As filed with the Securities and Exchange Commission on March 12, 2021

UNITED STATES

SECURITIES EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

Form 20-F

☐ REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES

EXCHANGE ACT OF 1934

or

☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE

ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2020

or

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

or

☐ SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

Date of event requiring this shell company report……………………………….

Commission file number 1-15242

Deutsche Bank Aktiengesellschaft

(Exact name of Registrant as specified in its charter)

Deutsche Bank Corporation

(Translation of Registrant’s name into English)

Federal Republic of Germany

(Jurisdiction of incorporation or organization)

Taunusanlage 12, 60325 Frankfurt am Main, Germany

(Address of principal executive offices)

Brigitte Bomm, +49-69-910-33996, brigitte.bomm@db.com, Taunusanlage 12, 60325 Frankfurt am Main, Germany

(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)

Securities registered or to be registered pursuant to Section 12(b) of the Act

See following page

Securities registered or to be registered pursuant to Section 12(g) of the Act.

NONE

(Title of Class)

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act.

NONE

(Title of Class)

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report:

Ordinary Shares, no par value 2,065,426,965

(as of December 31, 2020)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

1

☐ Yes ☒ No

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

☐ Yes ☒ No

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

☒ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

☒ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See definition of “large accelerated filer”, “accelerated filer”, and emerging growth company in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☒ Accelerated filer ☐

Non-accelerated filer ☐ Emerging growth company ☐

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards* provided pursuant to Section 13(a) of the Exchange Act. ☐

*The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

U.S. GAAP ☐ International Financial Reporting Standards ☒ Other ☐

as issued by the International Accounting Standards Board

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow

☐ Item 17 ☐ Item 18

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

☐ Yes ☒ No

(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.

☐ Yes ☐ No

Securities registered or to be registered pursuant to Section 12(b) of the Act (as of February 28, 2021)

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Ordinary shares, no par value	DB	New York Stock Exchange
Fixed to Fixed Reset Rate Subordinated Tier 2 Notes Due 2028	DB /28	New York Stock Exchange
4.50 % Fixed Rate Subordinated Tier 2 Notes Due 2025	DB 25	New York Stock Exchange
DB Gold Double Long Exchange Traded Notes due February 15, 2038	DGP	NYSE Arca
DB Gold Double Short Exchange Traded Notes due February 15, 2038	DZZ	NYSE Arca
DB Gold Short Exchange Traded Notes due February 15, 2038	DGZ	NYSE Arca

2

Table of Contents

PART I – 9

Item 1: Identity of Directors, Senior Management and Advisers – 9

Item 2: Offer Statistics and Expected Timetable – 9

Selected Financial Data – 9

Dividends – 12

Capitalization and Indebtedness – 13

Reasons for the Offer and Use of Proceeds – 13

Risk Factors – 14

Item 3: Key Information – 9

Item 4: Information on the Company – 52

History and Development of the Company – 52

Business Overview – 52

The Competitive Environment – 60

Regulation and Supervision – 66

Organizational Structure – 84

Property and Equipment – 84

Information Required by Industry Guide 3 – 84

Item 4A: Unresolved Staff Comments – 85

Overview – 85

Significant Accounting Policies and Critical Accounting Estimates – 85

Recently Adopted Accounting Pronouncements and New Accounting Pronouncements – 86

Operating Results – 86

Results of Operations – 87

Financial Position – 87

Liquidity and Capital Resources – 87

Post-Employment Benefit Plans – 88

Off-Balance Sheet Arrangements – 88

Tabular Disclosure of Contractual Obligations – 88

Research and Development, Patents and Licenses – 88

Item 5: Operating and Financial Review and Prospects – 85

Item 6: Directors, Senior Management and Employees – 88

Directors and Senior Management – 88

Board Practices of the Management Board – 91

Compensation – 92

Employees – 92

Share Ownership – 92

Item 7: Major Shareholders and Related Party Transactions – 93

Major Shareholders – 93

Related Party Transactions – 94

Interests of Experts and Counsel – 94

Item 8: Financial Information – 95

Consolidated Statements and Other Financial Information – 95

Significant Changes – 98

Item 9: The Offer and Listing – 99

Offer and Listing Details and Markets – 99

Plan of Distribution – 99

Selling Shareholders – 99

Dilution – 99

Expenses of the Issue – 99

Share Capital – 100

Memorandum and Articles of Association – 100

Notification Requirements – 103

Material Contracts – 106

Exchange Controls – 107

Taxation – 107

Dividends and Paying Agents – 110

Statement by Experts – 110

Documents on Display – 110

Subsidiary Information – 110

Item 10: Additional Information – 100

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Item 11: Quantitative and Qualitative Disclosures about Credit, Market and Other Risk – 111

Item 12: Description of Securities other than Equity Securities – 111

PART II – 112

Item 13: Defaults, Dividend Arrearages and Delinquencies – 112

Item 14: Material Modifications to the Rights of Security Holders and Use of Proceeds – 112

Disclosure Controls and Procedures – 112

Management’s Annual Report on Internal Control over Financial Reporting – 112

Report of Independent Registered Public Accounting Firm – 113

Change in Internal Control over Financial Reporting – 114

Item 15: Controls and Procedures – 112

Item 16A: Audit Committee Financial Expert – 114

Item 16B: Code of Ethics – 114

Item 16C: Principal accountant fees and services – 114

Item 16D: Exemptions from the Listing Standards for Audit Committees – 114

Item 16E: Purchases of Equity Securities by the Issuer and Affiliated Purchasers – 115

Item 16F: Change in Registrant’s Certifying Accountant – 116

Item 16G: Corporate Governance – 116

Item 16H: Mine Safety Disclosure – 119

Disclosures Under Iran Threat Reduction and Syria Human Rights Act of 2012 – 119

PART III – 121

Item 17: Financial Statements – 121

Item 18: Financial Statements – 121

Item 19: Exhibits – 121

Signatures – 122

Annual Report – 1

Supplemental Financial Information (Unaudited) – S-1

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Deutsche Bank Aktiengesellschaft, which we also call Deutsche Bank AG, is a stock corporation organized under the laws of the Federal Republic of Germany. Unless otherwise specified or required by the context, in this document, references to “we”, “us”, “our”, “the Group”, “Deutsche Bank” and “Deutsche Bank Group” are to Deutsche Bank Aktiengesellschaft and its consolidated subsidiaries.

Due to rounding, numbers presented throughout this document may not add up precisely to the totals we provide and percentages may not precisely reflect the absolute figures.

Our registered address is Taunusanlage 12, 60325 Frankfurt am Main, Germany, and our telephone number is +49-69-910-00.

Inclusion of Our Annual Report

We have included as an integral part of this Annual Report on Form 20-F our Annual Report 2020, to which we refer for the responses to certain items hereof. Certain portions of the Annual Report 2020 have been omitted, as indicated therein. The included Annual Report 2020 contains our Consolidated Financial Statements, which we also incorporate by reference into this report, in response to Items 8.A and 18.

The Annual Report 2020 and Consolidated Financial Statements included herein differ from those we publish for other purposes (the “non-SEC” versions thereof) in that the financial information presented in the Annual Report 2020 and Consolidated Financial Statements included herein has been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”). The financial information presented in the non-SEC Annual Report and Consolidated Financial Statements, by contrast, has been prepared in accordance with IFRS as issued by the IASB and endorsed by the European Union (EU), including, effective as of January 1, 2020, the application of 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 application of the EU carve-out version of IAS 39 had a positive impact of € 18 million on net revenues and profit before tax and of € 12 million on profit after tax. The impact on profit after tax also postivitely impacts the calculation of equity on the balance sheet by € 12 million. Effective as of January 1, 2020, the Group’s regulatory capital and ratios thereof are also reported on the basis of applying the EU carve-out version of IAS 39, in both the non-SEC Annual Report 2020 and Consolidated Financial Statements and the versions thereof included herein. This impacts the calculation of CET 1 capital, Tier 1 capital, Total capital and ratios based thereon, including the Leverage ratio, as the amount of profit after tax impacts the equity balance. As of December 31, 2020, this had a positive impact of less than 1 basis point on the CET 1 capital ratio. For further information, see Note 1, “Significant accounting policies and critical accounting estimates – Basis of accounting – EU carve-out” to the Consolidated Financial Statements.

The Consolidated Financial Statements included herein also differ from those contained in the non-SEC Annual Report 2020 in that (i) Notes 42, 43 and 44 of the non-SEC Consolidated Financial Statements, which address non-U.S. requirements, have been deleted, (ii) Note 45 of the non-SEC Consolidated Financial Statements is set forth as Note 42 of the Consolidated Financial Statements included herein and (iii) Note 43, which addresses U.S. requirements, has been added to the Consolidated Financial Statements included herein.

The Consolidated Financial Statements as of and for the year ended December 31, 2020 included herein have been audited by Ernst & Young GmbH Wirtschaftsprüfungsgesellschaft, as described in their “Report of Independent Registered Public Accounting Firm” included in the Annual Report 2020.

The Consolidated Financial Statements as of and for the years ended December 31, 2019 and 2018 included herein have been audited by KPMG AG Wirtschaftsprüfungsgesellschaft, as described in their “Report of Independent Registered Public Accounting Firm” included in the Annual Report 2020.

Such reports are included only in the version of the Annual Report 2020 included in this Annual Report on Form 20-F.

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Cautionary Statement Regarding Forward-Looking Statements

We make certain forward-looking statements in this document with respect to our financial condition and results of operations. In this document, forward-looking statements include, among others, statements relating to:

• the potential development and impact on us of economic and business conditions and the legal and regulatory environment to which we are subject, including as a result of the COVID-19 pandemic;
• the implementation of our strategic initiatives and other responses thereto;
• the development of aspects of our results of operations;
• our expectations of the impact of risks that affect our business, including the risks of losses on our trading processes and credit exposures; and
• other statements relating to our future business development and economic performance.

In addition, we may from time to time make forward-looking statements in our periodic reports to the United States Securities and Exchange Commission on Form 6-K, annual and interim reports, invitations to Annual General Meetings and other information sent to shareholders, offering circulars and prospectuses, press releases and other written materials. Our Management Board, Supervisory Board, officers and employees may also make oral forward-looking statements to third parties, including financial analysts.

Forward-looking statements are statements that are not historical facts, including statements about our beliefs and expectations. We use words such as “believe”, “anticipate”, “expect”, “intend”, “seek”, “estimate”, “project”, “should”, “potential”, “reasonably possible”, “plan”, “aim” and similar expressions to identify forward-looking statements.

By their very nature, forward-looking statements involve risks and uncertainties, both general and specific. We base these statements on our current plans, estimates, projections and expectations. You should therefore not place too much reliance on them. Our forward-looking statements speak only as of the date we make them, and we undertake no obligation to update any of them in light of new information or future events.

We caution you that a number of important factors could cause our actual results to differ materially from those we describe in any forward-looking statement. These factors include, among others, the following:

• the potential development and impact on us of economic and business conditions, including as a result of the COVID-19 pandemic;
• other changes in general economic and business conditions;
• changes and volatility in currency exchange rates, interest rates and asset prices;
• changes in governmental policy and regulation, including measures taken in response to economic, business, political and social conditions;
• the potential development and impact on us of legal and regulatory proceedings to which we are or may become subject;
• changes in our competitive environment;
• the success of our acquisitions, divestitures, mergers and strategic alliances;
• our success in implementing our strategic initiatives and other responses to economic and business conditions and the legal and regulatory environment and realizing the benefits anticipated therefrom; and
• other factors, including those we refer to in “Item 3: Key Information – Risk Factors” and elsewhere in this document and others to which we do not refer.

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Use of Non-GAAP Financial Measures

This document and other documents we have published or may publish contain non-GAAP financial measures. Non-GAAP financial measures are measures of our 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 our financial statements. Examples of our non-GAAP financial measures, and the most directly comparable IFRS financial measures, are as follows:

Non-GAAP Financial Measure	Most Directly Comparable IFRS Financial Measure
Profit (loss) attributable to Deutsche Bank shareholders, Profit (loss) attributable to Deutsche Bank shareholders after AT1 coupon, Adjusted profit (loss) before tax	Profit (loss) before tax
Revenues excluding specific items	Net revenues
Adjusted costs, Adjusted costs excluding transformation charges, Adjusted costs excluding transformation charges and expenses eligible for reimbursement related to Prime Finance	Noninterest expenses
Tangible shareholders’ equity, Average tangible shareholders’ equity, Tangible book value, Average tangible book value	Total shareholders’ equity (book value)
Post-tax return on average tangible shareholders’ equity, Post-tax return on average shareholders’ equity (based on Net income attributable to Deutsche bank shareholders)	Post-tax return on average shareholders’ equity
Tangible book value per basic share outstanding, Book value per basic share outstanding	Book value per share outstanding
Net assets	Total assets

For descriptions of these non-GAAP financial measures and the adjustments made to the most directly comparable financial measures under IFRS, please refer to “Supplementary Information (Unaudited): Non-GAAP Financial Measures”, which is incorporated by reference herein.

When used with respect to future periods, our non-GAAP financial measures are also forward-looking statements. We cannot predict or quantify the levels of the most directly comparable financial measures under IFRS that would correspond to these measures for future periods. This is because neither the magnitude of such IFRS financial measures, nor the magnitude of the adjustments to be used to calculate the related non-GAAP financial measures from such IFRS financial measures, can be predicted. Such adjustments, if any, will relate to specific, currently unknown, events and in most cases can be positive or negative, so that it is not possible to predict whether, for a future period, the non-GAAP financial measure will be greater than or less than the related IFRS financial measure.

Regulatory fully loaded measures

Our regulatory assets, exposures, risk-weighted assets, capital and ratios thereof are calculated for regulatory purposes and set forth throughout this document under the regulation on prudential requirements for credit institutions and investment firms (“CRR”) and the Capital Requirements Directive (“CRD”), including recent amendments, which implement Basel 3. Unless otherwise noted, our CRR/CRD solvency measures set forth in this document are calculated 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 the Leverage Ratio, on a “fully loaded” basis. We calculate such “fully loaded” figures excluding the transitional (or “phase-in”) 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. Measures calculated pursuant to our fully loaded methodology are non-GAAP financial measures.

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.

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For descriptions of these fully loaded CRR/CRD measures and the differences from the most directly comparable measures under the CRR/CRD transitional rules, please refer to the following sections of the Annual Report 2020, each of which is incorporated by reference herein: (i) “Management Report: Risk Report: Risk and Capital Performance: Capital, Leverage Ratio and MREL”, in particular the subsections thereof entitled “Development of Own Funds”, “Development of Risk-Weighted Assets” and “Leverage Ratio”, and (ii) “Supplementary Information (Unaudited): Non-GAAP Financial Measures: Regulatory fully loaded measures”.

When used with respect to future periods, our fully loaded CRR/CRD measures are also forward-looking statements. We cannot predict or quantify the levels of the most directly comparable transitional CRR/CRD measures that would correspond to these fully loaded CRR/CRD measures for future periods. We manage our business with the aim of achieving targets based on fully loaded CRR/CRD measures. Accordingly, the relation between the fully loaded and transitional measures may be variable and will depend upon, among other things, management action taken in light of future business, economic and other conditions.

Use of Internet Addresses

This document contains inactive textual addresses of Internet websites operated by us and third parties. Reference to such websites is made for informational purposes only, and information found at such websites is not incorporated by reference into this document.

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PART I

Item 1: Identity of Directors, Senior Management and Advisers

Not required because this document is filed as an annual report.

Item 2: Offer Statistics and Expected Timetable

Not required because this document is filed as an annual report.

Item 3: Key Information

Selected Financial Data

We have derived the data we present in the tables below from our audited consolidated financial statements for the years presented. You should read all of the data in the tables below together with the consolidated financial statements and notes included in “Item 18: Financial Statements” and the information we provide in “Item 5: Operating and Financial Review and Prospects.” Except where we have indicated otherwise, we have prepared the consolidated financial information for 2019, 2018, 2017 and 2016 in this document in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) and as endorsed by the European Union (“EU”). For 2020, consolidated financial information was prepared in accordance with IFRS as issued by the IASB only. Our corporate division and segment data comes from our management reporting systems and is not in all cases prepared in accordance with IFRS. For a discussion of the major differences between our management reporting systems and our consolidated financial statements under IFRS, see Note 4 “Business Segments and Related Information” to the consolidated financial statements.

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Income Statement Data

in € m.	2020	2019	2018	2017	2016
Net interest income	11,548	13,749	13,316	12,378	14,707
Provision for credit losses	1,792	723	525	525	1,383
Net interest income after provision for credit losses	9,756	13,026	12,791	11,853	13,324
Commissions and fee income	9,424	9,520	10,039	11,002	11,744
Net gains (losses) on financial assets/liabilities at fair value through profit or loss	2,332	193	1,209	2,926	1,401
Other noninterest income (loss)	707	(298)	753	142	2,161
Total net revenues	24,011	23,165	25,316	26,447	30,014
Compensation and benefits	10,471	11,142	11,814	12,253	11,874
General and administrative expenses	10,259	12,253	11,286	11,973	15,454
Policyholder benefits and claims	0	0	0	0	374
Impairment of goodwill and other intangible assets	0	1,037	0	21	1,256
Restructuring activities	485	644	360	447	484
Total noninterest expenses	21,216	25,076	23,461	24,695	29,442
Income (loss) before income taxes	1,003	(2,634)	1,330	1,228	(810)
Income tax expense	391	2,630	989	1,963	546
Net income (loss)	612	(5,265)	341	(735)	(1,356)
Net income attributable to noncontrolling interests	129	125	75	15	45
Net income (loss) attributable to Deutsche Bank shareholders and additional equity components	483	(5,390)	267	(751)	(1,402)
in € (unless stated otherwise)
Basic earnings per share1,2	0.06	(2.71)	(0.01)	(0.53)	(1.08)
Diluted earnings per share1,3	0.06	(2.71)	(0.01)	(0.53)	(1.08)
Dividends paid per share4	0.00	0.11	0.11	0.196	0.00
Dividends paid per share in U.S.$5	0.00	0.13	0.13	0.21	0.00

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 issue in connection with the capital increase in April 2017.

2We 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.

3We 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.

4Dividends declared and paid in the year.

5Dividends declared and paid in U.S.$ were translated from euro into U.S.$ based on the exchange rates as of the respective payment days.

6The 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.

Balance Sheet Data

	2020	2019	2018	2017	2016
	in € m.	in € m.	in € m.	in € m.	in € m.
Total assets	1,324,961	1,297,674	1,348,137	1,474,732	1,590,546
Loans at amortized cost	426,691	429,841	400,297	401,699	408,909
Deposits	567,745	572,208	564,405	581,873	550,204
Long-term debt	149,163	136,473	152,083	159,715	172,316
Common shares1	5,291	5,291	5,291	5,291	3,531
Total shareholders’ equity	54,774	55,857	62,495	63,174	59,833
Common Equity Tier 1 capital (CRR/CRD 4)2	44,700	44,148	47,486	50,808	47,782
Common Equity Tier 1 capital (CRR/CRD 4 fully loaded)2	44,700	44,148	47,486	48,300	42,279
Tier 1 capital (CRR/CRD 4)2	51,548	50,546	55,091	57,631	55,486
Tier 1 capital (CRR/CRD 4 fully loaded)2	50,448	48,733	52,082	52,921	46,829
Total regulatory capital (CRR/CRD 4)2	58,492	56,503	61,292	64,016	62,158
Total regulatory capital (CRR/CRD 4 fully loaded)2	57,071	56,503	61,292	63,250	59,502

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.

10

Certain Key Ratios and Figures

	2020	2019	2018	2017	2016
Share price at period-end1	€ 8.95	€ 6.92	€ 6.97	€ 15.88	€ 15.40
Share price high1	€ 10.37	€ 8.32	€ 16.46	€ 17.82	€ 19.72
Share price low1	€ 4.49	€ 5.78	€ 6.68	€ 13.11	€ 8.83
Book value per basic share outstanding2,4	€ 26.03	€ 26.37	€ 29.69	€ 30.16	€ 38.14
Tangible book value per basic share outstanding3,4	€ 23.18	€ 23.41	€ 25.71	€ 25.94	€ 32.42
Post-tax return on average shareholders’ equity5	0.2 %	(9.5) %	(0.1) %	(1.2) %	(2.3) %
Post-tax return on average tangible shareholders’ equity6	0.2 %	(10.9) %	(0.1) %	(1.4) %	(2.7) %
Cost/income ratio7	88.4 %	108.2 %	92.7 %	93.4 %	98.1 %
Compensation ratio8	43.6 %	48.1 %	46.7 %	46.3 %	39.6 %
Noncompensation ratio9	44.7 %	60.1 %	46.0 %	47.0 %	58.5 %
Common Equity Tier 1 capital ratio (CRR/CRD 4)10	13.6 %	13.6 %	13.6 %	14.8 %	13.4 %
Common Equity Tier 1 capital ratio (CRR/CRD 4 fully loaded)10	13.6 %	13.6 %	13.6 %	14.0 %	11.8 %
Tier 1 capital ratio (CRR/CRD 4)10	15.7 %	15.6 %	15.7 %	16.8 %	15.6 %
Tier 1 capital ratio (CRR/CRD 4 fully loaded)10	15.3 %	15.0 %	14.9 %	15.4 %	13.1 %
Employees at period-end (full-time equivalent):
In Germany	37,315	40,491	41,669	42,526	44,600
Outside Germany	47,344	47,106	50,068	55,009	55,144
Branches at period-end:
In Germany	1,295	1,325	1,409	1,570	1,776
Outside Germany	596	606	655	855	880

¹ Historical share prices have been adjusted on March 20, 2017 with retroactive effect to reflect the capital increase by multiplying a correcting factor of 0.8925.

² Shareholders’ equity divided by the number of basic shares outstanding (both at period-end). For further information, please refer to “Supplementary Information (Unaudited) Non-GAAP Financial Measures” of the Annual Report 2020.

³ Shareholders’ equity less goodwill and other intangible assets, divided by the number of basic shares outstanding (both at period-end). For further information, please refer to “Supplementary Information (Unaudited) Non-GAAP Financial Measures” of the Annual Report 2020.

⁴ 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 issue in connection with the capital increase in April 2017.

⁵ Net income attributable to our shareholders as a percentage of average shareholders’ equity. For further information, please refer to “Supplementary Information (Unaudited) Non-GAAP Financial Measures” of the Annual Report 2020.

⁶ Net income attributable to our shareholders as a percentage of average tangible shareholders’ equity. For further information, please refer to “Supplementary Information (Unaudited) Non-GAAP Financial Measures” of the Annual Report 2020.

⁷ Total noninterest expenses as a percentage of net interest income before provision for credit losses, plus noninterest income.

⁸ Compensation and benefits as a percentage of total net interest income before provision for credit losses, plus noninterest income.

⁹ Noncompensation noninterest expenses, which is defined as total noninterest expenses less compensation and benefits, as a percentage of total net interest income before provision for credit losses, plus noninterest income.

¹⁰ Figures are based on the transitional rules (“CRR/CRD 4”) and the full application (“CRR/CRD 4 fully loaded”) of the CRR/CRD 4 framework.

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Dividends

The following table shows the dividend per share in euro and in U.S. dollars for the years ended December 31, 2020, 2019, 2018, 2017 and 2016. We declare our dividends at our Annual General Meeting following each year. For 2020, the Management Board will propose in the Annual General Meeting not to pay a dividend. Our dividends are based on the non-consolidated results of Deutsche Bank AG as prepared in accordance with German accounting principles. Because we declare our dividends in euro, the amount an investor actually receives in any other currency depends on the exchange rate between euro and that currency at the time the euros are converted into that currency.

In general, the German withholding tax applicable to dividends is 26.375 % (consisting of a 25 % withholding tax and an effective 1.375 % surcharge). According to an amendment of the German Investment Tax Act, dividends received by a fund within the meaning of the German Investment Tax Act are subject to 15 % German withholding tax equal to the Treaty tax rate. For individual German tax residents the withholding tax paid represents for private dividends, generally, the full and final income tax applicable to the dividends. Dividend recipients who are tax residents of countries that have entered into a convention for avoiding double taxation may be eligible to receive a refund from the German tax authorities for a portion of the amount withheld and in addition may be entitled to receive a tax credit for the German withholding tax not refunded in accordance with their local tax law.

Generally, U.S. residents will be entitled to receive a refund equal to 11.375 % of the dividends paid. For US federal income tax purposes, the dividends we pay are not eligible for the dividends received deduction generally allowed for dividends received by US corporations from other US corporations.

Dividends in the table below are presented before German withholding tax.

See “Item 10: Additional Information – Taxation” for more information on the tax treatment of our dividends.

			Payout ratio2,3
	Dividends per share1,4	Dividends per share4	Basic earnings per share	Diluted earnings per share
2020 (proposed)	$ 0.00	€ 0.00	€ 0.00	€ 0.00
2019	$ 0.00	€ 0.00	N/M	N/M
2018	$ 0.13	€ 0.11	N/M	N/M
2017	$ 0.13	€ 0.11	N/M	N/M
2016	$ 0.12	€ 0.11	N/M	N/M

N/M – Not meaningful

¹ For your convenience, we present dividends in U.S. dollars for each year by translating the euro amounts at the period end rate for the last business day of each year.

² We define our payout ratio as the dividends we paid per share in respect of each year as a percentage of our basic and diluted earnings per share for that year.

³ The number of average basic and diluted shares outstanding has been adjusted in order to reflect the effect of the bonus element of the subscription rights issue in connection with the capital increase in April 2017. For 2019, 2017 and 2016 , there was no dilutive effect as the Group reported a net loss attributable to shareholders and no dilutive effect for 2018 as net income was offset by AT1 coupons paid.

⁴ Dividends for 2016 and 2015 were approved by the annual general meeting in 2017 and were paid simultaneously in 2017.

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Capitalization and Indebtedness

Consolidated capitalization in accordance with IFRS as issued by the IASB as of December 31, 2020

	in € m.
Debt:1,2
Long-term debt	149,163
Trust preferred securities	1,321
Long-term debt at fair value through profit or loss	3,374
Total debt	153,858
Shareholders’ equity:
Common shares (no par value)	5,291
Additional paid-in capital	40,606
Retained earnings	10,002
Common shares in treasury, at cost	(7)
Accumulated other comprehensive income, net of tax
Unrealized net gains (losses) on financial assets at fair value through other comprehensive income, net of tax and other	278
Unrealized net gains (losses) on derivatives hedging variability of cash flows, net of tax	7
Unrealized net gains (losses) on assets classified as held for sale, net of tax	0
Unrealized net gains (losses) attributable to change in own credit risk of financial liabilities designated at fair value through profit and loss, net of tax	7
Foreign currency translation, net of tax	(1,411)
Unrealized net gains (losses) from equity method investments	(1)
Total shareholders’ equity	54,774
Equity component of financial instruments	5,824
Noncontrolling interests	1,587
Total equity	62,184
Total capitalization	216,043

¹ € 734 million (0.5 %) of our debt was guaranteed by the German government as of December 31, 2020 related to legacy positions assumed in the context of the Postbank takeover.

² € 62,448 million (41 %) of our debt was secured as of December 31, 2020.

Reasons for the Offer and Use of Proceeds

Not required because this document is filed as an annual report.

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Risk Factors

An investment in our securities involves a number of risks. You should carefully consider the following information about the risks we face, together with other information in this document, when you make investment decisions involving our securities. If one or more of these risks were to materialize, it could have a material adverse effect on our financial condition, results of operations, cash flows or prices of our securities.

Summary of Risk Factors

Risks Relating to the Macroeconomic, Geopolitical and Market Environment . As a global investment bank with a large private client franchise, our businesses are materially affected by global macroeconomic and financial market conditions. Significant risks – in particular arising from the COVID-19 pandemic and its effects on the macroeconomic, market, business and political environment – exist that could negatively affect the results of operations and financial condition in some of our businesses as well as our strategic plans. In the European Union, continued elevated levels of political uncertainty could have unpredictable consequences for the financial system and the greater economy. The withdrawal of the United Kingdom from the European Union (“Brexit”) may have adverse effects on our business, results of operations or strategic plans. Political risks stemming from the deep divide in U.S. society observed around the Presidential elections or from the populist movements in major European Union member states could also have unpredictable consequences for the financial system and the economy. Our ability to protect ourselves against these risks is limited. We are also subject to other global macroeconomic and political risks.

Risks Relating to Our Business and Strategy. Our results of operation and financial condition have in the past been negatively impacted by the market environment, uncertain macroeconomic and geopolitical conditions, lower levels of client activity, increased competition and regulation, and the immediate impact of our strategic decisions. If we are unable to improve our profitability, we may be unable to meet our strategic aspirations, and may have difficulty maintaining capital, liquidity and leverage at levels expected by market participants and our regulators. Adverse market conditions, asset price deteriorations, volatility and cautious investor sentiment have affected and may in the future materially and adversely affect our revenues and profits, particularly in our investment banking, brokerage and other commission- and fee-based businesses. As a result, we have in the past incurred and may in the future incur significant losses from our trading and investment activities.

Our liquidity, business activities and profitability may be adversely affected by an inability to access the debt capital markets or to sell assets during periods of market-wide or firm-specific liquidity constraints. Credit rating downgrades have contributed to increases in our funding costs in the past, and any future downgrade could materially adversely affect our funding costs, the willingness of counterparties to continue to do business with us and significant aspects of our business model.

If we are unable to implement our strategic plans successfully, we may be unable to achieve our financial objectives. We may have difficulties selling companies, businesses or assets at favorable prices or at all and may experience material losses from these assets and other investments irrespective of market developments. We may also have difficulty in identifying and executing business combinations. Intense competition, in our home market of Germany as well as in international markets, has and could continue to have a material adverse impact on our revenues and profitability.

Risks Relating to Regulation and Supervision. Regulatory reforms, together with increased regulatory scrutiny more generally, have had and continue to have a significant impact on us and may adversely affect our business and ability to execute our strategic plans. Competent regulators may prohibit us from making dividend payments or payments on our regulatory capital instruments, suspend certain activities or take other actions if we fail to comply with regulatory requirements. Regulatory and legislative changes require us to maintain increased capital and debt that can be bailed in in a resolution scenario and abide by tightened liquidity requirements. Any perceptions in the market that we may be unable to meet our capital or liquidity requirements could intensify the effect of these factors on our business and results. Other regulatory reforms adopted or proposed in the wake of the financial crisis – for example, extensive new regulations governing our derivatives activities, compensation, bank levies, deposit protection including in the event that a compensation case is ascertained, data protection or a possible financial transaction tax – may materially increase our operating costs and negatively impact our business model.

Risks Relating to Our Internal Control Environment . We have identified the need to strengthen our internal control environment and infrastructure and have embarked on initiatives to do so. The BaFin has ordered us to improve our control and compliance infrastructure relating to our anti-money laundering and know-your-client processes, and appointed a special representative to monitor these measures’ implementation. Should we fail in our efforts, we may be subject to regulatory sanctions.

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Risks Relating to Litigation, Regulatory Enforcement Matters and Investigations. We operate in a highly and increasingly regulated and litigious environment, potentially exposing us to liability and other costs, the amounts of which may be substantial and difficult to estimate, as well as to legal and regulatory sanctions and reputational harm. Among other matters:

• We are the subject of industry-wide investigations by regulatory and law enforcement agencies relating to interbank and dealer offered rates, as well as civil actions.
• We are involved in civil proceedings in connection with our takeover offer for Postbank.
• We have investigated the circumstances around equity trades entered into by certain clients in Moscow and London and have advised regulators and law enforcement authorities in several jurisdictions about those trades.
• We are the subject of industry-wide inquiries and investigations by regulatory and law enforcement authorities relating to transactions of clients in German shares around the dividend record dates for the purpose of obtaining German tax credits or refunds of withholding tax levied on dividend payments (so-called cum-ex transactions), as well as civil actions.
• We have entered into a deferred prosecution agreement (DPA) with the U.S. Department of Justice concerning our historical engagements of finders and consultants and precious metals spoofing. If we violate the DPA, its term could be extended, or we could be subject to criminal prosecution or other actions.
• We are under continuous examination by tax authorities in the jurisdictions in which we operate.
• We are 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.
• U.S. Congressional committees and other U.S. governmental entities have sought and may seek information from us concerning potential dealings between us and the U.S. executive branch, former President Trump, his family and other close associates.
• We have received requests for information from regulatory and law enforcement agencies concerning our correspondent banking relationship with Danske Bank and our anti-financial crime controls, including in the United States.

Should any of the legal proceedings be resolved against us, or any investigations result in a finding that the Bank failed to comply with applicable law, the Bank could be exposed to material damages, fines, limitations on business, remedial undertakings, criminal prosecution or other material adverse effects on our financial condition, as well as risk to our reputation and potential loss of business as a result of extensive media attention. Guilty pleas by or convictions of us or our affiliates in criminal proceedings, or regulatory or enforcement orders, settlements or agreements to which we or our affiliates become subject, may have consequences that have adverse effects on certain of our businesses.

Other Risks . In addition to our traditional banking businesses of deposit-taking and lending, we also engage in nontraditional credit businesses in which credit is extended in transactions that include holding securities of third parties or in complex derivative transactions. These businesses materially increase our exposure to credit risk.

A substantial proportion of our assets and liabilities comprise financial instruments that we carry at fair value, with changes in fair value recognized in our income statement. We have incurred losses, and may incur further losses, from such changes.

Pursuant to accounting rules, we must periodically test the value of the goodwill of our businesses and the value of our other intangible assets for impairment. If such test determines that impairment exists, we must write down the value of such asset. We must also review our deferred tax assets at the end of each reporting period. If 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. Impairments of goodwill and other intangible assets and reductions in deferred tax assets have had and may in the future have material adverse effects on our profitability, equity and financial condition. We are also 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.

Our risk management policies, procedures and methods leave us exposed to unidentified or unanticipated risks, which could lead to material losses.

Operational risks, which may arise from errors in the performance of our processes, the conduct of our employees, instability, malfunction or outage of our IT systems and infrastructure, or loss of business continuity, or comparable issues with respect to our third party service providers, may disrupt our businesses and lead to material losses.

We utilize a variety of third parties in support of our business and operations. 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. If such a third party does not conduct business in accordance with applicable standards or our expectations, we could be exposed to material losses or regulatory action or litigation or fail to achieve the benefits we sought from them.

Our operational systems are subject to an increasing risk of cyber-attacks and other internet crime, which could result in material losses of client or customer information, damage our reputation and lead to regulatory penalties and financial losses.

The size of our clearing operations exposes us to a heightened risk of material losses should they fail to function properly.

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Ongoing global benchmark reform efforts, specifically the transition from interbank offered rates to alternative reference rates that are under development, introduce a number of risks to our business and the financial industry.

We are subject to laws and other requirements relating to financial and trade sanctions and embargoes. If we breach such laws and requirements, we can be subject, and have in the past been subject, to material regulatory enforcement actions and penalties. Transactions with counterparties in countries designated by the U.S. State Department as state sponsors of terrorism or persons targeted by U.S. economic sanctions may lead potential customers and investors to avoid doing business with us or investing in our securities, harm our reputation or result in regulatory or enforcement action.

Risks Relating to the Macroeconomic, Geopolitical and Market Environment

As a global investment bank with a large private client franchise, our businesses are materially affected by global macroeconomic and financial market conditions. Significant risks exist that could negatively affect the results of operations and financial condition in some of our businesses as well as our strategic plans, including risks posed by the COVID-19 pandemic, deterioration of the economic outlook for the euro area and slowing in emerging markets, trade tensions between the United States and China as well between the United States and Europe, inflation risks and other geopolitical risks.

The COVID-19 pandemic led to unprecedented GDP declines in virtually all countries in 2020 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 only be protracted by widespread vaccination delays. By the end of 2020, a resurgence of COVID-19 cases was observed in various regions and many countries have moved to re-impose national lockdowns. Overall, global real GDP decreased by 3.3 % in 2020 in comparison to 3.0 % growth reported in 2019. Global inflation was 2.7 % in 2020. In the industrialized countries, GDP plunged by 5.1 % and consumer prices rose by 0.7 % while GDP of emerging market economies decreased by 2.1 % and inflation reached 3.9 %.

Following a sharp contraction in the first half of 2020, the Eurozone economy recovered strongly, but suffered another albeit much smaller GDP decline in the final quarter. Households and businesses were supported by massively expanded fiscal policy measures and the expansionary monetary policy of the European Central Bank (ECB), which provided favorable financial conditions. At the end of 2020, the ECB increased Pandemic Emergency Purchase Program (PEPP) by another € 500 billion, expanding it to a total of € 1.85 trillion. In addition, PEPP will run nine months longer than planned, until at least the end of March 2022. At the beginning of the fourth quarter of 2020, a second wave of COVID-19 infections gained momentum and required renewed containment measures. A modest trade deal between the EU and the UK was finally agreed in December 2020. In 2020 the Eurozone economy decreased by 6.8 % and consumer prices rose by only 0.2 %. Due to the slump caused by the COVID-19 pandemic, German economic activity fell by 5.0 % in 2020.

The U.S. economy experienced a massive contraction in the second quarter of 2020, followed by a stronger than expected recovery. The unemployment rate climbed to new record highs, but the labor market improved again as the recovery progressed. A strong second wave of COVID-19 in combination with delayed additional fiscal stimulus constrained the recovery. All in all, U.S. GDP contracted by 3.5 % in 2020. Inflation decelerated to 1.2 % from 1.8 % in 2019. The Federal Reserve acted quickly and aggressively to keep funds flowing freely in money and credit markets.

The Japanese economy recovered faster than expected in the third quarter after contracting sharply in the first half of the year. During a second wave of COVID-19 infections in summer 2020, the government did not declare a nationwide state of emergency and instead tried to support economic activity. GDP contracted by 4.9 % in 2020. The Bank of Japan kept an accommodative policy stance, while paying attention to policy side effects. Inflation decelerated to 0 %, after 0.5 % in 2019.

Asian economies experienced a stronger than expected rebound in economic activity from the impact of COVID-19. 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. Emerging Asia economies contracted by only 1.0 % in 2020. Asian central banks have reached the limits of conventional stimulus through interest rate cuts. China continued its V-shaped recovery, making it the only major economy achieving a positive growth rate in 2020, with growth of 3 %. The rebound was driven by a robust industrial sector and a faster-than-expected recovery in services activity. The surge in China contributed strongly to the recovery in global trade. Inflation decelerated to 2.5 % in 2020 from 2.9 % in 2019.

There are a number of global economic and political risks that could jeopardize global, regional and national economies. Challenges in containing the COVID-19 pandemic or a more severe global spread could further dampen economic momentum considerably. Trade conflicts including upcoming trade negotiations between the U.S. and the European Union (EU) could negatively impact the global economic outlook. Following Brexit, trade relations between the United Kingdom (UK) and the EU remain uncertain, particularly in respect of financial services. In the Eurozone, the government debt burden in some countries, especially in Italy, is a risk due to the fragile political situation. We expect fiscal stimulus proposals from the new U.S. administration. Additionally, geopolitical tensions with respect to China and the Middle East could create further uncertainty.

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If these risks materialize, or current negative conditions persist or worsen, our business, results of operations or strategic plans could be adversely affected.

We are subject to global economic, market and business risks with respect to the current COVID-19 pandemic.

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 U.S. and 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, potentially more infectious COVID-19 strains, and resumed lockdown restrictions. 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. Additionally, new lockdown measures with types, durations, and intensities that are not fully predictable could outweigh any potential 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 such as debt moratoria have helped to mitigate some of the short-term impacts. 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 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 raise 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, unfavorable 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.

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If the COVID-19 vaccine roll-out continues, and boosted by massive monetary and fiscal policy support, the expected economic recovery and reflation is possible 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. While 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 potentially overvalued 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.

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 strains 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, and the demand on our technology infrastructure. Additionally, the current situation also exposes us to a greater 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, 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 implementation 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 addition, 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 arrangements. This also limited the opportunity to redeploy talented employees within the bank whose roles were made redundant. Despite the overall lower attrition rate, we may also face difficulties attracting and retaining talented personnel, particularly in front-office positions that are key to revenue generation and in positions key to improving our control environment.

Accordingly, the current COVID-19 pandemic and its impact on the global economy and our business may affect our results of operations, strategic plans and targets, and the prices of our securities.

In the European Union, continued elevated levels of political uncertainty could have unpredictable consequences for the financial system and the greater economy, and could contribute to European de-integration in certain areas, potentially leading to declines in business levels, write-downs of assets and losses across our businesses. Our ability to protect ourselves against these risks is limited.

The last several years have been characterized by increased political uncertainty as Europe in particular has been impacted by the European sovereign debt crisis, the withdrawal of the UK from the European Union, Italian political and economic developments, protests in France, the refugee crisis and the increasing attractiveness to voters of populist and anti-austerity movements. Although the severity of the European debt crisis appeared to have abated somewhat over recent years as the actions by the ECB, the rescue packages and the economic recovery appeared to have stabilized the situation in Europe, political uncertainty has nevertheless continued to be at an elevated level in recent periods and could trigger unwinding of aspects of European integration that have benefitted our businesses. Against this backdrop, the prospects for national structural reform and further integration among EU member states, both viewed as important tools to reduce the Eurozone’s vulnerabilities to future crises, appear to have worsened. These trends may ultimately result in material reductions in our business levels as our customers rein in activity levels in light of decreased economic output and increased uncertainty, which would materially adversely affect our operating results and financial condition. An escalation of political risks could have consequences both for the financial system and the greater economy as a whole, potentially leading to declines in business levels, write-downs of assets and losses across our businesses.

In addition, in a number of EU member states which had national elections in recent years, including France, Germany and the Netherlands, political parties disfavoring current levels of European integration, or espousing the unwinding of European integration to varying extents, have attracted support. Brexit has also given a voice to some of these political parties to challenge European integration. The resulting uncertainty could have significant effects on the value of the euro and on prospects for member states’ financial stability, which in turn could potentially lead to a significant deterioration of the sovereign debt market, especially if Brexit did not result in the strongly adverse effects on the UK that many have predicted. If one or more members of the Eurozone defaults on their debt obligations or decides to leave the common currency, this would result in the reintroduction of one or more national currencies. Should a Eurozone country conclude it must exit the common currency, the resulting need to reintroduce a national currency and restate existing contractual obligations could have unpredictable financial, legal, political and social consequences, leading not only to significant losses on sovereign debt but also on private debt in that country. Given the highly interconnected nature of the financial system within the Eurozone, and the high levels of exposure we have to public and private counterparties around Europe, our ability to plan for such a contingency in a manner that would reduce our exposure to non-material levels is likely to be limited. If the overall economic climate deteriorates as a result of Brexit or further departures from the Eurozone, our businesses could be adversely affected, and, if overall business levels decline or we are forced to write down significant exposures among our various businesses, we could incur substantial losses.

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The withdrawal of the United Kingdom from the European Union – Brexit – may have adverse effects on our business, results of operations or strategic plans.

The UK Government concluded a Trade Cooperation Agreement (TCA) with the European Union which came into effect on January 1, 2021. The TCA generally did not seek to cover financial services.

Given the ongoing uncertainty over the UK’s withdrawal from the European Union, it is difficult to determine the exact impact on Deutsche Bank AG over the long term. However, the UK’s economy and those of the Eurozone countries are very tightly linked as a result of EU integration projects other than the Euro, and the scale of our businesses in the UK – especially those dependent on activity levels in the City of London, to which we are heavily exposed and which may deteriorate as a result of Brexit – means that even modest effects in percentage terms can have a very substantial adverse effect on our businesses. Brexit has, unfortunately, resulted in a disruption of the provision of cross-border financial services. Also, if there is to be further delay or possibly a failure to reach agreement on matters determining mutual ‘equivalence’ under respective legislation, this will lead to greater costs to reorganize parts of our business and will restrict our ability to provide financial services to and from the UK in the seamless manner that was done previously. The currently unsettled future relationship between the EU and the UK is also likely to lead to further uncertainty in relation to the regulation of cross-border business activities.

We have applied for authorization from the Prudential Regulation Authority and Financial Conduct 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 financials services we will be restricted in our ability to provide financial services to and from the UK.

Despite our extensive preparations as a result of Brexit, our business and strategic plans could be adversely affected. It is difficult to assess any adverse consequences with any quantitative certainty at this time, particularly since they will depend on future political and market developments.

We may be required to take impairments on our exposures to the sovereign debt of European or other countries if the European sovereign debt crisis reignites. The credit default swaps into which we have entered to manage sovereign credit risk may not be available to offset these losses.

The effects of the sovereign debt crisis have been especially evident in the financial sector, as a large portion of the sovereign debt of Eurozone countries is held by European financial institutions, including Deutsche Bank. As of December 31, 2020, we had a direct sovereign credit risk exposure of € 5.7 billion to Italy, € 4.4 billion to Spain, € 1.1 billion to Greece, € 212 million to Portugal and € 197 million to Ireland. Despite the apparent abatement of the crisis in recent years, it remains uncertain whether, in light of the current political environment, Greece or other Eurozone sovereigns, such as Spain, Italy, Portugal and Cyprus, will be able to manage their debt levels in the future and whether Greece will attempt to renegotiate its past international debt restructuring. The rise of anti-austerity parties and populist sentiment in many of these countries poses a threat to the medium- to long-term measures recommended for these countries to alleviate the tensions in the Eurozone caused by drastically differing economic situations among the Eurozone states. In the future, negotiations or exchanges similar to the Greek debt restructuring in 2012 could take place with respect to the sovereign debt of these or other affected countries. The outcome of any negotiations regarding changed terms (including reduced principal amounts or extended maturities) of sovereign debt may result in additional impairments of assets on our balance sheet. Any negotiations are highly likely to be subject to political and economic pressures that we cannot control, and we are unable to predict their effects on the financial markets, on the greater economy or on ourselves.

In addition, any restructuring of outstanding sovereign debt may result in potential losses for us and other market participants that are not covered by payouts on hedging instruments that we have entered into to protect against the risk of default. These instruments largely consist of credit default swaps, generally referred to as CDSs, pursuant to which one party agrees to make a payment to another party if a credit event (such as a default) occurs on the identified underlying debt obligation. A sovereign restructuring that avoids a credit event through voluntary write-downs of value may not trigger the provisions in CDSs we have entered into, meaning that our exposures in the event of a write-down could exceed the exposures we previously viewed as our net exposure after hedging. Additionally, even if the CDS provisions are triggered, the amounts ultimately paid under the CDSs may not correspond to the full amount of any loss we incur. We also face the risk that our hedging counterparties have not effectively hedged their own exposures and may be unable to provide the necessary liquidity if payments under the instruments they have written are triggered. This may result in systemic risk for the European banking sector as a whole and may negatively affect our business and financial position.

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We are also subject to other global macroeconomic and political risks, including with respect to China and the Middle East.

The passing of a national security law for Hong Kong by China has exacerbated tensions between the U.S. and China. The U.S. views this move by China as compromising Hong Kong’s autonomy and has therefore revoked Hong Kong’s special trade status and sanctioned Chinese officials. Tensions between the U.S. and China regarding Taiwan have also increased. While it is too early for us to predict the medium to long term impacts of this on our business or our financial targets, these could be material and adverse.

The escalation of tensions in the Middle East is another important political risk, which came into focus in light of a brief U.S.-Iran military escalation in January 2020 and which has the potential to escalate again over Iran’s nuclear programme following recent steps towards higher uranium enrichment levels. A full scale conflict would lead to a sharp increase in oil prices and affect oil dependent industries (such as Automotives, Chemicals, Aviation). Ensuing turbulence in global financial markets would impact risky assets and countries. Taken together, a full blown conflict would lead to a substantial slowdown in the global economy and diminish our ability to generate revenues and the profitability on specific portfolios as well as result in higher than expected loan losses. Despite the business continuity and crisis management policies currently in place, a regional conflict could pose challenges related to a potential personnel evacuation as well as loss of business continuity, which may disrupt our business and lead to material losses.

Risks Relating to Our Business and Strategy

Our results of operation and financial condition have in the past been negatively impacted by the challenging market environment, uncertain macroeconomic and geopolitical conditions, lower levels of client activity, increased competition and regulation, and the immediate impact of our strategic decisions. If we are unable to improve our profitability, we may be unable to meet our strategic aspirations, and may have difficulty maintaining capital, liquidity and leverage at levels expected by market participants and our regulators.

The Bank experienced an increase in net revenues in 2020 compared to 2019. This revenue increase was caused by significantly higher revenues in the Investment Bank driven by benefits of underlying market activity. Net revenues in our other Core Bank divisions – the Corporate Bank, the Private Bank and Asset Management – each declined slightly, impacted by interest rate headwinds, negative impacts from the COVID-19 pandemic and industry-wide margin compression.

The ability of our Investment Bank to continue its performance of 2020 is dependent on the continuation of high levels of market activity in investment banking as an industry. This will likely be impacted by the development of the COVID-19 pandemic, which continues to pose significant downside risks. The COVID-19 pandemic also has intensified the “lower for longer” interest rate environment, which has impacted the results of several of our divisions. The low rate environment has also supported elevated market valuations across risk assets as investors search for yield. 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. We expect our provision for credit losses to continue to be impacted by the COVID-19 pandemic and its effect on our Expected Credit Loss (ECL) estimate to continue in 2021. Adverse market conditions, unfavorable 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.

Changes in our business mix towards lower-margin, lower-risk products can limit our opportunities to profit from volatility. Regulators have generally encouraged the banking sector to focus more on the facilitation of client flow and less on risk taking. This has been effected in part by increasing capital requirements for higher-risk activities. In addition, some of our regulators have encouraged or welcomed changes to our business perimeter, consistent with their emphasis on lower-risk activities for banks. In recent years, we have reduced our exposure to a number of businesses that focused on riskier but more capital-intensive products (but that in earlier periods also had the potential to be more highly profitable). Further pressure on our revenues and profitability has resulted from long-term structural trends driven by regulation (especially increased regulatory capital, leverage and liquidity requirements and increased compliance costs) and competition that have further compressed our margins in many of our businesses. Should a combination of these factors continue to lead to reduced margins and subdued activity levels in our trading and markets business over the longer term, this could impair out ability to reach our financial targets.

Although we have in current years made considerable progress resolving litigation, enforcement and similar matters broadly within our established reserves, this pattern may not continue. In particular, these costs could substantially exceed the level of provisions that we established for our litigation, enforcement and similar matters, which can contribute to negative market perceptions about our financial health, costing us business. This, combined with the actual costs of litigation, enforcement and other matters, could in turn adversely affect our ability to maintain capital, liquidity and leverage at levels expected by market participants and our regulators.

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Adverse market conditions, asset price deteriorations, volatility and cautious investor sentiment have affected and may in the future materially and adversely affect our revenues and profits, particularly in our investment banking, brokerage and other commission- and fee-based businesses. As a result, we have in the past incurred and may in the future incur significant losses from our trading and investment activities.

As a global investment bank, we have significant exposure to the financial markets and are more at risk from adverse developments in the financial markets than are institutions engaged predominantly in traditional banking activities. Sustained market declines have in the past caused and can in the future cause our revenues to decline, and, if we are unable to reduce our expenses at the same pace, can cause our profitability to erode or cause us to show material losses. Volatility can also adversely affect us, by causing the value of financial assets we hold to decline or the expense of hedging our risks to rise. Reduced customer activity can also lead to lower revenues in our “flow” business.

Specifically, our investment banking revenues, in the form of financial advisory and underwriting fees, directly relate to the number and size of the transactions in which we participate and are susceptible to adverse effects from sustained market downturns. These fees and other income are generally linked to the value of the underlying transactions and therefore can decline with asset values. In addition, periods of market decline and uncertainty tend to dampen client appetite for market and credit risk, a critical driver of transaction volumes and investment banking revenues, especially transactions with higher margins. In recent and other times in the past, decreased client appetite for risk has led to lower levels of activity and lower levels of profitability in our Investment Bank corporate division. Our revenues and profitability could sustain material adverse effects from a significant reduction in the number or size of debt and equity offerings and merger and acquisition transactions.

Market downturns also have led and may in the future lead to declines in the volume of transactions that we execute for our clients and, therefore, to declines in our noninterest income. In addition, because the fees that we charge for managing our clients’ portfolios are in many cases based on the value or performance of those portfolios, a market downturn that reduces the value of our clients’ portfolios or increases the amount of withdrawals reduces the revenues we receive from our asset management and private banking businesses. Even in the absence of a market downturn, below-market or negative performance by our investment funds may result in increased withdrawals and reduced inflows, which would reduce the revenue we receive. While our clients would be responsible for losses we incur in taking positions for their accounts, we may be exposed to additional credit risk as a result of their need to cover the losses where we do not hold adequate collateral or cannot realize it. Our business may also suffer if our clients lose money and we lose the confidence of clients in our products and services.

In addition, the revenues and profits we derive from many of our trading and investment positions and our transactions in connection with them can be directly and negatively impacted by market prices. In each of the product and business lines in which we enter into these trading and investment positions, part of our business entails making assessments about the financial markets and trends in them. When we own assets, market price declines can expose us to losses. Many of the more sophisticated transactions of our Investment Bank corporate division are influenced by price movements and differences among prices. If prices move in a way we have not anticipated, we may experience losses. Also, when markets are volatile, the assessments we have made may prove to lead to lower revenues or profits, or may lead to losses, on the related transactions and positions. In addition, we commit capital and take market risk to facilitate certain capital markets transactions; doing so can result in losses as well as income volatility. Such losses may especially occur on assets we hold for which there are not very liquid markets to begin with. Assets that are not traded on stock exchanges or other public trading markets, such as derivatives contracts between banks, may have values that we calculate using models other than publicly-quoted prices. Monitoring the deterioration of prices of assets like these is difficult and could lead to losses we did not anticipate. We can also be adversely affected if general perceptions of risk cause uncertain investors to remain on the sidelines of the market, curtailing their activity and in turn reducing the levels of activity in those of our businesses dependent on transaction flow.

Additionally, the current market environment is characterized by very low interest rates, particularly in the Eurozone, including negative interest yields on German government bonds. A prolonged period of low interest rates in the Eurozone or elsewhere could materially impact our net interest margin, 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 rates environment can also impact other balance sheet positions which are accounted at fair value. These current conditions, as well as any further easing of monetary conditions, could result in a significant impact on revenues relative to our current expectations. Actions to offset this rate impact, such as pricing changes or the introduction of additional fees, may not be sufficient to offset this impact.

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Our liquidity, business activities and profitability may be adversely affected by an inability to access the debt capital markets or to sell assets during periods of market-wide or firm-specific liquidity constraints. Credit rating downgrades have contributed to an increase in our funding costs in the past, and any future downgrade could materially adversely affect our funding costs, the willingness of counterparties to continue to do business with us and significant aspects of our business model.

We have a continuous demand for liquidity to fund our business activities. Our liquidity may be impaired by an inability to access secured and/or unsecured debt markets, an inability to access funds from our subsidiaries or otherwise allocate liquidity optimally across our businesses, an inability to sell assets or redeem our investments, or unforeseen outflows of cash or collateral. This situation may arise due to circumstances unrelated to our businesses and outside our control, such as disruptions in the financial markets, or circumstances specific to us, such as reluctance of our counterparties or the market to finance our operations due to perceptions about potential outflows resulting from litigation, regulatory and similar matters, actual or perceived weaknesses in our businesses, our business model or our strategy, as well as in our resilience to counter negative economic and market conditions. For example, we have experienced steep declines in the price of our shares and increases in the spread versus government bonds at which our debt trades in the secondary markets. Reflecting these conditions, our internal estimates of our available liquidity over the duration of a stressed scenario have at times been negatively impacted in recent periods. In addition, negative developments concerning other financial institutions perceived to be comparable to us and negative views about the financial services industry in general have also affected us in recent years. These perceptions have affected the prices at which we have accessed the capital markets to obtain the necessary funding to support our business activities; should these perceptions exist, continue or worsen, our ability to obtain this financing on acceptable terms may be adversely affected. Among other things, an inability to refinance assets on our balance sheet or maintain appropriate levels of capital to protect against deteriorations in their value could force us to liquidate assets we hold at depressed prices or on unfavorable terms, and could also force us to curtail business, such as the extension of new credit. This could have an adverse effect on our business, financial condition and results of operations.

