Dr. Clemens Börsig
Chairman of the Supervisory Board
In 2010, the economic environment continued to stabilize further, beyond our original expectations. In particular our home market, Germany, benefited from this. Growth continued in the key emerging markets of Latin America and Asia. In the eurozone, fiscal tightening and economic rebalancing dampened growth in some countries. Uncertainties remain concerning the stability of the financial system, which, in light of the excessive levels of sovereign debt, led to high volatility in the capital markets. Furthermore, new regulatory requirements have become more concrete in the wake of the crisis. The “Basel III” rules recently approved by the G20 are just the beginning.
For Deutsche Bank, 2010 was a year of investments, a year in which we drove change and clearly enhanced our competitive position. In many ways, the bank is now stronger than before the financial crisis and exceptionally well positioned for renewed growth. Our market presence was significantly expanded through the takeover of parts of ABN AMRO Bank in the Netherlands as well as Sal. Oppenheim and Postbank in Germany. The bank has thus improved its earnings power, especially in the retail and commercial banking businesses, and is creating a second powerful revenue engine alongside its globally successful investment banking operations.
The bank also strengthened its equity capital base. Thanks to the well-chosen timeframe, the capital increase was carried out very successfully in September with gross issue proceeds of € 10.2 billion, making it possible to launch into the decisive phase of the Postbank takeover. The bank’s capital strength will continue to be a top priority for the Management Board and Supervisory Board in the future, too. We also took this into account in this year’s dividend proposal, just like last year. The bank will continue to face major challenges, including the Postbank integration, and new regulatory requirements. We would like to thank the Management Board and the bank’s employees for their great personal dedication.
In 2010, we again addressed numerous statutory and regulatory changes. Last year, we extensively discussed the bank’s economic and financial development, its operating environment, risk management system, planning and internal control system as well as changes in the system of compensation for the Management Board. We held in-depth discussions with the Management Board on the bank’s strategy and continued implementation of the measures in phase four of the bank’s management agenda. The Management Board reported to us regularly, without delay and comprehensively on business policies and other fundamental issues relating to management and corporate planning, the bank’s financial development and earnings situation, the bank’s risk, liquidity and capital management as well as transactions and events that were of significant importance to the bank. We advised the Management Board and monitored its management of business. We were involved in decisions of fundamental importance. Regular discussions were also held between the Chairman of the Supervisory Board and the Chairman of the Management Board dealing with important topics and upcoming decisions. Between meetings, the Management Board kept us informed in writing of important events. Resolutions were passed by circulation procedure when necessary between the meetings.
Meetings of the Supervisory Board
The Supervisory Board held nine meetings in the 2010 financial year.
At the first meeting of the year on February 3, 2010, we discussed the development of business in 2009, the key figures of the Annual Financial Statements for 2009 and a comparison of the plan-actual figures for 2009. The dividend proposal for the year 2009 as well as the corporate planning for the years 2010 to 2012 were noted with approval. Furthermore, we discussed the audit report by PricewaterhouseCoopers on the proper functioning of the business organization of the Corporate Security area, as well as the and Corporate Governance Statement. We gave our consent to Dr. Börsig and Dr. Eick being named in the Annual Report as financial experts in accordance with German and U.S. law and verified the independence of the Audit Committee members. Finally, we approved amendments to the Articles of Association and, following extensive discussion, the restructuring of the Management Board’s compensation based on a recommendation from the Chairman’s Committee.
At two other meetings on February 10 and February 18, 2010, we discussed the basis for calculating the variable compensation for the Management Board for the 2009 financial year, including the regulations of the Act on the Appropriateness of Management Board Compensation (VorstAG), and subsequently determined the Management Board’s compensation – with the involvement of an independent external legal advisor and compensation consultant – while taking into account the recommendations of the Chairman’s Committee.
At the financial statements meeting on March 12, 2010, based on the Audit Committee’s recommendation and after a discussion with the auditor, we approved the Consolidated Financial Statements and Annual Financial Statements for 2009. Furthermore, the Compliance and Anti-Money Laundering Report was presented and a discussion was held on the possible increase in our participation in Hua Xia Bank in China. Mr. Lamberti informed us of the bank’s compensation structures and practices (Remuneration Report) in accordance with the new requirements of the Federal Financial Supervisory Authority (BaFin). We also obtained extensive information on the key risk positions and the Group’s risk management. Changes in the composition of the Regional Advisory Boards and Advisory Councils in Germany were presented to us, and the resolution proposals for the Agenda of the General Meeting 2010 were approved.
