SEC Form 20-F - Deutsche Bank Annual Report 2012

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Deutsche Bank Notes to the Consolidated Balance Sheet F-86 Annual Report 2010 on Form 20-F 12 – Financial Assets/Liabilities at Fair Value through Profit or Loss The credit risk on the securities purchased under resale agreements and securities borrowed designated under the fair value option was € 136.8 billion and € 110.0 billion at December 31, 2010 and December 31, 2009 respectively, this credit risk is mitigated by the holding of collateral. The valuation of these instruments takes into account the credit enhancement in the form of the collateral received. As such there is no material movement during the year or cumulatively due to movements in counterparty credit risk on these instruments. The credit risk on the loans designated under the fair value option of € 23.3 billion and € 13.0 billion as of December 31, 2010 and 2009, respectively, is mitigated in a number of ways. The majority of the drawn loan balance is mitigated through the purchase of credit default swaps, the remainder is mitigated by the holding of collateral. The valuation of collateralized loans takes into account the credit enhancement received. Where the instruments are over-collateralized there is no material movement in valuation during the year or cumulatively due to movements in counterparty credit risk, rather the fair value movement of the instruments is due to market risk movements in the value of the collateral and interest rates. Of the total drawn and undrawn lending facilities designated at fair value, the Group managed counterparty credit risk by purchasing credit default swap protection on facilities with a notional value of € 57.3 billion and € 50.9 billion as of December 31, 2010, and 2009, respectively. The notional value of credit derivatives used specifically to mitigate the exposure to credit risk on these drawn loans and undrawn irrevocable loan commitments designated at fair value was € 38.0 billion and € 34.7 billion as of December 31, 2010, and 2009, respectively. The changes in fair value attributable to movements in counterparty credit risk for instruments held at the reporting date are detailed in the table below. in € m. Loans Dec 31, 2010 Dec 31, 2009 1 Loan commitments Loans Loan commitments Changes in fair value of loans and loan commitments due to credit risk Cumulative change in the fair value 3 490 143 66 Annual change in the fair value in 2010/2009 – 394 938 1,703 Changes in fair value of credit derivatives specifically used to mitigate credit risk Cumulative change in the fair value (9) (151) (47) (82) Annual change in the fair value in 2010/2009 (27) (230) (1,250) (1,470) 1 Prior year amounts have been adjusted.
Deutsche Bank Notes to the Consolidated Balance Sheet F-87 Annual Report 2010 on Form 20-F 12 – Financial Assets/Liabilities at Fair Value through Profit or Loss The change in fair value of the loans and loan commitments attributable to movements in the counterparty’s credit risk is determined as the amount of change in its fair value that is not attributable to changes in market conditions that give rise to market risk. For collateralized loans, including securities purchased under resale agreements and securities borrowed, the collateral received acts to mitigate the counterparty credit risk. The fair value movement due to counterparty credit risk on securities purchased under resale agreements was not material due to the credit enhancement received. Financial Liabilities designated at Fair Value through Profit or Loss The fair value of a financial liability incorporates the credit risk of that financial liability. The changes in fair value of financial liabilities designated at fair value through profit or loss in issue at the year-end attributable to movements in the Group’s credit risk are detailed in the table below. The changes in the fair value of financial liabilities designated at fair value through profit or loss issued by consolidated SPEs have been excluded as this is not related to the Group’s credit risk but to that of the legally isolated SPE, which is dependent on the collateral it holds. in € m. Dec 31, 2010 Dec 31, 2009 Cumulative change in the fair value 76 30 Annual change in the fair value in 2010/2009 43 (264) The fair value of the debt issued takes into account the credit risk of the Group. Where the instrument is quoted in an active market, the movement in fair value due to credit risk is calculated as the amount of change in fair value that is not attributable to changes in market conditions that give rise to market risk. Where the instrument is not quoted in an active market, the fair value is calculated using a valuation technique that incorporates credit risk by discounting the contractual cash flows on the debt using a credit-adjusted yield curve which reflects the level at which the Group could issue similar instruments at the reporting date. The credit risk on undrawn irrevocable loan commitments is predominantly counterparty credit risk. The change in fair value due to counterparty credit risk on undrawn irrevocable loan commitments has been disclosed with the counterparty credit risk on the drawn loans. For all financial liabilities designated at fair value through profit or loss the amount that the Group would contractually be required to pay at maturity was € 23.7 billion and € 36.8 billion more than the carrying amount as of December 31, 2010 and 2009, respectively. The amount contractually required to pay at maturity assumes the liability is extinguished at the earliest contractual maturity that the Group can be required to repay. When the amount payable is not fixed, the amount the Group would contractually be required to pay is determined by reference to the conditions existing at the reporting date.
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Deutsche Bank Supplemental Financia
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2011 April 28, 2011 Interim Report
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SEC Form 20-F - Deutsche Bank Annual Report 2012

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