Deutsche Bank : Pillar 3 Report 2020 - Update

Deutsche Bank

Pillar 3 Report 2020

Contents 

5	Regulatory framework
5	Introduction
5	Basel 3 and CRR/CRD

1. TLAC and European MREL (SRMR / BRRD)

1. ICAAP, ILAAP and SREP

1. Prudential measures for non-performing exposure
2. Measures in context of COVID-19 pandemic
3. General requirements for

disclosures

9 Article 431 (1) CRR - Pillar 3 disclosure concept

9 Article 431 (2) CRR - Information on operational risk methodologies

1. Article 431 (3) CRR - Disclosure policy
2. Article 431 (4) CRR - Explanation of rating decisions

1. Article 432 CRR - Non-material, proprietary or confidential information

1. Article 433 CRR - Frequency of disclosure

1. Article 434 CRR - Means of disclosure

12 Risk management objectives and policies

12 Article 435 (1)(a) CRR - Risk management strategies and processes

1. Article 435 (1)(b) CRR - Risk management structure and organization
2. Article 435 (1)(c) CRR - Scope and nature of risk measurement and reporting systems
3. Article 435 (1)(d) CRR - Policies for hedging and mitigating risk

1. Article 435 (1)(e) CRR - Declaration on the adequacy of­ risk management arrangements
2. Article 435 (1)(f) CRR - Concise risk statement approved by the board

15 Article 435 (2)(a) CRR -Number of directorships held by board members

1. Article 435 (2)(b) CRR - Recruitment policy for board members
2. Article 435 (2)(c) CRR - Policy on diversity for board members

1. Article 435 (2)(d- e)CRR - Risk committee and information flow
2. Scope of application of the

regulatory framework

17 Article 436 (a) CRR - Name of the institution

17 Article 436 (b) CRR - Difference in basis of consolidation for accounting and prudential purposes

1. Article 436 (c) CRR - Impediments to fund transfers

1. Article 436 (d) CRR - Potential capital shortfalls in unconsolidated subsidiaries

1. Article 436 (e) CRR - Derogations from prudential or liquidity requirements for subsidiaries

25 Own funds

25 Article 437 (1)(a,d- e)CRR - Own Funds composition, prudential filters and deduction items

1. Disclosures under Article 473a CRR - Transitional arrangements for mitigating the impact of the introduction of IFRS 9 on own funds
2. Article 437a (a- d)CRR - Own funds and eligible liabilities

1. Article 437 (1)(b- c)CRR - Main features of capital instruments

1. Article 437 (1)(f) CRR - Capital ratios different to CRR

36 Capital requirements

36 Article 438 (a) CRR - Summary of Deutsche Bank's ICAAP approach

1. Article 438 (b) CRR - SREP requirements
2. Article 438 (c- f)CRR - Overview of capital requirements
3. Article 438 CRR - Specialized lending and equity exposures in the banking book
4. Article 438 CRR - Othernon-credit obligation assets in

the banking book

1. Article 441 CRR - Indicators of global systemic importance

1. Article 440 CRR - Capital buffers
   43 Minimum capital requirements and additional capital buffers
   45 Article 440 (a) CRR - Geographical distribution of credit exposures
   50 Article 440 (b) CRR - Institution specific
   countercyclical­capital buffer

51 Credit risk and credit risk mitigation

51 General qualitative information on credit risk

51 Article 442 (a) CRR - Definitions of past due and impairment

1. Article 442 (b) CRR - Credit risk adjustments

51 General quantitative information on credit risk

1. Article 442 (c) CRR - Total and average amount of credit exposure by exposure classes
2. Article 442 (d) CRR - Geographic distribution of credit exposure

