Management Report Appendices Governance
Consolidated Financial Company Financial
to, in particular, accounting for impairments. The Supervisory
Board also followed the further development and preparations for
the implementation of Basel IV on capital requirements. These
reforms will especially impact Dutch banks, including Rabobank,
that have a relatively sizable mortgage portfolio.
In relation to the supervision on the bank'sfinancial reporting, the
following topics were discussed with the internal and external
independent auditor. These topics relate to financial,
operational, compliance and legal risks that occurred throughout
the year and on the basis of various reports discussed with
management in the Audit and Risk Committee.
As of January 1, 2018, the bank implemented IFRS 9. The Audit
Committee last year already evaluated the implementation
process for and the impact of this new accounting standard. In
2018, the implementation of the internal processes and key
controls for the application of the standard, in particularly the
impairment model, the impact on the opening balance sheet of
2018 and the outcome of the three-stage expected credit loss
impairment model, including the areas of judgement and
estimation in determining the level of loan impairments, were
discussed. The Audit Committee evaluated the remedial control
activities and impact assessments that were required for loan
quality classification and the top level adjustment made to the
loan impairments to address model and data limitations. The
Audit Committee also assessed the appropriateness of the
actions, management is taking to improve the process.
The Audit Committee took note of the outcome of the audit
procedures performed on the valuation of portfolios of
derivatives and financial assets and liabilities that are measured
at fair value. The committee considered the reports of the legal
and the compliance officer as well as the external audit report to
evaluate the adequacy of control effectiveness and the level of
provisioning for legal and arbitration proceedings.
The quality of the IT general controls has been audited by both
internal and external audit and is critical in the period of extensive
transformation of the bank. The committee has discussed the
outcome oftesting of controls and the actions forfurther
structural remediation of certain controls.
Annual Report 2018 - Corporate Governance