Deutsche Bank
Annual Report 2014
Deutsche Bank Annual Report 2014
Value-at-Risk of the Trading Units

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Value-at-Risk Metrics of Trading Units of Deutsche Bank Group Trading (excluding Postbank)

The tables and graph below present the value-at-risk metrics calculated with a 99 % confidence level and a one-day holding period for our trading units. They exclude contributions from Postbank trading book which are calculated on a stand-alone basis.

Value-at-Risk of our Trading Units by Risk Type

in € m.

Dec 31, 2014

Dec 31, 2013

1

Includes value-at-risk from gold and other precious metal positions.

Interest rate risk

18.1

27.2

Credit spread risk

29.6

37.9

Equity price risk

15.5

20.2

Foreign exchange risk1

20.5

12.4

Commodity price risk

1.3

7.8

Diversification effect

(36.0)

(57.7)

Total value-at-risk

49.0

47.9

Value-at-Risk of our Trading Units in the Reporting Period

 

Total

Diversification effect

Interest rate risk

Credit spread risk

Equity price risk

Foreign exchange risk1

Commodity price risk

in € m.

2014

2013

2014

2013

2014

2013

2014

2013

2014

2013

2014

2013

2014

2013

1

Includes value-at-risk from gold and other precious metal positions.

Average

51.6

53.6

(34.9)

(50.0)

25.1

26.5

31.2

41.6

14.8

13.4

13.2

13.8

2.2

8.3

Maximum

71.4

69.0

(61.9)

(62.1)

42.8

36.6

38.9

48.0

24.6

23.9

21.2

27.8

10.2

12.8

Minimum

35.4

43.0

(24.4)

(38.5)

15.7

18.7

25.9

34.9

9.9

8.8

6.9

5.8

0.7

5.5

Development of value-at-risk by risk types in 2014
Development of value-at-risk by risk types in 2014 (line chart)

The average value-at-risk over 2014 was € 51.6 million, which is a decrease of € 2.0 million compared with the full year 2013. There have been notable reductions in the average value-at-risk across credit spread, mainly coming from a reduction in name specific risk and commodity risk due to the winding down of the commodities business. Overall there has been less benefit from diversification following changes in the composition of the portfolio. The value-at-risk has moved over a wider range during 2014 compared with 2013 particularly towards the later part of the year. In October 2014 the value-at-risk reached a high for the year of € 71.4 million quickly followed by a low of € 35.4 million in November following an effort to de-risk the portfolio due to heightened volatility in the markets.

Regulatory Trading Market Risk Measures (excluding Postbank)

The tables below present the stressed value-at-risk metrics calculated with a 99 % confidence level and a one-day holding period for our trading units. They exclude contributions from Postbank trading book which are calculated on a stand-alone basis

Stressed Value-at-Risk by Risk Type

in € m.

Dec 31, 2014

Dec 31, 2013

1

Includes value-at-risk from gold and other precious metal positions.

Interest rate risk

52.3

53.0

Credit spread risk

140.8

114.4

Equity price risk

18.8

27.5

Foreign exchange risk1

46.2

27.0

Commodity price risk

1.8

8.9

Diversification effect

(139.3)

(125.3)

Total stressed value-at-risk of trading units

120.7

105.5

Average, Maximum and Minimum Stressed Value-at-Risk by Risk Type

 

Total

Diversification effect

Interest rate risk

Credit spread risk

Equity price risk

Foreign exchange risk1

Commodity price risk

in € m.

2014

2013

2014

2013

2014

2013

2014

2013

2014

2013

2014

2013

2014

2013

1

Includes value-at-risk from gold and other precious metal positions

Average

109.6

114.0

(125.4)

(127.5)

64.4

59.3

124.0

118.1

11.5

19.2

29.7

29.6

5.4

15.2

Maximum

161.1

169.2

(168.0)

(166.8)

85.9

93.1

142.8

149.5

42.6

53.6

70.3

59.2

16.7

37.1

Minimum

81.6

75.1

(102.3)

(105.5)

48.8

44.4

100.7

90.0

0.0

4.3

13.7

12.1

1.4

7.1

The average stressed value-at-risk was € 109.6 million over 2014, a decrease of € 4.4 million compared with the full year 2013. The reduction is most notably the result of lower equity risk due to carrying greater downside protection, and a decrease in commodity risk due to the unwind of the commodities business. This has partly been offset by an increase in credit spread risk following an overall increase in exposure over 2014, and there has been some increase in interest rate risk.

The following graph compares the development of the daily value-at-risk with the daily stressed value-at-risk and their 60 day averages, calculated with a 99 % confidence level and a one-day holding period for our trading units. Amounts are shown in millions of euro and exclude contributions from Postbank’s trading book which are calculated on a stand-alone basis.

Development of value-at-risk and stressed value-at-risk in 2014
Development of value-at-risk and stressed value-at-risk in 2014 (line chart)

For regulatory reporting purposes, the incremental risk charge for the respective reporting dates represents the higher of the spot value at the reporting dates, and their preceding 12-week average calculation. In contrast to this, the incremental risk charge amounts presented for the reporting dates and periods below are the spot values and the average, maximum and minimum values for the 12-week period preceding these reporting dates.

