Probability of Default (PD)
The likelihood or probability of default (PD) of a counterparty is assessed over the next twelve months time horizon and expressed as a percentage. The Group does not rate through the cycle. PD is the primary measure of creditworthiness of a counterparty. The numerical probabilities of default are mapped into a 26-grade rating scale that is similar to rating scales widely used by international rating agencies.
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.
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-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.
Asset Finance & Leasing
Center of competence for offering structured and innovative asset financing solution for durable and high value assets.
Auction Rate Securities
Debt instrument with a long-term nominal maturity (usually 20 to 30 years) with a variable interest rate. The interest rate is regularly reset through an auction.
Average Active Equity
The Group calculates active equity to facilitate comparison to its peers. The Group uses average active equity to calculate several ratios. However, active equity is not a measure provided for in IFRS and therefore the Group’s ratios based on average active equity should not be compared to other companies’ ratios without considering the differences in the calculation. The items for which the average shareholders’ equity is adjusted 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 annual general meeting.
A procedure used to verify the predictive power of the value-at-risk calculations involving the comparison of hypothetical daily profits and losses under the buy-and-hold assumption with the estimates from the value-at-risk model.
Basel II
Revised recommendations for international capital adequacy standards adopted by the Basel Committee on Banking Supervision, widely referred to as Basel II capital framework, which aligns capital requirements more closely with the underlying risks.
Bank for International Settlements domiciled in Basel.
Book Value per Basic Share Outstanding
Book value per basic share out-standing is defined as shareholders’ equity divided by the number of basic shares outstanding (both at period end).
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.
Business Risk
Risk that arises from potential changes in general business conditions, such as market environment, client behavior and technological progress, which can affect the Group’s earnings if the Group is unable to adjust quickly to them.
Purchase (in full or in part) of a company or specific corporate activities.
Capital according to Basel II
Capital recognized for regulatory purposes according to the new Basel Capital Adequancy 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 while the amount of long-term subordinated debt that can be recognized as Tier 2 capital is limited to 50 % of Tier 1 capital.
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, as well as the 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.
The process of transmitting, reconciling and, in some cases, confirming payment orders.
Collateralized Debt Obligations (CDOs)
Asset-backed securities based on a portfolio of assets that can include bonds, loans or derivatives.
Commercial Mortgage-backed Securities (CMBS)
Mortgage-backed securities (MBS), which are backed by commercial mortgage loans.
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.
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 value-at-risk and economic capital the level of probability that the actual loss will not exceed the potential loss estimated by the value-at-risk or economic capital number.
Corporate finance
General term for capital market-related, innovative financing services to satisfy special consulting requirements in business with corporate customers.
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
A ratio expressing a company’s cost effectiveness which sets operating expenses in relation to operating income.
Country Risk
The risk that the Group may suffer a loss, in any given country, due to deterioration in economic conditions, political and social unrest, nationalization and expropriation of assets, government repudiation of external indebtedness, exchange controls and currency depreciation or devaluation.
Credit Default Swap
A credit derivative which hedges credit risks related to loans, bonds or other borrower related securities. The secured party usually makes a periodic payment of a fixed coupon over a specified term and only receives a compensation at the occurence of a credit event, as defined on the date of the agreement, e.g. default of repayment due to insolvency of the creditor.
Credit Derivatives
Financial instruments which transfer credit risk connected with loans, bonds or other risk-weighted assets or market risk positions to parties providing protection. This does not alter or reestablish 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 and administration of securities as well as additional securities services.
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.
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.
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.
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.
Economic Capital
A figure which states with a high degree of certainty the amount of equity capital the Group needs at any given time to absorb unexpected losses arising from current exposures.
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.
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 loss that can be expected within a one-year period from credit risk and operational risk based on historical loss experience.
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.
Exposure at Default (EAD)
The expected amount of the credit exposure to a counterparty at the time of a default.
Fair Value
Amount at which assets or liabilities would be exchanged between knowledgeable, willing and independent counterparties, other than in a forced or liquidation sale.
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 supply chain management
Optimization of financial payments along the supply chain.
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 received 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).
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.
Hedge Accounting
Financial reporting of agreements in a hedging relationship which is subject to certain conditions. The relationship between the agreements is based on opposite terms which cause financial risks that can be compensated in whole or part due to the terms of these agreements. One agreement is usually referred to as underlying transaction – i.e. the contract that causes the risk – the other is referred to as hedging contract which mitigates the risk.
Hedge Fund
A fund whose investors are generally institutions and wealthy individuals. Hedge funds are part of alternative investments. They are subject to less stringent or no regulatory obligations and can therefore employ strategies which mutual funds are not permitted to use, e.g. strategies involving short selling, leveraging and derivatives. Hedge funds offer chances for high profits but also bear the risk of losing invested capital, thus their returns are uncorrelated with traditional investment returns.
High Yield Debt
Fixed income securities where the issuer has a low credit rating. They offer a higher return than investment-grade securities but also entail greater risks.
IFRS (International Financial Reporting Standards)/previously IAS (International Accounting Standards)
Financial Reporting Rules of the International Accounting Standards Board designed 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.
