COMMERZBANK AKTIENGESELLSCHAFT

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.
Market liquidity risk
Market liquidity risk is the risk of the Bank not being able to liquidate or hedge risky positions
in a timely manner, to the desired extent and on acceptable terms as a result of insufficient
liquidity in the market.
Market liquidity risk is measured by creating a liquidation profile for each portfolio in
order to classify the portfolio in terms of its convertibility into cash using a market liquidity
factor. The market risk based on a one-year-view is weighted with the market liquidity
factor to calculate the market liquidity risk.
At the end of 2011 Commerzbank earmarked €0.7bn in economic capital to cover market
liquidity risk in the trading and banking book. Securities, which are more liable to market
liquidity risk, include in particular asset-backed securities and specific positions in the equity
investment portfolio.
Liquidity risk
Liquidity risk is defined in the narrower sense as the risk that Commerzbank will be unable
to meet its payment obligations on a day-to-day basis. In a broader sense, liquidity risk is the
risk that future payments cannot be funded as and when they fall due, in full, in the correct
currency and at standard market conditions.
Management and monitoring
Group Treasury at Commerzbank is responsible for managing liquidity risks. Liquidity risks
occurring over the course of the year are monitored by the independent risk function using
an internal bank liquidity risk model. Key decisions on liquidity risk management and monitoring
are made by the Group Asset Liability Committee (ALCO). At the operating level,
additional sub-committees are responsible for dealing with liquidity risk issues at a local
level and with methodological issues regarding the quantification and limitation of liquidity
risks that are of lesser significance for the Group.
Quantification and stress testing
The internal bank liquidity risk model is the basis for liquidity management and reporting to
the Board of Managing Directors. In relation to a reference date the risk measurement
approach calculates the available net liquidity (ANL) for the next twelve months based on
various scenarios. Commerzbank’s available net liquidity is calculated for various stress
scenarios using the following three components: deterministic, i.e. contractually agreed
cash flows (forward cash exposure, FCE), statistically expected economic cash flows for the
relevant scenario (dynamic trade strategy, DTS), and the realisable assets in the relevant
scenario (balance sheet liquidity, BSL).
The stress scenario used by management which underlies the modelling allows for the
impact of both a bank-specific stress event and a broader market crisis when calculating
Financial Statements and Management Report 2011 71
Credit spread sensitivities
Downshift 1 bp | €m
82
75 74 72
66
12/10 03/11 06/11 09/11 12/11