About this
Report
Chairman's
Foreword
Management Report Appendices
Corporate
Governance
Consolidated Financial
Statements
Company Financial
Statements
amount of 15.25%, a recapitalization amount of 11.65%, and a
market confidence amount of 4.06%. The amounts for
recapitalization and market confidence include a correction for
the expected depletion (loss absorbing amount) of the balance
sheet. The 30.96% requirement is based on BRRD I. Future MREL
requirements are subject to ongoing political developments
(e.g., European Trilogue) concerning the risk reduction package
proposed by the European Commission in November 2016.
As under BRRD I, Preferred Senior is MREL eligible, Rabobank
already meets its MREL requirement, soa transition period has not
been set. Overtime, Rabobank intends to use only a combination
of own funds and Non-Preferred Seniorto meet its MREL
requirement. In the second half of 2018, Rabobank issued 3
tranches of Non-Preferred Seniors: EUR 1 billion, USD 1 billion and
USD 0.25 billion. With MREL eligible capital of 28.25%, the
additional MREL needs are manageable.
We define our MREL eligible capital buffer as qualifying capital
plus the non-qualifying part of the grandfathered additional tier
1 instruments, the (amortized part of) tier 2 with a remaining
maturity of at least one year and Non-Preferred Senior bonds with
a remaining maturity of at least one year. The buffer increased
from EUR 53.2 billion to EUR 56.6 billion due to profit retention
and the issuance of new instruments. This increase corresponds
to 28.25% (2017:26.82%) of risk-weighted assets.
MREL Eligible Capital and Non-Preferred Senior Bonds Buffer
in billions of euros
Qualifying capital
Non qualifying grandfathered additional tier 1 capital
Amortized tier 2 >1 year remaining maturity
Non-Preferred Senior bonds 1 year remaining
maturity
MREL eligible capital and Non-Preferred Senior
bonds buffer
Risk-weighted assets
MREL eligible capital and Non-Preferred Senior bonds
buffer risk-weighted assets
12-31-2018 12-31-2017
53.3
0.0
1.3
56.6
51.9
0.0
1.3
53.2
Regulatory Capital
Regulatory capital, 8% of our risk-weighted assets, is our external
capital requirement. It representsthe minimum amount of capital
which Rabobank is required to hold under CRR and CRD IV. Our
regulatory capital requirement amounted to EUR 16.0 billion
(2017: EUR 15.9 billion) at December 31, 2018, of which 84%
related to credit and transfer risk, 14% to operational risk and 2%
to market risk. This is in line with the regulatory capital at the end
of 2017.
Rabobank calculates its regulatory capital for credit risk for almost
the entire loan portfolio using the advanced IRB approach
approved by our supervisory authority. In consultation with the
DNB, Rabobank applies the standardized approach to portfolios
with relatively limited exposure and to some smaller portfolios
outside the Netherlands which are not suitable for the advanced
IRB approach.
We measure operational risk using an internal model, approved
by DNB, that is based on the advanced measurement approach.
For market risk exposure, DNB has given Rabobank permission to
calculate our general and specific position risk using our own
internal value-at-risk (VaR) models, based on the CRR.
Regulatory Capital by Business Segment
in billions of euros
Domestic Retail Banking
Wholesale, Rural Retail
Leasing
Real Estate
Other
Rabobank
12-31-2018 12-31-2017
6.5
6.6
1.5
0.4
1.0
16.0
6.3
6.0
1.4
0.8
1.4
15.9
Renewed Pillar II Capital Framework
The relevant rules and regulations for the capital adequacy
process of EU banks are addressed in the CRR/CRD IV
comprehensive frameworks. They take a three-pillar approach to
risk and capital management: Pillar I on minimum capital
requirements for credit, market and operational risk; Pillar II on the
supervisory review process (SREP) and internal capital and
liquidity adequacy assessment, and Pillar III on market discipline,
under which banks disclose to the public their overal I risk profiles.
In order to adequately assess the capital resources needed to
cover the risks inherent in its current activities, Rabobank renewed
its Pillar II modeling landscape. The renewed Pillar II capital
framework became effective on January 1, 2017. It covers those
areas that Rabobank believed either did not address the risk or
failed to adequately address the risk. Rabobankdeveloped mostly
statistical approaches and methodologies that: (1) challenge
regulatory capital requirements; (2) cover risks not addressed in
CRR/CRD IV, and (3) identify possible future events or changes in
the market conditions that could impact Rabobank's strategic
planning. The renewed Pillar II modeling landscape reflects the
changing regulatory environment and similar developments in
the industry.
The outputs of the renewed Pillar II models are used for various
purposes within the bank, such as deal acceptance and pricing,
strategy and planning of the company's operations, and
performance evaluation. Moreover, the regulators and
Annual Report 2018 - Management Report
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