LLC Deutsche Bank
Financial Statements
for the year ended 31 December 2013
and Auditors’ Report
Contents
Auditors’ Report .............................................................................................................................. 3
Statement of profit or loss and other comprehensive income .......................................................... 5
Statement of financial position ........................................................................................................ 6
Statement of cash flows ................................................................................................................... 7
Statement of changes in equity ........................................................................................................ 9
Notes to the financial statements
1 Background ............................................................................................................................ 10 2 Basis of preparation ............................................................................................................... 10 3 Significant accounting policies .............................................................................................. 12 4 Cash and cash equivalents ...................................................................................................... 22 5 Financial instruments held for trading ................................................................................... 23 6 Transfers of financial assets ................................................................................................... 24 7 Placements with banks ........................................................................................................... 25 8 Loans to customers................................................................................................................. 25 9 Other assets ............................................................................................................................ 28 10 Property, equipment and intangible assets ............................................................................. 29 11 Deposits and balances from banks ......................................................................................... 30 12 Current accounts and deposits from customers ...................................................................... 30 13 Other liabilities ....................................................................................................................... 31 14 Equity ..................................................................................................................................... 31 15 Net interest (expense) income ................................................................................................ 31 16 Net fee and commission income ............................................................................................ 32 17 Net gain on financial instruments held for trading ................................................................. 32 18 Other income .......................................................................................................................... 32 19 General administrative expenses ............................................................................................ 33 20 Provision for impairment other than on loans ........................................................................ 33 21 Income tax expense ................................................................................................................ 33 22 Risk management, corporate governance and internal control .............................................. 35 23 Capital management ............................................................................................................... 54 24 Contingencies ......................................................................................................................... 55 25 Related party transactions ...................................................................................................... 57 26 Financial assets and liabilities: fair values and accounting classifications ............................ 61
ZAO KPMG
10 Presnenskaya Naberezhnaya
Moscow, Russia 123317
Telephone +7 (495) 937 4477
Fax +7 (495) 937 4400/99
Internet www.kpmg.ru
Audited entity: LLC Deutsche Bank.
Registered by the Central Bank of the Russian Federation on 9 October
2003, Registration No. 3328.
Registered in the Unified State Register of Legal Entities on 14
October 2002 by Moscow Inter-Regional Tax Inspectorate No. 39 of
the Ministry of Taxes and Duties of the Russian Federation,
Registration No. 1027739369041, Certificate series 77 No. 004814544.
Address of the audited entity: Bld 2, 82, Sadovnicheskaya Street,
Moscow, 115035, Russian Federation.
Independent auditor: ZAO KPMG, a company incorporated under the
Laws of the Russian Federation, a part of the KPMG Europe LLP group,
and a member firm of the KPMG network of independent member firms
affiliated with KPMG International Cooperative (“KPMG International”), a
Swiss entity.
Registered by Moscow Registration Chamber on 25 May 1992,
Registration No. 011.585.
Included in the Unified State Register of Legal Entities on 13 August 2002
by Moscow Inter-Regional Tax Inspectorate No. 39 of the Ministry of
Taxes and Duties of the Russian Federation, Registration No.
1027700125628, Certificate series 77 No. 005721432.
Member of the Non-commercial Partnership “Chamber of Auditors of
Russia”. The Principal Registration Number of the Entry in the State
Register of Auditors and Audit Organisations: No.10301000804.
Auditors’ Report
To the Council of LLC Deutsche Bank
We have audited the accompanying financial statements of LLC Deutsche Bank (the Bank),
which comprise the statement of financial position as at 31 December 2013, and the statements of
profit and loss and other comprehensive income, changes in equity and cash flows for 2013, and
notes, comprising a summary of significant accounting policies and other explanatory
information.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements
in accordance with International Financial Reporting Standards, and for such internal control as
management determines is necessary to enable the preparation of financial statements that are free
from material misstatement, whether due to fraud or error.
Auditors’ Responsibility
Our responsibility is to express an opinion on the fair presentation of these financial statements
based on our audit. We conducted our audit in accordance with Russian Federal Auditing
Standards and International Standards on Auditing. Those standards require that we comply with
ethical requirements and plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and
disclosures in the financial statements. The procedures selected depend on the auditor’s judgment,
including the assessment of the risks of material misstatement of the financial statements, whether
due to fraud or error. In making those risk assessments, the auditor considers internal control
relevant to the entity’s preparation and fair presentation of the financial statements in order to
design audit procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes
evaluating the appropriateness of accounting policies used and the reasonableness of accounting
estimates made by management, as well as evaluating the overall presentation of the financial
statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to express an
opinion on the fair presentation of these financial statements.
Auditors’ Report to the Council of LLC Deutsche Bank
Page 2
Opinion
In our opinion, the financial statements present fairly, in all material respects, the financial
position of the Bank as at 31 December 2013, and its financial performance and its cash flows for
2013 in accordance with International Financial Reporting Standards.
Lukashova N.V.
Director
Power of attorney dated 1 October 2013 No. 64/13
ZAO KPMG
Moscow, Russian Federation
31 March 2014
LLC Deutsche Bank
Statement of Profit or Loss and Other Comprehensive Income for the year ended 31 December 2013
The statement of profit or loss and other comprehensive income is to be read in conjunction with the notes
to, and forming part of, the financial statements.
5
2013 2012
Notes RUB’000 RUB’000
Interest income 3,228,061 3,895,997
Interest expense (4,831,983) (3,159,920)
Net interest (expense) income 15 (1,603,922) 736,077
Provision for loan impairment 8 6,402 (421)
Net interest (expense) income after provision for
loan impairment (1,597,520) 735,656
Fee and commission income 1,610,682 1,346,738
Fee and commission expense (259,878) (205,235)
Net fee and commission income 16 1,350,804 1,141,503
Net gain on financial instruments held for trading 17 79,069 4,355,095
Net loss from financial assets available-for-sale (7,113) (8,445)
Net foreign exchange income 5,990,186 884,418
Other income 18 4,498,552 4,906,099
Operating income 10,313,978 12,014,326
General administrative expenses 19 (7,601,687) (7,488,989)
Profit before other provisions and income tax 2,712,291 4,525,337
Provision for impairment other than on loans 20 39,185 21,740
Profit before income tax 2,751,476 4,547,077
Income tax expense 21 (636,267) (894,711)
Profit for the year 2,115,209 3,652,366
Other comprehensive income for the year, net of
income tax
Items that are or may be reclassified subsequently to
profit or loss:
Revaluation reserve for financial assets available-for-
sale:
- Net change in fair value - (530)
- Net change in fair value transferred to profit or loss 5,388 -
Other comprehensive income (loss) for the year, net
of income tax 5,388 (530)
Total comprehensive income for the year 2,120,597 3,651,836
The financial statements were approved by the Board of Management on 31 March 2014 and were signed
on its behalf by:
________________________________ _____________________________
Joerg Bongartz Alexander Kirejev
Chairman of the Management Board Chief Accounant
LLC Deutsche Bank
Statement of Financial Position as at 31 December 2013
The statement of financial position is to be read in conjunction with the notes to, and forming part of, the
financial statements.
6
2013 2012 2011
Notes
RUB’000 RUB’000
(reclassified)
RUB’000
(reclassified)
Assets
Cash and cash equivalents 4 15,852,657 14,156,230 17,661,060
Mandatory reserve deposit with the Central
Bank of the Russian Federation 1,173,620
1,358,449
1,785,712
Financial instruments held for trading
- Held by the Bank 5 11,995,255 16,876,060 22,088,618
- Pledged under sale and repurchase
agreements 5, 6 7,557,489
39,104,217
-
Placements with banks 7 97,561,400 90,700,261 50,932,119
Loans to customers 8 7,161,229 8,849,410 3,500,651
Financial assets available-for-sale 1,524 1,698 407,418
Deferred tax asset 21 385,179 347,411 138,780
Other assets 9 4,097,921 2,143,421 3,450,821
Property, equipment and intangible assets 10 557,968 824,911 905,275
Total assets 146,304,242 174,362,068 100,870,454
Liabilities
Financial instruments held for trading 5 1,235,710 246,734 644,650
Deposits and balances from banks 11 65,258,082 67,052,581 44,375,089
Amounts payable under repurchase agreements
with the Central Bank of the Russian Federation
6 6,588,588 37,673,369 -
Current accounts and deposits from customers 12 54,170,249 48,713,225 39,469,404
Other liabilities 13 3,250,560 3,929,189 3,074,042
Total liabilities 130,503,189 157,615,098 87,563,185
Equity
Charter capital 14 1,237,450 1,237,450 1,237,450
Additional paid-in capital 557,276 557,276 557,276
Revaluation reserve for available-for-sale
financial assets (504)
(5,892)
(5,362)
Retained earnings 14,006,831 14,958,136 11,517,905
Total equity 15,801,053 16,746,970 13,307,269
Total liabilities and equity 146,304,242 174,362,068 100,870,454
________________________________ _____________________________
Joerg Bongartz Alexander Kirejev
Chairman of the Board Chief Accounant
LLC Deutsche Bank
Statement of Cash Flows for the year ended 31 December 2013
The statement of cash flows is to be read in conjunction with the notes to, and forming part of, the financial
statements.
7
2013 2012
Note RUB’000 RUB’000
(reclassified)
Cash flows from operating activities
Profit before income tax 2,751,476 4,547,077
Provision for impairment (45,587) (21,319)
Unrealized loss (gain) on financial instruments held for trading 479,076 (925,253)
Depreciation and amortization 320,017 324,480
Unrealized foreign exchange gain (5,990,186) (884,418)
Interest income (3,228,061) (3,895,997)
Interest expense 4,831,983 3,159,920
Loss from disposal of property and equipment 3,802 2,896
Losses from available-for-sale securities 7,113 8,445
Change in accruals in other income (391,731) 549,535
Change in accruals in general administrative expenses 51,047 (399,975)
Operating cash flows before changes in operating assets and
liabilities
(1,211,051) 2,465,391
Changes in operating assets and liabilities
Mandatory reserve deposit in the Central Bank of the Russian
Federation
184,829
427,263
Financial instruments held for trading 36,655,040 (33,338,712)
Placements with banks (538,699) (38,976,927)
Loans to customers 2,006,799 (5,297,369)
Other assets (1,358,482) 814,577
Deposits and balances from banks (2,254,091) 22,717,023
Amounts payable under repurchase agreements with the Central Bank
of the Russian Federation
(31,061,678)
37,644,976
Current accounts and deposits from customers 4,708,541 9,285,595
Other liabilities (305,175) 699,208
Net cash provided from (used in) operating activities before
income tax and interest
6,826,033 (3,558,975)
Interest paid (4,876,539) (3,114,922)
Interest received 3,662,820 3,877,639
Income tax paid (1,110,034) (537,023)
Net cash provided from (used in) operating activities 4,502,280 (3,333,281)
Cash flows from investing activities
Net cash used in operations with property, plant and equipment (70,391) (247,012)
Net cash provided from operations with available-for-sale securities 2 675 397,450
Net cash (used in) provided from investing activities (67,716) 150,438
Cash flows from financing activities
Distributions to the participant (3,066,514) (212,135)
Net cash used in financing activities (3,066,514) (212,135)
LLC Deutsche Bank
Statement of Cash Flows for the year ended 31 December 2013
The statement of cash flows is to be read in conjunction with the notes to, and forming part of, the financial
statements.
