Credit Exposures

Counterparty credit exposure arises from our traditional nontrading lending activities which include elements such as loans and contingent liabilities, as well as from our direct trading activity with clients in certain instruments including OTC derivatives like FX forwards and Forward Rate Agreements. A default risk also arises from our positions in equity products and traded credit products such as bonds.

We define our credit exposure by taking into account all transactions where losses might occur due to the fact that counterparties may not fulfil their contractual payment obligations.

Maximum Exposure to Credit Risk

The maximum exposure to credit risk table shows the direct exposure before consideration of associated collateral held and other credit enhancements (netting and hedges) that do not qualify for offset in our financial statements for the periods specified. The netting credit enhancement component includes the effects of legally enforceable netting agreements as well as the offset of negative mark-to-markets from derivatives against pledged cash collateral. The collateral credit enhancement component mainly includes real estate, collateral in the form of cash as well as securities related collateral. In relation to collateral we apply internally determined haircuts and additionally cap all collateral values at the level of the respective collateralized exposure.

Maximum Exposure to Credit Risk

Dec 31, 2013

 

Credit Enhancements

in € m.1

Maximum exposure to credit risk2

Netting

Collateral

Guarantees and Credit derivatives3

Total credit enhancements

1

All amounts at carrying value unless otherwise indicated.

2

Does not include credit derivative notional sold (€ 1,035,946 million) and credit derivative notional bought protection. Interest-earning deposits with banks mainly relate to Liquidity Reserves.

3

Credit derivatives are reflected with the notional of the underlying.

4

Excludes equities, other equity interests and commodities.

5

Gross loans less deferred expense/unearned income before deductions of allowance for loan losses.

6

Figures are reflected at notional amounts.

Due from banks

17,155

0

0

13

13

Interest-earning deposits with banks

77,984

0

2

31

34

Central bank funds sold and securities purchased under resale agreements

27,363

0

25,100

0

25,100

Securities borrowed

20,870

0

20,055

0

20,055

Financial assets at fair value through profit or loss4

824,458

434,328

206,002

3,851

644,181

Financial assets available for sale4

46,413

0

760

110

870

Loans5

382,171

0

198,668

29,971

228,640

Other assets subject to credit risk

59,030

43,574

1,150

385

45,109

Financial guarantees and other credit related contingent liabilities6

65,630

0

7,209

11,513

18,722

Irrevocable lending commitments and other credit related commitments6

126,660

0

4,538

9,182

13,720

Maximum exposure to credit risk

1,647,733

477,902

463,484

55,056

996,442

Dec 31, 2012

 

Credit Enhancements

in € m.1

Maximum exposure to credit risk2

Netting

Collateral

Guarantees and Credit derivatives3

Total credit enhancements

1

All amounts at carrying value unless otherwise indicated.

2

Does not include credit derivative notional sold (€ 1,274,960 million) and credit derivative notional bought protection. Interest-earning deposits with banks mainly relate to liquidity reserves.

3

Credit derivatives are reflected with the notional of the underlying.

4

Excludes equities, other equity interests and commodities.

5

Gross loans less deferred expense/unearned income before deductions of allowance for loan losses.

6

Figures are reflected at notional amounts.

Due from banks

27,877

0

0

1

1

Interest-earning deposits with banks

120,636

0

2

35

37

Central bank funds sold and securities purchased under resale agreements

36,570

0

36,349

0

36,349

Securities borrowed

24,013

0

23,308

0

23,308

Financial assets at fair value through profit or loss4

1,125,019

657,826

211,397

3,968

873,191

Financial assets available for sale4

47,110

0

1,287

703

1,990

Loans5

402,069

0

208,681

37,841

246,522

Other assets subject to credit risk

86,643

69,546

6,653

12

76,211

Financial guarantees and other credit related contingent liabilities6

68,358

0

7,810

8,444

16,254

Irrevocable lending commitments and other credit related commitments6

129,657

0

4,771

10,558

15,329

Maximum exposure to credit risk

2,067,952

727,372

500,258

61,562

1,289,192

Included in the category of financial assets at fair value through profit or loss as of December 31, 2013, were € 117 billion of securities purchased under resale agreements (€ 125 billion as of December 31, 2012) and € 32 billion of securities borrowed (€ 28 billion as of December 31, 2012), both with limited net credit risk as a result of very high levels of collateral, as well as traded bonds of € 126 billion (€ 159 billion as of December 31, 2012) that are over 86 % investment-grade (over 85 % as of December 31, 2012). The above mentioned financial assets available for sale category primarily reflected debt securities of which more than 97 % were investment-grade (more than 95 % as of December 31, 2012).