At the meeting on the day before the General Meeting, we discussed the procedures for the General Meeting and the announced counterproposals as well as the status of litigation in connection with the General Meetings 2004 – 2009. As necessary, resolutions were approved. Furthermore, Dr. Ackermann summarized the bank’s exposures in Greece and reported on the future course of action.
At an extraordinary meeting on June 15, 2010, we noted Mr. Cohrs’s request to retire from the Management Board with effect from September 30, 2010, and agreed in general, on the basis of specific criteria, to the termination of his service agreement. Furthermore, we approved in general the resulting changes to the Business Allocation Plan for the Management Board based on the proposal submitted by the Chairman’s Committee. Dr. Ackermann informed us of the stress tests planned for financial institutions.
At the meeting on July 27, 2010, we were informed of the bank’s development in the first six months of the year. Based on the supplements to the German Corporate Governance Code approved by the Government Commission in May 2010, amendments to the terms of reference for the Supervisory Board, Chairman’s Committee and Nomination Committee were resolved, with the aim of implementing all of the new recommendations of the Code. Furthermore, we approved an adjustment to the plan conditions for the restricted incentive and equity awards issued to the Management Board members in 2010. Mr. Lamberti reported to us on the bank’s IT infrastructure, the governance of GTO and ongoing challenges facing the banking sector. Mr. Krause presented the strategic and financial objectives of the complexity reduction program as well as a progress report on the integration of Sal. Oppenheim and the commercial banking activities taken over from ABN AMRO Bank in the Netherlands. In addition, we approved the Management Board resolution to raise our participation in Hua Xia Bank in China to 19.99 % within the framework of its capital increase as well as the proposal submitted by the Chairman’s Committee regarding the termination of Mr. Cohrs’s service agreement.
At an extraordinary meeting on September 12, 2010, based on the recommendation of the Chairman’s Committee, we consented to the Management Board resolutions taken on the same day to submit a public takeover offer to the shareholders of Deutsche Postbank AG and to increase the share capital of the bank.
At the last meeting of the year on October 27, 2010, we were informed of the development of business in the third quarter and of the status of the takeover offer submitted to shareholders of Deutsche Postbank AG. Together with the Management Board, we discussed in detail the bank’s further strategic development along with the corresponding targets and planned measures. Mr. Lamberti presented to us the Deutsche Bank Human Resources Report. Furthermore, changes to the Terms of Reference for the Management Board, including the Business Allocation Plan, and to the Terms of Reference for the Audit Committee, based on the Minimum Requirements for the Compliance Function were discussed and approved. Finally, we determined the objectives for the composition of the Supervisory Board.
The Committees of the Supervisory Board
The Chairman’s Committee met ten times during the reporting period. In addition, two telephone conferences took place. Between the meetings, the Chairman of the Chairman’s Committee spoke with the Committee members regularly about issues of major importance. The Committee examined, in particular, the new statutory and regulatory requirements for Management Board compensation and their implementation, the preparations for determining the variable compensation for the 2009 financial year, issues of succession planning and the termination of the Management Board appointment of Mr. Cohrs. Discussions also focussed on the amendments required to the terms of reference for the Management Board and the Supervisory Board and its committees as well as changes to the Management Board’s Business Allocation Plan. In addition, the Chairman’s Committee prepared resolutions for the Supervisory Board and gave its approval to Management Board members for their ancillary activities or to accept directorships at other companies. Furthermore, based on the authorization of the Supervisory Board, it approved the final structure of the bank’s capital increase. Finally, it handled the implementation of the new recommendations and suggestions of the German Corporate Governance Code.
At its six meetings, the Risk Committee discussed the bank’s exposures subject to mandatory approval under German law and the Articles of Association. Where necessary, the Risk Committee gave its approval. Apart from credit, liquidity, country, market and operational risks, the Committee also addressed legal and reputational risks. The Committee’s discussions extensively covered the bank’s risk position along with the developments of the sovereign debt crisis in Europe and their impacts on the bank. In addition to the development of risks relating to leveraged finance, commercial real estate finance and monoline insurers, the Committee discussed in detail the effects of the new regulatory rules on the bank and its risk position. Furthermore, the Committee focussed on the risk absorption capacity, i.e. the ratio between available and required capital (reporting in accordance with ICAAP) including a comparison of the economic risks to the risk coverage potential and its consistent incorporation in risk management, and on the development of the bank’s refinancing and liquidity position. Also, global industry portfolios were presented according to a specified plan and discussed at length.
