Decibel Cannabis Company
Annual Report 2020

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Deutsche Bank Annual Report 2020 Deutsche Bank Annual Report 2020 Deutsche Bank Management Board in the reporting year: Deutsche Bank Financial Summary Group financial targets Post-tax return on average tangible shareholders' equity1 Adjusted costs ex. transformation charges, in € bn.2 Cost/income ratio3 Common Equity Tier 1 capital ratio Leverage ratio (fully loaded) Statement of Income Total net revenues, in € bn. Provision for credit losses, in € bn. Total noninterest expenses, in € bn. Profit (loss) before tax, in € bn. Profit (loss), in € bn. Profit (loss) attributable to Deutsche Bank shareholders, in € bn. Balance Sheet Total assets, in € bn. Net assets (adjusted), in € bn. Loans (gross of allowance for loan losses), in € bn. Average Loans (gross of allowance for loan losses), in € bn. Deposits, in € bn. Allowance for loan losses, in € bn. Shareholders’ equity, in € bn. Resources Risk-weighted assets, in € bn. Thereof: Operational Risk RWA, in € bn. Leverage exposure, in € bn. Tangible shareholders' equity (Tangible book value), in € bn.4 Liquidity reserves in € bn. Employees (full-time equivalent) Branches Ratios Post-tax return on average shareholders’ equity1 Provision for credit losses as % of average loans, in bps Loan-to-deposit ratio Leverage ratio (phase-in) Liquidity coverage ratio 2020 2019 0.2 % 19.9 88.3 % 13.6 % 4.7 % 24.0 1.8 21.2 1.0 0.6 0.1 (10.9) % 21.6 108.2 % 13.6 % 4.2 % 23.2 0.7 25.1 (2.6) (5.3) (5.7) Dec 31, 2020 Dec 31, 2019 1,325 963 432 438 568 4.8 55 329 69 1,078 49 243 84,659 1,891 0.2 % 41 76.0 % 4.8 % 145 % 1,298 946 434 419 572 4.0 56 324 73 1,168 50 222 87,597 1,931 (9.5) % 17 75.8 % 4.3 % 141 % Per Share information Basic earnings per share Diluted earnings per share Book value per basic share outstanding4 Tangible book value per basic share outstanding4 1 Based on profit (loss) attributable to Deutsche Bank shareholders after AT1 coupon. For further information, please refer to “Supplementary Information (Unaudited): Non- € 0.07 € 0.07 € 26.04 € 23.19 € (2.71) € (2.71) € 26.37 € 23.41 GAAP Financial Measures” of this report. 2 The reconciliation of adjusted costs is provided in section “Supplementary Information (Unaudited): Non-GAAP Financial Measures/ Adjusted costs” of this document. 3 Total noninterest expenses as a percentage of net interest income before provision for credit losses, plus noninterest income. 4 For further information please refer to “Supplementary Information (Unaudited): Non-GAAP Financial Measures” of this report. Due to rounding, numbers presented throughout this document may not sum precisely to the totals provided and percentages may not precisely reflect the absolute figures.  Content Deutsche Bank Group II V VII XIV XVII Letter from the Chairman of the Management Board Management Board Report of the Supervisory Board Supervisory Board Strategy 1 — Combined Management Report 4 34 41 52 166 214 215 219 221 225 225 Operating and financial review Outlook Risks and opportunities Risk report Compensation report Sustainability Employees Internal control over financial reporting Information pursuant to section 315a (1) of the German Commercial Code and explanatory report Corporate governance statement pursuant to sections 289f and 315d of the German Commercial Code Standalone parent company information (HGB) 2 — Consolidated Financial Statements 233 234 235 236 238 240 274 281 333 391 Consolidated statement of income Consolidated statement of comprehensive income Consolidated balance sheet Consolidated statement of changes in equity Consolidated statement of cash flows Notes to the consolidated financial statements Notes to the consolidated income statement Notes to the consolidated balance sheet Additional notes Confirmations 3 — Corporate Governance Statement / Corporate Governance Report 402 417 417 418 421 Management Board and Supervisory Board Reporting and transparency Related party transactions Auditing and controlling Compliance with the German Corporate Governance Code 4 — Supplementary Information 427 435 436 437 Non-GAAP financial measures Declaration of backing Group five-year record Imprint / publications  Deutsche Bank Group II V VII Letter from the Chairman of the Management Board Management Board Report of the Supervisory Board XIV Supervisory Board XVII Strategy Deutsche Bank Annual Report 2020 Letter from the Chairman of the Management Board Management Board in the reporting year: Letter from the Chairman of the Management Board Dear Shareholders, 2020 was a year that confronted the world with health, social and economic challenges that we could hardly have imagined. At the same time, our bank was in the middle of a fundamental transformation. However, we mastered these twin challenges better than expected. We are ahead of our strategic transformation plan. We have achieved all of our objectives over the past year. We recorded a pre-tax profit of more than 1 billion euros and net profit of 624 million euros. In other words, we have been able to more than offset the significant strains of the pandemic and ongoing burdens relating to our transformation. With hindsight, this demonstrates that our repositioning launched in summer 2019 was not only the right strategy, but that we also proceeded to implement it rigorously. Last year, we increased our revenues by 4 percent at Group level and by 6 percent in our Core Bank. Two factors drove this: firstly, we focused on business areas where we had a leading position. Secondly, as we demonstrated in this crisis, we are relevant to our clients, including corporates and sovereigns who had increased financing demands or private clients who wanted to secure their assets or needed flexibility on their loans. Businesses demonstrate their strengths during the crisis Across all our divisions, we have shown we are both flexible and resilient. In our Corporate Bank revenues fell in 2020 by two percent, but when adjusted for exchange rate effects remained in line with last year. We largely offset the revenue impact from interest rate headwinds as we entered into new pricing agreements relating to accounts, with almost 80 billion euros of client deposits by the end of 2020. We are also making progress in our identified growth areas, namely in the Asia-Pacific region where we increased revenues by 4 percent when adjusted for ex- change rate effects, and in payments globally where volumes with our fintech, ecommerce and platform clients grew by 20 percent. At the same time, we have also helped companies through the COVID-19 crisis, for example, we managed applications for more than 12 billion euros of government-sponsored loans in Germany and answered more than 250,000 inquiries to our Coronavirus Helpdesk. Our Investment Bank increased its revenues last year by one third. Major drivers were the significant financing needs of many corporates and sovereigns and the corresponding associated market activity, which we were well positioned to capture. In Debt Capital Markets last year, Deutsche Bank helped clients raise a record 1.7 trillion euros, an increase of 43 percent year-on-year. At the same time we gained market share and we outperformed the market in revenue growth in all four quarters in our Origination & Advisory (O&A) business. In Fixed Income & Currencies (FIC), we achieved double-digit revenue growth in every quarter and full year revenues were up 28 percent year-on-year, as clients are re-engaging with us across business lines. In FIC we also gained market share in the second half of the year. All of this makes us confident that a substantial portion of our revenue performance will prove to be sustainable, even if markets are set to normalise somewhat this year. In our Private Bank net revenues declined by 1 percent in 2020, but were stable if adjusted for specific items. We were able to offset low interest rates by, among other things, increasing fee income due to net inflows of 16 billion euros into investment products. In our International Private Bank we benefited from having continuously recruited client advisers over recent years. We also originated net new client loans of 13 billion euros. New mortgages for energy-efficient homes totalled 4 billion euros, an increase of almost 30 percent year-on-year. We also expanded our digital offerings. In 2020 the number of users and logins for the German private banking business mobile app increased by 35 percent. We also had a successful year in Asset Management. Assets under management rose to an all-time high of 793 billion euros. This was mainly due to net inflows of 30 billion euros. Almost one-third of this went into sustainable investment products, making us particularly well positioned in this growing area. II Deutsche Bank Annual Report 2020 Letter from the Chairman of the Management Board Management Board in the reporting year: While revenues fell slightly, DWS managed to keep its management fees broadly stable, despite the margin pressure in the industry and to significantly improve its adjusted cost-income ratio to 64 percent. Transformation on track despite the pandemic Thanks to our discipline, we have made further progress on costs throughout our bank, achieving our target of reducing adjusted costs excluding transformation costs and reimbursable Prime Finance expenses to 19.5 billion euros last year. By this measure, our cost base was almost 4.5 billion euros lower than in 2017 and we have reduced adjusted costs, excluding transformation charges and bank levies year-on-year for 12 consecutive quarters. To achieve our 2022 target, we must now reduce adjusted costs by a further 2.8 billion euros, which will require ongoing discipline as well as process and technology improvements. However, given our track record, we are confident that we will maintain our rigorous execution. We also invested in technology last year. During the COVID-19 crisis, our IT systems have proven they are stable, powerful and highly flexible. There were times when more than 70 percent of our global staff were working from home and they did so successfully. We also made progress with our major technology projects. We sold our subsidiary Postbank Systems as part of merging the IT systems in our Private Bank in Germany. Our partnership with Google Cloud is another major step forward, as we look to work with the world’s leading technology group to move our IT infrastructure into a modern and efficient environment, so that we can focus on designing innovative products for our clients and to constantly expand our digital offerings. Moreover, we have continued to strengthen our controls, spending approximately 2 billion euros in this area over the last two years. However, it is also clear that our controls have to continue to improve. In a world that is increasingly digital and complex, the demands on banks are growing day by day and we need to be prepared. Our Non-Financial Report 2020 contains more details on these topics. Credit loss provisions increased, as expected, accounting for 1.8 billion euros for the full year, in line with the guidance we gave as early as April 2020. This is a reflection of our very solid loan book and our conservative risk management. Our Common Equity Tier 1 (CET1) ratio of 13.6 percent at year-end was higher than expected. This was in part due to regulatory changes resulting from the coronavirus crisis, as well as our Capital Release Unit being able to reduce its risk-weighted assets faster than planned, at a lower cost than expected. Since the end of 2018, we have reduced our leverage exposure in the Capital Release Unit by roughly 75 percent and our risk-weighted assets by more than 50 percent. Therefore, we continue to have the financial strength to be a reliable partner for our clients. These figures reflect our employees’ successful efforts, for which the Management Board and the Group Management Com- mittee are very thankful. Our teams around the world have delivered and continue to deliver exemplary performance. We are seeing support within the bank grow to levels we have not seen for some time. 79 percent of staff support our strategy that is 10 percentage points higher than in the preceding year. Almost 90 percent are convinced that we are navigating the crisis well and our staff’s loyalty is the highest it has been since 2012. It is particularly important to note that we fundamentally changed the way we work. Our results would not have been possible if we had not put our clients further at the centre of our strategy and activities. In our home market, clients’ trust in our brand has reached the highest level in eight years. We are also seeing enormous momentum developing around the topic of sustainability, where we made good progress in 2020. In May, we set our target for 2025 of 200 billion euros in financing and assets under management which meet strict environmental, social and governance (ESG) standards. With 46 billion euros last year, we exceeded our first interim target by more than 100 percent. Our Non-Financial Report 2020 also contains more details on our efforts in sustainability. Outlook: on track for sustainable profitability A little over 18 months after the announcement of our new strategy, we have completed the most intense of our transformation phases. After these six quarters, we have already accounted for 85 percent of the transformation-related effects that we expected for the period up to 2022. This means we can now focus even more on our clients. This provides a solid foundation on which to build the next phase of our transformation this year, a phase in which we focus on sustainable profitability. This will require growth, while remaining disciplined on cost and capital and working consistently to strengthen our controls and processes. We know that we still have work to do, but we also know that we are on the right track. Challenges will continue to emerge during 2021, not least because the fight against the pandemic continues. Nevertheless, we expect economic activity to return in many markets that are important for our business, especially with the roll out of III Deutsche Bank Annual Report 2020 Letter from the Chairman of the Management Board Management Board in the reporting year: vaccination programmes. We had a strong start to 2021; however, we continue to expect Investment Bank revenues to decline year-on-year as industry volumes and volatility normalize from very high levels of activity in 2020. This is expected to result in marginally lower group revenues year-on-year before growth resumes in 2022 in line with the projections given at our Investor Deep Dive in December. At the same time, we expect loan loss provisions to decrease slightly in 2021 and to decline further in 2022. And we continue to see opportunities for the coming years. We are well positioned for an economic environment in which financing demands remain high, wealth preservation and global trade become more complex and sustainability rapidly gains in importance. The economy is facing major upheavals and we are being called on to support and help shape its transfor- mation. We are ideally positioned to do so and to benefit from these global trends. We are well on track to achieving a post-tax return on equity of 8 percent in 2022. Our aim is to achieve this sustainably, in both senses of the word, and we remain firmly committed to our plans to return 5 billion euros of capital to our shareholders from 2022. To do so, we must continue along this path, the path towards a bank that is sustainably profitable and that is even better positioned to be relevant for our clients, the economy and society. Best regards, Christian Sewing Chief Executive Officer of Deutsche Bank AG Frankfurt am Main, March 2021 IV Management Board Christian Sewing, * 1970 since January 1, 2015 Chairman of the Management Board Karl von Rohr, * 1965 since November 1, 2015 President Fabrizio Campelli, * 1973 since November 1, 2019 Chief Transformation Officer Frank Kuhnke, * 1967 since January 1, 2019 Chief Operating Officer Bernd Leukert, * 1967 since January 1, 2020 Chief Technology, Data and Innovation Officer Stuart Lewis, * 1965 since June 1, 2012 Chief Risk Officer James von Moltke, * 1969 since July 1, 2017 Chief Financial Officer Alexander von zur Mühlen, * 1975 since August 1, 2020 Regional CEO for Asia Pacific Christiana Riley, * 1978 since January 1, 2020 Regional CEO for America Prof. Dr. Stefan Simon, * 1969 since August 1, 2020 Chief Administrative Officer Management Board in the  reporting year: Christian Sewing Chairman of the Management Board Karl von Rohr President Fabrizio Campelli Frank Kuhnke Bernd Leukert (since January 1, 2020) Stuart Lewis James von Moltke Alexander von zur Mühlen (since August 1, 2020) Christiana Riley (since January 1, 2020) Stefan Simon (since August 1, 2020) Werner Steinmüller (until July 31, 2020) V Deutsche Bank GroupDeutsche BankAnnual Report 2020Deutsche Bank GroupDeutsche Bank Annual Report 2020 Management Board Management Board in the reporting year: Dear Shareholders, Deutsche Bank’s 150th anniversary year turned out quite differently than we could ever have imagined. Nevertheless, or perhaps precisely because of this, the 151st year of its existence has shown that your Deutsche Bank is on the right track. The bank has successfully met the challenges posed by the Covid-19 crisis to date. Not only that, it has also been able to help its clients and the economy to better cope with the fallout from the pandemic. Deutsche Bank managed to finish this extraor- dinary year with a profit. All of this proves that we have succeeded in recent years in making Deutsche Bank more stable and resilient than it had been for a long time. And that the Management Board not only laid the right foundations with the strategy announced in 2019 but has also rigorously implemented the transformation. In the past year, the bank hit all interim targets. Importantly, these were targets management set itself prior to the onset of the pandemic. The Supervisory Board and its committees actively supported the bank’s transformation during a total of 63 meet- ings. This year, too, management needs to continue to execute its strategy just as rigorously in order to fully achieve its ambitions for 2022. These include the objective of resuming the distribution of capital to you, our shareholders. To this end, we will build on the cost discipline of recent years and the strengthened positions of all our businesses. Deutsche Bank is well placed to support its clients on the trends that will shape the economy over the coming years – first and foremost, the transformation to a digital and sustainable economy. With regard to sustainable finance and ESG investments, Deutsche Bank made significant progress last year, ranging from announcing quantifiable targets to embedding this priority even deeper at the Management Board level. Our Non-Financial Report 2020 contains full details as well as extensive information on how the bank has been extending and improving its control systems and how it manages its non-financial risks. These topics now make up a sizeable share of the Supervisory Board’s work, something you can read more about in the Report of the Supervisory Board below. We know these topics are also important to you, our shareholders, as we can see from the questions regularly asked at our Annual General Meeting. Unfortunately, it was not possible to convene in person at the Festhalle in Frankfurt last year. Of course, our virtual AGM could never fully replace that face-to-face dialogue, but we made every effort to keep this first meeting of its kind as interactive as possible. For instance, we published our speeches eight days before the event in order to give our shareholders the oppor- tunity to ask questions or respond. We also invited shareholders to submit advance contributions relating to agenda items, which we then published on our website for all shareholders to see. This year too, I very much regret that the pandemic will still prevent us from holding a physical AGM. Deutsche Bank will, however, utilise the wealth of experience gained from hosting and participating in digital events over the past year to make our second virtual AGM an even more interactive and shareholder-friendly experience. We will inform you of the details in your invitation. One of the most important topics at this year’s meeting will be the Management Board compensation system. Our compensa- tion framework was last approved by the AGM in 2017, and this year shareholders will once again be asked to approve it in order to comply with the Act on the Implementation of the Second Shareholder Rights Directive. We have taken this as an opportunity to further develop the compensation framework, which has proven itself in principle. In the interest of good gov- ernance and sustainable development, the framework now places a greater focus on ESG objectives. Furthermore, we would like to make sure that our compensation criteria become even more transparent and consistent than before. We also want to create more scope for payment in Deutsche Bank shares, which will align Management Board members’ interests with share- holders’ interests even more rigorously. With a view to the AGM in 2022, when my second term as Supervisory Board Chairman ends and where I do not intend to stand for re-election, I stepped down from my position as Chairman of the Nomination Committee in July 2020. That committee is now chaired by Mayree Clark. Our intention is to ensure an orderly transition in the interest of good corporate governance. As regards the composition of the Supervisory Board, our primary objective remains to ensure representation by individuals with a wide range of experience and expertise in order to be able to advise and monitor the Management Board on all key issues. Two members who were new to the Supervisory Board last year have been playing their part here: Sigmar Gabriel, who brings with him not only experience in politics but also a deep knowledge of sustainability issues, and Theodor Weimer, whose expertise is based on a decades-long career in international finance. Diversity on the Supervisory Board also remains a priority for us, with individuals of different gender, age, nationality and ethnic background. Our bank’s Management Board, VI Deutsche Bank Annual Report 2020 Report of the Supervisory Board Management Board in the reporting year: however, currently fails to meet our own target for the proportion of women in its ranks. This is something that we will focus on in particular when making future appointments. As usual, the following Report of the Supervisory Board contains information on how actively the Supervisory Board has been supporting the bank as well as the key issues we worked on in 2020. Report of the Supervisory Board The Supervisory Board performed the tasks assigned to it by law, regulatory requirements, Articles of Association and Terms of Reference. The Management Board reported to us regularly, without delay and comprehensively on business policies and strategy, in addition to other fundamental issues relating to the company’s management and culture, corporate planning and control, as well as compliance and compensation systems. It reported to us on the financial development, earnings and risk situation, the bank’s risk, liquidity and capital management, the appropriate technical and organizational resources as well as events that were of significant importance to the bank. We were involved in decisions of fundamental importance, for example, regarding the cooperation with Google. As in previous years, the Management Board provided, upon our request, enhanced reporting on several topic areas. Thus, the Management Board reported to us regularly on the prevention of money laundering and the controls for this. We regularly and intensively deliberated on these matters, also with experts and together with the Manage- ment Board. The Supervisory Board Chairman and the five other committee chairs maintained regular contact with the Man- agement Board between the meetings. They also consulted each other on the agendas of the various meetings of the com- mittees they chair and discussed topics of key strategic importance to the bank. Regular discussions concerning upcoming decisions were also held between the Chairman of the Supervisory Board, the chairs of the Supervisory Board committees and the Management Board. There were a total of 63 meetings of the Supervisory Board and its committees. Due to the COVID-19 pandemic, most of the meetings were held as video conferences. When necessary, resolutions were passed by circulation procedure between the meetings. Meetings of the Supervisory Board in plenum The Supervisory Board held eight meetings in plenum in the 2020 financial year, where it addressed all topics with a special relevance for the bank. In particular, we also attached a special importance to the effective implementation of the bank’s strategy in 2020, and we again took sufficient time at all our meetings to deliberate on strategic matters with the Management Board. At our meetings, we regularly addressed the development of the bank’s business, which is influenced by a dynamic regulatory and competitive environment, along with the related priorities. Furthermore, we regularly addressed the Management Board’s report on the bank’s sustainability, Environmental, Social and Governance (ESG) initiatives as well as the developments in litigation cases and regulatory proceedings of significant importance to the bank. At our meeting on January 29, we analyzed the differences between the plan and actual figures for 2019, along with their underlying reasons. Furthermore, we confirmed the Management Board’s preliminary proposal, also in consideration of the regulatory requirements for capital funding, not to pay a dividend. We addressed the strategic financial and capital plan at the Group level for the years 2020-2024 and discussed a progress report on the processes for the prescribed reviewing of our customers (Know-Your-Customer (KYC)). We approved the report, prepared by the Nomination Committee, on the assess- ment to be performed annually of the Management Board and the Supervisory Board in accordance with Section 25d of the German Banking Act (KWG) for the year 2019. Furthermore, we addressed the draft of the Corporate Governance Statement, reviewed the independence of the individual Supervisory Board members, and determined that the Supervisory Board has an adequate number of independent members. In addition, we adopted the diversity concept for the composition of the Manage- ment Board and the Supervisory Board. Following a review of the appropriateness of the compensation system for the Man- agement Board – and while taking the recommendations of the Compensation Control Committee into account as well as in consultation with the bank’s Compensation Officer and independent external compensation experts – we determined the level of the variable compensation for the Management Board members for the 2019 financial year. We also discussed the possible topics of the Supervisory Board training measures in the ongoing financial year. At our meeting on March 19, after the Management Board’s reporting and a discussion with the auditor, and based on the Audit Committee’s recommendation, we approved the Consolidated Financial Statements and Annual Financial Statements for 2019, which did not report a profit. The Management Board presented to us the structuring of the compensation systems, the Human Resources Report for 2019, the effects until then of the COVID-19 pandemic on the bank and regulatory topics. VII Deutsche Bank Annual Report 2020 Report of the Supervisory Board Management Board in the reporting year: We addressed the topics for the General Meeting, approved the proposals for the agenda and the procedures for shareholders’ rights and agreed to conduct it as a virtual General Meeting. At an extraordinary meeting on April 30, the Management Board reported to us on the macroeconomic situation as well as the capital market’s reaction to the published results for the quarter. Furthermore, the Management Board informed us of the current status of planning for the General Meeting and of current regulatory topics. At our meeting on May 15, we discussed all of the topics of the pending General Meeting with the Management Board. Fur- thermore, we noted the report of the Management Board on changes in the regional advisory councils in Germany in accord- ance with Section 8 of the Articles of Association and addressed regulatory and legal topics. On July 30, the Management Board reported to us on the capital market’s reactions to the results of the first half of the year. The Management Board additionally informed us of the results of the staff survey and the implementation of the requirements based on the Shareholder Rights Directive, and we deliberated on the current investigations of Group Audit. The Management Board also reported to us on how the bank intends to create the conditions and structures necessary for “agile” working methods. The bank’s Anti-Money Laundering Officer presented the Anti-Money Laundering Report 2019, which we discussed. At the meeting held on September 24 and 25, we intensively addressed the bank’s strategy and transformation. On October 29 and 30, we then addressed in detail the strategic targets and priorities relating to the bank’s individual business divisions as well as their implementation. Together with the Chairman of the Management Board and the Management Board member responsible for Human Resources, we discussed succession planning for the Management Board. Furthermore, we addressed regulatory requirements and topics. In addition, we approved objectives for the composition of the Supervisory Board, including the profile of skills and expertise and the diversity concept for the Supervisory Board, which are presented in the Corporate Governance Statement in accordance with Sections 289f and 315d of the German Commercial Code (HGB). At the last meeting of the year on December 17, we discussed the report of the Management Board on the prevention of money laundering and the related controls. The Management Board also reported to us on the feedback received on our investor day, which we call the “Investor Deep Dive”. The Management Board discussed with us the significant milestones of the planning process 2021-2025. Furthermore, we addressed Management Board and Supervisory Board compensation. Committees of the Supervisory Board The members of the individual committees along with the changes in their composition in 2020 are specified in the Corporate Governance Statement in the Annual Report. The Chairman’s Committee held nine meetings in 2020. It regularly handled the preparations for our Supervisory Board meet- ings and took care of ongoing matters between the meetings. The Chairman’s Committee issued the approval of current and former Management Board members’ acceptance of mandates, honorary offices or special tasks outside of Deutsche Bank Group. The Committee also took note of the mandates of the Supervisory Board members as well as their time commitments. The Chairman’s Committee prepared the decisions of the Supervisory Board on matters of corporate governance. At its nine meetings, the Risk Committee dealt with the current and future overall risk appetite and strategy of the bank, in particular with regard to credit, liquidity, refinancing, interest rate, country, market and operational risks. It intensively ad- dressed the financial and non-financial risks of the bank, their identification and their management as well as the measures to reduce them. In 2020, one of the focal points of the Committee’s work was on assessing whether the bank’s risk appetite is in alignment with its strategy and the conditions in client business. With regard to emerging markets, foreign exchange, rates, private banking and non-financial risk management, the Committee focused in particular on model risks, vendor risks and product controls. Furthermore, with regard to risk management, it intensively addressed the organizational structure of the Risk area and the data architecture. In addition, the Committee addressed the effects of the compensation framework on the bank’s capital, risk, liquidity and profitability situation. Due to the outbreak of the COVID-19 pandemic in the spring of 2020, the Committee very intensively addressed the changed risk environment and its impacts on the bank as well as the measures subsequently taken by the bank. These measures addressed the effects on the bank’s capital, risk, liquidity and profitability situation while also taking into account, among other things, adverse scenarios within the framework of internal stress testing. The Committee addressed in detail the impacts of the pandemic on the credit and market risk profiles and non-financial risks, including in the operating and IT infrastructure. The Audit Committee held eight meetings in 2020. The Audit Committee supported us in monitoring the financial reporting process and intensively addressed the Annual Financial Statements and Consolidated Financial Statements, the interim and earnings reports as well as the Annual Report on Form 20-F for the U.S. Securities and Exchange Commission. With regard VIII Deutsche Bank Annual Report 2020 Report of the Supervisory Board Management Board in the reporting year: to the accounting process, the Audit Committee also supported us with the accounting-related effects of the bank’s transfor- mation and the COVID-19 pandemic and in this context in particular with the recognition of the provision for credit losses. The Committee also dealt with, among other things, the valuation of financial instruments and the bank’s pension obligations as well as tax-related topics. The Audit Committee had the Management Board report regularly on the “available distributable items” and the capacity to service the coupons on the Additional Tier 1 capital instruments. The Audit Committee monitored the effectiveness of the risk management system, in particular with regard to the internal control system and Group Audit, while also taking into account the impacts from the COVID-19 pandemic and the bank’s transformation. This also covered, among other things, the reporting on the further development of controls to combat money laundering and to prevent financial crime, transaction surveillance, the three lines of defense model and the key initiatives for the continued strengthening of the risk management system and the internal control system. The Audit Committee was kept up-to-date on the work of Group Audit, its audit plan and its resources. It addressed measures taken by the Management Board to remediate deficiencies identified by the auditor, Group Audit and regulatory authorities and regularly received updates on the status and progress in this context and on the remediation of identified deficiencies. The Audit Committee resolved to approve the recommendation to be made to the Supervisory Board and afterwards to the General Meeting that Ernst & Young be appointed as the independent statutory auditor. In this context, the deliberations took into account the results of the review of independence, which did not identify indications for an apprehension of bias or for a risk to independence. The Committee also discussed the proposal for the fee agreement to be reached with the auditor for the 2020 financial year. The Audit Committee dealt with the measures to prepare for the audit of the Annual Financial State- ments and Consolidated Financial Statements for 2020, specified its own areas of focus for the audit and approved a list of permissible non-audit services. The Audit Committee was regularly provided with reports when accounting firms, including the auditor, were engaged for non-audit-related services. The Committee also addressed the key audit matters presented in the auditor’s report, the separate Non-Financial Report as well as the Non-Financial Statement. Ernst & Young reported to the Audit Committee on the quality of the financial statements audit as well, so that the Committee could assess this on the basis of suitable indicators. The Head of Group Audit as well as representatives of the auditor also attended all of the ordinary meetings, however, with the exception of the agenda items relating specifically to the auditor. The Nomination Committee met seven times. It addressed, in particular, issues related to succession and appointments while taking into account statutory and regulatory requirements, and it nominated specific candidates for the Management Board and Supervisory Board. The Nomination Committee reviewed the training plan for the Management Board for the year 2020. Furthermore, it supported us in implementing the requirements of the European Banking Authority (EBA) Guidelines on Inter- nal Governance, in developing an objective to promote the under-represented gender on the Management Board as well as a strategy for achieving this, and in reviewing the Management Board’s principles for selecting and appointing persons to the upper management levels and in the recommendations made to the Management Board in this context. The Committee also supported us in the implementation of potential improvements identified through the assessment carried out in 2019 and intensively prepared the assessment of the Supervisory Board and Management Board for the year 2020 at several meetings and in discussions with the Management Board members. Further details concerning this are given in the Corporate Governance Statement. The Compensation Control Committee met seven times in 2020. It monitored the appropriate structuring of the compensation systems for employees, and in particular for material risk takers and the heads of control functions. In addition, it addressed the Compensation Report for the 2019 financial year, the Compensation Officer’s Compensation Control Report and the Re- port in accordance with Section 12 of the Remuneration Ordinance for Institutions (InstitutsVergV) on the appropriateness of the compensation system for the members of the Management Board, which concluded that the compensation systems are appropriately structured and in accordance with the requirements of the InstitutsVergV. The Committee concurred with this assessment. The Compensation Control Committee submitted proposals to us regarding the compensation of the Management Board, in consideration of the targets and objectives agreed for the 2020 financial year, as well as proposals for the targets and objec- tives for the Management Board for the 2021 financial year. The Committee supported us in monitoring if the internal control areas and all other material areas were involved in the structuring of the compensation systems and assessed, together with the Risk Committee, the effects of the compensation systems and the variable compensation for the 2020 financial year on the risk, capital and liquidity situation. The Management Board reported to the Compensation Control Committee on the pro- cedures for identifying material risk takers and Group-level material risk takers as well as for determining and allocating the total amount of variable compensation for the bank’s employees, while taking into account, in particular, affordability. The Committee also addressed the Management Board and Supervisory Board compensation systems in preparation for the pro- posals to the General Meeting. IX Deutsche Bank Annual Report 2020 Report of the Supervisory Board Management Board in the reporting year: At its meetings, the Compensation Control Committee received reports on the Management Board’s communications with the regulatory authorities on compensation topics and changes in the regulatory framework relating to compensation. It addressed the structuring of the individual components of variable compensation of employees for the 2020 financial year as well as the plan rules. Furthermore, the Management Board reported on measures relating to the ex post risk adjustment of compensation decisions and on the procedure for determining the occurrence of disbursement conditions. The Compensation Control Com- mittee also reviewed the occurrence of the disbursement conditions for current and former members of the Management Board. The Integrity Committee met five times in 2020. The meeting scheduled for the month of March was cancelled due to the COVID-19 pandemic. At every meeting, the Committee addressed cultural topics, the revision of the Consequence Manage- ment policies and procedures as well as litigation cases and other material legal disputes. The discussions with the Manage- ment Board on corporate culture focused on, among other things, the handling of leaks to the media and their effects on the bank as well as the timely remediation of regulatory findings and obligations. At every meeting, the Management Board re- ported on Consequence Management in the bank and the progress made in revising the program as well as the disciplinary decisions and measures taken. The Integrity Committee discussed with the Management Board litigation cases with the high- est risks and other material legal disputes. It addressed not only broad-ranging topic areas, such as money laundering, but also individual cases, such as Cum-Ex and Business Development Consultants, as well as significant internal investigations. Furthermore, the Integrity Committee had reports submitted to it regularly on the bank’s interactions with its monitors from the regulatory authorities as well as the challenges and progress made within the framework of remediation management. The Integrity Committee addressed the governance and preventive compliance controls in the bank’s individual business regions (Asia-Pacific, Europe and Africa, the USA as well as the UK and Ireland). In May, the Integrity Committee conducted a discussion with the Management Board on the bank’s strategy for Environmental, Social and Governance (ESG) issues. The Strategy Committee met four times. At its meetings, the Committee handled in particular the ongoing implementation of the bank’s new strategic alignment, which was adopted in 2019, as well as the underlying transformation initiatives. It regularly received reports from the Management Board Chairman and the Chief Transformation Officer on the current status of pro- gress. Within the framework of its addressing individual corporate and business divisions, the Committee dealt with the exe- cution of the strategy in the private client business including the IT strategy, with the Global Financing & Credit Trading division in the Investment Bank as well as with the bank’s strategies for North America and for Asia. The Technology, Data and Innovation Committee met six times. At its meetings, the Committee addressed the IT strategy and IT architecture at the Group-wide level, and also within the individual corporate divisions of the bank. In this context, it also focused on the cloud efforts of the bank, addressed the application landscape, the monitoring of important IT metrics, as well as topics of IT security and cybersecurity. In addition, this also covered the mitigation and management of IT risks, in particular with regard to the technological challenges relating to system stability and the technical prerequisites for Business Continuity Planning in light of the COVID-19 pandemic. At the meetings, the Management Board reported on the bank’s global data management strategy, along with the related defined targets and objectives and the status of their implementation. Further- more, the Committee deliberated with the Management Board on the budget and implementation planning of key IT projects for the 2021 financial year as well as on the tracking of the benefits achieved through past IT projects. In addition, the Com- mittee addressed the bank’s initiatives on innovation. Meetings of the Mediation Committee, established pursuant to the provisions of Germany’s Co-Determination Act (MitbestG), were not necessary. X Deutsche Bank Annual Report 2020 Report of the Supervisory Board Management Board in the reporting year: Participation in meetings Due to the COVID-19 pandemic, meetings were conducted mostly by video conference. The Supervisory Board members participated in the meetings of the Supervisory Board and of the committees in which they were members as follows: Achleitner Blomeyer-Bartenstein Bsirske Clark Duscheck Eschelbeck Gabriel Garrett-Cox Heider Klee Mark Platscher Polaschek Rose Schütz Szukalski Thain Trogni Valcárcel Weimer Winkeljohann Meetings (incl. committees) 63 22 35 28 23 14 11 8 17 14 20 21 43 26 19 17 12 27 25 9 34 Meetings (plenary sessions) 8 8 8 8 8 8 7 4 8 8 8 8 8 8 8 8 8 8 8 4 8 Participation (plenary sessions) 8 8 8 8 8 8 7 4 8 8 8 8 8 7 8 8 8 8 8 4 8 Meetings (committees) 55 14 27 20 15 6 4 4 9 6 12 13 35 18 11 9 4 19 17 5 26 Participation (committees) 54 13 26 20 15 6 4 4 9 6 12 13 35 15 11 7 4 19 17 5 26 Participation in % (all meetings) 98 95 97 100 100 100 100 100 100 100 100 100 100 85 100 88 100 100 100 100 100 Corporate Governance The composition of the Supervisory Board and its committees is in accordance with the requirements of the German Banking Act (KWG) as well as regulatory governance standards. The suitability of each individual member was assessed both internally by the Nomination Committee and externally by the European Central Bank, and determined and monitored continually by the Joint Supervisory Team (JST) and the Nomination Committee. The suitability assessment covers the expertise, reliability and time available of each individual member. In addition, there was an assessment of the knowledge, skills and experience of the Supervisory Board in its entirety that are necessary for the performance of its tasks (collective suitability). The Chairman of the Supervisory Board and the chairpersons of all the committees are independent in accordance with the applicable Terms of Reference as amended from time to time. They coordinated their work continually and consulted each other regularly and – as required – on an ad hoc basis between the meetings in order to ensure the exchange of information necessary to capture and assess all relevant case matters and risks in the performance of their tasks. The cooperation in the committees was marked by an open and trustful atmosphere. The committee chairpersons reported regularly at the meetings of the Supervisory Board on the work of the individual com- mittees. Regularly before the meetings of the Supervisory Board, the representatives of the employees and the representatives of the shareholders conducted preliminary discussions separately. Before or at the end of the meetings of the Supervisory Board and its committees, discussions were regularly held in “Executive Sessions” without the participation of the Management Board. Based on individual recommendations from the committees responsible for issuing them, we determined that Dr. Paul Achleit- ner, Dr. Dagmar Valcárcel, Dr. Theodor Weimer and Professor Dr. Norbert Winkeljohann are financial experts in accordance with the definition of the implementation rules of the U.S. Securities and Exchange Commission issued pursuant to Section 407 of the Sarbanes-Oxley Act of 2002 as well as Section 100 (5) and Section 107 (4) of Germany’s Stock Corporation Act (AktG) and Section 25d (9) of the German Banking Act (KWG). Dr. Paul Achleitner and Dr. Dagmar Valcárcel were specified by name as compensation experts in accordance with Section 25d (12) of the German Banking Act (KWG). Furthermore, we confirmed the independence, as defined by U.S. regulations, of all members of the Audit Committee. Based on the assessment of our shareholder representatives, the Supervisory Board is considered to have an adequate number of independent mem- bers on the shareholder representatives’ side. Dr. Achleitner and the chairpersons of the committees regularly held discussions with representatives of key regulators and informed them about the work of the Supervisory Board and its committees and about the cooperation with the Management Board. XI Deutsche Bank Annual Report 2020 Report of the Supervisory Board Management Board in the reporting year: During the 2020 financial year, Dr. Paul Achleitner, in his capacity as Chairman of the Supervisory Board, conducted discus- sions together with the bank’s Investor Relations Department with investors, proxy advisors and shareholders’ associations. Governance and strategy topics from the Supervisory Board’s perspective were the subject of the discussions. These included questions of appointments, the bank’s control processes, Management Board compensation and the bank’s ESG strategy. At several meetings of the Nomination Committee and of the Supervisory Board in plenum, we addressed the assessment prescribed by law of the Management Board and the Supervisory Board for the 2020 financial year. This also comprises the self-assessment according to the German Corporate Governance Code. The final discussion of the results took place at the Supervisory Board meeting in plenum on February 3, 2021, and the results were set out in a final report. For further information, we refer to the section “Self-assessment of the work of the Supervisory Board and of its committees” in the Corporate Gov- ernance Statement. One topic area in which we do not yet meet our own standards as a bank is gender diversity at senior management levels. The Supervisory Board intensified its advising of the Management Board in this context in 2020 and stepped up this drive under the leadership of Michele Trogni. The Declaration of Conformity pursuant to Section 161 of the Stock Corporation Act (AktG), which we had last issued with the Management Board in October 2019, was reissued in October 2020. The text of the Declaration of Conformity, along with a comprehensive presentation of the bank’s corporate governance, can be found in the Annual Report 2020 and on the bank’s website at https://www.db.com/ir/en/documents.htm. Our Declarations of Conformity since 2007 are also available there, in addition to the currently applicable versions of the Terms of Reference for the Supervisory Board and its committees as well as for the Management Board. Training and further education measures The members of the Supervisory Board completed the training and further education measures required for their tasks on their own. Furthermore, numerous further education measures were conducted for the work of the Supervisory Board in ple- num and of its committees to maintain and expand the required specialized knowledge. The topics comprised, among others, the products and services of an investment bank, risk management and valuation mechanisms, technological innovations, bank regulatory law as well as internal communications and investor relations. For the new members that joined the Supervisory Board, extensive induction courses tailored to them individually were devel- oped and carried out to facilitate their induction into office. Conflicts of Interest and their handling Dr. Paul Achleitner, Gerd Alexander Schütz and Professor Dr. Norbert Winkeljohann did not participate in the Supervisory Board’s voting on resolutions for the General Meeting that related to them. Annual financial statements, consolidated financial statements, and the com- bined separate Non-financial report For the first time, EY audited the Annual Financial Statements, including the accounting and the Combined Management Report for the Annual Financial Statements and Consolidated Financial Statements for the 2020 financial year and issued in each case an unqualified audit opinion on March 8, 2021. The Auditor’s Reports were signed jointly by the Auditors Mr. Barth and Mr. Lösken. Both of them signed the Auditor’s Report for the Annual Financial Statements and Consolidated Financial Statements for the first time. Furthermore, EY performed a limited assurance review in the context of the combined separate Non-Financial Report as well as the Non-Financial Statement (Non-Financial Reporting) and in each case issued an unqualified opinion. The Audit Committee examined the documents for the Annual Financial Statements 2020 and Consolidated Financial State- ments 2020 as well as the Non-Financial Reporting 2020 at its meeting on March 9, 2021. The representatives of EY provided the final report on the audit results. The Chairman of the Audit Committee reported to us on this at the meeting of the Super- visory Board. Based on the recommendation of the Audit Committee, and after inspecting the Annual Financial Statements and Consolidated Financial Statements documents as well as the documents for the Non-Financial Reporting – following an extensive discussion on the Supervisory Board as well as with the representatives of the auditor – we noted the results of the audits with approval. We determined that, also based on the final results of our inspections, there are no objections to be raised. XII Deutsche Bank Annual Report 2020 Report of the Supervisory Board Management Board in the reporting year: Today, we approved the Annual Financial Statements and Consolidated Financial Statements prepared by the Management Board. The Annual Financial Statements are thus established. Personnel issues Sigmar Gabriel was appointed as member of the Supervisory Board by way of court order on March 11, 2020, until the con- clusion of the Ordinary General Meeting in 2020. At the General Meeting 2020, Sigmar Gabriel, Dr. Dagmar Valcárcel and Dr. Theodor Weimer were each elected for the period until the conclusion of the General Meeting that resolves on the ratification of the acts of management for the 2024 financial year. Katherine Garrett-Cox resigned from office effective as of the end of the General Meeting 2020. Stephan Szukalski resigned from his mandate as of December 31, 2020. His successor since January 1, 2021, is the substitute member elected to replace him, Stefan Viertel. After the responsible regulatory authorities had notified Deutsche Bank AG in writing that no objections existed to their Man- agement Board appointments, Christiana Riley and Bernd Leukert became members of the Management Board on January 1, 2020. Professor Dr. Stefan Simon became a member of the Management Board on August 1, 2020. At the meeting on April 30, we appointed Alexander von zur Mühlen as successor as of August 1, 2020, to Werner Steinmüller, who left the Manage- ment Board as of July 31, 2020. In January 2020, we resolved to extend the Management Board appointments of Stuart Lewis, for three years until May 31, 2023, and of James von Moltke, for three years until June 30, 2023. We thank the members of the Management Board and Supervisory Board who left last year for their dedicated work and their constructive assistance to the company during the past years. We would also like to thank the bank’s employees for their great personal dedication. Frankfurt am Main, March 11, 2021 The Supervisory Board Dr. Paul Achleitner Chairman XIII Supervisory Board Dr. Paul Achleitner – Chairman Munich Germany Detlef Polaschek* – Deputy Chairman Essen Germany Ludwig Blomeyer- Bartenstein* Bremen Germany Frank Bsirske* Isernhagen Germany Mayree Carroll Clark New Canaan USA Jan Duscheck* Berlin Germany Dr. Gerhard Eschelbeck Cupertino USA Sigmar Gabriel since March 11, 2020 Goslar Germany Katherine Garrett-Cox until May 20, 2020 Brechin, Angus United Kingdom Michele Trogni Riverside USA Dr. Dagmar Valcárcel Madrid Spain Stefan Viertel* since January 1, 2021 Kelkheim im Taunus Germany Dr. Theodor Weimer since May 20, 2020 Wiesbaden Germany Prof. Dr. Norbert Winkeljohann Osnabrück Germany Timo Heider* Emmerthal Germany Martina Klee* Frankfurt am Main Germany Henriette Mark* Munich Germany Gabriele Platscher* Braunschweig Germany Bernd Rose* Menden Germany Gerd Alexander Schütz Vienna Austria Stephan Szukalski* until December 31, 2020 Ober-Mörlen Germany John Alexander Thain Rye USA * Employee representatives XIV Deutsche Bank GroupDeutsche BankAnnual Report 2020Deutsche Bank GroupCommittees Committees Chairman’s Committee Audit Committee Integrity Committee Dr. Paul Achleitner – Chairman Frank Bsirske* Detlef Polaschek* Prof. Dr. Norbert Winkeljohann Nomination Committee Mayree Carroll Clark – Chairperson (since July 1, 2020) Dr. Paul Achleitner – Chairman (until June 30, 2020) Member (since July 1, 2020) Frank Bsirske* Detlef Polaschek* Gerd Alexander Schütz (until January 28, 2021) Prof. Dr. Norbert Winkeljohann (since February 3, 2021) Prof. Dr. Norbert Winkeljohann – Chairman Dr. Dagmar Valcárcel – Chairperson Dr. Paul Achleitner Dr. Paul Achleitner Katherine Garrett-Cox (until May 20, 2020) Henriette Mark* Gabriele Platscher* Detlef Polaschek* Bernd Rose* Dr. Dagmar Valcárcel Dr. Theodor Weimer (since July 1, 2020) Risk Committee Mayree Carroll Clark – Chairman Dr. Paul Achleitner Ludwig Blomeyer-Bartenstein* Jan Duscheck* Stephan Szukalski* (until December 31, 2020) Michele Trogni Stefan Viertel* (since January 1, 2021) Prof. Dr. Norbert Winkeljohann Ludwig Blomeyer-Bartenstein* Sigmar Gabriel (since March 11, 2020) Katherine Garrett-Cox (until March 11, 2020) Timo Heider* Gabriele Platscher* Compensation Control Committee Dr. Paul Achleitner – Chairman Frank Bsirske* Dr. Gerhard Eschelbeck (since February 3, 2021) Detlef Polaschek* Bernd Rose* (since July 1, 2020) Gerd Alexander Schütz (from July 1, 2020 until February 1, 2021) Dr. Dagmar Valcárcel (since July 1, 2020) * Employee representatives XV Deutsche BankAnnual Report 2020Strategy Committee John Alexander Thain – Chairman Dr. Paul Achleitner Frank Bsirske* Mayree Carroll Clark Timo Heider* Henriette Mark* Detlef Polaschek* Michele Trogni Technology, Data and Innovation Committee Michele Trogni – Chairperson Dr. Paul Achleitner Jan Duscheck* Dr. Gerhard Eschelbeck Martina Klee* Bernd Rose* Mediation Committee Dr. Paul Achleitner – Chairman Frank Bsirske* Detlef Polaschek* Prof. Dr. Norbert Winkeljohann * Employee representatives XVI Deutsche Bank GroupDeutsche BankAnnual Report 2020Deutsche Bank GroupDeutsche Bank Annual Report 2020 Strategy Committees Strategy In July 2019, we announced a strategic transformation of Deutsche Bank, designed to significantly improve sustainable returns to shareholders. This strategy is underpinned by four specific objectives. First, to refocus Deutsche Bank around four core businesses, focusing on key areas of strength and on more predictable revenue sources while exiting business areas unlikely to produce adequate returns. Second, to reduce our adjusted costs and improve the efficiency and effectiveness of our infra- structure. Third, to reinvigorate the leadership and spirit of the bank by enabling faster decision-making, increasing discipline in execution and unleashing Deutsche Bank’s entrepreneurial culture. Finally, we established the Capital Release Unit to liberate capital consumed by low return assets and businesses that earn insufficient returns or that are no longer core to our strategy, by winding those down in an economically rational manner. Progress towards our strategic transformation In July 2019, we identified the transformation steps that we would take by the end of 2022. In 2020, we made substantial progress regarding our strategic transformation notwithstanding the challenges associated with the protracted COVID-19 pan- demic. By the end of 2020, we had put 85 % of these transformation related costs behind us. We have continued to deliver against all our financial targets and milestones in 2020, supported by our ongoing disciplined execution of our strategic agenda. In addition, in 2020 we signed a multi-year partnership with Google Cloud which will help transform our IT infrastructure into a more efficient cloud-based environment. We completed the legal entity merger of DB Privat- und Firmenkundenbank AG into Deutsche Bank AG and launched the International Private Bank (IPB) by combining Wealth Management and Private & Commercial Business International into one unit. We announced our decision to reduce Deutsche Bank’s branded network from around 500 to approximately 400 branches in Germany and the sale of Postbank Systems AG, which is intended to lead to a reduction in future stranded costs. In the Private Bank, we agreed balance of interest agreements with our workers council in Germany, which will allow us to further rationalize our head office and operations functions in Germany. We have extended our insurance partnerships with Talanx and Zurich Insurance Group to sustainably optimize our insurance offerings for our customers and to strengthen our sources of fee income. The creation of our German Business Banking unit in the Corporate Bank will help us serve our 800,000 small business clients. Our delivery record is setting us up for the next phase of our transformation which will focus on ensuring sustainable profitability by growing our businesses while maintaining cost discipline as well as risk and balance sheet management and control. Sustaining revenue growth in our Core Bank Our strategic transformation is designed to refocus our Core Bank around market leading businesses, which operate in grow- ing markets with attractive return potential. Our Core Bank comprises our four core operating divisions, namely the Corporate Bank, the Investment Bank, the Private Bank, and Asset Management, together with the segment Corporate & Other. Our Corporate Bank is our ‘global Hausbank’ combining a strong home market with a network across 151 countries, Our refocused Investment Bank is a top global player in fixed income and financing where we have demonstrated our strengths in 2020. In addition, we have a focused Origination & Advisory business, including a leading position in Debt Capital Markets. Our Private Bank is the leader in our home market, has strong positions in major European countries and a global Wealth Management franchise. Another leading business in our home market is our asset manager, DWS. Revenues in our Core Bank of € 24.3 billion and for Group € 24 billion in 2020 increased by 6 % and 3.7 % respectively compared to the prior year. We acknowledge there are additional headwinds we are facing, compared to the original assump- tions we made at the time of our strategy announcement in 2019. The most significant of these is the lower interest rate environment, which continues to pose a risk to our revenues, as the movements in forward interest rate curves has reduced our revenue forecasts through 2022. We expect that our refocused business model across the Core Bank can offset some of these challenges, as we focus on growing our market share with our top institutional, corporate and retail clients. The Corporate Bank made progress in offsetting the impact of interest rate headwinds, including the implementation of deposit repricing measures. The Investment Bank’s performance momentum experienced in the first half of 2020 continued into the second half of the year. Revenues grew as a result of continued client re-engagement and further progress on our strategic objectives, underpinned by strong market conditions, and in part by the partnership with the Corporate Bank. The Private Bank offset the interest rate headwinds and the negative impacts of the COVID-19 pandemic with growth in volumes across loans, investment and insurance products. In Asset Management, DWS continued to see strong inflows in its core focus areas, including inflows through its strategic partners and into its Environmental, Social and Governance (ESG) funds. XVII Deutsche Bank Annual Report 2020 Strategy Committees Continuing to deliver on cost reduction targets We continued to be highly focused on costs. In 2020, noninterest expenses were € 21.2 billion, a year-over-year decrease of € 3.9 billion or 15 %. Adjusted costs excluding transformation charges and expenses eligible for reimbursement related to Prime Finance were € 19.5 billion, a year over year reduction of € 2 billion or 9 %, thus meeting our near-term objective of adjusted costs excluding transformation charges and expenses eligible for reimbursement related to Prime Finance of € 19.5 billion in 2020. During the next phase of our transformation we expect further savings from central and divisional measures, some of these as responses to COVID-19, for example from an examination of our real estate footprint and lower travel costs. In addition, we plan to focus on tackling costs in our Capital Release Unit. We have therefore tightened our adjusted cost target excluding transformation charges for 2022 to € 16.7 billion, revised from € 17 billion. Continued balance sheet reductions in the Capital Release Unit The Capital Release Unit (CRU) was created in July 2019. The CRU’s principal objectives are to liberate capital consumed by low return assets and businesses that earn insufficient returns or activities that are no longer core to our strategy by liberating capital in an economically rational manner. In addition, the CRU is focused on reducing costs. In 2020, the CRU continued to execute its asset reduction program and to work towards the migration of Deutsche Bank’s Prime Finance and Electronic Equities clients, while reducing cost. Risk weighted assets were € 34 billion at the end of the fourth quarter of 2020, representing an € 11 billion reduction from the fourth quarter of 2019. Leverage exposure was € 72 billion at the end of the fourth quarter of 2020, representing a € 55 billion reduction from the fourth quarter of 2019. From time to time client transactions can be transferred from the Capital Release Unit to the Investment Bank within the Core Bank to preserve franchise client relationships. These transfers are effected on an arm’s length equivalent basis between segments. In 2020, such transactions totalled € 1.5 billion of Risk Weighted Assets and € 4.6 billion of Leverage Exposure excluding leverage allocations. For the full year 2020, noninterest expenses in the CRU declined by € 1.5 billion or 43 % versus the prior year, reflecting lower service cost allocations, lower transformation charges and lower restructuring and severance charges. In the same period, adjusted costs excluding transformation charges declined by € 0.9 billion or 33 % versus the prior year, reflecting lower service cost allocations, lower compensation and lower non-compensation costs such as professional fees and market data. Through the year, further simplification of the division’s infrastructure was achieved through decommissioning of applications and closing of books and cost centers. Conservative balance sheet management We remain committed to managing our balance sheet conservatively as we execute on our strategic transformation and nav- igate through the COVID-19 pandemic. At the end of 2020, the CET1 ratio was 13.6 %, 4 basis points lower compared to last year and 316 basis points above the regulatory CET1 requirements, principally driven by lower than anticipated credit risk weighted assets (RWAs) and benefits from regulatory measures including the EU’s ‘Quick Fix’ to Capital Requirement Regu- lation (CRR Quick fix). For 2022, we remain committed to maintaining our CET1 ratio above 12.5 %. The CRR Quick fix, the ECB’s decision to temporarily exclude certain eligible central bank exposures from the Leverage calculation due to the COVID-19 pandemic, was a benefit to the Leverage ratio (fully loaded). These factors led to an increase in the Leverage ratio (fully loaded) to 4.7 % by the end of 2020. Without the Quick fix adjustment our Leverage ratio (fully loaded) was 4.3 %. As we plan to offset the additional interest rate headwinds with revenue opportunities we have updated our 2022 Leverage ratio target to 4.5 %, still comfortably above regulatory requirements. Liquidity reserves increased by € 21 billion year-over-year to € 243 billion at the end of 2020, mainly as a result deposit growth, participation in Central Bank liquidity facilities as well as continued deleveraging of CRU. The Liquidity Coverage Ratio rose to 145 % in the year 2020, a surplus to regulatory requirements of € 66 billion. We believe that our risk levels are conservative with Value-at-Risk (VaR) in our Group at € 46 million at the end of 2020, based on the Historical Simulation Model implemented in the fourth quarter of 2020. Provisions for credit losses were in line with our expectations at 41 basis points as a percentage of average loans for the full year 2020. Provisions for credit losses in 2020 were impacted by the COVID-19 pandemic and had a negative effect on our Expected Credit Loss (ECL) estimates and we expect these factors to continue in 2021. For 2022, we expect provisions for XVIII Deutsche Bank Annual Report 2020 Strategy Committees credit losses of between 25 to 30 basis points as a percentage of average loans, as the economy recovers and provision levels normalize. We remain committed to our stringent underwriting standards and our tight risk management framework. Further details on the calculation of ECL is provided in the section ‘Risk Report’ in the Annual Report 2020. Our Sustainability strategy Sustainability has become a central component of the bank’s strategy, which we set in July 2019. Since then we have made significant progress in embedding sustainability into our business practices, focusing on the following four dimensions: sus- tainable finance; policies & commitments; our own operations and through leadership and engagement. In 2020, we set a target of achieving € 200 billion in sustainable financing and ESG investment by year-end 2025 (excluding asset under man- agement managed by our Asset Management). In 2020, we further improved our sustainability governance structure by establishing a Sustainability Committee. The commit- tee, chaired by our Chief Executive Officer (CEO), began its work in late October, 2020 and meets once a month. While the Sustainability Committee is the highest decision-making forum for all major sustainability initiatives, the Sustainability Council – established in 2018 – remains an important governance body. It does preparatory work for the Sustainability Committee’s decisions, coordinates their implementation, and oversees the work streams aligned to the four dimensions of our sustainability strategy. The Council is composed of executives from across all four business divisions as well as all infrastructure functions and also meets on a monthly basis. Our Supervisory Board and our Management Board reinforced the bank’s sustainability ambition by tying our top-level exec- utives’ compensation to further non-financial criteria from 2021 onwards. The awards have been extended with several ESG objectives such as the volumes for sustainable financing and ESG investments and reducing own power consumption in our buildings. A sustainability rating index comprising five large rating agencies will also be considered in the Short-term Awards. Per the Shareholder Rights Directive II we will publish and propose amendments to the Management Board’s compensation framework to the 2021 Annual General Meeting. – For the first time, we have published quantifiable targets for expanding our sustainable business activities. By the end of 2025, the Bank plans to increase its volume of sustainable financing plus its portfolio of ESG investments under manage- ment to over € 200 billion. We have also defined annual growth targets. We will report annually on our overall progress toward the € 200 billion target. – Following the announcement of our sustainable finance target, we established a Sustainable Finance Framework. The Framework defines comprehensive rules for classifying our financing offers and products as sustainable and is aligned to the Green and Social Bond Principles of the International Capital Market Association as well as towards the EU Taxonomy. – We are continuously growing our involvement in sustainable finance. According to Dealogic, in 2020, we partnered with a number of global clients to support their sustainable bond transactions, such as green, social, sustainability, and sustaina- bility-linked bonds. We helped our clients raise more than € 83 billion of funding in sustainable bond instruments, of which Deutsche Bank underwrote almost € 16 billion. We climbed the League Table for Euro-denominated sustainable bonds and finished the year in sixth place, making us one of the fastest growing players in this strategic market. – Furthermore, in June 2020 we successfully placed our first green bond. It was issued under our Green Bond Framework, which is based on the Green Bond Principles of the International Capital Market Association (ICMA) as well as on the latest guidance on the EU Taxonomy developed by the European Union's Technical Expert Group on Sustainable Finance. The framework enables us to finance green assets, including loans to and investments in companies, assets, and projects relating to renewable energy, energy efficiency, and sustainable buildings. – We have made significant progress with our rules and policies. We have adopted the Equator Principles and strengthened our Fossil Fuel Policy. We intend to end our global business activities with regard to financing as well as capital market transactions in coal mining by 2025 at the latest. – Our strengthened Fossil Fuel Policy will also support our commitment to align our credit portfolios with the goals of the Paris Agreement, which we entered by joining the German financial sector’s collective commitment to climate action in June this year. – We committed to expanding the use of electricity from renewable sources for our own operations from approximately 80 % currently, to 100 % by 2025 globally. We remain committed to working on all dimensions of our sustainability strategy and increasing our sustainable product and services offerings. Impact of COVID-19 on our financial targets and client franchise The COVID-19 pandemic has led to changes in the macroeconomic and fiscal environment. These changes have impacted Deutsche Bank’s operating environment, as changes to customer behavior have impacted transaction volumes and associ- ated management of capital and risk. We remain prudent in our approach to risk management, with a CET1 ratio of 13.6 %, a Leverage ratio of 4.7 % and a Liquidity Coverage Ratio of 145 %, € 66 billion above our regulatory requirement. XIX Deutsche Bank Annual Report 2020 Strategy Committees The current economic environment is expected to continue and to result in pressures on the bank’s capital ratios and financial performance. In particular, the COVID-19 related downside risks dominated our macroeconomic business environment in 2020 and remained elevated over the year-end. Also, 2020 has finished with significant GDP contraction across major economies compared to 2019. On that basis, we continue to see downside risks throughout the global economy, as ongoing regional and national lockdowns impact macro-economic activity on a global basis. Despite these challenges, we believe we have implemented high risk management standards in our businesses. We have continued to make progress against our key transformation objectives, while continuing to serve our clients‘ financing needs. In addition, we have been the most active bank in the German program for government-sponsored loans (KfW). We recognize that going forward, execution risks of our strategy have risen due to the prolonged macro-economic uncertainty from the impact of COVID-19. However, the strength of our businesses and our refocused business model are expected to support offsetting these headwinds. We remain committed to working towards our targets for a Post-tax Return on Average Tangible Equity of 8 % for the Group and of above 9 % for the Core Bank by 2022. Our financial targets Our key financial targets are: Financial Targets for 2022 – Post-tax Return on Average Tangible Equity of 8 % for the Group – Post-tax Return on Average Tangible Equity of more than 9 % for the Core Bank – Adjusted costs excluding transformation charges of € 16.7 billion – Cost income ratio of 70 % – Common Equity Tier 1 capital ratio of above 12.5 % – Leverage ratio (fully loaded) of ~4.5 % The COVID-19 pandemic and its impact on the global economy may affect our ability to meet our financial targets, as its ultimate impact remains difficult to predict. Adjusted costs, Adjusted costs excluding transformation charges, Adjusted costs excluding transformation charges and ex- penses eligible for reimbursement related to Prime Finance, Post-tax Return on Average Tangible Equity as well as Leverage ratio (fully loaded) are non-GAAP financial measures. Please refer to “Supplementary Information (Unaudited): Non-GAAP Financial Measures” of this report for the definitions of such measures and reconciliations to the IFRS measures on which they are based. Our businesses This section should be read in conjunction with the section Deutsche Bank: Our Organization in the Operating and Financial Review in the Annual Report 2020. Corporate Bank Corporate banking is at the core of our business. Firstly, our capabilities in Cash Management, Trade Finance and Lending, as well as Foreign Exchange, the latter delivered in close collaboration with the Investment Bank, enable us to serve core needs of our corporate clients. As a leading bank serving German corporates domestically and abroad, we help clients in optimizing their working capital and liquidity, securing global supply chains and distribution channels and managing their risks. Secondly, we act as a specialized provider of services to Financial Institutions, offering Correspondent Banking, Trust and Agency as well as Securities Services. Finally, we provide business banking services to approximately 800,000 clients in Germany, business banking covers small corporates and entrepreneur clients and offers a largely standardized product suite. We have defined a number of specific initiatives to capitalize on our core competencies across these different areas and grow our revenues to achieve our targets. In 2020, we made significant progress on all of these targets despite the COVID-19 pandemic. We have re-priced more than € 40 billion of deposits in order to pass on negative interest rates, bringing the total amount of deposits under charging agree- ments to about € 78 billion. We continued working towards the target of doubling the fees we generate from platforms, FinTechs and eCommerce clients over the next two years. We have also grown Rates and Foreign Exchange revenues - booked in Investment Bank - with our corporate clients, in particular in the U.S. and Asia Pacific, and increased our revenues in Asia Pacific despite declining interest rates in the region. In Germany, we have materially completed the integration of our XX Deutsche Bank Annual Report 2020 Strategy Committees commercial and corporate banking activities, combining under one umbrella our operations for business clients with all the products and services of our Deutsche Bank, Postbank and FYRST brands. We aim to continue working towards our target for the Post-tax Return on Average Tangible Shareholders’ Equity of 11 – 12 % in 2022. Firstly, we will re-price further deposits, both in our Cash Management franchise and with domestic German corporate clients, in order to offset the impact of negative interest rates in Europe. Implementation of deposit charging agreements is materially within our control and relies on our disciplined execution. Building on 2020 achievements, our initiatives also include to further grow our business with platforms, FinTechs and eCommerce payment providers. We also aim to offer a full suite of advisory and financing solutions for corporate treasurers. In addition , we intend to continue to expand our business in Asia and finally to enhance our offering for small German businesses. Parts of corporate banking, especially payments, are expe- riencing a high degree of innovation and disruption driven by high-paced technology developments and the emergence of new competitors. We intend to make targeted investments in new growth areas, including asset as a service and merchant pay- ments, where we see market opportunity and believe to have a competitive advantage. As we grow our business with clients globally, we intend to continue to apply sound risk management principles in order to maintain the high quality of our loan portfolio and strict lending standards. We also aim to significantly advance our provision of sustainable financing solutions for our clients. In 2020, we developed distinct sustainable finance product strategies, integrated ESG into client coverage models, rolled-out global employee train- ings on ESG and started integrating Deutsche Bank’s newly defined Sustainable Finance Framework into our Corporate Bank’s core systems and processes. In our strategic measures, we want to support our clients’ ESG transformation. Building on our knowledge of the needs of corporate treasurers, strong product offerings across all our business divisions, deep un- derstanding of EU sustainable finance regulation and standards as well our global network, we intend to help our clients become ESG-compliant around the world. Investment Bank In 2020, the Investment Bank (IB) continued with the implementation of the outlined strategic priorities: delivering sustainable revenue growth; client franchise improvements; limited financial resource increases; and reduction of the cost base. In each of these areas, the IB successfully delivered tangible results, all while navigating the immediate reaction following the COVID- 19 pandemic in March and April 2020. The result was a significant improvement in the Return on Tangible Equity for the IB. IB’s strategy will continue to focus upon the core priorities, building on the franchise’s key strengths and optimizing where possible to work towards a future Return on Tangible Equity target of between 9.5 % to 10.5 %. Within Fixed Income and Currencies (FIC), the strategic transformation of key businesses that has been underway since 2019 will continue. Our leading Financing business will focus upon maintaining disciplined risk management across the diversified portfolio, with the deployment of resources into targeted sectors, such as Asset Backed Securities. The FIC businesses ex- cluding Financing will build upon the substantial progress made in 2020 by continuing to deliver franchise improvements and ensure the sustainability of revenue growth. In Credit trading, we continue the rebuilding of our Credit Flow franchise in Europe and U.S. by expanding our product suite, while we further develop our e-trading capabilities, with a focus upon a more targeted client set. In Foreign Exchange (FX), technology development remains a key priority to maintain competitive advantage, in addition to targeting under-penetrated client groups and further enhancing the partnership with the Corporate Bank (CB). In Rates, the franchise will continue to focus upon automation and digitalization of flow, deeper investment in e-channels and turnaround of specific EMEA businesses. The Global Emerging Markets (GEM) organizational structure and leadership of the GEM business are now in place and further product development and enhanced e-pricing and execution tools (particularly in Central and Eastern Europe Middle East and Africa and Latin America) will be aligned with increased alignment with the Corporate Bank (CB). The strategic transformation of the FIC business will be reinforced by our FIC reengineering program, which is intended to enable us to materially improve client experience, eliminate complexity and manual processes, and as a result lower costs and enhance the control environment. In Origination and Advisory (O&A), we intend to continue to focus on a targeted client set, increasing the level of intensity with which we cover clients. Investments will be focused upon coverage of growth sectors where the Bank has a competitive advantage in the Advisory business, such as Healthcare, Consumer, Industrials, real estate, gaming, lodging and leisure sector and Technology Media & Telecom as well as strategic growth opportunities for incremental cross-border activity. In Equity Capital Markets (ECM), we plan to continue to offer a full underwriting and distribution capability in US and EMEA and targeted in APAC. Our Debt Origination business plans to continue to target areas of strength, further building the franchise, ensuring efficient risk distribution and resource optimization, in addition to future growth areas, such as ESG. The strategy of IB is underpinned by a controlled approach to capital deployment, continued effort on reducing the cost base and a focus on control improvements. In addition, we aim to further eliminate inefficiencies in our funding costs in 2021 and beyond. XXI Deutsche Bank Annual Report 2020 Strategy Committees Finally, ESG remains a priority across all our business lines, as we develop market leading sustainable finance capabilities and a range of derivative solutions. Significant progress was made in 2020 in transaction volumes across Debt Origination and FIC Financing, with innovative hedging and investment product solutions also delivered. In our strategic initiatives, we are targeting continued growth, with an expansion of the client-base for both origination and distribution. Private Bank Private Bank (PB) covers private, wealth and commercial clients across more than 60 countries and operates through two distinct business units: Private Bank Germany (PB GY) and the International Private Bank (IPB). At the Investor Deep Dive in December 2020, we detailed that our divisional targets for 2022 are to contribute revenues of € 8.3 billion to the Group despite interest rate headwinds and to reduce our cost base by € 0.8 billion within the next two years. Higher revenues and lower cost are key drivers as we work towards a Return on Tangible Equity of around 8 to 9 % in 2022. PB GY is Germany’s leading retail bank with two highly complementary brands, Deutsche Bank and Postbank, serving ap- proximately 19 million clients. We target clients who are seeking advisory solutions with Deutsche Bank offerings and those looking for convenience through the Postbank offerings. In cooperation with Deutsche Post DHL AG, we also offer postal and parcel services in the Postbank branches. We renewed our insurance partnerships with Talanx and Zurich Insurance Group and will extend the offering to both Deutsche Bank and Postbank clients starting in 2023. Within PB GY, the transformation is well on track. In 2020, we successfully completed the merger of Deutsche Bank Privat- und Firmenkundenbank AG into Deutsche Bank AG, consolidating the retail business of both brands into one legal entity. Additionally, at the end of 2020, we completed the sale of Postbank Systems AG to Tata Consultancy Services to simplify the unit’s IT infrastructure. In addition, balance of interest negotiations were completed to further streamline the head office functions of the unit. The corresponding restructuring process will begin in early 2021 and is scheduled to be completed by the end of 2022. To sustain revenues, PB GY focuses on growth in investment and lending products, on an increasing share of revenues from direct sales channels (e.g. by leveraging its market leading mobile banking app) and is continuously reviewing and adjusting its price position across relevant products. With regard to the unit’s cost optimization, PB GY is continuing to implement its consolidation and transformation program, which represents a central cornerstone of the Group’s overall strategic realignment. In particular, cost savings will be achieved through consolidating Postbank’s IT infrastructure into one joint IT system. In addition, PB GY is further optimizing its distribution network by reducing the branch network and self-service infrastructure of DB and Postbank brand. Moreover, PB GY is targeting significant headcount reduction across central functions in order to realize the overall cost target. In 2020, we combined Wealth Management (WM) and the Private and Commercial Business International to create the Inter- national Private Bank . IPB serves the holistic needs of 3 million clients and has a unique client proposition, especially for family entrepreneurs, Ultra High Net Worth Individuals (UHNWI) and affluent customers. While IPB’s core scalable business is located in continental Europe, it also has a fast growing franchise in Asia and the Middle East, and operates a specialized UHNW franchise in the U.S. In Personal Banking, we serve our clients, primarily in Italy and Spain, acting as a source of potential clients for Private Banking and Wealth Management. We intend the combination of our internationally focused Private Bank businesses to allow us to develop our market share within and across markets, as well as to drive synergies to scale the business. The most prominent and immediate strategic opportunity was the merger of the Wealth Management and Private Banking activities, which brought a number of quick wins on cost, by combining platforms, products, operations and manage- ment. It also delivered revenue opportunities such as leveraging WM products for Private Banking clients and deploying WM capabilities in new markets such as Belgium. The next step is to unlock further growth potential by more closely aligning our WM and SME Business Banking offerings, starting in Italy and Spain. Additionally in 2020, we continued to selectively invest in our business by enhancing our product and core banking platforms as well as hiring front-office employees. As a result, we saw an increase in net inflows in our broader range of investment products as well as our newly launched Strategic Asset Allocation (SAA) solutions. Going forward, we aim to grow business through our focus on entrepreneurial families as well as through our continued con- version of deposits and non-invested assets into investment solutions. We intend to roll out our flagship SAA solution to the whole domestic client base in Italy, Spain and Belgium and plan to launch an ESG-compliant offering. We plan to continue to focus the combined business on our target client segments and drive cost efficiencies through optimizing our branch network and head office functions. We intend to enhance our digital capabilities and increase the use of automation and agile IT solutions. In 2020, the Private Bank further strengthened its focus on sustainability by defining ESG targets for 2025 and commenced various initiatives in this area. PB GY, for example, developed a specific taxonomy for classification of ESG-compliant mort- gage lending. In IPB, we integrated ESG into our investment platform and launched ESG-enhanced wealth mandates. XXII Deutsche Bank Annual Report 2020 Strategy Committees Asset Management We are a leading asset manager with over € 790 billion in assets under management. With approximately 3,930 employees operating globally, we provide a range of traditional and alternative investment capabilities to clients worldwide. Our investment offerings span all major asset classes including equity, fixed income, cash and multi asset as well as alternative and passive investments. Our product offerings are distributed through our single global distribution network, while also leveraging third- party distribution channels. We serve a diverse base of retail and institutional investors worldwide, with a strong presence in our home market in Germany. Our clients include government institutions, corporations and foundations as well as millions of individual investors. The asset management industry is evolving, with greater competition, continued margin pressure, and technological disruption amid heightened geopolitical tensions and increased market volatility. As a result, Asset Management (AM) has implemented a number of strategic initiatives to support our medium-term targets and aim to continue delivering shareholder value through net flows, cost discipline and dividend distributions. We believe our diverse range of well-performing products and investment solutions give us a strong basis for growing assets and profitability. We responded rapidly to the COVID-19 pandemic by implementing robust business continuity management and changed the way we work without compromising our commitment to clients or shareholders. At the same time, we have continued execution on our strategic agenda during 2020, making significant progress in all areas of our business. We have simplified our global business structure to become even more client- centric, flexible, efficient and effective. Our target is to make ESG and sustainability a key strategic focus of both our fiduciary and corporate activities. We expect sustainability and sustainable investments to become the driving force behind successful asset management over the coming years. Demand for ESG investment products has risen significantly, we have responded to this demand by launching new innovative products and offering ESG-versions of existing funds, resulting in significant inflows to these products in 2020. COVID-19 has amplified ESG as the pandemic’s fallout reinforces the need to build our economy on a more responsible and sustainable basis. Our aim is to become a leading ESG-integrated asset manager, which requires ESG to be embedded in everything we do. In our strategic measures, we aim to increase our focus on smart ESG integration across the investment platform, extending our Group Sustainability Office, and to continue to embed ESG into all of our corporate activities. Cost control continues to be fundamental to execute on our business strategy and ensure high shareholder value creation. We continue investing in our business and infrastructure functions and our plan for the future is to shift away from our complex legacy IT infrastructure towards a leading IT infrastructure that is more efficient and more appropriate for an asset manage- ment business. We aim to build a standalone operating model that delivers a sustainably low adjusted cost-income ratio, while supporting commercial success and driving agility. A key strategic focus is to continue delivering consistent investment outperformance across strategies that align with the increasingly sophisticated demands of our clients. We are evolving our innovation process to match our solutions to client requirements. We unified our Investment Division in 2020, which now encompasses all liquid and illiquid investment strategies. Furthermore, we established a unified Systematic Investment Solutions function, which combines our Passive and Quant capabilities in a single investment unit. Our strategy targets growth in specific product lines and regions, especially Asia. As part of our regional strategy optimization, we aim to focus on developing and nurturing strategic alliances. In Asia, we are continuing to work closely with our partners Nippon Life and Harvest Fund Management to explore new business opportunities in the region. Furthermore, we have ex- tended our strategic partnership with Zurich Insurance Group in the unit-linked retail business in Germany until 2032. We plan to continue to invest in digital capabilities to accelerate our readiness to compete in a rapidly evolving industry. Our growth commitment into digitization and technology is further underlined by our ongoing strategic partnerships. We will also continue working towards our target for the Post-tax Return on Average Tangible Shareholders’ Equity of above 20% for 2022. AM has prioritized execution and delivery in 2020, making significant progress in all areas of its business. We have continued our efforts to become a leading ESG-integrated asset manager. We made meaningful progress in order to reach our ambitions, including the appointment of a Group Sustainability Officer, introduced an ESG smart Integration process and formed of a new ESG Advisory Board. Product innovation has been a key focus, as reflected by the majority of our new ESG-focused product launches in 2020. In 2020, we maintained a strict cost discipline, helping us to achieve an adjusted cost-income ratio of 66.6 % for AM. This was achieved through our accelerated efficiency initiatives, focusing on making our workforce more efficient, strategic vendor management and reviewing our real estate portfolio in all locations. We established a standalone Product Division in 2020, which operates globally with responsibility for the entire product life-cycle, and will enable a more agile and innovative approach to product development while retaining a clear focus on client needs, product quality, time-to-market and profitability along the product life cycle. Organic growth remains a top priority for AM, and we have continued to increase our focus on the targeted asset classes of Passive and Alternatives, as well as strengthening our strategic partnerships, resulting in net inflows of 4 % of assets under management (based on beginning of year AuM). XXIII 1  Combined Management Report 4 4 7 12 30 32 Operating and financial review Executive summary Deutsche Bank Group Results of operations Financial position Liquidity and capital resources 34 Outlook 41 Risks and opportunities Risk report 52 Risk and capital overview 54 Risk and capital framework 58 68 Risk and capital management 111 Risk and capital performance 166 Compensation report 168 Management Board compensation report 199 211 Employee compensation report Compensation system for Supervisory Board members 214 Sustainability 215 Employees 219 Internal control over financial reporting 221 225 Information pursuant to Section 315a (1) of the German Commercial Code and explanatory report Corporate governance statement pursuant to sections 289f and 315d of the German Commercial Code 225 Standalone parent company information (HGB) Deutsche Bank Annual Report 2020 Operating and financial review Executive summary Operating and financial review The following discussion and analysis should be read in conjunction with the Consolidated Financial Statements and the related notes to them. Our Operating and Financial Review includes qualitative and quantitative disclosures on Segmental Results of Operations and Entity Wide disclosures on Net Revenue Components as required by International Financial Re- porting Standard (IFRS) 8, “Operating Segments”. For additional Business Segment disclosure under IFRS 8 please refer to Note 4 “Business Segments and Related Information” of the Consolidated Financial Statements. Forward-looking statements are disclosed in our Outlook section. Executive summary The Global Economy Economic growth (in %)¹ Global Economy 2020² (3.3) 2019 3.0 Main driver The COVID-19 pandemic led to unprecedented GDP declines in almost all countries in 2020 with few historical precedents though recovery in many regions progressed faster than expected. In spite of this, the historic economic disruptions caused by the COVID- 19 pandemic will still have lingering effects in the months ahead, and this may be pro- tracted by widespread vaccination delays. By the end of 2020 resurgence of COVID-19 cases has been observed in some regions, and several countries have moved to re- impose containment measures. Of which: Industrialized countries 0.6 1.3 4.0 1.6 (5.1) (5.0) (2.1) (6.8) U.S. Economy Emerging markets Eurozone Economy Of which: German economy Industrialized countries responded to the COVID-19 pandemic with extensive fiscal and monetary support measures. They benefited from comparatively low borrowing costs. Economic activity improved faster than expected after the slump in the first half of the year, although second wave of infections slowed the recovery. Emerging markets had a demanding and fairly divergent entry point into the COVID-19 crisis, in terms of policy capacity and medical infrastructure. As a result and as expected, the growth shock in some countries was more pronounced and persistent. However, the slump was followed by a strong recovery, albeit divergent across regions. Following a sharp contraction in the first half of 2020, the Eurozone economy rebounded strongly. Households and businesses were supported by expanded fiscal policy measures and the European Central Bank’s expansionary monetary policy, which pro- vided favourable financial conditions. At the beginning of the fourth quarter, a second wave of COVID-19 infections gained momentum and required renewed containment measures. A trade deal between the EU and the UK was finally agreed in December. The economic slump in the first half of 2020 was historic, but the end of most lockdown restrictions in the second quarter resulted in a stronger-than-expected recovery. In the wake of massive fiscal support measures, the short-time work scheme helped to curb the rise in unemployment and strengthened household incomes. Nevertheless, rising COVID-19 infections created headwinds for economic momentum in the last quarter of 2020. The U.S. economy experienced a massive contraction in the second quarter, followed by a stronger than expected recovery. The unemployment rate climbed to new record highs, but the labour market improved again as the recovery progressed. A strong second wave of COVID-19 in combination with delayed additional fiscal stimulus constrained the re- covery. The Federal Reserve Bank (the “Fed”) acted quickly and aggressively to keep funds flowing freely in money and credit markets. Economic activity recovered faster than expected in the third quarter. During a second wave of COVID-19 infections in summer, the government did not declare a nationwide state of emergency and instead tried to support economic activity. The Bank of Japan kept an accommodative policy stance, while paying attention to policy side effects. With maintained fiscal stimulus, there was less pressure on the Bank of Japan to ease. The rebound from the COVID-19-driven plunge in economic activity has been stronger than anticipated. China, Japan and other north Asian economies have been relatively successful in controlling the virus and returning to or toward pre-virus levels of activity. Asian central banks have reached the limits of conventional stimulus through interest rate cuts. The continued V-shaped recovery led to an expansion of the Chinese economy in 2020, reflecting the robust industrial sector and a faster-than-expected recovery in services ac- tivity, with real estate and transport services outperforming. This mainly contributed to the global recovery. 1 Annual Real GDP Growth (% YoY). Sources: National Authorities unless stated otherwise. 2 Sources: Deutsche Bank Research. 3 Including China, India, Indonesia, Republic of Korea, and Taiwan, ex Japan. Of which: Chinese Economy Japanese Economy Asian Economy³ (4.9) (1.0) (3.5) 2.3 0.3 5.2 6.0 2.2 4 Deutsche Bank Annual Report 2020 Operating and financial review Executive summary The Banking Industry Growth year-over-year (in %) Eurozone Corporate Lending 5.5 Retail Lending 3.2 Corporate Deposits 18.6 Retail Deposits 7.5 Of which: Germany 4.1 4.7 13.3 6.1 Dec 31, 2020 Main driver Corporate loan growth was sharply higher year over year due to the recession, but has stabilized in recent months. Retail lending maintains momentum. The pandemic triggered a dramatic accel- eration in corporate deposit growth, the strongest since the start of the monetary union in 1999, household deposits also ex- panded at the fastest pace since the financial crisis. After an initial spike, corporate loan growth has slowed to its low- est level in three years as companies are flush with liquidity, and the strongest expansion in corporate deposits on record. Growth in retail loans overall and in mortgages particularly has plateaued at the highest level on record, while consumer lending is stagnat- ing. Household deposits are rising the most since the financial crisis. U.S. 7.4 (2.9) 21.41 China 13.0 14.2 10.8 1 Total U.S. deposits as segment breakdown is not available. 21.41 Following an exceptional surge in corporate loans at the begin- ning of the pandemic, volumes are shrinking now and year over year growth has come down to near the pre-crisis pace. Over the course of the crisis, household lending turned from robust growth to the sharpest contraction since the aftermath of the financial crisis. The current crisis has also caused momentum in total de- posits to accelerate from a substantial increase to extraordinary speed, where it has recently stabilized. Retail lending (and deposit-taking) have maintained their dy- namic expansion, while corporate lending (and deposit-taking) have picked up to a similar level. 13.8 2020 was a very strong year for investment banking. Debt capital markets broke previous records across the board, including with regard to investment grade, high yield and sovereign issuances. Similarly, equity capital markets reached an all-time high, driven by follow-on transactions and convertibles, while the Initial Public Offering (“IPO”) market was also very strong. Mergers & acquisitions (M&A) activity slumped in the first half of 2020 but posted the strongest second half of 2020 on record, leading to only modestly lower announced deal volumes in the full year compared to 2019 and still a solid result in total. Investment banking fee income surged to a new record, driven by the U.S. and China, whereas Europe lagged behind slightly. Equity trading volumes were far higher than a year ago, especially in the U.S., while fixed income trading saw a moderate uptick and derivatives were flat. Deutsche Bank performance Deutsche Bank reported a profit before tax of € 1 billion for the full year 2020, remained on track to achieve key milestones in its transformation journey, including a significant reduction in costs, and to build a firm foundation for sustainable profitability despite significant strains of the global COVID-19 pandemic. Significant profit growth in the re-focused Core Bank more than offset the costs of transformation-related effects together with elevated provisions for credit losses. Our businesses made considerable progress against its strategic objectives driving visible franchise improvements and revenue growth while main- taining strict cost and risk discipline. Strong capital and liquidity reserves enabled Deutsche Bank to resolutely support clients during 2020. Deutsche Bank reported a net profit of € 624 million in 2020. Pre-tax profit was € 1 billion in 2020 after absorbing transformation charges of € 490 million and restructuring and severance expenses of € 688 million. The Core Bank, which excludes the Capital Release Unit, reported a pre-tax profit of € 3.2 billion in 2020 versus € 536 million in 2019. Adjusting for transformation charges of € 328 million, restructuring and severance expenses of € 671 million and specific revenue items of negative € 38 million, pre-tax profit in the Core Bank would have been € 4.2 billion, up 52 % versus 2019 on a comparable basis. Revenues excluding specific items, Adjusted costs, Adjusted costs excluding transformation charges, Adjusted costs exclud- ing transformation charges and expenses eligible for reimbursement related to Prime Finance, Adjusted profit (loss) before tax, Post-tax return on average tangible shareholders’ equity and Net Assets (adjusted) are non-GAAP financial measures. Please refer to “Supplementary Information (Unaudited): Non-GAAP Financial Measures” of this annual report for the defini- tions of such measures and reconciliations to the IFRS measures on which they are based. 5 Deutsche Bank Annual Report 2020 Operating and financial review Executive summary Group Key Performance Indicators Near-term operating performance Post-tax return on average tangible shareholders’ equity¹ Adjusted costs excl. transformation charges2 Employees3 Status end of 2020 0.2 % € 19.9 bn 84,659 Status end of 2019 (10.9) % € 21.6 bn 87,597 Capital performance Common Equity Tier 1 capital ratio4 Leverage ratio (fully loaded)4 1 Based on profit (loss) attributable to Deutsche Bank shareholders after AT1 coupon. For further information, please refer to “Supplementary Information (Unaudited): Non- 13.6 % 4.7 % 13.6 % 4.2 % GAAP Financial Measures” of this annual report. 2 Excluding transformation charges but including expenses of € 360 million eligible for reimbursement related to Prime Finance. For further information, please refer to “Supple- mentary Information (Unaudited): Non-GAAP Financial Measures” of this annual report. 3 Internal full-time equivalents. 4 Further detail on the calculation of this ratio is provided in the Risk Report. Net revenues were € 24 billion in 2020, an increase of € 864 million, or 4 % compared to 2019. The main drivers for the increase were significantly higher revenues in Investment Bank (IB) driven by benefits of underlying market activity and strong client engagement following our strategic re-positioning which more than offset the negative contribution from valuation and timing differences in Corporate and Others (C&O) and de-risking impacts in the Capital Release Unit (CRU). Net revenues in the Core Bank increased by 6 % to € 24.3 billion on a reported basis. Net revenues in the Corporate Bank (CB) of € 5.1 billion decreased 2 % year-on-year driven by interest rate headwinds partially offset by positive effects from deposit repricing. Net revenues in the Investment Bank (IB) increased by 32 % to € 9.3 billion in 2020, driven by higher revenues in Fixed Income & Currency (FIC) Sales & Trading as well as Origination & Advisory business reflecting supportive market conditions and market share gains in key areas. Full-year net revenues in the Private Bank (PB) were € 8.1 billion, down 1 % year-on-year reflecting a negative impact related to the sale of Postbank Systems AG. Excluding specific items, net revenues in the Private Bank remained essentially flat as growth in loan volumes and fee income, including benefits of deposit repricing measures partly compensated for the negative impacts from COVID-19 and interest rate headwinds. Net revenues in Asset Management (AM) of € 2.2 billion decreased by 4 % compared to the prior year due to absence of performance fees from Multi Asset and Alternatives recognized in 2019. Management fees remained stable as positive impacts of client flows and market develop- ment offset the industry-wide margin compression. Revenues in Corporate and Other (C&O) were negative € 530 million compared to positive € 147 million in the prior year reflecting an unfavorable impact from valuation and timing differences driven by the negative mark-to-market impact of hedging activities in connection with the bank’s funding arrangements. Provision for credit losses was € 1.8 billion in 2020, an increase of € 1.1 billion, or 148 %, compared to 2019, 41 basis points of average loans, for the full year. The increase was largely due to the effects of the COVID-19 pandemic on the economy. Noninterest expenses were € 21.2 billion in 2020, a decrease of € 3.9 billion or 15 %, from 2019. The decrease includes absence of 2019 transformation-related goodwill impairments of € 1.0 billion as well as decreases in transformation charges by € 655 million, litigation expenses by € 315 million and restructuring and severance expenses by € 118 million. Adjusted costs excluding transformation charges were € 19.9 billion, down 8 % compared to the prior year and in line with our target of € 19.5 billion for 2020 if adjusted for € 360 million expenses eligible for reimbursement related to Prime Finance. The year- on-year decrease reflects workforce reductions of over 2,900 full-time equivalents during 2020 as well as disciplined expense management and positive impact of currency translation effects. Profit before tax was € 1.0 billion in 2020 compared to a loss of € 2.6 billion in 2019, mainly driven by significant higher revenues in Investment Bank in 2020, absence of 2019 transformation-related goodwill impairments as well as decreases in transformation charges, litigation expenses, restructuring and severance expenses and in adjusted costs excluding transfor- mation charges reflecting workforce reductions, disciplined expense management and positive impact of currency translation effects. These were partly offset by increased levels of provision for credit losses largely due to the effects of the COVID-19 pandemic on the economy. Income tax expense was € 397 million in 2020, compared to € 2.6 billion in the prior year. The effective tax rate in 2020 was 39 % . The Bank reported a net profit of € 624 million in 2020, compared to a net loss of € 5.3 billion in 2019. This was driven by the abovementioned strong revenue performance in Investment Bank, absence of 2019 transformation-related goodwill impair- ments as well as decreases in transformation charges, litigation expenses, restructuring and severance expenses and in adjusted costs excluding transformation charges reflecting workforce reductions, disciplined expense management and posi- tive impact of currency translation effects. Valuation adjustments on deferred tax assets decreased from € 2.8 billion in 2019 to € 37 million in 2020. These positive effects were partly offset by increased levels of provision for credit losses. The Common Equity Tier 1 (CET 1) capital ratio was 13.6 % at the end of 2020, unchanged compared to 2019. The leverage ratio improved from 4.2 % in 2019 to 4.7% at the end of 2020 on a fully loaded basis. The leverage ratio on a phase-in basis improved from 4.3 % in 2019 to 4.8 % in 2020. 6 Deutsche Bank Annual Report 2020 Operating and financial review Deutsche Bank Group Deutsche Bank Group Deutsche Bank: Our organization Headquartered in Frankfurt am Main, Germany, we are the largest bank in Germany and one of the largest financial institutions in the world, as measured by total assets of € 1,325 billion as of December 31, 2020. As of that date, we had 84,659 full-time equivalent internal employees and operated in 59 countries with 1,891 branches, of which 68 % were located in Germany. We offer a wide variety of investment, financial and related products and services to private individuals, corporate entities and institutional clients around the world. As of December 31, 2020, we were organized into the following segments: – Corporate Bank (CB) – Investment Bank (IB) – Private Bank (PB) – Asset Management (AM) – Capital Release Unit (CRU) – Corporate & Other (C&O) We refer to CB, IB, PB, AM and C&O as our Core Bank. In addition, Deutsche Bank has a country and regional organizational layer to facilitate a consistent implementation of global strategies. We have operations or dealings with existing and potential customers in most countries in the world. These operations and dealings include working through: – subsidiaries and branches; – representative offices; and – one or more representatives assigned to serve customers. In 2018, we successfully completed the merger of Deutsche Bank Privat- und Geschäftskunden AG and Deutsche Postbank AG to form DB Privat- und Firmenkundenbank AG. Subsequently, in 2020, DB Privat- und Firmenkundenbank AG was merged into Deutsche Bank AG. The mergers are an important step towards significant cost reductions, mainly from eliminating infra- structure functions and governance tasks that were executed specifically for the individual legal entity. With this step, refinanc- ing and administrative expenses will be reduced and corporate governance simplified. The mergers also lay the foundation for integrated technology solutions, including the migration of Postbank’s systems to Deutsche Bank’s IT infrastructure in 2022 and the decommissioning of legacy applications is planned for 2023. The aim is to simplify what has been a complex IT environment, resulting in greater efficiency and improved technology for a more seamless client experience. Management Structure The Management Board has structured the Group as a matrix organization, comprising Corporate Divisions and Infrastructure Functions operating in legal entities and branches across geographic locations. The Management Board is responsible for the management of the company in accordance with the law, the Articles of Asso- ciation and the Terms of Reference for the Management Board with the objective of creating sustainable value in the interests of the company. It considers the interests of shareholders, employees and other company-related stakeholders. The Manage- ment Board manages Deutsche Bank Group in accordance with uniform guidelines; it exercises general control over all Group companies. The Management Board decides on all matters prescribed by law and the Articles of Association and ensures compliance with the legal requirements and internal guidelines (compliance). It also takes the necessary measures to ensure that adequate internal guidelines are developed and implemented. The Management Board's responsibilities include, in particular, the bank’s strategic management and direction, the allocation of resources, financial accounting and reporting, control and risk manage- ment, as well as corporate control and a properly functioning business organization. The members of the Management Board are collectively responsible for managing the bank’s business. The allocation of functional responsibilities to the individual members of the Management Board is described in the Business Allocation Plan for the Management Board, which sets the framework for the delegation of responsibilities to senior manage- ment below the Management Board. The Management Board endorses individual accountability of senior position holders as opposed to joint decision-taking in committees. At the same time, the Management Board recognizes the importance of having comprehensive and robust information across all businesses in order to take well informed decisions and established, the 7 Deutsche Bank Annual Report 2020 Operating and financial review Deutsche Bank Group “Group Management Committee” which aims to improve the information flow across the corporate divisions and between the corporate divisions and the Management Board along with the Infrastructure Committees, Business Executive Committees and Regional Committees. The Group Management Committee is a senior platform, which is not required by the German Stock Corporation Act, and is composed of all Management Board members, the most senior business representatives as well as the Head of Group Panning & Performance Management to exchange information and discuss business, growth and profitability. Corporate Bank Corporate Division Overview The Corporate Bank (CB) comprises Global Transaction Banking as well as Commercial Banking in Germany. The division is primarily focused on serving corporate clients, including the German “Mittelstand”, larger and smaller sized commercial and business banking clients in Germany as well as multinational companies. It is also a partner to financial institutions with regards to certain Transaction Banking services. Global Transaction Banking consists of four businesses Cash Management, Trade Finance & Lending, Trust & Agency Services and Securities Services. Commercial Banking provides integrated expertise and a holistic product offering across the Deutsche Bank and Postbank brands in Germany. Commencing from first quarter of 2021, the Corporate Bank will report revenues based on three client segments: Institutional Client Services, Corporate Treasury Services and Business Banking. Institutional Client Services comprises of Cash Manage- ment for Institutional clients, Trust and Agency Services, as well as Securities Services. Corporate Treasury Services provides the full suite of Trade Finance and Lending, as well as Corporate Cash Management for large and mid-sized corporate clients. Business Banking covers small corporates and entrepreneur clients and offers a largely standardized product suite. In CB, we have made one significant capital divestiture since January 1, 2018. In early October 2017, Deutsche Bank Group signed a binding agreement to sell its Alternative Fund Services business, a unit of the Global Transaction Banking division, to Apex Group Limited. The transaction was completed in the second quarter of 2018.There have been no significant capital expenditures since January 1, 2018. Products and Services The Corporate Bank is a global provider of risk management solutions, cash management, lending, trade finance, trust and agency services as well as securities services. Focusing on the finance departments of corporate and commercial clients and financial institutions in Germany and across the globe, our holistic expertise and global network allows us to offer integrated solutions. In addition to the Corporate Bank product suite, our Coverage teams provide clients with access to the expertise of the Invest- ment Bank. Distribution Channels and Marketing The global Coverage function of the Corporate Bank focuses on international Large Corporate Clients and is organized into two units: Coverage and Risk Management Solutions. Coverage includes multi-product generalists covering headquarter level and subsidiaries via global, regional and local coverage teams. Risk Management Solutions includes Foreign Exchange, Emerging Markets and Rates product specialists. This unit is managed regionally in APAC, Americas and EMEA to ensure close connectivity to our clients. Commencing from the first quarter 2021, Corporate clients in Germany will be served out of two units: Corporate Treasury Services and Business Banking. Corporate Treasury Services covers mid and large corporate clients across two brands, Deutsche Bank and Postbank, and offers the whole range of solutions across cash, trade financing, lending and risk manage- ment for the corporate treasurer. Business Banking covers small corporates and entrepreneur clients and offers a largely standardized product suite and selected contextual-banking partner offerings (e.g. accounting solutions). 8 Deutsche Bank Annual Report 2020 Operating and financial review Deutsche Bank Group Investment Bank Corporate Division Overview The Investment Bank (IB) combines Deutsche Bank’s Fixed Income, Currency (FIC) Sales & Trading and, Origination & Ad- visory, as well as Deutsche Bank Research. It focuses on its traditional strengths in financing, advisory, fixed income and currencies, bringing together wholesale banking expertise across coverage, risk management, sales and trading, Investment Banking and infrastructure. This enables IB to align resourcing and capital across our client and product perimeter to effectively serve the Bank’s clients. In IB we made one significant capital divestiture since January 1, 2018. In April 2019, Tradeweb closed its initial public offering. Tradeweb is a financial services company that builds and operates over-the-counter (OTC) marketplaces for trading fixed income products and derivatives. Deutsche Bank Group has had an economic interest in Tradeweb since 2007 and partici- pated in the initial public offering and several subsequent secondary offerings, alongside other large bank shareholders by selling a portion of its holdings. There have been no significant capital expenditures since January 1, 2018. Products and Services FIC Sales & Trading brings together an institutional sales force and research with trading and structuring expertise across Foreign Exchange, Rates, Credit and Emerging Markets. The FIC Sales & Trading business enables Deutsche Bank to re- spond to increasing automation, regulatory expectations as well as client demand for standardization and transparency in transaction execution across fixed income and currencies. Origination and Advisory is responsible for our debt origination business, mergers and acquisitions (M&A), and a focused equity advisory and origination platform. It is comprised of regional and industry-focused coverage teams, co-led from the bank’s hubs in Europe, the U.S. and Asia Pacific, that facilitates the delivery of a range of financial products and services to the bank’s corporate clients. Distribution Channels and Marketing Coverage of the IB’s clients is provided by the Institutional Client Group, which houses our debt sales team, and the Investment Banking Coverage team within Origination & Advisory. Both teams work in conjunction with our Risk Management Solutions team in the Corporate Bank, covering capital markets and Treasury solutions. The close cooperation between these groups help to create enhanced synergies leading to increased cross selling of products/solutions to our clients. Private Bank Corporate Division Overview In the Private Bank (PB), we serve personal and private clients, wealthy individuals, entrepreneurs and families. In our inter- national businesses we also focus on commercial clients. We are organized along two business divisions: Private Bank Ger- many and International Private Bank. Our product range includes payment and account services, credit and deposit products as well as investment advice including a range of Environmental, Social and Governance (ESG) products. We offer our cus- tomers both the coverage of all basic financial needs as well as individual, tailor-made solutions. PB made one significant capital divestiture since January 1, 2018. In November 2020, Deutsche Bank AG signed an agree- ment to sell its share in Postbank Systems AG to Tata Consultancy Services (TCS). The transaction was closed after regula- tory and governmental approvals on December 31, 2020. There have been no significant capital expenditures since January 1, 2018. Products and Services In our Private Bank Germany division, we pursue a differentiated, customer-focused approach with two strong and comple- mentary main brands: Deutsche Bank and Postbank. With our Deutsche Bank brand we focus on providing our private cus- tomers with banking and financial products and services that include sophisticated and individual advisory solutions. The focus of our Postbank brand remains on providing our retail customers with standard products and daily retail banking services. In cooperation with Deutsche Post DHL AG, we also offer postal and parcel services in the Postbank brand branches. In the International Private Bank we also have a differentiated, customer-focused approach with two client segments. The “IPB Personal Banking” client segment covers the retail and affluent customers as well as small businesses in Italy, Spain, Belgium and India, providing them with banking and other financial services. The client segment “Private Banking and Wealth Management” covers high-net-worth and ultra-high-net-worth clients globally as well as small and medium-sized corporate clients and private banking clients in Italy, Spain, Belgium and India. We support our clients in planning, managing and invest- ing their wealth, financing their personal and business interests and servicing their institutional and corporate needs. In addi- tion, we offer a range of Environmental, Social and Governance (ESG) products across our discretionary portfolio manage- ment and advisory platform. These products enable our clients to invest in line with their values and according to specified ESG strategies, scores and exclusionary criteria. We also provide institutional-type services for sophisticated clients and com- plement our offerings by closely collaborating with the Investment Bank, the Corporate Bank and Asset Management. 9 Deutsche Bank Annual Report 2020 Operating and financial review Deutsche Bank Group Distribution Channels and Marketing We pursue an omni-channel approach and our customers can flexibly choose between different possibilities to access our services and products. Our distribution channels include our branch networks in Private Bank Germany and International Private Bank, supported by customer call centers and self-service terminals as well as advisory centers of the Deutsche Bank brand in Germany, Italy and Spain, which supplement our branch network and our digital offerings. We also offer online and mobile banking including our Digital Platform, through which we provide a transaction platform for banking, brokerage and self-services, combined with a multi-mobile offering for smartphones and tablets. We also have collaborations with self-employed financial advisors and other sales and cooperation partners. For our private banking and wealth management client segment we have a distinct client coverage team approach with Relationship and Investment Managers supported by Client Service Executives assisting clients with wealth management services and open-architecture products. In addition, in Germany, Deutsche Oppenheim Family Offices AG provides family office services, discretionary funds and advisory solutions. The expansion of digital capabilities remains a strong focus across our businesses. We will continue to optimize our omni- channel mix in the future in order to provide our customers with the most convenient access to our products and services. Asset Management Corporate Division Overview With over € 790 billion of assets under management as of December 31, 2020, the asset management division (DWS) is one of the world’s leading asset management organizations. DWS serves a diverse client base of retail and institutional investors worldwide, with a strong presence in our home market in Germany. These clients include government institutions, corporations and foundations as well as individual investors. Deutsche Bank retains 79.49% ownership interest in DWS and asset management remains a core business for the group. The shares of DWS are listed on the Frankfurt stock exchange. There have been no significant capital expenditures or divestitures since January 1, 2018, other than the partial initial public offering (IPO) of DWS Group GmbH & Co. KGaA. Products and Services DWS’s investment offerings span all major asset classes including equity, fixed income, cash and multi asset as well as alternative investments. Our alternative investments include real estate, infrastructure, private equity, liquid real assets and sustainable investments. We also offer a range of passive investments. In addition, DWS’s solution strategies are targeted to client needs that cannot be addressed by traditional asset classes alone. Such services include insurance and pension solu- tions, asset-liability management, portfolio management solutions, asset allocation advisory, structuring and overlay. Our deep environmental, social and governance focus complement each other when creating targeted solutions for our clients. Distribution Channels and Marketing DWS’s product offerings are distributed across EMEA (Europe, Middle East and Africa), the Americas and Asia Pacific through a single global distribution network. DWS also leverages third-party distribution channels, including Deutsche Bank Group. Capital Release Unit The Capital Release Unit (CRU) was created in July 2019. The CRU’s principal objectives are to liberate capital consumed by low return assets and businesses that earn insufficient returns or activities that are no longer core to our strategy by liberating capital in an economically rational manner. In addition, the CRU is focused on reducing costs. BNP Paribas and Deutsche Bank have signed a master transaction agreement to provide continuity of service to Deutsche Bank’s Prime Finance and Electronic Equities clients. Under the agreement Deutsche Bank will continue to operate the plat- form until clients can be migrated to BNP Paribas, which is expected to occur by the end of 2021. In addition, in the restated financials of the CRU division, we recorded the following significant capital divestitures since Jan- uary 1, 2018: In December 2017, the Group entered into an agreement to sell its Polish Private & Commercial Banking business, excluding its foreign currency denominated retail mortgage portfolio, together with DB Securities S.A., to Santander Bank Polska. The transaction was successfully completed in the fourth quarter 2018. In March 2018, Deutsche Bank Group entered into an agreement to sell the retail banking business in Portugal to ABANCA Corporación Bancaria S.A. The parties closed the transaction in the first half of 2019. 10 Deutsche Bank Annual Report 2020 Operating and financial review Deutsche Bank Group Infrastructure The Infrastructure functions perform control and service activities for the businesses, including tasks relating to Group-wide, cross-divisional resource-planning, steering and control, as well as tasks relating to risk, liquidity and capital management. The Infrastructure functions are organized into the following areas of responsibility of our senior management: – Finance, Tax, Treasury, Investor Relations – Risk, Compliance, Anti Financial Crime – Legal, Group Governance, Data Privacy, Government & Regulatory Affairs – Technology, Data and Innovation – Operations and Corporate Services – HR and Transformation Infrastructure also includes Communications & Corporate Social Responsibility and Group Audit which report to the Chief Executive Officer. Costs originating in the Infrastructure functions are currently allocated to the corporate divisions based on planned allocations, with the exception of technology development costs which will be charged to Divisions based on actual expenditures during 2021. The current cost allocation methodology is being replaced with a Driver based cost management (DBCM) framework. This new methodology links the services provided by the Infrastructure functions to the businesses which consume them thereby creating enhanced transparency regarding the drivers for the costs which are being charged and facilitate the identi- fication of cost reduction opportunities. Significant Capital Expenditures and Divestitures Information on each Corporate Division’s significant capital expenditures and divestitures for the last three financial years has been included in the above descriptions of the Corporate Divisions. Since January 1, 2020, there have been no public takeover offers by third parties with respect to our shares and we have not made any public takeover offers for our own account in respect of any other company’s shares. 11 Deutsche Bank Annual Report 2020 Operating and financial review Results of operations Results of operations Consolidated results of operations You should read the following discussion and analysis in conjunction with the Consolidated Financial Statements. Condensed Consolidated Statement of Income in € m. (unless stated otherwise) Net interest income Provision for credit losses Net interest income after provision for credit losses Commissions and fee income¹ Net gains (losses) on financial assets/liabilities at fair value through profit or loss¹ Net gains (losses) on financial assets at fair value through other comprehensive income Net gains (losses) on financial assets at amortized cost Net income (loss) from equity method investments Other income (loss) Total noninterest income Total net revenues² Compensation and benefits General and administrative expenses Impairment of goodwill and other intangible assets Restructuring activities Total noninterest expenses Profit (loss) before tax Income tax expense (benefit) Profit (loss) Profit (loss) attributable to noncontrolling interests Profit (loss) attributable to Deutsche Bank share- holders and additional equity components Profit (loss) attributable to additional equity com- ponents Profit (loss) attributable to Deutsche Bank share- holders 2020 increase (decrease) from 2019 2019 increase (decrease) from 2018 2020 11,526 1,792 9,734 9,424 2019 13,749 723 13,026 9,520 2018 13,316 525 12,791 10,039 in € m. (2,223) 1,068 (3,292) (96) in % (16) 148 (25) (1) in € m. 433 199 235 (519) in % 3 38 2 (5) 2,465 193 1,209 2,271 N/M (1,015) (84) 323 260 317 63 24 (57) (18) 324 120 (154) 12,503 22,237 10,471 10,259 0 485 21,216 1,021 397 624 129 0 110 (668) 9,416 22,441 11,142 12,253 1,037 644 25,076 (2,634) 2,630 (5,265) 125 2 219 215 12,000 24,791 11,814 11,286 0 360 23,461 1,330 989 341 75 324 10 515 3,087 (205) (671) (1,993) (1,037) (159) (3,860) 3,655 (2,233) 5,888 4 N/M 9 (77) 33 (1) (6) (16) (100) (25) (15) N/M (85) N/M 3 (2) (109) (883) (2,585) (2,350) (672) 966 1,037 283 1,615 (3,965) 1,641 (5,606) 50 (78) (50) N/M (22) (9) (6) 9 N/M 79 7 N/M 166 N/M 68 495 (5,390) 267 5,885 N/M (5,657) N/M 382 328 319 53 16 9 3 113 (5,718) (52) 5,831 N/M (5,666) N/M N/M – Not meaningful 1 For further detail please refer to Note 1 “Significant Accounting Policies and Critical Accounting Estimates” of this annual report. 2 After provision for credit losses. Net Interest Income in € m. (unless stated otherwise) Total interest and similar in- come Total interest expenses Net interest income Average interest-earning as- sets1 Average interest-bearing liabili- ties1 Gross interest yield2 Gross interest rate paid3 Net interest spread4 Net interest margin5 2020 2019 2018 in € m. in % in € m. in % 2020 increase (decrease) from 2019 2019 increase (decrease) from 2018 17,806 25,208 24,718 (7,401) 6,280 11,526 11,458 13,749 11,402 13,316 (5,178) (2,223) (29) (45) (16) 489 56 433 920,444 956,362 990,670 (35,918) (4) (34,307) 685,830 1.82 % 0.76 % 1.06 % 1.25 % 714,716 2.53 % 1.47 % 1.07 % 1.44 % 745,904 2.39 % 1.38 % 1.00 % 1.34 % (28,886) (0.72) ppt (0.71) ppt (0.01) ppt (0.19) ppt (4) (28) (48) (1) (13) (31,188) 0.14 ppt 0.09 ppt 0.06 ppt 0.09 ppt 2 0 3 (3) (4) 6 6 6 7 ppt – Percentage points Prior period comparatives for gross interest income and gross interest expense have been restated. € 59 million and € 75 million for year ended December 31, 2019 and De- cember 31, 2018 were restated. Additionally, € 124 million was reclassified from trading Income to interest expense for year ended December 31, 2018. 1 Average balances for each year are calculated in general based upon month-end balances. Prior period comparatives for 2019 have been restated. 2 Gross interest yield is the average interest rate earned on our average interest-earning assets. 3 Gross interest rate paid is the average interest rate paid on our average interest-bearing liabilities. 4 Net interest spread is the difference between the average interest rate earned on average interest-earning assets and the average interest rate paid on average interest- bearing liabilities. 5 Net interest margin is net interest income expressed as a percentage of average interest-earning assets. 12 Deutsche Bank Annual Report 2020 Operating and financial review Results of operations 2020 Net interest income was € 11.5 billion in 2020 compared to € 13.7 billion in 2019, a decrease of € 2.2 billion, or 16 %. The decrease was primarily driven by lower interest rates and unfavorable movements in foreign exchange rates. These negative effects were partly offset by improved volumes and client flows in Investment Bank as well as positive effects from deposit repricing in Corporate Bank. Interest income included € 43 million related to EU government grants under the Targeted Longer- Term Refinancing Operations II (TLTRO II) program in 2020, whereas 2019 included € 93 million under this program. In addition, interest income for the year 2020 included € 86 million, which were related to EU government grants under the Targeted Longer-Term Refinancing Operations III (TLTRO III) program. Overall, the bank’s net interest margin declined by 19 basis points compared to the prior year to 1.25 % in 2020. 2019 Net interest income was € 13.7 billion in 2019 compared to € 13.3 billion in 2018, an increase of € 433 million, or 3 %. The increase was primarily driven by a € 24 billion, or 6%, growth in average loan volumes, lower volumes of negative yielding deposits with banks and central banks, mainly in Germany, as well as a favorable interest rate development in the U.S. in the first half of 2019. These positive effects were partly offset by lower interest income associated with discontinued business activities following the execution of the bank’s transformation strategy announced in July 2019. Interest income included € 93 million related to EU government grants under the Targeted Longer-Term Refinancing Operations II (TLTRO II) program, which remained unchanged compared to 2018. Overall, the bank’s net interest margin improved by 9 basis points compared to the prior year to 1.44 % in 2019. Net Gains (Losses) on Financial Assets/Liabilities at Fair Value through Profit or Loss in € m. (unless stated otherwise) Trading income Net gains (losses) on non-trading financial assets mandatory at fair value through profit or loss Net gains (losses) on financial assets/liabilities designated at fair value through profit or loss Total net gains (losses) on financial assets/liabilities at fair value through profit or loss 2020 2,230 2019 197 2018 (72) in € m. 2,033 in % N/M in € m. 269 in % N/M 2020 increase (decrease) from 2019 2019 increase (decrease) from 2018 276 377 212 (102) (27) 165 78 (40) (381) 1,069 341 (89) (1,449) N/M 2,465 193 1,209 2,271 N/M (1,015) (84) N/M – Not meaningful € 124 million was reclassified from trading income to net interest income for year ended December 31, 2018. 2020 Net gains on financial assets/liabilities at fair value through profit or loss were € 2.5 billion in 2020, compared to € 193 million in 2019. The increase of € 2.3 billion was primarily driven by mark-to-market impacts on derivatives as well as positive impacts from overall strategic repositioning in IB resulting in strong client flows and benefits from increased market volatility. This was further benefited by positive effects from interest rate hedges in C&O, which did not fully compensate the negative effects of the lower interest rates in Net Interest Income. This overall increase was partly offset by a negative impact from de-risking in Capital Release Unit (CRU). 2019 Net gains on financial assets/liabilities at fair value through profit or loss were € 193 million in 2019, compared to € 1.2 billion in 2018. The decrease of € 1.0 billion, or 84 %, was primarily driven by the non-recurrence of revenues associated with discontinued business activities following the execution of the bank’s transformation strategy announced in July 2019, negative mark-to-market impacts as well as de-risking in the Capital Release Unit (CRU). Net Interest Income and Net Gains (Losses) on Financial Assets/Liabilities at Fair Value through Profit or Loss Our trading and risk management activities include interest rate instruments and related derivatives. Under IFRS, interest and similar income earned from trading instruments and financial instruments designated at fair value through profit or loss (i.e., coupon and dividend income) and the costs of funding net trading positions are part of net interest income. Our trading activ- ities can periodically shift income between net interest income and net gains (losses) on financial assets/liabilities at fair value through profit or loss depending on a variety of factors, including risk management strategies. In order to provide a more business-focused discussion, the following table presents net interest income and net gains (losses) on financial assets/liabilities at fair value through profit or loss by corporate division. 13 Deutsche Bank Annual Report 2020 Operating and financial review Results of operations in € m. (unless stated otherwise) Net interest income Total net gains (losses) on financial assets/liabilities at fair value through profit or loss Total net interest income and net gains (losses) on financial assets/liabilities at fair value through profit or loss Breakdown by Corporate Division:1 Corporate Bank Investment Bank Private Bank Asset Management Capital Release Unit Corporate & Other Total net interest income and net gains (losses) on financial assets/liabilities at fair value through profit or loss 2020 2019 2018 11,526 13,749 13,316 in € m. (2,223) in % (16) in € m. 433 in % 3 2020 increase (decrease) from 2019 2019 increase (decrease) from 2018 2,465 193 1,209 2,271 N/M (1,015) (84) 13,991 13,942 14,524 48 0 (582) (4) 2,935 7,196 4,623 (98) (33) (632) 2,709 5,444 4,946 87 155 602 2,562 5,273 5,017 (88) 1,442 318 226 1,751 (323) (185) (188) (1,233) 8 32 (7) N/M N/M N/M 147 171 (71) 175 (1,287) 284 6 3 (1) N/M (89) 89 13,991 13,942 14,524 48 0 (582) (4) N/M – Not meaningful Prior year segmental information presented in the current structure € 124 million was reclassified from trading income to net interest income for year ended December 31, 2018. 1 This breakdown reflects net interest income and net gains (losses) on financial assets/liabilities at fair value through profit or loss only. For a discussion of the corporate divi- sions’ total revenues by product please refer to Note 4 “Business Segments and Related Information”. 2020 Total net interest income and net gains (losses) on financial assets/liabilities at fair value through profit or loss were € 14.0 bil- lion in 2020, compared to € 13.9 billion in 2019, an increase of € 48 million. This was primarily due to mark-to-market impacts on derivatives as well as positive impacts from overall strategic repositioning in IB resulting in strong client flows and benefits from increased market volatility, deposit repricing measures in CB and PB and growth in loan volumes in PB. In C&O, mark- to-market impacts from interest rate hedging activities did not fully compensate the negative effects of the lower interest rates. This was further offset by continued negative impact of the low interest rate environment on deposit margins in PB and de- risking costs in CRU. Net interest income and net gains (losses) on financial assets/liabilities at fair value through profit or loss in AM also decreased compared to the prior year reflecting an unfavorable impact from the valuation of consolidated guaran- teed mutual funds which has a corresponding offset in Other Income. 2019 Total net interest income and net gains (losses) on financial assets/liabilities at fair value through profit or loss were € 13.9 bil- lion in 2019, compared to € 14.5 billion in 2018, a decrease of € 582 million, or 4 %. The decrease was primarily driven by the CRU reflecting the non-recurrence of revenues associated with discontinued business activities, negative mark-to-market impacts as well as de-risking costs. In PB, total net interest income and net gains (losses) on financial assets/liabilities at fair value through profit or loss decreased versus the prior year mainly due to the continued negative impact of the low interest rate environment on deposit margins and negative mark-to-market impacts from interest rate hedging activities. This was offset by positive mark-to-market impacts in C&O and by growth in loan volumes in IB, CB and PB. Net interest income and net gains (losses) on financial assets/liabilities at fair value through profit or loss in AM also increased compared to the prior year reflecting a favorable impact from the valuation of consolidated guaranteed mutual funds which has a corresponding offset in Other Income. Provision for Credit Losses 2020 Provision for credit losses was € 1.8 billion in 2020, an increase of € 1.1 billion, or 148 % compared to 2019. This increase was primarily driven by negative impacts from COVID-19 related impairments. The net increase of provisions for credit losses on performing assets includes a management overlay to flatten the high amplitudes of the standard model on forward looking information in the COVID-19 crisis and an additional management overlay to account for remaining uncertainties in the macro- economic outlook. Provision for credit losses was 41 basis points of average loans reflecting the high quality of the bank’s loan book. Please refer to the sections “Segment Results of Operations” and “Risk Report” for further details on provision for credit losses. 2019 Provision for credit losses was € 723 million in 2019, an increase of € 199 million, or 38 %, compared to 2018. The return to a more normalized level was a result of the overall weakened macroeconomic environment with a number of specific events across all segments as well as lower releases and recoveries compared to the prior year. Provision for credit losses in 2019 included a net positive effect of € 18 million arising from changes in estimates of € 183 million, stemming from model refine- ments and the annual recalibration of the forward looking information in our IFRS 9 model, which offset a negative impact of € 165 million from the update of macroeconomic variables. Provision for credit losses was 17 basis points of average loans reflecting the bank’s strong underwriting standards and risk management as well as the low-risk nature of our portfolios. Please refer to the sections “Segment Results of Operations” and “Risk Report” for further details on provision for credit losses. 14 Deutsche Bank Annual Report 2020 Operating and financial review Results of operations Remaining Noninterest Income in € m. (unless stated otherwise) Commissions and fee income1 Net gains (losses) on financial assets at fair value through other comprehensive income Net gains (losses) on financial assets at amortized cost Net income (loss) from equity method investments Other income (loss) Total remaining noninterest income 1 includes: Commissions and fees from fiduciary activities: Commissions for administration Commissions for assets under management Commissions for other securities business Total Commissions, broker’s fees, mark-ups on securities underwriting and other securities activities: Underwriting and advisory fees Brokerage fees Total Fees for other customer services Total commissions and fee income N/M – Not meaningful 2020 9,424 2019 9,520 2018 10,039 in € m. in % in € m. (96) (1) (519) in % (5) 2020 increase (decrease) from 2019 2019 increase (decrease) from 2018 323 260 317 63 24 (57) (18) 324 120 (154) 10,038 0 110 (668) 9,222 2 219 215 10,792 324 10 515 816 N/M 9 (77) 9 (2) (109) (883) (1,570) (78) (50) N/M (15) 347 3,208 341 3,896 327 3,298 317 3,943 303 3,130 290 3,724 1,625 637 2,262 3,266 9,424 1,501 637 2,137 3,440 9,520 1,629 936 2,565 3,751 10,039 19 (90) 24 (47) 125 0 125 (174) (96) 6 (3) 7 (1) 8 0 6 (5) (1) 24 168 27 219 (128) (299) (427) (311) (519) 8 5 9 6 (8) (32) (17) (8) (5) Commissions and fee income 2020 Commissions and fee income was € 9.4 billion in 2020, a decrease of € 96 million, or 1 %, compared to 2019. The decrease included € 174 million lower fees for other customer services in Corporate Bank mainly driven by reduced economic activities. Commissions for assets under management decreased by € 90 million in AM mainly due to absence of performance fees from Multi Asset and Alternatives recognized in 2019. Underwriting and advisory fees increased by € 125 million mainly driven by increased activity and market share gains in debt market as well as an increase in global fee pool and issuances in equities. Brokerage fees have remained flat year-over-year mainly as the negative impact from discontinued business activities in CRU following the execution of the bank’s transformation strategy announced in July 2019 was fully compensated by higher com- mission and fee income in PB from investment and insurance products including benefits form re-pricing measures. 2019 Commissions and fee income was € 9.5 billion in 2019, a decrease of € 519 million, or 5 %, compared to the prior year. The decrease included € 427 million lower underwriting and advisory fees as well as brokerage fees, primarily in the CRU, asso- ciated with discontinued business activities following the execution of the bank’s transformation strategy announced in July 2019. Fees for other customer services declined by € 311 million primarily driven by a reduction in the global fee pool and issuances, lower leveraged loan fees and capital markets fees. These decreases were partly offset by higher commissions for assets under management in AM, mainly driven by a non-recurring alternatives and multi asset performance fee recognized in 2019. Net gains (losses) on financial assets at fair value through other comprehensive income 2020 Net gains on financial assets at fair value through other comprehensive income were € 323 million in 2020, an increase of € 63 million, or 24 % compared to 2019 driven mainly by higher gains from the sale of bonds and securities from our strategic liquidity reserve. 2019 Net gains on financial assets at fair value through other comprehensive income were € 260 million in 2019, a decrease of € 57 million, or 18 % compared to 2018 driven mainly by lower gains from sale of the municipal bonds in the U.S., government bonds and securities from our strategic liquidity reserve. Net gains (losses) on financial assets at amortized cost 2020 Net gains (losses) on financial assets at amortized cost were € 324 million in 2020 and nil in 2019, driven by sale of assets out of Hold-to-collect portfolio in 2020 as part of our strategy for managing the interest rate risk in the banking book. 15 Deutsche Bank Annual Report 2020 Operating and financial review Results of operations 2019 Net gains (losses) on financial assets at amortized cost were nil in 2019 and € 2 million in 2018, which primarily included the impact from the early redemption of certain bonds. Net income (loss) from equity method investments 2020 Net gains from equity method investments were € 120 million in 2020 compared to € 110 million in 2019, an increase of € 10 million, or 9 %. 2019 Net gains from equity method investments were € 110 million in 2019 compared to € 219 million in 2018, a decrease of € 109 million, or 50 %, primarily due to the absence of a prior year gain from the valuation of an investment and lower equity pickup from Huarong Rongde Asset Management Company Limited. Other income (loss) 2020 Other income (loss) was € (154) million in 2020 compared to € (668) million in 2019. The improvement was driven by positive impacts associated with hedge ineffectiveness along with fair value hedge accounting adjustments. Furthermore, other income includes a positive impact from a valuation adjustment on liabilities of guaranteed mutual funds in AM that offsets a negative impact from the valuation of consolidated guaranteed mutual funds in net gains (losses) on financial assets/liabilities at fair value through profit or loss. 2019 Other income (loss) was € (668) million in 2019 compared to € 215 million in 2018. The decrease was driven by the impact of hedge ineffectiveness together with bond sales and fair value hedge accounting adjustments following the unwinding of the municipal bond portfolio in the U.S. in 2018. The decrease was also impacted by the absence of a prior year gain from the sale of real estate assets in 2018 and lower positive impacts from workout activities related to legacy positions in Sal. Oppen- heim in 2019. Furthermore, other income includes a negative impact from a valuation adjustment on liabilities of guaranteed mutual funds in AM that offsets a positive impact from the valuation of consolidated guaranteed mutual funds in net gains (losses) on financial assets/liabilities at fair value through profit or loss. Noninterest Expenses in € m. (unless stated otherwise) Compensation and benefits General and administrative expenses¹ Impairment of goodwill and other intangible assets Restructuring activities Total noninterest expenses N/M – Not meaningful 1 includes: Information Technology2 Occupancy, furniture and equipment expenses3 Regulatory, tax & insurance3,4 Professional services5 Banking Services and outsourced operations5 Market Data and Research services2 Travel expenses Marketing expenses Other expenses6 Total general and administrative expenses 2020 increase (decrease) from 2019 2019 increase (decrease) from 2018 2020 10,471 10,259 2019 11,142 12,253 2018 11,814 11,286 in € m. (671) (1,993) in % in € m. (6) (16) (672) 966 0 485 21,216 1,037 644 25,076 0 360 23,461 (1,037) (159) (3,860) (100) (25) (15) 1,037 283 1,615 in % (6) 9 N/M 79 7 3,862 5,011 4,043 (1,150) (23) 968 24 1,724 1,407 982 962 376 76 174 696 10,259 1,693 1,440 1,143 967 421 256 251 1,071 12,253 1,698 1,570 1,323 960 415 288 299 690 11,286 31 (33) (161) (5) (46) (180) (77) (374) (1,993) 2 (2) (14) (0) (11) (70) (31) (35) (16) (5) (130) (180) 6 7 (32) (48) 381 966 (0) (8) (14) 1 2 (11) (16) 55 9 2 Prior year numbers have been restated to reflect the shift of telecommunications expenses from (communications) and market data & research services expenses to infor- mation technology expenses 3 Prior year numbers have been restated to reflect the shift of insurance premium expenses from occupancy, furniture and equipment expenses to regulatory, tax & insurance expenses 4 Includes bank levy of € 633 million in 2020, € 622 million in 2019 and € 690 million in 2018. 5 Prior year numbers have been restated to reflect the shift of other outsourced operations expenses from professional services expenses to banking services and outsourced operations expenses 6 Includes litigation related expenses of € 158 million in 2020, € 473 million in 2019 and € 88 million in 2018. See Note 27 “Provisions”, for more detail on litigation Compensation and benefits 2020 Compensation and benefits decreased by € 671 million, or 6 %, to € 10.5 billion in 2020 compared to € 11.1 billion in 2019. The decrease was primarily driven by lower fixed compensation expenses resulting from workforce reductions. 16 Deutsche Bank Annual Report 2020 Operating and financial review Results of operations 2019 Compensation and benefits decreased by € 672 million, or 6 %, to € 11.1 billion in 2019 compared to € 11.8 billion in 2018. The decrease was primarily driven by lower fixed and variable compensation expenses which reflects overall affordability and performance at the Group level and the reduction in headcount. General and administrative expenses 2020 General and administrative expenses decreased by € 2 billion, or 16 %, to € 10.3 billion in 2020 compared to € 12.3 billion in 2019. The decrease was driven by € 655 million lower transformation charges as 2019 included higher software impairments and higher litigation expenses. Apart from these, general and administrative expenses further decreased compared to the prior year following a disciplined cost management with reductions across all major cost categories including IT expenses due to lower software amortization and a reduction of IT service expenses, professional service fees mainly reflecting a reduction in external workforce expenses as well as travel and marketing expenses. 2019 General and administrative expenses increased by € 966 million, or 9 %, to € 12.3 billion in 2019 compared to € 11.3 billion in 2018. The increase was driven by € 1.1 billion transformation charges mainly related to the impairment of software and real estate assets, as well as higher litigation expenses. Excluding these effects, general and administrative expenses decreased compared to the prior year following a disciplined cost management with reductions across all major cost categories except IT expenses, which remained essentially stable during 2019, reflecting Deutsche Bank’s commitment to continue spending on technology and controls in line with its transformation strategy. Impairment of goodwill and other intangible assets 2020 No impairment charges were reported for 2020. Impairment of goodwill and other intangible assets of € 1.0 billion was reported in 2019. The announcement of the strategic transformation in July 2019 triggered the impairment review of Deutsche Bank’s goodwill. A worsening macro-economic outlook, including interest rate curves, industry-specific market growth corrections, as well as the impact related to the implementation of the transformation strategy resulted in the full impairment of the Wealth Management goodwill of € 545 million in PB and the GTB & CF goodwill of € 492 million in CB in the second quarter 2019. 2019 Impairment of goodwill and other intangible assets was € 1.0 billion in 2019 as aforementioned. Restructuring 2020 Expenses for restructuring activities were € 485 million in 2020 compared to € 644 million in 2019. The decrease was primarily due to higher costs related to the execution of the bank’s transformation strategy in 2019. 2019 Expenses for restructuring activities were € 644 million in 2019 compared to € 360 million in 2018. The increase was primarily related to the execution of the bank’s transformation strategy which led to new provisions in all segments in 2019. Income Tax Expense 2020 Income tax expense in 2020 was € 397 million compared to € 2.6 billion in 2019. The effective tax rate in 2020 was 39 %. 2019 Income tax expense in 2019 was € 2.6 billion compared to € 989 million in 2018. The effective tax rate of (100) % (2018: 74 %) mainly resulted from € 2.8 billion transformation related deferred tax assets valuation adjustments and non-deductible goodwill impairments. Net profit (loss) 2020 Net profit in 2020 was € 624 million, compared to a net loss of € 5.3 billion in the prior year. The increase in net profit was primarily driven by strong revenue performance in Investment Bank, absence of 2019 transformation-related goodwill impair- ments as well as decreases in transformation charges, litigation expenses, restructuring and severance expenses and in adjusted costs excluding transformation charges reflecting workforce reductions, disciplined expense management and posi- tive impact of currency translation effects. Valuation adjustments on deferred tax assets decreased from € 2.8 billion in 2019 to € 37 million in 2020. These positive effects were partly offset by increased levels of provision for credit losses. 2019 The net loss was € 5.3 billion in 2019, compared to a net income of € 341 million in the prior year, primarily driven by the aforementioned € 2.8 billion transformation related deferred tax assets valuation adjustments, € 1.0 billion impairment of 17 Deutsche Bank Annual Report 2020 Operating and financial review Results of operations goodwill, € 1.1 billion of transformation charges, mainly impairments of software and real estate assets, as well as restructuring and severance expenses of € 805 million. Segment results of operations The following is a discussion of the results of our business segments. See Note 4 “Business Segments and Related Infor- mation” to the consolidated financial statements for information regarding: – changes in the format of our segment disclosure and – the framework of our management reporting systems. The Group’s segment reporting follows the organizational structure as reflected in its internal management reporting systems, which are the basis for assessing the financial performance of the business segments and for allocating resources to the business segments. The criterion for segmentation into divisions is our organizational structure as it existed at December 31, 2020. Prior period comparables were restated due to changes in the divisional structure. in € m. (unless stated otherwise) Net revenues1 Provision for credit losses Noninterest expenses Compensation and benefits General and administrative expenses Impairment of goodwill and other intangible assets Restructuring activities Total noninterest expenses Noncontrolling interests Profit (loss) before tax Cost/income ratio Assets2 Additions to non-current assets Risk-weighted assets Leverage exposure (fully loaded)3 Average allocated shareholders' equity Post-tax return on average shareholders’ equity4 Post-tax return on average tangible share- holders’ equity4 1 includes: Net interest income Net income (loss) from equity method investments 2 includes: Equity method investments Corporate Bank 5,145 366 Investment Bank 9,283 688 1,064 3,126 0 28 4,218 0 561 82 % 1,906 3,493 0 14 5,413 11 3,171 58 % Private Bank 8,126 711 2,884 4,242 0 413 7,539 0 (124) 93 % 237,497 10 57,288 273,795 9,904 573,673 4 128,487 476,261 22,943 296,637 485 77,074 307,746 11,521 Asset Manage- ment 2,229 2 740 764 0 22 1,527 157 544 68 % 9,453 32 9,997 4,695 4,760 2020 Capital Release Unit (225) 29 Corporate & Other (530) (3) Total Consolidated 24,028 1,792 168 1,774 0 5 1,947 (0) (2,201) N/M 197,667 0 34,415 71,726 6,205 3,709 (3,140) 10,471 10,259 0 3 572 (169) (930) N/M 10,333 2,891 21,690 29,243 0 0 485 21,216 0 1,021 88 % 1,325,259 3,423 328,951 1,078,268 55,332 3 % 9 % (1) % 8 % (26) % N/M 4 % 10 % (2) % 21 % (27) % N/M 0 % 0 % 2,882 3,325 4,475 3 69 22 399 23 60 1 63 304 61 9 67 781 11,526 1 4 120 901 N/M – Not meaningful 3 The Group leverage exposure is presented excluding certain Euro-based exposures facing Eurosystem central banks based on the ECB-decision (EU) 2020/1306 and after having obtained permission from the ECB. The segmental leverage exposures are presented without that deduction. 4 The post-tax return on average tangible shareholders’ equity and average shareholders’ equity at the Group level reflects the reported effective tax rate for the Group, which was 39 % for the year ended December 31, 2020. For the post-tax return on average tangible shareholders’ equity and average shareholders’ equity of the segments, the Group effective tax rate was adjusted to exclude the impact of permanent differences not attributed to the segments, so that the segment tax rates were 28 % for the year ended December 31, 2020. For further information, please refer to “Supplementary Information (Unaudited): Non-GAAP Financial Measures” of this annual report. 18 Deutsche Bank Annual Report 2020 Operating and financial review Results of operations in € m. (unless stated otherwise) Net revenues1 Provision for credit losses Noninterest expenses Compensation and benefits General and administrative expenses Impairment of goodwill and other intangible assets Restructuring activities Total noninterest expenses Noncontrolling interests Profit (loss) before tax Cost/income ratio Assets2 Additions to non-current assets Risk-weighted assets Leverage exposure (fully loaded) Average allocated shareholders' equity Post-tax return on average shareholders’ equity3 Post-tax return on average tangible share- holders’ equity3 1 includes: Net interest income Net income (loss) from equity method investments 2 includes: Equity method investments Corporate Bank 5,244 284 Investment Bank 7,019 109 1,073 3,165 492 137 4,867 0 92 93 % 1,983 4,237 0 169 6,389 20 502 91 % Private Bank 8,206 344 2,990 4,481 545 126 8,142 (0) (279) 99 % 228,663 9 58,808 270,647 10,464 501,774 1 116,552 432,254 23,052 270,334 215 74,032 282,575 11,729 2019 Asset Manage- ment 2,332 1 Capital Release Unit 217 (14) Corporate & Other 147 0 Total Consolidated 23,165 723 832 851 359 2,898 3,906 (3,380) 11,142 12,253 0 29 1,711 152 468 73 % 9,936 27 9,527 4,643 4,821 0 143 3,400 1 (3,170) N/M 259,224 0 45,874 126,905 10,105 0 40 566 (173) (247) N/M 27,743 1,069 19,223 51,016 0 1,037 644 25,076 0 (2,634) 108 % 1,297,674 1,322 324,015 1,168,040 60,170 0 % 1 % (2) % 7 % (23) % N/M (10) % 0 % 1 % (3) % 18 % (24) % N/M (11) % 2,633 2,707 4,804 (39) 3 66 32 412 14 82 49 276 85 12 90 3,559 13,749 1 4 110 929 N/M – Not meaningful Prior year segmental information presented in the current structure 3 The post-tax return on average tangible shareholders’ equity and average shareholders’ equity at the Group level reflects the reported effective tax rate for the Group, which was (100) % for the year ended December 31, 2019. For the post-tax return on average tangible shareholders’ equity and average shareholders’ equity of the segments, the Group effective tax rate was adjusted to exclude the impact of permanent differences not attributed to the segments, so that the segment tax rates were 28 % for the year ended December 31, 2019. For further information, please refer to “Supplementary Information (Unaudited): Non-GAAP Financial Measures” of this annual report. in € m. (unless stated otherwise) Net revenues1 Provision for credit losses Noninterest expenses Compensation and benefits General and administrative expenses Impairment of goodwill and other intangible assets Restructuring activities Total noninterest expenses Noncontrolling interests Profit (loss) before tax Cost/income ratio Assets2 Additions to non-current assets Risk-weighted assets3 Leverage exposure (fully loaded) Average allocated shareholders' equity Post-tax return on average shareholders’ equity4 Post-tax return on average tangible share- holders’ equity4 1 includes: Net interest income Net income (loss) from equity method investments 2 includes: Equity method investments Corporate Bank 5,278 142 Investment Bank 7,561 70 1,063 2,787 0 32 3,882 0 1,254 74 % 2,175 4,134 0 199 6,509 24 958 86 % Private Bank 8,520 349 3,059 4,448 0 49 7,556 (0) 616 89 % 216,163 13 60,305 257,921 10,927 458,464 2 122,662 413,631 22,629 270,150 303 67,180 287,760 12,397 2018 Asset Manage- ment 2,187 Capital Release Unit 1,911 (1) (36) Corporate & Other (142) 1 Total Consolidated 25,316 525 787 929 547 2,742 4,183 (3,754) 11,814 11,286 0 19 1,735 85 368 79 % 10,030 43 10,365 5,044 4,837 0 62 3,351 1 (1,404) N/M 370,090 1 72,133 280,638 11,704 0 (1) 428 (109) (461) N/M 23,240 1,286 17,789 27,933 115 0 360 23,461 0 1,330 93 % 1,348,137 1,647 350,432 1,272,926 62,610 8 % 2 % 3 % 5 % (9) % N/M (0) % 9 % 3 % 4 % 14 % (9) % N/M (0) % 2,419 2,209 4,905 (51) 416 3,417 13,316 3 63 157 406 2 78 41 240 10 87 6 5 219 879 N/M – Not meaningful Prior year segmental information presented in the current structure 3 Risk-weighted assets are based upon CRR/CRD 4 fully-loaded. 19 Deutsche Bank Annual Report 2020 Operating and financial review Results of operations 4 The post-tax return on average tangible shareholders’ equity and average shareholders’ equity at the Group level reflects the reported effective tax rate for the Group, which was 74 % for the year ended December 31, 2018. For the post-tax return on average tangible shareholders’ equity and average shareholders’ equity of the segments, the Group effective tax rate was adjusted to exclude the impact of permanent differences not attributed to the segments, so that the segment tax rates were 28 % for the year ended December 31, 2018. For further information, please refer to “Supplementary Information (Unaudited): Non-GAAP Financial Measures” of this annual report. Corporate Bank in € m. (unless stated otherwise) Net revenues Global Transaction Banking Commercial Banking Total net revenues Provision for credit losses Noninterest expenses Compensation and benefits General and administrative expenses Impairment of goodwill and other intangible assets Restructuring activities Total noninterest expenses Noncontrolling interests Profit (loss) before tax Total assets (in € bn)1 Loans (gross of allowance for loan losses, in € bn) Employees (full-time equivalent) 2020 increase (decrease) from 2019 2019 increase (decrease) from 2018 2020 2019 2018 in € m. in % in € m. in % 3,698 1,447 5,145 366 1,064 3,126 0 28 4,218 0 561 237 114 7,368 3,810 1,433 5,244 284 1,073 3,165 492 137 4,867 0 92 229 119 7,712 3,908 1,370 5,278 142 1,063 2,787 0 32 3,882 0 1,254 216 114 7,653 (112) 14 (98) 82 (9) (40) (492) (108) (649) 0 469 9 (5) (345) (3) 1 (2) 29 (1) (1) N/M (79) (13) N/M N/M 4 (4) (4) (98) 63 (34) 142 10 378 492 105 986 0 (1,162) 13 5 60 (3) 5 (1) 100 1 14 N/M N/M 25 N/M (93) 6 5 1 N/M – Not meaningful Prior year segmental information presented in the current structure 1 Segment assets represent consolidated view, i.e., the amounts do not include intersegment balances 2020 Profit before tax of the Corporate Bank was € 561 million for the full year 2020, up from € 92 million in 2019. This increase was mainly driven by the non-recurrence of an impairment of goodwill in the prior year and lower restructuring activities. Ad- justed for transformation charges, restructuring and severance expenses, goodwill impairments and specific revenue items, profit before tax was € 714 million, 20% below the prior year, mainly driven by lower revenues and higher credit loss provi- sions in 2020. Full year net revenues were € 5.1 billion, or € 5.2 billion excluding a loss on sale of Postbank Systems AG, 2% lower year- over-year despite a challenging interest rate environment and other macro-economic headwinds. Global Transaction Banking net revenues of € 3.7 billion were €112 million or 3% lower compared to € 3.8 billion in the prior year, as interest rate headwinds were partly offset by deposit repricing, balance sheet management initiatives and ECB tier- ing as well as portfolio rebalancing actions. Cash Management revenues were slightly lower, as interest rate and currency translation headwinds were partly offset by deposit repricing, ECB tiering and balance sheet management initiatives. Trade Finance and Lending revenues were essentially flat year-on-year. Securities Services and Trust and Agency Services reve- nues were significantly lower, mainly due to interest rate reductions in the U.S. and in Asia. Commercial Banking net revenues of € 1.4 billion increased by 1% or 2% excluding a € 16 million loss on sale of Postbank Systems AG compared to 2019, as interest rate headwinds were offset, mainly from deposit re-pricing. Provision for credit losses was €366 million, up € 82 million year-on-year, mainly as a result of idiosyncratic events. Non-interest expenses were € 4.2 billion, 13% lower compared to € 4.9 billion in the prior year, which included an impair- ment of goodwill in the second quarter and higher restructuring charges. Adjusted costs ex-transformation charges of € 4.0 billion were down 2% year-on-year, reflecting non-compensation cost reduction initiatives, workforce reduction and the posi- tive impact of currency translation effects. 2019 Profit before tax of the Corporate Bank was € 92 million for the full year 2019, compared to € 1.3 billion in the prior year. The year-on-year decrease was driven by higher general and administrative expenses, including transformation charges, an im- pairment of goodwill as well as higher restructuring costs. Adjusted for transformation charges, restructuring and severance expenses, goodwill impairments and specific revenue items, profit before tax was € 894 million in 2019. Net revenues for the full year 2019 were € 5.2 billion, 1% lower compared to the prior year. Global Transaction Banking reported net revenues of € 3.8 billion in 2019, a decrease of € 98 million, or 3 %, compared to € 3.9 billion in the prior year. Cash Management revenues were essentially flat as the negative impact from a lower interest 20 Deutsche Bank Annual Report 2020 Operating and financial review Results of operations rate environment was largely compensated by the positive effects from a shift in the currency mix of deposits from Euro to higher-yielding US dollar deposits as well as the implementation of ECB tiering in the fourth quarter of 2019. Trade Finance revenues increased slightly as growth in the flow business following a good performance specifically in Asia and Germany offset a slowdown in structured products. Revenues in Trust & Agency Services slightly increased driven by higher net interest revenues and commissions and fees. Securities Services revenues were significantly lower as a result of a change in business perimeter following the disposal of the Alternative Funds Services business including a related gain on disposal in 2018, further non-recurring items in 2018 and the exit of the Equities business in 2019. Net revenues in Commercial Banking were € 1.4 billion, an increase of € 63 million or 5 % compared to the prior year driven by a slightly higher net interest income following growth in loan volume and higher commission and fee income mainly as a result of repricing measures. These effects more than offset the adverse impact of the low interest rate environment. Provision for credit losses was € 284 million, an increase from € 142 million in 2018, a year with an exceptionally low level of provisions by historical standards. The increase reflects the weakened macroeconomic environment and geopolitical uncer- tainties with a small number of specific events and lower releases and recoveries. Noninterest expenses in 2019 were € 4.9 billion, an increase of € 986 million or 25 % compared to € 3.9 billon in the prior year, driven by the execution of the transformation strategy, which triggered an impairment of goodwill, higher restructuring costs and transformation charges mainly related to IT impairments in 2019. Furthermore, costs were negatively impacted by changes in internal cost allocations following the resegmentation in 2019. Adjusted costs excluding transformation charges were € 4.1 billion, up 7 % year-on-year. The increase reflects higher spend on controls and technology, as well as the aforementioned changes in allocation of costs of internal services. Investment Bank in € m. (unless stated otherwise) Net revenues Fixed Income, Currency (FIC) Sales & Trading Debt Origination Equity Origination Advisory Origination & Advisory Other Total net revenues Provision for credit losses Noninterest expenses Compensation and benefits General and administrative expenses Impairment of goodwill and other intangible assets Restructuring activities Total noninterest expenses Noncontrolling interests Profit (loss) before tax Total assets (in € bn)1 Loans (gross of allowance for loan losses, in € bn) Employees (full-time equivalent) 2020 increase (decrease) from 2019 2019 increase (decrease) from 2018 2020 2019 2018 in € m. in % in € m. in % 7,088 1,542 379 277 2,198 (3) 9,283 688 1,906 3,493 0 14 5,413 11 3,171 574 69 4,258 5,525 1,119 149 370 1,638 (144) 7,019 109 1,983 4,237 0 169 6,389 20 502 502 75 4,351 5,644 1,146 197 458 1,801 117 7,561 70 2,175 4,134 0 199 6,509 24 958 458 65 4,623 1,563 423 231 (93) 560 142 2,265 579 (76) (744) 0 (155) (975) (8) 2,669 72 (6) (93) 28 38 155 (25) 34 (98) 32 N/M (4) (18) N/M (92) (15) (41) N/M 14 (8) (2) (119) (27) (48) (88) (163) (261) (542) 38 (192) 103 0 (30) (121) (4) (456) 43 10 (273) (2) (2) (24) (19) (9) N/M (7) 54 (9) 2 N/M (15) (2) (18) (48) 9 16 (6) N/M – Not meaningful Prior year segmental information presented in the current structure 1 Segment assets represent consolidated view, i.e., the amounts do not include intersegment balances 2020 Profit before tax was € 3.2 billion in 2020, an increase of € 2.7 billion compared to the prior year. The increase was mainly driven by significantly higher revenues, as well as lower general and administrative expenses and restructuring, partly offset by significantly higher provisions for credit losses. Net revenues were € 9.3 billion in 2020, an increase of € 2.3 billion or 32 % compared to 2019. Revenues in FIC Sales & Trading were € 7.1 billion, an increase of € 1.6 billion or 28 %. Rates revenues were significantly higher, with the business benefitting from the impact of strategic repositioning, in addition to strong client flows and market conditions. Foreign Exchange revenues were significantly higher, driven by the increased market volatility, specifically in the first half of the year and strength in derivatives. Revenues from Credit Trading were lower driven by the adverse credit market conditions in the first quarter, though the business recovered well in the second half of the year. Revenues in Emerging 21 Deutsche Bank Annual Report 2020 Operating and financial review Results of operations Markets were significantly higher, with all three regions up versus the prior year. Revenues in Financing were lower, with the business also affected by the adverse credit market in the first quarter, in addition to lower revenues from sectors impacted by the COVID-19 pandemic. Origination and Advisory net revenues were € 2.2 billion, a € 560 million or 34 % increase compared to the prior year. Debt Origination revenues were € 1.5 billion, significantly higher than the prior year driven principally by increased activity and market share gains in Investment Grade Debt. Equity Origination revenues of € 379 million were also significantly higher, reflecting a record industry fee pool and DB’s strength in the Special Purpose Acquisition Company market. Advisory revenues of € 277 million were significantly lower in a reduced fee pool environment which was impacted by the COVID-19 pandemic. Other revenues were negative € 3 million, compared to negative € 144 million in 2019. The year–on-year increase was mate- rially driven by a small gain of € 6 million relating to the impact of DVA on certain derivative liabilities versus a loss of € 140 million in 2019. Provision for credit losses was € 688 million or 89 basis points of average loans, an increase of € 579 million or 74 basis points primarily driven by COVID-19 related impairments. Noninterest expenses in 2020 were € 5.4 billion, a decrease of € 975 million or 15 % compared to the prior year, reflecting lower adjusted costs, reduced restructuring and severance and lower litigation. Adjusted costs excluding transformation charges decreased by 9 % driven by disciplined expense management and lower service cost allocations. 2019 Profit before tax was € 502 million in 2019, a decrease of € 456 million or 48 % compared to the prior year. The decrease was mainly driven by lower revenues, higher provisions for credit losses as well as higher general and administrative expenses, partly offset by lower compensation and benefits. The setup of the division during the second half of 2019 following Deutsche Bank’s strategic transformation announcement created a short-term negative revenue impact and drove transformation charges that impacted the full year profitability. Adjusted for transformation charges, restructuring and severance expenses as well as specific revenue items, profit before tax in 2019 was € 929 million, compared to € 924 million in 2018. Net revenues were € 7.0 billion in 2019, a decrease of € 543 million or 7 % compared to 2018. Revenues in FIC Sales & Trading were € 5.5 billion, a decrease of € 119 million or 2 %. Rates revenues were slightly lower, with the business impacted in the short term by the operational set up of the division. Foreign Exchange revenues were lower, largely driven by the continued low market volatility. Credit revenues were higher driven by a strong performance in flow trading and increased net interest income due to higher loan balances, partially offset by lower revenues in distressed debt. Revenues in Emerging Markets were higher as a result of significantly improved performance in flow trading. Origination and Advisory net revenues were € 1.6 billion, a € 163 million or 9 % decrease compared to the prior year. Debt Origination revenues were € 1.1 billion, essentially flat compared to the prior year as higher revenues in both High Yield and Investment Grade bonds were offset by a decline in leveraged loans. Advisory revenues of € 370 million were lower in a reduced fee pool environment. Equity Origination revenues of € 149 million were significantly lower, reflecting our repositioned franchise. Other revenues were negative € 144 million, compared to a gain of € 117 million in 2018. The year–on-year decrease was driven by a loss of € 140 million (2018: a gain of € 126 million) relating to the impact of DVA on certain derivative liabilities. Provision for credit losses was € 109 million, an increase of € 38 million compared to the prior year, however, provisions remained at 15 basis points of average loans, or relatively low levels, reflecting the bank’s strong underwriting standards and risk management. Noninterest expenses in 2019 were € 6.4 billion, a decrease of € 121 million or 2 % compared to the prior year, despite € 211 million of transformation charges. Adjusted costs excluding transformation charges decreased by 6 % driven by reduction in front office employees and related compensation, lower service cost allocations and disciplined management of non-compen- sation costs. 22 Deutsche Bank Annual Report 2020 Operating and financial review Results of operations Private Bank in € m. (unless stated otherwise) Net revenues: Private Bank Germany International Private Bank IPB Personal Banking1 IPB Private Banking2 and Wealth Management Total net revenues Of which: Net interest income Commissions and fee income Remaining income Provision for credit losses Noninterest expenses: Compensation and benefits General and administrative expenses Impairment of goodwill and other intangible assets Restructuring activities Total noninterest expenses Noncontrolling interests Profit (loss) before tax Total assets (in € bn)3 Loans (gross of allowance for loan losses, in € bn) Assets under Management (in € bn)4 Net flows (in € bn) Employees (full-time equivalent) 2020 increase (decrease) from 2019 2019 increase (decrease) from 2018 2020 2019 2018 in € m. in % in € m. in % 4,992 3,134 830 2,304 8,126 4,475 3,048 603 711 2,884 4,242 0 413 7,539 0 (124) 297 237 493 16 29,945 5,070 3,137 869 2,267 8,206 4,804 2,865 537 344 2,990 4,481 545 126 8,142 (0) (279) 270 227 482 4 31,599 5,320 3,200 888 2,312 8,520 4,905 2,788 827 349 3,059 4,448 0 49 7,556 (0) 616 270 216 446 (2) 32,437 (78) (3) (39) 37 (80) (329) 183 66 367 (106) (240) (545) 287 (603) 1 155 26 10 11 12 (1,654) (2) (0) (5) 2 (1) (7) 6 12 107 (4) (5) N/M N/M (7) N/M (56) 10 5 2 N/M (5) (251) (64) (19) (44) (314) (101) 77 (290) (5) (69) 34 545 76 586 (0) (895) 0 11 36 7 (838) (5) (2) (2) (2) (4) (2) 3 (35) (2) (2) 1 N/M 155 8 N/M N/M 0 5 8 N/M (3) N/M – Not meaningful Prior year segmental information presented in the current structure 1 Including small businesses in Italy, Spain and India. 2 Including small & mid caps in Italy, Spain and India. 3 Segment assets represent consolidated view, i.e., the amounts do not include intersegment balances. 4 We define assets under management as (a) assets we hold on behalf of customers for investment purposes and/or (b) client assets that are managed by us. We manage assets under management on a discretionary or advisory basis, or these assets are deposited with us. Deposits are considered assets under management if they serve in- vestment purposes. In the Private Bank Germany, IPB Personal Banking and IPB Private Banking, this includes time deposits and savings deposits. In IPB Wealth Manage- ment, it is assumed that all customer deposits are held with us primarily for investment purposes. 2020 In 2020, the Private Bank continued the implementation of its strategic agenda. Results were impacted by transformation- related effects of € 642 million including € 520 million restructuring and severance expenses as well as € 122 million transfor- mation charges, which were the main reason for a reported pre-tax loss of € 124 million in 2020. Adjusted for these transfor- mation-related effects and for specific revenue items as mentioned in the Non-GAAP Financial Measures section of this report, profit before tax was € 493 million in 2020 compared to adjusted profit before tax of € 507 million in the prior year. Higher provision for credit losses and higher litigation charges were largely offset by cost reductions. Net revenues of € 8.1 billion in 2020 declined by € 80 million, or 1 %, compared to 2019, mainly reflecting lower positive contributions from specific revenue items which included in 2020 a negative impact of € 88 million euros related to the sale of Postbank Systems AG. Excluding specific revenue items, revenues remained at prior year level as growth in volumes and higher commission and fee income compensated headwinds from the low interest rate environment and the COVID-19 pan- demic. In the Private Bank Germany, net revenues of € 5.0 billion declined by € 78 million, or 2 %, year-on-year. Revenues excluding the impact related to Postbank Systems AG were stable compared to 2019. Ongoing headwinds from lower interest rates and COVID-19 were offset by growth in loan revenues and higher commission and fee income from investment products, insurance products and from repricing measures. Net revenues in the International Private Bank (IPB) of € 3.1 billion remained essentially flat compared to the prior year. IPB’s client segment Private Banking and Wealth Management achieved net revenues of € 2.3 billion in 2020, an increase of € 37 million, or 2 %, compared to 2019. Headwinds from lower interest rates and COVID-19 and negative impacts from foreign currency translation were more than offset by business growth in investment products and lending reflecting benefits from previous hiring. Net revenues in the Personal Banking client segment declined by € 39 million, or 5 %, to € 830 million in 2020. The decline was mainly due to negative impacts from deposit margin compression and COVID-19. Provision for credit losses amounted to € 711 million in 2020 compared to € 344 million in 2019. The increase was mainly due to negative impacts from the COVID-19 pandemic as well as higher benefits in 2019 from portfolio sales and model refine- ments. Furthermore the increase was also related to the growth in the loan business. 23 Deutsche Bank Annual Report 2020 Operating and financial review Results of operations Noninterest expenses of € 7.5 billion declined by € 603 million, or 7 %, compared to 2019. The positive year-on-year impact from the non-recurrence of a goodwill impairment of € 545 million in 2019 was largely offset by € 296 million higher transfor- mation-related effects driven by higher restructuring and severance expenses reflecting initiatives related to the execution of the strategic agenda as well as € 104 million higher litigation charges. Adjusted costs excluding transformation charges of € 6.8 billion reduced by € 459 million, or 6 %, compared to 2019. The decline was mainly attributable to cost reduction initiatives and synergies from efficiency measures including workforce reduc- tions. PB’s internal workforce declined to below 30,000 at year end 2020. Assets under Management of € 493 billion increased by € 11 billion compared to December 31, 2019. The increase was mainly attributable to € 16 billion net inflows and € 6 billion market appreciation, in part offset by a € 9 billion negative impact from foreign exchange rate movements. Net inflows of € 16 billion during 2020 were almost entirely in investment products. 2019 In 2019, Private Bank reported a loss before tax of € 279 million, compared to a profit before tax of € 616 million in 2018. The decrease was attributable to lower gains from asset sales as well as an aggregate impact of approximately € 900 million related to the execution of the transformation strategy in 2019. This included an impairment of € 545 million for the full write- down of Wealth Management‘s goodwill, transformation charges of € 190 million, comprised mainly of software and real estate impairments as well as restructuring and severance costs. Adjusted for these charges as well as specific revenue items, profit before tax improved, despite ongoing headwinds from the low interest rate environment, from € 360 million in 2018 to € 507 million in 2019, supported by volume growth in loans and assets under management as well as incremental cost synergies related to the merger of the German businesses completed in 2018. Net revenues were € 8.2 billion in 2019 a decrease of € 314 million, or 4 %, compared to 2018 driven by the absence of a € 156 million gain from a property sale in 2018 and lower positive impacts from workout activities in Sal. Oppenheim. Excluding these items, revenues remained essentially flat compared to 2018 as growth in volumes and fee income partly compensated the headwinds from the low interest rate environment. Net revenues in the Private Bank Germany of € 5.1 billion declined by € 251 million, or 5 %, year-on-year mainly following lower asset sale gains including a € 156 million gain from a property sale in 2018. The ongoing headwinds from the low interest rate environment were partly offset by growth in loan revenues. Lower revenues from postal services subsequent to a contract alignment were more than offset by higher revenues from investment products as well as higher fee income from current accounts reflecting repricing measures. In the International Private Bank (IPB), net revenues of € 3.1 billion declined by € 64 million, or 2 %, compared to 2018 driven by a € 107 million lower impact from workout activities related to legacy positions in Sal. Oppenheim. Net revenues in IPB Private Banking and Wealth Management of € 2.3 billion declined by € 44 million, or 2 %, driven by the aforementioned lower impact from net revenues relating to Sal. Oppenheim workout activities. Excluding this effect, net revenues remained essen- tially flat compared to the prior year period. Higher loan revenues as well as higher fee income following higher assets under management compensated the negative impact from the ongoing low interest rate environment on deposits. Net revenues in IPB Personal Banking of € 869 million declined by € 19 million, or 2 %. Higher loan revenues compensated the negative impact from the ongoing low interest rate environment. Revenue growth in investment products and repricing measures related to current accounts largely offset the negative impact of a change in the treatment of loan fees in Italy and the non-recurrence of benefits from smaller asset sales. Provision for credit losses of € 344 million, or 15 basis points of loans, remained essentially flat compared to 2018 reflecting the conservative nature of our portfolios, strong underwriting standards and also a positive impact from portfolio sales and model refinements. These positive impacts offset the increase in provision for credit losses in line with the growth in our loan businesses. Noninterest expenses were € 8.1 billion, an increase of € 586 million, or 8 %, compared to 2018. The increase included the aforementioned aggregated impact of approximately € 900 million related to the impairment of goodwill, transformation related charges as well as restructuring and severance expenses. Adjusted costs excluding transformation charges were € 7.3 billion, a decrease of 3 % compared to 2018, reflecting strict cost discipline as well as executed reorganization measures including incremental cost synergies related to the merger of the German businesses. Assets under Management of € 482 billion increased by € 36 billion compared to December 31, 2018. The increase was mainly attributable to € 31 billion of market appreciation, € 4 billion net inflows and € 2 billion of foreign exchange rate move- ments. Net inflows of € 4 billion during 2019 were primarily in investment products. 24 Deutsche Bank Annual Report 2020 Operating and financial review Results of operations Asset Management in € m. (unless stated otherwise) Net revenues Management Fees Performance and transaction fees Other Total net revenues Provision for credit losses Noninterest expenses Compensation and benefits General and administrative expenses Impairment of goodwill and other intangible assets Restructuring activities Total noninterest expenses Noncontrolling interests Profit (loss) before tax Total assets (in € bn)1 Assets under Management (in € bn) Net flows (in € bn) Employees (full-time equivalent) 2020 increase (decrease) from 2019 2019 increase (decrease) from 2018 2020 2019 2018 in € m. in % in € m. in % 2,136 90 3 2,229 2 740 764 0 22 1,527 157 544 9 793 30 3,926 2,141 201 (10) 2,332 1 832 851 0 29 1,711 152 468 10 768 25 3,925 2,115 91 (19) 2,187 (1) 787 929 0 19 1,735 85 368 10 664 (23) 4,022 (5) (111) 13 (103) 1 (92) (87) 0 (6) (185) 5 76 (0) 25 5 1 (0) (55) N/M (4) 59 (11) (10) N/M (22) (11) 4 16 (5) 3 N/M 0 26 111 9 146 2 45 (78) 0 10 (23) 68 99 (0) 103 48 (97) 1 122 (48) 7 N/M 6 (8) N/M 51 (1) 80 27 (1) 16 N/M (2) N/M – Not meaningful Prior year segmental information presented in the current structure 1 Segment assets represent consolidated view, i.e., the amounts do not include intersegment balances. 2020 In 2020 the market conditions were impacted by the global COVID-19 pandemic. All major equity indices traded at significantly lower levels in the second quarter, with a recovery in most markets by year end, and with the U.S. dollar depreciating against the Euro. Overall net flows were positive combined with a growth in Assets under Management. In 2020 AM reported a profit before tax of € 544 million, an increase of € 76 million or 16 % compared to € 468 million in the prior year, primarily driven by lower expenses. Adjusted for transformation charges as well as restructuring and severance expenses, profit before tax was € 586 million in 2020 compared to € 539 million in 2019. Net revenues were € 2.2 billion, a decrease of € 103 million or 4 % compared to the prior year. Management fees were € 2.1 billion in 2020, essentially flat compared to the prior year as effects from the positive market performance and growth in Passive were partly offset by declining management fee margins. Performance and transaction fees of € 90 million in 2020 were significantly lower by € 111 million or 55 % compared to the full year 2019, predominantly due a non-recurring Alternatives and a Multi Asset performance fee recognized in 2019. Other revenues were € 3 million compared to negative € 10 million in 2019 with both years negatively impacted by the fair value of guaranteed products, combined with lower investment income, higher contribution from investment in Harvest Fund Management Co Limited and lower treasury funding charges in 2020. Noninterest expenses were € 1.5 billion, a decrease of € 185 million, or 11 % compared to the prior year, driven by a decline in variable compensation, and efficiency initiatives combined with pandemic related savings such as travel and entertainment and marketing costs. Noninterest expenses were also lower as the prior year included transformation charges relating to a real estate impairment. Adjusted costs excluding transformation charges were € 1.5 billion in 2020, a decrease of € 159 million, or 10 % compared to € 1.6 billion in 2019 as lower compensation expenses were supported by lower non-compensation costs. Assets under Management were € 793 billion, an increase of € 25 billion, or 3 %, versus December 31, 2019. The increase was driven by € 30 billion net inflows and € 24 billion related to favorable market development, mainly coming from the second half of 2020, partly offset by negative € 26 billion foreign exchange effects. The net inflows were primarily driven by Passive and Cash, and further supported by Alternatives. ESG dedicated funds continued to attract strong net inflows. The following table provides the development of Assets under Management during 2020, broken down by product type as well as the respective management fee margins: 25 Deutsche Bank Annual Report 2020 Operating and financial review Results of operations in € bn. Balance as of December 31, 2019 Inflows Outflows Net Flows FX impact Performance Other Balance as of December 31, 2020 Management fee margin (in bps) Active Equity Active Fixed Income Active Multi Asset 96 21 (19) 2 (2) 3 (1) 97 72 234 47 (54) (7) (9) 7 (6) 220 13 58 16 (18) (2) (0) 1 1 59 34 Active SQI 71 19 (22) (3) (0) 1 1 69 28 Active Cash 57 503 (483) 20 (4) 0 2 75 4 Passive Alternatives 156 85 (68) 17 (7) 13 0 179 19 Assets under Management 768 703 (673) 30 (26) 24 (3) 793 28 96 12 (8) 4 (3) (2) (1) 93 50 2019 In 2019 the market conditions were less volatile compared to 2018, helping to improve investor risk appetite. All major equity indices traded at higher levels in 2019 and the U.S. dollar appreciated against the Euro. Overall market conditions were more favorable compared to 2018, with positive effects on net inflows and significant growth in Assets under Management. In 2019 AM reported a profit before tax of € 468 million, an increase of € 99 million or 27 % compared to € 368 million in the prior year, primarily driven by significantly higher performance fees. Adjusted for transformation charges as well as restructur- ing and severance expenses, profit before tax was € 539 million in 2019 compared to € 413 million in 2018. Net revenues were € 2.3 billion, an increase of € 146 million or 7 % compared to the prior year. Management fees were € 2.1 billion in 2019, essentially flat compared to the prior year as effects from the positive market performance and growth in Passive and Alternatives were partly offset by declining management fee margins. Performance and transaction fees of € 201 million in 2019 significantly increased by € 111 million or 122 % compared to the full year 2018, mainly driven by a non-recurring Alternatives and a Multi Asset performance fee recognized in 2019. Other revenues were € 10 million negative compared to negative € 19 million in 2018 with both years impacted by the fair value of guarantees for the guaranteed products. Noninterest expenses were € 1.7 billion, a decrease of € 23 million, or 1 % compared to the prior year. General and adminis- trative expenses were lower driven by a significant decline in professional service fees, marketing cost and the absence of litigation expenses relating to a sold legacy business, partially offset by transformation charges relating to a real estate im- pairment. Compensation and benefits were higher mainly driven by performance related compensation. Adjusted costs excluding transformation charges were € 1.6 billion in 2019, a slight decrease of € 13 million, or 1 % compared to € 1.7 billion in 2018 as higher compensation expenses were offset by savings in professional service fees and marketing expenses. Assets under Management were € 768 billion, an increase of € 103 billion, or 16 %, versus December 31, 2018. The increase was driven by € 74 billion related to favorable market development, € 25 billion net inflows and € 7 billion resulting from positive foreign exchange effects. The net inflows were primarily in the targeted growth areas of Passive, Alternatives and Multi Asset products. The development in Assets under Management was also impacted by the outperformance of flagship funds and targeted strategies, an increase in the number of funds rated 4 or 5 stars by Morningstar and product innovations. The following table provides the development of Assets under Management during 2019, broken down by product type as well as the respective management fee margins: in € bn. Balance as of December 31, 2018 Inflows Outflows Net Flows FX impact Performance Other Balance as of December 31, 2019 Management fee margin (in bps) Active Equity Active Fixed Income Active Multi Asset 77 15 (17) (2) 0 20 (1) 96 76 227 58 (66) (8) 3 13 (1) 234 12 46 16 (9) 7 0 5 (0) 58 35 Active SQI 63 20 (18) 2 0 8 (2) 71 27 Active Cash 58 447 (449) (2) 1 1 (0) 57 4 Passive Alternatives Assets under Management 664 642 (617) 25 7 74 (3) 768 30 81 20 (11) 9 1 4 1 96 54 112 65 (46) 19 1 23 1 156 22 26 Deutsche Bank Annual Report 2020 Operating and financial review Results of operations Capital Release Unit in € m. (unless stated otherwise) Net revenues Provision for credit losses Noninterest expenses Compensation and benefits General and administrative expenses Impairment of goodwill and other intangible assets Restructuring activities Total noninterest expenses Noncontrolling interests Profit (loss) before tax Total assets (in € bn)1 Employees (full-time equivalent) 2020 increase (decrease) from 2019 2019 increase (decrease) from 2018 2020 (225) 29 2019 217 (14) 2018 1,911 (36) in € m. (442) 43 in % N/M N/M in € m. (1,694) 22 168 1,774 0 5 1,947 (0) (2,201) 198 482 359 2,898 0 143 3,400 1 (3,170) 259 621 547 2,742 0 62 3,351 1 (1,404) 370 1,540 (191) (1,124) 0 (139) (1,453) (1) 970 (62) (139) (53) (39) N/M (97) (43) N/M (31) (24) (22) (188) 156 0 81 49 1 (1,766) (111) (919) in % (89) (61) (34) 6 N/M 131 1 136 126 (30) (60) N/M – Not meaningful Prior year segmental information presented in the current structure 1 Segment assets represent consolidated view, i.e., the amounts do not include intersegment balances 2020 CRU incurred a loss before tax of € 2.2 billion in 2020, compared to a loss before tax of € 3.2 billion in 2019. This improvement versus the prior year was mainly driven by lower general and administrative expenses, lower compensation and benefits, lower restructuring costs that more than offset the loss of revenues from the exit of the equities trading business. Net revenues were negative € 225 million, a decrease of € 442 million compared to 2019. Negative revenues in 2020 represent a full year of executing the strategy and were driven by de-risking, funding and hedging costs, partly offset by Prime Finance cost recovery. The prior year included six months of operating revenue before the CRU formation. Provision for credit losses were € 29 million, compared to a release of € 14 million in 2019. While the net release in 2019 was dominated by a small number of specific events across several portfolios, 2020 saw additional provisions driven by the legacy shipping portfolio. Noninterest expenses were € 1.9 billion, a reduction of € 1.5 billion or 43 % compared to the prior year. Consistent with our strategy, 2020 saw significantly lower restructuring costs of € 5 million compared to € 143 million incurred in the prior year. Similarly, CRU incurred significantly lower transformation costs, with € 162 million incurred in 2020, compared to transfor- mation charges of € 510 million in 2019, mainly related to impairments of software. Adjusted costs excluding transformation charges were € 1.7 billion, a decrease of € 861 million, or 33 % compared to 2019 following lower compensation and benefits costs across both fixed and variable compensation and reduced non-compensation costs mainly driven by lower professional fees as well as communication and data services. Leverage exposure was € 72 billion, € 8 billion ahead of the euro year-end target of € 80 billion. This represents a full-year reduction of 43% versus € 127 billion at the end of 2019. Risk weighted assets (RWAs) were € 34 billion at the end of 2020, € 4 billion below the year-end target of € 38 billion. This represents a full year reduction of € 11 billion, of which € 10 billion from Credit and Market Risk or a 48 % reduction from the prior year period. 2019 CRU incurred a loss before tax of € 3.2 billion in 2019, compared to a loss before tax of € 1.4 billion in 2018. However, management actions enabled the division to significantly reduce risk-weighted assets and leverage exposure in line with the strategy. The increase in loss over the prior year was mainly driven by lower revenues, higher restructuring costs and higher general and administrative expenses partly offset by lower compensation and benefits and provision for credit losses. Net revenues were € 208 million, a decrease of € 1.7 billion or 89 % compared to 2018. Revenues were impacted by the decision in the third quarter to exit Equity trading, the closing of the transaction in the first half of 2019 to sell the retail banking business in Portugal and costs associated with de-risking of assets. Revenues in Prime Finance were significantly lower compared to the prior year reflecting lower average balances during the year and reduced margins. Revenues included a loss of € 116 million from specific items relating to model parameter updates and DVA. Provision for credit losses was a € 14 million release in 2019 compared to a release of € 36 million in the prior year. While the net release in 2018 was mainly driven by sales activities in our retail and shipping business, 2019 was dominated by a small number of specific events across several portfolios. 27 Deutsche Bank Annual Report 2020 Operating and financial review Results of operations Noninterest expenses were € 3.4 billion, an increase of € 49 million or 1 % compared to the prior year. 2019 included restruc- turing expenses of € 143 million, an increase of € 81 million compared to the prior year and transformation charges of € 510 million, mainly related to impairments of software. Adjusted costs excluding transformation charges were € 2.6 billion, a decrease of € 725 million, or 22 % compared to the prior year following lower compensation and benefits costs across both fixed and variable compensation and reduced non-com- pensation costs mainly driven by lower professional fees as well as communication and data services. Leverage exposure was € 127 billion at the end of 2019, € 13 billion ahead of the 2019 target. This represents a full-year reduction of 55% versus € 281 billion at the end of 2018. Risk weighted assets (RWAs) were € 46 billion at the end of 2019, € 6 billion below the year-end target of € 52 billion, and down by 36% versus € 72 billion at the end of 2018. Corporate & Other (C&O) in € m. (unless stated otherwise) Net revenues Provision for credit losses Noninterest expenses Compensation and benefits General and administrative expenses Impairment of goodwill and other intangible assets Restructuring activities Total noninterest expenses Noncontrolling interests Profit (loss) before tax Employees (full-time equivalent) N/M – not meaningful Prior year segmental information presented in the current structure 2020 increase (decrease) from 2019 2019 increase (decrease) from 2018 2020 (530) (3) 2019 147 0 2018 (142) 1 in € m. (678) (4) in % N/M N/M in € m. 289 (0) 3,709 (3,140) 0 3 572 (169) (930) 4,183 (3,754) 0 (1) 428 (109) (461) 38,680 39,389 41,463 3,906 (3,380) 0 40 566 (173) (247) (197) 240 0 (38) 6 3 (684) (709) (5) (7) N/M (93) 1 (2) N/M (2) (277) 374 0 41 138 (64) 215 (2,074) in % N/M (84) (7) (10) N/M N/M 32 58 (47) (5) 2020 C&O reported a loss before tax of € 930 million in 2020 compared to a loss before tax of € 247 million in 2019, a loss increase of € 684 million, mainly driven by a negative contribution from valuation and timing differences in 2020 after a positive contri- bution in the prior year. Net revenues were negative € 530 million in 2020, compared to € 147 million in 2019. Revenues related to valuation and timing differences were negative € 85 million in 2020, compared to € 573 million in 2019. This was driven by the negative mark-to-market impact of hedging activities in connection with the bank’s funding arrangements, against the backdrop of tightening spreads on Deutsche Bank funding issuances leading to lower funding costs. Net revenues relating to funding and liquidity were negative € 235 million in 2020, versus negative € 204 million in 2019. Noninterest expenses were € 572 million in 2020, an increase of € 6 million, or 1 %, compared to 2019. 2020 noninterest expenses included € 168 million higher than planned infrastructure expenses which are retained in C&O, compared to € 65 million lower than planned infrastructure expenses in 2019 as well as transformation charges primarily reflecting the bank’s accelerated rationalization of its real estate footprint. Litigation expenses amounted to a credit of € 67 million in 2020, reflecting a net provision release, compared to expenses of € 238 million in 2019. Expenses associated with shareholder activities as defined in the OECD Transfer Pricing guidelines not allocated to the business divisions were € 403 million in 2020, down 15 % compared to 2019. In 2019 positive effects were recognized from the release of legacy balances. Noncontrolling interests are deducted from the profit before tax of the divisions and reversed in C&O. These amounted to € 169 million in 2020, compared to € 173 million in 2019, mainly related to DWS. 2019 C&O reported a loss before tax of € 247 million in 2019 compared to a loss before tax of € 461 million in 2018, a decrease of 47 %, mainly driven by higher positive effects from valuation and timing differences and by higher reversals of noncontrolling interests, mainly related to DWS, deducted from profit before tax of the divisions in 2019. Net revenues were € 147 million in 2019, compared to negative € 142 million in 2018. Revenues related to valuation and timing differences were € 573 million in 2019, compared to € 107 million in 2018 driven by the positive mark-to-market impact of hedging activities in connection with the bank’s funding arrangements. Net revenues relating to funding and liquidity were negative € 204 million in 2019, down from negative € 87 million in 2019 mainly due to the implementation of a new internal 28 Deutsche Bank Annual Report 2020 Operating and financial review Results of operations Funds Transfer Pricing framework in the third quarter of 2019. Costs related to the introduction of the new framework are held in C&O while the new framework is phased in. Noninterest expenses were € 566 million in 2019, an increase of € 138 million, or 32 %, compared to 2018, mainly driven by litigation expenses of € 238 million in 2019, compared to € 52 million in 2018. Expenses associated with shareholder activities as defined in the OECD Transfer Pricing guidelines not allocated to the business divisions increased from € 422 million in 2018 to € 476 million in 2019. In addition, positive effects from the release of legacy balances were also recognized in the third quarter of 2019 in noninterest expenses. Noncontrolling interests are deducted from the profit before tax of the divisions and reversed in C&O. The increase from € 109 million reversed noncontrolling interests in 2018 to € 173 million in 2019 was mainly related to higher profits in DWS. 29 Deutsche Bank Annual Report 2020 Operating and financial review Financial position Financial position Assets in € m. (unless stated otherwise) Cash, central bank and interbank balances Central bank funds sold, securities purchased under resale agreements and securities borrowed Financial assets at fair value through profit or loss Of which: Trading assets Of which: Positive market values from derivative financial instruments Of which: Non-trading financial assets mandatory at fair value through profit and loss Financial assets at fair value through other comprehensive income Loans at amortized cost Remaining assets Of which: Brokerage and securities related receivables Total assets Dec 31, 2020 Dec 31, 2019 175,339 147,228 8,533 527,941 107,929 343,455 14,229 530,713 110,875 332,931 76,121 55,834 426,995 130,617 74,564 1,325,259 86,901 45,503 429,841 130,161 63,401 1,297,674 Absolute Change 28,111 (5,696) (2,772) (2,946) 10,524 (10,779) 10,331 (2,846) 457 11,163 27,585 Change in % 19 (40) (1) (3) 3 (12) 23 (1) 0 18 2 Liabilities and Equity in € m. (unless stated otherwise) Deposits Central bank funds purchased, securities sold under repurchase agreements and securities loaned Financial liabilities at fair value through profit or loss Of which: Trading liabilities Of which: Negative market values from derivative financial instruments Of which: Financial liabilities designated at fair value through profit or loss Other short-term borrowings Long-term debt Remaining liabilities Of which: Brokerage and securities related payables Total liabilities Total equity Total liabilities and equity Dec 31, 2020 Dec 31, 2019 568,031 572,208 Absolute Change (4,177) Change in % (1) 4,241 419,199 44,316 327,775 46,582 3,553 149,163 118,876 79,810 1,263,063 62,196 1,325,259 3,374 404,448 37,065 316,506 50,332 5,218 136,473 113,795 71,287 1,235,515 62,160 1,297,674 867 14,751 7,250 11,269 (3,750) (1,665) 12,690 5,082 8,524 27,548 37 27,585 26 4 20 4 (7) (32) 9 4 12 2 0 2 Movements in assets and liabilities As of December 31, 2020, the total balance sheet of € 1.3 trillion slightly increased by € 27.6 billion (or 2.1 %) compared to year-end 2019. Key drivers for the overall movement were increases in cash, central bank and interbank balances by € 28.1 billion, primarily driven by funds received from the third TLTRO refinancing program of the ECB recognized in long-term debt, the sale of selected hold-to-collect assets and a decrease in securities purchased under resale agreements and securities borrowed. Brokerage and securities related receivables increased by € 11.2 billion, largely by an increase in cash margin receivables of € 9.6 billion resulting primarily from higher derivative positions. This increase in remaining assets was largely offset by a de- crease of € 10.7 billion from the sale of hold-to-collect assets. Brokerage and securities related payables similarly increased by € 8.5 billion primarily from cash margin payables as a result of higher derivative positions, contributing to the overall in- crease of € 5.1 billion in remaining liabilities. Positive and negative market values of derivative financial instruments increased by € 10.5 billion and € 11.3 billion, respec- tively, primarily in foreign exchange products in the U.S. Financial assets at fair value through other comprehensive income increased by € 10.3 billion, mainly driven by sovereign bond purchases as part of managing our strategic liquidity reserve. Central bank funds sold, securities purchased under resale agreements and securities borrowed measured at amortized costs and under non-trading financial assets mandatory at fair value through profit and loss decreased by € 13.8 billion, driven by managed reductions in the wake of unfavourable market conditions as well as matured trades. Corresponding liabilities de- creased by € 1.3 billion. 30 Deutsche Bank Annual Report 2020 Operating and financial review Financial position Trading liabilities increased by € 7.3 billion, mainly attributable to support market making activities in cash and derivative products. Trading assets decreased by € 2.9 billion, primarily driven from the wind-down of positions in the Capital Release Unit. Deposits decreased by € 4.2 billion, primarily driven by a reduction in Corporate Bank deposits reflecting our targeted initia- tives to pro-actively manage liabilities, partially offset by a modest increase in Private Bank sight deposits. Loans at amortized cost decreased by € 2.8 billion, primarily driven by foreign exchange movements, partially offset by loan growth in Germany. The overall movement of the balance sheet included a decrease of € 47.6 billion due to foreign exchange rate movements, mainly driven by a weakening of the U.S. Dollar against the Euro. The effects from foreign exchange rate movements are embedded in the movement of the balance sheet line items discussed in this section. Liquidity Liquidity reserves amounted to € 243 billion as of December 31, 2020 (compared to € 222 billion as of December 31, 2019). We maintained a positive liquidity stress result as of December 31, 2020 (under the combined scenario). Equity Total equity as of December 31, 2020, was up by € 37 million compared to December 31, 2019. This change was driven by a number of factors which altogether had an offsetting effect, including the issuance of new additional equity components (Ad- ditional Tier 1 securities, treated as equity according to IFRS) of € 1.2 billion on February 11, 2020, the net income attributable to Deutsche Bank shareholders of € 495 million, unrealized net gains of financial assets at fair value through other compre- hensive income of € 233 million, as well as remeasurement gains related to defined benefit plans of € 223 million, net of tax. These factors were almost offset by a negative impact from foreign currency translation of € 1.7 billion, net of tax, mainly resulting from the weakening of the U.S. dollar against the Euro and coupons paid on additional equity components of € 349 million.. Own funds Our CRR/CRD Common Equity Tier 1 (CET 1) capital as of December 31, 2020 increased by € 0.6 billion to € 44.7 billion, compared to € 44.1 billion as of December 31, 2019. The CRR/CRD Risk-weighted assets (RWA) increased by € 4.9 billion to € 329.0 billion as of December 31, 2020, compared to € 324.0 billion as of December 31, 2019. Due to the increased CRR/CRD CET 1 capital and CRR/CRD RWA, the CRR/CRD CET 1 capital ratio as of December 31, 2020 remains unchanged at 13.6% compared to December 31, 2019. Our CRR/CRD Tier 1 capital as of December 31, 2020 amounted to € 51.5 billion, consisting of a CRR/CRD CET 1 capital of € 44.7 billion and CRR/CRD Additional Tier 1 (AT1) capital of € 6.8 billion. The CRR/CRD Tier 1 capital was € 1.0 billion higher than at the end of December 31, 2019, driven by an increase in CRR/CRD CET 1 capital of € 0.6 billion and an increase in CRR/CRD AT1 capital of € 0.5 billion since year end 2019. The CRR/CRD Tier 1 capital ratio as of December 31, 2020 increased to 15.7% compared to 15.6% as of December 31, 2019. Our CRR/CRD Total Regulatory capital as of December 31, 2020 amounted to € 58.5 billion compared to € 56.5 billion at the end of December 31, 2019. The CRR/CRD Total capital increase was driven by an increase in CRR/CRD Tier 1 capital of € 1.0 billion and an increase in CRR/CRD Tier 2 capital of € 1.0 billion since year end 2019. The CRR/CRD Total capital ratio as of December 31, 2020 increased to 17.8% compared to 17.4% as of December 31, 2019. 31 Deutsche Bank Annual Report 2020 Operating and financial review Liquidity and capital resources Liquidity and capital resources For a detailed discussion of our liquidity risk management, see our Risk Report. Credit ratings Deutsche Bank is rated by Moody’s Deutschland GmbH (“Moody’s”), S&P Global Ratings UK Limited (“S&P”), Fitch Ratings – a branch of Fitch Ratings Ireland Limited (“Fitch”), and DBRS Ratings GmbH. (“DBRS Morningstar”, together with Moody’s, S&P and Fitch, the “Rating Agencies”). Moody’s, Fitch and DBRS are established in the European Union and have been registered in accordance with Regulation (EC) No 1060/2009 of the European Parliament and of the Council of September 16, 2009, as amended, on credit rating agencies (“CRA Regulation”). With respect to S&P, the credit ratings are endorsed by S&P’s office in Ireland (S&P Global Ratings Europe Limited) in accordance with Article 4(3) of the CRA Regulation. Credit Ratings Development The rating agencies recognize the constant execution progress the bank has made towards its targets over the course of 2020, specifically the improvement in profitability and contained credit loss provisions, despite the challenging macro-eco- nomic environment. This was reflected in the latest outlook upgrades by S&P, Moody’s and Fitch. On 26th February 2021, S&P raised its outlook on Deutsche Bank to positive from negative highlighting the bank’s improved resilience and disciplined execution of its transformation strategy with 85 % of the transformation now completed. The Agency also raised its ratings on Deutsche Bank's Additional Tier 1 securities by one notch to BB- from B+. In April 2020, S&P had revised Deutsche Bank’s outlook to negative from stable on deepening COVID-19 risks. On 25th January 2021, Fitch raised its outlook on Deutsche Bank’s ratings to positive from negative highlighting the progress on transformation as the key driver for this two-step improvement. Overall, the impact of the pandemic on the bank’s financial performance and strategy has been manageable so far. Better than expected revenue momentum in the core businesses offset interest rate headwinds and elevated credit provisions. This rating action followed a series of actions by Fitch earlier in the year. On 28th May 2020, the agency affirmed Deutsche Bank’s ratings and changed the outlook to negative, resolving its Credit Watch Negative assignment from 27th March 2020. On 12th October 2020 Fitch upgraded Deutsche Bank’s Additional Tier 1 securities to BB- from B+ reflecting the banks im- proved capitalization and buffers above regulatory requirements. On 3rd November 2020, Moody’s affirmed its ratings of Deutsche Bank and changed its outlook to stable from negative. Effective execution and steady underlying progress towards its medium-term targets have helped Deutsche Bank improve earnings stability, reduce capital and leverage exposure consumption as well as its reliance on wholesale funding. All Agencies will closely monitor further progress made towards the bank’s 2022 targets, with a focus on prudent risk man- agement, strong asset quality and further improvements in profitability. In the short-term, the Agencies continue to see exe- cution challenges.. Potential Impacts of Ratings Downgrades Deutsche Bank calculates both the contractual and hypothetical potential impact of a one-notch and two-notch downgrade by the rating agencies (Moody’s, Standard & Poor’s and Fitch) on its liquidity position, and includes this impact in its daily liquidity stress test and Liquidity Coverage Ratio calculations. The LCR and liquidity stress test results by scenario are disclosed separately. In terms of contractual obligations, the hypothetical impact on derivative liquidity stress outflows of a one-notch downgrade across the three Rating Agencies Moody’s, Standard & Poor’s and Fitch amounts to approximately € 0.4 billion, mainly driven by increased contractual derivatives funding and/or margin requirements. The hypothetical impact of a two-notch downgrade amounts to approximately € 0.4 billion, mainly driven by increased contractual derivatives funding and/or margin requirements. The above analysis assumes a simultaneous downgrade by the three rating agencies Moody’s, Standard & Poor’s and Fitch that would consequently reduce Deutsche Bank’s funding capacity in the stated amounts. This specific contractual analysis feeds into the bank’s idiosyncratic liquidity stress test scenario. 32 Deutsche Bank Annual Report 2020 Operating and financial review Liquidity and capital resources The actual impact of a downgrade to Deutsche Bank is unpredictable and may differ from potential funding and liquidity impacts described above. Selected rating categories Senior preferred/ Deposits¹ Senior non-preferred² Counterparty Risk A3 – BBB+ (dcr) A (high) Short-term rating P-2 A-2 F2 R-1 (low) Moody’s Investors Service, New York Standard & Poor’s, New York Fitch Ratings, New York DBRS, Toronto 1 Defined as senior unsecured bank rating at Moody‘s, senior unsecured debt at Standard & Poor’s, senior preferred debt rating at Fitch and senior debt rating at DBRS. All Baa3 BBB- BBB BBB (high) A3 BBB+ BBB+ A (low) agencies provide separate ratings for deposits and ‘senior preferred’ debt, but at the same rating level. 2 Defined as junior senior debt rating at Moody's, as senior subordinated debt at Standard & Poor’s and as senior non-preferred debt at Fitch and DBRS. Each rating reflects the view of the rating agency only at the time the rating was issued, and each rating should be separately evaluated and the rating agencies should be consulted for any explanations of the significance of their ratings. The rating agencies can change their ratings at any time if they believe that circumstances so warrant. The long-term credit ratings should not be viewed as recommendations to buy, hold or sell Deutsche Bank’s securities. Tabular disclosure of contractual obligations Cash payment requirements outstanding as of December 31, 2020. Contractual obligations in € m. Long-term debt obligations¹ Trust preferred securities1,2 Long-term financial liabilities designated at fair value through profit or loss3 Future cash outflows not reflected in the measure- ment of Lease liabilities4 Lease liabilities1 Purchase obligations Long-term deposits¹ Other long-term liabilities Total Total 159,425 1,345 3,501 5,971 4,566 4,209 24,018 1,279 204,313 1 Includes interest payments. 2 Contractual payment date or first call date. 3 Long-term debt and long-term deposits designated at fair value through profit or loss. 4 For further detail please refer to Note 22 “Leases”. Less than 1 year 1–3 years 3–5 years 61,783 1,345 367 50 699 500 0 419 65,163 36,206 0 727 330 902 1,825 8,585 117 48,692 Payment due by period 30,366 0 More than 5 years 31,070 0 1,090 461 902 899 5,223 202 39,141 1,316 5,130 2,064 985 10,210 541 51,316 Purchase obligations for goods and services include future payments for, among other things, information technology services and facility management. Some figures above for purchase obligations represent minimum contractual payments and actual future payments may be higher. Long-term deposits exclude contracts with a remaining maturity of less than one year. Under certain conditions future payments for some long-term financial liabilities designated at fair value through profit or loss may occur earlier. See the following notes to the consolidated financial statements for further information: Note 5 “Net Interest Income and Net Gains (Losses) on Financial Assets/Liabilities at Fair Value through Profit or Loss”, Note 22 “Leases”, Note 26 “Deposits” and Note 30 “Long-Term Debt and Trust Preferred Securities”. 33 Deutsche Bank Annual Report 2020 Outlook The Global Economy Outlook The Global Economy The Global Economy Outlook 2021² 2020 Economic growth (in %)¹ Global Economy GDP Inflation Of which: Industrialized countries GDP Inflation Emerging markets GDP Inflation Eurozone Economy GDP Inflation Of which: German econ- omy GDP Inflation U.S. Economy GDP Inflation Japanese Economy GDP Inflation Asian Economy³ GDP Inflation 6.3 2.9 5.0 1.6 7.1 3.7 5.6 1.0 4.0 1.3 5.9 2.4 1.5 0.2 8.8 2.3 (3.3) 2.7 Main driver In 2021, the course of the COVID-19 pandemic and the progress made with regards to vaccina- tions will have a significant impact on the development of global economic activities. Since the beginning of 2021, a number of economies have been facing a resurgence of the pandemic. Highly effective and broadly available vaccines could drive economic recovery, as upgraded eco- nomic growth expectations indicate. The pace of this recovery will vary significantly across coun- tries depending on access to vaccines and available government support. (5.1) 0.7 With expansive monetary policy, the central banks of industrialized countries continue to be very supportive. As high immunization levels are not expected to be reached by the second half of 2021, additional fiscal support is expected to help limit the economic impact to households and corporates from COVID-19 measures reinstated in the beginning of 2021. Industrial countries are expected to benefit from robust global trade. (2.1) 3.9 In emerging markets, vaccines are expected to become more widely available in the course of 2021. Economies with low economic activity levels and relatively high reliance on domestic de- mand, as in most Latin American countries, are expected to particularly benefit. A gradual recov- ery of the travel industry is expected to further support economic recovery, especially in Asia. Global economic recovery will be an important driver for exchange rate developments in emerging markets. (6.8) 0.2 (5.0) 0.4 The start of the vaccination programs in Eurozone economies in 2021 is expected to support the recovery of economic activity, which is expected to return to pre-COVID-19 levels by the end of 2021 due to the expected recovery of the global manufacturing cycle. The continuation of Eu- rope's temporary stimulus measures depends in part on the pace of the economic recovery as the EU Recovery Fund is not expected to disburse proceeds until the second half of 2021 and the European Central Bank (ECB) not expected to revisit the monetary policy stance until the end of the third quarter of 2021, six months before the scheduled expiry for the Pandemic Emergency Purchase Program (PEPP) net purchases. After an expected weak first quarter of 2021 following renewed COVID-19 containment measures, German GDP growth is expected to pick up strongly over the course of the year. The pre-pan- demic output level are expected to be reached in the second half of 2021. Exports are expected to remain the main driver for the output, mainly due to recovery of global trade and declining uncertainty in trade policy. In 2021, Germany will face political transition as both a federal election and multiple state elections will take place during the year. (3.5) 1.2 The new Biden administration is likely to deliver another tranche of fiscal support in 2021. A joint infrastructure program and tax reform bill is expected to be passed late in the year. U.S. real GDP is expected to return to its pre-pandemic level in the second half of 2021 and to converge towards the pre-pandemic growth path by the end of 2021. A meaningful upgrade to growth and the labor market is expected to pull forward a tapering of the Federal Reserve Bank’s Quantitative Easing to the end of 2021. (4.9) 0.0 Japan is expected to achieve a high level of vaccination only by the end of the first half of 2021, given the limited supplies of COVID-19 vaccines. Inflation could be impacted by government pol- icy and remain subdued. The government and the Bank of Japan (BoJ) have become more aligned on coordinating policy, which may deepen further in 2021. (1.0) 3.1 Positive news on COVID-19 vaccines have improved growth prospects for Asian economies. China and South Korea may reach high immunization levels and thus a full normalization of eco- nomic activity before the fourth quarter of 2021. Most Asian emerging economies are expected to follow a quarter or two later. Central banks will be in focus not so much for their rate setting, but for their ability to backstop government bonds and offset appreciation pressure on Asian curren- cies. Positive economic momentum is expected to continue in the first half of 2021, supported by stronger external demand. This will set the stage for fiscal and monetary policy exit by the second half of the year. The People’s Bank of China (PBOC) policy objectives for 2021 have shifted to more structural issues. The tightening of real estate lending is expected to send a strong policy signal. Borrowing by local governments is likely to be constrained, which will slow infrastructure investments. Of which: Chinese Econ- omy GDP Inflation 10.0 1.5 2.3 2.5 The outlook for the global economy and banking industry in the following chapter reflects our general expectations regarding future economic and industry developments. Eco- nomic assumptions used in our models are laid out separately in the respective sections. 