INFORMATION STATEMENT Dated May 26, 2020 · 2020-06-02 · Certificates, on the upcoming scheduled...

INFORMATION STATEMENT Dated May 26, 2020

COÖPERATIEVE RABOBANK U.A., (a cooperative (coöperatie) with limited liability established under the laws of The Netherlands

and having its statutory seat in Amsterdam, The Netherlands)

New York Branch, as Issuer and

Utrecht Branch, as Issuer Guaranteed by The New York Branch

Medium Term Note Program (the “Program”)

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TABLE OF CONTENTS

Page

PRESENTATION OF FINANCIAL AND OTHER INFORMATION .......................................................... 2 FORWARD-LOOKING STATEMENTS ................................................................................................... 4 SUMMARY FINANCIAL INFORMATION ................................................................................................ 5 CAPITALIZATION AND INDEBTEDNESS OF RABOBANK GROUP .................................................... 6 RISK FACTORS ...................................................................................................................................... 9 DESCRIPTION OF BUSINESS OF RABOBANK GROUP ................................................................... 23 STRUCTURE AND GOVERNANCE OF RABOBANK GROUP ........................................................... 33 THE UTRECHT BRANCH ..................................................................................................................... 37 THE NEW YORK BRANCH .................................................................................................................. 38 GOVERNANCE OF RABOBANK GROUP ........................................................................................... 39 SELECTED FINANCIAL INFORMATION ............................................................................................. 47 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS .................................................................................................. 51 RISK MANAGEMENT ........................................................................................................................... 82 REGULATION OF RABOBANK GROUP ............................................................................................. 90 INDEX TO FINANCIAL STATEMENTS .............................................................................................. F-1 HISTORICAL FINANCIAL INFORMATION ........................................................................................ F-1

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PRESENTATION OF FINANCIAL AND OTHER INFORMATION

Unless the context otherwise requires, references in this Information Statement to “Rabobank” and “Rabobank Nederland” are to Coöperatieve Rabobank U.A. and references to “Rabobank Group”, or the “Group” are to Rabobank and its group companies (within the meaning of Section 2:24b of the Dutch Civil Code, which shall in any event include its subsidiaries). References herein to the “Issuer” shall mean Rabobank acting through its head office or through Rabobank New York Branch.

In this Information Statement, unless otherwise specified or the context otherwise requires, references to “U.S.$” and “$” are to the lawful currency of the United States and to “euro,” “EUR” and “€” are to the lawful currency of the member states of the European Union (“EU”) that have adopted the single currency in accordance with the Treaty establishing the European Community, as amended by the Treaty on European Union.

Presentation of financial information

The audited consolidated financial statements for the years ended 31 December 2017, 31 December 2018 and 31 December 2019, incorporated by reference into the Offering Circular dated May 26, 2020 (the “Offering Circular”), have been prepared in accordance with International Financial Reporting Standards as adopted by the EU pursuant to EU Regulation No 1606/2002 (“IFRS”) and comply with Part 9 of Book 2 of the Dutch Civil Code.

The financial information for the year ended 31 December 2017 has been derived from the audited consolidated financial statements of Rabobank Group for the year ended 31 December 2018, which has been audited by PricewaterhouseCoopers Accountants N.V. The financial information for the years ended 31 December 2018 and 31 December 2019 has been derived from the audited consolidated financial statements of Rabobank Group for the year ended 31 December 2019, which has been audited by PricewaterhouseCoopers Accountants N.V. The financial ratios, excluding the leverage ratio, the fully loaded common equity tier 1 ratio and loan impairment charges in basis points of average lending are derived from the audited consolidated financial statements of Rabobank Group for the years ended 31 December 2019 and 31 December 2018.

Change in accounting policies and presentation

As a result of changes in accounting policies and presentation, certain figures for Rabobank Group for the year ended 31 December 2018 in this Information Statement have been restated. See Rabobank Group audited consolidated financial statements for the years ended 31 December 2019, under note 2.1 “Basis of Preparation” for further information.

Key performance indicators and non-IFRS measures

This Information Statement presents certain financial measures that are not measures defined under IFRS, including operating results. These non-IFRS financial measures are not measures of financial performance under IFRS and should not be considered as a replacement for any IFRS financial measure. In addition, such measures, as defined by Rabobank Group, may not be comparable to other similarly titled measures used by other companies, because the above-mentioned non-IFRS financial measures are not defined under IFRS, other companies may calculate them in a different manner than Rabobank Group which limits their usefulness as comparative measures. Rabobank Group believes that these non-IFRS measures are important to understand Rabobank Group’s performance and capital position.

This Information Statement also presents certain financial measures that are not measures defined under EU IFRS, including regulatory capital, risk-weighted assets and underlying results.

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Rounding and negative amounts

Certain figures contained in this Information Statement, including financial information, have been rounded. Accordingly, in certain instances the sum of the numbers in the text or a column or a row in tables contained in this Information Statement may not conform exactly to the total figure given for that column or row.

In tables, negative amounts are shown between brackets. Otherwise, negative amounts are shown by “-” or “negative” before the amount.

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FORWARD-LOOKING STATEMENTS

This Information Statement includes “forward-looking statements” within the meaning of section 27A of the U.S. Securities Act, as amended, (the “Securities Act”) and section 21E of the U.S. Securities Exchange Act of 1934, as amended, (the “Exchange Act”). All statements other than statements of historical facts included in this Information Statement, including, without limitation, those regarding the Issuer’s financial position, business strategy, plans and objectives of management for future operations (including development plans and objectives relating to the Issuer’s products), are forward-looking statements.

Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Issuer or industry results to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such forward-looking statements are based on numerous assumptions regarding the Issuer’s present and future business strategies and the environment in which the Issuer will operate in the future.

Important factors that could cause the Issuer’s actual results, performance or achievements to differ materially from those in the forward-looking statements include, among others, changes or downturns in the Dutch economy or the economies in other countries in which the Issuer conducts business, the impact of fluctuations in foreign exchange rates and interest rates and the impact of future regulatory requirements. Additional factors that could cause actual results, performance or achievements to differ materially include, but are not limited to, those discussed under “Risk Factors”.

These forward-looking statements speak only as of the date of this Information Statement. Other than as required by law or the rules and regulations of the relevant stock exchange, the Issuer expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statement contained herein to reflect any change in the Issuer’s expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based.

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SUMMARY FINANCIAL INFORMATION

The following unaudited table presents certain historical consolidated financial information for Rabobank Group derived from Rabobank’s 2019 Annual Report. This information should be read in conjunction with Rabobank Group’s audited consolidated financial statements and the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” which appear elsewhere in this Information Statement.

31 December

2019

31 December

2018(1)

31 December

2017

(in millions of euro, except percentages) Financial Key Figures

Common equity tier 1 ratio (fully loaded) ............................ 16.3% 16.0% 15.5%

Total capital ratio (transitional) ........................................ 25.2% 26.6% 26.2%

Leverage ratio (transitional) ............................................ 6.3% 6.4% 6.0%

Risk-weighted assets ..................................................... 205,797 200,531 198,269

Wholesale funding ......................................................... 151,742 153,223 160,407

Cost/income ratio including regulatory levies ....................... 63.8% 65.9% 71.3%

Underlying cost/income ratio including regulatory levies ........ 63.5%(2) 63.9% 65.3%

ROIC........................................................................... 5.5% 7.4% 6.9%

Return on equity ............................................................ 5.3% 7.3% 6.7%

Return on assets ........................................................... 0.4% 0.5% 0.4%

Other Financial Figures

Income ........................................................................ 11,915 12,020 12,001

Operating expenses ....................................................... 7,115 7,446 8,054

Impairment charges on financial assets .............................. 975 190 -190

Net profit ...................................................................... 2,203 3,004 2,674

Total assets .................................................................. 590,598 590,437 602,991

Private sector loan portfolio ............................................. 417,914 416,025 410,964

Deposits from customers ................................................. 342,536 342,410 340,682

Equity .......................................................................... 41,347 42,236 39,610

Loan-to-deposit ratio ...................................................... 1.21 1.21 1.21

Non-performing loans ..................................................... 15,705 18,436 18,315

(1) As a result of changes in accounting policies and presentation, certain figures for Rabobank Group for the year ended 31 December 2018 in this Information Statement have been restated. See Rabobank Group audited consolidated financial statements for the years ended 31 December 2019, under note 2.1 “Basis of Preparation” for further information.

(2) Adjusted for the result on fair value items, the sale of Rabobank National Association (RNA), restructuring expenses and the additional provision for the derivatives recovery framework

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CAPITALIZATION AND INDEBTEDNESS OF RABOBANK GROUP

The table with respect to the capitalisation and indebtedness of Rabobank Group below sets out Rabobank Group’s consolidated own funds and consolidated long-term and short-term debt securities as at 31 December 2019 and 31 December 2018. All information has been derived from and should be read in conjunction with the audited consolidated financial information for the year ended 31 December 2019, the information included in “Selected Financial Information”, the information in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and other financial data appearing elsewhere in this Information Statement.

There has been no material change in the capitalisation and indebtedness of Rabobank Group since 31 December 2019.

As at 31 December

(in millions of euros) 2019 2018

Capitalisation of Rabobank Group

Reserves and retained earnings ............................................................. 28,157 27,264

Equity instruments issued by Rabobank

Rabobank Certificates ............................................................................. 7,449 7,445

Capital Securities .................................................................................... 5,264 6,493

12,713 13,938

Equity instruments issued by subsidiaries

Capital Securities .................................................................................... _ 164

Trust Preferred Securities IV ................................................................... _ 389

_ 553

Other non-controlling interests ................................................................ 477 481

Total equity ............................................................................................ 41,347 42,236

Subordinated liabilities – non-current ...................................................... 14,342 15,499

Debt securities in issue – non-current - unsecured ................................. 60,195 65,069

Debt securities in issue – non-current – secured .................................... 30,754 24,481

Total non-current debt (excluding current portion of long-term

debt) ....................................................................................................... 105,291 105,048

Subordinated liabilities - current .............................................................. 1,448 1,000

Debt securities in issue - current - unsecured ......................................... 39,689 39,785

Debt securities in issue - current - secured ............................................. 5,354 7,341

Total current debt (maturity up to one year) ...................................... 46,490 48,126

Total capitalisation ............................................................................... 151,781 153,223

Breakdown of reserves and retained earnings

Revaluation reserve – financial assets at fair value through other

comprehensive income ........................................................................... 308 240

Revaluation reserve – pensions .............................................................. (170 ) (145 )

Other reserves ........................................................................................ (149 ) (76 )

Foreign currency translation reserves ..................................................... (742 ) (817 )

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As at 31 December


Retained earnings ................................................................................... 28,910 28,062

Total reserves and retained earnings ................................................. 28,157 27,264

The table below sets forth Rabobank Group’s net indebtedness in the short term and in the medium-long term. All information has been derived from and should be read in conjunction with Rabobank Group’s audited consolidated financial statements for the years ended 31 December 2019 and 31 December 2018 and the notes thereto, incorporated by reference into the Offering Circular.

As at 31 December


Indebtedness of Rabobank Group

Cash and balances at central banks(1) .................................................................... 63,086 73,335

Cash equivalents(2) .................................................................................................. 28,964 17,497

Trading securities(3) ................................................................................................. 398 521

Total liquidity ......................................................................................................... 92,448 91,353

Current financial receivables(4) ............................................................................ 109,999 104,038

Current bank debt(5) ................................................................................................ 16,495 14,060

Current portion of issued debt(6) .............................................................................. 46,145 47,196

Other current financial debt(7) .................................................................................. 318,570 315,720

Total current financial debt .................................................................................. 381,210 376,976

Net current financial indebtedness ..................................................................... 178,763 181,585

Non-current bank debt(8) ......................................................................................... 4,749 5,337

Non-current portion of issued debt(9) ....................................................................... 100,048 100,108

Other non-current financial debt(10) ......................................................................... 61,372 63,719

Non-current financial indebtedness .................................................................... 166,169 169,164

Net financial indebtedness .................................................................................. 344,932 350,749

Notes:

(1) Cash and balances at central banks.

(2) Loans and advances to credit institutions with a maturity of up to one year.

(3) Financial assets held for trading with a maturity of up to one year.

(4) Total financial assets with a maturity of up to one year excluding cash balances at central banks, loans and

advances to credit institutions and financial assets held for trading.

(5) Due to banks with a maturity of up to one year.

(6) Debt securities in issue and subordinated liabilities with a maturity of up to one year.

(7) Total financial liabilities with a maturity of up to one year excluding due to banks, debt securities in issue and

subordinated liabilities.

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(8) Due to banks with a maturity of more than one year.

(9) Debt securities in issue and subordinated liabilities with a maturity of more than one year.

(10) Total financial liabilities with a maturity of more than one year excluding due to banks, debt securities in issue

and subordinated liabilities.

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RISK FACTORS

An investment in our notes involves a number of risks. Investors should carefully consider the following information about the risks the Rabobank Group faces, together with other information in this Information Statement, when making investment decisions involving the notes. If one or more of these risks were to materialize, it could have a material adverse effect on Rabobank’s results of operations.

Section A: Risks related to the Issuer's financial position

Rabobank faces substantial funding and liquidity risk

Rabobank’s primary source of funding is customer deposits (2019: €342.5 billion) followed by wholesale funding (2019: €151.7 billion). Customer deposits are, generally speaking, volatile in nature and therefore no clear predictions can be made as to their amounts. Given that Rabobank’s funding requirements are greater than the amount of customer deposits, Rabobank is also reliant on wholesale funding to fund its balance sheet, which requires access to capital and money markets. Access to wholesale funding may be negatively affected by concerns about Rabobank’s credit strength or a downgrade of any of its credit ratings. Access can also be influenced by concerns about the market segments in which Rabobank is active or by a general market disruption. For example, the current coronavirus (or Covid-19) and measures taken to contain its spread have resulted in significant market disruptions.

Rabobank expects its 2020 net profit and income to be significantly impacted by the Covid-19 outbreak, mainly as a result of materially increased impairment charges on financial assets in Domestic Retail Banking ("DRB"), Wholesale & Rural and DLL International B.V. ( "DLL"), the impact of the continued low interest rate environment and a decrease in new business volume and economic activity generally, which could have a material adverse impact on Rabobank's financial position. See also the section “Description of Business of Rabobank Group – Recent Developments – Potential Impact of Covid-19” for further information in respect of the impact of the coronavirus outbreak. Any such factors as described above may result in higher funding and refinancing costs in the capital and money markets, which may also affect or effectively limit access to these markets. Although, in addition to the aforementioned funding sources, Rabobank may have access to the European Central Bank (the "ECB") facilities, the sensitivity of Rabobank to a liquidity risk is substantial.

Funding risk is the risk of not being able to meet both expected and unexpected current and future cash outflows and collateral needs without affecting either daily operations or the financial position of Rabobank. Liquidity risk is the risk that the bank will not be able to meet all of its payment obligations on time, as well as the risk that the bank will not be able to fund increases in assets at a reasonable price. Important factors in preventing this are maintaining an adequate liquidity position and retaining the confidence of institutional market participants and retail customers to maintain the deposit base and access to public money and the capital markets for the Group. However, if these are seriously threatened, this could have a material adverse effect on the Group’s business, financial condition and results of operations.

Rabobank is subject to significant exposure to systemic risk

The Group could be negatively affected by the weakness or the perceived weakness of other financial institutions, which could result in significant systemic liquidity problems, losses or defaults by other financial institutions and counterparties. This risk is sometimes referred to as ‘systemic risk’ and may adversely affect financial institutions as well as financial intermediaries, such as clearing agencies, clearing houses, banks, securities firms and exchanges with whom the Group interacts on a daily basis. Concerns about, or a default by, a financial institution could lead to significant liquidity problems and losses or defaults by other financial institutions, since the commercial and financial soundness of many financial institutions is closely related and inter-dependent as a result of credit, trading, clearing and other relationships. Any perceived lack of creditworthiness of a counterparty may lead to market-wide liquidity problems and losses for the Group. Concerns about the creditworthiness of sovereigns and financial institutions in Europe and the United States remain.

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The large sovereign debts or fiscal deficits of a number of European countries and the United States go hand in hand with concerns regarding the financial condition of financial institutions. Banks typically hold large amounts of (national) sovereign debt instruments for liquidity, securities’ finance and collateral management purposes. As a result, changes affecting the value of these debt instruments affect financial institutions directly. Increased debt financing by sovereigns ultimately would lead to higher debt financing, rating adjustments and will likely have a negative impact on banks. The Group is exposed to the financial institutions industry, including sovereign debt securities, banks, financial intermediation providers and securitised products. Due to the Group’s exposure to the financial industry, it also has exposure to shadow banking entities (ie, entities which carry out banking activities outside a regulated framework, such as payment platforms and crowdfunding platforms). Recently, there has been increasing regulatory focus on shadow banking. In particular, the European Banking Authority Guidelines (EBA/GL/2015/20) require the Group to identify and monitor its exposure to shadow banking entities, implement and maintain an internal framework for the identification, management, control and mitigation of the risks associated with exposure to shadow banking entities, and ensure effective reporting and governance in respect such exposure. If the Group is unable to properly identify and monitor its shadow banking exposure, maintain an adequate framework, or ensure effective reporting and governance, any of the above-mentioned consequences of systemic risk could have an adverse effect on the Group’s ability to raise new funding, its business, financial condition and results of operations.

Rabobank is exposed to the risk of a credit rating downgrade of any of its credit ratings

Rabobank’s access to capital and money markets is dependent on its credit ratings. The Group’s credit ratings could be negatively affected by a number of factors that can change over time, including a credit rating agency’s assessment of the Group’s strategy and management’s capability; its financial condition including in respect of profitability, asset quality, capital, funding and liquidity; the legal and regulatory frameworks applicable to the Group’s legal structure and business activities; changes in rating methodologies; the competitive environment, political and economic conditions in the Group’s key markets. A downgrading, an announcement of a potential downgrade in its credit ratings or a withdrawal of its credit rating, or a deterioration in the market’s perception of the Group’s financial position could significantly affect the Group’s access to money markets, reduce the size of its deposit base and trigger additional collateral or other requirements in derivatives contracts and other secured funding arrangements or the need to amend such arrangements, which could adversely affect the Group’s cost of funding, its access to capital markets and lead to higher refinancing costs and could limit the range of counterparties willing to enter into transactions with the Group. In addition, it might even limit access to these respective markets, and adversely affect Rabobank’s competitive position. This could have a material adverse effect on Rabobank’s prospects, business, financial condition and results of operations.

Rabobank is exposed to credit risks, which could result in economic losses

Rabobank is exposed to credit risk arising from third parties that owe money, securities or other assets. These parties include customers, issuers whose securities are being held by an entity within Rabobank, trading counterparties, counterparties under swaps and credit and other derivative contracts, clearing agents, exchanges, clearing houses and other financial intermediaries. The credit quality of the Group’s borrowers and other counterparties is impacted by prevailing economic and market conditions and by the legal and regulatory landscape in the relevant market and any deterioration in such conditions or changes to legal or regulatory landscapes could worsen borrower and counterparty credit quality and consequently impact the Group’s ability to enforce contractual security rights. These parties may default on their obligations to Rabobank due to bankruptcy, lack of liquidity, downturns in the economy or real estate values, operational failure or other reasons and could have an adverse effect on Rabobank’s business, financial position and results of operations. Any such defaults will reflect the adequacy of Rabobank’s credit provisions. These provisions relate to the possibility that a counterparty may default on its obligations which arise from lending or other financial transactions. If future events or the effects thereof do not fall within any of the assumptions, factors or assessments used by the Group to determine its credit provisions, these provisions could be inadequate. Inadequate provisions and economic losses in general have a material adverse effect on Rabobank’s business, financial condition and results of operations.

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See also the risk factor "The outbreak of communicable diseases around the world may materially and adversely affect Rabobank's business, financial condition and results of operations" on how Covid-19 may contribute to increasing credit risk for the Group.

Rabobank’s business is primarily concentrated in the Netherlands

Rabobank generates most of its income in the Netherlands (in 2019, 59 per cent. of its operating profit before tax was derived from its operations in the Netherlands) and therefore is particularly exposed to the economic, political and social conditions in the Netherlands. Economic conditions in the Netherlands may be negatively influenced by conditions in the global financial markets and economy. Partly due to the economic crisis and Covid-19, growth of the Dutch gross domestic product ("GDP") has been subdued. Following the growth of 2.0 per cent. in 2015, GDP grew by 2.20 per cent. in 2016 followed by a growth of 2.90 per cent. in 2017, 2.60 per cent. in 2018 and 1.7 per cent. in 2019. Any further deterioration or merely a long-term persistence of a difficult economic environment in the Netherlands could negatively affect the demand for products and services of Rabobank, as well as the credit risk of its borrowers. Also, Rabobank expects its 2020 net profit to be significantly impacted by the Covid-19 outbreak, mainly as a result of materially increased impairment charges on financial assets in DRB, Wholesale & Rural and DLL and lower income, which could have a material adverse impact on Rabobank's financial position. See also the section “Description of Business of Rabobank Group – Recent Developments – Potential Impact of Covid-19” for further information in respect of the impact of the coronavirus outbreak. In addition to the Netherlands, Rabobank is active in 39 countries, including, amongst others, Australia, New Zealand, North America and Latin America. In addition, Rabobank is generally exposed to transfer and/or collective debtor risk outside of the Netherlands. Transfer risk relates to the possibility of foreign governments placing restrictions on funds transfers from debtors in that country to creditors abroad. Collective debtor risk relates to the situation in which a large number of debtors in a country cannot meet their commitments for the same reason (e.g. war, political and social unrest or natural disasters, but also government policy that does not succeed in creating macro-economic and financial stability). Unpredictable and unexpected events which increase transfer risk and/or collective debtor risk could have a material adverse effect on Rabobank’s business, financial condition and results of operations.

Conditions in the global financial markets and economy could have a material adverse effect

on the Group’s business, financial condition and results of operations

The profitability of the Group could be adversely affected by a downturn in general economic conditions in the Netherlands or globally. Financial markets are volatile. Factors such as interest rates, exchange rates, inflation, deflation, investor sentiment, the availability and cost of credit, the liquidity of the global financial markets and the level and volatility of equity prices can significantly affect the activity level of customers and the profitability of the Group. In addition, developments like Brexit (as defined below) could adversely affect the general economic conditions and thereby the profitability of the Group. Interest rates remained low in 2019. Persistent low interest rates have negatively affected and continue to negatively affect the net interest income of the Group. An economic downturn, or significantly higher interest rates for customers, could adversely affect the credit quality of the Group’s assets by increasing the risk that a greater number of its customers would be unable to meet their obligations. Moreover, a market downturn in the Dutch or global economy could reduce the value of the Group’s assets and could cause the Group to incur marked-to-market losses in its trading portfolios or could reduce the fees the Group earns for managing assets or the levels of assets under management. In addition, a market downturn and increased competition for savings in the Netherlands could lead to a decline in the volume of customer transactions that the Group executes and, therefore, a decline in customer deposits and the income it receives from commissions and interest. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Material factors affecting results of operations — General market conditions” for (other) factors that could affect the Group's results of operations. Continuing volatility in the financial markets or a protracted economic downturn in the Group’s major markets or the Group’s inability to accurately predict or respond to such developments could have a material adverse effect on the Group’s business, financial condition and results of operations.

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Rabobank performs a number of operations in the United Kingdom for its customers, including products and services for international clients in the field of corporate banking, commercial financing and operations relating to global financial markets. In 2019, Rabobank's revenue in relation to the aforementioned operations in the United Kingdom was €753 million. On 31 January 2020, the United Kingdom left the European Union (the "Brexit"). The consequences of the Brexit are uncertain. Depending on the timing and outcome of negotiations about, amongst other things, the future relationship between the United Kingdom and the European Union, there may be volatility in financial markets, liquidity disruptions and market dislocations. The Group could be adversely impacted by related market developments such as increased exchange rate movements of the pound sterling versus the euro and higher financial market volatility in general due to increased uncertainty, any of which could affect the results of the Group's operations in the European Union or the United Kingdom. The United Kingdom moving away from agreed and implemented EU legislation as a result of Brexit could lead to increased regulatory uncertainty and might adversely impact the Group.

See also the risk factor " The outbreak of communicable diseases around the world may materially and adversely affect Rabobank's business, financial condition and results of operations" on how Covid-19 has affected, and may continue to affect, conditions in the global financial markets and economy.

Any of these factors could have a material adverse effect on the Group’s results of operations.

The outbreak of communicable diseases around the world may materially and adversely affect Rabobank's business, financial condition and results of operations

The outbreak of communicable diseases, pandemics and epidemics or health emergencies all impact the business and economic environment in which Rabobank operates. Certain of these risks are often experienced globally as well as in specific geographic regions where Rabobank does business. The coronavirus (or Covid-19) outbreak, which has spread globally in recent months, has disrupted various markets and resulted in uncertainty about the development of the economies affected by the outbreak. Rabobank has been, and could be further, affected by the Covid-19 outbreak through its direct and indirect impact on, among others, the customers or other counterparties of Rabobank, both in the Netherlands and elsewhere. Rabobank expects its 2020 net profit to be significantly impacted by the Covid-19 outbreak, mainly as a result of materially increased impairment charges on financial assets in DRB, Wholesale & Rural and DLL and lower income, which could have a material adverse impact on Rabobank's financial position. More specifically, the impact is expected on instruments measured at fair value and on expected credit losses. Given the uncertainties and ongoing developments, the exact ramifications of the Covid-19 outbreak are highly uncertain and it is difficult to predict the spread or duration of the outbreak. See also the section “Description of Business of Rabobank Group – Recent Developments – Potential Impact of Covid-19” for further information in respect of the impact of the coronavirus outbreak. There can also be no assurances that a potential tightening of liquidity conditions in the future as a result of, for example, further deterioration of public finances of certain European countries will not lead to new funding uncertainty, resulting in increased volatility and widening credit spreads. Any of the foregoing factors could have a material adverse effect on Rabobank's business, financial condition and results of operations.

Rabobank is exposed to changes in the interest rate environment as well as other market

risks

Rabobank’s results could potentially be adversely impacted by the level of and changes in interest rates, exchange rates, commodity prices, equity prices and credit spreads. Persistent low interest rates have in particular negatively affected and continue to negatively affect the net interest income of Rabobank (2019: €8,483 billion; 2018: €8,559 billion). This is mainly from mismatches between lending and borrowing costs given the periods for which interest rates are fixed for loans and funds entrusted. If interest rates increase, the rate for Rabobank’s liabilities, such as savings, may need to be adjusted immediately. At the same time, the rates on the majority of the Group’s

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assets, such as mortgages, which have longer interest rate fixation periods, will not change before the end of the fixed rate period. As a result, rising interest rates may have an adverse impact on Rabobank’s earnings. In addition, there is no certainty with regards to the successfulness of Rabobank’s interest rate risk management or the potential negative impact of risks associated with sustained low, flat or even negative interest rates.

Section B: Risks related to the Issuer’s business activities and industry

Rabobank’s results are to a large extent related to its domestic residential mortgage portfolio

Rabobank’s residential mortgage portfolio constitutes €187.7 billion (32 per cent. of the balance sheet total as at December 2019). As a result, any material changes affecting this portfolio could have a material impact on Rabobank. An economic downturn, stagnation or drop in property values, changes in or abolition of the tax deductibility of interest payments on residential mortgage loans in the Netherlands, increased and/or decreased interest rates, the financial standing of borrowers or a combination thereof, could lead to a decrease in the production of new mortgage loans and/or increased default rates on existing mortgage loans. A decrease in the level of interest rates on residential mortgage loans could affect Rabobank through, among other things, (i) increased prepayments on the loan and mortgage portfolio, for instance when as a result of low interest rates on saving accounts prepayments on mortgage loans are considered more beneficial to customers than savings, (ii) interest rate averaging, (iii) low margins for mortgage loans, in particular long term mortgages loans and (iv) other measures enabling customers to benefit from the low interest rate environment.

Any of the above factors, events and developments may have a negative impact on Rabobank’s interest margins on new and existing residential mortgage loans and may result in a decrease of its existing portfolio and/or in the production of new mortgage loans. The higher the loan-to-income ratio, the larger the proportion of the earnings of a borrower that will be needed to pay interest and principal under mortgage loans, especially when confronted with unexpected costs or expenses, or, in respect of an interest-only mortgage loan, the repayment of principal. This loan-to-income ratio and factors such as loss of earnings, illness, divorce and other similar factors may lead to an increase in delinquencies and bankruptcy filings by borrowers and could ultimately have an adverse impact on the ability of borrowers to repay their mortgage loans and lead to losses for Rabobank.

The tax rate against which the mortgage interest payments may be deducted (the “deductibility maximum”) by Dutch homeowners has been gradually reduced since 1 January 2014 by 0.5 percentage points per year. For taxpayers previously deducting mortgage interest at the 52 per cent. rate (highest income tax rate), the deductibility maximum is set at 49 per cent. in 2019. With effect from 1 January 2020, the deductibility maximum will be reduced by 3 percentage points per year to 37.05 per cent. in 2023. This acceleration could ultimately have an adverse impact on the ability of borrowers to pay interest and principal on their mortgage loans and may lead to different prepayment behaviour by borrowers on their mortgage loans, and may thus result in higher or lower prepayment rates of such loans. Any such increase in prepayment rates, could have a material adverse effect on Rabobank's financial condition and results of operations.

Changes in governmental policy or regulation with respect to the Dutch housing market could have a material adverse effect on the Group’s business, financial condition and results of operations.

Rabobank faces substantial competitive pressure both domestically as well as internationally,

which could adversely affect its results

Rabobank’s business environment in the Netherlands as well as internationally is highly competitive. Not only does Rabobank face competition from traditional banking parties, but also from non-banking parties, such as pension funds, insurance companies, technology giants, fintech companies, payment specialists, retailers, telecommunication companies and crowd-funding initiatives, all of which are offering some form of traditional banking services. Some of these parties have for example started to provide more segmented offers in the field of residential mortgages. In

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the Netherlands specifically, competition is reflected by an increased level of consolidation. This could result in increased pressure with regards to pricing particularly as competitors seek to win market share and may harm Rabobank’s ability to maintain or increase its market share and profitability. Rabobank’s ability to compete effectively depends on many factors, including its ability to maintain its reputation, the quality of its services and advice, its intellectual capital, product innovation, execution ability, pricing, sales efforts and the talent of its employees. Any failure by Rabobank to maintain its competitive position could have a material adverse effect on Rabobank’s prospects, business, financial condition and results of operations.

Rabobank’s financial condition is to a large extent dependent on its ability to accurately

price its services and products

Rabobank’s financial condition is to a large extent dependent on the ability to set accurately its prices and rates. Accuracy on both is necessary to generate sufficient profits to cover costs and sustain losses. However, the ability to do so is subject to a range of uncertainties. For example, the interest rates or pricing of products and or services provided by Rabobank (such as loans and derivatives) may be based on references to various benchmarks (such as the Euro Interbank Offered Rate ("EURIBOR") and the London Inter-Bank Offered Rate ("LIBOR")), most of which are subject to recent national and international regulatory guidance and proposals for reform (including the Benchmark Regulation which entered into force on 1 January 2018). Reforms such as the discontinuation of LIBOR (or any other reference rate or index), may cause benchmarks to perform differently than in the past, or to disappear entirely, or have other consequences which cannot be fully anticipated. This may result in rates and prices of products and services being determined on the basis of inadequate or inaccurate data or inappropriate analyses, assumptions or methodologies. If Rabobank fails to establish adequate rates and prices for its products and services, its revenues derived from such products could decline while its expenses increase resulting in proportionately greater financial losses. The replacement benchmarks, and the timing of and mechanisms for implementation have not yet been confirmed by benchmark administrators and central banks. Accordingly, it is not currently possible to determine whether, or to what extent, any such changes would affect Rabobank.

Rabobank is exposed to operational risks, including cybercrime risk

Operational risks faced by Rabobank are risk of losses resulting from inadequate or failed internal processes, people or systems or by external events (this includes, amongst others, financial reporting risk, cyber risk, model risk, compliance risk, legal risk, BCM/IT risk and fraud risk) and can have a material adverse effect (financial loss, reputational and/or regulatory impact). This includes all non-financial risk types and can have a material adverse effect on Rabobank’s reputation or have a material adverse effect on its business, financial condition and results of operations. It arises from day-to-day operations and is relevant to every aspect of the business. Events in modern international banking have shown that operational risks can lead to substantial losses. Examples of operational risk incidents are highly diverse: fraud or other illegal conduct, failure of an institution to have policies and procedures and controls in place to prevent, detect and report incidents of non-compliance with applicable laws or regulations, claims relating to inadequate products, inadequate documentation, errors in transaction processing, system failures, as well as the inability to retain and attract key personnel. Although Rabobank seeks to adhere to a robust Risk and Control Framework, Rabobank cannot ensure that interruptions, failures or breaches of its communication and information systems as a result of fraud or human error will not occur. In addition, if such events do occur, Rabobank cannot ensure that they will be adequately addressed in a timely manner.

Finally, cybercrime risk is also a relevant and ongoing threat that may lead to an interruption of services to customers, loss of confidential information or erosion of trust and reputation. The above may also apply for third parties on which the Group depends. The global environment Rabobank is operating in requires constant adjustment to changing circumstances. Projects relating to cybercrime (including projects intended to ensure compliance with regulatory requirements) continue to take place within the bank which may result in an increased risk profile and could have a material adverse effect on Rabobank's business, reputation, financial condition and results of operations. Any failure in the Group’s cybersecurity policies, procedures or controls, may result in significant financial losses, major business disruption, inability to deliver customer services, or loss

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of data or other sensitive information (including as a result of an outage) and may cause associated reputational damage. Any of these factors could increase costs, result in regulatory investigations or sanctions being imposed or may affect the Group’s ability to retain and attract customers. Regulators in Europe, the US, UK and Asia continue to recognise cybersecurity as an increasing systemic risk to the financial sector and have highlighted the need for financial institutions to improve their monitoring and control of, and resilience to cyberattacks, and to provide timely notification of them, as appropriate.

Section C: Legal and regulatory risk

The Group faces risk where legal and arbitration proceedings are brought against it. The outcome

of such proceedings is inherently uncertain and could adversely affect its financial and business

operations

Rabobank is subject to a comprehensive range of legal obligations in all countries in which it operates. As a result, Rabobank is exposed to many forms of legal risk, which may arise in a number of ways. Failure to manage and or a negative outcome of potentially significant claims (including proceedings, collective-actions and settlements and including the developments described above), action taken by supervisory authorities or other authorities, legislation, sector-wide measures, and other arrangements for the benefit of clients and third parties could have a negative impact on Rabobank’s reputation or impose additional operational costs, and could have a material adverse effect on Rabobank’s prospects, business, financial condition and results of operations. An example of this is the (re-)assessment of the interest rate derivatives of Rabobank's Dutch small and medium-sized enterprises ("SME") customers and the advance payments made.

In March 2016 the Dutch Minister of Finance appointed an independent committee which on 5 July 2016 published a recovery framework (the "Recovery Framework") on the reassessment of Dutch SME interest rate derivatives. Rabobank announced its decision to take part in the Recovery Framework on 7 July 2016. The final version of the Recovery Framework was published by the independent committee on 19 December 2016. Rabobank is involved in civil proceedings in the Netherlands relating to interest rate derivatives entered into with Dutch business customers. The majority of these concern individual cases. In addition, there is a collective action regarding interest rate derivatives pending before the Court of Appeal (for which a standstill was agreed to, due to the Recovery Framework, and the few remaining out-of-scope customers will be assessed on an individual basis). These actions concern allegations of misinforming clients with respect to interest rate derivatives. Some of these actions also concern allegations in connection with Rabobank’s EURIBOR submissions. Rabobank will defend itself against all these claims. Furthermore, there are pending complaints and proceedings against Rabobank regarding interest rate derivatives brought before "Kifid" (Dutch Financial Services Complaints Authority, Klachteninstituut Financiële Dienstverlening), which in January 2015 opened a conflict resolution procedure for SME businesses with interest rate derivatives. With respect to the (re-)assessment of the interest rate derivatives of its Dutch SME business customers and the advance payments made, Rabobank recognised at 31 December 2019 a provision of €107 million (2018: €316 million). At year-end 2019, Rabobank’s payments to clients under the Recovery Framework amounted to €249 million. By 31 December 2019, all Dutch SME business customers eligible under the Recovery Framework have received clarity on the remuneration of the reassessment of their interest rate derivatives. When customers agree to the remuneration amount, Rabobank will draw up a closing letter and an independent reviewer will review the reassessment. All reassessments and reviews are expected to be finished in 2020.

A negative outcome of potentially significant claims (including proceedings, collective-actions and settlements and including the developments described above), action taken by supervisory authorities or other authorities, legislation, sector-wide measures, and other arrangements for the benefit of clients and third parties could have a negative impact on the Group’s reputation or impose additional operational costs, and could have a material adverse effect on the Group’s prospects, business, financial condition and results of operations. For an overview of the legal and arbitration proceedings of the Group, see “Description of Business of Rabobank Group — Legal and arbitration proceedings” on pages 29 to 30 of this Information Statement. For relevant specific

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proceedings, reference is made to pages 152 to 153 of the Group’s audited consolidated financial statements, including the notes thereto, for year ended 31 December 2019, incorporated by reference into the Offering Circular.

Rabobank’s financial condition is exposed to changes as a result of the Benchmark

Regulation

Regulators are driving a transition from the use of certain benchmark rates, including LIBOR, to alternative risk free rates. In the UK, the FCA has asserted that they will not compel LIBOR submissions beyond 2021, thereby jeopardising its continued availability, and have strongly urged market participants to transition to alternative rates, as has the CFTC and other regulators in the US. The Group has a significant exposure to benchmark rates, and continues to reference LIBOR in certain products, primarily its derivatives, commercial lending and legacy securities. Although the Group is actively engaged with customers and industry working groups to manage the risks relating to such exposure, and is exploring ways to utilise alternative risk free rates to the extent possible, the legal mechanisms to effect transition cannot be confirmed, and the impact cannot be determined nor any associated costs accounted for, until such time that alternative risk free rates are utilised exclusively, and there is market acceptance on the form of alternative risk free rates for different products, and certain benchmark obligations may not be able to be changed. The transition and uncertainties around the timing and manner of transition to alternative risk free rates represent a number of risks for the Group, its customers and the financial services industry more widely, including:

legal risks arising from potential changes required to documentation for new and

existing transactions, which may have a material adverse effect on the Group's

business and prospects;

financial risks arising from any changes in the valuation of financial instruments

linked to benchmark rates, which may have a material adverse effect on the Group's

results of operations and financial condition;

operational risks arising from the potential requirement to adapt IT systems, trade

reporting infrastructure and operational processes, which may have a material

adverse effect on the Group's business and results of operations; and

conduct risks arising from the potential impact of communication with customers and

engagement during the transition period, which may have a material adverse effect

on the Group's business and prospects.

The replacement benchmarks, and the timing of and mechanisms for implementation have not yet been confirmed by benchmark administrators and central banks. Accordingly, it is not currently possible to determine whether, or to what extent, any such changes would affect Rabobank. However, the implementation of alternative benchmark rates may, as a result of one or more of the risks set out in the preceding paragraph, have a material adverse effect on Rabobank’s business, results of operations, financial condition and prospectus.

See also the risk factor "Rabobank’s financial condition is to a large extent dependent on its ability to accurately price its services and products" for other examples relating to benchmark reform which could have a material adverse impact on Rabobank.

The Group's participation in the Dutch Deposit Guarantee Scheme may have a material

adverse effect on its business, results of operations and financial condition

Since 2015, the Group has been required to make yearly contributions to the resolution funds which were established to ensure the efficient application of resolution tools and the exercise of the resolution powers conferred to the SRB (as defined below) by the Regulation (EU) No 806/2014 (the “SRM Regulation”). In 2019, the contribution to the Dutch National Resolution Fund (the “DNRF”) amounted to €206 million.

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Furthermore, the SRM (as defined below) and other new European rules on deposit guarantee schemes could have an impact on the Group in the years to come. All these factors could have a material adverse effect on the Group’s business, financial condition and results of operations.

In November 2015, a new way of financing the Dutch deposit guarantee scheme (the “Dutch Deposit Guarantee Scheme”), a pre-funded system that protects bank depositors from losses caused by a bank’s inability to pay its debts when due, came into force. As of 2016, banks were required to pay a premium on a quarterly basis. The target size of the scheme is 0.8 per cent. of total guaranteed deposits of all banks in the Netherlands. In 2019, the Group’s contribution to the Dutch Deposit Guarantee Scheme amounted to €137 million compared to €118 million in 2018.

There can be no assurance that additional taxes or levies will not be imposed, which could have a material adverse effect on the Group’s business, financial condition and results of operations.

For further information on regulation applicable to Rabobank, please see the section entitled “Regulation of Rabobank Group”.

The Issuer is subject to stress tests and other regulatory enquiries, the outcome of which

could materially and adversely affect the Issuer's reputation, financing costs and trigger

enforcement action by supervisory authorities

The banking sector, which includes the Group, is subject to periodic stress testing and other regulatory enquiries to examine the resilience of banks to adverse market developments. Such stress tests are initiated and coordinated by the EBA or the ECB. Stress tests and the announcements of their results by supervisory authorities can destabilise the banking or the financial services sector and lead to a loss of trust with regard to individual banks or the financial services sector as a whole. The outcome of stress tests could materially and adversely affect the Issuer's reputation, financing costs and trigger enforcement action by supervisory authorities. The outcome of stress tests could also result in the Group having to meet higher capital and liquidity requirements, which could have a material adverse effect on the Issuer's business, results of operations, profitability or reputation.

In addition, stress tests could divulge certain information that would not otherwise have surfaced or which until then, the Issuer had not considered to be material and worthy of taking remedial action on. This could lead to certain measures or capital and funding requirements by supervisory authorities being imposed or taken, which could have a material adverse effect on the Issuer's business, results of operations, profitability or reputation.

Rabobank is subject to changes in financial reporting standards and or polices, which might

have an adverse impact on its reported results and financial condition

The Group’s consolidated financial statements are prepared in accordance with IFRS as adopted by the European Union, which is periodically revised or expanded. Accordingly, from time to time, the Group is required to adopt new or revised accounting standards issued by recognised bodies, including the International Accounting Standards Board (“IASB”). It is possible that future accounting standards which the Group is required to adopt, could change the current accounting treatment that applies to its consolidated financial statements and that such changes could have a material adverse effect on the Group’s results of operations and financial condition and may have a corresponding material adverse effect on capital ratios. An example of which is the introduction of IFRS 16 on leases on 1 January 2019. The introduction of IFRS 16 did not have an impact on equity of Rabobank but did lead to an increase of assets and liabilities as at 1 January 2019 for an amount of €554 million.

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Resolution regimes may lead to fewer assets of the Issuer being available to investors for

recourse for their claims, and may lead to lower credit ratings and possibly higher cost of

funding

The Special Measures Financial Institutions Act (Wet bijzondere maatregelen financiële ondernemingen, the “Intervention Act”), the Directive 2014/59/EU for the establishment of an EU-wide framework for the recovery and resolution of credit institutions and investment firms ( “BRRD”) and the SRM Regulation set out the intervention and resolution framework applicable to the Issuer.

Recovery and resolution plans and powers to address impediments to resolvability

The Group has drawn up a recovery plan. In addition, the SRB, in cooperation with DNB acting in its capacity as the national resolution authority draws up a resolution plan for the Group on a yearly basis providing for resolution actions it may take if the Group is failing or is likely to fail. In drawing up the Group’s resolution plan, the SRB can identify any material impediments to its resolvability. Where necessary, the SRB may require the removal of such impediments. This may lead to mandatory restructuring of the Group, which could lead to high transaction costs, or could make the Group’s business operations or its funding mix to become less optimally composed or more expensive.

Early intervention measures

If the Group would infringe or, due to a rapidly deteriorating financial condition, would be likely to infringe capital or liquidity requirements in the near future, the ECB has power to impose early intervention measures on the Group. A rapidly deteriorating financial condition could, for example, occur in the case of a deterioration of the Group’s liquidity position, or in the case of increasing levels of leverage, non-performing loans or concentrations of exposures. Intervention measures include the power to require changes to the legal or operational structure of the Group, or its business strategy, and the power to require the Managing Board to convene a meeting of the General Members’ Council of Rabobank, failing which the ECB can directly convene such meeting, in both cases with the power of the ECB to set the agenda and require certain decisions to be considered for adoption. Furthermore, if these early intervention measures are not considered sufficient, management may be replaced or a temporary administrator may be installed. A special manager may also be appointed who will be granted management authority over the Issuer instead of its existing executive board members, in order to implement the measures decided on by the ECB. These measures, when implemented, may lead to fewer assets of the Issuer being available to investors for recourse for their claims.

(Pre-)Resolution measures

If Rabobank or the Group were to reach a point of non-viability but not (yet) meet the conditions for resolution, the SRB in close cooperation with the national resolution authority can take pre-resolution measures. These measures include the power to write down capital instruments or convert them into Common Equity Tier 1 Capital instruments.

If Rabobank meets the conditions for resolution, the SRB may take resolution measures. Conditions for resolution are: (i) the ECB or the SRB determines that Rabobank is failing or is likely to fail, (ii) having regard to the circumstances, there is no reasonable prospect that any alternative private sector or supervisory action would, within a reasonable timeframe, prevent the failure of Rabobank, and (iii) the resolution measure is necessary in the public interest.

Rabobank would be considered to be failing or likely to fail, inter alia, if it infringes capital or liquidity requirements or Rabobank’s liabilities exceed its assets, or Rabobank is unable to pay its debts and liabilities as they fall due, or there are objective elements to support a determination that this will be the case in the near future.

Resolution tools of the SRB include a sale of a business or part of a business, a bridge institution tool, an asset separation tool and a bail-in tool that would enable the write-down and conversion of debt into shares and other instruments of ownership to strengthen the financial condition of the failing bank and allow it to continue as a going concern subject to appropriate

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restructuring. The SRB also has the power to require the mandatory write-down of capital instruments when a bank enters resolution.

When applying the resolution tools and exercising the resolution powers, including the preparation and implementation thereof, the SRB can exercise its powers irrespective of any restriction on, or requirement for consent for, transfer of the financial instruments, rights, assets or liabilities in question that might otherwise apply. Any such exercise may lead to fewer assets of the Issuer being available to investors for recourse for their claims.

Risks relating to the EU Banking Reforms

On 23 November 2016, the European Commission announced amendments of certain provisions of, inter alia, CRD IV, CRR, the BRRD and the SRM Regulation which were included in the EU banking reform package adopted in April 2019 (the "EU Banking Reforms") and which, amongst others, intend to implement the final total loss-absorbing capacity ("TLAC") standard and clarify its interaction with MREL. It is not possible to give any assurances as to the ultimate scope, nature, timing and of any resulting obligations, or the impact that they will have on the Issuer once implemented, including the amount of currently outstanding instruments qualifying as MREL going forward.

The Intervention Act, BRRD, SRM and the EU Banking Reforms may lead to lower credit ratings and may increase the Issuer's cost of funding and thereby have an adverse impact on the Issuer's funding ability, financial position and results of operations. In case of a capital shortfall, the Issuer would first be required to carry out all possible capital raising measures by private means, including the conversion of junior debt into equity, before one is eligible for any kind of restructuring State aid.

In addition, potential investors should refer to the risk factors entitled “Any difficulty in raising minimum requirement for own funds and eligible liabilities may have a material adverse effect on the Group’s business, financial position and results of operations” which set out the risks relating to the resolution framework applicable to the Group.

Any difficulty in raising minimum requirement for own funds and eligible liabilities may have a material adverse effect on the Group’s business, financial position and results of operations

In order to ensure the effectiveness of bail-in and other resolution tools introduced by BRRD, the BRRD requires that all institutions (including Rabobank) must meet a minimum requirement for own funds and eligible liabilities (“MREL”), expressed as a percentage of total liabilities and own funds and set by the relevant resolution authorities.

In 2019, Rabobank received an updated binding MREL requirement of 9.64 per cent. of Total Liabilities (TLOF) which corresponds to 28.58 per cent. of the risk weighted assets (“RWA”) as of 2017 based on the BRRD and the 2018 SRB MREL Policy framework. On the basis of the regulatory technical standards (“MREL RTS”) adopted on 23 May 2016 by the European Commission on the criteria for determining the MREL, it is possible that the Group may have to issue a significant amount of additional MREL eligible liabilities in order to meet the new requirements within the required timeframes. This may result in higher capital and funding costs for the Group, and as a result adversely affect the Group's profits. Moreover, the MREL framework may be subject to substantial change over the coming years. For example, the EU Banking Reforms have recently made changes to the existing MREL framework and furthermore introduced changes to the CRD IV, CRR, BRRD and the SRM Regulation. Any future changes may also require the Group to raise additional regulatory capital or hold additional liquidity buffers which may adversely affect the Group's financial position and results of operation. As a result, it is not possible to give any assurances as to the ultimate scope, nature, timing, disclosure and consequences of breach of any resulting obligations, or the impact that they will have on Rabobank once implemented. If the Group were to experience difficulties in raising MREL eligible liabilities, it may have to reduce its lending or investments in other operations which would have a material adverse effect on the

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Group’s business, financial position and results of operations. In addition, the above requirements and the market’s perception of the Group’s ability to satisfy them may adversely affect the market value of the notes.

Any increase in the Group’s minimum regulatory capital and liquidity requirements may have a

material adverse effect on the Group’s business, financial condition and results of operations

Under CRD IV (as defined below), institutions (including Rabobank) are required to hold a minimum amount of regulatory capital equal to 8 per cent. of the aggregate total risk exposure amount of the Group (“Risk-Weighted Assets”) (of which at least 4.5 per cent. must be Common Equity Tier 1 Capital). In addition to these so-called minimum or “Pillar 1” “own funds” requirements, the CRD IV Directive also introduces capital buffer requirements that are in addition to the minimum “own funds” requirements and are required to be met with Common Equity Tier 1 Capital. It provides for five capital buffers: (i) the capital conservation buffer, (ii) the institution-specific countercyclical capital buffer, (iii) the global systemically important institutions buffer (the “G-SII Buffer”), (iv) the other systemically important institutions buffer (the “O-SII Buffer”) and (v) the systemic risk buffer. The capital conservation buffer (2.5 per cent.), systemic risk buffer (currently set at 3.0 per cent., but lowered to 2.0 per cent. by DNB to mitigate the impact of the Covid-19 pandemic on the Dutch economy) and countercyclical capital buffer (0.06 per cent. as of 31 December 2019) all apply to the Group and some or all of the other buffers may be applicable to the Group from time to time, as determined by the ECB, the Dutch Central Bank (“DNB”) or any other competent authority at such time. Any increase in the pillar 2 requirements and/or capital buffer requirements, including an increase of the systemic risk buffer by DNB, may require the Group to increase its CET1 Ratio and also its overall amount of capital and MREL which could have a material adverse effect on the Group’s business, financial position and results of operations.

In addition to the “Pillar 1” and capital buffer requirements described above, CRD IV contemplates that competent authorities may require additional “Pillar 2” capital to be maintained by an institution relating to elements of risks which are not fully captured by the minimum “own funds” requirements (“additional own funds requirements”) or to address macro-prudential requirements.

On 15 December 2019, Rabobank published its 2020 ECB capital requirements, determined pursuant to the SREP. The ECB decision requires that Rabobank maintains a total supervisory review and evaluation process (“SREP”) capital requirement of 9.75 per cent. on a consolidated and unconsolidated basis. The requirement consists of an 8 per cent. minimum own funds requirement and a 1.75 per cent. Pillar 2 requirement (“P2R”). The total Common Equity Tier 1 Capital minimum requirement is 6.25 per cent., consisting of the minimum Pillar 1 requirement (4.5 per cent.) and the P2R (1.75 per cent.). On 8 April 2020 the ECB informed the Rabobank that the P2R is “ to be held in the form of Common Equity Tier 1 (CET1) capital, which the Original Decision imposes on the Supervised Entity and other ECB addressees, if any, shall, instead, be held in the form of 56.25 per cent. of CET1 capital and 75 per cent. of Tier 1 capital, as a minimum.” This effectively lowers the total Common Equity Tier 1 Capital minimum requirement with 0.77 per cent.

In addition, Rabobank is required to comply with the combined buffer requirements consisting of a capital conservation buffer (2.5 per cent. as of 2019), a systemic risk buffer imposed by DNB of 2 per cent. as of 2019 (which, as at the date of this Information Statement, has been lowered to 3.0 per cent. by DNB to mitigate the impact of the Covid-19 pandemic on the Dutch economy) and a countercyclical capital buffer (0.06 per cent. as of 31 December 2019) that needs to be applied on top of these Common Equity Tier 1 Capital requirements. When taking into account the temporarily lowered systemic risk buffer imposed by DNB, this would translate into an aggregate 10.04 percent. Common Equity Tier 1 Capital requirement for 2020. At the date of this Information Statement, the Group complies with these requirements. See also “Capital Adequacy” under the chapter “Management’s discussion and analysis of financial condition and results of operation” on page 71 of this Information Statement for an overview of the capital figures applicable to Rabobank. In the Netherlands, the countercyclical capital buffer currently has been set at zero per cent. by DNB. However, DNB and (in respect of exposures outside the Netherlands) local regulators may set the countercyclical capital buffer at a level other than zero per cent resulting in a countercyclical capital

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buffer of 0.06 per cent as per 31 December 2019. Furthermore, DNB has noted that once the situation is back to normal, it will compensate the systemic buffers reduction by gradually increasing the countercyclical capital buffer to 2.0 per cent.

The ECB decision also requires that Rabobank maintains a CET1 Ratio of 8.75 per cent. on an unconsolidated basis. This 8.75 per cent. capital requirement is comprised of the minimum Pillar 1 requirement (4.5 per cent.), the P2R (1.75 per cent.) and the capital conservation buffer (2.5 per cent. as of 2019).

Rabobank currently intends to maintain an internal management buffer comprising Common Equity Tier 1 Capital over the combined buffer requirement applicable to the Group. As part of its Strategic Framework 2016-2020 and an update of the strategy, in anticipation of the expected impact of new rules on capital requirements, the Group aims at a long term CET1 Ratio of a minimum of 14 per cent., but there can be no assurance that this target ratio will be maintained. This target could be revised as a result of (regulatory) developments. As at 31 December 2019, the CET1 Ratio of the Group was 16.3 per cent. and the solo CET1 Ratio of the Group as at 31 December 2019 was 16.8 per cent. There can be no assurance, however, that Rabobank will continue to maintain such internal management buffer or that any such buffer would be sufficient to protect against a breach of the combined buffer requirement resulting in restrictions on payments on its Common Equity Tier 1 and additional tier 1 instruments.

The Group is subject to the risk, inherent in all regulated financial businesses, of having insufficient capital resources to meet its minimum regulatory capital requirements, any additional own funds requirements or any capital buffer requirements. Capital requirements may increase if economic conditions or negative trends in the financial markets worsen. Any failure of the Group to maintain its “Pillar 1” minimum regulatory capital ratios, any “Pillar 2” additional own funds requirements or any capital buffer requirements could result in administrative actions or sanctions, which in turn could have a material adverse impact on the Group’s results of operations. A shortage of available capital may restrict the Group’s opportunities.

In December 2017, the Basel Committee on Banking Supervision (the “Basel Committee”) finalised the Basel III reforms (also referred to as “Basel IV” by the industry) (the “Basel III Reforms”).

Of the Basel III Reforms, the introduction of the standardized credit risk RWA (REA) floor is expected to have the most significant impact on the Group. The standards for the new standardized credit risk RWA (REA) calculation rules include (i) introduction of new risk drivers, (ii) introduction of higher risk weights and (iii) reduction of mechanistic reliance on credit ratings (by requiring banks to conduct sufficient due diligence, and by developing a sufficiently granular non-ratings-based approach for jurisdictions that cannot or do not wish to rely on external credit ratings). The implementation of the standardized RWA (REA) floors is expected to have a significant impact on the calculation of the Group’s risk weighted assets due to the substantial difference in RWA (REA) calculated on the basis of advanced approaches and such calculation on the basis of new standardized rules for mortgages, and, to a lesser extent, exposures to corporates.

If the regulatory capital requirements, liquidity restrictions or ratios applied to the Group are increased in the future, any failure of the Group to maintain such increased capital and liquidity ratios may result in administrative actions or sanctions, which may have a material adverse effect on the Group’s business, financial condition and results of operations. For further information regarding Basel III Reforms and CRD IV, including their implementation in the Netherlands, please see the section entitled “Regulation of Rabobank Group”.

The Issuer's ability to retain and attract qualified employees is critical to the success of its

business and the failure to do so may adversely affect the Issuer's business, financial condition

and results of operations

The Group’s success depends to a great extent on the ability and experience of its senior management and other key employees. The loss of the services of certain key employees,

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particularly to competitors, could have a material adverse effect on the Group’s business, financial condition and results of operations. The failure to attract or retain a sufficient number of appropriate employees could significantly impede the Group’s financial plans, growth and other objectives and have a material adverse effect on the Group’s business, financial condition and results of operations.

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DESCRIPTION OF BUSINESS OF RABOBANK GROUP

(Chamber of Commerce registration number 30046259)

General

Rabobank Group is an international financial services provider operating on the basis of cooperative principles. Rabobank Group comprises Rabobank as the top holding entity together with its subsidiaries in the Netherlands and abroad. Rabobank Group operates in 40 countries. Its operations include domestic retail banking, wholesale & rural, leasing and real estate. It serves approximately 9.5 million clients around the world. In the Netherlands, its focus is on maintaining Rabobank Group’s position in the Dutch market and, internationally, on food and agriculture.

Rabobank Group’s cooperative core business is carried out by the local Rabobanks. With 371 branches at 31 December 2019, the local Rabobanks form a dense banking network in the Netherlands. Together the local Rabobanks serve approximately 8.0 million private customers, and approximately 0.8 million corporate clients, offering a comprehensive package of financial services. Clients can become members of Rabobank.

Historically, Rabobank Group has engaged primarily in lending to the agricultural and horticultural sectors in the Dutch market. Since the 1990s, Rabobank Group has also offered a wide variety of commercial banking and other financial services not only in the Netherlands but also internationally. As part of an on-going programme, Rabobank Group has increased both the number and type of products and services available to its customers in order to diversify from a traditional savings and mortgage-based business to become a provider of a full range of financial products and services, both in the Netherlands and internationally. Rabobank Group provides an integrated range of financial services comprising primarily Domestic Retail Banking, Wholesale & Rural, Leasing, Real Estate and distribution of insurance products to a wide range of both individual and corporate customers.

As at 31 December 2019, Rabobank Group had total assets of €590.6 billion, a private sector loan portfolio of €417.9 billion, amounts due to customers of €342.5 billion (of which savings deposits total €145.8 billion) and equity of €41.3 billion. Of the private sector loan portfolio, €191.3 billion, virtually all of which were mortgages, consisted of loans to private individuals, €119.4 billion of loans to the trade, industry and services sector and €107.2 billion of loans to the food and agriculture sector. As at 31 December 2019, its CET1 Ratio, which is the ratio between Common Equity Tier 1 Capital and total risk-weighted assets, was 16.3 per cent. and its capital ratio, which is the ratio between qualifying capital and total risk-weighted assets, was 25.2 per cent. Rabobank Group’s cost/income ratio, which is the ratio between total operating expenses (regulatory levies included) and total income, was 63.8 per cent. for the year ended 31 December 2019 and 65.9 per cent. for the year ended 31 December 2018. Rabobank Group realised a net profit of €2,203 million for the year ended 31 December 2019. As at 31 December 2019, Rabobank Group employed 43,822 employees (internal and external full time employees (“FTEs”)).

The return on invested capital (“ROIC”) is calculated by dividing net profit realised after non-controlling interests by the core capital (actual Tier 1 capital plus the goodwill in the balance sheet at the end of the reporting period) minus deductions for non-controlling interests in Rabobank’s equity. For the year ended 31 December 2019, Rabobank’s ROIC was 5.5 per cent. As at 31 December 2018, it was 7.4 per cent.

Group overview

The overview below provides an overview of the business of Rabobank Group. The figures presented in the overview are provided as at 31 December 2019.

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Business activities of Rabobank Group

Through the local Rabobanks, Rabobank and its other subsidiaries, Rabobank Group provides services in the following core business areas: Domestic Retail Banking; Wholesale & Rural; Leasing; and Real Estate.

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Domestic Retail Banking

DRB comprises the local Rabobanks and Obvion N.V. (“Obvion”). In the Netherlands, Rabobank is a significant mortgage bank, savings bank and insurance agent. Based on internal estimates, Rabobank believes it is also the leading bank for the small and medium-sized enterprises sector in the Netherlands. Obvion focuses exclusively on collaboration with independent brokers.

As at 31 December 2019, DRB had total external assets of €275.9 billion, a private sector loan portfolio of €271.2 billion, deposits from customers of €253.1 billion (of which savings deposits total €123.7 billion). For the year ended 31 December 2019, DRB accounted for 57 per cent., or €6,815 million, of Rabobank Group’s total income and 81 per cent., or €1,776 million, of Rabobank Group’s net profit. As at 31 December 2019, DRB employed 26,889 FTEs.

Local Rabobanks

Proximity and commitment to their clients enhance the local Rabobanks’ responsiveness and speed of decision-making. Their commitment is reflected in their close ties with local associations and institutions. The local Rabobanks are committed to providing maximum service to their clients by making optimum use of different distribution channels, such as branch offices, the internet and mobile telephones. Many private individuals have current, savings or investment accounts or mortgages with the local Rabobanks. The local Rabobanks constitute a major financier of Dutch industry, from small high street shops to listed enterprises. Furthermore, the local Rabobanks traditionally have had close ties with the agricultural sector.

Obvion

Obvion is a provider of mortgages and a number of service products, including guarantees and bridging loans. Obvion focuses exclusively on collaboration with independent brokers.

Wholesale & Rural

Wholesale & Rural focuses its activities on the food and agri sector and has an international network of branches with offices and subsidiaries in various countries. Rabobank also operates RaboDirect internet savings banks. The wholesale banking division serves the largest domestic and international companies (Corporates, Financial Institutions, Traders and Private Equity). Rural banking is focused on offering financial solutions for the specific needs of leading farmers and their communities in a selected number of key Food & Agri countries. The total number of internal and external employees in Wholesale & Rural stood at 9,897 FTEs at year-end 2019.

All sectors in the Netherlands are being serviced, while outside the Netherlands Rabobank focuses on the Food & Agri and trade-related sectors. Internationally, Rabobank Group services food & agri clients, ranging from growers to the industrial sector, through its global network of branches. Rabobank Group services the entire food value chain, with specialists per sector. Rabobank Group advises its clients and prospects in these sectors by offering them finance, knowledge and its network. Rabobank is active in the main food-producing countries such as the United States, Australia, New Zealand, Brazil and main food consumption countries.

As at 31 December 2019, Wholesale & Rural had total external assets of €137.1 billion and a private sector loan portfolio of €112.4 billion. For the year ended 31 December 2019, Wholesale & Rural accounted for 31 per cent., or €3,662 million, of Rabobank Group’s total income and 31 per cent., or €677 million, of Rabobank Group’s net profit.

Leasing

Within Rabobank, DLL is the entity responsible for Rabobank Group’s leasing business supporting manufacturers and distributors selling products and services worldwide with vendor finance. DLL, active in more than 30 countries and 9 industries, is a global provider of asset-based financial solutions in the agriculture, food, healthcare, clean technology, transportation, construction, industrial and office technology industries. DLL is committed to delivering integrated

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financial solutions that support the complete asset life cycle. As of 31 December 2019, DLL employed 5,303 FTEs (including external staff).

Rabobank owned a 100 per cent. equity interest in DLL as at 31 December 2019. Its issued share capital amounted to €98,470,307 as at 31 December 2019, all of which is owned by Rabobank. As at 31 December 2018, Rabobank’s liabilities to DLL amounted to €2,724 million. As at 31 December 2019, Rabobank’s claims on DLL amounted to €28,676 million (loans, current accounts, financial assets and derivatives).

As at 31 December 2019, DLL had a private sector loan portfolio of €33.2 billion. For the year ended 31 December 2019, DLL accounted for 12 per cent., or €1,431 million, of Rabobank Group’s total income and 15 per cent., or €322 million, of Rabobank Group’s net profit.

Real Estate

The Real Estate segment results almost completely comprise the results of Bouwfonds Property Development (“BPD”). Responsible for developing residential real estate areas, BPD focuses on residential areas, multifunctional projects and public facilities. BPD has been positioned as a direct subsidiary of Rabobank since 1 July 2017. As of 31 December 2019, the Real Estate segment employed 701 FTEs (including external staff).

