Foundation Internal Ratings Based Approach

We apply the foundation IRBA for the majority of our remaining foundation IRBA eligible credit portfolios at Postbank to the extent these have not been newly assigned to the advanced IRBA during 2014. The foundation IRBA is an approach available under the regulatory framework for credit risk allowing institutions to make use of their internal rating methodologies while using pre-defined regulatory values for all other risk parameters. Parameters subject to internal estimates include the probability of default (“PD”) while the loss given default (“LGD”) and the credit conversion factor (“CCF”) are defined in the regulatory framework.

For exposures in classes institutions and corporates respective foundation IRBA rating systems have been developed. A probability of default is assigned to each relevant counterparty credit exposure as a function of a transparent and consistent rating master scale. The borrower ratings assigned are derived on the grounds of internally developed rating models which specify consistent and distinct customer-relevant criteria and assign a rating grade based on a specific set of criteria as given for a certain customer. The set of criteria is generated from information sets relevant for the respective customer segments like general customer behavior, financial and external data. The methods in use are based on statistical analyses and for specific portfolio segments amended by expert-based assessments while taking into account the relevant available quantitative and qualitative information. The rating systems consider external long-term ratings from the major rating agencies (i.e., Standard & Poor’s, Moody’s and Fitch Ratings).

For the foundation IRBA a default definition was applied in accordance with the requirements of Article 178 CRR as confirmed by the BaFin as part of its IRBA approval process.

Foundation Internal Ratings – Model Validation

We regularly validate our rating methodologies and credit risk parameters at Postbank. Whereas the rating methodology validation focuses on the discriminatory power of the models, the risk parameter validation for PD analyzes its predictive power when compared against historical default experiences.

Validation results of risk parameters used in our Foundation IRBA at Postbank

 

PD

 

2014

2013

 

Count

EAD in %

Count

EAD in %

Appropriate

0

0.0

2

99.6

Overly conservative

0

0.0

1

0.4

Progressive

2

100.0

0

0.0

Total

2

100.0

3

100.0

 

 

 

 

 

Thereof already recalibrated and introduced

 

in 2014

 

in 2013

Overly conservative

0

0.0

0

0.0

Progressive

0

0.0

0

0.0

Total

0

0.0

0

0.0

Above table summarizes the outcome of the model validations for the risk parameter PD used in our foundation IRBA for Postbank. If individual risk parameter settings are classified as appropriate, no recalibration was triggered by the validation. The breakdown is presented by number as well as by the relative EAD attached to the respective parameter as of December 31, 2014 and as of December 31, 2013.

The validations classify the PD parameter settings for the two foundation IRBA relevant rating systems of Postbank as too progressive. The recalibration is scheduled for 2015. The rating system classified as overly conservative in 2013 was discontinued in 2014.

Foundation IRBA Exposure

Within the Postbank portfolios we assign our exposures to the relevant regulatory exposure class by taking into account factors like customer-specific characteristics and the rating system used. The following tables also consider Postbank’s counterparty credit risk position resulting from derivatives and SFTs as far as they are assigned to the foundation IRBA.

The table below presents the EAD in conjunction with exposures-weighted average risk weights (“RW”). The information is shown after credit risk mitigation obtained in the form of financial, physical and other collateral as well as guarantees and credit derivatives. EAD gross information for exposures covered by guarantees or credit derivatives are assigned to the exposure class of the original counterparty whereas the EAD net information assigns the exposure to the protection seller.

Foundation IRBA exposures for each exposure class by rating scale

 

Dec 31, 2014

in € m.
(unless stated otherwise)

iAAA to iAA 0.000–0.045 %

iA
0.045–0.125 %

iBBB 0.125–0.475 %

iBB to iCCC > 0.475 %

Total excluding default

Default

Total including default

Central governments and central banks

 

 

 

 

 

 

 

EAD gross

0

0

0

0

0

0

0

EAD net

0

0

0

0

0

0

0

thereof:

 

 

 

 

 

 

 

undrawn commitments

0

0

0

0

0

0

0

Average RW in %

0.00

0.00

0.00

0.00

0.00

0.00

0.00

Institutions

 

