Credit Opinion: Bank Nederlandse Gemeenten N.V.

Credit Opinion: Bank Nederlandse Gemeenten N.V. Global Credit Research - 09 May 2014 The Hague, Netherlands Ratings Category Moody's Rating Outlook Stable Bank Deposits Aaa/P-1 Bank Financial Strength B- Baseline Credit Assessment a1 Adjusted Baseline Credit Assessment a1 Issuer Rating Senior Unsecured Aaa Aaa Commercial Paper P-1 Contacts Analyst Phone Jan Skogberg/London 44.20.7772.5454 David Rubinoff/London Opinion SUMMARY RATING RATIONALE The main drivers of the Aaa long-term and P-1 short-term ratings with stable outlooks of Bank Nederlandse Gemeenten N.V. (BNG Bank) are: (1) its role as the largest lender to the Dutch public sector; (2) its good standing in the capital markets and its central bank access; (3) solid financial fundamentals and prudent risk management and (4) some non-solvency-free lending, although the bulk of its lending carries a zero-risk weighting. Unlike its Nordic peers, BNG Bank does not have a contractual guarantee from its key stakeholders or a comfort letter from its national government. However, in a stress scenario, Moody's anticipates a very high likelihood of support from the Dutch national government (Aaa stable). This is because of BNG Bank's mandate to fund the Dutch local government sector and the bank's importance to the social housing sector. Rating Drivers - Ownership structure emphasises BNG Bank's importance to the Dutch public sector - Credit risks that arise from lending, subject to solvency requirements, amount to EUR 9.2 billion or 10% of BNG Bank's total net lending - BNG Bank's financial performance is commensurate with the bank's public-policy role - Funding profile is diverse, liquidity position is adequate, even though BNG Bank holds a small amount of securities rated lower than investment-grade - Prudent risk management, including a low appetite for counterparty risks - Leverage ratio is below the 3% that is likely to come into force under basel iii; BNG Bank targets a 3% leverage ratio by the end of 2017 Rating Outlook

On 7 March 2014, the rating outlook on the Government of the Netherlands was changed to stable from negative. Given the direct and indirect linkages between the sovereign and BNG Bank, the outlook on BNG Bank's ratings was also changed to stable. What Could Change the Rating - Down Downward pressure on BNG Bank's rating could result from (1) a downgrade of the Netherlands' sovereign rating; (2) a weakening of its ownership or support structure; (3) a narrower mandate to fund the Dutch public sector or (4) a weaker standing in the capital markets. DETAILED RATING CONSIDERATIONS The rating assigned to BNG Bank reflects the application of Moody's Global Banks methodology and the Government-Related Issuers: Methodology Update. In accordance with these methodologies, Moody's first establishes the baseline credit assessment (BCA) for the entity and then considers the likelihood of support coming from the local and/or national governments in order to avoid an imminent default by BNG Bank, should this extreme event ever arise. Baseline Credit Assessment On 15 April, we adjusted BNG Bank's BCA to a1 from aaa. This adjustment reflects our desire to delineate our assessment of the standalone strength of the bank from our view on the likelihood of support being made available to BNG Bank. BNG Bank's BCA of a1 reflects the following factors: OWNERSHIP STRUCTURE EMPHASISES BNG BANK'S IMPORTANCE TO THE DUTCH PUBLIC SECTOR BNG Bank's bylaws restrict its ownership to the Dutch public sector. The central government holds a 50% stake in the bank, with the remaining 50% spread among Dutch municipalities and provinces and a district water board. This ownership structure has been stable since 1925 and is unlikely to change given BNG Bank's unchanged mandate to act as a lender to the Dutch public sector. CREDIT RISKS THAT ARISE FROM LENDING, SUBJECT TO SOLVENCY REQUIREMENTS, AMOUNT TO EUR 9.2 BILLION OR 10% OF BNG BANK'S TOTAL NET LENDING BNG Bank's importance as a provider of cost-effective lending to the Dutch public sector is an important factor that has been emphasised in recent years. Despite market volatility, BNG Bank has consistently been able to lend to the Dutch public sector at advantageous rates, given its low funding costs compared to commercial banks. The bank's narrow public policy mandate translates into concentrations on the asset side