For the year ended 31 December 2019, BPD sold 6,471 houses. The loan portfolio of the Real Estate segment amounted to €0.3 billion. For the year ended 31 December 2019, the Real Estate segment accounted for 3 per cent., or €306 million, of Rabobank Group’s total income and 6 per cent., or €131 million, of Rabobank Group’s net profit.

Participations

As of 31 December 2019, Rabobank held a 30 per cent. interest in Achmea B.V. (“Achmea”). Rabobank does not exercise control over Achmea and therefore does not consolidate Achmea as a subsidiary in Rabobank’s audited consolidated financial statements. Achmea is accounted for as an associate in Rabobank’s audited consolidated financial statements in accordance with the equity method. Achmea is a major insurance company in the Netherlands, where it serves a broad customer base of private individuals as well as government agencies and corporate clients. Achmea occupies a relatively minor position outside the Netherlands, operating in four other European countries and Australia. Rabobank and Achmea work closely together in the area of insurance.

Recent Developments

Potential Impact of Covid-19

Rabobank Group is monitoring the ongoing outbreak of the coronavirus (Covid-19) carefully as it evolves to understand the potential impact on its people and business.

On 20 May 2020, Rabobank provided an update on the expected impact of the Covid-19 pandemic on itself and its customers. Based on the current position, Covid-19 could significantly impact Rabobank's net profit, including as follows:

Asset quality: Changes in the macroeconomic scenarios have an upward effect on IFRS 9 stage 1 and 2 provisions, resulting in materially higher levels of impairment charges. Furthermore, based on current assumptions, Rabobank anticipates 2020 impairment charges on financial assets to amount to approximately €2 billion, which is in the upper range of twice the through-the-cycle level1. The ultimate level of impairment charges depends on the severity and duration of the Covid-19 crisis and

1 Based on the April Baseline scenario of RaboResearch. Downward revision of this scenario could negatively impact current expectations of 2020 impairment charges.

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is thus difficult to predict. As such, a more severe or protracted experience than the current baseline assumed scenario could negatively impact current expectations.

Financial performance: Rabobank is expecting its 2020 net profit to be significantly impacted, mainly as a result of materially increased impairment charges2. Rabobank is continuously assessing the impact on its financial performance, however at the date of this Information Statement it is too early to give a reliable indication of the impact on aggregate net profit for the full year 2020.

Capital, funding & liquidity: Rabobank adhered to the ECB’s recommendation not to make any distributions on Rabobank Certificates until at least 1 October 2020 (see also below under "Rabobank adheres to ECB’s recommendation not to pay dividends during the Covid-19 pandemic until at least October 2020"). As at 31 March 2020 Rabobank has a solid liquidity position with an LCR ratio of 125 per cent. (31 December 2019: 132 per cent.) and a strong liquidity buffer of €124 billion (31 December 2019: €111 billion).

Furthermore, Rabobank considers that approximately 5 per cent. of its private sector loan portfolio at 31 March 2020 is considered to be highly impacted. The most critical sectors Rabobank currently identifies are Food services, Flowers, Leisure & entertainment, Non-food retail and Transport. In addition, a medium-high impact is expected for the following sectors: animal protein and dairy in the United States, sugar and wholesale trade, which a further 8 per cent. of Rabobank’s private sector loan portfolio.

Further to the above, Rabobank expects its 2020 net profit to be significantly impacted by the

Covid-19 pandemic, mainly as a result of materially increased impairment charges on financial assets in DRB, Wholesale & Rural and DLL and lower income. In 2020, income of Rabobank is expected to be negatively impacted by the Covid-19 pandemic, the continued low interest rate environment and a decrease in new business volume and economic activity generally.

Rabobank adheres to ECB’s recommendation not to pay dividends during the Covid-19

pandemic until at least October 2020

On 27 March 2020, the ECB adopted a recommendation on dividend distributions during the Covid-19 pandemic (ECB/2020/19). The ECB considers it essential that banks conserve capital to retain their capacity to support the economy in these uncertain times. The ECB therefore expects banks to refrain from dividend distributions for the financial years 2019 and 2020 until at least 1 October 2020 to ensure that banks retain their capacity to be able to support households, small businesses and corporates. Following recent ECB and DNB announcements, Rabobank has decided to use its discretion not to pay any distributions on its CET1 instrument, the Rabobank Certificates, on the upcoming scheduled payment dates of 29 March, 29 June and 29 September 2020.

Rabobank pays fine for 2014 remuneration issue

On 13 February 2020 Rabobank announced that it has been fined €2 million by Dutch regulator DNB for the incorrect application of European remuneration rules in its international business in 2014.

Rabobank’s credit ratings

At the date of this Information Statement, Rabobank has been assigned the following ratings: S&P (“A+”), Moody’s (“Aa3”), Fitch (“AA-”) and DBRS (“AA”). Rabobank’s outlook with Moody’s is “Stable”. In April 2020, S&P and Fitch revised their outlooks to “Negative” and in May 2020, DBRS revised its outlook to “Negative”.

2 Based on the April Baseline scenario of RaboResearch. Downward revision of this scenario could negatively impact current expectations of 2020 impairment charges.

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All the rating agencies view Rabobank’s leading position in the Dutch banking sector and the International Food and Agri sector as important rating drivers. The Rating Agencies also note Rabobank’s significant equity and subordinated debt, which is an important factor in determining the Group’s ratings.

A rating outlook is an opinion regarding the likely direction of an issuer’s rating over the medium term. Actual or anticipated declines in Rabobank’s credit ratings may affect the market value of the notes of any series. There is no assurance that a rating will remain unchanged during the term of the notes of any series.

The ratings represent the relevant rating agency’s assessment of Rabobank’s financial condition and ability to pay its obligations, and do not reflect the potential impact of all risks relating to the notes of any series. Any rating assigned to the long term unsecured debt of Rabobank does not affect or address the likely performance of the notes of any series other than Rabobank’s ability to meet its obligations.

Rabobank Group’s access to the unsecured funding markets is dependent on its credit ratings. A downgrading or announcement of a potential downgrade in its credit ratings, as a result of a change in the agency’s view of Rabobank, its industry outlook, sovereign rating, rating methodology or otherwise, could adversely affect Rabobank Group’s access to liquidity alternatives and its competitive position, and could increase the cost of funding or trigger additional collateral requirements all of which could have a material adverse effect on Rabobank Group’s results of operations.

Strategy of Rabobank Group

In 2019, Rabobank continued the implementation of its Strategic Framework 2016-2020, which describes how it wants to achieve its ambitions. This strategy provides a sharpened focus on improving customer service and realising a fundamental improvement in financial performance across Rabobank in order to safeguard its future success. To fulfil its ambitions for 2020, Rabobank is focusing on the following three core objectives.

1. Excellent customer focus. In the Netherlands, Rabobank strives to be the most customer-focused

bank in the country and Rabobank aims for a sharp increase in customer satisfaction outside the

Netherlands as well. The management of Rabobank believes that this is where its strength and

distinctiveness lie. Rabobank expects to undergo a fundamental transformation in the coming

years in terms of working methods, culture, attitudes and conduct. By doing so, Rabobank is

responding to changes in customer needs, the uncertain economic climate, expectations of

society and the stricter requirements of regulators. Rabobank wants to become the most

customer-focused bank in the Netherlands and in the food & agri sector internationally by

excelling in basic services, being the closest to its customers at key moments and fulfilling its role

as a financial partner serving Rabobank’s customers. This will enable Rabobank to expand its

services as an intermediary, for example in the fields of crowdfunding and working with

institutional investors.

2. Increased flexibility and reduction of the balance sheet. In the years to come, Rabobank

anticipates a further tightening of the regulatory environment. For example the implementation of

the proposed reforms to Basel III and implementation of MREL require Rabobank’s balance sheet

to be more flexible. Rabobank wants to achieve balance sheet optimisation by, among other

things, placing parts of its loan portfolio with external parties and maintaining a liquidity buffer that

is in line with the reduced balance sheet total. Rabobank is carefully monitoring ongoing

developments with regard to the pending Basel regulations, the final outcome of which will

ultimately determine the extent of the required balance sheet reduction, but without changing its

other financial targets for 2020.

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3. Performance improvement. Rabobank aims to improve its performance by improvements in

efficiency and cost reductions within Rabobank’s central organisation, the local Rabobanks and

the international organisation. The improvement should be effected by both higher revenues and

lower costs through increasing efficiency and new ways of working (e.g. increased digitalisation

and more flexible working spaces).

Implementation accelerators

The strategy calls for a substantial transformation of Rabobank. In view of the challenges Rabobank faces, Rabobank has identified three accelerators to realise and strengthen the transformation:

1. Strengthening innovation: Innovation allows Rabobank to improve its services and respond rapidly

to opportunities in the market. In addition, innovation is essential to provide support to Rabobank’s

customers.

2. Empowering employees: Achieving the strategic objectives will require a transformation into an

organisation in which there is scope for professionalism and entrepreneurship, with a continual

focus on development and training, employee diversity and a good, learning corporate culture.

3. Creating a better cooperative organisation: The new governance structure (see “Structure and

Governance of Rabobank Group”) will contribute to the transformation that Rabobank as an

organisation must go through to fulfil its strategy. This will allow an organisation to emerge that is

flexible for the future and centres on maximum local entrepreneurship.

Strategy implementation

The Strategic Framework 2016-2020 has initiated a group wide transition process consisting of a wide range of change initiatives that impact Rabobank’s organisational structure, the way it works and the way it serves its customers. In addition to many initiatives in the line organisation, several large, strategic projects are also expected to be implemented. The strategic implementation agenda has been designed along four strategic pillars: Complete customer focus, Rock-solid bank, Meaningful cooperative and Empowered employees. The transition process is dynamic and is expected to be adjusted based on evolving circumstances.

An integrated process for the coordination of the transition is essential to ensure timely and coherent implementation of the strategic goals. This process began in 2016 and is expected to continue in the coming years. Strategy implementation is facilitated by a central oversight and coordination office for performance and strategic initiatives, which reports frequently to the Managing Board, Supervisory Board and supervisors. Processes have been established to ensure short-cycle steering by the Managing Board members in their respective domains, based on goals that have been translated into concrete activities, key performance indicators (“KPI”) and clearly allocated responsibilities. This approach enables the line organisation to remain in the lead of the transition process.

Competition in the Netherlands

Rabobank Group competes in the Netherlands with several other large commercial banks such as ABN Amro and ING Group, with insurance companies and pension funds and also with smaller financial institutions in specific markets. Rabobank Group expects competition in the Dutch savings market to continue.

The Dutch mortgage loan market is highly competitive. Driven by the tax deductibility of mortgage loan interest payments, Dutch homeowners usually take out relatively high mortgage loans. This does not necessarily indicate a high risk for banks with mortgage-lending operations. The local Rabobanks and Obvion have a balanced mortgage loan portfolio. Historically, mortgage lending in the Netherlands has been relatively low risk and all mortgage loans are collateralised. Mortgage loan defaults do not occur frequently, either in Rabobank Group’s mortgage-lending operations or in the Netherlands generally. Almost all mortgages in the Netherlands have a maturity

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of 30 years. Generally, mortgages have a long-term (greater than five years) fixed interest rate, after which period the rate is reset at the current market rate. Customers generally only have the option to prepay a certain percentage on the principal amount on their mortgage loan without incurring a penalty fee, thus reducing the interest rate risks related to mortgage loan refinancing for Rabobank Group.

Market Shares in the Netherlands

Rabobank Group offers a comprehensive package of financial products and services in the Netherlands. Set forth below is information regarding Rabobank Group’s shares in selected markets. The percentages of market share should be read as percentages of the relevant Dutch market as a whole.

Residential mortgages: As at 31 December 2019, Rabobank Group had a market share of 20.9 per cent. of the total amount of new home mortgages in the Dutch mortgage market by value (15.5 per cent. by local Rabobanks and 5.4 per cent. by Obvion; source: Dutch Land Registry Office (Kadaster)). Rabobank Group is the largest mortgage-lending institution in the Netherlands (measured by Rabobank’s own surveys).

Saving deposits of individuals: As at 31 December 2019, Rabobank Group had a market share of 33.0 per cent. of the Dutch savings market (source: Statistics Netherlands (Centraal Bureau voor de Statistiek)). Rabobank Group is one of the largest savings institutions in the Netherlands measured as a percentage of the amount of saving deposits (source: Statistics Netherlands).

Property, Plant and Equipment

Rabobank and the local Rabobanks typically own the land and buildings used in the ordinary course of their business activities in the Netherlands. Outside the Netherlands, some Group entities also own the land and buildings used in the ordinary course of their business activities. In addition, Rabobank Group’s investment portfolio includes investments in land and buildings. Rabobank Group believes that its facilities are adequate for its present needs in all material respects. The table below provides an overview of Rabobank Group’s material owned facilities:

Location Country Owned / Rented Encumbrances

Croeselaan 18 – 22, Utrecht The Netherlands Owned None

Bloemmolen 2 – 4, Boxtel The Netherlands Owned None

Material Contracts

There are no contracts, other than contracts entered into in the ordinary course of business, to which Rabobank or any member of Rabobank Group is party, for the two years prior to the date of this Information Statement that are material to Rabobank Group as a whole. There are no other contracts (not being contracts entered in the ordinary course of business) entered into by any member of Rabobank Group which contain any provision under which any member of Rabobank Group has any obligation or entitlement which is material to Rabobank Group as at the date of this Information Statement.

Insurance

On behalf of all entities of Rabobank Group, Rabobank has taken out a group policy that is customary for the financial industry taking into consideration the scope and complexity of the business of Rabobank Group. Rabobank Group is of the opinion that this insurance, which is banker’s blanket and professional indemnity, is of an adequate level for the business of Rabobank Group.

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Legal and Arbitration Proceedings

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, including the United States. The most relevant legal and regulatory claims which could give rise to liability on the part of Rabobank Group are described on pages 152 and 153 in Rabobank Group’s audited consolidated financial statements for the year ended 31 December 2019, including the notes thereto, incorporated by reference into the Offering Circular. In addition, see the risk factor “Legal Risk” in the “Risk Management” section of this Information Statement. If it appears necessary on the basis of the applicable reporting criteria, provisions are made based on current information; similar types of cases are grouped together and some cases may also consist of a number of claims. The estimated loss for each individual case (for which it is possible to make a realistic estimate) is not reported, because Rabobank Group feels that information of this type could be detrimental to the outcome of individual cases.

When determining which of the claims is more likely than not (i.e., with a likelihood of over 50 per cent.) to lead to an outflow of funds, Rabobank Group takes several factors into account. These include (but are not limited to) the type of claim and the underlying facts; the procedural process and history of each case; rulings from legal and arbitration bodies; Rabobank Group’s experience and that of third parties in similar cases (if known); previous settlement discussions; third party settlements in similar cases (where known); available indemnities; and the advice and opinions of legal advisers and other experts.

The estimated potential losses, and the existing provisions, are based on the information available at the time and are for the main part subject to judgements and a number of different assumptions, variables and known and unknown uncertainties. These uncertainties may include the inaccuracy or incompleteness of the information available to Rabobank Group (especially in the early stages of a case). In addition, assumptions made by Rabobank Group about the future rulings of legal or other instances or the likely actions or attitudes of supervisory bodies or the parties opposing Rabobank Group may turn out to be incorrect. Furthermore, estimates of potential losses relating to the legal disputes are often impossible to process using statistical or other quantitative analysis instruments that are generally used to make judgements and estimates. They are then subject to a still greater level of uncertainly than many other areas where Rabobank Group needs to make judgements and estimates.

The group of cases for which Rabobank Group determines that the risk of future outflows of funds is higher than 50 per cent. varies over time, as do the number of cases for which Rabobank can estimate the potential loss. In practice the end results could turn out considerably higher or lower than the estimates of potential losses in those cases where an estimate was made. Rabobank Group can also sustain losses from legal risks where the occurrence of a loss may not be probable, but is not improbable either, and for which no provisions have been recognised. For those cases where (a) the possibility of an outflow of funds is less likely than not but also not remote or (b) the possibility of an outflow of funds is more likely than not but the potential loss cannot be estimated, a contingent liability is shown.

Rabobank Group may settle legal cases or regulatory proceedings or investigations before any fine is imposed or liability is determined. Reasons for settling could include (i) the wish to avoid costs and/or management effort at this level, (ii) to avoid other adverse business consequences and/ or (iii) pre-empt the regulatory or reputational consequences of continuing with disputes relating to liability, even if Rabobank Group believes it has good arguments in its defence. Furthermore, Rabobank Group may, for the same reasons, compensate third parties for their losses, even in situations where Rabobank Group does not believe that it is legally required to do so.

Information on any governmental, legal or arbitration proceedings (including any such proceedings which are pending or threatened of which Rabobank is aware), during the 12 months prior to the date of this Information Statement which may have, or have had in the past, significant

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effects on Rabobank and Rabobank Group’s financial position or profitability are described under “Legal and arbitration proceedings” in Rabobank Group’s audited consolidated financial statements for the year ended 31 December 2019, including the notes thereto, incorporated by reference into the Offering Circular. In addition, see the risk factor “Legal risk” in the “Risk Management” section of this Information Statement.

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STRUCTURE AND GOVERNANCE OF RABOBANK GROUP

Rabobank Group comprises Coöperatieve Rabobank U.A. and its subsidiaries and participations in the Netherlands and abroad. Rabobank operates not only from the Netherlands but also from branches and representative offices all over the world. These branches and offices all form part of the legal entity Rabobank. Rabobank branches are located in Sydney, Antwerp, Toronto, Beijing, Shanghai, Dublin, Frankfurt, Madrid, Paris, Mumbai, Milan, Labuan, Wellington, New York, Singapore, Hong Kong and London. Rabobank representative offices are located in Mexico City, Buenos Aires, Istanbul, Atlanta, Chicago, Roseville, San Francisco, Nairobi and St. Louis.

Rabobank also conducts business through separate legal entities worldwide. Rabobank is shareholder of such entities. Rabobank has its executive office in Utrecht (Croeselaan 18, 3521 CB), the Netherlands (telephone number +31 (0)30 216 0000). Its statutory seat is in Amsterdam, the Netherlands. Rabobank is registered in the commercial register of the Chamber of Commerce under number 30046259. Rabobank uses various tradenames.

General

Rabobank is a licensed bank, in the legal form of a cooperative with excluded liability (coöperatie U.A.). It was established under Dutch law. Rabobank uses amongst others the trade names Rabobank Nederland and Rabobank. Rabobank was formed as a result of the merger of the Coöperatieve Centrale Raiffeisen Bank and the Coöperatieve Centrale Boerenleenbank, the two largest banking cooperative entities in the Netherlands. It was established with unlimited duration on 22 December 1970. Until 1 January 2016, the Dutch local Rabobanks were separate legal cooperative entities. On 1 January 2016, a legal merger under universal title took place between Rabobank and all local banks. Rabobank was the surviving entity.

The Managing Board is responsible for the management of Rabobank, including the local banks and, indirectly, its affiliated entities. Managing Board members are appointed by the Supervisory Board. The Supervisory Board is responsible for the supervision of the management by the Managing Board. Supervisory Board members are appointed by the General Members’ Council of Rabobank. For further information regarding the governance of Rabobank Group, see “— Member influence within Rabobank Group” below and “Governance of Rabobank Group”.

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Corporate purpose

The objective of a cooperative is to provide for certain material needs of its members by whom it is effectively owned and controlled. Pursuant to Article 3 of the Rabobank Articles, the corporate object of Rabobank is to promote the interests of its members and to do so by:

(i) conducting a banking business, providing other financial services, and, in that context,

concluding agreements with its members;

(ii) participating in, otherwise assuming an interest in, and managing other enterprises of any

nature whatsoever, and financing third parties, providing security in any way whatsoever or

guaranteeing the obligations of third parties;

(iii) contributing to society, including promoting economic and social initiatives and

developments; and

(iv) performing any activities which are incidental to or may be conducive to this object.

Rabobank is furthermore authorised to extend its activities to parties other than its members.

Member influence within Rabobank Group

As a cooperative, Rabobank has members, not shareholders. Customers of Rabobank in the Netherlands have the opportunity to become members of Rabobank. As at the date of this Information Statement, Rabobank has approximately 2 million members. Members do not make capital contributions to Rabobank and do not have claims on the equity of Rabobank. The members do not have any obligations and are not liable for the obligations of Rabobank.

Main characteristics of Governance

Rabobank is a decentralised organisation with decision making powers at both a local and central level. The governance reflects the unity of cooperative and bank. Although the Dutch Corporate Governance Code does not apply to the cooperative, Rabobank’s corporate governance is broadly consistent with this code. Rabobank also observes the Dutch Banking Code.

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The members of Rabobank are organised, based on, amongst other things, geographical criteria into about 90 Departments. Each local bank is linked to a Department. Within each Department, members are organised into delegates’ election assemblies. These assemblies elect the members of the local members’ councils.

The local members’ councils consist of 30 to 50 members and were established pursuant to the Articles of Association. Local members’ councils report to and collaborate with the management team of the local bank on the quality of services and the contribution on social and sustainable development of the local environment. These councils have a number of formal tasks and responsibilities. One of the powers of the local members’ council is appointment, suspension and dismissal of the local supervisory body, including its chairman.

The local supervisory body consists of three to seven members and is part of the Department. It is a corporate body established pursuant to the Articles of Association and performs various tasks and has various responsibilities, including a supervisory role on the level of the local bank. As part of that role, the Executive Board has granted the local supervisory body a number of powers in respect of material decisions of the management team chairman. The local supervisory body monitors the execution by the management team chairman of the local strategy. The local supervisory body also exercises the functional employer’s role in relation to the management team chairman of the local bank. The local supervisory body is accountable to the local members’ council.

Regional assemblies are not formal corporate bodies in the Rabobank governance. These assemblies are important for the preparation for the General Members’ Council of Rabobank. The assemblies are consultative bodies where the chairmen of the supervisory bodies and the management chairmen of the local banks meet to discuss.

The members of the local supervisory body have to be members of Rabobank. Every chairman of a local supervisory body represents the members of its Department in the General Members’ Council of Rabobank. This council is the highest decision making body in the Rabobank governance. Although the chairmen of the local supervisory bodies participate in the General Members’ Council of Rabobank without instruction and consultation, they will also take the local points of view into account. The General Members’ Council of Rabobank has a focus on strategy, identity, budget and financial results of Rabobank and has powers on these matters. On behalf of the members, the General Members’ Council of Rabobank safeguards continuity as well as acts as the custodian of collective values. The General Members’ Council of Rabobank has three permanent committees: the urgency affairs committee, the coordination committee and the committee on confidential matters.

The members of the Supervisory Board of Rabobank are appointed by the General Members’ Council of Rabobank. Two thirds of the number of members of the Supervisory Board must be members of Rabobank. The Supervisory Board performs the supervisory role and is accountable to the General Members’ Council of Rabobank. In this respect, the Supervisory Board monitors compliance with laws and regulations and inter alia achievement of Rabobanks’ objectives and strategy. The Supervisory Board has the power to approve material decisions of the Managing Board. The Supervisory Board also has an advisory role in respect to the Managing Board. The Supervisory Board has several committees, inter alia a risk committee and an audit committee that perform preparatory and advisory work for the Supervisory Board. For further information regarding the Supervisory Board, see “Governance of Rabobank Group”.

The local business is organised through about 90 local banks. These local banks are not separate legal entities but are part of the legal entity Rabobank. To preserve local orientation and local entrepreneurship as distinguishing features of Rabobank, the Executive Board of Rabobank has granted the management team chairmen of the local banks a number of authorisations. Consequently, these chairmen are able to perform their tasks locally and to take responsibility for their designated local bank. The management team chairmen have additional responsibilities for the Department that is connected with the local bank.

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The Managing Board of Rabobank is responsible for the management of Rabobank including the local banks and, indirectly, its affiliated entities. The Managing Board has the ultimate responsibility for defining and achieving the targets, strategic policy and associated risk profile, financial results and corporate social responsibility aspects. In addition, the Managing Board is in charge of Rabobank Groups’ compliance with relevant laws and regulations. Rabobank, represented by the Managing Board, is the hierarchical employer of the management team chairmen of the local banks. The Managing Board members are appointed by the Supervisory Board and are accountable to the Supervisory Board and the General Members’ Council of Rabobank. For further information regarding the Managing Board, see “Governance of Rabobank Group”.

The directors’ conference was established pursuant to the Articles of Association but is not a decision-making body. It is a preparatory, informative and advisory meeting for proposals and policies concerning the business of the local banks. The Managing Board, management team chairmen of the local banks and directors of local banks participate in this meeting.

Employee Influence within Rabobank Group

Rabobank Group attaches great value to consultations with the various employee representative bodies. Employee influence within Rabobank Group has been enabled at various levels. Issues concerning the Dutch business of Rabobank are handled by the works council (ondernemingsraad) of Rabobank (the “Works Council”). Local issues concerning the business of one, two or three local banks are handled by the local work(s) council(s). Issues concerning a subsidiary are handled by the works council of that subsidiary. Rabobank has also installed a European works council for issues concerning the businesses that operate in more than one EU member state.

Material Subsidiaries or other interests

Rabobank also conducts business through separate legal entities, not only in the Netherlands but also worldwide. At 31 December 2019 Rabobank was the (ultimate) shareholder of 384 subsidiaries and participations.

Rabobank has assumed liability for debts arising from legal transactions for 15 of its Dutch subsidiaries under Section 2:403 DCC.

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THE UTRECHT BRANCH

Rabobank, Utrecht Branch is not a separate legal entity under Dutch law. All payments and/or deliveries of principal, premium (if any), interest (if any) or other amounts (in cash or in securities) payable or deliverable on, or exchangeable for, the notes of any series will be irrevocably and unconditionally guaranteed by Coöperatieve Rabobank U.A., New York Branch, a branch duly licensed in the State of New York (the “New York Branch”), pursuant to a guarantee issued by the New York Branch. Notes issued by the Utrecht Branch are not bank deposits and are not insured or guaranteed by the FDIC, the United States Deposit Insurance Fund, the Dutch Deposit Guarantee Scheme or any other U.S. or Dutch governmental or deposit insurance agency or entity.

38

THE NEW YORK BRANCH

The New York Branch, established in 1981, is a branch licensed by the New York Superintendent of Financial Services (the “Superintendent”). The New York Branch is responsible for Rabobank’s North American corporate banking business. The New York Branch focuses primarily on financing agribusiness companies engaged in the processing, distribution, storage, export and import of agricultural commodities although it also engages in lending activities in other sectors of the United States economy. Additionally, the New York Branch provides banking services in the United States to Rabobank’s Dutch customers. The New York Branch provides for its own funding needs through transactions in the domestic and international money markets, such as the issuance of certificates of deposit, commercial paper and medium-term notes.

The New York Branch is presently located at 245 Park Avenue, New York, NY 10167, United States of America. Neither deposits held by the New York Branch nor any notes issued or guaranteed by the New York Branch are insured or guaranteed by the FDIC, the United States Deposit Insurance Fund, the Dutch Deposit Guarantee Scheme or any other U.S. or Dutch governmental or deposit insurance agency or entity. See also “Regulation of Rabobank Group—United States”.

39

GOVERNANCE OF RABOBANK GROUP

Members of Supervisory Board and Managing Board

Supervisory Board of Rabobank

The following persons, all of whom are resident in the Netherlands, are appointed as members of the Supervisory Board:

Name Born

Year

Appointed Term Expires Nationality

Ron (R.) Teerlink, Chairman .................................................. 1961 2013 2021 Dutch

Marjan (M.) Trompetter, Vice Chairman ................................. 1963 2015 2019 Dutch

Annet (A.P.) Aris…………………………… 1958 2018 2022 Dutch

Leo (L.N.) Degle ..................................................................... 1948 2012 2020 German

Petri (P.H.M.) Hofsté .............................................................. 1961 2016 2020 Dutch

Arian (A.A.J.M.) Kamp ............................................................ 1963 2014 2022 Dutch

Jan (J.) Nooitgedagt ............................................................... 1953 2016 2020 Dutch

Mark (M.R.C) Pensaert 1964 2020 2024 Belgian

Pascal (P.H.J.M.) Visée .......................................................... 1961 2016 2020 Dutch

Mr. R. Teerlink (Ron)

Date of birth 28 January 1961

Profession Professional Supervisory Director/Management Consultant

Main position Chairman of the Supervisory Board of Rabobank

Nationality Dutch

Auxiliary positions – Member of the Supervisory Board of Takeaway.com

– Chairman of the Supervisory Board of Vrije Universiteit

Amsterdam

Date of first appointment to the

Supervisory Board

2013

Current term of appointment to the

Supervisory Board

2017 - 2021

Mrs. M. Trompetter (Marjan)

Date of birth 1 November 1963

Profession Professional Supervisory Director

Management Consultant

Main position Vice Chairman of the Supervisory Board of Rabobank

Nationality Dutch

Auxiliary positions Supervisory Directorships:

– Vice Chairman of the Supervisory Board of Rijnstate

Hospital, Arnhem

40

Other auxiliary position:

– Owner Corona Consultancy


Supervisory Board

2015


Supervisory Board

2015 - 2019

Mrs. A.P. Aris (Annet)

Date of birth 27 October 1958

Profession Professional Supervisory Director and Senior Affiliate Professor

Main position None

Nationality Dutch


Member of the Supervisory Board Rabobank

– Member Supervisory Board Randstad N.V.

Member Supervisory Board ASML N.V.

Member Supervisory Board Jungheinrich AG

Other auxiliary positions:

– Senior Affiliate Professor of Strategy INSEAD


Supervisory Board

2018


Supervisory Board

2018 - 2022

Mr. L.N. Degle (Leo)

Date of birth 15 August 1948


Main position None

Nationality German


– Member of the Supervisory Board of Rabobank

– Member of the Supervisory Board of Sakroon B.V./Ten Kate

B.V.

Other auxiliary position:

– Board Member of FINCA Microfinance

– Board Member of Wasser für die Welt

– Board Member of Foundation Social Investment

Innovation


Supervisory Board

2012

41


Supervisory Board

2016 - 2020

Mrs. P.H.M. Hofsté (Petri)

Appointment is conditional upon approval by external supervisors

Date of birth 6 April 1961


Main position None

Nationality Dutch


– Member of the Supervisory Board of Rabobank

– Member of the Supervisory Board and Audit Committee of

Fugro N.V.

– Member of the Supervisory Board of PON Holding

– Member of the Supervisory Board of Achmea B.V. and of

several subsidiaries


– Juror Kristal Price Dutch Ministry of Economical Affairs and

Climate Policy

– Member of the board of Nyenrode Foundation

– Member of the board of ‘Vereniging Hendrick de Keyser’


Supervisory Board

2016


Supervisory Board

2016 - 2020

Mr. A.A.J.M. Kamp (Arian)

Date of birth 12 June 1963

Profession Entrepreneur

Professional Supervisory Director

Main position Cattle farmer

Nationality Dutch


Member of the Supervisory Board of Rabobank

Chairman of the Supervisory Board Koninklijke

Coöperatie Agrifirm UA


Owner Partnership A.A.J.M. Kamp and W.D. Kamp-

Davelaar

Chairman of the Foundation ‘Beheer Flynth’

Date of first appointment to the 2014

42

Supervisory Board


Supervisory Board

2014 –2018

Mr. J. Nooitgedagt (Jan)

Date of birth 17 July 1953


Main position None

Nationality Dutch


– Member of the Supervisory Board Rabobank

– Chairman of the Supervisory Board Telegraaf Media Group

– Chairman of the Supervisory Board of PostNL N.V.

– Chairman of Invest-NL B.V.


– Chairman of the Nyenrode Foundation

– Member of the Board of the Fiep Westerdorp Foundation

– Member of the Financial Reporting and Accountancy

Committee of AFM

– Chairman of the Foundation ‘Aandelenbeheer BAM Groep’


Supervisory Board

2016


Supervisory Board

2016 - 2020

M.R.C Pensaert (Mark)

Date of birth 16 October 1964


Main position None

Nationality Belgian



– Member Supervisory Board Tikehau Capital Belgium

S.A.

– Member Supervisory Board Agfa Gevaert N.V.


Supervisory Board

2020


Supervisory Board

2020 - 2024

43

Mr. P.H.J.M. Visée (Pascal)

Date of birth 11 July 1961

Profession Professional Supervisory Director and Independent Adviser

Main position None

Nationality Dutch



– Member of the Supervisory Board of Mediq Holding B.V.

– Member of the Supervisory Board of Plus Holding B.V.

– Member of the Supervisory Board of Royal Flora Holland

U.A.

– Member of the Supervisory Council Board of Erasmus

University

– Chairman of the Supervisory Board of Foundation Stedelijk

Museum Schiedam


– Board Member of the Foundation of Prins Claus Fund


Supervisory Board

2016


Supervisory Board

2016 - 2020

Managing Board of Rabobank

The following persons, all of whom are resident in the Netherlands, are appointed as members of the

Managing Board of Rabobank:

Name Born

Year

Appointed Nationality

Wiebe (W.) Draijer, Chairman* .................................... 1965 2014 Dutch

Bas (B.C.) Brouwers, member* .................................... 1972 2016 Dutch

Els (E.A.) de Groot, member* ...................................... 1965 2019 Dutch

Berry (B.J.) Marttin, member* ......................................

1965

2009

Dutch and

Brazilian

Jan (J.L.) van Nieuwenhuizen, member* ..................... 1961 2014 Dutch

Kirsten (C.M.) Konst, member* .................................... 1974 2017 Dutch

Mariëlle (M.P.J.) Lichtenberg, member ........................ 1967 2017 Dutch

Bart (B.) Leurs, member .............................................. 1971 2017 Dutch

Ieko (I.A.) Sevinga, member ........................................ 1966 2017 Dutch

Janine (B.J.) Vos, member .......................................... 1972 2017 Dutch

*statutory member (Executive Board)

44

Wiebe (W.) Draijer

Mr. Draijer was appointed as Chairman of the Managing/Executive Board of Rabobank as of 1 October

2014. Mr. Draijer served as President of the Social and Economic Council of the Netherlands from 2012

to 2014. Prior to that, he held several positions within management-consulting firm McKinsey & Company

and worked as a researcher at Philips Research Laboratories and as a freelance journalist.

Auxiliary positions – Member of the supervisory board of Staatsbosbeheer (national nature

conservation)

– Member of the ‘Cyber Security Raad’

– Member of the board of the ‘Nationale Coöperatieve Raad’

Bas (B.C.) Brouwers

Mr. Brouwers was appointed to the Managing/Executive Board as Chief Financial Officer as of 1 January

2016. Mr Brouwers started his career at KPMG Audit in 1995. He then held various positions within ING

from 1998 until 2007. He was head of Controlling & Risk Management of ING-DiBa AG (Germany) from

2007 until 2008 and CFO of ING-DiBa AG (Germany) from 2008 until 2013. From 2013 until 2015, Mr

Brouwers was CFO of ING Netherlands.

Auxiliary positions – Vice-Chair of the Board of the Dutch Banking Association

Els (E.A.) de Groot

Mrs. De Groot is a member of the Managing/Executive Board and Chief Risk Officer since 1 February

2019. Mrs. De Groot has over 20 years of experience in the financial sector. From 1987 until 2008, Mrs.

De Groot held several positions at ABN AMRO Bank mainly in the field of risk management and

(structured) finance. Her last role within ABN AMRO was Head of Policy & Portfolio Management and

member of the Global Risk Management Team. After that period, she had various interim assignments

before she joined Royal Schiphol Group as CFO and member of the Board of Management.

Berry (B.J.) Marttin

Mr. Marttin was appointed to the Managing/Executive Board as of 1 July 2009. Within the Managing

Board, Mr. Marttin is responsible for international Rural & Retail, Sustainability, Leasing, B4F Inspiration

Centre and the Rabobank Foundation. Mr. Marttin joined Rabobank in 1990. From 1990 until 2004 he

fulfilled a number of international positions within Rabobank. After several positions in Brazil and

Curacao he served as Head of International Corporates in Hong Kong, Head of Risk Management in

Indonesia and as Deputy General Manager Rural Banking for Rabobank Australia and New Zealand.

From 2004 until 2009 he was Chairman of the board of directors of Rabobank Amsterdam.

Auxiliary positions – Chairman of the Supervisory Board of DLL International B.V

– Member of the Board of Directors of Rabobank International Holding B.V.

– Member of the Board of Rabobank Foundation

– Member of the Board of Rabobank Australia Ltd.

– Member of the Board of Rabobank New Zealand Ltd

– Chairman of the Shareholders Council of Rabo Partnerships

– Member of the North America Board of Directors and member of the North

America Board Risk Committee (Utrecht-America-Holding Inc.)

– Member of the Supervisory Board of Arise N.V.

45

– First Vice President of the Board of Directors, American Chamber of Commerce

– Member of the Supervisory Board of IDH (Initiatief Duurzame Handel/Dutch

Sustainable Trade Initiative)

– Member of the Board Trustees Hanns R. Neumann Stiftung

Jan (J.L.) van Nieuwenhuizen

Mr. Van Nieuwenhuizen was appointed to the Managing/Executive Board as of 24 March 2014. Within

the Managing Board, Mr. Van Nieuwenhuizen is responsible for Rabobank’s Dutch and international

Wholesale Banking activities and Commercial Real Estate. From 1986 until 2009, Mr. Van

Nieuwenhuizen fulfilled several international positions at JP Morgan, Morgan Stanley and NIBC. Since

2009, Mr. Van Nieuwenhuizen has been a member of the Management Team of Rabobank International,

currently known as Wholesale & Rural.

Auxiliary positions – Member Advisory Board Euronext

– Member of the Board of VNO/NCW

Kirsten (C.M.) Konst

Mrs. Konst is a member of the Managing/Executive Board as of 1 September 2017. Her main areas of

focus are Commercial Banking in the Netherlands and regional directors. After having had several

positions at ABN Amro, Mrs. Konst joined Rabobank in 2010. She fulfilled several positions at local

Rabobanks and was Operations Director before her appointment to the Managing Board.

Auxiliary positions – Member Supervisory Board Public Broadcasting association KRO-NCRV,

Hilversum

Mariëlle (M.P.J.) Lichtenberg

Mrs. Lichtenberg is a member of the Managing Board as of 1 September 2017. Her main areas of focus

are Retail & Private Banking in the Netherlands. She started at Rabobank International in 1995. Since

then Mrs. Lichtenberg fulfilled several positions at the local Rabobank as well as staff department. From

2016 she was Director Digital Bank before she joined the Managing Board.

Auxiliary positions – Member of the Supervisory Board of Obvion N.V

Bart (B.) Leurs

Mr. Leurs became a member of the Managing Board and Chief Digital Transformation Officer (CDTO) on

1 September 2017. He started his career in banking in 1997 at ING as a management trainee. After

having fulfilled several positions at ING in Canada, Germany and Belgium, Mr. Leurs joined Rabobank in

2016 as Head of Fintech & Innovation.

Ieko (I.A.) Sevinga

Mr. Sevinga became a member of the Managing Board and Chief Information & Operations Officer

(CIOO) on 1 September 2017. He started his career in 1986 at the Erasmus University in Rotterdam.

After that Mr. Sevinga had various positions at McKinsey & Company and Kempen & Co./Van Lanschot

Bankiers. He joined Rabobank in 2015 as Director Organisation Development & Performance before he

was appointed to the Managing Board.

46

Auxiliary positions – Non-Executive board member of DPG Media B.V.

– Non-Executive board member of MerweOord, holding company of Van Oord

Janine (B.J.) Vos

Mrs. Vos became a member of the Managing Board and Chief Human Resources Officer (CHRO) on 1

September 2017. She started her career in 1997 at KPN as a management trainee. After having fulfilled

several (HR) positions, she switched as Chief Human Resources Officer from KPN to Rabobank in 2016.

Auxiliary positions – Member of the Supervisory Board of KLM N.V.

Administrative, management and supervisory bodies — conflicts of interests

As of the date of this Information Statement, there are no conflicts of interest between the duties to Rabobank and their private interests or other duties of the persons listed above under “Supervisory Board of Rabobank” and “Managing Board of Rabobank”. These members may obtain financial services of Rabobank. In order to avoid potential conflicts of interest, Rabobank has internal rules of procedures (reglementen) in place for members of its Supervisory Board and Managing Board for situations in which potential or perceived conflicts of interest could arise, including rules in respect of additional positions which may be held by any such member.

Administrative, management and supervisory bodies — business address

The business address of the members of Rabobank’s Supervisory Board and Managing Board is Croeselaan 18, 3521 CB Utrecht, the Netherlands.

47

SELECTED FINANCIAL INFORMATION

The following selected financial data for the year ended 31 December 2017 are derived from the audited consolidated financial statements of Rabobank Group for the year ended 31 December 2018. The following selected financial data for the years ended 31 December 2019 and 2018 are derived from the audited consolidated financial statements of Rabobank Group for the year ended 31 December 2019, which has been audited by PricewaterhouseCoopers Accountants N.V. The financial ratios, excluding the leverage ratio, the fully loaded common equity tier 1 ratio and loan impairment charges in basis points of average lending which are marked with an asterisk (*), are derived from the audited consolidated financial statements of Rabobank Group for the years ended 31 December 2019 and 31 December 2018.

The data should be read in conjunction with the Audited Consolidated Financial Statements (and related notes), incorporated by reference into the Offering Circular and “Important Information — Presentation of Financial and other Information”, “Capitalisation and indebtedness of Rabobank Group” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in this Information Statement. Rabobank Group’s Audited Consolidated Financial Statements have been prepared in accordance with IFRS as adopted by the European Union and comply with Part 9 of Book 2 of the DCC.

The financial data in the (sub) paragraphs in this chapter marked with an asterisk (*) have not been directly extracted from the Audited Consolidated Financial Statements but instead are derived from other accounting records of Rabobank.

Consolidated statement of financial position

As at 31 December

(in millions of euros) 2019 2018 2017

Assets

Cash and cash equivalents .......................................... 63,086 73,335 66,861

Loans and advances to credit institutions .................... 29,297 17,859 27,254

Financial assets held for trading .................................. 1,870 2,876 1,760

Financial assets designated at fair value ..................... 101 157 1,194

Financial assets mandatorily at fair value .................... 1,905 2,134 n/a

Derivatives ................................................................... 23,584 22,660 25,505

Loans and advances to customers .............................. 440,507 436,591 432,564

Financial assets at fair value through other

comprehensive income………………………………….. 13,505 18,730 n/a

Available-for-sale financial assets ................................ n/a n/a 28,689

Investments in associates and joint ventures .............. 2,308 2,374 2,521

Goodwill and other intangible assets ........................... 829 966 1,002

Property and equipment ............................................... 5,088 4,455 4,587

Investment properties .................................................. 371 193 193

Current tax assets ........................................................ 169 243 175

Deferred tax assets ...................................................... 933 1,165 1,733

Other assets ................................................................. 6,610 6,431 7,961

Non-current assets held for sale .................................. 435 268 992

48

As at 31 December


Total assets ................................................................ 590,598 590,437 602,991

As at 31 December


Liabilities

Deposits from banks .................................................... 21,244 19,397 18,922

Deposits from customers ............................................. 342,536 342,410 340,682

Debt securities in issue ................................................ 130,403 130,806 134,423

Financial liabilities held for trading ............................... 399 400 581

Financial liabilities designated at fair value .................. 6,328 6,614 13,792

Derivatives ................................................................... 24,074 23,927 28,103

Other liabilities ............................................................. 6,835 6,342 8,271

Provisions .................................................................... 783 1,126 1,537

Current tax liabilities ..................................................... 228 229 248

Deferred tax liabilities ................................................... 540 452 396

Subordinated liabilities ................................................. 15,790 16,498 16,170

Liabilities held for sale .................................................. 91 — 256

Total liabilities ............................................................ 549,251 548,201 563,381

As at 31 December


Equity

Reserves and retained earnings .................................. 28,157 27,264 25,376


– Rabobank Certificates ........................................... 7,449 7,445 7,440

– Capital Securities ................................................... 5,264 6,493 5,759

12,713 13,938 13,199


– Capital Securities ................................................... — 164 166

– Trust Preferred Securities IV ................................. — 389 394

— 553 560

Other non-controlling interests ..................................... 477 481 475

Total equity .................................................................. 41,347 42,236 39,610

Total equity and liabilities ............................................. 590,598 590,437 602,991

49

See “Management’s Discussion and Analysis of Financial Condition and Results of Operations —Change in accounting policies and presentation” for a comparison of the figures that were adjusted in the audited consolidated financial statements for the years ended 31 December 2019 and 31 December 2018 compared to, respectively, the audited consolidated financial statements for the years ended 31 December 2018 and 31 December 2017.

Condensed Consolidated Statement of Income

Year ended 31 December

(in millions of euros) 2019

2018

(adjusted)

2017

(adjusted)

Net interest income ...................................................... 8,483 8,559 8,843

Net fee and commission income .................................. 1,989 1,931 1,915

Other results ................................................................ 1,443 1,530 1,243

Income ........................................................................ 11,915 12,020 12,001

Staff costs .................................................................... 4,821 4,868 4,472

Other administrative expenses .................................... 1,874 2,190 3,176

Depreciation and amortisation ..................................... 420 388 406

Operating expenses ................................................... 7,115 7,446 8,054

Impairment on investments in associates .................... 300 0 0

Loan impairment charges ............................................ n/a n/a (190 )

Impairment charges on financial assets ....................... 975 190 n/a

Regulatory levies ......................................................... 484 478 505

Operating profit before tax ........................................ 3,041 3,906 3,632

Income tax ................................................................... 838 902 958

Net profit ..................................................................... 2,203 3,004 2,674

Of which attributed to Rabobank .................................. 1,295 1,894 1,509

Of which attributed to holders of Rabobank

Certificates ................................................................... 484 484 484

Of which attributed to Capital Securities issued by

Rabobank ..................................................................... 355 530 586

Of which attributed to Capital Securities issued by

subsidiaries .................................................................. 4 14 15

Of which attributed to Trust Preferred Securities IV ..... 19 22 22

Of which attributed to non-controlling interests ............ 46 60 58

Net profit for the year ................................................ 2,203 3,004 2,674

50

Financial Ratios:

As at 31 December

2019 2018 2017

Total capital ratio .......................................................... 25.2 % 26.6 % 26.2 %

Tier 1 ratio .................................................................... 18.8 % 19.5 % 18.8 %

Common Equity Tier 1 ratio* ........................................ 16.3 % 16.0 % 15.5 %

Equity capital ratio ........................................................ 17.7 % 17.7 % 17.3 %

Leverage ratio* ............................................................. 6.3 % 6.4 % 6.0 %

Impairment charges on financial assets (in basis

points of average lending)* .......................................... 23 5 (5 )

51

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with the rest of the Information Statement, including the information set forth in “Selected Financial Information” and the Audited Consolidated Financial Statements and the notes thereto of Rabobank Group incorporated by reference into the Offering Circular.

Certain figures for Rabobank Group at and for the years ended 31 December 2018 and 31 December 2017 included in the following discussion and analysis have been adjusted as a result of changes in accounting policies and presentation. The adjusted figures for the year ended 31 December 2018 have been derived from the audited consolidated financial statements for the year ended 31 December 2019 and the adjusted figures for the year ended 2017 have been derived from the audited consolidated financial statements for the year ended 31 December 2018. See “Change in accounting policies and presentation” below for further information. The Audited Consolidated Financial Statements have been prepared in accordance with IFRS as adopted by the European Union and comply with Part 9 of Book 2 of the DCC.

The financial data in the (sub) paragraphs in this chapter marked with an asterisk (*) has not been directly extracted from the Audited Consolidated Financial Statements but instead is derived from the accounting records of Rabobank.

The following discussion and analysis does not cover any period since 1 January 2020. For information on certain developments in this period, see “Description of Business of Rabobank Group – Recent Developments” and “Risk Factors - The outbreak of communicable diseases around the world may materially and adversely affect Rabobank's business, financial condition and results of operations”.

Material Factors Affecting Results of Operations

General market conditions*

Rabobank Group’s results of operations are affected by a variety of market conditions, including economic cycles, fluctuations in stock markets, interest rates and exchange rates, and increased competition. Competition for mortgages and savings in the Netherlands continues in 2020.

In 2019, 59 per cent. of Rabobank Group’s operating profit before tax was derived from its Dutch operations. Accordingly, changes in the Dutch economy, the levels of Dutch consumer spending and changes in the Dutch real estate, securities and other markets may have a material effect on Rabobank Group’s operations. However, because of Rabobank Group’s high level of product diversification, it has not experienced major fluctuations in its levels of profitability in the past. Outside of the Netherlands, the markets Rabobank Group focuses on, i.e. principally Food and Agri, have historically been impacted by business cycles only in a limited way.

Although Rabobank Group expects that the foregoing factors will continue to affect its consolidated results of operations, it believes that the impact of any one of these factors is mitigated by its high level of product diversification. However, a protracted economic downturn in the Netherlands or Rabobank Group’s other major markets could have a material negative impact on its results of operations.

Interest rates

Changes in prevailing interest rates (including changes in the difference between the levels of prevailing short-term and long-term rates) can materially affect Rabobank Group’s results. For example, a sustained low interest rate environment could adversely affect Rabobank Group’s results, as due to the structure of its balance sheet, Rabobank has a significant level of non- and low-interest-bearing liabilities (its reserves, balances on payment accounts and current accounts). Generally, a sustained period of lower interest rates will reduce the yields on the assets that are

52

financed with these liabilities. Conversely, rising interest rates should, over time, increase investment income but may, at the same time, reduce the market value of pre-existing investment portfolios. Rising rates can also lead to higher or lower interest margins depending on whether Rabobank Group’s interest-earning assets reprice at a faster rate than interest-bearing liabilities or the degree to which the spreads on assets or liabilities narrow or widen. Rabobank expects that the relatively low interest rate environment that it has faced in the recent past is likely to continue in 2020, with a corresponding impact on Rabobank Group’s results.

Critical accounting policies

The accounting policies that are most critical to Rabobank Group’s business operations and the understanding of its results are identified below. In each case, the application of these policies requires Rabobank to make complex judgements based on information and financial data that may change in future periods, the results of which can have a significant effect on Rabobank Group’s results of operations. As a result, determinations regarding these items necessarily involve the use of assumptions and judgements as to future events and are subject to change. Different assumptions or judgements could lead to materially different results. See the notes to the Audited Consolidated Financial Statements incorporated by reference into the Offering Circular for additional discussion of the application of Rabobank Group’s accounting policies.

Impairment charges on financial assets

Rabobank regularly assesses the adequacy of the impairment allowance on financial assets by performing ongoing evaluations of the relevant portfolio. Rabobank’s policies and procedures to measure impairment are IFRS-9 compliant. IFRS-9 works with a Credit Deterioration Model which requires banks to define three different stages reflecting different degrees of credit risk. Rabobank considers a financial asset to be impaired when, based on current information and events, it is likely that Rabobank will not be able to collect all amounts due (principal and interest) according to the original contractual terms of the financial asset.

Based on IFRS-9, the impairment allowance on financial assets consists of three components, or stages:

Stage 1 allowance: for facilities for which no significant credit risk deterioration has been

identified since initial recognition (no objective evidence for Default/Impairment). In this

case, a 12-Months ECL (Expected Credit Loss) is recorded as an allowance. This

allowance reflects the portion of lifetime expected credit losses resulting from default events

on a financial instrument that are possible within the 12 months period after the reporting

date. Calculation of such allowance is model-based.

Stage 2 allowance: for facilities for which a significant increase in credit risk has been

identified since initial recognition, but for which there has not been any objective evidence

of Default/Impairment, a Lifetime ECL is recorded as an allowance. This allowance reflects

the expected loss related to credit granting over the expected residual lifetime of such

facility. Calculation of such allowance is model-based.

Stage 3 allowance: for facilities that are in Default for which an objective evidence of

Default/Impairment is available), a Lifetime ECL is recorded as an allowance. Calculation of

such allowance depends on the nature of the borrower as described below:

Stage 3A allowance: for Retail (such as Private Individuals and Retail SME), the

calculation of the allowance is model-based.

Stage 3B allowance: for Other (such as Corporate, Institutions, Central Banks and

Central Governments), the allowance is calculated based on the weighted average

of the NPV of expected cash flows in three different scenarios.

53

The impairment amount thus determined is recorded in the profit and loss account as an impairment charge and for the corresponding financial asset an allowance is posted against the financial asset balance in the balance sheet.

Trading activities

Rabobank’s trading portfolio is carried at fair value based on market prices or model prices if the market prices are not available. The market value of financial instruments in Rabobank Group’s trading portfolio is generally based on listed market prices or broker-dealer price quotations. If prices are not readily determinable, fair value is based on valuation models. The fair value of certain financial instruments, including OTC derivative instruments, are valued using valuations models that consider, among other factors, contractual and market prices, correlations, time value, credit, yield curve volatility factors or prepayment rates of the underlying positions.

Change in accounting policies and presentation

As a result of changes in accounting policies and presentation, certain figures for Rabobank Group for the years ended 31 December 2018 and 31 December 2017 have been adjusted. See Rabobank Group’s audited consolidated financial statements for the years ended 31 December 2019 and 31 December 2018 under note 2.1, “Basis of Preparation”. Where the year ended 31 December 2019 is compared with the year ended 31 December 2018, the adjusted figures for 2018 are discussed. Where the year ended 31 December 2018 is compared with the year ended 31 December 2017 the adjusted figures for 2017 are discussed.

As per the financial statements for the year ended 31 December 2019 IT staff costs, training and travel expenses have been reclassified from “Other Administrative Expenses” to “Staff Costs” to better reflect the type of costs incurred. The comparative figures were reclassified for an amount of € 590 million on 31 December 2018.

As per the financial statements for the year ended 31 December 2018, Rabobank decided to allocate additional intersegment expenses from ‘Other segments’ to the other business segments: Domestic Retail Banking; Wholesale, Rural & Retail; Leasing; and Real Estate to reflect a comprehensive cost view within these business segments. The figures for 31 December 2017 have been adjusted accordingly to align with internal management reporting.

Results of operations

The following table sets forth certain summarised financial information for Rabobank Group for the periods indicated:


(in millions of euro)

2019

2018

(adjusted)(1)

2018

2017

(adjusted)

Net interest income ................................... 8,483 8,559 8,559 8,843

Net fee and commission income ............... 1,989 1,931 1,931 1,915

Other results .............................................. 1,443 1,530 1,530 1,243

Income ...................................................... 11,915 12,020 12,020 12,001

Staff costs .................................................. 4,821 4,868 4,278 4,472

Other administrative expenses .................. 1,874 2,190 2,780 3,176

Depreciation and amortisation ................... 420 388 388 406

Total operating expenses ....................... 7,115 7,446 7,446 8,054

Gross result ............................................. 4,800 4,574 4,574 3,947

Impairment losses on investments in

associates .................................................. 300 - - -

54



2019

2018

(adjusted)(1)

2018

2017

(adjusted)

Loan impairment charges .......................... n/a n/a n/a (190)

Impairment charges on financial assets .... 975 190 190 n/a

Regulatory levies ....................................... 484 478 478 505

Operating profit before tax ..................... 3,041 3,906 3,906 3,632

Income tax ................................................. 838 902 902 958

Net profit ................................................... 2,203 3,004 3,004 2,674

Note:

(1) Prior-year figures adjusted; see paragraph “Change in accounting policies and presentation”.

Comparison results of operations for the years ended 31 December 2019 and 31 December

2018 (adjusted)

Total income. Rabobank Group’s total income decreased by €105 million in 2019 to €11,915 million compared to €12,020 million in 2018. The decrease was mainly due to a decrease in net interest income and other results, as further described below.

Net interest income. Net interest income decreased by €76 million to €8,483 million in 2019 compared to €8,559 million in 2018. This 1 per cent decrease was the result of the persistent low interest rate environment, which has specifically impacted margins on savings and current accounts, partly mitigated by sound and stable margins on new lending.

Net fee and commission income. Net fee and commission income increased by €58 million to €1,989 million in 2019 compared to €1,931 million in 2018. At local Rabobanks, net fee and commission income on payment accounts and insurances increased. At Wholesale & Rural net fee and commission income decreased slightly due to lower activity within Capital Markets and the M&A division. Net fee and commission income at DLL increased by 17 per cent mainly as a result of higher fees earned on syndicated financial leases in the United States.

Other results. Other results decreased by €87 million to €1,443 million in 2019 compared to €1,530 million in 2018. On balance, the gross loss on fair value items was higher than last year: a loss of €162 million in 2019 compared to a loss of €115 million in 2018. The sale of Rabobank, National Association (RNA) boosted other results at Wholesale & Rural. The Markets and Rabo Corporate Investment divisions could not match 2018's strong performance as market conditions were less favourable. Other results in the Real Estate segment decreased by 46 per cent as the results in 2018 included the proceeds from the sale of the final part of FGH Bank's noncore CRE loan portfolio. Also, BPD figures no longer include the results of BPD Marignan after the sale of this subsidiary in 2018. At DLL other results went down by 7 per cent due to the release of a provision for DLL's foreign activities in 2018.

Total operating expenses. Rabobank Group’s total operating expenses decreased €331 million in 2019 to €7,115 million compared to €7,446 million in 2018, primarily due to a decrease in staff costs and other administrative expenses.

Staff costs. Staff costs decreased €47 million to €4,821 million in 2019 compared to €4,868 million in 2018. In 2019, Rabobank's total staff levels (including external hires) increased by 575 FTEs to 43,822 FTEs compared to 43,247 FTEs in 2018. A substantial part of the increase in staff levels at DRB can be attributed to hiring additional capacity for CDD and digitalization. This increase was partly offset by a decrease in staff as a result of the implementation of a new

55

operating model in the Netherlands (Bankieren 3.0). Staff levels at Wholesale & Rural decreased by 958 FTEs as a result of the sale of RNA. This decrease was partly offset by staff increases to support business growth within Rural and for digitalization and compliance related activities. At DLL, staff levels increased as expected in line with business growth. Despite the overall FTE increase in 2019, average staff levels dropped by 1 per cent.

Other administrative expenses. Other administrative expenses decreased by €316 million to €1,874 million in 2019 compared to €2,190 million in 2018. At DRB, Leasing and Real Estate, administrative expenses were lower than in 2018. The decrease at Real Estate is largely as a result of the phasing out of activities. Higher compliance costs had an upward effect on other administrative expenses.

Depreciation and amortisation. Depreciation and amortisation increased by €32 million to €420 million in 2019 compared to €388 million in 2018 as a result of IFRS 16 and higher depreciation on premises and real estate, equipment and outfitting in North America, Asia and Europe.

Impairment losses on investments in associates. Impairment losses on investments in associates increased by €300 million to €300 million in 2019 compared to €0 million in 2018. In 2019, non-cash impairment of Rabobank’s stake in Achmea of €300 million negatively impacted Rabobank’s operating profit before tax. The impairment is a consequence of the sustained low interest rate setting that continues to negatively affect companies in the European insurance sector, including Achmea. The financial environment has had and is expected to continue to have in the future, an adverse effect on Achmea’s business and its results. This development triggered a re-assessment of Rabobank’s value of the investment in Achmea. The test to establish whether a potential impairment had occurred resulted in downward adjustments of the book value of the investment in Achmea in the amount of €300 million.

Impairment charges on financial assets. Impairment charges on financial assets were up €785 million to €975 million in 2019 compared to €190 million in 2018. After a period of exceptionally low impairment charges, impairment charges returned to more normalized levels. This represents an increase of €785 million compared to 2018. Impairment charges on financial assets amounted to 23 basis points in 2019 compared to 5 basis points in 2018, which is still below the long-term average (period 2009-2018) of 32 basis points. Due to less optimistic macroeconomic scenarios used for IFRS, impairment charges in stage 1 and 2 were €239 million in 2019 compared to minus €72 million in 2018.

Regulatory levies. Regulatory levies led to an expense item for Rabobank Group of €484 million in 2019, compared to €478 million in 2018.

Income tax. The recognised tax expense was €838 million in 2019 compared to €902 million in 2018, which corresponds to an effective tax rate of 28 per cent. in 2019 compared to 23 per cent. in 2018. The increase in tax rate was partly due to the fact that a large part of additional tier 1 capital instruments are not tax deductible anymore as from 1 January 2019.

Net profit. Net profit decreased by 27 per cent. to €2,203 million in 2019 compared to €3,004 million in 2018. Lower income and higher impairments on financial assets had a negative impact on net profit compared to 2018. Also, the impairment on Rabobank’s equity stake in Achmea had a downward effect on net profit.

Comparison results of operations for the years ended 31 December 2018 (unadjusted) and

31 December 2017 (adjusted)

Total income. Rabobank Group’s total income increased by €19 million in 2018 to €12,020 million compared to €12,001 million in 2017. The increase was mainly due to an increase in other results, as further described below.

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Net interest income. Net interest income decreased by €284 million to €8,559 million in 2018 compared to €8,843 million in 2017. This 3 per cent decrease was the result of the continued low interest rate environment, which affects margins on savings and current accounts, and of the expenses incurred by Treasury for managing ample liquidity buffers. New business margins on mortgages and SME lending had a positive effect on net interest income.

Net fee and commission income. Net fee and commission income increased by €16 million to €1,931 million in 2018 compared to €1,915 million in 2017. Investment management services and insurance policies contributed to a higher net fee and commission income at DRB. Local Rabobanks saw higher commissions on payment accounts. At Wholesale & Rural, net fee and commission income increased slightly due to the strong performance of Rabobank’s Markets division. Also, Rabobank’s Mergers and Acquisitions division performed stronger than in 2017. Net fee and commission income in the Real Estate segment decreased by 83 per cent. following the decrease of activities by Bouwfonds IM. This was more than offset by higher income earned by Rabobank’s core business segments. Net fee and commission income at DLL increased by 41 per cent. This increase comes from higher fee income for syndicated leases as well as a negative one-off adjustment in 2017.

Other results. Other results increased by €287 million to €1,530 million in 2018 compared to €1,243 million in 2017. This increase can be partly attributed to the improved result on fair value items. On balance, the gross result on fair value items improved from a negative result of €313 million in 2017 to a negative result of €115 million in 2018. Also, higher results on Rabobank’s equity stake in Achmea contributed to the increase of other results. Other results at Wholesale & Rural decreased by 26 per cent. as Rabobank’s Markets division could not match the previous year's strong performance. The Real Estate segment's other results increased by 19 per cent. due to gains on the sales of the residual part of FGH Bank's loan portfolio as well as of BPD's French subsidiary (BPD Marignan) and BPD's improved performance in general. At DLL, other results increased by 32 per cent., as a result of the reversal of an impairment taken at year-end 2017 due to a portfolio optimisation.

Total operating expenses. Rabobank Group’s total operating expenses decreased €608 million in 2018 to €7,446 million compared to €8,054 million in 2017, primarily due to a decrease in staff costs and other administrative expenses.

Staff costs. Staff costs decreased €194 million to €4,278 million in 2018 compared to €4,472 million in 2017. In 2018, the total number of employees (including external hires) at Rabobank decreased by 1,868 FTEs to 41,861 (as compared to 43,729 in 2017) FTEs mainly because of the large restructuring programs in the Netherlands. The largest reduction in staff in 2018 was realized at local Rabobanks. At Wholesale & Rural and DLL, staff levels increased as expected. At Wholesale & Rural more (temporary) staff came on board for the execution of several (regulatory) projects, whereas DLL needed more resources to support business growth. Overall staff costs decreased by 4 per cent., which was tempered by an increase in costs for temporary staff. In 2018 the costs associated with the 2 per cent. pension accrual guarantee given in 2013 to the pension fund (covering the years 2014-2020) decreased to €5 million compared to €160 million in 2017. This accounts for part of the decrease in staff costs. This guarantee is capped at €217 million, of which €202 million has already been used up in 2018.

Other administrative expenses. Other administrative expenses decreased by €396 million to €2,780 million in 2018 compared to €3,176 million in 2017. This decrease can be largely explained by the €310 million provision taken by RNA for compliance program matters. Lower restructuring costs (€120 million versus €159 million in 2017) helped reduce other administrative expenses as well.

Depreciation and amortisation. Depreciation and amortisation was down by €18 million to €388 million in 2018 compared to €406 million in 2017 as a result of Rabobank’s restructuring efforts and the consequential closing down of offices in the Netherlands.

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Impairment charges on financial assets. Impairment charges on financial assets were up €380 million to €190 million in 2018 compared to minus €190 million in 2017. Although higher than in 2017, they are still at a low level. We again saw favourable developments in most business segments. Relative to the average private sector loan portfolio, impairment charges on financial assets amounted to 5 basis points (as compared to minus 5 basis points in 2017). Calculated over the past 10 years (2008-2017) and including the elevated level of impairment charges over the years 2012 – 2014, the average impairment charges amount to 34 basis points.

Regulatory levies. Regulatory levies led to an expense item for Rabobank Group of €478 million in 2018, compared to €505 million in 2017.

