Development of Risk-weighted Assets

The tables below provide an overview of risk-weighted assets broken down by model approach and business division. They include the aggregated effects of the segmental reallocation of infrastructure related positions if applicable as well as reallocations between the segments.

For the current reporting date the amounts presented are based on the CRR/CRD 4 framework according to the transitional rules. The amounts for the comparative period are presented on the then applicable Basel 2.5 framework.

In line with our decision to scale down and discontinue parts of our commodities business, certain portfolios containing discontinued activities were aggregated under the Special Commodities Group (SCG), which has been subsequently transferred from CB&S to NCOU in the first quarter of 2014. The amounts for credit, market and operational risk RWA for the comparative period have been restated including related effects from reallocations between the segments, accordingly.

Within credit risk, the line item “Other” in Advanced IRBA reflects RWA from securitization positions in the banking book, specific equity positions and other non-credit obligation assets. Within the Standardized Approach, the majority of the line item “Other” includes RWAs from our pension fund assets with the remainder being RWAs from banking book securitizations as well as exposures assigned to the further exposure classes apart from central governments or central banks, institutions, corporates and retail.

Risk-weighted Assets by Model Approach and Business Division

 

Dec 31, 2014

 

CRR/CRD 4

in € m.

Corporate Banking & Securities

Private & Business Clients

Global Transaction Banking

Deutsche Asset & Wealth Management

Non-Core Operations Unit

Consolidation & Adjustments and Other

Total

Credit Risk

83,548

69,584

41,740

7,310

19,280

22,666

244,128

Segment reallocation

(2,200)

520

3,327

330

94

(2,071)

0

Advanced IRBA

77,263

58,786

31,763

3,910

13,062

14,638

199,422

Central Governments and Central Banks

3,948

124

1,020

0

74

218

5,385

Institutions

8,359

1,538

3,103

73

623

171

13,869

Corporates

55,678

9,938

26,916

2,740

5,062

1,199

101,533

Retail

121

37,852

30

91

773

0

38,867

Other

9,157

9,334

694

1,006

6,529

13,049

39,769

Foundation IRBA

2,079

3,303

107

0

1

0

5,491

Central Governments and Central Banks

0

0

0

0

0

0

0

Institutions

0

0

0

0

0

0

0

Corporates

2,079

3,303

107

0

1

0

5,490

Standardized Approach

4,804

6,884

6,542

3,070

6,122

10,099

37,522

Central Governments or Central Banks

21

63

27

3

0

0

114

Institutions

593

124

51

4

3

35

810

Corporates

2,841

1,401

4,747

1,111

1,075

584

11,759

Retail

7

4,064

422

45

1,141

18

5,697

Other

1,341

1,232

1,296

1,908

3,903

9,462

19,142

Risk exposure amount for default funds contributions

1,601

90

1

0

1

0

1,693

Settlement Risk

25

0

0

0

0

1

27

Credit Valuation Adjustment (CVA)

16,024

445

7

445

4,019

262

21,203

Internal Model Approach

15,953

417

7

443

3,953

1

20,774

Standardized Approach

71

28

0

2

66

261

428

Market Risk

44,469

92

199

2,483

16,967

0

64,209

Internal Model Approach

31,439

0

199

1,339

8,625

0

41,602

Standardized Approach

13,029

92

0

1,144

8,342

0

22,607

Operational Risk

31,512

9,605

1,321

6,368

18,275

0

67,082

Advanced measurement approach

31,512

9,605

1,321

6,368

18,275

0

67,082

Total

175,578

79,725

43,268

16,607

58,541

22,929

396,648

 

Dec 31, 2013

 

Basel 2.5

in € m.

Corporate Banking & Securities1

Private & Business Clients

Global Transaction Banking

Deutsche Asset & Wealth Management

Non-Core Operations Unit1

Consolidation & Adjustments and Other

Total

1

For the above shown numbers in December 2013 the restatement of the Special Commodities Group (SCG) had not been performed.

