COMMERZBANK AKTIENGESELLSCHAFT

50
Commerzbank AG
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.
When determining the economic capital required, allowance is made for potential unexpected
fluctuations in value. Where such fluctuations exceed forecasts, they must be covered
by available economic capital in order to absorb unexpected losses (capital available for risk
coverage). The quantification of capital available for risk coverage is based on a differentiated
view on the accounting values of assets and liabilities and involves economic valuations
of certain balance sheet items.
The capital requirement for the risks taken is quantified using the internal economic
capital model. When setting the economic capital required, allowance is made for all the
types of risk at Commerzbank Group that are classified as material in the annual risk inventory.
The economic risk approach therefore also includes risk types that are not included in
the regulatory requirements for banks’ capital adequacy and reflects the effect of portfoliospecific
interrelationships. The confidence level of 99.91% in the economic capital model is
in line with the underlying gone concern assumptions and ensures the economic risk-taking
capability concept is internally consistent.
Risk-taking capability at Commerzbank Group level is monitored and managed monthly
at Group level. Risk-taking capability is assessed based on the utilisation of the capital
available for risk coverage, and is deemed to be assured as long as utilisation is below 100%.
In 2011, the utilisation level was consistently well below 100% and was 81.5% as at
December 31, 2011.
Risk-taking capability Commerzbank Group | €bn 31.12.20112 31.12.20103 Capital available for risk coverage 27 36
Economically required capital 22 20
thereof for credit risk 13 14
thereof for market risk 8 6
thereof for OpRisk 2 3
thereof for business risk 2 2
thereof diversification between risk types – 4 – 4
Utilisation level1 81.5% 56.8%
1
Utilisation level = economically required capital/capital available for risk coverage.
2
Based on current methodology from the first quarter of 2011; only partially comparable to values for 2010.
3
2010 figures based on methodology as at 31 December 2010.
The higher utilisation level during the year under review was mainly due to the increase of
the economically required capital for market risk, which was driven by heavy capital markets
turmoil in the second half of 2011, as well as the decrease of capital available for risk coverage.
The main drivers of the change in capital available for risk coverage were the capital
measure carried out in 2011 in order to repay most of the SoFFin’s silent participation as
well as actions taken to strengthen our capital structure and the development of the Public
Finance portfolio as a consequence of the crisis.