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Risk-oriented global bank management

The overall aim of comdirect is to increase the value of the company on a sustainable basis with a manageable level of risk at all times, whilst striking a balance between attractive earnings and the creation of future earnings potential through customer and asset growth.

comdirect pursues business models, which are geared towards generating net commission income and net interest income in brokerage, banking and advice. The associated risks are transparent and limits are set for risks which can be quantified and compliance with these limits is monitored on a continual basis.

We do not assess risks on an isolated basis but as an integral part of global bank management. In every market and corporate phase, the aim is to secure an optimum risk/return ratio taking external and internal influencing factors into consideration and allowing for comdirect’s risk-bearing capacity as well as regulatory requirements.

A consistent risk strategy is developed on the basis of comdirect’s business strategy and adopted by the Board of Managing Directors of comdirect bank AG. This strategy specifies the extent to which comdirect is prepared to take on risk to utilise opportunities and to provide the equity to do this. Specific sub-strategies for all material individual risks were defined in the overall risk strategy.

In accordance with the stipulations of the minimum requirements for risk management (MaRisk), we have established a process for planning, adjusting, implementing and assessing our strategies that facilitates a target/actual comparison of objectives and the level of implementation achieved.

Risk management

Our risk management system forms the basis for implementation of the risk strategy. The system enables us to identify risks at an early stage, assess them under various assumptions and scenarios, and carefully manage them. We are therefore in a position to take measures immediately to counter risks in the event of any unwanted developments. The procedures with which we measure, aggregate and manage risks are enhanced continually on a best practice basis. In this respect, we are closely integrated into the risk management systems of the Commerzbank Group.

The comdirect bank Board of Managing Directors is responsible for the risk management system. The Board specifies the permissible overall risk and its allocation across the individual types of risk and business divisions. The Internal Capital Adequacy Assessment Process (ICAAP) ensures that sufficient capital is available to cover all material risks.

At comdirect, the CFO (Chief Financial Officer) – independent from the overall responsibility of the Board of Managing Directors – is responsible for monitoring and implementing the risk strategy.

The task of risk management is to identify, measure, assess and manage as well as monitor and communicate all risks in the respective risk categories. The management is carried out partly on a centralised basis, for market and liquidity risks for instance, and partly on a decentralised basis, as in the case of operational risks (OpRisk) and reputation risks. With the aid of a risk inventory we obtain a regular overview of the material risks and examine whether and to what extent these risks may adversely affect the capital resources, earnings situation or liquidity situation. Taking account of risk concentrations, tolerances are set for all material risks and the effect of such concentrations is also analysed across all risk types.

The Risk Management department is responsible for risk controlling. It monitors, evaluates and aggregates risks for the bank as a whole. In addition, the department implements the corresponding regulatory requirements and monitors compliance with them.

Comprehensive and up-to-date risk reporting forms an essential part of the risk management system. The Board of Managing Directors receives regular risk status reports. Key risk ratios are included in the overall management of comdirect. Risk status reports provide information on the current development of major risk categories among other things. Thus we promptly identify developments that require countermeasures.

Internal Audit regularly checks the functionality and suitability of risk management activities pursuant to the minimum requirements for risk management (MaRisk).

Inclusion in the Commerzbank Group

comdirect is included in the risk management processes of the Commerzbank Group to identify, measure, assess and manage as well as monitor and communicate risks. Against this backdrop, the bank makes use of the “waiver regulation” under Section 2a of the German Banking Act (KWG). As a subsidiary of the Commerzbank Group, it is exempt from applying the regulations of Section 10 of the German Banking Act (KWG) (Reporting of own funds to the Federal Financial Supervisory Authority) and Section 13 of the German Banking Act (KWG) (Notification of major loans of more than 10% of the liable capital to Deutsche Bundesbank).

As a result of this integration, comdirect meets the requirements in the three pillars of Basel II as follows:

  • The first pillar of Basel II relates to the approaches for measuring credit, market and operational risk, which are used to calculate the minimum capital requirements of a bank. For internal management purposes as well as for the Commerzbank Group’s risk management, we determine the overall risk position of comdirect using advanced procedures. Credit risk is mostly assessed using the Advanced Internal Ratings Based Approach (AIRB). With regard to operational risks, comdirect uses the Advanced Measurement Approach (AMA).
  • The minimum requirements for risk management for banks and financial services institutions (MaRisk), the second pillar of Basel II, are complied with throughout the comdirect group. These relate to the implementation of internal procedures, which are to be checked by the regulatory authorities and are used among other things to assess the risk situation and appropriate capital resources, which are based on the respective risk profile of comdirect.
  • The third pillar of Basel II relates to the disclosure of risks. Here the parent company, Commerzbank AG, meets the requirements for compliance for the Commerzbank Group as a whole.

Adjustments during the reporting year

On 24 September 2012, we extended the product offering in customer credit business with the new Visa card credit product (debiting at weekly intervals). The new credit product was integrated into comdirect’s risk management system, in particular through the use of a correspondingly precise and adequately conservative rating model. This expansion of lending business only led to a minor rise in the economically required capital for credit risks in the ICAAP.

Furthermore, as part of the risk inventory carried out during the financial year, reputation risk, which previously was assessed and managed as part of OpRisk management, was classified as a separate material type of risk.