ANNUAL REPORT 2008 - DG Hyp

Deutsche Genossenschafts-Hypothekenbank AG 

ANNUAL REPORT 2008 

Member of the 

Cooperative Financial 

Services Network

€ mn 2008 2007 

Development of originated new business 1) 

Commercial Real Estate Finance 3,766 2,941 

– German originated/cooperative sector 2,425 2,076 

– International/secondary market 1,341 865 

Portfolio investments 2) 0 2,394 

Treasury 

– Originated loans to local authorities 750 1,760 

– Public-sector lending3) 2,066 5,392 

– Pfandbrief sales and other sources of refinancing 7,865 8,862 

Special portfolio 4) 10 405 

Portfolio development 

Total assets 76,016 83,335 

Real estate lending 21,774 22,499 

Mortgage Backed Securities (MBS) 4,016 4,387 

Public-sector3) and local authority loans 

Covered bonds (Pfandbriefe) 

45,151 47,775 

and other debt securities 62,077 67,496 

Own funds for solvency purposes 1,733 1,954 

Profit and loss account 

Gross profit 174 273 

Administrative expenses 130 169 

Revaluation results – 111 – 121 

Provisions for loan losses – 62 – 68 

Operating profit – 129 – 86 

Net extraordinary income/expenses 187 148 

Profit transfer – – 

Number of employees 

OVERVIEW 

Annual average 

(full-time equivalent) 473 576 

Vocational trainees 6 17 

1) Previous year’s figure included loan extensions 

2) Completely suspended in response to the financial markets crisis 

3) Securities and promissory note loans eligible as cover assets for public-sector covered bonds 

4) Retail and non-strategic commercial loan portfolios

CONTENTS 

Letter from the Management Board 2 

DG HYP: The commercial real estate bank 

in the German Cooperative Financial Services Network 4 

Management Report Economic environment 6 

Commercial Real Estate Finance 8 

Treasury 

Loans to local authorities and public-sector lending 15 

Refinancing 16 

Special portfolio 18 

Strategic realignment 20 

Financial position and results of operations 22 

Risk Report 27 

Our staff 35 

Report on material events after the balance sheet date 

and forecast 37 

Financial Statements Balance sheet 41 

Profit and loss account 47 

Notes to the financial statements 53 

General notes 53 

Notes to the balance sheet 55 

Notes to the profit and loss account 67 

Cash flow statement 68 

Coverage 69 

Other information on the annual financial statements 75 

Responsibility Statement 79 

Audit Opinion 80 

Report of the Supervisory Board 81 

Corporate Bodies And Committees; Executives Supervisory Board 83 

Management Board, Department Heads 84 

Trustees, Advisory Council 85 

DG HYP Offices 87 

Deutsche Genossenschafts-Hypothekenbank AG | Annual Report 2008 

1

Our Management Board from left to right: Dr. Georg Reutter, Hans-Theo Macke (Chairman), Manfred Salber 

Ladies and Gentlemen, dear business associates, 

The year 2008 will be remembered as the year of the worldwide financial markets crisis, a crisis that 

has rapidly spread to the real economy and a crisis that we, like every other bank, have been unable 

to avoid entirely unscathed. However, from DG HYP’s perspective, 2008 was also a year 

marked by the Bank’s successful strategic realignment as a commercial real estate bank within the 

German Cooperative Financial Services Network. 

The financial markets crisis is increasingly impeding worldwide money and capital movements and 

has caused the interbank and Pfandbrief markets to grind to a halt. This can be attributed to the 

huge loss in confidence among market participants, without which the money and capital markets 

cannot function properly. To an ever greater extent, the crisis is having an impact beyond the financial 

sector itself, causing a worldwide drop in economic growth. The commercial real estate markets 

have also been hit by this development, with a significant reduction in transaction volumes being 

recorded during the second half of 2008. 

Despite such difficult market conditions, we were able to increase new business in commercial real 

estate finance at home and abroad during the past financial year and achieved our operational 

goals. The fact that we are strongly anchored in the German Cooperative Financial Services Network, 

and thanks to our being integrated into DZ BANK’s group liquidity management, we remained 

able to fulfil our customers’ finance wishes during the second half of the year. 

As a result of the crisis on the financial markets, traditional lending business is gaining in importance, 

whilst complex capital market transactions are being pushed into the background. One effect 

of the crisis will be that lending will once again be viewed as a demanding and complex product 

area, and as a product that must come with a price – with the recognition that loans that 

cannot simply be produced in as high a quantity as possible, like a commodity. This requires a high 

degree of individual attention and quality in the form of responsibility and trust. 

2 Deutsche Genossenschafts-Hypothekenbank AG | Annual Report 2008

We successfully implemented our strategic realignment process during 2008, completing the associated 

restructuring measures more quickly than anticipated. By the middle of 2008 the commercial 

realignment, the new organisational structures in sales, the back office and in the services and support 

departments, as well as key personnel changes were all already in place. On the basis of solutions 

reached by mutual agreement with nearly all of the employees affected by redundancies, we 

had reached our target size of approximately 400 full-time employees by the year-end. Additionally, 

over the course of the second half of the year, we analysed our processes, structures and IT so 

that these could be optimised to generate further improvements in efficiency and to reduce their 

complexity. We will continue to pursue this aim as one of our priorities for 2009. 

Based on personnel changes and the rapid restructuring process, we were able to record a significant 

reduction in administrative expenses during the reporting period, thereby creating the necessary 

basic framework for a streamlined and commercially focused real estate bank. 

In order to bolster our market position, we will be further expanding our real estate centres 

and building up our team of employees with well-qualified staff who specialise in commercial real 

estate lending. For the purposes of training young up-and-coming employees in-house, we have 

developed a trainee programme that is geared specifically towards the Bank’s future requirements. 

The past year has not only shown that even the most difficult economic phases can offer attractive 

opportunities but has also demonstrated that DG HYP is a reliable partner during such periods in 

particular. This is why we are working intensively to support our partners with competitive products 

and a broad range of services, even during times of economic downturn in commercial real estate 

finance. We are looking forward to continuing along this successful path during the current financial 

year, and to further expanding our market position. 

The Management Board of DG HYP 

Hamburg, March 2009 


3

4 

DG HYP: THE COMMERCIAL REAL ESTATE BANK IN THE 

GERMAN COOPERATIVE FINANCIAL SERVICES NETWORK 

DZ BANK Group is part of the German Cooperative 

Financial Services Network, which comprises approximately 

1,230 individual cooperative banks. In terms of aggregate 

total assets, the cooperative banking sector ranks 

among the largest financial services organisations in Germany. 

With 30 million customers, of whom around 16 million 

are members of their bank, no other group in the 

world has such a broadly diversified ownership. Within the 

Cooperative Financial Services Network, DZ BANK AG acts 

as the central institution for around 1,000 cooperative 

banks with a total of 12,000 outlets. 

Combining banking services with insurance products 

and asset management has a long tradition within the German 

Cooperative Financial Services Network. The specialist 

institutions within the DZ BANK Group each offer highly 


competitive, first-rate products in their respective area of 

competence. This allows Germany’s cooperative banks to 

offer their customers an end-to-end range of excellent 

financial services. 

As a member of the DZ BANK Group, DG HYP is affiliated 

with Bausparkasse Schwäbisch Hall, DZ BANK International, 

DZ PRIVATBANK Switzerland, R+V Insurance, Team- 

Bank, Union Investment Group, VR LEASING, and various 

other specialist financial services providers. The various 

DZ BANK Group entities are the cornerstones of a comprehensive 

range of financial services offered to (and through) 

the German cooperative banking sector. Within this strong 

network, DZ BANK Group entities work together to optimise 

the products and services delivered to cooperative 

banks and their customers.

Management Report 

ECONOMIC ENVIRONMENT 


5

ECONOMIC ENVIRONMENT 

A financial markets crisis on a global scale 

The international financial markets crisis has taken 

everyone by surprise in terms of its sheer scale. The crisis 

was triggered in mid-2007 when problems with sub/prime 

loans arose in the USA against the background of rising 

interest rate levels there. The intensity of international links 

among banks meant that the crisis expanded across the 

world in the course of the reporting year, impeding the 

ability of the international financial markets to function 

properly. 

Europe was increasingly hard hit by the impact of the 

financial crisis from the middle of 2008 onwards. In order 

to stabilise the financial system, the international central 

banks injected the markets with substantial quantities of 

liquidity and reduced key interest rates over a series of rate 

cuts. 

In Germany, the Federal Government, in conjunction 

with the other European governments, agreed on a rescue 

package worth € 480 billion in the form of the German 

Financial Market Stabilisation Fund („SoFFin“) in mid-October. 

This Fund can extend guarantees of up to € 400 billion 

and can provide banks with equity capital support of 

up to € 80 billion. In taking this step, the German government 

is attempting to restore market participants’ confidence 

in each other. Banks will be able to receive guarantees 

for liabilities and equity capital allocations, and to have 

their risk positions assumed by SoFFin in exchange for debt 

instruments of the Federal Republic. 

During the year under review, fifteen banks availed 

themselves of this rescue package. It is our estimate that 

stabilising the capital markets and enabling them to function 

properly again are tasks that will take until well into 

2009. 

6 Deutsche Genossenschafts-Hypothekenbank AG | Annual Report 2008 


Economic downturn in the second half of 2008 

During the second half of 2008 the financial markets 

crisis picked up speed, spreading beyond the confines of 

the banking sector and hitting the economy as a whole. 

After two strong years, there was a clear dip in the state of 

the economy during the reporting year. As a result, leading 

economic researchers began, one after the other, to revise 

their GDP forecasts for 2008 downwards. Whilst the 

growth rate in 2007 was still 2.6%, the figure for 2008 

was just a mere 1.3% despite getting off to a good start in 

the first quarter due to the favourable weather conditions. 

A further fall in overall economic output is expected for 

2009. 

Against this background, in early November 2008 the 

Federal Government introduced a package of measures 

worth up to € 12 billion designed to strengthen the economy 

and safeguard jobs, stimulating investment of € 50 

billion over the next two years. This economic package is 

limited to fifteen specific measures that can be implemented 

in the short term but that will have a sound long-term 

impact. These include improved write-down conditions for 

companies, tax benefits for craft professions and the limited 

waiver of motor vehicle tax. The EU heads of government 

also agreed on a comprehensive package of economic 

measures in December with a view to harmonising the 

national programmes in the member states so as to avoid 

unfair competition. The overriding aim is to prevent Europe 

from sliding into a long and difficult recession as a result of 

the crisis on the financial markets. 

The highest level of employment since reunification 

was recorded on the German labour market during the 

year under review. It was only towards the year-end that 

signs of a fall began to emerge, with the cooling of the 

economy sparking a turnaround on the labour market too. 

The unemployment rate is expected to rise in 2009.


COMMERCIAL 

REAL ESTATE FINANCE 

Deutsche Genossenschafts-Hypothekenbank AG | Annual Report 2008 7

COMMERCIAL REAL ESTATE FINANCE 

Mixed fortunes on the German real estate market 

The volume of commercial real estate transactions fell 

significantly during 2008 after what had been a very good 

2007 in Germany. Whilst the level of market activity almost 

remained as high during the first quarter of the year, it only 

took until the spring for the visibly worsening financial crisis 

to impact on the number of deals being concluded. 

Activity failed to pick up again for the rest of the year. 

Instead, market activities almost collapsed completely. This 

meant that transactions in Germany during the reporting 

year only totalled some € 18 billion, compared with 

€ 55 billion during the previous year. Compared with the 

very strong 2007 in terms of sales, there was therefore a 

clear collapse in activity, although the figure recorded was 

only slightly below the long-term average. 

GROWTH OF OFFICE SPACE 

2.5 

2.0 

1.5 

1.0 

0.5 

% 



At a European level, there was also a marked fall in 

transaction volume. The trading volume amounted to only 

around 40% of the previous year’s level, whilst in Germany 

it was only about one third as high as in 2007. With the 

German market still having benefited to a disproportionate 

extent from the most recent upturn, the fall this time 

round was all the more dramatic. In some cases foreign 

investors withdrew from major projects due to a lack of 

viable finance options. Elsewhere, large-scale projects were 

simply cancelled due to the uncertain prospects for the 

economy as a whole. 

Hamburg Berlin Frankfurt / Main Munich 

Dusseldorf Stuttgart 

2007 2008 2009 

Hamburg 2007 0.6 2008 0.7 2009 1.0 

Hamburg Berlin 

0.2 0.6 0.8 0.7 0.5 1.0 

Berlin Frankfurt / Main 0.9 0.2 0.4 0.8 2.0 0.5 

Frankfurt Munich / Main 0.6 0.9 2.2 0.4 1.9 2.0 

Munich Dusseldorf 0.5 0.6 1.0 2.2 1.4 1.9 

Stuttgart 0.4 1.1 0.8 

2007 2008 2009 e 

2007 2008 2009 e 

Source: DZ BANK Research 

Please note that the charts and diagrams depicted do not constitute a part of the Management Report, for the purpose of the Financial Statements.


Differing market developments across the segments 

Up until the middle of the year it still looked as if retail 

properties would outperform office real estate in terms of 

transaction levels. However, retail properties once again 

took up second place behind office premises. During the 

reporting year, however, the difference in trading volumes 

in these sectors was only small, whilst the office segment 

had been nearly three times as big as the retail segment 

during 2007. Just under € 7 billion was invested in German 

office real estate in 2008. The figure for retail properties 

was one billion less. It was only the logistics and industrial 

real estate market segment that experienced a 

below-average decline, to € 1.6 billion, enabling it to 

increase its market share from 5 to 9% as a result. 

Still no rise in office property vacancy levels in 2008 

During the reporting period comparatively few new 

builds were completed in the major office locations, with 

the exception of Munich. At the same time, however, 

demand dipped towards the middle of the year as a result 

of the economy as a whole slowing down. Office property 

sales were therefore significantly down on 2007, which 

was an exceptional year. Nevertheless, in Munich and 

Frankfurt rents for office premises in prime locations rose 

slightly, whilst they stagnated in Berlin, Dusseldorf and 

Stuttgart. Despite the gloomy market situation, the vacancy 

rate for office premises in Hamburg and Munich 

remained unchanged, with Frankfurt, Berlin and Stuttgart 

actually recording a slight improvement. The prospects for 

this year are less good. Given that numerous construction 

projects will only be finished over the coming months in 

many areas, contributing to a further rise in supply at a 

time when demand is waning, we are expecting to see an 

increase in vacancy rates. 

Retail properties benefit from foreign demand 

The rents in the top segment increased in 2008 across 

all of the major German locations. The expansion in the 

available surface area lagged behind demand, largely due 

to the limited space available at prime locations. Despite 

this rise, rents for retail premises in Germany remained 

moderate by international standards, which again bolstered 

demand from abroad. Moreover, the share of rental 

space in Germany taken up by international chain store 

operators is still lower than on other markets. Given that 

these foreign chain operators generally do not move away 

to less favourable locations, the price difference between 

ideal and less ideal locations for retail real estate widened. 

Munich – still the most expensive location for retail 

properties in Germany – was able to record the best result 

of the major German locations with a rise of almost 7% in 

the rents paid for prime locations in 2008. The rises in rent 

levels recorded in Berlin, Dusseldorf and Frankfurt were 

only slightly smaller. Even in Stuttgart, there was a slight 

rise of 1% in rent levels, following a succession of falls over 

previous years. Vacancy levels, however, also rose in 

peripheral areas during the year under review. This is a 

trend that can also be expected to continue over the coming 

months. 

TRANSACTIONS INVOLVING 

RETAIL PROPERTIES 

€ bn 

20 

18 

16 

14 

12 

10 

8 

6 

4 

2 


6.6 


18.6 

11.5 

2005 2006 2007 2008 

5.9 

9

Logistics properties being pulled in the wake of the 

industrial sector 

The expansion in world trade lent momentum to the 

market for logistics properties during the first few months 

of the past financial year. As of the middle of the year, 

however, the economic down-turn and financing difficulties 

in relation to large-scale projects stifled demand. The 

sector’s strong dependence on the industrial sector, in 

which the business climate deteriorated over the course of 

the year, meant that investment in storage premises practically 

ground to a halt during the autumn. Consequently, 

the transaction volume was down on the previous year as 

in the other real estate sectors. The expansion in available 

space outside the conurbations meant that there was a fall 

in the average price payable in Germany for one square 

metre of storage space. 

TURNOVER OF STORAGE FACILITIES 

(thousand sq.m.) 

4,000 

3,500 

3,000 

2,500 

2,000 

1,500 

1,000 

500 

1,900 

900 

2,366 

1,210 

2,651 



The number of newly rented premises was in line with 

the previous year. In terms of this financial year, the volume 

of goods transportation can at best be expected to stagnate, 

with the result that prices and rent levels in the logistics 

sector will remain under pressure. 

An end to portfolio acquisitions in 

commercial housing 

The wave of ‘bulk buying’ by foreign investors ended 

once and for all in 2008. As a result, the number of residential 

units changing hands fell considerably compared 

with earlier years. Whilst slight price increases were generally 

still achievable in the conurbations in the case of new 

builds, prices stagnated in rural areas. Construction activity 

with regard to flats has been quite weak across Germany 

over previous years and this is likely to remain the case for 

the current year. Given that the number of households is 

rising in Germany again, the prices for newly completed 

homes look likely to remain stable. 

