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 181
Funding Matrix
We map all funding-relevant assets and all liabilities into time buckets corresponding to their economic maturities
to compile a maturity profile (funding matrix). Given that trading assets are typically more liquid than their contractual
maturities suggest, we determine individual liquidity profiles reflecting their relative liquidity value. We
take assets and liabilities from the retail bank that show a behavior of being renewed or prolonged regardless
of capital market conditions (mortgage loans and retail deposits) and assign them to time buckets reflecting the
expected prolongation. Wholesale banking products are included with their contractual maturities.
The funding matrix identifies the excess or shortfall of assets over liabilities in each time bucket, facilitating
management of open liquidity exposures. The funding matrix analysis together with the strategic liquidity planning
process, which forecasts the funding supply and demand across business units, provides the key input parameter
for our annual capital market issuance plan. Upon approval by the Capital and Risk Committee and the
Management Board the capital market issuance plan establishes issuing targets for securities by tenor, volume
and instrument. As per the year-end 2010, we were long funded in each of the annual time buckets of the funding
matrix (2-10 years).
In 2010, Treasury issued capital market instruments with a total value of approximately € 22.9 billion, € 3.9 billion
more than the original issuance plan.
For information regarding the maturity profile of our long-term debt, please refer to Note 30 “Long-Term Debt
and Trust Preferred Securities” of our consolidated financial statements.
Transfer Pricing
We operate a transfer pricing framework that applies to all businesses and ensures that pricing is made of (i)
assets in accordance with their underlying liquidity risk, (ii) liabilities in accordance with their funding maturity
and (iii) contingent liquidity exposures in accordance with the cost of providing for commensurate liquidity reserves
to fund unexpected cash requirements.
Within this transfer pricing framework we allocate funding and liquidity risk costs and benefits to the firm’s business
units and set financial incentives in line with the firm’s liquidity risk guidelines. Transfer prices are subject
to liquidity (term) premiums depending on market conditions. Liquidity premiums are set by Treasury and
picked up by a segregated liquidity account. The Treasury liquidity account is the aggregator of long-term liquidity
costs. The management and cost allocation of the liquidity account is the key variable for transfer pricing funding
costs within Deutsche Bank.
Stress Testing and Scenario Analysis
We use stress testing and scenario analysis to evaluate the impact of sudden stress events on our liquidity
position. The scenarios we apply have been based on historic events, such as the 1987 stock market crash,
the 1990 U.S. liquidity crunch and the September 2001 terrorist attacks, liquidity crisis case studies and hypothetical
events.
Also incorporated are the lessons learned from the latest financial markets crisis. They include the prolonged
term money-market and secured funding freeze, collateral repudiation, reduced fungibility of currencies,
stranded syndications as well as other systemic knock-on effects. The scenario types cover institution-specific
events (e.g. rating downgrade), market related events (e.g. systemic market risk) as well as a combination of
both, which links a systemic market shock with a multi-notch rating downgrade.