SEC Form 20-F - Deutsche Bank Annual Report 2012

Deutsche Bank
Annual Report 2010 on Form 20-F
Item 11: Quantitative and Qualitative Disclosures about Credit, Market and Other Risk 174
with Deutsche Bank’s economic capital methodology. Newly included in this category is a restructured subordinated
loan facility with significant equity characteristics, which contributed € 253 million to economic
capital after diversification.
— Alternative assets. Our alternative assets portfolio includes principal investments, real estate investments
(including mezzanine debt) and small investments in hedge funds. Principal investments are composed of
direct investments in private equity, mezzanine debt, short-term investments in financial sponsor leveraged
buy-out funds, bridge capital to leveraged buy-out funds and private equity led transactions. The alternative
assets portfolio has some concentration in infrastructure and real estate assets. While recent market conditions
have limited the opportunities to sell down the portfolio, our intention remains to do so, provided suitable
conditions allow it.
— Other nontrading market risks:
— Interest Rate Risk. This is mainly driven by maturity transformation of contractually short term deposits.
The effective duration of contractually short term deposits is based upon observable client behavior,
elasticity of deposit rates to market interest rates (DRE), volatility of deposit balances and Deutsche Bank’s
own credit spread. Economic capital is derived by stressing modeling assumptions – in particular the DRE –
for the effective duration of overnight deposits. Our economic capital usage was € 435 million as of December
31, 2010 and was mainly driven by PBC including DB Bauspar. Behavioral and economic characteristics
are taken into account when calculating the effective duration and optional exposures from
our mortgages business.
— Equity compensation. Risk arising from structural short position in our own share price arising from restricted
equity units. Our economic capital usage was € (272) million as of December 31, 2010, on a diversified
basis. The negative contribution to our diversified economic capital was derived from the fact
that a reduction of our share price in a downside scenario as expressed by economic capital calculation
methodology would reduce the negative impact on our capital position from the equity compensation liabilities.
— Pension risk. Risk arising from our defined benefit obligations, including interest rate risk and inflation risk,
credit spread risk, equity risk and longevity risk. Our economic capital usage, excluding Postbank, was
€ 146 million as of December 31, 2010. The economic capital charge allocated at DB Group level for respective
pension risks of Postbank amounted to € 33 million.
— Structural Foreign Exchange Risk. Our foreign exchange exposure arising from unhedged capital and
retained earnings in non-euro currencies in certain subsidiaries. Our economic capital usage was
€ 927 million as of December 31, 2010 on a diversified basis.
— Asset Management’s Guaranteed Funds. Our economic capital usage was € 1.4 billion as of December
31, 2010.
Our total economic capital figures for nontrading market risk currently do not take into account diversification
benefits between the asset categories except for those of equity compensation and structural foreign exchange
risk and pension risk.
Operational Risk
Organizational Structure
The Head of Operational Risk & Business Continuity Management chairs the Operational Risk Management
Committee, which is a permanent sub-committee of the Risk Executive Committee and is composed of the
operational risk officers from our business divisions and our infrastructure functions. It is the main decisionmaking
committee for all operational risk management matters.