The table below shows the overall risk position of the Group as measured by the economic capital calculated for credit, market, business and operational risk ; it does not include liquidity risk or the risk of our insurance companies. To determine our overall (nonregulatory) risk position, we aggregate the individual economic capital calculated for the various types of risk. This aggregation assumes that all the risk types are 100% correlated, i.e. it does not consider any diversification across risk types.
On December 31, 2003, our economic capital usage totaled € 16.7 billion, which is € 5.8 billion or 26% below the € 22.4 billion economic capital usage as of December 31, 2002. The following table shows the year-end 2003 allocation of total economic capital among the risk types compared to the allocation at year-end 2002.
| Economic Capital Usage in € m. | Dec 31, 2003 | Dec 31, 2002 |
| Credit Risk | 7,363 | 8,942 |
| Market Risk | 5,912 | 9,057 |
| Trading Market Risk1 | 972 | 765 |
| Nontrading Market Risk2 | 4,940 | 8,292 |
| Business Risk | 1,117 | 1,978 |
| Operational Risk | 2,282 | 2,449 |
| Total Economic Capital Usage | 16,674 | 22,426 |
| 1 | Trading market risk as shown in this table has been calculated using a refined aggregation process which we implemented in 2003, in order to better reflect correlations among market risk factors in stressed market conditions. Consequently, we have restated our trading market risk economic capital for December 31, 2002, which was previously reported as € 0.9 billion. |
| 2 | Nontrading market risk economic capital includes the risk related to our industrial holdings. For year-end 2002, an amount of € 2.0 billion has been included in the table, compared to € 1.3 billion for the year-end 2003. |
The reduction in credit risk economic capital primarily reflects the overall reduction in our lending-related credit exposures as well as the improved credit quality of our loan book. The reduction in market risk economic capital is mainly caused by decreases in risk from alternative assets investments, principally private equity and real estate investments, as well as lower risk from industrial holdings. The reduction in business risk economic capital reflects an improved market outlook and our increasing ability to adjust costs in a market downturn.
The allocation of economic capital may change from time to time to reflect refinements in our risk measurement methodology. In 2004, we plan to regularly calculate the diversification effects on economic capital across the credit and market risk categories. We estimate the diversification benefit across these categories as € 1.2 billion as of December 31, 2003, but this effect is not reflected in the table above. The diversification benefit across all risk types has not yet been calculated.