 

 

 

 

 

 

EAD gross

0

0

1

0

1

0

1

EAD net

0

0

0

0

0

0

0

thereof:

 

 

 

 

 

 

 

undrawn commitments

0

0

0

0

0

0

0

Average RW in %

0.00

0.00

0.00

0.00

0.00

0.00

0.00

Corporates

 

 

 

 

 

 

 

EAD gross

1,785

267

2,261

1,559

5,872

167

6,039

EAD net

1,785

848

2,031

1,222

5,886

167

6,053

thereof:

 

 

 

 

 

 

 

undrawn commitments

8

1

169

41

219

5

224

Average RW in %

10.23

16.49

41.36

81.77

36.72

0.11

35.71

Total

 

 

 

 

 

 

 

EAD gross

1,785

267

2,262

1,559

5,873

167

6,040

EAD net

1,785

848

2,031

1,222

5,886

167

6,053

thereof:

 

 

 

 

 

 

 

undrawn commitments

8

1

169

41

219

5

224

Average RW in %

10.23

16.49

41.36

81.77

36.72

0.11

35.71

 

Dec 31, 2013

in € m.
(unless stated otherwise)

iAAA to iAA 0.000–0.045 %

iA
0.045–0.125 %

iBBB 0.125–0.475 %

iBB to iCCC > 0.475 %

Total excluding default

Default

Total including default

Central governments and central banks

 

 

 

 

 

 

 

EAD gross

0

8

0

0

8

0

8

EAD net

0

8

0

0

8

0

8

thereof:

 

 

 

 

 

 

 

undrawn commitments

0

0

0

0

0

0

0

Average RW in %

0.00

27.57

0.00

0.00

27.57

0.00

27.57

Institutions

 

 

 

 

 

 

 

EAD gross

259

3,413

1,790

130

5,592

0

5,592

EAD net

259

3,413

1,790

130

5,592

0

5,592

thereof:

 

 

 

 

 

 

 

undrawn commitments

0

0

6

0

6

0

6

Average RW in %

17.11

16.09

30.22

141.57

23.58

0.00

23.58

Corporates

 

 

 

 

 

 

 

EAD gross

35

557

4,449

2,399

7,440

81

7,521

EAD net

35

928

4,224

2,128

7,315

81

7,396

thereof:

 

 

 

 

 

 

 

undrawn commitments

0

2

606

154

762

5

767

Average RW in %

15.31

26.16

53.72

110.99

66.71

0.00

65.97

Total

 

 

 

 

 

 

 

EAD gross

294

3,978

6,239

2,529

13,040

81

13,121

EAD net

294

4,349

6,014

2,258

12,915

81

12,996

thereof:

 

 

 

 

 

 

 

undrawn commitments

0

2

612

154

768

5

773

Average RW in %

16.90

18.25

46.72

112.75

48.01

0.00

47.70

The tables below show our foundation IRBA exposures excluding counterparty credit risk exposures from derivatives and SFT for central governments and central banks, institutions and corporates, distributed on our internal rating scale, showing also the PD range for each grade. The internal rating grades take into account the respective external Standard & Poor’s rating grade equivalents. The EAD net is presented in conjunction with risk-weighted assets calculated and the average RW. The information is shown after credit risk mitigation obtained in the form of financial, physical and other collateral as well as guarantees and credit derivatives.

EAD net for Foundation IRBA credit exposures by PD grade for central governments and central banks (excluding derivative positions and SFTs)

in € m. (unless stated otherwise)