1 Annual Real GDP Growth (% YoY). Sources: National Authorities unless stated otherwise 2 Sources: Deutsche Bank Research 3 Including China, India, Indonesia, Republic of Korea and ex Japan There are a number of risks to our global economic outlook. Ongoing challenges from COVID-19 and scope for further lock- downs in 2021 could considerably dampen economic momentum. Growing government debt burdens could also impact the broader Eurozone economy. Trade tensions including upcoming trade negotiations between the U.S. and the European Union (EU) could negatively impact the global economic outlook. Additionally, rising geopolitical tensions, particularly in the Middle East could create further uncertainty. 34 Deutsche Bank Annual Report 2020 Outlook The Deutsche Bank Group The Banking Industry The outlook for the global banking industry in 2021 will continue to be impacted by the COVID-19 pandemic and the onset of an economic recovery. A number of trends which have dominated the banking business in 2020 could reverse. Overall, bank profitability is expected to recover from the large declines seen in 2020 as declining loan loss provisions are expected to more than offset the revenue headwinds. Low interest rates are likely to continue to impact net interest income, with a greater impact in the U.S. given the more recent declines in interest rates than in Europe where rates have been more stable at lower levels. Net interest income is also likely to be negatively impacted by a slowdown in loan growth particularly in the corporate sector given companies’ strong liquidity levels in both Europe and the U.S. In China, banks may benefit from the early containment of the pandemic and the more advanced economic recovery. Fee and commission income is expected to be impacted by a series of factors. Firstly, financing volumes may decrease, which could impact capital markets actively. Secondly, stock market valuations could continue to rise due to ultra-loose monetary policy, benefiting asset management fees. Finally, very low interest rates could also trigger an increase in M&A activity. Provisions for credit losses are expected to decline from the high levels recorded in 2020. The pace of decline is likely to be faster in the U.S. where provisions were built earlier in the crisis than in Europe where provisioning has been more gradual. Where applicable, banks both in the U.S. and Europe are also expected to resume share buybacks and dividend payments, respectively, which had been suspended by supervisors last year. The United Kingdom (UK) has now left the European Union (EU) and the immediate future of their economic relationship is governed by a trade agreement, which does not cover cross-border financial services. Such services will be governed by either local regulatory requirements or ad-hoc agreements between regulatory bodies in the two jurisdictions. The Bank of England and the UK Financial Conduct Authority (FCA) have signed a Memorandum of Understanding (MOU) with the Euro- pean Securities and Markets Authority (ESMA) concerning the supervision of market infrastructure entities. Similar agree- ments are expected to follow this year, particularly a MOU establishing a structured framework for regulatory cooperation and the process for adoption, suspension and withdrawal of equivalence decisions. To date, only two time-limited equivalence decisions have been made by the EU, which address UK central counterparties, expiring June 30, 2022, and UK central securities depositories, expiring June 30, 2021. European policymakers will be discussing changes to prudential and resolution regulation aimed at implementing the Final Basel III package, with particular focus on risk models. The legislative proposal is expected to be issued during the first half of 2021, with negotiation for the final package to take several years. The Deutsche Bank Group In July 2019, we announced a strategic transformation of Deutsche Bank to re-focus on delivering sustainable profitability and improved returns for our shareholders. The macroeconomic, fiscal and regulatory environment has however changed since as a result of the COVID-19 pandemic. This changed environment impacted and may further impact our results of operations, capital ratios and the capital plan that underlies our targets. Despite the challenges associated with the COVID-19 pandemic, we intend to continue executing our strategy in a disciplined manner in 2021 and beyond, by focusing on improving sustainable profitability by growing revenues in our Core Bank while remaining disciplined on costs and capital. Our key performance indicators are shown in the table below: Key Performance Indicators Key Performance Indicators Group Post-tax Return on Average Tangible Equity1 Core Bank Post-tax Return on Average Tangible Equity2 Adjusted costs3 Cost income ratio4 Common Equity Tier 1 capital ratio5 Leverage ratio (fully loaded)6 1 Based on Net Income attributable to Deutsche Bank shareholders. For further information, please refer to “Supplementary Information (Unaudited): Non-GAAP Financial € 19.5 bn 88.3 % 13.6 % 4.7 % 0.2 % 4.0 % Dec 31, 2020 Target KPI 2022 8.0 % Above 9.0 % € 16.7 bn 70.0 % Above 12.5 % ~4.5 % Measures” of this report. 35 Deutsche Bank Annual Report 2020 Outlook The Deutsche Bank Group 2 Based on Core Bank Net Income attributable to Deutsche Bank shareholders. For further information, please refer to “Supplementary Information (Unaudited): Non-GAAP Financial Measures” of this report. 3 Adjusted costs excluding transformation charges and expenses eligible for reimbursement related to Prime Finance. For further information, please refer to “Supplementary Information (Unaudited): Non-GAAP Financial Measures” of this report. 4 Noninterest expenses as a percentage of total net revenues, which are defined as net interest income before provision for credit losses plus noninterest income. 5 Further detail on the calculation of this ratio is provided in the Risk Report. 6 On September 17, 2020, ECB announced its decision to exercise its regulatory discretion declaring exceptional circumstances. This measure allows banks to exclude certain eligible central bank balances from the leverage exposure. Banks will benefit from the relief measure until June 27, 2021, when CRR2 comes into force. Leverage Ratio ex- cluding this effect was 4.3 % as at December 31, 2020. We are focused on achieving our 2022 financial targets, principally the Post-tax Return on Average Tangible Shareholders’ Equity of 8 % for the Group and above 9 % for our Core Bank. In 2021, we intend to build on the progress made in 2020 including some targeted investments principally in our German IT integration. In 2021, Group and Core Bank revenues are expected to be marginally lower compared to the prior year. In the Investment Bank, we expect revenues to decline as industry volumes and volatility normalize from the elevated levels in 2020. Growth in volumes and fee income in the Corporate Bank and Private Bank is expected to be offset by the ongoing interest rate head- winds. In Asset Management, revenues are expected to be slightly higher as a result of performance and transaction fees as well as lesser or positive impact from the fair value of guarantees. We aim to further reduce adjusted costs excluding transformation charges and expenses eligible for reimbursement related to Prime Finance in 2021. The decline is expected to result mainly from the run-rate impact of measures already in place as well as execution of further reductions principally in our Infrastructure functions and Private Bank. We plan incremental invest- ments of approximately € 300 million in 2021, principally in our German IT integration. We expect transformation-related effects of approximately € 1 billion in 2021. Execution on our 2021 cost reduction measures and investment plans are consistent with our updated € 16.7 billion adjusted costs excluding transformation charges target in 2022, revised from € 17 billion. Our adjusted costs target for 2022 includes assumptions for contributions to the Single Resolution Fund (SRF) of approximately € 0.4 billion in 2022. Our SRF assumptions assume no change in the Single Resolution Board’s (SRB) original target fund size of € 55 billion. An increase in the SRB’s overall target fund size would negatively impact our adjusted costs excluding transformation charges target accordingly. These impacts apply equally if funds of the SRB were used in connection with resolution measures or assets held by the SRF declined in value and must be replenished to reach the target level or if assumptions for contributions to deposit guarantee schemes change. We expect provisions for credit losses to be slightly lower in 2021 compared to the previous year but to remain elevated compared to the pre-COVID-19 periods. For 2022, we expect provision for credit losses of between 25 to 30 basis points as a percentage of average loans as the global economy recovers and provision levels normalize. Further detail on the calculation of expected credit losses (ECL) is provided in the section ‘Risk Report’ in this report. We expect our Common Equity Tier 1 ratio (CET 1 ratio) in 2021 to be negatively impacted by pending supervisory decisions and rule changes leading to slightly increasing Risk-weighted assets (RWA) with a negative impact of approximately 80 basis points on our CET 1 ratio. Otherwise, RWA are expected to be essentially flat with selective growth in our Core Bank and small reduction from asset disposals and continued de-risking in the Capital Release Unit. Our Common Equity Tier 1 capital is expected to remain essentially flat. The CET1 ratio is expected to remain above 12.5 % in 2021. We expect an increase in our Leverage exposure in June 2021 as the temporary exclusion of certain Eurosystem central bank balances expires. We expect Leverage exposure in the Capital Release Unit to benefit from the completion of the transfer of our Prime Finance platform to BNP Paribas by year-end 2021. Leverage exposure reductions in the Capital Release Unit are expected to support selective business deployment in our Core bank. As a result, Leverage exposure is expected to be higher by year-end 2021 compared to year-end 2020. Our Tier 1 capital is expected to grow moderately. Consequently we expect our Leverage ratio to be slightly lower by year-end 2021 compared to year-end 2020. We remain committed to our Leverage ratio target of 4.5 % by year-end 2022. Execution against our 2022 financial targets should position us to begin returning capital to shareholders through dividends and share buybacks from 2022, in respect of the financial year 2021, subject to regulatory approvals. Our dividend payments are subject to our ability to report sufficient levels of distributable profits under our standalone financial statements in accord- ance with German accounting rules (HGB) for the respective fiscal year. While we announced that no dividend payment will be proposed for the financial year 2020, we aim to free up capital for distribution from 2022 and expect to return € 5 billion capital to shareholders over time. By the nature of our business, we are involved in litigation, arbitration and regulatory proceedings and investigations in Ger- many and in a number of jurisdictions outside Germany, especially in the U.S. Such matters are subject to many uncertainties. While we have resolved a number of important legal matters and made progress on others, we expect the litigation and enforcement environment to remain challenging. Net litigation charges in 2020 were lower than 2019 levels, to some extent due to matters progressing at a slower pace than expected, which in part was the result of the COVID-19 pandemic. For 2021, and with a caveat that forecasting litigation charges is subject to many uncertainties, we expect litigation charges, net, to exceed the levels experienced in 2020. 36 Deutsche Bank Annual Report 2020 Outlook Our Business Segments Adjusted costs, Adjusted costs excluding transformation charges, Adjusted costs excluding transformation charges and ex- penses eligible for reimbursement related to Prime Finance, Post-tax Return on Average Tangible Equity as well as Leverage ratio (fully loaded) are non-GAAP financial measures. Please refer to “Supplementary Information (Unaudited): Non-GAAP Financial Measures” of this report for the definitions of such measures and reconciliations to the IFRS measures on which they are based. Our Business Segments Corporate Bank For Corporate Bank (CB), we expect the macro-economic environment in 2021 to remain challenging as a result of the COVID- 19 pandemic and continued interest rate headwinds as a result of the further deterioration of the interest rate environment in the first quarter of 2020. However, the Corporate Bank has been able to largely mitigate these headwinds in 2020 and kept revenues essentially flat by executing on its strategic objectives. In 2021, we expect Corporate Bank revenues to be essentially flat compared to the prior year as our strategic growth initiatives and benefits from the ECB’s TLTRO III program are expected to offset the impacts of COVID-19 pandemic and the challenging interest rate environment. For Global Transaction Banking, we expect revenues in 2021 to stay essentially flat compared to the prior year, with revenues in Cash Management essentially flat as the benefits of deposit repricing as well as fee income growth from our payments-related projects are expected to offset negative effects of interest rate reductions in the U.S. and Asia-Pacific in the first quarter of 2020. Trade Finance and Lending revenues are expected to be slightly higher reflecting additional revenues from new lending, benefits from the ECB’s TLTRO III program and an expected recovery of global busi- ness activity in the second half of the year. Securities Services revenues are expected to be slightly lower in 2021 driven by the roll-off of specific client mandates and the absence of episodic items recorded in the prior year. Trust and Agency Services revenues are expected to be essentially flat supported by business growth in both the corporate trust and depositary receipts businesses, partially offset by negative effects of interest rate cuts in the U.S. and Asia-Pacific in the first quarter of 2020. Commercial Banking revenues are expected to be essentially flat as repricing actions, lending initiatives, the widening of our non-banking offering and benefits from the ECB’s TLTRO III program are expected to offset the headwinds of the negative interest rate environment. We expect provision for credit losses for the Corporate Bank in 2021 to be lower as a result of the absence of idiosyncratic events in the prior year and the improved macroeconomic outlook. Noninterest expenses for 2021 are expected to be slightly lower primarily reflecting lower levels of non-operating costs. Ad- justed costs excluding transformation charges are expected to stay essentially flat reflecting continuous cost discipline across direct expenses and internal service cost allocations. We plan to continue to focus on regulatory compliance, know-your-client (KYC) and client on-boarding process enhancement, system stability and control and conduct. For 2021, we expect risk-weighted assets in the Corporate Bank to be higher driven by internal model changes in alignment with regulatory requirements, as well as growth of our lending activities. Risks to our outlook include potential impacts on our business model from macroeconomic and global geopolitical uncertainty including uncertainty around duration of and recovery from the COVID-19 pandemic. In addition, uncertainty around central bank policies (e.g. the interest rate environment), ongoing regulatory developments (e.g. the finalization of the Basel III frame- work), event risks and levels of client activity may also have an adverse impact. Investment Bank We expect IB revenues to be lower in 2021 compared to the prior year. Macroeconomic and market conditions for the Invest- ment Bank (IB) continue to be uncertain in 2021. 2020 was a very strong year for the IB, driven by our refocused strategy and client re-engagement driving sustainable increases in revenues, which we expect to continue in 2021. However, the division also benefited from the increased volatility and client activity driven by the COVID-19 pandemic, which we do not expect to recur this year. We expect Sales and Trading (FIC) revenues to be lower in 2021 compared to 2020. Rates and Global Emerging Markets are both expected to continue to build on the success their refocused businesses had in 2020, while our FX business is expected to benefit from development in technology and enhanced partnership with the Corporate Bank (CB). In Credit Trading we will look to develop the product suite further, with a focus upon a more targeted client set, while our Financing business will focus on disciplined risk management and targeted resource deployment. However, we do not expect Sales and Trading (FIC) to 37 Deutsche Bank Annual Report 2020 Outlook Our Business Segments benefit from the extreme COVID-19 related volatility seen in the first half of last year and as a result, impacting the year over year comparison. In Origination & Advisory, we expect revenues to be lower in 2021 compared to 2020. We expect our Debt Origination business to build on the successes seen in 2020 in Investment Grade debt, while our Leveraged Loan business is expected to benefit from a further reopening of the leveraged loan market. In Equity Origination we will continue to offer a full underwriting and distribution capability and will look to maintain our strength in the Special Purpose Acquisition Company market. In Advisory, investments will be focused upon coverage of growth sectors where the bank has a competitive advantage. However the industry Origination & Advisory fee pool is expected to reduce in 2021 as the market returns to more normalized levels and as a result, impacting the year over year comparison. We expect provision for credit losses for the Investment Bank in 2021 to be lower than in the prior year, though still at elevated levels, due to the ongoing impact of the COVID-19 pandemic. Noninterest expenses in the Investment Bank in 2021 are expected to be broadly flat compared to the previous year. Adjusted cost excluding transformation charges are also planned to be essentially flat. Reductions are expected from the full-year run- rate impact of headcount actions in 2020 and lower non-compensation costs. However, this is expected to be offset by in- creases to non-operating expenses which benefited from provision releases in 2020. For 2021, we expect risk-weighted assets in the IB to be slightly higher, driven by Credit Risk RWA resulting from regulatory inflation. The underlying business growth is expected to be broadly flat for the year. There are several risks to our outlook in 2021, with the biggest likely to be the uncertainty caused by the ongoing COVID-19 pandemic. The relative success of the various vaccination roll outs across the globe could well have positive or adverse impacts. Increasing levels of default risks, a continued Euro exchange rate appreciation and a soft U.S. dollar could also slow economic recovery. Central bank policies and ongoing regulatory developments also pose risks, while challenges such as event risks and levels of client activity may also have an adverse impact. Private Bank For the Private Bank (PB), we assume that the interest rate environment remains challenging and the COVID-19 pandemic is expected to further impact the levels of our credit loss provisioning in 2021. At the same time, our plans assume a gradual normalization of the market environment and client activity throughout 2021. Net revenues in 2021 are expected to remain essentially flat compared to 2020 with continued headwinds from the low interest rate environment offset by business growth and selected re-pricing measures. Revenues for Private Bank Germany are expected to remain essentially flat compared to 2020. Continued headwinds from deposit margin compression and a lower contribution from central treasury allocations are expected to be mitigated by contin- ued growth in the loan businesses, higher fee income from investment and insurance products as well as by continued efforts to implement pricing changes. In the International Private Bank (IPB), we expect revenues to be essentially flat year over year with headwinds from the lower interest rate environment and lower contribution from the workout of legacy positions in Sal. Oppenheim, expected to be mitigated by continued business growth in investment and loan products and the benefits from targeted hiring with a focus on the IPB Private Banking and Wealth Management customer segment. We expect to continue to grow our new business volumes in a normalizing market environment. The development of overall Assets under Management volumes will be highly dependent on market parameters including FX rates and we expect them to be slightly higher compared to 2020 in a normalizing environment. Provision for credit losses in the Private Bank are expected to be slightly higher in 2021 reflecting the continued uncertainty around extent, duration and market spillover related to the COVID-19 pandemic as well as selected growth in our loan books. This reflects also our expectation regarding our customers’ ability to pay after leaving legislative and non-legislative moratoria. RWAs are expected to be higher in 2021 as a result of the implementation of regulatory changes to improve consistency of internal risk models in the industry and the growth in our loan book. Noninterest expenses in Private Bank are expected to be slightly lower in 2021 than in 2020, mainly due to lower transfor- mation related impacts. Synergies from the execution of our transformation objectives are expected to increase further in 2021 and are expected to be offset in part by inflationary effects and continued targeted investments. As a result, we expect adjusted costs excluding transformation charges to remain essentially flat in 2021. 38 Deutsche Bank Annual Report 2020 Outlook Our Business Segments Risks to our outlook include potential impacts on our business model from macroeconomic uncertainties, including uncertainty around duration of and recovery from COVID-19 pandemic, increasing pressure on interest rates in the Eurozone, slower economic growth in our major operating countries and lower client activity. Client activity could be impacted by market uncer- tainties including higher than expected volatility in equity and credit markets. The implementation of regulatory requirements including consumer protection measures and delays in the implementation of our strategic projects could also have a negative impact on our revenues and costs. Asset Management We believe that due to its diverse range of investments and solutions, Asset Management (AM) is well positioned to grow market share amid the industry growth trends, supported by our broad distribution reach, global footprint and digital capabili- ties. However, wider industry challenges such as fee compression, rising costs of regulation, competitive dynamics and the economic impact of the COVID-19 pandemic are likely to remain. In the face of these challenges, we intend to focus on innovative and sustainable products and services where we can differentiate and best serve clients, while also maintaining a disciplined cost approach. Given the current economic climate, and the trends we have observed in recent quarters, we expect the revenue environment to remain challenging in the year 2021 amid ongoing margin pressure together with the low interest rate environment. As a result, full year 2021 revenues in AM are expected to be slightly higher compared to 2020. Management fees are assumed to remain essentially flat year-over-year as we expect that positive effects resulting from both net inflows and favorable market development during the second half of 2020 will be partly offset by continued fee compression. Performance and transaction fees are expected to be slightly higher compared to 2020. Other revenues are expected to be significantly higher, mainly from a projected improvement in the fair value of guarantees. To ensure our business is well protected against potential revenue headwinds, we remain committed to actively managing our costs in 2021 to maintain a relatively stable adjusted cost-income ratio. As a result we expect noninterest expenses and adjusted costs excluding transformation charges to be slightly higher compared to 2020. We expect Assets under Management at the end of 2021 to be slightly higher compared to the end of 2020, driven by net flows. In 2021, we expect sustained net inflows into targeted growth areas of passive and alternative investments, further enhanced by strategic alliances and product innovations, including further ESG offerings. Risks to our outlook include macro-economic and market conditions, growth prospects and continued economic impact from COVID-19 pandemic, which could adversely affect our business, results of operations or strategic plans. Elevated levels of economic and political uncertainty worldwide, and protectionist and anti-trade policies, could have unpredictable conse- quences in the economy, market volatility and investors’ confidence, which may lead to declines in business and could affect our revenues and profits. In addition, the evolving regulatory framework could lead to unforeseen regulatory compliance costs and possible delays in the implementation of our efficiency measures, which could adversely impact our cost base. Capital Release Unit In 2021, the Capital Release Unit (CRU) intends to continue to execute our defined asset reduction programs and the transition of Deutsche Bank’s Prime Finance and Electronic Equities clients and staff, while continuing to align cost reductions to asset disposals. We expect that CRU will continue to report negative revenues in 2021. These will be driven by de-risking impacts, funding costs, hedging costs and mark to market impacts and will be partially offset by positive revenues related to the reimbursement of Prime Finance operating costs and a modest income from loan portfolios. Noninterest expenses for 2021 are expected to be lower than in 2020. Adjusted costs excluding transformation charges are expected to be lower driven by lower service cost allocations, lower non-compensation costs and lower compensation costs. Further expense management initiatives in 2021 are focused on reduction of business-aligned infrastructure expenditure re- sulting from exited businesses and locations, headcount reductions and reduction of non-compensation spend. For 2021, we will continue to execute towards the RWA and Leverage Exposure targets laid out in the December 2020 Investor Deep Dive. We expect RWA to be lower year over year and Leverage exposure to be significantly lower. However, we expect CRU to see additional leverage exposure in the first half of 2021 due to incremental Central Liquidity Reserve allocations, as we noted in the Investor Deep Dive and from the implementation of the Standardized Approach to Counterparty Credit Risk (SA-CCR). 39 Deutsche Bank Annual Report 2020 Outlook Our Business Segments We plan to also continue with the transition of our Prime Finance and Electronic Equities staff, clients, and related positions. We expect this transition to conclude by the end of 2021, resulting in lower costs, revenue, Leverage exposure and RWA. Risks to our outlook include that the speed and cost of our asset reductions could be affected by adverse developments or market uncertainties, including from COVID-19, higher than expected volatility in equity and credit markets and lack of coun- terparty appetite. Delays to the implementation of our expense management initiatives could have an adverse impact on our cost base. The transition of Prime Finance and Electronic Equities is dependent upon the readiness of the acquirer, which therefore represents a risk to our client/staff transition timeline. We continue to carefully monitor the legal and regulatory environment as it relates to the foreign currency denominated mortgage portfolio in Poland. Adverse judicial or regulatory developments could have a negative impact on the portfolio. Corporate & Other In 2021, Corporate & Other will continue to be impacted by valuation and timing differences on positions that are economically hedged but do not meet the accounting requirements for hedge accounting. It will also include infrastructure expenses asso- ciated with shareholder activities as defined in the OECD Transfer Pricing Guidelines, which are not business specific. There will be certain transitional costs held centrally in Corporate & Other relating to changes in our internal funds transfer pricing (‘FTP’) framework, as well as costs linked to legacy activities relating to the merger of the DB Privat- und Firmenkundenbank AG into Deutsche Bank AG. We expect to retain around € 250 million in total related to these funding costs in Corporate & Other in 2021. Additionally, Corporate & Other will continue to be impacted by any difference between planned and actual allocations as Infrastructure expenses are allocated to the corporate divisions based on our expense plan, with the exception of technology development costs which will be charged based on actual expenditures. Corporate & Other also includes the reversal of non- controlling interests, mainly related to DWS, which are deducted from profit or loss before tax of the divisions. 40 Deutsche Bank Annual Report 2020 Risks and opportunities Risks Risks and opportunities The following section focuses on future trends or events that may result in downside risk or upside potential from what we have anticipated in our “Outlook”. Our aspirations are subject to various external and internal factors. Timely and complete achievement of our strategic aspira- tions may be adversely impacted by the reduced revenue-generating capacities of some of our core businesses in the current challenging macro-economic and market environment, in particular in light of the COVID-19 pandemic, the ongoing headwinds posed by regulatory reforms and/or the effects on us of legal and regulatory proceedings. Additionally, materialisation of risks, whether individually or simultaneously, might (inter alia) lead to reduced profitability negatively affecting capital accretion and dividend capacity. In contrast, improved macroeconomic and market conditions, our focussed business strategy and the on- going benefits of digitalisation may generate opportunities for the Bank. The COVID-19 pandemic has and can affect many different areas of the bank, both with respect to risks and opportunities, driving significant levels of fluctuation in the results of our operations, strategic plans and targets, as well as our share price. Risks Macroeconomic and market conditions If growth prospects, the interest rate environment and competition in the financial services industry worsen compared to our expectations, this could adversely affect our business, results of operations or strategic plans. Since early 2020 our macroeconomic business and operating environment has been dominated by the COVID-19 pandemic. Following the severe GDP contractions observed across major advanced economies in 2020, we expect economic recovery to unfold in the course of 2021 as COVID-19 vaccination becomes more available and additional fiscal stimulus is provided in the United States (U.S.) and European Union (EU) economies in particular. However, we continue to see significant downside risks in the short-term economic outlook from the protracted waves of COVID-19 infections, the emergence of new, supposedly more infections COVID-19 strains, and resumed lockdown re- strictions. The pandemic continues to create a climate of uncertainty which has significantly impacted economies and our operations. Though most countries have approved vaccines for public use and begun vaccination programs, there remains some uncertainty about their effectiveness on certain groups of the population, as well as doubt about the speed at which vaccinations can be rolled out across populations, and this skepticism will likely continue for some time. Furthermore, with respect to the phased delivery and availability of vaccines across the globe, the underlying recovery rate may vary from country to country and therefore affect creditworthiness of counterparties and drive elevated default risk throughout the year. Addi- tionally, new lockdown measures with types, durations, and intensities that are not fully predictable could outweigh any poten- tial upside from the vaccines. Due to the largely unprecedented nature of the COVID-19 crisis, forecast uncertainty will probably remain unusually high for quite some time. As a bank, our working assumption remains that lagging effects of the recession caused by the COVID-19 pandemic will continue to unfold in 2021 and that the low interest rate environment in the Eurozone will persist for several quarters at least. During 2020, we observed a worsening of the creditworthiness of certain portfolios due to the deterioration of the overall economic situation, which is also reflected in our increased level of loan loss provisions. If the situation continues to worsen, it may lead to additional rating declines among our clients, further increasing loan losses as well as potential client drawdowns of credit facilities (as observed earlier in 2020) which in turn would lead to an increase in capital requirements and liquidity demands. Higher volatility in financial markets could lead to increased margin calls both inbound and outbound. The bank regularly utilises collateralized loan obligations (CLO) and credit default swaps (CDS) to manage concentration risk. However this may not be sufficient to fully offset potential credit losses. Policy measures taken by central banks and governments are helping to mitigate some of the short-term impacts. Numerous countries have introduced debt moratoria for private clients and small businesses, as well as supporting measures such as state-backed credit programs for corporates. Additionally, several institutions have put private moratoria in place to support their clients. Customers could apply for all of these moratoria during a given application phase while the measure, depending on the respective moratoria, could run over a longer time period (mostly up to three or six months, sometimes even longer). In some countries, like Germany, the private and state moratoria have expired. Other countries, like Italy, have extended their state moratoria for small and medium-sized enterprises and corporates until June 2021. 41 Deutsche Bank Annual Report 2020 Risks and opportunities Risks While we currently observe no material adverse impact from the expired moratoria, withdrawal of support measures coupled with a significant increase in corporate and sovereign debt levels as a result of the crisis is likely to mean that defaults and credit losses will remain elevated over the course of 2021 with an ongoing dispersion both between and within sectors. The bank will continue to monitor relevant portfolios with regards to the upcoming expiry of the remaining moratoria and signs of credit deterioration. The COVID-19 pandemic has intensified the “lower for longer” interest rate environment. This has resulted in further pressure on bank interest margins and a prolonged period of low interest rates in the Eurozone could materially affect our profitability and balance sheet deployment. While our revenues are particularly sensitive to interest rates, given the size of our loan and deposit books denominated in Euros, the low interest rate environment can also impact other balance sheet positions which are accounted at fair value. Interest rates remain negative for certain risk-free instruments, especially German government bonds. The low interest rate environment has also supported elevated market valuations across risk assets as investors search for yield, with the technology sector in particular focus. In recent weeks this has included concerted action from retail investors resulting in a short squeeze across selected assets. These trends raises the risk of a significant price correction which may potentially be triggered by delays to vaccine rollout, lower vaccine efficacy and / or an increase in interest rates. Risks are amplified by high debt levels, a lack of liquidity in some areas of the market and an easing of global underwriting standards. Adverse market conditions, unfavourable prices and volatility including material movements in foreign exchange rates (and resulting translation effects) as well as cautious investor and client sentiment may in the future materially and adversely affect our revenues and profits as well as the timely and complete achievement of our strategic aspirations and targets. If the COVID-19 vaccine roll-out continues, and boosted by massive monetary and fiscal policy support, the expected eco- nomic recovery and reflation is subject to significant upside over the medium term. This could in turn lead consumer price and asset price inflation in major advanced economies to accelerate substantially faster than anticipated. Whilst this could create some upside potential for our business activity levels and net interest income, a disorderly sharp increase in bond yields could trigger a downward correction to equities and other highly valued risk asset markets. While it is likely that central banks would act to contain market volatility, potential increases in short-term interest rates and rapid curtailment of quantitative easing programs could lead to the materialisation of a number of risks, such as the widening of credit spreads, which could impact trading results. In addition, we could see increased counterparty credit exposure on derivatives, increased credit risks on highly leveraged clients and emerging markets with external imbalances as well as inflation risk on pension fund assets. With the new US administration, the risk of escalatory global trade and technology disputes may have declined, but trade, technology and broader geopolitical tensions between key trading partners (especially between the U.S. and China), are likely to persist and the tariffs and other punitive measures put in place by the Trump administration may only slowly be reversed. This could continue to undermine global growth and trade volumes. Supply-chain disruptions could lead to a slowdown in global production, with Germany and emerging markets (China in particular) being hit especially hard, potentially leading to declines in business levels and losses across our businesses. A substantial proportion of the assets and liabilities on our balance sheet comprise financial instruments that we carry at fair value. As a result of such changes, we have incurred losses in the past, and may incur further losses in the future. We are exposed to risks related to movements from foreign exchange rates, most notably related to the USD and GBP. Similarly, liquidity risk could arise from lower value and marketability of assets, as these would affect the amount of proceeds available for covering cash outflows during a stress event. Additional haircuts may be incurred on top of any already impaired asset values. Moreover, securities might lose their eligibility as collateral necessary for accessing central bank facilities, as well as their value in the repo/wholesale funding market. As such, a debt crisis would directly affect the bank’s liquidity position. The aforementioned external developments can impact our revenue generating capabilities, while market declines and vola- tility could also negatively impact the value of financial instruments and cause us to incur losses. We are exposed to pension risks which can materially impact the measurement of our pension obligations, including interest rate, inflation and longevity risks that can materially impact our earnings. If multiple key downside risks simultaneously materialize and/or occur in combination with a more pronounced economic slowdown, the negative impact on our business environment could be more severe than currently expected. Political risks We currently see several political and geopolitical risks and events which could negatively affect our business environment, including weaker economic activity, financial market corrections or a lower interest rate level. 42 Deutsche Bank Annual Report 2020 Risks and opportunities Risks In case of a potentially severe escalation, political risks stemming for instance from the deep divide in US society observed around the Presidential elections or from the populist movements in major European Union member states could have unpre- dictable consequences for the financial system and the economy more broadly, potentially leading to declines in business levels, write-downs of assets and losses across our businesses. We currently see only low probabilities of severe escalation of these political risks, however our ability to protect ourselves against these risks is limited. The COVID-19 pandemic has so far not resulted in any further political fragmentation in the Eurozone with ample central bank liquidity provisions, the availability of EU financial support and the agreement of the € 750 billion Recovery Fund supporting the medium-term economic outlook of countries hit hardest by the pandemic through the disbursement of grants and loans. The Recovery Fund will also help to mitigate against the risk of upward pressure on government bond yields in those countries. Brexit uncertainty and associated economic downside risks have declined as the UK and the EU agreed on a Trade and Cooperation Agreement shortly before the UK left the EU’s single market and customs union at the end of the transition period on December 31, 2020. However, significant uncertainty remains as negotiations between the UK and the EU on their future relationship will continue in 2021, especially with regard to financial and other services not extensively covered by the existing deal. A no-deal Brexit has been the base scenario for our dedicated Brexit program to ensure readiness in the event a no- deal Brexit were to materialize. This would have included utilizing well-established Crisis Management procedures. Although a Brexit trade deal has been agreed, uncertainty still remains while the details of the deal are being assessed, including aspects for Financial Services. We have applied for authorization from the Prudential Regulation Authority and Financial Con- duct Authority, our UK regulators, to continue to undertake regulated activity in the UK (previously undertaken pursuant to the European Passport provisions) in case of a no-deal outcome. Despite our Brexit preparations, failure to gain authorization as a Third Country Branch in 2021 could adversely affect our business, results of operations or strategic plans. Also, without equivalence between EU and UK regimes for Financial Services we will be restricted in our ability to provide financial services to and from the UK. Tensions between the United States and China have continued to increase across a wide range of areas, including the au- tonomy of Hong Kong, human rights, cybersecurity, and other areas. The United States has imposed sanctions, export re- strictions, and investment restrictions on Chinese companies and officials, and China has imposed more limited sanctions on U.S. companies and officials and introduced a framework for blocking regulations aimed at extraterritorial enforcement of sanctions. While it is too early for us to predict the impacts of these escalating measures on our business or our financial targets, these could be material and adverse. Other geopolitical risks which could negatively impact our business environment include tensions in the South China Sea and between the US and China over Taiwan as well as the potential for escalation in the Middle East over Iran’s nuclear program following recent steps towards higher uranium enrichment levels. Following the U.S. presidential transition Congressional enquiries seeking us to produce information may intensify and could result in a negative impact on Deutsche Bank’s reputation. Strategy Preserving a CET 1 ratio above 12.5 % is a key element of our strategy and our commitments to regulators. Our capital ratio development reflects, among other things: the operating performance of our core businesses; the extent of our restructuring and transformation costs; costs relating to potential litigation and regulatory enforcement actions; the progress we make in deleveraging the Capital Release Unit; growth in the balance sheet usage of the core businesses; changes in our tax and pension accounts; impacts on Other Comprehensive Income; and changes in regulation and regulatory technical standards. We may also have difficulties selling businesses or assets at favourable prices or at all and may experience material losses from these assets and other investments irrespective of market developments. With the announcement of a series of measures to restructure our operations on July 7, 2019, including the creation of the Capital Release Unit, we face transformation risks associated with the disposal and wind down of assets as well as the delivery of the cost reduction program aimed at improving long-term profitability and returns. Following the announcement, additional controls and processes have been established and a dedicated governance structure, including the appointment of a Chief Transformation Officer to the Management Board, are now in place to capture and track risks arising from the transformation process. Although we are currently fully on track to achieve our targets and execute our strategy, we could still face material and adverse impacts on our business activities, including material losses if we fail to appropriately identify risks or implement additional controls as required. Moreover, if we miss our publicly communicated targets, incur losses, including further impairments and provisions, experience low profitability or an erosion of our capital base and broader financial condition, our results of operations and share price may be materially and adversely affected. Where such targets reflect also commitments to regulators, missing them may also trigger action from such regulators. 43 Deutsche Bank Annual Report 2020 Risks and opportunities Risks The Group enters into contracts and letters of intent in connection with its transformation strategy as well as in the ordinary course of business. When these are preliminary in nature or conditional, the Group is exposed to the risk that they do not result in execution of the final agreement or consummation of the proposed arrangement, putting associated benefits with such agreements at risk. The operating environment could worsen significantly or our assumptions and controls over any of the aforementioned items could vary significantly from our current expectations. The COVID-19 pandemic and its continuing impact on the global econ- omy may affect our ability to meet our financial targets. We continually plan and adapt to the changing situation but continue to run the risk that we may be materially adversely affected by a protracted downturn in local, regional or global economic conditions that are harming specific sectors of various economies and in turn could impact our core businesses. In that situa- tion, we would need to take action to ensure we meet our minimum capital objectives. These actions or measures may result in adverse effects on our business, results of operations or strategic plans and targets. The COVID-19 pandemic reduced the rate of regular employee attrition by around 30% versus historical levels, creating a more challenging context to the Group headcount and cost targets and increasing the cost of involuntary severance arrange- ments. This also limited the opportunity to redeploy talented employees within the bank whose roles were made redundant. Requests from regulators to demonstrate moderation in the levels of compensation that we can offer may put the Group at a disadvantage in attracting and retaining talented employees. All of the above could have a material impact on our CET 1 ratio. It is therefore possible that we will fall below our CET 1 target of at least 12.5 % in upcoming periods. Liquidity and funding risks Our liquidity, business activities and profitability may be adversely affected by an inability to access wholesale funding markets or funds from our subsidiaries or to sell assets during periods of market-wide or firm-specific liquidity constraints. Issues such as these could arise due to circumstances unrelated to our businesses and therefore outside our control, such as disruptions in the financial markets. Alternatively, circumstances specific to us could adversely impact our business such as reluctance of our counterparties or the market to finance our operations due to perceptions about potential outflows resulting from litigation or regulatory proceedings or actual or perceived weaknesses in our businesses, business model or strategy or resilience to counter negative economic and market conditions. The liquidity position may be impacted by Deutsche Bank-specific negative press coverage and increase the franchise risk faced by the organization. Deterioration of our brand perception may lead to reduced funding contributions as clients seek to move their deposits elsewhere. This situation could be exacerbated where we have unmitigated exposure to concentration risk due to a lack of funding diversification, particularly where funding sources are a flight risk during periods of stress. Wider financial market issues could lead to customers requiring liquidity when supply is limited. Clients may be forced to draw down on facilities to meet working capital requirements. This situation may arise in a financial stress or an economic recession event where there is an acute shortage of liquidity. Our credit spread levels are sensitive to adverse rating actions and any future downgrade could bring our non-preferred credit rating into the non-investment grade category. This could materially and adversely affect our funding costs, the willingness of customers to continue to do business with us and significant aspects of our business model. Moreover, under some contracts to which we are a party, a downgrade could require us to post additional collateral, lead to terminations of contracts with accompanying payment obligations for us or give counterparties additional remedies, all of which would lead to liquidity out- flows. Additional, intraday funding risks may arise to the extent that any of these outflows coincide with timing mismatches between incoming receipts of cash and outgoing payment obligations, including any payments made to Financial Market Utilities to ensure timely execution of Deutsche Bank’s intraday clearing and settlement activities. Our ability to transact FX trades may be reduced when there are issues in the FX market or where counterparties are con- cerned about our ability to fulfil agreed transaction terms and therefore seek to limit their exposure to us. Additionally, increased FX mismatch may lead to increased collateral outflows where the euro (our local currency) materially depreciates against other major currencies. The Net Stable Funding Ratio (NSFR) will become a regulatory requirement for Deutsche Bank Group, including the parent entity Deutsche Bank AG as of June 28 2021. NSFR shall apply to other subsidiaries across the group subject to local regu- latory requirements. Upon the introduction of the ratio as a binding minimum requirement, we expect both the Group and its subsidiaries for which it applies to be above the regulatory minimum. While our Liquidity Coverage Ratio remained above the regulatory minimum during 2020, the risk of future waves of COVID- 19 and a deeper and more protracted economic recession may put pressure on liquidity metrics in 2021 and lead to liquidity 44 Deutsche Bank Annual Report 2020 Risks and opportunities Risks and funding outflows. At the same time, this may temporarily impact our cost of funding and therefore adversely affect our profitability. Regulatory supervisory reforms, assessments and proceedings Although regulatory reforms have been selectively delayed in order to support banks’ efforts to more easily manage the im- pacts from COVID-19 and provide financing to the real economy, the regulatory reforms enacted and proposed in response to weaknesses identified during the last financial crisis together with the increased regulatory scrutiny and discretion – for example, extensive new regulations governing our derivatives activities, compensation, bank levies, deposit protection includ- ing in the event that a compensation case is ascertained, data protection or a possible financial transaction tax – will impose material costs on us, create significant uncertainty and may adversely affect our business plans as well as our ability to execute our strategic plans in the medium-term. Those changes that require us to make significant contributions to resolution funds and deposit guarantee schemes, to maintain increased capital may significantly affect our business model, financial condition and results of operation as well as the competitive environment generally. The amounts of these requirements are difficult and often impossible to predict. Two future changes which will impact our business are the implementation of Final Basel III reforms and Brexit. Implementation of both changes are however still heavily debated in all key jurisdictions by policymakers. We currently expect our capital requirements to increase in 2024 from the implementation of Final Basel III in the EU, in particular from higher risk weights for our exposure in most risk areas. We expect a further increase in risk-weights for our exposures from 2028/2029 from the introduction of the new output floor included in Final Basel III. Regulatory reforms in respect of resolvability or resolution measures may also impact our business operations. In addition, regulatory changes may impact how key entities are funded which could affect how businesses operate and negatively impact results. Regulatory actions may also require us to change our business model or result in some business activities becoming unviable. Regulators can also impose capital surcharges or regulatory adjustments, for example, as a result of the regular Supervisory Review and Evaluation Process (SREP). Such adjustments may, for example, reflect additional risks posed by deficiencies in our control environment, or come as a result of supervisory inspections concerning the treatment of specific products or trans- actions. This includes conclusions the ECB draws from regulatory stress tests conducted by the EBA or the ECB. The ECB evaluates each bank’s performance from a qualitative angle to inform the decision on the level of Pillar 2 Requirement and a quantitative outcome which is one aspect when assessing the level of Pillar 2 Guidance. The European Central Bank (ECB) has already used these powers in its SREP decisions in the past and it may continue to do so to address findings from onsite inspections. In extreme cases, they can even suspend certain activities or our permission to operate within their jurisdictions and impose monetary fines for failures to comply with rules applicable to us. As the ECB did not issue any new SREP decision in 2020, the 2019 SREP decision continues to apply. Action has been taken by regulators in Europe and in other regions to provide targeted and temporary flexibility from elements of the prudential framework to avoid unintended pro-cyclical effects. For instance at the European level, changes made to the Leverage Ratio include, allowing the netting of pending settlements payables and receivables and the temporary exclusion of cash held in Eurozone central banks. In addition, a limited and temporary off-set for market risk Risk Weighted Assets (RWA) increases was introduced, where excesses relative to modelled outcomes would previously have given rise to increased cap- ital requirements, without any off-set. Furthermore, implementing enhanced controls may result in higher regulatory compliance costs that could offset or exceed efficiency gains. Regulators may disagree with our interpretation of specific regulatory requirements when interpretative mat- ters are discussed as part of our ongoing regulatory dialogue or in the context of supervisory exams. An example of unantici- pated increase of control could be the risk that local regulators require a major DB legal entity to ring-fence liquidity held locally and, in turn, limit the redeployment of liquidity to other affiliates. Changes in rule interpretations can have a material impact on the treatment of positions for Pillar 1 regulatory purposes. Similarly, the evolving interpretations of the European Banking Authority (EBA) on the Capital Requirements Regulation (CRR) can also negatively impact our regulatory capital, leverage or liquidity ratios. Regulators and central banks have set the goal of improving the robustness of financial benchmarks, especially interest rate benchmarks. As a result of this initiative, the ongoing availability of the London Interbank Offered Rate (“LIBOR”), and other benchmarks (together “IBORs”) is uncertain. Some reforms are already effective (such as the recent Central Counterparties (CCP) switch to Secured Overnight Financing Rate (SOFR) discounting from Fed Funds) while others are still to be imple- mented or are under consideration. For example, the administrator of LIBOR consulted, in December 2020, on its intention to cease publication of GBP, CHF, JPY, EUR and certain USD settings after December 31, 2021, and additionally, to cease publication of the remaining USD LIBOR settings after June 30 2023. These reforms may cause IBORs to perform differently than in the past, or to disappear entirely, or have other consequences, which cannot be fully anticipated. Regulators such as FCA and CFTC have strongly urged market participants to transition to alternative risk-free rates (“RFRs”). As of October 2, 2019, the administrator of EONIA has changed the way it calculates EONIA, so that it is now based on the “€STR” or “euro short-term rate”; nonetheless, EONIA is scheduled to cease to exist as of January 3, 2022. In 2019, EURIBOR was reformed to comply with the EU financial benchmarks regulation, and continues to be available. 45 Deutsche Bank Annual Report 2020 Risks and opportunities Risks A material portion of our assets and liabilities, including financial instruments we trade and other transactions and services we are involved in, have interest rates linked to IBORs that may be subject to potential reform or discontinuation, requiring us to prepare for such change and for a potential transition to “risk-free-rates” (RFRs where relevant. The discontinuation of these IBORs and the transition to RFRs pose a variety of risks to us, including risks of market disruption with associated market and liquidity risks, litigation risk, accounting and tax risks and operational risks. Depending on how these matters and the related risks develop, along with the adequacy of the response of the industry, the market, regulators and how Deutsche Bank react to them, the reform and discontinuation of IBORs and transition to RFRs could have adverse effects on our business, results of operations, capital requirements and profitability. Also, as discounting methodologies for interest rate derivatives continue to change, including the recent USD related transition from Federal Funds Rate to SOFR, our consolidated income statement may be impacted accordingly. As part of the transition, we may also face operational or financial risks if not all systems and processes dependencies on IBOR availability are identified and remediated. A dedicated IBOR program is in place to manage the transition. More broadly, initiatives to reform existing benchmarks and our participation in them, including as benchmark submitter, could potentially expose us to legal, reputational and other risks. In particular, legal and compliance risk (including conduct risk) may arise due to the operational risks of participating in a benchmark submission, either as part of a panel with the requirement to use models and potentially exercise expert judgement or as provider of transactions data to a benchmark administrator. While we continue to develop and implement our approach to climate risk assessment and management and promote the integration of climate-related factors across our entire platform, both rapidly changing regulatory as well as stakeholder de- mands may materially affect our business, results of operations or strategic plans if we fail to adopt or implement our measures to transition to a low-carbon economy. Legal and regulatory enforcement proceedings and tax examinations We are subject to a number of legal and regulatory enforcement proceedings and investigations as well as tax examinations. The outcome of these proceedings is difficult to estimate and may substantially and adversely affect our planned results of operations, financial condition and reputation. If these matters are resolved on terms that are more adverse to us than we expect, in terms of their costs or necessary changes to our businesses, or if related negative perceptions concerning our business and prospects and related business impacts increase, we may not be able to achieve our strategic objectives or we may be required to change them. Compliance and Anti-Financial Crime risks Combatting financial crime and complying with applicable laws and regulations is vital to ensuring the stability of banks, such as Deutsche Bank, and the integrity of the international financial system. Our anti-money laundering (AML) and know-your-client (KYC) processes and controls, aimed at preventing misuse of our products and services to commit financial crime, continue to be subject of regulatory reviews, investigations and enforcement actions in a number of jurisdictions. We continually seek to enhance the efficacy of our internal control environment and improve our infrastructure to revised regulatory requirements and to close gaps identified by us and/or by regulators and monitors. Gaps identified by enforcement actions often include common themes. With a clear commitment to strengthen our global and bank-wide approach to financial crime risk management, a global, Management Board driven, financial crime program is overseeing our remediation activities. Furthermore, our compliance controls and surveillance processes, as well as other internal control processes that are aiming at ensuring the proper conduct of our businesses and services as well at preventing market abuse, insider dealing and conduct breaches are from time to time subject to regulatory reviews and/or inquiries in certain jurisdictions. Risk management policies, procedures and methods as well as operational risks Although we have devoted significant resources to develop our risk management policies, procedures and methods, including with respect to market, credit, liquidity, operational as well as reputational and model risk, they may not be fully effective in mitigating our risk exposures in all economic or market environments or against all types of risk, including risks that we fail to identify or anticipate. Where we use these models to calculate risk-weighted assets for regulatory purposes, potential defi- ciencies may also lead regulators to impose a recalibration of input parameters or a complete review of the model. We may face operational risks arising from failures in our internal control environment or errors in the performance of our processes, e.g. in transaction processing, as well as loss of business continuity, which may disrupt our business and lead to 46 Deutsche Bank Annual Report 2020 Risks and opportunities Risks material losses. At the same time, we may also face risks of material losses or reputational damage if services third parties facilitate are not provided as agreed or in line with our internal standards. As a global bank, Deutsche Bank is often in the news. Deutsche Bank conducts its media dialogue through official teams, however, members of the media sometimes approach Deutsche Bank staff outside of these channels and DB internal infor- mation, including confidential matters have been subject to external news media coverage. Leaks to the media can have severe consequences for Deutsche Bank, particularly when they involve inaccurate statements, rumours, speculation or un- sanctioned opinions. This can result in financial consequences such as the loss of confidence or business with clients and may impact the bank’s share price or our capital instruments by undermining investor confidence. While we have processes in place to manage these risks, our ability to protect ourselves against these risks is limited. In addition, we are also exposed to conduct risk, comprising risks relating to inappropriate business practices, including selling products that are not suitable for a particular customer, fraud, unauthorized trading and failure to comply with applicable regulations, laws and internal policies. For example an employee’s misconduct reflecting fraudulent intent may lead to not only material losses but also reputational damage. From an operational perspective, and despite the business continuity and crisis management policies currently in place, the COVID-19 pandemic, unexpected developments such as the emergence of new mutations of the virus and resulting rapid changes in government responses may continue to have an adverse impact on our business activities. The move across global industries to conduct business from home and away from primary office locations continues to put pressure on business practices, the demand on our technology infrastructure and also the risk of cyber-attacks which could lead to technology failures, security breaches, unauthorized access, loss or destruction of data or unavailability of services, as well as increase the likelihood of conduct breaches. Any of these events could result in litigation or result in a financial loss, disruption of our business activities and liability to our customers, regulatory scrutiny, government intervention or damage to our reputation. At the same time the cost to us of managing these cyber, information security and other risks remains high. Delays in the imple- mentation of regulatory requirements, including consumer protection measures and of our strategic projects could also have a negative impact on our revenues and costs, while a return of higher market volatility has led and could continue to lead to increased demand on markets surveillance monitoring and processing. Our vendors and service providers are facing similar challenges with the risk that these counterparties could be unable to fulfil their contractual obligations, putting the benefits we seek to obtain from such contracts at risk. In order to manage financial and non-financial risk impacts of COVID-19, Deutsche Bank is utilizing dedicated governance structures including Global and Regional Crisis Management. More broadly and where relevant, additional controls and pro- cesses have been established including additional reporting to ensure relevant senior stakeholders including the Management Board are up-to-date. We expect a demanding year 2021 from a risk management perspective. Third party risk Third parties are integral to the successful daily operation of any financial services firm, including Deutsche Bank. The use of and dependence upon third parties in the sector has increased over the years, in support of our business and operations, necessitating a corresponding increase in capabilities to manage them. The nature of what we use third parties for has also evolved and now includes more fundamental aspects of services and infrastructure such as the Cloud. This in itself represents different risks and requires more robust risk assessments, appropri- ate contracting and ongoing oversight commensurate with relevant risks. It has also led to an understandable, steady increase in regulation and regulatory scrutiny over how we manage their third parties. Deutsche Bank has a well-established approach to Third Party Risk Management; from a clear policy and procedure through to centralised risk process for businesses to use when engaging with external vendors. However, services provided by third parties pose risks to us comparable to those we bear when we perform the services ourselves, and we remain ultimately responsible for the services our third parties provide. We depend on our third parties to conduct their delivery of services in compliance with applicable laws, regulations and in accordance with the contractual terms and service levels they have agreed with us. If our third parties do not conduct business in accordance with these standards, we may be exposed to material losses and could be subject to regulatory action or litigation as well as be exposed to reputational damage. More generally, if a third party relationship does not meet our expectations, we could be exposed to financial risks, such as the costs and expenses associated with migration of the services to another third party and business and operational risks related to the transition, and we could fail to achieve the benefits we sought from the relationship. In order to mitigate such risks, we continue to enhance our internal control environment and improve our infrastructure to meet revised regulatory requirements and to close any gaps identified by us and/or by regulators and or their nominated monitors. 47 Deutsche Bank Annual Report 2020 Risks and opportunities Risks Impairment of goodwill and other intangible assets Goodwill is reviewed annually for impairment or more frequently if there are indications that impairment may have occurred. Other intangible assets are recognized separately from goodwill when they are separable or arise from contractual or other legal rights and their fair value can be measured reliably. These assets are tested for impairment or their useful lives reaffirmed at least annually. This includes the testing in relation to software impairments. The determination of the recoverable amount in the impairment assessment of non-financial assets requires estimates based on quoted market prices, prices of comparable businesses, present value or other valuation techniques, or a combination thereof, necessitating management to make subjective judgments and assumptions. These estimates and assumptions could result in significant differences to the amounts reported if underlying circumstances were to change. Impairments of goodwill and other intangible assets have had and may have a material adverse effect on our profitability and results of operations. Pension obligations We sponsor a number of post-employment benefit plans on behalf of our employees, including defined benefit plans. To the extent that the factors that drive our pension liabilities move in a manner adverse to us, or that our assumptions regarding key variables prove incorrect, or that our funding of our pension liabilities does not sufficiently hedge those liabilities, we could be required to make additional contributions or be exposed to actuarial or accounting losses in respect of our pension plans. Deferred tax assets We recognize deferred tax assets for future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, unused tax losses and unused tax credits. To the extent that it is no longer probable that sufficient taxable income will be available to allow all or a portion of our deferred tax assets to be utilized, we must reduce the carrying amounts. This accounting estimate related to the deferred tax assets depends upon underlying assumptions, such as assumptions about the historical tax capacity and profitability infor- mation as well as forecasted operating results based upon approved business plans, that can change from period to period and requires significant management judgment. Each quarter, we re-evaluate our estimate related to deferred tax assets, including our assumptions about future profitability. Reductions in the amount of deferred tax assets from a change in estimate have had and may in the future have material adverse effects on our profitability, equity and financial condition. Technology and innovation Digital Innovation offers market entry opportunities for new competitors such as cross-industry entrants, global high tech com- panies or financial technology companies. We therefore expect our businesses to have an increased need for investment in digital product and process resources to mitigate the risk of a potential loss of market share. In addition, with increasing levels of digitization, and the continually evolving threat landscape related to information security, the ubiquitous access to banking services via social networks, mobile devices and the advent of new computing techniques, cyber-attacks could lead to tech- nology failures, security breaches, unauthorized access, loss, destruction of data or unavailability of services or inaccessibility of systems of data. To be able to respond to market developments and client needs faster and more flexibly, the bank has decided to migrate in- scope applications to the public Cloud through a strategic partnership with Google Cloud. This partnership with Google is a major milestone in the Banks’ digital journey and shows a commitment to embrace new technologies such as Cloud. The objective is to enhance client experience through improved system resiliency and security as well as reducing the cost ineffi- ciencies of running legacy platforms. Such a major technology migration requires robust governance and planning, including required allocation of funding, to manage the risk of security and stability issues. Additionally, there is significant regulatory focus on this program. Also, as with any external service providers, the bank must ensure the highest standards of data privacy and security controls to safeguard client and bank information. Failure to do so can compromise client trust, lead to financial losses and, in severe cases, regulatory penalties, litigation and the obligation to compensate individuals for damage. As part of our obligation to help maintain a stable and resilient global financial system, we continue to invest in security risk mitigation. Of particular importance in 2020 was the continued focus on addressing the following main threats: financial theft, data disclosure, and service disruption along with compliance risk, system misuse, asset destruction, and data distortion. The bank continually reviewed and – where necessary – modified its layered defence, investigated and remediated information security vulnerabilities, working systematically to fend off evolving threats. We aim to build information security controls into every layer of technology, including identity, data, infrastructure, devices and applications. This layered approach shall provide end-to-end protection as well as multiple opportunities to detect, prevent, respond to, and recover from cyber threats. 48 Deutsche Bank Annual Report 2020 Risks and opportunities Opportunities We may face operational risks arising from failures in our control environment including errors in the performance of our processes or security controls, as well as loss of data, which may disrupt our business and lead to material losses. At the same time, we may also face risks of material losses or reputational damage if services are not provided as agreed or in line with our internal standards. Additionally, the lack of a comprehensive data approach in our customer lifecycle management can put customer experience and regulatory reviews at risk. Any of these events could involve us in litigation or cause us to suffer financial loss, disruption of our business activities, liability to our customers, government intervention or damage to our reputation, whereas the cost of managing these cyber and information security risks remains high. In particular risks arising from non-compliance with KYC while on-boarding customers and additional risks of AFC and AML downstream of the customer lifecycle, could be mediated by a coherent data approach which is currently in the process of being developed. Furthermore we also face challenge with respect to embracing and incorporating new, disruptive technologies in conjunction with existing technological architecture in order to ensure industry standards of information security and customer experience. Major technology transformations in our business areas are executed via dedicated initiatives. The benefits of these include IT and business cost reduction, control improvements, revenue growth through provision of new client features or targeted client growth. The associated program execution risks, including resource shortage, extended implementation timelines or impact of the change related activity on the control environment or functionality issues in the upgraded applications or under- lying technology are carefully managed to partially mitigate the risk of not fully achieving expected benefits. Opportunities Macroeconomic and market conditions Should economic conditions, such as GDP growth or levels of unemployment, the interest rate environment and competitive conditions in the financial services industry improve beyond forecasted levels, this could lead to increasing revenues, that may only be partially offset by additional costs, thus improving both profit before taxes, net profit and the cost-income ratio directly and subsequently improving regulatory measures, such as CET 1 and the leverage ratio. Higher inflation and interest rate levels could present a number of opportunities for us across all our divisions, such as in- creased revenues from higher trading flows amid private, corporate and institutional customers repositioning their portfolios, net interest income gains as well as, higher margins on lending across our balance sheet. A substantial proportion of the assets and liabilities on our balance sheet comprise financial instruments that we carry at fair value, with changes in fair value recognized in our income statement. As a result of such changes, we may realise gains in the future. If market conditions, price levels, volatility and investor sentiment develop better than expected, this may also positively impact our revenues, profits and our costs of lending. Similarly, if we experience higher levels of customer demand and market share than anticipated, this may also positively affect our results of operations. In the event of faster delivery times and increased availability of vaccines across the globe, the underlying recovery rate may accelerate across countries and lead to the easing of lockdowns. This could drive a pickup in cross border trade, increased business and client activity and therefore lead to additional revenue potential. Certain industries may benefit more from the recovery, in particular industries that have been more significantly impacted by the pandemic could see a more rapid recovery, thus resulting in additional business opportunities for us. Regulatory change Regulatory change can encourage banks to provide better products or services that can offer opportunities for differentiation in the marketplace. For example, as reporting standards continue to develop for sustainable finance, the market may evolve to embrace sustainable finance initiatives more broadly. As clients and the market adopt sustainable finance related initiatives, we may have the opportunity to further differentiate the bank by enhancing the services provided to its clients. Strategy Our strategy seeks to enable us to materially improve returns to shareholders over time and deploy our balance sheet and other resources to the highest return activities consistent with our client franchise and risk appetite. The implementation of our strategy may create further opportunities if implemented to a greater extent or under more favourable conditions than antici- pated. If businesses and processes improve beyond our planning assumptions and cost efficiencies can be realized sooner 49 Deutsche Bank Annual Report 2020 Risks and opportunities Opportunities or to a greater extent than forecasted, this could also positively impact our results of operations. The progress could be further stimulated if markets react favourably to DB’s performance in this area, for example leading to a rating upgrade by one of the Rating Agencies. This could in turn reduce funding costs and further amplify the Bank’s profitability. With our announcement on July 7, 2019, we are placing greater focus on those areas of core strengths that are fundamental for our clients. Focus remains on growth across our four core businesses and on continuing to leverage opportunities in the market to continue to dispose of assets no longer core to our strategy through our Capital Release Unit. In an increasingly globalised world, DB’s global reach, deep local presence and closely inter-connected businesses provide a solid platform for clients to utilise. By investing in our areas of core strengths we expect to pursue our strategy of targeted growth. Within the Corporate Bank we seek to continue to grow revenues in our home market of Germany but also expanding into Asia-Pacific and leveraging payments businesses in particular to capture the value chain. The Investment Bank continues to be a global leader in fixed income and financing products, and we are focused on retaining the market share captured in 2020 and stabilizing the fran- chise while reducing costs. For the Private Bank, our focus remains on German retail, international retail and business clients, and on seeking growth predominantly within advisory areas. With the creation of the International Private Bank we aim to provide a more seamless wealth management to Private Bank clients. Asset Management, comprising the DWS legal entities, have set a strategy to pursue with targeted growth, particularly in Europe to cement leading asset manager status and also in Asia and anticipate launching new products in high margin growth areas and responsible investing. We continue to focus on sustainability throughout the bank and have seen opportunities for growth in this space across all our core businesses as our clients’ response to climate change gains further traction. In May 2020, we set ourselves the target of reaching €200 billion in sustainable finance volumes cumulatively by 2025, given strong client appetite this is a key opportunity and area of investment for years to come. As part of the broader efforts to develop a risk appetite strategy to manage climate risk, we see opportunities to support our clients, for example, in developing credible decarbonisation strategies and support their transition. Individuals and institutions, including clients and non-clients of ours, increasingly view environmental, social and governance risks and opportunities as significant for long-term returns and we believe this to become a key differentiator in the years to come. Interest in dedicated drivers of ESG services such as inclusion of ESG factors in the investment processes or decision making process for awarding business mandates across our businesses is growing. As such, we plan to develop and provide financial products or investment possibilities that can help both us and our clients to achieve our common ESG goals. Also, in order to advance our holistic ESG strategy, DWS has recently established an advisory body who will actively advise on the acceleration of DWS’ ESG strategy. More broadly, advancing our ESG activities can lead to both additional revenues oppor- tunities but also an improved brand and stakeholder perception of us. As well as freeing up financial resources, RWA and leverage exposure, the Capital Release Unit is also helping to lower the liquidity demand of the bank. As such this can have an impact on the P&L by lowering the liquidity costs for the Group. At the same time, we may benefit from opportunities to grow our market share and client base in the Core Bank, especially in Europe and in our German home market, supporting clients where peers have retreated and supporting the economy by ensuring corporates have the necessary working capital to manage though the crisis. The COVID-19 pandemic has also impacted the bank’s cost structure. While in the short term we were required to equip branches and office buildings with anti-infection supplies, we are now assessing options to sustainably reduce costs including real estate cost through continued higher levels of working from home, which has generally been positively received by em- ployees and can help accelerate our cost saving initiatives. Certain cost categories have been positively impacted by COVID- 19 temporarily, such as Travel & Entertainment and Marketing & Events. Technology and innovation Digital Innovation offers various revenue opportunities to increase monetization on existing customers and acquire new cus- tomer groups by expanding our own portfolio of products and engaging in product partnerships with third parties, thereby potentially benefiting from a shorter time-to-market. Market trends such as the platform economy, matching internal and ex- ternal products with customer demands and transacting through one central platform, and open banking provide a clear op- portunity for us to position ourselves as a strong player in these ecosystems. The goal is to develop an ecosystem of compre- hensive services, with different components developed by different firms for areas like the retail deposit marketplace, auto- mated financial planning services (robo-advisor), or insurance recommendation services leveraging DB’s banking platform. Furthermore, we have an opportunity to expand our data capabilities, to improve personalized services for a better customer experience as well as to embrace disruptive technologies such as artificial intelligence to build out our service offering. Our global reach allows us to scale products quickly and efficiently across geographies. In this context Deutsche Bank officially signed as day-1 member the GAIA-X foundation (a project aimed to develop common requirements for a European data 50 Deutsche Bank Annual Report 2020 Risks and opportunities Opportunities infrastructure) to strongly support GAIA objectives to enable a trusted data space in Europe and enhance data sharing cross industries and countries. To drive change, accelerate the adoption of technologies into the bank and monetize on the above-mentioned market oppor- tunities, the Bank has created the Technology, Data and Innovation (TDI) division. While general digitalization and innovation activities happen within the business lines, this new centralized approach enables us to address key strategic challenges in a focused set-up, drive a culture of engineering and innovation and invest in mid to long term digital services and new business models. On the cost side, digitization offers our divisions an opportunity for significant efficiency gains. By investing in digital applica- tions such as digital client self-boarding, front-to-back processes can be automated and the productivity increased. Develop- ment of strong data capabilities should enhance our ability to make accurate predictions about client and market behaviour, reducing fraud and pricing products more efficiently, while complying with regulatory obligations using latest technologies. To ensure the best privacy and security guarantees as well as mitigate risks while working with data, DB has launched an internal Data Privacy Engineering initiative. Again, the new TDI organization is intended to serve as a focal point to accelerate selected strategic initiatives and to bring overall cost down. Deutsche Bank and Google Cloud have finalized a strategic multi-year partnership to accelerate the bank’s transition to the Cloud, which will offer Deutsche Bank direct access to world-class data science, artificial intelligence and machine learning that should result in, e.g., improved risk analytics and advanced security solutions to protect clients’ accounts but also Deutsche Bank by improving our Anti Financial Crime capabilities, e.g. by enhancing KYC capabilities and Transaction Mon- itoring solutions. The COVID-19 pandemic also brings potential opportunities including accelerating the process of digitalization across various industries, enabling the bank to provide a faster service to customers through emerging digital touchpoints as well as the opportunity to co-innovate and support clients with their investment in digitalization projects and strategies. Both of these strengthen our client relationships and drive additional business. 51  Risk Report 53 54 54 55 56 58 58 59 62 62 64 65 66 Introduction Risk and capital overview Key risk metrics Overall risk assessment Risk profile Risk and capital framework Risk management principles Risk governance Risk appetite and capacity Risk and capital plan Stress testing Risk measurement and reporting systems Recovery and resolution planning Risk and capital management Capital management Resource limit setting Risk identification and assessment Credit risk management and asset quality 68 68 68 69 69 93 Market risk management 99 104 108 Business (strategic) risk management 108 Model risk management 109 Reputational risk management 110 Risk concentration and risk diversification Operational risk management Liquidity risk management 111 Risk and capital performance 111 Capital, leverage ratio, TLAC and MREL 127 Credit risk exposure 149 152 Nontrading market risk exposures 154 Operational risk exposure 155 Trading market risk exposures Liquidity risk exposure Deutsche Bank Annual Report 2020 Introduction Disclosures according to principles and recommendations of the Enhanced Disclosure Task Force (EDTF) Introduction Disclosures in line with IFRS 7 The following Risk Report provides qualitative and quantitative disclosures about credit, market and other risks in line with the requirements of International Financial Reporting Standard 7 (IFRS 7) Financial Instruments: Disclosures. It also considers the underlying classification and measurement and impairment requirements in IFRS 9 with further details to be found in the “Credit Risk Management and Model” section, in the “Asset quality” section, in the “Credit risk mitigation” section and in Note 1 “Significant accounting policies and critical accounting estimates” to the consolidated financial statements. Information which forms part of and is incorporated by reference into the financial statements of this report is marked by a grey shading through- out this Risk report. Disclosures according to Pillar 3 of the Basel 3 Capital Frame- work Most disclosures according to Pillar 3 of the Basel 3 Capital Framework, which are implemented in the European Union by the Regulation (EU) No 575/2013 on prudential requirements for credit institutions and investment firms (Capital Requirements Regulation or CRR), including recent amendments; and supported by EBA Implementing Technical Standards or the “Final Report on the Guidelines on Disclosure Requirements under Part Eight of Regulation (EU) No 575/2013” (“EBA Guideline”, EBA/GL/2016/11, version 2*) and related guidelines applicable to Pillar 3 disclosures, are published in our additional Pillar 3 Report, which can be found on our website. In cases where disclosures in this Risk Report also support Pillar 3 disclosure requirements these are highlighted by references from the Pillar 3 Report into the Risk Report. For year-end 2020, we introduced for the first time a framework to determine the prudential provisioning of non-performing exposures as a Pillar 2 measure in accordance with ECB guidance. Furthermore, Regulation (EU) 2019/876 introduces that certain software assets do not have to be deducted from CET1 items, instead the concept of a prudential amortization is applied. In addition Regulation (EU) 2019/876 introduces a different treatment of subsidiaries and participations that are only consolidated under IFRS. For these entities we now apply an at-equity treatment, instead of an at-cost treatment. Disclosures according to principles and recommendations of the Enhanced Disclosure Task Force (EDTF) In 2012 the Enhanced Disclosure Task Force (“EDTF”) was established as a private sector initiative under the auspices of the Financial Stability Board (“FSB”), with the primary objective to develop fundamental principles for enhanced risk disclosures and to recommend improvements to existing risk disclosures. As a member of the EDTF we adhere to the disclosure recom- mendations in this Risk Report and also in our additional Pillar 3 report. 53 Deutsche Bank Annual Report 2020 Risk and capital overview Key risk metrics Risk and capital overview Key risk metrics The following selected key risk ratios and corresponding metrics form part of our holistic risk management across individual risk types. The Common Equity Tier 1 Ratio (CET 1), Economic Capital Adequacy Ratio (ECA), Leverage Ratio (LR), Total loss absorbing capacity (TLAC), Minimum Requirement for Own Funds and Eligible Liabilities (MREL), Liquidity Coverage Ratio (LCR), and Stressed Net Liquidity Position (sNLP) serve as high level metrics and are fully integrated across strategic planning, risk appetite framework, stress testing (except LCR, TLAC and MREL), and recovery and resolution planning prac- tices, which are reviewed and approved by our Management Board at least annually. The CET 1, LR, Leverage Exposure, TLAC, MREL, LCR and Risk-Weighted-Assets ratios and metrics, which are regulatory defined, are based on the Regulation (EU) No 575/2013 on prudential requirements for credit institutions and investment firms (Capital Requirements Regulation or “CRR”) and the directive 2013/36/EU on access to the activity of credit institutions and the prudential supervision of credit institutions and investment firms (Capital Requirements Directive or “CRD”), including recent amendments. MREL is based on the Single Resolution Mechanism (SRM) regulation as well as respective communication by the Single Resolution Board (SRB). ECA, Economic Capital and sNLP are Deutsche Bank-specific internal risk metrics in addition to the above described regulatory metrics. Common Equity Tier 1 Ratio 31.12.2020 31.12.2019 Economic Capital Adequacy Ratio 31.12.2020 31.12.2019 Leverage Ratio (fully-loaded) 31.12.2020 31.12.2019 Total loss absorbing capacity (TLAC) 31.12.2020 (Risk Weighted Asset based) 31.12.2020 (Leverage Exposure based) 31.12.2019 (Risk Weighted Asset based) 31.12.2019 (Leverage Exposure based) Liquidity Coverage Ratio 31.12.2020 31.12.2019 Total Risk-Weighted Assets 31.12.2020 31.12.2019 Total Economic Capital 31.12.2020 31.12.2019 Leverage Exposure 31.12.2020 31.12.2019 € 329.0 bn € 324.0 bn € 28.6 bn € 29.2 bn € 1,078 bn € 1,168 bn Minimum requirement for own funds and eligible liabilities (MREL) 10.67 % 31.12.2020 11.57 % 31.12.2019 13.6 % 13.6 % 179 % 163 % 4.7 % 4.2 % 31.94 % 9.74 % 34.67 % 9.62 % 145 % 141 % Stressed Net Liquidity Position (sNLP) 31.12.2020 31.12.2019 € 43.0 bn € 24.3 bn For further details please refer to sections “Risk profile”, “Risk appetite and capacity”, “Risk and capital plan”, “Stress testing”, “Recovery and resolution planning”, “Risk and capital management”, “Capital, leverage ratio, TLAC and MREL” (for phase-in and fully loaded figures), “Liquidity coverage ratio”, and “Stress testing and scenario analysis”. 54 Deutsche Bank Annual Report 2020 Risk and capital overview Overall risk assessment Overall risk assessment Key risk types as reflected in Deutsche Bank’s risk type taxonomy include credit risk (including default, migration, transaction, settlement, exposure, country, mitigation and concentration risks), market risk (including interest rate, foreign exchange, eq- uity, credit spread, commodity and cross-asset risks), liquidity risk (including short term liquidity and funding risk), business risk (including strategic and tax risk), cross risk, reputational risk and operational risk (with important sub-categories like com- pliance, legal, model, information security & technology, fraud, and money laundering risks). We manage the identification, assessment and mitigation of top and emerging risks through an internal governance process and the use of risk management tools and processes. Our approach to identification and impact assessment aims to ensure that we mitigate the impact of these risks on our financial results, long-term strategic goals and reputation. Please refer to the section "Risk and capital management" for detailed information on the management of our material risks. As part of our regular analysis, sensitivities of the key portfolio risks are reviewed using bottom-up risk assessment, comple- mented by top-down macro-economic and political scenario analysis. This two-pronged approach allows us to capture risk drivers that have an impact across our risk portfolios and business divisions as well as those relevant to specific portfolios. Since early 2020 our macroeconomic business and operating environment has been dominated by the coronavirus pandemic, and the associated downside risks remained elevated over year-end. Following the severe GDP contractions observed across major advanced economies in 2020, we expect economic recovery to unfold in the course of 2021 as effective COVID-19 vaccination becomes widely available and additional fiscal stimulus is provided in the US and EU economies in particular. However, for the short-term economic outlook, we continue to see significant downside risks rippling through the global econ- omy from elevated levels of COVID-19 infections, lockdown restrictions and deeper risk aversion. Due to the largely unprecedented nature of the COVID-19 crisis, the forecast uncertainty is expected to remain unusually high for quite some time. As a bank, our working assumption remains that lagging effects of the COVID-19 recession will continue to unfold and that the low interest rate environment in the Eurozone will persist for several quarters at least. The intensified “lower for longer” interest rate environment, as key central banks provide abundant additional liquidity in support of their economies, can impact our net interest income and other rate sensitive businesses activities. Lower for longer rates have also supported elevated market valuations as investors search for yield. This raises the risk of a significant price correction, poten- tially triggering wider market instability. Higher corporate and sovereign debt will be a legacy of the pandemic. Currently, risks of credit problems and defaults are partially mitigated by generous fiscal and monetary policy support but the eventual withdrawal of such support may increase credit pressures over time. If the COVID-19 vaccine roll-out continues successfully, and continues to be boosted by massive monetary and fiscal policy support, the expected economic recovery and reflation may be subject to significant upside over the medium term. This could in turn lead consumer price and asset price inflation in major advanced economies to accelerate substantially faster than anticipated. Whilst this could create some upside potential for our business activity levels and net interest income, a disorderly sharp increase in bond yields could trigger a downward correction to equities and other highly valued risk asset markets as well as increased credit risks on highly leveraged clients. Political uncertainty has arguably declined towards the end of 2020, with the new US President Joseph R. Biden elected in November, the EU agreeing on its multi-year budget plan and the associated European Recovery Fund (“RRF”) in mid-De- cember, and a Brexit trade deal agreed between the UK and the EU shortly before the end of the transition period at year end. However, geopolitical risks remain elevated and need to be monitored closely, e.g. with regard to the deep divide in US society, the tense US-China relations in international trade and following the passing of the new national security law in Hong Kong, populist movements in various EU countries, or the ongoing negotiations between the UK and the EU on their future relation- ship. Other geopolitical risks which could negatively impact our business environment include tensions in the South China Sea and between the US and China over Taiwan as well as the potential for escalation in the Middle East over Iran’s nuclear program following recent steps towards higher uranium enrichment levels. In addition to the risks described above, we are exposed to a variety of financial risks, including but not limited to counterparty default risks or sudden market shocks impacting our credit and market risk profiles and non-financial risks including but not limited to operational and IT infrastructure, transaction processing and third party vendor risks. The potential impacts of these risks on our balance sheet and profitability are assessed through portfolio reviews and stress tests. Stress tests are also used to test the resilience of Deutsche Bank’s strategic plans. The results of these tests indicate that the currently available capital and liquidity reserves, in combination with available mitigation measures, would allow us to absorb the impact of these risks if they were to materialize as envisaged. Information about risk and capital positions for our portfolios can be found in the “Risk and capital performance” section. 55 Deutsche Bank Annual Report 2020 Risk and capital overview Risk profile Risk profile The table below shows our overall risk position as measured by the economic capital demand calculated for credit, market, operational and business risk for the dates specified. To determine our overall economic risk position, we generally consider diversification benefits across risk types. Overall risk position as measured by economic capital demand by risk type in € m. (unless stated otherwise) Credit risk Market risk Trading market risk Nontrading market risk Operational risk Business risk Diversification benefit¹ Total economic capital demand 2020 increase (decrease) from 2019 Dec 31, 2020 Dec 31, 2019 11,636 10,894 2,198 8,696 5,512 5,949 (5,429) 28,560 10,757 11,767 3,592 8,175 5,813 6,374 (5,535) 29,176 in € m. 879 (874) (1,394) 521 (301) (425) 106 (616) in % 8 (7) (39) 6 (5) (7) (2) (2) 1 Diversification benefit across credit, market, operational and strategic risk (largest part of business risk). As of December 31, 2020, our economic capital demand amounted to € 28.6 billion, which was € 0.6 billion or 2 % lower than € 29.2 billion economic capital demand as of December 31, 2019. The economic capital demand for credit risk as of December 31, 2020 was € 0.9 billion or 8 % higher compared to year-end 2019 mainly due to rating migrations related to the COVID-19 pandemic and a model enhancement for recovery risk. The economic capital demand for trading market risk decreased to € 2.2 billion as of December 31, 2020, compared to € 3.6 billion at year-end 2019 primarily driven by a lower level of credit inventory in the Investment Bank, most notably from Com- mercial Real Estate business. The economic capital demand for nontrading market risk increased by € 0.5 billion or 6% com- pared to December 31, 2019 mainly driven by the increase in market risk exposures in the liquidity reserves portfolio and in equity compensation plans. Market risk economic capital remains on the Monte Carlo methodology at present and will be migrated to historical simulation in due course. The operational risk economic capital usage totaled € 5.5 billion as of December 31, 2020, which was € 0.3 billion or 5 % lower than the € 5.8 billion economic capital usage as of December 31, 2019. In line with the development of our RWA for operational risk, the decrease was largely driven by a lighter loss profile feeding into our capital model, which was partly offset by a reduction of the expected loss deductible and by slightly weaker risk appetite metrics and risk assessment scores. For a detailed description see the section “Operational risk management”. Our business risk economic capital methodology captures strategic risk, which also implicitly includes elements of nonstandard risks including refinancing and reputational risk, tax risk, a capital charge for risk related to IFRS deferred tax assets on temporary differences and a newly introduced capital charge for risk related to software assets. The business risk decreased to € 5.9 billion as of December 31, 2020 which was € 0.4 billion or 7 % lower compared to € 6.4 billion as of December 31, 2019. The decrease was mainly driven by lower economic capital demand for strategic risk of € 2.1 billion, which primarily reflects the execution of Deutsche Bank’s transformation and the associated improvement in the earnings outlook. This de- crease was partially offset by the introduction of a capital charge of € 1.8 billion to account for the risk associated with the software assets recognized in economic capital supply. The economic capital demand for tax risk and the capital charge for IFRS deferred tax assets remained stable during the year. The inter-risk diversification benefit of the economic capital demand across credit, market, operational and strategic risk de- creased by € 0.1 billion mainly reflecting changes in the underlying risk type profile. Our mix of business activities results in diverse risk taking by our business divisions. We also measure the key risks inherent in their respective business models through the total economic capital metric, which mirrors each business division’s risk profile and takes into account cross-risk effects at group level. 56 Deutsche Bank Annual Report 2020 Risk and capital overview Risk profile Risk profile of our business divisions as measured by economic capital in € m. (unless stated otherwise) Credit Risk Market Risk Operational Risk Business Risk Diversification Benefit¹ Total EC Total EC in % Corporate Bank 2,588 822 482 193 (469) 3,617 13 Investment Bank 4,675 2,369 2,169 2,767 (2,457) 9,523 33 Private Bank Asset Management Capital Release Unit 2,404 1,170 646 80 (534) 3,766 13 60 420 284 0 (180) 584 2 648 235 1,930 0 (982) 1,831 6 Corporate & Other 1,262 5,877 0 2,909 (808) 9,239 32 N/M – Not meaningful 1 Diversification benefit across credit, market, operational and strategic risk (largest part of business risk). in € m. (unless stated otherwise) Credit Risk Market Risk Operational Risk Business Risk Diversification Benefit² Total EC Total EC in % Corporate Bank 2,417 539 585 195 (510) 3,226 11 Investment Bank 4,064 3,563 2,122 4,914 (2,460) 12,203 42 Private Bank Asset Management Capital Release Unit 2,181 1,827 666 71 (647) 4,097 14 71 456 366 0 (224) 668 2 859 464 2,074 20 (1,075) 2,343 8 Corporate & Other 1,164 4,920 0 1,174 (619) 6,639 23 Dec 31, 2020 Total (in %) 41 38 19 21 (19) 100 N/M Dec 31, 2019¹ Total (in %) 37 40 20 22 (19) 100 N/M Total 11,636 10,894 5,512 5,949 (5,429) 28,560 100 Total 10,757 11,767 5,813 6,374 (5,535) 29,176 100 N/M – Not meaningful 1 Risks amounts allocated to the business segments have been restated to reflect comparatives according to the structure as of December 31, 2020. 2 Diversification benefit across credit, market, operational and strategic risk (largest part of business risk). The Corporate Bank’s risk profile is dominated by its Trade Finance, Commercial Banking and Cash Management products and services offered. Economic capital demand largely arises from credit risk and is predominantly driven by the Trade Fi- nance and Commercial Clients businesses. The economic capital demand for the Corporate Bank increased by € 0.4 billion in comparison to year-end 2019 as a result of higher market and credit risks. The economic capital demand for market risk increased by € 0.3 billion compared to December 31, 2019 mainly driven by increased exposures in the liquidity reserves portfolio and in equity compensation plans. The economic capital demand for credit risk as of December 31, 2020 was € 0.2 billion higher compared to year-end 2019 mainly driven by higher counterparty risk in Global Transaction Banking. Aforemen- tioned increases were offset by lower economic capital demand for operational risk of € 0.1 billion compared to the year-end 2019, mainly due to the full roll-out of a model enhancement resulting in an improved capture of divisional risk profiles. The economic capital demand for business risk in the Corporate Bank remained flat compared to year-end 2019. The Investment Bank’s risk profile is dominated by its trading activities to support origination, structuring and market making activities, which give rise to all major risk types. Credit risk in Investment Bank is broadly distributed across business units but most prominent in Global Credit Trading, Rates and Leveraged Debt Capital Markets. Market risk arises mainly from trading and market making activities. The remainder of Investment Bank’s risk profile is largely derived from business risk reflecting earnings volatility risk. The economic capital demand for the Investment Bank decreased by € 2.7 billion in comparison to year-end 2019 mainly driven by lower business and market risks. Business risk economic capital demand decreased by € 2.1 billion year-on-year mainly due to an improvement in the bank’s earnings outlook. The economic capital demand for market risk decreased by € 1.2 billion over the year driven by a lower level of credit inventory, most notably from Commercial Real Estate business. The increases in business and market risks were partially offset by higher credit risk and operational risk. The economic capital demand for credit risk as of December 31, 2020 was € 0.6 billion higher compared to year-end 2019 mainly due to strong fixed income trading activity during 2020. The operational risk economic capital demand slightly increased driven by weaker risk appetite metrics and risk assessment scores as well as cross-divisional reallocation effects. The Private Bank’s risk profile comprises business with German retail, international retail and business clients as well as wealth management clients generating credit risks as well as non-trading market risks from investment risk, modelling of client deposits and credit spread risk. The economic capital demand for the Private Bank decreased by € 0.3 billion in comparison to year-end 2019. The decrease was mainly driven by lower market risk due to the transfer of the liquidity reserve portfolio of DB PFK to Group Treasury part of the business division Corporate & Other, in the context of the merger of DB PFK AG on DB AG. This was partially offset by higher credit risk as a result of portfolio growth, rating deteriorations in the current market environment and methodology changes. The economic capital for operational and business risks remained stable over the year. 57 Deutsche Bank Annual Report 2020 Risk and capital framework Risk management principles Asset Management, as a fiduciary asset manager, invests money on behalf of clients. Its corporate activities are exposed to movements in the market, flows and foreign exchange rates. Economic capital demand largely arises from nontrading market risk due to guarantee products and co-investments in our funds and from operational risk events. The economic capital de- mand for Asset Management decreased by € 0.1 billion in comparison to year-end 2019 mainly driven by lower operational risk due to a lighter loss profile. The Capital Release Unit continued to exit and run down the non-strategic assets and businesses transferred into the unit in third quarter of 2019. In line with the de-risking achieved throughout 2020, the economic capital demand of the unit decreased by € 0.5 billion over the course of 2020 compared to year-end 2019. Corporate & Other’s risk profile mainly comprises non-trading market risk from structural foreign exchange risk, pension risk and equity compensation risk, and business risk from a new capital charge for software assets. The economic capital demand for Corporate & Other increased by € 2.6 billion in comparison to year-end 2019 mainly due to the introduction of aforemen- tioned capital charge to account for the risk associated with software assets. Risk and capital framework Risk management principles Our business model inherently involves taking risks. Risks can be financial and non-financial and include on and off-balance sheet risks. Our objective is to create sustainable value in the interests of the company taking into consideration shareholders, employees and other company related stakeholders. The risk management framework contributes to this by aligning our planned and actual risk taking with our risk appetite as expressed by the Management Board, while being in line with our available capital and liquidity. Our risk management framework consists of various components. Principles and standards were set for each component: – Organizational structures must follow the Three Lines of Defense (“3LoD”) model with a clear definition of roles and responsibilities for all risk types. – The 1st Line of Defense (“1st LoD”) refers to those roles in the Bank whose activities generate risks, whether financial or non-financial, and who own and are accountable for these risks. The 1st LoD manages these risks within the defined risk appetite, establishes an appropriate risk governance and risk culture, and adheres to the risk type frameworks defined by the 2nd Line of Defense (“2nd LoD”). – The 2nd LoD refers to the roles in the Bank who define the risk management framework for a specific risk type. The 2nd LoD independently assesses and challenges the implementation of the risk type framework and adherence to the risk appetite, and acts as an advisor to the 1st LoD on how to identify, assess and manage risks. – The 3rd Line of Defense (“3rd LoD”) is Group Audit, which is accountable for providing independent and objective assurance on the adequacy of the design, operating effectiveness and efficiency of the risk management system and systems of internal control. – Every employee must act as a risk manager consistent with our risk appetite, risk management standards and values. – The Management Board approved risk appetite must be cascaded and adhered to across all dimensions of the Group, with appropriate consequences in the event of a breach. – Risks must be identified and assessed. – Risks must be actively managed including via appropriate risk mitigation and effective internal control systems. – Risks must be measured and reported using accurate, complete and timely data using approved models. – Regular stress tests must be performed against adverse scenarios and appropriate crisis response planning must be established. We promote a strong risk culture where every employee must fully understand and take a holistic view of the risks which could result from their actions, understand the consequences and manage them appropriately against our risk appetite. We expect employees to exhibit behaviors that support a strong risk culture in line with our Code of Conduct. To promote this, our policies require that risks taken (including against risk appetite) must be taken into account during our performance assessment and compensation processes. This expectation continues to be reinforced through communications campaigns and mandatory training courses for all DB employees. In addition, our Management Board members and senior management frequently com- municate the importance of a strong risk culture to support a consistent tone from the top. 58 Deutsche Bank Annual Report 2020 Risk and capital framework Risk governance Risk governance Our operations throughout the world are regulated and supervised by relevant authorities in each of the jurisdictions in which we conduct business. Such regulation focuses on licensing, capital adequacy, liquidity, risk concentration, conduct of business as well as organizational and reporting requirements. The European Central Bank (the “ECB”) in connection with the compe- tent authorities of EU countries which joined the Single Supervisory Mechanism via the Joint Supervisory Team act in coop- eration as our primary supervisors to monitor our compliance with the German Banking Act and other applicable laws and regulations. Several layers of management provide cohesive risk governance: – The Supervisory Board is informed regularly on our risk situation, risk management and risk controlling, including reputa- tional risk related items as well as material litigation cases. It has formed various committees to handle specific topics (for a detailed description of these committees, please see the “Corporate Governance Report” under “Management Board and Supervisory Board”, “Standing Committees”). – At the meetings of the Risk Committee, the Management Board reports on current and forward-looking risk exposures, portfolios, on risk appetite and strategy and on matters deemed relevant for the assessment and oversight of the risk situation of Deutsche Bank AG. It also reports on loans requiring a Supervisory Board resolution pursuant to law or the Articles of Association. The Risk Committee advises the Management Board on issues related to the overall risk appe- tite, aggregate risk position and the risk strategy and keeps the Supervisory Board informed of its activities. – The Integrity Committee, among other responsibilities, advises and monitors the Management Board with regard to the management’s commitment to an economically sound, sustainable development of the company, monitors the Manage- ment Board’s measures that promote the company’s compliance with legal requirements, authorities’ regulations and the company’s own in-house policies, including risk policies. It also reviews the Bank’s Code of Conduct and Ethics, and, upon request, supports the Risk Committee in monitoring and analyzing the Bank’s legal and reputational risks. – The Audit Committee, among other matters, monitors the effectiveness of the risk management system, particularly the internal control system and the internal audit system. – The Management Board is responsible for managing Deutsche Bank Group in accordance with the law, the Articles of Association and its Terms of Reference with the objective of creating sustainable value in the interest of the company, thus taking into consideration the interests of the shareholders, employees and other company related stakeholders. The Man- agement Board is responsible for establishing a proper business organization, encompassing appropriate and effective risk management, as well as compliance with legal requirements and internal guidelines. The Management Board established the Group Risk Committee (“GRC”) as the central forum for review and decision on material risk and capital-related topics. The GRC generally meets once a week. It has delegated some of its duties to individuals and sub-committees. The GRC and its sub-committees are described in more detail below. 59 Deutsche Bank Annual Report 2020 Risk and capital framework Risk governance Risk management governance structure of the Deutsche Bank Group Supervisory Board Audit Committee Monitors the effectiveness of the risk management system, particularly of the internal control system and the internal audit system Risk Committee Advises on overall risk appetite and risk strategy and monitors strategy implementation by the management. Discusses the risk strategy, key risk topics and portfolios Integrity Committee Monitors compliance with legal requirements, authorities‘ regulation and in-house policies. Precautionary monitoring and strategic analysis of legal and reputational risk Management Board Overall Risk and Capital Management Supervision Group Asset & Liability Committee Optimizes the sourcing and deployment of the bank's balance sheet and financial resources, within the overarching risk appetite Group Risk Committee Evaluates and classifies risks, sets rules for risk management, risk appetite planning & steering and monitors risks Financial Resource Management Council Supports the decision-making in a period of anticipated or actual capital or liquidity stress as a forum to discuss and recommend mitigating actions Enterprise Risk Committee Oversight and decision-making on financial risks and cross risks, including definition & review of stress tests, and management of group-wide risk patterns Group Reputational Risk Committee Ensures the oversight, governance and coordination of the reputational risk management Non-Financial Risk Committee Ensures oversight, governance and coordination of non- financial risk management and establishes a cross-risk and holistic perspective of key non- financial risks Product Governance Committee Ensures oversight, governance and coordination of product governance The following functional committees are central to the management of risk at Deutsche Bank: – The Group Risk Committee (GRC) has various duties and dedicated authority, including approval of new or materially changed risk and capital models and review of the inventory of risks, high-level risk portfolios, risk exposure developments, and internal and regulatory Group-wide stress testing results. In addition, the GRC reviews and recommends items for Management Board approval, such as key risk management principles, the Group Risk Appetite Statement, the Group Recovery Plan and the Contingency Funding Plan, over-arching risk appetite parameters, and recovery and escalation indicators. The GRC also supports the Management Board during Group-wide risk and capital planning processes. – The Non-Financial Risk Committee (NFRC) oversees, governs and coordinates the management of non-financial risks in Deutsche Bank Group and establishes a cross-risk and holistic perspective of the key non-financial risks of the Group, including conduct and financial crime risk. It is tasked to define the non-financial risk appetite tolerance framework, to monitor and control the effectiveness of the non-financial risk operating model (including interdependencies between business divisions and control functions), and to monitor the development of emerging non-financial risks relevant for the Group. – The Group Reputational Risk Committee (GRRC) is responsible for the oversight, governance and coordination of rep- utational risk management and provides for a look-back and a lessons learnt process. It reviews and decides all repu- tational risk issues escalated by the Regional Reputational Risk Committees (RRRCs) and RRRC decisions which have been appealed by the business divisions, infrastructure functions or regional management. It provides guidance on Group-wide reputational risk matters, including communication of sensitive topics, to the appropriate levels of Deutsche Bank Group. The RRRCs which are sub-committees of the GRRC, are responsible for the oversight, governance and coordination of the management of reputational risk in the respective regions on behalf of the Management Board. – The Enterprise Risk Committee (ERC) has been established with a mandate to focus on enterprise-wide risk trends, events and cross-risk portfolios, bringing together risk experts from various risk disciplines. As part of its mandate, the ERC approves the enterprise risk inventory, certain country and industry threshold increases, and scenario design out- lines for more severe group-wide stress tests as well as reverse stress tests. It reviews group-wide stress test results in accordance with risk appetite, reviews the risk outlook, emerging risks and topics with enterprise-wide risk implications. – The Product Governance Committee has the mandate to ensure that there is appropriate oversight, governance and coordination of Product Governance in the Group by establishing a cross-risk and holistic perspective of key financial and non-financial risks associated with products and transactions throughout the lifecycle. – The Financial Resource Management Council (FRMC) is an ad-hoc governance body, chaired by the Chief Financial Officer and Chief Risk Officer with delegated authority from the Management Board, to oversee financial crisis management at the bank. The FRMC provides a single forum to oversee execution of both the Contingency Funding Plan and the Group 60 Deutsche Bank Annual Report 2020 Risk and capital framework Risk governance Recovery Plan. The council recommends upon mitigating actions to be taken in a time of anticipated or actual capital or liquidity stress. Specifically, the FRMC is tasked with analyzing the bank’s capital and liquidity position, in anticipation of a stress scenario recommending proposals for capital and liquidity related matters, and ensure execution of decisions. – The Group Asset & Liability Committee has been established by the Management Board. Its mandate is to optimize the sourcing and deployment of the bank’s balance sheet and financial resources within the overarching risk appetite set by the Management Board. Our Chief Risk Officer (CRO), who is a member of the Management Board, has Group-wide, supra-divisional responsibility for establishing a risk management framework with appropriate identification, measurement, monitoring, mitigation and reporting of liquidity, credit, market, business and non-financial risks (including reputational, IT, legal, conduct, compliance as well as regulatory risks), however frameworks for certain risks are established by other divisions as per the business allocation plan. The CRO has direct management responsibility for the CRO function. Risk management & control duties in the CRO function are generally assigned to specialized risk management units focusing on the management of – Specific risk types – Risks within a specific business – Risks in a specific region. These specialized risk management units generally handle the following core tasks: – Foster consistency with the risk appetite set by the GRC within a framework established by the Management Board and applied to Business Divisions; – Determine and implement risk and capital management policies, procedures and methodologies that are appropriate to the businesses within each division; – Establish and approve risk limits; – Conduct periodic portfolio reviews to keep the portfolio of risks within acceptable parameters; and – Develop and implement risk and capital management infrastructures and systems that are appropriate for each division. Chief Risk Officers for each business division, having a holistic view of the respective business, challenge and influence the divisions’ strategies, risk awareness and ownership as well as their adherence to risk appetite. The Enterprise Risk Management (ERM) function sets a bank-wide risk management framework seeking to ensure that all risks at the Group and Divisional level are identified, owned and assessed for materiality. ERM is also responsible for aggre- gating and analyzing enterprise-wide risk information and concentrations, including review of the risk/return profiles of portfo- lios to support informed strategic decision-making regarding the effective application of the Bank’s resources. ERM has the mandate to: – Manage enterprise risk appetite at Group level, including the framework and methodology as to how appetite is applied across risk types, divisions, businesses and legal entities; – Integrate and aggregate risks to provide greater enterprise risk transparency to support decision making; – Commission forward-looking stress tests and manage Group recovery plans; and – Govern and improve the effectiveness of the risk management framework. Compliance protects the Bank’s licenses to operate by establishing a framework to promote and enforce adherence with rules and regulations. They provide an independent and objective assurance to the Management Board on the adequacy of the design and effectiveness of the Compliance Risk control framework for the areas for which they have been allocated respon- sibility. Anti-Financial-Crime (AFC) sets the framework to prevent money laundering, countering terrorist financing and other criminal activities (including but not limited to fraud, and bribery and corruption activities) and to ensure compliance with financial and trade sanctions. The functions described above have a reporting line to the CRO. While operating independently from each other and the business divisions, our Finance and Risk functions have the joint responsibility to quantify and verify the risk that we assume. 61 Deutsche Bank Annual Report 2020 Risk and capital framework Risk and capital plan Risk appetite and capacity Risk appetite expresses the aggregate level and types of risk that we are willing to assume to achieve our strategic objectives, as defined by a set of quantitative metrics and qualitative statements. Risk capacity is defined as the maximum level of risk we can assume given our capital and liquidity base, risk management and control capabilities, and our regulatory constraints. Risk appetite is an integral element in our business planning processes via our risk strategy and plan, to promote the appro- priate alignment of risk, capital and performance targets, while at the same time considering risk capacity and appetite con- straints from both financial and non-financial risks. Compliance of the plan with our risk appetite and capacity is also tested under stressed market conditions. Top-down risk appetite serves as the limit for risk-taking for the bottom-up planning from the business functions. The Management Board reviews and approves our risk appetite and capacity on an annual basis, or more frequently in the event of unexpected changes to the risk environment, with the aim of ensuring that they are consistent with our Group’s strategy, business and regulatory environment and stakeholders’ requirements. In order to determine our risk appetite and capacity, we set different group level triggers and thresholds on a forward looking basis and define the escalation requirements for further action. We assign risk metrics that are sensitive to the material risks to which we are exposed and which are able to function as key indicators of financial health. In addition to that, we link our risk and recovery management governance framework with the risk appetite framework. Reports relating to our risk profile as compared to our risk appetite and strategy and our monitoring thereof are presented regularly up to the Management Board. In the event that our desired risk appetite is breached, a predefined escalation gov- ernance matrix is applied so these breaches are highlighted to the respective committees. Risk and capital plan Strategic and capital plan We conduct annually an integrated strategic planning process which lays out the development of our future strategic direction for us as a Group and for our business areas. The strategic plan aims to create a holistic perspective on capital, funding and risk under risk-return considerations. This process translates our long-term strategic targets into measurable short- to medium- term financial targets and enables intra-year performance monitoring and management. Thereby we aim to identify growth options by considering the risks involved and the allocation of available capital resources to drive sustainable performance. Risk-specific portfolio strategies complement this framework and allow for an in-depth implementation of the risk strategy on portfolio level, addressing risk specifics including risk concentrations. The strategic planning process consists of two phases: a top-down target setting and a bottom-up substantiation. In a first phase – the top-down target setting – our key targets for profit and loss (including revenues and costs), capital supply, capital demand as well as leverage, funding and liquidity are discussed for the group and the key business areas. In this process, the targets for the next five years are based on our global macro-economic outlook and the expected regulatory framework. Subsequently, the targets are approved by the Management Board. In a second phase, the top-down objectives are substantiated bottom-up by detailed business unit plans, which consist of a month by month operative plan; years two and three are planned per quarter and years four and five are annual plans. The proposed bottom-up plans are reviewed and challenged by Finance and Risk and are discussed individually with the business heads. Thereby, the specifics of the business are considered and concrete targets decided in line with our strategic direction. The bottom-up plans include targets for key legal entities to review local risk and capitalization levels. Stress tests complement the strategic plan to also consider stressed market conditions. The resulting Strategic and Capital Plan is presented to the Management Board for discussion and approval. The final plan is presented to the Supervisory Board. The Strategic and Capital Plan is designed to support our vision of being a leading German bank with strong European roots and a global network and aims to ensure: – Balanced risk adjusted performance across business areas and units; – High risk management standards with focus on risk concentrations; – Compliance with regulatory requirements; – Strong capital and liquidity position; and 62 Deutsche Bank Annual Report 2020 Risk and capital framework Risk and capital plan – Stable funding and liquidity strategy allowing for business planning within the liquidity risk appetite and regulatory require- ments. The Strategic and Capital Planning process allows us to: – Set earnings and key risk and capital adequacy targets considering the bank’s strategic focus and business plans; – Assess our capital adequacy with regard to internal and external requirements (i.e., economic capital and regulatory capi- tal); and – Apply appropriate stress test analyses’ to assess the impact on capital demand, capital supply and liquidity. All externally communicated financial targets are monitored on an ongoing basis in appropriate management committees. Any projected shortfall versus targets is discussed together with potential mitigating strategies with the aim to ensure that we remain on track to achieve our targets. Amendments to the strategic and capital plan must be approved by the Management Board. Achieving our externally communicated solvency targets ensures that we also comply with the solvency ratio-related Group Supervisory Review and Evaluation Process (SREP) requirements as articulated by our home supervisor. On December 9, 2019, Deutsche Bank was informed by the ECB of its decision regarding prudential minimum capital require- ments for 2020 that applied from January 1, 2020 onwards, following the results of the 2019 SREP. The decision acknowl- edges the progress Deutsche Bank has made since the first SREP assessment in 2016, leading to a decrease in the ECB’s Pillar 2 Requirement (P2R) from 2.75% to 2.50% of RWA, effective as of January 1, 2020. As a result, Deutsche Bank was required to maintain a CET 1 ratio of at least 11.58 % on a consolidated basis. This CET 1 capital requirement comprised the Pillar 1 minimum capital requirement of 4.50 %, the lowered Pillar 2 requirement (SREP add-on) of 2.50 %, the capital con- servation buffer of 2.50 %, the countercyclical buffer of 0.08 % as of January 1 2020 (subject to changes throughout the year) and the G-SII buffer requirement of 2.00 %. Correspondingly, 2020 requirements for Deutsche Bank's Tier 1 capital ratio were at 13.08 % and for its total capital ratio at 15.08 %. On March 12, 2020, the ECB announced various supervisory measures in reaction to the COVID-19 pandemic. Related to that, Deutsche Bank was informed by the ECB of its decision to implement Article 104a of the Directive (EU) 2019/878 of the European Parliament (CRDV) with effect from March 12, 2020. The decision requires Deutsche Bank to fulfill its unchanged 2.50% Pillar 2 requirement (SREP add-on) with at least 56.25 % CET 1, 18.75 % Additional Tier 1 and 25 % Tier 2 capital. As of December 31, 2020, Deutsche Bank needs to maintain on a consolidated basis a CET 1 ratio of at least 10.42 %, a Tier 1 ratio of at least 12.39 % and a Total Capital ratio of at least 15.02 %. The CET 1 requirement comprises the Pillar 1 minimum capital requirement of 4.50 %, the Pillar 2 requirement (SREP add-on) of 1.41 %, the capital conservation buffer of 2.50 %, the countercyclical buffer (subject to changes throughout the year) of 0.02 % and the higher of our G-SII/O-SII buffer of 2.00 %. Correspondingly, the Tier 1 capital requirement includes additionally a Tier 1 minimum capital requirement of 1.50 % plus a Pillar 2 requirement of 0.47 %, and the Total Capital requirement includes further a Tier 2 minimum capital requirement of 2.00 % and a Pillar 2 requirement of 0.63 %. Also, the ECB communicated to Deutsche Bank that its individual expectation to hold a further Pillar 2 CET 1 capital add-on, commonly referred to as ‘Pillar 2 guidance’ will be seen as guidance only and – until further notice – a breach of this guidance will not trigger the need to provide a capital restoration plan or a need to execute measures to re-build CET 1 capital. The ECB has further communicated that once this period of financial distress is over, banks will be granted sufficient time to build up the buffers again. In December 2020 the ECB informed Deutsche Bank that these capital requirements will remain unchanged in 2021 with no update of requirements as part of the 2020 SREP, for which, in light of the pandemic and the unique economic and financial situation it has generated, and in line with EBA’s statement of April 22, 2020, the ECB has adopted a “pragmatic approach”, based on which in principle no new decisions are issued in the 2020 cycle with the 2019 SREP decisions continuing to apply, amended by the above mentioned additional supervisory measures announced on March 12, 2020 In 2021, Deutsche Bank will participate in the EBA Stress Test 2021 which was postponed from 2020 due to the COVID-19 pandemic. By its standard procedures, the ECB will consider our quantitative performance in the adverse scenario as an input when reconsidering the level of the Pillar 2 Guidance in its 2021 SREP assessment and our qualitative performance as one aspect when holistically reviewing the Pillar 2 Requirement. As can be seen from the published adverse macro-economic scenario and market shock, the banking sector will be tested against the most severe scenario of all European regulatory stress tests conducted so far. It should be noted that the Financial Stability Board announced in 2019 that our G-SII buffer will be reduced to 1.5 % effective from January 1, 2021. This however does not change the Banks’ capital requirements as the O-SII buffer remains at 2.0 %. Internal Capital Adequacy Assessment Process Deutsche Bank’s internal capital adequacy assessment process (ICAAP) consists of several well-established components which ensure that Deutsche Bank maintains sufficient capital to cover the risks to which the bank is exposed on an ongoing basis: 63 Deutsche Bank Annual Report 2020 Risk and capital framework Stress testing – Risk identification and assessment: The risk identification process forms the basis of the ICAAP and results in an inventory of risks for the Group. All risks identified are assessed for their materiality. Further details can be found in section “Risk identification and assessment”. – Capital demand/risk measurement: Risk measurement methodologies and models are applied to quantify the regulatory and economic capital demand which is required to cover all material risks except for those which cannot be adequately limited by capital e.g. liquidity risk. Further details can be found in sections “Risk profile” and “Capital, Leverage Ratio, TLAC and MREL”. – Capital supply: Capital supply quantification refers to the definition of available capital resources to absorb unexpected losses. Further details can be found in sections “Capital, Leverage Ratio, TLAC and MREL” and “Economic Capital Ade- quacy”. – Risk appetite: Deutsche Bank has established a set of qualitative statements, quantitative metrics and thresholds which express the level of risk that we are willing to assume to achieve our strategic objectives. Threshold breaches are subject to a dedicated governance framework triggering management actions aimed to safeguard capital adequacy. Further details can be found in sections “Risk appetite and capacity” and “Key risk metrics”. – Capital planning: The risk appetite thresholds for capital adequacy metrics constitute boundaries which have to be met in the strategic plan to safeguard capital adequacy on a forward-looking basis. Further details can be found in section “Stra- tegic and capital plan”. – Stress testing: Capital plan figures are also considered under various stress test scenarios to prove resilience and overall viability of the bank. Regulatory and economic capital adequacy metrics are also subject to regular stress tests throughout the year to constantly evaluate Deutsche Bank’s capital position in hypothetical stress scenarios and to detect vulnerabili- ties under stress. Further details can be found in section “Stress testing”. – Capital adequacy assessment: Although capital adequacy is constantly monitored throughout the year, the ICAAP con- cludes with a dedicated annual capital adequacy assessment (CAS). The assessment consists of a Management Board statement about Deutsche Bank’s capital adequacy, which is linked to specific conclusions and management actions to be taken to safeguard capital adequacy on a forward-looking basis. As part of its ICAAP, Deutsche Bank distinguishes between a normative and economic internal perspective. The normative internal perspective refers to a multi-year assessment of the ability to fulfil all capital-related legal requirements and supervi- sory demands on an ongoing basis under a baseline and adverse scenario. The economic internal perspective refers to an internal process aimed at capital adequacy using internal economic capital demand models and an internal economic capital supply definition. Both perspectives focus on maintaining the continuity of Deutsche Bank on an ongoing basis. Stress testing Deutsche Bank has implemented a stress test framework to satisfy internal as well as external stress test requirements. The internal stress tests are based on in-house developed methods and inform a variety of risk management use cases (risk type specific as well as cross risk). Internal stress tests form an integral part of our risk management framework complementing traditional risk measures. The cross-risk stress test framework, the Group Wide Stress Test Framework (GWST), serves a variety of bank management processes, in particular the strategic planning process, the ICAAP, the risk appetite framework and capital allocation. Capital plan stress testing is performed to assess the viability of our capital plan in adverse circum- stances and to demonstrate a clear link between risk appetite, business strategy, capital plan and stress testing. The regulatory stress tests, e.g. the EBA stress test and the US-based CCAR (Comprehensive Capital Analysis and Review) stress tests, are strictly following the processes and methodologies as prescribed by the regulatory authorities. Our internal stress tests are performed on a regular basis in order to assess the impact of a severe economic downturn as well as adverse bank-specific events on our risk profile and financial position. Our stress testing framework comprises regular sensitivity-based and scenario-based approaches addressing different severities and localizations. We include all material risk types into our stress testing activities. These activities are complemented by portfolio- and country-specific downside analysis as well as further regulatory requirements, such as annual reverse stress tests and additional stress tests requested by our regulators on group or legal entity level. Our methodologies undergo regular scrutiny from Deutsche Bank’s internal validation team (Model Risk Management) whether they correctly capture the impact of a given stress scenario. The initial phase of our cross-risk stress test consists of defining a macroeconomic downturn scenario by ERM Risk Research in cooperation with business specialists. ERM Risk Research monitors the political and economic development around the world and maintains a macro-economic heat map that identifies potentially harmful scenarios. Based on quantitative models and expert judgments, economic parameters such as foreign exchange rates, interest rates, GDP growth or unemployment rates are set accordingly to reflect the impact on our business. The scenario parameters are translated into specific risk drivers by subject matter experts in the risk units. Based on our internal models framework for stress testing, the following major metrics are calculated under stress: risk-weighted assets, impacts on profit and loss and economic capital by risk type. These results are aggregated at the Group level, and key metrics such as the CET 1 ratio, ECA ratio, MREL ratio and Leverage Ratio under stress are derived. Stress impacts on the Liquidity Coverage Ratio (LCR) and the Liquidity Reserve are also considered. The time-horizon of internal stress tests is between one and five years, depending on the use case and scenario assumptions. 64 Deutsche Bank Annual Report 2020 Risk and capital framework Risk measurement and reporting systems The Enterprise Risk Committee (ERC) reviews the final stress results. After comparing these results against our defined risk appetite, the ERC also discusses specific mitigation actions to remediate the stress impact in alignment with the overall stra- tegic and capital plan if certain limits are breached. The results also feed into the recovery planning which is crucial for the recoverability of the Bank in times of crisis. The outcome is presented to senior management up to the Management Board to raise awareness on the highest level as it provides key insights into specific business vulnerabilities and contributes to the overall risk profile assessment of the bank. The group wide stress tests performed in 2020 indicated that the bank’s capitalization together with available mitigation measures as defined in the Group Recovery Plan allow it to reach the internally set stress exit level. The cross-risk reverse stress test leverages the GWST framework and is typically performed annually in order to challenge our business model by determining scenarios which would cause us to become unviable. Such a reverse stress test is based on a hypothetical macroeconomic scenario enriched by idiosyncratic events based on the top risks monitored by each risk type. Comparing such a hypothetical scenario resulting in the Bank’s non-viability to the current economic environment, we consider the probability of occurrence of such a hypothetical stress scenario as extremely low. Given this, we do not believe that our business continuity is at risk. In 2020, we have further strengthened our framework through the following initiatives: - - Roll out and implementation of ‘Consensus’ based macro forecasts for our internal stress test baseline scenarios Link the stress testing platform with the capital application tool to better capture second order effects. In addition to the GWST that includes all material risk types and major revenue streams, we have individual stress test pro- grams in place for all relevant risk metrics in line with regulatory requirements. For the relevant stress test programs we refer to the sections describing the individual risk management methods. Deutsche Bank also took part in the US-based CCAR stress test, as implemented pursuant to the US Dodd-Frank Act. The Federal Reserve (FRB) publicly disclosed that it did not object to the capital plans submitted by DB USA Corporation and DWS USA Corporation. GWST framework of Deutsche Bank Group Finance: Capital plan ERM Risk Research: Scenario definition Research defines scenario with several risk parameters such as FX, interest rates, growth, etc. Risk Units: Parameter translation Risk Units: Calculation engines Scenario parameters are translated into risk-specific drivers Teams run risk- specific calculation engines to arrive at stressed results Central Function: Calculation of aggregated impact Central Function: Comparison against risk appetite Calculation of aggregated stress impact based on capital plan for several metrics such as RWA, CET1, etc. Stress results are compared against risk appetite and in case of breaches mitigation actions are considered Senior Management: No action required Senior Management: Actions Strategic decision on adequate risk mitigation or reduction from a catalogue of pre- determined alternatives Risk measurement and reporting systems Our risk measurement systems support regulatory reporting and external disclosures, as well as internal management report- ing across credit, market, liquidity, cross, business, operational and reputational risks. The risk infrastructure incorporates the relevant legal entities and business divisions and provides the basis for reporting on risk positions, capital adequacy and limit, threshold or target utilization to the relevant functions on a regular and ad-hoc basis. Established units within Finance and the Risk-Function assume responsibility for measurement, analysis and reporting of risk while promoting sufficient quality and integrity of risk-related data. Our risk management systems are reviewed by Group Audit following a risk-based audit approach. Deutsche Bank’s reporting is an integral part of Deutsche Bank’s risk management approach and as such aligns with the organizational setup by delivering consistent information on Group level and for material legal entities as well as breakdowns by risk types, business division and material business units. The following principles guide Deutsche Bank’s “risk measurement and reporting” practices: 65 Deutsche Bank Annual Report 2020 Risk and capital framework Recovery and resolution planning – Deutsche Bank monitors risks taken against risk appetite and risk-reward considerations on various levels across the Group, e.g. Group, business divisions, material business units, material legal entities, risk types, portfolio and counterparty levels. – Risk reporting is required to be accurate, clear, useful and complete and must convey reconciled and validated risk data to communicate information in a concise manner to ensure, across material Financial and Non-Financial Risks, the bank’s risk profile is clearly understood. – Senior risk committees, such as the Enterprise Risk Committee (ERC) and the Group Risk Committee (GRC), as well as the Management Board who are responsible for risk and capital management receive regular reporting (as well as ad-hoc reporting as required). – Dedicated teams within Deutsche Bank proactively manage material Financial and Non-Financial Risks and must ensure that required management information is in place to enable proactive identification and management of risks and avoid undue concentrations within a specific Risk Type and across risks (Cross-Risk view). In applying the previously mentioned principles, Deutsche Bank maintains a common basis for all risk reports and aims to minimize segregated reporting efforts to allow Deutsche Bank to provide consistent information, which only differs by granu- larity and audience focus. The Bank identifies a large number of metrics within its risk measurement systems which support regulatory reporting and external disclosures, as well as internal management reporting across risks and for material risk types. Deutsche Bank des- ignates a subset of those as “Key Risk Metrics” that represent the most critical ones for which the Bank places an appetite, limit, threshold or target at Group level and / or are reported routinely to senior management for discussion or decision making. The identified Key Risk Metrics include Capital Adequacy and Liquidity metrics; further details can be found in the section “Key risk metrics”. While a large number of reports are used across the Bank, Deutsche Bank designates a subset of these as “Key Risk Reports” that are critical to support Deutsche Bank’s Risk Management Framework through the provision of risk information to senior management and therefore enable the relevant governing bodies to monitor, steer and control the Bank’s risk taking activities effectively. The main reports on risk and capital management that are used to provide Deutsche Bank’s central governance bodies with information relating to the Group risk profile are the following: – The monthly Risk and Capital Profile (RCP) report is a Cross-Risk report, provides a comprehensive view of Deutsche Bank’s risk profile and is used to inform the ERC, the GRC as well as the Management Board and subsequently the Risk Committee of the Supervisory Board. The RCP includes Risk Type specific and Business-Aligned overviews and Enter- prise-wide risk topics. It also includes updates on Key Group Risk Appetite Metrics and other Key Portfolio Risk Type Control Metrics as well as updates on Key Risk Developments, highlighting areas of particular interest with updates on corresponding risk management strategies. – The Weekly Risk Report (WRR) is a weekly briefing covering high-level topical issues across key risk areas and is submit- ted every Friday to the Members of the ERC, the GRC and the Management Board and subsequently to the Members of the Risk Committee of the Supervisory Board. The WRR is characterized by the ad-hoc nature of its commentary as well as coverage of themes and focuses on more volatile risk metrics. – Group-wide macroeconomic stress tests are typically performed twice per quarter (or more frequently if required). They are reported to and discussed in the ERC and escalated to the GRC if deemed necessary. The stressed key performance indicators are benchmarked against the Group Risk Appetite thresholds. While the above reports are used at a Group level to monitor and review the risk profile of Deutsche Bank holistically, there are other, supplementing standard and ad-hoc management reports, including for Risk Types or Focus Portfolios, which are used to monitor and control the risk profile. Recovery and resolution planning The Bank Recovery and Resolution Directive (BRRD) was introduced in 2014 and updated in 2019 to reduce the likelihood of another financial crisis, enhance the resilience of institutions under stress, and eventually support the long term stability of the financial systems without exposing taxpayers’ money to losses. In line with the BRRD and relevant German law Sanierungs- und Abwicklungsgesetz (SAG), we introduce and continuously improve a recovery and resolution planning framework designed to anticipate, identify, mitigate and manage in a timely and coordinated manner the impact of adverse events on the Group and its ability to continue as a going concern. The 2020 refresh of our Group recovery plan shows a well-established recovery planning framework and reflects targeted enhancements to address the latest regulatory feedback. Updates in this iteration of the plan include the following: 66 Deutsche Bank Annual Report 2020 Risk and capital framework Recovery and resolution planning – The Recovery governance reflects the changes in the infrastructure and business functions, to facilitate a swift communi- cation and transition between “business-as-usual” and “crisis” governing bodies; – All recovery metrics levels have been aligned to the new Group risk appetite and regulatory guidance, integrating the Net Stable Funding Ratio (NSFR) and new early warning metrics to further improve our capacity to anticipate severe crisis, e.g. new metrics focusing on profitability; and – The updated overall recovery capacity has been assessed against a COVID-19 severe stress scenario and is deemed sufficient to withstand severe capital and liquidity stress scenarios as per BRRD requirement. Similarly to previous years, the 2020 Group recovery plan has been prepared with the joint effort of Risk, Finance and the business Divisions teams, with the oversight of the Management Board who is responsible for its approval and submission to the authority. The Group resolution plan on the other hand is prepared by the resolution authorities, rather than by the bank itself. We work closely with the Single Resolution Board (SRB) and the Bundesanstalt für Finanzdienstleistungsaufsicht (“BaFin”) who estab- lish the Group resolution plan for Deutsche Bank, which is currently based on a single point of entry (SPE) bail-in as the preferred resolution strategy. Under the SPE bail-in strategy, the parent entity Deutsche Bank AG would be recapitalized through a write-down and/or conversion to equity of capital instruments (Common Equity Tier 1, Additional Tier 1, Tier 2) and other eligible liabilities in order to stabilize the Group. Within one month after the application of the bail-in tool to recapitalize an institution, the BRRD (as implemented in the SAG) requires such institution to prepare a business reorganization plan, addressing the causes of failure and aiming to restore the institution's long-term viability. To further support and improve operational continuity of the bank for resolution planning purposes, DB has largely completed additional preparations, such as adding termination stay clauses into client financial agreements governed by non-EU law and including continuity provisions into key service agreements. Financial contracts and service agreements governed by EU law are already covered by statutory laws which prevent termination solely due to any resolution measure. The BRRD requires banks in EU member states to maintain minimum requirements for own funds and eligible liabilities (MREL) to make resolution credible by establishing sufficient loss absorption and recapitalization capacity. Apart from MREL- requirements, Deutsche Bank, as a global systemically important bank, is subject to global minimum standards for Total Loss- Absorbing Capacity (TLAC), which set out strict requirements for the amount and eligibility of instruments to be maintained for bail-in purposes. In particular, TLAC instruments must be subordinated (including so-called senior “non-preferred” debt, but also in the form of regulatory capital instruments) to other senior liabilities. This ensures that a bail-in would be applied first to equity and TLAC instruments, which must be exhausted before a bail-in may affect other senior (“preferred”) liabilities such as deposits, derivatives, debt instruments that are “structured” and senior preferred plain vanilla bonds. In the United States, Deutsche Bank AG is required under Title I of the Dodd-Frank Wall Street Reform and Consumer Pro- tection Act (the “Dodd-Frank Act”), as amended, to prepare and submit to the Federal Reserve Board and the Federal Deposit Insurance Corporation (“FDIC”) either a full or targeted resolution plan (the “U.S. Resolution Plan”) on a timeline prescribed by such agencies. The U.S. Resolution Plan must demonstrate that Deutsche Bank AG has the ability to execute and imple- ment a strategy for the orderly resolution of its designated material U.S. entities and operations. For foreign-based companies subject to these resolution planning requirements such as Deutsche Bank AG, the U.S. Resolution Plan relates only to sub- sidiaries, branches, agencies and businesses that are domiciled in or whose activities are carried out in whole or in material part in the United States. Deutsche Bank AG filed its most recent full U.S. Resolution Plan in June 2018. The 2018 U.S. Resolution Plan described the single point of entry strategy for Deutsche Bank’s U.S. operations and prescribed how DB USA Corporation would provide liquidity and capital support to its U.S. material entity subsidiaries and ensure their solvent wind-down outside of applicable resolution proceedings. In December 2018, Deutsche Bank received regulatory feedback from the Federal Reserve Board and FDIC, which found that Deutsche Bank’s U.S. Resolution Plan had no deficiencies but identified one shortcoming in the plan, associated with governance mechanisms and related escalation triggers. Subsequent to the aforementioned feedback, Deutsche Bank was required by the Federal Reserve Board and FDIC to demonstrate in a targeted submission that the shortcoming had been remediated. In accordance with Federal Reserve Board and FDIC requirements, Deutsche Bank AG filed this targeted submission in September 2020. In December 2020, the Federal Reserve Board and FDIC confirmed that the shortcoming had been remediated. Following this submission, Deutsche Bank’s next targeted and full U.S. Resolution Plans are due in 2021 and 2024, respectively. 67 Deutsche Bank Annual Report 2020 Risk and capital management Resource limit setting Risk and capital management Capital management Our Treasury function manages solvency, capital adequacy, leverage and bail-in capacity ratios at Group level and locally in each region, as applicable. Treasury implements our capital strategy, which itself is developed by the Group Risk Committee and approved by the Management Board. Treasury, directly or through the Group Asset and Liability Committee, manages, among other things, issuance and repurchase of shares and capital instruments, hedging of capital ratios against foreign exchange swings, setting capacities for key financial resources, design of shareholders’ equity allocation, and regional capital planning. We are fully committed to maintaining our sound capitalization both from an economic and regulatory perspective. We continuously monitor and adjust our overall capital demand and supply in an effort to achieve an appropriate balance of the economic and regulatory considerations at all times and from all perspectives. These perspectives include book equity based on IFRS accounting standards, regulatory and economic capital as well as specific capital requirements from rating agencies. Treasury manages the issuance and repurchase of capital instruments, namely Common Equity Tier 1, Additional Tier 1 and Tier 2 capital instruments as well as TLAC/MREL eligible debt instruments. Treasury constantly monitors the market for liability management trades. Such trades represent a countercyclical opportunity to create Common Equity Tier 1 capital by buying back our issuances below par. Treasury manages the sensitivity of our capital ratios against swings in currencies. For this purpose, Treasury determines which currencies are to be hedged, develops suitable hedging strategies in close cooperation with Risk Management and finally executes these hedges. The capital invested into our foreign subsidiaries and branches in our core currencies Euro, US Dollar, Chinese Renminbi and Pound Sterling is not hedged in order to balance respective effects from movements in capital deduction items and risk weighted assets. The capital invested in non-core currencies is either partly hedged taking capital demand into account or fully hedged. Resource limit setting Usage of key financial resources is influenced through the following governance processes and incentives. Target resource capacities are reviewed in our annual strategic plan in line with our CET 1 and Leverage Ratio ambitions. As a part of our quarterly process, the Group Asset and Liability Committee approves divisional resource limits for total capital demand (defined as the sum of Risk Weighted Assets (RWA) and certain RWA equivalents of Capital Deduction Items) and leverage exposure that are based on the strategic plan but adjusted for market conditions and the short-term outlook. Limits are enforced through a close monitoring process and an excess charging mechanism. Overall regulatory capital requirements are principally driven by either our CET 1 ratio (solvency) or leverage ratio (leverage) requirements, whichever is the more binding constraint. For the internal capital allocation, the combined contribution of each segment to the Group’s Common Equity Tier 1 ratio, the Group’s Leverage ratio and the Group’s Capital Loss under Stress are weighted to reflect their relative importance and level of constraint to the Group. Contributions to the Common Equity Tier 1 ratio and the Leverage ratio are measured through RWA and Leverage Ratio Exposure (LRE). The Group’s Capital Loss under Stress is a measure of the Group’s overall economic risk exposure under a defined stress scenario. Goodwill and other intangible assets are directly allocated to the respective segments, supporting the calculation of the allocated tangible shareholders equity and the respective rate of return. Most of our subsidiaries and a number of our branches are subject to legal and regulatory capital requirements. In developing, implementing and testing our capital and liquidity, we fully take such legal and regulatory requirements into account. Any material capital requests of our branches and subsidiaries across the globe are presented to and approved by the Group Investment Committee prior to execution. Further, Treasury is represented on the Investment Committee of the largest Deutsche Bank pension fund which sets the investment guidelines for this fund. This representation is intended to ensure that pension assets are aligned with pension liabilities, thus protecting our capital base. 68 Deutsche Bank Annual Report 2020 Risk and capital management Credit risk management and asset quality Risk identification and assessment We regularly identify risks to our business’ and infrastructure’s operations, also under stressed conditions, and assess the materiality of identified risks with respect to their severity and likelihood of materialization. The process incorporates input from both first line and second line of defense. The assessment of current risks is complemented by a view on emerging risks applying a forward-looking perspective. This risk identification and assessment process results in our risk inventory which captures the material risks across relevant businesses and entities. Regular updates to the risk inventory are reported to senior management together with the risk profile and inform our risk management processes. This framework provides the basis, on which we can aggregate risks for the Group across businesses and entities. The re- sulting inventory of risks, after review and challenge by senior management, informs key risk management processes including the development of stress scenarios tailored to Deutsche Bank’s risk profile, the calibration of risk appetite and risk profile monitoring and reporting. Risks in the inventory are also mapped to the following risk types as part of the risk type taxonomy: credit risk, market risk, operational risk, liquidity risk, business risk, reputational risk and cross risk. Credit risk management and asset quality Credit risk framework Credit Risk arises from all transactions where actual, contingent or potential claims against any counterparty, borrower, obligor or issuer (which we refer to collectively as “counterparties”) exist, including those claims that we plan to distribute. These transactions are typically part of our non-trading lending activities (such as loans and contingent liabilities) as well as our direct trading activity with clients (such as OTC derivatives). These also include traded bonds and debt securities. Carrying values of equity investments are also disclosed in our Credit Risk section. We manage the respective positions within our market risk and credit risk frameworks. Based on the Risk Type Taxonomy, Credit Risk is grouped into five categories, namely default/ migration risk, country risk, transaction/settlement risk (exposure risk), mitigation (failure) risk and concentration risk. This is complemented by a regular risk identification and materiality assessment. – Default/Migration Risk as the main element of credit risk, is the risk that a counterparty defaults on its payment obligations or experiences material credit quality deterioration increasing the likelihood of a default. – Country Risk is the risk that otherwise solvent and willing counterparties are unable to meet their obligations due to direct sovereign intervention or policies. – Transaction/Settlement Risk (Exposure Risk) is the risk that arises from any existing, contingent or potential future positive exposure. – Mitigation Risk is the risk of higher losses due to risk mitigation measures not performing as anticipated. – Concentration Risk is the risk of an adverse development in a specific single counterparty, country, industry or product leading to a disproportionate deterioration in the risk profile of Deutsche Bank’s credit exposures to that counterparty, country, industry or product. We manage our credit risk using the following philosophy and principles: – Our Credit Risk Management function is independent from our business divisions and in each of our divisions, credit deci- sion standards, processes and principles are consistently applied. – A key principle of credit risk management is client credit due diligence. Our client selection is achieved in collaboration with our business division counterparts who stand as a first line of defense. – We aim to prevent undue concentration and tail-risks (large unexpected losses) by maintaining a diversified credit portfolio. Client, industry, country and product-specific concentrations are assessed and managed against our risk appetite. – We maintain underwriting standards aiming to avoid large undue credit risk on a counterparty and portfolio level. In this regard we extend unsecured cash positions and actively use hedging for risk mitigation purposes. Additionally, we strive to secure our derivative portfolio through collateral agreements and may additionally hedge concentration risks to further mitigate credit risks from underlying market movements. – Every new credit facility and every extension or material change of an existing credit facility (such as its tenor, collateral structure or major covenants) to any counterparty requires credit approval at the appropriate authority level. We assign credit approval authorities to individuals according to their qualifications, experience and training, and we review these periodically. – We manage all our credit exposures to each obligor across our consolidated Group on the basis of the “one obligor princi- ple” (as required under CRR Article 4(1)(39)), under which all facilities to a group of borrowers which are linked to each other (for example by one entity holding a majority of the voting rights or capital of another) are consolidated under one group. 69 Deutsche Bank Annual Report 2020 Risk and capital management Credit risk management and asset quality – We have established within Credit Risk Management – where appropriate – specialized teams for deriving internal client ratings, analyzing and approving transactions, monitoring the portfolio or covering workout clients. For transaction approval purposes, structured credit risk management teams are aligned to the respective lending business areas. – Where required, we have established processes to report credit exposures at legal entity level. Measuring credit risk Credit Risk is measured by credit rating, regulatory and internal capital demand and key credit metrics mentioned below. The credit rating is an essential part of the Bank’s underwriting and credit process and builds the basis for risk appetite deter- mination on a counterparty and portfolio level, credit decision and transaction pricing as well the determination of regulatory capital demand for credit risk. Each counterparty must be rated and each rating has to be reviewed at least annually. Ongoing monitoring of counterparties helps keep ratings up-to-date. There must be no credit limit without a credit rating. For each credit rating the appropriate rating approach has to be applied and the derived credit rating has to be established in the relevant systems. Different rating approaches have been established to best reflect the specific characteristics of exposure classes, including central governments and central banks, institutions, corporates and retail. Counterparties in our non-homogenous portfolios are rated by our independent Credit Risk Management function. Country risk related ratings are provided by ERM Risk Research. Our rating analysis is based on a combination of qualitative and quantitative factors. When rating a counterparty we apply in- house assessment methodologies, scorecards and our 21-grade rating scale for evaluating the credit-worthiness of our coun- terparties. Changes to existing credit models and introduction of new models are approved by the Regulatory Credit Risk Model Com- mittee (RCRMC) chaired by the Head of CRM before the models are used for credit decisions and capital calculation for the first time or before they are significantly changed. Separately, an approval by the Head of Model Risk Management is required. Where appropriate, less significant changes can be approved by a delegate of either function under a delegated authority. Proposals with high impact are recommended for approval to the Group Risk Committee. Regulatory approval may also be required. The model validation is performed independently of model development by Model Risk Management. The results of the regular validation processes as stipulated by internal policies are brought to the attention of the Regulatory Credit Risk Model Forum (RCRMF) and the RCRMC, even if the validation results do not lead to a change. We measure risk-weighted assets to determine the regulatory capital demand for credit risk using “advanced”, “foundation” and “standard” approaches of which advanced and foundation are approved by our regulator. The advanced Internal Ratings Based Approach (IRBA) is the most sophisticated approach available under the regulatory framework for credit risk and allows us to make use of our internal credit rating methodologies as well as internal estimates of specific further risk parameters. These methods and parameters represent long-used key components of the internal risk measurement and management process supporting the credit approval process, the economic capital and expected loss calculation and the internal monitoring and reporting of credit risk. The relevant parameters include the probability of default (PD), the loss given default (LGD) and the maturity (M) driving the regulatory risk-weight and the credit conversion factor (CCF) as part of the regulatory exposure at default (EAD) estimation. For the majority of derivative counterparty exposures as well as securities financing transactions (SFT), we make use of the internal model method (IMM) in accordance with CRR and SolvV to calculate EAD. For most of our internal rating systems more than seven years of historical information is available to assess these parameters. Our internal rating methodologies aim at point-in-time rather than a through-the-cycle rating, but in line with regulatory solvency requirements, they are calibrated based on long-term averages of observed default rates. The foundation IRBA is an approach available under the regulatory framework for credit risk allowing institutions to make use of their internal rating methodologies while using pre-defined regulatory values for all other risk parameters. Parameters sub- ject to internal estimates include the PD while the LGD and the CCF are defined in the regulatory framework. Foundation IRBA remains in place for some exposures stemming from ex-Postbank. We apply the standardized approach to a subset of our credit risk exposures. The standardized approach measures credit risk either pursuant to fixed risk weights, which are predefined by the regulator, or through the application of external ratings. We assign certain credit exposures permanently to the standardized approach in accordance with Article 150 CRR. These are predominantly exposures to the Federal Republic of Germany and other German public sector entities as well as expo- sures to central governments of other European Member States that meet the required conditions. These exposures make up the majority of the exposures carried in the standardized approach and receive predominantly a risk weight of zero percent. For internal purposes, however, these exposures are subject to an internal credit assessment and fully integrated in the risk management and economic capital processes. 70 Deutsche Bank Annual Report 2020 Risk and capital management Credit risk management and asset quality In addition to the above described regulatory capital demand, we determine the internal capital demand for credit risk via an economic capital model. We calculate economic capital for the default risk, country risk and settlement risk as elements of credit risk. In line with our economic capital framework, economic capital for credit risk is set at a level to absorb with a probability of 99.9 % very severe aggregate unexpected losses within one year. Our economic capital for credit risk is derived from the loss distribution of a portfolio via Monte Carlo Simulation of correlated rating migrations. The loss distribution is modeled in two steps. First, indi- vidual credit exposures are specified based on parameters for the probability of default, exposure at default and loss given default. In a second step, the probability of joint defaults is modeled through the introduction of economic factors, which correspond to geographic regions and industries. The simulation of portfolio losses is then performed by an internally devel- oped model, which takes rating migration and maturity effects into account. Effects due to wrong-way derivatives risk (i.e., the credit exposure of a derivative in the default case is higher than in non-default scenarios) are modeled by applying our own alpha factor when deriving the exposure at default for derivatives and securities financing transactions under the CRR. We allocate expected losses and economic capital derived from loss distributions down to transaction level to enable management on transaction, customer and business level. Besides the credit rating which is the key credit risk metric we apply for managing our credit portfolio, including transaction approval and the setting of risk appetite, we establish credit limits for all credit exposures. Credit limits set forth maximum credit exposures we are willing to assume over specified periods. In determining the credit limit for a counterparty, we consider the counterparty’s credit quality by reference to our internal credit rating. Credit limits and credit exposures are both measured on a gross and net basis where net is derived by deducting hedges and certain collateral from respective gross figures. For derivatives, we look at current market values and the potential future exposure over the relevant time horizon which is based upon our legal agreements with the counterparty. We generally also take into consideration the risk-return characteristics of individual transactions and portfolios. Risk-Return metrics explain the development of client revenues as well as capital con- sumption. In this regard we also look at the client revenues in relation to the balance sheet consumption. IFRS 9 Impairment Approach The impairment requirements of IFRS 9 apply to all credit exposures that are measured at amortized cost or fair value through other comprehensive income and to off balance sheet lending commitments, such as loan commitments and financial guar- antees. For purposes of our impairment approach, we refer to these instruments as financial assets. The Group determines its credit loss allowances in accordance with IFRS 9 as follows: – Stage 1 reflects financial instruments where it is assumed that credit risk has not increased significantly after initial recog- nition. – Stage 2 contains all financial assets, that are not defaulted, but have experienced a significant increase in credit risk since initial recognition. – Stage 3 consists of financial assets of clients which are defaulted in accordance of Capital Requirements Regulation (CRR) under Art. 178. The Group defines these financial assets as impaired. – Significant increase in Credit Risk is determined using quantitative and qualitative information based on the Group’s his- torical experience, credit risk assessment and forward-looking information. – Purchased or Originated Credit Impaired (“POCI”) financial assets are assets where at the time of initial recognition there is objective evidence of impairment. The IFRS 9 impairment approach is an integral part of the Group’s Credit Risk Management. The estimation of ECL (Expected Credit Loss) which is the basis for the Group’s credit loss allowance is either performed via the automated ECL calculation using the Group’s ECL engine or determined by Credit Officers. In both cases, the calculation takes place for each financial asset individually. Similarly, the determination of the need to transfer between stages is made on an individual asset basis. The Group ECL engine is used to calculate the credit loss allowance for all financial assets in the homogeneous portfolio, for all financial assets in the non-homogenous portfolios in Stage 1 and Stage 2. For every individual financial asset the credit loss allowance in our non-homogeneous portfolio in Stage 3 and for POCI assets is determined by Credit Officers. The Group uses three main components to measure ECL. These are Probability of Default (PD), Loss Given Default (LGD) and Exposure at Default (EAD). The Group leveraged existing parameters used for determination of capital demand under the Basel Internal Ratings Based Approach and internal risk management practices as much as possible to calculate ECL. These parameters are adjusted where necessary to comply with IFRS 9 requirements (e.g. use of point in time ratings and removal of downturn elements in the regulatory parameters). Incorporating forecasts of future economic conditions into the measurement of expected credit losses influences the allowance for credit losses in Stage 1 and 2. In order to calculate lifetime expected credit losses, the Group’s calculation includes deriving the corresponding lifetime PDs from migration matrices that reflect economic forecasts. For details on the Group’s accounting policy related to IFRS 9 Impairment, please refer to Note 1 - Significant Accounting Policies and Critical Accounting Estimates of the Consolidated Financial Statements. 71 Deutsche Bank Annual Report 2020 Risk and capital management Credit risk management and asset quality Stage Determination At initial recognition, financial assets which are not POCI are reflected in Stage 1. If there is a significant increase in credit risk, the financial asset is transferred to Stage 2. A significant increase in credit risk is determined by using rating-related and process-related indicators. In contrast, the assignment of financial assets to Stage 3 is based on the status of the obligor being in default (i.e. in case of default, all financial assets of the obligor are transferred to Stage 3). The Group has not changed existing stage trigger mechanics and rules due to COVID-19 with following exeptions: EBA compliant moratoria and conces- sions granted to clients whose credit standing would not be significantly affected by COVID-19. In accordance with the EBA guidance, delayed payments of interest and principle to such clients would not trigger stage migration or a default. Forbear- ance measures granted to clients with financial difficulties triggered by COVID-19 assuming that the respective business model and the financial situation will allow a rapid stabilization after the crisis, would not trigger a stage migration. Rating-related indicators: Based on a dynamic change in counterparty PDs that is linked to all transactions with the counter- party, the Group compares lifetime PD at the reporting date, with lifetime PD expectations at the date of initial recognition. Based on historically observed migration behavior and a sampling of different economic scenarios, a lifetime PD distribution is obtained. A quantile of this distribution, which is defined for each counterparty class, is chosen as the lifetime PD threshold. If the remaining lifetime PD of a transaction according to current expectations exceeds this threshold, the financial asset experienced a significant increase in credit risk and is transferred to Stage 2. The quantiles used to define Stage 2 thresholds are determined using expert judgment, are validated annually and have not changed as a result of COVID-19. The threshold applied varies depending on the original credit quality of the borrower, past lifetime, remaining lifetime and counterparty class. Process-related Indicators: Process-related indicators are derived via the use of existing risk management indicators, which allow the Group to identify whether the credit risk of financial assets has significantly increased. These include obligors being added mandatorily to a credit watchlist, being mandatorily transferred to workout status, payments being 30 days or more overdue or in forbearance. Aligned to the Group, former Postbank indicators consist of credit watchlist, which include clients with workout status and forbearance measures, and payments being 30 days or more overdue. As long as the conditions for one or more of the process-related or rating-related indicators is fulfilled and the obligor of the financial asset has not met the definition of default, the asset will remain in Stage 2. If the indicators are no longer fulfilled and the financial asset is not defaulted, the financial asset transfers back to Stage 1. If the obligor defaults, all financial assets of the obligor are allocated to Stage 3. If at a later date a previously defaulted financial asset ceases to be classified as defaulted, it transfers back to Stage 2 or Stage 1, when probation periods defined by regulatory guidance are met. The expected credit loss calculation for Stage 3 distinguishes between transactions in homogeneous and non-homogenous portfolios, and POCI financial assets. For transactions that are in Stage 3 and in a homogeneous portfolio, the Group uses the ECL engine to determine the credit loss allowance. Whereas the credit loss allowance for non-homogeneous portfolios in Stage 3, as well as for POCI assets are determined by Credit Officers. Since a Stage 3 transaction is defaulted, the probability of default is equal to 100 %. To incorporate the currently available information, the LGD parameters are modelled to be time- dependent, thus capture the time dependency of recovery expectation after default. Estimation Techniques for Input Factors The one-year PD for counterparties is derived from our internal rating systems. The Group assigns a PD to each relevant counterparty credit exposure based on a 21-grade master rating scale for all of our exposure. The counterparty ratings assigned are derived based on internally developed rating models which specify consistent and distinct customer-relevant criteria and assign a rating grade based on a specific set of criteria as given for a certain customer. The set of criteria is generated from information sets relevant for the respective customer segments including general customer behavior, financial and external data. The methods in use range from statistical scoring models to expert-based models taking into account the relevant available quantitative and qualitative information. Expert-based models are usually applied for coun- terparties in the exposure classes “Central governments and central banks”, “Institutions” and “Corporates” with the exception of those “Corporates” segments for which sufficient data basis is available for statistical scoring models. For the latter as well as for the retail segment statistical scoring or hybrid models combining both approaches are commonly used. Quantitative rating methodologies are developed based on applicable statistical modelling techniques, such as logistic regression. One-year PDs are extended to multi-year PD curves using through-the-cycle (TTC) matrices and macroeconomic forecasts. Based on these forecasts, TTC matrices are transformed into point-in-time (PIT) rating migration matrices, typically for a two year period. The calculation of the PIT matrices is performed by specifying a direct link between macroeconomic variables and the default and rating behavior of counterparties. The macroeconomic forecasts adjust the distribution of the respective macroeconomic factors and consequently, the rating migration matrices that define migration and default probabilities. This approach can be interpreted as a Monte-Carlo simulation of multiple scenarios. However, for reasons of efficiency, the actual calculation is based on equivalent analytical techniques. Multi-year PDs and rating migration matrices are thus derived and applied to portfolios in scope for IFRS 9 which are categorized according to the following counterparty classes: retail Germany, retail Spain, retail Italy, financial institutions, midcaps, corporates, and sovereigns. 72 Deutsche Bank Annual Report 2020 Risk and capital management Credit risk management and asset quality LGD is defined as the likely loss intensity in case of a counterparty default. It provides an estimation of the exposure that cannot be recovered in a default event and therefore captures the severity of a loss. Conceptually, LGD estimates are inde- pendent of a customer’s probability of default. The LGD models ensure that the main drivers for losses (i.e., different levels and quality of collateralization and customer or product types or seniority of facility) are reflected in specific LGD factors. In our LGD models we assign collateral type specific LGD parameters to the collateralized exposure (collateral value after appli- cation of haircuts). In our LGD models used outside of former Postbank we assign collateral type specific LGD parameters to the collateralized exposure (collateral value after application of haircuts). The Exposure at Default (EAD) over the lifetime of a financial asset is modelled taking into account expected repayment profiles. We apply specific Credit Conversion Factors (CCFs) in order to calculate an EAD value. Conceptually, the EAD is defined as the expected amount of the credit exposure to a counterparty at the time of its default. In instances where a transaction involves an unused limit, a percentage share of this unused limit is added to the outstanding amount in order to appropriately reflect the expected outstanding amount in case of a counterparty default. This reflects the assumption that for commitments, the utilization at the time of default might be higher than the current outstanding balance. In case a transaction involves an additional contingent component (i.e., guarantees) a further percentage share is applied as part of the CCF model in order to estimate the amount of guarantees drawn in case of default. The calibrations of such parameters are based on statistical experience as well as internal historical data and consider counterparty and product type specifics. Expected Lifetime The expected lifetime of a financial asset is a key factor in determining the lifetime expected credit losses (LTECL). Lifetime expected credit losses represent default events over the expected life of a financial asset. The Group measures expected credit losses considering the risk of default over the maximum contractual period (including any borrower’s extension options) over which the Group is exposed to credit risk. Retail overdrafts, credit card facilities and certain corporate revolving facilities typically include both a loan and an undrawn commitment component. The expected lifetime of such on-demand facilities exceeds their contractual life as they are typically cancelled only when the Group becomes aware of an increase in credit risk. The expected lifetime is estimated by taking into consideration historical information and the Group’s Credit Risk Management actions such as credit limit reductions and facility cancellation. Where such facilities are subject to an individual review by Credit Risk Management, the lifetime for calculating expected credit losses is 12 months. For facilities not subject to individual review by Credit Risk Management, we apply a lifetime for calculating expected credit losses of 24 months. Consideration of Collateralization in IFRS 9 Expected Credit Loss Calculation The ECL engine projects the level of collateralization for each point in time in the life of a financial asset. For the reporting date, the engine uses the existing collateral distribution process applied for the DB’s Economic Capital model. In this model, the liquidation value of each eligible collateral is allocated to relevant financial assets to distinguish between collateralized and uncollateralized parts of each exposure. For personal collateral (e.g. guarantees), the ECL engine assumes that the relative level of collateralization remains stable over time. In case of an amortizing loan the absolute exposure and collateral values decrease together over time. For physical collateral (e.g. residential property), the ECL shall assume that the absolute collateral value remains constant. In case of an amortizing loan, the collateralized part of the exposure increases over time and consequently the exposure is likely to be fully collateralized at some point. Certain financial guarantee contracts are integral to the financial assets guaranteed. In such cases, the financial guarantee is considered as collateral for the financial asset and the benefit of the guarantee is used to mitigate the ECL of the guaranteed financial asset. For further details on how we determine the liquidation value of our collaterals please refer to section “Managing and Mitigation of Credit Risk” Forward Looking Information Under IFRS 9, the allowance for credit losses is based on reasonable and supportable forward looking information available without undue cost or effort, which takes into consideration past events, current conditions and forecasts of future economic conditions. To incorporate forward looking information into the Group’s allowance for credit losses, we use two key elements: ‒ As its base scenario, the Group uses external survey-based macroeconomic forecasts (e.g. consensus view on GDP and unemployment rates) supplemented by market-implied projections of interest and FX rates. In addition, our scenario ex- pansion model, which has been initially developed for stress testing, is used for forecasting macroeconomic variables that are not covered by external consensus data or market sources to determine lifetime PD’s. All forecasts are assumed to reflect the most likely development of the respective variables and are updated at least once per quarter. 73 Deutsche Bank Annual Report 2020 Risk and capital management Credit risk management and asset quality ‒ Statistical techniques are then applied to transform the base scenario into a multiple scenario analysis. The scenarios specify deviations from the baseline forecasts. The scenario distribution is then used for deriving multi-year PD curves for different rating and counterparty classes, which are applied in the calculation of expected credit losses and in the identifi- cation of significant deterioration in credit quality of financial assets as described above in the rating-related indicators. The general use of forward looking information, including macro-economic factors, as well as adjustments taking into account extraordinary factors (e.g. COVID-19), are monitored by the Group's Risk and Finance Credit Loss Provision Forum. In certain situations, Credit Risk officers and senior management may have additional information in general or in relation to specific portfolios that are not taken into account by the statistical model. In such situations, the Group would apply a judgmental overlay. The Group’s standard approach to incorporating macroeconomic variables into the calculation of the ECL estimate is to incor- porate forecasts for the next two years, using eight discrete quarterly observations. This methodology, which reflects the historical relationship between movements in those macroeconomic variables and default rates, was developed during the implementation of IFRS 9 and applied as of December 31, 2019. Impact of COVID-19 Pandemic on Forward Looking Information To fight the COVID-19 pandemic in 2020, many countries imposed strict lockdowns of economic activity – particularly with regards to travel, hospitality and events. The lockdowns together with the collapse in consumer and business sentiment caused one of the most severe recessions in recent history. As the pandemic unfolded, economists slashed their forecasts for variables such as Gross Domestic Product and employment. Downward revisions of economic forecasts accelerated in late March 2020 as it became clear that the pandemic could not be contained and countries around the world went into lockdown. The consensus data improved moderately since May 2020 when many businesses were allowed to re-open again. Moreover, many countries provided support and stimulus packages to firms, workers and to those unemployed that helped to mitigate the impact of COVID-19, which was initially not fully reflected in the consensus forecasts. Later forecasts increasingly took these stimulus packages into account which contributed to further improvements of economic forecasts. Economists estimated another GDP contraction in the fourth quarter of 2020 of e.g. around 2-3% Quarter-on-Quarter in the European Monetary Union (EMU) because business activity and consumer sentiment suffer from a second wave of COVID- 19 infections. The aggregated medium-term outlook for 2021 and beyond is so far mitigated by better-than-expected economic data in the third quarter of 2020 and the prospect of effective vaccines against COVID-19. Based on Management’s opinion that the standard methodology did not provide a reliable indicator for future credit losses as it took a very short term view of the development of those variables and considering regulatory guidance provided, Manage- ment determined that the most representative approach in 2020 for estimating expected credit losses was to reduce the weight of some of the short-term data (as it had lost relevance since it did not take into account the unprecedented levels of govern- ment support and fiscal stimulus being provided across the global economy) and derive adjusted inputs based on longer term averages. This approach better reflected underlying credit conditions in 2020 and avoided the build-up of unrealistically high credit reserves in the first half of the year and their subsequent release in the third and fourth quarter of 2020. As a result, the Group viewed it more appropriate to apply an overlay during 2020 to ensure its ECL provision was adequate. The overlay is based on averaging forecasts for GDP and unemployment rates over the next three years in its ECL estimation, which is the basis for the bank’s year end 2020 Credit Loss Allowance. The following table provides an overview of the three year forward looking information, which determines the three year aver- age used as input for calculating and the Group’s allowance for credit losses for the year end 2020. Please note that the economic data used in the forward-looking information for the calculation of the allowance for credit losses may differ from forecasts used in the economic outlook section. The reason is that the economic outlook is based on the specific views of DB Research economists whereas forward-looking information is derived from broader consensus and mar- ket-implied projections as aggregated, expanded and quality-assured within Risk Management. 74 Deutsche Bank Annual Report 2020 Risk and capital management Credit risk management and asset quality IFRS 9 – Forward Looking Information applied for the year end 2020 Year 1 (4 quarter avg) Year 2 (4 quarter avg) Credit - ITX Europe 125 FX - EUR/USD GDP Eurozone GDP Germany GDP Italy GDP USA Rate - US Treasury 2y Unemployment - Eurozone Unemployment - Germany Unemployment - Italy Unemployment - Spain Unemployment - USA 1 Rates, FX and credit spreads as per 7 December release; GDP, unemployment forecasts updated per 16 December. 2 Year 1 equals Q4 2020 to Q3 2021, Year 2 equals Q4 2021 to Q3 2022 and Year 3 equals Q4 2022 to Q3 2023 52.81 1.20 1.38 % 1.54 % 1.92 % 2.80 % 0.17 % 8.86 % 4.30 % 10.65 % 17.89 % 6.40 % December 20201,2 Year 3 (4 quarter avg) − − 2.32 % 2.08 % 1.93 % 2.29 % – 7.94 % 3.72 % 9.85 % 15.49 % 4.46 % − − 4.37 % 4.01 % 3.80 % 3.35 % − 8.35 % 3.95 % 10.38 % 16.32 % 5.19 % In the third quarter 2020, the Group introduced an additional overlay and retained the overlay for the year end 2020 due to the fact that the level of uncertainty remains high, in particular as the COVID-19 pandemic, related lock-down measures and associated economic support measures offered by central governments will further hamper the ability to assess the true state of borrowers’ capacity to repay their financial obligations, also taking into account the emerging downsides expected in par- ticular as moratoria are fading out (although partially extended, e.g. in Spain and Italy) and a second wave of lockdown measures started in December 2020. Taking into account the above mentioned overlays, the Group reported a provision for credit losses of €1.8 billion for the year ended 2020, which is a significant increase compared to € 723 million for the year ended 2019. This is primarily driven by a significant increase in Stage 3 credit loss allowances due to client defaults following the COVID-19 pandemic, predominantly in the Investment Bank and Private Bank. Provisions for performing assets were mainly driven by the impact from including the forward looking element based on consensus forecast with charges in the first half of the year and subsequent releases in the second half. The accumulated full year impact with net releases in Stage 1 and Stage 2 was fully compensated by the additional overlay recorded in 2020. Model Sensitivity There are two main sources of ECL volatility for Stage 1 and 2 assets. Firstly, changes to the portfolio composition, the exposure profile or counterparty ratings, which are particularly important due to potential implications on stage determination, influence the level of ECL and thus the level of our Credit Loss Allowance. Secondly, in addition to portfolio changes, ECL is also impacted by macroeconomic forecasts. As the relevant macroeconomic variables vary by counterparty class, ECL sensitivities to macroeconomic forecasts are portfolio-specific with GDP growth rates and unemployment rates in the Eurozone and the US as dominant factors overall. The sensitivity of our model with respect to future changes in macroeconomic variables (MEVs) is illustrated in the following table, which provides the ECL impact for Stages 1 and 2 from a Downward and Upward shift across all scenarios used in the ECL calculation. Both shifts are applied in addition to the baseline ECL as of December 31, 2020, by specifying Downward and Upward MEV values that are all either one standard deviation above or below the baseline forecasts, e.g. shifting fore- casted GDP rates by 2 percentage points on average. ECL for Stage 3 is not affected and not reflected in the following tables as its modelling is independent of the macroeconomic scenarios. IFRS 9 – Sensitivities of Forward Looking Information applied on Stage 1 and Stage 2 Corporate Bank Investment Bank Private Bank Asset Management Capital Release Unit Corporate & Other Total Downward shift ECL per Dec 31, 2020 Upward shift 425 462 1,014 2 10 17 1,929 293 330 788 2 8 9 1,429 213 244 701 1 6 5 1,171 75 Deutsche Bank Annual Report 2020 Risk and capital management Credit risk management and asset quality Corporate Bank Investment Bank Private Bank Asset Management Capital Release Unit Corporate & Other Total Downward shift ECL per Dec 31, 2019 374 438 890 4 13 29 1,747 241 288 697 3 10 12 1,250 Upward shift 170 198 572 2 7 6 955 Focus Industries in light of COVID-19 Pandemic While the negative implications of the COVID-19 pandemic are materializing across economies and sectors globally, certain industries are seeing particularly severe direct or indirect impacts. These sectors accounted for approximately 30 % of group credit loss provisions in the year 2020. The information below is based on an internal risk view that is not fully congruent with the NACE (Nomenclature des Activities Economiques dans la Communate Europeenne, which is the statistical classification of economic activities in the European Union) applied elsewhere in this report, e.g. in the Asset Quality section. – Commercial real estate (€ 27 billion loan exposure as of December 31, 2020): Commercial real estate (CRE) has been severely affected by the COVID-19 pandemic, with the strongest impact noted on hotel and retail segments given the direct impact of lockdowns, travel restrictions and social distancing measures on these property types. Borrowers in these sectors have been faced with property closures, tenant rent deferral requests and tenant defaults which in turn have triggered a large number of requests for loan modifications and resulted in a significant increase of credit loss provisions in our CRE loan portfolio. The impact on other property types including multifamily, office, industrial and logistics has been more con- tained. CRE exposure (comprises Commercial Real Estate Group, APAC CRE exposures in the investment bank and non- recourse CRE business in the corporate bank) accounts for 6 % of the loan book. The risk profile of the portfolio improved in the fourth quarter as a result of selective de-risking initiatives, including loan sales in the US. Portfolios are managed to tight underwriting standards with regular stress tests under conservative assumptions. Moderate pre-crisis loan-to-value ratios (LTVs) averaging slightly below 60 % provide a substantial buffer to absorb declines in collateral values which have been most pronounced in the US hotel segment. Hotel exposures are concentrated in the U.S. and benefit from significant sponsor equity in the assets and demonstrated support in most cases, although sponsor support could weaken in an extended pandemic scenario. – Oil & gas (€ 7 billion loan exposure as of December 31, 2020): Significant fall in travel and trade volumes, as well as the wider economic downturn, led to a meaningful contraction of demand for oil and a significant fall in prices in early 2020 before recovery in the second half of the year. There have been a number of bankruptcies among smaller/ weaker compa- nies in 2020. Our loan exposure to the sector has fallen by approximately € 1 billion in 2020 and accounts for less than 2 % of the total loan book. We have seen an ongoing downward migration of credit ratings among our clients, however, portfolio risk is mitigated by a focus on more resilient oil & gas majors and national oil & gas companies. More than 80 % of net credit limits are to investment grade rated clients. Our exposure to the higher risk “shale” companies in North America is small since we have realigned our portfolio in recent years. – Retail (excluding food/staples) (€ 4 billion loan exposure as of December 31, 2020): The impact of lockdowns and a drop in consumer confidence have added to the structural challenges the retail industry is facing, including digitalization and shifting consumer preferences. Consequently, we are seeing a downward migration of credit ratings within our portfolio. Our loan exposure accounts for ~ 1 % of the total loan book. Portfolio risks are mitigated by a focus on strong global brands with approximately two third of net credit limits to investment grade rated clients. – Aviation (€ 3 billion loan exposure as of December 31, 2020): The industry is going through its deepest crisis in history. The International Air Transport Association (IATA) expects substantial losses across the sector, and bankruptcies have been observed among weaker airlines. Our loan exposure accounts for under 1 % of total loan book and portfolio risks are mitigated by a significant share of secured aircraft financing which is biased towards newer/ liquid aircraft. The unsecured portfolio is focused on developed market flag carriers, many of which benefit from robust government support packages. – Leisure (€ 2 billion loan exposure as of December 31, 2020): The industry has been hit by a very sharp decline in both business and private travel during lockdowns. It is unlikely that volumes will recover to pre-crisis levels in the near-term. Loan exposure is contained at well under 1 % of the total loan book, with a focus on industry leaders in the hotels and casinos segment, mostly domiciled in the U.S. market. We have very limited exposure to tour operators and cruise lines. 76 Deutsche Bank Annual Report 2020 Risk and capital management Credit risk management and asset quality IFRS 9 - Application of EBA guidance regarding Default, Forbearance and IFRS 9 in light of COVID-19 measures EBA’s “Statement on the application of the prudential framework regarding Default, Forbearance and IFRS 9 in light of COVID-19 measures” published on March 25, 2020 states that institutions are expected to use a degree of judgement and distinguish between borrowers whose credit standing would not be significantly affected by the current situation in the long term, and those who would be unlikely to restore their creditworthiness. The Bank performed portfolio reviews and applied this regulatory guidance to a number of clients mainly in the Investment Bank and Corporate Bank. EBA is further of the view that the public and private moratoria, as a response to COVID-19 pandemic, do not have to be automatically classified as forbearance if the moratoria are not borrower specific, based on the applicable national law or on an industry or sector-wide private initiative agreed and applied broadly by relevant credit institutions. Deutsche Bank has introduced this guidance into its internal risk management processes. Legislative and non-legislative moratoria and public guarantee schemes in light of COVID-19 pandemic After the breakout of the COVID-19 pandemic, a number of governments issued programs offering legislative moratoria and guarantee schemes. Non-legislative moratoria programs have been developed to support our clients as well as individual measures have been agreed with our clients. On April 2, 2020 and June 25, 2020 EBA published its Guidelines on legislative and non-legislative moratoria on loan repay- ments applied in light of the COVID-19 crisis. These guidelines provide clarity on the treatment of legislative and non-legislative moratoria applied before September 30, 2020 and supplement the EBA Guidelines on the application of the definition of default in regards to the treatment of a distressed restructuring. On September 21, 2020, EBA announced that it “will phase out its Guidelines on legislative and non-legislative payment moratoria in accordance with its end of September deadline. The regu- latory treatment set out in the Guidelines will continue to apply to all payment holidays granted under eligible payment mora- toria prior to September 30, 2020”. On December 2, 2020 after closely monitoring the developments of the COVID-19 pandemic and, in particular, the impact of the second COVID-19 wave and the related government restrictions taken in many EU countries, the EBA has decided to reactivate its Guidelines on legislative and non-legislative moratoria. The following table provides an overview of active and expired loans and advances subject to EBA-compliant moratoria, loans and advances subject to COVID-19 related forbearance measures and newly originated loans and advances subject to a public guarantee scheme in the context of the COVID-19 pandemic as of December 31, 2020 and September 30, 2020. Overview of active and expired moratoria, forbearance measures and guarantee schemes in light of COVID-19 pandemic April 1 to Dec 31, 2020 April 1 to Sep 30, 2020 Newly originated loans and advances subject to public guarantee schemes in the context of the COVID-19 crisis1 2,362 60 1,124 0 3,546 Loans and advances subject to EBA- compliant moratoria Loans and advances subject to COVID-19- related forbearance measures Other loans and advances subject to COVID-19- related forbearance measures Newly originated loans and advances subject to public guarantee schemes in the context of the COVID-19 crisis Loans and advances subject to EBA- compliant moratoria in € m. 2,956 Corporate Bank 4,353 Investment Bank 1,114 Private Bank 0 Capital Release Unit Total 8,424 1 Excluding € 0.3 billion as of December 31, 2020 and € 0.2 billion as of September 30, 2020 which qualify for derecognition as these loans meet the pass-through criteria for 610 107 7,499 433 8,649 2,716 4,449 1,514 20 8,699 651 222 7,747 430 9,050 1,974 60 928 0 2,962 financial instruments under IFRS 9 EBA-compliant moratoria can be divided into legislative moratoria, which are instituted by the Government and non-legislative moratoria granted by (group of) financial institutions. The loans and advances subject to EBA-compliant moratoria shown are mainly legislative moratoria instituted by the German, Italian, Indian and Spanish governments and non-legislative moratoria in Germany, Italy and Spain. Under the legislative moratoria, the Group has granted a postponement of interest and/or principal payments depending on the requirements defined by each individual government. The postponement of principal payments led to an extension of the loan maturity date. The German legislative moratoria were granted to consumer loan agreements and mortgages and only postponed principal payments with interest being waived during the holiday period. Whereas the Italian, Spanish and Indian moratoria deferred both principal and interest to households and financial intermediaries in Italy and Spain and to standard 77 Deutsche Bank Annual Report 2020 Risk and capital management Credit risk management and asset quality term and working capital loans in India. The ability to utilize the legislative German moratoria ended for all borrowers at the end of June 2020 and the legislative Indian moratoria ended at the end of August 2020. Italy has two legislative moratoria one for private households which ended December 16, 2020 and a second one for Small and Medium Sized Entities (SME) and Corporates. The moratorium for SMEs and Corporates was originally scheduled to end on September 30, 2020, but has been further extended until June 2021. Also, the Spanish government extended the legislative Spanish moratoria for SMEs and Corporates up and to 2021. Under the non-legislative moratoria, the Group has granted a postponement of interest and/or principal payments depending on the requirements defined by local banking groups setting up the local moratoria in Germany, Italy and Spain. The non- legislative moratoria were granted to consumer loan agreements and mortgages with Private Clients only. All non-legislative moratoria were originally planned to end by yearend 2020. However, due to the development of COVID-19 a new non-legis- lative moratorium was launched in Italy to support consumer finance clients from January 2021 until end of March 2021. Overall the majority of loans affected by the moratoria relate to the Private Bank. Upon granting the moratoria the carrying value of the loan was amended by scheduling out the new expected cash flows and discounting at the original effective interest rate. The difference in carrying value was taken as a loss to interest income in the Profit and Loss account (P&L). The amount was not material to the Group. During the second half of 2020, the number of clients under moratoria has significantly reduced, from peak levels in the second quarter 2020. As of December 31, 2020, € 6 billion of moratoria already expired. More than 95 % of these clients, who took advantage of moratoria have now resumed payments. The transition is actively managed whereby DB contacts each private client in order to ensure the clients are aware and able to resume payments before leaving moratoria. COVID-19 related forbearance measures were also granted to clients which did not fulfill the EBA compliant moratoria criteria, but the Bank decided on an individual customer basis to amend the conditions of the loan. Individual COVID-19 forbearance measures were granted for borrowers in several business lines and portfolios. For the Investment Bank a significant amount of modifications were granted to Commercial Real Estate Clients, in the Private Bank to clients in the Lending business and in the Corporate Banking to Trade Finance Clients. Upon granting the modifications to the borrowers, the carrying value of the loan was amended by scheduling out the new expected cash flows and discounting at the original effective interest rate. The difference in carrying value was taken as a loss to interest income in the P&L. The amount was not material to the Group. As of December 31, 2020 forbearance measures have been granted for € 8.4 billion loans reflecting a broad range from modifi- cations of selected covenants in the respective loan contract to payment deferrals. Also, to further strengthen credit oversight, forbearance measure flagging is now considered an additional criterion to add the exposure on a “watchlist”. Newly originated loans and advances subject to a public guarantee scheme include loans and advances mainly guaranteed by KfW (Kreditanstalt für Wiederaufbau, a government-owned promotional). These loans were granted by the bank mainly to European clients in the Corporate Business across all industries. Similar Guarantees were also offered by the Luxembourg Public Investment Bank and by the Ministry of Economic Affairs and Digital Transformation (MINECO) of Spain. Less than 1 % of the loan population has an EBA forborne or non-performing status. The Group has originated approximately € 3.8 billion of loans under the public guarantee scheme during 2020 and in most cases the terms of the new originated loans and advances are between two and five years. Approximately € 2.1 billion of loans were granted in Germany via programs sponsored by KfW, of which, € 0.3 billion were derecognized as the terms of the loan and guarantee met the criteria for derecognition under IFRS 9, and € 1.2 billion were originated in Spain and € 0.5 billion in Luxembourg. As of December 31, 2020, 98.7 % of the loans that were granted public guarantees in 2020 continue to make regular repayments. Breakdown of COVID-19 related measures by stages in € m. Stage 1 Stage 2 Stage 3 Total Legislative and non-legislative Moratoria COVID-19 related forbearance measures Dec 31, 2020 Public guarantee schemes Gross Carrying Amount 6,464 1,872 313 8,649 Expected Credit Losses (23) (63) (69) (155) Gross Carrying Amount 5,746 1,994 684 8,424 Expected Credit Losses (18) (54) (80) (152) Gross Carrying Amount 3,135 360 51 3,546 Expected Credit Losses (3) (4) (4) (11) The Group continues to manage and monitor the current and future COVID-19 situation. Of the € 8.6 billion legislative and non-legislative moratoria circa € 1.5 billion exposure is still active mainly due to extensions in Italy with modest increases in Stage 3 from expired moratoria. There have been no material economic losses to date regarding voluntary forbearance where Deutsche Bank provides a range of measures not only extension of grace periods. Of those loans in forbearance, only circa 8 % of the € 8.4 billion exposures have defaulted after forbearance measures were taken. As COVID-19 forbearance measures are applied to clients with a positive post-crisis outlook, we expect no significant stage moves of these assets under 78 Deutsche Bank Annual Report 2020 Risk and capital management Credit risk management and asset quality the assumption of a normalized economic recovery. Additionally economic recovery regarding Deutsche Bank’s participation in public guarantee schemes remains low as at December 31, 2020. Asset quality The Asset Quality section under IFRS 9 describes the quality of debt instruments subject to impairment, which under IFRS 9 consist of debt instruments measured at amortized cost, financial instruments at fair value through other comprehensive in- come (FVOCI) as well as off balance sheet lending commitments such as loan commitments and financial guarantees (here- after collectively referred to as “Financial Assets”). Overview of financial assets subject to impairment The following tables provide an overview of the exposure amount and allowance for credit losses by financial asset class broken down into stages as per IFRS 9 requirements. Overview of financial assets subject to impairment in € m. Amortized cost¹ Gross carrying amount Allowance for credit los- ses² of which Loans Gross carrying amount Allowance for credit losses² Stage 1 Stage 2 Stage 3 Stage 3 POCI Total Stage 1 Stage 2 Stage 3 Dec 31, 2020 Dec 31, 2019 Stage 3 POCI Total 651,941 35,372 10,655 1,729 699,697 645,967 24,680 7,531 2,150 680,328 544 648 3,614 139 4,946 549 492 3,015 36 4,093 385,422 34,537 10,138 1,710 431,807 400,434 23,832 7,437 2,130 433,833 522 647 3,506 133 4,808 537 488 2,932 33 3,990 Fair value through OCI Fair value Allowance for credit losses 55,566 12 163 6 105 2 0 55,834 45,083 16 20 0 397 9 23 10 0 45,503 35 0 Off-balance sheet Notional amount Allowance for credit los- ses³ 0 1 Financial Assets at Amortized Cost consist of: Loans at Amortized Cost, Cash and central bank balances, Interbank balances (w/o central banks), Central bank funds sold and 1 262,856 251,930 251,545 0 259,218 1,424 2,587 5,864 8,723 166 200 419 144 128 48 74 0 342 securities purchased under resale agreements, Securities borrowed and certain subcategories of Other assets. 2 Allowance for credit losses do not include allowance for country risk amounting to € 5 million as of December 31, 2020 and € 3 million as of December 31, 2019. 3 Allowance for credit losses do not include allowance for country risk amounting to € 4 million as of December 31, 2020 and € 4 million as of December 31, 2019. Financial assets at amortized cost The following tables provide an overview of the gross carrying amount and credit loss allowance by financial asset class broken down into stages as per IFRS 9 requirements. Development of exposures and allowance for credit losses in the reporting period in € Balance, beginning of year Movements in financial assets including new business Transfers due to changes in creditworthiness Changes due to modifications that did not result in derecognition Changes in models Financial assets that have been derecognized during the pe- riod Recovery of written off amounts Foreign exchange and other changes Balance, end of reporting period Stage 1 645,967 79,588 (7,462) Stage 2 24,680 8,215 5,543 0 0 (3) 0 (48,990) 0 (17,162) 651,941 (2,268) 0 (795) 35,372 Stage 3 7,531 3,304 1,919 (31) 0 (1,910) 58 (216) 10,655 Dec 31, 2020 Gross carrying amount Stage 3 POCI 2,150 (166) Total 680,328 90,940 0 0 0 (34) 0 (263) 0 7 1,729 (53,430) 58 (18,165) 699,697 Financial assets at amortized cost subject to impairment increased by € 19 billion or 3% in 2020, which was primarily driven by stage 2: Stage 1 exposures slightly increased by € 6 billion or 1 %. 79 Deutsche Bank Annual Report 2020 Risk and capital management Credit risk management and asset quality Stage 2 exposures increased by € 11 billion or 43 % driven by Loans at Amortized Cost in Private Bank and Corporate Bank due to the update of the macroeconomic outlook. Stage 3 exposures increased by € 2,703 million or 28 % in 2020 driven by new defaults across business divisions, partly offset by a reduction in the POCI loan portfolio. in € Balance, beginning of year Movements in financial assets including new business Transfers due to changes in creditworthiness Changes due to modifications that did not result in derecognition Changes in models Financial assets that have been derecognized during the pe- riod Recovery of written off amounts Foreign exchange and other changes Balance, end of reporting period Stage 1 637,037 86,882 (1,652) Stage 2 32,335 (6,503) 327 (4) 0 (0) 0 (81,545) 0 5,249 645,967 (1,691) 0 213 24,680 Dec 31, 2019 Gross carrying amount Stage 3 POCI 1,963 418 0 Total 678,787 81,820 0 0 0 (45) 0 (272) 0 41 2,150 (85,852) 70 5,548 680,328 Stage 3 7,452 1,022 1,325 (40) 0 (2,343) 70 45 7,531 Financial assets at amortized cost subject to impairment remained roughly stable with a slight increase of € 2 billion in 2019 across all stages: Stage 1 exposures increased by € 9 billion or 1 %. Stage 2 exposures decreased by € 8 billion or 24 % driven by Brokerage cash / margin receivables in Investment Bank as well as Loans at Amortized Cost in Corporate Bank. Stage 3 exposures increased by € 266 million or 3 % in 2019 driven by new defaults across business divisions, partly offset by write-offs in shipping. Dec 31, 2020 Allowance for Credit Losses³ Stage 2 Stage 1 Stage 3 POCI 549 (44) 77 in € Balance, beginning of year Movements in financial assets including new business Transfers due to changes in creditworthiness Changes due to modifications that did not result in derecognition Changes in models Financial assets that have been derecognized during the pe- (781) riod² 58 Recovery of written off amounts (110) Foreign exchange and other changes 4,946 Balance, end of reporting period Provision for Credit Losses excluding country risk¹ 1,686 1 Movements in financial assets including new business, transfers due to changes in creditworthiness and changes in models add up to Provision for Credit Losses excluding (781) 58 (75) 3,614 1,397 Stage 3 3,015 1,348 49 0 0 31 139 72 0 0 (28) 648 184 0 0 (38) 544 33 492 309 (125) Total 4,093 1,686 0 36 724 N/M N/M 0 N/M 0 N/M 0 N/M 0 N/M 0 country risk. 2 This position includes charge offs of allowance for credit losses. 3 Allowance for credit losses does not include allowance for country risk amounting to € 5 million as of December 31, 2020. 4 The total amount of undiscounted expected credit losses at initial recognition on financial assets that are purchased or originated credit-impaired initially recognised during the reporting period was € 50 million in 2020 and € 0 million in 2019. Allowance for credit losses against financial assets at amortized cost subject to impairment increased by € 853 million or 21 % in 2020 mainly driven by Stage 3: Stage 1 allowances remained roughly stable with a slight decrease of € 5 million or 1 %. Stage 2 allowances increased by € 156 million or 32 % due to the update of the macroeconomic outlook. Stage 3 allowances increased by € 702 million or 23 % driven by new defaults across business divisions and the increase against the existing POCI loan portfolio. Our Stage 3 coverage ratio (defined as Allowance for credit losses in Stage 3 (excluding POCI) divided by Financial assets at amortized cost in Stage 3 (excluding POCI)) amounted to 34 % in the current fiscal year, compared to 40 % in the prior year. 80 Deutsche Bank Annual Report 2020 Risk and capital management Credit risk management and asset quality in € Balance, beginning of year Movements in financial assets including new business Transfers due to changes in creditworthiness Changes due to modifications that did not result in derecognition Changes in models Financial assets that have been derecognized during the pe- riod² Recovery of written off amounts Foreign exchange and other changes Balance, end of reporting period Provision for Credit Losses excluding country risk¹ Stage 1 Stage 2 509 (57) 120 N/M 0 0 0 (22) 549 62 501 102 (106) N/M 0 0 0 (4) 492 (4) Dec 31, 2019 Allowance for Credit Losses³ Stage 3 3,247 550 (14) N/M 0 (872) 96 8 3,015 536 Stage 3 POCI 3 40 0 N/M 0 (26) 0 18 36 40 Total 4,259 636 0 N/M 0 (898) 96 0 4,093 636 1 Movements in financial assets including new business, transfers due to changes in creditworthiness and changes in models add up to Provision for Credit Losses excluding country risk. 2 This position includes charge offs of allowance for credit losses. 