Management system

The Bank’s strategic objectives and the measures required to achieve them, as well as the strategic control parameters, are derived from its business strategy. The strategic objectives are operationalised in different sub-strategies.

The strategic control parameters are applied in four categories to measure the effectiveness of strategic measures at the company-wide level:

• Attractive promotional programmes
• Efficient bank operations
• Adequate risk culture
• Fulfilment of the capital and liquidity requirements defined in the Risk Appetite Statement
  
  

Segments

The Bank is managed on the basis of three segments:

• Promotional Activity
• Capital Investment
• Treasury Management

In the “Promotional Activity” segment, Rentenbank promotes investments in agribusiness and rural areas by funding earmarked loans granted to ultimate borrowers by local banks for use in Germany according to the terms and conditions of its special promotional lending programme.

Rentenbank also fulfils its promotional mandate by acting as a funding partner to lending banks operating in agriculture and rural areas, as well as local authorities in rural areas. Such funding takes the form of various financial instruments (registered bonds, promissory notes, securities). These transactions also serve to fulfil regulatory liquidity requirements in part. Rentenbank manages both the business volume and the risk structure.

Since 2022, Rentenbank’s line-up of promotional instruments to finance start-ups operating in areas related to the Bank’s promotional mandate also includes investments in venture capital funds, which are presented within the “Promotional Activity” segment.

The mainly maturity-matched funding operations are likewise assigned to the “Promotional Activity” segment.

The “Capital Investment” segment comprises investments of the Bank’s equity and long-term provisions. The Bank invests mainly in registered bonds, promissory notes, and securities issued by banks and public-sector issuers.

Short-term liquidity and short-term interest rate risk are managed in the “Treasury Management” segment. Various instruments featuring fixed-interest periods of no more than one year are available for short-term investments of surplus liquidity and for the borrowing of required liquidity. In addition to money market transactions, Rentenbank can also purchase longer-term debt instruments for the purpose of managing the Bank’s liquidity profile.

Financial key performance indicators

Financial key performance indicators are the key financial reporting-related metrics applied to measure the achievement of strategic objectives within the internal management system. These KPIs are reflective of the Bank’s business activities. They include:

• Operating result (operating result before loan loss provisions and valuation effects)
  Rentenbank’s business activity is not geared primarily to generating profits, but rather to fulfilling its statutory promotional mandate. However, business management principles must be observed in order for the Bank to perform a self-supporting promotional activity. In particular, this means that the Bank’s activities must be economically efficient so that it can permanently sustain and adapt its promotional activity when necessary. With a view to rising regulatory requirements, the operating profit is reinvested to strengthen the Bank’s capital base. Rentenbank relies on its high credit rating as a promotional institution under public law combined with a commensurate capital markets strategy to raise funds at favourable rates.
• Cost-income ratio¹
  As a key performance indicator for measuring cost in relation to income, the cost-income ratio is applied to ensure the efficient use of the Bank’s resources. Referring as it does to the ratio of cost to income, it is influenced by changes in both these variables. To enhance operational transparency, allocations to promotional contributions and reversals of promotional subsidies from previous years are not included in the calculation of the cost-income ratio. The cost-income ratio is observed over a longer period of time and is supplemented by the periodic analysis of changes in costs.
• Volume of promotional loans
  The volume of promotional loans refers to the volume of new special promotional loans granted in a given year. The special promotional loans granted to promote agribusiness and rural areas represent the core of Rentenbank’s promotional activity. The loans are granted as earmarked funding instruments. The loans granted to the federal states’ development banks may also be bundled together.
  
  

These three financial key performance indicators and their primary components are calculated and checked against the corresponding budget values as part of the monthly reporting process. They are also included in the multi-year plan as separate indicators. Additional information on the financial key performance indicators is provided in the section on Rentenbank’s financial position, cash flows, and financial performance and in the forecast report.

Non-financial key performance indicators

• Employees
  Highly qualified and dedicated employees are the basis of Rentenbank’s long-term success. The objectives of the corresponding personnel strategy, which is consistently derived from the business strategy, include the assurance of appropriate staff in quantitative and qualitative terms, the promotion of equal opportunity, and the provision and refinement of personnel management instruments and processes.

• Corporate social responsibility
  An essential aspect of Rentenbank’s corporate social responsibility is closely linked to its promotional mandate. As a direct agency of the German federal government, however, it is also committed to serving the public good beyond the scope of its promotional mandate.

• ESG ratings
  An enterprise’s activities in the area of sustainability management are reflected in its ESG ratings, which assess the entirety of an enterprise’s exertions in this area. ESG ratings are an important indicator for external stakeholders, but they also serve to measure the success of implemented sustainability measures. Rentenbank strives to continually improve its ESG ratings or maintain them at a constantly high level.