2003 


2004 2005 2006 2007 2008 

1,053 

3,230 

1,531 

3,883 

1,275 

3,600 

1,200 

Nationwide 

Conurbations


With regard to residential rents, the market was once 

again muted during the period under review. However, not 

least due to the good start to the year in terms of the economy 

as a whole, residential rent levels did rise slightly. In 

the main economic centres, this slightly positive development 

can be expected to continue due to the shortage of 

residential properties in the most popular locations. In contrast, 

rent levels can be expected to dip slightly in rural 

areas. 

International real estate markets 

Transaction volumes in numerous European countries 

shrank just as sharply as in Germany. In the UK, for example, 

a fall of almost one third was recorded. Yet the UK also 

recorded the largest trading volume in Europe in the commercial 

properties segment. On the UK office market and 

in the case of commercial properties, however, this was 

only possible through a fall in purchase prices with rising 

returns. France also recorded a rise in returns on the office 

market, whilst commercial properties stagnated. The 

RENT DEVELOPMENTS FOR NEWLY-BUILT FLATS 

Change (€/sq. m.) 

8 

6 

4 

2 

0 

-2 

-4 

-6 

-8 

Netherlands, meanwhile, was an exceptional case as far as 

European office markets were concerned, with purchase 

prices still tending slightly upwards in 2008. 

In the USA, where the global financial market crisis was 

triggered in mid-2007 by rising interest rates and the associated 

increase in the number of clients defaulting on subprime 

loans, it was not just the private residential markets 

that cooled but also the commercial real estate markets. 

Despite a weak level of construction activity, which scarcely 

increased the volume of office space available across the 

country, vacancy rates in this segment increased. The market’s 

low absorption of surface area was to blame, only 

reaching a quarter of the level recorded during the previous 

year. Despite the poor level of demand, rent increases 

were still possible in the case of US office properties. In 

terms of commercial properties, however, rents struggled 

to rise above the previous year’s level and had begun to dip 

before the end of the final quarter. 

2001 2002 2003 2004 2005 2006 2007 2008 

Berlin Dusseldorf Frankfurt / Main Hamburg Munich Stuttgart 



11

BUSINESS DEVELOPMENT IN 

COMMERCIAL REAL ESTATE FINANCE 

Business activities at home and abroad 

DG HYP’s commercial real estate finance activities 

encompass domestic direct and syndicated business, as 

well as activities as a partner to the cooperative banks 

within the German Cooperative Financial Services Network. 

With regard to domestic direct business, DG HYP 

focuses on the core segments of office, residential and 

retail. The Bank is also involved in the specialist segments 

of hotels and logistics as part of its credit risk strategy. In 

terms of foreign business, DG HYP operates primarily as a 

syndicate partner. DG HYP’s activities also include public 

finance and originated lending to local authorities. The 

Bank has developed a customised portfolio of commercial 

real estate finance services for the cooperative banks, 

which has been optimised as part of the Bank’s realignment 

process and will be further expanded in future. 

NEW COMMERCIAL REAL ESTATE 

FINANCE BUSINESS 

€ mn 

4,000 

3,000 

2,000 

1,000 

2005 

1,722 

2006 

1,974 

2007 

2,941 

2008 

3,766 



Good sales performance even under 

difficult conditions 

DG HYP continued its expansion course of recent years 

and, despite the difficult general economic conditions during 

the year under review, was once again able to achieve 

an increase both domestic and foreign business. Embedded 

within the German Cooperative Financial Services Network, 

the Bank’s strategy as a Pfandbrief bank and traditional 

provider of real estate finance proved its worth. At 

the same time, DG HYP also benefited from the fact that 

some of its competitors withdrew from the market. 

With six real estate centres in the country’s major cities, 

namely Hamburg, Berlin, Dusseldorf, Frankfurt, Stuttgart 

and Munich, DG HYP has a good decentralised set-up 

across Germany. Short decision-making channels, a high 

level of market penetration, as well as good networks on 

the market thanks to intensive contacts in the cooperative 

banking sector and direct customer business, ensure that 

DG HYP is a high-performance partner to direct customers 

and the German cooperative banks alike. 

Outside Germany, DG HYP has representative offices in 

New York and London, whilst its business in France and 

Scandinavia is dealt with through country desks. The 

Bank’s focus during 2008 was on the USA, the UK and 

France. During the second half of the year, DG HYP also 

began moving in to the Eastern European markets and for 

the first time wrote new business in Poland, working in 

close cooperation with DZ BANK Polska. In light of the positive 

business environment there, Poland is an important 

market within the Bank’s Eastern European strategy and 

one in which it will be expanding its activities in the 2009 

financial year.


Products tailored to the cooperative banking sector’s 

commercial real estate lending business 

DG HYP supports the some 1,230 cooperative banks in 

the Cooperative Financial Services Network in the area of 

commercial real estate finance by providing a tailored 

range of services that is expanded on an ongoing basis. It 

offers the cooperative banks syndicate finance from 

€ 3 million upwards in the form of its “Immo Meta” and 

„Immo-Meta-Reverse” products. Whilst the partner bank 

leading the syndicate is the customer’s first point of contact 

in the case of the Immo Meta product, the Immo-Meta- 

Reverse product is offered by DG HYP to the cooperative 

banks, through which they can participate in large-scale 

commercial real estate finance projects local to them. 

DG HYP has also developed the “Immo-Aval” standard 

loan products for commercial real estate finance covering 

amounts from € 0.5 to 3 million, and this will be offered 

within the Cooperative Financial Services Network from 

2009 onwards. 

In addition to the specialist range of products, DG HYP 

also offers the cooperative banks the opportunity of cooperation 

projects to exhaust the regional market potential 

for a joint market presence in commercial real estate 

finance. As the real estate bank within the Cooperative 

Financial Services Network, DG HYP, working together with 

the Federal Association of German Credit Unions and Rural 

Banking Cooperatives (BVR) and the cooperative associations, 

has developed a group rating system for commercial 

real estate finance. This is due to be introduced in 2009. 

1) Previous year’s figure included loan extensions 

Increase in volume of new business at home and 

abroad 

At € 3.8 billion, originated new business 1) Previous 

year’s figure included loan extensions in commercial real 

estate finance in the 2008 financial year exceeded the previous 

year’s level by 28% (2007: € 2.9 billion). The share of 

finance related to domestic direct and cooperative banking 

sector business increased from € 2.1 billion in the previous 

year to € 2.4 billion in the 2008 financial year. A gratifying 

development was recorded with regard to foreign and secondary 

market business, where the volume of new business 

was up 55% on the previous year to reach € 1.3 billion 

(2007: € 865 million). 

Despite the fact the market environment clouded over 

during the second half of the year, DG HYP was still able to 

notch up new business in its domestic and foreign markets 

through to the year-end. New commitments at home and 

abroad were entered into on the basis of a conservative risk 

assessment of the individual transactions, taking due 

account of the basic economic conditions on the respective 

market. The fact that the financing options on the market 

as a whole remain limited enabled DG HYP to enter into 

selected transactions with an improved risk and reward 

profile. This is clearly reflected in the rise in margins for 

new business. 


13

TREASURY 


Management Report


LOANS TO LOCAL AUTHORITIES AND 

PUBLIC-SECTOR LENDING 

Originated loans to local authorities were initially 

affected by a fall in demand from the public sector. In the 

first half of the 2008 in particular, the improved financial 

situation of local authorities meant that there was less 

PORTFOLIO OF ORIGINATED LOANS 

TO LOCAL AUTHORITIES 

€ mn 

1,592 

1,933 

77 

1.400 

Bremen 

North Rhine- 

Westphalia 

Hesse 

Rhineland- 

Palatinate 

1,542 

329 

Saarland 

424 

Schleswig-Holstein 

Mecklenburg-Western 

Pomerania 

Hamburg 

Lower Saxony 

1,060 

137 

1,776 

Baden- 

Württemberg 

82 

262 

Brandenburg 

Berlin 

209 

Saxony-Anhalt 

Thuringia 

Bavaria 

271 

Saxony 

€ bn 

Local authorities / municipalities / cities 8.46 

Special public-sector administrative unions / administrative districts / 2.64 

companies under a public-sector guarantee 

Total originated loans to local authorities 11.10 

31 Dec 2008 

demand for finance. During the second six months, the 

impact of the financial markets crisis changed the pricing 

structure for the provision of liquidity for public financing 

projects and, as a result, stifled business activity in this segment 

further. 

Through its involvement in originated lending to local 

authorities, DG HYP supports the banks within the cooperative 

sector in terms of their market positioning. This 

makes DG HYP a competent point of contact for these 

banks with regard to the financing of local authority projects 

– provided, of course, that an adequate margin is generated 

for the Bank. 

In this environment the volume of new business, at 

€ 750 million, was down, as expected (-57% year-onyear). 

With the change in market circumstances also affecting 

public financing tenders, DG HYP was able to impose 

higher margins on the market, particularly during the second 

half of 2008. 

A similar scenario emerged with regard to securitised 

public financing business. The strategic direction of this 

area of business was adapted in line with the volatile market 

environment and lower margins. Overall, this implies a 

reduction of securities portfolios taking into account a profitability-oriented 

approach to new business. In line with this 

strategy, the volume of new business in securitised public 

finance fell by 62% year-on-year to € 2.1 billion. 


15

REFINANCING 

The German Pfandbrief – a highly secure refinancing 

tool 

The German Pfandbrief continued to enjoy its reputation 

as a stable and particularly secure refinancing tool during 

the year under review. This is based first and foremost 

on the statutory provisions of the German Pfandbrief Act, 

which provides a high degree of investor protection. There 

has not been a single case of a German Pfandbrief failing 

during the product’s 200-year history. Against this background, 

the Federal Government also felt that it was not 

necessary to explicitly include the Pfandbrief in the Financial 

Market Stabilisation Act (FMStG) adopted in October 

2008. 

Even if a Pfandbrief issuer should become insolvent, the 

cover assets held by the Pfandbrief bank are exclusively 

available to the Pfandbrief creditors for the purposes of 

satisfying their claims. From the investors’ perspective, a 

crucial aspect is, therefore, the intrinsic value of the cover 

assets. To ensure that these assets are of the highest possible 

quality, in addition to the provisions of the Pfandbrief 

Act, the Mortgage Lending Value Ordinance, for example, 

also sets out further conditions for determining the value 

of mortgage cover assets. These stringent statutory 

requirements and the priority right of recourse to the cover 

assets enjoyed by the Pfandbrief creditors provide investors 

with a particularly high degree of protection. 

Pfandbrief sales impaired by financial market crisis 

Due to its high security standards, the German Pfandbrief 

was in demand among investors as a financing tool 

during the first six months of the reporting year particularly 

as the financial market crisis spread to and took hold in 

Europe. Pfandbrief sales rose by 25% during the first half 

of 2008 compared with the same period of the previous 

year. Yet as the financial market crisis intensified the Pfandbrief 

market was also hit by distortions, with its ability to 

function properly still not being fully restored by the end of 

2008. 



The Pfandbrief market is expected to pick up again in 

2009. Meanwhile, their experiences of the financial markets 

crisis have made investors more aware of potential 

problems. As a result, in addition to considering the product 

itself, future investors will be increasingly scrutinising 

the quality and structure of the cover assets and the risk 

management approach of the Pfandbrief bank in question. 

DG HYP is in a good position to deal with such scrutiny, 

which means that there is a good basic framework in place 

for ongoing refinancing. 

Good placement opportunities create scope for 

sound refinancing base 

Despite the difficult market environment, DG HYP was 

able to raise funding of € 7.9 billion. In line with the Bank’s 

strategy, mortgage bonds in the covered segment totalled 

€ 2.5 billion, with public-sector covered bonds totalling 

€ 0.6 billion. Unsecured refinancing involved the sale of 

bearer bonds and the taking up of promissory note loans 

totalling € 4.8 billion. The good placement opportunities 

open to DG HYP meant that the Bank enjoyed a solid refinancing 

base even when faced with a difficult year on the 

capital market. The financial market crisis has only had a 

minor impact on professional investors and private customers’ 

attitude to Pfandbrief products. The volume of 

outstanding Pfandbriefe from both cover pools at the end 

of the reporting year was € 51 billion.


SPECIAL PORTFOLIO 


SPECIAL PORTFOLIO 

Successive reduction of the special portfolio 

In line with its new business strategy and the strategic 

realignment, DG HYP ceased to take on new lending business 

in the area of private real estate finance – providing 

finance for residential property to retail customers, effective 

1 January 2008. As a result, new private construction 

financing business is to be transferred within the DZ BANK 

Group to Bausparkasse Schwäbisch Hall. The existing business 

will remain with DG HYP; exposures not exceeding 

€ 500,000 will be serviced by VR Kreditwerk AG in accordance 

with section 25a of the German Banking Act. With 

effect from 1 October 2008, VR Kreditwerk AG will provide 

these processing services through its Mannheim-based 

subsidiary Kreditwerk Hypotheken Management GmbH. 

Loan portfolios to be kept within the 

Cooperative Financial Services Network 

Within the special portfolio, the loan portfolio that no 

longer comprises DG HYP’s target business will be 

processed and gradually reduced. The special portfolio primarily 

comprises retail business in the area of finance for 

residential property. As at 31 December 2008, DG HYP’s 

portfolio included some 159,000 retail customers accounting 

for a volume of approximately € 12.7 billion. 



The aim, within the process of prolongation of loans, is 

to transfer as many loans as possible at interest maturity to 

the cooperative banks that arranged the business, and to 

Bausparkasse Schwäbisch Hall. Additionally, the business 

shall be processed as lean and efficient as possible. At the 

request of the cooperative banks concerned, DG HYP in 

2008 began transferring back the retail portfolios that the 

banks had arranged. A first portfolio transfer was successfully 

concluded at the end of 2008. Further cooperative 

banks have expressed an interest in this move, with the 

result that further transfers can be expected in the 2009 

financial year. 

In addition to retail business in the area of residential 

real estate finance, within the special portfolio the NPL 

portfolio and the non-strategic commercial real estate 

lending business, representing a volume of € 2 billion, are 

also being processed. The latter comprises small-scale commercial 

lending and the residual portfolios from agricultural 

lending business. DG HYP ceased actively pursuing agricultural 

lending business back in 2003.


STRATEGIC REALIGNMENT 


STRATEGIC REALIGNMENT 

Realignment of DG HYP successfully concluded 

DG HYP successfully implemented its strategic realignment 

in its capacity as a commercial real estate bank during 

the 2008 financial year. In terms of its business strategy, 

DGH HYP has placed the focus on commercial real 

estate lending business in Germany and abroad. As 

planned, residential real estate business in the retail banking 

sector was no longer pursued with effect from 1 January 

2008. Existing loan portfolios relating to private real 

estate finance will continue to be maintained by DG HYP. 

Where loans are due to be extended, the customers will be 

given the opportunity of having their loans extended by 

the respective cooperative bank, or by Bausparkasse 

Schwäbisch Hall. Where preferred by the cooperative 

banks in question, DG HYP will transfer the loans that they 

arranged back to them en bloc. The first portfolio transfer 

took place during the reporting year with further transfers 

scheduled for 2009. 

Optimisation of internal processes 

and organisational structures 

DG HYP had already begun with the rapid implementation 

of its reorganisation during the first half of 2008. 

Processes and organisational structures in sales, the back 

office and in the various staff departments have been 

DG HYP‘S STRATEGIC POSITION 

Originated 

German 

Business 

DG HYP 

Commercial real estate bank 

Commercial Real Estate Finance 

International 

and Secondary 

Market Business 



geared towards the new business model. The Bank’s personnel 

capacity has also been reduced. In addition, the 

Bank’s main sources of non-personnel costs – such as infrastructure 

and IT – have been optimised. This task also 

extended to comprehensive outsourcing activities. Implementation 

of these measures had already led to a marked 

reduction in personnel and non-personnel costs by the end 

of 2008. 

With regard to 2009, the further optimisation of the 

way in which the Bank is aligned on its new business 

model will be one of the main tasks facing DG HYP. With 

regard to activities in the domestic direct and cooperative 

banking sector markets, as well as in foreign and secondary 

market business, the expansion of sales capacity and 

sales management, as well as ongoing process optimisation 

in relation to the front and back office activities, will 

be the main priorities during the current financial year. 

The realignment of the Bank and the measures that 

have already been successfully put in place mean that 

DG HYP has created the prerequisites for growth in its 

capacity as a commercial real estate bank. DG HYP will 

consistently continue to pursue the route embarked upon 

during the year under review. 

Cooperative 

Sector Sales 

Local Authority 

Lending, 

Public Finance, 

Treasury


FINANCIAL SITUATION 

AND RESULTS OF OPERATIONS 


FINANCIAL SITUATION AND RESULTS OF OPERATIONS 

Financial situation 

Following the changes to the Bank’s business model, 

DG HYP’s total assets fell as planned during the 2008 

financial year, down by 8.8% to € 76.0 billion. 

The real estate loan portfolio developed in line with the 

Bank’s strategy overall, down by 3.2% to € 21.8 billion. 

The increase of € 1.7 billion in the commercial real estate 

loan portfolio was more than offset by a planned reduction 

of € 2.1 billion in the portfolio for private real estate lending 

business. 