3 Allowance for credit losses does not include allowance for country risk amounting to € 3 million as of December 31, 2019. Allowance for credit losses against financial assets at amortized cost subject to impairment dropped by € 166 million or 4 % in 2019 mainly driven by Stage 3: Stage 1 allowances increased by € 40 million or 8 % driven by an increase in Loans at Amortized Cost in Investment Bank and Private Bank. Stage 2 allowances remained roughly stable with a slight decrease of € 8 million or 2 %. Stage 3 allowances decreased by € 198 million or 6 % driven by NPL sales in Private Bank as well as write-offs in shipping in Capital Release Unit, which were partly offset by new defaults in Corporate Bank and Investment Bank. Financial assets at amortized cost by business division Gross Carrying Amount1 in € m. Corporate Bank Investment Bank Private Bank Asset Management Capital Release Unit Corporate & Other Total Stage 2 Stage 1 7,747 109,484 134,634 5,832 216,412 21,328 57 303 105 Stage 3 2,305 2,023 5,954 0 2,131 372 4,463 184,816 1 651,941 35,372 10,655 Stage 3 POCI Total Stage 1 Stage 2 0 119,537 1,459 143,948 270 243,964 2,188 0 0 5,138 0 184,922 1,729 699,697 85 139 311 1 4 5 544 106 92 446 1 4 (0) 648 Dec 31, 2020 Allowance for Credit Losses Stage 3 1,052 290 2,098 0 174 0 3,614 Stage 3 POCI 0 139 0 0 0 0 139 Total 1,244 659 2,855 1 182 5 4,946 1 Gross Carrying Amount numbers per business division are reported after a reallocation of cash balances from business divisions to Corporate & Other. Gross Carrying Amount Dec 31, 2019 Allowance for Credit Losses in € m. Corporate Bank Investment Bank Private Bank Asset Management Capital Release Unit Corporate & Other Total Stage 2 Stage 1 4,769 174,685 159,301 4,894 251,699 14,376 101 1,965 378 16,051 163 42,266 645,967 24,680 Stage 3 1,921 575 4,520 0 502 13 7,531 Stage 3 POCI Total Stage 1 Stage 2 Stage 3 0 181,375 1,830 166,600 321 270,915 0 2,066 0 16,930 0 42,442 2,150 680,328 82 146 313 1 1 5 549 63 60 360 1 7 2 492 843 117 1,834 0 221 1 3,015 Stage 3 POCI 0 36 0 0 0 0 36 Total 988 358 2,508 2 230 8 4,093 Financial assets at amortized cost by industry sector The below table gives an overview of our asset quality by industry, and is based on the NACE code of the counterparty. NACE (Nomenclature des Activités Économiques dans la Communauté Européenne) is a standard European industry classification system. The information below is not fully congruent to the internal risk view applied in the section “Focus industries in light of COVID-19 pandemic”. 81 Deutsche Bank Annual Report 2020 Risk and capital management Credit risk management and asset quality Gross Carrying Amount Dec 31, 2020 Allowance for Credit Losses Stage 1 Stage 2 Stage 3 Stage 3 POCI Total Stage 1 Stage 2 Stage 3 Stage 3 POCI in € m. Agriculture, forestry and fishing Mining and quarrying Manufacturing Electricity, gas, steam and air conditioning supply Water supply, sewerage, waste management and remediation activities Construction Wholesale and retail trade, repair of motor vehicles and motorcycles Transport and storage Accommodation and food service activities Information and communi- cation Financial and insurance activities Real estate activities Professional, scientific and technical activities Administrative and support service activities Public administration and defense, compulsory social security Education Human health services and social work activities Arts, entertainment and re- creation Other service activities Activities of households as employers, undifferentiated goods- and services-pro- ducing activities of house- holds for own use Activities of extraterritorial organizations and bodies Total 538 2,808 23,245 69 115 2,518 39 162 1,024 0 0 646 3,085 138 26,925 1 4 32 1 4 42 12 98 479 0 0 3 3,268 276 117 0 3,661 3 2 35 0 40 573 3,706 52 304 57 271 0 169 681 4,450 1 6 2 7 9 193 0 6 12 212 19,049 4,760 1,066 710 830 387 46 20,991 5,869 12 21 20 20 18 516 93 2 0 558 131 1,871 445 90 24 2,429 5 8 22 0 35 5,482 207 131 0 5,820 12 5 95 0 111 316,950 38,993 6,336 2,089 1,159 824 551 324,996 293 42,200 88 32 64 22 285 94 37 42 474 190 6,295 1,049 223 198 7,765 8 15 97 5 125 8,966 1,365 409 47 10,787 14 22 88 1 125 16,648 179 593 23 229 3 0 17,469 205 0 8 0 5 1 11 1 0 0 3,104 347 15 1 3,468 4 6 8 0 874 10,548 79 823 9 180 1 961 215 11,766 3 13 1 12 3 21 0 40 Total 14 106 557 24 2 17 8 86 184,031 16,906 4,496 34 205,468 270 393 1,453 2 2,120 52 1 651,941 35,372 10,655 0 0 53 1,729 699,697 0 544 0 648 1 3,614 0 139 1 4,946 82 Total 12 19 546 Deutsche Bank Annual Report 2020 Risk and capital management Credit risk management and asset quality Gross Carrying Amount Dec 31, 2019 Allowance for Credit Losses Stage 1 Stage 2 Stage 3 Stage 3 POCI Total Stage 1 Stage 2 Stage 3 Stage 3 POCI in € m. Agriculture, forestry and fishing Mining and quarrying Manufacturing Electricity, gas, steam and air conditioning supply Water supply, sewerage, waste management and remediation activities Construction Wholesale and retail trade, repair of motor vehicles and motorcycles Transport and storage Accommodation and food service activities Information and communi- cation Financial and insurance activities Real estate activities Professional, scientific and technical activities Administrative and support service activities Public administration and defense, compulsory social security Education Human health services and social work activities Arts, entertainment and re- creation Other service activities Activities of households as employers, undifferentiated goods- and services- pro- ducing activities of house- holds for own use Activities of extraterritorial organizations and bodies Total 613 2,647 26,784 43 4 1,498 42 141 923 1 1 699 2,793 122 29,327 1 4 32 2 0 33 10 15 481 0 0 0 4,609 160 70 0 4,839 4 5 4 0 13 708 2,987 11 208 64 307 0 144 783 3,646 1 4 0 4 10 227 0 1 11 235 19,404 4,259 978 488 653 249 11 21,046 4,995 0 19 6 18 6 389 64 (0) 0 426 76 2,240 93 31 74 2,437 5 2 15 0 5,633 472 32 0 6,138 10 17 16 0 22 43 299,108 42,868 3,756 1,832 431 311 824 304,119 399 45,410 95 43 30 13 189 80 2 15 317 152 9,253 512 195 232 10,193 8 8 98 4 117 5,909 400 189 25 6,523 6 6 52 (5) 59 20,972 354 794 18 43 2 0 21,809 373 0 3 0 5 0 5 1 0 0 3,264 187 15 2 3,469 5 6 7 0 837 8,707 24 387 10 74 0 210 872 9,378 3 10 0 8 4 39 0 19 13 2 18 7 75 182,912 12,817 3,748 106 199,583 290 330 1,310 (0) 1,930 1,895 0 645,967 24,680 1 7,531 0 1,896 2,150 680,328 0 549 0 492 1 3,015 0 36 1 4,093 Financial assets at amortized cost by region in € m. Germany Western Europe (excluding Germany) Eastern Europe North America Central and South America Asia/Pacific Africa Other Total Stage 1 Stage 2 Stage 3 294,063 17,709 3,840 3,188 130,592 90 5,175 2,079 144,876 374 3,731 973 57,197 11 2,617 13,689 99 651,941 35,372 10,655 7,639 214 6,303 146 2,691 218 453 Gross Carrying Amount Stage 3 POCI 270 315,884 Total 1,103 142,522 0 7 5,480 105 153,362 4,258 219 61,081 2,845 24 14,265 1,729 699,697 0 Stage 1 Stage 2 Stage 3 Dec 31, 2020 Allowance for Credit Losses Stage 3 POCI Total 252 356 1,438 52 2,098 152 7 77 4 31 5 15 544 215 2 57 4 13 1 1 648 1,603 42 225 32 273 1 0 3,614 77 0 7 0 2 0 (0) 139 2,048 51 366 40 318 7 16 4,946 83 Deutsche Bank Annual Report 2020 Risk and capital management Credit risk management and asset quality Stage 1 Stage 2 Stage 3 in € m. Germany Western Europe (excluding Germany) Eastern Europe North America Central and South America Asia/Pacific Africa Other Total 262,104 12,872 131,432 5,929 166,357 3,952 65,128 2,637 8,429 5,516 230 3,467 532 1,862 172 30 645,967 24,680 3,259 2,979 75 612 103 489 13 0 7,531 Gross Carrying Amount Stage 3 POCI 321 278,556 Total 1,631 141,558 0 9 6,234 71 170,507 4,595 119 67,597 2,823 8,458 2,150 680,328 0 0 Stage 1 Stage 2 Stage 3 Dec 31, 2019 Allowance for Credit Losses Stage 3 POCI Total 266 279 1,311 (0) 1,857 152 2 83 2 34 7 2 549 150 5 39 7 10 2 0 492 1,418 39 32 29 186 1 0 3,015 39 0 3 (1) (5) 0 0 36 1,760 45 156 38 225 10 3 4,093 Financial assets at amortized cost by rating class in € m. iAAA–iAA iA iBBB iBB iB iCCC and below Total in € m. iAAA–iAA iA iBBB iBB iB iCCC and below Total Gross Carrying Amount Stage 3 Stage 3 POCI Total Stage 1 Stage 2 Stage 3 Stage 2 Stage 1 538 225,216 734 88,250 150,519 2,662 147,005 11,891 36,178 13,674 0 0 0 0 0 5,874 10,655 651,941 35,372 10,655 4,774 0 225,754 0 88,983 0 153,181 0 158,896 0 49,851 1,729 23,032 1,729 699,697 1 5 43 202 240 54 544 0 0 9 76 251 310 648 0 0 0 0 0 3,614 3,614 Dec 31, 2020 Allowance for Credit Losses Stage 3 POCI 0 0 0 0 0 139 139 Total 1 5 52 279 492 4,117 4,946 Stage 2 Stage 1 380 209,612 259 93,098 1,922 150,213 146,655 6,695 40,495 10,625 4,799 645,967 24,680 5,894 Gross Carrying Amount Dec 31, 2019 Allowance for Credit Losses Stage 3 Stage 3 POCI Total Stage 1 Stage 2 Stage 3 0 0 0 1 1 7,529 7,531 0 209,992 0 93,357 0 152,135 0 153,351 1 51,122 2,149 20,371 2,150 680,328 2 7 39 191 263 49 549 0 0 7 58 192 236 492 0 0 0 0 0 3,015 3,015 Stage 3 POCI 0 0 0 0 0 36 36 Total 2 7 46 249 455 3,335 4,093 Our existing commitments to lend additional funds to debtors with Stage 3 financial assets at amortized cost amounted to € 446 million as of December 31, 2020 and € 279 million as of December 31, 2019. Collateral held against financial assets at amortized cost in stage 3 in € m. Financial Assets at Amortized Cost (Stage 3) 1 Stage 3 consists here only of non-POCI assets Gross Carrying Amount Collateral Guarantees Gross Carrying Amount Collateral Guarantees Dec 31, 2020 Dec 31, 2019 10,655 3,753 558 7,531 2,855 243 In 2020, collateral and guarantees held against financial assets as amortized cost in stage 3 increased by € 1,213 million, or 39 %, driven by Private Bank. Due to full collateralization we did not recognize an allowance for credit losses against Financial assets at amortized cost in Stage 3 for € 625 million in 2020 and € 832 million in 2019. Modified Assets at Amortized Cost A financial asset is considered modified when its contractual cash flows are renegotiated or otherwise modified. Renegotiation or modification may or may not lead to derecognition of the old and recognition of the new financial instrument. This section covers modified financial assets that have not been derecognized. Under IFRS 9, when the terms of a Financial Asset are renegotiated or modified and the modification does not result in derecognition, a gain or loss is recognized in the income statement as the difference between the original contractual cash flows and the modified cash flows discounted at the original effective interest rate (EIR). For modified financial assets the determination of whether the asset’s credit risk has increased significantly reflects the comparison of: 84 Deutsche Bank Annual Report 2020 Risk and capital management Credit risk management and asset quality – The remaining lifetime probability of default (PD) at the reporting date based on the modified terms; with – The remaining lifetime PD estimated based on data at initial recognition and based on the original contractual terms. Modified Assets Amortized Cost in € m. Amortized cost carrying amount prior to modi- fication Net modification gain/losses recognized Stage 1 Stage 2 Stage 3 Stage 3 POCI Total Stage 1 Stage 2 Stage 3 Dec 31, 2020 Dec 31, 2019 Stage 3 POCI Total 0 0 81 2 73 (30) 0 0 153 (29) 4 (4) 1 (0) 42 (40) 0 0 47 (45) In 2020, we have observed the increase of € 107 million, or 228 %, in modified assets at amortized cost due to client related modifications, which were granted with no modification loss. We did not include any COVID-19 driven modifications into the above table. For further details to COVID-19 related modifications, please refer to “Legislative and non-legislative moratoria and public guarantee schemes in light of COVID-19 pandemic” We have observed immaterial amounts of modified assets that have been upgraded to stage 1. We have not observed any subsequent re-deterioration of those assets into stages 2 and 3. In 2019, we have observed immaterial amounts of modified assets that have been upgraded to stage 1. We have not observed any subsequent re-deterioration of those assets into stages 2 and 3. Financial Assets at Fair value through Other Comprehensive Income The fair value of financial assets at Fair value through Other Comprehensive Income (FVOCI) subject to impairment was € 56 billion at December 31, 2020, compared to € 46 billion at December 31, 2019. Allowance for credit losses against these assets remained at very low levels (€ 20 million as of December 31, 2020 and € 35 million as of December 31, 2019). Due to immateriality no further breakdown is provided for financial assets at FVOCI. Off-balance sheet lending commitments and guarantee business The following tables provide an overview of the nominal amount and credit loss allowance for our off-balance sheet financial asset class broken down into stages as per IFRS 9 requirements. Development of nominal amount and allowance for credit losses in € m. Balance, beginning of year Movements including new business Transfers due to changes in creditworthiness Changes in models Foreign exchange and other changes Balance, end of reporting period in € m. Balance, beginning of year Movements including new business Transfers due to changes in creditworthiness Changes in models Foreign exchange and other changes Balance, end of reporting period Dec 31, 2020 Nominal Amount Stage 1 251,930 16,918 (7,247) 0 (10,056) 251,545 Stage 2 5,864 (2,786) 6,101 0 (455) 8,723 Stage 3 1,424 126 1,146 0 (110) 2,587 Stage 3 POCI 0 1 0 0 0 1 Total 259,218 14,259 0 0 (10,622) 262,856 Dec 31, 2019 Nominal Amount Stage 1 252,039 (507) (99) 0 496 251,930 Stage 2 10,021 (3,256) (933) 0 33 5,864 Stage 3 Stage 3 POCI 599 (213) 1,032 0 6 1,424 0 0 0 0 0 0 Total 262,659 (3,976) 0 0 535 259,218 85 Deutsche Bank Annual Report 2020 Risk and capital management Credit risk management and asset quality Stage 1 in € m. Balance, beginning of year Movements including new business Transfers due to changes in creditworthiness Changes in models Foreign exchange and other changes Balance, end of reporting period Provision for Credit Losses excluding country risk1 1 The above table breaks down the impact on provision for credit losses from movements in financial assets including new business, transfers due to changes in creditworthi- 166 41 (1) 0 (6) 200 40 128 13 0 0 3 144 13 48 21 0 0 4 74 22 0 0 0 0 0 0 0 Stage 3 POCI Stage 2 Stage 3 Dec 31, 2020 Allowance for Credit Losses2 Total 342 75 0 0 1 419 75 ness and changes in models. 2 Allowance for credit losses does not include allowance for country risk amounting to € 4 million as of December 31, 2020. Stage 1 in € m. Balance, beginning of year Movements including new business Transfers due to changes in creditworthiness Changes in models Foreign exchange and other changes Balance, end of reporting period Provision for Credit Losses excluding country risk1 1 The above table breaks down the impact on provision for credit losses from movements in financial assets including new business, transfers due to changes in creditworthi- 84 88 3 0 (9) 166 90 132 (13) 9 0 (1) 128 (4) 73 (5) (12) 0 (7) 48 (17) 0 0 0 0 0 0 0 Stage 3 POCI Stage 3 Stage 2 Dec 31, 2019 Allowance for Credit Losses2 Total 289 70 0 0 (17) 342 70 ness and changes in models. 2 Allowance for credit losses does not include allowance for country risk amounting to € 4 million as of December 31, 2019. Legal Claims Assets subject to enforcement activity consist of assets, which have been fully or partially written off and the Group still con- tinues to pursue recovery of the asset. Such enforcement activity comprises for example cases where the bank continues to devote resources (e.g. our Legal Department/CRM workout unit) towards recovery, either via legal channels or third party recovery agents. Enforcement activity also applies to cases where the Bank maintains outstanding and unsettled legal claims. This is irrespective of whether amounts are expected to be recovered and the recovery timeframe. It may be common practice in certain jurisdictions for recovery cases to span several years. Amounts outstanding on financial assets that were written off during the reporting period and are still subject to enforcement activity amounted to € 295 million in fiscal year 2020, mainly in Corporate Bank, Investment Bank and Private Bank. In 2019, legal claims amounted to € 152 million, mainly in Corporate Bank and Private Bank. Renegotiated and forborne assets at amortized costs For economic or legal reasons we might enter into a forbearance agreement with a borrower who faces or will face financial difficulties in order to ease the contractual obligation for a limited period of time. A case-by-case approach is applied for our corporate clients considering each transaction and client -specific facts and circumstances. For consumer loans we offer forbearances for a limited period of time, in which the total or partial outstanding or future instalments are deferred to a later point of time. However, the amount not paid including accrued interest during this period must be re-compensated at a later point of time. Repayment options include distribution over residual tenor, a one-off payment or a tenor extension. Forbear- ances are restricted and depending on the economic situation of the client, our risk management strategies and the local legislation. In case a forbearance agreement is entered into, an impairment measurement is conducted as described below, an impairment charge is taken if necessary and the loan is subsequently recorded as impaired. In our management and reporting of forborne assets at amortized costs, we are following the EBA definition for forbearances and non-performing loans (Implementing Technical Standards (ITS) on Supervisory reporting on forbearance and non-per- forming exposures under article 99(4) of Regulation (EU) No 575/2013). Once the conditions mentioned in the ITS are met, we report the loan as being forborne; we remove the asset from our forbearance reporting, once the discontinuance criteria in the ITS are met (i.e., the contract is considered as performing, a minimum two year probation period has passed, regular payments of more than an insignificant aggregate amount of principal or interest have been made during at least half of the probation period, and none of the exposures to the debtor is more than 30 days past-due at the end of the probation period). In 2020, forbearance measures granted as a consequence of the COVID-19 crisis have been added to the above regulations and are included in the following table, even if these measures, in accordance with EBA guidance, do in general not trigger a stage transition. COVID-19 related moratoria in contrast are not relevant for the below table. For further details please refer to the section “Legislative and non-legislative moratoria and public guarantee schemes in light of COVID-19 pandemic”. 86 Deutsche Bank Annual Report 2020 Risk and capital management Credit risk management and asset quality Forborne financial assets at amortized cost Performing Non-performing Dec 31, 2020 Total forborne loans at amortized cost Performing Non-performing Dec 31, 2019 Total forborne loans at amortized cost in € m. German Non-German Total Stage 1 1,014 4,515 5,529 Stage 2 1,404 2,388 3,792 Stage 1 Stage 2 2 10 12 18 35 53 Stage 3 1,297 2,775 4,072 Stage 2 Stage 2 3,735 9,723 13,459 985 780 1,765 31 59 90 Stage 3 1,227 1,714 2,940 2,243 2,552 4,796 Development of forborne financial assets at amortized cost in € m. Balance beginning of period Classified as forborne during the year Transferred to non-forborne during the year (including repayments) Charge-offs Exchange rate and other movements Balance end of period Dec 31, 2020 4,796 10,141 (1,371) (35) (72) 13,459 Dec 31, 2019 4,841 1,702 (1,408) (342) 1 4,796 Forborne assets at amortized cost increased by € 8.7 billion, predominantly due to the inclusion of Forbearance measures granted as a consequence of the COVID-19 pandemic. Forborne assets at amortized cost slightly decreased by € 45 million, or 1 % in 2019. Collateral Obtained We obtain collateral on the balance sheet only in certain cases by either taking possession of collateral held as security or by calling upon other credit enhancements. Collateral obtained is made available for sale in an orderly fashion or through public auctions, with the proceeds used to repay or reduce outstanding indebtedness. Generally we do not occupy obtained proper- ties for our business use. The residential real estate collateral obtained in 2020 refers predominantly to our exposures in Spain. Collateral Obtained during the reporting period in € m. Commercial real estate Residential real estate1 Other Total collateral obtained during the reporting period 2020 0 3 0 3 2019² 0 3 0 3 1 Carrying amount of foreclosed residential real estate properties amounted to € 27 million as of December 31, 2020 and € 29 million as of December 31, 2019 (restated com- pared to prior year disclosure). 2 Numbers have been restated compared to prior year disclosure. The collateral obtained, as shown in the table above, excludes collateral recorded as a result of consolidating securitization trusts under IFRS 10. In 2020 as well as in 2019 the Group did not obtain any collateral related to these trusts. Derivatives – Credit Valuation Adjustment We establish counterparty Credit Valuation Adjustment (CVA) for OTC derivative transactions to cover expected credit losses. The adjustment amount is determined by assessing the potential credit exposure to a given counterparty and taking into account any collateral held, the effect of any relevant netting arrangements, expected loss given default and the credit risk, based on available market information, including CDS spreads. Treatment of default situations under derivatives Unlike standard loan assets, we generally have more options to manage the credit risk in our derivatives transactions when movement in the current replacement costs or the behavior of our counterparty indicate that there is the risk that upcoming payment obligations under the transactions might not be honored. In these situations, we are frequently able under the relevant derivatives agreements to obtain additional collateral or to terminate and close-out the derivative transactions at short notice. The master agreements and associated collateralization agreements for OTC derivative transactions executed with our clients typically result in the majority of our credit exposure being secured by collateral. It also provides for a broad set of standard or bespoke termination rights, which allow us to respond swiftly to a counterparty’s default or to other circumstances which indicate a high probability of failure. 87 Deutsche Bank Annual Report 2020 Risk and capital management Credit risk management and asset quality Our contractual termination rights are supported by internal policies and procedures with defined roles and responsibilities which ensure that potential counterparty defaults are identified and addressed in a timely fashion. These procedures include necessary settlement and trading restrictions. When our decision to terminate derivative transactions results in a residual net obligation owed by the counterparty, we restructure the obligation into a non-derivative claim and manage it through our regular work-out process. As a consequence, for accounting purposes we typically do not show any nonperforming derivatives. Wrong-way risk occurs when exposure to a counterparty is adversely correlated with the credit quality of that counterparty. In compliance with Article 291(2) and (4) CRR we have a monthly process to monitor several layers of wrong-way risk (specific wrong-way risk, general explicit wrong-way risk at country/industry/region levels and general implicit wrong-way risk, whereby relevant exposures arising from transactions subject to wrong-way risk are automatically selected and presented for comment to the responsible credit officer). A wrong-way risk report is then sent to Credit Risk senior management on a monthly basis. In addition, we utilized our established process for calibrating our own alpha factor (as defined in Article 284 (9) CRR) to estimate the overall wrong-way risk in our derivatives and securities financing transaction portfolio. The Private Bank Ger- many’s derivative counterparty risk is immaterial to the Group and collateral held is typically in the form of cash. Managing and mitigation of Credit Risk Managing Credit Risk on counterparty level Credit-related counterparties are principally allocated to credit officers within credit teams which are organized by types of counterparty (such as financial institutions, corporates or private individuals) or economic area (e.g., emerging markets) and supported by dedicated rating analyst teams where deemed necessary. The individual credit officers have the relevant exper- tise and experience to manage the credit risks associated with these counterparties and their associated credit related trans- actions. For retail clients, credit decision making and credit monitoring is highly automated for efficiency reasons. Credit Risk Management has full oversight of the respective processes and tools used in these highly automated retail credit processes. It is the responsibility of each credit officer to undertake ongoing credit monitoring for their allocated portfolio of counterparties. We also have procedures in place intended to identify at an early stage credit exposures for which there may be an increased risk of loss. In instances where we have identified counterparties where there is a concern that the credit quality has deteriorated or appears likely to deteriorate to the point where they present a heightened risk of loss in default, the respective exposure is generally placed on a “watchlist”. We aim to identify counterparties that, on the basis of the application of our risk management tools, demonstrate the likelihood of problems well in advance in order to effectively manage the credit exposure and minimize potential losses. The objective of this early warning system is to address potential problems while adequate options for action are still available. This early risk detection is a tenet of our credit culture and is intended to ensure that greater attention is paid to such exposures. Credit limits are established by the Credit Risk Management function via the execution of assigned credit authorities. This also applies to settlement risk that must fall within limits pre-approved by Credit Risk Management considering risk appetite and in a manner that reflects expected settlement patterns for the subject counterparty. Credit approvals are documented by the signing of the credit report by the respective credit authority holders and retained for future reference. Credit authority is generally assigned to individuals as personal credit authority according to the individual’s professional qual- ification, experience and training. All assigned credit authorities are reviewed on a periodic basis to help ensure that they are commensurate with the individual performance of the authority holder. Where an individual’s personal authority is insufficient to establish required credit limits, the transaction is referred to a higher credit authority holder or where necessary to an appropriate credit committee. Where personal and committee authorities are insufficient to establish appropriate limits, the case is referred to the Management Board for approval. Mitigation of Credit Risk on counterparty level In addition to determining counterparty credit quality and our risk appetite, we also use various credit risk mitigation techniques to optimize credit exposure and reduce potential credit losses. Credit risk mitigants are applied in the following forms: – Comprehensive and enforceable credit documentation with adequate terms and conditions. – Collateral held as security to reduce losses by increasing the recovery of obligations. – Risk transfers, which shift the loss arising from the probability of default risk of an obligor to a third party including hedging executed by our Strategic Corporate Lending (SCL). – Netting and collateral arrangements which reduce the credit exposure from derivatives and securities financing transactions (e.g. repo transactions). – Hedging of derivatives counterparty risk including CVA, using primarily CDS contracts via our Counterparty Portfolio Man- agement desk. 88 Deutsche Bank Annual Report 2020 Risk and capital management Credit risk management and asset quality Collateral We regularly agree on collateral to be received from or to be provided to customers in contracts that are subject to credit risk. Collateral is security in the form of an asset or third-party obligation that serves to mitigate the inherent risk of credit loss in an exposure, by either substituting the counterparty default risk or improving recoveries in the event of a default. While collateral can be an alternative source of repayment, it does not replace the necessity of high quality underwriting standards and a thorough assessment of the debt service ability of the counterparty in line with CRR Article 194 (9). We segregate collateral received into the following two types: – Financial and other collateral, which enables us to recover all or part of the outstanding exposure by liquidating the collateral asset provided, in cases where the counterparty is unable or unwilling to fulfill its primary obligations. Cash collateral, securities (equity, bonds), collateral assignments of other claims or inventory, equipment (i.e., plant, machinery and aircraft) and real estate typically fall into this category. All financial collateral is regularly, mostly daily, revalued and measured against the respective credit exposure. The value of other collateral, including real estate, is monitored based upon estab- lished processes that includes regular reviews or revaluations by internal and/or external experts. – Guarantee collateral, which complements the counterparty’s ability to fulfill its obligation under the legal contract and as such is provided by third parties. Letters of credit, insurance contracts, export credit insurance, guarantees, credit deriva- tives and risk participations typically fall into this category. Guarantee collateral with a non-investment grade rating of the guarantor is limited. Our processes seek to ensure that the collateral we accept for risk mitigation purposes is of high quality. This includes seeking to have in place legally effective and enforceable documentation for realizable and measureable collateral assets which are evaluated regularly by dedicated teams. The assessment of the suitability of collateral for a specific transaction is part of the credit decision and must be undertaken in a conservative way, including collateral haircuts that are applied. We have collateral type specific haircuts in place which are regularly reviewed and approved. In this regard, we strive to avoid “wrong-way” risk characteristics where the counterparty’s risk is positively correlated with the risk of deterioration in the collateral value. For guarantee collateral, the process for the analysis of the guarantor’s creditworthiness is aligned to the credit assessment pro- cess for counterparties. The valuation of collateral is considered under a liquidation scenario. Liquidation value is equal to the expected proceeds of collateral monetization / realization in a base case scenario, wherein a fair price is achieved through careful preparation and orderly liquidation of the collateral. Collateral can either move in value over time (dynamic value) or not (static value). The dynamic liquidation value generally includes a safety margin or haircut over realizable value to address liquidity and marketa- bility aspects. The Group assigns a liquidation value to eligible collateral, based on, among other things: – the market value and / or lending value, notional amount or face value of a collateral as a starting point; – the type of collateral; the currency mismatch, if any, between the secured exposure and the collateral; and a maturity mismatch, if any; – the applicable legal environment or jurisdiction (onshore versus offshore collateral); – the market liquidity and volatility in relation to agreed termination clauses; – the correlation between the performance of the borrower and the value of the collateral, e.g., in the case of the pledge of a borrower’s own shares or securities (in this case generally full correlation leads to no liquidation value); – the quality of physical collateral and potential for litigation or environmental risks; and – a determined collateral type specific haircut (0 – 100 %) reflecting collection risks (i.e. price risks over the average liquida- tion period and processing/utilization/sales cost) as specified in the respective policies. Collateral haircut settings are typically based on available historic internal and/or external recovery data (expert opinions may also be used, where appropriate). They also incorporate a forward-looking component in the form of collection and valuation forecast provided by experts within Risk Management. When data is not sufficiently available or inconclusive, more conserva- tive haircuts than otherwise used must be applied. Haircut settings are reviewed at least annually. Risk transfers Risk transfers to third parties form a key part of our overall risk management process and are executed in various forms, including outright sales, single name and portfolio hedging, and securitizations. Risk transfers are conducted by the respective business units and by Strategic Corporate Lending (“SCL”), in accordance with specifically approved mandates. SCL manages the residual credit risk of loans and lending-related commitments of the institutional and corporate credit port- folio, the leveraged portfolio and the medium-sized German companies’ portfolio across our CB and IB divisions. Acting as a central pricing reference, SCL provides the businesses with an observed or derived capital market rate for loan applications; however, the decision of whether or not the business can enter into the credit risk remains exclusively with Credit Risk Management. 89 Deutsche Bank Annual Report 2020 Risk and capital management Credit risk management and asset quality SCL is concentrating on two primary objectives within the credit risk framework to enhance risk management discipline, im- prove returns and use capital more efficiently: – to reduce single-name credit risk concentrations within the credit portfolio and – to manage credit exposures by utilizing techniques including loan sales, securitization via collateralized loan obligations, sub-participations and single-name and portfolio credit default swaps. Netting and collateral arrangements for derivatives and Securities Financing Transactions Netting is applicable to both exchange traded derivatives and OTC derivatives. Netting is also applied to securities financing transactions (e.g. repurchase, securities lending and margin lending transactions) as far as documentation, structure and nature of the risk mitigation allow netting with the underlying credit risk. All exchange traded derivatives are cleared through central counterparties (CCPs), which interpose themselves between the trading entities by becoming the counterparty to each of the entities. Where legally required or where available and to the extent agreed with our counterparties, we also use CCP clearing for our OTC derivative transactions. The Dodd-Frank Act and related Commodity Futures Trading Commission (CFTC) rules require CCP clearing in the United States for certain standardized OTC derivative transactions, including certain interest rate swaps and index credit default swaps, subject to limited exceptions when facing certain counterparties. The European Regulation (EU) No 648/2012 on OTC Derivatives, Central Counterparties and Trade Repositories (EMIR) and the Commission Delegated Regulations (EU) 2015/2205, (EU) 2015/592 and (EU) 2016/1178 based thereupon introduced mandatory CCP clearing in the EU for cer- tain standardized OTC derivatives transactions. Mandatory CCP clearing in the EU began for certain interest rate derivatives on June 21, 2016 and for certain iTraxx-based credit derivatives and additional interest rate derivatives on February 9, 2017. Article 4 (2) of EMIR authorizes competent authorities to exempt intragroup transactions from mandatory CCP clearing, pro- vided certain requirements, such as full consolidation of the intragroup transactions and the application of an appropriate centralized risk evaluation, measurement and control procedure are met. The Bank successfully applied for the clearing ex- emption for a number of its regulatory-consolidated subsidiaries with intragroup derivatives, including e.g., Deutsche Bank Securities Inc. and Deutsche Bank Luxembourg S.A. As of December 31, 2020, the Bank is allowed to make use of has obtained intragroup exemptions from the EMIR clearing obligation for 57 bilateral intragroup relationships. The extent of the exemptions differs as not all entities enter into relevant transaction types subject to the clearing obligation. Of the 57 intragroup relationships, 14 are relationships where both entities are established in the Union (EU) for which a full exemption has been granted, and 43 are relationships where one is established in a third country (“Third Country Relationship”). Third Country Relationships required repeat applications for each new asset class being subject to the clearing obligation; the process took place in the course of 2017. Such repeat applications, at the time, were been filed for 39 of the Third Country Relationships, with a number of those entities having been liquidated in the meantime. Due to “Brexit”, the status of some group entities will change from an EU entity to a third country entity. There are two affected UK group entities, but we have not applied for any EMIR clearing exemption for those entities. The rules and regulations of CCPs typically provide for the bilateral set off of all amounts payable on the same day and in the same currency (“payment netting”) thereby reducing our settlement risk. Depending on the business model applied by the CCP, this payment netting applies either to all of our derivatives cleared by the CCP or at least to those that form part of the same class of derivatives. Many CCPs’ rules and regulations also provide for the termination, close-out and netting of all cleared transactions upon the CCP’s default (“close-out netting”), which reduces our credit risk. In our risk measurement and risk assessment processes we apply close-out netting only to the extent we believe that the relevant CCP’s close-out netting provisions are legally valid and enforceable. In order to reduce the credit risk resulting from OTC derivative transactions, where CCP clearing is not available, we regularly seek the execution of standard master agreements (such as master agreements for derivatives published by the International Swaps and Derivatives Association, Inc. (ISDA) or the German Master Agreement for Financial Derivative Transactions) with our counterparties. A master agreement allows for the close-out netting of rights and obligations arising under derivative transactions that have been entered into under such a master agreement upon the counterparty’s default, resulting in a single net claim owed by or to the counterparty. For certain parts of the derivatives business (e.g., foreign exchange transactions), we also enter into master agreements under which payment netting applies with respect to transactions covered by such master agreements, reducing our settlement risk. In our risk measurement and risk assessment processes we apply close- out netting only to the extent we believe that the master agreement is legally valid and enforceable in all relevant jurisdictions. We also enter into credit support annexes (CSAs) to master agreements in order to further reduce our derivatives-related credit risk. These annexes generally provide risk mitigation through periodic, usually daily, margining of the covered exposure. The CSAs also provide for the right to terminate the related derivative transactions upon the counterparty’s failure to honor a margin call. As with netting, when we believe the annex is enforceable, we reflect this in our exposure measurement. The Dodd-Frank Act and CFTC rules thereunder, including CFTC rule § 23.504, as well as EMIR and Commission Delegated Regulation based thereupon, namely Commission Delegated Regulation (EU) 2016/2251, introduced the mandatory use of master agreements and related CSAs, which must be executed prior to or contemporaneously with entering into an uncleared 90 Deutsche Bank Annual Report 2020 Risk and capital management Credit risk management and asset quality OTC derivative transaction. Similar documentation is required by the U.S. margin rules adopted by U.S. prudential regulators, and will be required under SEC rules for security based swaps scheduled to become effective in 2021. Under the U.S. margin rules, we are required to post and collect initial margin for our derivatives exposures with other derivatives dealers, as well as with our counterparties that (a) are “financial end users,” as that term is defined in the U.S. margin rules, and (b) have an average daily aggregate notional amount of uncleared swaps, uncleared security-based swaps, foreign exchange forwards and foreign exchange swaps exceeding U.S.$ 8 billion in June, July and August of the previous calendar year. The U.S. margin rules additionally require us to post and collect variation margin for our derivatives with other derivatives dealers and certain financial end user counterparties. These margin requirements are subject to a U.S.$ 50 million threshold for initial margin, but no threshold for variation margin, with a combined U.S.$ 500,000 minimum transfer amount. The U.S. margin requirements have been in effect for large banks since September 2016, with additional variation margin requirements having come into effect March 1, 2017 and additional initial margin requirements are being phased in from September 2017 through September 2022, with the relevant compliance dates depending in each case on the transactional volume of the parties and their affiliates. Compliance with SEC margin requirements will not be required prior to the compliance date for registration of security-based swap dealers in November 2021 at the latest. Under Commission Delegated Regulation (EU) 2016/2251, which implements the EMIR margin requirements, the CSA must provide for daily valuation and daily variation margining based on a zero threshold and a minimum transfer amount of not more than € 500,000. For large derivative exposures exceeding € 8 billion, initial margin has to be posted as well. The variation margin requirements under EMIR apply as of March 1, 2017; the initial margin requirements will be subject to a staged phase- in until September 1, 2021. However, legislative changes have been published on February 17, 2021 that, among others, will extend deadlines into 2022. Under Article 31 of Commission Delegated Regulation (EU) 2016/2251, an EU party may decide to not exchange margin with counterparties in certain non-netting jurisdictions provided certain requirements are met. Pursuant to Article 11 (5) to (10) of EMIR competent authorities are authorized to exempt intragroup transactions from the margining obligation, provided certain requirements are met. While some of those requirements are the same as for the EMIR clearing exemptions (see above), there are additional requirements such as the absence of any current or foreseen practical or legal impediment to the prompt transfer of funds or repayment of liabilities between intragroup counterparties. The Bank is making use of this exemption. The Bank has successfully applied for the collateral exemption for some of its regulatory-consolidated subsidiaries with intragroup derivatives, including, e.g., Deutsche Bank Securities Inc. and Deutsche Bank Luxembourg S.A. As of December 31, 2020, the Bank has obtained intragroup exemptions from the EMIR collateral obligation for a number of bilateral intragroup relationships which are published under https://www.db.com/company/en/intra-group-exemptions--mar- gining.htm. For third country subsidiaries, the intragroup exemption is currently limited until the earlier of December 21, 2020 and four months after the publication of an equivalence decision by the EU Commission under Article 13(2) EMIR, unless, in the case of an equivalence decision being applicable, a follow-up exemption application is made and granted. The pending legislative changes mentioned above extend that deadline to June 30, 2022, but re-application will be necessary also for third countries without equivalence decision. For some bilateral intragroup relationships, the EMIR margining exemption may be used based on Article 11 (5) of EMIR, i.e. without the need for any application, because both entities are established in the same EU Member State. Due to “Brexit”, the status of the one intragroup entity contained in the published list will change from an EU entity to that of a third country entity. That entity has been taken off the exemption list as per December 31, 2020 and no margin exemption will be used for the time being. Certain CSAs to master agreements provide for rating-dependent triggers, where additional collateral must be pledged if a party’s rating is downgraded. We also enter into master agreements that provide for an additional termination event upon a party’s rating downgrade. These downgrade provisions in CSAs and master agreements usually apply to both parties but in some agreements may apply to us only. We analyze and monitor our potential contingent payment obligations resulting from a rating downgrade in our stress testing approach for liquidity risk on an ongoing basis. For an assessment of the quantitative impact of a downgrading of our credit rating please refer to table “Stress Testing Results” in the section “Liquidity Risk”. Concentrations within Credit Risk mitigation Concentrations within credit risk mitigations taken may occur if a number of guarantors and credit derivative providers with similar economic characteristics are engaged in comparable activities with changes in economic or industry conditions affect- ing their ability to meet contractual obligations. We use a range of tools and metrics to monitor our credit risk mitigating activities. For more qualitative and quantitative details in relation to the application of credit risk mitigation and potential concentration effects please refer to the section “Maximum Exposure to Credit Risk”. 91 Deutsche Bank Annual Report 2020 Risk and capital management Credit risk management and asset quality Managing Credit Risk on portfolio level On a portfolio level, significant concentrations of credit risk could result from having material exposures to a number of coun- terparties with similar economic characteristics, or who are engaged in comparable activities, where these similarities may cause their ability to meet contractual obligations to be affected in the same manner by changes in economic or industry conditions. Our portfolio management framework supports a comprehensive assessment of concentrations within our credit risk portfolio in order to keep concentrations within acceptable levels. Industry risk management To manage industry risk, we have grouped our corporate and financial institutions counterparties into various industry sub- portfolios. Portfolios are regularly reviewed with the frequency of review according to portfolio size and risk profile as well as risk developments. Larger / riskier portfolios are reviewed at least on an annual basis. Reviews highlight industry developments and risks to our credit portfolio, review cross-risk concentration risks, analyze the risk/reward profile of the portfolio and incor- porate the results of an economic downside stress test. Finally, this analysis is used to define the credit strategies for the portfolio in question. In our Industry Limit framework, thresholds are established for aggregate credit limits to counterparties within each industry sub-portfolio. For risk management purposes, the aggregation of limits across industry sectors follows an internal risk view that does not have to be congruent with NACE (Nomenclature des Activities Economiques dans la Communate Europeenne) code based view applied elsewhere in this report. Regular overviews are prepared for the Enterprise Risk Committee to discuss recent developments and to agree on actions where necessary. Beyond credit risk, our Industry Risk Framework comprises of thresholds for Traded Credit Positions while key non-financial risks are closely monitored. Country risk management Avoiding undue concentrations from a regional perspective is also an integral part of our credit risk management framework. In order to achieve this, country risk thresholds are applied to Emerging Markets as well as selected Developed Markets countries (based on internal country risk ratings). Emerging Markets are divided into regions. Similar to industry risk, country portfolios are regularly reviewed with the frequency of review according to portfolio size and risk profile as well as risk devel- opments. Larger / riskier portfolios are reviewed at least on an annual basis. These reviews assess key macroeconomic developments and outlook, review portfolio composition and cross-risk concentration risks and analyze the risk/reward profile of the portfolio. Based on this, country risk appetite and strategies are set. In our Country Risk Framework, thresholds are established for counterparty credit risk exposures in a given country to manage the aggregated credit risk subject to country-specific economic and political events. These thresholds cover exposures to entities incorporated locally including subsidiaries of foreign multinational corporations as well as companies with significant economic or operational dependence on a specific country even though they are incorporated externally. In addition, gap risk thresholds are set to control the risk of loss due to intra-country wrong-way risk exposure. As such, for risk management purposes, the aggregation of exposures across countries follows an internal risk view that may differ from the geographical exposure view applied elsewhere in this report. Beyond credit risk, our Country Risk Framework comprises thresholds for trading positions in Emerging Markets and selective Developed Markets that measure the aggregate market value of traded credit risk positions. For Emerging Markets, thresholds are also set to measure the Profit and Loss impact under specific country stress scenarios on trading positions across the Bank’s portfolio. Furthermore thresholds are set for capital positions and intra-group funding exposure of Deutsche Bank entities in above countries given the transfer risk inherent in these cross- border positions. Key non-financial risks are closely monitored. Our country risk ratings represent a key tool in our manage- ment of country risk. They include: – Sovereign rating (set and managed by ERM): A measure of the probability of the sovereign defaulting on its foreign or local currency obligations. – Transfer risk rating (set and managed by ERM): A measure of the probability of a “transfer risk event”, i.e., the risk that an otherwise solvent debtor is unable to meet its obligations due to inability to obtain foreign currency or to transfer assets as a result of direct sovereign intervention. All sovereign and transfer risk ratings are reviewed, at least on an annual basis. Product/Asset class specific risk management Complementary to our counterparty, industry and country risk approach, we focus on product/asset class specific risk con- centrations and set limits or thresholds where required for risk management purposes. Specific risk limits are set in particular if a concentration of transactions of a specific type might lead to significant losses under certain conditions. In this respect, correlated losses might result from disruptions of the functioning of financial markets, significant moves in market parameters 92 Deutsche Bank Annual Report 2020 Risk and capital management Market risk management to which the respective product is sensitive, macroeconomic default scenarios or other factors. Specific focus is put on trans- actions with underwriting risks where we underwrite commitments with the intention to sell down or distribute part of the risk to third parties. These commitments include the undertaking to provide bank loans for syndication into the debt capital market and bridge loans for the issuance of notes. The inherent risks of being unsuccessful in the distribution of the facilities or the placement of the notes, comprise of a delayed distribution, funding of the underlying loans as well as a pricing risk as some underwriting commitments are additionally exposed to market risk in the form of widening credit spreads. Where applicable, we dynamically hedge this credit spread risk to be within the approved market risk limit framework. A major asset class, in which Deutsche Bank is active in underwriting, is leverage lending, which we mainly execute through our Leveraged Debt Capital Markets (LDCM) business unit. The business model is a fee-based‚ originate to distribute ap- proach focused on the distribution of largely unfunded underwriting commitments into the capital market. The aforementioned risks regarding distribution and credit spread movement apply to this business unit, however, are managed under a range of specific notional as well as market risk limits. The latter require the business to also hedge its underwriting pipeline against market dislocations. The fee-based model of our LDCM business unit includes a restrictive approach to single-name risk concentrations retained on Deutsche Bank‘s balance sheet, which results in a diversified overall portfolio without any material concentrations. The resulting longer-term on-balance sheet portfolio is also subject to a comprehensive credit limit and hedg- ing framework. Deutsche Bank also assumes underwriting risk with respect to Commercial Real Estate (CRE) loans, primarily in the CRE business unit in the Investment Bank where loans may be originated with the intent to securitize in the capital markets or syndicate to other lenders. The aforementioned inherent underwriting risks such as delayed distribution and pricing risk are managed through notional caps, market risk limits and hedging against the risk of market dislocations. In addition to underwriting risk, we also focus on concentration of transactions with specific risk dynamics (including risk to commercial real estate and risk from securitization positions). Furthermore, DB defines its risk appetite on division, asset class (product) and business unit level. In addition, our PB and certain CB businesses are managed via product-specific strategies setting our risk appetite for sufficiently homogeneous portfolios, such as the retail portfolios of mortgages and consumer finance products as well as products for business clients. Here risk analyses are performed on portfolio level. Analysis for individual clients are of secondary importance. In Wealth Management, target levels are set for global concentrations along products as well as based on type and liquidity of collateral. Market risk management Market risk framework The vast majority of our businesses are subject to market risk, defined as the potential for change in the market value of our trading and invested positions. Risk can arise from changes in interest rates, credit spreads, foreign exchange rates, equity prices, commodity prices and other relevant parameters, such as market volatility and market implied default probabilities. The market risk can affect accounting, economic and regulatory views of our exposure. Market Risk Management is part of our independent Risk function and sits within the Market and Valuations Risk Management group. One of the primary objectives of Market Risk Management is to ensure that our business units’ risk exposure is within the approved risk appetite commensurate with its defined strategy. To achieve this objective, Market Risk Management works closely together with risk takers (“the business units”) and other control and support groups. We distinguish between three substantially different types of market risk: – Trading market risk arises primarily through the market-making and client facilitation activities of the Investment Bank and Corporate Bank Divisions. This involves taking positions in debt, equity, foreign exchange, other securities and commodities as well as in equivalent derivatives. – Traded default risk arising from defaults and rating migrations relating to trading instruments. – Nontrading market risk arises from market movements, primarily outside the activities of our trading units, in our banking book and from off-balance sheet items. This includes interest rate risk, credit spread risk, investment risk and foreign exchange risk as well as market risk arising from our pension schemes, guaranteed funds and equity compensation. Non- trading market risk also includes risk from the modeling of client deposits as well as savings and loan products. Market Risk Management governance is designed and established to promote oversight of all market risks, effective decision- making and timely escalation to senior management. 93 Deutsche Bank Annual Report 2020 Risk and capital management Market risk management Market Risk Management defines and implements a framework to systematically identify, assess, monitor and report our market risk. Market risk managers identify market risks through active portfolio analysis and engagement with the business units. Market risk measurement We aim to accurately measure all types of market risks by a comprehensive set of risk metrics embedding accounting, eco- nomic and regulatory considerations. We measure market risks by several internally developed key risk metrics and regulatory defined market risk approaches. Trading market risk Our primary mechanism to manage trading market risk is the application of our risk appetite framework of which the limit framework is a key component. Our Management Board, supported by Market Risk Management, sets group-wide value-at- risk, economic capital and portfolio stress testing limits for market risk in the trading book. Market Risk Management allocates this overall appetite to our Corporate Divisions and their individual business units based on established and agreed business plans. We also have business aligned heads within Market Risk Management who establish business unit limits, by allocating the limit down to individual portfolios, geographical regions and types of market risks. Value-at-risk, economic capital and portfolio stress testing limits are used for managing all types of market risk at an overall portfolio level. As an additional and important complementary tool for managing certain portfolios or risk types, Market Risk Management performs risk analysis and business specific stress testing. Limits are also set on sensitivity and concentration/li- quidity, exposure, business-level stress testing and event risk scenarios, taking into consideration business plans and the risk vs return assessment. Business units are responsible for adhering to the limits against which exposures are monitored and reported. The market risk limits set by Market Risk Management are monitored on a daily, weekly and monthly basis, dependent on the risk management tool being used. Internally developed market risk models Value-at-Risk (VaR) VaR is a quantitative measure of the potential loss (in value) of Fair Value positions due to market movements that should not be exceeded in a defined period of time and with a defined confidence level. Our value-at-risk for the trading businesses is based on our own internal model. In October 1998, the German Banking Su- pervisory Authority (now the BaFin) approved our internal model for calculating the regulatory market risk capital for our gen- eral and specific market risks based on a sensitivity based Monte Carlo approach. In October 2020, the ECB approved a significant change to our VaR model, now a Historical Simulation approach predominantly utilizing full revaluation, although some portfolios remain on a sensitivity based approach. The new approach is used for both Risk Management and Capital Requirements. The new approach provides more accurate modelling of our risks, enhances our analysis capabilities and provides a more effective tool for risk management. Aside from enabling a more accurate view of market risk, the implementation of Historical Simulation VaR has brought about an even closer alignment of our market risk systems and models to our end of day pricing. Risk management VaR is calibrated to a 99 % confidence level and a one day holding period. This means we estimate there is a 1 in 100 chance that a mark-to-market loss from our trading positions will be at least as large as the reported VaR. For regulatory capital purposes, our VaR model is calibrated to a 99% confidence interval and a ten day holding period. The calculation employs a Historical Simulation technique that uses one year of historical market data as input and observed correlations between the risk factors during this one year period. Our VaR model is designed to take into account a comprehensive set of risk factors across all asset classes. Key risk factors are swap/government curves, index and issuer-specific credit curves, single equity and index prices, foreign exchange rates, commodity prices as well as their implied volatilities. To help ensure completeness in the risk coverage, second order risk factors, e.g. money market basis, implied dividends, option-adjusted spreads and precious metals lease rates are also con- sidered in the VaR calculation. The list of risk factors include in the VaR model is reviewed regularly and enhanced as part of ongoing model performance reviews. 94 Deutsche Bank Annual Report 2020 Risk and capital management Market risk management The model incorporates both linear and, especially for derivatives, nonlinear impacts predominantly through a full revaluation approach but it also utilizes a sensitivity-based approach for certain portfolios. The full revaluation approach uses the historical changes to risk factors as input to pricing functions. Whilst this approach is computationally expensive, it does yield a more accurate view of market risk for nonlinear positions, especially under stressed scenarios. The sensitivity based approach uses sensitivities to underlying risk factors in combination with historical changes to those risk factors. For each business unit a separate VaR is calculated for each risk type, e.g. interest rate risk, credit spread risk, equity risk, foreign exchange risk and commodity risk. “Diversification effect” reflects the fact that the total VaR on a given day will be lower than the sum of the VaR relating to the individual risk types. Simply adding the VaR figures of the individual risk types to arrive at an aggregate VaR would imply the assumption that the losses in all risk types occur simultaneously The VaR enables us to apply a consistent measure across our fair value exposures. It allows a comparison of risk in different businesses, and also provides a means of aggregating and netting positions within a portfolio to reflect correlations and offsets between different asset classes. Furthermore, it facilitates comparisons of our market risk both over time and against our daily trading results. When using VaR results a number of considerations should be taken into account. These include: – The use of historical market data may not be a good indicator of potential future events, particularly those that are extreme in nature. This “backward-looking” limitation can cause VaR to understate future potential losses (as in 2008), but can also cause it to be overstated immediately following a period of significant stress (as in COVID-19 pandemic). – The one day holding period does not fully capture the market risk arising during periods of illiquidity, when positions cannot be closed out or hedged within one day. – VaR does not indicate the potential loss beyond the 99th quantile. – Intra-day risk is not reflected in the end of day VaR calculation. – There may be risks in the trading or banking book that are partially or not captured by the VaR model. Our process of systematically capturing and evaluating risks currently not captured in our VaR model has been further devel- oped and improved. An assessment is made to determine the level of materiality of these risks and material risks are prioritized for inclusion in our internal model. Risks not in VaR are monitored and assessed on a regular basis through our Risk Not In VaR (RNIV) framework. This framework has also undergone a significant overhaul in 2020. This includes aligning the meth- odologies with the Historical Simulation approach which in turn yields a more accurate estimate of the contribution of these missing items and their potential capitalization. We are committed to the ongoing development of our internal risk models, and we allocate substantial resources to reviewing, validating and improving them. Stressed Value-at-Risk Stressed Value-at-Risk (SVaR) calculates a stressed value-at-risk measure based on a one year period of significant market stress. We calculate a stressed value-at-risk measure using a 99 % confidence level. Stressed VaR is calculated with a holding period of ten days. Our SVaR calculation utilizes the same systems, trade information and processes as those used for the calculation of value-at-risk. The only difference is that historical market data and observed correlations from a period of signif- icant financial stress (i.e., characterized by high volatilities) is used as an input for the Historical Simulation. The time window selection process for the stressed value-at-risk calculation is based on the identification of a time window characterized by high levels of volatility in the top value-at-risk contributors. The identified window is then further validated by comparing the SVaR results to neighboring windows using the complete Group portfolio. Under the Historical Simulation model introduced in fourth quarter of 2020, the capital calculation for VaR has been higher than that for Stressed VaR which would normally lead to a change in the time window used for Stressed VaR. Following guidance from our regulators, the assessment of this stressed period window has been delayed until 2021 as the current VaR is already based on this more stressed period driven by COVID-19. Incremental Risk Charge Incremental Risk Charge captures default and credit rating migration risks for credit-sensitive positions in the trading book. We use a Monte Carlo Simulation for calculating incremental risk charge as the 99.9 % quantile of the portfolio loss distribution over a one-year capital horizon under a constant position approach and for allocating contributory incremental risk charge to individual positions. 95 Deutsche Bank Annual Report 2020 Risk and capital management Market risk management The model captures the default and migration risk in an accurate and consistent quantitative approach for all portfolios. Im- portant parameters for the incremental risk charge calculation are exposures, recovery rates, maturity, ratings with corre- sponding default and migration probabilities and parameters specifying issuer correlations. Market risk standardized approach The Market Risk Standardized Approach (“MRSA”) is used to determine the regulatory capital charge for the specific market risk of trading book securitizations, for certain types of investment funds and for longevity risk as set out in CRR/CRD regula- tions. Longevity risk is the risk of adverse changes in life expectancies resulting in a loss in value on longevity linked policies and transactions. For risk management purposes, stress testing and economic capital allocations are also used to monitor and manage longevity risk. Market risk stress testing Stress testing is a key risk management technique, which evaluates the potential effects of extreme market events and move- ments in individual risk factors. It is one of the core quantitative tools used to assess the market risk of Deutsche Bank’s positions and complements VaR and Economic Capital. Market Risk Management performs several types of stress testing to capture the variety of risks (Portfolio Stress Testing, individual specific stress tests and Event Risk Scenarios) and also con- tributes to Group-wide stress testing. These stress tests cover a wide range of severities designed to test the earnings stability and capital adequacy of the bank. Trading market risk economic capital (TMR EC) Our trading market risk economic capital model-scaled Stressed VaR based EC (SVaR based EC) - comprises two core components, the “common risk” component covering risk drivers across all businesses and the “business-specific risk” com- ponent, which enriches the Common Risk via a suite of Business Specific Stress Tests (BSSTs). Both components are cali- brated to historically observed severe market shocks. Common risk is calculated using a scaled version of the SVaR frame- work while BSSTs are designed to capture more product/business-related bespoke risks (e.g. complex basis risks) as well as higher order risks not captured in the common risk component. The SVaR based EC uses the Monte Carlo SVaR framework. Traded default risk economic capital (TDR EC) TDR EC captures the relevant credit exposures across our trading and fair value banking books. Trading book exposures are monitored by MRM via single name concentration and portfolio thresholds which are set based upon rating, size and liquidity. Single name concentration risk thresholds are set for two key metrics: Default Exposure, i.e., the P&L impact of an instanta- neous default at the current recovery rate (RR), and bond equivalent Market Value (MV), i.e. default exposure at 0 % recovery. In order to capture diversification and concentration effects we perform a joint calculation for traded default risk economic capital and credit risk economic capital. Important parameters for the calculation of traded default risk are exposures, recovery rates and default probabilities as well as maturities. The probability of joint rating downgrades and defaults is determined by the default and rating correlations of the portfolio model. These correlations are specified through systematic factors that represent countries, geographical regions and industries. Trading market risk reporting Market Risk Management reporting creates transparency on the risk profile and facilitates the understanding of core market risk drivers to all levels of the organization. The Management Board and Senior Governance Committees receive regular reporting, as well as ad hoc reporting as required, on market risk, regulatory capital and stress testing. Senior Risk Committees receive risk information at a number of frequencies, including weekly or monthly. Additionally, Market Risk Management produces daily and weekly Market Risk specific reports and daily limit utilization reports for each business owner. Regulatory prudent valuation of assets carried at fair value We determined the amount of the additional value adjustments based on the methodology defined in the Commission Dele- gated Regulation (EU) 2016/101 including the amendment via Commission Delegated Regulation (EU) 2020/866 providing for a revised aggregation factor to apply for duration of the extreme market volatility due to the COVID-19 pandemic until December 31, 2020. 96 Deutsche Bank Annual Report 2020 Risk and capital management Market risk management As of December 31, 2020 the amount of the additional value adjustments was € 1.4 billion. The December 31, 2019 amount was € 1.7 billion. The impact of the revised aggregation factor as at December 31, 2020 was € 0.5 billion. As of December 31, 2020 the reduction of the expected loss from subtracting the additional value adjustments was € 121 mil- lion, which partly mitigated the negative impact of the additional value adjustments on our CET 1 capital. Nontrading market risk Nontrading market risk arises primarily from activities outside of our trading units, in our banking book, and from certain off- balance sheet items, and embedding considerations of different accounting treatment of transactions. Significant market risk factors the Group is exposed to and are overseen by risk management groups in that area are: – Interest rate risk (including risk from embedded optionality and changes in behavioral patterns for certain product types), credit spread risk, foreign exchange risk, equity risk (including investments in public and private equity as well as real estate, infrastructure and fund assets). – Market risks from off-balance sheet items, such as pension schemes and guarantees, as well as structural foreign exchange risk and equity compensation risk. As for trading market risks our risk appetite & limit framework is also applied to manage our exposure to nontrading market risk. On group level those are captured by the management board set limits for market risk economic capital capturing expo- sures to all market risks across asset classes as well as earnings & economic value based limits for interest rate risk in the banking books. Those limits are cascaded down by market risk management to the divisional or portfolio level. The limit framework for nontrading market risk exposure is further complemented by a set of business specific stress tests, value-at- risk & sensitivity limits monitored on a daily or monthly basis dependent on the risk measure being used. Interest Rate Risk in the Banking Book Interest rate risk in the banking book (IRRBB) is the current or prospective risk, to both the Group's capital and earnings, arising from movements in interest rates, which affect the Group's banking book exposures. This includes gap risk, which arises from the term structure of banking book instruments, basis risk, which describes the impact of relative changes in interest rates for financial instruments that are priced using different interest rate curves, as well as option risk, which arises from option derivative positions or from optional elements embedded in financial instruments. The Group manages its IRRBB exposures using economic value as well as earnings based measures. Our Group Treasury function is mandated to manage the interest rate risk centrally, with Market Risk Management acting as an independent oversight function. Economic value based measures look at the change in economic value of banking book assets, liabilities and off-balance sheet exposures resulting from interest rate movements, independent of the accounting treatment. Thereby the Group measures the change in Economic Value of Equity (ΔEVE) as the maximum decrease of the banking book economic value under the six standard scenarios defined by the European Banking Authority (EBA) in addition to internal stress scenarios for risk steering purposes. Earnings-based measures look at the expected change in Net Interest Income (NII) resulting from interest rate movements over a defined time horizon, compared to a defined benchmark scenario. Thereby the Group measures ΔNII as the maximum reduction in NII under the six standard scenarios defined by the European Banking Authority (EBA) in addition to internal stress scenarios for risk steering purposes, compared to a market implied curve scenario, over a period of 12 months. The Group employs mitigation techniques to hedge the interest rate risk arising from nontrading positions within given limits. The interest rate risk arising from nontrading asset and liability positions is managed through Treasury Markets & Investments. The residual interest rate risk positions are hedged with Deutsche Bank’s trading books within the IB division. The treatment of interest rate risk in our trading portfolios and the application of the value-at-risk model is discussed in the “Trading Market Risk” section of this document. Positions in our banking books as well as the hedges described in the aforementioned paragraph follow the accounting prin- ciples as detailed in the “Notes to the Consolidated Financial Statements” section of this document. The Model Risk Management function performs independent validation of models used for IRRBB measurement, as per all market risk models, in line with Deutsche Bank’s group-wide risk governance framework. The calculation of VaR and sensitivities of interest rate risk is performed daily, whereas the measurement and reporting of economic value interest rate and earnings risk is performed on a monthly basis. The Group generally uses the same metrics 97 Deutsche Bank Annual Report 2020 Risk and capital management Market risk management in its internal management systems as it applies for the disclosure in this report. This is applicable to both the methodology as well as the modelling assumptions used when calculating the metrics. Deutsche Bank’s key modelling assumptions are applied to the positions in our PB and CB divisions. Those positions are subject to risk of changes in our client’s behavior with regard to their deposits as well as loan products. The Group manages the interest rate risk exposure of its Non-Maturity Deposits (NMDs) through a replicating portfolio ap- proach to determine the average repricing maturity of the portfolio. For the purpose of constructing the replicating portfolio, the portfolio of NMDs is clustered by dimensions such as business unit, currency, product and geographical location. The main dimensions influencing the repricing maturity are elasticity of deposit rates to market interest rates, volatility of deposit balances and observable client behavior. For the reporting period the average repricing maturity assigned across all such replicating portfolios is 2.14 years and Deutsche Bank uses 15 years as the longest repricing maturity. In the loan and some of the term deposit products Deutsche Bank considers early prepayment/withdrawal behavior of its customers. The parameters are based on historical observations, statistical analyses and expert assessments. Furthermore, the Group generally calculates IRRBB related metrics in contractual currencies and aggregates the resulting metrics for reporting purposes. When calculating economic value based metrics the commercial margin is excluded for mate- rial parts of the balance sheet. Credit Spread Risk in the Banking Book Deutsche Bank is exposed to credit spread risk of bonds held in the banking book, mainly as part of the Treasury Liquidity Reserves portfolio. The credit spread risk in the banking book is managed by the businesses, with Market Risk Management acting as an independent oversight function ensuring that the exposure is within the approved risk appetite. This risk category is closely associated with interest rate risk in the banking book as changes in the perceived credit quality of individual instru- ments may result in fluctuations in spreads relative to underlying interest rates. The calculation of credit spread sensitivities and value-at-risk for credit spread exposure is in general performed on a daily basis, the measurement and reporting of eco- nomic capital and stress tests are performed on a monthly basis. Foreign exchange risk Foreign exchange risk arises from our nontrading asset and liability positions that are denominated in currencies other than the functional currency of the respective entity. The majority of this foreign exchange risk is transferred through internal hedges to trading books within the IB division and is therefore reflected and managed via the value-at-risk figures in the trading books. The remaining foreign exchange risks that have not been transferred are mitigated through match funding the investment in the same currency, so that only residual risk remains in the portfolios. Small exceptions to above approach follow the general Market Risk Management monitoring and reporting process, as outlined for the trading portfolio. The bulk of nontrading foreign exchange risk is related to unhedged structural foreign exchange exposure, mainly in our U.S., U.K. and China entities. Structural foreign exchange exposure arises from local capital (including retained earnings) held in the Group’s consolidated subsidiaries and branches and from investments accounted for at equity. Change in foreign ex- change rates of the underlying functional currencies are booked as Currency Translation Adjustments (CTA). The primary objective for managing our structural foreign exchange exposure is to stabilize consolidated capital ratios from the effects of fluctuations in exchange rates. Therefore the exposure remains unhedged or partially hedged for a number of currencies with considerable amounts of risk-weighted assets denominated in that currency in order to avoid volatility in the capital ratio for the specific entity and the Group as a whole. Equity and investment risk Nontrading equity risk arising predominantly from our non-consolidated investment holdings in the banking book and from our equity compensation plans. Our non-consolidated equity investment holdings in the banking book are categorized into strategic and alternative investment assets. Strategic investments typically relate to acquisitions made to support our business franchise and are undertaken with a medium to long-term investment horizon. Alternative assets are comprised of principal investments and other non-strategic investment assets. Principal investments are direct investments in private equity, real estate, venture capital, hedge or mutual funds whereas assets recovered in the workout of distressed positions or other legacy investment assets in private equity and real estate are of a non-strategic nature. 98 Deutsche Bank Annual Report 2020 Risk and capital management Operational risk management Investment proposals for strategic investments as well as monitoring of progress and performance against committed targets are evaluated by the Group Investment Committee. Depending on size, strategic investments may require approval from the Group Investment Committee, the Management Board or the Supervisory Board. CRM Principal Investments is responsible for the risk-related governance and monitoring of our alternative asset activities. The review of new or increased principal investment commitments is the task of the Principal Investment Commitment Ap- proval Group (PICAG), established by the Enterprise Risk Committee (ERC) as a risk management forum for alternative asset investments. The PICAG approves investments under its authority or recommends decisions above its authority to the Man- agement Board for approval. The Management Board also sets investment limits for business divisions and various portfolios of risk upon recommendation by the ERC. The equity investment holdings are included in regular group wide stress tests and the monthly market risk economic capital calculations. Pension risk We are exposed to market risk from a number of defined benefit pension schemes for past and current employees. The ability of the pension schemes to meet the projected pension payments is maintained through investments and ongoing plan contri- butions. Market risk materializes due to a potential decline in the market value of the assets or an increase in the liability of each of the pension plans. Market Risk Management monitors and reports all market risks both on the asset and liability side of our defined benefit pension plans including interest rate risk, inflation risk, credit spread risk, equity risk and longevity risk. Overall, the Group seeks to minimize the impact of adverse market movements to key financial metric, with the primary ob- jective on protecting the overall IFRS funded status, however in selected markets with the aim to balance competing key financial metrics. The investment managers manage the pension assets in line with investment mandates or guidelines as agreed with the pension plans’ trustees and investment committees. For key defined benefit plans for which the Bank aims to protect the IFRS funded status, the Group applies a liability driven investment (LDI) approach. Risks from mismatches between fluctuations in the present value of the defined benefit obligations and plan assets due to capital market movements are minimized, subject to balancing relevant trade-offs. For details on our defined benefit pension obligation see Note 33 “Employee Benefits” in the “Notes to the Consolidated Financial Statements” section. Other risks in the Banking Book Market risks in our Asset Management business primarily result from principal guaranteed funds or accounts, but also from co-investments in our funds. Nontrading market risk economic capital Nontrading market risk economic capital is calculated either by applying the standard traded market risk EC methodology or through the use of non-traded market risk models that are specific to each risk class and which consider, among other factors, historically observed market moves, the liquidity of each asset class, and changes in client’s behavior in relation to products with behavioral optionalities. Operational risk management Operational risk management framework Deutsche Bank applies the European Banking Authority’s Single Rulebook definition of operational risk: “Operational risk means the risk of losses stemming from inadequate or failed internal processes, people and systems or from external events. Operational risk includes legal risks, but excludes business and reputational risk and is embedded in all banking products and activities.” Operational risk forms a subset of the bank’s non-financial risks (NFR). Deutsche Bank’s operational risk appetite sets out the amount of operational risk we are willing to accept as a consequence of doing business. We take on operational risks consciously, both strategically as well as in day-to-day business. While the bank may have no appetite for certain types of operational risk events (such as violations of laws or regulations and miscon- duct), in other cases a certain amount of operational risk must be accepted if the bank is to achieve its business objectives. In case a residual risk is assessed to be outside our risk appetite, risk reducing actions must be undertaken, including reme- diating the risks, insuring risks or ceasing business. 99 Deutsche Bank Annual Report 2020 Risk and capital management Operational risk management The Operational risk management framework (ORMF) is a set of interrelated tools and processes that are used to identify, assess, measure, monitor and mitigate the bank’s operational risks. Its components have been designed to operate together to provide a comprehensive but risk-based approach to managing the bank’s most material operational risks. ORMF compo- nents include the Group’s approach to setting and adhering to operational risk appetite, the operational risk type and control taxonomies, the minimum standards for operational risk management processes including tools, and the bank’s operational risk capital model. Organizational & governance structure While the day-to-day management of operational risk is the primary responsibility of our business divisions and infrastructure functions, where these risks are generated, Non-Financial Risk Management (NFRM) oversees the Group-wide management of operational risks, identifies and reports risk concentrations, and promotes a consistent application of the ORMF across the bank. NFRM is part of the Group risk function, the Chief Risk Office, which is headed by the Chief Risk Officer. The Chief Risk Officer appoints the Head of NFRM, who is accountable for the design oversight and maintenance of an effective, efficient and regulatory compliant ORMF, including the operational risk capital model. The Head of NFRM monitors and challenges the ORMF’s Group wide implementation and monitors overall risk levels against the bank’s operational risk appetite. The Non-Financial Risk Committee (NFRC), which is chaired by the Chief Risk Officer, is responsible for the oversight, gov- ernance and coordination of the management of operational risk in the Group on behalf of the Management Board by estab- lishing a cross-risk perspective of the key operational risks of the Group. Its decision-making authorities include the review, advice and management of all operational risk issues that may impact the risk profile of our business divisions and infrastruc- ture functions. Several sub-fora with an oversight and alignment function attendees from both the 1st and 2nd LoDs support the NFRC to effectively fulfil its mandate. In addition to the Group level NFRC, business divisions have established 1st LoD NFR fora for the oversight and management of operational risks on various levels of the organization. The governance of our operational risks follows the bank’s Three Lines of Defence (3LoD) approach to managing all of its financial and non-financial risks. The ORMF establishes the operational risk governance standards including the core 1st and 2nd LoD roles and their responsibilities, to ensure effective risk management and appropriate independent challenge: Operational risk requirements for the first line of defence (1st LoD): Risk owners as the 1st LoD have full accountability for their operational risks and manage these against a defined risk specific appetite. Operational risk owners are those roles in the bank whose activities generate – or who are exposed to – operational risks. As heads of business divisions and infrastructure functions, they must determine the appropriate organizational structure to iden- tify their operational risk profile, actively manage these risks within their organization, take business decisions on the mitigation or acceptance of operational risks to ensure they remain within risk appetite and establish and maintain 1st LoD controls. Operational risk requirements for the second line of defence (2nd LoD): Risk Type Controllers (RTCs) act as the 2nd LoD control functions for all sub-risk types under the overarching risk type “operational risk”. RTCs establish the framework and define Group level risk appetite statements for the specific operational risk type they over- see. RTCs define the minimum risk management and control standards and independently monitor and challenge risk owners’ implementation of these standards in their day-to-day processes, as well as their risk-taking and management activities. RTCs provide independent operational risk oversight and prepare aggregated risk type profile reporting. RTCs monitor the risk type’s profile against risk appetite and have a right to veto risk decisions leading to foreseeable risk appetite breaches. As risk type experts, RTCs define the risk type and its taxonomy and support and facilitate the implementation of the risk type framework in the 1st LoD. To maintain their independence, RTC roles are located only in infrastructure functions. Operational risk requirements for NFRM as the RTC for the overarching risk type operational risk: As the RTC / risk control function for operational risk, NFRM establishes and maintains the overarching ORMF and determines the appropriate level of capital to underpin the Group’s operational risk. – As the 2nd LoD risk control function, NFRM defines the bank’s approach to operational risk appetite and monitors its adherence, breaches and consequences. NFRM is the independent reviewer and challenger of the 1st LoD’s risk and control assessments and risk management activities relating to the holistic operational risk profile of a unit (while RTCs monitor and challenge activities related to their specific risk types). NFRM provides the oversight of risk and control mitiga- tion plans to return the bank’s operational risk to its risk appetite, where required. It also establishes and regularly reports the bank’s operational risk profile and operational top risks, i.e. the bank’s material operational risks which are outside of risk appetite. 100 Deutsche Bank Annual Report 2020 Risk and capital management Operational risk management – As the subject matter expert for operational risk, NFRM provides independent risk views to facilitate forward-looking man- agement of operational risks, actively engages with risk owners (1st LoD) and facilitates the implementation of risk man- agement and control standards across the bank. – NFRM is accountable for the design, implementation and maintenance of the approach to determine the adequate level of capital required for operational risk, for recommendation to the Management Board. This includes the calculation and allo- cation of operational risk capital demand and expected loss under the Advanced Measurement Approach (AMA). Managing our operational risk In order to manage the broad range of sub-risk types underlying operational risk, the ORMF provides a set of tools and processes that apply to all operational risk types across the bank. These enable us to determine our operational risk profile in relation to our risk appetite for operational risk, to systematically identify operational risk themes and concentrations, and to define risk mitigating measures and priorities. In 2020, we further enhanced the management of operational risks by integrating and simplifying our risk management pro- cesses, by promoting an active and continuous dialogue between the 1st and 2nd LoDs on operational risks, by strengthening our controls, and by making the management of operational risks more transparent, meaningful and embedded in day-to-day business decisions: Loss data collection: We collect, categorize and analyze data on internal and relevant external operational risk events (with a P&L impact ≥ €10,000) in a timely manner. Material operational risk events trigger clearly defined lessons learned and read- across analyses, which are performed in close collaboration between business partners, risk control and other infrastructure functions. Lessons learned reviews analyze the reasons for significant operational risk events, identify their root causes, and document appropriate remediation actions to reduce the likelihood of their reoccurrence. Read across reviews take the con- clusions of the lessons learned process and seek to analyze whether similar risks and control weaknesses identified in a lessons learned review exist in other areas of the bank, even if they have not yet resulted in problems. This allows preventative actions to be undertaken. In 2020, we further simplified the event management processes by integrating the review of external events into our scenario analysis framework and continued the development of a new, convenient to use, event management platform. We complement our operational risk profile by using a set of scenarios including internal scenarios and relevant external operational risk events provided by an industry database. We thereby systematically utilize information on external loss events occurring in the industry to reduce the likelihood of similar incidents happening to us, for example through particular deep dive analyses or risk profile reviews. In 2020, we implemented a redesigned approach to integrate scenario analysis more closely into day-to-day risk management processes. Scenario analysis has played an important role in assessing impacts from the COVID-19 pandemic onto our operating environment and helped us to prepare adequate crisis management decisions. The Risk & Control Assessment process (RCA) comprises of a series of bottom-up assessments of the risks generated by business divisions and infrastructure functions (1st LoDs), the effectiveness of the controls in place to manage them, and the remediation actions required to bring the risks outside of risk appetite back into risk appetite. This enables both the 1st and 2nd LoDs to have a clear view of the bank’s material operational risks. In 2020, we began implementing a dynamic trigger based approach to RCA to permit risk changes to be reflected throughout the year, thereby providing a more real time risk profile for the organization. To support this dynamic approach, we improved our reporting capabilities for greater information transparency and strengthened the usage of NFR contextual data (e.g. scenarios or controls assurance data) to inform the assessments. We further enhanced the bank’s central control inventory and introduced risk-based control assurance planning across both 1st LoD and 2nd LoD functions for a subset of risk types. This improves transparency of control assurance activ- ities across various levels of the bank, and provides useful information on the effectiveness of the controls the bank relies on to mitigate its operational risks. We regularly report and perform analyses on our top risks to establish that they are appropriately mitigated. As all risks, top risks are rated in terms of both the likelihood that they could occur and the impact on the bank should they do so, and through this assessment they are identified to be particularly material for the bank. The reporting provides a forward-looking perspec- tive on the impact of planned remediation and control enhancements. It also contains emerging risks and themes that have the potential to evolve as top risks in the future. Top risk reduction programs comprise the most significant risk reduction activities that are key to bringing our operational top risk themes back within risk appetite. In 2020, we improved the criteria and process for adopting or retiring divisional and Group level top risks, in addition to a regional top risk concept. To appropriately identify and manage risks from material change initiatives within the bank, a Transformation Risk Assessment (TRA) process is in place to assess the impact of transformation on the bank’s risk profile and control environment. This process considers impacts to both financial and non-financial risk types and is applicable to initiatives including regulatory initiatives, technology migrations, risk remediation projects, strategy changes, organisational changes and real estate moves within the bank. In 2020, we expanded the scope of change initiatives that require a mandatory TRA to include all key deliv- erables on the transformation roadmap of the bank. 101 Deutsche Bank Annual Report 2020 Risk and capital management Operational risk management NFR appetite is the amount of non-financial risk the bank is willing to accept as a consequence of doing business. The NFR appetite framework provides a common approach to measure and monitor the level of risk appetite across the firm. NFR appetite metrics are used to monitor the operational risk profile against the bank’s defined risk appetite, and to alert the organization to impending problems in a timely fashion. In 2020, we clarified the linkage between risk appetite and tolerance and increased the granularity and depth of risk appetite planning and monitoring in legal entities, branches and business units risk appetite statements. The findings and issue management process allows the bank to mitigate the risks associated with known control weaknesses and deficiencies, and enables management to make risk-based decisions over the need for further remediation or risk ac- ceptance. Outputs from the findings management process must be able to demonstrate to internal and external stakeholders that the bank is actively identifying its control weaknesses and taking steps to manage associated risks within acceptable levels of risk appetite. In 2020, we enabled multiple risk types to be linked to each finding, enhancing our ability to monitor risk appetite by risk type concentration. This approach also allows the 2nd LoD to review, with greater precision, the potential portfolio impact of risk acceptances on risk appetite, thus strengthening the role of the 2nd LoD in risk acceptance decisions. Operational risk type frameworks The ORMF provides the overarching set of standards, tools and processes that apply to the management of all operational sub-risk types. It is complemented by the operational risk type frameworks, risk management and control standards and tools set up by the respective RTCs for the operational sub-risk types they control. These operational sub-risk types are controlled by various infrastructure functions and include the following: – The Compliance department performs an independent 2nd level control function that protects the bank’s license to operate by promoting and enforcing compliance with the law and driving a culture of compliance and ethical conduct in the bank. The Compliance department assists the business divisions and works with other infrastructure functions and regulators to establish and maintain a risk-based approach to the management of the bank’s compliance risks in accordance with the bank’s risk appetite and to help the bank detect, mitigate and prevent breaches of laws and regulations. The Compliance department performs the following principal activities: regulatory engagement and management, collaborating with govern- ment & regulatory affairs; acting as a trusted advisor; and identifying, assessing, mitigating, monitoring and reporting on compliance risk. The results of these assessments are regularly reported to the Management Board and Supervisory Board. – Financial crime risks are managed by our Anti-Financial Crime (AFC) function via maintenance and development of a dedicated program. The AFC program is based on regulatory and supervisory requirements. AFC has defined roles and responsibilities and established dedicated functions for the identification and management of financial crime risks resulting from money laundering, terrorism financing, non-compliance with sanctions and embargoes, the facilitation of tax evasion as well as other criminal activities including fraud, bribery and corruption and other crimes. AFC updates its strategy for financial crime prevention via regular development of internal policies processes and controls, institution-specific risk as- sessment and staff training. – The Legal Department (including Group Governance and Group Data Privacy) is an infrastructure function that is mandated to provide legal advice to the Management Board, the Supervisory Board (to the extent it does not give rise to conflict of interest), business divisions and infrastructure functions and to support the Management Board in setting up and guarding the Group’s governance and control frameworks in respect of the bank’s legal, internal corporate governance and data privacy risks. This includes in particular but without limitation: – Advising the Management Board and Supervisory Board on legal aspects of their activities – Providing legal advice to all Deutsche Bank units to facilitate adherence to legal and regulatory requirements in relation to their activities respectively – Supporting other Deutsche Bank units in managing Deutsche Bank Group’s interactions with regulatory authorities – Engaging and managing external lawyers used by Deutsche Bank Group – Managing Deutsche Bank Group’s litigation and contentious regulatory matters, (incl. contentious HR matters), and managing Deutsche Bank Group’s response to external regulatory enforcement investigations – Advising on legal aspects of internal investigations – Setting the global governance framework for Deutsche Bank Group, facilitating its cross-unit application and assessing its implementation – Developing and safeguarding efficient corporate governance structures suitable to support efficient decision-making, to align risk and accountability on the basis of clear and consistent roles and responsibilities – Maintaining Deutsche Bank Group’s framework for policies and procedures and serve as guardian for Group policies and procedures – Ensuring appropriate quality assurance around all of the above – NFRM Product Governance oversees the New Product Approval (NPA) and Systematic Product Review (SPR) cross-risk processes forming a control framework designed to manage the risks associated with the implementation of new products and services, changes in products and services during their lifecycles and, the process by which they are systematically 102 Deutsche Bank Annual Report 2020 Risk and capital management Operational risk management reviewed. Applicable bank-wide, the cross-risk processes cover different stages of the product lifecycle with NPA focusing on pre-implementation and SPR on post-implementation. Pre-implementation, the primary objective of the NPA process is to ensure proper assessment of all risks, both financial and non-financial, in NPA relevant products and services, as well as related processes and infrastructure. Post-implementation, the SPR process focuses on the periodic review of all prod- ucts to determine if they are to remain live or need to be modified or withdrawn. – NFRM is the RTC for a number of operational resilience risks. Its mandate includes second line oversight of controls over transaction processing activities, as well as infrastructure risks to prevent technology or process disruption, maintain the confidentiality, integrity and availability of data, records and information security, and ensure business divisions and infra- structure functions have robust plans in place to recover critical business processes and functions in the event of disruption including technical or building outage, or the effects of cyber-attack or natural disaster as well as any physical security or safety risk. NFRM RTC also manages the risks arising from the bank’s internal and external vendor engagements via the provision of a comprehensive third party risk management framework Measuring our operational risks We calculate and measure the regulatory and economic capital requirements for operational risk using the Advanced Meas- urement Approach (AMA) methodology. Our AMA capital calculation is based upon the loss distribution approach. Gross losses from historical internal and external loss data (Operational Riskdata eXchange Association consortium data) and ex- ternal scenarios from a public database (IBM OpData) complemented by internal scenario data are used to estimate the risk profile (i.e., a loss frequency and a loss severity distribution). Our loss distribution approach model includes conservatism by recognizing losses on events that arise over multiple years as single events in our historical loss profile. Within the loss distribution approach model, the frequency and severity distributions are combined in a Monte Carlo simulation to generate potential losses over a one year time horizon. Finally, the risk mitigating benefits of insurance are applied to each loss generated in the Monte Carlo simulation. Correlation and diversification benefits are applied to the net losses in a manner compatible with regulatory requirements to arrive at a net loss distribution at Group level, covering expected and unexpected losses. Capital is then allocated to each of the business divisions after considering qualitative adjustments and expected loss. The regulatory and economic capital requirements for operational risk are derived from the 99.9 % percentile; see the section “Internal Capital Adequacy” for details. Both regulatory and economic capital requirements are calculated for a time horizon of one year. The regulatory and economic capital demand calculations are performed on a quarterly basis. NFRM establishes and main- tains the approach for capital demand quantification and ensures that appropriate development, validation and change gov- ernance processes are in place, whereby the validation is performed by an independent validation function and in line with the Group’s model risk management process. Drivers for operational risk capital development In 2020, our total operational risk losses decreased by 8 % compared with 2019. They were predominantly driven by losses and provisions arising from civil litigation and regulatory enforcement. Such losses still make up 73 % of operational risk losses and account for the majority of operational risk regulatory and economic capital demand, being more heavily reliant on our long-term loss history. For a description of our current legal and regulatory proceedings, please see section “Current Individual Proceedings” in Note 27 “Provisions” to the consolidated financial statements. The operational risk losses from civil litigation and regulatory enforcement decreased by € 74 million or 21 % while our non-legal operational risk losses increased by € 42 million or 63 % compared to 2019, primarily as a result of COVID-19 related expenses. Excluding the effects of COVID-19, non-legal operational risk losses were broadly flat. In view of the relevance of legal risks within our operational risk profile, we dedicate specific attention to the management and measurement of our open civil litigation and regulatory enforcement matters where the Bank relies both on information from internal as well as external data sources to consider developments in legal matters that affect the Bank specifically but also the banking industry as a whole. Reflecting the multi-year nature of legal proceedings the measurement of these risks further- more takes into account changing levels of certainty by capturing the risks at various stages throughout the lifecycle of a legal matter. Conceptually, the Bank measures operational risk including legal risk by determining the maximum loss that will not be ex- ceeded with a given probability. This maximum loss amount includes a component that due to the IFRS criteria is reflected in our financial statements and a component that is expressed as regulatory or economic capital demand beyond the amount reflected as provisions within our financial statements. 103 Deutsche Bank Annual Report 2020 Risk and capital management Liquidity risk management The legal losses which the Bank expects with a likelihood of more than 50 % are already reflected in our IFRS group financial statements. These losses include net changes in provisions for existing and new cases in a specific period where the loss is deemed probable and is reliably measurable in accordance with IAS 37. The development of our legal provisions for civil litigations and regulatory enforcement is outlined in detail in Note 27 “Provisions” to the consolidated financial statements. Uncertain legal losses which are not reflected in our financial statements as provisions because they do not meet the recog- nition criteria under IAS 37 are expressed as “regulatory or economic capital demand”. To quantify the litigation losses in the AMA model, the bank takes into account historical losses, provisions, contingent liabilities and legal forecasts. Legal forecasts are generally comprised of ranges of potential losses from legal matters that are not deemed probable but are reasonably possible. Reasonably possible losses may result from ongoing and new legal matters which are reviewed at least quarterly by the attorneys handling the legal matters. We include the legal forecasts in the “relevant loss data” used in our AMA model. The projection range of the legal forecasts is not restricted to the one year capital time horizon but goes beyond and conservatively assumes early settlement of the underlying losses in the reporting period - thus considering the multi-year nature of legal matters. Liquidity risk management Liquidity risk arises from our potential inability to meet payment obligations when they come due or only being able to meet these obligations at excessive costs. The objective of the Group’s liquidity risk management framework is to ensure that the Group can fulfill its payment obligations at all times and can manage liquidity and funding risks within its risk appetite. The framework considers relevant and significant drivers of liquidity risk, whether on-balance sheet or off-balance sheet. Liquidity risk management framework In accordance with the ECB’s SREP, Deutsche Bank has implemented an Internal Liquidity Adequacy Assessment Process (ILAAP), which is reviewed at least annually and approved by the Management Board. The ILAAP provides comprehensive documentation and assessment of the Bank’s Liquidity Risk Management framework, including: identifying the key liquidity and funding risks to which the Group is exposed; describing how these risks are identified, monitored and measured and describing the techniques and resources used to manage and mitigate these risks. The Management Board defines the liquidity and funding risk strategy for the Bank as well as the risk appetite, based on recommendations made by the Group Risk Committee (GRC). The Management Board reviews and approves the risk appetite at least annually. The risk appetite is applied to the Group to monitor and control liquidity risk as well as our long-term funding and issuance plan. Treasury is mandated to manage the overall liquidity and funding position of the Bank, with Liquidity Risk Management (LRM) acting as an independent control function. LRM is responsible for reviewing the liquidity risk framework, proposing the risk appetite, limits and stress test scenarios to GRC and the validation of Liquidity Risk models which are developed by Treasury, to measure and manage the Group’s liquidity risk profile. Deutsche Banks has a dedicated Stress Testing and Risk Appetite Framework set by LRM, which ensures the Bank’s liquidity position is balanced throughout the Group and across currencies. Treasury manages liquidity and funding, in accordance with the Management Board-approved risk appetite across a range of relevant metrics, and implements a number of tools including business level risk appetites, to ensure compliance. As such, Treasury works closely with LRM and business divisions, to identify, analyze and monitor underlying liquidity risk characteristics within business portfolios. These parties are engaged in regular dialogue regarding changes in the Bank’s position arising from business activities and market circumstances. The Management Board is informed about the performance against the key liquidity metrics for both internal and market indicators for which limits and thresholds are approved by either GRC or Management Board, via a weekly Liquidity Dash- board. Liquidity & Treasury Reporting & Analysis (LTRA) has overall accountability for the accurate and timely delivery of both external regulatory liquidity reporting and the internal management reporting of liquidity risk for DB Group. In addition LTRA ensure the development of management information systems (MIS) and analysis to support the liquidity risk framework and its governance for both Treasury and LRM. Treasury, LRM and LTRA maintain a Liquidity policy landscape which articulates the overarching guiding principles for the robust and rigorous management of the Bank’s liquidity. The landscape outlines approaches to liquidity risk management and practices and is reviewed on an annual basis. 104 Deutsche Bank Annual Report 2020 Risk and capital management Liquidity risk management As part of the annual strategic planning process, Treasury project the development of the key liquidity and funding metrics including the USD currency exposure based on anticipated business consumption to ensure that the plan is in compliance with our risk appetite. Deutsche Bank has a wide range of funding sources, including retail and institutional deposits, unsecured and secured whole- sale funding and debt issuance in the capital markets. Group ALCo is the Bank’s decisive Governance body that has been mandated by Management Board to optimize the sourcing and deployment of the Bank’s balance sheet and financial resources in line with the Management Board risk appetite and strategy. As such, it has the overarching responsibilities to define, approve and optimize the Bank`s funding strategy. Short-term liquidity and wholesale funding Deutsche Bank tracks all contractual cash flows from wholesale funding sources, on a daily basis, over a 12-month horizon. For this purpose, we consider wholesale funding to include unsecured liabilities largely raised by Treasury Markets Pool, as well as secured liabilities primarily raised by our Investment Bank Division. Our wholesale funding counterparties typically include corporates, banks and other financial institutions, governments and sovereigns. The Group has implemented a set of limits to restrict the Bank’s exposure to wholesale counterparties, which have historically shown to be the most susceptible to market stress. The wholesale funding limits are monitored daily, and apply to the total combined currency amount of all wholesale funding currently outstanding, both secured and unsecured with specific tenor limits. Our Liquidity Reserves are the primary mitigants against potential stress in the short-term. The tables in section “Liquidity Risk Exposure: Funding Diversification” show the contractual maturity of our short-term whole- sale funding and capital markets issuance. Liquidity stress testing and scenario analysis Global internal liquidity stress testing and scenario analysis is used for measuring liquidity risk and evaluating the Group’s short-term liquidity position within the liquidity framework. This complements the daily operational cash management process. The long-term liquidity strategy based on contractual and behavioral modelled cash flow information is represented by a long term funding analysis known as the Funding Matrix (refer to Funding Risk Management below). Our global liquidity stress testing process is managed by Treasury in accordance with the Management Board approved risk appetite. Treasury is responsible for the design of the overall methodology, the choice of liquidity risk drivers and the determi- nation of appropriate assumptions (parameters) to translate input data into stress testing output. LRM is responsible for the definition of the stress scenarios and the independent validation of liquidity risk models. LTRA is responsible for implementing these methodologies and performing the stress test calculation in conjunction with Treasury, LRM and IT. We use stress testing and scenario analysis to evaluate the impact of sudden and severe stress events on our liquidity position. Deutsche Bank has selected four scenarios to calculate the Group’s stressed Net Liquidity Position (“sNLP”). These scenarios capture the historical experience of Deutsche Bank during periods of idiosyncratic and/or market-wide stress and are assumed to be both plausible and sufficiently severe as to materially impact the Group’s liquidity position. The most severe scenario assesses the potential consequences of a combined market-wide and idiosyncratic stress event, including downgrades of our credit rating. Under each of the scenarios we consider the impact of a liquidity stress event over different time horizons and across multiple liquidity risk drivers, covering all of our business, product areas and balance sheet. The output from scenario analysis feeds the Group Wide Stress Test, which considers the impact of scenarios on all risk stripes. In addition, we include the potential funding requirements from contingent liquidity risks which might arise, including draw- downs on credit facilities, increased collateral requirements under derivative agreements, and outflows from deposits with a contractual rating linked trigger. We then take into consideration Countermeasures which are the actions we would take to counterbalance the outflows incurred. Countermeasures include utilizing the Liquidity Reserve and generating liquidity from unencumbered, marketable assets. Stress testing is conducted at a global level and for defined material legal entities covering an eight-week stress horizon. In addition to the consolidated currency stress test, stress tests for material currencies (EUR, USD and GBP) are performed. We also perform stress testing out to 12 months in the U.S. Ad-hoc analysis may be conducted to reflect the impact of potential downside events that could affect the Bank’s liquidity for instance the COVID-19 pandemic and Brexit. Our suite of stress testing scenarios and assumptions are reviewed on a regular basis and are updated when enhancements are made to stress testing methodologies. On a daily basis the liquidity stress test is calculated over a 12 month period however the initial eight-weeks, is considered the most critical time span during a liquidity crisis. Relevant stress assumptions are applied to reflect liquidity flows from risk drivers and on-balance sheet and off-balance sheet products. 105 Deutsche Bank Annual Report 2020 Risk and capital management Liquidity risk management Complementing daily liquidity stress testing, the Bank also conducts regular Group Wide Stress Testing (GWST) run by En- terprise Risk Management (ERM) analyzing liquidity risks in conjunction with the other defined risk types and evaluating their impact to both capital and liquidity positions as described in Risk and Capital Framework chapter. The tables in section “Liquidity Risk Exposure: Stress Testing and Scenario Analysis” show the results of our internal global liquidity stress test under the various different scenarios. Liquidity coverage ratio In addition to our internal stress test result, the Group has a Management Board-approved risk appetite for the Liquidity Cov- erage Ratio (LCR). The LCR is intended to promote the short-term resilience of a Bank’s liquidity risk profile over a 30 day stress scenario. The ratio is defined as the amount of High Quality Liquid Assets (HQLA) that could be used to raise liquidity in a stressed scenario, measured against the total volume of net cash outflows, arising from both contractual and modelled exposures. This requirement has been implemented into European law, via the Commission Delegated Regulation (EU) 2015/61, adopted in October 2014. Compliance with the LCR was required in the EU from October 1, 2015. The LCR complements the internal stress testing framework. By maintaining a ratio in excess of minimum regulatory require- ments, the LCR seeks to ensure that the Group holds adequate liquidity resources to mitigate a short-term liquidity stress. Key differences between the internal liquidity stress test and LCR include the time horizon (eight weeks versus 30 days), classification and haircut differences between Liquidity Reserves and the LCR HQLA, outflow rates for various categories of funding, and inflow assumption for various assets (for example, loan repayments). Our liquidity stress test also includes out- flows related to intraday liquidity assumptions, which are not explicitly captured in the LCR. Funding risk management Deutsche Bank’s primary tool for monitoring and managing longer term funding risk is the Funding Matrix. The Funding Matrix assesses the Group’s structural funding profile for the greater than one year time horizon. To produce the Funding Matrix, all funding-relevant assets and liabilities are mapped into time buckets corresponding to their contractual or modeled maturities. This allows the Group to identify expected excesses and shortfalls in term liabilities over assets in each time bucket, facilitating the management of potential liquidity exposures. The liquidity profile is based on contractual cash flow information. If the contractual maturity profile of a product does not adequately reflect the liquidity profile, it is replaced by modeling assumptions. Short-term balance sheet items (<1yr) or matched funded structures (asset and liabilities directly matched with no liquidity risk) are excluded from the term analysis. The bottom-up assessment by individual business line is combined with a top-down reconciliation against the Group’s IFRS balance sheet. From the cumulative term profile of assets and liabilities beyond 1 year, long-funded surpluses or short-funded gaps in the Group’s maturity structure can be identified. The cumulative profile is thereby built up starting from the greater than 10 year bucket down to the greater than 1 year bucket. The strategic liquidity planning process, which incorporates the development of funding supply and demand across business units, together with the Bank’s targeted key liquidity and funding metrics, provides the key input parameter for our annual capital markets issuance plan. Upon approval by the Management Board the capital markets issuance plan establishes issu- ance targets for securities by tenor, volume, currency and instrument. Capital markets issuance Debt issuance, encompassing senior unsecured bonds, covered bonds as well as capital securities, is a key source of term funding for the Bank and is managed directly by Treasury. At least once a year Treasury, after endorsement at ALCo, submits an annual long-term Funding Plan to the GRC for recommendation and then to the Management Board for approval. This plan is driven by global and local funding and liquidity requirements based on expected business development. Our capital markets issuance portfolio is dynamically managed through our yearly issuance plans to avoid excessive maturity concentrations. 106 Deutsche Bank Annual Report 2020 Risk and capital management Liquidity risk management Net stable funding ratio The Net Stable Funding Ratio (NSFR) is a regulatory metric for assessing a Bank’s structural funding profile. The NSFR is intended to reduce medium to long-term funding risks by requiring banks to maintain a stable funding profile in relation to their on- and off-balance sheet activities. The ratio is defined as the amount of Available Stable Funding (the portion of capital and liabilities expected to be a stable source of funding), relative to the amount of Required Stable Funding (a function of the liquidity characteristics of various assets held). An NFSR limit has been set for Group as well as for DBAG in anticipation of this regulatory requirement. The NSFR will come into effect as of June 28, 2021, after which the Bank will be required to maintain a 100 % ratio. Therefore NSFR risk appetite levels shall serve as a threshold until then and as a limit from June 28, 2021 onwards. Funding diversification Diversification of our funding profile in terms of investor types, regions and products is an important element of our liquidity risk management framework. Our most stable funding sources for which the Bank has introduced a minimum risk appetite stem from capital markets issuances and equity, as well as from retail, and transaction banking clients. Other customer de- posits and secured funding and short positions are additional sources of funding. Unsecured wholesale funding represents unsecured wholesale liabilities sourced primarily by our Treasury Pool Management team. Given the relatively short-term nature of these liabilities, they are predominantly used to fund liquid trading assets. To promote the additional diversification of our refinancing activities, we hold a license to issue mortgage Pfandbriefe. We continue to run a program for the purpose of issuing Covered Bonds under Spanish law (Cedulas) and participate in the TLTRO III program. Additionally, we expanded in 2020 our potential investor base by introducing our Sustainable Finance Framework and issued a Green Bond in June 2020. Unsecured wholesale funding comprises a range of institutional products, such as Certificate of Deposits (CDs), Commercial Papers (CPs) as well as Money Market deposits. To avoid any unwanted reliance on these short-term funding sources, and to promote a sound funding profile which complies with the defined risk appetite, we have implemented limits (across tenors) on these funding sources which are derived from our daily stress testing analysis. In addition, we limit the total volume of unsecured wholesale funding to manage the reliance on this funding source as part of the overall funding diversification. The chart “Liquidity Risk Exposure: Funding Diversification” shows the composition of our external funding sources that con- tribute to the liquidity risk position, both in € billion and as a percentage of our total external funding sources. Funds transfer pricing The funds transfer pricing framework applies to all businesses/regions and promotes pricing of (i) assets in accordance with their underlying liquidity risk, (ii) liabilities in accordance with their liquidity value and (iii) contingent liquidity exposures in accordance with the cost of providing for appropriate liquidity reserves. Within this framework funding and liquidity risk costs and benefits are allocated to the firm’s business units based on rates which reflect the economic costs of liquidity for Deutsche Bank. Treasury might set further financial incentives in line with the Bank’s liquidity risk guidelines. While the framework promotes a diligent group-wide allocation of the Bank's funding costs to the liquidity users, it also provides an incentive-based framework for businesses generating stable long-term and stress com- pliant funding. In the third quarter of 2019, the internal fFTP framework was changed in order to enhance its effectiveness as a management tool, as well as to better support funding cost optimization. Additional details are included in Note 4 „Business segments and related information“ of the consolidated financial statements. Liquidity reserves Liquidity reserves comprise available cash and cash equivalents, unencumbered highly liquid securities (including government and agency bonds and government guarantees) and other unencumbered central bank eligible assets. Certain intraday re- quirements and Mandatory Minimum Reserves are directly deducted in the calculation of the Liquidity Reserves while other intraday outflows are represented in our internal liquidity model. 107 Deutsche Bank Annual Report 2020 Risk and capital management Model risk management We hold the vast majority of our liquidity reserves centrally across major currencies at the central bank accounts of our parent and our foreign branches in the key locations in which we are active and in a dedicated Treasury-owned Strategic Liquidity Reserve (SLR), set up exclusively to serve as a mitigant during periods of stress. To ensure a prudent composition of liquidity reserves across asset classes, we maintain minimum cash thresholds for the material currencies. Asset encumbrance Encumbered assets primarily comprise those on- and off-balance sheet assets that are pledged as collateral against secured funding, collateral swaps, and other collateralized obligations. We generally encumber loans to support long-term capital mar- kets secured issuance such as covered bonds or other self-securitization structures, while financing debt and equity inventory on a secured basis is a regular activity for our Investment Bank business. Additionally, in line with the EBA technical standards on regulatory asset encumbrance reporting, assets pledged with settlement systems are considered encumbered assets, including default funds and initial margins, as well as other assets pledged which cannot be freely withdrawn such as manda- tory minimum reserves at central banks. We also include derivative margin receivable assets as encumbered under these EBA guidelines. Business (strategic) risk management Strategic risk is the risk of a shortfall in earnings (excluding other material risks) due to incorrect business plans (owing to flawed assumptions), ineffective plan execution or a lack of responsiveness to material plan deviations. Strategic risk arises from the exposure of the bank to the macroeconomic environment, changes in the competitive landscape, and regulatory and technological developments. Additionally, it could occur due to errors in strategic positioning, the bank’s failure to execute its planned strategy and/or a failure to effectively address under-performance versus plan targets. A Strategic and Capital plan is developed annually and presented to the Management Board for discussion and approval. The final plan is then presented to the Supervisory Board. During the year, execution of business strategies is regularly monitored to assess the performance against strategic objectives and to seek to ensure we remain on track to achieve targets. A more comprehensive description of this process is detailed in the section ‘Strategic and Capital Plan’. The risk type controller for strategic risk is Enterprise Risk Management (ERM) in Risk. Finance, together with the Divisions, are the key risk managers of the associated risk. Model risk management Introduction Model risk is the potential for adverse consequences from decisions based on incorrect or misused model outputs. Model risk can lead to: financial loss, poor business or strategic decision making, or damage to our reputation. Deutsche Bank uses models for a broad range of decision making activities, such as: underwriting credits; valuing exposures, instruments and positions; measuring risk; managing and safeguarding client assets, and determining capital and reserve adequacy. The term ‘model’ refers to a quantitative method, system, or approach that applies statistical, economic, financial, or mathematical theories, techniques, and assumptions to process input data into quantitative estimates. Models are simplified representations of real-world relationships, and are based on assumptions and judgment. Accordingly, the bank is exposed to model risk, which must be identified, measured and controlled appropriately. Model risk management oversight is provided by all levels of management, including the Management Board. Management of model risk is underpinned by a framework designed and monitored by 2nd Line of Defence, including components across the lifecycle of a model. The model risk management framework is formalized within policies and procedures, and overseen by a robust governance structure. Model Risk Management Governance and Structure Model risk is one of the bank’s five main risk types, overseen by the Chief Risk Officer through the setting of a qualitative risk appetite statement and managed through: – Model risk policies and procedures, aligned to regulatory requirements, with clear roles and responsibilities for stakehold- ers; 108 Deutsche Bank Annual Report 2020 Risk and capital management Reputational risk management – Model risk governance, including senior forums for monitoring and escalation of model risk related topics, as well as monthly updates to the Management Board on the model risk appetite metrics and periodic model risk updates to the Supervisory Board; – Inventorization of all models, supporting ongoing model risk framework components including risk assessment and attes- tation; – Independent model validation providing effective challenge, identifying models’ limitations and weaknesses, resulting in findings and conditions for use, such as adjustments or overlays. Developments during the reporting period: In 2020, a new bank-wide ‘Group Model Risk Council’ has been established to improve oversight, monitoring and governance on model risk. The model risk framework has been further improved to drive consistency of model development, validation as well as risk management approaches across the bank. Reputational risk management Within our risk management process, reputational risk is defined as the risk of possible damage to Deutsche Bank’s brand and reputation, and the associated risk to earnings, capital or liquidity arising from any association, action or inaction which could be perceived by stakeholders to be inappropriate, unethical or inconsistent with the DB’s values and beliefs. Deutsche Bank seeks to ensure that reputational risk is as low as reasonably possible. Reputational risk cannot be precluded as it can be driven by unforeseeable changes in perception of our practices by our various stakeholders (e.g. public, clients, shareholders and regulators). Deutsche Bank strives to promote sustainable standards that will enhance profitability and min- imize reputational risk. The Reputational Risk Framework (the Framework) is in place to manage the process through which active decisions are taken on matters which may pose a reputational risk, before the event, and in doing so to prevent damage to Deutsche Bank’s reputation wherever possible. The Framework provides consistent standards for the identification, assessment and manage- ment of reputational risk issues. Reputational impacts which may arise as a consequence of a failure from another risk type, control or process are addressed separately via the associated risk type framework and are therefore not addressed in this section. The reputational risk could arise from multiple sources including, but not limited to, potential issues with the profile of the counterparty, the business purpose / economic substance of the transaction or product, high risk industries, environmental and social considerations, and the nature of the transaction or product or its structure and terms. The modelling and quantitative measurement of reputational risk internal capital is implicitly covered in our economic capital framework primarily within operational and strategic risk. Governance and organizational structure The Framework is applicable across all Business Divisions and Regions. DWS-specific matters are reviewed by a DWS- dedicated reputational risk committee and escalated to the DWS Executive Board where required. Whilst every employee has a responsibility to protect our reputation, the primary responsibility for the identification, assess- ment, management, monitoring and, if necessary, referring or reporting of reputational risk matters lies with Deutsche Bank’s Business Divisions as the primary risk owners. Each Business Division has an established process through which matters, which are deemed to be a moderate or greater reputational risk are assessed, the Unit Reputational Risk Assessment Process (Unit RRAP). The Unit RRAP is required to refer any material reputational risk matters to the respective Regional Reputational Risk Com- mittee (RRRC). The Framework also sets out a number of matters which are considered inherently higher risk from a reputa- tional risk perspective and are therefore mandatory referrals to the RRRCs. The RRRCs, which are 2nd LoD Committees, are responsible for ensuring the oversight, governance and coordination of the management of reputational risk in the respective region of Deutsche Bank. The RRRCs meet, as a minimum, on a quarterly basis with ad hoc meetings as required. The Group Reputational Risk Committee (GRRC) is responsible for ensuring the oversight, governance and coordination of the manage- ment of reputational risk at Deutsche Bank on behalf of the Group Risk Committee and the Management Board. Additionally, the GRRC reviews cases with a Group wide impact and in exceptional circumstances, those that could not be resolved at a regional level. 109 Deutsche Bank Annual Report 2020 Risk and capital management Risk concentration and risk diversification Risk concentration and risk diversification Risk concentrations Risk concentrations refer to clusters of the same or similar risk drivers within specific risk types (intra-risk concentrations in credit, market, operational, liquidity and business risks) as well as across different risk types (inter-risk concentrations). They occur within and across counterparties, businesses, regions/countries, industries and products. The management and moni- toring of risk concentrations is achieved through a quantitative and qualitative approach, as follows: – Intra-risk concentrations are assessed, monitored and mitigated by the individual risk functions (credit, market, operational, liquidity and strategic risk management). This is supported by limit setting on different levels and/or management according to each risk type. – Inter-risk concentrations are managed through quantitative top-down stress-testing and qualitative bottom-up reviews, iden- tifying and assessing risk themes independent of any risk type and providing a holistic view across the bank. The most senior governance body for the oversight of risk concentrations throughout 2020 was the Enterprise Risk Committee (ERC), which is a subcommittee of the Group Risk Committee (GRC). Risk type diversification benefit The risk type diversification benefit quantifies diversification effects between credit, market, operational and strategic risk in economic capital caused by non-perfect correlations between these risk types. The calculation of the risk type diversification benefit is intended to ensure that the standalone economic capital figures for the individual risk types are aggregated in an economically meaningful way. 110 Deutsche Bank Annual Report 2020 Risk and capital performance Capital, Leverage ratio, TLAC and MREL Risk and capital performance Capital, Leverage ratio, TLAC and MREL Own funds The calculation of our own funds incorporates the capital requirements following the “Regulation (EU) No 575/2013 on pru- dential requirements for credit institutions and investment firms” (Capital Requirements Regulation or “CRR”) and the “Di- rective 2013/36/EU on access to the activity of credit institutions and the prudential supervision of credit institutions and in- vestment firms” (Capital Requirements Directive or “CRD”) which have been further amended with subsequent Regulations and Directives. The CRD has been implemented into German law. The information in this section as well as in the section “Development of risk-weighted Assets” is based on the regulatory principles of consolidation. This section refers to the capital adequacy of the group of entities consolidated for banking regulatory purposes pursuant to the CRR and the German Banking Act (“Kreditwesengesetz” or “KWG”). Therein not included are insurance companies or companies outside the finance sector. The total own funds pursuant to the effective regulations as of year-end 2020 comprises Tier 1 and Tier 2 (T2) capital. Tier 1 capital is subdivided into Common Equity Tier 1 (CET 1) capital and Additional Tier 1 (AT1) capital. Common Equity Tier 1 (CET 1) capital consists primarily of common share capital (reduced by own holdings) including related share premium accounts, retained earnings (including losses for the financial year, if any) and accumulated other comprehen- sive income, subject to regulatory adjustments (i.e. prudential filters and deductions), as well as minority interests qualifying for inclusion in consolidated CET1 capital. Prudential filters for CET 1 capital, according to Articles 32 to 35 CRR, include (i) securitization gains on sale, (ii) cash flow hedges and changes in the value of own liabilities, and (iii) additional value adjust- ments. CET 1 capital deductions for instance includes (i) intangible assets, (ii) deferred tax assets that rely on future profita- bility, (iii) negative amounts resulting from the calculation of expected loss amounts, (iv) net defined benefit pension fund assets, (v) reciprocal cross holdings in the capital of financial sector entities and, (vi) significant and non-significant invest- ments in the capital (CET 1, AT1, T2) of financial sector entities above certain thresholds. All items not deducted (i.e., amounts below the threshold) are subject to risk-weighting. Additional Tier 1 (AT1) capital consists of AT1 capital instruments and related share premium accounts as well as noncontrol- ling interests qualifying for inclusion in consolidated AT1 capital and during the transitional period grandfathered instruments. To qualify as AT1 capital under CRR/CRD, instruments must have principal loss absorption through a conversion to common shares or a write-down mechanism allocating losses at a trigger point and must also meet further requirements (perpetual with no incentive to redeem; institution must have full dividend/coupon discretion at all times, etc.). Tier 2 (T2) capital comprises eligible capital instruments, the related share premium accounts and subordinated long-term debt, certain loan loss provisions and noncontrolling interests that qualify for inclusion in consolidated T2 capital. To qualify as T2 capital, capital instruments or subordinated debt must have an original maturity of at least five years. Moreover, eligible capital instruments may inter alia not contain an incentive to redeem, a right of investors to accelerate repayment, or a credit sensitive dividend feature We present in this report certain figures based on the CRR definition of own fund instruments applicable for Additional Tier 1 (AT1) capital and Tier 2 (T2) capital and figures based thereon, including Tier 1, Total Capital and Leverage Ratio) on a “fully loaded” basis. We calculate such “fully loaded” figures excluding the transitional arrangements for own fund instruments as provided in the currently applicable CRR/CRD. For CET 1 instruments there are no transitional provisions. Transitional arrangements are applicable for AT1 and T2 instruments. Capital instruments issued on or prior to December 31, 2011, that no longer qualify as AT1 or T2 capital under the fully loaded CRR/CRD as currently applicable are subject to grandfathering rules during the transitional period and are being phased out from 2013 to 2022 with their recognition capped at 20 % in 2020 and 10 % in 2021 (in relation to the portfolio eligible for grandfathering which was still in issue on December 31, 2012). The current CRR as applicable since June 27, 2019 provides further grandfathering rules for AT1 and T2 instruments issued prior to June 27, 2019. Thereunder, AT1 and T2 instruments issued through special purpose entities are grandfathered until December 31, 2021, and AT1 and T2 instruments that do not meet certain new requirements that apply since June 27, 2019 continue to qualify until June 26, 2025. Instruments issued under UK law which do not fulfill all CRR requirements after the UK has left the European Union are also excluded from our fully loaded definition. Our CET 1 and RWA figures show no difference between CRR/CRD as currently applicable and fully loaded CRR/CRD based on our definition of “fully loaded”. 111 Deutsche Bank Annual Report 2020 Risk and capital performance Capital, Leverage ratio, TLAC and MREL For the comparative numbers as per year-end 2019 we still applied our earlier concept of fully loaded, defined as excluding the transitional arrangements for own funds instruments introduced by the CRR/CRD applicable until June 26, 2019, but reflecting the transitional arrangements introduced by the amendments to the CRR/CRD applicable from June 27, 2019 and further amendments thereafter. We believe that these “fully loaded” calculations provide useful information to investors as they reflect our progress against the regulatory capital standards and as many of our competitors have been describing calculations on a “fully loaded” basis. As our competitors’ assumptions and estimates regarding “fully loaded” calculations may vary, however, our “fully loaded” measures may not be comparable with similarly labelled measures used by our competitors. Capital instruments Our Management Board received approval from the 2019 Annual General Meeting to buy back up to 206.7 million shares before the end of April 2024. Thereof 103.3 million shares can be purchased by using derivatives, this includes 41.3 million derivatives with a maturity exceeding 18 months. During the period from the 2019 Annual General Meeting until the 2020 Annual General Meeting (May 20, 2020), 33.8 million shares were purchased. The shares purchased were used for equity compensation purposes in the same period or are to be used in the upcoming period so that the number of shares held in Treasury from buybacks was 10.5 million as of the 2020 Annual General Meeting. The 2020 Annual General Meeting granted our Management Board the approval to buy back up to 206.7 million shares before the end of April 2025. Thereof 103.3 million shares can be purchased by using derivatives, this includes 41.3 million derivatives with a maturity exceeding 18 months. These authorizations substitute the authorizations of the previous year. During the period from the 2020 Annual General Meeting until December 31, 2020, there were not any shares purchased. The shares in inventory are to be used in this period or the upcoming period for equity compensation purposes; the number of shares held in Treasury from buybacks was 1.3 million as of December 31, 2020. Since the 2017 Annual General Meeting, and as of December 31, 2020, authorized capital available to the Management Board is € 2,560 million (1,000 million shares). As of December 31, 2020, the conditional capital against cash stands at € 512 million (200 million shares). Additional conditional capital for equity compensation amounts to € 51.2 million (20 million shares). Fur- ther, the 2018 Annual General Meeting authorized the issuance of participatory notes and other Hybrid Debt Securities that fulfill the regulatory requirements to qualify as Additional Tier 1 capital with an equivalent value of € 8.0 billion. Our legacy Hybrid Tier 1 capital instruments (substantially all noncumulative trust preferred securities) are not recognized under fully loaded CRR/CRD rules as Additional Tier 1 capital, mainly because they have no write-down or equity conversion feature. During the transitional phase-out period the maximum recognizable amount of Additional Tier 1 instruments from Basel 2.5 compliant issuances as of December 31, 2012 will be reduced at the beginning of each financial year by 10 % or € 1.3 billion, through 2022. For December 31, 2020, this resulted in eligible Additional Tier 1 instruments of € 6.8 billion (i.e. € 5.7 billion newly issued AT1 Notes plus € 1.1 billion of legacy Hybrid Tier 1 instruments recognizable during the transition period). Additional Tier 1 instruments recognized under fully loaded CRR/CRD rules amounted to € 5.7 billion as of Decem- ber 31, 2020. In 2020, the bank issued AT1 notes amounting to U.S.$ 1.3 billion or an equivalent amount of € 1.2 billion. Furthermore, the bank redeemed legacy Hybrid Tier 1 instruments with a notional of U.S.$ 0.8 billion and an eligible equivalent amount of € 0.7 billion. The total of our Tier 2 capital instruments as of December 31, 2020 recognized during the transition period under CRR/CRD was € 6.9 billion (nominal value of € 7.7 billion). Tier 2 instruments recognized under fully loaded CRR/CRD rules amounted to € 6.6 billion (nominal value of € 7.4 billion). In 2020, the bank issued Tier 2 capital instruments with a nominal value of U.S.$ 0.5 billion (equivalent amount of € 0.4 billion) and € 1.3 billion. Minimum capital requirements and additional capital buffers The Pillar 1 CET 1 minimum capital requirement applicable to the Group is 4.50 % of risk-weighted assets (RWA). The Pillar 1 total capital requirement of 8.00 % demands further resources that may be met with up to 1.50 % Additional Tier 1 capital and up to 2.00 % Tier 2 capital. Failure to meet minimum capital requirements can result in supervisory measures such as restrictions of profit distributions or limitations on certain businesses such as lending. We complied with the regulatory capital adequacy requirements in 2020. In addition to these minimum capital requirements, the following combined capital buffer requirements were fully effective beginning 2020 onwards. The buffer requirements must be met in addition to the Pillar 1 minimum capital requirements, but can be drawn down in times of economic stress. The capital conservation buffer is implemented in Section 10c German Banking Act, based on Article 129 CRD and equals a requirement of 2.50 % CET 1 capital of RWA in 2020 and onwards. 112 Deutsche Bank Annual Report 2020 Risk and capital performance Capital, Leverage ratio, TLAC and MREL The countercyclical capital buffer is deployed in a jurisdiction when excess credit growth is associated with an increase in system-wide risk. It may vary between 0 % and 2.50 % CET 1 capital of RWA by 2020. In exceptional cases, it could also be higher than 2.50 %. The institution-specific countercyclical buffer that applies to Deutsche Bank is the weighted average of the countercyclical capital buffers that apply in the jurisdictions where our relevant credit exposures are located. As per De- cember 31, 2020, the institution-specific countercyclical capital buffer was at 0.02 %. In addition to the aforementioned buffers, national authorities, such as the BaFin, may require a systemic risk buffer to prevent and mitigate long-term non-cyclical systemic or macro-prudential risks that are not covered by the CRR. They can require an additional buffer of up to 5.00 % CET 1 capital of RWA. As of the year-end 2020, no systemic risk buffer applied to Deutsche Bank. Deutsche Bank continues to be designated as a global systemically important institution (G-SII) by the German Federal Fi- nancial Supervisory Authority (BaFin) in agreement with the Deutsche Bundesbank, resulting in a G-SII buffer requirement of 2.00 % CET 1 capital of RWA in 2020. This is in line with the FSB assessment of systemic importance based on the indicators as published in 2017. According to the recent FSB assessment based on the indicators as published in 2019, the G-SII buffer requirement for Deutsche Bank is reduced to 1.50 %, which will become effective from January 1, 2021. This assessment has been confirmed by the FSB in 2020. We will continue to publish our indicators on our website. Additionally, Deutsche Bank AG has been classified by BaFin in agreement with the Deutsche Bundesbank as an “other systemically important institution” (O-SII) with an additional capital buffer requirement of 2.00 % in 2020 that has to be met on a consolidated level. Unless certain exceptions apply, only the higher of the systemic risk buffer, G-SII buffer and O-SII buffer must be applied. In addition, pursuant to the Pillar 2 Supervisory Review and Evaluation Process (SREP), the European Central Bank (ECB) may impose capital requirements on individual banks which are more stringent than statutory requirements (so-called Pillar 2 requirement). On December 9, 2019, Deutsche Bank was informed by the ECB of its decision regarding prudential minimum capital require- ments for 2020 that applied from January 1, 2020 onwards, following the results of the 2019 SREP. The decision acknowl- edges the progress Deutsche Bank has made since the first SREP assessment in 2016, leading to a decrease in the ECB’s Pillar 2 Requirement (P2R) from 2.75% to 2.50% CET 1 capital of RWA, effective as of January 1, 2020. As a result, Deutsche Bank was required to maintain a CET 1 ratio of at least 11.58 % on a consolidated basis. This CET 1 capital requirement comprised the Pillar 1 minimum capital requirement of 4.50 %, the lowered Pillar 2 requirement (SREP add-on) of 2.50 %, the capital conservation buffer of 2.50 %, the countercyclical buffer of 0.08 % as of January 1 2020 (subject to changes throughout the year) and the G-SII buffer of 2.00 %. Correspondingly, 2020 requirements for Deutsche Bank's Tier 1 capital ratio were at 13.08 % and for its total capital ratio at 15.08 %. On March 12, 2020, the ECB announced various supervisory measures in reaction to the COVID-19 pandemic. Related to that, Deutsche Bank was informed by the ECB of its decision to implement Article 104a of the Directive (EU) 2019/878 of the European Parliament (CRDV) with effect from March 12, 2020. The decision requires Deutsche Bank to fulfill its unchanged 2.50 % Pillar 2 requirement (SREP add-on) with at least 56.25 % CET 1, 18.75 % Additional Tier 1 and 25 % Tier 2 capital. As of December 31, 2020, Deutsche Bank needs to maintain on a consolidated basis a CET 1 ratio of at least 10.42 %, a Tier 1 ratio of at least 12.39 % and a Total Capital ratio of at least 15.02 %. The CET 1 requirement comprises the Pillar 1 minimum capital requirement of 4.50 %, the Pillar 2 requirement (SREP add-on) of 1.41 %, the capital conservation buffer of 2.50 %, the countercyclical buffer (subject to changes throughout the year) of 0.02 % and the higher of our G-SII/O-SII buffer of 2.00 %. Correspondingly, the Tier 1 capital requirement includes additionally a Tier 1 minimum capital requirement of 1.50 % plus a Pillar 2 requirement of 0.47 %, and the Total Capital requirement includes further a Tier 2 minimum capital requirement of 2.00 % and a Pillar 2 requirement of 0.63 %. Also, the ECB communicated to Deutsche Bank that its individual expectation to hold a further Pillar 2 CET 1 capital add-on, commonly referred to as ‘Pillar 2 guidance’ will be seen as guidance only and until further notice a breach of this guidance will not trigger the need to provide a capital restoration plan or a need to execute measures to re-build CET 1 capital. The ECB has further communicated that once this period of financial distress is over, banks will be granted sufficient time to build up the buffers again. In December 2020 the ECB informed Deutsche Bank that these capital requirements will remain unchanged in 2021 with no update of requirements as part of the 2020 SREP, for which, in light of the pandemic and the unique economic and financial situation it has generated, and in line with the European Banking Authority’s (EBA’s) statement of April 22, 2020, the ECB has adopted a “pragmatic approach”, based on which in principle no new decisions are issued in the 2020 cycle with the 2019 SREP decisions continuing to apply, amended by the above mentioned additional supervisory measures announced on March 12, 2020. It should be noted that the Financial Stability Board has announced in 2019 that our G-SII buffer will be reduced to 1.5 % starting January 1, 2021. This does not change the capital requirements as the O-SII buffer remains at 2.0 % as the higher of the G-SII, O-SII, and systemic risk buffer. 113 Deutsche Bank Annual Report 2020 Risk and capital performance Capital, Leverage ratio, TLAC and MREL The following table gives an overview of the different Pillar 1 and Pillar 2 minimum capital requirements (but excluding the Pillar 2 guidance) as well as capital buffer requirements applicable to Deutsche Bank for years 2020 and 2021: Overview total capital requirements and capital buffers Pillar 1 Minimum CET 1 requirement Combined buffer requirement Capital Conservation Buffer Countercyclical Buffer Maximum of: G-SII Buffer O-SII Buffer Systemic Risk Buffer Pillar 2 Pillar 2 SREP Add-on of CET 1 capital (excluding the "Pillar 2" guidance) of which covered by CET 1 capital of which covered by Tier 1 capital of which covered by Tier 2 capital Total CET 1 requirement from Pillar 1 and 2³ Total Tier 1 requirement from Pillar 1 and 2 Total capital requirement from Pillar 1 and 2 2020 2021 4.50 % 4.52 % 2.50 % 0.02 % 2.00 % 2.00 % 2.00 % 0.00 % 2.50 % 1.41 % 1.88 % 0.63 % 10.42 % 12.39 % 15.02 % 4.50 % 4.52 % 2.50 % 0.02 % 2.00 % 1.50 % 2.00 % 0.00 % 2.50 % 1.41 % 1.88 % 0.63 % 10.42 % 12.39 % 15.02 % 1 Deutsche Bank’s countercyclical buffer requirement is subject to country-specific buffer rates decreed by EBA and the Basel Committee of Banking Supervision (BCBS) as well as Deutsche Bank’s relevant credit exposures as per respective reporting date. The countercyclical buffer rate for 2021 has been assumed to be 0.02 % as per beginning of the year 2021. The countercyclical buffer is subject to changes throughout the year depending on its constituents. 2 The systemic risk buffer has been assumed to remain at 0 % for the projected year 2021, subject to changes based on further directives. 3 The total Pillar 1 and Pillar 2 CET 1 requirement (excluding the “Pillar 2” guidance) is calculated as the sum of the SREP requirement, the higher of the G-SII, O-SII and sys- temic risk buffer requirement as well as the countercyclical buffer requirement. Development of own funds Our Total Regulatory capital as of December 31, 2020 amounted to € 58.5 billion compared to € 56.5 billion at the end of December 31, 2019. Our Tier 1 capital as of December 31, 2020 amounted to € 51.5 billion, consisting of a Common Equity Tier 1 (CET 1) capital of € 44.7 billion and Additional Tier 1 (AT1) capital of € 6.8 billion. The Tier 1 capital was € 1.0 billion higher than at the end of December 31, 2019, driven by an increase in CET 1 capital of € 0.6 billion and an increase in AT1 capital of € 0.5 billion since year end 2019. The CET 1 capital increase of € 0.6 billion was largely the result of benefits from the regulatory changes. Our capital increased as respective deductions of goodwill and other intangible assets lowered by € 1.6 billion due to regulatory changes from software assets due to an amended Art. 36 (1) (b) CRR. An additional increase of € 0.4 billion resulted from the regulatory requirement of valuing subsidiaries and participations that are only consolidated under IFRS at-equity rather than at-cost and a further increase of € 0.1 billion as of year-end 2020 as we make use of the IFRS 9 transitional provision as per Article 473a of the CRR. Our decreased regulatory adjustment of € 0.3 billion from prudential filters (mainly additional value adjustments) were the result of a temporary change of the EBA technical standard on the aggregation methodology of prudential valuations following the disruptions caused by the COVID-19 pandemic and markets normalizing in the second half of 2020. Further increase of € 0.3 billion was driven by re-measurement gains related to defined benefit pension plan and unrealized gains from financial instruments at fair value through other comprehensive income of € 0.2 billion driven mainly by falling interest rates and narrowing credit spreads compared to 2019. These positive impacts were partly offset by negative effects from Currency Translation Adjustments of € 1.7 billion with some positive foreign exchange counter-effects in capital deduction items of € 0.4 billion. Furthermore our CET 1 capital decreased by € 0.7 billion from a deduction as per ECB’s supervisory recommendation for prudential provisioning of non-performing exposures and € 0.3 billion due to payment of our AT1 coupon in the second quarter of 2020 which was not accrued in CET 1 capital as a consequence of the negative net income in financial year 2019 following Article 26(2) of Regulation (EU) No 575/2013 (ECB/2015/4). The € 0.5 billion increase in AT1 capital was mainly the result of an issued AT1 capital instruments with a notional amount of U.S.$ 1.3 billion (€ 1.2 billion) during the first quarter of 2020 partially offset by call and redemption of one legacy hybrid Tier 1 instrument, recognizable as AT1 capital during the transition period, with a notional amount of € 0.7 billion in the second quarter of 2020. 114 Deutsche Bank Annual Report 2020 Risk and capital performance Capital, Leverage ratio, TLAC and MREL Our fully loaded Total Regulatory capital as of December 31, 2020 was € 57.1 billion, compared to € 56.5 billion at the end of December 31, 2019. Our fully loaded Tier 1 capital as of December 31, 2020 was € 50.4 billion, compared to € 48.7 billion at the end of December 31, 2019. Our fully loaded AT1 capital amounted to € 5.7 billion as of December 31, 2020 which increased compared to € 4.6 billion at the end of December 31, 2019 due to the above mentioned issuance. Our CET 1 capital amounted to € 44.7 billion as of December 31, 2020, compared to € 44.1 billion at the end of December 31, 2019. Please note: In our CET 1 capital amounting to € 44.7 billion at December 31, 2020, we reflected a full year profit of € 84 million in line with ECB Decision (EU) 2015/656 and Article 26(2) CRR. If we would have considered a dividend payment of zero, which is expected for the financial year 2020, our CET 1 capital would have amounted to € 44.9 billion. On the basis of this revised CET1 capital our key regulatory metrics would have amounted to the following: CET 1 ratio 13.6 %, Tier 1 ratio 15.7 %, Total Capital ratio 17.8 %, fully loaded Leverage Ratio 4.7 %, TLAC ratio 32.0 % and MREL 10.3 %. In order to comply with recent EBA/ECB guidance we will provide an updated Pillar 3 Report in 2021. 115 Deutsche Bank Annual Report 2020 Risk and capital performance Capital, Leverage ratio, TLAC and MREL Own Funds Template (incl. RWA and capital ratios) in € m. Common Equity Tier 1 (CET 1) capital: instruments and reserves Capital instruments, related share premium accounts and other reserves Retained earnings Accumulated other comprehensive income (loss), net of tax Independently reviewed interim profits net of any foreseeable charge or dividend1 Other Common Equity Tier 1 (CET 1) capital before regulatory adjustments Dec 31, 2020 Dec 31, 2019 CRR/CRD fully-loaded3 CRR/CRD CRR/CRD fully loaded3 CRR/CRD 45,890 9,784 (1,118) 84 805 55,444 45,890 9,784 (1,118) 84 805 55,444 45,780 14,814 537 (5,390) 837 56,579 45,780 14,814 537 (5,390) 837 56,579 Common Equity Tier 1 (CET 1) capital: regulatory adjustments Additional value adjustments (negative amount) Other prudential filters (other than additional value adjustments) Goodwill and other intangible assets (net of related tax liabilities) (negative amount) Deferred tax assets that rely on future profitability excluding those arising from temporary differences (net of related tax liabilities where the conditions in Art. 38 (3) CRR are met) (negative amount) Negative amounts resulting from the calculation of expected loss amounts Defined benefit pension fund assets (net of related tax liabilities) (negative amount) Direct, indirect and synthetic holdings by an institution of own CET 1 instruments (negative amount) Direct, indirect and synthetic holdings by the institution of the CET 1 instruments of financial sector entities where the institution has a significant investment in those entities (amount above the 10 % / 15 % thresholds and net of eligible short positions) (negative amount) Deferred tax assets arising from temporary differences (net of related tax liabilities where the conditions in Art. 38 (3) CRR are met) (amount above the 10 % / 15 % thresholds) (neg- ative amount) Other regulatory adjustments2 Total regulatory adjustments to Common Equity Tier 1 (CET 1) capital Common Equity Tier 1 (CET 1) capital Additional Tier 1 (AT1) capital: instruments Capital instruments and the related share premium accounts Amount of qualifying items referred to in Art. 484 (4) CRR and the related share premium accounts subject to phase out from AT1 Additional Tier 1 (AT1) capital before regulatory adjustments Additional Tier 1 (AT1) capital: regulatory adjustments Direct, indirect and synthetic holdings by an institution of own AT1 instruments (negative amount) Residual amounts deducted from AT1 capital with regard to deduction from CET 1 capital during the transitional period pursuant to Art. 472 CRR Other regulatory adjustments Total regulatory adjustments to Additional Tier 1 (AT1) capital Additional Tier 1 (AT1) capital Tier 1 capital (T1 = CET 1 + AT1) Tier 2 (T2) capital Total capital (TC = T1 + T2) Total risk-weighted assets Capital ratios Common Equity Tier 1 capital ratio (as a percentage of risk-weighted assets) Tier 1 capital ratio (as a percentage of risk-weighted assets) Total capital ratio (as a percentage of risk-weighted assets) (1,430) (112) (4,635) (1,430) (112) (4,635) (1,738) (150) (6,515) (1,738) (150) (6,515) (1,353) (99) (772) (1,353) (99) (772) (1,126) (259) (892) (1,126) (259) (892) 0 0 (15) (15) 0 0 0 0 (92) (2,252) (10,745) 44,700 (92) (2,252) (10,745) 44,700 (319) (1,417) (12,430) 44,148 (319) (1,417) (12,430) 44,148 5,828 5,828 4,676 4,676 N/M 5,828 1,100 6,928 N/M 4,676 1,813 6,489 (80) (80) (91) (91) N/M 0 (80) 5,748 50,448 N/M 0 (80) 6,848 51,548 N/M 0 (91) 4,584 48,733 N/M 0 (91) 6,397 50,546 6,623 57,071 328,951 6,944 58,492 328,951 7,770 56,503 324,015 5,957 56,503 324,015 13.6 15.3 17.3 13.6 15.7 17.8 13.6 15.0 17.4 13.6 15.6 17.4 N/M – Not meaningful 1 Full year profit is recognized as per ECB Decision (EU) 2015/656 in accordance with the Article 26(2) of Regulation (EU) No 575/2013 (ECB/2015/4). 2 Includes € 0.4 billion capital deduction effective from April 2019 and € 0.3 billion effective from October 2016 based on regular ECB review, € 0.9 billion capital deduction based on ECB guidance on irrevocable payment commitments related to the Single Resolution Fund and the Deposit Guarantee Scheme effective from January 2018 on- wards and € 0.7 billion capital deduction effective from December 2020 based on ECB’s supervisory recommendation for a prudential provisioning of non-performing expo- sures. Effective June 30, 2020, we make use of the IFRS 9 transitional provision as per Article 473a of the CRR resulting in CET 1 increase of € 0.1 billion as of December 31, 2020. 3 For the understanding of the term “fully-loaded” please refer to our definition as provided in section “Own Funds” of this report. 116 Deutsche Bank Annual Report 2020 Risk and capital performance Capital, Leverage ratio, TLAC and MREL Reconciliation of shareholders’ equity to Own Funds in € m. Total shareholders’ equity per accounting balance sheet Deconsolidation/Consolidation of entities3 Of which: Additional paid-in capital Retained earnings Accumulated other comprehensive income (loss), net of tax Total shareholders' equity per regulatory balance sheet Minority Interests (amount allowed in consolidated CET 1) Accrual for dividend and AT1 coupons1 Reversal of deconsolidation/consolidation of the position Accumulated other comprehensive income (loss), net of tax, during transitional period Common Equity Tier 1 (CET 1) capital before regulatory adjustments Additional value adjustments Other prudential filters (other than additional value adjustments) Regulatory adjustments relating to unrealized gains and losses pursuant to Art. 467 and 468 CRR Goodwill and other intangible assets (net of related tax liabilities) (negative amount) Deferred tax assets that rely on future profitability Defined benefit pension fund assets (net of related tax liabilities) (negative amount) Direct, indirect and synthetic holdings by the institution of the CET 1 instruments of financial sector entities where the institution has a significant investment in those entities Other regulatory adjustments2 Common Equity Tier 1 capital Dec 31, 2020 54,786 265 0 265 0 55,050 805 (411) 0 55,444 (1,430) (112) 0 (4,635) (1,445) (772) 0 (2,351) 44,700 CRR/CRD Dec 31, 2019 55,857 (116) (12) (220) 116 55,741 837 0 0 56,579 (1,738) (150) 0 (6,515) (1,445) (892) 0 (1,692) 44,148 1 Full year profit is recognized as per ECB Decision (EU) 2015/656 in accordance with the Article 26(2) of Regulation (EU) No 575/2013 (ECB/2015/4). 2 Includes € 0.4 billion capital deduction effective from April 2019 and € 0.3 billion effective from October 2016 based on regular ECB review, € 0.9 billion capital deduction based on ECB guidance on irrevocable payment commitments related to the Single Resolution Fund and the Deposit Guarantee Scheme effective from January 2018 on- wards, € 0.1 billion negative amounts resulting from the calculation of expected loss amounts and € 0.7 billion capital deduction effective from December 2020 based on ECB’s supervisory recommendation for a prudential provisioning of non-performing exposures. Effective June 30, 2020, we make use of the IFRS 9 transitional provision as per Article 473a of the CRR resulting in CET 1 increase of € 0.1 billion as of December 31, 2020. 3 Includes € 0.4 billion increase due to regulatory changes from cost to at-equity treatment of subsidiaries and participations that are only consolidated under IFRS. Development of Own Funds in € m. Common Equity Tier 1 (CET 1) capital - opening amount Common shares, net effect Additional paid-in capital Retained earnings Common shares in treasury, net effect/(+) sales (–) purchase Movements in accumulated other comprehensive income Accrual for dividend and Additional Tier 1 (AT1) coupons ¹ Additional value adjustments Goodwill and other intangible assets (net of related tax liabilities) (negative amount) Deferred tax assets that rely on future profitability (excluding those arising from temporary differences) Negative amounts resulting from the calculation of expected loss amounts Defined benefit pension fund assets (net of related tax liabilities) (negative amount) Direct, indirect and synthetic holdings by the institution of the CET 1 instruments of financial sector entities where the institution has a significant investment in those entities Securitization positions not included in risk-weighted assets Deferred tax assets arising from temporary differences (amount above 10 % and 15 % threshold, net of related tax liabilities where the conditions in Art. 38 (3) CRR are met) Other, including regulatory adjustments Common Equity Tier 1 (CET 1) capital - closing amount Additional Tier 1 (AT1) Capital – opening amount New Additional Tier 1 eligible capital issues Matured and called instruments Transitional arrangements Of which: Goodwill and other intangible assets (net of related tax liabilities) Other, including regulatory adjustments Additional Tier 1 (AT1) Capital – closing amount Tier 1 capital Tier 2 (T2) capital – closing amount Total regulatory capital 1 Full year profit is recognized as per ECB Decision (EU) 2015/656 in accordance with the Article 26(2) of Regulation (EU) No 575/2013 (ECB/2015/4). twelve months ended Dec 31, 2020 44,148 CRR/CRD twelve months ended Dec 31, 2019 47,486 0 113 854 (3) (1,655) (411) 308 1,880 (227) 160 119 0 0 227 (814) 44,700 6,397 1,134 (713) 0 0 30 6,848 51,548 6,944 58,492 0 253 (6,873) 11 155 0 (234) 2,051 1,632 108 219 0 0 (319) (341) 44,148 7,604 0 (1,210) 0 0 3 6,397 50,546 5,957 56,503 117 Deutsche Bank Annual Report 2020 Risk and capital performance Capital, Leverage ratio, TLAC and MREL Minimum loss coverage for Non Performing Exposure (NPE) In April 2019, the EU published final regulations for a prudential backstop reserve for non-performing exposure (NPE), which will result in a Pillar 1 deduction from CET 1 capital when a minimum loss coverage requirement is not met. It is applied to exposures originated and defaulted after April 26, 2019 In addition, in March 2018, the ECB published its “Addendum to the ECB Guidance to banks on non-performing loans: super- visory expectations for prudential provisioning of non-performing exposures” and in August 2019, its “Communication on su- pervisory coverage expectations for NPEs”. The ECB guidance issued is applicable to all newly defaulted loans after April 1, 2018 and, similar to the EU rules, it requires banks to take measures in case a minimum impairment coverage requirement is not met. Within the annual SREP discussions ECB may impose Pillar 2 measures on banks in case ECB is not confident with measure taken by the individual bank. For the year end 2020, we introduced a framework to determine the prudential provisioning of non-performing exposure as a Pillar 2 measure as requested in the before mentioned ECB’s guidance and SREP recommendation. The shortfall between the minimum loss coverage requirements for non-performing exposure and the risk reserves recorded in line with the IFRS 9 for defaulted (Stage 3) assets amounted to € 740 million as of December 31, 2020 and was deducted from CET 1. This additional CET 1 charge can be considered as additional loss reserve and leads to a € 499 million RWA relief. Non-performing exposure loss coverage in € m. (unless stated otherwise) Corporate Bank Investment Bank Private Bank Asset Management Capital Release Unit Corporate & Other Total Exposure value Total minimum coverage requirement 2,852 13,510 6,123 0 422 1 22,907 377 7,816 1,269 0 183 1 9,646 Dec 31, 2020 Applicable amount of insufficient coverage 63 255 361 0 60 1 740 Available coverage 1,058 10,574 2,011 0 182 0 13,825 Development of risk-weighted assets The table below provides an overview of RWA broken down by risk type and business division. It includes the aggregated effects of the segmental reallocation of infrastructure related positions, if applicable, as well as reallocations between the segments. Risk-weighted assets by risk type and business division in € m. Credit Risk Settlement Risk Credit Valuation Adjust- ment (CVA) Market Risk Operational Risk Total Corporate Bank 50,799 0 Investment Bank 70,746 0 75 385 6,029 57,288 6,302 24,323 27,115 128,487 in € m. Credit Risk Settlement Risk Credit Valuation Adjust- ment (CVA) Market Risk Operational Risk Total Corporate Bank 48,633 0 Investment Bank 69,507 192 48 530 7,312 56,522 2,009 20,390 26,525 118,622 Private Bank 68,353 0 92 548 8,081 77,074 Private Bank 66,925 0 103 89 8,325 75,442 Asset Management Capital Release Unit 6,224 0 198 31 3,544 9,997 7,214 1 1,599 1,470 24,130 34,415 Asset Management Capital Release Unit 4,873 0 56 28 4,570 9,527 13,155 6 2,450 4,331 25,931 45,874 Corporate & Other 19,371 54 125 2,139 0 21,690 Corporate & Other 17,967 44 17 0 0 18,029 Dec 31, 2020 Total 222,708 56 8,392 28,897 68,899 328,951 Dec 31, 2019 Total 221,060 242 4,683 25,368 72,662 324,015 118 Deutsche Bank Annual Report 2020 Risk and capital performance Capital, Leverage ratio, TLAC and MREL Our RWA were € 329.0 billion as of December 31, 2020, compared to € 324.0 billion at the end of 2019. The increase of € 4.9 billion was primarily driven by higher RWA for credit valuation adjustment, market risk and credit risk, partially offset by de- creased RWA for operational risk. CVA RWA increased by € 3.7 billion as a result of model-related changes. Market risk RWA increased by € 3.5 billion and was primarily driven by the incremental risk charge and the model change from a Monte Carlo simulation to a historical simulation for VaR and SVaR components. The increase in credit risk RWA by € 1.6 billion was driven by the introduction of the new framework for securitization positions, impacts on rating migrations on the back of the reper- cussion of the prevailing COVID-19 pandemic, method changes for software assets and certain equity investments as well as exposure increases across all businesses. This is partly offset by positive impacts due to application of the “quick fix” amend- ment of the CRR (Regulation (EU) 2020/873) in relation to certain small or medium-sized enterprise (SME) exposures, where risk weight-reducing scaling factors were applied. Moreover, the decommissioning of our dilution risk model, benefits from the non-performing loan (NPL) backstop implementation as well as de-risking initiatives contributed to this offset. The operational risk RWA reduction of € 3.8 billion was mainly driven by a more favourable development of our internal loss profile feeding into our capital model as well as a model change roll-out of the external loss data classification in alignment with recent regulatory requirements. This was partially offset by the reduced expected loss deductible and the adverse impact on the forward looking component. The tables below provide an analysis of key drivers for risk-weighted asset movements observed for credit risk, credit valuation adjustments as well as market and operational risk in the reporting period. They also show the corresponding movements in capital requirements, derived from the RWA by an 8 % capital ratio. Development of risk-weighted assets for Credit Risk including Counterparty Credit Risk in € m. Credit risk RWA balance, beginning of year Book size Book quality Model updates Methodology and policy Acquisition and disposals Foreign exchange movements Other Credit risk RWA balance, end of year Credit risk RWA Dec 31, 2020 Capital requirements Credit risk RWA 221,060 4,659 1,160 (2,072) 6,542 (1,672) (7,237) 268 222,708 17,685 373 93 (166) 523 (134) (579) 21 17,817 212,827 3,192 (4,700) 4,867 2,693 (300) 2,069 413 221,060 Of which: Development of risk-weighted assets for Counterparty Credit Risk in € m. Counterparty credit risk RWA balance, beginning of year Book size Book quality Model updates Methodology and policy Acquisition and disposals Foreign exchange movements Other Counterparty credit risk RWA balance, end of year Counterparty credit risk RWA Dec 31, 2020 Capital requirements Counterparty credit risk RWA 23,698 1,784 (594) (643) 669 0 (1,100) 0 23,814 1,896 143 (48) (51) 54 0 (88) 0 1,905 25,282 (1,708) (12) 318 (507) 0 326 0 23,698 Dec 31, 2019 Capital requirements 17,026 255 (376) 389 215 (24) 166 33 17,685 Dec 31, 2019 Capital requirements 2,023 (137) (1) 25 (41) 0 26 0 1,896 The classifications of key drivers for the RWA credit risk development table are fully aligned with the recommendations of the Enhanced Disclosure Task Force (EDTF). Organic changes in our portfolio size and composition are considered in the cate- gory “book size”. The category “book quality” mainly represents the effects from portfolio rating migrations, loss given default, model parameter recalibrations as well as collateral and netting coverage activities. “Model updates” include model refine- ments and advanced model roll out. RWA movements resulting from externally, regulatory-driven changes, e.g. applying new regulations, are considered in the “methodology and policy” section. “Acquisition and disposals” is reserved to show significant exposure movements which can be clearly assigned to new businesses or disposal-related activities. Changes that cannot be attributed to the above categories are reflected in the category “other”. The increase in RWA for credit risk by 0.7 % or € 1.6 billion since December 31, 2019 is mainly driven by the categories “methodology and policy”, “book size” as well as “book quality” related changes offset by FX related movements, changes shown in the categories “model updates” and “acquisition and disposals”. The category “methodology and policy” reflects mainly updates to the framework for securitization positions, regulatory prudent valuation of software assets and the changed treatment of equity investments. This was partly offset by the benefit from the non-performing loan (NPL) backstop implemen- tation. The increase in the category “book size” reflects business growth in our core business segments. The category “book quality” includes increases resulting from parameter recalibrations and data enhancements. These increases were partly offset by a decrease resulting from foreign exchange movements. The category “model updates” reflects the decommissioning of 119 Deutsche Bank Annual Report 2020 Risk and capital performance Capital, Leverage ratio, TLAC and MREL our dilution risk model and further refinements to our risk models based on regulatory parameter updates. Furthermore, “ac- quisition and disposals” provides for a reduction in credit risk RWA particularly within Private Bank and our Capital Release Unit. The increase in counterparty credit risk is mainly driven by “book size” reflecting growth across core businesses as well as “methodology and policy”-related updates for collateral. This was offset by changes to “model updates” particularly on con- centration risk as well as “book quality”. In addition the category foreign exchange movements contributed to the offset. Based on the CRR/CRD regulatory framework, we are required to calculate RWA using the CVA which takes into account the credit quality of our counterparties. RWA for CVA covers the risk of mark-to-market losses on the expected counterparty risk in connection with OTC derivative exposures. We calculate the majority of the CVA based on our own internal model as approved by the BaFin. Development of risk-weighted assets for Credit Valuation Adjustment in € m. CVA RWA balance, beginning of year Movement in risk levels Market data changes and recalibrations Model updates Methodology and policy Acquisitions and disposals Foreign exchange movements CVA RWA balance, end of year Dec 31, 2020 Capital requirements 374 (267) 0 463 101 0 0 671 CVA RWA 4,683 (3,338) 0 5,787 1,260 0 0 8,392 Dec 31, 2019 Capital requirements 640 (114) 0 0 (151) 0 0 374 CVA RWA 7,997 (1,423) 0 0 (1,891) 0 0 4,683 The development of CVA RWA is broken down into a number of categories: “Movement in risk levels”, which includes changes to the portfolio size and composition; “Market data changes and calibrations”, which includes changes in market data levels and volatilities as well as recalibrations; “Model updates” refers to changes to either the IMM credit exposure models or the value-at-risk models that are used for CVA RWA; “Methodology and policy” relates to changes to the regulation. Any significant business acquisitions or disposals would be presented in the category with that name. As of December 31, 2020, the RWA for CVA amounted to € 8.4 billion, representing an increase of € 3.7 billion (79 %) compared with € 4.7 billion for December 31, 2019. The overall increase was primarily driven by model enhancements linked to the introduction of the Historical Simulation VaR in 2020, and increased volatility observed due to the COVID-19 market turbulence and additional hedging activity. Development of risk-weighted assets for Market Risk in € m. Market risk RWA balance, beginning of year Movement in risk levels Market data changes and recalibrations Model updates/changes Methodology and policy Acquisitions and disposals Foreign exchange movements Other Market risk RWA balance, end of year in € m. Market risk RWA balance, beginning of year Movement in risk levels Market data changes and recalibrations Model updates/changes Methodology and policy Acquisitions and disposals Foreign exchange movements Other Market risk RWA balance, end of year VaR 4,273 (4,775) 4,237 (107) 8,481 0 0 0 12,109 VaR 5,368 (1,021) (81) 7 0 0 0 0 4,273 SVaR 13,734 (2,397) 0 547 (4,901) 0 0 0 6,983 SVaR 16,426 (1,879) 0 (813) 0 0 0 0 13,734 IRC 4,868 2,698 0 (561) 0 0 0 0 7,005 IRC 10,068 (5,222) 0 22 0 0 0 0 4,868 Other 2,493 570 (131) 0 (15) 0 (118) 0 2,799 Total RWA 25,368 (3,902) 4,105 (121) 3,565 0 (118) 0 28,897 Other 5,673 (2,973) (315) 0 120 0 (11) 0 2,493 Total RWA 37,535 (11,095) (396) (784) 120 0 (11) 0 25,368 Dec 31, 2020 Total capital requirements 2,029 (311) 328 (10) 285 0 (9) 0 2,312 Dec 31, 2019 Total capital requirements 3,003 (888) (32) (63) 10 0 (1) 0 2,029 120 Deutsche Bank Annual Report 2020 Risk and capital performance Capital, Leverage ratio, TLAC and MREL The analysis for market risk covers movements in our internal models for value-at-risk (VaR), stressed value-at-risk (SVaR), incremental risk charge (IRC) as well as results from the market risk standardized approach (MRSA), which is captured in the table under the category “Other”. MRSA is used to determine the regulatory capital charge for the specific market risk of trading book securitizations, for certain types of investment funds and for longevity risk as set out in CRR/CRD regulations. The market risk RWA movements due to changes in market data levels, volatilities, correlations, liquidity and ratings are included under the “Market data changes and recalibrations” category. Changes to our market risk RWA internal models, such as methodology enhancements or risk scope extensions, are included in the category of “Model updates”. In the “Methodology and policy” category we reflect regulatory driven changes to our market risk RWA models and calculations. Significant new businesses and disposals would be assigned to the line item “Acquisition and disposals”. The impacts of “Foreign exchange movements” are only calculated for the CRM and Standardized approach methods. As of December 31, 2020 the RWA for market risk was € 28.9 billion which has increased by € 3.5 billion (+14 %) since December 31, 2019. The increase was driven by the “Market data changes and recalibrations” category across value-at-risk driven by the COVID-19 related market volatility and by the “Methodology and policy” category driven by the go-live of Histor- ical Simulation model. The offset from the "Movement in risk levels" category across value-at-risk and stressed value-at-risk reflect the portfolio de-risking activities over 2020; while an increase in incremental risk charge was driven by increases in sovereign exposures. Development of risk-weighted assets for operational risk in € m. Operational risk RWA balance, beginning of year Loss profile changes (internal and external) Expected loss development Forward looking risk component Model updates Methodology and policy Acquisitions and disposals Operational risk RWA balance, end of year Operational risk RWA 72,662 (4,677) 1,164 533 (784) 0 0 68,899 Dec 31, 2020 Capital requirements 5,813 (374) 93 43 (63) 0 0 5,512 Operational risk RWA 91,989 (8,185) 1,747 1,879 (14,768) 0 0 72,662 Dec 31, 2019 Capital requirements 7,359 (655) 140 150 (1,181) 0 0 5,813 Changes in internal and external loss events are reflected in the category “Loss profile changes”. The category “Expected loss development” is based on divisional business plans as well as historical losses and is deducted from the AMA capital figure within certain constraints. The category “Forward looking risk component” reflects qualitative adjustments and, as such, the effectiveness and performance of the day-to-day operational risk management activities via NFR appetite metrics and RCA scores, focusing on the business environment and internal control factors. The category “Model updates” covers model re- finements, such as the implementation of model changes. The category “Methodology and policy” represents externally driven changes such as regulatory add-ons. The category “Acquisition and disposals” represents significant exposure movements which can be clearly assigned to new or disposed businesses. The overall RWA decrease of € 3.8 billion was driven by several effects. A reduced litigation intensity throughout the industry as well as provision and legal forecast levels below previous years for Deutsche Bank led to a lighter loss profile feeding into our capital model. These loss profile changes (internal and external) reduced our RWA for Operational Risk by € 4.7 billion. The RWA decrease of € 0.8 billion from model updates was largely driven by the full roll-out of the external loss data classifi- cation process, which we had started to introduce in 2019. Two other model updates with smaller capital impact enhanced and simplified our methodology for the sub-allocation of OR RWA within business divisions and aligned our OR event fre- quency dependence modelling to AMA EBA Regulatory Technical Standard requirements. The expected loss deductible reduction was driven by a positive outlook of operational risk loss development, leading to an RWA increase of € 1.2 billion. The forward looking component was adversely impacted by slightly weaker NFR appetite metrics and RCA scores, resulting in an RWA increase of € 0.5 billion. 121 Deutsche Bank Annual Report 2020 Risk and capital performance Capital, Leverage ratio, TLAC and MREL Economic Capital Economic Capital Adequacy Our internal capital adequacy assessment process (ICAAP) aims at maintaining the continuity of Deutsche Bank on an ongo- ing basis. We assess our internal capital adequacy from an economic perspective as the ratio of our economic capital supply divided by our internal economic capital demand as shown in the table below. Total economic capital supply and demand in € m. (unless stated otherwise) Components of economic capital supply Shareholders' equity Noncontrolling interests¹ AT1 coupons accruals Gain on sale of securitisations, cash flow hedges Fair value gains on own debt and debt valuation adjustments, subject to own credit risk Additional valuation adjustments Intangible assets IFRS deferred tax assets excl. temporary differences Expected loss shortfall Defined benefit pension fund assets Holdings of own common equity tier 1 capital instruments Other adjustments² Additional tier 1 equity instruments³ Economic capital supply Components of economic capital demand Credit risk Market risk Operational risk Business risk Diversification benefit Total economic capital demand Economic capital adequacy ratio Dec 31, 2020 Dec 31, 2019 54,786 880 (242) (11) (100) (1,430) (3,463) (1,503) (99) (772) 0 (1,566) 4,659 51,138 11,636 10,894 5,512 5,949 (5,429) 28,560 55,857 953 (222) (23) (127) (1,738) (7,029) (1,254) (259) (892) (0) (1,417) 3,732 47,581 10,757 11,767 5,813 6,374 (5,535) 29,176 179 % 163 % 1 Includes noncontrolling interest up to the economic capital requirement for each subsidiary. 2 Includes € 0.4 billion capital deduction effective from April 2019 and € 0.3 billion effective from October 2016 based on regular ECB review and € 0.9 billion capital deduction based on ECB guidance on irrevocable payment commitments related to the Single Resolution Fund and the Deposit Guarantee Scheme effective from January 2018 on- wards. 3 De-recognition of Additional Tier 1 equity instruments from economic capital supply temporarily paused during 2020. The economic capital adequacy ratio was 179 % as of December 31, 2020, compared with 163 % as of December 31, 2019. The change in the ratio was mainly due to an increase in capital supply and a decrease in capital demand. The economic capital supply increased by € 3.6 billion and was primarily driven by lower capital deductions of intangible assets of € 3.6 billion which mainly reflects the methodology decision to recognize software assets in economic capital supply and the decrease in prudential filters (additional valuation adjustment) of € 0.3 billion which were the result of a temporary change of the EBA technical standard on the aggregation methodology of prudential valuations following the disruptions caused by the COVID-19 pandemic and markets normalizing in the second half of 2020. Additionally, capital increased from the recognition of newly issued Additional Tier 1 capital instruments of € 0.9 billion during the first quarter of 2020. These positive impacts were partly offset by reduction of € 1.1 billion from our IFRS shareholders’ equity mainly due to negative effects from Currency Translation Adjustments of € 1.7 billion with some positive offset from our net income of € 0.5 billion. The decrease in capital demand was driven by lower economic capital demand as explained in the section “Risk Profile”. The above capital adequacy measures apply to the consolidated Deutsche Bank Group as a whole and form an integral part of our risk and capital management framework. Leverage ratio We manage our balance sheet on a Group level and, where applicable, locally in each region. In the allocation of financial resources we favor business portfolios with the highest positive impact on our profitability and shareholder value. We monitor and analyze balance sheet developments and track certain market-observed balance sheet ratios. Based on this we trigger discussion and management action by the Group Risk Committee (GRC). 122 Deutsche Bank Annual Report 2020 Risk and capital performance Capital, Leverage ratio, TLAC and MREL Leverage ratio according to CRR/CRD framework The non-risk based leverage ratio is intended to act as a supplementary measure to the risk based capital requirements. Its objectives are to constrain the build-up of leverage in the banking sector, helping avoid destabilizing deleveraging processes which can damage the broader financial system and the economy, and to reinforce the risk based requirements with a simple, non-risk based “backstop” measure. A minimum leverage ratio requirement of 3 % was introduced that will be effective starting with June 28, 2021. From January 1, 2023 an additional leverage ratio buffer requirement of 50 % of the applicable G-SIB buffer rate will apply. It is currently expected that this additional requirement will equal 0.75 %. We calculate our leverage ratio exposure in accordance with Article 429 of the CRR as per Delegated Regulation (EU) 2015/62 of October 10, 2014 published in the Official Journal of the European Union on January 17, 2015 and amended by Regulation (EU) 2020/873 published in the Official Journal of the European Union on June 24, 2020. Our total leverage ratio exposure includes derivatives, securities financing transactions (SFTs), off-balance sheet exposure and other on-balance sheet exposure (excluding derivatives and SFTs). The leverage exposure for derivatives is calculated by using the regulatory mark-to-market method for derivatives comprising the current replacement cost plus a regulatory defined add-on for the potential future exposure. Variation margin received in cash from counterparties is deducted from the current replacement cost portion of the leverage ratio exposure measure and variation margin paid to counterparties is deducted from the leverage ratio exposure measure related to receivables recog- nized as an asset on the balance sheet, provided certain conditions are met. Deductions of receivables for cash variation margin provided in derivatives transactions are shown under derivative exposure in the table “Leverage ratio common disclo- sure” below. The effective notional amount of written credit derivatives, i.e., the notional reduced by any negative fair value changes that have been incorporated in Tier 1 capital is included in the leverage ratio exposure measure; the resulting expo- sure measure is further reduced by the effective notional amount of purchased credit derivative protection on the same refer- ence name provided certain conditions are met. The securities financing transaction (SFT) component includes the gross receivables for SFTs, which are netted with SFT payables if specific conditions are met. In addition to the gross exposure a regulatory add-on for the counterparty credit risk is included. The off-balance sheet exposure component follows the credit risk conversion factors (CCF) of the standardized approach for credit risk (0 %, 20 %, 50 %, or 100 %), which depend on the risk category subject to a floor of 10 %. The on-balance sheet exposures (excluding derivatives and SFTs) component reflects the accounting values of the assets (excluding derivatives, SFTs and regular-way purchases and sales awaiting settlement) as well as regulatory adjustments for asset amounts deducted in determining Tier 1 capital. The exposure value of regular-way purchases and sales awaiting set- tlement is determined as offset between those cash receivables and cash payables where the related regular-way sales and purchases are both settlement on a delivery-versus payment basis. The Group excludes certain Euro-based exposures to Eurosystem central banks from the leverage exposure having obtained permission from the European Central Bank in accordance with ECB’s Decision (EU) 2020/1306. This temporary exclusion was firstly introduced in the third quarter of 2020 and currently applies until June 27, 2021. The following tables show the leverage ratio exposure and the leverage ratio. The Leverage ratio common disclosure table provides the leverage ratio on a fully-loaded and phase-in basis with the fully-loaded and phase-in Tier 1 Capital, respectively, in the numerator. For further details on Tier 1 capital please also refer to the section “Development of Own Funds”. Summary reconciliation of accounting assets and leverage ratio exposures in € bn. Total assets as per published financial statements Adjustment for entities which are consolidated for accounting purposes but are outside the scope of regulatory consolidation Adjustments for derivative financial instruments Adjustment for securities financing transactions (SFTs) Adjustment for off-balance sheet items (i.e. conversion to credit equivalent amounts of off-balance sheet exposures) Other adjustments Leverage ratio total exposure measure Dec 31, 2020 1,325 Dec 31, 2019 1,298 1 (206) 10 101 (153) 1,078 (1) (188) 6 103 (50) 1,168 123 Deutsche Bank Annual Report 2020 Risk and capital performance Capital, Leverage ratio, TLAC and MREL Leverage ratio common disclosure in € bn. (unless stated otherwise) Total derivative exposures Total securities financing transaction exposures Total off-balance sheet exposures Other Assets Asset amounts deducted in determining Tier 1 capital Tier 1 capital (fully loaded) Leverage ratio total exposure measure Leverage ratio (fully loaded, in %) Tier 1 capital (phase-in) Leverage ratio total exposure measure Leverage ratio (phase-in, in %) Dec 31, 2020 99 83 101 803 (8) 50.4 1,078 4.7 51.5 1,078 4.8 Dec 31, 2019 113 93 103 869 (10) 48.7 1,168 4.2 50.5 1,168 4.3 Description of the factors that had an impact on the leverage ratio in 2020 As of December 31, 2020, our fully loaded leverage ratio was 4.7 % compared to 4.2 % as of December 31, 2019. This takes, into account a fully loaded Tier 1 capital of € 50.4 billion over an applicable exposure measure of € 1,078 billion as of Decem- ber 31, 2020 (€ 48.7 billion and € 1,168 billion as of December 31, 2019, respectively). Our leverage ratio according to transitional provisions was 4.8 % as of December 31, 2020 (4.3 % as of December 31, 2019), calculated as Tier 1 capital according to transitional rules of € 51.5 billion over an applicable exposure measure of € 1,078 bil- lion (€ 50.5 billion and € 1,168 billion as of December 31, 2019, respectively). Over the year 2020, our leverage exposure decreased by € 90 billion to € 1,078 billion, mainly driven by the application of the “quick fix” amendment of the CRR (Regulation (EU) 2020/873, Article 500b) approved by ECB-Decision (EU) 2020/1306, allowing the temporary exclusion of certain central bank exposures contributing a reduction of € 85 billion. Without this tem- porary exclusion, our Leverage exposure decreased by € 5 billion in the year 2020, primarily driven by the leverage exposure related to derivatives which decreased by € 14 billion (€ 7 billion excluding deductions of receivables assets for cash variation margin provided in derivatives transactions) mainly from lower add-ons for potential future exposure. The movements in the securities financing transactions (SFT) and other assets categories largely reflect the development of our balance sheet (for additional information please refer to section “Movements in assets and liabilities” in this report): Cash and central bank/inter- bank balances increased by € 28 billion and Financial assets at fair value through OCI grew by € 11 billion. This was partly offset by decreases in SFT-related items (Securities purchased under resale agreements, Securities borrowed and Receiva- bles from prime brokerage) by € 10 billion, Non-derivative trading assets by € 4 billion and Loans by € 3 billion. The remaining asset items decreased by € 5 billion, largely related to Held-to-collect debt securities. Pending settlements decreased by € 7 billion - despite being almost unchanged on a gross basis - due to application of the “quick fix” amendment of the CRR (Regulation (EU) 2020/873, Article 500d), allowing the netting of cash receivables and cash payables where the related reg- ular-way sales and purchases are both settled on a delivery-versus-payment basis. Furthermore, Off-balance sheet exposures decreased by € 1 billion corresponding to lower notional amounts for irrevocable lending commitments. The decrease in leverage exposure in 2020 included a negative foreign exchange impact of € 43 billion mainly due to the weakening of the U.S. Dollar versus the Euro. The effects from foreign exchange rate movements are embedded in the movement of the leverage exposure items discussed in this section. For main drivers of the Tier 1 capital development please refer to section “Development of Own Funds”. 124 Deutsche Bank Annual Report 2020 Risk and capital performance Capital, Leverage ratio, TLAC and MREL Minimum Requirement of own funds and Eligible Liabilities (“MREL”) and Total Loss Absorbing Capacity (“TLAC”) MREL Requirements The minimum requirement for own funds and eligible liabilities (“MREL”) requirement was introduced by the European Union’s regulation establishing uniform rules and a uniform procedure for the resolution of credit institutions (Single Resolution Mech- anism Regulation or “SRM Regulation”) and the European Union’s Directive establishing a framework for the recovery and resolution of credit institutions (Bank Recovery and Resolution Directive or “BRRD”) as implemented into German law by the German Recovery and Resolution Act. The currently required level of MREL is determined by the competent resolution authorities for each supervised bank individ- ually on a case-by-case basis, depending on the respective preferred resolution strategy. In the case of Deutsche Bank AG, MREL is determined by the Single Resolution Board (“SRB”). While there is no statutory minimum level of MREL, the SRM Regulation, BRRD and a delegated regulation set out criteria which the resolution authority must consider when determining the relevant required level of MREL. Guidance is provided through an MREL policy published annually by the SRB. Any binding MREL ratio determined by the SRB is communicated to Deutsche Bank via the German Federal Financial Supervisory Authority (BaFin). In the second quarter of 2018, Deutsche Bank AG’s binding MREL ratio requirement on a consolidated basis has been set at 9.14 % of Total Liabilities and Own Funds (“TLOF”) applicable immediately. TLOF principally consists of total liabilities after derivatives netting, plus own funds, i.e. regulatory capital. As a results of its regular annual review, the SRB has revised Deutsche Bank AG’s binding MREL ratio requirement in the last quarter of 2019 applicable immediately. The MREL ratio requirement on a consolidated basis has been lowered to 8.58 % of TLOF of which 6.11 % of TLOF now have to be met with own funds and subordinated instruments as an additional requirement. As announced by the SRB the next update of Deutsche Bank AG’s binding MREL and subordinated MREL requirement is expected in the first half of 2021 and will for the first time reflect the legal changes of the banking reform package via amend- ments to the Single Resolution Mechanism Regulation and the Bank Recovery and Resolution Directive provided in June 2019 with the publication of Regulation (EU) 2019/877 and Directive (EU) 2019/879. As a result the MREL and subordinated MREL requirement will no longer be expressed as a percentage of TLOF but as a percentage of Risk Weighted Assets (RWA) and Leverage Ratio Exposure (LRE). This will lead to a higher MREL and subordinated MREL requirement in 2021 compared to 2020. TLAC Requirements Since June 27, 2019, Deutsche Bank, as a global systemically important bank, has also become subject to global minimum standards for its Total Loss-Absorbing Capacity (“TLAC”). The TLAC requirement has been implemented with the banking reform package via amendments to the Capital Requirements Regulation and the Capital Requirements Directive provided in June 2019 with the publication of Regulation (EU) 2019/876 and Directive (EU) 2019/878. This TLAC requirement is based on both risk-based and non-risk-based denominators and set at the higher-of 16 % of risk weighted assets plus the combined buffer requirements and 6.00 % of the leverage exposure for a transition period until December 31, 2021. Thereafter, the higher-of 18 % of risk weighted assets plus the combined buffer requirements and 6.75% of the leverage exposure are to be met. MREL ratio development As of December 31, 2020, TLOF were € 1,019 billion and available MREL were € 109 billion, corresponding to a ratio of 10.67 %. This means that Deutsche Bank has a comfortable MREL surplus of € 21 billion above our MREL requirement of € 87 billion (i.e. 8.58 % of TLOF). € 105 billion of our available MREL were own funds and subordinated liabilities, correspond- ing to a MREL subordination ratio of 10.31 %, a buffer of € 43 billion over our subordination requirement of € 62 billion (i.e. 6.11 % of TLOF). Compared to December 31, 2019 the surpluses above both our MREL requirement and our subordinated MREL requirement have been reduced to more moderate levels. This was achieved through new issuances not fully replacing eligible liabilities falling below the one year maturity threshold for MREL eligibility. This also impacted the development of the TLAC ratio. 125 Deutsche Bank Annual Report 2020 Risk and capital performance Capital, Leverage ratio, TLAC and MREL TLAC ratio development As of December 31, 2020, TLAC was € 105 billion and the corresponding TLAC ratios were 31.9 % (RWA based) and 9.7 % (Leverage exposure based). This means that Deutsche Bank has a comfortable TLAC surplus of € 38 billion over its total loss absorbing capacity minimum requirement of € 67 billion (20.52 % RWA based). MREL and TLAC disclosure in € m. (unless stated otherwise) Regulatory capital elements of TLAC/MREL Common Equity Tier 1 capital (CET 1) Additional Tier 1 (AT1) capital instruments eligible under TLAC/MREL Tier 2 (T2) capital instruments eligible under TLAC/MREL Tier 2 (T2) capital instruments before TLAC/MREL adjustments Tier 2 (T2) capital instruments adjustments for TLAC/MREL Tier 2 (T2) capital instruments eligible under TLAC/MREL Total regulatory capital elements of TLAC/MREL Other elements of TLAC/MREL Senior non-preferred plain vanilla Holdings of eligible liabilities instruments of other G-SIIs (TLAC only) Total Loss Absorbing Capacity (TLAC) Add back of holdings of eligible liabilities instruments of other G-SIIs (TLAC only) Available Own Funds and subordinated Eligible Liabilities (subordinated MREL) Senior preferred plain vanilla Available Minimum Own Funds and Eligible Liabilities (MREL) Risk Weighted Assets (RWA) Leverage Ratio Exposure (LRE) Total liabilities and own funds after prudential netting (TLOF) TLAC ratio TLAC ratio (as percentage of RWA) TLAC requirement (as percentage of RWA) TLAC ratio (as percentage of Leverage Exposure) TLAC requirement (as percentage of Leverage Exposure) TLAC surplus over RWA requirement TLAC surplus over LRE requirement MREL subordination MREL subordination ratio (as percentage of TLOF) MREL subordination requirement (as percentage of TLOF) Surplus over MREL subordination requirement MREL ratio MREL ratio (as percentage of TLOF) MREL requirement (as percentage of TLOF) MREL surplus over requirement Own Funds and Eligible Liabilities Dec 31, 2020 Dec 31, 2019 44,700 6,848 6,944 518 7,462 59,010 46,048 0 105,058 0 105,058 3,658 108,716 44,148 6,397 5,957 16 5,973 56,519 55,803 – 112,322 0 112,322 2,856 115,178 328,951 1,078,268 1,018,558 324,015 1,168,040 995,513 31.94 20.52 9.74 6.00 37,562 40,362 10.31 6.11 42,824 10.67 8.58 21,323 34.67 20.58 9.62 6.00 45,639 42,239 11.28 6.11 51,496 11.57 8.58 29,763 In order to meet the MREL and TLAC requirement, Deutsche Bank needs to ensure that a sufficient amount of eligible instru- ments is maintained. Instruments eligible for MREL and TLAC are regulatory capital instruments (“own funds”) and liabilities that meet certain criteria, which are referred to as eligible liabilities. Own funds used for MREL and TLAC include the full amount of Tier 2 capital instruments with a remaining maturity of greater than 1 year and less than 5 years which are reflected in regulatory capital on a pro-rata basis only. Eligible liabilities are liabilities issued out of the resolution entity Deutsche Bank AG that meet eligibility criteria which are supposed to ensure that they are structurally suited as loss-absorbing capital. As a result, eligible liabilities exclude deposits which are covered by an deposit protection scheme or which are preferred under German insolvency law (e.g., deposits from private individuals as well as small and medium-size enterprises). Among other things, secured liabilities, derivatives liabilities and debt instruments with embedded derivatives (e.g. structured notes) are generally excluded as well. In addition, eligible liabilities must have a remaining time to maturity of at least one year and must either be issued under the law of a Member State of the European Union or must include a bail-in clause in their contractual terms to make write-down or conversion effective. As a consequence, € 4 bn eligible liabilities issued under UK law will lose recognition for MREL after Brexit starting 126 Deutsche Bank Annual Report 2020 Risk and capital performance Credit risk exposure January 2021 in case they are issued after January 1, 2015 (the effective date of the German transposition of the Bank Recovery and Resolution Directive) and do not include an enforceable and effective bail-in clause In addition, eligible liabilities need to be subordinated in order to be counted against the TLAC and new MREL subordination requirements. Effective January 1, 2017, the German Banking Act provided for a new class of statutorily subordinated debt securities that rank as “senior non-preferred” below the bank’s other senior liabilities (but in priority to the bank’s contractually subordinated liabilities, such as those qualifying as Tier 2 instruments). Following a harmonization effort by the European Union implemented in Germany effective July 21, 2018, banks are permitted to now decide if a specific issuance of eligible senior debt will be in the non-preferred or in the preferred category. Any such “senior non-preferred” debt instruments issued by Deutsche Bank AG under such new rules rank on parity with its outstanding debt instruments that were classified as “senior non-preferred” under the prior rules. All of these “senior non-preferred” issuances meet the TLAC and MREL subordination criteria. Credit risk exposure We define our credit exposure by taking into account all transactions where losses might occur due to the fact that counter- parties may not fulfill their contractual payment obligations as defined under ‘Credit Risk Framework’. Maximum Exposure to Credit Risk The maximum exposure to credit risk table shows the direct exposure before consideration of associated collateral held and other credit enhancements (netting and hedges) that do not qualify for offset in our financial statements for the periods spec- ified. The netting credit enhancement component includes the effects of legally enforceable netting agreements as well as the offset of negative mark-to-markets from derivatives against pledged cash collateral. The collateral credit enhancement com- ponent mainly includes real estate, collateral in the form of cash as well as securities-related collateral. In relation to collateral we apply internally determined haircuts and additionally cap all collateral values at the level of the respective collateralized exposure. 127 Deutsche Bank Annual Report 2020 Risk and capital performance Credit risk exposure Maximum Exposure to Credit Risk in € m. Financial assets at amortized cost³ Cash and central bank balances Interbank balances (w/o central banks) Central bank funds sold and securities purchased under resale agreements Securities borrowed Loans Other assets subject to credit risk4,5 Total financial assets at amortized cost³ Financial assets at fair value through profit or loss6 Trading assets Positive market values from derivative fi- nancial instruments Non-trading financial assets mandatory at fair value through profit or loss Of which: Securities purchased under resale agreement Securities borrowed Loans Financial assets designated at fair value through profit or loss Total financial assets at fair value through profit or loss Financial assets at fair value through OCI Of which: Securities purchased under resale agree- ment Securities borrowed Loans Total financial assets at fair value through OCI Financial guarantees and other credit re- lated contingent liabilities⁷ Revocable and irrevocable lending commit- ments and other credit related commit- ments⁷ Total off-balance sheet Maximum exposure to credit risk1 Subject to impairment Netting Collateral Dec 31, 2020 Credit Enhancements Guarantees and Credit derivatives2 Total credit enhancements 166,211 9,132 166,211 9,132 − − 0 0 − 0 0 0 8,535 0 431,807 96,394 712,078 8,535 0 431,807 85,106 700,790 − − − 43,316 43,316 8,173 0 228,513 902 237,588 − − 30,119 55 30,174 8,173 0 258,632 44,273 311,078 94,757 − − 2,998 1,248 4,246 343,455 − 262,486 52,329 83 314,898 75,116 − 993 62,036 244 63,273 46,057 17,009 2,192 437 − − − − 993 − − 44,967 16,730 272 0 0 244 45,961 16,730 516 − 0 0 0 513,764 55,834 − 55,834 263,479 0 117,364 1,581 1,575 1,153 382,418 2,734 1,543 0 4,635 1,543 0 4,635 − − − 0 0 1,581 0 0 1,153 0 0 2,734 55,834 55,834 − 1,581 1,153 2,734 47,978 47,978 − 2,327 6,157 8,484 215,877 263,854 214,898 262,876 − − 15,345 17,672 5,779 11,936 21,124 29,608 Maximum exposure to credit risk 1,545,531 1,019,501 306,795 374,205 44,838 725,838 1 Does not include credit derivative notional sold (€ 395,636 million) and credit derivative notional bought protection. 2 Bought Credit protection is reflected with the notional of the underlying. 3 All amounts at gross value before deductions of allowance for credit losses. 4 All amounts at amortized cost (gross) except for qualifying hedge derivatives, which are reflected at Fair value through P&L. 5 Includes Asset Held for Sale regardless of accounting classification. 6 Excludes equities, other equity interests and commodities. 7 Figures are reflected at notional amounts. 128 Deutsche Bank Annual Report 2020 Risk and capital performance Credit risk exposure in € m. Financial assets at amortized cost³ Cash and central bank balances Interbank balances (w/o central banks) Central bank funds sold and securities purchased under resale agreements Securities borrowed Loans Other assets subject to credit risk4,5 Total financial assets at amortized cost³ Financial assets at fair value through profit or loss⁶ Trading assets Positive market values from derivative fi- nancial instruments Non-trading financial assets mandatory at fair value through profit or loss Of which: Securities purchased under resale agreement Securities borrowed Loans Financial assets designated at fair value through profit or loss Total financial assets at fair value through profit or loss Financial assets at fair value through OCI Of which: Securities purchased under resale agree- ment Securities borrowed Loans Total financial assets at fair value through OCI Financial guarantees and other credit re- lated contingent liabilities⁷ Revocable and irrevocable lending commit- ments and other credit related commit- ments⁷ Total off-balance sheet Maximum exposure to credit risk1 Subject to impairment Netting Collateral Dec 31, 2019 Credit Enhancements Guarantees and Credit derivatives2 Total credit enhancements 137,596 9,642 137,596 9,642 − − 0 0 − 0 0 0 13,800 428 433,834 96,779 692,079 13,800 428 433,834 85,028 680,328 − − − 37,267 37,267 13,650 303 228,620 1,524 244,098 − − 27,984 42 28,026 13,650 303 256,605 38,833 309,392 93,369 − − 1,480 861 2,340 332,931 − 262,326 48,608 134 311,068 84,359 − 853 69,645 259 70,757 53,366 17,918 3,174 7 − − − − 853 − − 51,659 17,599 290 0 0 259 52,512 17,599 550 − 0 0 0 510,665 45,503 − 45,503 263,180 0 119,732 1,622 1,254 1,267 384,166 2,889 1,415 0 4,874 1,415 0 4,874 − − − 0 0 1,622 0 0 1,267 0 0 2,889 45,503 45,503 − 1,622 1,267 2,889 49,232 49,232 − 2,994 6,138 9,132 211,440 260,672 209,986 259,218 − − 15,217 18,211 4,984 11,122 20,202 29,333 Maximum exposure to credit risk 1,508,920 985,049 300,447 383,663 41,670 725,780 1 Does not include credit derivative notional sold (€ 356,362 million) and credit derivative notional bought protection. 2 Bought Credit protection is reflected with the notional of the underlying. 3 All amounts at gross value before deductions of allowance for credit losses. 4 All amounts at amortized cost (gross) except for qualifying hedge derivatives, which are reflected at Fair value through P&L. 5 Includes Asset Held for Sale regardless of accounting classification. 6 Excludes equities, other equity interests and commodities. 7 Figures are reflected at notional amounts. The overall increase in maximum exposure to credit risk for December 31, 2020 was € 36.6 billion mainly driven by an increase of € 28.6 billion in cash and central bank balances, € 10.5 billion in positive market values from derivatives and € 10.3 billion in financial assets at fair value through other comprehensive income, mainly in debt securities. These increases were offset by reductions in central bank funds sold, securities purchased under resale agreements and securities borrowed across all applicable measurement categories by € 13.8 billion and loans at amortized cost by € 2.0 billion. Included in the category of trading assets as of December 31, 2020, were traded bonds of € 83.5 billion (€ 80.7 billion as of December 31, 2019) of which over 84 % were investment-grade (over 81 % as of December 31, 2019). Credit Enhancements are split into three categories: netting, collateral and guarantees / credit derivatives. Haircuts, parameter setting for regular margin calls as well as expert judgments for collateral valuation are employed to prevent market develop- ments from leading to a build-up of uncollateralized exposures. All categories are monitored and reviewed regularly. Overall credit enhancements received are diversified and of adequate quality being largely cash, highly rated government bonds and third-party guarantees mostly from well rated banks and insurance companies. These financial institutions are domiciled mainly in European countries and the United States. Furthermore we have collateral pools of highly liquid assets and mort- gages (principally consisting of residential properties mainly in Germany) for the homogeneous retail portfolio. 129 Deutsche Bank Annual Report 2020 Risk and capital performance Credit risk exposure Main Credit Exposure Categories The tables in this section show details about several of our main credit exposure categories, namely Loans, Revocable and Irrevocable Lending Commitments, Contingent Liabilities, Over-The-Counter (“OTC”) Derivatives, Debt Securities and Repo and repo-style transactions: – “Loans” are gross loans as reported on our balance sheet at amortized cost, loans at fair value through profit and loss and loans at fair value through other comprehensive income before deduction of allowance for credit losses. This includes “Traded loans” that are bought and held for the purpose of selling them in the near term, or the material risks of which have all been hedged or sold. From a regulatory perspective the latter category principally covers trading book positions. – “Revocable and irrevocable lending commitments” consist of the undrawn portion of revocable and irrevocable lending- related commitments. – “Contingent liabilities” consist of financial and performance guarantees, standby letters of credit and other similar arrange- ments (mainly indemnity agreements). – “OTC derivatives” are our credit exposures from over-the-counter derivative transactions that we have entered into, after netting and cash collateral received. On our balance sheet, these are included in financial assets at fair value through profit or loss or, for derivatives qualifying for hedge accounting, in other assets, in either case only applying cash collateral received and netting eligible under IFRS. – “Debt securities” include debentures, bonds, deposits, notes or commercial paper, which are issued for a fixed term and redeemable by the issuer, as reported on our balance sheet within accounting categories at amortized cost and at fair value through other comprehensive income before deduction of allowance for credit losses, it also includes category at fair value through profit and loss. This includes “Traded bonds”, which are bonds, deposits, notes or commercial paper that are bought and held for the purpose of selling them in the near term. From a regulatory perspective the latter category principally covers trading book positions. – “Repo and repo-style transactions” consist of reverse repurchase transactions, as well as securities or commodities bor- rowing transactions, only applying collateral received and netting eligible under IFRS. Although considered in the monitoring of maximum credit exposures, the following are not included in the details of our main credit exposure: brokerage and securities related receivables, cash and central bank balances, interbank balances (without central banks), assets held for sale, accrued interest receivables, traditional securitization positions. Consequently, the gross exposure of OTC derivatives (prior to netting and cash collateral) as of December 31, 2020 of € 1.4 billion (€ 1.8 billion as of December 31, 2019) which is part of the “asset held for sale” classification is not included in our main credit exposure. This exposure is associated with the Prime Finance platform being transferred to BNP Paribas. For further information please refer to Note 24 “Non-Current Assets and Disposal Groups Held for Sale” to the consolidated financial statement. Main Credit Exposure Categories by Business Divisions Loans Off-balance sheet OTC derivatives Dec 31, 2020 at amortized cost¹ 114,491 69,309 237,194 20 2,807 7,986 431,807 trading - at fair value through P&L Designated / mandatory at fair value through P&L at fair value through OCI² Revocable and irrevocable lending commitments³ 621 6,366 0 0 1,352 0 8,339 784 1,618 7 0 220 0 2,629 4,393 220 0 0 22 0 4,635 130,690 45,053 37,315 121 1,592 1,106 215,877 Contingent liabilities 44,293 1,889 1,625 9 38 123 47,978 at fair value through P&L⁴ 299 22,533 440 0 9,388 268 32,928 at amortized cost⁵ at fair value through P&L Debt Securities at fair value through OCI⁶ 733 2,078 521 0 0 9,294 12,625 68 86,579 2 2,850 1,404 4,443 95,347 0 980 1 198 0 48,476 49,656 at amortized cost 345 7,356 10 0 1 824 8,535 Repo and repo-style transactions⁷ at fair value through OCI at fair value through P&L Dec 31, 2020 Total 0 59,974 0 0 3,091 0 63,066 0 0 0 0 0 1,543 1,543 296,717 303,956 277,115 3,198 19,915 74,063 974,964 in € m. Corporate Bank Investment Bank Private Bank Asset Management Capital Release Unit Corporate & Other Total in € m. Corporate Bank Investment Bank Private Bank Asset Management Capital Release Unit Corporate & Other Total 1 Includes stage 3 and stage 3 POCI loans at amortized cost amounting to € 11.9 billion as of December 31, 2020. 2 Includes stage 3 and stage 3 POCI loans at fair value through OCI amounting to € 90.3 million as of December 31, 2020 3 Includes stage 3 and stage 3 POCI off-balance sheet exposure amounting to € 2.6 billion as of December 31, 2020. 4 Includes the effect of netting agreements and cash collateral received where applicable. Excludes derivatives qualifying for hedge accounting. 5 Includes stage 3 and stage 3 POCI debt securities at amortized cost amounting to € 360.4 million as of December 31, 2020. 6 Includes stage 3 and stage 3 POCI debt securities at fair value through OCI amounting to € 15.1 million as of December 31, 2020. 7 Before reflection of collateral and limited to securities purchased under resale agreements and securities borrowed. 130 Deutsche Bank Annual Report 2020 Risk and capital performance Credit risk exposure Loans Off-balance sheet OTC derivatives Dec 31, 2019 at amortized cost¹ 118,311 75,145 229,746 57 3,555 7,020 433,834 trading - at fair value through P&L Designated / mandatory at fair value through P&L at fair value through OCI² Revocable and irrevocable lending commitments³ 427 10,091 (0) 0 1,827 0 12,346 480 1,597 7 0 1,096 0 3,181 4,549 174 0 0 150 0 4,874 120,073 51,701 35,550 121 2,901 1,094 211,440 Contingent liabilities 44,917 2,005 1,996 10 51 253 49,232 at fair value through P&L⁴ 216 13,506 262 2 13,904 148 28,039 at amortized cost⁵ at fair value through P&L Debt Securities at fair value through OCI⁶ 859 2,242 4,019 0 61 17,119 24,300 14 83,039 18 556 1,440 4,767 89,835 0 543 2,951 0 9 35,712 39,214 at amortized cost 583 7,842 4,082 0 521 1,201 14,228 Repo and repo-style transactions⁷ at fair value through OCI at fair value through P&L Dec 31, 2019 Total 0 68,199 0 0 3,085 0 71,284 0 0 0 0 0 1,415 1,415 290,429 316,085 278,632 746 28,601 68,728 983,222 in € m. Corporate Bank Investment Bank Private Bank Asset Management Capital Release Unit Corporate & Other Total in € m. Corporate Bank Investment Bank Private Bank Asset Management Capital Release Unit Corporate & Other Total 1 Includes stage 3 and stage 3 POCI loans at amortized cost amounting to € 9.6 billion as of December 31, 2019. 2 Includes stage 3 and stage 3 POCI loans at fair value through OCI amounting to € 22 million as of December 31, 2019 3 Includes stage 3 and stage 3 POCI off-balance sheet exposure amounting to € 1.4 billion as of December 31, 2019. 4 Includes the effect of netting agreements and cash collateral received where applicable. Excludes derivatives qualifying for hedge accounting. 5 Includes stage 3 and stage 3 POCI debt securities at amortized cost amounting to € 96 million as of December 31, 2019. 6 Includes stage 3 and stage 3 POCI debt securities at fair value through OCI amounting to € 1.4 million as of December 31, 2019. 7 Before reflection of collateral and limited to securities purchased under resale agreements and securities borrowed. Our total main credit exposure decreased by € 8.3 billion year-on-year. – In terms of business divisions total main credit exposure decreased by € 12.1 billion in the Investment Bank, € 8.7 billion in the Capital Release Unit, € 1.5 billion in the Private Bank, partially offset by an increase in the Corporate Bank by € 6.3 billion, € 5.3 billion in Corporate & Other and € 2.5 billion in Asset Management. The business division Corporate & Other primarily contains exposures in treasury. – From a product perspective exposure decreases have been observed for repo and repo-style transactions and loans while an increase is observed in OTC derivatives, debt securities and off balance sheet position. 