8
2013 2012
Note RUB’000 RUB’000
(reclassified)
Net increase (decrease) in cash and cash equivalents 1,368,050 (3,394,978)
Effect of changes in exchange rates on cash and cash equivalents 328 377 (109,852)
Cash and cash equivalents at the beginning of the year 14,156,230 17,661,060
Cash and cash equivalents at the end of the year 4 15,852,657 14,156,230
________________________________ _____________________________
Joerg Bongartz Alexander Kirejev
Chairman of the Board Chief Accounant
LLC Deutsche Bank
Statement of Changes in Equity for the year ended 31 December 2013
The statement of changes in equity is to be read in conjunction with the notes to, and forming part of, the financial statements.
9
RUB’000 Charter capital
Additional paid-in
capital
Revaluation
reserve for
available-for-sale
financial assets Retained earnings Total equity
Balance as at 1 January 2012 1,237,450 557,276 (5,362) 11,517,905 13,307,269
Profit for the year - - - 3,652,366 3,652,366
Other comprehensive income
Items that are or may be reclassified subsequently to
profit or loss:
Revaluation of financial assets available-for-sale, net of
deferred tax of RUB 133 thousand - - (530) - (530)
Total comprehensive income for the year - - (530) 3,652,366 3,651,836
Transactions with owners, recorded directly in equity
Distributions to the participant (note 14) - - - (212,135) (212,135)
Total transactions with owners - - - (212,135) (212,135)
Balance as at 31 December 2012 1,237,450 557,276 (5,892) 14,958,136 16,746,970
Profit for the year 2,115,209 2,115,209
Other comprehensive income - - - - -
Items that are or may be reclassified subsequently to
profit or loss:
Revaluation of financial assets available-for-sale, net of
deferred tax of RUB 1 346 thousand - - 5,388 - 5,388
Total comprehensive income for the year 5,388 2,115,209 2,120,597
Transactions with owners, recorded directly in equity
Distributions to the participant (note 14) - - - (3,066,514) (3,066,514)
Total transactions with owners - - - (3,066,514) (3,066,514)
Balance as at 31 December 2013 1,237,450 557,276 (504) 14,006,831 15,801,053
___________________ _____________________________
Joerg Bongartz Alexander Kirejev
Chairman of the Board Chief Accounant
LLC Deutsche Bank
Notes to, and forming part of, the financial statements for the year ended 31 December 2013
10
1 Background
(a) Organization and operations
LLC Deutsche Bank (the Bank) was established in the Russian Federation as a limited liability
company and was granted a general banking license in April 1998. The principal activities of the Bank
are interbank lending and borrowing, deposit taking, commercial lending, transactions with securities
and foreign exchange. The activities of the Bank are regulated by the Central Bank of the Russian
Federation (the CBR).
The address of the Bank’s registered office is Bld 2, 82, Sadovnicheskaya Street, Moscow, 115035,
Russian Federation. The average number of persons employed by the Bank during 2013 was 1,148
(2012: 1,003).
The Bank is owned by the Deutsche Bank Group, which operates in the global banking market. A large
amount of the Bank’s funding is from, and credit exposures are to, the Deutsche Bank Group. The
activities of the Bank are closely linked with the requirements of the Deutsche Bank Group and the
policies of the Deutsche Bank Group are determined for all Deutsche Bank Group members.
(b) Russian business environment
The Bank’s operations are primarily located in the Russian Federation. Consequently, the Bank is
exposed to the economic and financial markets of the Russian Federation, which display characteristics
of an emerging market. The legal, tax and regulatory frameworks continue development, but are
subject to varying interpretations and frequent changes which together with other legal and fiscal
impediments contribute to the challenges faced by entities operating in the Russian Federation. In
addition, the contraction in the capital and credit markets and its impact on the Russian economy have
further increased the level of economic uncertainty in the environment. The financial statements reflect
management’s assessment of the impact of the Russian business environment on the operations and the
financial position of the Bank. The future business environment may differ from management’s
assessment.
2 Basis of preparation
(a) Statement of compliance
The accompanying financial statements are prepared in accordance with International Financial
Reporting Standards (IFRS).
(b) Basis of measurement
The financial statements are prepared on the historical cost basis except that financial instruments held
for trading and available-for-sale financial assets are stated at fair value.
(c) Functional and presentation currency
The functional currency of the Bank is the Russian Rouble (RUB) as, being the national currency of
the Russian Federation, it reflects the economic substance of the majority of underlying events and
circumstances relevant to them.
RUB is also the presentation currency for the purposes of these financial statements.
Financial information presented in RUB is rounded to the nearest thousand.
(d) Use of estimates and judgments
The preparation of financial statements in conformity with IFRS requires management to make
judgments, estimates and assumptions that affect the application of accounting policies and the
LLC Deutsche Bank
Notes to, and forming part of, the financial statements for the year ended 31 December 2013
11
reported amounts of assets, liabilities, income and expenses. Actual results could differ from those
estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting
estimates are recognized in the period in which the estimates are revised and in any future periods
affected.
Information about significant areas of uncertainty and critical judgments in applying accounting
policies is described in the following notes:
loan impairement estimates – note 8
estimates of fair value of financial instruments – note 26.
(e) Changes in accounting policies
The Bank has adopted the following new standards and amendments to standards, including any
consequential amendments to other standards, with a date of initial application of 1 January 2013:
IFRS 13 Fair Value Measurements (see (i))
Presentation of Items of Other Comprehensive Income (Amendments to IAS 1 Presentation of
Financial Statements) (see (ii))
Financial Instruments: Disclosures - Offsetting Financial Assets and Financial Liabilities
(Amendments to IFRS 7) (see (iii)).
(i) Fair value measurement
IFRS 13 establishes a single framework for measuring fair value and making disclosures about fair
value measurements, when such measurements are required or permitted by other IFRS requirements.
In particular, it unifies the definition of fair value as the price that would be received to sell an asset or
paid to transfer a liability in an orderly transaction between market participants at the measurement
date. It also replaces and expands the disclosure requirements about fair value measurements in other
IFRS requirements, including IFRS 7 Financial Instruments: Disclosures (see note 26).
As a result, the Bank adopted a new definition of fair value, as set out in note 3(c)(v). The change had
no significant impact on the measurements of assets and liabilities. However, the Bank included new
disclosures in the financial statements that are required under IFRS 13. Comparatives not restated.
(ii) Presentation of items of other comprehensive income
As a result of the amendments to IAS 1, the Bank modified the presentation of items of other
comprehensive income in its statement of profit or loss and other comprehensive income, to present
separately items that would be reclassified to profit or loss in the future from those that would never
be. Comparative information is also re-presented accordingly.
The adoption of the amendment to IAS 1 has no impact on the recognized assets, liabilities or
comprehensive income.
(iii) Financial instruments: Disclosures – Offsetting financial assets and financial liabilities
Amendments to IFRS 7 Financial Instruments: Disclosures - Offsetting Financial Assets and
Financial Liabilities introduced new disclosure requirements for financial assets and liabilities that are
offset in the statement of financial position or subject to master netting arrangements or similar
agreements.
The Bank included new disclosures in the financial statements that are required under amendments to
IFRS 7 and provided comparative information for new disclosures.
LLC Deutsche Bank
Notes to, and forming part of, the financial statements for the year ended 31 December 2013
12
3 Significant accounting policies
The accounting policies set out below are applied consistently to all periods presented in these
financial statements, unless otherwise stated.
(a) Foreign currency
Transactions in foreign currencies are translated to the respective functional currency of the Bank at
exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign
currencies at the reporting date are retranslated to the functional currency at the exchange rate at that
date. The foreign currency gain or loss on monetary items is the difference between amortized cost in
the functional currency at the beginning of the period, adjusted for effective interest and payments
during the period, and the amortized cost in foreign currency translated at the exchange rate at the end
of the reporting period. Foreign currency differences arising on retranslation are recognized in profit or
loss, except for differences arising on the retranslation of available-for-sale equity instruments which
are recognized in other comprehensive income unless the difference is due to impairment in which
case foreign currency differences that have been recognized in other comprehensive income are
reclassified to profit or loss. As at 31 December 2013, the exchange rates used for translation of
balances in foreign currencies are 32.7292 USD/RUB and 44.9699 EUR/RUB (31 December 2012:
30.3727 USD/RUB and 40.2286 EUR/RUB).
(b) Cash and cash equivalents
Cash and cash equivalents include notes and coins on hand, unrestricted balances (nostro accounts)
held with the CBR and other banks.
The mandatory reserve deposit with the CBR is not considered to be a cash equivalent due to
restrictions on its withdrawability. Cash and cash equivalents are carried at amortised cost in the
statement of financial position.
(c) Financial instruments
(i) Classification
Financial instruments at fair value through profit or loss are financial assets or liabilities that are:
- acquired or incurred principally for the purpose of selling or repurchasing in the near term
- part of a portfolio of identified financial instruments that are managed together and for which there is
evidence of a recent actual pattern of short-term profit-taking
- derivative financial instruments (except for derivative that is a financial guarantee contract or a
designated and effective hedging instruments) or,
- upon initial recognition, designated as at fair value through profit or loss.
The Bank may designate financial assets and liabilities at fair value through profit or loss where either:
- the assets or liabilities are managed, evaluated and reported internally on a fair value basis
- the designation eliminates or significantly reduces an accounting mismatch which would otherwise
arise or,
- the asset or liability contains an embedded derivative that significantly modifies the cash flows that
would otherwise be required under the contract.
All trading derivatives in a net receivable position (positive fair value), as well as options purchased,
are reported as assets. All trading derivatives in a net payable position (negative fair value), as well as
options written, are reported as liabilities.
LLC Deutsche Bank
Notes to, and forming part of, the financial statements for the year ended 31 December 2013
13
Management determines the appropriate classification of financial instruments in this category at the
time of the initial recognition. Derivative financial instruments and financial instruments designated as
at fair value through profit or loss upon initial recognition are not reclassified out of at fair value
through profit or loss category. Financial assets that would have met the definition of loan and
receivables may be reclassified out of the fair value through profit or loss or available-for-sale category
if the Bank has an intention and ability to hold it for the foreseeable future or until maturity. Other
financial instruments may be reclassified out of at fair value through profit or loss category only in rare
circumstances. Rare circumstances arise from a single event that is unusual and highly unlikely to
recur in the near term.
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are
not quoted in an active market, other than those that the Bank:
- intends to sell immediately or in the near term
- upon initial recognition designates as at fair value through profit or loss
- upon initial recognition designates as available-for-sale or,
- may not recover substantially all of its initial investment, other than because of credit deterioration.
Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments
and fixed maturity that the Bank has the positive intention and ability to hold to maturity, other than
those that:
- the Bank upon initial recognition designates as at fair value through profit or loss
- the Bank designates as available-for-sale or,
- meet the definition of loans and receivables.
Available-for-sale financial assets are those non-derivative financial assets that are designated as
available-for-sale or are not classified as loans and receivables, held-to-maturity investments or
financial instruments at fair value through profit or loss.
(ii) Recognition
Financial assets and liabilities are recognized in the statement of financial position when the Bank
becomes a party to the contractual provisions of the instrument. All regular way purchases of financial
assets are accounted for at the settlement date.
(iii) Measurement
A financial asset or liability is initially measured at its fair value plus, in the case of a financial asset or
liability not at fair value through profit or loss, transaction costs that are directly attributable to the
acquisition or issue of the financial asset or liability.
Subsequent to initial recognition, financial assets, including derivatives that are assets, are measured at
their fair values, without any deduction for transaction costs that may be incurred on sale or other
disposal, except for:
- loans and receivables which are measured at amortised cost using the effective interest method
- held to maturity investments that are measured at amortised cost using the effective interest method
- investments in equity instruments that do not have a quoted market price in an active market and
whose fair value cannot be reliably measured, which are measured at cost.
