About this
Report
Chairman's
Foreword
Corporate
Management Report Appendices Governance
Consolidated Financial Company Financial
Statements Statements
contracts showing a positive market value, taking into account
master netting agreements enforceable under law.
Credit Risk Profile per Internal Rating Grade of Loans and
Advances to Credit Institutions
Amounts in millions of euros
Credit Related Contingent Liabilities
The financial guarantees and standby letters of credit that
Rabobank provides to third parties in the event of a client being
unable to fulfil its obligations to these third parties, are exposed
to credit risk. Documentary and commercial letters of credit and
written undertakings by Rabobank on behalf of clients that
authorize third parties to draw bills against Rabobank up to a fixed
amount and subject to specific conditions. As these transactions
are secu red by the delivery of the u nderlying goods to which they
relate, the risk exposure of such an instrument is less than that of
a direct loan. From the moment the documents have been
accepted under the terms of the letters of credit, Rabobank
recognizes an asset and a liability until the moment of payment.
Loan commitments are firm commitments to provide credit
under pre-specified terms and conditions. Rabobank is exposed
to credit risk when it promises to grant loans. The amount of any
losses is likely to be less than the total of the unused
commitments because the commitments are made subject to the
clients meeting certain loan conditions. Rabobank monitors the
term to the expiry of loan commitments because long-term
commitments generally involve higher risk than short-term
commitments.
4.3.3 Credit Risk Exposure and Credit Quality
In its financing approval process, Rabobank Group uses the
Rabobank Risk Rating, which reflects the risk of failure or the
probability of default (PD) ofthe loan relation overa period ofone
year. The loan-quality categories are determined on the basis of
the internal Rabobank Risk Rating.The Rabobank Risk Rating
consists of 21 performance ratings (R0-R20) and four default
ratings (D1-D4). The performance ratings assess the probability
of default within a period ofone year and the rating is
determined, in principle, on a cyclically neutral basis. D1-D4
ratings refer to default classifications. D1 represents more than
90 day's past due on a material contractual payment; D2 indicates
that it is unlikely that the obligor will pay its debt in full, without
recourse by the bank to actions such as realizing security; D3
indicates that a distressed sale or a distressed restructuring has
occurred that likely results in a credit-related economic loss; and
D4 indicates bankruptcy status. The default ratings make up the
total credit-impaired exposure. The table below shows the credit
quality ofthe financial assets subject to impairment. The gross
carrying amount ofthe financial assets below also represent the
maximum exposure to credit risk on these assets.
On December
31,2018
R0-R7
R8 - R20
Default
ratings
Non-rated
Total
Gross carrying amount
Non credit-impaired
Subject to 12-
month ECL
12,069
5,456
265
17,790
Subject to
lifetime ECL
42
15
57
Credit-impaired
Subject to
lifetime ECL
34
34
Total
12,111
5,471
34
265
17,881
Credit Risk Profile per Internal Rating Grade of Loans and
Advances to Customers
Amounts in millions of euros
On December
31,2018
R0-R7
R8 - R20
Default
ratings
Non-rated
Total
Gross carrying amount
Non credit-impaired
Subject to 12-
month ECL
57,520
336,406
8,677
402,603
Subject to
lifetime ECL
582
15,273
91
15,946
Credit-impaired
Subject to
lifetime ECL
15,993
15,993
Total
58,102
351,679
15,993
8,768
434,542
Credit Risk Profile per External Rating Grade of Financial Assets
at Fair Value through Other Comprehensive Income
Amounts in millions of euros
On December
31,2018
AAA-A
BBB-B
ccc-c
D
Non-rated
Total
Gross carrying amount
Non credit-impaired
Subject to 12-
month ECL
16,800
761
13
17,574
Subject to
lifetime ECL
574
Credit-impaired
Subject to
lifetime ECL
574
Total
17,374
761
13
18,148
Annual Report 2018 - Consolidated Financial Statements
154
