Annual Report 2009 on Form 20-F (PDF) - Deutsche Bank Annual ...

Capital Adequacy Requirements
The Banking Act and the Solvency Regulation issued by the BaFin thereunder reflect the capital adequacy
rules of Basel II and require German banks to maintain an adequate level of regulatory capital in relation to
their risk positions. Risk positions (commonly referred to as “risk-weighted assets” or “RWA”) comprise credit
risks, market risks and operational risks (comprising, among other things, risks related to certain external
factors, as well as to technical errors and errors of employees). Credit risks and operational risks must be
covered with Tier 1 capital (“core capital”) and Tier 2 capital (“supplementary capital”) (together, “regulatory
banking capital”). Market risk must be covered with regulatory banking capital (to the extent not required to
cover credit and operational risk) and Tier 3 capital (together with regulatory banking capital, “own funds”).
Under certain circumstances, the BaFin may impose capital requirements on individual banks which are more
stringent than statutory requirements. For details of our regulatory capital see Note [36] to the consolidated
financial statements.
Limitations on Large Exposures
The Banking Act and the Large Exposure Regulation (Großkredit- und Millionenkreditverordnung) limit a
bank’s concentration of credit risks through restrictions on large exposures (Großkredite). All exposures to
a single customer (and customers connected with it) are aggregated for these purposes.
An exposure incurred in the banking book that equals or exceeds 10 % of the bank’s regulatory banking capital
constitutes a banking book large exposure. A banking book and trading book exposure taken together that
equals or exceeds 10 % of the bank’s own funds constitutes an aggregate book large exposure. No large
exposure may exceed 25 % of the bank’s regulatory banking capital or own funds, as applicable. Where the
exposure is to affiliates of the bank that are not consolidated for regulatory purposes the limit is 20 %.
In addition, the total of all banking book large exposures must not exceed eight times the bank’s regulatory
banking capital and the total of all aggregate book large exposures must not exceed eight times the bank’s
own funds.
A bank may exceed these ceilings only with the approval of the BaFin and subject to increased capital
requirements for the amount of the large exposure that exceeds the ceiling.
Furthermore, total trading book exposures to a single customer (and customers affiliated with it) must not
exceed five times the bank’s own funds that are not required to meet the capital adequacy requirements with
respect to the banking book. Total trading book exposures to a single customer (and customers affiliated with
it) in excess of the aforementioned limit are not permitted.
Consolidated Regulation and Supervision
The Banking Act’s provisions on consolidated supervision require that each group of institutions (Institutsgruppe)
taken as a whole complies with the requirements on capital adequacy and the limitations on large
exposures described above. A group of institutions generally consists of a domestic bank or financial services
institution, as the parent company, and all other banks, financial services institutions, investment management
companies, financial enterprises, ancillary services enterprises or payment institutions in which the
41