Annual Report 2001 - Landesbank Berlin

Performance in the strategic business areas
The endeavours to stabilise the Bankgesellschaft Berlin Group and the drafting of
a new forward-looking strategy characterised the 2001 financial year.
Within the framework of the strategic business areas, the Group Board of Management
ensures that the Group is managed uniformly. Each member of the
Group Board of Management is responsible for business areas or staff units and
service divisions across the sub-banks. The business areas, which are arranged
according to client groups, are Retail Banking (combination of the Retail Banking
and Private Banking segments which were reported separately last year), Regional
Corporate Banking, Public Sector, Corporate/International Banking, Capital Markets
and Real Estate Financing.
The heads of the business areas are directly responsible for earnings in the Group
companies and brands assigned to them.
The success-oriented management of the strategic business areas is derived from
the fundamental operating variables for the success of the Group (result before
taxes, return on equity and cost income ratio).
The allocation of equity provides a basis for the management of the business areas
and the structural units allocated to them as profit centres. This is internally
defined as economic capital, which we determine taking two components into
account. The risk positions allocated to the business area pursuant to Principle I
relating to section 10 of the German Banking Act form the reference figure of the
commitment of capital to cover market and counterparty risks. From 2001
onwards, average values are used to determine the allocation of capital. In order
to additionally account for the equity backing of the operational risks, a percentage
of the administration expenditure is the second factor that comes into the
equation. The transition to the shareholder equity on the balance sheet is carried
out in the statement of earnings by segment under “Consolidation”.
The management ratio “Return on allocated capital” relates result before taxes for
the relevant business area to the economic capital. The following overview of the
statement of earnings by segment is broken down and illustrated in terms of content
in line with the German Accounting Standard no. 3 (DRS 3) on segment
reporting and no. 3-10 (DRS 3-10) on segment reporting for banks. There is no secondary
segmentation by region. To fully illustrate banking activity, the operating
business areas are being supplemented with the segments Interest Rate Manage-
10 PERFORMANCE IN THE STRATEGIC BUSINESS AREAS