Income tax. The recognised tax expense was €902 million in 2018 compared to €958 million in 2017, which corresponds to an effective tax rate of 23 per cent. in 2018 compared to 26 per cent. in 2017.

Net profit. Net profit increased by 12 per cent. to €3,004 million in 2018 compared to €2,674 million in 2017. Higher income and lower operating expenses, particularly staff costs, had a positive impact on net profit compared to 2017. Net profit was also boosted by lower restructuring costs and an improved result on fair value items in 2018. Impairment charges on financial assets remained at a low level.

Segment Discussion

Domestic Retail Banking

The following table sets forth certain summarised financial information for Rabobank Group’s DRB business for the periods indicated:


2018

(adjusted)(1) 2018

2017

(adjusted)

Net interest income ............................... 5,258 5,575 5,575 5,581

Net fee and commission income ........... 1,490 1,434 1,434 1,398

Other results ......................................... 67 56 92 74

Total income ....................................... 6,815 7,065 7,101 7,053

Staff costs ............................................. 2,738 2,765 1,158 1,430

Other administrative expenses ............. 1,177 1,382 3,025 2,959

Depreciation and amortisation .............. 95 84 84 98

Total operating expenses .................. 4,010 4,231 4,267 4,487

Gross result ........................................ 2,805 2,834 2,834 2,566

Loan impairment charges ..................... n/a n/a n/a (259)

Impairment charges on financial assets 152 (150) (150) n/a

Regulatory levies .................................. 270 237 237 270

Operating profit before tax ................ 2,383 2,747 2,747 2,555

Income tax ............................................ 607 712 712 659

Net profit .............................................. 1,776 2,035 2,035 1,896

Note:


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Comparison results of Domestic Retail Banking for the years ended 31 December 2019 and


Total income. Domestic Retail Banking total income decreased by 4 per cent. to €6,815 million in 2019, compared to €7,065 million in 2018 mainly due to a decrease in net interest income.

Net interest income. Net interest income decreased by €317 million to €5,258 million in 2019, compared to €5,575 million in 2018. Despite slightly increased margins on mortgages, net interest income was pressured by shrinking margins on savings and current accounts as a result of the low interest rate environment.

Net fee and commission income. Net fee and commission income increased by 4 per cent. to €1,490 million in 2019, compared to €1,434 million in 2018, due to increased fees on payment accounts and on insurances.

Other results. Other results increased by €11 million to €67 million in 2019, compared to €56 million in 2018. The increase in other results can be partly explained by the higher commercial agio received on whole loan sales.

Total operating expenses. Total operating expenses for Domestic Retail Banking decreased 5 per cent. to €4,010 million in 2019, compared to €4,231 million in 2018, as a result of a decrease in staff costs and other administrative expenses.

Staff costs. Staff costs decreased by €27 million to €2,738 million in 2019, compared to €2,765 million in 2018. Staff costs fell as the digitalization and centralization of services reduced the average size of the workforce. The implementation of a new operating model in the Netherlands (known as 'Bankieren 3.0') had a downward effect on the number of employees in the segment, while the regulatory agenda required extra staff in 2019.

Other administrative expenses. Other administrative expenses decreased by €205 million to €1,177 million in 2019, compared to €1,382 million in 2018. The revaluation of property for own use lowered expenses by €60 million. In 2018 this item had an upward effect on other administrative expenses of €61 million. Project expenses related to the derivatives project were €33 million lower than last year and restructuring costs were lower and amounted to €57 million compared to €69 million in 2018.

Depreciation and amortisation. Depreciation and amortisation increased by €11 million to €95 million in 2019, compared to €84 million in 2018, partly caused by the implementation of IFRS 16.

Impairment charges on financial assets. Impairment charges on financial assets (before 2018 it was called 'loan impairment charges') increased by €302 million to reach €152 million in 2019, compared to minus €150 million in 2018. This translates into 6 basis points of the average loan portfolio based on month-end balances in 2019, compared to minus 5 basis point in 2018, below the long-term average of 20 basis points. The impairment charges on financial assets increased in 2019, but are still on a low level benefitting from the favorable economic conditions in the Netherlands and are expected to continue the upward trend toward the longer term average.

Regulatory levies. Regulatory levies increased €33 million to €270 million in 2019, compared to €237 million in 2018. The regulatory levies consist of bank tax, contributions to the Single Resolution Fund and the Deposit Guarantee Scheme.

Income tax. Income tax decreased in 2019 by €105 million to €607 million, compared to €712 million in 2018 as a result of the lower operating profit before tax in 2019.

Net profit. Net profit decreased by €259 million to €1,776 million in 2019, compared to €2,035 million in 2018. The net result was negatively influenced by lower income and higher impairment charges on financial assets.

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Comparison results of Domestic Retail Banking for the years ended 31 December 2018

(unadjusted) and 31 December 2017 (adjusted)

Total income. Domestic retail banking total income increased by 1 per cent. to €7,101 million in 2018, compared to €7,053 million in 2017 mainly due to an increase in net fee and commission income.

Net interest income. Net interest income remained stable at €5,575 million in 2018, compared to €5,581 million in 2017. As was the case in 2017, we again observed a positive impact in Rabobank’s lending book from new business margins. At the same time, the volume of down-ward early interest rate revisions in Rabobank’s mortgage book remained high. Net interest income was pressured due to lower margins on savings and current accounts as a result of the low interest rate environment. The increased volume of payment accounts had a positive impact on net interest income.

Net fee and commission income. Net fee and commission income increased by 3 per cent. to €1,434 million in 2018, compared to €1,398 million in 2017, due to higher commissions on payment accounts.

Other results. Other results increased by €18 million to €92 million in 2018, compared to €74 million in 2017. The increase in other results can be partly explained by the premium on the sale of a share of Rabobank's mortgage portfolio to the French investor La Banque Postale in September 2018.

Total operating expenses. Total operating expenses for Domestic Retail Banking decreased 5 per cent. to €4,267 million in 2018, compared to €4,487 million in 2017, as a result of a decrease in staff costs and depreciation and amortisation.

Staff costs. Staff costs decreased by €272 million to €1,158 million in 2018, compared to €1,430 million in 2017. Staff costs fell as a consequence of the digitalization and centralization of services and resulting reduced size of the workforce. The number of internal and external employees in the segment decreased to 12,069 as of 31 December, 2018 compared to 13,635 FTEs in 2017, partly due to employees moving from local Rabobanks to the central organisation in order to create economies of scale. The decrease in staff costs was further caused by lower costs associated with the pension accrual guarantee given to the pension fund which amounted to €9 (as compared to €116 in 2017) million.

Other administrative expenses. Other administrative expenses increased by €66 million to €3,025 million in 2018, compared to €2,959 million in 2017. Other administrative expenses increased due to higher restructuring costs, which amounted to €69 (as compared to €52 in 2017) million and costs related to the accelerated depreciation of authentication devices for internet banking. The project expenses for the execution of the interest rate derivatives framework were somewhat lower than in 2017. The additional provision taken for the interest rate derivatives framework was in line with 2017 and amounted to €52 (as compared to €51 in 2017) million. The revaluation decrease of property for own use was higher than in 2017 due to lower occupancy rates, amounting to €61 (as compared to €49 in 2017) million.

Depreciation and amortisation. Depreciation and amortisation decreased by €14 million to €84 million in 2018, compared to €98 million in 2017, as a result of the closing of offices following Rabobank’s restructuring activities.

Impairment charges on financial assets. Impairment charges on financial assets (before 2018 it was called 'loan impairment charges') increased by €109 million to reach minus €150 million in 2018, compared to minus €259 million in 2017. This translates into minus 5 basis points of the average loan portfolio based on month-end balances in 2018, compared to minus 9 basis point in 2017, far below the long-term average of 21 basis points. Releases were mainly in the sea and coastal shipping sector, while additions were observable in industry sectors. The net additions on mortgages amounted to minus 2 basis points.

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Regulatory levies. Regulatory levies decreased €33 million to €237 million in 2018, compared to €270 million in 2017. The regulatory levies consist of bank tax, contributions to the Single Resolution Fund and the Deposit Guarantee Scheme.

Income tax. Income tax increased in 2017 by €53 million to €712 million, compared to €659 million in 2017 as a result of the higher operating profit before tax in 2018.

Net profit. Net profit increased by €139 million to €2,035 million in 2018, compared to €1,896 million in 2017. The net result was positively influenced by lower operating expenses.

Wholesale & Rural

The following table sets forth certain summarised financial information for Rabobank Group’s Wholesale & Rural business for the periods indicated:


2018

(adjusted)(1) 2018

2017

(adjusted)

Net interest income ............................... 2,458 2,388 2,388 2,367

Net fee and commission income ........... 438 461 461 432

Other results ......................................... 766 486 486 655

Total income ....................................... 3,662 3,335 3,335 3,454

Staff costs ............................................. 1,396 1,292 938 939

Other administrative expenses ............. 495 491 845 1,194


Total operating expenses .................. 1,974 1,823 1,823 2,189

Gross result ........................................ 1,688 1,512 1,512 1,265

Loan impairment charges ..................... n/a n/a n/a 95

Impairment charges on financial assets 611 300 300 n/a


Operating profit before tax ................ 937 1,043 1,043 999

Income tax ............................................ 260 333 333 412

Net profit .............................................. 677 710 710 587

Note:


Comparison results of Wholesale & Rural for the years ended 31 December 2019 and 31

December 2018 (adjusted)

Total income. Wholesale & Rural total income increased by €327 million to €3,662 million in 2019 compared to €3,335 million in 2018. This increase was attributable to an increase in other results and net interest income.

Net interest income. Net interest income increased by 3 per cent. to €2,458 million in 2019, compared to €2,388 million in 2018 This increase was driven by higher lending volumes. The strongest increase in net interest income was in Rabobank’s corporate and rural lending while the increase was tempered by a negative margin development in Brazil.

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Net fee and commission income. Net fee and commission income decreased by 5 per cent. to €438 million in 2019, compared to €461 million in 2018 due to lower activity levels in corporate finance, which is in line with market circumstances.

Other results. Other results increased by €280 million to €766 million in 2019, compared to €486 million in 2018 mainly due to the sale of RNA. The increase in other results was tempered by the results of Rabobank’s Markets division which was confronted with less favorable market conditions, and lower revaluations at Rabobank’s Corporate Investment division. Furthermore, the positive revaluation of ACC Loan Management's loan portfolio positively impacted other results in 2018.

Total operating expenses. Total operating expenses increased by 8 per cent. to €1,974 million in 2019, compared to €1,823 million in 2018. This increase was attributable to higher staff costs and higher depreciation and amortisation.

Staff costs. Staff costs increased by €104 million to €1,396 million in 2019, compared to €1,292 million in 2018. Staffing levels at Wholesale & Rural showed a 9 per cent decrease in 2019. The decrease as a result of the sale of RNA was partly offset by growth initiatives within Rural and additional staff related to digitalization and compliance.

Other administrative expenses. Other administrative expenses increased by 1 per cent. to €495 million in 2019, compared to €491 million in 2018.

Depreciation and amortisation. Depreciation and amortisation was up €43 million to €83 million in 2019, compared to €40 million in 2018 due to higher depreciation on premises and real estate, equipment and outfitting in North America, Asia and Europe.

Impairment charges on financial assets. Impairment charges on financial assets (before 2018 it was called 'loan impairment charges') at Wholesale & Rural increased by €311 million to €611 million in 2019, compared to €300 million in 2018. Significant impairments were seen in the Netherlands and Europe related to some non-related large individual cases and high impairments in Brazil (mainly sugar and ethanol) and the United States (mainly farm nutrition). The impairments have been rising since the first half of 2018. Total impairment charges on financial assets increased to 55 basis points of the average private sector loan portfolio compared to 29 basis point in 2018, above the long-term average of 52 basis points.

Regulatory levies. The regulatory levies led to an expense item of €140 million in 2019, compared to €169 million in 2018.

Income tax. Income tax decreased in 2019 by €73 million to €260 million, compared to €333 million in 2018.

Net profit. Net profit decreased by €33 million to €677 million in 2019, compared to €710 million in 2018. The higher impairment charges on financial assets lowered net profit in 2019.

Comparison results of Wholesale & Rural for the years ended 31 December 2018

(unadjusted) and 31 December 2017 (adjusted)

Total income. Wholesale & Rural total income decreased by €119 million to €3,335 million in 2018 compared to €3,454 million in 2017. This decrease was attributable to a decrease in other results partly offset by an increase in net interest income and net fee and commission income.

Net interest income. Net interest income increased by 1 per cent. to €2,388 million in 2018, compared to €2,367 million in 2017 as the underlying commercial interest margins stabilised. Excluding FX effects net interest income increased by 7 per cent. due to growth of the loan portfolio. Australia, North America and the Netherlands had the strongest growth in net interest income (in local currencies).

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Net fee and commission income. Net fee and commission income increased by 7 per cent. to €461 million in 2018, compared to €432 million in 2017 as Rabobank’s Mergers and Acquisitions division performed stronger than in 2017.

Other results. Other results decreased by €169 million to €486 million in 2018, compared to €655 million in 2017 due to market volatility in the final quarter of 2018, partially offset by a stronger performance of Rabobank’s Corporate Investments division.

Total operating expenses. Total operating expenses decreased by 17 per cent. to €1,823 million in 2018, compared to €2,189 million in 2017. This decrease was attributable to lower other administrative expenses and depreciation and amortisation.

Staff costs. Staff costs remained stable at €938 million in 2018, compared to €939 million in 2017. In 2018, staffing levels at Wholesale & Rural increased by 361 FTEs mainly because of (temporary) staff hired for several strategic projects. Despite the increase in staff levels, staff costs remained stable, which can be largely explained by FX effects.

Other administrative expenses. Other administrative expenses decreased by 29 per cent. to €845 million in 2018, compared to €1,194 million in 2017, largely driven by the fact that these expenses were lifted in 2017, due to the €310 million provision taken by RNA. The decrease was partly tempered by an increase in project expenses in 2018.

Depreciation and amortisation. Depreciation and amortisation was down €16 million to €40 million in 2018, compared to €56 million in 2017, largely caused by lower depreciation on software.

Impairment charges on financial assets. Impairment charges on financial assets (before 2018 it was called 'loan impairment charges') at Wholesale & Rural increased by €205 million to €300 million in 2018, compared to €95 million in 2017. This was the result of defaults of some large clients, mainly in Asia and Brazil. Total impairment charges on financial assets increased to 29 (as compared to 9 in 2017) basis points of the average private sector loan portfolio, well below the long-term average of 58 basis points.

Regulatory levies. The regulatory levies led to an expense item of €169 million in 2018, compared to €171 million in 2017.

Income tax. Income tax decreased in 2018 by €79 million to €333 million, compared to €412 million in 2017.

Net profit. Net profit increased by €123 million to €710 million in 2018, compared to €587 million in 2017. The provision of €310 million taken by RNA significantly lowered the operating profit before tax in 2017.

Leasing

The following table sets forth certain summarised financial information for Rabobank Group’s leasing business for the periods indicated:


2018

(adjusted)(1) 2018

2017

(adjusted)

Net interest income ............................... 1052 986 986 1,008


Other results ......................................... 255 274 274 207

Total income ....................................... 1,431 1,366 1,366 1,290

Staff costs ............................................. 536 517 487 487

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2018

(adjusted)(1) 2018

2017

(adjusted)

Other administrative expenses ............. 174 194 224 208


Total operating expenses .................. 738 738 738 723

Gross result ........................................ 693 628 628 567

Loan impairment charges ..................... n/a n/a n/a 106

Impairment charges on financial assets 214 105 105 n/a


Operating profit before tax ................ 453 498 498 439

Income tax ............................................ 131 99 99 (66 )

Net profit .............................................. 322 399 399 505

Note:


Comparison results of Leasing for the years ended 31 December 2019 and 31 December

2018 (adjusted)

Total income. Total income of Leasing increased by 5 per cent. to €1,431 million in 2019, compared to €1,366 million in 2018. The increase was mainly due to an increase in net interest income and net fee and commission income.

Net interest income. Net interest increased by 7 per cent. to €1,052 million in 2019, compared to €986 million in 2018 as result of portfolio growth. In 2018 net interest income was negatively affected by several residual value impairments on Food & Agri assets.

Net fee and commission income. Net fee and commission income increased by €18 million to €124 million in 2019, compared to €106 million in 2018. This is mainly the result of higher fees earned on syndicated leases in the United States.

Other results. Other results mainly consist of income from operating leases and results from sales on end-of-lease assets. Other results decreased by €19 million to €255 million in 2019 compared to €274 million in 2018. The decrease was entirely due to the release of a provision for foreign activities of DLL in 2018 and partly compensated by lower asset impairments in 2019.

Total operating expenses. Total operating expenses at DLL remained stable at €738 million in 2019, compared to €738 million in 2018. Other administrative expenses were higher, while staff costs and depreciation and amortisation were lower.

Staff costs. Staff costs increased by €19 million to €536 million in 2019, compared to €517 million in 2018 caused by the higher number of employees. Staff levels in the Leasing segment increased by 157 FTEs to 5,303 FTEs in 2019 as a result of business growth.

Other administrative expenses. Other administrative expenses decreased €20 million to €174 million in 2019, compared to €194 million in 2018 as restructuring costs were lower in 2019.

Depreciation and amortisation. Depreciation and amortisation increased by €1 million to €28 million in 2019, compared to €27 million in 2018.

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Impairment charges on financial assets. DLL’s impairment charges on financial assets (before 2018 it was called 'loan impairment charges') increased by €109 million to €214 million in 2019, compared to €105 million in 2018. Expressed in basis points of the average loan portfolio based on month-end balances, the impairment charges amounted to 67 basis points in 2019, compared to 34 basis points in 2018 above. the long-term average of 56 basis points. As DLL’s lease portfolio is spread over more than 30 countries and 9 industries, the associated credit risk is geographically diverse and spread across all industry sectors. In 2019, there were no new significant individual default cases in DLL's predominantly small ticket portfolio. The IFRS 9 stage 1 and 2 impairments were an important driver of the higher risk costs.

Regulatory levies. Regulatory levies led to an expense of €26 million in 2019, compared to €25 million in 2018.

Income tax. Income tax increased in 2019 by €32 million to €131 million, compared to €99 million in 2018. The higher income taxes are for a large part due to a one-off tax liability following a change in the fiscal structure of a DLL subsidiary.

Net profit. Net profit decreased 19 per cent. to €322 million in 2019, compared to €399 million in 2018 due to higher impairment charges on financial assets and an increase in income tax.

Comparison results of Leasing for the years ended 31 December 2018 (unadjusted) and 31

December 2017 (adjusted)

Total income. Total income of Leasing increased by 6 per cent. to €1,366 million in 2018, compared to €1,290 million in 2017. The increase was mainly due to an increase in other results and net fee and commission income.

Net interest income. Net interest decreased by 2 per cent. to €986 million in 2018, compared to €1,008 million in 2017 as the result of lower margins on new business compared to 2017.

Net fee and commission income. Net fee and commission income increased by €31 million to €106 million in 2018, compared to €75 million in 2017. This increase was caused by higher fee income for syndicated leases as well as a negative one-off adjustment in 2017.

Other results. Other results mainly consist of income from operational leases as well as results from sales of end-of-lease assets. Other results increased €67 million to €274 million compared to €207 million in 2017. This improvement can be attributed to the release of a provision for foreign activities of DLL that was taken late 2017.

Total operating expenses. Total operating expenses at DLL increased by 2 per cent. to €738 million in 2018, compared to €723 million in 2017. This increase was mainly caused by higher other administrative expenses.

Staff costs. Staff costs remained stable at €487 million in 2018, compared to €487 million in 2017 despite the higher number of employees. This can be partly explained by the lower costs related to the pension accrual guarantee given to the pension fund. Staff levels in the Leasing segment showed an increase of 8 per cent. to 5,026 FTEs as of 31 December 2018.

Other administrative expenses. Other administrative expenses increased €16 million to €224 million in 2018, compared to €208 million in 2017 in line with the increase in the portfolio and due to higher restructuring costs.

Depreciation and amortisation. Depreciation and amortisation decreased by €1 million to €27 million in 2018, compared to €28 million in 2017.

Impairment charges on financial assets. DLL’s impairment charges on financial assets (before 2018 it was called 'loan impairment charges') remained stable at €105 million in 2018, compared to €106 million in 2017. Expressed in basis points of the average loan portfolio based on

65

month-end balances, the impairment charges amounted to 34 basis points in 2018, compared to 36 basis points in 2017. impairment charges are well below the long-term average of 58 basis points. As DLL’s lease portfolio is spread over more than 30 countries and 8 industries, the credit risk associated with this portfolio is geographically diverse and well balanced across all industry sectors. In 2018, there were no new significant individual default cases.

Regulatory levies. Regulatory levies led to an expense of €25 million in 2018, compared to €22 million in 2017.

Income tax. Income tax increased in 2018 by €165 million to €99 million, compared to minus €66 million in 2017. The 2017 results were heavily impacted by tax reform in the United States, which resulted in a significant one-off tax benefit.

Net profit. Net profit decreased 21 per cent. to €399 million in 2018, compared to €505 million in 2017 due to an increase in income tax.

Real Estate

The following table sets forth certain summarised financial information for Rabobank Group’s Real Estate business for the periods indicated:


2018

(adjusted)(1) 2018

2017

(adjusted)

Net interest income ............................... (10 ) (7 ) (7 ) 57


Other results ......................................... 308 571 571 479

Total income ....................................... 306 574 574 595

Staff costs ............................................. 84 137 131 180

Other administrative expenses ............. 40 66 73 151


Total operating expenses .................. 131 208 209 338

Gross result ........................................ 175 366 365 257

Loan impairment charges ..................... n/a n/a n/a (116)

Impairment charges on financial assets 2 (15 ) (15 ) n/a


Operating profit before tax ................ 171 379 378 369

Income tax ............................................ 40 70 70 74

Net profit .............................................. 131 309 308 295

Note:


Comparison results of Real Estate for the years ended 31 December 2019 and 31 December

2018 (adjusted)

Total income. Total income in Rabobank Group’s Real Estate business decreased by 47 per cent to €306 million in 2019, compared to €574 million in 2018. This decrease was the result of decreases in net fee and commission income and other results.

66

Net interest income. Net interest income decreased by €3 million to minus €10 million in 2019 compared minus €7 million in 2018. Net interest income decreased mainly as a result of the sale of the remaining part of the loan portfolio of FGH Bank in 2018. Net interest income of Real Estate is negative, as BPD has to pay interest on the funding raised to finance its activities.

Net fee and commission income. Net fee and commission income decreased by €2 million to €8 million in 2018 compared to €10 million in 2018 as the activities of Bouwfonds Investment Management were phased out.

Other results. Other results at the real estate segment decreased by €263 million to €308 million in 2019, compared to €571 million in 2018. The decrease in other results is partly caused by BPD's pressured result following a delay in sales in 2019 and the nitrogen discussion in the Netherlands. Other results were also impacted by the deconsolidation of BPD’s French subsidiary at the end of 2018, following the sale of BPD Marignan in November 2018. Furthermore, the 2018 figures were also positively impacted by a book gain on the sale of FGH Bank's loan portfolio.

Operating expenses. Total operating expenses decreased €77 million to €131 million in 2019, compared to €208 million in 2018. This decrease is caused by a decrease in staff costs and other administrative expenses.

Staff costs. Staff costs decreased by €53 million to €84 million in 2019, compared to €137 million in 2018. This decrease is the result of the sale of BPD Marignan and the remaining part of the loan portfolio of FGH Bank, as well as the phasing out of BIM. Staff levels increased by 8 percent in 2019 to 701 FTEs.

Other administrative expenses. Other administrative expenses decreased by €26 million to €40 million in 2019, compared to €66 million in 2018 due to the sale and phasing out of related activities.

Depreciation and amortisation. Depreciation and amortisation increased by €2 million to €7 million in 2019, compared to €5 million in 2018.

Impairment charges on financial assets. Impairment charges on financial assets (before 2018 it was called 'loan impairment charges') increased to €2 million in 2019, compared to minus €15 million in 2018 .

Regulatory levies. Regulatory levies led to an expense item of €2 million in 2019, compared to €2 million in 2018.

Income tax. Income tax decreased by €30 million to €40 million in 2019, compared to €70 million in 2018.

Net profit. Net profit decreased by €178 million to €131 million in 2019, compared to €309 million in 2018, primarily due to lower income caused by the sale of BPD Marignan and phasing out of related activities.

Comparison results of Real Estate for the years ended 31 December 2018 (unadjusted) and


Total income. Total income in Rabobank Group’s real estate business decreased by 4 per cent. to €574 million in 2018, compared to €595 million in 2017. This decrease was the result of decreases in net interest income and net fee and commission income.

Net interest income. Net interest income decreased by €64 million to minus €7 million in 2018 compared to €57 million in 2017. FGH Bank's loan portfolio was further integrated within Rabobank and the final part of its non core loan portfolio was sold to Rabobank Nederland Hypotheekbank (RNHB). As a result, FGH Bank's loan portfolio shrank and its net interest income decreased.

67

Consequently, net interest income of Real Estate turned negative, as BPD has to pay interest on the funding raised to finance its activities.

Net fee and commission income. Net fee and commission income decreased by €49 million to €10 million in 2018 compared to €59 million in 2017 as the activities of Bouwfonds Investment Management were phased out.

Other results. The sale of the remaining part of FGH Bank’s loan portfolio to RNHB and higher results at PD had a positive effect on other results at the real estate segment which increased by €92 million to €571 million in 2018, compared to €479 million in 2017.

Operating expenses. Total operating expenses in Rabobank Group’s real estate business decreased €129 million to €209 million in 2018, compared to €338 million in 2017. This decrease is caused by a decrease in staff costs and other administrative expenses.

Staff costs. Staff costs decreased by €49 million to €131 million in 2018, compared to €180 million in 2017. This decrease is the result of the downscaling of activities at FGH Bank and BIM. The sale of BPD Marignan is reflected in the 48 per cent decrease in staff levels to 618 FTEs.

Other administrative expenses. Other administrative expenses decreased by €78 million to €73 million in 2018, compared to €151 million in 2017 due to lower expenses in all divisions.

Depreciation and amortisation. Depreciation and amortisation decreased by €2 million to €5 million in 2018, compared to €7 million in 2017.

Impairment charges on financial assets. Impairment charges on financial assets (before 2018 it was called 'loan impairment charges') increased to minus €15 million in 2018, compared to minus €116 million in 2017. This was mainly due to the liquidation of FGH Bank’s loan portfolio and its subsequent integration into Rabobank. Expressed in basis points of the average loan portfolio based on month-end balances, the loan impairment charges amounted to minus 287 basis points in 2018, compared to minus 521 basis points in 2017. Impairment charges on financial assets are below the long-term average of 69 basis points.

Regulatory levies. Regulatory levies led to an expense item of €2 million in 2018, compared to €4 million in 2017.

Income tax. Income tax decreased by €4 million to €70 million in 2018, compared to €74 million in 2017.

Net profit. Net profit increased by €13 million to €308 million in 2018, compared to €295 million in 2017, primarily due to lower total operating expenses.

Loan Portfolio

The sale of RNA to Mechanics Bank, which was completed in August 2019, tempered loan portfolio growth. Adjusting for the sale of RNA’s assets the private sector loan portfolio increased by €6.3 billion. Even with the sale of RNA’s loan portfolio Rabobank’s private sector lending increased of €1.9 billion to €417.9 billion in 2019. At DRB the mortgage portfolio decreased slightly due to the high level of repayments and several whole loan sales transactions. DRB's total private sector loan portfolio decreased by €4.9 billion to €271.2 billion. Excluding the sale of RNA, Wholesale & Rural’s loan portfolio increased by €7.8 billion and Rabobank’s leasing subsidiary DLL's portfolio ended up €2.9 billion higher than on December 31, 2018. The combined domestic commercial real estate loan exposure over all segments decreased to €19.8 billion on December 31, 2019, compared to €21.2 billion in 2018.

Loans and advances to customers increased by €3.9 billion, to €440.5 billion at 31 December 2019 from €436.6 billion at 31 December 2018. The private sector loan portfolio increased by €1.9 billion to €417.9 billion at 31 December 2019 from €416.0 billion at 31 December 2018. Loans to

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private individuals, primarily for mortgage finance, were down €3.6 billion to €191.3 billion at 31 December 2019. Residential mortgage loans are granted by local Rabobanks and by Obvion. These loans are secured on underlying properties and have maturities up to 30 years. Loans to the trade, industry and services sector increased by €1.4 billion to €119.4 billion at 31 December 2019. Lending to the food and agri sector increased by €4.1 billion to €107.2 billion at 31 December 2019.

The following table shows a breakdown of Rabobank Group’s total lending outstanding to the private sector at 31 December 2019, 31 December 2018 and 31 December 2017, by category of borrower:

As at 31 December

(in billions of euro and as

percentage of total private

sector lending) 2019 2018 2017

Private individuals ............... 191.3 45 % 194.9 47 % 198.0 48 %

Trade, industry and

services ............................... 119.4 29 % 118.0 28 % 115.2 28 %

Food and agri ...................... 107.2 26 % 103.1 25 % 97.8 24 %

Total private sector

lending ............................... 417.9 100 % 416.0 100 % 411.0 100 %

The maturities of loans granted by Rabobank Group vary from overdraft facilities to 30-year term loans.

The following table provides a breakdown of the remaining maturity of Rabobank Group’s total loans and advances to customers (public and private sector) and professional securities transactions at 31 December 2019 and 31 December 2018. These amounts are non-restated for the netting of cash pooling arrangements and correspond to the audited consolidated financial statements for the year ended 31 December 2019:

As at 31 December

(in millions of euro and as

percentage of total loans and

advances to customers) 2019 2018

Less than 1 year ................................. 95,893 21 % 90,775 21 %

More than 1 year ................................ 344,614 79 % 345,816 79 %

Total loans and advances to

customers ......................................... 440,507 100 % 436,591 100 %

Funding*

Total deposits from customers increased to €342.5 billion in 2019, compared to €342.4 billion in 2018. The sale of RNA lowered deposits from customers: adjusting for this sale, total deposits from customers increased by €10.5 billion in 2019 compared to 2018. Deposits from DRB customers increased to €253.0 billion in 2019 compared to € 236.7 billion in 2018. Deposits from customers in other segments decreased to €89.5 billion in 2019 compared to €105.7 billion in 2018 mainly as the result of the sale of RNA. Retail savings at DRB increased by €4.6 billion to €123.7 billion. Total retail savings increased by €3.1 billion to €145.8 billion.

The following table shows Rabobank Group’s sources of funding by source at 31 December 2019, 31 December 2018 and 31 December 2017:

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As at 31 December

(in millions of euro) 2019 2018 2017

Current accounts ........................................................... 89,010 85,511 77,914

Deposits with agreed maturity ....................................... 63,627 71,203 74,536

Deposits redeemable at notice ..................................... 180,159 175,932 178,162

Repurchase agreements ............................................... 32 13 108

Other due to customers ................................................ 186 1 1

Debt securities in issue ................................................. 130,403 130,806 134,423

Financial liabilities designated at fair value ................... 6,328 6,614 13,792

Total ............................................................................. 469,745 470,080 478,936

Rabobank Group also receives funds from the inter-bank and institutional markets. Rabobank Group’s total deposits from credit institutions were €21.2 billion at 31 December 2019, a 9.5 per cent. increase from €19.4 billion at 31 December 2018.

Other Financial Assets

Other financial assets comprise debt securities and other assets. Other financial assets are subdivided into the following categories:

Financial assets held for trading;

Other financial assets at fair value through profit or loss; and

Available-for-sale financial assets.

The tables below show Rabobank Group’s financial assets as at the dates indicated.

Other financial assets as at 31 December 2019


Financial

assets held for

trading

Financial

assets

designated at

fair value

Financial

assets

mandatorily at

fair value

Total

Purchased loans ........................................ 106 1 1,106 1,213

Short-term government securities ............. 0 0 0 0

Government bonds .................................... 666 0 0 666

Other debt securities ................................. 1,039 100 37 1,176

Total debt securities ............................... 1,811 101 1,143 3,055

Venture capital ........................................... 0 0 0 0

Other equity instruments ........................... 59 0 762 821

Total other assets .................................... 59 0 762 821

Total .......................................................... 1,870 101 1,905 3,876

Category 1(1) .............................................. 1,649 100 72 1,821

Category 2(2) .............................................. 147 0 620 767

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Category 3(3) .............................................. 74 1 1,213 1,288



Financial

assets held for

trading

Financial

assets

designated at

fair value

Available-for-

sale financial

assets Total

Purchased loans ........................................ 149 31 1,642 1,822

Short-term government securities ............. 0 0 0 0

Government bonds .................................... 1,055 0 0 1,055

Other debt securities ................................. 1,602 126 38 1,766


Venture capital ........................................... 0 0 0 0



Total .......................................................... 2,876 157 2,134 5,167

Category 1(1) .............................................. 2,382 126 0 2,508

Category 2(2) .............................................. 431 23 571 1,025

Category 3(3) .............................................. 63 8 1,563 1.634



Financial

assets held for

trading

Financial

assets

designated at

fair value

Available-for-

sale financial

assets Total

Purchased loans ........................................ 193 700 0 893

Short-term government securities ............. 2 0 1,362 1,364

Government bonds .................................... 496 0 22,418 22,914

Other debt securities ................................. 1,006 126 4,342 5,474


Venture capital ........................................... 0 333 0 333



Total .......................................................... 1,760 1,194 28,689 31,643

Category 1(1) .............................................. 1,481 143 24,645 26,269

Category 2(2) .............................................. 216 529 3,512 4,257

Category 3(3) .............................................. 63 522 532 1,117

Notes:

(1) Category 1: quoted prices in active markets for identical assets or liabilities;

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(2) Category 2: inputs other than quoted prices included in category 1 that are observable for the asset or liability,

either directly (i.e., as prices) or indirectly (i.e., derived from prices);

(3) Category 3: inputs for the asset or liability not based on observable market data.

Credit-related Commitments*

Credit granting liabilities represent the unused portions of funds authorised for the granting of credit in the form of loans, guarantees, letters of credit and other lending-related financial instruments. Rabobank’s credit risk exposure from credit granting liabilities consists of potential losses amounting to the unused portion of the authorised funds. The total expected loss is lower than the total of unused funds, however, because credit granting liabilities are subject to the clients in question continuing to meet specific standards of creditworthiness. Guarantees represent irrevocable undertakings that, provided certain conditions are met, Rabobank will make payments on behalf of clients if they are unable to meet their financial obligations to third parties. Rabobank also accepts credit granting liabilities in the form of credit facilities made available to ensure that clients’ liquidity requirements can be met, but which have not yet been drawn upon.

As at 31 December


Total credit related commitments ............................. 88,970 87,537 87,549

Capital Adequacy

Rabobank wishes to have an adequate solvency position, which it manages based on a number of ratios. The principal ratios are the CET1 Ratio, the Tier 1 ratio, the total capital ratio and the equity capital ratio. Rabobank’s internal targets exceed the regulators’ minimum requirements as it anticipates market expectations and developments in laws and regulations. Rabobank seeks to stand out from other financial institutions, managing its solvency position based on policy documents. The Risk Management Committee and the Asset and Liability Committee, the Managing Board and the Supervisory Board periodically discuss the solvency position and the targets to be used.

Rabobank must comply with a number of minimum solvency positions stipulated under the law. The solvency position is determined based on ratios. These ratios compare Rabobank’s total capital and Common Equity Tier 1 Capital with the total amount of the risk-weighted assets.

The determination of the risk-weighted assets is based on separate methods for credit risk, operational risk and market risk. The risk-weighted assets are determined for credit risk purposes in many different ways. For most assets the risk weight is determined with reference to internal ratings and a number of characteristics specific to the asset concerned. For off-balance sheet items the balance sheet equivalent is calculated first, on the basis of internal conversion factors. The resulting equivalent amounts are then also assigned risk-weightings. An Advanced Measurement Approach model is used to determine the amount with respect to the risk-weighted assets for operational risk. With the market risk approach, the general market risk is hedged, as well as the risk of open positions in foreign currencies, debt and equity instruments, as well as commodities.

The CET1 Ratio, the Tier 1 ratio and the total capital ratio are the most common ratios used to measure solvency. The CET1 Ratio expresses the relationship between Common Equity Tier 1 Capital and total risk-weighted assets. At 31 December 2019, Rabobank Group’s CET1 Ratio stood at 16.3 per cent. (year-end 2018: 16.0 per cent.). Effective 1 January 2014, the minimum required percentages are determined on the basis of CRD IV/CRR. The total required (end state in 2020) CET1 Ratio amounts to 11.81 per cent.

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Risk-weighted assets were up €5.3 billion to €205.8 billion at 31 December 2019 compared to €200.5 billion at 31 December 2018. Common Equity Tier 1 Capital increased by €1.5 billion to €33.6 billion at 31 December 2019 compared to €32.1 billion at 31 December 2018. See “Regulation of Rabobank Group” for further discussion of the Basel standards.

The Tier 1 ratio expresses the relationship between Tier 1 capital and total risk-weighted assets. As at 31 December 2019, Rabobank Group’s Tier 1 ratio stood at 18.8 per cent. (year-end 2018: 19.5 per cent.). The total required (end state in 2020) Tier 1 ratio amounts to 13.31 per cent.

The total capital ratio is calculated by dividing the total of Tier 1 and Tier 2 Capital by the total of risk-weighted assets. At 31 December 2019, the total capital ratio stood at 25.2 per cent. (year-end 2018: 26.6 per cent.). The total required (end state in 2020) total capital ratio amounts to 15.31 per cent.

The following table sets forth the development in capital and solvency ratios of Rabobank Group at 31 December 2019, 31 December 2018 and 31 December 2017:

Development in capital and solvency ratios

As at 31 December

(in millions of euros, except percentages) 2019 2018 2017

Common Equity Tier 1 Capital ...................................... 33,596 32,122 31,263

CET1 Ratio ................................................................... 16.3 % 16.0 % 15.8 %

Fully Loaded CET1 Ratio* ............................................ 16.3 % 16.0 % 15.5 %

Tier 1 capital ................................................................. 38,754 39,068 37,204

Tier 1 ratio ..................................................................... 18.8 % 19.5 % 18.8 %

Qualifying capital ........................................................... 51,961 53,259 51,923

Total capital ratio ........................................................... 25.2 % 26.6 % 26.2 %

Cash flow

The following table sets forth Rabobank Group’s cash flow for the years ended 31 December 2019, 2018 and 2017.



Net cash flow from operating activities ......................... (1,643 ) 12,626 1,547

Net cash flow from investing activities .......................... (1,031 ) 249 49

Net cash flow from financing activities .......................... (7,788 ) (6,560 ) (17,807 )

Net change in cash and cash equivalents ................ (10,462 ) 6,315 (16,211 )

Cash and cash equivalents at 1 January ...................... 73,335 66,861 84,405

Net change in cash and cash equivalents .................... (10,462 ) 6,315 (16,211 )

Foreign exchange differences on cash and cash

equivalents .................................................................... 213 159 (1,333 )

Cash and cash equivalents ........................................ 63,086 73,335 66,861

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Net cash flow from operating activities decreased to minus €1,643 million in the year ended 31 December 2019 compared to €12,626 million in the year ended 31 December 2018, mainly due to a net change in Loans and advances to and deposits from credit institutions.

Net cash flow from investing activities decreased to minus €1,031 million in the year ended 31 December 2019 compared to €249 million in the year ended 31 December 2018, mainly due to the disposal of subsidiaries net of cash and cash equivalents.

Net cash flow from financing activities decreased to minus €7,788 million in the year ended 31 December 2019 compared to minus €6,560 million in the year ended 31 December 2018, mainly due to the issue and redemption of capital securities.

Working capital

In the opinion of Rabobank Group, its working capital is sufficient for its present requirements, that is for at least 12 months following the date of this Information Statement. Rabobank Group currently complies with the applicable own funds and liquidity requirements as set out in the CRD IV Directive as implemented in the FMSA and CRR.

Selected Statistical Information*

The following section discusses selected statistical information regarding Rabobank Group’s operations. Unless otherwise indicated, average balances are calculated based on monthly balances and geographic data are based on the domicile of the customer. See “Results of operations” for an analysis of fluctuations in Rabobank Group’s results between periods.

Return on equity and assets

(in percentages) 2019 2018 2017

Return on assets (in percentages)(1) ............................ 0.35 0.49 0.42

Net profit (in millions of euro) ....................................... 2,203 3,004 2,674

Total average assets (month-end balances in billions

of euro) ......................................................................... 608.1 607.1 635.3

Return on equity (in percentages)(2) ............................. 5.18 7.35 6.58

Net profit (in millions of euro) ....................................... 2,203 3,004 2,674

Total average equity (quarter-end balance in billions

of euro) ......................................................................... 41.7 40.9 40.6

Equity to assets ratio (in percentages)(3) 6.92 6.77 6.41

Total average equity (quarter-end balances in billions

of euro) ......................................................................... 41.7 40.9 40.6

Total average assets (quarter-end balances in billions

of euro) ......................................................................... 602.0 603.8 633.7

Notes:

(1) The return on assets states net profit as a percentage of total average assets, based on month-end balances.

(2) The return on equity is a profitability ratio which states net profit as a percentage of average equity, based on

quarter-end balances.

(3) The equity to assets ratio is a leverage ratio and is calculated by dividing average equity by average total

assets, based on quarter-end balances.

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The following table presents information relating to payments on Rabobank Certificates for the years ended 31 December 2019, 31 December 2018 and 31 December 2017:

(in millions of euro, except percentages) 2019 2018 2017

Average outstanding Rabobank Certificates(1) ........... 7,448 7,445 7,331

Payments ..................................................................... 484 484 484

Average yield(2) ........................................................... 6.50 % 6.50 % 6.60 %

Notes:

(1) Average outstanding Rabobank Certificates based on month-end balances.

(2) Average yield is calculated by dividing payments by the average outstanding Rabobank Certificates.

Loan portfolio

Rabobank Group’s loan portfolio consists of loans, overdrafts, assets subject to operating leases, finance lease receivables to governments, corporations and consumers and reverse repurchase agreements. The following table analyses Rabobank Group’s loan portfolio by sector as at 31 December 2019, 31 December 2018 and 31 December 2017:

As at 31 December

(in billions of euro) 2019 2018 2017

Private sector lending ................................................... 417.9 416.0 411.0

Loans to government clients ......................................... 2.0 1.9 2.3

Receivables relating to securities transactions ............. 13.6 12.9 12.9

Hedge accounting ......................................................... 7.0 5.8 6.4

Total loans and advances to customers ................... 440.5 436.6 432.6

Loan impairment allowance loans and advances to

customers ..................................................................... (3.9 ) (3.7 ) (5.4 )

Reclassified assets ....................................................... — — 0.1

Gross loans and advances to customers ................. 436.6 440.3 437.9

The following table sets forth a geographic breakdown of Rabobank Group’s private sector loan portfolio as at 31 December 2019, 31 December 2018 and 31 December 2017:

As at 31 December


The Netherlands ........................................................... 292,637 294,628 298,583

Other European countries in the EU zone .................... 33,556 31,337 28,493

North America ............................................................... 41,681 44,255 41,831

Latin America ................................................................ 15,362 14,067 12,467

Asia ............................................................................... 9,449 8,887 8,076

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As at 31 December


Australia ........................................................................ 24,663 22,589 21,191

Africa ............................................................................. 566 262 323

Total private sector lending ....................................... 417,914 416,025 410,964

Risk Elements

Breakdown of assets and liabilities by repayment date

The table below shows assets and liabilities grouped according to the period remaining from the reporting date to the contractual repayment date. These amounts correspond with the amounts included in the consolidated statement of financial position.

Current and non-current

financial instruments

As at 31 December 2019

in millions of euros

On demand

Less than 3

months

3 months to

1 year

1-5 years

Longer than

5 years

No maturity

applicable

Total

Financial assets

Cash and cash equivalents 62,553 9 3 — — 521 63,086

Loans and advances to

credit institutions ................ 18,288 7,634 1,126 164 169 1,916 29,297

Financial assets held for

trading ............................... 28 160 151 628 844 59 1,870

Financial assets

designated at fair value ...... — 100 1 — — — 101

Financial assets

mandatorily at fair value ..... 45 64 440 89 538 729 1,905

Derivatives ......................... 1,081 1,003 1,488 4,023 15,989 — 23,584

Loan and advances to

customers .......................... 34,852 16,115 37,239 106,628 237,986 7,687 440,507

Financial assets at fair

value through OCI ............. 478 1,021 2,234 7,889 1,519 364 13,505

Other assets (excluding

employee benefits) ............ 667 1,815 1,596 1,376 170 980 6,604

Total financial assets ...... 117,992 27,921 44,278 120,797 257,215 12,256 580,459

Financial liabilities

Deposits from credit

institutions ......................... 4,489 1,642 2,378 3,977 772 7,986 21,244

Deposits from customers ... 282,565 15,763 8,423 11,934 22,573 1,278 342,536

Debt securities in issue ...... 8,530 12,887 23,716 55,065 30,205 — 130,403

Derivatives ......................... 1,293 1,121 1,598 5,426 14,602 34 24,074

Financial liabilities held for

trading ............................... — 399 — — — — 399

Other liabilities (excluding

employee benefits) ............ 2,159 1,478 532 845 292 757 6,063

Lease Liabilities ................. 2 18 30 174 317 1 542


designated at fair value ...... 114 233 772 2,477 2,732 — 6,328

Subordinated liabilities ....... — — 1,012 5,293 9,485 — 15,790

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Current and non-current

financial instruments


in millions of euros

On demand

Less than 3

months

3 months to

1 year

1-5 years

Longer than

5 years

No maturity

applicable

Total

Total financial liabilities .. 299,152 33,541 38,461 85,191 80,978 10,056 547,379

Net balance ...................... (181,160 ) (5,620 ) 5,817 35,606 176,237 2,200 33,080

The overview presented above has been composed on the basis of contractual information and does not represent the actual movements of these financial instruments. However, such actual movements are taken into account for the day-to-day management of the liquidity risk. Deposits from customers are an example. Under contract, these are payable on demand. Historically, this is a very stable source of long-term financing that Rabobank has at its disposal.

Interest rate sensitivity*

The key indicators used for managing the interest rate risk are the Basis Point Value (“BPV”), the Equity at Risk and the Income at Risk.

The BPV is the absolute loss of economic value of equity after a parallel shift of the yield curve with 1 basis point. In 2019, the BPV was 11.6 million.

Long-term interest rate risk is measured and managed using the Equity at Risk concept. Equity at Risk is the sensitivity of Rabobank Group’s economic value of equity to interest rate fluctuations. A 100 basis point overnight upward parallel shock of the curve will result in a 3.0 per cent. drop in economic value of equity (figure at 31 December 2019).

Short-term interest rate risk is monitored using the Income at Risk concept. This is the amount of net interest income that is put at risk on an annual basis, based on certain interest rate scenarios. If interest rates were to gradually decrease 10 basis points over a one-year period, net interest income would decrease by €35 million (figure at 31 December 2019).

Cross-border outstandings*

Cross-border outstandings are defined as loans (including accrued interest), acceptances, interest-earning deposits with other banks, other interest-earning investments and any other monetary assets which are denominated in a currency other than the functional currency of the office or subsidiary where the extension of credit is booked. To the extent that the material local currency outstandings are not hedged or are not funded by local currency borrowings, such amounts are included in cross-border outstandings.

At 31 December 2019, there were no cross-border outstandings exceeding 1 per cent. of total assets in any country where current conditions give rise to liquidity problems which are expected to have a material impact on the timely repayment of interest or principal.

The following table analyses cross-border outstandings at the end of each of the last three years and as at 31 December 2019, stating the name of the country and the aggregate amount of cross-border outstandings in each foreign country where such outstandings exceeded 1 per cent. of total assets, by type of borrower:

(in millions of euros) Banks

Public

authorities

Private

sector Total

As at 31 December 2019.....................

France ................................................. 8,434 713 1,412 10,559

United Kingdom .................................... 11,991 - 11,645 23,636

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(in millions of euros) Banks

Public

authorities

Private

sector Total


Australia................................................ 616 1,079 15,127 16,822

Brazil .................................................... 729 407 8,827 9,963

France ................................................. 2,318 1,318 4,514 8,150

New Zealand ........................................ 108 419 7,901 8,428

Germany .............................................. 807 336 5,887 7,030

United Kingdom ................................... 5,547 2,276 12,313 20,136

United States ........................................ 1,899 6,541 53,879 62,319

Switzerland .......................................... 592 4,476 2,848 7,916


France ................................................. 5,526 3,052 1,280 9,858

United Kingdom ................................... 10,895 1 8,921 19,817

Switzerland ........................................... 527 7,071 1,867 9,466

Diversification of loan portfolio*

One of the principal factors influencing the quality of the earnings and the loan portfolio is diversification of loans, e.g. by industry or by region. Rabobank Group uses the North America Industry Classification System (“NAICS”) as the leading system to classify industries. NAICS distinguishes a large number of sectors, subsectors and industries.

The following table is based on data according to NAICS and represents the loan portfolio of Rabobank Group loans by main sector at 31 December 2019:


(in millions of euros) On balance Off balance Total

Grain and oilseeds ........................................................ 21,018 4,109 25,127

Animal protein ............................................................... 17,369 4,277 21,646

Dairy .............................................................................. 23,221 2,726 25,947

Fruit and vegetables ..................................................... 10,666 1,969 12,635

Farm inputs ................................................................... 11,084 4,884 15,968

Food retail and food service .......................................... 5,637 2,462 8,099

Beverages ..................................................................... 2,579 1,866 4,445

Flowers ......................................................................... 1,489 227 1,716

Sugar ............................................................................ 3,283 661 3,944

Miscellaneous crop farming .......................................... 1,819 413 2,232

Other food and agri ....................................................... 9,053 661 9,713

Total private sector lending to food and agri ........... 107,218 26,852 134,070

Lessors of real estate .................................................... 10,521 411 10,932

Finance and insurance (except banks) ......................... 16,192 8,624 24,816

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(in millions of euros) On balance Off balance Total

Wholesale ..................................................................... 10,994 10,234 21,228

Activities related to real estate ...................................... 8,860 604 9,464

Manufacturing ............................................................... 9,818 4,604 14,351

Transportation and warehousing .................................. 6,226 1,589 7,815

Construction .................................................................. 5,141 3,290 8,431

Healthcare & social assistance ..................................... 7,114 1,716 8,830

Professional, scientific and technical services .............. 9,291 4,349 13,640

Retail (except food and beverages) .............................. 4,681 2,178 6,859

Utilities .......................................................................... 3,638 3,500 7,137

Information and communication .................................... 1,041 554 1,595

Arts, entertainment and recreation ................................ 1,368 182 1,550

Other services ............................................................... 24,544 5,318 29,863

Total private sector lending to trade, industry and

services ........................................................................ 119,429 47,153 166,582

Private individuals ......................................................... 191,267 11,553 202,820

Total private sector lending ....................................... 417,914 85,558 503,472

Apart from loans and advances to credit institutions (€29.3 billion at 31 December 2019 which is 5.0 per cent. of total assets), Rabobank’s only significant risk concentration is in the portfolio of loans to private individuals which accounted for 46 per cent. of the private sector loan portfolio at 31 December 2019. This portfolio has a relatively low risk profile as evidenced by the actual losses incurred in previous years. The proportion of the total loan portfolio attributable to the food and agri sector was 26 per cent. at 31 December 2019. The proportion of the total loan portfolio attributable to trade, industry and services was 29 per cent. at 31 December 2019. Loans to trade, industry and services and loans to the food and agri sector are both spread over a wide range of industries in many different countries. None of these shares represents more than 10 per cent. of the total loan portfolio.

Non-performing loans*

Rabobank focuses on non-performing loans. These meet at least one of the following criteria:

They are material loans in arrears by more than 90 days. The threshold for materiality amounts to

€1,000 per facility for retail exposures and expert judgement for other asset classes within

Rabobank Group;

The debtor is assessed as unlikely to pay its credit obligations in full without realisation of

collateral, regardless of the existence of any past due amount or the number of days past due.

As at December 31, 2019 the non-performing loans (NPL) decreased to €15.7 billion compared to €18.4 billion in 2018. The NPL ratio was 3.0 per cent. compared to 3.5 per cent. in 2018 and the NPL coverage ratio was 20 per cent. compared to 22 per cent. in 2018 The favorable Dutch economic environment and the sale of the ACC loan portfolio contributed to a further decline in the level of NPL and to the improving NPL ratio.

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The following table provides an analysis of Rabobank Group’s non-performing loans by business at 31 December 2019, 31 December 2018 and 31 December 2017:

At 31 December


DRB .............................................................................. 9,488 11,794 10,036

Wholesale & Rural ........................................................ 5,267 6,115 6,329

Leasing ......................................................................... 886 478 450

Real estate .................................................................... 65 49 1,500

Rabobank Group ......................................................... 15,705 18,436 18,315

Summary of loan loss experience

The following table shows the movements in the allocation of the allowance for loan losses on loans accounted for as loans to customers as at 31 December 2019, 31 December 2018 and 31 December 2017:

As at 31 December


DRB .............................................................................. 2,267 2,693 3,317

Wholesale & Rural ........................................................ 1,330 1,297 3,099

Leasing ......................................................................... 265 257 259

Real Estate ................................................................... 7 270 797

Other ............................................................................. 0 0 15

Balance on 1 January ................................................. 3,869 4,517 7,487

DRB .............................................................................. - - (172)

Wholesale & Rural ........................................................ - - 118

Leasing ......................................................................... - - 145

Real estate .................................................................... - - (114 )

Other ............................................................................. - - (15 )

Impairment charges from loans and advances to

customers .................................................................... n/a n/a (38 )

DRB .............................................................................. (324 ) (459 ) (632 )

Wholesale & Rural ........................................................ (254 ) (290) (1,047 )

Leasing ......................................................................... (156 ) (141 ) (136 )

Real Estate ................................................................... 0 (123 ) (204 )

Other ............................................................................. 0 0 0

Write-down of defaulted loans during the period .... (734 ) (1,013 ) (2,019 )

DRB .............................................................................. (30 ) 127 31

Wholesale & Rural ........................................................ (91 ) 49 (60 )

Leasing ......................................................................... (5 ) 9 (24 )

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As at 31 December


Real Estate ................................................................... 5 (127 ) 69

Other ............................................................................. 0 0 0

Interest and other adjustments ................................. (121 ) 58 16

DRB 211 (94 ) -

Wholesale & Rural 611 274 -

Leasing 253 140 -

Real Estate 2 (13 ) -

Other 0 0 -

Net additions 1,077 307 N/A

DRB .............................................................................. 2,124 2,267 2,544

Wholesale & Rural ........................................................ 1,596 1,330 2,110

Leasing ......................................................................... 357 265 244

Real Estate ................................................................... 14 7 548

Other ............................................................................. 0 0 0

Balance on end of period ........................................... 4,091 3,869 5,446

Deposits from customers

The following table presents a breakdown of deposits from customers as at 31 December 2019, 31 December 2018 and 31 December 2017. Interest rates paid on time deposits and savings deposits reflect market conditions and not all current accounts earn interest.

As at 31 December


Current accounts ........................................................... 89,010 85,511 77,914

Deposits with agreed maturity ....................................... 63,627 71,203 74,536

Deposits redeemable at notice ..................................... 180,159 175,932 178,162

Repurchase agreements ............................................... 32 13 108

Fiduciary deposits ......................................................... 9,522 9,750 9,961

Other deposits from customers ..................................... 186 1 1

Total due to customers .............................................. 342,536 342,410 340,682

Short-term borrowings*

Short-term borrowings are borrowings with an original maturity of one year or less. These are included in Rabobank Group’s consolidated statement of financial position within the line item “Debt securities in issue”. The following table includes an analysis of the balance of short-term borrowings as at 31 December 2019, 31 December 2018 and 31 December 2017 is provided below.

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As at 31 December


End of period balance ................................................... 26,699 29,729 37,727

Average balance ........................................................... 30,832 36,881 41,514

Maximum month-end balance ....................................... 35,429 40,450 48,724

Long-term borrowings*

Long-term borrowings are borrowings with an original maturity of more than one year. These are included in Rabobank Group’s consolidated statement of financial position within the line items “Debt securities in issue” and “Other financial liabilities at fair value through profit or loss”. The following table includes an analysis of the balance of long-term borrowings as at 31 December 2019, 31 December 2018 and 31 December 2017 is provided below.

As at 31 December


End of period balance ................................................... 110,032 107,691 110,488

Average balance ........................................................... 109,989 107,692 118,774

Maximum month-end balance ....................................... 113,353 110,608 125,365

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RISK MANAGEMENT

Rabobank Group places a high priority on the management of risk and has extensive procedures in place for systematic risk management. Within Rabobank Group, the risk management policies relating to interest rate risk, market risk and liquidity risk are developed and monitored by the Risk Management Committee Rabobank Group (“RMC”) in cooperation with the Risk Management Department. The RMC is responsible for financial and non-financial risk management, establishing risk policy, setting risk measurement standards, broadly determining limits and monitoring developments, and advising the Managing Board on all relevant issues regarding risk management.

The principal risks faced by Rabobank Group are credit risk, country risk, interest rate risk, liquidity risk, market risk, operational risk (including legal risk) and currency risk. Rabobank has implemented an economic capital framework to determine the amount of capital it should hold on the basis of its risk profile and desired credit rating. Economic capital represents the amount of capital needed to cover for all risks associated with a certain activity. The economic capital framework makes it possible to compare different risk categories with each other because all risks are analysed by using the same methodology. See also “Risk Factors”.

Credit risk

Rabobank Group aims to offer continuity in its services. It therefore pursues a prudent credit policy. Once granted, loans are carefully managed so there is a continuous monitoring of credit risk. At 31 December 2019, 46 per cent. of Rabobank Group’s private sector lending consisted of loans to private individuals, mainly residential mortgages, which tend to have a very low risk profile in relative terms. The remaining 54 per cent. was a highly diversified portfolio of loans to business clients in the Netherlands and internationally.

Within the boundaries set by the RMC the Managing Board has delegated decision-making authority to transactional committees and to credit decision approval officers that operate on an entity level, regional level or central level at Rabobank. In addition, credit committees review all significant risks in credit proposals to arrive at a systematic judgment and a balanced decision. Rabobank has various levels of credit committees. Applications exceeding authority level of a credit committee are complemented with a recommendation and submitted to a ‘higher’ credit committee for decision-making. Within Rabobank the ‘highest’ transactional committees are the following:

Central Credit Committee Rabobank Group (CCCRG) – The CCCRG takes credit decisions on

credit applications subject to the ‘corporate credit approval route’ exceeding:

the authority of Credit Approvals Local Banks (CA LB) – This department is responsible for

decisions on requests for non-classified (LQC Good or OLEM) obligors exceeding the authority of

Local Banks in The Netherlands.

the authority of Credit Approvals Wholesale & Rural (CA Wholesale & Rural) – This department is

responsible for decisions on requests for non-classified (LQC Good or OLEM) obligors exceeding

the authority of De Lage Landen (DLL) or a Wholesale & Rural office/region.

the authority of the Credit Committee Financial Restructuring & Recovery (CC-FR&R) - This credit

committee takes credit decisions on proposals for classified (LQC Substandard, Doubtful or Loss)

obligors exceeding the authority of local credit committees and the FR&R department. Country &

Financial Institutions Committee (CFIC) – The CFIC takes credit decisions on proposals

exceeding the authority of Credit Financial Institutions or Country Risk Research. These

departments are responsible for the risk management of exposure on financial institutions and

sovereigns/countries.

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Loan Loss Provision Committee (LLPC) – The LLPC monitors the development of qualified credit

and asset portfolios and recommends on impairment allowances for obligors exceeding the

authority of local credit committees or the CC-FR&R, to the Managing Board.

The Terms of Reference (ToR) provide the mandate, responsibilities and scope, hierarchical relationships, membership, authority levels and modalities of these approval bodies. Credit committees take decisions on the basis of consensus, unless local regulation requires majority voting. Consensus is reached when there is a general agreement and none of the members has fundamental objections to the decision. When no consensus can be reached, an application is considered declined. In the case of majority voting, the representative(s) from the Risk department must have a veto right.

For efficiency reasons credit committees can delegate part of their authority. A single person may not take a credit decision solely based on its own opinion; this means that a 4-eyes principle applies or decisions are system supported, in which case one person is allowed to decide as long as the credit is assessed as acceptable by an expert system or meets predefined criteria (the credit complies with decision tools). Fully IT supported assessments and approvals are allowed under strict conditions.

The credit committees play a key role in ensuring consistency among Rabobank standards of credit analysis, compliance with the overall Rabobank credit policy and consistent use of the rating models. The credit policy sets the parameters and remit of each committee, including the maximum amount they are allowed to approve for limits or transactions. Policies are also in place which restrict or prohibit certain counterparty types or industries. As a rule, all counterparty limits and internal ratings are reviewed once a year (corporate clients) at a minimum. Where counterparties are assigned a low loan quality classification, they are reviewed on a more frequent basis. Credit committees may request for more frequent reviews as well.

With respect to the management of Rabobank Group’s exposure to credit risk, Rabobank’s Credit Department within overall Risk Management play a key role. Credit applications beyond certain limits are subject to a thorough credit analysis by credit officers of Credit. Credit monitors and reports about Rabobank Group’s credit portfolio and develops new methods for quantifying credit risks.

Risk profiling is also undertaken at the portfolio level using internal risk classifications for portfolio modelling. Internal credit ratings are assigned to borrowers by allocating all outstanding loans into various risk categories on a regular basis.

Rabobank applies the IRB approach to the vast majority of its credit portfolio (including retail) to calculate its regulatory capital requirements according to CRR (CRD IV). The IRB approach is the most sophisticated and risk-sensitive of the CRR (CRD IV) approaches for credit risk, allowing Rabobank to make use of its internal rating methodologies and models. Rabobank combines CRR (CRD IV) compliance activities with a Pillar 2 framework. The approach represents key risk components for internal risk measurement and risk management processes. Key benefits are a more efficient credit approval process, improved internal monitoring and reporting of credit risk. Another important metric is the Risk Adjusted Return On Capital (RAROC) for a transaction as part of the credit application. This enables credit risk officers and committees to make better informed credit decisions. The IRB approach uses the Probability of Default (PD), Loss Given Default (LGD), Exposure at Default (EAD) and Maturity (M) as input for the regulatory capital formula.

Rabobank Group believes it has a framework of policies and processes in place that is designed to measure, manage and mitigate credit risks. Rabobank Group’s policy for accepting new clients is characterised by careful assessment of clients and their ability to make repayments on credit granted. Rabobank Group’s objective is to enter into long-term relationships with clients which are beneficial for both the client and Rabobank Group.

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Exposure at Default (“EAD”) is the expected exposure to the client in the event of, and at the time of, a counterparty’s default. As at 31 December 2019, in terms of EAD, Rabobank had the following exposures per approach: Advanced Internal Rating-Based (“AIRB”) €533.7 billion, Foundation Internal Ratings-Based (“FIRB”) €6.9 billion and Standardised Approach (“SA”) €18.3 billion (2018: €577 billion). This EAD includes the expected future usage of unused credit lines. As part of its approval process Rabobank Group uses the Rabobank Risk Rating system, which indicates the counterparty’s PD over a one-year period. The counterparties have been assigned to one of the 25 rating classes, including four default ratings. These default ratings are assigned if the customer defaults, the form of which varies from payment arrears of 90 days to bankruptcy. The weighted average PD of the performing IRB loan portfolio is 1.11 per cent. (2018: 0.91 per cent.).

The following table shows the non-performing loans of 31 December 2019, 2018 and 2017 per business unit as a percentage of gross carrying amount:

Non-performing loans/gross carrying amount per business unit

As at 31 December


DRB ............................................................................. 3.5 4.2 3.5

Wholesale & Rural ....................................................... 2.4 2.8 3.0

Leasing ........................................................................ 2.6 1.5 1.6

Real Estate .................................................................. 17.8 12.7 61.0

Rabobank Group .......................................................... 3.0 3.5 3.5

Impairment charges

Once a loan has been granted, ongoing credit management takes place as part of which new information, both financial and non-financial, is assessed. Rabobank monitors whether the client meets all its obligations and whether it can be expected the client will continue to do so. If this is not the case, credit management is intensified, monitoring becomes more frequent and a closer eye is kept on credit terms. Guidance is provided by a special unit within Rabobank Group, particularly in case of larger and more complex loans granted to businesses whose continuity is at stake. If it is likely that the debtor will be unable to fulfil its contractual obligations, this is a matter of impairment and an allowance is made which is charged to income.

