Transcript Consolidation and centralization of Liquidity

Inspiring views
Consolidation and
centralization of Liquidity
July 17, 2015
Rabobank International
Agenda
• Introduction Rabobank
• Assessing the benefits of managing individual branches as opposed
to a central view
• How to achieve an effective and centralised liquidity management
strategy ( Rabobank model)
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Rabobank International
About Rabobank Group
• Has the highest credit rating (Triple A) by the rating agencies
Moody’s and Standard & Poor’s
• Is a full-range financial services provider operating on the basis
of co-operative principles.
• Comprises 188 independent local co-operative member banks in
the Netherlands
• Employs 56,000 staff and is represented in 43 countries.
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Rabobank International
Key facts
• Cooperative structure and Cross-Guarantee system between
Rabobank Nederland, the Local Rabobanks and a number of
specialised subsidiaries
• Low risk strategy with dominant market shares in the healthy Dutch
retail market resulting in predictable and stable earnings
• Consistent achievement of Group Financial targets
• Track–record of higher net profits every year since 1898
• Focus on organic growth, and pursue growth opportunities in private
banking in large cities and insurance in the Netherlands.
• Selective acquisitions/alliances abroad to support country banking
concept
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Rabobank International
The Rabobank Group structure
9 million clients
1,64 million members
188 member banks
Rabobank Nederland
Wholesale Banking and
international retail Banking
Market support
domestic retail Banking
 Rabobank International
 Private Indivuduals
 Corporate Clients Netherlands
 SME
 Private Banking
Group departments
 Audit, supervision, ICT,
Finance, Communications,
Personnel, Co-operative and
Management, Credit control,
Shared Services & Facilities
 Other corporate departments
and services
Asset management
Investment




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Robeco Group
Schretlen & Co
Alex
Sarasin
Leasing
 De Lage
Landen
Real Estate
 Rabo
Bouwfonds
Insurance
 Eureko
Mortgages
 Obvion
(38%)
Rabobank International
The allfinanz concept
• Wholesale banking – both in the Netherlands and throughout the
rest of the world – with particular focus on the (international)
food & agri sector
• Retail banking
• Asset management and investment
• Leasing
• Real estate
• Insurance (via a strategic minority participation in Achmea)
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Rabobank International
Rabobank Liquidity Model
• CFO has outsourced the short term liquidity responsibilities to
Global Financial Market.
• Corporate Center Services responsible for long term funding 1 year
and longer
• CFO has signed off agreed funding levels within the Rabobank
Group.
– Up to 1 year => Ribid and Ribor
– 1 year and longer => related to Euribor, Libor etc
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Rabobank International
CFO
Treasury
Management
Centrale Thesaurie
Corporate Center
Services
Funding
•
Affiliates:
•
•Robeco
•Interpolis
•De Lage Landen
•Rabo Vastgoed
•Schretlen & Co
•Stroeve
•
•
Capital
Long term
funding and
affiliates > 1 year
Hedge interest
rate and currency
risk
Manage liquidity
risk
Executes
currency risk
policies Rabo
group
•FGH
•Obion
•Others
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Rabobank International
Global Financial Market model
• The belief behind this approach is that:
– we do not want to be reliant on other banks to provide us with
–
–
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emergency liquidity as we cannot control their ability to deliver
we do not assume that central banks will bail out banks in the
event of a name specific crisis - the moral hazard argument.
A fully integrated liquidity measurement function focuses on
short term liquidity, inclusive of all derivatives, contingent
liabilities, measuring on a daily basis.
Rabobank International
Global Financial Market Model
Global Financial Markets responsibility for short term funding is
managed through the Centre of Competency system.
The CoC structure is defined by the following parameters:
• primary CoC’s
• time zone CoC’s
• non-wholesale CoC’s
• designated currencies
• products
• limits
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Rabobank International
Global Financial Market Model
An integrated approach
London
New York
Utrecht
Tokyo
Singapore
Primary / Secondary CoC’s
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Rabobank International
Components of Integrated Liquidity
Measurement
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1:
Liquidity Facilities
2:
Collateral
3:
Cash requirements
Rabobank International
Liquidity Facilities
• Any contingent liability will be captured regardless of booking class
e.g. a product
• Limits will be allocated to business per region/ per currency
• Hedging: Portfolio approach regardless of product
– 10% probability of draw over a 1 month period (DNB weighting)
– Rabobank conservative approach is 20%
– Exclude liquidity whereby Rabobank will own Central bank eligible
collateral
– The required liquidity should be held as a surplus by the bank (monthly
DNB regulatory ratio)
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Rabobank International
Collateral
• Central Bank Model
– All liquid assets will be identified
– Liquidity haircut. Similar to central bank weightings
– Distinguish between pledge collateral and available collateral
– Procedure transferring available collateral to central bank
– Emergency plan in place per currency
– Central bank lender of last resort!!!
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Rabobank International
Global Financial Market Model
Global Collateral Management
Primary Collateral Books
Secondary Collateral Books
GFM Trading Books
MM Securities
Utrecht
MBS
Singapore
Credit Spread Books
Hong Kong
Structured Credit portfolios
Debt Derivatives
Spread & Prop Trading
Financing Books
Liquidity &
Balance Sheet
Management
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Rabobank International
Cash Requirements
• Global liquidity limits per Currency
– Different limit between overnight/ tom next and spot – 30 days
– Limits per sub-branch
– Limits per currency in local currency. We NOT allow netting between
currencies. Example fx-forward market after Sept 11
– Branch limit => Global limit => Trigger limit
– Controlled by market risk
– Report included all on-off balance products who are generating cash
flows
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Rabobank International
RABOBANK LIQUIDITY AT
RISK
1) Liquidity Facilities
Back Stop
Committed Undrawn
364 day facilities
Per currency
Per sector
Structured Liquidity
2) Collateral
Bonds
Commercial Paper
Commodities
Loans
Others
3) Net Cash
Requirements
USD
GBP
EURO
SGD
JPY
All Derivatives
Risk Management
Daily Reporting
Framework
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Rabobank International
Managing Flows and Collateral on a Global
basis
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Rabobank International
Global Financial Market Model
• The approach allows us to:
– protect Rabobank from market disruptions (e.g. September 11)
– give the Executive Board time in the event of a Rabobank name
–
specific problem
to protect Rabobank from potential liquidity needs arising from
liquidity facilities.
• As a result of this approach:
– We have direct access to the BoJ, MAS, ECB, SNB, BoE and Fed
– We have diversified our liability base by type and location of
institution.
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Rabobank International
Thank you for your attention
Any Questions ?
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Rabobank International