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 income for the period 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 trading, investing and banking as well as 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, 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. 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 appropriateness of 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 equity is available to cover all material risks. The risk management system is therefore in line with the comdirect profile and strategy.

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

The Risk Management department is responsible for risk controlling at the operational level and reports directly to the CFO. 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.

The task of the Risk Management department is to identify, measure, assess and manage as well as monitor and communicate all risks in the respective risk categories. It has the powers it needs to execute this task. 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 risk concentrations into account, tolerances are set for all material risks as part of the risk strategy, which is updated at least once a year. The guidelines for risk provisioning and reduction are also derived from these. The effect of the existing risk concentrations is also analysed across all risk types.

Comprehensive and up-to-date risk reporting forms an essential part of the risk management system. The Board of Managing Directors and the Supervisory Board receive regular risk status reports in a timely manner. 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. This allows us to identify at an early stage any developments that require countermeasures.

comdirect has an escalation process in place for risk provisioning and reduction in the event that the specified risk tolerances are exceeded. In addition to ad hoc reporting to the comdirect Board of Managing Directors and, if necessary, also to the Supervisory Board, this process entails regulation of the measures implemented for risk reduction.

Internal Audit regularly checks the functionality and suitability of risk management activities pursuant to MaRisk.

The scope of risk consolidation is the same as the group of consolidated companies.

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) in connection with article 7 CRR. As a subsidiary of the Commerzbank Group, it is exempt from applying the regulations of sections 2 – 5 CRR (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 of Basel III as follows:

  • The equity requirements relate to the provisions for measuring equity, compliance with capital ratios and the provision of capital buffers. Compliance with these requirements is assured at group level by the parent company, Commerzbank AG. 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 liquidity coverage requirements, i.e. the calculation of the key figures LCR and NSFR, are substantiated in section 6 of the CRR. At comdirect, the key figures are calculated monthly for internal control purposes and reported at individual institution level in accordance with the regulatory requirements (LCR monthly, NSFR quarterly) and additionally included in Commerzbank group reporting.
  • The leverage ratio requirements are implemented for the Commerzbank Group as a whole by the parent company, Commerzbank AG.
  • Compliance with the provisions governing increased credit value adjustments for counterparty risks is also ensured for the Commerzbank Group as a whole by the parent company, Commerzbank AG.
  • The operational risk requirements are handled for the Commerzbank Group as a whole by the parent company, Commerzbank AG.