Glossary

A

American Depositary Receipts (ADRs)

Negotiable certificates issued by U.S. banks and representing non-American equities deposited with them. ADRs simplify, reduce the cost of and accelerate trading in the American securities markets.

Asset Finance & Leasing

Center of competence for offering structured and innovative asset financing solution for durable and high value assets.

Asset-backed securities (ABS)

Particular type of securitized payment receivables in the form of tradable securities. These securities are created by the repackaging of certain financial assets Securitization.

Average Active Equity

We calculate active equity to make it easier to compare us to our competitors and we refer to active equity for several ratios. However, active equity is not a measure provided for in IFRS and you should not compare our ratios based on average active equity to other companies’ ratios without considering the differences in the calculation. The items for which we adjust the average shareholders' equity are average unrealized net gains on assets available for sale, average fair value adjustments on cash flow hedges (both components net of applicable taxes), as well as average dividends, for which a proposal is accrued on a quarterly basis and for which payments occur once a year following the approval by the general shareholders’ meeting.

B

Back-testing

Back-testing is used to verify the predictive power of the Value-at-risk model. Hypothetical daily profits and losses are compared with the estimates we had forecasted using the Value-at-risk model.

Banking book

All risk positions that are not allocated to the Trading book.

Basel II

Revised capital framework of the Basel Committee which has replaced the former Basel I-regulations especially on the calculation of the regulatory risk position.

BIS

Bank for International Settlements domiciled in Basel.

Book value per basic share outstanding

Book value per basic share outstanding is defined as shareholders’ equity divided by the number of basic shares outstanding (both at period end).

Broker/brokerage

Brokers accept orders to buy and sell securities from banks and private investors and execute them on behalf of the customer. For this activity, the broker usually receives a commission.

Buy-out

Purchase (in full or in part) of a company or specific corporate activities.

C

Capital according to Basel II

Capital recognized for regulatory purposes according to the new Basel Capital Adequacy Accord of 2004 for banks. Capital according to Basel II consists of:
– Tier 1 capital: primarily share capital, reserves and certain Trust Preferred Securities,
– Tier 2 capital: primarily participatory capital, cumulative preference shares, long-term subordinated debt and unrealized gains on listed securities,
– Tier 3 capital: mainly short-term subordinated debt and excess Tier 2 capital.
Tier 2 capital is limited to 100 % of Tier 1 capital and the amount of long-term subordinated debt that can be recognized as Tier 2 capital is limited to 50 % of Tier 1 capital.

Capital adequacy ratio

Key figure for banks expressing in % the ratio between their Capital according to Basel II and their Regulatory risk position comprised of credit risks, market risks and operational risks. The minimum total capital ratio to be complied with is 8 %.

Cash flow statement

Calculation and presentation of the cash flow generated or consumed by a company during a financial year as a result of its business, investing and financing activities, and reconciliation of holdings of cash and cash equivalents (cash reserve) at the beginning and end of a financial year.

Cash management

Refers to the management of liquid assets in dollars, euro and other currencies for companies and financial institutions to optimize financial transactions.

Clearing

The process of transmitting, reconciling and, in some cases, confirming payment orders.

Coaching

Personalized, tailored developmental intervention aimed at improving an employee’s performance (e.g. management competence, communication skills) as a rule with the help of a coach.

H

Hedge accounting

Financial reporting of hedging relationships which are subject to certain conditions.

C

Compensation ratio

Compensation and benefits as a percentage of total net revenues, which is defined as net interest income before provision for credit losses plus noninterest income.

Compliance

Entirety of measures adopted to ensure that relevant laws, rules and internal regulations are adhered to and to prevent legal or regulatory sanctions as well as financial or reputational damage.

Confidence level

In the framework of the Value-at-risk concept it is the level of probability that the loss stated by the Value-at-risk will arise in the respective interval.

Corporate finance

General term for capital market-related, innovative financing services to satisfy special consulting requirements in business with corporate customers.

