Deutsche Bank : DB USA Corporation U.S. Liquidity Coverage Ratio Disclosures Q2 2022

DB USA Corporation

U.S. LIQUIDITY COVERAGE RATIO DISCLOSURES

For the quarter ended June 30, 2022

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Table of Contents
The Liquidity Coverage Ratio (LCR).................................................................................................	3
U.S. Disclosure Requirements..........................................................................................................	3
U.S. Qualitative Disclosures .............................................................................................................	4
Main drivers of LCR .......................................................................................................................	4
Composition of eligible HQLA........................................................................................................	4
Changes in LCR.............................................................................................................................	5
Other Liquidity Sources..................................................................................................................	5
Concentration of funding sources ..................................................................................................	5
Derivatives exposures and potential collateral calls ......................................................................	6
Currency mismatch in the LCR......................................................................................................	7
Cash Inflows ..................................................................................................................................	7
Liquidity Management....................................................................................................................	7
Liquidity Risk Management Framework.........................................................................................	8
Liquidity Stress Testing..................................................................................................................	8
U.S. Quantitative Disclosures ...........................................................................................................	9

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The Liquidity Coverage Ratio (LCR)

The LCR is intended to promote the short-term resilience of a bank's liquidity risk profile over a 30-day stress scenario. The ratio is defined as the amount of High Quality Liquid Assets (HQLA) that could be used to raise liquidity, measured against the total volume of net cash outflows, arising from both actual and contingent exposures, projected over a 30 calendar-day stress period. Banks are also required to take into account potential maturity mismatches between contractual outflows and inflows during the 30-day stress period.

Deutsche Bank (DB), a banking group domiciled in Germany1, is currently required to be compliant with the Liquidity Coverage Ratio (LCR) as outlined in the "Commission Delegated Regulation (EU) 2015/61 of October 10, 2014 to supplement Regulation (EU) No 575/2013 of the European Parliament and the Council with regard to liquidity coverage requirement for Credit Institutions" and the corrigendum to "Regulation (EU) No 575/2013 of the European Parliament and of the Council of June 26, 2013 on prudential requirements for credit institutions and investment firms and amending Regulation (EU) No 648/2012", published on November 30, 2013.

The Basel Committee on Banking Supervision (BCBS) published the international liquidity standards in December 2010 as a part of the Basel III package and revised the liquidity standard in January 2013. On September 3, 2014, the U.S. regulators adopted a final rule that implements a quantitative liquidity requirement generally consistent with the LCR standard established by the BCBS. The final LCR rule applies to top-tier U.S. BHCs as well as depository institution subsidiaries of U.S. BHCs that meet the applicability criteria of the LCR rule.

The Enhanced Prudential Standards for Foreign Banking Organizations (FBOs) requires FBOs, including DB, with non-branch assets of $50 billion or more to form a U.S. Intermediate Holding Company (IHC) by July 01, 2016 to serve as the top-tier holding company for their non-branch U.S. subsidiaries. DB's U.S. IHC or DB USA Corporation (the Firm) became subject to the full LCR requirements effective April 01, 2017.

Subsequently, the Federal Reserve adopted the Tailoring Rule that introduces risk-based categories for determining scope, nature and applicability of requirements under the LCR rule and modifies the LCR requirements based on the category of the banking organizations. Under the Tailoring Rule, the stringency of requirements increases based on measures of size, cross- jurisdictional activity, weighted short-term wholesale funding, nonbank assets and off-balance sheet exposures. Based on these new guidelines, which are effective December 31, 2019, the firm is categorized as a Category III bank and therefore a reduced LCR minimum requirement of 85% applies.

U.S. Disclosure Requirements

In December 2016, the Federal Reserve adopted a rule to implement public disclosure requirements (PDR) for the LCR. Under PDR, a BHC with $50 billion or more in consolidated assets or $10 billion or more in foreign exposure is required to disclose publicly, on a quarterly basis, quantitative information about its LCR calculation and a discussion of the factors that have a significant effect on its LCR. Presently, the Firm is the only DB U.S. entity that is subject to these disclosure requirements.

