Amendments to IAS 39 and IFRS 7, “Reclassification of Financial Assets”

 (unaudited)

Under the amendments to IAS 39 and IFRS 7, issued in October 2008, certain financial assets were reclassified in the second half of 2008 and the first quarter of 2009 from the financial assets at fair value through profit or loss and the available for sale classifications into the loans classification. No reclassifications have been made since the first quarter 2009.

The Group identified assets, eligible under the amendments, for which at the reclassification date it had a clear change of intent and ability to hold for the foreseeable future, rather than to exit or trade in the short term. The reclassifications were made at the fair value of the assets at the reclassification date.

Reclassified Financial Assets

in € bn.
(unless stated otherwise)

Trading assets reclassified to loans

Financial assets available for sale reclassified to loans

Carrying value at reclassification date

26.6

11.4

Unrealized fair value losses in accumulated other comprehensive income

0.0

(1.1)

Effective interest rates at reclassification date:

 

 

Upper range

13.1 %

9.9 %

Lower range

2.8 %

3.9 %

Expected recoverable cash flows at reclassification date

39.6

17.6

Carrying values and fair values by asset type of assets reclassified in 2008 and 2009

 

Sep 30, 2015

Dec 31, 2014

in € m.

Carrying value

Fair value

Carrying value

Fair value

1

There is an associated effect on the carrying value from effective fair value hedge accounting for interest rate risk to the carrying value of the reclassified assets shown in the table above. This effect increases carrying value by € 65 million and € 86 million as at September 30, 2015 and December 31, 2014, respectively.

Trading assets reclassified to loans:

 

 

 

 

Securitization assets

1,988

2,078

1,983

2,124

Debt securities

536

558

1,067

1,160

Loans

954

862

1,146

888

Total trading assets reclassified to loans

3,479

3,499

4,197

4,171

Financial assets available for sale reclassified to loans:

 

 

 

 

Securitization assets

1,697

1,636

1,782

1,743

Debt securities

531

566

1,378

1,493

Total financial assets available for sale reclassified to loans

2,228

2,202

3,160

3,236

Total financial assets reclassified to loans

5,7071

5,700

7,3571

7,408

All reclassified assets are managed by NCOU and disposal decisions across this portfolio are made by NCOU in accordance with their remit to take de-risking decisions. For the nine months ending September 30, 2015, the Group sold reclassified assets with a carrying value of € 1.6 billion, resulting in a net gain of € 130 million and a further € 30 million relating to reversal of impairment on positions sold.

In addition to sales, the decrease in the carrying value of assets previously classified as trading reduced due to redemptions of € 313 million. The reduction in the carrying value of assets previously classified as available for sale includes redemptions of € 132 million. These reductions in carrying value were partially offset by foreign exchange impacts in the period.

Unrealized fair value gains (losses) that would have been recognized in profit or loss and net gains (losses) that would have been recognized in other comprehensive income if the reclassifications had not been made

 

Three months ended

Nine months ended

in € m.

Sep 30, 2015

Sep 30, 2014

Sep 30, 2015

Sep 30, 2014

Unrealized fair value gains (losses) on the reclassified trading assets, gross of provisions for credit losses

150

74

132

286

Impairment (losses) on the reclassified financial assets available for sale which were impaired

0

2

0

(6)

Net gains (losses) recognized in other comprehensive income representing additional unrealized fair value gains (losses) on the reclassified financial assets available for sale which were not impaired

(25)

(1)

(30)

141

Pre-tax contribution of all reclassified assets to the income statement

 

Three months ended

Nine months ended

in € m.

Sep 30, 2015

Sep 30, 2014

Sep 30, 2015

Sep 30, 2014

1

Relates to gains and losses from the sale of reclassified assets.

Interest income

29

22

108

98

Provision for credit losses

15

(23)

37

(60)

Other income1

6

0

56

5

Income (loss) before income taxes on reclassified trading assets

50

(1)

202

42

Interest income

(5)

25

37

62

Provision for credit losses

1

(4)

1

(9)

Other income1

22

0

73

0

Income (loss) before income taxes on reclassified financial assets available for sale

17

20

111

53

Reclassified Financial Assets: Carrying values and fair values by asset class

All IAS 39 reclassified assets were transferred into NCOU upon creation of the new division in the fourth quarter of 2012. NCOU has been tasked to accelerate de-risking to reduce total capital demand and total adjusted assets. A number of factors are considered in determining whether and when to sell assets including the income statement, regulatory capital and leverage impacts. The movements in carrying value and fair value are illustrated in the following table:

Carrying values and fair values by asset class reclassification in 2008 and 2009

 

Sep 30, 2015

Dec 31, 2014

in € m.

Carrying value (CV)

Fair value (FV)

Unrealized gains/(losses)

Carrying value (CV)

Fair value (FV)

Unrealized gains/(losses)

1

Includes asset backed securities related to the aviation industry and a mixture of other securitization assets and debt securities.

Securitization assets and debt securities reclassified:

 

 

 

 

 

 

US municipal bonds

911

966

55

2,302

2,503

201

Student loans ABS

1,579

1,593

14

1,464

1,529

65

CDO/CLO

570

531

(38)

717

689

(28)

Covered bond

898

974

76

893

987

95

Commercial mortgages securities

159

164

5

187

192

5

Residential mortgages ABS

89

92

3

83

92

9

Other1

547

518

(29)

566

528

(38)

Total securitization assets and debt securities reclassified

4,753

4,838

85

6,211

6,520

309

Loans reclassified:

 

 

 

 

 

 

Commercial mortgages

59

59

0

227

226

0

Residential mortgages

845

754

(91)

871

616

(255)

Other

50

49

(1)

49

46

(3)

Total loans reclassified

954

862

(92)

1,146

888

(259)

Total financial assets reclassified to loans

5,707

5,700

(6)

7,357

7,408

51