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Credit risk

Risk quantification, management and reporting

Credit risks at comdirect primarily exist in the form of counterparty and issuer risks as a result of trading transactions. In addition, retail lending involves credit risks.

Treasury acts as the front office for counterparty and issuer risks and Customer Services fulfils this function for retail lending. In accordance with MaRisk, other tasks are to be carried out by departments other than the front office departments. The back office tasks for retail lending and the function of risk controlling are carried out by the Risk Management department. The Finance department is responsible for the settlement of trading transactions.

Trading transactions in Treasury are conducted within the limits approved by the Board of Managing Directors of comdirect bank AG as well the Group-wide requirements of Commerzbank. These limits are defined for both the respective counterparties and issuers as well as the underlying transactions. In the capital market, in principle, comdirect only takes direct positions in the investment grade segment, that is with an external rating of BBB– (Standard & Poor’s) or Baa3 (Moody’s) or better. When assessing the credit rating, comdirect uses both the internal ratings of Commerzbank AG – in accordance with the AIRB approach – as well as those of the external rating agencies.

In retail lending, a distinction is made between the customer credit products loans against securities, the overdraft facility on the comdirect current account and the Visa credit card launched in September 2012. Loans against securities are secured by pledged securities. Potential losses may arise if the price of the pledged securities falls as a result of the general market development or specific market risks of individual securities and it is no longer sufficient to secure the claims on customers. The decision to provide the loan is made with the aid of internal scoring models.

comdirect maintains an early warning system for the credit risks associated with the customer credit business. The necessary adjustments or cancellations of credit lines are carried out immediately.

Credit risks are quantified on a monthly basis by calculating the credit value-at-risk (CVaR) for trading transactions (excluding intragroup receivables) and retail lending. The method is described in detail in note (56).

Specific loan loss provisions are recognised separately for each product type for customers in the significant lending business, provided a Basel II default criterion applies to those customers.

Portfolio loan loss provisions are recognised for all other customers with claims and/or existing credit lines. The level is primarily influenced by

  • the level of claims and open lines, taking conversion factors into consideration,
  • the level of the expected probability of default,
  • the consideration of existing collateral and the recovery rate.

Called-in claims, which we hand over to collection agencies for recovery, are written down in the amount of the loss incurred.

Current risk situation

At the end of 2012, the total CVaR for credit risks amounted to €66.5m (previous year: €61.1m). The average rating in the Treasury portfolio outside the Commerzbank Group stood at Aa1 compared with Aa3 in the previous year (Moody’s). In terms of external ratings, around 95% of the portfolio remained within the investment grade range.

At the end of 2012, 14% (previous year 10%) of the banking book portfolio was invested short term in the money market. The share of capital market investments decreased accordingly, with the investment focus on promissory notes as in the previous year. Of the capital market investments, €0.49bn (previous year: €0.42bn) was attributable to five special funds, which were invested almost exclusively in fixed-income securities (see note (70)).

As in the previous year, more than 90% of the portfolio was ascribed to German counterparties, with the rest primarily accounted for by other European countries with a focus on Northern Europe.

As of 31 December 2012, less than 0.1% (end 2011: 0.6%) of the balance sheet total was attributable to Treasury positions in the so-called “PIIGS” nations. Here we are continuing to pursue our strategic aim of reducing the positions subject to intensive monitoring, if necessary through disposals prior to final maturity when market opportunities arise.

In comdirect’s retail lending, the average total utilisation of loans against securities declined significantly compared with the previous year. At €2.53bn, the credit facility for loans against securities remained virtually unchanged on the level at the end of 2011 (€2.59bn). However, potential utilisation of the credit facility is restricted through the specific collateral value of the respective securities portfolio. As a result of the recovery in the equity markets, this increased over the course of the year from €766m to €791m. Equities accounted for nearly three quarters of the collateral portfolio. Despite the slight price correction in the second quarter, the number and volume of overdrafts on average in the financial year was lower than the respective figure for 2011. For this reason, considerably fewer default action processes were started. On average during the reporting year, taking account of collateral values, the utilisation rate of the credit facility provided for loans against securities stood at 17.1% (previous year: 19.5%); as of year-end 2012, the volume of loans against securities amounted to €124m (previous year: €150m).

The increased number of current accounts with a credit facility associated with the growth in current accounts led once again to greater utilisation of credit lines than in the previous year. The volume rose over the course of the year from €31.2m to €32.9 as of 31 December 2012; this equated to 5.3% of the overdraft facilities of €619m made available (end 2011: €565m). Over the course of the year, the share of overdrafts declined relative to the number of current accounts with an overdraft facility.

As of 31 December 2012, the credit volume utilised in the Visa card portfolio totalled €10.1m, corresponding to 1.6% of the total limit granted of €626m.

At the end of 2012, the total receivables in retail lending amounted to €173.2m and were therefore somewhat lower than in the previous year (€188.7m). Portfolio loan loss provisions and provisions for possible loan losses amounted to €6.7m as of the reporting date. Appropriations stood at €5.6m (including one-off effect from introduction of Visa credit card), while reversals amounted to €1.9m and utilisation was €0.3m.