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