60 Article 442 (e) CRR - Distribution of credit exposure by industry type

66 Article 442 (f) CRR - Residual maturity breakdown of credit exposure

68 Article 442 (g) CRR - Defaulted exposures by regulatory exposure class and industry

72 Article 442 (h) CRR - Defaulted exposures by geographical area, past due, nonperforming and

forborne exposures

1. Minimum loss coverage for Non Performing Exposure
2. Exposures subject to measures applied in

response to the COVID-19 pandemic

87 Article 442 (i) CRR - Development of credit risk adjustments and defaulted loans and debt securities

88 General qualitative information on credit risk mitigation 88 Introduction

89 Article 453 (a) CRR - Use of on- and off-balance sheet netting

89 Article 453 (b) CRR - Collateral evaluation and management

89 Article 453 (c) CRR - Main types of collateral

89 Article 453 (d) CRR - Main types of guarantor and credit derivative counterparties

89 Article 453 (e) CRR - Risk concentrations within credit risk mitigation

90 General quantitative information on credit risk mitigation

90 Article 453 (f - g)CRR - Overview of credit risk mitigation techniques

93 Credit risk exposure in the standardized approach

93 Qualitative information on the use of the standardized approach

93 Article 444 (a- b)CRR - External ratings in the standardized approach

93 Article 444 (c) CRR - Usage of issue ratings

93 Article 444 (d) CRR - Mapping of external rating

to credit quality steps

93 Quantitative information on the use of the standardi- zed approach­

93 Article 444 (e) CRR - Standardized approach exposure by risk weight before and after credit mitigation

97 Credit risk exposure and credit risk mitigation in the internal-rating-­ based approach

97 Qualitative information on the use of the IRB approach

97 Article 452 (a) CRR - Approval status for IRB approaches

97 Article 452 (b)(i) CRR - Mapping of internal rating scales to external ratings

98 Article 452 (b)(ii) CRR - Use of internal ratings

98 Article 452 (b)(iii) CRR - Management and recognition of credit risk mitigation

98 Article 452 (b)(iv) CRR - Controls around rating systems

98 Article 452 (c) CRR - Internalrating-based

approaches

101 Quantitative information on the use of the IRB approach

101 Article 452 (d - g)CRR - Advanced IRB exposure

110 Article 452 (d - g)CRR - Foundation IRB exposure

115 Article 453 (j) CRR - Total IRB exposure covered by credit derivatives

115 Article 438 (d) CRR - Development of credit risk

RWA

116 Article 452 (h - i)CRR - Model validation results and expected versus actual losses

126 Article 452 (j) CRR - IRB exposure by country where Deutsche Bank operates

138 Counterparty credit risk (CCR)

1. Article 439 (a) CRR - Internal capital and credit limits for counterparty credit risk exposures
2. Article 439 (b) CRR - Collateral and credit reserves for counterparty credit risk

139 Article 439 (c) CRR - Management of wrong-way risk exposures

139 Article 439 (d) CRR - Collateral in the event of ­a rating downgrade

139 Article 439 (f) CRR - CCR exposures by model approach

141 Article 444 (e) CRR - CCR exposures in the standardized approach

143 Article 452 (e) CRR - CCR exposures within the advanced IRBA

148 Article 452 (e) CRR - CCR exposures within the foundation IRBA

1. Article 438 (d) CRR - Development of CCR RWA

1. Article 439 (e) CRR - CCR exposures after credit risk mitigation
2. Article 439 (g-h)CRR - Credit derivatives exposures
3. Article 439 (i) CRR - Estimate of alpha factor

1. Economic capital usage for credit risk
2. Market risk

154 Own funds requirements for market risk under the standardized approach

154 Article 445 CRR - Market Risk Standardized Approach

154 Qualitative information on the internal model approach

154 Article 455 (a)(i) CRR - Characteristics of the market risk models

156 Article 455 (a)(ii) CRR - Incremental risk charge

157 Article 455 (a)(iii) CRR - Market risk stress testing

157 Article 455 (a)(iv) CRR - Methodology for backtesting and model validation

158 Article 455 (b) CRR - Regulatory approval for market risk models

158 Article 455 (c) CRR - Trading book allocation and

prudent valuation

159 Own funds requirements for market risk under the IMA 159 Article 455 (e) CRR - Regulatorycapital

requirements for market risk

161 Other quantitative information for market risk under the internal models approach

161 Article 455 (d) CRR - Overview of Value-at-Risk Metrics

161 Article 455 (f) CRR - Weighted average liquidity horizons in market risk models

161 Article 455 (g) CRR - Comparison of end-of-day VaR measures with one-day changes in portfolio's value

161 Economic capital demand for our trading market risk

162 Economic capital demand for our nontrading

market risk portfolios per business area

163 Operational Risk

1. Article 446 CRR - Operational risk measurement
2. Article 446 CRR - Operational risk exposure

1. Article 454 CRR - Use of the Advanced Measurement Approaches to operational risk
2. Exposures in equities in the

banking book

167 Article 447 (a) CRR - Accounting and valuation of equity investments

1. Article 447 (b) CRR - Equity investment exposure

1. Article 447 (c) CRR - Types and nature of equity exposures
2. Article 447 (d - e)CRR - Gains and losses from equity investments

168 Exposure to interest rate risk in the banking book  (Article­ 448 CRR)

169 Exposure to securitization positions

169 Article 449 (a) CRR - Objectives in relation

to securitization­activity

169 Article 449 (b) CRR - Nature of other risks in securitized assets

1. Article 449 (d-e)CRR - The roles played in the securitization process
2. Article 449 (c,f) CRR - Management of securitization positions, and risks in re-securitization activities

172 Article 449 (g) CRR - Policies with respect to hedging and unfunded protection

172 Article 449 (h) CRR - RWA calculation approaches

for securitization­positions

1. Article 449 (i) CRR - SSPEs related to institution

1. Article 449 (j) CRR - Accounting policies for securitizations

1. Article 449 (k) CRR - External rating agencies used for­ securitizations­

1. Article 449 (l) CRR - Internal Assessment Approach

1. Article 449 (m) CRR - Explanation of changes in quantitative disclosures
2. Article 449 (n) CRR - Banking and trading book securitization exposures

181 Article 449 (o)(i) CRR - Retained or purchased banking and trading book securitizations broken down by

	risk-weight bands
184	Article 449 (o)(ii) CRR - Retained or purchased
	re-securitization exposures for banking and trading
	book
185	Article 449 (p) CRR - Impaired assets and recognized
	losses related to banking book securitizations
185	Article 449 (q) CRR - Trading book securitization
	positions
185	Article 449 (r) CRR - Financial support to securitization
	vehicles