All financial liabilities, other than those designated at fair value through profit or loss and financial
liabilities that arise when a transfer of a financial asset carried at fair value does not qualify for
derecognition, are measured at amortised cost.
LLC Deutsche Bank
Notes to, and forming part of, the financial statements for the year ended 31 December 2013
14
(iv) Amortized cost
The amortized cost of a financial asset or liability is the amount at which the financial asset or liability
is measured at initial recognition, minus principal repayments, plus or minus the cumulative
amortization using the effective interest method of any difference between the initial amount
recognized and the maturity amount, minus any reduction for impairment. Premiums and discounts,
including initial transaction costs, are included in the carrying amount of the related instrument and
amortised based on the effective interest rate of the instrument.
(v) Fair value measurement principles
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date in the principal, or in its absence, the
most advantageous market to which the Bank has access at that date. The fair value of a liability
reflects its non-performance risk.
When available, the Bank measures the fair value of an instrument using quoted prices in an active
market for that instrument. A market is regarded as active if transactions for the asset or liability take
place with sufficient frequency and volume to provide pricing information on an ongoing basis.
When there is no quoted price in an active market, the Bank uses valuation techniques that maximise
the use of relevant observable inputs and minimise the use of unobservable inputs. The chosen
valuation technique incorporates all the factors that market participants would take into account in
these circumstances.
The best evidence of the fair value of a financial instrument at initial recognition is normally the
transaction price, i.e., the fair value of the consideration given or received. If the Bank determines that
the fair value at initial recognition differs from the transaction price and the fair value is evidenced
neither by a quoted price in an active market for an identical asset or liability nor based on a valuation
technique that uses only data from observable markets, the financial instrument is initially measured at
fair value, adjusted to defer the difference between the fair value at initial recognition and the
transaction price. Subsequently, that difference is recognized in profit or loss on an appropriate basis
over the life of the instrument but no later than when the valuation is supported wholly by observable
market data or the transaction is closed out.
If an asset or a liability measured at fair value has a bid price and an ask price, the Bank measures
assets and long positions at the bid price and liabilities and short positions at the ask price.
The Bank recognizes transfers between levels of the fair value hierarchy as of the end of the reporting
period during which the change has occurred.
(vi) Gains and losses on subsequent measurement
A gain or loss arising from a change in the fair value of a financial asset or liability is recognized as
follows:
- a gain or loss on a financial instrument classified as at fair value through profit or loss is recognized
in profit or loss
- a gain or loss on an available-for-sale financial asset is recognized as other comprehensive income in
equity (except for impairment losses and foreign exchange gains and losses on debt financial
instruments available-for-sale) until the asset is derecognized, at which time the cumulative gain or
loss previously recognized in equity is recognized in profit or loss. Interest in relation to an available-
for-sale financial asset is recognized in profit or loss using the effective interest method.
For financial assets and liabilities carried at amortised cost, a gain or loss is recognized in profit or loss
when the financial asset or liability is derecognized or impaired, and through the amortization process.
LLC Deutsche Bank
Notes to, and forming part of, the financial statements for the year ended 31 December 2013
15
(vii) Derecognition
The Bank derecognizes a financial asset when the contractual rights to the cash flows from the
financial asset expire, or when it transfers the financial asset in a transaction in which substantially all
the risks and rewards of ownership of the financial asset are transferred or in which the Bank neither
transfers nor retains substantially all the risks and rewards of ownership and it does not retain control
of the financial asset. Any interest in transferred financial assets that qualify for derecognition that is
created or retained by the Bank is recognized as a separate asset or liability in the statement of
financial position. The Bank derecognizes a financial liability when its contractual obligations are
discharged or cancelled or expire.
The Bank enters into transactions whereby it transfers assets recognized on its statement of financial
position, but retains either all risks and rewards of the transferred assets or a portion of them. If all or
substantially all risks and rewards are retained, then the transferred assets are not derecognized.
In transactions where the Bank neither retains nor transfers substantially all the risks and rewards of
ownership of a financial asset, it derecognizes the asset if control over the asset is lost.
In transfers where control over the asset is retained, the Bank continues to recognize the asset to the
extent of its continuing involvement, determined by the extent to which it is exposed to changes in the
value of the transferred assets.
If the Bank purchases its own debt, it is removed from the statement of financial position and the
difference between the carrying amount of the liability and the consideration paid is included in gains
or losses arising from early retirement of debt.
The Bank writes off assets deemed to be uncollectible.
(viii) Repurchase and reverse repurchase agreements
Securities sold under sale and repurchase agreements are accounted for as secured financing
transactions, with the securities retained in the statement of financial position and the counterparty
liability included in amounts payable under repurchase agreements with the Central Bank of the
Russian Federation. The difference between the sale and repurchase prices represents interest expense
and is recognized in profit or loss over the term of the repurchase agreement using the effective interest
method.
Securities purchased under agreements to resell are recorded as amounts receivable under reverse
repurchase transactions within placements with banks or loans to customers, as appropriate. The
difference between the purchase and resale prices represents interest income and is recognized in profit
or loss over the term of the reverse repurchase agreement using the effective interest method.
If assets purchased under an agreement to resell are sold to third parties, the obligation to return
securities is recorded as a trading liability and measured at fair value.
(ix) Derivative financial instruments
Derivative financial instruments include swaps, forwards, futures, spot transactions and options in
interest rates, foreign exchanges, and stock markets, and any combinations of these instruments.
Derivatives are initially recognized at fair value on the date on which a derivative contract is entered
into and are subsequently remeasured at fair value. All derivatives are carried as assets when their fair
value is positive and as liabilities when their fair value is negative.
Changes in the fair value of derivatives are recognized immediately in profit or loss.
LLC Deutsche Bank
Notes to, and forming part of, the financial statements for the year ended 31 December 2013
16
Derivatives may be embedded in another contractual arrangement (a host contract). An embedded
derivative is separated from the host contract and is accounted for as a derivative if, and only if the
economic characteristics and risks of the embedded derivative are not closely related to the economic
characteristics and risks of the host contract, a separate instrument with the same terms as the
embedded derivative would meet the definition of a derivative; and the combined instrument is not
measured at fair value with changes in fair value recognized in profit or loss. Derivatives embedded in
financial assets or financial liabilities at fair value through profit or loss are not separated.
Although the Bank trades in derivative instruments for risk hedging purposes, these instruments do not
qualify for hedge accounting.
(x) Offsetting
Financial assets and liabilities are offset and the net amount reported in the statement of financial
position when there is a legally enforceable right to set off the recognized amounts and there is an
intention to settle on a net basis, or realize the asset and settle the liability simultaneously.
(d) Property, equipment and intangible assets
(i) Owned assets and intangible assets
Items of property and equipment are stated at cost less accumulated depreciation and impairment
losses.
Where an item of property and equipment comprises major components having different useful lives,
they are accounted for as separate items of property and equipment.
Acquired intangible assets are stated at cost less accumulated amortization and impairment losses.
Acquired computer software licenses are capitalized on the basis of the costs incurred to acquire and
bring to use the specific software.
(ii) Leased assets
Operating leases, the terms of which the Bank does not assume substantially all the risks and rewards
of ownership, are expensed over the term of the lease.
(iii) Depreciation and amortization
Depreciation and amortization is charged to profit or loss on a straight-line basis over the estimated
useful lives of the individual assets. Depreciation and amortization commences on the date of
acquisition or, in respect of internally constructed assets, from the time an asset is completed and ready
for use. The estimated useful lives are as follows:
- leasehold improvements 3 - 15 years
- equipment 3 - 7 years
- computer software 1 - 3 years
(e) Impairment
The Bank assesses at the end of each reporting period whether there is any objective evidence that a
financial asset or group of financial assets is impaired. If any such evidence exists, the Bank
determines the amount of any impairment loss.
A financial asset or a group of financial assets is impaired and impairment losses are incurred if, and
only if, there is objective evidence of impairment as a result of one or more events that occurred after
the initial recognition of the financial asset (a loss event) and that event (or events) has had an impact
on the estimated future cash flows of the financial asset or group of financial assets that can be reliably
estimated.
LLC Deutsche Bank
Notes to, and forming part of, the financial statements for the year ended 31 December 2013
17
Objective evidence that financial assets are impaired can include default or delinquency by a borrower,
breach of loan covenants or conditions, restructuring of financial asset or group of financial assets that
the Bank would not otherwise consider, indications that a borrower or issuer will enter bankruptcy, the
disappearance of an active market for a security, deterioration in the value of collateral, or other
observable data relating to a group of assets such as adverse changes in the payment status of
borrowers in the group, or economic conditions that correlate with defaults in the group.
In addition, for an investment in an equity security available-for-sale a significant or prolonged decline
in its fair value below its cost is objective evidence of impairment.
(i) Financial assets carried at amortized cost
Financial assets carried at amortized cost consist principally of loans and other receivables (loans and
receivables). The Bank reviews its loans and receivables to assess impairment on a regular basis.
The Bank first assesses whether objective evidence of impairment exists individually for loans and
receivables that are individually significant, and individually or collectively for loans and receivables
that are not individually significant. If the Bank determines that no objective evidence of impairment
exists for an individually assessed loan or receivable, whether significant or not, it includes the loan in
a group of loans and receivables with similar credit risk characteristics and collectively assesses them
for impairment. Loans and receivables that are individually assessed for impairment and for which an
impairment loss is or continues to be recognized are not included in a collective assessment of
impairment.
If there is objective evidence that an impairment loss on a loan or receivable has been incurred, the
amount of the loss is measured as the difference between the carrying amount of the loan or receivable
and the present value of estimated future cash flows including amounts recoverable from guarantees
and collateral discounted at the loan or receivable’s original effective interest rate. Contractual cash
flows and historical loss experience adjusted on the basis of relevant observable data that reflect
current economic conditions provide the basis for estimating expected cash flows.
In some cases the observable data required to estimate the amount of an impairment loss on a loan or
receivable may be limited or no longer fully relevant to current circumstances. This may be the case
when a borrower is in financial difficulties and there is little available historical data relating to similar
borrowers. In such cases, the Bank uses its experience and judgment to estimate the amount of any
impairment loss.
All impairment losses in respect of loans and receivables are recognized in profit or loss and are only
reversed if a subsequent increase in recoverable amount can be related objectively to an event
occurring after the impairment loss was recognized.
When a loan is uncollectable, it is written off against the related allowance for loan impairment. The
Bank writes off a loan balance (and any related allowances for loan losses) when management
determines that the loans are uncollectible and when all necessary steps to collect the loan are
completed.
(ii) Financial assets carried at cost
Financial assets carried at cost include unquoted equity instruments included in available-for-sale
financial assets that are not carried at fair value because their fair value cannot be reliably measured. If
there is objective evidence that such investments are impaired, the impairment loss is calculated as the
difference between the carrying amount of the investment and the present value of the estimated future
cash flows discounted at the current market rate of return for a similar financial asset.
All impairment losses in respect of these investments are recognized in profit or loss and cannot be
reversed.
LLC Deutsche Bank
Notes to, and forming part of, the financial statements for the year ended 31 December 2013
18
(iii) Available-for-sale financial assets
Impairment losses on available-for-sale financial assets are recognized by transferring the cumulative
loss that is recognized in other comprehensive income to profit or loss as a reclassification adjustment.