In addition, we have benefited in recent years from a number of incremental measures by the ECB and other central banks to provide additional liquidity to financial institutions and the financial markets, particularly in the Eurozone. To the extent these actions are curtailed or halted, our funding costs could increase, or our funding supply could decrease, which could in turn result in a reduction in our business activities. In particular, any decision by the ECB to discontinue or reduce quantitative easing or steps by the Federal Reserve to tighten its monetary policy or actions by central banks more generally to tighten their monetary policy will likely cause long-term interest rates to increase and accordingly impact the costs of our funding.

Rating agencies regularly review our credit ratings, which could be negatively affected by a number of factors that can change over time, including the credit rating agency’s assessment of: our strategy and management’s capability; our financial condition including in respect of profitability, asset quality, capital, funding and liquidity; the level of political support for the industries in which we operate; the implementation of structural reform; the legal and regulatory frameworks applicable to our legal structure; business activities and the rights of our creditors; changes in rating methodologies; changes in the relative size of the loss-absorbing buffers protecting bondholders and depositors; the competitive environment, political and economic conditions in our key markets (including the impact of the COVID-19 pandemic and Brexit); and market uncertainty. In addition, credit ratings agencies are increasingly taking into account environmental, social and governance factors, including climate risk, as part of the credit ratings analysis, as are investors in their investment decisions.

Any reductions in our credit ratings, including, in particular, downgrades below investment grade, or a deterioration in the capital markets’ perception of our financial resilience could significantly affect our access to money markets, reduce the size of our deposit base and trigger additional collateral or other requirements in derivatives contracts and other secured funding arrangements or the need to amend such arrangements, which could adversely affect our cost of funding and our access to capital markets and could limit the range of counterparties willing to enter into transactions with us. This could in turn adversely impact our competitive position and threaten our prospects in the short to medium-term.

Since the start of the global financial crisis, the major credit rating agencies have lowered our credit ratings or placed them on review or negative watch on multiple occasions. These credit rating downgrades have contributed to an increase in our funding costs. Our credit spread levels (meaning the difference between the yields on our securities as compared to benchmark government bonds ) are sensitive to further adverse developments and any future downgrade could bring our credit rating into the non-investment grade category . This could materially and adversely affect our funding costs and significant aspects of our business model. The effect would depend on a number of factors including whether a downgrade affects financial institutions across the industry or on a regional basis, or is intended to reflect circumstances specific to us, such as our potential settlement of regulatory, litigation and similar matters; any actions our senior management may take in advance of or in response to the downgrade; the willingness of counterparties to continue to do business with us; any impact of other market events and the state of the macroeconomic environment more generally.

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Additionally, under many of the contracts governing derivative instruments 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. We take these effects into account in our liquidity stress testing analysis, as further described in “Management Report: Risk Report: Liquidity Risk: Stress Testing and Scenario Analysis” in the Annual Report 2020.

If we are unable to implement our strategic plans successfully, we may be unable to achieve our financial objectives, or we may incur losses, including further impairments and provisions, or low profitability, and our financial condition, results of operations and share price may be materially and adversely affected.

In July 2019, we announced a strategic transformation of the Bank, designed to significantly improve sustainable returns to shareholders by refocusing our Core Bank around market leading businesses, which typically operate in growing 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. We also created the Capital Release Unit (CRU), with the principal objective 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. The next phase of our transformation will focus on seeking to ensure sustainable profitability by growing our businesses, while remaining disciplined on costs, risk and balance sheet management and control.

Our updated key financial targets for 2022 are:

• 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 %

Our strategic goals are subject to various internal and external factors and to market, regulatory, economic and political uncertainties, and to limitations relating to our operating model. These could negatively impact or prevent the implementation of our strategic goals or the realization of their anticipated benefits.

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 associated management of capital and risk. 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 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. Execution risks of our strategy have risen due to the prolonged macro-economic uncertainty from the impact of COVID-19.

Economic uncertainties such as the impact of the COVID-19 pandemic; the recurrence of extreme turbulence in the markets; potential weakness in global, regional and national economic conditions; the continuation of a market environment characterized by low interest rates and low volatility; increased competition for business; and political instability, especially in Europe, may impact our ability to achieve our strategic goals. Regulatory changes could also adversely impact our ability to achieve our strategic aims. In particular, regulators could demand changes to our business model or organization that could reduce our profitability, or we may be forced to make changes that reduce our profitability in an effort to remain compliant with law and regulation.

We are also involved in numerous litigation, arbitration and regulatory proceedings and investigations in Germany and in a number of jurisdictions outside of Germany, especially in the United States. Such matters are subject to many uncertainties. We expect the litigation environment to continue to be challenging. If litigation and regulatory matters occur at the same or higher rate and magnitude than they have in some recent years or if we are subject to sustained market speculation about our potential exposure to such matters, we may not be able to achieve our strategic aspirations.

Our strategic objectives are also subject to the following assumptions and risks:

• The base case scenario for our financial and capital plan includes revenue growth estimates which are dependent on positive macroeconomic developments. Stagnation or a downturn in the macroeconomic environment could significantly impact our ability to generate the revenue growth necessary to achieve these strategic financial and capital targets. This scenario also includes assumptions regarding our ability to reduce costs in future periods.

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• The current COVID-19 pandemic and its potential impact on the global economy may affect our ability to meet our financial targets. We may be materially adversely affected by a protracted downturn in local, regional or global economic conditions. In that situation, 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, and the prices of our securities.
• The ability of all our divisions to perform is dependent on their ability to offset the expected continuation of interest rate headwinds, negative impacts from the COVID-19 pandemic and industry-wide margin compression.
• Results for the Investment Bank in 2020 were supported by high levels of market activity in investment banking as an industry. The ability of the Investment Bank to continue its performance is dependent on the continuation of high levels of market activity.
• Provisions for credit losses increased to 41 basis points as a percentage of average loans for the full year 2020, impacted by the COVID-19 pandemic and its effect on our Expected Credit Loss (ECL) estimate, and we expect these factors to continue in 2021. For 2022, we expect provisions for credit losses of between 25 to 30 basis points as a percentage of average loans, as the economy recovers and provision levels normalize. Should higher levels of provisions for credit losses be required, our results of operations and our ability to meet our strategic financial and capital targets may be adversely affected.
• We expect that we will be able to overcome significant challenges arising from our business model. We continue to rely on our trading and markets businesses as a significant source of profit. Depending on how economic and market conditions evolve, such businesses may be adversely impacted or be unable to achieve the profitability we seek from them.
• Asset and client levels have been impacted by the negative market perceptions of Deutsche Bank from time to time. A continued or renewed negative market focus on Deutsche Bank could result in new client and asset outflows.
• We seek to achieve further savings from central and divisional measures, some of these as response to COVID-19, for example from an examination of our real estate footprint and lower travel costs. Such savings may not be able to be achieved.
• 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 arrangements. This also limited the opportunity to redeploy talented employees within the bank whose roles were made redundant.
• Despite the overall lower attrition rate, we may also face difficulties attracting and retaining talented personnel, particularly in front-office positions that are key to revenue generation and in positions key to improving our control environment. 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. Our traditional competitors such as other universal banks and financial services firms and an emerging group of future competitors in the form of start-ups and technology firms, including those providing “fintech” services, are also potential competitors of ours in attracting and retaining talented personnel.
• We currently operate a highly complex infrastructure, which can compromise the quality of the overall control environment. Establishing a more efficient bank with a strong control environment depends on successfully streamlining and simplifying our IT landscape as well as cultural change.
• A robust and effective internal control environment is necessary to ensure that we conduct our business in compliance with the laws and regulations applicable to us. We may be unable to complete our initiatives to enhance the efficacy of our internal control environment as quickly as we intend or as our regulators demand, and our efforts may be insufficient to prevent all future deficiencies in our control environment or to result in fewer litigations or regulatory and enforcement investigations and proceedings in the future. Furthermore, implementation of enhanced controls may result in higher than expected costs of regulatory compliance that could offset efficiency gains.
• We expect that de-leveraging of CRU will continue, while reducing cost. 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. For the remainder of the CRU assets, we will take opportunities to accelerate the wind down, where it is economically rational. In the event that the CRU is not able to de-leverage or reduced costs as planned, or if issues arise that interfere with our agreement with BNP Paribas, our objectives could be jeopardized.

If we fail to implement our strategic initiatives in whole or in part or should the initiatives that are implemented fail to produce the anticipated benefits, or should the costs we incur to implement our initiatives exceed the amounts anticipated, or should we fail to achieve the publicly communicated targets we have set for implementation of these initiatives, we may fail to achieve our financial objectives, or incur losses or low profitability or erosions of our capital base, and our financial condition, results of operations and share price may be materially and adversely affected.

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We may have difficulties selling companies, businesses or assets at favorable prices or at all and may experience material losses from these assets and other investments irrespective of market developments.

We seek to sell or otherwise reduce our exposure to assets that are not part of our core business or as part of our strategy to simplify and focus our business and to meet or exceed capital and leverage requirements, as well as to help us meet our return on tangible equity target. This may prove difficult in the current and future market environment as many of our competitors are also seeking to dispose of assets to improve their capital and leverage ratios and returns on equity. We have already sold a substantial portion of our non-core assets, and our remaining non-core assets may be particularly difficult for us to sell as quickly as we have expected at prices we deem acceptable. Where we sell companies or businesses, we may remain exposed to certain of their losses or risks under the terms of the sale contracts, and the process of separating and selling such companies or businesses may give rise to operating risks or other losses. Unfavorable business or market conditions may make it difficult for us to sell companies, businesses or assets at favorable prices, or may preclude a sale altogether. If we cannot reduce our assets according to plan, we may not be able to achieve the capital targets set out under our strategy.

We may have difficulty in identifying and executing business combinations, and both engaging in combinations and avoiding them could materially harm our results of operations and our share price.

We consider business combinations from time to time. Were we to announce or complete a significant business combination transaction, our share price or the share price of the combined entity could decline significantly if investors viewed the transaction as too costly, dilutive to existing shareholders or unlikely to improve our competitive position. It is generally not feasible for our reviews of any business with which we might engage in a combination to be complete in all respects. As a result, a combination may not perform as well as expected. In addition, we may fail to integrate our operations successfully with any entity with which we participate in a business combination. Failure to complete announced business combinations or failure to achieve the expected benefits of any such combination could materially and adversely affect our profitability. Such failures could also affect investors’ perception of our business prospects and management, and thus cause our share price to fall. They could also lead to departures of key employees, or lead to increased costs and reduced profitability if we felt compelled to offer them financial incentives to remain.

If we avoid entering into business combination transactions or if announced or expected transactions fail to materialize, market participants may perceive us negatively. We may also be unable to expand our businesses, especially into new business areas, as quickly or successfully as our competitors if we do so through organic growth alone. These perceptions and limitations could cost us business and harm our reputation, which could have material adverse effects on our financial condition, results of operations and liquidity.

Intense competition, in our home market of Germany as well as in international markets, has and could continue to materially adversely impact our revenues and profitability.

Competition is intense in all of our primary business areas, in Germany as well as in international markets. If we are unable to respond to the competitive environment in these markets with attractive product and service offerings that are profitable for us, we may lose market share in important areas of our business or incur losses on some or all of our activities. In addition, downturns in the economies of these markets could add to the competitive pressure, through, for example, increased price pressure and lower business volumes for us.

There has been substantial consolidation and convergence among financial services companies. This trend has significantly increased the capital base and geographic reach of some of our competitors and has hastened the globalization of the securities and other financial services markets. As a result, we must compete with financial institutions that may be larger and better capitalized than we are and that may have a stronger position in local markets.

In addition to our traditional competitors such as other universal banks and financial services firms, an emerging group of future competitors in the form of start-ups and technology firms, including those providing “fintech” services, are showing an increasing interest in banking services and products. These new competitors could increase competition in both core products, e.g., payments, basic accounts and loans and investment advisory, as well as in new products, e.g., peer to peer lending and equity crowd funding. Such firms are also potential competitors of ours in attracting and retaining talented personnel.

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Risks Relating to Regulation and Supervision

Regulatory reforms enacted and proposed in response to weaknesses in the financial sector, together with increased regulatory scrutiny more generally, have had and continue to have a significant impact on us and may adversely affect our business and ability to execute our strategic plans. Competent regulators may prohibit us from making dividend payments or payments on our regulatory capital instruments or take other actions if we fail to comply with regulatory requirements.

In response to the global financial crisis and the European sovereign debt crisis, governments and regulatory authorities have worked to enhance the resilience of the financial services industry against future crises through changes to the regulatory framework. The pace of change of new proposals has slowed as the focus turns more to implementation of the various elements of the regulatory reform agenda outlined by the Basel Committee on Banking Supervision (“Basel Committee”) and other standard-setting bodies. As a result, there continues to be uncertainty for us and the financial industry in general, though the level of uncertainty is reduced from prior periods. The range of new (or revised) laws and regulations or current proposals includes, among other things:

• provisions for more stringent regulatory capital, leverage and liquidity standards,
• restrictions on compensation practices,
• restrictions on proprietary trading and other investment services;
• special bank levies and financial transaction taxes,
• recovery and resolution powers to intervene in a crisis including the “bail-in” of creditors;
• tightened large exposure limits;
• the creation of a single supervisory authority and a single resolution authority within the Eurozone and any other participating member states,
• separation of certain businesses from deposit taking,
• stress testing and capital planning regimes,
• heightened reporting requirements, and
• reforms of derivatives, other financial instruments, investment products and market infrastructures.

As a core element of the reform of the regulatory framework, in December 2010, the Basel Committee published a set of comprehensive changes to minimum capital adequacy and liquidity standards, known as Basel 3, which have been implemented into European and national (in our case, German) law beginning in 2014, with the European legislative package also referred to as “CRR/CRD 4” and the Bank Recovery and Resolution Directive (or “BRRD”).

On June 27, 2019, a comprehensive package of reforms (referred to in the following as the “banking reform package”) to further strengthen the resilience of European Union banks entered into force. The banking reform package includes amendments to the existing regulation on prudential requirements for credit institutions and investment firms, also referred to as the Capital Requirements Regulation (“CRR”), the directive on access to the activity of credit institutions and the prudential supervision of credit institutions and investment firms, also referred to as the Capital Requirements Directive (“CRD”), the European Union’s Regulation establishing Uniform Rules and a Uniform Procedure for the Resolution of Credit Institutions and certain Investment Firms in the Framework of a Single Resolution Mechanism and a Single Resolution Fund (the “SRM Regulation”), and the BRRD. In Germany, the amendments introduced by the banking reform package to the BRRD and the CRD have been implemented into German law by the Risk Reduction Act ( Risikoreduzierungsgesetz ).

The adopted changes incorporate various remaining elements of the regulatory framework agreed within the Basel Committee and the Financial Stability Board (“FSB”) to refine and supplement the global regulatory framework established by the Basel Committee, the so-called Basel Accords (Basel 1, 2 and 3). This includes more risk-sensitive capital requirements, in particular in the area of counterparty credit risk and for exposures to central counterparties, methodologies that reflect more accurately the actual risks to which banks may be exposed, a binding leverage ratio, a binding net stable funding ratio, tighter regulation of large exposures, new reporting requirements for market risk that may be supplemented at a later stage by own funds requirements, and a requirement for global systemically important institutions (“G-SIIs”), such as Deutsche Bank, to hold certain minimum levels of capital and other instruments which are capable of bearing losses in resolution (“Total Loss-Absorbing Capacity” or “TLAC”). Other measures are aimed at improving banks’ lending capacity to support the European Union economy and at further facilitating the role of banks in achieving deeper and more liquid European Union capital markets. While many provisions take effect in 2021, certain parts, including the TLAC requirements, already apply since June 27, 2019.

In response to the COVID-19 pandemic the European Union adopted a new regulation containing tailored adjustments to the CRR including the amendments contained in the banking reform package (the “CRR Quick Fix”). The CRR Quick Fix entered into force on June 27, 2020, and primarily aims to facilitate lending by banks as a response to the pandemic.

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In addition, regulatory scrutiny of compliance with existing laws and regulations has become more intense and supervisory expectations remain significant. The specific effects of a number of new (or revised) laws and regulations remain uncertain because the drafting and implementation of these laws and regulations are still on-going and supervisory expectations continue to develop.

At the international level, in December 2017, the Basel Committee published its final agreement (“December 2017 Agreement”) on further revisions to the Basel 3 framework that aim to increase consistency in risk weighted asset calculations and improve the comparability of banks’ capital ratios. The December 2017 Agreement includes, among other things, changes to the standardized and internal ratings-based approaches for determining credit risk, revisions to the operational risk framework, and an “output floor”, set at 72.5 %. The “output floor” limits the amount of capital benefit a bank can obtain from its use of internal models relative to using the standardized approach. This package of reforms is intended to finalize the Basel 3 framework and would reduce the ability of banks to apply internal models, while making the standardized approaches more risk-sensitive and granular. In addition, the December 2017 Agreement introduces a leverage ratio buffer for global systemically important banks (“G-SIBs”), such as Deutsche Bank, to be met with Tier 1 capital and sets it at 50 % of the applicable risk-based G-SIB buffer requirement, which was included in the adopted banking reform package. Due to COVID-19, the Basel Committee deferred the implementation date for the changes in the December 2017 Agreement to January 1, 2023, with a phase-in period of five years through January 1, 2028 for the output floor.

The EU is planning to implement this reform with a legislative proposal package, expected to be issued in mid-2021 (revision of the Capital Requirements Regulation or CRR III). In addition, on January 14, 2019 the Basel Committee also reached an agreement (“January 2019 Agreement”) on reforms to the market risk framework, known as the Fundamental Review of the Trading Book (“FRTB”). The main features of the final standard include an internal models approach to determine the risk weight of exposures that relies on the use of expected shortfall models. The standard sets out separate capital requirements for risks that are deemed non-modellable and includes a more risk-sensitive standardized approach as a fallback to the internal models approach. CRR II (as part of the banking reform package) has introduced specific reporting requirements for market risk based on the revised framework as the first step in the application of the FRTB by EU institutions, and empowers the Commission to propose further regulations to establish own funds requirements for market risk based on the FRTB.

The banking reform package will likely affect our business by raising our regulatory capital and liquidity requirements and by leading to increased costs. The implementation of the remaining outstanding proposals under Basel 3 as contained in the December 2017 Agreement and in the January 2019 Agreement could also affect our business by imposing higher capital charges when adopted into law.

These requirements may be in addition to regulatory capital buffers that may also be increased or be in addition to those already imposed on us and could themselves materially increase our capital requirements.

Regulatory authorities have substantial discretion in how to regulate banks, and this discretion, and the means available to the regulators, have been steadily increasing during recent years. Regulation may be imposed on an ad hoc basis by governments and regulators in response to ongoing or future crises (such as the COVID-19 pandemic), and may especially affect financial institutions such as Deutsche Bank that are deemed to be systemically important.

In particular, the regulators with jurisdiction over us, including the ECB under the Single Supervisory Mechanism (also referred to as the “SSM”), may, in connection with the supervisory review and evaluation process (“SREP”), SSM-wide reviews of asset quality or internal risk models or otherwise, conduct stress tests. They have discretion to impose capital surcharges on financial institutions for risks, including for litigation, regulatory and similar matters, that are not otherwise recognized in risk weighted assets or other surcharges depending on the individual situation of the bank and take or require other measures, such as restrictions on or changes to our business. In this context, the ECB may impose, and has imposed, on us individual capital requirements resulting from the SREP which are referred to as “Pillar 2” requirements. Institutions must meet their Pillar 2 requirements with at least 75 % of Tier 1 capital and at least 56.25 % of Common Equity Tier 1 capital. Pillar 2 requirements must be fulfilled in addition to the statutory minimum capital and buffer requirements and any non-compliance may have immediate legal consequences such as restrictions on dividend payments.

Also following the SREP, the ECB may communicate to individual banks, and has communicated to us, an expectation to hold a further Pillar 2 Common Equity Tier 1 capital add-on, the so-called Pillar 2 guidance. Although the Pillar 2 guidance is not legally binding and failure to meet the Pillar 2 guidance does not automatically trigger legal action, the ECB has stated that it generally expects banks to meet the Pillar 2 guidance. In light of the COVID-19 pandemic, the ECB allows banks to operate temporarily below the level of capital defined by the Pillar 2 guidance until at least the end of 2022.

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Also, more generally, competent regulators may, if we fail to comply with regulatory requirements, in particular with statutory minimum capital requirements or Pillar 2 requirements, or if there are shortcomings in our governance and risk management processes, prohibit us from making dividend payments to shareholders or distributions to holders of our other regulatory capital instruments. This could occur, for example, if we fail to make sufficient profits due to declining revenues, or as a result of substantial outflows due to litigation, regulatory and similar matters. Generally, a failure to comply with the quantitative and qualitative regulatory requirements could have a material adverse effect on our business, financial condition and results of operations, including our ability to pay out dividends to shareholders or distributions on our other regulatory capital instruments or, in certain circumstances, conduct business which we currently conduct or plan to conduct in the future.

Regulatory and legislative changes require us to maintain increased capital and bail-inable debt (debt that can be bailed in in resolution) and abide by tightened liquidity requirements. These requirements may significantly affect our business model, financial condition and results of operations as well as the competitive environment generally. Any perceptions in the market that we may be unable to meet our capital or liquidity requirements with an adequate buffer, or that we should maintain capital or liquidity in excess of these requirements or another failure to meet these requirements could intensify the effect of these factors on our business and results.

The implementation of the CRR/CRD 4 legislative package resulted, among other things, in increased capital and tightened liquidity requirements, including additional capital buffer requirements which were gradually phased in through January 1, 2019. Further revisions, such as stricter rules on the measurement of risks and the changes introduced by the banking reform package, the December 2017 Agreement and the January 2019 Agreement, increased risk weighted assets and the corresponding capital demand for banks, as well as tightened liquidity requirements (such as the introduction of a binding Net Stable Funding Ratio). In addition, the introduction of a binding leverage ratio (including the deferred leverage ratio buffer) by the banking reform package may affect our business model, financial conditions and results of operations.

Furthermore, under the SRM Regulation, the BRRD and the German Recovery and Resolution Act ( Sanierungs- und Abwicklungsgesetz ), we are required to meet at all times a robust minimum requirement for own funds and eligible liabilities (“MREL”) which is determined on a case-by-case basis by the competent resolution authority. In addition, the banking reform package implemented the FSB’s TLAC standard for G-SIBs (such as us) by introducing a new Pillar 1 MREL requirement for G-SIIs (the European equivalent term for G-SIBs). This new requirement is based on both risk-based and non-risk-based denominators and will be set at the higher of 18 % of total risk exposure and 6.75 % of the leverage ratio exposure measure following a transition period (until December 31, 2021, 16 % of total risk exposure and 6 % of the leverage ratio exposure measure). It can be met with Tier 1 or Tier 2 capital instruments or debt that meets specific eligibility criteria. Deduction rules apply for holdings by G-SIIs of TLAC instruments of other G-SIIs. In addition, the competent authorities have the ability to impose on G-SIIs individual MREL requirements that exceed the statutory minimum requirements.

Both the TLAC (or Pillar 1 MREL) and MREL requirements are specifically designed to require banks to maintain a sufficient amount of instruments which are eligible to absorb losses in resolution with the aim of ensuring that failing banks can be resolved without recourse to taxpayers’ money. To that end, in order to facilitate the meeting of TLAC requirements by German banks, obligations of German banks under certain specifically defined senior unsecured debt instruments issued by them (such as bonds that are not structured debt instruments) rank, since 2017, junior to all other outstanding unsecured unsubordinated obligations of such bank (such as deposits, derivatives, money market instruments and certain structured debt instruments), but continue to rank in priority to contractually subordinated debt instruments (such as Tier 2 instruments).

As part of the harmonization of national rules on the priority of claims of banks’ creditors in the European Union, the BRRD now allows banks to issue “senior non-preferred” debt instruments ranking according to their terms (and not only statutorily) junior to the bank’s other unsubordinated debt instruments (including bonds that are not treated as “senior non-preferred” debt instruments), but in priority to the bank’s contractually subordinated liabilities (such as Tier 2 instruments). Any such “senior non-preferred” debt instruments issued by Deutsche Bank AG under such rules rank on parity with its then outstanding “senior non-preferred” debt instruments under the prior rules. This BRRD amendment was finalized and implemented into German law as of July 21, 2018.

The need to comply with these requirements may affect our business, financial condition and results of operation and in particular may increase our financing costs.

We may not have sufficient capital or other loss-absorbing liabilities to meet these increasing regulatory requirements. This could occur due to regulatory changes and other factors, such as the gradual phase out of our hybrid capital instruments qualifying as Additional Tier 1 (or AT1) capital or our inability to issue new securities which are recognized as regulatory capital or loss-absorbing liabilities under the new standards, due to an increase of risk weighted assets based on more stringent rules for the measurement of risks or as a result of a future decline in the value of the euro as compared to other currencies, due to stricter requirements for the compliance with the non-risk based leverage ratio, due to any substantial losses we may incur, which would reduce our retained earnings, a component of Common Equity Tier 1 capital, or due to a combination of these or other factors.

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If we are unable to maintain sufficient capital to meet the applicable minimum capital ratios, the buffer requirements, any specific Pillar 2 capital requirements, leverage ratio requirements, or TLAC or MREL requirements, we may become subject to enforcement actions and/or restrictions on the pay-out of dividends, share buybacks, payments on our other regulatory capital instruments, and discretionary compensation payments. In addition, any requirement to increase risk-based capital ratios or the leverage ratio could lead us to adopt a strategy focusing on capital preservation and creation over revenue generation and profit growth, including the reduction of higher margin risk weighted assets. If we are unable to increase our capital ratios to the regulatory minimum in such a case or by raising new capital through the capital markets, through the reduction of risk weighted assets or through other means, we may be required to activate our group recovery plan. If these actions or other private or supervisory actions do not restore capital ratios to the required levels, and we are deemed to be failing or likely to fail, competent authorities may apply resolution powers under the Single Resolution Mechanism (“SRM”) and applicable rules and regulations, which could lead to a significant dilution of our shareholders’ or even the total loss of our shareholders’ or creditors’ investment.

The CRR introduced a new liquidity coverage requirement intended to ensure that banks have an adequate stock of unencumbered high quality liquid assets that can be easily and quickly converted into cash to meet their liquidity needs for a 30 calendar day liquidity stress scenario. The required liquidity coverage ratio (“LCR”) is calculated as the ratio of a bank’s liquidity buffer to its net liquidity outflows. Also, banks must regularly report the composition of the liquid assets in their liquidity buffer to their competent authorities.

In addition, the banking reform package introduced a net stable funding ratio (“NSFR”) to reduce medium- to long-term funding risks by requiring banks to fund their activities with sufficiently stable sources of funding over a one-year period. The NSFR, which will apply from June 28, 2021 onwards, is defined as the ratio of a bank’s available stable funding relative to the amount of required stable funding over a one-year period. Banks must maintain an NSFR of at least 100 %.The ECB may impose on individual banks liquidity requirements which are more stringent than the general statutory requirements if the bank’s continuous liquidity would otherwise not be ensured. The NSFR will apply to both the Group as a whole and to individual SSM regulated entities, including the parent entity Deutsche Bank AG. 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. To achieve this for Deutsche Bank AG, the company is actively working on a number of structural initiatives to improve the standalone NSFR position. In the event these initiatives are not successfully completed by June 2021, Deutsche Bank AG may incur additional costs.

If we fail to meet liquidity requirements, we may become subject to enforcement actions. In addition, any requirement to maintain or increase liquidity could lead us to reduce activities that pursue revenue generation and profit growth.

On January 29, 2021, the European Banking Authority and ECB launched the 2021 EU-wide stress test, designed to assess the impact of an adverse macroeconomic scenario on the solvency of EU banks, releasing at the same time the macroeconomic scenarios for the test. 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.

In some cases, we are required to hold and calculate capital and to comply with rules on liquidity and risk management separately for our local operations in different jurisdictions, in particular in the United States.

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We are required to hold and calculate capital and to comply with rules on liquidity and risk management separately for our local operations in different jurisdictions. In the United States, the Federal Reserve Board has adopted rules that impose enhanced prudential standards on our U.S. operations. In February 2014, the Federal Reserve Board adopted rules that set forth how the U.S. operations of certain foreign banking organizations (“FBOs”), such as Deutsche Bank, are required to be structured in the United States, as well as the enhanced prudential standards that apply to our U.S. operations. Under these rules, as of July 1, 2016, a large FBO with U.S.$ 50 billion or more in U.S. non-branch assets, such as Deutsche Bank, was required to establish or designate a separately capitalized top-tier U.S. intermediate holding company (an “IHC”) that would hold substantially all of the FBO’s ownership interests in its U.S. subsidiaries. The Federal Reserve Board may permit an FBO subject to the U.S. IHC requirement to establish or designate multiple U.S. IHCs upon written request. On July 1, 2016, we designated DB USA Corporation as our IHC. In March 2018, we completed the partial initial public offering of our Asset Management division, to form DWS Group GmbH & Co. KGaA (“DWS”), in which we retain approximately 80 % of the shares. In April 2018, DWS USA Corporation was formed as a subsidiary of DWS, and, following receipt of Federal Reserve Board approval, we designated it as our second IHC, through which our U.S. asset management subsidiaries are held. As of the date of designation or formation of each of these IHCs, they each became subject, on a consolidated basis, to the risk-based and leverage capital requirements under the U.S. Basel 3 capital framework, capital planning and stress testing requirements (on a phased-in basis), U.S. liquidity buffer requirements and other enhanced prudential standards comparable to those applicable to top-tier U.S. bank holding companies other than the U.S. G-SIB firms of a similar size as DB USA Corporation. Supplementary leverage ratio (“SLR”) requirements applicable to DB USA Corporation took effect beginning in January 2018 and were applicable to DWS USA Corporation upon its formation. In response to the COVID-19 pandemic, the Federal Reserve Board issued a final rule adopting a temporary change to the calculation of the SLR that permits IHCs to exclude U.S. Treasury securities and deposits at Federal Reserve Banks from the denominator of their SLR. This change, which took effect April 1, 2020, will remain in place until at least March 31, 2021. The Federal Reserve Board has the authority to examine an IHC, such as DB USA Corporation and DWS USA Corporation, and its subsidiaries, as well as U.S. branches and agencies of FBOs, such as our New York branch.

On October 10, 2019, the Federal Reserve Board finalized rules to categorize the U.S. operations of large FBOs based on size, complexity and risk for purposes of tailoring the application of the U.S. enhanced prudential standards (the “Tailoring Rules”). The Tailoring Rules do not significantly change the capital requirements that apply to DB USA Corporation or DWS USA Corporation although they provide the option to comply with certain simplifications to the capital requirements. However, the Tailoring Rules provide modest relief for our U.S. IHCs with respect to applicable liquidity requirements so long as our IHCs’ combined weighted short term wholesale funding remains below U.S.$ 75 billion .

As a bank holding company with assets of U.S.$ 250 billion or more, Deutsche Bank AG is required under Title I of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, as amended (the “Dodd-Frank Act”), and the implementing regulations thereunder 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 a strategy for the orderly resolution of its designated U.S. material 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 subsidiaries, 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 U.S. Resolution Plan by July 1, 2018. The 2018 U.S. Resolution Plan describes the single point of entry strategy for Deutsche Bank’s U.S. material entities and operations and prescribes that DB USA Corporation, our single U.S. IHC as of December 31, 2017, would provide liquidity and capital support to its U.S. material entity subsidiaries and ensure their solvent wind-down outside of applicable resolution proceedings. Deutsche Bank received feedback from the Federal Reserve and FDIC in December 2018. The Federal Reserve Board and FDIC 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. Deutsche Bank submitted a response to its December 2018 feedback letter on April 1, 2019. Deutsche Bank’s response discussed its proposed remediation of the shortcoming as well as enhancements of its resolution capabilities.

Deutsche Bank submitted its 2020 U.S. Resolution Plan on September 29, 2020. The 2020 U.S. Resolution Plan, like the 2018 U.S. Resolution Plan, described a single point of entry strategy for DB USA Corporation. It also explained how Deutsche Bank remediated the shortcoming and provided an update on the enhancement of its resolutions capabilities. On December 9, 2020, the Federal Reserve Board and FDIC confirmed that the shortcoming previously identified in Deutsche Bank AG’s 2018 U.S. Resolution Plan had been remediated. Also on December 9, 2020, the agencies finalized guidance for the resolution plans of certain large foreign banks, including Deutsche Bank AG. In that guidance, the agencies tailored their expectations around resolution capital and liquidity, derivatives and trading activity, as well as payment, clearing, and settlement activities. The agencies also provided information for large banks, including Deutsche Bank AG, which will inform the content of their next U.S. Resolution Plans, which now are due December 17, 2021. In particular, these ‘targeted’ plans (which are subsets of a full resolution plans) will be required to include core elements of a firm's resolution strategy — such as capital, liquidity, and recapitalization strategies — as well as how each firm has integrated changes to and lessons learned from its response to the COVID-19 pandemic into its resolution planning process. If the Federal Reserve Board and the FDIC were to jointly deem Deutsche Bank’s U.S. Resolution Plan not credible and Deutsche Bank failed to remediate any deficiencies in the required timeframe prescribed by the Federal Reserve Board and FDIC, these agencies could impose restrictions on Deutsche Bank or require the restructuring or reorganization of businesses, legal entities, operational systems and/or intra-company transactions which could negatively impact our operations and/or strategy. Additionally, the Federal Reserve Board and FDIC could also subject Deutsche Bank to more stringent capital, leverage or liquidity requirements, or require Deutsche Bank to divest certain assets or operations.

Both DB USA Corporation and DWS USA Corporation were subject to the Federal Reserve Board’s Comprehensive Capital Analysis and Review (“CCAR”) for 2020. On June 25, 2020, the Federal Reserve Board publicly indicated that it did not object to the 2019 capital plans submitted by DB USA Corporation and DWS USA Corporation. In June 2020, the Federal Reserve Board also publicly disclosed aggregated results of a sensitivity analysis aimed at gauging the ongoing economic impact of the COVID-19 outbreak on CCAR firms. Each CCAR firm was required to resubmit its capital plan in November 2020 based on additional economic scenarios provided by the Federal Reserve Board to assess the potential impact of the ongoing COVID-19 outbreak. DB USA Corporation and DWS USA Corporation will make their next capital plan submissions to the Federal Reserve Board in April 2021. If the Federal Reserve Board were to object to these capital plans we could be required to increase capital or restructure businesses in ways that may negatively impact our operations and strategy or could be subject to restrictions on growth in the United States.

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On March 4, 2020, the Federal Reserve Board issued a rule to amend its CCAR process to combine the CCAR quantitative assessment and the buffer requirements in the Federal Reserve Board’s capital rules to create an integrated capital buffer requirement. This final rule has eliminated the quantitative and qualitative ‘pass/fail’ assessments from CCAR and modifies the static capital conservation buffer to incorporate an institution-specific stress capital buffer (SCB), which is floored at 2.5%. The stress capital buffer equals (i) a bank holding company's projected peak-to-trough decline in common equity tier 1 under the annual CCAR supervisory severely adverse stress testing scenario prior to any planned capital actions, plus (ii) one year of planned common stock dividends. The stress capital buffer will be reset each year. On August 10, 2020, the Federal Reserve Board announced an SCB for each CCAR firm based on 2020 supervisory stress testing results conducted as part of CCAR, which for DB USA Corporation was 7.8% and for DWS USA Corporation was 2.5%. The first SCB became effective October 1, 2020 and would generally remain in effect until September 30, 2021, at which point the size of the SCB for each bank will be recalibrated based on the results of the 2021 stress tests. On December 18, 2020, the Federal Reserve Board released certain information related to this second round of bank stress tests, and indicated that it is extending, through March 31, 2021, the time period for notifying CCAR firms whether the Federal Reserve Board will recalculate a firm’s SCB. The Federal Reserve Board also announced it is limiting CCAR firms’ distributions in the first quarter of 2021. Under these restrictions, IHCs, such as DB USA Corporation and DWS USA Corporation, may make certain capital distributions in the first quarter of 2021, provided that the distributions paid in the final three quarters of 2020 and the first quarter of 2021, in the aggregate, do not exceed the amount of net income the IHC has earned in the preceding four calendar quarters.

The U.S. federal bank regulators in 2013 issued final rules implementing elements of the Basel 3 capital adequacy framework that are applicable to U.S. banking organizations.

In September 2014, the Federal Reserve Board and other U.S. regulators approved a final rule implementing liquidity coverage ratio (“LCR”) requirements for large U.S. bank holding companies and certain of their subsidiary depositary institutions that are generally consistent with the Basel Committee’s revised Basel 3 liquidity standards. DB USA Corporation and our principal U.S. bank subsidiary, Deutsche Bank Trust Company Americas (“DBTCA”), became subject to the full LCR requirements on April 1, 2017 and DWS USA Corporation became subject to LCR requirements on a phased-in basis upon its formation in April 2018. The Tailoring Rules reduced the LCR requirements applicable to DB USA Corporation, DWS USA Corporation and DBTCA from 100 to 85 percent beginning on January 1, 2020.

On October 20, 2020, the Federal Reserve Board and other U.S. regulators finalized rules implementing the second element of the Basel 3 liquidity framework, the net stable funding ratio (“NSFR”). Under the Tailoring Rules, DB USA Corporation, DWS USA Corporation and DBTCA would be subject to an 85 percent NSFR so long as our IHCs’ combined weighted short term wholesale funding remains below U.S.$ 75 billion. Firms will be required to calculate the NSFR and meet the minimum required ratios by July 1, 2021 with public reporting beginning in 2023.

On December 15, 2016, the Federal Reserve Board adopted final rules that implement the FSB’s TLAC standard in the United States. The final rules require, among other things, U.S. IHCs of non-U.S. G-SIBs, including our IHCs, DB USA Corporation and DWS USA Corporation, to maintain a minimum amount of TLAC, and separately require them to maintain a minimum amount of long-term debt meeting certain requirements.

U.S. rules and interpretations, including those described above, could cause us to reduce assets held in the United States, inject capital and/or liquidity into or otherwise change the structure of our U.S. operations, and could also restrict the ability of our U.S. subsidiaries to pay dividends to us or the amount of such dividends. To the extent that we are required to reduce operations in the United States or deploy capital or liquidity in the United States that could be deployed more profitably elsewhere, these requirements could have an adverse effect on our business, financial condition and results of operations.

Any increased capital or liquidity requirements, including those described above, could have adverse effects on our business, financial condition and results of operations, as well as on perceptions in the market of our stability, particularly if any such requirement and results in our having to raise capital at a time when we or the financial markets are distressed, or take other measures to increase liquidity in certain jurisdictions due to local requirements. The measures we might be required or find necessary to take in response to these shifting local requirements may be inconsistent with, and hinder the achievement of our strategic goals. In addition, if these regulatory requirements must be implemented more quickly than currently foreseen, we may decide that the quickest and most reliable path to compliance is to reduce the level of assets on our balance sheet, dispose of assets or otherwise segregate certain activities or reduce or close down certain business lines. The effects on our capital raising efforts in such a case could be amplified due to the expectation that our competitors, at least those subject to the same or similar capital requirements, would likely also be required to raise capital at the same time. Moreover, some of our competitors, particularly those outside the European Union, may not face the same or similar regulations, which could put us at a competitive disadvantage.

In addition to these regulatory initiatives, market sentiment may encourage financial institutions such as Deutsche Bank to maintain significantly more capital, liquidity and loss-absorbing capital instruments than the regulatory-mandated minima, which could exacerbate the effects on us described above or, if we do not increase our capital to the encouraged levels, could lead to the perception in the market that we are undercapitalized relative to our peers generally.

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It is unclear whether the U.S. capital and other requirements described above, as well as similar developments in other jurisdictions could lead to a fragmentation of supervision of global banks that could adversely affect our reliance on regulatory waivers allowing us to meet capital adequacy requirements, large exposure limits and certain organizational requirements on a consolidated basis only rather than on both a consolidated and non-consolidated basis. Should we no longer be entitled to rely on these waivers, we would have to adapt and take the steps necessary in order to meet regulatory capital requirements and other requirements on a consolidated as well as a non-consolidated basis, which could result also in significantly higher costs and potential adverse effects on our profitability and dividend paying ability.

Our regulatory capital and liquidity ratios and our funds available for distributions on our shares or regulatory capital instruments will be affected by our business decisions and, in making such decisions, our interests and those of the holders of such instruments may not be aligned, and we may make decisions in accordance with applicable law and the terms of the relevant instruments that result in no or lower payments being made on our shares or regulatory capital instruments.

Our regulatory capital and liquidity ratios are affected by a number of factors, including decisions we make relating to our businesses and operations as well as the management of our capital position, of our risk weighted assets and of our balance sheet in general, and external factors, such as regulations regarding the risk weightings we are permitted to allocate to our assets, commercial and market risks or the costs of our legal or regulatory proceedings. While we and our management are required to take into account a broad range of considerations in our and their managerial decisions, including the interests of the Bank as a regulated institution and those of our shareholders and creditors, particularly in times of weak earnings and increasing capital requirements, the regulatory requirements to build capital and liquidity may become paramount. Accordingly, in making decisions in respect of our capital and liquidity management, we are not required to adhere to the interests of the holders of instruments we have issued that qualify for inclusion in our regulatory capital, such as our shares or Additional Tier 1 capital instruments. We may decide to refrain from taking certain actions, including increasing our capital at a time when it is feasible to do so (through securities issuances or otherwise), even if our failure to take such actions would result in a non-payment or a write-down or other recovery- or resolution-related measure in respect of any of our regulatory capital instruments. Our decisions could cause the holders of such regulatory capital instruments to lose all or part of the value of their investments in these instruments due to their effect on our regulatory capital ratios, and such holders will not have any claim against us relating to such decisions, even if they result in a non-payment or a write-down or other recovery- or resolution-related measure in respect of such instruments they hold.

In addition, our annual profit and distributable reserves form an important part of the funds available for us to pay dividends on our shares and make payments on our other regulatory capital instruments, as determined in the case of each such instrument by its terms or by operation of law, and any adverse change in our financial prospects, financial position or profitability, or our distributable reserves, each as calculated on an unconsolidated basis, may have a material adverse effect on our ability to make dividend or other payments on these instruments. In addition, as part of the implementation of our strategy, we may record impairments that reduce the carrying value of subsidiaries on our unconsolidated balance sheet and reduce profits and distributable reserves. Future impairments or other events that reduce our profit or distributable reserves on an unconsolidated basis could lead us to be unable to make such payments in respect of future years in part or at all. In particular, the direct costs of our potential settlements of litigation, enforcement and similar matters, especially to the extent in excess of provisions we have established for them, and their related business impacts, if they occur, could impact such distributable amounts.

In addition, German law places limits on the extent to which annual profits and otherwise-distributable reserves, as calculated on an unconsolidated basis, may be distributed to our shareholders or the holders of our other regulatory capital instruments, such as our Additional Tier 1 capital instruments. Our management also has, subject to applicable law, broad discretion under the applicable accounting principles to influence all amounts relevant for calculating funds available for distribution. Such decisions may impact our ability to make dividend or other payments under the terms of our regulatory capital instruments.

European and German legislation regarding the recovery and resolution of banks and investment firms could, if steps were taken to ensure our resolvability or resolution measures were imposed on us, significantly affect our business operations, and lead to losses for our shareholders and creditors.

Germany participates in the SRM, which centralizes at a European level the key competences and resources for managing the failure of any bank in member states of the European Union participating in the banking union. The SRM is based on the SRM Regulation and the BRRD, which was implemented in Germany through the German Recovery and Resolution Act. In addition, the German Resolution Mechanism Act ( Abwicklungsmechanismusgesetz ) adapted German bank resolution laws to the SRM.

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The SRM Regulation and the German Recovery and Resolution Act require the preparation of recovery and resolution plans for banks and grant broad powers to public authorities to intervene in a bank which is failing or likely to fail. For a bank directly supervised by the ECB, such as Deutsche Bank, the Single Resolution Board (referred to as the “SRB”) assesses its resolvability and may require legal and operational changes to the bank’s structure to ensure its resolvability. In the event that such bank is deemed by the ECB or the SRB as failing or likely to fail and certain other conditions are met, the SRB is responsible for adopting a resolution scheme for resolving the bank pursuant to the SRM Regulation. The European Commission and, to a lesser extent, the Council of the European Union, have a role in endorsing or objecting to the resolution scheme proposed by the SRB. The resolution scheme would be addressed to and implemented by the competent national resolution authorities (in Germany, the German Federal Financial Supervisory Authority ( Bundesanstalt für Finanzdienstleistungsaufsicht , “BaFin”)) in line with the national laws implementing the BRRD. Resolution measures that could be imposed upon a bank in resolution may include the transfer of shares, assets or liabilities of the bank to another legal entity, the reduction, including to zero, of the nominal value of shares, the dilution of shareholders or the cancellation of shares outright, or the amendment, modification or variation of the terms of the bank’s outstanding debt instruments, for example by way of a deferral of payments or a reduction of the applicable interest rate. Furthermore, certain eligible unsecured liabilities, in particular certain senior “non-preferred” debt instruments specified by the German Banking Act, may be written down, including to zero, or converted into equity (commonly referred to as “bail-in”) if the bank becomes subject to resolution.

The SRM is intended to eliminate, or reduce, the need for public support of troubled banks. Therefore, financial public support for such banks, if any, would be used only as a last resort after having assessed and exploited, to the maximum extent practicable, the resolution powers, including a bail-in. The taking of actions to ensure our resolvability or the exercise of resolution powers by the competent resolution authority could materially affect our business operations and lead to a significant dilution of our shareholders or even the total loss of our shareholders’ or creditors’ investment.

Other regulatory reforms adopted or proposed in the wake of the financial crisis – for example, extensive new regulations governing our derivatives activities, compensation, bank levies, deposit protection, data protection or a possible financial transaction tax – may materially increase our operating costs and negatively impact our business model.

Beyond capital requirements and the other requirements discussed above, we are affected, or expect to be affected, by various additional regulatory reforms, including, among other things, regulations governing our derivatives activities, compensation, bank levies, deposit protection including in the event that a compensation case is ascertained, data protection or a possible financial transaction tax.

On August 16, 2012, the EU Regulation on over-the-counter (“OTC”) derivatives, central counterparties and trade repositories, referred to as European Market Infrastructure Regulation (“EMIR”), entered into force. EMIR introduced a number of requirements, including clearing obligations for certain classes of OTC derivatives and various reporting and disclosure obligations. EMIR implementation has led and may lead to changes that may negatively impact our profit margins. The revised Markets in Financial Instruments Directive (“MiFID 2”) and the corresponding Regulation (“MiFIR”) became applicable to us on January 3, 2018 and provide for, among other things, a trading obligation for those OTC derivatives which are subject to mandatory clearing and which are sufficiently standardized.

In the United States, the Dodd-Frank Act has numerous provisions that affect or may affect our operations. Pursuant to regulations implementing provisions of the Dodd-Frank Act, we provisionally registered as a swap dealer with the U.S. Commodity Futures Trading Commission (“CFTC”) and became subject to the CFTC’s extensive oversight. Regulation of swap dealers by the CFTC imposes numerous corporate governance, business conduct, capital, margin, reporting, clearing, execution and other regulatory requirements on us. It also requires us to comply with certain U.S. rules in some circumstances with respect to transactions conducted outside of the United States or with non-U.S. persons. Although the coverage of EMIR and CFTC regulations implementing the Dodd-Frank Act is in many ways similar, certain swaps may be subject to both regulatory regimes to a significant extent. However, pursuant to the CFTC’s guidance on cross-border swaps regulation, there may be instances where we can comply with the requirements of EMIR and MiFID in lieu of complying with the CFTC’s requirements. The requirements under the Dodd-Frank Act may adversely affect our derivatives business and make us less competitive, especially as compared to competitors not subject to such regulation.

Additionally, under the Dodd-Frank Act, security-based swaps are subject to a standalone regulatory regime under the jurisdiction of the U.S. Securities and Exchange Commission (“SEC”). The SEC has recently adopted supplemental guidance and rule amendments addressing the cross-border application of certain rules regulating security-based swaps. This rulemaking will establish a firm timeline for security-based swap dealer registration. The compliance date for Deutsche Bank to register with the SEC is no earlier than October 6, 2021. This will impose further regulation of our derivatives business.

In addition, the CRR/CRD 4 legislative package provided for executive compensation reforms including caps on bonuses that may be awarded to “material risk takers” and other employees as defined therein and in the German Banking Act and other applicable rules and regulations such as the Remuneration Regulation for Institutions ( Institutsvergütungsverordnung ). Such restrictions on compensation, including the amendments introduced by the banking reform package and any guidelines issued by the European Banking Authority to further implement them, could put us at a disadvantage to our competitors in attracting and retaining talented employees, especially compared to those outside the European Union that are not subject to these caps and other constraints.

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Following the financial crisis, bank levies have been introduced in some countries including, among others, Germany and the United Kingdom. We paid € 633 million for bank levies in 2020, € 622 million in 2019 and € 690 million in 2018. Also, we are required to contribute substantially to the Single Resolution Fund under the SRM (which is intended to reach a target level of 1 % of insured deposits of all banks in member states participating in the SRM by the end of 2023) and the statutory deposit guarantee and investor compensation schemes under the recast European Union directive on deposit guarantee schemes (“DGS Directive”) and the European Union directive on investor compensation schemes. The DGS Directive defines a 0.8 % target level of prefunding by July 3, 2024 (similar to resolution funds), which has significantly increased the costs of the statutory deposit protection scheme. In addition, in this context, on November 24, 2015, the European Commission proposed a regulation to establish a European Deposit Insurance Scheme, or “EDIS”, for bank deposits of all credit institutions that are members of any of the current national statutory deposit guarantee schemes of member states participating in the banking union. While the total impact of these future levies cannot currently be quantified, they may have a material adverse effect on our business, financial condition and results of operations in future periods. Failures of banks, resolution measures and a decline of the value of the assets held by the SRM by the relevant DGS can cause an increase of contributions in order to replenish the shortfall.

We are subject to the General Data Protection Regulation (“GDPR”) which has increased our regulatory obligations in connection with the processing of personal data, including requiring compliance with the GDPR’s data protection principles, the increased number of data subject rights and strict data breach notification requirements. The GDPR grants broad enforcement powers to supervisory authorities, including the potential to levy significant fines for non-compliance and provides for a private right of action for individuals who are affected by a violation of the GDPR. Compliance with the GDPR requires investment in appropriate technical and organizational measures and we may be required to devote significant resources to data protection on an ongoing basis. In the event that we are found to have not met the standards required by the GDPR we may incur damage to our reputation, the imposition by data protection supervisory authorities of significant fines or restrictions on our ability to process personal data, and we may be required to defend claims for compensation brought by affected individuals, all of which could have a material adverse effect on us.

Since the Council of the European Union adopted a decision in January 2013 authorizing EU member states to proceed with the introduction of a financial transaction tax under the European Union’s “enhanced cooperation procedure”, the EU member states Austria, Belgium, France, Germany, Greece, Italy, Portugal, Slovakia, Slovenia and Spain have been discussing the introduction of a European financial transaction tax. To date, Italy, France and Spain have introduced a national tax on listed share transactions. It is currently expected that the EU commission will issue a new legislative draft by summer 2024 with the tax being effective as of 2026 if approved by member states. If such a financial transaction tax is ultimately adopted, depending on its final details, it could result in compliance costs.

On November 27, 2019, the European Parliament and the Council adopted the Investment Firm Regulation and the Investment Firm Directive, which will introduce substantive regulatory changes (including to the calculation of capital requirements) in respect of investment firms, such as our subsidiary DWS. The Investment Firm Regulation and the Investment Firm Directive (as implemented into German law) will apply in large part from June 26, 2021.

Risks Relating to Our Internal Control Environment

A robust and effective internal control environment and adequate infrastructure (comprising people, policies and procedures, processes, controls assurance and IT systems) are necessary to ensure that we conduct our business in compliance with the laws, regulations and associated supervisory expectations applicable to us. We have identified the need to strengthen our internal control environment and infrastructure and have embarked on initiatives to accomplish this. If these initiatives are not successful or proceed too slowly, our reputation, regulatory position and financial condition may be materially adversely affected, and our ability to achieve our strategic ambitions may be impaired.

Our businesses are highly dependent on our ability to maintain a robust and effective internal control environment. This is needed for the Bank to process and monitor, on a daily basis, a wide variety of transactions, many of which are highly complex and occur at high speeds, volumes and frequencies, and across numerous and diverse markets and currencies. Such a robust and effective control environment is in turn dependent on the sufficiency of our infrastructure to support that environment. This infrastructure consists broadly of internal policies and procedures, processes, controls assurance, and the IT systems and employees needed to enforce and enable them. An effective control environment is dependent on infrastructure systems and procedures that cover the processing and settling of transactions; the valuation of assets; the identification, monitoring, aggregation, measurement and reporting of risks and positions against various metrics; the evaluation of counterparties and customers for legal, regulatory and compliance purposes; the escalation of reviews; and the taking of mitigating and remedial actions where necessary. They are also critical for regulatory reporting, data processing and compliance activities.

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Both our internal control environment and the infrastructure that underlies it fall short in a number of areas of our standards for completeness and comprehensiveness and are not well integrated across the Bank. Our IT infrastructure, in particular, is fragmented, with numerous distinct platforms, many of which need significant upgrades, in operation across the Bank. Our business processes and the related control systems often require manual procedures and actions that increase the risks of human error and other operational problems that can lead to delays in reporting information to management and to the need for more adjustments and revisions than would be the case with more seamlessly integrated and automated systems and processes. As a result, it is often difficult and labor-intensive for us to obtain or provide information of a consistently high quality and on a timely basis to comply with regulatory reporting and other compliance requirements or to meet regulatory expectations on a consistent basis and, in certain cases, to manage our risk comprehensively. Furthermore, it often takes intensive efforts to identify, when possible, inappropriate behavior by our staff and attempts by third parties to misuse our services as a conduit for prohibited activities, including those relating to anti-financial crime laws and regulation.

In addition, we may not always have the personnel with the appropriate experience, seniority and skill levels to compensate for shortcomings in our processes and infrastructure, or to identify, manage or control risks, and it often has been difficult to attract and retain the requisite talent. This has impacted our ability to remediate existing weaknesses and manage the risks inherent in our activity. Additionally, despite the lower overall rate of attrition we have experienced during the COVID-19 pandemic, attrition in positions key to improving our control environment remains a risk.

Against this backdrop, our regulators, our Management Board and our Group Audit function have increasingly and more intensively focused on our internal controls and infrastructure through numerous formal reviews and audits of our operations. These reviews and audits have identified various areas for improvement relating to a number of elements of our control environment and infrastructure. These include the infrastructure relating to transaction capturing and recognition, classification of assets, asset valuation frameworks, models, data and process consistency, information security, software license management, payment services, risk identification, measurement and management and other processes required by laws, regulations, and supervisory expectations. They also include regulatory reporting, anti-money laundering (“AML”), “know your customer” (“KYC”), sanctions and embargoes, market conduct and other internal processes that are aimed at preventing use of our products and services for the purpose of committing or concealing financial crime.

Our principal regulators, including the BaFin, the ECB and the Federal Reserve Board, have also conducted numerous reviews focused on our internal controls and the related infrastructure. These regulators have required us formally to commit to remediate our AML and other weaknesses, including the fragmented and manual nature of our infrastructure. For example, on September 21, 2018, the BaFin issued an order requiring us to implement measures on specified timelines over the coming months and years to improve our control and compliance infrastructure relating to AML and, in particular, the KYC processes in certain of our businesses. Local regulators in other countries in which we do business also review the sufficiency of our control environment and infrastructure with respect to their jurisdictions. While the overall goals of the various prudential regulators having authority over us in the many places in which we do business are broadly consistent, and the general themes of our deficiencies in internal controls and the supporting infrastructure are similar, the regulatory frameworks applicable to us in the area of internal controls are generally applicable at a national or EU-wide level and are not always consistent across the jurisdictions in which we operate around the world. This adds complexity and cost to our efforts to reduce fragmentation and put in place automated systems that communicate seamlessly and quickly with one another.

