entire - Deutsche Bank Annual Report 2012

Deutsche Bank 02 – Consolidated Financial Statements 311
Financial Report 2010 Additional Notes
36 – Regulatory Capital
In 2010, the Group issued € 1.2 billion of lower Tier 2 capital (qualified subordinated liabilities). Consolidation of
Tier 2 capital issued by Postbank added € 2.2 billion of lower Tier 2 capital and € 1.2 billion of profit participation
rights. Profit participation rights amounted to € 1.2 billion after and nil before consolidation of Postbank. Total
lower Tier 2 capital as of December 31, 2010, amounted to € 10.7 billion compared to € 7.1 billion as of
December 31, 2009. Cumulative preferred securities amounted to € 0.3 billion as of December 31, 2010,
unchanged to December 31, 2009.
Capital Adequacy
Since 2008, Deutsche Bank has calculated and published consolidated capital ratios for the Deutsche Bank
group of institutions pursuant to the Banking Act and the Solvency Regulation (“Solvabilitätsverordnung”), which
implemented the revised capital framework of the Basel Committee from 2004 (“Basel II”) into German law.
The group of companies consolidated for banking regulatory purposes (“group of institutions”) includes all
subsidiaries as defined in the German Banking Act that are classified as banks, financial services institutions,
investment management companies, financial enterprises, payment institutions or ancillary services enterprises.
It does not include insurance companies or companies outside the finance sector.
For financial conglomerates, however, insurance companies are included in an additional capital adequacy
(also “solvency margin”) calculation. Since October 2007, the Group is a financial conglomerate. The Group’s
solvency margin as a financial conglomerate remains dominated by its banking activities.
A bank’s total regulatory capital, also referred to as “Own Funds”, is divided into three tiers: Tier 1, Tier 2 and
Tier 3 capital, and the sum of Tier 1 and Tier 2 capital is also referred to as “Regulatory Banking Capital”.
— Tier 1 capital consists primarily of common share capital, additional paid-in capital, retained earnings and
certain hybrid capital components such as noncumulative trust preferred securities, also referred to as
“Additional Tier 1 capital”. Common shares in treasury, goodwill and other intangible assets are deducted
from Tier 1. Other regulatory adjustments entail the exclusion of capital from entities outside the group of
institutions and the reversal of capital effects under the fair value option on financial liabilities due to own
credit risk. Tier 1 capital without hybrid capital components is referred to as Core Tier 1 capital.
— Tier 2 capital consists primarily of cumulative trust preferred securities, certain profit participation rights and
long-term subordinated debt, as well as 45 % of unrealized gains on certain listed securities.
Certain items must be deducted from Tier 1 and Tier 2 capital. Primarily these include deductible investments
in unconsolidated banking, financial and insurance entities where the Group holds more than 10 % of the
capital (in case of insurance entities 20 % either of the capital or of voting rights unless included in the solvency
margin calculation of the financial conglomerate), the amount by which the expected loss for exposures to
central governments, institutions and corporate and retail exposures as measured under the bank’s internal
ratings based approach (“IRBA”) model exceeds the value adjustments and provisions for such exposures,
the expected losses for certain equity exposures, securitization positions not included in the risk-weighted
assets and the value of securities delivered to a counterparty plus any replacement cost to the extent the
required payment by the counterparty has not been made within five business days after delivery provided
the transaction has been allocated to the bank’s trading book.