will defend
itself against all these claims.
Furthermore, there are pending complaints and proceedings
against Rabobank regarding interest rate derivatives brought
before Kifid (Dutch Financial Services Complaints Authority,
which, in January 2015, opened a conflict resolution procedure
for SME businesses with interest rate derivatives).
With respect to the (re-)assessment of the interest rate
derivatives of its Dutch SME business customers and the
advance payments made, Rabobank recognised a provision of
450 (2016: 664). The scoping of clients is the most important
parameter in the calculations to estimate the provision.
Furthermore, the calculations regarding technical recovery are
based on a portfolio approach instead of individual contract
calculations.
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