The following table sets forth Rabobank Group’s impairment charges for the years ended 31 December 2019, 2018 and 2017 per business unit as a percentage of private sector lending:

Impairment charges/average private sector lending per business unit



DRB ........................................................... 0.06 (0.05 ) (0.09 )

Wholesale & Rural ..................................... 0.55 0.29 0.09

Leasing ...................................................... 0.62 0.34 0.36

Real estate ................................................ 0.71 (2.87 ) (5.21 )

Rabobank Group ..................................... 0.23 0.05 (0.05 )

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Country risk

Rabobank uses a country limit system to manage collective debtor risk and transfer risk. After careful review, relevant countries are given an internal country risk rating, after which, general limits and transfer limits are set. Transfer limits are introduced based on the net transfer risk, which is defined as total loans granted less loans granted in local currency, guarantees, other collateral obtained to cover transfer risk and a deduction related to the reduced weighting of specific products. The limits are allocated to the local business units, which are themselves responsible for the day-to-day monitoring of loans that have been granted and for reporting on this to the Risk Management function. At Rabobank Group level, the country risk outstanding is reported to the Country & Financial Institutions Committee (CFIC). Special Basel II parameters, specifically EATE (Exposure at Transfer Event), PTE (Probability of Transfer Event) and LGTE (Loss Given Transfer Event), are used to calculate the additional capital requirement for transfer risk. These calculations are made in accordance with internal guidelines and cover all countries where transfer risk is relevant.

At 31 December 2019, the ultimate collective debtor risk for non-OECD countries was €28.9 billion and the net ultimate transfer risk before provisions for non-OECD countries was €18.7 billion, which corresponds to 3.2 per cent. of total assets (2018: 2.8 per cent.). Total assets were €590.6 billion (2018: €590.4 billion). The total allowance for ultimate country risk amounted to 595 (2018: 526), which corresponds to 14.5 per cent. (2018: 13.6 per cent.) of the total allowance of 4,093 (2018: 3.865). It should be noted that reduced weighting of specific products is no longer included in this transfer risk figure.

Risk in non-OECD countries

in millions of euros 31 December 2019

Regions

Europe

Africa

Latin

America

Asia/

Pacific

Total

As % of

total

assets

Ultimate country risk (exclusive

of derivatives) ..............................

1,519

707

14,431

12,205

28,862 4.9 %

- of which in local currency

exposure ........................................ 579 6 7,624 1,963 10,173

Net ultimate country risk before

allowance ....................................... 940 701 6,807 10,242 18,689 3.2

%

As % of

total

allowance

Total allowance for ultimate country

risk ................................................. 3 0 509 83 595 14.5 %

Rabobank’s exposures in the largest EU economies are under increased scrutiny given the ongoing

uncertainties surrounding the details of the still to be negotiated trade agreement between the United

Kingdom and the EU, the still present fiscal challenges in Italy, the ongoing economic weakness in the

Eurozone, as well as potential repercussions from the US-China trade tensions and the Covid-19

outbreak.

Turkey has been under a special policy regime since the failed coup attempt in July 2016, with

restrictions only further intensifying after the Lira crisis of August 2018. The regime has been somewhat

liberalized in November 2019, but only for existing clients that have proven their ability to operate under

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challenging circumstances. Rabobank’s general stance remains cautious as the vulnerabilities of the

Turkish economy have not yet been adequately addressed by the current government.

Despite the deep economic crisis and implementation of capital controls Rabobank’s Portfolio in

Argentina, which solely focuses on F&A exporters has proven its resilience to such severe shocks. Due

to the tense social/political situation in Chile, Colombia and Brazil, Rabobank’s exposures are being

extensively monitored, especially given that the protests or the risks thereof can either change the

current policy direction or slow the necessary reform progress down.

Interest rate risk

Rabobank Group is exposed to structural interest rate risk in its balance sheet. Interest rate risk can result from, among other things, mismatches in assets and liabilities; for example, mismatches between the periods for which interest rates are fixed on loans and funds entrusted. Rabobank Group uses three indicators for managing, controlling and limiting short- and long-term interest rate risk: Basis Point Value, Earnings at Risk and Modified Duration. Based on the Basis Point Value, Earnings at Risk and Modified Duration analyses, the Managing Board forms an opinion with regard to the acceptability of losses related to projected interest rate scenarios, and decides upon limits with regard to Rabobank Group’s interest rate risk profile.

Rabobank Group’s short-term interest rate risk can be quantified by looking at the sensitivity of net interest income (interest income less interest expenses, before tax) for changes in interest rates. This “Earnings at Risk” figure represents the maximum decline in net interest income for the coming 12 months in a selection of interest rate scenarios, assuming no management intervention. The scenario with the largest negative effect on net interest income usually is the parallel down scenario in which the yield curve is gradually lowered during the first 12 months. The size of this downward shock is dependent on the level of the yield curve as strongly negative interest rates are not expected. At the end of 2019 the assumed downward shock of the EUR yield curve was 25bps. The simulation of the possible net interest income development is based on an internal interest rate risk model. This model includes certain assumptions regarding the interest rate sensitivity of products with interest rates that are not directly linked to a certain money or capital market rate, such as savings of private customers.

Rabobank Group’s long-term interest rate risk is measured and controlled based on the concept of “Modified Duration”, which is the sensitivity of Rabobank Group’s economic value of equity to an instant parallel change in interest rates of 100 basis points. The economic value of equity is defined as the present value of the assets less the present value of the liabilities plus the present value of the off-balance sheet items. In the Modified Duration calculation, client behaviour and the bank’s pricing policy are supposed to show no changes, while all market interest rates are assumed to increase by 100 basis points at once. Just as in the Earnings at Risk calculation, the impact analysis of these scenarios is based on an internal interest rate risk model. In that model, balance sheet items without a contractual maturity, like demand savings deposits and current accounts, are included as a replicating portfolio. Modified duration is expressed as a percentage. This percentage represents the deviation from the economic value of equity at the reporting date.

As at 31 December 2019, 31 December 2018 and 31 December 2017, the Earnings at Risk and Modified Duration for Rabobank Group were as follows:

As at 31 December


Earnings at Risk ...........................................................

35

(decline by 25

basis points)

109

(decline by

25 basis

points)

148

(decline by

25 basis

points)

87

As at 31 December


Modified Duration ......................................................... 3.0 % 2.8 % 2.0 %

The current low interest rate environment has prevailed since 2016. For a bank in general a low interest rate environment is challenging for profitability. Non-interest bearing liabilities and liabilities with very low interest rates, such as the equity and current account balances, are less profitable in the event of low interest rates. In 2019, the interest rate remained negative on the short end of the curve and in historical perspective the curve remained fairly flat by comparison. A flat curve results in a bank making less profit on the transformation of short-term liabilities into longer term assets.

Liquidity risk

Liquidity risk is the risk that a bank will not be able to meet all its payment obligations on time, as well as the risk that the bank will not be able to fund increases in assets at a reasonable price.

Responsibility for the day-to-day management of the liquidity position, the raising of professional funding on the money and the capital markets, and the management of the structural position lies within the Treasury department. In keeping with the Basel principles, the policy is aimed at financing long-term loans by means of stable funding, specifically amounts due to customers and long-term funding from the professional markets. Rabobank Group’s funding and liquidity risk policy also entails strictly limiting outgoing cash flows at the wholesale banking business, maintaining a large liquidity buffer and raising sufficient long-term funding in the international capital market. The retail banking division is assumed to be largely self-funded using money raised from customers. The division raised more than enough money to fund operations in 2019 given low lending demand, while retail savings increased.

Rabobank has developed several methods to measure and manage liquidity risk, including stress scenarios for calculating the survival period, i.e. the period that the liquidity buffer will hold up under severe market-specific or idiosyncratic stress. In the most severe stress scenario, it is assumed that Rabobank no longer has access to the capital markets, i.e. no long- or short-term debt can be issued or refinanced. During 2019, Rabobank more than satisfies the minimum survival period of three months in all the internally developed scenarios.

Market risk

Market Risk arises from the risk of losses on trading book positions affected by movements in interest rates, equities, credit spreads, currencies and commodities. The RMC Group is responsible for developing and supervising market risk policies and monitors Rabobank’s worldwide market risk profile. On a daily basis, the Financial Markets Risk Department measures and reports the market risk positions. Market risk is calculated based on internally developed risk models and systems, which are approved and accepted by DNB.

Rabobank considers Event Risk the most important market risk indicator in the trading environment, measuring events that are not captured by the Value at Risk (“VaR”) model. Rabobank designed a large number of scenarios based on book composition and current macro/economic financial markets situations to measure the potential effect of sharp and sudden changes in market prices. The internal VaR model also forms a key part of Rabobank’s market risk framework. VaR describes the maximum possible loss that Rabobank can suffer within a defined holding period, based on historical market price changes and a given certain confidence interval. VaR within Rabobank is based on actual historical market circumstances. In addition, interest rate delta is monitored and indicates how the value of trading positions change if the relevant yield curve

88

shows a parallel increase of one basis point. Event Risk, VaR and interest rate delta are subject to limits that are set by the Managing Board on an annual basis.

End of year 2019, the worst case, potential, loss from the event risk scenarios was €71 million (2018: €128 million). It fluctuated between €68 million (2018: €103 million) and €140 million (2018: €157 million), with an average of €93 million (2018: €129 million) which was well within the internal Event Risk limit. For the year 2019, the VaR, based on a one-day holding period and 97.5 per cent. confidence level, fluctuated between €2.3 million (2019: €1.9 million) and €4.3 million (2018: €3.9 million), with an average of €3.0 million (2018: €2.6 million). Throughout 2019, the position was well within the internal VaR limit. Changes in VaR have been driven by client related deals and volatility in the financial markets.

A drawback of using historical simulations is that it does not necessarily take into account all possible future market movements. Therefore, VaR results cannot guarantee that actual risk will follow the statistical estimate. The performance of the VaR models is regularly reviewed by means of back testing. These back testing results are reported internally as well as to the regulator. In addition to VaR, other risk indicators are also used for market risk management. Some of them are generated by using statistical models. All these indicators assist the Financial Markets Risk Department, as well as the RMC Group, in evaluating Rabobank’s trading book positions.

Operational risk

Operational risk is defined by Rabobank Group as “the risk of losses resulting from inadequate or failed internal processes, people or systems or by external events”. Operational risk includes all non-financial risk types. Rabobank Group operates within the current regulatory framework with measuring and managing operational risk, including holding capital for this risk following the Advanced Measurement Approach. Events in modern international banking have shown that operational risks can lead to substantial losses. Examples of operational risk incidents are highly diverse: fraud or other illegal conduct, failure of an institution to have policies and procedures and controls in place to prevent, detect and report incidents of non-compliance with applicable laws or regulations, inadequate control processes to manage risks, ineffective implementation of internal controls, claims relating to inadequate products, inadequate documentation, errors in transaction processing, system failures and cyberattacks. The global environment Rabobank Group is operating in requires constant adaption to changing circumstances. Quite a number of transitional, remedial and regulatory driven change projects are currently running which may result in an increased risk profile. As a result this may lead to the possible increase of the number of operational risk incidents or additional costs of complying with new regulations which could have a material adverse effect on Rabobank Group’s reputation or a material adverse effect on Rabobank Group’s business, financial condition and results of operations.

Legal risk

Rabobank Group is subject to a comprehensive range of legal obligations in all countries in which it operates. As a result, Rabobank Group is exposed to many forms of legal risk, which may arise in a number of ways. Rabobank Group faces risk where legal proceedings, whether private litigation or regulatory enforcement actions are brought against it. The outcome of such proceedings is inherently uncertain and could result in financial loss and reputational damage. Defending or responding to such proceedings can be expensive and time-consuming and there is no guarantee that all costs incurred will be recovered even if Rabobank Group is successful.

Currency risk

Currency risk or Foreign Exchange Rate Risk (“FX Risk”) is the risk that exchange rate movements could lead to volatility in the bank’s cash flow, assets and liabilities, net profit and/or equity. The bank distinguishes two types of non-trading FX Risks: (i) FX Risk in the banking books and (ii) FX translation risk (defined below).

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FX risk in the banking books

FX risk in the banking books, is the risk where known and/or ascertainable currency cash flow commitments and receivables in the banking books are unhedged. As a result, it could have an adverse impact on the financial results and/or financial position of the Group, due to movements in exchange rates.

FX Translation risk

FX translation risk is the risk that FX fluctuations will adversely affect the translation of assets and liabilities of operations – denominated in foreign currency – into the functional currency of the parent company. Translation risk reveals in Rabobank’s equity position, risk weighted assets and capital ratios.

Rabobank manages its FX translation risk with regard to the Rabobank Group CET1 ratio by deliberately taking FX positions, including deliberately maintaining FX positions and not or only partly closing FX positions. As a result of these structural FX positions, the impact of exchange rate fluctuations on the Rabobank Group CET1 ratio is mitigated.

FX translation risk at Rabobank Group is covered by Rabobank’s Global Standard on FX Translation Risk (“Standard”). The purpose of the Standard is to outline the Rabobank Group policy towards FX Translation risk to achieve and ensure a prudent and sound monitoring and controlling system, in order to manage these risks Group wide. Rabobank uses a pillar 2 framework for those areas where Rabobank is of the opinion that the regulatory framework (i.e. pillar 1) does not address the risk, or does not adequately address the risk. FX translation risk is one of these risks.

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REGULATION OF RABOBANK GROUP

Rabobank is a bank organised under Dutch law. The principal Dutch law on supervision applicable to Rabobank is the FMSA, under which Rabobank is supervised by DNB and the AFM. The ECB assumed certain supervisory tasks from DNB and is the competent authority responsible for supervising Rabobank Group’s compliance with prudential requirements. Rabobank and the various Rabobank Group entities are also subject to certain EU legislation, which has a significant impact on the regulation of Rabobank Group’s banking, asset management and broker-dealer businesses in the EU, and to the regulation and supervision of local supervisory authorities of the various countries in which Rabobank Group does business.

The overview below consists of a summary of the key applicable regulations and does not purport to be complete.

Basel Standards

The Basel Committee develops international capital adequacy guidelines based on the relationship between a bank’s capital and its risks, including, inter alia, credit, market, operational, liquidity and counterparty risks.

Credit Risk

To assess their credit risk, banks can choose between the “Standardised Approach”, the “Foundation Internal Ratings Based Approach” and the “Advanced Internal Ratings Based Approach”. The Standardised Approach is based on standardised risk weights set out in the Basel II capital guidelines and external credit ratings; it is the least complex. The two Internal Ratings Based Approaches allow banks to use internal credit rating systems to assess the adequacy of their capital. The Foundation Internal Ratings Based Approach allows banks to use their own credit rating systems with respect to the “Probability of Default”. In addition to this component of credit risk, the Advanced Internal Ratings Based Approach allows banks to use their own credit rating systems with respect to the “Exposure at Default” and the “Loss Given Default”. The rules on the assessment of credit risk are expected to change as a consequence of the Basel III Reforms. See “Basel III Reforms” and “Recent Developments” below.

See the risk factor entitled “Any increase in the Group’s minimum regulatory capital and liquidity requirements may have a material adverse effect on the Group’s business, financial condition and results of operations” above.

Market Risk

To assess their market risk, banks can choose between a “Standardised approach” or an alternative methodology based on own internal risk management models. Rabobank has permission from its supervisor to calculate the general and specific exposures using its internal Value-at-Risk (VaR) models.

Operational Risk

To assess their operational risk, banks can also choose between three approaches with different levels of sophistication, the most refined of which is the Advanced Measurement Approach. Rabobank Group has chosen the Advanced Measurement Approach.

Basel III Reforms

The Basel III framework, which is implemented in the EU by means of the CRD IV Directive and CRR (see “European Union Legislation – The CRD IV Directive and CRR” below) sets out rules for higher and better quality capital, better risk coverage, the introduction of a leverage ratio as a backstop to the risk-based requirements, measures to promote the build-up of capital that can be drawn down in periods of stress, and the introduction of two liquidity standards. Basel III includes increasing the minimum Common Equity Tier 1 Capital (or equivalent) requirement from 2 per cent. of the total risk exposure amount (before the application of regulatory adjustments) to 4.5 per cent.

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(after the application of stricter regulatory adjustments (which, under CRD IV, are gradually phased in from 1 January 2014 until 1 January 2018)). The total Common Equity Tier 1 Capital requirement has increased from 4 per cent. of the total risk exposure amount to 6 per cent. under CRD IV and the total Common Equity Tier 1 Capital requirement is 8 per cent of the total risk exposure amount under CRD IV. In addition, banks will be required to maintain, in the form of Common Equity Tier 1 Capital (or equivalent), a capital conservation buffer of 2.5 per cent. of the total risk exposure amount to withstand future periods of stress, bringing the total Common Equity Tier 1 Capital (or equivalent) requirements to 7 per cent. If there is excess credit growth in any given country resulting in a system-wide build-up of risk, a countercyclical capital buffer (generally of up to 2.5 per cent. of the total risk exposure amount and also comprised of Common Equity Tier 1 Capital (or other fully loss absorbing capital)) may be applied as an extension of the capital conservation buffer. Furthermore, banks considered to have systemic importance should have loss absorbing capacity beyond these standards.

Capital requirements have been further supplemented by the introduction of a non-risk based leverage ratio of 3 per cent., plus a surcharge of 50 per cent. of the G-SIB buffer requirement for G-SIB’s (under the Basel III Reforms, see below) in order to limit an excessive build-up of leverage on a bank’s balance sheet. During the period from 1 January 2013 to 1 January 2017, the Basel Committee has monitored banks’ leverage data on a semi-annual basis in order to assess whether the proposed design and calibration of a minimum leverage ratio of 3 per cent. is appropriate over a full credit cycle and for different types of business models. This assessment included consideration of whether a wider definition of exposures and an off-setting adjustment in the calibration would better achieve the objectives of the leverage ratio. The Basel Committee also closely monitored accounting standards and practices to address any differences in national accounting frameworks that are material to the definition and calculation of the leverage ratio. The Dutch government has indicated that Dutch systemically important banks, including Rabobank, should also have a surcharge like the G-SIB’s on top of the 3 per cent. leverage ratio requirement. As at 31 December 2019, the leverage ratio of Rabobank was 6.3 per cent.

In addition, Basel III has introduced two international minimum standards intended to promote resilience to potential liquidity disruptions over a 30 day horizon and limit over-reliance on short-term wholesale funding during times of buoyant market liquidity. The first one is referred to as the liquidity coverage ratio (the “LCR”) which is being gradually phased in from 1 January 2015. The LCR tests the short-term resilience of a bank’s liquidity risk profile by ensuring that it has sufficiently high-quality liquid assets to survive a significant stress scenario lasting for 30 days. The second one is referred to as a net stable funding ratio (the “NSFR”). The NSFR tests resilience over a longer period by requiring banks to hold a minimum amount of stable sources of funding relative to the liquidity profiles of the assets and the potential contingent liquidity needs arising from off-balance sheet commitments.

Recent Developments

In December 2017, the Basel Committee finalised the Basel III Reforms (also referred to as “Basel IV” by the industry). This reform complements the initial phase of Basel III announced in 2010 (and implemented in the CRR/CRD IV in 2014) as a response to the global financial crisis. The 2017 reform seeks to restore credibility in the calculation of risk-weighted assets (“RWAs”) and improve the comparability of banks’ capital ratios. Main features of the reform:

Revisions to the standardised approaches for calculating credit risk, market risk, credit

value adjustments (“CVA”) and operational risk

Constraints on the use of internal model approaches, by placing limits on certain inputs

used to calculate capital requirements under the interest ratings-based (“IRB”) approach for

credit risk (for metrics such as Probability of Default (“PD”) and Loss Given Default (“LGD”))

and by removing the use of internal model approaches for CVA risk and for operational risk

The introduction of an output floor, which limits the benefits banks can derive from using

internal models to calculate minimum capital requirements. Banks’ calculations of RWAs

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generated by internal models cannot, in aggregate, fall below 72.5 per cent. of the risk-

weighted assets computed by standardised approaches

Global systemically important banks (“G-SIBs”) are subject to higher leverage ratio

requirements.

According to the Basel III Reforms, the capital floors and other standards (including a revision of the leverage ratio framework) will become applicable as of 2022 and a transitional regime may apply. Furthermore, in March and April 2020, the Basel Committee set out measures to alleviate the impact of Covid-19 (including by deferring the Basel III Reforms by one year to 1 January 2023 and the accompanying transitional arrangements for the output floor also by one year to 1 January 2028) and to ensure that banks reflect the risk-reducing effect of governmental support measures when calculating their regulatory capital requirements.

European Union Legislation

The CRD IV Directive and CRR

As of 1 January 2014, EC Directive 2006/48 and EC Directive 2006/49 were repealed by the CRD IV Directive. The CRD IV Directive, together with the CRR, implements Basel III in the EEA. Both texts were published in the Official Journal of the European Union on 27 June 2013 and became effective on 1 January 2014 (except for capital buffer provisions which became effective on 1 January 2016). The CRD IV Directive was implemented into Dutch law by amendments to the FMSA pursuant to an amendment act (the “CRD IV/CRR Implementation Act”) which entered into force on 1 August 2014. The CRR has established a single set of harmonised prudential rules which apply directly to all banks in the EEA as of 1 January 2014, but with particular requirements being phased in over a period of time, to be fully applicable by various dates up to 2022. The harmonised prudential rules include own funds requirements, an obligation to maintain a liquidity coverage buffer, a requirement to ensure that long-term obligations are adequately met under both normal and stressed conditions and the requirement to report on these obligations. The competent supervisory authorities will evaluate whether capital instruments meet the criteria set out in the CRR. In addition, in June 2019, the European Commission adopted the EU Banking Reforms which are wide-ranging and cover multiple areas, including the Pillar 2 framework, a binding 3 per cent. leverage ratio, the introduction of a binding detailed NSFR, permission for reducing own funds and eligible liabilities, macroprudential tools, a new category of "non-preferred" senior debt, the MREL framework, the integration of the TLAC standard into EU legislation and the transposition of the fundamental review of the trading book (FRTB) conclusions into EU legislation. See also the risk factor entitled “Any increase in the Group’s minimum regulatory capital and liquidity requirements may have a material adverse effect on the Group’s business, financial condition and results of operations”).

On 17 January 2014, a regulation on specific provisions set out in the CRD IV Directive and the CRR (Regeling specifieke bepalingen CRD IV en CRR) (“Dutch CRD IV and CRR Regulation”), as published by DNB, entered into force. The Dutch CRD IV and CRR Regulation contains specific provisions relating to the CRD IV Directive and the CRR, such as the required CET1 Ratio of 4.5 per cent., tier 1 ratio of 6 per cent., total capital ratio of 8 per cent. and the capital conservation measures set out in CRD IV (restriction on distributions if a bank does not meet the combined buffer requirement). On 29 April 2014, DNB announced that, pursuant to the CRD IV/CRR Implementation Act, it will impose an additional capital buffer requirement for Rabobank. The systematic risk buffer, as set by DNB, is equal to 3 per cent. of risk-weighted assets but is currently lowered to 2.0 per cent. by DNB to mitigate the impact of the Covid-19 pandemic on the Dutch economy. See also the section titled "Covid-19 prudential regulatory initiatives" below for an overview of the Covid-19 prudential regulatory initiatives of the EC, the ECB, DNB and the EBA.

Pursuant to the 2019 SREP (Supervisory Review and Evaluation Process), the ECB has determined that the CET1 Ratio of Rabobank Group should be maintained at a minimum level of 8.75 per cent. This 8.75 per cent. Common Equity Tier 1 Capital requirement for Rabobank Group comprises the minimum Pillar 1 requirement (4.5 per cent.), the Pillar 2 additional own funds

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requirement (1.75 per cent.) and the capital conservation buffer (2.5 per cent.). In March 2020 the ECB decided that instead of 100 per cent. now 56.25 per cent. of this pillar 2 additional own funds requirement is to be held in the form of Common Equity Tier 1 Capital (effectively 0.98 per cent). In addition, Rabobank Group is subject to a systemic risk buffer that needs to be applied on top of these Common Equity Tier 1 Capital requirements. In April 2020 the Dutch Central Bank reduced this buffer from 3.0 per cent to 2.0 per cent surcharge (bringing the minimum Common Equity Tier 1 Capital requirement from 11.75 per cent, excluding the countercyclical buffer, to 9.98 per cent excluding the countercyclical buffer as from April 2020. The countercyclical buffer amounted to 0.06 per cent as per 31 December 2019. At the date of this Information Statement, Rabobank Group currently complies with these requirements.

Bank Recovery and Resolution Directive

The BRRD entered into force in July 2014. The bail-in tool with respect to eligible liabilities and the other measures set out in the BRRD (outlined below) were implemented into Dutch law on 26 November 2015. The stated aim of the BRRD is to provide relevant authorities with common tools and powers to address banking crises pre-emptively in order to safeguard financial stability and minimise taxpayers’ exposure to losses.

The BRRD provides competent authorities with early intervention powers and resolution authorities with pre-resolution powers, including the power to write down or convert capital instruments to ensure relevant capital instruments fully absorb losses at the point of non-viability of the issuing institution or group and the power to convert existing instruments of ownership or transfer them to bailed-in creditors. Moreover, when the conditions for resolution are met, resolution authorities can apply, among others, a bail-in tool, which comprises a more general power for resolution authorities to write down the claims of unsecured creditors of a failing institution or to convert unsecured debt claims to equity or other instruments of ownership.

In addition, the BRRD provides resolution authorities with broader powers to implement other resolution measures with respect to distressed banks which satisfy the conditions for resolution, which may include (without limitation) the sale of the bank’s business, the creation of a bridge bank, the separation of assets, the replacement or substitution of the bank as obligor in respect of debt instruments, modifications to the terms of debt instruments (including altering the maturity or the amount of interest payable or imposing a temporary suspension on payments) and discontinuing the listing and admission to trading of financial instruments. See further the risk factor entitled “Any difficulty in raising minimum requirement for own funds and eligible liabilities may have a material adverse effect on the Group’s business, financial position and results of operations”.

In order to ensure the effectiveness of bail-in and other resolution tools introduced by the BRRD, the BRRD requires that, with effect from 1 January 2016 all institutions must meet an individual MREL requirement, calculated as a percentage of total liabilities and own funds and set by the relevant resolution authorities. On 23 May 2016, the European Commission adopted MREL RTS on the criteria for determining the MREL under the BRRD. The MREL RTS were published in the EU Official Journal on 3 September 2016. The MREL RTS provide for resolution authorities to allow institutions an appropriate transitional period to reach the applicable MREL requirements.

The required level of MREL for Rabobank Group has been set by the Single Resolution Board (SRB) at a percentage of 9.64 per cent. of Total Liabilities and Own Funds (TLOF), which corresponds to 28.58 per cent. of RWA as at 2017, and consists of a loss absorption amount, a recapitalisation amount, and a market confidence amount. This calibration is based on the framework for MREL under BRRD I, the EBA RTS, and the 2018 SRB MREL policy. On the basis of the MREL RTS, it is possible that Rabobank Group may have to issue a significant amount of additional MREL eligible liabilities in order to meet the new requirements within the required timeframes. Moreover, the MREL framework may be subject to substantial change over the coming years. For instance, the EU Banking Reforms have amended the SRM Regulation, BRRD, CRR, CRD IV Directive so that any systemically important banks in a member state, such as Rabobank, are subject to a firm-specific MREL regime under which they are required to issue a sufficient amount of own funds and eligible liabilities to absorb expected losses in resolution and to

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recapitalise the institution or the surviving part thereof. If Rabobank Group were to experience difficulties in raising MREL eligible liabilities, it may have to reduce its lending or investments in other operations.

To complement the European Banking Union (an EU-level banking supervision and resolution system) and the Single Supervisory Mechanism (“SSM”), on 15 July 2014 the European Commission adopted the SRM Regulation to establish the Single Resolution Mechanism (“SRM”) (as further described, in the risk factor entitled “Bank recovery and resolution regimes”). The SRM establishes the single resolution board (the “SRB”) that will manage the failing of any bank in the Euro area and in other EU member states participating in the European Banking Union. On the basis of the SRM, the SRB is granted the same resolution tools as those set out in the BRRD, including a bail-in tool. The SRM applies directly to banks covered by the SSM, including Rabobank (see also “- Bank Recovery and Resolution Directive” above). On the basis of the SRM, the ECB is responsible for recovery planning as set out in the BRRD. In a Dutch context, DNB is the national resolution authority. While, as the Group’s resolution authority, the SRB is ultimately in charge of the decision to initiate the Group’s resolution, operationally the decision will be implemented in cooperation with DNB in its capacity as national resolution authority.

See also the risk factors entitled “Any difficulty in raising minimum requirement for own funds and eligible liabilities may have a material adverse effect on the Group’s business, financial position and results of operations”, “Any increase in the Group’s minimum regulatory capital and liquidity requirements may have a material adverse effect on the Group’s business, financial condition and results of operations” and “Bank recovery and resolution regimes”.

Supervision

In 2010, agreement was reached in the EU on the introduction of a new supervisory structure for the financial sector. The new European architecture combines the existing national authorities, the newly created European Systemic Risk Board and the following three European Authorities: the EBA, the European Insurance and Occupational Pensions Authority and the European Securities and Markets Authorities. These institutions have been in place since 1 January 2011.

However, as part of the European Banking Union (responsible for banking policy on the EU level), two further regulations have been enacted: (i) a regulation for the establishment of the SSM on the basis of which specific tasks relating to the prudential supervision of the most significant banks in the Euro area are conferred to the ECB; and (ii) a regulation amending the regulation which sets up the EBA. Regulation 1024/2013 (the “SSM Framework Regulation”), which establishes the SSM, was published in the Official Journal of the European Union on 29 October 2013 and entered into force on 4 November 2013. The SSM provides that the ECB carries out its tasks within a single supervisory mechanism comprised of the ECB and national competent authorities. The ECB and relevant competent authorities have formed joint supervisory teams (“JST”) for the supervision of each significant bank or significant banking group within the Euro area. As Rabobank Group qualifies as a significant group under the SSM and the SSM Framework Regulation, with effect from 4 November 2014, the day-to-day supervision of Rabobank Group is now carried out by a JST. The ECB and national competent authorities are subject to a duty of cooperation in good faith, and an obligation to exchange information. Where appropriate, and without prejudice to the responsibility and accountability of the ECB for the tasks conferred on it by the SSM, national competent authorities shall be responsible for assisting the ECB. In view of the assumption of these supervisory tasks, in 2014 the ECB (together with the national competent authorities) carried out a comprehensive assessment, including a balance sheet assessment, as well as a related asset quality review and stress tests, of the banks in respect of which it took on responsibility for formal supervision. The ECB supervises Rabobank Group’s compliance with prudential requirements, including (i) its own funds requirements, LCR, NSFR and the leverage ratio and the reporting and public disclosure of information on these matters, as set out in the CRR and (ii) the requirement to have in place robust governance arrangements, including fit and proper requirements for the persons responsible for the management of a bank, remuneration policies and practices and effective internal capital adequacy assessment processes, as set out in the FMSA.

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The ECB is also the competent authority which assesses notifications of the acquisition of qualifying holdings in banks and has the power to grant a declaration of no objection for such holdings.

Covid-19 prudential regulatory initiatives

Since the outbreak of the coronavirus (or Covid-19) pandemic, various legislative and regulatory

authorities have taken prudential regulatory initiatives to address the negative impact of the coronavirus,

including:

European Commission (EC)

In April 2020, the European Commission adopted a banking package aimed at facilitating bank

lending to support the economy. The package is intended to encourage banks and supervisory bodies to

apply the EU’s accounting and prudential rules more flexibly, and proposes certain targeted amendments

to CRR. These targeted amendments include (i) postponing the date of application of the leverage ratio

buffer requirement for G-SIIs with one year to 1 January 2023, (ii) offsetting the impact of certain central

bank exposures from the calculation of the leverage ratio and (iii) mitigating the impact of IFRS 9

provisions on CET1 capital through certain transitional arrangements (the "EC Corona Measures"). The

European Commission has requested the European Parliament and the Council to expedite the

discussion of its proposals in order to adopt the targeted amendments of CRR by June 2020.

European Central Bank (ECB)

In March 2020, the ECB announced its decision to allow its directly supervised banks (i) to

operate temporarily below the level of capital as defined by Pillar 2 Guidance ("P2G"), the capital

conservation buffer and the liquidity coverage ratio and (ii) to partially use capital instruments that do not

qualify as CET1 capital to meet Pillar 2 Requirements ("P2R"). In addition, the ECB asked banks not to

pay dividends until at least October 2020 (the "ECB Corona Measures").

Dutch Central Bank (DNB)

In March 2020, DNB announced (i) the temporary reduction of the systemic risk buffer

requirement applicable to the three major Dutch banks ABN AMRO Bank, ING Bank and Rabobank and

(ii) the postponement of the introduction of extra capital requirement for mortgage loans (the so-called

'DNB RWA Floor') for an indefinite period of time. In addition, DNB announced that, in line with the ECB

Corona Measures, less significant institutions under its supervision will be allowed (i) to operate

temporarily below the level of capital defined by the P2G, the capital conservation buffer and the liquidity

coverage ratio and (ii) to partially meet their P2R with capital instruments that do not qualify as CET1

capital (the "DNB Corona Measures").

European Banking Authority (EBA)

In March 2020, EBA announced that it would take certain measures to alleviate the immediate

operational burden on banks, including the postponement of stress test exercises to 2021. Furthermore,

EBA provided further guidance on (a) measures to mitigate the increase in aggregated amounts of

additional valuation adjustments (AVAs) under the prudent valuation framework (for institutions applying

the core approach) and (b) a postponement of the FRTB-SA (Fundamental Review of the Trading Book –

Standardised Approach) reporting requirement. EBA also recognised the need for a pragmatic approach

for the 2020 SREP, focusing on the most material risks and vulnerabilities driven by the coronavirus

crisis (together, the "EBA Corona Measures").

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Dutch Regulation

Scope of the FMSA

The ECB is formally the competent authority that supervises the majority of Rabobank Group’s activities. The day-to-day supervision of Rabobank Group is carried out by the JST. The AFM supervises primarily the conduct of business. Set forth below is a brief summary of the principal aspects of the FMSA.

Licensing

Under the FMSA, a bank established in the Netherlands is required to obtain a licence before engaging in any banking activities. Now that the ECB has assumed its supervisory tasks under the SSM, the ECB is the formal supervisory authority to grant and revoke a banking licence for banks in the Euro area including the Netherlands. DNB shall prepare a draft decision if in its view a licence should be granted and the ECB will take the formal decision. The requirements to obtain a licence, among others, are as follows: (i) the day-to-day policy of the bank must be determined by at least two persons; (ii) the bank must have a body of at least three members which has tasks similar to those of a supervisory board; and (iii) the bank must adhere to requirements that determine the minimum level of own funds (eigen vermogen). In addition, a licence may be refused if, among other things, the competent authority is of the view that (i) the persons who determine the day-to-day policy of the bank have insufficient expertise to engage in the business of the bank (fit and proper requirement), (ii) the policy of the bank is not (co-)determined by persons whose integrity is beyond doubt, or (iii) through a qualified holding in the bank, influence on the policy of such enterprise or institution may be exercised which is contrary to ‘prudent banking policy’ (gezonde en prudente bedrijfsvoering). DNB is still competent to make the decision to refuse to grant a licence on its own. In addition to certain other grounds, the licence may be revoked if a bank fails to comply with the requirements for maintaining its licence.

Reporting and investigation

A significant bank or significant banking group is required to file its annual financial statements with the ECB in a form approved by the ECB, which includes a statement of financial position and a statement of income that have been certified by an appropriately qualified auditor. In addition, a bank is required to file quarterly (and some monthly) statements, on a basis established by the ECB. The ECB has the option to demand additional reports.

Rabobank must file consolidated quarterly (and some monthly) reports as well as annual reports that provide a true and fair view of their respective financial position and results with the ECB. Rabobank’s independent auditor audits these reports annually.

Solvency

The CRR regulations on solvency supervision entail - in broad terms minimum standards on bank capital adequacy and capital buffers. These regulations also impose limitations on the aggregate amount of claims (including extensions of credit) a bank may have against one debtor or a group of related debtors. Over time, the regulations have become more sophisticated, being derived from the capital measurement guidelines of first Basel II and then Basel III as described under “Basel Standards” above and as laid down in EU legislation described above under “European Union legislation”. The regulations of DNB on solvency supervision have been repealed by the Dutch CRD IV and CRR Regulation.

Liquidity

The regulations relating to liquidity supervision require that banks maintain sufficient liquid assets to cover for net outflows. In the determination of net outflows banks are required to follow a prudential approach, taking into account that the call or prepayment occurs at the first possible date. On 1 January 2018, the 100 per cent. LCR requirement under CRR was fully phased in, meaning that Rabobank was required to hold at least enough high quality liquid assets to cover stressed 30 day net outflow. With 132 per cent. as per 31 December 2019, Rabobank complies with the minimum 100 per cent. requirement.

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Structure

The FMSA provides that a bank must obtain a declaration of no-objection before, among other things, (i) acquiring or increasing a qualifying holding in a bank, investment firm or insurer with its statutory seat in a state which is not part of the EEA, if the balance sheet total of that bank, investment firm or insurer at the time of the acquisition or increase amounts to more than 1 per cent. of the bank’s consolidated balance sheet total, (ii) acquiring or increasing a qualifying holding in an enterprise, not being a bank, investment firm or insurer with its statutory seat in the Netherlands or in a state which is part of the EEA or in a state which is not part of the EEA, if the amount paid for the acquisition or increase, together with the amounts paid for a previous acquisition or increase of a holding in such enterprise, amounts to more than 1 per cent. of the consolidated own funds of the bank, (iii) taking over all or a major part of the assets and liabilities of another enterprise or institution, directly or indirectly, if the total amount of the assets or the liabilities to be taken over amounts to more than 1 per cent. of the bank’s consolidated balance sheet total, (iv) merging with another enterprise or institution if the balance sheet total thereof amounts to more than 1 per cent. of the bank’s consolidated balance sheet total or (v) proceeding with a financial or corporate reorganisation. Decisions on the abovementioned declarations of no-objection are made by DNB. As of 1 January 2014, the definition of “qualifying holding” as set out in the CRR applies. “Qualifying holding” in the CRR is defined to mean a direct or indirect holding in an undertaking which represents 10 per cent. or more of the capital or of the voting rights or which makes it possible to exercise a significant influence over the management of that undertaking.

In addition, any person is permitted to hold, acquire or increase a qualifying holding in a Dutch bank, or to exercise any voting power in connection with such holding, only after such person has obtained a declaration of no objection from the ECB.

Governance and administrative organisation

The ECB supervises the governance of significant banks and significant banking groups within the Netherlands. This includes the administrative organisation of banks, their financial accounting system and internal control. The administrative organisation must be such as to ensure that a bank has at all times a reliable and up-to-date overview of its assets and liabilities. Furthermore, the electronic data processing systems, which form the core of the accounting system, must be secured in such a way as to ensure a high degree of security, operational reliability, continuity and adequate, scalable capacity.

Intervention

In addition to the Intervention Act (Wet bijzondere maatregelen financiële ondernemingen), and partly amending it, on 26 November 2015 the Act on implementing the European framework for the recovery and resolution of banks and investment firms (Implementatiewet Europees kader voor herstel en afwikkeling van banken en beleggingsondernemingen) came into force, implementing the BRRD. While the Intervention Act was amended following the adoption and implementation of the BRRD and the SRM Regulation, granting to DNB powers including resolution tools contemplated by the BRRD, the powers of the Minister of Finance have remained. Under the Intervention Act the Dutch Minister of Finance may, with immediate effect, take measures or expropriate assets, liabilities, or securities issued by or with the consent of a financial enterprise (financiële onderneming) or its parent, in each case if it has its corporate seat in the Netherlands, if in the Minister of Finance’s opinion, the stability of the financial system is in serious and immediate danger as a result of the situation in which the entity finds itself. In taking these measures, provisions in relevant Dutch legislation and the entity’s articles of association may be set aside. Examples of immediate measures include the suspension of voting rights or of board members. The measures that can be taken by the Minister of Finance may only be used if other measures would not work, would no longer work, or would be insufficient. In addition, to ensure such measures are utilised appropriately the Minister of Finance must consult with DNB in advance and the Dutch Prime Minister must agree with the decision to intervene. The Minister of Finance must further inform the AFM of his intentions, whereupon the AFM must give an instruction to Euronext Amsterdam to stop the trading in any securities that are expropriated. In the case of expropriation, the beneficiary of the relevant asset will be compensated for any damage that directly and

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necessarily results from the expropriation. It is unlikely that such compensation will cover all losses of the relevant beneficiary.

The SRB has additional intervention powers including the power to operate the bail-in tool as set out in the SRM and the BRRD (see “- Bank Recovery and Resolution Directive”).

U.S. Regulation

Regulation and Supervision in the U.S.

Rabobank Group’s operations are subject to federal and state banking and securities regulation and supervision, as well as federal derivatives regulation in the U.S. Rabobank Group engages in U.S. banking activities through Rabobank, New York Branch (the “New York Branch”). It controls a U.S. broker-dealer, Rabo Securities USA, Inc., as well as other U.S. non-bank subsidiaries.

Rabobank and Utrecht-America Holdings, Inc. are bank holding companies that are financial holding companies within the meaning of the U.S. Bank Holding Company Act of 1956, as amended (“BHC Act”). As such, they are subject to the regulation and supervision of the Federal Reserve. The New York Branch is licensed and supervised by the New York State Department of Financial Services, and it is also supervised by the Federal Reserve.

Under U.S. law, Rabobank Group’s activities and those of its subsidiaries in the U.S. are generally limited to the business of banking, and managing or controlling banks and certain other activities that are closely related to banking. As long as Rabobank and Utrecht-America Holdings, Inc. are financial holding companies under U.S. law, Rabobank Group may also engage in non-banking activities in the U.S. that are financial in nature, or incidental or complementary to such financial activity, including securities, merchant banking, insurance and other financial activities, subject to certain limitations on the conduct of such activities and to prior regulatory approval in some cases.

As a non-U.S. bank, Rabobank is generally authorised under U.S. law and regulations to acquire a non-U.S. company engaged in non-financial activities as long as the company’s U.S. operations do not exceed certain thresholds and certain other conditions are met. Rabobank is required to obtain the prior approval of the Federal Reserve before directly or indirectly acquiring the ownership or control of more than 5 per cent. of any class of voting shares of U.S. banks, certain other depository institutions, and bank or depository institution holding companies.

State-licensed branches and agencies of non-U.S. banks (such as the New York Branch) may not, with certain exceptions that require prior regulatory approval, engage as a principal in any type of activity not permissible for their federally chartered or licensed counterparts. Likewise, the U.S. federal banking laws also subject state branches and agencies to the same single-borrower lending limits that apply to federal branches or agencies, which are substantially similar to the lending limits applicable to national banks. These single-borrower lending limits are based on the worldwide capital of the entire non-U.S. bank.

The Federal Reserve may terminate the activities of any U.S. office of a non-U.S. bank if, among other things, it determines that the non-U.S. bank is not subject to comprehensive supervision on a consolidated basis in its home country or that there is reasonable cause to believe that such non-U.S. bank or its affiliate has violated the law or engaged in an unsafe or unsound banking practice in the U.S. or, for a non-U.S. bank that presents a risk to the stability of the U.S. financial system, the home country of the non-U.S. bank has not adopted, or made demonstrable progress toward adopting, an appropriate system of financial regulation to mitigate such risk. In addition, the Superintendent of Financial Services of the State of New York (the “Superintendent”) may revoke any licence for a branch of a non-U.S. bank issued under New York Banking Law if, among other things, the Superintendent finds that the licensed bank has violated any provision of any law, rule or regulation of the State of New York.

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A major focus of U.S. governmental policy relating to financial institutions is aimed at preventing money laundering and terrorist financing and compliance with economic sanctions in respect of designated countries or activities. Failure of an institution to have policies and procedures and controls in place to prevent, detect and report money laundering and terrorist financing could in some cases have serious legal, financial and reputational consequences for the institution.

New York Branch

The New York Branch is licensed by the Superintendent to conduct a commercial banking business. Under New York Banking Law, the New York Branch is subject to the asset pledge requirements and is required to maintain eligible high-quality assets with banks in the State of New York. The Superintendent may also establish asset maintenance requirements for branches of non-U.S. banks. Currently, no such requirement has been imposed upon the New York Branch.

New York Banking Law authorises the Superintendent to take possession of the business and property of a New York branch of a non-U.S. bank under certain circumstances, including violations of law, conduct of business in an unsafe manner, impairment of capital, suspension of payment of obligations, or initiation of liquidation proceedings against the non-U.S. bank at its domicile or elsewhere. In liquidating or dealing with a branch’s business after taking possession of a branch, only the claims of depositors and other creditors which arose out of transactions with a branch are to be accepted by the Superintendent for payment out of the business and property of the non-U.S. bank in the State of New York (which includes but is not limited to assets, or other property of the New York branch, wherever situated and any assets of the non-U.S. bank located in the State of New York, regardless of whether such assets are assets of the New York branch), without prejudice to the rights of the holders of such claims to be satisfied out of other assets of the non-U.S. bank. After such claims are paid, the Superintendent will turn over the remaining assets, if any, to the non-U.S. bank or its duly appointed liquidator or receiver.

The Dodd-Frank Act

The Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) provides a broad framework for significant regulatory changes that extend to almost every area of U.S. financial regulation. The Dodd-Frank Act and other post-financial crisis regulatory reforms in the United States have increased costs, imposed limitations on activities and resulted in an increased intensity in regulatory enforcement.

Among other things, the Dodd-Frank Act requires that the lending and affiliate transaction limits applicable to the New York Branch take into account credit exposures arising from derivative transactions, securities borrowing and lending transactions, and repurchase and reverse repurchase agreements with counterparties.

Additionally, the Dodd-Frank Act provides U.S. regulators with tools to impose greater capital, leverage and liquidity requirements and other prudential standards, particularly for financial institutions that pose significant systemic risk, which include any non-U.S. banking organisation, such as Rabobank Group, with a branch or agency in the U.S. or a U.S. bank subsidiary and U.S.$50 billion or more in total consolidated assets. On 18 February 2014, the Federal Reserve issued a final rule implementing these heightened standards. Under the final rule, the New York Branch is subject to liquidity, risk management requirements, and in certain circumstances, asset maintenance requirements. The Federal Reserve issued a final rulemaking on 10 October 2019 that revised the framework for applying the enhanced prudential standards applicable to FBOs under Section 165 of the Dodd-Frank Act, as amended by the Economic Growth, Regulatory Relief, and Consumer Protection Act (the “EGRRCPA”), by, among other things, (i) establishing risk-based categories for determining prudential standards for FBOs and (ii) amending those prudential standards, including standards relating to liquidity, risk management, stress testing, and single-counterparty credit limits, depending on the risk profile of banking organizations under the risk-based categories. In addition, a separate rulemaking was also issued on 10 October 2019 by the Federal Reserve, the Federal Deposit Insurance Corporation (“FDIC”) and the Office of the

100

Comptroller of the Currency (“OCC”) to, among other things, modify the application of capital and liquidity requirements to certain U.S. intermediate holding companies of FBOs.

Section 13 of the BHC Act, together with the rules, regulations and published guidance thereunder, as amended (the “Volcker Rule”), adopted as part of the Dodd-Frank Act, limits the ability of banking entities and their affiliates to engage as principal in proprietary trading or to sponsor or invest in hedge, private equity or other similar funds or enter into certain covered transactions with certain covered funds, subject to certain exceptions and exemptions. However, certain non-U.S. banking organisations, such as certain non-U.S. banking entities within Rabobank Group, are exempt from these limitations with respect to activities that are solely outside of the U.S., subject to certain conditions. On 20 August 2019, the relevant U.S. federal agencies finalized a rulemaking that amended, in part, certain of the proprietary trading provisions under the Volcker Rule. In addition, on January 30, 2020, the relevant U.S. federal agencies released a notice of proposed rulemaking to amend certain parts of the Volcker Rule’s covered fund-related restrictions. The proposed changes are intended to improve and streamline certain aspects of the covered funds portion of the Volcker Rule, and the U.S. federal agencies will consider any comments to the proposal submitted before 1 May 2020.

Proposals for legislation for further changes to the regulation of the financial services industry are continually being introduced in the U.S. Congress and in state legislatures, and President Donald Trump has signed orders and announced plans to reform regulations created pursuant to the Dodd-Frank Act. For example, on 24 May 2018, President Trump signed into law a financial services regulatory reform bill that received bipartisan support, the EGRRCPA. The EGRRCPA makes certain modifications to post-financial crisis regulatory requirements that apply to banking organisations of all sizes. In addition, the EGRRCPA amended the Volcker Rule, in part, by narrowing the definition of “banking entity”, principally by excluding insured depository institutions with less than U.S.$10 billion in total consolidated assets and that have total trading assets and trading liabilities that are less than 5 per cent. of total consolidated assets. The relevant U.S. federal agencies released a final rulemaking on 9 July 2019 to, among other things, address this statutory amendment.

In addition, Title VII of the Dodd-Frank Act, and the regulations adopted thereunder implementing the statutory requirements of Title VII, provide an extensive framework for the regulation of the derivatives market. While U.S. regulators have adopted many of the regulations governing the derivatives markets as contemplated by the Dodd-Frank Act, the implementation process is still ongoing and regulators continue to review and refine their initial rulemakings through additional interpretations and supplemental rulemakings. Under the Dodd-Frank Act, entities that qualify as swap dealers or major swap participants are required to register with the CFTC, while entities that qualify as security-based swap dealers and/or majority security-based swap participants will be required to register with the SEC. Rabobank is registered with the CFTC as a swap dealer. As a swap dealer, Rabobank is subject to additional regulatory requirements with respect to capital, margin requirements for OTC derivative transactions, business conduct standards and other requirements. As a swap dealer, Rabobank’s compliance with such regulatory requirements under Title VII of the Dodd-Frank Act may be costly and have an adverse impact on Rabobank Group. Additionally, under the so-called swap “push-out” provisions of the Dodd-Frank Act, certain ABS swaps activities of uninsured U.S. branches of non-U.S. banks, such as the New York Branch, are restricted as a result of Rabobank’s registration as a swap dealer. The Dodd-Frank Act also requires all swap market participants (notwithstanding any registration requirement) to (i) maintain records and report certain information to swap data repositories in real-time and on an ongoing basis and (ii) clear certain categories of derivatives through a derivatives clearing organisation and execute such derivatives on a registered exchange (e.g., a designated contract market or swap execution facility).

In October, 2015, the Federal Reserve, the OCC, the Farm Credit Administration and the Federal Housing Finance Agency issued a final rule to establish minimum initial and variation margin collection requirements for non-cleared swaps and non-cleared security-based swaps entered into by certain registered swap dealers, major swap participants, security-based swap dealers and/or major security-based swap participants (“Registered Entities”) when facing other

101

Registered Entities or financial end-user counterparties (the “PR Margin Rules”). The CFTC has also implemented its own initial and variation margin requirements in respect of non-cleared swaps entered into by swap dealers and major swap participants not captured by the PR Margin Rules (the “CFTC Margin Rules” and, together with the PR Margin Rules, the “Uncleared Swap Margin Rules”). Because Rabobank is regulated by the Federal Reserve and is a registered swap dealer (as noted above), it is subject to the Uncleared Swap Margin Rules with respect to its uncleared OTC derivative transactions when facing other Registered Entities and financial end-user counterparties.

Additionally, the Dodd-Frank Act requires systemically important non-bank financial companies and large, interconnected financial institutions, including any non-U.S. bank with U.S.$50 billion or more in total consolidated assets that has a branch or agency in the U.S. (such as Rabobank Group) to prepare and periodically submit to the Federal Reserve, the FDIC and the Financial Stability Oversight Council (“FSOC”), a plan for such company’s rapid and orderly resolution in the event of material financial distress or failure. The U.S. resolution plan requirements have been implemented through regulations issued by the Federal Reserve and the FDIC that establish rules and requirements regarding the submission and content of a resolution plan and procedures for review by the Federal Reserve and the FDIC. The Federal Reserve and the FDIC must determine that a company’s U.S. resolution plan is credible and would facilitate an orderly resolution of the company. A company that fails to submit a credible U.S. resolution plan may be subject to a range of measures imposed by the Federal Reserve and the FDIC, including more stringent capital, leverage or liquidity requirements; restrictions on growth, activities or operations; and requirements to divest assets or operations, as directed by the Federal Reserve and the FDIC. While Rabobank was not required to submit a U.S. resolution plan in 2016 or 2017, Rabobank was required to, and did, submit a U.S. resolution plan in 2018. On 10 October 2019, the Federal Reserve and the FDIC jointly adopted a final rule to amend the U.S. resolution plan requirements and to address amendments made by the EGRRCPA. Pursuant to the final rule, FBOs with US$250 billion or more in global consolidated assets, such as Rabobank Group, are required to file reduced U.S. resolution plans every three years, with the next U.S. resolution plan due on July 1, 2021.

Implementation of the Dodd-Frank Act and related final regulations is ongoing and has resulted in significant costs and potential limitations on Rabobank Group’s businesses and may have a material adverse effect on Rabobank Group’s results of operations. In addition, the uncertainty of the regulatory environment in the United States, especially with respect to the status of certain aspects of the Dodd-Frank Act and other U.S. regulations could impact Rabobank Group’s business activities and the value of the notes of any series should significant changes to such regulations be implemented.

United Kingdom Regulation

In the United Kingdom, the Banking Reform Act 2013 received Royal Assent on 18 December

2013. It is a key part of the UK Government’s plan to create a banking system that supports the

economy, consumers and small businesses. It implements the recommendations of the Independent

Commission on Banking, set up by the Government in 2010 to consider structural reform of the UK

banking sector. Measures contained in the Banking Reform Act 2013 include the structural separation of

the retail banking activities of banks in the United Kingdom from wholesale banking and investment

banking activities by the use of a “ring fence”.

F-1

INDEX TO FINANCIAL STATEMENTS

CONSOLIDATED FINANCIAL STATEMENTS OF RABOBANK GROUP AT AND FOR THE YEAR ENDED 31 DECEMBER 2019

Page Consolidated statement of financial position F-4 Consolidated statement of income F-6 Consolidated statement of comprehensive income F-7 Consolidated statement of changes in equity F-8 Consolidated statement of cash flows F-9 Notes to the consolidated financial statements F-11 Independent auditor’s report F-101 Assurance report of the independent auditor F-116 Assurance report of the independent auditor F-120

HISTORICAL FINANCIAL INFORMATION

Key figures of Rabobank Group (2019-2015) F-125 Consolidated statement of financial position of Rabobank Group (2018-2017) F-127 Consolidated statement of income of Rabobank Group (2018-2017) F-128 Consolidated statement of comprehensive income of Rabobank Group (2018-2017) F-129 Consolidated statement of changes in equity of Rabobank Group (2018-2017) F-130 Consolidated statement of cash flows of Rabobank Group (2018-2017) F-131 Statement of financial position (before profit appropriation) of Rabobank (2019-2018) F-133 Statement of income of Rabobank (2019-2018) F-134 Statement of financial position (before profit appropriation) of Rabobank (2018-2017) F-135 Statement of income of Rabobank (2018-2017) F-136

The consolidated financial statements are a translation of the Dutch consolidated financial statements. In the event of any conflict in interpretation, the Dutch original takes precedence.

About thisReport

Chairman'sForeword Management Report Appendices

CorporateGovernance

ConsolidatedFinancial Statements

CompanyFinancial Statements

Annual Report 2019 - Consolidated Financial Statements 102

Contents

Consolidated Statement of Financial Position 104

Consolidated Statement of Income 106

Consolidated Statement of Comprehensive Income 107

Consolidated Statement of Changes in Equity 108

Consolidated Statement of Cash Flows 109

Notes to the Consolidated Financial Statements 111

1. Corporate Information 112

2. Accounting Policies 113

2.1 Basis of Preparation 113

2.2 Consolidated Financial Statements 115

2.3 Derivatives and Hedging 115

2.4 Financial Assets and Liabilities Held for Trading 116

2.5 Financial Assets and Financial Liabilities Designated

at Fair Value

116

2.6 Day One Gains/ Losses 117

2.7 Financial Assets at Fair Value Through Other

Comprehensive Income

117

2.8 Repurchase Agreements and Reverse Repurchase

Agreements

117

2.9 Securitizations and (De)Recognition of Financial

Assets and Liabilities

117

2.10 Cash and Cash Equivalents 118

2.11 Offsetting Financial Assets and Liabilities 118

2.12 Foreign Currency 118

2.13 Interest 119

2.14 Fees and Commissions 119

2.15 Loans and Advances to Customers and Loans and

Advances to Credit Institutions

119

2.16 Impairment Allowances on Financial Assets 119

2.17 Modifications 121

2.18 Goodwill and Other Intangible Assets 121

2.19 Property and Equipment 122

2.20 Investment Properties 122

2.21 Other Assets 122

2.22 Leasing 123

2.23 Provisions 124

2.24 Employee Benefits 124

2.25 Variable Remuneration Based on Equity

Instruments

125

2.26 Tax 125

2.27 Deposits from Credit Institutions, Deposits from

Customers and Debt Securities in Issue

125

2.28 Rabobank Certificates 125

2.29 Trust Preferred Securities and Capital Securities 125

2.30 Financial Guarantees 125

2.31 Segmented Information 126

2.32 Business Combinations 126

2.33 Disposal Groups Classified as Held for Sale and

Discontinued Operations

126

2.34 Cash Flow Statement 126

3. Solvency and Capital Management 127

4. Risk Exposure on Financial Instruments 129

4.1 Risk Organization 129

4.2 Strategy for the Use of Financial Instruments 129

4.3 Credit Risk 129

4.4 Non-Trading Foreign Exchange Rate risk (FX risk) 140

4.5 Interest Rate Risk in the Banking Environment 140

4.6 Market Risk in the Trading Environment 142

4.7 Liquidity Risk 143

4.8 Operational Risk 146

4.9 Fair Value of Financial Assets and Liabilities 146

4.10 Legal and Arbitration Proceedings 152

5. Segment Reporting 154

5.1 Business Segments 154

5.2 Geographic Information (Country-by-Country

Reporting)

157

5.3 Geographic Information of Non-current Assets 160

6. Cash and Cash Equivalents 160

7. Loans and Advances to Credit Institutions 160

8. Financial Assets Held for Trading 160

9. Financial Assets Designated at Fair Value 161

10. Financial Assets Mandatorily at Fair Value 161

11. Derivatives 162

11.1 Types of Derivatives Used by Rabobank 162

11.2 Derivatives Held for Trading 162

11.3 Derivatives Designated as Hedging Instrument 162

11.4 Notional Amount and Fair Value of Derivatives 166

12. Loans and Advances to Customers 168

13. Financial Assets at Fair Value through Other


169

14. Investments in Associates and Joint Ventures 170

14.1 Investments in Associates 170

14.2 Investments in Joint Ventures 170

15. Goodwill and Other Intangible Assets 172

16. Property and Equipment 173

17. Investment Properties 175

18. Other Assets 176

19. Non-Current Assets Held for Sale 177

F-2

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20. Deposits from Credit Institutions 177

21. Deposits from Customers 177

22. Debt Securities in Issue 177

23. Financial Liabilities Held for Trading 177

24. Financial Liabilities Designated at Fair Value 178

25. Other Liabilities 178

26. Provisions 179

27. Deferred Taxes 180

28. Employee Benefits 181

29. Subordinated Liabilities 183

30. Contingent Liabilities 184

31. Reserves and Retained Earnings 185

32. Rabobank Certificates 185

33. Capital Securities and Trust Preferred Securities IV 187

34. Other Non-Controlling Interests 188

35. Changes in Liabilities Arising from Financing Activities 188

36. Net Interest Income 189

37. Net Fee and Commission Income 189

38. Net Income from Other Operating Activities 189

39. Income from Investments in Associates and Joint

Ventures

189

40. Gains/ (Losses) on Financial Assets and Liabilities at

Fair Value through Profit or Loss

190

41. Other Income 190

42. Staff Costs 190

43. Other Administrative Expenses 192

44. Depreciation and Amortization 192

45. Impairment Charges on Financial Assets 192

46. Regulatory Levies 192

47. Income Tax 192

48. Transactions with Related Parties 192

49. Cost of External Independent Auditor 195

50. Remuneration of the Supervisory Board and the

Managing Board

196

51. Main Subsidiaries 197

52. Transfer of Financial Assets and Financial Assets

Provided as Collateral

198

53. Structured Entities 199

54. Events after the Reporting Period 200

55. Management Report on Internal Control over

Financial Reporting

200

56. Authorization of the Financial Statements 200

F-3

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Consolidated Statement of Financial Position

F-4

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December 31 December 31

Amounts in millions of euros Note 2019 2018

Assets

Cash and cash equivalents 6 63,086 73,335

Loans and advances to credit institutions 7 29,297 17,859

Financial assets held for trading 8 1,870 2,876

Financial assets designated at fair value 9 101 157

Financial assets mandatorily at fair value 10 1,905 2,134

Derivatives 11 23,584 22,660

Loans and advances to customers 12 440,507 436,591

Financial assets at fair value through other comprehensive income 13 13,505 18,730

Investments in associates and joint ventures 14 2,308 2,374

Goodwill and other intangible assets 15 829 966

Property and equipment 16 5,088 4,455

Investment properties 17 371 193

Current tax assets 169 243

Deferred tax assets 27 933 1,165

Other assets 18 6,610 6,431

Non-current assets held for sale 19 435 268

Total assets 590,598 590,437

Liabilities

Deposits from credit institutions 20 21,244 19,397

Deposits from customers 21 342,536 342,410

Debt securities in issue 22 130,403 130,806

Financial liabilities held for trading 23 399 400

Financial liabilities designated at fair value 24 6,328 6,614

Derivatives 11 24,074 23,927

Other liabilities 25 6,835 6,342

Provisions 26 783 1,126

Current tax liabilities 228 229

Deferred tax liabilities 27 540 452

Subordinated liabilities 29 15,790 16,498

Liabilities held for sale 91 -

Total liabilities 549,251 548,201

Equity

Reserves and retained earnings 31 28,157 27,264


- Rabobank Certificates 32 7,449 7,445

- Capital Securities 33 5,264 6,493

12,713 13,938

Non-controlling interests


- Capital Securities 33 - 164

- Trust Preferred Securities IV 33 - 389

Other non-controlling interests 34 477 481

477 1,034

Total equity 41,347 42,236

Total equity and liabilities 590,598 590,437

F-5

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Consolidated Statement of Income

For the year ended December 31


Interest income from financial assets using the effective interest method 36 15,898 15,960

Other interest income 36 259 321

Interest expense 36 7,674 7,722

Net interest income 36 8,483 8,559

Fee and commission income 37 2,151 2,106

Fee and commission expense 37 162 175

Net fee and commission income 37 1,989 1,931

Income from other operating activities 38 2,154 2,547

Expenses from other operating activities 38 1,684 1,964

Net income from other operating activities 38 470 583

Income from investments in associates and joint ventures 39 192 243

Gains/ (losses) arising from the derecognition of financial assets measured at amortised cost 73 14

Gains/ (losses) on financial assets and liabilities at fair value through profit or loss 40 156 238

Gains/ (losses) on financial assets at fair value through other comprehensive income 27 112

Other income 41 525 340

Income 11,915 12,020

Staff costs 42 4,821 4,868

Other administrative expenses 43 1,874 2,190

Depreciation and amortization 44 420 388

Operating expenses 7,115 7,446

Impairment on investments in associates 14 300 -

Impairment charges on financial assets 45 975 190

Regulatory levies 46 484 478

Operating profit before tax 3,041 3,906

Income tax 47 838 902

Net profit for the year 2,203 3,004

Of which attributed to Rabobank 1,295 1,894

Of which attributed to Rabobank Certificates 484 484

Of which attributed to Capital Securities issued by Rabobank 355 530

Of which attributed to Capital Securities issued by subsidiaries 4 14

Of which attributed to Trust Preferred Securities IV 19 22

Of which attributed to other non-controlling interests 34 46 60



F-6

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Consolidated Statement of Comprehensive Income



Other comprehensive income transferred to profit or loss if specific conditions are met, net of tax:

Exchange differences on translation of foreign operations 31 84 134

Increase/ (decrease) in the fair value of debt instruments at fair value through othercomprehensive income 31 (1) (152)

Costs of hedging 31 16 30

Cash flow hedges 31 14 (1)

Share of other comprehensive income of associates and joint ventures 31 99 (84)

Other 31 5 -

Other comprehensive income not to be transferred to profit or loss, net of tax:

Remeasurements of post-employee benefit obligations 31 (20) 76

Increase/ (decrease) in the fair value of equity instruments at fair value through othercomprehensive income 31 31 (8)

Share of other comprehensive income of associates and joint ventures 31 (5) 4

Decrease/ (increase) in the fair value due to own credit risk on financial liabilities designated at fair value 31 (112) 111

Other 31 (62) -

Other comprehensive income 49 110

Total comprehensive income 2,252 3,114






Of which attributed to other non-controlling interests 50 57


Consolidated Statement ofComprehensive Income

F-7

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Consolidated Statement of Changes in Equity

Note Reserves andretained earnings

Equity instrumentsissued by Rabobank

Non-controlling interestsTotal

Amounts in millions of euros Equity instrumentsissued by subsidiaries Other

Balance on January 1, 2019 27,264 13,938 553 481 42,236

Net profit for the year 2,157 - - 46 2,203

Other comprehensive income 31 45 - - 4 49

Total comprehensive income 2,202 - - 50 2,252

Payments on Rabobank Certificates (484) - - - (484)

Payments on Trust PreferredSecurities IV (19) - - - (19)

Payments on Capital Securitiesissued by Rabobank (396) - - - (396)

Payments on Capital Securitiesissued by subsidiaries (5) - - - (5)

Redemption of Capital Securities 33 (493) (2,502) (164) - (3,159)

Redemption of Trust PreferredSecurities IV 33 - - (383) - (383)

Issue of Capital Securities 33 - 1,250 - - 1,250

Cost of issue of Capital Securities - (7) - - (7)

Disposal of financial assetsat fair value through othercomprehensive income 33

71 - - - 71

Other 17 34 (6) (54) (9)

Balance on December 31, 2019 28,157 12,713 - 477 41,347

Balance on December 31, 2017 25,376 13,199 560 475 39,610

Change in accounting policy IFRS 9 (26) - - - (26)

Change in accounting policy IFRS 15 41 - - - 41

Restated balance on January

1, 201825,391 13,199 560 475 39,625


Other comprehensive income 31 113 - - (3) 110



Payments on Trust PreferredSecurities IV (22) - - - (22)

Payments on Capital Securitiesissued by Rabobank (539) - - - (539)

Payments on Capital Securitiesissued by subsidiaries (14) - - - (14)

Redemption of Capital Securities 33 (79) (275) - - (354)



Settlement pension plan (56) - - - (56)

Other 10 20 (7) (51) (28)


Consolidated Statement of Changesin Equity

F-8

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Consolidated Statement of Cash Flows



Cash flows from operating activities


Adjusted for:

Non-cash items recognised in operating profit before tax


Depreciation of operating lease assets and investment properties 16,17 699 602

Impairment charges on financial assets 45 975 190

(Reversal) Impairment losses on property and equipment 16 (22) 42

(Reversal) Impairment losses on other intangible assets 15 25 2

Impairment on investments in associates 14 300 -

Gains/ (losses) on disposal of property and equipment 19 5

Income from investments in associates and joint ventures 39 (192) (243)

Income from disposal of subsidiaries (373) (119)

Gains/ (losses) on financial assets and liabilities at fair value through profit or loss 40 (156) (238)

Gains/ (losses) on derecognition of debt instruments at fair value through other comprehensive income 41 (27) (112)

Gains/ (losses) arising from the derecognition of financial assets measured at amortised cost (73) (14)

Provisions 26 163 276

Capitalised costs self-developed software and other assets (88) (118)

Net change in operating assets

Loans and advances to and deposits from credit institutions 7, 20, 45 (9,591) 9,459

Financial assets held for trading 9, 40 1,162 (872)

Derivatives 11 (923) 2,872

Net increase/ (decrease) in financial assets and liabilities designated at fair value 9, 24 (231) (17)

Net increase/ (decrease) in financial assets mandatorily at fair value 10 230 709

Loans and advances to customers 12, 45 (4,817) (7,360)

Acquisition of financial assets at fair value through other comprehensive income 13 (5,848) (4,861)

Proceeds from the sale and repayment of financial assets at fair value through othercomprehensive income 13 10,928 14,139

Acquisition of operational lease assets 16 (1,286) (1,152)

Proceeds from the disposal of operational lease assets 16 274 435

Dividends received from associates and financial assets 14 77 176

Net change in liabilities relating to operating activities

Derivatives 11 147 (4,636)

Financial liabilities held for trading 23 (1) (181)

Deposits from customers 21 126 (786)

Other liabilities 25 656 (1,853)

Income tax paid (289) (182)

Other changes 3,032 2,169

Net cash flow from operating activities (1,643) 12,626

Cash flows from investing activities

Acquisition of investments in associates 14 (90) (43)

Proceeds from disposal of investments in associates 14 71 182

Proceeds from disposal of subsidiaries net of cash and cash equivalents (996) -


F-9

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Acquisition of property, equipment and investment properties 16, 17 19 151

Proceeds from the disposal of property, equipment and investment properties 16, 17 (35) (41)

Net cash flow from investing activities (1,031) 249

Cash flows from financing activities

Proceeds from debt securities in issue 22, 35 43,318 63,164

Redemption of debt securities in issue 22, 35 (46,825) (69,203)

Proceeds from the issue of subordinated liabilities 35 1 -

Redemption of subordinated liabilities 35 (1,000) (21)

Purchase of Rabobank Certificates 32 (989) (1,038)

Sale of Rabobank Certificates 32 993 1,043

Issue of Capital Securities (including cost of issue) 1,243 994

Payments on Rabobank Certificates, Trust Preferred Securities IV and Capital Securities (904) (1,059)

Payments on Senior Contingent Notes (83) (86)

Redemption of Capital Securities 33 (3,159) (354)

Redemption of Trust Preferred Securities IV (383) -

Net cash flow from financing activities (7,788) (6,560)

Net change in cash and cash equivalents (10,462) 6,315

Cash and cash equivalents at the beginning of the year 73,335 66,861

Exchange rate differences on cash and cash equivalents 213 159

Cash and cash equivalents at the end of the year 63,086 73,335

The cash flows from interest are included in the net cash flow from operating activities

Interest received 15,551 15,693

Interest paid 6,834 7,180

F-10

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Notes to the ConsolidatedFinancial Statements

F-11

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1. Corporate Information

Rabobank is an international financial services provider operating

on the basis of cooperative principles. Rabobank offers retail

banking, wholesale banking, private banking, leasing and real

estate services. Rabobank serves approximately 9.4 million clients

around the world. Rabobank's Consolidated Financial Statements

include the financial information of Coöperatieve Rabobank

U.A. and its consolidated subsidiaries in the Netherlands and

abroad. Coöperatieve Rabobank U.A. has its registered office

in Amsterdam and is registered under Chamber of Commerce

number 30046259.

