Counterparty Credit Risk: Regulatory Assessment

The following section on “Counterparty Credit Risk: Regulatory Assessment” presents specific disclosures in relation to Pillar 3. Per regulation it is not required to audit Pillar 3 disclosures. As such this section, which ends with the beginning of section “Securitization”, is labeled unaudited. Quantitative information presented follows the regulatory scope of consolidation.

General Considerations for the Regulatory Assessment of Counterparty Risk

As a general rule, we applied the advanced IRBA for the majority of our advanced IRBA eligible credit portfolios to calculate the regulatory capital requirements according to the CRR/CRD 4 framework, based on respective approvals received from BaFin.

A prerequisite for the development of rating methodologies and the determination of risk parameters is a proper definition, identification and recording of the default event of a customer. We apply a default definition in accordance with the requirements of Article 178 CRR as confirmed by the BaFin as part of the IRBA approval process.

The BaFin approvals obtained as a result of the advanced IRBA audit processes for our counterparty credit exposures allow the usage of 68 internally developed rating systems for regulatory capital calculation purposes excluding for exposures in Postbank. Thereof, 37 rating systems were authorized in December 2007; a further 31 followed until year end 2014. Overall they cover all of our material exposures, excluding Postbank, in the advanced IRBA eligible exposure classes “central governments and central banks”, “institutions”, “corporates”, and “retail”.

At Postbank, the retail portfolio is also assigned to the advanced IRBA based on respective BaFin approvals Postbank received and the fact that we have an advanced IRBA status. Moreover, during 2014 Postbank obtained BaFin approvals for one Postbank specific rating system as well as nine rating systems already applied at Group level to start applying the advanced IRBA within the exposure classes “institutions” and “corporates” subsequent to respective audit processes. For a significant portion of Postbank’s remaining IRBA eligible credit portfolio we apply the foundation IRBA based on respective BaFin approvals Postbank received in recent years.

In summary, the approvals Postbank obtained from the BaFin as a result of its IRBA audit processes for the counterparty credit exposures allow the usage of eight internally developed rating systems for regulatory capital calculation purposes under the IRBA and the use of nine rating systems already used at Group level. Overall they cover Postbank’s material exposures in the advanced IRBA eligible exposure class “retail” as well as Postbank’s material exposures in the advanced and foundation IRBA eligible exposure classes “central governments and central banks”, “institutions” and “corporates”.

When referring to RWA and EAD as of December 31, 2014 in the following tables, we generally report according to the CRR/CRD 4 transitional rules if not stated otherwise.

Details of the advanced IRBA and the advanced IRBA exposures are provided in sections “Advanced Internal Ratings Based Approach” and “Advanced IRBA Exposure”. The foundation IRBA and the foundation IRBA exposures are discussed in Sections “Foundation Internal Ratings Based Approach” and “Foundation IRBA Exposure”.

As an IRBA institution, we are required to treat specific equity positions and other non-credit obligation assets generally within the IRBA. For these exposure types typically regulatory defined IRBA risk weights are applied. Our specialized lending exposures reported under the foundation IRBA also receive regulatory risk weights.

At Group level excluding Postbank, we assign a few remaining advanced IRBA eligible portfolios of small size temporarily to the standardized approach. With regard to these, an implementation plan and approval schedule have been set up and agreed with the Bundesbank, the BaFin and the ECB. A portion of Postbank’s IRBA eligible portfolios is also still temporarily assigned to the standardized approach. During 2014, the implementation plans for the Group excluding Postbank and for Postbank have been combined to an overall Group level implementation plan with a combined approval schedule set up and agreed with the BaFin and the Bundesbank.

Details of the standardized approach and the standardized approach exposures are discussed in the Section “Standardized Approach”.

Our advanced IRBA coverage ratio, excluding Postbank, exceeded, with 96,5 % by exposure value (“EAD”) as well as with 93 % by RWA as of December 31, 2014, the European regulatory requirement, remaining nearly unchanged from the levels at December 31, 2013 (96,7 % EAD and 93 % by RWA), using applicable measures according to Section 11 SolvV. These ratios excluded the exposures permanently assigned to the standardized approach (according to Article 150 CRR), other IRBA exposure as well as securitization positions. The regulatory minimum requirements with regard to the respective coverage ratio thresholds have been met at all times. Subsequent to the combination of the implementation plans for the Group excluding Postbank and Postbank the overall Group-wide advanced IRBA coverage ratios have also been established. They were measured according to Section 11 SolvV and were well above the regulatory defined initial thresholds during 2014.