Incremental Risk Charge of Trading Units (with a 99.9 % confidence level and one-year capital horizon)

in € m.

Dec 31, 2014

Dec 31, 2013

Global Finance and Foreign Exchange

109.0

82.4

Rates and Credit Trading

494.5

563.4

NCOU

39.4

(3.9)

Emerging Markets – Debt

170.5

168.3

Other

224.4

185.5

Total incremental risk charge

1,037.8

995.6

Average, Maximum and Minimum Incremental Risk Charge of Trading Units
(with a 99.9 % confidence level and one-year capital horizon)

 

2014

2013

in € m.

Weighted average liquidity horizon in month

Average1

Maximum1

Minimum1

Weighted average liquidity horizon in month

Average1

Maximum1

Minimum1

1

Amounts show the bands within which the values fluctuated during the 12-week period preceding December 31, 2014 and December 31, 2013.

Global Finance and Foreign Exchange

12.0

148.3

251.1

68.9

6.0

66.9

82.4

43.5

Rates and Credit Trading

12.0

384.6

645.7

235.7

6.0

505.8

603.4

414.2

NCOU

12.0

(3.6)

39.4

(25.8)

6.0

(20.6)

(3.7)

(36.6)

Emerging Markets – Debt

12.0

164.1

220.2

119.5

6.0

179.5

205.0

156.1

Other

12.0

118.6

224.4

38.9

6.0

236.5

323.9

185.1

Total incremental risk charge of trading units

12.0

811.9

1,065.4

647.9

6.0

968.2

1,044.8

928.5

The incremental risk charge as at the end of 2014 was € 1,038 million and increased by € 42 million (4 %) compared with year end 2013. The 12-week average incremental risk charge as at the end of 2014 was € 812 million and thus € 156 million (16 %) lower compared with the average for the 12-week period ended December 31, 2013. The increase at the end of 2014 is driven by model changes that increased the weighted average liquidity horizon from 6 months to 12 months and increased the charge for defaulted and unrated entities.

For regulatory reporting purposes, the comprehensive risk measure for the respective reporting dates represents the higher of the internal spot value at the reporting dates, their preceding 12-week average calculation, and the floor, where the floor is equal to 8 % of the equivalent capital charge under the standardised approach securitization framework.

Comprehensive Risk Measure of Trading Units (with a 99.9 % confidence level and one-year capital horizon)

in € m.

Dec 31, 2014

Dec 31, 2013

1

Spot value of internal model Comprehensive Risk Measure at period end.

Correlation trading1

222.0

223.8

Average, Maximum and Minimum Comprehensive Risk Measure of Trading Units
(with a 99.9 % confidence level and one-year capital horizon)

 

2014

2013

in € m.

Weighted average liquidity horizon in month

Average1

Maximum1

Minimum1

Weighted average liquidity horizon in month

Average1

Maximum1

Minimum1

1

Regulatory Comprehensive Risk Measure calculated for the 12-week period ending December 31.

Correlation trading

12.0

246.9

257.5

223.0

12.0

316.0

359.6

285.9

The comprehensive risk measure as of year end 2014 was € 222 million and decreased by € 2 million (1 %) compared with year end 2013. The 12-week average of our comprehensive risk measure as at the end of 2014 was € 247 million and thus € 69 million (22 %) lower compared with the average for the 12-week period ended December 31, 2013. There was an increase due to the impact of a higher floor applicable in the calculation under the CRR/CRD 4 framework which has now been offset by de-risking of the portfolio.

Market Risk Standardized Approach

As of December 31, 2014, the securitization positions, for which the specific interest rate risk is calculated using the market risk standardized approach, generated capital requirements of € 1,682 million corresponding to risk weighted-assets of € 21.0 billion. As of December 31, 2013 these positions generated capital requirements of € 473 million and further capital deduction items of € 1.5 billion corresponding to a total RWA-equivalent of € 13.3 billion. The increase in RWA was related to a regulatory driven change in the treatment of positions receiving a risk weight of 1,250 %. As a result these positions are now disclosed under RWA compared to CDI in the previous year. A like comparison made after adjusting the year end 2013 portfolio with the new CRD 4 regulatory framework would show a year on year decrease of € 3.4 billion RWA following the disposal of positions.

For nth-to-default credit default swaps the capital requirement reduced to € 1 million corresponding to risk weighted-assets of € 19 million compared with € 5 million and € 63 million as of December 31, 2013. This development was driven by certain positions becoming eligible for our comprehensive risk measurement model based on improved market liquidity.

Additionally, the capital requirement for investment funds under the market risk standardized approach was € 91 million corresponding to risk weighted-assets of € 1,139 million as of December 31, 2014, compared with € 78 million and € 977 million as of December 31, 2013.

The capital requirement for longevity risk under the market risk standardized approach was € 26 million corresponding to risk weighted-assets of € 326 million as of December 31 2014, compared with € 29 million and € 363 million as of December 31, 2013.