131 Deutsche Bank Annual Report 2020 Risk and capital performance Credit risk exposure Main Credit Exposure Categories by Industry Sectors The below tables give an overview of our credit exposure by industry based on the NACE code of the counterparty. NACE (Nomenclature des Activités Économiques dans la Communauté Européenne) is a standard European industry classification system and does not have to be congruent with an internal risk based view applied elsewhere in this report. at amortized cost¹ trading - at fair value through P&L Designated / mandatory at fair value through P&L at fair value through OCI² Revocable and irrevocable lending commitments³ Contingent liabilities at fair value through P&L⁴ Loans Off-balance sheet OTC derivatives Dec 31, 2020 637 2,871 26,050 0 250 525 0 8 354 0 15 1,111 544 5,148 52,722 40 1,370 10,314 3 34 4,677 3,419 295 51 0 5,080 1,783 614 681 4,440 20,697 5,575 0 243 330 427 2,427 60 5,525 308 0 2 83 69 0 3 0 22 396 2,672 156 2,490 913 312 15,672 5,235 5,025 978 27 1,203 158 404 14,030 2,072 80 438 614 715 27 887 84,724 36,571 2,860 989 1,823 46 813 339 56,024 5,776 19,467 312 18,042 1,401 7,707 228 0 12 4,919 1,915 9,112 333 66 56 4,266 453 147 672 6,139 205 828 0 3,436 68 929 5,353 22 551 13 0 26 0 84 433 0 2,983 126 93 14 3,094 459 0 2,373 127 0 177 1,105 4,305 59 877 484 30 131 205,308 22 0 2 31,298 272 325 1 431,807 0 8,339 0 2,629 0 4,635 0 215,877 2 47,978 54 32,928 in € m. Agriculture, forestry and fishing Mining and quarrying Manufacturing Electricity, gas, steam and air conditioning sup- ply Water supply, sewerage, waste management and remediation activities Construction Wholesale and retail trade, repair of motor ve- hicles and motorcycles Transport and storage Accommodation and food service activities Information and commu- nication Financial and insurance activities Real estate activities Professional, scientific and technical activities Administrative and sup- port service activities Public administration and defense, compulsory so- cial security Education Human health services and social work activities Arts, entertainment and recreation Other service activities Activities of households as employers, undifferen- tiated goods- and ser- vices-producing activities of households for own use Activities of extraterritorial organizations and bodies Total 132 Deutsche Bank Annual Report 2020 Risk and capital performance Credit risk exposure in € m. Agriculture, forestry and fishing Mining and quarrying Manufacturing Electricity, gas, steam and air conditioning sup- ply Water supply, sewerage, waste management and remediation activities Construction Wholesale and retail trade, repair of motor ve- hicles and motorcycles Transport and storage Accommodation and food service activities Information and commu- nication Financial and insurance activities Real estate activities Professional, scientific and technical activities Administrative and sup- port service activities Public administration and defense, compulsory so- cial security Education Human health services and social work activities Arts, entertainment and recreation Other service activities Activities of households as employers, undifferen- tiated goods- and ser- vices-producing activities of households for own use Activities of extraterritorial organizations and bodies Total at amortized cost⁵ at fair value through P&L Debt Securities at fair value through OCI⁶ at amortized cost Repo and repo-style transactions⁷ at fair value through OCI at fair value through P&L Dec 31, 2020 Total 0 0 0 6 354 995 0 2 39 0 0 0 0 0 0 0 0 0 1,230 10,053 96,788 0 437 1 0 0 0 11,679 0 0 0 203 0 8 40 565 213 811 63 514 0 70 2 26 0 5 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1,354 10,944 43,548 14,351 0 3,964 0 23,756 3,167 333 20,866 3,047 8,114 109 8,428 0 61,801 0 1,543 0 287,672 48,924 25 105 25 8 36 270 3 99 0 0 0 15,091 0 15,367 8,670 0 61,459 120 40,574 21 0 473 0 31 110 83 3,654 0 162 0 0 0 0 0 1,089 0 0 0 125,374 945 0 0 6,987 0 176 0 0 2,258 15,580 0 0 0 0 0 0 237,226 40 12,625 1,272 95,347 503 49,656 0 8,535 0 63,066 0 1,543 1,873 974,965 1 Includes stage 3 and stage 3 POCI loans at amortized cost amounting to € 11.9 billion as of December 31, 2020. 2 Includes stage 3 and stage 3 POCI loans at fair value through OCI amounting to € 90.3 million as of December 31, 2020 3 Includes stage 3 and stage 3 POCI off-balance sheet exposure amounting to € 2.6 billion as of December 31, 2020. 4 Includes the effect of netting agreements and cash collateral received where applicable. Excludes derivatives qualifying for hedge accounting. 5 Includes stage 3 and stage 3 POCI debt securities at amortized cost amounting to € 360.4 million as of December 31, 2020. 6 Includes stage 3 and stage 3 POCI debt securities at fair value through OCI amounting to € 15.1 million as of December 31, 2020. 7 Before reflection of collateral and limited to securities purchased under resale agreements and securities borrowed. 133 Deutsche Bank Annual Report 2020 Risk and capital performance Credit risk exposure at amortized cost¹ trading - at fair value through P&L Designated / mandatory at fair value through P&L at fair value through OCI² Revocable and irrevocable lending commitments³ Contingent liabilities at fair value through P&L⁴ Loans Off-balance sheet OTC derivatives Dec 31, 2019 676 2,537 28,412 0 274 418 0 135 84 0 80 1,285 874 4,606 51,627 39 1,223 12,180 1 22 1,169 4,115 401 60 0 5,774 1,630 589 833 3,810 20,990 4,872 10 259 624 534 2,565 40 5,783 434 0 27 97 54 0 1 0 14 486 2,876 136 2,174 858 150 12,669 5,066 5,087 996 29 1,935 191 358 14,460 2,640 68 364 306 1,213 49 919 90,962 41,670 4,015 3,236 2,521 49 936 198 57,295 5,600 19,036 306 17,286 1,516 7,307 91 0 32 4,429 1,890 6,833 102 106 22 4,070 373 48 502 6,437 327 1,071 0 15 0 489 0 2,650 95 109 18 2,586 397 3,503 63 2 63 2,476 124 843 4,677 24 707 0 24 0 358 1,309 3,428 44 733 352 23 130 196,680 45 5 2 29,713 301 324 3 433,834 0 12,346 0 3,181 0 4,874 3 211,440 4 49,232 176 28,039 in € m. Agriculture, forestry and fishing Mining and quarrying Manufacturing Electricity, gas, steam and air conditioning sup- ply Water supply, sewerage, waste management and remediation activities Construction Wholesale and retail trade, repair of motor ve- hicles and motorcycles Transport and storage Accommodation and food service activities Information and commu- nication Financial and insurance activities Real estate activities Professional, scientific and technical activities Administrative and sup- port service activities Public administration and defense, compulsory so- cial security Education Human health services and social work activities Arts, entertainment and recreation Other service activities Activities of households as employers, undifferen- tiated goods- and ser- vices-producing activities of households for own use Activities of extraterritorial organizations and bodies Total 134 Deutsche Bank Annual Report 2020 Risk and capital performance Credit risk exposure in € m. Agriculture, forestry and fishing Mining and quarrying Manufacturing Electricity, gas, steam and air conditioning sup- ply Water supply, sewerage, waste management and remediation activities Construction Wholesale and retail trade, repair of motor ve- hicles and motorcycles Transport and storage Accommodation and food service activities Information and commu- nication Financial and insurance activities Real estate activities Professional, scientific and technical activities Administrative and sup- port service activities Public administration and defense, compulsory so- cial security Education Human health services and social work activities Arts, entertainment and recreation Other service activities Activities of households as employers, undifferen- tiated goods- and ser- vices-producing activities of households for own use Activities of extraterritorial organizations and bodies Total at amortized cost⁵ at fair value through P&L Debt Securities at fair value through OCI⁶ at amortized cost Repo and repo-style transactions⁷ at fair value through OCI at fair value through P&L Dec 31, 2019 Total 0 115 371 4 369 1,029 0 7 51 0 0 0 0 0 0 0 0 0 1,593 9,369 96,626 420 668 1 0 0 0 13,659 5 26 68 194 27 263 226 431 21 33 0 68 15 47 0 126 478 36 0 0 0 0 0 0 0 0 0 0 0 9 0 0 0 0 1,565 9,880 40,938 13,557 0 4,863 0 25,244 7,915 387 18,296 2,327 11,118 81 14,228 0 70,224 0 1,415 0 315,247 55,371 10 194 10 59 133 3 12,492 0 59,381 194 24,814 0 0 461 0 55 143 125 3,421 0 246 0 0 0 0 0 0 0 0 0 948 0 0 0 5 0 14,009 0 12,203 0 0 110,992 1,032 0 7,044 0 0 2,423 13,871 0 0 0 0 0 0 227,071 1,893 24,300 1,772 89,835 2,718 39,214 0 14,228 96 71,284 0 1,415 6,665 983,222 1 Includes stage 3 and stage 3 POCI loans at amortized cost amounting to € 9.6 billion as of December 31, 2019. 2 Includes stage 3 and stage 3 POCI loans at fair value through OCI amounting to € 22 million as of December 31, 2019 3 Includes stage 3 and stage 3 POCI off-balance sheet exposure amounting to € 1.4 billion as of December 31, 2019. 4 Includes the effect of netting agreements and cash collateral received where applicable. Excludes derivatives qualifying for hedge accounting. 5 Includes stage 3 and stage 3 POCI debt securities at amortized cost amounting to € 96 million as of December 31, 2019. 6 Includes stage 3 and stage 3 POCI debt securities at fair value through OCI amounting to € 1.4 million as of December 31, 2019. 7 Before reflection of collateral and limited to securities purchased under resale agreements and securities borrowed. The portfolio is subject to the same credit underwriting requirements stipulated in our “Principles for Managing Credit Risk”, including various controls according to single name, country, industry and product/asset class-specific concentration. Material transactions, such as loans underwritten with the intention to sell down or distribute part of the risk to third parties, are subject to review and approval by senior credit risk management professionals and (depending upon size) an underwriting committee and/or the Management Board. High emphasis is placed on structuring and pricing such transactions so that de- risking can be achieved in a timely manner and – where DB takes market price risk – to mitigate such market risk. Our amortized cost loan exposure within above categories is mostly to good quality borrowers. Moreover, with the focus on the Corporate Bank and Investment Bank, loan exposure is subject to further risk mitigation through our Strategic Corporate Lending unit (“SCL”). Our household loans exposure is principally associated with our Private Bank portfolios. Our amortized cost loan exposure of € 36.5 billion to Real Estate activities above is based on NACE code classification. We also provide an understanding of our Commercial Real Estate exposures across the Commercial Real Estate Group, APAC 135 Deutsche Bank Annual Report 2020 Risk and capital performance Credit risk exposure CRE exposures in the Investment Bank and non-recourse CRE business in the Corporate Bank. Please refer to the chapter “Focus Industries in light of COVID-19 Pandemic” for further information on Commercial Real Estate exposures. Our commercial real estate loans, primarily originated in the U.S. and Europe, are generally secured by first mortgages on the underlying real estate property. Deutsche Bank originates fixed and floating rate loans and selectively acquires (generally at substantial discount) sub- /non-performing loans sold by financial institutions. The underwriting process is stringent and the exposure is managed under separate portfolio limits. Credit underwriting policy guidelines provide that LTV ratios of generally less than 75 % are maintained. Additionally, given the significance of the underlying collateral, independent external appraisals are commissioned for all secured loans by a valuation team (part of the independent Credit Risk Management function) which is also responsible for reviewing and challenging the reported real estate values regularly. Deutsche Bank originates loans for distribution in the banking market or via securitization. In this context Deutsche Bank frequently retains a portion of the syndi- cated loans while securitized positions may be entirely sold (except where regulation requires retention of economic risk). Mezzanine or other junior tranches of debt are retained only in exceptional cases. The bank also participates in conservatively underwritten unsecured lines of credit to well-capitalized real estate investment trusts and other real estate operating compa- nies. Commercial real estate property valuations and rental incomes can be significantly impacted by macro-economic conditions and idiosyncratic events affecting the underlying properties. Accordingly, the portfolio is categorized as higher risk and hence subject to the aforementioned tight restrictions on concentration. Our credit exposure to our ten largest counterparties accounted for 9 % of our aggregated total credit exposure in these categories as of December 31, 2020 compared with 8 % as of December 31, 2019. Our top ten counterparty exposures were well-rated counterparties or otherwise related to structured trades which show high levels of risk mitigation. Overall credit exposure to the industry sector Financial and Insurance Activities comprises of predominantly investment-grade exposures. The total Loans across all applicable measurement categories amounts to € 90.2 billion, Total Repo and repo style transaction across all applicable measurement categories amounts to € 71.8 billion and off balance sheet activities amounts to € 75.5 billion as of December 31, 2020 within Financial and Insurance activities and is principally associated with Investment Bank and Corporate Bank Portfolios, the same are majorly held in North America and Europe region. Main credit exposure categories by geographical region in € m. Europe Of which: Germany United Kingdom France Luxembourg Italy Netherlands Spain Ireland Switzerland Poland Belgium Other Europe North America Of which: U.S. Cayman Islands Canada Other North America Asia/Pacific Of which: Japan Australia India China Singapore Hong Kong Other Asia/Pacific Other geographical areas Total at amortized cost¹ 317,585 trading - at fair value through P&L Designated / mandatory at fair value through P&L at fair value through OCI² Revocable and irrevo- cable lending commitments³ 3,092 1,519 1,615 128,440 Contingent liabilities 29,529 at fair value through P&L⁴ 20,283 Loans Off-balance sheet OTC derivatives Dec 31, 2020 224,577 5,796 3,460 10,097 23,442 9,679 17,134 4,173 6,817 2,421 1,133 8,856 73,742 61,137 3,790 887 7,928 34,194 1,385 1,525 6,355 4,764 5,309 2,872 11,984 6,285 431,807 340 160 65 546 340 79 304 190 39 0 4 1,025 3,266 2,926 113 37 191 1,248 17 258 54 6 210 109 593 734 8,339 57 341 33 252 66 222 0 200 19 1 0 327 841 784 3 0 54 237 0 36 21 149 30 0 0 31 2,629 347 64 187 0 0 554 28 127 150 0 53 103 1,896 1,792 0 91 13 992 89 35 32 46 28 61 702 133 4,635 75,531 9,820 6,103 4,839 3,600 9,890 3,755 2,023 4,518 374 1,566 6,420 78,079 73,215 2,131 1,790 943 7,813 415 1,785 1,110 684 918 986 1,914 1,545 215,877 12,195 2,327 1,383 1,251 3,888 1,727 2,763 200 1,762 128 679 1,226 7,430 7,033 25 47 326 9,960 483 367 2,253 1,780 685 671 3,721 1,059 47,978 1,715 7,102 1,331 701 1,854 1,942 1,094 465 268 17 295 3,497 9,420 8,496 246 303 374 2,766 312 542 149 658 248 186 670 460 32,928 136 Deutsche Bank Annual Report 2020 Risk and capital performance Credit risk exposure in € m. Europe Of which: Germany United Kingdom France Luxembourg Italy Netherlands Spain Ireland Switzerland Poland Belgium Other Europe North America Of which: U.S. Cayman Islands Canada Other North America Asia/Pacific Of which: Japan Australia India China Singapore Hong Kong Other Asia/Pacific Other geographical areas Total at amortized cost⁵ 2,468 at fair value through P&L Debt Securities at fair value through OCI⁶ 46,446 31,868 at amortized cost 2,180 Repo and repo-style transactions⁷ at fair value through OCI at fair value through P&L Dec 31, 2020 Total 21,696 498 607,218 544 890 2 41 117 112 0 680 4 0 40 38 7,727 7,351 359 0 16 2,431 64 1,545 349 0 78 207 188 0 12,625 8,257 7,980 8,136 2,509 5,908 3,486 3,053 1,415 637 112 1,575 3,380 27,547 26,408 567 417 155 19,246 2,807 2,535 3,284 3,012 2,067 725 4,816 2,107 95,347 10,467 2,776 5,216 1,412 1,496 118 3,088 136 4 1,993 1,616 3,546 11,798 11,197 0 543 58 5,740 25 860 2,047 309 472 286 1,740 250 49,656 263 0 0 0 108 0 1,077 0 0 0 0 731 2,780 1,814 885 0 81 3,353 0 0 0 0 0 60 3,293 223 8,535 1,078 11,352 5,981 819 478 33 500 396 79 0 5 975 31,907 29,370 2,086 451 0 9,426 6,283 659 128 421 105 12 1,817 37 63,066 10 0 0 0 0 0 0 0 0 0 0 488 0 0 0 0 0 646 0 0 396 0 0 0 250 399 1,543 335,382 48,607 31,898 22,466 41,297 27,843 32,796 10,004 14,299 5,047 6,966 30,612 256,433 231,523 10,206 4,567 10,137 98,052 11,881 10,149 16,177 11,830 10,152 6,175 31,689 13,262 974,965 1 Includes stage 3 and stage 3 POCI loans at amortized cost amounting to € 11.9 billion as of December 31, 2020. 2 Includes stage 3 and stage 3 POCI loans at fair value through OCI amounting to € 90.3 million as of December 31, 2020 3 Includes stage 3 and stage 3 POCI off-balance sheet exposure amounting to € 2.6 billion as of December 31, 2020. 4 Includes the effect of netting agreements and cash collateral received where applicable. Excludes derivatives qualifying for hedge accounting. 5 Includes stage 3 and stage 3 POCI debt securities at amortized cost amounting to € 360.4 million as of December 31, 2020. 6 Includes stage 3 and stage 3 POCI debt securities at fair value through OCI amounting to € 15.1 million as of December 31, 2020. 7 Before reflection of collateral and limited to securities purchased under resale agreements and securities borrowed. 137 Deutsche Bank Annual Report 2020 Risk and capital performance Credit risk exposure at amortized cost¹ 307,871 trading - at fair value through P&L Designated / mandatory at fair value through P&L at fair value through OCI² Revocable and irrevo- cable lending commitments³ 4,469 2,435 1,778 114,586 Contingent liabilities 29,836 at fair value through P&L⁴ 18,964 Loans Off-balance sheet OTC derivatives Dec 31, 2019 214,155 7,927 3,106 8,320 22,347 9,679 17,265 4,783 6,818 2,771 1,347 9,352 79,522 66,991 3,560 1,155 7,816 39,584 1,752 1,577 7,717 4,816 5,722 4,315 13,685 6,857 433,834 316 607 70 1,193 298 83 257 157 30 0 0 1,458 4,543 3,891 318 23 310 1,780 16 320 126 38 185 380 714 1,554 12,346 5 373 0 1,084 109 162 54 280 85 5 0 279 483 389 30 0 64 248 0 63 149 0 37 0 0 14 3,181 245 230 209 46 0 457 59 124 262 0 67 78 2,155 2,016 0 116 22 820 112 0 0 45 30 18 614 122 4,874 65,468 7,960 5,905 4,374 3,127 9,015 2,262 2,241 5,880 316 1,773 6,267 88,260 83,894 764 2,230 1,371 6,962 599 1,587 646 725 761 1,182 1,461 1,632 211,440 12,078 2,587 1,322 652 3,721 1,805 3,246 172 2,213 130 421 1,489 8,332 7,842 20 81 389 9,652 333 104 2,392 1,503 833 628 3,860 1,412 49,232 1,572 6,337 1,264 859 1,389 2,123 916 545 194 60 285 3,420 6,628 4,943 481 1,007 197 1,946 405 357 128 308 210 146 392 501 28,039 in € m. Europe Of which: Germany United Kingdom France Luxembourg Italy Netherlands Spain Ireland Switzerland Poland Belgium Other Europe North America Of which: U.S. Cayman Islands Canada Other North America Asia/Pacific Of which: Japan Australia India China Singapore Hong Kong Other Asia/Pacific Other geographical areas Total 138 Deutsche Bank Annual Report 2020 Risk and capital performance Credit risk exposure in € m. Europe Of which: Germany United Kingdom France Luxembourg Italy Netherlands Spain Ireland Switzerland Poland Belgium Other Europe North America Of which: U.S. Cayman Islands Canada Other North America Asia/Pacific Of which: Japan Australia India China Singapore Hong Kong Other Asia/Pacific Other geographical areas Total at amortized cost⁵ 11,267 at fair value through P&L Debt Securities at fair value through OCI⁶ 37,936 24,791 at amortized cost 7,884 Repo and repo-style transactions⁷ at fair value through OCI at fair value through P&L Dec 31, 2019 Total 15,046 390 577,251 3,986 2,647 705 969 288 726 139 636 51 0 204 917 9,985 9,574 393 0 18 3,048 69 1,906 656 0 11 224 182 0 24,300 5,353 9,712 4,714 3,094 5,388 2,051 2,010 1,321 679 30 854 2,730 31,654 30,600 509 277 268 18,130 2,582 3,867 1,862 1,345 1,305 517 6,653 2,115 89,835 6,864 2,273 6,302 3,099 916 584 513 19 101 1,988 577 1,554 8,325 7,718 9 599 0 5,471 9 653 1,998 0 874 287 1,649 627 39,214 4,488 604 319 121 144 297 1,082 0 0 0 0 829 3,140 1,750 1,293 0 97 3,114 173 155 0 0 0 0 2,786 90 14,228 661 6,522 2,748 861 679 100 501 1,140 69 0 0 1,765 42,038 19,661 22,132 240 5 13,980 9,451 331 202 983 290 1 2,721 220 71,284 28 0 0 0 0 0 0 0 0 0 0 362 0 0 0 0 0 659 0 94 306 0 0 0 258 367 1,415 315,219 47,778 26,664 24,673 38,406 27,082 28,303 11,418 16,382 5,301 5,528 30,499 285,065 239,267 29,510 5,730 10,558 105,394 15,500 11,014 16,182 9,763 10,260 7,699 34,977 15,512 983,222 1 Includes stage 3 and stage 3 POCI loans at amortized cost amounting to € 9.6 billion as of December 31, 2019. 2 Includes stage 3 and stage 3 POCI loans at fair value through OCI amounting to € 22 million as of December 31, 2019 3 Includes stage 3 and stage 3 POCI off-balance sheet exposure amounting to € 1.4 billion as of December 31, 2019. 4 Includes the effect of netting agreements and cash collateral received where applicable. Excludes derivatives qualifying for hedge accounting. 5 Includes stage 3 and stage 3 POCI debt securities at amortized cost amounting to € 96 million as of December 31, 2019. 6 Includes stage 3 and stage 3 POCI debt securities at fair value through OCI amounting to € 1.4 million as of December 31, 2019. 7 Before reflection of collateral and limited to securities purchased under resale agreements and securities borrowed. The tables above give an overview of our credit exposure by geographical region, allocated based on the counterparty’s country of domicile, see also section “Credit Exposure to Certain Eurozone Countries” of this report for a detailed discussion of the “country of domicile view”. Aforementioned domicile view does not have to be congruent with an internal risk based view applied elsewhere in this report Our largest concentration of credit risk within loans from a regional perspective is in our home market Germany, with a signif- icant share in households, which includes the majority of our mortgage lending and home loan business. Within OTC derivatives, tradable assets as well as repo and repo-style transactions, our largest concentrations from a regional perspective were in Europe and North America. 139 Deutsche Bank Annual Report 2020 Risk and capital performance Credit risk exposure Credit Exposure to Certain Eurozone Countries Certain Eurozone countries are presented within the table below due to previous focus relating to sovereign risk. In our “country of domicile view” we aggregate credit risk exposures to counterparties by allocating them to the domicile of the primary counterparty, irrespective of any link to other counterparties, or in relation to credit default swaps underlying reference assets from these Eurozone countries. Hence we also include counterparties whose group parent is located outside of these countries and exposures to special purpose entities whose underlying assets are from entities domiciled in other countries. The following table, which is based on the country of domicile view, presents our gross position, the included amount thereof of undrawn / contingent exposure and our net exposure to these Eurozone countries. The gross exposure reflects our net credit risk exposure grossed up for net credit derivative protection purchased with underlying reference assets domiciled in one of these countries, guarantees received and collateral. Such collateral is particularly held with respect to the retail portfolio, but also for financial institutions predominantly based on derivative margining arrangements, as well as for corporates. In addition, the amounts also reflect the allowance for credit losses. In some cases, our counterparties’ ability to draw on undrawn commitments is limited by terms included in the specific contractual documentation. Net credit exposures are presented after effects of collateral held, guarantees received and further risk mitigation, including net notional amounts of credit derivatives for protection sold/bought. The provided gross and net exposures to certain European countries do not include credit derivative tranches which, by design, are structured to be credit risk neutral. Additionally, the tranche and correlated nature of these positions does not allow a meaningful disaggregated notional presentation by country, e.g., as identical notional exposures represent different levels of risk for different tranche levels. Gross position, included undrawn exposure and net exposure to certain Eurozone countries – Country of Domicile View in € m. Greece Gross Undrawn / contingent Net Ireland Gross Undrawn / contingent Net Italy Gross Undrawn / contingent Net Portugal Gross Undrawn / contingent Net Spain Gross Undrawn / contingent Net Total gross Total Undrawn / contingent Total net³ Sovereign Dec 31, 2020 Dec 31, 2019 Financial Institutions Dec 31, 2020 Dec 31, 2019 Corporates Dec 31, 2020 Dec 31, 2019 Dec 31, 2020 Retail Dec 31, 2019 Dec 31, 2020 Other Dec 31, 2019 Dec 31, 2020¹ Total Dec 31, 2019 1,055 0 1,055 437 2,023 1,342 42 61 323 360 0 437 337 2 8 464 7 14 4 2 2 4 1 2 11 0 11 0 3,429 2,248 51 0 64 776 0 1,437 197 0 217 302 0 270 194 1,280 6,089 7,256 16 1,807 2,439 649 3,787 4,156 45 135 21 2 5 26 3,610 3,501 10,111 12,364 2 531 2,467 2,988 6 3,501 3,397 7,646 8,478 613 5,726 6,260 4,501 3,805 14,514 13,331 17,639 18,451 38 5,935 5,384 1,739 1,733 487 8,666 8,209 10,379 10,715 0 4,133 5,341 62 403 0 262 0 261 95 42,641 41,941 0 7,737 7,154 95 23,841 24,848 212 0 186 228 0 281 83 20 90 84 26 85 689 303 628 860 342 638 12 2 4 11 2 4 93 0 93 208 1,088 1,390 370 208 1,001 1,217 325 0 1 4,448 1,226 1,921 1,513 14,250 12,942 10,039 9,948 112 5,831 4,611 523 467 10,038 8,514 2,529 2,536 258 30,907 25,888 3 6,655 5,249 0 4,332 1,191 310 17,912 13,019 11,637 8,452 8,722 8,023 35,879 34,853 27,715 28,440 4,224 4,063 88,177 83,832 534 17,248 15,811 9,922 7,521 1,714 2,011 23,126 21,532 12,920 13,264 4,153 4,010 51,836 48,338 233 13,877 12,783 2,476 2,260 249 0 287 91 726 280 614 732 1 1 1 Approximately 74% of the overall exposure as per December 31, 2020 will mature within the next 5 years. 2 Other exposures to Ireland include exposures to counterparties where the domicile of the group parent is located outside of Ireland as well as exposures to special purpose entities whose underlying assets are from entities domiciled in other countries. 3 Total net exposure excludes credit valuation reserves for derivatives amounting to € 45.2 million as of December 31, 2020 and € 49.8 million as of December 31, 2019. Net exposure to the above selected Eurozone countries increased by € 3.5 billion in 2020 driven by increased exposure in Spain and Greece that is partly offset by a decrease in Italy and Ireland. 140 Deutsche Bank Annual Report 2020 Risk and capital performance Credit risk exposure Sovereign Credit Risk Exposure to Certain Eurozone Countries The amounts below reflect a net “country of domicile view” of our sovereign exposure. Sovereign credit risk exposure to certain Eurozone countries Direct Sovereign exposure¹ Net Notional of CDS referencing sovereign debt Net sovereign exposure Dec 31, 2020 Memo Item: Net fair value of CDS referencing sovereign debt² Direct Sovereign exposure¹ Net Notional of CDS referencing sovereign debt Net sovereign exposure 1,055 189 5,501 212 4,447 11,404 0 28 (1,369) (26) (115) (1,481) 1,055 217 4,133 186 4,332 9,922 0 0 718 0 163 881 437 265 6,170 228 1,222 8,322 0 4 (828) 54 (31) (801) Dec 31, 2019 Memo Item: Net fair value of CDS referencing sovereign debt² 0 2 334 6 112 454 437 270 5,341 281 1,191 7,521 in € m. Greece Ireland Italy Portugal Spain Total 1 Includes sovereign debt classified as financial assets/liabilities at fair value through profit or loss and loans carried at amortized cost. Direct Sovereign exposure is net of guarantees received and collateral. 2 The amounts reflect the net fair value in relation to credit default swaps referencing sovereign debt of the respective country representing the counterparty credit risk. The increase of € 2.4 billion in net sovereign exposure compared with year-end 2019 mainly reflects increases in debt secu- rities in Spain within Central Investment Office and Investment Bank portfolios. Credit Exposure Classification We also classify our credit exposure along our business divisions, which is in line with the divisionally aligned chief risk officer mandates. In the section below, we show the credit exposure of the Corporate Bank and the Investment Bank together. In the subsequent section, we provide the credit exposure for the Private Bank. Corporate Bank and Investment Bank credit exposure The tables below show our main Corporate Bank and Investment Bank Credit Exposure by product types and internal rating bands. Please refer to section "Measuring Credit Risk" for more details about our internal ratings. Main Corporate Bank and Investment Bank credit exposure categories according to our internal creditworthiness categories of our counterparties – gross in € m. (unless stated otherwise) Probability of default in %1 Ratingband > 0.00 ≤ 0.04 iAAA–iAA > 0.04 ≤ 0.11 iA > 0.11 ≤ 0.5 iBBB > 0.5 ≤ 2.27 iBB > 2.27 ≤ 10.22 iB iCCC and below > 10.22 ≤ 100 Total at amortized cost 13,679 29,365 55,845 48,063 26,885 9,962 183,800 Loans Off-balance sheet trading - at fair value through P&L Designated / mandatory at fair value through P&L at fair value through OCI Revocable and irrevo- cable lending commitments 44 436 1,047 2,470 1,813 1,177 6,987 446 347 672 500 76 361 2,401 114 641 2,149 1,458 160 92 4,614 20,168 47,835 57,941 26,476 18,789 4,535 175,743 Contingent liabilities 1,911 11,794 22,069 5,566 2,864 1,978 46,182 in € m. (unless stated otherwise) Probability of default in %1 Ratingband > 0.00 ≤ 0.04 iAAA–iAA > 0.04 ≤ 0.11 iA > 0.11 ≤ 0.5 iBBB > 0.5 ≤ 2.27 iBB iB > 2.27 ≤ 10.22 iCCC and below > 10.22 ≤ 100 Total at amortized cost 1,183 527 307 174 239 382 2,811 at fair value through P&L Debt Securities at fair value through OCI at amortized cost Repo and repo-style transactions at fair value through P&L at fair value through OCI 50,886 7,762 12,569 13,062 1,607 762 86,647 103 82 87 400 293 15 980 298 827 1,425 2,239 2,311 600 7,700 27,745 8,504 8,346 15,004 375 0 59,974 − − − − − − − 1 Reflects the probability of default for a one year time horizon. 2 Includes the effect of netting agreements and cash collateral received where applicable. Dec 31, 2020 OTC derivatives at fair value through P&L2 4,230 6,414 4,395 3,202 4,477 113 22,831 Dec 31, 2020 Total 120,806 114,533 166,851 118,616 59,889 19,978 600,672 141 Deutsche Bank Annual Report 2020 Risk and capital performance Credit risk exposure Main Corporate Bank and Investment Bank credit exposure categories according to our internal creditworthiness categories of our counterparties – net in € m. (unless stated otherwise) Loans Off-balance sheet Dec 31, 2020¹ OTC derivatives Probability of default in %2 Ratingband > 0.00 ≤ 0.04 iAAA–iAA > 0.04 ≤ 0.11 iA > 0.11 ≤ 0.5 iBBB > 0.5 ≤ 2.27 iBB iB > 2.27 ≤ 10.22 iCCC and below > 10.22 ≤ 100 Total at amortized cost 8,684 22,618 31,266 22,984 8,853 4,823 99,228 trading - at fair value through P&L Designated / mandatory at fair value through P&L at fair value through OCI Revocable and irrevo- cable lending commitments 44 131 889 1,887 824 759 4,534 446 347 625 407 6 207 2,038 0 621 1,602 955 140 92 3,410 19,088 46,384 54,626 23,947 17,614 4,263 165,922 Contingent liabilities 1,618 9,837 19,365 3,995 2,244 1,269 38,330 at fair value through P&L 3,381 4,957 4,190 3,100 4,432 113 20,174 in € m. (unless stated otherwise) Probability Ratingband of default in %2 > 0.00 ≤ 0.04 iAAA–iAA > 0.04 ≤ 0.11 iA > 0.11 ≤ 0.5 iBBB > 0.5 ≤ 2.27 iBB iB > 2.27 ≤ 10.22 iCCC and below > 10.22 ≤ 100 Total at amortized cost 1,183 527 307 171 239 311 2,737 at fair value through P&L Debt Securities at fair value through OCI at amortized cost Repo and repo-style transactions at fair value through P&L at fair value through OCI 50,886 7,762 12,569 13,017 1,607 727 86,567 103 82 87 400 293 15 980 0 0 23 71 0 0 95 27 1 3 3 0 0 34 − − − − − − − Dec 31, 2020¹ Total 85,460 93,268 125,551 70,939 36,253 12,579 424,049 1 Net of eligible collateral, guarantees and hedges based on IFRS requirements. 2 Reflects the probability of default for a one year time horizon. The tables below show our main Corporate Bank and Investment Bank Credit Exposure for 2019 by product types and internal rating bands. Main Corporate Bank and Investment Bank credit exposure categories according to our internal creditworthiness categories of our counterparties – gross in € m. (unless stated otherwise) Probability of default in %1 Ratingband > 0.00 ≤ 0.04 iAAA–iAA > 0.04 ≤ 0.11 iA > 0.11 ≤ 0.5 iBBB > 0.5 ≤ 2.27 iBB iB > 2.27 ≤ 10.22 iCCC and below > 10.22 ≤ 100 Total at amortized cost 18,508 31,859 58,139 47,505 25,967 11,477 193,456 Loans Off-balance sheet trading - at fair value through P&L Designated / mandatory at fair value through P&L at fair value through OCI Revocable and irrevo- cable lending commitments 184 868 1,380 4,595 2,525 967 10,519 20 599 234 643 275 305 2,077 237 754 2,447 1,002 283 2 4,724 23,850 45,040 55,361 26,160 17,913 3,450 171,774 Contingent liabilities 3,364 11,706 22,441 4,642 3,207 1,563 46,922 in € m. (unless stated otherwise) Probability of default in %1 Ratingband > 0.00 ≤ 0.04 iAAA–iAA > 0.04 ≤ 0.11 iA > 0.11 ≤ 0.5 iBBB > 0.5 ≤ 2.27 iBB iB > 2.27 ≤ 10.22 iCCC and below > 10.22 ≤ 100 Total at amortized cost 1,422 392 366 373 449 99 3,102 at fair value through P&L Debt Securities at fair value through OCI at amortized cost Repo and repo-style transactions at fair value through P&L at fair value through OCI 48,992 5,864 11,414 14,525 1,700 558 83,053 0 8 76 233 225 0 543 847 1,522 408 3,265 1,344 1,039 8,425 30,382 8,745 7,320 20,498 1,101 153 68,199 − − − − − − − 1 Reflects the probability of default for a one year time horizon. 2 Includes the effect of netting agreements and cash collateral received where applicable. Dec 31, 2019 OTC derivatives at fair value through P&L2 3,234 4,144 3,199 2,261 844 40 13,722 Dec 31, 2019 Total 131,040 111,501 162,785 125,701 55,833 19,654 606,514 142 Deutsche Bank Annual Report 2020 Risk and capital performance Credit risk exposure Main Corporate Bank and Investment Bank credit exposure categories according to our internal creditworthiness categories of our counterparties – net in € m. (unless stated otherwise) Loans Off-balance sheet Dec 31, 2019¹ OTC derivatives Probability of default in %2 Ratingband > 0.00 ≤ 0.04 iAAA–iAA > 0.04 ≤ 0.11 iA > 0.11 ≤ 0.5 iBBB > 0.5 ≤ 2.27 iBB iB > 2.27 ≤ 10.22 iCCC and below > 10.22 ≤ 100 Total at amortized cost 12,575 25,249 33,115 21,734 6,610 4,053 103,336 trading - at fair value through P&L Designated / mandatory at fair value through P&L at fair value through OCI Revocable and irrevo- cable lending commitments 184 318 751 2,305 287 543 4,388 20 190 234 408 52 204 1,109 237 754 1,489 600 175 2 3,257 22,566 43,953 52,334 23,497 16,348 3,066 161,764 Contingent liabilities 2,535 9,814 19,470 4,071 2,104 1,115 39,108 at fair value through P&L 2,840 3,098 3,005 2,089 821 40 11,893 in € m. (unless stated otherwise) Probability Ratingband of default in %2 > 0.00 ≤ 0.04 iAAA–iAA > 0.04 ≤ 0.11 iA > 0.11 ≤ 0.5 iBBB > 0.5 ≤ 2.27 iBB iB > 2.27 ≤ 10.22 iCCC and below > 10.22 ≤ 100 Total at amortized cost 1,422 392 366 220 443 96 2,939 at fair value through P&L Debt Securities at fair value through OCI at amortized cost Repo and repo-style transactions at fair value through P&L at fair value through OCI 48,992 5,864 11,414 14,152 1,672 523 82,618 0 8 76 225 229 0 538 2 0 6 90 0 439 537 1,169 13 100 12 0 0 1,293 − − − − − − − Dec 31, 2019¹ Total 92,540 89,653 122,362 69,402 28,742 10,081 412,781 1 Net of eligible collateral, guarantees and hedges based on IFRS requirements. 2 Reflects the probability of default for a one year time horizon. The above table shows an overall decrease in our Corporate Bank and Investment Bank gross exposure in 2020 of € 5.8 billion or 1 %. Loans at amortized cost decreased by € 9.7 billion mainly due to prepayments across businesses as well as by the strengthening of the Euro in comparison to the U.S. Dollar. From a regional perspective the decrease is primarily attributable to counterparties domiciled in the United States and United Kingdom. This decrease is partly offset by an increase in trading debt securities of € 3.6 billion mainly due to increased trading activities on the back of volatile market conditions in the wake of the COVID-19 pandemic. We use risk mitigation techniques as described above to optimize our Corporate Bank and Investment Bank credit exposures and reduce potential credit losses. The tables for “net” exposure disclose the development of our Corporate Bank and Invest- ment Bank credit exposures net of collateral, guarantees and hedges. SCL Risk Mitigation for Credit Exposure Our Strategic Corporate Lending (“SCL”) unit helps mitigate the risk of our corporate credit exposures. The notional amount of SCL’s risk reduction activities increased from € 31.3 billion as of December 31, 2019, to € 34.0 billion as of December 31, 2020. As of year-end 2020, SCL mitigated the credit risk of € 30.9 billion of loans and lending-related commitments through synthetic collateralized loan obligations supported predominantly by financial guarantees. This position totaled € 30.3 billion as of De- cember 31, 2019. SCL also held credit derivatives with an underlying notional amount of € 3.1 billion as of December 31, 2020. The position totaled € 1.0 billion as of December 31, 2019. The credit derivatives used for our portfolio management activities are accounted for at fair value. 143 Deutsche Bank Annual Report 2020 Risk and capital performance Credit risk exposure Private Bank credit exposure Private Bank credit exposure, credit exposure in stage 3 and net credit costs PB Germany Consumer Finance Mortgage Business Finance Financial Markets Other Dec 31, 2020 185,959 29,352 153,165 1,246 0 2,196 International Private Bank Consumer Finance Mortgage Business Finance Wealth Manage- ment Other 91,156 11,162 13,611 12,151 53,928 303 Total exposure in € m. Dec 31, 2019 190,038 31,130 144,455 1,576 12,984 (107) of which loan book in € m. Dec 31, 2019 153,954 15,913 135,164 926 2,121 (170) Dec 31, 2020 160,683 15,240 143,368 870 0 1,206 Credit exposure stage 3 in € m. Dec 31, 2019 2,289 914 1,343 17 14 2 Dec 31, 2020 2,798 1,277 1,481 6 0 35 Dec 31, 2020 Net credit costs as a % of total exposure¹ Dec 31, 2019 0.08% 0.53% (0.01%) 0.08% (0.02%) (0.19%) 0.17% 0.77% 0.06% 0.15% N/M 0.05% 88,5942 11,693 14,413 9,821 51,934 734 278,632 76,511 8,937 13,520 9,914 44,072 68 75,8002 9,020 14,334 9,059 43,333 54 229,754 3,484 350 668 728 1,739 0 2,6242 243 682 660 0.43% 1.50% (0.08%) 1.16% 1,038 1 4,913 0.17% 0 0.26% 0.20%2 0.67% (0.17%) 1.24% 0.02% (0.03%) 0.12% Total 237,194 1 Net credit costs for the twelve months period ended at the respective balance sheet date divided by the total exposure at that balance sheet date. 2 PCB international and Wealth Management were reported separately in 2019. 277,115 6,282 Consumer finance is divided into personal instalment loans, credit lines and credit cards. Consumer finance business is un- collateralized, loan risk depends on client quality. Various lending requirements are stipulated, including (but not limited to) client rating, maximum loan amounts and maximum tenors, and are adapted to regional conditions and/or circumstances of the borrower (i.e., for consumer loans a maximum loan amount taking into account customer net income). Given the largely homogeneous nature of this portfolio, counterparty credit-worthiness and ratings are predominately derived by utilizing an automated decision engine. Mortgage business is the financing of residential properties (primarily owner-occupied) sold by various business channels in Europe, primarily in Germany but also in Spain and Italy. The level of credit risk of the mortgage loan portfolio is determined by assessing the quality of the client and the underlying collateral. The loan amounts are generally larger than consumer finance loans and they are extended for longer time horizons. Based on our underwriting criteria and processes and the diversified portfolio (customers/properties) with respective collateralization, the mortgage portfolio is categorized as lower risk, while consumer finance is categorized as high risk. Business finance represents credit products for small businesses, SME up to large corporates. Products range from current accounts and credit lines to investment loans or revolving facilities, factoring, leasing and derivatives. Smaller clients below a turnover of € 2.5 million are limited to current accounts and loans. Clients are located primarily in Italy and Spain, but credit can also be extended to subsidiaries abroad, mostly in Europe. The reported credit exposures for year-end 2019 in Financial Markets belong to a portfolio of DB PFK AG, that was transferred to Group Treasury in 2020 in the context of the merger of DB PFK AG on DB AG and is therefore no longer part of Private Bank. Wealth Management offers customized wealth management solutions and private banking services including discretionary portfolio management and traditional and alternative investment solutions, complemented by structured risk management, wealth planning, lending and family office services for wealth, high-net-worth (HNW) and ultra-high-net-worth (UHNW) indi- viduals and family offices. Wealth Management’s total exposure is divided into Lombard Lending (against readily marketable liquid collateral / securities) and Structured Lending (against less liquid collateral). While the level of credit risk for the Lombard portfolio is determined by assessing the quality of the underlying collateral, the level of credit risk for the structured portfolio is determined by assessing both the quality of the client and the collateral. Products range from secured Lombard and mortgage loans to current accounts (Europe only), credit lines and other loans; to a lesser extent derivatives and contingencies. Clients are located globally. 144 Deutsche Bank Annual Report 2020 Risk and capital performance Credit risk exposure PB mortgage loan-to-value1 Dec 31, 2019 67 % ≤ 50 % 16 % > 50 ≤ 70 % 9 % > 70 ≤ 90 % 3 % > 90 ≤ 100 % 2 % > 100 ≤ 110 % 2 % > 110 ≤ 130 % 1 % > 130 % 1 When assigning the exposure to the corresponding LTV buckets, the exposure amounts are distributed according to their relative share of the underlying assessed real estate 65 % 16 % 10 % 3 % 2 % 2 % 1 % Dec 31, 2020 value. The LTV expresses the amount of exposure as a percentage of the underlying real estate value. Our LTV ratios are calculated using the total exposure divided by the current determined value of the respective properties. These values are monitored and updated if necessary on a regular basis. The exposure of transactions that are additionally backed by liquid collateral is reduced by the respective collateral values, whereas any prior charges increase the correspond- ing total exposure. The LTV calculation includes exposure which is secured by real estate collateral. Any mortgage lending exposure that is collateralized exclusively by any other type of collateral is not included in the LTV calculation. The creditor’s creditworthiness, the LTV and the quality of collateral is an integral part of our risk management when originating loans and when monitoring and steering our credit risks. In general, we are willing to accept higher LTV’s, the better the creditor’s creditworthiness is. Nevertheless, restrictions of LTV apply e.g. for countries with negative economic outlook or expected declines of real estate values. As of December 31, 2020, 65 % of our exposure related to the mortgage lending portfolio had a LTV ratio below or equal to 50 %, compared to 67 % in the prior year. Credit Exposure from Derivatives All exchange traded derivatives are cleared through central counterparties (“CCPs”), the rules and regulations of which provide for daily margining of all current and future credit risk positions emerging out of such transactions. To the extent possible, we also use CCP services for OTC derivative transactions (“OTC clearing”); we thereby benefit from the credit risk mitigation achieved through the CCP’s settlement system. The Dodd-Frank Act provides for an extensive framework for the regulation of OTC derivatives, including mandatory clearing, platform trading and transaction reporting of certain OTC derivatives, as well as rules regarding the registration of, and capital, margin and business conduct standards for, swap dealers, security-based swap dealers, major swap participants and major security-based swap participants. The Dodd-Frank Act and related CFTC rules require OTC clearing in the United States for certain standardized OTC derivative transactions, including certain interest rate swaps and index credit default swaps. Margin requirements for non-cleared derivative transactions in the US started in September 2016. The European Regulation (EU) No 648/2012 on OTC Derivatives, Central Counterparties and Trade Repositories (“EMIR”) introduced a number of risk mitigation techniques for non-centrally cleared OTC derivatives in 2013 and the reporting of OTC and exchange traded derivatives in 2014. Mandatory clearing of certain standardized OTC derivatives transactions in the EU began in June 2016, and margin requirements for un-cleared OTC derivative transactions in the EU started in February 2017. Deutsche Bank implemented the exchange of both initial and variation margin in the EU from February 2017 for the first category of counterparties subject to the EMIR margin for un-cleared derivatives requirements. The CFTC adopted final rules in 2016 that require additional interest rate swaps to be cleared, with a phased implementation schedule ending in October 2018. Deutsche Bank implemented the CFTC’s expanded clearing requirements for the relevant interest rate swaps subject to the passed compliance, covering identified instruments denominated in AUD, CAD, CHF, HKD, MXN, NOK, PLN, SEK and SGD. In September, 2020, the CFTC issued a final rule on the cross-border application of U.S. swap rules, which builds on and in some case supersedes the CFTC’s cross-border guidance from 2013 and related no-action relief letters. In January 2021, also pursuant to the Dodd-Frank Act, the CFTC finalized regulations to impose position limits on certain commodities and economically equivalent swaps, futures and options. The SEC has also finalized rules regarding registration, reporting, capital, risk mitigation techniques, business conduct stand- ards and trade acknowledgement and verification requirements for security-based swap dealers and major security-based swap participants. Compliance with most of these requirements will be required starting in October 2021, when entities will be required to register as security-based swap dealers and major security-based swap participants. The SEC adopted in Decem- ber 2019 supplemental guidance and rule amendments addressing the cross-border application of certain rules regulating security-based swaps which also establishes a firm timeline for security-based swap dealer registration. The compliance date for Deutsche Bank to register with the SEC as a security-based swap dealer will be October 6, 2021. 1 Deutsche Bank Annual Report 2020 Risk and capital performance Credit risk exposure Finally, U.S. prudential regulators (the Federal Reserve, the FDIC, the Office of the Comptroller of the Currency, the Farm Credit Administration and the Federal Housing Finance Agency) have adopted final rules establishing margin requirements for non-cleared swaps and security-based swaps between prudentially regulated swap dealers (such as Deutsche Bank) and certain counterparties, and the CFTC has adopted final rules establishing margin requirements for non-cleared swaps between non-prudentially regulated swap dealers and certain counterparties. Deutsche Bank implemented the exchange of both initial and variation margin for un-cleared derivatives in the U.S. from September 2016, for the first category of counterparties subject to the U.S. prudential regulators’ margin requirements. Additional initial margin requirements for smaller counterparties are in the process of being phased in from September 2017 through September 2022, with the relevant compliance dates depending in each case on the transactional volume of the parties and their affiliates. The U.S. prudential regulators delayed the initial margin compliance date from September 2020 until September 2021 or September 2022 for swaps with certain counterparties with lower levels of transactional volume as a result of the impact of COVID-19. The SEC has also established margin require- ments for non-cleared security-based swaps, and compliance will be required starting in October 2021 for security based swaps dealers required to register with the SEC. The following table shows a breakdown of notional amounts and gross market values for assets and liabilities of exchange traded and OTC derivative transactions on the basis of clearing channel 146 Deutsche Bank Annual Report 2020 Risk and capital performance Credit risk exposure Notional amounts of derivatives on basis of clearing channel and type of derivative in € m. Interest rate related: OTC Bilateral (Amt) CCP (Amt) Exchange-traded Total Interest rate related Currency related: OTC Bilateral (Amt) CCP (Amt) Exchange-traded Total Currency related Equity/index related: OTC Bilateral (Amt) CCP (Amt) Exchange-traded Total Equity/index related Credit derivatives related OTC Bilateral (Amt) CCP (Amt) Exchange-traded Total Credit derivatives related Commodity related: OTC Bilateral (Amt) CCP (Amt) Exchange-traded Total Commodity related Other: OTC Bilateral (Amt) CCP (Amt) Exchange-traded Total Other Total OTC business Total bilateral business Total CCP business Total exchange-traded business Total Positive market values after netting and cash collateral received Notional amount maturity distribution Within 1 year > 1 and ≤ 5 years After 5 years Total 11,299,988 8,076,426 5,241,008 24,617,422 1,476,276 1,977,542 1,598,819 5,052,637 9,823,712 6,098,884 3,642,189 19,564,785 821,601 11,905,912 8,292,037 5,241,074 25,439,023 215,611 605,924 66 4,351,809 4,255,560 96,249 43,601 4,395,409 791,671 788,132 3,539 8 791,679 401,111 5,544,590 401,012 5,444,704 99,886 43,608 401,111 5,588,199 98 0 28,938 28,938 0 126,825 155,763 32,164 32,164 0 36,818 68,982 7,186 7,186 0 1,634 8,821 68,288 68,288 0 165,277 233,565 61,552 23,672 37,880 0 61,552 3,716 3,716 0 15,446 19,162 119,254 119,254 0 9,411 128,665 689,031 124,373 564,658 0 689,031 86,593 32,647 53,947 0 86,593 837,176 180,692 656,484 0 837,176 2,857 2,857 0 744 3,600 3,438 3,438 0 0 3,438 1,341 1,341 0 0 1,341 7,913 7,913 0 16,190 24,103 154 154 0 0 154 122,846 122,846 0 9,411 132,258 15,865,257 5,907,416 9,957,840 801,207 16,666,463 9,595,586 2,928,505 6,667,081 253,181 9,848,767 5,737,393 31,198,236 2,041,159 10,877,080 3,696,234 20,321,155 1,056,088 5,739,094 32,254,324 1,701 Dec 31, 2020 Positive market value Negative market value 230,512 220,704 9,808 347 230,859 215,795 206,192 9,602 154 215,948 91,241 90,297 944 5 91,246 5,700 5,700 0 3,772 9,473 13,557 3,043 10,515 0 13,557 142 138 4 409 551 1,043 1,043 0 29 1,072 342,196 320,925 21,271 4,562 346,758 87,177 85,830 1,347 24 87,202 5,692 5,692 0 4,902 10,594 13,272 2,628 10,645 0 13,272 993 661 332 55 1,048 936 936 0 53 989 323,866 301,939 21,926 5,188 329,054 Net market value 14,717 14,512 206 193 14,911 4,063 4,466 (403) (19) 4,044 8 8 0 (1,130) (1,122) 285 415 (130) 0 285 (851) (522) (328) 353 (497) 108 108 0 (24) 84 18,331 18,986 (656) (626) 17,704 − − − − 35,161 − − 147 Deutsche Bank Annual Report 2020 Risk and capital performance Credit risk exposure Dec 31, 2019 in € m. Interest rate related: OTC Bilateral (Amt) CCP (Amt) Exchange-traded Total Interest rate related Currency related: OTC Bilateral (Amt) CCP (Amt) Exchange-traded Total Currency related Equity/index related: OTC Bilateral (Amt) CCP (Amt) Exchange-traded Total Equity/index related Credit derivatives related OTC Bilateral (Amt) CCP (Amt) Exchange-traded Total Credit derivatives related Commodity related: OTC Bilateral (Amt) CCP (Amt) Exchange-traded Total Commodity related Other: OTC Bilateral (Amt) CCP (Amt) Exchange-traded Total Other Total OTC business Total bilateral business Total CCP business Total exchange-traded business Total Positive market values after netting and cash collateral received Notional amount maturity distribution Within 1 year > 1 and ≤ 5 years After 5 years Total Positive market value Negative market value 11,116,114 8,622,042 5,377,422 25,115,579 2,453,120 2,496,053 1,757,652 6,706,825 8,662,994 6,125,989 3,619,770 18,408,754 4,050,938 1,142,410 372 5,193,720 15,167,052 9,764,453 5,377,794 30,309,299 244,738 200,701 44,037 631 245,369 226,854 184,611 42,243 590 227,444 4,345,697 4,250,460 95,237 17,169 4,362,866 913,352 912,881 471 0 913,352 431,769 5,690,818 431,769 5,595,110 95,708 17,169 431,769 5,707,987 0 0 98,330 98,330 0 183,700 282,030 56,328 56,328 0 37,390 93,718 102,131 38,651 63,480 0 102,131 558,757 157,306 401,452 0 558,757 2,743 2,743 0 18,502 21,246 5,640 5,640 0 570 6,210 7,985 7,985 0 5,884 13,869 82,345 35,102 47,243 0 82,345 1,194 1,194 0 7 1,201 162,642 162,642 0 226,974 389,617 743,233 231,058 512,175 0 743,233 9,577 9,577 0 19,080 28,657 109 109 0 0 109 2,530 2,530 0 153 2,682 45,811 45,811 0 31,868 77,678 48,449 48,449 0 32,020 80,470 15,710,826 10,158,649 5,900,824 31,770,299 6,889,114 3,630,737 2,233,811 12,753,662 8,821,711 6,527,912 3,667,013 19,016,636 4,302,177 1,180,523 6,263 5,488,963 20,013,003 11,339,172 5,907,087 37,259,262 70,947 70,524 423 3 70,949 6,478 6,478 0 1,883 8,362 10,245 2,062 8,183 0 10,245 20 18 2 30 51 67,033 66,543 490 22 67,055 8,607 8,607 0 2,252 10,859 11,229 2,667 8,562 0 11,229 501 495 6 36 537 666 666 0 70 736 333,094 280,449 52,645 2,617 335,711 706 706 0 107 813 314,930 263,628 51,302 3,006 317,936 Net market value 17,884 16,090 1,794 42 17,925 3,914 3,981 (67) (19) 3,894 (2,129) (2,129) 0 (368) (2,497) (984) (605) (379) 0 (984) (481) (477) (4) (5) (486) (40) (40) 0 (37) (77) 18,164 16,820 1,343 (389) 17,775 − − − − 28,615 − − The gross exposure of OTC derivative prior to netting and cash collateral as of December 31, 2020 of € 1.4 billion (€ 1.8 billion as of December 31, 2019), which is part of the “asset held for sale” classification is not included in our disclosure for credit exposure from derivative. This exposure is associated with the Prime Finance platform being transferred to BNP Paribas. For further information please refer to Note 24 “Non-Current Assets and Disposal Groups Held for Sale” to the consolidated finan- cial statement. Equity Exposure The table below presents the carrying values of our equity investments according to IFRS definition split by trading and non- trading for the respective reporting dates. We manage our respective positions within our market risk and other appropriate risk frameworks. Composition of our Equity Exposure in € m. Trading Equities Nontrading Equities¹ Total Equity Exposure 1 Includes equity investment funds amounting to € 291 million as of December 31, 2020 and € 586 million as of December 31, 2019. Dec 31, 2020 11,769 2,375 14,145 Dec 31, 2019 18,640 2,660 21,300 148 Deutsche Bank Annual Report 2020 Risk and capital performance Trading market risk exposures As of December 31, 2020, our Trading Equities exposure was mainly composed of € 7.3 billion from Capital Release Unit activities and € 4.4 billion from Investment Bank. Overall trading equities decreased by € 6.9 billion year on year driven mainly by unwinding of trades in the Equities business. Trading market risk exposures Value-at-Risk Metrics of Trading Units of Deutsche Bank Group Deutsche Bank received regulatory approval for the Value-at-Risk model to transition to Historical Simulation, effective 1st Oct 2020. The figures for 2019 are shown for comparative purposes. The tables and graph below present the Historic Simulation value-at-risk metrics calculated with a 99 % confidence level and a one-day holding period for our trading units. Foreign exchange risk2 2019 Commodity price risk Value-at-Risk of our Trading Units by Risk Type1 Total Diversification effect Interest rate risk Credit spread risk Equity price risk 2019 2020 2020 in € m. Average Maximum Minimum Period-end 1 Figures for 2020 as of December 31 2020. Figures for 2019 as of December 31 2019. 2019 VaR results are also shown under the new Historical Simulation model rather than 2019 58.9 36.6 (44.0) (28.9) 17.9 14.5 53.6 28.2 15.5 13.6 13.3 8.2 133.3 48.8 (10.2) (16.8) 36.3 23.2 117.1 36.6 30.8 24.6 32.3 16.8 3.7 5.3 25.6 27.6 (84.4) (47.0) 5.3 48.1 38.8 (72.2) (17.6) 27.1 17.9 55.4 23.7 13.5 4.5 6.3 8.2 22.5 2.7 8.8 0.4 1.8 2019 1.0 3.3 0.0 1.3 8.8 17.9 19.7 8.1 2020 2020 2019 2019 2020 2020 2019 2020 the previously reported Monte Carlo model. 2 Includes value-at-risk from gold and other precious metal positions. Development of historic simulation value-at-risk by risk types in 2020 01/20 02/20 03/20 04/20 05/20 06/20 07/20 08/20 09/20 10/20 11/20 12/20 140 130 120 110 100 90 80 70 60 50 40 30 20 10 0 in € m. VaR Interest rate risk VaR Credit spread risk VaR Equity risk VaR Foreign exchange including precious metals VaR Commodity risk VaR Total The average value-at-risk over 2020 was € 58.9 million, which increased € 22.3 million (+61 %) compared to the average for 2019, driven by increases across risk classes from COVID-19 related market volatility impacts. 149 Deutsche Bank Annual Report 2020 Risk and capital performance Trading market risk exposures The below chart shows the value-at-risk trend under both Monte Carlo and Historical Simulations for comparative purposes. The increase in value-at-risk was more prominent under Historical Simulation which is more impacted by extreme tail events such as those experienced in March and April of 2020. Trading Book 1-day value-at-risk in 2019 and 2020 1/19 2/19 3/19 4/19 5/19 6/19 7/19 8/19 9/19 10/19 11/19 12/19 1/20 2/20 3/20 4/20 5/20 6/20 7/20 8/20 9/20 10/20 11/20 12/20 130 110 90 70 50 30 10 in € m. MC VaR1d (TB) HS VaR1d (TB) For regulatory reporting purposes, the incremental risk charge for the respective reporting dates represents the higher of the spot value at the reporting dates, and their preceding 12-week average calculation. Average, Maximum and Minimum Incremental Risk Charge of Trading Units (with a 99.9 % confidence level and one-year capital horizon)1,2,3, Total Credit Trading Core Rates Emerging Markets 2020 591.4 688.8 537.3 560.4 in € m. Average Maximum Minimum Period-end 1 Amounts show the bands within which the values fluctuated during the 12-weeks preceding December 31, 2020 and December 31, 2019, respectively. 2 Business line breakdowns have been updated for 2020 reporting to better reflect the current business structure. 3 All liquidity horizons are set to 12 months. 4 Other includes Capital Release Unit. 2019 178.5 213.6 139.0 139.0 2019 480.4 609.0 324.2 389.4 2019 211.4 260.4 152.8 174.3 2019 168.6 193.4 134.7 134.7 2020 347.4 631.6 263.1 283.6 2020 242.6 324.9 62.8 250.4 2020 100.2 147.4 50.0 124.8 2020 (98.7) (70.0) (147.6) (98.5) Other4 2019 (78.2) (58.5) (102.4) (58.5) The incremental risk charge as at the end of 2020 was € 560 million, an increase of € 171 million (+44 %) compared with year end 2019. The average of the incremental risk charge as at the end of 2020 was € 591 million and thus € 111 million (+23 %) higher compared with the average for the period ended December 31, 2019. The increase in incremental risk charge for 2020 was driven by increases in sovereign exposures in the Core Rates and Emerging Markets business areas when compared to 2019. Results of Regulatory Backtesting of Trading Market Risk In 2020 we observed seven global outliers under the Historical Simulation model, where our loss on a buy-and-hold basis exceeded the value-at-risk of our Trading Books, compared with two outliers in 2019. The outliers were driven by the significant market volatility experienced as a result of the COVID-19 crisis. Also, there were five Actual Backtesting outliers during 2020, which compares the VaR to Total Income less Fees & Commissions. However, the regulatory exemption allowed the removal of the outliers observed during the period from March 10, 2020 to March 24, 2020 from the calculation of the Backtesting capital multiplier, as they did not result from deficiencies in the internal model but due to the extraordinary nature of COVID-19 related market volatility. 150 Deutsche Bank Annual Report 2020 Risk and capital performance Trading market risk exposures Based on the backtesting results, our analysis of the underlying reasons for outliers and enhancements included in our value- at-risk methodology we continue to believe that our value-at-risk model will remain an appropriate measure for our trading market risk under normal market conditions. The following graph shows the trading units daily buy-and-hold income in com- parison to the value-at-risk as of the close of the previous business day for the trading days of the reporting period. The value- at-risk is presented in negative amounts to visually compare the estimated potential loss of our trading positions with the buy and hold income. Figures are shown in millions of euro. The chart shows that our trading units achieved a positive buy and hold income for 60 % of the trading days in 2020 (versus 44 % in 2019), as well as displaying the global outliers experienced in 2019. The capital requirements for the value-at-risk model, for which the backtesting results are shown here, accounts for 3.7 % of the total capital requirement for the Group. EU MR4 – Comparison of VAR estimates with gains/losses 01/20 02/20 03/20 04/20 05/20 06/20 07/20 08/20 09/20 10/20 11/20 12/20 125 100 75 50 25 0 -25 -50 -75 -100 -125 -150 in € m. Buy-and-hold income of Trading Units Actual income of Trading units Value-at-Risk Daily Income of our Trading Units The following histogram shows the distribution of daily income of our trading units. Daily income is defined as total income which consists of new trades, fees & commissions, buy & hold income, reserves, carry and other income. It displays the number of trading days on which we reached each level of trading income shown on the horizontal axis in millions of euro. 151 Deutsche Bank Annual Report 2020 Risk and capital performance Nontrading market risk exposures Distribution of daily income of our trading units in 2020 Days 40 30 20 10 0 ) 0 5 ( w o e B l ) 5 4 ( o t ) 0 5 ( ) 0 4 ( o t ) 5 4 ( ) 5 3 ( o t ) 0 4 ( ) 0 3 ( o t ) 5 3 ( ) 5 2 ( o t ) 0 3 ( ) 0 2 ( o t ) 5 2 ( ) 5 1 ( o t ) 0 2 ( ) 0 1 ( o t ) 5 1 ( ) 5 ( o t ) 0 1 ( . m € n i 0 o t ) 5 ( 5 o t 0 0 1 o t 5 5 1 o t 0 1 0 2 o t 5 1 5 2 o t 0 2 0 3 o t 5 2 5 3 o t 0 3 0 4 o t 5 3 5 4 o t 0 4 0 5 o t 5 4 5 5 o t 0 5 0 6 o t 5 5 5 6 o t 0 6 0 7 o t 5 6 5 7 o t 0 7 0 8 o t 5 7 5 8 o t 0 8 0 9 o t 5 8 5 9 o t 0 9 0 0 1 o t 5 9 0 0 1 r e v o Our trading units achieved a positive revenue for 90 % of the trading days in 2020 compared with 85 % in the full year 2019. Nontrading market risk exposures Economic Capital Usage for Nontrading Market Risk The following table shows the Nontrading Market Risk economic capital usage by risk type: Economic Capital Usage by risk type. in € m. Interest rate risk Credit spread risk Equity and Investment risk Foreign exchange risk Pension risk Guaranteed funds risk Total nontrading market risk portfolios Economic capital usage Dec 31, 2020 4,062 92 1,885 1,682 934 41 8,696 Dec 31, 2019 3,409 56 1,566 1,782 1,259 103 8,175 The economic capital figures do take into account diversification benefits between the different risk types. Economic Capital Usage for Nontrading Market Risk totaled € 8.7 billion as of December 31, 2020, which is € 0.5 billion above our economic capital usage at year-end 2019. – Interest rate risk. Economic capital charge for interest rate risk in the banking book, including gap risk, basis risk and option risk, such as the risk of a change in client behavior embedded in modelled non-maturity deposits or prepayment risk. In total the economic capital usage for December 31, 2020 was € 4,062 million, compared to € 3,409 million for December 31, 2019. The increase in economic capital contribution was mainly driven by increased level of interest rate risk exposure in our strategic liquidity reserve securities portfolio and from additional economic positions taken to further reduce Group’s net interest income sensitivity to a change in interest rates. – Credit spread risk. Economic capital charge for portfolios in the banking book subject to material credit spread risk. Eco- nomic capital usage was € 92 million as of December 31, 2020, versus € 56 million as of December 31, 2019. The increase in economic capital contribution was driven by lower diversification benefits with other risk types. – Equity and Investment risk. Economic capital charge for equity risk from our non-consolidated investment holdings, such as our strategic investments and alternative assets, and from a structural short position in our own share price arising from 152 Deutsche Bank Annual Report 2020 Risk and capital performance Nontrading market risk exposures our equity compensation plans. The economic capital usage was € 1,885 million as of December 31, 2020, compared with € 1,566 million as of December 31, 2019, predominately driven by an increased market value of our equity compensation short position, partially offset by reduced investment risk. – Foreign exchange risk. Foreign exchange risk predominantly arises from our structural position in unhedged capital and retained earnings in non-euro currencies in certain subsidiaries. Our economic capital usage was € 1,682 million as of December 31, 2020, versus € 1,782 million as of December 31, 2019. – Pension risk. This risk arises from our defined benefit obligations, including interest rate risk and inflation risk, credit spread risk, equity risk and longevity risk. The economic capital usage was € 934 million and € 1,259 million as of December 31, 2020 and December 31, 2019 respectively. The economic capital usage declined mainly as a consequence of a reduction in credit spread risk exposure and increased diversification benefit with other risk types. – Guaranteed funds risk. Economic capital usage was € 41 million as of December 31, 2020, versus € 103 million as of December 31, 2019. The decrease in economic capital contribution was largely driven by increased diversification benefit with other risk types. Interest Rate Risk in the Banking Book The following table shows the impact on the Group’s net interest income in the banking book as well as the change of the economic value for the banking book positions from interest rate changes under the six standard scenarios defined by the European Banking Authority (EBA) for current reporting period and under the six standard scenarios defined by the Basel Committee on Banking Supervision (BCBS) for the prior year: Economic value & net interest income interest rate risk in the banking book by EBA scenario (for current reporting period) and by BCBS scenario (for prior year) in € bn. Parallel up Parallel down Steepener Flattener Short rate up Short rate down Maximum in € bn. Tier 1 Capital Delta NII¹ Dec 31, 2020 2.3 (1.1) (0.9) 2.1 2.7 (1.1) (1.1) Delta EVE Dec 31, 2020 (5.2) 0.5 (0.6) (0.6) (1.7) 0.4 (5.2) Dec 31, 2020 51.5 1 Delta Net Interest Income (NII) reflects the difference between projected NII in the respective scenario with shifted rates vs. market implied rates. Sensitivities are based on a static balance sheet at constant exchange rates, excluding trading positions and DWS. Figures do not include Mark to Market (MtM) / Other Comprehensive Income (OCI) effects on centrally managed positions not eligible for hedge accounting. in € bn. Parallel up Parallel down Steepener Flattener Short rate up Short rate down Maximum in € bn. Tier 1 Capital Delta NII¹ Dec 31, 2019 3.0 (0.8) (0.5) 2.7 3.6 (0.8) (0.8) Delta EVE Dec 31, 2019 (4.2) 0.5 (1.2) (0.4) (1.2) 0.4 (4.2) Dec 31, 2019 50.52 1 Delta Net Interest Income (NII) reflects the difference between projected NII in the respective scenario with shifted rates vs. market implied rates. Sensitivities are based on a static balance sheet at constant exchange rates, excluding trading positions and DWS. Figures do not include Mark to Market (MtM) / Other Comprehensive Income (OCI) effects on centrally managed positions not eligible for hedge accounting. 2 Number has been restated due to rounding differences A sudden parallel increase in the yield curve would positively impact the Group’s earnings (net interest income) from the banking book positions. Deutsche Bank estimates that the total one-year net interest income change resulting from parallel yield curve shifts up and down (applying a maturity-dependent post-shock interest rate floor in line with guidance given by the EBA) would be € 2.3 billion and € (1.1) billion, respectively, at December 31, 2020. The maximum Economic Value of Equity (EVE) loss was € (5.2) billion as of December 2020, compared to € (4.2) billion as of December 2019. As per December 2020 the maximum EVE loss represents 10.2 % of Tier 1 Capital. The maximum Economic Value of Equity (EVE) loss due to a +200 basis points parallel shift of the yield curve across all currencies as defined by the BaFin was € (5.1) billion as of December 2020, representing 8.8 % of Total Capital. 153 Deutsche Bank Annual Report 2020 Risk and capital performance Operational risk exposure The increase in maximum EVE loss was mainly driven by increased economic value interest rate risk exposure built-up to stabilize the Group’s net interest income. Our NII risk has been reduced significantly in the reporting period due to the afore- mentioned measures. The reduction in the maximum loss scenario of approximately € 1.5 billion was however overcompen- sated by the application of a maturity-dependent post-shock interest rate floor with an impact of approximately € (1.8) billion. This resulted in larger interest rate shocks applied in downwards interest rate scenarios and as a consequence larger delta NII. The following table shows the variation of the economic value for Deutsche Bank’s banking book positions resulting from downward and upward interest rate shocks by currency: Economic value interest rate risk in the banking book by currency in € bn. EUR USD Other Total Operational risk exposure Operational risk – risk profile Operational risk losses by event type (profit and loss view) in € m. Clients, Products and Business Practices Execution, Delivery and Process Management Natural Disasters and Public Safety Internal Fraud External Fraud Others Group Parallel up (4.0) (0.7) (0.6) (5.2) Dec 31, 2020 Parallel down 0.3 0.2 0.1 0.5 2020 247 49 47 28 16 8 396 2019¹ 313 57 3 27 21 8 429 1 2019 loss figures revised from prior year presentation due to subsequent capture of losses and reclassification. As of December 31, 2020, operational losses decreased by € 33 million or 8 % compared to year-end 2019, despite a large increase in losses relating to the event type “Natural Disasters and Public Safety” as a result of COVID-19 expenses. Excluding the effects of COVID-19, operational losses would have decreased by € 77 million or 18 % compared to 2019. The decrease was driven by the event types “Clients, Products and Business Practices” and “Execution, Delivery and Process Management”, predominantly due to a reduction in legacy losses associated with civil litigation and regulatory enforcement. Operational losses by event type occurred in the period 2020 (2015-2019)1 Distribution of Operational Losses (posting date) Frequency of Operational Losses (first posting date) 4% (-1%) External Fraud 7% (22%) Internal Fraud 12% (0%) Natural Disasters and Public Safety 12% (9%) Execution, Delivery and Process Mgmt 2% (1%) Others 1% (2%) Natural Disasters and Public Safety 8% (10%) Execution, Delivery and Process Mgmt 11% (32%) Clients, Products and Business Practices 1% (2%) Others 62% (69%) Clients, Products and Business Practices 0% (0%) Internal Fraud 79% (56%) External Fraud 1 Percentages in brackets correspond to loss frequency respectively to loss amount for losses occurred in 2015-2019 period. Frequency and amounts can change subse- quently. The above left chart “Distribution of Operational Losses” summarizes the proportion of operational risk loss postings by event type using the P&L value in 2020 compared to the five-year period 2015-2019 in brackets. The event type “Clients, Products and Business Practices” dominates operational losses with a share of 62 % and is comprised mainly of outflows related to 154 Deutsche Bank Annual Report 2020 Risk and capital performance Liquidity risk exposure litigation, investigations and enforcement actions. “Execution, Delivery and Process Management” (12 %) and “Natural Disas- ters and Public Safety (12 %) share the second highest proportion of losses; the latter was primarily driven by expenses relating to COVID-19. Losses from “Internal Fraud” were at 7 %, “External Fraud” at 4 % and “Others” at 2 %. The above right chart “Frequency of Operational Losses” summarizes the proportion of operational risk events by event type based on a count of events where losses were first recognized in 2020, compared to the five-year period 2015-2019 in brack- ets. Frequencies are driven predominantly by the event type “External Fraud” which comprised 79 % of all observed loss events, followed by “Clients, Products and Business Practices” at 11 %. “Execution, Delivery and Process Management” con- tributed to 8 %, and other event types made up the remaining 2 %. Although the event type “Internal Fraud” contributed significantly to the distribution of losses, it has a negligible frequency, comprising less than 1 % of loss events in 2020. While we seek to ensure the comprehensive capture of operational risk loss events with a P&L impact of € 10.000 or greater, the totals shown in this section may be underestimated due to delayed detection and recording of loss events. Liquidity risk exposure Funding Markets and Capital Markets Issuance 2020 was dominated by the COVID-19 pandemic. Unprecedented circumstances and general uncertainties about the global economy’s trajectory added volatility to credit markets. Credit spreads peaked in March 2020 and have declined since then with the support of monetary policy and fiscal stimulus and trade roughly flat at the end of 2020 compared to the beginning of the year. DB’s spreads exhibit a similar behavior, but were able to outperform peers’ credit spreads year on year. Our 5 year Credit Default Swap (referencing preferred debt) contract peaked on March 18, 2020 at 141bp and closed on December 31, 2020 at 57 bp, outperforming peers by 13 bp y-o-y. In the bond markets, our senior non-preferred 2.625 % EUR benchmark maturing in February 2026 closed at 107bp over Euro Mid Swaps at the end of 2020, 43bp tighter than one year before and outper- forming peers by 40 bp. Our revised 2020 issuance plan of € 10-15 billion, comprising debt issuance with an original maturity in excess of one year, was completed and we concluded 2020 having raised € 18.5 billion in term funding, already prefunding part of our 2021 issuance plan. This funding was broadly spread across the following funding sources: AT1 issuance (€ 1.0 billion), Tier 2 issuance (€ 1.7 billion) senior non-preferred plain-vanilla issuance (€ 11.6 billion), senior preferred plain-vanilla issuance (€ 1.0 billion), covered bond issuance (€ 0.5 billion), and other senior preferred structured issuance (€ 2.7 billion). The (€ 18.5 billion) total is divided into Euro (€ 8.8 billion), US dollar (€ 8.3 billion), British Pound (€ 0.7 billion) and other currencies aggregated (€ 0.7 billion). In addition to direct issuance, we use long-term cross currency swaps to manage our non-Euro funding needs. Our investor base for 2020 issuances comprised asset managers and pension funds (58 %), banks (12 %), retail customers (10 %), insurance companies (4 %) and other institutional investors (13 %). The geographical distribution was split between Germany (15 %), rest of Europe (45 %), US (23 %), Asia/Pacific (9 %) and Other (8 %). The average spread of our issuance over 3-months-Euribor/Libor was 210 basis points for the full year. The average tenor was 6.9 years. Our issuance activities were slightly higher in the second half of the year. We issued the following volumes over each quarter: Q1: € 5.6 billion, Q2: € 3.3 billion, Q3: € 4.9 billion and Q4: € 4.7 billion, respectively. In 2021, our issuance plan is € 15-20 billion and comprises capital instruments, senior non-preferred, senior preferred and covered bonds. We also plan to raise a portion of this funding in U.S. dollar and may enter into cross currency swaps to manage any residual requirements. We have total capital markets maturities, excluding legally exercisable calls, of approxi- mately € 22 billion in 2021. Funding Diversification In 2020, total external funding increased by € 6.7 billion from € 879.4 billion at December 31, 2019 to € 886.2 billion at De- cember 31, 2020. The increase was driven by inflows in DB’s most stable deposits in particular the Private Bank, where deposits increased by € 11.6 billion primarily due to lower consumer spending related to COVID-19. In addition, secured fund- ing and shorts increased by € 28.2 billion as DB participated in ECB’s TLTRO III programme. Due to targeted up-pricing measures in the Corporate Bank, deposits decreased by € 7.9 billion. Furthermore, the reliance on unsecured wholesale funding was further reduced by € 7.2 billion. The € 5.6 billion decrease of Capital Markets and Equity outstanding relate to lower long term debt mainly due to maturities exceeding new issuances. Other customer funding decreased by € 12.0 billion. The overall proportion of our most stable funding sources (comprising Capital Markets and Equity, Private Bank and Corporate Bank) excluding TLTRO III has decreased from 83.1 % in 2019 to 82.3 % in 2020. 155 Deutsche Bank Annual Report 2020 Risk and capital performance Liquidity risk exposure Composition of External Funding Sources in € mn. 350 300 250 200 150 100 50 0 301 289 261 253 181 175 129 100 21% 20% Capital Markets and Equity 33% 34% Private Bank 30% 29% Corporate Bank 27 15 3% 2% Other Customers¹ 20 13 2% 1% Unsecured Wholesale 11% 15% Secured Funding and Shorts 1 0 0% 0% Financing Vehicles December 31, 2019: total € 879.4 billion December 31, 2020: total € 886.2 billion 1 Other Customers includes fiduciary deposits, X-markets notes and margin/Prime Brokerage cash balances (shown on a net basis). Reference: Reconciliation to total balance sheet of € 1,325.3 billion (€ 1,297.7 billion): Derivatives & settlement balances € 348.2 billion (€ 335.7 billion), add-back for netting effect for margin/Prime Brokerage cash balances (shown on a net basis) € 63.4 billion (€ 52.4 billion), other non-funding liabilities € 27.4 billion (€ 30.1 billion) for December 31, 2020 and December 31, 2019, respectively. Liabilities held for sale from the transfer of business to BNP Paribas were allocated back to their original line items prior to reclassification, to reflect their economic impact on funding: € 1.9 billion to derivatives & settlement balances (non-funding relevant) and € 7.9 billion to payables from Prime Brokerage, with a net impact of additional € 3.4 billion on other customer funding (funding relevant) and € 4.7 billion add-back effect for netting of margin/Prime Brokerage cash balances (reconciliation item). Maturity of unsecured wholesale funding, ABCP and capital markets issuance1 Not more than 1 month Over 1 month but not more than 3 months Over 3 months but not more than 6 months Over 6 months but not more than 1 year 964 1,063 779 547 Sub-total less than 1 year 3,354 Over 1 year but not more than 2 years Over 2 years 162 78 1,626 693 0 1,326 466 0 407 887 0 986 753 0 4,344 2,800 0 409 0 0 1,162 21 0 Dec 31, 2020 Total 3,594 5,914 2,821 0 3,689 3,970 2,349 8,291 18,298 8,235 34,106 60,639 15 544 70 0 137 7,738 0 416 1,179 0 0 8,420 5 917 786 538 0 6,668 1,698 1,465 1,966 531 0 16,237 1,718 3,343 4,001 1,069 137 39,063 85 2,310 1,337 1,765 0 14,303 1,955 12,021 17,303 11,437 695 78,779 3,759 17,674 22,641 14,271 832 132,145 in € m. Deposits from banks Deposits from other wholesale customers CDs and CP ABCP Senior non-preferred plain vanilla Senior preferred plain vanilla Senior structured Covered bonds/ABS Subordinated liabilities Other Total Of which: Secured Unsecured 22,641 109,505 1 Includes additional Tier 1 notes reported as additional equity components in the financial statements. Liabilities with call features are shown at earliest legally exercisable call 17,303 61,476 1,966 14,271 4,001 35,063 1,337 12,966 70 7,668 1,179 7,241 786 5,882 date. No assumption is made as to whether such calls would be exercised. 2 Secured funding volume reported on a gross basis pre own debt elimination The total volume of unsecured wholesale liabilities, ABCP and capital markets issuance maturing within one year amount to € 39 billion as of December 31, 2020, and should be viewed in the context of our total Liquidity Reserves of € 243 billion. 156 Deutsche Bank Annual Report 2020 Risk and capital performance Liquidity risk exposure Not more than 1 month Over 1 month but not more than 3 months Over 3 months but not more than 6 months Over 6 months but not more than 1 year 1,275 2,179 3,602 339 Sub-total less than 1 year 7,396 Over 1 year but not more than 2 years Over 2 years 92 211 682 260 0 4,466 569 0 754 857 0 1,819 983 0 7,720 2,670 0 605 1 0 1,064 0 0 Dec 31, 2019 Total 7,699 9,389 2,671 0 136 2,503 1,584 7,677 11,899 19,175 33,007 64,081 0 220 173 3 107 2,855 0 692 1,166 722 0 12,297 0 659 244 2,742 0 10,440 5 2,692 2,214 493 0 16,223 5 4,262 3,797 3,959 107 41,816 1,800 2,926 4,068 23 0 28,690 1,039 14,301 13,617 9,622 776 73,637 2,844 21,490 21,482 13,605 883 144,143 173 2,682 1,166 11,131 244 10,197 2,214 14,009 3,797 38,019 4,068 24,622 13,617 60,021 21,482 122,661 in € m. Deposits from banks Deposits from other wholesale customers CDs and CP ABCP Senior non-preferred plain vanilla Senior preferred plain vanilla Senior structured Covered bonds/ABS Subordinated liabilities Other Total Of which: Secured Unsecured The following table shows the currency breakdown of our short-term unsecured wholesale funding, of our ABCP funding and of our capital markets issuance. Unsecured wholesale funding, ABCP and capital markets issuance (currency breakdown) in € m. Deposits from banks Deposits from other whole- sale customers CDs and CP ABCP Senior non-preferred plain vanilla Senior preferred plain vanilla Senior structured Covered bonds/ ABS Subordinated liabilities Other Total Of which: Secured Unsecured in EUR in USD in GBP in other CCYs Total in EUR in USD in GBP Dec 31,2020 Dec 31,2019 in other CCYs Total 963 2,222 149 261 3,594 1,330 5,558 13 798 7,699 4,474 1,082 0 989 715 0 90 365 0 361 658 0 5,914 2,821 0 8,968 884 0 162 678 0 204 196 0 56 913 0 9,389 2,671 0 29,700 25,122 1,833 3,984 60,639 29,365 27,696 1,822 5,198 64,081 1,894 7,725 1,635 7,972 0 14 230 1,963 3,759 17,674 1,064 8,181 1,780 10,856 0 28 0 2,425 2,844 21,490 22,641 0 0 0 22,641 21,482 0 0 0 21,482 4,693 832 74,004 3,577 0 42,232 0 0 2,451 6,001 0 14,271 832 13,458 132,145 3,509 883 75,666 4,213 0 50,943 0 0 2,261 5,884 0 13,605 883 15,274 144,143 22,641 51,363 0 42,232 0 2,451 0 22,641 13,458 109,505 21,482 54,184 0 50,943 0 2,261 0 21,482 15,274 122,661 157 Deutsche Bank Annual Report 2020 Risk and capital performance Liquidity risk exposure Liquidity Reserves Composition of our liquidity reserves by parent company (including branches) and subsidiaries in € m. Available cash and cash equivalents (held primarily at central banks) Parent (incl. foreign branches) Subsidiaries Highly liquid securities (includes government, government guaranteed and agency securities) Parent (incl. foreign branches) Subsidiaries Other unencumbered central bank eligible securities Parent (incl. foreign branches) Subsidiaries Total liquidity reserves Parent (incl. foreign branches) Subsidiaries Carrying Value Liquidity Value Carrying Value Dec 31, 2020 155 130 25 62 42 20 26 21 5 243 192 51 155 130 25 62 41 20 24 19 5 241 191 50 134 91 43 67 45 23 21 17 4 222 153 69 Dec 31, 2019 Liquidity Value 134 91 43 64 42 22 15 13 2 213 146 67 As of December 31, 2020, our liquidity reserves amounted to € 243 billion compared with € 222 billion as of December 31, 2019. The increase of € 21 billion comprised approximately a € 21 billion increase in cash and cash equivalents, offset by a decrease of € 5 billion in highly liquid securities and € 5 billion increase in other unencumbered securities. The development was largely driven by participation in the ECB TLTRO III, ongoing deleveraging efforts in our Equity business and a modest increase in Private Bank deposits. Maturing debt issuances in the Capital Markets, decline in the unsecured wholesale funding and non-operating Corporate Bank deposits were complemented by model enhancements increasing the liquidity reserves. The quarterly average of our liquidity reserves for this year is € 233 billion compared with € 243 billion during 2019. In the table above the carrying value represents the market value of our liquidity reserves while the liquidity value reflects our as- sumption of the value that could be obtained, primarily through secured funding, taking into account the experience observed in secured funding markets at times of stress. Liquidity Coverage Ratio Our weighted average LCR of 142 % (twelve months average) has been calculated in accordance with the Commission Del- egated Regulation (EU) 2015/61 and the EBA Guidelines on LCR disclosure to complement the disclosure of liquidity risk management under Article 435 CRR. The year-end LCR as of December 31, 2020 stands at 144.8 % compared to 141.2 % as of December 31, 2019. LCR components in € bn. (unless stated otherwise) Number of data points used in the calculation of averages High Quality Liquid Assets Total net cash outflows Liquidity Coverage Ratio (LCR) in % Funding Risk Management Structural Funding Dec 31, 2020 Dec 31, 2019 Total adjusted weighted value (average) 12 207 146 142 % Total adjusted weighted value (average) 12 219 154 142 % All funding matrices (the aggregate currency, the USD and the GBP funding matrix) were in line with the respective risk appetite as of year ends 2020 and 2019. Stress Testing and Scenario Analysis At the end of 2020 our stressed Net Liquidity Position stood at €43 billion. The stressed Net Liquidity Position was negative at the end of the first quarter 2020 reflecting weeks of actual stress from COVID-19. The measure is designed to effectively add an additional stress over a further eight week period. The internal stress test proved effective providing an early indicator that the bank had entered an actual stressed period. Including a normalization of conditions in the client business, sNLP quickly improved for the remainder of the year, mainly as a result of increased liquidity, deposit optimization and methodology en- hancements. 158 Deutsche Bank Annual Report 2020 Risk and capital performance Liquidity risk exposure Global All Currency Daily Stress Testing Results Dec 31, 2020 Funding Gap¹ Gap Closure² Net Liquidity Position Funding Gap1,4 in € m. Systemic market risk 1 notch downgrade (DB specific) Severe downgrade (DB specific) Combined3 1 Funding gap caused by impaired rollover of liabilities and other projected outflows. 2 Based on liquidity generation through Liquidity Reserves and other business mitigants. 3 Combined impact of systemic market risk and severe downgrade. 4 December 31, 2019 numbers have been updated to align with updated methodology reflected in the December 31, 2020 numbers 82 17 157 177 107 128 59 43 189 145 216 220 100 83 172 185 Global EUR Daily Stress Testing Results Dec 31, 2020 in € m. Combined³ 1 Funding gap caused by impaired rollover of liabilities and other projected outflows. 2 Based on liquidity generation through Liquidity Reserves and other business mitigants. 3 Combined impact of systemic market risk and severe downgrade. 4 December 31, 2019 numbers have been updated to align with updated methodology reflected in the December 31, 2020 numbers 104 18 86 Funding Gap¹ Gap Closure² Net Liquidity Position Funding Gap1,4 91 Global USD Daily Stress Testing Results Dec 31, 2020 in € m. Combined³ 1 Funding gap caused by impaired rollover of liabilities and other projected outflows. 2 Based on liquidity generation through Liquidity Reserves and other business mitigants. 3 Combined impact of systemic market risk and severe downgrade. 4 December 31, 2019 numbers have been updated to align with updated methodology reflected in the December 31, 2020 numbers 64 60 4 Funding Gap¹ Gap Closure² Net Liquidity Position Funding Gap1,4 71 Global GBP Daily Stress Testing Results Dec 31, 2020 in € m. Combined³ 1 Funding gap caused by impaired rollover of liabilities and other projected outflows. 2 Based on liquidity generation through Liquidity Reserves and other business mitigants. 3 Combined impact of systemic market risk and severe downgrade. 4 December 31, 2019 numbers have been updated to align with updated methodology reflected in the December 31, 2020 numbers Funding Gap¹ Gap Closure² 10 4 6 Net Liquidity Position Funding Gap4 7 Gap Closure2,4 175 173 209 209 Dec 31, 2019 Net Liquidity Position4 75 90 37 24 Gap Closure2,4 99 Dec 31, 2019 Net Liquidity Position4 8 Gap Closure2,4 80 Dec 31, 2019 Net Liquidity Position4 9 Gap Closure4 9 Dec 31, 2019 Net Liquidity Position4 2 The following table presents the amount needed to meet collateral requirements from contractual obligations in the event of a one- or two-notch downgrade by rating agencies for all currencies. Contractual Obligations in € m. Contractual derivatives funding or margin requirements Other contractual funding or margin requirements Asset Encumbrance One-notch downgrade Dec 31, 2020 Two-notch downgrade One-notch downgrade 354 0 439 0 415 0 Dec 31, 2019 Two-notch downgrade 749 0 This section refers to asset encumbrance in the group of institutions consolidated for banking regulatory purposes pursuant to the German Banking Act. Therefore this excludes insurance companies or companies outside the finance sector. Assets pledged by our insurance subsidiaries are included in Note 20 “Assets Pledged and Received as Collateral” of the consolidated financial statements, and restricted assets held to satisfy obligations to insurance companies’ policy holders are included within Note 37 “Information on Subsidiaries” of the consolidated financial statements. Encumbered assets primarily comprise those on- and off-balance sheet assets that are pledged as collateral against secured funding, collateral swaps, and other collateralized obligations. Additionally, in line with EBA technical standards on regulatory asset encumbrance reporting, assets placed with settlement systems, including default funds and initial margins, as well as other assets pledged which cannot be freely withdrawn such as mandatory minimum reserves at central banks, are considered encumbered. We also include derivative margin receivable assets as encumbered under these EBA guidelines. Readily available assets are those on- and off-balance sheet assets that are not otherwise encumbered, and which are in freely transferrable form. Unencumbered financial assets at fair value, other than securities borrowed or purchased under resale agreements and positive market value from derivatives, and available for sale investments are all assumed to be read- ily available. 159 Deutsche Bank Annual Report 2020 Risk and capital performance Liquidity risk exposure The readily available value represents the on- and off-balance sheet carrying amount or fair value rather than any form of stressed liquidity value (see the “Liquidity Reserves” for an analysis of unencumbered liquid assets available under a liquidity stress scenario). Other unencumbered on- and off-balance sheet assets are those assets that have not been pledged as collateral against secured funding or other collateralized obligations, or are otherwise not considered to be readily available. Included in this category are securities borrowed or purchased under resale agreements and positive market value from derivatives. Similarly, for loans and other advances to customers, these would only be viewed as readily available to the extent they are already in a pre-packaged transferrable format, and have not already been used to generate funding. This represents the most conservative view given that an element of such loans currently shown in Other assets could be packaged into a format that would be suitable for use to generate funding. Encumbered and unencumbered assets in € m. (unless stated otherwise) Debt securities Equity instruments Other assets: Cash and due from banks & Interest earning deposits with Banks Securities borrowed or purchased under resale agreements¹ Financial assets at fair value through profit and loss² Trading assets Positive market value from derivative financial instruments Securities borrowed or purchased under resale agreements¹ Other financial assets at fair value through profit or loss Financial assets at fair value through other comprehensive income² Loans Other assets Total Dec 31, 2020 Carrying value Unencumbered assets Assets 156 13 175 9 9 344 63 3 6 459 90 1,326 Encumbered assets Readily available 61 6 13 0 0 0 0 0 0 83 55 218 95 7 162 0 9 0 0 3 5 3 0 282 Other 0 0 0 9 0 344 63 0 2 373 35 825 1 Securities borrowed and securities purchased under resale agreements are all shown as other unencumbered. The use of the underlying collateral is separately captured in the off-balance sheet table below. 2 Excludes Debt securities and Equity instruments (separately disclosed above). in € m. (unless stated otherwise) Collateral received: Debt securities Equity instruments Other collateral received in € m. (unless stated otherwise) Debt securities Equity instruments Other assets: Cash and due from banks & Interest earning deposits with Banks Securities borrowed or purchased under resale agreements¹ Financial assets at fair value through profit and loss² Trading assets Positive market value from derivative financial instruments Securities borrowed or purchased under resale agreements¹ Other financial assets at fair value through profit or loss Financial assets at fair value through other comprehensive income² Loans Other assets Total Dec 31, 2020 Fair value of collateral received Unencumbered assets Assets 237 193 42 2 Encumbered assets Readily available 199 159 40 0 36 34 2 0 Other 2 0 0 2 Dec 31, 2019 Carrying value Unencumbered assets Assets 153 18 147 14 13 333 71 3 6 458 80 1,297 Encumbered assets Readily available 46 8 12 0 0 0 0 0 0 70 48 184 108 10 135 0 13 0 0 3 5 10 0 282 Other 0 0 0 14 0 333 71 0 1 378 32 831 1 Securities borrowed and securities purchased under resale agreements are all shown as other unencumbered. The use of the underlying collateral is separately captured in the off-balance sheet table below. 2 Excludes Debt securities and Equity instruments (separately disclosed above). 160 Deutsche Bank Annual Report 2020 Risk and capital performance Liquidity risk exposure in € m. (unless stated otherwise) Collateral received: Debt securities Equity instruments Other collateral received … Dec 31, 2019 Fair value of collateral received Unencumbered assets Assets 252 215 33 4 Encumbered assets Readily available 200 171 29 0 47 43 4 0 Other 4 0 0 4 Maturity Analysis of Assets and Financial Liabilities Treasury manages the maturity analysis of assets and liabilities. Modeling of assets and liabilities is necessary in cases where the contractual maturity does not adequately reflect the liquidity risk position. The most significant example in this context would be immediately repayable deposits from retail and transaction banking customers which have consistently displayed high stability throughout even the most severe financial crises. The modeling profiles are part of the overall liquidity risk management framework (see section “Liquidity Stress Testing and Scenario Analysis” for short-term liquidity positions ≤ 1 year and section “Structural Funding” for long-term liquidity positions > 1 year) which is defined and approved by the Management Board. The following tables present a maturity analysis of our total assets based on carrying value and upon earliest legally exercis- able maturity as of December 31, 2020 and 2019, respectively. 161 Deutsche Bank Annual Report 2020 Risk and capital performance Liquidity risk exposure Analysis of the earliest contractual maturity of assets On demand (incl. Overnight and one day notice) Over 1 month to no more than 3 months Over 3 months but no more than 6 months Over 6 months but no more than 9 months Over 9 months but no more than 1 year Over 1 year but no more than 2 years Over 2 years but no more than 5 years Up to one month Over 5 years Total Dec 31, 2020 163,953 2,165 32 39 13 6 0 0 0 166,208 7,106 0 1,239 0 470 0 138 0 151 137 14 0 0 0 2,111 1,578 533 0 0 0 1,378 206 1,172 0 0 0 765 508 257 0 0 0 95 0 84 64 20 0 0 0 71 0 237 0 237 0 0 0 0 0 0 0 11 0 9,130 0 2,212 1,529 683 0 0 0 1,593 1,505 88 0 0 0 0 0 0 0 0 0 8,533 5,527 3,005 0 0 0 462,636 39,834 291 104,766 6,189 0 2,971 0 593 0 3,391 2,480 1,898 83 4,063 0 6,366 527,941 309 107,929 in € m. Cash and central bank balances Interbank balances (w/o central banks) Central bank funds sold Securities purchased under resale agreements With banks With customers Securities borrowed With banks With customers Financial assets at fair value through profit or loss Trading assets Fixed-income securities and loans Equities and other variable- income securities Other trading assets 91,353 11,579 1,833 291 0 0 0 2,480 83 0 119 94,326 0 0 0 0 0 0 0 0 0 0 0 0 0 0 190 11,769 1,833 0 Positive market values from derivative financial instru- ments Non-trading financial assets mandatory at fair value through profit or loss 343,455 0 0 0 0 0 0 0 0 343,455 14,415 39,543 6,189 2,971 593 912 1,461 3,980 6,057 76,121 Securities purchased under resale agreements Securities borrowed Fixed-income securities and loans Other non-trading financial assets mandatory at fair value through profit or loss Financial assets designated at fair value through profit or loss Positive market values from derivative financial instruments qualifying for hedge accounting Financial assets at fair value through other comprehensive income 3,649 32,309 5,752 10,532 5,052 721 2,848 0 560 0 97 0 373 4 1,169 0 0 46,057 0 17,009 198 1,188 399 117 6 278 997 2,691 5,678 11,553 36 294 16 6 27 536 88 121 378 1,503 0 0 0 0 0 0 353 83 1 437 0 528 622 350 131 71 215 258 1,129 3,303 5 3,013 3,182 3,059 3,304 1,831 8,436 11,271 21,735 55,834 Securities purchased under resale agreements Securities borrowed Debt securities Loans Other Loans To banks To customers Retail Corporates and other customers Other financial assets Total financial assets Other assets Total assets 0 0 0 5 0 0 0 2,621 561 0 1,543 0 1,167 303 0 0 0 2,684 374 0 13,792 41,904 19,375 15,763 577 13,522 41,210 18,632 15,186 1,817 3,226 2,288 8,222 744 270 693 0 0 0 0 0 0 7,633 803 0 0 0 1,653 179 0 0 0 2,963 341 0 1,543 0 9,252 21,683 49,656 4,635 2,019 0 0 9,482 11,575 28,140 75,957 211,005 426,995 5,514 9,247 11,191 27,882 74,355 210,255 421,480 4,955 16,034 164,343 203,246 1,100 52 0 1,262 1,602 235 384 258 751 7,766 9,929 22,927 58,321 45,912 218,234 11,234 32,988 15,406 13,369 73,415 1,560 96,791 2,207 1,112 721,057 98,560 32,611 24,197 14,133 19,390 42,975 100,008 241,806 1,294,736 13,892 9,749 30,523 9 734,950 100,159 32,612 25,869 14,142 21,373 43,186 101,414 251,555 1,325,259 8,148 430 1,362 6,867 1,983 1,406 1,599 1,672 2,073 211 1 162 Deutsche Bank Annual Report 2020 Risk and capital performance Liquidity risk exposure Analysis of the earliest contractual maturity of assets On demand (incl. Overnight and one day notice) Over 1 month to no more than 3 months Over 3 months but no more than 6 months Over 6 months but no more than 9 months Over 9 months but no more than 1 year Over 1 year but no more than 2 years Over 2 years but no more than 5 years Up to one month Over 5 years Total Dec 31, 2019 130,338 4,152 205 54 20 2,601 222 0 0 137,592 5,639 0 3,338 0 172 0 98 0 135 0 231 0 0 0 0 0 22 0 9,636 0 16 11 5 328 38 290 5,668 5,011 657 100 0 100 2,158 781 1,377 0 0 0 1,142 474 668 0 0 0 163 20 143 0 0 0 445 104 341 0 0 0 881 610 271 0 0 0 3,329 2,709 620 0 0 0 0 13,801 9,720 0 4,081 0 428 0 38 0 390 0 461,076 43,798 0 110,559 8,883 0 1,783 0 226 0 1,371 0 452 0 5,927 0 7,196 530,713 315 110,875 in € m. Cash and central bank balances Interbank balances (w/o central banks) Central bank funds sold Securities purchased under resale agreements With banks With customers Securities borrowed With banks With customers Financial assets at fair value through profit or loss Trading assets Fixed-income securities and loans Equities and other variable- income securities Other trading assets 93,000 17,017 543 0 0 0 0 0 0 0 12 93,012 0 0 0 0 0 0 0 0 0 0 0 0 0 0 303 17,320 543 0 Positive market values from derivative financial instru- ments Non-trading financial assets mandatory at fair value through profit or loss 332,931 0 0 0 0 0 0 0 0 332,931 17,586 43,798 8,883 1,783 226 1,371 452 5,921 6,881 86,901 Securities purchased under resale agreements Securities borrowed Fixed-income securities and loans Other non-trading financial assets mandatory at fair value through profit or loss Financial assets designated at fair value through profit or loss Positive market values from derivative financial instruments qualifying for hedge accounting Financial assets at fair value through other comprehensive income 4,791 38,563 4,355 12,623 6,796 930 743 0 91 0 121 0 156 10 2,105 0 0 53,366 0 17,918 0 493 1,079 865 135 388 285 3,780 5,344 12,369 172 387 78 176 0 862 0 35 1,537 3,247 0 0 0 0 0 0 0 6 0 7 0 121 272 129 38 15 180 578 1,446 2,780 12 3,315 2,395 2,989 1,417 2,055 4,603 15,570 13,148 45,503 Securities purchased under resale agreements Securities borrowed Debt securities Loans Other Loans To banks To customers Retail Corporates and other customers Other financial assets Total financial assets Other assets Total assets 0 0 0 12 0 1,408 0 1,618 289 0 0 0 1,848 546 0 0 0 2,561 428 0 16,410 45,045 20,166 15,716 670 16,325 43,186 19,102 15,046 2,361 1,064 3,419 2,264 1,859 8,699 85 0 0 1,065 352 0 9,554 238 9,316 1,531 0 0 7 0 0 0 0 0 1,851 204 0 1,415 0 4,187 13,016 13,068 39,214 4,874 0 8,778 29,985 80,631 203,556 429,841 6,201 8,310 29,751 79,418 203,186 423,640 4,295 15,325 156,824 195,762 1,044 2,554 0 409 0 80 0 1,213 468 234 370 7,807 7,266 25,456 64,094 46,362 227,878 14,061 34,487 15,683 12,685 62,134 7,697 97,196 2,767 557 675,954 113,345 35,706 22,468 11,801 18,263 38,574 118,314 233,065 1,267,490 10,921 1,632 13,392 30,185 686,875 113,609 38,926 22,571 11,910 18,459 38,921 119,946 246,458 1,297,674 7,785 249 2,252 12,277 1,455 3,220 109 197 103 264 347 163 Deutsche Bank Annual Report 2020 Risk and capital performance Liquidity risk exposure The following tables present a maturity analysis of our total liabilities based on carrying value and upon earliest legally exer- cisable maturity as of December 31, 2020 and 2019 respectively. Analysis of the earliest contractual maturity of liabilities On demand (incl. Over- night and one day notice) Over 1 month to no more than 3 months 375,436 20,323 85,104 47,290 10,005 5,353 34,818 7,969 4,653 340,618 18,959 77,244 39,322 992 3,660 57,516 28,093 151,438 Over 3 months but no more than 6 months Over 6 months but no more than 9 months Up to one month 7,860 1,364 Dec 31, 2020 Over 9 months but no more than 1 year 6,510 1,354 5,156 714 Over 1 year but no more than 2 years 5,362 2,961 2,401 605 Over 2 years but no more than 5 years 8,053 5,853 2,199 490 Over 5 years Total 9,948 568,031 7,901 75,432 2,047 492,599 150 243,656 189,180 15,300 19,728 11,229 0 372,090 0 43,882 0 434 0 0 0 0 0 0 3,661 0 0 0 4,442 0 0 0 1,796 0 0 0 1,709 0 0 0 1,898 248,943 0 372,090 0 43,882 434 0 327,775 0 0 0 0 0 0 0 0 327,775 in € m. Deposits Due to banks Due to customers Retail Corporates and other customers Trading liabilities Trading securities Other trading liabilities Negative market values from derivative financial instruments Financial liabilities designed at fair value through profit or loss 12,658 18,594 9,961 2,101 86 26 347 1,494 1,316 46,582 11,258 18,511 36 84 9,780 164 2,065 34 0 24 1 25 11 317 10 1,450 0 41,636 3,374 1,240 Securities sold under repur- chase agreements Long-term debt Other financial liabilities designated at fair value through profit or loss Investment contract liabilities Negative market values from derivative financial instruments qualifying for hedge accounting Central bank funds purchased Securities sold under repur- chase agreements Due to banks Due to customers Securities loaned Due to banks Due to customers Other short term borrowings Long-term debt Debt securities - senior Debt securities - subordi- nated Other long-term debt - senior Other long-term debt - subordinated Trust Preferred Securities Other financial liabilities Total financial liabilities Other liabilities Total equity Total liabilities and equity Off-balance sheet commitments given Banks Retail Corporates and other customers 1,316 0 47 0 17 0 1 0 62 0 0 526 18 0 34 0 77 0 1,572 526 0 0 108 0 245 0 46 0 11 0 9 0 65 0 254 0 541 0 1,279 0 1,815 1,814 1 1,697 426 1,271 1,385 0 0 14 13 0 0 0 0 282 4,307 4,143 0 0 0 164 0 0 0 0 0 0 647 1 0 1 0 0 0 366 2,325 2,246 79 1,698 427 1,271 3,553 5,579 13,873 25,273 10,595 13,751 47,489 28,297 149,163 7,356 12,462 35,199 20,266 93,391 5,229 0 0 0 0 0 0 400 0 0 0 0 0 0 474 485 409 76 0 0 0 0 1 0 1 0 0 0 0 9 9 0 0 0 0 0 5,093 3,643 14 0 335 10,202 20,180 4 0 3,239 0 1,274 3,948 8,156 7,352 3,386 4,552 48,103 0 0 942 0 0 1,735 316 0 1,321 0 1,784 93,894 86,658 851,738 44,569 102,991 64,753 36,232 18,898 20,410 58,985 41,888 1,240,463 0 0 22,599 0 22,599 0 62,196 62,196 0 0 874,337 44,569 102,991 64,753 36,232 18,898 20,410 58,985 104,084 1,325,259 185 0 1,211 0 269 188 0 528 230 24 524 272 15 0 875 93 0 0 0 0 0 0 0 0 0 0 0 41,744 576 16,654 8,996 11,000 18,109 2,137 1,268 1,356 333 950 802 8,285 21,379 36,149 84,924 33,269 263,854 1,453 2,704 15,437 468 10,262 31,570 225 1,532 1,529 2,008 349 2,401 24,514 6,838 8,783 15,639 6,607 18,318 33,792 82,054 20,303 216,847 164 Deutsche Bank Annual Report 2020 Risk and capital performance Liquidity risk exposure Analysis of the earliest contractual maturity of liabilities On demand (incl. Over- night and one day notice) Over 1 month to no more than 3 months Over 3 months but no more than 6 months Over 6 months but no more than 9 months Over 9 months but no more than 1 year Up to one month 364,007 20,305 92,964 35,712 17,979 15,110 665 43,745 320,262 18,674 84,130 30,374 16,914 14,445 5,854 135,727 4,746 57,398 16,271 1,065 8,895 8,834 1,631 5,338 Dec 31, 2019 Over 1 year but no more than 2 years 7,205 2,153 5,052 579 Over 2 years but no more Over than 5 years Total 5 years 8,675 10,251 572,208 7,972 76,856 5,453 2,279 495,352 3,222 171 230,296 654 184,534 13,929 26,732 14,102 0 353,571 0 36,692 0 373 0 0 0 0 0 0 8,018 0 0 0 8,591 0 0 0 4,473 0 0 0 2,569 0 0 0 2,108 265,056 0 353,571 0 36,692 373 0 316,506 0 0 0 0 0 0 0 0 316,506 in € m. Deposits Due to banks Due to customers Retail Corporates and other customers Trading liabilities Trading securities Other trading liabilities Negative market values from derivative financial instruments Financial liabilities designed at fair value through profit or loss Securities sold under repur- chase agreements Long-term debt Other financial liabilities designated at fair value through profit or loss Investment contract liabilities Negative market values from derivative financial instruments qualifying for hedge accounting Central bank funds purchased Securities sold under repur- chase agreements Due to banks Due to customers Securities loaned Due to banks Due to customers Other short term borrowings Long-term debt Debt securities - senior Debt securities - subordi- nated Other long-term debt - senior Other long-term debt - subordinated Trust Preferred Securities Other financial liabilities Total financial liabilities Other liabilities Total equity Total liabilities and equity Off-balance sheet commitments given Banks Retail Corporates and other customers 9,860 15,487 10,201 5,066 4,802 954 162 983 2,816 50,332 7,617 14,965 10,016 112 160 89 4,796 256 4,555 223 754 137 2 159 16 951 2 42,723 4,761 2,675 2,154 0 362 0 74 0 14 0 25 0 63 544 1 0 16 0 139 0 2,848 544 0 218 140 0 147 0 42 0 105 0 97 0 64 0 491 0 343 0 1,431 218 1,493 1,248 246 258 15 243 1,861 0 0 22 158 960 22 32 750 0 127 210 0 0 0 0 0 0 0 0 0 518 604 1,477 630 14,841 11,320 4,811 3,139 572 0 0 0 0 0 0 229 7,194 6,992 13 0 13 0 0 0 0 205 205 0 0 0 0 529 2,897 2,257 640 259 16 243 5,218 4,104 28,724 37,228 32,433 136,473 3,232 27,178 32,215 23,047 101,187 37 0 37 0 0 0 0 7 0 7 0 0 0 0 0 0 0 15 54 11,687 2,023 4,480 0 198 13 855 0 1,522 1,295 3,529 3,588 6,934 5,695 28,019 3 0 1,088 0 0 1,653 333 0 2,013 0 78,597 867 85,361 809,867 39,129 121,442 54,304 30,564 22,553 37,043 48,908 46,716 1,210,524 0 0 24,990 0 24,990 0 62,160 62,160 0 0 834,857 39,129 121,442 54,304 30,564 22,553 37,043 48,908 108,876 1,297,674 190 0 1,493 7 1,257 280 4 0 254 3 756 253 24 0 875 101 0 0 0 0 0 0 0 0 0 0 0 39,558 594 17,028 7,525 12,808 14,979 1,365 1,145 1,025 364 701 769 8,110 18,609 33,148 90,696 35,238 260,672 2,481 13,791 1,265 9,468 30,025 82 2,147 227 2,158 1,086 1,609 301 21,936 5,731 10,962 13,249 6,763 15,365 31,237 88,322 23,290 216,856 1 The figures for 2019 have been revised 165  Compensation Report 167 Introduction 168 Management Board compensation report 168 Management Board compensation governance 169 Compensation principles 170 Compensation structure 179 181 181 Long-term incentive and sustainability Forfeiture conditions / clawback Limitations in the event of exceptional developments 181 Shareholding guidelines 181 Pension benefits 182 Other benefits upon early termination 182 Management Board compensation for the 2020 financial year 185 Share awards 186 Management Board share ownership, shareholding guidelines Compensation in accordance with the German Corporate Governance Code (GCGC) Compensation in accordance with the German Accounting Standard No. 17 (GAS 17) Outlook: Further development of the compensation system from 2021 onwards 188 195 197 199 Employee compensation report 200 Regulatory environment 201 Compensation governance 202 Compensation strategy 203 Group compensation framework 204 Determination of performance-based variable compensation 205 Variable compensation structure Ex-post risk adjustment of 206 variable compensation Employee groups with specific compensation structures 208 Compensation decision for 2020 209 207 Material risk taker compensation disclosure 211 212 Compensation system for Supervisory Board members Supervisory Board compensation for the 2020 financial year Deutsche Bank Annual Report 2020 Introduction Supervisory Board report and disclosure Introduction The 2020 Compensation report provides detailed compensation information with regard to the overall Deutsche Bank Group. The Compensation report comprises the following three sections: Management Board compensation report The first section is the Compensation Report for the Management Board, which consists of three parts. The first part of the Report sets out the structure and design of the compensation system for the members of the Management Board of Deutsche Bank AG. The second part comprises the report on the actual compensation on the compensation and other benefits granted by the Supervisory Board to the members of the Management Board of Deutsche Bank AG. In the third part, which was added this year, we inform you about the most important changes in the compensation system that will apply from the financial year 2021. The new compensation system will be presented to the shareholders for their approval at the 2021 Annual General Meeting. We also refer here to the Letter of the Supervisory Board on pages … to …. Employee compensation report The second section of the Compensation Report discloses information with regard to the compensation system and structure that applies to the employees in Deutsche Bank Group (including DWS Group). The report provides details on the Group Compensation Framework and outlines the decisions on Variable Compensation for 2020. Furthermore, this part contains quantitative disclosures specific to employees identified as Material Risk Takers (MRTs) in accordance with the Remuneration Ordinance for Institutions (Institutsvergütungsverordnung – InstVV). Supervisory Board report and disclosure The third section of the Compensation Report provides information on the structure and level of compensation for Supervisory Board members of Deutsche Bank AG. The Compensation Report complies with the requirements of Section 314 (1) No. 6 of the German Commercial Code (Han- delsgesetzbuch, “HGB”), the German Accounting Standard No. 17 (“DRS 17”) “Reporting on Executive Body Remuneration”, CRR, InstVV, and the recommendations of the German Corporate Governance Code. 167 Deutsche Bank Annual Report 2020 Management Board compensation report Management Board compensation governance Management Board compensation report Management Board compensation governance The Supervisory Board as a whole is responsible for the structuring and design of the system for the compensation of the mem- bers of the Management Board as well as for determining their individual compensation. The Supervisory Board is supported by the Compensation Control Committee. The Compensation Control Committee controls and supports the appropriate structuring of the compensation policy and prepares the resolutions of the Supervisory Board regarding the individual compensation of the Management Board members. In addition, the Compensation Control Committee and/or the Supervisory Board will obtain advice from external consultants where this is considered necessary. The number of members of the Compensation Control Committee was increased from four to six with effect from July 1, 2020. In accordance with regulatory requirements, at least one member must have sufficient expertise and professional experience in the area of risk management and risk controlling and at least one member must be an employee representative. The Supervisory Board regularly reviews the compensation system for the members of the Management Board. In the past, the Supervisory Board had made use of the possibility provided in § 120 (4) of the German Stock Corporation Act (Aktiengesetz – AktG) for the General Meeting to approve the compensation system for Management Board members. The current system was approved by the Annual General Meeting in 2017. In 2020, the Supervisory Board reviewed the compensation structures in accordance with the legal framework changed by the law implementing the Second Shareholders' Rights Directive. It will have the 2021 Annual General Meeting resolve on the amended compensation system, now in accordance with § 120a AktG. An overview of the main changes can be found at the end of the Management Board compensation report. As part of the invitation to the Annual General Meeting, the amended compensation system will be presented in a holistic and transparent manner with all necessary detail. 168 Deutsche Bank Annual Report 2020 Management Board compensation report Compensation principles Compensation system Compensation principles The compensation system and thus the determination of individual compensation are based on the six compensation princi- ples outlined below. The compensation system was developed from these principles, and they provide guidance if questions of interpretation arise. Therefore, they are always taken into consideration by the Supervisory Board when passing a resolution on the compensation system and the assessment of individual compensation. Governance The structuring of the compensation system and determination of individual compensation takes place within the framework of the statutory and regulatory requirements. The Supervisory Board’s objective is to offer, within the boundaries of applicable regulatory requirements, a compensation package that is in line with customary market practices and therefore competitive with comparable roles. Group Strategy Through the structure of the compensation system, the members of the Management Board are to be motivated to achieve the objectives set out in the Bank’s strategies, to work continuously towards the positive development of the Group and thereby to avoid undue risks. Collective and Individual Performance of the Man- agement Board Members The variable, performance-related compensation is determined on the basis of the level of achievement of previously agreed objectives. For this purpose, collective and Deutsche Bank Group-related objectives applying equally to all Management Board members are set. In addition, the Supervisory Board sets individual objectives for each member of the Management Board sep- arately, which particularly take into account the development of the business, infrastructure or regional areas of responsibility as the case may be. In a balanced way, such objectives may be financial or non-financial. Regulatory or other compensation caps Sustainability Pursuant to CRD 4, the ratio of fixed to variable compensation is generally limited to 1:1 (cap regulation), i.e. the amount of variable compensation must not exceed that of fixed compensation. However, under CRD 4 EU member states are authorized to stipulate that shareholders may re- solve to relax the requirement by setting the ratio of fixed to variable compensation at 1:2. Ger- many has made use of this authorization. In line therewith, in May 2014, the General Meeting approved the aforementioned setting at 1:2 with a majority of 91 %. The compensation system resolved by the Supervisory Board also provides fixed caps for the different variable compensation components. In addition, the Supervisory Board is entitled to set an additional cap for the total compensation of the individual members of the Management Board. In the 2020 financial year, the additional cap was set at € 9.85 million. The total variable compensation for Management Board members is only to be granted on a de- ferred basis. The Long-Term Award, and therefore about 60 % of the deferred variable compen- sation, is to be granted in the form of equity-based compensation components, which only vest no less than five years after the grant in one tranche (cliff vesting) and are subject to an additional retention period of one year. The remaining portion is generally to be granted as non-equity-based compensation component and to vest in equal tranches over a period of seven years. During the deferral and retention period, deferred compensation is subject to specific performance- and for- feiture provisions. The total variable compensation may be reclaimed by the bank for up to two years after the expiry of the last deferral period in response to specific individual negative contributions to results made by the Management Board member (clawback). Alignment of interests of Management Board members and sharehold- ers When designing the specific structure of the compensation system, determining individual com- pensation amounts, and structuring compensation delivery and allocation, the focus is on ensuring a close link between the interests of both the Management Board members and shareholders. When defining the variable compensation, this is achieved through the utilization of clearly defined key financial figures which are directly linked to the performance of Deutsche Bank. Based on these principles, the Supervisory Board decides on the structure, amount and weighting of the individual compen- sation components. In order to ensure the appropriateness of the compensation, it takes into account the compensation both in a horizontal comparison with competitors and in a vertical comparison with the workforce. 169 Deutsche Bank Annual Report 2020 Management Board compensation report Compensation structure The compensation system and the compensation structures they encompass are reflected in the individual Management Board members’ contracts. Compensation structure Structure and compensation elements of the compensation policies The compensation system applicable since January 2017 consist of non-performance-related (fixed) and performance-related (variable) components. Non-Performance-Related Components (Fixed Compensation) The fixed compensation is not linked to performance and consists of the base salary, any allowances granted, contributions to the company pension plan and “fringe benefits”. The annual base salary amounts to € 3.4 million for the Chairman of the Management Board. The President receives an annual base salary of € 3 million. With effect from August 1, 2020, the Supervisory Board has approved an annual base salary for the Chief Financial Officer and the Chief Risk Officer of € 2.6 million. The annual base salary of the other ordinary Man- agement Board members is € 2.4 million. As the business divisions CB and IB are currently not represented on the Manage- ment Board separately, the base salary for a Management Board member that would be solely responsible for CB or IB, has not yet been determined. Various factors were considered when determining the appropriate level of the base salary. First, the base salary rewards general assumption of the office of Management Board member and the related overall responsibility of the individual Man- agement Board members. In addition, the compensation paid in the market to executives holding comparable positions is taken into account when determining the amount of the base salary. However, a market comparison must take into consider- ation that the regulatory requirements pursuant to the German Remuneration Ordinance for Institutions (Institutsvergütung- sverordnung – InstVV) in conjunction with Section 25a (5) of the German Banking Act (Kreditwesengesetz) set a cap for variable compensation at 200 % of the fixed compensation. Accordingly, the fixed compensation must be determined in a way that ensures competitive total compensation in line with market standards while taking into account the aforementioned re- quirements. The cap required for regulatory reasons was implemented in 2014. In 2017, the Supervisory Board introduced an optional functional allowance which may be awarded to Management Board members who are assigned additional tasks and a particular responsibility extending beyond the assigned regular area of responsibility within the Management Board. Since August 2019, none of the Management Board members has received an optional functional allowance. In addition, the Management Board members receive contributions to the company pension plan, or alternatively, if certain conditions are met, a so-called pension allowance. They are qualified as fixed compensation according to regulatory provisions and are therefore to be taken into account when determining the ratio of fixed to variable compensation components. The 170 Deutsche Bank Annual Report 2020 Management Board compensation report Compensation structure annual contribution to the company pension plan or the pension allowance for all Management Board members, including the Chairman, was consistently € 650,000. Additional non-performance-related components include “fringe benefits”. The “fringe benefits” comprise the monetary value of non-cash benefits such as company cars and driver services, insurance premiums, expenses for company-related social functions and security measures including payments, if applicable, of taxes on these benefits as well as taxable reimburse- ments of expenses. Performance-Related Components (Variable Compensation) The current compensation system provides that compensation must be linked to pre-defined transparent performance cri- teria. The system allows for the agreement of individual and divisional objectives alongside collective objectives and makes it possible to achieve competitive pay levels in line with market standards on the basis of the respective member’s area of responsibility and, at the same time, also meets in this respect the regulatory requirements. The entire variable compensation is performance related (“pay for performance”). It consists of a short-term component, the so-called Short-Term Award and a long-term component, the so-called Long-Term Award. Since 2017, the InstVV generally stipulates a three-year assessment period for the determination of the variable compen- sation for Management Board members. The bank complies with of this requirement by assessing each of the three objectives of the long-term component over a three-year period. If the relevant three years cannot be attributed to a member of the Management Board due to for example that member joining the bank only recently, the objective achievement level will be determined for the period that can be attributed to the Management Board member. If the assessment period is shorter than three years, the deferral period of the variable compensation to be granted is extended by the number of years missing with respect to the assessment period. Objectives Objectives are established by the Supervisory Board as part of an objective setting agreement at the beginning of the respective financial year for purposes of performance evaluation. For all objectives, financial metrics are set to measure the achievement level of the objectives in a transparent way. The discretionary decision is limited to 3 to 6 % with respect to the total variable compensation. 171 Deutsche Bank Annual Report 2020 Management Board compensation report Compensation structure The allocation of the objectives to the individual compensation components is set out below. 172 Deutsche Bank Annual Report 2020 Management Board compensation report Compensation structure Short-Term Award (STA) The STA is linked to the achievement of short term and medium-term objectives. Objectives include collective objectives to be achieved by the Management Board as a whole and individual objectives the level of achievement of which is determined separately for each member of the Management Board. In order to distinguish collective objectives from individual objectives, the STA is divided into two components: – the Group Component and – the Individual Component. Group Component Objectives to be achieved jointly by the Management Board are the basis for the assessment of the group component as part of the STA. The key objective of the Group component is to link the variable compensation to the performance of the Bank. In 2016, the Management Board decided to align part of the variable compensation for non-tariff employees of the Bank more closely with Group performance. This seeks to reward the contribution of all employees to the financial results of the Bank and the achievements in the implementation of its strategy. Management Board compensation is also closely linked to the performance of the Bank using selected key financial figures. The Supervisory Board decided to align the compensation policy for the Management Board members more closely with the compensation policies for employees. This is achieved by using the annual performance metrics underlying the Group component in the compensation system for employees as the reference value for the Group component of the STA since 2017. In accordance with the bank’s strategy, four performance metrics constituting important indicators for the capital, risk, cost and return profile of the Bank form the reference value for the Group Component of the STA: Common Equity Tier 1 (CET1) capital ratio (fully loaded) The Common Equity Tier-1 Ratio of the Bank in relation to risk-weighted assets. Leverage ratio The Bank´s Tier 1 capital as a percentage of its total leverage exposure pursuant to CRR/CRD 4. Adjusted costs Total noninterest expenses, excluding restructuring, severance and litigation cost as well as im- pairment of goodwill and other intangible assets. Post-tax return on tangible equity (RoTE) Net income (or loss) attributable to Deutsche Bank shareholders as a percentage of average tan- gible shareholders’ equity. The latter is the shareholders’ equity on the bank´s balance sheet, excluding goodwill and other intangible assets. The Supervisory Board regularly reviews the selection of the performance metrics. The above four objectives are equally weighted at up to 25 % in the determination of the Group Component of the STA, depending on the achievement level. If, overall, the performance metric-based objectives are not achieved during the period being evaluated, the Supervisory Board may determine that a Group component will not be granted. Individual Component The individual component of the STA rewards the achievement of short- and medium-term individual and divisional objec- tives. These objectives are established by the Supervisory Board as part of the objective setting agreement for the respective financial year’s performance evaluation. The key objectives are designed to contribute to the applicable business policy and strategic objectives of the Bank, in line with each Management Board member’s area of responsibility. In a balanced way, financial and non-financial successes are taken into account. Objectives for the individual component may for example include revenue developments in the course of the year, project-related targets, diversity objectives or other developments in em- ployee or client satisfaction. As part of the annual objective setting agreement, corresponding key financial figures and/or measurement criteria are set for all objectives that are used to determine the objective achievement level. At least three objectives per financial year are set for each Management Board member. Since 2018, a 30% share of the individual component has been measured on the basis of Balanced Scorecards in which qualitative and quantitative indicators are bundled. Balanced scorecards make it possible to translate strategic objectives into concrete actions. The Bank has thus introduced an appropriate tool for the steering and control of key performance indicators, which will measure the achievement level of targets against defined measurement parameters and measure them transpar- ently at the end of the year. 173 Deutsche Bank Annual Report 2020 Management Board compensation report Compensation structure Balanced scorecard The Balanced Scorecards are based on financial indicators and non-financial targets in the areas of financial performance, capital & risk, culture, control & conduct, franchise, digitization and innovation. At the beginning of the year, they will be weighted, performance indicators or parameters will be set and, finally, the translation of the degree of achievement into the percentage of achievement will be made transparent. At the same time, they provide an overview of the priorities of the individual divisions across the entire Group. At the end of the performance period, the achievement of each KPI is measured on the basis of predefined targets. The target achievement is represented by the colors green, amber and red in the Balanced Scorecards, which leads to a performance band in the overall view. The performance range is limited by predefined lower and upper limits. The weighting of the different KPI categories relative to each other as well as the relevant KPIs are determined individually by the Supervisory Board at the beginning of the year for each member of the Management Board. A maximum of 200 % of the target can be reached. The sum of all individual and divisional objectives determine 90 % of the individual component of the STA. The Supervisory Board decides on the remaining portion of 10 % of the individual component to reward outstanding contributions over the course of the financial year making use of its discretionary authority. If, overall, the objectives are not achieved during the period being evaluated, the Supervisory Board may determine that an individual component will not be granted. Minimum, Target and Maximum Values The sum of Group-wide and individually agreed objectives amounts to a maximum of 40 % of the total variable compensation, depending on the achievement level of the aforementioned objectives. If, overall, the objectives are not achieved during the period being evaluated, the Supervisory Board may determine that an STA will not be granted. in € Chairman Group component Individual component STA total¹ Ordinary Board member Group component Individual component (from - up to) STA total (from - up to) 1 STA: Short-Term Award. Minimum Target 0 0 0 500,000 1,400,000 1,900,000 2020 Maximum 1,000,000 2,800,000 3,800,000 500,000 800,000 1,000,000 0 0 1,600,000 0 up to 1,100,000 up to 2,200,000 0 2,600,000 0 up to 1,600,000 up to 3,200,000 1,300,000 174 Deutsche Bank Annual Report 2020 Management Board compensation report Compensation structure Long-Term Award (LTA) When determining the variable compensation, a clear focus is placed on the achievement of long-term objectives. Therefore, the target figure of the LTA constitutes a portion of no less than 60 % of the total variable target compensation. As with the short-term component, the Supervisory Board determines the collective long-term objectives for the Management Board mem- bers. The achievement level is determined on the basis of the definition of clear performance metrics and/or factors which are to be agreed for these objectives at the beginning of a financial year. The Supervisory Board determined a total of three objectives for each Management Board member. Each shall be measured over a period of three years and shall be included in the valuation of the LTA with a weighting of 60 % for the most recent financial year ended, 30 % for the precending year and 10% for the year before the precending year. In the case of members of the Management Board appointed for the first time within the last three years, who have joined the bank or have not yet completed a corresponding period of time in which they were entrusted with tasks and risks comparable to those of a Man- agement Board member, the retention period of the LTA shall be extended in accordance with regulatory requirements by the reduction period as compensation for the reduced assessment period. For 2020, the Supervisory Board determined the following three objectives for each Management Board member. The relative performance of the Deutsche Bank share in comparison to selected peer institutions is an objective within the framework of the LTA. This objective is intended to promote the sustainable performance of the Deutsche Bank share. The long-term nature of this objective is supported by the determination of the Relative Total Shareholder Return (RTSR) on the basis of a three-year assessment. The RTSR of Deutsche Bank is derived from the Total Shareholder Return of Deutsche Bank in relation to the average total shareholder returns of a selected peer group (calculated in Euros). If the weighted average of the relative total shareholder return of Deutsche Bank is greater than 100 % over a period of three years, then the value of the RTSR portion increases proportionately to an upper limit of 150 % of the target figure, i.e., the value increases by 1 % for each percentage point above 100 %. If the three-year average of the relative total shareholder return is lower than 100 %, the value declines disproportionately. If the relative total shareholder return is calculated to be in the range of less than 100 % to 80 %, the value of the Award portion is reduced for each lower percentage point by 2 percentage points. In the range between 80 % and 60 %, the value of the Award portion is reduced for each lower percentage point by 3 percentage points. If the three- year average of the RTSR does not exceed 60 %, the value of the Award portion is set to zero. 175 Deutsche Bank Annual Report 2020 Management Board compensation report Compensation structure Increase of RTSR and level of achievement The peer group used for the calculation of the relative total shareholder return is selected based on the criteria of generally comparable business activities, comparable size and international presence. The Supervisory Board reviews the composition of the peer group regularly. 176 Deutsche Bank Annual Report 2020 Management Board compensation report Compensation structure In 2020, the peer group for the RTSR comprised the following banks: The Supervisory Board sets an objective designed to promote the growing and strengthening of the Bank, based on the notion of actual Organic Capital Growth. Organic Capital Growth is defined as the balance of the following changes (which are also reported in the Consolidated Statement of Changes in Equity) occurring during the financial year, divided by the Deutsche Bank Shareholders Equity attributable as at December 31 of the previous financial year. – Total comprehensive income, net of tax – Coupons on additional equity components, net of tax – Remeasurement gains (losses) related to defined benefit plans, net of tax – Option premiums and other effects from options on common shares – Net gains (losses) on treasury shares sold Consequently, "non-organic" changes in equity, in particular payment of a dividend or capital increase, are of no relevance to the achievement of the objective. From an average organic capital growth of 2.5 %, the value of the Award share increases on a straight line basis by 1 % for each 0.05 % growth up to the 150 % cap, which is the case with an organic capital growth of 10% or more. If the three-year average remains below 2.5 %, the Award share value is zero. Development of organic capital growth and level of achievement 177 Deutsche Bank Annual Report 2020 Management Board compensation report Compensation structure The third objective is the “Culture & Client” factor. In this context, the Supervisory Board sets an objective which is linked to corporate culture, client satisfaction and dealing with clients. This objective is linked to the sustainable development of the intrabank environment or designed to foster the development of client relations for the 2020 financial year. One objective set by the Supervisory Board for all Management Board members is – this year again – the evaluation of the control environment within the Deutsche Bank Group and divided this into four equally weighted sub-targets. At the end of the financial year, the achievement of the sub-targets will be assessed as under average, average, good or excellent and the assessment will be translated into a level of achievement of 0-150%. “Culture & Client” Factor and level of achievement The Long-Term Award can be a maximum of 150% of the respective target figures. 178 Deutsche Bank Annual Report 2020 Management Board compensation report Compensation structure Maximum Compensation Total Compensation/Target and Maximum Values in € Chairman Target Maximum Ordinary Board member (CIB)3 Target Maximum Ordinary Board member (PB)4 Target Maximum Ordinary Board member (CFO & CRO)5 Base salary Group component STA1 Individual component 2020 2019 LTA2 Total compensation Total compensation 3,400,000 3,400,000 500,000 1,000,000 1,400,000 2,800,000 3,400,000 5,100,000 8,700,000 12,300,000 8,700,000 12,300,000 0 0 0 0 0 0 0 0 0 0 7,700,000 11,000,000 2,400,000 2,400,000 500,000 1,000,000 1,100,000 2,200,000 2,800,000 4,200,000 6,800,000 9,800,000 6,800,000 9,800,000 Target Maximum 2,600,000 2,600,000 500,000 1,000,000 800,000 1,600,000 2,800,000 4,200,000 6,700,000 9,400,000 6,500,000 9,200,000 Ordinary Board member (Infrastructure/Re- gion) Target Maximum 2,400,000 2,400,000 500,000 1,000,000 800,000 1,600,000 2,800,000 4,200,000 6,500,000 9,200,000 6,500,000 9,200,000 1 STA: Short-Term Award. 2 LTA: Long-Term Award. 3 Annual amounts until July 31, 2019. As of August 2019, the CEO has been responsible for the CB and the IB division, into which CIB was split. 4 As of August 2019, the President has been responsible for the PB division. His Fixed Pay was 3,000,000 €. 5 Annual amounts from August 1, 2020 onwards. For the period from January 1 to July 31, 2020, the remuneration was the same as for ordinary Board Members (Infrastruc- ture/Region). The total compensation of a Management Board member is subject to additional caps. Due to regulatory requirements, the variable compensation is capped at 200 % of the fixed compensation. In addition, the Supervisory Board has in recent years set a cap for the overall total compensation, which will become mandatory in the future due to the German Law implementing the Shareholders’ Rights Directive. For the 2020 financial year, the Supervisory Board has again capped compensation at a maximum of € 9.85 million, so that even where the objective achievement level would result in higher compensation, compen- sation is capped at a maximum of € 9.85 million. This cap is understood to be exclusive of any other benefits and annual service costs related to the pension scheme. Long-term incentive and sustainability According to the requirements of the InstVV at least 60 % of the total variable compensation must be granted on a deferred basis. Not less than half of this deferred portion must comprise equity-based compensation components, while the remaining portion is granted as deferred cash compensation. Both compensation components must be deferred over a multi-year period which, for the equity-based compensation components, must be followed by a retention period. During the period until payment or delivery, the compensation portions awarded on a deferred basis may be forfeited. At least half of the maximum of 40 % of the variable compensation granted on a non-deferred basis must consist of equity-based compensation components and only the remaining portion may be paid out directly in cash. Of the total Variable Compensation, no more than a maximum of 20 % may be paid out in cash immediately, while at least 80 % are paid or delivered at a later date. Since 2014, the total variable compensation for Management Board members is only granted on a deferred basis. In order to bind the Management Board members even closer to the performance of the Bank and the Deutsche Bank share price, the Supervisory Board decided that as of the 2019 financial year, the long-term component (LTA) will only be granted in the form of Restricted Equity Awards. The short-term component (STA) is generally granted in the form of a cash compen- sation (Restricted Incentive Awards). However, should the STA amount to more than 50 % of the total variable compensation, the amount exceeding 50 % will also be granted in the form of Restricted Equity Awards. This is designed to ensure that at 179 Deutsche Bank Annual Report 2020 Management Board compensation report Compensation structure least 50 % of total variable compensation are granted in the form of equity-based compensation in accordance with regulatory requirements. The InstVV requires in principle, that the combined (i) target assessment period and (ii) vesting period are at least eight years. With respect to the vesting schedule, the InstVV allows both, vesting in one tranche (“cliff vesting”) or in consecutive instal- ments (“tranche vesting”). The LTA is based on a three year assessment period, the Restricted Equity Awards granted for the LTA vest after five years in one tranche. The assessment period for the STA is only one year. Therefore, the Restricted Incentive Awards granted for the STA vest in seven equal tranches over a period of seven years. Any additional Restricted Equity Awards granted for the STA vest also after seven years, but in one tranche. All Restricted Equity Awards have an additional retention period of one year which follows the vesting period. Accordingly, Management Board members are first permitted to dispose of the equities after six or eight years respectively. During the deferral and retention period, the value of the Restricted Equity Awards is linked to the Bank’s share price and is therefore tied to the sustained performance of the Bank. Specific forfeiture provisions apply for Restricted Incentive Awards and Restricted Equity Awards during the deferral and retention period. Instead of receiving Restricted Equity Awards and Restricted Incentive Awards as described above, specified function holders of certain Deutsche Bank U.S. entities are required by applicable regulation to be compensated under different plans. Re- stricted compensation for this employee group consists of restricted share awards and restricted cash awards. The employee will be the beneficial owner of the awards from the Award Date and the awards will be held on the employee’s behalf. These awards will be restricted for a period of time (subject to the applicable plan rules and award statements, including performance conditions and forfeiture provisions). The restriction period is aligned with retention periods of the Bank´s usual deferred awards. With regard to the Management Board of Deutsche Bank AG, these rules apply to Christiana Riley as she is identified as such function holder under the described regime. The following chart shows the time period for the payment or the delivery of the variable compensation components in the seven consecutive years following the grant year as well as the period of a possible clawback. 180 Deutsche Bank Annual Report 2020 Management Board compensation report Compensation structure Forfeiture conditions / clawback In order to create long-term incentives, the Restricted Equity Awards and the Restricted Incentive Awards compensation components are deferred or spread out over several years. To this end, the Supervisory Board regularly reviews the results achieved in the past for their sustainability (back-testing). If the outcome is that the results rewarded by the granting of the variable compensation were not sustainable, the awards may be partially or fully forfeited. Also, if the Group result is negative, the awards may be fully or partially forfeited. In addition, the awards may be fully or partially forfeited if specific solvency or liquidity conditions were not met. Furthermore, awards may be forfeited in whole or in part in the event of individual misconduct (including breaches of regula- tions), dismissal for cause or negative individual contributions (malus). The contracts of the members of the Management Board contain "clawback provisions" and thus meet the requirements of InstVV. Going beyond the forfeiture conditions, this clause allows the Supervisory Board to reclaim already paid or delivered compensation components in response to specific individual negative contributions made by the Management Board member for up to two years after the expiry of the last deferral period. Limitations in the event of exceptional developments In the event of exceptional developments, the total compensation for each Management Board member is limited to a certain maximum amount. In addition, the Supervisory Board and the members of the Management Board agreed on a possible limitation of the variable compensation which is included in the service contracts of the Management Board members and according to which the variable compensation may be limited to amounts below the provided maximum amounts or may not be granted altogether. Furthermore, statutory regulations provide that the Supervisory Board may reduce the compensation of the Management Board members to an appropriate level, if the situation of the company deteriorates in such a way following the determination of the compensation that the continued granting of the compensation would be inappropriate for the com- pany. A payment of variable compensation elements will also not take place if the payment of variable compensation compo- nents is prohibited or restricted by the competent regulator in accordance with existing statutory requirements. Shareholding guidelines All members of the Management Board are required to hold a specified value of Deutsche Bank shares. This requirement fosters the identification of the Management Board members with Deutsche Bank and its shareholders and aims to ensure a sustainable link to the performance of the Bank. For the Chairman, the number of shares to be held amounts to two times the annual base salary, i.e., the equivalent of € 6,800,000. For other Management Board members, the number of shares to be held is one time the annual base salary, i.e., the equivalent of € 2,400,000 or € 2,600,000, respectively. The share retention obligations must first be fulfilled on the date on which the Management Board member was granted an overall equity based variable compensation corresponding to 1 ⅓ times the retention obligations since his or her appointment to the Management Board. Deferred equity-based compensation may be taken into account at 75 % of its value towards fulfillment of the obligation. Observance of the requirement is reviewed semi-annually as of June 30 and December 31. If the required number of shares is not met, the Management Board members have to make up for any deficits by the next review. Even if a member leaves the Management Board, the deferred compensation components, which have been spread out over several years, ensure that these members are linked to the performance of Deutsche Bank’s share over a long period of time. Pension benefits The Supervisory Board allocates an entitlement to pension plan benefits to the Management Board members. These entitle- ments involve a pension plan with predefined contributions. Under this pension plan, a personal pension account is set up for each participating member of the Management Board after appointment to the Management Board. Management Board members receive a contribution in the form of a contractually agreed fixed annual amount in Euro. The contribution accrues interest credited in advance, determined by means of an age-related factor, at an average rate of 4 % per year up to the age of 60. From the age of 61 onwards, an additional contribution in the amount of 4 % per year of the amount reached on December 31 of the previous year will be credited to the pension account. The Supervisory Board resolved 181 Deutsche Bank Annual Report 2020 Management Board compensation report Management Board compensation for the 2020 financial year that the interest for new Management Board members with employment contracts negotiated after January 1, 2020 will be reduced to 2 % p.a. The annual contributions, taken together, form the pension amount available to pay the future pension benefit in case of a pension event (age limit, disability or death). The pension right is vested from the start. If a member of the Management Board is subject to the income tax regulations of various countries, whereby the pension component granted is already subject to partial or full taxation at the time it is granted, he or she may choose to receive an annual pension allowance. This option can be exercised once and is valid in principle for the entire Management Board period. The pension allowance is equal to the amount of the annual pension contributions usually foreseen for the member of the Management Board, i.e. currently 650,000 €. Other benefits upon early termination The Management Board members are in principle entitled to receive a severance payment upon early termination of their appointment at the Bank’s initiative, provided the Bank is not entitled to revoke the appointment or give notice under the contractual agreement for cause. The circumstances of the early termination of the appointment and the length of service on the Management Board are to be taken into account when determining the amount of the severance payment. The severance payment, as a rule, is two annual compensation amounts and is limited to the claims to compensation for the remaining term of the contract. The calculation of the severance payment is based on the annual compensation for the previous financial year and on the expected annual compensation for the current financial year, if applicable. The severance payment is determined and granted in accordance with the statutory and regulatory requirements, in particular with the provisions of the InstVV. If a Management Board member leaves office in connection with a change of control, he/she is also, under certain conditions, entitled in principle to a severance payment. The exact amount of the severance payment is determined by the Supervisory Board within its sole discretion. According to the German Corporate Governance Codex, the severance payment will not exceed three annual compensation amounts and is limited to the claims to compensation for the remaining term of the contract. The calculation of the compensation is again based on the annual compensation for the previous financial year. Management Board compensation for the 2020 financial year Fixed compensation In the 2020 financial year, the annual base salary was € 3,400,000 for the CEO. and € 3,000,000 for the President. The annual base salaries of the other Management Board members were € 2,400,000 each, with a base salary of the Chief Financial Officer and the Chief Risk Officer of € 2.600.000 per year, effective from August 1, 2020. As part of the measurements taken in the context of the COVID-19 crisis, the members of the Management Board agreed to forgo one month`s base salary. Please find an overview on the COVID-19 related measures regarding Management Board compensation in the section “COVID-19 measures / reduction of compensation (“moderation”)”. Variable compensation The Supervisory Board, acting on a proposal of the Compensation Control Committee, determined the variable compensation for the Management Board members for the 2020 financial year. The Supervisory Board calculated and determined the amount of the LTA and the Group component of the STA based on the level of achievement of the respective objectives and/or key performance figures. The individual contribution was assessed by the achievement of the individually agreed targets and taking into account the results of the Balanced Scorecard. Level of objective achievement In the 2020 financial year, the development of the four performance metrics for the Group component of the STA was as follows: The 2020 target KPIs for Common Equity Tier 1 capital ratio (CET1), Leverage ratio (please refer to section “Leverage Ratio” in the Risk Report for further detail) and Adjusted Cost were achieved or exceeded, so that the degree of achievement of all three performance indicators was 100 %. The Group's return on equity target was positive in 2020, above our plan expectation; however, because the achievement level was only slightly above zero, the degree of achievement for this perfor- mance metric was set at 0 %. Mathematically, this resulted in an overall achievement level for the Group component of 75 % for 2020. As the Management Board decided to reduce the achievement level from 75 % to 72.5 % when determining the Group component as a commitment 182 Deutsche Bank Annual Report 2020 Management Board compensation report Management Board compensation for the 2020 financial year in light of the crisis situation triggered by the COVID-19 pandemic to exhibit moderation in variable compensation the Super- visory Board decided on the same reduction for the compensation of the members of the Management Board. As a result thereof, the Supervisory Board decided to set the payout rate for the Group component at 72.5 % (see also paragraph " COVID-19 measures / reduction of compensation (‘moderation’)”). The individual component of the STA is linked to the achievement of short-term and medium-term individual and divisional objectives determined for the Management Board members in 2020, including those from the Scorecard. The current Man- agement Board members as of December 31, 2020 had the following objectives: Christian Sewing In 2020, Mr. Sewing's main objective was to deliver on DB strategy execution while respecting the timetable ("mile-stones"). The further development of the culture and vision 2025 for Deutsche Bank was another target. In addition, it was his objective to continue to foster team spirit and to empower the leadership team. Finally, he was responsible for developing a bank- wide ESG and sustainable banking strategy. In his responsibility for the Corporate Bank and the Investment Bank, he aimed to deliver on CB/IB strategy execution and to generate sustainable profitability. Karl von Rohr Mr. von Rohr’s objectives for 2020 included: the implementation of the Private Bank strategy, including efficiency and growth measures and to generate sustainable profitability. In his role as Chairman of the Supervisory Board of DWS KGaA, one important aspect was to drive the implementation of the DWS strategy. As President of Deutsche Bank AG and CEO Ger- many, it was his priority to support the CEO, especially in Germany, in particular in political and economic affairs and with core client relationships in Germany on Group level. He also provided oversight of the Legal function until July 31. Finally, he was to support the CEO in fostering a culture of team spirit, accountability and integrity. Fabrizio Campelli Mr. Campelli’s objectives included developing and driving a bank-wide transformation roadmap, including the establishment of a Transformation Office tasked with supporting the effective execution of the Bank’s strategy. Another objective was to drive better client centricity across the Bank, as well as costs and complexity reduction, including through the cost catalyst program. As responsible Board Member for Human Resources, he was tasked with providing oversight to HR transformation as well as supporting the new global head of HR in his transition into Deutsche Bank. He was also asked to support the CEO in fostering a culture of accountability, integrity and team spirit. Frank Kuhnke As responsible Board Member for the Capital Release Unit (CRU), Mr. Kuhnke's objectives included optimizing capital usage (RWA), leverage exposure, costs and divestment losses within agreed time frames and loss targets. Furthermore, the im- plementation of the Know-Your-Client regulatory remedial measures for the Corporate Bank and the Investment Bank as well as for the CRU was on the agenda for 2020. To ensure stability and increase efficiency, the implementation of specific measures was agreed. In the EMEA region, one of its objectives until mid-2020 was to provide oversight to this region e.g. with regard to key control matters and client engagement. In addition, he supported the CEO in fostering a culture of team spirit, ownership and integrity. Bernd Leukert The main objective for Mr. Leukert was to drive the IT strategy execution. He should also continuously improve DB’s tech and data estate. Driving product and service innovation across the bank was another objective. He was to support the CEO in fostering a culture of team spirit, accountability and integrity. 183 Deutsche Bank Annual Report 2020 Management Board compensation report Management Board compensation for the 2020 financial year Stuart Lewis As Chief Risk Officer, Mr. Lewis was mandated to ensure operational resilience and proactive risk management during the prevailing operating and market environment. He was also tasked to implement further changes to the risk and compliance operating model, achieving planned efficiencies. Mr. Lewis objectives also included delivery on a portfolio of core transfor- mation initiatives to enhance the effectiveness and efficiency of controls. As the Management Board member responsible for the UK, he had to oversee activities and stakeholder relationships for the region, including implementation of the Brexit program. He also supported the CEO in fostering team spirit and delivering cultural initiatives regarding accountability and integrity. James von Moltke A key objective for Mr. von Moltke in 2020 was to ensure that the Group’s financial plan is executed through appropriately managing the Group’s performance. A further focus was to drive investor and Rating Agencies engagement. Mr. von Moltke was in charge of the continued optimization of the DB Group balance sheet in terms of both assets and liabilities and equity. The execution of the Group Finance strategy, including Financial & Analytics enhancement, was another objective. He was to support the CEO in fostering a culture of team spirit, accountability and integrity. Alexander von zur Mühlen When joining the Management Board on August 1, 2020, the strengthening of the APAC franchise and client focus was an objective for Mr. von zur Mühlen. The execution on the APAC strategy was another objective. Finally, he was to support the CEO in fostering a culture of team spirit, accountability and integrity. Christiana Riley Mrs. Riley's objectives included the execution on the Americas strategy. A further focus has been put on addressing U.S. regulators' requirements and trustful interaction with them. Her objectives included supporting the CEO in fostering a culture of team spirit, accountability and integrity. Prof. Dr. Stefan Simon Since joining the Management Board on August 1, 2020, one of Mr. Simon’s objectives was to further drive down the bank- wide litigation portfolio. Improvement of the strategic engagement with regulatory authorities and governments was an ob- jective that Mr. Simon had for the area of Government & Regulatory Affairs (GRAD), for which he was responsible. In addi- tion, he was responsible for the targeted reorganization of processes for the definition and implementation of policies. An- other objective was to support the CEO in fostering a culture of team spirit, accountability and integrity. The individual level of achievement of the Management Board members in 2020 is between 104 % and 175 %. The three key performance indicators of the LTA developed as follows in fiscal year 2020: In 2020, the RTSR achieved a significant improvement compared to the previous year. In 2020, Deutsche Bank's share price increased by more than 29% and developed better than any other bank of the peer group. In the relevant three-year period (2018 to 2020), the RTSR achievement level was at 114 % compared to 54 % in the previous year. Organic capital growth, as defined, has been negative between 2018 and 2020; this resulted in an achievement of 0%. The strengthening of the control environment has been assessed over three years on the basis of feedback from the internal audit and supervisory authorities; the achievement was 37.5% over the three-year period. This results in an overall achievement of 54 % for the LTA decided by the Supervisory Board. Bernd Leukert and Stefan Simon were appointed to Management Board in 2020 but had already joined the bank in 2019, so two years were available as reference period. The overall target achievement for the LTA derived is also 54 %. 184 Deutsche Bank Annual Report 2020 Management Board compensation report Management Board compensation for the 2020 financial year COVID-19 measures / reduction of compensation ("moderation") The target achievement levels for the STA as well as the LTA set by the Supervisory Board and presented above result in a total variable compensation of € 30,168,330 for the entire Management Board for the 2020 financial year. In the light of the crisis situation triggered by the COVID-19 pandemic, the European Supervisory Authority ECB has formu- lated the expectation that credit institutions exercise moderation with regard to the payment of variable remuneration for the 2020 financial year. Against this background, the total compensation for the entire Management Board for the 2020 financial year was reduced by a total of € 4,624,140. This was implemented by reducing the group component of the STA from 75 % to 72.5 %. In addition, the total compensation for the 2020 financial year was reduced by one twelfth (i.e. one month´s total compensation including base salary). The Chairman of the Supervisory Board joined by also reducing his compensation by one twelfth (please also see the ´Supervisory Board Report and Disclosure´). Total compensation The members of the Management Board collectively received in/for the 2020 financial year compensation (exclusive of fringe benefits and pension service costs) totaling € 50,020,069 (2019: € 35,994,279). € 22,473,664 (2019: € 22,700,000) of this amount was for fixed compensation. € 27,546,405 (2019: € 13,294,279) was received for performance-related compo-nents with long-term incentives.The Supervisory Board determined the aforementioned compensation on an individual basis for 2020 and 2019 as follows: Base salary 3,116,667 2,750,000 2,200,000 2,200,000 2,200,000 2,283,333 2,283,333 963,189 2,193,809 1,000,000 1,283,333 – – – 22,473,664 STA¹ LTA² 2020 2019 Total compensation Total compensation Group component 332,292 332,292 332,292 332,292 332,292 332,292 332,292 138,454 332,292 138,454 193,836 – – – 3,129,080 Individual component 2,246,475 1,422,758 1,269,400 850,667 986,700 986,333 1,269,400 381,944 869,367 406,389 443,606 – – – 11,133,039 1,672,611 1,377,445 1,377,445 1,377,445 1,390,278 1,377,445 1,377,445 573,935 1,377,445 579,283 803,509 – – – 13,284,286 7,368,045 5,882,495 5,179,137 4,760,403 4,909,270 4,979,403 5,262,470 2,057,522 4,772,912 2,124,126 2,724,286 – – – 50,020,069 5,031,717 4,396,708 632,785 3,796,708 – 3,796,708 3,796,708 – – – 3,796,708 2,588,079 4,968,079 3,190,079 35,994,279 in € Christian Sewing Karl von Rohr Fabrizio Campelli3 Frank Kuhnke Bernd Leukert4 Stuart Lewis James von Moltke Alexander von zur Mühlen5 Christiana Riley4 Prof. Dr. Stefan Simon5 Werner Steinmüller7 Sylvie Matherat7 Garth Ritchie7 Frank Strauß7 Total 1 STA: Short-Term Award. 2 LTA: Long-Term Award. 3 Member since November 1, 2019. 4 Member since January 1, 2020. 5 Member since August 1, 2020. 6 Member until July 31, 2020. 7 Member until July 31, 2019. The employment contracts of the Management Board members contain an obligation of the members to ensure that any remuneration they may claim in their capacity as a member of any body, in particular a supervisory board, advisory board or similar body of any group entity of the Bank (§ 18 of the German Stock Corporation Act (Aktiengesetz – AktG)) will not accrue to them. Accordingly, Management Board members did not receive any compensation for mandates on boards of Deutsche Bank subsidiaries. Share awards The number of share awards granted to the members of the Management Board in the form of Restricted Equity Awards (REA) in 2021 for the 2020 financial year was calculated by dividing the respective amounts in Euro by the higher of both, the average Xetra closing price of the Deutsche Bank share during the last ten trading days in February 2021 or the Xetra closing price on February 26, 2021 (€ 10.2140). 185 Deutsche Bank Annual Report 2020 Management Board compensation report Management Board compensation for the 2020 financial year Members of the Management Board Units Christian Sewing Karl von Rohr Fabrizio Campelli3 Frank Kuhnke Bernd Leukert5 Stuart Lewis James von Moltke Alexander von zur Mühlen7 Christiana Riley5 Prof. Dr. Stefan Simon7 Werner Steinmüller8 Restricted Equity Award(s) (deferred with additional retention period) 208,1151 144,392 153,3432 118,911 145,8364 19,819 134,859 118,911 136,1156 134,859 118,911 145,8367 118,911 56,191 134,859 56,71510 78,667 118,911 69,365 79,58913 97,04514 Year 2020 2019 2020 2019 2020 2019 2020 2019 2020 2020 2019 2020 2019 2020 2020 2020 2020 2019 2019 2019 2019 Sylvie Matherat Garth Ritchie Frank Strauß 1 Thereof 44,359 shares are attributable to the STA, which vest after 7 years. 2 Thereof 18,485 shares are attributable to the STA, which vest after 7 years. 3 Member since November 1, 2019. 4 Thereof 10,977 shares are attributable to the STA, which vest after 7 years. 5 Member since January 1, 2020. 6 Thereof 38.890 shares, which vest after 7 years. 7 Thereof 10,977 shares are attributable to the STA, which vest after 7 years. 8 Member since August 1, 2020. 9 Member since January 1, 2020. As a specified functionholder of certain Deutsche Bank US entities, specific plan rules are applicable for Christiana Riley; please see the respective disclosure in section ´Long-term Incentive and Sustainability`. 10 Thereof 16.204 shares, which vest after 7 years. 11 Member until July 31, 2020. 12 Member until July 31, 2019. 13 Thereof 10,224 shares are attributable to the STA, which vest after 7 year. 14 Thereof 27,680 shares are attributable to the STA, which vest after 7 year. Management Board share ownership, shareholding guidelines As of February 19, 2021 and January 31, 2020, respectively, the current members of the Management Board held Deutsche Bank shares as presented below: Members of the Management Board Christian Sewing Karl von Rohr Fabrizio Campelli1 Frank Kuhnke Bernd Leukert2 Stuart Lewis James von Moltke Alexander von zur Mühlen3 Christiana Riley2 Prof. Dr. Stefan Simon3 Total 1 Member since November 1, 2019. 2 Member since January 1, 2020. 3 Member since August 1, 2020. Number of shares 163,665 114,892 17,283 9,803 86,303 50,417 37,922 15,407 1,500 1,500 174,434 145,743 68,486 55,959 270,333 55,082 43,907 0 875,008 437,628 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 2021 2021 2020 2021 2021 2020 The current members of the Management Board held an aggregate of 875,008 Deutsche Bank shares on February 19, 2021, amounting to approximately 0.04 % of Deutsche Bank shares issued on that date. 186 Deutsche Bank Annual Report 2020 Management Board compensation report Management Board compensation for the 2020 financial year The following table shows the number of outstanding share awards of the current Management Board members as of Janu- ary 31, 2020 and February 19, 2021 as well as the number of share awards newly granted, delivered or forfeited in this period. Delivered Balance as of Jan 31, 2020 Members of the Management Board Christian Sewing Karl von Rohr Fabrizio Campelli1 Frank Kuhnke Bernd Leukert2 Stuart Lewis James von Moltke Alexander von zur Mühlen3 Christiana Riley2 Prof. Dr. Stefan Simon3 1 Member since November 1, 2019. 2 Member since January 1, 2020. 3 Member since August 1, 2020. 4 The awards listed in the table above as ´Forfeited´are equity-based awards granted under the Key Retention Plan in January 2017. These awards were subject to an additional Granted 144,392 118,911 127,751 118,911 25,309 118,911 118,911 – 64,8025 – 24,693 15,433 67,636 42,866 – 54,239 23,767 – 51,4836 – 365,416 289,373 296,795 196,399 0 283,470 335,369 – 255,057 – – – 78,3064 33,1814 – – – – 52,5364 – Balance as of 19 Feb 2021 485,115 392,851 278,603 239,263 25,309 348,142 430,513 251,256 215,8417 31,740 Forfeited share price condition and were forfeited as a result of this condition not being met. Please also see the section Share-Based Compensation Plans. 5 Under the associated plan, 64,802 restricted share awards originally granted were taxed at the time of grant, with 34,590 shares remaining on an after-tax basis. Please see the respective disclosure in section ´Long-term Incentive and Sustainability`. 6 Thereof a number of 30,212 share awards delivered to cover the tax amount due under the associated plan (see footnote 5). 7 Thereof a net number of 34,590 restricted share awards under the associated plan (see footnote 5). All Management Board members fulfilled the retention obligations for shares in 2020 or are currently in the waiting period. The Chairman of the Management Board, Mr. Sewing, voluntarily committed to invest 15 % of his net salary in Deutsche Bank shares from September 2019 until the end of December 2022. In each case, purchases took place on the 22nd day of each month or on the following trading day. All shares purchased by February 19, 2021 are included in the above table. Pension benefits The following table shows the annual contributions, the interest credits, the account balances and the annual service costs for the years 2020 and 2019 as well as the corresponding defined benefit obligations for each member of the Management Board in office in 2020 as of December 31, 2020 and December 31, 2019. The different balances are attributable to the different lengths of service on the Management Board, the respective age-related factors, and the different contribution rates, as well as the individual pensionable compensation amounts and the previously mentioned additional individual entitlements. Members of the Management Board Annual contribution, in the year Interest credit, in the year Account balance, end of year Service cost (IFRS), in the year Present value of the defined benefit obligation (IFRS), end of year in € Christian Sewing Karl von Rohr Fabrizio Campelli1 Frank Kuhnke Bernd Leukert2 Stuart Lewis James von Moltke Alexander von zur Mühlen3 Christina Riley2 2020 936,000 786,500 1,046,500 845,000 1,135,3345 786,500 903,500 0 0 2019 975,000 812,500 180,918 871,000 0 812,500 936,000 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 2020 2019 2020 2019 5,742,500 4,806,500 3,967,001 3,180,501 2020 936,063 831,427 2019 2020 2019 939,695 5,816,960 4,701,381 819,511 4,205,087 3,261,910 1,227,418 180,918 1,008,742 174,626 1,224,209 1,716,000 871,000 1,135,334 0 5,657,938 4,871,438 3,318,250 2,414,750 0 0 0 0 867,588 851,694 818,838 895,972 0 0 178,170 868,111 0 849,657 1,759,798 0 1,181,299 819,511 6,358,878 5,536,127 907,600 3,385,498 2,382,139 0 0 0 0 0 0 0 903,039 0 1,335,674 380,305 667,193 2,660,574 2,259,433 0 1,293,5015 Prof. Dr. Stefan Si- mon3 Werner Steinmüller4 1 Member since November 1, 2019. 2 Member since January 1, 2020. 3 Member since August 1, 2020. 4 Member until July 31, 2020. 5 This also includes amounts granted for the period prior to appointment as a member of the Management Board. 1,293,501 2,647,405 2,216,519 650,000 379,167 60,251 51,719 0 0 0 Expense for long-term incentive components The following table presents the compensation expense recognized in the respective years for long-term incentive components of compensation granted for service on the Management Board. 187 Deutsche Bank Annual Report 2020 Management Board compensation report Compensation in accordance with the German Corporate Governance Code (GCGC) Members of the Management Board in € Christian Sewing Karl von Rohr Fabrizio Campelli1 Frank Kuhnke Bernd Leukert2 Stuart Lewis James von Moltke Alexander von zur Mühlen3 Christina Riley2 Prof. Dr. Stefan Simon3 Werner Steinmüller4 1 Member since November 1, 2019. 2 Member since January 1, 2020. 3 Member since August 1, 2020. 4 Member until July 31, 2020. Share-based compensation components Amount expensed for Cash-based compensation components 2020 887,894 661,926 23,935 143,607 0 351,726 644,657 0 0 0 2,936,877 2019 226,040 163,938 0 0 0 472,969 156,957 0 0 0 144,494 2020 372,347 293,690 14,024 84,140 0 278,156 293,690 0 0 0 655,935 2019 380,022 275,911 0 0 0 255,458 275,911 0 0 0 243,186 Compensation in accordance with the German Corporate Gov- ernance Code (GCGC) The compensation for the members of the Management Board in accordance with the requirements of section 4.2.5 para- graph 3 of the GCGC 2017 is provided below. This comprises the benefits granted for the year under review including the fringe benefits and including the maximum and minimum achievable compensation for variable compensation components. In addition, the payment and delivery, as the case may be of fixed compensation and variable compensation (broken down by Restricted Incentive Awards and Restricted Equity Awards) in/for the year under review, broken down into the relevant refer- ence years are reported. The following table provides the compensation granted for the 2020 and 2019 financial years according to GCGC 2017: in € Fixed compensation (base salary) Fixed pay allowance Fringe benefits (fixed compensation) Total Variable compensation thereof: Restricted Incentive Awards Restricted Equity Awards Determined 3,116,667 0 3,756 3,120,423 4,251,378 Target 3,400,000 0 3,756 3,403,756 5,300,000 Min 3,400,000 0 3,756 3,403,756 0 Fringe benefits (variable compensation) Total Pension service costs Total compensation (GCGC) Total compensation2 1 Thereof Restricted Equity Awards in the amount of € 453,078 that are attributable to the STA and vest after 7 years. 2 Without fringe benefits and pension service costs. 1,900,000 3,400,000 0 5,300,000 936,063 9,639,819 8,700,000 0 0 0 0 936,063 4,339,819 3,400,000 2,125,689 2,125,6891 0 4,251,378 936,063 8,307,864 7,368,045 in € Fixed compensation (base salary) Fixed pay allowance Fringe benefits (fixed compensation) Total Variable compensation thereof: Restricted Incentive Awards Restricted Equity Awards Determined 2,750,000 0 11,208 2,761,208 3,132,495 Target 3,000,000 0 11,208 3,011,208 4,400,000 Min 3,000,000 0 11,208 3,011,208 0 Fringe benefits (variable compensation) Total Pension service costs Total compensation (GCGC) Total compensation2 1 Thereof Restricted Equity Awards in the amount of € 188,803 that are attributable to the STA and vest after 7 years. 2 Without fringe benefits and pension service costs. 1,600,000 2,800,000 0 4,400,000 831,427 8,242,635 7,400,000 0 0 0 0 831,427 3,842,635 3,000,000 1,566,247 1,566,2481 0 3,132,495 831,427 6,725,130 5,882,495 2020 Max 3,400,000 0 3,756 3,403,756 8,900,000 3,800,000 5,100,000 0 8,900,000 936,063 13,239,819 12,300,000 2020 Max 3,000,000 0 11,208 3,011,208 7,400,000 3,200,000 4,200,000 0 7,400,000 831,427 11,242,635 10,400,000 Christian Sewing Determined 3,400,000 0 69,338 3,469,338 1,631,717 300,000 1,331,717 0 1,631,717 939,695 6,040,750 5,031,717 2019 Target 3,400,000 0 69,338 3,469,338 5,300,000 1,900,000 3,400,000 0 5,300,000 939,695 9,709,033 8,700,000 Karl von Rohr 2019 Target 3,000,000 0 43,642 3,043,642 4,225,000 1,425,000 2,800,000 0 4,225,000 819,511 8,088,153 7,225,000 Determined 3,000,000 0 43,642 3,043,642 1,396,708 300,000 1,096,708 0 1,396,708 819,511 5,259,861 4,396,708 188 Deutsche Bank Annual Report 2020 Management Board compensation report Compensation in accordance with the German Corporate Governance Code (GCGC) in € Fixed compensation (base salary) Fixed pay allowance Fringe benefits (fixed compensation) Total Variable compensation thereof: Restricted Incentive Awards Restricted Equity Awards Determined 2,200,000 0 21,984 2,221,984 2,979,137 Target 2,400,000 0 21,984 2,421,984 4,100,000 Min 2,400,000 0 21,984 2,421,984 0 Fringe benefits (variable compensation) Total Pension service costs Total compensation (GCGC) Total compensation3 1 Member since November 1, 2019. 2 Thereof Restricted Equity Awards in the amount of € 112,124 that are attributable to the STA and vest after 7 years. 3 Without fringe benefits and pension service costs. 1,489,568 1,489,5692 0 2,979,137 1,008,742 6,209,863 5,179,137 1,300,000 2,800,000 0 4,100,000 1,008,742 7,530,726 6,500,000 0 0 0 0 1,008,742 3,430,726 2,400,000 in € Fixed compensation (base salary) Fixed pay allowance Fringe benefits (fixed compensation) Total Variable compensation thereof: Restricted Incentive Awards Restricted Equity Awards Fringe benefits (variable compensation) Total Pension service costs Total compensation (GCGC) Total compensation1 1 Without fringe benefits and pension service costs. Determined 2,200,000 0 6,692 2,206,692 2,560,403 1,182,958 1,377,445 0 2,560,403 867,588 5,634,683 4,760,403 Target 2,400,000 0 6,692 2,406,692 4,100,000 1,300,000 2,800,000 0 4,100,000 867,588 7,374,280 6,500,000 Min 2,400,000 0 6,692 2,406,692 0 0 0 0 0 867,588 3,274,280 2,400,000 in € Fixed compensation (base salary) Fixed pay allowance Fringe benefits (fixed compensation) Total Variable compensation thereof: Restricted Incentive Awards Restricted Equity Awards Determined 2,200,000 0 21,926 2,221,926 2,709,270 Target 2,400,000 0 21,926 2,421,926 4,100,000 Fringe benefits (variable compensation) Total Pension service costs Total compensation (GCGC) Total compensation3 1 Member since January 1, 2020. 2 Thereof Restricted Equity Awards in the amount of € 397,222 that vest after 7 years. 3 Without fringe benefits and pension service costs. 1,318,992 1,390,2782 0 2,709,270 851,694 5,782,890 4,909,270 1,300,000 2,800,000 0 4,100,000 851,694 7,373,620 6,500,000 Min 2,400,000 0 21,926 2,421,926 0 0 0 0 0 851,694 3,273,620 2,400,000 2020 Max 2,400,000 0 21,984 2,421,984 6,800,000 2,600,000 4,200,000 0 6,800,000 1,008,742 10,230,726 9,200,000 2020 Max 2,400,000 0 6,692 2,406,692 6,800,000 2,600,000 4,200,000 0 6,800,000 867,588 10,074,280 9,200,000 2020 Max 2,400,000 0 21,926 2,421,926 6,800,000 2,600,000 4,200,000 0 6,800,000 851,694 10,073,620 9,200,000 Fabrizio Campelli1 2019 Determined 400,000 – 8,182 408,182 232,785 50,000 182,785 – 232,785 174,626 815,593 632,785 Target 400,000 – 8,182 408,182 683,333 216,667 466,667 – 683,333 174,626 1,266,141 1,083,333 Frank Kuhnke 2019 Target 2,400,000 – 29,580 2,429,580 4,100,000 1,300,000 2,800,000 – 4,100,000 849,657 7,379,237 6,500,000 Bernd Leukert1 2019 Target – – – – – – – – – – – – Determined 2,400,000 – 29,580 2,429,580 1,396,708 300,000 1,096,708 – 1,396,708 849,657 4,675,945 3,796,708 Determined – – – – – – – – – – – – 189 Deutsche Bank Annual Report 2020 Management Board compensation report Compensation in accordance with the German Corporate Governance Code (GCGC) in € Fixed compensation (base salary) Fixed pay allowance Fringe benefits (fixed compensation) Total Variable compensation thereof: Restricted Incentive Awards Restricted Equity Awards Fringe benefits (variable compensation) Total Pension service costs Total compensation (GCGC) Total compensation1 1 Without fringe benefits and pension service costs. Determined 2,283,333 0 29,166 2,312,499 2,696,070 1,318,625 1,377,445 0 2,696,070 818,838 5,827,407 4,979,403 Target 2,483,333 0 29,166 2,512,499 4,100,000 1,300,000 2,800,000 0 4,100,000 818,838 7,431,337 6,583,333 Min 2,483,333 0 29,166 2,512,499 0 0 0 0 0 818,838 3,331,337 2,483,333 in € Fixed compensation (base salary) Fixed pay allowance Fringe benefits (fixed compensation) Total Variable compensation thereof: Restricted Incentive Awards Restricted Equity Awards Determined 2,283,333 0 42,980 2,326,313 2,979,137 Target 2,483,333 0 42,980 2,526,313 4,100,000 Min 2,483,333 0 42,980 2,526,313 0 Fringe benefits (variable compensation) Total Pension service costs Total compensation (GCGC) Total compensation2 1 Thereof Restricted Equity Awards in the amount of € 112,124 that are attributable to the STA and vest after 7 years. 2 Without fringe benefits and pension service costs. 1,300,000 2,800,000 615,516 4,715,516 895,972 8,137,801 6,583,333 0 0 615,516 615,516 895,972 4,037,801 2,483,333 1,489,568 1,489,5691 615,516 3,594,653 895,972 6,816,938 5,262,470 2020 Max 2,483,333 0 29,166 2,512,499 6,800,000 2,600,000 4,200,000 0 6,800,000 818,838 10,131,337 9,283,333 2020 Max 2,483,333 0 42,980 2,526,313 6,800,000 2,600,000 4,200,000 615,516 7,415,516 895,972 10,837,801 9,283,333 Stuart Lewis 2019 Target 2,400,000 0 312,607 2,712,607 4,100,000 1,300,000 2,800,000 0 4,100,000 819,511 7,632,118 6,500,000 Determined 2,400,000 0 312,607 2,712,607 1,396,708 300,000 1,096,708 0 1,396,708 819,511 4,928,826 3,796,708 James von Moltke Determined 2,400,000 0 310,510 2,710,510 1,396,708 300,000 1,096,708 615,516 2,012,224 907,600 5,630,334 3,796,708 2019 Target 2,400,000 0 310,510 2,710,510 4,100,000 1,300,000 2,800,000 615,516 4,715,516 907,600 8,333,626 6,500,000 in € Fixed compensation (base salary) Fixed pay allowance Fringe benefits (fixed compensation) Total Variable compensation thereof: Restricted Incentive Awards Restricted Equity Awards Determined 963,1892 270,833 14,851 1,248,873 1,094,333 Target 1,000,000 270,833 14,851 1,285,684 1,708,333 Min 1,000,000 270,833 14,851 1,285,684 0 2020 Max 1,000,000 270,833 14,851 1,285,684 2,833,333 Alexander von zur Mühlen1 2019 Determined – – – – – Target – – – – – Fringe benefits (variable compensation) Total Pension service costs Total compensation (GCGC) Total compensation3 1 Member since August 1, 2020. 2 As the fixed compensation is granted in local currency, it is subject to FX-rate changes. The waiver of 1/12th of the base salary took place prior to the appointment to the 520,398 573,935 33,304 1,127,637 0 2,376,510 2,057,522 541,666 1,166,667 33,304 1,741,637 0 3,027,321 2,708,333 0 0 33,304 33,304 0 1,318,988 1,000,000 1,083,332 1,750,001 33,304 2,866,637 0 4,152,321 3,833,333 – – – – – – – Management Board. 3 Without fixed pay allowance and fringe benefits. – – – – – – – 190 Deutsche Bank Annual Report 2020 Management Board compensation report Compensation in accordance with the German Corporate Governance Code (GCGC) in € Fixed compensation (base salary) Fixed pay allowance Fringe benefits (fixed compensation) Total Variable compensation thereof: Restricted Incentive Awards Restricted Equity Awards Determined 2,193,8092 650,000 94,530 2,938,339 2,579,103 Target 2,400,000 650,000 94,530 3,144,530 4,100,000 Min 2,400,000 650,000 94,530 3,144,530 0 2020 Max 2,400,000 650,000 94,530 3,144,530 6,800,000 Christiana Riley1 2019 Determined – – – – – Target – – – – – Fringe benefits (variable compensation) Total Pension service costs Total compensation (GCGC) Total compensation3 1 Member since January 1, 2020. As a specified functionholder of certain Deutsche Bank US entities, specific plan rules are applcable for Christiana Riley; please see the 1,201,658 1,377,445 95,643 2,674,746 0 5,613,085 4,772,912 1,300,000 2,800,000 95,643 4,195,643 0 7,340,173 6,500,000 0 0 95,643 95,643 0 3,240,173 2,400,000 2,600,000 4,200,000 95,643 6,895,643 0 10,040,173 9,200,000 – – – – – – – – – – – – – – respective disclosure in section ´Long-term Incentive and Sustainability`. 2 As the fixed compensation is granted in local currency, it is subject to FX-rate changes. 3 Without fixed pay allowance and fringe benefits. in € Fixed compensation (base salary) Fixed pay allowance Fringe benefits (fixed compensation) Total Variable compensation thereof: Restricted Incentive Awards Restricted Equity Awards Determined 1,000,0002 0 7,354 1,007,354 1,124,126 Target 1,000,000 0 7,354 1,007,354 1,708,333 Min 1,000,000 0 7,354 1,007,354 0 Fringe benefits (variable compensation) Total Pension service costs Total compensation (GCGC) Total compensation4 1 Member since August 1, 2020. 2 The waiver of 1/12th of the base salary took place prior to the appointment to the Management Board. 3 Thereof Restricted Equity Awards in the amount of € 165,509 that vest after 7 years. 4 Without fringe benefits and pension service costs. 544,843 579,2833 0 1,124,126 903,039 3,034,519 2,124,126 541,666 1,166,667 0 1,708,333 903,039 3,618,726 2,708,333 0 0 0 0 903,039 1,910,393 1,000,000 2020 Max 1,000,000 0 7,354 1,007,354 2,833,333 1,083,332 1,750,001 0 2,833,333 903,039 4,743,726 3,833,333 Prof. Dr. Stefan Simon1 2019 Determined – – – – – – – – – – – – Target – – – – – – – – – – – – in € Fixed compensation (base salary) Fringe benefits (fixed compensation) Total Variable compensation thereof: Restricted Incentive Awards Restricted Equity Awards Fringe benefits (variable compensation) Total Pension service costs Total compensation (GCGC) Total compensation2 1 Member until July 31, 2020. 2 Without fringe benefits and pension service costs. Determined 1,283,333 31,620 1,314,953 1,440,953 637,444 803,509 322,542 1,763,495 380,305 3,458,753 2,724,286 Target 1,400,000 31,620 1,431,620 2,391,667 758,334 1,633,333 322,542 2,714,209 380,305 4,494,514 3,791,667 Min 1,400,000 31,620 1,431,620 0 0 0 322,542 322,542 380,305 1,986,180 1,400,000 2020 Max 1,400,000 31,620 1,431,620 3,966,668 1,516,668 2,450,000 322,542 4,289,210 380,305 6,069,515 5,366,668 Werner Steinmüller1 2019 Determined 2,400,000 68,463 2,468,463 1,396,708 300,000 1,096,708 510,033 1,906,741 667,193 5,042,397 3,796,708 Target 2,400,000 68,463 2,468,463 4,100,000 1,300,000 2,800,000 510,033 4,610,033 667,193 7,745,689 6,500,000 191 Deutsche Bank Annual Report 2020 Management Board compensation report Compensation in accordance with the German Corporate Governance Code (GCGC) in € Fixed compensation (base salary) Fringe benefits (fixed compensation) Total Variable compensation thereof: Restricted Incentive Awards Restricted Equity Awards Fringe benefits (variable compensation) Total Pension service costs Total compensation (GCGC) Total compensation2 1 Member until July 31, 2019. 2 Without fringe benefits and pension service costs. Determined Target Min 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 in € Fixed compensation (base salary) Functional allowance Fringe benefits (fixed compensation) Total Variable compensation thereof: Restricted Incentive Awards Restricted Equity Awards2 Determined Target Min 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 Fringe benefits (variable compensation) Total Pension service costs Total compensation (GCGC) Total compensation3 1 Member until July 31, 2019. 2 Thereof Restricted Equity Awards in the amount of € 94,294 that are attributable to the STA and vest after 7 years. 3 Without functional allowance fringe benefits and pension service costs. 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 in € Fixed compensation (base salary) Fringe benefits (fixed compensation) Total Variable compensation thereof: Restricted Incentive Awards Restricted Equity Awards2 Determined Target Min 0 0 0 0 0 0 0 0 0 0 0 0 Fringe benefits (variable compensation) Total Pension service costs Total compensation (GCGC) Total compensation3 1 Member until July 31, 2019. 2 Thereof Restricted Equity Awards in the amount of € 255,294 that are attributable to the STA and vest after 7 years. 3 Without fringe benefits and pension service costs. 2020 Max 0 0 0 0 0 0 0 0 0 0 0 2020 Max 0 0 0 0 0 0 0 0 0 0 0 0 2020 Max 0 0 0 0 0 0 0 0 0 0 0 Sylvie Matherat1 2019 Determined 1,400,000 4,636 1,404,636 1,188,079 548,333 639,746 0 1,188,079 0 2,592,715 2,588,079 Target 1,400,000 4,636 1,404,636 2,391,667 758,333 1,633,333 0 2,391,667 0 3,796,303 3,791,667 Garth Ritchie1 2019 Target 1,750,000 1,750,000 267,834 3,767,834 2,741,667 1,108,333 1,633,333 0 2,741,667 0 6,509,501 4,491,667 Frank Strauß1 2019 Target 1,400,000 35,253 1,435,253 2,566,667 933,333 1,633,333 0 2,566,667 545,325 4,547,245 3,966,667 Determined 1,750,000 1,750,000 267,834 3,767,834 1,468,079 734,039 734,040 0 1,468,079 0 5,235,913 3,218,079 Determined 1,400,000 35,253 1,435,253 1,790,079 895,039 895,040 0 1,790,079 545,325 3,770,657 3,190,079 192 Deutsche Bank Annual Report 2020 Management Board compensation report Compensation in accordance with the German Corporate Governance Code (GCGC) The following table provides the compensation payments and deliveries in/for the 2020 and 2019 financial years according to GCGC 2017 in € Fixed compensation Functional allowance Fixed pay allowance Fringe benefits (fixed compensation) Total Variable compensation thereof Cash: thereof Restricted Incentive Awards: Fabrizio Campelli1 2019 Christian Sewing Karl von Rohr Frank Kuhnke 2020 2019 2020 2019 2020 0 0 3,756 2019 3,116,667 3,400,000 2,750,000 3,000,000 2,200,000 400,000 2,200,000 2,400,000 – 0 – 0 29,580 43,642 3,120,423 3,469,338 2,761,208 3,043,642 2,221,984 408,182 2,206,692 2,429,580 – 0 232,061 – 0 0 0 168,625 0 0 0 0 21,984 0 0 11,208 0 0 69,338 – – 8,182 0 0 6,692 – – 0 0 0 0 2020 2015 Restricted Incentive Award for 2014 2017 Restricted Incentive Award: Sign On 2017 Restricted Incentive Award: Buyout 2019 Restricted Incentive Award for 2018 0 0 0 232,061 0 0 0 0 0 0 – 168,625 0 0 0 0 0 0 0 0 – – – 0 0 0 0 0 – – – – thereof Equity Awards: 2017 Equity Upfront Award: Sign On 2014 Restricted Equity Award for 2013 2015 DB Equity Plan for 2014 2017 Restricted Equity Award: Buyout Fringe benefits (variable compensation) Total Pension service costs Total compensation (GCGC) 1 Member since November 1, 2019. in € Fixed compensation Functional allowance Fixed pay allowance Fringe benefits (fixed compensation) Total Variable compensation thereof Cash: thereof Restricted Incentive Awards: 2015 Restricted Incentive Award for 2014 2017 Restricted Incentive Award: Sign On 2017 Restricted Incentive Award: Buyout 2019 Restricted Incentive Award for 2018 thereof Equity Awards: 2017 Equity Upfront Award: Sign On 2014 Restricted Equity Award for 2013 2015 DB Equity Plan for 2014 2017 Restricted Equity Award: Buyout Fringe benefits (variable compensation) Total Pension service costs Total compensation (GCGC) – 0 0 – 0 0 – 0 0 – 0 0 – 0 0 232,061 – 0 936,063 939,695 831,427 819,511 1,008,742 174,626 867,588 849,657 4,288,547 4,409,033 3,761,260 3,863,153 3,230,726 582,808 3,074,280 3,279,237 0 0 0 0 0 0 0 0 0 0 0 168,625 – – – – – – 0 0 0 0 0 0 0 0 0 0 0 0 Bernd Leukert1 2019 2020 Stuart Lewis James von Moltke 2020 2019 2020 2019 2,200,000 0 0 21,926 2,221,926 0 0 0 0 0 0 29,166 312,607 – 2,283,333 2,400,000 2,283,333 2,400,000 963,1893 0 – 0 0 270,833 – – 14,851 – 2,312,499 2,712,607 2,326,313 2,710,510 1,248,873 0 – 599,399 704,736 693,011 951,953 0 0 0 – 42,980 310,510 0 0 0 0 2020 Alexander von zur Mühlen2 2019 – – – – – – – 0 0 0 0 0 0 105,340 – 0 0 66,638 – 0 280,379 420,568 0 – 0 0 168,625 – 156,125 0 66,638 0 0 0 0 0 0 0 0 0 0 851,694 3,073,620 0 0 183,170 0 0 – 0 0 0 0 599,396 – 0 0 0 0 – 443,274 0 0 177,369 281,577 0 – 33,304 – 0 615,516 615,516 0 33,304 – 599,399 704,736 1,308,527 1,567,469 – 818,838 819,511 895,972 907,600 0 – 3,730,736 4,236,854 4,530,812 5,185,579 1,282,177 – – – – – – – – – – – – 1 Member since January 1, 2020. 2 Member since August 1, 2020. 3 As the fixed compensation is granted in local currency, it is subject to FX-rate changes. The waiver of 1/12th of the base salary took place prior to the appointment to the Management Board. 193 Deutsche Bank Annual Report 2020 Management Board compensation report Compensation in accordance with the German Corporate Governance Code (GCGC) Christiana Riley1 2019 2020 Prof. Dr. Stefan Simon2 2019 2020 Werner Steinmüller3 2019 2020 in € Fixed compensation Functional allowance Fixed pay allowance Fringe benefits (fixed compensation) Total Variable compensation thereof Cash: thereof Restricted Incentive Awards: 2015 Restricted Incentive Award for 2014 2017 Restricted Incentive Award: Sign On 2017 Restricted Incentive Award: Buyout 2019 Restricted Incentive Award for 2018 thereof Equity Awards: 2017 Equity Upfront Award: Sign On 2014 Restricted Equity Award for 2013 2015 DB Equity Plan for 2014 2017 Restricted Equity Award: Buyout Fringe benefits (variable compensation) Total Pension service costs Total compensation (GCGC) 2,193,8095 0 650,000 94,530 2,938,339 0 0 0 0 0 0 0 0 0 0 95,643 95,643 0 3,033,982 – 1,000,0006 0 – 0 – – 7,354 – 1,007,354 0 – 0 – – – – – 0 0 0 0 – 0 – 0 – 0 – 0 – 0 0 – – 903,039 – 1,910,393 1 Member since January 1, 2020. 2 Member since August 1, 2020. 3 Member until July 31, 2020. 4 Member until July 31, 2019. 5 As the fixed compensation is granted in local currency, it is subject to FX-rate changes. 6 The waiver of 1/12th of the base salary took place prior to the appointment to the Management Board. in € Fixed compensation Functional allowance Fixed pay allowance Fringe benefits (fixed compensation) Total Variable compensation thereof Cash: thereof Restricted Incentive Awards: 2015 Restricted Incentive Award for 2014 2017 Restricted Incentive Award: Sign On 2017 Restricted Incentive Award: Buyout 2019 Restricted Incentive Award for 2018 thereof Equity Awards: 2017 Equity Upfront Award: Sign On 2014 Restricted Equity Award for 2013 2015 DB Equity Plan for 2014 2017 Restricted Equity Award: Buyout Fringe benefits (variable compensation) Total Pension service costs Total compensation (GCGC) 1 Member until July 31, 2019. – 1,283,333 2,400,000 0 0 – 0 0 – – 68,463 31,620 – 1,314,953 2,468,463 0 – 148,625 0 0 – 2020 Sylvie Matherat4 2019 0 1,400,000 0 0 0 0 0 4,636 0 1,404,636 0 0 0 0 0 – 0 – – 0 – 148,625 0 0 0 0 0 0 0 0 0 0 0 0 0 0 – 0 0 – 0 281,577 0 – 0 0 – 322,542 510,033 – 471,167 510,033 – 380,305 667,193 – 2,166,425 3,645,689 0 0 0 0 – 0 0 0 0 0 0 0 0 0 0 1,404,636 Garth Ritchie1 2019 2020 0 1,750,000 0 1,750,000 0 0 0 267,834 0 3,767,834 0 0 0 0 2020 Frank Strauß1 2019 0 1,400,000 0 0 0 0 0 35,253 0 1,435,253 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 – 0 0 0 0 0 0 0 0 0 0 3,767,834 #REF! 0 0 0 0 0 0 0 0 0 0 0 0 0 545,325 0 1,980,578 #REF! With respect to deferred awards scheduled to be delivered in the first quarter of 2021, the Supervisory Board has confirmed that the performance conditions for the financial year 2020 have been met. 194 Deutsche Bank Annual Report 2020 Management Board compensation report Compensation in accordance with the German Accounting Standard No. 17 (GAS 17) Compensation in accordance with the German Accounting Standard No. 17 (GAS 17) In accordance with the requirements of the GAS 17, the members of the Management Board collectively received in the 2020 financial year compensation totaling € 40,119,062 (2019: € 34,835,009). Of that, € 22,473,664 (2019: € 20,950,000) was for fixed compensation, € 0 (2019: € 1,750,000) for functional allowances, € 920,833 (2019: 0 €) for fixed pay allowances, € 1,353,072 (2019: € 2,275,594) for fringe benefits and € 15,371,493 (2019: € 9,859,415) for performance-related compo- nents. In accordance with German Accounting Standard No. 17, the Restricted Incentive Awards, as a deferred, non-equity-based compensation component subject to certain (forfeiture) conditions, must be recognized in the total compensation for the year of their payment (i.e. in the financial year in which the unconditional payment takes place) and not in the year they are originally granted. Based thereon, the Management Board members individually received the following compensation components for their service on the Management Board for or in the years 2020 and 2019, including the non-performance-related fringe benefits. Compensation according to GAS 17 in € Compensation Performance-related components Without long-term incentives Immediately paid out With short-term incentives Cash With long-term incentives Cash-based Christian Sewing Karl von Rohr 2020 2019 2020 2019 Fabrizio Campelli1 2019 2020 Frank Kuhnke 2020 2019 0 0 0 0 0 0 0 0 0 0 0 0 0 0 Restricted Incentive Award(s) paid Share-based Restricted Equity Award(s) 2,125,6892 1,331,717 1,566,2483 1,096,708 1,489,5694 232,061 168,625 0 0 0 Non-performance-related compo- nents Base salary Functional allowance Fixed pay allowance Fringe benefits (fixed and varia- ble) Total 3,116,667 3,400,000 2,750,000 3,000,000 2,200,000 0 0 0 0 0 0 0 0 0 0 3,756 21,984 5,478,173 4,801,055 4,496,081 4,140,350 3,711,553 69,338 11,208 43,642 1 Member since November 1, 2019. 2 Thereof Restricted Equity Awards in the amount of € 453,078 that are attributable to the STA and vest after 7 years. 3 Thereof Restricted Equity Awards in the amount of € 188,803 that are attributable to the STA and vest after 7 years. 4 Thereof Restricted Equity Awards in the amount of € 112,124 that are attributable to the STA and vest after 7 years. 0 0 182,785 1,377,445 1,096,708 400,000 2,200,000 2,400,000 0 0 0 0 0 0 8,182 29,580 590,967 3,584,137 3,526,288 6,692 Bernd Leukert1 2019 2020 Stuart Lewis James von Moltke 2020 2019 2020 2019 Alexander von zur Mühlen2 2019 2020 in € Compensation Performance-related components Without long-term incentives Immediately paid out With short-term incentives Cash With long-term incentives Cash-based 0 0 − − 0 0 0 0 0 0 0 0 0 0 Restricted Incentive Award(s) paid Share-based Restricted Equity Award(s) 1,390,278 0 Non-performance-related compo- nents Base salary Functional allowance Fixed pay allowance Fringe benefits (fixed and varia- ble compensation) Total 2,200,000 0 0 21,926 3,612,204 − 156,125 105,340 515,642 487,207 0 − 1,377,445 1,096,708 1,489,5693 1,096,708 573,935 − 2,283,333 2,400,000 2,283,333 2,400,000 0 0 − 0 0 − 0 0 0 0 963,1894 0 270,833 29,166 − 48,155 − 3,846,069 3,914,655 4,947,040 4,909,941 1,856,112 926,026 658,496 312,607 1 Member since January 1, 2020. 2 Member since August 1, 2020. 3 Thereof Restricted Equity Awards in the amount of € 112,124 that are attributable to the STA and vest after 7 years. 0 0 0 − − − − − − − − − 195 Deutsche Bank Annual Report 2020 Management Board compensation report Compensation in accordance with the German Accounting Standard No. 17 (GAS 17) 4 As the fixed compensation is granted in local currency, it is subject to FX-rate changes. The waiver of 1/12th of the base salary took place prior to the appointment to the Management Board. Christiana Riley1 2019 2020 Prof. Dr. Stefan Simon2 2019 2020 Werner Steinmüller3 2019 2020 Sylvie Matherat4 2019 2020 in € Compensation Performance-related components Without long-term incentives Immediately paid out With short-term incentives Cash With long-term incentives Cash-based Restricted Incentive Award(s) paid Share-based Restricted Equity Award(s) 1,377,445 0 Non-performance-related compo- nents Base salary Functional allowance Fixed pay allowance Fringe benefits (fixed and varia- ble compensation) 0 0 − − 0 0 − − 0 0 0 0 0 0 − 0 − 148,625 0 0 − 579,283 − 803,509 1,096,708 0 639,746 0 0 0 2,193,8095 0 650,000 − 1,000,0006 0 − 0 − − 1,283,333 2,400,000 0 0 − 0 0 − 0 1,400,000 0 0 0 0 Total − 7,354 − 1,586,637 1 Member since January 1, 2020. As a specified functionholder of certain Deutsche Bank US entities, specific plan rules are applcable for Christiana Riley; please see the − 578,496 − 2,589,629 4,075,204 190,173 4,411,427 0 4,636 0 2,044,382 354,162 respective disclosure in section ´Long-term Incentive and Sustainability`. 2 Member since August 1, 2020. 3 Member until July 31, 2020. 4 Member until July 31, 2019. 5 As the fixed compensation is granted in local currency, it is subject to FX-rate changes. 6 The waiver of 1/12th of the base salary took place prior to the appointment to the Management Board. in € Compensation Performance-related components Without long-term incentives Immediately paid out With short-term incentives Cash With long-term incentives Cash-based Restricted Incentive Award(s) paid Share-based Restricted Equity Award(s) Non-performance-related components Base salary Functional allowance Fixed pay allowance Fringe benefits (fixed and variable compensation) Total Garth Ritchie1 2019 2020 Frank Strauß1 2019 2020 2020 Total 2019 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1,221,078 592,547 0 734,0402 0 895,0403 14,150,415 9,266,868 0 1,750,000 0 1,750,000 0 0 0 267,834 0 4,501,874 0 1,400,000 22,473,664 20,950,000 0 1,750,000 0 0 0 920,833 0 35,253 1,353,072 2,275,594 0 2,330,293 40,119,062 34,835,009 0 0 1 Member until July 31, 2019. 2 Thereof Restricted Equity Awards in the amount of € 94,294 that are attributable to the STA and vest after 7 years. 3 Thereof Restricted Equity Awards in the amount of € 255,294 that are attributable to the STA and vest after 7 years. With respect to deferred awards scheduled to be delivered in the first quarter of 2021, the Supervisory Board has confirmed that the performance conditions for the 2020 financial year have been met. 196 Deutsche Bank Annual Report 2020 Management Board compensation report Outlook: Further development of the compensation system from 2021 onwards Outlook: Further development of the compensation system from 2021 onwards The current system for the compensation of Management Board members was approved by the 2017 Annual General Meeting with a large majority of around 97 %. The structure of the compensation system has proven itself since then, and its application shows that the targets anchored in it set the right incentives and lead to appropriate results ("pay for performance"). The compensation system will be resubmitted to the 2021 Annual General Meeting for approval in accordance with § 120a (1) of the German Stock Corporation Act (AktG) in order to take into account the changed regulatory requirements resulting from the entry into force of ARUG II (Act Implementing the Second Shareholders' Rights Directive). Aim of the adjustments The Supervisory Board took the upcoming vote on the compensation system as an opportunity to comprehensively review and develop further the current structure. As a result, adjustments were made that serve to structure the compensation com- ponents in such a way that they lead to even greater uniformity and transparency with regard to the compensation structures and weighting of the components. In the context of promoting good corporate governance and sustainable corporate devel- opment, ESG objectives in particular will be given even greater consideration in the performance criteria in the future. In order to closely link the compensation to the long-term development of the company, the level of share ownership will be promoted further in accordance with the ambitious Deutsche Bank Shareholding Guidelines. The alignment of the interests of the Man- agement Board with those of the shareholders will thus be significantly strengthened. Since the previous design and application of the system has overall worked well and was always in line with the statutory regulatory requirements, the basic structure of the Management Board compensation remains unchanged, except for the aforementioned adjustments. Where necessary, other components of the Management Board compensation system have been adjusted to the changed regulatory framework conditions; in particular, the requirements of Section 87a of the German Stock Corporation Act (AktG), the Remuneration Ordinance for Institutions (Institutsvergütungsverordnung) and the recom- mendations of the revised German Corporate Governance Code (DCGK 2020) have been taken into account. Within the framework of consistent management of compensation outcomes (consequence management), regular backtesting will be performed and the necessary instruments to correct or reverse undesired outcomes will continue to be used, in particular in the form of forfeiture, malus and clawback provisions. The continuation of the deferral and retention periods ensures that only sustainable successes are rewarded and through the availability of forfeiture, malus and clawback provisions, as well as the shareholding guidelines, the compensation granted is closely linked to the company's success even for a number of years after a member of the Management Board has left the company. In the event of a change of control, a severance payment will no longer be available and a simple special termination right will continue to apply instead. Target structure from January 2021 197 Deutsche Bank Annual Report 2020 Management Board compensation report Outlook: Further development of the compensation system from 2021 onwards In particular, three areas requiring action were identified, resulting in the following adjustments to the compensation system: 1. Increasing the portion of share-based variable compensation to up to 100 % in the interest of full compliance with the Shareholding Guidelines The portion of share-based variable compensation can be increased in relation to cash compensation for individual members of the Management Board until the DB Shareholding Guidelines are fulfilled, especially for members who are new to the Management Board and do not yet hold any shares or hardly any shares of the company. Until the shareholding obligation according to the Guidelines is fulfilled by each member of the Management Board, the Supervisory Board is given the option to temporarily increase the portion of share-based variable compensation to up to 100% for individual Management Board members concerned. This is a moderate way to achieve the desired level of the shareholding obligation in the coming years without increasing the complexity of the compensation system at the same time. 2. Increasing transparency and consistency of variable compensation components The variable compensation is to be made clearer and more transparent through the setting of a fixed ratio of the target values of the two variable compensation components and the alignment of the maximum target achievement of both variable com- pensation components. In the future, the target values of the Short Term Award and the Long Term Award will account for 40% and 60%, as the case may be, of the total variable compensation for each Management Board member. The maximum target achievement for the Short Term Award and the Long Term Award will be harmonized and set at 150% for both compo- nents (instead of previously 200% for the Short Term Award). Furthermore, the fact that all individual targets will relate to the Short Term Award and all group targets will relate to the Long Term Award leads to a further increase in transparency and reduction of complexity with regard to the target structure. Overall, the adjustment of the compensation system will lead to a reduction in the total amount of achievable variable compensation. 3. Linking the sustainability strategy to variable compensation by implementing ESG objectives Since 2000, Deutsche Bank has joined numerous sustainability programs and signed renowned voluntary commitments. For example, Deutsche Bank has been committed to the ten principles of the United Nations Global Compact, the goals of the Paris Climate Agreement, the Climate Commitment of the German banking industry, the UN Principles for Responsible Bank- ing and the Equator Principles for many years. Sustainability issues are actively promoted and supported with memberships in the Banking Environment Initiative (BEI), the Sustainability Finance Advisory Council of the German Federal Government, the Finance Initiative of the UN Environment Programme (UNEP FI) and participation in the ECB's pilot project on climate intensity. Deutsche Bank has bundled and expanded the management and monitoring of sustainability aspects within the Group-wide Sustainability Council established in 2018 and expanded this with the Sustainability Committee established last year. Taking responsible action for the protection of the climate and biodiversity, adopting resource-saving business practices and assuming responsibility towards society by the Bank is seen as an important contribution to corporate success. Aspects of employee diversity and satisfaction as well as good corporate governance have been part of the Management Board's com- pensation for some time. An important goal of the further development of the compensation system is therefore linking Deutsche Bank's ESG sustain- ability strategy with the objectives of the Management Board and thus the compensation of the Management Board. Last year, the Supervisory Board and the Management Board further strengthened the Bank's sustainability commitment by linking the compensation of the Management Board and other top executives to additional non-financial sustainability criteria and objec- tives from 2021. Several ESG targets were added to the variable compensation components, such as a target volume for sustainable financing/ESG investments and a reduction of electricity consumption in the Bank's buildings. The Culture & Client Factor with its governance objectives was expanded to include environmental and social aspects and will in future be merged into a so-called ESG Factor. The degree of achievement of the ESG factor will be measured within the framework of a Deutsche Bank-specific matrix on the basis of various selected goals from the areas of environment, social and governance. These targets can be set and monitored ambitiously by the Bank. The ESG factor will be included in the Long Term Award with a share of 20% of the total long-term variable compensation. The following table provides an overview of the changes in the compensation structure applicable from 2021 compared to the previous compensation system. 198 Deutsche Bank Annual Report 2020 Employee compensation report Outlook: Further development of the compensation system from 2021 onwards Overview of changes in the compensation system Employee compensation report The content of the 2020 Employee Compensation Report is based on the qualitative and quantitative remuneration disclosure requirements outlined in Article 450 No. 1 (a) to (i) Capital Requirements Regulation (CRR) in conjunction with Section 16 of the Remuneration Ordinance for Institutions (Institutsvergütungsverordnung – InstVV). This Compensation Report takes a group-wide view and covers all consolidated entities of the Deutsche Bank Group. In accordance with regulatory requirements, equivalent reports for 2020 are prepared for the following Significant Institutions within Deutsche Bank Group: BHW Bausparkasse AG, Germany; Deutsche Bank Luxembourg S.A., Luxembourg; Deutsche Bank S.p.A., Italy; Deutsche Bank Mutui S.p.A., Italy; Deutsche Bank S.A.E., Spain. 199 Deutsche Bank Annual Report 2020 Employee compensation report Regulatory environment Regulatory environment Ensuring compliance with regulatory requirements is an overarching consideration in our Group Compensation Strategy. We strive to be at the forefront of implementing regulatory requirements with respect to compensation and will continue to work closely with our prudential supervisor, the European Central Bank (ECB), to be in compliance with all existing and new re- quirements. As an EU-headquartered institution, Deutsche Bank is subject to the Capital Requirements Regulation / Capital Requirements Directive (CRR / CRD) globally, as transposed into German national law in the German Banking Act and InstVV. We adopted the rules in its current version for all of Deutsche Bank’s subsidiaries and branches world-wide to the extent required in ac- cordance with Section 27 InstVV. As a Significant Institution within the meaning of InstVV, Deutsche Bank identifies all em- ployees whose work is deemed to have a material impact on the overall risk profile (Material Risk Takers or MRTs) in accord- ance with criteria stipulated under the Commission Delegated Regulation (EU) No. 604/2014. MRTs are identified at a Group level and at the level of Significant Institutions. Taking into account more sector-specific legislation and in accordance with InstVV, some of Deutsche Bank’s subsidiaries (in particular within the DWS Group) fall under the local transpositions of the Alternative Investments Fund Managers Directive (AIFMD) or the Undertakings for Collective Investments in Transferable Securities Directive (UCITS). We also identify MRTs in these subsidiaries. Identified employees are subject to the remuneration provisions outlined in the Guidelines on sound remuneration policies under AIFMD/UCITS published by the European Securities and Markets Authority (ESMA). Deutsche Bank takes into account the regulations targeted at employees who engage directly or indirectly with the bank’s clients, for instance as per the local transpositions of the Markets in Financial Instruments Directive II – MiFID II. Accordingly, we have implemented specific provisions for employees deemed to be Relevant Persons to ensure that they act in the best interest of our clients. Where applicable, Deutsche Bank is also subject to specific rules and regulations implemented by local regulators. Many of these requirements are aligned with the InstVV. However, where deviations exist, proactive and open discussions with regu- lators have enabled us to follow the local regulations whilst ensuring that any impacted employees or locations remain within the bank’s overall Group Compensation Framework. This includes, for example, the identification of Covered Employees in the United States under the requirements of the Federal Reserve Board. In any case, we apply the InstVV requirements as minimum standards globally. 200 Deutsche Bank Annual Report 2020 Employee compensation report Compensation governance Compensation governance Deutsche Bank has a robust governance structure enabling it to operate within the clear parameters of its Compensation Strategy and Compensation Policy. In accordance with the German two-tier board structure, the Supervisory Board governs the compensation of the Management Board members while the Management Board oversees compensation matters for all other employees in the Group. Both the Supervisory Board and the Management Board are supported by specific committees and functions, in particular the Compensation Control Committee (CCC), the Compensation Officer, and the Senior Executive Compensation Committee (SECC). In line with their responsibilities, the bank’s control functions are involved in the design and application of the bank’s remuner- ation systems, in the identification of MRTs and in determining the total amount of VC. This includes assessing the impact of employees’ behavior and the business-related risks, performance criteria, granting of remuneration and severance payments as well as ex-post risk adjustments. Reward Governance structure Supervisory Board1 Chairman’s Committee Audit Committee Risk Committee Integrity Committee Compensation Control Committee Support & Information Compensation Officer Monitoring Information & Reporting Monitoring Information Management Board Senior Executive Compensation Committee (SECC) 1 Does not comprise a complete list of Supervisory Board Committees. Compensation Control Committee (CCC) The Supervisory Board has set up the CCC to support it in establishing and monitoring the structure of the compensation system for the Management Board members of Deutsche Bank AG, considering, in particular, the effects on the risks and risk management in accordance with the InstVV. Furthermore, the CCC monitors the appropriateness of the compensation sys- tems for the employees of Deutsche Bank Group, as established by the Management Board and the SECC. The CCC checks regularly whether the total amount of variable compensation is affordable and set in accordance with the InstVV. The CCC also assesses the impact of the compensation systems on the management of risk, capital and liquidity, and seeks to ensure that the compensation systems are aligned with the business and risk strategies. Furthermore, the CCC supports the Super- visory Board in monitoring the MRT identification process and whether the internal control functions and the other relevant areas are properly involved in the structuring of the compensation systems. The CCC consists of the Chairperson of the Supervisory Board and five further Supervisory Board members, three of whom are employee representatives. The CCC held seven meetings in the calendar year 2020. The members of the Risk Committee attended two meetings as guests. Further details can be found in the Report of the Supervisory Board within the Annual Report. Compensation Officer The Management Board, in cooperation with the CCC, has appointed a Group Compensation Officer to support the Supervi- sory Board of Deutsche Bank AG and the supervisory boards of the bank’s Significant Institutions in Germany in performing their compensation related duties. The Compensation Officer is involved in the conceptual review, development, monitoring and application of the employees’ compensation systems on an ongoing basis. The Compensation Officer performs his mon- itoring obligations independently and provides an assessment of the appropriateness of the design and practices of the com- pensation systems for employees at least annually. He supports and advises the CCC regularly. 201 Deutsche Bank Annual Report 2020 Employee compensation report Compensation strategy Senior Executive Compensation Committee (SECC) The SECC is a delegated committee established by the Management Board which has the mandate to develop sustainable compensation principles, to prepare recommendations on Total Compensation levels and to ensure appropriate compensation governance and oversight. The SECC establishes the Group Compensation Strategy and the Compensation and Benefits Policy. Moreover, using quantitative and qualitative factors, the SECC assesses Group and divisional performance as a basis for compensation decisions and makes recommendations to the Management Board regarding the total amount of annual variable compensation and its allocation across business divisions and infrastructure functions. In order to maintain its independence, only representatives from infrastructure and control functions who are not assigned to any of the business divisions are members of the SECC. In 2020, the SECC’s members were comprised of the Chief Trans- formation Officer (based on his responsibility for HR) and the Chief Financial Officer as Co-Chairpersons, as well as the Chief Risk Officer (all of whom are Management Board members), the Global Head of Human Resources as well as an additional representative from both Finance and Risk as voting members. The Compensation Officer, the Deputy Compensation Officer, the Global Head of HR Performance & Reward and an additional representative from Finance participated as non-voting members. The SECC generally meets on a monthly basis and meets more frequently during the compensation process. It held 25 meetings in total with regard to the compensation process for performance year 2020. Compensation strategy Deutsche Bank recognizes that its compensation framework plays a vital role in supporting its strategic objectives. It enables us to attract and retain the individuals required to achieve our bank’s objectives. The Group Compensation Strategy is aligned to Deutsche Bank’s business strategy, risk strategy, and to its corporate values and beliefs as outlined below. Five key objectives of our compensation practices Core remuneration principles – To support the delivery of the bank’s client-focused, global bank strategy by attracting and retaining talent across its full range of diverse business models and country locations – To support the long-term, sustainable performance and development of the bank and a corresponding risk strategy – To promote and support long-term performance based on cost discipline and efficiency – To ensure that the bank’s compensation practices are safe, by way of risk-adjusting performance outcomes, preventing inappropriate risk taking, ensuring sustained compatibility with capital and liquidity planning, and complying with regulation – To apply and promote the bank’s corporate values of integrity, sustainable performance, client centricity, innovation, discipline and partnership – Align compensation to shareholder interests and sustained bank-wide profitability, taking account of risk – Maximize sustainable performance, both at the employee and the bank-wide level – Attract and retain the best talent – Calibrate compensation to reflect different divisions and levels of responsibility – Apply a simple and transparent compensation design – Ensure compliance with regulatory requirements 202 Deutsche Bank Annual Report 2020 Employee compensation report Group compensation framework Group compensation framework Our compensation framework emphasizes an appropriate balance between Fixed Pay (FP) and Variable Compensation (VC) – together Total Compensation (TC). It aligns incentives for sustainable performance at all levels of Deutsche Bank whilst ensuring the transparency of compensation decisions and their impact on shareholders and employees. The underlying prin- ciples of our compensation framework are applied to all employees equally, irrespective of differences in seniority, tenure or gender. Pursuant to CRD 4 and the requirements subsequently adopted in the German Banking Act, Deutsche Bank is subject to a ratio of 1:1 with regard to fixed-to-variable remuneration components, which was increased to 1:2 through shareholder ap- proval on May 22, 2014 with an approval rate of 95.27 %, based on valid votes by 27.68 % of the share capital represented at the Annual General Meeting. Nonetheless, the bank has determined that employees in specific infrastructure functions should continue to be subject to a ratio of at least 1:1 while Control Functions as defined by InstVV are subject to a ratio of 2:1. The bank has assigned a Reference Total Compensation (RTC) to eligible employees that describes a reference value for their role. This value provides our employees orientation regarding their FP and VC. Actual individual TC can be at, above or below the Reference Total Compensation, depending on VC decisions. Fixed Pay is used to compensate employees for their skills, experience and competencies, commensurate with the require- ments, size and scope of their role. The appropriate level of FP is determined with reference to the prevailing market rates for each role, internal comparisons and applicable regulatory requirements. FP plays a key role in permitting us to meet our strategic objectives by attracting and retaining the right talent. For the majority of our employees, FP is the primary compen- sation component. Variable Compensation reflects affordability and performance at Group, divisional, and individual level. It allows us to differ- entiate individual performance and to drive behavior through appropriate incentives that can positively influence culture. It also allows for flexibility in the cost base. VC generally consists of two elements – the Group VC Component and the Individual VC Component. The Group VC Component is based on one of the overarching goals of the compensation framework – to ensure an explicit link between VC and the performance of the Group. To assess our annual achievements in reaching our strategic targets, the four Key Performance Indicators (KPIs) utilized as the basis for determining the 2020 Group VC Component were: Common Equity Tier 1 (CET 1) Capital Ratio, Leverage Ratio, Adjusted Costs, and Post-Tax Return on Tangible Equity (RoTE). These four KPIs represent the bank’s capital, leverage, profitability, and cost targets. The Individual VC Component is delivered either in the form of Individual VC (generally applicable for employees at the level of Vice President (VP) and above) or as Recognition Award (generally applicable for employees at the level of Assistant Vice President (AVP) and below). In cases of negative performance contributions or misconduct, an employee’s VC can be reduced accordingly and can go down to zero. VC is granted and paid out subject to Group affordability. Under our compensation framework, there continues to be no guarantee of VC in an existing employment relationship. Guaranteed VC arrangements are utilized only in very limited cases for new hires in the first year of employment and are subject to the bank’s standard deferral requirements. Key components of the compensation framework Vice President and above Assistant Vice President and below1 Reference Total Compensation Reference Total Compensation Individual VC Group VC Component Fixed Pay 1 Some Assistant Vice Presidents and below in select entities and divisions are eligible for Individual VC in lieu of the Recognition Award. Recognition Award Group VC Component Fixed Pay 203 Deutsche Bank Annual Report 2020 Employee compensation report Determination of performance-based variable compensation Individual VC takes into consideration a number of financial and nonfinancial factors, including the applicable divisional per- formance, the employee’s individual performance, conduct, and adherence to values and beliefs, as well as additional factors such as the comparison of pay levels with the employee’s peer group and retention considerations. Recognition Awards provide the opportunity to acknowledge and reward outstanding contributions made by the employees of lower seniority levels in a timely and transparent manner. Generally, the overall size of the Recognition Award budget is directly linked to a set percentage of FP for the eligible population and it is currently paid out twice a year, based on a review of nominations and contributions in a process managed at the divisional level. In the context of InstVV, severance payments are considered variable compensation. The bank’s framework for severance payments ensures full alignment with the respective InstVV requirements. Employee benefits complement Total Compensation and are considered FP from a regulatory perspective, as they have no direct link to performance or discretion. They are granted in accordance with applicable local market practices and require- ments. Pension expenses represent the main element of the bank’s benefits portfolio globally. Determination of performance-based variable compensation In 2020, we put a special focus on further improving our governance on compensation related decision making processes. This included the development of more sophisticated analytical tools and scenarios for testing affordability and other premises to determine variable compensation. Furthermore, we simplified and increased transparency of our policies and procedures. This resulted in a strengthened set of rule-based principles for compensation decisions with an even closer link to the business and individual performance. The total amount of VC for any given performance year is initially determined at Group level, taking into account the bank’s affordability parameters, and then allocated to divisions and infrastructure functions based on their performance in support of achieving the bank’s strategic objectives. In a first step, Deutsche Bank assesses the bank’s profitability, solvency and liquidity position in line with its Risk Appetite Framework, including a holistic review against the bank’s multi-year strategic plan to determine what the bank “can” award in line with regulatory requirements (i.e. Group affordability). In the next step, the bank assesses Group and divisional risk- adjusted performance, i.e. what the bank “should” award in order to provide an appropriate compensation for contributions to the bank’s success. When assessing divisional performance, a range of considerations is referenced. Performance is assessed in the context of financial and – based on Balanced Scorecards – nonfinancial targets. The financial targets for front-office divisions are subject to appropriate risk-adjustment, in particular by referencing the degree of future potential risks to which Deutsche Bank may be exposed, and the amount of capital required to absorb severe unexpected losses arising from these risks. For the infra- structure functions, the financial performance assessment is mainly based on the achievement of cost targets. While the allocation of VC to infrastructure functions, and in particular to control functions, depends on the overall performance of Deutsche Bank, it is not dependent on the performance of the division(s) that these functions oversee. At the level of the individual employee, we have established Variable Compensation Guiding Principles, which detail the factors and metrics that have to be taken into account when making Individual VC decisions. Our managers must fully appreciate the risk-taking activities of individuals to ensure that VC allocations are balanced and risk-taking is not inappropriately incentivized. The factors and metrics to be considered include, but are not limited to, individual performance based on quantitative and qualitative aspects, culture and behavioral considerations, and disciplinary sanctions. Managers of MRTs must specifically document the factors and risk metrics considered when making Individual VC decisions. Generally, performance is assessed based on a one year period. However, for Management Board members of Significant Institutions, the performance over three years is taken into account. 