About this Report Chairman's Foreword Corporate Management Report Appendices Governance Consolidated Financial Company Financial Statements Statements Rabobank policy framework each type of collateral is addressed separately. The main types of collateral that are recognized by Rabobank are real estate, inventory (such as equipment, machinery, stock etc.), commodities, receivables and guarantees. With a substantial domestic mortgage portfolio, housing is considered a concentration risk within the credit risk mitigation that is taken. The quality of the collateral is assessed in the initial credit request, and is evaluated within the credit revision process. The frequency of revaluation depends on the credit quality of the client and on the type of collateral and is in line with the requirements set in the CRR. The main types of guarantors are governments, local authorities, (central) banks and corporate entities. For institutions, insurance undertakings and export credit agencies, a minimum rating is required. Credit Committees and Credit Approval Within the boundaries set by the Risk Management Committee the Managing Board has mandated decision-making authority to transactional committees and to credit decision approval officers that operate on an entity level, regional level or central level at Rabobank. Credit committees review all significant risks in credit proposals to arrive at a systematic judgment and a balanced decision. Rabobank has various levels of credit committees. Applications exceeding authority level of a credit committee are complemented with a recommendation and submitted to a 'higher' credit committee for decision-making. Within Rabobank the 'highest' transactional committees are the following: Central Credit Committee Rabobank Group (CCCRG) - The CCCRG takes credit decisions on credit applications subject to the 'corporate credit approval route' exceeding: •the authority of Credit Approvals Local Banks (CA LB) - This department is responsible for decisions on requests for non classified (LQC Good or OLEM) obligors exceeding the authority of Local Banks in The Netherlands. •the authority of Credit Approvals Wholesale Rural Retail (CA WRR) - This department is responsible for decisions on requests for non-classified (LQC Good or OLEM) obligors exceeding the authority of DLL or a Wholesale Rural Retail (WRR) office/region. •the authority of the Credit Committee Financial Restructuring Recovery (CC-FR&R) - This credit committee takes credit decisions on proposals for classified (LQC Substandard, Doubtful or Loss) obligors exceeding the authority of local credit committees and the FR&R department. Country Financial Institutions Committee (CFIC) - The CFIC takes credit decisions on proposals exceeding the authority of Credit Financial Institutions or Country Risk Research. These departments are responsible for the risk management of exposure on financial institutions and sovereigns/countries. Loan Loss Provision Committee (LLPC) - The LLPC monitors the development of qualified credit and asset portfolios and recommends on impairment allowances for obligors exceeding the authority of local credit committees or the CC-FR&R, to the Managing Board. The Terms of Reference (ToR) provide the mandate, responsibilities scope, hierarchical relationships, membership, authority levels and modalities of these approval bodies. Credit committees take decisions on the basis of consensus, unless local regulation requires majority voting. Consensus is reached when there is a general agreement and none of the members has fundamental objections to the decision. When no consensus can be reached, an application is considered declined. In case of majority voting, the representative(s) from the Risk domain must have a veto right. For efficiency reasons Credit Committees can delegate part of their authority. A single person may not take a credit decision solely based on its own opinion; this means that a 4-eyes principle applies or decisions are system supported, in which case one person is allowed to decide as long as the credit is assessed as acceptable by an expert system or meets predefined criteria (the credit complies with decision tools). Fully IT supported assessments and approvals are allowed under strict conditions. The credit committees play a key role in ensuring consistency among Rabobank standards of credit analysis, compliance with the overall Rabobank credit policy and consistent use ofthe rating models. The credit policy sets the parameters and remit of each committee, including the maximum amount they are allowed to approve for limits or transactions. Policies are also in place which restrict or prohibit certain counterparty types or industries. As a rule, all counterparty limits and internal ratings are reviewed once a year (corporate clients) at a minimum. Where counterparties are assigned a low loan quality classification, they are reviewed on a more frequent basis. Credit committees may request for more frequent reviews as well. 4.3.2 Lending Rabobank has a significant market share in lending regarding residential mortgages. These loans have a low risk profile as evidenced by the net additions to allowances of minus 2 basis points (excluding one-offs) in 2018. In 2018, the proportion ofthe private sector lending allocable to the food and agricultural Annual Report 2018 - Consolidated Financial Statements 152

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Annual Reports Rabobank | 2018 | | pagina 154