About this Report Chairman's Foreword Corporate Management Report Appendices Governance Consolidated Financial Company Financial Statements Statements Market inefficiency misconduct Data privacy Conflicts of interest Anti-fraud -corruption Anti-money laundering (AML)/counter terrorist financing (CTF) Economic sanctions. Compliance Risks Every year, Rabobank performs a Systematic Integrity Risk Analysis (SIRA). This allows for an integrated view on the level of compliance risks pertaining to the organization as well as the level of effectiveness of the riskcontrol framework. The outcome of the SIRA and of ongoing monitoring activities provide further direction to the organization so that it may manage its compliance risks on a day-to-day basis. Ensuring that our clients receive the most appropriate advice and the most fitting products has our ongoing attention. During 2018, we continued the execution of the recovery framework on reassessment of Dutch SME interest rate derivatives. By the end of 2018, Rabobank has provided all qualifying clients clarity on the outcome. Rabobank is strongly committed to preventing the use of Rabobank's products and services for Money Laundering and Terrorist Financing purposes and to preventing violations of Sanctions Regulations. In 2018, Rabobank has stepped up its efforts in this area and we will continue this work in 2019. Activities are being undertaken across the organization to ensure that we meet all regulatory standards and that we achieve global oversight on and consistency in our approach. This includes an upgrade of our transaction monitoring capabilities throughout the entire network. Because it is an international financial institution, Rabobankfaces risks relating to bribery and corruption from both inside and outside the organization, which is why conflicts of interest between private and professional interests must be avoided at all times.The control framework which effectively mitigates these risks contains several elements, including our Global Policy on Anti- Corruption and Conflict of interest. In 2018, we updated the policy in order to remain aligned with changing legislation and society's expectations. In our control framework we continuously focus on potential risks related to third parties, with whom we do business and we screen parties in orderto mitigate potential risks. The implementation of these (new) requirements derived from the General Data Protection Regulation (GDPR) came into effect on May 25, 2018. The entire bank recognizes the importance of these new requirements. In view of our digitalization- and data strategy, privacy will remain a key risk. It will continue to be very important in safeguarding the interests of our clients, our employees and of other stakeholders. Therefore, Rabobank is strengthening its privacy governance model across our global organization, the roll-out of which will continue in 2019. Market Risk The market risk appetite is based on Rabobank's market risk appetite for Markets and Treasury. These are the main Rabobank departments with trading or banking books exposed to market risks. Market risks within other entities are limited. Rabobankaims for a modest exposure to market movements in its trading environment. Market riskentails that the bank's earnings and/or economic value may be negatively affected by changes in interest rates or market prices. Exposure to a certain degree of market risk is inherent in banking and creates the opportunity to realize profit and value. In managing and monitoring market risk, a distinction is made between the trading environment and market risk in the banking envi ronment. Market risk in the trading environ ment is managed and monitored on a daily basis within the trading market risk framework. The risk appetite is the core of the framework and is defined by the Managing Board. The framework further consists of a prudent limit and control infrastructure. Within the trading environment, the most significant types of market risk are: interest rate risk (including basis risk), credit spread risk and currency risk. Risk positions acquired from clients can be either redistributed or managed through risktransformation (hedging). Nexttothecore task of hedging, the trading desks also act as a market-maker for secondary markets (by providing liquidity and pricing) in a broad selection of products of interest to Rabobank's clients. The internal VaR model is an important part of Rabobank's market risk framework. Rabobank has opted to apply a VaR model based on a historical simulation that uses one year of historical data. Rabobank recognizes that VaR, due to its underlying statistical assumptions, must be complemented by stress testing to measure events not captured by the VaR model. In addition, an extensive set of complementary parameters and controls is used to monitor market risk in the trading book. These include, but are not limited to, interest rate delta, tenor basis swaps risk, commodity cash delta, notional limits and FX exposure limits. Interest Rate Risk Rabobank's risk appetite for interest rate risk follows from its business strategy. Being a rock-solid bank is one of the key themes of Rabobank's business strategy. In the IRRBB strategy this results in two objectives: we aim to generate predictable net Annual Report 2018 - Management Report 64

Rabobank Bronnenarchief

Annual Reports Rabobank | 2018 | | pagina 66