COMMERZBANK AKTIENGESELLSCHAFT

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Commerzbank AG
The Board of Managing Directors of Commerzbank is responsible for ensuring the effec-
tive management of market price risk throughout the Commerzbank Group. Specific levels of
authority and responsibility in relation to market risk management were assigned to the
respective market risk committees. Within the Bank various market risk committees are
established, in which segment representatives discuss current risk positioning issues and
management measures with the Risk Function and with Finance. The Segment Market Risk
Committee meets weekly and focuses on Corporates & Markets, Public Finance, PRU and
Treasury. The Group Market Risk Committee, which meets monthly, in addition deals with
the market risk position in Commerzbank Group and the remaining business divisions.
The risk management process (risk identification, risk measurement, management, limitation
and reporting) is the responsibility of Market Risk Management in functional terms. The
centralised market risk management function is supplemented by decentralised market risk
management units at segment level, in both regional units and subsidiaries.
As the central and local risk management is closely interlocked with the business units, the
risk management process already starts in the trading units. The trading units are in particular
responsible for the active management of the market risk position (e.g. pricing, increasing
or decreasing exposure and hedging).
Market risk management
Commerzbank uses a wide range of quantitative and qualitative tools to manage and monitor
market price risks. The main guidelines are set in the market risk strategy approved by the
Board of Managing Directors. Quantitative targets for sensitivities, value at risk, stress tests
and scenario analyses as well as for economic capital limit the market risk. Guidelines for
portfolio structure, new products, maturity limits or minimum ratings are designed to ensure
the quality of market risk positions. All the different factors are weighted individually for
each segment in the market risk grid (high, medium and low relevance) as part of the market
risk strategy. Hereby the varying relevance of the parameters for the management of the
segments with regard to the business strategy is allowed for.
The quantitative and qualitative factors limiting market price risk are determined by the
market risk committees. The utilisation of these limits, together with the relevant net income
figures, is reported daily to the Board of Managing Directors and the responsible heads of
the business segments. Based on qualitative analyses and quantitative ratios the market risk
function identifies potential future risks, anticipates, in collaboration with Finance, potential
financial losses, and draws up proposals for further action, which are discussed with the
market units. Voting on the proposed measures or risk positions takes place in the aforementioned
market risk committees and is subsequently submitted to the Board of Managing
Directors for approval.
The management of intra-risk concentration is already a component of market risk management
due to the existing limit system for market risks amongst other things. Risk concentrations
are contained directly with specific limits or are indirectly avoided (for example,
using stress test limits). In addition, the combination of various conventional risk measures
(for example, VaR, sensitivities) ensures the appropriate risk management of concentrations.
In addition Risk drivers are analysed on a regular basis in order to identify concentrations.
The risk management of existing concentrations is thus reviewed and, where necessary,
supplemented by targeted measures (for example, limits, processes). Situation-driven
analyses of existing concentrations are another tool used in the timely and adequate management
of concentrations.