Deutsche Bank Ag · XETR:DBK
Deutsche Bank — Investor Presentation (July 2010)
47 slides from Deutsche Bank's investor presentation, Jul 28, 2010
Slide 1: The Changing Regulatory Landscape
Deutsche Bank The Changing Regulatory Landscape Conference Call 28 July 2010 Deutsche Bank 28 July 2010 financial transparency. Investor Relations
Slide 2: Agenda
Agenda 1 Frank Kelly, Head of Government Affairs – Americas 2 Andrew Procter, Procter Global Head of Government & Regulatory Affairs Deutsche Bank 28 July 2010 financial transparency. 2 Investor Relations
Slide 3: Landmark Moments in US Financial History
Landmark Moments in US Financial History Year Event 1785 — Th US adopts The d t decimal d i l coinage i system t and d the th DDollar ll iis chosen h as th the money unitit ffor th the U United it d St States t — The First Bank of the United States is created, providing national currency and acting
Slide 4: Dodd-Frank Wall Street Reform and Consumer Protection Act: 20 key areas of focus
Dodd-Frank Wall Street Reform and Consumer Protection Act: 20 kkey areas off ffocus Rules for Government / Regulators Rules for Banks / Corporates 1. Financial Stability Oversight Council 5. Enhanced Prudential Standards 2. Ending Too-Big-To-Fail (Unwind Authority) 6. Volcker Rule 3 3. The Federal R
Slide 5: Summary Conclusions
Summary Conclusions The final bill is sweeping in its scope and impact, and is especially tough on the Big Banks (Wall Street) Most provisions result in significant downward pressure on profitability, upward pressure on capital, and increased system stability Although the legislation moves fur
Slide 6: A Plethora of New Agencies
A Plethora of New Agencies Eliminated Agencies — Office of Thrift Supervision p ((standalone)) Selected New Agencies — Consumer Financial Protection Bureau (“independent” with the Fed) — Financial Fi i l Stability St bilit OOversight i ht Council C il (stand-alone) ( t d l ) — Federal Insurance Offi
Slide 7: Over 500 Rules and Studies Still to Come
Over 500 Rules and Studies Still to Come Summary of Mandated Rulemaking and Studies by Agency Agency Rulemaking Studies Bureau of Consumer Financial Protection 24 4 Commodities Futures Trading Commission (CFTC) 61 6 Financial Stability y Oversight g Council 56 8 Federal Deposit Insurance Corporation
Slide 8: Timing and Implementation Schedule
Timing and Implementation Schedule Topic p Timing g and Implementation p Considerations Consumer Financial Protection — Within 18 months (possible extension to 24 months) Bureau Volcker Rule — Within 2 years Capital Requirements — Risk-based capital and leverage: Within 18 months — Phase-out of Trus
Slide 9: Why Rulemaking Won't Be Simple…
Why Rulemaking Won’t Be Simple… Voters & Voters & Media U S Congress U.S. Media New Regulators: — Financial Stability N Oversight Council F E GAO — Office of Financial E T W Reports Research D. R C — Bureau of Consumer E Y S Financial Protection R F A O E E T S R C S C U “Renewed” Regulators: K E R
Slide 10: Agenda
Agenda 1 Frank Kelly, Head of Government Affairs – Americas 2 Andrew Procter, Procter Global Head of Government & Regulatory Affairs Deutsche Bank 28 July 2010 financial transparency. 10 Investor Relations
Slide 11: Higher quality capital standards
Higher quality capital standards Significant uncertainty on the shape of future regulation along with any proposed implementation timetable New Trading Book rules — Correlation trading Basel 2.5 — Trading book securitisation — Stressed Value at Risk — Incremental risk charge g New Capital Rules — Ca
Slide 12: Expected Basel implementation timeline
Expected Basel implementation timeline 2010 2011 2012 2013 G-20 Communique 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q "We We agreed that all members will Large exposures adopt the new standards and Hybrids these will be phased in over a CRD II 5% retention & due diligence timeframe that is cons
Slide 13: Changing supervisory practices
Changing supervisory practices S Strengthening h i markets k iin the h name off fifinancial i l stability bili The supervisory framework will change but more importantly so will many supervisory practices Micro-prudential supervision — Strengthened micro-prudential supervision through enhancing the
Slide 14: Improving over-the-counter derivatives markets
Improving over-the-counter derivatives markets Industry led initiatives to enhance market infrastructure well underway. Differences between the EU and US likely in some instances — Central clearing for eligible trades — Joint responsibility across CCP’s (central counterparty) / regulators / dealers
Slide 15: UK Regulatory Architecture: Future Structure
UK Regulatory Architecture: Future Structure Consumer Cons mer Protection and Bank of England Economic Crime Agency Markets Authority Responsible for investor Responsibility for macro- Responsible for serious protection and conduct of prudential supervision and crime/enforcement business. oversight
Slide 16: Additional information
Deutsche Bank Additional information
Slide 17: #1 – Financial Stability Oversight Council
#1 – Financial Stability Oversight Council Overview — New agency to monitor systemic risk and make recommendations to regulators — Council of 10 voting members, chaired by US Secretary of Treasury (outlined on following page) Details — Responsibilities — Identify threats to financial stability and g