The following table provides an overview of our credit risk exposure broken down by model approaches and business division.

The line item “Other” in Advanced IRBA reflects EAD from securitization positions in the banking book, specific equity positions and other non-credit obligation assets. Within the Standardized Approach, the line item “central governments and central banks” includes exposures to regional governments or local authorities, public sector entities, multilateral developments banks and international organizations. “Other” in the Standardized Approach includes EAD from exposures secured by mortgages on immovable property, exposures in default, items associated with particular high risk, covered bonds, claims on institutions and corporates with a short-term credit assessment, collective investments undertakings (CIU), equity positions (grandfathered), securitization positions in the banking book and other items.

EAD net by model approach and business division

 

Dec 31, 2014

in € m.

Corporate Banking & Securities

Private & Business Clients

Global Transaction Banking

Deutsche Asset & Wealth Management

Non-Core Operations Unit

Consoli-
dation & Adjustments

Total

Credit Risk

 

 

 

 

 

 

 

Advanced IRBA

298,982

225,016

115,780

50,954

20,890

8,248

719,868

Central governments and central banks

58,284

989

30,048

1,694

390

574

91,978

Institutions

41,988

7,651

10,662

1,000

1,497

297

63,095

Corporates

151,859

19,570

72,600

46,275

11,970

1,239

303,513

Retail

823

188,652

112

1,604

1,936

0

193,127

Other

46,028

8,154

2,359

380

5,097

6,138

68,156

Foundation IRBA

2,410

7,708

142

0

10

0

10,269

Central governments and central banks

0

0

0

0

0

0

0

Institutions

0

0

0

0

0

0

0

Corporates

2,410

7,708

142

0

10

0

10,269

Standardized Approach

84,565

31,721

15,734

3,767

8,702

26,572

171,060

Central governments or central banks

48,777

19,474

7,910

264

565

185

77,175

Institutions

29,195

2,973

98

20

32

173

32,491

Corporates

5,323

1,522

5,720

1,529

1,340

548

15,982

Retail

10

5,761

743

64

1,523

24

8,124

Other

1,260

1,990

1,264

1,891

5,243

25,641

37,288

Risk exposure amount for default funds contributions

1,531

62

1

0

2

0

1,595

Total

387,487

264,506

131,656

54,720

29,603

34,820

902,793

The table below shows the credit risk exposures before credit risk mitigation, the average amount of the exposures and RWA broken down by model approach and regulatory exposure class. The EAD as defined for regulatory purposes is presented on a gross basis, i.e. information for exposures covered by guarantees or credit derivatives is assigned to the exposure class of the original counterparty. The average EAD is calculated over the last four quarter of this fiscal year. In contrast to the EAD gross the RWA is shown after credit risk mitigation.

EAD gross, average EAD gross and RWA by model approach and exposure class

 

Dec 31, 2014

in € m.

EAD gross

Average EAD gross

RWA

Advanced IRBA

 

 

 

Central governments and central banks

85,182

91,911

5,385

Institutions

61,785

67,954

13,869

Corporates

311,791

295,878

101,533

thereof: SMEs

21,661

7,200

6,040

Retail

192,891

191,604

38,867

thereof:

 

 

 

Secured by real estate SME

1,093

3,860

327

Secured by real estate non-SME

155,145

150,999

24,863

Qualifying revolving

4,417

4,376

532

Other SME

3,159

3,562

973

Other non-SME

29,078

28,807

12,172

Equity

4,318

4,056

12,216

Securitization positions

53,670

49,804

13,296

Other non-credit obligation assets

10,168

7,638

14,258

Total advanced IRBA

719,805

708,845

199,422

Foundation approach

 

 

 

Central governments and central banks

0

2

0

Institutions

0

1,230

0

Corporates

10,358

14,010

5,490

thereof: SMEs

235

115

83

Total foundation approach

10,359

15,242

5,491

Standardized approach

 

 

 