of the balance sheet. However, these concentrations are mainly to Dutch local governments and housing associations that benefit from the fact that the central government indirectly guarantees their liabilities. BNG Bank's market share of solvency-free lending to local governments, housing associations and healthcare institutions is in excess of 70% of all requested loan quotes in 2013. In 2013 lending increased by less than EUR2 billion. In contrast, from year-end 2007 to year-end 2012, total gross lending increased by more than EUR24 billion. Moody's believes that BNG Bank's advantageous funding cost will likely enable it to maintain its leading position in lending to Dutch public-sector entities. A small part (EUR9.2 billion) of the bank's lending is subject to solvency requirements that are higher than zero percent. These exposures consist of lending to companies that, for example, were privatised after they borrowed from BNG Bank. Lending and other below-investment-grade exposures amount to approximately 21% of BNG Bank's equity (as of 31 December 2013), which we view as manageable. Approximately 1% of BNG Bank's loan book consists of exposure to other European countries, including small amounts of lending to customers in Portugal and Spain. Lending to entities in other countries is limited to 15% of the loan book as per the bank's guidelines. Moody's expects foreign lending to remain a small percentage of total lending, given the financial challenges facing some European countries. BNG BANK'S FINANCIAL PERFORMANCE IS COMMENSURATE WITH THE BANK'S PUBLIC POLICY ROLE Like other government-related specialised lenders, BNG Bank must generate sufficient profits to grow its capital in

line with its portfolio expansion and to comply with higher regulatory capital requirements. However, it must also balance this growth with the provision of efficient, low-cost funding to local governments and their related sectors. BNG Bank has recorded relatively stable net income over the past five years. Net income of EUR 283 million in 2013 is slightly lower than in 2012 and, as before, largely due to value adjustments related to financial instruments. Moody's expects BNG Bank's net income to remain stable in the medium term because its business model is unlikely to change. BNG Bank's net interest margin (NIM) is consistently around 30 to 40 basis points as it continues to benefit from advantageous funding rates despite recent volatility in the financial markets. This is largely in line with peers. We understand from BNG Bank that a potential margin increase is not the preferred tool for complying with a 3% leverage ratio. Like other specialised lenders, BNG Bank's costs are low relative to its total assets. These costs consist mainly of staff expenses and other administrative expenses and they tend to amount to less than 20% of the bank's income. PRUDENT RISK MANAGEMENT, INCLUDING A LOW APPETITE FOR COUNTERPARTY RISKS BNG Bank's governance process results in prudent risk management that has been partly responsible for its strong financial performance. The highest decision-making authority within BNG Bank is its nine-member supervisory board. The board is diversified, with members having experience from the finance sector, the national government and Dutch local governments. BNG Bank has a thorough process for recruiting its supervisory board, reflected in the fact that its members are evaluated on their performance and are not automatically re-elected. The supervisory board is responsible for appointing the three-member executive board, which decides on all matters that are important to the Bank. In addition, all departments in the bank report to the executive board. BNG Bank uses derivatives to hedge all currency risks and assumes limited interest-rate risks. At year-end 2013, a 200 bps parallel shift in the yield curve would have translated into a negative EUR173 million income statement impact over the long-term, which equals approximately 5% of equity. BNG Bank enters into derivative agreements only with externally rated counterparties. It has signed ISDA and CSA agreements with its counterparties, which are well-known financial institutions, the terms of which include daily valuations and transfers of collateral. FUNDING PROFILE IS DIVERSE, LIQUIDITY POSITION IS ADEQUATE, EVEN THOUGH BNG BANK HOLDS A SMALL AMOUNT OF SECURITIES RATED LOWER THAN INVESTMENT-GRADE