204 Deutsche Bank Annual Report 2020 Employee compensation report Variable compensation structure Variable compensation structure Our compensation structures are designed to provide a mechanism that promotes and supports long-term performance of our employees and our bank. Whilst a portion of VC is paid upfront, these structures require that an appropriate portion is deferred to ensure alignment with the sustainable performance of the Group. For both parts of VC, we use Deutsche Bank shares as instruments and as an effective way to align compensation with Deutsche Bank’s sustainable performance and the interests of shareholders. We continue to go beyond regulatory requirements with the amount of VC that is deferred and our minimum deferral periods. The deferral rate and period are determined based on the risk categorization of the employee, the division and the business unit. We start to defer parts of variable compensation for MRTs where VC is set at or above € 50,000. For non-MRTs, deferrals start at higher levels of VC. MRTs are on average subject to deferral rates in excess of the minimum 40 % (60 % for Senior Management) as required by InstVV. For MRTs in Material Business Units (MBU) we introduced a deferral rate of at least 50 %. The VC threshold for MRTs requiring at least 60 % deferral is set at € 500,000. Furthermore, Directors and Managing Directors in Corporate Bank (CB), Investment Bank (IB) or Capital Release Unit (CRU) are subject to a VC deferral rate of 100 % with respect to any VC in excess of € 500,000. If Fixed Pay for these employees exceeds an amount of € 500,000, the full VC is deferred. As detailed in the table below, deferral periods range from three to five years, dependent on employee groups. Overview on 2020 Award Types (excluding DWS Group) Award Type Upfront: Cash VC Description Upfront cash portion Beneficiaries All eligible employees Deferral Period N/A Retention Period N/A Proportion InstVV MRTs: 50 % of upfront VC Non-MRTs: 100 % of upfront VC Upfront: Equity Upfront Award (EUA) Upfront equity portion (linked to Deutsche Bank’s share price over the retention period) All InstVV MRTs with VC >= € 50,000 N/A Twelve months 50 % of upfront VC Deferred: Restricted Incentive Award (RIA) Deferred cash portion All employees with de- ferred VC Deferred: Restricted Equity Award (REA) Deferred equity portion (linked to Deutsche Bank’s share price over the vesting and retention period) All employees with de- ferred VC N/A 50 % of deferred VC Twelve months for In- stVV MRTs 50 % of deferred VC Equal tranche vesting: CB/IB/CRU: 4 years MRTs in MBU: 4 years Sen. Mgmt.1: 5 years Other: 3 years Equal tranche vesting: CB/IB/CRU: 4 years MRTs in MBU: 4 years Sen. Mgmt.1: 5 years Other: 3 years N/A – Not applicable 1 For the purpose of Performance Year 2020 annual awards, Senior Management is defined as DB AG MB-1 positions; voting members of Business Division Top Executive Committees; MB members of Significant Institutions; respective MB-1 positions with managerial responsibility. For the specific deferral rules for the Management Board of DB AG refer to the Compensation Report for the Management Board. Our employees are not allowed to sell, pledge, transfer or assign a deferred award or any rights in respect to the award. They may not enter into any transaction having an economic effect of hedging any variable compensation, for example offsetting the risk of price movement with respect to the equity-based award. Our Human Resources and Compliance functions, sup- ported by the Compensation Officer, work together to monitor employee trading activity and to ensure that all our employees comply with this requirement. 205 Deutsche Bank Annual Report 2020 Employee compensation report Ex-post risk adjustment of variable compensation Ex-post risk adjustment of variable compensation In line with regulatory requirements relating to ex-post risk adjustment of variable compensation, we believe that a long-term view on conduct and performance of our employees is a key element of deferred VC. As a result, all deferred awards are subject to performance conditions and forfeiture provisions as detailed below. Overview of Deutsche Bank Group performance conditions and forfeiture provisions of Variable Compensation granted for Perfor- mance Year 2020 1 Considering clearly defined and governed adjustments for relevant Profit and Loss items (e.g., business restructurings; impairments of goodwill or intangibles). 2 Other provisions may apply as outlined in the respective plan rules. 206 Deutsche Bank Annual Report 2020 Employee compensation report Employee groups with specific compensation structures Employee groups with specific compensation structures For some areas of our bank, compensation structures apply that deviate, within the applicable regulatory framework, in some aspects from the Group Compensation Framework outlined previously. Postbank units While generally executive staff of former Postbank follows the remuneration structure of Deutsche Bank, the compensation for any other staff in Postbank units is based on specific frameworks agreed with trade unions or with the respective workers’ councils. Where no collective agreements exist, compensation is subject to individual contracts. In general, non-executive and tariff staff in Postbank units receive VC, but the structure and portion of VC can differ between legal entities. DWS The vast majority of DWS asset management entities and employees fall under AIFMD or UCITS, while a limited number of employees remain in scope of the bank’s Group Compensation Framework and InstVV. DWS has established its own com- pensation governance, policy, and structures, as well as a Risk Taker identification process in line with AIFMD/UCITS require- ments. These structures and processes are in line with InstVV where required, but tailored towards the Asset Management business. Pursuant to the ESMA Guidelines, DWS’s compensation strategy is designed to ensure an appropriate ratio be- tween fixed and variable compensation. Generally, DWS applies remuneration rules that are equivalent to the Deutsche Bank Group approach, but use DWS Group- related parameters, where possible. Notable deviations from the Group Compensation Framework include the use of share- based instruments linked to DWS shares and fund-linked instruments. These serve to improve the alignment of employee compensation with DWS’ shareholders’ and investors’ interests. Control Functions In line with InstVV, the bank has defined control functions that are subject to specific regulatory requirements. These control functions comprise Risk, Compliance, Anti-Financial Crime, Group Audit, parts of Human Resources, and the Compensation Officer and his Deputy. To prevent conflicts of interests, the parameters used to determine the Individual VC Component of these control functions do not follow the same parameters being used for the business they oversee. Based on their risk profile, these functions are subject to a fixed-to-variable pay ratio of 2:1. In addition, for some corporate functions that perform internal control roles (including Legal, Group Finance, Group Tax, Reg- ulation, and other parts of Human Resources), the bank has determined a fixed-to-variable pay ratio of 1:1. Tariff staff Within Deutsche Bank Group there are more than 17,000 tariff employees in Germany (based on full-time equivalent). These tariff employees are primarily employed by Deutsche Bank AG and former Postbank subsidiaries. Tariff employees employed by Deutsche Bank AG are subject to a collective agreement (Tarifvertrag für das private Bankgewerbe und die öffentlichen Banken), as negotiated between trade unions and employer associations. Former Postbank units are subject to agreements as negotiated with the respective trade unions directly. The remuneration of tariff staff is included in the quantitative disclosures in this report. 207 Deutsche Bank Annual Report 2020 Employee compensation report Compensation decisions for 2020 Compensation decisions for 2020 Year-end considerations and decisions for 2020 All compensation decisions are made within the boundaries of regulatory requirements. These requirements form the over- arching and limiting principle of determining compensation in Deutsche Bank. In particular, management must ensure that compensation decisions are not detrimental to maintaining a sound capital base and liquidity resources of the bank. In this respect, 2020 was an extraordinary year for the industry. In the light of the COVID-19 pandemic, the ECB and national regulators called upon all institutions to apply a moderate approach to variable compensation in order to preserve a strong capital base for the future. At the same time, despite the external circumstances and the bank’s ongoing transformation, 2020 was a successful year for Deutsche Bank. Thanks to our new strategy and to the great dedication of our employees to the bank, we are ahead of our transformation plan. As a result, we have achieved all of our strategic objectives over the past year. In 2020, we are profitable with a pre-tax profit of more than € 1 billion and a net profit of more than € 600 million. We have also made further progress on costs, which allowed us to achieve our adjusted cost target. The bank has built firm foundations for sustainable profitability, and we are confident that this overall positive trend will continue in 2021, despite these challenging times. At the same time, Deutsche Bank recognized the current economic situation and the recommendation of the ECB and took this into consideration when making its compensation decisions. We applied a prudent and forward-looking approach when deciding on the 2020 variable compensation and deferral structures, without losing sight of the need to remunerate our em- ployees, according to their performance and in line with market conditions, and of course within the boundaries of affordability. In particular, when determining the amount of year-end performance-based VC, we have exercised more moderation than the results at the Group and divisional level would have required. Also, we continue to apply deferral structures that go beyond the regulatory minimum, resulting in a deferral rate of 47 % in 2020. In the context of the above considerations, the Management Board confirmed that the bank is in a position to award variable compensation, including a year-end performance-based VC pool of € 1.857 billion for 2020. The VC for the Management Board of Deutsche Bank AG was determined by our Supervisory Board in a separate process. It is, however, included in the tables and charts below. For details, please refer to the Management Board Compensation Report. As part of the overall 2020 VC awards granted in March 2021, the Group VC Component was awarded to all eligible employees in line with the assessment of the four defined KPIs, as outlined in the section Group Compensation Framework. The Man- agement Board determined a payout rate of 72.5 % for the Group VC Component in 2020 (2019: 60 %). Compensation awards for 2020 – all employees in € m. (unless stated otherwise)¹ Number of employees (full-time equivalent) Total compensation Base salary and allow- ances Pension expenses Fixed Pay according to § 2 InstVV Year-end perfor- mance-based VC4 Other VC4 Severance payments5 Super- visory Board² Mana- gement Board3 IB3 CB3 PB3 AM3 CRU3 Control Func- tions3 Corporate Func- tions3 2020 2019 Group Total Group Total 20 6 6 0 6 0 0 0 10 4,258 7,368 29,945 3,926 690 62 1,032 2,048 2,570 482 6,423 32,247 84,659 87,597 2,798 10,119 10,093 161 757 26 7 946 60 695 67 1,975 138 415 37 88 7 606 56 2,190 182 6,940 7,350 581 554 32 1,006 762 2,113 451 95 663 2,371 7,494 7,931 30 0 0 876 138 28 152 14 103 227 54 177 181 36 22 25 15 26 70 4 20 295 25 107 1,857 1,444 314 405 286 482 Variable Pay according to § 2 InstVV 1 The table may contain marginal rounding differences. FTE (full-time equivalent) as of December 31, 2020. Pension expenses for 2019 adjusted. 2 Supervisory Board includes the Deutsche Bank AG Supervisory Board members. They are not considered for the Group Total number of employees. Employee representa- tives are considered with their compensation for the Supervisory Board role only (their employee compensation is included in the relevant divisional column). The remunera- tion for members of the Deutsche Bank AG Supervisory Board is not reflected in the Group Total. 2,625 2,162 1,042 269 239 427 457 95 30 66 3 Management Board includes the board members of Deutsche Bank AG. IB = Investment Bank; CB = Corporate Bank; PB = Private Bank; AM = Asset Management; CRU = 0 Capital Release Unit. Control Functions include Chief Risk Office, Group Audit, Compliance and Anti-Financial Crime. Corporate Functions include any Infrastructure function which is neither captured as a Control Function nor part of any division. Employees’ full year compensation is allocated to columns based on the role at year-end. 4 Year-end performance-based VC includes Individual and Group VC. Other VC includes other contractual VC commitments such as sign-on awards and retention awards (including € 171 million granted at the beginning of the year due to increased retention risk). Other VC in 2020 also includes recognition awards (€ 45 million) and specific VC elements for tariff staff and civil servants formerly reported as Year-end performance-based VC. 2019 figures disclosed in the 2019 Compensation Report for Year-end perfor- mance-based VC (€ 1,516 million) and Other VC (€ 242 million) were adjusted accordingly for the purpose of this table. The table does not include expenses eligible for reim- bursement related to Prime Finance and does not include new hire replacement awards for lost entitlements from previous employers (buyouts). 5 Severance payments now includes restructuring based severance costs. 2019 number restated to include severance costs formerly reported in Note 10 “Restructuring” only. All relevant 2019 Group Totals adjusted accordingly. 208 Deutsche Bank Annual Report 2020 Employee compensation report Material Risk Taker compensation disclosure Reported year-end performance-based Variable Compensation and deferral rates year over year Material Risk Taker compensation disclosure On a global basis, 2,298 employees were identified as MRTs according to InstVV for financial year 2020, compared to 2,553 employees for 2019 (-10 %). This decrease is primarily a result of a reduced number of quantitative (remuneration driven) MRTs, along with a reduction of headcount and our exit from some businesses. The remuneration elements for all MRTs are detailed in the table below in accordance with Section 16 InstVV and Article 450 CRR. 209 Deutsche Bank Annual Report 2020 Employee compensation report Material Risk Taker compensation disclosure Aggregate remuneration for Material Risk Takers according to InstVV Super- visory Board² Mana- gement Board3 IB3 CB3 PB3 AM3 CRU3 Control Func- tions3 Corporate Func- tions3 2020 2019 Group Total Group Total 41 31 45 36 1,027 925 36 94 52 18 1,239 522 183 165 29 128 63 301 256 51 192 108 37 26 4 46 20 95 53 4 73 34 229 216 39 103 80 340 292 2,298 2,553 1,999 2,101 51 247 135 232 253 2,130 2,070 1,022 1,297 52 522 63 108 20 34 80 135 1,020 1,295 0 0 0 0 0 0 0 0 1 1 42 716 66 84 26 39 23 112 1,109 773 22 364 37 48 17 23 14 66 590 411 21 352 28 36 0 0 0 0 9 1 17 0 36 593 41 45 10 28 18 297 21 22 18 296 21 22 0 0 0 0 4 5 1 14 14 0 9 0 8 4 4 0 45 518 361 0 1 1 51 813 526 26 406 260 26 406 265 0 1 1 64 1,050 69 93 43 65 29 122 1,536 1,971 11 41 5 9 5 2 5 12 89 115 10 54 41 1,009 4 64 9 84 5 38 2 63 5 24 11 110 88 114 1,446 1,856 in € m. (unless stated otherwise)¹ Number of MRTs (headcount) Number of MRTs (FTE) Thereof: Senior Man- agement4 Total Pay Total Fixed Pay Thereof: In cash (incl. pension expenses) In shares or other in- struments Total Variable Pay for period5 Thereof: In cash In shares or share- based instruments In other types of in- struments Total Variable Pay for period, deferred Thereof: In cash In shares or share- based instruments In other types of in- struments Total amount of variable pay still outstanding at the beginning of the year that was deferred in pre- vious years Thereof: Vested Vested and paid/de- livered Unvested Deferred Variable Pay awarded, paid out or re- duced during period 0 7 7 6 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 7 5 5 1 0 11 20 27 13 187 275 0 0 831 461 22 15 42 36 31 17 46 36 9 11 21 10 29 17 393 247 592 389 Awarded during period Paid out during period Reduced through ex- plicit risk adjustments6 Number of beneficiaries of guaranteed variable remuneration (incl. sign- on payments) Total amount of guaran- teed variable pay (incl. sign-on payments) Total amount of sever- ance payments granted during period7 Number of beneficiaries of severance payments granted during period Highest severance pay- ment granted to an indi- vidual during period 1 The table may contain marginal rounding differences. Employees are allocated to columns based on their primary role. FTE as of December 31, 2020. 2 Supervisory Board includes the Supervisory Board members of all Significant Institutions within Deutsche Bank Group. Employee representatives solely identified due to their 130 11 10 69 20 12 20 33 25 23 8 3 2 1 0 0 3 2 5 6 0 0 213 1 1 9 1 3 2 2 1 3 1 0 1 9 5 0 1 0 3 5 0 0 70 11 9 9 2 0 0 0 0 Supervisory Board role are considered with their compensation for the Supervisory Board role only. 3 Management Board includes the respective board members of all Significant Institutions within Deutsche Bank Group. IB = Investment Bank; CB = Corporate Bank; PB = Private Bank; AM = Asset Management; CRU = Capital Release Unit. Control Functions include Chief Risk Office, Group Audit, Compliance, Anti-Financial Crime. Corporate Functions include any Infrastructure function which is neither captured as a Control Function nor part of any division. 4 Senior Management for the purpose of this disclosure includes DB AG MB and MB-1 positions, voting members of Business Division Top Executive committees, MB members of Significant Institutions and respective MB-1 positions with managerial responsibility. 5 Total Variable Pay includes Deutsche Bank´s Year-end performance-based VC for 2020, Other VC, and severance payments. Buyouts are not included. 6 Includes forfeited equity based parts of the Retention Award Program granted in January 2017 due to not meeting the predefined share price target in 2020. 7 Severance payments are generally not deferred. 210 Deutsche Bank Annual Report 2020 Compensation system for Supervisory Board members Material Risk Taker compensation disclosure Remuneration of high earners in € Total Pay1 1,000,000 to 1,499,999 1,500,000 to 1,999,999 2,000,000 to 2,499,999 2,500,000 to 2,999,999 3,000,000 to 3,499,999 3,500,000 to 3,999,999 4.000,000 to 4,499,999 4,500,000 to 4,999,999 5,000,000 to 5,999,999 6,000,000 to 6,999,999 7,000,000 to 7,999,999 8,000,000 to 8,999,999 9,000,000 to 9,999,999 10,000,000 to 10,999,999 11,000,000 to 11,999,999 12,000,000 to 12,999,999 13,000,000 to 13,999,999 Total 2020 2019 Number of individuals Number of individuals 333 150 67 38 25 15 17 9 12 10 3 3 1 1 0 0 0 684 305 122 50 37 21 20 9 8 6 4 0 0 0 0 0 0 1 583 1 Includes all components of FP and VC (including severances). Buyouts are not included. Includes DB AG Management Board members and 2020 leavers. In total, 684 employees received a Total Pay of € 1 million or more for 2020, compared to 583 employees in 2019. This increase is based on higher levels of performance-based variable compensation following our significantly improved Group and divisional results as outlined above. Compensation system for Supervisory Board mem- bers The compensation principles for Supervisory Board members are set forth in our Articles of Association, which our sharehold- ers amend from time to time at the Annual General Meeting. Such compensation provisions, which were newly conceived in 2013, were last amended by resolution of the Annual General Meeting on May 18, 2017 and became effective on October 5, 2017. Accordingly, the following provisions apply: The members of the Supervisory Board receive fixed annual compensation (“Supervisory Board Compensation”). The annual base compensation amounts to € 100,000 for each Supervisory Board member. The Supervisory Board Chairman receives twice that amount and the Deputy Chairperson one and a half times that amount. Members and chairs of the committees of the Supervisory Board are paid additional fixed annual compensation as follows: Committee in € Audit Committee Risk Committee Nomination Committee Mediation Committee Integrity Committee Chairman’s Committee Compensation Control Committee Strategy Committee Technology, Data and Innovation Committee Dec 31, 2020 Member 100,000 100,000 50,000 0 100,000 50,000 50,000 50,000 50,000 Chair 200,000 200,000 100,000 0 200,000 100,000 100,000 100,000 100,000 75 % of the compensation determined is disbursed to each Supervisory Board member after submitting invoices within the first three month of the following year. The other 25 % is converted by the company at the same time into company shares based on the average closing price on the Frankfurt Stock Exchange (Xetra or successor system) during the last ten trading days of the preceding January, calculated to three digits after the decimal point. The share value of this number of shares is paid to the respective Supervisory Board member in February of the year following his departure from the Supervisory Board or the expiration of his term of office, based on the average closing price on the Frankfurt Stock Exchange (Xetra or successor system) during the last ten trading days of the preceding January, provided that the member does not leave the Supervisory Board due to important cause which would have justified dismissal. 211 Deutsche Bank Annual Report 2020 Compensation system for Supervisory Board members Supervisory Board compensation for the 2020 financial year In case of a change in Supervisory Board membership during the year, compensation for the financial year will be paid on a pro rata basis, rounded up/down to full months. For the year of departure, the entire compensation is paid in cash; a forfeiture regulation applies to 25 % of the compensation for that financial year. The company reimburses the Supervisory Board members for the cash expenses they incur in the performance of their office, including any value added tax (VAT) on their compensation and reimbursements of expenses. Furthermore, any employer contributions to social security schemes that may be applicable under foreign law to the performance of their Supervisory Board work shall be paid for each Supervisory Board member affected. Finally, the Chairman of the Supervisory Board will be appropriately reimbursed for travel expenses incurred in performing representative tasks that his function requires and for the costs of security measures required on account of his function. In the interest of the company, the members of the Supervisory Board will be included in an appropriate amount, with a deductible, in any financial liability insurance policy held by the company. The premiums for this are paid by the company. Supervisory Board compensation for the 2020 financial year Individual members of the Supervisory Board received the following compensation for the 2020 financial year (excluding value added tax). Members of the Supervisory Board in € Dr. Paul Achleitner1 Detlef Polaschek Ludwig Blomeyer-Bartenstein Frank Bsirske Mayree Carroll Clark Jan Duscheck Dr. Gerhard Eschelbeck Sigmar Gabriel2 Katherine Garrett-Cox3 Timo Heider Martina Klee Henriette Mark Richard Meddings4 Gabriele Platscher Bernd Rose Gerd Alexander Schütz Prof. Dr. Stefan Simon4 Stephan Szukalski5 John Alexander Thain Michele Trogni Dr. Dagmar Valcárcel6 Dr. Theodor Weimer7 Prof. Dr. Norbert Winkeljohann Jürg Zeltner8 Total Compensation for fiscal year 2020 Compensation for fiscal year 2019 Fixed 802,083 450,000 300,000 300,000 425,000 250,000 150,000 166,667 100,000 250,000 150,000 250,000 0 300,000 275,000 175,000 0 200,000 200,000 350,000 425,000 108,333 450,000 0 6,077,083 Thereof payable in 1st quarter 2021 601,563 337,500 225,000 225,000 318,750 187,500 112,500 125,000 100,000 187,500 112,500 187,500 0 225,000 206,250 131,250 0 200,000 150,000 262,500 318,750 81,250 337,500 0 4,632,813 Fixed 900,000 450,000 300,000 300,000 370,833 250,000 150,000 0 300,000 250,000 150,000 250,000 87,500 300,000 250,000 150,000 320,833 200,000 200,000 320,833 166,667 0 420,833 25,000 6,112,499 Thereof paid in 1st quarter 2020 675,000 337,500 225,000 225,000 278,125 187,500 112,500 0 225,000 187,500 112,500 187,500 87,500 225,000 187,500 112,500 320,833 150,000 150,000 240,625 125,000 0 315,625 25,000 4,692,708 1 In the context of the discussion of a voluntary waiver by senior managers of the bank of portions of their compensation claims, Dr. Achleitner offered to waive one-twelfth (€ 72,917) if this future compensation claim for the 2020 financial year pursuant to the Articles of Association. The Management Board accepted his offer. 2 Member since March 11, 2020. 3 Member until May 20, 2020. 4 Member until July 31, 2019. 5 Member until December 31, 2020. 6 Member since August 1, 2019. 7 Member since May 20,2020. 8 Member from August 20 until December 15, 2019. Following the submission of invoices 25 % of the compensation determined for each Supervisory Board member for the 2020 financial year was converted into notional shares of the company on the basis of a share price of € 8.9201 (average closing price on the Frankfurt Stock Exchange (Xetra) during the last ten trading days of January 2021). Members who left the Super- visory Board in 2020 were paid the entire amount of compensation in cash. The following table shows the number of notional shares of the Supervisory Board members, to three digits after the decimal point, that were awarded in the first three months 2021 as part of their 2020 compensation as well as the number of notional shares accrued from previous years as part of the compensation accumulated during the respective membership in the Su- pervisory Board as well as the total amounts paid out in February 2021 for members that left the Supervisory Board. 212 Deutsche Bank Annual Report 2020 Compensation system for Supervisory Board members Supervisory Board compensation for the 2020 financial year Members of the Supervisory Board Dr. Paul Achleitner2 Detlef Polaschek3 Ludwig Blomeyer-Bartenstein3 Frank Bsirske4 Mayree Carroll Clark3 Jan Duscheck4 Dr. Gerhard Eschelbeck5 Sigmar Gabriel6 Katherine Garrett-Cox7 Timo Heider4 Martina Klee4 Henriette Mark4 Gabriele Platscher4 Bernd Rose4 Gerd Alexander Schütz8 Stephan Szukalski9 John Alexander Thain3 Michele Trogni3 Dr. Dagmar Valcárcel10 Dr. Theodor Weimer11 Prof. Dr. Norbert Winkeljohann12 Total Number of notional shares Converted in February 2021 as part of the compensation 2020 22,479.662 12,611.966 8,407.977 8,407.977 11,911.301 7,006.648 4,203.989 4,671.099 0 7,006.648 4,203.989 7,006.648 8,407.977 7,707.313 4,904.654 0 5,605.318 9,809.307 11,911.301 3,036.214 12,611.966 161,911.954 Total number accrued during the current term of office 63,229.466 22,616.259 15,077.506 15,077.506 18,256.494 12,564.588 9,788.371 0 21,530.850 12,564.588 7,538.753 12,564.588 15,077.506 12,564.588 7,538.753 10,051.671 10,051.671 15,743.576 5,328.559 0 15,283.311 302,448.604 Total (cumulative) 85,709.128 35,228.225 23,485.483 23,485.483 30,167.795 19,571.236 13,992.360 4,671.099 21,530.850 19,571.236 11,742.742 19,571.236 23,485.483 20,271.901 12,443.407 10,051.671 15,656.989 25,552.883 17,239.860 3,036.214 27,895.277 464,360.558 In February 2021 payable in €¹ 0 0 0 0 0 0 0 0 192,057 0 0 0 0 0 0 89,662 0 0 0 0 0 281,719 1 At a value of € 8.9201 based on the average closing price on the Frankfurt Stock Exchange (Xetra or successor system) during the last ten trading days of January 2021. 2 Member was re-elected on May 18, 2017. The calculation was performed while taking into account Dr. Achleitner’s waiver of one-twelfth (€ 72,917) of his compensation for the 2020 financial year pursuant to the Articles of Association. 3 Member since May 24, 2018. 4 As Employee representatives on April 26, 2018 re-elected. 5 Member since May 18, 2017. 6 Member since March 11, 2020. 7 Member until May 20, 2020. 8 Member on May 24, 2018 re-elected. 9 Member until December 31, 2020. 10 Member since August 1, 2019. 11Member since May 20, 2020. 12 Member since August 1, 2018. All employee representatives on the Supervisory Board, with the exception of Frank Bsirske, Jan Duscheck and Stephan Szukalski (Member until December 31, 2020), are employed by us. In the 2020 financial year, we paid such members a total amount of € 1.1 million in the form of salary, retirement and pension compensation in addition to their Supervisory Board compensation. We do not provide members of the Supervisory Board with any benefits after they have left the Supervisory Board, though members who are or were employed by us are entitled to the benefits associated with the termination of such employment. During 2020, we set aside € 0.11 million for pension, retirement or similar benefits for the members of the Supervisory Board who are or were employed by us. With the agreement of the Bank’s Management Board, Dr. Paul Achleitner performs representative functions in various ways on an unpaid basis for the Bank and participates in opportunities for referrals of business for the Bank. These tasks are related to the functional responsibilities of the Chairman of the Supervisory Board of Deutsche Bank AG. In this respect, the reim- bursement of costs is provided for in the Articles of Association. On the basis of a separate contractual agreement, the Bank provides Dr. Paul Achleitner with infrastructure and support services free of charge for his services in the interest of the Bank. He is therefore entitled to avail himself of internal resources for preparing and carrying out these activities. The Bank’s security and car services are available for Dr. Paul Achleitner for use free of charge for these tasks. The Bank also reimburses travel expenses and attendance fees and covers the taxes for any non-cash benefits provided. On September 24, 2012, the Chair- man’s Committee approved the conclusion of this agreement. The provisions apply for the duration of Dr. Paul Achleitner’s tenure as Chairman of the Supervisory Board and are reviewed on an annual basis for appropriateness. Under this agreement between Deutsche Bank and Dr. Achleitner, support services equivalent to € 135,000 (2019: € 208,000) were provided and reimbursements for expenses amounting to € 150,290 (2019: € 277,010) were paid during the 2020 financial year. 213 Deutsche Bank Annual Report 2020 Sustainability Supervisory Board compensation for the 2020 financial year Sustainability Deutsche Bank has long been committed to sustainability and in recent years this issue has steadily gained importance in our discussions with investors, clients, and the broader public. Sustainability is a central component of our “Compete to win,” strategy, which we set in mid-2019. Since then, we have made significant progress in embedding sustainability into our busi- ness practices. As part of this progress, we defined a sustainability mission. The mission reflects our broad understanding of sustainability, encompassing environmental, social, and governance (ESG) aspects. Executing our sustainability strategy will involve a pro- found transformation of our bank and its business activities, which must increasingly assist our clients in their transformation toward sustainable and climate-neutral business models. This is why in 2020 we set a target of achieving € 200 billion in sustainable financing and ESG investment by year-end 2025. This target does not include assets managed by asset manager DWS. We see sustainability as a significant business opportunity. But we also strive to help achieve the Paris Climate Agreement’s targets and the United Nations (UN) Sustainable Development Goals through our actions. In addition, we support a number of international principles and standards, including the Ten Principles of the UN Global Compact and the UN Principles for Responsible Banking. In 2020, we added to these commitments by formally joining the Equator Principles. We also signed the Collective Commitment to Climate Action of the German Financial Sector, pledging to align our credit portfolios with the goals of the Paris Agreement. To execute our sustainability mission and achieve our targets, we have embedded sustainability holistically throughout the bank, focusing our efforts on the following four dimensions: – Sustainable finance – Policies and commitments – Our own operations – Thought leadership and stakeholder engagement In 2020, we have significantly strengthened our sustainability governance structure to move forward effectively in all four dimensions of our sustainability strategy. We established a Management Board Sustainability Committee, which held its inau- gural meeting in late October 2020. It makes decisions on all of the bank’s significant sustainability initiatives. Chaired by our Chief Executive Officer, it met twice in 2020 and consists of 13 members, including Management Board members, and the four heads of the business divisions. The committee also serves as the steering committee for sustainability-related transfor- mation initiatives as part of the bank’s change management governance, which is coordinated by the Group Transformation Office. Our Sustainability Council, which was established in in 2018, remains an important governance body. It does preparatory work for the Sustainability Committee’s decisions, coordinates their implementation, and oversees the work streams aligned to the four dimensions of the bank’s sustainability strategy. It is composed of executives from the four business divisions and all infrastructure functions. It meets on a monthly basis. More information on sustainability is published in our Non-Financial Report 2020. It includes Deutsche Bank’s combined sep- arate non-financial report in accordance with § 315 (3) of the German Commercial Code. A PDF of the Non-Financial Report is published on our Investor Relations website at db.com/annual-reports. 214 Deutsche Bank Annual Report 2020 Employees Group headcount Employees Group headcount As of December 31, 2020, we employed a total of 84,659 staff members compared to 87,597 as of December 31, 2019. We calculate our employee figures on a full-time equivalent basis, meaning we include proportionate numbers of part-time employees. The following table shows our numbers of full-time equivalent employees as of December 31, 2020, 2019 and 2018. Employees1 Germany Europe (outside Germany), Middle East and Africa Asia/Pacific North America2 Latin America Total employees Dec 31, 2020 Dec 31, 2019 37,315 19,617 19,430 8,149 148 84,659 40,491 19,672 18,874 8,399 162 87,597 Dec 31, 2018 41,669 20,871 19,732 9,275 189 91,737 1 Full-time equivalent employees; in 2019 the health insurance company of Deutsche Bank aligned its FTE definition which decreased the Group number as of December 31, 2019 by 81 (prior period not restated). 2 Primarily the United States. The number of our employees decreased in 2020 by 2,938 or 3.4 % driven by implementation of our targets announced in July 2019: – Germany (-3,176; -7.8 %) driven by the implementation of restructuring measures, primarily in the Private Bank related to private clients and global functions of the Private Bank and to Infrastructure functions driven by the sale of Postbank Sys- tems (-1,339); – North America (-250; -3.0 %) driven by reductions in all divisions and related infrastructure functions; – Latin America (-14; -8.6 %) due to reductions primarily in Mexico as a result of the implementation of our footprint strategy; – EMEA ex Germany (-55; -0.3 %) mainly driven by reductions in the Private Bank partly offset by increases in Technology Data & Innovation and in COO; – Asia/Pacific (+556; +2.9 %) primarily driven by increases in Technology Data & Innovation and in COO. The following table shows the distribution of full-time equivalent employees by division as of December 31, 2020, 2019 and 2018. Employees Corporate Bank (CB) Investment Bank (IB) Private Bank (PB) Asset Management (AM) Capital Release Unit (CRU) Infrastructure Dec 31, 2020 Dec 31, 2019 Dec 31, 2018 8.7 % 5.0 % 35.4 % 4.6 % 0.6 % 45.7 % 8.8 % 5.0 % 36.0 % 4.5 % 0.7 % 45.0 % 8.3 % 5.0 % 35.4 % 4.4 % 1.7 % 45.2 % – Corporate Bank (CB, -345; -4.5 %) mainly driven by reductions in Commercial Banking Germany; – Investment Bank (IB, -93; -2.1 %) mainly reductions in Fixed Income & Currencies; – Private Bank (PB, -1,654; -5.2 %) mainly driven by the reductions in Germany and in EMEA ex Germany; – Asset Management (AM, +1; +0.0 %) primarily driven by reductions in the US and UK more than offset by increases in Asia/Pacific related to DWS COO; – Capital Release Unit (CRU, -139; -22.3 %) mainly driven by reductions in the legacy Equities Business; – Infrastructure functions (-709; -1.8 %) primarily driven by the sale of Postbank Systems (-1,339) and reductions in Chief Transformation Office and HR (-171) and in Finance (-146), partly offset by increases in Technology Data & Innovation (+667 excluding sale of Postbank Systems) and in COO division (+322) mainly driven by insourcing of business critical external roles. 215 Deutsche Bank Annual Report 2020 Employees Promoting internal career mobility Post-employment benefit plans We sponsor a number of post-employment benefit plans on behalf of our employees, both defined contribution plans and defined benefit plans. In our globally coordinated accounting process covering defined benefit plans with a defined benefit obligation exceeding € 2 million our global actuary reviews the valuations provided by locally appointed actuaries in each country. By applying our global principles for determining the financial and demographic assumptions we ensure that the assumptions are best-estimate, unbiased and mutually compatible, and that they are globally consistent. For a further discussion on our employee benefit plans see Note 33 “Employee Benefits” to our consolidated financial state- ments. Restructuring As of December 31, 2020, Deutsche Bank had reduced the number of employees by 2,938 (-3.4%) to 84,659. The COVID-19 pandemic affected our reduction target in 2020. Deutsche Bank continued to improve efficiency and infrastructure, including further reduction of positions by the end of 2022. Reductions primarily in Germany mainly driven by Private Bank (-1,356) and by sale of entity Postbank Systems. In 2020, business-critical external roles, especially in IT, were again insourced. Talent acquisition In 2020, the total staff turnover has been affected by the COVID-19 pandemic: the bank temporarily suspended restructuring, while voluntary staff turnover declined by about 25% in 2020. The voluntary staff turnover rate was at 5.9 % in 2020 (2019: 8.0). The decrease of 2.1 percentage points is mainly driven by a lower staff turnover rate in Asia/Pacific (2020: 11.3 %, 2019: 17.0 %), Americas (2020: 10.1 %, 2019: 14.5% %) and in EMEA excluding Germany (2020: 5.6 %, 2019: 7.7 %), while voluntary staff turnover rate in Germany remains at prior year’s level (2020: 2.6 %, 2019: 2.5 %). Even amid the above-mentioned restructuring measures, recruiting talent remains a key priority for us. In 2020 the main focus was on filling the front office roles in growth areas (such as Global Transaction Banking, Wealth Management, and Asset Management). In addition, focus was on replacing operation-centre employees who left voluntarily, and hiring talent to meet the growing demand in regulatory roles (such as Client Lifecycle Management and Anti-Financial Crime). We remain committed to our strategic priority of hiring university graduates, as they help propel our change agenda. We hired 717 university graduates in 2020 (2019: 955). The bank also insourced 1,498 external roles (2019: 881), particularly in IT. Promoting internal career mobility Internal mobility plays a vital role in developing and retaining qualified, talented employees and ensuring that the bank contin- ues to benefit from their expertise and experience. In 2020 Deutsche Bank continued to implement its internal mobility strategy and live up to its commitment to filling one-third of all vacant positions with suitable candidates from within the organization. Vacant positions (except for managing directors) are typically first advertised inside the group for at least two weeks. Priori- tizing internal candidates helps employees affected by restructuring find new roles in the bank. We also foster mobility between divisions, which enables employees to broaden their skills and experience. Moreover, internal mobility helps reduce the bank’s redundancy and recruitment costs. In 2020, 35.9 % (2019: 37.6 %) of all job vacancies were filled internally (excluding Postbank). On average, it took 74 days to fill vacant positions (2019: 56 days). 216 Deutsche Bank Annual Report 2020 Employees Diversity and inclusion Diversity and inclusion We aim to attract, develop, and retain talented employees from all cultures, countries, races, ethnicities, genders, sexual orientations, disabilities, beliefs, backgrounds, and experiences. We want all individuals to feel welcomed, accepted, respected and supported. We expect our leaders to build inclusive teams of people with different skills, styles, and approaches who are empowered to contribute their best work. Throughout 2020 we continued our journey to embed diversity and inclusion in our culture and employee practices by sup- porting the advancement of women and members of other under-represented groups through targeted outreach to attract and hire, enhanced career planning, leadership development, exposure opportunities, and senior leader sponsorship. We continue to equip our people with resources to practice inclusion and interrupt unconscious bias in people-related decisions. At year-end 2020, six, or 30%, of Supervisory Board members were women (2019: 35%). This met the statutory requirement of 30% for publicly listed and codetermined German companies pursuant to gender quota legislation that took effect in 2015. The Supervisory Board’s goal, set in 2017, is to have at least 20% women on the Management Board by June 30, 2022. Two women would be required to achieve this goal on a Management Board with between eight and twelve members. At year-end 2020, there was one woman on the Management Board. The Supervisory Board is working toward the 2022 goal in line with the diversity principles of its Suitability Guidelines for Selecting Members of the Management Board. In accordance with the German Gender Quota Law, the bank set goals of 20.0% (at first management level below the Man- agement Board) and 25.0% (at second management level below the Management Board) for December 31, 2020. As of December 31, 2020, 20.0% of executive positions at the first management level below the Management Board were held by women (2019: 19.7%). At the second level below the Management Board the figure was 23.9% (2019: 19.5%). The voluntary goals as of December 31, 2020 have only partly been achieved. Since the target on the proportion of women at the two levels below the Management Board was set in September 2015, relevant conditions have changed. These include changes in the context of the transformation of the bank, which was decided in July 2019, and the decisions on the IPO of DWS and the merger of DB Privat- und Firmenkundenbank AG into Deutsche Bank AG. Our extensive cost-saving program has also limited our ability to hire or appoint at these two levels. In fact, since September 2015, the already relatively small number of employees at the two levels below the Management Board has been further reduced by around 36%. This leads to comparatively high percentage fluctuations with small absolute changes. Nev- ertheless, we have stuck to the goal and have continuously focused on increasing the proportion of women in leadership positions. Within this framework, we base our promotion and appointment decisions in particular on the suitability of the can- didates for the role, their potential and their demonstrated performance. The Management Board remains committed to increasing the representation of women in leadership positions. The bank’s voluntary goals for women’s representation remain unchanged and focus on the top three corporate titles (in headcount terms): Managing Director (21%), Director (28%), and Vice President (35% excluding Postbank). These goals form part of the key performance indicators on the performance “Balanced Scorecard” assessing the Management Board and Group Management Committee, and are designed to strengthen the pipeline of women at two levels below the Management Board. Deutsche Bank firmly believes that improved gender balance in leadership roles will meaningfully contribute to its future success. There has been an improvement at Managing Director and Director level since 2010, when the bank first published voluntary global gender diversity goals. Including promotions beginning of 2021, we have achieved 19.0% for Managing Directors, 25.5% for Directors and 32.5% for Vice President (excluding Postbank). Against these voluntary goals, we faced some challenges throughout 2020. However, the Management Board remains com- mitted to these goals and focused initiatives are put in place to accelerate change. These initiatives impact on the full lifecycle of people spanning across Talent Attraction, Talent Development, and promotion. In accordance with legal requirements and based on our self-perception of enhanced diversity and inclusion, the Management Board will set new goals for the proportion of women at the two management levels below the Management Board in the course of 2021. 217 Deutsche Bank Annual Report 2020 Employees Key employee figures Key employee figures A few selected employee figures and KPIs are set forth below. For full details on Deutsche Bank’s people metrics, as well as its strategic HR priorities and achievements, please refer to the bank’s Human Resources Report 2020. Dec 31, 2020 Dec 31, 2019 Dec 31, 2018 Female staff (in %, Headcount)1 Female Managing Directors Female Directors Female Vice Presidents Female Assistant Vice Presidents & Associates Female Non Officers Total female staff Age (in %, headcount) up to 29 years 30 - 39 years 40 - 49 years Over 49 years Part-time employment (in % of total staff) Germany Europe (outside Germany), Middle East and Africa Americas Asia/Pacific Total part-time employment Apprentices ratio in Germany Commitment index2 Enablement index2 Voluntary staff turnover rate Germany Europe (outside Germany), Middle East and Africa Americas Asia/Pacific Total voluntary staff turnover rate Health rate (in %)³ 1 Declared corporate titles of Postbank (incl. subsidiaries) are only alternative, technically derived, and not contractually defined or agreed. 2 Postbank included in 2019; prior period not restated. 3 Health rate: 100 - ((total sickness days x 100)/total regular working days); Germany, Postbank included in 2019, prior period restated. 18.4 % 25.1 % 32.4 % 40.6 % 59.9 % 46.4 % 14.9 % 28.4 % 27.1 % 29.6 % 27.2 % 5.8 % 0.2 % 0.1 % 14.3 % 4.2 % 2020 69 % 76 % 2.6 % 5.6 % 10.1 % 11.3 % 5.9 % 92.7 % 18.3 % 25.1 % 31.4 % 40.6 % 59.6 % 46.3 % 15.1 % 28.6 % 27.1 % 29.2 % 24.1 % 6.1 % 0.3 % 0.2 % 13.3 % 3.6 % 2019 58 % 66 % 2.5 % 7.7 % 14.4 % 17.0 % 8.0 % 92.2 % 18.1 % 24.5 % 31.2 % 40.2 % 59.8 % 46.2 % 15.5 % 29.3 % 27.6 % 27.6 % 23.9 % 6.4 % 0.5 % 0.2 % 13.1 % 3.4 % 2018 57 % 63 % 2.0 % 9.2 % 14.1 % 18.0 % 8.4 % 92.3 % 218 Deutsche Bank Annual Report 2020 Internal control over financial reporting Risks in financial reporting Internal control over financial reporting General Management of Deutsche Bank and its consolidated subsidiaries is responsible for establishing and maintaining adequate Internal Control over Financial Reporting (ICOFR). Our internal control over financial reporting is a process designed under the supervision of our Chairman and our Chief Financial Officer to provide reasonable assurance regarding the reliability of financial reporting. In addition to the preparation of the company’s consolidated financial statements for external reporting purposes in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB) and endorsed by the European Union (EU). Our Internal control over financial reporting includes our disclosure controls and procedures designed to prevent misstatements. Risks in financial reporting The primary risks in financial reporting are that either financial statements do not present a true and fair view due to inadvertent or intentional errors (fraud) or the publication of financial statements is not done on a timely basis. These risks may reduce investor confidence or cause reputational damage and may have legal consequences including banking regulatory interven- tions. A lack of fair presentation arises when one or more financial statement amounts or disclosures contain misstatements (or omissions) that are material. Misstatements are deemed material if they could, individually or in aggregate, influence eco- nomic decisions that users make on the basis of the financial statements. To confine those risks of financial reporting, management of the Group has established internal control over financial reporting with the aim of providing reasonable but not absolute assurance against material misstatements. In addition, an assessment was conducted of the effectiveness of the Group’s internal control over financial reporting. This was based on the Internal Control Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). COSO recommends the establishment of specific objectives to facilitate the design and evaluate adequacy of a control system. As a result in establishing internal control over financial reporting, management has adopted the following financial statement objectives: – Existence - assets and liabilities exist and transactions have occurred; – Completeness - all transactions are recorded, account balances are included in the financial statements; – Valuation - assets, liabilities and transactions are recorded in the financial statements at the appropriate amounts; – Rights, Obligations and Ownership – rights, obligations and ownership are appropriately recorded as assets and liabilities; – Presentation and Disclosures - classification, disclosure and presentation of financial reporting is appropriate; – Safeguarding of assets - unauthorized acquisition, use or disposition of assets is prevented or detected in a timely manner. However, any internal control system, including internal control over financial reporting, no matter how well conceived and operated, can provide only reasonable, but not absolute assurance that the objectives of that control system are met. As such, disclosure controls and procedures or systems for internal control over financial reporting may not prevent all errors; inadvert- ent or intentional errors (fraud). Furthermore, projections of any evaluation of effectiveness to future periods, are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with policies or procedures may deteriorate over time. In addition, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. On January 1, 2020, we adopted fair value hedge accounting for portfolio hedges of interest rate risk (macro hedging) for core deposits under the EU ‘carve-out’ rules of IAS 39, and have updated and modified certain internal controls over financial reporting as a result of the introduction of the new hedge accounting approach. Controls to minimize the risk of financial reporting misstatement The system of internal control over financial reporting includes those policies and procedures that: – Pertain to the maintenance of records, that, in reasonable detail accurately and fairly reflect the transactions and disposi- tions of the company’s assets; – Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are made only in accordance with authorisations of the company’s management and; 219 Deutsche Bank Annual Report 2020 Internal control over financial reporting Risks in financial reporting – Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material effect on the financial statements. Measuring effectiveness of internal control Each year, management of the Group undertakes a formal evaluation of the adequacy and effectiveness of the system of internal control over financial reporting. This evaluation incorporates an assessment of the effectiveness of the control envi- ronment as well as individual controls which make up the system of internal control over financial reporting taking into account: – The financial misstatement risk of the financial statement line items, considering such factors as materiality and the sus- ceptibility of the particular financial statement item to misstatement; and, – The susceptibility of identified controls to failure, considering such factors as the degree of automation, complexity, and risk of management override, competence of personnel and the level of judgment required. These factors determine in their entirety the type and scope of the evidence required by § 315 HGB, which the management needs to assess whether or not the established internal control over financial reporting is effective. The evidence itself is generated from procedures integrated within the daily responsibilities of staff or from procedures implemented specifically for purposes of the internal control over financial reporting evaluation. Information from other sources also form an important component of the evaluation since such evidence may either bring additional control issues to the attention of management or may corroborate findings. Such information sources may include: – Reports on audits carried out by or on behalf of regulatory authorities; – External Auditor reports; and, – Reports commissioned to evaluate the effectiveness of outsourced processes to third parties. In addition, Group Audit evaluates the design and operating effectiveness of internal control over financial reporting by per- forming periodic and ad-hoc risk-based audits. Reports are produced summarizing the results from each audit which are distributed to the responsible managers for the activities concerned. These reports also provide evidence to support the annual evaluation by management of the overall operating effectiveness of internal control over financial reporting. As a result of the evaluation, management has concluded that internal control over financial reporting is appropriately designed and operating effectively as of December 31, 2020. 220 Deutsche Bank Annual Report 2020 Information pursuant to section 315a (1) of the German Commercial Code and explanatory report System of Control of any Employee Share Scheme where the Control Rights are not Exercised Directly by the Employees Information pursuant to section 315a (1) of the Ger- man Commercial Code and explanatory report Structure of the share capital including authorized and condi- tional capital For information regarding Deutsche Bank’s share capital please refer to Note 32 “Common Shares” to the Consolidated Fi- nancial Statements. Restrictions on voting rights or the transfer of shares Under Section 136 of the German Stock Corporation Act the voting right of the affected shares is excluded by law. As far as the bank held own shares as of December 31, 2020 in its portfolio according to Section 71b of the German Stock Corporation Act no rights could be exercised. We are not aware of any other restrictions on voting rights or the transfer of shares. Shareholdings which exceed 10 % of the Voting Rights The German Securities Trading Act (Wertpapierhandelsgesetz) requires that any investor whose share of voting rights reaches, exceeds or falls below certain thresholds as the result of purchases, disposals or otherwise, must notify us and the German Federal Financial Supervisory Authority (BaFin) thereof. The lowest threshold is 3 %. We are not aware of any share- holder holding directly or indirectly 10 % or more of the voting rights. Shares with Special Control Rights Shares which confer special control rights have not been issued. System of Control of any Employee Share Scheme where the Control Rights are not Exercised Directly by the Employees The employees, who hold Deutsche Bank shares, exercise their control rights as other shareholders in accordance with ap- plicable law and the Articles of Association (Satzung). 221 Deutsche Bank Annual Report 2020 Information pursuant to section 315a (1) of the German Commercial Code and explanatory report Rules governing the amendment of the Articles of Association Rules governing the appointment and replacement of members of the Management Board Pursuant to the German Stock Corporation Act (Section 84) and the Articles of Association of Deutsche Bank (Section 6) the members of the Management Board are appointed by the Supervisory Board. The number of Management Board members is determined by the Supervisory Board. According to the Articles of Association, the Management Board has at least three members. The Supervisory Board may appoint one or two members of the Management Board as Chairpersons of the Man- agement Board. Members of the Management Board may be appointed for a maximum term of up to five years. They may be reappointed or have their term extended for one or more terms of up to a maximum of five years each. The German Co- Determination Act (Mitbestimmungsgesetz; Section 31) requires a majority of at least two thirds of the members of the Super- visory Board to appoint members of the Management Board. If such majority is not achieved, the Mediation Committee shall give, within one month, a recommendation for the appointment to the Management Board. The Supervisory Board will then appoint the members of the Management Board with the majority of its members. If such appointment fails, the Chairperson of the Supervisory Board shall have two votes in a new vote. If a required member of the Management Board has not been appointed, the Local Court (Amtsgericht) in Frankfurt am Main shall, in urgent cases, make the necessary appointments upon motion by any party concerned (Section 85 of the Stock Corporation Act). Pursuant to the German Banking Act (Kreditwesengesetz) and Regulation (EU) No 468/2014 of the European Central Bank (SSM Framework Regulation) evidence must be provided to the European Central Bank (ECB), the German Federal Financial Supervisory Authority (BaFin) and the Deutsche Bundesbank that the member of the Management Board has adequate the- oretical and practical experience of the businesses of the Bank as well as managerial experience before the member is ap- pointed (Sections 24 (1) No. 1 and 25c (1) of the Banking Act, Article 93 of the SSM Framework Regulation). The Supervisory Board may revoke the appointment of an individual as member of the Management Board or as Chairperson of the Management Board for good cause. Such cause includes in particular a gross breach of duties, the inability to manage the Bank properly or a vote of no-confidence by the shareholders’ meeting (Hauptversammlung, referred to as the General Meeting), unless such vote of no-confidence was made for obviously arbitrary reasons. The ECB or the BaFin may appoint a special representative and transfer to such special representative the responsibility and powers of individual members of the Management Board if such members are not trustworthy or do not have the required competencies or if the credit institution does not have the required number of Management Board members. In any such case, the responsibility and powers of the Management Board members concerned are suspended (Section 45c (1) through (3) of the Banking Act, Article 93 (2) of the SSM Framework Regulation). If the discharge of a bank’s obligations to its creditors is endangered or if there are valid concerns that effective supervision of the bank is not possible, the BaFin may take temporary measures to avert that risk. It may also prohibit members of the Management Board from carrying out their activities or impose limitations on such activities (Section 46 (1) of the Banking Act). In such case, the Local Court Frankfurt am Main shall, at the request of the BaFin appoint the necessary members of the Management Board, if, as a result of such prohibition, the Management Board no longer has the necessary number of members in order to conduct the business (Section 46 (2) of the Banking Act). Rules governing the amendment of the Articles of Association Any amendment of the Articles of Association requires a resolution of the General Meeting (Section 179 of the Stock Corpo- ration Act). The authority to amend the Articles of Association in so far as such amendments merely relate to the wording, such as changes of the share capital as a result of the issuance of authorized capital, has been assigned to the Supervisory Board by the Articles of Association of Deutsche Bank (Section 20 (3)). Pursuant to the Articles of Association, the resolutions of the General Meeting are taken by a simple majority of votes and, in so far as a majority of capital stock is required, by a simple majority of capital stock, except where law or the Articles of Association determine otherwise (Section 20 (1)). Amend- ments to the Articles of Association become effective upon their entry in the Commercial Register (Section 181 (3) of the Stock Corporation Act). 222 Deutsche Bank Annual Report 2020 Information pursuant to section 315a (1) of the German Commercial Code and explanatory report Powers of the Management Board to issue or buy back shares Powers of the Management Board to issue or buy back shares The Annual General Meeting of May 18, 2017 authorized the Management Board pursuant to Section 71 (1) No. 7 of the Stock Corporation Act to buy and sell, for the purpose of securities trading, own shares of Deutsche Bank AG on or before April 30, 2022, at prices which do not exceed or fall short by more than 10 % of the average of the share prices (closing auction prices of the Deutsche Bank share in Xetra trading and/or in a comparable successor system on the Frankfurt Stock Exchange) on the respective three preceding stock exchange trading days. In this context, the shares acquired for this purpose may not, at the end of any day, exceed 5 % of the share capital of Deutsche Bank AG. The Annual General Meeting of May 20, 2020 authorized the Management Board pursuant to Section 71 (1) No. 8 of the Stock Corporation Act to buy, on or before April 30, 2025, own shares of Deutsche Bank AG in a total volume of up to 10 % of the share capital at the time the resolution was taken or – if the value is lower – of the share capital at the time this authorization is exercised. Together with own shares acquired for trading purposes and/or for other reasons and which are from time to time in the company’s possession or attributable to the company pursuant to Sections 71a et seq. of the Stock Corporation Act, the own shares purchased on the basis of this authorization may not at any time exceed 10 % of the company’s respectively applicable share capital. The own shares may be bought through the stock exchange or by means of a public purchase offer to all shareholders. The consideration for the purchase of shares (excluding ancillary purchase costs) through the stock ex- change may not be more than 10 % higher or more than 20 % lower than the average of the share prices (closing auction prices of the Deutsche Bank share in Xetra trading and/or in a comparable successor system on the Frankfurt Stock Exchange) on the last three stock exchange trading days before the obligation to purchase. In the case of a public purchase offer, it may not be more than 10 % higher or more than 20 % lower than the average of the share prices (closing auction prices of the Deutsche Bank share in Xetra trading and/or in a comparable successor system on the Frankfurt Stock Exchange) on the last three stock exchange trading days before the day of publication of the offer. If the volume of shares offered in a public purchase offer exceeds the planned buyback volume, acceptance must be in proportion to the shares offered in each case. The pre- ferred acceptance of small quantities of up to 50 of the company’s shares offered for purchase per shareholder may be defined. The Management Board has also been authorized to dispose of the purchased shares and of any shares purchased on the basis of previous authorizations pursuant to Section 71 (1) No. 8 of the Stock Corporation Act on the stock exchange or by an offer to all shareholders. The Management Board has been authorized to dispose of the purchased shares against contribu- tion-in kind and with the exclusion of shareholders’ pre-emptive rights for the purpose of acquiring companies or shareholdings in companies or other assets that serve the company’s business operations. In addition, the Management Board has been authorized, in case it disposes of such own shares by offer to all shareholders, to grant to the holders of the option rights, convertible bonds and convertible participatory rights issued by the company and its affiliated companies pre-emptive rights to the shares to the extent that they would be entitled to such rights if they exercised their option and/or conversion rights. Shareholders’ pre-emptive rights are excluded for these cases and to this extent. The Management Board has also been authorized to use shares purchased on the basis of authorizations pursuant to § 71 (1) No. 8 Stock Corporation Act to issue staff shares, with the exclusion of shareholders’ pre-emptive rights, to employees and retired employees of the company and its affiliated companies or to use them to service option rights on shares of the company and/or rights or duties to purchase shares of the company granted to employees or members of executive or non-executive management bodies of the company and of affiliated companies. Furthermore, the Management Board has been authorized, with the exclusion of shareholders’ pre-emptive rights, to sell such own shares to third parties against cash payment if the purchase price is not substantially lower than the price of the shares on the stock exchange at the time of sale. Use may only be made of this authorization if it has been ensured that the number of shares sold on the basis of this authorization does not exceed 10 % of the company’s share capital at the time this author- ization becomes effective or – if the amount is lower – at the time this authorization is exercised. Shares that are issued or sold during the validity of this authorization with the exclusion of pre-emptive rights, in direct or analogous application of Section 186 (3) sentence 4 Stock Corporation Act, are to be included in the maximum limit of 10 % of the share capital. Also to be included are shares that are to be issued to service option and/or conversion rights from convertible bonds, bonds with warrants, convertible participatory rights or participatory rights, if these bond or participatory rights are issued during the validity of this authorization with the exclusion of pre-emptive rights in corresponding application of Section 186 (3) sentence 4 Stock Corporation Act. The Management Board has also been authorized to cancel shares acquired on the basis of this or a preceding authorization without the execution of this cancellation process requiring a further resolution by the General Meeting. 223 Deutsche Bank Annual Report 2020 Information pursuant to section 315a (1) of the German Commercial Code and explanatory report Agreements for compensation in case of a takeover bid The Annual General Meeting of May 20, 2020 authorized the Management Board pursuant to Section 71 (1) No. 8 of the Stock Corporation Act to execute the purchase of shares under the resolved authorization also with the use of put and call options or forward purchase contracts. The company may accordingly sell to third parties put options based on physical delivery and buy call options from third parties if it is ensured by the option conditions that these options are fulfilled only with shares which themselves were acquired subject to compliance with the principle of equal treatment. All share purchases based on put or call options are limited to shares in a maximum volume of 5 % of the actual share capital at the time of the resolution by the General Meeting on this authorization. The term of the options must be selected such that the share purchase upon exercising the option is carried out at the latest on April 30, 2025. The purchase price to be paid for the shares upon exercise of the put options or upon the maturity of the forward purchase may not exceed more than 10 % or fall below 10 % of the average of the share prices (closing auction prices of the Deutsche Bank share in Xetra trading and/or in a comparable successor system on the Frankfurt Stock Exchange) on the last three stock exchange trading days before conclusion of the respective transaction in each case excluding ancillary purchase costs but taking into account the option premium received. The call options may only be exercised if the purchase price to be paid does not exceed by more than 10 % or fall below 10 % of the average of the share prices (closing auction prices of the Deutsche Bank share in Xetra trading and/or in a comparable successor system on the Frankfurt Stock Exchange) on the last three stock exchange trading days before the acquisition of the shares. To the sale and cancellation of shares acquired with the use of derivatives the general rules established by the General Meeting apply. Own shares may continue to be purchased using existing derivatives that were agreed on the basis and during the existence of previous authorizations. Significant agreements which take effect, alter or terminate upon a change of control of the company following a takeover bid Significant agreements which take effect, alter or terminate upon a change of control of the company following a takeover bid have not been entered into. Agreements for compensation in case of a takeover bid If a member of the Management Board leaves the bank within the scope of a change of control, she or he receives a one-off compensation payment described in greater detail in the Compensation Report. 224 Deutsche Bank Annual Report 2020 Standalone parent company information (HGB) Deutsche Bank AG Performance Corporate governance statement pursuant to sections 289f and 315d of the German Commercial Code The entire Corporate Governance Statement according to sections 289f and 315d of the German Commercial Code is avail- able on our website under https://www.db.com/ir/en/reports.htm as well as in the chapter “3 – Corporate Governance State- ment according to Sections 289f, 315d of the German Commercial Code / Corporate Governance Report”. Standalone parent company information (HGB) Introduction Deutsche Bank AG is the parent company of Deutsche Bank Group and is its most material component. The management of Deutsche Bank Group is based on IFRS result of our corporate divisions. Deutsche Bank AG is fully integrated in the initiatives and target setting of Deutsche Bank Group. The performance of the Group is ultimately driving the performance of Deutsche Bank AG. Further, the bank has utilized the option under Section 2a of the German Banking Act (KWG) with respect to regu- latory capital so that regulatory capital ratios are only applicable on Group level. Therefore, information, that has been provided regarding Deutsche Bank Group in this combined management report, in general also is relevant and applies to Deutsche Bank AG. Additional information, that facilitates an understanding of Deutsche Bank AG, is contained in this section. The financial information in this section has been prepared in accordance with the German Commercial Code (“Handelsgesetzbuch”, HGB), unless stated otherwise. Further details on financial information prepared in accordance with HGB can be found in the notes to the financial statements for Deutsche Bank AG in a separate report. Deutsche Bank AG Performance Due to the circumstances set forth in the introduction above, the financial information prepared in accordance with HGB of Deutsche Bank AG are in general less relevant to assess or steer the financial performance. An additional parameter to evaluate the performance DB Bank Group is the ability to return capital to shareholders. This ability depends on the availability of distributable profit for DB AG. In May 2020 the former subsidiary DB Privat- und Firmenkundenbank AG (PFK) was merged with Deutsche Bank AG effective January 1, 2020. Therefore the explanation of changes to prior year is referring to the pro-forma financial data for 2019 and as of January 1, 2020, respectively which include PFK. In 2020, Deutsche Bank AG recorded a net loss of € 1.8 billion compared to net loss of € 19.7 billion in 2019 pro-forma finan- cials. Prior year’s loss was largely driven by our transformation strategy announced in July 2019, leading to significant valua- tion allowances. As a consequence, the operating result of prior year was negative € 7.0 billion and the net other ordinary expenses were recorded at € 11.7 billion, mainly driven by valuation adjustments related to investments. In the current year, COVID-19 was an additional significant driver for valuation allowances, thus leading to an operating result of negative € 902 million and net other ordinary expenses of € 752 million. Partly offsetting, net extraordinary results of € 779 million were recorded, positively impacted by a gain of € 1.2 billion on the merger with PFK. Tax expense amounted to € 894 million. Although the overall income situation of Deutsche Bank improved significantly compared to prior year, the bank recorded a net loss. Therefore, in line with public announcements made in the context with the transformation strategy during 2019, Deutsche Bank AG will not pay out dividends for the financial year 2020. 225 Deutsche Bank Annual Report 2020 Standalone parent company information (HGB) Deutsche Bank AG Performance Income Statement Condensed income statement in € m. Interest income1 Current income2 Total interest income Interest expenses Net interest income Commission income Commission expenses Net commission income Net trading result thereof release of trading-related special reserve according to Section 340e HGB Total revenues Wages and salaries Compulsory social security contributions3 Staff expenses Other administrative expenses4 Administrative expenses Balance of other operating income/expenses Risk provisioning Operating profit Balance of other ordinary income/expenses Extraordinary result Releases from/(Additions) to the fund for general banking risks Income before taxes Taxes Net income (loss) Profit carried forward from the previous year Withdrawal from capital reserves Allocations to revenue reserves – to other revenue reserves Distributable profit 2019 (pro-forma) 2020 15,079 1,254 16,333 7,808 8,525 7,841 2,487 5,354 1,328 0 15,207 4,679 1,294 5,972 10,002 15,974 835 971 (902) (752) 779 21,757 2,049 23,806 14,871 8,935 8,881 2,820 6,062 715 0 15,712 4,697 1,248 5,945 11,831 17,777 (1,204) 3,767 (7,035) (11,669) (421) 2019 16,525 1,997 18,522 12,852 5,671 7,538 1,892 5,646 710 0 12,027 3,623 949 4,572 8,725 13,297 (1,497) 3,684 (6,452) (12,231) (446) in € m. (6,678) (795) (7,473) (7,063) (410) (1,040) (333) (708) 613 0 (505) (18) 46 27 (1,829) (1,803) 2,039 (2,796) 6,133 10,917 1,200 0 0 0 0 (875) 894 (1,769) 0 (1,769) 1,769 0 0 0 (19,126) 559 (19,685) 259 (19,426) 19,426 0 0 0 (19,129) 556 (19,685) 259 (19,426) 19,426 0 0 0 18,251 335 17,916 (259) 17,657 (17,657) 0 0 0 Change in % (31) (39) (31) (47) (5) (12) (12) (12) 86 N/M (3) (0) 4 0 (15) (10) N/M (74) (87) (94) N/M N/M (95) 60 (91) N/M (91) (91) N/M N/M N/M N/M - Not meaningful 1 From lending and money market business, fixed-income securities, and government inscribed debt. 2 From equity shares and other variable-yield securities, participating interests, investments in affiliated companies (including profit transfer agreements). 3 Including expenses for pensions and other employee benefits. 4 Including depreciation on tangible and intangible assets. Net interest income decreased by € 410 million to € 8.5 billion. Within current income, down by € 795 million, income from equities and other non-fixed-income securities was down by € 873 million, mainly driven by continued de-risking strategies in CRU. In addition, income from investments in subsidiaries was down by € 186 million. Partly offsetting, income from profit pooling increased by € 264 million. The net interest result from lending and securities less interest expenses increased by € 385 million, reflecting, among other items, repricing of deposits in order to pass on negative interest rates. The significant decrease of gross interest income and expense is mainly driven by lower interest rates especially outside Euro denomination. Net commission income of € 5.4 billion was down by € 708 million compared to the previous year, mainly driven by lower income from services rendered to group companies and lower income from loan business. Deutsche Bank AG reported € 1.3 billion net trading result in 2020, up by € 613 million compared to prior year. This increase was mainly driven by positive results in foreign currency transactions and bonds. Staff expenses were slightly up by € 27 million to € 6.0 billion. Increased costs for pensions were not fully compensated by a reduction in wages and salaries and social contributions excluding pension costs. Geographical breakdown of our staff (full-time-equivalent) Staff (full-time equivalents)1 Germany2 Europe excl. Germany Americas Africa/Asia/Australia Total 1 Staff (full-time equivalent) = total headcount adjusted proportionately for part time staff, excluding apprentices and interns. Dec 31, 2020 Jan 1, 2020 (pro-forma) Dec 31, 2019 Change 22,305 8,144 560 5,331 36,341 22,682 8,215 645 5,400 36,942 11,133 8,149 645 5,400 25,326 (377) (71) (85) (69) (601) 226 Deutsche Bank Annual Report 2020 Standalone parent company information (HGB) Deutsche Bank AG Performance 2 In 2019 the health insurance company of Deutsche Bank aligned its FTE definition which decreased the Group number as of December 31, 2019 by 81 (prior period not restated). The number of employees in Germany decreased mainly driven by the implementation of restructuring measures, primarily in the Private Bank (PB) and Infrastructure functions. The number of employees in the Americas decreased mainly driven by reductions in Investment Bank (IB), Capital Release Unit (CRU) and in Infrastructure functions. In Europe excluding Germany the number of employees decreased primarily in the Netherlands and in Belgium. In region Africa/Asia/Australia the number of employees was primarily lower in Hong Kong and Singapore. Other administrative expenses (excluding depreciation and amortization on tangible and intangible assets) decreased by € 1.5 billion to € 8.8 billion. This development was driven by lower expenses from intercompany charges, down by € 1.0 billion, costs for IT equipment reduced by € 323 million and general operational expenses, down by € 226 million. Scheduled depreciation and amortization of tangible and intangible assets amounted to € 1.2 billion in 2020 (2019: € 1.3 bil- lion). The decrease is mainly attributable to lower levels of self-developed software after last years’ impairments. The balance of other operating income/expenses improved from negative € 1.2 billion in 2019 to positive € 835 million in 2020. The total improvement by € 2.0 billion was mainly driven by the following items: An increase in the net result from financial instruments in the banking book by € 802 million, reduced net interest expenses on staff related provisions which decreased by € 607 million. Expenses for civil damages penalties and fines were down by € 423 million. In 2020, total net risk provisioning, consisting of changes in credit related risk provisioning and the net result from securities held in the liquidity reserve, went down by € 2.8 billion from € 3.8 billion to € 971 million. This development was attributable to lower risk provisioning in the loan business, down by € 2.4 billion, and net results from securities held in the liquidity reserve, up by € 418 million, driven mainly by gains on sales. Prior year risk provisioning in the loan business was mainly driven by a credit loss allowance for one Group-internal funding relationship. Besides the impact from the COVID-19 pandemic, current year risk provisioning in the loan business increased by € 249 million due to the changes in our methodology to calculate credit loss allowance on financial assets which are not credit-impaired but have an increased probability of default. Starting this year, for such financial assets the credit loss allowance is based on probability of default (PD), loss given default (LGD) and exposure at default (EAD) all based on the remaining lifetime of the Financial Asset. Before this year, this methodology was based on a 12 months horizon. The balance of other ordinary income and expenses was negative € 752 million (2019: negative € 11.7 billion). Prior years’ negative balance was mainly driven by expenses for value adjustments of investments in affiliated companies of € 10.3 billion driven by the strategic transformation and a weaker economic outlook. This years’ loss is also mainly driven by net value adjustments of € 879 million. These impairments are mainly concerning bank subsidiaries und reflect, among other factors, the worsened economic outlook caused by COVID-19 and the expected development of interest rates. In addition, write-downs and non-scheduled depreciation of tangible and intangible assets amounted to € 38 million in 2020 (2019: € 787 million). Prior year impairments related to self-developed software, reflecting our strategic transformation. Expenses from loss take-over, also presented within other ordinary income and expenses, amounted to € 100 million in 2020 (2019: € 455 million). Net extraordinary income and expenses were positive € 779 million (2019: negative € 421 million). This change was mainly driven by a gain of € 1.2 billion from the merger with PFK. In 2020, a tax expense of € 894 million was recorded compared to a tax expense of € 556 million in the prior year. The current year’s income tax expense was mainly impacted by deferred tax assets valuation adjustments. Deutsche Bank AG recorded in 2020 a net loss of € 1.8 billion after a prior year net loss of € 19.7 billion. After a partial release of the capital reserves by € 1.8 billion, the distributable profit amounted to € 0 million as of Decem- ber 31, 2020. 227 Deutsche Bank Annual Report 2020 Standalone parent company information (HGB) Deutsche Bank AG Performance Balance Sheet in € m. Assets Receivables from banks and customers incl. balances with central banks and debt instruments of public-sector entities Participating interests and investments in affiliatied compa- nies Bonds and other securities and equity shares Trading Assets Remaining other assets Total assets Liabilities and Shareholders' Equity Liabilities to banks and customers Liabilities in certificate form Trading liabilities Provisions Capital and reserves Subordinated liabilities, Participation rights capital, Instru- ments for Additional Tier 1 Regulatory Capital and Fund for general banking risks Remaining other liabilities Total liabilities and shareholders' equity Dec 31, 2020 Jan 1, 2020 (pro-forma) Dec 31, 2019 in € m. 610,390 601,896 426,036 8,494 28,190 33,011 34,559 (4,821) 89,519 241,390 23,803 993,292 87,849 247,904 19,408 990,066 55,907 248,158 12,421 777,081 609,701 87,002 203,986 5,670 32,959 608,615 94,377 191,743 5,522 35,884 428,495 91,425 192,652 4,670 34,728 1,670 (6,514) 4,395 3,226 1,086 (7,375) 12,243 148 (2,925) 20,179 19,881 18,068 298 33,794 993,292 34,044 990,066 7,044 777,081 (250) 3,226 Change in % 1 (15) 2 (3) 23 0 0 (8) 6 3 (8) 1 (1) 0 Total assets of Deutsche Bank AG amounted to € 993.3 billion as of December 31, 2020. The slight increase by € 3.2 billion compared to January 1, 2020 (on pro forma basis) was mainly driven by increases in Receivables from banks and customers incl. balances with central banks and debt instruments of public-sector entities and Remaining other assets, partly offset by decreases in Participating interests and investments. Total credit extended (excluding reverse repos and securities spot deals) in € bn. Claims on customers with a residual period of up to 5 years1 over 5 years Loans to banks with a residual period of up to 5 years1 over 5 years Total Dec 31, 2020 Jan 1, 2020 (pro-forma) Dec 31, 2019 in € bn. 380 272 107 38 32 6 417 399 228 (20) 291 109 56 40 16 456 206 22 51 38 13 279 (19) (1) (18) (9) (10) (38) Change in % (5) (6) (1) (33) (21) (63) (8) 1 Including those repayable on demand and those with an indefinite period. Total credit extended (excluding reverse repos and securities spot deals) decreased by € 38.3 billion (8 %), to € 417.3 billion. This development was primarily driven by a decrease in Claims on Customers by € 19.8 billion (5 %) to € 379.5 billion and a decrease in Loans to banks, which are reported under total credit extended, by € 18.5 billion (33 %) to € 37.7 billion. Receivables from banks (excluding loans) outside trading decreased by € 1.2 billion to € 42.4 billion compared to January 1, 2020 (on pro forma basis). Our securities portfolio (excluding trading assets) increased by € 1.7 billion to € 89.5 billion, mainly driven by an increase in bonds. Trading assets amounted to € 241.4 billion, a decrease of € 6.5 billion (3%) compared to January 1, 2020 (on pro forma basis). This was mainly driven by a decrease in securities qualifying as trading, which were down by € 5 billion (6) % to € 78.5 billion and Receivables qualifying as trading down by € 4.9 billion (6) % to € 78.5 billion, partly offset by increases in positive market values from trading derivatives by € 1.9 billion (2 %) to € 82.8 billion. Investments in affiliated companies decreased by € 6.4 billion to € 27.9 billion. The decrease was attributable to the merger of DB Privat- und Firmenkundenbank AG with Deutsche Bank AG with retrospective effect as of January 1st, 2020 of € 5.3 billion, net write-downs of € 0.9 billion and a negative impact of foreign currency translation of € 0.5 billion, partially offset by net capital increases of € 0.3 bn. . 228 Deutsche Bank Annual Report 2020 Standalone parent company information (HGB) Management of Deutsche Bank AG within the Group Further details of Liabilities to banks, Liabilities to customers and Liabilities in certificate form are provided in the following table: Breakdown of liabilities in € bn. Liabilities to banks repayable on demand with agreed period or notice period Liabilities to customers savings deposits other liabilities repayable on demand with agreed period or notice period Liabilities in certificate form bonds and notes issued other liabilities in certificate form thereof: money market instruments Dec 31, 2020 Jan 1, 2020 (pro-forma) Dec 31, 2019 in € bn. 142 59 83 467 61 327 79 87 84 4 3 128 67 61 480 62 309 110 94 91 4 3 158 71 87 270 3 172 95 91 88 4 3 14 (8) 22 (13) (1) 18 (30) (7) (7) (0) (0) Change in % 11 (12) 37 (3) (2) 6 (28) (8) (8) (8) (4) Trading liabilities amounted to € 204.0 billion, an increase of 12.2 billion (6 %) in comparison to January 1, 2020 (on pro forma basis). This was mainly driven by increases in negative market values from trading derivatives by € 7.5 billion (9 %) to € 89.5 billion. Instruments for additional Tier 1 Regulatory Capital amounted to € 5.7 billion compared to € 5.0 billion last year. The year-on- year movement is the result of the new AT1 instrument issued in 2020 as well as currency translation effects. Capital and reserves of Deutsche Bank AG amounted to € 33.0 billion. The reduction of € 2.9 billion is mainly attributable to the net loss incurred in 2020 and subsequent releases of capital reserves as well as the gain from the merger with PFK of € 1.2 billion shown in the pro-forma financials. Consistent with prior years, the Bank has utilized the option available under Section 2a of the German Banking Act (KWG) with respect to its regulatory capital and presents capital requirements for Deutsche Bank Group only. In summary: The bank maintained its stable funding, high liquidity base and solid regulatory capital position which is based on Group capital. For further details please refer to the liquidity risk and capital adequacy sections in the Risk Report. Management of Deutsche Bank AG within the Group The content in this chapter should be read in conjunction with the respective group sections in this Annual Report, especially “Risk Report”, “Outlook”, “Risks and Opportunities” and “Internal control over financial reporting”. Risk Management The impact of the risks on Deutsche Bank AG cannot be isolated from the effects on Deutsche Bank’s other legal entities, mainly driven by: – The Group’s management structure, including its corporate Divisions follows its customers’ needs. The legal structure is determined by local legislation and therefore does not necessarily follow the management structure. For example, local legislation can determine whether the Group’s business in a certain country is conducted by a branch of Deutsche Bank AG or by a separate subsidiary. However, the management has to monitor the risks in the bank’s business – irrespective of whether it is transacted by a branch or a subsidiary. – Adequate risk monitoring and management requires knowledge of the extent to which the Group’s profit situation depends on the development of certain risk factors, i.e. on the creditworthiness of individual customers or securities issuers or on movements in market prices. The respective exposures therefore need to be analyzed across legal entities. Especially for the credit risk attached to a borrower, as it is irrelevant whether the credit exposure to a company is spread over several Group companies or concentrated on Deutsche Bank AG. Separate monitoring of the risk affecting Deutsche Bank AG alone would neglect the potential exposure facing the Group and, indirectly, Deutsche Bank AG – as the parent – if the company became insolvent. 229 Deutsche Bank Annual Report 2020 Standalone parent company information (HGB) Management of Deutsche Bank AG within the Group – Individual risk factors are sometimes correlated, and in some cases they are independent of each other. If estimates of the nature and extent of this correlation are available, the Group’s management can significantly reduce the overall risk by diversifying its businesses across customer groups, issuers and countries. The risk correlation is also independent of the Group’s legal and divisional structure. Therefore, management can only optimize the risk-mitigating effects of diversification if it manages them Group-wide and across legal entities. For the reasons mentioned, the identification, monitoring and management of all risks in Deutsche Bank AG are integrated into the Group-wide risk management process. Following Group policies, DB AG adheres to the respective legal and regulatory requirements. The Liquidity Coverage Ratio (LCR) which is calculated separately to ensure an appropriate level of liquidity within Deutsche Bank AG stands at 136 % as of December 31, 2020 compared to 128 % as of December 31, 2019. Outlook and Strategy Deutsche Bank AG as the parent company of the Group defines the strategy and planning for the individual Group Divisions. Deutsche Bank AG participates in the results of the Group Divisions through own activities and profit distribution from subsid- iaries. Therefore, the Group’s outlook encompasses all Group Divisions and is not limited to the parent company. In addition, financial key performance indicators are solely defined on Group level, except for the amount of distributable profit. Risks and Opportunities Risks Deutsche Bank AG as a solo entity reporting under HGB faces additional risks compared to the Group plan based on IFRS that certain transactions in a given year lead to higher losses or lower than in the Group financial statements. The following items carry significant risk in this respect: – Potential valuation adjustments of investments in affiliated companies, driven by local economic environment, increased local regulatory requirements, restructuring or changes of share prices of listed investments. – Increase in long-term provisions, especially pension obligations, despite rises in interest rate levels caused by the discount- ing with average interest rates according to section 253 par. 2 German Commercial Code. – Negative valuation adjustments to plan assets, especially in an environment of rising interest rate levels. Due to the above mentioned valuation methodology there might be no offsetting effect from lower pension obligations if interest rates are rising. – Potential requirement to set up a provision according to German accounting pronouncement IDW RS BFA 3 in case the interest bearing banking book does not generate an interest margin sufficient to cover expected credit risk costs and ad- ministrative expenses. A persisting low interest rate environment and the treatment of coupon payments related to the AT1 instruments as expenses under HGB increase this risk. In addition, profits or retained earnings from affiliated companies might not allow for sufficient dividend payments to fully cover losses recognized in Deutsche Bank AG. Opportunities Deutsche Bank AG as a solo entity reporting under HGB may have additional opportunities compared to the Group plan based on IFRS that certain transactions in a given year are reported in a more beneficial manner than for the Group under IFRS, such as realized gains which were recognized in the income statement under IFRS in an earlier period In addition, there is the possibility that Deutsche Bank AG as parent entity shows higher profits in a given year compared to its contribution to the group net income, that result from increased profit distributions from affiliated companies. Internal control over financial reporting The controls that are performed for our Group Annual Statements under IFRS apply to our financial statements under HGB accordingly. In addition to these controls specific HGB related controls are implemented which include: – Inter-branch reconciliation and elimination are performed for HGB specific balances; and, – Analytical reviews of revaluation and reclassification items between IFRS and HGB on the level of foreign branches and the German headquarters. 230 Deutsche Bank Annual Report 2020 Standalone parent company information (HGB) Non-financial Statement for Deutsche Bank AG Non-financial Statement for Deutsche Bank AG The details pursuant to § 340a (1a) German Commercial Code (HGB) in conjunction with § 289b (3) HGB can be found as a combined separate non-financial report under https://www.db.com/ir/en/annual-reports.htm. 231 2 Consolidated Financial Statements 233 Consolidated statement of income 234 Consolidated statement of comprehensive income 235 Consolidated balance sheet 236 Consolidated statement of changes in equity 238 Consolidated statement of cash flows 240 240 Notes to the consolidated financial statements 1 – Significant accounting policies and critical accounting estimates 263 2 – Recently adopted and new accounting pronouncements 266 266 3 – Acquisitions and dispositions 4 – Business segments and related information 274 274 Notes to the consolidated income statement 5 – Net interest income and net gains (losses) on financial assets / liabilities at fair value through profit or loss 6 – Commissions and fee income 7 – Gains and losses on derecognition of financial assets measured at amortized cost 8 – Other income (loss) 9 – General and administrative expenses 10 – Restructuring 11 – Earnings per share Notes to the consolidated balance sheet 12 – Financial assets / liabilities at fair value through profit or loss 276 278 278 278 279 280 281 281 282 13 – Financial instruments carried at fair value 296 14 – Fair Value of financial instruments not carried at fair value 298 15 – Financial assets at fair value through other comprehensive income 299 17 – Offsetting financial assets and 302 303 305 308 309 310 315 316 316 317 329 330 331 financial liabilities 18 – Loans 19 – Allowance for credit losses 20 – Transfer of financial assets, assets pledged and received as collateral 21 – Property and equipment 22 – Leases 23 – Goodwill and other intangible assets 24 – Non-current assets and disposal groups held for sale 25 – Other assets and other liabilities 26 – Deposits 27 – Provisions 28 – Credit related commitments 29 – Other short-term borrowings 30 – Long-term debt and trust preferred securities 331 31 – Maturity analysis of the earliest contractual undiscounted cash flows of financial liabilities 333 Additional notes 333 334 348 350 354 355 357 361 32 – Common shares 33 – Employee benefits 34 – Income taxes 35 – Derivatives 36 – Related party transactions 37 – Information on subsidiaries 38 – Structured entities 39 – Current and non-current assets and liabilities 362 40 – Events after the reporting period 363 367 41 – Regulatory capital information 42 – Supplementary information to the consolidated financial statements according to Sections 297 (1a) / 315a HGB 369 371 390 43 – Country by country reporting 44 – Shareholdings 45 – Impact of Deutsche Bank’s transformation 298 16 – Equity method investments 391 Confirmations Deutsche Bank Annual Report 2020 Consolidated statement of income Earnings per share Consolidated statement of income Notes 5 6 5 5 5 19 2018 24,718 11,402 13,316 525 12,791 10,039 2020 17,806 6,280 11,526 1,792 9,734 9,424 2019 25,208 11,458 13,749 723 13,026 9,520 in € m. Interest and similar income1 Interest expense Net interest income Provision for credit losses Net interest income after provision for credit losses Commissions and fee income Net gains (losses) on financial assets/liabilities at fair value through profit or loss Net gains (losses) on derecognition of assets measured at amortized cost Net gains (losses) on financial assets at fair value through other comprehensive income Net income (loss) from equity method investments Other income (loss) Total noninterest income Compensation and benefits General and administrative expenses Impairment of goodwill and other intangible assets Restructuring activities Total noninterest expenses Profit (loss) before income taxes Income tax expense (benefit) Profit (loss) Profit (loss) attributable to noncontrolling interests Profit (loss) attributable to Deutsche Bank shareholders and additional 267 equity components 1 Interest and similar income included € 14.0 billion, € 18.0 billion and € 16.8 billion for the year ended December 31, 2020, 2019 and 2018, respectively, calculated based on 260 110 (668) 9,416 11,142 12,253 1,037 644 25,076 (2,634) 2,630 (5,265) 125 323 120 (154) 12,503 10,471 10,259 0 485 21,216 1,021 397 624 129 317 219 215 12,000 11,814 11,286 0 360 23,461 1,330 989 341 75 33 9 23 10 2,465 324 193 0 16 8 1,209 2 (5,390) 495 34 effective interest method. Earnings per share Notes in € m. Earnings per share:1 Basic Diluted Number of shares in million: Denominator for basic earnings per share – weighted-average shares outstanding Denominator for diluted earnings per share – adjusted weighted-average shares after assumed conversions2 2,102.2 1 Earnings were adjusted by € 349 million and € 330 million before tax and € 292 million net of tax for the coupons paid on Additional Tier 1 Notes in April 2020, April 2019 and April 2018. Since 2019 the tax impact is recognized in net income (loss) directly. In accordance with IAS 33 the coupons paid on Additional Tier 1 Notes are not attributable to Deutsche Bank shareholders and therefore need to be deducted in the calculation. This adjustment created a net loss situation for Earnings per Common Share for 2018. 2 Due to the net loss situation for 2019 and 2018 potentially dilutive shares are generally not considered for the earnings per share calculation, because to do so would de- (€ 2.71) (€ 2.71) € 0.07 € 0.07 (€ 0.01) (€ 0.01) 2,110.0 2,110.0 2,108.2 2,170.1 2,102.2 11 2018 2020 2019 crease the net loss per share. Under a net income situation however, the number of adjusted weighted average shares after assumed conversion would have been increased by 60 million shares for 2019 and 53 million shares for 2018. The accompanying notes are an integral part of the Consolidated Financial Statements. 233 Deutsche Bank Annual Report 2020 Consolidated statement of comprehensive income Earnings per share Consolidated statement of comprehensive income in € m. Profit (loss) recognized in the income statement Other comprehensive income Items that will not be reclassified to profit or loss Remeasurement gains (losses) related to defined benefit plans, before tax Net fair value gains (losses) attributable to credit risk related to financial liabilities designated as at fair value through profit or loss, before tax Total of income tax related to items that will not be reclassified to profit or loss Items that are or may be reclassified to profit or loss Financial assets at fair value through other comprehensive income Unrealized net gains (losses) arising during the period, before tax Realized net (gains) losses arising during the period (reclassified to profit or loss), before tax Derivatives hedging variability of cash flows Unrealized net gains (losses) arising during the period, before tax Realized net (gains) losses arising during the period (reclassified to profit or loss), before tax Assets classified as held for sale Unrealized net gains (losses) arising during the period, before tax Realized net (gains) losses arising during the period (reclassified to profit or loss), before tax Foreign currency translation Unrealized net gains (losses) arising during the period, before tax Realized net (gains) losses arising during the period (reclassified to profit or loss), before tax Equity Method Investments Net gains (losses) arising during the period Total of income tax related to items that are or may be reclassified to profit or loss Other comprehensive income (loss), net of tax Total comprehensive income (loss), net of tax Attributable to: Noncontrolling interests Deutsche Bank shareholders and additional equity components 2020 624 2019 (5,265) 2018 341 149 (1,396) (216) (24) 82 (3) 403 676 309 (323) (260) (14) 4 0 0 (2) (2) 0 0 (1,819) (20) 6 (9) 1 (122) (1,385) (762) (22) 193 (809) (6,073) 59 (821) 136 (6,209) 52 10 (245) (317) (3) 0 2 (2) 457 0 (10) 228 (43) 298 116 182 The accompanying notes are an integral part of the Consolidated Financial Statements. 234 Deutsche Bank Annual Report 2020 Consolidated balance sheet Earnings per share Consolidated balance sheet in € m. Assets: Cash and central bank balances Interbank balances (w/o central banks) Central bank funds sold and securities purchased under resale agreements Securities borrowed Financial assets at fair value through profit or loss Trading assets Positive market values from derivative financial instruments Non-trading financial assets mandatory at fair value through profit and loss Financial assets designated at fair value through profit or loss Total financial assets at fair value through profit or loss Financial assets at fair value through other comprehensive income Equity method investments Loans at amortized cost Property and equipment Goodwill and other intangible assets Other assets 1 Assets for current tax Deferred tax assets Total assets Liabilities and equity: Deposits Central bank funds purchased and securities sold under repurchase agreements Securities loaned Financial liabilities at fair value through profit or loss Trading liabilities Negative market values from derivative financial instruments Financial liabilities designated at fair value through profit or loss Investment contract liabilities Total financial liabilities at fair value through profit or loss Other short-term borrowings Other liabilities 1 Provisions Liabilities for current tax Deferred tax liabilities Long-term debt Trust preferred securities Total liabilities Common shares, no par value, nominal value of € 2.56 Additional paid-in capital Retained earnings Common shares in treasury, at cost Accumulated other comprehensive income (loss), net of tax Total shareholders’ equity Additional equity components Noncontrolling interests Total equity Total liabilities and equity 1 Includes non-current assets and disposal groups held for sale. The accompanying notes are an integral part of the Consolidated Financial Statements. Notes Dec 31, 2020 Dec 31, 2019 20 20 12, 13, 20, 35 15 16 18, 19, 20 21, 22 23 24, 25 34 166,208 9,130 8,533 0 107,929 343,455 76,121 437 527,941 55,834 901 426,995 5,549 6,725 110,399 986 6,058 1,325,259 137,592 9,636 13,801 428 110,875 332,931 86,901 7 530,713 45,503 929 429,841 4,930 7,029 110,359 926 5,986 1,297,674 26 20 20 568,031 2,325 1,697 572,208 3,115 259 12, 13, 20, 35 29 22, 24, 25 19, 27 34 30 30 32 32 44,316 327,775 46,582 526 419,199 3,553 114,208 2,430 574 561 149,163 1,321 1,263,063 5,291 40,606 10,014 (7) (1,118) 54,786 5,824 1,587 62,196 1,325,259 37,065 316,506 50,332 544 404,448 5,218 107,964 2,622 651 545 136,473 2,013 1,235,515 5,291 40,505 9,644 (4) 421 55,857 4,665 1,638 62,160 1,297,674 235 Deutsche Bank Annual Report 2020 Consolidated statement of changes in equity Consolidated statement of changes in equity in € m. Balance as of December 31, 2017 IFRS 9 introduction impact Balance as of January 1, 2018 (IFRS 9) Total comprehensive income (loss), net of tax1 Gains (losses) attributable to equity instruments des- ignated as at fair value through other comprehensive income, net of tax Gains (losses) upon early extinguishment attributa- ble to change in own credit risk of financial liabilities designated as at fair value through profit and loss, net of tax Cash dividends paid Coupon on additional equity components, net of tax Remeasurement gains (losses) related to defined benefit plans, net of tax Net change in share awards in the reporting period Treasury shares distributed under share-based com- pensation plans Tax benefits related to share-based compensation plans Option premiums and other effects from options on common shares Purchases of treasury shares Sale of treasury shares Net gains (losses) on treasury shares sold Other Balance as of December 31, 2018 IFRS 16 transition impact Balance as of January 1, 2019 (IFRS 16) Total comprehensive income (loss), net of tax1 Gains (losses) attributable to equity instruments des- ignated as at fair value through other comprehensive income, net of tax Gains (losses) upon early extinguishment attributa- ble to change in own credit risk of financial liabilities designated as at fair value through profit and loss, net of tax Cash dividends paid Coupon on additional equity components, before tax Remeasurement gains (losses) related to defined benefit plans, net of tax Net change in share awards in the reporting period Treasury shares distributed under share-based com- pensation plans Tax benefits related to share-based compensation plans Option premiums and other effects from options on common shares Purchases of treasury shares Sale of treasury shares Net gains (losses) on treasury shares sold Other Balance as of December 31, 2019 Total comprehensive income (loss), net of tax1 Common shares (no par value) Additional paid-in capital 5,291 0 5,291 0 39,918 (2) 39,916 0 Retained earnings 17,454 (301) 17,153 267 Common shares in treasury, at cost Unrealized net gains (losses) On financial assets at fair value through other compre- hensive income, net of tax2 Attributable to change in own credit risk of financial liabilities designated as at fair value through profit and loss, net of tax2 On financial assets available for sale, net of tax2 On derivatives hedging variability of cash flows, net of tax2 On assets classified as held for sale, net of tax2 Foreign currency translation, net of tax2 Unrealized net gains (losses) from equity method investments Accumula- ted other comprehen- sive income, net of tax1 (9) 0 (9) 0 689 (689) 0 0 0 394 394 (428) 0 (16) (16) 44 18 0 18 (1) 0 0 0 0 (227) (45) (272) 500 40 (12) 28 (14) 520 (368) 152 101 Total shareholders’ equity 63,174 (671) 62,503 368 Additional equity components3 Noncontrolling interests 4,675 0 4,675 0 250 (1) 249 122 Total equity 68,099 (672) 67,427 490 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 5,291 0 5,291 0 0 0 0 0 90 0 (5) 0 0 0 (2) 2534 40,252 0 40,252 0 0 (227) (292) (186) 0 0 0 0 0 0 0 0 16,714 (136) 16,578 (5,390) 0 0 0 0 0 199 0 0 (4,119) 3,914 0 0 (15) 0 (15) 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 (34) 0 (34) 79 0 0 0 0 0 0 0 0 0 0 0 0 28 0 28 (2) 0 0 0 0 0 0 0 0 0 0 0 0 17 0 17 (3) 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 228 0 228 108 0 0 0 0 0 0 0 0 0 0 0 0 15 0 15 (15) 0 0 0 0 0 0 0 0 0 0 0 0 253 0 253 168 0 (227) (292) (186) 90 199 (5) 0 (4,119) 3,914 (2) 2534 62,495 (136) 62,358 (5,222) 0 0 0 0 0 0 0 0 0 0 0 0 4,675 0 4,675 0 0 (8) 0 (12) 23 0 1 0 0 0 0 1,1934 1,568 0 1,568 142 0 (235) (292) (198) 112 199 (4) 0 (4,119) 3,914 (2) 1,446 68,737 (137) 68,601 (5,079) 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 5,291 0 0 0 0 0 118 0 0 0 0 0 3 133 40,505 0 0 (227) (330)5 (987) 0 0 0 0 0 0 0 0 9,644 495 0 0 0 0 0 185 0 0 (1,359) 1,185 0 0 (4) 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 45 233 0 0 0 0 0 0 0 0 0 0 0 0 25 (18) 0 0 0 0 0 0 0 0 0 0 0 0 14 (7) 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 336 (1,747) 0 0 0 0 0 0 0 0 0 0 0 0 0 (1) 0 0 0 0 0 0 0 0 0 0 0 0 421 (1,539) 0 (227) (330)5 (987) 118 185 0 0 (1,359) 1,185 3 133 55,857 (1,044) 0 0 0 0 0 0 0 0 0 0 0 (10)6 4,665 0 0 (59) 0 (7) 2 0 0 0 0 0 0 (9) 1,638 57 0 (286) (330) (994) 119 185 0 0 (1,359) 1,185 3 114 62,160 (987) 236 Additional paid-in capital Retained earnings Common shares in treasury, at cost On financial assets at fair value through other compre- hensive income, net of tax2 Attributable to change in own credit risk of financial liabilities designated as at fair value through profit and loss, net of tax2 On financial assets available for sale, net of tax2 On derivatives hedging variability of cash flows, net of tax2 On assets classified as held for sale, net of tax2 Foreign currency translation, net of tax2 Unrealized net gains (losses) from equity method investments Accumula- ted other comprehen- sive income, net of tax1 Total shareholders’ equity Additional equity components3 Noncontrolling interests Total equity Unrealized net gains (losses) Common shares (no par value) 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 Deutsche Bank Annual Report 2020 Consolidated statement of changes in equity in € m. Gains (losses) attributable to equity instruments des- ignated as at fair value through other comprehensive income, net of tax Gains (losses) upon early extinguishment attributa- ble to change in own credit risk of financial liabilities designated as at fair value through profit and loss, net of tax Cash dividends paid Coupon on additional equity components, before tax Remeasurement gains (losses) related to defined benefit plans, net of tax Net change in share awards in the reporting period Treasury shares distributed under share-based com- pensation plans Tax benefits related to share-based compensation plans Option premiums and other effects from options on common shares Purchases of treasury shares Sale of treasury shares Net gains (losses) on treasury shares sold Other Balance as of December 31, 2020 0 0 0 0 0 0 0 0 0 0 0 (131) 0 11 0 0 (349)5 223 0 0 0 0 0 0 0 0 208 0 0 0 0 0 0 5,291 1 Excluding remeasurement gains (losses) related to defined benefit plans, net of tax. 2 Excluding unrealized net gains (losses) from equity method investments. 3 Includes Additional Tier 1 Notes, which constitute unsecured and subordinated notes of Deutsche Bank and are classified as equity in accordance with IFRS. 4 Includes the impact from the initial public offering of DWS Group GmbH & Co. KGaA. 5 Since 2019 tax impact is recognized in net income (loss) directly. 6 Includes net proceeds from issuance, purchase and sale of Additional Equity Components. 0 0 0 0 221 40,606 0 0 0 0 0 10,014 0 (279) 68 0 0 (7) 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 278 0 0 0 0 0 0 0 0 0 0 0 0 7 0 0 0 0 0 0 0 0 0 0 0 0 7 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 (1,411) 0 0 0 0 0 0 0 0 0 0 0 0 (1) 0 0 0 0 0 0 0 0 0 0 0 0 (1,118) 0 0 (349)5 223 (131) 208 11 0 (279) 68 0 221 54,786 0 0 0 0 0 0 0 0 0 0 0 1,1596 5,824 0 (77) 0 2 (4) 0 0 0 0 0 0 (28) 1,587 0 (77) (349) 225 (135) 208 11 0 (279) 68 0 1,352 62,196 237 Deutsche Bank Annual Report 2020 Consolidated statement of cash flows 01 – Significant accounting policies and critical accounting estimates Consolidated statement of cash flows in € m. Net Income (loss) Cash flows from operating activities: Adjustments to reconcile net income to net cash provided by (used in) operating activities: Provision for credit losses Restructuring activities Gain on sale of financial assets at fair value through other comprehensive income, equity method investments and other Deferred income taxes, net Impairment, depreciation and other amortization, and accretion Share of net income from equity method investments Income (loss) adjusted for noncash charges, credits and other items Adjustments for net change in operating assets and liabilities: Interest-earning time deposits with central banks and banks Central bank funds sold, securities purchased under resale agreements, securities borrowed Non-Trading financial assets mandatory at fair value through profit and loss Financial assets designated at fair value through profit or loss Loans at amortized cost Other assets Deposits Financial liabilities designated at fair value through profit or loss and investment contract liabili- ties1 Central bank funds purchased, securities sold under repurchase agreements, securities loaned Other short-term borrowings Other liabilities Senior long-term debt2 Trading assets and liabilities, positive and negative market values from derivative financial in- struments, net Other, net Net cash provided by (used in) operating activities Cash flows from investing activities: Proceeds from: Sale of financial assets at fair value through other comprehensive income Maturities of financial assets at fair value through other comprehensive income Sale of debt securities held to collect at amortized cost Maturities of debt securities held to collect at amortized cost Sale of equity method investments Sale of property and equipment Purchase of: Financial assets at fair value through other comprehensive income Debt Securities held to collect at amortized cost Equity method investments Property and equipment Net cash received in (paid for) business combinations/divestitures Other, net Net cash provided by (used in) investing activities Cash flows from financing activities: Issuances of subordinated long-term debt Repayments and extinguishments of subordinated long-term debt Issuances of trust preferred securities Repayments and extinguishments of trust preferred securities Principal portion of lease payments Common shares issued Purchases of treasury shares Sale of treasury shares Additional Equity Components (AT1) issued Purchases of Additional Equity Components (AT1) Sale of Additional Equity Components (AT1) Coupon on additional equity components, pre tax Dividends paid to noncontrolling interests Net change in noncontrolling interests Cash dividends paid to Deutsche Bank shareholders Other, net Net cash provided by (used in) financing activities 2020 624 2019 (5,265) 1,792 485 (665) (296) 2,192 (103) 4,030 (1,202) 5,688 8,597 (430) (1,098) (11,743) (2,154) (3,233) 678 (1,638) 7,030 13,282 9,892 3,036 30,736 38,325 32,964 10,110 4,890 69 24 (82,709) (4,011) (3) (512) 5 (1,045) (1,892) 1,6843 (1,168)3 04 (676)4 (653) 0 (279) 76 1,153 (792) 798 (349) (77) (28) 0 0 (311) 723 644 (277) 1,868 3,993 (104) 1,582 (1,203) (2,529) 11,403 101 (27,335) 7,464 6,432 (3,766) (4,871) (8,954) (16,563) (16,112) 22,559 (8,657) (40,449) 23,721 40,806 390 964 9 92 (56,568) (20,134) (17) (327) 1,762 (978) (10,280) 47 (152) 0 (1,235) (659) 0 (1,359) 1,191 0 (131) 121 (330) (59) (9) (227) 0 (2,802) 2018 341 525 360 (619) 276 2,391 (129) 3,145 (10,954) 15,004 (98,560) 91,176 302 6,284 (16,763) (10,549) (16,716) (4,266) (19,119) (6,840) 20,542 (6,858) (54,172) 22,126 26,001 94 1,904 30 356 (41,031) (309) (1) (465) 220 (1,291) 7,634 68 (1,171) 4 (2,733) N/A 0 (4,119) 3,912 0 (236) 234 (315) (8) 1,205 (227) 52 (3,334) 238 Deutsche Bank Annual Report 2020 Consolidated statement of cash flows 01 – Significant accounting policies and critical accounting estimates in € m. Net effect of exchange rate changes on cash and cash equivalents Net increase (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period Net cash provided by (used in) operating activities include Income taxes paid (received), net Interest paid Interest received Dividends received Cash and cash equivalents comprise Cash and central bank balances (not included: Interest-earning time deposits with central banks) Interbank balances (w/o central banks) (not included: time deposits with banks of € 19.0 billion as of December 31, 2020, € 18.4 billion as of December 31, 2019 and € 16.8 billion as of December 31, 2018) Total 2020 (1,074) 27,459 128,869 156,328 805 6,937 18,498 307 2019 1,578 (51,953) 180,822 128,869 945 11,493 23,748 1,309 2018 1,668 (48,203) 229,025 180,822 468 11,743 22,408 2,186 149,323 121,412 174,059 7,006 156,328 7,457 128,869 6,763 180,822 1 Included are senior long-term debt issuances of € 2.3 billion and € 3.1 billion and repayments and extinguishments of € 3.5 billion and € 4.4 billion through December 31, 2020 and December 31, 2019, respectively. 2 Included are issuances of € 67.4 billion and € 23.4 billion and repayments and extinguishments of € 51.4 billion and € 42.7 billion through December 31, 2020 and Decem- ber 31, 2019, respectively. 3 Non-cash changes for Subordinated Long Term Debt are € (114) million in total, mainly driven by Foreign Exchange movements € (293) million and Fair Value changes of € 177 million. 4 Non-cash changes for Trust Preferred Securities are € (15) million in total and driven by Foreign Exchange movements of € (18) million and Fair Value changes of € 12 mil- lion. The accompanying notes are an integral part of the Consolidated Financial Statements. 239 Deutsche Bank Annual Report 2020 Notes to the consolidated financial statements 01 – Significant accounting policies and critical accounting estimates Notes to the consolidated financial statements 01 – Significant accounting policies and critical accounting esti- mates Basis of accounting Deutsche Bank Aktiengesellschaft, Frankfurt am Main (“Deutsche Bank” or the “Parent”) is a stock corporation organized under the laws of the Federal Republic of Germany. Deutsche Bank together with all entities in which Deutsche Bank has a controlling financial interest (collectively the “Group”, “Deutsche Bank” or “DB”) is a global provider of a full range of corporate and investment banking, private clients and asset management products and services. The accompanying consolidated financial statements are stated in euros, the presentation currency of the Group. All financial information presented in million euros has been rounded to the nearest million. The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Ac- counting Standards Board (“IASB”) and endorsed by the European Union (EU). EU carve-out Since the first quarter of 2020, the Group applies fair value hedge accounting for portfolio hedges of interest rate risk (fair value macro hedges) in accordance with the EU carve out version of IAS 39. The purpose of applying the EU carve out version of IAS 39 is to align the Group’s hedge accounting approach with its risk management practice and the accounting practice of its major European peers. Under the EU carve out version of IAS 39, fair value macro hedge accounting may be applied to core deposits and hedge ineffectiveness is only recognized when the revised estimate of the amount of cash flows in sched- uled time buckets falls below the original designated amount of that bucket. If the revised amount of cash flows in scheduled time buckets is more than the original designated amount then there is no hedge ineffectiveness. Under IFRS as issued by the IASB, hedge accounting for fair value macro hedges cannot be applied to core deposits. In addition, under IFRS as issued by the IASB hedge ineffectiveness arises for all fair value macro hedge accounting relationships whenever the revised esti- mate of the amount of cash flows in scheduled time buckets is either more or less than the original designated amount of that bucket. For the financial year ended December 31, 2020, application of the EU carve out version of IAS 39 had a positive impact of € 18 million on net revenues and profit before taxes and of € 12 million on profit post taxes. The Group’s regulatory capital and ratios thereof are also reported on the basis of the EU carve out version of IAS 39. The impact on profit after taxes also impacts the calculation of the CET 1 capital ratio and had a positive impact of less than 1 basis point as of December 31, 2020. IFRS 7 disclosures Disclosures about the nature and the extent of risks arising from financial instruments as required by IFRS 7, “Financial In- struments: Disclosures” are set forth in the Risk Report section of the Management Report and are an integral part of the Consolidated Financial Statements. These audited disclosures are identified by grey shading in the Risk report. COVID-19 related disclosures The impact of the COVID-19 pandemic on the Group’s financial statements is reflected as follows: The Management Report section includes the impact of COVID-19 on the Group’s financial targets and client franchise, on the Global Economy and on the Macroeconomic and market conditions in the chapters Strategy, Outlook and Risks and Opportunities, respectively. The Risk Report section includes references to the COVID-19 pandemic in the Risk and Capital Management chapter, spe- cifically in the line items “Forward-looking-information”, “Application of EBA guidance regarding Default, Forbearance and IFRS 9 in light of COVID-19 measures”, “Legislative and non-legislative moratoria and public guarantee schemes”, “ECL Model” and “Focus Industries”. The Risk and Capital Performance chapter includes the impact of supervisory measures in reaction to the COVID-19 pandemic in the line item “Minimum capital requirements and additional capital buffers”. The accompanying consolidated financial statements include COVID-19 related disclosures in the notes 5 “Net interest income and net gains (losses) on financial assets/liabilities at fair value through profit or loss”, 13 “Financial instruments measured at fair value”, 23 “Goodwill and Other Intangible Assets” and 33 “Employee Benefits”. 240 Deutsche Bank Annual Report 2020 Notes to the consolidated financial statements 01 – Significant accounting policies and critical accounting estimates The section Supplementary Information (Unaudited) describes the impact of COVID-19 on the Group transformation charges in the Non-GAAP Financial Measures chapter. Change in accounting treatment of purchased financial guarantees In the second quarter of 2020, the Group changed its accounting policies for purchased contracts that meet the definition of a financial guarantee under IFRS 9. Previously, the Group accounted for purchased financial guarantees as contingent assets and did not recognize the reimbursement gain as Other Income (loss) in the Group’s Consolidated Statement of Income until the Group received payment from the guarantor. Under the Group’s new accounting policy, purchased financial guarantees are deemed to result in reimbursements under IAS 37 to the extent that the financial guarantee is entered into to mitigate the credit exposure from debt instruments with Hold to Collect (HTC) or Hold to Collect and Sell (HTC&S) business models. The new accounting policy results in recognition of a reimbursement asset for subsequent increases in the expected credit losses, to the extent it is virtually certain that the purchased financial guarantee will reimburse the Group for the loss incurred. Ac- cordingly, when the credit risk of the borrower significantly deteriorates a reimbursement asset is recognized equal to the life- time expected credit losses and is presented as Other Assets in the Group’s Consolidated Balance Sheet. The corresponding reimbursement gain is recognized as a reduction in the Provision for credit losses in the Group’s Consolidated Statement of Income. Purchased financial guarantees entered into to mitigate credit exposure from debt instruments included in the Other business model are accounted for at fair value through profit or loss. The new accounting policy more appropriately aligns the measurement basis and income statement presentation of the debt instruments and associated purchased financial guaran- tees. It therefore more accurately presents the credit exposure and provision for credit losses in the financial statements resulting in the presentation of more relevant information. The adoption of the changes for the financial year ended December 31, 2020 did not have a material impact to the Group’s Consolidated Statement of Income. Revision in estimate of contractual redemption payment from CLO’s issued In the second quarter of 2020, the Group refined its estimation of contractual cash flows from Collateralized Loan Obligations (CLO’s) issued that mitigate credit exposure from debt instruments with HTC or HTC&S business models. Under this refine- ment, the Group revises its estimated contractual redemption payment from the CLO when the credit risk of a borrower covered by the embedded financial guarantee in the CLO significantly deteriorates. The Group revises its estimated contractual re- demption payment under the CLO based on the life-time expected credit losses of the debt instrument (to the extent covered by the CLO). The refinement in the estimate of the contractual cashflows reduced the Group’s interest expense for financial year ended December 31, 2020, by € 44.5 million. Valuation adjustments for defined benefit pension plans For the Group’s most significant pension plans in the key countries, the discount rate used at each measurement date is set based on a high quality corporate bond yield curve, which is derived using a bond universe sourced from reputable third-party index data providers and rating agencies, and reflects the timing, amount and currency of the future expected benefit payments for the respective plan. A review of the Eurozone discount rate derivation was instigated in March 2020 following unprece- dented market turmoil, which resulted in several refinements to the methodology being implemented in 2020, initially in Q1 and more fundamentally in Q4 with the introduction of an internally produced DB Proprietary curve, which was employed as the basis for discounting the defined benefit obligation from December 31, 2020. Compared to the curve deployed at Decem- ber 31, 2019, the DB Proprietary curve results in a defined benefit obligation that is € 20 million higher, with the impact recognized through Other Comprehensive Income. The defined benefit obligation was € 435 million lower as at December 31, 2020 compared to curve utilized as at June 30, 2020. Due to the change in discount rate methodology and other effects, the Group’s net pension liability for the German pension plans was reduced by € 481 million from € 1,355 million as of December 31, 2019 to € 874 million as of December 31, 2020. In the financial year ended December 31, 2020, the Group recognized € 48 million of negative past service costs in connection with the inclusion of a lump-sum payment option to one of the German retirement benefit arrangements in the Private Bank division. This reduction in defined benefit plan obligations was reported in Compensation and benefits in the Consolidated Statement of Income. Adjustment of compensation expense Due to recent developments and historical experience, the Group has in the second quarter of 2020 changed its estimate of the service period for certain compensation awards granted to employees to recognize compensation expense over the re- spective vesting periods in which the related employee services are rendered. As a result of the change in estimate, the Group reported a benefit of approximately € 105 million in “Compensation and benefits” in the Group’s Consolidated Statement of Income in the second quarter 2020, and a benefit of approximately € 115 million due to the change in the ongoing rate of expense for the financial year ended December 31, 2020. 241 Deutsche Bank Annual Report 2020 Notes to the consolidated financial statements 01 – Significant accounting policies and critical accounting estimates Critical accounting estimates The preparation of financial statements under IFRS requires management to make estimates and assumptions for certain categories of assets and liabilities. These estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the balance sheet date, and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from management’s estimates, especially in relation to the COVID-19 crisis. The Group’s significant accounting policies are described in “Significant Accounting Policies”. Certain of the Group’s accounting policies require critical accounting estimates that involve complex and subjective judgments and the use of assumptions, some of which may be for matters that are inherently uncertain and susceptible to change. Such critical accounting estimates could change from period to period and may have a material impact on the Group’s financial condition, changes in financial condition or results of operations. Critical accounting estimates could also involve estimates where management could have reasonably used another estimate in the current accounting period. The Group has identified the following significant accounting policies that involve critical accounting estimates: – the impairment of associates (see “Associates” below) – the impairment of financial assets at fair value through other comprehensive income (see “Financial Assets – Financial Assets at Fair Value through Other Comprehensive Income” below) – the determination of fair value (see “Determination of Fair Value” below) – the recognition of trade date profit (see “Recognition of Trade Date Profit” below) – the impairment of loans and provisions for off-balance sheet positions (see “Impairment of Loans and Provision for Off- balance Sheet Positions” below) – the impairment of goodwill and other intangibles (see “Goodwill and Other Intangible Assets” below) – the recognition and measurement of deferred tax assets (see “Income Taxes” below) – the accounting for legal and regulatory contingencies and uncertain tax positions (see “Provisions” below) Significant accounting policies The following is a description of the significant accounting policies of the Group. Except for the changes in accounting policies and changes in accounting estimates described previously and noted below these policies have been consistently applied for 2018, 2019 and 2020. Principles of consolidation The financial information in the Consolidated Financial Statements includes the parent company, Deutsche Bank AG, together with its consolidated subsidiaries, including certain structured entities presented as a single economic unit. Subsidiaries The Group’s subsidiaries are those entities which it directly or indirectly controls. Control over an entity is evidenced by the Group’s ability to exercise its power in order to affect any variable returns that the Group is exposed to through its involvement with the entity. The Group sponsors the formation of structured entities and interacts with structured entities sponsored by third parties for a variety of reasons, including allowing clients to hold investments in separate legal entities, allowing clients to invest jointly in alternative assets, for asset securitization transactions, and for buying or selling credit protection. When assessing whether to consolidate an entity, the Group evaluates a range of control factors, namely: – the purpose and design of the entity – the relevant activities and how these are determined – whether the Group’s rights result in the ability to direct the relevant activities – whether the Group has exposure or rights to variable returns – whether the Group has the ability to use its power to affect the amount of its returns Where voting rights are relevant, the Group is deemed to have control where it holds, directly or indirectly, more than half of the voting rights over an entity unless there is evidence that another investor has the practical ability to unilaterally direct the relevant activities. Potential voting rights that are deemed to be substantive are also considered when assessing control. 242 Deutsche Bank Annual Report 2020 Notes to the consolidated financial statements 01 – Significant accounting policies and critical accounting estimates Likewise, the Group also assesses existence of control where it does not control the majority of the voting power but has the practical ability to unilaterally direct the relevant activities. This may arise in circumstances where the size and dispersion of holdings of the shareholders give the Group the power to direct the activities of the investee. The Group reassesses the consolidation status at least at every quarterly reporting date. Therefore, any changes in the struc- ture leading to a change in one or more of the control factors, require reassessment when they occur. This includes changes in decision making rights, changes in contractual arrangements, changes in the financing, ownership or capital structure as well as changes following a trigger event which was anticipated in the original documentation. All intercompany transactions, balances and unrealized gains on transactions between Group companies are eliminated on consolidation. Consistent accounting policies are applied throughout the Group for the purposes of consolidation. Issuances of a subsidiary’s stock to third parties are treated as non-controlling interests. Profit or loss attributable to non-controlling interests are reported separately in the Consolidated Statement of Income and Consolidated Statement of Comprehensive Income. At the date that control of a subsidiary is lost, the Group a) derecognizes the assets (including attributable goodwill) and liabilities of the subsidiary at their carrying amounts, b) derecognizes the carrying amount of any non-controlling interests in the former subsidiary, c) recognizes the fair value of the consideration received and any distribution of the shares of the subsidiary, d) recognizes any investment retained in the former subsidiary at its fair value and e) recognizes any resulting difference of the above items as a gain or loss in the income statement. Any amounts recognized in prior periods in other comprehensive income in relation to that subsidiary would be reclassified to the Consolidated Statement of Income or trans- ferred directly to retained earnings if required by other IFRSs. Associates Investments in associates are accounted for under the equity method of accounting. An associate is an entity in which the Group has significant influence, but not a controlling interest, over the operating and financial management policy decisions of the entity. Significant influence is generally presumed when the Group holds between 20 % and 50 % of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered in assessing whether the Group has significant influence. Among the other factors that are considered in determining whether the Group has significant influence are representation on the board of directors (supervisory board in the case of German stock corpo- rations) and material intercompany transactions. The existence of these factors could require the application of the equity method of accounting for a particular investment even though the Group’s investment is less than 20 % of the voting stock. Under the equity method of accounting, the Group’s investments in associates and jointly controlled entities are initially rec- orded at cost including any directly related transaction costs incurred in acquiring the associate, and subsequently increased (or decreased) to reflect both the Group’s pro-rata share of the post-acquisition net income (or loss) of the associate or jointly controlled entity and other movements included directly in the equity of the associate or jointly controlled entity. The Group’s share of the results of associates is adjusted to conform to the accounting policies of the Group and is reported in the Consol- idated Statement of Income as Net income (loss) from equity method investments. The Group’s share in the associate’s profits and losses resulting from intercompany sales is eliminated on consolidation. Goodwill arising on the acquisition of an associate or a jointly controlled entity is included in the carrying value of the investment. As goodwill is not reported separately it is not specifically tested for impairment. Rather, the entire equity method investment is tested for impairment at each balance sheet date. If there is objective evidence of impairment, an impairment test is performed by comparing the investment’s recoverable amount, which is the higher of its value in use and fair value less costs to sell, with its carrying amount. An impairment loss recognized in prior periods is only reversed if there has been a positive change in the estimates used to determine the invest- ment’s recoverable amount since the last impairment loss was recognized. If this is the case the carrying amount of the investment is increased to its higher recoverable amount. The increased carrying amount of the investment in the associate attributable to a reversal of an impairment loss shall not exceed the carrying amount that would have been determined had no impairment loss been recognized for the investment in prior years. At the date that the Group ceases to have significant influence over the associate or jointly controlled entity the Group recog- nizes a gain or loss on the disposal of the equity method investment equal to the difference between the sum of the fair value of any retained investment and the proceeds from disposing of the associate and the carrying amount of the investment. Amounts recognized in prior periods in other comprehensive income in relation to the associate are accounted for on the same basis as would have been required if the investee had directly disposed of the related assets or liabilities. Critical accounting estimates: The assessment of whether there is objective evidence of impairment may require significant management judgment and the estimates for impairment could change from period to period based on future events that may or may not occur. The Group considers this to be a critical accounting estimate. 243 Deutsche Bank Annual Report 2020 Notes to the consolidated financial statements 01 – Significant accounting policies and critical accounting estimates Foreign currency translation The Consolidated Financial Statements are prepared in euro, which is the presentation currency of the Group. Various entities in the Group use a different functional currency, being the currency of the primary economic environment in which the entity operates. An entity records foreign currency revenues, expenses, gains and losses in its functional currency using the exchange rates prevailing at the dates of recognition. Monetary assets and liabilities denominated in currencies other than the entity’s functional currency are translated at the period end closing rate. Foreign exchange gains and losses resulting from the translation and settlement of these items are recog- nized in the Consolidated Statement of Income as net gains (losses) on financial assets/liabilities at fair value through profit or loss in order to align the translation amounts with those recognized from foreign currency related transactions (derivatives) which hedge these monetary assets and liabilities. Non-monetary items that are measured at historical cost are translated using the historical exchange rate at the date of the transaction. Translation differences on non-monetary items which are held at fair value through profit or loss are recognized in profit or loss. For purposes of translation into the presentation currency, assets and liabilities of foreign operations are translated at the period end closing rate and items of income and expense are translated into euros at the rates prevailing on the dates of the transactions, or average rates of exchange where these approximate actual rates. The exchange differences arising on the translation of a foreign operation are included in other comprehensive income. For foreign operations that are subsidiaries, the amount of exchange differences attributable to any non-controlling interests is recognized in non-controlling interests. Upon disposal of a foreign subsidiary and associate (which results in loss of control or significant influence over that operation) the total cumulative exchange differences recognized in other comprehensive income are reclassified to profit or loss. Upon partial disposal of a foreign operation that is a subsidiary and which does not result in loss of control, the proportionate share of cumulative exchange differences is reclassified from other comprehensive income to non-controlling interests as this is deemed a transaction with equity holders. For a partial disposal of an associate which does not result in a loss of significant influence, the proportionate share of cumulative exchange differences is reclassified from other comprehensive income to profit or loss. Interest, commissions and fees Net interest income – Interest income and expense from all interest-bearing assets and liabilities is recognized as net interest income using the effective interest method. The effective interest rate (EIR) is a method of calculating the amortized cost of a financial asset or a financial liability and of allocating the interest income or expense over the relevant period using the esti- mated future cash flows. The estimated future cash flows used in the EIR calculation include those determined by all of the contractual terms of the asset or liability, all fees (including commissions) that are considered to be integral to the effective interest rate, direct and incremental transaction costs and all other premiums or discounts. However, if the financial instrument is carried at fair value through profit or loss, any associated fees are recognized in trading income when the instrument is initially recognized, pro- vided there are no significant unobservable inputs used in determining its fair value. If a financial asset is credit impaired interest revenue is calculated by applying the effective interest rate to the amortized cost amount. The amortized cost amount of a financial asset is the gross carrying amount of a financial asset after adjusting for any impairment allowance. For assets which are initially recognized as purchased or credit impaired, interest revenue is cal- culated through the use of a credit-adjusted effective interest rate which takes into consideration expected credit losses. The Group presents negative interest paid on interest-bearing assets as interest expense, and interest revenue received from interest-bearing liabilities as interest income. Commissions and fee income –The Group applies the IFRS 15, “Revenue from Contracts with Customers” five-step revenue recognition model to the recognition of Commissions and Fee Income, under which income must be recognized when control of goods and services is transferred, hence the contractual performance obligations to the customer has been satisfied. Accordingly, after a contract with a customer has been identified in the first step, the second step is to identify the performance obligation – or a series of distinct performance obligations – provided to the customer. The Group must examine whether the service is capable of being distinct and is actually distinct within the context of the contract. A promised service is distinct if 244 Deutsche Bank Annual Report 2020 Notes to the consolidated financial statements 01 – Significant accounting policies and critical accounting estimates the customer can benefit from the service either on its own or together with other resources that are readily available to the customer, and the promise to transfer the service to the customer is separately identifiable from other promises in the contract. The amount of income is measured on the basis of the contractually agreed transaction price for the performance obligation defined in the contract. If a contract includes a variable consideration, the Group estimates the amount of consideration to which it will be entitled in exchange for transferring the promised goods or services to a customer. Income is recognized in profit and loss when the identified performance obligation has been satisfied. The Group does not present information about its remaining performance obligations if it is part of a contract that has an original expected duration of one year or less. The Group determines the stand-alone selling price at contract inception of a distinct service underlying each performance obligation in the contract and allocates the transaction price in proportion to those stand-alone selling prices. The stand-alone selling price is the price at which DB would sell a promised service separately to a customer on an unbundled basis. The best evidence of a stand-alone selling price is the observable price of a service when the Group sells that service separately in similar circumstances and to similar customers. If the Group does not sell the service to a customer separately, it estimates the stand-alone selling price at an amount using a suitable method, for example, in loan syndication transactions the Group applies the requirements for recognition of trade day profit and considers the price at which other market participants provide the same service on an unbundled basis. As such when estimating a stand-alone selling price, the Group considers all infor- mation (including market conditions) that is reasonably available to it. In doing so, the Group maximizes the use of observable inputs and applies estimation methods consistently in similar circumstances. The Group provides asset management services that give rise to asset management and performance fees and constitute a single performance obligation. The asset management and performance fee components are variable considerations such that at each reporting date the Group estimates the fee amount to which it will be entitled in exchange for transferring the promised services to the customer. The benefits arising from the asset management services are simultaneously received and consumed by the customer over time. The Group recognizes revenue over time by measuring the progress towards complete satisfaction of that performance obligation, subject to the removal of any uncertainty as to whether it is highly prob- able that a significant reversal in the cumulative amount of revenue recognized would occur or not. For the management fee component this is the end of the monthly or quarterly service period. For performance fees this date is when any uncertainty related to the performance component has been fully removed. Loan commitment fees related to commitments that are accounted for off balance sheet are recognized in commissions and fee income over the life of the commitment if it is unlikely that the Group will enter into a specific lending arrangement. If it is probable that the Group will enter into a specific lending arrangement, the loan commitment fee is deferred until the origination of a loan and recognized as an adjustment to the loan’s effective interest rate. Commissions and Fee Income predominantly earned from services that are received and consumed by the customer over time: Administration, assets under management, foreign commercial business, loan processing and guarantees sundry other customer services. The Group recognizes revenue from these services over time by measuring the progress towards complete satisfaction of that performance obligation, subject to the removal of any uncertainty as to whether it is highly probable that a significant reversal in the cumulative amount of revenue recognized would occur or not. Commissions and Fee Income predominantly earned from providing services at a point in time or transaction-type services include: other securities, underwriting and advisory fees, brokerage fees, local payments, foreign currency/ exchange business and intermediary fees. Expenses that are directly related and incremental to the generation of Commissions and Fee Income are presented net in Commissions and Fee Income in the Consolidated Statement of Income. This includes income and associated expense where the Group contractually owns the performance obligation (i.e. as Principal) in relation to the service that gives rise to the revenue and associated expense. In contrast, it does not include situations where the Group does not contractually own the performance obligation and is acting as agent. The determination of whether the Group is acting as principal or agent is based on the contractual terms of the underlying service arrangement. The gross Commissions and Fee Income and Expense amounts are disclosed in “Note 6 – Commissions and Fee Income”. Financial assets The Group classifies financial assets in line with the classification and measurement requirements of IFRS 9, where financial assets are classified based on both the business model used for managing the financial assets and the contractual cash flow characteristics of the financial asset (known as Solely Payments of Principal and Interest or “SPPI”). There are three business models available: – Hold to Collect - Financial assets held with the objective to collect contractual cash flows. They are subsequently measured at amortized cost and are recorded in multiple lines on the Group’s consolidated balance sheet. 245 Deutsche Bank Annual Report 2020 Notes to the consolidated financial statements 01 – Significant accounting policies and critical accounting estimates – Hold to Collect and Sell - Financial assets held with the objective of both collecting contractual cash flows and selling financial assets. They are recorded as Financial assets at Fair Value through Other Comprehensive Income on the Group’s consolidated balance sheet. – Other - Financial assets that do not meet the criteria of either “Hold to Collect” or “Hold to Collect and Sell”. They are recorded as Financial Assets at Fair Value through Profit or Loss on the Group’s consolidated balance sheet. The assessment of business model requires judgment based on facts and circumstances upon initial recognition. As part of this assessment, the Group considers quantitative factors (e.g., the expected frequency and volume of sales) and qualitative factors such as how the performance of the business model and the financial assets held within that business model are evaluated and reported to the Group’s key management personnel. In addition to taking into consideration the risks that affect the performance of the business model and the financial assets held within that business model, in particular, the way in which those market and credit risks are managed; and how managers of the business are compensated (e.g., whether the compen- sation is based on the fair value of the assets managed or on the contractual cash flows collected). This assessment results in an asset being classified in either a Hold to Collect, Hold to Collect and Sell or Other business model. If the Group holds a financial asset either in a Hold to Collect or a Hold to Collect and Sell business model, then an assessment at initial recognition to determine whether the contractual cash flows of the financial asset are Solely Payments of Principal and Interest on the principal amount outstanding at initial recognition is required to determine the business model classification. Contractual cash flows, that are SPPI on the principal amount outstanding, are consistent with a basic lending arrangement. Interest in a basic lending arrangement is consideration for the time value of money and the credit risk associated with the principal amount outstanding during a particular period of time. It can also include consideration for other basic lending risks (e.g., liquidity risk) and costs (e.g., administrative costs) associated with holding the financial asset for a particular period of time; and a profit margin that is consistent with a basic lending arrangement. Financial assets at fair value through profit or loss Financial assets are classified at fair value through profit or loss if they are held in the Other business model because they are either held for trading or because they do not meet the criteria for Hold to Collect or Hold to Collect and Sell. In addition, it includes financial assets that meet the criteria for Hold to Collect or Hold to Collect and Sell business model, but the financial asset fails SPPI or where the Group designated the financial assets under the fair value option. Financial assets classified as Financial assets at fair value through profit or loss are measured at fair value with realized and unrealized gains and losses included in Net gains (losses) on financial assets/liabilities at fair value through profit or loss. Interest on interest earning assets such as trading loans and debt securities and dividends on equity instruments are presented in Interest and Similar Income. Financial assets classified at fair value through profit or loss are recognized or derecognized on trade date. Trade date is the date on which the Group commits to purchase or sell the asset. Trading assets – Financial assets are classified as held for trading if they have been originated, acquired or incurred principally for the purpose of selling or repurchasing them in the near term, or they form part of a portfolio of identified financial instruments that are managed together and for which there is evidence of a recent actual pattern of short-term profit-taking. Trading assets include debt and equity securities, derivatives held for trading purposes, and trading loans. This also includes loan commit- ments that are allocated to the Other business model and that are presented as derivatives held for trading. Non-trading financial assets mandatory at fair value through profit and loss –The Group assigns any non-trading financial asset that does not fall into the Hold to Collect nor Hold to Collect and Sell business models into the Other business model and classifies them as Non-Trading Financial Assets mandatory at Fair Value through Profit and Loss. This includes predom- inately reverse repurchase agreements which are managed on a fair value basis. Additionally, any financial asset that falls into the Hold to Collect or Hold to Collect and Sell business models for which the contractual cash flow characteristics are not SPPI is classified by the Group as Non-Trading Financial Assets Mandatory at Fair Value through Profit and Loss. Financial assets designated at fair value through profit or loss – Certain financial assets that would otherwise be measured subsequently at amortized cost or at fair value through other comprehensive income, may be designated at Fair Value through Profit or Loss if the designation eliminates or significantly reduces a measurement or recognition inconsistency. The use of the fair value option under IFRS 9 is limited. The Group allows the fair value option to be designated only for those financial instruments for which a reliable estimate of fair value can be obtained. Financial assets at fair value through other comprehensive income A financial asset shall be classified and measured at Fair Value through Other Comprehensive Income (“FVOCI”), if the finan- cial asset is held in a Hold to Collect and Sell business model and the contractual cash flows are SPPI, unless designated under the fair value option. 246 Deutsche Bank Annual Report 2020 Notes to the consolidated financial statements 01 – Significant accounting policies and critical accounting estimates Under FVOCI, a financial asset is measured at its fair value with any changes being recognized in Other Comprehensive Income (”OCI”) and is assessed for impairment under the IFRS 9 expected credit loss model where provisions are recorded through profit or loss based on expectations of potential credit losses. The Group’s impairment policy is described further in the section “Impairment of Loans and Provision for Off-Balance Sheet Positions (IFRS 9)”. The foreign currency translation effect for FVOCI assets is recognized in profit or loss, as is the interest component by using the effective interest method. The amortization of premiums and accretion of discounts are recorded in net interest income. Realized gains and losses are reported in net gains (losses) on financial assets at FVOCI. Generally, the weighted-average cost method is used to determine the cost of FVOCI financial assets. Financial assets classified as FVOCI are recognized or derecognized on trade date. Trade date is the date on which the Group commits to purchase or sell the asset. It is possible to designate non-trading equity instruments as FVOCI. However, this category is expected to have limited usage by the Group and has not been used to date. Financial assets at amortized cost A financial asset is classified and subsequently measured at amortized cost if the financial asset is held in a Hold to Collect business model and the contractual cash flows are SPPI. Under this measurement category, the financial asset is measured at fair value at initial recognition. Subsequently the carrying amount is reduced for principal payments, plus or minus the cumulative amortization using the effective interest method. The financial asset is assessed for impairment under the IFRS 9 expected credit loss model where provisions are recognized based on expectations of potential credit losses. The Group’s impairment of financial instruments policy is described further in the section “Impairment of Loans and Provision for Off-Balance Sheet Positions (IFRS 9)”. Financial assets measured at amortized cost are recognized on a settlement date basis. Financial Assets at amortized cost include predominately Loans at amortized cost, Central bank funds sold and securities purchased under resale agreements, Securities borrowed and certain receivables presented in Other Assets. Modification of financial assets and financial liabilities When the terms of a financial asset are renegotiated or modified and the modification does not result in derecognition, a gain or loss is recognized in the income statement as the difference between the original contractual cash flows and the modified cash flows discounted at the original effective interest rate. The modified financial asset will continue to accrued interest at its original EIR. When a modification results in derecognition the original instrument is derecognized and the new instrument recognized at fair value. Non-credit related or commercial renegotiations where an obligor has not experienced a significant increase in credit risk since origination, and has a readily exercisable right to early terminate the financial asset results in derecognition of the original agreement and recognition of a new financial asset based on the newly negotiated commercial terms. For credit related modifications (i.e. those modifications due to significant increase in credit risk since inception) or those where the obligor does not have the readily exercisable right to early terminate, the Group assesses whether the modified terms result in the financial asset being significantly modified and therefore derecognized. This assessment includes a quantitative assessment of the impact of the change in cash flows from the modification of contractual terms and additionally, where necessary, a qualitative assessment of the impact of the change in the contractual terms. Where these modifications are not concluded to be significant, the financial asset is not derecognized and is accounted for as a modification as described above. If the changes are concluded to be significant, the old instrument is derecognized and a new instrument recognized. The Group then recognizes a credit loss allowance based on 12-month expected credit losses. However, if following a modification that results in a derecognition of the original financial asset, there is evidence that the new financial asset is credit-impaired on initial recognition; then the new financial asset should be recognized as an originated credit-impaired financial asset and initially classified in Stage 3 (refer to section “Impairment of Loans and Provision for Off-Balance Sheet Positions” below). When the terms of a financial liability are renegotiated or modified then the Group assesses whether the modified terms result in the financial liability being significantly modified and therefore derecognized. This assessment includes a quantitative as- sessment of the impact of the change in cash flows from the modification of contractual terms and additionally, where neces- sary, a qualitative assessment of the impact of the change in the contractual terms. Where these modifications are not con- cluded to be significant, the financial liability is not derecognized and a gain or loss is recognized in the income statement as the difference between the original contractual cash flows and the modified cash flows discounted at the original effective interest rate. Where there is derecognition the original financial liability is derecognized and the new liability recognized at its fair value. 247 Deutsche Bank Annual Report 2020 Notes to the consolidated financial statements 01 – Significant accounting policies and critical accounting estimates Loan commitments Loan commitments remain off-balance sheet, unless allocated to the Other business model and presented as derivatives held for trading. The Group does not recognize and measure changes in fair value of off-balance sheet loan commitments that result from changes in market interest rates or credit spreads. However, as specified in the sections “Impairment of Loans and Provision for Off-Balance Sheet Positions” below, these off-balance sheet loan commitments are assessed for impairment individually and where appropriate, collectively. Financial liabilities Under IFRS 9 financial liabilities are measured at amortized cost using the effective interest method, except for financial lia- bilities at fair value through profit or loss. Financial liabilities at fair value through profit or loss Financial liabilities at fair value through profit or loss include Trading Liabilities, Financial Liabilities Designated at Fair Value through Profit or Loss and Non-Participating Investment Contracts (“Investment Contracts”). Under IFRS 9 they are carried at fair value with realized and unrealized gains and losses included in net gains (losses) on financial assets and liabilities at fair value through profit or loss. For financial liabilities designated at fair value through profit and loss the fair value movements attributable to the Group’s own credit component for fair value movements is recognized in Other Comprehensive Income. Financial liabilities classified at fair value through profit or loss are recognized or derecognized on trade date. Trade date is the date on which the Group commits to issue or repurchase the financial liability. Interest on interest paying liabilities are presented in interest expense for financial instruments at fair value through profit or loss. Trading liabilities - Financial liabilities that arise from debt issued are classified as held for trading if they have been originated or incurred principally for the purpose of repurchasing them in the near term. Trading liabilities consist primarily of derivative liabilities (including certain loan commitments) and short positions. This also includes loan commitments where the resulting loan upon funding is allocated to the other business model such that the undrawn loan commitment is classified as derivatives held for trading. Financial liabilities designated at fair value through profit or loss - Certain financial liabilities that do not meet the definition of trading liabilities are designated at fair value through profit or loss using the fair value option. To be designated at fair value through profit or loss, financial liabilities must meet one of the following criteria: (1) the designation eliminates or significantly reduces a measurement or recognition inconsistency; (2) a group of financial liabilities is managed and its performance is evaluated on a fair value basis in accordance with a documented risk management or investment strategy; or (3) the instrument contains one or more embedded derivatives unless: (a) the embedded derivative does not significantly modify the cash flows that otherwise would be required by the contract; or (b) it is clear with little or no analysis that separation is prohibited. In addition, the Group allows the fair value option to be designated only for those financial instruments for which a reliable estimate of fair value can be obtained. Financial liabilities which are designated at fair value through profit or loss, under the fair value option, include repurchase agreements, loan commitments and structured note liabilities. Investment contracts - All of the Group’s investment contracts are unit-linked contract that match specific assets held by the Group. The contracts oblige the Group to use these assets to settle investment contract liabilities. They do not contain signif- icant insurance risk or discretionary participation features. The contract liabilities are determined using current unit prices multiplied by the number of units attributed to the contract holders as of the balance sheet date. As this amount represents fair value, the liabilities have been classified as financial liabilities at fair value through profit or loss. Deposits collected under investment contracts are accounted for as an adjustment to the investment contract liabilities. Investment income attributable to investment contracts is included in the consolidated statement of Income. Investment contract claims reflect the excess of amounts paid over the account balance released. Investment contract policyholders are charged fees for policy administration, investment management, surrenders or other contract services. Embedded derivatives Some hybrid financial liability contracts contain both a derivative and a non-derivative component. In such cases, the derivative component is termed an embedded derivative, with the non-derivative component representing the host financial liability con- tract. If the economic characteristics and risks of embedded derivatives are not closely related to those of the host financial liability contract and the hybrid financial liability contract itself is not carried at fair value through profit or loss, the embedded derivative is bifurcated and reported at fair value, with gains and losses recognized in net gains (losses) on financial assets/li- abilities at fair value through profit or loss. The host financial liability contract will continue to be accounted for in accordance 248 Deutsche Bank Annual Report 2020 Notes to the consolidated financial statements 01 – Significant accounting policies and critical accounting estimates with the appropriate accounting standard. The carrying amount of an embedded derivative is reported in the same Consoli- dated balance sheet line item as the host financial liability contract. Certain hybrid financial liability instruments have been designated at fair value through profit or loss using the fair value option. Financial liabilities at amortized cost Financial liabilities measured at amortized cost include long-term and short-term debt issued which are initially measured at fair value, which is the consideration received, net of transaction costs incurred. Repurchases of issued debt in the market are treated as extinguishments and any related gain or loss is recorded in the Consolidated Statement of Income. A subsequent sale of own bonds in the market is treated as a reissuance of debt. Financial liabilities measured at amortized cost are recog- nized on a settlement date basis. Offsetting of financial instruments Financial assets and liabilities are offset, with the net amount presented in the Consolidated balance sheet, only if the Group holds a currently enforceable legal right to set off the recognized amounts and there is an intention to settle on a net basis or to realize an asset and settle the liability simultaneously. The legal right to set off the recognized amounts must be enforceable in both the normal course of business and in the event of default, insolvency or bankruptcy of both the Group and its counter- party. In all other situations they are presented gross. When financial assets and financial liabilities are offset in the Consoli- dated balance sheet, the associated income and expense items will also be offset in the Consolidated Statement of Income, unless specifically prohibited by an applicable accounting standard. The majority of the offsetting applied by the Group relates to derivatives and repurchase and reverse repurchase agreements. A significant portion of offsetting is applied to interest rate derivatives and related cash margin balances, which are cleared through central clearing parties. For further information please refer to Note 17 “Offsetting Financial Assets and Financial Liabilities”. Determination of fair value Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an arm’s length transaction between market participants at the measurement date. The fair value of instruments that are quoted in active markets is determined using the quoted prices where they represent those at which regularly and recently occurring transac- tions take place. The Group measures certain portfolios of financial assets and financial liabilities on the basis of their net risk exposures when the following criteria are met: – The group of financial assets and liabilities is managed on the basis of its net exposure to a particular market risk (or risks) or to the credit risk of a particular counterparty, in accordance with a documented risk management strategy, – The fair values are provided to key management personnel, and – The financial assets and liabilities are measured at fair value through profit or loss. This portfolio valuation approach is consistent with how the Group manages its net exposures to market and counterparty credit risks. Critical accounting estimates – The Group uses valuation techniques to establish the fair value of instruments where prices quoted in active markets are not available. Therefore, where possible, parameter inputs to the valuation techniques are based on observable data derived from prices of relevant instruments traded in an active market. These valuation techniques involve some level of management estimation and judgment, the degree of which will depend on the price transparency for the instru- ment or market and the instrument’s complexity. In reaching estimates of fair value management judgment needs to be exercised. The areas requiring significant management judgment are identified, documented and reported to senior management as part of the valuation control process and the standard monthly reporting cycle. The specialist model validation and valuation control groups focus attention on the areas of subjectivity and judgment. The level of management judgment required in establishing fair value of financial instruments for which there is a quoted price in an active market is usually minimal. Similarly there is little subjectivity or judgment required for instruments valued using valuation models which are standard across the industry and where all parameter inputs are quoted in active markets. 249 Deutsche Bank Annual Report 2020 Notes to the consolidated financial statements 01 – Significant accounting policies and critical accounting estimates The level of subjectivity and degree of management judgment required is more significant for those instruments valued using specialized and sophisticated models and where some or all of the parameter inputs are less liquid or less observable. Man- agement judgment is required in the selection and application of appropriate parameters, assumptions and modelling tech- niques. In particular, where data are obtained from infrequent market transactions then extrapolation and interpolation tech- niques must be applied. Where no market data are available for a particular instrument then pricing inputs are determined by assessing other relevant sources of information such as historical data, fundamental analysis of the economics of the trans- action and proxy information from similar transactions, and making appropriate adjustment to reflect the actual instrument being valued and current market conditions. Where different valuation techniques indicate a range of possible fair values for an instrument then management has to decide what point within the range of estimates appropriately represents the fair value. Further, some valuation adjustments may require the exercise of management judgment to achieve fair value. Financial assets and liabilities carried at fair value are required to be disclosed according to the inputs to the valuation method that are used to determine their fair value. Specifically, segmentation is required between those valued using quoted market prices in an active market (level 1), valuation techniques based on observable parameters (level 2) and valuation techniques using significant unobservable parameters (level 3). Management judgment is required in determining the category to which certain instruments should be allocated. This specifically arises when the valuation is determined by a number of parameters, some of which are observable and others are not. Further, the classification of an instrument can change over time to reflect changes in market liquidity and therefore price transparency. The Group provides a sensitivity analysis of the impact upon the level 3 financial instruments of using a reasonably possible alternative for the unobservable parameter. The determination of reasonably possible alternatives requires significant man- agement judgment. For financial instruments measured at amortized cost (which include loans, deposits and short and long term debt issued) the Group discloses the fair value. Generally there is limited or no trading activity in these instruments and therefore the fair value determination requires significant management judgment. For further discussion of the valuation methods and controls and quantitative disclosures with respect to the determination of fair value, please refer to Note 13 “Financial Instruments carried at Fair Value” and Note 14 “Fair Value of Financial Instru- ments not carried at Fair Value”. Recognition of trade date profit Trade date profit is recognized if the fair value of the financial instrument measured at fair value through profit or loss is obtained from a quoted market price in an active market, or otherwise evidenced by comparison to other observable current market transactions or based on a valuation technique incorporating observable market data. If there are significant unobserv- able inputs used in the valuation technique, the financial instrument is recognized at the transaction price and any profit implied from the valuation technique at trade date is deferred. Using systematic methods, the deferred amount is recognized over the period between trade date and the date when the market is expected to become observable, or over the life of the trade (whichever is shorter). Such methodology is used because it reflects the changing economic and risk profile of the instrument as the market develops or as the instrument itself progresses to maturity. Any remaining trade date deferred profit is recognized in the Consolidated Statement of Income when the transaction becomes observable. In the rare circumstances that a trade date loss arises, it would be recognized at inception of the transaction to the extent that it is probable that a loss has been incurred and a reliable estimate of the loss amount can be made. Critical Accounting Estimates – Management judgment is required in determining whether there exist significant unobservable inputs in the valuation technique. Once deferred, the decision to subsequently recognize the trade date profit requires a careful assessment of the then current facts and circumstances supporting observability of parameters and/or risk mitigation. Derivatives and hedge accounting Derivatives are used to manage exposures to interest rate, foreign currency, credit and other market price risks, including exposures arising from forecast transactions. All freestanding contracts that are considered derivatives for accounting pur- poses are carried at fair value on the Consolidated balance sheet regardless of whether they are held for trading or non- trading purposes. The changes in fair value on derivatives held for trading are included in net gains (losses) on financial assets/liabilities at fair value through profit or loss. 250 Deutsche Bank Annual Report 2020 Notes to the consolidated financial statements 01 – Significant accounting policies and critical accounting estimates Hedge accounting IFRS 9 includes an accounting policy choice to defer the adoption of IFRS 9 hedge accounting and to continue with IAS 39 hedge accounting. The Group decided to exercise this accounting policy choice and did not adopt IFRS 9 hedge accounting as of January 1, 2018. The Group applies fair value hedge accounting for portfolio hedges of interest rate risk (fair value macro hedges) in accordance with the EU carve out version of IAS 39. Under the EU IAS 39 carve-out, fair value macro hedge accounting may be applied to core deposits and hedge ineffectiveness for all fair value macro hedge accounting applications is only recognized when the revised estimate of the amount of cash flows in scheduled time buckets falls below the original designated amount of that bucket and is not recognized when the revised amount of cash flows in scheduled time buckets is more than the original designated amount. For accounting purposes there are three possible types of hedges: (1) hedges of changes in the fair value of assets, liabilities or unrecognized firm commitments (fair value hedges); (2) hedges of the variability of future cash flows from highly probable forecast transactions and floating rate assets and liabilities (cash flow hedges); and (3) hedges of the translation adjustments resulting from translating the functional currency financial statements of foreign operations into the presentation currency of the parent (hedges of net investments in foreign operations). When hedge accounting is applied, the Group designates and documents the relationship between the hedging instrument and the hedged item as well as its risk management objective and strategy for undertaking the hedging transactions and the nature of the risk being hedged. This documentation includes a description of how the Group will assess the hedging instru- ment’s effectiveness in offsetting the exposure to changes in the hedged item’s fair value or cash flows attributable to the hedged risk. Hedge effectiveness is assessed at inception and throughout the term of each hedging relationship. Hedge effectiveness is always assessed, even when the terms of the derivative and hedged item are matched. For hedges of changes in fair value, the changes in the fair value of the hedged asset, liability or unrecognized firm commit- ment, or a portion thereof, attributable to the risk being hedged, are recognized in the Consolidated Statement of Income along with changes in the entire fair value of the derivative. When hedging interest rate risk, any interest accrued or paid on both the derivative and the hedged item is reported in interest income or expense and the unrealized gains and losses from the hedge accounting fair value adjustments are reported in other revenue. Hedge ineffectiveness is reported in other revenue and is measured as the net effect of changes in the fair value of the hedging instrument and changes in the fair value of the hedged item arising from changes in the market rate or price related to the risk(s) being hedged. If a fair value hedge of a debt instrument is discontinued prior to the instrument’s maturity because the derivative is terminated or the relationship is de-designated, any remaining interest rate-related fair value adjustments made to the carrying amount of the debt instrument (basis adjustments) are amortized to interest income or expense over the remaining term of the original hedging relationship. For other types of fair value adjustments and whenever a fair value hedged asset or liability is sold or otherwise derecognized, any basis adjustments are included in the calculation of the gain or loss on derecognition. For hedges of variability in future cash flows, there is no change to the accounting for the hedged item and the derivative is carried at fair value, with changes in value reported initially in other comprehensive income to the extent the hedge is effective. These amounts initially recorded in other comprehensive income are subsequently reclassified into the Consolidated State- ment of Income in the same periods during which the forecast transaction affects the Consolidated Statement of Income. Thus, for hedges of interest rate risk, the amounts are amortized into interest income or expense at the same time as the interest is accrued on the hedged transaction. Hedge ineffectiveness is recorded in other income and is measured as changes in the excess (if any) in the absolute cumu- lative change in fair value of the actual hedging derivative over the absolute cumulative change in the fair value of the hypo- thetically perfect hedge. When hedges of variability in cash flows attributable to interest rate risk are discontinued, amounts remaining in accumulated other comprehensive income are amortized to interest income or expense over the remaining life of the original hedge rela- tionship, unless the hedged transaction is no longer expected to occur in which case the amount will be reclassified into other income immediately. When hedges of variability in cash flows attributable to other risks are discontinued, the related amounts in accumulated other comprehensive income are reclassified into either the same Consolidated Statement of Income caption and period as profit or loss from the forecast transaction, or into other income when the forecast transaction is no longer expected to occur. For hedges of the translation adjustments resulting from translating the functional currency financial statements of foreign operations (hedges of net investments in foreign operations) into the functional currency of the parent, the portion of the change in fair value of the derivative due to changes in the spot foreign exchange rates is recorded as a foreign currency translation adjustment in other comprehensive income to the extent the hedge is effective; the remainder is recorded as other income in the Consolidated Statement of Income. 251 Deutsche Bank Annual Report 2020 Notes to the consolidated financial statements 01 – Significant accounting policies and critical accounting estimates Changes in fair value of the hedging instrument relating to the effective portion of the hedge are subsequently recognized in profit or loss on disposal of the foreign operations. Hedging derivatives are reported as other assets and other liabilities. In the event that a derivative is subsequently de-desig- nated from a hedging relationship, it is transferred to financial assets/liabilities at fair value through profit or loss. Impairment of loans and provision for off-balance sheet positions The impairment requirements of IFRS 9 apply to all credit exposures that are measured at amortized cost or FVOCI, and to off balance sheet lending commitments such as loan commitments and financial guarantees. For purposes of the impairment policy below, these instruments are referred to as (“Financial Assets”) The determination of impairment losses an expected credit loss (“ECL”) model under IFRS 9, where allowances are taken upon initial recognition of the Financial Asset, based on expectations of potential credit losses at the time of initial recognition. Staged approach to the determination of expected credit losses IFRS 9 states a three stage approach to impairment for Financial Assets that are not credit impaired at the date of origination or purchase. This approach is summarized as follows: – Stage 1: The Group recognizes a credit loss allowance at an amount equal to 12-month expected credit losses for all Financial Assets. This represents the portion of lifetime expected credit losses from default events that are expected within 12 months of the reporting date, assuming that credit risk has not increased significantly after initial recognition. – Stage 2: The Group recognizes a credit loss allowance at an amount equal to lifetime expected credit losses for those Financial Assets which are considered to have experienced a significant increase in credit risk since initial recognition. This requires the computation of ECL based on lifetime probability of default, lifetime loss given default and lifetime exposure at default that represents the probability of default occurring over the remaining lifetime of the Financial Asset. Allowance for credit losses are higher in this stage because of an increase in credit risk and the impact of a longer time horizon being considered compared to 12 months in Stage 1. – Stage 3: The Group recognizes a loss allowance at an amount equal to lifetime expected credit losses, reflecting a Proba- bility of Default of 100 %, via the expected recoverable cash flows for the asset, for those Financial Assets that are credit- impaired. The Group’s definition of default is aligned with the regulatory definition. Financial Assets that are credit-impaired upon initial recognition are categorized within Stage 3 with a carrying value already reflecting the lifetime expected credit losses. The accounting treatment for these purchased or originated credit-impaired (“POCI”) assets is discussed further below. Significant increase in credit risk Under IFRS 9, when determining whether the credit risk (i.e., risk of default) of a Financial Asset has increased significantly since initial recognition, the Group considers reasonable and supportable information that is relevant and available without undue cost or effort. This includes quantitative and qualitative information based on the Group’s historical experience, credit risk assessment and forward-looking information (including macro-economic factors). The assessment of significant credit deterioration is key in determining when to move from measuring an allowance based on 12-month ECLs to one that is based on lifetime ECLs (i.e., transfer from Stage 1 to Stage 2). The Group’s framework for determining if there has been a significant increase in credit risk aligns with the internal Credit Risk Management (“CRM”) process and covers rating related and process related indicators which are discussed further in section “IFRS 9 Impairment Approach” in the Risk Report. Credit impaired financial assets in Stage 3 The Group has aligned its definition of credit impaired under IFRS 9 to when a Financial Asset has defaulted for regulatory purposes, according to the Capital Requirements Regulation under Art. 178. The determination of whether a Financial Asset is credit impaired and therefore in Stage 3 focusses exclusively on default risk, without taking into consideration the effects of credit risk mitigants such as collateral or guarantees. Specifically, a Finan- cial Asset is credit impaired and in Stage 3 when: – The Group considers the obligor is unlikely to pay its credit obligations to the Group. Determination may include forbearance actions, where a concession has been granted to the borrower or economic or legal reasons that are qualitative indicators of credit impairment; or – Contractual payments of either principal or interest by the obligor are past due by more than 90 days. 252 Deutsche Bank Annual Report 2020 Notes to the consolidated financial statements 01 – Significant accounting policies and critical accounting estimates For Financial Assets considered to be credit impaired, the ECL allowance covers the amount of loss the Group is expected to suffer. The estimation of ECLs is done on a case-by-case basis for non-homogeneous portfolios, or by applying portfolio based parameters to individual Financial Assets in these portfolios via the Group’s ECL model for homogeneous portfolios. This estimate includes the use of discounted cash flows that are adjusted for scenarios. Forecasts of future economic conditions when calculating ECLs are considered. The lifetime expected losses are estimated based on the probability-weighted present value of the difference between the contractual cash flows that are due to the Group under the contract; and the cash flows that the Group expects to receive. A Financial Asset can be classified as credit impaired in Stage 3 but without an allowance for credit losses (i.e., no impairment loss is expected). This may be due to the value of collateral. The Group’s engine based ECL calculation is conducted on a monthly basis, whereas the case-by-case assessment of ECL in Stage 3 for non-homogeneous portfolio has to be performed at least on a quarterly basis. Purchased or originated credit impaired financial assets in Stage 3 A Financial Asset is considered purchased or originated credit-impaired if there is objective evidence of impairment at the time of initial recognition. Such credit impaired Financial Assets are termed POCI Financial Assets. POCI Financial Assets are measured to reflect lifetime expected credit losses, and all subsequent changes in lifetime expected credit losses, whether positive or negative, are recognized in the income statement as a component of the provision for credit losses. POCI Financial Assets can only be classified in Stage 3 over the life of the Financial Asset. Write-offs The Group reduces the gross carrying amount of a Financial Asset when there is no reasonable expectation of recovery. Write-offs can relate to a Financial Asset in its entirety, or to a portion of it, and constitute a derecognition event. The Group considers all relevant information in making this determination, including but not limited to: – Foreclosure actions taken by the Group which have not been successful or have a high probability of not being successful – Collateral liquidation which has not, or will not lead to further considerable recoveries – Situations where no further recoveries are reasonably expected Write-offs can take place before legal actions against the borrower to recover the debt have been concluded, and a write-off does not involve the Group forfeiting its legal right to recover the debt. Collateral for financial assets considered in the impairment analysis IFRS 9 requires cash flows expected from collateral and other credit enhancement to be reflected in the ECL calculation. The following are key aspects with respect to collateral and guarantees: – Eligibility of collateral, i.e. which collateral should be considered in the ECL calculation; – Collateral evaluation, i.e. what collateral (liquidation) value should be used; and – Projection of the available collateral amount over the life of a transaction. These concepts are outlined in more detail in section “IFRS 9 Impairment Approach” in the Risk Report. Critical accounting estimates – The accounting estimates and judgments related to the impairment of Financial Assets is a critical accounting estimate because the underlying assumptions used can change from period to period and may significantly affect the Group’s results of operations. In assessing assets for impairments, management judgment is required, particularly in projecting future economic information and scenarios in particular in circumstances of economic and financial uncertainty, when developments and changes to ex- pected cash flows can occur both with greater rapidity and less predictability. The actual amount of the future cash flows and their timing may differ from the estimates used by management and consequently may cause actual losses to differ from reported allowances. For those non-homogeneous loans in Stage 3 the determination of the impairment allowance often requires the use of con- siderable judgment concerning such matters as local economic conditions, the financial performance of the counterparty and the value of any collateral held, for which there may not be a readily accessible market. The determination of the expected credit losses in Stages 1 and 2 and for homogeneous loans in Stage 3 is calculated using statistical expected loss models. The model incorporates numerous estimates and judgments. The Group performs a regular review of the model and underlying data and assumptions. The probability of defaults, loss recovery rates and judgments 253 Deutsche Bank Annual Report 2020 Notes to the consolidated financial statements 01 – Significant accounting policies and critical accounting estimates concerning ability of borrowers in foreign countries to transfer the foreign currency necessary to comply with debt repayments, amongst other things, are incorporated into this review. The quantitative disclosures are provided in Note 18 “Loans” and Note 19 “Allowance for credit losses”. Derecognition of financial assets and liabilities Financial asset derecognition A financial asset is considered for derecognition when the contractual rights to the cash flows from the financial asset expire, or the Group has either transferred the contractual right to receive the cash flows from that asset, or has assumed an obligation to pay those cash flows to one or more recipients, subject to certain criteria. The Group derecognizes a transferred financial asset if it transfers substantially all the risks and rewards of ownership. The Group enters into transactions in which it transfers previously recognized financial assets but retains substantially all the associated risks and rewards of those assets; for example, a sale to a third party in which the Group enters into a concurrent total return swap with the same counterparty. These types of transactions are accounted for as secured financing transactions. In transactions in which substantially all the risks and rewards of ownership of a financial asset are neither retained nor trans- ferred, the Group derecognizes the transferred asset if control over that asset is not retained, i.e., if the transferee has the practical ability to sell the transferred asset. The rights and obligations retained in the transfer are recognized separately as assets and liabilities, as appropriate. If control over the asset is retained, the Group continues to recognize the asset to the extent of its continuing involvement, which is determined by the extent to which it remains exposed to changes in the value of the transferred asset. The derecognition criteria are also applied to the transfer of part of an asset, rather than the asset as a whole, or to a group of similar financial assets in their entirety, when applicable. If transferring a part of an asset, such part must be a specifically identified cash flow, a fully proportionate share of the asset, or a fully proportionate share of a specifically-identified cash flow. If an existing financial asset is replaced by another asset from the same counterparty on substantially different terms, or if the terms of the financial asset are substantially modified (due to forbearance measures or otherwise), the existing financial asset is derecognized and a new asset is recognized. Any difference between the respective carrying amounts is recognized in the Consolidated Statement of Income. Securitization The Group securitizes various consumer and commercial financial assets, which is achieved via the transfer of these assets to a structured entity, which issues securities to investors to finance the acquisition of the assets. Financial assets awaiting securitization are classified and measured as appropriate under the policies in the “Financial Assets and Liabilities” section. If the structured entity is not consolidated then the transferred assets may qualify for derecognition in full or in part, under the policy on derecognition of financial assets. Synthetic securitization structures typically involve derivative financial instruments for which the policies in the “Derivatives and Hedge Accounting” section would apply. Those transfers that do not qualify for derecognition may be reported as secured financing or result in the recognition of continuing involvement liabilities. The in- vestors and the securitization vehicles generally have no recourse to the Group’s other assets in cases where the issuers of the financial assets fail to perform under the original terms of those assets. Interests in the securitized financial assets may be retained in the form of senior or subordinated tranches, interest only strips or other residual interests (collectively referred to as “retained interests”). Provided the Group’s retained interests do not result in consolidation of a structured entity, nor in continued recognition of the transferred assets, these interests are typically recorded in financial assets at fair value through profit or loss and carried at fair value. Consistent with the valuation of similar financial instruments, the fair value of retained tranches or the financial assets is initially and subsequently determined using market price quotations where available or internal pricing models that utilize variables such as yield curves, prepayment speeds, default rates, loss severity, interest rate volatilities and spreads. The assumptions used for pricing are based on observable transactions in similar securities and are verified by external pricing sources, where available. Where observable transactions in similar securities and other external pricing sources are not available, management judgment must be used to determine fair value. The Group may also periodically hold interests in securitized financial assets and record them at amor- tized cost. In situations where the Group has a present obligation (either legal or constructive) to provide financial support to an uncon- solidated securitization entity a provision will be created if the obligation can be reliably measured and it is probable that there will be an outflow of economic resources required to settle it. 254 Deutsche Bank Annual Report 2020 Notes to the consolidated financial statements 01 – Significant accounting policies and critical accounting estimates When an asset is derecognized a gain or loss equal to the difference between the consideration received and the carrying amount of the transferred asset is recorded. When a part of an asset is derecognized, gains or losses on securitization depend in part on the carrying amount of the transferred financial assets, allocated between the financial assets derecognized and the retained interests based on their relative fair values at the date of the transfer. Derecognition of financial liabilities A financial liability is derecognized when the obligation under the liability is discharged or cancelled or expires. If an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of the existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognized in the Consolidated Statement of Income. Repurchase and reverse repurchase agreements Securities purchased under resale agreements (“reverse repurchase agreements”) and securities sold under agreements to repurchase (“repurchase agreements”) are treated as collateralized financings and are recognized initially at fair value, being the amount of cash disbursed and received, respectively. The party disbursing the cash takes possession of the securities serving as collateral for the financing and having a market value equal to, or in excess of, the principal amount loaned. The securities received under reverse repurchase agreements and securities delivered under repurchase agreements are not recognized on, or derecognized from, the balance sheet, because the risks and rewards of ownership are not obtained nor relinquished. Securities delivered under repurchase agreements which are not derecognized from the balance sheet and where the counterparty has the right by contract or custom to sell or repledge the collateral are disclosed in Note 20 “Transfer of Financial Assets, Assets Pledged and Received as Collateral”. The Group allocates reverse repurchase portfolios that are managed on a fair value basis to the other business model under IFRS 9 and classifies them as “Non-trading financial assets mandatory at fair value through profit or loss”. Interest earned on reverse repurchase agreements and interest incurred on repurchase agreements is reported as interest income and interest expense, respectively. Securities borrowed and securities loaned Securities borrowed transactions generally require the Group to deposit cash with the securities lender. In a securities loaned transaction, the Group generally receives either cash collateral, in an amount equal to or in excess of the market value of securities loaned, or securities. The Group monitors the fair value of securities borrowed and securities loaned and additional collateral is disbursed or obtained, if necessary. The securities borrowed are not themselves recognized in the financial statements. If they are sold to third parties, the obliga- tion to return the securities is recorded as a financial liability at fair value through profit or loss and any subsequent gain or loss is included in the Consolidated Statement of Income in net gains (losses) on financial assets/liabilities at fair value through profit or loss. Securities lent to counterparties are also retained on the Consolidated balance sheet. The Group records the amount of cash advanced or received as securities borrowed and securities loaned, respectively, in the Consolidated balance sheet. Fees received or paid are reported in interest income and interest expense, respectively. Securities lent to counterparties which are not derecognized from the Consolidated balance sheet and where the counterparty has the right by contract or custom to sell or repledge the collateral are disclosed in Note 20 “Transfer of Financial Assets, Assets Pledged and Received as Collateral”. Goodwill and other intangible assets Goodwill arises on the acquisition of subsidiaries and associates and represents the excess of the aggregate of the cost of an acquisition and any non-controlling interests in the acquiree over the fair value of the identifiable net assets acquired at the date of the acquisition. For the purpose of calculating goodwill, fair values of acquired assets, liabilities and contingent liabilities are determined by reference to market values or by discounting expected future cash flows to present value. This discounting is either performed using market rates or by using risk-free rates and risk-adjusted expected future cash flows. Any non-controlling interests in the acquiree is measured either at fair value or at the non-controlling interests’ proportionate share of the acquiree’s identifiable net assets (this is determined for each business combination). 255 Deutsche Bank Annual Report 2020 Notes to the consolidated financial statements 01 – Significant accounting policies and critical accounting estimates Goodwill on the acquisition of subsidiaries is capitalized and reviewed for impairment annually or more frequently if there are indications that impairment may have occurred. For the purposes of impairment testing, goodwill acquired in a business com- bination is allocated to cash-generating units (“CGUs”), which are the smallest identifiable groups of assets that generate cash inflows largely independent of the cash inflows from other assets or groups of assets and that are expected to benefit from the synergies of the combination and considering the business level at which goodwill is monitored for internal management purposes. In identifying whether cash inflows from an asset (or a group of assets) are largely independent of the cash inflows from other assets (or groups of assets) various factors are considered, including how management monitors the entity’s op- erations or makes decisions about continuing or disposing of the entity’s assets and operations. If goodwill has been allocated to a CGU and an operation within that unit is disposed of, the attributable goodwill is included in the carrying amount of the operation when determining the gain or loss on its disposal. Corporate assets are allocated to a CGU when the allocation can be done on a reasonable and consistent basis. If this is not possible, the individual CGU is tested without the corporate assets. They are then tested on the level of the minimum collection of CGUs to which they can be allocated on a reasonable and consistent basis. Intangible assets are recognized separately from goodwill when they are separable or arise from contractual or other legal rights and their fair value can be measured reliably. Intangible assets that have a finite useful life are stated at cost less any accumulated amortization and accumulated impairment losses. Customer-related intangible assets that have a finite useful life are amortized over periods of between 1 and 20 years on a straight-line basis based on their expected useful life. These assets are tested for impairment and their useful lives reaffirmed at least annually. Certain intangible assets have an indefinite useful life and hence are not amortized, but are tested for impairment at least annually or more frequently if events or changes in circumstances indicate that impairment may have occurred. Costs related to software developed or obtained for internal use are capitalized if it is probable that future economic benefits will flow to the Group and the cost can be measured reliably. Capitalized costs are amortized using the straight-line method over the asset’s useful life which is deemed to be either three, five or ten years. Eligible costs include external direct costs for materials and services, as well as payroll and payroll-related costs for employees directly associated with an internal-use software project. Overhead costs, as well as costs incurred during the research phase or after software is ready for use, are expensed as incurred. Capitalized software costs are tested for impairment either annually if still under development or any time when there is an indication of impairment once the software is in use. Critical accounting estimates – The determination of the recoverable amount in the impairment assessment of non-financial assets requires estimates based on quoted market prices, prices of comparable businesses, present value or other valuation techniques (such as the cost approach), or a combination thereof, necessitating management to make subjective judgments and assumptions. Because these estimates and assumptions could result in significant differences to the amounts reported if underlying circumstances were to change, the Group considers these estimates to be critical. The quantitative disclosures are provided in Note 23 “Goodwill and other intangible assets”. Provisions Provisions are recognized if the Group has a present legal or constructive obligation as a result of past events, if it is probable that an outflow of resources will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. The amount recognized as a provision is the best estimate of the consideration required to settle the present obligation as of the balance sheet date, taking into account the risks and uncertainties surrounding the obligation. If the effect of the time value of money is material, provisions are discounted and measured at the present value of the expenditure expected to be required to settle the obligation, using a pre-tax rate that reflects the current market assessments of the time value of money and the risks specific to the obligation. The increase in the provision due to the passage of time is recognized as interest expense. When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party (for example, because the obligation is covered by an insurance policy), an asset is recognized if it is virtually certain that reim- bursement will be received. If the Group has a contract that is onerous, the present obligation under the contract is recognized and measured as a provi- sion. An onerous contract is a contract in which the unavoidable costs of meeting the obligations under the contract exceed the economic benefits expected to be received under it. 256 Deutsche Bank Annual Report 2020 Notes to the consolidated financial statements 01 – Significant accounting policies and critical accounting estimates Critical accounting estimates –The use of estimates is important in determining provisions for potential losses that may arise from litigation and regulatory proceedings. The Group estimates and provides for potential losses that may arise out of litigation and regulatory proceedings to the extent that such losses are probable and can be estimated, in accordance with IAS 37, “Provisions, Contingent Liabilities and Contingent Assets”. Significant judgment is required in making these estimates and the Group’s final liabilities may ultimately be materially different. Contingencies in respect of legal matters are subject to many uncertainties and the outcome of individual matters is not pre- dictable with assurance. Significant judgment is required in assessing probability and making estimates in respect of contin- gencies, and the Group’s final liability may ultimately be materially different. The Group’s total liability in respect of litigation, arbitration and regulatory proceedings is determined on a case-by-case basis and represents an estimate of probable losses after considering, among other factors, the progress of each case, the Group’s experience and the experience of others in similar cases, and the opinions and views of legal counsel. Predicting the outcome of the Group’s litigation matters is inherently difficult, particularly in cases in which claimants seek substantial or indeterminate damages. See Note 27 “Provisions” for information on the Group’s judicial, regulatory and arbitration proceedings. Income taxes The Group recognizes the current and deferred tax consequences of transactions that have been included in the consolidated financial statements using the provisions of the respective jurisdictions’ tax laws. Current and deferred taxes are recognized in profit or loss except to the extent that the tax relates to items that are recognized directly in equity or other comprehensive income in which case the related tax is recognized either directly in equity or other comprehensive income accordingly. Deferred tax assets and liabilities are recognized for future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, unused tax losses and unused tax credits. Deferred tax assets are recognized only to the extent that it is probable that sufficient taxable profit will be available against which those unused tax losses, unused tax credits and deductible temporary differences can be utilized. Deferred tax assets and liabilities are measured based on the tax rates that are expected to apply in the period that the asset is realized or the liability is settled, based on tax rates and tax laws that have been enacted or substantively enacted at the balance sheet date. Current tax assets and liabilities are offset when (1) they arise from the same tax reporting entity or tax group of reporting entities, (2) the legally enforceable right to offset exists and (3) they are intended to be settled net or realized simultaneously. Deferred tax assets and liabilities are offset when the legally enforceable right to offset current tax assets and liabilities exists and the deferred tax assets and liabilities relate to income taxes levied by the same taxing authority on either the same tax reporting entity or tax group of reporting entities. Deferred tax liabilities are provided on taxable temporary differences arising from investments in subsidiaries, branches and associates and interests in joint ventures except when the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the difference will not reverse in the foreseeable future. Deferred income tax assets are provided on deductible temporary differences arising from such investments only to the extent that it is probable that the differences will reverse in the foreseeable future and sufficient taxable income will be available against which those temporary differences can be utilized. Deferred tax related to fair value remeasurement of financial assets classified as FVTOCI, cash flow hedges and other items, which are charged or credited directly to other comprehensive income, is also credited or charged directly to other compre- hensive income and subsequently recognized in the Consolidated Statement of Income once the underlying transaction or event to which the deferred tax relates is recognized in the Consolidated Statement of Income. For share-based payment transactions, the Group may receive a tax deduction related to the compensation paid in shares. The amount deductible for tax purposes may differ from the cumulative compensation expense recorded. At any reporting date, the Group must estimate the expected future tax deduction based on the current share price. The associated current and deferred tax consequences are recognized as income or expense in the consolidated statement of Income for the period. If the amount deductible, or expected to be deductible, for tax purposes exceeds the cumulative compensation expense, the excess tax benefit is recognized directly in equity. Critical accounting estimates – In determining the amount of deferred tax assets, the Group uses historical tax capacity and profitability information and, if relevant, forecasted operating results based upon approved business plans, including a review of the eligible carry-forward periods, available tax planning opportunities and other relevant considerations. The analysis of historical tax capacity includes the determination as to whether a history of recent losses exists at the reporting date. The determination of a history of recent losses is based on the pre-tax results adjusted for permanent differences and typically 257 Deutsche Bank Annual Report 2020 Notes to the consolidated financial statements 01 – Significant accounting policies and critical accounting estimates covers the current and the two preceding financial years. Each quarter, the Group re-evaluates its estimate related to deferred tax assets, including its assumptions about future profitability. The Group believes that the accounting estimate related to the deferred tax assets is a critical accounting estimate because the underlying assumptions can change from period to period and requires significant management judgment. For example, tax law changes or variances in future projected operating performance could result in a change of the deferred tax asset. If the Group was not able to realize all or part of its net deferred tax assets in the future, an adjustment to its deferred tax assets would be charged to income tax expense or directly to equity in the period such determination was made. If the Group was to recognize previously unrecognized deferred tax assets in the future, an adjustment to its deferred tax asset would be credited to income tax expense or directly to equity in the period such determination was made. The use of estimates is also important in determining provisions for potential losses that may arise from uncertain income tax positions. The Group estimates and provides for potential losses that may arise out of uncertain income tax positions, in accordance with IAS 12, “Income Taxes” and IFRIC 23, “Uncertainty over Income Tax Treatment”. Significant judgment is required in making these estimates and the Group’s final liabilities may ultimately be materially different. For further information on the Group’s deferred taxes (including quantitative disclosures on recognized deferred tax assets) see Note 34 “Income Taxes”. Business combinations and non-controlling Interests The Group uses the acquisition method to account for business combinations. At the date the Group obtains control of the subsidiary, the cost of an acquisition is measured at the fair value of the consideration given, including any cash or non-cash consideration (equity instruments) transferred, any contingent consideration, any previously held equity interest in the acquiree and liabilities incurred or assumed. The excess of the aggregate of the cost of an acquisition and any non-controlling interests in the acquiree over the Group’s share of the fair value of the identifiable net assets acquired is recorded as goodwill. If the aggregate of the acquisition cost and any non-controlling interests is below the fair value of the identifiable net assets (negative goodwill), a gain is reported in other income. Acquisition-related costs are recognized as expenses in the period in which they are incurred. In business combinations achieved in stages (“step acquisitions”), a previously held equity interest in the acquiree is remeas- ured to its acquisition-date fair value and the resulting gain or loss, if any, is recognized in profit or loss. Amounts recognized in prior periods in other comprehensive income associated with the previously held investment would be recognized on the same basis as would be required if the Group had directly disposed of the previously held equity interest. Non-controlling interests are shown in the consolidated balance sheet as a separate component of equity, which is distinct from the Group’s shareholders’ equity. The net income attributable to non-controlling interests is separately disclosed on the face of the Consolidated Statement of Income. Changes in the ownership interest in subsidiaries which do not result in a change of control are treated as transactions between equity holders and are reported in additional paid-in capital (“APIC”). Non-current assets held for sale Individual non-current assets (and disposal groups) are classified as held for sale if they are available for immediate sale in their present condition subject only to the customary sales terms of such assets (and disposal groups) and their sale is con- sidered highly probable. For a sale to be highly probable, management must be committed to a sales plan and be actively looking for a buyer and has no substantive regulatory approvals outstanding. Furthermore, the assets (and disposal groups) must be actively marketed at a reasonable sales price in relation to their current fair value and the sale should be expected to be completed within one year. Non-current non-financial assets (and disposal groups) which meet the criteria for held for sale classification are measured at the lower of their carrying amount and fair value less costs of disposal and are presented within “Other assets” and “Other liabilities” in the balance sheet. Financial assets and liabilities meeting the criteria continue to be measured in accordance with IFRS 9. The comparatives are not presented when non-current assets (and disposal groups) are classified as held for sale. If the disposal group contains financial instruments, no adjustment to their carrying amounts is permitted. Property and equipment Property and equipment includes own-use properties, leasehold improvements, furniture and equipment and software (oper- ating systems only). Right-of-use assets are presented together with property and equipment on the Group’s consolidated balance sheet. Own-use properties are carried at cost less accumulated depreciation and accumulated impairment losses. Depreciation is generally recognized using the straight-line method over the estimated useful lives of the assets. The range of estimated useful lives is 25 to 50 years for property and 3 to 10 years for furniture and equipment (including initial improve- ments to purchased buildings). Leasehold improvements are capitalized and subsequently depreciated on a straight-line basis 258 Deutsche Bank Annual Report 2020 Notes to the consolidated financial statements 01 – Significant accounting policies and critical accounting estimates over the shorter of the term of the lease and the estimated useful life of the improvement, which generally ranges from 3 to 18 years. Depreciation of property and equipment is included in general and administrative expenses. Maintenance and re- pairs are also charged to general and administrative expenses. Gains and losses on disposals are included in other income. Property and equipment are assessed for any indication of impairment at each quarterly reporting date. If such indication exists, the recoverable amount, which is the higher of fair value less costs of disposal and value in use, must be estimated and an impairment charge is recorded to the extent the recoverable amount is less than its carrying amount. Value in use is the present value of the future cash flows expected to be derived from the asset. After the recognition of impairment of an asset, the depreciation charge is adjusted in future periods to reflect the asset’s revised carrying amount. If an impairment is later reversed, the depreciation charge is adjusted prospectively. Financial guarantees Financial guarantee contracts are contracts that require the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payments when due in accordance with the terms of a debt instrument. Financial guarantees written The Group has chosen to apply the fair value option to certain written financial guarantees that are managed on a fair value basis. Financial guarantees that the Group has not designated at fair value are recognized initially in the financial statements at fair value on the date the guarantee is given. Subsequent to initial recognition, the Group’s liabilities under such guarantees are measured at the higher of the amount initially recognized, less cumulative amortization, and the best estimate of the expenditure required to settle any financial obligation as of the balance sheet date. These estimates are determined based on experience with similar transactions and history of past losses, and management’s determination of the best estimate. Any increase in the liability relating to guarantees is recorded in the Consolidated Statement of Income in Provision for Credit Losses. Financial guarantees purchased Purchased financial guarantees result in reimbursements under IAS 37 to the extent that the financial guarantee is entered into to mitigate the credit exposure from debt instruments with Hold to Collect (HTC) or Hold to Collect and Sell (HTC&S) business models. This results in recognition of a reimbursement asset for subsequent increases in the expected credit losses, to the extent it is virtually certain that the purchased financial guarantee will reimburse the Group for the loss incurred. Ac- cordingly, when the credit risk of the borrower significantly deteriorates a reimbursement asset is recognized equal to the life- time expected credit losses and is presented as Other Assets in the Group’s Consolidated Balance Sheet. The corresponding reimbursement gain is recognized as a reduction in the Provision for credit losses in the Group’s Consolidated Statement of Income. Purchased financial guarantees entered into to mitigate credit exposure from debt instruments allocated to HTC or HTC&S business models may also be embedded in Collateralized Loan Obligations (CLO’s) issued by the Group. Such embedded guarantees are not accounted for separately as a reimbursement asset and instead accounted as part of the CLO’s liability held at amortized cost. The Group regularly revises its estimated contractual redemption payment (including the benefit of such embedded guarantees) from the CLO when the credit risk of a borrower covered by the embedded financial guarantee in the CLO significantly deteriorates. The revision is based on the life-time expected credit losses of the debt instrument (to the extent covered by the CLO). Purchased financial guarantees entered into to mitigate credit exposure from debt instruments included in the Other business model are accounted for at fair value through profit or loss. Leasing transactions The Group enters into lease contracts, predominantly for land and buildings, as a lessee. Other categories are company cars and technical/IT equipment. The Group assesses at contract inception whether a contract is, or contains, a lease. That is, if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. The Group applies a single recognition and measurement approach for all leases with a term of more than 12 months, unless the underlying asset is of low value. As a lessee, at the lease commencement date, the Group recognizes a right-of-use asset representing its right to use the underlying leased asset and a lease liability representing its obligation to make lease payments. 259 Deutsche Bank Annual Report 2020 Notes to the consolidated financial statements 01 – Significant accounting policies and critical accounting estimates The right-of-use asset is measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any re-measurement of lease liabilities. The cost of right-of-use assets includes the amount of lease liabilities, adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset or to restore the site on which it is located, less any lease incentives received. Right-of-use assets are depreciated on a straight-line basis over the lease term. The lease liability is measured at the present value of lease payments to be made over the lease term. The lease payments include fixed payments (including in substance fixed payments) less any lease incentives receivable and variable lease pay- ments that depend on an index or a rate. Variable lease payments that do not depend on an index or a rate are recognized as expenses in the period in which the event or condition that triggers the payment occurs. In calculating the present value of lease payments, the Group uses its incremental borrowing rate at the lease commencement date because the interest rate implicit in the lease is not readily determinable. After the commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments made. In addition, the carrying amount of lease liabilities is re-measured if there is a modification, a change in the lease term or a change in the lease payments (e.g., changes to future payments resulting from a change in an index or rate used to determine such lease payments). Right-of-use assets are assessed for any indication of impairment at each quarterly reporting date. If such indication exists, the recoverable amount, which is the fair value less costs of disposal, must be estimated and an impairment charge is recorded to the extent the recoverable amount is less than its carrying amount. As right-of-use assets do not have independently gen- erated cash flows to calculate its value in use, the Group considers any sublease income that could reasonably be earned. After the recognition of impairment of an asset, the depreciation charge is adjusted in future periods to reflect the asset’s revised carrying amount. If an impairment is later reversed, the depreciation charge is adjusted prospectively. The Group presents right-of-use assets “Property and Equipment” and lease liabilities in “Other Liabilities”. The Group applies the short-term lease recognition exemption to its short-term leases, i.e., those leases that have a lease term of 12 months or less from the commencement date. It also applies the lease of low-value assets recognition exemption to leases of technical/IT equipment that are considered to be low value. Lease payments on short-term leases and leases of low value assets are recognized as expense on a straight-line basis over the lease term. Employee benefits Pension benefits The Group provides a number of pension plans. In addition to defined contribution plans, there are retirement benefit plans accounted for as defined benefit plans. The assets of all the Group’s defined contribution plans are held in independently administered funds. Contributions are generally determined as a percentage of salary and are expensed based on employee services rendered, generally in the year of contribution. All retirement benefit plans accounted for as defined benefit plans are valued using the projected unit-credit method to deter- mine the present value of the defined benefit obligation and the related service costs. Under this method, the determination is based on actuarial calculations which include assumptions about demographics, salary increases and interest and inflation rates. Actuarial gains and losses are recognized in Other Comprehensive Income and presented in equity in the period in which they occur. The majority of the Group’s benefit plans is funded. For the Group’s most significant pension plans in the key countries, the discount rate used at each measurement date is set based on a high quality corporate bond yield curve – derived based on bond universe information sourced from reputable third-party index data providers and rating agencies – reflecting the timing, amount and currency of the future expected benefit payments for the respective plan. Other post-employment benefits In addition, the Group maintains unfunded contributory post-employment medical plans for a number of current and retired employees who are mainly located in the United States. These plans pay stated percentages of eligible medical and dental expenses of retirees after a stated deductible has been met. The Group funds these plans on a cash basis as benefits are due. Analogous to retirement benefit plans these plans are valued using the projected unit-credit method. Actuarial gains and losses are recognized in full in the period in which they occur in other comprehensive income and presented in equity. Refer to Note 33 “Employee benefits” for further information on the accounting for pension benefits and other post-employment benefits. 