1. Remuneration policy (Article 450 CRR)
2. Leverage (Article 451 CRR)

1. Leverage Ratio according to CRR/CRD framework

1. Process used to manage the risk of excessive leverage

1. Factors that had an impact on the leverage ratio in the second half of 2020

189 Unencumbered assets (Article 443 CRR)

1. Liquidity

1. Business risk
2. List of tables

Deutsche Bank	Regulatory framework
Pillar 3 Report as of December 31, 2020	Basel 3 and CRR/CRD

Regulatory framework

Introduction

This report replaces the document published on March 12, 2021 and considers a net income of € 0.3 billion in CET1 capital based on the proposed shareholder dividend payment of zero and our AT1 coupon accrual of € 0.2 billion for the year-end 2020 which is in line with the ECB Decision (EU) 2015/656 in accordance with the Article 26(2) of Regulation (EU) No 575/2013 (ECB/2015/4).

This Report provides Pillar 3 disclosures at the consolidated level of Deutsche Bank Group (the Group) as required by the global regulatory framework for capital and liquidity, established by the Basel Committee on Banking Supervision, also known as Basel 3. At the European level these are implemented in the disclosure requirements as provided in Part Eight of the "Regulation (EU) 575/2013 on prudential requirements for credit institutions and investment firms" (Capital Requirements Regulation or "CRR") and the "Directive (EU) 2013/36 on access to the activity of credit institutions and the prudential supervision of credit institutions and investment firms" (Capital Requirements Directive or "CRD") which have been further amended with subsequent Regulations and Directives. Germany implemented the CRD disclosure requirements into national law in Section 26a of the German Banking Act ("Kreditwesengesetz" or "KWG"). Further disclosure guidance has been provided by the European Banking Authority ("EBA") in its "Final Report on the Guidelines on Disclosure Requirements under Part Eight of Regulation (EU) No 575/2013" ("EBA Guideline", EBA/GL/2016/11, version 2*). The information provided in this Pillar 3 Report is unaudited.

Due to rounding, numbers presented throughout this document may not add up precisely to the totals we provide and percentages may not precisely reflect the absolute figures.

Basel 3 and CRR/CRD

In the European Union, the Basel 3 capital framework is implemented by the amended versions of CRR and CRD. As a single rulebook the CRR is directly applicable to credit institutions and investment firms in the European Union and provides the grounds for the determination of regulatory capital requirements, regulatory own funds, leverage and liquidity as well as other relevant requirements. In addition, the CRD was implemented into German law by means of further amendments to the KWG and the German Solvency Regulation (SolvV) and accompanying regulations. Jointly, these laws and regulations represent the regulatory framework applicable in Germany.

Regarding the regulatory minimum capital requirements the CRR/CRD lays the foundation for the calculation of risk weighted assets (RWA) for credit risk, including counterparty credit risk, credit valuation adjustments, market risk and operational risk.

In January 2019, Regulations (EU) 2017/2401 and 2017/2402 introduced changes to the methodology for determining RWAs for new securitizations originated on or after January 1, 2019. All securitization transactions originated before this date remained subject to the rules introduced by CRR/CRD as applicable until December 31, 2018 and are subject to the new framework from January 1, 2020 onwards.

In May 2019, Regulation (EU) 2019/876 and Directive (EU) 2019/878 introduced amendments to the CRR/CRD with various changes to the credit risk RWA framework becoming applicable in June 2021. These legal acts relate. for example to the applicable risk weights for banking book investments in collective investment undertakings or the replacement of the mark-to-market method to determine the exposure value for derivatives that are not in scope of the internal model method by a new standardized approach to determine counterparty credit risk (SA-CCR).

As a reaction to the COVID-19 outbreak, certain legislative changes to the prudential framework have been made and are applicable since the second quarter reporting. Regulation (EU) 2020/866 increases the diversification benefit applicable to aggregate additional value adjustments from 50 % to 66 % until year end 2020. Regulation (EU) 2020/873 introduces various changes to the determination of risk weighted assets and the leverage exposure. For example the risk weights applicable to certain small or medium-sized enterprise (SME) are reduced by applying scaling factors depending on the exposure value. With respect to the leverage exposure, for example cash receivables and cash payables are offset where the related regular-way sales and purchases are both settled on a delivery-versus-payment basis. In addition certain Euro-based exposures facing Eurosystem central banks may be excluded from the leverage exposure subject to having obtained permission from the European Central Bank. Based on Decision (EU) 2020/1306 of the European Central Bank, the Group was allowed for the first time in the third quarter reporting to exclude these exposures from the leverage exposure. This exclusion currently applies until June 27, 2021.

A further core element of the CRR/CRD framework is the development and maintenance of a high quality capital base which should primarily consist of Common Equity Tier 1 (CET 1) capital. The CET 1 minimum capital requirement applicable to the5 Group is 4.5 % of risk-weighted assets. In addition to this minimum capital requirement, various capital buffer requirements