Deutsche Bank : DB USA Corporation Pillar 3 report Q4 2020

Deutsche Bank

DB USA Corporation Pillar 3 Report 2020

DB USA Corporation

Pillar 3 Report 2020

Contents
INTRODUCTION.........................................................................................................................................................	4
DISCLOSURES ACCORDING TOPILLAR3OF THEBASEL3 CAPITALFRAMEWORK ..............................................................	4
ADDITIONALDISCLOSUREREQUIREMENTS FORSIGNIFICANTSUBSIDIARIES.....................................................................	4
LOCATION OFPILLAR3DISCLOSURES ..................................................................................................................................	5
BASIS OF PRESENTATION ......................................................................................................................................................	6
SCOPE OF APPLICATION ........................................................................................................................................................	6
RISK MANAGEMENT FRAMEWORK AND GOVERNANCE ...................................................................................	7
RISK MANAGEMENT FRAMEWORK ........................................................................................................................................	7
RISK GOVERNANCE................................................................................................................................................................	8
RISK APPETITE AND CAPACITY..............................................................................................................................................	9
RISK AND CAPITAL PLAN .......................................................................................................................................	10
STRATEGIC AND CAPITAL PLAN ..........................................................................................................................................	10
INTERNAL CAPITAL ADEQUACY ASSESSMENT PROCESS ...................................................................................................	10
STRESS TESTING .................................................................................................................................................................	11
RISK AND CAPITAL MANAGEMENT .....................................................................................................................	12
CAPITAL MANAGEMENT ......................................................................................................................................................	12
CONTINGENCY FUNDING PLAN ...........................................................................................................................................	13
RISK IDENTIFICATION AND ASSESSMENT ...........................................................................................................................	14
CREDIT RISK MANAGEMENT ...............................................................................................................................................	15
MARKET RISK MANAGEMENT .............................................................................................................................................	18
LIQUIDITY RISK MANAGEMENT ...........................................................................................................................................	20
NON-FINANCIAL RISK MANAGEMENT.................................................................................................................................	22
MODEL RISK MANAGEMENT ...............................................................................................................................................	24
COMPLIANCE RISK MANAGEMENT......................................................................................................................................	25
ANTI-FINANCIAL CRIME RISK MANAGEMENT.....................................................................................................................	26
RISK AND CAPITAL PERFORMANCE ....................................................................................................................	27
REGULATORY CAPITAL ........................................................................................................................................................	27

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DB USA Corporation

Pillar 3 Report 2020

MINIMUM CAPITAL REQUIREMENTS AND ADDITIONAL CAPITAL BUFFERS..........................................................................	28
RECONCILIATION OF FINANCIAL AND REGULATORY BALANCE SHEET ..............................................................................	30
EXPOSURES AND RISK-WEIGHTED ASSETS.........................................................................................................................	32
CREDIT RISK EXPOSURE......................................................................................................................................................	35
CREDIT RISK AND CREDIT RISK MITIGATION ........................................................................................................................	41
IMPAIRMENTS ......................................................................................................................................................................	44
SUPPLEMENTARY LEVERAGE RATIO ...................................................................................................................................	46
LIQUIDITY COVERAGE RATIO...............................................................................................................................................	48
EMPLOYEE COMPENSATION REPORT................................................................................................................	50
OVERVIEW ON COMPENSATION DECISIONS FOR 2020......................................................................................................	50
REGULATORY ENVIRONMENT .............................................................................................................................................	51
COMPENSATION GOVERNANCE...........................................................................................................................................	52
COMPENSATION STRATEGY ................................................................................................................................................	53
GROUP COMPENSATION FRAMEWORK ...............................................................................................................................	54
DETERMINATION OF PERFORMANCE-BASED VARIABLE COMPENSATION.........................................................................	55
VARIABLE COMPENSATION STRUCTURE ............................................................................................................................	56
EX-POST RISK ADJUSTMENT OF VARIABLE COMPENSATION ............................................................................................	57
EMPLOYEE GROUPS WITH SPECIFIC COMPENSATION STRUCTURES.................................................................................	59
MATERIAL RISK TAKER COMPENSATION DISCLOSURE ......................................................................................................	60

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DB USA Corporation

Pillar 3 Report 2020

Introduction

Disclosures according to Pillar 3 of the Basel 3 Capital Framework

The purpose of this Report is to provide Pillar 3 disclosures for DB USA Corporation ("DB USA Corp") as required by the regulatory framework for capital & liquidity, established by the Basel Committee on Banking Supervision, also known as Basel 3. On a European level these are implemented in the disclosure requirements pursuant to Part Eight of the "Regulation (EU) No 575/2013 on prudential requirements for credit institutions and investment firms" (Capital Requirements Regulation, or "CRR") and the "Directive 2013/36/EU on access to the activity of credit institutions and the prudential supervision of credit institutions and investment firms" (Capital Requirements Directive 4, or "CRD 4"). Germany implemented these CRD 4 requirements into national law in Section 26a of the German Banking Act ("Kreditwesengesetz" or "KWG"). Per regulation it is not required to have Pillar 3 disclosures audited. As such the information provided in this Pillar 3 Report is unaudited.

