Standardized Approach

We treat a subset of our credit risk exposures within the standardized approach. The standardized approach measures credit risk either pursuant to fixed risk weights, which are predefined by the regulator, or through the application of external ratings.

We assign certain credit exposures permanently to the standardized approach in accordance with Article 150 CRR. These are predominantly exposures to the Federal Republic of Germany and other German public sector entities as well as exposures to central governments of other European Member States that meet the required conditions. These exposures make up more than half of the exposures carried in the standardized approach and receive predominantly a risk weight of zero percent. For internal purposes, however, these exposures are subject to an internal credit assessment and fully integrated in the risk management and economic capital processes.

For certain CIU exposures we apply the “look-through”-treatment which constitutes a decomposition of the CIU into its underlying investments. According to Article 152 CRR these exposures, primarily consisting of defined benefit pension fund assets, are assigned to the standardized approach.

In line with Article 150 CRR and Section 10 SolvV, we assign further – generally IRBA eligible – exposures permanently to the standardized approach. This population comprises several small-sized portfolios, which are considered to be immaterial on a stand-alone basis for inclusion in the IRBA.

Other credit exposures which are small in size are temporarily assigned to the standardized approach and we plan to transfer them to the IRBA over time. The prioritization and the corresponding transition plan is discussed and agreed with the competent authorities, the Bundesbank, the BaFin and the ECB.

Equity positions entered into before January 1, 2008 are subject to the transitional arrangement to exempt them from the IRBA and a risk weight of 100 % is applied according to the standardized approach treatment.

In order to calculate the regulatory capital requirements under the standardized approach, we use eligible external ratings from Standard & Poor’s, Moody’s, Fitch Ratings and in some cases from DBRS. DBRS ratings are applied in the standardized approach for a small number of exposures since 2009. Ratings are applied to all relevant exposure classes in the standardized approach. If more than one rating is available for a specific counterparty, the selection criteria as set out in Article 138 CRR are applied in order to determine the relevant risk weight for the capital calculation. Moreover, given the low volume of exposures covered under the standardized approach and the high percentage of (externally rated) central government exposures therein, we do not infer borrower ratings from issuer ratings.

The table below shows exposure values in the standardized approach broken down by risk weight before and after credit risk mitigation obtained in the form of eligible financial collateral, guarantees and credit derivatives excluding securitization positions in the regulatory banking book and Postbank’s CIU exposures assigned to the standardized approach which are displayed in the table “EAD of CIUs of Postbank in the Standardized Approach by Risk Weight” thereafter.

Exposure values in the standardized approach by risk weight

 

Dec 31, 2014

Dec 31, 2013

in € m.

Before credit risk mitigation

After credit risk mitigation

Before credit risk mitigation

After credit risk mitigation

0 %

83,870

84,907

78,483

80,150

2 %

31,773

31,654

0

0

4 %

0

0

0

0

10 %

22

22

34

34

20 %

1,131

1,197

1,661

1,656

35 %

3,699

3,698

11,606

11,601

50 %

12,020

12,056

5,914

5,960

70 %

2,992

2,992

0

0

75 %

8,612

7,250

15,043

12,300

100 %

20,388

15,152

27,050

17,861

150 %

3,062

2,926

889

880

Total EAD in the standardized approach

167,568

161,854

140,680

130,441

The increase in EAD is predominantly driven by the implementation of the CRR/CRD 4 framework regarding our trade exposure against Central Counterparties that is reported with a fixed risk weight of 2 %. The impact for our defined benefit pension fund assets exposure that are calculated at a phase-in rate of 20 % in 2014 also contributed to the increase.

The table below comprises bonds in the form of collective investment undertakings assigned to the standardized approach based on a “look through” treatment as well as the exposure values for collective investment undertakings with risk weights calculated by third parties from Postbank. Credit risk mitigation techniques have not been applied.

EAD of CIUs of Postbank in the standardized approach by risk weight

in € m.

Dec 31, 2014

Dec 31, 2013

Bonds in CIUs

 

 

0 %

0

1,058

5 %

1,569

0

11 %

0

0

22 %

2

26

55 %

0

274

110 %

0

327

200 %

44

45

300 %

0

0

EAD for bonds in CIUs

1,615

1,730

CIUs with risk weight calculated by third parties

 

 

< 22 %

0

0

> 22 % < 110 %

215

182

> 110 %

8

8

EAD for CIUs with risk weight calculated by third parties

223

190

Total EAD for CIUs in the standardized approach

1,838

1,920


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