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2. Accounting Policies

The primary accounting policies used in preparing these

consolidated financial statements are set out below.

2.1 Basis of Preparation

The Consolidated Financial Statements of Rabobank have been

prepared in accordance with International Financial Reporting

Standards (IFRS) as adopted by the European Union (E.U.) and the

applicable articles of Part 9 of Book 2 of the Dutch Civil Code.

The consolidated financial statements have been prepared on the

basis of the accounting policies set out in this section.

New and Amended Standards issued by the

International Accounting Standards Board (IASB) and

adopted by the European Union which apply in the

Current Financial Year

IFRS 16 Leases

IFRS 16 became effective on January 1, 2019 and Rabobank

applied the modified retrospective approach which retained the

prior period figures as reported under the previous standard

and recognized the effects of IFRS 16 in the opening balance as

per January 1, 2019. The adoption of IFRS 16 Leases resulted in

changes in accounting policies. The new accounting policies are

set out in Section 2.22 Leasing. Rabobank recognized the right-of-

use assets as part of the line-item Property and Equipment and a

corresponding lease liability as part of line-item Other Liabilities

in the Consolidated Statement of Financial Position. The lease

liability is measured at the present value of the lease payments. On

initial application, the right-of-use asset is measured at an amount

equal to the lease liability, adjusted by the amount of any prepaid

or accrued lease payments.

The introduction of IFRS 16 did not have an impact on the

opening balance of equity, but led to an increase of assets and

liabilities as per January 1, 2019, for an amount of EUR 554 million.

Rabobank applied the following practical expedients at the date

of initial application: i) reliance on previous assessments whether

a contract is, or contains a lease at the date of initial application;

ii) reliance on the assessment of whether leases are onerous by

applying IAS 37 immediately before the date of initial application

as an alternative to performing an impairment review which then

leads to an adjustment of the right-of-use asset by the amount

of any provision for onerous leases and iii) exclusion of the initial

direct costs from the measurement of the right-of-use asset.

January1, 2019

The weighted average lessee’s incremental borrowing rate applied tolease liabilities recognized 4.2

Off balance operating lease commitments as per December 31, 2018,discounted using the incremental borrowing rate on January 1, 2019 611

Change as a result of excluding non-lease components (31)

Change as a result of excluding low-value and short-term leases (26)

Lease liabilities recognized in the statement of financial position 554

Other Amendments to IFRS

Amendments have been made to IAS 28, IAS 19 and IFRS

9. Furthermore, IFRIC 23 and the Annual Improvements

to IFRS Standards 2015-2017 Cycle have been issued. The

implementation of these amendments does not impact profit

or equity.

New Standards issued by the International Accounting

Standards Board (IASB) and adopted by the European

Union which do not yet apply in the Current

Financial Year

Interest Rate Benchmark Reform (Amendments to IFRS 9, IAS 39 and

IFRS 7)

These amendments will affect Rabobank because it applies

the hedge accounting requirements of IFRS 9 and IAS 39 to

hedging relationships that are affected by the interest rate

benchmark reform. The amendments modify specific hedge

accounting requirements, so that entities would apply those

hedge accounting requirements assuming that the interest

rate benchmark is not altered as a result of the interest rate

benchmark reform. The changes will mandatorily apply to all

hedging relationships that are directly affected by the interest

rate benchmark reform. If a hedging relationship no longer meets

the requirements for hedge accounting for reasons other than

those specified by the amended Standards, then discontinuation

of hedge accounting is still required.

Rabobank closely monitors the market and the output from the

various industry working groups, central banks and regulators

in order to manage the transition to alternative benchmark

interest rates. Rabobank has set up an IBOR transition programme

and governance structure that focuses on all areas of impact,

including but not limited to product development and

operational readiness, client outreach and contract changes,

reporting and valuation, education and communication.The

amendments are effective for annual periods beginning on or

after 1 January 2020, with earlier application permitted. Rabobank

will not early adopt these amendments nor does it expect that the

implementation of these amendments will affect profit or equity.

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Other Amendments to IFRS

Minor amendments have been made to IFRS 3, IAS 1 and IAS 8, and

to References to the Conceptual Framework in IFRS Standards.

Although these new requirements are currently being analyzed

and their impact is not yet known, Rabobank does not expect that

the implementation of these amendments will significantly affect

profit or equity.

New Standards issued by the International Accounting

Standards Board (IASB) but not yet endorsed by the

European Union

IFRS 17 Insurance Contracts

In May 2017, the IASB issued "IFRS 17 Insurance Contracts" with

an effective date of annual periods beginning on or after January

1, 2021. IFRS 17 establishes the principles for the recognition,

measurement, presentation and disclosure of insurance contracts

within the scope of the standard. The objective of IFRS 17

is to ensure that an entity provides relevant information that

faithfully represents those contracts. This information gives a

basis for users of financial statements to assess the effect that

insurance contracts have on an entity's financial position, financial

performance and cash flows. Rabobank is currently assessing

the impact of this standard. An effect could arise at Rabobank's

associate, Achmea.

Changes in Accounting Principles and Presentation

As per the Financial Statements 2019 IT staff costs, training

and travelling expenses have been reclassified from "Other

Administrative Expenses" to "Staff Costs" to better reflects the

type of costs incurred. The comparative figures were reclassified

for an amount of EUR 590 million on 31 December 2018.

Going Concern

The Managing Board considers it appropriate to adopt the

going concern basis of accounting in preparing these financial

statements based on a forecast analysis which supports the going

concern assumption.

Judgments and Estimates

In preparing the consolidated financial statements management

applied judgment with respect to estimates and assumptions

that affect the amounts reported for assets and liabilities, the

reporting of contingent assets and liabilities on the date of the

consolidated financial statements, and the amounts reported

for income and expenses during the reporting period. The

accounting principles listed below require critical estimates

that are based on assessments and assumptions. Although

management estimates are based on the most careful assessment

of current circumstances and activities on the basis of available

financial data and information, the actual results may deviate from

these estimates.

Impairment Allowances on Financial Assets

Rabobank applies the three-stage expected credit loss

impairment models for measuring and recognizing expected

credit losses which involve a significant degree of management

judgement. Rabobank uses estimates and management

judgment in the determination of the expected credit

losses for the model based impairment allowances and for

the measurement of individually assessed financial assets.

Information regarding the model based impairment allowances

is included in Section 4.3.6 "Judgements and estimates on Model

Based Impairment Allowances on Financial Assets". For credit-

impaired financial assets that are assessed on an individual basis,

a discounted cash flow calculation is performed. In many cases,

judgment is required for the estimation of the expected future

cash flows and the weighting of the three scenarios.

Fair Value of Financial Assets and Liabilities

Information regarding the determination of the fair value of

financial assets and liabilities is included in Section 4.9 "Fair Value

of Financial Assets and Liabilities" and Section 11 "Derivatives".

Impairment of Goodwill, Other Intangible Assets and Investments in

Associates and Joint Ventures

Goodwill and other intangible assets are assessed for impairment

– at least once a year – by comparing the recoverable

value to the carrying amount, while investments in associates

and joint ventures are tested for impairment when specific

triggers are identified. The determination of the recoverable

amount in an impairment assessment of these assets requires

estimates based on quoted market prices, prices of comparable

businesses, present value or other valuation techniques, or

a combination thereof, necessitating management to make

subjective judgments and assumptions. Because these estimates

and assumptions could result in significant differences to the

amounts reported if underlying circumstances were to change,

these estimates are considered to be critical. The important

assumptions for determining recoverable value of goodwill

are set out in Section 15; the assumptions for investments in

associates and joint ventures are set out in Section 14.

Taxation

Estimates are used when determining the income tax charge and

the related current and deferred tax assets and liabilities. The tax

treatment of transactions is not always clear or certain and, in

a number of countries, prior year tax returns often remain open

and subject to approval of the tax authorities for lengthy periods.

The tax assets and liabilities reported here are based on the best

available information, and where applicable, on external advice.

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Differences between the final outcome and the original estimates

are accounted for in the current and deferred tax assets and

liabilities in the period in which reasonable certainty is obtained.

Other Provisions

Judgement is involved in the application of IAS 37 when

determining whether a present obligation exists and in

estimating the probability, timing, and amount of any outflows.

More information on judgments regarding the provision for SME

derivatives and the restructuring provision is included in Section

26 "Provisions".

2.2 Consolidated Financial Statements

2.2.1 Subsidiaries

The participating interests over which Rabobank has control

are its subsidiaries (including structured entities) and these are

consolidated. Control is exercised over a participating interest

if the investor is entitled to receive variable returns from its

involvement in the participating interest and has the ability to

influence these returns through its control over the participating

interest. The assets, liabilities and profit and loss of these

companies are fully consolidated.

Subsidiaries are consolidated as from the date on which

Rabobank acquires effective control and subsidiaries are de-

consolidated as of the date on which this control is ceded.

Transactions, balances and unrealized gains and losses on

transactions between and among Rabobank Group and its

subsidiaries are eliminated on consolidation.

2.2.2 Investments in Associates and Joint Ventures

Investments in associates and joint ventures are initially

recognized at cost (including goodwill) and subsequently

accounted for using the equity method of accounting. Its

share of post-acquisition profits and losses is recognized in the

income statement and its share of post-acquisition movements

in reserves is recognized directly in other comprehensive income.

The cumulative post-acquisition movements are included in the

carrying amount of the investment.

Associates are entities over which Rabobank can exercise

significant influence and in which it generally holds between

20% and 50% of the voting rights but does not have control.

A joint venture is an agreement between one or more parties

under which the parties jointly have control and are jointly

entitled to the net assets under the agreement. Unrealized

profits on transactions between Rabobank and its associates

and joint ventures are eliminated in proportion to Rabobank’s

interest in the respective associates and joint ventures. Unrealized

losses are also eliminated unless the transaction indicates that an

impairment loss should be recognized on the asset(s) underlying

the transaction.

2.3 Derivatives and Hedging

Derivatives generally comprise foreign exchange contracts,

currency and interest rate futures, forward rate agreements,

currency and interest rate swaps and currency and interest rate

options (written or acquired). Derivatives are recognized at fair

value (excluding transaction costs) determined on the basis of

listed market prices (with mid-prices being used for EUR, USD

and GBP derivatives that have a bid-ask range), prices offered

by traders, discounted cash flow models and option valuation

models based on current market prices and contract prices for

the underlying instruments and reflecting the time value of

money, yield curves and the volatility of the underlying assets and

liabilities. Derivatives are included under assets if their fair value is

positive and under liabilities if their fair value is negative.

Derivatives Not Used for Hedging

Realized and unrealized gains and losses on derivatives held for

trading are recognized at fair value in "Gains/ (Losses) on Financial

Assets and Liabilities at Fair Value through Profit or Loss".

Derivatives Used for Hedging

Derivatives are used for asset and liability management of interest

rate risks, credit risks and foreign currency risks. Rabobank applies

IFRS 9 for non-portfolio hedge accounting. IFRS 9 does not offer

a solution for fair value hedge accounting for a portfolio hedge

of interest rate risk. Rabobank opted to use the accounting policy

choice of IFRS 9 to continue to apply the IAS 39 EU carve-out for

such portfolio hedge accounting.

At the time of inception of a hedge-accounting relationship,

derivatives are designated as one of the following: (1) a hedge

of the fair value of an asset, a group of assets or a liability

in the statement of financial position (fair value hedge); (2) a

hedge of future cash flows allocable to an asset or liability in the

statement of financial position, an expected transaction or a firm

commitment (cash flow hedge); or (3) a hedge of a net investment

in a foreign operation (net investment hedge). Hedge accounting

is applied for derivatives designated in this manner provided that

certain criteria are met, including the following:

There must be formal documentation of the hedging instrument,

the hedged item, the objective of the hedge, the hedging

strategy, and the hedge relationship; Documentation of the

assessment and analysis of the sources of hedge ineffectiveness

and how the hedges ratio is determined (IFRS 9); The hedge

must be expected to be effective, within 80% to 125% (IAS 39), in

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covering changes in the hedged item’s fair value or the cash flows

allocable to the hedged risks during the entire reporting period;

The hedge must be continuously effective from the moment

of its inception; There is an economic relationship between the

hedged item and hedging instrument (IFRS 9).

1. Derivatives Used for Fair Value Hedge Accounting

Changes in the fair value of derivatives that are designated as

fair value hedges and are effective in terms of the hedged risks

are recognized in the statement of income in ‘Gains/ (losses) on

financial assets and liabilities at fair value through profit or loss’,

together with the corresponding changes in the fair values of the

assets or liabilities hedged.

As and when the hedge no longer meets the criteria for hedge

accounting (applying the fair value hedge model), the cumulative

adjustment to the fair value of a hedged interest-bearing financial

instrument is amortized through profit and loss over the relevant

interest repricing period.

2. Derivatives Used for Cash Flow Hedge Accounting

Changes in the fair value of derivatives that are designated (and

qualify) as cash flow hedges and that are effective in relation

to the hedged risks are recognized in other comprehensive

income. Ineffective elements of the changes in the fair value

of derivatives are recognized in the statement of income. If

a forecast transaction or a recognized liability results in the

recognition of a non-financial asset or liability, any deferred profits

or losses included in other comprehensive income are transferred

to the initial carrying amount (cost) of the asset or liability. In all

other cases, deferred amounts included in other comprehensive

income are taken to the statement of income in "Gains/ (Losses)

on Financial Assets and Liabilities at Fair Value through Profit

or Loss" in the periods in which the hedged recognized liability

or the forecast transaction was recognized in the statement

of income.

3. Derivatives Used for Net Investment Hedge Accounting

The hedging instruments used to hedge net investments in

foreign operations are measured at fair value, with changes in the

fair value being recognized in other comprehensive income for

the portion that is determined to be an effective hedge. Changes

in the hedged equity instrument resulting from exchange-rate

fluctuations are also recognized in other comprehensive income.

Gains and losses accumulated in other comprehensive income

are reclassified to profit or losses when the equity instrument is

disposed of.

4. Costs of Hedging

The cross currency basis spreads of cross currency interest rate

swaps in hedge accounting relationships designated with issued

bonds in foreign currency is excluded from designation. The cross

currency basis spread volatility is taken through OCI as costs of

hedging and is reclassified to profit or loss in the same periods

as when the hedged expected future cash flows affect profit or

loss till maturity of the issued bond (time period of the related

hedged item).

Although derivatives are used as economic hedges under

Rabobank’s managed risk positions, certain derivative contracts

do not qualify for hedge accounting under the specific IFRS rules.

Interest on derivatives held for economic hedging purposes are

shown under interest expense, both the receive and pay leg of

the derivative.

2.4 Financial Assets and Liabilities Held forTrading

Financial assets held for trading are financial assets acquired with

the objective of generating profit from short-term fluctuations in

prices or trading margins or they are financial assets that form

part of portfolios characterized by patterns of short-term profit

participation. Financial assets held for trading are recognized at

fair value based on listed bid prices and all realized and unrealized

results therefrom are recognized under "Gains/ (Losses) on

Financial Assets and Liabilities at Fair Value through Profit or

Loss’. Interest earned on financial assets is recognized as interest

income. Dividends received from financial assets held for trading

are recognized as "Gains/ (Losses) on Financial Assets and

Liabilities at Fair Value through Profit or Loss’.

Financial liabilities held for trading are mainly negative fair values

of derivatives and delivery obligations that arise on the short

selling of securities. Securities are sold short to realize gains from

short-term price fluctuations. The securities needed to settle short

sales are acquired through securities lending and repurchasing

agreements. Securities sold short are recognized at fair value on

the reporting date.

2.5 Financial Assets and Financial LiabilitiesDesignated at Fair Value

On initial recognition, certain financial assets (including direct and

indirect investments in venture capital but excluding assets held

for trading) and certain liabilities may be included as "Financial

Assets and Liabilities designated at Fair Value" if this accounting

eliminates or significantly reduces any inconsistent treatment

that would otherwise have arisen upon measurement of the

assets or liabilities or recognition of profits or losses on the basis

of different accounting policies.

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Interest earned and due on such assets and liabilities is recognized

as interest income and expense, respectively. Other realized and

unrealized gains and losses on the revaluation of these financial

instruments to fair value are included under "Gains/ (Losses) on

Financial Assets and Liabilities at Fair Value through Profit or Loss"

except for fair value changes due to own credit risk of Financial

Liabilities designated at fair value. These Fair Value changes after

tax are presented in other comprehensive income under line item

"Fair Value Changes Due to Own Credit Risk on Financial Liabilities

Designated at Fair Value". Presenting these effects of changes

in credit risk in other comprehensive income does not create or

enlarge an accounting mismatch in profit or loss.

2.6 Day One Gains/ Losses

When using fair value accounting at the inception of a financial

instrument, any positive or negative difference between the

transaction price and the fair value (referred to as "day one gain/

loss") is accounted for immediately under "Gains/ (Losses) on

Financial Assets and Liabilities at Fair Value through Profit or Loss"

where the valuation method is based on observable inputs from

active markets. In all other cases, the entire day one gain/loss

is deferred and accounted for as "Other liabilities" or "Other

assets". After initial recognition the deferred day one gain/ loss is

recognized as a gain/ loss to the extent it results from a change in

a factor (including time effects).

2.7 Financial Assets at Fair Value ThroughOther Comprehensive Income

Debt instruments that are held for collection of contractual cash

flows and for selling the financial assets, where the assets’ cash

flows represent solely payments of principal and interest on the

principal amount outstanding, are measured at fair value through

other comprehensive income and presented as "Financial Assets

at Fair Value through Other Comprehensive Income".

Financial assets at fair value through other comprehensive

income are initially recognized at fair value, including transaction

costs, based on quoted bid prices or at values derived from

cash flow models. The fair values of unlisted equity instruments

are estimated on the basis of appropriate price/earnings ratios

and adjusted to reflect the specific circumstances of the

respective issuer.

Movements in the carrying amount are taken through OCI, except

for the recognition of impairment gains or losses, interest income

and foreign exchange gains and losses which are recognized

in profit or loss. When the financial asset is derecognized, the

cumulative gain or loss previously recognized in OCI is reclassified

from equity to profit or loss. Interest from these financial assets is

included in net interest income using the effective interest rate

method. Impairment losses are included in "Impairment Charges

on Financial Assets" in the statement of income.

Where Rabobank has elected to present fair value gains and

losses on equity investments in OCI, there is no subsequent

reclassification of fair value gains and losses to profit or loss

following the derecognition of the investment. Dividends from

such investments continue to be recognized in profit or loss

as other income when Rabobank’s right to receive payments

is established.

2.8 Repurchase Agreements and ReverseRepurchase Agreements

Financial assets that are sold subject to related sale and

repurchase agreements are included in the financial statements

under "Financial Assets Held for Trading" or "Financial Assets at

Fair Value through Other Comprehensive Income", as applicable.

The liability to the counterparty is included under "Deposits from

Credit Institutions" or "Deposits from Customers", as applicable.

Financial assets acquired under reverse sale and reverse

repurchase agreements are recognized as "Loans and Advances

to Credit Institutions" or "Loans and Advances to Customers", as

applicable. The difference between the sales and repurchasing

prices is recognized as interest income/expense over the term of

the agreement using the effective interest method.

2.9 Securitizations and (De)Recognition ofFinancial Assets and Liabilities

Recognition of Financial Assets and Liabilities

Purchases and sales of financial assets and liabilities classified as

fair value through profit or loss and financial assets at fair value

through profit or loss which are required to be delivered within

a regulatory-prescribed period or in accordance with market

conventions are recognized on the transaction date. Financial

instruments carried at amortized cost are recognized on the

settlement date.

Securitizations and Derecognition of Financial Assets and Liabilities

Rabobank securitizes, sells and carries various financial assets.

Those assets are sometimes sold to a special purpose entity

(SPE) which then issues securities to investors. Rabobank has the

option of retaining an interest in these assets in the form of

subordinated interest-only strips, subordinated securities, spread

accounts, servicing rights, guarantees, put and call options or

other constructions.

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A financial asset (or a portion thereof) is derecognized where:

• The rights to the cash flows from the asset expire;

• The rights to the cash flows from the asset and substantially all

the risks and rewards of ownership of the asset are transferred;

• A contractual obligation is assumed to transfer the cash flows

from the asset and substantially all the risks and rewards have

been transferred; or

• Substantially all the risks and rewards are neither transferred

nor retained but where control over the asset is not retained.

A financial liability or a part thereof is derecognized if it ceases

to exist, i.e. after the contractual obligation has been fulfilled or

cancelled or has expired. Continuing involvement is recognized

if Rabobank neither retains nor transfers substantially all the risks

and rewards and control has retained. The asset is recognized to

the extent of Rabobanks continuing involvement in it.

Where a transaction does not meet these conditions for

derecognition, it is recognized as a loan for which security has

been provided. To the extent that the transfer of a financial asset

does not qualify for derecognition, Rabobank’s contractual rights

are not separately recognized as derivatives if recognition of these

instruments and the transferred asset, or the liability arising from

the transfer, were to result in the double recognition of the same

rights and obligations.

Profits and losses on securitizations and sale transactions depend

partly on the carrying amounts of the assets transferred. The

carrying amounts of these assets are allocated to the interests sold

and retained using the relative fair values of these interests on the

date of sale. Any gains and losses are recognized through profit

and loss at the time of transfer. The fair value of the interests sold

and retained is determined based on listed market prices or as the

present value of the future expected cash flows based on pricing

models that involve several assumptions regarding credit losses,

discount rates, yield curves, payment frequency or other factors.

2.10 Cash and Cash Equivalents

Cash equivalents are highly liquid short-term assets held at central

banks to meet current cash obligations rather than for investment

or other purposes. These assets have terms of less than 90 days

from inception. Cash equivalents are readily convertible to known

amounts of cash and are subject to insignificant risk of changes

in value.

2.11 Offsetting Financial Assets andLiabilities

Where there is legal right to offset recognized amounts and it is

intended to settle the expected future cash flows on a net basis or

to realize the asset and settle the liability simultaneously, financial

assets and liabilities are offset and the net amount is recognized

in the statement of financial position. This relates predominantly

to derivatives and reverse repurchase agreements. The offsetting

of taxes is addressed in Section 2.26.

2.12 Foreign Currency

Foreign Entities

Transactions and balances included in the financial statements

of individual entities within Rabobank Group are reported

in the currency that best reflects the economic reality of

the individual entity’s underlying operating environment (the

functional currency).

The consolidated financial statements are presented in euros,

which is the parent company’s functional currency. The

statements of income and cash flows of foreign operations

are translated into Rabobank’s presentation currency at the

exchange rates prevailing on the transaction dates, which

approximate the average exchange rates for the reporting period,

and the statements of financial position are translated at the

rates prevailing at the end of the reporting period. Exchange

differences arising on net investments in foreign operations and

on loans and other currency instruments designated as hedges

of these investments are recognized in other comprehensive

income. On sale of a foreign operation, these translation

differences are transferred to the statement of income as part of

the profit or loss on the sale.

Goodwill and fair value adjustments arising on the acquisition of

a foreign entity are recognized as the assets and liabilities of the

foreign entity, and are translated at the prevailing rate at the end

of the reporting period.

Foreign Currency Transactions

Transactions in foreign currencies are translated into the

functional currency at the exchange rates prevailing on the

transaction dates. Differences arising on the settlement of

transactions or on the translation of monetary assets and

liabilities denominated in foreign currencies are recognized

in the statement of income as foreign exchange gains and

losses and differences that qualify as net investment hedges

are recognized in other comprehensive income. Translation

differences on non-monetary items measured at fair value

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through profit or loss are recognized as part of the fair value

gains or losses. Translation differences on non-monetary assets

at fair value through other comprehensive income are included

in the revaluation reserves for equity instruments at fair value

through other comprehensive income.

2.13 Interest

Interest income and expense are recognized in the statement of

profit or loss using the effective interest method. The effective

interest method is a method used for calculating the amortized

cost of a financial asset or a financial liability and for allocating the

interest income or interest expense to the relevant period. The

calculation includes all fees paid or received between parties to

the contract that are an integral part of the effective interest rate,

transaction costs, and all other premiums or discounts. Interest

income shall be calculated by applying the effective interest

rate to the gross carrying amount of a financial asset except

for credit-impaired financial assets. For those financial assets,

Rabobank applies the effective interest rate to the amortized cost

of the financial asset in subsequent reporting periods. Interest

income on financial assets using the effective interest method

includes interest income on "Cash and Cash Equivalents", "Loans

and Advances to Credit Institutions", "Loans and Advances

to Customers", "Financial Assets at Fair Value through Other

Comprehensive Income" and "Derivatives used for Fair Value

Hedge-Accounting". Interest on derivatives held for economic

hedging purposes are shown under interest expense, both the

receive and pay leg of the derivative.

2.14 Fees and Commissions

Rabobank earns fee and commission income from a diverse

range of services it provides to its customers. Commissions

earned for the provision of services such as payment services

and advisory fees are generally recognized as the service is

provided. Commission received for negotiating a transaction or

for involvement in negotiations on behalf of third parties (for

example the acquisition of a portfolio of loans, shares or other

securities or the sale or purchase of companies) is recognized

upon completion of the underlying transaction.

2.15 Loans and Advances to Customers andLoans and Advances to CreditInstitutions

Financial assets that are held for collection of contractual cash

flows where those cash flows represent solely payments of

principal and interest on the principal amount outstanding

are measured at amortized cost and presented as "Loans and

Advances to Credit Institutions" or "Loans and Advances to

Customers". At initial recognition, Rabobank measures these

financial assets at its fair value plus transaction costs that are

directly attributable to the acquisition of the financial asset.

Interest income from these financial assets is included in net

interest income using the effective interest rate method. Any

gain or loss arising on derecognition is recognized directly in

profit or loss and presented in "Gains/ (Losses) Arising from

the Derecognition of Financial Assets Measured at Amortized

Cost". Impairment losses are included in "Impairment Charges on

Financial Assets" in the statement of income.

2.16 Impairment Allowances on FinancialAssets

Impairment allowances apply to financial assets at amortized

cost and financial assets at fair value through OCI, as well as to

lease receivables, contract assets, trade receivables, certain loan

commitments and financial guarantees. At initial recognition,

an allowance is formed for the amount of the expected credit

losses from possible defaults in the coming 12 months (stage

1). If credit risk increased significantly since origination (but

remains non-credit-impaired), an allowance will be required for

the amount that equals the expected credit losses stemming

from possible defaults during the expected lifetime of the

financial asset (stage 2). If the financial instrument becomes

credit-impaired the allowance will remain at the Lifetime ECL

(stage 3). For these instruments the interest income will be

recognized by applying the effective interest rate on the net

carrying amount (including the impairment allowance). Financial

instruments become credit-impaired when one or more events

have occurred that had a detrimental impact on estimated future

cash flows. Rabobank does not use the low credit risk exemption

for any financial instrument.

Two fundamental drivers of the IFRS 9 impairments requirements

are a) the methodology for the measurement of 12-Month

and Lifetime Expected Credit Losses and b) the criteria used

to determine whether a 12-month ECL, Lifetime ECL non-credit-

impaired, or Lifetime ECL credit-impaired should be applied (also

referred to as stage determination criteria).

a) Methodology to Determine Expected Credit Losses

In order to determine ECLs Rabobank utilizes point in time

Probability of Default (PD) x Loss Given Default (LGD) x Exposure

at Default (EAD) models for the majority of the portfolio in scope.

Three global macroeconomic scenarios are incorporated into

these models and probability weighted in order to determine the

expected credit losses. When unexpected external developments

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or data quality issues are not sufficiently covered by the outcome

of the ECL models, an adjustment will be made.

b) Stage Determination Criteria

In order to allocate financial instruments in scope between stage

1, stage 2 and stage 3 a framework of qualitative and quantitative

factors has been developed. The criteria for allocating a financial

instrument to stage 3 are fully aligned with the criteria for

assigning a defaulted status, for example 90 days past due

status, or if a debtor is likely to become unable to pay its

credit obligations without liquidation of collateral by the bank. In

order to allocate financial instruments between stages 1 and 2,

Rabobank uses criteria, such as days past due status, special asset

management status and deterioration of the PD since origination.

For portfolios without individual PD’s or with PD’s that are not

updated on a frequent basis such that an assessment of the

change in PD is not possible, a collective assessment on groups

of financial instruments with shared credit risk characteristics

is made.

Significant Increases in Credit Risk (SICR)

At each reporting date, Rabobank assesses whether the credit risk

on financial instruments has increased significantly since initial

recognition. There is a rebuttable presumption that the credit

risk on a financial asset has increased significantly since initial

recognition when the contractual payments are over 30 days past

due and/ or the financial asset is included in a watch-list. The

rebuttable presumption is not an absolute indicator that lifetime

ECL should be recognized, but is presumed to be the latest point

at which lifetime ECL should be recognized.

The assessment of whether lifetime ECL are recognized is based

on significant increases in the likelihood of default risk occurring

since initial recognition – irrespective of whether a financial

instrument has been repriced to reflect an increase in credit

risk – instead of based on evidence of a financial instrument

being credit-impaired at the reporting date or an actual default

occurring. Generally, there will be a SICR before a financial

instrument becomes credit impaired or an actual default occurs.

For loan commitments, Rabobank considers changes in the

default risk occurring on the loan to which a loan commitment

relates. For financial guarantee contracts, it considers the changes

in the risk that the specified debtor will default on the contract.

The assessment of changes in credit risk analysis is a multifactor

and holistic analysis. Whether a specific factor is relevant (and

its weight compared to other factors) depends on the type

of product, characteristics of the financial instruments and the

borrower as well as geographical region. The methods used

to determine whether credit risk on financial instruments has

increased significantly since initial recognition should consider

the mentioned characteristics of the instruments (or a group of

instruments) and the default patterns in the past for comparable

financial instruments.

Default Definition

In defining default for the purposes of determining the risk

of a default occurring, Rabobank applies a default definition

consistent with the definition used for internal credit risk

management purposes for the relevant financial instrument

and considers qualitative indicators when appropriate. However,

there is a rebuttable presumption that default does not occur

later than when a contractual payment on a financial asset is 90

days past due. The definition of default used for these purposes is

applied consistently to all financial instruments.

Collective Versus Individual Assessment

Some factors or indicators may not be identifiable on an individual

instrument level. In that case, the factors or indicators are

assessed for appropriate portfolios, groups of portfolios or a

portion of a portfolio to determine whether the requirements

for recognition of lifetime ECL have been met. The aggregation

of financial instruments to assess whether there are changes

in credit risk on a collective basis may change over time when

new information becomes available on groups of, or individual,

financial instruments.

Depending on the nature of the financial instruments and the

credit risk information available for particular groups of financial

instruments, Rabobank may not be able to identify SICR for an

individual instrument before that instrument becomes past due.

This may be the case for financial assets (such as retail loans) for

which there is little or no updated credit risk information routinely

obtained and monitored on an individual instrument level until a

customer breaches the contractual terms. If changes in the credit

risk for an individual instrument is not captured before it becomes

past due, a loss allowance based solely on credit information at

an individual instrument level would not faithfully represent the

changes in credit risk since initial recognition.

In some circumstances, Rabobank has no reasonable and

supportable information available without undue cost or

effort to measure lifetime ECL on an individual instrument

basis. Lifetime ECL is then recognized by collectively

considering comprehensive credit risk information, which not

only incorporates past due information but also all relevant

credit information (including forward-looking macroeconomic

information) to approximate the result of recognizing lifetime

ECL when there has been a SICR since initial recognition on an

individual instrument level.

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For the purpose of determining SICR and recognizing a loss

allowance on a collective basis, Rabobank may group financial

instruments based on shared credit risk characteristics with the

objective of facilitating an analysis designed to enable SICR to be

identified on a timely basis. However, when Rabobank is unable to

group financial instruments for which the credit risk is considered

to have increased significantly since initial recognition based on

shared credit risk characteristics, it recognizes lifetime ECL on a

portion of the financial instruments for which credit risk is deemed

to have increased significantly.

Shared credit risk characteristics may include but are not

limited to: instrument types, credit risk ratings, collateral types,

initial recognition dates, remaining terms to maturity, industries,

geographic location, collateral value relative to the financial

instrument if it has an impact on the PD (e.g., non-recourse loans

in some jurisdictions or LTV ratios).

2.17 Modifications

The contractual terms of a financial asset may be modified

for a commercial reason or due to a forbearance measure. A

commercial modification is a change to the previous terms and

conditions of a contract (financial asset) that alters the timing

or amount of the contractual cash flows of the financial asset.

Typically Rabobank considers a modification as non-substantial if

it does not impact multiple aspects of the contract at the same

time, for example a change in the fixed interest period, repayment

type or obligors. At Rabobank, normally forbearance measures are

non-substantial modifications.

Substantial modifications lead to a derecognition of the financial

asset and non-substantial modifications lead to modification

accounting. In case of a modification Rabobank recalculates the

gross carrying amount based on the revised cash flows of the

financial asset and recognizes a modification gain or loss in

profit or loss. The new gross carrying amount is recalculated

by discounting the modified cash flows at the original effective

interest rate.

2.18 Goodwill and Other Intangible Assets

Goodwill

Goodwill is the amount by which the acquisition price paid for a

subsidiary exceeds the fair value on the date on which the share

of net assets and contingent liabilities of the entity was acquired.

With each acquisition, the other non-controlling interests are

recognized at fair value or at its share of the identifiable assets and

liabilities of the acquired entity. Tests are performed annually, or

more frequently if indications so dictate, to determine whether

there has been impairment.

Other Intangible Assets, including software development costs

Costs directly incurred in connection with identifiable and

unique software products over which Rabobank has control

and which will likely provide economic benefits exceeding the

costs for longer than one year are recognized as other intangible

assets. Direct costs include the personnel costs of the software

development team, financing costs and an appropriate portion of

the relevant overhead.

Expenditures that improve the performance of software as

compared with their original specifications are added to the

original cost of the software. Software development costs are

recognized as other intangible assets and are amortized on a

linear basis over a period not exceeding five years. Costs related

to the maintenance of software are recognized as an expense at

the time they are incurred.

Other intangible assets include those identified through business

combinations, and they are amortized over their expected useful

lives when the asset is available for use.

Impairment Losses on Goodwill

Goodwill is allocated to cash-generating units for the purpose of

impairment testing, which is undertaken at the lowest level of

assets that generate largely independent cash inflows. During the

fourth quarter of each financial year, or more frequently if there

are indications of impairment, goodwill is tested for impairment

and any excess of carrying amount over recoverable amount is

provided. The recoverable amount is the higher of the value in use

and the fair value less selling costs.

The value in use of a cash flow generating unit is determined as

the present value of the expected future pre-tax cash flows of

the cash flow generating unit in question. The key assumptions

used in the cash flow model depend on the input data and

they reflect various judgmental financial and economic variables,

such as risk-free interest rates and premiums reflecting the risk

inherent in the entity concerned. Impairments of goodwill are

included under ‘Impairment losses on goodwill’ in the statement

of income, if applicable.

Impairment Losses on Other Intangible Assets

At each reporting date, an assessment is made as to whether

there are indications of impairment of other intangible assets. If

there are such indications, impairment testing is carried out to

determine whether the carrying amount of the other intangible

assets is fully recoverable. The recoverable amount shall be

estimated for the individual asset. If it is not possible to estimate

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the recoverable amount of the individual asset, the recoverable

amount of the cash generating unit to which the asset belongs

is determined. An impairment loss is recognized if the carrying

amount exceeds the recoverable amount. Impairment losses

and impairment reversals are included in "Other Administrative

Expenses" in the statement of income.

Regardless of any indication of impairment, intangible assets not

yet available for use shall be tested for impairment annually by

comparing its carrying amount with its recoverable amount.

2.19 Property and Equipment

Property and Equipment for Own Use

Property for own use consists mainly of office buildings

and is recognized at cost less accumulated depreciation and

impairment, as is equipment for own use. Assets are depreciated

to their residual values over the following estimated useful lives

on a straight-line basis:

Property

- Land Not depreciated

- Buildings 25 - 40 years

Equipment

- Computer equipment 1 - 5 years

- Other equipment and vehicles 3 - 8 years

An annual assessment is made as to whether there are indications

of impairment of property and equipment. If the carrying amount

of an asset exceeds its estimated recoverable amount, the

carrying amount is written down to the recoverable amount.

Impairment losses and impairment reversals are included under

"Other Administrative Expenses" in the statement of income.

Gains and losses on the disposal of property and equipment

are determined on the basis of their carrying amounts and are

recognized in operating results.

Repair and maintenance work is charged to the statement of

income at the time the costs are incurred. Expenditures to extend

the economic life or increase the economic value of land and

buildings as compared with their original economic value are

capitalized and subsequently depreciated.

2.20 Investment Properties

Investment properties, primarily office buildings, are held for

their long-term rental income and are not used by Rabobank

or its subsidiaries. Investment properties are recognized as long-

term investments and included in the statement of financial

position at cost net of accumulated depreciation and impairment.

Investment properties are depreciated on a straight-line basis to

their residual values over an estimated useful life of forty years.

2.21 Other Assets

Structured Inventory Products

Rabobank offers several products that relate to financing

commodities. Some of these products are recognized as loans

with commodities as collateral, others as loans with embedded

derivatives and others as commodities. The classification is mainly

dependent on the transfer of risk and rewards of the commodity

from the client to Rabobank.

Building Sites

Building sites are carried at cost, including allocated interest and

additional expenses for purchasing the sites and making them

ready for construction or, if lower, the net realizable value. Interest

is not recognized in the statement of financial position for land

which has not been zoned for a particular purpose if there is no

certainty that the land will be built on. Possible decreases in value

as a result of future change of designated use of the relevant

land are not included in the cost of land, but are included in the

determination of the net realizable value.

The net realizable value of all building sites is reviewed at least

once a year or earlier, in case of any indications of impairment. The

net realizable value for building sites is the direct realizable value

or, if higher, the indirect realizable value. The direct realizable

value is the estimated value upon sale less the estimated

costs for achieving the sale. The indirect realizable value is the

estimated sale price within the context of normal operations

less the estimated costs of completion and the estimated costs

necessarily incurred to realize the sale. The calculation of the

indirect realizable value is based on an analysis of scenarios

that includes as many site-specific aspects and company-specific

parameters and conditions as possible. A downward revaluation

is recognized if the carrying value exceeds the realizable value.

Properties on building sites are classified as investment property if

the current use of Rabobank is to lease out these properties under

one or more operating leases.

Work in Progress

Work in progress concerns sold and unsold residential projects

under construction or in preparation, as well sold and unsold

commercial property projects. Work in progress is carried at the

costs incurred plus allocated interest or, if lower, the net realizable

value. Revenues from projects for the construction of real estate

are recognized when the related performance obligations are

satisfied. Expected losses on projects are immediately deducted

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from the work in progress. If Rabobank transfers (parts of) a project

to a customer before the customer pays instalments, Rabobank

presents a contract asset. If a customer pays instalments, or

Rabobank has a right to instalments that is unconditional, before

Rabobank transfers (parts of) a project to a customer, Rabobank

presents a contract liability.

The carrying amount of unsold work in progress is annually

reviewed for indications of a decline in value. If there is such

an indication, the indirect realizable value of the work in

progress is estimated; in most cases this is done by means of an

internal or external appraisal. The indirect realizable value is the

estimated sale price within the context of normal operations

less the estimated costs of completion and the estimated

costs necessarily incurred to realize the sale. A downward

value adjustment is recognized if the carrying value exceeds

the expected indirect realizable value, to the extent that this

difference must be borne by Rabobank.

Finished Properties

Unsold residential properties and commercial developed in-

house are carried at cost or, if lower, the net realizable value.

The net realizable value of finished properties is reviewed at least

once a year or if there are any indications for a decline in value. For

finished properties, the net realizable value is generally equal to

the direct realizable value, which is mostly determined by means

of an internal or external appraisal. A downward value adjustment

is recognized if the carrying value exceeds the expected direct

realizable value, to the extent that the difference is on account

of Rabobank.

2.22 Leasing

Rabobank as Lessee

Rabobank as a lessee recognises a right-of-use asset representing

its right to use the underlying leased asset and a corresponding

liability representing its obligation to make lease payments at

the date at which the leased asset is available for use. Each lease

payment is allocated between the lease liability and interest

expense. The interest expenses are charged to profit or loss

over the lease period so as to produce a constant periodic rate

of interest on the remaining balance of the liability for each

period. The right-of-use assets are depreciated over the lease

term on a straight-line basis. The lease liability is measured at

the present value of the lease payments. The lease payments

comprise the following payments for the right to use the

underlying asset during the lease term that are not paid at the

commencement date:

• Fixed payments less any lease incentives received;

• Variable lease payments that depend on an index or a

rate, initially measured using the index or rate as at the

commencement date;

• Amounts expected to be payable by the lessee under residual

value guarantees;

• The exercise price of a purchase option if the lessee is

reasonably certain to exercise that option; and

• Payments of penalties for terminating the lease, if the lease

term reflects the lessee exercising an option to terminate

the lease.

The lease payments are discounted using the interest rate implicit

in the lease. If that rate cannot be determined, the lessee’s

incremental borrowing rate is used, being the rate that the lessee

would have to pay to borrow the funds necessary to obtain an

asset of similar value in a similar economic environment with

similar terms and conditions. Rabobank defines the incremental

borrowing rate as the internal funding rate (Funds Transfer Pricing

(FTP) rate) plus an asset-specific premium. By using the FTP rate as

a basis the discount rate will be defined for each time bucket and

consists of the following elements:

• Base rate: the risk-free rate;

• Credit spread: based on credit risk of the group company;

• Country specific risk: based on location of the group

company; and

• Currency risk: based on the functional currency of the

group company;

The right-of-use asset is measured at an amount equal to the lease

liability, adjusted by the lease payments made at or before the

commencement date less any lease incentives received and any

initial direct costs and restoration costs. Payments associated with

short-term leases and leases of low-value assets are recognised

on a straight-line basis as an expense in profit or loss. Short-term

leases are leases with a lease term of 12 months or less. Rabobank

recognizes the right-of-use assets as part of the line-item Property

and Equipment and the lease liability as part of line-item Other

Liabilities in the Consolidated Statement of Financial Position.

Rabobank as Lessor

Finance Leases

A finance lease is recognized as a receivable under "Loans

and Advances to Credit Institutions" or "Loans and Advances

to Customers", as applicable, at an amount equal to the net

investment in the lease. The net investment in the lease is the

present value of the nominal minimum lease payments and the

unguaranteed residual value. The difference between the gross

investment and the net investment in the lease is recognized

as unearned finance income. Lease income is recognized as

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interest income over the term of the lease using the net

investment method, which results in a constant rate of return on

the investment.

Operating Leases

Assets leased under operating leases are included in the

statement of financial position under "Property and Equipment".

The assets are depreciated over their expected useful lives in

line with those of comparable items of property and equipment.

Rental income (less write-offs and discounts granted to lessees) is

recognized under "Net Income from Other Operating Activities"

on a linear basis over the term of the lease.

2.23 Provisions

Provisions are recognized for obligations (both legal and

constructive) 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 of the amount of

the obligation. If Rabobank expects a provision to be reimbursed,

for example under an insurance policy, the reimbursement is

recognized as a separate asset but only if the reimbursement is

virtually certain. The provisions are carried at the discounted value

of the expected future cash flows. The additions to and releases

of provisions are recognized in the statement of income under

"Other Administrative Expenses".

Restructuring

Restructuring provisions comprise payments under redundancy

schemes and other costs directly attributable to restructuring

programs. These costs are recognized during the period in

which the legal or actual payment obligation arises, a detailed

plan has been prepared for redundancy pay and there are

realistic expectations among the parties concerned that the

reorganization will be implemented.

Legal Issues

The provision for legal issues is based on the best estimates

available at the end of the reporting period, taking into account

legal advice. The timing of the cash outflow of these provisions

is uncertain because the outcome of the disputes and the time

involved are unpredictable.

Other Provisions

Other provisions include provisions for onerous contracts,

potential settlements and credit related contingent liabilities.

2.24 Employee Benefits

Rabobank has various pension plans in place based on the local

conditions and practices of the countries in which it operates.

In general, the plans are financed by payments to insurance

companies or to trustee administered funds determined by

periodic actuarial calculations. A defined benefit pension plan

is one that incorporates an obligation to pay an agreed amount

of pension benefit, which is usually based on several factors such

as age, number of years’ service and remuneration. A defined

contribution plan is one in which fixed contributions are paid

to a separate entity (a pension fund) with no further legal or

constructive obligation on the part of the employer should the

fund have insufficient assets to settle its obligations to employee-

members of the plan.

Pension Obligations

The obligation under defined benefit pension plans is the present

value of the defined benefit pension obligation at the end of

the reporting period reduced by the fair value of the fund

investments. The defined benefit obligation is calculated annually

by independent actuaries based on the projected unit credit

method. The present value of the defined benefit obligation is

determined as the estimated future outflow of cash funds based

on the interest rates of high-quality corporate bonds with terms

that approximate those of the corresponding obligation. The

majority of pension plans are career-average plans. The costs of

these plans (being the net pension charge for the period after

deducting employee contributions and interest) are included

under ‘Staff costs’. Net interest expense/income is determined

by applying the discount rate at the beginning of the reporting

period to the asset or liability of the defined benefit pension plan.

Actuarial gains and losses arising from events and/or changes

in actuarial assumptions are recognized in the statement of

comprehensive income.

Defined Contribution Plans

Under defined contribution plans, contributions are paid into

publicly or privately managed pension insurance plans on

a compulsory, contractual or voluntary basis. These regular

contributions are recognized as expense in the year in which

they are due and they are included under "Staff costs".

Other Post-employment Obligations

Some of Rabobank’s business units provide other post-

employment benefits. To become eligible for such benefits, the

usual requirement is that the employee remains in service until

retirement and has been with the company for a minimum

number of years. The expected costs of these benefits are accrued

during the years of service, based on a system similar to that

for defined benefit pension plans. The obligations are calculated

annually by independent actuaries.

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Variable Remuneration

Variable remuneration payable unconditionally and in cash is

recognized in the year in which the employee renders the service.

Conditional cash remuneration is included, on a straight line

basis, in staff costs in the statement of income over the period of

the year in which the employee’s services are received and the

remaining three years of the vesting period (i.e. over four years).

The liability is recognized in "Other liabilities". The accounting

treatment of payments based on equity instruments is disclosed

in Section 2.25.

2.25 Variable Remuneration Based on EquityInstruments

For certain identified staff, remuneration for services rendered is

settled in the form of cash payments based on equity instruments

that are similar to, and have the same characteristics as, Rabobank

Certificates. The costs of the services received are based on the

fair value of the equity instruments on the award date and are

restated annually to fair value. The costs related to the award of

equity instruments during the period of the employee’s contract

are included in staff costs in the statement of income over the

period of the year of award and the remaining three years of the

vesting period of the equity instruments (i.e. over four years). The

liability is recognized in 'Other liabilities'.

2.26 Tax

Current tax receivables and payables are offset where there is

a legally enforceable right to offset and where simultaneous

treatment or settlement is intended. Deferred tax assets and

liabilities are offset where there is a legally enforceable right to

offset and where they relate to the same tax authority and arise

within the same taxable entity.

Deferred income tax is provided, using the liability method,

on temporary differences between the tax bases of assets and

liabilities and their carrying amounts for financial reporting

purposes. These temporary differences arise primarily on

depreciation of tangible fixed assets, revaluation of certain

financial assets and liabilities (including derivatives), employee

benefits, loan impairment allowances and other impairments,

tax losses and fair value adjustments to net assets acquired in

business combinations. Deferred tax assets and liabilities are also

recognized on the revaluation of financial assets at fair value

through other comprehensive income and cash flow hedges that

are taken directly to other comprehensive income. When realized,

they are recognized in the income statement at the same time

as the respective deferred gain or loss is recognized. Deferred

tax assets are recognized to the extent that it is probable that

future taxable profits will be available against which the losses

can be utilized and are measured at the tax rates that have

been enacted or substantively enacted as at the reporting date.

Rabobank considers all deferred taxes to be non-current.

Taxes on profit are calculated in accordance with the tax

legislation of the relevant jurisdictions in which Rabobank

operates and are recognized as an expense in the period in

which the profit is realized. The tax effects of loss carry forwards

are recognized as an asset if it is probable that future taxable

profits will be available against which the losses can be utilized.

2.27 Deposits from Credit Institutions,Deposits from Customers and DebtSecurities in Issue

These liabilities are initially recognized at fair value, being

the issue price less directly allocable and non-recurring

transaction costs, and thereafter at amortized cost including

transaction costs.

Own issued debt securities that are repurchased are

derecognized, with the difference between the carrying

amount and the consideration paid being recognized in the

income statement.

2.28 Rabobank Certificates

The proceeds of the issue of Rabobank Certificates are available

to Rabobank in perpetuity and are subordinate to all liabilities

and to the Trust Preferred Securities and the Capital Securities. As

the payment of distributions is wholly discretionary, the proceeds

received and dividends paid on them are recognized in equity.

2.29 Trust Preferred Securities and CapitalSecurities

As there is no formal obligation to (re)pay the principal or to pay a

dividend, the Trust Preferred Securities and Capital Securities are

recognized as "Equity" and dividends paid on these instruments

are recognized directly in equity.

2.30 Financial Guarantees

Financial guarantee contracts require the issuer to compensate

the holder for losses incurred when the debtor fails to meet

its obligations under the terms of the related debt instrument.

The guarantees are initially recognized at fair value and

subsequently measured at the higher of the amount of the

impairment allowance and the amount initially recognized less

cumulative amortization.

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2.31 Segmented Information

A segment is a discrete operating component that is subject

to risks and returns that differ from those of other segments or

operating components and that is viewed and managed as a

separate and discrete component for Rabobank’s strategic and

operating management purposes.

2.32 Business Combinations

Business combinations are accounted for using the acquisition

method. The cost of an acquisition is determined as the monetary

amount (or equivalent) agreed for the acquisition of the business

combination. Goodwill represents the difference between the

cost of the acquisition and the acquirer’s share of the fair value

of the identifiable assets, liabilities, and conditional assets and

liabilities acquired. Goodwill is capitalized and recognized as an

intangible asset. The non-controlling interest is also determined

as the fair value or its share of the identifiable net assets of the

company acquired. Direct acquisition costs are charged directly

to the statement of income on acquisition.

2.33 Disposal Groups Classified as Held forSale and Discontinued Operations

Assets that have been classified as held for sale are written down

to their fair value, reduced by the estimated costs of sale, where

this is lower than the carrying amount. An asset (or group of

assets) is classified as held for sale when it is very likely that its

economic value will be realized primarily through sale rather

than through continued use, the asset (or group of assets) is

fully available for sale in its current condition, management has

committed itself to a plan to sell the asset, and the sale is expected

to be completed within one year of its classification as held for

sale. If a group of assets classified as held for sale represents a

key business activity or key geographic region, it is classified as

discontinued operations and recognized outside comprehensive

income arising from continuing operations.

2.34 Cash Flow Statement

Cash and cash equivalents include cash resources, money market

deposits and deposits at central banks. The cash flow statement

is prepared using the indirect method and provides details of the

source of the cash and cash equivalents that became available

during the year as well as their application during the year. The

net pre-tax cash flow from operating activities is adjusted for

non-cash items in the statement of income and for non-cash

changes in items in the statement of financial position.

The Consolidated Statement of Cash Flows presents separately

the cash flows from operating, investing and financing activities.

Cash flows from operating activities include net changes in loans

and advances, interbank deposits, deposits from customers and

acquisitions, disposals and repayment of financial investments.

Investment activities include acquisitions and disposals of

subsidiaries, investments in associates and property and

equipment. Financing activities include issues and repayments

of Rabobank Certificates, Trust Preferred Securities, Capital

Securities, Senior Contingent Notes, subordinated liabilities and

debt securities in issue.

The difference between the net change presented in the

statement of cash flows and the change in cash and cash

equivalents included in the statement of financial position is

due to exchange differences.

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3. Solvency and CapitalManagement

Rabobank aims to maintain a proper level of solvency. For this

purpose a number of capital ratios are utilized. The principal

ratios are the common equity tier 1 ratio (CET1), the tier

1 ratio, the total capital ratio and the equity capital ratio.

Rabobank uses its own internal objectives that extend beyond

the minimum requirements of the 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.

The ‘Capital Requirements Regulation (CRR)’ and ‘Capital

Requirements Directive IV (CRD IV)’ together constitute the

European implementation of the Basel Capital and Liquidity

Accord of 2010. These rules, which became effective on 1 January

2014, are applied by Rabobank.

Rabobank 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 of the risk-adjusted assets. Effective 1 January 2014, the

minimum required percentages are determined on the basis of

CRD IV/CRR. The table below shows the minimum buffers based

on CRD IV/CRR.

Minimum Capital Buffer

CET 1 Tier 1 Total capital

Pillar 1 requirement 4.5% 6.0% 8.0%

Pillar 2 requirement 1.75% 1.75% 1.75%

Capital conservation buffer 2.5% 2.5% 2.5%

Systemic risk buffer 3.0% 3.0% 3.0%

Countercyclical buffer 0.06% 0.06% 0.06%

Total required 11.81% 13.31% 15.31%

Risk-weighted assets are determined based on separate and

distinct methods for each of the credit, operational and market

risks. For credit risk purposes, the risk-weighted assets are

determined in several ways dependent on the nature of the

asset. For the majority of assets the risk weighting is determined

by reference to internal ratings and a number of characteristics

specific to the asset concerned. For off-balance sheet items the

balance sheet equivalent is calculated firstly on the basis of

internal conversion factors and the resulting equivalent amounts

are then also assigned risk-weightings. For operational risk

purposes, an Advanced Measurement Approach model is used

to determine the amount of risk-weighted assets. For market risk

purposes, the Internal Model Approach is applied on the majority

of the exposures in scope, with very small exposures following

standardized methods. At 31 December 2019, Rabobank's capital

requirement was EUR 16.5 billion (2018: EUR 16.0 billion).

The increase in the regulatory capital requirement for credit

risk, market risk and operational risk was mainly due to the

redevelopment of the operational risk model and to the fact

that Rabobank included in its capital calculations an amount of

EUR 5.3 billion of risk weighted assets in anticipation of the macro

prudential measure for retail mortgages which DNB intends to

implement in 2020.

The transitional CRR provisions have been reflected in the ratios

set out below.

Capital Ratios

Amounts in millions of euros 2019 2018

Retained earnings 28,910 28,062

Expected dividends (3) (46)

Rabobank Certificates 7,449 7,445

Part of non-controlling interests treated as qualifying capital - -

Reserves (753) (798)

Deductions (2,007) (2,553)

Transition guidance - 12

Common Equity Tier 1 capital 33,596 32,122

Capital Securities 4,951 3,721

Grandfathered instruments 313 3,325

Non-controlling interests - -

Deductions (106) (100)

Transition guidance - -

Tier 1 capital 38,754 39,068

Part of subordinated liabilities treated as qualifying capital 13,299 14,274

Non-controlling interests - -

Deductions (92) (83)

Transition guidance - -

Qualifying capital 51,961 53,259

Risk-weighted assets 205,797 200,531

Common Equity Tier 1 ratio 16.3% 16.0%

Tier 1 ratio 18.8% 19.5%

Total capital ratio 25.2% 26.6%

Equity capital ratio1 17.7% 17.7%

1 The equity/ capital ratio is calculated by comparing the items Retained

earnings and Rabobank Certificates to the risk-weighted assets.

The deductions consist mostly of goodwill, other intangible fixed

assets, deferred tax assets which depend on future profit, the IRB

shortfall for credit risk adjustments and adjustments relating to

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cumulative results due to changes in the bank’s credit risk on

instruments designated at fair value.

The additional tier 1 instruments issued by Rabobank prior to

2015 do not comply with the CRR requirements. They are being

‘grandfathered’. This means that these instruments will be phased

out of capital ratios, in line with the regulatory requirements.

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4. Risk Exposure on FinancialInstruments

4.1 Risk Organization

The Managing Board is responsible for overseeing the

development and operations of risk management at various

levels within the organization. This includes the ongoing

strengthening of staff skills and enhancements to risk

management systems, policies, processes, quantitative models

and reports as necessary to ensure the bank’s risk management

capabilities are sufficiently robust and effective to fully support

its strategic objectives and all of its risk-taking activities. The

Supervisory Board is responsible for the supervision of the

Managing Board with regard to their execution of risk profile, risk

policies and risk management activities. The Supervisory Board

Risk Committee consists of members of the Supervisory Board and

supports the Supervisory Board in preparing its decision making

in relation to its supervision.

Risk Appetite

Identifying and managing risks for its organization is an ongoing

process at Rabobank. For this purpose an integrated risk

management strategy is applied. The risk management cycle

includes determining risk appetite, preparing integrated risk

analyses, and measuring and monitoring risk. Throughout this

process Rabobank uses a risk strategy aimed at continuity and

designed to protect profitability, maintain solid balance-sheet

ratios and protect its identity and reputation.

4.2 Strategy for the Use of FinancialInstruments

Rabobank’s activities are inherently related to the use of financial

instruments, including derivatives. As part of the services it

offers, Rabobank accepts deposits from customers at varying

terms and at both fixed and variable interest rates. Rabobank

earns interest income by investing these deposits in high-quality

assets as well as by providing loans to commercial and retail

borrowers. Rabobank aims to increase these margins through

a portfolio approach of short-term funds at lower interest rates

and the allocation to loans for longer periods at higher interest

rates, maintaining sufficient cash resources to meet obligations

as they fall due. Rabobank is exposed to credit risk on the

on-balance sheet loans and on the off-balance sheet guarantees it

provides, such as letters of credit, letters of performance and other

guarantee documents.

4.3 Credit Risk

Credit risk is defined as the risk of the bank facing an

economic loss because the bank’s counterparties cannot fulfil

their contractual obligations.

Credit risk management within the bank is governed by the

bank-wide central credit risk policy and further detailed in

underlying specific credit risk standards and procedures. The

primary responsibility for managing and monitoring credit risk

lies with the business as the first line of defense. The business

is required to identify, assess and manage, monitor and report

potential weaknesses in the credit risk portfolios. Monitoring takes

place on an ongoing basis to limit credit risk exposures to a level

in line with the business line’s risk appetite.

In addition, risk in the credit portfolio is measured and monitored

at bank-wide level and on entity level on a monthly basis and

by quarterly and ad-hoc portfolio reporting and analysis, with

specific attention to risk developments and concentrations.