The cumulative loss that is reclassified from other comprehensive income to profit or loss is the
difference between the acquisition cost, net of any principal repayment and amortization, and the
current fair value, less any impairment loss previously recognized in profit or loss. Changes in
impairment allowance attributable to time value are reflected as a component of interest income.
If, in a subsequent period, the fair value of an impaired available-for-sale debt security increases and
the increase can be objectively related to an event occurring after the impairment loss was recognized
in profit or loss, the impairment loss is reversed, with the amount of the reversal recognized in profit or
loss. However, any subsequent recovery in the fair value of an impaired available-for-sale equity
security is recognized in other comprehensive income.
(iv) Non financial assets
Other non financial assets, other than deferred taxes, are assessed at each reporting date for any
indications of impairment. The recoverable amount of non financial assets is the greater of their fair
value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are
discounted to their present value using a pre-tax discount rate that reflects current market assessments
of the time value of money and the risks specific to the asset. For an asset that does not generate cash
inflows largely independent of those from other assets, the recoverable amount is determined for the
cash-generating unit to which the asset belongs. An impairment loss is recognized when the carrying
amount of an asset or its cash-generating unit exceeds its recoverable amount.
All impairment losses in respect of non financial assets are recognized in profit or loss and reversed
only if there has been a change in the estimates used to determine the recoverable amount. Any
impairment loss reversed is only reversed to the extent that the asset’s carrying amount does not
exceed the carrying amount that would have been determined, net of depreciation or amortization, if no
impairment loss had been recognized.
(f) Provisions
A provision is recognized in the statement of financial position when the Bank has a legal or
constructive obligation as a result of a past event, and it is probable that an outflow of economic
benefits will be required to settle the obligation. If the effect is material, provisions are determined by
discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of
the time value of money and, where appropriate, the risks specific to the liability.
(g) Credit related commitments
In the normal course of business, the Bank enters into credit related commitments, comprising
undrawn loan commitments, letters of credit and guarantees, and provides other forms of credit
insurance.
Financial guarantees are contracts that require the Bank to make specified payments to reimburse the
holder for a loss it incurs because a specified debtor fails to make payment when due in accordance
with the terms of a debt instrument.
A financial guarantee liability is recognized initially at fair value net of associated transaction costs,
and is measured subsequently at the higher of the amount initially recognized less cumulative
amortization or the amount of provision for losses under the guarantee. Provisions for losses under
financial guarantees and other credit related commitments are recognized when losses are considered
probable and can be measured reliably.
Financial guarantee liabilities and provisions for other credit related commitments are included in other
liabilities.
LLC Deutsche Bank
Notes to, and forming part of, the financial statements for the year ended 31 December 2013
19
Loan commitments are not recognized.
(h) Distributions to the participant
Distributions to the participant are recorded in the period in which they are declared. Distributions to
the participant declared after the reporting date are disclosed as a subsequent event. The Bank
distributes profits on the basis of financial statements prepared in accordance with Russian Accounting
Rules.
(i) Taxation
Income tax comprises current and deferred tax. Income tax is recognized in profit or loss except to the
extent that it relates to items of other comprehensive income or transactions with the participant
recognized directly in equity, in which case it is recognized within other comprehensive income or
directly within equity.
Current tax expense is the expected tax payable on the taxable profit for the year, using tax rates
enacted or substantially enacted at the reporting date, and any adjustment to tax payable in respect of
previous years.
Deferred tax assets and liabilities are recognized in respect of temporary differences between the
carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for
taxation purposes. Deferred tax assets and liabilities are not recognized for the temporary differences
arisen from the initial recognition of assets or liabilities that affect neither accounting nor taxable
profit.
The measurement of deferred tax assets and liabilities reflects the tax consequences that would follow
the manner in which the Bank expects, at the end of the reporting period, to recover or settle the
carrying amount of its assets and liabilities.
Deferred tax assets and liabilities are measured at the tax rates that are expected to be applied to the
temporary differences when they reverse, based on the laws that have been enacted or substantively
enacted by the reporting date.
Deferred tax assets are recognized only to the extent that it is probable that future taxable profits will
be available against which the temporary differences, unused tax losses and credits can be utilised.
Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefit
will be realised.
(j) Income and expense recognition
Interest income and expense are recognized in profit or loss using the effective interest method.
Loan organization fees, loan servicing fees and other fees that are considered to be integral to the
overall profitability of a loan, and together with the related transaction costs, are deferred and
amortized to interest income over the estimated life of the financial instrument using the effective
interest method.
Other fees, commissions and other income and expense items are recognized in profit or loss when the
corresponding service is provided.
Dividend income is recognized in profit or loss on the date that the dividend is declared.
Payments made under operating leases are recognized in profit or loss on a straight-line basis over the
term of the lease. Lease incentives received are recognized as an integral part of the total lease
expense, over the term of the lease.
LLC Deutsche Bank
Notes to, and forming part of, the financial statements for the year ended 31 December 2013
20
(k) Comparative information
Certain comparative amounts in the statement of financial position have been reclassified to conform
with the current year’s presentation, which was changed for better disclose the nature of the assets. The
effects of these reclassifications on amounts presented in the statement of financial position as at 31
December 2012 were as follows:
RUB’000
As originally
presented Reclassification As reclassified for 2012
Cash 63,607 (63,607) -
Cash and cash equivalents - 14,156,230 14,156,230
Mandatory reserve deposit with
the Central Bank of the Russian
Federation
- 1,358,449 1,358,449
Placements with banks 89,354,950 1,345,311 90,700,261
Due from the Central Bank of
the Russian Federation
11,043,854 (11,043,854) -
Other assets 7,895,950 (5,752,529) 2,143,421
The effects of these reclassifications on amounts presented in the statement of financial position as at
31 December 2011 were as follows:
RUB’000
As originally
presented Reclassification As reclassified for 2011
Cash 196,970 (196,970) -
Cash and cash equivalents - 17,661,060 17,661,060
Mandatory reserve deposit
with the Central Bank of the
Russian Federation
- 1,785,712 1,785,712
Placements with banks 54,289,788 (3,357,669) 50,932,119
Due from the Central Bank of
the Russian Federation
10,635,333 (10,635,333) -
Other assets 8,707,621 (5,256,800) 3,450,821
Certain comparative amounts in the statement of profit or loss and other comprehensive income have
been reclassified to conform with the current year’s presentation, which was changed to better reflect
the underlying activity. The effects of these reclassifications on amounts presented in the statement of
profit or loss and other comprehensive income as at 31 December 2012 were as follows:
RUB’000
As originally
presented Reclassification As reclassified for 2012
Net gain on financial
instruments held for trading
2,177,467
2,177,628
4,355,095
Net foreign exchange income 3,062,046 (2,177,628) 884,418
The respective reclassifications have been made in the statement of cash flows as at
31 December 2012:
LLC Deutsche Bank
Notes to, and forming part of, the financial statements for the year ended 31 December 2013
21
RUB’000
As originally
presented Reclassification As reclassified for 2012
Unrealized gain on financial
instruments held for trading
(593,587) (331,666) (925,253)
Change in accruals in other
income
-
549,535
549,535
Change in accruals in general
administrative expenses
-
(399,975)
(399,975)
Financial instruments held for
trading
(33,670,378)
331,666
(33,338,712)
Placements with banks (34,388,618) (4,588,309) (38,976,927)
Other assets 876,593 (62,016) 814,577
Other liabilities 299,233 399,975 699,208
Net cash provided from
(used in) operating activities
767,509
(4,100,790)
(3,333,281)
Effect of changes in exchange
rates on cash and cash
equivalents
(3,391)
(106,461)
(109,852)
Cash and cash equivalents at
the beginning of the year
9,046,591
8,614,469
17,661,060
Cash and cash equivalents
at the end of the year
9,749,012
4,407,218
14,156,230
The respective amounts in the notes to these financial statements were modified accordingly.
(l) New standards and interpretations not yet adopted
The following new standards, amendments to standards and interpretations are not yet effective as at
31 December 2013, and are not applied in preparing these financial statements. The Bank plans to
adopt these pronouncements when they become effective.
IFRS 9 Financial Instruments is to be issued in phases and is intended ultimately to replace IAS 39
Financial Instruments: Recognition and Measurement. The first phase of IFRS 9 was issued in
November 2009 and relates to the classification and measurement of financial assets. The second
phase regarding classification and measurement of financial liabilities was published in October
2010. The third phase of IFRS 9 was issued in November 2013 and relates to general hedge
accounting. The final standard is expected to be issued in 2014 and will be effective for annual
periods beginning on or after 1 January 2018. The Bank recognizes that the new standard
introduces many changes to the accounting for financial instruments and is likely to have a
significant impact on the financial statements. The impact of these changes will be analyzed during
the course of the project as further phases of the standard are issued. The Bank does not intend to
adopt this standard early.
Amendments to IAS 32 Financial Instruments: Presentation - Offsetting Financial Assets and
Financial Liabilities do not introduce new rules for offsetting financial assets and liabilities; rather
they clarify the offsetting criteria to address inconsistencies in their application. The amendments
specify that an entity currently has a legally enforceable right to set-off if that right is not
contingent on a future event; and enforceable both in the normal course of business and in the
event of default, insolvency or bankruptcy of the entity and all counterparties. The amendments are
effective for annual periods beginning on or after 1 January 2014, and are to be applied
retrospectively. The Bank has not yet analyzed the likely impact of the amendments on its financial
position or performance.
LLC Deutsche Bank
Notes to, and forming part of, the financial statements for the year ended 31 December 2013
22
Various Improvements to IFRS are dealt with on a standard-by-standard basis. All amendments,
which result in accounting changes for presentation, recognition or measurement purposes, will
come into effect not earlier than 1 January 2014. The Bank has not yet analyzed the likely impact
of the improvements on its financial position or performance.
4 Cash and cash equivalents
2013 2012
RUB’000 RUB’000
Cash on hand 134,000 63,607
Nostro accounts with the CBR 10,281,432 9,685,405
Nostro accounts at Moscow Exchange 2,737,921 1,740,889
Nostro accounts with other banks 2,699,304 2,666,329
- Rated from iAA- to iAA+ 287,205 298,223
- Rated from iA to iA+ 2,399,458 2,161,414
- Rated iBB+ - 206,287
- Not rated 12,641 405
Total cash and cash equivalents 15,852,657 14,156,230
No cash and cash equivalents are past due or impaired.
Concentration of cash and cash equivalents
As at 31 December, cash equivalents that individually comprised more than 10% of cash and cash
equivalents are as follows:
2013 2012
Balance Percentage Balance Percentage
RUB’000 % RUB’000 %
The Central Bank of the Russian
Federation 10,281,432 65% 9,685,405 68%
Moscow Exchange 2,737,921 17% 1,740,889 12%
Deutsche Bank Group 2,397,683 15% 2,366,151 17%
Total 15,417,036 97% 13,792,445 97%
LLC Deutsche Bank
Notes to, and forming part of, the financial statements for the year ended 31 December 2013
23
5 Financial instruments held for trading
2013 2012
RUB’000 RUB’000
ASSETS
Held by the Bank
Debt and other fixed-income instruments
Russian Government OFZ bonds 4,797,745 7,795,773
Russian municipal and regional authorities bonds 702,926 -
Corporate bonds 3,315,665 6,333,015
- Rated from iBBB- to iBBB+ 2,115,308 5,865,566
- Rated from iBB- to iBB+ 1,200,357 117,612
- Not rated - 349,837
Promissory notes 1,565,900 2,380,262
- Rated iBBB+ - 2,380,262
- Rated iBB- 1,565,900 -
Derivative financial instruments
Foreign currency contracts 758,714 367,010
- Rated from iA+ to iA- 84,053 68,094
- Rated from iBBB+ to iBB- 674,661 288,356
- Rated from iB+ to iB- - 3,922
- Not rated - 6,638
Structured derivatives contracts 814,305 -
- Rated from iA+ to iA- 492,620 -
- Rated from iBBB+ to iBB- 321,685 -
Total financial instruments held by the Bank 11,955,255 16,876,060
Pledged under sale and repurchase agreements
Debt and other fixed-income instruments
Russian Government OFZ bonds 4,339,353 32,254,808
Russian municipal and regional authorities bonds 200,836 -
Corporate bonds 3,017,300 6,849,409
- Rated from iBBB- to iBBB+ 3,017,300 6,643,665
- Rated from iBB- to iBB+ - 205,744
Total financial instruments pledged under sale and
repurchase agreements 7,557,489 39,104,217
LLC Deutsche Bank
Notes to, and forming part of, the financial statements for the year ended 31 December 2013
24
2013 2012
RUB’000 RUB’000
LIABILITY
Derivative financial instruments
Foreign currency contracts 424,232 246,734
Structured derivative contracts 811,478 -
1,235,710 246,734
No financial instruments held for trading are past due or impaired.