Central governments or central banks

40,445

45,438

0

Regional governments or local authorities

18,322

18,231

7

Public sector entities

10,182

9,185

107

Multilateral development banks

4,931

2,585

0

International organizations

2,357

1,438

0

Institutions

32,449

29,759

810

Corporates

16,381

19,961

11,759

thereof: SMEs

1,399

1,519

1,125

Retail

8,613

8,444

5,697

thereof: SMEs

690

787

357

Secured by mortgages on immovable property

3,956

4,448

1,345

thereof: SMEs

9

6

4

Exposures in default

3,423

3,566

4,275

Items associated with particular high risk

161

219

229

Covered bonds

22

25

2

Claims on institutions and corporates with a short-term credit assessment

0

0

0

Collective investments undertakings (CIU)

25,262

23,892

9,046

Equity

2,707

2,563

2,707

Other items

419

311

350

Securitization positions

1,404

1,950

1,188

Total standardized approach

171,034

172,016

37,522

Risk exposure amount for default funds contributions

1,595

1,587

1,693

Total

902,793

897,690

244,128

thereof counterparty credit risk from

 

 

 

Derivatives

122,742

115,728

37,690

Securities financing transactions

44,208

54,357

3,427

The following three tables set out the distribution of the credit risk portfolio by model approach and regulatory exposure class before credit risk mitigation into geographical region, industry and residual maturity.

EAD gross by model approach, exposure class and geographical region

 

Dec 31, 2014

in € m.

Germany

Western Europe (excluding Germany)

Eastern Europe

North America

Central and South America

Asia/ Pacific

Africa

Other

Total

Advanced IRBA

 

 

 

 

 

 

 

 

 

Central governments and central banks

0

5,983

3,579

54,008

1,405

13,060

1,135

6,011

85,182

Institutions

7,411

25,959

620

12,873

2,042

9,355

450

3,075

61,785

Corporates

42,305

86,364

6,331

107,428

6,207

48,578

2,643

11,935

311,791

thereof: SMEs

2,229

3,739

1,510

2,185

288

9,930

322

1,459

21,661

Retail

160,601

26,101

5,719

100

126

98

77

71

192,891

thereof:

 

 

 

 

 

 

 

 

 

Secured by real estate SME

23

739

327

2

0

0

1

1

1,093

Secured by real estate non-SME

133,332

16,795

4,799

69

19

67

14

49

155,145

Qualifying revolving

4,351

38

5

5

5

7

2

3

4,417

Other SME

291

2,529

336

1

0

2

0

0

3,159

Other non-SME

22,601

5,999

254

23

102

22

60

18

29,078

Equity

934

241

0

383

4

2,614

4

138

4,318

Securitization positions

3,459

12,568

592

22,023

273

14,194

33

528

53,670

Other non-credit obligation assets

N/M

N/M

N/M

N/M

N/M

N/M

N/M

N/M

10,168

Total advanced IRBA

214,710

157,216

16,841

196,814

10,057

87,899

4,343

21,758

719,805

Foundation approach

 

 

 

 

 

 

 

 

 

Central governments and central banks

0

0

0

0

0

0

0

0

0

Institutions

0

0

0

0

0

0

0

0

0

Corporates

6,379

2,487

223

645

50

108

8

459

10,358

thereof: SMEs

201

32

1

0

0

1

0

0

235

Total foundation approach

6,380

2,487

223

645

50

108

8

458

10,359

Standardized approach

 

 

 

 

 

 

 

 

 

Central governments or central banks

10,895

29,467

49

15

0

0

0

20

40,445

Regional governments or local authorities

17,993

329

0

0

0

0

0

0

18,322

Public sector entities

9,430

719

0

32

0

0

0

0

10,182

Multilateral development banks

0

724

0

0

0

0

0

4,207

4,931

International organizations

0

0

0

0

0

0

0

2,357

2,357

Institutions

6,501

12,830

1

10,064

627

2,326

0

101

32,449

Corporates

2,504

10,840

206

1,556

147

788

94

244

16,381

thereof: SMEs

90

1,287

11

0

0

3

0

7

1,399

Retail

2,345

5,088

411

143

0

616

0

10

8,613

thereof: SMEs

43

637

8

0

0

0

0

2

690

Secured by mortgages on immovable property

258

3,263

24

4

0

251

0

156

3,956

thereof: SMEs

6

2

0

0

0

0

0

0

9

Exposures in default

651

1,905

13

665

1

185

0

4

3,423

Items associated with particular high risk

1

136

0

0

0

0

0

24

161

Covered bonds

22

0

0

0

0

0

0

0

22

Claims on institutions and corporates with a short-term credit assessment

0

0

0

0

0

0

0

0

0

Collective investments undertakings (CIU)