In order to improve in the areas discussed above, we are undertaking several major initiatives to enhance the efficacy of the transaction processing environment, strengthen our controls and infrastructure, manage non-financial risks and enhance the skill set of our personnel. We believe that these initiatives will better enable us to avoid the circumstances that have resulted in many of the litigations and regulatory and enforcement investigations and proceedings to which we have been subject, and will improve our ability to comply with laws and regulations and meet supervisory expectations. In particular, we are making efforts to reduce the complexity of our business and to integrate and automate processes and business and second-line controls. We have also exited certain businesses and high-risk countries, selectively off-boarded a number of clients, worked to strengthen our compliance culture and control functions. However, we may be unable to complete these initiatives as quickly as we intend or as our regulators demand, and our efforts may be insufficient to remediate existing deficiencies and prevent future deficiencies or to result in fewer litigations or regulatory and enforcement investigations, proceedings and criticism in the future. We may also, when faced with the considerable expense of these initiatives, fail to provide sufficient resources for them quickly enough or at all, especially during periods when our operating performance and profitability are challenged or when we focus on our cost-savings efforts. The slow pace of our remediation efforts and progress on achieving significant and durable improvements in the areas discussed above may result in regulatory action of the type that has been taken against other financial institutions whose progress regulators have deemed insufficient or too slow. If we are unable to significantly improve our infrastructure and control environment in a timely manner, we may be subject to fines or penalties, as well as to regulatory intervention in aspects of our businesses. For example, we might feel pressure or be required by our regulators to reduce our exposure to or terminate certain kinds of products or businesses, counterparties or regions, which could, depending on the extent of such requirement, significantly challenge our ability to operate profitably under our current business model.

Regulators can also impose capital surcharges, requiring capital buffers in addition to those directly required under the regulatory capital rules applicable to us, to reflect the additional risks posed by deficiencies in our control environment. In extreme cases, regulators can suspend our permission to operate in the businesses and regions within their jurisdictions or require extensive and costly remedial actions. Furthermore, implementation of enhanced infrastructure and controls may result in higher-than-expected costs of regulatory compliance that could offset or exceed efficiency gains or significantly affect our profitability. Any of these factors could affect our ability to implement our strategy in a timely manner or at all.

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The BaFin has ordered us to improve our control and compliance infrastructure relating to our anti-money laundering and know-your-client processes, and appointed a special representative to monitor these measures’ implementation. Our results of operations, financial condition and reputation could be materially and adversely affected if we are unable to significantly improve our infrastructure and control environment by the set deadline.

On September 21, 2018, the BaFin issued an order requiring us to implement measures on specified timelines over the coming months and years to improve our control and compliance infrastructure relating to AML and, in particular, the KYC processes in certain of our businesses. The BaFin also appointed KPMG as special representative, reporting to the BaFin on a quarterly basis on certain aspects of our compliance and progress with the implementation of these measures. In February 2019, the BaFin extended the special representative’s mandate to cover our internal controls in the correspondent banking business. Our AML and KYC processes, as well as our other internal processes that are aimed at preventing use of our products and services for the purpose of committing or concealing financial crime and our personnel responsible for our efforts in these areas, continue to be the subject of regulatory scrutiny in a number of jurisdictions, including in the U.S., and other regulators could take actions against us similar to those of the BaFin. If we are unable to significantly improve our infrastructure and control environment by the set deadline, our results of operations, financial condition and reputation could be materially and adversely affected. For example, some of our regulators, such as BaFin, would likely impose fines or require us to reduce our exposure to or terminate certain kinds of products or businesses or relationships with counterparties or regions. We may also face additional legal proceedings, investigations or regulatory actions in the future, including in other jurisdictions and/or with respect to matters similar to, or broader than, the September 2018 BaFin order. These could, depending on the extent of any resulting requirements, significantly challenge our reputation and our ability to operate profitably under our current business model.

Risks Relating to Litigation, Regulatory Enforcement Matters and Investigations

We operate in a highly and increasingly regulated and litigious environment, potentially exposing us to liability and other costs, the amounts of which may be substantial and difficult to estimate, as well as to legal and regulatory sanctions and reputational harm.

The financial services industry is among the most highly regulated industries. Our operations throughout the world are regulated and supervised by the central banks and regulatory authorities in the jurisdictions in which we operate. In recent years, regulation and supervision in a number of areas has increased, and regulators, law enforcement authorities, governmental bodies and others have sought to subject financial services providers to increasing oversight and scrutiny, which in turn has led to additional regulatory investigations or enforcement actions which are often followed by civil litigation. There has been a steep escalation in the severity of the terms which regulators and law enforcement authorities have required to settle legal and regulatory proceedings against financial institutions, with settlements in recent years including unprecedented monetary penalties as well as criminal sanctions. As a result, we may continue to be subject to increasing levels of liability and regulatory sanctions, and may be required to make greater expenditures and devote additional resources to addressing these liabilities and sanctions. Regulatory sanctions may include status changes to local licenses or orders to discontinue certain business practices.

We and our subsidiaries are involved in various litigation proceedings, including civil class action lawsuits, arbitration proceedings and other disputes with third parties, as well as regulatory proceedings and investigations by both civil and criminal authorities in jurisdictions around the world. We expect that the costs to us arising from the resolution of litigation, enforcement and similar matters pending against us to continue to be significant in the near to medium term and to adversely affect our business, financial condition and results of operations. Litigation and regulatory matters are subject to many uncertainties, and the outcome of individual matters is not predictable with assurance. We may settle litigation or regulatory proceedings prior to a final judgment or determination of liability. We may do so for a number of reasons, including to avoid the cost, management efforts or negative business, regulatory or reputational consequences of continuing to contest liability, even when we believe we have valid defenses to liability. We may also do so when the potential consequences of failing to prevail would be disproportionate to the costs of settlement. Furthermore, we may, for similar reasons, reimburse counterparties for their losses even in situations where we do not believe that we are legally compelled to do so. The financial impact of legal risks might be considerable but may be difficult or impossible to estimate and to quantify, so that amounts eventually paid may exceed the amount of provisions made or contingent liabilities assessed for such risks.

Actions currently pending against us or our current or former employees may not only result in judgments, settlements, fines or penalties, but may also cause substantial reputational harm to us. The risk of damage to our reputation arising from such proceedings is also difficult or impossible to quantify.

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Regulators have increasingly sought admissions of wrongdoing in connection with settlement of matters brought by them. This could lead to increased exposure in subsequent civil litigation or in consequences under so-called "bad actor" laws, in which persons or entities determined to have committed offenses under some laws can be subject to limitations on business activities under other laws, as well as adverse reputational consequences. In addition, the U.S. Department of Justice (“DOJ”) conditions the granting of cooperation credit in civil and criminal investigations of corporate wrongdoing on the company involved having provided to investigators all relevant facts relating to the individuals responsible for the alleged misconduct. This policy may result in increased fines and penalties if the DOJ determines that we have not provided sufficient information about applicable individuals in connection with an investigation. Other governmental authorities could adopt similar policies.

In addition, the financial impact of legal risks arising out of matters similar to some of those we face have been very large for a number of participants in the financial services industry, with fines and settlement payments greatly exceeding what market participants may have expected and, as noted above, escalating steeply in recent years to unprecedented levels. The experience of others, including settlement terms, in similar cases is among the factors we take into consideration in determining the level of provisions we maintain in respect of these legal risks. Developments in cases involving other financial institutions in recent years have led to greater uncertainty as to the predictability of outcomes and could lead us to add to our provisions. Moreover, the costs of our investigations and defenses relating to these matters are themselves substantial. Further uncertainty may arise as a result of a lack of coordination among regulators from different jurisdictions or among regulators with varying competencies in a single jurisdiction, which may make it difficult for us to reach concurrent settlements with each regulator. Should we be subject to financial impacts arising out of litigation and regulatory matters to which we are subject in excess of those we have calculated in accordance with our expectations and the relevant accounting rules, our provisions in respect of such risks may prove to be materially insufficient to cover these impacts. This could have a material adverse effect on our results of operations, financial condition or reputation as well as on our ability to maintain capital, leverage and liquidity ratios at levels expected by market participants and our regulators. In such an event, we could find it necessary to reduce our risk weighted assets (including on terms disadvantageous to us) or substantially cut costs to improve these ratios, in an amount corresponding to the adverse effects of the provisioning shortfall.

We are currently the subject of industry-wide investigations by regulatory and law enforcement agencies relating to interbank and dealer offered rates, as well as civil actions. Due to a number of uncertainties, including those related to the high profile of the matters and other banks’ settlement negotiations, the eventual outcome of these matters is unpredictable, and may materially and adversely affect our results of operations, financial condition and reputation.

We have 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 dealer offered rates. The investigations underway have the potential to result in the imposition of significant financial penalties and other consequences for the Bank.

As previously reported, we 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. Also as previously reported, on April 23, 2015, we reached settlements with the DOJ, the CFTC, FCA, and the New York State Department of Financial Services (“DFS”) to resolve investigations into misconduct concerning the setting of LIBOR, EURIBOR, and TIBOR. Under the terms of these agreements, we 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 ours) pled guilty to one count of wire fraud in the U.S. District Court for the District of Connecticut and we entered into a Deferred Prosecution Agreement with a three year term, which expired in 2018. On October 25, 2017, we entered into a settlement with a working group of U.S. state attorneys general resolving their interbank offered rate investigation. Among other conditions, we made a settlement payment of U.S.$ 220 million. The factual admissions we have made in connection with these settlements could make it difficult for us to defend against pending and future claims. Other investigations of us concerning the setting of various interbank offered rates remain ongoing.

In addition, we are party to 37 U.S. civil actions concerning alleged manipulation relating to the setting of various interbank and/or dealer offered rates, 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 us and numerous other defendants. 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 us 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).

We cannot predict the effect on us of the interbank and dealer offered rates matters, which could include fines levied by government bodies, damages from private litigation for which we may be liable, legal and regulatory sanctions (including possible criminal sanctions) and other consequences.

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We are currently involved in civil proceedings in connection with our voluntary takeover offer for the acquisition of all shares of Postbank. The extent of our financial exposure to this matter could be material, and our reputation may be harmed.

On September 12, 2010, we announced a voluntary takeover offer for the acquisition of all shares in Deutsche Postbank AG (Postbank). On October 7, 2010, we published our 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 us alleging that the offer price was too low and was not determined in accordance with the applicable German law. The plaintiff alleges that we 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 us pursuant to Section 30 of the German Takeover Act. Based thereon, the plaintiff alleges that the consideration offered by us in the 2010 voluntary takeover offer needed to be raised to € 57.25 per share.

The Regional Court (Landgericht) Cologne dismissed the claim in 2011 and the Higher Regional Court ( Oberlandesgericht ) Cologne dismissed the appeal in 2012. The German Federal Court ( Bundesgerichtshof ) 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. 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 we were 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. We 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.

On December 16, 2020, the Higher Regional Court Cologne handed down a decision and fully dismissed the claims of Effecten-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 dismissed 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 at the end of January and beginning of February 2021, respectively.

We have been served with a large number of additional lawsuits filed against us 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 us for the shares in Postbank in the 2010 voluntary takeover should be raised to € 64.25 per share.

The claims for payment against us in relation to these matters total almost € 700 million (excluding interest).

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 shareholders meeting of Postbank in August 2015. Among other things, the plaintiffs alleged that we were subject to a suspension of voting rights with respect to our shares in Postbank based on the allegation that we 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 proceeding 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 by us 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 appealed this decision. On May 15, 2020 DB Privat- und Firmenkundenbank 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 become final.

The legal question of whether we had been obliged to make a mandatory takeover offer for all Postbank shares prior to our 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 connection 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.

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The applicants in the appraisal proceedings claim that a potential obligation of ours 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 opinion of the applicants in two resolutions. In a decision dated June 2019, the Regional Court of Cologne expressly deviated from this legal resolution in the appraisal proceedings in connection with execution of a domination and profit and loss transfer agreement. According to this decision, the question whether we were obliged to make a mandatory offer for all Postbank shares prior to our 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 extent of our financial exposure to these matters could be material, and our reputation may be harmed.

We have investigated the circumstances around equity trades entered into by certain clients in Moscow and London and have advised regulators and law enforcement authorities in several jurisdictions about those trades. In the event that violations of law or regulation are found to have occurred, any resulting penalties against us may materially and adversely affect our results of operations, financial condition and reputation.

We have investigated the circumstances around equity trades entered into by certain clients with us in Moscow and London that offset one another. The total volume of transactions reviewed is significant. Our internal investigation of potential violations of law, regulation and policy and into the related internal control environment has concluded, and we have assessed the findings identified during the investigation; to date we have identified certain violations of our policies and deficiencies in our control environment. We have advised regulators and law enforcement authorities in several jurisdictions (including Germany, Russia, the UK and the United States) of this investigation and have taken disciplinary measures with regards to certain individuals in this matter.

On January 30 and 31, 2017, the DFS and 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 investment banking division, including in relation to the equity trading described above. Under the terms of the settlement agreement with the DFS, Deutsche Bank entered into a consent order, and agreed to pay civil monetary penalties of U.S.$ 425 million and to engage an independent monitor to conduct a comprehensive review of its existing AML compliance programs that pertain to or affect activities conducted by or through our U.S. bank subsidiary DBTCA and our New York branch for a term of up to two years. Under the terms of the settlement agreement with the FCA, we agreed to pay civil monetary penalties of approximately GBP 163 million. On May 30, 2017, the Federal Reserve announced its settlement with us resolving this matter as well as additional AML issues identified by the Federal Reserve. We paid a penalty of U.S.$ 41 million. We also agreed to retain independent third parties to assess our Bank Secrecy Act/AML program and review certain foreign correspondent banking activity of DBTCA. We are also required to submit written remediation plans and programs.

We continue to cooperate with regulators and law enforcement authorities, including the DOJ which has its own ongoing investigation into these securities trades. In the event that violations of law or regulation are found to have occurred, legal and regulatory sanctions in respect thereof may materially and adversely affect our results of operations, financial condition and reputation.

We are currently the subject of industry-wide inquiries and investigations by regulatory and law enforcement authorities relating to transactions of clients in German shares around the dividend record dates for the purpose of obtaining German tax credits or refunds in relation to withholding tax levied on dividend payments (so-called cum-ex transactions). In addition, we are exposed to potential tax liabilities and to the assertion of potential civil law claims by third parties, e.g. former counterparties, custodian banks, investors and other market participants, including as a consequence of criminal judgements in criminal proceedings in which we are not directly involved. The eventual outcome of these matters is unpredictable, and may materially and adversely affect our results of operations, financial condition and reputation.

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The Public Prosecutor in Cologne ( Staatsanwaltschaft Köln , "CPP") has been conducting a criminal investigation since August 2017 concerning two former employees of Deutsche Bank in relation to cum-ex transactions of certain former clients of the Bank. At the end of May and beginning of June 2019, the CPP broadened the investigation proceedings against further current and former employees and former board members of the Bank. In July 2020, in the course of inspecting 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 Deutsche Bank personnel, including one former Management Board member and one current Management Board member. It is difficult to predict how the proceeding will further develop. Deutsche Bank is a potential secondary participant in these proceedings and the proceedings could result in a disgorgement of profits and fines. There is a risk that the proceedings lead to a formal indictment and criminal prosecution of accused individuals and Deutsche Bank. Increased media attention surrounding the cum-ex topic as well as any future criminal judgement that is unfavorable to the Bank can create reputational risks. The imposition of fines and the disgorgement of profits could have a material adverse effect on our financial condition or results of operations.

We are further exposed to the assertion of potential tax and civil law recourse and compensation claims by German tax authorities and third parties.

Deutsche Bank acted as participant in and filed withholding tax refund claims through the electronic refund procedure ( elektronisches Datenträgerverfahren ) on behalf of, inter alia, two former custody clients in connection with their cum-ex transactions. 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 one former custody client. In December 2019, Deutsche Bank received a liability notice from the FTO in the amount of € 2.1 million 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. In the event that the FTO issues the liability notice announced in February 2018 or further liability notices and to the extent Deutsche Bank is eventually liable under the liability notices, this would expose the Bank to potential financial losses and could have a material adverse effect on our results of operations.

As regards civil law claims, The Bank of New York Mellon SA/NV ("BNY") – as a parent of two companies acting as depot bank and fund administrator which Deutsche Bank acquired in 2010 and sold to BNY later in 2010 – has informed Deutsche Bank of its intention to assert indemnification claims under a contractual tax indemnity provision for potential cum-ex related tax liabilities incurred by these companies. 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 regarding 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.Warburg & CO Gruppe GmbH and M.M.Warburg & CO (AG & Co.) KGaA (together “Warburg”) in connection with cum-ex transactions of Warburg with a custody client of Deutsche Bank during 2007 to 2011. Warburg claims from Deutsche Bank indemnification 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 Frankfurt am Main. Deutsche Bank has until April 12, 2021 to respond to Warburg’s appellate brief.

On January 25, 2021, the Regional Court 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, respectively. Warburg Invest was fund manager for both funds. Warburg Invest claims, from Deutsche Bank together with several 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 damages 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 risks arising from the cum-ex topic are difficult to quantify and the likelihood of these risks materializing is hard to predict. In the event that Deutsche Bank is eventually liable under the civil law claims already asserted or under claims that will potentially be asserted by third parties in the future, this may materially and adversely affect our financial condition or results of operations.

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We have entered into a deferred prosecution agreement (DPA) with the DOJ concerning our historical engagements of finders and consultants and precious metals spoofing. If we violate the DPA, its term could be extended, or we could be subject to criminal prosecution or other actions, any of which could result in additional fines, penalties, settlements, payments or other materially adverse impacts to us.

On January 8, 2021, we entered into a deferred prosecution agreement (DPA) with the DOJ concerning our historical engagements of finders and consultants and, as part of our obligations in the DPA, agreed to pay approximately U.S.$ 80 million in connection with this conduct. The DPA with the DOJ also involved a resolution involving precious metals spoofing. As part of our obligations in the DPA relating to precious metals, we agreed to pay approximately U.S.$ 8 million, of which approximately U.S.$ 6 million would be credited by virtue of our 2018 resolution with the CFTC. On the same day, we also reached a settlement with the SEC to resolve its investigation into conduct regarding our compliance with the U.S. Foreign Corrupt Practices Act with respect to our engagement of finders and consultants. We agreed to pay approximately U.S.$ 43 million in this SEC settlement. If we violate the DPA, its term could be extended, or we could be subject to criminal prosecution or other actions, any of which could result in additional fines, penalties, settlements, payments or other materially adverse impacts to us.

We are under continuous examination by tax authorities in the jurisdictions in which we operate. Tax laws are increasingly complex and are evolving. The cost to us arising from the resolution of routine tax examinations, tax litigation and other forms of tax proceedings or tax disputes may increase and may adversely affect our business, financial condition and results of operation.

We are under continuous examination by tax authorities in the jurisdictions in which we operate. Tax laws are increasingly complex. In the current political and regulatory environment, tax administrations' and courts' interpretation of tax laws and regulations and their application are evolving, and scrutiny by tax authorities has become increasingly intense. Wide ranging and continuous changes in the principles of international taxation emanating from the OECD's Base Erosion and Profit Shifting agenda are generating significant uncertainties for us and our subsidiaries and may result in an increase in instances of tax disputes or instances of double taxation going forward, as member states may take different approaches in transposing these requirements into national law or may choose to implement unilateral measures. A recent example is the EU directive requiring disclosure of arrangements with specific tax features that took effect in 2020. Tax administrations have also been focusing on the eligibility of taxpayers for reduced withholding taxes on dividends in connection with certain cross-border lending or derivative transactions. In addition, while a significant amount of guidance has been issued since the enactment of the U.S. tax reform at the end of 2017 which included the Base Erosion Anti-Abuse Tax provisions, uncertainties remain and further interpretative guidance may be necessary over the coming years. As a result, the cost to us arising from the resolution of routine tax examinations, tax litigation and other forms of tax proceedings or tax disputes, as well as from rapidly changing and increasingly complex and uncertain tax laws and principles, may increase and may adversely affect our business, financial condition and results of operation.

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 ). 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.

We sponsor a number of post-employment benefit plans on behalf of our employees. In Germany, the pension assets that fund the obligations under these pension plans are held by Benefit Trust GmbH. The German tax authorities are challenging the tax treatment of certain income received by Benefit Trust GmbH in the years 2010 to 2013 with respect to its pension plan assets. For the year 2010 Benefit Trust GmbH paid the amount of tax and interest assessed of € 160 million to the tax authorities and is seeking a refund of the amounts paid in litigation with the relevant lower fiscal court. For 2011 to 2013 the matter is stayed pending the outcome of the 2010 tax litigation. The amount of tax and interest under dispute for years 2011 to 2013, which also has been paid to the tax authorities, amounts to € 456 million. In March 2017, the lower fiscal court ruled in favor of Benefit Trust GmbH and in September 2017 the tax authorities appealed the decision to the German supreme fiscal court ( Bundesfinanzhof ). A court hearing is scheduled for March 15, 2021. An ultimate decision by the court that is unfavorable to us could materially and adversely affect our comprehensive income and financial condition.

U.S. Congressional committees and other U.S. governmental entities have sought and may seek information from us concerning potential dealings between us and the U.S. executive branch, former President Trump, his family and other close associates, exposing us in particular to risk to our reputation and potential loss of business as a result of extensive media attention.

A number of media entities have reported that U.S. Congressional committees and other U.S. governmental entities are seeking or may seek information from us concerning, among other things, potential dealings between the Bank and certain members of the executive branch of the U.S. government, former President Trump, his family, and other close associates. Attention surrounding such actual or potential requests and inquiries and our responses can create reputational and other risks that could have a material adverse effect on us. Our policy is to cooperate with all authorized government inquiries.

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We have received requests for information from regulatory and law enforcement agencies concerning our correspondent banking relationship with Danske Bank, exposing us in particular to risk to our reputation and potential loss of business as a result of extensive media attention.

We have received requests for information from regulatory and law enforcement agencies concerning our correspondent banking relationship with Danske Bank, including our 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. We are providing information to and otherwise cooperating with the investigating agencies. We have also completed an internal investigation into these matters, including of whether any violations of law, regulation or 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 investigations are in connection with suspicious activity reports relating to 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 suspicious activity reports (SARs) in Germany in a timely fashion, which it paid in the fourth quarter of 2020.

On July 7, 2020, the 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.

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 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 effectiveness 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.

Media and market attention surrounding these matters can create reputational risks in particular, even if our investigations and those of our regulators and the authorities do not result in evidence of wrongdoing. We could in particular suffer diminished volumes of business as a result, which could have a material adverse effect on our financial condition and results of operations.

We have received requests for information from regulatory and law enforcement agencies concerning our anti-financial crime controls, including in the United States. As a result of these investigations, the Bank could be exposed to material fines, limitations on business, remedial undertakings and/or criminal prosecution, as well as risk to our reputation and potential loss of business as a result of extensive media attention.

We have received requests for information from regulatory and law enforcement agencies concerning our anti-financial crime controls over the past several years, both generally and in connection with specific clients, counterparties or incidents, including in the United States. Among the areas within the scope of these inquiries are client onboarding and KYC processes, transaction monitoring systems and procedures, processes concerning the decision to file or not to file a suspicious activity report, escalation procedures, and other related processes and procedures. The Bank is cooperating in these investigations. As a result of these investigations, the Bank could be exposed to material fines, limitations on business, remedial undertakings and/or criminal prosecution. In addition, media and market attention surrounding these inquiries can create reputational risks. We could in particular suffer diminished volumes of business as a result, which could have a material adverse effect on our financial condition and results of operations.

Guilty pleas by or convictions of us or our affiliates in criminal proceedings, or regulatory or enforcement orders, settlements or agreements to which we or our affiliates become subject, may have consequences that have adverse effects on certain of our businesses.

We and our affiliates have been and are subjects of criminal and regulatory enforcement proceedings. In particular, as part of the resolution of the investigation of the DOJ into misconduct relating to London interbank offered rates, our subsidiary DB Group Services (UK) Limited entered into a plea agreement with the DOJ in 2015, pursuant to which the company pled guilty to one count of wire fraud, and, subsequently, a judgment of conviction was issued against the company. Also, in connection with the KOSPI Index unwind matters, our subsidiary Deutsche Securities Korea Co. was convicted of vicarious corporate criminal liability in respect of spot/futures linked market manipulation by one of its employees; though the criminal trial verdict has been overturned on appeal, the Korean prosecutor’s office has appealed the decision. We and our subsidiaries are also subjects of other criminal or regulatory enforcement proceedings or investigations.

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Guilty pleas or convictions against us or our affiliates, or regulatory or enforcement orders, settlements or agreements to which we or our affiliates become subject, could lead to our ineligibility to conduct certain business activities. In particular, such guilty pleas or convictions could cause our asset management affiliates to no longer qualify as “qualified professional asset managers” (“QPAMs”) under the QPAM Prohibited Transaction Exemption under ERISA, which exemption is relied on to provide asset management services to certain pension plans in connection with certain asset management strategies. While there are a number of statutory exemptions and numerous other administrative exemptions that our asset management affiliates may use to trade on behalf of ERISA plans, and in many instances they may do so in lieu of relying on the QPAM exemption, loss of QPAM status could cause customers who rely on such status (whether because they are legally required to do so or because we have agreed contractually with them to maintain such status) to cease to do business or refrain from doing business with us and could negatively impact our reputation more generally. For example, clients may mistakenly see the loss as a signal that our asset management affiliates are somehow no longer approved as asset managers generally by the U.S. Department of Labor (“DOL”), the agency responsible for ERISA, and cease to do business or refrain from doing business with us for that reason. This could have a material adverse effect on our results of operations, particularly those of our asset management business in the United States. On December 29, 2017, the DOL published an individual exemption permitting certain of our affiliates to retain their QPAM status despite both the conviction of DB Group Services (UK) Limited and the conviction of Deutsche Securities Korea Co. The exemption applies through April 17, 2021 but may terminate earlier if, among other things, we or our affiliates are convicted of crimes in other matters. The disqualification period arising from these convictions extends until April 17, 2027, so we will need to obtain a further exemption by April 18, 2021 to avoid a loss of QPAM status at that time. We have requested an extension of our current exemption, and the DOL has published for comment a proposed, three-year extension. If an extension were not to be granted, we face the potential for the adverse effects described above.

Other Risks

In addition to our traditional banking businesses of deposit-taking and lending, we also engage in nontraditional credit businesses in which credit is extended in transactions that include, for example, our holding of securities of third parties or our engaging in complex derivative transactions. These nontraditional credit businesses materially increase our exposure to credit risk.

As a bank and provider of financial services, we are exposed to the risk that third parties who owe us money, securities or other assets will not perform their obligations. Many of the businesses we engage in beyond the traditional banking businesses of deposit-taking and lending also expose us to credit risk.

In particular, much of the business we conduct through our Investment Bank corporate division entails credit transactions, frequently ancillary to other transactions. Nontraditional sources of credit risk can arise, for example, from holding securities of third parties; entering into swap or other derivative contracts under which counterparties have obligations to make payments to us; executing securities, futures, currency or commodity trades that fail to settle at the required time due to nondelivery by the counterparty or systems failure by clearing agents, exchanges, clearing houses or other financial intermediaries; and extending credit through other arrangements. Parties to these transactions, such as trading counterparties, may default on their obligations to us due to bankruptcy, political and economic events, lack of liquidity, operational failure or other reasons.

Many of our derivative transactions are individually negotiated and non-standardized, which can make exiting, transferring or settling the position difficult. Certain credit derivatives require that we deliver to the counterparty the underlying security, loan or other obligation in order to receive payment. In a number of cases, we do not hold, and may not be able to obtain, the underlying security, loan or other obligation. This could cause us to forfeit the payments otherwise due to us or result in settlement delays, which could damage our reputation and ability to transact future business, as well as impose increased costs on us. Legislation in the European Union (EMIR) and the United States (the Dodd-Frank Act) has introduced requirements for the standardization, margining, central clearing and transaction reporting of certain over-the-counter derivatives. While such requirements are aimed at reducing the risk posed to counterparties and the financial system by such derivatives, they may reduce the volume and profitability of the transactions in which we engage, and compliance with such provisions may impose substantial costs on us.

The exceptionally difficult market conditions experienced during the global financial crisis severely adversely affected certain areas in which we do business that entail nontraditional credit risks, including the leveraged finance and structured credit markets, and similar market conditions, should they occur, may do so in the future.

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A substantial proportion of our assets and liabilities 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 have incurred losses in the past, and may incur further losses in the future.

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 the income statement. Fair value is defined as the price at which an asset or liability could be exchanged in an arm’s length transaction between knowledgeable, willing parties, other than in a forced or liquidation sale. If the value of an asset carried at fair value declines (or the value of a liability carried at fair value increases) a corresponding unfavorable change in fair value is recognized in the income statement. These changes have been and could in the future be significant.

Observable prices or inputs are not available for certain classes of financial instruments. Fair value is determined in these cases using valuation techniques we believe to be appropriate for the particular instrument. The application of valuation techniques to determine fair value involves estimation and management judgment, the extent of which will vary with the degree of complexity of the instrument and liquidity in the market. Management judgment is required in the selection and application of the appropriate parameters, assumptions and modeling techniques. If any of the assumptions change due to negative market conditions or for other reasons, subsequent valuations may result in significant changes in the fair values of our financial instruments, requiring us to record losses.

Our exposure and related changes in fair value are reported net of any fair value gains we may record in connection with hedging transactions related to the underlying assets. However, we may never realize these gains, and the fair value of the hedges may change in future periods for a number of reasons, including as a result of deterioration in the credit of our hedging counterparties. Such declines may be independent of the fair values of the underlying hedged assets or liabilities and may result in future losses.

Pursuant to accounting rules, we must periodically test the value of the goodwill of our businesses and the value of our other intangible assets for impairment. In the event such test determines that criteria for impairment exists, we are required under accounting rules to write down the value of such asset. Impairments of goodwill and other intangible assets have had and may have a material adverse effect on our profitability results of operations.

Goodwill arises on the acquisition of subsidiaries and associates and represents the excess of the aggregate of the cost of an acquisition and any noncontrolling interests in the acquiree over the fair value of the identifiable net assets acquired at the date of the acquisition. 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. 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 and their useful lives reaffirmed at least annually. 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. Impairment of goodwill and other intangible assets was € 1.0 billion 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 the Private Bank and the Global Transaction Banking and Corporate Finance goodwill of € 492 million in the Corporate Bank in the second quarter of 2019.

Pursuant to accounting rules, we must review our deferred tax assets at the end of each reporting period. 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 have to reduce the carrying amounts. These reductions have had and may in the future have material adverse effects on our profitability, equity and financial condition.

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. 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. As of December 31, 2020 and December 31, 2019, we recognized deferred tax assets of € 6.1 billion and € 6.0 billion, respectively.

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In determining the amount of deferred tax assets, we use 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, and is generally based on the pre-tax results adjusted for permanent differences for the current and the two preceding financial years. Each quarter, we re-evaluate our estimate related to deferred tax assets, including our assumptions about future profitability. The accounting estimate related to the deferred tax assets depends upon underlying assumptions about the historical tax capacity and profitability information, as well as forecasted operating results based upon approved business plans, which 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 an adjustment to the deferred tax assets that would be charged to income tax expense or directly to equity in the period such determination was made.

These adjustments have had and may in the future have material adverse effects on our profitability or equity. In connection with the transformation, the Group adjusted the estimate related to deferred tax assets in affected jurisdictions, such as the UK and the United States, and recognized € 37 million and € 2.8 billion of valuation adjustments for the financial years ended December 31, 2020 and 2019, respectively.

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.

We sponsor a number of post-employment benefit plans on behalf of our employees, including defined benefit plans. Our 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. We maintain various external pension trusts to fund the majority of our defined benefit plan obligations. Our 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. We have 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 our unfunded plans are accrued on the balance sheet. For most of the externally funded defined benefit plans there are local minimum funding requirements. We can decide on any additional plan contributions, with reference to our funding principle. There are some locations, e.g. the United Kingdom, where the trustees and the Bank jointly agree contribution levels. We also sponsor 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.

We develop and maintain 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 us related to market developments (e.g., interest rate, credit spread, price inflation), asset investment, regulatory or legislative requirements, as well as monitoring demographic changes (e.g., longevity). To the extent that pension plans are funded, the assets held mitigate some of the liability risks, but introduce investment risk. In our key pension countries, our 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, we seek to minimize the impact of pensions on our 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.

All plans are valued annually by independent qualified actuaries using the projected unit credit method, with inputs including the discount rate, inflation rate, rate of increase in future compensation and for pensions in payment and longevity expectations. In 2019, we conducted a review of the mortality assumptions used to determine the defined benefit obligation for its defined benefit pension plans in Germany. The intention of the review was to establish whether the tables “Richttafeln Heubeck 2018G” reflect the best estimate assumption for future mortality of the plan member population. Based on an analysis of mortality experience over the preceding five years, it was concluded that the “Richttafeln” have to be adjusted in order to reflect the underlying mortality of the pension plan population in Germany. This change in actuarial assumptions led to an actuarial loss of € 125 million before taxes as of December 31, 2019 and is reported in the Consolidated Statement of Comprehensive Income in the line item remeasurement gains (losses).

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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 unprecedented market turmoil, which resulted in several refinements to the methodology being implemented in 2020, initially in the first quarter 2020 and more fundamentally in the fourth quarter 2020 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 December 31, 2019, the DB Proprietary curve results in a defined benefit obligation that is € 20 million 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.

Our investment objective in funding the plans and our obligations in respect of them is to protect ourselves from adverse impacts of our defined benefit pension plans on key financial metrics. We seek to allocate plan assets closely to the market risk factor exposures of the pension liability to interest rates, credit spreads and inflation and, thereby, plan assets broadly reflect the underlying risk profile and currency of the pension obligations.

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. More detailed information regarding our employee benefit plans is provided in Note 33, “Employee Benefits” of the consolidated financial statements.

Our risk management policies, procedures and methods leave us exposed to unidentified or unanticipated risks, which could lead to material losses.

We have devoted significant resources to developing our risk management policies, procedures and assessment methods and intend to continue to do so in the future. Nonetheless, the risk management techniques and strategies have not been and may in the future not be fully effective in mitigating our risk exposure in all economic market environments or against all types of risk, including risks that we fail to identify or anticipate. Some of our quantitative tools and metrics for managing risk are based upon our use of observed historical market behavior. We apply statistical and other tools to these observations to arrive at quantifications of our risk exposures. During the financial crisis, the financial markets experienced unprecedented levels of volatility (rapid changes in price direction) and the breakdown of historically observed correlations (the extent to which prices move in tandem) across asset classes, compounded by extremely limited liquidity. In this volatile market environment, our risk management tools and metrics failed to predict some of the losses we have experienced, and they may in the future fail to predict important risk exposures. In addition, our quantitative modeling does not take all risks into account and makes numerous assumptions regarding the overall environment, which may not be borne out by events. As a result, risk exposures have arisen and could continue to arise from factors we did not anticipate or correctly evaluate in our statistical models. This has limited and could continue to limit our ability to manage our risks especially in light of geopolitical developments, many of the outcomes of which are currently unforeseeable. Our losses thus have been and may in the future be significantly greater than the historical measures indicate.

In addition, our more qualitative approach to managing those risks not taken into account by our quantitative methods could also prove insufficient, exposing us to material unanticipated losses. Also, if existing or potential customers or counterparties believe our risk management is inadequate, they could take their business elsewhere or seek to limit their transactions with us. This could harm our reputation as well as our revenues and profits. See “Management Report: Risk Report” in the Annual Report 2020 for a more detailed discussion of the policies, procedures and methods we use to identify, monitor and manage our risks.

Operational risks, which may arise from errors in the performance of our processes, the conduct of our employees, instability, malfunction or outage of our IT system and infrastructure, or loss of business continuity, or comparable issues with respect to our vendors, may disrupt our businesses and lead to material losses.

We face operational risk arising from errors, inadvertent or intentional, made in the execution, confirmation or settlement of transactions or from transactions not being properly recorded, evaluated or accounted for. An example of this risk concerns our derivative contracts, which are not always confirmed with the counterparties on a timely basis. For so long as the transaction remains unconfirmed, we are subject to heightened credit and operational risk and in the event of a default may find it more difficult to enforce the contract.

In addition, our businesses are highly dependent on our ability to process manually or through our systems a large number of transactions on a daily basis, across numerous and diverse markets in many currencies. Some of the transactions have become increasingly complex. Moreover, management relies heavily on its financial, accounting and other data processing systems that include manual processing components. If any of these processes or systems do not operate properly, or are disabled, or subject to intentional or inadvertent human error, we could suffer financial loss, a disruption of our businesses, liability to clients, regulatory intervention or reputational damage.

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We are also dependent on our employees to conduct our business in accordance with applicable laws, regulations and generally accepted business standards. If our employees do not conduct our business in this manner, we may be exposed to material losses. Furthermore, if an employee’s misconduct reflects fraudulent intent, we could also be exposed to reputational damage. We categorize these risks as conduct risk, a term used to describe the risks associated with behavior by employees and agents, including third parties, that could harm clients, customers or the integrity of the markets, such as selling products that are not suitable for a particular customer, fraud, unauthorized trading and failure to comply with applicable regulations, laws and internal policies. U.S. regulators in particular have been increasingly focused on conduct risk, and such heightened regulatory scrutiny and expectations could lead to investigations and other inquiries, as well as remediation requirements, more regulatory or other enforcement proceedings, civil litigation and higher compliance and other risks and costs.

We in particular face the risk of loss events due to the instability, malfunction or outage of our IT system and IT infrastructure, as well as breaches in IT system and infrastructure (including cyber-attacks). Such losses could materially affect our ability to perform business processes and may, for example, arise from the erroneous or delayed execution of processes as a result of system outages, degraded services in systems and IT applications or the inaccessibility of our IT systems. A delay in processing a transaction, for example, could result in an operational loss if market conditions worsen during the period after the error. IT-related errors may also result in the mishandling of confidential information, damage to our computer systems, financial losses, additional costs for repairing systems, reputational damage, customer dissatisfaction or potential regulatory or litigation exposure (including under data protection laws such as the GDPR).

The move across global industries to conduct business from home and away from primary office locations in response to the COVID-19 pandemic continues to put pressure on business practices, and the demand on our technology infrastructure. Additionally, the current situation also exposes us to a greater 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.

Business continuity risk is the risk of incurring losses resulting from the interruption of normal business activities. We operate in many geographic locations and are frequently subject to the occurrence of events outside of our control. Despite the contingency plans we have in place, our ability to conduct business in any of these locations may be adversely impacted by a disruption to the infrastructure that supports our business, whether as a result of, for example, events that affect our third party vendors or the community or public infrastructure in which we operate. Any number of events could cause such a disruption including deliberate acts such as sabotage, terrorist activities, bomb threats, strikes, riots and assaults on the bank’s staff; natural calamities such as hurricanes, snow storms, floods, disease pandemics (such as the current COVID-19 pandemic) and earthquakes; or other unforeseen incidents such as accidents, fires, explosions, utility outages and political unrest. Any such disruption could have a material adverse effect on our business and financial position.

We utilize a variety of third parties in support of our business and operations. 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. Furthermore, if a third party does not conduct business in accordance with applicable standards or our expectations, we could be exposed to material losses or regulatory action or litigation or fail to achieve the benefits we sought from the relationship.

We utilize a variety of third parties in support of our business and operations. We do so in order to focus on our core competencies and to seek improvements in costs, efficiency and effectiveness in our operations, for instance in connection with our IT modernization efforts. The nature of what we use third parties for has also evolved and now includes more fundamental aspects of services and infrastructure such as “Cloud” internet technology. This in itself represents different risks and requires more robust risk assessments, appropriate 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.

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 the third parties provide. We depend on such third parties to conduct their delivery of services in compliance with applicable laws, regulations and generally accepted business standards and in accordance with the contractual terms and service levels they have agreed with us. If the 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.

Our operational systems are subject to an increasing risk of cyber-attacks and other internet crime, which could result in material losses of client or customer information, damage our reputation and lead to regulatory penalties and financial losses.

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Among the operational risks we face is the risk of breaches of the security of our or our vendors’ computer systems due to unauthorized access to networks or resources, the introduction of computer viruses or malware, or other forms of cybersecurity attacks or incidents. Such breaches could threaten the confidentiality of our or our clients’ data and the integrity of our systems. We devote significant resources toward the protection of our computer systems against such breaches and toward ensuring that our vendors employ appropriate cybersecurity safeguards. To address the evolving cyber threat risk, we have expended significant resources to modify and enhance our protective measures and to investigate and remediate any information security vulnerabilities. These measures, however, may not be effective against the many security threats we face.

The increasing frequency and sophistication of recent cyber-attacks has resulted in an elevated risk profile for many organizations around the world, and significant attention by our management has been paid to the overall level of preparedness against such attacks. Cybersecurity is growing in importance due to factors such as the continued and increasing reliance on our technology environment. We and other financial institutions have experienced attacks on computer systems, including attacks aimed at obtaining unauthorized access to confidential company or customer information or damaging or interfering with company data, resources or business activities, or otherwise exploiting vulnerabilities in our infrastructure. We expect to continue to be the target of such attacks in the future. Although we have to date not experienced any material business impact from these attacks, we may not be able to effectively anticipate and prevent more material attacks from occurring in the future. The move across global industries to conduct business from home and away from primary office locations in response to the COVID-19 pandemic also exposes us to a greater risk of cyber-attacks, which could lead to technology failures, security breaches, unauthorized access, loss or destruction of data or unavailability of services. A successful attack could have a significant negative impact on us, including as a result of disclosure or misappropriation of client or proprietary information, damage to computer systems, an inability to access information technology (IT) systems, financial losses, remediation costs (such as for investigation and re-establishing services), increased cybersecurity costs (such as for additional personnel, technology, or third-party vendors), personal data breach notification obligations, reputational damage, customer dissatisfaction and potential regulatory or litigation exposure.

The size of our clearing operations exposes us to a heightened risk of material losses should these operations fail to function properly.

We have large clearing and settlement businesses and an increasingly complex and interconnected information technology (IT) landscape. These give rise to the risk that we, our customers or other third parties could lose substantial sums if our systems fail to operate properly for even short periods. This will be the case even where the reason for the interruption is external to us. In such a case, we might suffer harm to our reputation even if no material amounts of money are lost. This could cause customers to take their business elsewhere, which could materially harm our revenues and profits.

Ongoing global benchmark reform efforts, specifically the transition from interbank offered rates to alternative reference rates, including “risk-free-rates”, introduce a number of inherent risks to our business and the financial industry. These risks, should they materialize, may have adverse effects on our business, results of operations and profitability.

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 LIBOR and other benchmarks (together “IBORs”) is uncertain. Some reforms have already come into effect (such as the recent Central Counterparties (CCP) switch to Secured Overnight Funding Rate (SOFR) discounting from Fed Funds) while others are still to be implemented or are under consideration. For example, in December 2020, the LIBOR administrator 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. 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 the 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” 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.

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 that are linked to IBORs that may be subject to potential discontinuation, requiring us to prepare for such discontinuation and for a transition to RFRs. Transition of legacy transactions will depend, in some cases on client engagement and agreement to spread adjustments, which may not be forthcoming. In some cases, transition of legacy products may be hampered by structural factors, such as technical inability to contact numerous bondholders. Those difficult cases are referred to as “tough legacy”. To address tough legacy products, legislative proposals have been made in EU, and the State of New York. In addition, the FCA is consulting on production of “synthetic” LIBORs, which will be calculated according to a different methodology but which may be published to enable roll-off of tough legacy products. The transition and uncertainties around the timing and manner of transition to RFRs represent a number of risks for us, our customers and the financial services industry more widely. The discontinuation of these IBORs and the transition to RFRs pose a variety of risks to us, including the following:

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• Legal and compliance risk (including conduct risk) may arise due to possible disputes regarding either the terms of financial contracts with counterparties, or the manner of transition to replacement rates. Many financial instruments linked to IBORs contain provisions for the use of a successor interest rate in the event of the discontinuation of such IBORs, while others do not. In connection with such a discontinuation and transition, the counterparty to the financial instrument may challenge the rate determined for such instrument, particularly if we are involved in the determination or setting of the successor rate, whether in respect of the particular financial instrument or generally. Such disputes could result in litigation or regulatory action founded in claims of, breach of contract, anti-trust violations, market abuse and/or other mistreatment of customers.
• Liquidity risk may arise due to slow acceptance, take-up, and development of liquidity in RFR-related products, leading to market dislocation or fragmentation. Additionally, bid/offer spreads may widen impacting funding and collateral postings. Similar risks may apply to IBOR exposure toward the date of any discontinuation, or in relation to tough-legacy products which are locked into synthetic LIBOR, which may perform differently than LIBOR.
• Also, replacement of IBORs with a new benchmark rate, or being locked into a synthetic LIBOR, could adversely impact the value of and return on existing instruments and contracts and the market for securities and other instruments whose returns are linked to IBOR benchmarks.
• Market risk may arise due to interest rate “basis” risks – the risks posed by different interest rate provisions applying to assets than to liabilities – across tenors and currencies, driven by differing fallback methodologies and timings. Different timings of adoption of fallback protocols will create new basis risk and potentially make hedging more costly or less effective, and losses may result from value transfer in the fallback methodology adopted. In the event of discontinuation of IBORs and a transition to a successor interest rate, we may incur losses in respect of our assets and liabilities linked to IBORs if the successor interest rate is not economically equivalent to the discontinued IBORs.
• Introduction of new RFRs will require us to develop new pricing and risk models related to new RFR-linked products. The models we develop may require approval by competent regulators if they differ significantly from existing models, which may introduce delays.
• Finance and tax risk may arise due to the discontinuation of IBORs and transition to RFRs, which could cause hedge accounting items to be derecognized, adversely impacting our profitability or causing us to incur losses. Discontinuation and transition could also pose difficulties for the independent price verification of financial instruments, where market data is unavailable for the new or modified financial instrument. Tax uncertainties could arise, for example, if a discontinuation or transition is viewed as a significant modification of a financial instrument that results in a profit or loss recognition event for tax purposes.
• Technology and operational risk may arise as a result of the complexity of transition processes, which will require collaboration with our regulators and central banks as well as a wide range of market participants. Also, significant change efforts – relating to RFR product development, re-documentation of client contracts and infrastructure change, including to systems, processes and models across the business and our Finance, Risk and Treasury functions –, will be required. There is a risk that not all systems and process dependencies on IBOR availability are identified and remediated. Successful transition processes are, to some extent, dependent on achieving industry and client consensus on standards and conventions, timing and sequencing of transition steps, creation of term versions of the RFRs and the timely re-documenting of client contracts.

It is therefore currently difficult to determine to what extent the changes will adversely affect us, or the costs of implementing any relevant remedial action. Uncertainty as to the nature and extent to such potential changes, alternative reference rates or other reforms including the potential continuation of the publication of synthetic LIBORs may adversely affect financial instruments using IBORs as benchmarks. The implementation of any alternative RFRs may be impossible or impracticable under the existing terms of such financial instruments and could have an adverse effect on the value of, return on the trading market for certain financial instruments and on our profitability. There is also the risk of an adverse effect to reported performance arising from the transition rules established by accounting bodies.

More broadly, initiatives to reform existing benchmarks and our participation in them, including as benchmark submitter, could potentially expose us to legal, reputational or other risks. In particular, legal and compliance risk (including conduct risk) may arise due to the operational risks of participating in benchmark submissions, 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.

The necessity and potential timing of the discontinuation of IBORs, the prospects for transition to RFRs in the various markets in which they would be required, and industry, market and regulatory response, remain highly uncertain. Also, as mentioned, there are external factors, such as required actions of regulators or counterparties, which create risks that an individual institution, or the industry as a whole, would find difficult to address. Depending how such contingencies develop, and the adequacy of the response of the industry, the market, regulators and us to them, the discontinuation of IBORs and transition to RFRs could have adverse effects on our business, results of operations and profitability.

We are subject to laws and other requirements relating to financial and trade sanctions and embargoes. If we breach such laws and requirements, we can be subject, and have in the past been subject, to material regulatory enforcement actions and penalties.

We are required to monitor, evaluate, and observe laws and other requirements relating to financial and trade sanctions and embargoes set by the EU, the Deutsche Bundesbank, Germany’s Federal Office for Economic Affairs and Export Control, and other authorities, such as the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) and the UK Treasury Department. If we breach such laws and requirements, we can be subject, and have in the past been subject, to material regulatory enforcement actions and penalties.

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Transactions with counterparties in countries designated by the U.S. State Department as state sponsors of terrorism or persons targeted by U.S. economic sanctions may lead potential customers and investors to avoid doing business with us or investing in our securities, harm our reputation or result in regulatory or enforcement action which could materially and adversely affect our business.

We engage or have engaged in a limited amount of business with counterparties, including government-owned or -controlled counterparties, in certain countries or territories that are subject to comprehensive U.S. sanctions, including Iran and Cuba (referred to as “Sanctioned Countries”), or with persons targeted by U.S. economic sanctions (referred to as “Sanctioned Persons”). U.S. law generally prohibits U.S. persons or any other persons acting within U.S. jurisdiction from doing business with Sanctioned Countries or Sanctioned Persons. Additionally, U.S. indirect or “secondary” sanctions threaten retaliation against certain activities, including categories of transactions with certain entities and countries, by non-U.S. persons entirely outside of U.S. jurisdiction. Thus, U.S. regulations may extend to activities in other geographic areas and by non-U.S. persons depending on the circumstances. Our U.S. subsidiaries, branch offices, and employees are, and our non-U.S. subsidiaries, branch offices, and employees may become, subject to those prohibitions and other regulations.

We are a German bank and our activities with respect to Sanctioned Countries and Sanctioned Persons have been subject to policies and procedures designed to avoid the involvement of persons acting under U.S. jurisdiction in any managerial or operational role and to ensure compliance with United Nations, European Union and German sanctions and embargoes; in reflection of legal developments in recent years, we have further developed our policies and procedures with the aim of ensuring – to the extent legally permitted – compliance with regulatory requirements extending to other geographic areas regardless of jurisdiction. However, should our policies prove to be, or have been, ineffective, we may be subject to regulatory or enforcement action that could materially and adversely affect our reputation, financial condition, or business. We have taken action to reduce the risk of compliance violations. In 2007, our Management Board decided that we will not engage in new business with counterparties in countries such as Iran, Syria, Sudan and North Korea and to exit existing business to the extent legally possible. It also decided to limit our business with counterparties in Cuba. Iran, North Korea, Syria and Cuba are currently designated as state sponsors of terrorism by the U.S. State Department.

We had a representative office in Tehran, Iran, which we discontinued on December 31, 2007. Our remaining business with Iranian counterparties consisted mostly of participations as lender and/or agent in a few large trade finance facilities arranged before 2007 to finance the export contracts of exporters in Europe and Asia. As of December 31, 2018, those loans were fully paid back, subsequently the majority of the remaining Iranian business consists of legacy contractual obligations related to guarantees. We do not believe our business activities with Iranian counterparties are or had been material to our overall business, with the aforementioned guarantees having notional amounts of substantially less than 0.01 % of our total assets over recent years. As of December 31, 2020, the revenues from such activities represented substantially less than 0.01 % of our total revenues for the year ended December 31, 2020.

As required by Section 219 of the Iran Threat Reduction and Syria Human Rights Act of 2012 (Section 13(r) of the Securities Exchange Act of 1934, as amended) we have disclosed certain information regarding our activities or transactions with persons subject to U.S. sanctions against Iran and other persons subject to such provision. Such disclosure is set forth in the section of this document entitled “Disclosures Under Iran Threat Reduction and Syria Human Rights Act of 2012”, which follows “Item 16H: Mine Safety Disclosure”.

We are also engaged in a limited amount of business with counterparties domiciled in Cuba, which is not subject to any United Nations, European Union or German embargoes. The business consists of a limited number of letters of credit and of cash payments, each without a U.S. nexus, and it represented substantially less than 0.01 % of our assets as of December 31, 2020. The letters of credit served to finance commercial products such as machinery as well as medical products.

We have set up appropriate processes and procedures aimed at complying with other substantial changes in U.S. economic sanctions that have occurred since 2017. In August 2017, the United States enacted the “Countering America’s Adversaries Through Sanctions Act” (referred to as “CAATSA”), which codifies existing U.S. sanctions against Russia (including designation of Russian entities under U.S. sanctions), expands U.S. secondary sanctions against Russia, tightens existing sectoral sanctions (targeting specific sectors of the Russian economy), and permits the imposition of sectoral sanctions against additional sectors of the Russian economy. In particular, expanded U.S. secondary sanctions under CAATSA allow for the imposition of U.S. sanctions on non-U.S. entities who engage in “significant” transactions with Russian specially designated nationals (SDNs) or specific entities in the Russian defense and intelligence sectors. We do not believe we have engaged or are currently engaged in any transactions with Russian entities that violate, or are sanctionable under, U.S. sanctions. However, given the broad discretion U.S. authorities have in interpreting and enforcing U.S. sanctions, there can be no assurances that U.S. authorities will not bring enforcement actions against us, or impose secondary sanctions on us for our ongoing activities. Any such actions could have a material impact on our business and harm our reputation. It is also possible that the United States could impose broader sanctions on Russia or Russian entities in the future and that such sanctions could have a material impact on our business activities.

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Additionally, since 2017, the U.S. Administration has imposed a number of sanctions against the Government of Venezuela and Venezuelan officials. These sanctions prohibit (beginning on August 5, 2019) virtually all unlicensed transactions involving the Government of Venezuela, including state owned or state controlled companies, and also threaten to impose regulations on (non-U.S.) persons having materially assisted such transactions or dealings. We have taken steps and established processes and procedures aimed at complying with these U.S. sanctions against the Government of Venezuela. In response to these U.S. sanctions, we have wound down several client relationships. With respect to entities of the Government of Venezuela, we are currently only engaged in legacy transactions. We do not believe that any of our remaining activities related to the Government of Venezuela violate U.S. sanctions. However, given the broad discretion U.S. authorities have in interpreting and enforcing U.S. sanctions, there can be no assurances that U.S. authorities do not allege that our ongoing activities violate U.S. sanctions.

Political and trade tensions between the United States and China led to a series of sanctions and countermeasures in 2020 through the end of the Trump Administration in early 2021, some of which are particularly relevant to financial institutions. In November 2020, the United States adopted Executive Order 13959, which restricts and ultimately bars investment by U.S. persons in publicly traded securities of companies the United States determines are affiliated with the Chinese military, as well as related derivatives and indirect investments through funds. These authorities are new and not yet well-defined, and their ultimate impact on financial markets and financial institutions remains unclear. Given the high complexity of these sanctions regulations, there can be no assurance that U.S. authorities will not consider the control measures which we have taken as insufficient.

We are aware, through press reports and other means, of initiatives by governmental and non-governmental entities in the United States and elsewhere to adopt laws, regulations or policies prohibiting transactions with or investment in, or requiring divestment from, entities doing business with Sanctioned Countries, particularly China, Iran and Russia. Such initiatives may result in our being unable to gain or retain entities subject to such prohibitions as customers or as investors in our securities. In addition, our reputation may suffer due to our association with such countries. Such a result could have significant adverse effects on our business or the price of our securities. It is also possible that new direct or indirect secondary sanctions could be imposed by the United States or other jurisdictions without warning as a result of geopolitical developments.

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Item 4: Information on the Company

History and Development of the Company

The legal and commercial name of our company is Deutsche Bank Aktiengesellschaft. It is a stock corporation organized under the laws of Germany.

