Credit Exposures

Counterparty credit exposure arises from our traditional nontrading lending activities which include elements such as loans and contingent liabilities, as well as from our direct trading activity with clients in certain instruments including OTC derivatives like foreign exchange forwards and Forward Rate Agreements. A default risk also arises from our positions in equity products and traded credit products such as bonds.

We define our credit exposure by taking into account all transactions where losses might occur due to the fact that counterparties may not fulfil their contractual payment obligations.

Maximum Exposure to Credit Risk

The maximum exposure to credit risk table shows the direct exposure before consideration of associated collateral held and other credit enhancements (netting and hedges) that do not qualify for offset in our financial statements for the periods specified. The netting credit enhancement component includes the effects of legally enforceable netting agreements as well as the offset of negative mark-to-markets from derivatives against pledged cash collateral. The collateral credit enhancement component mainly includes real estate, collateral in the form of cash as well as securities related collateral. In relation to collateral we apply internally determined haircuts and additionally cap all collateral values at the level of the respective collateralized exposure.

Maximum Exposure to Credit Risk

Dec 31, 2014

 

Credit Enhancements

in € m.1

Maximum exposure to credit risk2

Netting

Collateral

Guarantees and Credit derivatives3

Total credit enhancements

1

All amounts at carrying value unless otherwise indicated.

2

Does not include credit derivative notional sold (€ 680,699 million) and credit derivative notional bought protection. Interest-earning deposits with banks mainly relate to Liquidity Reserves.

3

Bought credit protection is reflected with the notional of the underlying.

4

Excludes equities, other equity interests and commodities.

5

Gross loans less deferred expense/unearned income before deductions of allowance for loan losses.

6

Figures are reflected at notional amounts.

Cash and due from banks

20,055

0

7

0

7

Interest-earning deposits with banks

63,518

0

53

21

74

Central bank funds sold and securities purchased under resale agreements

17,796

0

16,988

0

16,988

Securities borrowed

25,834

0

24,700

0

24,700

Financial assets at fair value through profit or loss4

862,035

522,373

163,576

1,102

687,051

Trading assets

125,130

0

3,537

533

4,070

Positive market values from derivative financial instruments

629,958

519,590

76,512

336

596,439

Financial assets designated at fair value through profit or loss

106,947

2,782

83,527

233

86,542

thereof:

 

 

 

 

 

Securities purchased under resale agreement

60,473

2,415

58,058

0

58,058

Securities borrowed

20,404

368

19,955

0

19,955

Financial assets available for sale4

62,038

0

938

0

938

Loans5

410,825

0

205,376

28,496

233,872

Other assets subject to credit risk

85,061

67,009

768

363

68,140

Financial guarantees and other credit related contingent liabilities6

62,087

0

6,741

8,723

15,464

Irrevocable lending commitments and other credit related commitments6

154,446

0

5,958

8,582

14,540

Maximum exposure to credit risk

1,763,695

589,381

425,106

47,287

1,061,774

Dec 31, 2013

 

Credit Enhancements

in € m.1

Maximum exposure to credit risk2

Netting

Collateral

Guarantees and Credit derivatives3

Total credit enhancements

1

All amounts at carrying value unless otherwise indicated.

2

Does not include credit derivative notional sold (€ 1,035,946 million) and credit derivative notional bought protection. Interest-earning deposits with banks mainly relate to liquidity reserves.

3

Bought credit protection is reflected with the notional of the underlying.

4

Excludes equities, other equity interests and commodities.

5

Comparatives have been restated by € 10,591 million (netting) and € 9,681 million (collateral) erroneously included in prior disclosure.

6

Gross loans less deferred expense/unearned income before deductions of allowance for loan losses.

7

Figures are reflected at notional amounts.

8

In 2014, comparatives have been restated by € 10,542 million to include Fronting Commitments erroneously not included in prior disclosure.