260 Deutsche Bank Annual Report 2020 Notes to the consolidated financial statements 01 – Significant accounting policies and critical accounting estimates Termination benefits Termination benefits arise when employment is terminated by the Group before the normal retirement date or whenever an employee accepts voluntary redundancy in exchange for these benefits. The Group recognizes termination benefits as a liability and an expense if the Group is demonstrably committed to a detailed formal plan without realistic possibility of with- drawal. In the case of an offer made to encourage voluntary redundancy, termination benefits are measured based on the number of employees expected to accept the offer. Benefits falling due more than twelve months after the end of the reporting period are discounted to their present value. The discount rate is determined by reference to market yields on high-quality corporate bonds. Share-based compensation Compensation expense for awards classified as equity instruments is measured at the grant date based on the fair value of the share-based award. For share awards, the fair value is the quoted market price of the share reduced by the present value of the expected dividends that will not be received by the employee and adjusted for the effect, if any, of restrictions beyond the vesting date. In case an award is modified such that its fair value immediately after modification exceeds its fair value immediately prior to modification, a remeasurement takes place and the resulting increase in fair value is recognized as addi- tional compensation expense. The Group records the offsetting amount to the recognized compensation expense in additional paid-in capital (“APIC”). Com- pensation expense is recorded on a straight-line basis over the period in which employees perform services to which the awards relate or over the period of the tranches for those awards delivered in tranches. Estimates of expected forfeitures are periodically adjusted in the event of actual forfeitures or for changes in expectations. The timing of expense recognition relating to grants which, due to early retirement provisions, include a nominal but non-substantive service period are accelerated by shortening the amortization period of the expense from the grant date to the date when the employee meets the eligibility criteria for the award, and not the vesting date. For awards that are delivered in tranches, each tranche is considered a separate award and amortized separately. Compensation expense for share-based awards payable in cash is remeasured to fair value at each balance sheet date and recognized over the vesting period in which the related employee services are rendered. The related obligations are included in Other Liabilities until paid. Government Grants The Group recognizes income from government grants when there is reasonable assurance that it will receive the grant and will comply with the conditions attached to the grant. The Group presents income from government grants as a deduction of the related expense. The Group considers long-term debt that arises from the ECB’s Targeted Longer-Term Refinancing Operations III (“TLTRO III”)-refinancing program as a borrowing at below-market rate interest. The effective interest rate for borrowings under the TLTRO III refinancing program is determined based on the applicable ECB refinancing rates outside of TLTRO III. The Group accounts for the benefit from the below-market rate interest as a government grant. The TLTRO III refinancing program is intended to stimulate credit creation in the Eurozone area by incentivizing lending by participating banks to the “real economy”. The size of the benefit depends on the amounts borrowed and on meeting the various lending performance thresholds. The Group considers the ECB as a government or similar body for purposes of IAS 20. The Group recognizes the benefit from the TLTRO III refinancing program in the period in which the grant is intended to compensate the Group for the related borrowing costs if it has established reasonable assurance that it will meet the relevant lending thresholds. For further information on the benefit recognized by the Group from the TLTRO III refinancing program see Note 5 “Net interest income and net gains (losses) on financial assets/liabilities at fair value through profit or loss”. Obligations to purchase common shares Forward purchases of Deutsche Bank shares, and written put options where Deutsche Bank shares are the underlying, are reported as obligations to purchase common shares if the number of shares is fixed and physical settlement for a fixed amount of cash is required. At inception, the obligation is recorded at the present value of the settlement amount of the forward or option. For forward purchases and written put options of Deutsche Bank shares, a corresponding charge is made to share- holders’ equity and reported as equity classified as an obligation to purchase common shares. The liabilities are accounted for on an accrual basis, and interest costs, which consist of time value of money and dividends, on the liability are reported as interest expense. Upon settlement of such forward purchases and written put options, the liability is extinguished and the charge to equity is reclassified to common shares in treasury. 261 Deutsche Bank Annual Report 2020 Notes to the consolidated financial statements 01 – Significant accounting policies and critical accounting estimates Deutsche Bank common shares subject to such forward contracts are not considered to be outstanding for purposes of basic earnings per share calculations, but are considered for dilutive earnings per share calculations to the extent that they are, in fact, dilutive. Option and forward contracts on Deutsche Bank shares are classified as equity if the number of shares is fixed and physical settlement is required. All other contracts in which Deutsche Bank shares are the underlying are recorded as financial assets or liabilities at fair value through profit or loss. Consolidated statement of cash flows For purposes of the consolidated statement of cash flows, the Group’s cash and cash equivalents include highly liquid invest- ments that are readily convertible into cash and which are subject to an insignificant risk of change in value. Such investments include cash and balances at central banks and demand deposits with banks. The Group’s assignment of cash flows to the operating, investing or financing category depends on the business model (“man- agement approach”). For the Group the primary operating activity is to manage financial assets and financial liabilities. There- fore, the issuance and management of long-term borrowings is a core operating activity which is different than for a non- financial company, where borrowing is not a principal revenue producing activity and thus is part of the financing category. The Group views the issuance of senior long-term debt as an operating activity. Senior long-term debt comprises structured notes and asset-backed securities, which are designed and executed by the Corporate Bank and Investment Bank business line segments and which are revenue generating activities. The other component is debt issued by Treasury, which is consid- ered interchangeable with other funding sources; all of the funding costs are allocated to business activities to establish their profitability. Cash flows related to subordinated long-term debt and trust preferred securities are viewed differently than those related to senior-long term debt because they are managed as an integral part of the Group’s capital, primarily to meet regulatory capital requirements. As a result they are not interchangeable with other operating liabilities, but can only be interchanged with equity and thus are considered part of the financing category. The amounts shown in the consolidated statement of cash flows do not precisely match the movements in the consolidated balance sheet from one period to the next as they exclude non-cash items such as movements due to foreign exchange translation and movements due to changes in the group of consolidated companies. Movements in balances carried at fair value through profit or loss represent all changes affecting the carrying value. This includes the effects of market movements and cash inflows and outflows. The movements in balances carried at fair value are usually presented in operating cash flows. 262 Deutsche Bank Annual Report 2020 Notes to the consolidated financial statements 02 – Recently adopted and new accounting pronouncements 02 – Recently adopted and new accounting pronouncements Recently adopted accounting pronouncements The following are those accounting pronouncements which are relevant to the Group and which have been adopted during 2020 in the preparation of these consolidated financial statements. IFRS 16 Leases On June 1, 2020, the Group adopted amendments to IFRS 16 “Leases” that provide lessees with an exemption from assessing whether a COVID-19-related rent concession is a lease modification. The adoption of the amendments did not have a material impact on the Group’s consolidated financial statements. IFRS 3 Business Combinations On January 1, 2020, the Group adopted amendments to IFRS 3, “Business Combinations”. These amendments clarify the determination of whether an acquisition made is of a business or a group of assets. The amended definition of a business emphasizes that the output of a business is to provide goods and services to customers, whereas the previous definition focused on returns in the form of dividends, lower costs or other economic benefits to investors and others. Distinguishing between a business and a group of assets is important because an acquirer recognizes goodwill only when acquiring a busi- ness. The adoption of the amendments did not have an impact on the Group’s consolidated financial statements. In addition, the Group adopted on January 1, 2020 “Amendments to IAS 1 and IAS 8: Definition of Material” and “Amendments to References to the Conceptual Framework in IFRS Standards”. The adoption of the amendments did not have an impact on the Group's consolidated financial statements. New accounting pronouncements The following accounting pronouncements were not effective as of December 31, 2020 and therefore have not been applied in preparing these consolidated financial statements. IFRS 17 Insurance Contracts In May 2017, the IASB issued IFRS 17, “Insurance Contracts”, which establishes the principles for the recognition, measure- ment, presentation and disclosure of insurance contracts within the scope of the standard. IFRS 17 replaces IFRS 4 which has given companies dispensation to carry on accounting for insurance contracts using national accounting standards, result- ing in a multitude of different approaches. IFRS 17 solves the comparison problems created by IFRS 4 by requiring all insur- ance contracts to be accounted for in a consistent manner, benefiting both investors and insurance companies. Insurance obligations will be accounted for using current values – instead of historical cost. The information will be updated regularly, providing more useful information to users of financial statements. IFRS 17 is effective for annual periods beginning on or after January 1, 2023. Based on the Group’s current business activities it is expected that IFRS 17 will not have a material impact on the Group’s consolidated financial statements. These amendments have yet to be endorsed by the EU. In June 2020, the IASB issued amendments to IFRS 17 “Insurance Contracts” that address concerns and implementation challenges that were identified after IFRS 17 was published in 2017. The amendments are effective for annual periods begin- ning on or after January 1, 2023 with early adoption permitted. These amendments have yet to be endorsed by the EU. IFRS 4 Insurance Contracts The IASB has also issued an amendment to IFRS 4 “Insurance Contracts” which extends the temporary exemption to apply IFRS 9 to annual periods beginning on or after 1 January 2023. The amendments will not have a material impact on the Group’s consolidated financial statements. IAS 37 Provisions, Contingent Liabilities and Contingent Assets In May 2020, the IASB issued amendments to IAS 37, “Provisions, Contingent Liabilities and Contingent Assets” to clarify what costs an entity considers in assessing whether a contract is onerous. The amendments specify that the ‘cost of fulfilling’ a contract comprises the ‘costs that relate directly to the contract’. Costs that relate directly to a contract can either be incre- mental costs of fulfilling that contract or an allocation of other costs that relate directly to fulfilling contracts. The amendments are effective for annual periods beginning on or after January 1, 2022 with early adoption permitted. The amendments will not 263 Deutsche Bank Annual Report 2020 Notes to the consolidated financial statements 02 – Recently adopted and new accounting pronouncements have a material impact on the Group’s consolidated financial statements. These amendments have yet to be endorsed by the EU. IAS 1 Presentation of Financial Statements In January 2020, the IASB issued amendments to IAS 1 “Presentation of Financial Statements: Classification of Liabilities as Current or Non-Current”. They clarify that the classification of liabilities as current or non-current should be based on rights that are in existence at the end of the reporting period. The amendments also clarify that classification is unaffected by expec- tations about whether an entity will exercise its right to defer settlement of a liability and make clear that settlement refers to the transfer to the counterparty of cash, equity instruments, other assets or services. The amendments will be effective for annual periods beginning on or after January 1, 2023 with early adoption permitted. The Group is currently assessing the impact to its consolidated financial statements. These amendments have yet to be endorsed by the EU. Improvements to IFRS 2018-2020 Cycles In May 2020, the IASB issued amendments to multiple IFRS standards, which resulted from the IASB’s annual improvement project for the 2018-2020 cycles. This comprises amendments that result in accounting changes for presentation, recognition or measurement purposes as well as terminology or editorial amendments related to IFRS 1 “First-time Adoption of Interna- tional Financial Reporting Standards”, IFRS 9 “Financial Instruments”, IFRS 16 “Leases” and IAS 41 “Agriculture”. The amend- ments to IFRS 9 clarify which fees an entity includes when assessing whether to derecognize a financial liability. The amend- ments will be effective for annual periods beginning on or after January 1, 2022 with early adoption permitted. The amend- ments will not have a material impact on the Group’s consolidated financial statements. These amendments have yet to be endorsed by the EU. Interest Rate Benchmark Reform (Amendments to IFRS 9, IAS 39 and IFRS 7) In August 2020, the IASB issued amendments to IFRS 9, “Financial Instruments”, IAS 39, “Financial Instruments: Recognition and Measurement“, IFRS 7, “Financial Instruments: Disclosures”, IFRS 4, “Insurance Contracts” and IFRS 16, “Leases” as Phase 2 of their project addressing the potential effects from the reform of the Interbank Offered Rate (“IBOR”) on financial reporting. The amendments in Phase 2 deal with replacement issues, therefore, they address issues that might affect financial reporting when an existing interest rate benchmark is actually replaced. This includes modification of financial assets, financial liabilities and lease liabilities as well as specific hedge accounting requirements. The amendments introduce a practical expe- dient for modifications required by the reform (modifications required as a direct consequence of the IBOR reform and made on an economically equivalent basis). These modifications are accounted for by updating the effective interest rate. All other modifications are accounted for using the current IFRS requirements. A similar practical expedient is introduced for lessee accounting applying IFRS 16. Under the amendments, hedge accounting is not discontinued solely because of the IBOR reform. Hedging relationships (and related documentation) must be amended to reflect modifications to the hedged item, hedging instrument and hedged risk. Amended hedging relationships should meet all qualifying criteria to apply hedge ac- counting, including effectiveness requirements. The amendments also amended IFRS 4 to require insurers that apply the temporary exemption from IFRS 9 to apply the amendments in accounting for modifications directly required by IBOR reform. The amendments also require additional disclosures that allow users to understand the nature and extent of risks arising from the IBOR reform to which the entity is exposed to and how the entity manages those risks as well as the entity’s progress in transitioning from IBORs to alternative benchmark rates, and how the entity is managing this transition. The amendments will be effective for annual periods beginning on or after January 1, 2021 with early adoption permitted. Although the Group has significant exposure to IBORs predominantly in financial instruments, the amendments will not have a material impact on transition on the Group’s consolidated financial statements. Recent Developments on Interest Rate Benchmark Reform In recent years, transactions in the unsecured short-term financing market, which IBOR interest rate benchmarks seek to measure, have significantly reduced. As a result, IBOR reform projects have been initiated under the leadership of the FSB and central bank working groups, which aim to create alternative and robust benchmark interest rates or so-called risk-free rates (“RFRs”). Some reforms are already effective, e.g. on July 27, 2020 the discounting methodology of Euro denominated interest rate derivatives centrally cleared through LCH, EUREX and CME changed from EONIA to €STR. This changed the fair value of the derivatives with a compensating cash payment or receipt so there was no value transfer. The change in discounting to €STR did not have a material impact to the Group’s consolidated income statement. A similar change for USD interest rate discounted centrally cleared interest rate derivatives to change discounting from Federal Funds Rate to SOFR occurred on October 19, 2020. The change in discounting to SOFR did not have a material impact to the Group’s consolidated income statement. 264 Deutsche Bank Annual Report 2020 Notes to the consolidated financial statements 02 – Recently adopted and new accounting pronouncements Other reforms are still to be implemented or are under consideration. In 2019, EURIBOR was reformed to comply with the EU financial benchmarks regulation and continues to be available. Effective October 2, 2019, the administrator of EONIA has changed the way it calculates EONIA, so that it is now based on the “€STR” euro short-term rate”. EONIA will cease to exist from January 3, 2022. In December 2020, the administrator of LIBOR consulted on its intention to cease publication of GBP, CHF, JPY, EUR and certain USD settings after December 31, 2021, and additionally, to cease publication of the remaining USD LIBOR settings after June 30, 2023. Regulators have strongly urged market participants to transition to RFRs. As significant change effort is required across the Group, specifically in relation to RFR product development, client legal documentation, upgrades and infrastructure changes including to systems, processes and models, the Group has established a Group-wide IBOR & EU Benchmark Regulation transition program in 2018, aimed at managing a smooth transition from LIBOR and other IBORs to the new RFRs. The program is sponsored by the Chief Financial Officer and has senior representation from each division, region and infrastructure functions. The program has been focused on identifying and quantifying exposures to various interest rate benchmarks, provid- ing the capability to trade products referencing alternative RFRs and evaluating existing contracts that reference IBORs. Ef- forts also include identifying potential accounting impacts and options to mitigate these impacts, for example, through impact analysis on the reform and its effects on Financial Reporting. Progress updates are provided monthly to the Group’s IBOR Transition Steering Committee and the CFO. The Group continues to work closely with regulators and industry bodies to manage the impact. Oversight of the program to prepare for the transition has been a major focus along with activities across all three lines of defense to minimize risk and disruption to customers. The Group has significant exposure to IBORs predominantly in financial instruments and many of these contracts mature after 2021. The Group’s exposures from derivatives results from transactions that are entered into in order to make markets for its clients and hedge its risks as well as from loans and deposits, bonds and securitizations. The Group’s core planning for LIBOR transition has been a base case scenario of LIBOR cessation by end of 2021 with sufficient market adoption of RFRs to provide a viable replacement. There are a number of dependencies within this scenario that are outside of the Group’s control, creating significant uncertainty. Recently the cessation date for certain US LIBOR tenors was extended to be the end of June 2023 and so the Group’s plans have been updated accordingly. As part of the program, the Group has undertaken a comprehensive risk assessment which is refreshed regularly and has identified key inherent risks and mitigating actions. Key risks include business strategic risk, legal and compliance risk, liquidity risk, market risk, credit risk, operational risk, transition risk, model risk, accounting, financial reporting and tax risk, information security and technology transformation risk. The Group continues to implement plans, aiming to mitigate the risks associated with the expected discontinuation of IBOR- referenced benchmark interest rates, including LIBOR. In this regards, the Group: - has reviewed, or is in the process of reviewing, the fallback language for LIBOR-linked instruments including the develop- ment of a new framework introduced to quantify the potential impact of positions difficult to transition, referred to as “tough legacy”; - has active cross functional and advocacy channels to ensure continued appropriate offering of RFR linked products to clients and gauge their adoption appetite in RFR related products. A Conduct Risk Advisory forum was initiated in the beginning of 2020, aiming to discuss and review all conduct risks types (including new risks and current plan) relevant for the IBOR transition; - continues to engage with regulators, standard setters and industry groups in relation to the additional items for which relief is being considered; - has been engaged in the discussions with the IASB in relation to its project IBOR Reform and its effects on financial reporting—Phase 2 which the Group will adopt on January 1, 2021. The Group continues to develop infrastructure improvements and assess potential transition risk impacts alongside relevant stress scenarios. Where possible, the Group is proactively using the most effective fallback language available when conduct- ing new transactions. 265 Deutsche Bank Annual Report 2020 Notes to the consolidated financial statements 04 – Business segments and related information 03 – Acquisitions and dispositions Business combinations During the years 2020, 2019 and 2018, the Group did not undertake any acquisitions accounted for as business combinations. Dispositions During 2020, 2019 and 2018, the Group finalized several dispositions of subsidiaries/businesses. These disposals are mainly comprised of businesses the Group had previously classified as held for sale. Accordingly, dispositions in 2020 included the sale of Postbank Systems AG. Disposals in 2019 mainly included the sale of the Private & Commercial Clients business in Portugal, while dispositions in 2018 included the partial sale of the Polish Private & Commercial Bank business. For more detail on these transactions, please refer to Note 24 “Non-Current Assets and Disposal Groups Held for Sale”. The total consideration received for these dispositions (thereof in cash) in 2020, 2019 and 2018 was € 7 million (cash € 7 million), € 1.8 billion (cash € 1.8 billion) and € 398 million (cash € 270 million), respectively. The table below shows the assets and liabilities that were included in these disposals. in € m. Cash and cash equivalents All remaining assets Total assets disposed Total liabilities disposed 2020 2 7 9 79 2019 0 2,713 2,714 1,003 2018 50 4,619 4,669 6,035 04 – Business segments and related information The Group’s segmental information has been prepared in accordance with the “management approach”, which requires presentation of the segments on the basis of the internal management reports of the entity which are regularly reviewed by the chief operating decision maker, which is the Deutsche Bank Management Board, in order to allocate resources to a seg- ment and to assess its financial performance. Business segments The Group’s segment reporting follows the organizational structure as reflected in its internal management reporting systems, which are the basis for assessing the financial performance of the business segments and for allocating resources to the business segments. Restatements due to changes in the organizational structure were implemented in the presentation of prior period comparisons. Our business operations are organized under the divisional structure comprising the following corporate divisions:- – Corporate Bank (CB) – Investment Bank (IB) – Private Bank (PB) – Asset Management (AM) – Capital Release Unit (CRU) – Corporate & Other (C&O) The segmental information for the corporate divisions CB, IB, AM, CRU and C&O remained unchanged in its scope. Within PB, Wealth Management (WM) and Private & Commercial Business International (PCBI) has been combined into one unit called the International Private Bank (IPB) from the third quarter 2020 reporting onwards. The segmental information for the corporate divisions are outlined below. The Corporate Bank is comprised of Global Transaction Banking as well Commercial Banking. The division covers global corporate clients and commercial and business banking clients in Germany. The Investment Bank (IB) combines Deutsche Bank’s Fixed Income, Currency (FIC) Sales & Trading and, Origination & Ad- visory, as well as Deutsche Bank Research. 266 Deutsche Bank Annual Report 2020 Notes to the consolidated financial statements 04 – Business segments and related information The Private Bank comprises of Private Bank Germany and International Private Bank. Private Bank Germany remains un- changed in its scope. The International Private Bank brings together WM’s globally connected clients across Germany, Eu- rope, the Americas, Asia and the Middle East and Africa, along with PCBI’s private clients and small and medium-sized en- terprises in Italy, Spain, Belgium and India. IPB revenues are further categorized into the client segments “IPB Personal Banking” and “IPB Private Banking and Wealth Management”. The “IPB Personal Banking” client segment covers the retail and affluent customers as well as small businesses. The client segment “Private Banking and Wealth Management” combines our coverage of high-net-worth and ultra-high-net-worth clients, as well as private banking clients and small and medium-sized corporate clients, providing an integrated servicing model for wealth management, private and business banking. Prior period data has been restated. Asset Management operates under the DWS brand. Asset Management provides investment solutions to individual investors and institutions with a diversified range of Active, Passive and Alternative Asset Management products and services. Capital Release Unit (CRU) includes the remaining assets transferred in from our Equities Sales & Trading business, lower yielding fixed income positions, particularly in Rates, our former CIB Non-Strategic portfolio as well as a legacy loan portfolio from the former Private & Commercial Bank in Poland. BNP Paribas and Deutsche Bank have signed a master transaction agreement to provide continuity of service to Deutsche Bank’s Prime Finance and Electronic Equities clients. Under the agree- ment Deutsche Bank will continue to operate the platform until clients can be migrated to BNP Paribas. Corporate & Other includes revenues, costs and resources held centrally that are not allocated to the individual business segments as well as valuation and timing differences from different accounting methods used for management reporting and IFRS. Measurement of segment profit or loss Segment reporting requires a presentation of the segment results based on management reporting methods, including a reconciliation between the results of the business segments and the consolidated financial statements, which is presented in the “Segmental Results of Operations” within this note. The information provided about each segment is based on internal management reporting about segment profit or loss, assets and other information which is regularly reviewed by the chief operating decision maker. Segment assets are presented in the Group’s internal management reporting based on a consoli- dated view, i.e., the amounts do not include intersegment balances. The Group`s internal management reporting does not consider segment liabilities or interest expense separately. Similarly, depreciation and amortization, tax expenses and other comprehensive income are not presented separately internally and are therefore not disclosed here Non-IFRS compliant accounting methods used in the Group’s management reporting represent either valuation or classifica- tion differences. The largest valuation differences relate to measurement at fair value in management reporting versus meas- urement at amortized cost under IFRS and to the recognition of trading results from own shares in revenues in management reporting (in IB) and in equity under IFRS. The major classification difference relates to noncontrolling interest, which repre- sents the net share of minority shareholders in revenues, provision for credit losses, noninterest expenses and income tax expenses. Noncontrolling interest is reported as a component of the profit before tax of the businesses in management re- porting (with a reversal in C&O) and a component of net income appropriation under IFRS. Since the Group’s business activities are diverse in nature and its operations are integrated, certain estimates and judgments have been made to apportion revenue and expense items among the business segments. The management reporting systems allocate the Group’s external net interest income according to the value of funding con- sumed or provided by each business segment’s activities, in accordance with our internal funds transfer pricing (“FTP”) frame- work. Furthermore, to retain comparability with those competitors that have legally independent units with their own equity funding, the Group allocates a net notional interest benefit on its consolidated capital, in line with each segment’s proportion of average shareholders’ equity. Management uses certain measures for equity and related ratios as part of its internal reporting system because it believes that these measures provide it with a useful indication of the financial performance of the business segments. The Group discloses such measures to provide investors and analysts with further insight into how management operates the Group’s businesses and to enable them to better understand the Group’s results. These measures includes allocation of average shareholder’s equity. Funds Transfer Pricing In the third quarter of 2019, the FTP framework was changed in order to enhance its effectiveness as a management tool, as well as to better support funding cost optimization. The new FTP framework aims to more accurately allocate funding costs and benefits to the firm’s business divisions in a risk-adjusted and uniform manner across the Group. The methodology 267 Deutsche Bank Annual Report 2020 Notes to the consolidated financial statements 04 – Business segments and related information changes do not impact overall group funding costs, however, the framework results in a re-allocation of costs and benefits between segments. This re-allocation resulted in a benefit to the trading businesses, partially offset by a reduction in funding benefits to the Private Bank (PB) and Corporate Bank (CB) versus the prior methodology. As part of the introduction of the new framework, a decision was made to hold certain transitional costs in Corporate & Others (C&O), which will reduce over time, reflecting the long dated nature of our liabilities. The impact of the new FTP framework for the first half of 2019 would have been a positive impact on the results of IB and CRU of approximately € 140 million and € 30 million, respectively, while the results of CB, PB and C&O would have been lower by approximately € 20 million, € 30 million and € 120 million, respectively. The impact of the new FTP framework for the full year 2018 would have been a positive impact on the results of IB and CRU of approximately € 200 million and € 40 million, respectively, while the results of CB, PB and C&O would have been lower by approximately € 60 million, € 60 million and € 120 million, respectively. Allocation of Average Shareholder’s Equity Shareholders’ equity is fully allocated to the Group’s segments based on the regulatory capital demand of each segment. Regulatory capital demand reflects the combined contribution of each segment to the Groups’ Common Equity Tier 1 ratio, the Groups’ Leverage ratio and the Group’s Capital Loss under Stress. Contributions in each of the three dimensions are weighted to reflect their relative importance and level of constraint for the Group. Contributions to the Common Equity Tier 1 ratio and the Leverage ratio are measured through Risk Weighted Assets (RWA) and Leverage Ratio Exposure. The Group’s Capital Loss under Stress is a measure of the Group’s overall economic risk exposure under a defined stress scenario. Good- will and other intangible assets are directly attributed to the Group’s segments in order to allow the determination of allocated tangible shareholders’ equity and the respective returns. Shareholders’ equity and tangible shareholders’ equity is allocated on a monthly basis and averaged across quarters and for the full year. U.S. Tax Exempt Securities Net interest income as a component of net revenues, profit (loss) before tax and related ratios are presented on a fully taxable- equivalent basis for US tax-exempt securities for the Investment Bank. This enables management to measure performance of taxable and tax-exempt securities on a comparable basis. This presentation resulted in an increase in Investment Bank net interest income of € 45 million for full year 2020, € 35 million for full year 2019 and € 42 million for full year 2018. This increase is offset in Group consolidated figures through a reversal in C&O. The tax rate used in determining the fully taxable-equivalent of net interest income in respect of the majority of the US tax-exempt securities is 21 % for 2020, 2019 and 2018. Infrastructure Full-time Employees realignment During 2020 Infrastructure functions that were embedded within the operating business segments were realigned to the busi- ness segment C&O. Accordingly, approximately 11,600 full-time equivalent employees (FTEs) moved from the Investment Bank, Private Bank and Capital Release Unit to the business segment C&O. This change did not result in a material financial impact at a segment level, as costs are allocated from C&O to the operating business segments that are using the service of the respective infrastructure functions, in accordance with the plan. Comparative segmental financial information has been restated accordingly. Segmental results of operations The following tables present the results of the Group’s business segments, including the reconciliation to the consolidated results of operations under IFRS. 268 Deutsche Bank Annual Report 2020 Notes to the consolidated financial statements 04 – Business segments and related information in € m. (unless stated otherwise) Net revenues1 Provision for credit losses Noninterest expenses Compensation and benefits General and administrative expenses Impairment of goodwill and other intangible assets Restructuring activities Total noninterest expenses Noncontrolling interests Profit (loss) before tax Cost/income ratio Assets2 Additions to non-current assets Risk-weighted assets Leverage exposure (fully loaded)3 Average allocated shareholders' equity Post-tax return on average shareholders’ equity4 Post-tax return on average tangible share- holders’ equity4 1 includes: Net interest income Net income (loss) from equity method investments 2 includes: Equity method investments Corporate Bank 5,145 366 Investment Bank 9,283 688 1,064 3,126 0 28 4,218 0 561 82 % 1,906 3,493 0 14 5,413 11 3,171 58 % Private Bank 8,126 711 2,884 4,242 0 413 7,539 0 (124) 93 % 237,497 10 57,288 273,795 9,904 573,673 4 128,487 476,261 22,943 296,637 485 77,074 307,746 11,521 Asset Manage- ment 2,229 2 740 764 0 22 1,527 157 544 68 % 9,453 32 9,997 4,695 4,760 2020 Capital Release Unit (225) 29 Corporate & Other (530) (3) Total Consolidated 24,028 1,792 168 1,774 0 5 1,947 (0) (2,201) N/M 197,667 0 34,415 71,726 6,205 3,709 (3,140) 10,471 10,259 0 3 572 (169) (930) N/M 10,333 2,891 21,690 29,243 0 0 485 21,216 0 1,021 88 % 1,325,259 3,423 328,951 1,078,268 55,332 3 % 9 % (1) % 8 % (26) % N/M 4 % 10 % (2) % 21 % (27) % N/M 0 % 0 % 2,882 3,325 4,475 3 69 22 399 23 60 1 63 304 61 9 67 781 11,526 1 4 120 901 N/M – Not meaningful 3 The Group leverage exposure is presented excluding certain Euro-based exposures facing Eurosystem central banks based on the ECB-decision (EU) 2020/1306 and after having obtained permission from the ECB. The segmental leverage exposures are presented without that deduction. 4 The post-tax return on average tangible shareholders’ equity and average shareholders’ equity at the Group level reflects the reported effective tax rate for the Group, which was 39 % for the year ended December 31, 2020. For the post-tax return on average tangible shareholders’ equity and average shareholders’ equity of the segments, the Group effective tax rate was adjusted to exclude the impact of permanent differences not attributed to the segments, so that the segment tax rates were 28 % for the year ended December 31, 2020. For further information, please refer to “Supplementary Information (Unaudited): Non-GAAP Financial Measures” of this annual report. in € m. (unless stated otherwise) Net revenues1 Provision for credit losses Noninterest expenses Compensation and benefits General and administrative expenses Impairment of goodwill and other intangible assets Restructuring activities Total noninterest expenses Noncontrolling interests Profit (loss) before tax Cost/income ratio Assets2 Additions to non-current assets Risk-weighted assets Leverage exposure (fully loaded) Average allocated shareholders' equity Post-tax return on average shareholders’ equity3 Post-tax return on average tangible share- holders’ equity3 1 includes: Net interest income Net income (loss) from equity method investments 2 includes: Equity method investments Corporate Bank 5,244 284 Investment Bank 7,019 109 1,073 3,165 492 137 4,867 0 92 93 % 1,983 4,237 0 169 6,389 20 502 91 % Private Bank 8,206 344 2,990 4,481 545 126 8,142 (0) (279) 99 % 228,663 9 58,808 270,647 10,464 501,774 1 116,552 432,254 23,052 270,334 215 74,032 282,575 11,729 2019 Asset Manage- ment 2,332 1 Capital Release Unit 217 (14) Corporate & Other 147 0 Total Consolidated 23,165 723 832 851 359 2,898 3,906 (3,380) 11,142 12,253 0 29 1,711 152 468 73 % 9,936 27 9,527 4,643 4,821 0 143 3,400 1 (3,170) N/M 259,224 0 45,874 126,905 10,105 0 40 566 (173) (247) N/M 27,743 1,069 19,223 51,016 0 1,037 644 25,076 0 (2,634) 108 % 1,297,674 1,322 324,015 1,168,040 60,170 0 % 1 % (2) % 7 % (23) % N/M (10) % 0 % 1 % (3) % 18 % (24) % N/M (11) % 2,633 2,707 4,804 (39) 3 66 32 412 14 82 49 276 85 12 90 3,559 13,749 1 4 110 929 N/M – Not meaningful Prior year segmental information presented in the current structure 3 The post-tax return on average tangible shareholders’ equity and average shareholders’ equity at the Group level reflects the reported effective tax rate for the Group, which was (100) % for the year ended December 31, 2019. For the post-tax return on average tangible shareholders’ equity and average shareholders’ equity of the segments, the 269 Deutsche Bank Annual Report 2020 Notes to the consolidated financial statements 04 – Business segments and related information Group effective tax rate was adjusted to exclude the impact of permanent differences not attributed to the segments, so that the segment tax rates were 28 % for the year ended December 31, 2019. For further information, please refer to “Supplementary Information (Unaudited): Non-GAAP Financial Measures” of this annual report. in € m. (unless stated otherwise) Net revenues1 Provision for credit losses Noninterest expenses Compensation and benefits General and administrative expenses Impairment of goodwill and other intangible assets Restructuring activities Total noninterest expenses Noncontrolling interests Profit (loss) before tax Cost/income ratio Assets2 Additions to non-current assets Risk-weighted assets3 Leverage exposure (fully loaded) Average allocated shareholders' equity Post-tax return on average shareholders’ equity4 Post-tax return on average tangible share- holders’ equity4 1 includes: Net interest income Net income (loss) from equity method investments 2 includes: Equity method investments Corporate Bank 5,278 142 Investment Bank 7,561 70 1,063 2,787 0 32 3,882 0 1,254 74 % 2,175 4,134 0 199 6,509 24 958 86 % Private Bank 8,520 349 3,059 4,448 0 49 7,556 (0) 616 89 % 216,163 13 60,305 257,921 10,927 458,464 2 122,662 413,631 22,629 270,150 303 67,180 287,760 12,397 2018 Asset Manage- ment 2,187 Capital Release Unit 1,911 (1) (36) Corporate & Other (142) 1 Total Consolidated 25,316 525 787 929 547 2,742 4,183 (3,754) 11,814 11,286 0 19 1,735 85 368 79 % 10,030 43 10,365 5,044 4,837 0 62 3,351 1 (1,404) N/M 370,090 1 72,133 280,638 11,704 0 (1) 428 (109) (461) N/M 23,240 1,286 17,789 27,933 115 0 360 23,461 0 1,330 93 % 1,348,137 1,647 350,432 1,272,926 62,610 8 % 2 % 3 % 5 % (9) % N/M (0) % 9 % 3 % 4 % 14 % (9) % N/M (0) % 2,419 2,209 4,905 (51) 416 3,417 13,316 3 63 157 406 2 78 41 240 10 87 6 5 219 879 N/M – Not meaningful Prior year segmental information presented in the current structure 3 Risk-weighted assets are based upon CRR/CRD 4 fully loaded. 4 The post-tax return on average tangible shareholders’ equity and average shareholders’ equity at the Group level reflects the reported effective tax rate for the Group, which was 74 % for the year ended December 31, 2018. For the post-tax return on average tangible shareholders’ equity and average shareholders’ equity of the segments, the Group effective tax rate was adjusted to exclude the impact of permanent differences not attributed to the segments, so that the segment tax rates were 28 % for the year ended December 31, 2018. For further information, please refer to “Supplementary Information (Unaudited): Non-GAAP Financial Measures” of this annual report. Corporate Bank in € m. (unless stated otherwise) Net revenues Global Transaction Banking Commercial Banking Total net revenues Provision for credit losses Noninterest expenses Compensation and benefits General and administrative expenses Impairment of goodwill and other intangible assets Restructuring activities Total noninterest expenses Noncontrolling interests Profit (loss) before tax Total assets (in € bn)1 Loans (gross of allowance for loan losses, in € bn) Employees (full-time equivalent) 2020 increase (decrease) from 2019 2019 increase (decrease) from 2018 2020 2019 2018 in € m. in % in € m. in % 3,698 1,447 5,145 366 1,064 3,126 0 28 4,218 0 561 237 114 7,368 3,810 1,433 5,244 284 1,073 3,165 492 137 4,867 0 92 229 119 7,712 3,908 1,370 5,278 142 1,063 2,787 0 32 3,882 0 1,254 216 114 7,653 (112) 14 (98) 82 (9) (40) (492) (108) (649) 0 469 9 (5) (345) (3) 1 (2) 29 (1) (1) N/M (79) (13) N/M N/M 4 (4) (4) (98) 63 (34) 142 10 378 492 105 986 0 (1,162) 13 5 60 (3) 5 (1) 100 1 14 N/M N/M 25 N/M (93) 6 5 1 N/M – Not meaningful Prior year segmental information presented in the current structure 1 Segment assets represent consolidated view, i.e., the amounts do not include intersegment balances. 270 Deutsche Bank Annual Report 2020 Notes to the consolidated financial statements 04 – Business segments and related information Investment Bank in € m. (unless stated otherwise) Net revenues Fixed Income, Currency (FIC) Sales & Trading Debt Origination Equity Origination Advisory Origination & Advisory Other Total net revenues Provision for credit losses Noninterest expenses Compensation and benefits General and administrative expenses Impairment of goodwill and other intangible assets Restructuring activities Total noninterest expenses Noncontrolling interests Profit (loss) before tax Total assets (in € bn)1 Loans (gross of allowance for loan losses, in € bn) Employees (full-time equivalent) 2020 increase (decrease) from 2019 2019 increase (decrease) from 2018 2020 2019 2018 in € m. in % in € m. in % 7,088 1,542 379 277 2,198 (3) 9,283 688 1,906 3,493 0 14 5,413 11 3,171 574 69 4,258 5,525 1,119 149 370 1,638 (144) 7,019 109 1,983 4,237 0 169 6,389 20 502 502 75 4,351 5,644 1,146 197 458 1,801 117 7,561 70 2,175 4,134 0 199 6,509 24 958 458 65 4,623 1,563 423 231 (93) 560 142 2,265 579 (76) (744) 0 (155) (975) (8) 2,669 72 (6) (93) 28 38 155 (25) 34 (98) 32 N/M (4) (18) N/M (92) (15) (41) N/M 14 (8) (2) (119) (27) (48) (88) (163) (261) (542) 38 (192) 103 0 (30) (121) (4) (456) 43 10 (273) (2) (2) (24) (19) (9) N/M (7) 54 (9) 2 N/M (15) (2) (18) (48) 9 16 (6) N/M – Not meaningful Prior year segmental information presented in the current structure 1 Segment assets represent consolidated view, i.e., the amounts do not include intersegment balances. Private Bank in € m. (unless stated otherwise) Net revenues: Private Bank Germany International Private Bank IPB Personal Banking1 IPB Private Banking2 and Wealth Management Total net revenues Of which: Net interest income Commissions and fee income Remaining income Provision for credit losses Noninterest expenses: Compensation and benefits General and administrative expenses Impairment of goodwill and other intangible assets Restructuring activities Total noninterest expenses Noncontrolling interests Profit (loss) before tax Total assets (in € bn)3 Loans (gross of allowance for loan losses, in € bn) Assets under Management (in € bn)4 Net flows (in € bn) Employees (full-time equivalent) 2020 increase (decrease) from 2019 2019 increase (decrease) from 2018 2020 2019 2018 in € m. in % in € m. in % 4,992 3,134 830 2,304 8,126 4,475 3,048 603 711 2,884 4,242 0 413 7,539 0 (124) 297 237 493 16 29,945 5,070 3,137 869 2,267 8,206 4,804 2,865 537 344 2,990 4,481 545 126 8,142 (0) (279) 270 227 482 4 31,599 5,320 3,200 888 2,312 8,520 4,905 2,788 827 349 3,059 4,448 0 49 7,556 (0) 616 270 216 446 (2) 32,437 (78) (3) (39) 37 (80) (329) 183 66 367 (106) (240) (545) 287 (603) 1 155 26 10 11 12 (1,654) (2) (0) (5) 2 (1) (7) 6 12 107 (4) (5) N/M N/M (7) N/M (56) 10 5 2 N/M (5) (251) (64) (19) (44) (314) (101) 77 (290) (5) (69) 34 545 76 586 (0) (895) 0 11 36 7 (838) (5) (2) (2) (2) (4) (2) 3 (35) (2) (2) 1 N/M 155 8 N/M N/M 0 5 8 N/M (3) N/M – Not meaningful Prior year segmental information presented in the current structure 1 Including small businesses in Italy, Spain and India. 2 Including small & mid caps in Italy, Spain and India. 3 Segment assets represent consolidated view, i.e., the amounts do not include intersegment balances. 4 We define assets under management as (a) assets we hold on behalf of customers for investment purposes and/or (b) client assets that are managed by us. We manage assets under management on a discretionary or advisory basis, or these assets are deposited with us. Deposits are considered assets under management if they serve in- vestment purposes. In the Private Bank Germany, IPB Personal Banking and IPB Private Banking, this includes time deposits and savings deposits. In IPB Wealth Manage- ment, it is assumed that all customer deposits are held with us primarily for investment purposes. 271 Deutsche Bank Annual Report 2020 Notes to the consolidated financial statements 04 – Business segments and related information Asset Management in € m. (unless stated otherwise) Net revenues Management Fees Performance and transaction fees Other Total net revenues Provision for credit losses Noninterest expenses Compensation and benefits General and administrative expenses Impairment of goodwill and other intangible assets Restructuring activities Total noninterest expenses Noncontrolling interests Profit (loss) before tax Total assets (in € bn)1 Assets under Management (in € bn) Net flows (in € bn) Employees (full-time equivalent) 2020 increase (decrease) from 2019 2019 increase (decrease) from 2018 2020 2019 2018 in € m. in % in € m. in % 2,136 90 3 2,229 2 740 764 0 22 1,527 157 544 9 793 30 3,926 2,141 201 (10) 2,332 1 832 851 0 29 1,711 152 468 10 768 25 3,925 2,115 91 (19) 2,187 (1) 787 929 0 19 1,735 85 368 10 664 (23) 4,022 (5) (111) 13 (103) 1 (92) (87) 0 (6) (185) 5 76 (0) 25 5 1 (0) (55) N/M (4) 59 (11) (10) N/M (22) (11) 4 16 (5) 3 N/M 0 26 111 9 146 2 45 (78) 0 10 (23) 68 99 (0) 103 48 (97) 1 122 (48) 7 N/M 6 (8) N/M 51 (1) 80 27 (1) 16 N/M (2) N/M – Not meaningful Prior year segmental information presented in the current structure 1 Segment assets represent consolidated view, i.e., the amounts do not include intersegment balances. Capital Release Unit in € m. (unless stated otherwise) Net revenues Provision for credit losses Noninterest expenses Compensation and benefits General and administrative expenses Impairment of goodwill and other intangible assets Restructuring activities Total noninterest expenses Noncontrolling interests Profit (loss) before tax Total assets (in € bn)1 Employees (full-time equivalent) 2020 increase (decrease) from 2019 2019 increase (decrease) from 2018 2020 (225) 29 2019 217 (14) 2018 1,911 (36) in € m. (442) 43 in % N/M N/M in € m. (1,694) 22 168 1,774 0 5 1,947 (0) (2,201) 198 482 359 2,898 0 143 3,400 1 (3,170) 259 621 547 2,742 0 62 3,351 1 (1,404) 370 1,540 (191) (1,124) 0 (139) (1,453) (1) 970 (62) (139) (53) (39) N/M (97) (43) N/M (31) (24) (22) (188) 156 0 81 49 1 (1,766) (111) (919) in % (89) (61) (34) 6 N/M 131 1 136 126 (30) (60) N/M – Not meaningful Prior year segmental information presented in the current structure 1 Segment assets represent consolidated view, i.e., the amounts do not include intersegment balances. Corporate & Other (C&O) 2020 increase (decrease) from 2019 2019 increase (decrease) from 2018 in € m. (unless stated otherwise) Net revenues Provision for credit losses Noninterest expenses Compensation and benefits General and administrative expenses Impairment of goodwill and other intangible assets Restructuring activities Total noninterest expenses Noncontrolling interests Profit (loss) before tax Employees (full-time equivalent) N/M – Not meaningful Prior year segmental information presented in the current structure 2020 (530) (3) 2019 147 0 2018 (142) 1 in € m. (678) (4) in % N/M N/M in € m. 289 (0) 3,709 (3,140) 0 3 572 (169) (930) 38,680 3,906 (3,380) 0 40 566 (173) (247) 39,389 4,183 (3,754) 0 (1) 428 (109) (461) 41,463 (197) 240 0 (38) 6 3 (684) (709) (5) (7) N/M (93) 1 (2) N/M (2) (277) 374 0 41 138 (64) 215 (2,074) in % N/M (84) (7) (10) N/M N/M 32 58 (47) (5) 272 Deutsche Bank Annual Report 2020 Notes to the consolidated financial statements 04 – Business segments and related information Entity-wide disclosures The Group’s Entity-Wide Disclosures include net revenues from internal and external counterparties. Excluding revenues from internal counterparties would require disproportionate IT investment and is not in line with the Bank's management approach. For detail of our net revenue components please see “Management Report: Operating and Financial Review: Results of Op- erations: Corporate Divisions”. The following table presents total net revenues (before provisions for credit losses) by geographic area for the years ended December 31, 2020, 2019 and 2018, respectively. The information presented for CB, IB, PB, AM and CRU has been classified based primarily on the location of the Group’s office in which the revenues are recorded. The information for C&O is presented on a global level only, as management responsibility for C&O is held centrally. in € Germany: Corporate Bank Investment Bank Private Bank Asset Management Capital Release Unit Total Germany UK: Corporate Bank Investment Bank Private Bank Asset Management Capital Release Unit Total UK Rest of Europe, Middle East and Africa: Corporate Bank Investment Bank Private Bank Asset Management Capital Release Unit Total Rest of Europe, Middle East and Africa Americas (primarily United States): Corporate Bank Investment Bank Private Bank Asset Management Capital Release Unit Total Americas Asia/Pacific: Corporate Bank Investment Bank Private Bank Asset Management Capital Release Unit 2020 2019 2018 2,532 431 5,460 992 23 9,439 110 3,552 31 292 (383) 3,602 934 358 1,680 344 35 3,352 772 3,281 362 465 50 4,930 2,441 365 5,541 1,054 80 9,481 207 2,244 29 345 (181) 2,645 846 292 1,669 380 99 3,286 952 2,697 374 437 88 4,548 2,366 419 5,903 985 85 9,758 241 2,621 26 295 485 3,667 832 250 1,704 379 243 3,408 1,023 2,958 361 413 712 5,467 796 1,660 594 136 49 3,236 (530) 24,028 797 1,420 593 116 130 3,057 147 23,165 816 1,313 527 114 387 3,157 (142) 25,316 Total Asia/Pacific Corporate and Other Consolidated net revenues1 1 Consolidated net revenues comprise interest and similar income, interest expenses and total noninterest income (including net commission and fee income). Revenues are attributed to countries based on the location in which the Group’s booking office is located. The location of a transaction on the Group’s books is sometimes different from the location of the headquarters or other offices of a customer and different from the location of the Group’s personnel who entered into or facilitated the transaction. Where the Group records a transaction involving its staff and customers and other third parties in different locations frequently depends on other considerations, such as the nature of the transaction, regulatory considerations and transaction processing considerations. 273 Deutsche Bank Annual Report 2020 Notes to the consolidated income statement 05 – Net interest income and net gains (losses) on financial assets/liabilities at fair value through profit or loss Notes to the consolidated income statement 05 – Net interest income and net gains (losses) on financial as- sets/liabilities at fair value through profit or loss Net interest income in € m. Interest and similar income:1 Interest income on cash and central bank balances Interest income on interbank balances (w/o central banks) Central bank funds sold and securities purchased under resale agreements Loans Other Total Interest and similar income from assets measured at amortized cost Interest income on financial assets at fair value through other comprehensive income Total interest and similar income calculated using the effective interest method Financial assets at fair value through profit or loss Total interest and similar income Interest expense:1,2 Interest-bearing deposits Central bank funds purchased and securities sold under repurchase agreements Other short-term borrowings Long-term debt Trust preferred securities Other Total interest expense measured at amortized cost Financial liabilities at fair value through profit or loss Total interest expense Net interest income 2020 2019 2018 321 325 318 11,439 913 13,315 635 13,950 3,856 17,806 1,941 169 62 1,612 42 807 4,633 1,648 6,280 11,526 1,762 293 340 13,760 844 16,999 1,023 18,022 7,186 25,208 3,643 367 163 2,002 187 1,667 8,030 3,429 11,458 13,749 1,860 223 221 12,992 475 15,771 1,014 16,785 7,933 24,718 3,122 379 139 1,981 234 1,679 7,534 3,868 11,402 13,316 1 Prior period comparatives for gross interest income and gross interest expense have been restated. The restatements did not affect net interest income. € 59 million and € 75 million for year ended December 31, 2019 and December 31, 2018 were restated. 2 € 124 million was reclassified from trading Income to interest expense for year ended December 31, 2018. Other interest income for the year ended December 31, 2020, 2019 and 2018 included € 43 million, € 93 million and € 93 mil- lion respectively, which were related to government grants under the Targeted Longer-Term Refinancing Operations II (TLTRO II)-program. Impact of ECB Targeted Longer-term Refinancing Operations (TLTRO III) The Governing Council of the ECB decided on a number of modifications to the terms and conditions of its TLTRO III in order to support further the provision of credit to households and firms in the face of the current economic disruption and heightened uncertainty caused by the COVID-19 pandemic. Banks whose eligible net lending exceeds 0 % between March 1, 2020 and March 31, 2021 pay a rate 0.5 % lower than the average deposit facility rate for borrowings between June 24, 2020 and June 23, 2021. This would currently equate to an all-in rate of (1) %. The interest rate outside of this period will be the average interest rate on the deposit facility (currently (0.5) %). The Group accounts for the potential reduction in the borrowing rate as government grant under IAS 20. The income from the government grant is presented in net interest income and is recognized when there is reasonable assurance that the Group will receive the grant and will comply with the conditions attached to the grants. The effective interest rate of each borrowing takes into account the base interest rate which is the average of the rates on the main refinancing operations over the life of the relevant TLTRO III operation (with the exception of the period from June 24, 2020, to June 23, 2021, when it will be 50 basis points lower than that average). Other interest income for the year ended December 31, 2020 included € 86 million, which were related to government grants under the Targeted Longer-Term Refinancing Operations III (TLTRO III)-refinancing program. This is because for the year ended December 31, 2020 the Group has established reasonable assurance for the benefit that arises from the base rate discount and the initial modified lending criteria but not for the new lending criteria in the TLTRO III refinancing program. The Group has borrowed € 37.5 billion under the TLTRO III-refinancing program as of December 31, 2020. 274 Deutsche Bank Annual Report 2020 Notes to the consolidated income statement 05 – Net interest income and net gains (losses) on financial assets/liabilities at fair value through profit or loss Net gains (losses) on financial assets/liabilities at fair value through profit or loss in € m. Trading Income: Sales & Trading (Equity)1,2 Sales & Trading (FIC)1 Total Sales & Trading Other trading income (loss)1 Total trading income (loss)2 Net gains (losses) on non-trading financial assets mandatory at fair value through profit or loss: Breakdown by financial assets category: Debt Securities3 Equity Securities3 Loans and loan commitments Deposits Others non-trading financial assets mandatory at fair value through profit and loss Total net gains (losses) on non-trading financial assets mandatory at fair value through profit or loss: Net gains (losses) on financial assets/liabilities designated at fair value through profit or loss: Breakdown by financial asset/liability category: Loans and loan commitments Deposits Long-term debt Other financial assets/liabilities designated at fair value through profit or loss Total net gains (losses) on financial assets/liabilities designated at fair value through profit or loss Total net gains (losses) on financial assets/liabilities at fair value through profit or loss2 1 Prior year figures are presented in the current structure. 2 € 124 million was reclassified from trading income to net interest income for year ended December 31, 2018. 3 Prior year number revised. in € m. Net interest income1 Trading income (loss)1,2 Net gains (losses) on non-trading financial assets mandatory at fair value through profit or loss Net gains (losses) on financial assets/liabilities designated at fair value through profit or loss Total net gains (losses) on financial assets/liabilities at fair value through profit or loss Total net interest income and net gains (losses) on financial assets/liabilities at fair value through profit or loss3 Commercial Banking Global Transaction Banking Corporate Bank FIC Sales & Trading Remaining Products Investment Bank Private Bank Asset Management Capital Release Unit Corporate & Other Total net interest income and net gains (losses) on financial assets/liabilities at fair value through profit or loss 1 € 124 million was reclassified from trading income to net interest income for year ended December 31, 2018. 2 Trading income (loss) includes gains and losses from derivatives not qualifying for hedge accounting. 3 Prior year segmental information presented in the current structure. 2020 2019 2018 (409) 3,457 3,049 (819) 2,230 5 114 (38) (9) 203 276 15 (1) (71) 16 (40) 2,465 87 2,563 2,650 (2,453) 197 72 271 28 (19) 25 377 (9) (0) (386) 15 (381) 193 2020 11,526 2,230 276 (40) 2,465 13,991 1,107 1,828 2,935 6,991 205 7,196 4,623 (98) (33) (632) 2019 13,749 197 377 (381) 193 13,942 1,089 1,620 2,709 5,696 (252) 5,444 4,946 87 155 602 369 2,712 3,081 (3,154) (72) (77) 159 77 27 26 212 7 19 1,118 (75) 1,069 1,209 2018 13,316 (72) 212 1,069 1,209 14,524 1,034 1,527 2,562 5,251 23 5,273 5,017 (88) 1,442 318 13,991 13,942 14,524 Combined net interest income and net gains (losses) on financial assets/liabilities at fair value through profit or loss The Group’s trading and risk management businesses include significant activities in interest rate instruments and related derivatives. Under IFRS, interest and similar income earned from trading instruments and financial instruments designated at fair value through profit or loss (i.e., coupon and dividend income), and the costs of funding net trading positions, are part of net interest income. The Group’s trading activities can periodically shift income to either net interest income or to net gains (losses) of financial assets/liabilities at fair value through profit or loss depending on a variety of factors, including risk man- agement strategies. The above table combines net interest income and net gains (losses) of financial assets/liabilities at fair value through profit or loss by business division. 275 Deutsche Bank Annual Report 2020 Notes to the consolidated income statement 06 – Commissions and fee income 06 – Commissions and fee income in € m. Commission and fee income and expense: Commission and fee income Commission and fee expense Net commissions and fee income Disaggregation of revenues by product type and business segment 2020 2019 2018 12,227 2,803 9,424 12,283 2,763 9,520 12,921 2,882 10,039 in € m. (unless stated otherwise) Major type of services: Commissions for admi- nistration Commissions for assets under management Commissions for other securities Underwriting and advi- sory fees Brokerage fees Commissions for local payments Commissions for foreign commercial business Commissions for foreign currency/exchange busi- ness Commissions for loan processing and guaran- tees Intermediary fees Fees for sundry other customer services Total fee and commis- sions income Gross expense Net fees and commis- sions Corporate Bank Investment Bank Private Bank Asset Management Capital Release Unit Corporate & Other Dec 31,2020 Total Consolidated 245 17 235 23 319 3,090 19 365 29 21 1 0 1,688 357 35 13 1,103 437 (2) 951 409 25 104 0 0 72 0 0 1 0 0 1 113 0 0 (3) 518 1 3,429 0 401 (42) (1) 1,688 1,665 7 1,394 (3) 536 4 0 6 0 0 0 11 529 13 210 2 305 757 0 1 271 289 39 131 7 1 4 7 12 1,058 787 7 741 2,343 2,588 3,867 3,317 127 (15) 12,227 (2,803) 9,424 276 Deutsche Bank Annual Report 2020 Notes to the consolidated income statement 06 – Commissions and fee income Prior year segmental information presented in the current structure. in € m. (unless stated otherwise) Major type of services: Commissions for admi- nistration Commissions for assets under management Commissions for other securities Underwriting and advi- sory fees Brokerage fees Commissions for local payments Commissions for foreign commercial business Commissions for foreign currency/exchange busi- ness Commissions for loan processing and guaran- tees Intermediary fees Fees for sundry other customer services Total fee and commis- sions income Gross expense Net fees and commis- sions in € m. (unless stated otherwise) Major type of services: Commissions for admi- nistration Commissions for assets under management Commissions for other securities Underwriting and advi- sory fees Brokerage fees Commissions for local payments Commissions for foreign commercial business Commissions for foreign currency/exchange busi- ness Commissions for loan processing and guaran- tees Intermediary fees Fees for sundry other customer services Total fee and commis- sions income Gross expense Net fees and commis- sions Corporate Bank Investment Bank Private Bank Asset Management Capital Release Unit Corporate & Other Dec 31,2019 Total Consolidated 251 22 330 29 13 8 1 0 1,568 253 498 0 974 455 26 106 234 23 304 3,219 28 15 930 1 0 81 0 0 5 1 1 61 470 1 0 0 521 2 3,547 0 359 (17) 5 1,656 1,751 1 1,474 (1) 586 7 0 7 0 0 0 15 497 32 189 2 281 486 0 0 297 349 54 127 16 1 23 6 14 1 2,429 2,397 3,419 3,451 578 10 989 535 850 12,283 (2,763) 9,520 Dec 31,2018 Total Consolidated Corporate Bank Investment Bank Private Bank Asset Management Capital Release Unit Corporate & Other 275 10 249 22 15 (3) 568 23 16 260 3,131 301 0 29 38 12 1,479 260 15 884 490 (1) 959 471 32 117 2 (1) 82 0 0 6 2 193 999 12 2 0 3,436 0 335 (28) 0 1,696 2,238 (1) 1,460 (1) 621 7 0 7 0 1 0 15 521 24 187 1 246 437 0 0 281 578 69 117 26 13 31 1 17 981 493 0 1,076 2,444 2,564 3,273 3,352 1,300 (13) 12,921 (2,882) 10,039 Prior year segmental information presented in the current structure. As of December 31, 2020, there were unsatisfied performance obligations with an expected original maturity of more than one year of € 66 million with a time band of seven years from 2022 to 2028 from alternative funds managed by the Group’s asset management business. The decrease of the unsatisfied performance obligations compared to December 31, 2019 (€ 75 million with a time band of seven years from 2021 to 2027) was mainly driven by a change in the fund model. Likewise, this affected timing of when fund assets would be sold and therefore when performance fees would be generated. 277 Deutsche Bank Annual Report 2020 Notes to the consolidated income statement 09 – General and administrative expenses As of December 31, 2020 and December 31, 2019, the Group’s balance of receivables from commission and fee income was € 876 million and € 861 million, respectively. As of December 31, 2020 and December 31, 2019, the Group’s balance of con- tract liabilities associated to commission and fee income was € 65 million and € 195 million, respectively. Contract liabilities arise from the Group’s obligation to provide future services to a customer for which it has received consideration from the customer prior to completion of the services. The balances of receivables and contract liabilities do not vary significantly from period to period reflecting the fact that they predominately relate to recurring service contracts with service periods of less than one year such as monthly current account services and quarterly asset management services. As a result, prior period balances of contract liabilities are generally recognized in revenue in the subsequent period. Customer payment in exchange for services provided are generally subject to performance by the Group over the specific service period such that the Group’s right to payment arises at the end of the service period when its performance obligations are fully completed. Therefore, no material balance of contract asset is reported. 07 – Gains and Losses on derecognition of financial assets measured at amortized cost For the twelve months ended December 31, 2020, the Group sold financial assets measured at amortized cost of € 10 billion (December 31, 2019: € 390 million and December 31, 2018: € 92 million) primarily from a Hold to Collect (HTC) portfolio in Postbank as well as sales made from a HTC portfolio in Treasury. A decision was made to divest the Postbank bond portfolio as part of the integration of Postbank into the Group. The Treasury sales were made as part of a strategy realignment for managing the interest rate risk in the Banking Book as a result of these sales, the HTC business model is no longer valid for future acquisitions of assets in this portfolio. The table below presents the gains and (losses) arising from derecognition of these securities. in € Gains Losses Net gains (losses) from derecognition of securities measured at amortized cost 2020 334 (10) 324 2019 0 (0) 0 2018 2 (0) 2 08 – Other income (loss) in € m. Other income (loss): Net gains (losses) on disposal of loans Insurance premiums Net income (loss) from hedge relationships qualifying for hedge accounting Remaining other income (loss)1 Total other income (loss) 2020 2019 2018 (13) 3 (306) 161 (154) 3 3 (635) (40) (668) (4) 3 (497) 712 215 1 Includes net gains (losses) of € (59) million, € 4 million and € 141 million for the years ended December 31, 2020, 2019 and 2018, respectively, that are related to non-current assets and disposal groups held for sale. 09 – General and administrative expenses in € m. General and administrative expenses: Information Technology1 Occupancy, furniture and equipment expenses2 Regulatory, Tax & Insurance2,3 Professional services4 Banking Services and outsourced operations4 Market Data and Research Services1 Travel expenses Marketing expenses Other expenses5 Total general and administrative expenses 2020 2019 2018 3,862 1,724 1,407 982 962 376 76 174 696 10,259 5,011 1,693 1,440 1,143 967 421 256 251 1,071 12,253 4,043 1,698 1,570 1,323 960 415 288 299 690 11,286 1 Prior year numbers have been restated to reflect the shift of telecommunications expenses from (communications) and market data & research services expenses to infor- mation technology expenses. 2 Prior year numbers have been restated to reflect the shift of insurance premium expenses from occupancy, furniture and equipment expenses to regulatory, tax & insurance expenses. 3 Includes bank levy of € 633 million in 2020, € 622 million in 2019 and € 690 million in 2018. 4 Prior year numbers have been restated to reflect the shift of other outsourced operations expenses from professional services expenses to banking services and outsourced operations expenses. 5 Includes litigation related expenses of € 158 million in 2020, € 473 million in 2019 and € 88 million in 2018. See Note 27 “Provisions”, for more detail on litigation. 278 Deutsche Bank Annual Report 2020 Notes to the consolidated income statement 10 – Restructuring 10 – Restructuring Restructuring is primarily driven by the implementation of the Group’s strategic changes as announced in the third quarter 2019. We have defined and are in the process of implementing measures that aim to strengthen the bank, position it for growth and simplify its organizational set-up. The measures also aim to reduce adjusted costs through higher efficiency, by optimizing and streamlining processes, and by exploiting synergies. Restructuring expense is comprised of termination benefits, additional expenses covering the acceleration of deferred com- pensation awards not yet amortized due to the discontinuation of employment and contract termination costs related to real estate. Net restructuring expense by division in € m. Corporate Bank Investment Bank Private Bank Asset Management Capital Release Unit Corporate & Other Total Net Restructuring Charges Net restructuring by type in € m. Restructuring – Staff related thereof: Termination Benefits Retention Acceleration Social Security Restructuring – Non Staff related Total Net Restructuring Charges 2020 28 14 413 22 5 3 485 2020 479 441 36 1 6 485 2019 137 169 126 29 143 40 644 2019 641 476 156 9 2 644 2018 32 199 49 19 62 (1) 360 2018 367 248 113 6 (6) 360 Provisions for restructuring amounted to € 676 million, € 684 million and € 585 million as of December 31, 2020, Decem- ber 31, 2019 and December 31, 2018, respectively. The majority of the current provisions for restructuring are expected to be utilized in the next two years. During 2020, 1,447 full-time equivalent staff was reduced through restructuring (2019: 2,564 and 2018: 3,217). Organizational changes Full-time equivalent staff Corporate Bank Investment Bank Private Bank Asset Management Capital Release Unit Infrastructure Total full-time equivalent staff FTE figures for 2019 and 2018 have been restated to include former Postbank employees which were not previously included in the disclosure. 2020 303 100 630 48 69 297 1,447 2019 138 626 731 136 514 419 2,564 2018 223 670 910 92 243 1,078 3,217 279 Deutsche Bank Annual Report 2020 Notes to the consolidated income statement 11 – Earnings per share 11 – Earnings per share Basic earnings per share amounts are computed by dividing net income (loss) attributable to Deutsche Bank shareholders by the average number of common shares outstanding during the year. The average number of common shares outstanding is defined as the average number of common shares issued, reduced by the average number of shares in treasury and by the average number of shares that will be acquired under physically-settled forward purchase contracts, and increased by undis- tributed vested shares awarded under deferred share plans. Diluted earnings per share assumes the conversion into common shares of outstanding securities or other contracts to issue common stock, such as share options, convertible debt, unvested deferred share awards and forward contracts. The afore- mentioned instruments are only included in the calculation of diluted earnings per share if they are dilutive in the respective reporting period. Computation of basic and diluted earnings per share in € m. Net income (loss) attributable to Deutsche Bank shareholders and additional equity components Coupons paid on additional equity components1 Net income (loss) attributable to Deutsche Bank shareholders – numerator for basic earnings per share Effect of dilutive securities Net income (loss) attributable to Deutsche Bank shareholders after assumed conversions – numerator for diluted earnings per share Number of shares in million Weighted-average shares outstanding – denominator for basic earnings per share Effect of dilutive securities: Forwards Employee stock compensation options Deferred shares Other (including trading options) Dilutive potential common shares Adjusted weighted-average shares after assumed conversions – denominator for diluted earnings per share 1 Since 2019 the tax impact is recognized in income (loss) directly. Earnings per share in € m. Basic earnings per share Diluted earnings per share 2020 495 (349) 146 0 2019 (5,390) (330) (5,719) 0 146 (5,719) 2018 267 (292) (26) 0 (26) 2,108.2 2,110.0 2,102.2 0.0 0.0 62.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 2,170.1 2,110.0 2,102.2 2020 0.07 0.07 2019 (2.71) (2.71) 2018 (0.01) (0.01) In accordance with IAS 33 the coupons paid on Additional Tier 1 Notes are not attributable to Deutsche Bank shareholders and therefore need to be deducted in the calculation. This adjustment created a net loss situation for Earnings per Common Share in 2018. Due to the net loss situation for 2019 and 2018 potentially dilutive shares are generally not considered for the earnings per share calculation, because to do so would have been anti-dilutive and hence decreased the net loss per share. Instruments outstanding and not included in the calculation of diluted earnings per share1 Number of shares in m. Call options sold Employee stock compensation options Deferred shares 1 Not included in the calculation of diluted earnings per share, because to do so would have been anti-dilutive. 2020 0.0 0.0 0.0 2019 0.0 0.0 117.6 2018 0.0 0.0 108.8 280 Deutsche Bank Annual Report 2020 Notes to the consolidated balance sheet 12 – Financial assets/liabilities at fair value through profit or loss Notes to the consolidated balance sheet 12 – Financial assets/liabilities at fair value through profit or loss in € m. Financial assets classified as held for trading: Trading assets: Trading securities Other trading assets1 Total trading assets Positive market values from derivative financial instruments Total financial assets classified as held for trading Non-trading financial assets mandatory at fair value through profit or loss: Securities purchased under resale agreements Securities borrowed Loans Other financial assets mandatory at fair value through profit or loss Total Non-trading financial assets mandatory at fair value through profit or loss Financial assets designated at fair value through profit or loss: Loans Other financial assets designated at fair value through profit or loss Total financial assets designated at fair value through profit or loss Total financial assets at fair value through profit or loss 1 Includes traded loans of € 8.3 billion and € 12.3 billion at December 31, 2020 and 2019 respectively. in € m. Financial liabilities classified as held for trading: Trading liabilities: Trading securities Other trading liabilities Total trading liabilities Negative market values from derivative financial instruments Total financial liabilities classified as held for trading Financial liabilities designated at fair value through profit or loss: Securities sold under repurchase agreements Loan commitments Long-term debt Other financial liabilities designated at fair value through profit or loss Total financial liabilities designated at fair value through profit or loss Investment contract liabilities Total financial liabilities at fair value through profit or loss Dec 31, 2020 Dec 31, 2019 97,756 10,173 107,929 343,455 451,383 46,057 17,009 2,192 10,864 76,121 437 0 437 527,941 97,986 12,889 110,875 332,931 443,805 53,366 17,918 3,174 12,443 86,901 7 0 7 530,713 Dec 31, 2020 Dec 31, 2019 43,882 434 44,316 327,775 372,090 41,636 2 3,374 1,570 46,582 526 419,199 36,692 373 37,065 316,506 353,571 42,723 1 4,761 2,847 50,332 544 404,448 Financial assets & liabilities designated at fair value through profit or loss The Group has designated various lending relationships at fair value through profit or loss. Lending facilities consist of drawn loan assets and undrawn irrevocable loan commitments. The maximum exposure to credit risk on a drawn loan is its fair value. The Group’s maximum exposure to credit risk on drawn loans was € 437 million and € 7 million as of December 31, 2020, and 2019, respectively. Exposure to credit risk also exists for undrawn irrevocable loan commitments and is predominantly coun- terparty credit risk. The credit risk on the securities purchased under resale agreements and securities borrowed designated under the fair value option is mitigated by the holding of collateral. The valuation of these instruments takes into account the credit enhancement in the form of the collateral received. As such there is no material movement during the year or cumulatively due to movements in counterparty credit risk on these instruments. 281 Deutsche Bank Annual Report 2020 Notes to the consolidated balance sheet 13 – Financial instruments carried at fair value Changes in fair value of financial assets attributable to movements in counterparty credit risk in € m. Notional value of financial assets exposed to credit risk Annual change in the fair value reflected in the Statement of Income Cumulative change in the fair value Notional of credit derivatives used to mitigate credit risk Annual change in the fair value reflected in the Statement of Income Cumulative change in the fair value Dec 31, 2020 439 (8) (8) 166 8 8 Dec 31, 2019 0 0 0 0 0 0 Changes in fair value of financial liabilities attributable to movements in the Group’s credit risk1 in € m. Presented in Other comprehensive Income Cumulative change in the fair value Presented in Statement of income 0 Annual change in the fair value reflected in the Statement of Income Cumulative change in the fair value 0 1 The fair value of a financial liability incorporates the credit risk of that financial liability. Changes in the fair value of financial liabilities issued by consolidated structured entities 0 0 Dec 31, 2019 Dec 31, 2020 (12) (34) have been excluded as this is not related to the Group’s credit risk but to that of the legally isolated structured entity, which is dependent on the collateral it holds. Transfers of the cumulative gains or losses within equity during the period in € m. Cumulative gains or losses within equity during the period Dec 31, 2020 0 Dec 31, 2019 0 Amounts realized on derecognition of liabilities designated at fair value through profit or loss in € m. Amount presented in other comprehensive income realized at derecognition Dec 31, 2020 0 Dec 31, 2019 0 The excess of the contractual amount repayable at maturity over the carrying value of financial liabilities1 in € m. Including undrawn loan commitments² Excluding undrawn loan commitments 1 Assuming the liability is extinguished at the earliest contractual maturity that the Group can be required to repay. When the amount payable is not fixed, it is determined by Dec 31, 2019 873 357 963 159 Dec 31, 2020 reference to conditions existing at the reporting date. 2 The contractual cash flows at maturity for undrawn loan commitments assume full drawdown of the facility. 13 – Financial instruments carried at fair value Valuation Methods and Control The Group has an established valuation control framework which governs internal control standards, methodologies, and procedures over the valuation process. Prices Quoted in Active Markets – The fair value of instruments that are quoted in active markets are determined using the quoted prices where they represent prices at which regularly and recently occurring transactions take place. Valuation Techniques – The Group uses valuation techniques to establish the fair value of instruments where prices, quoted in active markets, are not available. Valuation techniques used for financial instruments include modelling techniques, the use of indicative quotes for proxy instruments, quotes from recent and less regular transactions and broker quotes. For some financial instruments a rate or other parameter, rather than a price, is quoted. Where this is the case then the market rate or parameter is used as an input to a valuation model to determine fair value. For some instruments, modelling techniques follow industry standard models, for example, discounted cash flow analysis and standard option pricing models. These mod- els are dependent upon estimated future cash flows, discount factors and volatility levels. For more complex or unique instru- ments, more sophisticated modelling techniques are required, and may rely upon assumptions or more complex parameters such as correlations, prepayment speeds, default rates and loss severity. Frequently, valuation models require multiple parameter inputs. Where possible, parameter inputs are based on observable data or are derived from the prices of relevant instruments traded in active markets. Where observable data is not available for parameter inputs, then other market information is considered. For example, indicative broker quotes and consensus pric- ing information are used to support parameter inputs where they are available. Where no observable information is available to support parameter inputs then they are based on other relevant sources of information such as prices for similar transac- tions, historic data, economic fundamentals, and research information, with appropriate adjustment to reflect the terms of the actual instrument being valued and current market conditions. 282 Deutsche Bank Annual Report 2020 Notes to the consolidated balance sheet 13 – Financial instruments carried at fair value Valuation Adjustments – Valuation adjustments are an integral part of the valuation process. In making appropriate valuation adjustments, the Group follows methodologies that consider factors such as bid-offer spreads, counterparty/own credit and funding risk. Bid-offer spread valuation adjustments are required to adjust mid-market valuations to the appropriate bid or offer valuation. The bid or offer valuation is the best representation of the fair value for an instrument, and therefore its fair value. The carrying value of a long position is adjusted from mid to bid, and the carrying value of a short position is adjusted from mid to offer. Bid-offer valuation adjustments are determined from bid-offer prices observed in relevant trading activity and in quotes from other broker-dealers or other knowledgeable counterparties. Where the quoted price for the instrument is already a bid-offer price then no additional bid-offer valuation adjustment is necessary. Where the fair value of financial instruments is derived from a modelling technique, then the parameter inputs into that model are normally at a mid-market level. Such instru- ments are generally managed on a portfolio basis and, when specified criteria are met, valuation adjustments are taken to reflect the cost of closing out the net exposure the Bank has to individual market or counterparty risks. These adjustments are determined from bid-offer prices observed in relevant trading activity and quotes from other broker-dealers. Where complex valuation models are used, or where less-liquid positions are being valued, then bid-offer levels for those positions may not be available directly from the market, and therefore for the close-out cost of these positions, models and parameters must be estimated. When these adjustments are designed, the Group closely examines the valuation risks asso- ciated with the model as well as the positions themselves, and the resulting adjustments are closely monitored on an ongoing basis. Counterparty Credit Valuation Adjustments (CVAs) are required to cover expected credit losses to the extent that the valuation technique does not already include an expected credit loss factor relating to the non-performance risk of the counterparty. The CVA amount is applied to all relevant over-the-counter (OTC) derivatives, and is determined by assessing the potential credit exposure to a given counterparty and taking into account any collateral held, the effect of any relevant netting arrangements, expected loss given default and the probability of default, based on available market information, including Credit Default Swap (CDS) spreads. Where counterparty CDS spreads are not available, relevant proxies are used. The fair value of the Group’s financial liabilities at fair value through profit or loss (i.e., OTC derivative liabilities and issued note liabilities designated at fair value through profit or loss) incorporates valuation adjustments to measure the change in the Group’s own credit risk (i.e. Debt Valuation Adjustments (DVA) for Derivatives and Own Credit Adjustment (OCA) for struc- tured notes). For derivative liabilities the Group considers its own creditworthiness by assessing all counterparties’ expected future exposure to the Group, taking into account any collateral posted by the Group, the effect of relevant netting arrange- ments, the probability of default of the Group, based on the Group’s market CDS level and the expected loss given default, taking into account the seniority of derivative claims under resolution (statutory subordination). Issued note liabilities are dis- counted utilizing the spread at which similar instruments would be issued or bought back at the measurement date as this reflects the value from the perspective of a market participant who holds the identical item as an asset. This spread is further parameterized into a market level of funding component and an idiosyncratic own credit component. Under IFRS 9 the change in the own credit component is reported under Other Comprehensive Income (OCI). When determining CVA and DVA, additional adjustments are made where appropriate to achieve fair value, due to the ex- pected loss estimate of a particular arrangement, or where the credit risk being assessed differs in nature to that described by the available CDS instrument. Funding Valuation Adjustments (FVA) are required to incorporate the market implied funding costs into the fair value of deriv- ative positions. The FVA reflects a discounting spread applied to uncollateralized and partially collateralized derivatives and is determined by assessing the market-implied funding costs on both assets and liabilities. Where there is uncertainty in the assumptions used within a modelling technique, an additional adjustment is taken to calibrate the model price to the expected market price of the financial instrument. Typically, such transactions have bid-offer levels which are less observable, and these adjustments aim to estimate the bid-offer by computing the liquidity-premium associated with the transaction. Where a financial instrument is of sufficient complexity that the cost of closing it out would be higher than the cost of closing out its component risks, then an additional adjustment is taken to reflect this. Valuation Control – The Group has an independent specialized valuation control group within the Risk function which governs and develops the valuation control framework and manages the valuation control processes. The mandate of this specialist function includes the performance of the independent valuation control process for all businesses, the continued development of valuation control methodologies and techniques, as well as devising and governing the formal valuation control policy framework. Special attention of this independent valuation control group is directed to areas where management judgment forms part of the valuation process. Results of the valuation control process are collected and analyzed as part of a standard monthly reporting cycle. Variances of differences outside of preset and approved tolerance levels are escalated both within the Finance function and with Senior Business Management for review, resolution and, if required, adjustment. 283 Deutsche Bank Annual Report 2020 Notes to the consolidated balance sheet 13 – Financial instruments carried at fair value For instruments where fair value is determined from valuation models, the assumptions and techniques used within the models are independently validated by an independent specialist model validation group that is part of the Group’s Risk Management function. Quotes for transactions and parameter inputs are obtained from a number of third party sources including exchanges, pricing service providers, firm broker quotes and consensus pricing services. Price sources are examined and assessed to determine the quality of fair value information they represent, with greater emphasis given to those possessing greater valuation certainty and relevance. The results are compared against actual transactions in the market to ensure the model valuations are cali- brated to market prices. Price and parameter inputs to models, assumptions and valuation adjustments are verified against independent sources. Where they cannot be verified to independent sources due to lack of observable information, the estimate of fair value is subject to procedures to assess its reasonableness. Such procedures include performing revaluation using independently generated models (including where existing models are independently recalibrated), assessing the valuations against appro- priate proxy instruments and other benchmarks, and performing extrapolation techniques. Assessment is made as to whether the valuation techniques produce fair value estimates that are reflective of market levels by calibrating the results of the valuation models against market transactions where possible. Fair Value Hierarchy The financial instruments carried at fair value have been categorized under the three levels of the IFRS fair value hierarchy as follows: Level 1 – Instruments valued using quoted prices in active markets are instruments where the fair value can be determined directly from prices which are quoted in active, liquid markets and where the instrument observed in the market is representa- tive of that being priced in the Group’s inventory. These include: government bonds, exchange-traded derivatives and equity securities traded on active, liquid exchanges. Level 2 – Instruments valued with valuation techniques using observable market data are instruments where the fair value can be determined by reference to similar instruments trading in active markets, or where a technique is used to derive the valuation but where all inputs to that technique are observable. These include: many OTC derivatives; many investment-grade listed credit bonds; some CDS; many collateralized debt obli- gations (CDO); and many less-liquid equities. Level 3 – Instruments valued using valuation techniques using market data which is not directly observable are instruments where the fair value cannot be determined directly by reference to market-observable information, and some other pricing technique must be employed. Instruments classified in this category have an element which is unobservable and which has a significant impact on the fair value. These include: more-complex OTC derivatives; distressed debt; highly-structured bonds; illiquid asset-backed securities (ABS); illiquid CDO’s (cash and synthetic); some private equity placements; many commercial real estate (CRE) loans; illiquid loans; and some municipal bonds. 284 Deutsche Bank Annual Report 2020 Notes to the consolidated balance sheet 13 – Financial instruments carried at fair value Carrying value of the financial instruments held at fair value1 in € m. Financial assets held at fair value: Trading assets Trading securities Other trading assets Positive market values from derivative financial instruments Non-trading financial assets mandatory at fair value through profit or loss Financial assets designated at fair value through profit or loss Financial assets at fair value through other comprehensive income Other financial assets at fair value Total financial assets held at fair value Financial liabilities held at fair value: Trading liabilities Trading securities Other trading liabilities Negative market values from derivative finan- cial instruments Financial liabilities designated at fair value through profit or loss Investment contract liabilities Other financial liabilities at fair value Total financial liabilities held at fair value Quoted prices in active market (Level 1) 44,525 44,349 176 Valuation technique observable parameters (Level 2) 55,220 50,340 4,880 4,208 330,522 2,992 68,511 0 436 Dec 31, 2020 Valuation technique unobservable parameters (Level 3) 8,183 3,066 5,117 8,725 4,618 0 Quoted prices in active market (Level 1) 44,595 44,427 168 Valuation technique observable parameters (Level 2) 56,713 50,128 6,584 2,682 322,082 3,806 77,818 0 0 Dec 31, 2019 Valuation technique unobservable parameters (Level 3) 9,567 3,430 6,137 8,167 5,278 7 28,057 93 79,875 36,699 36,674 25 25,741 9,2772 489,707 2,037 20 23,583 7,615 7,206 409 2 2 0 30,924 2 82,009 23,873 23,862 11 13,529 7,3662 477,507 1,050 363 24,431 13,152 12,828 324 41 2 38 4,430 315,145 8,200 2,841 307,013 6,652 0 0 799 45,622 526 3,5732 41,929 372,480 960 0 (294)3 8,867 0 0 527 27,241 48,378 544 4,6092 373,697 1,954 0 (34)3 8,612 1 Amounts in this table are generally presented on a gross basis, in line with the Group’s accounting policy regarding offsetting of financial instruments, as described in Note 1 “Significant Accounting Policies and Critical Accounting Estimates”. 2 Predominantly relates to derivatives qualifying for hedge accounting. 3 Relates to derivatives which are embedded in contracts where the host contract is held at amortized cost but for which the embedded derivative is separated. The separated embedded derivatives may have a positive or a negative fair value but have been presented in this table to be consistent with the classification of the host contract. The sepa- rated embedded derivatives are held at fair value on a recurring basis and have been split between the fair value hierarchy classifications. During the third quarter of 2020, the Group implemented refinements to its liquidity testing procedures related to the definition of an active market. The revised approach is expected to result in a more transparent and consistent fair value hierarchy classification. The impact of these changes was the net movement of approximately € 2.0 billion of Trading Assets and € 9.0 billion Financial Assets at Fair Value through Other Comprehensive Income from Level 1 into Level 2. During the fourth quarter of 2020, the Group refined its levelling methodology for Strategic Corporate Lending loans related to the use of pricing of comparable positions. This refinement is expected to result in a more transparent and consistent fair value hierarchy classification.. The impact of this change was a movement of approximately € 1.0 billion of financial assets held at fair value through other comprehensive income into Level 3 from Level 2. Valuation Techniques The Group has an established valuation control framework which governs internal control standards, methodologies, valuation techniques and procedures over the valuation process and fair value measurement. In 2020, the outbreak of the COVID-19 pandemic broadly impacted the financial markets, notably in March 2020 and April 2020, causing market dislocations and increased market volatility. This resulted an increase in Group’s level 3 balances by € 4.0 billion mainly relating to interest rate derivatives, which has since been materially reversed by the end of fourth quarter of 2020. Sensitivity related to the level 3 assets and liabilities increased due to increased dispersion in market data. The market conditions necessitated additional focus and review in certain areas, including assessment of bid-offer spreads to ensure they were representative of fair value. However, standard procedures and controls were followed, and we continued to adhere to strict internal governance for fair value measurement changes and movements. The following is an explanation of the valuation techniques used in establishing the fair value of the different types of financial instruments that the Group trades. Sovereign, Quasi-sovereign and Corporate Debt and Equity Securities – Where there are no recent transactions then fair value may be determined from the last market price adjusted for all changes in risks and information since that date. Where a close proxy instrument is quoted in an active market then fair value is determined by adjusting the proxy value for differences in the risk profile of the instruments. Where close proxies are not available then fair value is estimated using more complex 285 Deutsche Bank Annual Report 2020 Notes to the consolidated balance sheet 13 – Financial instruments carried at fair value modelling techniques. These techniques include discounted cash flow models using current market rates for credit, interest, liquidity and other risks. For equity securities modeling techniques may also include those based on earnings multiples. Mortgage- and Other Asset-Backed Securities (MBS/ABS) include residential and commercial MBS and other ABS including CDOs. ABS have specific characteristics as they have different underlying assets and the issuing entities have different capital structures. The complexity increases further where the underlying assets are themselves ABS, as is the case with many of the CDO instruments. Where no reliable external pricing is available, ABS are valued, where applicable, using either relative value analysis which is performed based on similar transactions observable in the market, or industry-standard valuation models making largest pos- sible use of available observable inputs. The industry standard models calculate principal and interest payments for a given deal based on assumptions that can be independently price tested. The inputs include prepayment speeds, loss assumptions (timing and severity) and a discount rate (spread, yield or discount margin). These inputs/assumptions are derived from actual transactions, external market research and market indices where appropriate. Loans – For certain loans fair value may be determined from the market price on a recently occurring transaction adjusted for all changes in risks and information since that transaction date. Where there are no recent market transactions then broker quotes, consensus pricing, proxy instruments or discounted cash flow models are used to determine fair value. Discounted cash flow models incorporate parameter inputs for credit risk, interest rate risk, foreign exchange risk, loss given default estimates and amounts utilized given default, as appropriate. Credit risk, loss given default and utilization given default pa- rameters are determined using information from the loan or other credit markets, where available and appropriate. Leveraged loans can have transaction-specific characteristics which can limit the relevance of market-observed transactions. Where similar transactions exist for which observable quotes are available from external pricing services then this information is used with appropriate adjustments to reflect the transaction differences. When no similar transactions exist, a discounted cash flow valuation technique is used with credit spreads derived from the appropriate leveraged loan index, incorporating the industry classification, subordination of the loan, and any other relevant information on the loan and loan counterparty. Over-The-Counter Derivative Financial Instruments – Market standard transactions in liquid trading markets, such as interest rate swaps, foreign exchange forward and option contracts in G7 currencies, and equity swap and option contracts on listed securities or indices are valued using market standard models and quoted parameter inputs. Parameter inputs are obtained from pricing services, consensus pricing services and recently occurring transactions in active markets wherever possible. More complex instruments are modeled using more sophisticated modeling techniques specific for the instrument and are calibrated to available market prices. Where the model output value does not calibrate to a relevant market reference then valuation adjustments are made to the model output value to adjust for any difference. In less active markets, data is obtained from less frequent market transactions, broker quotes and through extrapolation and interpolation techniques. Where observ- able prices or inputs are not available, management judgment is required to determine fair values by assessing other relevant sources of information such as historical data, fundamental analysis of the economics of the transaction and proxy information from similar transactions. Financial Liabilities Designated at Fair Value through Profit or Loss under the Fair Value Option – The fair value of financial liabilities designated at fair value through profit or loss under the fair value option incorporates all market risk factors including a measure of the Group’s credit risk relevant for that financial liability. The financial liabilities include structured note issuances, structured deposits, and other structured securities issued by consolidated vehicles, which may not be quoted in an active market. The fair value of these financial liabilities is determined by discounting the contractual cash flows using the relevant credit-adjusted yield curve. The market risk parameters are valued consistently to similar instruments held as assets, for example, any derivatives embedded within the structured notes are valued using the same methodology discussed in the “Over-The-Counter Derivative Financial Instruments” section above. Where the financial liabilities designated at fair value through profit or loss under the fair value option are collateralized, such as securities loaned and securities sold under repurchase agreements, the credit enhancement is factored into the fair valua- tion of the liability. Investment Contract Liabilities – Assets which are linked to the investment contract liabilities are owned by the Group. The investment contract obliges the Group to use these assets to settle these liabilities. Therefore, the fair value of investment contract liabilities is determined by the fair value of the underlying assets (i.e., amount payable on surrender of the policies). 286 Deutsche Bank Annual Report 2020 Notes to the consolidated balance sheet 13 – Financial instruments carried at fair value Analysis of Financial Instruments with Fair Value Derived from Valuation Tech- niques Containing Significant Unobservable Parameters (Level 3) Some of the financial assets and financial liabilities in Level 3 of the fair value hierarchy have identical or similar offsetting exposures to the unobservable input. However, according to IFRS they are required to be presented gross. Trading Securities – Certain illiquid emerging market corporate bonds and illiquid highly structured corporate bonds are in- cluded in this level of the hierarchy. In addition, some of the holdings of notes issued by securitization entities, commercial and residential MBS, collateralized debt obligation securities and other ABS are reported here. The decrease during the year was mainly due to a sales, settlements, losses, deconsolidation and net transfers between Level 2 and Level 3 due to changes in the observability of input parameters used to value these instruments, partially offset by purchases and issuances. Positive and Negative Market Values from Derivative Instruments categorized in this level of the fair value hierarchy are valued based on one or more significant unobservable parameters. The unobservable parameters may include certain correlations, certain longer-term volatilities, certain prepayment rates, credit spreads and other transaction-specific parameters. Level 3 derivatives includes certain options where the volatility is unobservable; certain basket options in which the correlations between the referenced underlying assets are unobservable; longer-term interest rate option derivatives; multi-currency for- eign exchange derivatives; and certain credit default swaps for which the credit spread is not observable. The increase in assets during the year are driven by gains partially offset by settlements, deconsolidation and transfers be- tween Level 2 and Level 3 due to changes in the observability of input parameters used to value these instruments. The increase in liabilities during the year are driven by losses partially offset by settlement and transfers between Level 2 and Level 3 due to changes in the observability of input parameters used to value these instruments. Other Trading Instruments classified in Level 3 of the fair value hierarchy mainly consist of traded loans valued using valuation models based on one or more significant unobservable parameters. Level 3 loans comprise illiquid leveraged loans and illiquid residential and commercial mortgage loans. The decrease during the year refers to sales, settlements and losses partially offset by purchases, issuances and transfers between Level 2 and Level 3 due to changes in the observability of input param- eters used to value these instruments. Non-trading financial assets mandatory at fair value through profit or loss classified in Level 3 of fair value hierarchy consist of any non-trading financial asset that does not fall into the Hold to Collect nor Hold to Collect and Sell business models. This includes predominately reverse repurchase agreements which are managed on a fair value basis. Additionally, any financial asset that falls into the Hold to Collect or Hold to Collect and Sell business models for which the contractual cash flow char- acteristics are not SPPI. The decrease during the year is driven by sales, settlements and losses partially offset by purchases, issuances and transfers between Level 2 and Level 3 due to changes in the observability of input parameters used to value these instruments. Financial Assets/Liabilities designated at Fair Value through Profit or Loss – Certain corporate loans and structured liabilities which were designated at fair value through profit or loss under the fair value option were categorized in this level of the fair value hierarchy. The corporate loans are valued using valuation techniques which incorporate observable credit spreads, recovery rates and unobservable utilization parameters. Revolving loan facilities are reported in the third level of the hierarchy because the utilization in the event of the default parameter is significant and unobservable. In addition, certain hybrid debt issuances designated at fair value through profit or loss containing embedded derivatives are valued based on significant unobservable parameters. These unobservable parameters include single stock volatility correla- tions. The decrease in liabilities during the year is driven by settlements and net transfers between Level 2 and Level 3 due to changes in the observability of input parameters used to value these instruments partially offset by issuances and losses. Financial assets at fair value through other comprehensive income include non-performing loan portfolios where there is no trading intent and the market is very illiquid. The increase during the year is driven by purchases, issuances and transfers between Level 2 and Level 3 due to changes in the observability of input parameters used to value these instruments partially offset by settlements, sales and losses. 287 Deutsche Bank Annual Report 2020 Notes to the consolidated balance sheet 13 – Financial instruments carried at fair value Reconciliation of financial instruments classified in Level 3 Reconciliation of financial instruments classified in Level 3 Changes in the group of consoli- dated companies Balance, beginning of year Total gains/ losses1 Purchases Sales Issu- ances2 Settle- ments3 Transfers into Level 34 Transfers out of Level 34 Balance, end of year Dec 31, 2020 3,430 (79) (101) 2,134 (1,628) 11 (423) 333 (612) 3,066 8,167 6,137 (1) 0 1,422 (423) 0 1,188 0 (2,712) 0 1,855 (833) (1,207) 1,541 710 (1,572) (433) 8,725 5,117 5,278 7 1,050 363 0 0 0 0 (256) 389 (394) 347 (811) 852 (786) 4,618 (1) 0 0 6 (12) 0 0 0 (66)5 127 (50) 718 (182) 618 (177) 2,037 (9) 0 0 0 4 (147) (191) 20 24,431 (79) 5676,7 3,839 (4,784) 2,937 (3,463) 3,906 (3,771) 23,583 2 6,652 38 1,954 (34) 8,612 0 0 0 0 0 0 (2) 2,108 (1) 55 26 2,1856,7 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1 0 (0) 2 (365) (9) 1,420 0 (1,615) (28) 8,200 0 186 (763) 215 (687) 960 0 (16) (187) (83) (294) 186 (1,151) 1,448 (2,413) 8,867 in € m. Financial assets held at fair value: Trading securities Positive market values from derivative financial instruments Other trading assets Non-trading financial as- sets mandatory at fair value through profit or loss Financial assets desig- nated at fair value through profit or loss Financial assets at fair value through other com- prehensive income Other financial assets at fair value Total financial assets held at fair value Financial liabilities held at fair value: Trading securities Negative market values from derivative financial instruments Other trading liabilities Financial liabilities designated at fair value through profit or loss Other financial liabilities at fair value Total financial liabilities held at fair value 1 Total gains and losses predominantly relate to net gains (losses) on financial assets/liabilities at fair value through profit or loss reported in the consolidated statement of income. The balance also includes net gains (losses) on financial assets at fair value through other comprehensive income reported in the consolidated statement of income and unrealized net gains (losses) on financial assets at fair value through other comprehensive income and exchange rate changes reported in other comprehensive income, net of tax. Further, certain instruments are hedged with instruments in level 1 or level 2 but the table above does not include the gains and losses on these hedging instru- ments. Additionally, both observable and unobservable parameters may be used to determine the fair value of an instrument classified within level 3 of the fair value hierarchy; the gains and losses presented below are attributable to movements in both the observable and unobservable parameters. 2 Issuances relate to the cash amount received on the issuance of a liability and the cash amount paid on the primary issuance of a loan to a borrower. 3 Settlements represent cash flows to settle the asset or liability. For debt and loan instruments this includes principal on maturity, principal amortizations and principal repay- ments. For derivatives all cash flows are presented in settlements. 4 Transfers in and transfers out of Level 3 are related to changes in observability of input parameters. During the year they are recorded at their fair value at the beginning of year. For instruments transferred into Level 3 the table shows the gains and losses and cash flows on the instruments as if they had been transferred at the beginning of the year. Similarly for instruments transferred out of Level 3 the table does not show any gains or losses or cash flows on the instruments during the year since the table is pre- sented as if they have been transferred out at the beginning of the year. 5 Total gains and losses on financial assets at fair value through other comprehensive income include a gain of € 11 million recognized in other comprehensive income, net of tax. 6 This amount includes the effect of exchange rate changes. For total financial assets held at fair value this effect is a loss of € 495 million and for total financial liabilities held at fair value this is a gain of € 66 million. 7 For assets positive balances represent gains, negative balances represent losses. For liabilities positive balances represent losses, negative balances represent gains. 288 Deutsche Bank Annual Report 2020 Notes to the consolidated balance sheet 13 – Financial instruments carried at fair value Changes in the group of consoli- dated companies Balance, beginning of year Total gains/ losses1 Purchases Sales Issu- ances2 Settle- ments3 Transfers into Level 34 Transfers out of Level 34 Balance, end of year Dec 31, 2019 4,086 (0) 76 2,122 (2,242) 0 (408) 537 (742) 3,430 8,309 5,676 0 (75) 1,547 176 0 1,031 0 (2,493) 0 2,615 (1,420) (1,186) 1,571 729 (1,840) (337) 8,167 6,137 6,066 (12) 401 1,448 (473) 592 (1,822) 727 (1,649) 5,278 0 268 207 0 0 0 2 0 0 25 536 (35) 0 0 0 8 0 0 (16) 12 0 7 (19) 300 (2) 1,050 (6) 176 (14) 363 24,614 (86) 2,2046,7 5,136 (5,243) 3,215 (4,877) 4,052 (4,584) 24,431 0 6,289 15 0 0 0 2 1,337 (8) 2,021 (77) 290 (611) 0 304 7,714 (77) 1,9256,7 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 2 (1,175) (4) 1,904 34 (1,702) 0 6,652 38 385 (489) 681 (856) 1,954 0 100 56 117 (34) 385 (1,568) 2,674 (2,441) 8,612 in € m. Financial assets held at fair value: Trading securities Positive market values from derivative financial instruments Other trading assets Non-trading financial as- sets mandatory at fair value through profit or loss Financial assets desig- nated at fair value through profit or loss Financial assets at fair value through other com- prehensive income Other financial assets at fair value Total financial assets held at fair value Financial liabilities held at fair value: Trading securities Negative market values from derivative financial instruments Other trading liabilities Financial liabilities designated at fair value through profit or loss Other financial liabilities at fair value Total financial liabilities held at fair value 1 Total gains and losses predominantly relate to net gains (losses) on financial assets/liabilities at fair value through profit or loss reported in the consolidated statement of income. The balance also includes net gains (losses) on financial assets at fair value through other comprehensive income reported in the consolidated statement of income and unrealized net gains (losses) on financial assets at fair value through other comprehensive income and exchange rate changes reported in other comprehensive income, net of tax. Further, certain instruments are hedged with instruments in level 1 or level 2 but the table above does not include the gains and losses on these hedging instru- ments. Additionally, both observable and unobservable parameters may be used to determine the fair value of an instrument classified within level 3 of the fair value hierarchy; the gains and losses presented below are attributable to movements in both the observable and unobservable parameters. 2 Issuances relate to the cash amount received on the issuance of a liability and the cash amount paid on the primary issuance of a loan to a borrower. 3 Settlements represent cash flows to settle the asset or liability. For debt and loan instruments this includes principal on maturity, principal amortizations and principal repay- ments. For derivatives all cash flows are presented in settlements. 4 Transfers in and transfers out of Level 3 are related to changes in observability of input parameters. During the year they are recorded at their fair value at the beginning of year. For instruments transferred into Level 3 the table shows the gains and losses and cash flows on the instruments as if they had been transferred at the beginning of the year. Similarly for instruments transferred out of Level 3 the table does not show any gains or losses or cash flows on the instruments during the year since the table is pre- sented as if they have been transferred out at the beginning of the year. 5 Total gains and losses on financial assets at fair value through other comprehensive income include a loss of € 3 million recognized in other comprehensive income, net of tax. 6 This amount includes the effect of exchange rate changes. For total financial assets held at fair value this effect is a gain of € 157 million and for total financial liabilities held at fair value this is a loss of € 25 million. 7 For assets positive balances represent gains, negative balances represent losses. For liabilities positive balances represent losses, negative balances represent gains. Sensitivity Analysis of Unobservable Parameters Where the value of financial instruments is dependent on unobservable parameter inputs, the precise level for these parame- ters at the balance sheet date might be drawn from a range of reasonably possible alternatives. In preparing the financial statements, appropriate levels for these unobservable input parameters are chosen so that they are consistent with prevailing market evidence and in line with the Group’s approach to valuation control detailed above. Were the Group to have marked the financial instruments concerned using parameter values drawn from the extremes of the ranges of reasonably possible alternatives then as of December 31, 2020 it could have increased fair value by as much as € 1.8 billion or decreased fair value by as much as € 1.4 billion. As of December 31, 2019 it could have increased fair value by as much as € 1.7 billion or decreased fair value by as much as € 1.2 billion. The changes in sensitive amounts from December 31, 2019 to December 31, 2020 were an increase in positive fair value movement of € 156 million, and an increase in negative fair value movement of € 215 million. In the same period there has been a € 848 million decrease in Group level 3 assets and € 256 million increase in Group level 3 liabilities. During 2020 the outbreak of the COVID-19 pandemic broadly impacted the financial markets, notably in the first quarter of 2020, causing 289 Deutsche Bank Annual Report 2020 Notes to the consolidated balance sheet 13 – Financial instruments carried at fair value market dislocations and increased market volatility. Sensitivity related to the level 3 assets and liabilities has increased throughout 2020 as this significantly increased dispersion in market data continues to impact the positive and negative fair value movements upwards in spite of the level 3 reductions reported in the same period. This is a result of a number of idiosyncratic factors, amongst which include the impact of reductions in certain level 3 exposures on items which are deemed to be less sensitive to unobservable input parameters, whereas increases in other level 3 exposures have occurred on items deemed to be more sensitive to unobservable input parameters Our sensitivity calculation of unobservable parameters for Level 3 aligns to the approach used to assess valuation uncertainty for Prudent Valuation purposes. Prudent Valuation is a capital requirement for assets held at fair value. It provides a mecha- nism for quantifying and capitalizing valuation uncertainty in accordance with the European Commission Delegated Regulation (EU) 2016/101, which supplements Article 34 of Regulation (EU) No. 2019/876 (CRR), requiring institutions to apply as a deduction from CET 1 for the amount of any additional valuation adjustments on all assets measured at fair value calculated in accordance with Article 105 (14). This utilizes exit price analysis performed for the relevant assets and liabilities in the Prudent Valuation assessment. The downside sensitivity may be limited in some cases where the fair value is already demon- strably prudent. This disclosure is intended to illustrate the potential impact of the relative uncertainty in the fair value of financial instruments for which valuation is dependent on unobservable input parameters. However, it is unlikely in practice that all unobservable parameters would be simultaneously at the extremes of their ranges of reasonably possible alternatives. Hence, the estimates disclosed above are likely to be greater than the true uncertainty in fair value at the balance sheet date. Furthermore, the disclosure is neither predictive nor indicative of future movements in fair value. For many of the financial instruments considered here, in particular derivatives, unobservable input parameters represent only a subset of the parameters required to price the financial instrument, the remainder being observable. Hence for these instru- ments the overall impact of moving the unobservable input parameters to the extremes of their ranges might be relatively small compared with the total fair value of the financial instrument. For other instruments, fair value is determined based on the price of the entire instrument, for example, by adjusting the fair value of a reasonable proxy instrument. In addition, all financial instruments are already carried at fair values which are inclusive of valuation adjustments for the cost to close out that instrument and hence already factor in uncertainty as it reflects itself in market pricing. Any negative impact of uncertainty calculated within this disclosure, then, will be over and above that already included in the fair value contained in the financial statements. Breakdown of the sensitivity analysis by type of instrument1 in € m. Securities: Debt securities Commercial mortgage-backed securities Mortgage and other asset-backed securities Corporate, sovereign and other debt securities Equity securities Derivatives: Credit Equity Interest related Foreign Exchange Other Loans: Loans Other Total Dec 31, 2020 Dec 31, 2019 Positive fair value movement from using reasonable possible alternatives Negative fair value movement from using reasonable possible alternatives Positive fair value movement from using reasonable possible alternatives Negative fair value movement from using reasonable possible alternatives 287 9 20 259 83 283 257 306 37 93 483 0 1,829 163 22 12 129 95 185 238 266 32 82 306 0 1,367 2572 4 37 2162 612 189 168 312 44 116 525 0 1,673 1402 1 20 1192 532 123 128 303 39 101 264 0 1,151 1 Where the exposure to an unobservable parameter is offset across different instruments then only the net impact is disclosed in the table. 2 Reassessment of trades have resulted a reclassification in Positive and Negative fair value movement from using reasonable possible alternatives in ‘Corporate, sovereign and other debt securities’ from ‘Equity securities’. 290 Deutsche Bank Annual Report 2020 Notes to the consolidated balance sheet 13 – Financial instruments carried at fair value Quantitative Information about the Sensitivity of Significant Unobservable Inputs The behaviour of the unobservable parameters on Level 3 fair value measurement is not necessarily independent, and dy- namic relationships often exist between the other unobservable parameters and the observable parameters. Such relation- ships, where material to the fair value of a given instrument, are explicitly captured via correlation parameters, or are otherwise controlled via pricing models or valuation techniques. Frequently, where a valuation technique utilizes more than one input, the choice of a certain input will bound the range of possible values for other inputs. In addition, broader market factors (such as interest rates, equity, credit or commodity indices or foreign exchange rates) can also have effects. The range of values shown below represents the highest and lowest inputs used to value the significant exposures within Level 3. The diversity of financial instruments that make up the disclosure is significant and therefore the ranges of certain parameters can be large. For example, the range of credit spreads on mortgage backed securities represents performing, more liquid positions with lower spreads then the less liquid, non-performing positions which will have higher credit spreads. As Level 3 contains the less liquid fair value instruments, the wide ranges of parameters seen is to be expected, as there is a high degree of pricing differentiation within each exposure type to capture the relevant market dynamics. There follows a brief description of each of the principal parameter types, along with a commentary on significant interrelationships between them. Credit Parameters are used to assess the creditworthiness of an exposure, by enabling the probability of default and resulting losses of a default to be represented. The credit spread is the primary reflection of creditworthiness, and represents the premium or yield return above the benchmark reference instrument (typically LIBOR, or relevant Treasury Instrument, de- pending upon the asset being assessed), that a bond holder would require to allow for the credit quality difference between that entity and the reference benchmark. Higher credit spreads will indicate lower credit quality, and lead to a lower value for a given bond or other loan-asset that is to be repaid to the holder or lender by the borrower. Recovery Rates represent an estimate of the amount a lender would receive in the case of a default of a loan, or a bond holder would receive in the case of default of the bond. Higher recovery rates will give a higher valuation for a given bond position, if other parameters are held constant. Constant Default Rate (CDR) and Constant Prepayment Rate (CPR) allow more complex loan and debt assets to be assessed, as these parameters estimate the ongoing defaults arising on scheduled repayments and coupons, or whether the borrower is making additional (usually voluntary) prepayments. These parameters are particularly relevant when forming a fair value opinion for mortgage or other types of lending, where repayments are delivered by the borrower through time, or where the borrower may pre-pay the loan (seen for example in some residential mortgages). Higher CDR will lead to lower valuation of a given loan or mortgage as the lender will ultimately receive less cash. Interest rates, credit spreads, inflation rates, foreign exchange rates and equity prices are referenced in some option instru- ments, or other complex derivatives, where the payoff a holder of the derivative will receive is dependent upon the behaviour of these underlying references through time. Volatility parameters describe key attributes of option behaviour by enabling the variability of returns of the underlying instrument to be assessed. This volatility is a measure of probability, with higher volatil- ities denoting higher probabilities of a particular outcome occurring. The underlying references (interest rates, credit spreads etc.) have an effect on the valuation of options, by describing the size of the return that can be expected from the option. Therefore the value of a given option is dependent upon the value of the underlying instrument, and the volatility of that instrument, representing the size of the payoff, and the probability of that payoff occurring. Where volatilities are high, the option holder will see a higher option value as there is greater probability of positive returns. A higher option value will also occur where the payoff described by the option is significant. Correlations are used to describe influential relationships between underlying references where a derivative or other instru- ment has more than one underlying reference. Behind some of these relationships, for example commodity correlation and interest rate-foreign exchange correlations, typically lie macroeconomic factors such as the impact of global demand on groups of commodities, or the pricing parity effect of interest rates on foreign exchange rates. More specific relationships can exist between credit references or equity stocks in the case of credit derivatives and equity basket derivatives, for example. Credit correlations are used to estimate the relationship between the credit performance of a range of credit names, and stock correlations are used to estimate the relationship between the returns of a range of equities. A derivative with a correlation exposure will be either long- or short-correlation. A high correlation suggests a strong relationship between the underlying references is in force, and this will lead to an increase in value of a long-correlation derivative. Negative correlations suggest that the relationship between underlying references is opposing, i.e., an increase in price of one underlying reference will lead to a reduction in the price of the other. An EBITDA (‘earnings before interest, tax, depreciation and amortization’) multiple approach can be used in the valuation of less liquid securities. Under this approach the enterprise value (‘EV’) of an entity can be estimated via identifying the ratio of the EV to EBITDA of a comparable observable entity and applying this ratio to the EBITDA of the entity for which a valuation is being estimated. Under this approach a liquidity adjustment is often applied due to the difference in liquidity between the generally listed comparable used and the company under valuation. A higher EV/EBITDA multiple will result in a higher fair value. 291 Deutsche Bank Annual Report 2020 Notes to the consolidated balance sheet 13 – Financial instruments carried at fair value Financial instruments classified in Level 3 and quantitative information about unobservable inputs in € m. (unless stated otherwise) Financial instruments held at fair value – Non-Derivative financial instruments held at fair value: Mortgage and other asset backed securities held for trading: Commercial mortgage-backed securities Mortgage- and other asset-backed securities Total mortgage- and other asset-backed securities Debt securities and other debt obligations Held for trading Corporate, sovereign and other debt securities Non-trading financial assets mandatory at fair value through profit or loss Designated at fair value through profit or loss Financial assets at fair value through other comprehensive income Equity securities Held for trading Non-trading financial assets mandatory at fair value through profit or loss Designated at fair value through profit or loss Loans Held for trading Non-trading financial assets mandatory at fair value through profit or loss Designated at fair value through profit or loss Financial assets at fair value through other comprehensive income Loan commitments 4,625 2,813 2,813 1,652 0 160 727 70 657 0 7,888 5,101 910 0 1,877 0 Fair value Assets Liabilities Valuation technique(s)¹ Significant unobservable input(s) (Level 3) Dec 31, 2020 Range 28 155 0 Price based Discounted cash flow Price Credit spread (bps) 0 % 133 114 % 1,270 0 Price based Discounted cash flow Price Credit spread (bps) Recovery rate Constant default rate Constant prepayment rate 0 % 109 10 % 1 % 1 % 106 % 1,295 90 % 2 % 25 % 183 0 769 2 Price based Discounted cash flow Price Credit spread (bps) 0 % 21 200 % 544 768 0 Market approach Price per net asset value Enterprise value/EBITDA (multiple) Weighted average cost ca- pital Discounted cash flow Price based Price based Discounted cash flow Price Price Credit spread (bps) 42 % 100 % 5 23 8 % 20 % 0 % 0 % 51 108 % 373 % 2,233 0 0 0 0 1 Discounted cash flow Loan pricing model Recovery rate 20 % 85 % Credit spread (bps) Recovery rate Utilization IRR Repo rate (bps) 6 25 % 0 % 7 % 0 2,444 100 % 100 % 16 % 75 Other financial instruments 1,4322 1983 Discounted cash flow Total non-derivative financial instruments held at fair value 14,854 968 1 Valuation technique(s) and subsequently the significant unobservable input(s) relate to the respective total position. 2 Other financial assets include € 16 million of other trading assets and € 1.4 billion of other non-trading financial assets mandatory at fair value. 3 Other financial liabilities include € 192 million of securities sold under repurchase agreements designated at fair value and € 6 million of other financial liabilities designated at fair value. 292 Deutsche Bank Annual Report 2020 Notes to the consolidated balance sheet 13 – Financial instruments carried at fair value in € m. (unless stated otherwise) Financial instruments held at fair value: Market values from derivative financial instruments: Fair value Assets Liabilities Valuation technique(s) Significant unobservable input(s) (Level 3) Dec 31, 2020 Range Interest rate derivatives 4,708 4,025 Discounted cash flow Option pricing model Credit derivatives 575 585 Discounted cash flow Equity derivatives 800 1,916 Option pricing model Correlation pricing model FX derivatives Other derivatives 1,749 1,427 Option pricing model 898 (54)1 Discounted cash flow Option pricing model Swap rate (bps) Inflation swap rate Constant default rate Constant prepayment rate Inflation volatility Interest rate volatility IR - IR correlation Hybrid correlation Credit spread (bps) Recovery rate Credit correlation Stock volatility Index volatility Index - index correlation Stock - stock correlation Stock Forwards Index Forwards Volatility Quoted Vol Credit spread (bps) Index volatility Commodity correlation (77) 1 % 0 % 2 % 0 % 0 % (25) % (70) % 787 3 % 10 % 30 % 8 % 19 % 97 % 100 % 1,759 77 % 0 0 % 31 % 4 % 17 % 1 41 % 0 % 0 % (16) % 0 % – 0 % 16 % 63 % 85 % 75 % 1 67 % 5 % 4 % 42 % 0 % – 113 % 52 % Total market values from derivative financial instruments 8,729 7,899 1 Includes derivatives which are embedded in contracts where the host contract is held at amortized cost but for which the embedded derivative is separated. 293 Deutsche Bank Annual Report 2020 Notes to the consolidated balance sheet 13 – Financial instruments carried at fair value in € m. (unless stated otherwise) Financial instruments held at fair value – Non-Derivative financial instruments held at fair value: Mortgage and other asset backed securities held for trading: Commercial mortgage-backed securities Mortgage- and other asset-backed securities Total mortgage- and other asset-backed securities Debt securities and other debt obligations Held for trading Corporate, sovereign and other debt securities Non-trading financial assets mandatory at fair value through profit or loss Designated at fair value through profit or loss Financial assets at fair value through other comprehensive income Equity securities Held for trading Non-trading financial assets mandatory at fair value through profit or loss Loans Held for trading Non-trading financial assets mandatory at fair value through profit or loss Designated at fair value through profit or loss Financial assets at fair value through other comprehensive income Loan commitments Fair value Assets Liabilities Valuation technique(s)¹ Significant unobservable input(s) (Level 3) Dec 31, 2019 Range 33 225 0 0 Price based Discounted cash flow Price Credit spread (bps) Price based Discounted cash flow Price Credit spread (bps) Recovery rate Constant default rate Constant prepayment rate 0 % 3623 % 1,899 102 0 % 54 25 % 1 % 3 % 101 % 2,460 75 % 4 % 24 % 258 0 5,0844 3,090 1,679 2 Price based Discounted cash flow Price Credit spread (bps) 0 % 15 203 % 460 3,090 1,9384 0 1,676 56 760 82 6784 8,302 6,110 1,193 6 993 0 0 Market approach 0 Discounted cash flow Price based Discounted cash flow 38 38 Price per net asset value Enterprise value/EBITDA (multiple) Weighted average cost ca- pital Price Credit spread (bps) 0 % 101 % 5 17 0 % 0 % 11 20 % 341 % 1,209 0 Recovery rate 35 % 90 % 1 Discounted cash flow Loan pricing model Credit spread (bps) Recovery rate Utilization IRR Repo rate (bps) 8 25 % 0 % 7 % 5 979 95 % 84 % 46 % 271 Other financial instruments 1,5042,4 2783 Discounted cash flow Total non-derivative financial instruments held at fair value 15,908 1,996 1 Valuation technique(s) and subsequently the significant unobservable input(s) relate to the respective total position. 2 Other financial assets include € 28 million of other trading assets and € 1.5 billion other financial assets mandatory at fair value. 3 Other financial liabilities include € 186 million of securities sold under repurchase agreements designated at fair value and € 92 million of other financial liabilities designated at fair value. 4 Reassessment of trades have resulted a restatement in ‘Assets in Debt securities and other debt obligations from Equity securities and other financial instruments. 294 Deutsche Bank Annual Report 2020 Notes to the consolidated balance sheet 13 – Financial instruments carried at fair value in € m. (unless stated otherwise) Financial instruments held at fair value: Market values from derivative financial instruments: Fair value Assets Liabilities Valuation technique(s) Significant unobservable input(s) (Level 3) Dec 31, 2019 Range Interest rate derivatives 4,941 3,387 Discounted cash flow Option pricing model Credit derivatives 618 822 Discounted cash flow Equity derivatives 834 1,132 Option pricing model Correlation pricing model FX derivatives Other derivatives 1,320 1,158 Option pricing model 810 1171 Discounted cash flow Option pricing model Swap rate (bps) Inflation swap rate Inflation volatility Interest rate volatility IR - IR correlation Hybrid correlation Credit spread (bps) Recovery rate Credit correlation Stock volatility Index volatility Index - index correlation Stock - stock correlation Volatility Quoted Vol Credit spread (bps) Index volatility Commodity correlation (69) 0 % 0 % 0 % (25) % (70) % 668 3 % 5 % 33 % 99 % 100 % 18,812 75 % 0 0 % 33 % 4 % 4 % 1 18 % (12) % 0 % – 7 % 5 % 84 % 93 % 69 % 1 93 % 27 % 0 % – 67 % 86 % Total market values from derivative financial instruments 8,524 6,616 1 Includes derivatives which are embedded in contracts where the host contract is held at amortized cost but for which the embedded derivative is separated. Unrealized Gains or Losses on Level 3 Instruments held or in Issue at the Report- ing Date The unrealized gains or losses on Level 3 Instruments are not due solely to unobservable parameters. Many of the parameter inputs to the valuation of instruments in this level of the hierarchy are observable and the gain or loss is partly due to move- ments in these observable parameters over the period. Many of the positions in this level of the hierarchy are economically hedged by instruments which are categorized in other levels of the fair value hierarchy. The offsetting gains and losses that have been recorded on all such hedges are not included in the table below, which only shows the gains and losses related to the Level 3 classified instruments themselves held at the reporting date in accordance with IFRS 13. The unrealized gains and losses on Level 3 instruments are included in both net interest income and net gains on financial assets/liabilities at fair value through profit or loss in the consolidated income statement. in € m. Financial assets held at fair value: Trading securities Positive market values from derivative financial instruments Other trading assets Non-trading financial assets mandatory at fair value through profit or loss Financial assets designated at fair value through profit or loss Financial assets at fair value through other comprehensive income Other financial assets at fair value Total financial assets held at fair value Financial liabilities held at fair value: Trading securities Negative market values from derivative financial instruments Other trading liabilities Financial liabilities designated at fair value through profit or loss Other financial liabilities at fair value Total financial liabilities held at fair value Total Dec 31, 2020 Dec 31, 2019 38 2,589 (248) (14) 0 20 4 2,389 (0) (2,536) 0 53 (26) (2,510) (121) 60 1,906 35 387 2 0 6 2,397 (2) (1,660) 6 (259) (308) (2,223) 174 295 Deutsche Bank Annual Report 2020 Notes to the consolidated balance sheet 14 – Fair value of financial instruments not carried at fair value Recognition of Trade Date Profit If there are significant unobservable inputs used in a valuation technique, the financial instrument is recognized at the trans- action price and any trade date profit is deferred. The table below presents the year-to-year movement of the trade date profits deferred due to significant unobservable parameters for financial instruments classified at fair value through profit or loss. The balance is predominantly related to derivative instruments. in € m. Balance, beginning of year New trades during the period Amortization Matured trades Subsequent move to observability Exchange rate changes Balance, end of year 2020 441 308 (140) (130) (22) (4) 454 2019 531 170 (106) (95) (60) 1 441 14 – Fair value of financial instruments not carried at fair value Financial instruments not carried at fair value are not managed on a fair value basis. For these instruments fair values are calculated for disclosure purposes only and do not impact the Group balance sheet or income statement. Additionally, since the instruments generally do not trade there is significant management judgment required to determine these fair values. For the following financial instruments which are predominantly short-term the carrying value represents a reasonable estimate of the fair value: Assets Cash and central bank balances Interbank balances (w/o central banks) Central bank funds sold and securities purchased under resale agree- ments Securities borrowed Other financial assets Liabilities Deposits Central bank funds purchased and securities sold under repurchase agreements Securities loaned Other short-term borrowings Other financial liabilities For retail lending portfolios with a large number of homogenous loans (e.g. residential mortgages), the fair value is calculated for each product segment by discounting the portfolio’s contractual cash flows using the Group’s new loan rates for lending to issuers of similar credit quality. Key inputs for retail mortgages are the difference between historic and current product margins and the estimated prepayment rates. Capitalized broker fees included in the carrying value are considered to also be fair value. The fair value of corporate lending portfolio is estimated by discounting the loan till its maturity with loan specific credit spreads and funding costs for the Group. For long-term debt and trust preferred securities, fair value is determined from quoted market prices, where available. Where quoted market prices are not available, fair value is estimated using a valuation technique that discounts the remaining con- tractual cash flows at a rate at which an instrument with similar characteristics is quoted in the market. 296 Deutsche Bank Annual Report 2020 Notes to the consolidated balance sheet 14 – Fair value of financial instruments not carried at fair value Estimated fair value of financial instruments not carried at fair value on the balance sheet1 in € m. Financial assets: Cash and central bank balances Interbank balances (w/o central banks) Central bank funds sold and securities purchased under resale agreements Securities borrowed Loans Other financial assets Financial liabilities: Deposits Central bank funds purchased and securities sold under repurchase agreements Securities loaned Other short-term borrowings Other financial liabilities Long-term debt Trust preferred securities Carrying value Fair value Quoted prices in active market (Level 1) Valuation technique observable parameters (Level 2) Dec 31, 2020 Valuation technique unobservable parameters (Level 3) 166,208 9,130 166,208 9,132 166,208 866 0 8,266 0 0 8,533 0 426,995 94,069 8,519 0 434,442 94,393 0 0 0 7,714 7,694 0 13,253 86,049 825 0 421,189 629 568,031 568,172 66 568,105 0 2,325 1,697 3,553 96,602 149,163 1,321 2,328 1,697 3,556 96,602 150,691 1,069 0 0 0 1,902 0 0 2,328 1,697 3,540 94,700 144,130 1,069 0 0 15 0 6,560 0 Dec 31, 2019 Quoted prices in active market (Level 1) Valuation technique observable parameters (Level 2) Valuation technique unobservable parameters (Level 3) Fair value Carrying value 137,592 9,636 137,592 9,636 137,592 116 in € m. Financial assets: Cash and central bank balances Interbank balances (w/o central banks) Central bank funds sold and securities purchased under resale agreements Securities borrowed Loans Other financial assets Financial liabilities: Deposits Central bank funds purchased and securities sold under repurchase agreements Securities loaned Other short-term borrowings Other financial liabilities Long-term debt Trust preferred securities 1 Amounts generally presented on a gross basis, in line with the Group’s accounting policy regarding offsetting of financial instruments as described in Note 1 “Significant Ac- 3,114 259 5,219 85,771 125,344 1,7982 3,114 259 5,221 87,669 136,494 1,7982 3,115 259 5,218 87,669 136,473 2,013 0 0 0 1,898 0 0 13,801 428 436,997 94,423 13,801 428 429,841 94,157 13,801 428 11,376 78,463 0 0 0 15,960 0 9,520 0 0 2 0 11,150 0 0 0 425,620 0 572,476 572,596 572,208 120 0 0 0 counting Policies and Critical Accounting Estimates”. 2 Prior year information restated due to a refinement in the fair value calculation For loans, the difference between fair value and carrying value is due to the effect of product margin movements since initial recognition. For long-term debt and trust preferred securities, the difference between fair value and carrying value is due to the effect of changes in the rates at which the Group could issue debt with similar maturity and subordination at the balance sheet date compared to when the instrument was issued. 297 Deutsche Bank Annual Report 2020 Notes to the consolidated balance sheet 16 – Equity method investments 15 – Financial assets at fair value through other comprehensive income in € m. Securities purchased under resale agreement Debt securities: German government U.S. Treasury and U.S. government agencies U.S. local (municipal) governments Other foreign governments Corporates Other asset-backed securities Mortgage-backed securities, including obligations of U.S. federal agencies Other debt securities Total debt securities Loans Total financial assets at fair value through other comprehensive income 16 – Equity method investments Dec 31, 2020 1,543 Dec 31, 2019 1,415 10,245 9,221 251 26,308 2,272 31 636 692 49,656 4,635 55,834 6,243 7,703 0 21,020 3,423 36 457 332 39,214 4,874 45,503 Investments in associates and jointly controlled entities are accounted for using the equity method of accounting. The Group holds interests in 60 (2019: 65) associates and 11 (2019: 13) jointly controlled entities. Two associates are con- sidered to be material to the Group. Significant investments as of December 31, 20201 Investment Huarong Rongde Asset Management Company Lim- ited Harvest Fund Management Co., Ltd. 1 The Group has significant influence over these investees through its holding percentage and representation on the board seats. Principal place of business Shanghai, China Nature of relationship Beijing, China Strategic Investment Strategic Investment Summarized financial information on Huarong Rongde Asset Management Company Limited1 in € m. Total net revenues Net income Other comprehensive income Total comprehensive income2 in € m. Current assets Non-Current assets Total assets Current liabilities Non-Current liabilities Total liabilities Noncontrolling Interest Net assets of the equity method investee Ownership percentage 40.7 % 30.0 % Dec 31, 2019 97 62 54 116 Dec 31, 2019 2,323 804 3,127 1,157 1,274 2,431 (3) 699 Dec 31, 2018 118 74 (55) 19 Dec 31, 2018 4,160 1,507 5,667 1,820 2,712 4,532 417 718 1 Due to the difference in reporting timelines for the Group and Huarong Rongde Asset Management Company Limited Equity method accounting was performed for December 2020 based on December 2019 PRC GAAP audited financials and for December 2019 based on December 2018 PRC GAAP audited financials. 2 The Group received dividends from Huarong Rongde Asset Management Company Limited of € 9 million during the reporting period 2020 (2019: € 7 million). Reconciliation of total net assets of Huarong Rongde Asset Management Company Limited to the Group’s carrying amount1 in € m. Net assets of the equity method investee Group's ownership percentage on the investee's equity Group's share of net assets Goodwill Intangible Assets Other adjustments Carrying amount2 1 Due to the difference in reporting timelines for the Group and Huarong Rongde Asset Management Company Limited Equity method accounting was performed for December Dec 31, 2018 718 40.7 % 292 0 0 (7) 286 284 0 0 (9) 275 Dec 31, 2019 40.7 % 699 2020 based on December 2019 PRC GAAP audited financials and for December 2019 based on December 2018 PRC GAAP audited financials. 2 There is no impairment loss in 2019 and 2018. 298 Deutsche Bank Annual Report 2020 Notes to the consolidated balance sheet 17 – Offsetting financial assets and financial liabilities Summarized financial information on Harvest Fund Management Co., Ltd. in € m. Total net revenues Net income Other comprehensive income Total comprehensive income3 in € m. Current assets Non-Current assets Total assets Current liabilities Non-Current liabilities Total liabilities Noncontrolling Interest Net assets of the equity method investee Dec 31, 2020¹ 823 226 (2) 224 Dec 31, 2020 1,072 731 1,803 643 262 905 23 875 Dec 31, 2019² 606 146 2 148 Dec 31, 2019 883 720 1,603 652 165 817 21 765 1 December 2020 numbers are based on 2020 unaudited financials. 2 December 2019 numbers are based on 2019 audited financials. 3 The Group received dividends from Harvest Fund Management Co., Ltd. of € 21 million during the reporting period 2020 (2019: € 21 million) and reported an extraordinary dividend receivable of € 6 million since the dividend amount has been declared and reported as dividend payable following approval by shareholders of Harvest Fund Man- agement Co., Ltd. Reconciliation of total net assets of Harvest Fund Management Co., Ltd.to the Group’s carrying amount in € m. Net assets of the equity method investee Group's ownership percentage on the investee's equity Group's share of net assets Goodwill Intangible Assets Other adjustments Carrying amount3 1 December 2020 numbers are based on 2020 unaudited financials. 2 December 2019 numbers are based on 2019 audited financials. 3 There is no impairment loss in 2020 (€ 0 million in 2019). Dec 31, 2020¹ 875 30 % 262 16 14 (2) 290 Dec 31, 2019² 765 30 % 230 17 14 0 261 Aggregated financial information on the Group’s share in associates and joint ventures that are individually immaterial in € m. Carrying amount of all associates that are individually immaterial to the Group Aggregated amount of the Group's share of profit (loss) from continuing operations Aggregated amount of the Group's share of post-tax profit (loss) from discontinued operations Aggregated amount of the Group's share of other comprehensive income Aggregated amount of the Group's share of total comprehensive income Dec 31, 2020 337 20 0 (10) 10 Dec 31, 2019 383 39 0 (1) 38 17 – Offsetting financial assets and financial liabilities The Group is eligible to present certain financial assets and financial liabilities on a net basis on the balance sheet pursuant to criteria described in Note 1 “Significant Accounting Policies and Critical Accounting Estimates: Offsetting Financial Instru- ments”. The following tables provide information on the impact of offsetting on the consolidated balance sheet, as well as the financial impact of netting for instruments subject to an enforceable master netting arrangement or similar agreement as well as avail- able cash and financial instrument collateral. 299 Deutsche Bank Annual Report 2020 Notes to the consolidated balance sheet 17 – Offsetting financial assets and financial liabilities Assets in € m. Central bank funds sold and securities purchased under resale agreements (enforceable) Central bank funds sold and securities purchased under resale agreements (non-enforceable) Securities borrowed (enforceable) Securities borrowed (non-enforceable) Financial assets at fair value through profit or loss (en- forceable) Of which: Positive market values from derivative fi- nancial instruments (enforceable) Financial assets at fair value through profit or loss (non-enforceable) Of which: Positive market values from derivative fi- nancial instruments (non-enforceable) Total financial assets at fair value through profit or loss Loans at amortized cost Other assets Of which: Positive market values from derivatives qualifying for hedge accounting (enforceable) Remaining assets subject to netting Remaining assets not subject to netting Total assets Net amounts of financial assets presented on the balance sheet Gross amounts set off on the balance sheet Gross amounts of financial assets Amounts not set off on the balance sheet Dec 31, 2020 Impact of Master Netting Agreements Cash collateral Financial instrument collateral¹ Net amount 8,234 (2,863) 5,371 3,161 0 0 0 0 0 3,161 0 0 0 0 0 0 0 (5,319) 53 0 0 0 (2,855) 0 0 307 0 0 463,354 (84,550) 378,804 (263,479) (45,066) (58,410) 11,849 336,933 (12,552) 324,380 (262,486) (45,048) (5,162) 11,684 149,137 0 149,137 0 (1,098) (12,790) 135,249 19,074 0 19,074 0 (1,003) (1,116) 16,955 612,491 426,995 120,574 (84,550) 527,941 (263,479) 0 (43,316) 0 426,995 (10,175) 110,399 (46,164) (12,129) (412) (71,200) 147,098 (52,571) 362,294 66,581 (90) 3,329 1,543 249,848 1,422,846 3,303 (26) 0 1,543 0 249,848 (2,646) 0 0 (97,587) 1,325,259 (306,795) (90) 0 (411) 0 (384) 156 1,543 (2,768) 246,697 (59,089) (134,803) 824,573 1 Excludes real estate and other non-financial instrument collateral. Liabilities Amounts not set off on the balance sheet Dec 31, 2020 Net amounts of financial liabilities presented on the balance sheet Gross amounts set off on the balance sheet 0 568,031 Impact of Master Netting Agreements Gross amounts of financial liabilities 568,031 4,586 (2,263) 2,323 3 1,686 11 0 0 0 3 1,686 11 Cash collateral 0 Financial instrument collateral Net amount 0 568,031 0 (2,323) 0 0 0 (2) (1,686) (2) 0 1 0 9 0 0 0 0 0 478,541 (85,315) 393,226 (265,150) (34,846) (41,642) 51,588 325,203 (13,227) 311,976 (264,042) (34,846) (5,816) 7,273 25,972 0 25,972 0 (1,875) (6,184) 17,914 15,798 0 15,798 0 (1,875) (166) 13,757 504,513 124,218 (85,315) 419,199 (265,150) (49,534) (10,010) 114,208 (36,721) (121) (47,826) (6) 69,502 64,547 2,803 157,602 1,360,650 (1,524) 1,279 0 157,602 (1,090) 0 (97,587) 1,263,063 (314,684) (121) (2) (36,844) (6) 62 (1) 157,599 (51,845) 859,689 in € m. Deposits Central bank funds purchased and securities sold under repurchase agreements (enforceable) Central bank funds purchased and securities sold under repurchase agreements (non-enforceable) Securities loaned (enforceable) Securities loaned (non-enforceable) Financial liabilities at fair value through profit or loss (enforceable) Of which: Negative market values from derivative fi- nancial instruments (enforceable) Financial liabilities at fair value through profit or loss (non-enforceable) Of which: Negative market values from derivative fi- nancial instruments (non-enforceable) Total financial liabilities at fair value through profit or loss Other liabilities Of which: Negative market values from derivatives qualifying for hedge accounting (enforceable) Remaining liabilities not subject to netting Total liabilities Other assets include € 1.4 billion positive market values for derivative financial instruments which have been reclassified into asset held for sale, associated with the Prime Finance platform being transferred to BNP Paribas, along with the corresponding impact of master netting agreements and collateralization. Due to the same reason, other liabilities include € 1.9 billion nega- tive market values for derivative financial instruments which have been reclassified into liabilities held for sale, along with the corresponding impact of master netting agreements and collateralization. For further information please refer to Note 24 Non- Current Assets and Disposal Groups Held for Sale” to the consolidated financial statements. 300 Deutsche Bank Annual Report 2020 Notes to the consolidated balance sheet 17 – Offsetting financial assets and financial liabilities Assets Net amounts of financial assets presented on the balance sheet Gross amounts set off on the balance sheet Gross amounts of financial assets Amounts not set off on the balance sheet Dec 31, 2019 Impact of Master Netting Agreements Cash collateral Financial instrument collateral¹ Net amount 14,174 (2,985) 11,189 2,612 424 4 0 0 0 2,612 424 4 0 0 0 0 0 (11,186) 3 0 0 0 (2,464) (299) (4) 148 124 0 476,371 (96,171) 380,200 (263,180) (41,115) (65,075) 10,830 337,117 (17,479) 319,638 (262,326) (41,115) (5,535) 10,661 150,513 0 150,513 0 (1,119) (12,424) 136,971 13,293 0 13,293 0 (1,062) (896) 11,335 626,884 429,841 116,259 (96,171) 530,713 (263,180) 0 (37,267) 0 429,841 (5,900) 110,359 (42,234) (11,819) (570) (77,498) 147,801 (55,458) 362,563 72,384 (138) (2,149) 3,004 0 1,415 0 211,117 1,402,730 (105,056) 1,297,674 (300,447) 2,780 (224) 0 1,415 0 211,117 (443) 0 (745) 94 (94) (1,361) 54 (1,276) 209,096 (55,368) (149,685) 792,174 in € m. Central bank funds sold and securities purchased under resale agreements (enforceable) Central bank funds sold and securities purchased under resale agreements (non-enforceable) Securities borrowed (enforceable) Securities borrowed (non-enforceable) Financial assets at fair value through profit or loss (enforceable) Of which: Positive market values from derivative fi- nancial instruments (enforceable) Financial assets at fair value through profit or loss (non-enforceable) Of which: Positive market values from derivative fi- nancial instruments (non-enforceable) Total financial assets at fair value through profit or loss Loans at amortized cost Other assets Of which: Positive market values from derivatives qualifying for hedge accounting (enforceable) Remaining assets subject to netting Remaining assets not subject to netting Total assets 1 Excludes real estate and other non-financial instrument collateral. Liabilities Amounts not set off on the balance sheet Dec 31, 2019 Net amounts of financial liabilities presented on the balance sheet Gross amounts set off on the balance sheet 0 572,208 Impact of Master Netting Agreements Gross amounts of financial liabilities 572,208 5,452 (2,985) 2,467 648 191 68 0 0 0 648 191 68 Cash collateral 0 Financial instrument collateral Net amount 0 572,208 0 (2,467) 0 0 0 0 (400) (191) (61) 248 0 7 0 0 0 0 0 476,677 (96,316) 380,361 (264,392) (29,755) (42,121) 44,093 324,374 (18,125) 306,249 (263,358) (29,755) (6,108) 7,028 24,087 0 24,087 0 (1,535) (7,982) 14,570 10,257 0 10,257 0 (1,286) (401) 8,571 500,764 113,719 (96,316) 404,448 (264,392) (45,985) (5,754) 107,964 (31,290) (418) (50,103) (15) 58,663 61,546 2,539 (1,118) 0 147,521 1,340,571 (105,056) 1,235,515 (310,376) 1,431 0 147,521 (1,109) (269) 0 (31,708) (15) 28 (4) 147,517 (53,240) 840,190 in € m. Deposits Central bank funds purchased and securities sold under repurchase agreements (enforceable) Central bank funds purchased and securities sold under repurchase agreements (non-enforceable) Securities loaned (enforceable) Securities loaned (non-enforceable) Financial liabilities at fair value through profit or loss (enforceable) Of which: Negative market values from derivative fi- nancial instruments (enforceable) Financial liabilities at fair value through profit or loss (non-enforceable) Of which: Negative market values from derivative fi- nancial instruments (non-enforceable) Total financial liabilities at fair value through profit or loss Other liabilities Of which: Negative market values from derivatives qualifying for hedge accounting (enforceable) Remaining liabilities not subject to netting Total liabilities Other assets include € 1.8 billion positive market values for derivative financial instruments which have been reclassified into asset held for sale, associated with the Prime Finance platform being transferred to BNP Paribas, along with the corresponding impact of master netting agreements and collateralization. Due to the same reason, other liabilities include € 2.5 billion nega- tive market values for derivative financial instruments which have been reclassified into liabilities held for sale, along with the corresponding impact of master netting agreements and collateralization. For further information please refer to Note 24 “Non- Current Assets and Disposal Groups Held for Sale” to the consolidated financial statements. 301 Deutsche Bank Annual Report 2020 Notes to the consolidated balance sheet 18 – Loans Effective December 30, 2019, the Group elected to convert its interest rate swaps (IRS) transacted with the Japan Securities Clearing Corporation (JSCC) from the previous collateral model to a settlement model. The IRS are now legally settled on a daily basis resulting in derecognition of the associated assets and liabilities. Previously, the Group applied the principles of IAS 32 offsetting to present net the positive (negative) carrying amounts of the IRS and associated variation margin payables (receivables). As a result, gross amounts of financial assets and financial liabilities and corresponding gross amounts set off on the balance sheet decreased by € 5.0 billion and € 3.9 billion as of December 31, 2019, respectively, with no change to the net amounts of financial assets and financial liabilities presented on the balance sheet. The column ‘Gross amounts set off on the balance sheet’ discloses the amounts offset in accordance with all the criteria described in Note 1 “Significant Accounting Policies and Critical Accounting Estimates: Offsetting Financial Instruments”. The column ‘Impact of Master Netting Agreements’ discloses the amounts that are subject to master netting agreements but were not offset because they did not meet the net settlement/simultaneous settlement criteria; or because the rights of set off are conditional upon the default of the counterparty only. The amounts presented for other assets and other liabilities include cash margin receivables and payables respectively. The columns ‘Cash collateral’ and ‘Financial instrument collateral’ disclose the cash and financial instrument collateral amounts received or pledged in relation to the total amounts of assets and liabilities, including those that were not offset. Non-enforceable master netting agreements or similar agreements refer to contracts executed in jurisdictions where the rights of set off may not be upheld under the local bankruptcy laws. The cash collateral received against the positive market values of derivatives and the cash collateral pledged towards the negative mark-to-market values of derivatives are booked within the ‘Other liabilities’ and ‘Other assets’ balances respectively. The Cash and Financial instrument collateral amounts disclosed reflect their fair values. The rights of set off relating to the cash and financial instrument collateral are conditional upon the default of the counterparty. 18 – Loans The entire loan book presented includes loans classified at amortized cost, loans at fair value through other comprehensive income and loans at fair value through profit and loss. The below table gives an overview of our loan exposure by industry, and is based on the NACE code of the counterparty. NACE (Nomenclature des Activités Économiques dans la Communauté Européenne) is a standard European industry classi- fication system. 302 Deutsche Bank Annual Report 2020 Notes to the consolidated balance sheet 19 – Allowance for credit losses Loans by industry classification in € m. Agriculture, forestry and fishing Mining and quarrying Manufacturing Electricity, gas, steam and air conditioning supply Water supply, sewerage, waste management and remediation activities Construction Wholesale and retail trade, repair of motor vehicles and motorcycles Transport and storage Accommodation and food service activities Information and communication Financial and insurance activities Real estate activities Professional, scientific and technical activities Administrative and support service activities Public administration and defense, compulsory social security Education Human health services and social work activities Arts, entertainment and recreation Other service activities Activities of households as employers, undifferentiated goods- and services-producing activities of households for own use Activities of extraterritorial organizations and bodies Gross loans (Deferred expense)/unearned income Loans less (deferred expense)/unearned income Less: Allowance for loan losses Total loans Dec 31, 2020 637 3,145 28,040 3,765 681 4,708 22,023 6,382 2,514 6,240 90,220 37,946 7,946 9,568 7,413 205 3,530 951 6,165 Dec 31, 2019 676 3,027 30,199 4,577 843 4,110 22,568 5,610 2,633 6,575 98,434 45,153 7,430 7,063 8,012 327 3,631 867 5,766 205,331 196,732 1 447,410 394 447,016 4,823 442,193 3 454,235 340 453,895 4,018 449,876 19 – Allowance for credit losses The allowance for credit losses consists of an allowance for loan losses and an allowance for off-balance sheet positions. Development of allowance for credit losses for financial assets at amortized cost Dec 31, 2020 Allowance for Credit Losses³ Stage 2 Stage 1 Stage 3 POCI 549 (44) 77 in € Balance, beginning of year Movements in financial assets including new business Transfers due to changes in creditworthiness Changes due to modifications that did not result in derecognition Changes in models Financial assets that have been derecognized during the pe- (781) riod² 58 Recovery of written off amounts (110) Foreign exchange and other changes 4,946 Balance, end of reporting period Provision for Credit Losses excluding country risk¹ 1,686 1 Movements in financial assets including new business, transfers due to changes in creditworthiness and changes in models add up to Provision for Credit Losses excluding (781) 58 (75) 3,614 1,397 Stage 3 3,015 1,348 49 0 0 31 139 72 0 0 (28) 648 184 0 0 (38) 544 33 492 309 (125) Total 4,093 1,686 0 36 724 N/M N/M 0 N/M 0 N/M 0 N/M 0 N/M 0 country risk. 2 This position includes charge offs of allowance for credit losses. 3 Allowance for credit losses does not include allowance for country risk amounting to € 5 million as of December 31, 2020. 4 The total amount of undiscounted expected credit losses at initial recognition on financial assets that are purchased or originated credit-impaired initially recognised during the reporting period was € 50 million in 2020 and € 0 million in 2019. 303 Deutsche Bank Annual Report 2020 Notes to the consolidated balance sheet 19 – Allowance for credit losses Dec 31, 2019 Allowance for Credit Losses³ Stage 1 Stage 2 Stage 3 POCI 509 (57) 120 in € Balance, beginning of year Movements in financial assets including new business Transfers due to changes in creditworthiness Changes due to modifications that did not result in derecognition Changes in models Financial assets that have been derecognized during the pe- (898) riod² 96 Recovery of written off amounts 0 Foreign exchange and other changes 4,093 Balance, end of reporting period Provision for Credit Losses excluding country risk¹ 636 1 Movements in financial assets including new business, transfers due to changes in creditworthiness and changes in models add up to Provision for Credit Losses excluding (872) 96 8 3,015 536 Stage 3 3,247 550 (14) 0 0 (4) 492 (4) 0 0 (22) 549 62 (26) 0 18 36 40 501 102 (106) Total 4,259 636 0 3 40 0 N/M 0 N/M 0 N/M 0 N/M 0 N/M 0 country risk. 2 This position includes charge offs of allowance for credit losses. 3 Allowance for credit losses does not include allowance for country risk amounting to € 3 million as of December 31, 2019. Dec 31, 2018 Allowance for Credit Losses³ Stage 2 Stage 1 Stage 3 POCI 462 (132) 199 in € Balance, beginning of year Movements in financial assets including new business Transfers due to changes in creditworthiness Changes due to modifications that did not result in derecognition Changes in models Financial assets that have been derecognized during the pe- (995) riod² 172 Recovery of written off amounts (21) Foreign exchange and other changes 4,259 Balance, end of reporting period Provision for Credit Losses excluding country risk¹ 507 1 Movements in financial assets including new business, transfers due to changes in creditworthiness and changes in models add up to Provision for Credit Losses excluding (972) 172 30 3,247 379 Stage 3 3,638 440 (62) (17) 0 (54) 501 78 (6) 0 (14) 509 66 0 0 17 3 (17) 494 215 (137) Total 4,596 507 0 N/M 0 N/M 0 N/M 0 N/M 0 3 (17) N/M 0 country risk. 2 This position includes charge offs of allowance for credit losses. 3 Allowance for credit losses does not include allowance for country risk amounting to € 6 million as of December 31, 2018. Allowance for credit losses for financial assets at fair value through OCI1 Dec 31, 2020 Allowance for Credit Losses in € m. Fair Value through OCI 1 Allowance for credit losses against financial assets at fair value through OCI remained at very low levels (€ 35 million at December 31, 2019 and € 20 million as of Decem- Stage 3 POCI 12 Stage 1 Stage 3 Stage 2 0 6 2 Total 20 ber 31, 2020). Due to immateriality, we do not provide any details on the year-over-year development. Dec 31, 2019 Allowance for Credit Losses in € m. Fair Value through OCI 1 Allowance for credit losses against financial assets at fair value through OCI were almost unchanged at very low levels (€ 13 million at December 31, 2018 and € 35 million as Total 35 Stage 3 POCI 10 16 Stage 2 Stage 3 Stage 1 0 9 of December 31, 2019). Due to immateriality, we do not provide any details on the year-over-year development. Dec 31, 2018 Allowance for Credit Losses in € m. Fair Value through OCI 1 Allowance for credit losses against financial assets at fair value through OCI were almost unchanged at very low levels (€ 12 million at the beginning of year 2018 and Stage 3 POCI 11 Stage 1 Stage 3 Stage 2 (0) 1 0 € 13 million as of December 31, 2018, respectively). Due to immateriality, we do not provide any details on the year-over-year development. Total 13 304 Deutsche Bank Annual Report 2020 Notes to the consolidated balance sheet 20 – Transfer of financial assets, assets pledged and received as collateral Development of allowance for credit losses for off-balance sheet positions Stage 1 in € m. Balance, beginning of year Movements including new business Transfers due to changes in creditworthiness Changes in models Foreign exchange and other changes Balance, end of reporting period Provision for Credit Losses excluding country risk1 1 The above table breaks down the impact on provision for credit losses from movements in financial assets including new business, transfers due to changes in 166 41 (1) 0 (6) 200 40 128 13 0 0 3 144 13 48 21 0 0 4 74 22 0 0 0 0 0 0 0 Stage 3 POCI Stage 2 Stage 3 Dec 31, 2020 Allowance for Credit Losses2 Total 342 75 0 0 1 419 75 creditworthiness and changes in models. 2 Allowance for credit losses does not include allowance for country risk amounting to € 4 million as of December 31, 2020. Stage 1 in € m. Balance, beginning of year Movements including new business Transfers due to changes in creditworthiness Changes in models Foreign exchange and other changes Balance, end of reporting period Provision for Credit Losses excluding country risk1 1 The above table breaks down the impact on provision for credit losses from movements in financial assets including new business, transfers due to changes in creditworthi- 84 88 3 0 (9) 166 90 132 (13) 9 0 (1) 128 (4) 73 (5) (12) 0 (7) 48 (17) 0 0 0 0 0 0 0 Stage 3 POCI Stage 2 Stage 3 Dec 31, 2019 Allowance for Credit Losses2 Total 289 70 0 0 (17) 342 70 ness and changes in models. 2 Allowance for credit losses does not include allowance for country risk amounting to € 4 million as of December 31, 2019. Stage 1 in € m. Balance, beginning of year Movements including new business Transfers due to changes in creditworthiness Changes in models Foreign exchange and other changes Balance, end of reporting period Provision for Credit Losses excluding country risk1 1 The above table breaks down the impact on provision for credit losses from movements in financial assets including new business, transfers due to changes in creditworthi- 119 (13) (2) 0 (20) 84 (15) 117 (0) 2 0 14 132 1 36 31 (0) 0 6 73 31 0 0 0 0 0 0 0 Stage 3 POCI Stage 2 Stage 3 Dec 31, 2018 Allowance for Credit Losses2 Total 272 18 0 0 (0) 289 18 ness and changes in models. 2 Allowance for credit losses does not include allowance for country risk amounting to € 5 million as of December 31, 2018. 20 – Transfer of financial assets, assets pledged and received as collateral The Group enters into transactions in which it transfers financial assets held on the balance sheet and as a result may either be eligible to derecognize the transferred asset in its entirety or must continue to recognize the transferred asset to the extent of any continuing involvement, depending on certain criteria. These criteria are discussed in Note 1 “Significant Accounting Policies and Critical Accounting Estimates”. Where financial assets are not eligible to be derecognized, the transfers are viewed as secured financing transactions, with any consideration received resulting in a corresponding liability. The Group is not entitled to use these financial assets for any other purposes. The most common transactions of this nature entered into by the Group are repurchase agreements, securi- ties lending agreements and total return swaps, in which the Group retains substantially all of the associated credit, equity price, interest rate and foreign exchange risks and rewards associated with the assets as well as the associated income streams. 305 Deutsche Bank Annual Report 2020 Notes to the consolidated balance sheet 20 – Transfer of financial assets, assets pledged and received as collateral Information on asset types and associated transactions that did not qualify for derecognition in € m. Carrying amount of transferred assets Trading securities not derecognized due to the following transactions: Repurchase agreements Securities lending agreements Total return swaps Other Total trading securities Other trading assets Non-trading financial assets mandatory at fair value through profit or loss Financial assets at fair value through other comprehensive income Loans at amortized cost1 Others Total Carrying amount of associated liabilities Dec 31, 2020 Dec 31, 2019 40,654 8,951 1,319 5,028 55,953 21 666 5,951 210 72 62,872 53,348 31,329 13,001 1,615 2,341 48,285 90 439 2,537 310 236 51,897 37,790 ¹ Loans where the associated liability is recourse only to the transferred assets had NIL carrying value and fair value as at December 31, 2020 and December 31, 2019. The associated liabilities had the same carrying value and fair value which resulted in a net position of 0. Carrying value of assets transferred in which the Group still accounts for the asset to the extent of its continuing involvement in € m. Carrying amount of the original assets transferred Trading securities Financial assets designated at fair value through profit or loss Non-trading financial assets mandatory at fair value through profit or loss Carrying amount of the assets continued to be recognized Trading securities Financial assets designated at fair value through profit or loss Non-trading financial assets mandatory at fair value through profit or loss Carrying amount of associated liabilities Dec 31, 2020 Dec 31, 2019 1,039 0 673 81 0 17 139 1,101 0 698 109 0 23 185 The Group could retain some exposure to the future performance of a transferred asset either through new or existing con- tractual rights and obligations and still be eligible to derecognize the asset. This ongoing involvement will be recognized as a new instrument which may be different from the original financial asset that was transferred. Typical transactions include retaining senior notes of non-consolidated securitizations to which originated loans have been transferred; financing arrange- ments with structured entities to which the Group has sold a portfolio of assets; or sales of assets with credit-contingent swaps. The Group’s exposure to such transactions is not considered to be significant as any substantial retention of risks associated with the transferred asset will commonly result in an initial failure to derecognize. Transactions not considered to result in an ongoing involvement include normal warranties on fraudulent activities that could invalidate a transfer in the event of legal action, qualifying pass-through arrangements and standard trustee or administrative fees that are not linked to performance. The impact on the Group’s Balance Sheet of on-going involvement associated with transferred assets derecognized in full in € m. Loans at amortized cost Securitization notes Other Total loans at amortized cost Financial assets held at fair value through profit or loss Securitization notes Non-standard Interest Rate, cross-currency or inflation-linked swap Total financial assets held at fair value through profit or loss Financial assets at fair value through other comprehensive income: Securitization notes Other Total financial assets at fair value through other comprehensive income Total financial assets representing on-going involvement Financial liabilities held at fair value through profit or loss Non-standard Interest Rate, cross-currency or inflation-linked swap Total financial liabilities representing on-going involvement Carrying value Fair value Dec 31,2020 Maximum Exposure to Loss¹ Carrying value Fair value Dec 31,2019 Maximum Exposure to Loss¹ 254 7 261 271 7 279 271 7 279 325 10 336 334 10 344 28 0 28 624 0 624 913 28 0 28 645 0 645 951 28 0 28 645 0 645 951 36 0 36 457 0 457 828 36 0 36 465 0 465 845 11 11 11 11 0 0 11 11 11 11 334 10 344 36 0 36 465 0 465 845 0 0 1 The maximum exposure to loss is defined as the carrying value plus the notional value of any undrawn loan commitments not recognized as liabilities. 306 Deutsche Bank Annual Report 2020 Notes to the consolidated balance sheet 20 – Transfer of financial assets, assets pledged and received as collateral The impact on the Group’s Statement of Income of on-going involvement associated with transferred assets derecognized in full in € m. Securitization notes Non-standard Interest Rate, cross-currency or inflation-linked swap Net gains/(losses) recognized from on-going involvement in derecognized assets Year-to- date P&L Cumulative P&L Dec 31,2020 Gain/(loss) on disposal Year-to- date P&L Cumulative P&L 22 49 99 15 27 Dec 31,2019 Gain/(loss) on disposal 100 (1) (1) 0 (0) (0) 0 21 48 99 15 27 100 The Group pledges assets primarily as collateral against secured funding and for repurchase agreements, securities borrowing agreements as well as other borrowing arrangements and for margining purposes on OTC derivative liabilities. Pledges are generally conducted under terms that are usual and customary for standard securitized borrowing contracts and other trans- actions described. Carrying value of the Group’s assets pledged as collateral for liabilities or contingent liabilities1 in € m. Financial assets at fair value through profit or loss Financial assets at fair value through other comprehensive income Loans Other Total 1 Excludes assets pledged as collateral from transactions that do not result in liabilities or contingent liabilities. Total assets pledged to creditors available for sale or repledge1 in € m. Financial assets at fair value through profit or loss Financial assets at fair value through other comprehensive income Loans Other Total 1 Includes assets pledged as collateral from transactions that do not result in liabilities or contingent liabilities. Dec 31, 2020 47,553 7,858 77,433 1,257 134,101 Dec 31, 2019 36,686 2,943 70,323 1,617 111,570 Dec 31, 2020 44,210 4,911 2,232 72 51,426 Dec 31, 2019 34,503 1,303 132 236 36,174 The Group receives collateral primarily in reverse repurchase agreements, securities lending agreements, derivatives trans- actions, customer margin loans and other transactions. These transactions are generally conducted under terms that are usual and customary for standard secured lending activities and the other transactions described. The Group, as the secured party, has the right to sell or re-pledge such collateral, subject to the Group returning equivalent securities upon completion of the transaction. This right is used primarily to cover short sales, securities loaned and securities sold under repurchase agree- ments. Fair Value of collateral received in € m. Securities and other financial assets accepted as collateral Of which: Collateral sold or repledged Dec 31, 2020 237,157 Dec 31, 2019 251,757 199,346 200,378 307 Deutsche Bank Annual Report 2020 Notes to the consolidated balance sheet 21 – Property and equipment 21 – Property and equipment in € m. Cost of acquisition: Balance as of January 1, 2019 Changes in the group of consolidated companies Additions Transfers Reclassifications (to)/from “held for sale” Disposals Exchange rate changes Balance as of December 31, 2019 Changes in the group of consolidated companies Additions Transfers Reclassifications (to)/from “held for sale” Disposals Exchange rate changes Balance as of December 31, 2020 Accumulated depreciation and impairment: Balance as of January 1, 2019 Changes in the group of consolidated companies Depreciation Impairment losses Reversals of impairment losses Transfers Reclassifications (to)/from “held for sale” Disposals Exchange rate changes Balance as of December 31, 2019 Changes in the group of consolidated companies Depreciation Impairment losses Reversals of impairment losses Transfers Reclassifications (to)/from “held for sale” Disposals Exchange rate changes Balance as of December 31, 2020 Carrying amount: Balance as of December 31, 2019 Balance as of December 31, 2020 Owner occupied properties Furniture and equipment Leasehold improvements Construction-in- progress Property and equipment owned (IAS 16) Right-of-use for leased assets (IFRS 16) Total 778 2,602 2,860 142 6,382 3,185 9,567 0 8 (56) (0) 75 1 (165) 111 15 (11) 190 19 0 49 116 0 82 19 (0) (165) 0 (165) 160 (147) (0) 0 1 327 (72) (11) 347 39 413 32 0 115 19 740 (40) (11) 462 58 656 2,380 2,961 155 6,153 3,533 9,686 0 2 8 (73) 2 (4) (1) 128 173 (65) 223 (50) (0) 47 43 0 96 (58) (0) 335 (97) (1) 0 (5) (1) 512 127 (139) 321 (117) (1) 1,806 (388) (0) 41 (64) (3) 2,317 (261) (139) 362 (181) 587 2,343 2,897 387 6,214 4,844 11,058 328 1,862 1,770 0 3,960 5 18 20 0 (31) (0) 16 0 (49) 199 2 0 (4) (4) 180 15 0 217 5 0 (16) 0 66 16 325 1,841 1,927 0 16 5 3 2 (25) 1 (3) (1) 171 2 0 145 (53) 206 (42) (0) 187 8 0 2 0 89 (45) 317 1,856 1,989 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1 615 85 0 41 0 79 0 3,960 (43) 1,049 112 0 (10) (5) 341 32 (44) 434 27 0 (51) (5) 262 32 4,093 663 4,756 (1) 373 16 3 149 (78) 296 (90) 0 648 77 10 5 0 11 (24) (1) 1,021 93 12 153 (78) 307 (114) 4,163 1,347 5,510 331 540 1,034 155 2,060 2,870 4,930 270 487 908 387 2,051 3,497 5,549 Depreciation expenses, impairment losses and reversal of impairment losses on property and equipment are recorded within general and administrative expenses for the income statement. The carrying value of items of property and equipment on which there is a restriction on sale was € 23 million and € 24 million as of December 31, 2020 and December 31, 2019, respectively. 308 Deutsche Bank Annual Report 2020 Notes to the consolidated balance sheet 22 – Leases Commitments for the acquisition of property and equipment were € 27 million at year-end 2020 and € 46 million at year-end 2019. The Group leases many assets including land and buildings, vehicles and IT equipment for which it records right-of-use assets. During 2020, additions to right-of-use assets amounted to € 1.8 billion and largely reflected new real estate leases. Deprecia- tion charges of € 648 million recognized in 2020 mainly resulted from planned consumption of right-of-use assets for property leases over their contractual terms. The carrying amount of right-of-use assets of € 3.5 billion included in Total Property and equipment as of December 31, 2020 predominantly represented leased properties of € 3.5 billion and vehicle leases of € 12 million. For more information on the Group´s leased properties and related disclosures required under IFRS 16, please refer to Note 22 “Leases”. 22 – Leases The Group’s disclosures are as a lessee under lease arrangements covering property and equipment. The Group has applied judgement in presenting related information pursuant to IFRS 16 in a manner that it considers to be most relevant to an understanding of its financial performance and position. The Group leases many assets including land and buildings, vehicles and IT equipment. The Group is a lessee for the majority of its offices and branches under long-term rental agreements. Most of the lease contracts are made under usual terms and conditions, which means they include options to extend the lease by a defined amount of time, price adjustment clauses and escalation clauses in line with general office rental market conditions. However, the lease agreements do not include any clauses that impose any restriction on the Group’s ability to pay dividends, engage in debt financing transactions or enter into further lease agreements. As of December 31, 2020 (December 31, 2019), the Group recorded right-of-use assets on its balance sheet with a carrying amount of € 3.5 billion (€ 2.9 billion), which are included in Property and equipment. The right-of-use assets predominantly represented leased properties of € 3.5 billion (€ 2.8 billion) and vehicle leases of € 12 million (€ 19 million). For more infor- mation on the year-to-date development of right-of-use assets, please refer to Note 21 “Property and Equipment”. Corresponding to the recognition of the right-of-use assets, as of December 31, 2020 (December 31, 2019), the Group rec- orded lease liabilities on its balance sheet with a carrying amount of € 4.0 billion (€ 3.3 billion), which are included in Other liabilities. As of December 31, 2020, the lease liabilities included the discounted value of future lease payments of € 348 million for the Group headquarters in Frankfurt am Main that was sold and leased back on December 1, 2011. The Group entered into a 181 months leaseback arrangement for the entire facility in connection with the transaction, which also includes the option to extend the lease for an additional 5 year period up to 2031. During 2020 and 2019, interest expenses recorded from the compounding of the lease liabilities amounted to € 79 million and € 80 million, respectively. The contractual maturities for the undiscounted cash flows from these liabilities are shown in Note 31 “Maturity Analysis of the earliest contractual undiscounted cash flows of Financial Liabilities”. Expenses recognized in 2020 (2019) relating to short-term leases and leases of low-value assets, for which the Group decided to apply the recognition exemption under IFRS 16 (and thus not to record right-of-use assets and corresponding lease liabilities on the balance sheet), amounted to € 7 million (€ 44 million) and € 2 million (€ 1 million), respectively. Income recorded in 2020 (2019) from the subletting of right-of-use assets totaled € 24 million (€ 21 million). The total cash outflow for leases for 2020 (2019) was € 729 million (€ 738 million) and represented mainly expenditures made for real estate rentals over € 708 million (€ 724 million). Of the total cash outflow amount, payments of € 653 million (€ 659 million) were made for the principal portion of lease liabilities, payments of € 77 million (€ 79 million) were made for the interest portion. Total future cash outflows to which the Group as a lessee is potentially exposed, that are not reflected in the measurement of the lease liabilities, mainly include potential payment exposures arising from extension options (2020: € 4.7 billion) and future payments for leases not yet commenced, but to which the Group is committed (2020: € 1.2 billion). Their expected maturities are shown in the table below. 309 Deutsche Bank Annual Report 2020 Notes to the consolidated balance sheet 23 – Goodwill and other intangible assets Future cash outflows to which the Group is potentially exposed that are not reflected in the measurement of lease liabilities in € m. Future cash outflows not reflected in lease liabilities: Not later than one year Later than one year and not later than five years Later than five years Future cash outflows not reflected in lease liabilities Dec 31, 2020 Dec 31, 2019 50 791 5,097 5,938 17 816 4,797 5,629 23 – Goodwill and other intangible assets Goodwill Changes in Goodwill The changes in the carrying amount of goodwill, as well as gross amounts and accumulated impairment losses of goodwill, for the years ended December 31, 2020, and December 31, 2019, are shown below by cash-generating units (“CGU”). The Group’s business operations are organized under the following divisional structure: the Core Bank, which includes the Corporate Bank (“CB”), Investment Bank (“IB”), Private Bank (“PB”) and Asset Management (“AM”) corporate divisions and the Capital Release Unit (“CRU”). The CB, IB and the AM corporate divisions as well as the CRU each are considered cash- generating units (CGUs). The PB corporate division which was previously comprised of two separate CGUs – Wealth Man- agement (“WM”) and Private Bank excluding Wealth Management (“PB excl. WM”) – has been considered as one single CGU since the fourth quarter 2020. Please also refer to Note 4 “Business Segments and Related Information” for more information regarding changes in the presentation of segment disclosures. Goodwill allocated to cash-generating units in € m. Balance as of January 1, 2019 Goodwill acquired during the year Purchase accounting adjustments Transfers Reclassification from (to) “held for sale” Goodwill related to dispositions without being classified as “held for sale” Impairment losses1 Exchange rate changes/other Balance as of December 31, 2019 Gross amount of goodwill Accumulated impairment losses Balance as of January 1, 2020 Goodwill acquired during the year Purchase accounting adjustments Transfers Reclassification from (to) “held for sale” Goodwill related to dispositions without being classified as “held for sale” Impairment losses1 Exchange rate changes/other Balance as of December 31, 2020 Gross amount of goodwill Accumulated impairment losses Investment Bank 0 0 0 0 0 0 0 0 0 3,915 (3,915) 0 0 0 0 0 0 0 0 0 3,608 (3,608) Corporate Bank 489 0 0 0 0 0 (491) 2 0 603 (603) 0 0 0 0 0 0 0 0 0 569 (569) Asset Manage- ment 2,843 0 0 0 0 0 0 38 2,881 3,371 (490) 2,881 0 0 0 0 0 0 (142) 2,739 3,197 (458) Private Bank 543 0 0 0 0 0 (545) 2 0 3,717 (3,717) 0 0 0 0 0 0 0 0 0 3,698 (3,698) Others 1 0 0 0 0 (1) 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 Total 3,876 0 0 0 0 (1) (1,035) 42 2,881 11,607 (8,726) 2,881 0 0 0 0 0 0 (142) 2,739 11,073 (8,334) 1 Impairment losses of goodwill are recorded as impairment of goodwill and other intangible assets in the income statement. In addition to the primary CGUs, the IB segment had included goodwill resulting from the acquisition of a nonintegrated in- vestment which is not allocated to the respective CGU. Such goodwill is summarized as “Others” in the table above. Changes in goodwill in 2020 solely related to foreign exchange rate movements of AM goodwill held in non-Group currencies. Changes in goodwill in 2019 were mainly driven by the transformational measures relating to the Group’s businesses and its reorganization. Triggered by the impact of a lowered outlook on business plans driven both by adjustments to macro-economic 310 Deutsche Bank Annual Report 2020 Notes to the consolidated balance sheet 23 – Goodwill and other intangible assets factors as well as by the impact of strategic decisions in preparation of the above mentioned transformation announcement, in the second quarter 2019 the Group reviewed the recoverable amounts of its CGUs in the then existing structure. This review resulted in a short-fall of the recoverable amounts against the then existing respective CGUs carrying amounts for WM within the former Private & Commercial Bank (“PCB”) corporate division and GTB & CF within the former Corporate & Investment Bank (“CIB”) corporate division. With a recoverable amount of approximately € 1.9 billion for WM, goodwill in former CGU WM (€ 545 million) was impaired and had to be fully written-off, mainly as a result of worsening macro-economic assumptions, including interest rate curves, as well as industry-specific market growth corrections for the WM business globally. For former CGU GTB & CF, the recover- able amount of approximately € 10.2 billion led to the full impairment of allocated goodwill (€ 491 million). This was mainly driven by adverse industry trends in Corporate Finance as well as by adjustments to macro-economic assumptions, including interest rate curves. The total impairment charges of € 1.0 billion were recorded in Impairment of goodwill and other intangible assets of the respective Private Bank (here: WM CGU; € 545 million) and Corporate Bank (€ 491 million) segment results of the second quarter of 2019. Goodwill Impairment Test For the purposes of impairment testing, goodwill acquired in a business combination is allocated to CGUs. On the basis as described in Note 1 “Significant Accounting Policies and Critical Accounting Estimates”, the Group’s primary CGUs are as outlined above. “Other” goodwill is tested individually for impairment on the level of each of the nonintegrated investments. Goodwill is tested for impairment annually in the fourth quarter by comparing the recoverable amount of each goodwill-carrying CGU with its carrying amount. In addition, in accordance with IAS 36, the Group tests goodwill whenever a triggering event is identified. The recoverable amount is the higher of a CGU’s fair value less costs of disposal and its value in use. Following the aforementioned write-off of goodwill in the former GTB & CF CGUs in the second quarter 2019 and the de- -recognition of ring-fenced goodwill included in the disposal of a nonintegrated subsidiary recorded in the third quarter 2019, the AM CGU was the only goodwill carrying CGU to be tested for annual impairment in both 2019 and 2020. The annual goodwill impairment tests conducted in these periods did not result in an impairment loss on the Group’s primary goodwill- carrying CGU as the recoverable amount of the AM CGU was higher than the respective carrying amounts. A review of the Group’s strategy or certain political or global risks for the banking industry, uncertainties regarding the imple- mentation of already adopted regulation and the introduction of legislation that is already under discussion could result in an impairment of goodwill in the future. Carrying Amount The carrying amount of a primary CGU is derived using a capital allocation model based on the Shareholders’ Equity Allocation Framework of the Group (please refer to Note 4, “Business Segments and Related Information” for more details). The alloca- tion uses the Group’s total equity at the date of valuation, including Additional Tier 1 Notes (“AT1 Notes”), which constitute unsecured and subordinated notes of Deutsche Bank and which are classified as Additional equity components in accordance with IFRS. Total equity is adjusted for specific effects related to nonintegrated investments, which are tested separately for impairment as outlined above, and for an add-on adjustment for goodwill attributable to noncontrolling interests. Recoverable Amount The Group determines the recoverable amounts of its primary CGUs on the basis of the higher of value in use and fair value less costs of disposal (Level 3 of the fair value hierarchy). It employs a discounted cash flow (DCF) model, which reflects the specifics of the banking business and its regulatory environment. The model calculates the present value of the estimated future earnings that are distributable to shareholders after fulfilling the respective regulatory capital requirements. The recov- erable amounts also include the fair value of the AT1 Notes, allocated to the primary CGUs consistent to their treatment in the carrying amount. The DCF model uses earnings projections and respective capitalization assumptions based on five-year financial plans as well as longer term expectations on the impact of regulatory developments, which are discounted to their present value. Estimating future earnings and capital requirements involves judgment and the consideration of past and current performances as well as expected developments in the respective markets, and in the overall macroeconomic and regulatory environments. Earnings projections beyond the initial five-year period are, where applicable, adjusted to derive a sustainable level. In case of a going concern, the cash flow to equity is assumed to increase by or converge towards a constant long-term growth rate of up to 3.1 % (2019: up to 2.8 %). This is based on projected revenue forecasts of the CGU as well as expectations for the development of gross domestic product and inflation, and is captured in the terminal value. 311 Deutsche Bank Annual Report 2020 Notes to the consolidated balance sheet 23 – Goodwill and other intangible assets Key Assumptions and Sensitivities Key Assumptions: The DCF value of a CGU is sensitive to the earnings projections, to the discount rate (cost of equity) applied and, to a much lesser extent, to the long-term growth rate. The discount rates applied have been determined based on the capital asset pricing model and comprise a risk-free interest rate, a market risk premium and a factor covering the systematic market risk (beta factor). The values for the risk-free interest rate, the market risk premium and the beta factors are determined using external sources of information. CGU-specific beta factors are determined based on a respective group of peer compa- nies. Variations in all of these components might impact the discount rates. For the AM CGU, the discount rates (after tax) applied for 2020 and 2019 were 9.8 % and 9.6 %, respectively. Management determined the values for the key assumptions in the following table based on a combination of internal and external analysis. Estimates for efficiency and the cost reduction program are based on progress made to date and scheduled future projects and initiatives. Primary goodwill- carrying cash- generating unit Description of key assumptions Uncertainty associated with key assumptions and potential events/circumstances that could have a negative effect Asset Management — Deliver strong investment product performance — Expand product suite in growth areas (e.g. alternatives, multi assets, passive, ESG investment schemes) while consolidating non-core strategies — Consistent net flows leveraging market share leadership in Germany and the rest of Europe, while expanding cover- age in Asia Pacific and focused growth in the Americas — Diversification of intermediary coverage towards high growth channels and deployment of digital solutions to serve new channels — Challenging market environment and volatility unfavoura- ble to our investment strategies — Unfavourable margin development and adverse competi- tion levels in key markets and products beyond expected levels — Business/execution risks, e.g., underachievement of net flow targets from market uncertainty, loss of high quality client facing employees, unfavourable investment perfor- mance, lower than expected efficiency gains — Uncertainty around regulation and its potential implica- — Further efficiency through improved core operating pro- tions not yet anticipated cesses, platform optimization and product rationalization — Anticipation of further headwinds in the asset management industry as a result of the changing regulatory environment Sensitivities: In order to test the resilience of the recoverable amount, key assumptions used in the DCF model (for example, the discount rate and the earnings projections) are sensitized. Management believes that reasonable possible changes in key assumptions could cause an impairment loss in AM. Currently, in AM the recoverable amount exceeds the carrying amount by 12 % / € 0.7 billion. Change in certain key assumptions to cause the recoverable amount to equal the carrying amount Change in Key Assumptions Discount rate (post tax) increase from to Change in projected future earnings in each period by Long term growth rate from to AM 9.8 % 10.6 % (9.5) % 3.1 % 1.6 % 312 Deutsche Bank Annual Report 2020 Notes to the consolidated balance sheet 23 – Goodwill and other intangible assets Other Intangible Assets Changes of other intangible assets by asset classes for the years ended December 31, 2020 and December 31, 2019 Purchased intangible assets Internally generated intangible assets Total other intangible assets Retail investment management agreements Unamortized Total unamortized purchased intangible assets Other Amortized Amortized Customer- related intangible assets Contract- based intangible assets Software and other Total amortized purchased intangible assets Software 1,010 441 1,451 1,384 70 603 2,057 7,814 11,322 0 0 0 0 0 20 1,030 0 0 0 0 0 0 0 0 0 0 1 0 0 0 0 0 21 9 0 0 0 (1) 11 0 0 0 0 0 0 442 1,472 1,403 70 0 0 0 0 0 0 0 0 0 0 5 0 0 0 0 34 0 40 0 28 0 625 138 0 5 43 0 40 0 27 11 2,098 143 0 5 997 1,040 0 1,295 (21) (29) 47 0 1,335 (22) (2) 79 7,512 11,082 911 0 390 (37) 60 (2) (37) 60 (55) (9) 21 (136) Exchange rate changes (85) (1) (86) (53) 945 441 1,386 1,356 70 778 2,204 7,910 11,499 255 439 694 1,358 70 494 1,922 0 0 0 0 0 0 0 5 0 0 0 0 0 0 1 0 0 0 0 0 0 0 1 5 13 0 0 0 2 0 0 11 0 0 0 0 0 0 0 0 260 440 700 1,384 70 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 8 0 0 0 0 0 0 38 0 40 0 6 0 29 1 528 37 0 3 3,442 1,205 0 1,291 (15) 931 0 (38) 20 51 0 40 0 8 0 29 12 1,982 4,254 45 0 3 994 0 385 (33) (33) (8) 0 0 0 0 106 (2) 106 (54) 50 2 (22) (88) Exchange rate changes (22) (1) (23) (52) Balance as of December 31, 2020 Carrying amount: 239 439 678 1,340 70 633 2,043 4,793 7,513 As of December 31, 2019 As of December 31, 2020 770 706 2 2 772 708 20 16 0 0 96 145 116 161 3,259 3,117 4,147 3,986 1 € 1.3 billion were included in general and administrative expenses. 2 € 939 million were comprised of impairments of purchased (€ 6 million) and self-developed software (€ 931 million), both recorded in general and administrative expenses, and € 2 million referring to the impairment of an amortizing customer-related intangible asset which is included under impairment of goodwill and other intangible assets. 3 € 1.0 billion were included in general and administrative expenses. 4 € 51 million were mainly comprised of impairments of self-developed software recorded in general and administrative expenses. 5 € 2 million were comprised of reversal of impairments of self-developed software recorded in general and administrative expenses. 313 in € m. Cost of acquisition/ manufacture: Balance as of January 1, 2019 Additions Changes in the group of consolidated companies Disposals Reclassifications from (to) “held for sale” Transfers Exchange rate changes Balance as of December 31, 2019 Additions Changes in the group of consolidated companies Disposals Reclassifications from (to) “held for sale” Transfers Balance as of December 31, 2020 Accumulated amortization and impairment: Balance as of January 1, 2019 Amortization for the year Changes in the group of consolidated companies Disposals Reclassifications from (to) “held for sale” Impairment losses Reversals of impairment losses Transfers Exchange rate changes Balance as of December 31, 2019 Amortization for the year Changes in the group of consolidated companies Disposals Reclassifications from (to) “held for sale” Impairment losses Reversals of impairment losses Transfers 1,054 0 394 (46) 81 (277) 6,057 1,2561 0 1,330 (15) 9392 0 (8) 37 6,935 1,0403 0 388 (41) 514 25 84 (165) 0 0 0 0 0 0 0 0 0 0 0 0 0 0 Deutsche Bank Annual Report 2020 Notes to the consolidated balance sheet 23 – Goodwill and other intangible assets Amortizing Intangible Assets In 2020, amortizing other intangible assets decreased by € 161 million. This reduction was driven by amortization expenses of € 1.0 billion, mostly for the scheduled consumption of capitalized software (€ 1.0 billion) and the impairment of current platform software as well as software under construction (€ 50 million). More information in regards to the related impact from the transformation strategy is included in Note 45 “Impact of Deutsche Bank’s transformation”. Additions to internally generated intangible assets of € 1.1 billion resulting from the capitalization of expenses incurred in conjunction with the Group’s devel- opment of own-used software compensated for the decrease in net book value. A stronger Euro exchange rate against major currencies accounted for negative exchange rate changes of € 112 million. In 2019, amortizing other intangible assets decreased by a net € 1.1 billion. This was mainly driven by amortization expenses of € 1.3 billion, mostly for the scheduled consumption of capitalized software (€ 1.2 billion) and the impairment of current platform software as well as software under construction (€ 937 million). Offsetting were additions to internally generated intangible assets of € 1.0 billion resulting from the capitalization of expenses incurred in conjunction with the Group’s devel- opment of own-used software. Furthermore, the weakening of the Euro against major currencies accounted for positive ex- change rate changes of € 26 million. In 2018, amortizing other intangible assets increased by a net € 171 million. This was in particular driven by additions to internally generated intangible assets of € 1.2 billion resulting from the capitalization of expenses incurred in conjunction with the Group’s development of own-used software. Offsetting were amortization expenses of € 1.1 billion, mostly for the sched- uled consumption of capitalized software (€ 1.1 billion). The reassessment of current platform software as well as software under construction led to the impairment of self-developed software (€ 42 million). Furthermore, the weakening of the Euro against major currencies accounted for positive exchange rate changes of € 46 million increasing the net book value of amor- tizing intangible assets. Other intangible assets with finite useful lives are generally amortized over their useful lives based on the straight-line method. Useful lives of other amortized intangible assets by asset class Internally generated intangible assets: Software Purchased intangible assets: Customer-related intangible assets Other Unamortized Intangible Assets Useful lives in years up to 10 up to 20 up to 80 Within this asset class, the Group recognizes certain contract-based and marketing-related intangible assets, which are deemed to have an indefinite useful life. In particular, the asset class comprises the below detailed investment management agreements related to retail mutual funds and certain trademarks. Due to the specific nature of these intangible assets, market prices are ordinarily not observable and, therefore, the Group values such assets based on the income approach, using a post-tax DCF-methodology. Retail investment management agreements: These assets, amounting to € 706 million, relate to the Group’s U.S. retail mutual fund business and are allocated to the AM CGU. Retail investment management agreements are contracts that give AM the exclusive right to manage a variety of mutual funds for a specified period. Since these contracts are easily renewable, the cost of renewal is minimal, and they have a long history of renewal, these agreements are not expected to have a foreseeable limit on the contract period. Therefore, the rights to manage the associated assets under management are expected to generate cash flows for an indefinite period of time. This intangible asset was recorded at fair value based upon a valuation provided by a third party at the date of acquisition of Zurich Scudder Investments, Inc. in 2002. The recoverable amount was calculated as fair value less costs of disposal using the multi-period excess earnings method and the fair value measurement was categorized as Level 3 in the fair value hierarchy and is essentially flat compared to the carrying amount. The key assumptions in determining the fair value less costs of disposal include the asset mix, the flows forecast, the effective fee rate and discount rate as well as the terminal value growth rate. The discount rates (cost of equity) applied in the calculation were 10.3 % in 2020 and 9.8 % in 2019. The terminal value growth rate applied for 2020 is 4.1 % (for 2019 4.1 %). The reviews of the valuations for the years 2020 and 2019 neither resulted in any impairment nor a reversal of prior impairments. 314 Deutsche Bank Annual Report 2020 Notes to the consolidated balance sheet 24 – Non-current assets and disposal groups held for sale 24 – Non-current assets and disposal groups held for sale Within the balance sheet, non-current assets and disposal groups held for sale are included in other assets and other liabilities. in € m. Financial assets at fair value through profit or loss Property and equipment Other assets Total assets classified as held for sale Financial liabilities at fair value through profit or loss Other liabilities Total liabilities classified as held for sale Dec 31, 2020 6,086 11 0 6,097 2,000 7,850 9,850 Dec 31, 2019 4,951 15 10 4,976 2,671 6,978 9,650 As of December 31, 2020 and December 31, 2019, no unrealized gains (losses) relating to non-current assets classified as held for sale were recognized directly in accumulated other comprehensive income (loss) (net of tax). Sale of Postbank Systems AG to Tata Consultancy Services On November 9, 2020, Deutsche Bank and Tata Consultancy Services (TCS) announced that they had reached an agreement concerning the sale of Postbank Systems AG, including its around 1,500 employees, to TCS. Following the fulfillment of all closing conditions achieved in the fourth quarter 2020, including the receipt of required regulatory and governmental approvals, TCS, through its subsidiary Tata Consultancy Services Netherlands B.V., acquired 100 % of the shares of Postbank Systems. Accordingly, Postbank Systems was deconsolidated at year-end 2020. The sale represents an important step forward for Deutsche Bank’s announced strategic transformation and is consistent with previously-communicated financial plans, resulting in the acceleration of expected transformation charges. Following the an- nouncement and prior to its deconsolidation, Postbank Systems was classified as a disposal group held-for-sale. Along with the reclassification of the assets and liabilities in the disposal group to the other assets and other liabilities, the Group recog- nized a negative pre-tax impact of € (120) million which was recorded in the fourth quarter 2020 within other revenues (€ (104) million) and non-interest expenses (€ (16) million). Transfer of Global Prime Finance and Electronic Equities platform to BNP Paribas S.A. As part of the Group’s strategic transformation and restructuring plans announced on July 7, 2019, the Management Board of Deutsche Bank had also announced the exit of the Equities Sales & Trading business. In this context, Deutsche Bank had entered into an agreement with BNP Paribas S.A. (“BNP Paribas”) to provide continuity of service to its prime finance and electronic equities clients, with a view to transferring technology and staff to BNP Paribas and to continue to operate the platform until clients are migrated to BNP Paribas, with revenues transferred to BNP Paribas and certain costs to be refunded to Deutsche Bank. On November 14, 2019, BNP Paribas and Deutsche Bank announced that the agreement to refer clients and to transfer technology and key staff from the respective businesses to BNP Paribas had received the necessary approvals and was therefore considered unconditional. The revenue transfer and cost reimbursement arrangement commenced on December 1, 2019. Accordingly, in the fourth quarter 2019, the assets (€ 5.0 billion) and liabilities (€ 9.6 billion) forming the transaction perimeter were classified as assets and liabilities held for sale of the Capital Release Unit (CRU). The assets and liabilities included in the disposal group are predominantly financial instruments which will either be novated to BNP Paribas, or the balances will be closed out between Deutsche Bank and the counterparties and simultaneously the clients would enter into the equivalent transactions with BNP Paribas. The measurement of the financial instruments is not impacted by their held for sale classification. As of December 31, 2020, the disposal group held-for-sale continues to comprise of assets and liabilities in the aforementioned composition, amounting to € 6.1 billion and € 9.9 billion, respectively. It is expected that the transaction will unwind by end of 2021 with client transactions, IT hardware and software and employees transferred over the period. 315 Deutsche Bank Annual Report 2020 Notes to the consolidated balance sheet 26 – Deposits Disposals in 2019 Division Capital Release Unit Disposal On June 9, 2019 and as planned, Deutsche Bank completed the sale of its Private & Com- mercial Bank (“PCB”) business in Portugal to ABANCA Corporación Bancaria S.A. (“ABANCA”). The unit was previously classified as a disposal group held for sale in the first quarter 2018. Upon closing, the Group trans- ferred assets under management of approxi- mately € 3 billion, deposits of € 1 billion, and loans of € 3 billion as well as approximately 330 FTE to ABANCA. Financial impact1 None. Date of the disposal Second quarter 2019. 1 Impairment losses and reversals of impairment losses are included in Other income. 25 – Other assets and other liabilities in € m. Brokerage and securities related receivables Cash/margin receivables Receivables from prime brokerage Pending securities transactions past settlement date Receivables from unsettled regular way trades Total brokerage and securities related receivables Debt Securities held to collect Accrued interest receivable Assets held for sale Other Total other assets in € m. Brokerage and securities related payables Cash/margin payables Payables from prime brokerage Pending securities transactions past settlement date Payables from unsettled regular way trades Total brokerage and securities related payables Accrued interest payable Liabilities held for sale Lease liabilities Other Total other liabilities Dec 31, 2020 Dec 31, 2019 58,714 41 2,752 13,057 74,564 12,587 1,656 6,097 15,495 110,399 49,147 15 1,687 12,552 63,401 24,292 2,614 4,976 15,075 110,358 Dec 31, 2020 Dec 31, 2019 66,259 271 1,612 11,668 79,810 1,740 9,850 3,974 18,834 114,208 59,291 6 1,588 10,402 71,287 2,420 9,650 3,281 21,327 107,964 For further details on the assets and liabilities held for sale, please refer to Note 24 “Non-Current Assets and Disposal Groups Held for Sale”. 26 – Deposits in € m. Noninterest-bearing demand deposits Interest-bearing deposits Demand deposits Time deposits Savings deposits Total interest-bearing deposits Total deposits Dec 31, 2020 220,646 Dec 31, 2019 228,731 154,790 106,551 86,044 347,385 568,031 135,276 121,120 87,081 343,477 572,208 316 Deutsche Bank Annual Report 2020 Notes to the consolidated balance sheet 27 – Provisions 27 – Provisions Movements by Class of Provisions in € m. Balance as of January 1, 2019 Changes in the group of consolidated companies New provisions Amounts used Unused amounts reversed Effects from exchange rate fluctuations/Unwind of discount Transfers Balance as of December 31, 2019 Changes in the group of consolidated companies New provisions Amounts used Unused amounts reversed Effects from exchange rate fluctuations/Unwind of discount Transfers Balance as of December 31, 2020 Operational Risk 215 (0) 43 22 116 (0) (0) 119 (0) 20 11 39 0 (0) 89 Civil Litigation Regulatory Enforcement Re- structuring 684 0 533 591 128 8 39 544 0 107 182 106 (9) 0 355 499 0 74 34 3 9 (1) 543 (0) 183 165 27 (41) (1) 492 585 (0) 603 395 125 (10) 27 684 (0) 553 641 105 4 181 676 Other 433 (2) 593 546 87 2 (9) 384 (3) 505 401 84 (15) 8 396 Total1 2,416 (2) 1,846 1,590 459 8 56 2,276 (4) 1,368 1,400 361 (60) 189 2,007 1 For the remaining portion of provisions as disclosed on the consolidated balance sheet, please see Note 19 “Allowance for Credit Losses”, in which allowances for credit related off-balance sheet positions are disclosed. Classes of Provisions Operational Risk provisions arise out of operational risk and exclude civil litigation and regulatory enforcement provisions, which are presented as separate classes of provisions. Operational risk is the risk of loss resulting from inadequate or failed internal processes, people and systems, or from external events. The definition used for the purposes of determining opera- tional provisions differs from the risk management definition, as it excludes risk of loss resulting from civil litigation and regu- latory enforcement matters. For risk management purposes, operational risk includes legal risk, as payments to customers, counterparties and regulatory bodies in civil litigations or regulatory enforcement matters constitute loss events for operational shortcomings, but excludes business and reputational risk. Civil Litigation provisions arise out of current or potential claims or proceedings alleging non-compliance with contractual or other legal or regulatory responsibilities, which have resulted or may result in demands from customers, counterparties or other parties in civil litigations. Regulatory Enforcement provisions arise out of current or potential claims or proceedings alleging non-compliance with legal or regulatory responsibilities, which have resulted or may result in an assessment of fines or penalties by governmental regu- latory agencies, self-regulatory organizations or other enforcement authorities. Restructuring provisions arise out of restructuring activities. The Group aims to enhance its long-term competitiveness through major reductions in costs, duplication and complexity in the years ahead. For details see Note 10 “Restructuring”. Other provisions include several specific items arising from a variety of different circumstances, including the provision for the reimbursement of loan processing fees, deferred sales commissions, provisions for bank levies and mortgage repurchase demands. Provisions and Contingent Liabilities The Group recognizes a provision for potential loss only when there is a present obligation arising from a past event that is probable to result in an economic outflow that can be reliably estimated. Where a reliable estimate cannot be made for such an obligation, no provision is recognized and the obligation is deemed a contingent liability. Contingent liabilities also include possible obligations for which the possibility of future economic outflow is more than remote but less than probable. Where a provision has been taken for a particular claim, no contingent liability is recorded; for matters or sets of matters consisting of more than one claim, however, provisions may be recorded for some claims, and contingent liabilities (or neither a provision nor a contingent liability) may be recorded for others. The Group operates in a legal and regulatory environment that exposes it to significant litigation risks. As a result, the Group is involved in litigation, arbitration and regulatory proceedings and investigations in Germany and in a number of jurisdictions outside Germany, including the United States. In recent years, regulation and supervision in a number of areas have increased, and regulators, governmental bodies and others have sought to subject financial services providers to increasing oversight 317 Deutsche Bank Annual Report 2020 Notes to the consolidated balance sheet 27 – Provisions and scrutiny, which in turn has led to additional regulatory investigations and enforcement actions which are often followed by civil litigation. In determining for which of the claims the possibility of a loss is probable, or less than probable but more than remote, and then estimating the possible loss for those claims, the Group takes into consideration a number of factors, including but not limited to the nature of the claim and its underlying facts, the procedural posture and litigation history of each case, rulings by the courts or tribunals, the Group’s experience and the experience of others in similar cases (to the extent this is known to the Group), prior settlement discussions, settlements by others in similar cases (to the extent this is known to the Group), available indemnities and the opinions and views of legal counsel and other experts. The provisions the Group has recognized for civil litigation and regulatory enforcement matters as of December 31, 2020 and December 31, 2019 are set forth in the table above. For some matters for which the Group believes an outflow of funds is probable, no provisions were recognized as the Group could not reliably estimate the amount of the potential outflow. For the matters for which a reliable estimate can be made, the Group currently estimates that, as of December 31, 2020, the aggregate future loss of which the possibility is more than remote but less than probable is approximately € 2.1 billion for civil litigation matters (December 31, 2019: € 1.8 billion) and € 0.2 billion for regulatory enforcement matters (December 31, 2019: € 0.2 billion). These figures include matters where the Group’s potential liability is joint and several and where the Group expects any such liability to be paid by a third party. For other significant civil litigation and regulatory enforcement matters, the Group believes the possibility of an outflow of funds is more than remote but less than probable but the amount is not reliably estimable, and accordingly such matters are not included in the contingent liability estimates. For still other significant civil litigation and regulatory enforcement matters, the Group believes the possibility of an outflow of funds is remote and therefore has neither recognized a provision nor included them in the contingent liability estimates. This estimated possible loss, as well as any provisions taken, is based upon currently available information and is subject to significant judgment and a variety of assumptions, variables and known and unknown uncertainties. These uncertainties may include inaccuracies in or incompleteness of the information available to the Group, particularly at the preliminary stages of matters, and assumptions by the Group as to future rulings of courts or other tribunals or the likely actions or positions taken by regulators or adversaries may prove incorrect. Moreover, estimates of possible loss for these matters are often not ame- nable to the use of statistical or other quantitative analytical tools frequently used in making judgments and estimates, and are subject to even greater degrees of uncertainty than in many other areas where the Group must exercise judgment and make estimates. The estimated possible loss, as well as any provisions taken, can be and often are substantially less than the amount initially requested by regulators or adversaries or the maximum potential loss that could be incurred were the matters to result in a final adjudication adverse to the Group. Moreover, in several regions in which the Group operates, an adversary often is not required to set forth the amount it is seeking, and where it is, the amount may not be subject to the same require- ments that generally apply to pleading factual allegations or legal claims. The matters for which the Group determines that the possibility of a future loss is more than remote will change from time to time, as will the matters as to which a reliable estimate can be made and the estimated possible loss for such matters. Actual results may prove to be significantly higher or lower than the estimate of possible loss in those matters where such an estimate was made. In addition, loss may be incurred in matters with respect to which the Group believed the likelihood of loss was remote. In particular, the estimated aggregate possible loss does not represent the Group’s potential maximum loss exposure for those matters. The Group may settle litigation or regulatory proceedings or investigations prior to a final judgment or determination of liability. It may do so to avoid the cost, management efforts or negative business, regulatory or reputational consequences of contin- uing to contest liability, even when the Group believes it has valid defenses to liability. It may also do so when the potential consequences of failing to prevail would be disproportionate to the costs of settlement. Furthermore, the Group may, for similar reasons, reimburse counterparties for their losses even in situations where it does not believe that it is legally compelled to do so. 318 Deutsche Bank Annual Report 2020 Notes to the consolidated balance sheet 27 – Provisions Current Individual Proceedings Set forth below are descriptions of civil litigation and regulatory enforcement matters or groups of matters for which the Group has taken material provisions, or for which there are material contingent liabilities that are more than remote, or for which there is the possibility of material business or reputational risk; similar matters are grouped together and some matters consist of a number of proceedings or claims. The disclosed matters include matters for which the possibility of a loss is more than remote but for which the Group cannot reliably estimate the possible loss. Sets of matters are presented in English-language alpha- betical order based on the titles the Group has used for them. Cum-ex Investigations and Litigations. Deutsche Bank has received inquiries from law enforcement authorities, including re- quests for information and documents, in relation to cum-ex transactions of clients. “Cum-ex” refers to trading activities in German shares around dividend record dates (trade date before and settlement date after dividend record date) for the pur- pose of obtaining German tax credits or refunds in relation to withholding tax levied on dividend payments including, in partic- ular, transaction structures that have resulted in more than one market participant claiming such credit or refund with respect to the same dividend payment. Deutsche Bank is cooperating with the law enforcement authorities in these matters. The Public Prosecutor in Cologne (Staatsanwaltschaft Köln, “CPP”) has been conducting a criminal investigation since Au- gust 2017 concerning two former employees of Deutsche Bank in relation to cum-ex transactions of certain former clients of the Bank. Deutsche Bank is a potential secondary participant pursuant to Section 30 of the German Law on Administrative Offences in this proceeding. This proceeding could result in a disgorgement of profits and fines. Deutsche Bank is cooperating with the CPP. At the end of May and beginning of June 2019, the CPP initiated criminal investigations against further current and former employees of Deutsche Bank and five former Management Board members. In July 2020, in the course of inspect- ing the CPP’s investigation file, Deutsche Bank learned that the CPP had further extended its investigation in June 2019 to include further current and former DB personnel, including one former Management Board member and one current Manage- ment Board member. Very limited information on the individuals was recorded in the file. The investigation is still at an early stage and the scope of the investigation may be further broadened. Deutsche Bank acted as participant in and filed withholding tax refund claims through the electronic refund procedure (el- ektronisches Datenträgerverfahren) on behalf of, inter alia, two former custody clients in connection with their cum-ex trans- actions. In February 2018, Deutsche Bank received from the German Federal Tax Office (Bundeszentralamt für Steuern, “FTO”) a demand of approximately € 49 million for tax refunds paid to a former custody client. Deutsche Bank expects to receive a formal notice for the same amount. On December 20, 2019, Deutsche Bank received a liability notice from the FTO requesting payment of € 2.1 million by January 20, 2020 in connection with tax refund claims Deutsche Bank had submitted on behalf of another former custody client. On January 20, 2020, Deutsche Bank made the requested payment and filed an objection against the liability notice. Deutsche Bank filed the reasoning for the objection on June 19, 2020. On December 3, 2020, Deutsche Bank received another hearing letter from the FTO in relation to the € 2.1 million liability notice. By letter dated February 26, 2018, The Bank of New York Mellon SA/NV (“BNY”) informed Deutsche Bank of its intention to seek indemnification for potential cum-ex related tax liabilities incurred by BHF Asset Servicing GmbH (“BAS”) and/or Frank- furter Service Kapitalanlage-GmbH (“Service KAG”, now named BNY Mellon Service Kapitalanlage-Gesellschaft mbH). Deutsche Bank had acquired BAS and Service KAG as part of the acquisition of Sal. Oppenheim in 2010 and sold them to BNY in the same year. BNY estimates the potential tax liability to amount to up to € 120 million (excluding interest of 6 per cent p.a.). In November and December 2020 counsel to BNY informed Deutsche Bank that BNY and / or Service KAG (among others) have received notices from tax authorities in the estimated amount with respect to cum-ex related trades by certain investment funds in 2009 and 2010. BNY has filed objections against the notices. On February 6, 2019, the Regional Court (Landgericht) Frankfurt am Main served Deutsche Bank with a claim by M.M.War- burg & CO Gruppe GmbH and M.M.Warburg & CO (AG & Co.) KGaA (together “Warburg”) in connection with cum-ex trans- actions of Warburg with a custody client of Deutsche Bank during 2007 to 2011. Warburg claims from Deutsche Bank indem- nification against German taxes in relation to transactions conducted in the years 2007 to 2011. Further, Warburg claims compensation of unspecified damages relating to these transactions. Based on the tax assessment notices received for 2007 to 2011, Warburg is claiming a total of € 250 million (of which € 166 million is in relation to taxes and € 84 million is in relation to interest). On March 20, 2020, Warburg extended its claim against Deutsche Bank to indemnify Warburg in relation to the € 176 million (of which € 166 million is in relation to taxes and € 10 million is in relation to interest) confiscation order issued by the Regional Court Bonn in the criminal cum-ex trial on March 18, 2020 regarding the same transactions. On September 23, 2020 the Frankfurt Regional Court fully dismissed Warburg’s claim against Deutsche Bank on the grounds that Warburg as the tax debtor (Steuerschuldner) is primarily liable and cannot request payment from Deutsche Bank. The court further held that any claims are time-barred. On October 29, 2020, Warburg appealed the decision with the Higher Regional Court (Ober- landesgericht) Frankfurt am Main. Deutsche Bank has until April 12, 2021 to respond to Warburg’s appellate brief. On January 25, 2021, the Regional Court (Landgericht) Hamburg served Deutsche Bank with a claim by Warburg Invest Kapitalanlagegesellschaft mbH (“Warburg Invest”) in relation to transactions of two investment funds in 2009 and 2010, re- 319 Deutsche Bank Annual Report 2020 Notes to the consolidated balance sheet 27 – Provisions spectively. Warburg Invest was fund manager for both funds. Warburg Invest claims, from Deutsche Bank together with sev- eral other parties as joint and several debtors (Gesamtschuldner), indemnification against German taxes in relation to cum-ex transactions conducted by the two funds. Further, Warburg Invest claims compensation of unspecified damages relating to these transactions. In November 2020, Warburg Invest received a tax liability notice from tax authorities for one of the funds in the amount of € 61 million. Based on publicly available information Deutsche Bank estimates the tax amount for the second fund to be approximately € 49 million. Warburg Invest filed its claim against several parties including Deutsche Bank inter alia based on an allegation of intentional damage contrary to public policy (Section 826 German Civil Code) and the accusation that Deutsche Bank participated in a business model that was contrary to public policy (sittenwidriges Geschäftsmodell). The Group has not disclosed whether it has established a provision or contingent liability with respect to these matters because it has concluded that such disclosure can be expected to prejudice seriously their outcome. Danske Bank Estonia Investigations. Deutsche Bank has received requests for information from regulatory and law enforce- ment agencies concerning the Bank’s former correspondent banking relationship with Danske Bank, including the Bank’s historical processing of correspondent banking transactions on behalf of customers of Danske Bank’s Estonia branch prior to cessation of the correspondent banking relationship with that branch in 2015. Deutsche Bank is providing information to and otherwise cooperating with the investigating agencies. The Bank has also completed an internal investigation into these mat- ters, including of whether any violations of law, regulation or Bank policy occurred and the effectiveness of the related internal control environment. Additionally, on September 24 and 25, 2019, based on a search warrant issued by the Local Court (Amtsgericht) in Frankfurt, the Frankfurt public prosecutor’s office conducted investigations into Deutsche Bank. The investi- gations were in connection with suspicious activity reports relating to potential money laundering at Danske Bank. On October 13, 2020, the FPP closed its criminal investigation because the FPP did not find sufficient evidence to substantiate the money laundering suspicion. However, the Bank agreed to pay an administrative fine of € 13.5 million to the FPP for failing to submit SARs in Germany in a timely fashion, which Deutsche Bank paid in the fourth quarter of 2020. On July 7, 2020, the New York State Department of Financial Services (DFS) issued a Consent Order, finding that Deutsche Bank violated New York State banking laws in connection with its relationships with three former Deutsche Bank clients, Danske Bank’s Estonia branch, Jeffrey Epstein and FBME Bank, and imposing a U.S.