Correlation

Reciprocal relationship between at least two variables (e.g. assets). It can be positive, in which case the variables move in the same direction, or negative when they move in opposite directions. However, correlation says nothing about causality (i.e. cause/effect). Correlation is an important tool used in asset allocation to diversify and/or hedge risks.

Cost/income ratio

In general: a ratio expressing a company’s cost effectiveness which sets operating expenses in relation to operating income.

Country risk

The risk that we may suffer a loss, in any given country, due to political and social unrest, nationalization and expropriation of assets, government repudiation of external indebtedness, exchange controls and currency depreciation or devaluation.

Credit default swap

An agreement between two parties whereby one party pays the other a fixed coupon over a specified term. The other party makes no payment unless a specified credit event such as a default occurs, at which time a payment is made and the swap terminates.

Credit derivatives

Financial instruments with which Credit risk connected with loans, bonds or other risk-weighted assets or market risk positions is transferred to parties providing protection. This does not alter or re-establish the underlying credit relationship of the original risk-takers (parties selling the credit risks).

Credit linked note (CLN)

A structured note that combines a debt product and an embedded credit derivative, typically a Credit default swap.

Credit risk

Risk that customers may not be able to meet their contractual payment obligations. Credit risk includes default risk, Country risk and settlement risk.

Credit trading

Trading in loan or credit-related products.

Custody

Custody and administration of securities as well as additional securities services.

D

Debt products

Tradable instruments representing a liability or claim with respect to assets of one or more private or public sector entities. The phrase also denotes a broader range of instruments including foreign exchange and commodity contracts.

Deferred taxes

Income tax to be paid or received as a result of temporary differences between the carrying amounts in the financial accounts and the relevant tax base or the value of unused tax losses and unused tax credits. At the balance sheet date, deferred taxes do not yet represent actual amounts receivable or payable from or to tax authorities.

Derivatives

Financial instruments whose value derives largely from the price, price fluctuations and price expectations of an underlying instrument (e.g. share, bond, foreign exchange or index). Derivatives include Swaps, Options and Futures.

DJSI

Dow Jones Sustainability Indexes are an index family tracking the member companies’ ecological and social achievements. Deutsche Bank has been listed in the DJSI World and the DJSI STOXX ever since they were first launched. www.sustainability-index.com

E

Earnings per share

Key figure determined according to IFRS and expressing a company’s net income attributable to its shareholders in relation to the average number of common shares outstanding. Apart from basic earnings per share, diluted earnings per share must also be reported if the assumed conversion and exercise of outstanding share options, unvested deferred share awards and convertible debt and certain forward contracts could increase the number of shares.

Equity method

Valuation method for investments in companies over which significant influence can be exercised. The pro-rata share of the company’s net income (loss) increases (decreases) the carrying value of the investment affecting net income. Distributions decrease the carrying value of the investment without affecting net income.

Euro Commercial Paper Program

Instrument allowing the flexible issuance of unsecured, short-term debt by an issuer. A program may comprise several bond issues over a period of time.

Event risk scenarios

Scenarios representing important events, e.g. large movements in interest or exchange rates.

Expected loss

Measurement of the default loss to be expected in our loan  portfolio within one year on the basis of historical loss data.

Exposure

The amount which the bank may lose in case of losses incurred due to risks taken, e.g. in case of a borrower’s or counterparty’s default.

F

Fair value

Amount at which assets or liabilities would be exchanged between knowledgeable, willing and independent counterparties.

Family office

Financial services which are designed for families with very large and complex portfolios of assets and which protect customers’ interests on the basis of absolute independence through optimal management and comprehensive coordination of individual wealth components.

Financial assets available for sale

Non-derivatives financial assets that are designated as available for sale or are not classified as loans and receivables or financial assets at fair value through profit and loss. They are reported in the balance sheet at their Fair value. Changes in Fair value are generally reported in net gains/losses not recognized in the income statement in shareholders’ equity. Impairments and realized gains and losses are reported in the consolidated statement of income.