Structured derivative contracts represent target profit forwards, cross currency interest rate swap with
cap, cross currency swap with knock-out and binary options.
The Bank uses the Deutsche Bank Group’s internal credit ratings system to rate the credit quality of
financial instruments. A detailed description of the internal credit ratings system is presented in note
22 “Risk management, corporate governance and internal control”.
6 Transfers of financial assets
Transferred financial assets that are not derecognized in their entirety
2013
RUB’000
Financial intruments held for
trading
Carrying amount of assets 7,557,489
Carrying amount of associated liabilities (6,588,588)
2012
RUB’000
Financial intruments held for
trading
Carrying amount of assets 39,104,217
Carrying amount of associated liabilities (37,673,369)
Securities
The Bank has transactions to sell securities under agreements to repurchase. Sale and repurchase
agreements are transactions in which the Bank sells a security and simultaneously agrees to repurchase
it (or an asset that is substantially the same) at a fixed price on a future date.
The securities sold under agreements to repurchase are transferred to a third party and the Bank
receives cash in exchange. These financial assets may be repledged or resold by counterparties in the
absence of default by the Bank, but the counterparty has an obligation to return the securities at the
maturity of the contract. The Bank has determined that it retains substantially all the risks and rewards
of these securities and therefore has not derecognized them. These securities are presented as “pledged
under sale and repurchase agreements” in note 5. The cash received is recognized as a financial asset
and a financial liability is recognized for the obligation to repay the purchase price for this collateral,
and is included in amounts payable under repurchase agreements with the Central Bank of the Russian
Federation. Because the Bank sells the contractual rights to the cash flows of the securities it does not
have the ability to use the transferred assets during the term of the agreement.
These transactions are conducted under terms that are usual and customary to standard lending
activities, as well as requirements determined by exchanges where the Bank acts as intermediary.
LLC Deutsche Bank
Notes to, and forming part of, the financial statements for the year ended 31 December 2013
25
7 Placements with banks
2013 2012
RUB’000 RUB’000
Placements with Moscow Exchange 6,173,380 4,011,740
Loans and deposits 91,388,020 86,688,521
- Rated from iAA- to iAA+ 89,956,875 82,960,321
- Rated iBBB+ 1,428,229 3,728,200
- Not rated 2,916 -
Total placements with banks 97,561,400 90,700,261
No placements with banks are past due or impaired.
Placements with Moscow Exchange represent guarantee deposits and unsettled transacations at
CJSC ACB National Clearing Centre which are subject to certain restrictions on withdrawability.
Concentration of placements with banks
As at 31 December, placements with banks that individually comprised more than 10% of placements
with banks, are as follows:
2013 2012
Balance Percentage Balance Percentage
RUB’000 % RUB’000 %
Deutsche Bank Group 89,940,591 92% 82,951,282 91%
8 Loans to customers
2013 2012
RUB’000 RUB’000
Loans to legal entities 7,166,041 8,860,624
Impairment allowance (4,812) (11,214)
7,161,229 8,849,410
Movements in the loan impairment allowance for the years ended 31 December 2013 and 2012 are as
follows:
2013 2012
RUB’000 RUB’000
Balance as at the beginning of the year (11,214) (10,793)
Net reversal (charge) 6,402 (421)
Balance as at the end of the year (4,812) (11,214)
LLC Deutsche Bank
Notes to, and forming part of, the financial statements for the year ended 31 December 2013
26
Credit quality of loans to customers
The following table provides information on the credit quality of the loans to legal entities as at
31 December 2013:
Gross loans
Impairment
allowance Net loans
Impairment
to gross loans
RUB’000 RUB’000 RUB’000 %
Loans to legal entities
Rated from iAAA- to iAA- 198,998 (29) 198,969 0.01%
Rated from iA+ to iA- 1,088,518 (438) 1,088,080 0.04%
Rated from iBBB+ to iBB- 5,836,413 (4,239) 5,832,174 0.07%
Not rated 42,112 (106) 42,006 0.25%
Total loans to legal entities 7,166,041 (4,812) 7,161,229 0.07%
The following table provides information on the credit quality of the loans to legal entities as at
31 December 2012:
Gross loans
Impairment
allowance Net loans
Impairment
to gross loans
RUB’000 RUB’000 RUB’000 %
Loans to legal entities
Rated from iAAA- to iAA- 160,072 (52) 160,020 0.03%
Rated from iA+ to iA- 580,170 (77) 580,093 0.01%
Rated from iBBB+ to iBB- 5,977,420 (7,365) 5,970,055 0.12%
Rated from iB+ to iB- 1,105,571 (37) 1,105,534 0.00%
Not rated 1,037,391 (3,683) 1,033,708 0.36%
Total loans to legal entities 8,860,624 (11,214) 8,849,410 0.13%
Management has not identified any specific loans that display indicators of impairment. There are no
loans that are past due or that have been restructured. In addition, the Bank historically has not
incurred impairment losses on loans and has received guarantees from Deutsche Bank AG and other
Deutsche Bank Group companies that, as at 31 December 2013, cover 23% (31 December 2012: 12%)
of loans to customers. The Bank created a 0.07% collective impairment allowance on loans to
customers, based on historical experience and its assessment of the risks in the loan portfolio as at 31
December 2013 (31 December 2012: 0.13%).
Analysis of collateral
The following table provides the analysis of loans to customers, net of impairment, by types of
collateral as at 31 December 2013 and 31 December 2012:
31 December 2013
RUB’000
Loans to legal entities
Guarantees of Deutsсhe Bank Group companies 1,660,642
Corporate guarantees 4,205,466
No collateral or fair value not assessed 1,295,121
Total loans to legal entities 7,161,229
LLC Deutsche Bank
Notes to, and forming part of, the financial statements for the year ended 31 December 2013
27
31 December 2012
RUB’000
Loans to legal entities
Guarantees of Deutsсhe Bank Group companies 1,088,087
Corporate guarantees 6,623,580
No collateral or fair value not assessed 1,137,743
Total loans to legal entities 8,849,410
The amounts shown in the table above represent the carrying value of the loans and do not necessarily
represent the fair value of the collateral.
Management estimates that the impairment allowance on loans to legal entities secured by guarantees
would not change without the respective guarantees as at 31 December 2013 and 31 December 2012.
During the year ended 31 December 2013 the Bank did not obtain any assets by repossessing of
collateral securing loans to customers (31 December 2012: nil).
Industry analysis of the loan portfolio
Loans were issued primarily to customers located within the Russian Federation who operate in the
following economic sectors:
2013 2012
RUB’000 RUB’000
Manufacturing 4,817,134 2,816,707
Real estate 1,082,718 1,082,710
Trade 812,165 4,667,815
Transport and logistics 190,998 160,072
Other 263,026 133,320
Impairment allowance (4,812) (11,214)
7,161,229 8,849,410
Significant credit exposures
As at 31 December 2013 and 2012, loans to customers, which individually comprised more than 10%
of gross loans to customers, are as follows:
2013 2012
Balance
% of loan
portfolio Balance
% of loan
portfolio
RUB’000 % RUB’000 %
OJSC “Rudnik imeni Matrosova” 3,700,618 51.7% 1,071,619 12.1%
LLC “Ikea Mos” 1,081,962 15.1% 1,082,710 12.2%
OJSC “TENEX” - - 3,212,775 36.3%
OJSC “Volzhskiy Orgsintes” - - 918,892 10.4%
Total gross value 4,782,580 66.8% 6,285,996 71.0%
Loan maturities
The maturity of the loan portfolio is presented in note 22 “Risk management, corporate governance
and internal control”, which shows the remaining period from the reporting date to the contractual
maturity date. It is likely that many of the loans to customers will be prolonged on maturity.
Accordingly, the effective maturity of the loan portfolio may be significantly longer than the
classification indicated based on contractual terms.
LLC Deutsche Bank
Notes to, and forming part of, the financial statements for the year ended 31 December 2013
28
9 Other assets
2013 2012
RUB’000 RUB’000
Settlements on conversion deals 1,636,400 -
Receivables for commissions, corporate finance and underwriting
services 40,981 90,705
Impairment allowance (12,612) (50,041)
Total other financial assets 1,664,769 40,664
Receivable for services rendered to Deutsche Bank Group
companies 1,953,136 1,495,798
Income tax prepayment 311,586 382,795
Guarantee deposits for rented objects 84,726 82,025
Prepayments 44,392 101,287
Other tax prepayments 31,567 34,633
Other 7,745 6,219
Total other non-financial assets 2,433,152 2,102,757
Total other assets 4,097,921 2,143,421
Settlements on conversion deals represent receivables of currency from a counterparty on a spot
transaction with a valuation date on 27 December 2013. The cash was received on 9 January 2014.
Movements in the other assets impairment allowance for the years ended 31 December 2013 and 2012
are as follows:
2013 2012
RUB’000 RUB’000
Balance at the beginning of the year (50,041) (53,648)
Write-offs 264 -
Net reversal 37,165 3,607
Balance at the end of the year (12,612) (50,041)
LLC Deutsche Bank
Notes to, and forming part of, the financial statements for the year ended 31 December 2013
29
10 Property, equipment and intangible assets
The roll-forward of property, equipment and intangible assets from 1 January 2013 to 31 December
2013 is as follows:
RUB’000 Leasehold
improvements Equipment
Computer
software Total
Cost
Balance at 1 January 2013 1,034,260 711,289 124,172 1,869,721
Additions 4,682 54,407 12,785 71,874
Disposals (13,129) (145,842) (47,637) (206,608)
Balance at 31 December 2013 1,025,813 619,854 89,320 1,734,987
Depreciation
Balance at 1 January 2012 630,190 335,890 78,730 1,044,810
Depreciation and amortization 169,241 123,269 27,507 320,017
Disposals (7,066) (133,105) (47,637) (187,808)
Balance at 31 December 2013 792,365 326,054 58,600 1,177,019
Carrying value
Balance at 31 December 2013 233,448 293,800 30,720 557,968
The roll-forward of property, equipment and intangible assets from 1 January 2012 to 31 December
2012 is as follows:
RUB’000 Leasehold
improvements Equipment
Computer
software Total
Cost
Balance at 1 January 2012 1,010,143 562,343 98,123 1,670,609
Additions 24,482 196,481 26,049 247,012
Disposals (365) (47,535) - (47,900)
Balance at 31 December 2012 1,034,260 711,289 124,172 1,869,721
Depreciation
Balance at 1 January 2012 459,666 254,208 51,460 765,334
Depreciation and amortization 170,889 126,321 27,270 324,480
Disposals (365) (44,639) - (45,004)
Balance at 31 December 2012 630,190 335,890 78,730 1,044,810
Carrying value
Balance at 31 December 2012 404,070 375,399 45,442 824,911
LLC Deutsche Bank
Notes to, and forming part of, the financial statements for the year ended 31 December 2013
30
11 Deposits and balances from banks
2013 2012
RUB’000 RUB’000
Vostro accounts 43,055,949 28,494,490
Loans and deposits from banks 22,202,133 38,558,091
65,258,082 67,052,581
Concentration of deposits and balances from banks
As at 31 December, deposits and balances from banks, which individually comprised more than 10%
of deposits and balances from banks, are as follows:
2013 2012
Balance % of Balance % of
RUB’000 portfolio RUB’000 portfolio
Deutsche Bank Group 46,049,070 71% 31,718,488 47%
12 Current accounts and deposits from customers
2013 2012
RUB’000 RUB’000
Current accounts and demand deposits 24,535,662 20,780,407
Corporate customers 22,325,854 18,535,166
Individuals 2,209,808 2,245,241
Term deposits 29,634,587 27,932,818
Corporate customers 29,430,001 27,659,757
Individuals 204,586 273,061
54,170,249 48,713,225
As at 31 December 2013, the Bank has no customers whose balances individually comprised more
than 10% of total current accounts and deposits from customers (31 December 2012: no customers).
