Notes to the Company Financial Statements 1. Basis of Preparation 2. Risk Exposure on Financial Instruments About this Report Chairman's Foreword Corporate Management Report Appendices Governance Consolidated Financial Company Financial Statements Statements The company financial statements of Rabobank, a credit institution as referred to in Section 1:1 ofthe Financial Supervision Act, have been prepared in accordance with accounting policies generally accepted in the Netherlands and comply with the financial reporting requirements included in Part 9 of Book 2 of the Dutch Civil Code. In accordance with subsection 8 of section 362 of Book 2 ofthe Dutch Civil Code, the accounting policies in the company financial statements are the same as those used in preparing the consolidated financial statements of Rabobank Group, reference is made to Section 2 "Accounting Policies ofthe Consolidated Financial Statements", with one exception regarding the measurement of interests in group companies as these are measured at net asset value. The hedge accounting entries ofthe consolidated financial statements are also applied in the company financial statements by using combination 3 (Option 3 RJ). Rabobank Group, the Coöperatieve Rabobank U.A. (Rabobank) and the legal entitiesand companies thatform part ofthe group, is an international financial services provider operating on the basis of cooperative principles. Rabobank has its registered office in Amsterdam and is registered under Chamber of commerce number 30046259. Rabobank Group manages risks at various levels within the organization. Atthe highest level, the Managing Board (underthe supervision ofthe Supervisory Board) determines the risk strategy it will pursue, the risk appetite, the policy framework as well as the limits.The Supervisory Board regularly assesses the risks attached to the activities and portfolio of Rabobank Group. The Chief Risk Officer, as a Memberofthe Managing Board, is responsibleforthe risk management policy within Rabobank Group. Rabobank considers risks at company level the same as risks at consolidated level. We therefore refer to Section 4 "Risk Exposure on Financial Instruments" of the consolidated financial statements except the section regarding legal and arbitration proceedings. Additional remarks on solvency on solo level are disclosed below. Solvency Rabobank uses its own internal solvency objectives on a solo level that extend beyond the minimum requirements ofthe supervisors. It takes market expectations and developments in legislation and regulations into account. Rabobank manages its solvency position based on policy documents. The solvency position and the objectives are periodically reviewed by the Risk Management Committee and the Asset Liability Committee of the Managing Board and the Supervisory Board. Coöperatieve Rabobank U.A. (solo) must comply with a number of minimum solvency positions as stipulated under law. The solvency position is determined on the basis of ratios. These ratios compare the qualifying capital (total capital ratio), the tier 1 capital (tier 1 ratio) and the core capital (common equity tier 1 ratio) with the total ofthe risk-adjusted assets. Effective January 1, 2014, the minimum required percentages are determined on the basis of CRD IV/CRR. The buffers below are applicable as from 2016. These buffers will gradually increase until the year 2019. Rabobank is already allowing for these changes in its capital planning. The table below shows the minimum buffers based on the planned final situation under CRD IV/CRR. Minimum Capital Buffer Total CET1 Tier 7 capital Pillar 1 requirement 4.5% 6.0% 8.0% Pillar 2 requirement 1.75% 1.75% 1.75% Capital conservation buffer 2016-2019 2.5% 2.5% 2.5% The CET1-ratio of Coöperatieve Rabobank U.A. (solo) is 16.0% (2017:15.5%). Legal and Arbitration Proceedings Rabobank considers risks regarding legal and arbitration proceedings the same at company level as at consolidated level. 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 ofthe amount ofthe obligation. When determining whether the probability that claims lead to an outflow of resources is more likely than not (i.e. with a likelihood Annual Report 2018 - Company Financial Statements 219

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Annual Reports Rabobank | 2018 | | pagina 221