New Collateral Framework

Transcription

1 New Collateral Framework Commercial Loans (credit claims) as Collateral June 19, 2007

2 Amendments have made the process more attractive Until 2007 From 2007 onwards Manual, paper-based process Debtor need to be notified High credit rating requirements but public sector excluded Restrictions on remaining maturity (one month to two years) Debtor located in Germany only Creditworthiness check only by Bundesbank Schuldscheindarlehen ( promissory notes ) possible Automated, electronic process debtor notification required ( stille Zession ) Public sector included restrictions on remaining maturity Debtor located in Euroland Various approaches for credit assessment Schuldscheindarlehen ( promissory notes ) possible

3 Strengths and Weakness Commercial loans as collateral offer stability at relatively low opportunity costs: Strengths Stability (compared to a buy&hold securities portfolio) Lower opportunity costs (compared to trading book) Collateral Types in Comparision Flexibility (Amount) Stability Costs [Bonds] Buy & Hold [Bonds] Trading Book o [Bonds] Reverse Repo Weakness: Volume of commercial loans cannot easily be expanded indefinitely Commercial loans are a lower-cost substitute for part of a buy&hold portfolio Commercial Loans

4 Why does the technical upgrades help? Changes in our collateral portfolio at the Bundesbank are to be reported on a daily basis Special pay-downs Changes in credit rating Roll-overs etc Providing great numbers of individual commercial loans as collateral would be impossible without technical advances implemented in new approach Partial submissions of commercial loans are not allowed (no buffers possible)

5 Status Quo at Deutsche Bank Amendments and new system ( KEV ) successfully implemented Active participant from Day One on while no pledging of commercial loans took place before changes Share of commercial loans as collateral for our RTGS portfolio has increased to 5% from 0% more additions planned for 2007 and 2008 to increase share of commercial loans in our RTGS portfolio

6 Issues to be considered European-wide, standardized process to provide commercial loans as collateral harmonization Rules for cross-border utilization Include loans based on British law (i.e. syndicated loans) Relatively restrictive requirements for creditworthiness Possible solution: allow other risk classes and apply higher haircuts to account for higher risk European-wide list of all public-sector-entity debtors Possibility of submitting an entire credit portfolio instead of single loans only

7 Process (carried out by GTB ALM) Single test cases with Bundesbank proofed the feasibility of the concept Controlling Informs Debtor and Receives Feedback Global Banking Data of potential loans provided by GB BAC GTB / ALM Database Loan in CAST/GATE or not securitized Yes Approval from Relationship Manager Yes Contract contains ATC Yes Provide list of pledged loans to controlling Update Loan not pledged to Bundesbank Debtor signs supplementary document Obtain list of accepted loans from Bundesbank Update Inform Relationship Manager Submit information to Bundesbank: Pledge loans to Deutsche Bank security pool Yes Bundesbank accepts loan Name and postal address of debtor Amount Maturity Unique Reference Bundesbank

8 Pledging Collateral outlook 2007 and beyond Minimum residual maturity Maximum residual maturity Current Rules for Germany 1 Month 2 Years harmonised EU Rules Restrictions Minimum amount EUR EUR *) Denomination currency Euro Euro Debtor residence Germany Country of ESCB Credit assessment of enterprise Other Items Debtor of bank loan evaluated as eligible by Deutsche Bundesbank Granted under German law credits in current account Rating Agencies IBR-Rating (Basel II) Assessment of Central Bank Rating-Tools *) to be reviewed in 2010 and potentially increased to EUR 500,000 from 2012 onwards From 2007 onwards Deutsche Bank will be able to pledge commercial loans from any country of the Euro area as collateral.