At the same time, the public finance and local authority 

lending portfolio was cut by € 2.6 billion due to a fall 

in demand from the public sector and as a result of our 

investment strategy being focused to a greater extent on 

profitability. Reflecting a change in the intention to hold, 

DEVELOPMENT OF LENDING VOLUME 



DG HYP reclassified a securities portfolio worth € 4.7 billion 

from the liquidity reserve to fixed assets. 

We basically suspended any investments in mortgagebacked 

securities (MBS) from the middle of 2007 onwards 

as the first problems with sub-prime loans in the USA 

began to emerge. During the year under review, only the 

cancellation of an MBS transaction with an opportunity 

and risk lever led to a risk-neutral increase in the portfolio. 

Taking into account scheduled repayments, the MBS portfolio, 

at € 4.0 billion, was approx. € 0.4 billion lower than 

in the previous year. 

Overall, our lending portfolio was therefore reduced 

in line with our strategy by a total of € 3.7 billion to 

€ 70.9 billion. 

Change from the previous year 

€ mn 31 Dec 2008 31 Dec 2007 € mn % 

Real estate lending 21,774 22,499 – 725 – 3.2 

MBS 

Public-sector and 

4,016 4,387 – 371 – 8.5 

local authority loans 45,151 47,775 – 2,624 – 5.5 

Total portfolio 70,941 74,661 – 3,720 – 5.0 

The volume of DG HYP Pfandbriefe outstanding during 

the 2008 financial year was marked by the Bank’s new 

strategic direction. In the same way as the loan portfolio, the 

volume of outstanding mortgage Pfandbriefe was reduced 

by € 2.0 billion overall to € 13.9 billion (with € 4.5 billion 

falling due). In parallel to the low level of new business in the 

public finance sector, the volume of public-sector covered 

bonds outstanding fell by € 5.2 billion to € 39.1 billion. 

Maturities totalling € 5.7 billion contrasted with only a low 

level of new issues for the refinancing of local authority lending 

business. At the same time, there was a rise in the volume 

of uncovered other bonds in circulation, up by 

€ 1.8 billion to € 9.0 billion, due to the reclassification of 

securities which were transferred from the liquidity reserve 

to fixed assets. Overall, the distorted movements on the 

Pfandbrief market did not have a material impact on our refinancing 

opportunities, not least due to the Bank’s integration 

in the German Cooperative Financial Services Network. 

Own funds and risk-weighted assets 

DG HYP’s own funds for regulatory purposes are 

reported in accordance with the requirements of the German 

Banking Act, as last amended with effect from 1 January 

2007, and pursuant to the terms of the Solvency Ordinance 

which fleshes out the detail of the Banking Act. The 

internal rating-based approach (IRBA) is applied to this 

reporting. 

In accordance with the Solvency Ordinance, aggregate 

own funds for solvency purposes total € 1,733 million. The 

fall of € 221 million compared with the previous year is 

due to subordinated capital falling due, and to greater 

account being taken of deductible items in accordance 

with section 10 (6a) no. 3 of the German Banking Act.


OWN FUNDS FOR SOLVENCY PURPOSES 

€ mn 31 Dec 2008 31 Dec 2007 

Core capital 1,243 1,314 

Supplementary capital 490 640 

Total capital 1,733 1,954 

During the 2008 financial year, the German Federal 

Financial Supervisory Authority (BaFin) confirmed three further 

rating systems as suitable with regard to the internal 

rating-based approach (IRBA). There was a further fall in 

the risk-weighted items after these systems had been 

applied: 

RISK-WEIGHTED ASSETS ACCORDING TO THE SOLVABILITY ORDINANCE 

(SOLVV – BASEL II) AS OF 31 DEC 2008 


Counterparty risk (total) 16,349 19,775 

- Credit Risk Standard Approach 1,702 6,475 

- Internal Rating-Based Approach (IRBA) 14,647 13,300 

Total currency position 50 18 

Operational risk 

Transitory capital adequacy requirements 

518 525 

in accordance with section 339 of the SolvV 0 388 

Total portfolio 16,917 20,706 

The weighted amounts for the individual risk assets 

according to the Solvency Ordinance totalling € 16.9 mil- 

REGULATORY INDICATORS 

lion on the balance sheet date were € 3.8 million lower 

than the previous year’s figure. 


Total capital ratio 10.2 9.4 

Core capital (Tier 1) ratio 7.3 6.3 


23

RESULTS OF OPERATIONS 

The restructuring of DG HYP and the implementation 

of the new business model progressed according to plan 

during the 2008 financial year. The discernible successes 

notched up in new business and in the key income and 

expenditure items confirm that our decision to embark on 

a process of strategic realignment was the right one. At the 

same time, however, the Bank’s result for the year is still 

affected by extraordinary factors from the ongoing crisis on 

the financial markets and the knock-on effects of restructuring. 

Gross profit 

Against this background, gross profit, as expected, was 

down from € 273.1 million to € 174.0 million. This fall can 

be attributed in particular to the fact that DG HYP purposely 

avoided structural measures during the 2008 financial 

year that were used the year before to stabilise interest 

income levels. Adjusted to take account of these effects, 

interest income was in line with the Bank’s expectations, 

approximately 5 per cent down on the previous year. 

At the same time, net commission income, at 

€ 1.5 million, showed an improvement of € 37.7 million 

on the previous year. This reflects the key effects of our 

new business model. Whilst commission expenses for the 

procurement of private real estate finance ceased to be 

incurred with the abolition of the relevant division, there 

was a rise in commission income generated by the issuing 

of guarantees and service fees in the core area of commercial 

real estate finance. Furthermore, issue commissions 

were down due to the lower funding requirement. 

Costs development 

Administrative expenses, at € 129.8 million during the 

reporting period, were 23.3% down on the previous year’s 

figure of € 169.0 million. This fall can be attributed to our 

consistent restructuring and redimensioning of DG HYP. 

The savings relate to all of the key expense items. In addition 

to the 17% reduction in personnel expenses to 

€ 47 million and the drop of € 17.8 million (or 52.1%) in 

processing costs for private real estate lending, particular 

mention should be made of the fall in legal, auditing and 

consultancy expenses, which were cut by € 6.7 million to 

€ 6.4 million. 



Provisions for loan losses 

Based on our cautious risk policy, provisions for loans 

losses were cut further, from € 68.2 million in 2007 to 

€ 61.5 million during the reporting period. This marks the 

successful continuation of the downward trend of the past 

few years. 

Valuations/impact of the financial market crisis 

In contrast, the ongoing liquidity squeeze and crisis of 

confidence on the financial markets had a negative impact 

on DG HYP’s earnings in 2008. The direct and indirect 

consequences are reflected in our revaluation losses of 

€ 111.3 million. These include valuation losses of 

€ 25.8 million for securities held in the liquidity reserve. 

These temporary valuation adjustments are mostly due to 

the widening of credit spreads in response to the liquidity 

situation. Additionally, long-term write-downs of 

€ 47.1 million were also recorded with regard to some 

mortgage-backed securities. Unsecured bank and government-issued 

papers also required a write-down of 

€ 48.5 million. 

Extraordinary restructuring expenses 

As part of the restructuring of DG HYP, the Bank’s main 

sources of non-personnel costs – such as infrastructure and 

IT – were further optimised during the 2008 financial year. 

The sale and lease-back transactions for the Bank’s headquarters 

in Rosenstrasse and a further rented property, 

which have been in existence since 2003/04, were 

unwound. The repurchase of this building at market prices 

resulted in extraordinary expenses of € 24.8 million. Implementation 

of these measures also resulted in a significant 

reduction in personnel and non-personnel costs. Moreover, 

restructuring provisions in conjunction with personnel 

measures and consultancy services totalling € 11.6 million 

were included in the category of extraordinary expenses. 

Extraordinary contribution to income 

On the basis of the existing profit and loss transfer 

agreement, the notable burdens on income during the current 

period were compensated for by DZ BANK, in the 

form of an extraordinary contribution to income that was 

unchanged on the previous year, at € 223 million. 

DZ BANK has thus further underscored its readiness to 

provide support for DG HYP’s consistent restructuring 

program.


Net income 

During the reporting year € 153.8 million of silent partnership 

contributions that had fallen due were repaid. 

DG HYP – also as a result of the lower interest rate level – 

transferred a partial profit of € 57.7 million, down 

€ 17.8 million, to its silent partners, with the result that the 

Bank reported a balanced result overall. 

OVERVIEW OF THE PROFIT AND LOSS ACCOUNT 

Change from the previous year 

€ mn 2008 2007 € mn % 

Net interest income 163.0 297.9 – 134.9 – 45.3 

Net commission result 1.5 – 36.2 37.7 104.1 

Other operating income 9.5 11.4 – 1.9 – 16.7 

Gross profit 174.0 273.1 – 99.1 – 36.3 

Administrative expenses 129.8 169.0 – 39.2 – 23.2 

Provisions for loan losses – 61.5 – 68.2 6.7 9.8 

Revaluation results – 111.3 – 121.4 10.1 8.3 

Operating profit – 128.6 – 85.5 – 43.1 – 50.4 

Net extraordinary income/expenses 186.6 147.8 38.8 26.3 

Taxes 0.3 – 13.2 13.5 102.3 

Partial profit transfer 57.7 75.5 – 17.8 – 23.6 

Net income 0.0 0.0 0.0 0.0 


25

RISK REPORT 


Management Report


RISK REPORT 

I) Risk management – objectives and organisation 

a) Objectives of risk management 

DG HYP’s risk management process is geared towards 

exploiting the business potential within the scope of the 

bank’s capacity to carry and sustain risk, emphasising profitability. 

Within this context, we aim to optimise the 

risk/return profile of the lending business, with respect to 

individual transactions as well as within the framework of 

active management of the entire portfolio. The individual 

types of risk in the lending and securities business are standardised 

to permit comparison, in order to provide a basis 

on which capital allocation throughout the entire bank is 

managed, with an emphasis on risk and return. 

b) Responsibilities 

The regulatory organisational requirements and the 

allocation of risk management responsibilities are set out, 

in particular, in the Minimum Requirements for Risk Management 

(Mindestanforderungen an das Risikomanagement 

- MaRisk). DG HYP meets these requirements, adapting 

its relevant processes to the specific needs of its 

business model. DG HYP has also developed and implemented 

risk management and risk controlling systems that 

take into account market and competitive requirements. 

This forms the basis that ensures the proper operation and 

efficiency of the risk management process. 

Management Board.All members of the Management 

Board are jointly responsible for risk management at 

DG HYP. The Management Board determines the risk policy 

with regard to defining the business and risk strategies, 

determining the types of business pursued and the scope 

of the justifiable overall risk level, in line with the bank’s 

capacity to carry and sustain risk. 

Risk/Return Management Committee. The 

Risk/Return Management Committee is responsible for 

managing the risks facing the entire bank at portfolio level 

and for equity allocation. As well as including the members 

of the Management Board, the Committee also comprises 

the heads of Finance and Treasury. 

Credit Committee. The Credit Committee is responsible 

for managing and monitoring all of DG HYP’s credit 

risks. It comprises the entire Management Board and the 

heads of Front Office Credit, Back Office Credit and Controlling. 

The Credit Committee deals with strategic issues 

regarding the bank’s lending business. These include, in 

particular, the credit risk strategy, current risk events and 

risk provisioning, credit portfolio management and income 

optimisation as well as credit workflow optimisation. 

Risks and Participations Committee of the Supervisory 

Board. This Committee is responsible for decisionmaking 

regarding those loan exposures, portfolio transactions 

and participating interests that – in line with the 

Internal Rules of Procedure – do not fall within the remit of 

the Management Board. In addition, the Lending and Participations 

Committee of the Supervisory Board deals with risk 

management, and the overall bank strategy according to the 

minimum requirements for risk management (MaRisk). 

Audit Committee of the Supervisory Board. The 

Audit Committee is responsible for supervisory issues in 

relation to accounting, the internal monitoring system and 

the requisite independence of the auditor of the financial 

statements. 

Supervisory Board.The entire Supervisory Board 

decides on the acquisition or disposal of participating interests 

in the event of changes exceeding € 500,000 in the 

carrying amount of such interests, as well as on the establishment 

or disposal of business lines, establishing branches 

and representative offices, the internal rules of procedure 

of the Management Board, the business distribution 

plan, and on material issues related to loans or participations 

that are not explicitly assigned to the Risk and Participations 

Committee of the Supervisory Board. 

c) Functions 

Risk Planning. Planning, as a bank-wide exercise, 

comprises the planning of income and costs, as well as the 

risks associated with DG HYP’s individual business activities. 

Based on the strategic business orientation as part of 

a five-year plan, the bank carries out operative planning on 

an annual basis. Within this planning process, risk limits 

and earnings projections are determined on the basis of 

the Bank’s capacity to carry and sustain risk. 

Risk management. As part of the credit risk strategy 

defined by the committees detailed above, the back office 

together with Credit Risk Controlling is responsible for 

managing the risk of counterparty default at an individual 

exposure level and controlling risks at a portfolio level. This 

involves both the implementation of rules as part of the 

credit risk strategy as well as the active management and 

monitoring of counterparty risks in the context of the issuing 

and processing of loans. The early identification of risk 

potential in lending business and the intensive handling, 

restructuring and settlement of loan commitments are governed 

by strictly defined processes and control systems. 

The management of market and liquidity risks is the 

responsibility of Treasury, within the scope of asset/liability 

management. 


27

RISK MANAGEMENT – OBJECTIVES AND EXECUTIVE BODIES 

OBJECTIVES 

EXECUTIVE BODIES 

To manage the allocation of (risk) capital with a focus on risks and profitability 

Management 

Board 

Risk Controlling. The Controlling units are responsible 

for current reporting and – together with the respective 

risk management unit – for monitoring risk on a portfolio 

level. This comprises quantifying the risk exposure, monitoring 

the quality and accuracy of data relevant to the risk 

exposure, monitoring the limit utilisations, and risk reporting 

to the Management Board. For this purpose, Credit 

Risk Controlling prepares a MaRisk-compliant credit risk 

report on a quarterly basis outlining the key structural features 

of the lending business. The regular portfolio evaluations 

are used to recognise abnormalities in the portfolio at 

an early state, and counter these in good time if required. 

In addition, portfolio evaluations form the basis for the 

annual review of the credit risk strategy. 



To exploit the business potential within the scope of the Bank’s risk-bearing capacity, emphasising profitability 

To optimise the Bank’s risk / return profile 

Risk/Return 

Management 

Committee 

Credit 

Committee 

Risks and 

Participations 

Committee 

Supervisory 

Board 

Holds overall responsibility for risk management: determines the risk policy with regard to defining the business 

and risk strategies, determining the types of business pursued, and defining the justifiable overall risk level, 

in line with the Bank’s risk-bearing capacity. 

Management Board, plus the Heads of Finance, Treasury, and ASM (International and Secondary Market Business) 

> Managing the risks of the entire Bank at a portfolio level, as well as the allocation of capital. 

Management Board, plus the heads of front office and back office units 

> Managing the Bank’s overall credit risk exposure (including current risk exposures, risk provisioning, 

credit portfolio management, optimising profitability and credit processes) at single-exposure and portfolio 

level; allocating equity capital; defining the credit risk strategy. 

(a Supervisory Board committee) 

> Decisions regarding loan exposures, portfolio transactions and participating interests that – 

in line with the Internal Rules of Procedure – do not fall within the remit of the Management Board. 

> Decisions regarding the acquisition or disposal of participating interests in the event of changes exceeding ¤ 

€ 500,000 in the carrying amount of such interests, as well as on the establishment or disposal of business 

lines, establishing branches and representative offices, the internal rules of procedure of the Management 

Board, the business distribution plan, and on material issues related to loans or participations that are not 

explicitly assigned to the Risk and Participations Committee. 

A risk report for the Bank as a whole is drafted monthly, 

illustrating credit risks as well as market, operational and 

strategic risks. The measured risks are standardised for 

each risk type on the basis of a confidence level of 99.95% 

and a holding period of one year. The risk capital requirement 

calculated in this way for the Bank as a whole is then 

contrasted against DG HYP’s capacity to carry and sustain 

risk. The consideration of scenarios for all risk types and 

their impact on the Bank as a whole, as required by 

MaRisk, is regularly carried out, with the results being 

reported to the management/Supervisory Board.


Furthermore, Risk Controlling also carries out daily risk 

reporting on the market risks and existing liquidity risks to 

which DG HYP is exposed, in accordance with MaRisk. The 

key findings are regularly reported to the Supervisory 

Board, or to the Risk and Participations Committee of the 

Supervisory Board. 

Risks arising from investments in other companies are 

only of minor significance to DG HYP. 

Internal Audit. The internal audit examines whether 

the demands on the internal controlling systems, the risk 

management and controlling systems, and the necessary 

reporting, are adequately met. 

d) Basel II 

The new Basel Capital Accord (commonly referred to as 

“Basel II”), which came into force as of 1 January 2007 in 

the form of the Solvability Ordinance, is focused on securing 

the stability of the banking system and promoting 

banking supervision with greater qualitative focus. The 

core element of Basel II is greater risk-adjusted differentiation 

of the regulatory capital requirements for loans, 

depending on the credit quality of the borrower. 