BNG Bank is almost entirely wholesale-funded and therefore relies on capital markets for its financing. It employs a diversified funding strategy by issuing debt in multiple currencies and markets to a wide array of investors. This diversified strategy is prudent and similar to the one used by its specialised lender peers. Basel III regulations will introduce a net stable funding ratio (NSFR) that compares the amount of available stable funding with required stable funding. It is worth noting that BNG Bank already meets the 100% minimum that is anticipated to come into force. The Bank maintains a substantial liquidity portfolio, which consists mainly of highly rated securities. Eighty one percent of the portfolio consists of securities rated from Aaa to A. A large part of the liquidity portfolio is invested in government debt, bonds with government guarantees, and covered bonds. Fourteen percent of its investments are Baa-rated and another 5% are rated as non-investment-grade. However, we do not see the below-investmentgrade investments as a threat to BNG Bank's capitalisation. BNG Bank complied with the minimum required 100% liquidity coverage ratio (LCR) in both 2013 and 2012. Moreover, BNG Bank can repo a large part of both its securities and its zero-risk weighted lending with the European Central Bank (ECB). LEVERAGE RATIO IS BELOW THE 3% THAT IS LIKELY TO COME INTO FORCE UNDER BASEL III; BNG BANK TARGETS A 3% LEVERAGE RATIO BY THE END OF 2017 BNG Bank's capitalisation is adequate in relation to its low-risk assets. Its Common Equity Tier 1 ratio stood at 25% at year end-2013, compared to 22% at year-end 2012. BNG Bank's leverage ratio of 2.3% (as of 31 December 2013) is also robust relative to its peers. In 2011, BNG Bank reduced its dividend payout ratio to 25%

from 50% in order to achieve its 3% leverage ratio target before the end of 2017. We also understand that the bank could issue additional tier 1 capital in order to comply with the 3% leverage ratio. Support Considerations Moody's assigns a very high likelihood of support from the Dutch national government. This is reflected in the importance of the local government sector to the overall Dutch economy and in BNG Bank's role as the principal financier to those local governments. 2014 Moody's Corporation, Moody's Investors Service, Inc., Moody's Analytics, Inc. and/or their licensors and affiliates (collectively, "MOODY'S"). All rights reserved. CREDIT RATINGS ISSUED BY MOODY'S INVESTORS SERVICE, INC. ("MIS") AND ITS AFFILIATES ARE MOODY'S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND CREDIT RATINGS AND RESEARCH PUBLICATIONS PUBLISHED BY MOODY'S ("MOODY'S PUBLICATION") MAY INCLUDE MOODY'S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES. MOODY'S DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL, FINANCIAL OBLIGATIONS AS THEY COME DUE AND ANY ESTIMATED FINANCIAL LOSS IN THE EVENT OF DEFAULT. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS AND MOODY'S OPINIONS INCLUDED IN MOODY'S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. MOODY'S PUBLICATIONS MAY ALSO INCLUDE QUANTITATIVE MODEL-BASED ESTIMATES OF CREDIT RISK AND RELATED OPINIONS OR COMMENTARY PUBLISHED BY MOODY'S ANALYTICS, INC. CREDIT RATINGS AND MOODY'S PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND CREDIT RATINGS AND MOODY'S PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL, OR HOLD PARTICULAR SECURITIES. NEITHER CREDIT RATINGS NOR MOODY'S PUBLICATIONS COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. MOODY'S ISSUES ITS CREDIT RATINGS AND PUBLISHES MOODY'S PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL, WITH DUE CARE, MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING, OR SALE. MOODY'S CREDIT RATINGS AND MOODY'S PUBLICATIONS ARE NOT INTENDED FOR USE BY RETAIL INVESTORS AND IT WOULD BE RECKLESS FOR RETAIL INVESTORS TO CONSIDER MOODY'S CREDIT RATINGS OR MOODY'S PUBLICATIONS IN MAKING ANY INVESTMENT DECISION. IF IN DOUBT YOU SHOULD CONTACT YOUR FINANCIAL OR OTHER PROFESSIONAL ADVISER. ALL INFORMATION CONTAINED HEREIN IS PROTECTED BY LAW, INCLUDING BUT NOT LIMITED TO, COPYRIGHT LAW, AND NONE OF SUCH INFORMATION MAY BE COPIED OR OTHERWISE REPRODUCED, REPACKAGED, FURTHER TRANSMITTED, TRANSFERRED, DISSEMINATED, REDISTRIBUTED OR RESOLD, OR STORED FOR SUBSEQUENT USE FOR ANY SUCH PURPOSE, IN WHOLE OR IN PART, IN ANY FORM OR MANNER OR BY ANY MEANS WHATSOEVER, BY ANY PERSON