Deutsche Bank Aktiengesellschaft originated from the reunification of Norddeutsche Bank Aktiengesellschaft, Hamburg, Rheinisch-Westfälische Bank Aktiengesellschaft, Düsseldorf, and Süddeutsche Bank Aktiengesellschaft, Munich. Pursuant to the Law on the Regional Scope of Credit Institutions, these were disincorporated in 1952 from Deutsche Bank, which had been founded in 1870. The merger and the name were entered in the Commercial Register of the District Court Frankfurt am Main on May 2, 1957.

We are registered under registration number HRB 30 000. Our registered address is Taunusanlage 12, 60325 Frankfurt am Main, Germany, and our telephone number is +49-69-910-00. Our agent in the United States is: DB USA Corporation, c/o Office of the Secretary, 60 Wall Street, Mail Stop NYC60-4099, New York, NY 10005.

For information on significant capital expenditures and divestitures, please see “Management Report: Operating and Financial Review: Deutsche Bank Group: Significant Capital Expenditures and Divestitures” in the Annual Report 2020.

The Securities and Exchange Commission (“SEC”) maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC, such as Deutsche Bank Aktiengesellschaft, with the address http://www.sec.gov. Our filings are available on the SEC’s Internet site under File Number 001-15242. Our Internet address is http://www.db.com.

Business Overview

Our Organization

Please see “Management Report: Operating and Financial Review: Deutsche Bank Group: Our Organization” in the Annual Report 2020. For information on net revenues by geographic area and by corporate division please see Note 4 “Business Segments and Related Information: Entity-Wide Disclosures” to the consolidated financial statements and “Management Report: Operating and Financial Review: Results of Operations: Segment Results of Operations” in the Annual Report 2020.

Management Structure

Please see “Management Report: Operating and Financial Review: Deutsche Bank Group: Management Structure” in the Annual Report 2020.

Our Business 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 infrastructure. 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 liberating capital in an economically rational manner.

Progress towards our strategic transformation

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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 pandemic. 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 growing 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 € 24.2 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 assumptions 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.

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.

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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 navigate 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 Regulation (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 % and Leverage ratio (phase-in) was 4.4 %. 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 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: sustainable 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 management managed by our Asset Management).

In 2020, we further improved our sustainability governance structure by establishing a Sustainability Committee. The committee, 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.

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Our Supervisory Board and our Management Board reinforced the bank’s sustainability ambition by tying our top-level executives’ 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 management 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 sustainability-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 associated 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.

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.

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Our Financial Targets

Our financial targets are based on our financial results prepared in accordance with the International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) and endorsed by the European Union (“EU”). The financial information included in this Annual Report on Form 20-F, by contrast, is prepared in accordance with IFRS as issued by IASB, which differs from EU IFRS. For further information, see Note 1, “Significant accounting policies and critical accounting estimates – Basis of accounting – EU carve-out” to the Consolidated Financial Statements.

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 expenses 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 agreements 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 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.

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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 experiencing 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 payments, 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 trainings 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 understanding 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.

The 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 excluding 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 U.S. 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.

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.

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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 approximately 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 International 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 management. 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 conversion 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 mortgage lending. In IPB, we integrated ESG into our investment platform and launched ESG-enhanced wealth mandates.

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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 management 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 extended 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 number 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).

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The Competitive Environment

2020 The Global Economy

The COVID-19 pandemic led to unprecedented GDP declines in all countries in 2020, 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 protracted by widespread vaccination delays. By the end of 2020, a resurgence of COVID-19 cases was observed in various regions and many countries have moved to re-impose national lockdowns. Overall, global economic growth decreased by 3.3 % in 2020 in comparison to 3.0 % growth reported in 2019. Global inflation was at 2.7 % in 2020. In the industrialized countries, GDP plunged by 5.1 % and consumer prices rose by 0.7 % while GDP of emerging market economies decreased by 2.1 % and inflation reached 3.9 %.

Following a sharp contraction in the first half of 2020, the Eurozone economy recovered strongly, but suffered another albeit much smaller GDP decline in the final quarter. Households and businesses were supported by massively expanded fiscal policy measures and the ECB’s expansionary monetary policy, which provided favorable financial conditions. At the end of 2020, the ECB increased the Pandemic Emergency Purchase Program (PEPP) by another € 500 billion, expanding it to a total of € 1.85 trillion. In addition, PEPP will run nine months longer than planned, until at least the end of March 2022. At the beginning of the fourth quarter of 2020, a second wave of COVID-19 infections gained momentum and required renewed containment measures. A modest trade deal between the EU and the UK was finally agreed in December 2020. In 2020 the Eurozone economy decreased by 6.8 % and consumer prices rose by only 0.2 %. Due to the slump caused by the COVID-19 pandemic, German economic activity fell by 5.0 % in 2020.

The U.S. economy experienced a massive contraction in the second quarter of 2020, followed by a stronger than expected recovery. The unemployment rate climbed to new record highs, but the labor market improved again as the recovery progressed. A strong second wave of COVID-19 in combination with delayed additional fiscal stimulus constrained the recovery. All in all, U.S. GDP contracted by 3.5 % in 2020. Inflation decelerated to 1.2 % from 1.8 % in 2019. The Federal Reserve Bank acted quickly and aggressively to keep funds flowing freely in money and credit markets

The Japanese economy recovered faster than expected in the third quarter after contracting sharply in the first half of the year. During the 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. GDP contracted by 4.9 % in 2020. The Bank of Japan kept an accommodative policy stance, while paying attention to policy side effects. Inflation decelerated to 0 %, after 0.5 % in 2019.

Asian economies experienced a stronger than expected rebound in economic activity from impact of COVID-19. 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. Emerging Asia economies contracted by only 1.0 % in 2020. Asian central banks have reached the limits of conventional stimulus through interest rate cuts. China continued its V-shaped recovery, making it the only major economy achieving a positive growth rate in 2020 of 2.3 %. The rebound was driven by a robust industrial sector and a faster-than-expected recovery in services activity. The surge in China contributed strongly to the recovery in global trade. Inflation decelerated to 2.5 % in 2020 from 2.9 % in 2019.

2021 Outlook

In 2021, the course of the COVID-19 pandemic and the progress made with regards to vaccinations 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 economic growth expectations indicate. However, the pace of this recovery will significantly vary across countries depending on access to vaccines and availability of government support. We expect global GDP to grow by 6.3 % in 2021. The global inflation rate is expected to rise gradually to 2.9 % from 2.7 % in 2020. For industrialized countries, we expect GDP growth to pick up to 5.0 % and consumer prices to increase by 1.6 % in 2021 from negative 5.1 % and 0.7 % respectively. Economic growth in emerging markets is projected to recover to 7.1 % in 2021, while inflation is expected to slow to 3.7 % from 3.9 % in 2020.

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In the Eurozone the vaccine rollout is expected to support activity from the end of spring onwards, bringing it to pre-COVID-19 levels by the end of 2021. GDP in 2021 is expected to grow by 5.6 %. Eurozone economies are expected to benefit from an improvement in global manufacturing activity, although the EU Recovery Fund will not disburse funds until the second half of 2021. The ECB is not expected to revisit its monetary policy stance until autumn 2021, six months before the scheduled expiry for the PEPP net purchases. In 2021, Eurozone inflation is expected to increase to 1.0 %. Following a GDP contraction of 5.0 % in 2020, we expect the German economy to grow by 4.0 % in 2021. After a weak first quarter, German GDP growth is expected to pick up strongly. Exports are expected to remain robust, given the fast rebound in global trade and an expected decline in trade policy uncertainty. A thriving export business is a catalyst for investment spending, which is expected to rebound strongly.

We expect U.S. economy to expand by 5.9 % in 2021. The new Biden administration is expected to deliver another tranche of fiscal support in 2021. A joint infrastructure plan is expected to be passed later 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 would pull forward Federal Reserve Bank’s Quantitative Easing tapering to the end of 2021. The Federal Reserve is expected to maintain its policy rate at 0.125 % in 2021. We expect U.S. inflation to increase to 2.4 % in 2021 from 1.2 % in 2020.

The Japanese economy is expected to recover by 1.5 % in 2021. Japan is expected to achieve a high level of vaccination by the end of the first half of 2021 given the amount of COVID-19 vaccines it has secured. Inflation could be impacted by government policy factors and remain subdued (the base year will change from 2015 to 2020). We expect the inflation to be at 0.2 % in 2021.

In the course of 2021, vaccines are expected to become more widely available in emerging markets. Economies with low activity levels and relatively high reliance on domestic demand, as in most Latin American countries, should particularly benefit. A gradual recovery of the travel industry is expected to further support economic recovery, especially in Asia. Emerging market GDP growth is expected to accelerate by 7.1 % in 2021, and in Asia by 8.8 %. Inflation in emerging markets is expected to decelerate to 3.7 % in 2021, from 3.9 % in 2020.

The positive economic momentum of the Chinese economy is likely to continue in the first half of 2021, supported by stronger external demand. In 2021 the Chinese economy is expected to expand by 10 %. This will set the stage for fiscal and monetary policy normalization by the second half of the year. The People’s Bank of China policy objectives for 2021 have shifted to more structural issues. The tightening of property loans should be a strong policy signal. Borrowing of local governments is likely be constrained, which will slow infrastructure investments. We expect the People’s Bank of China to raise its policy rate two times by 10 basis points each time in the second half of 2021. Chinese inflation is forecasted to decelerate to 1.5 % in 2021 from 2.5 % in 2020.

There are a number of risks to our global economic outlook. Ongoing challenges from COVID-19 and the possibility of further lockdowns 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.

Competitor Landscape

Against this backdrop, Deutsche Bank competes in the financial services sector with a spectrum of competitors, who include other universal banks, commercial banks, savings banks and other public sector banks, broker dealers, investment banking firms, asset management firms, private banks, investment advisors, payments services providers, financial technology firms and insurance companies. Some of the competitors are global like Deutsche Bank, while others have a regional, product or niche client footprint. Deutsche Bank competes on a number of factors, including the quality of client relationships, transaction execution, products and services, innovation, reputation and price.

Profitability of the European banking industry tumbled in 2020 as a result of the COVID-19 pandemic-induced recession. Revenues and costs were both moderately lower compared to the prior year, while loan loss provisions surged to the highest level in a decade. Likewise, loan growth with non-financial companies in the euro area shot up to multi-year highs before stabilizing. Momentum in private-sector deposits was the strongest since the financial crisis. Even more, negative interest rates continue to keep the net interest margin under pressure. Total assets increased substantially, also due to higher liquidity holdings at central banks and purchases of government bonds. In corporate finance, European banks lost further market share to U.S. competitors.

The outlook for the European banking industry in 2021 will continue to be shaped by the COVID-19 pandemic, associated market volatility and the onset of an economic recovery. A number of trends which have dominated the banking business in 2020 are likely to go into reverse, although the markets remain supportive of our business so far this year. First, the trading boom in capital markets could slow as economies start to recover and uncertainty retreats. Stock market valuations could continue to rise, and M&A activity could pick up, as a result of extremely loose monetary policies. Second, loan loss provisions may come down somewhat from their peak. Third, loan growth particularly with corporates may slow further after the spike at the beginning of the crisis, as the sector has accumulated vast liquidity reserves.

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Some of the biggest risks for banks stem from delays and other setbacks in the vaccination process against COVID-19, including more contagious and vaccine-resistant new mutations, as well as a greater than envisaged impact of renewed lockdowns on the labor market and particularly services industries which are currently suffering heavily. This could trigger a wave of corporate but also private insolvencies and thus another spike in loan loss provisions. By contrast, with a new administration taking office in the U.S., geopolitical and trade tensions are less likely to escalate.

Banks’ revenue growth may be sluggish or even negative in 2021 as some of the previous tailwinds, especially in investment banking, subside. Very low interest rates may continue to eat into net interest income. However, this could be more than compensated for by lower provisions. Hence, bank profitability might recover a significant part of the 2020 plunge. Where applicable, banks in Europe are also expected to resume dividend payments, which had been suspended by supervisors last year.

In our home market, Germany, the retail banking market remains fragmented and our competitive environment is influenced by the three pillar system of private banks, public banks and cooperative banks. Competitive intensity has increased in recent years following some consolidation activity, particularly among public regional banks (Landesbanken) and private banks, and increased activity levels from foreign players.

Looking at the wider banking ecosystem, the evolution of financial technology firms remains as much an opportunity as a challenge for banks. While we see the risk of banking disruption primarily through big technology companies and in select product areas, particularly the unregulated segments, some banks have also taken the opportunity to selectively partner with financial technology firms and leverage their solutions to become more efficient and/or develop differentiated delivery channels for end clients.

Regulatory Environment

The flow of new legislative proposals under the post-crisis global regulatory reform agenda has slowed, but the focus of regulators turned to measures to support banks and the economy during COVID-19, as well as implementing and supervising previous reforms. Preparations for the implementation of further global reforms also accelerated.

While a number of regulatory reforms impacting Deutsche Bank are already in force, others continue to be developed on an international level and implemented regionally. Where primary legislation has been agreed on by lawmakers, regulators have yet to develop detailed rules, or determine their cross-border application, which might lead to a fragmented and inconsistent landscape. Moreover, certain post-crisis reforms which have already been implemented are or have been subject to reviews that might lead to additional changes in legislation in the coming years. The impact of the implementation of such final or revised standards on specific institutions remains uncertain. In some instances there remains a lack of clarity around the final rules and the impact that they might have on banks in different regions.

During 2020, a number of international developments in the area of banking regulation and supervision have been implemented and will continue to be further refined, in particular with a view to strengthening international standards to create financially resilient institutions and ensuring resolvability of banks. At the same time, authorities adopted temporary measures to provide limited regulatory relief, in view of COVID-19.

Capital, liquidity and leverage requirements – In 2020, several authorities adopted measures to provide temporary relief to banks and the economy, including on capital requirements, liquidity and reporting, as well as exemptions to the leverage exposure. These were in line with the global regulatory framework established by the Basel Committee, the so-called Basel Accords (Basel 1, 2 and 3). On December 23, 2020 the EU published a Delegated Regulation changing the capital treatment of software assets, with partial exemption form capital deduction.

On October 3, 2019, the Federal Reserve and other U.S. regulators adopted final rules that tailor the prudential standards applicable to large U.S. and foreign banking organizations based on their risk profiles. The final rules, which took effect December 31, 2019, implement section 401 of the Economic Growth, Regulatory Relief and Consumer Protection Act (EGRRCPA) of 2018. The rule tailors Enhanced Prudential Standards and U.S. Basel 3 capital and liquidity standards for banking organizations with U.S.$ 100 billion or more in total consolidated assets.

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At the international level, in December 2017, the Basel Committee published its final agreement (“December 2017 Agreement”) on further revisions to the Basel 3 framework that aim to increase consistency in risk-weighted asset calculations and improve the comparability of banks’ capital ratios. The December 2017 Agreement includes, among other things, changes to the standardized and internal ratings-based approaches for determining credit risk, revisions to the operational risk framework, and an “output floor”, set at 72.5 %. The “output floor” limits the amount of capital benefit a bank can obtain from its use of internal models relative to using the standardized approach. This package of reforms is intended to finalize the Basel 3 framework and would reduce the ability of banks to apply internal models, while making the standardized approaches more risk-sensitive and granular. In addition, the December 2017 Agreement introduces a leverage ratio buffer for global systemically important banks (“G-SIBs”), such as Deutsche Bank, to be met with Tier 1 capital and sets it at 50 % of the applicable risk-based G-SIB buffer requirement, which was included in the adopted banking reform package. Due to COVID-19, the Basel Committee deferred the implementation date for the changes in the December 2017 Agreement to January 1, 2023, with a phase-in period of five years through January 1, 2028 for the output floor. The EU is planning to implement this reform with a legislative proposal package, expected to be issued in mid-2021 (revision of the Capital Requirements Regulation or CRR III). In addition, the U.S. Federal Reserve Board is planning to release a proposal to implement this reform as well, which is expected to be released in mid-2021 as well.

In addition, on January 14, 2019 the Basel Committee also reached an agreement (“January 2019 Agreement”) on reforms to the market risk framework, known as the Fundamental Review of the Trading Book (FRTB). The main features of the final standard include an internal models approach to determine the risk weight of exposures that relies on the use of expected shortfall models. The standard sets out separate capital requirements for risks that are deemed non-modellable and includes a more risk-sensitive standardized approach as a fallback to the internal models approach. CRR II (as part of the banking reform package) has introduced specific reporting requirements for market risk based on the revised framework as the first step in the application of the FRTB by EU institutions, and empowers the European Commission to propose further regulations to establish own funds requirements for market risk based on the FRTB.

The CRR III reform package will likely affect our business by raising our regulatory capital and liquidity requirements and by leading to increased costs. The December 2017 Agreement and the January 2019 Agreement could also affect our business by imposing higher capital charges when adopted into law.

Capital planning and stress testing – Although on January 31, 2020 the European Banking Authority (“EBA”) and the European Central Bank (“ECB”, our principal supervisor) launched the 2020 EU-wide stress test, this was later postponed to 2021, due to COVID-19. This test was designed to provide supervisors, banks and other market participants with a common analytical framework to compare and assess the resilience of EU banks to economic shocks, while at the same time releasing the macroeconomic scenarios for the test. In November 2020, the EBA published its revised stress test methodology for 2021.

The stress test will be conducted on a sample of 49 EU banks, including Deutsche Bank. In line with the previous exercises, this exercise does not include a pass-fail threshold as the results of the exercise are designed to serve as an input to the SREP. The EBA expects to publish the results of the exercise by end-July, 2021. We are subject to SREP for an ongoing assessment of risks, governance arrangements and the capital and liquidity situation, which is a review of the arrangements, strategies, processes and mechanisms of supervised banks on a regular basis, in order to evaluate risks to which these banks are or might be exposed, risks they could pose to the financial system, and risks revealed by stress testing. The SREP can result in Pillar 2 capital requirements or guidance and liquidity requirements for the relevant institution.

Both DB USA Corporation and DWS USA Corporation, our U.S. intermediate holding companies, were subject to the Federal Reserve Board’s Comprehensive Capital Analysis and Review (“CCAR”) for 2020. On June 25, 2020, the Federal Reserve Board publicly indicated that it did not object to the 2020 capital plans submitted by DB USA Corporation and DWS USA Corporation. DB USA Corporation and DWS USA Corporation will make their next capital plan submissions to the Federal Reserve Board in April 2021. Due to the material uncertainty of the trajectory of the economic recovery and its effects on the health of the banking organizations, a second round of supervisory stress tests were run during the second half of 2020. The Federal Reserve released results on December 18, 2020 which showed post stress capital well above regulatory minimums for DB USA Corporation and DWS USA Corporation. On March 4, 2020, the Federal Reserve Board issued a rule to amend its CCAR process to combine the CCAR quantitative assessment and the buffer requirements in the Federal Reserve Board’s capital rules to create an integrated capital buffer requirement – the Stress Capital Buffer (SCB). The Fed’s SCB went into effect for the first time on October 1, 2020 and will be re-calculated annually, with the revised assessment taking effect each year on October 1st.

Recovery and resolution – The major jurisdictions where we have significant group operations have now finalized the implementation of the Financial Stability Board’s (FSB) Key Attributes for Effective Resolution Regimes. Under the EU’s Bank Recovery and Resolution Directive (BRRD) and Single Resolution Mechanism (SRM), to which we are subject, competent supervisory and resolution authorities have far-reaching powers to impose resolution measures upon banks that are deemed to be failing or likely to fail. Resolution measures, in particular, include the power to reduce, including to zero, the nominal value of shares, or to cancel shares outright, and to write down certain eligible subordinated and unsubordinated unsecured liabilities, including to zero, or convert them into equity (commonly referred to as “bail in”). To ensure sufficient availability of liabilities with loss-absorbing capacity that could be bailed in, banks in the European Union must meet, or will have to meet, certain minimum requirements such as the Total Loss Absorption Capacity (TLAC) or the Minimum Requirements for Own Funds and Eligible Liabilities (MREL) (as further explained below).

For a bank directly supervised by the ECB, such as Deutsche Bank, the Single Resolution Board (“SRB”) draws up the resolution plan, assesses the bank’s resolvability and may require legal and operational changes to the bank’s structure to ensure its resolvability.

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In the United States, Deutsche Bank AG is required under Title I of the Dodd-Frank Act, as amended, to prepare and submit periodically to U.S. regulators a plan for the orderly resolution of its U.S. subsidiaries and operations in the event of future material financial distress or failure (the “U.S. Resolution Plan”). Deutsche Bank AG filed its most recent U.S. Resolution Plan in September 2020 and received written regulatory feedback in December 2020. The Federal Reserve Board and Federal Deposit Insurance Corporation (FDIC) found that Deutsche Bank’s U.S. Resolution Plan had no deficiencies and concluded that the previously identified shortcoming, associated with governance mechanisms and related escalation triggers, was satisfactorily addressed. Following this submission, Deutsche Bank’s next targeted U.S. Resolution Plan is due on or before December 17, 2021.

Loss-absorbing capacity – Following the FSB’s final term sheet on TLAC in November 2015, several jurisdictions (including Germany) have started to implement the TLAC standard in their regulatory frameworks. The TLAC standard is designed to ensure that G-SIBs, such as Deutsche Bank, maintain enough capital and long-term debt instruments that can be effectively bailed-in to absorb losses and recapitalize the bank. The EU banking reform package implemented the FSB’s TLAC standard for G-SIBs by introducing a new “Pillar 1” minimum requirement for eligible liabilities (or “MREL”) for G-SIIs (the European equivalent term for G-SIBs). This new requirement is based on both risk-based and non-risk-based denominators and is set at the higher of 18 % of total risk exposure and 6.75 % of the leverage ratio exposure measure following a transition period (until December 31, 2021, 16% of total risk exposure and 6% of the leverage ratio exposure measure). It can be met with Tier 1 or Tier 2 capital or debt that meets specific eligibility criteria. In addition, the competent authorities will have the ability to impose a TLAC add-on requirement on G-SIIs. We also are subject to TLAC requirements in other jurisdictions. For example, the Federal Reserve Board’s rules implementing the TLAC standard in the United States are effective as of January 2019, with TLAC requirements that apply to U.S. intermediate holding companies (such as ours) of non-U.S. G-SIBs. These rules include a minimum TLAC requirement and TLAC buffer, a minimum long-term debt requirement and clean holding company requirements.

Completion of the Banking Union and reduction of non-performing exposures – A European Deposit Insurance Scheme (EDIS) is intended to complete the Banking Union but the corresponding proposal is still under negotiation. Discussions have centered on EDIS, while in 2020 Member States agreed in principle to set up a backstop to the Single Resolution Fund (SRF) through the European Stability Mechanism (ESM). As some voices have requested more progress on risk reduction as a prerequisite for the implementation of any risk sharing arrangement, the recent focus has been to reduce non-performing loans (NPL) of banks in the EU, and prevent further build-up as a result of the COVID-19 pandemic. To that end, in December 2020 the European Commission issued a new NPL Action plan, but did not propose any legislative changes to prudential regulation.

Development of the Capital Markets Union and related regulation – In 2020, the European Commission proposed amendments to the Markets in Financial Instruments Directive (MiFID II) as part of its Capital Markets Recovery Package following the outbreak of COVID-19, in order to provide regulatory relief to banks and corporates, and support economic recovery. The amendments largely relate to investor protection provisions, such as the reduction in requirements for costs and charges disclosures, as well as a temporary suspension of best execution reports for a period of two years. The amendments will enter into force in the first quarter of 2021. Against the background of the COVID-19 pandemic, in 2020 the European Commission also issued a notice of information on the postponement of entry into application of the open access provisions with regard to exchange-traded derivatives in the Markets in Financial Instruments Regulation (MiFIR). A more fundamental review of the MiFID/R covering market structure provisions will take place in the third quarter of 2021.

The European Commission also published its new Capital Markets Union (CMU) Action Plan on September 24, 2020, as it aims to strengthen the CMU and post-COVID-19 recovery in the coming years. The key proposed actions focus on scaling up European securitization markets, supporting European banks’ ability for market making, simplifying listing rules for public markets, and developing a European single access point (ESAP) so that investors can access financial and sustainability-related information.

Benchmarks – Ahead of the expected cessation of LIBOR production at the end of 2021, regulators have concentrated efforts on speeding up transition from interbank offered rates (IBORs) to risk-free rates, developing tough legacy solutions, and finalizing proposals and authorities’ powers to implement replacement rates in their respective jurisdictions. In the EU, amendments to the Benchmarks Regulation to support the European Commission’s powers on the statutory replacement rate, and extend the transition period for the third country benchmark regime until the end of 2023, will enter into force in the first quarter of 2021.

On October 21, 2020, the UK government introduced a Financial Service Bill which amends the UK Benchmark Regulation to facilitate the orderly wind-down of critical benchmarks by providing new powers to the UK Financial Conduct Authority (FCA) to mandate a statutory replacement rate for tough legacy contracts referencing LIBOR. The FCA will consult on its benchmark powers through 2021. In the U.S., the Alternative Reference Rate Committee (ARRC) issued its recommendation on March 6, 2020 for a legislative solution to minimize legal uncertainty and adverse economic impacts associated with LIBOR transition for certain contracts. Legislative solutions based on the ARRC recommendation are expected to progress in 2021 at both the federal and New York state level.

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Digital Transformation – Several jurisdictions progressed initiatives in 2020 to both address risks and capitalize on the benefits associated with the digitalization of financial services. Work in this area is expected to continue in 2021 with a focus on data protection, cybersecurity, and operational resilience.

On September 24, 2020, the European Commission published its Digital Finance Strategy, which outlined regulatory priorities and policy actions through 2024. The strategy was published alongside legislative proposals to strengthen and harmonize financial sector operational resilience requirements (proposal for a Regulation of Digital Operational Resilience Act for the Financial Sector (DORA)) and establish a regulatory framework for crypto-assets (proposals for a Regulation on Markets in Crypto-assets (MiCA) and a Regulation on a Pilot Regime for Market Infrastructures Based on Distributed Ledger Technology (DLT Pilot Regime)). The Digital Services Act and Digital Markets Act proposals followed on December 15, 2020, which focus on protecting fundamental rights of all users of digital services and establishing a level playing field for businesses and consumers with regards to online platforms. On December 16, 2020, the EU published a new Cybersecurity Strategy which was accompanied by a new draft Directive on the resilience of critical entities (CER Directive) and a proposal for a revised Directive on measures for high common level of cybersecurity across the Union (NIS 2). The proposals aim at adapting online and offline security requirements in response to growing interconnectedness and digitalization.

Work by UK and U.S. authorities focused primarily on putting in place a stronger regulatory framework to promote operational resilience of firms and financial market infrastructures. In the UK, the Bank of England, Prudential Regulatory Authority, and Financial Conduct Authority (FCA) progressed with their December 2019 policy proposals which update requirements for the financial sector and embeds operational resilience into the UK prudential framework. The final UK policy is expected in the first half of 2021. In the U.S., the Federal Reserve Board, FDIC, and Office of the Comptroller of the Currency (“OCC”) released a paper on October 30, 2020 applicable to certain large U.S. domestic banks, which provides guidance on sound practices designed to help banks increase operational resilience for their critical operations and core business lines. At the international level, the Basel Committee published on August 6, 2020 two linked principles documents related to operational resilience and the management of operational risk to help banks enhance their ability to withstand, adapt and recover from operational risk-related events in order to mitigate potential severe adverse impact.

Investment Firm Regulation – On November 27, 2019, the European Parliament and the Council adopted the Investment Firm Regulation and the Investment Firm Directive, which will introduce substantive regulatory changes (including to the calculation of capital requirements) in respect of investment firms, such as our subsidiary DWS. The Investment Firm Regulation and the Investment Firm Directive (as implemented into German law) will apply in large part from June 26, 2021.

Climate change, environmental and social issues

The Sustainable Development Goals (SDGs) adopted by the United Nations member states in 2015 set ambitious goals for achieving a better and more sustainable future. In doing so, they address the most pressing economic, social and environmental challenges of our time, including those closely related to climate change. To effectively respond to climate change and achieve the SDGs, significant investment levels are required. In 2020, COVID-19 pandemic has put even greater emphasis on sustainable development and related investments and re-financing measures for corporates. Investors, clients and the broader public are expecting t he financial sector to have a critical role to play in closing existing investment gaps by mobilizing private capital to enable the transition of economies towards low-carbon and sustainable growth.

In this context, the European Commission continued its efforts to drive its Action Plan on Sustainable Finance and its ”European Green Deal”. Key items included the passing of the EU Taxonomy and Disclosure Regulation, which entered into law in 2020. The work on the several respective implementation rules is ongoing. Similar activity took place amongst regulators around the world, particularly in APAC. The political and regulatory agenda in many jurisdictions delivers clear supervisory expectations for banks to manage sustainability risks with a focus on climate-related risks. Another focus is transparency, with many regulators in Europe, America and APAC publishing different initiatives on non-financial reporting, labelling of sustainable investment products and disclosure of shares of sustainable business. Deutsche Bank is engaging constructively with regulators globally on their agenda. This includes the work on many public consultations on the topic, the largest one of which regarded the EU renewed Sustainable Finance Strategy, on which Deutsche Bank submitted a substantial response.

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Regulation and Supervision

Our operations throughout the world are regulated and supervised by the relevant authorities in each of the jurisdictions where we conduct business. Such regulation relates to licensing, capital adequacy, liquidity, risk concentration, conduct of business as well as organizational and reporting requirements. It affects the type and scope of the business we conduct in a country and how we structure specific operations. In reaction to the 2008 financial crisis, the regulatory environment has undergone and is still undergoing significant changes.

Highlights

On June 27, 2019, a comprehensive package of reforms designed to further strengthen the resilience of European Union banks (referred to in the following as the “banking reform package”) entered into force. The banking reform package includes amendments to the existing regulation on prudential requirements for credit institutions and investment firms, also referred to as the Capital Requirements Regulation (“CRR”), the directive on access to the activity of credit institutions and the prudential supervision of credit institutions and investment firms, also referred to as the Capital Requirements Directive (“CRD”), the European Union’s Regulation establishing Uniform Rules and a Uniform Procedure for the Resolution of Credit Institutions and certain Investment Firms in the Framework of a Single Resolution Mechanism and a Single Resolution Fund (the “SRM Regulation”), and the Bank Resolution and Recovery Directive (“BRRD”). In Germany, the amendments introduced by the banking reform package to the BRRD and the CRD have been implemented into German law by the Risk Reduction Act ( Risikoreduzierungsgesetz ).

The adopted changes incorporate various remaining elements of the regulatory framework agreed within the Basel Committee on Banking Supervision (“Basel Committee”) and the Financial Stability Board (“FSB”) to refine and supplement the global regulatory framework established by the Basel Committee, the so-called Basel Accords (Basel 1, 2 and 3). This includes more risk-sensitive capital requirements, in particular in the area of counterparty credit risk and for exposures to central counterparties, methodologies that reflect more accurately the actual risks to which banks may be exposed, a binding leverage ratio, a binding net stable funding ratio, tighter regulation of large exposures, new reporting requirements for market risk that may be supplemented at a later stage by own funds requirements, and a requirement for global systemically important institutions (“G-SIIs”), such as Deutsche Bank, to hold certain minimum levels of capital and other instruments which are capable of bearing losses in resolution (“Total Loss-Absorbing Capacity” or “TLAC”). Other measures are aimed at improving banks’ lending capacity to support the European Union economy and at further facilitating the role of banks in achieving deeper and more liquid European Union capital markets. While many provisions take effect in 2021, certain parts, including the TLAC requirements, have applied since June 27, 2019. The banking reform package will likely affect our business by raising our regulatory capital and liquidity requirements and by leading to increased costs.

Similarly, the implementation of the remaining outstanding proposals under Basel 3 as contained in the December 2017 Agreement and in the January 2019 Agreement (see “The Competitive Environment – Regulatory Environment” above) could also affect our business by imposing higher capital charges when adopted into law. The implementation date of Basel 3 has been deferred to January 1, 2023 due to the economic impact of Covid-19.

Furthermore, a new regulation amending the CRR entered into force on April 26, 2019 relating to minimum loss coverage for non-performing exposures, creating a statutory prudential backstop against excessive future build-up of non-performing loans without sufficient loss coverage on banks’ balance sheets. Finally, in response to the COVID-19 pandemic, the European Union adopted a new regulation containing tailored adjustments to the CRR including the amendments contained in the banking reform package (the “CRR Quick Fix”). The CRR Quick Fix entered into force on June 27, 2020, and primarily aims to facilitate lending by banks as a response to the pandemic.

Also, the United Kingdom (UK) ceased to be a Member State of the European Union as from 11 pm on January 31, 2020, and entered into a ‘Transition Period’ pursuant to the UK/EU Withdrawal Act 2020 during which EU law continued to be applicable in the UK. On December 31, 2020, the Transition Period terminated, and EU law was no longer applicable within the UK. For the UK, this meant that all extensions of EU Member State ‘privileges’ were no longer available including any reliance upon the European Passport and automatic rights of access to EU market infrastructure.

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As from the end of the Transition Period, new UK requirements must be complied with when conducting regulated activity in the UK, both as regards cross border business as well as Deutsche Bank AG London Branch activity. Deutsche Bank AG is planning to continue to provide banking and other financial services in the UK both from its London Branch and also on a cross-border basis in compliance with applicable law. Deutsche Bank AG is now subject to additional regulatory requirements in the United Kingdom, and its activities in the United Kingdom will be supervised and monitored by both the Prudential Regulatory Authority (“PRA”) and the Financial Conduct Authority (“FCA”). Deutsche Bank AG is already in the process of applying for authorization to provide banking and other financial services in the United Kingdom. The date by which Deutsche Bank AG can expect to receive UK authorisation is currently unknown, and in the meantime, it has the benefit of ‘deemed permission’ pursuant to the UK’s Temporary Permissions Regime (TPR). The TPR also provides Deutsche Bank AG with some temporary relief as to needing to comply with a number of UK rules by allowing ‘substituted compliance’ with similar EU rules. However, certain UK rules have already come into effect and some of these conflict with the similar European rules, and this has already posed challenges for both Deutsche Bank AG and the financial services industry generally (e.g., Derivatives Trading Obligation and Share Trading Obligation under MiFID).

On November 27, 2019, the European Parliament and the Council adopted the Investment Firm Regulation and the Investment Firm Directive, which will introduce substantive regulatory changes (including to the calculation of capital requirements) in respect of investment firms, such as our subsidiary DWS. The Investment Firm Regulation and the Investment Firm Directive (as implemented into German law) will apply in large part from June 26, 2021.

The following sections present a description of the regulation and supervision of our business in our home market Germany under the European Union framework of regulation and in the United States.

Regulation in Germany under the Regulatory Framework of the European Union

We are subject to comprehensive regulation under German law and regulations promulgated by the European Union which are directly applicable law in Germany.

The amendments by the banking reform package to the BRRD and the CRD have been implemented into German law by the Risk Reduction Act ( Risikoreduzierungsgesetz ) which, in particular, amended the German Banking Act ( Kreditwesengesetz ).

The German Banking Act and the CRR are important sources of regulation for German banks with respect to prudential regulation, licensing requirements, and the business activities of financial institutions. In particular, the German Banking Act requires that an enterprise which engages in one or more of the activities categorized in the German Banking Act as “banking business” or “financial services” in Germany must be licensed as a credit institution ( Kreditinstitut ) or financial services institution ( Finanzdienstleistungsinstitut ), as the case may be. Deutsche Bank AG is licensed as a credit institution and is authorized to conduct banking business and to provide financial services.

Significant parts of the regulatory framework for banks in the European Union are governed by the CRR. The CRR includes requirements relating to regulatory capital, risk-based capital adequacy, monitoring and control of large exposures, consolidated supervision, leverage, liquidity and public disclosure, including Basel 3 standards.

Certain other requirements that apply to us, including those with respect to capital buffers, organizational and risk management requirements, are set forth in the German Banking Act and other German laws, partly implementing European Union directives such as the CRD.

Deutsche Bank AG, headquartered in Frankfurt am Main, Germany, is the parent institution of Deutsche Bank Group. Under the CRR, Deutsche Bank AG, as credit institution and parent company, is responsible for regulatory consolidation of all subsidiary credit institutions, financial institutions, asset management companies and ancillary service undertakings. Generally, the bank regulatory requirements under the CRR and the German Banking Act apply both on a stand-alone and a consolidated basis. However, banks forming part of a consolidated group may receive a waiver with respect to the application of specific regulatory requirements on an unconsolidated basis if certain conditions are met. As of December 31, 2020, Deutsche Bank AG benefited from such a waiver, according to which Deutsche Bank AG needs to apply the requirements relating to own funds, large exposures, exposures to transferred credit risks, leverage and disclosure by institutions, as well as certain risk management requirements, only on a consolidated basis.

Capital Adequacy Requirements

Minimum Capital Adequacy Requirements (Pillar 1)

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The minimum capital adequacy requirements for banks are primarily set forth in the CRR. The CRR requires German banks to maintain an adequate level of regulatory capital in relation to the total of their risk positions, referred to as total exposure amount. Risk positions include credit risk positions, market risk positions and operational risk positions (including, among other things, risks related to certain external factors, as well as to technical errors and errors of employees). The most important type of capital for compliance with the capital requirements under the CRR is Common Equity Tier 1 capital. Common Equity Tier 1 capital primarily consists of share capital, retained earnings and other reserves, subject to certain regulatory adjustments. Another component of regulatory capital is Additional Tier 1 capital, which includes, for example, certain unsecured subordinated perpetual capital instruments and related share premium accounts. An important feature of Additional Tier 1 capital is that the principal amount of the instruments will be written down, or converted into Common Equity Tier 1 capital, when the Common Equity Tier 1 capital ratio of the financial institution falls below a minimum of 5.125 % (or such higher level as the issuing bank may determine). Regulators may require an earlier conversion, for example for stress-testing purposes. Common Equity Tier 1 capital and Additional Tier 1 capital together constitute Tier 1 capital. An additional type of regulatory capital is Tier 2 capital which generally consists of long-term subordinated debt instruments. Tier 1 capital and Tier 2 capital together constitute own funds. Pursuant to the CRR, hybrid capital instruments that qualified as Tier 1 or Tier 2 capital under what is known as Basel 2.5 cease to qualify as such and will be gradually phased out through the end of 2021.

Under the CRR, banks are required to maintain a minimum ratio of Tier 1 capital to total risk exposure amount of 6 % and a minimum ratio of Common Equity Tier 1 capital to total risk exposure of 4.5 %. The minimum total capital ratio of own funds to total risk exposure is 8 %.

Capital Buffers

The German Banking Act also requires banks to build up a mandatory capital conservation buffer (Common Equity Tier 1 capital amounting to 2.5 % of total risk exposure), and authorizes the German Federal Financial Supervisory Authority ( Bundesanstalt für Finanzdienstleistungsaufsicht (“BaFin“)) to set a domestic counter-cyclical capital buffer for Germany (Common Equity Tier 1 capital of generally 0 % to 2.5 % of total risk exposure, or more in particular circumstances) during periods of high credit growth. Due to the impact of the current pandemic, BaFin has temporarily lowered the counter-cyclical capital buffer to 0%. In order to comply with the countercyclical capital buffer requirement, banks must calculate their institution-specific countercyclical capital buffer as the weighted average of the countercyclical capital buffers that apply to them in the jurisdictions where their relevant credit exposures are located. Accordingly, the total countercyclical buffer requirement, if any, with which we need to comply also depends on the corresponding buffer requirements in other jurisdictions. In addition, BaFin may require banks to build up a systemic risk buffer (Common Equity Tier 1 capital of a minimum of 0.5 % of the total risk exposure amount for all exposures to prevent and mitigate long term non-cyclical systemic or macro-prudential risks not otherwise covered by CRR/CRD. Any systemic risk buffer determined by BaFin in excess of 5% would require prior authorization of the European Commission. Deutsche Bank’s current systemic risk buffer is 0 %. G-SIIs are subject to an additional capital buffer (Common Equity Tier 1 capital of between 1 % and 3.5 % of risk-weighted assets), which the BaFin determines for German banks based on a scoring system measuring the bank’s global systemic importance. Deutsche Bank’s current G-SII capital risk buffer is 1.5 %. BaFin can also determine a capital buffer of Common Equity Tier 1 capital of up to 3 % of risk-weighted assets for other systemically important banks (so-called O-SIIs) in Germany, based on criteria measuring, among others, the bank’s importance for the economy in Germany and the European Economic Area. Deutsche Bank is subject to treatment both as a G-SII, as well as an O-SII (on a consolidated basis). Any risk buffer for O-SIIs that exceeds the threshold of 3 % requires prior authorization by the European Commission. Deutsche Bank’s current O-SII capital buffer is 2 %. The buffers for G-SIIs and the buffer for O-SIIs are not cumulative; only the higher of these buffers applies. However, such higher buffer and the systemic risk buffer are cumulative. If the total buffer is higher than 5 %, BaFin needs to seek approval by the European Commission. If a bank fails to build up the required capital buffers, it will be subject to restrictions on the pay-out of dividends, share buybacks and discretionary compensation payments. Also, within the single supervisory mechanism (“SSM”), the European Central Bank (“ECB”) may require banks to maintain higher capital buffers than those required by the BaFin.

Leverage Ratio

The banking reform package (see “Highlights” above) also introduced Tier 1 capital-based a binding minimum leverage ratio requirement of 3 %. The minimum leverage ratio requirement is calculated on a non-risk basis and complements the other risk-based capital requirements. Banks are currently only required to report and publish their leverage ratios and will become required to comply with the minimum leverage ratio requirement from June 28, 2021. The CRR Quick Fix provided competent authorities with the discretion to allow banks to exclude certain central bank exposures from the calculation of the leverage ratio. In September 2020, the ECB and the BaFin declared the existence of exceptional circumstances and allowed such an exclusion until June 27, 2021.

In addition to the minimum leverage ratio requirement, the banking reform package provides for a leverage ratio buffer requirement for G-SIIs (such as Deutsche Bank), which must be met with Tier 1 capital and is set at 50 % of the G-SII's risk-weighted capital buffer rate. The CRR Quick Fix deferred the application of the leverage ratio buffer by one year to January 1, 2023. Certain aspects relating to the leverage ratio buffer requirement as contained in the CRD (such as restrictions on the pay out of dividends etc. if the requirements are not met) must be implemented in the laws of the individual member jurisdictions.

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Pillar 2 Capital Requirements and Guidance

Furthermore, the ECB may impose capital requirements on individual significant credit institutions which are more stringent than the statutory minimum requirements set forth in the CRR, the German Banking Act or the related regulations. Upon completion of the supervisory review and evaluation process (“SREP”) discussed in greater detail below, the competent supervisory authority makes an SREP decision in relation to each relevant bank, which may include specific capital and liquidity requirements for each affected bank. Any such additional bank-specific capital requirements resulting from the SREP are referred to as “Pillar 2” requirements in addition to the statutory minimum capital and buffer requirements. Institutions must meet their Pillar 2 requirements with at least 75 % of Tier 1 capital and at least 56.25 % of Common Equity Tier 1 capital.

In addition, the ECB may decide following the SREP to communicate to individual banks an expectation to hold a further Pillar 2 Common Equity Tier 1 capital add-on, the so-called Pillar 2 guidance. The ECB has stated that it generally expects banks to meet the Pillar 2 guidance although it is not legally binding and failure to meet the Pillar 2 guidance does not automatically have legal consequences. The competent supervisory authority may take a range of other measures based on the SREP outcome to address shortcomings in a bank’s governance and risk management processes or its capital or liquidity position, such as prohibiting dividend payments to shareholders or distributions to holders of regulatory capital instruments. In light of the COVID-19 pandemic, the ECB allows banks to operate temporarily below the level of capital defined by the Pillar 2 guidance until at least the end of 2022.

For details of Deutsche Bank’s regulatory capital, see “Management Report: Risk Report: Risk and Capital Performance” in our Annual Report 2020.

MREL Requirements

As discussed below under “Recovery and Resolution”, to ensure that European banks have a sufficient amount of liabilities with loss-absorbing capacity, they are required to meet minimum requirements for own funds and eligible liabilities (“MREL”) determined for each institution individually on a case-by-case basis. As part of the banking reform package (see “Highlights” above), the European Union implemented the FSB’s TLAC standard for G-SIBs (such as us) by introducing a new Pillar 1 MREL requirement for G-SIIs (the European equivalent term for G-SIBs). This new requirement is based on both risk-based and non-risk-based denominators and will be set at the higher of 18 % of total risk exposure and 6.75 % of the leverage ratio exposure measure following a transition period (until December 31, 2021, 16 % of total risk exposure and 6 % of the leverage ratio exposure measure). It can be met with Tier 1 or Tier 2 capital or debt that meets specific eligibility criteria. Deduction rules apply for holdings by G-SIIs of TLAC instruments of other G-SIIs. In addition, the competent authorities have the ability to impose on G-SIIs individual MREL requirements that exceed the statutory minimum requirements.

Limitations on Large Exposures

The CRR also contains the primary restrictions on large exposures, which limit a bank’s concentration of credit risks. The German Banking Act and the Large Exposure Regulation ( Großkredit- und Millionenkreditverordnung ) supplement the CRR. Under the CRR, our exposure to a customer and any customers affiliated with such customer is deemed to be a “large exposure” when the value of such exposure is equal to or exceeds 10 % of our eligible regulatory capital. All exposures to a single customer and any customers affiliated with such customer are aggregated for these purposes. In general, no large exposure may exceed 25 % of our eligible regulatory capital. “Eligible regulatory capital” for this purpose means the sum of Tier 1 capital and Tier 2 capital where the latter may not exceed one third of Tier 1 capital. If the customer is a credit institution or investment firm, the exposure is limited to the higher of 25 % of our eligible regulatory capital or € 150 million. Competent authorities may set a lower limit than € 150 million. For exposures in the trading book, the large exposure regime may give greater latitude, subject to an additional own funds requirement.

The banking reform package (see “Highlights” above) will restrict a bank’s exposures to a single counterparty to 25 % of its Tier 1 capital (instead of 25 % of the sum of its Tier 1 and Tier 2 capital) and will further limit exposures between banks designated as G-SIIs, such as Deutsche Bank, to 15 % of Tier 1 capital. The new rules will apply from June 28, 2021.

Liquidity Requirements

The CRR introduced a liquidity coverage requirement intended to ensure that banks have an adequate stock of unencumbered high quality liquid assets that can be easily and quickly converted into cash to meet their liquidity needs for a 30-calendar day liquidity stress scenario. The required liquidity coverage ratio (“LCR”) is calculated as the ratio of a bank’s liquidity buffer to its net liquidity outflows. Also, banks must regularly report the composition of the liquid assets in their liquidity buffer to their competent authorities.

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In addition, the banking reform package (see “Highlights” above) introduced a net stable funding ratio (“NSFR”) to reduce medium- to long-term funding risks by requiring banks to fund their activities with sufficiently stable sources of funding over a one-year period. The NSFR, which will apply from June 28, 2021 onwards, is defined as the ratio of a bank’s available stable funding relative to the amount of required stable funding over a one-year period. Banks must maintain an NSFR of at least 100 %.The NSFR will apply to both the Group as a whole and to individual SSM regulated entities, including the parent entity Deutsche Bank AG. 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. To achieve this for Deutsche Bank AG, the company is actively working on a number of structural initiatives to improve the standalone NSFR position. In the event these initiatives are not successfully completed by June 2021, Deutsche Bank AG may incur additional costs.

The ECB may impose on individual banks liquidity requirements which are more stringent than the general statutory requirements if the bank’s continuous liquidity would otherwise not be ensured.

Separation of Proprietary Trading Activities by Universal Banks

The German Separation Act provides that deposit-taking banks and their affiliates are prohibited from engaging in proprietary trading that does not constitute a service for others, high-frequency trading, and credit or guarantee transactions with hedge funds and comparable enterprises that are substantially leveraged, unless such activities are exempt or excluded, or in the case no such exemption or exclusion is available, is transferred to a separate legal entity, referred to as a financial trading institution ( Finanzhandelsinstitut ). The separation requirement applies if certain thresholds are exceeded, which is the case for us. In addition, the German Separation Act authorizes the BaFin to prohibit the deposit-taking bank and its affiliates, on a case-by-case basis, from engaging in market-making and other activities that are comparable to the activities prohibited by law, if these activities may put the solvency of the deposit-taking bank or any of its affiliates at risk. In the event that the BaFin orders such a prohibition, the respective activities must be discontinued or transferred to a separate financial trading institution. The financial trading institution may be established in the form of an investment firm or a bank and may be part of the same group as the deposit-taking bank. However, it must be economically and organizationally independent from the deposit-taking bank and its other affiliates, and it has to comply with enhanced risk management requirements. We have established a compliance and control framework to ensure that no prohibited activities are conducted. Deutsche Bank has not established a financial trading institution.

Anti-Financial Crime, Sanctions, Fraud, Bribery and Corruption

Financial sector participants are required to take steps to prevent the abuse of the financial system through money laundering and other financial crime. The European Union has continually sought to strengthen its framework for anti-money laundering and combating the financing of terrorism, in line with international standards set by the Financial Action Task Force. Recent developments include the implementation into German law as of January 2020 of the European Union’s Fifth Anti-Money Laundering Directive. It aims to enhance transparency on beneficial ownership and reinforce the framework for the assessment of high-risk third countries, address other risk and further the cooperation between anti-money-laundering and prudential supervisors. In addition, the Sixth Anti-Money Laundering Directive will now be implemented into German law even though this should already have been done by December 3, 2020. Generally, the requirements (such as know-your-customer requirements) set out in the German AML Act ( Geldwäschegesetz ) and German Banking Act apply to all business lines and infrastructure units as well as all subsidiaries and affiliates that undertake AML-relevant business and in which Deutsche Bank AG has a dominating influence.

We are required to comply with international sanctions, which are measures to protect national security interests or international law by countries, multilateral or regional organizations against certain countries, organizations or individuals restricting economic activity. In 2020, various sanctions laws and regulations were issued or changed requiring us to update policies and processes such as name list screening and transaction filtering.

We are subject to fraud, bribery and corruption laws and regulations under the German Criminal Code and in the other countries in which we conduct business. The UK Bribery Act 2010 has extraterritorial impact and requires us to design and develop appropriate measures to mitigate bribery and corruption risk and to administer controls and safeguards to mitigate such risks.

Data Protection and Cyber Risk

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We have to comply with all applicable data protection laws in the countries in which we operate. The regulation on the protection of natural persons with regard to the processing of personal data and on the free movement of such data, also referred to as the General Data Protection Regulation (“GDPR”), became applicable in the European Union on May 25, 2018. It relates to data protection and privacy rights of individuals within the European Union and addresses the export of personal data to other jurisdictions. The GDPR primarily aims at giving individuals control over their personal data and to unifying the regulatory environment for cross-border business. Superseding the 1995 Data Protection Directive, the GDPR contains provisions and requirements pertaining to the processing of personal data of individuals and also applies to businesses inside the European Union that are processing personal data. The regulation furthermore applies to businesses outside of the European Union if goods or services are offered to data subjects in the European Union, or if the behavior of data subjects in the European Union is being monitored. The GDPR imposes compliance obligations and grants broad enforcement powers to supervisory authorities, including the potential to levy significant fines for non-compliance.

Under the German Banking Act and the BaFin’s Minimum Requirements for Risk Management for Banks ( Mindestan- forderungen an das Risikomanagement ) information security needs to be an integral part of a financial institution’s IT strategy and risk management. The BaFin requires that financial institutions establish a comprehensive information and cyber security program, define standards, implement controls and adhere to their resulting security policies and standards in accordance with evolving business requirements, regulatory guidance, and an emerging threat landscape. Information security risk management is part of vendor risk management for any procurement if information technology or outsourcing activity include the use of new technologies like cloud services. Information security risk (also referred to as cyber risk) is a component of operational risk assessed in the context of the SREP under Guidelines on Information and Communication Technology Risk Assessment issued by the European Banking Authority, which expects financial institutions to protect the confidentiality, integrity, and availability of customer data and information assets. Such guidelines are complemented by the European Banking Authority’s Guidelines on ICT and Security Risk Management.

Remuneration Rules

Under the German Banking Act and the German Credit Institution Remuneration Regulation ( Institutsvergütungsverordnung ), we are subject to certain restrictions on the remuneration we pay our management board members and employees. These remuneration rules implement requirements of the CRD and impose a cap on bonuses. Pursuant to this cap, the variable remuneration for management board members and employees must not exceed the fixed remuneration. The variable remuneration may be increased to twice the management board member's or employee’s fixed remuneration if expressly approved by the shareholders’ meeting with the required majority. In addition, we are obliged to identify individuals who have a material impact on our risk profile (“material risk takers”). Such material risk takers are subject to additional rules, such as the requirement that at least 40 % or, as the case may be, at least 60 % of the variable remuneration granted to them must be on a deferred basis. Following the revision of the German Credit Institution Remuneration Regulation, the minimum deferral period will be extended from three to four years and may increase to five years depending on certain factors. For certain material risk takers the minimum deferral period is set to five years. Also at least 50 % of the variable remuneration for material risk takers must be paid in shares of the bank or instruments linked to shares of the bank. Variable compensation of material risk takers has to be subject to an ex post risk adjustment mechanism and from the 2018 measurement period onwards to a claw back provision in case of personal wrongdoing. Finally, we are required to comply with certain disclosure requirements relating to the remuneration we pay to, and our remuneration principles in respect of, our material risk takers and other affected employees.

For details of Deutsche Bank’s remuneration system, see “Management Report: Compensation Report” in our Annual Report 2020.

Deposit Protection and Investor Compensation in Germany

The Deposit Protection Act and the Investor Compensation Act

The German Deposit Protection Act ( Einlagensicherungsgesetz ) and the German Investor Compensation Act ( Anlegerentschädigungsgesetz ) provide for a mandatory deposit protection and investor compensation system in Germany, based on a European Union directive on deposit guarantee schemes (“DGS Directive”) and a European Union directive on investor compensation schemes.

The German Deposit Protection Act requires that each German bank participates in one of the statutory government-controlled deposit protection schemes ( Entschädigungseinrichtungen ). The Entschädigungseinrichtung deutscher Banken GmbH acts as the deposit protection scheme for private sector banks such as Deutsche Bank, collects and administers the contributions of the member banks, and settles any compensation claims of depositors in accordance with the German Deposit Protection Act. The Federal Ministry of Finance intends to have the Entschädigungseinrichtung deutscher Banken GmbH as the sole German deposit protection scheme for all German banks as from October 2021.

Under the German Deposit Protection Act, deposit protection schemes are generally liable for obligations resulting from deposits denominated in any currency in an amount of up to € 100,000 per depositor and bank. Certain depositors, such as banks, insurance companies, investment funds and governmental bodies, are excluded from coverage.

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Deposit protection schemes are financed by annual contributions of the participating banks proportionate to their potential liabilities, depending on the amount of its covered deposits and the degree of risk the bank is exposed to. A target level of 0.8 % of the total covered deposits of the participating banks is supposed to be reached by July 3, 2024. Deposit protection schemes may also levy special contributions if required to settle compensation claims. Where the available funds of the deposit protection scheme fall below the target level, it must raise the level of contributions until the target level is reached.

Deposit protection schemes will be required to contribute to bank resolution costs where resolution tools are used. The contribution made by the deposit protection scheme is limited to the compensation it would have to pay if the affected bank had become subject to insolvency proceedings. Furthermore, deposit protection schemes may provide funding to its participating banks to avoid their failure under certain circumstances.

Under the German Investor Compensation Act, in the event that the BaFin ascertains a compensation case, Entschädigungseinrichtung deutscher Banken GmbH as Deutsche Bank AG’s deposit protection scheme is also required to compensate 90 % of the aggregate claims of each covered creditor arising from securities transactions denominated in euro or in a currency of any other European Union Member State up to an amount of the equivalent of € 20,000. Many financial sector participants such as banks, insurance companies, investment funds, governmental bodies or medium-sized and large corporations do not benefit from this coverage.

