Liquidity Reserves, Liquidity Coverage Ratio and Funding Risk Management

Liquidity Reserves

As of December 31, 2017, our liquidity reserves amounted to € 280 billion compared with € 219 billion as of December 31, 2016. The increase of € 61 billion comprised a € 44 billion increase in cash and cash equivalents, a € 12 billion increase in highly liquid securities and a € 5 billion increase in other unencumbered securities. The development was largely driven by a steady growth of stable funding sources, as well as an adaption of internal and regulatory liquidity models that resulted in an increase in the requirement for liquidity buffers. Our average liquidity reserves during the year were € 269.3 billion compared with € 212.4 billion during 2016. In the table above the carrying value represents the market value of our liquidity reserves while the liquidity value reflects our assumption of the value that could be obtained, primarily through secured funding, taking into account the experience observed in secured funding markets at times of stress.

The liquidity value (weighted) of our Liquidity Reserves of € 272 billion exceeds the liquidity value (weighted) of our High Quality Liquid Assets (HQLA) of € 247 billion. The major drivers of this difference are that Liquidity Reserves include central bank eligible, but otherwise less liquid securities (for example traded loans, other investment grade corporate bonds and ABS) which are not recognized in HQLA. Additionally, HQLA includes major index equities, but excludes cash balances deposited with central banks to satisfy minimum cash requirements as well as cash balances deposited with non EU Central Banks rated below AA- which are included in the LCR but not as part of the HQLA.

Liquidity Coverage Ratio

The final EBA guidelines on LCR disclosure released on March 8, 2017 (EBA/GL/2017/01) requires us to disclose the average of month-end observations over twelve months preceding the end of each quarter instead of the year-end LCR. Therefore, this year’s disclosed LCR for 2016 will differ slightly from the disclosed LCR in the previous year. For reference, we have additionally included the year-end LCR numbers below.

Our weighted average LCR of 144 % (twelve months average) has been calculated in accordance with the Commission Delegated Regulation (EU) 2015/61 and the EBA Guidelines on LCR disclosure to complement the disclosure of liquidity risk management under Article 435 CRR. Due to changes of the calculation method in October 2016, the December 2016 weighted average LCR of 121 % includes 3 data points (October – December 2016) whereas the December 2017 LCR includes 12 data points (January – December 2017).

The year-end LCR as of December 31, 2017 stands at 140 % compared to 128 % as of December 31, 2016

Funding Risk Management

Structural Funding

All funding matrices (the aggregate currency, the U.S. dollar and the GBP funding matrix) were in line with the respective risk appetite as of year ends 2017 and 2016.