Rabobank confirms ECB capital requirements 2018
15 December 2017
Rabobank has received notification of the ECB’s final decision concerning the own funds requirements that it has to meet as of 1 January 2018, following the results of the 2017 Supervisory Review and Evaluation Process (SREP).
The decision requires that Coöperatieve Rabobank U.A. (“Rabobank”) maintains a total SREP Capital requirement of 9.75% on a consolidated and unconsolidated basis. The requirement consists of a 8% minimum own funds requirement and a 1.75% Pillar 2 requirement.
The total CET1 minimum requirement is 6.25% consisting of the minimum Pillar 1 requirement (4.5%) and the Pillar 2 requirement (1.75%). In addition, Rabobank should comply with the phasing in combined buffer requirements consisting of a Capital Conservation Buffer (1.875%) and a Systemic Risk Buffer imposed by the Dutch Central Bank (“DNB”) of 2.25% in 2018. This translates into an aggregate 10.375% CET1 requirement for 2018.
In 2019 the CET1 requirement will increase, as both the Capital Conservation Buffer and the Systemic Risk Buffer requirements will become fully phased-in (2.50% and 3.00% respectively). This will result in an expected aggregate CET1 requirement of 11.75% in 2019. Rabobank has a CET1 ratio target of at least 14%.
Since 2017 the Pillar 2 surcharge has been split by the ECB into the aforementioned Pillar 2 requirement and a Pillar 2 guidance. The 10.375% CET1 requirement does not include the Pillar 2 guidance, which is not disclosed. The Pillar 2 guidance is not relevant for the Maximum Distributable Amount (“MDA”).
With a fully loaded CET1 ratio of 14.7% on 30 June 2017, Rabobank already complies with the requirements for 2018. With a Tier 1 ratio of 18.1% and a Total Capital Ratio of 25.5% on 30 June 2017 Rabobank also comfortably meets its total SREP capital requirements.
Requirement on an unconsolidated basis
The decision also requires that Rabobank maintains a CET1 ratio of 8.125% on an unconsolidated basis. This 8.125% capital requirement includes the minimum Pillar 1 requirement (4.5%), the Pillar 2 requirement (1.75%) and the Capital Conservation Buffer (1.875%). The unconsolidated CET1 ratio of Rabobank was 15.6% on 30 June 2017.