Credit Risk Management Herman Mulder Head of Group

Credit Risk Management Herman Mulder Head of Group Risk Management 12 November 2001

Credit Risk Management Topic Issues 1 How do we manage risk 2 Profile of our portfolios 2

Credit Risk Management Corporate Centre: Group Risk Management organisation chart T. de Swaan Board Member CFO & CRO Head of Corporate Center H. Mulder SEVP Group Risk Management C. Norris EVP Consumer Credit M. Seckel EVP Credit Corporate, FI, Retail H. Erbe EVP Portfolio Management Country Risk Policy TBN EVP Operational Risk Policy A. J. van der Linden EVP Market Risk Policy n Effective 15 October 2001 n Independent risk management (functional line Group CFO/CRO) n Group Risk: 100 staff (at Head Office) 3

Credit Risk Management Tested, effective commercial banking, relationship driven, risk management process General Comments Group Risk Committee Delegated Authority n Meeting 3 x per week n Based on GOOE* (by limits) and UCR** (by counterparty) n Members: Board Member(s), SEVP Group Risk, SEVP RMW, SEVP relevant BU’s n Delegated authority: to committees / CRO*** n Coverage: risk policy, credit risk, market risk Review Discipline n Approx. number of applications: 1, 250 p. a. n WCS Clients: approx. 4, 000 relationships/ 12, 500 counterpaties n Loan Pricing Tool: Economic Profit / RAROC n Corporate, Financial Institutions, Public Sector: UCR 1 -3 1 x p. a. ; UCR 4 -7: 2 x p. a. n Country Risk: Whole portfolio bi-monthly n Consumer Products Programs: 1 x p. a. product / country specific programs Note: * GOOE = Global One Obligor Exposure ** UCR = Uniform Credit Rating *** CRO = Country Risk Officer BU = Business Unit 4

Credit Risk Management Stable, transparent, credible internal rating methodology (UCR = Uniform Credit Rating) 1. Internal rating benchmark tool for commercial credit is a customised version of the "Moody's Risk Analyst” 2. Components are (counterparty) financial assessment (60% impact) and (industry & country) business analysis (40% impact) 3. Business Analysis is based on input from (independent) Economic Department: since 12 months the scores of 70% of all industries have been negative leading to a downgrade of up to 1 -2 notches on the overall Corporate Score for counterparties in these industries 4. Credit Committees take final decision on internal rating UCR 1 UCR 2 UCR 3 UCR 4 UCR 5 UCR 6 UCR 7 > Aa 3 > A 3 > Baa 3 > B 3 >C

Credit Risk Management Stable portfolio composition (by outstanding) Dec 2000 Mar 2001 Jun 2001 24% Sept 2001 25% 24% 35% 69% 5% 5% 2% 69% 5% 69% 2% Wholesale 57% 68% 2% C&CC PCAM 5% 5% 2% Other NL Brazil 3% US Other Private Loans ( Eur bn - by outstandings) 200 180 160 140 120 100 80 60 40 20 0 Dec-00 Mar-01 Wholesale C&CC Jun-01 Private Sep-01 Other 6

Credit Risk Management Wholesale (WCS): Client base predominantly OECD (by limits; September 2001) Europe 49% North America 29% Africa 1% Eastern Europe 1% Middle East 1% Asia 6% Asia Advanced 7% Latin America 6% 7

Credit Risk Management WCS: 5 Client BUs organised globally by sectors (by limits; September 2001) TMT Public Sector 7% Telecom, Media, Technology 13% ECP Financial Institutions 25% Energy, Chemical, Pharma 19% ACD Automotive, Consumer, Diversified 36% 8

Credit Risk Management WCS Corporate Exposure (Limits): Well diversified (as of September 2001) 9

Credit Risk Management February 2001: Observations underlying risk approval policies 10

Credit Risk Management WCS Portfolio: Effective steps taken since February 2001 (Weighted average UCR by limits) 3. 2 3 2. 8 2. 6 2. 4 2. 2 Dec-2000 Mar-2001 TMT ECP Jun-2001 ACD Sep-2001 Total ABN AMRO 11

Credit Risk Management WCS: Corporate exposure for selected sectors (by limits, September 2001) Telecom Services 7. 7% of AAB Portfolio Technology 7. 0% of AAB Portfolio UCR >=4 15% UCR >=4 20% UCR 1, 2, 3 85% 12

Credit Risk Management WCS: Corporate exposure for selected sectors (by limits, September 2001) Oil & Gas Utilities Airlines 10. 3% of AAB Portfolio 10. 0% of AAB Portfolio 1. 5% of AAB Portfolio (*) UCR >=4 14% UCR >=4 22% UCR 1, 2, 3 86% Cash / ECA 31% UCR 1, 2, 3 78% Other secured 6% Unsecured 13% Treasury 10% Aircraft secured 40% (*) Nov. over Sep. portfolio 13