Cash and due from banks

17,155

0

0

13

13

Interest-earning deposits with banks

77,984

0

2

31

34

Central bank funds sold and securities purchased under resale agreements

27,363

0

25,100

0

25,100

Securities borrowed

20,870

0

20,055

0

20,055

Financial assets at fair value through profit or loss4

824,458

423,737

196,321

3,892

623,951

Trading assets

145,170

0

2,333

2,660

4,993

Positive market values from derivative financial instruments5

504,590

406,616

57,493

274

464,383

Financial assets designated at fair value through profit or loss

174,698

17,121

136,495

959

154,575

thereof:

 

 

 

 

 

Securities purchased under resale agreement

116,764

16,198

100,091

0

116,289

Securities borrowed

32,485

923

31,017

0

31,941

Financial assets available for sale4

46,413

0

760

110

870

Loans6

382,171

0

198,668

29,971

228,640

Other assets subject to credit risk

59,030

43,574

1,150

385

45,109

Financial guarantees and other credit related contingent liabilities7

65,630

0

7,209

11,513

18,722

Irrevocable lending commitments and other credit related commitments7,8

137,202

0

4,538

9,182

13,720

Maximum exposure to credit risk

1,658,275

467,311

453,803

55,097

976,212

The overall increase in maximum exposure to credit risk for December 31, 2014 was predominantly driven by a € 125 billion increase in positive market values from derivative financial instruments during the period as well as foreign exchange impact across various products, partly offset by a € 73 billion decrease in securities purchased under resale agreements and securities borrowed both under fair value and accrual accounting as discussed in various other sections of this report. Our overall loan book increased by € 29 billion or 7 %, from € 382 billion as of December 31, 2013 to € 411 billion as of December 31, 2014. Increases were driven by foreign exchange impact, collateral restructuring related to ETF business within CB&S, and business growth across CB&S and Deutsche AWM, partly offset by reductions in NCOU.

Included in the category of trading assets as of December 31, 2014, were traded bonds of € 108 billion (€ 126 billion as of December 31, 2013) that are over 80 % investment-grade (over 86 % as of December 31, 2013). The above mentioned financial assets available for sale category primarily reflected debt securities of which more than 94 % were investment-grade (more than 97 % as of December 31, 2013).

Credit Enhancements are split into three categories: netting, collateral, and guarantees and credit derivatives. A prudent approach is taken with respect to haircuts, parameter setting for regular margin calls as well as expert judgements for collateral valuation to prevent market developments from leading to a build-up of uncollateralized exposures. All categories are monitored and reviewed regularly. Overall credit enhancements received are diversified and of adequate quality being largely cash, highly rated government bonds and third-party guarantees mostly from well rated banks and insurance companies. These financial institutions are mainly domiciled in Western European countries and the United States. Furthermore we have collateral pools of highly liquid assets and mortgages (principally consisting of residential properties mainly in Germany) for the homogeneous retail portfolio.

Credit Quality of Financial Instruments neither Past Due nor Impaired

We derive our credit quality from internal ratings and group our exposures into classes as shown below. Please refer to the sections “Credit Risk Ratings” and “Rating Governance” for more details about our internal ratings.

Credit Quality of Financial Instruments neither Past Due nor Impaired

 

Dec 31, 2014

in € m.1

iAAA–iAA

iA

iBBB

iBB

iB

iCCC and below

Total

1

All amounts at carrying value unless otherwise indicated.

2

Excludes equities, other equity interests and commodities.

3

Includes past due instruments in order to be consistent with the Asset Quality section of this report.

4

Gross loans less deferred expense/unearned income before deductions of allowance for loan losses.

5

Figures are reflected at notional amounts.