The Audit Committee met six times in 2010. Representatives of the bank’s auditor participated regularly in these meetings. Subjects covered were the audit of the Annual Financial Statements and Consolidated Financial Statements for 2009, the quarterly financial statements, Forms 20-F and 6-K for the U.S. Securities and Exchange Commission (SEC), as well as the interim reports. The Committee dealt with the proposal for the election of the auditor for the 2010 financial year, issued the audit mandate, specified audit areas of focus, resolved on the auditor’s remuneration and verified the auditor’s independence in accordance with the requirements of the German Corporate Governance Code and the rules of the U.S. Public Company Accounting Oversight Board (PCAOB). The Audit Committee is convinced that, as in the previous years, there are no conflicts of interest on the part of the bank’s auditor. It checked in detail to what extent our internal control systems are in accordance with the requirements of the Sarbanes-Oxley Act. The Committee assured itself of the effectiveness of the system of internal controls, risk management and internal audit and monitored the financial reporting and accounting process. When necessary, resolutions were passed or recommendations were issued for the Supervisory Board’s approval. The Audit Committee had reports submitted to it regularly on the engagement of accounting firms, including the auditor, with non-audit-related tasks, on the work of internal audit, on issues relating to compliance, on legal and reputational risks as well as on special investigations and significant findings of regulatory authorities. Internal Audit’s plan for the year was noted with approval. The Audit Committee did not receive any complaints in connection with accounting, internal accounting controls and auditing matters. At the last meeting of the year, the Committee obtained information from the Management Board and the auditor on key topics in planning for the Annual Financial Statements for 2010. These included, above all, the initial consolidation of Deutsche Postbank AG, Sal. Oppenheim and the business units acquired from ABN AMRO Bank in the Netherlands, the measures to prepare for the audit of the Annual Financial Statements and the areas of audit focus pursuant to Section 30 of the German Banking Act (KWG). Furthermore, it received reports on the replacement of IAS 39 and the introduction of IFRS 9 for financial instruments, as well as on steps taken and further plans for the complexity reduction program.
The Nomination Committee held two informal meetings relating to succession issues on the Supervisory Board.
Meetings of the Mediation Committee, established pursuant to the provisions of Germany’s Co-Determination Act (MitbestG), were not necessary in 2010.
The committee chairmen reported regularly to the Supervisory Board on the work of the committees.
In 2010, all Supervisory Board members participated in the meetings of the Supervisory Board and their respective committees with only few exceptions (average attendance: 95 %).
Implementation of the new recommendations of the German Corporate Governance Code was discussed at the Supervisory Board and Chairman’s Committee meetings in July 2010. The Supervisory Board resolved to implement all of the new recommendations of the Code and accordingly amended the terms of reference for the Supervisory Board, Chairman’s Committee, Nomination Committee and Management Board as necessary.
In addition, the Chairman’s Committee and Supervisory Board addressed the implementation of the new regulations on Management Board compensation at several meetings. For the review of the structure of the Management Board’s compensation system and of the appropriateness of the variable compensation for the 2010 financial year, the Supervisory Board resolved to engage an independent legal advisor and a compensation consultant.
Furthermore, at the meeting in October 2010, based on a proposal by the Chairman’s Committee and in accordance with No. 5.4.1 of the German Corporate Governance Code, we determined the objectives for the composition of the Supervisory Board (see the ).
As resolved in October 2009, efficiency reviews on the basis of company-specific questionnaires were carried out in spring 2010, not only for the Supervisory Board as a whole, but also for the Chairman’s, Audit and Risk Committees, and the results were presented and discussed in detail at the subsequent meetings. We are of the opinion that the work of the Supervisory Board is carried out efficiently and that a high standard was achieved in this context. Suggestions and measures that had been recommended in the previous review of the Supervisory Board’s efficiency were effectively implemented and led to a further increase in the efficiency of the work of the Supervisory Board and its committees. In addition, initial suggestions from the efficiency reviews were already implemented in 2010.
We determined that the Supervisory Board has what we consider to be an adequate number of independent members. We also determined that all members of the Audit Committee are independent as defined by the implementation rules of the Securities and Exchange Commission (SEC) issued pursuant to Section 407 of the Sarbanes-Oxley Act of 2002. Dr. Börsig and Dr. Eick were named as Audit Committee financial experts in accordance with the regulations of the SEC as well as Sections 107 (4) and 100 (5) of the German Stock Corporation Act (AktG).
The Declaration of Conformity pursuant to Section 161 of the German Stock Corporation Act (AktG), last issued by the Supervisory Board and Management Board in October 2009 and updated in January 2010, was reissued at the meeting of the Supervisory Board on October 27, 2010. Deutsche Bank AG complies, without exception, with all of the recommendations in the version of the Code dated May 26, 2010.
