Update on Key Credit Market Exposures


The following is an update on the development of certain credit positions (including protection purchased from monoline insurers) of certain CB&S businesses on which we have previously provided additional risk disclosures. There have been no significant developments since December 31, 2011, with respect to our commercial paper holdings in Ocala or those mortgage related exposures described in our 2011 Financial Report – Management Report: Operating and Financial Review. Our gross exposure to U.S. subprime and Alt-A RMBS and CDO declined from € 2.4 billion at December 31, 2011 to € 2.2 billion at June 30, 2012. Net of hedges and other protection purchased, we had negative exposures to these positions (i.e. we would recognize a gain if all of the gross positions were to default and result in zero recovery, and if all of the hedges triggered were effective) of € 146 million at December 31, 2011 and € 207 million at June 30, 2012.

The following is an update on the development of protection purchased from monoline insurers.

Monoline exposure related to U.S. residential mortgages1,2

Jun 30, 2012

Mar 31, 2012

in € m.

Notional amount

Fair value prior to CVA3

CVA3

Fair
value after CVA3

Notional amount

Fair value prior to CVA3

CVA3

Fair
value after CVA3

1

Excludes counterparty exposure to monoline insurers that relates to wrapped bonds of € 49 million as of June 30, 2012 and € 48 million as of March 31, 2012, which represents an estimate of the potential mark-downs of wrapped assets in the event of monoline defaults.

2

A portion of the mark-to-market monoline exposure has been mitigated with CDS protection arranged with other market counterparties and other economic hedge activity.

3

For monolines with actively traded CDS, the credit valuation adjustment (CVA) is calculated using a full CDS-based valuation model. For monolines without actively traded CDS, a model-based approach is used with various input factors, including relevant market driven default probabilities, the likelihood of an event (either a restructuring or an insolvency), an assessment of any potential settlement in the event of a restructuring, and recovery rates in the event of either restructuring or insolvency. The monolines CVA methodology is reviewed on a quarterly basis by management.

4

Ratings are the lowest of Standard & Poor’s, Moody’s or our own internal credit ratings as of June 30, 2012 and March 31, 2012.

AA Monolines:4

 

 

 

 

 

 

 

 

Other subprime

122

68

(18)

50

118

63

(17)

46

Alt-A

3,377

1,523

(293)

1,230

3,335

1,519

(255)

1,264

Total AA Monolines

3,499

1,591

(311)

1,280

3,453

1,582

(272)

1,310

Other Monoline exposure1,2

Jun 30, 2012

Mar 31, 2012

in € m.

Notional amount

Fair value prior to CVA3

CVA3

Fair
value after CVA3

Notional amount

Fair value prior to CVA3

CVA3

Fair
value after CVA3

1

Excludes counterparty exposure to monoline insurers that relates to wrapped bonds of € 45 million as of June 30, 2012, and € 43 million as of March 31, 2012, which represents an estimate of the potential mark-downs of wrapped assets in the event of monoline defaults.

2

A portion of the mark-to-market monoline exposure has been mitigated with CDS protection arranged with other market counterparties and other economic hedge activity.

3

For monolines with actively traded CDS, the credit valuation adjustment (CVA) is calculated using a full CDS-based valuation model. For monolines without actively traded CDS, a model-based approach is used with various input factors, including relevant market driven default probabilities, the likelihood of an event (either a restructuring or an insolvency), an assessment of any potential settlement in the event of a restructuring, and recovery rates in the event of either restructuring or insolvency. The monolines CVA methodology is reviewed on a quarterly basis by management.

4

Ratings are the lowest of Standard & Poor’s, Moody’s or our own internal credit ratings as of June 30, 2012 and March 31, 2012.

AA Monolines:4

 

 

 

 

 

 

 

 

TPS-CLO

2,668

754

(157)

597

2,629

727

(180)

547

CMBS

1,135

15

(1)

14

1,082

11

(1)

10

Student loans

309

26

(5)

21

294

23

(4)

19

Other

938

301

(129)

172

901

255

(100)

155

Total AA Monolines

5,050

1,096

(292)

804

4,906

1,016

(285)

731

Non Investment Grade Monolines:4

 

 

 

 

 

 

 

 

TPS-CLO

522

194

(68)

126

514

179

(70)

109

CMBS

3,505

175

(32)

143

3,468

167

(26)

141

Corporate single name/Corporate CDO

19

1

1

1,008

2

2

Student loans

1,342

620

(190)

430

1,284

580

(168)

412

Other

1,089

202

(82)

120

1,054

165

(57)

108

Total Non Investment-Grade Monolines

6,477

1,192

(372)

820

7,328

1,093

(321)

772

Total

11,527

2,288

(664)

1,624

12,234

2,108

(605)

1,503

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Deutsche Bank Interim Report as of June 30, 2012

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