DG HYP has implemented the Foundation Internal Rating 

Based Approach (FIRB) as part of Basel II. The acceptance 

audit for the first entry level of FIRB from 1 January 

2007 by the Bundesbank and the Bundesanstalt für Finanzdienstleistungsaufsicht 

(BaFin – the German Financial 

Supervisory Authority) took place in the autumn of 2006 

and was successfully completed, with confirmation of 

admission. Following a further audit in November 2007, 

BaFin confirmed the suitability of further rating systems 

and the supervisory reference point with effect from 1 July 

2008. This means that the coverage rate for IRBA item values 

and risk-weighted IRBA item values with appropriate 

risk systems is at least 80%. The exit threshold (92% coverage 

for IRBA positions and risk-weighted IRBA positions) 

is almost achieved at the current time with a level of just 

under 90%, although this is not actually required until 

2012. 

Developing our internal rating systems to implement 

the requirements of the Basel II Accord remains on schedule. 

All of the Basel II projects have been implemented in 

close coordination with the DZ BANK Group since 2003. 

The bank-wide Basel II projects are also implemented with 

the Federal Association of German Credit Unions and Rural 

Banking Cooperatives (Bundesverband der Deutschen 

Volksbanken und Raiffeisenbanken- (BVR) and the Association 

of German Pfandbrief Banks (Verband deutscher 

Pfandbriefbanken - vdp). 

All told, the regulations of the Basel Committee confirm 

our approach to a risk/return-oriented business and 

portfolio management. The FIRB admission and the ongoing 

further developments confirm the high performance of 

our risk management system. 

II) Counterparty risk 

Risk management in the real estate lending sector 

focuses on the risk of counterparty default. Counterparty 

risk denotes the risk that a business partner has defaulted 

on a major liability for more than 90 days, or can only repay 

liabilities by way of recourse to pledged collateral. Valuing 

the collateral is of particular importance due to the fact 

that real estate is involved. The management of counterparty 

default risk is conducted largely as follows: 

rating and portfolio-oriented management of new business 

and loan extensions; 

risk-oriented credit pricing; 

active portfolio management (constant portfolio monitoring 

and management); 

active management of problem loans (early warning 

process, intensified handling, restructuring and settlement). 

annual review of credit risk strategy. 

a) Lending process 

The front and back offices for commercial real estate 

finance in Germany are located in DG HYP’s Real Estate 

Centres. Key workflow stages include the credit rating, 

which is identified using rating systems that comply with 

Basel II, and also property and project assessments. In the 

latter case, DG HYP benefits from the proximity of its Real 

Estate Centres and surveyors – who are also decentralised 

– to its clients. Each lending decision requires a separate 

vote by the market unit as well as by the back-office unit. 

The loan application is authorised on the basis of lending 

volume and risk classification. The corresponding parameters 

are laid down in the credit and portfolio strategies. 

Credit analysis and the processing of foreign commitments, 

domestic secondary market transactions in the 

banking market and small-scale commercial commitments 

are dealt with centrally in Hamburg by specialist backoffice 

departments. 


29

With regard to capital market products, the existing 

portfolio of mortgage backed securities (MBS) is also 

looked after centrally in Hamburg by a specialist backoffice 

department. New business is not currently being pursued 

in this product area in the wake of the global financial 

markets crisis. 

b) Limit system 

DG HYP has a limit system in place to manage and 

monitor counterparty and country risks. This system calculates 

the utilisation of external limits (country risk limits in 

the DZ BANK Group, and default risks in accordance with 

section 13 of the KWG), setting internal limits for country 

and default risks simultaneously and independently of one 

another. The respective limits must be upheld and can be 

viewed at any time via an online system. 

During the back-office monitoring processes, the utilisation 

of the individual limits is monitored daily. If the limits 

are exceeded a process of escalation is induced, during 

which support is provided to ensure that the limit is 

returned to, and that suitable measures are implemented. 

Internal individual risk limits are identified depending 

on the individual counterparty risk of the business partner. 

Essentially, this is carried out in cooperation with the parent 

company DZ BANK, which calculates an individual VR 

rating per counterparty risk and makes this available to 

DG HYP. Additionally, as part of Group risk management, 

limits and ceilings on counterparty risks are taken into 

account, whilst an agreed traffic light system for the early 

detection of risks is also in place. 

c) Credit rating 

In order to take the particular demands on the commercial 

real estate lending business into account, DG HYP 

has developed (in cooperation with the central institutions 

of the German cooperative banking sector and BVR) and 

implemented a special Basel-II compliant rating system for 

specialised lending (SLRE – Specialised Lending Real 

Estate). These rating procedures apply to the following customer 

groups: real estate developers, residential property 

developers, development companies, closed-end funds, 

project developers and commercial real estate investors. 

The procedures underwent end-to-end validation, updates 

and optimisation during the period under review. An independent 

consultancy company has described the procedures 

as ‘state of the art’. Given this particularly high level 

of quality, the procedures will therefore also be rolled out 

in the cooperative banks in 2009 in the context of a rating 

desk solution. 



The calculated data forms the basis for the lending 

decision and pricing. The borrower’s rating in conjunction 

with the property’s ability to cover interest and principal 

repayments, is at the forefront of DG HYP’s forward-looking 

credit analysis. Also taken into account is the security 

situation and, where applicable, any existed intertwining of 

risks. 

For local authority lending, credit ratings are also estimated 

based on a rating method that complies with 

Basel II. DG HYP played a major role in developing the 

municipal rating system, particularly within the scope of a 

cooperative project where vdp joined forces with S&P Risk 

Solutions. We use the VR rating procedures implemented 

in DZ BANK within the framework of a ‘rating desk’ solution 

for the rating of sovereigns, banks and key accounts. 

As part of the implementation of Basel II, the review of 

loan exposure – including a rating update required under 

section 18 of the KWG – has been expanded for all customer 

categories registered for IRBA. In addition, monitoring 

documents are prepared regularly for exposures 

exceeding EUR 2.5 million per primary obligor group. The 

monitoring comprises the rating analysis and other customer 

records, an assessment of the current rental situation, 

and the tenant rating(s). The property or other collateral 

is revalued if deemed necessary. 

d) Management of problem loans 

DG HYP uses what is known as an individual risk management 

system for the purposes of early warning and the 

management of problem loans, this being used in a similar 

way at the parent company DZ BANK. Cases with early 

warning signs of a possible long-term negative development 

are assigned to a yellow list. Loans with regard to 

which a subsequent loss cannot be excluded are kept on a 

watch list. The loans included on this watch list are not 

subject to individual write-downs. Where there is clear 

negative trend, coupled with an existing requirement for 

risk provisioning in the form of individual value adjustments, 

the cases are included on the list of individual writedowns. 

The processing rules and requirements on the 

transfer from one ERM list to another are subject to 

defined criteria. 

Those problem credit exposures whose economic perspective 

can be assessed as positive are processed in the 

restructuring department, which forms part of the back 

office. Submitting a concept that must comprise a differentiated 

analysis and assessment of the overall situation of 

the exposure and a cost-benefit analysis, as well as a com-


prehensive restructuring plan, forms the basis for a restructuring 

decision. Loan exposures are transferred to workout 

if restructuring has failed or if this is deemed to be fruitless 

from the outset. 

Detailed reporting on ailing exposures is carried out 

quarterly. 

III) Market risks 

For us, the concept of ‘market risks’ comprises the risks 

associated with fluctuations in market prices (market risks 

in the narrower sense), and liquidity risk. Market price risk 

is the impact of interest rate fluctuations on the money and 

capital markets, and changes in exchange rates. Liquidity 

risk comprises the threat that DG HYP is unable to borrow 

the funds required to maintain payments, or the risk of 

only being able to do so at considerably less favourable 

terms. 

a) Risks associated with market price fluctuations 

DG HYP uses various hedging tools in its dynamic management 

of interest rate risk and currency risk for the bank 

as a whole. This consists mainly of macro hedge transactions 

employing interest-rate swaps and caps; options on 

interest-rate swaps (known as “swaptions”) are also concluded 

occasionally, albeit to a limited extent. In addition, 

a number of large-sized transactions, such as granting 

promissory note loans to institutional clients, are hedged 

regularly through micro hedges against the interest rate 

risk. Interest-rate swaps and swaptions are also used for 

this purpose. 

In order to quantify the bank’s market price risk exposure, 

DG HYP calculates VaR figures daily using a 

variance/co-variance procedure for all positions in each of 

the portfolios. This is done with due account being taken 

of the provisions of section 315 of the Solvency Ordinance 

with regard to internal risk models. 

RISK CAPITAL REQUIREMENTS 

The forecasting quality of our internal VaR model is 

checked daily. We apply the requirements of section 318 of 

the SolvV for this back-testing. 

Market Risk Controlling compares the projected 

changes in present value that are calculated according to 

these parameters, with the negative changes in present 

value that actually occur the following day. On this basis, 

we determine how often the actual negative changes in 

the present value exceeded the VaR figures in the risk 

model. The results from back-testing in 2008 confirm the 

quality of our calculations. 

Market Risk Controlling informs the Management 

Board (as well as the Treasury) on the day-to-day Treasury 

performance and utilisation of the VaR limit. The Management 

Board decides on the management of the risk structure 

for the entire bank at the regular meetings of the 

Risk/Return Management Committee. 

The impact of the sub-prime crisis also made itself felt 

in the development of the entire bank’s VaR during 2008. 

The overall positioning was relatively constant, and low in 

terms of the basis point value. However, the volatility 

surges during September 2008 in particular led to a substantial 

increase in VaR. 

In parallel, DG HYP reviewed and adapted its concept 

for managing market price risks during the year under 

review, adapting it to the new business model. In parallel, 

Treasury management was more strongly focused on managing 

profit and loss, taking into account the intent to hold 

investment securities permanently. The associated changes 

to the value-at-risk model led to a VaR reduction towards 

the year-end. 

Maximum Minimum Mean value Year-end value 

€ mn in 2008 in 2008 in 2008 2008 

Risk capital requirement, VaR, 1 year 

holding period, 99.95% confidence level 

497.6 165.7 390.1 285.5 


31

) Liquidity risks 

The bank’s liquidity situation is determined daily in line 

with the regulatory and daily business requirements. For 

this purpose, Market Risk Controlling provides Treasury 

with a differentiated overview on a daily basis, indicating 

future liquidity flows resulting from the individual positions 

in the portfolio. Additionally, at its meetings the 

Risk/Return Management Committee is provided with an 

overview of the short- and long-term liquidity projection. 

Liquidity is managed on the basis of this overview, with the 

RISK CAPITAL REQUIREMENTS 

BY TYPE OF RISK 

Credit risk 

Operational risks 

Business risks and 

strategic risks 

Market risk 

Credit risk 

% 

52 

Market risk 38 

Operational risks 5 

Business risks and strategic risks 5 

Total 100 

30 Dec 2008 



dual objectives of securing the Bank’s long-term liquidity 

and achieving compliance with the Liquidity Ordinance. 

A suitable liquidity controlling system is already in place 

in line with the requirements of Basel II for measuring and 

reporting on liquidity risk. On the basis of the short- and 

long-term liquidity projection, a limit system is implemented 

on a daily basis and integrated into the risk monitoring 

process. The results from the scenarios are fed into the risk 

analysis process. 

IV) Operational risks 

The Basel Committee defines operational risk as “the 

risk of direct or indirect losses resulting from inadequate or 

failed internal processes, people and systems, or from 

external events”. DG HYP has adopted this definition, 

albeit with marginal changes to detail in order to adjust it 

to the bank’s own special interests. According to the Basel 

II regulations, DG HYP has been subject to capital requirements 

for operational risks since 1 January 2007. DG HYP 

has adopted the standardised approach for quantification, 

and has notified BaFin accordingly. 

A system for collecting and recording loss data has 

already been in place since 2002. Incoming loss reports are 

collected systematically in a database arranged according 

to predefined categories: they are subsequently used as 

indicators for further improving the operating processes, 

and hence for reducing operational risks. 

In addition, all of DG HYP’s organisational units have 

regularly conducted self-assessments since 2004. Current 

risks are estimated using a standardised electronic questionnaire. 

In addition, Risk Controlling carries out continuous 

plausibility and consistency checks. 

In order to also be able to identify operational risks in 

good time, an early warning system regularly records various 

risk indicators (such as system failures, fraud, staff fluctuation). 

The agreed risk indicators and the collated reports 

are submitted anonymously within the scope of groupwide 

reporting to DZ BANK.


From an organisational perspective, DG HYP’s Controlling 

unit is responsible for measuring operational risks. It 

reports regularly on operational risk issues to DG HYP’s 

Management Board, and on the activities for further developing 

the quantification approach, within the scope of the 

Risk/Return Management Committee meetings. 

V) Strategic risks 

Strategic risks include the threat of losses arising from 

management decisions regarding DG HYP’s business policy. 

Strategic risks can also include long-term success factors in 

DG HYP’s environment. These include, for example, 

changes to the legal or corporate environment, changes to 

the market and competitive conditions, customers or refinancing 

partners. We also include planning and reputation 

risks in this risk category. 

In order to reduce planning risks, variance analyses are 

prepared as a basis for continuously reviewing planning 

data and assumptions. 

Reputation risk concerns direct or indirect losses 

incurred by the erosion of DG HYP’s reputation among 

shareholders, staff, customers, business partners and the 

general public. All activities and events that can affect the 

Bank’s reputation are identified in both the Corporate 

Development, Organisation and IT units, and in the market 

units concerned. They are evaluated in close cooperation 

with the Management Board, in order to mitigate their 

impact as early as possible. 

DG HYP generally uses, amongst other things, investment 

calculations and projections, business plans including 

scenario-based simulations, cost/benefit analyses, and risk 

analyses as the basis for strategic decisions, in order to 

identify and minimise strategic risks. In addition, all decision 

proposals submitted that may involve or induce strategic 

risks include a statement by the responsible organisational 

unit on the risk content, which is taken into account 

in the resolution passed. 

Given that, as a rule, strategic risks are subject to very 

complex and irregular factual connections, they cannot be 

included in an integrated system as special risks. They are 

therefore specially monitored by the Management Board; 

they are also monitored and continuously analysed by the 

respective individual organisational units responsible. The 

regular review of business unit strategies is also a core element 

of the continuous process of business unit planning 

and control. 


33

34 

OUR STAFF 


Management Report


OUR STAFF 

Job and personnel planning reworked 

As part of the strategic realignment of DG HYP, the 

Bank’s personnel planning has also been overhauled in line 

with the changed requirements. A settlement of conflicting 

interests and a social plan have been agreed. The planning 

horizon for the medium-term job and personnel plans has 

been set as 31 December 2012. Measures will be gradually 

implemented by then, and the social plan will also 

remain in force until this date. The jobs plan involved a 

reduction in personnel to 445.6 full-time equivalents by 

31 December 2008. This reduction in numbers has been 

implemented in the Retail division and in the staff departments 

in particular. 

On 31 March 2008 – immediately before the conclusion 

of the settlement of conflicting interests and the introduction 

of the personnel measures – DG HYP employed 

518 active members of staff (equating to 493.7 FTEs). By 

31 December 2008, this figure had been reduced to 

419 employees (404.4 FTEs) through termination agreements 

and the use of a small number of redundancies for 

operational reasons. This meant that the target of 

445.6 FTEs by the year-end was not just achieved but actually 

exceeded as a result of the rapid and successful restructuring 

process. 

Over the final few weeks of the reporting year DG HYP 

further stepped up its efforts to acquire skilled employees 

for its core business and for credit risk analysis activities 

with regard to foreign markets. 

Internal communication concept successfully 

implemented 

Implementation of the new jobs and personnel plan 

was accompanied by intensive communications work and 

change management measures. DG HYP kept its staff up 

to date on progress made in relation to the “Aufbruch 

2008” (Re-positioning 2008) project and with regard to 

the next stages in the process. This created transparency 

with regard to the process itself and the need for the 

changes being introduced. Workshops were also staged at 

which managers were prepared for the change processes 

and given appropriate training. In this way, DG HYP succeeded 

in presenting the arguments for the changes to its 

middle management and employees. 

The fact that the labour market was very absorbent 

through until the third quarter of the reporting year meant 

that those employees who left the Bank were able to enter 

new employment relatively quickly. The outplacement 

advice provided within the context of the social plan was 

also helpful in this regard. 

Following the complete separation from VR Kreditwerk 

AG, the workforce elected a new works council in December 

2008, now only composed of eleven members. The 

Management Board has taken the new election as an 

opportunity to thank all of the members of the Works 

Council for their constructive contribution to the Bank’s 

reorganisation during the past financial year. 

Thanks must also go to the employees of DG HYP who 

were forced to take on many changes during the restructuring 

phase and who, thanks to their ongoing dedication 

and commitment, guaranteed a smooth transition. In this 

way our employees have helped to ensure that DG HYP 

could successfully move forwards and capture new business. 


35

REPORT ON EVENTS AFTER THE 

BALANCE SHEET DATE AND FORECAST 


Management Report


REPORT ON EVENTS AFTER THE BALANCE SHEET DATE 

AND FORECAST 

Report on material events after the reporting date 

Events after 31 December 2008 

No events occurred between 1 January and 10 February 

2009 that would have had a material impact on our 

2008 results. 

Report on expected developments 

Cautionary forward-looking statement 

The forecast and other parts of the Annual Report 

include expectations and forecasts that relate to the future. 