WITHOUT MOODY'S PRIOR WRITTEN CONSENT. All information contained herein is obtained by MOODY'S from sources believed by it to be accurate and reliable. Because of the possibility of human or mechanical error as well as other factors, however, all information contained herein is provided "AS IS" without warranty of any kind. MOODY'S adopts all necessary measures so that the information it uses in assigning a credit rating is of sufficient quality and from sources MOODY'S considers to be reliable including, when appropriate, independent third-party sources. However, MOODY'S is not an auditor and cannot in every instance independently verify or validate information received in the rating process or in preparing the Moody s Publications. To the extent permitted by law, MOODY'S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability to any person or entity for any indirect, special, consequential, or incidental losses or damages whatsoever arising from or in connection with the information contained herein or the use of or inability to use any such information, even if MOODY'S or any of its directors, officers, employees, agents, representatives, licensors or suppliers is advised in advance of the possibility of such losses or damages, including but not limited to: (a) any loss of present or prospective profits or (b) any loss or damage arising where the relevant financial instrument is not the subject of a particular credit rating assigned by MOODY S. To the extent permitted by law, MOODY'S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability for any direct or compensatory losses or damages caused to any person or entity, including but not limited to by any negligence (but excluding fraud, willful misconduct or any other type of liability that, for the avoidance of doubt, by law cannot be excluded) on the part of, or any contingency within or beyond the control of, MOODY'S or any of its directors, officers, employees, agents, representatives, licensors or suppliers, arising from or in connection with the information contained herein or the use of or inability to use any such information. NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE ACCURACY, TIMELINESS, COMPLETENESS, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF ANY SUCH RATING OR OTHER OPINION OR INFORMATION IS GIVEN OR MADE BY MOODY'S IN ANY FORM OR MANNER WHATSOEVER. MIS, a wholly-owned credit rating agency subsidiary of Moody s Corporation ("MCO"), hereby discloses that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by MIS have, prior to assignment of any rating, agreed to pay to MIS for appraisal and rating services rendered by it fees ranging from $1,500 to approximately $2,500,000. MCO and MIS also maintain policies and procedures to address the independence of MIS's ratings and rating processes. Information regarding certain affiliations that may exist between directors of MCO and rated entities, and between entities who hold ratings from MIS and have also publicly reported to the SEC an ownership interest in MCO of more than 5%, is posted annually at www.moodys.com under the heading "Shareholder Relations Corporate Governance Director and Shareholder Affiliation Policy."

For Australia only: Any publication into Australia of this document is pursuant to the Australian Financial Services License of MOODY'S affiliate, Moody's Investors Service Pty Limited ABN 61 003 399 657AFSL 336969 and/or Moody's Analytics Australia Pty Ltd ABN 94 105 136 972 AFSL 383569 (as applicable). This document is intended to be provided only to "wholesale clients" within the meaning of section 761G of the Corporations Act 2001. By continuing to access this document from within Australia, you represent to MOODY'S that you are, or are accessing the document as a representative of, a "wholesale client" and that neither you nor the entity you represent will directly or indirectly disseminate this document or its contents to "retail clients" within the meaning of section 761G of the Corporations Act 2001. MOODY'S credit rating is an opinion as to the creditworthiness of a debt obligation of the issuer, not on the equity securities of the issuer or any form of security that is available to retail clients. It would be dangerous for "retail clients" to make any investment decision based on MOODY'S credit rating. If in doubt you should contact your financial or other professional adviser.