Slide 18: #1 – Financial Stability Oversight Council (continued)
#1 – Financial Stability Oversight Council (continued) Financial Stability Oversight Council Members 10 Voting Members 5 Nonvoting Members — Strong systemic 1. Chair: US Treasury Secretary 1. Office of Financial Research (OFR) oversight role 2. Federal Reserve Chairman 2. Federal Insurance Office (F
Slide 19: #2 – Ending Too-Big-To-Fail (Unwind Authority)
#2 – Ending Too-Big-To-Fail (Unwind Authority) — FDIC gains additional new power to unwind large failing financial firms Overview — However, generally more alignment of unwinds with the bankruptcy code (than the more ad hoc powers permitted in the bank resolution statutes) — Orderly Unwind and Liqui
Slide 20: #3 – The Federal Reserve
#3 – The Federal Reserve — The Federal Reserve becomes the preeminent financial regulator with a broadened Overview supervisory scope and will be subject to the most transparency in its 96-year history — Consumer Protection Details — Will house the new Consumer Financial Protection Bureau — Systemic
Slide 21: #3 – The Federal Reserve (continued)
#3 – The Federal Reserve (continued) Overview — The Federal Reserve faces new rules on governance and will be subject to ongoing audits — Governance Details — GAO to conduct study on current system for appointing directors and identify measures to improve reserve bank governance governance, within 1
Slide 22: #4 – Improving Bank Regulation
#4 – Improving Bank Regulation — Largely Financial Stability Oversight Council (FSOC) systemic focus — Newlyy created agency g y responsible p for systemic y risk — Provide recommendations for capital and leverage requirements — Prevent systemic risk from threatening the financial system — 10 voting
Slide 23: #4 – Improving Bank Regulation (continued)
#4 – Improving Bank Regulation (continued) — Eliminates: OTS Overview — Keeps: Fed, FDIC, OCC — Creates: FSOC — Clear and streamlined supervision Details — OTS abolished, with authority transferred to OCC; thrift charter preserved — Elimination of regulatory overlap (less arbitrage on regulatory sup
Slide 24: #5 – Enhanced Prudential Standards
#5 – Enhanced Prudential Standards Overview — Enhanced prudential standards for systemically important non-bank financial companies and interconnected bank holding companies — Discourage excessive growth and complexity Details — Financial Stability Oversight Council to make recommendations for incre
Slide 25: #6 – Volcker Rule: Overview
#6 – Volcker Rule: Overview Overview — Intended to limit bank activity in higher risk businesses such as proprietary trading, hedge fund and private equity businesses Key Provisions Securitization activities limited Proprietary trading prohibited (conflicts of interest) Investments in and sponsorshi
Slide 26: #6 – Volcker Rule (Continued): Proprietary Trading Restrictions
#6 – Volcker Rule (Continued): Propriety Trading R Restrictions i i — Banks are prohibited from engaging in proprietary trading — Language stringently defined in the legislation rather than leaving flexibility with the regulators as earlier versions had contemplated — GAO study on prop trading to be
Slide 27: #6 – Volcker Rule (Continued): Other Key Provisions
#6 – Volcker Rule (Continued): Other Key Provisions Fund Investments — Hedge fund and private equity fund investments and sponsorship (3% Rule) and Sponsorship — Banks can provide no more than 3% of the fund’s capital — Banks cannot invest more than 3% of their Tier 1 capital — Banks can sponsor and
Slide 28: #7 – Bank Capital
#7 – Bank Capital — Federal Reserve establishing enhanced leverage and risk-based standards and capital Overview requirements for systemically important firms — Trust preferred (TruPS) and hybrid securities excluded from Tier 1 capital Details — For banks with assets < $ 15 billion, existing TruPS g
Slide 29: #7 – Bank Capital (continued)
#7 – Bank Capital (continued) Timing and Applicability of “Collins Amendment” Capital Requirements Regulatory capital deductions Leverage ratios and risk-based capital ratios (e.g., hybrid exclusions from Tier 1) Phased in from Jan 1, 2013 to Jan 1, 2016; no impact for first 2 Banks with assets Effe
Slide 30: #8 – OTC Derivatives: Overview
#8 – OTC Derivatives: Overview — Comprehensive set of new rules to reduce counterparty risk and increase transparency Overview — While the Dodd-Frank Act establishes the broad outline of regulation, most of the details will be determined by the regulators (CFTC and SEC) in the months ahead Key Issue
Slide 31: #8 – OTC Derivatives (Continued): Key Provisions
#8 – OTC Derivatives (Continued): Key Provisions Key issue High-level Considerations 1. Central clearing g — Financial companies: Required to centrally clear (existing swaps grandfathered) — Non-financial companies: Not required to centrally clear (exempt) — Captive finance subsidiary companies: Not
Slide 32: #8 – OTC Derivatives (Continued): Key Provisions
#8 – OTC Derivatives (Continued): Key Provisions Key issue High-level Considerations 5. Capital p — Conservative capital requirements for dealers and major swap participants requirements — Higher capital requirements for dealers for counterparty credit risk on OTC positions — Implications: — For ban