• Deutsche Bank (DB) AG is a financial conglomerate as designated by the BaFin

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The information presented in this document is calculated in accordance with the U.S. LCR rule and presented in accordance with the LCR PDR, unless otherwise stated. Table 7 (lines 1 through

1. presents the Firm's LCR in the format provided in the LCR PDR. Tables 1 through 6 present a supplemental breakdown of the Firm's LCR components.

U.S. Qualitative Disclosures

Main drivers of LCR

The table below summarizes the Firm's average weighted LCR for the three months ended June 30, 2022.

Table 1: Liquidity Coverage Ratio
Average Weighted Amounts	Three months ended
($ in millions)	June 30, 2022
HQLA1	23,036
Net cash outflows2	16,229
LCR	142%
Excess HQLA1	6,807

1. Excludes excess HQLA held at subsidiaries that are not transferable.
2. After application of 85% factor under the Tailoring Rule. Total average net cash outflows, including the add-on for maturity mismatches was $19,093 million.
3. Unadjusted for the 85% factor under the Tailoring Rule (i.e., at 100% of net outflows), the LCR for DB USA would be 121%.

In the table above, HQLA is calculated after applying regulatory haircuts to eligible assets as prescribed by the LCR rule. Similarly, the Firm calculates its outflow and inflow amounts by applying the standardized set of regulatory outflow and inflow rates to various asset and liability balances, including off-balance-sheet commitments, as prescribed in the LCR rule.

The firm's average daily LCR for the three months ended June 30, 2022 was 181%, which is largely driven by:

• HQLA, which consists of cash with the Federal Reserve Bank, U.S. Treasury securities purchased outright and sourced via reverse repurchase transactions.
• Net cash outflows primarily related to operational and non-operational deposits and to a lesser degree, secured wholesale funding.

Composition of eligible HQLA

HQLA represent the sum of eligible Level 1 liquid assets, Level 2A liquid assets, and Level 2B liquid assets, eligible for inclusion in the LCR after prescribed haircuts and asset composition limits. Eligible HQLA must also meet specific operational and general requirements, as prescribed under the LCR rule.

The table below presents the average weighted amount of the Firm's HQLA segregated into cash and eligible securities components for the three months ended June 30, 2022.

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Table 2: High Quality Liquid Assets
Average Weighted Amounts	Three months ended
($ in millions)	June 30, 2022
Eligible Reserve Bank Balances1	15,797
Eligible Level 1 Securities2	20,052
Eligible Level 2B Securities3	2
Less: Excess HQLA held at subsidiaries and are not transferable4	(12,815)
Total Eligible High Quality Liquid Assets	23,036

1. Comprises deposits with the Federal Reserve Bank.
2. Represents U.S. Treasury Securities.
3. Represents qualifying Sovereigns, Supranationals and Agencies
4. Comprises both Reserve Bank Balances and Treasury Securities.

Changes in LCR

As shown above in Table 1, the Firm's average LCR for three months ended June 30, 2022 was 142% which represents an average LCR position well above the required minimum. In comparison to the average LCR of 181% for the quarter ended March 31, 2022, this represents a decrease of 39 percentage points. This change in LCR was primarily driven by a $1.6 billion decrease in HQLA and a $3.0 billion increase in unsecured wholesale funding outflows, largely from non-operational deposits. These movements were partly offset by a $1.1 billion net reduction in outflows from secured wholesale funding and other off-balance-sheet commitments.

Other Liquidity Sources

In addition to the above, the Firm had approximately $12.8 billion of HQLA held at subsidiaries that are not transferable but are available to raise liquidity at the subsidiaries if required.

Even though the Firm has significant holdings in other LCR asset classes (primarily level 2B), these assets are generally not considered under the control of the Firm's liquidity management function, which is one of the criteria for HQLA inclusion set forth in the LCR rule. Hence, the majority of such asset holdings are not currently considered part of the liquidity buffer. These assets can also be sold or lent as collateral for secured funding to generate liquidity.

Concentration of funding sources

The Firm has a range of funding sources, including retail and institutional deposits, secured wholesale funding, and funding from DB Group. The Firm's most stable funding sources come from transaction banking clients.

Below is a summary of the average weighted amount of deposit related cash outflows in accordance with the LCR rule.

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