The significant decrease in maximum exposure to credit risk for December 31, 2013 was predominantly driven by positive market values from derivatives (in financial assets at fair value through profit or loss) which decreased by € 264 billion to € 505 billion as of December 31, 2013 and interest-earning deposits with banks, which decreased by € 43 billion and accounted for € 78 billion exposure as of December 31, 2013.

Credit Enhancements are split into three categories: netting, collateral, and guarantees and credit derivatives. A prudent approach is taken with respect to haircuts, parameter setting for regular margin calls as well as expert judgements for collateral valuation to prevent market developments from leading to a build-up of uncollateralized exposures. All categories are monitored and reviewed regularly. Overall credit enhancements received are diversified and of adequate quality being largely cash, highly rated government bonds and third-party guarantees mostly from well rated banks and insurance companies. These financial institutions are mainly domiciled in Western European countries and the United States. Furthermore we have collateral pools of highly liquid assets and mortgages (principally consisting of residential properties mainly in Germany) for the homogeneous retail portfolio.

Credit Quality of Financial Instruments neither Past Due nor Impaired

We derive our credit quality from internal ratings and group our exposures into classes as shown below. Please refer to “Credit Risk Ratings” and “Rating Governance” sections for more details about our internal ratings.

Credit Quality of Financial Instruments neither Past Due nor Impaired

 

Dec 31, 2013

in € m.1

iAAA–iAA

iA

iBBB

iBB

iB

iCCC
and below

Total

1

All amounts at carrying value unless otherwise indicated.

2

Excludes equities, other equity interests and commodities.

3

Gross loans less deferred expense/unearned income before deductions of allowance for loan losses.

4

Figures are reflected at notional amounts.

Due from banks

13,804

1,971

998

311

17

55

17,155

Interest-earning deposits with banks

71,053

5,078

1,145

391

282

35

77,984

Central bank funds sold and securities purchased under resale agreements

3,774

19,949

1,904

1,516

201

19

27,363

Securities borrowed

12,783

6,381

1,057

382

267

0

20,870

Financial assets at fair value through profit or loss2

282,000

368,969

69,497

84,517

14,009

5,466

824,458

Financial assets available for sale2

35,708

5,366

1,662

1,171

586

307

44,799

Loans3

34,708

53,624

99,941

127,613

40,869

9,884

366,639

Thereof: IAS 39 reclassified loans

999

2,894

2,088

962

817

286

8,046

Other assets subject to credit risk

7,923

37,446

2,821

9,416

1,140

284

59,030

Financial guarantees and other credit related contingent liabilities4

8,318

19,285

20,234

11,604

4,382

1,807

65,630

Irrevocable lending commitments and other credit related commitments4

19,791

31,009

37,326

25,363

11,927

1,245

126,660

Total

489,860

549,078

236,584

262,284

73,680

19,102

1,630,588

 

Dec 31, 2012

in € m.1

iAAA–iAA

iA

iBBB

iBB

iB

iCCC
and below

Total

1

All amounts at carrying value unless otherwise indicated.

2

Excludes equities, other equity interests and commodities.

3

Gross loans less deferred expense/unearned income before deductions of allowance for loan losses.

4

Figures are reflected at notional amounts.

Due from banks

24,950

1,528

988

193

171

47

27,877

Interest-earning deposits with banks

110,051

7,238

1,369

746

79

65

119,548

Central bank funds sold and securities purchased under resale agreements

1,605

32,560

1,332

877

140

56

36,570

Securities borrowed

14,708

7,342

1,216

439

306

0

24,011

Financial assets at fair value through profit or loss2

349,773

553,851

99,414

91,766

23,044

7,065

1,124,913

Financial assets available for sale2

30,077

8,303

4,076

1,913

515

1,964

46,848

Loans3

52,248

52,133

99,418

129,814

39,193

12,955

385,761

Thereof: IAS 39 reclassified loans

3,285

4,444

2,333

4,292

861

726

15,941

Other assets subject to credit risk

6,472

40,131

2,688

35,145

1,300

110

85,846

Financial guarantees and other credit related contingent liabilities4

9,064

19,192

21,304

11,460

4,886

2,455

68,361

Irrevocable lending commitments and other credit related commitments4

20,233

37,456

37,754

22,631

10,068

1,515

129,657

Total

619,181

759,734

269,559

294,984

79,702

26,232

2,049,392

Financial assets at fair value through profit and loss saw a material fall in gross exposures (i.e., before credit enhancements) principally driven by a reduction of positive market values of derivatives. On a net basis after credit enhancements portfolio quality has remained broadly stable and heavily biased towards investment-grade-rated counterparties.


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