Credit Risk

61,599

65,909

35,417

5,809

22,632

10,818

202,184

Segment reallocation

(658)

553

1,912

259

86

(2,152)

0

Advanced IRBA

56,974

46,066

26,159

3,029

14,852

3,237

150,317

Central Governments and Central Banks

2,927

90

896

5

253

181

4,353

Institutions

5,438

803

1,921

80

909

12

9,163

Corporates

43,075

5,638

22,378

2,398

7,301

620

81,409

Retail

124

35,844

33

106

1,027

0

37,134

Other

5,410

3,692

931

440

5,362

2,424

18,258

Foundation IRBA

1,367

10,568

67

0

266

0

12,268

Central Governments and Central Banks

0

0

0

0

2

0

2

Institutions

0

1,059

0

0

261

0

1,320

Corporates

1,367

9,509

67

0

3

0

10,946

Standardized Approach

3,916

8,722

7,279

2,521

7,428

9,733

39,599

Central Governments or Central Banks

61

0

39

0

40

0

141

Institutions

28

116

12

8

32

1

198

Corporates

2,929

2,004

6,107

942

2,905

470

15,357

Retail

10

4,423

915

44

1,164

0

6,557

Other

887

2,179

206

1,526

3,287

9,261

17,346

Risk exposure amount for default funds contributions

0

0

0

0

0

0

0

Settlement Risk

19

0

0

0

0

15

34

Credit Valuation Adjustment (CVA)

0

0

0

0

0

0

0

Internal Model Approach

0

0

0

0

0

0

0

Standardized Approach

0

0

0

0

0

0

0

Market Risk

34,473

128

562

2,085

10,011

0

47,259

Internal Model Approach

29,156

0

562

1,102

8,892

0

39,712

Standardized Approach

5,317

128

0

983

1,120

0

7,547

Operational Risk

22,598

6,964

832

4,659

15,839

0

50,891

Advanced measurement approach

22,598

6,964

832

4,659

15,839

0

50,891

Total

118,689

73,001

36,811

12,553

48,483

10,832

300,369

The overall movements of risk-weighted asset for the specific risk types are discussed in detail in the following sections starting with “Development of Risk-weighted Assets for Credit Risk”.

Regulatory Capital Requirements and Risk-weighted Assets

 

Dec 31, 2014

Dec 31, 2013

in € m.

Capital requirements CRR/CRD 4

RWA
CRR/CRD 4

Capital requirements Basel 2.5

RWA
Basel 2.5

Counterparty credit risk

 

 

 

 

Advanced IRBA

 

 

 

 

Central governments and central banks

431

5,385

348

4,353

Institutions

1,109

13,869

734

9,175

Corporates

8,123

101,533

6,512

81,397

Retail

3,109

38,867

2,970

37,134

Equity

977

12,216

375

4,685

Securitization positions

1,064

13,296

627

7,834

Other non-credit obligation assets

1,141

14,258

459

5,739

Total advanced IRBA

15,954

199,422

12,025

150,317

Foundation approach

 

 

 

 

Central governments and central banks

0

0

0

2

Institutions

0

0

106

1,320

Corporates

439

5,490

876

10,946

Total foundation approach

439

5,491

981

12,268

Standardized approach

 

 

 

 

Central governments or central banks

0

0

2

28

Regional governments and local authorities

1

7

5

68

Public sector entities

9

107

9

118

Multilateral development banks

0

0

0

0

International organizations

0

0

0

0

Institutions

65

810

16

198

Corporates

941

11,759

1,219

15,235

Retail

456

5,697

479

5,982

Secured by mortgages on immovable property

108

1,345

182

2,275

Exposures in default

342

4,275

124

1,553

Items associated with particular high risk

18

229

0

0

Covered bonds

0

2

0

3

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

0

0

0

0

Collective investments undertakings (CIU)

724

9,046

54

670

Equity

217

2,707

242

3,023

Other items

28

350

738

9,223

Securitization positions

95

1,188

98

1,222

Total standardized approach

3,002

37,522

3,168

39,598

Risk exposure amount for default funds contributions

135

1,693

0

0

Total counterparty credit risk

19,530

244,128

16,175

202,185

Settlement risk

2

27

3

34

Credit Valuation Adjustment (CVA)

 

 

 

 

Internal model approach

1,662

20,774

0

0

Standardized approach

34

428

0

0

Total Credit Valuation Adjustment

1,696

21,203

0

0

Market risk in the trading book

 

 

 

 

Internal model approach

3,328

41,602

3,179

39,738

Value-at-Risk

613

7,662

674

8,427

Stressed Value-at-Risk

1,454

18,181

1,254

15,673

Incremental Risk Charge

1,038

12,972

996

12,446

Comprehensive Risk Measurement (Correlation Trading)