LLC Deutsche Bank
Notes to, and forming part of, the financial statements for the year ended 31 December 2013
31
13 Other liabilities
2013 2012
RUB’000 RUB’000
Settlements payable 68,693 39,140
Total other financial liabilities 68,693 39,140
Employee compensation payable 1,680,032 1,798,096
Payables for services rendered by Deutsche Bank Group companies 1,194,517 1,251,650
Taxes other than on income payable 214,799 245,684
Income tax payable 80,631 586,493
Provision for guarantees and letters of credit issued 4,938 3,163
Other liabilities 6,950 4,963
Total other non-financial liabilities 3,181,867 3,890,049
Total other liabilities 3,250,560 3,929,189
14 Equity
Charter capital represents contributions made by the sole participant of the Bank. Under Russian
legislation the sole participant in a Russian limited liability company does not have the unilateral right
to withdraw his capital from the company. Accordingly charter capital is classified as equity.
As at 31 December 2013, the charter capital consists of the registered unit with a par value of
RUB 1,237,450 thousand (31 December 2012: RUB 1,237,450 thousand).
Distributions to participants are restricted to the maximum retained earnings of the Bank, which are
determined according to legislation of the Russian Federation. In accordance with the requirements of
the legislation of the Russian Federation as of the reporting date the amount available for distribution
to the participant constitutes RUB 13,443,872 thousand (31 December 2012: RUB 14,818,961
thousand).
During 2013 a distribution of RUB 3,066,514 thousand (2012: RUB 212,135 thousand) was declared
and paid to the participant.
15 Net interest (expense) income
2013 2012
RUB’000 RUB’000
Interest income
Financial instruments held for trading 2,364,443 3,025,642
Placements with banks 451,981 571,049
Loans to customers 411,637 299,306
Total interest income 3,228,061 3,895,997
Interest expense
Deposits and balances from banks (2,546,979) (1,929,928)
Term deposits from legal entities (2,285,004) (1,229,992)
Total interest expense (4,831,983) (3,159,920)
Net interest (expense) income (1,603,922) 736,077
LLC Deutsche Bank
Notes to, and forming part of, the financial statements for the year ended 31 December 2013
32
16 Net fee and commission income
2013 2012
RUB’000 RUB’000
Fee and commission income
Brokerage fees 844,682 635,274
Custodian and trust management fees 233,245 230,757
Settlement fees 192,756 176,018
Foreign exchange fees 147,127 148,908
Commissions on guarantees issued 94,875 85,073
Commissions on letters of credit 94,599 65,844
Consultancy fees 3,398 4,864
Total fee and commission income 1,610,682 1,346,738
Fee and commission expense
Custodian fees (81,893) (80,343)
Foreign exchange fees (73,508) (48,336)
Brokerage fees (39,777) (32,123)
Settlement fees (27,701) (25,588)
Commissions on guarantees received (24,464) (1,893)
Other (12,535) (16,952)
Total fee and commission expense (259,878) (205,235)
Net fee and commission income 1,350,804 1,141,503
17 Net gain on financial instruments held for trading
2013 2012
RUB’000 RUB’000
Net realized gain on financial instruments held for trading 558,145 3,429,842
Net unrealized (loss) gain on financial instruments held for trading (479,076) 925,253
Net gain on financial instruments held for trading 79,069 4,355,095
18 Other income
Other income represents mainly income from consultancy and information technology services
rendered to Deutsche Bank Group companies.
LLC Deutsche Bank
Notes to, and forming part of, the financial statements for the year ended 31 December 2013
33
19 General administrative expenses
2013 2012
RUB’000 RUB’000
Employee compensation 4,702,238 4,625,807
Communications and information services 439,039 570,756
Allocation of overhead expenses of Deutsche Bank Group companies 690,279 535,053
Occupancy 398,769 335,579
Depreciation and amortization 320,017 324,480
Professional services 274,605 295,541
Taxes other than on income 236,756 293,706
Office maintenance costs 196,660 145,536
Travel 107,759 110,864
Advertising and marketing 63,245 74,365
Other 172,320 177,302
Total general administrative expenses 7,601,687 7,488,989
20 Provision for impairment other than on loans
2013 2012
RUB’000 RUB’000
Available-for-sale securities 3,795 512
Other assets 37,165 3,607
Guarantees and letters of credit (1,775) 17,621
Total reversal of provision for impairment other than on loans 39,185 21,740
21 Income tax expense
2013 2012
RUB’000 RUB’000
Current year tax expense 669,416 1,103,209
Current tax underprovided in prior years 5,965 -
Deferred taxation (39,114) (208,498)
Total income tax expense 636,267 894,711
In 2013 the applicable tax rate for current and deferred tax is 20% (2012: 20%)
A reconciliation of effective tax rate for the year ended 31 December is as follows:
LLC Deutsche Bank
Notes to, and forming part of, the financial statements for the year ended 31 December 2013
34
2013 2012
RUB’000 % RUB’000 %
Profit before tax 2,751,476 4,547,077
Income tax expense at 20% 550,295 20.0% 909,415 20.0%
Non-deductible costs 140,803 5.1% 132,783 2.9%
Income taxed at lower tax rates (60,796) (2.2%) (140,453) (3.1%)
Current tax underprovided in prior years 5,965 0.2% - -
Non-taxable income - - (7,034) (0.2%)
Total income tax expense 636,267 23.1% 894,711 19.%
Deferred tax asset
Temporary differences between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for taxation purposes give rise to net deferred tax assets as at
31 December 2013 and 2012.
Movements in temporary differences during the years ended 31 December 2013 and 2012 are
presented as follows.
RUB’000
Balance
1 January 2013
Recognized
in profit
or loss
Recognized
in other
comprehensive
income
Balance
31 December
2013
Financial instruments held for trading (assets) (196,731) (135,714) - (332,445)
Loans to customers 2,243 (1,293) - 950
Available-for-sale financial assets 1,470 - (1,346) 124
Property and equipment 90,717 27,079 - 117,796
Financial instruments held for trading (liabilities) 41,350 205,794 - 247,144
Other assets 8,670 (8,370) - 300
Other liabilities 399,692 (48,382) - 351,310
347,411 39,114 (1,346) 385,179
RUB’000
Balance
1 January 2012
Recognized
in profit
or loss
Recognized
in other
comprehensive
income
Balance
31 December
2012
Financial instruments held for trading (assets) (86,819) (109,912) - (196,731)
Loans to customers 2,158 85 - 2,243
Available-for-sale financial assets (80,258) 81,595 133 1,470
Property and equipment 33,494 57,223 - 90,717
Financial instruments held for trading (liabilities) 122,933 (81,583) - 41,350
Other assets (21,430) 30,100 - 8,670
Other liabilities 168,702 230,990 - 399,692
138,780 208,498 133 347,411
LLC Deutsche Bank
Notes to, and forming part of, the financial statements for the year ended 31 December 2013
35
Income tax recognized in other comprehensive income
The tax effects relating to components of other comprehensive income for the years ended 31
December 2013 and 2012 comprise the following:
2013 2012
RUB’000
Amount
before tax
Tax
expense
Amount
net-of-tax
Amount
before tax
Tax
benefit
Amount
net-of-tax
Net change in fair value of financial
assets available-for-sale - - - (663) 133 (530)
Net change in fair value of financial
assets available-for-sale transferred to profit or loss
6,734 (1,346) 5,388 - - -
Other comprehensive income (loss)
for the year 6,734 (1,346) 5,388 (663) 133 (530)
22 Risk management, corporate governance and internal
control
(a) Corporate governance framework
The Bank is established as a limited liability company in accordance with Russian legislation. The
Bank is governed by the Sole participant. The Sole participant makes strategic decisions on the Bank’s
operations.
The Sole participant elects the Supervisory Board. The Supervisory Board is responsible for overall
governance of the Bank's activities.
Russian legislation and the charter of the Bank define certain decisions that are exclusively approved
by the Sole participant and that are approved by the Supervisory Board.
As at 31 December 2013, the Supervisory Board includes:
Stephan Leithner – Chairman of the Supervisory Board
Marco Francesco Bizzozero, Ahmet Arinc, Stefan Gernot Bender, Peter Johannes Maria Tils, Jeremy
William Bailey, Murray Roos – members of the Supervisory Board.
During the year ended 31 December 2013, the following changes occurred in composition of the
Supervisory Board:
- 3 June 2013: Peter Johannes Maria Tils, Jeremy William Bailey and Murray Roos were elected
as members of the Supervisory Board;
- 30 July 2013: Philip Richard Girzevald resigned.
General activities of the Bank are managed by the sole executive body of the Bank (Chairman of the
Management Board) and collective executive body of the Management Board. The Supervisory Board
meeting elects the Chairman of the Management Board and the Management Board. The executive
bodies of the Bank are responsible for implementation of decisions of the Sole participant and the
Supervisory Board. Executive bodies report to the Supervisory Board and to the Sole participant.
As at 31 December 2013, the Management Board includes:
Joerg Bongartz – Chairman of the Management Board
Batubay Ozkan, Alexander Kirejev, Yaroslav Lisovolik, Pavel Kushnir, Ekaterina Seredinskaya –
members of the Management Board.
LLC Deutsche Bank
Notes to, and forming part of, the financial statements for the year ended 31 December 2013
36
During the year ended 31 December 2013, the following changes occurred in composition of the
Management Board:
- 17 October 2013: Ekaterina Seredinskaya was elected as a member of Management Board.
(b) Internal control policies and procedures
The Supervisory Board and the Management Board have responsibility for the development,
implementation and maintaining of internal controls in the Bank that are commensurate with the scale
and nature of operations.
The purpose of internal controls is to ensure:
proper and comprehensive risk assessment and management
proper business and accounting and financial reporting functions, including proper
authorization, processing and recording of transactions
completeness, accuracy and timeliness of accounting records, managerial information,
regulatory reports, etc.
reliability of IT-systems, data and systems integrity and protection
prevention of fraudulent or illegal activities, including misappropriation of assets
compliance with laws and regulations.
