pwc About this Chairman's Corporate Consolidated Financial Company Financial Report Foreword Management Report Appendices Governance Statements Statements Key audit matter Management judgement The recognition and measurement of provisions and the disclosure of contingent liabilities requires considerable management judgement around future outcome of legal, regulatory or client care disputes, including the provision for the execution of the Uniform Recovery Framework for SME Interest Rate Derivatives. As at 31 December 2018 the SME provision amounted to EUR 316 million. Given the inherent uncertainty and the judgemental nature of contingent liabilities and provisions, we determined the provisions and disclosures on contingent liabilities to be of particular importance to our audit, since this area is subject to a higher risk of material misstatement due to error or fraud. Therefore determined this to be a key audit matter in our audit. Our audit work and observations We held regular bilateral meetings with the Chairs of the Supervisory Board, Audit committee and Risk committee. We inquired with internal legal counsel to understand the risk position of new and existing regulatory matters and reviewed audit reports and assessments of the internal audit department relating to compliance with laws and regulations. In general we noticed that compliance, related matters and improvement of procedures and tooling around compliance receive adequate attention of management. More specifically we noticed significant management attention on specific programs in place that aim to improve the quality of its customer files and transactions monitoring throughout the entire network. Also following regulatory enforcement actions related to AML and CDD in the United States and the Netherlands. We obtained an understanding of the initiatives which are part of this program through inquiry of the program owners, Managing Board, Audit committee, reading correspondence with AFM, DNB, Federal Reserve and ECB related to these matters and discussed the outcomes of audits performed by Audit Rabobank with respect AML and CDD. Based on the aforementioned we noticed that funds and resources were made available for this change program and that the program receives significant attention of management. Substantive audit procedures We obtained legal letters from the Bank's external lawyers to verify completeness of he identified exposures. We assessed customer complaints received and the analysis prepared by management of these complaints. We used this analysis to understand whether there were indicators of more systematic exposures being present for which provisions or disclosures should be made in the financial statements. These procedures did not result in the identification of any new provisions or systematic exposures. The majority of our detailed audit work was on the provision for SME interest rate derivatives. Coöperatieve Rabobank UA. - EH44X5NCPJUJ-1288894667-935 Page 12 of 17

Rabobank Bronnenarchief

Annual Reports Rabobank | 2018 | | pagina 254