223

2,788

255

3,193

Standardized approach

1,809

22,607

602

7,521

Traded debt instruments

1,684

21,049

479

5,984

Equity risk

84

1,051

0

0

Foreign exchange risk

14

181

16

200

Commodity risk

0

0

0

0

Other market risk

26

326

107

1,338

Total market risk in the trading book

5,137

64,209

3,781

47,259

Operational risk

 

 

 

 

Advanced measurement approach

5,367

67,082

4,071

50,891

Total regulatory capital requirements and RWA

31,732

396,648

24,030

300,369

The tables below provide an analysis of key drivers for RWA movements on a CRR/CRD 4 basis observed for credit, market and operational risk in the reporting period.

Development of Risk-weighted Assets for Credit Risk

 

Dec 31, 2014

Dec 31, 2013

 

CRR/CRD 4

Basel 2.5

in € m.

Counterparty credit risk

thereof: derivatives and repo-style transactions

Counterparty credit risk

thereof: derivatives and repo-style transactions

1

RWA balances beginning of the year 2014 are based on Basel 2.5.

Credit risk RWA balance, beginning of year

202,1861

29,4541

228,952

35,274

Book size

(5,024)

(5,327)

4,272

621

Book quality

(2,348)

1,841

(18,522)

(5,036)

Model updates

11,676

11,676

(2,061)

0

Methodology and Policy

24,110

297

0

0

Acquisition and Disposals

(3,198)

(62)

(5,467)

(3)

Foreign exchange movements

11,752

3,237

(4,988)

(1,403)

Other

4,974

0

0

0

Credit risk RWA balance, end of year

244,128

41,117

202,186

29,454

The classifications of key drivers for the RWA credit risk development table are fully aligned with the recommendations of the Enhanced Disclosure Task Force (EDTF). The category “Book quality” mainly represents the effects from portfolio rating migrations, loss given default, model parameter re-calibrations as well as collateral coverage activities. Organic changes in our portfolio size and composition are considered in the category “Book size”. “Model updates” include model refinements and advanced model roll out. RWA movements resulting from externally, regulatory-driven changes, e.g. applying new regulations, are now considered in the “methodology and policy” section. “Acquisition and disposals” is reserved to show significant exposure movements which can be clearly assigned to new businesses or disposal-related activities.

The increase in RWA for counterparty credit risk by 20.7 % or € 41.9 billion since December 31, 2013 is primarily driven by the impact from foreign exchange movements mainly resulting from a strengthening US Dollar and by the introduction of the new CRR/CRD 4 regulatory framework, which is shown under “Methodology and Policy”. The increase in the category “model updates” represents the impact of a more restrictive application of the maturity capping which allows the bank to use a maturity of one year when calculating the credit risk RWA for derivatives depending on the market risk model applied for the Credit Valuation Adjustment (CVA) RWA, a model change for our Internal Model Method impacting derivatives RWA as well as a more restrictive application of a Security Financing Collateral haircut. The overall decrease in the category “Book size” is predominantly driven by derivatives and security financing transaction positions mainly in our Core Bank reflecting our de-risking activities. The decrease in the category “Acquisition and Disposals” shows the impact of the sale of BHF-BANK as well as the sale of The Cosmopolitan of Las Vegas. The increase in the category “Other” reflects the effects on RWA subsequent to our share capital increase in the second quarter 2014 (€ 4 billion) with the remaining resulting from movements applying the 10/15 % threshold rule.

Development of Risk-weighted Assets for Credit Valuation Adjustment

 

Dec 31, 2014

in € m.

CRR/CRD 4

CVA RWA balance, beginning of year

0

Movement in risk levels

2,017

Market data changes and recalibrations

(1,914)

Model updates

7,400

Methodology and policy

12,330

Acquisitions and disposals

0

Foreign exchange movements

1,370

CVA RWA balance, end of year

21,203

Based on the new CRR/CRD 4 regulatory framework, we are required to calculate RWA using the CVA which takes into account the credit quality of our counterparties. RWA for CVA covers the risk of mark-to-market losses on the expected counterparty risk in connection with OTC derivative exposures. We calculate the majority of the CVA based on our own internal model as approved by BaFin.

