Allocation of Positions to the Regulatory Trading book

For German regulatory purposes all our positions must be assigned to either the trading book or the banking book. This classification of a position impacts its regulatory treatment, in particular the calculation of the regulatory capital charges for the position. We laid down the criteria for the allocation of positions to either the trading book or banking book in internal policy documents, which were based on the requirements applicable to the group as outlined in section 1a of the German Banking Act (KWG).

A central function in Finance is responsible for the policy guidance and is the centre of competence with regard to questions concerning its application. The Finance functions for the individual business areas are responsible for the classification of positions based on the policy requirements.

We include positions in the trading book that are financial instruments or commodities which are held with trading intent or which are held for the purpose of hedging the market risk of other trading book positions.

Positions included in the trading book must be free of any restrictive covenants regarding their transferability or able to be hedged.

Moreover, positions assigned to the trading book must be valued daily. Further information on the valuation methodology that we used is provided in Note 14 “Financial Instruments carried at Fair Value”.

As part of the ongoing procedures to confirm that the inclusion of positions in the trading book continues to be in line with the above referenced internal policy guidance, the Finance functions for our trading businesses carry out a global review of the classification of positions on a quarterly basis. The results of the review are documented and presented to the Trading Book Review Committee with representatives from Finance and Legal.

Re-allocations of positions between the trading book and the banking book may only be carried out in line with the internal policy guidance. They must be documented and are subject to approval by the central function in Finance described above.

Balance Sheet and Trading Book Assets and Liabilities

The tables below present trading or banking book splits for assets and liabilities of our balance sheet from a regulatory point of view.

Regulatory Trading Book Assets and Liabilities as part of the Balance Sheet

 

Dec 31, 2013

Dec 31, 2012

in € m.

Balance Sheet

Trading Book

Banking Book1

Balance Sheet

Trading Book

Banking Book1

1

Includes exposure in relation to non regulatory consolidated entities.

2

Includes as of December 31, 2013 and as of December 31, 2012 only securities purchased under resale agreements.

3

The regulatory banking book primarily includes debt securities as part of our liquidity portfolio as well as traded loans which do not fulfill the criteria for being allocated to the regulatory trading book.

4

Regulatory trading book positions mainly include brokerage receivables and derivatives qualifying for hedge accounting.

Assets

 

 

 

 

 

 

Cash and due from banks

17,155

91

17,063

27,877

251

27,626

Interest earning deposits with banks

77,984

4,391

73,593

120,637

3,706

116,931

Central banks funds sold and securities purchased under resale agreements2

27,363

5,784

21,578

36,570

18,872

17,698

Securities borrowed

20,870

20,712

157

24,013

23,911

102

Financial assets at fair value through profit or loss

899,257

843,374

55,883

1,209,839

1,155,080

54,759

Trading Assets3

210,070

187,939

22,131

254,459

231,319

23,139

Positive market values from derivative financial instruments

504,590

499,279

5,311

768,353

754,830

13,524

Financial assets designated at fair value through profit or loss

184,597

156,155

28,441

187,027

168,931

18,096

Financial assets available for sale

48,326

600

47,725

49,400

527

48,873

Equity method investments

3,581

8

3,573

3,577

0

3,577

Loans

376,582

1,617

374,964

397,377

4,368

393,009

Property and equipment

4,420

0

4,420

4,963

0

4,963

Goodwill and other intangible assets

13,932

0

13,932

14,219

0

14,219

Other assets4

112,539

34,995

77,545

123,702

47,708

75,993

Assets for current tax

2,322

0

2,322

2,389

0

2,389

Deferred tax assets

7,071

0

7,071

7,712

0

7,712

Total Assets

1,611,400

911,574

699,826

2,022,275

1,254,423

767,851

 

Dec 31, 2013

Dec 31, 2012

in € m.

Balance Sheet

Trading Book

Banking Book

Balance Sheet

Trading Book

Banking Book

Financial liabilities at fair value through profit or loss

637,404

631,182

6,222

925,193

910,970

14,223

Trading liabilities

55,804

55,604

200

54,400

54,195

205

Negative market values from derivative financial instruments

483,428

478,005

5,423

752,652

738,634

14,018

Financial liabilities designated at fair value through profit or loss

90,104

89,505

599

110,409

110,409

0

Investment contract liabilities

8,067

8,067

0

7,732

7,732

0

Remaining Liabilities

919,030

65,733

853,298

1,042,842

84,122

958,720

Total Liabilities

1,556,434

696,914

859,520

1,968,035

995,092

972,944

The vast majority of our trading book assets on our balance sheet are financial assets at fair value through profit or loss. The 27 % decrease as of December 31, 2013 compared with prior year end especially in positive market values from derivative financial instruments was principally related to interest rate derivatives and shifts in yield curves as well as from the result of our de-leveraging initiative.

Within liabilities the vast majority of our trading book is comprised of financial liabilities at fair value through profit or loss. The 31 % decrease as of December 31, 2013 compared with prior year end especially in negative market values from derivative financial instruments was primarily related to shifts in yield curves impacting interest rate derivatives as well as from the result of our de-leveraging initiative.

For an additional breakdown of our net interest income and net gains or losses on our trading book assets and liabilities please see Note 5 “Net Interest Income and Net Gains (Losses) on Financial Assets/Liabilities at Fair Value through Profit or Loss”.