Management system

Rentenbank’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 through a number of sub-strategies.

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

• Attractive promotional programmes
• Efficient bank operations
• Appropriate risk culture
• Compliance with the capital and liquidity requirements defined in the Risk Appetite Statement

Segments

Rentenbank is managed on the basis of three segments:

• Promotional Activity
• Capital Investment
• Treasury Management

In the “Promotional Activity” segment, Rentenbank promotes investment in the agricultural sector and in rural areas. This is done by refinancing earmarked loans granted by local banks to ultimate borrowers for use in Germany in accordance with the terms and conditions of the special promotional lending programmes.

In addition, Rentenbank fulfils its promotional mandate by acting as a refinancing partner to local banks with business activities in the agricultural sector and in rural areas, as well as to domestic public authorities. This is achieved through various forms of funding, including registered bonds, promissory note loans and securities. Some of these transactions also contribute to meeting regulatory liquidity requirements. Rentenbank manages both its business volume and its risk structure. Rentenbank’s promotional offering for the financing of start-ups related to its promotional mandate also includes investments in venture capital funds, which are reported in the “Promotional Activity” segment.

Refinancing, which is largely maturity-matched, is also allocated to the “Promotional Activity” segment.

The “Capital Investment” comprises the investment of equity and long-term provisions. Investments are made primarily in registered bonds, promissory note loans 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. Rentenbank has a range of instruments with maturities of up to one year at its disposal both for the short-term investment of surplus liquidity and for raising the liquidity required. In addition to entering into money market transactions, debt securities with longer maturities may also be acquired to manage the Rentenbank’s liquidity profile.

Financial key performance indicators

Financial key performance indicators are the principal metrics used within the internal management system to measure the achievement of strategic objectives in financial reporting. These KPIs reflect Rentenbank’s business activities. They include:

• Operating result (operating result before loan loss provisions and valuation effects)
  Rentenbank’s business activities are not primarily aimed at generating profits, but at fulfilling its statutory promotional mandate. At the same time, sound business management principles must be observed in order to enable Rentenbank to conduct its promotional activities on a self-supporting basis. In particular, this means that Rentenbank’s activities must be economically efficient so that it can sustain its promotional activities on a permanent basis and adapt them where necessary. In view of increasing regulatory requirements, the operating result is retained in order to strengthen Rentenbank’s capital base. As a promotional institution under public law, Rentenbank relies on its high credit rating, combined with an appropriate capital markets strategy, to raise funding on favourable terms.
• Cost-income ratio¹
  As a key performance indicator measuring costs in relation to income, the cost-income ratio is used to ensure the efficient use of Rentenbank’s resources. As it reflects the relationship between costs and income, it is influenced by changes in both variables. In order to enhance operational transparency, allocations to promotional contributions and reversals of promotional grants from previous years are excluded from the calculation of the cost-income ratio. The cost-income ratio is monitored over a longer period and supplemented by periodic analyses of changes in costs.
• Promotional activity volume
  Promotional activity volume 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 form the core of Rentenbank’s promotional activities. These loans are granted as earmarked funding instruments. Loans granted to the promotional institutions of the federal states may also be bundled.

These three financial key performance indicators and their principal components are calculated and compared with the corresponding budget figures as part of the monthly reporting process. They are also included as separate indicators in the multi-year plan. Further information on the financial key performance indicators is provided in the section on Rentenbank’s net assets, financial position and results of operations, as well as in the forecast report.

Non-financial key performance indicators

• Employees
  Highly qualified and committed employees are the basis for Rentenbank’s long-term success. The objectives of the related HR strategy, which is consistently derived from the business strategy, include ensuring adequate staffing in quantitative and qualitative terms, promoting equal opportunities, and providing and further developing HR management instruments and processes.
• Corporate social responsibility
  A key aspect of Rentenbank’s corporate social responsibility is closely linked to its promotional mandate. However, as a direct public law institution, Rentenbank is also committed to serving the public good beyond the scope of that mandate.
• ESG ratings
  An enterprise’s sustainability management activities are reflected in its ESG ratings, which assess the enterprise’s overall efforts in this area. ESG ratings are an important indicator for external stakeholders, but they also serve as a measure of the effectiveness of implemented sustainability measures. Rentenbank aims to continuously improve its ESG ratings or maintain them at a consistently high level.