COMMERZBANK AKTIENGESELLSCHAFT

Group Risk Report
216
160 Commerzbank Annual Report 2011
of the other major EU countries (France, Italy, Spain or the UK) or of the USA, respectively a
collapse in the basic repo functionality of the ECB. Pursuing our business targets, those risks
are taken deliberately and lie out of scope of the management defined within our Group risk
strategy.
The overall risk strategy covers all material risks to which Commerzbank is exposed. It is
detailed further in the form of sub-risk strategies for the risk types which are material. These
are then specified and made operational through policies, regulations and instructions/guidelines.
The annual risk inventory process ensures that all quantifiable and
unquantifiable risks material to the Group are identified. The assessment of the materiality of
a risk is based on whether its occurrence could have a major direct or indirect impact on the
Bank’s risk-taking capability.
As part of the planning process, the Board of Managing Directors uses stress scenarios to
decide on the extent to which the capital available to the Bank for risk coverage should be
utilised. The Board sets the risk appetite at Group level by consciously defining a capital
framework as part of the capital available for risk coverage. In a second step, as a result of
the planning process this capital framework is broken down into limits for each risk category
and allocated to the relevant units. Compliance with limits and guidelines is monitored
during the year and action taken where required.
The avoidance of risk concentrations is a core strategy of risk management. Risk
concentrations can arise both from the synchronous movement of risk positions within a risk
type (“intra-risk concentrations”), and through the synchronous movement of risk positions
across differing risk types (through common risk drivers or interactions between different
risk drivers of various risk types – “inter-risk concentrations”).
The establishment of adequate risk management and controlling processes, which enable
the identification, assessment, management, monitoring and communication of substantial
risks and related risk concentrations, serves to ensure that all Commerzbank-specific risk
concentrations are adequately accounted for. A major objective is to ensure early
transparency regarding risk concentrations, and thus to reduce the potential risk of losses.
Commerzbank uses a combination of portfolio and scenario analyses to identify Commerzbank-specific
inter-risk concentrations. Stress tests are used to deepen the analysis of risk
concentrations and, where necessary, to identify new drivers of risk concentrations.
Management is regularly informed about the results of the analyses.
Risk-taking capability and stress testing
The risk-taking capability analysis is a key part of overall bank management and
Commerzbank’s Internal Capital Adequacy Assessment Process (ICAAP). The purpose is to
ensure that sufficient capital is held for the risk profile of the Commerzbank Group at all
times.
Commerzbank monitors risk-taking capability using a gone concern approach which
seeks primarily to protect unsubordinated lenders. This objective should be achieved even in
the event of extraordinarily high losses from an unlikely extreme event.