$ 150 million civil penalty in connection with these three former relationships, which Deutsche Bank paid in the third quarter of 2020. The remaining investigations relating to Danske Bank’s Estonia branch are ongoing. On July 15, 2020, Deutsche Bank was named as a defendant in a securities class action filed in the U.S. District Court for the District of New Jersey, alleging that the Bank made material misrepresentations regarding the effectiveness of its anti-money laundering (AML) controls and related remediation. The complaint cites allegations regarding control deficiencies raised in the DFS Consent Order related to the Bank’s relationships with Danske Bank’s Estonia branch, Jeffrey Epstein and FBME Bank. On September 30, 2020, the plaintiff filed an amended complaint that included additional allegations regarding the effective- ness of the Bank’s AML controls. On December 28, 2020, the court appointed lead plaintiff and lead counsel. Lead plaintiff is anticipated to file a second amended complaint by March 1, 2021. The Bank’s motion to dismiss is due by April 15, 2021, with briefing on the motion to conclude by July 1, 2021. The Group has not established a provision or contingent liability with respect to the remaining Danske Bank Estonia investi- gations and civil action. FX Investigations and Litigations. Deutsche Bank has received requests for information from certain regulatory and law en- forcement agencies globally who investigated trading in, and various other aspects of, the foreign exchange market. Deutsche Bank cooperated with these investigations. Relatedly, Deutsche Bank has conducted its own internal global review of foreign exchange trading and other aspects of its foreign exchange business. On October 19, 2016, the U.S. Commodity Futures Trading Commission (CFTC), Division of Enforcement, issued a letter (“CFTC Letter”) notifying Deutsche Bank that the CFTC Division of Enforcement “is not taking any further action at this time and has closed the investigation of Deutsche Bank” regarding foreign exchange. As is customary, the CFTC Letter states that the CFTC Division of Enforcement “maintains the discretion to decide to reopen the investigation at any time in the future.” The CFTC Letter has no binding impact on other regulatory and law enforcement agency investigations regarding Deutsche Bank’s foreign exchange trading and practices. On December 7, 2016, it was announced that Deutsche Bank reached an agreement with CADE, the Brazilian antitrust en- forcement agency, to settle an investigation into conduct by a former Brazil-based Deutsche Bank trader. As part of that settlement, Deutsche Bank paid a fine of BRL 51 million and agreed to continue to comply with the CADE’s administrative process until it is concluded. This resolves CADE’s administrative process as it relates to Deutsche Bank, subject to Deutsche Bank’s continued compliance with the settlement terms. 320 Deutsche Bank Annual Report 2020 Notes to the consolidated balance sheet 27 – Provisions On February 13, 2017, the U.S. Department of Justice (DOJ), Criminal Division, Fraud Section, issued a letter (“DOJ Letter”) notifying Deutsche Bank that the DOJ has closed its criminal inquiry “concerning possible violations of federal criminal law in connection with the foreign exchange markets.” As is customary, the DOJ Letter states that the DOJ may reopen its inquiry if it obtains additional information or evidence regarding the inquiry. The DOJ Letter has no binding impact on other regulatory and law enforcement agency investigations regarding Deutsche Bank’s foreign exchange trading and practices. On April 20, 2017, it was announced that Deutsche Bank AG, DB USA Corporation and Deutsche Bank AG New York Branch reached an agreement with the Board of Governors of the Federal Reserve System to settle an investigation into Deutsche Bank’s foreign exchange trading and practices. Under the terms of the settlement, Deutsche Bank entered into a cease-and- desist order, and agreed to pay a civil monetary penalty of U.S.$ 137 million. In addition, the Federal Reserve ordered Deutsche Bank to “continue to implement additional improvements in its oversight, internal controls, compliance, risk man- agement and audit programs” for its foreign exchange business and other similar products, and to periodically report to the Federal Reserve on its progress. On June 20, 2018, it was announced that Deutsche Bank AG and Deutsche Bank AG New York Branch reached an agreement with the New York State Department of Financial Services (DFS) to settle an investigation into Deutsche Bank’s foreign ex- change trading and sales practices. Under the terms of the settlement, Deutsche Bank entered into a consent order, and agreed to pay a civil monetary penalty of U.S.$ 205 million. In addition, the DFS ordered Deutsche Bank to continue to imple- ment improvements in its oversight, internal controls, compliance, risk management and audit programs for its foreign ex- change business, and to periodically report to the DFS on its progress. Investigations conducted by certain other regulatory agencies are ongoing, and Deutsche Bank has cooperated with these investigations. On February 25, 2020, plaintiffs in the “Indirect Purchasers” action pending in the U.S. District Court for the Southern District of New York (Contant, et al. v. Bank of America Corp., et al.) informed the court of a global settlement with all eleven defend- ants remaining in that action, including Deutsche Bank, collectively for U.S.$ 10 million. Each individual defendant’s contribu- tion, including Deutsche Bank’s, remains confidential. The court approved the settlement and dismissed with prejudice all claims alleged against Deutsche Bank in that action on November 19, 2020. Filed on November 7, 2018, Allianz, et al. v. Bank of America Corporation, et al., was brought on an individual basis by a group of asset managers who opted out of the settle- ment in a consolidated action (In re Foreign Exchange Benchmark Rates Antitrust Litigation). Defendants’ motion to dismiss was granted and denied in part on May 28, 2020. Plaintiffs filed a third amended complaint on July 28, 2020. Discovery is ongoing. Deutsche Bank also has been named as a defendant in two Canadian class proceedings brought in the provinces of Ontario and Quebec. Filed on September 10, 2015, these class actions assert factual allegations similar to those made in the consol- idated action in the United States and seek damages pursuant to the Canadian Competition Act as well as other causes of action. Plaintiffs’ motion for class certification in the Ontario action was granted on April 14, 2020. Discovery is ongoing. Deutsche Bank has also been named as a defendant in an amended and consolidated class action filed in Israel. This action asserts factual allegations similar to those made in the consolidated action in the United States and seeks damages pursuant to Israeli antitrust law as well as other causes of action. This action is in preliminary stages. On November 10, 2020, Deutsche Bank was named in an action issued (but not served upon Deutsche Bank) in the UK High Court of Justice (Commercial Court) brought by The ECU Group PLC. The claim has not been particularized and is in prelim- inary stage. On November 11, 2020, Deutsche Bank was named in an action issued in the UK High Court of Justice (Commercial Court) brought by many of the same plaintiffs who brought Allianz, et al. v. Bank of America Corporation, et al. referred to above. The claim has not been particularized, but it is believed to be based upon factual allegations similar to those made in Allianz, et al. v. Bank of America Corporation, et al. This action is in preliminary stages. The Group has not disclosed whether it has established a provision or contingent liability with respect to these matters because it has concluded that such disclosure can be expected to prejudice seriously their outcome. Interbank and Dealer Offered Rates Matters. Regulatory and Law Enforcement Matters. Deutsche Bank has responded to requests for information from, and cooperated with, various regulatory and law enforcement agencies, in connection with industry-wide investigations concerning the setting of the London Interbank Offered Rate (LIBOR), Euro Interbank Offered Rate (EURIBOR), Tokyo Interbank Offered Rate (TIBOR) and other interbank and/or dealer offered rates. As previously reported, Deutsche Bank paid € 725 million to the European Commission pursuant to a settlement agreement dated December 4, 2013 in relation to anticompetitive conduct in the trading of interest rate derivatives. 321 Deutsche Bank Annual Report 2020 Notes to the consolidated balance sheet 27 – Provisions Also as previously reported, on April 23, 2015, Deutsche Bank entered into separate settlements with the DOJ, the CFTC, the UK Financial Conduct Authority (FCA), and the New York State Department of Financial Services (DFS) to resolve investiga- tions into misconduct concerning the setting of LIBOR, EURIBOR, and TIBOR. Under the terms of these agreements, Deutsche Bank paid penalties of U.S.$ 2.175 billion to the DOJ, CFTC and DFS and GBP 226.8 million to the FCA. As part of the resolution with the DOJ, DB Group Services (UK) Limited (an indirectly-held, wholly-owned subsidiary of Deutsche Bank) pled guilty to one count of wire fraud in the U.S. District Court for the District of Connecticut and Deutsche Bank entered into a Deferred Prosecution Agreement with a three year term pursuant to which it agreed (among other things) to the filing of an Information in the U.S. District Court for the District of Connecticut charging Deutsche Bank with one count of wire fraud and one count of price fixing in violation of the Sherman Act. On April 23, 2018, the Deferred Prosecution Agreement expired, and the U.S. District Court for the District of Connecticut subsequently dismissed the criminal Information against Deutsche Bank. Also, as previously reported, on March 20, 2017, Deutsche Bank paid CHF 5.4 million to the Swiss Competition Commission (WEKO) pursuant to a settlement agreement in relation to Yen LIBOR. On October 25, 2017, Deutsche Bank entered into a settlement with a working group of U.S. state attorneys general resolving their interbank offered rate investigation. Among other conditions, Deutsche Bank made a settlement payment of U.S.$ 220 million. Other investigations of Deutsche Bank concerning the setting of various interbank and/or dealer offered rates remain ongoing. The Group has not disclosed whether it has established a provision or contingent liability with respect to the remaining inves- tigations because it has concluded that such disclosure can be expected to prejudice seriously their outcome. Overview of Civil Litigations. Deutsche Bank is party to 37 U.S. civil actions concerning alleged manipulation relating to the setting of various interbank and/or dealer offered rates which are described in the following paragraphs, as well as actions pending in each of the UK, Israel, Argentina and Spain. Most of the civil actions, including putative class actions, are pending in the U.S. District Court for the Southern District of New York (SDNY), against Deutsche Bank and numerous other defend- ants. All but three of the U.S. civil actions were filed on behalf of parties who allege losses as a result of manipulation relating to the setting of U.S. dollar LIBOR. The three U.S. civil actions pending against Deutsche Bank that do not relate to U.S. dollar LIBOR were also filed in the SDNY, and include one consolidated action concerning Pound Sterling (GBP) LIBOR, one action concerning Swiss franc (CHF) LIBOR, and one action concerning two Singapore Dollar (SGD) benchmark rates, the Singapore Interbank Offered Rate (SIBOR) and the Swap Offer Rate (SOR). Claims for damages for all 37 of the U.S. civil actions discussed have been asserted under various legal theories, including violations of the U.S. Commodity Exchange Act, federal and state antitrust laws, the U.S. Racketeer Influenced and Corrupt Organizations Act, and other federal and state laws. The Group has not disclosed whether it has established a provision or contingent liability with respect to these matters because it has concluded that such disclosure can be expected to prejudice seriously their outcome. U.S. dollar LIBOR. With two exceptions, all of the U.S. civil actions concerning U.S. dollar LIBOR are being coordinated as part of a multidistrict litigation (the “U.S. dollar LIBOR MDL”) in the SDNY. In light of the large number of individual cases pending against Deutsche Bank and their similarity, the civil actions included in the U.S. dollar LIBOR MDL are now subsumed under the following general description of the litigation pertaining to all such actions, without disclosure of individual actions except when the circumstances or the resolution of an individual case is material to Deutsche Bank. Following a series of decisions in the U.S. dollar LIBOR MDL between March 2013 and March 2019 narrowing their claims, plaintiffs are currently asserting antitrust claims, claims under the U.S. Commodity Exchange Act and U.S. Securities Ex- change Act and state law fraud, contract, unjust enrichment and other tort claims. The court has also issued decisions dis- missing certain plaintiffs’ claims for lack of personal jurisdiction and on statute of limitations grounds. On December 20, 2016, the district court issued a ruling dismissing certain antitrust claims while allowing others to proceed. Multiple plaintiffs have filed appeals of the district court’s December 20, 2016 ruling to the U.S. Court of Appeals for the Second Circuit, and those appeals are proceeding in parallel with the ongoing proceedings in the district court. Briefing of the appeals is complete, and oral argument was heard on May 24, 2019. On July 13, 2017, Deutsche Bank executed a settlement agreement in the amount of U.S.$ 80 million with plaintiffs to resolve a putative class action pending as part of the U.S. dollar LIBOR MDL asserting claims based on alleged transactions in Eurodollar futures and options traded on the Chicago Mercantile Exchange (Metzler Investment GmbH v. Credit Suisse Group AG). The court granted the settlement final approval on September 17, 2020, and dismissed all claims against Deutsche Bank. Accordingly, the action is not included in the total number of actions above. The settlement amount, which Deutsche Bank has paid, is no longer reflected in Deutsche Bank’s litigation provisions. 322 Deutsche Bank Annual Report 2020 Notes to the consolidated balance sheet 27 – Provisions On July 29, 2020, Deutsche Bank executed a settlement agreement with plaintiffs in the amount of U.S.$ 425,000 to resolve a putative class action pending as part of the U.S. dollar LIBOR MDL asserting claims on behalf of lending institutions head- quartered in the United States that originated, purchased outright, or purchased a participation interest in loans tied to U.S. dollar LIBOR (The Berkshire Bank v. Bank of America). The court granted the settlement preliminary approval on October 30, 2020. On February 8, 2021, the plaintiffs moved the court for final approval of the settlement. The settlement amount, which Deutsche Bank has paid, is no longer reflected in Deutsche Bank’s litigation provisions. On March 24, 2020, Deutsche Bank and the plaintiff in a non-class action pending as part of the U.S. dollar LIBOR MDL (Salix Capital US Inc. v. Banc of America Securities LLC) stipulated to the dismissal of the plaintiff’s claims against Deutsche Bank. The court dismissed the plaintiff’s claims on March 25, 2020. On August 17, 2020, Deutsche Bank and the plaintiffs in two non-class actions pending as part of the U.S. dollar LIBOR MDL (Prudential Investment Portfolios v. Bank of America Corp.; Prudential Investment Portfolios v. Barclays Bank plc.) stipulated to the dismissal of the plaintiffs’ claims against Deutsche Bank. The court dismissed the plaintiffs’ claims on August 18, 2020. On November 9, 2020, Deutsche Bank and the plaintiff in a non-class action pending as part of the U.S. dollar LIBOR MDL (Federal National Mortgage Association v. Barclays Bank plc.) stipulated to the dismissal of the plaintiff’s claims against Deutsche Bank, and the court dismissed the claims. On February 3, 2021, Deutsche Bank and the plaintiffs in a non-class action pending as part of the U.S. dollar LIBOR MDL (Darby Financial Products v. Barclays Bank plc.) stipulated to the dismissal of the plaintiffs’ claims against Deutsche Bank, and the court dis- missed the claims. In January and March 2019, plaintiffs filed three putative class action complaints in the SDNY against several financial insti- tutions, alleging that the defendants, members of the panel of banks that provided U.S. dollar LIBOR submissions, the organ- ization that administers LIBOR, and their affiliates, conspired to suppress U.S. dollar LIBOR submissions from February 1, 2014 through the present. These actions were subsequently consolidated under In re ICE LIBOR Antitrust Litigation, and on July 1, 2019, the plaintiffs filed a consolidated amended complaint. On March 26, 2020, the court granted the defendants’ motion to dismiss the action, dismissing all claims against Deutsche Bank. Plaintiffs have appealed that decision to the U.S. Court of Appeals for the Second Circuit. Briefing of the appeal is complete. On December 28, 2020, DYJ Holdings, LLC filed a motion to intervene in the appeal as named plaintiff and proposed class representative, as one of the original named plaintiffs has withdrawn and dismissed its claims and the other two named plaintiffs have expressed a desire to withdraw from the case. On January 7, 2021, defendants filed a motion to dismiss the appeal for lack of subject matter jurisdiction. Briefing of both motions is complete. This action is not part of the U.S. dollar LIBOR MDL. In August 2020, plaintiffs filed a non-class action in the U.S. District Court for the Northern District of California against several financial institutions, alleging that U.S. dollar LIBOR has been suppressed through the present. On November 10, 2020, plaintiffs moved the court for a preliminary and permanent injunction; briefing of that motion is complete. On November 11, 2020, certain defendants moved to transfer the action to the SDNY; briefing of that motion is complete. This action is not part of the U.S. dollar LIBOR MDL. There is a further UK civil action regarding U.S. dollar LIBOR brought by the U.S. Federal Deposit Insurance Corporation, in which a claim for damages has been asserted pursuant to Article 101 of The Treaty on the Functioning of the European Union, Section 2 of Chapter 1 of the UK Competition Act 1998 and U.S. state laws. Deutsche Bank is defending this action. A further class action regarding LIBOR, EURIBOR and TIBOR was filed in Israel in 2018 seeking damages for losses incurred by Israeli individuals and entities. Deutsche Bank contested service and jurisdiction, and the class action claim against Deutsche Bank was dismissed by the Israeli court on November 30, 2020. A further class action regarding LIBOR has been filed in Argentina seeking damages for losses allegedly suffered by holders of Argentine bonds with interest rates based on LIBOR. Deutsche Bank is defending this action. SIBOR and SOR. A putative class action alleging manipulation of the Singapore Interbank Offered Rate (SIBOR) and Swap Offer Rate (SOR) remains pending. On July 26, 2019, the SDNY granted the defendants’ motion to dismiss the action, dis- missing all claims against Deutsche Bank, and denied plaintiff’s motion for leave to file a fourth amended complaint. Plaintiff appealed that decision to the U.S. Court of Appeals for the Second Circuit. Briefing of the appeal is complete, and oral argu- ment was heard on September 11, 2020. GBP LIBOR. A putative class action alleging manipulation of the Pound Sterling (GBP) LIBOR remains pending. On Decem- ber 21, 2018, the SDNY partially granted defendants’ motions to dismiss the action, dismissing all claims against Deutsche Bank. On August 16, 2019, the court denied plaintiffs’ motion for partial reconsideration of the court’s December 21, 2018 decision. Plaintiffs have filed a notice of appeal; the U.S. Court of Appeals for the Second Circuit has ordered that the appeal be held in abeyance pending that court’s decision in the appeal of the SIBOR and SOR class action. 323 Deutsche Bank Annual Report 2020 Notes to the consolidated balance sheet 27 – Provisions CHF LIBOR. A putative class action alleging manipulation of the Swiss Franc (CHF) LIBOR remains pending. On Septem- ber 16, 2019, the SDNY granted defendants’ motion to dismiss the action, dismissing all claims against Deutsche Bank. Plain- tiffs have filed a notice of appeal; the U.S. Court of Appeals for the Second Circuit has ordered that the appeal be held in abeyance pending that court’s decision in the appeal of the SIBOR and SOR class action. Spanish EURIBOR Claims. 53 claims in Spain have been filed against Deutsche Bank by claimants with mortgage loans held by banks and other financial institutions for damages resulting from alleged collusive behaviour by Deutsche Bank following the European Commission’s Decision. Of the 53 claims, court proceedings with respect to 22 claims have commenced. The total value of current claims is approximately € 790,000, with the potential for more claims. The first trial was due to take place on February 1, 2021, but it has been postponed with a new trial date to be advised. Investigations Into Referral Hiring Practices and Certain Business Relationships and Precious Metals. On August 22, 2019, Deutsche Bank reached a settlement with the U.S. Securities and Exchange Commission (SEC) to resolve its investigation into the Bank’s hiring practices related to candidates referred by clients, potential clients and government officials. The Bank agreed to pay U.S.$ 16 million as part of the settlement. The U.S. Department of Justice (DOJ) closed its investigation of the Bank regarding its hiring practices. Deutsche Bank has also reached settlements with the DOJ and the SEC, respectively, regarding their investigations of the Bank’s compliance with the U.S. Foreign Corrupt Practices Act (FCPA) and other laws with respect to the Bank’s engagement of finders and consultants. On January 8, 2021, Deutsche Bank entered into a deferred prosecution agreement (DPA) with the DOJ concerning its historical engagements of finders and consultants and, as part of its obligations in the DPA, agreed to pay approximately U.S.$ 80 million in connection with this conduct. The DPA with DOJ also involved a resolution involving spoofing in precious metals. As part of its obligations in the DPA relating to precious metals, Deutsche Bank agreed to pay approximately U.S.$ 8 million, of which approximately U.S.$ 6 million would be credited by virtue of Deutsche Bank’s 2018 resolution with the CFTC. On the same day, Deutsche Bank also reached a settlement with the SEC to resolve its investigation into conduct regarding the Bank’s compliance with the FCPA with respect to the Bank’s engagement of finders and consultants. The Bank agreed to pay approximately U.S.$ 43 million in this SEC settlement. Jeffrey Epstein Investigations. Deutsche Bank has received requests for information from regulatory and law enforcement agencies concerning the Bank’s former client relationship with Jeffrey Epstein (individually, and through related parties and entities). In December 2018, Deutsche Bank began the process to terminate its relationship with Epstein, which began in August 2013. Deutsche Bank has provided information to and otherwise cooperated with the investigating agencies. The Bank has also completed an internal investigation into the Epstein relationship. On July 7, 2020, the New York State Department of Financial Services (DFS) issued a Consent Order, finding that Deutsche Bank violated New York State banking laws in connection with its relationships with three former Deutsche Bank clients, Danske Bank’s Estonia branch, Jeffrey Epstein and FBME Bank, and imposing a U.S.$ 150 million civil penalty in connection with these three former relationships, which Deutsche Bank paid in the third quarter of 2020. As noted above, the Bank is also named as a defendant in a securities class action pending in the U.S. District Court for the District of New Jersey that includes allegations relating to the Bank’s relationship with Jeffrey Epstein and other entities. The Group has not established a provision or contingent liability with respect to the Jeffrey Epstein investigations and civil action. The remaining investigations relating to Jeffrey Epstein are ongoing. Mortgage-Related and Asset-Backed Securities Matters and Investigation. Regulatory and Governmental Matters. Deutsche Bank, along with certain affiliates (collectively referred in these paragraphs to as “Deutsche Bank”), received sub- poenas and requests for information from certain regulators and government entities, including members of the Residential Mortgage-Backed Securities Working Group of the U.S. Financial Fraud Enforcement Task Force, concerning its activities regarding the origination, purchase, securitization, sale, valuation and/or trading of mortgage loans, residential mortgage- backed securities (RMBS), commercial mortgage-backed securities (CMBS), collateralized debt obligations (CDOs), other asset-backed securities and credit derivatives. Deutsche Bank fully cooperated in response to those subpoenas and requests for information. On December 23, 2016, Deutsche Bank announced that it reached a settlement-in-principle with the DOJ to resolve potential claims related to its RMBS business conducted from 2005 to 2007. The settlement became final and was announced by the DOJ on January 17, 2017. Under the settlement, Deutsche Bank paid a civil monetary penalty of U.S.$ 3.1 billion and provided U.S.$ 4.1 billion in consumer relief. The DOJ appointed an independent monitor to oversee and validate the provision of consumer relief. In September 2016, Deutsche Bank received administrative subpoenas from the Maryland Attorney General seeking infor- mation concerning Deutsche Bank’s RMBS and CDO businesses from 2002 to 2009. On June 1, 2017, Deutsche Bank and the Maryland Attorney General reached a settlement to resolve the matter for U.S.$ 15 million in cash and U.S.$ 80 million in consumer relief (to be allocated from the overall U.S.$ 4.1 billion consumer relief obligation agreed to as part of Deutsche Bank’s settlement with the DOJ). 324 Deutsche Bank Annual Report 2020 Notes to the consolidated balance sheet 27 – Provisions On July 8, 2020, the DOJ-appointed monitor released his final report, validating that Deutsche Bank has fulfilled its U.S.$ 4.1 billion consumer relief obligations in its entirety, inclusive of the U.S.$ 80 million commitment to the State of Maryland. The Group has recorded provisions with respect to some of the outstanding regulatory investigations but not others. The Group has not disclosed the amount of these provisions because it has concluded that such disclosure can be expected to prejudice seriously the resolution of these matters. Issuer and Underwriter Civil Litigation. Deutsche Bank has been named as defendant in numerous civil litigations brought by private parties in connection with its various roles, including issuer or underwriter, in offerings of RMBS and other asset-backed securities. These cases, described below, allege that the offering documents contained material misrepresentations and omis- sions, including with regard to the underwriting standards pursuant to which the underlying mortgage loans were issued, or assert that various representations or warranties relating to the loans were breached at the time of origination. The Group has recorded provisions with respect to several of these civil cases, but has not recorded provisions with respect to all of these matters. The Group has not disclosed the amount of these provisions because it has concluded that such disclosure can be expected to prejudice seriously the resolution of these matters. Deutsche Bank is a defendant in a class action relating to its role as one of the underwriters of six RMBS offerings issued by Novastar Mortgage Corporation. No specific damages are alleged in the complaint. The lawsuit was brought by plaintiffs representing a class of investors who purchased certificates in those offerings. The parties reached a settlement to resolve the matter for a total of U.S.$ 165 million, a portion of which was paid by the Bank. On August 30, 2017, FHFA/Freddie Mac filed an objection to the settlement and shortly thereafter appealed the district court’s denial of their request to stay settlement approval proceedings, which appeal was resolved against FHFA/Freddie Mac. The court approved the settlement on March 7, 2019 over FHFA/Freddie Mac’s objections. FHFA filed its appeal on June 28, 2019, which is pending. Deutsche Bank is a defendant in an action related to RMBS offerings brought by the U.S. Federal Deposit Insurance Corpo- ration (FDIC) as receiver for Citizens National Bank and Strategic Capital Bank (alleging an unspecified amount in damages against all defendants). In this action, the appellate court reinstated claims previously dismissed on statute of limitations grounds and petitions for rehearing and certiorari to the U.S. Supreme Court were denied. On July 31, 2017, the FDIC filed a second amended complaint, which defendants moved to dismiss on September 14, 2017. On October 18, 2019, defendants’ motion to dismiss was denied. Discovery is ongoing. In June 2014, HSBC, as trustee, brought an action in New York state court against Deutsche Bank to revive a prior action, alleging that Deutsche Bank failed to repurchase mortgage loans in the ACE Securities Corp. 2006-SL2 RMBS offering. The revival action was stayed during the pendency of an appeal of the dismissal of a separate action wherein HSBC, as trustee, brought an action against Deutsche Bank alleging breaches of representations and warranties made by Deutsche Bank con- cerning the mortgage loans in the same offering. On March 29, 2016, the court dismissed the revival action, and on April 29, 2016, plaintiff filed a notice of appeal. On July 8, 2019, plaintiff filed its opening appellate brief. On November 19, 2019, the appellate court affirmed the dismissal. On December 19, 2019, plaintiff filed a motion to appeal to the New York Court of Appeals in the appeals court, which was denied on February 13, 2020. On March 16, 2020, plaintiff petitioned the New York Court of Appeals for leave to appeal, which was granted on September 1, 2020. Plaintiff’s opening brief was filed on November 2, 2020. Deutsche Bank is a defendant in cases concerning two RMBS trusts that were brought initially by RMBS investors and sub- sequently by HSBC, as trustee, in New York state court. The cases allege breaches of loan-level representations and warran- ties in the ACE Securities Corp. 2006-FM1 and ACE Securities Corp. 2007-ASAP1 RMBS offerings, respectively. Both cases were dismissed on statute of limitations grounds by the trial court on March 28, 2018. Plaintiff appealed the dismissals. On April 25, 2019, the First Department affirmed the dismissals on claims for breach of representations and warranties and for breach of the implied covenant of good faith and fair dealing, but reversed the denial of the motions for leave to file amended complaints alleging failure to notify the trustee of alleged representations and warranty breaches. HSBC filed amended com- plaints on April 30, 2019, and Deutsche Bank filed its answers on June 3, 2019. Discovery is ongoing. On October 25, 2019, plaintiffs filed two complaints seeking to revive, under Section 205(a) of the New York Civil Practice Law and Rules, the breach of representations and warranties claims as to which dismissal was affirmed in the case concerning ACE 2006-FM1. On December 16, 2019, Deutsche Bank moved to dismiss these actions. In the actions against Deutsche Bank solely as an underwriter of other issuers’ RMBS offerings, Deutsche Bank has contrac- tual rights to indemnification from the issuers, but those indemnity rights may in whole or in part prove effectively unenforceable where the issuers are now or may in the future be in bankruptcy or otherwise defunct. Trustee Civil Litigation. Deutsche Bank is a defendant in four separate civil lawsuits brought by investors concerning its role as trustee of certain RMBS trusts. The actions generally allege claims for breach of contract, breach of fiduciary duty, breach of the duty to avoid conflicts of interest, negligence and/or violations of the U.S. Trust Indenture Act of 1939, based on the trustees’ alleged failure to perform adequately certain obligations and/or duties as trustee for the trusts. 325 Deutsche Bank Annual Report 2020 Notes to the consolidated balance sheet 27 – Provisions The four lawsuits include actions by (a) the National Credit Union Administration Board (“NCUA”), as an investor in 37 trusts, which allegedly suffered total realized collateral losses of U.S.$ 8.5 billion; (b) certain CDOs (collectively, “Phoenix Light”) that hold RMBS certificates issued by 43 RMBS trusts, and seeking “hundreds of millions of dollars in damages”; (c) Commerzbank AG, as an investor in 50 RMBS trusts, seeking recovery for alleged “hundreds of millions of dollars in losses”; and (d) IKB International, S.A. in Liquidation and IKB Deutsche Industriebank AG (collectively, “IKB”), as an investor in 30 RMBS trusts, seeking more than U.S.$ 268 million of damages. In the NCUA case, NCUA notified the court on August 31, 2018 that it was dismissing claims relating to 60 out of the 97 trusts originally at issue; on October 15, 2019, NCUA’s motion for leave to amend its complaint was granted, and Deutsche Bank’s motion to dismiss the amended complaint was granted in part and denied in part, dismissing NCUA’s tort claims but preserving its breach-of-contract claims. In the Phoenix Light case and Commerzbank case, on December 7, 2018 the parties filed motions for summary judgment, which have been fully briefed as of March 9, 2019. On January 27, 2021, the court in the IKB case granted in part and denied in part Deutsche Bank’s motion to dismiss, dismissing certain of IKB’s claims but allowing most of its breach of contract and tort claims to go forward. Discovery is ongoing. The Group has established contingent liabilities with respect to certain of these matters but the Group has not disclosed the amounts because it has concluded that such disclosure can be expected to prejudice seriously the outcome of these matters. Postbank Voluntary Public Takeover Offer. On September 12, 2010, Deutsche Bank announced the decision to make a voluntary takeover offer for the acquisition of all shares in Deutsche Postbank AG (Postbank). On October 7, 2010, the Bank published its official takeover offer and offered Postbank shareholders a consideration of € 25 for each Postbank share. This offer was accepted for a total of approximately 48.2 million Postbank shares. In November 2010, a former shareholder of Postbank, Effecten-Spiegel AG, which had accepted the takeover offer, brought a claim against Deutsche Bank alleging that the offer price was too low and was not determined in accordance with the applicable German laws. The plaintiff alleges that Deutsche Bank had been obliged to make a mandatory takeover offer for all shares in Postbank, at the latest, in 2009 as the voting rights of Deutsche Post AG in Postbank had to be attributed to Deutsche Bank pursuant to Section 30 of the German Takeover Act. Based thereon, the plaintiff alleges that the consideration offered by Deutsche Bank for the shares in Postbank in the 2010 voluntary takeover offer needed to be raised to € 57.25 per share. The Regional Court Cologne (Landgericht) dismissed the claim in 2011 and the Cologne appellate court dismissed the appeal in 2012. The Federal Court set this judgment aside and referred the case back to the Higher Regional Court Cologne to take evidence on certain allegations of the plaintiff. Starting in 2014, additional former shareholders of Postbank, who accepted the 2010 tender offer, brought similar claims as Effecten-Spiegel AG against Deutsche Bank which are pending with the Regional Court Cologne and the Higher Regional Court of Cologne, respectively. On October 20, 2017, the Regional Court Cologne handed down a decision granting the claims in a total of 14 cases which were combined in one proceeding. The Regional Court Cologne took the view that Deutsche Bank was obliged to make a mandatory takeover offer already in 2008 so that the appropriate consideration to be offered in the takeover offer should have been € 57.25 per Postbank share (instead of € 25). The additional consideration per share owed to shareholders which have accepted the takeover offer would thus amount to € 32.25. Deutsche Bank appealed this decision and the appeal was assigned to the 13th Senate of the Higher Regional Court of Cologne, which also heard the appeal of Effecten-Spiegel AG. In 2019 and 2020 the Higher Regional Court Cologne called a number of witnesses in both cases. The individuals heard included current and former board members of Deutsche Bank, Deutsche Post AG and Postbank as well as other persons involved in the Postbank transaction. In addition, the Higher Regional Court Cologne issued orders for the production of relevant transaction documents entered into between Deutsche Bank and Deutsche Post AG in 2008 and 2009. Deutsche Bank had therefore deposited the originals of these documents with the court in 2019. On December 16, 2020, the Higher Regional Court Cologne handed down a decision and fully dismissed the claims of Ef- fecten-Spiegel AG. Further, in a second decision handed down on December 16, 2020, the Higher Regional Court Cologne allowed the appeal of Deutsche Bank against the decision of the Regional Court Cologne dated October, 20, 2017 and dis- missed all related claims of the relevant plaintiffs. The Higher Regional Court Cologne has granted leave to appeal to the German Federal Court (Bundesgerichtshof) as regards both decisions and all relevant plaintiffs have lodged their respective appeals with the Federal Court end of January and beginning of February 2021, respectively. Deutsche Bank has been served with a large number of additional lawsuits filed against Deutsche Bank shortly before the end of 2017, almost all of which are now pending with the Regional Court Cologne. Some of the new plaintiffs allege that the consideration offered by Deutsche Bank AG for the shares in Postbank in the 2010 voluntary takeover should be raised to € 64.25 per share. The claims for payment against Deutsche Bank in relation to these matters total almost € 700 million (excluding interest). 326 Deutsche Bank Annual Report 2020 Notes to the consolidated balance sheet 27 – Provisions The Group has established a contingent liability with respect to these matters but the Group has not disclosed the amount of this contingent liability because it has concluded that such disclosure can be expected to prejudice seriously the outcome of these matters. Further Proceedings Relating to the Postbank Takeover. In September 2015, former shareholders of Postbank filed in the Regional Court Cologne shareholder actions against Postbank to set aside the squeeze-out resolution taken in the sharehold- ers meeting of Postbank in August 2015 (actions for voidance). Among other things, the plaintiffs alleged that Deutsche Bank was subject to a suspension of voting rights with respect to its shares in Postbank based on the allegation that Deutsche Bank failed to make a mandatory takeover offer. The squeeze out is final and the proceeding itself has no reversal effect, but may result in damage payments. The claimants refer to legal arguments similar to those asserted in the Effecten-Spiegel proceed- ing described above. In a decision on October 20, 2017, the Regional Court Cologne declared the squeeze-out resolution to be void. The court, however, did not rely on a suspension of voting rights due to an alleged failure of Deutsche Bank to make a mandatory takeover offer, but argued that Postbank violated information rights of Postbank shareholders in Postbank's shareholders meeting in August 2015. Postbank has appealed this decision. On May 15, 2020 DB Privat- und Firmenkunden- bank AG (legal successor of Postbank due to a merger in 2018) was merged into Deutsche Bank AG. On July 3, 2020 Deutsche Bank AG withdrew the appeal as regards the actions for voidance because efforts and costs to pursue this appeal became disproportionate to the minor remaining economic importance of the case considering that the 2015 squeeze-out cannot be reversed. As a consequence, the first instance judgement which found that Postbank violated the information rights of its shareholders in the shareholders’ meeting has now become final. The legal question of whether Deutsche Bank had been obliged to make a mandatory takeover offer for all Postbank shares prior to its 2010 voluntary takeover may also impact two pending appraisal proceedings (Spruchverfahren). These proceedings were initiated by former Postbank shareholders with the aim to increase the cash compensation offered in connection with the squeeze-out of Postbank shareholders in 2015 and the cash compensation offered and annual compensation paid in connec- tion with the execution of a domination and profit and loss transfer agreement (Beherrschungs- und Gewinnabführungsvertrag) between DB Finanz-Holding AG (now DB Beteiligungs-Holding GmbH) and Postbank in 2012. The applicants in the appraisal proceedings claim that a potential obligation of Deutsche Bank to make a mandatory takeover offer for Postbank at an offer price of € 57.25 should be decisive when determining the adequate cash compensation in the appraisal proceedings. The Regional Court Cologne had originally followed this legal view of the applicants in two resolutions. In a decision dated June 2019, the Regional Court Cologne expressly gave up this legal view in the appraisal proceedings in connection with execution of a domination and profit and loss transfer agreement. According to this decision, the question whether Deutsche Bank was obliged to make a mandatory offer for all Postbank shares prior to its voluntary takeover offer in 2010 shall not be relevant for determining the appropriate cash compensation. It is likely that the Regional Court Cologne will take the same legal position in the appraisal proceedings in connection with the squeeze-out. On October 1, 2020, the Regional Court Cologne handed down a decision in the appraisal proceeding concerning the domination and profit and loss transfer agreement (dated December 5, 2012) according to which the annual compensation pursuant to Section 304 of the German Stock Corporation Act (jährliche Ausgleichszahlung) shall be increased by € 0.12 to € 1.78 per Postbank share and the settlement amount pursuant to Section 305 of the German Stock Corporation Act (Abfindungsbetrag) shall be increased by € 4.56 to € 29.74 per Postbank share. The increase of the settlement amount is of relevance for approximately 492.000 former Postbank shares whereas the increase of the annual compensation is of relevance for approximately 7 million former Postbank shares. Deutsche Bank as well as the applicants have lodged an appeal against this decision. The Group has not disclosed whether it has established a provision or contingent liability with respect to this matter because it has concluded that such disclosure can be expected to prejudice seriously its outcome. Russia/UK Equities Trading Investigation. Deutsche Bank has investigated the circumstances around equity trades entered into by certain clients with Deutsche Bank in Moscow and London that offset one another. The total volume of transactions reviewed is significant. Deutsche Bank's internal investigation of potential violations of law, regulation and policy and into the related internal control environment has concluded, and Deutsche Bank has assessed the findings identified during the inves- tigation; to date it has identified certain violations of Deutsche Bank’s policies and deficiencies in Deutsche Bank's control environment. Deutsche Bank has advised regulators and law enforcement authorities in several jurisdictions (including Ger- many, Russia, the UK and the United States) of this investigation. Deutsche Bank has taken disciplinary measures with regards to certain individuals in this matter. On January 30 and 31, 2017, the DFS and the FCA announced settlements with the Bank related to their investigations into this matter. The settlements conclude the DFS and the FCA’s investigations into the Bank’s AML control function in its invest- ment banking division, including in relation to the equity trading described above. Under the terms of the settlement agreement the DFS issued a Consent Order pursuant to which Deutsche Bank agreed to pay a civil monetary penalty of U.S.$ 425 million and to engage an independent monitor for a term of up to two years. Under the terms of the settlement agreement with the FCA, Deutsche Bank agreed to pay a civil monetary penalty of approximately GBP 163 million. On May 30, 2017, the Federal Reserve announced its settlement with the Bank resolving this matter as well as additional AML issues identified by the Federal Reserve. Deutsche Bank paid a penalty of U.S.$ 41 million. Deutsche Bank also agreed to retain independent third parties to 327 Deutsche Bank Annual Report 2020 Notes to the consolidated balance sheet 27 – Provisions assess its Bank Secrecy Act/AML program and review certain foreign correspondent banking activity of its subsidiary Deutsche Bank Trust Company Americas. The Bank is also required to submit written remediation plans and programs. Deutsche Bank continues to cooperate with regulators and law enforcement authorities, including the DOJ which has its own ongoing investigation into these securities trades. The Group has recorded a provision with respect to the remaining investi- gation. The Group has not disclosed the amount of this provision because it has concluded that such disclosure can be expected to prejudice seriously the outcome of this matter. Sovereign, Supranational and Agency Bonds (SSA) Investigations and Litigations. Deutsche Bank has received inquiries from certain regulatory and law enforcement authorities, including requests for information and documents, pertaining to SSA bond trading. Deutsche Bank is cooperating with these investigations. On December 20, 2018, the European Commission sent a Statement of Objections to Deutsche Bank regarding a potential breach of EU antitrust rules in relation to secondary market trading of SSA bonds denominated in U.S. dollars. The sending of a Statement of Objections is a step in the European Commission’s investigation and does not prejudge the outcome of the investigation. Deutsche Bank has proactively cooperated with the European Commission in this matter and as a result has been granted immunity. In accordance with the European Commission’s guidelines, Deutsche Bank does not expect a financial penalty. Deutsche Bank is a defendant in several putative class action complaints filed in the U.S. District Court for the Southern District of New York by alleged direct and indirect market participants claiming violations of antitrust law and common law related to alleged manipulation of the secondary trading market for SSA bonds. Deutsche Bank has reached an agreement to settle the actions by direct market participants for the amount of U.S.$ 48.5 million and has recorded a provision in the same amount. The settlement is subject to court approval. The action filed on behalf of alleged indirect market participants was voluntarily dismissed by the plaintiffs. Deutsche Bank is also a defendant in putative class actions filed on November 7, 2017 and December 5, 2017 in the Ontario Superior Court of Justice and Federal Court of Canada, respectively, claiming violations of antitrust law and the common law relating to alleged manipulation of secondary trading of SSA bonds. The complaints rely on allegations similar to those in the U.S. class actions involving SSA bond trading, and seek compensatory and punitive damages. The cases are in their early stages. Deutsche Bank was named as a defendant in a consolidated putative class action filed in the U.S. District Court for the Southern District of New York alleging violations of U.S. antitrust law and a claim for unjust enrichment relating to Mexican government bond trading. In October 2019, the court granted defendants’ motion to dismiss plaintiffs’ consolidated amended complaint without prejudice. In December 2019, plaintiffs filed a Second Amended Complaint, which the court dismissed with- out prejudice on November 30, 2020. On January 22, 2021, Deutsche Bank was notified that the Mexican competition author- ity, COFECE, reached a resolution that imposes fines against DB Mexico and two of its former traders, as well as six other financial institutions and nine other traders, for engaging in alleged monopolistic practices in the Mexican government bond secondary market, which may be appealed. The fine against DB Mexico was approximately U.S.$ 427,000. Deutsche Bank was also named as a defendant in several putative class action complaints filed in the U.S. District Court for the Southern District of New York alleging violations of antitrust law and common law related to alleged manipulation of the secondary trading market for U.S. Agency bonds; on September 3, 2019, the court denied a motion to dismiss the complaint. Deutsche Bank has reached an agreement to settle the class actions for the amount of U.S.$ 15 million, which amount was already fully reflected in existing litigation reserves and no additional provision was taken for this settlement amount. The court granted preliminary approval over the settlement on October 29, 2019, supported by an opinion issued November 8, 2019. The court held a final fairness hearing on June 9, 2020. On June 18, 2020, the court entered final judgement approving the class action settlement with Deutsche Bank and separately as to the class action settlements with the other defendants which will result in a total of U.S.$ 386.5 million paid to the settlement class. A separate action was filed in the U.S. District Court for the Middle District of Louisiana on September 23, 2019, which was dismissed with prejudice as to Deutsche Bank by stipula- tion of the parties on October 30, 2019. Other than as noted above, the Group has not disclosed whether it has established provisions or contingent liabilities with respect to the matters referred to above because it has concluded that such disclosure can be expected to prejudice seriously their outcome. US Treasury Securities Investigations. Deutsche Bank has received inquiries from certain regulatory and law enforcement authorities, including requests for information and documents, pertaining to U.S. Treasuries auctions, trading, and related market activity. Deutsche Bank is cooperating with these investigations. Deutsche Bank‘s subsidiary Deutsche Bank Securities Inc. (DBSI) was a defendant in several putative class actions alleging violations of U.S. antitrust law, the U.S. Commodity Exchange Act and common law related to the alleged manipulation of the 328 Deutsche Bank Annual Report 2020 Notes to the consolidated balance sheet 28 – Credit related commitments and contingent liabilities U.S. Treasury securities market. These cases have been consolidated in the Southern District of New York. On November 16, 2017, plaintiffs filed a consolidated amended complaint, which did not name DBSI as a defendant. On December 11, 2017, the court dismissed DBSI from the class action without prejudice. On June 18, 2020, the CFTC entered an order pursuant to settlement with DBSI for alleged spoofing by two Tokyo-based traders between January and December 2013. Without admitting or denying the findings or conclusions therein, Deutsche Bank consented to the entry of the order, including a civil monetary fine of U.S.$ 1.25 million. US Treasury Spoofing Litigation. Following the Bank’s settlement with the CFTC five separate putative class actions were filed in the Northern District of Illinois against Deutsche Bank AG and DBSI. The cases allege that Deutsche Bank and other unnamed entities participated in a scheme from January to December 2013 to spoof the market for Treasuries futures and options contracts and Eurodollars futures and options contracts. Plaintiffs filed a consolidated complaint on November 13, 2020. Deutsche Bank AG and DBSI filed a motion to dismiss on January 15, 2021; briefing on the motion to dismiss is set to conclude by April 16, 2021. The Group has not disclosed whether it has established a provision or contingent liability with respect to these matters because it has concluded that such disclosure can be expected to prejudice seriously their outcome. 28 – Credit related commitments and contingent liabilities Irrevocable lending commitments and lending related contingent liabilities In the normal course of business the Group regularly enters into irrevocable lending commitments, including fronting commit- ments as well as contingent liabilities consisting of financial and performance guarantees, standby letters of credit and indem- nity agreements on behalf of its customers. Under these contracts the Group is required to perform under an obligation agree- ment or to make payments to the beneficiary based on third party’s failure to meet its obligations. For these instruments it is not known to the Group in detail if, when and to what extent claims will be made. In the event that the Group has to pay out cash in respect of its fronting commitments, the Group would immediately seek reimbursement from the other syndicate lend- ers. The Group considers all the above instruments in monitoring the credit exposure and may require collateral to mitigate inherent credit risk. If the credit risk monitoring provides sufficient perception about a loss from an expected claim, a provision is established and recorded on the balance sheet. The following table shows the Group’s revocable lending commitments, irrevocable lending commitments and lending related contingent liabilities without considering collateral or provisions. It shows the maximum potential utilization of the Group in case all these liabilities entered into must be fulfilled. The table therefore does not show the expected future cash flows from these liabilities as many of them will expire without being drawn and arising claims will be honoured by the customers or can be recovered from proceeds of arranged collateral. At the end of the first quarter 2020, we observed that many clients drew down their lending commitments due to liquidity concerns as impact of the COVID-19 pandemic, which led to a significant decrease of up to € 12.8 billion in irrevocable lending commitments. Throughout the year the situation has stabilized and irrevocable lending commitments returned to similar levels in December 2020 compared to December 2019. Irrevocable lending commitments and lending related contingent liabilities in € m. Irrevocable lending commitments Revocable lending commitments Contingent liabilities Total Dec 31, 2020 165,643 50,233 47,978 263,854 Dec 31, 2019 167,788 43,652 49,232 260,672 329 Deutsche Bank Annual Report 2020 Notes to the consolidated balance sheet 29 – Other short-term borrowings Other commitments and other contingent liabilities The following table shows the Group’s other irrevocable commitments and other contingent liabilities without considering collateral or provisions. It shows the maximum potential utilization of the Group in case all these liabilities entered into must be fulfilled. The table therefore does not show the expected future cash flows from these liabilities as many of them will expire without being drawn and arising claims will be honoured by the customers or can be recovered from proceeds of arranged collateral. Other commitments and other contingent liabilities in € m. Other commitments Other contingent liabilities Total Government Assistance Dec 31, 2020 144 73 217 Dec 31, 2019 143 78 220 In the course of its business, the Group regularly applies for and receives government support by means of Export Credit Agency (“ECA”) guarantees covering transfer and default risks for the financing of exports and investments into Emerging Markets and to a lesser extent, developed markets for Structured Trade & Export Finance and short- and medium-term Trade Finance business. Almost all export-oriented states have established such ECAs to support their domestic exporters. The ECAs act in the name and on behalf of the government of their respective country and are either constituted directly as governmental departments or organized as private companies vested with the official mandate of the government to act on its behalf. Terms and conditions of such ECA guarantees are broadly similar due to the fact that most of the ECAs act within the scope of the Organization for Economic Cooperation and Development (“OECD”) consensus rules. The OECD consensus rules, an intergovernmental agreement of the OECD member states, define benchmarks intended to ensure that a fair com- petition between different exporting nations will take place. In some countries dedicated funding programs with governmental support are offered for ECA-covered financings. The Group makes use of such programs to assist its clients in the financing of exported goods and services. In certain financings, the Group also receives government guarantees from national and international governmental institutions as collateral to support financings in the interest of the respective governments. The majority of such ECA guarantees received by the Group were issued either by the Euler-Hermes Kreditversicherungs-AG acting on behalf of the Federal Republic of Germany, by the Ko- rean Export Credit Agencies (Korea Trade Insurance Corporation and The Export-Import Bank of Korea) acting on behalf of the Republic of Korea or by Chinese Export Credit Agency (China Export & Insurance Corporation (Sinosure)) acting on behalf of the People’s Republic of China. In light of the COVID-19 pandemic, the government created additional support via state backed loans. Further information can be found in section “Legislative and non-legislative moratoria and public guarantee schemes in light of COVID-19 pandemic”. Irrevocable payment commitments with regard to levies Irrevocable payment commitments related to bank levy according to Bank Recovery and Resolution Directive (BRRD), the Single Resolution Fund (SRF) and the German deposit protection amounted to € 915.6 million as of December 31, 2020, and to € 767.3 million as of December 31, 2019. 29 – Other short-term borrowings in € m. Other short-term borrowings: Commercial paper Other Total other short-term borrowings Dec 31, 2020 Dec 31, 2019 1,748 1,804 3,553 1,585 3,633 5,218 330 Deutsche Bank Annual Report 2020 Notes to the consolidated balance sheet 31 – Maturity analysis of the earliest contractual undiscounted cash flows of financial liabilities 30 – Long-term debt and trust preferred securities Long-Term Debt by Earliest Contractual Maturity in € m. Senior debt: Bonds and notes: Fixed rate Floating rate Other Subordinated debt: Bonds and notes: Fixed rate Floating rate Other Total long-term debt Due in 2021 Due in 2022 Due in 2023 Due in 2024 Due in 2025 Due after 2025 Total Dec 31, 2020 Total Dec 31, 2019 18,447 7,017 34,120 9,575 2,887 1,274 11,234 1,584 5,739 8,518 3,526 911 6,435 3,903 1,507 13,288 6,978 4,552 67,496 25,895 48,103 77,243 23,944 28,019 18 0 24 59,626 0 0 15 13,751 30 1,100 103 19,789 14 123 82 13,174 2,601 80 0 14,526 3,386 0 93 28,297 6,049 1,303 316 149,163 5,517 1,417 333 136,473 The Group did not have any defaults of principal, interest or other breaches with respect to its liabilities in 2020 and 2019. Trust Preferred Securities1 in € m. Fixed rate Floating rate Total trust preferred securities 1 Perpetual instruments, redeemable at specific future dates at the Group’s option. Dec 31, 2020 269 1,052 1,321 Dec 31, 2019 976 1,037 2,013 31 – Maturity analysis of the earliest contractual undiscounted cash flows of financial liabilities Dec 31, 2020 Due within 3 months Due between 3 and 12 months Due between 1 and 5 years Due after 5 years 0 10,230 0 0 0 0 On demand 327,775 16,204 0 23,692 0 0 64,784 0 0 13,815 0 220,646 154,863 44,289 0 105,566 0 in € m. Noninterest bearing deposits Interest bearing deposits Trading liabilities¹ Negative market values from derivative financial instruments¹ Financial liabilities designated at fair value through profit or loss Investment contract liabilities² Negative market values from derivative financial instruments qualifying for hedge accounting³ Central bank funds purchased Securities sold under repurchase agreements Securities loaned Other short-term borrowings Long-term debt Trust preferred securities Lease liabilities Other financial liabilities Off-balance sheet loan commitments Financial guarantees Total⁴ 1 Trading liabilities and derivatives not qualifying for hedge accounting balances are recorded at fair value. The Group believes that this best represents the cash flow that would have to be paid if these positions had to be closed out. Trading liabilities and derivatives not qualifying for hedge accounting balances are shown within “on demand” which Group’s management believes most accurately reflects the short-term nature of trading activities. The contractual maturity of the instruments may however extend over signifi- cantly longer periods. 0 0 1,815 1,697 1,385 1 0 49 86,618 164,843 20,337 1,048,009 354 0 17 1 919 14,430 0 128 2,565 0 0 140,182 66 0 0 0 1,530 48,164 1,345 522 225 0 0 120,611 319 0 504 0 0 68,130 0 1,804 501 0 0 87,200 541 0 1 0 0 31,637 0 2,064 16 0 0 46,584 2,127 0 3,451 526 2,095 0 0 2 These are investment contracts where the policy terms and conditions result in their redemption value equaling fair value. 3 Derivatives designated for hedge accounting are recorded at fair value and are shown in the time bucket at which the hedged relationship is expected to terminate. 4 The balances in the table do not agree to the numbers in the Group’s balance sheet as the cash flows included in the table are undiscounted. This analysis represents the worst case scenario for the Group if the Group was required to repay all liabilities earlier than expected. The Group believes that the likelihood of such an event occurring is remote. 331 Deutsche Bank Annual Report 2020 Notes to the consolidated balance sheet 31 – Maturity analysis of the earliest contractual undiscounted cash flows of financial liabilities Dec 31, 2019 Due within 3 months Due between 3 and 12 months Due between 1 and 5 years Due after 5 years 0 10,468 0 0 0 0 On demand 316,506 29,680 0 11,705 0 0 68,955 0 0 16,258 0 0 113,449 0 228,731 135,330 37,065 in € m. Noninterest bearing deposits Interest bearing deposits Trading liabilities¹ Negative market values from derivative financial instruments¹ Financial liabilities designated at fair value through profit or loss Investment contract liabilities² Negative market values from derivative financial instruments qualifying for hedge accounting³ Central bank funds purchased Securities sold under repurchase agreements Securities loaned Other short-term borrowings Long-term debt Trust preferred securities Lease liabilities Other financial liabilities Off-balance sheet loan commitments Financial guarantees Total⁴ 1 Trading liabilities and derivatives not qualifying for hedge accounting balances are recorded at fair value. The Group believes that this best represents the cash flow that would have to be paid if these positions had to be closed out. Trading liabilities and derivatives not qualifying for hedge accounting balances are shown within “on demand” which Group’s management believes most accurately reflects the short-term nature of trading activities. The contractual maturity of the instruments may however extend over signifi- cantly longer periods. 0 218 1,494 258 1,893 2 0 53 78,555 167,281 21,645 1,000,736 288 0 1,130 0 2,435 17,670 12 144 2,624 0 0 167,431 245 0 238 0 1,368 24,046 2,073 533 293 0 0 116,280 555 0 50 0 0 73,086 0 1,922 607 0 0 94,294 343 0 7 0 0 36,177 0 957 8 0 0 52,901 17,986 544 1,815 0 4,941 0 0 2 These are investment contracts where the policy terms and conditions result in their redemption value equaling fair value. 3 Derivatives designated for hedge accounting are recorded at fair value and are shown in the time bucket at which the hedged relationship is expected to terminate. 4 The balances in the table do not agree to the numbers in the Group’s balance sheet as the cash flows included in the table are undiscounted. This analysis represents the worst case scenario for the Group if the Group was required to repay all liabilities earlier than expected. The Group believes that the likelihood of such an event occurring is remote. 332 Deutsche Bank Annual Report 2020 Additional notes 32 – Common shares Additional notes 32 – Common shares Common Shares Deutsche Bank’s share capital consists of common shares issued in registered form without par value. Under German law, each share represents an equal stake in the subscribed capital. Therefore, each share has a nominal value of € 2.56, derived by dividing the total amount of share capital by the number of shares. Number of shares Common shares, January 1, 2019 Shares issued under share-based compensation plans Capital increase Shares purchased for treasury Shares sold or distributed from treasury Common shares, December 31, 2019 Shares issued under share-based compensation plans Capital increase Shares purchased for treasury Shares sold or distributed from treasury Common shares, December 31, 2020 Issued and fully paid 0 0 Treasury shares Outstanding (1,344,144) 2,065,428,987 2,066,773,131 0 0 0 0 0 (193,666,155) (193,666,155) 0 194,338,942 194,338,942 (671,357) 2,066,101,774 0 0 0 0 (35,058,705) (35,058,705) 34,383,896 34,383,896 (1,346,166) 2,065,426,965 2,066,773,131 0 0 0 0 2,066,773,131 There are no issued ordinary shares that have not been fully paid. Shares purchased for treasury mainly consist of shares purchased with the intention of being resold in the short-term as well as held by the Group for a period of time. In addition, the Group has bought back shares for equity compensation purposes. All such transactions were recorded in shareholders’ equity and no revenues and expenses were recorded in connection with these activities. Treasury stock held as of year-end will mainly be used for future share-based compensation. Authorized Capital The Management Board is authorized to increase the share capital by issuing new shares for cash consideration. As of De- cember 31, 2020, Deutsche Bank AG had authorized but unissued capital of € 2,560,000 which may be issued in whole or in part until April 30, 2022. Further details are governed by Section 4 of the Articles of Association. Authorized capital € 512,000,000 Consideration Cash € 2,048,000,000 Cash Pre-emptive rights May be excluded pursuant to Section 186 (3) sentence 4 of the Stock Corporation Act and may be excluded in so far as it is necessary to grant pre-emptive rights to the holders of option rights, convertible bonds and convertible participatory rights May be excluded insofar as it is necessary to grant pre-emptive rights to the holders of option rights, convertible bonds and convertible participatory rights. Expiration date April 30, 2022 April 30, 2022 Conditional Capital The Management Board is authorized to issue once or more than once, participatory notes that are linked with conversion rights or option rights and/or convertible bonds and/or bonds with warrants. The participatory notes, convertible bonds or bonds with warrants may also be issued by affiliated companies of Deutsche Bank AG. For this purpose share capital was increased conditionally upon exercise of these conversion and/or exchange rights or upon mandatory conversion. Conditional capital € 512,000,000 May be used if holders of conversion or option rights that are linked with participatory notes or convertible bonds or bonds Purpose of conditional capital Expiration date April 30, 2022 with warrants make use of their conversion or option rights or holders with conversion obligations of convertible participatory notes or convertible bonds fulfill their obligation to convert. € 51,200,000 May be used to fulfill options that are awarded on or before the expiration date and will only be used to the extent that holders of issued options make use of their right to receive shares and shares are not delivered out of treasury shares April 30, 2022 333 Deutsche Bank Annual Report 2020 Additional notes 33 – Employee benefits Dividends The following table presents the amount of dividends proposed or declared for the years ended December 31, 2020, 2019 and 2018, respectively. Cash dividends declared (in € ) Cash dividends declared per common share (in €) 2020 (proposed) 0 0.00 No dividends have been declared since the balance sheet date. 33 – Employee benefits Share-Based Compensation Plans 2019 2018 0 227,000,000 0.11 0.00 The Group made grants of share-based compensation under the DB Equity Plan. This plan represents a contingent right to receive Deutsche Bank common shares after a specified period of time. The award recipient is not entitled to receive dividends during the vesting period of the award. The share awards granted under the terms and conditions of the DB Equity Plan may be forfeited fully or partly if the recipient voluntarily terminates employment before the end of the relevant vesting period (or release period for Upfront Awards). Vesting usually continues after termination of employment in cases such as redundancy or retirement. In countries where legal or other restrictions hinder the delivery of shares, a cash plan variant of the DB Equity Plan was used for granting awards, and for employees of certain legal entities, deferred equity is replaced with restricted shares due to local regulatory requirements. Please note that this table does not cover awards granted to the Management Board, and from 2018 this table does not cover AIFMD/UCITS MRTs, or DWS Share-Based Compensation Payments, please refer to separate DWS section that covers grants to this population. The following table sets forth the basic terms of these share plans: Grant year(s) 2019-2020 Deutsche Bank Equity Plan Annual Award Annual Award Annual Award Retention/New Hire 2017 -2018 Annual Award – Upfront Annual Award Retention/New Hire Key Retention Plan (KRP)4 Vesting schedule 1/4: 12 months1 1/4: 24 months1 1/4: 36 months1 1/4: 48 months1 1/3: 12 months1 1/3: 24 months1 1/3: 36 months1 1/5: 12 months1 1/5: 24 months1 1/5: 36 months1 1/5: 48 months1 1/5: 60 months1 Individual specification Vesting immediately at grant3 1/4: 12 months1 1/4: 24 months1 1/4: 36 months1 1/4: 48 months1 Or cliff vesting after 54 months1 Individual specification 1/2: 50 months3 1/2: 62 months3 Cliff vesting after 43 months Cliff-vesting after 4 years3 Eligibility Select employees as annual performance-based compensation (CB/IB/CRU)2 Select employees as annual performance-based compensation (non-CB/IB/CRU)2 Select employees as annual performance-based compensation (Senior Management) Select employees to attract and retain the best talent Regulated employees Select employees as annual performance-based compensation Members of Senior Leadership Cadre Select employees to attract and retain the best talent Material Risk Takers (MRTs) Non-Material Risk Takers (non-MRTs) Select employees as annual retention 334 2016 1 For InstVV-regulated employees (and Senior Management) a further retention period of twelve months applies (six months for awards granted from 2017 -2018). Key Position Award (KPA)5 Deutsche Bank Annual Report 2020 Additional notes 33 – Employee benefits 2 For grant year 2019 divisions were called CIB, for grant year 2020 CIB is split into CB/IB/CRU. 3 Share delivery takes place after a further retention period of twelve months. 4 Equity-based awards granted under this plan in January 2017 were subject to an additional share price condition and were forfeited as a result of this condition not being met. 5 A predefined proportion of the individual’s KPA was subject to an additional share price condition and was forfeited as a result of this condition not being met. Furthermore, the Group offers a broad-based employee share ownership plan entitled Global Share Purchase Plan (“GSPP”). The GSPP offers employees in specific countries the opportunity to purchase Deutsche Bank shares in monthly installments over one year. At the end of the purchase cycle, the bank matches the acquired stock in a ratio of one to one up to a maximum of ten free shares, provided that the employee remains at Deutsche Bank Group for another year. In total, about 11,045 staff from 18 countries enrolled in the twelfth cycle that began in November 2020. The Group has other local share-based compensation plans, none of which, individually or in the aggregate, are material to the consolidated financial statements. The following table sets out the movements in share award units, including grants under the cash plan variant of the DB Equity Plan. Share units (in thousands) Balance outstanding as of January 01 Granted Released Forfeited Other movements Balance outstanding as of December 31 1 Share Units outstanding at the beginning of year 2019 restated 2020 168,332 44,768 (32,454) (62,398) (441) 117,806 2019 143,9231 64,217 (28,475) (11,157) (177) 168,332 The DB Equity Plan includes awards with share price hurdles under both the Key Position Award and the Key Retention Plan. The share price hurdle condition for both plans was measured during 2020 and was not met. As a result approximately 56 million share units were forfeited. In accordance with IFRS 2 the forfeiture due to a market performance condition did not result in a reversal to the recorded expense. The following table sets out key information regarding awards granted, released and remaining in the year. Weighted average fair value per award granted in year Weighted average share price at release in year 2020 Weighted average remaining contractual life in years DB Equity Plan € 7.20 7.79 2 Weighted average fair value per award granted in the year € 6.34 Weighted average share price at release in year 7.6 2019 Weighted average remaining contractual life in years 2 Share-based payment transactions resulting in a cash payment give rise to a liability, which amounted to approximately € 8 million and € 6 million for the years ended December 31, 2020 and 2019, respectively. The grant volume of outstanding share awards was approximately € 0.9 billion and € 1.4 billion as of December 31, 2020 and 2019, respectively. Thereof, approximately € 0.7 billion and € 1.2 billion had been recognized as compensation expense in the reporting year or prior to that. Hence, compensation expense for deferred share-based compensation not yet recognized amounted to approximately € 0.2 billion and € 0.3 billion as of December 31, 2020 and 2019, respectively. DWS Share-Based Compensation Plans The DWS Group made grants of share-based compensation under the DWS Equity Plan. This plan represents a contingent right to receive a cash payment by referencing to the value of DWS shares during a specified time period. In September 2018 one-off IPO related awards under the DWS Stock Appreciation Rights (SAR) Plan were granted to all DWS employees. A limited number of DWS senior managers were granted a one-off IPO-related Performance Share Unit (PSU) under the DWS Equity Plan instead. For members of the Executive Board, one-off IPO-related awards under the DWS Equity Plan were granted in January 2019. The DWS SAR Plan represents a contingent right to receive a cash payment equal to any appreciation (or gain) in the value of a set number of notional DWS shares over a fixed period of time. This award does not provide any entitlement to receive DWS shares, voting rights or associated dividends. The DWS Equity Plan is a phantom share plan representing a contingent right to receive a cash payment by referencing to the value of DWS shares during a specified period of time. 335 Deutsche Bank Annual Report 2020 Additional notes 33 – Employee benefits The award recipient for any share-based compensation plan is not entitled to receive dividends during the vesting period of the award. The share awards granted under the terms and conditions of any share-based compensation plan are forfeited fully or partly if the recipient voluntarily terminates employment before the end of the relevant vesting period (or the end of the retention period for Upfront Awards). Vesting usually continues after termination of employment in cases such as redundancy or retire- ment. The following table sets forth the basic terms of the DWS share-based plans: Grant year(s) 2019 / 2020 DWS Equity Plan Award Type Annual Awards Annual Awards (Senior Management) Vesting schedule 1/3: 12 months2 1/3: 24 months2 1/3: 36 months2 1/5: 12 months2 1/5: 24 months2 1/5: 36 months2 1/5: 48 months2 1/5: 60 months2 Annual Award - Upfront Retention/New Hire Vesting immediately at grant2 Individual specification Eligibility Select employees as annual perfor- mance-based compensation Members of the Executive Board Regulated employees Select employees to attract and retain the best talent Members of the Executive Board Performance Share Unit (PSU) Award (one-off IPO related award granted 1 January 2019)1 Retention/New Hire 1/3: March 20222 1/3: March 20232 1/3: March 20242 2018 DWS Equity Plan 2018 DWS SAR Plan Individual specification Select employees to attract and retain Performance Share Unit (PSU) Award (one-off IPO related award)1 1/3: March 20222 1/3: March 20232 1/3: March 20242 the best talent Select Senior Managers SAR Award (one-off IPO related award) For non-MRTs: all DWS employees3 June 1, 20214 For MRTs: March 1, 20232 1 The award and the number of units is subject to the achievement of pre-defined targets (Average Net flows (NNA)2019-2020 and FY 2020 Adjusted CIR (Cost Income Ratio). 2 Depending on their individual regulatory status, a 6 months retention period (AIFMD/UCITS MRTs) or a 12-months retention period (InstVV MRTs) applies after vesting. 3 Unless the employee received PSU Award. 4 In 2020 two Early Exercise windows were offered to non-MRTs leading to accelerated vesting and exercise upon acceptance. For outstanding awards a 4-year exercise period applies following vesting / retention period. The following table sets out the movements in share award units. Share units (in thousands) Outstanding at beginning of year Granted Issued or Exercised Forfeited Expired Other Movements Outstanding at end of year Of which, exercisable 1 DWS SAR Plan share Units outstanding at the end of year 2019 restated. DWS Equity Plan 2020 2019 Number of Awards 2,040 805 (368) (54) 0 (6) 2,418 0 Number of Awards 1,248 1,003 (186) (42) 0 16 2,040 0 Number of Awards 2,0871 0 (766) (52) 0 (14) 1,254 0 2020 Weighted- average exercise price € 24.65 - € 24.65 € 24.65 - € 24.65 € 24.65 - DWS SAR Plan 2019 Weighted- average exercise price € 24.65 - - € 24.65 - € 24.65 € 24.65 - Number of Awards 2,192 0 0 (110) 0 4 2,0871 0 The following table sets out key information regarding awards granted, released and remaining in the year. Weighted average fair value per award granted in year Weighted average share price at release/ exercise in year 2020 Weighted average remaining contractual life in years DWS Equity Plan DWS SAR Plan € 29.07 n/a € 34.88 € 31.95 2 5 Weighted average fair value per award granted in the year € 20.98 n/a Weighted average share price at release/ exercise in year € 26.33 n/a 2019 Weighted average remaining contractual life in years 3 6 The fair value of outstanding share-based awards was approximately € 85 million and € 64 million as of December 31, 2020 and 2019, respectively. Of the awards, approximately € 61 million and € 35 million has been recognised in the income state- ment up to the period ending 2020 and 2019 respectively, of which € 21 million and € 12 million relate to fully vested awards. 336 Deutsche Bank Annual Report 2020 Additional notes 33 – Employee benefits Total unrecognised expense related to share-based plans was approximately € 25 million and € 29 million as of December 31, 2020 and 2019 respectively, dependent on future share price development. The PSU Award has performance conditions which will determine the number of units which can ultimately vest under the award. These performance conditions are linked to the DWS Group strategy, specifically with regards to the target for net inflows and the adjusted cost income ratio. Based on the outcome of the performance conditions, it was confirmed that 100 % of the units originally granted remain subject to continued vesting. During the year, eligible employees were invited to exercise their SAR Awards as part of two distinct Early Exercise Offers in 2020. SAR Awards which were not exercised continue to be subject to the terms and conditions of the DWS SAR Plan Rules, including forfeiture provisions. The fair value of the SAR Equity Plan awards is measured using the Black-Scholes formula. The liabilities incurred are re- measured at the end of each reporting period until settlement. The principal inputs being the market value on reporting date, discounted for any dividends foregone over the holding periods of the award, and adjustment for expected and actual levels of vesting which includes estimating the number of eligible employees leaving the Group and number of employees eligible for early retirement. The inputs used in the measurement of the fair values at grant date and measurement date of the SAR Equity Plan awards were as follows. Units (in thousands) Fair value Share price Exercise price Expected volatility (weighted-average) Expected life (weighted-average) in years Expected dividends (% of income) Measurement date Dec 31, 2020 1,254 € 10.68 € 34.80 € 24.65 33% 5 65% Measurement date Dec 31, 2019 2,087 € 8.19 € 31.70 € 24.65 34% 6 65% Given the limited years of DWS share price volatility and the absence of implied volatility actively traded in the market, the expected volatility of the DWS share price has been based on an evaluation of the historical volatility for a comparable peer group over the preceding 5-year period. The expected dividend level is linked to the latest DWS Group communication. Post-employment Benefit Plans Nature of Plans The Group sponsors a number of post-employment benefit plans on behalf of its employees, both defined contribution plans and defined benefit plans. The Group’s plans are accounted for based on the nature and substance of the plan. Generally, for defined benefit plans the value of a participant’s accrued benefit is based on each employee’s remuneration and length of service; contributions to defined contribution plans are typically based on a percentage of each employee’s remuneration. The rest of this note focuses predominantly on the Group’s defined benefit plans. The Group’s defined benefit plans are primarily described on a geographical basis, reflecting differences in the nature and risks of benefits, as well as in the respective regulatory environments. In particular, the requirements set by local regulators can vary significantly and determine the design and financing of the benefit plans to a certain extent. Key information is also shown based on participant status, which provides a broad indication of the maturity of the Group’s obligations. in € m. Defined benefit obligation related to Active plan participants Participants in deferred status Participants in payment status Total defined benefit obligation Fair value of plan assets Funding ratio (in %) Germany UK U.S. Other Total Dec 31, 2020 4,950 2,639 5,943 13,532 12,658 94 % 706 2,876 1,335 4,917 5,705 116 % 236 561 530 1,327 1,107 83 %1 648 111 272 1,031 987 96 % 6,540 6,187 8,080 20,807 20,457 98 % 1 US Total defined benefit obligation is inclusive of the unfunded US Medicare Plan (€ 168 million) in addition to defined benefit pension plans. The US defined benefit pension funding ratio excluding Medicare is 96 %. 337 Deutsche Bank Annual Report 2020 Additional notes 33 – Employee benefits in € m. Defined benefit obligation related to Active plan participants Participants in deferred status Participants in payment status Total defined benefit obligation Fair value of plan assets Funding ratio (in %) Germany UK U.S. Other Total Dec 31, 2019 5,031 2,483 5,756 13,270 11,915 90 % 680 2,569 1,438 4,687 5,615 120 % 282 593 543 1,418 1,143 81 %1 650 119 274 1,043 982 94 % 6,643 5,764 8,011 20,418 19,655 96 % 1 US Total defined benefit obligation is inclusive of the unfunded US Medicare Plan (€ 181 million) in addition to defined benefit pension plans. The US defined benefit pension funding ratio excluding Medicare is 92 %. The majority of the Group’s defined benefit plan obligations relate to Germany, the United Kingdom and the United States. Within the other countries, the largest obligation relates to Switzerland. In Germany and some continental European countries, post-employment benefits are usually agreed on a collective basis with respective employee workers councils, unions or their equivalent. The Group’s main pension plans are governed by boards of trustees, fiduciaries or their equivalent. Post-employment benefits can form an important part of an employee’s total remuneration. The Group’s approach is that their design shall be attractive to employees in the respective market, but sustainable for the Group to provide over the longer term. At the same time, the Group tries to limit its risks related to provision of such benefits. Consequently the Group has moved to offer defined contribution plans in many locations over recent years. In the past the Group typically offered pension plans based on final pay prior to retirement. These types of benefits still form a significant part of the pension obligations for participants in deferred and payment status. Currently, in Germany and the United States, the main defined benefit pension plans for active staff are cash account type plans where the Group credits an annual amount to individual accounts based on an employee’s current compensation. Dependent on the plan rules, the ac- counts increase either at a fixed interest rate or participate in market movements of certain underlying investments to limit the investment risk for the Group. Sometimes, in particular in Germany, there is a guaranteed benefit amount within the plan rules, e.g. payment of at least the amounts contributed. Upon retirement, beneficiaries may usually opt for a lump sum, a fixed number of annual instalments or for conversion of the accumulated account balance into a life annuity. This conversion is often based on market conditions and mortality assumptions at retirement. The Group also sponsors retirement and termination indemnity plans in several countries, as well as some post-employment medical plans for a number of current and retired employees, mainly in the United States. The post-employment medical plans typically pay fixed percentages of medical expenses of eligible retirees after a set deductible has been met. In the United States, once a retiree is eligible for Medicare, the Group contributes to a Health Reimbursement Account and the retiree is no longer eligible for the Group’s medical program. The Group’s total defined benefit obligation for post-employment medical plans was € 202 million and € 220 million at December 31, 2020 and December 31, 2019, respectively. In combination with the benefit structure, these plans represent limited risk for the Group, given the nature and size of the post-retirement medical plan liabilities of € 202 million versus the size of the Group’s balance sheet at year end 2020. The following amounts of expected benefit payments from the Group’s defined benefit plans include benefits attributable to employees’ past and estimated future service, and include both amounts paid from the Group’s external pension trusts and paid directly by the Group in respect of unfunded plans. in € m. Actual benefit payments 2020 Benefits expected to be paid 2021 Benefits expected to be paid 2022 Benefits expected to be paid 2023 Benefits expected to be paid 2024 Benefits expected to be paid 2025 Benefits expected to be paid 2026 – 2030 Weighted average duration of defined benefit obligation (in years) Multi-employer Plans Germany 456 505 503 521 536 551 2,949 UK 160 134 98 110 118 131 762 U.S. 96 70 71 74 74 75 376 Other 80 59 56 55 59 57 281 Total 792 768 728 760 787 814 4,368 14 20 11 12 15 In Germany, the Group is a member of the BVV Versicherungsverein des Bankgewerbes a.G. (BVV) together with other financial institutions. The BVV offers retirement benefits to eligible employees in Germany as a complement to post-employ- ment benefit promises of the Group. Both employers and employees contribute on a regular basis to the BVV. The BVV provides annuities of a fixed amount to individuals on retirement and increases these fixed amounts if surplus assets arise within the plan. According to legislation in Germany, the employer is ultimately liable for providing the benefits to its employees. An increase in benefits may also arise due to additional obligations to retirees for the effects of inflation. BVV is a multi- employer defined benefit plan. However, in line with industry practice, the Group accounts for it as a defined contribution plan 338 Deutsche Bank Annual Report 2020 Additional notes 33 – Employee benefits since insufficient information is available to identify assets and liabilities relating to the Group’s current and former employees, primarily because the BVV does not fully allocate plan assets to beneficiaries nor to member companies. Governance and Risk The Group maintains a Pensions Committee to oversee its pension and related risks on a global basis. This Committee meets quarterly and reports directly to the Senior Executive Compensation Committee. Within this context, the Group develops and maintains guidelines for governance and risk management, including funding, asset allocation and actuarial assumption setting. In this regard, risk management means the management and control of risks for the Group related to market developments (e.g., interest rate, credit spread, price inflation), asset investment, regu- latory or legislative requirements, as well as monitoring demographic changes (e.g., longevity). Especially during and after acquisitions or changes in the external environment (e.g., legislation, taxation), topics such as the general plan design or potential plan amendments are considered. Any plan changes follow a process requiring approval by Group Human Re- sources. To the extent that pension plans are funded, the assets held mitigate some of the liability risks, but introduce invest- ment risk. In the Group’s key pension countries, the Group’s largest post-employment benefit plan risk exposures relate to potential changes in credit spreads, interest rates, price inflation and longevity, although these have been partially mitigated through the investment strategy adopted. Overall, the Group seeks to minimize the impact of pensions on the Group’s financial position from market movements, subject to balancing the trade-offs involved in financing post-employment benefits, regulatory capital and constraints from local funding or accounting requirements. The Group measures its pension risk exposures on a regular basis using specific metrics devel- oped by the Group for this purpose. Funding The Group maintains various external pension trusts to fund the majority of its defined benefit plan obligations. The Group’s funding principle is to maintain funding of the defined benefit obligation by plan assets within a range of 90 % to 100 % of the obligation, subject to meeting any local statutory requirements. The Group has also determined that certain plans should remain unfunded, although their funding approach is subject to periodic review, e.g. when local regulations or practices change. Obligations for the Group’s unfunded plans are accrued on the balance sheet. For most of the externally funded defined benefit plans there are local minimum funding requirements. The Group can decide on any additional plan contributions, with reference to the Group’s funding principle. There are some locations, e.g. the United Kingdom, where the trustees and the Bank jointly agree contribution levels. In most countries the Group expects to receive an economic benefit from any plan surpluses of plan assets compared to defined benefit obligations, typically by way of reduced future contributions. Given the relatively high funding level and the investment strategy adopted in the Group’s key funded defined benefit plans, any minimum funding requirements that may apply are not expected to place the Group under any material adverse cash strain in the short term. With reference to the Group’s funding principle, the Group considers not re- claiming benefits paid from the Group’s assets as an equivalent to making cash contributions into the external pension trusts during the year. For post-retirement medical plans, the Group accrues for obligations over the period of employment and pays the benefits from Group assets when the benefits become due. Actuarial Methodology and Assumptions December 31 is the measurement date for all plans. All plans are valued by independent qualified actuaries using the projected unit credit method. A Group policy provides guidance to ensure consistency globally on setting actuarial assumptions which are finally determined by the Group’s Pensions Committee. Senior management of the Group is regularly informed of move- ments and changes in key actuarial assumptions. 339 Deutsche Bank Annual Report 2020 Additional notes 33 – Employee benefits The key actuarial assumptions applied in determining the defined benefit obligations at December 31 are presented below in the form of weighted averages. Discount rate (in %) Rate of price inflation (in %) Rate of nominal increase in future compensation levels (in %) Rate of nominal increase for pensions in payment (in %) Germany 0.60 % 1.29 % UK 1.26 % 3.22 % U.S.1 2.31 % 2.10 % Other 1.51 % 1.54 % Germany 0.93 % 1.40 % UK 1.91 % 3.29 % Dec 31, 2020 Dec 31, 2019 U.S.1 3.16 % 2.20 % Other 1.92 % 1.70 % 1.79 % 3.72 % 2.20 % 2.57 % 1.90 % 3.79 % 2.30 % 2.71 % 1.19 % 3.08 % 2.10 % 0.86 % 1.30 % 3.19 % 2.20 % 0.91 % Assumed life expectancy at age 65 For a male aged 65 at measurement date For a female aged 65 at measurement date For a male aged 45 at measurement date For a female aged 45 at measurement date Mortality tables applied 21.2 23.5 21.8 22.0 21.1 23.4 22.0 21.9 23.5 25.0 23.2 24.2 23.4 24.9 23.4 24.1 22.5 24.5 23.2 23.3 22.5 24.4 23.5 23.3 24.6 26.4 24.5 25.6 24.5 26.2 24.9 25.5 Modified Richttafeln Heubeck SAPS (S3) Very Light with CMI 2019 2018G projections PRI-2012 with MP-2020 projection Country specific Modified Richttafeln Heubeck tables 2018G SAPS (S3) Light with CMI 2018 projections PRI-2012 with MP-2019 projection Country specific tables 1 Cash balance interest crediting rate in line with the 30-year US government bond yield. For the Group’s most significant pension plans in the key countries, the discount rate used at each measurement date is set based on a high quality corporate bond yield curve, which is derived using a bond universe sourced from reputable third-party index data providers and rating agencies, and reflects the timing, amount and currency of the future expected benefit payments for the respective plan. A review of the Eurozone discount rate derivation was instigated in March 2020 following unprece- dented market turmoil, which resulted in several refinements to the methodology being implemented in 2020, initially in Q1 and more fundamentally in Q4 with the introduction of an internally produced DB Proprietary curve, which was employed as the basis for discounting the defined benefit obligation from December 31, 2020. Compared to the curve deployed at Decem- ber 31, 2019, the DB Proprietary curve results in a defined benefit obligation that is €[20]m higher, with the impact recognised through Other Comprehensive Income. The defined benefit obligation was € [435] million lower as at December 31, 2020 compared to curve utilised as at June 30, 2020. Due to the change in discount rate methodology and other effects, the Group’s net pension liability for the German pension plans was reduced by € 481 million from € 1,355 million as of December 31, 2019 to € 874 million as of December 31, 2020. The price inflation assumptions in the Eurozone and the United Kingdom are set with reference to market measures of inflation based on inflation swap rates in those markets at each measurement date. For other countries, the price inflation assumptions are typically based on long term forecasts by Consensus Economics Inc. The assumptions for the increases in future compensation levels and for increases to pensions in payment are developed separately for each plan, where relevant. Each is set based on the price inflation assumption and reflecting the Group’s reward structure or policies in each market, as well as relevant local statutory and plan-specific requirements. Among other assumptions, mortality assumptions can be significant in measuring the Group’s obligations under its defined benefit plans. These assumptions have been set in accordance with current best estimate in the respective countries. Future potential improvements in longevity have been considered and included where appropriate. Due to the long term nature of mortality assumptions and lack of clarity over the longer term impacts of the pandemic on health outcomes, there has been no specific allowance for the impact of COVID-19 in any region, other than for recent experience captured as part of the annual valuation process. In the financial year ended December 31, 2020, the Group recognized a € 48 million of past service credit in connection with the inclusion of a lump-sum payment option to one of the German retirement benefit arrangements primarily in the Private Bank division. This reduction in defined benefit plan obligations was reported as part of Compensation and benefits in the Consolidated Statement of Income. 340 Deutsche Bank Annual Report 2020 Additional notes 33 – Employee benefits Reconciliation in Movement of Liabilities and Assets – Impact on Financial Statements in € m. Change in the present value of the defined benefit obligation: Balance, beginning of year Defined benefit cost recognized in Profit & Loss Current service cost Interest cost Past service cost and gain or loss arising from settlements Defined benefit cost recognized in Other Comprehensive Income Actuarial gain or loss arising from changes in financial assumptions Actuarial gain or loss arising from changes in demographic as- sumptions Actuarial gain or loss arising from experience Cash flow and other changes Contributions by plan participants Benefits paid Payments in respect to settlements Acquisitions/Divestitures Exchange rate changes Other Balance, end of year thereof: Unfunded Funded Change in fair value of plan assets: Balance, beginning of year Defined benefit cost recognized in Profit & Loss Interest income Germany UK U.S. Other 2020 Total 13,270 4,687 1,418 1,043 20,418 200 122 (22)1 536 110 (73) 4 (456) 0 (158)2 0 (1) 13,532 0 13,532 28 85 11 600 (11) (68) 0 (160) 0 0 (255) 0 4,917 15 4,902 12 43 0 75 (9) 3 0 (96) 0 0 (119) 0 1,327 195 1,132 42 18 0 282 268 (11) 39 1,250 2 (14) 15 (80) 0 0 (36) 2 1,031 92 (152) 19 (792) 0 (158) (410) 1 20,807 105 926 315 20,492 11,915 5,615 1,143 982 19,655 111 101 Defined benefit cost recognized in Other Comprehensive Income Return from plan assets less interest income 777 456 Cash flow and other changes Contributions by plan participants Contributions by the employer Benefits paid3 Payments in respect to settlements Acquisitions/Divestitures Exchange rate changes Other Plan administration costs Balance, end of year Funded status, end of year Change in irrecoverable surplus (asset ceiling) Balance, beginning of year Interest cost Changes in irrecoverable surplus Exchange rate changes Balance, end of year 4 444 (456) 0 (137)2 0 0 0 12,658 (874) 0 0 0 0 0 0 0 (159) 0 0 (303) 0 (5) 5,705 788 0 0 0 0 0 34 60 0 56 (84) 0 0 (99) 0 (3) 1,107 (220) 0 0 0 0 0 17 263 42 1,335 15 28 (65) 0 0 (31) 0 (1) 987 (44) (40) 0 2 0 (38) 19 528 (764) 0 (137) (433) 0 (9) 20,457 (350) (40) 0 2 0 (38) Net asset (liability) recognized (874) 788 (220) (82) (388) 1 Contains a past service credit of € 48 million due to the introduction of a capital option for a specific plan sponsored by former Postbank. 2 Postbank Systems AG. 3 For funded plans only. 4 Thereof € 877 million recognized in Other assets and € 1,265 million in Other liabilities. 341 Deutsche Bank Annual Report 2020 Additional notes 33 – Employee benefits in € m. Change in the present value of the defined benefit obligation: Balance, beginning of year Defined benefit cost recognized in Profit & Loss Current service cost Interest cost Past service cost and gain or loss arising from settlements Defined benefit cost recognized in Other Comprehensive In- come Actuarial gain or loss arising from changes in financial assumptions Actuarial gain or loss arising from changes in demographic assumptions Actuarial gain or loss arising from experience Cash flow and other changes Contributions by plan participants Benefits paid2 Payments in respect to settlements Acquisitions/Divestitures Exchange rate changes Other Balance, end of year thereof: Unfunded Funded Change in fair value of plan assets: Balance, beginning of year Defined benefit cost recognized in Profit & Loss Interest income Defined benefit cost recognized in Other Comprehensive In- come Germany UK U.S. Other 2019 Total 11,953 3,868 1,337 962 18,120 192 201 19 26 106 3 14 56 0 44 26 (12) 276 389 10 1,179 582 112 67 1,940 1251 43 4 (446) 0 0 0 0 13,270 0 13,270 (105) 113 0 (154) 0 0 248 0 4,687 16 4,671 (11) (8) 0 (109) 0 0 27 0 1,418 210 1,208 (1) (5) 17 (73) (11) 0 24 5 1,043 121 922 8 143 21 (782) (11) 0 299 5 20,418 347 20,071 10,877 4,884 1,074 892 17,727 185 134 44 23 386 Return from plan assets less interest income 137 448 80 54 719 Cash flow and other changes Contributions by plan participants Contributions by the employer Benefits paid1 Payments in respect to settlements Acquisitions/Divestitures Exchange rate changes Other Plan administration costs Balance, end of year Funded status, end of year Change in irrecoverable surplus (asset ceiling) Balance, beginning of year Interest cost Changes in irrecoverable surplus Exchange rate changes Balance, end of year 4 1,158 (446) 0 0 0 0 0 11,915 (1,355) 0 0 0 0 0 0 0 (153) 0 0 304 0 (2) 5,615 928 0 0 0 0 0 0 22 (96) 0 0 22 0 (3) 1,143 (275) 0 0 0 0 0 18 25 (56) 0 0 27 0 (1) 982 (61) (25) 0 (14) (1) (40) 22 1,205 (751) 0 0 353 0 (6) 19,655 (763) (25) 0 (14) (1) (40) Net asset (liability) recognized (1,355) 928 (275) (101) (803)3 1 Resulting predominantly from updated mortality assumptions (modified Heubeck 2018G instead of Heubeck 2018G). 2 For funded plans only. 3 Thereof € 1,011 million recognized in Other assets and € 1,814 million in Other liabilities. There are no reimbursement rights for the Group. Investment Strategy The Group’s investment objective is to protect the Group from adverse impacts of its defined benefit pension plans on key financial metrics. In the past, the primary focus has been on protecting the plans’ IFRS funded status in the case of adverse market scenarios. While there has been a shift in the investment strategy in selected markets to balance competing key financial metrics the Group reverted to the IFRS driven investment strategy in 2019. Investment managers manage pension assets in line with investment mandates or guidelines as agreed with the pension plans’ trustees and investment committees. 342 Deutsche Bank Annual Report 2020 Additional notes 33 – Employee benefits For key defined benefit plans for which the Bank aims to protect the IFRS funded status, the Group applies a liability driven investment (LDI) approach. Risks from mismatches between fluctuations in the present value of the defined benefit obligations and plan assets due to capital market movements are minimized, subject to balancing relevant trade-offs. This is achieved by allocating plan assets closely to the market risk factor exposures of the pension liability to interest rates, credit spreads and inflation. Thereby, plan assets broadly reflect the underlying risk profile and currency of the pension obligations. Where the desired hedging level for market risks cannot be achieved with physical instruments (i.e., corporate and government bonds), derivatives are employed. Derivative overlays mainly include interest rate, inflation swaps and credit default swaps. Other instruments are also used, such as interest rate futures and options. In practice, a completely hedged approach is impractical, for instance because of insufficient market depth for ultra-long-term corporate bonds, as well as liquidity and cost considerations. Therefore, plan assets contain further asset categories to create long-term return enhancement and diversifi- cation benefits such as equity, real estate, high yield bonds or emerging markets bonds. In 2020, the group entered into two buy-in transactions with a third party insurer to de-risk €1.2 billion of exposure to the UK defined benefit pension schemes funded from existing assets, with no additional employer contribution required. The recog- nition of the insurance policies as qualifying plan assets in Q1 and Q4 negatively impacted Other Comprehensive Income in the Group’s financial statement by approximately €115 million and €60 million, respectively. Plan asset allocation to key asset classes The following table shows the asset allocation of the Group’s funded defined benefit plans to key asset classes, i.e. exposures include physical securities in discretely managed portfolios and underlying asset allocations of any commingled funds used to invest plan assets. Asset amounts in the following table include both “quoted” (i.e., Level 1 assets in accordance with IFRS 13 – amounts invested in markets where the fair value can be determined directly from prices which are quoted in active, liquid markets) and “other” (i.e., Level 2 and 3 assets in accordance with IFRS 13) assets. in € m. Cash and cash equivalents Equity instruments1 Investment-grade bonds2 Government Non-government bonds Non-investment-grade bonds Government Non-government bonds Securitized and other Debt In- vestments Insurance Alternatives Real estate Commodities Private equity Other4 Derivatives (Market Value) Interest rate Credit Inflation Foreign exchange Other Total fair value of plan assets Germany 290 899 UK 504 609 U.S. 67 126 Other 57 57 Total 918 1,691 Germany 340 875 Dec 31, 2020 UK 292 643 U.S. 57 116 Dec 31, 2019 Other 64 53 Total 753 1,687 2,829 6,144 1,0483 2,0343 422 387 167 258 4,466 8,823 2,508 5,921 1,633 2,847 432 425 202 216 4,775 9,409 99 236 2 107 1 37 18 28 120 408 125 259 7 124 1 17 16 17 1 122 73 0 196 1 157 67 1 1 1,2483 0 13 1,262 0 0 0 15 149 417 226 15 443 24 72 1,406 37 0 0 0 0 0 0 0 79 0 23 271 559 24 95 1,677 361 0 63 1,579 42 0 0 0 0 0 0 0 67 0 25 284 470 0 88 1,863 78 115 0 20 1 12,658 (18) (107) (109) 3 225 5,705 (3) 15 0 0 (18) 1,107 0 1 11 4 0 (263) 57 110 24 26 (98) 6 27 4 208 987 20,457 11,915 35 1 (126) 4 (44) 5,615 10 19 0 0 (1) 1,143 7 1 11 3 0 (211) 131 (89) 13 (41) 982 19,655 1 Allocation of equity exposure is broadly in line with the typical index in the respective market, e.g. the equity portfolio’s benchmark of the UK retirement benefit plans is the MSCI All Countries World Index. 2 Investment-grade means BBB and above. Average credit rating exposure for the Group’s main plans is around A. 3 The movement from 2019 to 2020 is the result of the de-risking activity for the UK pension plans to reduce impact from the defined benefit plan exposure for the Group. 4 Amongst others this position contains commingled funds which could not be segregated into the other asset categories. The following table sets out the Group’s funded defined benefit plan assets only invested in “quoted” assets, i.e. Level 1 assets in accordance with IFRS 13. 343 Deutsche Bank Annual Report 2020 Additional notes 33 – Employee benefits Dec 31, 2020 in € m. Cash and cash equivalents Equity instruments1 Investment-grade bonds2 Government Non-government bonds Non-investment-grade bonds Government Non-government bonds Securitized and other Debt In- vestments Insurance Alternatives Real estate Commodities Private equity Other Derivatives (Market Value) Interest rate Credit Inflation Foreign exchange Other Total fair value of quoted plan assets Germany 226 760 1,107 0 UK 504 609 9893 0 U.S. 63 126 417 0 Other 26 45 Total 819 1,540 Germany 339 758 UK 292 643 U.S. 54 116 Dec 31, 2019 Other 30 42 Total 715 1,559 56 0 2,569 0 1,115 0 1,618 0 426 0 36 0 3,195 0 0 0 0 0 0 0 0 0 0 0 0 0 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 5 0 0 0 0 0 0 0 5 0 0 0 0 0 0 0 1 (107) 0 4 0 (15) 0 0 0 0 0 0 11 0 0 (14) (107) 11 4 1 0 0 0 0 0 0 0 0 0 0 0 0 4 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 3 0 0 0 0 0 0 0 3 0 0 0 0 0 0 0 34 1 (125) 4 0 (19) 0 0 0 0 8 0 10 0 0 23 1 (115) 4 4 2,094 2,000 591 143 4,828 2,216 2,467 577 129 5,389 1 Allocation of equity exposure is broadly in line with the typical index in the respective market, e.g. the equity portfolio’s benchmark of the UK retirement benefit plans is the MSCI All Countries World Index. 2 Investment-grade means BBB and above. Average credit rating exposure for the Group’s main plans is around A. 3 The movement from 2019 to 2020 is the result of the de-risking activity for the UK pension plans to reduce impact from the defined benefit plan exposure for the Group. The following tables show the asset allocation of the “quoted” and “other” defined benefit plan assets by key geography in which they are invested. in € m. Cash and cash equivalents Equity instruments Government bonds (investment-grade and above) Government bonds (non-investment-grade) Non-government bonds (investment-grade and above) Non-government bonds (non-investment-grade) Securitized and other Debt In- vestments Subtotal Share (in %) Other asset categories Fair value of plan assets Germany (7) 209 United Kingdom 396 70 United States 170 703 Other Eurozone Other developed countries Emerging markets 308 270 20 336 31 103 Dec 31, 2020 Total 918 1,691 1,018 979 470 1,150 292 557 4,466 2 0 0 7 11 100 120 639 1,601 2,685 3,2651 554 79 8,823 1 52 46 292 8 8 407 1 1,863 11% 99 3,197 19% 82 4,156 25% 12 5,304 32% 0 1,221 7% 2 880 5% 196 16,621 100% 3,8362 20,457 1 Majority of this amount relates to bonds of French, Dutch and Italian corporates. 2 The movement from 2019 to 2020 is the result of the de-risking activity for the UK pension plans to reduce impact from the defined benefit plan exposure for the Group. 344 Deutsche Bank Annual Report 2020 Additional notes 33 – Employee benefits in € m. Cash and cash equivalents Equity instruments Government bonds (investment-grade and above) Government bonds (non-investment-grade) Non-government bonds (investment-grade and above) Non-government bonds (non-investment-grade) Securitized and other Debt In- vestments Subtotal Share (in %) Other asset categories Fair value of plan assets Germany 5 186 United Kingdom 224 101 United States 122 703 Other Eurozone 342 285 Other developed countries 27 291 Emerging markets 33 121 Dec 31, 2019 Total 753 1,687 868 1,477 550 1,003 329 548 4,775 0 6 1 7 13 122 149 738 2,110 2,662 3,2011 4 45 24 297 1 1,802 10% 98 4,061 23% 104 4,166 24% 14 5,149 30% 612 41 6 1,319 8% 86 9,409 6 417 3 919 5% 226 17,416 100% 2,239 19,655 1 Majority of this amount relates to bonds of French, Dutch and Italian corporate bonds. Plan assets include derivative transactions with Group entities with a positive market value of around € 210 million at Decem- ber 31, 2020 and a negative market value of around € 252 million December 31, 2019, respectively. There is neither a material amount of securities issued by the Group nor other claims on Group assets included in the fair value of plan assets. The plan assets do not include any real estate which is used by the Group. In addition, the Group estimates and allows for uncertain income tax positions which may have an impact on the Group’s plan assets. Significant judgment is required in making these estimates and the Group’s final net liabilities may ultimately be ma- terially different. We are currently involved in a legal dispute with the German tax authorities in relation to the tax treatment of certain income received with respect to our pension plan assets. The proceeding is pending in front of the German supreme fiscal court (Bundesfinanzhof). A court hearing is scheduled for March 15, 2021. Should the court ultimately rule in favor of the German tax authorities, the outcome could have a material effect on our comprehensive income and financial condition. Key Risk Sensitivities The Group’s defined benefit obligations are sensitive to changes in capital market conditions and actuarial assumptions. Sen- sitivities to capital market movements and key assumption changes are presented in the following table. Each market risk factor or assumption is changed in isolation. Sensitivities of the defined benefit obligations are approximated using geometric extrapolation methods based on plan durations for the respective assumption. Duration is a risk measure that indicates the broad sensitivity of the obligations to a change in an underlying assumption and provides a reasonable approximation for small to moderate changes in those assumptions. For example, the interest rate duration is derived from the change in the defined benefit obligation to a change in the interest rate based on information provided by the local actuaries of the respective plans. The resulting duration is used to estimate the remeasurement liability loss or gain from changes in the interest rate. For other assumptions, a similar approach is used to derive the respective sensitivity results. For defined benefit pension plans, changes in capital market conditions will impact the plan obligations via actuarial assump- tions – mainly interest rate and price inflation rate – as well as the plan assets. Where the Group applies a LDI approach, the Bank’s overall exposure to changes is reduced. Consequently, to aid understanding of the Group’s risk exposures related to key capital market movements, the net impact of the change in the defined benefit obligations and plan assets due to a change of the related market risk factor or underlying actuarial assumption is shown; for sensitivities to changes in actuarial assump- tions that do not impact the plan assets, only the impact on the defined benefit obligations is shown. Asset-related sensitivities are derived for the Group’s major plans by using risk sensitivity factors determined by the Group’s Market Risk Management function. These sensitivities are calculated based on information provided by the plans’ investment managers and extrapolated linearly to reflect the approximate change of the plan assets’ market value in case of a change in the underlying risk factor. The sensitivities illustrate plausible variations over time in capital market movements and key actuarial assumptions. The Group is not in a position to provide a view on the likelihood of these capital market or assumption changes. While these sensitivities illustrate the overall impact on the funded status of the changes shown, the significance of the impact and the range of reasonable possible alternative assumptions may differ between the different plans that comprise the aggregated results. Even though plan assets and plan obligations are sensitive to similar risk factors, actual changes in plan assets and 345 Deutsche Bank Annual Report 2020 Additional notes 33 – Employee benefits obligations may not fully offset each other due to imperfect correlations between market risk factors and actuarial assumptions. Caution should be used when extrapolating these sensitivities due to non-linear effects that changes in capital market condi- tions and key actuarial assumptions may have on the overall funded status. Any management actions that may be taken to mitigate the inherent risks in the post-employment defined benefit plans are not reflected in these sensitivities. in € m. Interest rate (–50 bp): (Increase) in DBO Expected increase in plan assets1 Expected net impact on funded status (de-) in- crease Interest rate (+50 bp): Decrease in DBO Expected (decrease) in plan assets1 Expected net impact on funded status (de-) in- crease Credit spread (–50 bp): (Increase) in DBO Expected increase in plan assets1 Expected net impact on funded status (de-) in- crease Credit spread (+50 bp): Decrease in DBO Expected (decrease) in plan assets1 Expected net impact on funded status (de-) in- crease Rate of price inflation (–50 bp):2 Decrease in DBO Expected (decrease) in plan assets1 Expected net impact on funded status (de-) in- crease Rate of price inflation (+50 bp):2 (Increase) in DBO Expected increase in plan assets1 Expected net impact on funded status (de-) in- crease Rate of real increase in future compensation levels (–50 bp): Germany UK U.S. Other Germany UK U.S. Other Dec 31, 2020 Dec 31, 2019 (970) 895 (520) 400 (45) 35 (60) 25 (970) 875 (500) 530 (45) 30 (60) 25 (75) (120) (10) (35) (95) 30 (15) (35) 900 (895) 470 (400) 40 (35) 55 (25) 905 (875) 450 (530) 30 (30) 55 (25) 5 70 5 30 30 (80) 0 30 (970) 760 (520) 120 (75) 15 (65) 10 (970) 620 (500) 145 (80) 15 (65) 10 (210) (400) (60) (55) (350) (355) (65) (55) 900 (760) 470 (120) 70 (15) 60 (10) 905 (620) 450 (145) 75 (15) 60 (10) 140 350 55 50 285 305 60 50 320 (235) 390 (255) 0 0 20 (10) 335 (185) 360 (305) 0 0 20 (10) 85 135 0 10 150 55 0 10 (330) 235 (425) 255 0 0 (20) 10 (345) 185 (385) 305 0 0 (20) 10 (95) (170) 0 (10) (160) (80) 0 (10) Decrease in DBO, net impact on funded status 60 10 0 15 60 15 0 10 Rate of real increase in future compensation levels (+50 bp): (Increase) in DBO, net impact on funded status (60) (10) 0 (15) (60) (15) 0 (15) Longevity improvements by 10 %:3 (Increase) in DBO, net impact on funded status (160) 1 Expected changes in the fair value of plan assets contain the simulated impact from the biggest plans in Germany, the UK, the U.S., Channel Islands, Switzerland and Bel- (145) (320) (325) (30) (15) (30) (15) gium which cover over 99 % of the total fair value of plan assets. The fair value of plan assets for other plans is assumed to be unchanged for this presentation. 2 Incorporates sensitivity to changes in pension benefits to the extent linked to the price inflation assumption. 3 Estimated to be equivalent to an increase of around 1 year in overall life expectancy. 346 Deutsche Bank Annual Report 2020 Additional notes 33 – Employee benefits Expected cash flows The following table shows expected cash flows for post-employment benefits in 2021, including contributions to the Group’s external pension trusts in respect of funded plans, direct payment to beneficiaries in respect of unfunded plans, as well as contributions to defined contribution plans. in € m. Expected contributions to Defined benefit plan assets BVV Other defined contribution plans Expected benefit payments for unfunded defined benefit plans Expected total cash flow related to post-employment benefits Expense of employee benefits 2021 Total 285 60 245 25 615 The following table presents a breakdown of specific expenses according to the requirements of IAS 19 and IFRS 2. in € m. Expenses for defined benefit plans: Service cost1 Net interest cost (income) Total expenses defined benefit plans Expenses for defined contribution plans: BVV Other defined contribution plans Total expenses for defined contribution plans Total expenses for post-employment benefit plans Employer contributions to state-mandated pension plans Pensions related payments social security in Germany Contributions to pension fund for Postbank´s postal civil servants Further pension related state-mandated benefit plans Total employer contributions to state-mandated benefit plans Expenses for share-based payments: Expenses for share-based payments, equity settled2 Expenses for share-based payments, cash settled2 2020 2019 2018 246 5 251 60 243 303 554 233 79 245 557 272 2 274 63 244 307 581 231 85 249 565 259 4 263 62 246 308 571 236 88 246 570 318 49 329 184 549 39 516 92 560 1 481 137 Expenses for cash retention plans2 Expenses for severance payments3 1 Severance related items under Service Costs were reclassified to Expenses for Severance payments. Therefore previous periods were adjusted as well. 2 Including expenses for new hire awards and the acceleration of expenses not yet amortized due to the discontinuation of employment including those amounts which are recognized as part of the Group’s restructuring expenses. 3 Excluding the acceleration of expenses for deferred compensation awards not yet amortized. Severance related items under Service Costs were reclassified to Expense for Severance payments. Prior year numbers have been restated. 347 Deutsche Bank Annual Report 2020 Additional notes 34 – Income taxes 34 – Income taxes in € m. Current tax expense (benefit): Tax expense (benefit) for current year Adjustments for prior years Total current tax expense (benefit) Deferred tax expense (benefit): Origination and reversal of temporary differences, unused tax losses and tax credits Effect of changes in tax law and/or tax rate Adjustments for prior years Total deferred tax expense (benefit) Total income tax expense (benefit) 2020 2019 2018 739 (46) 693 (218) (11) (67) (296) 397 757 5 762 (71) (9) 1,948 1,868 2,630 733 (20) 713 316 (6) (34) 276 989 Total deferred tax benefit includes expenses from previously unrecognized tax losses (tax credits/deductible temporary differ- ences) and the reversal of previous write-downs of deferred tax assets and expenses arising from write-downs of deferred tax assets, which decreased the deferred tax benefit by € 96 million in 2020, and increased the deferred tax expense by € 2,785 million in 2019, and by € 253 million in 2018. Difference between applying German statutory (domestic) income tax rate and actual income tax expense/(benefit) in € m. Expected tax expense (benefit) at domestic income tax rate of 31.3% (31.3% for 2019 and 31.3% for 2018) Foreign rate differential Tax-exempt gains on securities and other income Loss (income) on equity method investments Nondeductible expenses Impairments of goodwill Changes in recognition and measurement of deferred tax assets1 Effect of changes in tax law and/or tax rate Effect related to share-based payments Other1 Actual income tax expense (benefit) 2020 2019 319 (38) (181) (18) 293 0 96 (11) (29) (34) 397 (825) 170 (191) (19) 326 269 2,785 (9) 54 70 2,630 2018 416 8 (209) (19) 340 0 253 (6) 133 73 989 1 Current and deferred tax expense/(benefit) relating to prior years are mainly reflected in the line items “Changes in recognition and measurement of deferred tax assets” and “Other”. The Group is under continuous examinations by tax authorities in various jurisdictions. “Other” in the preceding table includes the effects of these examinations by the tax authorities. The domestic income tax rate, including corporate tax, solidarity surcharge, and trade tax, used for calculating deferred tax assets and liabilities was 31.3 % for 2020, 2019 and 2018. Income taxes charged or credited to equity (other comprehensive income/additional paid in capital) in € m. Actuarial gains/losses related to defined benefit plans Net fair value gains (losses) attributable to credit risk related to financial liabilities designated as at fair value through profit or loss Financial assets available for sale: Unrealized net gains/losses arising during the period Net gains/losses reclassified to profit or loss Financial assets mandatory at fair value through other comprehensive income: Unrealized net gains/losses arising during the period Realized net gains/losses arising during the period (reclassified to profit or loss) Derivatives hedging variability of cash flows: Unrealized net gains/losses arising during the period Net gains/losses reclassified to profit or loss Other equity movement: Unrealized net gains/losses arising during the period Net gains/losses reclassified to profit or loss Income taxes (charged) credited to other comprehensive income Other income taxes (charged) credited to equity 2020 76 6 0 0 (204) 84 4 (1) (19) 14 (40) 11 2019 402 1 0 0 (42) 71 1 1 162 0 596 (11) 2018 18 (8) 0 0 48 86 1 0 91 2 238 1 348 Deutsche Bank Annual Report 2020 Additional notes 34 – Income taxes Major components of the Group’s gross deferred tax assets and liabilities in € m. Deferred tax assets: Unused tax losses Unused tax credits Deductible temporary differences: Trading activities, including derivatives Employee benefits, including equity settled share based payments Accrued interest expense Loans and borrowings, including allowance for loans Leases Intangible Assets Fair value OCI (IFRS 9) Other assets Other provisions Other liabilities Total deferred tax assets pre offsetting Deferred tax liabilities: Taxable temporary differences: Trading activities, including derivatives Employee benefits, including equity settled share based payments Loans and borrowings, including allowance for loans Leases Intangible Assets Fair value OCI (IFRS 9) Other assets Other provisions Other liabilities Total deferred tax liabilities pre offsetting Deferred tax assets and liabilities, after offsetting in € m. Presented as deferred tax assets Presented as deferred tax liabilities Net deferred tax assets Dec 31, 2020 Dec 31, 2019 1,476 0 2,994 2,457 1,122 1,069 806 214 1 560 122 4 10,825 2,752 183 501 712 560 144 350 79 47 5,328 1,307 1 4,321 2,507 1,148 878 614 236 21 879 126 6 12,044 3,937 265 785 537 554 51 347 87 40 6,603 Dec 31, 2020 6,058 561 5,497 Dec 31, 2019 5,986 545 5,441 The change in the balance of deferred tax assets and deferred tax liabilities might not equal the deferred tax expense/(benefit). In general, this is due to (1) deferred taxes that are booked directly to equity, (2) the effects of exchange rate changes on tax assets and liabilities denominated in currencies other than euro, (3) the acquisition and disposal of entities as part of ordinary activities and (4) the reclassification of deferred tax assets and liabilities which are presented on the face of the balance sheet as components of other assets and liabilities. Items for which no deferred tax assets were recognized in € m. Deductible temporary differences Not expiring Expiring in subsequent period Expiring after subsequent period Unused tax losses Expiring after subsequent period Unused tax credits Dec 31, 2020¹ (2,204) (9,982) (138) (4,702) (14,822) (56) (58) Dec 31, 2019¹ (3,046) (9,629) (192) (4,214) (14,035) (95) (96) 1 Amounts in the table refer to deductible temporary differences, unused tax losses and tax credits for federal income tax purposes. Deferred tax assets were not recognized on these items because it is not probable that future taxable profit will be available against which the unused tax losses, unused tax credits and deductible temporary differences can be utilized. As of December 31, 2020 and December 31, 2019, the Group recognized deferred tax assets of € 5.1 billion and € 3.2 billion, respectively, that exceeded deferred tax liabilities in entities which have suffered a loss in either the current or preceding period. This is based on management’s assessment that it is probable that the respective entities will have taxable profits against which the unused tax losses, unused tax credits and deductible temporary differences can be utilized. Generally, in determining the amounts of deferred tax assets to be recognized, management uses historical profitability information and, if relevant, forecasted operating results, based upon approved business plans, including a review of the eligible carry-forward periods, tax planning opportunities and other relevant considerations. As of December 31, 2020 and December 31, 2019, the Group had temporary differences associated with the Group’s parent company’s investments in subsidiaries, branches and associates and interests in joint ventures of € 24 million and € 20 million respectively, in respect of which no deferred tax liabilities were recognized. 349 Deutsche Bank Annual Report 2020 Additional notes 35 – Derivatives 35 – Derivatives Derivative financial instruments and hedging activities Derivative contracts used by the Group include swaps, futures, forwards, options and other similar types of contracts. In the normal course of business, the Group enters into a variety of derivative transactions for sales, market-making and risk man- agement purposes. The Group’s objectives in using derivative instruments are to meet customers’ risk management needs and to manage the Group’s exposure to risks. In accordance with the Group’s accounting policy relating to derivatives and hedge accounting as described in Note 1 “Signif- icant Accounting Policies and Critical Accounting Estimates”, all derivatives are carried at fair value in the balance sheet regardless of whether they are held for trading or non-trading purposes. Derivatives held for sales and market-making purposes Sales and market-making The majority of the Group’s derivatives transactions relate to sales and market-making activities. Sales activities include the structuring and marketing of derivative products to customers to enable them to take, transfer, modify or reduce current or expected risks. Market-making involves quoting bid and offer prices to other market participants, enabling revenue to be generated based on spreads and volume. Risk management The Group uses derivatives in order to reduce its exposure to market risks as part of its asset and liability management. This is achieved by entering into derivatives that hedge specific portfolios of fixed rate financial instruments and forecast transac- tions as well as strategic hedging against overall balance sheet exposures. The Group actively manages interest rate risk through, among other things, the use of derivative contracts. Utilization of derivative financial instruments is modified from time to time within prescribed limits in response to changing market conditions, as well as to changes in the characteristics and mix of the related assets and liabilities. Derivatives qualifying for hedge accounting The Group applies hedge accounting if derivatives meet the specific criteria described in Note 1 “Significant Accounting Poli- cies and Critical Accounting Estimates”. In fair value hedge relationship, the Group uses primarily interest rate swaps and options, in order to protect itself against movements in the fair value of fixed-rate financial instruments due to movements in market interest rates. In a cash flow hedge relationship, the Group uses interest rate swaps in order to protect itself against exposure to variability in interest rates. The Group enters into foreign exchange forwards and swaps for hedges of translation adjustments resulting from translating the financial statements of net investments in foreign operations into the reporting currency of the parent at period end spot rates. Interest rate risk The Group uses interest rate swaps and options to manage its exposure to interest rate risk by modifying the re-pricing characteristics of existing and/or forecasted assets and liabilities, including funding and investment activities. The interest rate swaps and options are designated in either a fair value hedge or a cash flow hedge. For fair value hedges, the Group uses interest rate swaps and options contracts to manage the fair value movements of fixed rate financial instruments due to changes in benchmark interest. For cash flow hedges, we use interest rate swaps to manage the exposure to cash flow variability of our variable rate instruments as a result of changes in benchmark interest rates. The Group manages its interest rate risk exposure on a portfolio basis with frequent changes in the portfolio due to the origi- nation of new loans and bonds, repayments of existing loans and bonds, issuance of new funding liabilities and repayment of existing funding liabilities. Accordingly, a dynamic hedging accounting approach is adopted for the portfolio, in which individual hedge relationships are designated and de-designated on a more frequent basis (e.g. on a monthly basis). The Group assesses and measures hedge effectiveness of a hedging relationship based on the change in the fair value or cash flows of the derivative hedging instrument relative to the change in the fair value or cash flows of the hedged item attributable to the hedged risk. Potential sources of ineffectiveness can be attributed to differences between hedging instru- ments and hedged items: 350 Deutsche Bank Annual Report 2020 Additional notes 35 – Derivatives – Mismatches in the terms of hedged items and hedging instruments, for example the frequency and timing of when interest rates are reset, frequency of payment and callable features. – Difference in the discounting rate applied to the hedged item and the hedging instrument, taking into consideration differ- ences in the reset frequency of the hedged item and hedging instrument. – Derivatives used as hedging instrument with a non-zero fair value at inception date of the hedging relationship, resulting in mismatch in terms with the hedged item. Foreign exchange risk The Group manages its foreign currency risk (including U.S. dollar and British pound) from investments in foreign operation through net investment hedges using a combination of foreign exchange forwards and swaps as hedging instruments. As the investments in foreign operations are only hedged to the extent of the notional amount of the hedging derivative instru- ment the Group generally does not expect to incur significant ineffectiveness on hedges of net investments in foreign opera- tions. Potential sources of ineffectiveness are limited to situations where derivatives with a non-zero fair value at inception date of the hedging relationship are used as hedging instrument, or where the spot foreign currency risk has been designated as hedged risk, resulting in mismatch in terms with the hedged item. Description of significant assumptions and judgements on the application of in- terest rate benchmark reform accounting The main judgement to make regarding the application of IASB Phase 1 benchmark reform surrounded the development of Euribor. The Group expects that Euribor will continue to exist in its current form as a benchmark rate for the foreseeable future. For these reasons, the Group does not consider its hedge accounting, with Euribor as the hedged risk, to be directly affected by interest rate benchmark reform at December 31, 2020. Hedge Accounting and Interest Rate Benchmarks The table below shows the Group’s hedge accounting relationships impacted by the IASB Benchmark Reform amendments, the significant interest rate benchmarks the Group is exposed to which are subject to expected future reform, and the nominal amounts of the derivative hedging instruments as at December 31, 2020. The derivative hedging instruments provide a close approximation to the extent of the risk exposure the Group manages through hedge accounting relationships. in € m. Fair value hedge CHF LIBOR GBP LIBOR JPY LIBOR USD LIBOR Fair value hedge accounting Derivatives held as fair value hedges in € m. Derivatives held as fair value hedges in € m. Result of fair value hedges Dec 31, 2020 Notional 493 2,073 1,383 20,877 2019 Fair Value changes used for hedge effectiveness Dec 31, 2020 2020 Dec 31, 2019 Assets Liabilities Fair Value changes used for hedge effectiveness Nominal amount Assets Liabilities Nominal amount 7,015 2,835 143,047 757 5,385 878 118,125 811 2020 Hedge ineffectiveness 14 2019 Hedge ineffectiveness (343) 351 Deutsche Bank Annual Report 2020 Additional notes 35 – Derivatives Financial instruments designated as fair value hedges Carrying amount of Financial instruments designated as fair value hedges Accumulated amount of fair value hedge adjustments - Total Dec 31, 2020 2020 Accumulated amount of fair value hedge adjustments - Terminated hedge relationships Fair Value changes used for hedge effectiveness in € m. Financial assets at fair value through other comprehensive income Bonds at amortized cost Long-term debt Deposits Loans at amortized cost Assets Liabilities Assets Liabilities Assets Liabilities 25,568 831 0 0 16,354 0 0 57,883 54,730 0 100 22 0 0 303 0 0 4,196 265 0 2 4 0 0 0 0 0 629 21 0 12 63 (1,132) (4) 318 Carrying amount of Financial instruments designated as fair value hedges Accumulated amount of fair value hedge adjustments - Total Dec 31, 2019 2019 Accumulated amount of fair value hedge adjustments - Terminated hedge relationships Fair Value changes used for hedge effectiveness in € m. Financial assets at fair value through other comprehensive income Loans at amortized cost Long-term debt Deposits Assets Liabilities Assets Liabilities Assets Liabilities 11,496 3,185 0 0 0 0 80,078 0 327 82 0 0 0 0 3,822 0 58 (1) 0 0 0 0 417 0 481 100 (1,734) 0 Cash flow hedge accounting Derivatives held as cash flow hedges in € m. Derivatives held as cash flow hedges Dec 31, 2020 2020 Fair Value changes used for hedge effectiveness Nominal amount Dec 31, 2019 2019 Fair Value changes used for hedge effectiveness Nominal amount Assets Liabilities Assets Liabilities 79 0 6,171 (14) 25 0 2,714 (2) Cash flow hedge balances in € m. Reported in Equity1 thereof relates to terminated programs Gains (losses) posted to equity for the year ended Gains (losses) removed from equity for the year ended thereof relates to terminated programs Dec 31, 2020 Dec 31, 2019 11 0 (14) 4 0 (7) (12) 21 0 (2) (2) 0 0 0 Dec 31, 2018 25 0 (3) 0 0 0 0 Changes of hedged item's value used for hedge effectiveness Ineffectiveness recorded within P&L 1 Reported in equity refers to accumulated other comprehensive income as presented in the Consolidated Balance Sheet. In accordance with IAS 39.96 the gains and losses posted to equity in a cash flow hedge relationship is the lesser of cumulative gain or loss on the hedging instrument from the inception of the hedge and the cumulative change in fair value of the expected future cash flows on the hedged item from inception of the hedge. As a result, changes of the hedged item’s value used for hedge effectiveness are not fully recorded in equity if it exceeds the hedging instrument’s fair value changes used for hedge effectiveness. Consequently, hedge ineffectiveness recorded within P&L does not always reconcile to the difference between the changes of the hedged item’s value used for hedge effectiveness and the hedging instrument’s fair value changes used for hedge effectiveness. As of December 31, 2020 the longest term cash flow hedge matures in 2025. The financial instruments designated as cash flow hedges are recognized as Loans at amortized cost in the Group’s Consolidated Balance Sheet. 352 Deutsche Bank Annual Report 2020 Additional notes 35 – Derivatives Net investment hedge accounting Derivatives held as net investment hedges in € m. Derivatives held as net investment hedges Dec 31, 2020 2020 Fair Value changes used for hedge effectiveness Nominal amount Dec 31, 2019 2019 Fair Value changes used for hedge effectiveness Nominal amount Assets Liabilities Assets Liabilities 1,617 408 40,277 1,933 556 957 43,546 (413) 2020 2019 in € m. Result of net investment hedges 1 Reported in equity refers to accumulated other comprehensive income as presented in the Consolidated Balance Sheet. Fair value changes recognised in Equity1 (1,415) Hedge ineffectiveness Fair value changes recognised in Equity1 (186) 795 Hedge ineffectiveness (386) Profile of derivatives held as net investment hedges in € m. As of December 31, 2020 Nominal amount Foreign exchange forwards Nominal amount Foreign exchange swaps Total As of December 31, 2019 Nominal amount Foreign exchange forwards Nominal amount Foreign exchange swaps Total Within 1 year 1–3 years 3–5 years Over 5 years 40,217 0 40,217 32,702 3,337 36,039 60 0 60 78 3,820 3,898 0 0 0 0 579 579 0 0 0 0 3,030 3,030 The Group uses a combination of a rolling foreign exchange forward strategy and a static foreign currency swap hedging strategy. Over the past 2 financial years, the average foreign currency rate for the Group’s foreign currency Euro/USD swap portfolio was 0.85. 353 Deutsche Bank Annual Report 2020 Additional notes 36 – Related party transactions 36 – Related party transactions Parties are considered to be related if one party has the ability to directly or indirectly control the other party or exercise significant influence over the other party in making financial or operational decisions. The Group’s related parties include: – key management personnel including close family members and entities which are controlled, significantly influenced by, or for which significant voting power is held by key management personnel or their close family members, – subsidiaries, joint ventures and associates and their respective subsidiaries, and – post-employment benefit plans for the benefit of Deutsche Bank employees. Transactions with Key Management Personnel Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of Deutsche Bank, directly or indirectly. The Group considers the members of the Management Board and of the Supervisory Board of the parent company to constitute key management personnel for purposes of IAS 24. Compensation expense of key management personnel in € m. Short-term employee benefits Post-employment benefits Other long-term benefits Termination benefits Share-based payment Total 2020 2019 30 7 2 0 8 47 32 6 6 34 21 99 2018 41 10 2 32 2 87 The above table does not contain compensation that employee representatives and former board members on the Supervisory Board have received. The aggregated compensation paid to such members for their services as employees of Deutsche Bank or status as former employees (retirement, pension and deferred compensation) amounted to € 1 million as of Decem- ber 31, 2020, € 1 million as of December 31, 2019 and € 1 million as of December 31, 2018. Among the Group’s transactions with key management personnel as of December 31, 2020 were loans and commitments of € 8 million and deposits of € 21 million. As of December 31, 2019, the Group’s transactions with key management personnel were loans and commitments of € 10 million and deposits of € 38 million. In addition, the Group provides banking services, such as payment and account services as well as investment advice, to key management personnel. Transactions with Subsidiaries, Joint Ventures and Associates Transactions between Deutsche Bank AG and its subsidiaries meet the definition of related party transactions. If these trans- actions are eliminated on consolidation, they are not disclosed as related party transactions. Transactions between the Group and its associated companies and joint ventures and their respective subsidiaries also qualify as related party transactions. Transactions for subsidiaries, joint ventures and associates are presented combined in below table as these are not material individually. Loans in € m. Loans outstanding, beginning of year Net movement in loans during the period Changes in the group of consolidated companies Exchange rate changes/other Loans outstanding, end of year1 Other credit risk related transactions: 0 Allowance for loan losses 0 Provision for loan losses Guarantees and commitments 7 1 Loans past due were € 0 million as of December 31, 2020 and € 0 million as of December 31, 2019. For the total loans the Group held collateral of € 5 million and € 5 million 2020 228 (19) 0 5 214 2019 228 (3) 0 4 228 0 0 42 as of December 31, 2020 and December 31, 2019, respectively. 354 Deutsche Bank Annual Report 2020 Additional notes 37 – Information on subsidiaries Deposits in € m. Deposits outstanding, beginning of year Net movement in deposits during the period Changes in the group of consolidated companies Exchange rate changes/other Deposits outstanding, end of year Other Transactions 2020 58 (8) 0 (0) 49 2019 68 (11) 0 1 58 Trading assets and positive market values from derivative financial transactions with associated companies amounted to € 1 million as of December 31, 2020 and € 1 million as of December 31, 2019. Trading liabilities and negative market values from derivative financial transactions with associated companies amounted to € 0 million as of December 31, 2020 and € 0 million as of December 31, 2019. Other assets related to transactions with associated companies amounted to € 55 million as of December 31, 2020, and € 1 million as of December 31, 2019. Other liabilities related to transactions with associated companies were € 2 million as of December 31, 2020, and € 0 million as of December 31, 2019. Transactions with Pension Plans Under IFRS, post-employment benefit plans are considered related parties. The Group has business relationships with a number of its pension plans pursuant to which it provides financial services to these plans, including investment management services. The Group’s pension funds may hold or trade Deutsche Bank shares or securities. Transactions with related party pension plans in € m. Equity shares issued by the Group held in plan assets Other assets Fees paid from plan assets to asset managers of the Group Market value of derivatives with a counterparty of the Group Notional amount of derivatives with a counterparty of the Group 1 Prior year figures have been restated due to the consideration of defined contribution plans. 37 – Information on subsidiaries Composition of the Group 2020 1 24 24 306 14,623 2019¹ 1 10 24 (184) 9,083 Deutsche Bank AG is the direct or indirect holding company for the Group’s subsidiaries. The Group consists of 628 (2019: 666 ) consolidated entities, thereof 242 (2019: 249) consolidated structured entities. 420 (2019: 459) of the entities controlled by the Group are directly or indirectly held by the Group at 100 % of the ownership interests (share of capital). Third parties also hold ownership interests in 208 (2019: 207) of the consolidated entities (non- controlling interests). As of December 31, 2020 and 2019, one subsidiary has material non-controlling interests. Non-control- ling interests for all other subsidiaries are neither individually nor cumulatively material to the Group. Subsidiaries with material non-controlling interests DWS Group GmbH & Co. KGaA Proportion of ownership interests and voting rights held by non-controlling interests Place of business Dec 31, 2020 Dec 31, 2019 20.51 % Global 20.51 % Global 355 Deutsche Bank Annual Report 2020 Additional notes 37 – Information on subsidiaries in € m Net income attributable to non-controlling interests Accumulated non-controlling interests of the subsidiary Dividends paid to non-controlling interests Summarised financial information: Total assets Total liabilities Total net revenues Net income (loss) Total comprehensive income (loss), net of tax Dec 31, 2020 117 1,412 69 10,448 3,685 2,237 558 259 Dec 31, 2019 105 1,420 56 10,952 4,100 2,389 512 583 Significant restrictions to access or use the Group’s assets Statutory, contractual or regulatory requirements as well as protective rights of noncontrolling interests might restrict the ability of the Group to access and transfer assets freely to or from other entities within the Group and to settle liabilities of the Group. Since the Group did not have any material noncontrolling interests at the balance sheet date, any protective rights associated with these did not give rise to significant restrictions. The following restrictions impact the Group’s ability to use assets: – The Group has pledged assets to collateralize its obligations under repurchase agreements, securities financing transac- tions, collateralized loan obligations and for margining purposes for OTC derivative liabilities. – The assets of consolidated structured entities are held for the benefit of the parties that have bought the notes issued by these entities. – Regulatory and central bank requirements or local corporate laws may restrict the Group’s ability to transfer assets to or from other entities within the Group in certain jurisdictions. Restricted assets in € m. Interest-earning deposits with banks Financial assets at fair value through profit or loss Financial assets at fair value through other comprehensive income Loans at amortized cost Other Total Total assets 152,143 527,941 55,834 426,995 162,346 1,325,259 Dec 31, 2020 Restricted assets 153 52,494 8,110 78,144 3,316 142,217 Total assets 104,327 530,713 45,503 429,841 187,290 1,297,674 Dec 31, 2019 Restricted assets 159 43,190 2,943 71,369 3,017 120,678 The table above excludes assets that are not encumbered at an individual entity level but which may be subject to restrictions in terms of their transferability within the Group. Such restrictions may be based on local connected lending requirements or similar regulatory restrictions. In this situation, it is not feasible to identify individual balance sheet items that cannot be trans- ferred. This is also the case for regulatory minimum liquidity requirements. The Group identifies the volume of liquidity reserves in excess of local stress liquidity outflows. The aggregate amount of such liquidity reserves that are considered restricted for this purpose is € 43.5 billion as of December 31, 2020 (as of December 31, 2019: € 31.2 billion). 356 Deutsche Bank Annual Report 2020 Additional notes 38 – Structured entities 38 – Structured entities Nature, purpose and extent of the Group’s interests in structured entities The Group engages in various business activities with structured entities which are designed to achieve a specific business purpose. A structured entity is one that has been set up so that any voting rights or similar rights are not the dominant factor in deciding who controls the entity. An example is when voting rights relate only to administrative tasks and the relevant activities are directed by contractual arrangements. A structured entity often has some or all of the following features or attributes: – Restricted activities; – A narrow and well defined objective; – Insufficient equity to permit the structured entity to finance its activities without subordinated financial support; – Financing in the form of multiple contractually linked instruments to investors that create concentrations of credit or other risks (tranches). The principal uses of structured entities are to provide clients with access to specific portfolios of assets and to provide market liquidity for clients through securitizing financial assets. Structured entities may be established as corporations, trusts or part- nerships. Structured entities generally finance the purchase of assets by issuing debt and equity securities that are collateral- ized by and/or indexed to the assets held by the structured entities. The debt and equity securities issued by structured entities may include tranches with varying levels of subordination. Structured entities are consolidated when the substance of the relationship between the Group and the structured entities indicate that the structured entities are controlled by the Group, as discussed in Note 1 “Significant Accounting Policies and Critical Accounting Estimates”. Consolidated structured entities The Group has contractual arrangements which may require it to provide financial support to the following types of consoli- dated structured entities. Securitization vehicles The Group uses securitization vehicles for funding purchase of diversified pool of assets. The Group provides financial support to these entities in the form of liquidity facility. As of December 31, 2020, and December 31, 2019, there were no outstanding loan commitments to these entities. Funds The Group may provide funding and liquidity facility or guarantees to funds consolidated by the group. As of Decem- ber 31, 2020 and December 31, 2019, the notional value of the liquidity facilities and guarantees provided by the Group to such funds was € 1.0 billion and € 1.8 billion, respectively. Deutsche Bank did not provide non-contractual support during the year to consolidated structured entities. Unconsolidated structured entities These are entities which are not consolidated because the Group does not control them through voting rights, contract, funding agreements, or other means. The extent of the Group’s interests to unconsolidated structured entities will vary depending on the type of structured entities. Below is a description of the Group’s involvements in unconsolidated structured entities by type. Repackaging and investment entities Repackaging and investment entities are established to meet clients’ investment needs through the combination of securities and derivatives. These entities are not consolidated by the Group because the Group does not have power to influence the returns obtained from the entities. These entities are usually set up to provide a certain investment return pre-agreed with the investor, and the Group is not able to change the investment strategy or return during the life of the transaction. 357 Deutsche Bank Annual Report 2020 Additional notes 38 – Structured entities Third party funding entities The Group provides funding to structured entities that hold a variety of assets. These entities may take the form of funding entities, trusts and private investment companies. The funding is collateralized by the asset in the structured entities. The group’s involvement involves predominantly both lending and loan commitments. The vehicles used in these transactions are controlled by the borrowers where the borrowers have the ability to decide whether to post additional margin or collateral in respect of the financing. In such cases, where borrowers can decide to continue or terminate the financing, the borrowers will consolidate the vehicle. Securitization Vehicles The Group establishes securitization vehicles which purchase diversified pools of assets, including fixed income securities, corporate loans, and asset-backed securities (predominantly commercial and residential mortgage-backed securities and credit card receivables). The vehicles fund these purchases by issuing multiple tranches of debt and equity securities, the repayment of which is linked to the performance of the assets in the vehicles. The Group may transfer assets to these securitization vehicles and provides financial support to these entities in the form of liquidity facilities. The Group also invests and provides liquidity facilities to third party sponsored securitization vehicles. The securitization vehicles that are not consolidated into the Group are those where the Group does not hold the power or ability to unilaterally remove the servicer or special servicer who has been delegated power over the activities of the entity. Funds The Group establishes structured entities to accommodate client requirements to hold investments in specific assets. The Group also invests in funds that are sponsored by third parties. A group entity may act as fund manager, custodian or some other capacity and provide funding and liquidity facilities to both group sponsored and third party funds. The funding provided is collateralized by the underlying assets held by the fund. The Group does not consolidate funds when Deutsche Bank is deemed agent or when another third party investor has the ability to direct the activities of the fund. Other These are Deutsche Bank sponsored or third party structured entities that do not fall into any criteria above. These entities are not consolidated by the Group when the Group does not hold power over the decision making of these entities. Income derived from involvement with structured entities The Group earns management fees and, occasionally, performance-based fees for its investment management service in relation to funds. Interest income is recognized on the funding provided to structured entities. Any trading revenue as a result of derivatives with structured entities and from the movements in the value of notes held in these entities is recognized in ‘Net gains/losses on financial assets/liabilities held at fair value through profit and loss’. Interests in unconsolidated structured entities The Group’s interests in unconsolidated structured entities refer to contractual and non-contractual involvement that exposes the Group to variability of returns from the performance of the structured entities. Examples of interests in unconsolidated structured entities include debt or equity investments, liquidity facilities, guarantees and certain derivative instruments in which the Group is absorbing variability of returns from the structured entities. Interests in unconsolidated structured entities exclude instruments which introduce variability of returns into the structured entities. For example, when the Group purchases credit protection from an unconsolidated structured entity whose purpose and design is to pass through credit risk to investors, the Group is providing the variability of returns to the entity rather than absorbing variability. The purchased credit protection is therefore not considered as an interest for the purpose of the table below. Maximum exposure to unconsolidated structured entities The maximum exposure to loss is determined by considering the nature of the interest in the unconsolidated structured entity. The maximum exposure for loans and trading instruments is reflected by their carrying amounts in the consolidated balance sheet. The maximum exposure for derivatives and off balance sheet commitments such as guarantees, liquidity facilities and loan commitments under IFRS 12, as interpreted by the Group, is reflected by the notional amounts. Such amounts or their development do not reflect the economic risks faced by the Group because they do not take into account the effects of collat- eral or hedges nor the probability of such losses being incurred. At December 31, 2020, the notional related to the positive and negative replacement values of derivatives and off balance sheet commitments were € 78 billion, € 238 billion and 358 Deutsche Bank Annual Report 2020 Additional notes 38 – Structured entities € 16 billion respectively. At December 31, 2019, the notional related to the positive and negative replacement values of deriv- atives and off balance sheet commitments were € 136 billion, € 506 billion and € 16 billion respectively. Size of structured entities The Group provides a different measure for size of structured entities depending on their type. The following measures have been considered as appropriate indicators for evaluating the size of structured entities: – Funds – Net asset value or assets under management where the Group holds fund units and notional of derivatives when the Group’s interest comprises of derivatives. – Securitizations – notional of notes in issue (excluding interest only and excess notes where applicable) when the Group derives its interests through notes its holds and notional of derivatives when the Group’s interests is in the form of deriva- tives. – Third party funding entities –Total assets in entities – Repackaging and investment entities – Fair value of notes in issue For Third party funding entities, size information is not publicly available, therefore the Group has disclosed the greater of the collateral the Group has received/pledged or the notional of the exposure the Group has to the entity. Based on the above definitions, the total size of structured entities is € 1,878 billion, of which the majority of € 1,088 billion is from Funds. In 2019, it was € 2,091 billion and € 1,617 billion respectively. The following table shows, by type of structured entity, the carrying amounts of the Group’s interests recognized in the con- solidated statement of financial position as well as the maximum exposure to loss resulting from these interests.The carrying amounts presented below do not reflect the true variability of returns faced by the Group because they do not take into account the effects of collateral or hedges. Carrying amounts and size relating to Deutsche Bank’s interests in € m. Assets Cash and central bank balances Interbank balances (w/o central banks) Central bank funds sold and securities purchased under resale agreements Securities Borrowed Total financial assets at fair value through profit or loss Trading assets Positive market values (derivative financial instruments) Non-trading financial assets mandatory at fair value through profit or loss Financial assets designated at fair value through profit or loss Financial assets at fair value through other comprehensive in- come Loans at amortized cost Other assets Total assets Liabilities Total financial liabilities at fair value through profit or loss Negative market values (derivative financial instruments) Other short-term borrowings Other liabilities Total liabilities Off-balance sheet exposure Total Repacka- ging and Investment Entities Third Party Funding Entities Securiti- zations Dec 31, 2020 Funds Total 0 1 0 0 0 0 126 0 0 0 0 0 0 12 1,901 0 340 181 6,368 4,134 4,428 2,408 50,316 4,304 0 13 2,027 0 61,452 11,027 158 154 31 3,635 3,977 0 2,080 1,990 42,377 46,448 0 0 0 0 0 0 165 51 557 333 46,867 400 54,096 457 27,638 3,065 35,587 270 10,270 20,499 83,267 1,060 84,939 24,015 173,508 92 58 10 11,191 11,351 92 0 0 92 0 466 58 0 0 58 5,889 59,927 10 0 0 10 8,279 43,856 11,191 0 1,815 13,006 1,944 72,205 11,351 0 1,815 13,166 16,112 176,453 359 Deutsche Bank Annual Report 2020 Additional notes 38 – Structured entities in € m. Assets Cash and central bank balances Interbank balances (w/o central banks) Central bank funds sold and securities purchased under resale agreements Securities Borrowed Total financial assets at fair value through profit or loss Trading assets Positive market values (derivative financial instruments) Non-trading financial assets mandatory at fair value through profit or loss Financial assets designated at fair value through profit or loss Financial assets at fair value through other comprehensive in- come Loans at amortized cost Other assets Total assets Liabilities Total financial liabilities at fair value through profit or loss Negative market values (derivative financial instruments) Other short-term borrowings Other liabilities Total liabilities Off-balance sheet exposure Total Repacka- ging and Investment Entities Third Party Funding Entities Securiti- zations Dec 31, 2019 Funds Total 0 1 0 0 0 6 603 0 0 0 8 0 0 35 2,613 3 262 199 6,035 4,033 6,257 4,371 54,853 5,361 0 42 3,224 3 67,408 13,964 63 176 32 2,777 3,049 0 1,820 1,854 46,715 50,389 0 6 0 0 6 0 151 0 414 221 44,284 332 51,481 491 36,183 3,894 46,834 106 9,842 17,863 85,316 818 90,460 22,089 184,044 44 27 5 8,865 8,941 44 0 0 44 1 371 27 0 0 27 4,793 56,247 5 0 0 5 9,358 56,187 8,865 0 2,257 11,122 2,245 76,439 8,941 0 2,257 11,197 16,396 189,243 Trading assets –Total trading assets as of December 31, 2020 and December 31, 2019 of € 11.0 billion and € 14.0 billion are comprised primarily of € 2.4 billion and € 4.4 billion in Securitizations and € 4.3 billion and € 5.4 billion in Funds structured entities respectively. The Group’s interests in securitizations are collateralized by the assets contained in these entities. Where the Group holds fund units these are typically in regards to market making in funds or otherwise serve as hedges for notes issued to clients. Moreover the credit risk arising from loans made to Third party funding structured entities is mitigated by the collateral received. Non-trading financial assets mandatory at fair value through profit or loss – Reverse repurchase agreements to Funds com- prise the majority of the interests in this category and are collateralized by the underlying securities. Loans – Loans as of December 31, 2020 and December 31, 2019 consist of € 84.9 billion and € 90.5 billion investment in securitization tranches and financing to Third party funding entities. The Group’s financing to Third party funding entities is collateralized by the assets in those structured entities. Other assets – Other assets as of December 31, 2020 and December 31, 2019 of € 24.0 billion and € 22.1 billion, respectively, consist primarily of prime brokerage receivables and cash margin balances. Pending Receivables – Pending Receivable balances are not included in this disclosure note due to the fact that these balances arise from typical customer supplier relationships out of e.g. brokerage type activities and their inherent volatility would not provide users of the financial statements with effective information about Deutsche Bank’s exposures to structured entities. Financial support Deutsche Bank did not provide non-contractual support during the year to unconsolidated structured entities. 360 Deutsche Bank Annual Report 2020 Additional notes 39 – Current and non-current assets and liabilities Sponsored unconsolidated structured entities where the Group has no interest as of December 31, 2020 and December 31, 2019. As a sponsor, the Group is involved in the legal set up and marketing of the entity and supports the entity in different ways, namely: – transferring assets to the entities – providing seed capital to the entities – providing operational support to ensure the entity’s continued operation – providing guarantees of performance to the structured entities. The Group is also deemed a sponsor for a structured entity if market participants would reasonably associate the entity with the Group. Additionally, the use of the Deutsche Bank name for the structured entity indicates that the Group has acted as a sponsor. The gross revenues from sponsored entities where the Group did not hold an interest as of December 31, 2020 and Decem- ber 31, 2019 were € (134) million and € 145 million respectively. Instances where the Group does not hold an interest in an unconsolidated sponsored structured entity include cases where any seed capital or funding to the structured entity has al- ready been repaid in full to the Group during the year. This amount does not take into account the impacts of hedges and is recognized in Net gains/losses on financial assets/liabilities at fair value through profit and loss. The aggregated carrying amounts of assets transferred to sponsored unconsolidated structured entities in 2020 were € 1.4 billion for securitization and € 1.2 billion for repackaging and investment entities. In 2019, they were € 0.3 billion for securitization and € 2.2 billion for repackaging and investment entities. 39 – Current and non-current assets and liabilities Asset and liability line items by amounts recovered or settled within or after one year Asset items as of December 31, 2020 in € m. Cash and central bank balances Interbank balances (w/o central banks) Central bank funds sold and securities purchased under resale agreements Securities borrowed Financial assets at fair value through profit or loss Financial assets at fair value through other comprehensive income Equity method investments Loans at amortized cost Property and equipment Goodwill and other intangible assets Other assets Assets for current tax Total assets before deferred tax assets Deferred tax assets Total assets Amounts recovered or settled Total within one year after one year 166,208 9,120 4,728 0 515,614 14,393 0 111,892 0 0 94,685 300 916,939 0 11 3,805 0 12,327 41,441 901 315,103 5,549 6,725 15,714 686 402,262 Dec 31, 2020 166,208 9,130 8,533 0 527,941 55,834 901 426,995 5,549 6,725 110,399 986 1,319,201 6,058 1,325,259 361 Deutsche Bank Annual Report 2020 Additional notes 40 – Events after the reporting period Liability items as of December 31, 2020 in € m. Deposits Central bank funds purchased and securities sold under repurchase agreements Securities loaned Financial liabilities at fair value through profit or loss Other short-term borrowings Other liabilities Provisions Liabilities for current tax Long-term debt Trust preferred securities Total liabilities before deferred tax liabilities Deferred tax liabilities Total liabilities Asset items as of December 31, 2019 in € m. Cash and central bank balances Interbank balances (w/o central banks) Central bank funds sold and securities purchased under resale agreements Securities borrowed Financial assets at fair value through profit or loss Financial assets at fair value through other comprehensive income Equity method investments Loans at amortized cost Property and equipment Goodwill and other intangible assets Other assets Assets for current tax Total assets before deferred tax assets Deferred tax assets Total assets Liability items as of December 31, 2019 in € m. Deposits Central bank funds purchased and securities sold under repurchase agreements Securities loaned Financial liabilities at fair value through profit or loss Other short-term borrowings Other liabilities Provisions Liabilities for current tax Long-term debt Trust preferred securities Total liabilities before deferred tax liabilities Deferred tax liabilities Total liabilities Amounts recovered or settled Total within one year after one year 544,669 1,830 1,698 416,042 3,553 112,617 2,430 328 59,626 1,321 1,144,113 23,362 495 0 3,157 0 1,592 0 246 89,537 0 118,389 Dec 31, 2020 568,031 2,325 1,698 419,199 3,553 114,208 2,430 574 149,163 1,321 1,262,502 561 1,263,063 Amounts recovered or settled Total within one year after one year 137,370 9,613 9,591 428 517,138 12,183 0 115,669 0 0 82,355 405 884,752 222 22 4,210 0 13,576 33,320 929 314,172 4,930 7,029 28,004 521 406,936 Dec 31, 2019 137,592 9,636 13,801 428 530,713 45,503 929 429,841 4,930 7,029 110,359 926 1,291,688 5,986 1,297,674 Amounts recovered or settled Total within one year after one year 546,077 3,057 259 399,943 5,218 105,978 2,622 502 38,088 2,013 1,103,756 26,131 58 0 4,505 0 1,986 0 149 98,384 0 131,214 Dec 31, 2019 572,208 3,115 259 404,448 5,218 107,964 2,622 651 136,473 2,013 1,234,970 545 1,235,515 40 – Events after the reporting period After the reporting date no material events occurred which had a significant impact on our results of operations, financial position and net assets. 362 Deutsche Bank Annual Report 2020 Additional notes 41 – Regulatory capital Information 41 – Regulatory capital Information General definitions The calculation of our own funds incorporates the capital requirements following the “Regulation (EU) No 575/2013 on pru- dential requirements for credit institutions and investment firms” (Capital Requirements Regulation or “CRR”) and the “Di- rective 2013/36/EU on access to the activity of credit institutions and the prudential supervision of credit institutions and in- vestment firms” (Capital Requirements Directive or “CRD”) which have been further amended with subsequent Regulations and Directives. The CRD has been implemented into German law. The information in this section as well as in the section “Development of risk-weighted Assets” is based on the regulatory principles of consolidation. This section refers to the capital adequacy of the group of entities consolidated for banking regulatory purposes pursuant to the CRR and the German Banking Act (“Kreditwesengesetz” or “KWG”). Therein not included are insurance companies or companies outside the finance sector. The total own funds pursuant to the effective regulations as of year-end 2020 comprises Tier 1 and Tier 2 (T2) capital. Tier 1 capital is subdivided into Common Equity Tier 1 (CET 1) capital and Additional Tier 1 (AT1) capital. Common Equity Tier 1 (CET 1) capital consists primarily of common share capital (reduced by own holdings) including related share premium accounts, retained earnings (including losses for the financial year, if any) and accumulated other comprehen- sive income, subject to regulatory adjustments (i.e. prudential filters and deductions), as well as minority interests qualifying for inclusion in consolidated CET1 capital. Prudential filters for CET 1 capital, according to Articles 32 to 35 CRR, include (i) securitization gains on sale, (ii) cash flow hedges and changes in the value of own liabilities, and (iii) additional value adjust- ments. CET 1 capital deductions for instance includes (i) intangible assets, (ii) deferred tax assets that rely on future profita- bility, (iii) negative amounts resulting from the calculation of expected loss amounts, (iv) net defined benefit pension fund assets, (v) reciprocal cross holdings in the capital of financial sector entities and, (vi) significant and non-significant invest- ments in the capital (CET 1, AT1, T2) of financial sector entities above certain thresholds. All items not deducted (i.e., amounts below the threshold) are subject to risk-weighting. Additional Tier 1 (AT1) capital consists of AT1 capital instruments and related share premium accounts as well as noncontrol- ling interests qualifying for inclusion in consolidated AT1 capital and during the transitional period grandfathered instruments. To qualify as AT1 capital under CRR/CRD, instruments must have principal loss absorption through a conversion to common shares or a write-down mechanism allocating losses at a trigger point and must also meet further requirements (perpetual with no incentive to redeem; institution must have full dividend/coupon discretion at all times, etc.). Tier 2 (T2) capital comprises eligible capital instruments, the related share premium accounts and subordinated long-term debt, certain loan loss provisions and noncontrolling interests that qualify for inclusion in consolidated T2 capital. To qualify as T2 capital, capital instruments or subordinated debt must have an original maturity of at least five years. Moreover, eligible capital instruments may inter alia not contain an incentive to redeem, a right of investors to accelerate repayment, or a credit sensitive dividend feature We present in this report certain figures based on the CRR definition of own fund instruments applicable for Additional Tier 1 (AT1) capital and Tier 2 (T2) capital and figures based thereon, including Tier 1, Total Capital and Leverage Ratio) on a “fully loaded” basis. We calculate such “fully loaded” figures excluding the transitional arrangements for own fund instruments as provided in the currently applicable CRR/CRD. For CET 1 instruments there are no transitional provisions. Transitional arrangements are applicable for AT1 and T2 instruments. Capital instruments issued on or prior to December 31, 2011, that no longer qualify as AT1 or T2 capital under the fully loaded CRR/CRD as currently applicable are subject to grandfathering rules during the transitional period and are being phased out from 2013 to 2022 with their recognition capped at 20 % in 2020 and 10 % in 2021 (in relation to the portfolio eligible for grandfathering which was still in issue on December 31, 2012). The current CRR as applicable since June 27, 2019 provides further grandfathering rules for AT1 and T2 instruments issued prior to June 27, 2019. Thereunder, AT1 and T2 instruments issued through special purpose entities are grandfathered until December 31, 2021, and AT1 and T2 instruments that do not meet certain new requirements that apply since June 27, 2019 continue to qualify until June 26, 2025. Instruments issued under UK law which do not fulfill all CRR requirements after the UK has left the European Union are also excluded from our fully loaded definition. Our CET 1 and RWA figures show no difference between CRR/CRD as currently applicable and fully loaded CRR/CRD based on our definition of “fully loaded”. For the comparative numbers as per year-end 2019 we still applied our earlier concept of fully loaded, defined as excluding the transitional arrangements for own funds instruments introduced by the CRR/CRD applicable until June 26, 2019, but reflecting the transitional arrangements introduced by the amendments to the CRR/CRD applicable from June 27, 2019 and further amendments thereafter. 363 Deutsche Bank Annual Report 2020 Additional notes 41 – Regulatory capital Information We believe that these “fully loaded” calculations provide useful information to investors as they reflect our progress against the regulatory capital standards and as many of our competitors have been describing calculations on a “fully loaded” basis. As our competitors’ assumptions and estimates regarding “fully loaded” calculations may vary, however, our “fully loaded” measures may not be comparable with similarly labelled measures used by our competitors. Capital instruments Our Management Board received approval from the 2019 Annual General Meeting to buy back up to 206.7 million shares before the end of April 2024. Thereof 103.3 million shares can be purchased by using derivatives, this includes 41.3 million derivatives with a maturity exceeding 18 months. During the period from the 2019 Annual General Meeting until the 2020 Annual General Meeting (May 20, 2020), 33.8 million shares were purchased. The shares purchased were used for equity compensation purposes in the same period or are to be used in the upcoming period so that the number of shares held in Treasury from buybacks was 10.5 million as of the 2020 Annual General Meeting. The 2020 Annual General Meeting granted our Management Board the approval to buy back up to 206.7 million shares before the end of April 2025. Thereof 103.3 million shares can be purchased by using derivatives, this includes 41.3 million derivatives with a maturity exceeding 18 months. These authorizations substitute the authorizations of the previous year. During the period from the 2020 Annual General Meeting until December 31, 2020, there were not any shares purchased. The shares in inven- tory are to be used in this period or the upcoming period for equity compensation purposes; the number of shares held in Treasury from buybacks was 1.3 million as of December 31, 2020. Since the 2017 Annual General Meeting, and as of December 31, 2020, authorized capital available to the Management Board is € 2,560 million (1,000 million shares). As of December 31, 2020, the conditional capital against cash stands at € 512 million (200 million shares). Additional conditional capital for equity compensation amounts to € 51.2 million (20 million shares). Further, the 2018 Annual General Meeting authorized the issuance of participatory notes and other Hybrid Debt Securities that fulfill the regulatory requirements to qualify as Additional Tier 1 capital with an equivalent value of € 8.0 billion. Our legacy Hybrid Tier 1 capital instruments (substantially all noncumulative trust preferred securities) are not recognized under fully loaded CRR/CRD rules as Additional Tier 1 capital, mainly because they have no write-down or equity conversion feature. During the transitional phase-out period the maximum recognizable amount of Additional Tier 1 instruments from Basel 2.5 compliant issuances as of December 31, 2012 will be reduced at the beginning of each financial year by 10 % or € 1.3 billion, through 2022. For December 31, 2020, this resulted in eligible Additional Tier 1 instruments of € 6.8 billion (i.e. € 5.7 billion newly issued AT1 Notes plus € 1.1 billion of legacy Hybrid Tier 1 instruments recognizable during the transition period). Additional Tier 1 instruments recognized under fully loaded CRR/CRD rules amounted to € 5.7 billion as of December 31, 2020. In 2020, the bank issued AT1 notes amounting to U.S.$ 1.3 billion or an equivalent amount of € 1.2 billion. Further- more, the bank redeemed legacy Hybrid Tier 1 instruments with a notional of U.S.$ 0.8 billion and an eligible equivalent amount of € 0.7 billion. The total of our Tier 2 capital instruments as of December 31, 2020 recognized during the transition period under CRR/CRD was € 6.9 billion (nominal value of € 7.7 billion). Tier 2 instruments recognized under fully loaded CRR/CRD rules amounted to € 6.6 billion (nominal value of € 7.4 billion). In 2020, the bank issued Tier 2 capital instruments with a nominal value of U.S.$ 0.5 billion (equivalent amount of € 0.4 billion) and € 1.3 billion. Minimum capital requirements and additional capital buffers Failure to meet minimum capital requirements can result in supervisory measures such as restrictions of profit distributions or limitations on certain businesses such as lending. We complied with the regulatory capital adequacy requirements in 2020. 364 Deutsche Bank Annual Report 2020 Additional notes 41 – Regulatory capital Information Details on regulatory capital Own Funds Template (incl. RWA and capital ratios) in € m. Common Equity Tier 1 (CET 1) capital: instruments and reserves Capital instruments, related share premium accounts and other reserves Retained earnings Accumulated other comprehensive income (loss), net of tax Independently reviewed interim profits net of any foreseeable charge or dividend1 Other Common Equity Tier 1 (CET 1) capital before regulatory adjustments Common Equity Tier 1 (CET 1) capital: regulatory adjustments Additional value adjustments (negative amount) Other prudential filters (other than additional value adjustments) CRR/CRD Dec 31, 2020 CRR/CRD Dec 31, 2019 45,890 9,784 (1,118) 84 805 55,444 (1,430) (112) 45,780 14,814 537 (5,390) 837 56,579 (1,738) (150) Goodwill and other intangible assets (net of related tax liabilities) (negative amount) (4,635) (6,515) Deferred tax assets that rely on future profitability excluding those arising from temporary differences (net of related tax liabilities where the conditions in Art. 38 (3) CRR are met) (negative amount) Negative amounts resulting from the calculation of expected loss amounts Defined benefit pension fund assets (net of related tax liabilities) (negative amount) Direct, indirect and synthetic holdings by an institution of own CET 1 instruments (negative amount) Direct, indirect and synthetic holdings by the institution of the CET 1 instruments of financial sector entities where the institution has a significant investment in those entities (amount above the 10 % / 15 % thresholds and net of eligible short positions) (negative amount) Deferred tax assets arising from temporary differences (net of related tax liabilities where the conditions in Art. 38 (3) CRR are met) (amount above the 10 % / 15 % thresholds) (negative amount) Other regulatory adjustments2 Total regulatory adjustments to Common Equity Tier 1 (CET 1) capital Common Equity Tier 1 (CET 1) capital Additional Tier 1 (AT1) capital: instruments Capital instruments and the related share premium accounts Amount of qualifying items referred to in Art. 484 (4) CRR and the related share premium accounts subject to phase out from AT1 Additional Tier 1 (AT1) capital before regulatory adjustments Additional Tier 1 (AT1) capital: regulatory adjustments Direct, indirect and synthetic holdings by an institution of own AT1 instruments (negative amount) Residual amounts deducted from AT1 capital with regard to deduction from CET 1 capital dur- ing the transitional period pursuant to Art. 472 CRR Other regulatory adjustments Total regulatory adjustments to Additional Tier 1 (AT1) capital Additional Tier 1 (AT1) capital Tier 1 capital (T1 = CET 1 + AT1) Tier 2 (T2) capital Total capital (TC = T1 + T2) Total risk-weighted assets Capital ratios Common Equity Tier 1 capital ratio (as a percentage of risk-weighted assets) Tier 1 capital ratio (as a percentage of risk-weighted assets) Total capital ratio (as a percentage of risk-weighted assets) (1,353) (99) (772) 0 (1,126) (259) (892) (15) 0 0 (92) (2,252) (10,745) 44,700 (319) (1,417) (12,430) 44,148 5,828 4,676 1,100 6,928 1,813 6,489 (80) N/M 0 (80) 6,848 51,548 6,944 58,492 328,951 13.6 15.7 17.8 (91) N/M 0 (91) 6,397 50,546 5,957 56,503 324,015 13.6 15.6 17.4 N/M – Not meaningful 1 Full year profit is recognized as per ECB Decision (EU) 2015/656 in accordance with the Article 26(2) of Regulation (EU) No 575/2013 (ECB/2015/4). 2 Includes € 0.4 billion capital deduction effective from April 2019 and € 0.3 billion effective from October 2016 based on regular ECB review, € 0.9 billion capital deduction based on ECB guidance on irrevocable payment commitments related to the Single Resolution Fund and the Deposit Guarantee Scheme effective from January 2018 on- 365 Deutsche Bank Annual Report 2020 Additional notes 41 – Regulatory capital Information wards and € 0.7 billion capital deduction effective from December 2020 based on ECB’s supervisory recommendation for a prudential provisioning of non-performing expo- sures. Effective June 30, 2020, we make use of the IFRS 9 transitional provision as per Article 473a of the CRR resulting in CET 1 increase of € 0.1 billion as of December 31, 2020. 3 For the understanding of the term “fully-loaded” please refer to our definition as provided in section “Own Funds”. Reconciliation of shareholders’ equity to Own Funds in € m. Total shareholders’ equity per accounting balance sheet Deconsolidation/Consolidation of entities3 Of which: Additional paid-in capital Retained earnings Accumulated other comprehensive income (loss), net of tax Total shareholders' equity per regulatory balance sheet Minority Interests (amount allowed in consolidated CET 1) Accrual for dividend and AT1 coupons1 Reversal of deconsolidation/consolidation of the position Accumulated other comprehensive income (loss), net of tax, during transitional period Common Equity Tier 1 (CET 1) capital before regulatory adjustments Additional value adjustments Other prudential filters (other than additional value adjustments) Regulatory adjustments relating to unrealized gains and losses pursuant to Art. 467 and 468 CRR Goodwill and other intangible assets (net of related tax liabilities) (negative amount) Deferred tax assets that rely on future profitability Defined benefit pension fund assets (net of related tax liabilities) (negative amount) Direct, indirect and synthetic holdings by the institution of the CET 1 instruments of financial sector entities where the institution has a significant investment in those entities Other regulatory adjustments2 Common Equity Tier 1 capital Dec 31, 2020 54,786 265 0 265 0 55,050 805 (411) 0 55,444 (1,430) (112) 0 (4,635) (1,445) (772) 0 (2,351) 44,700 CRR/CRD Dec 31, 2019 55,857 (116) (12) (220) 116 55,741 837 0 0 56,579 (1,738) (150) 0 (6,515) (1,445) (892) 0 (1,692) 44,148 1 Full year profit is recognized as per ECB Decision (EU) 2015/656 in accordance with the Article 26(2) of Regulation (EU) No 575/2013 (ECB/2015/4). 2 Includes € 0.4 billion capital deduction effective from April 2019 and € 0.3 billion effective from October 2016 based on regular ECB review, € 0.9 billion capital deduction based on ECB guidance on irrevocable payment commitments related to the Single Resolution Fund and the Deposit Guarantee Scheme effective from January 2018 on- wards, € 0.1 billion negative amounts resulting from the calculation of expected loss amounts and € 0.7 billion capital deduction effective from December 2020 based on ECB’s supervisory recommendation for a prudential provisioning of non-performing exposures. Effective June 30, 2020, we make use of the IFRS 9 transitional provision as per Article 473a of the CRR resulting in CET 1 increase of € 0.1 billion as of December 31, 2020. 3 Includes € 0.4 billion increase due to regulatory changes from cost to at-equity treatment of subsidiaries and participations that are only consolidated under IFRS. Capital management Our Treasury function manages solvency, capital adequacy, leverage and bail-in capacity ratios at Group level and locally in each region, as applicable. Treasury implements our capital strategy, which itself is developed by the Group Risk Committee and approved by the Management Board. Treasury, directly or through the Group Asset and Liability Committee, manages, among other things, issuance and repurchase of shares and capital instruments, hedging of capital ratios against foreign exchange swings, setting capacities for key financial resources, design of shareholders’ equity allocation, and regional capital planning. We are fully committed to maintaining our sound capitalization both from an economic and regulatory perspective. We continuously monitor and adjust our overall capital demand and supply in an effort to achieve an appropriate balance of the economic and regulatory considerations at all times and from all perspectives. These perspectives include book equity based on IFRS accounting standards, regulatory and economic capital as well as specific capital requirements from rating agencies. Treasury manages the issuance and repurchase of capital instruments, namely Common Equity Tier 1, Additional Tier 1 and Tier 2 capital instruments as well as TLAC/MREL eligible debt instruments. Treasury constantly monitors the market for liability management trades. Such trades represent a countercyclical opportunity to create Common Equity Tier 1 capital by buying back our issuances below par. Treasury manages the sensitivity of our capital ratios against swings in currencies. For this purpose, Treasury determines which currencies are to be hedged, develops suitable hedging strategies in close cooperation with Risk Management and finally executes these hedges. The capital invested into our foreign subsidiaries and branches in our core currencies Euro, US Dollar, Chinese Renminbi and Pound Sterling is not hedged in order to balance respective effects from movements in capital deduction items and risk weighted assets. The capital invested in non-core currencies is either partly hedged taking capital demand into account or fully hedged. 366 Deutsche Bank Annual Report 2020 Additional notes 42 – Supplementary information to the consolidated financial statements according to Sections 297 (1a) / 315a HGB and the return on assets according to article 26a of the German Banking Act Resource limit setting Usage of key financial resources is influenced through the following governance processes and incentives. Target resource capacities are reviewed in our annual strategic plan in line with our CET 1 and Leverage Ratio ambitions. As a part of our quarterly process, the Group Asset and Liability Committee approves divisional resource limits for total capital demand (defined as the sum of Risk Weighted Assets (RWA) and certain RWA equivalents of Capital Deduction Items) and leverage exposure that are based on the strategic plan but adjusted for market conditions and the short-term outlook. Limits are enforced through a close monitoring process and an excess charging mechanism. Overall regulatory capital requirements are principally driven by either our CET 1 ratio (solvency) or leverage ratio (leverage) requirements, whichever is the more binding constraint. For the internal capital allocation, the combined contribution of each segment to the Group’s Common Equity Tier 1 ratio, the Group’s Leverage ratio and the Group’s Capital Loss under Stress are weighted to reflect their relative importance and level of constraint to the Group. Contributions to the Common Equity Tier 1 ratio and the Leverage ratio are measured through RWA and Leverage Ratio Exposure (LRE). The Group’s Capital Loss under Stress is a measure of the Group’s overall economic risk exposure under a defined stress scenario. Goodwill and other intangible assets are directly allocated to the respective segments, supporting the calculation of the allocated tangible shareholders equity and the respective rate of return. Most of our subsidiaries and a number of our branches are subject to legal and regulatory capital requirements. In developing, implementing and testing our capital and liquidity, we fully take such legal and regulatory requirements into account. Any material capital requests of our branches and subsidiaries across the globe are presented to and approved by the Group Investment Committee prior to execution. Further, Treasury is represented on the Investment Committee of the largest Deutsche Bank pension fund which sets the investment guidelines for this fund. This representation is intended to ensure that pension assets are aligned with pension liabilities, thus protecting our capital base. 42 – Supplementary information to the consolidated financial statements according to Sections 297 (1a) / 315a HGB and the return on assets according to article 26a of the German Banking Act Staff costs in € m. Staff costs: Wages and salaries Social security costs thereof: those relating to pensions Total 1 The comparative number has been restated for the impact of state-mandated pension plan contributions Staff 2020 2019 8,526 1,945 1,111 10,471 9,184 1,958 1,1461 11,142 The average number of effective staff employed in 2020 was 86,756 (2019: 90,584) of whom 38,193 (2019: 39,756) were women. Part-time staff is included in these figures proportionately. An average of 46,948 (2019: 49,290) staff members worked outside Germany. 367 Deutsche Bank Annual Report 2020 Additional notes 42 – Supplementary information to the consolidated financial statements according to Sections 297 (1a) / 315a HGB and the return on assets according to article 26a of the German Banking Act Management Board and Supervisory Board remuneration In accordance with the requirements of the GAS 17, the members of the Management Board collectively received in the 2020 financial year compensation totaling € 40,119,062 (2019: € 34,835,009). Of that, € 22,473,664 (2019: € 20,950,000) was for fixed compensation, € 0 (2019: € 1,750,000) for functional allowances, € 920,833 (2019: € 0) for fixed allowances, € 1,353,072 (2019: € 2,275,594) for fringe benefits and € 15,371,493 (2019: € 9,859,415) for performance-related components. Former members of the Management Board of Deutsche Bank AG or their surviving dependents received € 31,929,318 and € 18,093,988 for the years ended December 31, 2020 and 2019, respectively. Provisions for pension obligations to former members of the Management Board and their surviving dependents amounted to € 223,844,881 and € 206,400,923 at December 31, 2020 and 2019, respectively. The compensation principles for Supervisory Board members are set forth in our Articles of Association. The compensation provisions, which were newly conceived in 2013, were last amended by resolution of the Annual General Meeting on May 18 2017 and became effective on October 5, 2017. The members of the Supervisory Board receive fixed annual compensation. The annual base compensation amounts to € 100,000 for each Supervisory Board member. The Supervisory Board Chairman receives twice that amount and the Deputy Chairperson one and a half times that amount. Members and chairs of the com- mittees of the Supervisory Board are paid additional fixed annual compensation. 75 % of the compensation determined is disbursed to each Supervisory Board member after submitting invoices within the first three month of the following year. The other 25 % is converted by the company at the same time into company shares (notional shares) according to the provisions of the Articles of Association. The share value of this number of shares is paid to the respective Supervisory Board member in February of the year following his departure from the Supervisory Board or the expiration of his term of office according to the provisions of the Articles of Association, provided that the member does not leave the Supervisory Board due to important cause which would have justified dismissal. In case of a change in Supervisory Board membership during the year, compen- sation for the financial year will be paid on a pro rata basis, rounded up/down to full months. For the year of departure, the entire compensation is paid in cash; a forfeiture regulation applies to 25 % of the compensation for that financial year. The members of the Supervisory Board received for the financial year 2020 a total remuneration of € 6,007,083 (2019: € 6,112,499), of which € 4,632,813 will be paid out in spring 2021 (2020: € 4,692,708) according to the provisions of the Articles of Association. Loans and advances granted and contingent liabilities assumed for members of the Management Board amounted to € 6,516,181 and € 8,106,465 and for members of the Supervisory Board amounted to € 1,546,839 and € 1,620,722 for the years ended December 31, 2020 and 2019, respectively. Members of the Supervisory Board repaid € 268,802 loans in 2020. Return on assets Article 26a of the German Banking Act defines the return on assets as net profit divided by average total assets. According to this definition the return on assets was 0.04% and (0.38) % for the years ended December 31, 2020 and 2019, respectively. Information on the parent company Deutsche Bank Aktiengesellschaft is the parent company of Deutsche Bank Group. It is incorporated in Frankfurt am Main and is registered in the Commercial Register of the District Court Frankfurt am Main under registration number HRB 30000. Corporate governance Deutsche Bank AG has approved the Declaration of Conformity in accordance with section 161 of the German Corporation Act (AktG). The declaration is published on Deutsche Bank’s website (www.db.com/ir/en/documents.htm). 368 Deutsche Bank Annual Report 2020 Additional notes 43 – Country by country reporting Principal accountant fees and services Breakdown of fees charged by Ernst & Young GmbH Wirtschaftsprüfungsgesellschaft („EY“) Fee category in € m. Audit fees thereof to EY Audit-related fees thereof to EY Tax-related fees thereof to EY All other fees thereof to EY Total fees Breakdown of fees charged by KPMG AG Fee category in € m. Audit fees thereof to KPMG AG Audit-related fees thereof to KPMG AG Tax-related fees thereof to KPMG AG All other fees thereof to KPMG AG Total fees 2020 53 40 5 4 0 0 0 0 58 2020 0 0 0 0 0 0 0 0 0 2019 0 0 0 0 0 0 0 0 0 2019 60 35 13 7 4 1 0 0 77 The Audit fees include fees for professional services for the audit of Deutsche Bank AG’s annual financial statements and consolidated financial statements and do not include the 2020 audit fees for DWS and its subsidiaries that are not audited by EY. The Audit-related fees include fees for other assurance services required by law or regulations, in particular for financial service specific attestation, for quarterly reviews, for spin-off audits and for merger audits, as well as fees for voluntary assur- ance services, like voluntary audits for internal management purposes and the issuance of comfort letters. Tax-related fees include fees for services relating to the preparation and review of tax returns and related compliance assistance and advice, tax consultation and advice relating to Group tax planning strategies and initiatives and assistance with assessing compliance with tax regulations. 43 – Country by country reporting § 26a KWG requires annual disclosure of certain information by country. The disclosed information is derived from the IFRS Group accounts of Deutsche Bank. It is however not reconcilable to other financial information in this report because of specific requirements published by Bundesbank on December 16, 2014 which include the requirement to present the country infor- mation prior to elimination of cross-border intra group transactions. In line with these Bundesbank requirements, intra group transactions within the same country are eliminated. These eliminations are identical to the eliminations applied for internal management reporting on countries. The geographical location of subsidiaries and branches considers the country of incorporation or residence as well as the relevant tax jurisdiction. For the names, nature of activity and geographical location of subsidiaries and branches, please refer to Note 44 “Shareholdings”. In addition, Deutsche Bank AG and its subsidiaries have German and foreign branches, for ex- ample in London, New York and Singapore. The net revenues are composed of net interest revenues and non-interest reve- nues. 369 Deutsche Bank Annual Report 2020 Additional notes 43 – Country by country reporting in € m. (unless stated otherwise) Australia Austria Belgium Brazil Canada Cayman Islands China Czech Republic France Germany Great Britain Greece Hong Kong Hungary India Indonesia Ireland Israel Italy Japan Jersey Luxembourg Malaysia Mauritius Mexico Netherlands Pakistan Philippines Poland Portugal Qatar Romania Russian Fed. Saudi Arabia Singapore South Africa South Korea Spain Sri Lanka Sweden Switzerland Taiwan Thailand Turkey UAE Ukraine USA Vietnam Net revenues (Turnover) Employees (full-time equivalent) 177 8 165 39 5 2 136 11 61 9,555 3,323 (0) 702 19 670 150 27 0 895 275 1 907 109 20 9 217 16 28 73 12 0 0 45 16 838 9 107 497 16 1 265 75 40 27 11 4 4,908 17 309 74 499 129 13 0 538 44 192 37,315 7,728 9 966 51 12,944 204 408 7 3,460 432 14 510 198 0 19 560 66 1,392 377 45 3 746 1,512 47 1,861 44 206 2,261 58 27 603 135 116 106 191 34 8,136 72 Profit (loss) before income tax (25) (8) 19 (7) 1 0 44 2 13 459 (593) 0 89 2 446 86 1 2 (120) (18) (6) 408 73 19 (13) 44 9 7 8 (1) 2 1 18 (26) 133 (3) 31 (32) 5 (1) 22 35 7 11 7 0 320 5 Dec 31, 2020 Income tax (expense)/ benefit 9 (0) (5) 3 (1) 0 (11) (0) 1 (125) 65 (0) 22 (1) (186) (30) 0 (1) 12 10 (0) (83) (18) (1) (1) (9) (3) (3) (4) (0) (0) (0) (7) (6) (17) (1) (11) 9 (1) 0 (3) (6) (1) (3) (0) 0 (39) (1) 370 Deutsche Bank Annual Report 2020 Additional notes 44 – Shareholdings 44 – Shareholdings 372 Subsidiaries 379 Consolidated structured entities 383 Companies accounted for at equity 385 Other companies, where the holding exceeds 20 % 389 Holdings in large corporations, where the holding exceeds 5 % of the voting rights The following pages show the Shareholdings of Deutsche Bank Group pursuant to Section 313 (2) of the German Commercial Code (“HGB”) as well as to the Guidelines on disclosure requirements under Part Eight of Regulation (EU) No 575/2013 (Template EU LI3). Footnotes: Entity fully consolidated under the regulatory scope. Entity neither consolidated nor deducted under the regulatory scope. Entity under the regulatory scope deducted from own funds according to Articles 36 and 48 CRR. Controlled. Status as shareholder with unlimited liability pursuant to Section 313 (2) Number 6 HGB. General Partnership. Only specified assets and related liabilities (silos) of this entity were consolidated. Not controlled. Joint venture. 1 2 3 4 5 6 7 8 9 10 Accounted for at equity due to significant influence. 11 Classified as Structured Entity not to be accounted for at equity under IFRS. 12 Own funds of € 60.2m / Result of € 1.0m (Business Year 2019). 13 Preliminary Own funds of € 7,631.7m / Result of € (0.7)m (Business Year 2020). 14 Classified as Structured Entity not to be consolidated under IFRS. 15 Preliminary Own funds of € 9,970.2m / Result of € 322.3m (Business Year 2020). 16 Not consolidated or accounted for at equity as classified as non-trading financial assets mandatory at fair value through profit or loss. 17 Own funds of € 0.4m / Result of € 13.7m (Business Year 2019). 18 Own funds of € 17.2m / Result of € 0.8m (Business Year 2019). 19 Entity proportionally consolidated under the regulatory scope. 371 Deutsche Bank Annual Report 2020 Additional notes 44 – Shareholdings Subsidiaries Serial No. 1 2 Name of company Deutsche Bank Aktiengesellschaft ABFS I Incorporated Domicile of company Foot- note Frankfurt am Main Lutherville-Timo- nium Nature of activity Credit Institution 1 Financial Institution Share of Capital in % 100.0 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 ABS MB Ltd. Lutherville-Timo- 1 Financial Institution 100.0 nium Alex. Brown Financial Services Incorporated Lutherville-Timo- 1 Financial Institution 100.0 Alex. Brown Investments Incorporated Alfred Herrhausen Gesellschaft mbH Ambidexter GmbH i.L. Argent Incorporated Baincor Nominees Pty Limited Bainpro Nominees Pty Ltd Baldur Mortgages Limited Bankers Trust Investments Limited (in members' voluntary liquida- tion) Bayan Delinquent Loan Recovery 1 (SPV-AMC), Inc. Betriebs-Center für Banken AG BHW - Gesellschaft für Wohnungswirtschaft mbH BHW Bausparkasse Aktiengesellschaft BHW Holding GmbH Biomass Holdings S.à r.l. Blue Cork, Inc. BNA Nominees Pty Limited Borfield Sociedad Anonima Breaking Wave DB Limited BT Globenet Nominees Limited BTD Nominees Pty Limited Cape Acquisition Corp. CapeSuccess Inc. CapeSuccess LLC Cardales UK Limited (in members' voluntary liquidation) Cardea Real Estate S.r.l. Career Blazers LLC Career Blazers Management Company, Inc. Career Blazers Personnel Services, Inc. Caribbean Resort Holdings, Inc. Cathay Advisory (Beijing) Co., Ltd. Cathay Asset Management Company Limited Cathay Capital Company (No 2) Limited Cedar (Luxembourg) S.à r.l. China Recovery Fund, LLC Cinda - DB NPL Securitization Trust 2003-1 Consumo Srl in Liquidazione Cyrus J. Lawrence Capital Holdings, Inc. D B Investments (GB) Limited D&M Turnaround Partners Godo Kaisha D.B. International Delaware, Inc. DB (Barbados) SRL DB (Malaysia) Nominee (Asing) Sdn. Bhd. DB (Malaysia) Nominee (Tempatan) Sendirian Berhad DB (Pacific) Limited, New York DB Abalone LLC DB Alex. Brown Holdings Incorporated DB Alps Corporation DB Aotearoa Investments Limited DB Asset Finance II S.à r.l. DB Beteiligungs-Holding GmbH DB Boracay LLC DB Capital Investments Sàrl DB Capital Markets (Deutschland) GmbH nium Lutherville-Timo- nium Berlin Frankfurt Lutherville-Timo- nium Sydney Sydney London London Makati City Frankfurt Hameln Hameln Hameln Luxembourg Wilmington Sydney Montevideo London London Sydney Wilmington Wilmington Wilmington London Milan Wilmington Albany Albany New York Beijing Ebène Ebène Luxembourg Wilmington Wilmington Milan Wilmington London Tokyo Wilmington Christ Church Kuala Lumpur Kuala Lumpur New York Wilmington Wilmington Wilmington George Town Luxembourg Frankfurt Wilmington Luxembourg Frankfurt 1 Financial Institution 100.0 2 Other Enterprise 1 Payment Institution 1 Financial Institution 2 Other Enterprise 1 Ancillary Services Undertaking 1 Financial Institution 2 Other Enterprise 1 Financial Institution 1 Ancillary Services Undertaking 1 Financial Institution 1 Credit Institution 1 Financial Holding Company 1 Financial Institution 1 Ancillary Services Undertaking 1 Ancillary Services Undertaking 2 Other Enterprise 1 Ancillary Services Undertaking 2 Other Enterprise 2 Other Enterprise 3 Financial Institution 3 Ancillary Services Undertaking 3 Financial Institution 2 Other Enterprise 1 Ancillary Services Undertaking 3 Financial Institution 2 Other Enterprise 3 Financial Institution 1, 4 Financial Institution 2 Other Enterprise 1 Financial Institution 1 Financial Institution 2 Other Enterprise 1 Financial Institution 1, 4 Financial Institution 1 Financial Institution 1 Financial Institution 1 Financial Holding Company 1 Financial Institution 1 Ancillary Services Undertaking 1 Ancillary Services Undertaking 2 Other Enterprise 2 Other Enterprise 1 Financial Institution 1 Financial Institution 1 Financial Institution 1 Financial Institution 1 Ancillary Services Undertaking 2 Other Enterprise 1 Financial Institution 1 Financial Institution 2 Other Enterprise 1 Financial Holding Company 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 82.6 100.0 100.0 100.0 100.0 100.0 0.0 100.0 100.0 67.6 100.0 85.0 10.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 372 Deutsche Bank Annual Report 2020 Additional notes 44 – Shareholdings Serial No. 58 59 60 61 62 63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 100 101 102 103 104 105 106 107 108 109 110 111 112 113 114 115 116 117 118 119 120 121 122 123 124 125 Name of company DB Capital Partners, Inc. DB Cartera de Inmuebles 1, S.A.U. DB Chestnut Holdings Limited DB Commodity Services LLC DB Corporate Advisory (Malaysia) Sdn. Bhd. DB Delaware Holdings (Europe) Limited DB Direkt GmbH DB Elara LLC DB Energy Trading LLC DB Enfield Infrastructure Holdings Limited (in liquidation) DB Equipment Leasing, Inc. DB Equity Limited DB Finance (Delaware), LLC DB Global Technology SRL DB Global Technology, Inc. DB Group Services (UK) Limited DB Holdings (New York), Inc. DB HR Solutions GmbH DB Immobilienfonds 5 Wieland KG DB Impact Investment Fund I, L.P. DB Industrial Holdings Beteiligungs GmbH & Co. KG DB Industrial Holdings GmbH DB Intermezzo LLC DB International (Asia) Limited DB International Investments Limited DB International Trust (Singapore) Limited DB Investment Managers, Inc. DB Investment Partners, Inc. DB Investment Resources (US) Corporation DB Investment Resources Holdings Corp. DB Investment Services GmbH DB Io LP DB IROC Leasing Corp. DB London (Investor Services) Nominees Limited DB Management Support GmbH DB Nominees (Hong Kong) Limited DB Nominees (Singapore) Pte Ltd DB Omega BTV S.C.S. DB Omega Holdings LLC DB Omega Ltd. DB Omega S.C.S. DB Operaciones y Servicios Interactivos Agrupación de Interés Económico DB Overseas Finance Delaware, Inc. DB Overseas Holdings Limited DB Print GmbH DB Private Clients Corp. DB Private Wealth Mortgage Ltd. DB Re S.A. DB Service Centre Limited DB Service Uruguay S.A. DB Services Americas, Inc. DB Servizi Amministrativi S.r.l. DB Strategic Advisors, Inc. DB Structured Derivative Products, LLC DB Structured Products, Inc. DB Trustee Services Limited DB Trustees (Hong Kong) Limited DB U.S. Financial Markets Holding Corporation DB UK Bank Limited DB UK Holdings Limited DB UK PCAM Holdings Limited DB USA Core Corporation DB USA Corporation DB Valoren S.à r.l. DB Value S.à r.l. DB VersicherungsManager GmbH DB Vita S.A. DBAH Capital, LLC Domicile of company Wilmington Pozuelo de Alarcón George Town Wilmington Kuala Lumpur George Town Frankfurt Wilmington Wilmington St. Helier New York London Wilmington Bucharest Wilmington London New York Eschborn Frankfurt Edinburgh Luetzen Luetzen Wilmington Singapore London Singapore Wilmington Wilmington Wilmington Wilmington Frankfurt Wilmington New York London Frankfurt Hong Kong Singapore Luxembourg Wilmington George Town Luxembourg Madrid Foot- note Nature of activity 1 Financial Institution 1 Ancillary Services Undertaking 1 Ancillary Services Undertaking 1 Ancillary Services Undertaking 1 Financial Institution 1 Financial Institution 1 Ancillary Services Undertaking 1 Financial Institution 1 Ancillary Services Undertaking 1 Financial Institution 1 Financial Institution 1 Financial Institution 1 Financial Institution 1 Ancillary Services Undertaking 1 Ancillary Services Undertaking 1 Ancillary Services Undertaking 1 Financial Institution 1 Ancillary Services Undertaking 2 Other Enterprise 1, 5 Financial Institution 1, 5 Financial Institution 1 Financial Institution 1 Financial Institution 1 Credit Institution 1 Financial Institution 2 Other Enterprise 1 Financial Institution 1 Financial Institution 1 Financial Institution 1 Financial Institution 1 Ancillary Services Undertaking 1, 5 Financial Institution 1 Financial Institution 1 Financial Institution 3 Ancillary Services Undertaking 3 Ancillary Services Undertaking 2 Other Enterprise 1, 5 Financial Institution 1 Financial Institution 1 Financial Institution 1, 5 Financial Institution Wilmington London Frankfurt Wilmington New York Luxembourg Dublin Montevideo Wilmington Milan Makati City Wilmington Wilmington London Hong Kong Wilmington London London London West Trenton Wilmington Luxembourg Luxembourg Frankfurt Luxembourg Wilmington 1 Ancillary Services Undertaking 1 Financial Institution 1 Financial Institution 1 Ancillary Services Undertaking 1 Financial Institution 1 Financial Institution 3 Reinsurance Undertaking 1 Ancillary Services Undertaking 1 Financial Institution 1 Ancillary Services Undertaking 1 Ancillary Services Undertaking 1 Ancillary Services Undertaking 1 Ancillary Services Undertaking 1 Financial Institution 2 Other Enterprise 2 Other Enterprise 1 Financial Holding Company 1 Credit Institution 1 Financial Institution 1 Financial Institution 1 Ancillary Services Undertaking 1 Financial Institution 1 Financial Holding Company 1 Financial Institution 2 Other Enterprise 3 Insurance Undertaking 1 Financial Institution Share of Capital in % 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 93.6 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 99.9 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 75.0 100.0 373 Deutsche Bank Annual Report 2020 Additional notes 44 – Shareholdings Serial No. 126 127 128 129 130 131 132 133 Name of company DBCIBZ1 DBCIBZ2 DBFIC, Inc. DBNZ Overseas Investments (No.1) Limited DBOI Global Services (UK) Limited DBOI Global Services Private Limited DBR Investments Co. Limited DBRE Global Real Estate Management IA, Ltd. (in voluntary liqui- dation) DBRE Global Real Estate Management IB, Ltd. DBRMS4 DBRMSGP1 DBUK PCAM Limited DBUKH No. 2 Limited (in members' voluntary liquidation) DBUSBZ1, LLC DBUSBZ2, S.à r.l. DBX Advisors LLC DBX Strategic Advisors LLC DEBEKO Immobilien GmbH & Co Grundbesitz OHG DEE Deutsche Erneuerbare Energien GmbH Delowrezham de México S. de R.L. de C.V. DEUKONA Versicherungs-Vermittlungs-GmbH Deutsche (Aotearoa) Capital Holdings New Zealand Deutsche (Aotearoa) Foreign Investments New Zealand Deutsche (New Munster) Holdings New Zealand Limited Deutsche Access Investments Limited Deutsche Aeolia Power Production Société Anonyme Deutsche Alt-A Securities, Inc. Deutsche Alternative Asset Management (UK) Limited Deutsche Asia Pacific Holdings Pte Ltd Deutsche Asset Management (India) Private Limited Deutsche Australia Limited Deutsche Bank (Cayman) Limited Deutsche Bank (China) Co., Ltd. Deutsche Bank (Malaysia) Berhad Deutsche Bank (Suisse) SA Deutsche Bank (Uruguay) Sociedad Anónima Institución Finan- ciera Externa DEUTSCHE BANK A.S. Deutsche Bank Americas Holding Corp. Deutsche Bank Europe GmbH Deutsche Bank Financial Company Deutsche Bank Holdings, Inc. Deutsche Bank Insurance Agency Incorporated Deutsche Bank International Limited Deutsche Bank Investments (Guernsey) Limited Deutsche Bank Luxembourg S.A. Deutsche Bank Mutui S.p.A. Deutsche Bank México, S.A., Institución de Banca Múltiple Deutsche Bank National Trust Company Deutsche Bank Nominees (Jersey) Limited Deutsche Bank Polska Spólka Akcyjna Deutsche Bank Representative Office Nigeria Limited Deutsche Bank S.A. - Banco Alemão Deutsche Bank Securities Inc. Deutsche Bank Securities Limited Deutsche Bank Services (Jersey) Limited Deutsche Bank Società per Azioni Deutsche Bank Trust Company Americas Deutsche Bank Trust Company Delaware Deutsche Bank Trust Company, National Association Deutsche Bank Trust Corporation Deutsche Bank, Sociedad Anónima Española Deutsche Capital Finance (2000) Limited Deutsche Capital Hong Kong Limited Deutsche Capital Markets Australia Limited Deutsche Capital Partners China Limited Deutsche Cayman Ltd. 134 135 136 137 138 139 140 141 142 143 144 145 146 147 148 149 150 151 152 153 154 155 156 157 158 159 160 161 162 163 164 165 166 167 168 169 170 171 172 173 174 175 176 177 178 179 180 181 182 183 184 185 186 187 188 189 190 191 Domicile of company George Town George Town Wilmington George Town London Mumbai George Town George Town George Town George Town George Town London London Wilmington Luxembourg Wilmington Wilmington Eschborn Frankfurt Mexico City Frankfurt Auckland Auckland Auckland Sydney Athens Wilmington London Singapore Mumbai Sydney George Town Beijing Kuala Lumpur Geneva Montevideo Foot- note Nature of activity 1 Financial Institution 1 Financial Institution 1 Financial Institution 1 Financial Institution 1 Ancillary Services Undertaking 1 Ancillary Services Undertaking 1 Financial Institution 1 Asset Management Company 1 Asset Management Company 1, 5, 6 Financial Institution 1, 5, 6 Financial Institution 1 Financial Holding Company 1, 4 Financial Institution 2 Other Enterprise 1 Financial Institution 1 Investment Firm 1 Investment Firm 1, 5 Ancillary Services Undertaking 1 Financial Institution 1 Financial Institution 1 Ancillary Services Undertaking 1 Financial Institution 1 Financial Institution 1 Financial Institution 1 Ancillary Services Undertaking 2 Other Enterprise 3 Financial Institution 1 Asset Management Company 1 Financial Holding Company 1 Ancillary Services Undertaking 1 Financial Institution 2 Other Enterprise 1 Credit Institution 1 Credit Institution 1 Credit Institution 1 Credit Institution Istanbul Wilmington Frankfurt George Town Wilmington Lutherville-Timo- 1 Credit Institution 1 Financial Holding Company 1 Credit Institution 1 Financial Institution 1 Financial Institution 2 Other Enterprise nium St. Helier St. Peter Port Luxembourg Milan Mexico City Los Angeles St. Helier Warsaw Lagos Sao Paulo Wilmington Toronto St. Helier Milan New York Wilmington New York New York Madrid George Town Hong Kong Sydney George Town George Town 1 Credit Institution 2 Other Enterprise 1 Credit Institution 1 Financial Institution 1 Credit Institution 1 Financial Institution 2 Other Enterprise 1 Credit Institution 3 Ancillary Services Undertaking 1 Credit Institution 1 Investment Firm 1 Investment Firm 1 Ancillary Services Undertaking 1 Credit Institution 1 Credit Institution 1 Credit Institution 1 Financial Institution 1 Financial Holding Company 1 Credit Institution 1 Financial Institution 1 Financial Institution 1 Investment Firm 1 Financial Institution 2 Other Enterprise Share of Capital in % 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 0.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 95.6 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 99.9 100.0 100.0 100.0 100.0 99.8 100.0 100.0 100.0 100.0 100.0 374 Deutsche Bank Annual Report 2020 Additional notes 44 – Shareholdings Serial No. 192 193 194 195 196 197 198 Name of company Deutsche CIB Centre Private Limited Deutsche Custody N.V. Deutsche Domus New Zealand Limited Deutsche Equities India Private Limited Deutsche Finance No. 2 Limited Deutsche Foras New Zealand Limited Deutsche Gesellschaft für Immobilien-Leasing mit beschränkter Domicile of company Mumbai Amsterdam Auckland Mumbai George Town Auckland Duesseldorf Haftung 199 200 201 202 203 Deutsche Global Markets Limited Deutsche Group Holdings (SA) Proprietary Limited Deutsche Group Services Pty Limited Deutsche Grundbesitz Beteiligungsgesellschaft mbH i.L. Deutsche Grundbesitz-Anlagegesellschaft mit beschränkter Haf- Tel Aviv Johannesburg Sydney Eschborn Frankfurt tung Foot- note Nature of activity 1 Ancillary Services Undertaking 3 Financial Institution 1 Financial Institution 1 Securities Trading Firm 1 Financial Institution 1 Financial Institution 3 Financial Institution 1 Ancillary Services Undertaking 1 Financial Institution 1 Ancillary Services Undertaking 3 Financial Institution 2 Other Enterprise Share of Capital in % 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 99.8 204 Deutsche Holdings (BTI) Limited (in members' voluntary liquida- London 1 Financial Institution 100.0 tion) Deutsche Holdings (Grand Duchy) Deutsche Holdings (Luxembourg) S.à r.l. Deutsche Holdings Limited Deutsche Holdings No. 2 Limited Deutsche Holdings No. 3 Limited Deutsche Holdings No. 4 Limited Deutsche Immobilien Leasing GmbH Deutsche India Holdings Private Limited Deutsche International Corporate Services (Ireland) Limited Deutsche International Corporate Services Limited Deutsche International Custodial Services Limited Deutsche Investments (Netherlands) N.V. Deutsche Investments India Private Limited Deutsche Investor Services Private Limited Deutsche Knowledge Services Pte. Ltd. Deutsche Leasing New York Corp. Deutsche Mandatos S.A. Deutsche Master Funding Corporation Deutsche Mexico Holdings S.à r.l. Deutsche Morgan Grenfell Group Limited Deutsche Mortgage & Asset Receiving Corporation Deutsche Mortgage Securities, Inc. Deutsche Nederland N.V. Deutsche New Zealand Limited Deutsche Nominees Limited Deutsche Oppenheim Family Office AG Deutsche Overseas Issuance New Zealand Limited Deutsche Postbank Finance Center Objekt GmbH Deutsche Private Asset Management Limited Deutsche Securities (India) Private Limited Deutsche Securities (Proprietary) Limited Deutsche Securities (SA) (Proprietary) Limited Deutsche Securities Asia Limited Deutsche Securities Australia Limited Deutsche Securities Inc. Deutsche Securities Israel Ltd. Deutsche Securities Korea Co. Deutsche Securities Mauritius Limited Deutsche Securities S.A. Deutsche Securities Saudi Arabia (a closed joint stock company) Deutsche Securities, S.A. de C.V., Casa de Bolsa Deutsche Services Polska Sp. z o.o. Deutsche StiftungsTrust GmbH Deutsche Strategic Investment Holdings Yugen Kaisha Deutsche Trustee Company Limited Deutsche Trustee Services (India) Private Limited Deutsche Trustees Malaysia Berhad Deutsche Wealth Management S.G.I.I.C., S.A. Deutsches Institut für Altersvorsorge GmbH DI Deutsche Immobilien Treuhandgesellschaft mbH DISCA Beteiligungsgesellschaft mbH DNU Nominees Pty Limited DTS Nominees Pty Limited Luxembourg Luxembourg London London London London Duesseldorf Mumbai Dublin St. Helier St. Helier Amsterdam Mumbai Mumbai Singapore New York Buenos Aires Wilmington Luxembourg London Wilmington Wilmington Amsterdam Auckland London Cologne Auckland Schuettringen London New Delhi Johannesburg Johannesburg Hong Kong Sydney Tokyo Tel Aviv Seoul Ebène Buenos Aires Riyadh Mexico City Warsaw Frankfurt Tokyo London Mumbai Kuala Lumpur Madrid Frankfurt Frankfurt Duesseldorf Sydney Sydney 205 206 207 208 209 210 211 212 213 214 215 216 217 218 219 220 221 222 223 224 225 226 227 228 229 230 231 232 233 234 235 236 237 238 239 240 241 242 243 244 245 246 247 248 249 250 251 252 253 254 255 256 257 1 Financial Holding Company 1 Financial Holding Company 1 Financial Holding Company 1 Financial Institution 1 Financial Institution 1 Financial Institution 1 Financial Institution 1 Financial Holding Company 1 Financial Institution 2 Other Enterprise 2 Other Enterprise 1 Financial Institution 1 Financial Institution 2 Other Enterprise 1 Ancillary Services Undertaking 1 Ancillary Services Undertaking 1 Financial Institution 1 Financial Institution 1 Financial Holding Company 1 Financial Institution 1 Ancillary Services Undertaking 3 Financial Institution 1 Ancillary Services Undertaking 1 Financial Institution 1 Financial Institution 1 Credit Institution 1 Ancillary Services Undertaking 1 Ancillary Services Undertaking 2 Other Enterprise 1 Securities Trading Firm 1 Financial Institution 1 Financial Institution 1 Investment Firm 1 Investment Firm 1 Investment Firm 1 Financial Institution 1 Investment Firm 1 Securities Trading Firm 1 Securities Trading Firm 1 Investment Firm 1 Investment Firm 1 Ancillary Services Undertaking 2 Other Enterprise 1 Financial Institution 2 Other Enterprise 2 Other Enterprise 2 Other Enterprise 1 Asset Management Company 2 Other Enterprise 2 Other Enterprise 1 Financial Institution 1 Ancillary Services Undertaking 2 Other Enterprise 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 78.0 100.0 100.0 100.0 100.0 375 Deutsche Bank Annual Report 2020 Additional notes 44 – Shareholdings Serial No. 258 259 260 261 262 263 264 265 266 267 268 269 270 271 272 273 274 275 276 277 278 279 280 281 282 283 284 285 286 287 288 289 290 291 Name of company Durian (Luxembourg) S.à r.l. DWS Alternatives France DWS Alternatives Global Limited DWS Alternatives GmbH DWS Asset Management (Korea) Company Limited DWS Beteiligungs GmbH DWS CH AG DWS Distributors, Inc. DWS Far Eastern Investments Limited DWS Group GmbH & Co. KGaA DWS Group Services UK Limited DWS Grundbesitz GmbH DWS International GmbH DWS Investment GmbH DWS Investment Management Americas, Inc. DWS Investment S.A. DWS Investments Australia Limited DWS Investments Hong Kong Limited DWS Investments Japan Limited DWS Investments Shanghai Limited DWS Investments Singapore Limited DWS Investments UK Limited DWS Management GmbH DWS Real Estate GmbH DWS Service Company DWS Trust Company DWS USA Corporation EC EUROPA IMMOBILIEN FONDS NR. 3 GmbH & CO. KG i.I. Elizabethan Holdings Limited Elizabethan Management Limited European Value Added I (Alternate G.P.) LLP Fiduciaria Sant' Andrea S.r.l. Finanzberatungsgesellschaft mbH der Deutschen Bank Franz Urbig- und Oscar Schlitter-Stiftung Gesellschaft mit be- schränkter Haftung Domicile of company Luxembourg Paris London Frankfurt Seoul Frankfurt Zurich Wilmington Taipei Frankfurt London Frankfurt Frankfurt Frankfurt Wilmington Luxembourg Sydney Hong Kong Tokyo Shanghai Singapore London Frankfurt Frankfurt Wilmington Concord Wilmington Hamburg George Town George Town London Milan Berlin Frankfurt Foot- note Nature of activity 2 Other Enterprise 2 Other Enterprise 1 Asset Management Company 1 Asset Management Company 1 Asset Management Company 1 Financial Institution 1 Investment Firm 1 Investment Firm 1 Securities Trading Firm 1, 5 Financial Holding Company 1 Ancillary Services Undertaking 1 Asset Management Company 1 Investment Firm 1 Asset Management Company 1 Financial Institution 1 Asset Management Company 1 Investment Firm 1 Investment Firm 1 Investment Firm 1 Investment Firm 1 Investment Firm 1 Asset Management Company 1 Financial Institution 1 Financial Institution 1 Ancillary Services Undertaking 1 Investment Firm 1 Financial Holding Company 2 Other Enterprise 3 Financial Institution 2 Other Enterprise 1 Financial Institution 2 Other Enterprise 3 Ancillary Services Undertaking 3 Ancillary Services Undertaking 292 Fünfte SAB Treuhand und Verwaltung GmbH & Co. Suhl "Rim- Bad Homburg 2 Other Enterprise 293 294 295 296 297 298 299 300 bachzentrum" KG G Finance Holding Corp. G918 Corp. German American Capital Corporation Wilmington Wilmington Lutherville-Timo- nium 1 Financial Institution 1 Financial Institution 1 Financial Institution New York Greenwood Properties Corp. Grundstücksgesellschaft Frankfurt Bockenheimer Landstraße GbR Troisdorf Troisdorf Grundstücksgesellschaft Kerpen-Sindorf Vogelrutherfeld GbR Troisdorf Grundstücksgesellschaft Leipzig Petersstraße GbR Troisdorf Grundstücksgesellschaft Wiesbaden Luisenstraße/Kirchgasse 1, 4 Financial Institution 2, 5 Other Enterprise 2, 4 Other Enterprise 2, 4, 5 Other Enterprise 2, 5 Other Enterprise GbR 301 Immobilienfonds Büro-Center Erfurt am Flughafen Bindersleben I Troisdorf 2, 4 Other Enterprise GbR 302 Immobilienfonds Büro-Center Erfurt am Flughafen Bindersleben II Troisdorf 2, 4, 5 Other Enterprise GbR 303 304 Immobilienfonds Mietwohnhäuser Quadrath-Ichendorf GbR Immobilienfonds Wohn- und Geschäftshaus Köln-Blumenberg V Troisdorf Troisdorf 2, 4 Other Enterprise 2, 4 Other Enterprise GbR 305 306 307 308 309 310 311 312 313 314 315 316 317 318 319 ISTRON Beteiligungs- und Verwaltungs-GmbH IVAF I Manager, S.