Financial supply chain management

Optimization of financial payments along the supply chain.

Futures

Forward contracts standardized with respect to quantity, quality and delivery date, in which an instrument traded on the money, capital, precious metal or foreign exchange markets, is to be delivered or taken receipt of at an agreed price at a certain future time. Cash settlement is often stipulated for such contracts (e.g. futures based on equity indices) to meet the obligation (instead of delivery or receipt of securities).

G

General business risk

Risk arising from changes in general business conditions, such as market environment, client behavior and technological progress. These factors can affect our earnings if we are unable to adjust quickly to changes in them.

Goodwill

The amount which the buyer of a company pays, taking account of future earnings, over and above the Fair value of the company’s individually identifiable assets and liabilities.

H

Hedge fund

A fund whose investors are generally institutions and wealthy individuals. Hedge funds can employ strategies which mutual funds are not permitted to use. Examples include short selling, leveraging and Derivatives. Hedge fund returns are often uncorrelated with traditional investment returns.

E

Economic capital

A figure which states with a high degree of certainty the amount of equity capital we need at any given time to absorb unexpected losses arising from current exposures. It must be clearly distinguished from reported capital and reserves.

Equity Capital Markets (ECM)

Primarily, activities connected with a company’s IPO or the placement of new shares. It also covers the privatization of state-owned companies.

W

Wrapped bond

Term for debt security insured or guaranteed by a third party.

I

Investor relations

Investor relations describes the systematic and continuous two-way communication between companies and both current and potential providers of capital. Information is supplied on major corporate events, financial results, business strategy and the capital market’s expectations of management. One objective of investor relations activities is to ensure that a company’s equity is appropriately valued by the market.

M

Mark-to-market valuation

Valuation at current market prices. Applies, for instance, to trading activities.

L

Leverage ratio

The ratio of shareholders’ equity to total assets.

Leveraged buyout

Debt-financed purchase of all or parts of a company or specific activities of a company. Interest and principal payments are financed from the acquired company’s future revenues.

Liquidity risk

Risk to our earnings and capital arising from the bank’s potential inability to meet matured obligations without incurring unacceptably high losses.

M

Management buyout

Purchase of a company’s entire outstanding shares by its management, thereby ending the company’s listing.

Mezzanine

Flexible, mixed form of financing comprising equity and debt capital. Here: long-term subordinated financing instrument used to finance growth while at the same time strengthening the borrower’s economic equity capital base.

Market risk

Arises from the uncertainty concerning changes in market prices and rates (including interest rates, share prices, foreign exchange rates and commodity prices), the correlations among them and their levels of volatility.

L

Leveraged Financing

Financing of an investment which typically includes a very high amount of external debt (leverage) in the purchase price financing.

M

Monoline Insurers

Insurers, which provide credit insurance to debt issuers and other market participants.

N

Netting agreements

Contracts between two parties that under certain circumstances – e.g. insolvency – mutual claims from outstanding business can be offset against each other. The inclusion of a legally binding netting agreement reduces the default risk from a gross to a net amount.

M

Monte Carlo simulation

A Monte Carlo simulation is a model that calculates the gain or loss from a transaction by analyzing a large number of different market scenarios (e.g.10,000).

Mortgaged-backed securities (MBS)

Asset-backed securities, which are backed by mortgage loans. Subcategories are Residential mortgage-backed securities (RMBS) and Commercial mortgage-backed securities (CMBS).

S

Securitization

In general: rights evidenced by securities (e.g. shares or bonds).
Here: replacing loans or financing various kinds of claims by issuing securities (such as bonds or commercial paper).

Segment information

Disclosure of a company’s assets and income, broken down by activity (division) and geographical area (region).

Shareholder value

Management concept that focuses strategic and operational decision-making on the steady growth of a company’s value. The guiding principle is that only returns above the cost of capital add value for shareholders.

Sharia conform

In accordance with Islamic Law.