4.3.1 Credit Risk Management

Credit Acceptance

Rabobank’s credit acceptance policy is typified by prudent

assessment of customers and their ability to repay the loan

that was issued (continuity perspective). As a result, the loan

portfolio has an acceptable risk profile even in less than favorable

economic circumstances. Rabobank aims to have long-term

relationships with customers that are beneficial for both the client

and the bank. An important starting point in acceptance policy for

business loans is the ‘know your customer’ principle. This means

that the bank only issues loans to business customers whose

management Rabobank considers to be ethical and competent.

In addition, Rabobank closely monitors developments in the

business sectors in which its customers operate and can properly

assess the financial performance of its customers. Corporate

sustainability also means sustainable financing. Sustainability

guidelines have been established for use in the credit process.

Although credit is usually granted on the cash flow generating

potential of the client or project, collateral will improve the

position of the bank in case a client defaults. Collateral can be

independent of the client’s business and/or obtained from the

client’s business. Rabobank has outlined its policies for collateral

valuation and management in the Global Standard Credit Risk

Mitigation. Compliant to CRR 181 1.(e) all (eligible) collateral

is valued at market value or less than market value and the

collateral value is monitored regularly. The collateral must be

sufficiently liquid and its value over time should be sufficiently

stable to provide appropriate credit protection. Within the

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Rabobank policy framework each type of collateral is addressed

separately. The main types of collateral that are recognized

by Rabobank are real estate, inventory (such as equipment,

machinery, stock etc.), commodities, receivables and guarantees.

With a substantial domestic mortgage portfolio, housing is

considered a concentration risk within the credit risk mitigation

that is taken. The quality of the collateral is assessed in the initial

credit request, and is evaluated within the credit revision process.

The frequency of revaluation depends on the credit quality of

the client and on the type of collateral and is in line with the

requirements set out in the CRR.

The main types of guarantors are governments, local authorities,

(central) banks and corporate entities. For institutions, insurance

undertakings and export credit agencies, a minimum rating

is required.

Credit Committees and Credit Approval

Within the boundaries set by the Risk Management Committee

the Managing Board has mandated decision-making authority to

transactional committees and to credit decision approval officers

that operate on an entity level, regional level or central level at

Rabobank. Credit committees review all significant risks in credit

proposals to arrive at a systematic judgment and a balanced

decision. Rabobank has various levels of credit committees.

Applications exceeding authority level of a credit committee

are complemented with a recommendation and submitted to a

‘higher’ credit committee for decision-making.

• Central Credit Committee Rabobank Group (CCCRG) - The

CCCRG takes credit decisions on credit applications subject to

the ‘corporate credit approval route’ exceeding:

• The authority of Credit Approvals Local Banks (CA LB) -

This department is responsible for decisions on requests for

non-classified (LQC Good or OLEM) obligors exceeding the

authority of Local Banks in The Netherlands.

• The authority of Credit Approvals Wholesale Rural & Retail

(CA WRR) - This department is responsible for decisions on

requests for non-classified (LQC Good or OLEM) obligors

exceeding the authority of DLL or a Wholesale Rural & Retail

(WRR) office/region.

• The authority of the Credit Committee Financial

Restructuring & Recovery (CC-FR&R) - This credit

committee takes credit decisions on proposals for

classified (LQC Substandard, Doubtful or Loss) obligors

exceeding the authority of local credit committees and the

FR&R department.

• Country & Financial Institutions Committee (CFIC) - The CFIC

takes credit decisions on proposals exceeding the authority

of Credit Financial Institutions or Country Risk Research. These

departments are responsible for the risk management of

exposure on financial institutions and sovereigns/countries.

• Loan Loss Provision Committee (LLPC) - The Loan Loss

Provision Committee is responsible for determining the level

of expected credit loss (ECL) provisions for Rabobank. This

responsibility is delegated by the Managing Board. The

Committee approves the setting of provisioning levels for

both model-based (stage 1, stage 2 and stage 3a) and

individually assessed exposures (stage 3b) in the loan book

(business and private individuals/ mortgages) as well as top

level adjustments (technical and business). For individually

assessed Stage 3b exposures as well as top level adjustments,

estimates based on individual assessments and expert

judgement are used. In addition, the Committee considers

relevant internal and external information in its decisions. This

includes the outcomes of the backstop process and forward-

looking elements such as budget forecasts, scenario analyses

or stress test outcomes. Following such considerations, the

Committee may approve deviations from the provisioning

estimates and/or provide strategic recommendations to the

Managing Board.

The Terms of Reference (ToR) provide the mandate,

responsibilities & scope, hierarchical relationships, membership,

authority levels and modalities of these approval bodies. Credit

committees take decisions on the basis of consensus, unless

local regulation requires majority voting. Consensus is reached

when there is a general agreement or none of the members

has fundamental objections to the decision. When no consensus

can be reached, an application is considered declined. In case of

majority voting, the representative(s) from the Risk domain must

have a veto right. In the case a veto right is used, ultimately the

Managing Board decides.

For efficiency reasons Credit Committees can delegate part of

their authority. A single person may not take a credit decision

solely based on its own opinion; this means that a 4-eyes principle

applies or decisions are system supported, in which case one

person is allowed to decide as long as the credit is assessed

as acceptable by an expert system or meets predefined criteria

(the credit complies with decision tools). Fully IT supported

assessments and approvals are allowed under strict conditions.

The credit committees play a key role in ensuring consistency

among Rabobank standards of credit analysis, compliance with

the overall Rabobank credit policy and consistent use of the rating

models. The credit policy sets the parameters and remit of each

committee, including the maximum amount they are allowed to

approve for limits or transactions. Policies are also in place which

restrict or prohibit certain counterparty types or industries. As a

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rule, all counterparty limits and internal ratings are reviewed once

a year (corporate clients) at a minimum. Where counterparties are

assigned a low loan quality classification, they are reviewed on

a more frequent basis. Credit committees may request for more

frequent reviews as well.

4.3.2 Lending

Rabobank has a significant market share in lending regarding

residential mortgages. These loans have a low risk profile, the net

addition in 2019 to loan impairment allowances is 1 basis point.

In 2019, the proportion of the private sector lending allocable to

the food and agricultural sectors was 26% and the proportion of

private sector lending allocable to trade, industry and services

was 29%. The loans to trade, industry and services and loans to

the food and agricultural sectors are spread over a wide range of

industries in many different countries. None of these individual

sector shares represents more than 10% of the total private

sector lending.


Total loans and advances to customers 440,507 436,591

Of which:

Loans to government clients 1,996 1,853

Reverse repurchase transactions, securities borrowing agreements andsettlement accounts 13,553 12,929

Hedge accounting adjustment 7,044 5,784

Loans to private sector clients 417,914 416,025

This can be broken down geographically as follows:

The Netherlands 292,637 70% 294,628 71%

Rest of Europe 33,556 8% 31,337 8%

North America 41,681 10% 44,255 11%

Latin America 15,362 4% 14,067 3%

Asia 9,449 2% 8,887 2%

Australia 24,663 6% 22,589 5%

Africa 566 0% 262 0%

Total loans to private sector clients 417,914 100% 416,025 100%

Breakdown of loans by business sector

Private individuals 191,267 45% 194,897 47%

Trade, industry and services (TIS) 119,429 29% 118,022 28%

Food & agri 107,218 26% 103,106 25%

Total loans to private sector clients 417,914 100% 416,025 100%

Trade, Industry and Services Loan Portfolio Analyzedby Industry


Lessors of real estate 10,521 13,517

Finance and insurance (except credit institutions) 16,192 13,892

Wholesale 10,994 11,386

Activities related to real estate 8,860 8,918

Manufacturing 9,818 9,441

Transport and warehousing 6,226 6,305

Construction 5,141 4,742

Healthcare and social assistance 7,114 6,827

Professional, scientific and technical services 9,291 9,648

Retail (non-food) 4,681 4,293

Utilities 3,638 3,049

Information and communication 1,041 1,021

Arts, entertainment and leisure 1,368 1,283

Other TIS 24,544 23,700

Total 119,429 118,022

Food & Agri Loan Portfolio Analyzed by Sector


Dairy 23,221 22,486

Grain and oil seeds 21,018 19,686

Animal protein 17,369 16,717

Fruit and vegetables 10,666 10,675

Farm inputs 11,084 11,089

Food retail 5,637 5,226

Beverages 2,579 2,733

Flowers 1,489 1,581

Sugar 3,283 2,817

Miscellaneous crop farming 1,819 1,357

Other food & agri 9,053 8,739

Total 107,218 103,106

Derivatives

Rabobank sets strict limits for open positions, in amounts as

well as in terms. If ISDA (International Swaps and Derivatives

Association) standards apply or a master agreement including

equivalent terms has been concluded with the counterparty,

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and if the jurisdiction of the counterparty permits offsetting, the

net open position is monitored and reported. This credit risk is

managed as part of the general lending limits for clients. Where

needed, Rabobank obtains collateral or other safeguards to

mitigate credit risks inherent in these transactions. The credit risk

exposure represents the current fair value of all open derivative

contracts showing a positive market value, taking into account

master netting agreements enforceable under law.

Credit Related Contingent Liabilities

The financial guarantees and standby letters of credit that

Rabobank provides to third parties in the event of a client being

unable to fulfil its obligations to these third parties, are exposed

to credit risk. Documentary and commercial letters of credit

and written undertakings by Rabobank on behalf of clients that

authorize third parties to draw bills against Rabobank up to a fixed

amount and subject to specific conditions. As these transactions

are secured by the delivery of the underlying goods to which

they relate, the risk exposure of such an instrument is less than

that of a direct loan. From the moment the documents have

been accepted under the terms of the letters of credit, Rabobank

recognizes an asset and a liability until the moment of payment.

Loan commitments are firm commitments to provide credit

under pre-specified terms and conditions. Rabobank is exposed

to credit risk when it promises to grant loans. The amount

of any losses is likely to be less than the total of the unused

commitments because the commitments are made subject to

the clients meeting certain loan conditions. Rabobank monitors

the term to the expiry of loan commitments because long-

term commitments generally involve higher risk than short-

term commitments.

4.3.3 Credit Risk Exposure and Credit Quality

In its financing approval process, Rabobank Group uses the

Rabobank Risk Rating, which reflects the risk of failure or the

probability of default (PD) of the loan relation over a period of

one year. The loan-quality categories are determined on the basis

of the internal Rabobank Risk Rating. The Rabobank Risk Rating

consists of 21 performance ratings (R0-R20) and four default

ratings (D1-D4). The performance ratings assess the probability of

default within a period of one year and the rating is determined,

in principle, on a cyclically neutral basis. D1-D4 ratings refer to

default classifications. D1 represents more than 90 day's past

due on a material contractual payment; D2 indicates that it

is unlikely that the obligor will pay its debt in full, without

recourse by the bank to actions such as realizing security; D3

indicates that a distressed sale or a distressed restructuring has

occurred that likely results in a credit-related economic loss;

and D4 indicates bankruptcy status. The default ratings make

up the total credit-impaired exposure. The table below shows

the credit quality of the financial assets subject to impairment

disclosed in ranges of rating grades that is consistent with the

number that is reported to key management personnel for credit

risk management purposes. The gross carrying amount of the

financial assets below also represent the maximum exposure to

credit risk on these assets.

Credit Risk Profile per Internal Rating Grade of Loans andAdvances to Credit Institutions

Amounts in millions of euros

On December

31, 2019Gross carrying amount

Non credit-impaired Credit-impairedTotalSubject to 12-

month ECLSubject to

lifetime ECLSubject to

lifetime ECL

R0-R1 (AAA) 9 - - 9

R2-R4 (AA) 138 - - 138

R5-R7 (A) 22,316 - - 22,316

R8-R10 (BBB) 4,350 - - 4,350

R11-R13 (BB) 1,352 - - 1,352

R14-R16 (B+) 594 3 - 597

R17-R19 (B-) 141 8 - 149

R20 (CCC+) - - - -

Defaultratings (D) - - 14 14

Non-rated 374 - - 374

Total 29,274 11 14 29,299

On December

31, 2018

R0-R1 (AAA) 496 - - 496

R2-R4 (AA) 583 - - 583

R5-R7 (A) 10,990 42 - 11,032

R8-R10 (BBB) 3,197 - - 3,197

R11-R13 (BB) 1,112 1 - 1,113

R14-R16 (B+) 761 1 - 762

R17-R19 (B-) 363 13 - 376

R20 (CCC+) 23 - - 23


Non-rated 265 - - 265

Total 17,790 57 34 17,881

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Credit Risk Profile per Internal Rating Grade of Loans andAdvances to Customers


On December



month ECLSubject to


lifetime ECL

R0-R1 (AAA) 1,497 5 - 1,502

R2-R4 (AA) 10,289 22 - 10,311

R5-R7 (A) 51,656 214 - 51,870

R8-R10 (BBB) 137,752 584 - 138,336

R11-R13 (BB) 120,705 2,892 - 123,597

R14-R16 (B+) 63,091 7,650 - 70,741

R17-R19 (B-) 12,752 7,189 - 19,941

R20 (CCC+) 1,022 1,844 - 2,866

Defaultratings (D) - - 15,090 15,090

Non-rated 3,131 17 - 3,148

Total 401,895 20,417 15,090 437,402

On December

31, 2018

R0-R1 (AAA) 680 3 - 683

R2-R4 (AA) 8,723 27 - 8,750

R5-R7 (A) 48,117 552 - 48,669

R8-R10 (BBB) 160,613 2,142 - 162,755

R11-R13 (BB) 111,652 3,076 - 114,728

R14-R16 (B+) 52,614 4,229 - 56,843

R17-R19 (B-) 11,002 4,812 - 15,814

R20 (CCC+) 525 1,014 - 1,539

Defaultratings (D) - - 15,993 15,993

Non-rated 8,677 91 - 8,768

Total 402,603 15,946 15,993 434,542

Credit Risk Profile per External Rating Grade of Financial Assetsat Fair Value through Other Comprehensive Income


On December



month ECLSubject to


lifetime ECL

AAA-A 9,963 1,562 - 11,525

BBB-B 1,368 - - 1,368

CCC-C - - - -

D - - - -

Non-rated 248 - - 248

Total 11,579 1,562 - 13,141

On December

31, 2018

AAA-A 16,800 574 - 17,374

BBB-B 761 - - 761

CCC-C - - - -

D - - - -

Non-rated 13 - - 13

Total 17,574 574 - 18,148

Credit Risk Profile per Internal Rating Grade of LoanCommitments and Financial Guarantees


On December

31, 2019Exposure to credit risk

Non credit-impaired Credit-impaired

Subject to 12-month ECL

Subject tolifetime ECL

Subject tolifetime ECL Total

R0-R1 (AAA) 1,486 - - 1,486

R2-R4 (AA) 1,991 - - 1,991

R5-R7 (A) 10,853 65 - 10,918

R8-R10 (BBB) 17,022 103 - 17,125

R11-R13 (BB) 15,080 356 - 15,436

R14-R16 (B+) 5,944 590 - 6,534

R17-R19 (B-) 744 510 - 1,254

R20 (CCC+) 44 82 - 126


Non-rated 10,301 2 - 10,303

Total 63,465 1,708 480 65,653

On December

31, 2018

R0-R1 (AAA) 1,577 - - 1,577

R2-R4 (AA) 529 1 - 530

R5-R7 (A) 8,671 3 - 8,674

R8-R10 (BBB) 17,211 118 - 17,329

R11-R13 (BB) 15,423 209 - 15,632

R14-R16 (B+) 7,071 314 - 7,385

R17-R19 (B-) 648 357 - 1,005

R20 (CCC+) 28 104 - 132


Non-rated 9,500 28 - 9,528

Total 60,658 1,134 572 62,364

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4.3.4 Impairment Allowances on Financial Assets and


In the next tables, a reconciliation from the opening balance to

the closing balance of the impairment allowances of financial

assets and credit related contingent liabilities is provided.

Impairment Allowances on Loans and Advances toCredit Institutions


Subject

to 12-

month

ECL

Subject

to

lifetime

ECL non-

credit

impaired

Subject

to

lifetime

ECL

credit

impaired

Total

Balance on January 1, 2019 1 1 20 22

Increases due to originationand acquisition 1 - - 1

Decreases due to derecognition - - - -

Changes due to change in credit risk - - - -

Write-off of defaulted loans duringthe year - - (19) (19)

Other changes (1) - - (1)

Balance on December 31, 2019 1 1 1 3


Increases due to originationand acquisition - - - -


Changes due to change in credit risk 1 - 2 3

Write-off of defaulted loans duringthe year - - - -

Other changes (1) - 1 -


Impairment Allowances on Loans and Advances to Customers


Subjectto 12-

monthECL

Subjectto

lifetimeECL non-

creditimpaired

Subjectto

lifetimeECL

creditimpaired

Total

Balance on January 1, 2019 270 239 3,226 3,735

Increases due to originationand acquisition 87 6 144 237

Decreases due to derecognition (60) (69) (266) (395)

Changes due to change in credit risk 78 178 875 1,131

Write-off of defaulted loans duringthe year (8) (8) (699) (715)

Other changes 2 - (55) (53)

Balance on December 31, 2019 369 346 3,225 3,940

Balance on January 1, 2018 320 287 3,754 4,361

Increases due to originationand acquisition 68 6 276 350


Changes due to change in credit risk (50) (2) 835 783

Write-off of defaulted loans duringthe year (12) (2) (998) (1,012)

Other changes 3 - (64) (61)

Balance on December 31, 2018 270 239 3,226 3,735

Impairment Allowances on Financial Assets at Fair Valuethrough Other Comprehensive Income


Subjectto 12-

monthECL

Subjectto

lifetimeECL non-

creditimpaired

Subjectto

lifetimeECL

creditimpaired

Total

Balance on January 1, 2019 2 1 - 3



Changes due to change in credit risk (5) - - (5)


Other changes - - - -

Balance on December 31, 2019 1 1 - 2

Balance on January 1, 2018 3 5 - 8



Changes due to change in credit risk (1) (5) - (6)


Other changes (2) 1 - (1)

Balance on December 31, 2018 2 1 - 3

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Impairment Allowances on Loan Commitments andFinancial Guarantees


Subjectto 12-

monthECL

Subjectto

lifetimeECL non-

creditimpaired

Subjectto

lifetimeECL

creditimpaired

Total


Increases due to originationand acquisition 4 - 2 6


Changes due to change in credit risk 33 16 66 115


Other changes - - (6) (6)



Increases due to originationand acquisition 3 - 17 20


Changes due to change in credit risk 18 11 34 63

Write-off of defaulted loans duringthe year - - (1) (1)

Other changes 3 (2) (20) (19)


In the following table an overview is given of the significant

changes in the gross carrying amount of loans and advances to

customers during the period that contributed to changes in the

total impairment allowance.

Changes in the Gross Carrying Amount of Loans and Advancesto Customers

Amounts in millionsof euros Gross carrying amount

Non-credit-impaired Credit-impaired

Subject to12-month

ECL

Subject tolifetime ECL

Subject tolifetime ECL Total

Balance on January

1, 2019 402,603 15,946 15,993 434,542

Transfers offinancial assets (8,847) 7,312 1,536 1

New financial assetsoriginated or acquired 122,673 4,710 1,821 129,204

Financial assets that havebeen derecognized (111,309) (7,651) (3,400) (122,360)

Write-offs (12) (8) (693) (713)

Transfers to assets heldfor sale (4,412) (83) (292) (4,787)

Other changes 1,199 191 125 1,515

Balance on December

31, 2019 401,895 20,417 15,090 437,402

Balance on January

1, 2018 396,816 14,842 15,773 427,431

Transfers offinancial assets (5,957) 4,530 2,856 1,429

New financial assetsoriginated or acquired 117,531 3,962 2,199 123,692

Financial assets that havebeen derecognized (103,787) (7,328) (4,388) (115,503)

Write-offs (15) (2) (493) (510)

Other changes (1,985) (58) 46 (1,997)

Balance on December

31, 2018402,603 15,946 15,993 434,542

4.3.5 Criteria for identifying a significant increase in

credit risk (SICR)

The main parameter taken into account in the quantitative SICR

assessment is the lifetime probability of default (PD) and its

development from origination to reporting date. In case the

relative change is above a certain threshold this is considered

to be an indicator for a significant increase in credit risk. The

comparison between the lifetime PD at origination and the

lifetime PD at reporting date is done using the rating at the

start of the financial instrument and the rating at reporting

date while translating both into (Point-in-Time) PD curves. The

threshold value has been determined on the basis of a percentage

in proportion to the observed long term default rate (Central

Tendency) of the portfolio. In the table below the thresholds

for each loan portfolio are presented. These thresholds are the

multipliers by which the lifetime PD needs to be increased to

migrate from stage 1 to stage 2.

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Type of loan portfolio

SICR threshold at

December 31, 2019

Mortgage loans: Local banks 5.11

Mortgage loans: Obvion 3.28

Bridge loans 7.64

Corporate loans 2.26

Corporate loans: Income producing real estate 1.68

Corporate loans: Finance lease 3.57

Retail SME loans 2.50

Retail SME loans: Commercial real estate 2.25

Retail SME loans: Finance lease 3.23

4.3.6 Judgments and Estimates on Model Based

Impairment Allowances on Financial Assets

Rabobank applies the three-stage expected credit loss

impairment models for measuring and recognizing expected

credit losses which involve a significant degree of management

judgement. The impairment methodology results in the

recognition of allowances measured at an amount equal to 12

month expected credit losses (stage 1); allowances measured at

an amount equal to lifetime expected credit losses for financial

assets for which credit risk has increased significantly since initial

recognition but that are not credit-impaired financial assets

(stage 2); and financial assets that are credit-impaired (stage 3).

We use estimates and management judgment in determining the

expected credit loss in model based impairment allowances for

the following elements.

Significant increase in credit risk

Judgment is required to transfer assets from stage 1 to stage 2.

To demonstrate the sensitivity of the ECL to the PD thresholds,

analysis was run, which assumed all assets were below the

PD threshold and apportioned a 12 month ECL. On the same

asset base, analysis was run which assumed all assets were

above the PD threshold and apportioned a lifetime ECL. These

analyses resulted in ECLs of EUR 489 million and EUR 1,771 million

respectively. The total stage 1 and stage 2 impairment allowances

as per 31 December 2019 amount to EUR 402 million and

EUR 366 million respectively.

Forward-looking information and macro-economic scenarios

The estimation of expected credit losses for each stage and

the assessment of significant increases in credit risk consider

information about past events and current conditions as well

as reasonable and supportable forecasts of future events and

economic conditions (forward looking information). We use

three, probability-weighted, global macroeconomic scenarios

(consisting of a baseline, a baseline minus and a baseline

plus scenario) in our ECL models to determine the expected

credit losses. Important variables are gross domestic product

growth, unemployment rates and interest rates. These forward-

looking macroeconomic forecasts require judgment and are

largely based on internal Rabobank research. An analysis on the

sensitivity of key forward-looking macroeconomic inputs used in

the ECL modelling process for stage 1 and stage 2 provisioning

and the probability-weights applied to each of the three scenarios

is presented below. The countries included in the analysis are the

most significant in terms of gross contribution to reportable ECL.

Accordingly, Rabobank considers these portfolios to present the

most significant risk of resulting in an adjustment to the carrying

amount of financial assets.

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Weighted ECLin millions ofeuro per

Weighted ECLin millions ofeuro per

Netherlands 2020 2021 2022ECLunweighted Probability

December 31,2019

December 31,2018

Plus GDP per capita 2.50% 1.80% 0.20%

Unemployment 2.50% 0.90% 0.50% 322 15%

Real Interest Rate 1.00% 0.00% 0.20%

Baseline GDP per capita 1.10% 0.40% 0.70%

Unemployment 3.60% 3.80% 4.10% 384 70% 387 290

Real Interest Rate 0.80% -0.40% 0.10%

Minus GDP per capita -0.80% -1.00% 1.80%

Unemployment 4.60% 6.40% 7.30% 466 15%

Real Interest Rate 0.40% -0.90% 0.00%

Weighted ECL

in millions of

euro per

Weighted ECL

in millions of

euro per

United States 2020 2021 2022ECLunweighted Probability

December 31,2019

December 31,2018


Unemployment 3.50% 4.60% 3.90% 100 15%

Real Interest Rate -0.50% 0.80% -2.30%

Baseline GDP per capita 0.00% -0.30% 0.90%

Unemployment 3.90% 5.60% 5.20% 127 70% 129 83

Real Interest Rate -0.80% 0.10% -2.40%


Unemployment 4.30% 6.60% 6.50% 170 15%

Real Interest Rate -1.10% -0.80% -2.50%

Weighted ECL

in millions of

euro per

Weighted ECL

in millions of

euro per

Brazil 2020 2021 2022ECLunweighted Probability

December 31,2019

December 31,2018


Unemployment 7.50% 8.90% 8.00% 26 15%



Unemployment 8.00% 10.30% 9.70% 32 70% 32 19


Minus GDP per capita 0.20% 1.90% 3.80%

Unemployment 8.60% 11.60% 11.30% 39 15%


Weighted ECL

in millions of

euro per

Weighted ECL

in millions of

euro per

Australia 2020 2021 2022ECLunweighted Probability

December 31,2019

December 31,2018


Unemployment 4.50% 3.00% 2.50% 12 15%



Unemployment 5.50% 5.70% 5.80% 15 70% 15 12



Unemployment 6.50% 8.30% 9.00% 18 15%


Measurement of expected credit losses

The probability of default (PD), loss given default (LGD) and the

exposure at default (EAD) are used to estimate expected credit

losses as inputs for the ECL models. When unexpected external

developments or data quality issues are not sufficiently covered

by these ECL models, an adjustment will be made based on

judgements and estimates. The mentioned inputs also require

estimates in the following way:

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• PD – The probability of default is an estimate of the likelihood

of default over a given time horizon.

• LGD – The loss given default is an estimate of the loss

arising in the case where a default occurs at a given time.

It is based on the difference between the contractual cash

flows due and those that Rabobank would expect to receive,

including cash flows expected from collateral and other

credit enhancements.

• EAD – The exposure at default is an estimate of the exposure

at a future default date, taking into account expected changes

in the exposure after reporting date due to prepayment.

The table below shows the impact on the ECL in the baseline

scenario resulting from changes in probability of default (PD),

collateral value and full prepayment rate.

Amounts in millions of euros Impact on ECL per31 December 2019

PD rating 1 notch deterioration (PD) 265

PD rating 1 notch improved (PD) (197)

Collateral value down by 10 % (LGD) 123

Collateral value up by 10% (LGD) (80)

Full prepayment rate down by 50% (EAD) 34

Full prepayment rate up by 50% (EAD) (30)

4.3.7 Collateral and Credit Management

Rabobank’s credit risk exposure is partly mitigated by obtaining

collateral where necessary. The amount and nature of the

collateral required depends partly on the assessment of the credit

risk of the loan to the counterparty. Rabobank has guidelines in

place for the purpose of accepting and valuing different types of

collateral. The major types of collateral are:

• Mortgage collateral on residential property;

• Mortgage collateral on immovable property, pledges on

movable property, inventories and receivables, mainly for

corporate loans;

• Cash and securities, mainly for securities lending activities and

reverse repurchase transactions.

Management monitors the market value of collateral obtained

and requires additional collateral where necessary. Rabobank

also uses credit derivatives to manage credit risks and it

further mitigates its exposure to credit risk by entering into

master netting arrangements with counterparties for a significant

volume of transactions. In general, master netting arrangements

do not lead to the offsetting of assets and liabilities included in the

statement of financial position because transactions are usually

settled gross except for transactions that meet the offsetting

criteria as mentioned in paragraph 2.11. Credit risk is limited

by master netting arrangements, but only to the extent that

if an event or cancellation occurs, all amounts involving the

counterparty are frozen and settled net. The total credit risk

exposure from derivatives to which offsetting arrangements

apply is sensitive to the closure of new transactions, the expiry

of existing transactions and fluctuations in market interest and

exchange rates.

The table below shows offsets which have been applied in

the consolidated balance sheet (IAS 32 Offsetting) and offsets

which have not been applied in the statement of financial

position (Other offsetting), both limiting credit risk. The other

offsets consist of securities Rabobank has received from reverse

repurchase transactions and securities Rabobank has provided in

relation to loans for repurchase transactions.

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Offsetting of Financial Instruments

Amounts in millions of euros Amountbefore offsetting IAS 32 Offsetting

Net carryingamount included in

balance sheet

Masternetting agreements Other offsetting Amount after

other offsetting

On December 31, 2019

Loans and advances tocredit institutions 29,297 - 29,297 - (23,269) 6,028

Derivatives 111,906 (88,322) 23,584 (12,283) - 11,301

Loans and advances to customers 447,627 (7,120) 440,507 - (13,687) 426,820

Other assets 6,876 (266) 6,610 - - 6,610

Total 595,706 (95,708) 499,998 (12,283) (36,956) 450,759

Deposits from credit institutions 22,570 (1,326) 21,244 - (1,505) 19,739

Deposits from customers 345,354 (2,818) 342,536 - (20) 342,516

Derivatives 115,372 (91,298) 24,074 (12,283) - 11,791

Other liabilities 7,101 (266) 6,835 - - 6,835

Total 490,397 (95,708) 394,689 (12,283) (1,525) 380,881


Loans and advances tocredit institutions 17,859 - 17,859 - (6,756) 11,103

Derivatives 81,402 (58,742) 22,660 (13,531) - 9,129

Loans and advances to customers 443,093 (6,502) 436,591 - (12,131) 424,460

Other assets 6,640 (209) 6,431 - - 6,431

Total 548,994 (65,453) 483,541 (13,531) (18,887) 451,123

Deposits from credit institutions 20,666 (1,269) 19,397 - (79) 19,318

Deposits from customers 344,504 (2,094) 342,410 - (13) 342,397

Derivatives 85,807 (61,880) 23,927 (13,531) - 10,396

Other liabilities 6,551 (209) 6,342 - - 6,342

Total 457,528 (65,452) 392,076 (13,531) (92) 378,453

The next table shows the credit-impaired financial assets in

relation with the collateral that is held as security to mitigate

credit risk.

Collateral Held as Security and Other Credit Enhancements for Credit-impaired Financial Assets

Amounts in millions of eurosGross carrying amount

credit impairedfinancial assets

Impairment allowancesCarrying amount

after deductionimpairment allowance

Collateral held assecurity and other

credit enhancements


Loans and advances to credit institutions 14 1 13 -

Loans and advances to customers 15,090 3,225 11,865 8,611

Financial assets at fair value through other comprehensive income - - - -

Total 15,104 3,226 11,878 8,611


Loans and advances to credit institutions 34 20 14 -

Loans and advances to customers 15,993 3,226 12,767 10,044

Financial assets at fair value through other comprehensive income - - - -

Total 16,027 3,246 12,781 10,044

The next table sets out the maximum exposure to credit risk to

which Rabobank is exposed for financial instruments not subject

to the IFRS 9 impairment requirements, without taking into

account any collateral or other measures for restricting credit risk.

It also shows the financial effect of any collateral provided or other

types of credit risk reduction. In some cases the amounts stated

deviate from the carrying amounts as presented in the statement

of financial position because the outstanding equity instruments

are not included in the maximum exposure to credit risk.

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Maximum Exposure to Credit Risk of Financial Assets NotSubject to Impairment


Maximumexposure tocredit risk

Collateral heldas security andother creditenhancements


Financial assets held for trading 1,811 -

Financial assets designated at fair value 101 -

Financial assets mandatorily at fair value 1,143 46

Derivatives 23,584 8,078

Total 26,639 8,124


Financial assets held for trading 2,806 -

Financial assets designated at fair value 157 -

Financial assets mandatorily at fair value 1,680 744

Derivatives 22,660 6,851

Total 27,303 7,595

Write-off PolicyRabobank writes off loans when it has exhausted all practical

recovery efforts and has concluded there is no reasonable

expectation of recovery. Indicators that there is no reasonable

expectation of recovery include (i) ceasing enforcement activity

and (ii) where the recovery method is foreclosing on collateral

and the value of the collateral is such that there is no reasonable

expectation of recovering in full. Rabobank may write-off loans

that are still subject to enforcement activity. The outstanding

contractual amounts of partly or wholly written off assets during

2019 was EUR 461 million.

Rabobank acquired financial and non-financial assets during

the year by taking possession of collateral with an estimated

value of EUR 2 million as per 31 December 2019 (2018:

EUR 15 million). It is policy of Rabobank to sell these assets

in the reasonably foreseeable future. Yields are allocated to repay

the outstanding amount.

4.3.8 Modified Assets

The risk of default of modified assets is assessed at the reporting

date and compared with the risk under the original terms at initial

recognition. Rabobank monitors the subsequent performance of

these forborne modified assets and may determine that the credit

risk has significantly improved, so that the assets are moved from

stage 3 or stage 2 (Lifetime ECL) to stage 1 (12-month ECL). The

gross carrying amount of such assets held as at 31 December 2019

was EUR 37 million (2018: EUR 32 million).

The following table includes summary information for financial

assets with lifetime ECL whose cash flows were modified during

the period and their respective effect on financial performance:

Financial Assets Modified While Loss Allowance Measured atLifetime ECL


Amortized cost before modification 835 217

Net modification gain/ loss 5 2

Financial assets modified since

initial recognition840 219

4.4 Non-Trading Foreign Exchange Rate risk(FX risk)

FX risk is the risk that exchange rate movements could lead to

volatility in the bank’s cash flows, assets and liabilities, net profit

and/ or equity. The bank distinguishes two types of non-trading

FX risks: (i) FX risk in the banking books and (ii) FX translation risk.

Foreign Exchange Risk in the Banking Books

FX risk in the banking books, is the risk where known and/ or

ascertainable currency cash flow commitments and receivables

in the banking books are unhedged. As a result, movements in

exchange rates could have an adverse impact on the financial

results and/ or financial position of Rabobank.

Foreign Exchange Translation Risk

FX translation risk is the risk that FX fluctuations will adversely

affect the translation of assets and liabilities of operations –

denominated in foreign currency – into the functional currency of

the parent company. Translation risk reveals in Rabobank’s equity

position, risk weighted assets and capital ratios.

Rabobank manages its FX translation risk with regard to the

Rabobank Consolidated CET1 ratio by deliberately taking FX

positions, including deliberately maintaining FX positions (as a

result of these structural FX positions, the impact of exchange

rate fluctuations on the Rabobank Consolidated CET1 ratio

is mitigated).

FX translation risk level is covered by the Global Standard on FX

Translation Risk which outlines Rabobank's Global policy towards

FX Translation risk to achieve and ensure a prudent and sound

monitoring and controlling system, in order to manage these

risks. Rabobank uses a pillar 2 framework for those areas where

Rabobank is of the opinion that the regulatory framework (i.e.

pillar 1) does not address the risk, or does not adequately address

the risk. FX translation risk is one of these risks.

4.5 Interest Rate Risk in the BankingEnvironment

"Interest rate risk in the banking environment" refers to the

risk that the financial results and/or the economic value of

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the banking book are adversely affected by changes in market

interest rates.

Interest rate risk at Rabobank arises because of repricing

and maturity mismatches between loans and funding, and

optionality in client products. Customer behavior is an important

determining factor with respect to interest rate risk in the banking

environment. The modelling of customer behavior is therefore

one of the core elements of the interest rate risk framework.

There are behavioral models in place for mortgage prepayments,

savings accounts and current accounts. Movements in interest

rates may also affect the creditworthiness of customers. Higher

interest rates might for example lead to higher borrowing costs

and, hence, have a negative impact on the creditworthiness of a

customer. This effect is however regarded as credit risk rather than

interest rate risk.

Rabobank accepts a certain amount of interest rate risk in the

banking environment; this is a fundamental part of banking.

But at the same time the bank also aims to avoid unexpected

material fluctuations in the financial result and the economic

value because of interest rate fluctuations. The Managing Board,

overseen by the Supervisory Board, therefore annually approves

the interest rate risk appetite and the corresponding interest rate

risk limits.

At group level, Rabobank’s interest rate risk is managed by

the Asset and Liability Committee Group chaired by the Chief

Financial Officer. Treasury is responsible for implementing

the decisions of this committee, while Risk Management is

responsible for measuring and monitoring the interest rate

risk position.

The definition of equity used for managing interest rate risk

varies from the IFRS definition of equity. For interest rate risk

management, the economic value of equity is defined as the

present value of the assets minus the present value of the

liabilities together with the present value of the off-balance-sheet

items. Through the use of hedge accounting and because a large

proportion of the balance sheet is carried at amortized cost (in

IFRS terms) and is therefore not exposed to value changes due to

changes in market interest rates, the effects of the value changes

on IFRS capital will be limited.

As part of its interest rate risk policy, Rabobank uses the following

two key indicators for managing and controlling interest rate risk:

• Earnings at risk; the EaR is the largest deviation in negative

terms of the expected net interest income in the next 12

months as a result of different interest rates scenarios; and

• Modified duration of equity.

Sections 4.5.1 and 4.5.2 provide further details on "Earnings at risk"

and "Modified duration" developments.

4.5.1 Earnings at Risk

Earnings at risk is calculated once a month based on a standard

interest-rate-sensitivity analysis. This analysis shows the main

reduction of the projected interest income over the next 12

months triggered by a set of scenarios: one in which all money

market and capital market interest rates gradually increase by 2

percentage points, by a scenario in which all money market and

capital market interest rates gradually decrease by a maximum

of 2 percentage points, and by two scenarios in which the yield

curve steepens or flattens. The projected interest rate income is

based on a scenario in which all interest rates and other rates

remain equal. Due to already low interest levels, the floor in

the downward scenario has been reached leading to a decrease

of 25 basispoints instead of 2 percentage points for both 2018

and 2019.

In 2019, Rabobank’s net interest income suffers the most under

an interest rate downward scenario throughout the year. On

31st of December 2019 the EaR ended up at EUR 35 million,

lower than the EaR of EUR 109 million in 2018. This is mainly

driven by changes in the composition of the balance sheet

and subsequent interest rate risk hedging decisions by the

responsible committee (ALCO).

Earnings at Risk

December 31, 2019 December 31, 2018

Earnings at Risk 35 109

Split by main currencies

Earnings at Risk – EUR 28 76

Earnings at Risk – USD 3 32

4.5.2 Modified Duration

The Modified duration (MD) or duration of equity indicates by

what percentage the economic value of equity will fall if the

money market and capital market interest rates increase by one

percentage point. The Managing Board has set an upper limit of

6% for this purpose. Additional limits apply for the basis point

value (BPV) of equity and the delta profile (BPV per term point)

of equity.

Modified Duration

December 31,2019

December 31,2018

Modified Duration (%) Group level in EUR 3,00% 2,80%

Split by main currencies

Modified Duration (%) – EUR 3,80% 3,20%

Modified Duration (%) – USD (3,50%) (2,20%)

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4.6 Market Risk in the Trading Environment

Market Risk arises from the risk of losses on trading book positions

affected by movements in interest rates, equities, credit spreads,

currencies and commodities. Risk positions acquired from clients

can either be redistributed to other clients or dynamically

managed by hedging. The trading desks are also acting as a

market-maker for secondary markets (by providing liquidity and

pricing) in interest rate derivatives and debt, including Rabobank

Bonds and Rabobank Certificates.

Market risk in the trading environment is monitored daily within

the market risk framework, which is put in place to measure,

monitor and manage market risk in the trading books. This

framework contains all derivatives in trading books, the bond

trading books the loan syndication books, and the securities

finance & repo books. An important part of the framework is an

appropriate system of limits and trading controls. The relevant

risk appetite limits are translated into limits and trading controls

at book level and are monitored on a daily basis by the market

risk departments.

Due to Rabobank’s strategy of client risk redistribution, risk

hedging and the low secondary market activity, the real market

risk exposure of the trading portfolio is well within the risk

appetite boundaries. If limits are breached, remedial actions will

be stipulated which decrease the chance of large actual losses.

The risk position is reported to senior management and discussed

in the various risk management committees each month. Risk

developments that require ad hoc attention are communicated

accordingly outside the regular reporting cycle.

On consolidated level, the risk appetite is defined for event risk

trading, event risk underwriting, VaR and interest rate delta.

Rabobank considers Event Risk the most important indicator

for market risk in the trading environment. It is instrumental

in gauging the impact of extreme, yet plausible predefined

moves in market risk factors on the P&L of individual trading

portfolios. These moves are reflected in scenarios which capture

risk drivers such as tenor basis swap spreads, interest rates,

foreign exchange, credit spreads, volatility and interest rate curve

rotation. Depending on the scenario, individual risk factors or

multiple risk factor categories will be stressed.

The event risk, which is measured by performing sensitivity

analyses and stress tests was EUR 71 million on December

31, 2019, well within the set limit according to the risk

appetite statement . It fluctuated between EUR 68 million and

EUR 140 million with an average of EUR 93 million.

The VaR indicates the maximum loss for a given confidence level

and horizon under ‘normal’ market conditions, based on one

year of historical market movements. Daily risk management

uses a confidence level of 97.5% and a horizon of 1 day.

Under this method, VaR is calculated on the basis of historical

market movements and the positions taken. The table below

presents the composition of the VaR. In 2019, the VaR fluctuated

between EUR 2.3 million and EUR 4.3 million, the average

being EUR 3.0 million. The VaR amounted to EUR 3.2 million

on December 31, 2019.

VAR (1 day, 97.5%) (amounts in millions of euros)

Interest Credit Currencies Shares Commodities Diversification Total

December 31, 2019 3.4 0.7 0.2 0.0 0.2 (1.4) 3.2

2019 – average 2.9 1.4 0.2 0.0 0.2 - 3.0

2019 – highest 3.9 3.1 1.9 0.0 1.2 - 4.3

2019 – Lowest 2.1 0.7 0.0 0.0 0.1 - 2.3

December 31, 2018 2.3 2.9 0.1 0.0 0.2 (2.1) 3.4

2018– average 2.2 1.5 0.1 0.0 0.1 - 2.6

2018 – highest 3.4 3.0 0.6 0.1 0.7 - 3.9

2018 – lowest 1.7 0.7 0.0 0.0 0.1 - 1.9

The interest rate delta is a measure of the change in the value

of positions if there is a parallel increase in the yield curve of 1

basis point (i.e. 0.01 percentage point). The interest rate delta

table shows the sensitivity to changes in the yield curves for the

major currencies. On December 31, 2019, the interest rate delta for

trading books was EUR 0.1 million negative. The interest rate delta

remained well within the set limit during the reporting period.

Interest Rate Delta

Amounts in millions of eurosDecember 31,

2019December 31,

2018

EUR (0.2) 0.4

USD 0.1 0.1

AUD 0.1 0.0

Other 0.0 0.0

Total (0.1) 0.6

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4.7 Liquidity Risk

Liquidity risk is the risk that the bank will not be able to meet

all of its payment and repayment obligations on time, as well as

the risk that the bank will not be able to fund increases in assets

at a reasonable price, if at all. This could happen if, for instance,

customers or professional counterparties suddenly withdraw

more funds than expected which cannot be absorbed by the

bank’s cash resources, by selling or pledging assets in the market

or by borrowing funds from third parties. Rabobank considers

an adequate liquidity position and retaining the confidence of

both professional market parties and retail customers to be

crucial in ensuring unimpeded access to the public money and

capital markets.

The liquidity risk policy focuses on financing assets using stable

funding, i.e., funds entrusted by customers and long-term

wholesale funding. Liquidity risk is managed based on three

pillars. The first of these sets strict limits for the maximum

outgoing cash flows within the wholesale banking business.

Among other things, Rabobank measures and reports on a daily

basis what incoming and outgoing cash flows can be expected

during the next twelve months. Limits have been set for these

outgoing cash flows, including for each currency and each

location. Detailed plans (the contingency funding plans) have

been drawn up for contingency funding to ensure the bank is

prepared for potential crisis situations. Periodic operational tests

are performed for these plans.

The second pillar is used to maintain a substantial high-quality

buffer of liquid assets. Besides credit balances held at central

banks, these assets can be pledged to central banks, in repo

transactions, or to be sold directly in the market to generate

liquidity immediately. The size of the liquidity buffer is attuned

to the risk Rabobank is exposed to in its balance sheet. In

addition Rabobank has securitized a portion of the mortgage

portfolio internally, which means it can be pledged to the central

bank, thereby serving as an additional liquidity buffer. Since

this concerns retained securitizations, it is not reflected in the

consolidated balance sheet.

The third pillar for managing liquidity risk consists of a good credit

rating, high capital levels and prudent funding policies. Rabobank

takes various measures to avoid becoming overly dependent on

a single source of funding. These include balanced diversification

of financing sources regarding maturity, currencies, investors,

geography and markets, a high degree of unsecured funding

and therefore limited asset encumbrance, and an active and

consistent investor-relations policy play a major role.

Scenario analyses are performed each month to determine the

potential consequences of a wide range of stress scenarios.

The analyses cover market-specific scenarios, Rabobank-specific

scenarios and a combination of both. Monthly reports on the

Group’s overall liquidity position are submitted to the Dutch

Central Bank. These reports are prepared in accordance with the

guidelines drawn up by this supervisory authority.

The table below shows the undiscounted liabilities grouped

according to the remaining liquidity period from the reporting

date to the expected contract repayment date. The total amounts

do not correspond exactly with the amounts in the consolidated

statement of financial position because this table is based on

undiscounted contractual cash flows relating to both principal

and future interest payments. Derivatives are not included in this

table and have not been analyzed on the basis of the contractual

due date, because they are not essential for the management of

liquidity risk or for reporting to senior management. The maturity

profile of derivatives used for cash flow hedging is disclosed in

Section 11.3 Derivatives Designated as Hedging Instrument.

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Contractual Repayment Date

Amounts in millions of euros On demand Less than3 months

3 monthsto 1 year 1 - 5 years Longer than

5 yearsNo maturity

applicable Total


Liabilities

Deposits from credit institutions 4,491 1,649 2,410 4,130 818 7,986 21,484

Deposits from customers 282,651 15,767 8,475 12,360 24,584 1,278 345,115

Debt securities in issue 8,595 13,099 23,221 60,413 35,912 - 141,240

Other liabilities (excluding employee benefits andlease liabilities) 2,297 1,384 362 660 265 756 5,724

Lease liabilities 2 19 34 198 319 4 576

Financial liabilities held for trading - 399 - - - - 399

Financial liabilities designated at fair value 114 248 800 2,724 3,271 - 7,157

Subordinated liabilities 31 59 1,574 7,474 12,717 - 21,855

Total financial liabilities 298,181 32,624 36,876 87,959 77,886 10,024 543,550

Financial guarantees 3,726 - - - - - 3,726

Loan commitments 35,089 - - - - - 35,089



5 yearsNo maturity

applicable Total


Liabilities

Deposits from credit institutions 2,916 675 4,492 4,900 634 6,052 19,669



Other liabilities (excluding employee benefits) 2,038 1,967 309 544 20 826 5,704



Subordinated liabilities 31 58 1,624 8,275 13,204 - 23,192


Financial guarantees 3,377 - - - - - 3,377

Loan commitments 32,583 - - - - - 32,583

The table below shows assets and liabilities grouped according to

the period remaining from the reporting date to the contractual

repayment date. These amounts correspond to the amounts

included in the Consolidated Statement of Financial Position.

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Current and Non-current Financial Instruments



5 yearsNo maturity

applicable Total


Financial assets

Cash and cash equivalents 62,553 9 3 - - 521 63,086

Loans and advances to credit institutions 18,288 7,634 1,126 164 169 1,916 29,297

Financial assets held for trading 28 160 151 628 844 59 1,870

Financial assets designated at fair value - 100 1 - - - 101

Financial assets mandatorily at fair value 45 64 440 89 538 729 1,905

Derivatives 1,081 1,003 1,488 4,023 15,989 - 23,584

Loans and advances to customers 34,852 16,115 37,239 106,628 237,986 7,687 440,507

Financial assets at fair value through othercomprehensive income 478 1,021 2,234 7,889 1,519 364 13,505

Other assets (excluding employee benefits) 667 1,815 1,596 1,376 170 980 6,604

Total financial assets 117,992 27,921 44,278 120,797 257,215 12,256 580,459


Deposits from credit institutions 4,489 1,642 2,378 3,977 772 7,986 21,244



Derivatives 1,293 1,121 1,598 5,426 14,602 34 24,074


Other liabilities (excluding employee benefits andlease liabilities) 2,159 1,478 532 845 292 757 6,063

Lease liabilities 2 18 30 174 317 1 542


Subordinated liabilities - - 1,012 5,293 9,485 - 15,790


Net balance (181,160) (5,620) 5,817 35,606 176,237 2,200 33,080



5 yearsNo maturity

applicable Total


Financial assets

Cash and cash equivalents 72,391 99 7 - - 838 73,335

Loans and advances to credit institutions 9,180 4,422 1,345 194 168 2,550 17,859

Financial assets held for trading 158 178 115 880 1,475 70 2,876

Financial assets designated at fair value - 127 7 - 23 - 157

Financial assets mandatorily at fair value 9 24 36 518 643 904 2,134

Derivatives 1,009 1,100 1,552 5,300 13,699 - 22,660

Loans and advances to customers 31,867 17,834 35,687 103,680 242,136 5,387 436,591

Financial assets at fair value through othercomprehensive income 222 629 2,430 10,865 4,009 575 18,730

Other assets (excluding employee benefits) 349 2,027 1,444 1,673 113 819 6,425

Total financial assets 115,185 26,440 42,623 123,110 262,266 11,143 580,767


Deposits from credit institutions 2,914 667 4,428 4,753 584 6,051 19,397



Derivatives 1,099 1,334 1,500 6,166 13,792 36 23,927


Other liabilities (excluding employee benefits) 2,076 2,082 478 576 50 826 6,088


Subordinated liabilities - - 1,007 5,804 9,687 - 16,498


Net balance (176,051) (8,437) (192) 27,915 188,297 3,095 34,627

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The overview presented above was composed based on

contractual information and does not represent the actual

behavior of these financial instruments. However, this is

accounted for in the day-to-day management of the liquidity

risk. Customer savings are an example. Under contract, these are

payable on demand. Experience has shown this to be very stable

source of long-term financing for Rabobank to have at its disposal.

The liquidity regulations of the supervisory authority also factor

this in.

With a Liquidity Coverage Ratio (LCR) of 132% as per December 31,

2019 (2018: 135%), Rabobank complies with the minimum 100%

requirement as set by the Dutch Central Bank (DNB).

The liquidity requirements to meet payments under financial

guarantees are considerably lower than the amount of the

liabilities because Rabobank does not generally expect that

third parties to such arrangements will draw funds. The total

outstanding amount in contractual obligations to provide credit

does not necessarily represent the future cash resource needs

of Rabobank because many of these obligations will lapse or

terminate without financing being required.

4.8 Operational Risk

Exposure to operational risks is an inevitable part of executing

business activities; Rabobank minimizes this risk within the

boundaries set by the complexity and size of its organization.

Operational risks are actively managed and controlled through

the Rabobank’s Risk and Control Framework supported

by policies, procedures, limits and control structures. With

mentioned size and complexity of the organization, Rabobank has

a tolerance for operational risk losses not to exceed approximately

1.5% of the budgeted annual gross income. Rabobank has

multiple RAS metrics to set the boundaries of accepted risk levels.

The operational risk losses of 2019 are within set tolerance limits.

Rabobank has developed and implemented a Risk and Control

Framework (RCF), which is mandatory for all business units

(including subsidiaries) and central support functions. The RCF

ensures that risks because of inadequate or failing processes,

people, systems and/or external events are managed and

monitored within the accepted risk levels. The RCF supports

risk owners at all levels in the organization to manage

their operational risks effectively using a forward looking and

integrated approach. In addition, quarterly In Control meetings

by the risk owners are in place to manage and steer on

operational risks.

Rabobank performs a structured and integrated risk analysis

to holistically manage its operational risks. Performing this

risk assessment across all entities helps to ensure Rabobank’s

operational risk management is sound and complies with

regulatory requirements. This assessment results in uniform and

consistent risk control activities reflected in the Risk Control

Framework. This results in the effective and efficient management

of various types of operational risks and a good balance between

risks and controls within the organization and helps to become a

better learning organization.

AML, CTF, and Sanctions

As a gatekeeper to the financial system, we are strongly

committed to preventing the use of our products and services

for money laundering and terrorist financing purposes and

to preventing violations of sanctions regulations. We are

strengthening the on-boarding procedures in the distribution

channels in the Netherlands, as well as the remediation of client

files. We run a global program to improve the quality of our

(global) client files and the usage of data to identify (potential)

criminal activity. Monitoring transactions by using data in a more

intelligent way provides further inside and enables us to detect

(potential) unusual transactions patterns more adequately. The

change program also includes initiatives to enhance our global

AML/CFT and Sanctions framework. After receiving an injunction

(last onder dwangsom) from DNB in September 2018 we further

intensified our KYC (CDD and TM) activities. We took further steps

in 2019 to enhance our resources and technical capabilities. In

2020, we will continue to invest in KYC (CDD and TM) activities

and advanced technology to improve transaction monitoring.

In addition, we promote close cooperation between banks and

various parties in the public sector. This is essential to effectively

fight these criminal activities. From 1 April 2020 onwards, DNB

will verify if we meet all requirements of the injunction and will

validate among other things if, as a result, Rabobank has classified

its client portfolio adequately.

4.9 Fair Value of Financial Assets andLiabilities

For fair value measurement Rabobank assumes that the

transaction to sell the asset or transfer the liability is conducted

in the principal market for the asset or liability, or in the most

advantageous market if no principal market exists.

Market prices are not available for a large number of the financial

assets and liabilities that Rabobank holds or issues. For financial

instruments for which no market prices are available, the fair

values shown in the following table have been estimated using

the present value or the results of other estimation and valuation

methods, based on the market conditions on the reporting date.

The values produced using these methods are highly sensitive

to the underlying assumptions used for the amounts and for

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the timing of future cash flows, discount rates and possible

market illiquidity. The following methods and assumptions have

been used.

Cash and Cash Equivalents.The fair value of cash and cash equivalents is assumed to be

almost equal to their carrying amount. This assumption is used for

highly liquid investments and also for the short-term component

of all other financial assets and liabilities.

Loans and Advances to Credit Institutions.Loans and advances to credit institutions also includes interbank

placings and items to be collected. The fair values of floating rate

placings, that are repriced regularly and do not vary significantly

in terms of credit risk, and overnight deposits are their carrying

amounts. The estimated fair value of fixed-interest deposits

is based on the present value of the cash flows, calculated

based on appropriate money market interest rates for debts with

comparable credit risks and terms to maturity.

Financial Assets and Derivatives Held for Trading.Financial assets held for trading are carried at fair value based on

available quoted prices in an active market. If quoted prices in an

active market are not available, the fair value is estimated based

on discounted cash flow models and option valuation models.

Derivatives are recognized at fair value determined on the basis

of listed market prices (mid-prices are used for EUR, USD and GBP

derivatives that have a bid-ask range), prices offered by traders,

discounted cash flow models and option valuation models based

on current market prices and contract prices for the underlying

instruments and reflecting the time value of money, yield curves

and the volatility of the underlying assets and liabilities.

For OTC derivatives credit valuation adjustments (CVA) are

made to reflect expected credit losses related to the non-

performance risk of a given counterparty. A CVA is determined per

counterparty and depends on expected future exposure taking

into account collateral, netting agreements and other relevant

contractual factors, default probability and recovery rates. The

CVA calculation is based on available market data including credit

default swap (CDS) spreads, Where CDS spreads are not available

relevant proxies are used. A debit valuation adjustment (DVA) is

made to include own credit in the valuation of OTC derivatives.

The calculation of DVA is consistent with the CVA framework and

is calculated using the Rabobank CDS spread. Another factor that

is taken into account is the funding valuation adjustments (FVA).

FVA concerns the valuation difference between transactions

hedged by securities and transactions not hedged by securities.

Collateralized transactions are valued by means of a discounting

curve, based on the overnight index spread. Non-collateralized

transactions are valued by means of a discounting curve, based on

Euribor/ Libor plus a spread which reflects the market conditions.

Financial Assets Designated at Fair Value and Financial AssetsMandatorily at Fair Value.These financial assets are carried at fair value based on quoted

prices on an active market if available. If not, they are estimated

from comparable assets on the market, or using valuation

methods, including appropriate discounted cash flow models

and option valuation models.

Loans and Advances to Customers.The fair value of loans and advances to customers is estimated

by discounting expected future cash flows using current market

rates for similar loans, considering the creditworthiness of the

counterparty. For the fair valuation of residential mortgage loans,

the contractual cash flows are adjusted for the prepayment rate of

the portfolio. For variable-interest loans that are repriced regularly

and do not vary significantly in terms of credit risk, the fair value

approximates the carrying amount.

Financial Assets at Fair Value through OtherComprehensive Income.These financial assets are measured at fair value based on listed

market prices. If quoted prices on an active market are not

available, the fair value is estimated based on discounted cash

flow models and option valuation models.

Deposits from Credit Institutions.Deposits from credit institutions include interbank placings, items

to be collected and deposits. The fair values of floating rate

placings, that are repriced regularly and do not vary significantly

in terms of credit risk, and overnight deposits are their carrying

amounts. The estimated fair value of fixed-interest deposits is

based on the present value of the cash flows, calculated based

on valid money market interest rates for debts with comparable

credit risks and terms to maturity.

Deposits from Customers.Deposits from customers includes current accounts and deposits.

The fair value of savings and current account balances that have

no specific termination date are assumed to be the amount

payable on demand on the reporting date i.e. their carrying

amount on that date. The fair value of these deposits is estimated

from the present value of the cash flows based on current bid

rates for interest for similar arrangements and terms to maturity

and that match the items to be measured. The carrying amount

of variable-interest deposits is a good approximation of their fair

value on the reporting date.

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Financial Liabilities Held for Trading.The fair value of financial liabilities held for trading is based on

available quoted prices on an active market. If quoted prices on an

active market are not available, the fair value is estimated on the

basis of valuation models.

Financial Liabilities Designated at Fair Value.The fair value option is used to eliminate the accounting

mismatch and valuation asymmetry between these instruments

and the hedging derivatives which would occur if these

instruments would have been accounted for at amortized cost.

The financial liabilities designated at fair value include structured

notes and structured deposits which are managed and reported

on a fair value basis together with the hedging derivatives. The fair

value of these liabilities is determined by discounting contractual

cash flows using credit adjusted yield curves based on available

market data in the secondary market and appropriate CDS

spreads. All other market risk parameters are valued consistently

with derivatives used to hedge the market risk in these liabilities.

Changes in the fair value that are attributable to changes in own

credit risk are reported in "Other comprehensive income". The

change in fair value that is attributable to changes in own credit

risk is calculated by deducting on a note by note basis the current

fair value of the structured notes portfolio at the reporting date

from the fair value recalculated based on the prevailing credit

curve at the time of origination, with all other pricing components

unchanged. This calculation reflects the amount that can be

attributed to the change in the own credit risk of Rabobank since

the origination of these structured notes.

Debt Securities in Issue.The fair value of these instruments is calculated using quoted

prices on an active market. For debt securities for which no

quoted prices on an active market are available, a discounted

cash flow model is used based on credit adjusted yield curves

appropriate for the term to maturity.

The following table shows the fair value of financial instruments,

recognized at amortized cost based on the valuation methods

and assumptions detailed below. This table is included because

not all financial instruments are recognized at fair value in the

balance sheet. Fair value represents the price that would have

been either received for the sale of an asset or paid in order to

transfer a liability in a standard transaction conducted between

market participants on the valuation date.

2019 2018

Amounts in millions of eurosCarryingamount Fair value Carrying

amount Fair value

Assets

Cash and cash equivalents 63,086 63,104 73,335 73,335

Loans and advances tocredit institutions 29,297 29,314 17,859 17,878

Loans and advancesto customers 440,507 455,258 436,591 443,867

Liabilities

Deposits fromcredit institutions 21,244 21,267 19,397 19,333

Deposits from customers 342,536 347,905 342,410 345,719

Debt securities in issue 130,403 132,326 130,806 132,397

Subordinated liabilities 15,790 17,625 16,498 17,220

The above stated figures represent the best possible estimates

by management based on a range of methods and assumptions.

If a quoted price on an active market is available, this is the best

estimate of fair value.

If no quoted prices on an active market are available for fixed-

term securities, equity instruments, derivatives and commodity

instruments, Rabobank bases the expected fair value on the

present value of the future cash flows, discounted at market rates

which correspond to the credit ratings and terms to maturity

of the investments. A model-based price can also be used to

determine fair value.

Rabobank follows a policy of having all models used for valuing

financial instruments in the statement of financial position

validated by expert staff who are independent of the staff who

determine the fair values of the financial instruments.

In determining market values or fair values, various factors have

to be considered. These factors include the time value of money,

volatility, underlying options, credit quality of the counterparty

and other factors. The valuation process has been designed in

such a way that market prices that are available on a periodic

basis are systematically used. Modifications to assumptions might

affect the fair value of financial assets and liabilities held for

trading and non-trading purposes.

The table on the next page illustrates the fair value hierarchy used

in determining the fair value of financial assets and liabilities. The

breakdown is:

• Level 1: Quoted prices on active markets for identical assets or

liabilities; an "active market" is a market in which transactions

relating to the asset or liability occur in sufficient frequency

and at a sufficient volume in order to provide price information

on a permanent basis

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• Level 2: Inputs other than quoted prices included in level 1 that

are observable for the asset or liability, either directly (i.e. as

prices) or indirectly (i.e. derived from prices)

• Level 3: Inputs for the asset or liability are not based on

observable market data.

Rabobank determines for recurrent valuations of financial

instruments at fair value when transfers between the various

categories of the fair-value hierarchy occurred by reassessing the

level at the end of each reporting period.

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Amounts in millions of euros Level 1 Level 2 Level 3 Total


Assets carried at amortized cost in the statement of

financial position

Cash and cash equivalents 63,084 20 - 63,104

Loans and advances to credit institutions 38 29,000 276 29,314

Loans and advances to customers - 132,562 322,696 455,258

Assets carried at fair value in the statement of

financial position

Financial assets held for trading 1,649 147 74 1,870

Financial assets designated at fair value 100 - 1 101

Financial assets mandatorily at fair value 72 620 1,213 1,905

Derivatives 36 23,434 114 23,584

Financial assets at fair value through othercomprehensive income 11,608 1,671 226 13,505

Non-current assets held for sale - - 435 435

Liabilities carried at amortized cost in the statement of

financial position

Deposits from credit institutions - 21,131 136 21,267

Deposits from customers - 80,043 267,862 347,905


Subordinated liabilities 17,601 24 - 17,625

Liabilities carried at fair value in the statement of

financial position

Derivatives 28 23,980 66 24,074

Financial liabilities held for trading 399 - - 399

Financial liabilities designated at fair value - 6,328 - 6,328

Amounts in millions of euros Level 1 Level 2 Level 3 Total


Assets carried at amortized cost in the statement of

financial position

Cash and cash equivalents 73,298 32 5 73,335

Loans and advances to credit institutions 18 17,232 628 17,878

Loans and advances to customers 850 124,438 318,579 443,867

Assets carried at fair value in the statement of

financial position

Financial assets held for trading 2,382 431 63 2,876

Financial assets designated at fair value 126 23 8 157

Financial assets mandatorily at fair value - 571 1,563 2,134

Derivatives 23 22,381 256 22,660

Financial assets at fair value through othercomprehensive income 14,453 3,813 464 18,730

Non-current assets held for sale - - 268 268

Liabilities carried at amortized cost in the statement of

financial position

Deposits from credit institutions 18 19,164 151 19,333

Deposits from customers (9) 95,824 249,904 345,719


Subordinated liabilities 17,197 23 - 17,220

Liabilities carried at fair value in the statement of

financial position

Derivatives 41 23,763 123 23,927

Financial liabilities held for trading 400 - - 400

Financial liabilities designated at fair value - 6,614 - 6,614

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The potential effect before taxation, if more favorable reasonable

assumptions are used for the valuation of the financial

instruments in level 3 on the income statement, is EUR 90 million

(2018: EUR 145 million) and on other comprehensive income

EUR 3 million (2018: EUR 9 million). The potential effect before

taxation, if more unfavorable reasonable assumptions are used

for the valuation of financial instruments in level 3 on the income

statement, is EUR -69 million (2018: EUR -142 million) and on other

comprehensive income EUR -3 million (2018: EUR -7 million).

Financial assets at fair value categorised in Level 3 mainly include

the DGS receivable, the equity stake in Mechanics Bank and

private equity interests for a total amount of EUR 1,117 million as

per 31 December 2019. A significant unobservable input for the

valuation of the private equity interests is the multiplier which

is applied to the EBITDA. The average weighted multiplier is

8.8, with a bandwidth of -1 (unfavorable) and +1 (favorable) of

the multiplier.

The table shows movements in the financial instruments which

are stated at fair value in the statement of financial position

and which are categorised in Level 3. The fair value adjustments

in Level 3 which are included in equity are accounted for in

the revaluation reserves for financial assets at fair value through

comprehensive income.