Dec 31, 2014

Dec 31, 2013

Internal rating

EAD net

Average PD in %

RWA

Average RW in %

EAD net

Average PD in %

RWA

Average RW in %

iAAA

0

0.00

0

0.00

0

0.00

0

0.00

iAA+

0

0.00

0

0.00

0

0.00

0

0.00

iAA

0

0.00

0

0.00

0

0.00

0

0.00

iAA–

0

0.00

0

0.00

0

0.00

0

0.00

iA+

0

0.00

0

0.00

0

0.00

0

0.00

iA

0

0.00

0

0.00

0

0.00

0

0.00

iA–

0

0.00

0

0.00

8

0.08

2

27.57

iBBB+

0

0.00

0

0.00

0

0.00

0

0.00

iBBB

0

0.00

0

0.00

0

0.00

0

0.00

iBBB–

0

0.00

0

0.00

0

0.00

0

0.00

iBB+

0

0.00

0

0.00

0

0.00

0

0.00

iBB

0

0.00

0

0.00

0

0.00

0

0.00

iBB–

0

0.00

0

0.00

0

0.00

0

0.00

iB+

0

0.00

0

0.00

0

0.00

0

0.00

iB

0

0.00

0

0.00

0

0.00

0

0.00

iB–

0

0.00

0

0.00

0

0.00

0

0.00

iCCC+

0

0.00

0

0.00

0

0.00

0

0.00

iCCC

0

0.00

0

0.00

0

0.00

0

0.00

iCCC–

0

0.00

0

0.00

0

0.00

0

0.00

Total excluding default

0

0.00

0

0.00

8

0.08

2

27.57

Default

0

0.00

0

0.00

0

0.00

0

0.00

Total including default

0

0.00

0

0.00

8

0.08

2

27.57

EAD net for Foundation IRBA credit exposures by PD grade for institutions (excluding derivative positions and SFTs)

in € m. (unless stated otherwise)

Dec 31, 2014

Dec 31, 2013

Internal rating

EAD net

Average PD in %

RWA

Average RW in %

EAD net

Average PD in %

RWA

Average RW in %

iAAA

0

0.00

0

0.00

0

0.00

0

0.00

iAA+

0

0.00

0

0.00

0

0.00

0

0.00

iAA

0

0.00

0

0.00

98

0.03

15

15.31

iAA–

0

0.00

0

0.00

155

0.04

28

18.21

iA+

0

0.00

0

0.00

0

0.00

0

0.00

iA

0

0.00

0

0.00

405

0.06

27

6.77

iA–

0

0.00

0

0.00

2,934

0.09

499

17.00

iBBB+

0

0.00

0

0.00

411

0.15

141

34.24

iBBB

0

0.00

0

0.00

994

0.23

260

26.18

iBBB–

0

0.00

0

0.00

369

0.38

133

36.14

iBB+

0

0.00

0

0.00

64

0.69

54

84.83

iBB

0

0.00

0

0.00

15

1.23

16

105.09

iBB–

0

0.00

0

0.00

9

2.06

11

122.67

iB+

0

0.00

0

0.00

0

0.00

0

0.00

iB

0

0.00

0

0.00

0

0.00

0

0.00

iB–

0

0.00

0

0.00

0

0.00

0

0.00

iCCC+

0

0.00

0

0.00

0

0.00

0

0.00

iCCC

0

0.00

0

0.00

41

18.00

102

246.68

iCCC–

0

0.00

0

0.00

0

0.00

0

0.00

Total excluding default

0

0.00

0

0.00

5,495

0.29

1,286

23.43

Default

0

0.00

0

0.00

0

0.00

0

0.00

Total including default

0

0.00

0

0.00

5,495

0.29

1,286

23.43

EAD net for Foundation IRBA credit exposures by PD grade for corporates (excluding derivative positions and SFTs)

in € m. (unless stated otherwise)