Management is responsible for identifying and assessing risks, designing controls and monitoring their
effectiveness. Management monitors the effectiveness of the Bank’s internal controls and periodically
implements additional controls or modifies existing controls as considered necessary.
The Bank developed a system of standards, policies and procedures to ensure effective operations and
compliance with relevant legal and regulatory requirements, including the following areas:
requirements for appropriate segregation of duties, including the independent authorization
of transactions
requirements for the recording, reconciliation and monitoring of transactions
compliance with regulatory and other legal requirements
documentation of controls and procedures
requirements for the periodic assessment of operational risks faced, and the adequacy of
controls and procedures to address the risks identified
requirements for the reporting of operational losses and proposed remedial action
development of contingency plans
training and professional development
ethical and business standards and
risk mitigation, including insurance where this is effective.
There is a hierarchy of requirements for authorization of transactions depending on their size and
complexity. A significant portion of operations are automated and the Bank put in place a system of
automated controls.
LLC Deutsche Bank
Notes to, and forming part of, the financial statements for the year ended 31 December 2013
37
Compliance with the Bank’s standards is supported by a program of periodic reviews undertaken by
the Internal Audit function. The Internal Audit function is independent from management and reports
directly to the Supervisory Board. The results of the Internal Audit reviews are discussed with relevant
business process managers, with summaries submitted to the Supervisory Board and senior
management of the Bank.
The internal control system in the Bank comprises:
the Supervisory Board
the Chairman of the Management Board and the Management Board
the Chief Accountant
the risk management function
the security function, including IT-security
the human resource function
the Internal Audit function
other employees, division and functions that are responsible for compliance with the
established standards, policies and procedures, including:
heads of business-units
business processes managers
the compliance officer and the compliance function, including the division responsible
for compliance with anti-money laundering and anti-corruption requirements
professional securities market participant controller – an executive office responsible for
compliance with the requirements for securities market participants
the legal officer – an employee and a division responsible for compliance with the legal
and regulatory requirements
other employees/divisions with control responsibilities.
Russian legislation, including Federal Law dated 2 December 1990 No. 395-1 On Banks and Banking
Activity, establishes the professional qualifications, business reputation and other requirements for
members of the Supervisory Board, the Management Board, the Head of the Internal Audit function
and other key management personnel. All members of the Bank’s governing and management bodies
meet with these requirements.
Management believes that the Bank complies with the CBR requirements related to risk management
and internal control systems, including requirements related to the Internal Audit function, and that
risk management and internal control systems are appropriate for the scale, nature and complexity of
operations.
(c) Risk management policies and procedures
Risk and capital are managed through a framework of principles, organizational structures as well as
measurement and monitoring processes that are closely aligned with the activities of the Bank’s
divisions. The importance of a strong focus on risk management and the continuous need to refine risk
management practice have become particularly evident during the financial market crisis.
The organizational risk management and functions, tasks and authorities of the employees, committees
and departments involved in the management of risk are clearly and unambiguously defined. All
principles and guidelines are reviewed regularly and adapted and enhanced in line with internal and
external developments.
LLC Deutsche Bank
Notes to, and forming part of, the financial statements for the year ended 31 December 2013
38
The Supervisory Board appoints, supervises and advises the Management Board and is directly
involved in decisions of fundamental importance to the Bank. The Management Board regularly
informs the Supervisory Board of the intended business policies and other fundamental matters relating
to assets, liabilities, financial and profit situation as well as its risk situation, risk management and risk
controlling.
The Bank has a dedicated risk management function on a global level to ensure that oversight and
monitoring of risk is achieved in a robust manner. This function is performed by the Risk Division
under the lead of the Chief Risk Officer, who is a member of the Management Board, and is
responsible for the identification, assessment, management and reporting of risks arising within
operations across all businesses and risk types.
Credit, market, liquidity, operational, business, legal and reputational risks as well as capital are
managed in a coordinated manner at all relevant levels within the Bank.
Risk management and risk monitoring are an established part of all organizational processes. The aim
of risk management policies and procedures is to ensure that all risks assumed in the context of the
Bank are recognized at an early stage, and that they are specifically managed in line with the Bank’s
risk appetite.
Risk management and in particular the risk limitation processes are closely linked to Bank-wide
management processes such as strategic planning, annual earnings, cost and risk budgeting, and
performance measurement within the Bank.
The Management Board provides overall risk and capital management supervision for the Bank.
Treasury is responsible for identification, measurement, monitoring and management of the Bank’s
liquidity risk profile. It implements Deutsche Bank Group policies and has the authority to issue local
policies and executes measures required to keep the Bank’s liquidity risk profile within the risk
tolerance defined by the Management Board.
Under the stewardship of Treasury, the Asset and Liability Committee (the ALCO) provides the forum
for managing capital, funding and liquidity risk of the Bank.
The main objectives of the ALCO are:
review the usage of capital liquidity and funding to ensure it is employed in the most efficient
way
ensure compliance with Deutsche Bank Group policies and procedures as well as external
rules and regulations
establish a link between the local, regional and Deutsche Bank Group perspective on capital,
liquidity and funding.
The Operating Committee (the OpCo) is the main decision and policy making body on all operational
issues. The purpose of the OpCo is to organize efficient support for all businesses and reliable control
environment.The OpCo approves relevant policies and procedures, decides on infrastructure projects,
budgets and cost containment issues and staffing issues, ensures that the implementation of the global
strategies of Business Divisions and Infrastructure/Control Functions is consistent with local
requirements.
Market risk
Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate
because of changes in market prices. Market risk comprises currency risk, interest rate risk and other
price risks. Market risk arises from open positions in interest rate and equity financial instruments,
which are exposed to general and specific market movements and changes in the level of volatility of
market prices and foreign currency rates.
LLC Deutsche Bank
Notes to, and forming part of, the financial statements for the year ended 31 December 2013
39
The objective of market risk management is to manage and control market risk exposures within
acceptable parameters, whilst optimizing the return on risk. The Global Market Risk Limits Policy
describes the requirements for the Bank in the setting, monitoring, management and reporting of
market risk limits.
The Bank manages its market risk by setting managing open position limits in relation to financial
instrument, interest rate maturity and currency positions. Currency positions are subject to the CBR
regulations.
Interest rate risk
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will
fluctuate because of changes in market interest rates.
The Bank is exposed to the effects of fluctuations in the prevailing levels of market interest rates on its
financial position and cash flows. Interest margins may increase as a result of such changes but may
also reduce or create losses in the event that unexpected movements occur.
The Bank’s interest rate policy is reviewed and approved by the Management Board.
Interest rate gap analysis
Interest rate risk is managed principally through monitoring interest rate gaps. A summary of the
interest gap position as at 31 December for major financial instruments is as follows:
RUB ’000
Demand and
less than 1
month
From 1 to
6 months
From 6 to
12
months 1-5 years
More than
5 years
Non-interest
bearing
Carrying
amount
31 December 2013
Assets
Financial
instruments held for trading 896,879 3,894,000 626,934 6,589,303 5,932,609 1,573,019 19,512,744
Placements with
banks 89,940,535 1,444,570 - - - 6,176,295 97,561,400
Loans to customers 103,150 2,159,419 1,901,780 2,996,880 - - 7,161,229
Total assets 90,940,564 7,497,989 2,528,714 9,586,183 5,932,609 7,749,314 124,235,373
Liabilities
Deposits and
balances from banks 22,202,133 - - - - 43,055,949 65,258,082
Amounts payable
under repurchase
agreements with the
CBR 6,588,588 - - - - - 6,588,588
Current accounts
and deposits from
customers 27,869,743 1,726,153 25,022 - - 24,549,331 54,170,249
Total liabilities 56,660,464 1,726,153 25,022 - - 67,605,280 126,016,919
Net position 34,280,100 5,771,836 2,503,692 9,586,183 5,932,609 (59,855,966) (1,781,546)
LLC Deutsche Bank
Notes to, and forming part of, the financial statements for the year ended 31 December 2013
40
RUB ’000
Demand and
less than 1
month
From 1 to
6 months
From 6 to
12
months 1-5 years
More than
5 years
Non-interest
bearing
Carrying
amount
31 December 2012
Assets
Financial
instruments held for trading - 1,255,530 1,478,182 25,777,519 27,102,036 367,010 55,980,277
Placements with
banks 85,101,474 1,587,047 - - - 4,011,740 90,700,261
Loans to customers 96,555 1,512,022 6,158,123 1,082,710 - 8,849,410
Total assets 85,198,029 4,354,599 7,636,305 26,860,229 27,102,036 4,378,750 155,529,948
Liabilities
Deposits and
balances from banks 35,335,645 598,696 3,681,607 - - 27,436,633 67,052,581
Amounts payable
under repurchase
agreements with the CBR 37,673,369 - - - - - 37,673,369
Current accounts
and deposits from customers 26,568,106 1,342,786 17,976 3,949 - 20,780,408 48,713,225
Total liabilities 99,577,120 1,941,482 3,699,583 3,949 - 48,217,041
153,439,175
Net position (14,379,091) 2,413,117 3,936,722 26,856,280 27,102,036 (43,838,291) 2,090,773
Interest rate sensitivity analysis
An analysis of sensitivity of profit or loss and equity (net of taxes) as a result of changes in the fair
value of financial instruments held for trading due to changes in the interest rates based on positions
existing as at 31 December 2013 and 2012 and a simplified scenario of a 100 bp symmetrical fall or
rise in all yield curves is as follows:
2013
RUB’000
2012
RUB’000
100 bp parallel rise (434,284) (1,029,548)
100 bp parallel fall 471,020 1,030,577
An analysis of sensitivity of profit or loss and equity (net of taxes) to changes in interest rates
(repricing risk) based on a simplified scenario of a 100 basis point (bp) symmetrical fall or rise in all
yield curves and positions of interest-bearing assets and liabilities existing as at 31 December 2013 and
2012 is as follows:
2013
RUB’000
2012
RUB’000
100 bp parallel rise 321,450 (70,240)
100 bp parallel fall (321,450) 70,240
LLC Deutsche Bank
Notes to, and forming part of, the financial statements for the year ended 31 December 2013
41
Average interest rates
The table below displays average effective interest rates for interest bearing assets and liabilities as at
31 December 2013 and 2012. These interest rates are an approximation of the yields to maturity of
these assets and liabilities, except for overdrafts included in loans to customers, which are variable rate
contracts.
2013
Average effective interest rate, %
2012
Average effective interest rate, %
RUB EUR USD
RUB EUR
USD
Interest bearing assets
Financial instruments
held for trading 7.45% 3.46% -
7.41% - 3.91%
Placements with banks 6.60% - 0.30% 5.84% 0.50%
0.37%
Loans to customers 8.12% 1.93% 1.90% 8.11% 2.56% 2.33%
Interest bearing
liabilities
Deposits and balances
from banks 6.04% - 0.82% 6.15% 0.74% 1.79%
Amounts payable under
repurchase agreements
with the CBR
5.51% - - 5.51% - -
Current accounts and
deposits from customers 5.80% 0.01% 0.01% 5.61% 0.01% 0.12%
Currency risk
The Bank has assets and liabilities denominated in several foreign currencies.
Currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate
because of changes in foreign currency exchange rates. Although the Bank hedges its exposure to
currency risk, such activities do not qualify as hedging relationships in accordance with IFRS.