16,431

7,108

0

1,630

28

66

0

0

25,262

Equity

295

1,593

0

611

0

79

0

129

2,707

Other items

88

327

0

5

0

0

0

0

419

Securitization positions

294

646

0

464

0

0

0

0

1,404

Total standardized approach

67,708

75,042

704

15,189

803

4,311

94

7,184

171,034

Risk exposure amount for default funds contributions

N/M

N/M

N/M

N/M

N/M

N/M

N/M

N/M

1,595

Total

288,798

234,744

17,768

212,648

10,910

92,317

4,445

29,400

902,793

Thereof counterparty credit risk from

 

 

 

 

 

 

 

 

 

Derivatives

12,831

53,911

1,290

38,924

2,034

10,726

689

2,337

122,742

Securities financing transactions

1,056

15,242

1,160

18,534

1,499

3,436

393

2,887

44,208

N/M – Not meaningful

 

 

 

 

 

 

 

 

 

EAD gross by model approach, exposure class and industry

 

Dec 31, 2014

in € m.

Banks and in­surance

Fund manage­ment activities

Manu­factoring

Whole­sale and retail­trade

House­holds

Com­mercial real estate activites

Public sector

Other

Total

Advanced IRBA

 

 

 

 

 

 

 

 

 

Central governments and central banks

66,993

49

0

0

0

0

12,068

6,072

85,182

Institutions

49,192

364

465

221

0

129

2,072

9,342

61,785

Corporates

25,334

8,889

45,262

19,952

31,536

23,758

1,328

155,731

311,791

thereof: SMEs

13,691

205

2,519

938

232

256

4

3,814

21,661

Retail

2

38

1,989

2,108

171,826

12,519

3

4,405

192,891

thereof:

 

 

 

 

 

 

 

 

 

Secured by real estate SME

0

0

0

0

642

451

0

0

1,093

Secured by real estate non-SME

0

0

0

0

143,497

11,647

0

1

155,145

Qualifying revolving

0

0

0

0

4,417

0

0

0

4,417

Other SME

0

0

1,020

890

490

55

1

704

3,159

Other non-SME

2

38

969

1,218

22,781

366

3

3,701

29,078

Equity

93

22

7

16

0

155

0

4,025

4,318

Securitization positions

950

17,521

0

0

672

340

156

34,032

53,670

Other non-credit obligation assets

N/M

N/M

N/M

N/M

N/M

N/M

N/M

N/M

10,168

Total advanced IRBA

142,563

26,883

47,723

22,298

204,034

36,901

15,628

213,607

719,805

Foundation approach

 

 

 

 

 

 

 

 

 

Central governments and central banks

0

0

0

0

0

0

0

0

0

Institutions

0

0

0

0

0

0

0

0

0

Corporates

127

25

1,961

3,545

314

1,238

1

3,148

10,358

thereof: SMEs

0

0

115

107

0

0

0

13

235

Total foundation approach

128

25

1,961

3,545

314

1,238

1

3,147

10,359

Standardized approach

 

 

 

 

 

 

 

 

 

Central governments and central banks

10,174

2

0

0

0

0

29,476

793

40,445

Regional governments or local authorities

0

0

0

50

0

59

17,593

620

18,322

Public sector entities

6,697

0

0

42

0

8

2,258

1,176

10,182

Multilateral development banks

724

0

0

0

0

0

4,207

0

4,931

International organizations

1,602

0

0

0

0

0

0

755

2,357

Institutions

1,090

2

0

0

0

0

0

31,357

32,449

Corporates

175

1,650

1,356

1,873

364

1,933

38

8,991

16,381

thereof: SMEs

10

0

177

345

10

275

0

581

1,399

Retail

0

0

105

210

7,286

464

0

546

8,613

thereof: SMEs

0

0

71

175

50

58

0

336

690

Secured by mortgages on immovable property

0

0

0

4

3,428

368

0

156

3,956

thereof: SMEs

0

0

0

0

1

2

0

0

3

Exposures in default

147

9

224

138

911

583

5

1,407

3,423

Items associated with particular high risk

0

0

5

10

100

8

0

38

161

Covered bonds

22

0

0

0

0

0

0

0

22

Claims on institutions and corporates with a short-term credit assessment

0

0

0

0

0

0

0

0

0

Collective investments undertakings (CIU)

