COMMERZBANK AKTIENGESELLSCHAFT

To our Shareholders Corporate Responsibility Management Report Risk Report Group Financial Statements Further Information 241
185
157 213 Key developments in 2011
159 215 Risk-oriented overall bank management
163 219 Default risk
178 234 Intensive care
182 238 Market risk
187 243 Liquidity risk
190 246 Operational risk
192 248 Other risks
195 251 Outlook
VaR contribution by risk type in the trading book1 | €m 31.12.2011 31.12.2010
Credit spreads 17.6 43.9
Interest rates 31.2 36.9
Equities 3.5 6.1
FX 4.0 4.7
Commodities 2.8 4.2
Total 59.1 95.9
1 99% confidence level, holding period 1 day, equally-weighted market data, 254 days history.
Table 27
In December 2011, BaFin also approved the use of the internal market risk model for
regulatory purposes. In the first three quarters of 2011 the regulatory capital requirement
was still calculated using the regulator-certified market risk models of Commerzbank (old)
and Dresdner Bank. The regulatory capital calculation for the fourth quarter of 2011 was
thus based on the internal market risk model recently certified by BaFin. The approval of the
internal model by BaFin also includes the certification of improved methodology for special
interest rate derivatives.
The reliability of the market risk model is constantly monitored by backtesting. Apart from
meeting supervisory requirements, the aim is to assess forecasting quality. Analysing the
results of backtesting provides important guidance for checking parameters and further
improving the model. All negative outliers at Group level are classified under a traffic light
system laid down by the supervisory authorities and are reported immediately to the
authorities with details of the size and cause of the failure. As per end of 2011
Commerzbank’s model lies within the green area of the traffic light system.
Market risk in the banking book
The key driver of market risk in the banking book is the credit spread risk in the Public
Finance portfolio including the positions held by the subsidiaries Eurohypo AG and Erste
Europäische Pfandbrief und Kommunalkreditbank (EEPK). The Treasury portfolios with their
credit spread risk, interest rate risk, and underlying risk also have a particular impact on the
market risk in the banking book. Reclassifications of credit spread risk bearing positions
from the PRU trading book have also had an effect on the risk position in the banking book.
To a lesser extent the equity price risk in the equity investment portfolio is also a risk driver.
The adjoining diagram documents the development of credit spread sensitivities for all
securities and derivative positions (excluding loans) in Commerzbank Group. The reduction
in the Public Finance portfolio as part of the de-risking strategy, lower market values due to
increased credit spreads and a change in Treasury positioning led to a decline with an
overall position of €66m at year-end. Over 80% of the credit spread relates to securities
positions classified as loans and receivables (LaR). Changes in credit spreads have no impact
on the revaluation reserve or the income statement for these portfolios.
Credit spread sensitivities
Downshift 1 bp | €m
82
75 74 72
66
12/10
Figure 7
03/11 06/11 09/11 12/11
Group Risk Report