Enterprise Risk Management at ABN AMRO

Risk Governance

The Managing Board established the risk philosophy and policies for ABN AMRO under the guidance of the Supervisory Board. Responsibility for the overall implementation of risk policy lay with the Chief Financial Officer, who was a member of the Managing Board. Risk was managed through two principal departments: Group Risk Management (GRM) and Group Asset and Liability Management (GALM).

GRM was responsible for the management of credit, country, market and operational risks and was also responsible for leading the assessment of the impact of the New Capital Accord (Basel II) and its implementation. GALM attempted to protected the earnings and capital position of the bank from adverse interest rate and currency movements. GALM also managed the group's longer-term liquidity profile. Overnight liquidity or cash management was taken care of by the Treasury department in WCS (Wholesale Client Services).

Exhibit: III
ABN AMRO: Risk Governance Organizational

Source: ABN AMRO Annual Report, 2002.

Group Risk Management

The Group Risk Committee (GRC) was the highest-ranking committee on policy and exposure approval for credit, country and market risk.

GRC's main responsibilities were to:
� Determine the risk policies, procedures and methodologies for measuring and monitoring risk
� Set delegated credit authorities for lower committees and authorized individuals within GRM, C&CC (Consumer and Commercial Clients) and PC&AM (Private Clients and Asset Management)
� Approve credit, market and operational risk associated with new products
� Approve risk transactions larger than the delegated authorities of lower committees
� Set the overall value-at-risk (VAR) for the bank's trading products globally
� Oversee the bank's overall portfolio for WCS, C&CC and PC&AM.

Exhibit: IV
ABN AMRO: Consumer & Commercial Clients

(in millions)	2002	2001	2000
Net interest revenue	6,853	6,812	6,970
Net commissions	1,658	1,852	1,988
Results from financial transactions	226	272	266
Other revenue	1,645	1,267	802
Total revenue	10,382	10,203	10,026
Operating expenses	6,710	7,052	6,809
Operating result	3,672	3,151	3,217
Provisioning for loan losses	881	802	612
Value adjustments to financial fixed assets	8	2
Operating profit before taxes	2,783	2,347	2,605
Taxes	744	584	700
Minority interests	21	99	129
Net profit	2,018	1,664	1,776
Total assets	229,181	242,796	223,154
Risk-weighted assets	143,449	158,141	157,385
Full-time equivalent staff	71,340	73,736	75,867
Number of branches and offices	3,078	3,161	3,238

Source: ABN AMRO Annual Report, 2002

The credit risk organizations of C&CC and PC&AM had a local focus and were overseen by GRM. The WCS risk function had been integrated into GRM. Market risk and operational risk were separate risk functions within GRM. Country risk officers were part of GRM and provided local oversight.

The main responsibilities of C&CC, PC&AM and GRM were:
� Overseeing all credit, market and regulatory matters and ensuring compliance with local laws
� Approving risk transactions within delegated limits or advising on credits, which exceeded such authority
� Implementing review and control policies on all risk portfolios
� Establishing and maintaining operational risk control discipline
� Ensuring compliance with the bank's Values and Business Principles.

Basel Framework and Status

In January 2001, the Basel Committee on Banking Supervision (BCBS) published its second Consultative Document reviewing the Basel Accord of 1988. The European Commission also published a new draft Directive. In 2002, the BCBS delayed publication of the New Capital Accord to the end of 2003, simultaneously delaying its implementation until 2006.

The BCBS launched its third Quantitative Impact Survey (QIS3) in October 2002, which incorporated potential changes to the second Consultative Document, in line with some industry recommendations. The BCBS was expected to finalize the Accord partly on the basis of the results of QIS3. ABN AMRO participated in the survey as part of its close involvement in the consultations on the New Capital Accord.

ABN AMRO supported the increased risk-sensitive nature of the proposed New Capital Accord. The resulting regulatory framework was much more detailed and complex. ABN Amro believed there was a need for balance between the appropriate risk sensitivity, a level international playing field and the regulatory burden.

The bank had set up a project group to work on the implementation of the coming capital adequacy regulations on an Internal Rating Based basis for credit risk and Advanced Measurement Approach for operational risk.

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