0

0

9

0

0

0

1,569

23,684

25,262

Equity

1,354

15

25

1

0

137

14

1,161

2,707

Other items

84

0

0

0

0

0

0

335

419

Securitization positions

5

514

0

0

784

0

0

101

1,404

Total standardized approach

22,076

2,191

1,724

2,329

12,873

3,559

55,161

71,120

171,034

Risk exposure amount for default funds contributions

N/M

N/M

N/M

N/M

N/M

N/M

N/M

N/M

1,595

Total

164,767

29,099

51,408

28,172

217,222

41,699

70,789

287,874

902,793

Thereof counterparty credit risk from

 

 

 

 

 

 

 

 

 

Derivatives

21,586

6,133

4,073

1,776

1,348

2,826

9,046

75,955

122,742

Securities financing transactions

16,710

184

18

6

420

131

85

26,654

44,208

N/M – Not meaningful

 

 

 

 

 

 

 

 

 

EAD gross by model approach, exposure class and residual maturity

 

Dec 31, 2014

in € m.

Up to one month

Over 1 month to not more than 1 year

Over 1 year to not more than 2 years

Over 2 years to not more than 5 years

Over 5 years

Total

Advanced IRBA

 

 

 

 

 

 

Central governments and central banks

60,299

9,280

1,408

14,010

184

85,182

Institutions

13,513

23,081

6,503

18,509

179

61,785

Corporates

38,426

106,617

32,795

129,733

4,220

311,791

thereof: SMEs

4,063

10,459

1,627

4,924

588

21,661

Retail

10,981

6,136

4,526

16,573

154,675

192,891

thereof:

 

 

 

 

 

 

Secured by real estate SME

2

3

6

98

985

1,093

Secured by real estate non-SME

1,558

2,712

2,761

8,359

139,755

155,145

Qualifying revolving

4,238

179

0

0

0

4,417

Other SME

821

1,067

182

759

331

3,159

Other non-SME

4,363

2,174

1,577

7,359

13,605

29,078

Equity

1

44

22

3,573

678

4,318

Securitization positions

1,445

4,313

1,738

20,684

25,490

53,670

Other non-credit obligation assets

N/M

N/M

N/M

N/M

N/M

10,168

Total advanced IRBA

124,666

149,470

46,994

203,082

185,425

719,805

Foundation approach

 

 

 

 

 

 

Central governments and central banks

0

0

0

0

0

0

Institutions

0

0

0

0

0

0

Corporates

524

880

261

3,026

5,668

10,358

thereof: SMEs

23

5

1

28

178

235

Total foundation approach

524

880

261

3,026

5,669

10,359

Standardized approach

 

 

 

 

 

 

Central governments or central banks

9,569

2,175

4,706

23,995

0

40,445

Regional governments or local authorities

468

7,052

1,253

6,087

3,462

18,322

Public sector entities

129

817

1,463

7,551

222

10,182

Multilateral development banks

17

54

247

4,614

0

4,931

International organizations

0

51

123

2,184

0

2,357

Institutions

1,854

7,610

9,679

13,232

73

32,449

Corporates

2,460

3,625

1,812

7,919

565

16,381

thereof: SMEs

355

170

89

734

51

1,399

Retail

1,430

881

400

2,285

3,617

8,613

thereof: SMEs

182

30

52

404

22

690

Secured by mortgages on immovable property

125

920

146

745

2,020

3,956

thereof: SMEs

0

0

0

6

3

9

Exposures in default

842

463

212

1,561

345

3,423

Items associated with particular high risk

14

13

33

53

48

161

Covered bonds

22

0

0

0

0

22

Claims on institutions and corporates with a short-term credit assessment

0

0

0

0

0

0

Collective investments undertakings (CIU)

9

0

0

17,836

7,417

25,262

Equity

0

480

6

2,143

78

2,707

Other items

5

35

22

242

116

419

Securitization positions

19

67

165

436

716

1,404

Total standardized approach

16,964

24,242

20,265

90,884

18,679

171,034

Risk exposure amount for default funds contributions

N/M

N/M

N/M

N/M

N/M

1,595

Total

142,153

174,592

67,519

296,992

209,774

902,793

Thereof counterparty credit risk from

 

 

 

 

 

 

Derivatives

265

33,504

23,697

63,770

1,506

122,742

Securities financing transactions

29,488

10,566

1,621

2,533

0

44,208

N/M – Not meaningful

 

 

 

 

 

 


Key figures comparison

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