Commerzbank Aktiengesellschaft - CMVM

are being used in the Bank’s risk-adjusted pricing and define a system of incentives
in the acquisition of new and follow-up business. In this way, it is ensured
that the portfolio targets established by the Bank under its credit-risk strategy
are already observed at the loan origination level.
Credit-approval powers
The basis for managing credit risk throughout the Group is a structure of ratingrelated
credit approval powers, which also extends to the subsidiaries
Hypothekenbank in Essen and Erste Europäische Pfandbrief- und Kommunalkreditbank
(EEPK).
Credit decisions for individual borrowers or groups of borrowers are made
on the basis of either the aggregated exposure pursuant to Art. 19, (2), German
Banking Act – KWG (borrower unit), or a larger economic risk entity. The Board
of Managing Directors has delegated credit decisions up to a maximum amount
of 2% of the liable equity to the central credit committee chaired by the CRO.
Sub-credit committees at head office (up to 1% of liable equity) for banks, corporate
and retail customers and regional sub-credit committees on the corporate
and retail side in Germany and abroad complete the picture of credit-approval
powers. The credit committees are made up of representatives of the front and
back office in equal numbers.
By way of preparation for the MaK, the credit-approval powers delegated
ad personam were scaled back, according to the degree of creditworthiness, to
a low euro figure in the double-digit millions and the lending powers of the committee
were strengthened. The result in terms of risk underlines the success of
this structure of credit-approval powers.
Monitoring of credit risk for trading activities
In Commerzbank’s management of the Group’s credit risks arising from trading
activities, special attention is paid to counterparty and issuer risk. A system of
limits is used to monitor whether daily utilization remains within the set framework.
The system of limits directly intervenes in trading systems and ensures
that credit exposure arising from trading activities is monitored globally, in real
time, and right around the clock.
The size of the credit risk for trading activities is worked out using simulation
methods, which project credit risks on to the future. Here, the risk-mitigating
effects of netting agreements are taken into consideration, as is the effect of
collateral agreements. In addition to such information, trading units are
provided with data on whether the relevant limits are available. Only if the socalled
pre-deal limit check has confirmed that free trading lines are available
may deals be concluded. Limit breaches are reported daily to the management.
By means of a graduated procedure, such overruns are brought back within the
set limits.
RISK REPORT 65