Contents Introduction Management report Appendices Corporate governance Consolidated Financial Statements Company Financial Statements
to calculate our general and specific position risk using our own
internal value-at-risk (VaR) models, based on the CRR.
Regulatory capital by business segments
Amounts in billions of euros 31-12-2017 31-12-2016
Domestic retail banking 6.3 6.4
Wholesale, rural and retail 6.0 6.3
Leasing 1.4 1.7
Real estate 0.8 1.2
Other 1.4 1.3
Rabobank 15.9 16.9
Renewed pillar 2 capital framework
The relevant rules and regulations related to the capital
adequacy process of EU banks are addressed in the CRR/CRD IV
comprehensive frameworks.These frameworks are the EU legal
translation of the banking guidelines suggested by the Basel
Committee - the so-called Basel III standards from December
2010. CRR/CRD IV lays out a three-pillar approach to risk and
capital management: the Pillar I on minimum capital requirements
of credit, market and operational risk; Pillar 2 about supervisory
review process (SREP) and internal capital and liquidity adequacy
assessment; and Pillar 3 on market discipline, where banks
disclose to the public their overall risk profiles.
Pillar 2, the focus of this section, describes the mandatory
processes for both banks and regulators to fulfill the capital
adequacy requirements. The main areas that fall under this Pillar
are: risks considered under Pillar I that are not fully or adequately
captured by the prescribed methodologies; risks that are not
considered in the Pillar I capital requirements (e.g. interest rate
risk); and external factors to the bank (e.g. market conditions).
In order to adequately assess the capital resources needed
to cover the risks inherent in its current activities, Rabobank
renewed its Pillar 2 modelling landscape.The renewed Pillar 2
capital framework entered into effect as of 1 January 2017 and
covers all those areas where Rabobank is of the opinion that
the regulatory framework does not address the risk, or does
not adequately address the risk. Rabobank developed mostly
statistical approaches and methodologies that: (1) challenge
regulatory capital requirements; (2) cover risks not addressed in
CRR/CRD IV; and (3) identify possible future events or changes
in the market conditions that could impact Rabobank's strategic
planning.The renewed Pillar 2 modelling landscape reflects the
changing regulatory environment and similar developments in
the industry.
The outputs of the renewed Pillar 2 models are used for various
purposes within the bank, such as deal acceptance and pricing,
strategy and planning of the firm's operations, and performance
evaluation. Moreover, the regulators and supervisors view
the level of capitalisation as one of their key instruments to
supervise Rabobank. Therefore, the renewed Pillar 2 capital
framework promotes a sound and effective risk management
culture within Rabobank, ensuring adequate capital levels
to support business growth, maintain depositor and creditor
confidence and comply with regulatory requirements.
Qualifying capital decreased
Our sizeable buffer underlines the financial solidity of Rabobank.
The available qualifying capital of EUR 51.9 (52.9) billion that the
bank retains to absorb potential losses was well above the level
of the total external (regulatory) and internal capital requirements.
Pillar II capital by business
segment
at year-end 2017
I Domestic retail banking 37%
H Wholesale, Rural Retail 32%
Leasing 7%
Real estate 4%
Other 19%
Pillar 2 capital by risk type
at year-end 2017
v
I Credit and transfer risk 64%
I Interest rate and market risk 18%
Operational risk 10%
Other risks 8%
Rabobank Annual Report 2017 - Management report
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