Dresdner Bank - Commerzbank International SA

The risk management process of the bank takes place in close cooperation with the units of the Dresdner
Bank Group. The general conditions defined by the Dresdner Bank Group specifically apply. In the Group,
an extensive risk management and controlling system is established, which guarantee consistent management
of the risks across the units. The rules and standards of the Dresdner Bank Group are at the level
of the bank and are adapted/expanded to accommodate local requirements on the basis of its business
model.
The risk appetite of the bank is expressed through the minimum relationship between internally calculated
risk capital for covering existing risks and the risk-bearing capacity, mainly the liable equity capital of
the bank. With the calculation of the internal risk capital, the Dresdner Bank Group approaches are relied
upon. The bank's Supervisory Board and Management Board define the minimum thresholds for solvency
coefficients. In doing so, internal risk capital is compared under normal conditions, as well as under stress
conditions of risk-bearing capacity.
The bank’s risk profile is reviewed on a regular basis. As far as it is meaningfully possible, all material risks
are quantified. Individual risk types, particularly reputational risks, are encountered with proactive management
and sensitisation of the employees, instead of quantification.
Market risks
Market risks are understood as possible fluctuations in the value of a portfolio as a result of changes in
market prices, such as interest rates, share prices or exchange rates. Market risks for Dresdner Bank
Luxembourg S.A. are assessed according to group-wide standards using the parametric value at risk
method (VaR).
Risk calculation and limitation follows the Dresdner Bank Group’s internal model based on a 1-day holding
period and a 95% confidence level. For the overall bank, a limit exists, which was utilised in the
amount of € 2.15 million through continuing market volatilities. In addition to the VaR calculation, the
effects of extreme market trends, such as the simulation of a 200 basis point interest rate rise, on the
portfolio’s value are observed in the context of stress testing.
Liquidity risks
Liquidity risk is the risk of not being able to meet current and future payment obligations either fully or at
the due time, or, in the event of a liquidity crisis, the risk involves refinancing that can be generated only
at excessively high market rates (refinancing risk) or assets that can be liquidated only with discounts on
market prices (market liquidity risk).
At the Dresdner Bank Group, liquidity risks are assessed on the basis of an integrated system, which indicates
the maturity structure for all future cash flows and generates a cash flow balance sheet, taking into
consideration available first-class collateral. Risks are limited respectively in the context of a structured
limit system. Regular stress testing shows the effects on liquidity in different extreme scenarios.
Notes to the Annual Accounts
63
Balance Sheet as at 31 December 2008