A comprehensive presentation of the bank’s corporate governance, including the text of the issued on October 27, 2010, can be found in the . and on our Internet . The terms of reference for the Supervisory Board and its committees as well as for the Management Board are also published there, each in their currently applicable versions.
Training and Further Education Measures
Members of the Supervisory Board completed the training and further education measures required for their tasks on their own. Deutsche Bank provided the appropriate support to them in this context. New members joining the Supervisory Board in 2010 were given orientation individually tailored to their levels of knowledge, a package of information material and opportunities, for internal and external training, which were widely used. All of the members of the Supervisory Board were informed of the legal basis of the Supervisory Board’s work as part of a workshop carried out by an external attorney. Furthermore, another external attorney spoke to them on the Supervisory Board’s responsibilities and task. During the reporting year, two internal workshops were held for members of the Risk Committee on issues relating to credit, market and operational risks as well as the economic capital model (ICAAP). Together with staff members of the Finance department and the auditor, the Audit Committee members discussed the new regulations on accounting and financial reporting. In addition, members of the Supervisory Board were informed of new developments in corporate governance.
Conflicts of Interest and Their Handling
The Risk Committee dealt with the loan approvals required pursuant to Section 15 of the German Banking Act (KWG). Supervisory Board members who were also board members of the respective borrowing company when the resolutions were taken, or who might have faced a possible conflict of interests for other reasons, did not participate in the discussion and voting.
In September 2010, Professor Kagermann did not participate in the discussion of and voting on the submission of a public takeover offer to the shareholders of Deutsche Postbank AG owing to his membership on the Supervisory Board of Deutsche Post AG and thus a possible conflict of interests in this context.
Occasionally, there were latent conflicts of interest on the part of individual Supervisory Board members. During the reporting period, Ms. Förster and Ms. Ruck were also members of the Supervisory Board of Deutsche Bank Privat- und Geschäftskunden AG as representatives of the employees. They did not participate in the discussions of and voting on topics relating to their work, such as resolutions pursuant to Section 32 of the German Co-determination Act (MitbestG). Additional special measures to address these latent and only occasional conflicts of interest were not required.
As in the preceding years, the Supervisory Board was regularly informed of important lawsuits and discussed further courses of action. These included the actions for rescission and to obtain information filed in connection with the General Meetings in 2004, 2005, 2006, 2007, 2008, 2009 and 2010, as well as the lawsuits brought against Deutsche Bank and Dr. Breuer by Dr. Kirch and KGL Pool GmbH. The General Meeting’s election of shareholder representatives on May 29, 2008, was contested by several shareholders. The case is currently before Germany’s Supreme Court, which will rule on the admissibility of an appeal against the decision taken by the Higher Regional Court Frankfurt am Main to dismiss the complaint.
Furthermore, reports concerning important lawsuits were presented to the Supervisory Board on a regular basis and, in detail, to the Audit and Risk Committees.
Annual Financial Statements
KPMG Aktiengesellschaft Wirtschaftsprüfungsgesellschaft, the auditor of the Annual Financial Statements elected at last year’s General Meeting, has audited the accounting, the Annual Financial Statements and the Management Report for 2010 as well as the Consolidated Financial Statements with the related Notes and Management Report for 2010. The audits led in each case to an unqualified opinion. The Audit Committee examined the documents for the Annual Financial Statements and Consolidated Financial Statements, along with the auditor’s report, and discussed these extensively with the auditor. The Chairman of the Audit Committee reported to us on this at today’s meeting of the Supervisory Board. We agreed with the results of the audits after inspecting the auditor’s reports and the documents for the Annual Financial Statements and Consolidated Financial Statements, and after an extensive discussion, we agreed to the recommendation of the Audit Committee and determined that, also based on the results of our inspections, there were no objections to be raised.
Today, we approved the Annual Financial Statements and Consolidated Financial Statements prepared by the Management Board; the Annual Financial Statements are thus established. We agree to the Management Board’s proposal for the appropriation of profits.
With effect from the end of September 30, 2010, Mr. Cohrs retired from the Management Board. His functional responsibilities were assumed by Mr. Jain in addition to his existing tasks.
There were changes in the composition of the Supervisory Board. Mr. Wunderlich was a member of the Supervisory Board until June 30, 2010. He was replaced for the remainder of his term of office by Mr. Kazmierczak. Ms. Förster was a member of the Supervisory Board until July 31, 2010. She was replaced for the remainder of her term of office by Mr. Viertel.
We thank the members who left last year for their dedicated work on the Supervisory Board and for their constructive assistance to the company and the Management Board in recent years.
Frankfurt am Main, March 11, 2011
The Supervisory Board
Dr. Clemens Börsig