Credit Risk Management C&CC NL portfolio - Outstanding C&CC NL Commerical Portfolio by Product - September 2001 44% 56% C&CC NL Commerical Portfolio by UCR - September 2001 0. 5% 42. 5% Corporate Clients SME 57. 0% UCR 1, 2 and 3 UCR >= 4 Not rated 14

Credit Risk Management C&CC US portfolio UCR Percentage (outstanding by UCR, as per September 2001) Asset Quality 80% 70% 60% 50% 40% 30% 20% 10% 0% Dec-1999 Dec-2000 Mar-2001 UCR 1, 2, and 3 Michigan 16% Jun-2001 Sep-2001 UCR >=4 UCR >= 4 35% La. Salle 58% UCR 1/2/3 65% Standard Federal 26% 15

Credit Risk Management C&CC Brazilian portfolio (outstanding by UCR, as per September 2001) 5, 000 B R L 4, 000 M l n 2, 000 3, 000 1, 000 Dec. 00 Jun. 01 Car financing Retail Sep. 01 Middle Corp 17% Not rated 10% Car financing 43% UCR >=4 27% UCR 1/2/3 63% Retail 40% 16

Credit Risk Management Consumer Credit Outstanding (Sept 2001) By Geography Rest of Europe, Middle East, Africa 0. 9% Rest of Latin America 0. 3% By Product Asia 4. 3% Brasil 4. 4% USA 16. 5% Netherlands 73. 6% Loans against Other Overdraft 1% shares 1% Credit cards 1% 1% Mortgage Personal loans other Loans 3% 9% Mortgage loans USA 14% Auto Loans 5% Mortgage loans NL 65% 17

Credit Risk Management C&CC Worldwide - Asset Quality n US – Seasoned management teams at La. Salle, Standard Federal and Michigan National. – Increased provisioning in 2 Q 01; maintaining conservative standards on new lending in light of market conditions. – Halted Leverage business (currently, 2. 7% of C&CC USA portfolio) and winding down existing portfolio. Possible asset securitisation as market conditions improve. n Brazil – In 2001, major portfolio reviews were done: April 2001 and Aug 2001. An update following Sep. 11 th. terrorist strikes was also conducted. – Following portfolio reviews outcomes, Brazilian Risk Management actively implemented protection measures. Actions proved to be effective: stable provisions and credit losses are within budget. – 98% of the credit limits approved with an automated credit scoring system. Behaviour scoring has been introduced to the retail portfolio, for constant monitoring of clients and early actions. n Netherlands – Economic slowdown in NL is leading to increased infection, but not beyond our own scenarios / targets. – Credit structures in the Netherlands are generally well collateralised. – Seasoned risk management organisation is able to manage a downturn scenario effectively. – Dutch mortgage portfolio provides stability. 18

Credit Risk Management Group-wide: Cross-border risk (September 2001) Argentina 3% Other 38% Turkey 4% Brazil 15% China / HK 17% Pakistan 0% South Korea Indonesia Thailand 7% 2% 4% India 10% n Large part of ABN AMRO's cross border portfolio is short term, trade related and/or otherwise mitigated, to diverse corporate and consumer borrowers n After Sep 11 th, impact analysis on the portfolio was made, followed by reduction and re-evaluation of limits and exposures in Emerging Markets. n The share of exposure on Brazil, Turkey and Argentina (after the recent sale of our consumer business to Banco Galicia) is low and decreasing 19

Credit Risk Management Net loan loss provisioning 2001 Summary of provisioning by SBU (Including Netherlands BU; EUR million) SBU C&CC 1 Q 01 176 2 Q 01 220 WCS PCAM 92 3 40 -1 90 1 222 3 CC / other -4 -6 17 7 267 253 308 828 Total PCAM CC / other 0% 1% 3 Q 01 YTD Sept 200 596 Annualised Provisioning/ RWA 0. 6% 0. 5% WCS 27% 0. 4% 0. 3% 0. 2% C&CC 72% 0. 1% 0. 0% Q 1 Q 2 C&CC WCS Q 3 YTD ABN AMRO 20

Credit Risk Management Net loan loss provisioning: Last 10 years 40 - 45 bps / RWA (Net provisioning as % gross loans) 0. 6% 0. 57% 0. 56% 0. 54% 0. 5% 0. 42% 0. 4% 0. 37% 0. 4% 0. 31% 0. 3% 0. 27% 0. 3% 0. 24% 0. 29% 0. 25% 0. 2% 0. 19% 0. 2% 0. 1% 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2 Q 01 3 Q 01 21

Credit Risk Management Net loan loss provisioning to loans: Stable performance relative to peers Source: Bank Scope 22

Credit Risk Management Non-performing loans to loans: Stable performance relative to peers Source: Bank Scope 23

Credit Risk Management Final remarks Reality Check 1 Cannot escape macro-economic & business reality 2 Hence: migration in the portfolio However 3 Well-diversified portfolio by client segments, industry sectors and countries 4 Proven risk management practices with adequate early warning systems and effective response So 5 Will suffer less in downside, will benefit more in upside 24

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