entire - Deutsche Bank Annual Report 2012

Deutsche Bank 01 – Management Report 67
Financial Report 2010 Risk Report
Our country risk ratings represent a key tool in our management of country risk. They are established by an
independent country risk research function within our Credit Risk Management function and include:
— Sovereign rating. A measure of the probability of the sovereign defaulting on its foreign or local currency
obligations.
— Transfer risk rating. A measure of the probability of a “transfer risk event.”
— Event risk rating. A measure of the probability of major disruptions in the market risk factors relating to a
country.
All sovereign and transfer risk ratings are reviewed, at least annually, by the Group Credit Policy Committee, a
sub-committee of our Risk Executive Committee. Our country risk research group also reviews, at least quarterly,
our ratings for the major Emerging Markets countries. Ratings for countries that we view as particularly volatile,
as well as all event risk ratings, are subject to continuous review.
We also regularly compare our internal risk ratings with the ratings of the major international rating agencies.
Country Risk limits are reviewed at least annually, in conjunction with the review of country risk ratings. Country
Risk limits are set by either our Management Board or by our Cross Risk Review Committee, a sub-committee
of our Risk Executive Committee pursuant to delegated authority.
We charge our group divisions with the responsibility of managing their country risk within the approved limits.
The regional units within Credit Risk Management monitor our country risk based on information provided by
our finance function. Our Group Credit Policy Committee also reviews data on transfer risk.
Important elements of the country risk management at Postbank are country risk ratings and country risk limits.
Ratings are reviewed and adjusted if required by means of a rating tool on a monthly basis. Country risk limits
and sovereign risk limits for all relevant countries are approved by the Management Board annually. Loans are
charged to the limits with their gross nominal amounts and allocated to individual countries based on the country
of domicile of the borrower.
Settlement Risk Management
Our trading activities may give rise to risk at the time of settlement of those trades. Settlement risk is the risk of
loss due to the failure of a counterparty to honor its obligations to deliver cash, securities or other assets as
contractually agreed.
For many types of transactions, we mitigate settlement risk by closing the transaction through a clearing agent,
which effectively acts as a stakeholder for both parties, only settling the trade once both parties have fulfilled
their sides of the bargain.