SPAC (special purpose acquisition company)

Publicly traded buyout company that raises money in order to pursue the acquisition of an existing company.

Subprime

Used as a term to categorize U.S. mortgages representing loans with a higher expectation of risk.

Sustainability

Denotes the interplay of economy, ecology and social responsibility with the objective of sustainably advancing the basis for human life while preparing it for the future.

T

Trading book

A bank-regulatory term for positions in financial instruments, shares and tradable claims held by a bank which are intended for resale in the short term to benefit from price and interest rate fluctuations. This also includes business that is closely associated with trading book positions (e.g. for hedging purposes). Risk positions not belonging to the trading book are shown in the Banking book.

S

Swaps

In general: exchange of one payment flow for another.
Interest rate swap: exchange of interest payment flows in the same currency with different terms and conditions (e.g. fixed or floating).
Currency swap: exchange of interest payment flows and principal amounts in different currencies.

T

Target definition

Target definition excludes significant gains (such as gains from the sale of industrial holdings, businesses or premises) or significant charges (such as charges from restructuring, goodwill impairment or litigation) if they are not indicative of the future performance of Deutsche Bank core businesses.

C

Collateralized debt obligations (CDOs)

Asset-backed securities, which are in general backed by bonds or loans.

Commercial mortgage-backed securities (CMBS)

Mortgage-backed securities (MBS), which are backed by commercial mortgage loans.

Commitment

A firm’s employees have commitment when they identify with their company, its goals and values, are willing to work hard for it and prefer to stay in its employment.

A

Alpha

Investment return in excess of the benchmark return.

Alternative A (Alt-A)

Used as a term to categorize U.S. mortgages representing loans with a higher expectation of risk than Prime but still lower than Subprime.

Alternative assets/investments

Direct investments in Private equity, venture capital, mezzanine capital, real estate capital investments and investments in leveraged buyout funds, venture capital funds and Hedge funds.

T

Trust & Securities Services

Broad range of administrative services for securities. They include, for example, securities custody, trust administration, issuing and paying agent services, depositary bank function for American Depositary Receipts (ADRs).

Trust Preferred Securities

Hybrid capital instruments characterized by profit-related interest payments. Under banking supervisory regulations they are part of Tier 1 capital if interest payments are not accumulated in case of losses (noncumulative trust preferred securities) and if the instruments do not have a stated maturity date or if they are not redeemable at the option of the holder. Otherwise they are included in Tier 2 capital (for example cumulative trust preferred  securities).

U

U.S. GAAP (United States Generally Accepted Accounting Principles)

U.S. accounting principles drawn up by the Financial Accounting Standards Board (FASB) and the American Institute of Certified Public Accountants (AICPA). In addition, the interpretations and explanations furnished by the Securities and Exchange Commission (SEC) are particularly relevant for companies listed on the stock exchange. As in the case of IFRS the main objective is to provide decision useful information, especially for investors.

V

Value-at-risk

Value-at-risk measures, for a given Portfolio, the potential future loss (in terms of market value) that, under normal market conditions, will not be exceeded in a given period and with a given Confidence level.

I

IFRS (International Financial Reporting Standards)/previously IAS (International Accounting Standards)

Financial Reporting Rules of the International Accounting Standards Board to ensure globally transparent and comparable accounting and disclosure. Main objective is to present information that is useful in making economic decisions, mainly for investors.

Institutional equity registered direct transaction

A negotiated sale by an issuer to institutional investor(s) of securities that have been registered pursuant to an effective shelf registration statement.

Investment banking

Generic term for capital market-oriented business. This includes primarily the issuing and trading of securities and their Derivatives, interest and currency management, corporate finance, M&A advisory, structured finance and Private equity.

N

Non-compensation ratio

Non-compensation noninterest expenses, which is defined as total noninterest expenses less compensation and benefits, as a percentage of total net revenues, which is defined as net interest income before provision for credit losses plus noninterest income.

