Capital Developments
About this
Report
Chairman's
Foreword
Corporate
Management Report Appendices Governance
Consolidated Financial Company Financial
Statements Statements
Positive Development of Capital Ratios
On December 31, 2018, our fully loaded CET1 ratio amounted to
16.0% (2017:15.5%). This is well above the 14% target. The
increase of this ratio was mainly due to adding net profit for the
financial year (after several distributions) to retained earnings.
Our total capital ratio has been replaced by a MREL requirement
to be met with a combination of own funds and Non-Preferred
Seniors. Rabobank will maintain its best in class total capital ratio
to protect NPS holders. The total capital ratio is 26.6% and will
trend downward to around 24% in the coming years (subject to
RWA development).
Our leverage ratiothat is, our tier 1 capital divided by balance
sheet positions and off-balance-sheet liabilitiesis calculated
based on the definitions provided in the CRR/CRD IV. On
December 31, 2018, our leverage ratio was 6.4% (2017: 6.0%),
which is well above the minimum leverage ratio of 3% required
by Basel III guidelines.
IFRS 9 Impact on CET 1 Capital on January 1, 2018
The total negative impact of the adoption of IFRS 9 on the fully
loaded CET1 ratio was 14 basis points. IFRS 9 impairment
calculations have led to higher loan loss allowances as of January
1,2018. Instead of incurred losses, expected losses are being
recognized. Incurred but not reported (IBNR) losses have been
replaced by expected one-year losses for Stage 1 assets and
expected lifeti me losses for Stage 2 assets. The day-one effect was
an increase of our loan loss allowances by EUR 227 million. For
CET 1 capital calculations the impact of higher loan loss
allowances was fully compensated by a decrease in the IRB
shortfall.
IFRS 9gives newguidancearound modification accounting under
its classification and measurement rules. This has altered the way
Rabobank accounts for prepayment penalties and interest rate
averaging in the consolidated statement of income. Another
change in classification and measurement relates to some legacy,
non-core credit portfolios that are sold before their legal maturity
and therefore receive the classification "Other." They are
measured at fair value through profit or loss. On the liability side
Rabobank has elected to reclassify the callable notes included in
the structured funding portfolio to amortized cost. This
reclassification resulted in the bifurcation of the embedded
derivatives while the funding host contract is measured at
amortized cost. The total effect of IFRS 9 classification and
measurement amounts to positive EUR 201 million.
Capital ratios
in millions of euros
12-31-2018
1-1-2018
12-31-2017
Retained earnings
28,062
26,302
26,777
Expected distributions
(46)
(54)
(54)
Rabobank Certificates
7,445
7,440
7,440
Part of non-controlling interest treated as
qualifying capital
0
26
26
Reserves
(798)
(911)
(1,401)
Regulatory adjustments
(2,553)
(2,317)
(2,050)
Transition guidance
12
24
525
Common equity tier 1 capital
32,122
30,510
31,263
Capital securities
3,721
2,728
2,728
Grandfathered instruments
3,325
3,590
3,590
Non-controlling interests
0
6
6
Regulatory adjustments
(100)
(88)
(88)
Transition guidance
0
0
(295)
Additional tier 7 capital
6,946
6,236
5,941
Tier 1 capital
39,068
36,746
37,204
Part of subordinated debt treated as
qualifying capital
14,274
14,896
14,896
Non-controlling interests
0
7
7
Regulatory adjustments
(83)
(89)
(89)
Transition guidance
0
0
(95)
Tier 2 capital
14,191
14,814
14,719
Qualifying capital
53,259
51,560
51,923
Risk-weighted assets
200,531
198,207
198,269
Common equity tier 1 ratio (transitional)
16.0%
15.4%
15.8%
Common equity tier 1 ratio (fully loaded)
16.0%
15.4%
15.5%
Tier 1 ratio
19.5%
18.5%
18.8%
MREL buffer
28.25%
26.64%
26.82%
Total capital ratio
26.6%
26.0%
26.2%
Equity capital ratio
17.7%
17.0%
17.3%
Common equity tier 1 ratio of
Coöperatieve Rabobank U.A. solo (issuer
level)
16.0%
15.4%
15.5%
The Benefit of Our MREL-Eligible Capital Buffer
Rabobank aims to protect senior creditors and depositors against
the unlikely event of a bail-in. Rabobank therefore holds a large
bufferof equity and subordinated debtthat will firstabsorb losses
in the event of a bail-in.
Rabobank has received formal notification from De
Nederlandsche Bank (DNB) of its binding minimum requirement
for own funds and eligible liabilities (MREL). The MREL
requirement has been established to ensure that banks in the
European Union have sufficient own funds and eligible liabilities
to absorb losses in the case of a potential bank failure. The MREL
requirement is set for Rabobank Group at a consolidated level, as
determined by the Single Resolution Board (SRB).
This MREL requirement is based on Rabobank's year-end 2016
figures. The requirement was set at 30.96% of Rabobank's risk-
weighted assets (EUR 65 billion) and consists of a loss absorption
Annual Report 2018 - Management Report
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