Dec 31, 2014

Dec 31, 2013

Internal rating

EAD net

Average PD in %

RWA

Average RW in %

EAD net

Average PD in %

RWA

Average RW in %

iAAA

0

0.00

0

0.00

0

0.00

0

0.00

iAA+

0

0.00

0

0.00

0

0.00

0

0.00

iAA

1,767

0.03

180

10.20

35

0.03

5

15.31

iAA–

18

0.04

2

13.26

0

0.00

0

0.00

iA+

0

0.00

0

0.00

0

0.00

0

0.00

iA

26

0.06

4

16.90

518

0.06

115

22.13

iA–

814

0.08

133

16.31

405

0.10

127

31.30

iBBB+

540

0.15

121

22.32

912

0.15

362

39.65

iBBB

879

0.23

379

43.12

1,510

0.23

754

49.93

iBBB–

549

0.38

306

55.82

1,666

0.38

1,076

64.60

iBB+

736

0.69

494

67.12

1,121

0.69

951

84.81

iBB

236

1.23

162

68.79

272

1.23

284

104.62

iBB–

35

2.06

28

78.64

287

2.06

347

120.99

iB+

0

0.00

0

0.00

0

0.00

0

0.00

iB

32

3.78

17

54.16

170

3.78

246

144.76

iB–

28

7.26

32

113.90

37

7.26

66

177.02

iCCC+

5

12.76

11

198.16

1

12.76

3

223.09

iCCC

62

18.00

156

250.41

163

18.00

382

234.34

iCCC–

0

0.00

0

0.00

0

0.00

0

0.00

Total excluding default

5,727

0.52

2,025

35.36

7,097

0.95

4,718

66.48

Default

165

100.00

0

0.11

80

100.00

0

0.00

Total including default

5,892

3.31

2,025

34.38

7,177

2.05

4,718

65.73

The decrease in the Foundation IRBA exposures classes’ central governments and banks, institutions and corporates mainly results from the transition of Postbank Large Cap Corporate/Financials portfolio into the Advanced IRBA.

The table below shows our Foundation IRBA exposure distributed based on the corresponding exposure classes for each relevant geographical location. As geographical location we show countries where the Bank maintains a branch or subsidiary and exposure volume is equal to or higher than € 0.5 million. Exposure which does not meet these criteria is shown in “Other”, which also comprises exposure to international organizations. Exposures are assigned to the specific geographical location based on the country of domicile of the respective counterparty. The EAD net is presented in conjunction with exposures-weighted average PD in percentage.

EAD net and average PD of Foundation IRBA credit exposures by geographical location (including derivatives and SFTs)

 

Dec 31, 2014

in € m.
(unless stated otherwise)

Central governments and central banks

Institutions

Corporates

Total

Argentina

 

 

 

 

EAD net

0

0

9

9

Average PD in %

0

0

0.13

0.13

Australia

 

 

 

 

EAD net

0

0

6

6

Average PD in %

0

0

0.27

0.27

Austria

 

 

 

 

EAD net

0

0

249

249

Average PD in %

0

0

0.20

0.20

Belgium

 

 

 

 

EAD net

0

0

88

88

Average PD in %

0

0

2.15

2.15

Brazil

 

 

 

 

EAD net

0

0

13

13

Average PD in %

0

0

0.28

0.28

Chile

 

 

 

 

EAD net

0

0

1

1

Average PD in %

0

0

0.07

0.07

China

 

 

 

 

EAD net

0

0

5

5

Average PD in %

0

0

1.17

1.17

Colombia

 

 

 

 

EAD net

0

0

3

3

Average PD in %

0

0

0.16

0.16

Czech Republic

 

 

 

 

EAD net

0

0

19

19

Average PD in %

0

0

0.28

0.28

Denmark

 

 

 

 

EAD net

0

0

12

12

Average PD in %

0

0

1.47

1.47

Finland

 

 

 

 

EAD net

0

0

12

12

Average PD in %

0

0

0.17

0.17

France

 

 

 

 

EAD net

0

0

180

180

Average PD in %

0

0

1.06

1.06

Germany

 

 

 

 

EAD net

0

0

4,621

4,621

Average PD in %

0

0

2.72

2.72

Greece

 

 

 

 

EAD net

0

0

10

10

Average PD in %

0

0

0.07

0.07

Hong Kong

 

 

 

 

EAD net

0

0

2

2

Average PD in %

0

0

0.34

0.34

Hungary

 

 

 

 

EAD net

0

0

19

19

Average PD in %

0

0

0.43

0.43

India

 

 

 

 

EAD net

0

0

6

6

Average PD in %

0

0

0.31

0.31

Indonesia

 

 

 

 

EAD net

0

0

2

2

Average PD in %

0

0

0.28

0.28

Ireland

 

 

 

 

EAD net

0

0

8

8

Average PD in %

0

0

0.27

0.27

Israel

 

 

 

 

EAD net

0

0

1

1

Average PD in %

0

0

0.43

0.43

Italy

 

 

 

 

