COMMERZBANK AKTIENGESELLSCHAFT

Group Risk Report
240
184 Commerzbank Annual Report 2011
In the bonds markets this high level of uncertainty led to a flight to quality investments
and thus to significantly lower interest rates for these asset classes, in particular for German
Bunds and US treasuries. By contrast, the yields on bonds from many southern European
countries continued to increase significantly.
In 2011, increased volatilities were also evident in the equity markets and were
accompanied by significant price declines in almost all the relevant stock markets.
In the foreign exchange markets, problems relating to the European debt crisis led to a
loss of confidence in the euro, which caused it to depreciate against the major currencies.
In 2011, commodity markets were characterised by record highs in gold and precious
metals and also by severe market fluctuations.
Market risk in the trading book
Commerzbank has been using a uniform market price risk model for its internal management
since the end of October 2010. This model is based on historical simulation (HistSim model)
and applies to all entities of the Group. This ensures that risk measurement is consistent
across the whole Group and meets the future requirements of Basel III. In particular, this
includes the calculation of “stressed VaR”, which evaluates the risk arising from the current
positioning in the trading book with market movements in a crisis period. In addition, the
“incremental risk charge” and “equity event VaR” ratios quantify the risk of a deterioration in
creditworthiness and event risks in trading book positions.
A comprehensive revision of the structure of the scenarios used for risk measurement
through stress testing took place in 2011 with the aim of improving the mapping of crisis
periods.
Value at risk in the trading book declined significantly at the end of 2011 compared with
the previous year. This is largely due to an additional reduction in non-strategic risk
positions and methodological improvements in the risk measurement of special interest rate
derivatives. Furthermore due to regulatory matters securities (mainly asset-backed
securities) have been transferred to the regulatory banking book as a short-term sale is not
aimed for under current market conditions.
The market risk profile in the trading book is diversified across all asset classes. The value
at risk decreased by €36.8m to €59.1m at year end 2011. The dominant asset classes are
interest risk and credit spread risk.
The value at risk in the credit spread asset class reduced by €26.3m to €17.6m year-onyear.
The main reasons for this were the transfer of risk positions to the banking book, and
measures to reduce risk positions, in particular in the Portfolio Restructuring Unit.
The value at risk for interest rate risk fell by €5.7m to €31.2m year-on-year. The main
reason for this was the optimised risk measurement for special interest rate derivatives. The
significant decrease in interest rate risk due to improvements in the model was weakened by
the increased risk from government bonds, which is included in interest rate risk. This
particularly reflects interest spread risks relating to southern European government bonds
which have been especially affected by the crisis.