These forward-looking statements, in particular regarding 

DG HYP’s business and earnings growth, are based on 

forecasts and assumptions, and are subject to risks and 

uncertainties. As a result, the actual results may differ 

materially from those currently forecast. There are a large 

number of factors that impact on our business, and which 

are beyond our control. These factors primarily include 

changes to the general economic situation, the competitive 

situation and developments on the national and international 

real estate and capital markets. In addition, results 

can be impacted by possible defaults by borrowers or other 

risks, some of which are discussed in detail in the risk 

report. 

In this regard, it must be pointed out that, at the time 

of writing, there is major uncertainty surrounding the 

development of the capital and real estate markets over 

the rest of 2009. What does appear to be certain is that it 

will take until well into 2009 for the Pfandbrief and interbank 

markets to become fully functional again. The extent 

of the economic downturn and the related negative impact 

on the real estate markets are all the subject of very different 

assessments. 

Anticipated business development 

In implementing its restructuring, DG HYP has ensured 

that its business strategy and organisational approach are 

geared towards the future developments and needs of the 

market. DG HYP’s strategy, with its focus on traditional balance-sheet 

real estate lending business and based on a 

strong anchoring in the cooperative banking sector, has 

proven its worth. Despite the increasingly difficult liquidity 

situation as a result of the crisis of confidence on the market, 

we were able to position ourselves at the year-end as 

a strong, well-functioning provider of commercial real 

estate finance. Whilst DG HYP was still able to enter into 

new business during the fourth quarter thanks to the allocation 

of liquidity via the DZ BANK Group, some of its competitors 

were forced to withdraw from the market. In this 

way, the Bank has proved itself to be a reliable provider of 

commercial real estate finance for its new and existing customers 

alike in Germany and abroad even in difficult times. 

From this position, we are confident that we can 

achieve our goals. Looking to 2009, we expect to see 

greater growth in new business in our domestic and foreign 

markets. As a centre of excellence within the German 

Cooperative Financial Services Network, we will be further 

developing customised commercial real estate finance 

products and services for the cooperative banks and supporting 

them as they present themselves on the market 

and tap into regional potential. 

Our commercial real estate financing expertise, our network 

in the German cooperative banking sector and the 

expansion of our international activities form solid foundations 

for a high-performance real estate bank focused on 

the commercial real estate sector. 


37

Earnings forecast 

DG HYP recognised at an early stage the need for a 

new strategic direction in a market environment that has 

grown increasingly difficult for all credit institutions and 

implemented a viable business model during the 2008 

financial year. As part of this process we have looked intensively 

at the changing market conditions in the wake of the 

financial market crisis and, on this basis, geared our 

growth targets to the expected level of market potential. 

The successful implementation of the new business 

model will be reflected in a clear improvement in our operating 

result before the end of 2009, resulting in a tangible 

reduction in the required contribution from income from 

DZ BANK. We anticipate sustained positive results from 

2010 following the conclusion of the reorientation process. 

We also expect the fall-out from the current financial crisis 

to have been largely dealt with by the end of the 2009 

financial year. 

The predicted level of interest income for 2009 is some 

13 per cent above that of the 2008 financial year, due to 

the less marked impact of earlier structural measures and 

the rising margins from new business from 2007 and 

2008. The successive increase in the volume of commercial 

real estate financing will be reflected in a constant increase 

in net interest income in the following financial years. This 

forecast is based on the margins that can currently be 

realised on the market. 



The improvement in the net commission result already 

recorded during 2008 will be maintained on the basis of 

the new business model. 

The organisational restructuring and redimensioning of 

DG HYP was successfully concluded in 2008. We have 

therefore laid the foundation for a greatly improved cost 

structure, which we will further optimise as we continue 

our efforts to reduce our non-strategic lending portfolio. 

With the focus on commercial real estate finance, foreign 

business with professional clients, alongside domestic 

business, will have a long-term role to play. The risk measurement 

system in place is appropriate for the risks associated 

with our business model and will be developed further 

on an ongoing basis. Against this background, despite 

our cautious business policy, our risk position will also 

increase over the years to come as our business volumes 

rise. We have taken due account of this with regard to provisioning 

for loan losses. 

Overall, it is our view that our decision to embark on a 

new strategy has been proved correct: we firmly believe in 

the long-term profitability of our business model with the 

turnaround in 2010. These strategic objectives are based 

on the first signs of a calming on the financial markets 

emerging during the second half of 2009, accompanied by 

a renewed upturn on the Pfandbrief market.

FINANCIAL STATEMENTS 

Financial Statements 

Page 

Balance as at 31 December 2008 41 

Profit and Loss Account 

for the period from 1 January to 31 December 2008 47 

Notes to the Financial Statements 

General Notes 53 

Notes to the Balance Sheet 55 

Notes to the Profit and Loss Account 67 

Cash flow statement 68 

Coverage 69 

Other information 

on the annual financial statements 75 


39

BALANCE SHEET 

AS AT 31 DECEMBER 2008 


41

ASSETS 

BALANCE SHEET 

31 Dec 2007 

€ 000’s Note # € 000’s € 000’s € 000’s 

Cash funds 54,795 33,309 

a) Cash on hand 9 16 

b) Balances with central banks 54,786 33,293 

of which: with Deutsche Bundesbank 54,786 (33,293) 

Loans and advances to banks (4) 4,327,010 7,174,567 

a) Loans secured by property mortgages 133,221 159,096 

b) Loans to local authorities 2,647,235 4,319,910 

c) Other loans and advances 1,546,554 2,695,561 

of which: Payable on demand 140,819 (156,880) 

Loans and advances to customers (4) 39,089,815 40,763,277 

a) Loans secured by property mortgages 21,641,134 22,339,652 

b) Loans to local authorities 16,573,506 17,817,321 

c) Other loans and advances 875,175 606,304 

Debt securities and other fixed-income securities (7) 31,290,214 34,202,704 

a) Bonds and debt securities (30,162,724) (33,835,301) 

aa) Public-sector issuers 12,606,762 16,322,450 

of which: Securities eligible as collateral 

with Deutsche Bundesbank 11,810,615 (15,222,425) 

ab) Other issuers 17,555,962 17,512,851 

of which: Securities eligible as collateral 

with Deutsche Bundesbank 14,208,211 (13,419,322) 

b) Own bonds issued 1,127,490 367,403 

Nominal amount 1,125,943 (365,294) 

Equities and other non-fixed income securities (7) 1,316 2,042 

Participations (7) 167 726 

Investments in affiliated companies (7) 2,569 2,044 

Trust assets (6) 696,499 685,666 

of which: Trustee loans 663,789 (652,956) 

Intangible fixed assets (7) 543 10,188 

Tangible fixed assets (7) 153,589 2,997 

Other assets (22) 241,757 268,148 

Prepaid expenses (9) 157,601 189,626 

a) From new issues and lending 156,685 188,719 

b) Other 916 907 

Total assets 76,015,875 83,335,294

AS AT 31 DECEMBER 2008 

LIABILITIES AND EQUITY 

31 Dec 2007 

€ 000’s Note # € 000’s € 000’s € 000’s 

Liabilities to banks (12) 10,006,152 11,930,167 

a) Outstanding registered mortgage bonds 

(Hypotheken-Namenspfandbriefe) 772,769 784,936 

b) Outstanding registered public sector covered bonds 

(öffentliche Namenspfandbriefe) 2,099,194 2,550,288 

c) Other liabilities 7,134,189 8,594,943 

of which: Payable on demand 306,427 (1,408,867) 

Registered mortgage bonds 2 (3) 

and registered public-sector covered bonds 3,281 (9,833) 

surrendered to lenders as collateral for borrowings 

Liabilities to customers (12) 17,000,069 17,127,557 

a) Outstanding registered mortgage bonds 

(Hypotheken-Namenspfandbriefe) 2,606,015 2,685,224 

b) Outstanding registered public sector covered bonds 

(öffentliche Namenspfandbriefe) 11,207,081 11,126,050 

c) Other liabilities 3,186,973 3,316,283 

of which: Payable on demand 391,505 (345,984) 

Registered mortgage bonds 5,113 (5,113) 

and registered public-sector covered bonds 7,113 (9,669) 

surrendered to lenders as collateral for borrowings 

Securitised liabilities (12) 45,392,241 50,349,525 

Bonds issued 

a) Mortgage bonds (Hypothekenpfandbriefe) 10,535,048 12,430,851 

b) Public-sector covered bonds (öffentliche Pfandbriefe) 25,819,136 30,686,292 

c) Other debt securities 9,038,057 7,232,382 

Trust liabilities (6) 696,499 685,666 

of which: Trustee loans 663,789 (652,956) 

Other liabilities (23) 110,927 119,802 

Deferred income (9) 121,817 129,797 

a) From new issues and lending 121,740 129,704 

b) Other 77 93 

Provisions 111,142 114,218 

a) Provisions for pensions and similar obligations 71,086 69,702 

b) Provisions for taxes 734 767 

c) Other provisions 39,322 43,749 

Subordinated liabilities (13) 619,926 731,899 

Profit-participation certificates (14) 109,928 145,718 

of which: Due within two years 53,686 (89,476) 

Shareholders’ equity 1,847,174 2,000,945 

a) Subscribed capital (15) (1,164,916) (1,318,687) 

aa) Share capital 90,000 90,000 

ab) Silent partnership contributions 1,074,916 1,228,687 

b) Capital reserves (16) 589,113 589,113 

c) Retained earnings (16) (93,145) (93,145) 

ca) Legal reserves 945 945 

cb) Other retained earnings 92,200 92,200 

Total equity and liabilities 76,015,875 83,335,294 

Contingent liabilities (17) 

Liabilities from guarantees and indemnity agreements 470,357 1,575,437 

Other commitments 

Irrevocable loan commitments 1,946,311 2,067,839

PROFIT AND LOSS ACCOUNT 

FOR THE PERIOD FROM 1 JANUARY TO 31 DECEMBER 2008 


47

PROFIT AND LOSS ACCOUNT 

FOR THE PERIOD FROM 1 JANUARY TO 31 DECEMBER 2008 

2007 

€ 000’s Note # € 000’s € 000’s € 000’s 

Interest income from 

a) Lending and money market transactions 2,227,730 2,437,958 

b) Fixed-income securities and debt register claims 1,519,397 1,587,143 

3,747,127 4,025,101 

Interest expense 3,584,187 3,728,335 

162,940 296,766 

Current income from 

equities and other non-fixed-income securities 62 79 

Income from profit-pooling, profit transfer, 

and partial profit transfer agreements 0 1,087 

Commission income 28,356 20,242 

Commission expenses 26,844 56,425 

Net commission result 1,512 – 36,183 

Other operating income 

General administrative expenses 

a) Personnel expenses 

(26) 9,458 11,415 

aa) Wages and salaries 

ab) Compulsory social security contributions and 

35,936 44,096 

expenses for pensions and other employee benefits 10,769 11,822 

46,705 55,918 

of which: Pension expenses 6,122 (6,074) 

b) Other administrative expenses 69,920 104,193 

116,625 160,111 

Amortisation/depreciation and write-downs of 

intangible and tangible fixed assets 10,579 7,410 

Other operating expenses (27) 2,607 1,547 

Amortisation and write-downs of loans 

and advances and specific securities, 

as well as additions to loan loss provisions 87,318 131,113 

Amortisation and write-downs on participations, 

interests in affiliated companies, 

and investment securities 85,463 58,475 

Result from ordinary activities – 128,620 – 85,492 

Extraordinary income (28) 223,000 237,000 

Extraordinary expenses (29) 36,424 89,146 

Net extraordinary income/expenses 186,576 147,854 

Taxes on income 

Other taxes not disclosed under 

(30) 267 – 13,172 

“Other operating expenses” 0 – 1 

267 – 13,173 

Profits transferred under 

partial profit transfer agreements 57,689 75,535 

Net income 0 0


NOTES TO THE FINANCIAL STATEMENTS 

General notes 

(1) General information on the preparation of financial 

statements 

The financial statements of DG HYP for the financial 

year 2008 have been prepared in accordance with the provisions 

of the German Commercial Code (Handelsgesetzbuch 

– “HGB”) and the provisions of the German 

Accounting Directive for Banks (Verordnung über die Rechnungslegung 

der Kreditinstitute – “RechKredV”). At the 

same time, the financial statements fulfil the requirements 

of the German Public Limited Companies Act (Aktiengesetz 

– “AktG”) and the German Pfandbrief Act (Pfandbriefgesetz 

– “PfandBG”). 

Given the non-materiality of all subsidiaries, in accordance 

with section 296 (2) of the HGB, the company has 

not prepared consolidated financial statements. 

All amounts have been quoted in euros, in accordance 

with section 244 of the HGB. 

(2) Accounting policies 

Loans and advances to banks/to customers 

Loans and advances to banks and customers are recognised 

at nominal value, in accordance with section 340e (2) 

of the HGB. Where their stated value of the loans differs 

from the amount disbursed, or cost, the amount of the difference 

is reported under prepaid expenses/deferred 

income and amortised in interest income over the term of 

the transaction. 

Loans and advances which are fully classified as current 

assets are valued strictly at the lower of cost or market. All 

existing individual lending risks are covered by specific loan 

loss provisions. Existing risks of default in the retail lending 

business are covered by recognising specific provisions at a 

flat rate. We have formed a tax-deductible general loan 

loss provision to cover expected loan losses which have 

been incurred but not identified as such at the balance 

sheet date. 

Early repayment penalties charged for loan repayments 

or extensions during the fixed-interest term of a loan are 

fully recognised in interest income. With regard to interest 

claims, we no longer recognise interest income where it 

becomes obvious during execution proceedings that the 

realisable proceeds will fall short of the carrying amount. 

Debt securities and other fixed-income securities 

At the balance sheet date, all debt securities and other 

fixed-income securities are carried as fixed assets (invest- 

ment securities), at amortised cost, except repurchased 

own issues which are valued strictly at the lower of cost or 

market. Premiums and discounts are amortised in net interest 

income over the term of the securities. 

At the balance sheet date, the fair value of investment 

securities was € 85 million higher than their book value. 

The fixed-income securities of the investment portfolio are 

grouped with interest rate hedges (swaps), to establish 

hedging relationships. The accounting of hedging relationships 

and the effectiveness test are both performed on 

portfolio level. Taking these hedges into account, we did 

not recognise an extraordinary write-down in the amount 

of € 997 million for investment securities due to the 

expected temporary nature of the impairment, pursuant to 

section 253 (2) sentence 3 of the HGB. Based on our current 

assessment, no impairment of interest and principal 

payments is expected to occur with respect to these securities. 

In contrast, extraordinary write-downs pursuant to section 

253 (2) sentence 3 of the HGB were required due to 

an expected permanent impairment of government and 

bank bonds (write-down of € 49 million) and mortgagebacked 

securities (MBS; write-down of € 47 million). 

To ensure a uniform measurement within the DZ BANK 

Group, price data used to determine the fair value of debt 

securities and other fixed-income securities as at the 2008 

balance sheet date was taken from a DZ BANK price feed 

for the first time. As a result of the lacking validity of market 

values in view of increasingly illiquid markets and 

applying a valuation model complying with generally 

accepted accounting principles, future cash flows from 

interest and principal were projected and discounted to 

their present value, using market interest rates in line with 

the risks and maturities concerned, and applying adequate 

liquidity yield add-ons (discounted cash flow method). 

Yield add-ons to reflect risk and liquidity were determined 

on the basis of most recent values observed on an active 

market, taking into account current market developments. 

Given the illiquid market for mortgage-backed securities, 

the liquidity yield add-ons for a portfolio in the amount of 

€ 4.0 billion were derived from still liquid bond markets. 

Valuation parameters for all other securities were derived 

from market prices and rates prevailing on the 2008 balance 

sheet date. 

Participations and interests in affiliated companies 

Participations and interests in affiliated companies are 

carried at amortised cost. 


53

Intangible and tangible fixed assets 

Tangible fixed assets are carried at cost less regular 

depreciation, where applicable. In the year under review, a 

write-down to the lower going concern value under German 

tax laws (Teilwert) was recognised for the building in 

Rosenstrasse 2, Hamburg. Movable tangible fixed assets 

are predominantly depreciated on a straight-line basis, 

using the maximum rates permissible under tax laws, or 

based on the declining-balance method with a subsequent 

transfer to straight-line depreciation. Low-value assets are 

written off in full during their year of purchase. Standard 

software is reported under intangible assets, as prescribed 

by accounting standard HFA 11 issued by the Main Committee 

of the IDW (IDW RS HFA 11). As a result of the 

change of the business model, write-downs in the amount 

of € 6.5 million had to be recognised for a securitisation 

software and a capitalised expected economic benefit due 

to the resulting impairment. 

Liabilities 

Liabilities are shown on the balance sheet at the 

amount due for repayment. The difference between the 

nominal value and the initial carrying amount of liabilities is 

recognised under deferred items and amortised over the 

term of the transaction. 

Liabilities classified as structured products (as defined in 

Accounting Practice Statement BFA 1.003 issued by the 

Banking Committee of the IdW) are accounted for as uniform 

liabilities as they only contain embedded interest rate 

derivatives. Such liabilities are grouped with corresponding 

hedge transactions, to establish hedging relationships. 