In 2019 there were no significant transfers between level 1 and

level 2.

Amounts in millions of eurosBalance onJanuary 1,2019

Fair valuechanges

incorporatedin profit or loss

Fair valuechanges

incorporatedin OCI

Purchases Sales Settlements Transfers to orfrom level 3

Transfers toassets held for

sale

Balance onDecember 31,

2019

Assets

Financial assets held for trading 63 - - 17 (6) - - - 74

Financial assets designated atfair value 8 - - 1 (7) (1) - - 1

Financial assets mandatorily atfair value 1,563 94 - 400 (738) (106) - - 1,213

Derivatives 256 8 - - - (138) (12) - 114

Financial assets at fairvalue through othercomprehensive income

464 2 10 10 (31) - - (229) 226

Liabilities

Derivatives 123 59 - - - (115) (1) - 66

Financial liabilities designatedat fair value - - - - - - - - -

Amounts in millions of euros Balance onJanuary 1, 2018

Fair valuechanges

incorporated inprofit or loss

Fair valuechanges

incorporated inOCI

Purchases Sales Settlements Transfers to orfrom level 3

Balance onDecember 31,

2018

Assets

Financial assets held for trading 68 6 - - (11) - - 63

Financial assets designated atfair value 23 1 - - - (16) - 8

Financial assets mandatorily atfair value 1,668 54 - 162 (117) (224) 20 1,563

Derivatives 315 (18) - 82 - (123) - 256


471 10 19 20 (56) - - 464

Liabilities

Derivatives 259 (10) - 1 - (127) - 123

Financial liabilities designated atfair value 6 - - (2) - - (4) -

The amount in total gains or losses recognized in the income

statement for the period relating to the assets and liabilities held

in Level 3 until the end of the reporting period is given in the

following table.

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Instrumentsheld at the endof the reporting

period

Instruments nolonger held atthe end of the

reportingperiod

Total


Assets

Financial assets held for trading - - -

Financial assets designated atfair value - - -

Financial assets mandatorily atfair value 71 23 94

Derivatives 8 - 8

Financial assets at fairvalue through othercomprehensive income 2 - 2

Liabilities

Derivatives 36 23 59

Financial liabilities designatedat fair value - - -


Assets

Financial assets held for trading 6 - 6

Financial assets designated atfair value 1 - 1

Financial assets mandatorily atfair value 50 4 54

Derivatives 40 (58) (18)


11 (1) 10

Liabilities

Derivatives 44 (54) (10)

Financial liabilities designatedat fair value - - -

Recognition of Day 1 Gains

When using fair value accounting at the inception of a financial

instrument, any positive difference between the transaction price

and the fair value (known as "day 1 gains") is accounted for in the

statement of income where the valuation method is based on

observable inputs from active markets. In all other cases, the entire

day 1 gain is deferred and after initial recognition the deferred day

1 gain is recognized as a gain to the extent it results from a change

in a factor (including time effects). There are no deferred day 1

gains as at December 31, 2019.

4.10 Legal and Arbitration Proceedings

Rabobank is active in a legal and regulatory environment that

exposes it to substantial risk of litigation. As a result, Rabobank 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 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

of the amount of the obligation. When determining whether

the probability that claims lead to an outflow of resources is

more likely than not (i.e. with a likelihood of over fifty percent),

Rabobank takes several factors into account. These factors include

(but are not limited to) the type of claim and the underlying facts;

the procedural process and history of each case; rulings from legal

and arbitration bodies; Rabobank’s experience and that of third

parties in similar cases (if known); previous settlement discussions,

third-party settlements in similar cases (where known); available

(potential) recourse; and the advice and opinions of legal advisors

and other experts. Similar types of cases are grouped together

and some cases may also consist of a number of claims. When

estimated loss for individual cases is assessed by Rabobank as

information that could be detrimental to the outcome of such

cases this information is not disclosed separately. The estimated

potential losses and provisions are based on the information

available at the time and are largely subject to judgments

and a number of different assumptions, variables and known

and unknown uncertainties. These uncertainties may include

the inaccuracy or incompleteness of information available to

Rabobank (especially in the early stages of a case). In addition,

assumptions made by Rabobank about the future rulings of legal

or other instances or the likely actions or attitudes of supervisory

bodies or the parties opposing Rabobank may turn out to be

incorrect. Furthermore, estimates of potential losses relating to

legal disputes are often impossible to process using statistical or

other quantitative analysis instruments that are generally used

to make judgments and estimates. The group of cases for which

Rabobank determines that the risk of future outflows of funds

is more likely than not to occur varies over time, as do the

number of cases for which the bank can estimate the potential

loss. In practice, the end results could turn out considerably

higher or lower than the estimates of potential losses in those

cases where an estimate was made. Rabobank can also sustain

losses from legal risks where the occurrence of a loss may not

be probable, but is not improbable either, and for which no

provisions have been recognized. For those cases where (a) the

probability of an outflow of funds is not probable but also not

remote or (b) the probability of an outflow of funds is more likely

than not but the potential loss cannot be estimated reliably, a

contingent liability is disclosed. Rabobank may settle legal cases

or regulatory proceedings or investigations before any fine is

imposed or liability is determined. Reasons for settling could

include (i) the wish to avoid costs and/or management effort,

(ii) avoiding other adverse business consequences and/or (iii) pre-

empt the regulatory or reputational consequences of continuing

with disputes relating to liability, even if Rabobank believes it has

good arguments in its defence. Furthermore, Rabobank may, for

the same reasons, compensate third parties for their losses, even

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in situations where Rabobank does not believe that it is legally

required to do so.

Interest Rate DerivativesRabobank concludes interest rate derivatives, such as interest rate

swaps, with Dutch business customers who wish to reduce the

interest rate risk associated with variable (e.g. Euribor-indexed)

loans. An interest rate swap protects businesses from rising

variable interest rates and helps them to keep their interest

payments at an acceptable level. In March 2016, the Dutch

Minister of Finance appointed an independent committee which

on July 5, 2016 published a recovery framework (the Recovery

Framework) on the reassessment of Dutch SME interest rate

derivatives. Rabobank announced its decision to take part in

the Recovery Framework on July 7, 2016. The final version of

the Recovery Framework was published by the independent

committee on December 19, 2016. Rabobank is involved in

civil proceedings in the Netherlands relating to interest rate

derivatives entered into with Dutch business customers. The

majority of these concern individual cases. In addition, there is

a collective action regarding interest rate derivatives pending

before the Court of Appeal (for which a standstill was agreed

to, due to the Recovery Framework; the few remaining out-of-

scope customers will be assessed on an individual basis). These

actions concern allegations of misinforming clients with respect

to interest rate derivatives. Some of these actions also concern

allegations in connection with Rabobank’s Euribor submissions

(as described below). Rabobank will defend itself against all

these claims. Furthermore, there are pending complaints and

proceedings against Rabobank regarding interest rate derivatives

brought before Kifid (Dutch Financial Services Complaints

Authority, which, in January 2015, opened a conflict resolution

procedure for SME businesses with interest rate derivatives). With

respect to the (re-)assessment of the interest rate derivatives of

its Dutch SME business customers and the advance payments

made, Rabobank recognized at December 31, 2019 a provision

of EUR 107 million (December 31, 2018: EUR 316 million). At

year-end 2018, Rabobank provided all qualifying clients clarity on

the outcome. Rabobank’s payments to clients under the Recovery

Framework amounted to EUR 249 million in 2019.

ImtechOn January 30, 2018, Rabobank received a letter indicating that

legal proceedings may be started at a later stage with respect to a

potential collective action in relation to certain share offerings of

Royal Imtech N.V. in which Rabobank was involved. This situation

has remained unchanged. Furthermore, the receivers sent a letter

(August 10, 2018) in which they describe on what (possible)

grounds their (future) claim(s) towards Rabobank in its capacity

of lender will be based. Rabobank considers the Imtech case

to be a contingent liability because it is not possible to assess

the outcome of these claims at this moment. No provision has

been made.

Libor/EuriborRabobank has been involved for a number of years in regulatory

proceedings in relation to benchmark-related issues. Rabobank

has cooperated, and will continue to cooperate as appropriate,

with the regulators and authorities involved in these proceedings.

On October 29, 2013, Rabobank entered into settlement

agreements with a number of these authorities in relation

to their investigations into the historical Libor and Euribor

submission processes of Rabobank. All amounts payable under

these settlement agreements were fully paid and accounted for

by Rabobank in 2013. Rabobank entered into one additional

related settlement agreement with an authority on July 2, 2019.

The amount payable under this settlement agreement (CHF

390.000 (excluding costs made by the authority)) was fully paid

and accounted for by Rabobank in 2019. Rabobank, along with a

large number of other panel banks and inter-dealer brokers, has

been named as a defendant in a number of putative class action

suits and individual civil court cases brought before the Federal

Courts in the United States. These proceedings relate to U.S.

Dollar (USD) Libor, British Pound Sterling (GBP) Libor, Japanese

Yen (JPY) Libor, Tibor (note: Rabobank was never a member of

the Tibor panel) and Euribor. Rabobank and/or its subsidiaries

have also received complaints and writs of summons ordering

Rabobank to appear before various Dutch, Argentine, United

Kingdom, Irish, and Israeli courts in civil proceedings (inc. class

action suits) relating to interest rate benchmarks. Since the class

action suits and civil proceedings listed above are intrinsically

subject to uncertainties, it is difficult to predict their outcome.

Rabobank takes the stance that it has substantive and convincing

legal and factual defences against these claims. Rabobank has

the intention to continue to defend itself against these claims.

Rabobank considers the Libor/Euribor group of cases to be a

contingent liability because the probability of an outflow of funds

is not probable but also not remote. No provision has been made.

Other CasesRabobank is subject to other legal proceedings for which

provisions have been recognized. These cases are individually

less significant in size and are therefore not separately disclosed

(as discussed above). The total provision for these cases amounts

to EUR 91 million. In addition to the contingent liability-cases

described above, Rabobank has identified other less relevant

cases in terms of size as a contingent liability. The maximum

amount claimed for those contingent liability cases amounts to

EUR 288 million.

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5. Segment Reporting

5.1 Business Segments

The business segments Rabobank uses in its reporting are defined

from a management viewpoint. This means that the segments

are reviewed as part of the strategic management of Rabobank

and are used to make business decisions with different risks

and returns.

Rabobank distinguishes five major business segments: Domestic

Retail Banking; Wholesale, Rural & Retail (WRR); Leasing; Real

Estate; and Other Segments.

• Domestic Retail Banking mainly encompasses the activities of

the local Rabobanks, Obvion, Financial Solutions and Roparco.

• Wholesale, Rural & Retail (WRR) supports wholesale activities

in the Netherlands and focuses on the Food & Agri sectors

internationally. This segment develops corporate banking

activities and also controls globally operating divisions such

as Markets, Acquisition Finance, Global Corporate Clients,

Export & Project Finance, Trade & Commodity Finance, the

Financial Institutions Group and Rabo Corporate Investments.

The segment also contains International Rural operations

under the Rabobank label.

• In the Leasing segment, DLL is responsible for leasing activities

and offers a wide range of leasing products. Manufacturers,

vendors and distributors are globally supported in their sales

with products relevant to asset financing.

• Real Estate mainly encompasses the activities of BPD. The core

activity is the development of housing.

• Other segments within Rabobank include various sub-

segments of which no single segment can be listed separately.

This segment mainly comprises the financial results of

investments in associates (in particular Achmea B.V.), Treasury

and Head Office operations.

There are no customers who represent more than a 10% share

in Rabobank's total revenues. Transactions between the various

business segments are conducted under regular commercial

terms. Other than operating activities, there is no other material

comprehensive income between the business segments. The

financial reporting principles used for the segments are identical

to those described in the "Accounting Policies" section. As

management primarily relies on net interest income to assess

the performance of the segments and make decisions about

resources to be allocated to the segment the segment’s interest

income is presented net of its interest expense.

As per the Financial statements 2019, Rabobank decided to

allocate recharges of the Head Office operations related to

staff expenses from Other administrative expenses to Staff

costs to better reflect a comprehensive cost view within the

business segments. The figures in the previous period segment

information have been adjusted accordingly to align with internal

management reporting.

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Amounts in millions of euros DomesticRetail Banking WRR Leasing Real Estate Other

SegmentsConsolidation

Effects Total

For the year ended December 31, 2019

Net interest income 5,258 2,458 1,052 (10) (273) (2) 8,483

Net fee and commission income 1,490 438 124 8 (21) (50) 1,989

Other results 67 766 255 308 (3) 50 1,443

Income 6,815 3,662 1,431 306 (297) (2) 11,915

Staff costs 2,738 1,396 536 84 214 (147) 4,821

Other administrative expenses 1,177 495 174 40 (15) 3 1,874

Depreciation and amortization 95 83 28 7 63 144 420

Operating expenses 4,010 1,974 738 131 262 - 7,115

Impairment on investments in associates - - - - 300 - 300

Impairment charges on financial assets 152 611 214 2 (4) - 975

Regulatory levies 270 140 26 2 46 - 484

Operating profit before tax 2,383 937 453 171 (901) (2) 3,041

Income tax 607 260 131 40 (200) - 838

Net profit 1,776 677 322 131 (701) (2) 2,203

Cost/income ratio including regulatory levies (in %)1 62.8 57.7 53.4 43.5 n/a n/a 63.8

Impairment charges on financial assets (in basis points ofaverage private sector loan portfolio)2 6 55 67 n/a n/a n/a 23

External assets 275,885 137,092 37,876 3,201 136,544 - 590,598

Goodwill 322 - 70 - - - 392

Private sector loan portfolio 271,165 112,410 33,169 256 914 - 417,914

1 Operating expenses plus regulatory levies divided by Income

2 Impairment charges on financial assets divided by 12-month average private sector loan portfolio

Amounts in millions of euros Domestic RetailBanking WRR Leasing Real Estate Other Segments Consolidation

Effects Total

Impairment allowances on financial assets

Balance on January 1, 2019 2,267 1,330 265 7 - - 3,869

Increases due to origination and acquisition 120 92 36 - - - 248

Decreases due to derecognition (283) (139) (51) - - - (473)

Changes due to change in credit risk 345 660 254 1 (19) - 1,241

Write-off of defaulted loans during the year (324) (254) (156) - - - (734)

Other adjustments (1) (93) 9 6 19 - (60)

Balance on December 31, 2019 2,124 1,596 357 14 - - 4,091

Impairment allowance 12-month ECL 176 158 68 - - - 402

Impairment allowance lifetime ECL non-credit impaired 213 76 77 - - - 366

Impairment allowance lifetime ECL credit-impaired 1,735 1,362 212 14 - - 3,323


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Effects Total

For the year ended on December 31, 2018

Net interest income 5,575 2,388 986 (7) (383) - 8,559

Net fee and commission income 1,434 461 106 10 (35) (45) 1,931

Other results 56 486 274 571 102 41 1,530

Income 7,065 3,335 1,366 574 (316) (4) 12,020

Staff costs 2,765 1,292 517 137 215 (58) 4,868

Other administrative expenses 1,382 491 194 66 57 - 2,190

Depreciation and amortization 84 40 27 5 49 183 388

Operating expenses 4,231 1,823 738 208 321 125 7,446

Impairment charges on financial assets (150) 300 105 (15) (50) - 190

Regulatory levies 237 169 25 2 45 - 478

Operating profit before tax 2,747 1,043 498 379 (632) (129) 3,906

Income tax 712 333 99 70 (281) (31) 902

Net profit 2,035 710 399 309 (351) (98) 3,004

Cost/income ratio including regulatory levies(in %)1 63.2 59.7 55.9 36.6 n/a n/a 65.9

Impairment charges on financial assets (in basispoints of average private sector loan portfolio)2 (5) 29 34 (287) n/a n/a 5

External assets 280,691 139,963 35,227 2,979 131,577 - 590,437

Goodwill 322 125 72 - - - 519

Private sector loan portfolio 276,140 108,972 30,309 301 303 - 416,025

1 Operating expenses plus regulatory levies divided by Income

2 Impairment charges on financial assets (in basis points of average private sector loan portfolio)


Effects Total

Impairment allowances on financial assets

Balance on January 1, 2018 2,693 1,297 257 270 - - 4,517

Increases due to origination and acquisition 134 208 30 - - - 372

Decreases due to derecognition (489) (230) (48) - - - (767)

Changes due to change in credit risk 361 324 170 (12) - - 843

Write-off of defaulted loans during the year (459) (290) (141) (123) - - (1,013)

Other adjustments 27 21 (3) (128) - - (83)


Impairment allowance 12-month ECL 132 114 55 - - - 301

Impairment allowance lifetime ECL non-credit impaired 168 39 46 - - - 253

Impairment allowance lifetime ECL credit-impaired 1,967 1,177 164 7 - - 3,315


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5.2 Geographic Information (Country-by-Country Reporting)

Rabobank operates in seven main geographical areas. The

country of domicile of Rabobank is the Netherlands. The

information below is reported by distinguishable components

of Rabobank that provide products and/or services within a

particular economic environment within specific geographical

locations/ areas. The breakdown is based on the location of the

individual subsidiary/ branch from which the transactions are

initiated. Revenue is defined as total income as presented in the

statement of income plus interest expense, fee and commission

expense and expenses from other operating activities.



Geographiclocation Country Name of division Type of operations Revenues

Average number ofinternal employees

in FTE

Operating profitbefore tax Income tax

The Netherlands The Netherlands

Rabobank, DLL,Obvion, RaboVastgoedgroep,BPD

Domestic RetailBanking,Wholesale, Ruraland Retail, Leasing,Real Estate

20,354 24,780 1,801 448

Other Eurozone

countriesFrance

DLL, Rabobank,RaboVastgoedgroep,BPD

Leasing,Wholesale, Ruraland Retail, RealEstate

102 224 (7) 23

Belgium DLL, RabobankLeasing,Wholesale, Ruraland Retail

112 108 (31) (10)

Germany

DLL, Rabobank,RaboVastgoedgroep,BPD


941 658 99 29

Italy DLL, RabobankLeasing,Wholesale, Ruraland Retail

77 146 28 3

Luxembourg RaboVastgoedgroep Real Estate - - - -

Ireland DLL, RabobankLeasing,Wholesale, Ruraland Retail

620 173 120 12

Finland DLL Leasing 8 12 2 -

Austria DLL Leasing 3 3 - -

Portugal DLL Leasing 14 18 1 -

Spain DLL, RabobankLeasing,Wholesale, Ruraland Retail

63 145 15 6

Rest of Europe

(non-Eurozone)United Kingdom DLL, Rabobank

Leasing,Wholesale, Ruraland Retail

753 567 85 9

Norway DLL Leasing 42 42 8 2

Sweden DLL Leasing 51 129 4 3

Denmark DLL Leasing 36 28 6 -

Switzerland DLL Leasing 5 6 1 -

Russia DLL Leasing 43 69 20 6

Poland DLL Leasing 36 83 9 2

Hungary DLL Leasing 14 37 - -

Romania DLL Leasing - 2 - -

Turkey DLL, RabobankLeasing,Wholesale, Ruraland Retail

42 55 30 7

North America United StatesDLL, Rabobank,RaboVastgoedgroep


4,244 3,524 434 133

Canada DLL, RabobankLeasing,Wholesale, Ruraland Retail

285 238 63 16

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Latin America Mexico DLL Leasing 37 71 4 2

Brazil DLL, RabobankLeasing,Wholesale, Ruraland Retail

603 752 97 30

Chile DLL, RabobankLeasing,Wholesale, Ruraland Retail

76 140 (11) 2

Argentina DLL Leasing 6 17 (1) -

Peru Rabobank Wholesale, Ruraland Retail 1 - - -

Asia India DLL, RabobankLeasing,Wholesale, Ruraland Retail

87 547 (10) 3

Singapore DLL, RabobankLeasing,Wholesale, Ruraland Retail

257 195 6 1

Indonesia Rabobank Wholesale, Ruraland Retail 33 539 (85) 7

Malaysia Rabobank Wholesale, Ruraland Retail - 1 - -

China DLL, RabobankLeasing,Wholesale, Ruraland Retail

72 106 3 4

Hong Kong DLL, RabobankLeasing,Wholesale, Ruraland Retail

355 189 16 -

South Korea DLL Leasing 13 23 3 1

United ArabEmirates DLL Leasing - 2 (1) -

Australia Australia DLL, RabobankLeasing,Wholesale, Ruraland Retail

1,154 1,153 233 70

New Zealand DLL, Rabobank,Leasing,Wholesale, Ruraland Retail

514 351 99 29

Other Mauritius, Kenya Rabobank Wholesale, Ruraland Retail 2 18 - -

Consolidationeffects (9,620) - - -

21,435 35,145 3,041 838



Geographic location Country Name ofdivision

Type ofoperations Revenues

Average numberof internal

employees in FTE

Operating profitbefore tax Income tax

The NetherlandsTheNetherlands

Rabobank,DLL, Obvion,RaboVastgoedgroep,BPD

DomesticRetail Banking,Wholesale,Rural andRetail, Leasing,Real Estate

20,718 25,504 2,268 493

Other Eurozone countries France

DLL,Rabobank,RaboVastgoedgroep,BPD

Leasing,Wholesale,Rural andRetail, RealEstate

529 334 116 13

Belgium DLL, Rabobank

Leasing,Wholesale,Rural andRetail

118 104 25 5

GermanyDLL,Rabobank,Rabo

Leasing,Wholesale,Rural and

855 645 116 36

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On December 31, 2018Vastgoedgroep,BPD

Retail, RealEstate

Italy DLL, Rabobank


72 138 28 3

Luxembourg RaboVastgoedgroep Real Estate 1 - - -

Ireland DLL, Rabobank


606 188 140 4

Finland DLL Leasing 7 10 2 -

Austria DLL Leasing 3 3 1 -

Portugal DLL Leasing 12 16 4 -

Spain DLL, Rabobank


52 132 15 4

Rest of Europe (non-Eurozone)UnitedKingdom DLL, Rabobank


698 671 81 18

Norway DLL Leasing 29 38 7 2

Sweden DLL Leasing 49 122 9 2

Denmark DLL Leasing 32 26 6 1

Switzerland DLL Leasing 5 6 2 -

Russia DLL Leasing 39 64 20 4

Poland DLL Leasing 34 86 7 2

Hungary DLL Leasing 8 40 2 -

Romania DLL Leasing - 3 - -

Turkey DLL, Rabobank


37 55 23 4

North America United States

DLL,Rabobank,RaboVastgoedgroep

Leasing,Wholesale,Rural andRetail, RealEstate

3,709 4,053 577 128

Canada DLL, Rabobank


245 213 33 9

Latin America Mexico DLL Leasing 22 65 5 1

Brazil DLL, Rabobank


548 708 191 72

Chile DLL Leasing 71 141 13 13

Argentina DLL Leasing 5 17 (2) (1)

Peru RabobankWholesale,Rural andRetail

- - - -

Asia India DLL, Rabobank


69 445 3 6

Singapore DLL, Rabobank


219 194 (8) (1)

Indonesia RabobankWholesale,Rural andRetail

58 707 (60) (9)

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Malaysia RabobankWholesale,Rural andRetail

7 3 2 -

China DLL, Rabobank


82 138 2 5

Hong Kong DLL, Rabobank


341 186 (46) (8)

South Korea DLL Leasing 12 22 2 -

United ArabEmirates DLL Leasing - 2 - -

Australia Australia DLL, Rabobank


1,150 1,059 211 64

New Zealand DLL,Rabobank,


510 310 111 32

OtherMauritius,Kenya Rabobank

Wholesale,Rural andRetail

3 13 - -

Consolidationeffects (9,074) - - -

21,881 36,461 3,906 902

Rabobank did not receive government subsidies in 2019

and 2018.

5.3 Geographic Information of Non-currentAssets


Domestic Non-domestic Domestic Non-

domestic

Goodwill and other intangible assets 683 146 728 238

Property and equipment andinvestment properties 2,173 3,286 1,852 2,796

Other assets 4,660 1,950 3,720 2,711

Non-current assets held for sale 221 214 255 13

Total 7,737 5,596 6,555 5,758

6. Cash and Cash Equivalents


Cash 745 811

Deposits at central banks 62,341 72,524

Total cash and cash equivalents 63,086 73,335

The average minimum reserve to be held for the Netherlands for

the month of December 2019 was EUR 3,110 million (December

2018: EUR 3,066 million).

7. Loans and Advances to CreditInstitutions


Current accounts and receivables 5,905 8,007

Reverse repurchase transactions and securitiesborrowing agreements 22,703 8,743

Loans 644 1,080

Other 48 51

Gross carrying amount loans and advances to

credit institutions29,300 17,881

Loan impairment allowance on loans and advances tocredit institutions (3) (22)

Total loans and advances to credit institutions 29,297 17,859

8. Financial Assets Held for Trading


Government bonds 666 1,055

Other debt securities 1,039 1,602

Loans 106 149

Equity instruments 59 70

Total 1,870 2,876

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9. Financial Assets Designated atFair Value


Debt securities 100 126

Loans 1 31

Total 101 157

The maximum exposure to credit risk is best represented by the

carrying amount of the financial assets designated at fair value.

The change in the current year in the fair value of the financial

assets designated at fair value that is attributable to changes in

the credit risk amounts to EUR 0 million (2018: EUR 14 million).

The cumulative change is EUR 14 million (2018: EUR 14 million).

Any changes in fair value are calculated by discounting future

cash flows. When setting the discount rate, account is taken

of expected losses, liquidity mark-ups and the risk margin. No

use is made of credit derivatives to hedge the financial assets

designated at fair value.

10. Financial Assets Mandatorily atFair Value


Debt securities 37 38

Loans 1,106 1,642


Total 1,905 2,134

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11. Derivatives

Derivatives are used at Rabobank to mitigate at least a portion

of the risks arising from the bank’s various operations. Examples

of this include interest rate swaps used to hedge interest rate

risks arising from the difference in maturities between assets and

liabilities. Another example are cross-currency swaps, which are

used to hedge the currency risk to which the bank is exposed

after issuing debt instruments in foreign currencies. Besides

hedging purposes, derivatives are also contracted with the bank’s

corporate customers where Rabobank is the counterparty.

11.1 Types of Derivatives Used by Rabobank

Forward currency and interest rate contracts are contractual

obligations to receive or pay a net amount based on prevailing

exchange or interest rates, or to purchase or sell foreign currency

or a financial instrument on a future date at a fixed specified price

in an organized financial market. Since collateral for forward

contracts is provided in the form of cash, cash equivalents

or marketable securities, and changes in the value of forward

contracts are settled daily, mainly via a central counterparty

clearing house, the credit risk is low. The credit risk exposure

for Rabobank is represented by the potential cost of replacing

the swaps if the counterparties default. The risk is monitored

continuously against current fair value, a portion of the notional

amount of the contracts and the liquidity in the markets. As part of

the credit risk management process, Rabobank employs the same

methods for evaluating counterparties as it does for evaluating its

own lending activities.

Forward rate agreements are individually agreed forward

interest rate contracts under which the difference between

a contractually agreed interest rate and the market rate on

a future date has to be settled in cash, based on a notional

principal amount.

Currency and interest rate swaps are commitments to exchange

one set of cash flows for another. Swaps entail an economic

exchange of currencies or interest rates (such as a fixed rate for

one or more variable rates), or a combination (i.e. a cross-currency

interest rate swap). Except in certain currency swaps, no transfer

of the principal amount takes place.

Currency and interest rate options are contracts under which the

seller (known as the writer) gives the buyer (known as the holder)

the right, entailing no obligation, to purchase (in the case of a call

option) or sell (in the case of a put option) a specific amount of

foreign currency or a specific financial instrument on or before an

agreed date or during an agreed period at a price set in advance.

As consideration for accepting the currency or interest rate risk,

the writer receives a payment (known as a premium) from the

holder. Options are traded on exchanges or between Rabobank

and clients (OTC). Rabobank is only exposed to credit risks as

an option holder and only up to the carrying amount, which is

equivalent to the fair value.

Credit default swaps (CDSs) are instruments by means with which

the seller of a CDS undertakes to pay an amount to the buyer. This

amount is equal to the loss that would be incurred by holding an

underlying reference asset if a specific credit event were to occur

(i.e. the materialization of a risk). The buyer is under no obligation

to hold the underlying reference asset. The buyer pays the seller

a credit protection fee largely expressed in basis points, with the

size of the fee depending on the credit spread and tenor of the

reference asset.

11.2 Derivatives Held for Trading

The derivatives held or issued for trading are those used to hedge

economic risks but which do not qualify as hedge accounting

instruments and derivatives that corporate customers have

contracted with Rabobank to hedge interest rate and currency

risks. The exposures from derivatives with corporate customers

are normally hedged by entering into offsetting positions with

one or more professional counterparties, within trading limits set.

11.3 Derivatives Designated as HedgingInstrument

Rabobank has various derivatives that serve to hedge economic

risks, including interest rate and currency risks, which qualify as a

hedging instrument in a fair value hedge, a cash flow hedge or a

net investment hedge.

Fair value hedges

Rabobank uses interest rate swaps and cross-currency interest

rate swaps to hedge potential changes in the fair value due to

interest rate or foreign currency rate changes. These changes

ordinarily form the majority of the overall change of the hedged

items. Hedged items are fixed-income financial assets and

liabilities in both local and foreign currencies, such as mortgages,

debt securities at fair value through other comprehensive

income and issued debt securities. Rabobank tests the hedge

effectiveness based on statistical regression analysis models,

both prospectively and retrospectively for IAS 39 portfolio fair

value hedges and analyses the sources of ineffectiveness for

IFRS 9 non-portfolio fair value hedges. The identified source of

ineffectiveness of the IFRS 9 fair value hedges is the float leg

(excluding margin) of the cross currency interest rate swap.

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The hedged ratio of the IFRS 9 fair value hedges is the actual

economic hedge (notional issued bond and notional cross

currency interest rate swap).

Maturity Profile and Average Interest Rate of Hedging Instruments in Fair Value Hedges

Amounts in millions of euros Remaining maturity

Totalnotional amount Less than 1 year 1 - 5 years Longer than 5 years


Hedging instrument - Hedge of financial assets 47,514 4,393 25,541 17,580

Average fixed interest rate 1.92% 0.76% 1.74% 2.14%

Hedging instrument - Hedge of financial liabilities 49,342 560 21,094 27,688



Hedging instrument - Hedge of financial assets 51,852 7,553 31,990 12,309


Hedging instrument - Hedge of financial liabilities 62,604 3,954 18,797 39,853


Designated Hedging Instruments in Fair Value Hedges of Interest Rate Risk

Amounts in millions of eurosCarrying amount

derivativefinancial assets

Carrying amountderivative

financial liabilities

Change in fair valueused for calculating

hedge ineffectiveness


Hedge of loans and advances to customers 274 3,783 1,989

Hedge of financial assets at fair value through other comprehensive income - 185 21

Hedge of issued debt securities 3,551 548 (1,234)


Hedge of loans and advances to customers 101 4,014 305

Hedge of financial assets at fair value through other comprehensive income 19 457 (148)

Hedge of issued debt securities 3,156 699 636

Hedge ineffectiveness of fair value hedging amounts to

EUR 70 million and is included in the statement of income on

line item "Gains/ (Losses) on Financial Assets and Liabilities at Fair

Value through Profit or Loss".

Designated Hedged Items in Fair Value Hedges of Interest Rate Risk

Amounts in millions of euros Carrying amount

Accumulated amountof fair value hedgeadjustment on the

hedged item includedin the carryingamount of the

hedged item



Accumulatedamount of fair valuehedge adjustmentsremaining for anyhedged items thathave ceased to beadjusted for hedginggains and losses


Loans and advances to customers 35,106 7,044 (1,961) 6,440

Financial assets at fair value through other comprehensive income 1,986 - (20) -

Issued debt securities 46,533 2,924 1,135 2,250


Loans and advances to customers 43,013 5,784 (285) 6,309

Financial assets at fair value through other comprehensive income 8,188 - 159 -

Issued debt securities 37,935 1,375 (841) 1,077

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Cash Flow Hedges

Rabobank’s cash flow hedges mainly consist of hedges of the

margin of issued bonds in foreign currency hedged with cross-

currency interest rate swaps to protect against a potential change

in cash flows due to change in foreign currency rates. Rabobank

analyzes the sources of ineffectiveness for IFRS 9 cash flow

hedges. The IFRS 9 cash flow hedges are 100% effective. The

interest rate risk is not hedged in the cash flow hedge (two fixed

legs, foreign currency and Euro) and the average interest rate is

therefore not disclosed in the table below.

Maturity Profile and Average Price/ Rate of Hedging Instruments in Cash Flow Hedges

Amounts in millions of euros Remaining maturity

Totalnotional amount Less than 1 year 1 - 5 years Longer than 5 years


Cross-currency swaps (USD:EUR)

Notional amounts of hedging instrument 25 1 - 24

Average exchange rate (USD:EUR) 1.37 n/a 1.24

Cross-currency swaps (GBP:EUR)

Notional amounts of hedging instrument 77 - 32 45

Average exchange rate (GBP:EUR) n/a 0.78 0.83

Cross-currency swaps (other currencies)

Notional amounts of hedging instrument 86 13 56 17


Cross-currency swaps (USD:EUR)


Average exchange rate (USD:EUR) 1.37 1.37 1.31

Cross-currency swaps (GBP:EUR)

Notional amounts of hedging instrument 25 - 17 8

Average exchange rate (GBP:EUR) n/a 0.79 0.80

Cross-currency swaps (other currencies)


Cash Flow Hedges of Interest Rate and Foreign Currency Risk, Designated Hedging Instruments

Amounts in millions of eurosCarrying amount

derivativefinancial assets

Carrying amountderivative

financial liabilities




Cross-currency interest rate swaps (USD:EUR) 7 9 (8)

Cross-currency interest rate swaps (GBP:EUR) 9 9 25

Cross-currency interest rate swaps (other currencies) 7 1 (14)

Total 23 19 3


Cross-currency interest rate swaps (USD:EUR) - 1 15

Cross-currency interest rate swaps (GBP:EUR) 3 9 27

Cross-currency interest rate swaps (other currencies) 3 3 (33)

Total 6 13 9

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For the changes in the value of the hedging instrument

recognized in other comprehensive income and the amount

reclassified from the cash flow hedge reserve to profit or loss,

reference is made to section 31 Reserves and Retained Earnings.

Hedge ineffectiveness amounts to nil and is included in the

statement of income on line item "Gains/ (losses) on financial

assets and liabilities at fair value through profit or loss".

Cash Flow Hedges of Interest Rate and Foreign Currency Risk, Designated Hedged Items

Amounts in millions of eurosChange in fair valueused for calculating


Cash flow hedgereserve for

continuing hedges

Remaining cash flowhedge reserve from

hedging relationshipsfor which hedgeaccounting is no

longer applied


Issued debt securities (3) 10 (36)


Issued debt securities 9 2 (42)

Net Investment Hedges

Rabobank uses forward currency contracts to hedge a

portion of the currency translation risk of net investments in

foreign operations.

Maturity Profile and Average Rate of Hedging Instruments in Net Investment Hedges

Totalnotional amount Remaining maturity on December 31, 2019

Amounts in millions of euros Less than 1 year 1 - 5 years Longer than 5 years

Forward currency contracts

Notional amounts of hedging instrument 5,719 5,231 488 -

Totalnotional amount Remaining maturity on December 31, 2018

Forward currency contracts

Notional amounts of hedging instrument 5,848 5,724 124 -

For the main currencies the average exchange rates used in net

investment hedge accounting for 2019 are EUR/AUD 1.63 (2018:

1.58), EUR/NZD 1.73 (2018: 1.66) and EUR/BRL 4.58 (2018: 4.57).

Amounts in millions of euros Carrying amountfinancial assets

Carrying amountfinancial liabilities




Forward currency contracts - 1,984 (73)


Forward currency contracts 32 1,706 132

For the changes in the value of the hedging instrument

recognized in other comprehensive income and the amount

reclassified from the net investment hedge reserve to profit or

loss, reference is made to Section 31 Reserves and Retained

Earnings. Hedge ineffectiveness amounts to nil and is included in

the statement of income on line item "Gains/ (Losses) on Financial

Assets and Liabilities at Fair Value through Profit or Loss".

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Net Investment Hedges of Currency Translation Risk, Designated Hedged Items

Amounts in millions of eurosChange in fair valueused for calculating


Foreign currencytranslation reserve for

continuing hedges

Remaining foreigncurrency translation

reserve from hedgingrelationships for

which hedgeaccounting is no

longer applied


Net investment 73 276 140


Net investment (132) 230 213

11.4 Notional Amount and Fair Value ofDerivatives

The following table shows the notional amounts and the positive

and negative fair values of derivatives as presented in the

statement of financial position.

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Notional Amount and Fair Values of Derivatives

On december 31, 2019 On december 31, 2018

Amounts in millions of euros Notional amounts Fair values Notional amounts Fair values

Assets Liabilities Assets Liabilities

Derivatives held for trading 3,918,192 19,737 19,539 3,395,342 19,379 18,745

Derivatives designated ashedging instrument 97,042 3,847 4,535 114,541 3,281 5,182

Total derivatives 4,015,234 23,584 24,074 3,509,883 22,660 23,927

Derivatives held for trading

Currency derivatives

Currency swaps 416,494 3,187 4,948 388,686 3,949 5,116

Currency options - purchasedand sold 5,579 55 45 3,437 47 30

Listed tradeable contracts 7,223 24 16 5,582 7 6

Currency futures 185 1 2 296 - 8

Total currency derivatives 429,481 3,267 5,011 398,001 4,003 5,160

Interest rate derivatives

OTC interest rate swaps 2,973,088 13,789 11,788 2,828,432 12,908 11,108

OTC interest rate options 71,963 2,490 2,549 72,417 2,212 2,238

Listed interest rate swaps 434,346 1 1 91,454 1 1

Total interest rate derivatives 3,479,397 16,280 14,338 2,992,303 15,121 13,347

Credit derivatives 880 4 5 1,071 2 2

Equity instruments/index derivatives 3 2 - - - 1

Other derivatives 8,431 184 185 3,967 253 235

Total derivatives held for trading 3,918,192 19,737 19,539 3,395,342 19,379 18,745

Derivatives designated ashedging instrument

Derivatives designated as hedging

instrument in fair value hedges

Interest rate swaps and cross-currency interest rate swaps 94,219 3,824 4,476 111,380 3,243 5,169

Derivatives designated as hedging

instrument in cash flow hedges

Currency swaps and cross-currencyinterest rate swaps 188 23 19 87 6 13

Derivatives designated as

hedging instrument as net

investment hedges

Currency futures contracts 2,635 40 3,074 32

Total derivatives designated as

hedging instrument97,042 3,847 4,535 114,541 3,281 5,182

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12. Loans and Advances toCustomers


Loans to private sector clients:

Overdrafts 14,335 15,758

Mortgages 186,594 190,651

Finance leases 20,332 18,772

Corporate loans 189,733 186,563

Other 10,850 8,009

Loans to government clients:

Finance leases 194 202

Other 1,812 1,658

Reverse repurchase transactions, securities borrowing

agreements and settlement accounts13,553 12,929

Gross carrying amount loans and advances to customers 437,403 434,542

Hedge accounting adjustment 7,044 5,784

Impairment allowances on loans and advancesto customers (3,940) (3,735)

Total loans and advances to customers 440,507 436,591

Finance Leases

Loans and advances to customers also includes receivables from

finance leases, which can be broken down as follows:

Amounts in millions of euros 2019

Receivables from gross investment in finance leases

Not exceeding 1 year 6,969

1 to 2 years 5,344

2 to 3 years 3,950

3 to 4 years 2,661

4 to 5 years 1,700

More than 5 years 1,239

Gross investment in finance leases 21,863

Unearned deferred finance income from finance leases 1,556

Net investment in finance leases 20,307

Loan impairment allowance finance leases 219

Gross carying amount finance leases 20,526

Finance income on net investment 878


Receivables from gross investment in finance leases


Longer than 1 year but less than 5 years 13,026

Longer than 5 years 1,292

Gross investment in finance leases 20,434

Unearned deferred finance income from finance leases 1,626




Longer than 5 years 1,272


Loan impairment allowance finance leases 166

Gross carying amount finance leases 18,974

The finance leases mainly relate to the lease of equipment,

cars and factoring products. The unguaranteed residual values

accruing to the lessor amounted to EUR 2,153 million (2018:

EUR 2,227 million). The contingent lease payments recognized as

income in 2018 were zero.

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13. Financial Assets at Fair Valuethrough Other ComprehensiveIncome

Financial Assets at Fair Value through Other



Government bonds 9,505 13,514


Loans 206 214


Total financial assets at fair value through

other comprehensive income13,505 18,730

Rabobank designated equity investments in foreign financial

service providers at fair value through other comprehensive

income upon initial recognition because these instruments are

held for strategic purposes rather than for the purpose of selling

it in the near term.


Equity investments in foreign financialservice providers 108 104

Equity investments held by subsidiaries 113 166

Other equity investments 69 230

Total equity instruments 290 500

During 2019, Rabobank recognized dividends of EUR 20 million

of which EUR 0 million relates to equity investments that are

derecognised in 2019. Transfers of the cumulative gains or losses

within equity during the period are disclosed in Section 31 in

the movement schedule of the Revaluation Reserve – Equity

Instruments at Fair Value Through Other Comprehensive Income.

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14. Investments in Associates andJoint Ventures


Opening balance 2,374 2,521

Foreign exchange differences (8) 5

Purchases 91 43

Sales (71) (187)

Share of profit of associates and and joint ventures 193 242

Dividends paid out (and capital repayments) (56) (149)

Revaluation 94 (80)

Impairment (300) -

Other (9) (21)

Total investments in associates and joint ventures 2,308 2,374

14.1 Investments in Associates

The main associate in terms of the size of the capital interest held

by Rabobank is:

On December 31, 2019 Shareholding Voting rights

The Netherlands

Achmea B.V. 30% 30%

Achmea is a strategic partner of Rabobank for insurance products

and Interpolis, a subsidiary of the Achmea Group, works closely

with Rabobank. Achmea’s head office is located in Zeist, the

Netherlands. No listed market price is available for the interest

in Achmea. The interest in Achmea is valued according to the

equity method. Rabobank received dividend from Achmea for an

amount of EUR 35 million (2018: EUR 37 million).

As mentioned by Achmea in its prospectus of the Tier 1 issue of

September 2019, the sustained low interest rate environment

in recent years in Europe has negatively impacted Achmea

in various ways and will continue to do so if it persists, in

particular for the closed pension and life book where long term

options and guarantees have been underwritten. This element,

in combination with the deteriorating business environment of

Dutch insurers over the last years, gave triggers to reassess the

valuation of the investment in Achmea. The test to establish

whether potential impairments had occurred, resulted in a

downward adjustments of the carrying value of the investment in

Achmea of EUR 300 million which was recognised in the income

statement as ‘Impairment losses on investments in associates’.

Achmea B.V. is part of the operating segment ‘Other segments’.

The recoverable amount is based on the estimated value in use

and is a level 3 valuation according to the fair value hierarchy. To

determine the value in use for Achmea, Rabobank has undertaken

a review of the expected cash flows that Achmea generates for

Rabobank discounted at a pre-tax discount rate of 10.24%.

Achmea


Cash and balances at central banks 963 1,466

Investments 78,758 70,948

Other assets 9,767 9,402

Total assets 89,488 81,816

Insurance related provisions 57,770 55,065

Loans and funds borrowed 18,475 15,197

Other liabilities 3,052 1,849


Revenues 24,653 21,336

Net profit 481 315

Other comprehensive income 313 (266)

Total comprehensive income 794 49

Reconciliation Carrying Amount of Interest in Achmea

2019 2018

Total equity Achmea 10,192 9,705

Minus: hybrid capital 1,250 1,350

Minus: preference shares and accrued dividend 350 350

Shareholder’s equity 8,592 8,005

Share of Rabobank 30.00% 30.00%

2,577 2,401

Accumulated impairment (1,019) (719)

Carrying amount 1,558 1,682

Result from Other Associates


Result from continuing operations 52 137

Net profit 52 137

Other comprehensive income - -


14.2 Investments in Joint Ventures

Virtually all joint ventures are investments of BPD. Their total

carrying amount is EUR 19 million (2018: EUR 7 million). Joint

ventures are recognized in accordance with the equity method.

BPD often enters into partnerships for developing integrated

residential areas. In the majority of cases, each participating

member of the partnership has a decisive vote, and decisions can

only be passed by consensus. The majority of these partnerships

therefore qualify as "joint arrangements."

Each partnership has its own legal structure depending on the

needs and requirements of the parties concerned. The legal form

(business structure) typically used is the Dutch "CV-BV" structure

(a limited partnership-private limited liability company) or the

"VOF" structure (general partnership) or a comparable structure.

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In the case of a CV-BV, the risk of a partner is generally limited to

the issued capital and partners are only entitled to the net assets

of the entity. In the case of general partnerships ("VOF"), each

party bears, in principle, unlimited liability and has, in principle, a

proportional right to the assets and obligations for the liabilities

of the entity. On the basis of the legal form, a CV-BV structure

qualifies as a "joint venture", whereas a VOF structure qualifies as

a "joint operation". It is important to note that the contractual

terms and other relevant facts and circumstances may result in a

different classification.

As a separate legal structure is established for each project,

projects have different participating partners and individual

projects are not of a substantial size, BPD did not have material

joint arrangements in 2019 and 2018.

Result from Joint Ventures


Profit or loss from continuing operations 22 31

Post-tax profit or loss from discontinued operations - -

Net profit 22 31



Contingent Liabilities to Joint Ventures

BPD entered into commitments on December 31, 2019 with

regard to real estate projects, commitments with third parties

(including subcontractors and architects) for an amount of

EUR 8 million (2018: EUR 5 million). The commitments regarding

building sites amount to EUR 45 million (2018: EUR 23 million).

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15. Goodwill and Other IntangibleAssets

Amounts in milliions of euros GoodwillSoftwaredevelopedinhouse

Otherintangibleassets

Total

Year ended December 31, 2019

Opening balance 519 357 90 966

Foreign exchange differences 1 1 1 3

Additions - 85 78 163

Disposals - (16) (6) (22)

Disposal of subsidiary (128) (1) (1) (130)

Other 1 9 (3) 7

Amortization - (87) (45) (132)

Impairments (1) (25) - (26)

Closing balance 392 323 114 829

Cost 427 1,330 363 2,120

Accumulated amortisationand impairments (35) (1,007) (249) (1,291)

Net carrying amount 392 323 114 829


Opening balance 519 371 112 1,002

Foreign exchange differences 3 - - 3

Additions - 80 41 121

Disposals (2) (17) (13) (32)

Other - 18 1 19

Amortization - (95) (49) (144)

Impairments (1) - (2) (3)

Closing balance 519 357 90 966

Cost 1,136 1,286 444 2,866

Accumulated amortisationand impairments (617) (929) (354) (1,900)

Net carrying amount 519 357 90 966

Goodwill is reviewed for impairment by comparing the carrying

amount of the cash generating unit (including goodwill) with

the best estimate of the value in use of the cash generating

unit. For this purpose, the best estimate of the value in use

determined on the basis of cash flow forecasts is used first, as

taken from annual medium-term plans drawn up as part of the

annual planning cycle. The plans reflect the management’s best

estimates of market conditions, market restrictions, discount rates

(before taxation), growth in operations, etc. If the outcome shows

that there is no significant difference between the fair value and

the carrying amount, the fair value is assessed in more detail,

with the relevant share price being used for listed companies.

In addition, valuation models are used which are similar to

the initial recognition of an acquisition, peer reviews, etc. The

valuation models are tested and include the development of

the activities since the acquisition, the most recent income

and expenses forecasts drawn up by management, as well as

updated forecasts, assessments of discount rates, final values of

growth rates, etc. Peer reviews include an assessment of the

price/earnings ratio and price/carrying amount ratio of similar

listed companies, or similar market transactions. Assumptions are

generally based on experience, management’s best estimates of

future developments and, if available, external data.

The goodwill allocated to one of the cash-generating units in

the Domestic Retail segment is significant in comparison with

the goodwill’s total carrying amount. The carrying amount of

this goodwill is EUR 322 million (2018: EUR 322 million) and the

cash-generating unit is the collective of local Rabobanks. The

recoverable amount is based on the value in use. The value

in use is determined using cash flows expected in the near

future based on financial forecasts. As the recoverable amount

substantially exceeded the carrying amount, it was concluded

that the goodwill allocated to this cash-generating unit was not

impaired. An increase in the discount rate of 10% or a reduction

in the future cash flows of 10% are considered to be a maximum

of possible changes in key assumptions. Such a change does not

cause the carrying amount to exceed the recoverable amount

and would not result in an impairment.

An impairment of goodwill was recognized in 2019 for

EUR 1 million (2018: EUR 1 million). Impairments of software

developed in-house and other intangible assets are not

individually material. The total impairments of software

developed in-house was EUR 25 million (2018: EUR 0 million).

This was mainly caused by a too highly appreciated value of

software in development.

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16. Property and Equipment

Property and equipment


Land and buildings 1,205 1,343

Equipment 275 312

Operating lease assets 3,114 2,800

Tangible fixed assets 4,594 4,455

Right-of-use assets 494 n/a

Total property and equipment 5,088 4,455

Tangible fixed assets

Amounts in millions of euros Land andbuildingsEquipment

Operatinglease

assets

Tangiblefixed

assets


Opening balance 1,343 312 2,800 4,455

Foreign exchange differences 3 2 58 63

Purchases 43 82 1,286 1,411

Disposals (5) (20) (274) (299)

Transfers to held for sale (81) (13) (81) (175)

Impairments (10) - - (10)

Reversal impairments 32 - - 32

Depreciation (98) (91) - (189)

Depreciation of operating lease assets - - (693) (693)

Other (22) 3 18 (1)

Closing balance as per

December 311,205 275 3,114 4,594

Cost 2,447 943 4,705 8,095

Accumulated depreciationand impairments (1,242) (668) (1,591) (3,501)

Net carrying amount as per

December 311,205 275 3,114 4,594


Cost 2,912 1,239 3,816 7,967


Net carrying amount as January 1 1,546 387 2,654 4,587

Opening balance 1,546 387 2,654 4,587

Foreign exchange differences 5 - 36 41

Purchases 35 87 1,152 1,274

Disposals (9) (10) (435) (454)

Transfers to held for sale (91) - - (91)

Impairments (85) (2) - (87)

Reversal impairments 45 - - 45

Depreciation (95) (149) - (244)

Depreciation of operating lease assets - - (594) (594)

Other (8) (1) (13) (22)

Closing balance as per

December 311,343 312 2,800 4,455

Cost 2,628 1,137 4,091 7,856


Net carrying amount as per

December 311,343 312 2,800 4,455

The impairments and reversal impairments recognized per

December 31, 2019 relate to property for own use in segment

Domestic Retail Banking. Vacancy of property as a result of

the restructuring (decreasing usage of square meters) triggered

impairments calculations and resulted in impairments for

a total amount of EUR 10 million (2018: EUR 85 million).

Impairments were reversed for an amount of EUR 32 million (2018:

EUR 45 million) as a result of increased own use of properties.

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LeasesRabobank has several lease contracts as a lessee, predominantly

related to property used as office and cars for employees. The

consolidated statement of financial position shows the following

amounts relating to leases:


Property-lease 443

Car-lease 34

Other leases 17

Total right-of-use assets 494

Total lease liabilities 542

Additions to right-of-use assets during 2019 were 36. The

consolidated statement of income shows the following amounts

relating to leases:


Property-lease 79

Car-lease 14

Other leases 6

Depreciation charge of right-of-use assets 99

Interest expense 18

Expense relating to short-term leases -

Expense relating to leases of low-value assets 12

Expense relating to variable lease payments notincluded in lease liabilities -

The total cash outflow for leases in 2019 was 60.

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17. Investment Properties


Cost 259 291

Accumulated depreciation and impairments (66) (98)

Net carrying amount as per January 1 193 193

Opening balance 193 193

Purchases 55 28

Sales (7) (22)

Transfers from other assets 124 -

Depreciation (6) (8)

Impairments - (2)

Reversal impairment (1) 2

Other 13 2

Closing balance as per December 31 371 193

Cost 454 259

Accumulated depreciation and impairments (83) (66)

Net carrying amount as per December 31 371 193

The fair value of the investment properties amounts to

EUR 402 million (2018: EUR 208 million). External valuations

of investment properties were performed by duly certified

external parties in accordance with RICS valuation standards or

other equivalent standards. Investment properties are valued, for

determining of fair value, based on the methodologies which are

most appropriate for that property. This includes the discounted

cash flow valuation method and the capitalisation method based

on net initial yields for comparable transactions.

Valuations

2019 2018

External valuations 60% 100%

Internal valuations 40% 0%

Most investment property is unique. There is often no active

market for similar properties in the same location and condition.

Appraisals of the different types of investment properties are

based on many parameters, which are derived from current

contracts and market information as much as possible. A

certain degree of judgment and estimation cannot be avoided.

Therefore, all investment property has been designated as level

3 in line with the fair value classification under IFRS 13. When

determining the fair value of investment property, the parameters

used include the following, depending on the type of property:

current and expected future market rent per m2, current and

expected future vacancy rates, location of the property, the

marketability of the property, the average discount rate, the

development budget, and any credit risks.

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18. Other Assets

Other Assets


Receivables and prepayments 1,743 2,325

Accrued interest 950 1,041

Precious metals, goods and warehouse receipts 1,189 445

Real estate projects 1,810 1,694

Accrued income 408 393

Employee benefits 28 4 6

Other assets 506 527

Total other assets 6,610 6,431

Real Estate Projects


Building sites 1,299 1,200

Work in progress 498 463

Finished goods 13 31

Total real estate projects 1,810 1,694

In 2019, the net realisable value of all current land operations and

sites not subject to a zoning plan was calculated and compared

with the carrying amount. This resulted in a release of provisions

of EUR 14 million (2018: release of EUR 89 million).

Movements in Provisions for Real Estate Projects

Amounts in millionsof euros

Balance onJanuary 1,

2019Additions/

release

Withdrawals/other

changes

Balance onDecember

31, 2019

Building sites 411 (14) (23) 374

Work in progress 65 (1) (6) 58

Completeddevelopments

4 - - 4

Total 480 (15) (29) 436

Amounts in millionsof euros

Balance onJanuary 1,

2018Additions/

release

Withdrawals/other

changes

Balance onDecember

31, 2018

Building sites 536 (89) (36) 411

Work in progress 80 (7) (8) 65

Completeddevelopments

8 - (4) 4

Total 624 (96) (48) 480

Work in Progress


Residential property in preparation and under construction 1,232 957

Commercial property in development and under construction 23 13

Instalments invoiced in advance – residential property (736) (507)

Instalments invoiced in advance – commercial property (21) -

Total work in progress 498 463

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19. Non-Current Assets Held for Sale

The non-current assets held for sale amount to EUR 435 million

(2018: EUR 268 million) and include assets related to the sale of

Rabobank Indonesia for EUR 203 million, various types of real

estate in the segments Domestic Retail Banking and Real Estate

for an amount of EUR 113 million and a stake in a financial

service provider in Africa for an amount of EUR 108 million. The

carrying values are expected to be realized through sale rather

than through continuing use.

Sale of Rabobank IndonesiaOn December 11, 2019, Rabobank has signed a conditional

sale and purchase agreement to sell Rabobank Indonesia which

predominantly consists of a loan portfolio to retail customers.

The completion of the transaction is expected to take place in

the first half year of 2020. As per December 31, 2019 Rabobank

Indonesia has been classified as held for sale according to IFRS

5. The assets and liabilities are included in the Wholesale, Rural

& Retail segment and are measured at fair value less cost to sell

which led to an impairment of EUR 10 million recognised in Other

administrative expenses.

20. Deposits from Credit Institutions


Demand deposits 1,415 986

Fixed-term deposits 18,244 18,280

Repurchase agreements 1,522 91

Other deposits from credit institutions 63 40

Total deposits from credit institutions 21,244 19,397

21. Deposits from Customers


Current accounts 89,010 85,511

Deposits with agreed maturity 63,627 71,203

Deposits redeemable at notice 180,159 175,932

Repurchase agreements 32 13

Fiduciary deposits 9,522 9,750

Other deposits from customers 186 1

Total deposits from customers 342,536 342,410

Short-term deposits from central banks amounting to

EUR 17 billion (2018: EUR 20 billion) are included in Deposits

with agreed maturity.

22. Debt Securities in Issue


Certificates of deposit 19,387 19,927

Commercial paper 7,312 9,802

Issued bonds 84,276 86,793


Total debt securities in issue 130,403 130,806

23. Financial Liabilities Held forTrading

Financial liabilities held for trading are mainly negative fair values

of derivatives and delivery obligations that arise on the short

selling of securities. Securities are sold short to realize gains from

short-term price fluctuations. The securities needed to settle short

sales are acquired through securities lending and repurchasing

agreements. The fair value of the shares and bonds sold short are

EUR 399 million (2018: EUR 400 million).

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24. Financial Liabilities Designatedat Fair Value


Debt securities issued 5,592 5,906

Deposits 736 708

Total financial liabilities designated at fair value 6,328 6,614

The cumulative change in fair value of the financial liabilities

designated at fair value attributable to changes in the own credit

risk of Rabobank amounts to EUR 191 million before taxes (2018:

EUR 41 million).

The change in fair value that is attributable to changes in own

credit risk is calculated by deducting on a note by note basis the

current fair value of the structured notes portfolio at the reporting

date from the fair value recalculated based on the prevailing

credit curve at the time of origination, with all other pricing

components unchanged. This calculation reflects the amount

that can be attributed to the change in the own credit risk of

Rabobank since the origination of these structured notes.

Transfers of the cumulative gains or losses within equity during

the period and the amounts presented in other comprehensive

income that are realized at derecognition are disclosed in Section

31 in the movement schedule of the "Revaluation Reserve – Fair

Value Changes Due to Own Credit Risk on Financial Liabilities

Designated at Fair Value".

The carrying value of the issued structured notes designated at

fair value is EUR 138 million (2018: EUR 318 million) lower than the

amount Rabobank is contractually obliged to repay to the holders

of the structured notes.

25. Other Liabilities


Payables 4,022 4,241

Accrued interest 2,055 1,894

Lease liabilities 542 n/a

Employee benefits 28 230 254

Other (14) (47)

Total other liabilities 6,835 6,342

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26. Provisions


Restructuring provision 271 318

Provision for legal issues 198 469

Impairment allowances on loan commitmentsand financial guarantees 4.3.4 146 109

Other provisions 168 230

Total provisions 783 1,126

Amounts in millions of eurosRestruct-uringprovision

Provisionforlegal issues

Otherprovisions Total

Opening balance on January 1, 2019 318 469 230 1,017

Change in accounting policy IFRS 16 - - (25) (25)

Additions 122 68 88 278

Withdrawals (140) (264) (114) (518)

Releases (29) (75) (11) (115)

Closing balance on December

31, 2019271 198 168 637

Opening balance on January 1, 2018 332 591 594 1,517

Additions 213 109 108 430

Withdrawals (134) (214) (415) (763)

Releases (93) (17) (57) (167)

Closing balance on December

31, 2018318 469 230 1,017

In the additions to the restructuring provision, an amount

of EUR 75 million (2018: EUR 151 million) is included for

the reorganization program of the local Rabobanks. This

reorganization provision consists of future payments relating

to redundancy pay and other costs directly attributable to the

reorganization program. These expenses are included when

a redundancy scheme is drawn up and communicated to

stakeholders. The expected outflow of funds will occur in 2020

and 2021.

An addition of EUR 40 million (2018: EUR 52 million) in the

provision for legal issues was made for the SME interest rate

derivatives recovery framework. For additional information,

please refer to Section 4.10, "Legal and arbitration proceedings".

Maturities of Provisions

Amounts in millions of eurosNotexceedingone year

Longerthan 1year butless than5 years

Longerthan5 years

Total

On December 31, 2019 615 166 2 783

On December 31, 2018 917 207 2 1,126

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27. Deferred Taxes

Deferred tax assets and liabilities are measured for all temporary

differences using the liability-method. No deferred tax asset has

been recognized for unused tax losses totalling EUR 14 million

(2018: EUR 1,458 million).

Deferred tax assets recognized in respect of carry forward losses

can only be utilized if taxable profits are realized in the future.

On December 31, 2019, Rabobank expects that sufficient taxable

profits will be generated within the applicable periods.

Deferredtax assets

Deferredtax

liabilities

Deferredtax

charges

Tax onother

compre-hensiveincome



Pensions and other post-employment benefits 30 - 1 1

Impairment allowances onfinancial assets 229 - 46 -

Provisions 15 (3) 3 -

Hedge accounting 147 - (42) -

Carry forward losses 219 (150) 38 -

Tax credits 106 (63) 50 -

Goodwill and other intangible assets - - 2 -

Revaluation reserves for financialassets at fair value through othercomprehensive income

(41) 6 (7) 14

Revaluation reserves – Cashflow hedges 6 - 3 2

Revaluation reserves – Costsof hedging (13) - 6 (1)

Revaluation reserve – Fair valuechanges due to own credit riskon financial liabilities designated atfair value

40 - - (31)

Property and equipment, includingoperating leases 75 672 (10) -

Other temporary differences 120 78 32 -

Total 933 540 122 (15)

Deferredtax assets

Deferredtax

liabilities

Deferredtax

charges

Tax onother

compre-hensiveincome



Pensions and other post-employment benefits 42 (2) 8 -

Impairment allowances onfinancial assets 296 (16) (52) -

Provisions 33 (2) 9 -

Hedge accounting 105 - (6) -

Carry forward losses 187 (113) (39) -

Tax credits 121 (68) 28 -

Goodwill and other intangible assets 14 - - -

Revaluation reserves for financialassets at fair value through othercomprehensive income

(35) 2 (26) (35)

Revaluation reserves – Cashflow hedges 11 - (2) 3

Revaluation reserves – Costsof hedging - 8 - 8

Revaluation reserve – Fair valuechanges due to own credit riskon financial liabilities designated atfair value

8 - - 40

Property and equipment, includingoperating leases 58 647 199 -

Other temporary differences 325 (4) 92 -

Total 1,165 452 211 16

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28. Employee Benefits


Employee benefits – assets (4) (6)

Employee benefits – liabilities 230 254

Total employee benefits 226 248

Pension plans 118 118

Other employee benefits 108 130

Total employee benefits 226 248

28.1 Pension Plans

Rabobank has placed its Dutch pension plan with Rabobank

Pension Fund. The scheme is a collective defined contribution

plan with a pensionable age of 68 and a target accrual percentage

of 2. Each year Rabobank deposits pension contributions into

the Rabobank Pension Fund based on a fixed system aimed

at achieving the target pension accrual for services provided

during the year of service based on a conditional career-average

plan with a conditional indexation. Rabobank complies with

all its pension obligations by paying the annual pension

premium. Rabobank therefore has no financial liabilities with

regard to underlying membership years and already accrued

pension rights.

The Dutch pension plan qualifies as a defined contribution plan

under IAS 19. Rabobank’s obligation is limited to the premium

payments owed, less previously made payments. As of December

31, 2019, a few small plans qualify as defined benefit pension

plans. These are career-average defined benefit pension plans,

administered by a fund or otherwise that are related to the

remuneration of employees upon retirement and which mostly

pay annual pensions. Annual contributions are paid to the funds

at a rate necessary to adequately finance the accrued liabilities of

the plans calculated in accordance with local legal requirements.

The assets related to the plans maintained in a fund are held

independently of Rabobank assets in separate funds managed by

trustees. The obligations are valued each year by independent

actuaries based on the method prescribed by IFRS. The most

recent actuarial valuations were performed at the end of 2019.

The tables with the weighted averages of the main actuarial

assumptions, the sensitivity analysis and the future premium

payments relate to the pension plan of Friesland Bank.


Defined benefit obligation 546 487

Fair value of plan assets 428 369

Net defined benefit obligation 118 118

Movements in plan assets and liabilities:


Defined benefit obligation


Exchange rate differences 1 (1)

Interest expense 10 16

Benefits paid (15) (22)

Settlements (13) (232)

Other 3 3

Experience adjustments 3 (1)

Actuarial gains and lossesarising from changes indemographic assumptions

1 (1)

Actuarial gains and losses arising fromchanges in financial assumptions 69 (23)

Defined benefit obligation on

December 31546 487

Fair value of plan assets



Interest income 8 9

Contributions paid by employer 6 30

Benefits paid (15) (22)

Settlements - (240)

Other 2 (2)

Experience adjustments 4 -

Remeasurements arising fromchanges in financial assumptionsplan assets

49 (1)

Fair value of plan assets on

December 31428 369

The costs recognized in profit and loss are shown in the

table below.


