Regulatory Capital Ratios

The KWG and the SolvV reflect the capital adequacy rules of Basel 2.5 and require German banks to maintain an adequate level of capital in relation to their regulatory capital requirements comprising counterparty credit risk, operational risk and market risk. Counterparty credit risk and operational risk must be covered with Tier 1 capital and Tier 2 capital (together “regulatory banking capital”). Market risk must be covered with regulatory banking capital (to the extent not required to cover counterparty credit and operational risk) or Tier 3 capital (together with regulatory banking capital, “own funds”).

The following table shows our eligible regulatory capital, including transitional items pursuant to Section 64h (3) KWG, available to cover the minimum capital requirements by risk type:

Coverage of Minimum Capital Requirements

 

Dec 31, 2013

Dec 31, 2012

in € m.

Regulatory capital requirements

Available regulatory capital

Regulatory capital requirements

Available regulatory capital

Counterparty credit risk and operational risk

20,261

55,618

22,464

57,251

Market risk

3,781

35,357

4,245

34,787

As of each of December 31, 2013, and December 31, 2012, we held regulatory capital well above the required minimum standards. The decrease of regulatory capital in 2013 of € 1.6 billion was the result of a decreased Tier 2 capital (€ 1.8 billion), primarily reflecting the maturing and amortization of Tier 2 capital instruments.

The German Banking Act and Solvency Regulation rules required us to cover our market risk as of December 31, 2013 with € 3.8 billion of total regulatory capital (Tier 1 +2 +3) compared with € 4.2 billion as of December 31, 2012. We met this requirement entirely with Tier 1 and Tier 2 capital that was not required for the minimum coverage of credit and operational risk.

Basel 2.5 requires the deduction of goodwill from Tier 1 capital. However, for a transitional period the partial inclusion of certain goodwill components in Tier 1 capital is allowed pursuant to German Banking Act Section 64h (3).

As of December 31, 2013, the transitional item amounted to € 154 million compared with € 236 million as of December 31, 2012. In our reporting to the German regulatory authorities, this amount is included in the Tier 1 capital, total regulatory capital and the total risk-weighted assets, as shown in the tables above. Correspondingly, our Tier 1 and total capital ratios reported to the German regulatory authorities including this item were 16.9 % and 18.5 %, respectively, on December 31, 2013 compared with 15.2 % and 17.1 %, respectively, on December 31, 2012.

As of December 31, 2013, Deutsche Bank AG and its subsidiaries Deutsche Bank Privat- und Geschäftskunden AG, norisbank GmbH, Deutsche Bank Europe GmbH, Sal. Oppenheim jr. & Cie. AG & Co. KGaA, Deutsche Oppenheim Family Office AG, Deutsche Immobilien Leasing GmbH and Leasing Verwaltungsgesellschaft Waltersdorf mbH did not calculate or report regulatory capital ratios on a stand-alone basis as these companies had applied the exemptions codified to the waiver rule Section 2a German Banking Act. As a result, they are exempted from the obligation to comply with certain requirements of the Banking Act regarding their regulatory capital on a standalone basis, including solvency calculations and reporting of regulatory capital ratios. These exemptions are available only for group companies in Germany and can only be applied if, among other things, the risk strategies and risk management processes of Deutsche Bank AG also include the companies that apply the waiver rules, there is no material practical or legal impediment to the prompt transfer of own funds or repayment of liabilities from Deutsche Bank AG to the respective subsidiaries or from all subsidiaries in the Group to Deutsche Bank AG and Deutsche Bank AG has assumed the responsibility for the liabilities of the respective subsidiaries unless the risks presented by them are insignificant.

Deutsche Postbank AG, which we have consolidated since December 3, 2010, as well as Deutsche Bank Privat- und Geschäftskunden AG and Deutsche Bank Securities Inc. are considered significant subsidiaries of the Group. Here, “significant” is defined as an entity whose relative individual contribution to our risk-weighted assets exceeds 5 % of our overall RWA. In December 2012 Deutsche Postbank AG has issued a waiver notification in accordance with Section 2a KWG to the German Supervisory Authority, the application of which is currently under discussion between Deutsche Postbank AG and the Supervisory Authority. Notwithstanding, the Tier 1 capital ratio as of December 31, 2013 and the total capital ratio for the Deutsche Postbank Group including Deutsche Postbank AG with goodwill components allowed pursuant to Section 64h (3) KWG amounted to 10.9 % and 15.4 %, and 12.0 % and 15.9 % as of December 31, 2012, respectively. For Deutsche Bank Privat- und Geschäftskunden AG no capital ratios were disclosed due to its waiver application. Deutsche Bank Securities Inc. was exempted from reporting regulatory capital ratios according to the Basel framework based on its broker dealer entity status under the regulation of the Securities Exchange Commission (SEC). It reports a net capital well in excess of the minimum standard required for broker dealers.

Failure to meet minimum capital requirements can result in orders to suspend or reduce dividend payments or other profit distributions on regulatory capital and discretionary actions by the BaFin that, if undertaken, could have a direct material effect on our businesses. We complied with the regulatory capital adequacy requirements in 2013. Our subsidiaries which are not included in the regulatory consolidation did not report any capital deficiencies in 2013.