The development of CVA RWA is broken down into a number of categories: movement in risk levels, which includes changes to the portfolio size and composition; market data changes and calibrations, which includes changes in market data levels and volatilities as well as recalibrations; model updates refers to changes to either the IMM credit exposure models or the value-at-risk models that are used for CVA RWA; methodology and policy relates to changes to the regulation, for 2014 the first introduction of CVA RWA. Any significant business acquisitions or disposals would be highlighted on their own.

As of December 31, 2014, the RWA for CVA amounted to € 21.2 billion, representing an increase of € 8.9 billion (72 %) compared with our pro forma calculation of € 12.3 billion for December 31, 2013. The increase was driven by changes to the portfolio as part of regular business activities throughout the year, but also due to re-optimization of the CVA RWA hedging program and market volatility. During the fourth quarter we implemented a change to the value-at-risk model as per the EBA guidelines for CVA which increased the CVA RWA. This was partly offset by further de-risking efforts which reduced capital requirements in both core and non-core business units.

Development of Risk-weighted Assets for Market Risk

 

Dec 31, 2014

Dec 31, 2013

in € m.

CRR/CRD 4

Basel 2.5

1

RWA balance beginning of the year 2014 is based on Basel 2.5.

Market risk RWA balance, beginning of year

47,2591

53,058

Movement in risk levels

(10,161)

(8,598)

Market data changes and recalibrations

(730)

1,136

Model updates

5,101

542

Methodology and policy

20,089

1,200

Acquisitions and disposals

(81)

0

Foreign exchange movements

2,732

(79)

Market risk RWA balance, end of year

64,209

47,259

The analysis for market risk covers movements in our internal models for value-at-risk, stressed value-at-risk, incremental risk charge and comprehensive risk measure as well as results from the market risk standardized approach, e.g. for trading securitizations and nth-to-default derivatives or trading exposures for Postbank. The market risk RWA movements due to changes in market data levels, volatilities, correlations, liquidity and ratings are included under the market data changes and recalibrations category. Changes to our market risk RWA internal models, such as methodology enhancements or risk scope extensions, are included in the category of model updates. In the methodology and policy category we reflect regulatory driven changes to our market risk RWA models and calculations. Significant new businesses and disposals would be assigned to the line item acquisition and disposals.

The € 17.0 billion (36 %) RWA increase for market risk since December 31, 2013 was primarily driven by increases in the category methodology and policy as well as movement in risk levels. There is an € 20.1 billion RWA increase for methodology and policy primarily from the Market Risk Standardized Approach for securitizations due to the new regulatory CRR/CRD 4 framework, which became effective on January 1, 2014. In the new framework we assign all retained securitization positions that are unrated or rated below BB a risk weight of 1,250 % to the exposure and these are now included in RWA whereas these exposures were previously considered capital deduction items. Also, under the new framework there is some increase in the floor applied to the comprehensive risk measure for the correlation trading portfolio although this has now been offset by de risking. The increase from model changes is driven by the Incremental Risk Charge with changes for the treatment of unrated and defaulted exposures as well as an increase of the liquidity horizons. There has been a reduction from movements in risk levels since December 31, 2013 particularly coming from the Incremental Risk Charge, Comprehensive Risk Measure and the Market Risk Standardized Approach for securitizations. There has also been an increase from Foreign exchange movements mainly during the second half of the year.

Development of Risk-weighted Assets for Operational Risk

 

Dec 31, 2014

Dec 31, 2013

in € m.

CRR/CRD 4

Basel 2.5

1

RWA balance beginning of the year 2014 is based on Basel 2.5.

Operational risk RWA balance, beginning of year

50,8911

51,595

Loss profile changes (internal and external)

9,345

2,623

Expected loss development

37

(959)

Forward looking risk component

(734)

(515)

Model updates

7,652

1,885

Methodology and policy

0

0

Acquisitions and disposals

(109)

(3,738)

Operational risk RWA balance, end of year

67,082

50,891

The overall RWA increase of € 16.2 billion was mainly driven by our early recognition of enhancements to our Advanced Measurement Approach (AMA) model in the second quarter of this year, which led to additional RWA of € 7.7 billion. From the third quarter, further effects from the model change related to reasonably possible litigation losses are shown under the category “loss profile changes”.

The increase in “loss profile changes” resulted from large external market operational risk events which are reflected in our AMA model, such as settlements of regulatory matters by financial institutions.

Further embedded impacts from the AMA model enhancements on the other operational risk RWA components, specifically on the expected loss, are expected to materialize after the awaited model approval by the joint supervisory team, when the model changes have been implemented.