European Deposit Insurance Scheme

The European Union is still aiming for a common European Deposit Insurance Scheme (“EDIS”) based upon a proposal of the European Commission originally published in 2015. EDIS is still under discussion at the European Union level and the ultimate impact on us is uncertain.

Voluntary Deposit Protection System

Liabilities to creditors that are not covered by a statutory compensation scheme may be covered by the Deposit Protection Fund ( Einlagensicherungsfonds ) set up by the Association of German Banks (Bundesverband deutscher Banken e.V.) of which Deutsche Bank AG is a member. The Deposit Protection Fund protects deposits, i.e., generally credit balances credited to an account or resulting from interim positions which the bank is required to repay, subject to certain exclusions, up to an amount equal to 15 % of the bank’s own funds ( Eigenmittel ) as further specified in the Deposit Protection Fund’s by-laws. This limit will be reduced to 8.75 % from January 1, 2025 onwards.

The financial resources of the Deposit Protection Fund are funded by contributions of the participating banks. If the resources of the Fund are insufficient, banks may be required to make higher or special contributions.

Market Conduct, Investor Protection and Infrastructure Regulation

Under the German Securities Trading Act ( Wertpapierhandelsgesetz ), the BaFin regulates and supervises securities trading, including the provision of investment services, in Germany. The German Securities Trading Act contains, among other things, disclosure and transparency rules for issuers of securities that are listed on a German exchange and organizational requirements as well as rules of conduct which apply to all businesses that provide investment services. Investment services include, in particular, the purchase and sale of securities or derivatives for others and the intermediation of transactions in securities or derivatives as well as investment advice. The BaFin has broad powers to investigate businesses providing investment services to monitor their compliance with the organizational requirements, rules of conduct and reporting requirements. In addition, the German Securities Trading Act requires an independent auditor to perform an annual audit of the investment services provider’s compliance with its obligations under the German Securities Trading Act.

A related area is the Market Abuse Regulation (“MAR”) which establishes a common European Union framework for, inter alia, insider dealing, the public disclosure of inside information, market manipulation, and managers’ transactions. The German Securities Trading Act, which had contained rules on market abuse prior to the entering into force of the MAR, continues to supplement the MAR in this respect, for example by providing for sanctions in case of violations of the MAR.

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In addition, the revised Markets in Financial Instruments Directive (“MiFID 2”), implemented primarily through amendments to the German Securities Trading Act, and the new Markets in Financial Instruments Regulation (“MiFIR”) became applicable on January 3, 2018. Their objectives are greater regulation and oversight of financial firms providing investment services or activities in the European Union by covering additional markets and instruments, the extension of pre- and post-trade transparency rules from equities to all financial instruments, greater restrictions on operating trading platforms, and greater sanctioning powers. The trading venues under supervision now also include organized trading facilities. In addition, MiFID 2/MiFIR, introduced a trading obligation for those OTC derivatives which are subject to mandatory clearing and which are sufficiently standardized, and new investor protection rules that significantly impact the way investment firms distribute products. The Regulation on Key Information Documents or Packaged Retail and Insurance-based Investment Products (PRIIPs) applies since January 1, 2018. It focuses on disclosure and transparency requirements when advising on or selling retail structured products and other complex and packaged investment products and aims at increasing investor protection.

Beyond the infrastructure-related provisions of MiFID 2 and MiFIR, market infrastructure has been the focus of other regulatory initiatives of the European Union that are relevant for Deutsche Bank. The Regulation on Transparency of Securities Financing Transaction aims at increasing transparency and reducing risks associated with such transactions. The regulation requires that repos, securities lending transactions and transactions with equivalent effect and margin lending transactions be reported to trade repositories and requires risk disclosures and consent before assets are reused or re-hypothecated. For the OTC derivatives markets, the European Regulation on OTC Derivatives, Central Counterparties and Trade Repositories, also referred to as European Market Infrastructure Regulation (“EMIR”), pursues the goals of reducing system, counterparty and operational risk and increase transparency in the OTC derivatives markets. The regulation introduced requirements for standardized over-the-counter derivatives, such as central clearing, margining, portfolio reconciliation or reporting to trade repositories.

In addition, the European Union’s Regulation on Financial Benchmarks seeks to ensure the integrity and accuracy of indices used as benchmarks for financial instruments and contracts, and prevent their manipulation. European Union-regulated banks, investment firms, fund managers and certain other supervised entities are only permitted to use benchmarks provided in accordance with the regulation. Benchmark administrators in the European Union are required to obtain authorization or registration, and are subject to rules and oversight regarding their organization, governance and conduct. Benchmarks provided by non-EU administrators are permissible under certain conditions.

Legal Requirements relating to Financial Statements and Audits

As required by the German Commercial Code ( Handelsgesetzbuch ), Deutsche Bank AG prepares its non-consolidated financial statements in accordance with German GAAP. Deutsche Bank Group’s consolidated financial statements are prepared in accordance with International Financial Reporting Standards (“IFRS”), and our compliance with capital adequacy requirements and large exposure limits is determined solely based upon such consolidated financial statements.

Under German law, Deutsche Bank AG is required to be audited annually by a certified public accountant ( Wirtschaftsprüfer ). Deutsche Bank AG’s auditor is appointed each year at the annual shareholders’ meeting. However, the supervisory board mandates the auditor and supervises the audit. The BaFin and the Deutsche Bundesbank (“Bundesbank”), the German central bank, must be informed of the appointment and the BaFin may reject the auditor’s appointment. The German Banking Act requires that a bank’s auditor inform the BaFin and the Bundesbank of any facts that come to the auditor’s attention which would lead it to refuse to certify or to limit its certification of the bank’s annual financial statements or which would adversely affect the bank’s financial position. The auditor is also required to notify the BaFin and the Bundesbank in the event of a material breach by management of the articles of association or of any other applicable law. The auditor is required to prepare a detailed and comprehensive annual audit report ( Prüfungsbericht ) for submission to the bank’s supervisory board, the BaFin and the Bundesbank. The BaFin and the Bundesbank share their information with the ECB. In addition to the statutory audit directive and its amendment that has been implemented into national law, Deutsche Bank is also subject to the European Union’s Regulation on Specific Requirements regarding Statutory Audit of Public-Interest Entities which includes requirements for mandatory audit firm rotation and restrictions on non-audit services.

Banking Supervision under the Single Supervisory Mechanism

Under the European Union’s system of financial supervision referred to as the single supervisory mechanism (“SSM”), the ECB is the primary supervisor of all systemically important or significant credit institutions (such as Deutsche Bank AG) and their banking affiliates in the relevant Member States. The competent national authorities supervise the remaining, less significant banks under the oversight of the ECB. As a result, Deutsche Bank AG is supervised by the ECB, the BaFin and the Bundesbank.

With respect to us and other significant credit institutions, the ECB is the primary supervisor and is responsible for most tasks of prudential supervision, such as compliance with regulatory requirements concerning own funds, large exposure limits, leverage, liquidity, securitizations, corporate governance, business organization and risk management requirements. The ECB carries out its day-to-day supervisory functions through a joint supervisory team (“JST”) established for Deutsche Bank Group. The JST is led by the ECB and comprises staff from the ECB and national supervisory authorities, including the BaFin and the Bundesbank. In addition, and regardless of whether an institution is significant or not, the ECB is responsible for issuing new licenses to credit institutions and for assessing the acquisition and increase of significant participations (also referred to as qualifying holdings) in credit institutions established in those Member States of the European Union that participate in the SSM and where notification of such changes must be filed.

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The BaFin is our principal supervisor for regulatory matters with respect to which we are not supervised by the ECB. These include business conduct in the securities markets, in particular when providing investment services to clients, payment services and implementing measures against money laundering and terrorist financing, and they also include certain special areas of bank regulation, such as those related to the issuance of covered bonds (Pfandbriefe) and the supervision of German home loan banks ( Bausparkassen ) with regard to certain regulatory requirements specifically applicable to such home loan banks Generally, the BaFin also supervises us with respect to those requirements under the German Banking Act that are not based upon European law. The Bundesbank supports the BaFin and the ECB and closely cooperates with them. The cooperation includes the ongoing review and evaluation of reports submitted by us and of our audit reports as well as assessments of the adequacy of our capital base and risk management systems. The ECB, the BaFin and the Bundesbank receive comprehensive information from us in order to monitor our compliance with applicable legal requirements and to obtain information on our financial condition.

Supervisory Review and Evaluation Process

For significant institutions such as Deutsche Bank, the JST conducts the SREP for an ongoing assessment of risks, governance arrangements and the capital and liquidity situation. The SREP requires that the JSTs review the arrangements, strategies, processes and mechanisms of supervised banks on a regular basis, in order to evaluate risks to which these banks are or might be exposed, risks they could pose to the financial system, and risks revealed by stress testing.

The SREP framework consists of a business model analysis, an assessment of internal governance and institution-wide control arrangements, an assessment of risks to capital and adequacy of capital to cover these risks; and an assessment of risks to liquidity and adequacy of liquidity resources to cover these risks. The SREP can result in Pillar 2 capital and liquidity requirements or guidance for the relevant institution (see above “Pillar 2 Capital Requirements and Guidance”).

Audits, Investigations and Enforcement

Investigations and Supervisory Audits

The ECB and the BaFin may conduct audits of banks on a discretionary basis, as well as for cause. In particular, the ECB may audit our compliance with requirements with respect to which it supervises us, such as those set forth in the CRR/CRD. The BaFin may also decide to audit our compliance with requirements with respect to which it supervises us, such as those relating to business conduct in the securities markets and the regulation of anti-money laundering, to counter terrorist financing and payment services, as well as certain special areas of bank regulation, such as those related to the issuance of covered bonds and the supervision of German home loan banks.

The ECB as well as the BaFin may require a bank to furnish information and documents in order to ensure that the bank is complying with applicable bank supervisory laws. The ECB and the BaFin may conduct investigations without having to state a reason therefor. Such investigations may also take place at a foreign entity that is part of a bank’s group for regulatory purposes. Investigations of foreign entities are limited to the extent that the law of the jurisdiction where the entity is located restricts such investigations.

The ECB and the BaFin may attend meetings of a bank’s supervisory board and shareholders meetings. They also have the authority to require that such meetings be convened.

Supervisory and Enforcement Powers

The ECB has a wide range of enforcement powers in the event it discovers any irregularities concerning adherence to requirements with respect to which it supervises us.

It may, for example,

• impose additional own funds or liquidity requirements in excess of statutory minimum requirements;
• restrict or limit a bank’s business;
• require the cessation of activities to reduce risk;
• require a bank to use net profits to strengthen its own funds;
• restrict or prohibit dividend payments to shareholders or distributions to holders of Additional Tier 1 instruments; or
• remove the members of the bank’s management or supervisory board members from office.

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To the extent necessary to carry out the tasks granted to it, the ECB may also require national supervisory authorities to make use of their powers under national law. If these measures are inadequate, the ECB may revoke the bank’s license. Furthermore, the ECB has the power to impose administrative penalties in case of breaches of directly applicable European Union laws, such as the CRR, or of applicable ECB regulations and decisions. Penalties imposed by the ECB may amount to up to twice the amount of profits gained or losses avoided because of the violation, or up to 10 % of the total annual turnover of the relevant entity in the preceding business year or such other amounts as may be provided for in relevant European Union law. In addition, where necessary to carry out the tasks granted to it, the ECB may also require that the BaFin initiate proceedings to ensure that appropriate penalties are imposed on the affected bank.

The BaFin also retains a wide range of enforcement powers. As discussed above, it may take action if instructed by the ECB in connection with supervisory tasks granted to the ECB. With respect to supervisory tasks remaining with the BaFin, the BaFin may take action upon its own initiative. In particular, if a bank is in danger of defaulting on its obligations to creditors, the BaFin may take emergency measures to avert default. These emergency measures may include:

• issuing instructions relating to the management of the bank;
• prohibiting the acceptance of deposits and the extension of credit;
• prohibiting or restricting the bank’s managers from carrying on their functions;
• prohibiting payments and disposals of assets;
• closing the bank’s customer services; and
• prohibiting the bank from accepting any payments other than payments of debts owed to the bank.

The BaFin may also impose administrative pecuniary penalties under the German Banking Act and other German laws. Penalties under the German Banking Act may amount to generally up to € 5 million or, in certain cases, € 20 million, depending of the type of offense. If the economic benefit derived from the offense is higher, the BaFin may impose penalties of up to 10 % of the net turnover of the preceding business year or twice the amount of the economic benefit derived from the violation.

Finally, violations of the German Banking Act may result in criminal penalties against the members of the Management Board or senior management.

Recovery and Resolution

Germany participates in the European Union’s single resolution mechanism (“SRM”), which centralizes at a European level the key competences and resources for managing the failure of banks in Member States of the European Union participating in the banking union. The SRM is based on the SRM Regulation and the BRRD, which in Germany are mainly implemented through the German Recovery and Resolution Act ( Sanierungs- und Abwicklungsgesetz ).

Under the SRM, broad resolution powers with respect to banks domiciled in the participating Member States are granted to the Single Resolution Board (“SRB”) as the central European resolution authority and to the competent national resolution authorities. Resolution powers in particular include the power to reduce, including to zero, the nominal value of shares, or to cancel shares outright, and to write down certain eligible subordinated and unsubordinated unsecured liabilities, including to zero, or convert them into equity (commonly referred to as “bail-in”).

For a bank directly supervised by the ECB, such as Deutsche Bank, the SRB draws up the resolution plan, assesses the bank’s resolvability and may require legal and operational changes to the bank’s structure to ensure its resolvability. In the event that a bank is failing or likely to fail and certain other conditions are met, in particular where there is no reasonable prospect that any alternative private sector measures would prevent the failure and resolution measures are necessary in the public interest, the SRB is responsible for adopting a resolution scheme for resolving the bank pursuant to the SRM Regulation. The European Commission and, to a lesser extent, the Council of the European Union, have a role in endorsing or objecting to the resolution scheme proposed by the SRB. The resolution scheme would be addressed to and implemented by the competent national resolution authorities (the BaFin in Germany).

Resolution measures that could be imposed upon a failing bank may include a range of measures including the transfer of shares, assets or liabilities of the bank to another legal entity, the reduction, including to zero, of the nominal value of shares, the dilution of shareholders of a failing bank or the cancellation of shares outright, or the amendment, modification or variation of the terms of the bank’s outstanding debt instruments, for example by way of deferral of payments or a reduction of the applicable interest rate. Furthermore, by way of a “bail-in”, certain liabilities may be written down, including to zero, or converted into equity after the bank’s regulatory capital has been exhausted.

To ensure that resolution measures can be effectively taken, contractual obligations governed by the laws of a non-EU country or that are subject to jurisdiction outside the European Union are required to include contractual provisions that ensure that the relevant obligation can be bailed in. In the case of financial contracts governed by the laws of a non-EU country or that are subject to jurisdiction outside the European Union, stay acceptance clauses need to be included.

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To ensure sufficient availability of liabilities with loss-absorbing capacity that could be bailed in, the SRM Regulation and the German Recovery and Resolution Act introduced a requirement for banks to meet minimum requirements for own funds and eligible liabilities (“MREL”). The required level of MREL is determined by the competent resolution authorities for each supervised bank individually on a case-by-case basis, depending on the preferred resolution strategy. In the case of Deutsche Bank AG, MREL is determined by the SRB.

In addition, the banking reform package entered into force on June 27, 2019 (see “Highlights” above) implemented the FSB’s TLAC standard for G-SIBs by introducing a new Pillar 1 MREL requirement for G-SIIs (see “MREL Requirements” above).

G-SIIs will need to predominantly rely on capital instruments or eligible subordinated debt for this purpose. Effective January 1, 2017, the German Banking Acts 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 decide if a specific issuance of eligible senior debt will rank as senior non-preferred debt or as senior preferred debt.

The SRB is charged with administering the Single Resolution Fund, a pool of money which is financed by bank levies raised at national level and intended to reach a target level of 1 % of insured deposits of all banks in Member States participating in the SRM by the end of 2023. It will be used for resolving failing banks after other options, such as the bail-in tool, have been exhausted. In line with the German Recovery and Resolution Act, public financial support for a failing bank should only be used as a last resort, after having assessed and exploited, to the maximum extent possible, resolution measures set forth in the SRM Regulation and the German Recovery and Resolution Act, including the bail-in tool.

Regulation in the European Economic Area and Brexit

The European Union pursues common standards of laws and regulations to create consistency across the internal market and reduce compliance and regulatory burdens for businesses operating on a cross-border basis. The Agreement on the European Economic Area (EEA) extends this objective to Iceland, Liechtenstein and Norway. Members of the EEA have agreed to enact legislation similar to that passed in the European Union in many areas. Within the EEA, Deutsche Bank AG generally operates under the so-called “European Passport”. Deutsche Bank AG is subject to regulation and supervision primarily by the ECB and the BaFin. Deutsche Bank AG provides services in the European Economic Area under the “European Passport” both through local branches established in many of the Member States, but also on a cross border basis from its headquarters in Frankfurt. To the extent that activities are carried out within a Member State’s jurisdiction, the authorities of that host Member State supervise the conduct of such activities. This includes, for example, rules on treating clients fairly and rules governing a bank’s conduct in the securities market.

The United Kingdom (UK) ceased to be a Member State of the European Union as from 11 pm on January 31, 2020, and entered into a ‘Transition Period’ pursuant to UK/EU Withdrawal Act 2020 during which EU law continued to be applicable in the UK. On December 31, 2020, the Transition Period terminated, and EU law was no longer applicable within the UK. For the UK, this meant that all extensions of EU Member State ‘privileges’ were no longer available including any reliance upon the European Passport and automatic rights of access to EU market infrastructure.

As from the end of the Transition Period, new UK requirements must be complied with when conducting regulated activity in the UK, both as regards cross border business as well as Deutsche Bank AG London Branch activity. Deutsche Bank AG is planning to continue to provide banking and other financial services in the UK both from its London Branch and also on a cross-border basis in compliance with applicable law. Deutsche Bank AG is now subject to additional regulatory requirements in the United Kingdom, and its activities in the United Kingdom will be supervised and monitored by both the Prudential Regulatory Authority (“PRA”) and the Financial Conduct Authority (“FCA”). Deutsche Bank AG is already in the process of applying for authorization to provide banking and other financial services in the United Kingdom. The date by which Deutsche Bank AG can expect to receive UK authorisation is currently unknown, and in the meantime, it has the benefit of ‘deemed permission’ pursuant to the UK’s Temporary Permissions Regime (TPR). The TPR also provides Deutsche Bank AG with some temporary relief as to needing to comply with a number of UK rules by allowing ‘substituted compliance’ with similar EU rules. However, certain UK rules have already come into effect and some of these conflict with the similar European rules, and this has already posed challenges for both Deutsche Bank AG and the financial services industry generally (e.g., Derivatives Trading Obligation and Share Trading Obligation under MiFID).

Subsidiaries of the Deutsche Bank Group established in the EEA which were previously benefitting from the European Passport will also need to seek authorisation in the UK if any plan to continue to service UK clients or conduct UK regulated activity in the UK. Certain other Deutsche Bank Group subsidiaries have had to assess whether they conduct regulated activity in the UK (e.g. by providing UK regulated services to UK based clients), and where necessary, make plans to run off that activity within the UK’s Financial Services Contracts Regime (FSCR) or otherwise ensure such activity can be conducted pursuant to a UK licensing exemption (i.e., an overseas persons exclusion). Deutsche Bank subsidiaries expected to conduct contractual run-off operations within the FSCR include BHM (FFT), Norisbank (FFT), DB Spa (Milan), DB SAE (Madrid), DB Polska (Warsaw), DB Luxembourg (Brussels) and all with respect to retail client activity only (largely as a result of clients having moved to the UK since first availing of the services).

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Regulation and Supervision in the United States

Our operations are subject to extensive federal and state banking, securities and derivatives regulation and supervision in the United States. We engage in U.S. banking activities directly through our New York branch. We also control U.S. banking organization subsidiaries, including DB USA Corporation and Deutsche Bank Trust Company Americas (“DBTCA”), and U.S. broker-dealers, such as Deutsche Bank Securities Inc., U.S. non-depository trust companies and nonbanking subsidiaries. We hold our U.S. subsidiaries through two intermediate holding companies, DB USA Corporation, through which our U.S. banking subsidiaries and the large majority of our other U.S. subsidiaries are held, and DWS USA Corporation, through which our U.S. asset management subsidiaries are held.

In 2010, the United States enacted the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), which provides a broad framework for significant regulatory changes that extend to almost every area of U.S. financial regulation. While rulemaking in respect of many of the provisions of the Dodd-Frank Act has already taken place, full implementation of the Dodd-Frank Act will require further detailed rulemaking and uncertainty remains about the final details, timing and impact of some rules. Some existing regulations implementing the Dodd-Frank Act are undergoing tailoring as part of the implementation process. In addition, the substance and impact of the Dodd-Frank Act may be affected by subsequent legislation and changes in the U.S. political landscape.

The Dodd-Frank Act provisions known as the “Volcker Rule” limit the ability of banking entities and their affiliates to engage as principal in certain types of proprietary trading and to sponsor or invest in private equity or hedge funds or similar funds (“covered funds”), subject to certain exclusions and exemptions. In the case of non-U.S. banking entities such as Deutsche Bank AG, these exemptions permit certain activities conducted outside the United States, provided that certain criteria are satisfied. The Volcker Rule also limits the ability of banking entities and their affiliates to enter into certain transactions with covered funds with which they or their affiliates have certain relationships. The Volcker Rule also requires banking entities to establish comprehensive compliance programs designed to help ensure and monitor compliance with restrictions under the Volcker Rule. In September and October 2019, the U.S. federal agencies responsible for administration of the Volcker Rule finalized amendments to simplify and tailor compliance requirements related to the proprietary trading provisions of the Volcker Rule. These amendments to the Volcker Rule became effective January 1, 2020, with compliance required by January 1, 2021. On July 31, 2020, the agencies adopted further amendments to the Volcker Rule's covered funds provisions, which became effective on October 1, 2020. While the recent amendments are intended to streamline the existing requirements and result in a more simplified revised final rule, these changes to the Volcker Rule may result in increased compliance and operational costs.

The Dodd-Frank Act also provides regulators with tools to provide greater capital, leverage and liquidity requirements and other prudential standards, particularly for financial institutions that pose significant systemic risk. U.S. regulators are also able to restrict the size and growth of systemically significant non-bank financial companies and large interconnected bank holding companies. U.S. regulators are also required to impose bright-line debt-to-equity ratio limits on financial companies that the Financial Stability Oversight Council determines pose a grave threat to financial stability if it determines that the imposition of such limits is necessary to minimize the risk.

With respect to prudential standards, in February 2014, the Federal Reserve Board adopted rules that set forth how the U.S. operations of certain foreign banking organizations (“FBOs”), such as Deutsche Bank, are required to be structured, as well as the enhanced prudential standards that apply to our U.S. operations. Under these rules, as of July 1, 2016, a large FBO with U.S.$ 50 billion or more in U.S. non-branch assets, such as Deutsche Bank, was required to establish or designate a separately capitalized top-tier U.S. intermediate holding company (an “IHC”) that would hold substantially all of the FBO’s ownership interests in its U.S. subsidiaries. The Federal Reserve Board may permit an FBO subject to the U.S. IHC requirement to establish or designate multiple U.S. IHCs upon written request. On July 1, 2016, we designated DB USA Corporation as our IHC. In March 2018, we completed the partial initial public offering of our Asset Management division, consolidating these activities in DWS Group GmbH & Co. KGaA, in which we retain approximately 80 % of the shares. In April 2018, DWS USA Corporation was formed as a subsidiary of DWS Group GmbH & Co. KGaA, and, following receipt of Federal Reserve Board approval, we designated it as our second IHC, through which our U.S. asset management subsidiaries are held. As of the date of their designation or formation, they each became subject, on a consolidated basis, to the risk-based and leverage capital requirements under the U.S. Basel 3 capital framework, capital planning and stress testing requirements (on a phased-in basis), U.S. liquidity buffer requirements and other enhanced prudential standards comparable to those applicable to top-tier U.S. bank holding companies of a similar size as DB USA Corporation. Supplementary leverage ratio requirements applicable to DB USA Corporation took effect beginning in January 2018 and were applicable to DWS USA Corporation upon its formation.

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On October 10, 2019, the Federal Reserve Board finalized rules to categorize the U.S. operations of large FBOs based on size, complexity and risk for purposes of tailoring the application of the U.S. enhanced prudential standards (the “Tailoring Rules”). The Tailoring Rules do not significantly change the capital requirements that apply to DB USA Corporation or DWS USA Corporation, although they provide the option to comply with certain simplifications to the capital requirements. However, the Tailoring Rules provide modest relief for our U.S. IHCs with respect to applicable liquidity requirements so long as the IHCs’ combined weighted short term wholesale funding remains below U.S.$ 75 billion.

The Federal Reserve Board has the authority to examine an IHC, such as DB USA Corporation and DWS USA Corporation, and its subsidiaries, as well as U.S. branches and agencies of FBOs, such as our New York branch. An FBO’s U.S. branches and agencies are not held beneath an IHC; however, the U.S. branches and agencies of the FBO are subject to certain liquidity requirements, as well as other specific enhanced prudential standards, such as risk management and, under certain circumstances, asset maintenance requirements. Additionally, the Tailoring Rules also placed requirements on the FBO itself related to the adequacy and reporting of the FBO’s home country capital and stress testing regime.

In June 2018 and October 2019, the Federal Reserve Board finalized rules relating to single counterparty credit limits that apply to an FBO’s combined U.S. operations and its IHCs. Our IHCs are prohibited from having net credit exposure to a single unaffiliated counterparty in excess of 25 percent of each IHC’s tier 1 capital. Our combined U.S. operations (including our IHCs and our New York branch) would become separately subject to similar restrictions beginning July 1, 2021 unless Deutsche Bank AG certifies compliance with a home country large exposure regime that is consistent with the Basel large exposure framework. In May 2020, the Federal Reserve Board announced a final rule to extend the initial compliance date for FBOs’ combined U.S. operations to July 1, 2021 for FBOs that have the characteristics of a G-SIB. Deutsche Bank AG may avail itself of substituted compliance through certification for its combined U.S. operations, as the European Union’s framework becomes effective on June 28, 2021.

In addition, the Federal Reserve Board proposed but has not adopted an “early remediation” framework under which it would implement prescribed restrictions and penalties against the FBO and its U.S. operations, such as restrictions on the ability of the FBO and its U.S. operations to make discretionary compensation payments to certain of its officers and directors, if the FBO and/or its U.S. operations do not meet certain risk-based capital, leverage, liquidity, stress testing or other risk management requirements, and would authorize the termination of U.S. operations under certain circumstances.

As a bank holding company with assets of U.S.$ 250 billion or more, Deutsche Bank AG is required under Title I of the Dodd-Frank Act 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 a strategy for the orderly resolution of its designated U.S. material 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 subsidiaries, 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 U.S. Resolution Plan by July 1, 2018. The 2018 U.S. Resolution Plan describes the single point of entry strategy for Deutsche Bank’s U.S. material entities and operations and prescribes that DB USA Corporation, our single U.S. IHC as of December 31, 2017, would provide liquidity and capital support to its U.S. material entity subsidiaries and ensure their solvent wind-down outside of applicable resolution proceedings. Deutsche Bank received feedback from the Federal Reserve and FDIC in December 2018. The Federal Reserve Board and FDIC 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. Deutsche Bank submitted a response to its December 2018 feedback letter on April 1, 2019. Deutsche Bank’s response discussed its proposed remediation of the shortcoming as well as enhancements of its resolution capabilities.

Deutsche Bank submitted its 2020 U.S. Resolution Plan on September 29, 2020. The 2020 U.S. Resolution Plan, like the 2018 U.S. Resolution Plan, described a single point of entry strategy for DB USA Corporation. It also explained how Deutsche Bank remediated the shortcoming and provided an update on the enhancement of its resolutions capabilities. On December 9, 2020, the Federal Reserve Board and FDIC confirmed that the shortcoming previously identified in Deutsche Bank AG’s 2018 U.S. Resolution Plan had been remediated. Also on December 9, 2020, the agencies finalized guidance for the resolution plans of certain large foreign banks, including Deutsche Bank AG. In that guidance, the agencies tailored their expectations around resolution capital and liquidity, derivatives and trading activity, as well as payment, clearing, and settlement activities. The agencies also provided information for large banks, including Deutsche Bank AG, which will inform the content of their next U.S. Resolution Plans, which now are due December 17, 2021. In particular, these ‘targeted’ plans (which are subsets of a full resolution plans) will be required to include core elements of a firm's resolution strategy — such as capital, liquidity, and recapitalization strategies — as well as how each firm has integrated changes to and lessons learned from its response to the COVID-19 pandemic into its resolution planning process.

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Both DB USA Corporation and DWS USA Corporation were subject to the Federal Reserve Board’s Comprehensive Capital Analysis and Review (“CCAR”) for 2020. On June 25, 2020, the Federal Reserve Board publicly indicated that it did not object to the 2019 capital plans submitted by DB USA Corporation and DWS USA Corporation. DB USA Corporation and DWS USA Corporation will make their next capital plan submissions to the Federal Reserve Board in April 2021. On March 4, 2020, the Federal Reserve Board issued a rule to amend its CCAR process to combine the CCAR quantitative assessment and the buffer requirements in the Federal Reserve Board’s capital rules to create an integrated capital buffer requirement. This final rule has eliminated the quantitative and qualitative ‘pass/fail’ assessments from CCAR and modifies the static capital conservation buffer to incorporate an institution-specific stress capital buffer (SCB), which is floored at 2.5%. The stress capital buffer equals (i) a bank holding company's projected peak-to-trough decline in common equity tier 1 under the annual CCAR supervisory severely adverse stress testing scenario prior to any planned capital actions, plus (ii) one year of planned common stock dividends. The stress capital buffer will be reset each year. On August 10, 2020, the Federal Reserve Board announced an SCB for each CCAR firm based on 2020 supervisory stress testing results conducted as part of CCAR, which for DB USA Corporation was 7.8% and for DWS USA Corporation was 2.5%. The first SCB became effective October 1, 2020 and would generally remain in effect until September 30, 2021, at which point the size of the SCB for each bank will be recalibrated based on the results of the 2021 stress tests. On December 18, 2020, the Federal Reserve Board released certain information related to this second round of bank stress tests, and indicated that it is extending, through March 31, 2021, the time period for notifying CCAR firms whether the Federal Reserve Board will recalculate a firm’s SCB. The Federal Reserve Board also announced it is limiting CCAR firms’ distributions in the first quarter of 2021. Under these restrictions, IHCs, such as DB USA Corporation and DWS USA Corporation, may make certain capital distributions in the first quarter of 2021, provided that the distributions paid in the final three quarters of 2020 and the first quarter of 2021, in the aggregate, do not exceed the amount of net income the IHC has earned in the preceding four calendar quarters.

The U.S. federal bank regulators in 2013 issued final rules implementing elements of the Basel 3 capital adequacy framework that are applicable to U.S. banking organizations.

In September 2014, the Federal Reserve Board and other U.S. regulators approved a final rule implementing liquidity coverage ratio (“LCR”) requirements for large U.S. banking holding companies and certain of their subsidiary depositary institutions that are generally consistent with the Basel Committee’s revised Basel 3 liquidity standards. DB USA Corporation and DBTCA became subject to the full LCR requirements on April 1, 2017 and DWS USA Corporation became subject to LCR requirements on a phased-in basis following its formation in April 2018. The Tailoring Rules reduced the LCR requirements applicable to DB USA Corporation, DWS USA Corporation and DBTCA from 100 to 85 percent beginning on January 1, 2020.

On October 20, 2020, the Federal Reserve Board and other U.S. regulators finalized rules implementing the second element of the Basel 3 liquidity framework, the net stable funding ratio (“NSFR”). Under the Tailoring Rules, DB USA Corporation, DWS USA Corporation and DBTCA would be subject to an 85 percent NSFR so long as our IHCs’ combined weighted short term wholesale funding remains below U.S.$ 75 billion. Firms will be required to calculate the NSFR and meet the minimum required ratios by July 1, 2021 with public reporting beginning in 2023.

On December 15, 2016, the Federal Reserve Board adopted final rules that implement a U.S. version of the FSB’s TLAC standard in the United States. The final rules require, among other things, the U.S. IHCs of non-U.S. G-SIBs, including DB USA Corporation and DWS USA Corporation, to maintain a minimum TLAC amount, and separately require them to maintain a minimum amount of eligible long-term debt. Under the final rules, the required TLAC amount and the ability or inability of the IHC to count long-term debt issued externally towards the requirements varies depending on the G-SIB’s planned resolution strategy. DB USA Corporation and DWS USA Corporation are each considered a “non-resolution covered IHC”, which means that they are intended, under the planned resolution strategy of their G-SIB parent (Deutsche Bank AG), to continue to operate outside of resolution proceedings while the G-SIB parent is subject to a bail-in under the applicable European resolution regime. The final rules require a “non-resolution covered IHC” to maintain (i) internal minimum TLAC of at least 16 % of its risk-weighted assets, 6 % of its Basel 3 leverage ratio denominator and 8 % of its average total consolidated assets, and (ii) internal eligible long-term debt of at least 6 % of its risk-weighted assets, 2.5 % of its Basel 3 leverage ratio denominator and 3.5 % of its average total consolidated assets. Eligible long-term debt instruments for non-resolution covered IHCs are required to meet certain criteria, including issuance to a foreign company that controls directly or indirectly the covered IHC or a foreign affiliate (a non-U.S. entity that is wholly owned, directly or indirectly, by the non-U.S. G-SIB) and the inclusion of a contractual trigger allowing for, in limited circumstances, the immediate conversion or exchange of some or all of the instrument into Common Equity Tier 1 instruments upon an order by the Federal Reserve Board. Internal TLAC requirements may be satisfied with a combination of eligible long-term debt instruments and Tier 1 capital. Each of DB USA Corporation and DWS USA Corporation would also face restrictions on its discretionary bonus payments and capital distributions if it fails to maintain a TLAC buffer consisting of Common Equity Tier 1 capital above the minimum TLAC requirement equal to 2.5 % of risk-weighted assets. The final rules also prohibit or limit the ability of DB USA Corporation and DWS USA Corporation to engage in certain types of financial transactions. In October 2020, the Federal Reserve Board finalized a proposal to align the calculation of TLAC buffer for U.S. IHCs of non-U.S. G-SIBs with the calculation methodology used by U.S. G-SIBs which will take effect on April 1, 2021.

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Furthermore, the Dodd-Frank Act provides for an extensive framework for the regulation of over-the-counter (“OTC”) derivatives, including mandatory clearing, exchange 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 Commodity Futures Trading Commission (“CFTC”) adopted final rules in 2016 that require additional interest rate swaps to be cleared. In November 2018 the CFTC proposed amendments to rules that would significantly expand the types of swaps that must be executed on an approved platform. More recently, in October 2020, 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. In July 2020, the CFTC announced a finalized rule on the cross-border application of U.S. swap rules, building on the CFTC’s cross-border guidance from 2013 and related no-action relief letters. The Securities and Exchange Commission (“SEC”) has also finalized rules regarding registration, capital, risk-mitigation techniques, reporting, business conduct standards, trade acknowledgement and verification requirements, and cross-border requirements for security-based swap dealers and major security-based swap participants. These rules will generally come into effect in November 2021, the latest compliance date for registration of security-based swap dealers and major security-based swap participants. Finally, the U.S. prudential regulators (the Federal Reserve Board, 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, the CFTC has adopted final rules establishing margin requirements for non-cleared swaps, and the SEC has adopted final rules establishing margin requirements for non-cleared security-based swaps. The final margin rules follow a phased implementation schedule, with certain initial margin and variation margin requirements in effect as of September 2016, additional variation margin requirements in effect as of March 2017, and additional initial margin requirements 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.

The Dodd-Frank Act, as amended, also established a regulatory framework and enhanced regulation for several other areas, including but not limited to the following. The Dodd-Frank Act established a new regime for the orderly liquidation of failing financial companies through the appointment of the FDIC as receiver that is available only if the U.S. Secretary of the Treasury determines in consultation with the U.S. President that certain criteria are met, including that the failure of the company and its resolution under otherwise applicable federal or state law would have serious adverse effects on U.S. financial stability. In addition, the Dodd-Frank Act requires U.S. regulatory agencies to prescribe regulations with respect to incentive-based compensation at financial institutions in order to prevent inappropriate behavior that could lead to a material financial loss. Other provisions require issuers with securities listed on U.S. stock exchanges, which may include foreign private issuers such as Deutsche Bank, to establish a “clawback” policy to recoup previously awarded executive compensation in the event of an accounting restatement; in May 2016, the SEC re-proposed rules to implement this provision of the Dodd-Frank Act that would cover foreign private issuers, but such rules have not yet been adopted. The Dodd-Frank Act also grants the SEC discretionary rule-making authority to impose a new fiduciary standard on brokers, dealers and investment advisers; pursuant to this authority, on June 5, 2019, the SEC adopted rules and interpretations applicable to the relationships between such entities and their retail customers, and full compliance was required on June 30, 2020. The Dodd-Frank Act also expands the extraterritorial jurisdiction of U.S. courts over actions brought by the SEC or the United States with respect to violations of the antifraud provisions of the Securities Act of 1933, the Securities Exchange Act of 1934 and the Investment Advisers Act of 1940.

Implementation of the Dodd-Frank Act and related final regulations will result in additional costs and could limit or restrict the way we conduct our business.

Regulatory Authorities

We, as well as our wholly owned subsidiary DB USA Corporation are bank holding companies under the U.S. Bank Holding Company Act of 1956, as amended (the “Bank Holding Company Act“), by virtue of, among other things, our and its ownership of DBTCA. We and DB USA Corporation have elected to be financial holding companies pursuant to the provisions of the Gramm-Leach-Bliley Act (the “GLB Act”) and, accordingly, may affiliate with securities firms and engage in other activities that are financial in nature or incidental or complementary to activities that are financial in nature. As a bank holding company and financial holding company, Deutsche Bank’s U.S. operations are subject to regulation, supervision and examination by the Federal Reserve Board as our U.S. “umbrella supervisor”.

DBTCA is a New York state-chartered bank whose deposits are insured by the FDIC to the extent permitted by law. DBTCA is subject to regulation, supervision and examination by the Federal Reserve Board and the New York State Department of Financial Services and to applicable FDIC rules. In addition, DBTCA is also subject to regulation by the Consumer Financial Protection Bureau in relation to retail products and services offered to its customers. Deutsche Bank Trust Company Delaware is a Delaware state-chartered bank which is subject to regulation, supervision and examination by the FDIC and the Office of the State Bank Commissioner of Delaware. Deutsche Bank AG’s New York branch is supervised by the Federal Reserve Board and the New York State Department of Financial Services. Deutsche Bank’s federally chartered non-depository trust companies are subject to regulation, supervision and examination by the Office of the Comptroller of the Currency. We and our subsidiaries are also subject to regulation, supervision and examination by state banking regulators of certain states in which we and they conduct banking operations.

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Restrictions on Activities

As described below, federal and state banking laws and regulations restrict our ability to engage, directly or indirectly through subsidiaries, in activities in the United States. Among others, we are required to obtain the prior approval of the Federal Reserve Board before directly or indirectly acquiring the ownership or control of more than 5 % of any class of voting shares of U.S. banks, certain other depository institutions, and bank or depository institution holding companies. Under applicable U.S. federal banking law, our U.S. banking operations are also restricted from engaging in certain “tying” arrangements involving products and services.

Our two U.S. FDIC-insured bank subsidiaries, as well as our New York branch, are subject to requirements and restrictions under federal and state law, including requirements to maintain reserves against deposits, restrictions on the types and amounts of loans that may be made and the interest that may be charged thereon, and limitations on the types of investments that may be made and the types of services that may be offered.

In addition to the business of banking, and managing or controlling banks, so long as we are a financial holding company under U.S. law, we may also engage in nonbanking activities in the United States that are financial in nature, or incidental or complementary to such financial activity, including certain securities, merchant banking, insurance and other financial activities, subject to certain limitations on the conduct of such activities and to notice or prior regulatory approval in some cases. As a non-U.S. bank, Deutsche Bank AG and our non-U.S. subsidiaries are generally authorized under U.S. law and regulations to acquire a non-U.S. company engaged in nonfinancial activities as long as that company’s U.S. operations do not exceed certain thresholds and certain other conditions are met.

In November 2018, the Federal Reserve Board adopted a revised supervisory rating system for bank holding companies with U.S.$ 100 billion or more in total consolidated assets and for IHCs with U.S.$ 50 billion or more in total consolidated assets, such as DB USA Corporation. The revised system will also generally apply to DWS USA Corporation. Under the revised system, covered companies receive separate ratings from the Federal Reserve Board for (i) capital planning and positions, (ii) liquidity risk management and positions and (iii) governance and controls. Each of these component areas will receive one of the following four ratings: (i) Broadly Meets Expectations, (ii) Conditionally Meets Expectations, (iii) Deficient-1, and (iv) Deficient-2. A covered company must maintain a rating of Broadly Meets Expectations or Conditionally Meets Expectations for each of the three components to be considered “well managed.”

In August 2017, the Federal Reserve Board issued proposed guidance intended to enhance the effectiveness of boards of directors and refocus the Federal Reserve Board’s supervisory expectations for boards of directors on their core responsibilities, and also to delineate between roles and responsibilities for boards of directors and for senior management. Although the proposed guidance does not directly apply to DB USA Corporation or DWS USA Corporation, the Federal Reserve Board indicated that it expects to issue a separate proposal on governance specific to IHCs.

Our status as a financial holding company, and our resulting ability to engage in a broader range of nonbanking activities, are dependent on Deutsche Bank AG, DB USA Corporation and our two insured U.S. depository institutions qualifying as “well capitalized” and “well managed” under applicable regulations and upon our insured U.S. depository institutions meeting certain requirements under the Community Reinvestment Act. The Federal Reserve Board’s and other U.S. regulators’ “well capitalized” standards are generally based on specified quantitative thresholds set at levels above the minimum requirements to be considered “adequately capitalized.” For our two insured depository institution subsidiaries, DBTCA and Deutsche Bank Trust Company Delaware, the well-capitalized thresholds under the U.S. Basel 3 framework are a Common Equity Tier 1 capital ratio of 6.5 %, a Tier 1 capital ratio of 8 %, a Total capital ratio of 10 %, and a U.S. leverage ratio of 5 %. For bank holding companies, including Deutsche Bank AG and DB USA Corporation, the well-capitalized thresholds are a Tier 1 capital ratio of 6 % and a Total capital ratio of 10 %, both of which in the case of Deutsche Bank AG are calculated for Deutsche Bank AG under its home country standards.

State-chartered banks (such as DBTCA) and state-licensed branches and agencies of foreign banks (such as our New York branch) may not, with certain exceptions that require prior regulatory approval, engage as a principal in any type of activity not permissible for their federally chartered or licensed counterparts. In addition, DBTCA and Deutsche Bank Trust Company Delaware are subject to their respective state banking laws pertaining to legal lending limits and permissible investments and activities. Likewise, the United States federal banking laws also subject state branches and agencies to the single-borrower lending limits that apply to federal branches or agencies, which are substantially similar to the lending limits applicable to national banks. The single-borrower lending limits applicable to branches and agencies are calculated based on the dollar equivalent of the capital of the foreign bank (i.e., Deutsche Bank AG in the case of the New York branch).

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The Federal Reserve Board may terminate the activities of any U.S. office of a foreign bank if it determines that the foreign bank is not subject to comprehensive supervision on a consolidated basis in its home country or that there is reasonable cause to believe that such foreign bank or its affiliate has violated the law or engaged in an unsafe or unsound banking practice in the United States or, for a foreign bank that presents a risk to the stability of the United States financial system, the home country of the foreign bank has not adopted, or made demonstrable progress toward adopting, an appropriate system of financial regulation to mitigate such risk.

Also, under the so-called swaps “push-out” provisions of the Dodd-Frank Act, certain structured finance derivatives activities of FDIC-insured banks and U.S. branch offices of foreign banks (including our New York branch) are restricted.

There are various qualitative and quantitative restrictions on the extent to which we and our nonbank subsidiaries can borrow or otherwise obtain credit from our U.S. banking subsidiaries or engage in certain other transactions involving those subsidiaries, including derivative transactions and securities borrowing or lending transactions. In general, these transactions must be on terms that would ordinarily be offered to unaffiliated entities, must be secured by designated amounts of specified collateral and are subject to volume limitations. These restrictions also apply to certain transactions of our New York branch with our U.S. broker-dealers and certain of our other U.S. affiliates.

A major focus of U.S. governmental policy relating to financial institutions is aimed at preventing money laundering and terrorist financing and compliance with economic sanctions in respect of designated countries or activities. Failure of an institution to have policies and procedures and controls in place to prevent, detect and report money laundering and terrorist financing could in some cases have serious legal, financial and reputational consequences for the institution.

New York Branch

The New York branch of Deutsche Bank AG is licensed by the Superintendent of the New York State Department of Financial Services to conduct a commercial banking business and is required to maintain and pledge eligible high-quality assets with banks in the State of New York (up to a maximum of U.S.$ 100 million of assets pledged so long as the foreign bank remains designated as “well-rated” by the Superintendent of Financial Services). Should we cease to be designated as “well-rated” by the Superintendent of Financial Services, we may need to maintain and pledge substantial additional amounts of eligible assets. The Superintendent of Financial Services may also impose asset maintenance requirements on foreign banks with branch offices in New York. In addition, the Federal Reserve Board is authorized to impose institution-specific asset maintenance requirements under certain conditions, pursuant to the Tailoring Rules. Currently, no such requirements have been imposed upon our New York branch.

The New York State Banking Law authorizes the Superintendent of Financial Services to take possession of the business and property of a New York branch of a foreign bank under certain circumstances, generally involving violation of law, conduct of business in an unsafe manner, impairment of capital, suspension of payment of obligations, or initiation of liquidation proceedings against the foreign bank at its domicile or elsewhere. In liquidating or dealing with a branch’s business after taking possession of a branch, only the claims of depositors and other creditors which arose out of transactions with a branch are to be accepted by the Superintendent of Financial Services for payment out of the business and property of the foreign bank in the State of New York or in the U.S. and reflected on the books of the New York branch, without prejudice to the rights of the holders of such claims to be satisfied out of other assets of the foreign bank. After such claims are paid, the Superintendent of Financial Services will turn over the remaining assets, if any, first to the liquidators of other offices of the foreign bank that are being liquidated in the United States and then, if any assets remain, to the foreign bank or its duly appointed liquidator or receiver.

The New York branch’s deposits and other note obligations are not permitted to be, and are not, insured by the FDIC. In general, under the International Banking Act, the New York branch is not permitted to accept or maintain domestic retail deposits or their note equivalent having a balance of less than U.S.$ 250,000. The New York branch may not engage as principal in any type of activity that is not permissible for a federally licensed branch of a foreign bank unless the Federal Reserve Board has determined that such activity is consistent with sound banking practice. The New York branch must also comply with the same single borrower (or issuer) lending and investment limits applicable to national banks. The lending limits applicable to the New York branch take into account credit exposures from derivative transactions, securities borrowing and lending transactions, and repurchase and reverse repurchase agreements. These limits are based on the foreign bank’s worldwide capital. In addition, regulations that the U.S. Financial Stability Oversight Council or other regulators may adopt could affect the nature of the activities which the New York branch may conduct, and may impose restrictions and limitations on the conduct of such activities.

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Deutsche Bank Trust Company Americas

The Federal Deposit Insurance Corporation Improvement Act of 1991 (“FDICIA”) provides for extensive regulation of depository institutions (such as DBTCA and its direct and indirect parent companies), including requiring federal banking regulators to take “prompt corrective action” with respect to FDIC-insured banks that do not meet minimum capital requirements. As an insured bank’s capital level declines and the bank falls into lower categories (or if it is placed in a lower category by the discretionary action of its supervisor), greater limits are placed on its activities and federal banking regulators are authorized (and, in many cases, required) to take increasingly more stringent supervisory actions, which could ultimately include the appointment of a conservator or receiver for the bank (even if it is solvent). In addition, FDICIA generally prohibits an FDIC-insured bank from making any capital distribution (including payment of a dividend) or payment of a management fee to its holding company if the bank would thereafter be undercapitalized. If an insured bank becomes “undercapitalized”, it is required to submit to federal regulators a capital restoration plan guaranteed by the bank’s holding company. Since the enactment of FDICIA, both of our U.S. insured banks have maintained capital above the “well capitalized” standards, the highest capital category under applicable regulations.

DBTCA, like other FDIC-insured banks, is required to pay assessments to the FDIC for deposit insurance under the FDIC’s Deposit Insurance Fund (calculated using the FDIC’s risk-based assessment system). The minimum reserve ratio for the Deposit Insurance Fund was increased under the Dodd-Frank Act from 1.15 % to 1.35 %, which was reached as of September 30, 2018 following the imposition from July 1, 2016 through that date of a surcharge on the quarterly assessments of large insured depository institutions, including DBTCA. In addition, the FDIC has set the designated reserve ratio at 2 % as a long-term goal. The FDIC’s standard maximum deposit insurance amount per depositor at an insured depository institution is U.S.$ 250,000.

Other

In the United States, our U.S.-registered broker-dealers are regulated by the SEC. Broker-dealers are subject to regulations that cover all aspects of the securities business, including sales methods, trade practices among broker-dealers, use and safekeeping of customers’ funds and securities, capital structure, recordkeeping, the financing of customers’ purchases and the conduct of directors, officers and employees.

Our principal U.S. SEC-registered broker-dealer subsidiary, Deutsche Bank Securities Inc., is a member of the New York Stock Exchange (and other securities exchanges) and is regulated by the Financial Industry Regulatory Authority, Inc. (“FINRA”) and the individual state securities authorities in the states in which it operates. The U.S. government agencies and self-regulatory organizations, as well as state securities authorities in the United States having jurisdiction over our U.S. broker-dealer affiliates, are empowered to conduct administrative proceedings that can result in censure, fine, the issuance of cease-and-desist orders or the suspension or expulsion of a broker-dealer or its directors, officers or employees. Deutsche Bank Securities Inc. is also registered with and regulated by the SEC as an investment adviser, and by the CFTC and the National Futures Association as a futures commission merchant and commodity pool operator.

Under the Dodd-Frank Act, with certain exceptions, our entities that are swap dealers, security-based swap dealers, major swap participants or major security-based swap participants are registered or will be required to register with the SEC or CFTC, or both. Currently, Deutsche Bank AG is provisionally registered as a swap dealer. Deutsche Bank AG will be required in November 2021 to register with the SEC as a security based swap dealer. Registration, including provisional registration, as a swap dealer or security-based swap dealer subjects us to requirements as to capital, margin, business conduct and recordkeeping, among other requirements.

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Organizational Structure

We operate our business along the structure of our four corporate divisions and the Capital Release Unit. Deutsche Bank AG is the direct or indirect holding company for our subsidiaries. The following table sets forth the significant subsidiaries we own, directly or indirectly, as of December 31, 2020. We used the three-part test set out in Section 1-02 (w) of Regulation S-X under the U.S. Securities Exchange Act of 1934 to determine significance. We do not have any other subsidiaries we believe are material based on other, less quantifiable, factors.

We own 100 % of the equity and voting interests in these subsidiaries except for DWS Group GmbH & Co. KGaA, of which we own 79.49 % of equity and voting interests. These subsidiaries are included in our consolidated financial statements and prepare standalone financial statements as of December 31, 2020. Their principal countries of operation are the same as their countries of incorporation.

Subsidiary	Place of Incorporation
DB USA Corporation1	Delaware, United States
Deutsche Bank Americas Holding Corporation2	Delaware, United States
DB U.S. Financial Markets Holding Corporation3	Delaware, United States
Deutsche Bank Securities Inc.4	Delaware, United States
Deutsche Bank Trust Corporation5	New York, United States
Deutsche Bank Trust Company Americas6	New York, United States
Deutsche Bank Luxembourg S.A.7	Luxembourg
DB Beteiligungs-Holding GmbH8	Frankfurt am Main, Germany
DWS Group GmbH & Co. KGaA9	Frankfurt am Main, Germany

¹ DB USA Corporation is the top-level holding company for our subsidiaries in the United States.

² Deutsche Bank Americas Holding Corporation is a second tier holding company for subsidiaries in the United States.

³ DB U.S. Financial Markets Holding Corporation is a second tier holding company for subsidiaries in the United States.

⁴ Deutsche Bank Securities Inc. is a U.S. company registered as a broker dealer and investment advisor with the Securities and Exchange Commission and as a futures commission merchant with the Commodities Futures Trading Commission.

⁵ Deutsche Bank Trust Corporation is a bank holding company under Federal Reserve Board regulations.

⁶ Deutsche Bank Trust Company Americas is a New York State-chartered bank and member of the Federal Reserve System. It originates loans and other forms of credit, accepts deposits, arranges financings and provides numerous other commercial banking and financial services.

⁷ The company's primary business model comprises loan business with international clients (Corporate Bank & Investment Bank), where the bank acts globally as lending office and as risk transfer hub for the Strategic Corporate Lending of Deutsche Bank, as well as structured finance activities covering long-term infrastructure projects and high quality investment goods. Furthermore, the bank offers tailor-made solutions with a wide range of products and services to their ultra-high-net-worth (UHNW) clients.

⁸ The company holds the majority stake in DWS Group GmbH & Co. KGaA.

⁹ The company is a partnership limited by shares (Kommanditgesellschaft auf Aktien) with a German limited liability company (Gesellschaft mit beschränkter Haftung) as a general partner. The business purpose of the company is the holding of participations in as well as the management and support of a group of financial services providers. Following the public listing on March 23, 2018 on the Frankfurt Stock Exchange Deutsche Bank Group owns 79.49 % of equity and voting interests in the entity.

Property and Equipment

As of December 31, 2020, we operated in 59 countries out of 1,891 branches around the world, of which 68 % were in Germany. We lease a majority of our offices and branches under long-term agreements.

We continue to review our property requirements worldwide taking into account cost containment measures as well as growth initiatives in selected businesses. Please see Note 21 “Property and Equipment” to the consolidated financial statements for further information.

Information Required by Industry Guide 3

Please see pages S-1 through S-18 of the Supplemental Financial Information, which pages are incorporated by reference herein, for information required by SEC Industry Guide 3.

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Item 4A: Unresolved Staff Comments

We have not received written comments from the Securities and Exchange Commission regarding our periodic reports under the Exchange Act, as of any day 180 days or more before the end of the fiscal year to which this annual report relates, which remain unresolved.

Item 5: Operating and Financial Review and Prospects

Overview

The following discussion and analysis should be read in conjunction with the consolidated financial statements and the related notes to them included in “Item 18: Financial Statements” of this document, on which we have based this discussion and analysis.

We have prepared our consolidated financial statements in accordance with IFRS as issued by the International Accounting Standards Board (“IASB”).

Significant Accounting Policies and Critical Accounting Estimates

Our significant accounting policies are essential to understanding our reported results of operations and financial condition. Certain of these 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 have a material impact on our 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. Actual results may differ from these estimates if conditions or underlying circumstances were to change. See Note 1 “Significant Accounting Policies and Critical Accounting Estimates” to the consolidated financial statements for a discussion on our significant accounting policies and critical accounting estimates.

We have identified the following significant accounting policies that involve critical accounting estimates:

• the impairment of associates
• the impairment of financial assets at fair value through other comprehensive income
• the determination of fair value
• the recognition of trade date profit
• the impairment of loans and provisions for off-balance sheet positions
• the impairment of goodwill and other intangibles
• the recognition and measurement of deferred tax assets
• the accounting for legal and regulatory contingencies and uncertain tax positions

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Recently Adopted Accounting Pronouncements and New Accounting Pronouncements

See Note 2 “Recently Adopted and New Accounting Pronouncements” to the consolidated financial statements for a discussion on our recently adopted and new accounting pronouncements.

Operating Results

You should read the following discussion and analysis in conjunction with our consolidated financial statements.

Executive Summary

Please see “Management Report: Operating and Financial Review: Executive Summary” in the Annual Report 2020.

