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 179
Liquidity Risk Management Framework
The Management Board defines our liquidity risk strategy, and in particular our tolerance for liquidity risk based
on recommendations made by Treasury and the Capital and Risk Committee. At least once every year the
Management Board will review and approve the limits which are applied to the Group to measure and control
liquidity risk as well as the Bank’s long-term funding and issuance plan.
Our Treasury function is responsible for the management of liquidity and funding risk of Deutsche Bank globally
as defined in the liquidity risk strategy. Our liquidity risk management framework is designed to identify, measure
and manage the liquidity risk position of the Group. Treasury reports the Bank’s overall liquidity and funding to
the Management Board at least weekly via a Liquidity Scorecard. Our liquidity risk management approach
starts at the intraday level (operational liquidity) managing the daily payments queue, forecasting cash flows
and factoring in our access to Central Banks. It then covers tactical liquidity risk management dealing with
access to secured and unsecured funding sources. Finally, the strategic perspective comprises the maturity
profile of all assets and liabilities (Funding Matrix) and our issuance strategy.
Our cash-flow based reporting system provides daily liquidity risk information to global and regional management.
Stress testing and scenario analysis plays a central role in our liquidity risk management framework. This also
incorporates an assessment of asset liquidity, i.e. the characteristics of our asset inventory, under various
stress scenarios as well as contingent funding requirements from off-balance-sheet commitments. The monthly
stress testing results are used in setting our short-term wholesale funding limits (both unsecured and secured)
and thereby ensuring we remain within the Board’s overall liquidity risk tolerance.
Short-term Liquidity and Wholesale Funding
Our Group-wide reporting system tracks all contractual cash flows from wholesale funding sources on a daily
basis over a 12-month horizon. The system captures all cash flows from unsecured as well as from secured
funding transactions. Wholesale funding limits, which are calibrated against our stress testing results and approved
by the Management Board, express our maximum tolerance for liquidity risk. These limits apply to the
respective cumulative global cash outflows and are monitored on a daily basis. Our liquidity reserves are the
primary mitigant against stresses in short-term wholesale funding markets. At an individual entity level we may
set liquidity outflow limits across a broader range of cash flows where this is considered to be meaningful or
appropriate.
Unsecured Funding
Unsecured funding is a finite resource. Total unsecured funding represents the amount of external liabilities
which we take from the market irrespective of instrument, currency or tenor. Unsecured funding is measured
on a regional basis and aggregated to a global utilization report. As part of the overall Liquidity Risk Strategy,
the management board approves limits to protect our access to unsecured funding at attractive levels.
Funding Diversification
Diversification of our funding profile in terms of investor types, regions, products and instruments is an important
element of our liquidity risk management framework. Our core funding resources come from retail clients, longterm
capital markets investors and transaction banking clients. Other customer deposits and borrowing from
wholesale clients are additional sources of funding. We use wholesale deposits primarily to fund liquid assets.
To ensure the additional diversification of its refinancing activities, we have a Pfandbrief license allowing us to
issue mortgage Pfandbriefe.