4.10 Legal and Arbitration Proceedings About this Report Chairman's Foreword Corporate Management Report Appendices Governance Consolidated Financial Company Financial Statements Statements Amounts in millions of euros On December 312018 Assets Financial assets held for trading Financial assets designated at fair value Financial assets mandatorily at fair value Derivatives Financial assets at fair value through other comprehensive income Liabilities Derivatives Financial liabilities designated at fair value On December 312017 Assets Financial assets held for trading Financial assets designated at fair value Derivatives Available-for-sale financial assets Liabilities Derivatives Financial liabilities designated at fair value Instruments held ot the end of the reporting period Instruments no longer held at the end of the reporting period Total 50 40 44 4 (58) (1) (54) 54 (18) (10) (3) 37 61 (22) 52 (1) 5 (11) (6) (3) 42 50 (22) 46 (1) Recognition of Day 1 Gains When using fair value accounting at the inception of a financial instrument, any positive difference between the transaction price and the fair value (referred to as "day 1 gains") is accounted for in the statement of income where the valuation method is based on observable inputs from active markets. In all other cases, the entire day 1 gain is deferred and after initial recognition the deferred day 1 gain is recognized as a gain to the extent it results from a change in a factor (including time effects). There are no deferred day 1 gains as at December 31,2018. Rabobank Group is active in a legal and regulatory environment that exposes it to substantial risk of litigation. As a result, Rabobank Group is involved in legal cases, arbitrations and regulatory proceedings in the Netherlands and in other countries. The most relevant legal and regulatory claims which could give rise to liability on the part of Rabobank Group are described below. Provisions for legal claims are recognized for obligations arising as a result of a past event where it is probable that an outflow of resources will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. When determining whether the probability that claims lead to an outflow of resources is more likely than not (i.e. with a likelihood of over fifty percent), Rabobank Group takes several factors into account. These factors include (but are not limited to) the type of claim and the underlying facts; the procedural process and history of each case; rulings from legal and arbitration bodies; Rabobank Group's experience and that of third parties in similar cases (if known); previous settlement discussions, third-party settlements in similar cases (where known); available (potential) recourse; and the advice and opinions of legal advisors and other experts. Similar types of cases are grouped together and some cases may also consist of a number of claims. The estimated loss for each individual case (for which it is possible to make a reliable estimate) is not disclosed because Rabobank Group feels that information of this type could be detrimental to the outcome of individual cases. The estimated potential losses and provisions, are based on the information available at the time and are largely subject to judgments and a number of different assumptions, variables and known and unknown uncertainties.These uncertainties may include the inaccuracy or incompleteness of information available to Rabobank Group (especially in the early stages of a case). In addition, assumptions made by Rabobank Group about the future rulings of legal or other instances or the likely actions or attitudes of supervisory bodies or the parties opposing Rabobank Group may turn out to be incorrect. Furthermore, estimates of potential losses relating to legal disputes are often impossible to process using statistical or other quantitative analysis instruments that are generally used to make judgments and estimates. They are subject to a still greater level of uncertainty than many other areas where Rabobankgroup needs to make judgments and estimates. The group of cases for which Rabobank Group determines that the risk of future outflows of funds is more likely than not varies over time, as do the number of cases for which the bank can estimate the potential loss. In practice the end results could turn out considerably higher or lower than the estimates of potential losses in those cases where an estimate was made. RabobankGroupcanalsosustain losses from legal risks where the occurrence of a loss may not be probable, but is not improbable either, and for which no provisions have been recognized. For those cases where (a) the possibility of an outflow of funds is not probable but also not remote or (b) the possibility of an outflow of funds is more likely than not but the potential loss cannot be estimated reliably, a contingent liability is disclosed. Rabobank Annual Report 2018 - Consolidated Financial Statements 169

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Annual Reports Rabobank | 2018 | | pagina 171