Additional Disclosure Requirements for Significant Subsidiaries

In line with Article 13 (1) CRR significant subsidiaries and those subsidiaries which are of significance for their local market are required to disclose information to the extent applicable in respect of own funds, capital requirements, capital buffers, credit risk adjustments, remuneration policy, leverage and use of credit risk mitigation techniques on an individual or sub-consolidated basis.

In order to identify significant subsidiaries a catalogue of criteria has been developed, applied to all subsidiaries classified as "credit institution" or "investment firm" under the CRR and not qualifying for a waiver status pursuant to Section 2a KWG in conjunction with Article 7 CRR. A subsidiary is required to comply with the requirements in Article 13 CRR (as described above) if at least one criterion mentioned in the list below has been met. The criteria have been defined in relation to our business activities as well as the complexity and risk profile of the respective subsidiary. All figures referenced below are calculated on an IFRS basis, where applicable, as of December 31, 2020:

• Total Assets of € 30 billion or more (on individual or sub-consolidated basis)
• Five percent or more of our risk-weighted assets (RWA) on group level
• 20 percent or more of the gross domestic product in its respective country, in which the subsidiary is located, but at least total assets of € five billion (on individual or sub-consolidated basis)
• Institutions directly supported by the European Stability Mechanism (ESM), European Financial Stability Facility (EFSF) or similar mechanisms
• Institutions belonging to the three largest institutions in their respective countries, in which the subsidiary is located (referring to the amount of total assets)
• Classification as "local systemically important institution" by the local competent authority

As a result of the selection process described above, DB USA Corp has been identified as "significant" for the Group and hence required to provide additional disclosure requirements in accordance with Article 13 CRR:

DB USA Corp publishes the Pillar 3 disclosure report on a quarterly basis on its website at https://www.db.com/ir/en/reports-and- events.htm.

All financial information disclosed is presented in USD and is rounded to the nearest million, with exception to certain tables in the Remuneration section which are reported in Euro. The consolidated financial balance sheet is based on DB USA Corp financial statements prepared in accordance with U.S. generally accepted accounting principles (US GAAP). Regulatory capital and credit exposure disclosures are based on DB USA Corp Consolidated Financial Statements for Holding Companies (FR Y- 9C).

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DB USA Corporation

Pillar 3 Report 2020

Location of Pillar 3 disclosures

The following table provides an overview of the location of the required Pillar 3 disclosures in this Pillar 3 Report.

Pillar 3 requirements topic with reference	Primary location in this report
to CRR-Article
Main features of the CET1, AT1 and Tier 2		"Regulatory Capital"
instruments, and reconciliation of		"Reconciliation of Financial and Regulatory Balance Sheet"
filters/deductions applied to own funds and
balance sheet (Article 437)
Compliance to own funds requirements		"Regulatory Capital table" table
(Article 92)		"Regulatory Capital Requirements and Risk-weighted Assets"
		table
Approach to assessing the adequacy of		"Internal Capital Adequacy Assessment Process" section
internal capital to support current and future
activities (Article 438 (a)
Risk-weighted exposure amounts (Article		"Gross exposure by asset class and geographical region" table
438 (c)-(f)		"Gross exposure by class and residual maturity" table
		"Exposure values in the standardized approach by risk weight"
		table
Capital buffer (Article 440)		"Minimum capital requirements and additional capital buffers"
		section.
		"Gross exposure by class and geographical region" table
Credit risk adjustments: information		"Impairment loans, allowance for loan losses and coverage ratio
regarding exposure to credit risk and dilution		by business divisions" table
risk (Article. 442)		"Impairment loans, allowance for loan losses and coverage ratio
		by industry" table
		"Impairment loans, allowance for loan losses and coverage ratio
		by region" table
		"Impaired Loans" table
Remuneration policy (Article 450)		"Remuneration policy" section
Leverage (Article 451)		"Supplemental Leverage Ratio" section
Liquidity		"Liquidity" section
Use of credit risk mitigation techniques		"Credit risk management" section
(Article 453)

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