Trends and Uncertainties

For insight into the trends impacting our performance please see the “Management Report: Operating and Financial Review” section of the Annual Report 2020. Key risks and uncertainties for the Bank are discussed in “Item 3: Key Information – Risk Factors”.

The Bank’s future performance and the implementation of our strategic goals could be influenced by a number of uncertainties. Challenges may arise from sustained market volatility, increasing competitive pressures, potential deterioration of international trade relations, weakness of global, regional and national economic conditions, in particular in light of the COVID-19 pandemic, and political instability in key markets.

In addition, regulatory, tax and supervisory requirements continue to evolve. Although regulatory reforms have been selectively delayed in order to support banks’ efforts to more easily manage the impacts from COVID-19 and provide financing to the real economy, regulatory changes including to contributions to the SRB and to deposit guarantee schemes have and may continue to increase our costs, restrict our operations, or require structural change, which could put pressure on our capital position. In addition, we are involved in litigation, tax examinations, arbitration and regulatory proceedings and investigations. Such matters are subject to many uncertainties.

While we seek to achieve efficiencies in our operations, the realization of planned savings will be dependent on the successful and timely implementation of our updated strategy measures. The benefits, costs and timeframe of the implementation of our strategy could be adversely affected by unforeseen difficulties in the implementation process as well as factors beyond our control, such as negative market developments.

Risks to our Corporate Bank (CB) 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 framework), event risks and levels of client activity may also have an adverse impact.

There are several risks to our Investment Bank (IB) 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.

Risks to our Private Bank (PB) 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 uncertainties 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.

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Risks to our Asset Management (AM) 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 consequences 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.

Risks to our Capital Release Unit (CRU) 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 counterparty 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.

Performance in 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 associated 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.

The effective tax rate in future periods may be influenced by changes in tax laws or interpretative guidance, the occurrence of non-tax deductible litigation and other charges, changes in the measurement of deferred tax assets, or the resolution of tax examinations and investigations.

Results of Operations

Please see “Management Report: Operating and Financial Review: Results of Operations” in the Annual Report 2020 and our discussion of Non-GAAP financial measures in the “Supplementary Financial Information”.

Financial Position

Please see “Management Report: Operating and Financial Review: Financial Position” in the Annual Report 2020.

Liquidity and Capital Resources

For a detailed discussion of our liquidity risk management, see “Management Report: Risk Report: Liquidity Risk” in the Annual Report 2020.

For a detailed discussion of our capital management, see “Management Report: Risk Report: Capital Management” in the Annual Report 2020.

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Post-Employment Benefit Plans

Please see “Management Report: Employees: Post-Employment Benefit Plans” in the Annual Report 2020.

Off-Balance Sheet Arrangements

For information on the nature, purpose and extent of our off-balance sheet arrangements, please see Note 38 “Structured Entities” to the consolidated financial statements. For further information on off-balance sheet arrangements, including allowances for off-balance sheet positions, please refer to “Management Report: Risk Report: Asset Quality: Allowance for Credit Losses” in the Annual Report 2020 and Note 19 “Allowance for Credit Losses” to the consolidated financial statements. For information on irrevocable lending commitments and contingent liabilities with respect to third parties, please see Note 28 “Credit related Commitments” to the consolidated financial statements.

Tabular Disclosure of Contractual Obligations

Please see “Management Report: Operating and Financial Review: Tabular Disclosure of Contractual Obligations” in the Annual Report 2020.

Research and Development, Patents and Licenses

Not applicable.

Item 6: Directors, Senior Management and Employees

Directors and Senior Management

In accordance with the German Stock Corporation Act (Aktiengesetz), we have a Management Board (Vorstand) and a Supervisory Board (Aufsichtsrat). The German Stock Corporation Act prohibits simultaneous membership on both the Management Board and the Supervisory Board. The members of the Management Board are the executive officers of our company. The Management Board is responsible for managing our company and representing us in dealings with third parties. The Supervisory Board oversees the Management Board, appoints and removes its members and determines their remuneration and other compensation components, including pension benefits. According to German law, our Supervisory Board represents us in dealings with members of the Management Board. Therefore, no members of the Management Board may enter into any agreement with us without the prior consent of our Supervisory Board.

German law does not require the members of the Management Board nor the members of the Supervisory Board to own any of our shares to be qualified. In addition, German law has no requirement that members of the Management Board retire based on an age limit. However, age limits for members of the Management Board are defined contractually. Accordingly, 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. Age limits also exist for the members of the Supervisory Board according to the Terms of Reference (Geschäftsordnung) for our Supervisory Board. There is a maximum age limit of 70 years for members of the Supervisory Board. In exceptional cases, a Supervisory Board member can be elected or appointed for a period that extends no longer than until the end of the fourth Ordinary General Meeting that takes place after he/she has reached the age of 70.

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The Supervisory Board may not make management decisions. However, German law and our Articles of Association (Satzung) require the Management Board to obtain the approval of the Supervisory Board for certain actions. The most important of these actions are:

• granting of general powers of attorney (Generalvollmachten). A general power of attorney authorizes its holder to represent the company in substantially all legal matters without limitation to the affairs of a specific office;
• acquisitions and disposals (including transactions carried out by a dependent company) of real estate in so far as the object involves more than € 500,000,000;
• granting of credits, including the acquisition of participations in other companies, where the German Banking Act (Kreditwesengesetz) requires approval by the Supervisory Board. In particular, pursuant to the German Banking Act, it requires of the Supervisory Board inter alia the approval if we grant a loan (to the extent legally permissible) to a member of the Management Board or the Supervisory Board or one of our employees who holds a procuration (Prokura) or general power of attorney; and
• acquisitions and disposals (including transactions carried out by a dependent company) of other participations, insofar as the object involves more than € 1 billion. The Supervisory Board must be informed without delay of any acquisition or disposal of such participations involving more than € 500,000,000.

The Management Board must submit regular reports or ad-hoc reports, as the case may be, to the Supervisory Board on our current operations and future business planning as well as on our risk situation. The Supervisory Board may also request special reports from the Management Board at any time.

With respect to voting powers, a member of the Supervisory Board or the Management Board may not vote on resolutions open to a vote at a board meeting if the proposed resolution concerns:

• a legal transaction between us and the respective member; or
• commencement, settlement or completion of legal proceedings between us and the respective member.

A member of the Supervisory Board or the Management Board may not directly or indirectly exercise voting rights on resolutions open to a vote at a shareholders’ meeting (Hauptversammlung, which we refer to as the General Meeting) if the proposed resolution concerns:

• ratification of the member’s acts;
• a discharge of liability of the member; or
• enforcement of a claim against the member by us.

Supervisory Board and Management Board

In carrying out their duties, members of both the Management Board and Supervisory Board must exercise the standard of care of a prudent and diligent business person, and they are liable to us for damages if they fail to do so.

The liability of the members of the Management Board or the Supervisory Board under the German Stock Corporation Act for breach of their fiduciary duties is to the company rather than individual shareholders. However, individual shareholders that hold at least 1 % or € 100,000 of the subscribed capital and are granted standing by the court may also invoke such liability to the company. The underlying concept is that all shareholders should benefit equally from amounts received under this liability by adding such amounts to the company’s assets rather than disbursing them to plaintiff shareholders. We may waive the right to claim damages or settle these claims if at least three years have passed since the alleged breach and if the shareholders approve the waiver or settlement at the General Meeting with a simple majority of the votes cast, and provided that opposing shareholders do not hold, in the aggregate, one tenth or more of our share capital and do not have their opposition formally noted in the minutes maintained by a German notary.

Supervisory Board

The German Co-Determination Act of 1976 (Mitbestimmungsgesetz) requires our Supervisory Board to have twenty members, which is also reflected in the Articles of Association. In the event that the number of members of our Supervisory Board falls below twenty, upon application to a competent court, the court must appoint replacement members to serve on the board until official appointments are made by the general meeting of shareholders (with respect to shareholder representatives) or the employees and their representatives (with respect to employee representatives).

The German Co-Determination Act of 1976 (Mitbestimmungsgesetz) requires that the shareholders elect half of the members of the supervisory board of large German companies, such as Deutsche Bank, and that employees in Germany elect the other half. None of the current members of either of our boards were selected pursuant to any arrangement or understandings with major shareholders, customers or others.

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Each member of the Supervisory Board generally serves for a fixed term of approximately five years. For the election of shareholder representatives, the General Meeting may establish that the terms of office of up to five members may begin or end on differing dates. Pursuant to German law, the term expires at the latest at the end of the Annual General Meeting that approves and ratifies such member’s actions in the fourth fiscal year after the year in which the Supervisory Board member was elected. Supervisory Board members may also be re-elected. The shareholders may, by a majority of the votes cast in a General Meeting, remove any member of the Supervisory Board they have elected in a General Meeting. The employees may remove any member they have elected by a vote of three-quarters of the employee votes cast.

The members of the Supervisory Board elect the chairperson and the deputy chairperson of the Supervisory Board. Traditionally, the chairperson is a representative of the shareholders, and the deputy chairperson is a representative of the employees. At least half of the members of the Supervisory Board must be present at a meeting or must have submitted their vote in writing to constitute a quorum. In general, approval by a simple majority of the members of the Supervisory Board present and voting is required to pass a resolution. In the case of a deadlock, the resolution is put to a second vote. In the case of a second deadlock, the chairperson has the deciding vote.

For additional information on our Supervisory Board, including a table providing the names of and biographical information for the current members, see “Corporate Governance Statement: Management Board and Supervisory Board: Supervisory Board” in the Annual Report 2020.

Standing Committees

For information on the standing committees of our Supervisory Board, please see “Corporate Governance Statement: Management Board and Supervisory Board: Standing Committees” in the Annual Report 2020.

The business address of the members of the Supervisory Board is the same as our business address, Taunusanlage 12, 60325 Frankfurt am Main, Germany.

Management Board

Our Articles of Association require the Management Board to have at least three members. Our Management Board currently has ten members. The Supervisory Board has also appointed a Chairman (CEO) and one Deputy Chairman (President) of the Management Board.

The Supervisory Board appoints the members of the Management Board for a maximum term of five years and oversees them. They may be re-appointed or have their term extended for one or more terms of up to a maximum of five years each. The Supervisory Board may remove a member of the Management Board prior to the expiration of his or her term for good cause.

Pursuant to our Articles of Association, two members of the Management Board, or one member of the Management Board together with a holder of procuration, may represent us for legal purposes. A holder of procuration is an attorney-in-fact who holds a legally defined power under German law, which cannot be restricted with respect to third parties. However, pursuant to German law, the Management Board itself must resolve on certain matters as a whole and may not delegate the decision to one or more individual members. In particular, it may not delegate the determination of our business and risk strategies, and the coordinating or controlling responsibilities. The Management Board is required to ensure that shareholders are treated on an equal basis and receive equal information. The Management Board is also responsible for ensuring our proper business organization, which includes appropriate and effective risk management as well as compliance with legal requirements and internal guidelines, and for taking the necessary measures to ensure that adequate internal guidelines are developed and implemented.

Other selected responsibilities of the Management Board in accordance with the Terms of Reference for the Management Board and/or German law are:

• appointing key personnel at the level directly below the Management Board, in particular, appointing the Global Key Function Holders employed by us;
• making decisions regarding significant credit exposures or other risks which have not been delegated to individual risk management units;
• acquisition and disposal of equity investments, including capital measures in all cases in which (i) the law or our Articles of Association require approval by the Supervisory Board, or (ii) the equivalent of € 100 million is exceeded;
• acquisition and disposal of real estate – directly or by separate legal entities – in all cases in which: (i) the law or our Articles of Association require approval by the Supervisory Board, or (ii) the real estate’s equivalent exceeds € 100 million;

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• individual vendor or intra Group-outsourcings (or material changes to those outsourcings) in all cases in which the equivalent of € 100 million is exceeded on an annual basis or include the delegation of core organizational duties of the Management Board;
• calling shareholders’ meetings;
• filing petitions to set aside shareholders’ resolutions;
• preparing and executing shareholders’ resolutions; and
• reporting to the Supervisory Board.

For additional information on our Management Board, including the names of and biographical information for the current members, see “Corporate Governance Statement: Management Board and Supervisory Board: Management Board” in the Annual Report 2020. The Terms of Reference of the Management Board are published on our website www.db.com/ir/en/documents.htm.

Board Practices of the Management Board

The Terms of Reference for the Management Board are in accordance with the Supervisory Board resolution of July 7, 2019. These Terms of Reference provide that the members of the Management Board have the collective responsibility for managing Deutsche Bank. Notwithstanding this principle, the allocation of functional responsibilities to the individual members of the Management Board and their substitution (in case of temporary absence) are set out in the Business Allocation Plan for the Management Board in accordance with the Supervisory Board resolution of December 17, 2020. The allocation of functional responsibilities does not exempt any member of the Management Board from collective responsibility for the management of the business. The members of the Management Board are responsible for the proper performance and/or delegation of their duties and the clear allocation of accountabilities and responsibilities within the area of own functional responsibility (so-called “ Ressort ”) in accordance with the Business Allocation Plan.

Members of the Management Board are bound to the corporate interest of Deutsche Bank. No member of the Management Board may pursue personal interests in his/her decisions or use business opportunities intended for the company for himself/herself. To the extent permitted by German law, individual members of the Management Board may assume Deutsche Bank Group-external mandates, honorary offices or special assignments. In order to effectively prevent any conflicts of interest, the members of the Management Board may accept such positions only upon the approval of the other members of the Management Board and the Chairman’s Committee of the Supervisory Board. Management Board members generally do not accept the role of chair of supervisory boards of Group-external companies.

Section 161 of the German Stock Corporation Act requires that the management board and supervisory board of any German stock exchange-listed company declare annually that the company complies with the recommendations of the German Corporate Governance Code or, if not, which recommendations the company does not comply with and why it does not comply with these recommendations (so-called “comply or explain”-principle). On some points, these recommendations go beyond the requirements of the German Stock Corporation Act. The Management Board and Supervisory Board issued a new Declaration of Conformity in accordance with Section 161 of the German Stock Corporation Act in October 2020, which is available on our internet website at www.db.com/ir/en/documents.htm under the heading “Declaration of Conformity pursuant to Section 161 German Stock Corporation Act (AktG), Oct 2020”.

For information on the Management Board’s terms of office, please see “Corporate Governance Statement: Management Board and Supervisory Board: Management Board” in the Annual Report 2020. For details of the Management Board’s service contracts providing benefits upon termination, please see “Compensation Report: Pension Benefits” and “Compensation Report: Other Benefits upon Early Termination” in the Management Report of the Annual Report 2020.

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 management 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, in addition to Infrastructure Committees, Business Executive Committees and Regional Committees, the “Group Management Committee” which aims to improve the information flow across the Corporate Divisions and between the Corporate Divisions and the Management Board. The Group Management Committee as a senior platform, which is not required by the German Stock Corporation Act, is composed of all Management Board members as well as most senior business representatives to exchange information and discuss business, growth and profitability.

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Compensation

For information on the compensation of the members of our Management Board, see “Management Report: Compensation Report: Management Board Compensation Report” in the Annual Report 2020.

For information on the compensation of the members of our Employees, see “Management Report: Compensation Report: Employee Compensation Report” in the Annual Report 2020.

For information on the compensation of the members of our Supervisory Board, see “Management Report: Compensation Report: Compensation System for Supervisory Board Members” in the Annual Report 2020.

Employees

Labor Relations

In Germany, labor unions and employers’ associations generally negotiate collective bargaining agreements on salaries and benefits for employees below the management level. Many companies in Germany, including ourselves and our material German subsidiaries, are members of employers’ associations and are bound by collective bargaining agreements.

Accordingly, our employers’ association, the “Arbeitgeberverband des privaten Bankgewerbes e.V.”, regularly renegotiates the collective bargaining agreements that cover many of our employees. The current agreement was reached in July 2019. As part of the final package, salaries were increased in two stages by a total of 4.0 %: 2.0 % from September 2019 and a further 2.0 % from November 2020. In addition to salary increases, the final result also includes mutual negotiation obligations regarding new collective bargaining agreements on qualification, working hours, training and prevention as well as the start of a further modernization of the collective bargaining agreements. The existing collective wage agreement lasts until end of June 2021, negotiations on a renewal are likely to begin in autumn 2021.

Our employers’ association negotiates with the following unions:

• ver.di (Vereinigte Dienstleistungsgewerkschaft);
• Deutscher Bankangestellten Verband (DBV – Gewerkschaft der Finanzdienstleister);
• Deutscher Handels- und Industrieangestellten Verband (DHV – Die Berufsgewerkschaft).

As German law prohibits us from asking our employees whether they are members of labor unions, there is no record of how many of the bank’s employees are union members.

On the basis of the agreement on cross-border information and consultation of Deutsche Bank employees in the EU concluded on September 10, 1996, all employees in the EU are represented by the European Works Council. This adds up to around two thirds of the Group's total workforce.

For further information on our employees, see “Management Report: Employees” in the Annual Report 2020.

Share Ownership

For the share ownership of the Management Board, see “Management Report: Compensation Report: Management Board Share Ownership” in the Annual Report 2020.

For the share ownership of the members of the Supervisory Board, see “Corporate Governance Statement/ Corporate Governance Report: Reporting and Transparency: Directors’ Share Ownership” in the Annual Report 2020.

For a description of our employee share programs, please see Note 33 “Employee Benefits” to the consolidated financial statements.

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Item 7: Major Shareholders and Related Party Transactions

Major Shareholders

On December 31, 2020, our issued share capital amounted to € 5,290,939,215.36 divided into 2,066,773,131 no par value ordinary registered shares.

On December 31, 2020, we had 604,997 registered shareholders 946,450,284 of our shares were registered in the names of 594,082 shareholders resident in Germany, representing 45.79 % of our share capital. 363,580,475 of our shares were registered in the names of 573 shareholders resident in the United States, representing 17.59 % of our share capital.

The German Securities Trading Act (Wertpapierhandelsgesetz) requires investors in publicly-traded corporations whose investments reach certain thresholds to notify both the corporation and the BaFin of such change within four trading days. The minimum disclosure threshold is 3 % of the corporation’s issued voting share capital.

BlackRock, Inc., Wilmington, DE, has notified us that as of December 31, 2020 it held 5.23 % of our shares. We have received no further notification by BlackRock, Inc., Wilmington, DE, through February 2, 2021.

The Capital Group Companies, Inc., Los Angeles, California, has notified us that as of March 31, 2020 it held 3.74 % of our shares. We have received no further notification by The Capital Group Companies, Inc., Los Angeles, California, through February 2, 2021.

Euro Pacific Growth Fund, Boston, Massachusetts (part of the Capital Group shareholding), has notified us that as of October 6, 2020 it held 3.61 % of our shares. We have received no further notification by Euro Pacific Growth Fund, Boston, Massachusetts (part of the Capital Group shareholding), through February 2, 2021.

Douglas L. Braunstein ( Hudson Executive Capital LP ), has notified us that as of November 20, 2020 he held 3.18 % of our shares. We have received no further notification by Douglas L. Braunstein ( Hudson Executive Capital LP ), through February 2, 2021.

Paramount Services Holdings Ltd., British Virgin Islands, has notified us that as of August 20, 2015 it held 3.05 % of our shares. We have received no further notification by Paramount Services Holdings Ltd., British Virgin Islands, through February 2, 2021.

Supreme Universal Holdings Ltd., Cayman Islands, has notified us that as of August 20, 2015 it held 3.05 % of our shares. We have received no further notification by Supreme Universal Holdings Ltd., Cayman Islands, through February 2, 2021.

Stephen A. Feinberg (Cerberus), has notified us that as of November 14, 2017 he held 3.001 % of our shares. We have received no further notification by Stephen A. Feinberg (Cerberus), through February 2, 2021.

We are neither directly nor indirectly owned nor controlled by any other corporation, by any government or by any other natural or legal person severally or jointly.

Pursuant to German law and our Articles of Association, to the extent that we may have major shareholders at any time, we may not give them different voting rights from any of our other shareholders.

We are aware of no arrangements which may at a subsequent date result in a change in control of our company.

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Related Party Transactions

We have business relationships with a number of the companies in which we own significant equity interests. We also have business relationships with a number of companies where members of our Management Board also hold positions on boards of directors. Our business relationships with these companies cover many of the financial services we provide to our clients generally. For more detailed information, refer to Note 36 “Related Party Transactions” to the consolidated financial statements.

We conduct our business with these companies on terms equivalent to those that would prevail if we did not have equity holdings in them or management members in common, and we have conducted business with these companies on that basis in 2020 and prior years. None of these transactions is or was material to us.

Among our business with related party companies in 2020, there have been and currently are loans, guarantees and commitments, which totaled € 212 million (including loans amounting to € 169 million) as of December 31, 2020, compared to € 199 million (including loans amounting to € 187 million) as of December 31, 2019.

All these credit exposures

• were made in the ordinary course of business,
• were made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with other persons, and
• did not involve more than the normal risk of collectability or present other unfavorable features compared to loans to nonrelated parties at their initiation.

Related Party Impaired Loans

In addition to our other shareholdings, we hold acquired equity interests in some of our clients arising from our efforts to protect our then-outstanding lending exposures to them.

Impaired loans to related parties which may exhibit more than normal risk of collectability or present other unfavorable features compared to performing loans to related parties decreased by € 11 million to € 0 million, from December 31, 2019. The following table presents an overview of the impaired loans we hold of our related parties as of December 31, 2020.

in € m.	Amount outstanding as of Decem- ber 31, 2020	Largest amount outstanding January 1, to December 31, 2020	Provision for loan losses in 2020¹	Allowance for loan losses as of Decem- ber 31, 2020¹	Nature of the loan and transaction in which incurred
Customer A	0	11	0	0	Company was put into a court-supervised debt moratorium process in 2016. This triggered a debt to equity swap for 70 % of our loans and a € 25 million write-off in 2017. The company has informed lenders of inability to service the debt. No recoveries expected. DB sold exposure in April 2020 sales price € 0.3 million triggered additional € 9.8 million final write off.
Total	0	11	0	0

¹ The allowance for loan losses is calculated by subtracting the net present value of future expected cash flows from the current outstanding. The year-end balance of the loan loss allowance is in most cases lower than the amount of provision for credit losses required for the recognition due to unwinding effects based upon passage of time which are recognized in interest income.

² Provision of € 0.5 million in 2020 driven by FX effect of € 0.5 million.

In the above table, customer A is a company in which we held a minority share and which is not consolidated at equity.

We have not disclosed the name of the related party customer described above because we have concluded that such disclosure would violate applicable privacy laws, such as customer confidentiality and data protection laws, and this customer has not waived application of these privacy laws. A legal opinion regarding the applicable privacy laws is filed as Exhibit 14.1 hereto.

Interests of Experts and Counsel

Not required because this document is filed as an annual report.

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Item 8: Financial Information

Consolidated Statements and Other Financial Information

Consolidated Financial Statements

The Financial Statements of this Annual Report on Form 20-F consist of the Consolidated Financial Statements including Notes 1 to 43 thereto, which are set forth as Part 2 of the Annual Report 2020, and, as described in Note 1 “Significant Accounting Policies and Critical Accounting Estimates” thereto under “Basis of accounting – IFRS 7 disclosures”, certain parts of the Management Report set forth as Part 1 of the Annual Report 2020.

The Consolidated Financial Statements as of and for the year ended December 31, 2020 have been audited by Ernst & Young GmbH Wirtschaftsprüfungsgesellschaft, as described in their “Report of Independent Registered Public Accounting Firm” included in the Annual Report 2020.

The Consolidated Financial Statements as of December 31, 2019 and for the years ended December 31, 2019 and 2018 have been audited by KPMG AG Wirtschaftsprüfungsgesellschaft, as described in their “Report of Independent Registered Public Accounting Firm” included in the Annual Report 2020.

Legal Proceedings

General. We and our subsidiaries operate in a legal and regulatory environment that exposes us to significant litigation risks. As a result, we are involved in litigation, arbitration and regulatory proceedings and investigations in Germany and in a number of jurisdictions outside Germany, including the United States. Please refer to Note 27 “Provisions” to the Consolidated Financial Statements for descriptions of certain significant legal proceedings. Additional legal proceedings that may have, or have had in the recent past, significant effects on our financial position or profitability are described below.

Australian Antitrust Proceedings. In June 2018, the Australian Commonwealth Director of Public Prosecutions (CDPP) filed charges against Deutsche Bank for alleged criminal cartel offenses following a referral by the Australian Competition and Consumer Commission. CDPP alleges that the cartel conduct took place in connection with an institutional share placement by Australia and New Zealand Banking Group Limited in August 2015, on which Deutsche Bank acted as joint underwriter with other banks. CDPP has also charged other banks and individuals, including two former Deutsche Bank employees. Deutsche Bank AG and its former employees have been charged with six offences of making, and giving effect to, anti-competitive arrangements. Deutsche Bank AG and its former employees are defending these charges. The criminal trial in this matter has been scheduled to commence on April 4, 2022 before the Federal Court of Australia.

Bank Bill Swap Rate Claims. On August 16, 2016, a putative class action was filed in the U.S. District Court for the Southern District of New York against Deutsche Bank and other defendants, bringing claims based on alleged collusion and manipulation in connection with the Australian Bank Bill Swap Rate (“BBSW”) on behalf of persons and entities that engaged in U.S.-based transactions in BBSW-linked financial instruments from 2003 through the date on which the effects of the alleged unlawful conduct ceased. The complaint alleged that the defendants, among other things, engaged in money market transactions intended to influence the BBSW fixing, made false BBSW submissions, and used their control over BBSW rules to further the alleged misconduct. An amended complaint was filed on December 16, 2016. On November 26, 2018, the court partially granted defendants’ motions to dismiss the amended complaint, dismissing all claims against Deutsche Bank. On April 3, 2019, the plaintiffs filed a second amended complaint, which the defendants moved to dismiss. On February 13, 2020, the court partially granted the motion to dismiss the second amended complaint, with certain claims against Deutsche Bank remaining. On June 16, 2020, Deutsche Bank served an answer denying all allegations of misconduct. Discovery is ongoing.

Central Bank of the Republic of China (Taiwan) Foreign Exchange Sanction . On February 5, 2021, the Central Bank of the Republic of China (Taiwan) (CBC) sanctioned Deutsche Bank AG, Taipei Branch (DBTP) and three other banks for engaging in foreign exchange forward transactions with international commodities trading clients in violation of the CBC’s Regulations Governing Foreign Exchange Business of Banking Enterprises. While no fine was imposed on DBTP, CBC revoked DBTP’s business permission to conduct Taiwan dollar deliverable forward and Taiwan dollar non-deliverable forward business and suspended DBTP’s business permission for all foreign exchange related derivatives business for two years. The sanction does not affect performance and settlement of existing trades, nor does it affect DBTP’s interbank swap funding transactions. The sanctions take effect from February 8, 2021. DBTP may apply to CBC to reinstate the affected business upon demonstrating concrete remediation measures.

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Challenge of the General Meeting’s Resolution Not to Pay a Dividend for the 2015 Fiscal Year. In May 2016, Deutsche Bank AG’s General Meeting resolved that no dividend was to be paid to Deutsche Bank’s shareholders for the 2015 fiscal year. Some shareholders filed a lawsuit with the Regional Court Frankfurt am Main (Landgericht), challenging (among other things) the resolution on the grounds that Deutsche Bank was required by law to pay a minimum dividend in an amount equal to 4 % of Deutsche Bank’s share capital. In December 2016, the Regional Court ruled in favor of the plaintiffs. Deutsche Bank initially appealed the court’s decision. However, Deutsche Bank withdrew its appeal prior to Deutsche Bank’s 2017 General Meeting, as a result of which the challenged resolution became void. Deutsche Bank’s General Meeting in May 2017 resolved the payment of a dividend of approximately € 400 million from Deutsche Bank’s distributable profit for 2016 which amount contained a component reflecting the distributable profit carried forward from 2015 of approximately € 165 million. Such dividend was paid to the shareholders shortly after the annual General Meeting. The resolution was also challenged in court based on the allegation that the way the decision was taken was not correct. On January 18, 2018, the Regional Court Frankfurt am Main dismissed the shareholder actions as regards the dividend resolution taken in May 2017. The plaintiffs appealed to the Higher Regional Court Frankfurt am Main. On March 26, 2019, the Higher Regional Court Frankfurt am Main confirmed the decision of the Regional Court and dismissed the appeal. The plaintiffs filed an appeal against the denial of leave to appeal with the Federal Court of Justice. On May 5, 2020 the Federal Court of Justice dismissed the appeal of the plaintiff against the denial of leave to appeal. This decision is final.

FX derivatives products investigations and litigation. Deutsche Bank has received requests for information from certain regulators in connection with its internal investigation into the historical sales of certain FX derivatives products with a limited number of clients. Deutsche Bank is providing information to and otherwise cooperating with these regulators. Separately, a related claim has been filed in the High Courts of England and Wales by one of the Bank’s clients but proceedings have yet to formally commence.

KOSPI Index Unwind Matters. Following the decline of the Korea Composite Stock Price Index 200 (the “KOSPI 200”) in the closing auction on November 11, 2010 by approximately 2.7 %, the Korean Financial Supervisory Service (“FSS”) commenced an investigation and expressed concerns that the fall in the KOSPI 200 was attributable to a sale by Deutsche Bank of a basket of stocks, worth approximately € 1.6 billion, that was held as part of an index arbitrage position on the KOSPI 200. On February 23, 2011, the Korean Financial Services Commission, which oversees the work of the FSS, reviewed the FSS’ findings and recommendations and resolved to take the following actions: (i) to file a criminal complaint to the Korean Prosecutor’s Office for alleged market manipulation against five employees of Deutsche Bank group and Deutsche Bank’s subsidiary Deutsche Securities Korea Co. (DSK) for vicarious corporate criminal liability; and (ii) to impose a suspension of six months, commencing April 1, 2011 and ending September 30, 2011, of DSK’s business for proprietary trading of cash equities and listed derivatives and DMA (direct market access) cash equities trading, and the requirement that DSK suspend the employment of one named employee for six months. On August 19, 2011, the Korean Prosecutor’s Office announced its decision to indict DSK and four employees of Deutsche Bank group on charges of spot/futures-linked market manipulation. The criminal trial commenced in January 2012. On January 25, 2016, the Seoul Central District Court rendered guilty verdicts against a DSK trader and DSK. A criminal fine of KRW 1.5 billion (less than € 2.0 million) was imposed on DSK. The Court also ordered forfeiture of the profits generated on the underlying trading activity. The Group disgorged the profits on the underlying trading activity in 2011. The criminal trial verdicts against both the DSK trader and against DSK were overturned on appeal in a decision rendered by the Seoul High Court on December 12, 2018. The Korean Prosecutor’s Office has appealed the Seoul High Court decision.

In addition, a number of civil actions have been filed in Korean courts against Deutsche Bank and DSK by certain parties who allege they incurred losses as a consequence of the fall in the KOSPI 200 on November 11, 2010. First instance court decisions were rendered against the Bank and DSK in some of these cases starting in the fourth quarter of 2015. The outstanding claims known to Deutsche Bank have an aggregate claim amount of less than € 60 million (at present exchange rates).

Monte Dei Paschi. In March 2013, Banca Monte dei Paschi di Siena (“MPS”) initiated civil proceedings in Italy against Deutsche Bank alleging that Deutsche Bank assisted former MPS senior management in an accounting fraud on MPS, by undertaking repo transactions with MPS and “Santorini”, a wholly owned special-purpose vehicle of MPS, which helped MPS defer losses on a previous transaction undertaken with Deutsche Bank. Subsequently, in July 2013, the Fondazione Monte dei Paschi di Siena (“FMPS”), MPS’ largest shareholder, also commenced civil proceedings in Italy for damages based on substantially the same facts. In December 2013, Deutsche Bank reached an agreement with MPS to settle the civil proceedings and the transactions were unwound. The civil proceedings initiated by FMPS, in which damages of between € 220 million and € 381 million were claimed, were also settled in December 2018 upon payment by Deutsche Bank of € 17.5 million. FMPS’s separate claim filed in July 2014 against FMPS’s former administrators and a syndicate of 12 banks including Deutsche Bank S.p.A. for € 286 million continues to be pending before the first instance Florence courts.

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A criminal investigation was launched by the Siena Public Prosecutor into the transactions entered into by MPS with Deutsche Bank and certain unrelated transactions entered into by MPS with other parties. Such investigation was moved in summer 2014 from Siena to the Milan Public Prosecutors as a result of a change in the alleged charges being investigated. On February 16, 2016, the Milan Public Prosecutors issued a request of committal to trial against Deutsche Bank and six current and former employees. The committal process concluded with a hearing on October 1, 2016, during which the Milan court committed all defendants in the criminal proceedings to trial. Deutsche Bank’s potential exposure was for administrative liability under Italian Legislative Decree n. 231/2001 and for civil vicarious liability as an employer of current and former Deutsche Bank employees who are being criminally prosecuted.

On November 8, 2019, the Milan court issued its verdicts, finding five former employees and one current employee of Deutsche Bank guilty and sentencing them to either 3 years and 6 months or 4 years and 8 months. Deutsche Bank was found liable under Italian Legislative Decree n. 231/2001 and the court ordered the seizure of alleged profits of € 64.9 million and a fine of € 3 million. The Court also found Deutsche Bank has civil vicarious liability for damages (to be quantified by the civil court) as an employer of the current and former employees who were convicted. The sentences and fines are not due until the conclusion of any appeal process. The final judgment was issued by the Court on May 13, 2020. Deutsche Bank and the six former or current employees filed an appeal to the Milan Court of Appeal on September 22, 2020.

On May 22, 2018, CONSOB, the authority responsible for regulating the Italian financial markets, issued fines of € 100,000 each against the six current and former employees of Deutsche Bank who are defendants in the criminal proceedings. The six individuals were also banned from performing management functions in Italy and for Italian based institutions for three to six months each. No separate fine or sanction was imposed on Deutsche Bank but it is jointly and severally liable for the six current/former Deutsche Bank employees’ fines. On June 14, 2018, Deutsche Bank and the six individuals filed an appeal in the Milan Court of Appeal challenging CONSOB’s decision and one of the individuals sought a stay of enforcement of the fine against that individual. On December 17, 2020, the Milan Court of Appeal allowed the appeals filed by Deutsche Bank and the six current and former employees and annulled the resolution sanctioning them. CONSOB may appeal the decision.

Pension Plan Assets. The Group sponsors a number of post-employment benefit plans on behalf of its employees. In Germany, the pension assets that fund the obligations under these pension plans are held by Benefit Trust GmbH. The German tax authorities are challenging the tax treatment of certain income received by Benefit Trust GmbH in the years 2010 to 2013 with respect to its pension plan assets. For the year 2010 Benefit Trust GmbH paid the amount of tax and interest assessed of € 160 million to the tax authorities and is seeking a refund of the amounts paid in litigation. For 2011 to 2013 the matter is stayed pending the outcome of the 2010 tax litigation. The amount of tax and interest under dispute for years 2011 to 2013, which also has been paid to the tax authorities, amounts to € 456 million. In March 2017, the lower fiscal court ruled in favor of Benefit Trust GmbH and in September 2017 the tax authorities appealed the decision to the German supreme fiscal court ( Bundesfinanzhof ). A court hearing is scheduled for March 15, 2021.

Precious Metals Investigations and Litigations. Deutsche Bank received inquiries from certain regulatory and law enforcement authorities, including requests for information and documents, pertaining to investigations of precious metals trading and related conduct. Deutsche Bank has cooperated with these investigations. On January 29, 2018, Deutsche Bank entered into a U.S.$ 30 million settlement with the U.S. Commodity Futures Trading Commission (“CFTC”) concerning spoofing, and manipulation and attempted manipulation in precious metals futures and of stop loss orders. On January 8, 2021, Deutsche Bank entered into a deferred prosecution agreement with the U.S. Department of Justice concerning spoofing and the Foreign Corrupt Practices Act conduct as mentioned in the Note 27 “Provisions” to the Consolidated Financial Statements. As part of its obligations in the deferred prosecution agreement, Deutsche Bank agreed to pay approximately U.S.$ 8 million, of which approximately U.S.$ 6 million would be credited by virtue of the aforementioned CFTC resolution.

Deutsche Bank is a defendant in two consolidated class action lawsuits pending in the U.S. District Court for the Southern District of New York. The suits allege violations of U.S. antitrust law, the U.S. Commodity Exchange Act and related state law arising out of the alleged manipulation of gold and silver prices through participation in the Gold and Silver Fixes. Deutsche Bank has reached agreements to settle the Gold action for U.S.$ 60 million and the Silver action for U.S.$ 38 million, which remain subject to final court approval.

Pre-Release ADRs. Deutsche Bank and certain affiliates have received inquiries from certain European regulatory, tax and law enforcement authorities, including requests for documents and information, with respect to American Depositary Receipts (ADRs), including ADRs that have been issued on a "pre-release" basis (“pre-release ADRs”). Deutsche Bank is cooperating with these inquiries.

Transfer of Lease Assets. In December 2017, a claim for damages was filed with the Regional Court Frankfurt am Main against Deutsche Bank AG in the amount of approximately € 155 million (excluding interest). In 2006, Deutsche Bank AG (indirectly, through a special-purpose vehicle) entered into transactions according to which the plaintiff transferred certain lease assets to the special-purpose vehicle against, among others things, receipt of a preference dividend. The plaintiff alleges that Deutsche Bank had entered into an agreement with it under which Deutsche Bank provided flawed contractual documentation as a result of which the German tax authorities have disallowed the plaintiff’s expected tax savings. The Regional Court Frankfurt am Main fully dismissed the claim on July 26, 2019. The plaintiff has appealed this decision to the Higher Regional Court Frankfurt am Main. A date for an oral hearing has not yet been set.

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Dividend Policy

For 2020, the Management Board will propose to the General Meeting that we do not pay a dividend. For 2019, we also did not pay a dividend. For 2018, we paid a dividend of € 0.11 per share. Historically, we have paid dividends at higher levels, and we aim to free up capital for distribution from 2022 with the goal of returning € 5 billion of capital to shareholders over time. However, we cannot assure investors that we will pay dividends as we did in previous years, nor at any other level, or at all, in any future period. If the company is not profitable, we may not pay dividends at all.

Furthermore, if Deutsche Bank AG fails to meet the regulatory capital adequacy requirements under CRR/CRD (including individually imposed capital requirements (so-called “Pillar 2” requirements) and the combined buffer requirement), it may be prohibited from making, and the ECB or the BaFin may suspend or limit, the payment of dividends. In addition, the ECB expects banks to meet “Pillar 2” guidance. If Deutsche Bank AG operates or expects to operate below “Pillar 2” guidance, the ECB will review the reasons why the Bank’s capital level has fallen or is expected to fall and may take appropriate and proportionate measures in connection with such shortfall. Any such measures might have an impact on Deutsche Bank AG’s willingness or ability to pay dividends. For further information on regulatory capital adequacy requirements and the powers of Deutsche Bank AG’s regulators to suspend dividend payments, see “Item 4: Information on the Company – Regulation and Supervision – Capital Adequacy Requirements” and “– Investigative and Enforcement Powers.”

Under German law, Deutsche Bank AG’s dividends are based on the unconsolidated results of Deutsche Bank AG as prepared in accordance with German accounting rules. Deutsche Bank AG’s Management Board, which prepares the annual financial statements of Deutsche Bank AG on an unconsolidated basis, and its Supervisory Board, which reviews them, first allocate part of Deutsche Bank AG’s annual surplus (if any) to Deutsche Bank AG’s statutory reserves and to any losses carried forward, as it is legally required to do. They then allocate the remainder between other revenue reserves (or retained earnings) and balance sheet profit. They may allocate up to one-half of this remainder to other revenue reserves, and must allocate at least one-half to balance sheet profit. A profit distribution from balance sheet profit is only permitted to the extent that the balance sheet profit plus distributable earnings exceeds potential dividend blocking items, which consist primarily of deferred tax assets, self-developed software and unrealized gains on plan assets, all net of respective deferred tax liabilities.

Deutsche Bank AG then distributes up to the full amount of the balance sheet profit not subject to dividend blocking of Deutsche Bank AG if the annual General Meeting so resolves. The annual General Meeting may resolve a non-cash distribution instead of, or in addition to, a cash dividend. However, Deutsche Bank AG is not legally required to distribute its balance sheet profit to its shareholders to the extent that it has issued participatory rights ( Genussrechte ) or granted a silent participation (stille Beteiligung) that accord their holders the right to a portion of Deutsche Bank AG’s distributable profit.

Deutsche Bank AG declares dividends by resolution of the annual General Meeting and pays them (if any) once a year. Dividends approved at a General Meeting are payable on the third business day after that meeting, unless a later date has been determined at that meeting or by the Articles of Association. In accordance with the German Stock Corporation Act, the record date for determining which holders of Deutsche Bank AG’s ordinary shares are entitled to the payment of dividends, if any, or other distributions whether cash, stock or property, is the date of the General Meeting at which such dividends or other distributions are declared.

Significant Changes

Except as otherwise stated in this document, there have been no significant changes subsequent to December 31, 2020.

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Item 9: The Offer and Listing

Offer and Listing Details and Markets

Our share capital consists of ordinary shares issued in registered form without par value. Under German law, shares without par value are deemed to have a “nominal” value equal to the total amount of share capital divided by the number of shares. Our shares have a nominal value in this sense of € 2.56 per share.

The principal trading market for our shares is the Frankfurt Stock Exchange, where it trades under the symbol DBK. Our shares are also traded on the six other German stock exchanges (Berlin, Duesseldorf, Hamburg, Hanover, Munich and Stuttgart, where on each exchange it also trades under the symbol DBK), on the Eurex and the New York Stock Exchange, where it trades under the symbol DB.

We maintain a share register in Frankfurt am Main and, for the purposes of trading our shares on the New York Stock Exchange, a share register in New York.

All shares on German stock exchanges trade in euros, and all shares on the New York Stock Exchange trade in U.S. dollars.

You should not rely on our past share performance as a guide to our future share performance.

Plan of Distribution

Not required because this document is filed as an annual report.

Selling Shareholders

Not required because this document is filed as an annual report.

Dilution

Not required because this document is filed as an annual report.

Expenses of the Issue

Not required because this document is filed as an annual report.

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Item 10: Additional Information

Share Capital

Not required because this document is filed as an annual report.

Memorandum and Articles of Association

The following is a summary of certain information relating to certain provisions of our Articles of Association, our share capital and German law. This summary is not complete and is qualified by reference to our Articles of Association and German law in effect at the date of this filing. Copies of our Articles of Association are publicly available at the Commercial Register ( Handelsregister ) in Frankfurt am Main, and an English translation is filed as Exhibit 1.1 to this Annual Report.

Our Business Objectives

Section 2 of our Articles of Association sets out the objectives of our business:

• to transact all aspects of banking business;
• to provide financial and other services; and
• to promote international economic relations.

Our Articles of Association permit us to pursue these objectives directly or through subsidiaries and affiliated companies.

Our Articles of Association also provide that, to the extent permitted by law, we may transact all business and take all steps that appear likely to promote our business objectives. In particular, we may:

• acquire and dispose of real estate;
• establish branches in Germany and abroad;
• acquire, administer and dispose of participations in other enterprises; and
• conclude intercompany agreements ( Unternehmensverträge ).

Supervisory Board and Management Board

For more information on our Supervisory Board and Management Board, see “Item 6: Directors, Senior Management and Employees.”

Voting Rights and Shareholders' Meetings

Each of our shares entitles its registered holder to one vote at our General Meeting. Our Annual General Meeting takes place within the first eight months of our fiscal year. Pursuant to our Articles of Association, we may hold the meeting in Frankfurt am Main, Düsseldorf or any other German city with over 250,000 inhabitants. Unless a shorter period is permitted by law, we must give the notice convening the General Meeting at least 30 days before the last day on which shareholders can register their attendance of the General Meeting (which is the fifth day immediately preceding that General Meeting). Shorter periods apply if the General Meeting is called to adopt a resolution on a capital increase in the context of early intervention measures pursuant to the Act on the Recovery and Resolution of Institutions and Financial Groups (Gesetz zur Sanierung und Abwicklung von Instituten und Finanzgruppen). We are required to include details regarding the shareholder attendance registration process and the issuance of admission cards in our invitation to the General Meeting.

The Management Board or the Supervisory Board may also call an extraordinary General Meeting. Shareholders holding in the aggregate at least 5 % of the nominal value of our share capital may also request that such a meeting be called.

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According to our Articles of Association our shares are issued in the form of registered shares. For purposes of registration in the share register, all shareholders are required to notify us of the number of shares they hold and, in the case of natural persons, of their name, address and date of birth and, in the case of legal persons, of their registered name, business address and registered domicile. Both being registered in our share register and the timely registration for attendance of the General Meeting constitute prerequisite conditions for any shareholder’s attendance and exercise of voting rights at the General Meeting. Shareholders may register their attendance of a General Meeting with the Management Board (or as otherwise designated in the invitation) by written notice or electronically, no later than the fifth day immediately preceding the date of that General Meeting. Any shareholders who have failed to comply with certain notification requirements summarized under “Notification Requirements” below are precluded from exercising any rights attached to their shares, including voting rights.

Under German law, upon our request a registered shareholder must inform us whether that shareholder owns the shares registered in its name or whether that shareholder holds the shares for any other person as a nominee shareholder. Both the nominee shareholder and the person for whom the shares are held have an obligation to provide the same personal data as required for registration in the share register with respect to the person for whom the shares are held. For so long as a registered shareholder does not provide the requested information as to its holding of the shares or, in the case of nominee shareholding, the required information about the person for whom the shares are held has not been provided, the shares held by the registered shareholder carry no voting rights.

Shareholders may appoint proxies to represent them at General Meetings. As a matter of German law, a proxy relating to voting rights granted by shares may be revoked at any time.

As a foreign private issuer, we are not required to file a proxy statement under U.S. securities law. The proxy voting process for our shareholders in the United States is substantially similar to the process for publicly held companies incorporated in the United States.

The Annual General Meeting normally adopts resolutions on the following matters:

• appropriation of distributable balance sheet profits ( Bilanzgewinn ) from the preceding fiscal year;
• formal ratification of the acts ( Entlastung ) of the members of the Management Board and the members of the Supervisory Board in the preceding fiscal year; and
• appointment of independent auditors for the current fiscal year.

A simple majority of votes cast is generally sufficient to approve a measure, except in cases where a greater majority is otherwise required by our Articles of Association or by law. Under the German Stock Corporation Act and the German Transformation Act ( Umwandlungsgesetz ), certain resolutions of fundamental importance require a majority of at least 75 % of the share capital represented at the General Meeting adopting the resolution, in addition to a majority of the votes cast. Such resolutions include the following matters, among others:

• amendments to our Articles of Association changing our business objectives;
• capital increases that exclude subscription rights;
• capital reductions;
• creation of authorized or conditional capital;
• our dissolution;
• “transformations” under the German Transformation Act such as mergers, spin-offs and changes in our legal form;
• transfer of all our assets;
• integration of another company; and
• intercompany agreements (in particular, domination and profit-transfer agreements).

Under certain circumstances, such as when a resolution violates our Articles of Association or the German Stock Corporation Act, shareholders may file a shareholder action with the appropriate Regional Court ( Landgericht ) in Germany to set aside resolutions adopted at the General Meeting.

Under German law, the rights of shareholders as a group can be changed by amendment of the company's articles of association. Any amendment of our Articles of Association requires a resolution of the General Meeting. The authority to amend our Articles of Association, insofar as such amendments merely relate to the wording, such as changes of the share capital as a result of the issuance of shares from authorized capital, has been assigned to our Supervisory Board by our Articles of Association. Pursuant to our Articles of Association, the resolutions of the General Meeting are taken by a simple majority of votes and, insofar as a majority of capital stock is required, by a simple majority of capital stock, except where law or our Articles of Association determine otherwise. The rights of individual shareholders can only be changed with their consent. Amendments to the Articles of Association become effective upon their registration in the Commercial Register.

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Share Register

We maintain a share register with Link Market Services GmbH and our New York transfer agent, pursuant to an agency agreement between us and Link Market Services GmbH and a sub-agency agreement between Link Market Services GmbH and the New York transfer agent.

Our share register will be open for inspection by shareholders during normal business hours at our offices at Taunusanlage 12, 60325 Frankfurt am Main, Germany. The share register generally contains each shareholder's surname, first name, date of birth, address and the number or the quantity of our shares held. Shareholders may prevent their personal information from appearing in the share register by holding their securities through a bank or custodian. Although the shareholder would remain the beneficial owner of the securities, only the bank's or custodian's name would appear in the share register.

Dividend Rights

For a summary of our dividend policy and legal basis for dividends under German law, see “Item 8: Financial Information – Dividend Policy.”

Increases in Share Capital

German law and our Articles of Association permit us to increase our share capital in any of three ways:

• Resolution by our General Meeting authorizing the issuance of new shares.
• Resolution by our General Meeting authorizing the Management Board, subject to the approval of the Supervisory Board, to issue new shares up to a specified amount (no more than 50 % of existing share capital) within a specified period, which may not exceed five years. This is referred to as authorized capital ( genehmigtes Kapital ).
• Resolution by our General Meeting authorizing the issuance of new shares up to a specified amount (no more than 50 % of existing share capital) for specific purposes, such as for employee stock options, for use as consideration in a merger or to issue to holders of convertible bonds or other convertible securities. This is referred to as conditional capital ( bedingtes Kapital ).

The issuance of new ordinary shares by resolution of the General Meeting requires the simple majority of the votes cast and of the share capital represented at the General Meeting. Resolutions of the General Meeting concerning the creation of authorized or conditional capital require the simple majority of the votes cast and a majority of at least 75 % of the share capital represented at the General Meeting.

Liquidation Rights

The German Stock Corporation Act requires that if we are liquidated, any liquidation proceeds remaining after the payment of all our liabilities will be distributed to our shareholders in proportion to their shareholdings.

Preemptive Rights

In principle, holders of our shares have preemptive rights allowing them to subscribe any shares, bonds convertible into, or attached warrants to subscribe for, our shares or participatory certificates we issue. Such preemptive rights exist in proportion to the number of shares currently held by the shareholder. Preemptive rights of shareholders may be excluded with respect to any capital increase, however, as part of the resolution by the General Meeting on such capital increase. Such a resolution by the General Meeting on a capital increase that excludes the shareholders’ preemptive rights with respect thereto requires both a majority of the votes cast and a majority of at least 75 % of the share capital represented at the General Meeting. A resolution to exclude preemptive rights requires that the proposed exclusion is expressly disclosed in the agenda to the General Meeting and that the Management Board presents the reasons for the exclusion to the shareholders in a written report. Under the German Stock Corporation Act, preemptive rights may in particular be excluded with respect to capital increases not exceeding 10 % of the existing share capital with an issue price payable in cash not significantly below the stock exchange price at the time of issuance. In addition, shareholders may, in a resolution by the General Meeting on authorized capital, authorize the Management Board to exclude the preemptive rights with respect to newly issued shares from authorized capital in specific circumstances set forth in the resolution.

Shareholders are generally permitted to transfer their preemptive rights. Preemptive rights may be traded on one or more German stock exchanges for a limited number of days prior to the final day the preemptive rights can be exercised.

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Notices and Reports

We publish notices pertaining to our shares and the General Meeting in the electronic German Federal Gazette (Bundes- anzeiger) and, when so required, in at least one national newspaper designated for exchange notices.

We send our New York transfer agent, through publication or otherwise, a copy of each of our notices pertaining to any General Meeting, any adjourned General Meeting or our actions with respect to any cash or other distributions or the offering of any rights. We provide such notices in the form given or to be given to our shareholders. Our New York transfer agent is requested to arrange for the mailing of such notices to all shareholders registered in the New York registry.

We will make all notices we send to shareholders available at our principal office for inspection by shareholders. Link Market Services GmbH and our New York transfer agent will send copies of all notices pertaining to General Meetings to all registered shareholders. Link Market Services GmbH and our New York transfer agent will send copies of other notices or information material, such as quarterly reports or shareholder letters, to those registered shareholders who have requested to receive such notices or information material.

Charges of Transfer Agents

We pay Link Market Services GmbH and our New York transfer agent customary fees for their services as transfer agents and registrars. Our shareholders will not be required to pay Link Market Services GmbH or our New York transfer agent any fees or charges in connection with their transfers of shares in the share register. Our shareholders will also not be required to pay any fees in connection with the conversion of dividends from euros to U.S. dollars.

Liability of Transfer Agents

Neither Link Market Services GmbH nor our New York transfer agent will be liable to shareholders if prevented or delayed by law, or any circumstances beyond their control, from performing their obligations as transfer agents and registrars.

Notification Requirements

Disclosure of Interests in a Listed Stock Corporation

Disclosure Obligations under the German Securities Trading Act

Deutsche Bank AG, as a listed company, and its shareholders are subject to the shareholding disclosure obligations under the German Securities Trading Act ( Wertpapierhandelsgesetz ). Pursuant to the German Securities Trading Act, any shareholder whose voting interest in a listed company like Deutsche Bank AG, through acquisition, sale or by other means, reaches, exceeds or falls below a 3 %, 5 %, 10 %, 15 %, 20 %, 25 %, 30 %, 50 % or 75 % threshold must notify us and the BaFin of its current aggregate voting interest in writing and without undue delay, but at the latest within four trading days. In connection with this requirement, the German Securities Trading Act contains various provisions regarding the attribution of voting rights to the person who actually controls the voting rights attached to the shares.

Furthermore, the voting rights attached to a third party’s shares are attributed to a shareholder if the shareholder coordinates its conduct concerning the listed company with the third party (so-called “acting in concert”) either through an agreement or other means. Acting in concert is deemed to exist if the parties coordinate their voting at the listed company’s general meeting or, outside the general meeting, coordinate their actions with the goal of significantly and permanently modifying the listed company’s corporate strategy. Each party’s voting rights are attributed to each of the other parties acting in concert.

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Shareholders failing to comply with their notification obligations are prevented from exercising any rights attached to their shares (including voting rights and the right to receive dividends) until they have complied with the notification requirements. If the failure to comply with the notification obligations specifically relates to the size of the voting interest in the Deutsche Bank AG and is the result of willful or grossly negligent conduct, the suspension of shareholder rights is – subject to certain exceptions in case of an incorrect notification deviating no more than 10 % from the actual percentage of voting rights – extended by a six-month period commencing upon the submission of the required notification.

Except for the 3 % threshold, similar notification obligations exist for reaching, exceeding or falling below the thresholds described above when a person holds, directly or indirectly, certain instruments other than shares. This applies to instruments which grant upon maturity an unconditional right to acquire existing voting shares of Deutsche Bank AG, a discretionary right to acquire such shares, as well as to instruments that refer to such shares and have an economic effect similar to that of the aforementioned instruments, irrespective of whether such instruments are physically or cash-settled. These instruments include, for example, transferable securities, options, futures contracts and swaps. Voting rights to be attributed to a person based on any such instrument will generally be aggregated with the person’s other voting rights deriving from shares or other instruments.

Notice must be given without undue delay, but within four trading days at the latest. The notice period commences as soon as the person obliged to notify knows, or, under the circumstances should know, that his or her voting rights reach, exceed or fall below any of the abovementioned relevant thresholds, but in any event no later than two trading days after reaching, exceeding or falling below the threshold. Only in case that the voting rights reach, exceed or fall below any of the thresholds as a result of an event affecting all voting rights, the notice period might commence at a later stage. Deutsche Bank AG must publish the foregoing notifications without undue delay, but no later than within three trading days after their receipt, and report such publication to the BaFin. Furthermore, the Deutsche Bank AG must publish a notification in case of any increase or decrease of the total number of voting rights without undue delay, but within two trading days at the latest, and such notification must be reported to the BaFin and forwarded to the German Company Register ( Unternehmensregister ). An exception applies where the increase of the total number of voting rights is due to the issue of new shares from conditional capital. In this case, Deutsche Bank AG must publish the increase at the end of the month in which it occurred. However, such increase must also be notified without undue delay, but within two trading days at the latest, where any other increase or decrease of the total number of voting rights triggers the aforementioned notification requirement.