EAD net

0

0

117

117

Average PD in %

0

0

0.25

0.25

Japan

 

 

 

 

EAD net

0

0

2

2

Average PD in %

0

0

0.35

0.35

Luxembourg

 

 

 

 

EAD net

0

0

42

42

Average PD in %

0

0

0.16

0.16

Malaysia

 

 

 

 

EAD net

0

0

2

2

Average PD in %

0

0

0.31

0.31

Mexico

 

 

 

 

EAD net

0

0

7

7

Average PD in %

0

0

0.16

0.16

Netherlands

 

 

 

 

EAD net

0

0

102

102

Average PD in %

0

0

0.42

0.42

Nigeria

 

 

 

 

EAD net

0

0

2

2

Average PD in %

0

0

8.72

8.72

Norway

 

 

 

 

EAD net

0

0

3

3

Average PD in %

0

0

0.13

0.13

Peru

 

 

 

 

EAD net

0

0

2

2

Average PD in %

0

0

0.13

0.13

Poland

 

 

 

 

EAD net

0

0

26

26

Average PD in %

0

0

0.70

0.70

Portugal

 

 

 

 

EAD net

0

0

7

7

Average PD in %

0

0

0.22

0.22

Qatar

 

 

 

 

EAD net

0

0

1

1

Average PD in %

0

0

0.09

0.09

Romania

 

 

 

 

EAD net

0

0

17

17

Average PD in %

0

0

0.81

0.81

Singapore

 

 

 

 

EAD net

0

0

3

3

Average PD in %

0

0

0.13

0.13

Slovakia

 

 

 

 

EAD net

0

0

12

12

Average PD in %

0

0

0.59

0.59

South Africa

 

 

 

 

EAD net

0

0

1

1

Average PD in %

0

0

0.20

0.20

South Korea

 

 

 

 

EAD net

0

0

2

2

Average PD in %

0

0

0.31

0.31

Spain

 

 

 

 

EAD net

0

0

47

47

Average PD in %

0

0

0.41

0.41

Sweden

 

 

 

 

EAD net

0

0

21

21

Average PD in %

0

0

0.29

0.29

Switzerland

 

 

 

 

EAD net

0

0

111

111

Average PD in %

0

0

0.81

0.81

Taiwan

 

 

 

 

EAD net

0

0

1

1

Average PD in %

0

0

0.35

0.35

Thailand

 

 

 

 

EAD net

0

0

3

3

Average PD in %

0

0

0.22

0.22

Turkey

 

 

 

 

EAD net

0

0

3

3

Average PD in %

0

0

1.40

1.40

United Arab Emirates

 

 

 

 

EAD net

0

0

2

2

Average PD in %

0

0

0.19

0.19

United Kingdom

 

 

 

 

EAD net

0

0

158

158

Average PD in %

0

0

41.44

41.44

United States of America

 

 

 

 

EAD net

0

0

51

51

Average PD in %

0

0

0.47

0.47

Uruguay

 

 

 

 

EAD net

0

0

2

2

Average PD in %

0

0

0.12

0.12

Other

 

 

 

 

EAD

0

0

40

40

Average PD in %

0

0

2.15

2.15

thereof:

 

 

 

 

International Organizations

 

 

 

 

EAD

0

0

0

0

Average PD in %

0

0

0

0

Total

0

0

6,053

6,053

The table below summarizes on an EAD basis our foundation approach exposure for specialized lending. For the calculation of minimum capital requirements regulatory risk weights are applied where potential risk mitigating factors are already considered in the assignment of a risk weight to a specific structure. Additional credit risk mitigation techniques have not been applied.

Exposure for specialized lending by risk weight

in € m.

Dec 31, 2014

Dec 31, 2013

Risk weight category 1 (strong)

2,806

8,223

Risk weight category 2 (good)

811

680

Risk weight category 3 (satisfactory)

429

139

Risk weight category 4 (weak)

41

65

Risk weight category 5 (defaulted)

128

1,061

Total EAD of specialized lending

4,215

10,169

The decrease is primarily driven by a part of Postbank exposures resulting from the Advanced IRBA rating system approval from BaFin for specialized lending in 2014.


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