Interest expense on liabilities 10 16

Interest income on plan assets (8) (9)

Losses/(gains) on curtailments,settlements and costs (1) 6

Total cost of defined benefit

pension plans1 13

Main Actuarial Assumptions

The main actuarial assumptions for the valuation of the defined

benefit obligation are the discount rate, the salary increases, and

the price inflation. Recent mortality tables have also been used for

the valuation of the respective plans. The weighted averages of

the actuarial financial assumptions are shown in the table below

(in % per year):

2019 2018

Discount rate 0.8% 2.0%

Salary increases 1.3% 1.6%

Price inflation 1.3% 1.6%

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Sensitivity Analysis

Rabobank is exposed to risks regarding their defined benefit

plans related to the assumptions disclosed in the table below.

The sensitivity analysis of these most significant assumptions

has been determined based on changes of the assumptions

occurring at the end of the reporting period that are deemed

reasonably possible.

Amounts in millions of euros Changein assumption

Effect on defined benefit Effect on defined benefit

obligation of increase obligation of decrease

2019 2018 2019 2018

Discount rate 0.25% (16) (12) 17 13

Salary increases 0.25% 7 6 (7) (6)

Price inflation 0.25% - - - -

Mortality 1 year - 12 - (12)

Estimated Contribution

The estimated contributions to defined benefit pension plans for

2019 are approximately EUR 9 million (2018: EUR 5 million).

Average Duration

The average duration of the defined benefit plan of Friesland Bank

is 18 years (2018: 17 years)

28.2 Other Employee Benefits

Other employee benefits mainly comprise liabilities for future

long-service awards for an amount of EUR 32 million (2018:

EUR 37 million).

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29. Subordinated Liabilities


Issued by Rabobank 15,777 16,485

Other 13 13

Total subordinated liabilities 15,790 16,498

In the following table details of the issues of subordinated

liabilities are shown:

Subordinated Liabilities issued by Rabobank

Notional

(Amountsin millions) Currency Coupon

Year ofissuance Year of maturity

500 USD 4.00% 20172029, early repaymentdate 2024

1,500 USD 3.75% 2016 2026

225 AUD 5.00% 20152025, early repaymentdate 2020

475 AUD Variable 20152025, early repaymentdate 2020

1,500 USD 4.375% 2015 2025

1,250 USD 5.25% 2015 2045

1,000 GBP 4.625% 2014 2029

2,000 EUR 2.50% 20142026, early repaymentdate 2021

50,800 JPY 1.429% 2014 2024

1,000 EUR 3.875% 2013 2023

1,750 USD 4.625% 2013 2023

1,250 USD 5.75% 2013 2043

1,000 EUR 4.125% 2012 2022

500 GBP 5.25% 2012 2027

1,500 USD 3.95% 2012 2022

1,000 EUR 3.75% 2010 2020

10 EUR 4.21% 2005 2025

10 EUR 5.32% 2004 2024

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30. Contingent Liabilities


Rabobank enters into irrevocable loan commitments and

contingent liabilities consisting of financial guarantees and

standby letters of credit on behalf of its customers. Under these

contracts Rabobank is required to perform under an obligation

agreement or to make payments to the beneficiary on third

party's failure to meet its obligations. The following table shows

the amount of the maximum potential utilization of credit related

contingent liabilities.


Financial guarantees 3,726 3,377

Loan commitments 35,089 32,583

Other commitments 19,353 20,273

Credit related contingent liabilities 58,168 56,233

Contingent Liabilities Related to Litigation

Rabobank is involved in a number of legal and arbitration

proceedings in the Netherlands and other countries, including

the United States, in connection with claims brought by

and against Rabobank Group arising from its operations.

The maximum amount of non-remote measurable contingent

liabilities relating to claims is EUR 288 million (2018:

EUR 197 million). For additional information, refer to Section

4.10 "Legal and Arbitration Proceedings".

Payments Receivable from Operating Leases

Rabobank has concluded various operating lease contracts as

lessor. The future minimum lease payments receivable from

non-cancellable operating leases can be broken down as follows:


Not exceeding 1 year 692

1 to 2 years 547

2 to 3 years 351

3 to 4 years 212

4 to 5 years 158

More than 5 years 112

Total payments receivable from operating leases 2,072


Not exceeding 1 year 589


Longer than 5 years 107

Total payments receivable from operating leases 1,828

No contingent lease payments were recognized as assets

during 2018.

Other Contingent Liabilities

The contractual commitments relating to the acquisition,

construction and development of work in progress and

investment properties amounts to EUR 484 million (2018:

EUR 518 million).

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31. Reserves and Retained Earnings


Foreign currency translation reserves (742) (817)

Revaluation reserve – Financial assets at fair value throughother comprehensive income 308 240

Revaluation reserve – Cash flow hedges (26) (40)

Revaluation reserve – Costs of hedging 46 30

Revaluation reserve – Assets held for sale (26) (35)

Remeasurement reserve – Pensions (170) (145)

Revaluation reserve – Fair value changes due to own creditrisk on financial liabilities designated at fair value (143) (31)

Retained earnings 28,910 28,062

Total reserves and retained earnings at year-end 28,157 27,264

Changes in the reserves were as follows:


Foreign currency translation reserves

Opening balance (817) (938)

Translation of foreign operations 217 (16)

Changes in hedging instrument (73) 132

Changes at associates and joint ventures (5) (16)

Transferred to profit or loss (64) 21

Closing balance (742) (817)

Revaluation reserves – Debt instruments at fair value

through other comprehensive income

Opening balance 23 -

Change in accounting policy - 243

Foreign exchange differences - (2)

Changes at associates and joint ventures 104 (68)

Fair value changes 20 (62)

Transferred to profit or loss (21) (88)

Transfers to assets held for sale 5 -

Closing balance 131 23

Revaluation reserves – Equity instruments at fair value

through other comprehensive income



Foreign exchange differences - (1)

Changes at associates and joint ventures - -

Fair value changes 39 (6)

Transferred to retained earnings 1 (1)

Transferred to assets held for sale (71) -

Other (9) -


Revaluation reserve – Cash flow hedges



Foreign exchange differences 19 8

Fair value changes (10) (16)

Transferred to profit or loss 5 7


Revaluation reserve – Costs of hedging



Foreign exchange differences (2) (1)

Fair value changes 20 31

Transferred to profit or loss (2) -


Revaluation reserve – Assets held for sale


Transfers from revaluation reserves 66 -

Fair value changes 9 -

Disposal of assets (66) -


Remeasurement reserve – Pensions


Changes at associates and joint ventures (5) 4

Remeasurements defined benefit plans (20) 20

Settlement - 56


Revaluation reserve – Fair value changes due to own

credit risk on financial liabilities designated at fair value



Fair value changes (112) 111


Retained earnings


Change in accounting policies - (475)

Net profit 2,157 2,944

Payments on equity instruments (904) (1,059)

Redemption of Capital Securities (493) (79)

Disposal of financial assets at fair value through othercomprehensive income 71 -

Settlement pension plan - (56)

Other 17 10

Closing balance 28,910 28,062

Total reserves and retained earnings 28,157 27,264

32. Rabobank Certificates

Rabobank Certificates represent participation rights issued by

Rabobank via the foundation Stichting Administratie Kantoor

Rabobank Certificaten and belong to the Common Equity Tier 1

capital of Rabobank. As from 2014, the Rabobank Certificates are

listed on Euronext Amsterdam.

The total number of certificates is 297,961,365 with a nominal

value of EUR 25 each. The actual payment policy of Rabobank

pursuant to the Participation Rules in respect of the participation

issued by Rabobank (and via AK Foundation in respect of the

Rabobank Certificates) can be found on the Rabobank website.

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The distribution paid per certificate in 2019 was EUR 1.625 (2018:

EUR 1.625). The Managing Board is entitled to decide not to pay

the distribution. Unpaid distributions will not be paid at a later

date. The amounts listed in the table below are based on the

nominal value of EUR 25 per Rabobank Certificate. Cash flows

arising from changes during the year in the Rabobank Certificates

are included in the consolidated statement of cash flows.


Changes during the year:


Change in Rabobank Certificates during the year 4 5


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33. Capital Securities and TrustPreferred Securities IV

Capital Securities and Trust Preferred Securities IV can be broken

down as follows:


Capital Securities issued by Rabobank 5,264 6,493

Capital securities issued by subsidiaries - 164

Trust Preferred Securities IV - 389

Total Capital Securities and Trust Preferred Securities IV 5,264 7,046

Capital Securities

All Capital Securities are perpetual securities and have no expiry

date. The discretionary distribution on Capital Securities per issue

is as follows:

33.1 Capital Securities Issued by Rabobank

Issue of EUR 1,500 Million

The coupon is 5.5% per year and is made payable every six months

in arrears as of the issue date (January 22, 2015), for the first time

on June 29, 2015. The Capital Securities are perpetual and first

redeemable on June 29, 2020. As of June 29, 2020, and subject to

Capital Securities not being redeemed early, the distribution is set

for a five-year period, but without a step-up, based on the 5-year

euro swap rate + 5.25%. The coupon is fully discretionary.


The coupon is 6.625% per year and is made payable every six

months in arrears as of the issue date (April 26, 2016), for the first

time on June 29, 2016. The Capital Securities are perpetual and

first redeemable on June 29, 2021. As of June 29, 2021, and subject

to Capital Securities not being redeemed early, the distribution

is set for a five-year period, but without a step-up, based on the

5-year euro swap rate + 6.697%. The coupon is fully discretionary.



months in arrears as of the issue date (September 11, 2018), for

the first time on December 29, 2018. The Capital Securities are

perpetual and first redeemable on December 29, 2025. As of

December 29, 2025, and subject to Capital Securities not being

redeemed early, the distribution is set for a five-year period, but

without a step-up, based on the 5-year euro swap rate + 4.098%.

The coupon is fully discretionary.



months in arrears as of the issue date (September 9, 2019), for

the first time on December 29, 2019. The Capital Securities are

perpetual and first redeemable on December 29, 2026. As of

December 29, 2026, and subject to Capital Securities not being

redeemed early, the distribution is set for a five-year period, but

without a step-up, based on the 5-year euro swap rate + 3.702%.

The coupon is fully discretionary.

Issue of GBP 250 Million


months in arrears as of the issue date (June 10, 2008), for the first

time on December 10, 2008. As of June 10, 2038, the coupon

will be made payable every six months based on the six-month

GBP Libor plus an annual 2.825% mark-up. The coupon is payable

at the issuer’s discretion. In case Rabobank does not use its

discretionary power to not pay distributions on the Rabobank

Certificates, payment on this instrument will also apply.

33.2 Capital Securities Issued by Rabobank That Were

Redeemed During the Reporting Year

Issue of EUR 500 Million

Rabobank issued the EUR 500 million Capital Securities on

February 27, 2009. In accordance with the Terms and Conditions

of these Capital Securities, Rabobank has redeemed the Capital

Securities on the first call date, being February 27, 2019.

Issue of USD 2,872 Million

Rabobank issued the USD 2,872 million Capital Securities on June

4, 2009. In accordance with the Terms and Conditions of these

Capital Securities, Rabobank has elected to redeem these Capital

Securities on the first call date being June 30, 2019.

33.3 Capital Securities Issued by Subsidiaries

of Rabobank That Were Redeemed During the

Reporting Year

Issue of NZD 280 Million

Rabo Capital Securities Limited issued the NZD 280 million Capital

Securities on May 27, 2009. In accordance with the Terms and

Conditions of these Capital Securities, Rabo Capital Securities

Limited redeemed these Capital Securities on the first call date

being June 18, 2019.

33.4 Trust Preferred Securities IV That Were Redeemed

During the Reporting Year

Issue of GBP 350 Million

Rabobank Capital Funding Trust IV, Delaware, a group company of

Rabobank, issued GBP 350 million non-cumulative Trust Preferred

Securities on October 21, 2004. In accordance with the Terms and

Conditions of these Trust Preferred Securities, Rabobank Capital

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Funding Trust IV redeemed these Trust Preferred Securities on the

first call date being December 31, 2019.



Redemption of Trust Preferred Securities IV (383) -

Exchange rate differences and other (6) (5)

Closing balance - 389

34. Other Non-Controlling Interests

This item relates to shares held by non-controlling interests in

Rabobank subsidiaries.



Net profit 46 60


Entities included in consolidation/deconsolidated - 9

Dividends (50) (58)

Other (4) (2)


The Rabobank subsidiaries with the largest non-controlling

interests are Cargobull Finance Holding and AGCO Finance SNC.

Both entities are accounted for in the segment Leasing.

Cargobull Holding B.V. is based in Eindhoven, Netherlands, and

Rabobank has a capital and voting right interest of 51%. The

non-controlling interests with regard to this entity amount to

EUR 66 million (2018: EUR 60 million). The following financial

data apply:

Cargobull Holding B.V.


Revenues 57 57

Net profit 11 13



Profit attributable to non-controlling interests 6 7

Dividends paid to non-controlling interests - 22

Financial assets 704 693

Other assets 138 152

Financial liabilities 671 697

Other liabilities 37 25

AGCO Finance SNC is located in Beauvais, France, and Rabobank

has a capital and voting right interest of 51.0%. The non-

controlling interests with regard to this entity amount to

EUR 97 million (2018: EUR 106 million). The following financial

data apply:

AGCO Finance SNC


Revenues 37 36

Net profit (10) 16


Total comprehensive income (10) 16

Profit attributable to non-controlling interests (5) 8

Dividends paid to non-controlling interests 4 3

Financial assets 1,800 1,536

Other assets 14 55

Financial liabilities 1,554 1,348

Other liabilities 62 34

35. Changes in Liabilities Arisingfrom Financing Activities

Amounts in millions of eurosDebtsecuritiesin issue

Subordinatedliabilities Total


Opening balance 130,806 16,498 147,304

Changes from financing cash flows (3,507) (999) (4,506)

Effect of changes in foreign exchange rates 1,457 270 1,727

Other non-cash changes 1,647 21 1,668

Closing balance 130,403 15,790 146,193


Opening balance 134,423 16,170 150,593

Changes from financing cash flows (6,039) (21) (6,060)

Effect of changes in foreign exchange rates 272 342 614

Other non-cash changes 2,150 7 2,157

Closing balance 130,806 16,498 147,304

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36. Net Interest Income


Interest income

Cash and cash equivalents 390 347

Loans and advances to credit institutions 154 295

Loans and advances to customers 14,935 15,001

Derivatives used for fair value hedge-accounting 9 (320)

Financial assets at fair value through othercomprehensive income 410 637

Interest income from financial assets using the effective

interest method15,898 15,960

Financial assets held for trading 29 36

Financial assets designated at fair value 2 1

Financial assets mandatorily at fair value 27 49

Interest income on financial liabilities with a negativeinterest rate 112 152

Other 89 83

Other interest income 259 321

Total interest income 16,157 16,281

Interest expense

Deposits from credit institutions 182 173

Deposits from customers 2,598 2,587

Debt securities in issue 3,025 3,026

Financial liabilities held for trading 5 10

Derivatives held as economic hedges 696 758

Financial liabilities designated at fair value 164 199

Subordinated liabilities 728 713

Interest expense on financial assets with a negativeinterest rate 249 259

Other 27 (3)

Total interest expense 7,674 7,722

Net interest income 8,483 8,559

Capitalized interest attributable to qualifying assets amounted

to EUR 17 million (2018: EUR 18 million). The average interest

rate applied in determining interest charges to be capitalized

ranges between 1% and 6% (2018: between 1% and 6%). The

interest income on credit-impaired financial assets accrued is

EUR 420 million (2018: EUR 485 million).

37. Net Fee and Commission Income


Fee and commission income

Payment services 754 726

Lending 569 564

Purchase and sale of other financial assets and handling fees 334 326

Insurance commissions 297 276

Investment management 4 8

Custodial fees and securities services 5 6

Other commission income 188 200

Total fee and commission income 2,151 2,106

Fee and commission expense

Payment services 58 56

Purchase and sale of other financial assets and handling fees 53 61

Custodial fees and securities services 8 9

Other commission expense 43 49

Total fee and commission expense 162 175

Net fee and commission income 1,989 1,931

38. Net Income from OtherOperating Activities


Income from real estate activities 1,238 1,754

Expenses from real estate activities 969 1,352

Net income real estate activities 269 402

Income from operational lease activities 887 768

Expenses from operational lease activities 700 601

Net income from operational lease activities 187 167

Income from investment property 29 25

Expenses from investment property 15 11

Net income from investment property 14 14

Net income from other operating activities 470 583

All expenses from investment properties relate to properties that

are leased.

39. Income from Investments inAssociates and Joint Ventures


Rabobanks share of profit of investments in associates andjoint ventures 193 242

Result on disposal of investments in associates andjoint ventures (1) 1

Income from investments in associates and

joint ventures192 243

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40. Gains/ (Losses) on FinancialAssets and Liabilities at FairValue through Profit or Loss


Gains/ (losses) on financial assets and liabilities held fortrading and from derivatives held for trading 79 225

Gains/ (losses) on financial assets designated at fair value - (5)

Gains/ (losses) on financial assets mandatorily at fair valuethrough profit or loss 141 21

Gains/ (losses) on financial liabilities designated at fair valueand derivatives used to hedge the interest rate risk of thosefinancial liabilities

(64) (3)

Total gains/ (losses) on financial assets and liabilities at

fair value through profit or loss156 238

Gains/ (losses) on other financial liabilities designated at fair value

and derivatives used to hedge the interest rate risk of those

financial liabilities mainly relates to fair value changes of the

structured notes portfolio attributable to changes in i) market

interest rates and ii) day-one gains that are directly recognized in

profit or loss for an amount of EUR 5 million (2018: EUR 5 million).

The results related to fair value changes of the structured notes

due to changes in market interest rates are largely offset by the

fair value changes of the derivatives used to hedge this interest

rate risk.


Gains/ (losses) on interest rate instruments 227 (310)

Gains/ (losses) on equity instruments (5) 24

Gains/ (losses) on foreign currency instruments (20) 524

Translation gains/ (losses) on foreign currency 26 14

Other (72) (14)

Gains/ (losses) on financial assets and liabilities at fair

value through profit or loss156 238

41. Other Income


Gains/ (losses) arising from the derecognition of financialliabilities at amortised cost (1) (10)

Result on sale of group companies 373 119

Other 153 231

Other income 525 340

The gain on sale of Rabobank National Association as disclosed

below is included in line-item 'Result on sale of group companies'.

Sale of Rabobank National AssociationOn March 15, 2019, Rabobank has signed transaction

documentation to sell Rabobank National Association (RNA)'s

retail, business banking, commercial real estate, mortgage,

wealth management and other non-Food & Agri business to

Mechanics Bank. Prior to the closing, at July 1, 2019, the

Food & Agri loan portfolio of RNA with a carrying amount of

EUR 4.0 billion has been transferred to Rabo Agrifinance. The

transaction has been completed in the third quarter of 2019.

The total consideration received amounted to USD 2.1 billion

(EUR 1.9 billion) consisting of a 9.9% equity stake in Mechanics

Bank measured at EUR 220 million and cash for an amount of

USD 1.9 billion (EUR 1.7 billion), including a pre-closing dividend

of USD 600 million (EUR 545 million). The sale led to a gain of

EUR 380 million recognised in 'Other income' in the Wholesale,

Rural & Retail segment.

The carrying amounts of assets and liabilities as at the date of

sale were:


Cash and cash equivalents 2,707

Loans and advances to customers 4,600

Financial assets at fair value through othercomprehensive income

2,152

Other assets 529

Total assets 9,989

Deposits from customers 8,853

Other liabilties 125

Total liabilities 8,978

42. Staff Costs


Wages and salaries 2,660 2,698

Social security contributions and insurance costs 331 348

Pension costs - defined contribution plans 408 400

Pension costs - defined benefit pension plans 1 13

Training and travelling expenses 191 206

Addition/ (release) of other post-employment provisions 18 8

Other staff costs 1,212 1,195

Staff costs 4,821 4,868

Expressed in FTEs, the number of internal and external employees

in Rabobank was 43,822 (2018: 43,247).

Rabobank has a Group Remuneration Policy which is updated

on a regular basis and includes the provisions under the Dutch

Act on Remuneration Policies for Financial Companies. Insofar

as employees in the Netherlands are still eligible for variable

remuneration, it never amounts to more than an average of

20% of the fixed income. Outside the Netherlands, any variable

remuneration never amounts to more than 100% of the fixed

income. Insofar as identified staff (employees who can have a

material influence on the risk profile of Rabobank Group) are

eligible for variable remuneration, it is awarded for such a period

that the risks associated with the underlying business activities

are adequately taken into account. Payment of a significant

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portion of variable remuneration is therefore deferred; 40% of

the variable pay is paid on a deferred basis. If the total variable

pay exceeds €500,000, 60% of the total variable pay will be

deferred. The immediate portion of variable remuneration is

unconditional, whereas the deferred portion is conditional. The

deferred portion vests after three years if the conditions are

met, or after five years when rewarded to ‘senior management’.

Among other things, it is assessed whether there has been a

significant reduction in financial performance or a significant

change in risk management at Rabobank or one of its business

unit that puts the circumstances assessed when the relevant

variable remuneration was awarded in a different perspective. In

principle, the right to any provisionally allocated remuneration

lapses when the staff member’s employment ends. 50% of both

the direct and the deferred portion of the variable remuneration

is allocated in cash. The cash component of the direct portion is

immediately awarded following allocation. The cash component

of the deferred portion is awarded to employees only after vesting

(after a period of three or five years). 50% of the direct and the

deferred portion of the variable remuneration is allocated in the

form of an instrument (instrument component) i.e. the Deferred

Remuneration Note (DRN). The value of a DRN is linked directly

to the price of a Rabobank Certificate (RC) as listed on the NYSE

Euronext. The instrument component is converted into DRNs at

the time of allocation on completion of the performance year. The

number of DRNs is determined on the basis of the closing rates

for Rabobank Certificates, as traded on the NYSE Euronext during

the first five trading days of February of each year. This therefore

represents both the instrument component of the direct and the

deferred portion of the variable remuneration. The final value

of the DRNs relating to the deferred portion is established on

vesting (after a period of three or five years). The payment of the

instrument component is subject to a one year retention period.

After the end of the retention period, the employee receives,

for each DRN (or a portion thereof) an amount in cash that

corresponds with the value of the DRN at that moment.

Payment of the variable remuneration is measured in accordance

with IAS 19 Employee benefits. The immediate portion of

the variable remuneration is recognized in the performance

year, whereas the deferred portion is recognised in the years

before vesting.

The same system also applies, in broad terms, to non-identified

staff, although no deferral policy applies to the first one hundred

thousand euros and both the immediate and the deferred portion

are paid fully in cash, which means that no DRNs are awarded.

On December 31, 2019, the costs of equity instrument-based

payments were EUR 12 million (2018: EUR 14 million) and a liability

of EUR 36 million was recognized (2018: EUR 34 million) of which

EUR 18 million (2018: EUR 16 million) was vested. The costs of

variable remuneration paid in cash were EUR 160 million (2018:

EUR 180 million). The number of DRNs outstanding is presented

in the following table.

in thousands 2019 2018


Awarded during the year 378 455

Paid during the year (356) (348)

Changes from previous year (73) (35)


The value of a DRN is linked directly to the price of a Rabobank

Certificate. The estimated payments to be made for the variable

remuneration are shown in the following table.

On December 31, 2019 Year of payment

Amounts in millions of euros 2020 2021 2022 2023 2024 2025 2026 Total

Variable remuneration, excluding DRNs 163.9 7.4 5.8 4.2 0.2 0.1 - 181.6

DRNs 16.0 17.6 4.6 3.2 1.7 0.2 0.1 43.4

Total 179.9 25.1 10.4 7.3 1.9 0.3 0.1 225.0

On December 31, 2018 Year of payment

Amounts in millions of euros 2019 2020 2021 2022 2023 2024 2025 Total

Variable remuneration, excluding DRNs 181.0 13.4 3.5 1.7 0.1 0.1 - 199.8

DRNs 10.2 15.8 10.6 3.2 1.7 0.1 0.1 41.8

Total 191.2 29.2 14.2 4.9 1.8 0.2 0.1 241.6

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43. Other Administrative Expenses


Additions and releases of provisions 163 262

IT expenses and software costs 530 426

Consultants fees 388 420

Publicity expenses 150 151

Result on derecognition and impairments on(in)tangible assets (4) 66

Other expenses 647 865

Other administrative expenses 1,874 2,190

44. Depreciation and Amortization


Depreciation of tangible fixed assets 189 244

Depreciation of right-of-use assets 99 n/a

Amortization of intangible assets 132 144

Depreciation and amortization 420 388

45. Impairment Charges onFinancial Assets


Loans and advances to customers andcredit institutions 1,035 315

Financial assets at fair value through othercomprehensive income (1) (5)

Recoveries following write-off (103) (117)

Loan commitments and financial guarantees 44 (3)

Impairment charges on financial assets 975 190

46. Regulatory Levies

The regulatory levies consist of bank tax, bank levies and

contributions to the Single Resolution Fund and contributions to

the Deposit Guarantee Scheme.


Bank tax Netherlands 133 139

Bank tax other countries 8 31

Contribution Single Resolution Fund 206 190

Contribution Deposit Guarantee Fund 137 118

Regulatory levies 484 478

47. Income Tax


Income tax

Reporting period 731 727

Adjustments of previous years 78 (26)

Recognition of previously unrecognized tax losses (3) (10)

Deferred tax 32 211

Total income tax 838 902

The effective tax rate was 27.6% (2018: 23.1%) and differs from the

theoretical rate that would arise using the Dutch corporate tax

rate. This difference is explained as follows:


Operating profit before taxation 3,041 3,906

Applicable tax rate 25% 760 25% 977

Increase/(decrease) in taxesresulting from:

Tax-exempt income (2.7%) (82) (2.6%) (101)

Impact of foreign tax rates 0.7% 20 1.3% 52

Non-deductible expenses 2.0% 62 1.7% 65

Recognition of previouslyunrecognized tax losses (0.1%) (3) (0.3%) (10)

Other permanent differences (1.7%) (52) (4.5%) (174)

Adjustments of previous years 2.6% 78 (0.5%) (18)

Adjustment due to changes intax rates (0.6%) (19) 1.3% 51

Other non-recurring tax items 2.4% 74 1.5% 60

Total income tax 27.6% 838 23.1% 902

The other permanent differences mainly comprise of the

deduction of interest payments on Capital Securities.

48. Transactions with RelatedParties

Two parties are considered related if one party exercises control

or has significant influence over the other party regarding

financial or operating decisions. In the normal course of business,

Rabobank conducts a wide variety of transactions with related

entities which involve different types of loans, deposits and

transactions in foreign currencies. Transactions between related

parties also includes transactions with associates, pension funds,

joint ventures, the Managing Board and the Supervisory Board.

These transactions are conducted against commercial terms

and conditions and market prices. In accordance with IAS 24.4,

intragroup transactions are not disclosed in the consolidated

financial statements.

In the normal course of Rabobank’s business operations,

banking transactions are carried out with related parties. These

involve loans, deposits and transactions in foreign currencies.

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These transactions are conducted against commercial terms

and conditions and market prices. The volumes of related

party transactions, year-end outstanding balances and the

corresponding income and expenses during the year are

presented in the following table. Transactions and balances

outstanding with members of the Managing Board and members

of the Supervisory Board are disclosed in Section 50. Transactions

with pension funds are disclosed in Section 28.

Amounts in millions of eurosInvestments in

associatesOther related

parties

2019 2018 2019 2018

Loans

Outstanding at beginning of year 19 397 44 -

Provided during the year 6 - 7 44

Redeemed during the year (6) (378) (9) -

Other - - - -

Gross loans as of December 31 19 19 42 44

Less: loan impairment allowance - - - -

Total loans as of December 31 19 19 42 44

Deposits from credit institutions and depositsfrom customers

Outstanding at beginning of the year 6,062 6,946 38 -

Received during the year 348 263 86 38

Repaid during the year (390) (1,017) (77) -

Other - (130) - -

Total deposits as of December 31 6,020 6,062 47 38

Credit related contingent liabilities 274 262 - -

Income

Net interest income 8 6 - -

Net fee and commission income 250 237 - -

Trading income 3 - - -

Other 14 15 - -

Total income from transactions with

related parties275 258 - -

Expenses

Interest expense 224 244 - -

Net fee and commission expense - - - -

Impairments - - - -

Total expenses from transactions with

related parties224 244 - -

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Annual Report 2019 - Consolidated Financial Statements 194F-94

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49. Cost of External IndependentAuditor

Expenses for services provided by Rabobank’s independent

auditor, PricewaterhouseCoopers Accountants N.V. ("PwC") and

its member firms and/ or affiliates to Rabobank and its subsidiaries

in 2019 are specified as follows:


PwC Netherlands Other PwC network firms Total PwC Netherlands Other PwC network firms Total

Audit services 8.2 7.4 15.6 9.8 7.5 17.3

Other audit services 1.5 0.6 2.1 0.5 0.5 1.0

Tax advisory services - 1.8 1.8 - 0.3 0.3

Other non-audit services - - - - 0.6 0.6

Total 9.7 9.8 19.5 10.3 8.9 19.2

The audit fees listed above relate to the procedure applied to

Rabobank and its consolidated group entities by PwC and other

member firms in the global PwC network, including their tax

services and advisory groups. These audit fees relate to the audit

of the financial statements, regardless of whether the work was

performed during the financial year.

Our independent auditor, PricewaterhouseCoopers Accountants

N.V., has rendered, for the period to which our statutory audit

relates, in addition to the audit of the statutory financial

statements the following services to the company and its

controlled entities:

Summary of services rendered by the independent auditor, in

addition to the audit of the financial statements (Section 10,

subsection 2.g of the EU Regulation 537/2015)

Other Audit Services Required by Law or Regulatory Requirements

• Statutory audits of controlled and related entities

• Audit of the regulatory returns to be submitted to European

Central Bank

• Assurance engagement for the TLTRO II reporting to be

submitted to De Nederlandsche Bank

• Non-audit assurance engagement cost price models for the

Authority Financial Markets

Other Audit Services

• Assurance engagement on the sustainability report

• Assurance engagement on the effectiveness of internal

control over financial reporting

• Agreed-upon procedures on cost allocations

• Special purpose financial statement audits of controlled and

related entities

• Comfort letters issued as part of funding transactions and

based on Dutch Accounting Standard 3850N

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50. Remuneration of the SupervisoryBoard and the Managing Board

The members of the Supervisory Board and the Managing

Board are listed in Section 56 of these Consolidated Financial

Statements. Rabobank regards the members of the Managing

Board and the Supervisory Board as key management personnel.

The members of the Managing Board are among the identified

staff as disclosed in Section 42. The remuneration of members of

the Managing Board is set out below.

Amounts in thousands of euros Short-term employee benefits Post-employment benefits Total

Salary Other Pension scheme Individualpension contribution

Berry Marttin 884 - 27 188 1,099

Jan van Nieuwenhuizen 884 - 27 188 1,099

Kirsten Konst 800 2 27 168 997

Wiebe Draijer 980 - 27 211 1,218

Mariëlle Lichtenberg 750 9 27 156 942

Ieko Sevinga 750 - 27 156 933

Bas Brouwers 884 2 27 188 1,101

Petra van Hoeken (till February 1, 2019) 74 - 2 16 92

Janine Vos 650 - 27 132 809

Bart Leurs 650 - 27 132 809

Els de Groot (from February 1, 2019) 688 - 25 143 855

Total 2019 7,993 13 272 1,674 9,952

Members Managing Board 8,116 164 260 1,707 10,247

Former members Managing Board - - - - -

Total 2018 8,116 164 260 1,707 10,247

At year-end 2019, there were a total of 2,761 DRNs (liability of

EUR 83 thousand) outstanding with members of the Managing

Board (year-end 2018 Managing Board: 2,761 pieces). The pension

scheme for the members of the Managing Board is classified

as a collective defined contribution scheme. The maximum

income on the basis of which the members of the Managing

Board can build up a pension amounts to a maximum, for 2019

one-hundred one thousand seven-hundred forty five euros. Any

income exceeding this amount is not pensionable. As of January

1, 2015, the members of the Managing Board therefore receive an

individual pension contribution. There is entitlement to a car lease

arrangement. There is also a company car policy in place for all

members of the Managing Board for the purpose of commuting

and business travels.

Expenses related to members and former members of the

Supervisory Board totalled EUR 1.2 million (2018: EUR 1.2 million).

This includes VAT and employer’s contributions payable. In

addition to the role of Member of the Supervisory Board of

Rabobank, the remuneration also depends on the roles in the

various committees. The composition of these committees is

detailed in the Annual Report. The remuneration structure as of

October 1, 2016 (exclusive of VAT and other charges) is:

Amounts in euros Fee

Member 90,000

Chairman of Audit Committee, Risk Committee, Cooperative IssuesCommittee, additional 20,000

Chairman of Appointments Committee together with HRCommittee, additional 20,000

Vice chairman, additional 30,000

Chairman 220,000

The table below shows the remuneration (excluding VAT and

other charges) for individual members of the Supervisory Board.

Amounts in thousands of euros Remuneration

Irene Asscher-Vonk (till June, 2019) 38

Leo Degle 90

Petri Hofsté 110

Arian Kamp 110

Jan Nooitgedagt 110

Ron Teerlink 220

Pascal Visée 90

Marjan Trompetter 140

Annet Aris (from December 12, 2018) 90

Total 2019 998

Total 2018 992

At Rabobank, the Chairman of the Supervisory Board holds a

number of roles which are related to the cooperative such as

Chairman of the General Members' Council.

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Amounts in millions of euros Managing Board Supervisory Board

Loans, advances and guarantees 2019 2018 2019 2018

Outstanding on 1 January 5.3 5.8 2.2 1.9

Provided during the year - - - 0.4

Redeemed during the year (1.1) (0.5) (0.3) (0.3)

Reduction on account ofleaving office - - - -

Increase on account of taking office - - - 0.2

Outstanding on 31 December 4.2 5.3 1.8 2.1

The loans, advances and guarantees of the members of the

Managing Board in office and the average interest rates were

as follows:

Amounts in millions of euros Outstandingloans

Averageinterest

rate (in %)


Bas Brouwers - n/a

Kirsten Konst 0.2 5.0

Bart Leurs 0.8 2.2

Mariëlle Lichtenberg 1.2 3.6

Berry Marttin 0.0 5.8

Jan van Nieuwenhuizen 1.2 1.9

Janine Vos 0.9 2.3


Averageinterest

rate (in %)


Bas Brouwers 0.5 2.6

Kirsten Konst 0.2 4.6

Bart Leurs 0.9 2.1

Mariëlle Lichtenberg 1.4 3.9

Berry Marttin 0.1 5.8

Jan van Nieuwenhuizen 1.2 2.0

Janine Vos 0.9 2.3

The loans, advances and guarantees of the members of the

Supervisory Board in office and the average interest rates were

as follows:


Averageinterest

rate (in %)


Annet Aris - n/a

Arian Kamp 1.2 1.6

Marjan Trompetter 0.6 2.5


Averageinterest

rate (in %)


Annet Aris 0.2 5.2

Arian Kamp 1.3 1.7

Marjan Trompetter 0.6 2.5

At year-end 2019, the members of the Supervisory Board not

listed in the table had not received any loans, advances or

guarantees. These transactions with members of the Managing

Board and Supervisory Board were completed in person on the

basis of employee terms and conditions and/or market rates

for the Supervisory Board. The rates depend in part on the

currency, the agreed fixed-interest period and the time the

transaction was completed or the time a new fixed-interest term

becomes effective.

Some members of the Supervisory Board have invested in

Rabobank Certificates in person and/or through their own

pension B.V.

Supervisory BoardNumber ofRabobank

CertificatesRemarks


Irene Asscher-Vonk 14,995 out of office perMay 31, 2019

Leo Degle 4,836 in pension BV

Managing BoardNumber ofRabobank

CertificatesRemarks


Kirsten Konst 800

Mariëlle Lichtenberg 970

Berry Marttin 5,600

51. Main Subsidiaries

On December 31, 2019, Rabobank Group is comprised of

Coöperatieve Rabobank U.A. and its consolidated subsidiaries

in the Netherlands and abroad.

On December 31, 2019 Share Voting rights

Main subsidiaries

The Netherlands

DLL International B.V. 100% 100%

BPD Europe B.V. 100% 100%

Obvion N.V. 100% 100%

North America

Utrecht America Holdings Inc. 100% 100%

Australia and New Zealand

Rabobank Australia Limited 100% 100%

Rabobank New Zealand Limited 100% 100%

All subsidiaries listed in the table have been consolidated.

In 2019, none of the subsidiaries experienced any significant

restrictions in the payment of dividends or the redemption of

loans and repayment of advances. The option of subsidiaries

to pay dividend to Rabobank depends on various factors,

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including local regulatory requirements, statutory reserves and

financial performance.

Several structured entities in segment WRR are not consolidated,

even if Rabobank retains more than half of the voting rights. These

structured entities are not consolidated because the relevant

activities are determined by a third party to the contract which

also determines the variable returns.

Rabobank has control over several entities in the "Leasing"

segment as part of its vendor leasing operations, even though

it retains less than half of the voting rights because control

is not determined based on such rights, but rather on

management participation.

52. Transfer of Financial Assets andFinancial Assets Provided asCollateral

52.1 Reverse Repurchase Transactions and Securities

Borrowing Agreements

Reverse repurchase transactions and securities borrowing

agreements concluded by Rabobank are included under "Loans

and Advances to Credit Institutions" or "Loans and Advances to

Customers" and amount to:


Loans and advances to credit institutions 22,703 8,743


Total reverse repurchase transactions and securities

borrowing agreements36,165 21,671

Under the terms of the reverse repurchase transactions and

securities borrowing agreements, Rabobank receives collateral

under conditions that enable it to re-pledge or resell the collateral

to third parties. On December 31, 2019, the total fair value of

the securities received under the terms of the agreements was

EUR 36,956 million (2018: EUR 18,887 million). In accordance with

the agreement terms, a portion of the securities was re-pledged or

sold as collateral. These transactions were effected subject to the

normal conditions for standard reverse repurchase transactions

and securities borrowing agreements. The securities are not

recognized in the statement of financial position because almost

all the associated risks and benefits accrue to the counterparty. A

receivable is recognized at a value equivalent to the amount paid

as collateral.

52.2 Repurchase Transactions and Securities

Lending Agreements

Repurchase transactions and securities lending agreements

concluded by Rabobank are included under "Deposits from Credit

Institutions" and "Deposits from Customers" and amount to:


Deposits from credit institutions 1,522 91

Deposits from customers 32 13

Total repurchase and securities lending 1,554 104

On December 31, 2019, interest-bearing securities with a

carrying amount (equal to fair value) of EUR 1,525 million

(2018: EUR 92 million) were provided as collateral for repurchase

agreements. The counterparty retains the right to sell or re-pledge

the securities. These transactions were performed subject to

the normal conditions for standard repurchase transactions and

securities lending agreements. The bank may provide or receive

securities or cash as collateral if the value of the securities

changes. The securities are not de-recognized because almost all

the associated risks and benefits accrue to Rabobank, including

credit and market risks. A liability is recognized at a value

equivalent to the amount received as collateral.

52.3 Securitizations

As part of the financing activities and liquidity management of

Rabobank Group, and in order to reduce credit risk, cash flows

from certain financial assets are transferred to third parties (true

sale transactions). Most of the financial assets subject to these

transactions are mortgages and other loan portfolios that are

transferred to a special purpose vehicle that is subsequently

consolidated. After securitization, the assets continue to be

recognised in the statement of financial position of Rabobank

Group, mainly under "Loans and advances to customers".

The securitized assets are measured in accordance with the

accounting policies referred to in Section 2.15.

The carrying amount of the transferred financial assets

related to own-asset securitization is EUR 82,053 million

(2018: EUR 80,842 million) with the corresponding liability

amounting to EUR 80,121 million (2018: EUR 78,880 million).

Approximately 72% (2018: 72%) of the transferred assets are

securitized internally for liquidity purposes. The carrying amount

of the assets where Rabobank acts as a sponsor (Nieuw-

Amsterdam) is EUR 3,398 million (2018: EUR 4,938 million) with

the corresponding liability amounting to EUR 3,398 million

(2018: EUR 4,938 million). Rabobank retains 5% to 6% of the

outstanding commercial paper issued by Nieuw Amsterdam for

regulatory purposes.

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52.4 Carrying Amount of Financial Assets Pledged as

Collateral for (Contingent) Liabilities

The assets referred to below have been pledged as collateral

for (contingent) liabilities (with exception of repo transactions,

securities lending and own-asset securitizations) with the

objective of providing security for the counterparty. If Rabobank

would enter into default the counterparties may use the security

to settle the debt.


Cash and cash equivalents 28 82

Loans and advances to credit institutions 2,155 2,536


Financial assets held for trading 77 77

Financial assets designated at fair value 100 126

Financial assets at fair value through othercomprehensive income 3,083 4,223

Total assets pledged as collateral 31,460 34,543

53. Structured Entities

53.1 Consolidated Structured Entities

A structured entity is an entity which is structured so that

voting rights or comparable rights do not constitute the

dominant factor in determining who exercises control over the

entity. Rabobank uses structured entities in order to securitize

mortgages and other loan portfolios as part of its financing

activities, liquidity management and in order to reduce credit

risk. The loans are actually transferred to the structured entities.

Own-asset securitization is handled by Obvion and DLL. As well

as having provided cash facilities, Rabobank also acts as a swap

counterparty for all own-asset securitizations.

Rabobank acts as a sponsor in Nieuw Amsterdam Receivables

Corporation. Nieuw Amsterdam issues ABCP in various currencies

and provides Rabobank customers access to liquidity through

the commercial paper market. Rabobank provides advice and

manages the program, markets ABCP, provides cash facilities and

credit risk enhancements and other facilities for the underlying

transactions and the program itself.

Rabobank consolidates the own-asset securitisation vehicles

and Nieuw Amsterdam because it is exposed to or entitled

to fluctuating income in respect of its involvement in these

entities. In addition, Rabobank also has the option to influence the

amount of the investor’s income by virtue of having control over

the entities.

53.2 Non-Consolidated Structured Entities

Non-consolidated structured entities refers to all structured

entities over which Rabobank has no control. These interests

are comprised mainly of debt securities in a securitization vehicle,

including RMBS, ABS and CDO and private equity interests.

The amount of these debt securities is almost always limited

when compared to the vehicle’s total assets. Those securitization

vehicles are usually refinanced by issued debt securities or

credit facilities.

The following table shows the nature and risks of Rabobank’s

interests in non-consolidated structured entities. The size

of non-consolidated structured entities generally reflects the

carrying amount of the assets and the contingent liabilities. The

maximum exposure equals the carrying amount disclosed in the

table below.

Amounts in millions of euros On December 31, 2019 On December 31, 2018

Assets recognizedby Rabobank

Securitisations Other Total Securitisations Other Total

Financial assets held for trading - 48 48 7 52 59

Financial assets designated atfair value - - - - - -

Financial assets mandatorily atfair value 41 337 378 2 267 269

Derivatives 105 - 105 131 - 131

Loans and advances to customers 683 - 683 798 - 798

Financial assets at fair value throughother comprehensive income 5 - 5 142 - 142

Investments in associates 74 226 300 98 253 351

Total financial assets recognized

by Rabobank908 611 1,519 1,178 572 1,750

Liabilities recognizedby Rabobank

Derivatives (4) - (4) 26 - 26

Deposits from customers 233 - 233 182 - 182

Total liabilities recognized

by Rabobank229 - 229 208 - 208

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Income from sponsored, non-consolidated structured entities in

which Rabobank holds no interest is nil (2018: nil).

54. Events after the Reporting Period

Since early 2020 the coronavirus is spreading across the world.

The impact for economic growth and business activities will

depend on the severity of the outbreak. At this moment it is

too early to define the concrete financial impact for clients and

provisioning levels.

55. Management Report on InternalControl over Financial Reporting

The Managing Board of Rabobank is responsible for establishing

and maintaining adequate internal control over financial

reporting. Management is also responsible for the preparation

and fair presentation of the Consolidated Financial Statements.

At the end of the period covered by this Annual Report,

Rabobank’s’ management carried out an evaluation, under the

supervision and with the participation of its Chief Executive

Officer (CEO) and Chief Financial Officer (CFO), of the effectiveness

of the design and operation of it’s internal control over financial

reporting. Rabobank’s internal control over financial reporting is a

process designed, when working effective, to provide reasonable

assurance regarding the reliability of financial reporting for the

preparation of its financial statements for external purposes in

accordance with generally accepted accounting principles.

All internal control systems, no matter how well designed, have

inherent limitations. Due to the inherent limitations, internal

control over financial reporting may not prevent or detect

misstatements. At the same time, future projections on the

basis of any evaluation of the effectiveness of internal control

are subject to the risk that the control measures may become

inadequate because of changes in conditions, or that the degree

of compliance with the policies or procedures may deteriorate.

Management has assessed the effectiveness of Rabobank’s

internal control over financial reporting as of December 31, 2019

in accordance with the criteria set out in 2013 by the Committee

of Sponsoring Organisations of the Treadway Commission

(COSO), as defined in Internal Control - Integrated Framework.

Based on that assessment, the Managing Board of Rabobank

concluded that, it maintained in all material aspects, effective

internal control over financial reporting as of 31 December, 2019,

in accordance with criteria established in the Internal Control

– Integrated Framework issued in 2013 by the Committee of

Sponsoring Organisations of the Treadway Commission (COSO).

PricewaterhouseCoopers Accountants N.V., which has audited

the consolidated financial statements of Rabobank for the

financial year ended December 31, 2019, also examined

management’s assessment of the effectiveness of the internal

control over financial reporting in Rabobank . The assurance

report of PricewaterhouseCoopers Accountants N.V. is included

on page 239.

Wiebe Draijer and Bas Brouwers

Utrecht, March 5, 2020

The above statement on internal controls should not be

construed as a statement in response to the requirements of

section 404 of the US Sarbanes-Oxley Act.

56. Authorization of the FinancialStatements

The financial statements were signed by the Supervisory Board

and Managing Board on March 5, 2020. The financial statements

will be presented to the General Meeting, to be held on April 8,

2020, for adoption. With regard to the adoption of the financial

statements of Rabobank, the Articles of Association state: "The

resolution to adopt the financial statements will be passed by

an absolute majority of the votes validly cast by the General

Members’ Council".

Managing BoardWiebe Draijer, Chairman

Bas Brouwers, CFO

Els de Groot, CRO

Kirsten Konst, Member

Bart Leurs, Member

Mariëlle Lichtenberg, Member

Berry Marttin, Member

Jan van Nieuwenhuizen, Member

Ieko Sevinga, Member

Janine Vos, Member

Supervisory BoardRon Teerlink, Chairman

Marjan Trompetter, Vice Chairman

Leo Degle

Arian Kamp

Jan Nooitgedagt

Petri Hofsté

Pascal Visée

Annet Aris

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Annual Report 2019 - Company Financial Statements 223F-101

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Annual Report 2019 - Management Report 6

Amounts in millions of euros 2019 2018 2017 2016 2015

Non-Financial Key Figures

Net promotor score Private Customers in the Netherlands 61 57 53 36 33

Net promotor score Private Banking Customers in the Netherlands 63 61 50 41 37

Net promotor score Corporate Customers in the Netherlands 51 53 43 30 21

% Online active private customers in the Netherlands 64.0% 61.8% - - -

% Online active corporate customers in the Netherlands 81.5% 80.8% - - -

Reptrak pulse score 71.5 70.8 69.5 66.1 -

Member engagement score 50% 44% - - -

Employee engagement scan 64 61 - - -

Financial Key Figures

Common equity tier 1 ratio (fully loaded) 16.3% 16.0% 15.5% 13.5% 12.0%

Total capital ratio (transitional) 25.2% 26.6% 26.2% 25.0% 23.2%

Leverage ratio (transitional) 6.3% 6.4% 6.0% 5.5% 5.1%

Risk-weighted assets 205,797 200,531 198,269 211,226 213,092

Wholesale funding 151,742 153,223 160,407 188,862 203,218

Cost/income ratio including regulatory levies 63.8% 65.9% 71.3% 70.9% 65.2%

Underlying cost/income ratio including regulatory levies 63.5%1 63.9% 65.3% 64.8% 64.6%

ROIC2 5.5% 7.4% 6.9% 5.2% 6.0%

Return on equity 5.3% 7.3% 6.7% 4.9% 5.5%

Return on assets 0.4% 0.5% 0.4% 0.3% 0.3%

Other Financial Figures

Income 11,915 12,020 12,001 12,805 13,014

Operating expenses 7,115 7,446 8,054 8,594 8,145

Impairment charges on financial assets 975 190 -190 310 1,033

Net profit 2,203 3,004 2,674 2,024 2,214

Total assets 590,598 590,437 602,991 662,593 678,827

Private sector loan portfolio 417,914 416,025 410,964 424,551 433,927

Deposits from customers 342,536 342,410 340,682 347,712 345,884

Equity 41,347 42,236 39,610 40,524 41,197

Loan-to-deposit ratio 1.21 1.21 1.21 1.22 1.25

Non-performing loans 15,705 18,436 18,315 18,873 19,763

Ratings

Standard & Poor’s A+ A+ A+ A+ A+

Moody’s Investors Service Aa3 Aa3 Aa2 Aa2 Aa2

Fitch Ratings AA- AA- AA- AA- AA-

DBRS AA AA AA AA AA

Sustainalytics Ranking category diversified banks 5 2 7 2 11

Sustainalytics ESG Risk Rating category diversified banks 1 1 - - -

About Rabobank

Local Rabobanks 89 101 102 103 106

Offices in the Netherlands 371 409 446 475 506

Availability of internet banking 99.7% 99.9% 99.9% 99.7% 99.8%

Availability of mobile banking 99.6% 99.9% 99.9% 99.7% 99.8%

Availability of iDEAL 99.7% 99.8% - - -

Community funds and donations 45.4 48.8 45.5 43.3 45

CO2 emissions (tonnes per FTE) 2.9 3.33 4.0 3.8 3.5

Sustainable Products & Services

Total sustainable financing 46,000 46,607 17,377 - -

Total sustainable assets under management and assets held in custody 6,399 4,726 4,030 3,835 2,843

Key Figures

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Annual Report 2019 - Management Report 7

Amounts in millions of euros 2019 2018 2017 2016 2015

Total sustainable funding 5,300 3,941 3,436 2,985 2,122

Total financial transactions supervised by Rabobank 6,701 7,140 6,236 5,750 6,313

Sustainability performance (Client Photo) of clients of local Rabobanks in the Netherlands (exposure> EUR 1M) coverage 98% 99% 98% 99% -

Sustainability performance (Client Photo) of clients of local Rabobanks in the Netherlands (exposure> EUR 1M) % A-level4 8% 5% 4% 5% -

Sustainability performance (Client Photo) of clients of Wholesale offices (exposure >EUR 1M) coverage 86% 87% 73% 85% -

Sustainability performance (Client Photo) of clients of Wholesale offices (exposure > EUR 1M )% A-level4 24% 24% 21% 26% -

Personnel Data

Number of employees (total in FTE)5 43,822 43,247 45,063 46,781 53,269

Diversity: % Women in Managing Board 40% 40% 40% 14% -

Diversity: % Women in first level below Managing Board 33% 31% 29% - -

Diversity: % Women employed in the Netherlands 51% 52% - - -

Staff costs 4,821 4,868 4,472 4,680 4,787

Absenteeism in the Netherlands 4.3% 4.3% 4.0% 3.6% 3.7%

1 Adjusted for the result on fair value items, the sale of RNA, restructuring expenses and the additional provision for the derivatives recovery framework

2 The ROIC is calculated by dividing the net profit realized after non-controlling interests by the core capital (actual tier 1 capital plus the goodwill in the balance

sheet at the end of the reporting period) minus deductions for non-controlling interests in Rabobank’s equity.

3 The 2018 figure was restated due to an improved calculation method.

4 We measure the sustainability performance of our clients with an exposure over EUR 1 million in a client photo ranking them from A-D.

5 As a result of definition refinement the comparative FTE figures were adjusted.

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Consolidated FinancialStatements

Company FinancialStatements




December 31 December 31


Assets

Cash and cash equivalents 6 73,335 66,861


Financial assets held for trading 8 2,876 1,760

Financial assets designated at fair value 9 157 1,194

Financial assets mandatorily at fair value 10 2,134 n/a

Derivatives 11 22,660 25,505


Financial assets at fair value through other comprehensive income 13 18,730 n/a

Available-for-sale financial assets 13 n/a 28,689

Investments in associates and joint ventures 14 2,374 2,521

Goodwill and other intangible assets 15 966 1,002

Property and equipment 16 4,455 4,587

Investment properties 17 193 193

Current tax assets 243 175

Deferred tax assets 27 1,165 1,733


Non-current assets held for sale 19 268 992

Total assets 590,437 602,991

Liabilities

Deposits from credit institutions 20 19,397 18,922

Deposits from customers 21 342,410 340,682


Financial liabilities held for trading 23 400 581

Financial liabilities designated at fair value 24 6,614 13,792

Derivatives 11 23,927 28,103


Provisions 26 1,126 1,537

Current tax liabilities 229 248

Deferred tax liabilities 27 452 396


Liabilities held for sale - 256


Equity

Reserves and retained earnings 31 27,264 25,376


- Rabobank Certificates 32 7,445 7,440

- Capital Securities 33 6,493 5,759

13,938 13,199



- Capital Securities 33 164 166

- Trust Preferred Securities IV 33 389 394

Other non-controlling interests 34 481 475

1,034 1,035

Total equity 42,236 39,610


1 As reported under IAS 39

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Interest income from financial assets using the effective interest method2 36 15,960 16,275

Other interest income 36 321 296






Income from other operating activities 38 2,547 2,347

Expenses from other operating activities 38 1,964 1,825

Net income from other operating activities 38 583 522

Income from investments in associates and joint ventures 39 243 245

Gains/ (losses) arising from the derecognition of financial assets measured at amortised cost 14 n/a

Gains/ (losses) on financial assets and liabilities at fair value through profit or loss 40 238 84

Gains/ (losses) on available-for-sale financial assets 13 n/a 158

Gains/ (losses) on financial assets at fair value through other comprehensive income 112 n/a

Other income 41 340 234

Income 12,020 12,001

Staff costs 42 4,278 4,472

Other administrative expenses 43 2,780 3,176



Loan impairment charges 45 n/a (190)

Impairment charges on financial assets 45 190 n/a










Of which attributed to other non-controlling interests 34 60 58



2 Presentation adjusted (see note 2.1)

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Other comprehensive income transferred to profit or loss if specific conditions are met, net of tax:

Exchange differences on translation of foreign operations 31 134 (1,161)

Increase/ (decrease) in the fair value of available-for-sale financial assets 31 n/a (129)

Increase/ (decrease) in the fair value of debt instruments at fair value through other comprehensiveincome 31 (152) n/a

Costs of hedging 31 30 n/a

Cash flow hedges 31 (1) 28

Share of other comprehensive income of associates and joint ventures 31 (84) 11

Other 31 - 35

Other comprehensive income not to be transferred to profit or loss, net of tax:

Remeasurements of post-employee benefit obligations 31 76 -

Increase/ (decrease) in the fair value of equity instruments at fair value through other comprehensiveincome 31 (8) n/a

Share of other comprehensive income of associates and joint ventures 31 4 (6)

Decrease/ (increase) in the fair value due to own credit risk on financial liabilities designated at fair value 31 111 (322)

Other comprehensive income 110 (1,544)


Of which attributed to Rabobank 2,007 (4)





Of which attributed to other non-controlling interests 57 27



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Note Reserves andretained earnings

Equity instrumentsissued by Rabobank


TotalAmounts in millions of euros

Equity instrumentsissued by

subsidiariesOther


Change in accounting policy IFRS 91 (26) - - - (26)

Change in accounting policy IFRS 151 41 - - - 41

Restated balance on January 1, 2018 25,391 13,199 560 475 39,625


Other comprehensive income 31 113 - - (3) 110



Payments on Trust Preferred Securities IV (22) - - - (22)

Payments on Capital Securities issued by Rabobank (539) - - - (539)

Payments on Capital Securities issued by subsidiaries (14) - - - (14)

Redemption of Capital Securities 33 (79) (275) - - (354)



Settlement pension plan (56) - - - (56)

Other 10 20 (7) (51) (28)


Balance on January 1, 2017 25,821 13,584 594 525 40,524


Other comprehensive income 31 (1,513) - - (31) (1,544)



Payments on Trust Preferred Securities IV (22) - - - (22)

Payments on Capital Securities issued by Rabobank (592) - - - (592)

Payments on Capital Securities issued by subsidiaries (15) - - - (15)

Redemption of Capital Securities 33 (439) (1,894) - - (2,333)

Issue of Rabobank Certificates 32 120 1,500 - - 1,620

Cost of issue of Rabobank Certificates (12) - - - (12)

Other (104) 9 (34) (77) (206)


1 See note 2.1 ‘New and amended standards issued by the IASB and adopted by the European Union which apply in the current financial year’.

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Consolidated statement of cash flows



Cash flows from operating activities


Adjusted for:

Non-cash items recognised in operating profit before tax


Depreciation of operating lease assets and investment properties 16,17 602 536

Loan impairment charges 45 n/a (190)

Impairment charges on financial assets 45 190 n/a

(Reversal) Impairment losses on property and equipment 16 42 48

(Reversal) Impairment losses on other intangible assets 15 2 31

Impairment losses on goodwill and investments in associates 14 - -

Gains/ (losses) on disposal of property and equipment 5 40

Income from investments in associates and joint ventures 39 (243) (245)

Income from disposal of subsidiaries (119) (3)

Gains/ (losses) on financial assets and liabilities at fair value through profit or loss 40 (238) (84)

Gains/(losses) on available-for-sale financial assets 13 n/a (158)

Gains/ (losses) on derecognition of debt instruments at fair value through other comprehensive income 41 (112) n/a

Gains/ (losses) arising from the derecognition of financial assets measured at amortised cost (14) n/a

Provisions 26 276 688

Capitalised costs self-developed software and other assets (118) (130)

Net change in operating assets

Loans and advances to and deposits from credit institutions 7, 20, 45 9,459 (4,426)

Financial assets held for trading 9, 40 (872) 952

Derivatives 11 2,872 16,867

Net increase/ (decrease) in financial assets and liabilities designated at fair value 9, 24 (17) (2,644)

Net increase/ (decrease) in financial assets mandatorily at fair value 10 709 n/a

Loans and advances to customers 12, 45 (7,360) 9,042

Acquisition of available-for-sale financial assets 13 n/a (3,687)

Acquisition of financial assets at fair value through other comprehensive income 13 (4,861) n/a

Proceeds from the sale and repayment of available-for-sale financial assets 13 n/a 7,707

Proceeds from the sale and repayment of financial assets at fair value through other comprehensiveincome 13 14,139 n/a

Acquisition of operational lease assets 16 (1,152) (1,087)

Proceeds from the disposal of operational lease assets 16 435 165

Dividends received from associates and financial assets 14 176 125

Net change in liabilities relating to operating activities

Derivatives 11 (4,636) (19,921)

Financial liabilities held for trading 23 (181) (158)

Deposits from customers 21 (786) (6,950)

Other liabilities 25 (1,853) (115)

Income tax paid (182) (302)

Other changes 2,169 1,408

Net cash flow from operating activities 12,626 1,547

Cash flows from investing activities

Acquisition of investments in associates net of cash and cash equivalents acquired 14 (43) (113)

Proceeds from disposal of investments in associates net of cash and cash equivalents 14 182 214

Proceeds from disposal of subsidiaries net of cash and cash equivalents - -

Acquisition of property, equipment and investment properties 16, 17 151 (170)

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Proceeds from the disposal of property, equipment and investment properties 16, 17 (41) 118

Net cash flow from investing activities 249 49

Cash flows from financing activities

Proceeds from debt securities in issue 22, 35 63,164 71,398

Redemption of debt securities in issue 22, 35 (69,203) (88,121)

Proceeds from the issue of subordinated liabilities 35 - 413

Redemption of subordinated liabilities 35 (21) (4)

Purchase of Rabobank Certificates 32 (1,038) (913)

Sale of Rabobank Certificates 32 1,043 905

Issue of Capital Securities (including cost of issue) 994 -

Payments on Rabobank Certificates, Trust Preferred Securities IV and Capital Securities (1,059) (1,113)

Payments on Senior Contingent Notes (86) (86)

Redemption of Capital Securities 33 (354) (1,894)

Issue of Rabobank Certificates (including cost of issue) - 1,608

Net cash flow from financing activities (6,560) (17,807)

Net change in cash and cash equivalents 6,315 (16,211)

Cash and cash equivalents at the beginning of the year 66,861 84,405

Exchange rate differences on cash and cash equivalents 159 (1,333)

Cash and cash equivalents at the end of the year 73,335 66,861

The cash flows from interest are included in the net cash flow from operating activities

Interest received 15,693 16,095

Interest paid 7,180 7,537

1 As reported under IAS39

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Annual Report 2019 - Company Financial Statements 203

Statement of Financial Position (Before Profit Apprpriation)

Amounts in millions of euros Note December 31, 2019 December 31, 2018

Assets

Cash and balances at central banks 1 62,908 72,786

Short-term government papers 2 792 330

Professional securities transactions 22,074 8,238

Other loans and advances to credit institutions 15,679 20,994


Public sector lending 1,728 1,556

Private sector lending 383,336 369,461



Interest-bearing securities 5 62,653 67,299

Shares 6 83 253

Interests in group companies 7 14,077 13,555

Other equity investments 8 1,632 1,722

Intangible assets 9 417 419

Tangible fixed assets 10 1,720 1,451


Derivatives 12 26,993 25,252

Prepayments and accrued income 914 905

Total assets 613,267 601,521

Liabilities

Professional securities transactions 1,502 80

Other liabilities to credit institutions 20,356 19,497

Due to credit institutions 14 21,858 19,577

Savings 148,851 135,441

Professional securities transactions 32 13

Other due to customers 188,393 191,202

Due to customers 15 337,276 326,656



Derivatives 12 24,322 24,225

Accruals and deferred income 1,919 1,767

Provisions 18 843 1,100


572,397 560,156



Revaluation reserves 359 199

Legal reserves (106) (252)

Other reserves 25,746 24,373

Profit for the year 2,158 2,943

Equity 20 40,870 41,365


Contingent liabilities 28 67,437 64,342

Statement of Financial Position (BeforeProfit Appropriation)

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Statement of Income

For the year ended 31 December


Interest income 21 13,839 14,070






Income from equity interests 23 890 1,889

Gains/ (losses) from trading portfoliowith external parties (23) 87

Gains/ (losses) from trading portfoliowith group companies 587 (465)

Gains/ (losses) from investment portfolio 97 236

Net income from financial transactions 661 (142)

Other results 165 96

Income 9,116 9,301

Staff costs 24 3,682 3,773


Depreciation 350 332


Impairment on investments in associates 300 -

Impairment charges on financial assets 346 (3)





Statement of Income

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Statement of Financial Position (Before Profit Appropriation)

Statement of Financial Position

Amounts in millions of euros Note December 31 2018 December 31 2017

Assets

Cash and balances at central banks 1 72,786 66,233

Short-term government papers 2 330 498


Other loans and advances to credit institutions 20,994 24,879


Public sector lending 1,556 1,938

Private sector lending 369,461 363,777



Interest-bearing securities 5 67,299 76,384

Shares 6 253 220

Interests in group companies 7 13,555 13,536

Other equity investments 8 1,722 1,745

Goodwill and other intangible assets 9 419 437

Tangible fixed assets 10 1,451 1,700


Derivatives 12 25,252 28,947

Prepayments and accrued income 905 1,103

Total assets 601,521 615,816

Liabilities


Other liabilities to credit institutions 19,497 18,701

Due to credit institutions 14 19,577 19,060

Savings 135,441 135,248


Other due to customers 191,202 192,074

Due to customers 15 326,656 327,429



Derivatives 12 24,225 28,461

Accruals and deferred income 1,767 1,961

Provisions 18 1,100 1,215


560,155 577,075



Revaluation reserves 199 386

Legal reserves (252) (359)

Other reserves 24,373 22,733

Profit for the year 2,944 2,616

Equity 20 41,366 38,741


Contingent liabilities 28 64,342 62,035

Annual Figures

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Statement of Income

Statement of Income



Interest income 21 14,070 14,393






Income from equity interests 23 1,889 2,344

Gains/ (losses) from trading portfolio with external parties 87 (165)

Gains/ (losses) from trading portfolio with group companies (465) (1,132)

Gains/ (losses) from investment portfolio 236 263

Net income from financial transactions (142) (1,034)

Other results 336 343

Income 9,541 9,153

Staff costs 24 3,233 3,392


Depreciation 332 337


Impairment charges on financial assets (3) (172)





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