Non-compliance with the disclosure requirements regarding shareholdings and holdings of other instruments may result in a significant fine imposed by the BaFin. In addition, the BaFin publishes, on its website, sanctions imposed and measures taken indicating the person or entity responsible and the nature of the breach (so-called “naming and shaming”).

Shareholders whose voting rights reach or exceed thresholds of 10 % of the voting rights in a listed company, or higher thresholds, are obliged to inform the company within 20 trading days of the purpose of their investment and the origin of the funds used for such investment, unless the articles of association of the listed company provide otherwise. Our Articles of Association do not contain such a provision.

Disclosure Obligations under the German Securities Acquisition and Takeover Act

Pursuant to the German Securities Acquisition and Takeover Act ( Wertpapiererwerbs- und Übernahmegesetz ), any person whose voting interest reaches or exceeds 30 % of the voting shares of a listed stock corporation must, within seven calendar days, publish this fact (including the percentage of its voting rights) on the Internet and by means of an electronically operated financial information dissemination system. In addition, the person must subsequently make a mandatory public tender offer within four weeks to all shareholders of the listed company unless an exemption has been granted. The German Securities Acquisition and Takeover Act contains a number of provisions intended to ensure that shareholdings are attributed to those persons who actually control the voting rights attached to the shares. The provisions regarding coordinated conduct as part of the German Securities Acquisition and Takeover Act (so-called “acting in concert”) and the rules on the attribution of voting rights attached to shares of third parties are the same as the statutory securities trading provisions described above under “Disclosure Obligations under the German Securities Trading Act” except with respect to voting rights of shares underlying instruments whose holders are vested with the right to unilaterally acquire existing voting shares of the listed company or voting rights which may be acquired on the basis of instruments with similar economic effect. If a shareholder fails to provide notice on reaching or exceeding the 30 % threshold, or fails to make a public tender offer, the shareholder will be precluded from exercising any rights associated with its shares (including voting and dividend rights) until it has complied with the requirements under the German Securities Acquisition and Takeover Act. In addition, non-compliance with the disclosure requirement may result in a fine.

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Disclosure of Participations in a Credit Institution

The German Banking Act ( Kreditwesengesetz ) requires any person intending to acquire, alone or acting in concert with another person, directly or indirectly, a qualifying holding ( bedeutende Beteiligung ) in a credit or financial services institution to notify the BaFin and the Bundesbank without undue delay and in writing of the intended acquisition. A qualifying holding is a direct or indirect holding in an undertaking which represents 10 % or more of the capital or voting rights or which makes it possible to exercise a significant influence over the management of such undertaking. The required notice must contain information demonstrating, among other things, the reliability of the person or, in the case of a corporation or other legal entity, the reliability of its directors and officers.

A person holding a qualifying holding shall also notify the BaFin and the Bundesbank without undue delay and in writing if he intends to increase the amount of the qualifying holding up to or beyond the thresholds of 20 %, 30 % or 50 % of the voting rights or capital or in such way that the institution comes under such person’s control or if such person intends to reduce the participation below 10 % or below one of the other thresholds described above.

The BaFin will have to confirm the receipt of a complete notification within two working days in writing to the proposed acquirer. Within a period of 60 working days from the BaFin’s written confirmation that a complete notification has been received (assessment period), the BaFin will review and, in accordance with Council Regulation (EU) No 1024/2013 of October 15, 2013 conferring specific tasks on the European Central Bank concerning policies relating to the prudential supervision of credit institutions, forward the notification and a proposal for a decision whether or not to object to the acquisition to the ECB. The ECB will decide whether or not to object to the acquisition on the basis of the applicable assessment criteria. Within the assessment period the ECB may prohibit the intended acquisition in particular if there appears to be reason to assume that the acquirer or its directors and officers are not reliable or that the acquirer is not financially sound, that the participation would impair the effective supervision of the relevant credit institution, that a prospective managing director ( Geschäftsleiter ) is not reliable or not qualified, that money laundering or financing of terrorism has occurred or been attempted in connection with the intended acquisition, or that there would be an increased risk of such illegal acts as a result of the intended acquisition. During the assessment period the BaFin may request further information necessary for its or the ECB’s assessment. Generally, such a request delays the expiration of the assessment period by up to 30 business days. If the information submitted is incomplete or incorrect the ECB may prohibit the intended acquisition.

If a person acquires a qualifying holding despite such prohibition or without making the required notification, the competent authority may prohibit the person from exercising the voting rights attached to the shares. In addition, non-compliance with the disclosure requirement may result in the imposition of a fine in accordance with statutory provisions. Moreover, the competent authority may order that any disposition of the shares requires its approval and may ultimately appoint a trustee to exercise the voting rights attached to the shares or to sell the shares to the extent they constitute a qualifying holding.

Review of Acquisition of 10 % of voting rights or more by the German Federal Ministry of Economics and Energy

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Pursuant to the German Foreign Trade Act ( Außenwirtschaftsgesetz ) and the German Foreign Trade Regulation ( Außenwirtschaftsverordnung ), the direct or indirect acquisition of 25 % or more of the voting rights in a German company by investors from outside the European Union and the European Free Trade Association (Iceland, Liechtenstein, Norway and Switzerland) or by entities which are owned by 25 % or more by investors from outside the aforementioned region may be reviewed by the German Federal Ministry of Economics and Energy (the “Ministry”). If the Ministry determines that the acquisition will likely affect the public policy or public security of Germany, it may impose conditions on or prohibit the acquisition or require that it is unwound. The acquirer may seek pre-clearance of a proposed acquisition from the Ministry. The Ministry must be notified in writing regarding the conclusion of a contract pertaining to the direct or indirect acquisition by an investor from outside the European Union and the European Free Trade Association of 10% or more of the voting rights in a German company which operates certain critical infrastructure or operates in other certain sensitive sectors (including inter alia certain technologies, IT, telecommunication, healthcare or the media). The Ministry must also be notified in writing regarding the conclusion of a contract pertaining to the direct or indirect acquisition by an investor from outside Germany of 10% or more of the voting rights in a German company operating in the defense or cryptology sector. If Deutsche Bank is considered to be a company which operates in any such critical infrastructure or sensitive sector, the Ministry would need to be notified of an acquisition of voting rights in Deutsche Bank that meets the abovementioned threshold. Pending clearance by the Ministry, an acquisition subject to this reporting requirement is legally void and may not be consummated. Consummating such an acquisition without clearance may result in monetary fines of up to € 500,000 or up to five years imprisonment. If the Ministry determines that the acquisition likely affects the German public order or security, or in case of an acquisition of voting rights in a German company active in the defense or cryptology sector determines that the acquisition poses a threat to essential security interests of Germany, it may impose conditions on or prohibit the acquisition or require that it is unwound in case it is implemented. The Ministry’s decision to review an acquisition must be made within two months following the Ministry’s knowledge of the conclusion of the acquisition contract, of the publication of the decision to launch a take-over bid or of the publication of the acquisition of control. The review must be completed within four months following receipt of the complete acquisition documents and any additional information requested by the Ministry. The Ministry can extend its review period up to an additional four months. A review is precluded if more than five years have passed since the acquisition. On January 22, 2021 the Ministry published a draft revision of the German Foreign Trade Regulation ( Außenwirtschaftsverordnung ) may result in further restrictions.

EU Short Selling Regulation (ban on naked short selling)

Regulation (EU) No 236/2012 of the European Parliament and of the Council of March 14, 2012 on short selling and certain aspects of credit default swaps (the “EU Short Selling Regulation”) came into force on November 1, 2012. The EU Short Selling Regulation, the regulations adopted by the EU Commission implementing it, and the German act implementing the EU Short Selling Regulation replace the previously applicable German federal provisions governing the ban on naked short selling of shares and certain debt securities. (Short sales are sales of securities that the seller does not own, with the intention of buying back an identical security at a later point in time in order to be able to deliver the security. A short sale is “naked” when the seller has not borrowed the securities at the time of the short sale, or ensured they can be borrowed or obtained under a similar arrangement.) Under the EU Short Selling Regulation, except for certain exemptions, naked short sales of listed shares are not permitted. Short sales of listed shares that are covered by borrowing or similar arrangements are subject to the following transparency requirements. Significant net short positions in shares must be reported to the BaFin and, if a certain threshold is exceeded, they must also be publicly disclosed. Net short positions are calculated by netting the long and short positions held by a natural or legal person in the issued capital of the company concerned. The details are set forth in the EU Short Selling Regulation and the regulations adopted by the EU Commission implementing it. In certain situations described in greater detail in the EU Short Selling Regulation, the BaFin is permitted to limit short selling and comparable transactions.

Disclosure of Transactions of Managers

Art. 19 of Regulation (EU) No 596/2014 of the European Parliament and of the Council of April 16, 2014 on market abuse (the “EU Market Abuse Regulation”) requires persons with management responsibilities (“Managers”) in a listed company like Deutsche Bank AG to notify the company and the BaFin of their own transactions in shares or debt instruments of the company or financial instruments based thereon, in particular derivatives. Such notifications must be made promptly and no later than three business days after the date of the transaction. The notification obligation also applies to persons who are closely associated with a Manager. The obligation does not apply if the aggregate annual transactions by a Manager or persons with whom he or she is closely associated do not, individually, exceed a certain threshold amount through the end of a calendar year. The BaFin has made use of its authority to increase the threshold of € 5,000 set forth in the EU Marked Abuse Regulation to the maximum possible amount of € 20,000.

Deutsche Bank AG is required to promptly publish any notification received but in any case no later than two business days after receipt of such notification. The publication must be made in a manner which enables fast access to this information on a non-discriminatory basis in accordance with the implementing standards published by the European Securities and Markets Authority. Furthermore, Deutsche Bank AG must without undue delay notify the BaFin and forward the notification to the Company Register (Unternehmensregister). For the purposes of the EU Market Abuse Regulation, the following persons are deemed to be a Manager: members of management, administrative or supervisory bodies of Deutsche Bank AG as well as senior executives who are not such members but who have regular access to inside information relating directly or indirectly to the Company and who have power to take managerial decisions affecting the future developments and business prospects of the Company. The following persons are deemed to be closely associated with a Manager: spouses, registered civil partners ( eingetragene Lebenspartner ), dependent children and other relatives who at the time of the transaction requiring notification have lived in the same household with the Manager for at least one year. Legal entities for which the aforementioned persons have management responsibilities are also subject to the notification requirement. The aforementioned provisions also apply to legal entities, companies and institutions directly or indirectly controlled by a Manager or by a person closely associated with a Manager, which have been founded to the benefit of such a person, or whose economic interests correspond to a considerable extent to those of such a person. Non-compliance with the notification requirements may result in a fine.

Material Contracts

In the usual course of our business, we enter into numerous contracts with various other entities. We have not, however, entered into any material contracts outside the ordinary course of our business within the past two years.

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Exchange Controls

As in other member states of the European Union, regulations issued by the competent European Union authorities to comply with United Nations resolutions have caused freeze orders on assets of certain legal and natural persons designated in such regulations. In addition, the European Union maintained a wide range of autonomous economic and financial sanctions on Iran. While all nuclear-related economic and financial EU sanctions against Iran were repealed on January 16, 2016, some restrictions remain in force.

With some exceptions, corporations or individuals residing in Germany are required to report to the Bundesbank any payment received from, or made to or for the account of, a nonresident corporation or individual that exceeds € 12,500 (or the equivalent in a foreign currency). This reporting requirement is for statistical purposes.

Subject to the above-mentioned exceptions, there are currently no German laws, decrees or regulations that would prevent the transfer of capital or remittance of dividends or other payments to our shareholders who are not residents or citizens of Germany.

There are also no restrictions under German law or our Articles of Association concerning the right of nonresident or foreign shareholders to hold our shares or to exercise any applicable voting rights. Where the investment reaches or exceeds certain thresholds, however, certain reporting obligations apply and the investment may become subject to review by the BaFin, the European Central Bank and other competent authorities. For more information see “Item 10: Additional Information – Notification Requirements”.

Taxation

The following is a general summary of material German and United States federal income tax consequences of the ownership and disposition of shares for a resident of the United States for purposes of the income tax convention between the United States and Germany (the “Treaty”) who is fully eligible for benefits under the Treaty. A U.S. resident will generally be entitled to Treaty benefits if it is:

• the beneficial owner of shares (and of the dividends paid with respect to the shares);
• an individual resident of the United States, a U.S. corporation, or a partnership, estate or trust to the extent its income is subject to taxation in the United States in its hands or in the hands of its partners or beneficiaries;
• not also a resident of Germany for German tax purposes; and
• not subject to “anti-treaty shopping” articles under German domestic law or the Treaty that apply in limited circumstances.

The Treaty benefits discussed below generally are not available to shareholders who hold shares in connection with the conduct of business through a permanent establishment in Germany. The summary does not discuss the treatment of those shareholders.

The summary does not purport to be a comprehensive description of all of the tax considerations that may be relevant to any particular shareholder, including tax considerations that arise from rules of general application or that are generally assumed to be known by shareholders. In particular, the summary deals only with shareholders that will hold shares as capital assets and does not address the tax treatment of shareholders that are subject to special rules, such as fiduciaries of pension (e.g. U.S. pension funds), profit-sharing or other employee benefit plans, banks, insurance companies, dealers in securities or currencies, persons that hold shares as a position in a straddle, conversion transaction, synthetic security or other integrated financial transaction, persons that elect mark-to-market treatment, persons that own, directly or indirectly, 10 % or more of our stock, measured by vote or value, persons that hold shares through a partnership or hybrid entity and persons whose “functional currency” is not the U.S. dollar. The summary is based on German and U.S. laws, treaties and regulatory interpretations, including in the United States current and proposed U.S. Treasury regulations as of the date hereof, all of which are subject to change (possibly with retroactive effect).

Shareholders should consult their own advisors regarding the tax consequences of the ownership and disposition of shares in light of their particular circumstances, as well as the effect of any state, local or other national laws.

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Taxation of Dividends

In general, dividends that we pay are subject to German withholding tax at an aggregate rate of 26.375 % (consisting of a 25 % withholding tax and a 1.375 % surcharge). Under the Treaty, a U.S. resident will be entitled to receive a refund from the German tax authorities of 11.375 in respect of a declared dividend of 100. For example, for a declared dividend of 100, a U.S. resident initially will receive 73.625 and may claim a refund from the German tax authorities of 11.375 and, therefore, receive a total cash payment of 85 (i.e., 85 % of the declared dividend). According to an amendment of the German Investment Tax Act dividends received by a fund within the meaning of the German Investment Tax Act are generally subject to 15 % German withholding tax equal to the Treaty tax rate. U.S. residents who are entitled to a refund of more than 11.375 % (e.g. U.S. pension funds) have to fulfil further requirements according to para. 50j German Income Tax Act, in particular certain holding requirements.

For U.S. tax purposes, a U.S. resident will be deemed to have received total dividends of 100. The gross amount of dividends that a U.S. resident receives (which includes amounts withheld in respect of German withholding tax) generally will be subject to U.S. federal income taxation as foreign source dividend income, and will not be eligible for the dividends received deduction generally allowed to U.S. corporations. German withholding tax at the 15 % rate provided under the Treaty will be treated as a foreign income tax that, subject to generally applicable limitations under U.S. tax law, is eligible for credit against a U.S. resident’s U.S. federal income tax liability or, at its election, may be deducted in computing taxable income. Thus, for a declared dividend of 100, a U.S. resident will be deemed to have paid German taxes of 15. A U.S. resident cannot claim credits for German taxes that would have been refunded to it if it had filed a claim for refund. Foreign tax credits will not be allowed for withholding taxes imposed in respect of certain short-term or hedged positions. The creditability of foreign withholding taxes may be limited in certain situations, including where the burden of foreign taxes is separated inappropriately from the related foreign income.

Subject to certain exceptions for short-term and hedged positions, “qualified dividends” received by certain non-corporate U.S. shareholders will generally be subject to taxation in the United States at a lower rate than other ordinary income. Dividends received will be qualified dividends if we (i) are eligible for the benefits of a comprehensive income tax treaty with the United States that the U.S. Internal Revenue Service (“IRS”) has approved for purposes of the qualified dividend rules and (ii) were not, in the year prior to the year in which the dividend was paid, and are not, in the year in which the dividend is paid, a passive foreign investment company (“PFIC”). The Treaty has been approved for purposes of the qualified dividend rules, and we believe we qualify for benefits under the Treaty. The determination of whether we are a PFIC must be made annually and is dependent on the particular facts and circumstances at the time. It requires an analysis of our income and valuation of our assets, including goodwill and other intangible assets. Based on our audited financial statements and relevant market and shareholder data, we believe that we were not a PFIC for U.S. federal income tax purposes with respect to our taxable years ended December 31, 2018 or December 31, 2019. In addition, based on our current expectations regarding the value and nature of our assets, the sources and nature of our income, and relevant market and shareholder data, we do not currently anticipate becoming a PFIC for our taxable year ending December 31, 2020, or for the foreseeable future. However, the PFIC rules are complex and their application to financial services companies is unclear. Each U.S. shareholder should consult its own tax advisor regarding the potential applicability of the PFIC regime to us and its implications for their particular circumstances.

If a U.S. resident receives a dividend paid in euros, it will recognize income in a U.S. dollar amount calculated by reference to the exchange rate in effect on the date of receipt, regardless of whether the payment is in fact converted into U.S. dollars. If dividends are converted into U.S. dollars on the date of receipt, a U.S. resident generally should not be required to recognize foreign currency gain or loss in respect of the dividend income but may be required to recognize foreign currency gain or loss on the receipt of a refund in respect of German withholding tax to the extent the U.S. dollar value of the refund differs from the U.S. dollar equivalent of that amount on the date of receipt of the underlying dividend.

Refund Procedures

To claim a refund, a U.S. resident must submit, within four years from the end of the calendar year in which the dividend is received, a claim for refund to the German tax authorities. The claim for refund must be accompanied by a withholding tax certificate (Kapitalertragsteuerbescheinigung) on an officially prescribed form and issued by the institution that withheld the tax.

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Claims for refunds are made on a German claim for refund form, which must be filed with the German tax authorities: Bundeszentralamt für Steuern, An der Küppe 1, D-53225 Bonn, Germany. The German claim for refund forms can be downloaded from the homepage of the Bundeszentralamt für Steuern (www.bzst.de). A special form is available in cases para. 50j German Income Tax Act is applicable. A U.S. resident must also submit to the German tax authorities a certification (on IRS Form 6166) with respect to its last filed U.S. federal income tax return. Requests for IRS Form 6166 are made on IRS Form 8802, which requires payment of a user fee. IRS Form 8802 and its instructions can be obtained from the IRS website at www.irs.gov. Instead of the individual refund procedure described above, a U.S. resident may use an IT-supported quick-refund procedure (“Datenträgerverfahren – DTV”/“Data Medium Procedure – DMP”). If the U.S. resident’s bank or broker elects to participate in the DMP, it will perform administrative functions necessary to claim the Treaty refund for the beneficiaries. The refund beneficiaries must provide specified information to the DMP participant and confirm to the DMP participant that they meet the conditions of the Treaty provisions and that they authorize the DMP participant to file applications and receive notices and payments on their behalf.

The refund beneficiaries also must provide a “certification of filing a tax return” on IRS Form 6166 with the DMP participant. In addition, if the individual refund procedure requires a withholding tax certificate (see above), such certificate is generally also necessary under the DMP.

The German tax authorities reserve the right to audit the entitlement to tax refunds for several years following their payment pursuant to the Treaty in individual cases. The DMP participant must assist with the audit by providing the necessary details or by forwarding the queries to the respective refund beneficiaries/shareholders. Presently the DMP cannot be used if the Treaty tax rate is below 15 % or if a holder of Depository Receipts claims a refund.

The German tax authorities will issue refunds denominated in euros. In the case of shares held through banks or brokers participating in the Depository Trust Company, the refunds will be issued to the Depository Trust Company, which will convert the refunds to U.S. dollars. The resulting amounts will be paid to banks or brokers for the account of holders.

If a U.S. resident holds its shares through a bank or broker who elects to participate in the DMP, it could take at least three weeks for it to receive a refund after a combined claim for refund has been filed with the German tax authorities. If a U.S. resident files a claim for refund directly with the German tax authorities, it could take at least eight months for it to receive a refund. The length of time between filing a claim for refund and receipt of that refund is uncertain and we can give no assurances as to when any refund will be received.

Germany recently initiated a reform of the refund procedures. If implemented, such reform would, among other elements, retire DMP and paper-based refund systems. A U.S. resident holder would generally have to file a claim for refund electronically after 2022. For dividends received by a U.S. holder after 2023 withholding tax certificates would be replaced by electronic submission of data directly to the tax authorities by the institution that withheld the tax. Such reform proposals may change in the course of the legislative procedure.

Taxation of Capital Gains

Under the Treaty, a U.S. resident will generally not be subject to German capital gains tax in respect of a sale or other disposition of shares. For U.S. federal income tax purposes, a U.S. holder will generally recognize capital gain or loss on the sale or other disposition of shares in an amount equal to the difference between such holder’s tax basis in the shares and the U.S. dollar value of the amount realized from their sale or other disposition. Such gain or loss will be long-term capital gain or loss if the shares were held for more than one year. The net amount of long-term capital gain realized by an individual generally is subject to taxation at a lower rate than ordinary income. Any such gain generally would be treated as income arising from sources within the United States; any such loss would generally be allocated against U.S. source income. The ability to offset capital losses against ordinary income is subject to limitations.

Shareholders whose shares are held in an account with a German bank or financial services institution (including a German branch of a non-German bank or financial services institution) are urged to consult their own advisors. This summary does not discuss their particular tax situation.

United States Information Reporting and Backup Withholding

Dividends and payments of the proceeds on a sale of shares, paid within the United States or through certain U.S.-related financial intermediaries are subject to information reporting and may be subject to backup withholding unless the U.S. resident (i) is a corporation (other than an S corporation) or other exempt recipient or (ii) provides a taxpayer identification number and certifies (on IRS Form W-9) that no loss of exemption from backup withholding has occurred. Shareholders that are not U.S. persons generally are not subject to information reporting or backup withholding.

However, a non-U.S. person may be required to provide a certification (generally on IRS Form W-8BEN or W-8BEN-E) of its non-U.S. status in connection with payments received in the United States or through a U.S.-related financial intermediary.

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Backup withholding tax is not an additional tax, and any amounts withheld under the backup withholding rules will be allowed as a refund or a credit against a holder’s U.S. federal income tax liability, provided the required information is furnished to the IRS.

Shareholders may be subject to other U.S. information reporting requirements. Shareholders should consult their own advisors regarding the application of U.S. information reporting rules in light of their particular circumstances.

German Gift and Inheritance Taxes

Under the current estate, inheritance and gift tax treaty between the United States and Germany (the “Estate Tax Treaty”), a transfer of shares generally will not be subject to German gift or inheritance tax so long as the donor or decedent, and the heir, donee or other beneficiary, were not domiciled in Germany for purposes of the Estate Tax Treaty at the time the gift was made, or at the time of the decedent’s death, and the shares were not held in connection with a permanent establishment or fixed base in Germany.

The Estate Tax Treaty provides a credit against U.S. federal estate and gift tax liability for the amount of inheritance and gift tax paid in Germany, subject to certain limitations, where shares are subject to German inheritance or gift tax and United States federal estate or gift tax.

Other German Taxes

There are currently no German net wealth, transfer, stamp or other similar taxes that would apply to a U.S. resident as a result of the receipt, purchase, ownership or sale of shares.

Dividends and Paying Agents

Not required because this document is filed as an annual report.

Statement by Experts

Not required because this document is filed as an annual report.

Documents on Display

We are subject to the informational requirements of the Securities Exchange Act of 1934, as amended. In accordance with these requirements, we file reports and other information with the Securities and Exchange Commission. You may inspect and copy these materials, including this document and its exhibits, at the Commission’s Public Reference Room at 100 F Street, N.E., Room 1580, Washington, D.C. 20549. You may also obtain copies of the materials from the Public Reference Room at prescribed rates. You may obtain information on the operation of the Commission’s Public Reference Room by calling the Commission in the United States at 1-800-SEC-0330. Our Securities and Exchange Commission filings are also available over the Internet at the Securities and Exchange Commission’s website at www.sec.gov under File Number 001-15242.

Subsidiary Information

Not applicable.

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Item 11: Quantitative and Qualitative Disclosures about Credit, Market and Other Risk

For Quantitative and Qualitative Disclosures about Credit, Market and Other Risk, please see “Management Report: Risk Report” in the Annual Report 2020.

Please see pages S-1 through S-18 of the Supplemental Financial Information, which pages are incorporated by reference herein, for information required by SEC Industry Guide 3.

Item 12: Description of Securities other than Equity Securities

Our ordinary shares are not represented by American Depositary Receipts and accordingly no information is required to be provided pursuant to Item 12.D.3 and Item 12.D.4. The remainder of the information required by this Item 12 and by Instruction 2(d) under the Instructions as to Exhibits of Form 20-F is provided as Exhibit 2.2 to this Annual Report on Form 20-F.

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PART II

Item 13: Defaults, Dividend Arrearages and Delinquencies

Not applicable.

Item 14: Material Modifications to the Rights of Security Holders and Use of Proceeds

According to recent changes to the German Banking Act ( Kreditwesengesetz ) and the German Recovery and Resolution Act ( Sanierungs- und Abwicklungsgesetz ), additional restrictions on distributions may apply or will apply, as the case may be, when we are in breach of capital requirements. In particular, under the new regime, a credit institution, such as us, will be considered as failing to meet the combined buffer requirement where it does not have sufficient own funds in an amount and of the quality needed to meet at the same time (i) its minimum capital requirements under the CRR, (ii) certain “Pillar 2” capital requirements, and (iii) the sum of the capital buffers applicable to the relevant credit institution. In calculating the respective amounts that may be distributed (so-called “Maximum Distributable Amount” or “MDA”), we will have to take certain “Pillar 2” capital requirements into account. We would also be subject to MDA restrictions in instances of non-compliance with our leverage ratio buffer introduced in the CRR (so-called “L-MDA”) from January 2022 onwards. In addition, we are subject to additional restrictions on distributions (so-called “M-MDA”) if we breach the harmonized minimum TLAC requirement under the CRR and our institution-specific minimum requirement for own funds and eligible liabilities set by the Single Resolution Board.

Item 15: Controls and Procedures

Disclosure Controls and Procedures

An evaluation was carried out under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934) as of December 31, 2020. There are, as described below, inherent limitations to the effectiveness of any control system, including disclosure controls and procedures. Accordingly, even effective disclosure controls and procedures can provide only reasonable assurance of achieving their control objectives. Based upon such evaluation, our Chief Executive Officer and Chief Financial Officer concluded that the design and operation of our disclosure controls and procedures were effective as of December 31, 2020.

Management’s Annual Report on Internal Control over Financial Reporting

Management of Deutsche Bank Aktiengesellschaft, together with its consolidated subsidiaries, is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control over financial reporting is a process designed under the supervision of our Chief Executive Officer and our Chief Financial Officer to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the firm’s financial statements for external reporting purposes in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB). As of December 31, 2020, management conducted an assessment of the effectiveness of our internal control over financial reporting based on the framework established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on the assessment performed, management has determined that our internal control over financial reporting as of December 31, 2020 was effective based on the COSO framework (2013).

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Ernst & Young GmbH Wirtschaftsprüfungsgesellschaft, the registered public accounting firm that audited the financial statements included in this document, has issued a report on our internal control over financial reporting, which is set forth below.

Report of Independent Registered Public Accounting Firm

To the Shareholders and the Supervisory Board of Deutsche Bank Aktiengesellschaft:

Opinion on Internal Control Over Financial Reporting

We have audited Deutsche Bank Aktiengesellschaft and subsidiaries’ internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Deutsche Bank Aktiengesellschaft and subsidiaries (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2020, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheet of the Company as of December 31, 2020, the related consolidated statements of income, comprehensive income, changes in equity and cash flows for the year then ended, and the related notes, and our report dated March 8, 2021 expressed an unqualified opinion thereon.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) 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 being made only in accordance with authorizations of management and directors of the company; and (3) 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.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, 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 the policies or procedures may deteriorate.

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/s/ Ernst & Young GmbH Wirtschaftsprüfungsgesellschaft
Eschborn/Frankfurt am Main, Germany

March 8, 2021

Change in Internal Control over Financial Reporting

There was no change in our internal control over financial reporting identified in connection with the evaluation referred to above that occurred during the year ended December 31, 2020 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. As such, disclosure controls and procedures or systems for internal control over financial reporting may not prevent all error and all fraud. Further, 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. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and any design may not succeed in achieving its stated goals under all potential future conditions; over time, control may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

Item 16A: Audit Committee Financial Expert

Please see “Corporate Governance Statement according to Sections 289f and 315d of the German Commercial Code: Auditing and Controlling: Audit Committee Financial Expert” in the Annual Report 2020.

Item 16B: Code of Ethics

Please see “Corporate Governance Statement according to Sections 289f and 315d of the German Commercial Code: 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” in the Annual Report 2020.

Item 16C: Principal accountant fees and services

Please see “Management Report: Corporate Governance Statement/Corporate Governance Report: Auditing and Controlling: Principal Accountant Fees and Services” in the Annual Report 2020.

Item 16D: Exemptions from the Listing Standards for Audit Committees

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Our common shares are listed on the New York Stock Exchange, the corporate governance rules of which require a foreign private issuer such as us to have an audit committee that satisfies the requirements of Rule 10A-3 under the U.S. Securities Exchange Act of 1934. These requirements include a requirement that the audit committee be composed of members that are “independent” of the issuer, as defined in the Rule, subject to certain exemptions, including an exemption for employees who are not executive officers of the issuer if the employees are elected or named to the board of directors or audit committee pursuant to the issuer’s governing law or documents, an employee collective bargaining or similar agreement or other home country legal or listing requirements. The German Co-Determination Act of 1976 ( Mitbestimmungsgesetz ) requires that the shareholders elect half of the members of the supervisory board of large German companies, such as us, and that employees in Germany elect the other half. Employee-elected members are typically themselves employees or representatives of labor unions representing employees. Pursuant to law and practice, committees of the Supervisory Board are typically composed of both shareholder- and employee-elected members. Of the current members of our Audit Committee, four – Henriette Mark, Gabriele Platscher, Detlef Polaschek and Bernd Rose – are current employees of Deutsche Bank who have been elected as Supervisory Board members by the employees. None of them is an executive officer. Accordingly, their service on the Audit Committee is permissible pursuant to the exemption from the independence requirements provided for by paragraph (b)(1)(iv)(C) of the Rule. We do not believe the reliance on such exemption would materially adversely affect the ability of the Audit Committee to act independently and to satisfy the other requirements of the Rule.

Item 16E: Purchases of Equity Securities by the Issuer and Affiliated Purchasers

In 2020, we repurchased a total of 25,499,999 shares, for group purposes pursuant to share buybacks authorized by the General Meeting. None were via derivatives. During the period from January 1, 2020 until the 2020 Annual General Meeting on May 20, 2020 we repurchased 25,499,999 shares, of which none were via derivatives, of our ordinary shares pursuant to the authorization granted by the Annual General Meeting on May 23, 2019, at an average price of € 7.98 and for a total consideration of € 204 million. This authorization was replaced by a new authorization to buy back shares approved by the Annual General Meeting on May 20, 2020. Under the new authorization, up to 206,677,313 shares may be repurchased through April 30, 2025. Of these, 103,338,656 shares may be purchased by using derivatives. During the period from the 2020 Annual General Meeting until December 31, 2020, no shares were brought back. At December 31, 2020, the number of shares held in Treasury from buybacks totaled 1.3 million. This figure stems from one share at the beginning of the year, plus 25.5 million shares from buybacks in 2020, less 24.2 million shares which were used to fulfill delivery obligations in the course of share-based compensation of employees. We did not cancel any shares in 2020.

In addition to these share buybacks for group purposes, pursuant to a shareholder authorization approved at our 2020 Annual General Meeting, we are authorized to buy and sell, for the purpose of securities trading, our ordinary shares through April 30, 2025, provided that number of shares held for this purpose may not at any time exceed 10 % of the company’s share capital. The shares may be bought through the stock exchange or by means of a public purchase offer to all shareholders. The gross volume of these securities trading transactions is often large, and even the net amount of such repurchases or sales may, in a given month, be large, though over longer periods of time such transactions tend to offset and are in any event constrained by the 10 % of share capital limit. These securities trading transactions consist predominantly of transactions on major non-US securities exchanges. We also enter into derivative contracts with respect to our shares and limited to shares in a maximum volume of 5 % of the actual share capital.

The following table sets forth, for each month in 2020 and for the year as a whole, the total gross number of our shares repurchased by us and our affiliated purchasers (pursuant to both activities described above), the total gross number of shares sold, the net number of shares purchased or sold, the average price paid per share (based on the gross shares repurchased), the number of shares that were purchased for group purposes mentioned above and the maximum number of shares that at that date remained eligible for purchase under such programs.

Issuer Purchases of Equity Securities in 2020

Month	Total number of shares purchased	Total number of shares sold	Net number of shares purchased or (sold)	Average price paid per share (in €)	Number of shares purchased for group purposes	Maximum number of shares that may yet be purchased under plans or programs
January	4,041,854	3,851,518	190,336	7.67	3,399,999	194,977,313
February	14,192,512	1,590,564	12,601,948	9.75	12,600,000	182,377,313
March	2,214,770	13,608,544	(11,393,774)	6.93	0	182,377,313
April	10,386,862	1,981,839	8,405,023	5.65	9,500,000	172,877,313
May	825,470	832,196	(6,726)	6.79	0	206,677,313
June	633,735	1,248,135	(614,400)	9.86	0	206,677,313
July	98,916	(96,007)	194,923	8.65	0	206,677,313
August	76,580	1,515,953	(1,439,373)	8.02	0	206,677,313
September	1,121,058	7,473,550	(6,352,492)	7.94	0	206,677,313
October	67,929	119,738	(51,809)	7.71	0	206,677,313
November	1,069,386	1,259,090	(189,704)	8.96	0	206,677,313
December	329,633	998,776	(669,143)	9.17	0	206,677,313
Total 2020	35,058,705	34,383,896	674,809	7.95	25,499,999	206,677,313

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At December 31, 2020, the number of shares held by us in treasury totaled 1,346,166. This figure stems from 671,357 shares at the beginning of the year, plus 674,809 net shares purchased in 2020. At December 31, 2020, our issued share capital consisted of 2,066,773,131 ordinary shares, of which 2,065,426,965 were outstanding.

Item 16F: Change in Registrant’s Certifying Accountant

Recent European and national regulations require a rotation of the external auditor at regular intervals. The Bank’s tender process for a new external auditor was announced in February 2018. An extensive and rigorous evaluation process held over seven months was run independently by the Audit Committee of the Bank’s Supervisory Board. As a result of the required rotation, the Bank did not request KPMG AG Wirtschaftsprüfungsgesellschaft (“KPMG”), the Bank’s previous external auditor, to submit a tender proposal to stand for re-election as auditor, and the engagement of KPMG terminated as of March 23, 2020.

The Bank’s Supervisory Board decided to recommend the appointment of Ernst & Young GmbH Wirtschaftsprüfungs- gesellschaft (“EY”) as external auditor. This recommendation was approved by the Bank’s shareholders at the 2019 Annual General Meeting on May 23, 2019. The appointment of EY as external auditor for fiscal year 2020 and interim periods through the 2021 Annual General Meeting was approved by the Bank’s shareholders at the 2020 Annual General Meeting on May 20, 2020.

The disclosure called for by paragraph (a) of this Item 16F was previously reported, as that term is defined in Rule 12b-2 under the Exchange Act, in the Bank’s Annual Report on Form 20-F filed on March 20, 2020.

Item 16G: Corporate Governance

Our common shares are listed on the New York Stock Exchange, as well as on all seven German stock exchanges. Set forth below is a description of the significant ways in which our corporate governance practices differ from those applicable to U.S. domestic companies under the New York Stock Exchange’s listing standards as set forth in its Listed Company Manual (the “NYSE Manual”).

The Legal Framework. Corporate governance principles for German stock corporations ( Aktiengesellschaften ) are set forth in the German Stock Corporation Act ( Aktiengesetz ), the German Co-Determination Act of 1976 ( Mitbestimmungsgesetz ) and the German Corporate Governance Code ( Deutscher Corporate Governance Kodex , referred to as the Code).

The Two-Tier Board System of a German Stock Corporation. The German Stock Corporation Act provides for a clear separation of management and oversight functions. It therefore requires German stock corporations to have both a supervisory board ( Aufsichtsrat ) and a management board ( Vorstand ). These boards are separate; no individual may be a member of both. Both the members of the management board and the members of the supervisory board must exercise the standard of care of a diligent business person to the company. In complying with this standard of care they are required to take into account a broad range of considerations, including the interests of the company and those of its shareholders, employees and creditors.

The management board is responsible for managing the company and representing the company in its dealings with third parties. The management board is also required to ensure appropriate risk management within the corporation and to establish an internal monitoring system. The members of the management board, including its chairperson or speaker, are regarded as peers and share a collective responsibility for all management decisions.

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The supervisory board appoints and removes the members of the management board. It also may appoint a chairman (CEO) and one or more deputy chairmen of the management board. Although it is not permitted to make management decisions, the supervisory board has comprehensive monitoring functions with respect to the activities of the management board, including advising the management board and participating in decisions of fundamental importance to the company. To ensure that these monitoring functions are carried out properly, the management board must, among other things, regularly report to the supervisory board with regard to current business operations and business planning, including any deviation of actual developments from concrete and material targets previously presented to the supervisory board. The supervisory board may also request special reports from the management board at any time. Transactions of fundamental importance to the company, such as major strategic decisions or other actions that may have a fundamental impact on the company’s assets and liabilities, financial condition or results of operations, may be subject to the consent of the supervisory board. Pursuant to our Articles of Association ( Satzung ), such transactions include the granting of general powers of attorney, the granting of credits, including the acquisition of participations in other companies for which the German Banking Act ( Kreditwesengesetz ) requires approval by the Supervisory Board, as well as major acquisitions or disposals of real estate or other participations.

Pursuant to the German Co-Determination Act, our Supervisory Board consists of representatives elected by the shareholders and representatives elected by the employees in Germany. Based on the total number of Deutsche Bank employees in Germany these employees have the right to elect one-half of the total of twenty Supervisory Board members. The chairperson of the Supervisory Board of Deutsche Bank is a shareholder representative who has the deciding vote in the event of a tie.

This two-tier board system contrasts with the unitary board of directors envisaged by the relevant laws of all U.S. states and the New York Stock Exchange listing standards for U.S. companies.

German companies which have their shares listed on a stock exchange must each year issue a statement on the company’s corporate governance and either include such statement in their annual management report or publish it separately on their website.

The Recommendations of the Code. The Code was issued in 2002 by a commission composed of German corporate governance experts appointed by the German Federal Ministry of Justice in 2001. The Code was last amended in December 2019 with effect of March 20, 2020. It describes and summarizes the basic mandatory statutory corporate governance principles found in the provisions of German law. In addition, it contains supplemental recommendations and suggestions for standards on responsible corporate governance intended to reflect generally accepted best practice.

The Code is structured from a task perspective and addresses seven core areas of corporate governance. These are the tasks of (a) management and supervision, (b) appointment of candidates to the management board, (c) composition of the supervisory board, (d) supervisory board procedures, (e) conflicts of interest, (f) transparency and external reporting as well as (g) the remuneration of the members of the management board and the supervisory board. The Code contains three types of provisions. First, the Code contains principles which reflect material legal requirements for responsible governance, and are used in the Code to inform investors and other stakeholders. The second type of provisions is recommendations. While these are not legally binding, Section 161 of the German Stock Corporation Act requires that any German exchange-listed company declare annually that the company complies with the recommendations of the Code or, if not, which recommendations the company does not comply with and the reasons for the non-compliance (“comply or explain”). The third type of Code provisions comprises suggestions which companies may choose not to comply with without disclosure. The Code contains a significant number of such suggestions, covering almost all of the core areas of corporate governance it addresses.

In their last Declaration of Conformity of October 30, 2020, the Management Board and the Supervisory Board of Deutsche Bank stated that, since the last Declaration of Conformity issued on October 30, 2019, they have acted and will act in the future in conformity with the recommendations of the Code, with certain specified exceptions. The Declaration of Conformity is available on Deutsche Bank’s internet website at www.db.com/ir/en/documents.htm.

Supervisory Board Committees. The supervisory board may form committees. Pursuant to the German Stock Corporation Act, any supervisory board committee must regularly report to the supervisory board.

The German Co-Determination Act requires that the supervisory board form a mediation committee to propose candidates for the management board in the event that the two-thirds majority of the members of the supervisory board needed to appoint members of the management board is not met.

The German Stock Corporation Act specifically mentions the possibility to establish an “audit committee” to deal with the supervision of accounting processes, the efficiency of the internal control system the risk management system and the internal revision system as well as with the annual auditing, in particular with the selection and the independence of the external auditor and the additional services rendered by the external auditor. The Code recommends establishing such an “audit committee”. The Code also recommends establishing a “nomination committee” comprised only of shareholder-elected supervisory board members to prepare the supervisory board’s proposals for the election or appointment of new shareholder representatives to the supervisory board. In general the Code recommends that the supervisory board shall form – depending on the specific circumstances of the enterprise and the number of supervisory board members – committees of members with relevant specialist expertise which can handle subjects, such as corporate strategy, compensation of the members of the management board, investments and financing.

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Sections 25d (7) to (12) of the German Banking Act require, depending on size and complexity of the respective credit institution, the establishment of supervisory board committees with specific tasks to be performed as follows: risk committee, audit committee, nomination committee (with tasks and composition requirements different from those set out in the Code) and compensation control committee. The Code’s recommendation that the nomination committee shall only comprise shareholder representatives is not complied with by Deutsche Bank AG because of mandatory special rules set forth in the German Banking Act, which assign further tasks to the nomination committee in addition to the preparation of proposals for the appointment of new shareholder representatives to the supervisory board. These further tasks do not justify the exclusion of employee representatives from the nomination committee. Based on the previous version of the Code, which was applicable until March 20, 2020, this non-compliance had to be disclosed and justified in the annual Declaration of Conformity. The current version of the Code provides that credit institutions and insurance companies are exempt from recommendations of the Code which conflict with special rules or regulations applicable to them. However, the Code recommends that in the case of such conflicts, companies indicate in their annual corporate governance statement what recommendations of the Code were not applicable to them.

The Supervisory Board of Deutsche Bank has established a Chairman’s Committee ( Präsidialausschuss ) which is inter alia responsible for conclusion, amendment and termination of employment and pension contracts with members of the Management Board, taking into account the responsibility of the Supervisory Board as a whole for the remuneration of the members of the Management Board, a Nomination Committee ( Nominierungsausschuss ), an Audit Committee ( Prüfungsausschuss ), a Risk Committee ( Risikoausschuss ), an Integrity Committee ( Integritätsausschuss ), a Compensation Control Committee ( Vergütungskontrollausschuss ), a Strategy Committee ( Strategieausschuss ), a Technology, Data and Innovation Committee ( Technologie-, Daten- und Innovationsausschuss ) and a Mediation Committee ( Vermittlungsausschuss ). The functions of a nominating/corporate governance committee and of a compensation committee required by the NYSE Manual for U.S. companies listed on the NYSE are therefore performed by the Supervisory Board or one of its committees, in particular the Chairman’s Committee, the Compensation Control Committee and the Mediation Committee.

Independent Board Members. The NYSE Manual requires that a majority of the members of the board of directors of a NYSE listed U.S. company and each member of its nominating/corporate governance, compensation and audit committees be “independent” according to strict criteria and that the board of directors determines that such member has no material direct or indirect relationship with the company.

As a foreign private issuer, Deutsche Bank is not subject to these requirements. However, its audit committee must meet the more lenient independence requirement of Rule 10A-3 under the Securities Exchange Act of 1934. German corporate law does not require an affirmative independence determination, meaning that the Supervisory Board need not make affirmative findings that audit committee members are independent. However, the German Stock Corporation Act and the Code, as the case may be, contain several rules, recommendations and suggestions to ensure the supervisory board’s independent advice to, and supervision of, the management board. As noted above, no member of the management board may serve on the supervisory board (and vice versa). Supervisory board members will not be bound by directions or instructions from third parties. Any advisory, service or similar contract between a member of the supervisory board and the company is subject to the supervisory board’s approval. A similar requirement applies to loans granted by the company to a supervisory board member or other persons, such as certain members of a supervisory board member’s family. In addition, the German Stock Corporation Act prohibits a person who within the last two years was a member of the management board from becoming a member of the supervisory board of the same company unless he or she is elected upon the proposal of shareholders holding more than 25 % of the voting rights of the company.

The Code also recommends that each member of the supervisory board inform the supervisory board of any conflicts of interest. In the case of material conflicts of interest or ongoing conflicts, the Code recommends that the mandate of the Supervisory Board member shall end either as a result of such supervisory board member’s withdrawal or, failing that, based on his or her removal from office by the shareholders’ meeting. The Code further recommends that any conflicts of interest that have occurred be reported by the supervisory board at the annual general meeting, together with the action taken, and that potential conflicts of interest also be taken into account in the nomination process for the election of supervisory board members.

Audit Committee Procedures. Pursuant to the NYSE Manual the audit committee of a U.S. company listed on the NYSE must have a written charter addressing its purpose, an annual performance evaluation, and the review of an auditor’s report describing internal quality control issues and procedures and all relationships between the auditor and the company. The Audit Committee of Deutsche Bank operates under written terms of reference and reviews the efficiency of its activities regularly.

Disclosure of Corporate Governance Guidelines. Deutsche Bank discloses its Articles of Association, the Terms of Reference of its Management Board, its Supervisory Board, the Chairman’s Committee, the Audit Committee, the Risk Committee, the Integrity Committee, the Compensation Control Committee, the Nomination Committee, the Strategy Committee and the Technology, Data and Innovation Committee, its Declaration of Conformity under the Code pursuant to Section 161 of the German Stock Corporation Act and other documents pertaining to its corporate governance on its internet website at www.db.com/ir/en/documents.htm.

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Item 16H: Mine Safety Disclosure

Not applicable.

Disclosures Under Iran Threat Reduction and Syria Human Rights Act of 2012

Under Section 219 of the Iran Threat Reduction and Syria Human Rights Act of 2012, which added Section 13(r) of the U.S. Securities Exchange Act of 1934, as amended, an issuer of securities registered under the Securities Exchange Act of 1934 is required to disclose in its periodic reports filed under the Securities Exchange Act of 1934 certain of its activities and those of its affiliates relating to Iran and to other persons sanctioned by the U.S. under programs relating to terrorism and proliferation of weapons of mass destruction that occurred during the period covered by the report. We describe below a number of potentially disclosable activities of Deutsche Bank AG and its affiliates. Disclosure is generally required regardless of whether the activities, transactions or dealings were conducted in compliance with applicable law. Deutsche Bank also reports transactions in which other Iranian persons or entities listed on OFAC sanctions lists were involved, whether or not they are directly or indirectly owned or controlled by the Iranian government.

Legacy Contractual Obligations Related to Guarantees and Letters of Credit . Prior to 2007, we provided guarantees to a number of Iranian entities. In almost all of these cases, we issued counter-indemnities in support of guarantees issued by Iranian banks because the Iranian beneficiaries of the guarantees required that they be backed directly by Iranian banks. In 2007, we made a decision to discontinue issuing new guarantees to Iranian or Iran-related beneficiaries. Although the pre-existing guarantees stipulate that they must be either extended or honored if we receive such a demand and we are legally not able to terminate these guarantees, we decided to reject any “extend or pay” demands under such guarantees. Even though we had exited, where possible, many of these guarantees, guarantees with an aggregate face amount of approximately € 7.0 million are still outstanding as of year-end 2020. The gross revenues from this business in 2020 which we received from non-Iranian parties were approximately € 31,000 and the net profit we derived from these activities was less than this amount.

We also have outstanding legacy guarantees in relation to a Syrian bank sanctioned by the U.S. under its non-proliferation program. The aggregate face amount of these legacy guarantees was approximately € 9.8 million as of December 31, 2020, the gross revenues received from non-Syrian parties for these guarantees were approximately € 65,000 in 2020 and the net profit we derived from these activities was less than this amount. We intend to exit these guarantee arrangements.

Payments Executed. Deutsche Bank continuous to severely restrict its policy on Iran and consequently the execution of such payments.

Incoming Payments. In 2020, we received 5 payments from Iranian government parties or persons sanctioned by the United States under its programs relating to terrorism or weapons of mass destruction, adding up to approximately € 12,000 in favor of non-Iranian clients Revenues for these incoming payments were less than € 50. These figures include relevant transactions for Iranian Embassy-related offices not included in the section on Iranian Consulates and Embassies below and in favor of our non-Iranian clients.

Outgoing Payments. In 2020, no outgoing payments were executed in favor of Iranian parties outside of Germany; with regards to the Iranian Embassy in Germany, see below.

Operations of Iranian Bank Branches and Subsidiaries in Germany. Several Iranian banks, including Bank Melli Iran, Bank Saderat, Bank Sepah, and Europäisch-Iranische Handelsbank, have branches or offices in Germany, even though their funds and other economic resources had been frozen earlier under European law. As part of the payment clearing system in Germany and other European countries, when these branches or offices needed to make payments in Germany or Europe to cover their day-to-day operations such as rent, taxes, insurance premiums and salaries for their remaining staff, or for any other kind of banking-related operations, fund transfers from these Iranian banks had been accepted through Target2.

In 2020, we executed approximately € 3.5 million in (almost only in-coming) transfers through Target2 across approximately 1,000 transactions and credited the relevant amounts to our non-Iranian clients. The gross revenues derived from these payments were approximately € 5,000.

We do not consider the execution of such transactions to be significant and we expect that we will continue to execute such transactions in the future.

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Maintaining of Accounts for Iranian Consulates and Embassies. In 2020, Iranian embassies and consulates in Germany held accounts with us. The purpose of these accounts is the funding of day-to-day operational costs of the embassies and consulates, such as salaries, rent and electricity. In 2020, the total volume of outgoing payments from these accounts was approximately € 5.8 million which have been funded through € 4.5 million of incoming payments. From these activities, we derived gross revenues of approximately € 2,700 and net profits which were less than this amount. The German government has requested that we provide these services to enable the government of Iran to conduct its diplomatic relations and we intend to continue such maintenance.

Activities of Entities in Which We Have Interests. Section 13(r) requires us to provide the specified disclosure with respect to ourselves and our “affiliates,” as defined in Exchange Act Rule 12b-2. Although we have minority equity interests in certain entities that could arguably result in these entities being deemed “affiliates,” we do not have the authority or the legal ability to acquire in every instance the information from these entities that would be necessary to determine whether they are engaged in any disclosable activities under Section 13(r). In some cases, legally independent entities are not permitted to disclose the details of their activities to us because of German privacy and data protection laws or the applicable banking laws and regulations. In such cases, voluntary disclosure of such details could violate such legal and/or regulatory requirements and subject the relevant entities to criminal prosecution or regulatory investigations.

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PART III

Item 17: Financial Statements

Not applicable.

Item 18: Financial Statements

The Financial Statements of this Annual Report on Form 20-F consist of the Consolidated Financial Statements including Notes 1 to 43 thereto, which are set forth as Part 2 of the Annual Report 2020, and, as described in Note 1 “Significant Accounting Policies and Critical Accounting Estimates” thereto under “Basis of accounting – IFRS 7 disclosures”, certain parts of the Management Report set forth as Part 1 of the Annual Report 2020.

The Consolidated Financial Statements as of and for the year ended December 31, 2020 have been audited by Ernst & Young GmbH Wirtschaftsprüfungsgesellschaft, as described in their “Report of Independent Registered Public Accounting Firm” included in the Annual Report 2020.

The Consolidated Financial Statements as of and for the years ended December 31, 2019 and 2018 have been audited by KPMG AG Wirtschaftsprüfungsgesellschaft, as described in their “Report of Independent Registered Public Accounting Firm” included in the Annual Report 2020.

Item 19: Exhibits

We have filed the following documents as exhibits to this document.

Exhibit number	Description of Exhibit
1.1	English translation of the Articles of Association of Deutsche Bank AG, furnished as Exhibit 3.2 to our Report on Form 6-K dated January 11, 2021 and incorporated by reference herein.
2.1	The total amount of long-term debt securities of us or our subsidiaries authorized under any instrument does not exceed 10 percent of the total assets of our Group on a consolidated basis. We hereby agree to furnish to the Commission, upon its request, a copy of any instrument defining the rights of holders of long-term debt of us or of our subsidiaries for which consolidated or unconsolidated financial statements are required to be filed.
2.2	Descriptions of securities registered under the Securities Exchange Act of 1934.
4.1	Equity Plan Rules 2017, furnished as Exhibit 4.6 to our 2016 Annual Report on Form 20-F and incorporated by reference herein.
4.2	Equity Plan Rules 2018, furnished as Exhibit 4.6 to our Registration Statement on Form S-8 No. 333-223301 and incorporated by reference herein.
4.3	Equity Plan Rules 2019, furnished as Exhibit 4.5 to our 2018 Annual Report on Form 20-F and incorporated by reference herein.
4.4	Equity Plan Rules 2020, furnished as Exhibit 4.5 to our 2019 Annual Report on Form 20-F and incorporated by reference herein.
4.5	Equity Plan Rules 2021.
4.6	Key Retention Plan Equity Plan Rules 2017, furnished as Exhibit 4.7 to our 2016 Annual Report on Form 20-F and incorporated by reference herein.
4.7	Restricted Share Plan Rules 2018, furnished as Exhibit 4.8 to our Registration Statement on Form S-8 No. 333-223301 and incorporated by reference herein.
4.8	Restricted Share Plan Rules 2019, furnished as Exhibit 4.8 to our 2018 Annual Report on Form 20-F and incorporated by reference herein.
4.9	Restricted Share Plan Rules 2020, furnished as Exhibit 4.9 to our 2019 Annual Report on Form 20-F and incorporated by reference herein.
4.10	Restricted Share Plan Rules 2021.
8.1	List of Subsidiaries.
12.1	Principal Executive Officer Certifications Required by 17 C.F.R. 240.13a-14(a).
12.2	Principal Financial Officer Certifications Required by 17 C.F.R. 240.13a-14(a).
13.1	Chief Executive Officer Certification Required by 18 U.S.C. Section 1350.
13.2	Chief Financial Officer Certification Required by 18 U.S.C. Section 1350.
14.1	Legal Opinion regarding confidentiality of related party customers.
15.1	Consent of Ernst & Young GmbH Wirtschaftspruefungsgesellschaft .
15.2	Consent of KPMG AG Wirtschaftspruefungsgesellschaft.
101.1	Interactive Data File.

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Signatures

The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and has duly caused and authorized the undersigned to sign this annual report on its behalf.

