COMMERZBANK AKTIENGESELLSCHAFT

254 Commerzbank Interim Report as of June 30, 2009
can only be borrowed at very high market rates (refinancing
risk) or that assets can only be liquidated at a discount to
market rates (market liquidity risk) and the risk of limited
access to funding sources such as the capital market, money
market and deposits.
The Commerzbank Group’s ability to meet its payment
obligations is monitored on the basis of two interlinked
concepts:
• The available net liquidity (ANL) concept (up to one year,
measurement on basis of ANL)
• The stable funding concept (> 1 year, measurement on
basis of stable funding ratio)
The basis for liquidity management and reporting to the
Board of Managing Directors is Commerzbank’s internal
liquidity risk model. With the internally developed liquidity
risk measurement approach, ANL for the next twelve
months is calculated on the basis of contractual and economic
cash flows and compared with liquid assets. The results
are then used to produce forecasts for trends in liquidity at
various aggregation levels such as currencies, products or
business units.
One important component of the internal liquidity risk
model is stress testing, which shows the impact of unplanned
developments on the liquidity situation and also provides
information on possible countermeasures for contingency
planning. The stress scenarios apply to both bank-specific
and market-specific crises and account for the impact of a
rating downgrade, the withdrawal of customer deposits or
lower liquidity of assets. Outflows of liquidity as a result of
contingent liabilities are also taken into account, such as
increased drawing of agreed credit lines or claims under
guarantees. In particular it anticipates impending illiquidity
in the money, capital and repo markets. During the current
crisis in particular, the internal liquidity risk model has
proven to be a risk-sensitive and reliable tool for monitoring
and managing liquidity.
Commerzbank’s liquidity and solvency were adequate at
all times during the period under review – even under the
assumptions of the stress scenarios – and the regulatory
provisions of the Liquidity Regulation were observed.
Liquidity management is the responsibility of Group
Treasury, and the setting and monitoring of risk limits, the
validation of applied procedures and reporting are managed
– functionally and organizationally separated from the Treasury
– by the Group Market & Operational Risk Management
unit within the risk function. Setting ANL, and currency
limits for individual units as well as for the entire Commerzbank
Group, prevents liquidity risks from being entered into
over a period of up to one year that cannot be closed out
in good time. The strategic decisions on liquidity risk are
made in close cooperation between market and back-office
side in the Asset Liability Committee and in the Market Risk
Committee. This includes, for example, the annual review of
the Liquidity Risk Manual, which sets out the principles of
liquidity management and liquidity risk limits (including an
escalation process when a limit is exceeded) and a contingency
plan.
Given the slightly easier market conditions and the additional
SoFFin funds, Commerzbank’s liquidity profile has
improved further. In addition, the accommodative monetary
policies being pursued by central banks should prevent a
shortage of liquidity in the markets over the next few
months.
The liquidity risks from Dresdner Bank’s business
volume were transferred to the Commerzbank liquidity
model in an initial step at the end of the first quarter of
2009. As a result a consolidated view of the liquidity risk
including Dresdner Bank exposures is already available
for liquidity monitoring and management. This tactical
solution, which is partially subject to limitations, will be
gradually replaced by the strategic migration of the transactions
into Commerzbank’s front-office and booking
systems. In this process the existing model parameters
will be validated and adjusted as necessary in the context
of the new Commerzbank business model.
The Commerzbank Group’s short-term and medium-term
funding relies on an appropriately broad diversification in
terms of investor groups, regions and products. Liquidity
management regularly analyses the structure of the various
sources of funding of our liabilities in order to be in a position
to actively manage the funding profile.
Long-term funding is mainly secured by means of
structured and non-structured capital market products that
may or may not be collateralized, as well as customer deposits.
The basis for planning issues in the capital markets
is provided by the results of the calculations of our stable
funding concept. This identifies the structural liquidity
requirement for the Bank’s core lending business as well as
those assets that cannot be liquidated within one year, and
compares these to the liabilities available long-term to the
Bank (including core customer deposit bases). The aim is to
finance the Bank’s illiquid assets and core business in terms
of volume and maturity as far as possible with long-term
liabilities.