Investment Banking
Generic term for capital market-oriented business. This includes primarily the issuance and trading of securities and their derivatives, interest and currency management, corporate finance, M&A advisory, structured finance and private equity.
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.
Leveraged Financing
Financing of an investment which typically includes a very high amount of external debt (leverage) in the purchase price financing.
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.
Leverage Ratio
The ratio of total assets to equity.
Liquidity Risk
The risk arising from the Group’s potential inability to meet all payment obligations when they come due or only being able to meet these obligations at excessive costs.
Loss Given Default (LGD)
The likely loss intensity in case of a counterparty default. Its estimation represents, expressed as a percentage, the part of the exposure that cannot be recovered in a default event and therefore captures the severity of a loss.
Management buyout
Purchase of a company’s entire outstanding shares by its management, thereby ending the company’s listing.
Market Risk
The risk that arises from the uncertainty concerning changes in market prices and rates (including interest rates, equity prices, foreign exchange rates and commodity prices), the correlations among them and their levels of volatility.
Mark-to-market Valuation
Valuation at current market prices. Applies, for instance, to trading activities.
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.
Monoline Insurers
Insurers, which provide credit insurance to debt issuers and other market participants.
Monte Carlo Simulation
Monte Carlo methods are used to value and analyze (complex) instruments, portfolios and investments by simulating the various sources of uncertainty affecting their value, and then determining their average value over the range of resultant outcomes.
Mortgage-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).
Netting Agreements
Bilateral agreements between the Group and its counterparties with regard to the included transactions which ensure that, if solvency or bankruptcy proceedings are initiated, only a single net amount is owed by one party to the other from the netting of all claims and liabilities.
Non-compensation Ratio
Non-compensation noninterest expenses, which are 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.
Operational Risk
Potential for incurring losses in relation to employees, contractual specifications and documentation, technology, infrastructure failure and disasters, external influences and customer relationships. This definition includes legal and regulatory risk, but excludes business and reputational risk.
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).
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.
In general: part or all of one or all categories of assets (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.
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.
Used as a term to categorize U.S. mortgages representing high quality loans.
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.
Seed Investments
Money used for initial research and/or operation of an investment fund.
Segment Information
Disclosure of a company’s assets, income and other information, 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.
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.
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.
Used as a term to categorize U.S. mortgages representing loans with a higher expectation of risk.
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.
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.
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).
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).
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.
For a given portfolio, the value-at-risk is an estimate of the potential future loss (in terms of market value) that, under normal market conditions, will not be exceeded in a defined period of time and with a defined confidence level.
Wrapped Bond
Term for debt security insured or guaranteed by a third party.
Projected Unit Credit Method
The actuarial method, prescribed by IAS 19, used to determine the actuarial present value of an entity’s defined benefit obligations and the related service cost. This method takes into account benefits accrued for employee service up to the reporting date and allows for expected rates of salary and pension increases. The rate used to discount post-employment benefit obligations shall be determined by reference to market yields at the balance sheet date on high quality corporate bonds.
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.
The result of the objective assessment of the future economic situation – namely the default probability – of counterparties based on present characteristics and assumptions. The methodology for the rating assignment strongly depends on the customer type and the available data. A broad range of methodologies for the assessment of the credit risk is applied, such as expert systems and econometric approaches.
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 Capital
Capital recognized for regulatory purposes according to the 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.
Regulatory Capital Ratio
Key figure for banks expressed as a percentage ratio of regulatory capital to the overall regulatory risk position, comprised of credit, market and operational risks according to Basel II. The minimum capital ratio to be complied with is 8 %. At least half of the regulatory capital principally has to be Tier 1 capital which leads to a minimum Tier 1 ratio of 4 %.
Regulatory Trading Book and Banking Book
The regulatory trading book is defined in Section 1a of the German Banking Act. It consists of financial instruments and commodities held with trading intent or held for the purpose of hedging the market risk of other trading book positions; repurchase transactions, lending transactions and similar transactions which relate to trading book positions; name-to-follow transactions; and receivables directly related to trading book positions. Financial instruments and commodities assigned to the trading book must be tradable or able to be hedged. The regulatory banking book comprises all positions that are not assigned to the trading book.
Real Estate Investment Trust is a tax designation for a corporation investing in real estate that reduces its corporate income tax. It provides a structure for investment in real estate similar to what mutual funds provide for investment stocks.
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.
Reputational Risk
Risk that publicity concerning a transaction, counterparty or business practice involving a client will negatively impact the public’s trust in the Group.
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.
Risk-weighted Assets (RWA)
Risk-weighted assets are positions that carry credit, market and/or operational risk, weighted according to regulatory requirements. RWAs are regulatory capital requirements multiplied by 12.5, or in other words, capital requirements equal 8 % of RWA.
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.
Creation of tradable securities from loan claims, deposit positions (i.e. future cash flows) and ownership rights in the wider sense. Examples of securitized rights are asset-backed securities and mortgage-backed securities (MBS). Rights are often evidenced through so-called SPVs (special purpose vehicles), companies whose sole purpose is to issue these securities and whose assets are the ownership interests in the company.

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