About this
Report
Chairman's
Foreword
Corporate
Management Report Appendices Governance
Consolidated Financial Company Financial
Statements Statements
on a financial asset has increased significantly since initial
recognition when the contractual payments are over 30 days past
due.The rebuttable presumption is notan absolute indicatorthat
lifetime ECL should be recognized, but is presumed to be the
latest point at which lifetime ECL should be recognized.
The assessment of whether lifetime ECL are recognized is based
on significant increases in the likelihood or default risk occurring
since initial recognition - irrespective of whether a financial
instrument has been repriced to reflect an increase in credit risk
- instead of based on evidence of a financial instrument being
credit-impaired at the reporting date or an actual default
occurring. Generally, there will be a SICR before a financial
instrument becomes credit impaired or an actual default occurs.
For loan commitments, Rabobank considers changes in the
default risk occurring on the loan to which a loan commitment
relates. For financial guarantee contracts, it considers the changes
in the risk that the specified debtor will default on the contract.
The assessment of changes in credit risk analysis is a multifactor
and holistic analysis. Whether a specific factor is relevant (and its
weight compared to other factors) depends on the type of
product, characteristics of the financial instruments and the
borrower as well as geographical region. The methods used to
determine whether credit risk on financial instruments has
increased significantly since initial recognition should consider
the mentioned characteristics of the instruments (or a group of
instruments) and the default patterns in the past for comparable
financial instruments.
Default Definition
In defining default for the purposes of determining the risk of a
default occurring, Rabobank applies a default definition
consistent with the definition used for internal credit risk
management purposes for the relevant financial instrument and
considers qualitative indicators when appropriate.
However, there is a rebuttable presumption that default does not
occur later than when a financial asset is 90 days past due, unless
Rabobank has reasonable and supportable information to
demonstrate that a more lagging default criterion is more
appropriate. The definition of default used for these purposes is
applied consistently to all financial instruments, unless
information becomes available that demonstrates that another
default definition is more appropriate for a particular financial
instrument.
Collective Versus Individual Assessment
Some factors or indicators may not be identifiable on an
individual instrument level. In that case, the factors or indicators
are assessed for appropriate portfolios, groups of portfolios or a
portion of a portfolio to determine whether the requirements for
recognition of lifetime ECL have been met. The aggregation of
financial instruments to assess whether there are changes in
credit risk on a collective basis may change over time when new
information becomes available on groups of, or individual,
financial instruments.
Depending on the nature of the financial instruments and the
credit risk information available for particular groups of financial
instruments, Rabobank may not be able to identify SICR for an
individual instrument before that instrument becomes past due.
This may be the case for financial assets (such as retail loans) for
which there is little or no updated credit risk information
routinely obtained and monitored on an individual instrument
level until a customer breaches the contractual terms. If changes
in the credit risk for an individual instrument is not captured
before it becomes past due, a loss allowance based solely on
credit information at an individual instrument level would not
faithfully represent the changes in credit risk since initial
recognition.
In some circumstances, Rabobank has no reasonable and
supportable information available without undue cost or effort
to measure lifetime ECL on an individual instrument basis.
Lifetime ECL is then recognized by collectively considering
comprehensive credit risk information, which not only
incorporates past due information but also all relevant credit
information (including forward-looking macroeconomic
information)toapproximatethe result ofrecognizing lifetime ECL
when there has been a SICR since initial recognition on an
individual instrument level.
For the purpose of determining SICR and recognizing a loss
allowance on a collective basis, Rabobank may group financial
instruments based on shared credit risk characteristics with the
objective of facilitating an analysis designed to enable SICR to be
identified on a timely basis. However, when Rabobank is unable
to group financial instruments for which the credit risk is
considered to have increased significantly since initial recognition
based on shared credit risk characteristics, it recognizes lifetime
ECL on a portion of the financial instruments for which credit risk
is deemed to have increased significantly.
Shared credit risk characteristics may include but are not limited
to: instrument types, credit risk ratings, collateral types, initial
recognition dates, remaining terms to maturity, industries,
geographic location, collateral value relative to the financial
instrument if it has an impact on the PD (for instance, non
recourse loans in some jurisdictions or LTV ratios).
Annual Report 2018 - Consolidated Financial Statements
143