Deutsche Bank

Annual Report 2017

Economic Capital

Internal Capital Adequacy

Our internal capital adequacy assessment process (ICAAP) is aimed at maintaining the viability of Deutsche Bank on an ongoing basis. We assess our internal capital adequacy as the ratio of our internal capital supply divided by our internal economic capital demand as shown in the table below. While Deutsche Bank’s ICAAP was historically based on a “gone concern approach”, the approach was changed in November 2017 to take a perspective aimed at maintaining the viability of Deutsche Bank on an ongoing basis. As a result, the quantile used for the calculation of the internal economic capital demand has been changed from 99.98 % to 99.9 % improving comparability with regulatory capital demand along with the following implications for the internal capital supply definition: The revised internal capital supply definition excludes any Tier 1 capital instruments subject to grandfathering and Tier 2 capital instruments. Accruals for AT1 coupons and IFRS deferred tax assets that rely on future profitability excluding those arising from temporary differences are fully deducted. IFRS deferred tax assets arising from temporary differences are risk weighted and covered within business risk economic capital on the internal capital demand side. Previously, deferred tax assets had been fully deducted from internal capital supply. Fair value adjustments for assets reclassified where no matched funding is available are no longer deducted from the internal capital supply.

Total capital supply and demand

in € m.
(unless stated otherwise)

Dec 31, 2017

Dec 31, 2016

1

Includes noncontrolling interest up to the economic capital requirement for each subsidiary.

2

Includes deduction of fair value gains on own credit-effect relating to own liabilities designated under the fair value option as well as the debt valuation adjustments.

3

As applied in the section Capital Management.

4

Deduction-treatment of deferred tax assets arising from temporary differences was changed to inclusion in business risk economic capital demand.

5

Reported as net assets (assets minus liabilities) of a defined pension fund, i.e. applicable for overfunded pension plans.

6

Includes fair value adjustments for assets reclassified in accordance with IAS 39 and for banking book assets where no matched funding is available.

7

As per Dec 31, 2016 included under 'Hybrid Tier 1 capital instruments'

Capital supply

 

 

Shareholders' equity

63,174

59,833

Noncontrolling interests1

0

0

Accruals AT1 coupons

(213)

N/M

Gain on sale of securitizations, cash flow hedges

(29)

N/M

Fair value gains on own debt and debt valuation adjustments, subject to own credit risk2

(73)

(440)

Additional valuation adjustments3

(1,204)

(1,398)

Intangible assets

(8,839)

(8,982)

IFRS deferred tax assets excl. temporary differences4

(3,341)

N/M

IFRS deferred tax assets4

N/M

(8,666)

Expected loss shortfall

(502)

(297)

Defined benefit pension fund assets5

(1,125)

(945)

Holdings of own common equity tier 1 capital instruments

(131)

(45)

Home loans and savings protection ("Fonds zur bauspartechnischen Absicherung")

(19)

(231)

Other adjustments

(322)

N/M

Fair value adjustments for financial assets reclassified to loans6

N/M

(557)

Additional tier 1 equity instruments7

4,675

N/M

Hybrid tier 1 capital instruments

N/M

11,259

Tier 2 capital instruments

N/M

8,003

Capital supply

52,051

57,534

 

 

 

Total economic capital requirement

 

 

Credit risk

10,769

13,105

Market risk

10,428

14,593

Operational risk

7,329

10,488

Business risk

5,677

5,098

Diversification benefit

(7,074)

(7,846)

Capital demand

27,129

35,438

 

 

 

Internal capital adequacy ratio

192 %

162 %

A ratio of more than 100 % signifies that the total capital supply is sufficient to cover the capital demand determined by the risk positions. This ratio was 192 % as of December 31, 2017, compared with 162 % as of December 31, 2016. The change of the ratio was due to the fact that capital supply decreased proportionately less than the capital demand did. The decrease in capital demand was driven by lower economic capital requirements partly due to the change in quantile as explained in the section “Risk Profile”. The capital supply decreased by € 5.4 billion mainly due to the new capital supply definition as per the new internal capital adequacy perspective implemented in November 2017.

The above capital adequacy measures apply to the consolidated Group as a whole (including Postbank) and form an integral part of our risk and capital management framework.