Due from banks

17,220

896

1,161

727

48

4

20,055

Interest-earning deposits with banks

57,175

4,514

1,081

578

28

141

63,518

Central bank funds sold and securities purchased under resale agreements

854

13,564

1,553

1,414

332

79

17,796

Securities borrowed

18,705

5,200

1,114

727

88

0

25,834

Financial assets at fair value through profit or loss2

312,470

385,335

81,930

58,678

16,094

7,529

862,036

Trading assets

58,014

15,973

18,230

21,767

7,061

4,085

125,130

Positive market values from derivative financial instruments

208,057

348,179

46,675

20,062

5,120

1,865

629,958

Financial assets designated at fair value through profit or loss

46,399

21,183

17,025

16,848

3,914

1,578

106,947

thereof:

 

 

 

 

 

 

 

Securities purchased under resale agreement

17,213

13,820

12,432

14,219

1,529

1,259

60,473

Securities borrowed

17,110

3,266

20

7

0

0

20,404

Financial assets available for sale2,3

50,810

3,375

1,782

3,958

194

1,719

61,838

Loans4

47,554

56,865

112,106

130,438

39,181

10,313

396,458

thereof:

 

 

 

 

 

 

 

IAS 39 reclassified loans

2,109

1,353

1,408

1,051

685

274

6,880

Other assets subject to credit risk

13,538

48,714

7,049

13,927

1,105

728

85,061

Financial guarantees and other credit related contingent liabilities5

6,281

17,696

20,190

11,640

4,929

1,352

62,087

Irrevocable lending commitments and other credit related commitments5

22,938

39,336

40,145

31,492

18,924

1,612

154,446

Total

547,546

575,494

268,110

253,577

80,924

23,477

1,749,129

 

Dec 31, 2013

in € m.1

iAAA–iAA

iA

iBBB

iBB

iB

iCCC and below

Total

1

All amounts at carrying value unless otherwise indicated.

2

Excludes equities, other equity interests and commodities.

3

Prior year figures have been restated by € 1.5 billion to include past due instruments in order to be consistent with the Asset Quality section of this report.

4

Gross loans less deferred expense/unearned income before deductions of allowance for loan losses. Amounts for December 31, 2013, were adjusted up for past due loans, neither renegotiated nor impaired by € 303 million erroneously not considered in prior disclosure.

5

Figures are reflected at notional amounts.

6

In 2014, comparatives have been restated by € 10.5 billion to include Fronting Commitments erroneously not included in prior disclosure.

Due from banks

13,804

1,971

998

311

17

55

17,155

Interest-earning deposits with banks

71,053

5,078

1,145

391

282

35

77,984

Central bank funds sold and securities purchased under resale agreements

3,774

19,949

1,904

1,516

201

19

27,363

Securities borrowed

12,783

6,381

1,057

382

267

0

20,870

Financial assets at fair value through profit or loss2

282,000

368,969

69,497

84,517

14,009

5,466

824,458

Trading assets

70,398

17,245

13,902

35,957

4,640

3,028

145,170

Positive market values from derivative financial instruments

143,770

303,107

36,452

15,743

3,876

1,642

504,590

Financial assets designated at fair value through profit or loss

67,832

48,617

19,144

32,816

5,493

796

174,698

thereof:

 

 

 

 

 

 

 

Securities purchased under resale agreement

29,217

40,922

14,960

28,119

3,095

452

116,764

Securities borrowed

29,104

3,260

75

37

10

0

32,485

Financial assets available for sale2,3

35,708

5,435

1,788

1,267

876

1,218

46,293

Loans4

34,708

53,624

99,941

127,613

40,869

9,581

366,336

thereof:

 

 

 

 

 

 

 

IAS 39 reclassified loans

999

2,894

2,088

962

817

286

8,046

Other assets subject to credit risk

7,923

37,446

2,821

9,416

1,140

284

59,030

Financial guarantees and other credit related contingent liabilities5

8,318

19,285

20,234

11,604

4,382

1,807

65,630

Irrevocable lending commitments and other credit related commitments5,6

19,794

32,452

39,216

28,523

15,857

1,360

137,202

Total

489,864

550,591

238,600

265,540

77,900

19,826

1,642,321

The overall growth in total credit exposure of € 107 billion for December 31, 2014 is mainly due to an increase in positive market value from derivative financial instruments in investment grade rating categories and here mainly in the top category iAAA-iAA as well as foreign exchange impact across various products.


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