The partial profits to be paid for silent partnership contributions 

are carried in their full amount. 

Provisions 

Contingent liabilities are covered by provisions 

equalling the anticipated amount of the liability, on the 

basis of prudent business judgement. Provisions for pensions 

are determined using the cost (“Teilwert”) method in 

accordance with actuarial principles, using the actuarial 

tables 2005 G by Dr. Klaus Heubeck. The imputed rate used 

for discounting was 4.5 per cent. 



Derivative financial instruments 

Financial derivatives are accounted for separately in 

auxiliary ledgers. These instruments are generally used to 

hedge the interest rate and currency risk exposure of onbalance 

sheet transactions. Current interest payments are 

amortised and recorded in net interest income. 

Income from the disposal (close-out) of interest ratebased 

derivative financial instruments is generally recognised 

in interest income. Where interest rate swaps are 

grouped with securities, to establish hedging relationships 

(asset swaps), income realised upon closing out swaps are 

recognised in line with the recognition of income of the 

underlying transaction, in the net result on financial assets, 

or in the net risk provisioning balance, respectively. 

Premiums paid or received for credit default swaps are 

amortised in commission income over the terms of the 

transactions. 

Premium payments for swaptions entered into as a 

hedge against the impact of statutory loan termination 

rights pursuant to section 489 of the German Civil Code 

(Bürgerliches Gesetzbuch - „BGB“) are allocated to the 

investment portfolio and carried at cost. 

(3) Currency translation 

Assets and liabilities from foreign exchange transactions 

are translated in line with section 340h of the HGB and 

Statement BFA 3/1995 issued by the IdW. Book receivables, 

securities, liabilities and unsettled spot transactions are 

generally translated using the ECB reference rate prevailing 

on the balance sheet date. Income and expenses from currency 

translation are recognised in the income statement in 

accordance with section 340h of the HGB. Income and 

expenses from foreign exchange forwards, which were 

entered into exclusively for the purpose of hedging interestbearing 

balance sheet items, are recognised in interest 

income.


Notes to the balance sheet 

(4) Lending business 

Principal Carrying amount 

Mortgage loans € mn € mn 

to banks 132 133 

to customers 21,331 21,641 

Total 21,463 21,774 

Portfolio development (principal) € mn € mn 

Balance at 31 Dec 2007 22,297 

Additions during the financial year 2008 2,817 

Disbursements 2,807 

Transfers 9 

Other additions 1 

Disposals during the financial year 2008 3,651 

Scheduled repayments 2,054 

Unscheduled repayments 1,563 

Transfers 9 

Other disposals 25 

Balance at 31 Dec 2008 21,463 

Principal Carrying amount 

Loans to local authorities € mn € mn 

to banks 2,597 2,647 


Total 18,910 19,221 

Portfolio development (principal) € mn € mn 

Balance at 31 Dec 2007 21,801 

Additions during the financial year 2008 1,245 

Disbursements 1,220 

Transfers – 

Other additions 25 

Disposals during the financial year 2008 4,136 

Scheduled repayments 3,349 

Unscheduled repayments 787 

Transfers – 

Other disposals – 

Balance at 31 Dec 2008 18,910 


55

(5) Negotiable securities 



Balance sheet item Listed Unlisted Amount of negotiable 

securities not valued at 

the lower of cost or market 

31 Dec 2008 31 Dec 2007 31 Dec 2008 31 Dec 2007 31 Dec 2008 31 Dec 2007 

€ 000’s € 000’s € 000’s € 000’s € 000’s € 000’s 

Debt securities 

and other fixed- 

income securities 29,150,767 32,446,678 2,139,447 1,756,026 9,746,437 17,571,028 

Equities and 

other non-fixed 

income securities – – 1,316 2,042 – – 

(6) Trust business 

31 Dec 2008 31 Dec 2007 

€ 000’s € 000’s 

Assets held in trust comprise: 

– Loans and advances to customers 663,789 652,956 

– Participations 32,710 32,710 

696,499 685,666 

Trust liabilities are carried vis-á-vis: 

– Banks 602,434 577,044 

– Customers 94,065 108,622 

696,499 685,666


(7) Breakdown of, and statement of changes in fixed assets 

I. Intangible 

Purchase or production cost Depreciation and amortisation Carrying amounts 

1 Jan 2008 Additions Reclassi- Disposals Financial Reclassi- Disposals Total 

fications year fications 31 Dec 2008 1 Jan 2008 

€ 000’s € 000’s € 000’s € 000’s € 000’s € 000’s € 000’s € 000’s € 000’s € 000’s 

assets 48,362 354 0 6,948 9,930 0 6,879 41,225 543 10,188 

II. Tangible 

fixed assets 

1. Land and 

buildings 881 174,366 0 303 22,3851) 0 0 22,436 152,5082) 2. Office furniture 

and 

830 

equipment 3) 23,442 134 0 3,984 649 0 3,413 18,511 1,081 2,167 

24,323 174,500 0 4,287 23,034 0 3,413 40,947 153,589 2,997 

Net change 

III. Financial assets 

1. Participations 

2. Investments in 

affiliated 

2,853 – 2,686 167 726 

companies 

3. Equities and 

other non-fixed 

income 

2,044 525 2,569 2,044 

securities 

4. Investment 

2,042 -726 1,316 2,042 

securities 29,416,007 746,717 30,162,724 29,823,585 

1) The extraordinary write-down on the building in Rosenstrasse, amounting to € 22.4 million, is reported in extraordinary expenses. 

2) Owner-occupied properties: € 62 million; used by third parties: € 90.5 million. 

3) Fully used for the bank’s own operations. 


57

(8) List of investments pursuant to sections 285 no. 11 and 340a of the HGB 



Minimum stake of 20 % Equity interest Shareholders’ equity Result 2007 

Name/Sitz % € 000’s € 000’s 

Landschaftliche 

Grundstücksgesellschaft mbH, Kiel 100.0 800 750 *) 

VR WERT Gesellschaft für 

Immobilienbewertungen mbH, Hamburg 100.0 100 221 *) 

IMMOFORI Gesellschaft für Immobilien 

Forderungsinkasso mbH, Hamburg 100.0 1,000 15 *) 

VR HYP GmbH, Hamburg 100.0 25 0 

VR REAL ESTATE GmbH, Hamburg 100.0 25 – 1 

TXS Financial Products GmbH, Ellerau 26.0 100 199 

*) Profit and loss transfer agreement with DG HYP 

(9) Prepaid expenses and deferred income 

Prepaid expenses 

Sub-item a) From new issues 

and lending comprises: 


€ 000’s € 000’s 

– Difference between the nominal amount 

and the higher disbursement amount 

of receivables 16,212 21,815 


and the lower issuing amount 

of liabilities 94,585 124,073 

Deferred income 

Sub-item a) From new issues 

and lending comprises: 


and the lower disbursement amount 

of loans and advances 47,836 48,972


(10) Open-market transactions 


€ 000’s € 000’s 

Open-market transactions entered into with 

Deutschen Bundesbank 3,609,689 3,445,302 

(11) Securities repurchase agreements 

There were no securities repurchase agreements on the balance sheet date. 

(12) Breakdown of, and statement of changes 

in debt securities and borrowed funds 

Carrying 

Principal amount 

€ mn € mn 

Registered mortgage bonds 

to banks 753 773 


Mortgage bonds 10,294 10,535 

13,601 13,914 

Registered public-sector covered bonds 

to banks 2,060 2,099 


Public-sector covered bonds 25,316 25,819 

38,324 39,125 

Other debt securities 8,898 9,038 

Borrowed funds 

from banks 1,438 1,460 

from customers 2,701 2,777 

4,139 4,237 

Total 64,962 66,314 

Development (principal) 

Balance on Additions Disposals Balance on 

31 Dec 2007 31 Dec 2008 

€ mn € mn € mn € mn 

Mortgage bonds and 

registered mortgage bonds 15,537 2,518 4,454 13,601 

Public-sector covered bonds 

and registered public-sector covered bonds 43,449 603 5,728 38,324 

Other debt securities 7,124 4,151 2,377 8,898 

Borrowed funds 4,350 706 917 4,139 

Total 70,460 7,978 13,476 64,962 


59

(13) Subordinated liabilities 




€ 000’s € 000’s 

Subordinated 

other debt securities 160,000 160,000 

borrowed funds 459,926 571,899 

619,926 731,899 

Expenses incurred 38,778 42,547 

On the basis of the requirements of section 10 (5a) of the German Banking Act (Kreditwesengesetz or „KWG“), an amount of 

€ 436,305 thousand is included as modified available capital for solvency purposes. Early repayment obligations are not provided 

for in all cases. There are no provisions or plans for a conversion of such funds to capital, or into another form of debt. 

Subordinated liabilities carry an average interest of 5.4 per cent, and have original maturities of between 9 and 20 years. 

Disclosures on subordinated liabilities amounting to 10.0 per cent or more of the aggregate amount of subordinated liabilities: 

(14) Profit-participation certificates 

Amount Currency Coupon Maturity 

€ mn % 

100.0 EUR 4.27 7 Dec 2015 

100.0 EUR 4.63 23 Nov 2016 

90.0 EUR 5.52 23 Jan 2017 

Issuer Year of issue Amount Coupon Repayment* 

€ mn % 

DG HYP 1993 51.1 7.25 11 Jun 2009 




109.9 

* The term of profit-participation certificates ends on 31 December of the preceding year. 

An amount of € 56.2 million of the profit-participation certificates represent supplementary capital pursuant to section 10 (5) of 

the KWG. The holders of profit-participation certificates receive an annual distribution in the amount of the respective coupon, 

which takes precedence over the profit entitlements of shareholders.


(15) Subscribed capital 


€ 000’s € 000’s 

Issued share capital 90,000 90,000 

Silent partnership contributions 1,074,916 1,228,687 

Total 1,164,916 1,318,687 

The issued share capital amounts to € 90,000,000 and is divided into 3,500,000 notional no-par value shares (“unit shares”). 

DZ PB-Beteiligungsgesellschaft mbH, Frankfurt/Main holds 3,321,500 shares (94.9 per cent), of which 1,131,320 shares are held in 

trust on behalf of DZ PB-Beteiligungsgesellschaft mbH by other entities. The remaining 178,500 shares (5.1 per cent) are held by 

DZ BANK Deutsche Zentral-Genossenschaftsbank AG, Frankfurt/Main. 

The silent partnership contributions are partial profit transfer agreements within the meaning of section 292 (1) no. 2 of the AktG. 

Of the silent partnership contributions, € 635.0 million are unlimited, and € 635.0 million comply with the provisions of section 

10 (4) of the KWG on the balance sheet date. 

(16) Breakdown of, and statement of changes in reserves 

Balance on Additions Disposals Balance on 

31 Dec 2007 31 Dec 2008 

€ 000’s € 000’s € 000’s € 000’s 

Capital reserve 589,113 – – 589,113 

Retained earnings (93,145) – – (93,145) 

– Legal reserves 945 – – 945 

– Other retained earnings 92,200 – – 92,200 

Total 682,258 – – 682,258 

(17) Contingent liabilities 

This item mainly includes guarantees extended to other banks for commercial real estate loans. 

(18) Revaluation reserves 

No revaluation reserves pursuant to section 10 (2b) sentence 1 no. 6 of the KWG were included in liable capital. 


61

(19) Relationships with affiliated enterprises and subsidiaries 

Affiliated enterprises 




€ 000’s € 000’s 

Loans and advances to 

– banks 358,657 1,894,356 

– customers 25,263 26,705 

Debt securities and other 

fixed-income securities 1,107,437 – 

Liabilities to 

– banks 3,546,299 5,332,527 

– customers 1,066,530 1,093,785 

Securitised liabilities 10,772,339 9,827,240 

Subordinated liabilities 308,271 315,940 

Subsidiaries 

There were no loans and advances, or liabilities, to subsidiaries at the reporting date.


(20) Breakdown of maturities for receivables and liabilities 


€ 000’s € 000’s 

Assets 

Loans and advances to banks 

Remaining term – payable on demand 140,819 156,880 

– up to three months 1,710,814 3,082,615 

– between three months and one year 579,085 1,205,302 

– between one year and five years 993,448 1,224,482 

– more than five years 902,844 1,505,288 

4,327,010 7,174,567 

Loans and advances to customers 



– between three months and one year 2,139,258 1,937,588 

– between one year and five years 10,908,450 9,962,649 

– more than five years 24,327,991 26,905,536 

39,089,815 40,763,277 

Bonds and other fixed-income 

securities maturing 

in the following year 3,747,569 2,698,058 

Liabilities 

Liabilities to banks 

Remaining term – payable on demand 306,427 1,408,867 


– between three months and one year 340,504 1,837,746 



10,006,152 11,930,167 

Liabilities to customers 


– up to three months 577,443 744,077 

– between three months and one year 921,643 545,268 



17,000,069 17,127,557 

Certificated liabilities maturing 

in the following year 9,936,095 12,700,569 


63

(21) Assets and liabilities in foreign currencies 




€ 000’s € 000’s 

Assets include foreign-currency receivables 

in the total amount of 1,086,768 1,959,083 

Liabilities and equity include foreign-currency liabilities 

in the total amount of 1,151,696 2,116,297 

(22) Other assets 

Other assets include loans and advances to fiscal entity subsidiaries in the amount of € 224.6 million as well as interest 

rate options with a carrying amount of € 10.2 million. 

(23) Other liabilities 

This item includes mainly € 58.4 million in profits to be transferred under partial profit transfer agreements.


(24) Forward contracts not reflected in the balance sheet 

The following types of forward transactions based on foreign currencies, interest rates or other underlying instruments 

were outstanding as at the balance sheet date: 

Nominal amounts by Fair value 

residual term Total 2008 2007 

€ mn _< 1 year > 1–5 yrs > 5 yrs 2008 2007 positive negative positive negative 

Interest rate instruments 24,453 56,758 73,975 155,186 174,478 2,909 4,496 1,991 3,229 

OTC products 

Interest rate swaps*) 23,859 56,609 73,975 154,443 173,122 2,831 4,490 1,928 3,225 

including: Forward swaps – 179 229 408 404 6 28 2 15 

including: With embedded 

caps/floors 143 70 51 264 264 3 18 2 12 

including: With embedded 

puts/calls 10 100 510 620 498 14 20 12 7 

Interest rate options 594 149 – 743 1,356 78 6 63 4 

including: Swaptions bought 594 139 – 733 1,312 78 – 63 – 

including: Swaptions sold – 10 – 10 44 – 6 – 4 

Exchange-traded products – – – – – – – – – 

Currency-related instruments 86 2,827 614 3,527 2,283 496 102 179 7 

Cross-currency swaps 86 2,827 614 3,527 2,283 496 102 179 7 

Foreign exchange forwards – – – – – – – – – 

Foreign exchange swaps – – – – – – – – – 

Credit-related transactions – 1,150 928 2,078 2,414 30 125 64 4 

Credit default swaps – 1,150 568 1,718 2,075 10 2 14 4 

including: Protection seller – 172 8 180 198 – – – – 

including: Protection buyer – 978 560 1,538 1,877 10 2 14 4 

Total Return Swaps – – 360 360 340 20 123 50 0 

including: Protection seller – – 360 360 340 20 123 50 0 

including: Protection buyer – – – – – – – – – 

Forward transactions exposed 

to other price risks – – – – – – – – – 

Total 24,539 60,735 75,517 160,791 179,176 3,435 4,723 2,234 3,240 

Of which part of hedging relationships with investment securities**). 14 1,096 510 332 

*) Including interest rate swaps with identical foreign currency. 

**) The negative market value of € 1,082 million is included in the write-downs which were not recognized in accordance with section 253 (2) sentence 3 of 

the HGB (as mentioned in Note (2)). 


65



The breakdown of the carrying amounts of forward contracts not reflected on the balance sheet by balance sheet items pursuant to 

section 285 sentence 1 no. 18 b) of the HGB is as follows: 

Carrying Carrying Balance sheet item Carrying Carrying Balance sheet item 

amount amount amount amount 

2008 2007 Assets 2008 2007 Liabilities and equity 


Interest rate swaps 130 108 Loans and advances to banks, 274 283 Liabilities to banks, 

loans and advances to customers, Liabilities to customers, 

prepaid expenses deferred income 

Interest rate options 10 18 Other assets 0 0 

Cross-currency swaps 460 168 Loans and advances to banks 17 7 Liabilities to banks, 

deferred income 

Credit default swaps 1 2 Other assets 2 2 Other liabilities 

prepaid expenses 

Total Return Swaps 26 26 Loans and advances to banks, 

prepaid expenses 

The forward transactions identified above are used to manage interest rate, currency and counterparty risk exposure. As a rule, counterparties 

are OECD banks, OECD financial services institutions or OECD central governments. In addition, borrowers also appear as counterparties 

(market value € 12.3 million) in connection with loan agreements. Interest rate swaps are valued using present values, determined 

by discounting cash flows using market interest rates in line with the credit risk and maturities concerned, as indicated by the yield 

curve prevailing on the balance sheet date. 

Options are valued using option pricing models. These are applied on the basis of generally recognised assumptions regarding valuation 

parameters, in particular the value and volatility of the underlying instrument, the agreed exercise price (interest rate), the remaining lifetime 

of the contract, as well as the risk-free interest rate for that lifetime. 