O

Operational risk

Potential for incurring losses in relation to employees, contractual specifications and documentation, technology, infrastructure failure and disasters, projects, external influences and customer relationships. This definition includes legal and regulatory risk.

Option

Right to purchase (call option) or sell (put option) a specific underlying (e.g. security or foreign exchange) from or to a counterparty (option seller) at a predetermined price on or before a specific future date.

OTC derivatives

Nonstandardized financial instruments (Derivatives) not traded on a stock exchange, but directly between market participants (over the counter).

P

Portfolio

In general: part or all of one or all categories of asset (e.g. securities, loans, equity investments or real estate). Portfolios are formed primarily to diversify risk.
Here: combination of similar transactions, especially in securities and/or Derivatives, under price risk considerations.

Portfolio management

Management and administration of a Portfolio of securities for a client. This can involve the continous review of the portfolio and, if agreed with the client, purchases and sales.

Pre-tax return on average active equity

Income before income tax expense attributable to Deutsche Bank shareholders (annualized), which is defined as Income before income taxes less minority interest, as a percentage of average active equity.

Prime

Used as a term to categorize U.S. mortgages representing high quality loans.

Prime Brokerage

Suite of products including Clearing and settlement, Custody, reporting, and financing of positions for institutional investors.

Prime services/brokerage

Suite of products including Clearing and settlement, Custody, reporting, and financing of positions for institutional investors.

Private banking

Business with investment-oriented and high net worth clients.

Private equity

Equity investment in non-listed companies. Examples are venture capital and buyout funds.

Projected unit credit method

An accrued benefit valuation method, according to IAS 19, used to determine the actuarial present value of an enterprise’s defined benefit obligations and the related current service cost. This method takes into account the expected rates of salary increases, for instance, as the basis for future benefit increases. The rate used to discount post-employment benefit obligations is determined by reference to market yields at the balance sheet date on high quality corporate bonds.

Q

Quantitative investments

Portfolios of equities, bonds as well as Hedge funds. Portfolios are managed in a systematic and regulated framework applying fundamental investment principles. The choice of investment is determined by the processing of large data volumes while applying quantitative methods and techniques.

R

Rating

External: standardized evaluation of issuers’ credit standing and debt instruments, carried out by specialized agencies.
Internal: detailed risk assessment of every Exposure associated with an obligor.

Registered shares

Shares registered in a person’s name. As required under joint stock company law, that person is registered in the share register with several personal details and the number of shares owned. Only those persons entered in the share register are deemed to be shareholders of the company and are entitled, for instance, to exercise rights at the General Meeting.

Regulatory Risk position

The regulatory risk position according to Basel II is made up of credit risk, market risk and operational risk. These risk components are calculated on the basis of standard and/or advanced approaches. The market risk corresponds to 12.5 times the Value-at-risk figure (99 % Confidence level and ten days holding period), which we calculate on the basis of our regulatorily recognized internal models scaled up with a bank-specific multiplier.

Repo (repurchase agreement)

An agreement to repurchase securities sold (genuine repurchase agreement where the asset remains the seller’s property). From the buyer’s viewpoint, the transaction is a reverse repo.

Residential mortgage-backed securities (RMBS)

Mortgage-backed securities (MBS), which are backed by residential mortgage loans.

Return on average total shareholders’ equity (RoE)

In general: ratio showing the income situation of a company, setting profit (net income) in relation to capital employed.
Here: net income as a percentage of average capital employed over the year.

S

Sale and lease back

Transaction in which one party sells assets such as real estate to another party and at the same time enters into an agreement to lease the assets for a pre-determined period of time.

Sarbanes-Oxley Act (SOX)

U.S. capital market law passed in 2002 to strengthen corporate governance and restore investor confidence in response to a number of major corporate and accounting scandals. Legislation establishes new or enhanced standards ranging from additional Corporate Board responsibilities to criminal penalties for all companies that have listed their shares on a U.S. stock exchange.