Slide 33: #8 – OTC Derivatives (Continued): Swaps Push-Out
#8 – OTC Derivatives (Continued): Swaps Push-Out — Prohibits federal assistance to swaps entities (Section 716) Importantly, the bill does not appear — “Swaps entities” defined as Swap Dealer or Major Swap Participant to either explicitly prohibit, or — Federal assistance “Federal assistance” define
Slide 34: #9 – Foreign Financials
#9 – Foreign Financials — Will impact foreign financials operating in the United States Overview — Most significant new development: Collins Amendment impact on capitalization of U.S. subsidiaries b idi i off fforeign i fifinancials i l Key issue Considerations Capital Requirements — Exemptions from
Slide 35: #10 – Insurance
#10 – Insurance — Creation of a Federal Insurance Office, but with little enforcement power Overview — Mandates study for potential future changes in insurance regulation (see below) — Federal Insurance Office Details — Federal Insurance Office created within the Treasury Federal Insurance Office —
Slide 36: #11 – Securitization
#11 – Securitization — Tries to align the interests of issuers of asset-back debt with ABS investors and reduce the Overview risks posed by asset-backed securities — Risk retention (“skin in the game”) Details — Lenders required to hold at least a 5% stake in the asset-backed debt they structure and
Slide 37: #12 – Executive Compensation & Corp Governance
#12 – Executive Compensation & Corp Governance — Requires greater disclosure on compensation and provides shareholders with a say on pay Overview and corporate affairs — Pay and performance disclosure requirements Details — historical relationship between executive compensation and financial perform
Slide 38: #13 – SEC and Investor Protection
#13 – SEC and Investor Protection — Several measures have been taken to increase investor protection and improve the Overview management and accountability of the SEC — Broker-dealers giving investment advice Details — SEC has authority to raise standards for broker-dealers who give investment advic
Slide 39: #14 – Credit Rating Agencies
#14 – Credit Rating Agencies — Credit rating agencies, including Standard & Poor’s, Moody’s, Fitch and McGraw-Hill, Overview escaped from the legislation relatively unscathed — Ends shopping for ratings of asset-backed securities Details — SEC conducting 2-year study (Credit Rating Agency Board Stud
Slide 40: #14 – Credit Rating Agencies (continued)
#14 – Credit Rating Agencies (continued) — Conflicts of interest Details — Prohibits compliance officers from working on ratings — Requires a review when an employee begins working for an underwriter of a security subject to a rating by that agency — Requires a report to the SEC when rating agency e
Slide 41: #15 – Hedge Funds and Private Equity Funds
#15 – Hedge Funds and Private Equity Funds — Few onerous provisions beyond SEC registration for funds > $150 million Overview — Potentially much more onerous regulations for funds judged to be systemically important — SEC registration Details — Hedge and private equity funds with assets >$150 millio
Slide 42: #16 – Municipal Securities
#16 – Municipal Securities — Requires SEC registration for municipal advisors and efforts to create transparency for Overview municipal securities market — Registration and oversight of municipal advisors Details — Requires registration and oversight of persons engaged in the municipal securities ma
Slide 43: #17 – Consumer Financial Protection Bureau
#17 – Consumer Financial Protection Bureau — Independent authority created with broad sweeping powers within the Federal Reserve, Overview with the specific mandate of consumer protection on financial products — Independent head, budget and rule writing authority Details — Established within the Fed
Slide 44: #18 – Other Consumer Protections
#18 – Other Consumer Protections — Enhanced policing of businesses for credit-card and mortgage-lending abuses, with Overview increased regulatory scrutiny on a full range of consumer-facing products — Interchange fees Details — Fed has authority to limit interchange, or “swipe” fees, that merchants
Slide 45: #19 – FDIC Deposit Insurance
#19 – FDIC Deposit Insurance Overview — Changes to deposit insurance Retail Deposit Insurance Limits Small Institution Deposit Insurance Details — Permanently increases the deposit — Extends unlimited deposit insurance on insurance limit to $ 250,000 “non-interest bearing transaction — Make the incr
Slide 46: #20 – Other Provisions of the Dodd-Frank Act
#20 – Other Provisions of the Dodd-Frank Act — Increases to the FDIC DIF Reserve Ratio — FDIC reserve ratio of the Deposit Insurance Fund will increase from 1.15% to 1.35% of insured deposits by September 30, 2020, raising ~$ 6 billion (banks with assets < $ 10 billion exempt) — Amendments to Sarban
Slide 47: Cautionary statements
Cautionary statements This presentation contains forward forward-looking looking statements. Forward Forward-looking looking statements are statements that are not historical facts; they include statements about our beliefs and expectations and the assumptions underlying them. These statements are b