Credit derivatives are valued on an individual basis, predominantly on the basis of the default probability of the reference obligations concerned. 

Market values are determined without consideration of netting agreements. No add-ons or credit quality weightings – as defined pursuant 

to methodology of the German Solvability Ordinance (Solvabilitätsverordnung) – are taken into account. Negative market values of 

derivatives are offset by positive market values of the related hedged balance sheet items.


Notes to the profit and loss account 

(25) Breakdown of income by geographic markets within the meaning of section 34 (2) no. 1 of the RechKredV 

The breakdown of interest income, current income from equities and other non-fixed-income securities, commission income 

and other operating income is as follows: 

in % 2008 2007 

Germany 68.1 69.8 

International 31.9 30.2 

(26) Other operating income 

Other operating income totalling € 9.5 million is mostly due to rental income totalling € 4.7 million and income on services 

totalling € 2.4 million. 

(27) Other operating expenses 

Other operating expenses totalling € 2.6 million includes purchases of goods in the amount of € 0.9 million. 

(28) Extraordinary income 

The restructuring expense and the impact of the crisis on the international capital markets have weighed on DG HYP’s earnings 

in the year under review. In order to compensate for these extraordinary factors, and to support a future realignment 

of DG HYP, the DZ BANK made a contribution to income of € 223 million, which was derived from the existing profit and 

loss transfer agreement and was recognised as extraordinary income in financial year 2008. 

(29) Extraordinary expense 

As part of the restructuring of DG HYP, the Bank’s main sources of non-personnel costs – such as infrastructure and IT – 

were further optimised during the 2008 financial year. The sale and lease-back transactions for the Bank’s headquarters in 

Rosenstrasse and a further rented property, which have been in existence since 2003/04, were unwound. The repurchase of 

this building at market prices resulted in extraordinary expenses of € 24.8 million. Moreover, restructuring provisions in conjunction 

with personnel measures and consultancy services totalling € 11.6 million were included in the category of extraordinary 

expenses. 

(30) Taxes on income 

The tax income of € 0.3 million recorded in the year under review results from the adjustment of the negative tax overhead 

credit that was recognised in 2007. This credit related to partial profit transfers, covered by section 8a of the KStG. 


67

Cash flow statement 

(31 ) Cash flow statement 



€ mn 2008 2007 

1. Net income for the period 

(including minority interests) 

excluding extraordinary items and taxes 

Non-cash items included in net income and 

reconciliation to cash flow from operating activities 

– 129 – 85 

2. +/– Depreciation, write-downs and write-ups on loans and advances, 

tangible fixed assets and financial assets 177 142 

3. +/– Increase / decrease in provisions – 3 18 

4. +/– Other non-cash expenses/income 28 99 

5. –/+ Profits/losses from the disposal of tangible fixed assets and financial assets – 11 – 2 

6. –/+ Other adjustments (net balance) – 176 – 298 

7. = Subtotal 

Net changes in assets and liabilities 

from operating activities 

– 114 – 126 

8. Loans and advances 

8a. +/– – to banks 2,798 – 756 

8b. +/– – to customers 1,599 556 

9. +/– Securities (excluding financial assets) – 1,015 3,073 

10. +/– Other assets from operating activities 48 – 75 

11. Liabilities 

11a. +/– – to banks – 1,934 – 1,563 

11b. +/– – to customers – 126 2,723 

12. +/– Securitised liabilities – 4,840 – 3,619 

13. +/– Other liabilities from operating activities – 59 – 124 

14. + Interest and dividends received 3,885 4,053 

15. – Interest paid – 3,698 – 3,905 

16. + Extraordinary cash receipts 223 237 

17. – Extraordinary cash payments – 1 – 71 

18. +/– Income tax payments – 13 

19. = Cash flow from operating activities – 3,234 416 

20. Receipts from the disposal of 

20a. + – financial assets 5,438 2,637 

20b. + – tangible fixed assets 1 – 

21. Payments for investments in 

21a. – – financial assets – 1,708 – 3,372 

21b. – – tangible fixed assets – 174 – 1 

22. + Cash receipts from the disposal of consolidated companies 

and other business units – – 

23. – Cash payments for the acquisition of consolidated companies 

and other business units – – 

24. +/– Changes in cash funds due to other investing activities (net balance) – – 1 

25. = Cash flow from investing activities 3,557 – 737 

26. + Cash receipts from issue of capital – 35 

27. Cash payments to owners and minority shareholders 

27a. – – Dividends paid – – 

27b. – – Other distributions/cash payments – 58 – 76 

28. +/– Changes in cash funds due to other capital movements (net balance) – 243 371 

29. = Cash flow from financing activities – 301 330 

30. Cash funds at the beginning of the period 33 24 

31. +/– Cash flow from operating activities – 3,234 416 

32. +/– Cash flow from investing activities 3,557 – 737 

33. +/– Cash flow from financing activities – 301 330 

34. +/– Effect on cash funds of exchange rate movements, 

changes in reporting entity structure and revaluation – – 

35. = Cash funds at the end of the period 55 33


Coverage 

(32) Coverage by balance sheet item 

Mortgage Mortgage Public-sector Public-sector 

bonds bonds covered bonds covered bonds 

31 Dec 2008 31 Dec 2007 31 Dec 2008 31 Dec 2007 


Ordinary cover 15,346 16,982 35,657 42,856 

Loans and advances to customers 15,346 16,982 16,760 18,027 

Loans secured by property mortgages to customers 15,346 16,982 1,580 *) 1,640 *) 

Loans to local authorities, to customers – – 15,180 16,387 

Loans and advances to banks – – 2,429 4,013 

Loans secured by property mortgages to banks – – 8 *) 10 *) 

Loans to local authorities, to banks – – 2,421 4,003 

Own bonds issued – – 16,468 20,816 

Extended cover 342 1,201 3,999 3,325 

Loans and advances to banks – – 2,973 2,299 

Balances held with banks – – 2,973 2,299 

Own bonds issued 342 1,201 1,026 978 

Derivatives – – – 48 

Total 15,688 18,183 39,656 46,181 

Market value of hedging derivatives**) – – – – 6 

*) under a municipal guarantee 

**) negative market value of a cross currency swap employed to hedge the outstanding Pfandbriefe 

(33) Details pursuant to section 28 of the German Pfandbrief Act 

Outstanding Pfandbriefe and related cover assets 

Nominal amount Present value Risk-adjusted present value*) 

a) Total amount 31 Dec 2008 31 Dec 2007 31 Dec 2008 31 Dec 2007 31 Dec 2008 31 Dec 2007 

of outstanding € mn € mn € mn € mn € mn € mn 

Mortgage bonds 13,606 15,542 14,273 15,867 13,931 15,532 

Cover assets pool 15,688 18,183 16,825 18,597 16,025 17,892 

of which: Derivatives 0 0 0 0 0 0 

Excess cover 2,082 2,641 2,552 2,730 2,094 2,360 

Excess cover (%) 15.3 17.0 17.9 17.2 15.0 15.2 

*) When calculating stress scenarios, the static method is used for currencies and the dynamic method for interest rates. 

ad a) Maturity structure Mortgage bonds Cover assets pool 



up to 1 year 1,482 4,439 1,963 2,485 

> year – 5 years 8,858 7,554 7,259 6,440 

> 5 years – 10 years 3,228 3,485 5,429 7,988 

> 10 years 38 64 1,037 1,270 

Total 13,606 15,542 15,688 18 ,183 


69



Nominal amount Present value Risk-adjusted present value*) 

b) Total amount 31 Dec 2008 31 Dec 2007 31 Dec 2008 31 Dec 2007 31 Dec 2008 31 Dec 2007 

of outstanding € mn € mn € mn € mn € mn € mn 

Public-sector covered bonds 37,419 43,326 39,375 43,296 37,056 41,458 

Cover assets pool 39,656 46,181 42,333 46,783 39,895 44,911 

of which: Derivatives 0 48 0 48 0 41 

Excess cover 2,237 2,855 2,958 3,487 2,839 3,453 

Excess cover (%) 6.0 6.6 7.5 8.1 7.7 8.3 

*) When calculating stress scenarios, the static method is used for currencies and the dynamic method for interest rates. 

ad b) Maturity structure Public-sector covered bonds Cover assets pool 



up to 1 year 6,165 5,752 5,585 6,635 

> 1 year – 5 years 13,029 16,188 16,651 18,431 

> 5 years – 10 years 11,723 14,221 10,337 13,635 

> 10 years 6,502 7,165 7,083 7,480 

Total 37,419 43,326 39,656 46,181 

Assets included in cover for mortgage bonds, by loan amount 

Mortgages serving as cover 


€ mn € mn 

up to € 300,000 11,337 13,241 

> € 300,000 to € 5 million 2,042 2,197 

> € 5 million 2,309 2,745 

Total 15,688 18,183


Assets included in cover for mortgage bonds, 

by country where real property collateral is located, and by type of property 

€ mn 

Commercial 

properties 

Commercial 

housing properties 

Residential properties 

Single-family homes 

Multi-family homes 

Office buildings 

Commercial buildings 

Industrial buildings 

Other commercial properties 

Unfinished new buildings 

not yet yielding returns 

Securities 

Total 

Financial year 

Belgium 

Federal Republic of Germany 

Denmark 

France 

Greece 

UK 

2008 – 3.2 – – – – – – – – – 3.2 

2007 – 3.8 – – – – – – – – – 3.8 

2008 – – – – – – – – – – – – 

2007 – – – – – – – – – – – – 

2008 – 1,917.2 – 0.9 – 0.4 – 0.1 – – – 1,918.6 

2007 0.1 2,265.3 – 1.1 – 0.4 0.1 0.1 – – – 2,267.1 

2008 0.3 6,739.1 0.1 14.8 – 0.2 0.7 0.2 – – – 6,755.4 

2007 0.3 7,770.2 0.1 17.6 – 0.2 0.8 0.2 0.1 – – 7,789.5 

2008 – 2,434.6 – 0.2 – – – 0.1 – – – 2,434.9 

2007 – 2,756.3 – 0.2 – – – 0.1 – – – 2,756.6 

2008 – 1,306.0 14.4 291.4 – 99.8 8.0 12.4 – 3.0 21.4 1,756.4 

2007 – 1,252.9 0.1 251.1 – 39.9 31.0 12.4 – 3.4 – 1,590.8 

2008 – 659.1 0.5 41.4 – 2.5 – 77.0 – 28.2 – 808.7 

2007 – 645.7 – – – 4.9 – – – 24.2 – 674.8 

2008 – 93.7 – – – – – – – – – 93.7 

2007 – 94.9 – – – – – – – – – 94.9 

2008 – 1,432.4 1.4 36.4 – – – – – – – 1,470.2 

2007 – 1,644.8 – 31.0 – – – – – – 1,675.8 

2008 – 104.3 – 0.3 – – – – – – – 104.6 

2007 – 127.9 – 0.3 – – – – – – – 128.2 

2008 – 342.3 – – – – – – – – – 342.3 

2007 – 681.1 – – 351.5 – – – 168.5 – – 1,201.1 

2008 0.3 15,031.9 16.4 385.4 – 102.9 8.7 89.8 – 31.2 21.4 15,688.0 

2007 0.4 17,242.9 0.2 301.3 351.5 45.4 31.9 12.8 168.6 27.6 – 18,182.6 

Netherlands 


Austria 

Portugal 

Sweden 

USA 

Total 

71

Aggregate payments in arrears by at least 90 days 

on cover assets for mortgage bonds 




€ mn € mn 

Germany 50.52 42.42 

France 0.25 0.35 

Netherlands – – 

Total 50.77 42.77 

Assets included in cover for mortgage bonds 

Forced sales/forced administration 

No. 3a 

Commercial properties Housing properties 

2008 2007 2008 2007 

Number Number Number Number 

Forced sales pending 144 207 1,247 1,195 

Forced administrations pending 60 96 444 479 

of which: Included in forced sales pending 52 86 429 447 

Forced sales executed 132 195 715 590 

No. 3b 

Number Number Number Number 

Purchases of properties to prevent losses 

(foreclosed assets) – – – 1 

of which: Still part of cover assets – – – – 

No. 3c 


Total arrears 13.6 11.5 85.1 54.4 

of which: on interest due 2.8 2.7 9.2 16.2 

No. 3d 

Repayments of mortgage loans 


through redemption 249.0 185.5 1,603.9 490.2 

through other forms of repayment 591.3 674.5 978.5 1,550.5


Assets included in cover for public-sector covered bonds, 

by country of domicile of the borrower and, in the case of full guarantee, of the guarantor 

Regional Local 

Sovereign public-sector public-sector Other 

€ mn borrowers entities entities borrowers Total 

2008 2007 2008 2007 2008 2007 2008 2007 2008 2007 

Belgium 70 340 94 96 – – – – 164 436 

Federal Republic of Germany 2 98 8,395 10,757 10,559 11,416 6,870 9,242 25,826 31,513 

Denmark – – – – – – 20 20 20 20 

Finland – 150 – – – – – – – 150 

France – – 225 225 – – 210 410 435 635 

Greece 436 990 235 235 – – 240 – 911 1,225 

UK – – – – – – 304 204 304 204 

Ireland 50 100 – – – – 95 95 145 195 

Iceland 30 30 – – – – – – 30 30 

Italy 822 965 851 875 175 175 – – 1,848 2,015 

Canada – – 511 449 – – – – 511 449 

Latvia 25 25 – – – – – – 25 25 

Lithuania – – 23 23 – – – – 23 23 

Luxembourg – – – – – – 180 200 180 200 

Netherlands – 150 – – – – 230 330 230 480 

Austria 180 205 315 315 – – 648 640 1,143 1,160 

Poland 133 83 – – – – – – 133 83 

Portugal 727 637 75 75 – – 270 196 1,072 908 

Switzerland – – 191 172 – – 200 195 391 367 

Slowakia 35 35 – – – – – – 35 35 

Slovenia 65 65 – – – – 10 10 75 75 

Spain – – 4,520 4,513 31 31 1,259 1,085 5,810 5,629 

Czech Republic 50 50 – – – – – – 50 50 

Hungary 81 81 – – – – – – 81 81 

USA – – 114 92 48 49 45 45 207 186 

Cyprus 7 7 – – – – – – 7 7 

Total 2,713 4,011 15,549 17,827 10,813 11,671 10,581 12,672 39,656 46,181 


73

Aggregate payments in arrears by at least 90 days 

on cover assets for public-sector covered bonds 

Germany 




€ mn € mn 

Sovereign states – – 

Regional public-sector entities – 6.4 

Local public-sector entities – 0.3 

Other 11.4 – 

Total 11.4 6.7


Other information on the annual financial statements 

(34) Audit and consulting fees within the meaning of section 285 no. 17 of the HGB 

In the 2008 financial year, € 1,267,000 was recorded as fee expenses for the auditor within the meaning of section 319 (1) 

sentences 1 and 2 of the HGB. The breakdown pursuant to Accounting Practice Statement HFA 1006 of the IDW is as follows. 

Audit of financial statements Other audit Tax advisory services Other services 

or valuation services 

875,000 € 249,000 € 5,000 € 138,000 € 


75

(35) Executive bodies of DG HYP 

Supervisory Board 

Dr. Thomas Duhnkrack 

Member of the Management Board 

DZ BANK Deutsche Zentral- 

Genossenschaftsbank AG, 

Frankfurt/Main 

– Chairman – 

Dr. Christopher Pleister 

President of the Federal 

Association of German 

Credit Unions and Rural 

Banking Cooperatives (BVR) 

– Deputy Chairman – 

(until 15 Jul 2008) 

Dagmar Mines 

Bank employee 

Deutsche Genossenschafts- 

Hypothekenbank AG 

– Deputy Chairman – 

Peter Bade 

Member of the Management 

Board 

Volksbank Lüneburger Heide eG 

Maik Brammer 

Bank employee 



Hans-Jürgen Buhlert 

Bank employee 



Carl-Christian Ehlers 

Chairman of the Management Board 

Kieler Volksbank eG 

Management Board 

Hans-Theo Macke 

CEO 

Ralph Gruber 

Bank employee 



Jürgen Handke 


VR Bank Hof eG 

Rainer Kattinger 


Stuttgarter Volksbank AG 

Klaus Kohlmorgen 

Bank employee 



Dietmar Küsters 


Volksbank Straubing eG 

(until 31 Dec 2008) 

Dr. Reinhard Kutscher 


Union Investment 

Real Estate AG 

(since 17 Jun 2008) 

Jens Meyer 

Bank employee 



(until 9 Jun 2008) 

Thomas Müller 


Dresdner Volksbank 

Raiffeisenbank eG 

Dr. Georg Reutter 

(since 1 Aug 2008) 



Manfred Nüssel 

President of the German Raiffeisen 

Federation 

Herbert Schindler 

Director 

Badischer Genossenschaftsverband 

e.V. (Association of Cooperative Banks 

in Baden) 

Martin Schmitt 


Kasseler Bank eG Volksbank 

Raiffeisenbank 

Diedrich Taaken 


Volksbank Esens eG 

Dietrich Voigtländer 



Genossenschaftsbank AG 

(until 26 May 2008) 

Thorsten Wenck 

Bank employee 



(since 22 Sep 2008) 

Frank Westhoff 



Genossenschaftsbank AG 

Winfried Willer 

Employee 

VR Kreditwerk Hamburg – 

Schwäbisch Hall AG 

Manfred Salber


(36) Remuneration of the executive bodies 

(37) Loans to members of executive bodies 


€ 000’s € 000’s 

Supervisory Board 1,654 1,710 

Advisory Council 1,881 2,794 

Management Board – – 

(38) Offices held by members of the Management Board or members of staff in supervisory bodies 

of large limited companies 

As at 31 December 2008, members of the Management Board held the following offices in supervisory bodies of large 

limited companies: 


2008 2007 

€ 000’s € 000’s 

Supervisory Board 259 275 

Management Board 1,385 1,708 

Former members of the Management Board 

or their surviving dependants 1,647 2,654 

Provisions for current pensions 

and pension commitments 

for former members of the Management Board 

or their surviving dependants 20,114 20,124 

Bausparkasse Schwäbisch Hall AG, Schwäbisch-Hall: member of the Supervisory Board 

VR Kreditwerk Hamburg – Schwäbisch Hall AG, Hamburg/Schwäbisch Hall: member of the Supervisory Board 


77

(39) Average number of employees 



2008 2007 

Male Female Total Male Female Total 

Total number of employees *) 280 193 473 353 223 576 

of which: Full-time employees 277 165 442 349 188 537 

Part-time employees 

Number (10) (47) (57) (8) (63) (71) 

weighted 3 28 31 4 35 39 

Vocational trainees 

(not included in total) 3 3 6 10 7 17 

*) Weighted in line with the hours worked. 