à r.l. J R Nominees (Pty) Ltd Joint Stock Company Deutsche Bank DBU Jyogashima Godo Kaisha KEBA Gesellschaft für interne Services mbH Kidson Pte Ltd Konsul Inkasso GmbH LA Water Holdings Limited LAWL Pte. Ltd. Leasing Verwaltungsgesellschaft Waltersdorf mbH Leonardo III Initial GP Limited Maher Terminals Holdings (Toronto) Limited MEF I Manager, S. à r.l. MIT Holdings, Inc. Cologne Luxembourg Johannesburg Kiev Tokyo Frankfurt Singapore Essen George Town Singapore Schoenefeld London Vancouver Luxembourg Baltimore 1 Financial Institution 1 Financial Institution 2 Other Enterprise 1 Credit Institution 1 Financial Institution 1 Ancillary Services Undertaking 1 Financial Institution 1 Ancillary Services Undertaking 1 Financial Institution 1 Financial Institution 1 Financial Institution 3 Financial Institution 1 Financial Institution 1 Financial Institution 1 Financial Institution Share of Capital in % 100.0 100.0 100.0 100.0 100.0 98.9 100.0 100.0 60.0 79.5 100.0 99.9 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 99.9 100.0 100.0 100.0 65.2 100.0 100.0 100.0 100.0 100.0 100.0 74.9 100.0 100.0 100.0 0.0 94.9 0.0 36.1 64.7 0.0 50.0 0.0 0.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 75.0 100.0 100.0 100.0 100.0 100.0 100.0 376 Deutsche Bank Annual Report 2020 Additional notes 44 – Shareholdings Name of company MortgageIT Securities Corp. MortgageIT, Inc. norisbank GmbH OOO "Deutsche Bank TechCentre" OOO "Deutsche Bank" OPB Verwaltungs- und Beteiligungs-GmbH OPB Verwaltungs- und Treuhand GmbH OPB-Nona GmbH OPB-Oktava GmbH OPB-Quarta GmbH OPB-Septima GmbH OPPENHEIM Capital Advisory GmbH OPPENHEIM PRIVATE EQUITY Manager GmbH OPPENHEIM PRIVATE EQUITY Verwaltungsgesellschaft mbH OPS Nominees Pty Limited OVV Beteiligungs GmbH PADUS Grundstücks-Vermietungsgesellschaft mbH Pan Australian Nominees Pty Ltd PB Factoring GmbH PB Firmenkunden AG PB Spezial-Investmentaktiengesellschaft mit Teilgesellschaftsver- mögen Domicile of company Wilmington New York Bonn Moscow Moscow Cologne Cologne Frankfurt Cologne Cologne Cologne Cologne Cologne Cologne Sydney Cologne Duesseldorf Sydney Bonn Bonn Bonn PCC Services GmbH der Deutschen Bank Plantation Bay, Inc. Postbank Akademie und Service GmbH Postbank Beteiligungen GmbH Postbank Direkt GmbH Postbank Filialvertrieb AG Postbank Finanzberatung AG Postbank Immobilien GmbH Postbank Immobilien und Baumanagement GmbH Postbank Leasing GmbH PT Deutsche Sekuritas Indonesia R.B.M. Nominees Pty Ltd REO Properties Corporation RoPro U.S. Holding, Inc. Route 28 Receivables, LLC RREEF America L.L.C. RREEF China REIT Management Limited RREEF European Value Added I (G.P.) Limited RREEF Fund Holding Co. RREEF India Advisors Private Limited RREEF Management L.L.C. RTS Nominees Pty Limited SAB Real Estate Verwaltungs GmbH SAGITA Grundstücks-Vermietungsgesellschaft mbH Sal. Oppenheim jr. & Cie. Beteiligungs GmbH SAPIO Grundstücks-Vermietungsgesellschaft mbH Sechste Salomon Beteiligungs- und Verwaltungsgesellschaft mbH Essen St. Thomas Hameln Bonn Bonn Bonn Hameln Hameln Bonn Bonn Jakarta Sydney Wilmington Wilmington Wilmington Wilmington Hong Kong London George Town Mumbai Wilmington Sydney Hameln Duesseldorf Cologne Duesseldorf Cologne i.L. Service Company Four Limited Sharps SP I LLC Stelvio Immobiliare S.r.l. Structured Finance Americas, LLC Süddeutsche Vermögensverwaltung Gesellschaft mit beschränkter Hong Kong Wilmington Bolzano Wilmington Frankfurt Haftung Foot- note Nature of activity 1 Ancillary Services Undertaking 1 Financial Institution 1 Credit Institution 1 Ancillary Services Undertaking 1 Credit Institution 3 Financial Institution 1 Financial Institution 1 Financial Institution 3 Financial Institution 3 Financial Institution 3 Financial Institution 1 Financial Institution 3 Financial Institution 3 Financial Institution 2 Other Enterprise 3 Financial Institution 1 Financial Institution 1 Ancillary Services Undertaking 1 Financial Institution 1 Ancillary Services Undertaking 1, 4 Ancillary Services Undertaking 1 Ancillary Services Undertaking 2 Other Enterprise 2 Other Enterprise 1 Financial Institution 1 Financial Institution 1 Financial Institution 2 Other Enterprise 2 Other Enterprise 1 Financial Institution 1 Financial Institution 1 Investment Firm 1 Ancillary Services Undertaking 1 Ancillary Services Undertaking 1 Financial Institution 1 Financial Institution 1 Financial Institution 2 Other Enterprise 1 Financial Institution 1 Financial Institution 2 Other Enterprise 2 Other Enterprise 2 Other Enterprise 3 Financial Institution 1 Financial Institution 1 Financial Institution 1 Financial Institution 1, 4 Financial Institution 2 Other Enterprise 1 Financial Institution 2 Other Enterprise 1 Investment Firm 1 Financial Institution Tasfiye Halinde Deutsche Securities Menkul Degerler A.S. TELO Beteiligungsgesellschaft mbH Tempurrite Leasing Limited Thai Asset Enforcement and Recovery Asset Management Com- Istanbul Schoenefeld London Bangkok 1 Securities Trading Firm 1 Financial Institution 1 Financial Institution 1 Financial Institution pany Limited Treuinvest Service GmbH Triplereason Limited Ullmann - Esch Grundstücksgesellschaft Kirchnerstraße GbR Ullmann - Esch Grundstücksverwaltungsgesellschaft Disternich Frankfurt London Troisdorf Troisdorf 2 Other Enterprise 1 Financial Institution 2, 4 Other Enterprise 2, 4 Other Enterprise Share of Capital in % 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 2.4 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 99.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 0.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 0.0 0.0 GbR Vesta Real Estate S.r.l. VÖB-ZVD Processing GmbH Wealthspur Investment Ltd. Milan Bonn Labuan 1 Ancillary Services Undertaking 1 Payment Institution 3 Financial Institution 100.0 100.0 100.0 Serial No. 320 321 322 323 324 325 326 327 328 329 330 331 332 333 334 335 336 337 338 339 340 341 342 343 344 345 346 347 348 349 350 351 352 353 354 355 356 357 358 359 360 361 362 363 364 365 366 367 368 369 370 371 372 373 374 375 376 377 378 379 380 381 382 383 377 Deutsche Bank Annual Report 2020 Additional notes 44 – Shareholdings Serial No. 384 385 386 Name of company WEPLA Beteiligungsgesellschaft mbH Whale Holdings S.à r.l., en liquidation volontaire World Trading (Delaware) Inc. Domicile of company Frankfurt Luxembourg Wilmington Foot- note Nature of activity 1 Financial Institution 1 Financial Institution 1 Financial Institution Share of Capital in % 100.0 100.0 100.0 378 Deutsche Bank Annual Report 2020 Additional notes 44 – Shareholdings Consolidated structured entities Serial No. 387 388 389 390 391 392 393 394 395 396 397 398 399 400 401 402 403 404 405 406 407 408 409 410 411 412 413 414 415 416 417 418 419 420 421 422 423 424 425 426 427 428 429 430 431 432 433 434 435 436 437 438 439 440 441 442 443 444 445 446 Name of company Alguer Inversiones Designated Activity Company Alixville Invest, S.L. Altersvorsorge Fonds Hamburg Alter Wall Dr. Juncker KG Amber Investments S.à r.l. Asset Repackaging Trust Five B.V. Atena SPV S.r.l. Atlas Investment Company 1 S.à r.l. Atlas Investment Company 2 S.à r.l. Atlas Investment Company 3 S.à r.l. Atlas Investment Company 4 S.à r.l. Atlas Portfolio Select SPC Atlas SICAV - FIS Axia Insurance, Ltd. Carpathian Investments Designated Activity Company Cathay Capital (Labuan) Company Limited Cathay Capital Company Limited Cathay Strategic Investment Company Limited Cathay Strategic Investment Company No. 2 Limited Cayman Reference Fund Holdings Limited Ceto S.à r.l. Charitable Luxembourg Four S.à r.l. Charitable Luxembourg Three S.à r.l. Charitable Luxembourg Two S.à r.l. City Leasing (Thameside) Limited City Leasing Limited CLASS Limited Collins Capital Low Volatility Performance II Special Investments, Ltd. Domicile of company Dublin Madrid Frankfurt Luxembourg Amsterdam Conegliano Luxembourg Luxembourg Luxembourg Luxembourg George Town Luxembourg Hamilton Dublin Labuan Ebène Hong Kong George Town George Town Luxembourg Luxembourg Luxembourg Luxembourg London London St. Helier Road Town Crofton Invest, S.L. Danube Properties S.à r.l., en faillite Dariconic Designated Activity Company DB Asset Finance I S.à r.l. DB Aster II, LLC DB Aster III, LLC DB Aster, Inc. DB Aster, LLC DB Covered Bond S.r.l. DB Credit Investments S.à r.l. DB Finance International GmbH DB Global Markets Multi-Strategy Fund I Ltd. DB Holding Fundo de Investimento Multimercado Investimento no Madrid Luxembourg Dublin Luxembourg Wilmington Wilmington Wilmington Wilmington Conegliano Luxembourg Frankfurt George Town Sao Paulo Exterior Crédito Privado DB Immobilienfonds 1 Wieland KG DB Immobilienfonds 2 KG i.L. DB Immobilienfonds 4 KG i.L. DB Impact Investment (GP) Limited DB Litigation Fee LLC DB Municipal Holdings LLC db PBC DB PWM DB RC Holdings, LLC DB SPEARs/LIFERs, Series DB-8015 Trust DB SPEARs/LIFERs, Series DB-8017 Trust DB SPEARs/LIFERs, Series DB-8018 Trust DB SPEARs/LIFERs, Series DB-8019 Trust DB SPEARs/LIFERs, Series DB-8020 Trust DB SPEARs/LIFERs, Series DB-8028 Trust DB SPEARs/LIFERs, Series DB-8029 Trust DB SPEARs/LIFERs, Series DB-8030 Trust DB SPEARs/LIFERs, Series DB-8031 Trust DB SPEARs/LIFERs, Series DB-8033 Trust DB SPEARs/LIFERs, Series DB-8036 Trust Frankfurt Frankfurt Frankfurt London Wilmington Wilmington Luxembourg Luxembourg Wilmington Wilmington Wilmington Wilmington Wilmington Wilmington Wilmington Wilmington Wilmington Wilmington Wilmington Wilmington Foot- note Nature of activity 2 Ancillary Services Undertaking 2 Other Enterprise 2 Other Enterprise 1 Ancillary Services Undertaking 2, 7 Other Enterprise 1 Ancillary Services Undertaking 2 Financial Institution 2 Financial Institution 2 Financial Institution 2 Financial Institution 3 Financial Institution 2, 7 Other Enterprise 2, 7 Other Enterprise 1 Financial Institution 2 Other Enterprise 3 Financial Institution 2 Financial Institution 2 Financial Institution 2 Ancillary Services Undertaking 2 Financial Institution 2 Financial Institution 2 Financial Institution 2 Financial Institution 1 Financial Institution 1 Financial Institution 2, 7 Other Enterprise 2 Financial Institution 2 Other Enterprise 2 Other Enterprise 2 Ancillary Services Undertaking 1 Financial Institution 1 Ancillary Services Undertaking 1 Ancillary Services Undertaking 1 Financial Institution 1 Ancillary Services Undertaking 1 Financial Institution 1 Financial Institution 1 Financial Institution 2 Financial Institution 3 Financial Institution 2 Other Enterprise 1 Financial Institution 2 Other Enterprise 1 Financial Institution 1 Financial Institution 1 Ancillary Services Undertaking 2, 7 Other Enterprise 2, 7 Other Enterprise 1 Financial Institution 3 Ancillary Services Undertaking 3 Ancillary Services Undertaking 3 Ancillary Services Undertaking 3 Ancillary Services Undertaking 3 Ancillary Services Undertaking 3 Ancillary Services Undertaking 3 Ancillary Services Undertaking 3 Ancillary Services Undertaking 3 Ancillary Services Undertaking 3 Ancillary Services Undertaking 3 Ancillary Services Undertaking Share of Capital in % 100.0 60.0 0.0 100.0 9.5 100.0 100.0 25.0 95.0 100.0 100.0 100.0 100.0 90.0 100.0 100.0 0.0 100.0 74.0 0.2 100.0 100.0 100.0 100.0 20.3 15.9 17.8 18.8 19.5 18.3 19.4 17.2 19.4 16.8 18.2 379 Deutsche Bank Annual Report 2020 Additional notes 44 – Shareholdings Serial No. 447 448 449 450 451 452 453 454 455 456 457 458 459 460 461 462 463 464 465 466 467 468 469 470 471 472 473 474 475 476 477 478 479 480 481 482 483 484 485 486 487 488 489 490 491 492 493 494 495 496 497 498 499 500 501 502 503 504 505 506 507 508 509 510 Name of company DB SPEARs/LIFERs, Series DBE-8022 Trust DB SPEARs/LIFERs, Series DBE-8032 Trust DB SPEARs/LIFERs, Series DBE-8034 Trust DB SPEARs/LIFERs, Series DBE-8052 Trust DB SPEARs/LIFERs, Series DBE-8054 Trust DB SPEARs/LIFERs, Series DBE-8055 Trust DB SPEARs/LIFERs, Series DBE-8056 Trust DB SPEARs/LIFERs, Series DBE-8057 Trust DB SPEARs/LIFERs, Series DBE-8058 Trust DB SPEARs/LIFERs, Series DBE-8059 Trust DB SPEARs/LIFERs, Series DBE-8060 Trust DB SPEARs/LIFERs, Series DBE-8061 Trust DB SPEARs/LIFERs, Series DBE-8062 Trust DB SPEARs/LIFERs, Series DBE-8063 Trust DB SPEARs/LIFERs, Series DBE-8064 Trust DB SPEARs/LIFERs, Series DBE-8065 Trust DB SPEARs/LIFERs, Series DBE-8066 Trust DB SPEARs/LIFERs, Series DBE-8067 Trust DB SPEARs/LIFERs, Series DBE-8068 Trust DB SPEARs/LIFERs, Series DBE-8069 Trust DB SPEARs/LIFERs, Series DBE-8070 Trust DB SPEARs/LIFERs, Series DBE-8071 Trust DB SPEARs/LIFERs, Series DBE-8072 Trust DB SPEARs/LIFERs, Series DBE-8073 Trust DB Structured Finance 1 Designated Activity Company DB Structured Finance 2 Designated Activity Company DB Structured Holdings Luxembourg S.à r.l. DBRE Global Real Estate Management US IB, L.L.C. DBX ETF Trust De Heng Asset Management Company Limited Deloraine Spain, S.L. Deutsche Bank Capital Finance LLC I Deutsche Bank Capital Finance Trust I Deutsche Bank Luxembourg S.A. - Fiduciary Deposits Deutsche Bank Luxembourg S.A. - Fiduciary Note Programme Deutsche Bank SPEARs/LIFERs, Series DBE-8011 Trust Deutsche Colombia S.A.S. Deutsche Postbank Funding LLC I Deutsche Postbank Funding LLC II Deutsche Postbank Funding LLC III Deutsche Postbank Funding Trust I Deutsche Postbank Funding Trust II Deutsche Postbank Funding Trust III DWS Access S.A. DWS FlexPension DWS Garant DWS Invest DWS Invest (IE) ICAV DWS World Protect 90 DWS Zeitwert Protect Dynamic Infrastructure Securities Fund LP Earls Four Limited EARLS Trading Limited Einkaufszentrum "HVD Dresden" S.à.r.l & Co. KG i.I. Eirles Three Designated Activity Company Eirles Two Designated Activity Company Emerald Asset Repackaging Designated Activity Company Emerging Markets Capital Protected Investments Limited Emeris Encina Property Finance Designated Activity Company Epicuro SPV S.r.l. Erste Frankfurter Hoist GmbH Fondo Privado de Titulizacion Activos Reales 1 B.V. Fondo Privado de Titulización PYMES I Designated Activity Com- pany Domicile of company Wilmington Wilmington Wilmington Wilmington Wilmington Wilmington Wilmington Wilmington Wilmington Wilmington Wilmington Wilmington Wilmington Wilmington Wilmington Wilmington Wilmington Wilmington Wilmington Wilmington Wilmington Wilmington Wilmington Wilmington Dublin Dublin Luxembourg Wilmington Wilmington Beijing Madrid Wilmington Wilmington Luxembourg Luxembourg Wilmington Bogotá Wilmington Wilmington Wilmington Wilmington Wilmington Wilmington Luxembourg Luxembourg Luxembourg Luxembourg Dublin Luxembourg Luxembourg Wilmington George Town George Town Cologne Dublin Dublin Dublin George Town George Town Dublin Conegliano Frankfurt Amsterdam Dublin Share of Capital in % 17.1 17.7 14.9 0.0 0.0 11.1 0.0 0.0 0.0 0.0 6.5 2.5 0.0 0.0 6.1 0.0 0.0 0.0 2.0 1.8 0.0 0.0 0.0 0.0 100.0 100.0 100.0 100.0 100.0 0.0 0.2 100.0 100.0 100.0 100.0 0.0 0.0 0.0 Foot- note Nature of activity 3 Ancillary Services Undertaking 3 Ancillary Services Undertaking 3 Ancillary Services Undertaking 3 Ancillary Services Undertaking 2 Ancillary Services Undertaking 3 Ancillary Services Undertaking 3 Ancillary Services Undertaking 3 Ancillary Services Undertaking 3 Ancillary Services Undertaking 3 Ancillary Services Undertaking 3 Ancillary Services Undertaking 3 Ancillary Services Undertaking 2 Ancillary Services Undertaking 3 Ancillary Services Undertaking 3 Ancillary Services Undertaking 3 Ancillary Services Undertaking 2 Ancillary Services Undertaking 3 Ancillary Services Undertaking 3 Ancillary Services Undertaking 3 Ancillary Services Undertaking 2 Ancillary Services Undertaking 3 Ancillary Services Undertaking 3 Ancillary Services Undertaking 3 Ancillary Services Undertaking 1 Ancillary Services Undertaking 1 Ancillary Services Undertaking 1 Financial Institution 1 Financial Institution 2, 7 Other Enterprise 2 Financial Institution 2 Ancillary Services Undertaking 1 Financial Institution 1, 4 Financial Institution 2, 7 Other Enterprise 2, 7 Other Enterprise 3 Ancillary Services Undertaking 1 Securities Trading Firm 1 Financial Institution 1 Financial Institution 1 Financial Institution 1, 4 Financial Institution 1, 4 Financial Institution 1, 4 Financial Institution 2, 7 Other Enterprise 2, 7 Other Enterprise 2, 7 Other Enterprise 2, 7 Other Enterprise 2 Other Enterprise 2 Other Enterprise 2 Other Enterprise 2 Financial Institution 2, 7 Other Enterprise 2 Financial Institution 2 Other Enterprise 2, 7 Other Enterprise 2, 7 Other Enterprise 1 Financial Institution 100.0 2, 7 Other Enterprise 2 Securities Trading Firm 2 Financial Institution 2 Ancillary Services Undertaking 1 Financial Institution 2 Other Enterprise 2 Ancillary Services Undertaking 100.0 511 512 FRANKFURT CONSULT GmbH Freddie Mac Class A Taxable Multifamily M Certificates Series M- Frankfurt McLean 1 Financial Institution 3 Ancillary Services Undertaking 100.0 100.0 037 380 Deutsche Bank Annual Report 2020 Additional notes 44 – Shareholdings Serial No. 513 Name of company Freddie Mac Class A Taxable Multifamily M Certificates Series M- Domicile of company McLean 039 Foot- note Nature of activity Share of Capital in % 3 Ancillary Services Undertaking 100.0 514 Freddie Mac Class A Taxable Multifamily M Certificates Series M- McLean 3 Ancillary Services Undertaking 100.0 040 515 Freddie Mac Class A Taxable Multifamily M Certificates Series M- McLean 3 Ancillary Services Undertaking 100.0 041 516 Freddie Mac Class A Taxable Multifamily M Certificates Series M- McLean 3 Ancillary Services Undertaking 100.0 043 517 Freddie Mac Class A Taxable Multifamily M Certificates Series M- McLean 3 Ancillary Services Undertaking 100.0 044 518 Freddie Mac Class A Taxable Multifamily M Certificates Series M- McLean 3 Ancillary Services Undertaking 100.0 047 519 520 521 522 523 524 525 526 527 528 529 530 531 532 533 534 535 536 537 538 539 540 541 542 543 G.O. IB-US Management, L.L.C. GAC-HEL, Inc. Galene S.à r.l. Gladyr Spain, S.L. Global Markets Fundo de Investimento Multimercado Global Markets III Fundo de Investimento Multimercado - Crédito Wilmington Wilmington Luxembourg Madrid Rio de Janeiro Rio de Janeiro Privado e Investimento No Exterior Global Opportunities Co-Investment Feeder, LLC Global Opportunities Co-Investment, LLC Groton Invest, S.L. GWC-GAC Corp. Hamildak Designated Activity Company Havbell Designated Activity Company Histria Inversiones Designated Activity Company Iberia Inversiones Designated Activity Company Iberia Inversiones II Designated Activity Company Infrastructure Holdings (Cayman) SPC Inn Properties S.à r.l., en faillite Investor Solutions Limited Isar Properties S.à r.l., en faillite IVAF (Jersey) Limited Kelona Invest, S.L. Kelsey Street LLC KH Kitty Hall Holdings Limited KOMPASS 3 Beteiligungsgesellschaft mbH KOMPASS 3 Erste Beteiligungsgesellschaft mbH & Co. Euro KG Wilmington George Town Madrid Wilmington Dublin Dublin Dublin Dublin Dublin George Town Luxembourg St. Helier Luxembourg St. Helier Madrid Wilmington Galway Duesseldorf Duesseldorf i.L. i.L. 545 546 547 548 549 550 551 552 553 554 555 556 557 558 559 560 561 562 563 564 565 566 567 568 569 Kratus Inversiones Designated Activity Company Latitude Australia Secured Personal Loans Trust Ledyard, S.L. 87 Leonard Development LLC Leonardo Charitable 1 Limited Lerma Investments 2018, Sociedad Limitada Life Mortgage S.r.l. Lindsell Finance Limited Lockwood Invest, S.L. London Industrial Leasing Limited Lunashadow Limited Malabo Holdings Designated Activity Company Merlin I (in voluntary liquidation) Merlin XI Meseta Inversiones Designated Activity Company Micro-E Finance S.r.l. Motion Picture Productions One GmbH & Co. KG MPP Beteiligungsgesellschaft mbH Navegator - SGFTC, S.A. NCW Holding Inc. New 87 Leonard, LLC Oasis Securitisation S.r.l. Oder Properties S.à r.l., en faillite OPAL, en liquidation volontaire Opus Niestandaryzowany Sekurytyzacyjny Fundusz Inwestycyjny Dublin Melbourne Madrid Wilmington George Town Madrid Conegliano St. Julian's Madrid London Dublin Dublin Camana Bay George Town Dublin Rome Frankfurt Frankfurt Lisbon Vancouver Wilmington Conegliano Luxembourg Luxembourg Warsaw Zamkniety 1 Financial Institution 1 Ancillary Services Undertaking 2 Other Enterprise 2 Ancillary Services Undertaking 3 Financial Institution 3 Financial Institution 100.0 100.0 100.0 100.0 2 Financial Institution 2 Financial Institution 2 Financial Institution 1 Ancillary Services Undertaking 2 Ancillary Services Undertaking 2 Ancillary Services Undertaking 2 Financial Institution 2 Other Enterprise 2 Ancillary Services Undertaking 2 Financial Institution 2 Other Enterprise 2, 7 Other Enterprise 2 Other Enterprise 2 Ancillary Services Undertaking 2 Other Enterprise 1 Ancillary Services Undertaking 2 Financial Institution 3 Financial Institution 1, 5 Ancillary Services Undertaking 2 Financial Institution 2 Other Enterprise 2 Other Enterprise 1 Ancillary Services Undertaking 2 Ancillary Services Undertaking 2 Financial Institution 2 Ancillary Services Undertaking 1 Ancillary Services Undertaking 2 Financial Institution 1 Financial Institution 2 Financial Institution 2 Financial Institution 2 Securities Trading Firm 2 Securities Trading Firm 2 Ancillary Services Undertaking 2 Ancillary Services Undertaking 100.0 25.0 25.0 100.0 50.0 96.1 97.0 100.0 100.0 100.0 100.0 1, 5 Financial Institution 1 Financial Institution 1 Ancillary Services Undertaking 1 Financial Institution 1 Financial Institution 1, 4 Ancillary Services Undertaking 2 Other Enterprise 2, 7 Other Enterprise 2 Ancillary Services Undertaking 100.0 100.0 100.0 100.0 100.0 0.0 25.0 544 KOMPASS 3 Zweite Beteiligungsgesellschaft mbH & Co. USD KG Duesseldorf 1, 5 Ancillary Services Undertaking 570 571 OTTAM Mexican Capital Trust Designated Activity Company Palladium Global Investments S.A. Dublin Luxembourg 2, 7 Other Enterprise 2, 7 Other Enterprise 381 Deutsche Bank Annual Report 2020 Additional notes 44 – Shareholdings Serial No. 572 573 574 575 576 577 578 579 580 581 582 583 584 585 586 587 588 589 590 591 592 593 594 595 596 597 598 599 600 601 602 603 604 605 606 607 608 609 610 611 612 613 614 615 616 617 618 619 620 621 622 623 624 625 626 627 628 Domicile of company Luxembourg George Town Wilmington Edinburgh Senningerberg Senningerberg London Luxembourg Luxembourg Luxembourg Name of company Palladium Securities 1 S.A. PanAsia Funds Investments Ltd. PARTS Funding, LLC PEIF II SLP Feeder, L.P. PEIF III SLP Feeder GP, S.à r.l. PEIF III SLP Feeder, SCSp Peruda Leasing Limited PERUS 1 S.à r.l. PES Carry and Employee Co-Investment Feeder SCSp PES Carry and Employee Co-Investment GP S.à r.l. Philippine Opportunities for Growth and Income (SPV-AMC), INC. Makati City Property Debt Fund S.C.Sp. SICAV-RAIF QR Tower 2, LLC Quartz No. 1 S.A. Radical Properties Unlimited Company Reference Capital Investments Limited REO Properties Corporation II Residential Mortgage Funding Trust Rhine Properties S.à r.l., en faillite Riviera Real Estate Romareda Holdings Designated Activity Company RREEF DCH, L.L.C. Samburg Invest, S.L. SCB Alpspitze UG (haftungsbeschränkt) Seaconview Designated Activity Company Select Access Investments Limited Singer Island Tower Suite LLC SOLIDO Grundstücks-Vermietungsgesellschaft mbH Somkid Immobiliare S.r.l. SP Mortgage Trust SPV I Sociedad Anónima Cerrada SPV II Sociedad Anónima Cerrada Style City Limited Swabia 1 Designated Activity Company Swabia 1. Vermögensbesitz-GmbH Tagus - Sociedade de Titularização de Creditos, S.A. Tasman NZ Residential Mortgage Trust Tender Option Bond Series 2019-BAML3502AB Trust Tender Option Bond Series 2019-BAML3503AB Trust Trave Properties S.à r.l., en faillite TRS Aria LLC TRS Leda LLC TRS Maple II LTD TRS Oak II LTD TRS Scorpio LLC TRS SVCO LLC TRS Tupelo II LTD TRS Venor LLC TRS Walnut II LTD VCJ Lease S.à r.l. Vermögensfondmandat Flexible (80% teilgeschützt) Waltzfire Limited Wedverville Spain, S.L. Wendelstein 2017-1 UG (haftungsbeschränkt) Xtrackers (IE) Public Limited Company Xtrackers ETC Public Limited Company Zumirez Drive LLC Luxembourg Wilmington Luxembourg Dublin London Wilmington Toronto Luxembourg Paris Dublin Wilmington Madrid Frankfurt Dublin Sydney Wilmington Duesseldorf Conegliano Wilmington Lima Lima Dublin Dublin Frankfurt Lisbon Auckland Wilmington Wilmington Luxembourg Wilmington Wilmington George Town George Town Wilmington Wilmington George Town Wilmington George Town Luxembourg Luxembourg Dublin Madrid Frankfurt Dublin Dublin Wilmington Share of Capital in % 100.0 0.7 54.0 100.0 1.3 95.0 100.0 99.9 0.0 25.0 100.0 100.0 100.0 100.0 100.0 100.0 99.9 99.8 100.0 100.0 15.0 15.0 25.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 Foot- note Nature of activity 2, 7 Other Enterprise 2, 7 Financial Institution 1 Financial Institution 3 Financial Institution 2 Financial Institution 2, 5 Other Enterprise 1 Financial Institution 2 Financial Institution 3 Financial Institution 2 Financial Institution 1 Financial Institution 2 Other Enterprise 1 Ancillary Services Undertaking 2 Ancillary Services Undertaking 2 Financial Institution 1 Financial Institution 1, 4 Ancillary Services Undertaking 2 Financial Institution 2 Other Enterprise 2 Other Enterprise 2 Financial Institution 1 Financial Institution 2 Other Enterprise 2 Financial Institution 2 Ancillary Services Undertaking 2, 7 Other Enterprise 1 Ancillary Services Undertaking 1 Financial Institution 2 Other Enterprise 2 Other Enterprise 1 Financial Institution 1 Ancillary Services Undertaking 2 Financial Institution 2 Ancillary Services Undertaking 1 Financial Institution 1 Ancillary Services Undertaking 2 Other Enterprise 3 Ancillary Services Undertaking 3 Ancillary Services Undertaking 2 Other Enterprise 3 Financial Institution 3 Financial Institution 1 Financial Institution 1 Financial Institution 3 Financial Institution 3 Financial Institution 1 Financial Institution 3 Financial Institution 1 Financial Institution 2 Other Enterprise 2 Other Enterprise 2 Financial Institution 2 Other Enterprise 2 Ancillary Services Undertaking 2, 7 Other Enterprise 2 Other Enterprise 1 Ancillary Services Undertaking 0.0 100.0 382 Deutsche Bank Annual Report 2020 Additional notes 44 – Shareholdings Companies accounted for at equity Serial No. 629 630 631 632 Name of company A.C.N. 603 303 126 Pty Ltd AKA Ausfuhrkredit-Gesellschaft mit beschränkter Haftung Arabesque AI Ltd Baigo Capital Partners Fund 1 Parallel 1 GmbH & Co. KG 633 634 BANKPOWER GmbH Personaldienstleistungen Bestra Gesellschaft für Vermögensverwaltung mit beschränkter Haftung Domicile of company Melbourne Frankfurt London Bad Soden am Taunus Frankfurt Duesseldorf 635 636 637 638 639 640 641 642 643 644 645 646 647 648 649 BFDB Tax Credit Fund 2011, Limited Partnership Comfund Consulting Limited Cyber Defence Alliance Limited DBG Eastern Europe II L.P. Deutsche Börse Commodities GmbH Deutsche Gulf Finance Deutsche Zurich Pensiones Entidad Gestora de Fondos de Pensi- New York Bangalore London St. Helier Eschborn Riyadh Barcelona ones, S.A. Deutscher Pensionsfonds Aktiengesellschaft DIL Internationale Leasinggesellschaft mbH Domus Beteiligungsgesellschaft der Privaten Bausparkassen mbH Berlin dwins GmbH Elbe Properties S.à r.l., en faillite clôturée equiNotes Management GmbH i.L. Evroenergeiaki Anonymi Etaireia Fünfte SAB Treuhand und Verwaltung GmbH & Co. "Leipzig-Mag- Frankfurt Luxembourg Duesseldorf Athens Bad Homburg Bonn Duesseldorf Foot- note Nature of activity Financial Institution Credit Institution Financial Institution Other Enterprise Other Enterprise Financial Institution 8, 9 Other Enterprise Other Enterprise 9, 10 Other Enterprise Financial Institution Other Enterprise 9 Financial Institution Other Enterprise Other Enterprise Financial Institution Financial Holding Company Other Enterprise Other Enterprise Other Enterprise 9 Other Enterprise Other Enterprise deburg" KG 650 Fünfte SAB Treuhand und Verwaltung GmbH & Co. Dresden Bad Homburg Other Enterprise "Louisenstraße" KG 651 652 653 654 655 656 657 658 659 660 661 662 663 664 665 666 667 668 669 670 Wilmington G.O. IB-SIV Feeder, L.L.C. Amsterdam German Public Sector Finance B.V. Berlin Gesellschaft für Kreditsicherung mit beschränkter Haftung Frankfurt giropay GmbH Troisdorf Grundstücksgesellschaft Bürohäuser Köln Rheinhallen GbR Troisdorf Grundstücksgesellschaft Karlsruhe Kaiserstraße GbR Troisdorf Grundstücksgesellschaft Köln Oppenheimstraße GbR Grundstücksgesellschaft Köln-Merheim Winterberger Straße GbR Troisdorf Troisdorf Grundstücksgesellschaft München Synagogenplatz GbR Troisdorf Grundstücksgesellschaft Schillingsrotter Weg GbR Shanghai Harvest Fund Management Co., Ltd. Huarong Rongde Asset Management Company Limited Beijing ILV Immobilien-Leasing Verwaltungsgesellschaft Düsseldorf mbH Duesseldorf Immobilienfonds Bürohaus Düsseldorf Grafenberg GbR Immobilienfonds Bürohaus Düsseldorf Parsevalstraße GbR Immobilienfonds Köln-Deutz Arena und Mantelbebauung GbR Immobilienfonds Köln-Ossendorf II GbR Ingrid S.à.r.l. iSwap Limited IZI Düsseldorf Informations-Zentrum Immobilien Gesellschaft mit Troisdorf Cologne Troisdorf Troisdorf Munsbach London Duesseldorf beschränkter Haftung Financial Institution Financial Institution Other Enterprise Other Enterprise 5 Other Enterprise 5 Other Enterprise 10 Other Enterprise 10 Other Enterprise 10 Other Enterprise 10 Other Enterprise Investment Firm Financial Institution Financial Institution 5 Other Enterprise 5 Other Enterprise 5 Other Enterprise 5 Other Enterprise 9 Other Enterprise Financial Institution Financial Institution 671 IZI Düsseldorf Informations-Zentrum Immobilien GmbH & Co. Duesseldorf 9 Other Enterprise Kommanditgesellschaft KVD Singapore Pte. Ltd. Lion Residential Holdings S.à r.l. Neo Strategic Holding Limited North Coast Wind Energy Corp. P.F.A.B. Passage Frankfurter Allee Betriebsgesellschaft mbH PERILLA Beteiligungsgesellschaft mbH Prestipay S.p.A. Relax Holding S.à r.l. 672 673 674 675 676 677 678 679 Singapore Luxembourg Abu Dhabi Vancouver Berlin Duesseldorf Udine Luxembourg Financial Institution Financial Institution Financial Institution 8, 9 Other Enterprise Other Enterprise Financial Institution 9 Financial Institution Other Enterprise Share of Capital in % 19.4 26.9 24.9 49.8 30.0 49.0 99.9 30.0 0.0 25.9 16.2 29.1 50.0 25.1 50.0 21.1 21.3 25.0 50.0 40.0 41.2 30.6 15.7 50.0 36.7 33.3 15.6 3.4 0.0 0.0 0.0 0.0 30.0 40.7 50.0 10.0 7.0 7.8 9.7 23.8 14.0 22.9 22.9 30.1 17.4 15.0 96.7 22.2 50.0 40.0 20.0 383 Deutsche Bank Annual Report 2020 Additional notes 44 – Shareholdings Serial No. 680 681 682 683 684 685 686 687 688 689 690 691 692 693 694 695 696 697 698 699 Name of company Robuterra AG in Liquidation Sakaras Holding Limited (in dissolution) SRC Security Research & Consulting GmbH Starpool Finanz GmbH Teesside Gas Transportation Limited (in members' voluntary liqui- dation) Trade Information Network Limited TRAXPAY GmbH Triton Beteiligungs GmbH i.L. U.S.A. ITCF XCI L.P. UKEM Motoryacht Medici Mangusta GbR Ullmann Krockow Esch GbR Ullmann, Krockow, Esch Luftverkehrsgesellschaft bürgerlichen Rechts Domicile of company Zurich Naxxar Bonn Berlin London London Frankfurt Frankfurt New York Troisdorf Troisdorf Troisdorf Foot- note Nature of activity 10 Other Enterprise 10 Financial Institution Other Enterprise Other Enterprise Other Enterprise 9 Other Enterprise Other Enterprise Other Enterprise 8 Other Enterprise 10 Other Enterprise 10 Other Enterprise 10 Other Enterprise Volbroker.com Limited Weser Properties S.à r.l., en faillite Wood NewCo S.à r.l. zeitinvest-Service GmbH Zhong De Securities Co., Ltd ZINDUS Beteiligungsgesellschaft mbH i.L. ZYRUS Beteiligungsgesellschaft mbH ZYRUS Beteiligungsgesellschaft mbH & Co. Patente I KG i.L. London Luxembourg Luxembourg Eschborn Beijing Duesseldorf Schoenefeld Schoenefeld Financial Institution Other Enterprise 8, 9 Other Enterprise Other Enterprise 9 Securities Trading Firm Financial Institution Financial Institution Other Enterprise Share of Capital in % 0.0 0.0 22.5 49.9 48.0 16.7 2.4 33.1 99.9 0.0 0.0 0.0 22.5 25.0 52.1 25.0 33.3 50.0 25.0 20.4 384 Deutsche Bank Annual Report 2020 Additional notes 44 – Shareholdings Other companies, where the holding exceeds 20 % Serial No. 700 701 702 703 704 Name of company ABATE Grundstücks-Vermietungsgesellschaft mbH ABRI Beteiligungsgesellschaft mbH Acamar Holding S.A. ACHTE PAXAS Treuhand- und Beteiligungsgesellschaft mbH ACHTUNDZWANZIGSTE PAXAS Treuhand- und Beteiligungsgesellschaft mbH i.L. ACHTZEHNTE PAXAS Treuhand- und Beteiligungsgesellschaft mbH ACIS Beteiligungsgesellschaft mbH ACTIO Grundstücks-Vermietungsgesellschaft mbH Adara S.A. ADEO Beteiligungsgesellschaft mbH ADLAT Beteiligungsgesellschaft mbH ADMANU Beteiligungsgesellschaft mbH Agena S.A. AGLOM Beteiligungsgesellschaft mbH AGUM Beteiligungsgesellschaft mbH ALANUM Beteiligungsgesellschaft mbH ALMO Beteiligungsgesellschaft mbH i.L. ALTA Beteiligungsgesellschaft mbH ANDOT Grundstücks-Vermietungsgesellschaft mbH APUR Beteiligungsgesellschaft mbH i.L. Asia Core Real Estate Fund SCA SICAV-RAIF ATAUT Beteiligungsgesellschaft mbH i.L. AVOC Beteiligungsgesellschaft mbH BAKTU Beteiligungsgesellschaft mbH BALIT Beteiligungsgesellschaft mbH Banks Island General Partner Inc. Benefit Trust GmbH BIMES Beteiligungsgesellschaft mbH BLI Beteiligungsgesellschaft für Leasinginvestitionen mbH BLI Internationale Beteiligungsgesellschaft mbH DB Advisors SICAV DB Fund (Mauritius) Limited Domicile of company Duesseldorf Duesseldorf Luxembourg Duesseldorf Duesseldorf Duesseldorf Duesseldorf Duesseldorf Luxembourg Duesseldorf Duesseldorf Duesseldorf Luxembourg Duesseldorf Duesseldorf Duesseldorf Duesseldorf Duesseldorf Duesseldorf Duesseldorf Luxembourg Duesseldorf Duesseldorf Schoenefeld Schoenefeld Toronto Luetzen Schoenefeld Duesseldorf Duesseldorf Luxembourg Ebène Cyber- City Foot- note Nature of activity 11 Financial Institution 11 Financial Institution 8 Other Enterprise 11 Other Enterprise 11 Other Enterprise 11 Other Enterprise 11 Financial Institution 11 Financial Institution 8 Other Enterprise 11 Financial Institution 11 Financial Institution 11 Financial Institution 8 Other Enterprise 11 Financial Institution 11 Financial Institution 11 Financial Institution 11 Financial Institution 11 Financial Institution 11 Financial Institution 11 Financial Institution 11, 12 Other Enterprise 11 Financial Institution 11 Financial Institution 11 Financial Institution 11 Financial Institution 11 Financial Institution 1, 13 Financial Institution 11 Financial Institution 11 Financial Institution 11 Financial Institution 14, 15 Other Enterprise 14 Other Enterprise Wilmington DB Placement, LLC Wilmington DB RC Investments II, LLC DB Real Estate Global Opportunities IB (Offshore), L.P. Camana Bay Deutsche River Investment Management Company S.à r.l., en faillite clôturée Luxembourg Duesseldorf DIL Fonds-Beteiligungsgesellschaft mbH i.L. Duesseldorf DONARUM Holding GmbH Duesseldorf DREIUNDZWANZIGSTE PAXAS Treuhand- und Beteiligungsgesellschaft mbH DREIZEHNTE PAXAS Treuhand- und Beteiligungsgesellschaft mbH Duesseldorf DRITTE Fonds-Beteiligungsgesellschaft mbH Duesseldorf Duesseldorf DRITTE PAXAS Treuhand- und Beteiligungsgesellschaft mbH EINUNDZWANZIGSTE PAXAS Treuhand- und Beteiligungsgesellschaft mbH Duesseldorf Eisler Capital (TA) Ltd ELC Logistik-Centrum Verwaltungs-GmbH ELFTE PAXAS Treuhand- und Beteiligungsgesellschaft mbH FÜNFTE Fonds-Beteiligungsgesellschaft mbH i.L. FÜNFTE PAXAS Treuhand- und Beteiligungsgesellschaft mbH FÜNFUNDZWANZIGSTE PAXAS Treuhand- und Beteiligungsgesellschaft London Erfurt Duesseldorf Duesseldorf Duesseldorf Duesseldorf mbH i.L. FÜNFZEHNTE PAXAS Treuhand- und Beteiligungsgesellschaft mbH Glor Music Production GmbH & Co. KG GLOR Music Production II GmbH & Co. KG HR "Simone" GmbH & Co. KG i.I. Immobilien-Vermietungsgesellschaft Schumacher GmbH & Co. Objekt Ro- Duesseldorf Tegernsee Tegernsee Jork Berlin 8 Other Enterprise 8 Other Enterprise 11 Financial Institution 11 Financial Institution 14 Financial Institution 11 Financial Institution 11 Other Enterprise 11 Other Enterprise 11 Financial Institution 11 Other Enterprise 11 Other Enterprise 16 Other Enterprise 11 Financial Institution 11 Other Enterprise 11 Financial Institution 11 Other Enterprise 11 Other Enterprise 11 Other Enterprise 16 Other Enterprise 16 Other Enterprise 16 Other Enterprise 11 Financial Institution landufer KG i.L. 754 Intermodal Finance I Ltd. George Town 11 Other Enterprise 705 706 707 708 709 710 711 712 713 714 715 716 717 718 719 720 721 722 723 724 725 726 727 728 729 730 731 732 733 734 735 736 737 738 739 740 741 742 743 744 745 746 747 748 749 750 751 752 753 Share of Capital in % 50.0 50.0 95.0 50.0 50.0 50.0 50.0 50.0 95.0 50.0 50.0 50.0 95.0 50.0 50.0 50.0 50.0 50.0 50.0 50.0 29.9 50.0 50.0 50.0 50.0 50.0 100.0 50.0 33.2 32.0 95.4 100.0 100.0 99.9 34.3 49.0 100.0 50.0 50.0 50.0 50.0 50.0 50.0 34.7 50.0 50.0 50.0 50.0 50.0 50.0 29.0 28.2 24.3 20.5 49.0 385 Deutsche Bank Annual Report 2020 Additional notes 44 – Shareholdings Serial No. 755 756 757 758 759 Name of company IOG Denali Upton, LLC IOG NOD I, LLC Isaac Newton S.A. Kinneil Leasing Company M Cap Finance Mittelstandsfonds GmbH & Co. KG Domicile of company Dover Dover Luxembourg London Frankfurt 760 761 762 763 764 765 766 767 768 769 770 771 772 773 774 775 776 777 778 779 780 781 782 783 784 785 786 787 788 789 790 791 792 793 794 795 796 797 798 799 800 801 802 803 804 805 806 807 808 809 810 811 812 813 814 815 816 M Cap Finance Mittelstandsfonds III GmbH & Co. KG MCT Südafrika 3 GmbH & Co. KG i.I. Metro plus Grundstücks-Vermietungsgesellschaft mbH i.L. MT "CAPE BEALE" Tankschiffahrts GmbH & Co. KG i.I. MT "KING DANIEL" Tankschiffahrts UG (haftungsbeschränkt) & Co. KG i.L. MT "KING DOUGLAS" Tankschiffahrts UG (haftungsbeschränkt) & Co. KG Frankfurt Hamburg Duesseldorf Hamburg Hamburg Hamburg i.L. MT "KING EDWARD" Tankschiffahrts GmbH & Co. KG MT "KING ERIC" Tankschiffahrts GmbH & Co. KG i.I. NBG Grundstücks-Vermietungsgesellschaft mbH NEUNTE PAXAS Treuhand- und Beteiligungsgesellschaft mbH NEUNZEHNTE PAXAS Treuhand- und Beteiligungsgesellschaft mbH Nexus Infrastruktur Beteiligungsgesellschaft mbH NOFA Grundstücks-Vermietungsgesellschaft mbH OPPENHEIM Buy Out GmbH & Co. KG i.L. PADEM Grundstücks-Vermietungsgesellschaft mbH PAGUS Beteiligungsgesellschaft mbH i.L. PALDO Grundstücks-Vermietungsgesellschaft mbH PANTUR Grundstücks-Vermietungsgesellschaft mbH i.L. PAXAS Treuhand- und Beteiligungsgesellschaft mbH PEDIS Grundstücks-Vermietungsgesellschaft mbH i.L. PEDUM Beteiligungsgesellschaft mbH i.L. PENDIS Grundstücks-Vermietungsgesellschaft mbH PENTUM Beteiligungsgesellschaft mbH PERGOS Beteiligungsgesellschaft mbH i.L. PERGUM Grundstücks-Vermietungsgesellschaft mbH PERLIT Mobilien-Vermietungsgesellschaft mbH PERLU Grundstücks-Vermietungsgesellschaft mbH PERNIO Grundstücks-Vermietungsgesellschaft mbH PERXIS Beteiligungsgesellschaft mbH PETA Grundstücks-Vermietungsgesellschaft mbH PONTUS Grundstücks-Vermietungsgesellschaft mbH PRADUM Beteiligungsgesellschaft mbH PRASEM Beteiligungsgesellschaft mbH PRATES Grundstücks-Vermietungsgesellschaft mbH i.L. PRISON Grundstücks-Vermietungsgesellschaft mbH Private Equity Invest Beteiligungs GmbH Private Equity Life Sciences Beteiligungsgesellschaft mbH PUDU Grundstücks-Vermietungsgesellschaft mbH PUKU Grundstücks-Vermietungsgesellschaft mbH i.L. PURIM Grundstücks-Vermietungsgesellschaft mbH QUANTIS Grundstücks-Vermietungsgesellschaft mbH QUELLUM Grundstücks-Vermietungsgesellschaft mbH QUOTAS Grundstücks-Vermietungsgesellschaft mbH SABIS Grundstücks-Vermietungsgesellschaft mbH SALIX Grundstücks-Vermietungsgesellschaft mbH SALUS Grundstücks-Vermietungsgesellschaft mbH SALUS Grundstücks-Vermietungsgesellschaft mbH & Co. Objekt Dresden KG Hamburg Hamburg Duesseldorf Duesseldorf Duesseldorf Duesseldorf Duesseldorf Cologne Duesseldorf Duesseldorf Duesseldorf Duesseldorf Duesseldorf Duesseldorf Duesseldorf Duesseldorf Duesseldorf Duesseldorf Duesseldorf Duesseldorf Duesseldorf Duesseldorf Duesseldorf Duesseldorf Duesseldorf Duesseldorf Duesseldorf Schoenefeld Schoenefeld Duesseldorf Duesseldorf Duesseldorf Duesseldorf Duesseldorf Schoenefeld Duesseldorf Duesseldorf Duesseldorf Duesseldorf Duesseldorf Duesseldorf SANCTOR Grundstücks-Vermietungsgesellschaft mbH SANDIX Grundstücks-Vermietungsgesellschaft mbH SANO Grundstücks-Vermietungsgesellschaft mbH SARIO Grundstücks-Vermietungsgesellschaft mbH SATINA Mobilien-Vermietungsgesellschaft mbH SCANDO Grundstücks-Vermietungsgesellschaft mbH SCHEDA Grundstücks-Vermietungsgesellschaft mbH i.L. Schumacher Beteiligungsgesellschaft mbH SCITOR Grundstücks-Vermietungsgesellschaft mbH SCITOR Grundstücks-Vermietungsgesellschaft mbH & Co. Objekt Heiligen- Duesseldorf Duesseldorf Duesseldorf Duesseldorf Duesseldorf Duesseldorf Duesseldorf Duesseldorf Duesseldorf Duesseldorf stadt KG i.L. Foot- note Nature of activity 16 Other Enterprise 16 Other Enterprise 8, 17 Other Enterprise 11 Financial Institution Financial Institution 8, 16, 18, 19 16 Financial Institution 16 Other Enterprise 11 Financial Institution 16 Other Enterprise 16 Other Enterprise 16 Other Enterprise 16 Other Enterprise 16 Other Enterprise 11 Financial Institution 11 Other Enterprise 11 Other Enterprise 11 Financial Institution 11 Financial Institution 4, 5 Financial Institution 11 Financial Institution 11 Financial Institution 11 Financial Institution 11 Financial Institution 11 Other Enterprise 11 Financial Institution 11 Financial Institution 11 Financial Institution 11 Financial Institution 11 Financial Institution 11 Financial Institution 11 Financial Institution 11 Financial Institution 11 Financial Institution 11 Financial Institution 11 Financial Institution 11 Financial Institution 11 Financial Institution 11 Financial Institution 11 Financial Institution 11 Financial Institution 11 Financial Institution 11 Financial Institution 11 Financial Institution 11 Financial Institution 11 Financial Institution 11 Financial Institution 11 Financial Institution 11 Financial Institution 11 Financial Institution 11 Financial Institution 11 Financial Institution 14 Financial Institution 11 Financial Institution 11 Financial Institution 11 Financial Institution 11 Financial Institution 11 Financial Institution 11 Financial Institution 11 Financial Institution 11 Financial Institution 11 Financial Institution 14 Financial Institution Share of Capital in % 23.0 22.5 95.0 35.0 77.1 38.4 38.5 40.0 34.0 33.0 33.0 35.3 34.5 50.0 50.0 50.0 50.0 50.0 27.7 50.0 50.0 50.0 50.0 50.0 50.0 50.0 50.0 50.0 50.0 50.0 50.0 50.0 50.0 50.0 50.0 50.0 50.0 50.0 50.0 50.0 50.0 50.0 50.0 50.0 50.0 50.0 50.0 50.0 50.0 50.0 50.0 58.5 50.0 50.0 50.0 50.0 50.0 50.0 50.0 33.2 50.0 71.1 817 818 SCUDO Grundstücks-Vermietungsgesellschaft mbH i.L. SECHSTE Fonds-Beteiligungsgesellschaft mbH Duesseldorf Duesseldorf 14 Financial Institution 11 Financial Institution 100.0 50.0 386 Deutsche Bank Annual Report 2020 Additional notes 44 – Shareholdings Serial No. 819 820 821 822 823 824 825 826 827 828 829 830 831 832 833 834 835 836 837 838 839 840 Domicile of company Name of company Duesseldorf SECHSTE PAXAS Treuhand- und Beteiligungsgesellschaft mbH Duesseldorf SECHZEHNTE PAXAS Treuhand- und Beteiligungsgesellschaft mbH Duesseldorf SEDO Grundstücks-Vermietungsgesellschaft mbH i.L. Duesseldorf SEGES Grundstücks-Vermietungsgesellschaft mbH Duesseldorf SEGU Grundstücks-Vermietungsgesellschaft mbH Duesseldorf SELEKTA Grundstücksverwaltungsgesellschaft mbH SENA Grundstücks-Vermietungsgesellschaft mbH Duesseldorf SENA Grundstücks-Vermietungsgesellschaft mbH & Co. Objekt Kamenz KG Duesseldorf Duesseldorf SERICA Grundstücks-Vermietungsgesellschaft mbH Duesseldorf SIDA Grundstücks-Vermietungsgesellschaft mbH Duesseldorf SIEBTE PAXAS Treuhand- und Beteiligungsgesellschaft mbH Duesseldorf SIEBZEHNTE PAXAS Treuhand- und Beteiligungsgesellschaft mbH Duesseldorf SIFA Grundstücks-Vermietungsgesellschaft mbH Duesseldorf SILANUS Grundstücks-Vermietungsgesellschaft mbH i.L. SILEX Grundstücks-Vermietungsgesellschaft mbH Duesseldorf SILEX Grundstücks-Vermietungsgesellschaft mbH & Co. Objekt Berlin KG i.L. Duesseldorf Duesseldorf SILIGO Mobilien-Vermietungsgesellschaft mbH i.L. Duesseldorf SILUR Grundstücks-Vermietungsgesellschaft mbH Duesseldorf SIMILA Grundstücks-Vermietungsgesellschaft mbH i.L. Duesseldorf SOLATOR Grundstücks-Vermietungsgesellschaft mbH Schoenefeld SOLON Grundstücks-Vermietungsgesellschaft mbH Halle/Saale SOLON Grundstücks-Vermietungsgesellschaft mbH & Co. Objekt Heizkraft- werk Halle KG i.L. 841 842 843 844 845 846 847 848 849 850 851 852 853 854 855 856 857 858 859 860 861 862 863 864 865 866 867 868 869 870 871 872 873 874 875 876 877 878 879 880 881 882 883 Duesseldorf SOLUM Grundstücks-Vermietungsgesellschaft mbH Duesseldorf SOMA Grundstücks-Vermietungsgesellschaft mbH Duesseldorf SOREX Grundstücks-Vermietungsgesellschaft mbH Duesseldorf SOSPITA Grundstücks-Vermietungsgesellschaft mbH Duesseldorf SPINO Grundstücks-Vermietungsgesellschaft mbH i.L. Schoenefeld SPLENDOR Grundstücks-Vermietungsgesellschaft mbH Duesseldorf STABLON Grundstücks-Vermietungsgesellschaft mbH i.L. Duesseldorf STAGIRA Grundstücks-Vermietungsgesellschaft mbH Schoenefeld STATOR Heizkraftwerk Frankfurt (Oder) Beteiligungsgesellschaft mbH Duesseldorf SUBLICA Grundstücks-Vermietungsgesellschaft mbH i.L. Duesseldorf SUBU Mobilien-Vermietungsgesellschaft mbH i.L. Schoenefeld SULPUR Grundstücks-Vermietungsgesellschaft mbH i.L. Duesseldorf SUPERA Grundstücks-Vermietungsgesellschaft mbH Duesseldorf SUPLION Beteiligungsgesellschaft mbH Duesseldorf SUSA Mobilien-Vermietungsgesellschaft mbH Duesseldorf SUSIK Grundstücks-Vermietungsgesellschaft mbH Schoenefeld TABA Grundstücks-Vermietungsgesellschaft mbH Duesseldorf TACET Grundstücks-Vermietungsgesellschaft mbH Duesseldorf TAGO Grundstücks-Vermietungsgesellschaft mbH Duesseldorf TAGUS Beteiligungsgesellschaft mbH Duesseldorf TAKIR Grundstücks-Vermietungsgesellschaft mbH Duesseldorf TEBOR Grundstücks-Vermietungsgesellschaft mbH i.L. Duesseldorf TEMATIS Grundstücks-Vermietungsgesellschaft mbH i.L. Duesseldorf TERRUS Grundstücks-Vermietungsgesellschaft mbH i.L. Duesseldorf TESATUR Beteiligungsgesellschaft mbH TESATUR Beteiligungsgesellschaft mbH & Co. Objekt Halle I KG i.L. Duesseldorf TESATUR Beteiligungsgesellschaft mbH & Co. Objekt Nordhausen I KG i.L. Duesseldorf Duesseldorf TIEDO Grundstücks-Vermietungsgesellschaft mbH Duesseldorf TIEDO Grundstücks-Vermietungsgesellschaft mbH & Co. Objekt Lager Nord KG i.L. TOSSA Grundstücks-Vermietungsgesellschaft mbH TRAGO Grundstücks-Vermietungsgesellschaft mbH TREMA Grundstücks-Vermietungsgesellschaft mbH TRENTO Grundstücks-Vermietungsgesellschaft mbH TRINTO Beteiligungsgesellschaft mbH i.L. TRIPLA Grundstücks-Vermietungsgesellschaft mbH TUDO Grundstücks-Vermietungsgesellschaft mbH i.L. TUGA Grundstücks-Vermietungsgesellschaft mbH i.L. TYRAS Beteiligungsgesellschaft mbH VARIS Beteiligungsgesellschaft mbH i.L. VCL Lease S.à r.l. VIERTE Fonds-Beteiligungsgesellschaft mbH VIERTE PAXAS Treuhand- und Beteiligungsgesellschaft mbH VIERUNDZWANZIGSTE PAXAS Treuhand- und Beteiligungsgesellschaft Duesseldorf Duesseldorf Berlin Duesseldorf Schoenefeld Duesseldorf Duesseldorf Duesseldorf Duesseldorf Duesseldorf Luxembourg Duesseldorf Duesseldorf Duesseldorf mbH Foot- note Nature of activity 11 Other Enterprise 11 Other Enterprise 14 Financial Institution 11 Financial Institution 11 Financial Institution 11 Financial Institution 11 Financial Institution 8 Financial Institution 11 Financial Institution 11 Financial Institution 11 Other Enterprise 11 Other Enterprise 14 Financial Institution 11 Financial Institution 11 Financial Institution 1 Financial Institution 11 Financial Institution 11 Financial Institution 11 Financial Institution 11 Financial Institution 11 Financial Institution 11 Other Enterprise 11 Financial Institution 11 Financial Institution 11 Financial Institution 11 Financial Institution 14 Financial Institution 11 Financial Institution 14 Financial Institution 11 Financial Institution 14 Financial Institution 11 Financial Institution 11 Financial Institution 11 Financial Institution 11 Financial Institution 11 Financial Institution 11 Financial Institution 11 Financial Institution 11 Financial Institution 11 Financial Institution 11 Financial Institution 11 Financial Institution 14 Financial Institution 11 Financial Institution 14 Financial Institution 14 Financial Institution 11 Financial Institution 1 Financial Institution 1 Financial Institution 11 Financial Institution 11 Financial Institution 14 Financial Institution 11 Financial Institution 11 Financial Institution 11 Financial Institution 11 Financial Institution 14 Financial Institution 11 Financial Institution 11 Financial Institution 11 Financial Institution 11 Financial Institution 8 Other Enterprise 11 Financial Institution 11 Other Enterprise 11 Other Enterprise Share of Capital in % 50.0 50.0 100.0 50.0 50.0 50.0 50.0 100.0 50.0 50.0 50.0 50.0 100.0 50.0 50.0 83.8 50.0 50.0 50.0 50.0 50.0 30.5 50.0 50.0 50.0 50.0 100.0 50.0 100.0 50.0 100.0 50.0 50.0 50.0 50.0 50.0 50.0 50.0 50.0 50.0 50.0 50.0 100.0 50.0 100.0 100.0 50.0 100.0 100.0 50.0 25.0 100.0 50.0 50.0 50.0 50.0 100.0 50.0 50.0 50.0 50.0 95.0 50.0 50.0 50.0 884 VIERZEHNTE PAXAS Treuhand- und Beteiligungsgesellschaft mbH Duesseldorf 11 Other Enterprise 50.0 387 Foot- note Nature of activity Share of Capital in % Deutsche Bank Annual Report 2020 Additional notes 44 – Shareholdings Serial No. 885 886 887 888 889 890 891 892 893 894 895 896 897 898 899 900 901 902 903 904 905 906 907 908 909 910 911 912 913 914 Name of company Wohnungs-Verwaltungsgesellschaft Moers mbH i.L. XARUS Grundstücks-Vermietungsgesellschaft mbH i.L. XELLUM Grundstücks-Vermietungsgesellschaft mbH XENTIS Grundstücks-Vermietungsgesellschaft mbH XERA Grundstücks-Vermietungsgesellschaft mbH ZABATUS Grundstücks-Vermietungsgesellschaft mbH ZAKATUR Grundstücks-Vermietungsgesellschaft mbH ZALLUS Beteiligungsgesellschaft mbH ZARAT Beteiligungsgesellschaft mbH ZARGUS Grundstücks-Vermietungsgesellschaft mbH ZEA Beteiligungsgesellschaft mbH ZEHNTE PAXAS Treuhand- und Beteiligungsgesellschaft mbH ZELAS Beteiligungsgesellschaft mbH ZENO Grundstücks-Vermietungsgesellschaft mbH ZEPTOS Grundstücks-Vermietungsgesellschaft mbH i.L. ZEREVIS Grundstücks-Vermietungsgesellschaft mbH ZERGUM Grundstücks-Vermietungsgesellschaft mbH ZIDES Grundstücks-Vermietungsgesellschaft mbH ZIMBEL Grundstücks-Vermietungsgesellschaft mbH ZINUS Grundstücks-Vermietungsgesellschaft mbH ZIRAS Grundstücks-Vermietungsgesellschaft mbH ZITON Grundstücks-Vermietungsgesellschaft mbH ZITUS Grundstücks-Vermietungsgesellschaft mbH ZONTUM Grundstücks-Vermietungsgesellschaft mbH ZORUS Grundstücks-Vermietungsgesellschaft mbH i.L. ZURET Beteiligungsgesellschaft mbH ZWANZIGSTE PAXAS Treuhand- und Beteiligungsgesellschaft mbH ZWEITE Fonds-Beteiligungsgesellschaft mbH ZWEITE PAXAS Treuhand- und Beteiligungsgesellschaft mbH ZWEIUNDZWANZIGSTE PAXAS Treuhand- und Beteiligungsgesellschaft mbH Domicile of company Duesseldorf Schoenefeld Duesseldorf Duesseldorf Duesseldorf Duesseldorf Duesseldorf Duesseldorf Duesseldorf Duesseldorf Schoenefeld Duesseldorf Duesseldorf Duesseldorf Duesseldorf Duesseldorf Duesseldorf Schoenefeld Schoenefeld Schoenefeld Schoenefeld Duesseldorf Schoenefeld Duesseldorf Duesseldorf Duesseldorf Duesseldorf Duesseldorf Duesseldorf Duesseldorf 11 Financial Institution 11 Financial Institution 11 Financial Institution 11 Financial Institution 11 Financial Institution 11 Financial Institution 11 Financial Institution 11 Financial Institution 11 Financial Institution 11 Financial Institution 11 Financial Institution 11 Other Enterprise 11 Financial Institution 11 Financial Institution 11 Financial Institution 11 Financial Institution 11 Financial Institution 11 Financial Institution 11 Financial Institution 11 Financial Institution 11 Financial Institution 11 Financial Institution 11 Financial Institution 11 Financial Institution 11 Financial Institution 11 Financial Institution 11 Other Enterprise 11 Financial Institution 11 Other Enterprise 11 Other Enterprise 915 916 ZWÖLFTE PAXAS Treuhand- und Beteiligungsgesellschaft mbH ZYLUM Beteiligungsgesellschaft mbH Duesseldorf Schoenefeld 11 Other Enterprise 11 Financial Institution 50.0 50.0 50.0 50.0 50.0 50.0 50.0 50.0 50.0 50.0 25.0 50.0 50.0 50.0 50.0 50.0 50.0 50.0 50.0 50.0 50.0 50.0 50.0 50.0 50.0 50.0 50.0 50.0 50.0 50.0 50.0 25.0 388 Deutsche Bank Annual Report 2020 Additional notes 44 – Shareholdings Holdings in large corporations, where the holding exceeds 5 % of the voting rights Serial No. 917 918 919 920 921 922 923 924 925 926 927 928 929 930 Name of company ABRAAJ Holdings (in official liquidation) BBB Bürgschaftsbank zu Berlin-Brandenburg GmbH BÜRGSCHAFTSBANK BRANDENBURG GmbH Bürgschaftsbank Mecklenburg-Vorpommern GmbH Bürgschaftsbank Sachsen GmbH Bürgschaftsbank Sachsen-Anhalt GmbH Bürgschaftsbank Schleswig-Holstein Gesellschaft mit beschränkter Haftung Bürgschaftsbank Thüringen GmbH Bürgschaftsgemeinschaft Hamburg GmbH MTS S.p.A. Prader Bank S.p.A. Private Export Funding Corporation Saarländische Investitionskreditbank Aktiengesellschaft Yensai.com Co., Ltd. Domicile of company Foot- note George Town Berlin Potsdam Schwerin Dresden Magdeburg Kiel Erfurt Hamburg Rome Bolzano Wilmington Saarbruecken Tokyo Nature of activity Financial Institution Financial Institution Financial Institution Financial Institution Financial Institution Financial Institution Financial Institution Financial Institution Financial Institution Other Enterprise Credit Institution Financial Institution Credit Institution Investment Firm Share of Capital in % 8.8 5.6 8.5 8.4 6.3 8.2 5.6 8.7 8.7 5.0 9.0 6.0 11.8 7.1 389 Deutsche Bank Annual Report 2020 Additional notes 45 – Impact of Deutsche Bank’s transformation 45 – Impact of Deutsche Bank’s transformation On July 7, 2019, Deutsche Bank announced a number of transformational measures relating to the Group’s businesses and its organization. The immediate and secondary impacts that these measures had on the Group’s operating results and financial position are disclosed below. Impairment and amortization of self-developed software In line with the transformation announcement, the Group reviewed current platform software and software under construction assigned to businesses subject to the transformation strategy. Accordingly, the reassessment of the respective recoverable amounts led to an impairment of self-developed software of € 36 million and € 855 million for the financial year ended Decem- ber 31, 2020 and 2019, respectively. In addition, the Group recorded amortization on Equities software subject to the transformation strategy of € 178 million and € 114 million for the financial year ended December 31, 2020 and 2019, respectively. The impairment write-down as well as the software amortization are included within the general and administrative expenses of the Group’s results in 2020 and 2019, respectively. Impairment of Right of Use assets and other related impacts The Group recognized impairments, accelerated or higher depreciation of Right-of-Use (RoU) assets, asset write downs and accelerated depreciation on leasehold improvements and furniture, onerous contracts provisions for non-lease costs, depre- ciation of capitalized reinstatement costs and other one-time relocation costs of € 195 million and € 137 million for the financial year ended December 31, 2020 and 2019, respectively. Certain of these costs related to incremental or accelerated decisions are driven by the changes in our expected operations due to the COVID-19 pandemic. Deferred tax asset valuation adjustments Each quarter, the Group re-evaluates its estimate related to deferred tax assets, including its assumptions about future profit- ability. In connection with the transformation the Group adjusted the estimate related to deferred tax assets in affected juris- dictions, such as the UK and the U.S., and recognized € 37 million and € 2.8 billion of valuation adjustments for the financial year ended December 31, 2020 and 2019, respectively. Restructuring and severance charges Starting with the announcement of the transformation of Deutsche Bank on July 7, 2019, we designated all restructuring expenses as related to the transformation announcement and the subsequent business re-organization and perimeter changes resulting in € 485 million and € 611 million restructuring expenses for the Group for the financial year ended Decem- ber 31, 2020 and 2019, respectively. These charges are comprised of termination benefits, additional expenses covering the acceleration of deferred compensation awards not yet amortized due to the discontinuation of employment and contract ter- mination costs related to real estate. 1,447 and 2,564 full-time equivalent employees (FTE) were impacted by the re-organi- zation and changes during the financial year 2020 and 2019, respectively. In addition to these restructuring expenses, € 203 million and € 97 million of severance related to the transformation announce- ment were recorded for the financial year ended December 31, 2020 and 2019, respectively. Other transformation related expenses As a result of the strategic transformation the Group recognized other transformation related expenses including expenses for Audit, Accounting & Tax, consulting fees and IT consulting fees of € 82 million and € 39 million for the financial year ended December 31, 2020 and 2019, respectively. 390 Deutsche Bank Annual Report 2020 Confirmations Report on the audit of the consolidated financial statements and of the group management report Confirmations Independent Auditor’s Report To Deutsche Bank Aktiengesellschaft, Frankfurt am Main Report on the audit of the consolidated financial statements and of the group management report Opinions We have audited the consolidated financial statements of Deutsche Bank Aktiengesellschaft, Frankfurt am Main, and its sub- sidiaries (the Group), which comprise the consolidated balance sheet as at 31 December 2020, and the consolidated state- ment of income, consolidated statement of comprehensive income, consolidated statement of changes in equity and consoli- dated statement of cash flows for the fiscal year from 1 January 2020 to 31 December 2020, and notes to the consolidated financial statements, including a summary of significant accounting policies. In addition, we have audited the group manage- ment report of Deutsche Bank Aktiengesellschaft, Frankfurt am Main, which is combined with the management report of the Bank, for the fiscal year from 1 January 2020 to 31 December 2020. In accordance with the German legal requirements, we have not audited the content of the combined Corporate Governance Statement pursuant to Sec. 315d HGB which is pub- lished on the website stated in the group management report and is part of the management report. In our opinion, on the basis of the knowledge obtained in the audit, – the accompanying consolidated financial statements comply, in all material respects, with the IFRSs as adopted by the EU, and the additional requirements of German commercial law pursuant to Sec. 315e (1) HGB and, in compliance with these requirements, give a true and fair view of the assets, liabilities and financial position of the Group as at 31 December 2020 and of its financial performance for the fiscal year from 1 January 2020 to 31 December 2020, and – the accompanying group management report as a whole provides an appropriate view of the Group’s position. In all material respects, this group management report is consistent with the consolidated financial statements, complies with German legal requirements and appropriately presents the opportunities and risks of future development. Our opinion on the group management report does not cover the content of the combined Corporate Governance Statement referred to above. Pursuant to Sec. 322 (3) Sentence 1 HGB, we declare that our audit has not led to any reservations relating to the legal compliance of the consolidated financial statements and of the group management report. Basis for the opinions We conducted our audit of the consolidated financial statements and of the group management report in accordance with Sec. 317 HGB and the EU Audit Regulation (No 537/2014, referred to subsequently as “EU Audit Regulation”) and in compli- ance with German Generally Accepted Standards for Financial Statement Audits promulgated by the Institut der Wirtschaftsprüfer [Institute of Public Auditors in Germany] (IDW). Our responsibilities under those requirements and principles are further described in the “Auditor’s responsibilities for the audit of the consolidated financial statements and of the group management report” section of our auditor’s report. We are independent of the group entities in accordance with the require- ments of European law and German commercial and professional law, and we have fulfilled our other German professional responsibilities in accordance with these requirements. In addition, in accordance with Art. 10 (2) f) of the EU Audit Regulation, we declare that we have not provided non-audit services prohibited under Art. 5 (1) of the EU Audit Regulation. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinions on the consolidated financial statements and on the group management report. Key audit matters in the audit of the consolidated financial statements Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consoli- dated financial statements for the fiscal year from 1 January 2020 to 31 December 2020. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon; we do not provide a separate opinion on these matters. 391 Deutsche Bank Annual Report 2020 Confirmations Report on the audit of the consolidated financial statements and of the group management report Below, we describe what we consider to be the key audit matters: 1. Valuation of level 3 financial instruments and related inputs not quoted in active markets Reasons why the matter was determined to be a key audit matter The bank uses valuation techniques to establish the fair value of level 3 financial instruments and related inputs not quoted in active markets. The bank held level 3 financial assets and financial liabilities measured at fair value of EUR 23,583 million and EUR 8,867 million as of December 31, 2020. The relevant financial instruments are reported within financial assets and liabilities at fair value through profit or loss. Financial instruments and related inputs that are not quoted in active markets include structured derivatives valued using complex models; derivatives with non-standard collateral arrangements; more-complex OTC derivatives; dis- tressed debt; highly-structured bonds; private equity placements; commercial real estate loans; illiquid loans; and mu- nicipal bonds; credit and funding spreads used to determine valuation adjustments (Credit Valuation Adjustment and Funding Valuation Adjustment); and other inputs which cannot be observed for instruments with longer-dated maturi- ties. As the valuation of level 3 financial instruments and related inputs not quoted in active markets is based on a high degree on management’s assumptions and judgements due to the complex nature of the valuation techniques and models being utilized and the unobservability of the significant inputs used, this is a key audit matter. Auditor’s response We obtained an understanding, evaluated the design and tested the operational effectiveness of the controls over manage- ment’s processes to determine fair value of financial instruments and determination of significant unobservable inputs therein, including controls relating to independent price verification; independent validation of valuation models, including assessment of model limitations; monitoring of potentially inappropriate valuation model usage; calculation of fair value adjustments; and the associated controls over relevant information technology systems. We evaluated the valuation techniques, models and methodologies, and tested the inputs used in those models. We performed an independent revaluation of a sample of derivatives and other financial instruments at fair value using independent models and inputs. We also independently assessed the reasonableness of a sample proxy inputs used. In addition, we evaluated the methodology and inputs used by management in determining fair value adjustments against the requirements of IFRS 13 and performed recalculations for a sample of these valuation adjustments using our own independent data and methodology. We involved internal specialists who have particular expertise in the area of financial instruments valuation. Our procedures did not lead to any reservations relating to the valuation of level 3 financial instruments and related inputs not quoted in active markets. Reference to related disclosures Information on the valuation techniques, models and methodologies used in the measurement of fair value is provided in notes 1 and 13 of the notes to the consolidated financial statements. Inclusion of forward-looking information in the model-based calculation of expected 2. credit losses Reasons why the matter was determined to be a key audit matter As of December 31, 2020, the Group recognized an allowance for credit losses of EUR 5,385 million. The estimated probabilities of default used in the model-based calculation of expected credit losses on non-defaulted financial instruments (IFRS 9 Stage 1 and Stage 2) are based on historical information, combined with current economic developments and forward-looking macroeconomic forecasts (e.g., gross domestic product and unemployment rates). Statistical techniques are then applied to transform the base scenario into a multiple scenario analysis. The scenarios specify deviations from the baseline forecasts. These are then used for deriving multi-year PD curves for different rating and counterparty classes, which are applied in the calculation of expected credit losses and in the identification of significant deterioration in credit quality of financial assets. In light of the economic uncertainty arising as a result of the COVID-19 pandemic in the fiscal year, the resulting uncertainty in the estimation of forward-looking information and the impact of government support schemes on the 392 Deutsche Bank Annual Report 2020 Confirmations Report on the audit of the consolidated financial statements and of the group management report early detection of risks, the Bank made adjustments to the expected credit losses calculated using the conventional credit risk models and forecasting methods. In view of the significant holdings of non-defaulted financial instruments and the increased uncertainty and use of judgment, including the COVID-19 pandemic, we consider the inclusion of forward-looking information (e.g., gross domestic product and unemployment rates) in the model-based calculation of expected credit losses to be a key audit matter. Auditor’s response During our audit we obtained an understanding of the processes implemented by the Bank, assessed the design of the controls over the selection, determination and validation of forward-looking information in respect of the requirements under IFRS 9, and tested their operating effectiveness. We evaluated the review of the forecasting methods on the basis of the Bank’s model validation reports. Furthermore, we evaluated the methods used to include the selected variables in the baseline scenario and the performance of the multi- scenario analysis. We assessed the macroeconomic forecasts used by the Bank as of the reporting date by comparing them with the macroe- conomic forecasts produced by external sources. We also evaluated the methodology applied by the Bank in making adjustments. In so doing, we assessed the results of the Bank’s sensitivity analyses by drawing on insights from our own benchmark analyses. We also tested that the adjustments were considered in the calculation of expected credit losses according to management’s methodology. To audit the inclusion of forward-looking information in the model-based calculation of expected credit losses, we involved internal specialists who have particular expertise in the area of credit risk modeling. Our procedures did not lead to any reservations relating to the inclusion of forward-looking information in the model-based calculation of expected credit losses. Reference to related disclosures Information on the inclusion of forward-looking information in the model-based calculation of expected credit losses is provided in notes 1 and 19 to the notes to the consolidated financial statements. 3. Measurement of goodwill for the Asset Management cash-generating unit Reasons why the matter was determined to be a key audit matter As of December 31, 2020, the Group reports goodwill of EUR 2,739 million that was exclusively allocated to its Asset Man- agement cash-generating unit (CGU). For purposes of the impairment test the recoverable amount of the Asset Management cash-generating unit is calculated using the discounted cash flow model. In this context, assumptions must be made regarding, earnings projections, long-term growth rate and the discount rate. The discount rate is derived using the Capital Asset Pricing Model. As the measurement of goodwill for the Asset Management cash-generating unit is based on a high degree of judgment this is a key audit matter. Auditor’s response During our audit procedures we obtained an understanding of the process for preparing the multi-year plan and calculating the recoverable amount of goodwill for the Asset Management cash-generating unit. In this respect, we also obtained an understanding of management’s controls regarding the earnings projections, applied discount rate and long-term growth rate, assessed the design of such controls and tested their effectiveness. Furthermore, we analyzed the significant assumptions described above with a focus on significant changes in the planning assumptions compared with the prior year. In this regard, we assessed the consistency and verifiability of the significant assumptions used in the multi-year plan and also compared them with external market expectations. In analyzing the expected future cash flows of the Asset Management cash-generating unit, we compared the business plan with the prior fiscal year’s plan and with the actual results achieved and evaluated any significant deviations. Furthermore, we examined the extent to which the assumptions on the economic development in the detailed planning period and for the perpetual annuity are within a range of externally available forecasts. We examined the valuation parameters used for the estimate of the recoverable amount, such as estimated discount rate and long-term growth rate, in comparison to externally available parameters. 393 Deutsche Bank Annual Report 2020 Confirmations Report on the audit of the consolidated financial statements and of the group management report We also recalculated the arithmetical accuracy of the valuation model used. To audit the recoverability of goodwill, we involved internal specialists who have particular expertise in the area of business valuation. Our procedures did not lead to any reservations relating to the measurement of the goodwill for the Asset Management cash- generating unit. Reference to related disclosures Information on the measurement of goodwill is provided in notes 1 and 23 of the notes to the consolidated financial statements. Measurement of the unamortized intangible asset from retail investment management 4. agreements in the U.S. (“Scudder”) Reasons why the matter was determined to be a key audit matter As of December 31, 2020, the Group reports an intangible asset of EUR 706 million stemming from agreements to manage a variety of retail mutual funds in the US. These agreements were acquired as part of the acquisition of Zurich Scudder Invest- ments, Inc. (Scudder) in 2002. For purposes of the impairment test the recoverable amount is calculated as fair value less cost of disposal using the multi- period excess earnings method on the basis of a multi-year plan of the earnings generated by the agreements and of the expected costs of managing the retail mutual funds. The key assumptions in determining the fair value less costs of disposal include the asset mix, the flows forecast, the effective fee rate and discount rate as well as the long-term growth rate. As the measurement of the “Scudder” unamortized intangible asset is based on a high degree of judgment this is a key audit matter. Auditor’s response For our audit, the process for preparing the multi-year plan and for the further calculation of the recoverable amount of the “Scudder” intangible asset was assessed and an understanding of management’s controls was obtained and the design and operating effectiveness of the controls related to the asset mix, flows forecast, effective fee rate and discount rate as well as the long-term growth rate was assessed. Furthermore, the significant assumptions described above with a focus on significant changes in the planning assumptions compared with the prior year were analyzed. In this regard, the consistency and verifiability of the significant assumptions used in the multi-year plan were assessed and also compared with external market expectations. In analyzing the expected earnings from the investment management agreements, the business plan was compared to the prior fiscal year’s plan and to the actual results achieved and any significant deviations were evaluated. Furthermore, the extent to which the assumptions on the economic development in the detailed planning period and for the perpetual annuity are within a range of externally available forecasts was examined. The valuation parameters used for the estimate of the recoverable amount, such as estimated discount rate and long-term growth rate, in comparison to externally available param- eters were examined. To audit the impairment of the “Scudder” unamortized intangible asset, we involved internal specialists who have particular expertise in the area of business valuation. Our procedures did not lead to any reservations relating to the measurement of the “Scudder” unamortized intangible asset. Reference to related disclosures Information on the measurement of the “Scudder” unamortized intangible asset is provided in notes 1 and 23 of the notes to the consolidated financial statements. 5. Recognition and measurement of deferred tax assets Reasons why the matter was determined to be a key audit matter As of December 31, 2020, the Group reports net deferred tax assets of EUR 5,497 million. The estimation of future ability to utilize such assets depends on the potential for future taxable profit. This is subject to estimation uncertainty and is dependent on the expected development of key assumptions. These include, but are not limited to, assumptions on the forecasted operating results based upon approved business plans, including a review of the eligible carry-forward periods, tax planning opportunities and other relevant considerations. 394 Deutsche Bank Annual Report 2020 Confirmations Report on the audit of the consolidated financial statements and of the group management report In light of the material significance and the use of judgment in numerous estimates of future taxable profit and the ability to use tax losses and previously unclaimed tax credits, the recognition and measurement of deferred tax assets is a key audit matter. Auditor’s response We obtained an understanding of the process for the recognition and measurement of deferred tax assets to determine whether deductible temporary differences and net operating loss carryforwards are identified and measured in accordance with the provisions of tax law and rules for accounting for deferred taxes under IAS 12, evaluated the design and tested the operational effectiveness of the controls. This included, but was not limited to, the assumptions used to develop and allocate elements of the approved business plan as a basis for estimating the future taxable income of the relevant group companies and tax groups. Furthermore, we verified the methodology for the recognition of deferred tax assets by analyzing the assumptions made in estimating future taxable profits. We assessed the accuracy of the data used to estimate future taxable income by comparing the key assumptions underlying the forecast of future taxable income with historical and prospective data available externally. We also assessed the parameters applied to the approved business plans and performed sensitivity analyses for the under- lying assumptions. We additionally compared the historical forecasts with the actual results. To audit the above assumptions involved in the recoverability of the deferred taxes, we involved our tax professionals and internal specialists who have knowledge in the area of business valuation. Our procedures did not lead to any reservations relating to the recognition and measurement of the deferred tax assets. Reference to related disclosures Information on the recognition and measurement of deferred tax assets is provided in notes 1 and 34 of the notes to the consolidated financial statements. 6. IT Access and Change Management in the financial reporting Reasons why the matter was determined to be a key audit matter The accuracy of the bank’s group financial reporting is highly dependent on the reliability and the continuity of the used infor- mation technology due to the significant number of transactions that are processed daily. The bank continued to make efforts during the year to enhance the centralization of their IT systems and processes, to increase the reliability and continuity of the IT processing and access and change management as well as to reduce the IT complexity. Given the high dependency on reliable and continuing data processing and given the pervasive nature of IT controls on the internal control system, we consider IT Access and Change Management in the financial reporting as a key audit matter. Auditor’s response We assessed the IT control environment including the IT general controls as well as the IT application controls relevant to the financial reporting. Our procedures also covered the changes during the year on the current IT control environment from ongoing centralization activities. Moreover, we tested the operating effectiveness of IT general controls related to user access management and change man- agement across applications, databases and operating systems. Additionally, we tested IT application controls over automated data processing, data feeds and interfaces. Our audit procedures related to IT access management included, but were not limited to, user access provisioning and withdrawal, privileged user access, periodic access right recertifications, system se- curity settings and user authentication controls. Our audit procedures related to IT change management included, but were not limited to, evaluating if changes were tested and approved prior to implementation and changes in the user management is restricted to authorized users. Furthermore, we tested if program developers had approval rights for changes in productive systems and whether they were able to carry out any modifications due to their access rights in the productive versions of applications, databases, and oper- ating systems respectively to assess if these responsibilities were functionally segregated. To audit the IT Access and Change Management in the financial reporting process, we involved internal professionals who have particular expertise in the area of IT audits. Our audit procedures did not lead to any reservations relating to the IT access and change management in the financial reporting. 395 Deutsche Bank Annual Report 2020 Confirmations Report on the audit of the consolidated financial statements and of the group management report Reference to related disclosures For a general description of internal controls over the financial reporting, we refer to the combined management report in section “Internal Control over Financial Reporting”. Other information The Supervisory Board is responsible for the Report of the Supervisory Board. The executive directors and the Supervisory Board are responsible for the declaration pursuant to Sec. 161 AktG [“Aktiengesetz”: German Stock Corporation Act] on the German Corporate Governance Code, which is part of the combined Corporate Governance Statement. In all other respects, the executive directors are responsible for the other information. The other information comprises – the combined Corporate Governance Statement pursuant to Sec. 315d HGB published on the website referred to in the group management report and other parts to be included in the annual report, of which we obtained a version prior to issuing this auditor’s report, in particular: – the Non-financial Statement, – the Responsibility Statement pursuant to Sec. 297 (2) Sentence 4 HGB in conjunction with Sec. 315 (1) Sentence 6 HGB, – the “Deutsche Bank – Financial Summary” section, – the “Deutsche Bank Group” section, – the “Corporate Governance Statement/Corporate Governance Report” section and – the “Supplementary Information” section, but not the consolidated financial statements, not the group management report disclosures whose content is audited and not our auditor’s report thereon. Our opinions on the annual financial statements and on the management report do not cover the other information, and con- sequently we do not express an opinion or any other form of assurance conclusion thereon. In connection with our audit, our responsibility is to read the other information referred to above and, in so doing, to consider whether the other information – is materially inconsistent with the consolidated financial statements, the disclosures in the group management report whose content was audited or our knowledge obtained in the audit, or – otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Responsibilities of the executive directors and the Supervisory Board for the con- solidated financial statements and the group management report The executive directors are responsible for the preparation of the consolidated financial statements that comply, in all material respects, with IFRSs as adopted by the EU and the additional requirements of German commercial law pursuant to Sec. 315e (1) HGB, and that the consolidated financial statements, in compliance with these requirements, give a true and fair view of the assets, liabilities, financial position and financial performance of the Group. In addition, the executive directors are respon- sible for such internal control as they have determined necessary to enable the preparation of consolidated financial state- ments that are free from material misstatement, whether due to fraud or error. In preparing the consolidated financial statements, the executive directors are responsible for assessing the Group’s ability to continue as a going concern. They also have the responsibility for disclosing, as applicable, matters related to going concern. In addition, they are responsible for financial reporting based on the going concern basis of accounting unless there is an intention to liquidate the Group or to cease operations, or there is no realistic alternative but to do so. Furthermore, the executive directors are responsible for the preparation of the group management report that, as a whole, provides an appropriate view of the Group’s position and is, in all material respects, consistent with the consolidated financial statements, complies with German legal requirements, and appropriately presents the opportunities and risks of future devel- opment. In addition, the executive directors are responsible for such arrangements and measures (systems) as they have considered necessary to enable the preparation of a group management report that is in accordance with the applicable German legal requirements, and to be able to provide sufficient appropriate evidence for the assertions in the group manage- ment report. 396 Deutsche Bank Annual Report 2020 Confirmations Report on the audit of the consolidated financial statements and of the group management report The Supervisory Board is responsible for overseeing the Group’s financial reporting process for the preparation of the consol- idated financial statements and of the group management report. Auditor’s responsibilities for the audit of the consolidated financial statements and of the group management report Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and whether the group management report as a whole provides an appropriate view of the Group’s position and, in all material respects, is consistent with the consolidated financial statements and the knowledge obtained in the audit, complies with the German legal requirements and appropriately presents the oppor- tunities and risks of future development, as well as to issue an auditor’s report that includes our opinions on the consolidated financial statements and on the group management report. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Sec. 317 HGB and the EU Audit Regulation and in compliance with German Generally Accepted Standards for Financial Statement Audits promulgated by the Institut der Wirtschaftsprüfer (IDW) will always detect a material misstatement. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements and this group man- agement report. We exercise professional judgment and maintain professional skepticism throughout the engagement. We also:  – Identify and assess the risks of material misstatement of the consolidated financial statements and of the group manage- ment report, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinions. The risk of not detecting a material misstate- ment resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. – Obtain an understanding of internal control relevant to the audit of the consolidated financial statements and of arrange- ments and measures (systems) relevant to the audit of the group management report in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of these systems. – Evaluate the appropriateness of accounting policies used by the executive directors and the reasonableness of estimates made by the executive directors and related disclosures. – Conclude on the appropriateness of the executive directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in the auditor’s report to the related disclosures in the consolidated financial statements and in the group management report or, if such disclosures are inadequate, to modify our respective opinions. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to be able to continue as a going concern. – Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements present the underlying transactions and events in a manner that the consolidated financial statements give a true and fair view of the assets, liabilities, financial position and financial perfor- mance of the Group in compliance with IFRSs as adopted by the EU and the additional requirements of German commercial law pursuant to Sec. 315e (1) HGB. – Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express opinions on the consolidated financial statements and on the group management report. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinions. – Evaluate the consistency of the group management report with the consolidated financial statements, its conformity with [German] law, and the view of the Group’s position it provides. – Perform audit procedures on the forward-looking information presented by the executive directors in the group management report. On the basis of sufficient appropriate audit evidence we evaluate, in particular, the significant assumptions used by the executive directors as a basis for the forward-looking information, and evaluate the proper derivation of the forward- looking information from these assumptions. We do not express a separate opinion on the forward-looking information and on the assumptions used as a basis. There is a substantial unavoidable risk that future events will differ materially from the forward-looking information. We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. 397 Deutsche Bank Annual Report 2020 Confirmations Report on the audit of the consolidated financial statements and of the group management report We also provide those charged with governance with a statement that we have complied with the relevant independence requirements, and communicate with them all relationships and other matters that may reasonably be thought to bear on our independence and where applicable, the related safeguards. From the matters communicated with those charged with governance, we determine those matters that were of most signifi- cance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter. Other legal and regulatory requirements Report on the assurance in accordance with Sec. 317 (3b) HGB on the electronic reproduction of the consolidated financial statements and the group management report prepared for publica- tion purposes Opinion We have performed assurance work in accordance with Sec. 317 (3b) HGB to obtain reasonable assurance about whether the reproduction of the consolidated financial statements and the group management report (hereinafter the “ESEF docu- ments”) contained in the attached electronic file [Deutsche_Bank_AG_KA+KLB_ESEF-2020-12-31.zip] and prepared for pub- lication purposes complies in all material respects with the requirements of Sec. 328 (1) HGB for the electronic reporting format (“ESEF format”). In accordance with German legal requirements, this assurance only extends to the conversion of the infor- mation contained in the consolidated financial statements and the group management report into the ESEF format and there- fore relates neither to the information contained in this reproduction nor to any other information contained in the abovemen- tioned electronic file. In our opinion, the reproduction of the consolidated financial statements and the group management report contained in the abovementioned attached electronic file and prepared for publication purposes complies in all material respects with the re- quirements of Sec. 328 (1) HGB for the electronic reporting format. We do not express any opinion on the information con- tained in this reproduction nor on any other information contained in the abovementioned file beyond this reasonable assur- ance opinion and our audit opinions on the accompanying consolidated financial statements and the accompanying group management report for the fiscal year from 1 January 2020 to 31 December 2020 contained in the “Report on the audit of the consolidated financial statements and of the group management report” above. Basis for the opinion We conducted our assurance work on the reproduction of the consolidated financial statements and the group management report contained in the abovementioned attached electronic file in accordance with Sec. 317 (3b) HGB and Exposure Draft of IDW Assurance Standard: Assurance in Accordance with Sec. 317 (3b) HGB on the Electronic Reproduction of Financial Statements and Management Reports Prepared for Publication Purposes (ED IDW AsS 410). Our responsibilities under that standard are further described in the “Group auditor’s responsibilities for the assurance work on the ESEF documents” section. Our auditor practice applied the requirements set forth in IDW Quality Control Standard: “Anforderungen an die Quali- tätssicherung in der Wirtschaftsprüferpraxis“ [Requirements for Quality Control in the Practice of Public Auditors] (IDW QS 1) with regard to its quality control system. Responsibilities of the executive directors and the Supervisory Board for the ESEF documents The executive directors of the Bank are responsible for the preparation of the ESEF documents including the electronic repro- duction of the consolidated financial statements and the group management report in accordance with Sec. 328 (1) Sentence 4 No. 1 HGB and for the tagging of the consolidated financial statements in accordance with Sec. 328 (1) Sentence 4 No. 2 HGB. In addition, the executive directors of the Bank are responsible for such internal control as they have considered necessary to enable the preparation of ESEF documents that are free from material non-compliance with the requirements of Sec. 328 Abs. 1 HGB for the electronic reporting format, whether due to fraud or error. The executive directors of the Bank are also responsible for the submission of the ESEF documents together with the auditor’s report and the attached audited consolidated financial statements and group management report as well as other documents to be published to the operator of the Bundesanzeiger [German Federal Gazette]. The Supervisory Board is responsible for overseeing the preparation of the ESEF documents as part of the financial reporting process. 398 Deutsche Bank Annual Report 2020 Confirmations Report on the audit of the consolidated financial statements and of the group management report Group auditor’s responsibilities for the assurance work on the ESEF documents Our objective is to obtain reasonable assurance about whether the ESEF documents are free from material non-compliance with the requirements of Sec. 328 (1) HGB, whether due to fraud or error. We exercise professional judgment and maintain professional skepticism throughout the engagement. We also: – Identify and assess the risks of material non-compliance with the requirements of Sec. 328 (1) HGB, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain assurance evidence that is sufficient and appropriate to provide a basis for our assurance opinion. – Obtain an understanding of internal control relevant to the assurance on the ESEF documents in order to design assurance procedures that are appropriate in the circumstances, but not for the purpose of expressing an assurance opinion on the effectiveness of these controls. – Evaluate the technical validity of the ESEF documents, i.e., whether the electronic file containing the ESEF documents meets the requirements of Delegated Regulation (EU) 2019/815, in the version valid as of the reporting date, on the tech- nical specification for this electronic file. – Evaluate whether the ESEF documents enable an XHTML reproduction with content equivalent to the audited consolidated financial statements and to the audited group management report. – Evaluate whether the tagging of the ESEF documents with Inline XBRL technology (iXBRL) enables an appropriate and complete machine-readable XBRL copy of the XHTML reproduction. Further information pursuant to Art. 10 of the EU Audit Regulation We were elected as group auditor by the Annual General Meeting on 20 May 2020. We were engaged by the Supervisory Board on 5 June 2020. We have been the group auditor of Deutsche Bank Aktiengesellschaft since fiscal year 2020. We declare that the opinions expressed in this auditor’s report are consistent with the additional report to the Audit Committee pursuant to Art. 11 of the EU Audit Regulation (long-form audit report). German Public Auditor responsible for the engagement The German Public Auditor responsible for the engagement is Mr. Holger Lösken. Eschborn/Frankfurt am Main, 8 March 2021 Ernst & Young GmbH Wirtschaftsprüfungsgesellschaft Barth Lösken Wirtschaftsprüfer Wirtschaftsprüfer [German Public Auditor] [German Public Auditor] 399 Deutsche Bank Annual Report 2020 Confirmations Responsibility statement by the Management Board Responsibility statement by the Management Board To the best of our knowledge, and in accordance with the applicable reporting principles, the consolidated financial statements give a true and fair view of the assets, liabilities, financial position and profit or loss of the Group and the Group management report, which has been combined with the management report for Deutsche Bank AG, includes a fair review of the development and performance of the business and the position of the Group, together with a description of the principal opportunities and risks associated with the expected development of the Group. Frankfurt am Main, March 4, 2021 Christian Sewing Karl von Rohr Fabrizio Campelli Frank Kuhnke Bernd Leukert Stuart Lewis James von Moltke Alexander von zur Mühlen Christiana Riley Stefan Simon 400 3 Corporate Governance Statement according to Sections 289f and 315d of the German Commercial Code / Corporate Governance Report 402 Management Board and Supervisory Board 417 Reporting and transparency 417 Related party transactions 418 Auditing and controlling 421 Compliance with the German Corporate Governance Code Deutsche Bank Annual Report 2020 Management Board and Supervisory Board Management Board All information presented in this Corporate Governance Statement according to Section 289f and 315d of the German Com- mercial Code is as of February 19, 2021. Management Board and Supervisory Board Management Board The Management Board of Deutsche Bank AG is responsible for the management of the company in accordance with the law, the Articles of Association of Deutsche Bank AG and the Terms of Reference for the Management Board with the objective of creating sustainable value in the interests of the company. It considers the interests of shareholders, employees and other company-related stakeholders. The members of the Management Board are collectively responsible for managing the bank’s business. The Management Board, as the Group Management Board, manages Deutsche Bank Group in accordance with uniform guidelines; it exercises general control over all Group companies. The Management Board decides on all matters prescribed by law and the Articles of Association and ensures compliance with the legal requirements and internal guidelines (compliance). It also takes the necessary measures to ensure that adequate internal guidelines are developed and implemented. The Management Board's responsibilities include, in particular, the bank’s strategic management and direction, the allocation of resources, financial accounting and reporting, control and risk manage- ment, as well as a properly functioning business organization and corporate control. The Management Board decides on the appointments to the senior management level below the Management Board and, in particular, on the appointment of Global Key Function Holders. In appointing people to management functions in the Group, the Management Board takes diversity into account and strives, in particular, to achieve an appropriate representation of women (more detailed information in section “Targets for the proportion of women in management positions/gender quota“ in this Corporate Governance Statement). The Management Board works closely together with the Supervisory Board in a cooperative relationship of trust and for the benefit of the company. The Management Board reports to the Supervisory Board at a minimum within the scope prescribed by law or administrative guidelines, in particular on all issues with relevance for the Group concerning strategy, the intended business policy, planning, business development, risk situation, risk management, staff development, reputation and compli- ance. A comprehensive presentation of the duties, responsibilities and procedures of our Management Board is specified in its Terms of Reference, the current version of which is available on our website (www.db.com/ir/en/documents.htm). Personnel changes to the Management Board and the current members of the Management Board The following members of the Management Board were appointed for a three-year period: – Christiana Riley and Bernd Leukert with effect from January 1, 2020 – Professor Dr. Stefan Simon and Alexander von zur Mühlen with effect from August 1, 2020. The following members of the Management Board left the Management Board: – As of July 31, 2020: Werner Steinmüller. The following, information is provided on the current members of the Management Board on the year in which they were born, year in which they were first appointed and year in which their term expires as well as their current positions and area of responsibility according to the current Business Allocation Plan for the Management Board. Also specified are their other board mandates or directorships outside of Deutsche Bank Group as well as all memberships in legally prescribed supervisory boards or other comparable domestic or foreign supervisory bodies of commercial enterprises. The members of our Manage- ment Board have generally undertaken not to assume chairmanships of supervisory boards of companies outside Deutsche Bank Group. 402 Deutsche Bank Annual Report 2020 Management Board and Supervisory Board Management Board Christian Sewing Year of birth: 1970 First appointed: 2015 Term expires: 2022 Christian Sewing became a member of our Management Board on January 1, 2015, and Chairman of the Management Board with effect from April 8, 2018. He is responsible on the Management Board for Communications & Corporate Social Respon- sibility (CSR), Research and Group Audit as well as for the Corporate Bank and the Investment Bank. Prior to assuming his role on the Management Board, Mr. Sewing was Global Head of Group Audit and held a number of positions before that in Risk, including Deputy Chief Risk Officer (from 2012 to 2013) and Chief Credit Officer (from 2010 to 2012) of Deutsche Bank. From 2005 until 2007, Mr. Sewing was a member of the Management Board of Deutsche Genossenschafts-Hypothekenbank. Before graduating with a diploma from the Bankakademie Bielefeld and Hamburg, Mr. Sewing completed a bank apprentice- ship at Deutsche Bank in 1989. Mr. Sewing does not have any external directorships subject to disclosure. Karl von Rohr Year of birth: 1965 First appointed: 2015 Term expires: 2023 Karl von Rohr became a member of our Management Board on November 1, 2015, and President as of April 8, 2018. He is responsible on the Management Board for the Private Bank and Asset Management (AM). He is also Regional Chief Executive Officer (CEO) for Germany and since September 2020 has also been responsible for the EMEA Region (Europe, Middle, East and Africa). Mr. von Rohr joined Deutsche Bank in 1997. From November 2015 to November 2019 he was the Management Board member responsible for Human Resources and until the end of July 31, 2020, he was responsible for Legal, Group Governance and Government & Regulatory Affairs. From 2013 to 2015 he was Global Chief Operating Officer, Regional Management. Prior to this, he was Head of Human Resources for Deutsche Bank in Germany and member of the Management Board of Deutsche Bank Privat- und Geschäftskunden AG. During his time at Deutsche Bank, he has held various senior management positions in other divisions in Germany and Belgium. He studied law at the universities of Bonn (Germany), Kiel (Germany), Lausanne (Switzerland) and at Cornell University (U.S.A.). Mr. von Rohr does not have any external directorships subject to disclosure. Mr. von Rohr is Chairman of the Supervisory Board of DWS Group GmbH & Co. KGaA and was Chairman of the Supervisory Board of DB Privat- und Firmenkundenbank AG until May 15, 2020. Fabrizio Campelli Year of birth: 1973 First appointed: 2019 Term expires: 2022 Fabrizio Campelli became a member of our Management Board on November 1, 2019. He is our Chief Transformation Officer and the Management Board member responsible for Transformation and Human Resources. He previously spent four years as the Global Head of Deutsche Bank Wealth Management. Before that he was Head of Strategy & Organizational Development as well as Deputy Chief Operating Officer for Deutsche Bank Group. He joined Deutsche Bank in 2004 after working at McKinsey & Company in the firm’s London and Milan offices, focusing on strategic assignments mainly for global financial institutions. He holds an MBA from MIT Sloan School of Management and a Business Administration degree from Bocconi University in Milan. 403 Deutsche Bank Annual Report 2020 Management Board and Supervisory Board Management Board Mr. Campelli has been a member of the following Supervisory Boards since June 26, 2020: BVV Versicherungsverein des Bankgewerbes a.G. and BVV Versorgungskasse des Bankgewerbes e.V. He was Chairman of the Board of Directors of Deutsche Bank (Suisse) SA until December 31, 2020. Frank Kuhnke Year of birth: 1967 First appointed: 2019 Term expires: 2021 Frank Kuhnke became a member of our Management Board on January 1, 2019. He is our Chief Operating Officer and is the Management Board member responsible for Global Procurement, Global Real Estate and for Corporate Bank/Investment Bank/Capital Release Unit (CB/IB/CRU) Operations (excluding Settlement Operations) and CB/IB/CRU Know-Your-Customer (KYC) Operations. In addition he is responsible for the Capital Release Unit. Until September 2020 he was responsible for the EMEA Region. He joined Deutsche Bank in 1986 and was appointed as Deutsche Bank’s Chief Operating Officer (COO) in April 2018. From January 2016 until April 2018 he was Divisional Control Officer, Chief Administrative Officer and Head of Operations of the Private & Commercial Bank. Prior to that Mr. Kuhnke was Divisional Control Officer for Deutsche Asset & Wealth Management. From 2012 until 2015 he worked in Deutsche Bank’s Non-Core Operations Unit, initially as Chief Risk Officer and subsequently as Chief Operating Officer (COO). Between 2008 and 2012 he held management positions in Risk, based in London. During his career, he has worked across several business divisions and infrastructure functions in Tokyo, New York and Germany and has run global organizations within Deutsche Bank Group. Before graduating with a diploma from Bank Akademie Lüneburg, Mr. Kuhnke completed a bank apprenticeship at Deutsche Bank. Mr. Kuhnke does not have any external directorships subject to disclosure. He was a member of the Supervisory Board of Deutsche Bank Società per Azioni until June 25, 2020. Bernd Leukert Year of birth: 1967 First appointed: 2020 Term expires: 2022 Bernd Leukert became a member of our Management Board on January 1, 2020. He is our Chief Technology, Data and Innovation Officer and is responsible for the Chief Information Offices for the Infrastructure areas and the busi- ness divisions, Chief Technology Office, Technology Infrastructure, Chief Data Office, Chief Security Office, Strategy & Innovation Network as well as CB/IB/CRU Settlement Operations. He joined Deutsche Bank on September 1, 2019. He previously worked for many years at SAP SE, the global soft- ware company. From 2014 to 2019, he was responsible for product development and innovations as well as the Digi- tal Business Services division on the Executive Board. He joined SAP in 1994 and held various management posi- tions. Mr. Leukert studied Industrial Engineering and Management at the University of Karlsruhe and at Trinity College Dub- lin, graduating in 1994 with a Masters Degree in Business Administration. Mr. Leukert is member of the Supervisory Board of Bertelsmann SE & Co. KGaA and was a member of the Supervi- sory Board of TomTom N.V. until April 15, 2020. He has been a member of the Supervisory Board of DWS Group GmbH & Co. KgaA since July 21, 2020. Stuart Lewis Year of birth: 1965 First appointed: 2012 Term expires: 2023 Stuart Lewis became a member of our Management Board on June 1, 2012. He is our Chief Risk Officer responsible for the functions managing Credit Risk, Non-Financial Risk, Market Risk and Liquidity Risk as well as for the Risk-Infrastructure units. In addition, he is responsible for Compliance, Anti-Financial Crime (AFC) and the Business Selection and Conflicts Office as well as the United Kingdom & Ireland region. 404 Deutsche Bank Annual Report 2020 Management Board and Supervisory Board Management Board He joined Deutsche Bank in 1996. Prior to assuming his current role, Mr. Lewis was Deputy Chief Risk Officer and subse- quently Chief Risk Officer of the Corporate & Investment Bank from 2010 to 2012. Between 2006 and 2010 he was Chief Credit Officer. Before joining Deutsche Bank in 1996, he worked at Credit Suisse and Continental Illinois National Bank in London. He studied at the University of Dundee, where he obtained an LLB (Hons), and he holds an LLM from the London School of Economics. He also attended the College of Law, Guildford. Mr. Lewis does not have any external directorships subject to disclosure. He has held the position of Visiting Professor in Practice in the Finance Department at the London School of Economics since 2017. He was Chairman of the Advisory Council of DEUKONA Versicherungs-Vermittlungs-GmbH until August 1, 2020 and Chair- man of the Supervisory Board of Deutsche Bank Società per Azioni until June 25, 2020. James von Moltke Year of birth: 1969 First appointed: 2017 Term expires: 2023 James von Moltke became a member of our Management Board on July 1, 2017. He is our Chief Financial Officer and in this function he is responsible for, among other things, Finance, Group Tax, Treasury and Investor Relations. Before Mr. von Moltke joined Deutsche Bank he served as Treasurer of Citigroup. He started his career at Credit Suisse First Boston in London in 1992. In 1995, he joined J.P. Morgan, working at the bank for 10 years in New York and Hong Kong. After next working at Morgan Stanley in New York for four years, where he led the Financial Technology advisory team globally, Mr. von Moltke joined Citigroup as Head of Corporate M&A in 2009. Three years later he became the Global Head of Financial Planning for the U.S. bank. He holds a Bachelor of Arts degree from New College, University of Oxford. Mr. von Moltke was a member of the following Supervisory Boards until June 26, 2020: BVV Versicherungsverein des Bankgewerbes a.G. and BVV Versorgungskasse des Bankgewerbes e.V. Alexander von zur Mühlen Year of birth: 1975 First appointed: 2020 Term expires: 2023 Alexander von zur Mühlen became a member of our Management Board on August 1, 2020. He is our Regional CEO Asia Pacific. Mr. von zur Mühlen joined Deutsche Bank in 1998 and over the years has held a range of management roles in London and Frankfurt across infrastructure and business divisions. Between 2018 and 2020 he was responsible for the Group’s strate- gic development and advisor to the Chief Executive Officer (CEO). Before that, he served as Co-Head of Global Capital Markets, with a regional focus on Asia Pacific and EMEA. From 2009 to 2017, he was Group Treasurer. Alexander von zur Mühlen holds a Diploma in Business Administration from the Berlin School of Economics and Law in Ber- lin. Mr. von zur Mühlen does not have any external directorships subject to disclosure. Christiana Riley Year of birth: 1978 First appointed: 2020 Term expires: 2022 Christiana Riley became a member of our Management Board on January 1, 2020. She is our Regional CEO Americas. Mrs. Riley joined Deutsche Bank in 2006 where she was recently the Chief Financial Officer of the Corporate & Investment Bank. She previously spent nine years in Group Strategy & Planning, which she headed from 2011 to 2015. Prior to this Mrs. Riley worked at the management consultancy McKinsey & Company and at the investment bank Greenhill & Co. 405 Deutsche Bank Annual Report 2020 Management Board and Supervisory Board Management Board She graduated cum laude in 2000 from Princeton University in America where she studied Romance Languages, Literature and Linguistics. She also studied at London Business School in the UK, where she gained a Master of Business Administration in 2005. Mrs. Riley is a member of the Supervisory Board of The Clearing House Payments Company LLC. Mrs. Riley is Chief Executive Officer of DB USA Corporation. Stefan Simon Year of birth: 1969 First appointed: 2020 Term expires: 2023 Stefan Simon became a member of our Management Board on August 1, 2020. He is our Chief Administrative Officer (CAO) and is responsible for Government and Regulatory Affairs as well as for Legal and Governance. Mr. Simon joined Deutsche Bank on August 1, 2019. He was a member of Deutsche Bank’s Supervisory Board from August 2016 until July 2019 and was Chairman of its Integrity Committee. He is a lawyer and tax consultant and between 1997 and 2016 worked at the law firm Flick Gocke Schaumburg, where he became a partner in 2002. Since 2008 he has also been an Honorary Professor at the University of Cologne. He studied law at the University of Cologne and received his doctorate there in 1998. Mr. Simon is Chairman of the Advisory Council of Leop. Krawinkel GmbH & Co. KG. 406 Deutsche Bank Annual Report 2020 Management Board and Supervisory Board Supervisory Board Supervisory Board The Supervisory Board of Deutsche Bank AG appoints, supervises and advises the Management Board and is directly in- volved in decisions of fundamental importance to the bank. It works together closely with the Management Board in a coop- erative relationship of trust and for the benefit of the company. The Supervisory Board decides on the appointment and dis- missal of members of the Management Board including long-term succession planning for the Management Board based on proposals of the Chairman’s Committee while taking into account recommendations of the Nomination Committee. Based on proposals of the Compensation Control Committee, the Supervisory Board determines the total compensation of the individual members of the Management Board resolves on the compensation system for the Management Board and reviews it regularly. In accordance with Section 9 (1) of the Articles of Association, the members of the Supervisory Board can be elected for the period until the conclusion of the General Meeting which adopts the resolutions concerning the ratification of the acts of man- agement for the fourth financial year following the beginning of the term of office. For the election of shareholder representa- tives, the General Meeting may establish that the terms of office of individual members may begin or end on differing dates. In accordance with Section 4 (2) of the Terms of Reference for the Supervisory Board, shareholder representatives will be proposed in the future to the General Meeting for election in each case only for a maximum of approximately four years, i.e. until the conclusion of the General Meeting which adopts the resolutions concerning the ratification of the acts of management for the third financial year following the beginning of the term of office, whereby the financial year in which the term of office begins is not taken into account. The internal organization of the Supervisory Board and its committees as well as the tasks and profiles of the individual members are subject to specific statutory and regulatory requirements that further specify and supplement the corporate-law regulations concerning corporate governance. Such requirements are founded on, among other things, the German Banking Act (Kreditwesengesetz), the Remuneration Ordinance for Institutions (Institutsvergütungsverordnung), the guidelines of the European Banking Authority and the administrative practices of the European Central Bank as our supervisory authority. In individual cases, these are in contradiction to the recommendations of the German Corporate Governance Code (“Code”) and, in such case, this may lead to a statement of exceptions in our Declaration of Conformity. The Supervisory Board receives reports from the Management Board at least within the scope prescribed by law or adminis- trative guidelines, in particular on all issues of relevance for the Group concerning strategy, intended business policy, planning, business development, risk situation, risk management, staff development, reputation and compliance. Furthermore, Group Audit informs the Audit Committee regularly, and in the case of severe deficiencies without undue delay, of any serious defi- ciencies identified and of any deficiencies that have not yet been remediated. The Chairman of the Supervisory Board is informed accordingly of any serious findings against the members of the Management Board. The Supervisory Board and Management Board adopted an Information Regime, which specifies not only the reporting to the Supervisory Board but also rules relating to the Supervisory Board’s enquiries and requests for information from employees of the company, as well as the exchange of information in connection with preparations for the meetings and between the meetings. The Chairman of the Supervisory Board plays a crucial role in the proper functioning of the Supervisory Board and has a leadership role in this. He can issue internal guidelines and principles concerning the Supervisory Board’s internal organization and communications, the coordination of the work within the Supervisory Board and the Supervisory Board’s interaction with the Management Board. Between meetings, the Chairman of the Supervisory Board, and, if expedient, the chairpersons of the Supervisory Board committees, maintain regular contact with the Management Board, especially with the Chairman of the Management Board, and deliberate with him on issues of Deutsche Bank Group’s strategy, planning, the development of its business, risk situation, risk management, risk controlling, governance, compliance, compensation systems, IT, data and dig- italization as well as material litigation cases. The Chairman of the Supervisory Board and – within their respective functional responsibility – the chairpersons of the Supervisory Board committees are informed without delay by the Chairman of the Management Board or by the respectively responsible Management Board member about important events of material signif- icance for the assessment of the situation, development and management of Deutsche Bank Group. The Chairman of the Supervisory Board engages in discussions with investors on Supervisory Board-related topics when necessary and regularly informs the Supervisory Board of the substance of such discussions. The types of business that require the approval of the Supervisory Board to be transacted are specified in Section 13 of the Articles of Association of Deutsche Bank AG. The Supervisory Board meets regularly without the Management Board. After due consideration and insofar as materially appropriate, the Supervisory Board, or any of its committees, may, in order to perform their tasks, consult auditors, legal advisors and other internal or external advisors. In performing their tasks, the Chairman of the Supervisory Board, the chairpersons of the standing committees and the Supervisory Board members are supported by the Office of the Supervisory Board, which is independent of the Management Board. The duties, procedures and committees of the Supervisory Board are specified in its Terms of Reference. The current version is available on the Deutsche Bank website (www.db.com/ir/en/documents.htm). The number of meetings that took place during the financial year is stated in the Report of the Supervisory Board. 407 Deutsche Bank Annual Report 2020 Management Board and Supervisory Board Supervisory Board Members of the Supervisory Board The Supervisory Board of Deutsche Bank AG has 20 members. In accordance with the German Co-Determination Act (Mit- bestimmungsgesetz), it comprises an equal number of shareholder representatives and employee representatives. The suitability of each individual member to perform their mandate is assessed both internally and externally by the regulatory authorities, determined and monitored continuously. The suitability assessment covers the expertise, reliability and time avail- ability of the individual members. In addition, there is an assessment of the knowledge, skills and experience of the Supervisory Board as a whole that are necessary for it to perform its control function. Passing the suitability assessment and the continual suitability of the Supervisory Board member during the entire mandate with Deutsche Bank AG are mandatory regulatory prerequisites for the performance of their work. The members representing our shareholders were elected at the General Meeting on May 24, 2018. In departure from this, Dr. Paul Achleitner was first elected at the General Meeting on May 31, 2012, Dr. Gerhard Eschelbeck was elected at the General Meeting on May 18, 2017 and Sigmar Gabriel, Dr. Dagmar Valcárcel and Dr. Theodor Weimer were elected at the General Meeting on May 20, 2020. The election of employee representatives took place on April 26, 2018. Among the members representing shareholders, Katherine Garrett-Cox left the Supervisory Board effective May 20, 2020. Stephan Szukalski stepped down as an employee representative from the Supervisory Board effective December 31, 2020. For the remainder of his term of office on the Supervisory Board, he is being replaced by the substitute member elected to take his place, Stefan Viertel with effect from January 1, 2021. The following table shows information on the current members of our Supervisory Board. The information includes the years in which the members were born, the dates on which they were first elected or appointed, the years when their terms expire, their principal occupations as well as their memberships on other companies’ supervisory boards, other non-executive direc- torships and other positions. Member Principal occupation Supervisory board memberships and other directorships Dr. Paul Achleitner Chairman of the Supervisory Board, Bayer AG; Daimler AG (until July 2020); Henkel AG & Co. Year of birth: 1956 Deutsche Bank AG KGaA (member of the Shareholders’ Committee) First elected: May 31, 2012 Term expires: 2022 Ludwig Blomeyer-Barten- stein* Year of birth: 1957 First elected: May 24, 2018 Term expires: 2023 Frank Bsirske* Year of birth: 1952 First elected: May 23, 2013 Term expires: 2023 Spokesman of the Management and Head of the Market Frowein & Co. Beteiligungs AG; Bürgschaftsbank Bremen Region Bremen, Deutsche Bank AG GmbH (member of the Board of Directors) Supervisory Board member RWE AG (Deputy Chairman); DB Privat- und Firmen-kun- denbank AG (until May 2020); innogy SE (Deputy Chair- man) Mayree Carroll Clark Founder and Managing Partner, Ally Financial, Inc. (Member of the Board of Directors); Year of birth: 1957 Eachwin Capital Taubman Centers, Inc. (Member of the Board of Directors) First elected: May 24, 2018 Term expires: 2023 (until December 2020) Jan Duscheck* Head of national working group Banking, No memberships or directorships subject to disclosure Year of birth: 1984 trade union ver.di (Vereinte Dienstleistungsgewerkschaft) Appointed by the court: Au- gust 2, 2016 Term expires: 2023 Dr. Gerhard Eschelbeck Chief Information Security Officer, Aurora Innovation, Inc. Onapsis Inc. (Member of the Board of Directors); Woot- Cloud Inc. (Member of the Board of Directors) Former Federal Minister GP Papenburg AG; Siemens Energy AG (since September 2020) Year of birth: 1965 First elected: May 18, 2017 Term expires: 2022 Sigmar Gabriel Year of birth: 1959 Appointed by the court: March 11, 2020 Term expires: 2025 408 Deutsche Bank Annual Report 2020 Management Board and Supervisory Board Supervisory Board Timo Heider* Chairman of the General Staff Council of BHW Bauspar- BHW Bausparkasse AG (Deputy Chairman); PCC Services Year of birth: 1975 kasse AG / Postbank Finanzberatung AG, Chairman of GmbH der Deutschen Bank (Deputy Chairman); Pension- First elected: May 23, 2013 the General Staff Council of PCC Services GmbH der skasse der BHW Bausparkasse AG VVaG (Deputy Chair- Term expires: 2023 Deutschen Bank; Chairman of the Staff Council of BHW man) Bausparkasse AG, PCC Services GmbH der Deutschen Bank, Postbank Finanzberatung AG and BHW Holding GmbH; Deputy Chairman of the Group Staff Council of Deutsche Bank AG Martina Klee* Deputy Chairperson of the Staff Council PWCC Center Sterbekasse für die Angestellten der Deutsche Bank- Year of birth: 1962 Frankfurt, Deutsche Bank AG Gruppe VVaG First elected: May 29, 2008 Term expires: 2023 Henriette Mark* Member of the Staff Council Southern Bavaria, of the No memberships or directorships subject to disclosure Year of birth: 1957 General Staff Council and of the Group Staff Council of First elected: June 10, 2003 Deutsche Bank Term expires: 2023 Gabriele Platscher* Chairperson of the Staff Council Niedersachsen Ost, Deut- BVV Versicherungsverein des Bankgewerbes a.G. Year of birth: 1957 sche Bank (Deputy Chairperson); First elected: June 10, 2003 Term expires: 2023 BVV Versorgungskasse des Bankgewerbes e.V. (Deputy Chairperson); BVV Pensionsfonds des Bankgewerbes AG (Deputy Chairperson) Detlef Polaschek* Deputy Chairman of the Supervisory Board; Member of No memberships of directorships subject to disclosure Year of birth: 1960 First elected: May 24, 2018
 Term expires: 2023 the General Staff Council; Chairman of the Staff Council of Deutsche Bank Niederrhein and Ruhr Region, Central and Eastern Region of Deutsche Bank AG Bernd Rose* Chairman of the General Staff Council of Postbank Filial- DB Privat- und Firmenkunden AG (until May 2020); Post- Year of birth: 1967 vertrieb AG; Member of the Group Staff Council and Euro- bank Filialvertrieb AG; ver.di Vermögensverwaltungsgesell- First elected: May 23, 2013 pean Staff Council of Deutsche Bank schaft m.b.H. (Deputy Chairman) Term expires: 2023 Gerd Alexander Schütz Chairman of the Management Board, cyan AG (Chairman) (since January 2021) Year of birth: 1967 C-QUADRAT Investment AG First elected: May 18, 2017 Term expires: 2023 John Alexander Thain Supervisory Board member Uber Technologies Inc. (Member of the Board of Directors); Year of birth: 1955 First elected: May 24, 2018 Term expires: 2023 Michele Trogni Year of birth: 1965 First elected: May 24, 2018 Term expires: 2023 Operating Partner Eldridge Industries LLC Morneau Shepell Inc. (Member of the Board of Directors) Aperture Investors LLC (Member of the Board of Directors); Pine Island Capital Partners LLC (Chairman); Pine Island Acquisition Corp. (Chairman of the Board of Directors) (since January 2021) (until September 2020); Capital Markets Gateway Inc. (Chairperson of the Board of Directors) (until August 2020); SE2 LLC (Chairperson of the Board); Horizon Acquisition Corporation (Member of the Board of Directors) (since July 2020) Dr. Dagmar Valcárcel Supervisory Board member amedes Holding GmbH Year of birth: 1966 Appointed by the court: Au- gust 1, 2019 Term expires: 2025 Stefan Viertel* Head of Institutional Cash Sales & Client Management No memberships or directorships subject to disclosure Year of birth: 1964 Hungary, Member of the General Staff Council, Staff Coun- Succession as substitute cil Representative of the Corporate Bank and Investment member: Bank, Deutsche Bank AG January 1, 2021** Term expires: 2023 Dr. Theodor Weimer Chief Executive Officer, Deutsche Börse AG Knorr Bremse AG (since June 2020); FC Bayern München Year of birth: 1959 First elected: May 20, 2020 Term expires: 2025 AG (until June 2020) 409 Deutsche Bank Annual Report 2020 Management Board and Supervisory Board Supervisory Board Professor Dr. Norbert Win- Supervisory Board member Bayer AG (Chairman) (since April 2020); Heristo AG keljohann Year of birth: 1957 First elected: August 1, 2018 Term expires: 2023 (Chairman) (until January 2021); Georgsmarienhütte Hold- ing GmbH; Sievert AG (Chairman); Bohnenkamp AG (Chairman) (since April 2020) * Employees representatives. ** Mr. Viertel already was a member of the Supervisory Board from August 1, 2010 to May 23, 2013. Objectives for the composition of the Supervisory Board, Profile of Requirements, diversity concept and status of implementation The Supervisory Board established objectives for its composition in October 2010 and last amended them as specified in the following in February 2018. Furthermore the Supervisory Board adopted a Profile of Requirements at its meeting on October 26, 2017, and last reviewed and confirmed it, unchanged, at its meeting on October 30, 2020. The Supervisory Board shall be composed in such a way that its members as a whole possess the knowledge, abilities and expert experience to properly complete its tasks and the members in their entirety of the Supervisory Board and the Audit Committee must be familiar with the banking sector. In particular, the Supervisory Board members should have sufficient time to perform their mandates. The composition of the Supervisory Board should ensure the Supervisory Board’s qualified control of and advice for the Management Board of an internationally operating, broadly positioned bank and should preserve the reputation of Deutsche Bank Group among the public. In this regard, in particular, attention should be placed on the integrity, personality, willingness to perform, professionalism and independence of the individuals proposed for election. The objective is for the Supervisory Board as a whole to have all of the knowledge and experience considered to be essential while taking into account the activities of Deutsche Bank Group. The Supervisory Board, as a whole, must possess the expertise required to effectively monitor and advise the Management Board in its management of Deutsche Bank AG and Deutsche Bank Group – also with regard to the observance of the relevant bank supervisory regulations. As set out in the Profile of Requirements each Supervisory Board member must have an understanding of the fields of exper- tise specified below that is appropriate for the size and complexity of Deutsche Bank AG. Experts shall have profound exper- tise in the individual fields. The fields of expertise include, in particular, the fields listed below: – Knowledge in the areas of banking, financial services, financial markets and the financial industry, including the home market and the bank’s key markets outside Europe – Knowledge of the relevant clients for the bank, the market expectations and the operational environment – Risk management (investigation, assessment, mitigation, management and control of financial and non-financial risks, capital and liquidity management, shareholdings) – Accounting (according to International Financial Reporting Standards (IFRS) and the German Commercial Code (HGB)) and audits of annual financial statements (financial experts: these members of the Supervisory Board must fulfill the re- quirements as “financial experts” as such term is defined by the implementation rules of the U.S. Securities and Exchange Commission (SEC) issued pursuant to Section 407 of the Sarbanes-Oxley Act of 2002 and by Section 100 of the German Stock Corporation Act) – Corporate and social responsibility, including reporting – Taxation – Internal audit – Compliance and internal controls – Strategic planning, business and risk strategies as well as their implementation – Digitalization – Information technology (IT), IT systems and IT security – Regulatory framework and legal requirements, in particular, knowledge of the legal systems relevant for the bank – Knowledge of the social, political and regulatory expectations in the home market – Selection procedure for management body members and assessment of their suitability – Governance and corporate culture – Human resources and staff management – Compensation and compensation systems (compensation expert) – Management of a large, international regulated company – Internal organization of the bank 410 Deutsche Bank Annual Report 2020 Management Board and Supervisory Board Supervisory Board Furthermore, consideration is to be given to the amendments to the current version of the Business Allocation Plan for the Management Board of Deutsche Bank AG as well as to the requirements and expectations of the regulatory authorities. In addition the Supervisory Board shall have what its shareholder representatives consider to be an adequate number of independent shareholder representatives and shall not have more than two former members of the Management Board of Deutsche Bank AG. In any event, the Supervisory Board shall be composed such that the number of independent members among the shareholder representatives will be at least six. The members of the Supervisory Board may not exercise functions on a management body of, or perform advisory duties, at major competitors. Important and not just temporary conflicts of interest with respect to a member of the Supervisory Board should lead to a termination of the mandate. Members of the Supervisory Board may not hold more than the allowed number of supervisory board mandates according to Section 25d of the German Banking Act (KWG) or mandates in supervisory bodies of companies which have similar requirements. There is a regular maximum age limit of 70. In well-founded, individual cases, a Supervisory Board member may be elected or appointed for a period that extends at the latest until the end of the fourth Annual General Meeting that takes place after he or she has reached the age of 70. This age limit was taken into account in the election proposals to the recent General Meetings and shall also be taken into account for the next Supervisory Board elections or subsequent appointments for Su- pervisory Board positions that become vacant. In July 2020, the Supervisory Board resolved that for members of the Super- visory Board to be elected or appointed in future, the length of each individual Supervisory Board membership shall not, as a rule, exceed 12 years. Otherwise, the respective Supervisory Board member shall not be considered independent. The Supervisory Board respects diversity when proposing members for appointment to the Supervisory Board. In light of the international operations of Deutsche Bank, care should be taken that the Supervisory Board has an appropriate number of members with long-term international experience. Currently, the professional careers or private lives of six members of the Supervisory Board are centered outside Germany. Furthermore, all of the shareholder representatives on the Supervisory Board have several years of international experience from their current or former activities as management board members or CEOs or a comparable executive function of corporations or organizations with international operations. In these two ways, the Supervisory Board believes the international activities of the company are sufficiently taken into account. The objective is to retain the currently existing international profile. The resumes of the members of the Supervisory Board are published on Deutsche Bank’s website (www.db.com/ir/en/supervisory-board.htm). For the election proposals to the General Meeting, the Supervisory Board takes into account the recommendations of the Nomination Committee and the legal requirements according to which the Supervisory Board shall be composed of at least 30 % women and at least 30 % men. Special importance has already been attached to an appropriate consideration of women in the selection process since the Supervisory Board elections in 2008. In reviewing potential candidates for a new election or subsequent appointments to Supervisory Board positions that have become vacant, qualified women shall be included in the selection process and shall be appropriately considered in the election proposals. For many years now, at least 30 % of the Supervisory Board members have been women and, since 2013, 30 % of the shareholder representatives have been women. The Supervisory Board believes that it complies with the specified concrete objectives regarding its composition and the Profile of Requirements. The members of the Supervisory Board as a whole possess the knowledge, ability and expert experience to properly complete their tasks. Diversity is appropriately taken into account. At the end of the financial year, six women (30%) and 14 men were members of the Supervisory Board. The statutory minimum quota of 30% was thus fulfilled. In com- parison to the prior year, the ratio declined from 35% to 30%, as in 2020 Katherine Garrett-Cox left the Supervisory Board and Dr. Theodor Weimer was elected by the General Meeting. The age structure is diverse, ranging from 35 to 67 years of age at the end of the financial year and spanning three generations, according to the general definition of the term. The length of experience as member of the Supervisory Board of Deutsche Bank ranged from under one year to around 18 years at the end of the financial year. Two of the 20 members of the Supervisory Board joined the Supervisory Board in the 2020 financial year. In accordance with our objectives specified above, all of the shareholder representatives on the Supervisory Board have many years of international experience in various companies and functions. In addition, on January 1, 2021, Mr. Viertel became a substitute member of the Supervisory Board. In addition, on January 1, 2021, Mr. Viertel became a substitute member of the Supervisory Board. The diverse range of the members’ educational and professional backgrounds includes banking, business administration, economics, law, German studies, history, political science and information technology. The bank transparently reports on Supervisory Board diversity beyond the information presented above in this Corporate Governance Statement in the section “Management Board and Supervisory Board: Supervisory Board” as well as on the bank’s website: www.db.com (Heading “Investor Relations”, “Corporate Governance”, “Supervisory Board”). The shareholder representatives on the Supervisory Board determined that it has what they consider to be an adequate number of members among the shareholder representatives who are independent from the Management Board and the com- pany. These are namely: Dr. Paul Achleitner, Mayree Carroll Clark, Dr. Gerhard Eschelbeck, Sigmar Gabriel, Gerd Alexander Schütz, John Alexander Thain, Michele Trogni, Dr. Dagmar Valcárcel, Dr. Theodor Weimer and Professor Dr. Norbert Win- keljohann. 411 Deutsche Bank Annual Report 2020 Management Board and Supervisory Board Standing Committees Some members of the Supervisory Board are, or were last year, in high-ranking positions at other companies that Deutsche Bank has business relations with. Business transactions with these companies are conducted under the same conditions as those between unrelated third parties. These transactions, in our opinion, do not affect the independence of the Supervisory Board members involved. Standing Committees The Supervisory Board has established the following eight standing committees. To the extent required, the committees co- ordinate their work and consult each other on an ad hoc basis. The committee chairpersons report regularly to the Supervisory Board on the work of the committees. The Report of the Supervisory Board in the Annual Report 2020 provides information on the concrete work of the committees over the preceding year. Chairman’s Committee: It is responsible for, in particular: preparing the meetings of the Supervisory Board and handling current business between meetings of the Supervisory Board; preparing for decisions by the Supervisory Board on the ap- pointment and dismissal of members of the Management Board, including long-term succession planning for the Management Board, while taking into account the recommendations of the Nomination Committee; concluding, amending and terminating employment and pension contracts in consideration of the plenary Supervisory Board’s sole authority to decide on the com- pensation of the members of the Management Board and in consideration of the recommendations of the Compensation Control Committee taking note of and, where necessary, expressing an opinion on contracts and/or amendments to contracts for a General Manager (Generalbevollmächtigter) of Deutsche Bank AG who is designated as an intended member of the Management Board; handling other contractual business with active and former members of the Management Board pursuant to Section 112 of the German Stock Corporation Act; and approving Management Board members’ mandates, honorary offices or special tasks outside of Deutsche Bank Group, while taking the recommendations of the Nomination Committee into ac- count. The Chairman’s Committee is also responsible for: approving the hand-over of confidential internal data concerning a Management Board member in consultation with the Chairman of the Management Board and/or the Chief Risk Officer, unless they have a conflict of interests; approving contracts with Supervisory Board members pursuant to Section 114 of the German Stock Corporation Act; preparing for decisions of the Supervisory Board in the field of corporate governance, deciding in the Supervisory Board’s stead on an adjustment of the annual Declaration of Conformity to changed actual circumstances and verifying compliance with the Declaration of Conformity. Its tasks also include: taking note of and, where necessary, expressing an opinion on the Supervisory Board’s and its committees’ costs for consultations with auditors, experts, legal advisors and other external advisors; as well as preparing recommendations for decisions of the Supervisory Board on pursuing claims for damages or taking other measures against incumbent or former members of the Management Board. As and when necessary, the Chairman’s Committee draws on the expertise of the Chair of the Integrity Committee. The current members of the Chairman’s Committee are Dr. Paul Achleitner (Chairman), Frank Bsirske, Detlef Polaschek and Professor Dr. Norbert Winkeljohann. Nomination Committee: It is responsible for, in particular, supporting the Supervisory Board in identifying candidates to fill a position on the bank's Management Board. In doing so, the Nomination Committee takes into account the balance and diversity of the knowledge, skills and experience of all members of the Management Board, prepares a position description with a candidate profile, and states the time commitment. The Nomination Committee and/or the Supervisory Board regularly receive reports from the Management Board on the internal planning and the process from the Management Board’s perspective. Furthermore, the Nomination Committee is responsible in particular for drawing up an objective to promote the representation of the under-represented gender on the Supervisory Board as well as a strategy for achieving this and the regular assessment, to be performed at least once a year, of the structure, size, composition and performance of the Management Board and of the Supervisory Board and making recommendations regarding this to the Supervisory Board. At several meetings of the Nomination Committee and of the Supervisory Board in plenary session, the Nomination Committee and the Supervisory Board addressed the assessment of the Management Board and the Supervisory Board, which is required by the German Banking Act. The Nomination Committee supports the Supervisory Board in drawing up guidelines for the individual and col- lective assessment of the professional qualifications, personal reliability and time availability of the members of the Manage- ment Board and Supervisory Board (“Suitability Guideline”) as well as in monitoring the effectiveness of the Suitability Guide- line. Furthermore, the Nomination Committee also supports the Supervisory Board in the regular assessment, to be performed at least once a year, of the knowledge, skills and experience of the individual members of the Management Board and Super- visory Board as well as of the respective body collectively in the assessment of the members of the Management Board and Supervisory Board in all other cases pursuant to the requirements of the Suitability Guideline; and in the review of the Man- agement Board’s principles for selecting and appointing persons to the upper management levels as well as the recommen- dations made to the Management Board in this respect. The shareholder representatives on the Nomination Committee pre- pare the Supervisory Board’s proposals for the election or appointment of new shareholder representatives to the Supervisory Board. In this context, they take into account the Profile of Requirements for the Supervisory Board, the criteria specified by the Supervisory Board for its composition as well as the balance and diversity of the knowledge, skills and experience of all members of the Supervisory Board, prepare a position description with a candidate profile, and state the time commitment. 412 Deutsche Bank Annual Report 2020 Management Board and Supervisory Board Standing Committees The current members of the Nomination Committee are Mayree Carroll Clark, (Chairperson), Dr. Paul Achleitner, Frank Bsirske, Detlef Polaschek und Professor Dr. Norbert Winkeljohann. Audit Committee: It supports the Supervisory Board in particular in monitoring the financial reporting process, and it can submit recommendations or suggestions to the Supervisory Board on ensuring the integrity of the financial reporting process. Fur- thermore, the Audit Committee supports the Supervisory Board in monitoring the effectiveness of the risk management sys- tem, particularly of the internal control system and the internal audit system, the auditing of the financial statements, especially with regard to the auditor’s independence and the additional services provided by the auditor, and the Management Board’s prompt remediation – through suitable measures – of the deficiencies identified by the auditor and bank-internal control func- tions based on internal and external audits, in particular relating to weaknesses in risk controls, as well as non-compliance with policies, laws and regulatory requirements. The Committee is entitled to inspect all business documentation of the bank, including the business information stored on data carriers. The Audit Committee pre-reviews the annual and consolidated financial statements and management reports as well as the separate non-financial report and the separate consolidated non- financial report, if they were prepared. It discusses the audit reports with the auditor and prepares the decisions of the Super- visory Board on establishing the annual financial statements and the approval of the consolidated financial statements as well as the resolution proposal on the appropriation of distributable profit. The Audit Committee submits corresponding recommen- dations to the Supervisory Board. It also provides support to the Supervisory Board with regard to engaging any external assurances for the non-financial statement and the consolidated non-financial statement or for the separate non-financial report and separate consolidated non-financial report. It discusses important changes to the audit and accounting methods. The Audit Committee also discusses the quarterly financial statements and the report on the limited review of the quarterly financial statements with the Management Board and the auditor prior to their publication. Furthermore, the Audit Committee submits proposals to the Supervisory Board for the appointment of the auditor and prepares the proposal of the Supervisory Board to the General Meeting for the election of the auditor. The Audit Committee advises the Supervisory Board on issuing the audit mandate to the auditor elected by the General Meeting, submits proposals to the Supervisory Board for the auditor’s remuneration and can specify areas of focus for the audit. It supports the Supervisory Board in monitoring the independence, qualifications and efficiency of the auditor as well as the rotation of the members of the audit team. It regularly assesses the quality of the auditing of the financial statements. Mandates for non-audit-related services given to the auditor or to companies to which the auditor is related in legal, economic or personnel terms need the prior consent of the Audit Committee (in this context, see also the Principal Accountant Fees and Services section in this Corporate Governance Statement / Corporate Governance Report). The Audit Committee issues guidelines for the employment of staff – including former staff – of the auditor by the company. It arranges to be informed regularly about the work done by Group Audit, the effectiveness of the internal audit system and in particular about its annual audit plan the focal areas of its auditing activity and on the results of its audits. The Audit Committee is responsible, in particular, for receiving and handling the quarterly, annual and ad hoc reports of Group Audit. The Management Board informs the Audit Committee about special audits, substantial complaints and other exceptional measures on the part of German and foreign bank regulatory authorities. The Committee regularly obtains reports on the receipt and handling of complaints from employees of the bank and its subsidiaries, from shareholders of Deutsche Bank AG and from third parties. In particular complaints concerning accounting, internal accounting controls, auditing and other financial reporting matters must be submitted to the Committee without undue delay. Reports concerning compliance matters and the prevention of money laundering are presented at the meetings of the Committee on a regular basis. The Chairman of the Audit Committee is entitled, in addition to the Chairman of the Supervisory Board, to obtain information directly from the Head of Compliance and the Anti-Money Laundering Officer. The Audit Committee is responsible for acknowledging communications about significant reductions in the budgets of Group Audit as well as the Compliance and Anti-Financial Crime infrastructure areas and for taking receipt of and handling the Compliance Report by the Head of Compliance as well as the Anti-Money Laundering Officer’s Report, , which are issued at least once a year. Furthermore, the Committee is entitled to obtain, through its Chairman, information in connection with its tasks from the auditor, the Management Board, the Head of Group Audit and – with the prior consent of the Management Board – senior managers of the bank reporting directly to the Management Board. The current members of the Audit Committee are Professor Dr. Norbert Winkeljohann (Chairman), Dr. Paul Achleitner, Hen- riette Mark, Gabriele Platscher, Detlef Polaschek, Bernd Rose, Dr. Dagmar Valcárcel and Dr. Theodor Weimer. 413 Deutsche Bank Annual Report 2020 Management Board and Supervisory Board Standing Committees Risk Committee: It advises the Supervisory Board on the overall risk appetite and risk strategy, and oversees the implemen- tation of the stated risk appetite and risk strategy by the senior management level. It discusses and oversees the strategies for capital and liquidity management as well as for all the bank’s material risks (financial and non-financial), such as credit, market, liquidity, personnel as well as operational and reputational risks to ensure they are consistent with the stated risk appetite. In its assessment, the Risk Committee reflects whether the material financial products and services offered by the bank as well as the conditions in the client business are in line with the business model and risk structure, thereby taking into account the alignment between the prices assigned to and the profits gained from these products and services. The committee assesses the bank’s current risk profile based on reports from the Management Board. This includes the review of a number of possible stress scenarios and overseeing that the Management Board has in place processes to pro- mote the adherence of Deutsche Bank AG to the applicable risk policies and regulations. The Risk Committee also monitors material aspects of the rating and valuation process. Furthermore, the Risk Committee oversees the reporting of the Management Board regarding the current state of risk culture and reviews whether the incentives set by the compensation system take into consideration the bank’s risk, capital and liquidity structure as well as the likelihood and maturity of earnings, taking into account retention risk. The Risk Committee also performs all of the tasks assigned to it by law or regulatory authorities, which includes the handling of certain loans including the acquisition of shareholdings in other companies as defined by section 13 (1) c) of the Articles of Association of Deutsche Bank AG, which require approval by the Supervisory Board according to the German Banking Act. The Risk Committee determines the nature, scope, format and frequency of the information which the Management Board is required to submit on strategy and risks. The Chairperson of the Risk Committee is entitled to obtain, in connection with its activities, information directly from the Management Board and the Head of Group Audit. It collaborates with other committees whose activities may have an impact on the risk strategy (e.g. Audit and Compensation Control Committees) and regularly communicates with the institution’s internal control functions, in particular the risk management function. The current members of the Risk Committee are Mayree Carroll Clark (Chairperson), Dr. Paul Achleitner, Ludwig Blomeyer- Bartenstein, Jan Duscheck, Michele Trogni, Stefan Viertel and Professor Dr. Norbert Winkeljohann. Integrity Committee: It continually advises and monitors the Management Board with regard to whether management is com- mitted to the economically sound, sustainable development of the company while observing the principles of sound, respon- sible management, fulfilling the company’s social responsibilities and protecting the natural resources of the environment (environmental, social and governance (ESG) issues), and to whether the business management is aligned to these values with the objective of a holistic corporate culture. The Integrity Committee monitors the Management Board’s measures that ensure the company’s compliance with legal requirements, authorities’ regulations and the company’s own in-house policies (preventive compliance control) as well as the measures if they are breached (consequence management). It regularly reviews the bank’s Code of Conduct and ethics to foster conduct on the part of company employees that is exemplary in every way, both within and outside the company, and that such conduct is not just aligned to the formal compliance with statutory require- ments. It supports on request the Risk Committee in monitoring and analyzing the legal and reputational risks that are material to the bank. For this purpose, it advises the Management Board on how to generate awareness of the importance of such risks (e. g. in the bank’s codes of conduct and ethics). It supports on request the preparation of the Chairman’s Committee’s recommendations for Supervisory Board decisions on pursuing recourse claims or taking other measures against current or former members of the Management Board and its Chairperson discusses the recommendations with the Chairman’s Com- mittee. Furthermore, the Integrity Committee supports the Supervisory Board in the monitoring of the highest risk associated litigation cases and other material cases. The current members of the Integrity Committee are Dr. Dagmar Valcárcel (Chairperson), Dr. Paul Achleitner, Ludwig Blomeyer-Bartenstein, Sigmar Gabriel, Timo Heider and Gabriele Platscher. Compensation Control Committee: It supports the Supervisory Board in the appropriate structuring of the compensation sys- tems for the members of the Management Board. It also monitors the appropriate structure of the compensation systems for the Management Board members and employees and, in particular, the appropriate structure of the compensation for the Head of the compliance function, for the Anti-Money Laundering Officer and for the employees who have a material influence on the bank's overall risk profile. The Compensation Control Committee supports the Supervisory Board in monitoring the process to identify Group risk takers in accordance with Section 27 (2) sentence 1 of the Remuneration Ordinance for Institu- tions (InstitutsVergV) as well as the appropriate structure of the compensation systems for the company’s employees. The Committee assesses the effects of the compensation systems on risk, capital and liquidity management, while ensuring that the compensation systems are aligned to the business strategy focused on the banks sustainable development, to the risk strategies derived from this and to the compensation strategies at the company and Group levels. It prepares the Supervisory Board’s resolutions on the compensation of the Management Board, considering, in particular, the effects of the resolutions on the company’s risks and risk management. The long-term interests of shareholders, investors and other stakeholders as well as the public interest are also taken into account. It also prepares the Supervisory Board's resolutions on setting the total 414 Deutsche Bank Annual Report 2020 Management Board and Supervisory Board Standing Committees amount of variable compensation for the members of the Management Board in accordance with Section 45 (2) sentence 1 No. 5a of the German Banking Act (KWG) in consideration of Section 7 of the Remuneration Ordinance for Institutions (Insti- tutsVergV) and on setting the appropriate compensation parameters, targets for contributions to performance, payment and deferral periods as well as the conditions for a full forfeiture or partial reduction of variable compensation. It also checks regularly, at least annually, whether the adopted specifications are still appropriate. Furthermore, it checks, as part of its support to the Supervisory Board in monitoring the appropriate structure of the compensation systems for employees, regu- larly, but at least annually, in particular, whether the total amount of variable compensation has been set in accordance with Section 45 (2) sentence 1 No. 5a of the German Banking Act (KWG) in consideration of Section 7 of the Remuneration Ordi- nance for Institutions (InstitutsVergV) and whether the specified principles to assess the compensation parameters, contribu- tions to performance as well as the payment and deferral periods, including the conditions for a full forfeiture or partial reduction of the variable compensation, are appropriate. In addition, it supports the Supervisory Board in monitoring whether the internal controls and other relevant areas are properly involved in the structuring of the compensation systems. The Committee is authorized to obtain, via its Chairperson, information relating to the Committee tasks from the Head of Group Audit and from the heads of the organizational units responsible for structuring the compensation systems. The current members of the Compensation Control Committee are Dr. Paul Achleitner (Chairman), Frank Bsirske, Dr. Gerhard Eschelbeck, Detlef Polaschek, Bernd Rose and Dr. Dagmar Valcárcel. Strategy Committee: It supports the Supervisory Board in fulfilling its oversight responsibilities relating to the bank’s strategy. It advises and monitors the Management Board with regard to the definition of business strategies geared to the sustainable development of the bank and the establishment of processes for planning, implementing, assessing and adjusting the business strategy. It oversees the Management Board’s work on the strategic perspective, direction and development of the strategy for Deutsche Bank Group and its business divisions, the Management Board’s implementation of the strategic plan and the execution progress against strategic milestones and goals, as well as the Management Board’s implementation of major business transformation projects and their execution. It advises the Management Board as to whether the governance, risk appetite, financial and capital planning, liquidity and funding management, control environment and resources can support the bank’s strategic objectives, and advises on divestitures and merger and acquisition strategy, including post-transaction per- formance tracking, as well as on the impact of changes in the competitive environment. Furthermore, the Strategy Committee advises the Management Board in preparation for the Supervisory Board meetings at which the Supervisory Board plenum addresses the company’s strategy and prepares the Supervisory Board’s decisions on transactions subject to its approval pursuant to Section 13 (1) b) and (1) d) of the Articles of Association. The current members of the Strategy Committee are John Alexander Thain (Chairman), Dr. Paul Achleitner, Frank Bsirske, Mayree Carroll Clark, Timo Heider, Henriette Mark, Detlef Polaschek and Michele Trogni. Technology, Data and Innovation Committee: It supports the Supervisory Board in fulfilling its oversight responsibilities relating to the bank’s innovation, data and technology environment. It continually advises and monitors the Management Board with regard to the adequate technical and organizational resources and the definition of an adequate plan for IT systems, including their application with generally established standards to the arrangement of the IT systems and the related IT processes. This includes in particular the oversight over the Management Board’s work on the IT strategy and its sustainability outlining the objectives and measures to be taken to achieve these objectives, the IT governance, the information security management, the user access management, the implementation of major IT projects and application development, IT operation, including data backup, outsourcing and other external procurement of IT services, data governance and data strategy, including their implementation, and any other material issues which may arise in connection with the IT systems and services or data quality. The current members of the Technology, Data and Innovation Committee are Michele Trogni (Chairperson), Dr. Paul Achleit- ner, Jan Duscheck, Dr. Gerhard Eschelbeck, Martina Klee and Bernd Rose. Mediation Committee: In addition to these eight standing committees, the Mediation Committee, which is required by German law, makes proposals to the Supervisory Board on the appointment or dismissal of members of the Management Board in cases where the Supervisory Board is unable to reach a two-thirds majority decision with respect to the appointment or dis- missal. The Mediation Committee only meets if necessary. The current members of the Mediation Committee are Dr. Paul Achleitner (Chairman), Frank Bsirske, Detlef Polaschek and Professor Dr. Norbert Winkeljohann. Further details regarding the Chairman’s Committee, the Nomination Committee, the Audit Committee, the Risk Committee, the Integrity Committee, the Compensation Control Committee, the Strategy Committee and the Technology, Data and Inno- vation Committee are regulated in separate Terms of Reference. The current versions are available on our website, along with the Terms of Reference for the Supervisory Board (see: www.db.com/ir/en/documents.htm). 415 Deutsche Bank Annual Report 2020 Management Board and Supervisory Board Share Plans Self-assessment of the work of the Supervisory Board and of its committees In 2020, the Supervisory Board performed the self-assessment of the work of the Supervisory Board and of its committees pursuant to the recommendation in Section D.13 of the German Corporate Governance Code. Based on the statutory require- ments for financial institutions pursuant to Section 25d (11) sentence 2 Nos. 3 and 4 of the German Banking Act (KWG), Deutsche Bank is required in any event to perform a self-assessment of the Supervisory Board at least annually. The Nomi- nation Committee and Supervisory Board addressed the assessment prescribed by law at several meetings. The concrete implementation of and the schedule for the assessment were deliberated on and set out at the meetings of the Nomination Committee on July 29, 2020, and September 22, 2020. Services of an external advisor were not mandated in this context. The assessment was performed essentially on the basis of extensive questionnaires regarding the work of the Supervisory Board, of the Supervisory Board committees and of the Management Board, individual interviews conducted by members of the Nomination Committee with the members of the Management Board, and an assessment of the individual members of both the Management Board and Supervisory Board. The final discussion of the assessment took place at the Supervisory Board meeting in plenum on February 3, 2021, and the results were set out in a final report. The Supervisory Board continues to hold the opinion that the Supervisory Board and Management Board have achieved a high standard and that there are no reservations, in particular, regarding the professional qualifications, personal reliability and time availability of the members of the Management Board and of the Supervisory Board. Furthermore, as one of the outcomes of the assessment against the backdrop of the progress achieved by the bank in its strategic transformation, the Supervisory Board will address the distribu- tion of tasks across its committees. Share Plans For information on our employee share programs, please refer to the additional Note 33 “Employee Benefits” to the Consoli- dated Financial Statements. 416 Deutsche Bank Annual Report 2020 Related party transactions Directors’ Share Ownership Reporting and transparency Directors’ Share Ownership Management Board. For information on the share ownership of the Management Board, please refer to our detailed Compen- sation Report in the Management Report. Supervisory Board. The members of our Supervisory Board held the following numbers of our shares and share awards under our employee share plans. Members of the Supervisory Board Dr. Paul Achleitner Ludwig Blomeyer-Bartenstein Frank Bsirske Mayree Carroll Clark Jan Duscheck Dr. Gerhard Eschelbeck Sigmar Gabriel Timo Heider Martina Klee Henriette Mark Gabriele Platscher Detlef Polaschek Bernd Rose Gerd Alexander Schütz John Alexander Thain Michele Trogni Dr. Dagmar Valcárcel Stefan Viertel Dr. Theodor Weimer Professor Dr. Norbert Winkeljohann Total Number of shares 145,000 3,694 0 109,444 0 0 0 0 2,493 1,524 1,549 655 0 0 100,000 15,000 0 1,007 108,000 0 488,366 Number of share awards 0 3,220 0 0 0 0 0 0 0 0 10 10 0 0 0 0 0 0 0 0 3,240 1 Restricted Equity Awards. Mr. Blomeyer-Bartenstein has an entitlement linked to 3,220 shares through Restricted Equity Awards as part of his variable compensation. These are due in 2021 till 2025. The members of the Supervisory Board held 488,366 shares, amounting to less than 0,03 % of our shares as of February 19, 2021. As listed in the “Number of share awards” column in the table, the members who are employees of Deutsche Bank hold matching awards granted under the Global Share Purchase Plan, which are scheduled to be delivered to them on November 1, 2021, as well as Restricted Equity Awards (deferred share awards), which are granted to employees with deferred variable compensation. The latter are marked separately in the table, and the further details concerning them as a compensation instrument are reported in the section “Employee Compensation Report”. As described in the “Management Report: Compensation Report: Compensation System for Supervisory Board Members”, 25 % of each member’s compensation for services as a member of the Supervisory Board for a given prior year is, rather than being paid in cash, converted into notional shares of Deutsche Bank AG in February of the following year. The cash value of the notional shares is paid to the member in February of the year following their departure from the Supervisory Board or the expiration of their term of office, based on the market price of the Deutsche Bank share near the payment date. The table in the section specified above shows the number of notional shares that will be credited in spring 2021 to members of the Supervisory Board as part of their 2020 compensation. Related party transactions For information on related party transactions please refer to Note 36 “Related Party Transactions“. 417 Deutsche Bank Annual Report 2020 Auditing and controlling Values and leadership principles of Deutsche Bank AG and Deutsche Bank Group Auditing and controlling Audit Committee Financial Expert The Supervisory Board determined that the following members of its Audit Committee are “audit committee financial experts”, as such term is defined by the implementation rules of the U.S. Securities and Exchange Commission issued pursuant to Section 407 of the Sarbanes-Oxley Act of 2002 Dr. Paul Achleitner, Dr. Dagmar Valcárcel, Dr. Theodor Weimer and Professor Dr. Norbert Winkeljohann. These audit committee financial experts are “independent” of the bank, as defined in Rule 10A-3 under the U.S. Securities Exchange Act of 1934. In accordance with the provisions of Sections 107 (4) and 100 (5) of the German Stock Corporation Act (AktG) as well as Section 25d (9) of the German Banking Act (KWG), they have the required expert knowledge in financial accounting and auditing. Compensation Control Committee Compensation Expert Pursuant to Section 25d (12) of the German Banking Act (KWG), at least one member of the Compensation Control Committee must have sufficient expertise and professional experience in the field of risk management and risk controlling, in particular, with regard to the mechanisms to align compensation systems to the company’s overall risk appetite and strategy and the bank’s capital base. The Supervisory Board determined that Dr. Paul Achleitner, Chairman of the Compensation Control Committee and Dr. Dagmar Valcárcel fulfill the requirements of Section 25d (12) of the German Banking Act (KWG) and therefore have the required expertise and professional experience in risk management and risk controlling. For a description of the experience of the Supervisory Board members mentioned in the two foregoing paragraphs, please see “Management Report: Corporate Governance Statement/Corporate Governance Report: Management Board and Super- visory Board: Supervisory Board” in the Annual Report 2020. Values and leadership principles of Deutsche Bank AG and Deutsche Bank Group Deutsche Bank Group Code of Conduct and Code of Ethics for Senior Financial Officers Deutsche Bank Group’s Code of Conduct sets out Deutsche Banks’s purpose, values and beliefs and minimum standards of conduct that we expect all members of our Management Board and employees to follow. These values and standards govern employee interactions with our clients, competitors, business partners, government and regulatory authorities, and sharehold- ers, as well as with other employees. In addition, the Code forms the cornerstone of our policies, which provide guidance on compliance with applicable laws and regulations. In accordance with Section 406 of the Sarbanes-Oxley Act of 2002, we adopted a Code of Ethics for Senior Financial Officers of Deutsche Bank AG and Deutsche Bank Group with special obligations that apply to our “senior financial officers”, which currently consist of Deutsche Bank’s Chairman of the Management Board, Chief Financial Officer, Group Controller as well as certain other senior financial officers. There were no amendments or waivers to this Code of Ethics in 2020. The current versions of the Code of Conduct as well as the Code of Ethics for Senior Financial Officers of Deutsche Bank AG and Deutsche Bank Group are available from Deutsche Bank’s website: www.db.com/ir/en/documents.htm. 418 Deutsche Bank Annual Report 2020 Auditing and controlling Principal accountant fees and services Corporate Governance at Deutsche Bank AG and Deutsche Bank Group Deutsche Bank established a Group Governance function to define, implement and monitor the corporate governance frame- work of Deutsche Bank AG and Deutsche Bank Group and to perform this governance function throughout the Group. Group Governance addresses corporate governance issues in Deutsche Bank AG and Deutsche Bank Group, while focusing closely on clear organizational structures aligned to the key elements of good corporate governance. Deutsche Bank AG and Deutsche Bank Group are committed to ensuring a corporate governance framework in accordance with international standards and statutory provisions. In support of this objective, Deutsche Bank AG and Deutsche Bank Group have instituted clear corporate governance principles. Further details on corporate governance are published on Deutsche Bank’s website (www.db.com/ir/en/corporate-govern- ance.htm). Principal accountant fees and services In accordance with German law, our principal accountant is appointed at our Annual General Meeting based on a recommen- dation of our Supervisory Board. The Audit Committee of our Supervisory Board prepares such a recommendation. Subse- quent to the principal accountant’s appointment, the Audit Committee awards the contract and in its sole authority approves the terms and scope of the audit and all audit engagement fees as well as monitors the principal accountant’s independence. Ernst & Young GmbH Wirtschaftsprüfungsgesellschaft („EY“) became our principal accountant for the 2020 fiscal year. KPMG AG Wirtschaftsprüfungsgesellschaft was our principal accountant for the 2019 fiscal year. The tables set forth below contain the aggregate fees billed for 2019 fiscal year by KPMG AG Wirtschaftsprüfungsgesellschaft and billed for 2020 fiscal year by EY in each of the following categories: (1) Audit fees, which are fees for professional services for the audit of our annual financial statements or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for those fiscal years, (2) Audit-related fees, which are fees for assurance and related services that are reasonably related to the performance of the audit or review of our financial statements and are not reported as Audit fees, (3) Tax-related fees, which are fees for professional services rendered for tax compliance, tax consult- ing and tax planning, and (4) All other fees, which are fees for products and services other than Audit fees, Audit-related fees and Tax-related fees. These amounts include expenses and exclude Value Added Tax (VAT). Fees billed by EY Fee category in € m. Audit fees Audit-related fees Tax-related fees All other fees Total fees Fees billed by KPMG AG Fee category in € m. Audit fees Audit-related fees Tax-related fees All other fees Total fees 2020 53 5 0 0 58 2020 0 0 0 0 0 2019 0 0 0 0 0 2019 60 13 4 0 77 1 1 The Audit fees include fees for professional services for the audit of our annual financial statements and consolidated financial statements and do not include the 2020 audit fees for DWS and its subsidiaries that are not audited by EY. The Audit-related fees include fees for other assurance services required by law or regulations, in particular for financial service specific attes- tation, for quarterly reviews, for spin-off audits and for merger audits, as well as fees for voluntary assurance services, like voluntary audits for internal management purposes and the issuance of comfort letters. Our Tax-related fees include fees for services relating to the preparation and review of tax returns and related compliance assistance and advice, tax consultation and advice relating to Group tax planning strategies and initiatives and assistance with assessing compliance with tax regu- lations. Under SEC regulations, the principal accountant fees are required to be presented as follows: audit fees were € 55 million in 2020 compared to € 62 million in 2019, audit-related fees were € 3 million in 2020 compared to € 11 million in 2019, tax-related fees were € 0 million in 2020 compared to € 4 million in 2019, and all other fees were € 0 million in 2020 compared to € 0 million in 2019. Fees in 2020 are paid to EY compared to fees in 2019 which were paid to KPMG. 419 Deutsche Bank Annual Report 2020 Auditing and controlling Principal accountant fees and services United States law and regulations, and our own policies, generally require that all engagements of our principal accountant be pre-approved by our Audit Committee or pursuant to policies and procedures adopted by it. Our Audit Committee has adopted the following policies and procedures for consideration and approval of requests to engage our principal accountant to perform non-audit services. Engagement requests must in the first instance be submitted to the Accounting Engagement Team. If the request relates to services that would impair the independence of our principal accountant, the request must be rejected. Our Audit Committee has given its pre-approval for specified assurance, financial advisory and tax services, provided the expected fees for any such service do not exceed € 1 million. If the engagement request relates to such specified pre- approved services, it may be approved by the Accounting Engagement Team and must thereafter be reported to the Audit Committee. If the engagement request relates neither to prohibited non-audit services nor to pre-approved non-audit services, it must be forwarded to the Audit Committee for consideration. In addition, to facilitate the consideration of engagement re- quests between its meetings, the Audit Committee has delegated approval authority to several of its members who are “inde- pendent” as defined by the Securities and Exchange Commission and the New York Stock Exchange. Such members are required to report any approvals made by them to the Audit Committee at its next meeting. Additionally, United States law and regulations permit the pre-approval requirement to be waived with respect to engagements for non-audit services aggregating to no more than five percent of the total amount of revenues we paid to our principal accountant, if such engagements were not recognized by us at the time of engagement and were promptly brought to the attention of our Audit Committee or a designated member thereof and approved prior to the completion of the audit. In 2019 and 2020, the percentage of the total amount of revenues we paid to our principal accountant for non-audit services that was subject to such a waiver was less than 5 % for each year. 420 Deutsche Bank Annual Report 2020 Compliance with the German Corporate Governance Code Declaration pursuant to Section 161 German Stock Corporation Act (AktG) (Declaration of Conformity 2020) Compliance with the German Corporate Governance Code Declaration pursuant to Section 161 German Stock Corporation Act (AktG) (Declaration of Conformity 2020) In updating the Declaration of Conformity last issued on October 30, 2019, the Management Board and Supervisory Board of Deutsche Bank AG approved the following Declaration of Conformity on October 30, 2020. “The Management Board and Supervisory Board of Deutsche Bank Aktiengesellschaft state pursuant to Section 161 German Stock Corporation Act (AktG): 1. The last Declaration of Conformity was issued on October 30, 2019. Since then Deutsche Bank Aktiengesellschaft has complied with the recommendations of the “Government Commission on the German Corporate Governance Code” in the version of the Code dated February 7, 2017, published in the Bundesanzeiger on April 24, 2017, subject to the following deviations:  Relating to No. 5.3.3, according to which the supervisory board shall form a nomination committee composed exclu- sively of shareholder representatives. Section 25 (d) of the German Banking Act stipulates that the nomination com- mittee of the supervisory board must take on additional tasks that should be performed not solely by the shareholder representatives on the supervisory board. For this reason, the Nomination Committee of the Supervisory Board of Deutsche Bank Aktiengesellschaft also comprises representatives of the employees. However, it will be ensured that the candidate recommendations for the election proposals to the General Meeting will be prepared exclusively by the Committee’s shareholder representatives.  Relating to No. 4.2.3 (2) sentence 6, according to which the amount of compensation for the management board members shall be capped, both overall and with regard to variable compensation components. The existing employ- ment contracts (in conjunction with equity plan conditions) of the members of the Management Board of Deutsche Bank Aktiengesellschaft do provide for a limit (cap) in the awarding of total compensation and their variable com- pensation components. In this context, however, some hold the view that such limits would have to apply not only to the granting and awarding of the compensation components but also to their later payout. Although Deutsche Bank Aktiengesellschaft does not consider this view to be convincing, we state merely as a precautionary measure that a limit (cap) has not been set for the payout amount of deferred equity-based compensation and that therefore Deutsche Bank Aktiengesellschaft deviates from the recommendation in No. 4.2.3 (2) sentence 6 according to this interpretation. 2. On December 16, 2019, the “Government Commission on the German Corporate Governance Code” submitted a new version of the German Corporate Governance Code, which came into effect with its publication by the Federal Ministry of Justice and Consumer Protection in the official section of the Federal Gazette (Bundesanzeiger) on March 20, 2020. The new version limits the applicability of the Code’s recommendations to credit institutions and insurance companies to the extent that the recommendations apply to them only insofar as there are no statutory provisions to the contrary. Deutsche Bank Aktiengesellschaft complies with the applicable recommendations of this new version and will continue to comply with them in the future, whereas as of now the following deviation applies:  Relating to recommendation G.1, first bullet point, which recommends that the remuneration system for the Man- agement Board shall – inter alia – define “how the target total remuneration is determined for each Management Board member, and the amount that the total remuneration must not exceed (maximum remuneration)”. The remu- neration system defines a maximum remuneration, but this maximum remuneration currently does not include the service costs for the contributions to the company pension of the Management Board members. For the future, it is envisaged to comply with the recommendation also in this regard. Frankfurt am Main, in October 2020 The Management Board of Deutsche Bank Aktiengesellschaft The Supervisory Board of Deutsche Bank Aktiengesellschaft” 421 Deutsche Bank Annual Report 2020 Compliance with the German Corporate Governance Code Targets for the proportion of women in management positions/gender quota Inapplicable Code recommendations due to the precedence of statutory provisions Pursuant to the recommendation in Section F.4 of the German Corporate Governance Code in the version of December 16, 2019, companies subject to special legal regulations shall specify in the Corporate Governance Statement which Code rec- ommendations were not applicable due to over-riding legal stipulations. For Deutsche Bank Aktiengesellschaft, this currently applies to the recommendation in Section D.5 of the German Corporate Governance Code in the version of December 16, 2019, which states that the Supervisory Board shall form a Nomination Committee composed exclusively of shareholder representatives. Deutsche Bank Aktiengesellschaft, as a supervised credit institution, is subject to the special legal regulations of the German Banking Act (KWG). The Supervisory Board of Deutsche Bank Aktiengesellschaft has to establish a Nomination Committee in accordance with Section 25d (11) of the German Banking Act (KWG) whose tasks are to support the Supervisory Board in the following tasks: • • • • • identifying candidates to fill a position on the Management Board and preparing proposals for the election of members of the Supervisory Board; drawing up an objective to promote the representation of the under-represented gender on the Supervisory Board as well as a strategy for achieving this; the regular assessment, to be performed at least once a year, of the structure, size, composition and performance of the Management Board and of the Supervisory Board and making recommendations regarding this to the Supervisory Board; the regular assessment, to be performed at least once a year, of the knowledge, skills and experience of the individual members of the Management Board and of the Supervisory Board as well as of the respective body collectively; and the review of the Management Board’s principles for selecting and appointing persons to the upper management level and the recommendations made to the Management Board in this respect. The Nomination Committee to be established in accordance with the German Banking Act (KWG) therefore has numerous tasks that go beyond the preparation of the election proposals for the shareholder representatives on the Supervisory Board. A general exclusion of a supervisory board’s employee representatives from a membership on a committee is only admissible, according to prevailing opinion, if there is a material reason for this. Whereas such a material reason can exist for a committee that solely handles the preparation of the proposals to the General Meeting for the election of shareholder representatives, a justification for the exclusion of employee representatives is lacking for a nomination committee with the range of tasks as- signed to it by the German Banking Act (KWG). Due to the Nomination Committee’s range of mandatory tasks stipulated by the German Banking Act (KWG) and the inadmissibility of discriminating against employee representatives in the composition of the committees, the recommendation in Section D.5 of the German Corporate Governance Code is therefore not applicable to Deutsche Bank Aktiengesellschaft. Nonetheless, in order to take this recommendation into account, Section 2 (3) of the Terms of Reference for the Nomination Committee provides that the election proposals to the General Meeting are prepared only by the shareholder representatives on the Nomination Committee. Targets for the proportion of women in management posi- tions/gender quota As of the date of this Corporate Governance Statement, the percentage of women on the Supervisory Board of Deutsche Bank AG is 30 %. The statutory minimum of 30 % pursuant to Section 96 (2) of the German Stock Corporation Act (AktG) is thereby fulfilled. On July 27, 2017, the Supervisory Board set a target of at least 20 % for the percentage of female members of the Manage- ment Board as of June 30, 2022. For a Management Board size of between eight and 12 members, this corresponds to two women When the decision was made two women were members of the Management Board. At the end of the financial year and as of the date of this Statement, there is one female member on the Management Board of Deutsche Bank AG, Christiana Riley. 422 Deutsche Bank Annual Report 2020 Compliance with the German Corporate Governance Code Diversity concept On September 16, 2015, the Management Board set targets for the percentage of women at 20 % for the first management level and 25 % for the second management level, to be reached by December 31, 2020 (when the decision was made the percentage of women on the first management level was 14 % and on the second management level 18 %). The population of the first management level comprises Managing Directors and Directors who report directly to the Manage- ment Board and managers with comparable responsibilities. The population of the second management level comprises Man- aging Directors and Directors who report to the first management level. Implementing German gender quota legislation at Deutsche Bank AG in % (unless stated otherwise) Women on the Supervisory Board Women on the Management Board First management level below the Management Board Second management level below the Management Board 1 Legal requirement. 2 For a Management Board size of between eight and 12 members, this corresponds to two women. Status as of Dec 31, 2019 35.0 % 0.0 % 19.7 % 19.5 % Status as of Dec 31, 2020 Target for Dec 31, 2020 30.0 % 10.0 % 20.0 % 23.9 % 30.0 %1 - 20.0 % 25.0 % Target for Jun 30, 2022 - 20.0 %2 - - As of December 31, 2020, the proportion of women is 20 % in the first management level below the Management Board and 23,9 % on the second management level below the Management Board. The target levels as of December 31, 2020 have only partly been achieved. The reasons are: Key conditions have changed since the target was set in September 2015 for the percentage of women on the two levels below the Management Board. These changes include the bank’s transformation program approved in July 2019, as well as our decisions regarding the IPO of DWS and the merging of the DB Privat- and Firmenkundenbank AG into Deutsche Bank AG. Furthermore, our extensive cost reduction program imposed restrictions on hiring and appointments at these two levels. In fact, the already relatively low number of employees on the two levels below the Management Board declined further in the period since September 2015, by nearly 36 %. Small changes in absolute numbers led to relatively high fluctuations in terms of percentages. Nevertheless, we maintained our target and continue to focus on increasing the percentage of women in management positions. Within this framework, our decisions on promotions and appointments are aligned, in particular, to the suitability of the candidates for the respective roles, their demonstrated performance and their future potential. In line with our basic diversity concept, we also take into account the knowledge and skills required for the proper performance of tasks and the necessary experience of the employees for the composition of the two levels below the Management Board. In accordance with the legal framework conditions and based on our own understanding of greater diversity and in- clusion, the Management Board, over the course of the year 2021, will set new targets for the percentage of women on the two senior management levels below the Management Board. Diversity concept As an integral part of our strategy as a leading European bank with a global reach and a strong home market in Germany, Diversity is a decisive factor for our success. Diversity & Inclusion help Deutsche Bank in forming sustainable relationships with our clients and partners and in taking part in the societies where we do business. Age, gender as well as educational and professional backgrounds have long been accepted as key aspects of our far more comprehensive understanding of Diversity at Deutsche Bank. We are convinced that Diversity & Inclusion stimulate innovation, for example, and help us to take more balanced decisions and thus play a decisive role for the success of Deutsche Bank. Diversity & Inclusion are therefore integral components of the bank’s values and beliefs and its Code of Conduct. The Supervisory Board and Management Board strive to and should serve as role models for the bank with regard to Diversity & Inclusion. In accordance with our values and beliefs specified above, diversity in the composition of the Supervisory Board and the Management Board also facilitates the proper performance of the tasks and duties assigned to them by law, the Articles of Association and Terms of Reference. Based on Deutsche Bank’s understanding of Diversity & Inclusion, the values and beliefs and the measures described in the following for their implementation also apply – to the extent legally admissible – to the Supervisory Board and the Management Board of Deutsche Bank AG. The Supervisory Board considers diversity in the company, in particular, when filling positions on the Management Board and Supervisory Board. On October 30, 2020, the Supervisory Board of Deutsche Bank AG updated the Suitability Guideline for selecting members of the Supervisory Board and Management Board of Deutsche Bank AG, which also continues to comprise diversity principles. This Suitability Guideline implements the “Guidelines on the assessment of the suitability of members of the management 423 Deutsche Bank Annual Report 2020 Compliance with the German Corporate Governance Code Diversity concept body and key function holders” issued jointly by the European Banking Authority and European Securities and Markets Au- thority. Diversity concept for the Supervisory Board The diversity concept for the Supervisory Board and its implementation are described above in the section “Objectives for the composition of the Supervisory Board, Profile of Requirements, diversity concept and status of implementation”. Diversity concept and succession planning for the Management Board Through the composition of the Management Board, it is to be ensured that its members have, at all times, the required knowledge, skills and experience necessary to properly perform their tasks. Accordingly, when selecting members for the Management Board, care is to be taken that they collectively have sufficient expertise and diversity within the meaning of our objectives specified above. Furthermore, the Supervisory Board and the Management Board should ensure long-term suc- cession planning. By way of resolution of the Supervisory Board, the Management Board should be composed of at least 20 % women by June 30, 2022. For a Management Board size of between eight and 12 members, this corresponds to two women. In general, a Management Board member should not be older at the end of his or her appointment period than the regular retirement age according to the rules of the statutory pension insurance scheme applicable in Germany for the long-term insured to claim an early retirement pension, which is currently 65 years of age. Implementation In accordance with the law, the Articles of Association and Terms of Reference, the Supervisory Board adopted candidate profiles for the members of the Management Board, based on a proposal from the Nomination Committee. These profiles take into account an “Expertise and Capability Matrix”, specifying, among other things, the required knowledge, skills and experi- ence to perform the tasks as Management Board member, in order to successfully develop and implement the bank’s strategy in the respective market or the respective division and as a management body collectively. The Management Board reviews succession plans for Management Board positions, both individually and as a group. Successions plans are reviewed and succession candidates are discussed in detail based on potential, leadership, fit and proper suitability. As gender diversity is a key focus of Deutsche Bank respective succession metrics and data analytics support this process. Upon approval by the Management Board these plans are submitted to the Supervisory Board’s Nomination Committee for review and approval. In identifying candidates to fill a position on the bank’s Management Board, the Supervisory Board’s Nomination Committee takes into account the appropriate diversity balance of all Management Board members collectively. Furthermore, it also considers the targets set by the Supervisory Board in accordance with statutory requirements for the percentage of women on the Management Board. The Nomination Committee supports the Supervisory Board with the periodic assessment, to be performed at least once a year, of the knowledge, skills and experience of the individual members of the Management Board and of the Management Board in its entirety. Results achieved in the 2020 financial year At the end of the financial year, the Management Board comprised one woman (10%) and nine men. The target of 20 % of the members or two women adopted for June 30, 2022 for the Management Board was therefore not yet met. As of the date of this Corporate Governance Statement, the Management Board of Deutsche Bank AG comprised one woman and nine men. The age structure is diverse, ranging from 42 to 55 years of age as of the date of this Corporate Governance Statement. As of the date of this Corporate Governance Statement the length of experience as member of the Management Board of Deutsche Bank ranged from under one year to around eight years. Also with our strategy in mind of being a leading European bank with a global reach and a strong home market in Germany, seven of the ten Management Board members as of the date of this Corporate Governance Statement have a German back- ground. The other members of the Management Board come from Italy, the United Kingdom and the USA. However, the ethnic diversity of the Management Board does not currently reflect the full diversity of the markets where we do business or the diversity of our employees. 424 Deutsche Bank Annual Report 2020 Compliance with the German Corporate Governance Code Diversity concept The diverse range of the members’ educational and professional backgrounds includes banking, business administration, economics, law, linguistics and engineering. The bank transparently reports on Management Board diversity in addition to the information presented above in this Corpo- rate Governance Report in the section “Management Board and Supervisory Board: Management Board” as well as on the bank’s website: www.db.com (Heading “Corporate Governance”, “Management Board”). 425 4 Supplementary Information ( Unaudited) 427 Non-GAAP financial measures 435 Declaration of backing 436 Group five-year record 437 Imprint / publications Deutsche Bank Annual Report 2020 Non-GAAP financial measures Return on equity ratios Non-GAAP financial measures This document and other documents the Group has published or may publish contain non-GAAP financial measures. Non- GAAP financial measures are measures of the Group’s historical or future performance, financial position or cash flows that contain adjustments that exclude or include amounts that are included or excluded, as the case may be, from the most directly comparable measure calculated and presented in accordance with IFRS in the Group’s financial statements. Return on equity ratios The Group reports a post-tax return on average shareholders’ equity and a post-tax return on average tangible shareholders’ equity, each of which is a non-GAAP financial measure. The post-tax returns on average shareholders’ equity and average tangible shareholders' equity are calculated as profit (loss) attributable to Deutsche Bank shareholders after AT1 coupon as a percentage of average shareholders’ equity and average tangible shareholders' equity, respectively. Profit (loss) attributable to Deutsche Bank shareholders after AT1 coupon for the segments is a non-GAAP financial measure and is defined as profit (loss) excluding post-tax profit (loss) attributable to noncontrolling interests and after AT1 coupon, which are allocated to segments based on their allocated average tangible shareholders’ equity. For the Group, it reflects the reported effective tax rate, which was 39 % for the full year 2020, (100) % for 2019 and 74 % for 2018. For the segments, the applied tax rate was 28 % for all reported periods in 2020, 2019 and 2018. At the Group level, tangible shareholders' equity is shareholders’ equity as reported in the Consolidated Balance Sheet ex- cluding goodwill and other intangible assets. Tangible shareholders’ equity for the segments is calculated by deducting good- will and other intangible assets from shareholders’ equity as allocated to the segments. Shareholders’ equity and tangible shareholders’ equity are presented on an average basis. The Group believes that a presentation of average tangible shareholders’ equity makes comparisons to its competitors easier, and refers to this measure in the return on equity ratios presented by the Group. However, average tangible shareholders’ equity is not a measure provided for in IFRS, and the Group’s ratios based on this measure should not be compared to other companies’ ratios without considering differences in the calculations. The reconciliation of the aforementioned ratios is set forth in the table below: in € m. (unless stated otherwise) Profit (loss) before tax Profit (loss) Profit (loss) attributable to noncontrolling interests Profit (loss) attributable to DB shareholders and additional equity components Profit (loss) attributable to additional equity components Profit (loss) attributable to Deutsche Bank shareholders Corporate Bank 561 404 Investment Bank 3,171 2,283 Private Bank (124) (89) Asset Management Capital Release Unit 544 391 (2,201) (1,584) Corporate & Other (930) (781) 2020 Total 1,021 624 0 0 0 0 0 129 129 404 2,283 (89) 391 (1,584) (910) 72 169 79 14 48 0 332 2,114 (168) 378 (1,632) (910) 495 382 113 9,904 11,521 22,943 Average allocated shareholders' equity Deduct: Average allocated goodwill and other intangible assets1 Average allocated tangible sharehold- ers' equity Post-tax return on average shareholders’ equity Post-tax return on average tangible shareholders’ equity 1 Goodwill and other intangible assets related to the share of DWS that is not held by Deutsche Bank are excluded since the first quarter of 2018. (26.9) % (26.3) % 21,809 10,266 (1.6) % (1.5) % 21.4 % 4,760 2,993 1,767 9,302 1,255 6,062 6,205 1,134 9.7 % 3.6 % 9.2 % 7.9 % 3.3 % 602 143 0 55,332 0 6,127 0 49,205 N/M 0.2 % N/M 0.2 % 427 Deutsche Bank Annual Report 2020 Non-GAAP financial measures Return on equity ratios in € m. (unless stated otherwise) Profit (loss) before tax Profit (loss) Profit (loss) attributable to noncontrolling interests Profit (loss) attributable to DB shareholders and additional equity components Profit (loss) attributable to additional equity components Profit (loss) attributable to Deutsche Bank shareholders Average allocated shareholders' equity Deduct: Average allocated goodwill and other intangible assets1 Average allocated tangible sharehold- ers' equity Post-tax return on average shareholders’ equity Post-tax return on average tangible shareholders’ equity Corporate Bank 92 66 Investment Bank 502 361 Private Bank (279) (201) Asset Management Capital Release Unit 468 337 (3,170) (2,283) Corporate & Other (247) (3,546) 2019 Total (2,634) (5,265) 0 0 0 0 0 125 125 66 361 (201) 337 (2,283) (3,670) (5,390) 60 132 62 11 63 0 328 6 229 (263) 326 (2,346) (3,670) (5,718) 10,464 23,052 11,729 4,821 10,105 0 60,170 780 1,824 1,731 3,032 160 0 7,528 9,684 21,227 9,998 1,789 9,945 0 52,643 0.1 % 1.0 % (2.2) % 6.8 % (23.2) % N/M (9.5) % 0.1 % 1.1 % (2.6) % 18.2 % (23.6) % N/M (10.9) % Prior year segmental information presented in the current structure 1 Goodwill and other intangible assets related to the share of DWS that is not held by Deutsche Bank are excluded since the first quarter of 2018. in € m. (unless stated otherwise) Profit (loss) before tax Profit (loss) Profit (loss) attributable to noncontrolling interests Profit (loss) attributable to DB shareholders and additional equity components Profit (loss) attributable to additional equity components Profit (loss) attributable to Deutsche Bank shareholders Average allocated shareholders' equity Deduct: Average allocated goodwill and other intangible assets1 Average allocated tangible sharehold- ers' equity Post-tax return on average shareholders’ equity Post-tax return on average tangible shareholders’ equity Corporate Bank 1,254 903 Investment Bank 958 690 Private Bank 616 443 Asset Management Capital Release Unit 368 265 (1,404) (1,011) Corporate & Other (461) (949) 2018 Total 1,330 341 0 0 0 0 0 75 75 903 690 443 265 (1,011) (1,023) 61 134 63 8 54 0 267 319 842 556 380 258 (1,065) (1,023) (52) 10,927 22,629 12,397 4,837 11,704 115 62,610 1,029 2,086 2,035 3,024 199 14 8,386 9,898 20,542 10,363 1,814 11,505 101 54,224 7.7 % 2.5 % 3.1 % 5.3 % (9.1) % N/M (0.1) % 8.5 % 2.7 % 3.7 % 14.2 % (9.3) % N/M (0.1) % Prior year segmental information presented in the current structure 1 Goodwill and other intangible assets related to the share of DWS that is not held by Deutsche Bank are excluded since the first quarter of 2018. 428 Deutsche Bank Annual Report 2020 Non-GAAP financial measures Adjusted costs Core Bank The Core Bank represents the Group excluding the Capital Release Unit (CRU). in € m. (unless stated otherwise) Profit (loss) before tax Profit (loss) Profit (loss) attributable to noncontrolling interests Profit (loss) attributable to Deutsche Bank shareholders and additional equity components Profit (loss) attributable to additional equity components Profit (loss) attributable to Deutsche Bank shareholders Average allocated shareholders' equity Deduct: Average allocated goodwill and other intangible assets Average allocated tangible shareholders' equity Post-tax return on average shareholders’ equity Post-tax return on average tangible shareholders’ equity Prior year segmental information presented in the current structure in € m. (unless stated otherwise) Profit (loss) before tax - Group Profit (loss) before tax - CRU Profit (loss) before tax - Core Bank Specific revenue items Transformation charges Impairment of goodwill / other intangibles Restructuring & severance Adjusted profit (loss) before tax – Core Bank Prior year segmental information presented in the current structure Transformation charges 2020 3,221 2,208 129 2,079 334 1,746 49,127 5,984 43,143 3.6 % 4.0 % 2020 1,021 (2,201) 3,221 (38) 328 0 671 4,182 2019 536 (2,982) 125 (3,107) 266 (3,372) 50,065 7,368 42,698 (6.7) % (7.9) % 2019 (2,634) (3,170) 536 (108) 635 1,037 649 2,749 2018 2,735 1,352 75 1,278 266 1,012 50,905 8,187 42,718 2.0 % 2.4 % 2018 1,330 (1,404) 2,735 (691) 0 0 494 2,537 Transformation charges are costs, included in adjusted costs, that are directly related to Deutsche Bank’s transformation as a result of the strategy announced on July 7, 2019 and certain costs related to incremental or accelerated decisions driven by the changes in our expected operations due to the COVID-19 pandemic. Such charges include the transformation-related impairment of software and real estate, the accelerated software amortization and other transformation charges like onerous contract provisions or legal and consulting fees related to the strategy execution. The table represents the transformation charges by the respective cost category. in € m. Compensation and benefits IT costs Professional service fees Occupancy, furniture and equipment expenses Communication, data services, marketing Other Transformation charges Adjusted costs 2020 8 257 18 196 7 4 490 2019 0 977 12 137 0 18 1,145 Adjusted costs is one of the key performance indicators and is a non-GAAP financial measure for which the most directly comparable IFRS financial measure is noninterest expenses. Adjusted costs is calculated by deducting (i) impairment of goodwill and other intangible assets, (ii) net litigation charges and (iii) restructuring and severance from noninterest expenses under IFRS. The Group believes that a presentation of noninterest expenses excluding the impact of these items provides a more meaningful depiction of the costs associated with our operating businesses. To show the development of our cost initi- atives excluding costs that are directly related to Deutsche Bank’s transformation as a result of the strategy announced on July 7, 2019, the Group also presents Adjusted costs excluding transformation charges, in which the transformation charges described above are deducted from Adjusted costs. 429 Deutsche Bank Annual Report 2020 Non-GAAP financial measures Adjusted costs In addition, BNP Paribas and Deutsche Bank have signed a master transaction agreement to provide continuity of service to Deutsche Bank’s Prime Finance and Electronic Equities clients. Under the agreement Deutsche Bank will continue to operate the platform until clients can be migrated to BNP Paribas, and BNP Paribas reimburses Deutsche Bank for the eligible ex- penses of the transferred business. To show the development of our cost initiatives excluding not only transformation charges but also these eligible reimbursable expenses, the Group also presents Adjusted costs excluding transformation charges and expenses eligible for reimbursement related to Prime Finance. Corporate Bank 4,218 Investment Bank 5,413 0 99 78 4,041 59 0 20 26 5,368 84 Private Bank 7,539 0 83 520 6,936 122 Asset Management Capital Release Unit 1,527 1,947 Corporate & Other 572 2020 Total consolidated 21,216 0 (1) 37 1,490 5 0 25 17 1,906 162 0 (67) 10 629 58 0 158 688 20,370 490 3,982 5,284 6,813 1,485 1,744 571 19,880 360 19,520 Corporate Bank 4,867 Investment Bank 6,389 492 (4) 150 4,229 160 0 135 218 6,035 211 Private Bank 8,142 545 (21) 156 7,462 190 Asset Management Capital Release Unit 1,711 3,400 Corporate & Other 566 2019 Total consolidated 25,076 0 (5) 41 1,675 30 0 129 157 3,115 510 0 238 83 245 43 1,037 473 805 22,761 1145 4,069 5,824 7,272 1,644 2,605 202 21,616 in € m. Noninterest expenses Impairment of goodwill and other intangible assets Litigation charges, net Restructuring and severance Adjusted costs Transformation charges Adjusted costs ex. transformation charges Expenses eligible for reimbursement related to Prime Finance Adjusted costs ex. transformation charges and expenses eligible for re- imbursement related to Prime Fi- nance in € m. Noninterest expenses Impairment of goodwill and other intangible assets Litigation charges, net Restructuring and severance Adjusted costs Transformation charges Adjusted costs ex. transformation charges Expenses eligible for reimbursement related to Prime Finance Adjusted costs ex. transformation charges and expenses eligible for re- imbursement related to Prime Fi- nance Prior year segmental information presented in the current structure in € m. Noninterest expenses Impairment of goodwill and other intangible assets Litigation charges, net Restructuring and severance Adjusted costs Transformation charges Adjusted costs ex. transformation charges Expenses eligible for reimbursement related to Prime Finance Adjusted costs ex. transformation charges and expenses eligible for re- imbursement related to Prime Finance Prior year segmental information presented in the current structure Corporate Bank 3,882 Investment Bank 6,509 0 34 45 3,802 0 0 96 232 6,181 0 Private Bank 7,556 0 (80) 112 7,524 0 Asset Management Capital Release Unit 1,735 3,351 Corporate & Other 428 Total consolidated 23,461 0 33 45 1,657 0 0 (47) 69 3,329 0 0 52 60 317 0 0 88 563 22,810 0 3,802 6,181 7,524 1,657 3,329 317 22,810 102 21,514 2018 0 22,810 430 Deutsche Bank Annual Report 2020 Non-GAAP financial measures Revenues excluding specific items Revenues excluding specific items Revenues excluding specific items is a performance indicator that is a non-GAAP financial measure most directly comparable to the IFRS financial measure net revenues. Revenues excluding specific items is calculated by adjusting net revenues under IFRS for specific revenue items which generally fall outside the usual nature or scope of the business and are likely to distort an accurate assessment of the divisional operating performance. Excluded items are Debt Valuation Adjustment (DVA) and material transactions or events that are either one-off in nature or belong to a portfolio of connected transactions or events where the P&L impact is limited to a specific period of time. The Group believes that a presentation of net revenues excluding the impact of these items provides a more meaningful depiction of the revenues associated with our business. in € m. Revenues DVA Sale of PB Systems to TCS Change in valuation of an investment - FIC S&T Gain on sale - Global Transaction Banking Gain from property sale - Private Bank Germany Gain from property sale - IPB / Sal. Oppenheim Sal. Oppenheim workout - International Private Bank (IPB) Update in valuation methodology – CRU Total Specific revenue items Revenues excluding specific items in € m. Revenues DVA Sale of PB Systems to TCS Change in valuation of an investment - FIC S&T Gain on sale - Global Transaction Banking Gain from property sale - Private Bank Germany Gain from property sale - IPB / Sal. Oppenheim Sal. Oppenheim workout - International Private Bank (IPB) Update in valuation methodology – CRU Total Specific revenue items Revenues excluding specific items Corporate Bank 5,145 0 (16) Investment Bank 9,283 6 0 Private Bank 8,126 0 (88) Asset Management Capital Release Unit 2,229 0 0 (225) (8) 0 Corporate & Other (530) 0 0 2020 Total consolidated 24,028 (2) (104) 0 0 0 0 0 22 0 0 0 0 0 0 0 0 114 0 0 0 0 0 0 0 0 0 0 0 0 0 0 22 0 0 0 0 114 0 (16) 5,161 0 28 9,255 0 26 8,100 0 0 2,229 0 (8) (217) 0 0 (530) 0 30 23,998 Corporate Bank 5,244 0 0 Investment Bank 7,019 (140) 0 Private Bank 8,206 0 0 Asset Management Capital Release Unit 2,332 0 0 217 (35) 0 0 143 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 105 Corporate & Other 147 0 0 2019 Total consolidated 23,165 (175) 0 0 143 0 0 0 0 0 0 0 105 0 0 5,244 0 3 7,016 0 105 8,101 0 0 2,332 (81) (116) 332 0 0 147 (81) (8) 23,173 Prior year segmental information presented in the current structure 431 Deutsche Bank Annual Report 2020 Non-GAAP financial measures Adjusted profit (loss) before tax in € m. Revenues DVA Sale of PB Systems to TCS Change in valuation of an investment - FIC S&T Gain on sale - Global Transaction Banking Termination of legacy Trust Preferred Security - Private Bank Germany Gain from asset sale - Private Bank Germany Gain from property sale - IPB / Sal. Oppenheim Sal. Oppenheim workout - International Private Bank (IPB) Update in valuation methodology – CRU Total Specific revenue items Revenues excluding specific items Corporate Bank 5,278 0 0 Investment Bank 7,561 126 0 0 140 57 0 Private Bank 8,520 0 0 0 0 0 0 0 0 0 0 0 156 0 0 40 172 0 368 8,153 0 57 5,221 0 266 7,295 Asset Management Capital Release Unit 2,187 0 0 1,911 0 0 2018 Corporate & Other (142) 0 0 Total consolidated 25,316 126 0 0 0 0 0 0 0 0 0 0 0 0 0 0 140 0 57 0 0 0 156 0 0 40 172 0 0 2,187 0 0 1,911 0 0 (142) 0 691 24,625 Prior year segmental information presented in the current structure Adjusted profit (loss) before tax Adjusted profit (loss) before tax is calculated by adjusting the profit (loss) before tax under IFRS for specific revenue items, transformation charges, impairments of goodwill and other intangibles, as well as restructuring and severance expenses. The Group believes that a presentation of profit (losses) before tax excluding the impact of the foregoing items provides a more meaningful depiction of the profitability of our operating business. in € m. Profit (loss) before tax Specific revenue items Transformation charges Impairment of goodwill / other intan- gibles Restructuring & severance Adjusted profit (loss) before tax Corporate Bank 561 16 59 Investment Bank 3,171 (28) 84 0 78 714 0 26 3,252 in € m. Profit (loss) before tax Specific revenue items Transformation charges Impairment of goodwill / other intan- gibles Restructuring & severance Adjusted profit (loss) before tax Corporate Bank 92 0 160 492 150 894 Investment Bank 502 (3) 211 0 218 929 Prior year segmental information presented in the current structure Private Bank (124) (26) 122 0 520 493 Private Bank (279) (105) 190 545 156 507 Asset Management Capital Release Unit 544 0 5 0 37 586 (2,201) 8 162 0 17 (2,014) Corporate & Other (930) 0 58 0 10 (862) 2020 Total consolidated 1,021 (30) 490 0 688 2,169 Asset Management Capital Release Unit 468 0 30 0 41 539 (3,170) 116 510 0 157 (2,388) Corporate & Other (247) 0 43 0 83 (121) 2019 Total consolidated (2,634) 8 1,145 1,037 805 361 in € m. Profit (loss) before tax Specific revenue items Transformation charges Impairment of goodwill / other intangi- bles Restructuring & severance Adjusted profit (loss) before tax Corporate Bank 1,254 (57) 0 Investment Bank 958 (266) 0 0 45 1,242 0 232 924 Private Bank 616 (368) 0 0 112 360 Asset Management Capital Release Unit 368 0 0 0 45 413 (1,404) 0 0 0 69 (1,335) Prior year segmental information presented in the current structure 2018 Corporate & Other (461) 0 0 Total consolidated 1,330 (691) 0 0 60 (402) 0 563 1,202 432 Deutsche Bank Annual Report 2020 Non-GAAP financial measures Book Value and Tangible Book Value per Basic Share Outstanding Net assets (adjusted) Net assets (adjusted) are defined as IFRS Total assets adjusted to reflect the recognition of legal netting agreements, offset- ting of cash collateral received and paid and offsetting pending settlements balances. The Group believes that a presentation of net assets (adjusted) makes comparisons to its competitors easier. in € m. (unless stated otherwise) Total assets Deduct: Derivatives (incl. hedging derivatives) credit line netting Deduct: Derivatives cash collateral received / paid Deduct: Securities Financing Transactions credit line netting Deduct: Pending settlements netting Net assets 2020 1,325 266 83 1 12 963 2019 1,298 266 74 1 10 946 2018 1,348 253 68 1 18 1,010 Book Value and Tangible Book Value per Basic Share Outstanding Book value per basic share outstanding and tangible book value per basic share outstanding are non-GAAP financial measures that are used and relied upon by investors and industry analysts as capital adequacy metrics. Book value per basic share outstanding represents the Bank’s total shareholders’ equity divided by the number of basic shares outstanding at period-end. Tangible book value represents the Bank’s total shareholders’ equity less goodwill and other intangible assets. Tangible book value per basic share outstanding is computed by dividing tangible book value by period-end basic shares outstanding. Tangible Book Value in € m. (unless stated otherwise) Total shareholders’ equity (Book value) Goodwill and other intangible assets1 Tangible shareholders’ equity (Tangi- ble book value) 2020 2019 2018 in € m. in % in € m. in % 2020 increase (decrease) from 2019 2019 increase (decrease) from 2018 54,786 (5,997) 55,857 (6,254) 62,495 (8,372) (1,071) 257 (2) (4) (6,638) 2,119 (11) (25) 48,789 49,603 54,122 (815) (2) (4,519) (8) 1 Excludes Goodwill and other intangible assets attributable to partial sale of DWS. Basic Shares Outstanding in € m. (unless stated otherwise) Number of shares Shares outstanding: Treasury shares Vested share awards Basic shares outstanding Book value per basic share outstand- ing in € Tangible book value per basic share outstanding in € 2020 increase (decrease) from 2019 2020 2,066.8 2019 2,066.8 2018 2,066.8 in € m. 0 (1.3) 38.6 2,104.1 (0.7) 52.4 2,118.5 (1.3) 39.8 2,105.2 (0.6) (13.8) (14.4) in % 0 94.0 (26.3) (0.7) 2019 increase (decrease) from 2018 in % 0 in € m. 0 0.7 12.6 13.3 (50.0) 31.7 0.6 26.04 26.37 29.69 (0.33) (1.3) (3.32) (11.2) 23.19 23.41 25.71 (0.22) (0.9) (2.30) (8.9) 433 Deutsche Bank Annual Report 2020 Non-GAAP financial measures Regulatory fully loaded measures Regulatory fully loaded measures Our regulatory assets, exposures, risk-weighted assets, capital and ratios thereof are calculated for regulatory purposes and are set forth throughout this document under the CRR/CRD as currently applicable. We present in this report certain figures based on the CRR definition of own fund instruments applicable for Additional Tier 1 (AT1) capital and Tier 2 (T2) capital and figures based thereon, including Tier 1, Total Capital and Leverage Ratio) on a “fully loaded” basis. We calculate such “fully loaded” figures excluding the transitional arrangements for own fund instruments as provided in the currently applicable CRR/CRD. For CET 1 instruments we do not make use of transitional provisions. Transitional arrangements are applicable for AT1 and T2 instruments. Capital instruments issued on or prior to December 31, 2011, that no longer qualify as AT1 or T2 capital under the fully loaded CRR/CRD as currently applicable are subject to grandfathering rules during the transitional period and are being phased out from 2013 to 2022 with their recognition capped at 30 % in 2019, 20 % in 2020 and 10 % in 2021 (in relation to the portfolio eligible for grandfathering which was still in issue on December 31, 2012). The current CRR as applicable since June 27, 2019 provides further grandfathering rules for AT1 and T2 instruments issued prior to June 27, 2019. Thereunder, AT1 and T2 instruments issued through special purpose enti- ties are grandfathered until December 31, 2021, and AT1 and T2 instruments that do not meet certain new requirements that apply since June 27, 2019 continue to qualify until June 26, 2025. Instruments issued under UK law which do not fulfill all CRR requirements after the UK has left the European Union are also excluded from our fully loaded definition. Our CET 1 and RWA figures show no difference between CRR/CRD as currently applicable and fully loaded CRR/CRD based on our definition of “fully loaded”. For the comparative numbers as per year-end 2019 we still applied our earlier concept of fully loaded, defined as excluding the transitional arrangements for own funds instruments introduced by the CRR/CRD applicable until June 26, 2019, but re- flecting the transitional arrangements introduced by the amendments to the CRR/CRD applicable from June 27, 2019 and further amendments thereafter. We believe that these “fully loaded” calculations provide useful information to investors as they reflect our progress against the regulatory capital standards and as many of our competitors have been describing calculations on a “fully loaded” basis. As our competitors’ assumptions and estimates regarding “fully loaded” calculations may vary, however, our “fully loaded” measures may not be comparable with similarly labelled measures used by our competitors. 434 Deutsche Bank Annual Report 2020 Declaration of backing Regulatory fully loaded measures Declaration of backing Deutsche Bank AG ensures, except in the case of political risk, that the following subsidiaries are able to meet their contractual liabilities: D B Investments (GB) Limited, London Deutsche Bank Trust Company Americas, New York DB International (Asia) Limited, Singapore Deutsche Holdings (Malta) S.à r.l., Luxembourg, Deutsche Australia Limited, Sydney Deutsche Immobilien Leasing GmbH, Düsseldorf DEUTSCHE BANK A.Ş., Istanbul Deutsche Bank Americas Holding Corp., Wilming- ton Deutsche Bank (China) Co., Ltd., Beijing Deutsche Bank Europe GmbH, Frankfurt am Main Deutsche Bank Luxembourg S.A., Luxembourg Deutsche Bank (Malaysia) Berhad, Kuala Lumpur Deutsche Bank Polska Spółka Akcyjna, Warsaw Deutsche Bank S.A. – Banco Alemão, São Paulo Deutsche Bank, Sociedad Anónima Española, Mad- rid Deutsche Bank Società per Azioni, Milan Deutsche Morgan Grenfell Group Public Limited Company, London Deutsche Securities Inc., Tokyo Deutsche Securities Asia Limited, Hong Kong Deutsche Securities Saudi Arabia (a closed joint stock company), Riyadh norisbank GmbH, Bonn Joint Stock Company Deutsche Bank DBU, Kiev OOO “Deutsche Bank”, Moscow Deutsche Oppenheim Family Office AG, Cologne BHW Bausparkasse Aktiengesellschaft, Hameln Deutsche Bank (Suisse) SA, Geneva PB Factoring GmbH, Bonn 435 Deutsche Bank Annual Report 2020 Group five-year record Regulatory fully loaded measures Group five-year record in € m. Net interest income Provision for credit losses Net interest income after provision for credit losses Commissions and fee income Net gains (losses) on financial assets/liabilities at fair value through profit or loss Other noninterest income (loss) Total net revenues Compensation and benefits General and administrative expenses Policyholder benefits and claims Impairment of goodwill and other intangible assets Restructuring activities Total noninterest expenses Income (loss) before income taxes Income tax expense Net income (loss) Net income attributable to noncontrolling interests Net income (loss) attributable to Deutsche Bank shareholders and additional equity components 2020 11,526 1,792 9,734 9,424 2,465 614 24,028 10,471 10,259 0 0 485 21,216 1,021 397 624 129 2019 13,749 723 13,026 9,520 193 (298) 23,165 11,142 12,253 0 1,037 644 25,076 (2,634) 2,630 (5,265) 125 2018 13,316 525 12,791 10,039 1,209 753 25,316 11,814 11,286 0 0 360 23,461 1,330 989 341 75 2017 12,378 525 11,853 11,002 2,926 142 26,447 12,253 11,973 0 21 447 24,695 1,228 1,963 (735) 15 2016 14,707 1,383 13,324 11,744 1,401 2,161 30,014 11,874 15,454 374 1,256 484 29,442 (810) 546 (1,356) 45 495 (5,390) 267 (751) (1,402) in € (unless stated otherwise) Basic earnings per share1,2 Diluted earnings per share1,3 Dividends paid per share4 Dividends paid per share in U.S.$5 1 The number of average basic shares outstanding has been adjusted for all periods before April 2017 in order to reflect the effect of the bonus element of the subscription rights (0.53) (0.53) 0.196 0.21 (2.71) (2.71) 0.11 0.13 (0.01) (0.01) 0.11 0.13 0.07 0.07 0.00 0.00 (1.08) (1.08) 0.00 0.00 issue in connection with the capital increase in April 2017. 2 We calculate basic earnings per share for each period by dividing our net income attributable to Deutsche Bank shareholders by the average number of common shares outstanding. Earnings were adjusted by € 349 million and € 330 million before tax, € 292 million, € 298 million and € 276 million net of tax for the coupons paid on Additional Tier 1 Notes in April 2020, April 2019, April 2018, April 2017 and April 2016, respectively. Since 2019 the tax impact is recognized in net income (loss) directly. 3 We calculate diluted earnings per share for each period by dividing our net income attributable to Deutsche Bank shareholders by the average number of common shares outstanding, both after assumed conversions. Earnings were adjusted by € 349 million and € 330 million before tax, € 292 million, € 298 million and € 276 million net of tax for the coupons paid on Additional Tier 1 Notes in April 2020, April 2019, April 2018, April 2017 and April 2016 , respectively. For 2019, 2017 and 2016, there was no dilutive effect as the Group reported a net loss. There was no dilutive effect for 2018 as the net income was offset by coupons paid on Additional Tier 1 Notes 4 Dividends declared and paid in the year. 5 Dividends declared and paid in U.S.$ were translated from euro into U.S.$ based on the exchange rates as of the respective payment days. 6 The dividend paid in 2017 consisted of € 0.11 for 2016 and of € 0.08 for 2015 that were paid simultaneously in 2017 after the agreement by the annual general meeting in 2017. 2020 2019 2018 2017 Total assets Loans at amortized cost Deposits Long-term debt Common shares1 Total shareholders’ equity Common Equity Tier 1 capital (CRR/CRD 4)2 Common Equity Tier 1 capital (CRR/CRD 4 fully loaded)2 Tier 1 capital (CRR/CRD 4)2 Tier 1 capital (CRR/CRD 4 fully loaded)2 Total regulatory capital (CRR/CRD 4)2 Total regulatory capital (CRR/CRD 4 fully loaded)2 1 Capital increased from authorized capital against cash contributions through a public offering with subscription rights in April 2017. 2 Figures presented based on the transitional rules (“CRR/CRD 4”) and the full application (“CRR/CRD 4 fully loaded”) of the CRR/CRD 4 framework. in € m. 1,297,674 429,841 572,208 136,473 5,291 55,857 44,148 44,148 50,546 48,733 56,503 56,503 in € m. 1,324,961 426,691 567,745 149,163 5,291 54,786 44,700 44,700 51,548 50,448 58,492 57,071 in € m. 1,348,137 400,297 564,405 152,083 5,291 62,495 47,486 47,486 55,091 52,082 61,292 61,292 in € m. 1,474,732 401,699 581,873 159,715 5,291 63,174 50,808 48,300 57,631 52,921 64,016 63,250 2016 in € m. 1,590,546 408,909 550,204 172,316 3,531 59,833 47,782 42,279 55,486 46,829 62,158 59,502 436 Deutsche Bank Annual Report 2020 Imprint / publications Regulatory fully loaded measures Imprint / publications Deutsche Bank Aktiengesellschaft Taunusanlage 12 60262 Frankfurt am Main Germany Telephone: +49 69 910-00 deutsche.bank@db.com Contact for shareholders +49 800 910-8000 db.ir@db.com AGM Hotline +49 6196 8870704 Online All publications relating to our financial reporting are available at: www.db.com/annual-reports Publication Published on March 12, 2021 Cautionary statement regarding for- ward-looking statements This report contains forward-looking statements. Forward-looking statements are statements that are not historical facts; they include statements about our beliefs and expectations and the assumptions underlying them. These statements are based on plans, estimates and projections as they are currently available to the management of Deutsche Bank. Forward-looking statements therefore speak only as of the date they are made, and we undertake no obligation to update publicly any of them in light of new information or future events. By their very nature, forward-looking statements involve risks and uncertainties. A number of important factors could therefore cause actual results to differ materially from those contained in any forward-looking statement. Such factors include the conditions in the financial markets in Germany, in Europe, in the United States and elsewhere from which we derive a substantial portion of our revenues and in which we hold a substantial portion of our assets, the development of asset prices and market volatility, potential defaults of borrowers or trading counterparties, the implementation of our strategic initiatives, the reliability of our risk management policies, procedures and methods, and other risks referenced in our filings with the U.S. Securities and Exchange Commission. Such factors are described in detail in our SEC Form 20-F of March 12, 2021 under the heading “Risk Factors.” Copies of this document are readily available upon request or can be downloaded from www.db.com/ir. 437  Our Purpose  This is why we‘re here. This is what we do. We are here to enable economic growth and societal progress, by creating positive impact for our clients, our people, our investors and our communities. 2021 Financial Calendar 2022 Financial Calendar April 28, 2021 Earnings Report as of March 31, 2021 February 3, 2022 Preliminary results for the 2021 financial year May 27, 2021 Annual General Meeting March 11, 2022 Annual Report 2021 and Form 20-F July 28, 2021 Interim Report as of June 30, 2021 April 27, 2022 Earnings Report as of March 31, 2022 October 27, 2021 Earnings Report as of September 30, 2021 May 19, 2022 Annual General Meeting July 27, 2022 Interim Report as of June 30, 2022 October 26, 2022 Earnings Report as of September 30, 2022 

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