What is the Rabobank?

Published by Thomas Herold in Banking, Economics, Real Estate, Trading

'Rabobank' is explained in detail and with examples in the Trading edition of the Herold Financial Dictionary, which you can get from Amazon in Ebook or Paperback edition.

Rabobank refers to the Dutch banking giant whose full name is the Coöperatieve Rabobank. This Dutch international banking giant is a full-scale financial services organization whose headquarters today lies in the city of Utrecht in the Netherlands. The banking group is a world leader for agriculture and food production financing as well as in banking based on sustainability. Their motto is “as large as necessary, as small as possible.”

The group Rabobank is a unique form of banking organization and structure in many ways. It is made up of 120 fully independent local Rabobanks in the Netherlands as of 2013. These banks actually own the parent central organization called Rabobank Nederland. They also operate a significant number of subsidiaries and specialized international operations and offices. The main international concentration of the Rabobank Group proves to be agribusiness and food-related.

By their assets, this bank remains the second biggest Dutch bank. When measured by their Tier 1 Capital, the bank proves to be in the top 30 biggest financial institutions on earth. Current as of December 2014, their aggregate assets equaled €681 billion (Euros) while they claimed a net profit amount of €1.8 billion. The banking and finance industry publication Global Finance ranks Rabobank at an impressive number 25 for “world’s safest banks.”

The bank’s historical and current day roots remain in agriculture. As a confederation of local credit union banks which deliver banking and financial services to their local markets, the company operates on a bottom up model which is most unusual in banking. This means that the central organization and all of its countless subsidiaries and international offices throughout the world are a huge subsidiary of the local Dutch branches. With the overwhelming majority of commercial banks in the world today, the central organization proves to be the owning parent entity.

The roots of the bank came from the founder of the credit union cooperative movement Friedrich Wilhelm Raiffeisen, whose name is today immortalized in the enormous central and Eastern European, Austrian-based Raiffeisen Bank. He was the one who started the original farmers’ bank within Germany. The local countryside town mayor was aghast at the dire poverty he saw in the local farmers, their families, and communities. Though he attempted to deliver charity to alleviate their suffering, he soon discovered that helping them to be more self-reliant would yield better results over the long term. He did this by establishing his farmers’ banks which gathered up the countryside residents’ savings in order to offer them out as loans to enterprising farmers who needed capital to expand. Among his early followers was Father Gerlacus van den Elsen. He founded and inspired many of the local farmers’ banks throughout the south of the Netherlands.

The bank had traditional dual headquarters in both Utrecht and Eindhoven. It was in the year 1898 that two different cooperative banking conglomerates formed as the Utrecht- based Coöperatieve Centrale Raiffeisen-Bank and the Eindhoven-based Coöperatieve Centrale Boerenleenbank. The former proved to be a co-op of six different area banks, while the latter existed when 22 local banks formed their co-op. Even though the two banks were largely the same, they still operated as separate competitors alongside one another for around 75 years. It was ironically the differing Christian religious bents of the two banks that kept them apart for so long. While the Eindhoven co-op was strongly Catholic, the Utrecht based Raiffeisen-Bank had Protestant roots. It explained why the Catholic based-bank was heavily centralized while the Protestant-based bank encouraged local autonomy of its branches.

The two were cooperating by 1940 and merged together in 1972 as Rabobank. The name changed to Rabobank Nederland in 1980. Overseas expansion came through many acquisitions in farming-oriented countries. They bought Primary Industry Bank of Australia in 1994 and reformed this as Rabobank Australia Limited by 2003. In 1997 they acquired Wrightson Farmers Finance Limited of New Zealand and converted this in 1999 to Rabobank New Zealand. They entered Indonesia decisively with the buyout of Bank Haga and Bank Hagakita. In 2011 and 2012, they opened online banks in Poland and then Germany. A savings business in Ireland followed. They also expanded into the Western U.S. with the purchase of Mid-State Bank & Trust in 2007 and Pacific State Bank in 2010.

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The term 'Rabobank' is included in the Trading edition of the Herold Financial Dictionary, which you can get from Amazon in Ebook or Paperback edition.