(40) Information about the parent company pursuant to section 285 no. 14 of the HGB 

DZ BANK AG Deutsche Zentral-Genossenschaftsbank, Frankfurt/Main, prepares consolidated financial statements 

which incorporate the financial statements of DG HYP. The consolidated financial statements of DZ BANK are published 

in the electronic German Federal Gazette (elektronischer Bundesanzeiger). 

Hamburg, 10 February 2009 

Deutsche Genossenschafts-Hypothekenbank Aktiengesellschaft 

Hans-Theo Macke Dr. Georg Reutter Manfred Salber

RESPONSIBILITY STATEMENT 

To the best of our knowledge, and in accordance 

with the applicable reporting principles, the annual financial 

statements give a true and fair view of the assets, liabilities, 

financial position and profit or loss of the company, 

and the management report of the company includes a fair 


Deutsche Genossenschafts-Hypothekenbank Aktiengesellschaft 

Hans-Theo Macke Dr. Georg Reutter Manfred Salber 

review of the development and performance of the business 

and the position of the company, together with a 

description of the principal opportunities and risks associated 

with the expected development of the company. 


79

The following is an English translation of the Audit Opinion, which has been prepared on the basis of the German language version of 

the Financial Statements and the Management Report. The translation of the Financial Statements, the Management Report, and the 

Audit Opinion are provided for convenience; the respective German versions shall be exclusively valid for all purposes. 

AUDIT OPINION 

We have issued the following opinion on the financial 

statements and management report: 

We have audited the annual financial statements, 

comprising the balance sheet, the income statement and 

the notes to the financial statements, together with the 

bookkeeping system, and the management report of Deutsche 

Genossenschafts-Hypothekenbank Aktiengesellschaft, 

Hamburg, for the fiscal year from 1 January 2008 to 

31 December 2008. The maintenance of the books and 

records and the preparation of the annual financial statements 

and management report in accordance with German 

commercial law are the responsibility of the Company’s 

management. Our responsibility is to express an opinion on 

the annual financial statements, together with the bookkeeping 

system, and the management report based on our 

audit. 

We conducted our audit of the annual financial statements 

in accordance with Sec. 317 HGB („Handelsgesetzbuch“: 

„German Commercial Code“] and German 

generally accepted standards for the audit of financial statements 

promulgated by the Institut der Wirtschaftsprüfer 

(Institute of Public Auditors in Germany) (IDW). Those standards 

require that we plan and perform the audit such that 

misstatements materially affecting the presentation of the 

net assets, financial position and results of operations in the 

annual financial statements in accordance with (German) 


Ernst & Young AG 

Wirtschaftsprüfungsgesellschaft 

Steuerberatungsgesellschaft 

Bühring Kaltschmidt 

Wirtschaftsprüfer Wirtschaftsprüfer 

(German Public Auditor) (German Public Auditor) 


principles of proper accounting and in the management 

report are detected with reasonable assurance. Knowledge 

of the business activities and the economic and legal environment 

of the Company and expectations as to possible 

misstatements are taken into account in the determination 

of audit procedures. The effectiveness of the accountingrelated 

internal control system and the evidence supporting 

the disclosures in the books and records, the annual financial 

statements and the management report are examined 

primarily on a test basis within the framework of the audit. 

The audit includes assessing the accounting principles used 

and significant estimates made by management, as well as 

evaluating the overall presentation of the annual financial 

statements and management report. We believe that our 

audit provides a reasonable basis for our opinion. 

Our audit has not led to any reservations. 

In our opinion, based on the findings of our audit, 

the annual financial statements comply with the legal 

requirements and give a true and fair view of the net assets, 

financial position and results of operations of the Company 

in accordance with German principles of proper accounting. 

The management report is consistent with the annual 

financial statements and as a whole provides a suitable 

view of the Company’s position and suitably presents the 

opportunities and risks of future development.“

REPORT OF THE SUPERVISORY BOARD 

Dr. Thomas Duhnkrack, 

Chairman of the Supervisory Board 

In the 2008 financial year, the Supervisory Board and its committees monitored 

the Management Board’s management of the Bank according to statutory regulations 

and those regulations set out in the Bank’s articles of association, and 

also took decisions on those transactions required to be presented to the 

Supervisory Board. 

In fulfilling its tasks, and in accordance with statutory requirements, the Supervisory 

Board formed a Human Resources Committee, an Audit Committee and 

a Risk and Participations Committee. These Committees convened several 

times during the 2008 financial year. 

The Management Board reported to the Supervisory Board on the bank’s situation 

and growth and on general business regularly, in good time and comprehensively, 

both in writing and in verbal reports. In addition, the Management 

Board reported regularly to the Supervisory Board on ongoing business as well 

as future business policy including the bank’s strategic and organisational orientation. 

The Supervisory Board also dealt with the bank’s risk situation, and 

particularly the development of credit, market price, liquidity and operating 

risks as well as additional key typical banking risks. 

The Supervisory Board convened four times during the 2008 financial year. At these meetings, the 

Supervisory Board received detailed reports on the current situation and the future strategic positioning 

of DG HYP, with updates on the work of the Committees being provided in rotation at two 

of these meetings. 

At its meeting on 5 March 2008, the Supervisory Board dealt with the 2007 financial statements 

and the Bank’s realignment. At the meeting of 21 April 2008, Dr. Georg Reutter was appointed to 

the Bank’s Management Board as an ordinary member. Following the implementation of the Bank’s 

new organisational structure with effect from 1 June 2008, the Supervisory Board, at its meeting 

on 18 June 2008, dealt with the future business development and direction of the Bank. At its 

meeting on 19 November 2008, discussion focused in particular on the developments on the financial 

and capital markets and the resulting impact on the Bank. 

Between meetings of the Supervisory Board, the Management Board informed it in writing of key 

transactions. In urgent cases, the Supervisory Board approved key transactions outside of its meetings 

by passing written resolutions. 

In regular discussions with the Chairman of the Management Board outside the meetings, the 

Chairman of the Supervisory Board and the Chairman of the Audit Committee and the Risk and 

Participations Committee also discussed key decisions, particular transactions, the bank’s business 

growth, and, in particular, the future strategic realignment of the bank. 


81

Ernst & Young AG Wirtschaftsprüfungsgesellschaft Steuerberatungsgesellschaft, Hamburg, presented 

a declaration of independence to the Supervisory Board and audited the annual financial 

statements as at 31 December 2008, including the accounting and management report of DG HYP 

for the financial year from 1 January 2008 to 31 December 2008 presented to it by the Management 

Board, and found these to be in line with statutory requirements. It issued an unqualified 

audit opinion. The audit reports were submitted to members of the Supervisory Board, and were 

discussed in detail. The Supervisory Board approved the results of the audit by the auditors. 

The auditor participated in the Supervisory Board meeting to adopt the annual financial statements 

according to section 171 (1) sentence 2 of the Aktiengesetz (AktG – German Public Limited Companies 

Act), and in the preparatory meetings of the Audit Committee and the Risk and Participations 

Committee, and reported on the key audit findings. The auditor was available to answer the 

Supervisory Board’s questions. 

The Supervisory Board, and the Audit Committee formed from amongst its number, reviewed in 

detail the annual financial statements of DG HYP and the management report of DG HYP at their 

meetings, and acknowledged and approved the findings of the auditor’s audit. There were no 

objections to the annual financial statements and the annual report, which includes the management 

report. 

At its meeting on 6 March 2009, the Supervisory Board approved the financial statements of 

DG HYP as at 31 December 2008 prepared by the Management Board. The financial statements 

are thus confirmed. 

The Supervisory Board would like to thank the Management Board and all of the Bank’s employees 

for their work during 2008, a year marked by the Bank’s realignment and the impact of the developments 

on the financial and capital markets. 

Hamburg, 6 March 2009 

Deutsche Genossenschafts-Hypothekenbank 

Aktiengesellschaft 

The Supervisory Board 


Chairman of the Supervisory Board 

82 Deutsche Genossenschafts-Hypothekenbank AG | Annual Report 2008

Corporate Bodies And Committees; Executives 

CORPORATE BODIES AND COMMITTEES; EXECUTIVES 

Supervisory Board 



DZ BANK AG Deutsche 

Zentral-Genossenschaftsbank, 

Frankfurt/Main, 

Chairman 

Dagmar Mines 


Hypothekenbank AG, 

Hamburg, 

Deputy Chairman 

Peter Bade 

Member of the Management Board, 

Volksbank Lüneburger Heide eG, 

Soltau 

Maik Brammer 



Hamburg 

Hans-Jürgen Buhlert 



Hamburg 

Carl-Christian Ehlers 

Chairman of the Management Board, 

Kieler Volksbank eG, 

Kiel 

Ralph Gruber 



Hamburg 

Updated: 1 March 2009 

Jürgen Handke 


VR Bank Hof eG, 

Hof 

Peter Heinrich 


Münchner Bank eG, 

Munich 

Rainer Kattinger 


Stuttgarter Volksbank AG, 

Stuttgart 

Klaus Kohlmorgen 



Hamburg 

Dr. Reinhard Kutscher 


Union Investment Real Estate AG, 

Hamburg 

Thomas Müller 


Dresdner Volksbank Raiffeisenbank 

eG, 

Dresden 

Manfred Nüssel 

President of the German Raiffeisen 

Federation, 

Berlin 

Herbert Schindler 

Director 

Badischer Genossenschaftsverband 

e.V. (Association of Cooperative 

Banks in Baden), Karlsruhe 

Martin Schmitt 


Kasseler Bank eG 

Volksbank Raiffeisenbank, 

Kassel 

Diedrich Taaken 


Volksbank Esens eG, 

Esens 

Thorsten Wenck 



Hamburg 

Frank Westhoff, 



Genossenschaftsbank AG, 

Frankfurt/Main 

Winfried Willer 

VR Kreditwerk Hamburg – 

Schwäbisch Hall AG, 

Hamburg 


83

Management Board, Department Heads 

Management Board 

(and distribution of responsibilities) 


Chairman 

– Management Board Office / 

Legal / Communication 

– Human Resources 

– Internal Audit 

– Corporate Development, 

Organisation and IT 

Department Heads 

Sibylle von Brunn 

Human Resources 

Steffen Günther 

International and 

Secondary Market Business 

Dr. Cornelius Riese 

Corporate Development, 

Organisation and IT 

Peter Vögelein 

Internal Audit 


Dr. Georg Reutter Manfred Salber 

– German Originated and 

Cooperative Sector Business 

– International and 

Secondary Market Business 

– Treasury 

Patrick Ernst 

Treasury 

Jörg Hermes 

Finance 

Siegfried Schneider 

Treasury Settlements 

Eckhard Wulff 

Management Board Office / 

Legal / Communications 



– Back Office I 

– Back Office II / Special Portfolio 

– Treasury Settlements 

– Finance 

Detlef Gäßler 

Back Office II / Special Portfolio 

Axel Jordan 

German Originated and 

Cooperative Sector Business 

Frank Stöfer 

Back Office I


Trustees, Advisory Council 

Trustees 

Dr. Michael Labe 

Judge at the Hamburg Higher 

Regional Court (Hanseatisches Oberlandesgericht 

Hamburg), 

Hamburg 

Advisory Council 

Rolf Witezek 


Volksbank Mittelhessen eG, 

Gießen, 

Chairman 

Dr. Dr. Claus Becker 


Volksbank Darmstadt eG, 

Darmstadt, 


Dr. Rolf Flechsig 


Berliner Volksbank eG, 

Berlin, 


Willi Braun 


Aachener Bank eG, 

Aachen 

Bernhard Carl 


H + G Bank Heidelberg Kurpfalz eG, 

Heidelberg 


Volker Thilo 

Deputy Trustee, 

Certified public accountant 

and tax adviser (retired), 

Hamburg 

Wolfgang Eckert 


VR-Bank eG, 

Regen 

Enno Emmerinck 


Hamburger Volksbank eG, 

Hamburg 

Alfred Foistner 


Raiffeisenbank Oberschleißheim eG, 

Oberschleißheim 

Klaus Geurden 


Volksbank Krefeld eG, 

Krefeld 

Manfred Geyer 


Raiffeisen Volksbank eG 

Gewerbebank, 

Ansbach 

Willi Göttsche 


Raiffeisenbank eG, 

Bad Bramstedt 

Dr. Peter Lassen 

Deputy Trustee, 

Judge (retired), 

Hamburg 

Dietmar Herderich 


Raiffeisenbank Mutlangen eG, 

Mutlangen 

Ulrich Jakobi 


Volksbank Wetzlar-Weilburg eG, 

Wetzlar 

Michael Joop 


Volksbank Hameln-Stadthagen eG, 

Hameln 

Andreas Mann 


Volksbank Regensburg eG, 

Regensburg 

Rudolf Müller 


Volksbank Bonn Rhein-Sieg eG, 

Bonn 

Lothar Peters 


Raiffeisenbank Ratzeburg eG, 

Ratzeburg 


85

Advisory Council 

Hans-Werner Reuter 


Dithmarscher Volksund 

Raiffeisenbank eG, 

Heide 

Wilhelm Rippen 


Raiffeisenbank Wesermarsch-Süd eG, 

Brake 

Tilman Römpp 


Volksbank Bautzen eG, 

Bautzen 


Alfred Salz 


Volksbank Rhein-Wupper eG, 

Leverkusen 

Elmar Stender 


Volksbank Marl-Recklinghausen eG, 

Marl 

Gerd Streuber 


Volksbank Hildesheimer Börde eG, 

Söhlde-Hoheneggelsen 



Günther Wainowski 


Vereinigte Volksbank AG 

Böblingen/Sindelfingen – Schönbuch 

– Calw/Weil der Stadt, 

Sindelfingen 

Horst Weyand 


Volksbank Nahetal eG, 

Bad Kreuznach

DG HYP ADDRESSES 

Deutsche Genossenschafts-Hypothekenbank AG 

20095 Hamburg, Germany 

Rosenstrasse 2 

Postfach 10 14 46 

20009 Hamburg 

Phone +49 40 33 34-0 

Fax +49 40 33 34-11 11 

Internet:www.dghyp.de 

Real Estate Centres for commercial investors 


Real Estate Centre Berlin 

Pariser Platz 3 

10117 Berlin 

Phone +49 30 3 19 93-51 01 

Fax +49 30 3 19 93-50 36 


Real Estate Centre Hamburg 

Rosenstrasse 2 

20095 Hamburg 

Phone +49 40 33 34-37 78 

Fax +49 40 33 34-11 02 

Representative offices 


London Representative Office 

10, Aldersgate Street 

London EC1A 4HJ 

United Kingdom 

Phone +44 20 777 676-13 

Fax +44 20 777 676-19 



Real Estate Centre Düsseldorf 

Ludwig-Erhard-Allee 9 

40227 Dusseldorf 

Phone +49 2 11 22 04 99-10 

Fax +49 2 11 22 04 99-40 


Real Estate Centre Munich 

Türkenstrasse 16 

80333 Munich 

Phone +49 89 51 26 76-10 

Fax +49 89 51 26 76-30 


New York Representative Office 

609 Fifth Avenue, 6th Floor 

New York NY 10017 

USA 

Phone +1 212 796 43-00 

Fax +1 212 796 43-13 


Real Estate Centre Frankfurt 

CITY HAUS 1, Platz der Republik 6 

60325 Frankfurt / Main 

Phone +49 69 75 06 76-21 

Fax +49 69 75 06 76-99 


Real Estate Centre Stuttgart 

Heilbronner Strasse 41 

70191 Stuttgart 

Phone +49 7 11 12 09 38-0 

Fax +49 7 11 12 09 38-30 


87

Production 

This Annual Report is climate-neutral and printed on PEFC-certified 

paper. The greenhouse gas emissions caused by the production 

and distribution of this publication have been offset by investments 

in an additional climate protection project.

ANNUAL REPORT 2008 - DG Hyp

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