Date: March 12, 2021

Deutsche Bank Aktiengesellschaft

/s/CHRISTIAN SEWING

Christian Sewing

Chairman of the Management Board

Chief Executive Officer

/s/JAMES VON MOLTKE

James von Moltke

Member of the Management Board

Chief Financial Officer

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Annual Report

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Content

1 –
Combined Management Report
4	Operating and financial review
34	Outlook
41	Risks and opportunities
52	Risk report
166	Compensation report
214	Sustainability
215	Employees
219	Internal control over financial reporting
221	Information pursuant to section 315a (1) of the German Commercial Code and explanatory report
225	Corporate governance statement pursuant to sections 289f and 315d of the German Commercial Code
225	Standalone parent company information (HGB)
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	Notes to the consolidated financial statements
274	Notes to the consolidated income statement
281	Notes to the consolidated balance sheet
333	Additional notes
391	Report of Independent Registered Public Accounting Firm
3 –
Corporate Governance Statement/ 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
4 –
Supplementary Information
427	Non-GAAP financial measures
435	Declaration of backing
436	Group five-year record
437	Imprint/ Publications

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1-

Combined Management Report

4	Operating and financial review
4	Executive summary
7	Deutsche Bank Group
12	Results of operations
30	Financial position
32	Liquidity and capital resources
34	Outlook
41	Risks and opportunities
52	Risk report
54	Risk and capital overview
58	Risk and capital framework
68	Risk and capital management
111	Risk and capital performance
166	Compensation report
168	Management Board compensation report
199	Employee compensation report
211	Compensation system for Supervisory Board members
214	Sustainability
215	Employees
219	Internal control over financial reporting
221	Information pursuant to section 315a (1) of the German Commercial Code and explanatory report
225	Corporate governance statement pursuant to sections 289f and 315d of the German Commercial Code
225	Standalone parent company information (HGB)

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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 Reporting 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	2020²	2019	Main driver
Global Economy	(3.3)	3.0	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 protracted 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	(5.1)	1.6	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	(2.1)	4.0	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.
Eurozone Economy	(6.8)	1.3	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 provided favorable 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.
Of which: German economy	(5.0)	0.6	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.
U.S. Economy	(3.5)	2.2	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 labor market improved again as the recovery progressed. A strong second wave of COVID-19 in combination with delayed additional fiscal stimulus constrained the recovery. The Federal Reserve Bank (the “Fed”) acted quickly and aggressively to keep funds flowing freely in money and credit markets.
Japanese Economy	(4.9)	0.3	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.
Asian Economy³	(1.0)	5.2	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.
Of which: Chinese Economy	2.3	6.0	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 activity, 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.

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The Banking Industry

	Dec 31, 2020
Growth year-over-year (in %)	Corporate Lending	Retail Lending	Corporate Deposits	Retail Deposits	Main driver
Eurozone	5.5	3.2	18.6	7.5	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 acceleration in corporate deposit growth, the strongest since the start of the monetary union in 1999, household deposits also expanded at the fastest pace since the financial crisis.
Of which: Germany	4.1	4.7	13.3	6.1	After an initial spike, corporate loan growth has slowed to its lowest 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 stagnating. Household deposits are rising the most since the financial crisis.
U.S.	7.4	(2.9)	21.4 1	21.4 1	Following an exceptional surge in corporate loans at the beginning 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 deposits to accelerate from a substantial increase to extraordinary speed, where it has recently stabilized.
China	13.0	14.2	10.8	13.8	Retail lending (and deposit-taking) have maintained their dynamic expansion, while corporate lending (and deposit-taking) have picked up to a similar level.

¹ Total U.S. deposits as segment breakdown is not available.

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 maintaining 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 € 612 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 51 % versus 2019 on a comparable basis.

Revenues excluding specific items, Adjusted costs, Adjusted costs excluding transformation charges, Adjusted costs excluding 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 definitions of such measures and reconciliations to the IFRS measures on which they are based.

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Group Key Performance Indicators

Near-term operating performance	Status end of 2020	Status end of 2019
Post-tax return on average tangible shareholders’ equity¹	0.2 %	(10.9) %
Adjusted costs excl. transformation charges2	€ 19.9 bn	€ 21.6 bn
Employees3	84,659	87,597
Capital performance
Common Equity Tier 1 capital ratio4	13.6 %	13.6 %
Leverage ratio (fully loaded)4	4.7 %	4.2 %

¹ Based on profit (loss) attributable to Deutsche Bank shareholders after AT1 coupon. For further information, please refer to “Supplementary Information: Non-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 “Supplementary 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 € 846 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 € 24.2 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 development offset the industry-wide margin compression. Revenues in Corporate and Other (C&O) were negative € 548 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 transformation 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 € 391 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 € 612 million in 2020, compared to a 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 impairments 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 positive 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.

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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 infrastructure functions and governance tasks that were executed specifically for the individual legal entity. With this step, refinancing 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 Association 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 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 management, 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.

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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 management 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 “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 Planning & 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 Management 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 Investment 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 management 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).

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Investment Bank

Corporate Division Overview

The Investment Bank (IB) combines Deutsche Bank’s Fixed Income, Currency (FIC) Sales & Trading and, Origination & Advisory, 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 participated 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 respond 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 international businesses we also focus on commercial clients. We are organized along two business divisions: Private Bank Germany 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 customers 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 agreement to sell its share in Postbank Systems AG to Tata Consultancy Services (TCS). The transaction was closed after regulatory 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 complementary main brands: Deutsche Bank and Postbank. With our Deutsche Bank brand we focus on providing our private customers 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 investing their wealth, financing their personal and business interests and servicing their institutional and corporate needs. In addition, we offer a range of Environmental, Social and Governance (ESG) products across our discretionary portfolio management 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 complement our offerings by closely collaborating with the Investment Bank, the Corporate Bank and Asset Management.

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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 solutions, 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 platform 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 January 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 .

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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 identification 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.

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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.				2020 increase (decrease) from 2019		2019 increase (decrease) from 2018
(unless stated otherwise)	2020	2019	2018	in € m.	in %	in € m.	in %
Net interest income	11,548	13,749	13,316	(2,201)	(16)	433	3
Provision for credit losses	1,792	723	525	1,068	148	199	38
Net interest income after provision for credit losses	9,756	13,026	12,791	(3,269)	(25)	235	2
Commissions and fee income¹	9,424	9,520	10,039	(96)	(1)	(519)	(5)
Net gains (losses) on financial assets/liabilities at fair value through profit or loss¹	2,332	193	1,209	2,139	N/M	(1,015)	(84)
Net gains (losses) on financial assets at fair value through other comprehensive income	323	260	317	63	24	(57)	(18)
Net gains (losses) on financial assets at amortized cost	324	0	2	324	N/M	(2)	(78)
Net income (loss) from equity method investments	120	110	219	10	9	(109)	(50)
Other income (loss)	(61)	(668)	215	607	(91)	(883)	N/M
Total noninterest income	12,463	9,416	12,000	3,047	32	(2,585)	(22)
Total net revenues²	22,219	22,441	24,791	(222)	(1)	(2,350)	(9)
Compensation and benefits	10,471	11,142	11,814	(671)	(6)	(672)	(6)
General and administrative expenses	10,259	12,253	11,286	(1,993)	(16)	966	9
Impairment of goodwill and other intangible assets	0	1,037	0	(1,037)	(100)	1,037	N/M
Restructuring activities	485	644	360	(159)	(25)	283	79
Total noninterest expenses	21,216	25,076	23,461	(3,860)	(15)	1,615	7
Profit (loss) before tax	1,003	(2,634)	1,330	3,637	N/M	(3,965)	N/M
Income tax expense (benefit)	391	2,630	989	(2,239)	(85)	1,641	166
Profit (loss)	612	(5,265)	341	5,876	N/M	(5,606)	N/M
Profit (loss) attributable to noncontrolling interests	129	125	75	4	3	50	68
Profit (loss) attributable to Deutsche Bank shareholders and additional equity components	483	(5,390)	267	5,873	N/M	(5,657)	N/M
Profit (loss) attributable to additional equity components	382	328	319	53	16	9	3
Profit (loss) attributable to Deutsche Bank shareholders	101	(5,718)	(52)	5,820	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.				2020 increase (decrease) from 2019		2019 increase (decrease) from 2018
(unless stated otherwise)	2020	2019	2018	in € m.	in %	in € m.	in %
Total interest and similar income	17,954	25,208	24,718	(7,254)	(29)	489	2
Total interest expenses	6,405	11,458	11,402	(5,053)	(44)	56	0
Net interest income	11,548	13,749	13,316	(2,201)	(16)	433	3
Average interest-earning assets1	920,259	956,362	990,670	(36,104)	(4)	(34,307)	(3)
Average interest-bearing liabilities1	685,772	714,716	745,904	(28,944)	(4)	(31,188)	(4)
Gross interest yield2	1.83 %	2.53 %	2.39 %	(0.70) ppt	(28)	0.14 ppt	6
Gross interest rate paid3	0.78 %	1.47 %	1.38 %	(0.69) ppt	(47)	0.09 ppt	6
Net interest spread4	1.06 %	1.07 %	1.00 %	(0.01) ppt	(1)	0.06 ppt	6
Net interest margin5	1.25 %	1.44 %	1.34 %	(0.18) ppt	(13)	0.09 ppt	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 December 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.

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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 18 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.				2020 increase (decrease) from 2019		2019 increase (decrease) from 2018
(unless stated otherwise)	2020	2019	2018	in € m.	in %	in € m.	in %
Trading income	2,097	197	(72)	1,900	N/M	269	N/M
Net gains (losses) on non-trading financial assets mandatory at fair value through profit or loss	276	377	212	(102)	(27)	165	78
Net gains (losses) on financial assets/liabilities designated at fair value through profit or loss	(40)	(381)	1,069	341	(89)	(1,449)	N/M
Total net gains (losses) on financial assets/liabilities at fair value through profit or loss	2,332	193	1,209	2,139	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 € 2.3 billion in 2020, compared to € 193 million in 2019. The increase of € 2.1 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 activities 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.

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in € m.				2020 increase (decrease) from 2019		2019 increase (decrease) from 2018
(unless stated otherwise)	2020	2019	2018	in € m.	in %	in € m.	in %
Net interest income	11,548	13,749	13,316	(2,201)	(16)	433	3
Total net gains (losses) on financial assets/liabilities at fair value through profit or loss	2,332	193	1,209	2,139	N/M	(1,015)	(84)
Total net interest income and net gains (losses) on financial assets/liabilities at fair value through profit or loss	13,880	13,942	14,524	(62)	(0)	(582)	(4)
Breakdown by Corporate Division:1
Corporate Bank	2,935	2,709	2,562	226	8	147	6
Investment Bank	7,196	5,444	5,273	1,751	32	171	3
Private Bank	4,623	4,946	5,017	(323)	(7)	(71)	(1)
Asset Management	(98)	87	(88)	(185)	N/M	175	N/M
Capital Release Unit	(33)	155	1,442	(188)	N/M	(1,287)	(89)
Corporate & Other	(742)	602	318	(1,343)	N/M	284	89
Total net interest income and net gains (losses) on financial assets/liabilities at fair value through profit or loss	13,880	13,942	14,524	(62)	(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 divisions’ 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 € 13.9 billion in 2020, which remained stable compared to 2019. 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 guaranteed 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 billion 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 refinements 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.

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Remaining Noninterest Income

in € m.				2020 increase (decrease) from 2019		2019 increase (decrease) from 2018
(unless stated otherwise)	2020	2019	2018	in € m.	in %	in € m.	in %
Commissions and fee income1	9,424	9,520	10,039	(96)	(1)	(519)	(5)
Net gains (losses) on financial assets at fair value through other comprehensive income	323	260	317	63	24	(57)	(18)
Net gains (losses) on financial assets at amortized cost	324	0	2	324	N/M	(2)	(78)
Net income (loss) from equity method investments	120	110	219	10	9	(109)	(50)
Other income (loss)	(61)	(668)	215	607	(91)	(883)	N/M
Total remaining noninterest income	10,130	9,222	10,792	908	10	(1,570)	(15)
1 includes:
Commissions and fees from fiduciary activities:
Commissions for administration	347	327	303	19	6	24	8
Commissions for assets under management	3,208	3,298	3,130	(90)	(3)	168	5
Commissions for other securities business	341	317	290	24	7	27	9
Total	3,896	3,943	3,724	(47)	(1)	219	6
Commissions, broker’s fees, mark-ups on securities underwriting and other securities activities:
Underwriting and advisory fees	1,625	1,501	1,629	125	8	(128)	(8)
Brokerage fees	637	637	936	0	0	(299)	(32)
Total	2,262	2,137	2,565	125	6	(427)	(17)
Fees for other customer services	3,266	3,440	3,751	(174)	(5)	(311)	(8)
Total commissions and fee income	9,424	9,520	10,039	(96)	(1)	(519)	(5)

N/M – Not meaningful

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 commission 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, associated 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 the sale of 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.

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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 € (61) 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. Oppenheim 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.				2020 increase (decrease) from 2019		2019 increase (decrease) from 2018
(unless stated otherwise)	2020	2019	2018	in € m.	in %	in € m.	in %
Compensation and benefits	10,471	11,142	11,814	(671)	(6)	(672)	(6)
General and administrative expenses¹	10,259	12,253	11,286	(1,993)	(16)	966	9
Impairment of goodwill and other intangible assets	0	1,037	0	(1,037)	(100)	1,037	N/M
Restructuring activities	485	644	360	(159)	(25)	283	79
Total noninterest expenses	21,216	25,076	23,461	(3,860)	(15)	1,615	7
N/M – Not meaningful
1 includes:
Information Technology2	3,862	5,011	4,043	(1,150)	(23)	968	24
Occupancy, furniture and equipment expenses3	1,724	1,693	1,698	31	2	(5)	(0)
Regulatory, tax & insurance3,4	1,407	1,440	1,570	(33)	(2)	(130)	(8)
Professional services5	982	1,143	1,323	(161)	(14)	(180)	(14)
Banking Services and outsourced operations5	962	967	960	(5)	(0)	6	1
Market Data and Research services2	376	421	415	(46)	(11)	7	2
Travel expenses	76	256	288	(180)	(70)	(32)	(11)
Marketing expenses	174	251	299	(77)	(31)	(48)	(16)
Other expenses6	696	1,071	690	(374)	(35)	381	55
Total general and administrative expenses	10,259	12,253	11,286	(1,993)	(16)	966	9

² Prior year numbers have been restated to reflect the shift of telecommunications expenses from (communications) and market data & research services expenses to information 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

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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.

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 € 391 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.

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Net profit (loss)

2020

The net profit in 2020 was € 612 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 impairments 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 positive 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 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 Information” 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.

	2020
in € m. (unless stated otherwise)	Corporate Bank	Investment Bank	Private Bank	Asset Management	Capital Release Unit	Corporate & Other	Total Consolidated
Net revenues1	5,145	9,283	8,126	2,229	(225)	(548)	24,011
Provision for credit losses	366	688	711	2	29	(3)	1,792
Noninterest expenses
Compensation and benefits	1,064	1,906	2,884	740	168	3,709	10,471
General and administrative expenses	3,126	3,493	4,242	764	1,774	(3,140)	10,259
Impairment of goodwill and other intangible assets	0	0	0	0	0	0	0
Restructuring activities	28	14	413	22	5	3	485
Total noninterest expenses	4,218	5,413	7,539	1,527	1,947	572	21,216
Noncontrolling interests	0	11	0	157	(0)	(169)	0
Profit (loss) before tax	561	3,171	(124)	544	(2,201)	(948)	1,003
Cost/income ratio	82%	58%	93%	68%	N/M	N/M	88%
Assets2	237,497	573,673	296,637	9,453	197,667	10,035	1,324,961
Additions to non-current assets	10	4	485	32	0	2,891	3,423
Risk-weighted assets	57,288	128,487	77,074	9,997	34,415	21,690	328,951
Leverage exposure (fully loaded)3	273,795	476,261	307,746	4,695	71,726	29,243	1,078,268
Average allocated shareholders' equity	9,904	22,943	11,521	4,760	6,205	(23)	55,308
Post-tax return on average shareholders’ equity4	3 %	9 %	(1) %	8 %	(26) %	N/M	0 %
Post-tax return on average tangible shareholders’ equity4	4 %	10 %	(2) %	21 %	(27) %	N/M	0 %
1 includes:
Net interest income	2,882	3,325	4,475	1	61	804	11,548
Net income (loss) from equity method investments	3	22	23	63	9	1	120
2 includes:
Equity method investments	69	399	60	304	67	4	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.

19

	2019
in € m. (unless stated otherwise)	Corporate Bank	Investment Bank	Private Bank	Asset Management	Capital Release Unit	Corporate & Other	Total Consolidated
Net revenues1	5,244	7,019	8,206	2,332	217	147	23,165
Provision for credit losses	284	109	344	1	(14)	0	723
Noninterest expenses
Compensation and benefits	1,073	1,983	2,990	832	359	3,906	11,142
General and administrative expenses	3,165	4,237	4,481	851	2,898	(3,380)	12,253
Impairment of goodwill and other intangible assets	492	0	545	0	0	0	1,037
Restructuring activities	137	169	126	29	143	40	644
Total noninterest expenses	4,867	6,389	8,142	1,711	3,400	566	25,076
Noncontrolling interests	0	20	(0)	152	1	(173)	0
Profit (loss) before tax	92	502	(279)	468	(3,170)	(247)	(2,634)
Cost/income ratio	93 %	91 %	99 %	73 %	N/M	N/M	108 %
Assets2	228,663	501,774	270,334	9,936	259,224	27,743	1,297,674
Additions to non-current assets	9	1	215	27	0	1,069	1,322
Risk-weighted assets	58,808	116,552	74,032	9,527	45,874	19,223	324,015
Leverage exposure (fully loaded)	270,647	432,254	282,575	4,643	126,905	51,016	1,168,040
Average allocated shareholders' equity	10,464	23,052	11,729	4,821	10,105	0	60,170
Post-tax return on average shareholders’ equity3	0 %	1 %	(2) %	7 %	(23) %	N/M	(10) %
Post-tax return on average tangible shareholders’ equity3	0 %	1 %	(3) %	18 %	(24) %	N/M	(11) %
1 includes:
Net interest income	2,633	2,707	4,804	(39)	85	3,559	13,749
Net income (loss) from equity method investments	3	32	14	49	12	1	110
2 includes:
Equity method investments	66	412	82	276	90	4	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.

	2018
in € m. (unless stated otherwise)	Corporate Bank	Investment Bank	Private Bank	Asset Management	Capital Release Unit	Corporate & Other	Total Consolidated
Net revenues1	5,278	7,561	8,520	2,187	1,911	(142)	25,316
Provision for credit losses	142	70	349	(1)	(36)	1	525
Noninterest expenses
Compensation and benefits	1,063	2,175	3,059	787	547	4,183	11,814
General and administrative expenses	2,787	4,134	4,448	929	2,742	(3,754)	11,286
Impairment of goodwill and other intangible assets	0	0	0	0	0	0	0
Restructuring activities	32	199	49	19	62	(1)	360
Total noninterest expenses	3,882	6,509	7,556	1,735	3,351	428	23,461
Noncontrolling interests	0	24	(0)	85	1	(109)	0
Profit (loss) before tax	1,254	958	616	368	(1,404)	(461)	1,330
Cost/income ratio	74 %	86 %	89 %	79 %	N/M	N/M	93 %
Assets2	216,163	458,464	270,150	10,030	370,090	23,240	1,348,137
Additions to non-current assets	13	2	303	43	1	1,286	1,647
Risk-weighted assets3	60,305	122,662	67,180	10,365	72,133	17,789	350,432
Leverage exposure (fully loaded)	257,921	413,631	287,760	5,044	280,638	27,933	1,272,926
Average allocated shareholders' equity	10,927	22,629	12,397	4,837	11,704	115	62,610
Post-tax return on average shareholders’ equity4	8 %	2 %	3 %	5 %	(9) %	N/M	(0) %
Post-tax return on average tangible shareholders’ equity4	9 %	3 %	4 %	14 %	(9) %	N/M	(0) %
1 includes:
Net interest income	2,419	2,209	4,905	(51)	416	3,417	13,316
Net income (loss) from equity method investments	3	157	2	41	10	6	219
2 includes:
Equity method investments	63	406	78	240	87	5	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

20

Corporate Bank

				2020 increase (decrease) from 2019		2019 increase (decrease) from 2018
in € m. (unless stated otherwise)	2020	2019	2018	in € m.	in %	in € m.	in %
Net revenues
Global Transaction Banking	3,698	3,810	3,908	(112)	(3)	(98)	(3)
Commercial Banking	1,447	1,433	1,370	14	1	63	5
Total net revenues	5,145	5,244	5,278	(98)	(2)	(34)	(1)
Provision for credit losses	366	284	142	82	29	142	100
Noninterest expenses
Compensation and benefits	1,064	1,073	1,063	(9)	(1)	10	1
General and administrative expenses	3,126	3,165	2,787	(40)	(1)	378	14
Impairment of goodwill and other intangible assets	0	492	0	(492)	N/M	492	N/M
Restructuring activities	28	137	32	(108)	(79)	105	N/M
Total noninterest expenses	4,218	4,867	3,882	(649)	(13)	986	25
Noncontrolling interests	0	0	0	0	N/M	0	N/M
Profit (loss) before tax	561	92	1,254	469	N/M	(1,162)	(93)
Total assets (in € bn)1	237	229	216	9	4	13	6
Loans (gross of allowance for loan losses, in € bn)	114	119	114	(5)	(4)	5	5
Employees (full-time equivalent)	7,368	7,712	7,653	(345)	(4)	60	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. Adjusted 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 provisions 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 tiering 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 revenues 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 impairment 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 positive 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 impairment 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.

21

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 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 uncertainties 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

				2020 increase (decrease) from 2019		2019 increase (decrease) from 2018
in € m. (unless stated otherwise)	2020	2019	2018	in € m.	in %	in € m.	in %
Net revenues
Fixed Income, Currency (FIC) Sales & Trading	7,088	5,525	5,644	1,563	28	(119)	(2)
Debt Origination	1,542	1,119	1,146	423	38	(27)	(2)
Equity Origination	379	149	197	231	155	(48)	(24)
Advisory	277	370	458	(93)	(25)	(88)	(19)
Origination & Advisory	2,198	1,638	1,801	560	34	(163)	(9)
Other	(3)	(144)	117	142	(98)	(261)	N/M
Total net revenues	9,283	7,019	7,561	2,265	32	(542)	(7)
Provision for credit losses	688	109	70	579	N/M	38	54
Noninterest expenses
Compensation and benefits	1,906	1,983	2,175	(76)	(4)	(192)	(9)
General and administrative expenses	3,493	4,237	4,134	(744)	(18)	103	2
Impairment of goodwill and other intangible assets	0	0	0	0	N/M	0	N/M
Restructuring activities	14	169	199	(155)	(92)	(30)	(15)
Total noninterest expenses	5,413	6,389	6,509	(975)	(15)	(121)	(2)
Noncontrolling interests	11	20	24	(8)	(41)	(4)	(18)
Profit (loss) before tax	3,171	502	958	2,669	N/M	(456)	(48)
Total assets (in € bn)1	574	502	458	72	14	43	9
Loans (gross of allowance for loan losses, in € bn)	69	75	65	(6)	(8)	10	16
Employees (full-time equivalent)	4,258	4,351	4,623	(93)	(2)	(273)	(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 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.

22

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 materially 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-compensation costs.

23

Private Bank

				2020 increase (decrease) from 2019		2019 increase (decrease) from 2018
in € m. (unless stated otherwise)	2020	2019	2018	in € m.	in %	in € m.	in %
Net revenues:
Private Bank Germany	4,992	5,070	5,320	(78)	(2)	(251)	(5)
International Private Bank	3,134	3,137	3,200	(3)	(0)	(64)	(2)
IPB Personal Banking1	830	869	888	(39)	(5)	(19)	(2)
IPB Private Banking2 and Wealth Management	2,304	2,267	2,312	37	2	(44)	(2)
Total net revenues	8,126	8,206	8,520	(80)	(1)	(314)	(4)
Of which:
Net interest income	4,475	4,804	4,905	(329)	(7)	(101)	(2)
Commissions and fee income	3,048	2,865	2,788	183	6	77	3
Remaining income	603	537	827	66	12	(290)	(35)
Provision for credit losses	711	344	349	367	107	(5)	(2)
Noninterest expenses:
Compensation and benefits	2,884	2,990	3,059	(106)	(4)	(69)	(2)
General and administrative expenses	4,242	4,481	4,448	(240)	(5)	34	1
Impairment of goodwill and other intangible assets	0	545	0	(545)	N/M	545	N/M
Restructuring activities	413	126	49	287	N/M	76	155
Total noninterest expenses	7,539	8,142	7,556	(603)	(7)	586	8
Noncontrolling interests	0	(0)	(0)	1	N/M	(0)	N/M
Profit (loss) before tax	(124)	(279)	616	155	(56)	(895)	N/M
Total assets (in € bn)3	297	270	270	26	10	0	0
Loans (gross of allowance for loan losses, in € bn)	237	227	216	10	5	11	5
Assets under Management (in € bn)4	493	482	446	11	2	36	8
Net flows (in € bn)	16	4	(2)	12	N/M	7	N/M
Employees (full-time equivalent)	29,945	31,599	32,437	(1,654)	(5)	(838)	(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 investment purposes. In the Private Bank Germany, IPB Personal Banking and IPB Private Banking, this includes time deposits and savings deposits. In IPB Wealth Management, 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 transformation charges, which were the main reason for a reported pre-tax loss of € 124 million in 2020. Adjusted for these transformation-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 pandemic.

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 refinements. Furthermore the increase was also related to the growth in the loan business.

24

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 transformation-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 reductions. 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 essentially 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 movements. Net inflows of € 4 billion during 2019 were primarily in investment products.

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Asset Management

				2020 increase (decrease) from 2019		2019 increase (decrease) from 2018
in € m. (unless stated otherwise)	2020	2019	2018	in € m.	in %	in € m.	in %
Net revenues
Management Fees	2,136	2,141	2,115	(5)	(0)	26	1
Performance and transaction fees	90	201	91	(111)	(55)	111	122
Other	3	(10)	(19)	13	N/M	9	(48)
Total net revenues	2,229	2,332	2,187	(103)	(4)	146	7
Provision for credit losses	2	1	(1)	1	59	2	N/M
Noninterest expenses
Compensation and benefits	740	832	787	(92)	(11)	45	6
General and administrative expenses	764	851	929	(87)	(10)	(78)	(8)
Impairment of goodwill and other intangible assets	0	0	0	0	N/M	0	N/M
Restructuring activities	22	29	19	(6)	(22)	10	51
Total noninterest expenses	1,527	1,711	1,735	(185)	(11)	(23)	(1)
Noncontrolling interests	157	152	85	5	4	68	80
Profit (loss) before tax	544	468	368	76	16	99	27
Total assets (in € bn)1	9	10	10	(0)	(5)	(0)	(1)
Assets under Management (in € bn)	793	768	664	25	3	103	16
Net flows (in € bn)	30	25	(23)	5	N/M	48	N/M
Employees (full-time equivalent)	3,926	3,925	4,022	1	0	(97)	(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:

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in € bn.	Active Equity	Active Fixed Income	Active Multi Asset	Active SQI	Active Cash	Passive	Alternatives	Assets under Management
Balance as of December 31, 2019	96	234	58	71	57	156	96	768
Inflows	21	47	16	19	503	85	12	703
Outflows	(19)	(54)	(18)	(22)	(483)	(68)	(8)	(673)
Net Flows	2	(7)	(2)	(3)	20	17	4	30
FX impact	(2)	(9)	(0)	(0)	(4)	(7)	(3)	(26)
Performance	3	7	1	1	0	13	(2)	24
Other	(1)	(6)	1	1	2	0	(1)	(3)
Balance as of December 31, 2020	97	220	59	69	75	179	93	793
Management fee margin (in bps)	72	13	34	28	4	19	50	28

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 restructuring 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 administrative 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 impairment. 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.	Active Equity	Active Fixed Income	Active Multi Asset	Active SQI	Active Cash	Passive	Alternatives	Assets under Management
Balance as of December 31, 2018	77	227	46	63	58	112	81	664
Inflows	15	58	16	20	447	65	20	642
Outflows	(17)	(66)	(9)	(18)	(449)	(46)	(11)	(617)
Net Flows	(2)	(8)	7	2	(2)	19	9	25
FX impact	0	3	0	0	1	1	1	7
Performance	20	13	5	8	1	23	4	74
Other	(1)	(1)	(0)	(2)	(0)	1	1	(3)
Balance as of December 31, 2019	96	234	58	71	57	156	96	768
Management fee margin (in bps)	76	12	35	27	4	22	54	30

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Capital Release Unit

				2020 increase (decrease) from 2019		2019 increase (decrease) from 2018
in € m. (unless stated otherwise)	2020	2019	2018	in € m.	in %	in € m.	in %
Net revenues	(225)	217	1,911	(442)	N/M	(1,694)	(89)
Provision for credit losses	29	(14)	(36)	43	N/M	22	(61)
Noninterest expenses
Compensation and benefits	168	359	547	(191)	(53)	(188)	(34)
General and administrative expenses	1,774	2,898	2,742	(1,124)	(39)	156	6
Impairment of goodwill and other intangible assets	0	0	0	0	N/M	0	N/M
Restructuring activities	5	143	62	(139)	(97)	81	131
Total noninterest expenses	1,947	3,400	3,351	(1,453)	(43)	49	1
Noncontrolling interests	(0)	1	1	(1)	N/M	1	136
Profit (loss) before tax	(2,201)	(3,170)	(1,404)	970	(31)	(1,766)	126
Total assets (in € bn)1	198	259	370	(62)	(24)	(111)	(30)
Employees (full-time equivalent)	482	621	1,540	(139)	(22)	(919)	(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 transformation 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.

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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 € 217 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.

Noninterest expenses were € 3.4 billion, an increase of € 49 million or 1 % compared to the prior year. 2019 included restructuring 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-compensation 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.

29

Corporate & Other (C&O)

				2020 increase (decrease) from 2019		2019 increase (decrease) from 2018
in € m. (unless stated otherwise)	2020	2019	2018	in € m.	in %	in € m.	in %
Net revenues	(548)	147	(142)	(695)	N/M	289	N/M
Provision for credit losses	(3)	0	1	(4)	N/M	(0)	(84)
Noninterest expenses
Compensation and benefits	3,709	3,906	4,183	(197)	(5)	(277)	(7)
General and administrative expenses	(3,140)	(3,380)	(3,754)	240	(7)	374	(10)
Impairment of goodwill and other intangible assets	0	0	0	0	N/M	0	N/M
Restructuring activities	3	40	(1)	(38)	(93)	41	N/M
Total noninterest expenses	572	566	428	6	1	138	32
Noncontrolling interests	(169)	(173)	(109)	3	(2)	(64)	58
Profit (loss) before tax	(948)	(247)	(461)	(701)	N/M	215	(47)
Employees (full-time equivalent)	38,680	39,389	41,463	(709)	(2)	(2,074)	(5)

N/M – Not meaningful

Prior year segmental information presented in the current structure

2020

C&O reported a loss before tax of € 948 million in 2020 compared to a loss before tax of € 247 million in 2019, a loss increase of € 701 million, mainly driven by a negative contribution from valuation and timing differences in 2020 after gains in the prior year.

Net revenues were negative € 548 million in 2020, compared to € 147 million in 2019. Revenues related to valuation and timing differences were negative € 103 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 where the difference is retained in C&O, compared to € 65 million lower than planned infrastructure expenses in prior year as well as transformation charges primarily reflecting the bank’s accelerated rationalisation 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 2018 mainly due to the implementation of a new internal 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.

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Financial position

Assets

in € m. (unless stated otherwise)	Dec 31, 2020	Dec 31, 2019	Absolute Change	Change in %
Cash, central bank and interbank balances	175,339	147,228	28,111	19
Central bank funds sold, securities purchased under resale agreements and securities borrowed	8,533	14,229	(5,696)	(40)
Financial assets at fair value through profit or loss	527,980	530,713	(2,733)	(1)
Of which: Trading assets	107,929	110,875	(2,946)	(3)
Of which: Positive market values from derivative financial instruments	343,493	332,931	10,563	3
Of which: Non-trading financial assets mandatory at fair value through profit and loss	76,121	86,901	(10,779)	(12)
Financial assets at fair value through other comprehensive income	55,834	45,503	10,331	23
Loans at amortized cost	426,691	429,841	(3,149)	(1)
Remaining assets	130,584	130,161	424	0
Of which: Brokerage and securities related receivables	74,564	63,401	11,163	18
Total assets	1,324,961	1,297,674	27,287	2

Liabilities and Equity

in € m. (unless stated otherwise)	Dec 31, 2020	Dec 31, 2019	Absolute Change	Change in %
Deposits	567,745	572,208	(4,463)	(1)
Central bank funds purchased, securities sold under repurchase agreements and securities loaned	4,023	3,374	649	19
Financial liabilities at fair value through profit or loss	419,199	404,448	14,751	4
Of which: Trading liabilities	44,316	37,065	7,250	20
Of which: Negative market values from derivative financial instruments	327,775	316,506	11,269	4
Of which: Financial liabilities designated at fair value through profit or loss	46,582	50,332	(3,750)	(7)
Other short-term borrowings	3,553	5,218	(1,665)	(32)
Long-term debt	149,163	136,473	12,690	9
Remaining liabilities	119,094	113,795	5,299	5
Of which: Brokerage and securities related payables	79,810	71,287	8,524	12
Total liabilities	1,262,777	1,235,515	27,262	2
Total equity	62,184	62,160	25	0
Total liabilities and equity	1,324,961	1,297,674	27,287	2

Movements in assets and liabilities

As of December 31, 2020, the total balance sheet of € 1.3 trillion slightly increased by € 27.3 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 decrease 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 increase of € 5.3 billion in remaining liabilities.

Positive and negative market values of derivative financial instruments increased by € 10.6 billion and € 11.3 billion, respectively, 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 decreased by € 1.3 billion.

31

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 € 4.5 billion, primarily driven by a reduction in Corporate Bank deposits reflecting our targeted initiatives to pro-actively manage liabilities, partially offset by a modest increase in Private Bank sight deposits.

Loans at amortized cost decreased by € 3.1 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 versus 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 € 25 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 (Additional 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 € 483 million, unrealized net gains of financial assets at fair value through other comprehensive 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.

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Liquidity and capital resources

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Tabular Disclosure of Contractual Obligations

Cash payment requirements outstanding as of December 31, 2020.

Contractual obligations					Payment due by period
in € m.	Total	Less than 1 year	1–3 years	3–5 years	More than 5 years
Long-term debt obligations¹	159,425	61,783	36,206	30,366	31,070
Trust preferred securities1,2	1,345	1,345	0	0	0
Long-term financial liabilities designated at fair value through profit or loss3	3,501	367	727	1,090	1,316
Future cash outflows not reflected in the measurement of Lease liabilities4	5,971	50	330	461	5,130
Lease liabilities1	4,566	699	902	902	2,064
Purchase obligations	4,209	500	1,825	899	985
Long-term deposits¹	24,018	0	8,585	5,223	10,210
Other long-term liabilities	1,279	419	117	202	541
Total	204,313	65,163	48,692	39,141	51,316

¹ Includes interest payments.

2Contractual 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”.

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”.

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Outlook

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Risks and opportunities

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Risk report

	Introduction – 53
54	Risk and capital overview
	Key risk metrics – 54
	Overall risk assessment – 55
	Risk profile – 56
58	Risk and capital framework
	Risk management principles – 58
	Risk governance – 59
	Risk appetite and capacity – 62
	Risk and capital plan – 62
	Stress testing – 64
	Risk measurement and reporting systems – 65
	Recovery and resolution planning – 67
68	Risk and capital management
	Capital management – 68
	Resource limit setting – 68
	Risk identification and assessment – 69
	Credit risk management and asset quality – 69
	Market risk management – 93
	Operational risk management – 100
	Liquidity risk management – 104
	Business (strategic) risk management – 108
	Model risk management – 109
	Reputational risk management – 109
	Risk concentration and risk diversification – 110
111	Risk and capital performance
	Capital, Leverage ratio, TLAC and MREL – 111
	Credit risk exposure – 127
	Trading market risk exposures – 149
	Nontrading market risk exposures – 152
	Operational risk exposure – 154
	Liquidity risk exposure – 155

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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 throughout this Risk report.

Disclosures according to Pillar 3 of the Basel 3 Capital Framework

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 recommendations in this Risk Report and also in our additional Pillar 3 report.

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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 practices, 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	13.6 %
31.12.2019	13.6 %
Economic Capital Adequacy Ratio
31.12.2020	179 %
31.12.2019	163 %
Leverage Ratio (fully-loaded)
31.12.2020	4.7 %
31.12.2019	4.2 %
Total loss absorbing capacity (TLAC)
31.12.2020 (Risk Weighted Asset based)	31.94 %
31.12.2020 (Leverage Exposure based)	9.74 %
31.12.2019 (Risk Weighted Asset based)	34.67 %
31.12.2019 (Leverage Exposure based)	9.62 %
Liquidity Coverage Ratio
31.12.2020	145 %
31.12.2019	141 %

Total Risk-Weighted Assets
31.12.2020	€ 329.0 bn
31.12.2019	€ 324.0 bn
Total Economic Capital
31.12.2020	€ 28.6 bn
31.12.2019	€ 29.2 bn
Leverage Exposure
31.12.2020	€ 1,078 bn
31.12.2019	€ 1,168 bn
Minimum requirement for own funds and eligible liabilities (MREL)
31.12.2020	10.67 %
31.12.2019	11.57 %
Stressed Net Liquidity Position (sNLP)
31.12.2020	€ 43.0 bn
31.12.2019	€ 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”.

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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, equity, 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 compliance, 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, complemented 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 economy 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, potentially 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-December, 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 relationship. 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.

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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

			2020 increase (decrease) from 2019
in € m. (unless stated otherwise)	Dec 31, 2020	Dec 31, 2019	in € m.	in %
Credit risk	11,636	10,757	879	8
Market risk	10,894	11,767	(874)	(7)
Trading market risk	2,198	3,592	(1,394)	(39)
Nontrading market risk	8,696	8,175	521	6
Operational risk	5,512	5,813	(301)	(5)
Business risk	5,949	6,374	(425)	(7)
Diversification benefit¹	(5,429)	(5,535)	106	(2)
Total economic capital demand	28,560	29,176	(616)	(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 Commercial Real Estate business. The economic capital demand for nontrading market risk increased by € 0.5 billion or 6 % compared 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 decrease 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 decreased 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.

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Risk profile of our business divisions as measured by economic capital

	Dec 31, 2020
in € m. (unless stated otherwise)	Corporate Bank	Investment Bank	Private Bank	Asset Management	Capital Release Unit	Corporate & Other	Total	Total (in %)
Credit Risk	2,588	4,675	2,404	60	648	1,262	11,636	41
Market Risk	822	2,369	1,170	420	235	5,877	10,894	38
Operational Risk	482	2,169	646	284	1,930	0	5,512	19
Business Risk	193	2,767	80	0	0	2,909	5,949	21
Diversification Benefit¹	(469)	(2,457)	(534)	(180)	(982)	(808)	(5,429)	(19)
Total EC	3,617	9,523	3,766	584	1,831	9,239	28,560	100
Total EC in %	13	33	13	2	6	32	100	N/M

N/M – Not meaningful

¹ Diversification benefit across credit, market, operational and strategic risk (largest part of business risk).

	Dec 31, 2019¹
in € m. (unless stated otherwise)	Corporate Bank	Investment Bank	Private Bank	Asset Management	Capital Release Unit	Corporate & Other	Total	Total (in %)
Credit Risk	2,417	4,064	2,181	71	859	1,164	10,757	37
Market Risk	539	3,563	1,827	456	464	4,920	11,767	40
Operational Risk	585	2,122	666	366	2,074	0	5,813	20
Business Risk	195	4,914	71	0	20	1,174	6,374	22
Diversification Benefit²	(510)	(2,460)	(647)	(224)	(1,075)	(619)	(5,535)	(19)
Total EC	3,226	12,203	4,097	668	2,343	6,639	29,176	100
Total EC in %	11	42	14	2	8	23	100	N/M

N/M – Not meaningful

1Risks 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 Finance 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. Aforementioned 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.

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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 demand 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 aforementioned 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 communicate the importance of a strong risk culture to support a consistent tone from the top.

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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 competent authorities of EU countries which joined the Single Supervisory Mechanism via the Joint Supervisory Team act in cooperation 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 reputational 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 appetite, 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 Management 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 Management 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.

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Risk management governance structure of the Deutsche Bank Group

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 reputational risk management and provides for a look-back and a lessons learnt process. It reviews and decides all reputational 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 outlines 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.

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• 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 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 aggregating and analyzing enterprise-wide risk information and concentrations, including review of the risk/return profiles of portfolios 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 responsibility.

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.

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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 appropriate alignment of risk, capital and performance targets, while at the same time considering risk capacity and appetite constraints 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 governance 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;

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• Strong capital and liquidity position; and
• Stable funding and liquidity strategy allowing for business planning within the liquidity risk appetite and regulatory requirements.

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 capital); 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 requirements for 2020 that applied from January 1, 2020 onwards, following the results of the 2019 SREP. The decision acknowledges 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 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 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 %.

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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:

• 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 Adequacy”.
• 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 “Strategic 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 vulnerabilities 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 concludes 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 supervisory 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 circumstances 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.

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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. 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 strategic 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 programs 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

Risk measurement and reporting systems

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Our risk measurement systems support regulatory reporting and external disclosures, as well as internal management reporting 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:

• 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 granularity 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 designates 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 Enterprise-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 submitted 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.

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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:

• The Recovery governance reflects the changes in the infrastructure and business functions, to facilitate a swift communication 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 establish 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 Protection 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 implement 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 subsidiaries, branches, agencies and businesses that are domiciled in or whose activities are carried out in whole or in material part in the United States.

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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.

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.

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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.

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 resulting 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 decision 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.

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• 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 principle” (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.
• 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 determination 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 counterparties.

Changes to existing credit models and introduction of new models are approved by the Regulatory Credit Risk Model Committee (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 subject 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.

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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 exposures 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.

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, individual 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 developed 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 consumption. 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 guarantees. 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 recognition.
• 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 historical 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.

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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.

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 exceptions: EBA compliant moratoria and concessions 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. Forbearance 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 counterparty, 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 counterparties 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.

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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.

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 independent 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 application 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”

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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 expansion 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.

• 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 identification 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 incorporate 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, Management 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 government 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 average used as input for calculating and the Group’s allowance for credit losses for the year end 2020.

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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 market-implied projections as aggregated, expanded and quality-assured within Risk Management.

IFRS 9 – Forward Looking Information applied for the year end 2020

	December 20201,2
	Year 1 (4 quarter avg)	Year 2 (4 quarter avg)	Year 3 (4 quarter avg)
Credit - ITX Europe 125	52.81	−	−
FX - EUR/USD	1.20	−	−
GDP Eurozone	1.38 %	4.37 %	2.32 %
GDP Germany	1.54 %	4.01 %	2.08 %
GDP Italy	1.92 %	3.80 %	1.93 %
GDP USA	2.80 %	3.35 %	2.29 %
Rate - US Treasury 2y	0.17 %	−	–
Unemployment - Eurozone	8.86 %	8.35 %	7.94 %
Unemployment - Germany	4.30 %	3.95 %	3.72 %
Unemployment - Italy	10.65 %	10.38 %	9.85 %
Unemployment - Spain	17.89 %	16.32 %	15.49 %
Unemployment - USA	6.40 %	5.19 %	4.46 %

¹ Rates, FX and credit spreads as per December 7 release; GDP, unemployment forecasts updated per December 16,2020.

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

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 particular 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 forecasted 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.

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IFRS 9 – Sensitivities of Forward Looking Information applied on Stage 1 and Stage 2

	Downward shift	ECL per Dec 31, 2020	Upward shift
Corporate Bank	425	293	213
Investment Bank	462	330	244
Private Bank	1,014	788	701
Asset Management	2	2	1
Capital Release Unit	10	8	6
Corporate & Other	17	9	5
Total	1,929	1,429	1,171

	Downward shift	ECL per Dec 31, 2019	Upward shift
Corporate Bank	374	241	170
Investment Bank	438	288	198
Private Bank	890	697	572
Asset Management	4	3	2
Capital Release Unit	13	10	7
Corporate & Other	29	12	6
Total	1,747	1,250	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 contained. 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 companies 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.

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• 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.

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 repayments applied in light of the COVID-19 pandemic. 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 regulatory treatment set out in the Guidelines will continue to apply to all payment holidays granted under eligible payment moratoria 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
in € m.	Loans and advances subject to EBA-compliant moratoria	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 crisis1	Loans and advances subject to EBA-compliant moratoria	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
Corporate Bank	610	2,956	2,362	651	2,716	1,974
Investment Bank	107	4,353	60	222	4,449	60
Private Bank	7,499	1,114	1,124	7,747	1,514	928
Capital Release Unit	433	0	0	430	20	0
Total	8,649	8,424	3,546	9,050	8,699	2,962

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 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.

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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 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-legislative 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 modifications 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

	Dec 31, 2020
	Legislative and non-legislative Moratoria		COVID-19 related forbearance measures		Public guarantee schemes
in € m.	Gross Carrying Amount	Expected Credit Losses	Gross Carrying Amount	Expected Credit Losses	Gross Carrying Amount	Expected Credit Losses
Stage 1	6,464	(23)	5,746	(18)	3,135	(3)
Stage 2	1,872	(63)	1,994	(54)	360	(4)
Stage 3	313	(69)	684	(80)	51	(4)
Total	8,649	(155)	8,424	(152)	3,546	(11)

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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 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 income (FVOCI) as well as off balance sheet lending commitments such as loan commitments and financial guarantees (hereafter 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

	Dec 31, 2020					Dec 31, 2019
in € m.	Stage 1	Stage 2	Stage 3	Stage 3 POCI	Total	Stage 1	Stage 2	Stage 3	Stage 3 POCI	Total
Amortized cost¹
Gross carrying amount	651,637	35,372	10,655	1,729	699,393	645,967	24,680	7,531	2,150	680,328
Allowance for credit losses²	544	648	3,614	139	4,946	549	492	3,015	36	4,093
of which Loans
Gross carrying amount	385,117	34,537	10,138	1,710	431,501	400,434	23,832	7,437	2,130	433,833
Allowance for credit losses²	522	647	3,506	133	4,808	537	488	2,932	33	3,990
Fair value through OCI
Fair value	55,566	163	105	0	55,834	45,083	397	23	0	45,503
Allowance for credit losses	12	6	2	0	20	16	9	10	0	35
Off-balance sheet
Notional amount	251,545	8,723	2,587	1	262,856	251,930	5,864	1,424	0	259,218
Allowance for credit losses³	144	74	200	0	419	128	48	166	0	342

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 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

	Dec 31, 2020
	Gross carrying amount
in € m.	Stage 1	Stage 2	Stage 3	Stage 3 POCI	Total
Balance, beginning of year	645,967	24,680	7,531	2,150	680,328
Movements in financial assets including new business	79,284	8,215	3,304	(166)	90,637
Transfers due to changes in creditworthiness	(7,462)	5,543	1,919	0	0
Changes due to modifications that did not result in derecognition	(0)	(3)	(31)	0	(34)
Changes in models	0	0	0	0	0
Financial assets that have been derecognized during the period	(48,990)	(2,268)	(1,910)	(263)	(53,430)
Recovery of written off amounts	0	0	58	0	58
Foreign exchange and other changes	(17,162)	(795)	(216)	7	(18,165)
Balance, end of reporting period	651,637	35,372	10,655	1,729	699,393

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Financial assets at amortized cost subject to impairment remained 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 %.

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.

	Dec 31, 2019
	Gross carrying amount
in € m.	Stage 1	Stage 2	Stage 3	Stage 3 POCI	Total
Balance, beginning of year	637,037	32,335	7,452	1,963	678,787
Movements in financial assets including new business	86,882	(6,503)	1,022	418	81,819
Transfers due to changes in creditworthiness	(1,652)	327	1,325	0	0
Changes due to modifications that did not result in derecognition	(4)	(0)	(40)	0	(45)
Changes in models	0	0	0	0	0
Financial assets that have been derecognized during the period	(81,545)	(1,691)	(2,343)	(272)	(85,852)
Recovery of written off amounts	0	0	70	0	70
Foreign exchange and other changes	5,249	213	45	41	5,548
Balance, end of reporting period	645,967	24,680	7,531	2,150	680,328

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 decreased 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 decreased 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
in € m.	Stage 1	Stage 2	Stage 3	Stage 3 POCI	Total
Balance, beginning of year	549	492	3,015	36	4,093
Movements in financial assets including new business	(44)	309	1,348	72 4	1,686
Transfers due to changes in creditworthiness	77	(125)	49	N/M	0
Changes due to modifications that did not result in derecognition	N/M	N/M	N/M	N/M	N/M
Changes in models	0	0	0	0	0
Financial assets that have been derecognized during the period²	0	0	(781)	0	(781)
Recovery of written off amounts	0	0	58	0	58
Foreign exchange and other changes	(38)	(28)	(75)	31	(110)
Balance, end of reporting period	544	648	3,614	139	4,946
Provision for Credit Losses excluding country risk¹	33	184	1,397	72	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 country risk.

² This position includes charge offs of allowance for credit losses.

3Allowance 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 recognized 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 by € 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.

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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.

	Dec 31, 2019
	Allowance for Credit Losses³
in € m.	Stage 1	Stage 2	Stage 3	Stage 3 POCI	Total
Balance, beginning of year	509	501	3,247	3	4,259
Movements in financial assets including new business	(57)	102	550	40	636
Transfers due to changes in creditworthiness	120	(106)	(14)	0	0
Changes due to modifications that did not result in derecognition	N/M	N/M	N/M	N/M	N/M
Changes in models	0	0	0	0	0
Financial assets that have been derecognized during the period²	0	0	(872)	(26)	(898)
Recovery of written off amounts	0	0	96	0	96
Foreign exchange and other changes	(22)	(4)	8	18	0
Balance, end of reporting period	549	492	3,015	36	4,093
Provision for Credit Losses excluding country risk¹	62	(4)	536	40	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

	Dec 31, 2020
	Gross Carrying Amount1					Allowance for Credit Losses
in € m.	Stage 1	Stage 2	Stage 3	Stage 3 POCI	Total	Stage 1	Stage 2	Stage 3	Stage 3 POCI	Total
Corporate Bank	109,484	7,747	2,305	0	119,537	85	106	1,052	0	1,244
Investment Bank	134,634	5,832	2,023	1,459	143,948	139	92	290	139	659
Private Bank	216,412	21,328	5,954	270	243,964	311	446	2,098	0	2,855
Asset Management	2,131	57	0	0	2,188	1	1	0	0	1
Capital Release Unit	4,463	303	372	0	5,138	4	4	174	0	182
Corporate & Other	184,512	105	1	0	184,618	5	(0)	0	0	5
Total	651,637	35,372	10,655	1,729	699,393	544	648	3,614	139	4,946

¹ Gross Carrying Amount numbers per business division are reported after a reallocation of cash balances from business divisions to Corporate & Other.

	Dec 31, 2019
	Gross Carrying Amount					Allowance for Credit Losses
in € m.	Stage 1	Stage 2	Stage 3	Stage 3 POCI	Total	Stage 1	Stage 2	Stage 3	Stage 3 POCI	Total
Corporate Bank	174,685	4,769	1,921	0	181,375	82	63	843	0	988
Investment Bank	159,301	4,894	575	1,830	166,600	146	60	117	36	358
Private Bank	251,699	14,376	4,520	321	270,915	313	360	1,834	0	2,508
Asset Management	1,965	101	0	0	2,066	1	1	0	0	2
Capital Release Unit	16,051	378	502	0	16,930	1	7	221	0	230
Corporate & Other	42,266	163	13	0	42,442	5	2	1	0	8
Total	645,967	24,680	7,531	2,150	680,328	549	492	3,015	36	4,093

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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”.

	Dec 31, 2020
	Gross Carrying Amount					Allowance for Credit Losses
in € m.	Stage 1	Stage 2	Stage 3	Stage 3 POCI	Total	Stage 1	Stage 2	Stage 3	Stage 3 POCI	Total
Agriculture, forestry and fishing	538	69	39	0	646	1	1	12	0	14
Mining and quarrying	2,808	115	162	0	3,085	4	4	98	0	106
Manufacturing	23,245	2,518	1,024	138	26,925	32	42	479	3	557
Electricity, gas, steam and air conditioning supply	3,268	276	117	0	3,661	3	2	35	0	40
Water supply, sewerage, waste management and remediation activities	573	52	57	0	681	1	2	9	0	12
Construction	3,706	304	271	169	4,450	6	7	193	6	212
Wholesale and retail trade, repair of motor vehicles and motorcycles	19,049	1,066	830	46	20,991	21	20	516	2	558
Transport and storage	4,760	710	387	12	5,869	20	18	93	0	131
Accommodation and food service activities	1,871	445	90	24	2,429	5	8	22	0	35
Information and communication	5,482	207	131	0	5,820	12	4	95	0	111
Financial and insurance activities	316,950	6,336	1,159	551	324,996	88	64	285	37	474
Real estate activities	38,993	2,089	824	293	42,200	32	22	94	42	190
Professional, scientific and technical activities	6,295	1,049	223	198	7,765	8	15	97	5	125
Administrative and support service activities	8,966	1,365	409	47	10,787	14	22	88	1	125
Public administration and defense, compulsory social security	16,648	593	229	0	17,469	8	5	11	0	24
Education	179	23	3	0	205	0	1	1	0	2
Human health services and social work activities	3,104	347	15	1	3,468	4	6	7	0	17
Arts, entertainment and recreation	874	78	9	1	961	3	1	3	0	8
Other service activities	10,548	823	180	215	11,766	13	12	21	40	86
Activities of households as employers, undifferentiated goods- and services-producing activities of households for own use	183,728	16,906	4,496	34	205,164	270	393	1,453	2	2,120
Activities of extraterritorial organizations and bodies	52	0	1	0	53	0	0	1	0	1
Total	651,637	35,372	10,655	1,729	699,393	544	648	3,614	139	4,946

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	Dec 31, 2019
	Gross Carrying Amount					Allowance for Credit Losses
in € m.	Stage 1	Stage 2	Stage 3	Stage 3 POCI	Total	Stage 1	Stage 2	Stage 3	Stage 3 POCI	Total
Agriculture, forestry and fishing	613	43	42	1	699	1	2	10	0	12
Mining and quarrying	2,647	4	141	1	2,793	4	0	15	0	19
Manufacturing	26,784	1,498	923	122	29,327	32	33	481	0	546
Electricity, gas, steam and air conditioning supply	4,609	160	70	0	4,839	4	5	4	0	13
Water supply, sewerage, waste management and remediation activities	708	11	64	0	783	1	0	10	0	11
Construction	2,987	208	307	144	3,646	4	4	227	1	235
Wholesale and retail trade, repair of motor vehicles and motorcycles	19,404	978	653	11	21,046	19	18	389	(0)	426
Transport and storage	4,259	488	249	0	4,995	6	6	64	0	76
Accommodation and food service activities	2,240	93	31	74	2,437	5	2	15	0	22
Information and communication	5,633	472	32	0	6,138	10	17	16	0	43
Financial and insurance activities	299,108	3,756	431	824	304,119	95	30	189	2	317
Real estate activities	42,868	1,831	311	399	45,410	43	13	80	15	152
Professional, scientific and technical activities	9,253	512	195	232	10,193	8	8	98	4	117
Administrative and support service activities	5,909	400	189	25	6,523	6	6	52	(5)	59
Public administration and defense, compulsory social security	20,972	794	43	0	21,809	3	5	5	0	13
Education	354	18	2	0	373	0	0	1	0	2
Human health services and social work activities	3,264	187	15	2	3,469	5	6	7	0	18
Arts, entertainment and recreation	837	24	10	0	872	3	0	4	0	7
Other service activities	8,707	387	74	210	9,378	10	8	39	19	75
Activities of households as employers, undifferentiated goods- and services- producing activities of households for own use	182,912	12,817	3,748	106	199,583	290	330	1,310	(0)	1,930
Activities of extraterritorial organizations and bodies	1,895	0	1	0	1,896	0	0	1	0	1
Total	645,967	24,680	7,531	2,150	680,328	549	492	3,015	36	4,093

Financial assets at amortized cost by region

	Dec 31, 2020
	Gross Carrying Amount					Allowance for Credit Losses
in € m.	Stage 1	Stage 2	Stage 3	Stage 3 POCI	Total	Stage 1	Stage 2	Stage 3	Stage 3 POCI	Total
Germany	293,760	17,709	3,840	270	315,580	252	356	1,438	52	2,098
Western Europe (excluding Germany)	130,592	7,639	3,188	1,103	142,522	152	215	1,603