The following table shows the foreign currency exposure structure of assets and liabilities as at
31 December 2013:
RUB’000 RUB EUR USD Other Total
Assets
Cash and cash equivalents 11,653,885 2,172,710 1,970,338 55,724 15,852,657 Mandatory reserve deposit with
the CBR 1,173,620 - - - 1,173,620
Financial instruments held for
trading net of currency derivatives
16,373,825 1,565,900 - - 17,939,725
Placements with banks 1,447,486 5,846,087 90,267,827 - 97,561,400
Loans to customers 2,525,039 3,959,481 676,709 - 7,161,229
Financial assets
available-for-sale 1,524 - - - 1,524
Deferred tax asset 385,179 - - - 385,179
Other assets 479,879 1,965,031 1,653,011 - 4,097,921
Property, equipment and
intangible assets 557,968 - - - 557,968
Total assets 34,598,405 15,509,209 94,567,885 55,724 144,731,223
LLC Deutsche Bank
Notes to, and forming part of, the financial statements for the year ended 31 December 2013
42
RUB’000 RUB EUR USD Other Total
Liabilities
Deposits and balances from banks 58,003,868 3,229,521 4,020,368 4,325 65,258,082
Amounts payable under
repurchase agreements with the
CBR 6,588,588 - - - 6,588,588
Current accounts and deposits from customers 42,738,681 7,451,935 3,920,230 59,403 54,170,249
Other liabilities 2,045,045 1,204,362 399 754 3,250,560
Total liabilities 109,376,182 11,885,818 7,940,997 64,482 129,267,479
Net recognized position (74,777,777) 3,623,391 86,626,888 (8,758) 15,463,744
Unrecognized position 89,098,347 (2,400,206) (86,802,033) 103,892 -
Net position 14,320,570 1,223,185 (175,145) 95,134 15,463,744
The following table shows the foreign currency exposure structure of financial assets and liabilities as
at 31 December 2012:
RUB’000 RUB EUR USD Other Total
Assets
Cash and cash equivalents 11,560,172 1,843,662 561,559 190,837 14,156,230
Mandatory reserve deposit with the CBR 1,358,449 - - - 1,358,449
Financial instruments held for
trading net of currency derivatives
52,307,764 - 3,305,503 - 55,613,267
Placements with banks 3,826,742 6,838,996 80,034,523 - 90,700,261
Loans to customers 2,711,023 4,182,064 1,956,323 - 8,849,410
Financial assets
available-for-sale 1,698 - - - 1,698
Deferred tax asset 347,411 - - - 347,411
Other assets 474,035 1,447,999 221,387 - 2,143,421
Property, equipment and intangible assets 824,911 - - - 824,911
Total assets 73,412,205 14,312,721 86,079,295 190,837 173,995,058
Liabilities
Deposits and balances from
banks 62,266,063 2,354,838 2,431,680 - 67,052,581
Amounts payable under
repurchase agreements with the CBR
37,673,369 - - - 37,673,369
Current accounts and deposits from customers 40,793,638 5,029,910 2,839,099 50,578 48,713,225
Other liabilities 2,586,175 1,262,099 58,820 22,095 3,929,189
Total liabilities 143,319,245 8,646,847 5,329,599 72,673 157,368,364
Net recognized position (69,907,040) 5,665,874 80,749,696 118,164 16,626,694
Unrecognized position 86,432,441 (5,505,702) (80,682,787) (243,952) -
Net position 16,256,401 160,172 66,909 125,788 16,626,694
LLC Deutsche Bank
Notes to, and forming part of, the financial statements for the year ended 31 December 2013
43
A strengthening of RUB, as indicated below, against the following currencies at 31 December 2013
and 2012 would have increased (decreased) equity and profit or loss by the amounts shown below.
This analysis is on net of tax basis and is based on foreign currency exchange rate variances that the
Bank considered to be reasonably possible at the end of the reporting period. The analysis assumes that
all other variables, in particular interest rates, remain constant.
2013
RUB’000
2012
RUB’000
10% appreciation of RUB against EUR (97,855) (12,814)
10% appreciation of RUB against USD 14,012 (5,353)
A weakening of RUB against the above currencies at 31 December 2013 and 2012 would have had the
equal but opposite effect on the above currencies to the amounts shown above, on the basis that all
other variables remain constant.
Other price risk
Other price risk is the risk that the fair value or future cash flows of a financial instrument will
fluctuate because of changes in market prices (other than those arising from interest rate risk or
currency risk), whether those changes are caused by factors specific to the individual financial
instrument or its issuer, or factors affecting all similar financial instruments traded in the market. Other
price risk arises when the Bank takes a long or short position in a financial instrument.
An analysis of sensitivity of profit or loss and equity to changes in securities prices based on positions
existing as at 31 December 2013 and 2012 and a simplified scenario of a 10% change in all securities
prices is as follows:
2013 2012
Profit
or loss
RUB’000
Equity
RUB’000
Profit
or loss
RUB’000
Equity
RUB’000
10% increase in securities prices 1,435,178 1,435,178 4,449,061 4,449,061
10% decrease in securities prices (1,435,178) (1,435,178) (4,449,061) (4,449,061)
Credit risk
Credit risk is the risk of financial loss to the Bank if a customer or counterparty to a financial
instrument fails to meet its contractual obligations.
Credit risk arises from all transactions that give rise to actual, contingent or potential claims against
any counterparty, borrower or obligor (which are collectively referred to as counterparties). Three
kinds of credit risk are monitored: default risk, country risk and settlement risk. The Bank has policies
and procedures for the management of credit exposures (both for recognized and unrecognized
exposures), including guidelines to limit portfolio concentration and the establishment of a Credit and
Policy Committee, which actively monitors credit risk of the Bank. The key credit risk related policies
are reviewed and approved by the Management Board’s Risk Executive Committee.
Monitoring tasks are primarily performed by the Divisional Risk Units in close cooperation with
Portfolio Management. Both also interact with other portfolio functions such as Loan Exposure
Management Group (LEMG), Credit Portfolio Management, Traded Credit Products as well as Market
Risk Management to ensure a complete and efficient monitoring and risk management.
To ensure a complete and comprehensive overview of the Bank’s credit portfolio, Credit Risk
Management operates a fully integrated Risk Management platform incorporating information from
various front and back office systems.
LLC Deutsche Bank
Notes to, and forming part of, the financial statements for the year ended 31 December 2013
44
Acting as a central pricing reference, LEMG provides the respective Corporate and Investment Bank
Group Division businesses with an observed or derived capital market rate for loan applications;
however, the decision of whether or not the business can enter into the loan remains with Credit Risk
Management.
The Bank continuously monitors the performance of individual credit exposures and regularly
reassesses the creditworthiness of its customers. The review is based on the customer’s most recent
financial statements and other information submitted by the borrower, or otherwise obtained by the
Bank.
The Bank uses the internal credit ratings system to rate the credit quality of financial instruments. A
broad range of methodologies for the assessment of the credit risk is applied, such as expert opinions,
expert systems, score cards and econometric approaches.
The Bank’s internal rating system uses a granular, transparent 26-grade rating scale, which is similar to
S&P’s rating scale. The Credit Rating Policy describes the principals for credit ratings.
Deutsche Bank’s rating Assigned probability of default S&P’s rating
iAAA 0.01% AAA
iAA+ 0.02% AA+
iAA 0.03% AA
iAA- 0.04% AA-
iA+ 0.05% A+
iA 0.07% A
iA- 0.09% A-
iBBB+ 0.14% BBB+
iBBB 0.23% BBB
iBBB- 0.39% BBB-
iBB+ 0.64% BB+
iBB 1.07% BB
iBB- 1.76% BB-
iB+ 2.92% B+
iB 4.82% B
iB- 7.95% B-
iCCC+ 13.00% CCC+
iCCC 22.00% CCC
iCCC- 31.00% CCC-, CC, C
iCC+ 100.00%
iCC 100.00%
iCC- 100.00%
iC+ 100.00%
iC 100.00%
iC- 100.00%
iD 100.00% D
The maximum exposure to credit risk is generally reflected in the carrying amounts of financial assets
on the statement of financial position. The impact of possible netting of assets and liabilities to reduce
potential credit exposure is not significant.
Collateral generally is not held against claims under derivative financial instruments, investments in
securities, and loans and advances to banks, except when securities are held as part of reverse
repurchase and securities borrowing activities.
For the analysis of collateral held against loans to customers and concentration of credit risk in respect
of loans to customers refer to note 8.
The maximum exposure to unrecognized credit risk is presented in note 24.
LLC Deutsche Bank
Notes to, and forming part of, the financial statements for the year ended 31 December 2013
45
Offsetting financial assets and financial liabilities
The Bank has no financial assets and financial liabilities that are offset in the statement of financial
position.
The disclosures set out in the tables below include financial assets and financial liabilities that are
subject to an enforceable master netting arrangement or similar agreement that covers similar financial
instruments, irrespective of whether they are offset in the statement of financial position.
The similar agreements include derivative clearing agreements, global master repurchase agreements.
Similar financial instruments include derivatives, sales and repurchase agreements. Financial
instruments such as loans and deposits are not disclosed in the table below unless they are offset in the
statement of financial position.
The Bank’s derivative transactions that are not transacted on the exchange are entered into under
International Derivative Swaps and Dealers Association (ISDA) Master Netting Agreements. In
general, under such agreements the amounts owed by each counterparty that are due on a single day in
respect of transactions outstanding in the same currency under the agreement are aggregated into a
single net amount being payable by one party to the other. In certain circumstances, for example when
a credit event such as a default occurs, all outstanding transactions under the agreement are terminated,
the termination value is assessed and only a single net amount is due or payable in settlement
transactions.
The Bank’s sale and repurchase transactions are covered by master agreements with netting terms
similar to those of ISDA Master Netting Agreements.
The above ISDA and similar master netting arrangements do not meet the criteria for offsetting in the
statement of financial position. This is because they create a right of set-off of recognized amounts that
is enforceable only following an event of default, insolvency or bankruptcy of the Bank or the
counterparties. In addition the Bank and its counterparties do not intend to settle on a net basis or to
realise the assets and settle the liabilities simultaneously.
The table below shows financial assets and financial liabilities subject to enforceable master netting
arrangements and similar arrangements as at 31 December 2013:
LLC Deutsche Bank
Notes to, and forming part of, the financial statements for the year ended 31 December 2013
46
RUB’000
Types
of financial
assets/liabilities
Gross amounts
of recognized
financial
asset/liability
Gross amount
of recognized
financial
liability/asset
offset in the
statement of
financial
position
Net amount of
financial
assets/liabilities
presented in the
statement of
financial
position
Related amounts subject
to offset under specific
conditions
Financial
instruments
Impact of
Master
Netting
Agreement
Net
amount
Derivatives
trading assets
990,634
-
990,634
-
(74,873)
915,761
Total
financial
assets
990,634
-
990,634
-
(74,873)
915,761
Derivatives
trading
liabilities
(560,758)
-
(560,758)
-
74,873
(485,885)
Sale and
repurchase
agreements
(6,588,588)
-
(6,588,588)
6,588,588
-
-
Total
financial
liabilities
(7,149,346)
-
(7,149,346)
6,588,588
74,873
(485,885)
The table below shows financial assets and financial liabilities subject enforceable master netting
arrangements and similar arrangements as at 31 December 2012:
RUB’000
Types
of financial
assets/liabilities
Gross amounts
of recognized
financial
asset/liability
Gross amount
of recognized
financial
liability/asset
offset in the
statement of
financial
position
Net amount of
financial
assets/liabilities
presented in the
statement of
financial
position
Related amounts subject
to offset under specific
conditions
Financial
instruments
Impact of
Master
Netting
Agreement
Net
amount
Derivatives
trading assets
78,274 -
78,274 -
(7,071)
71,203
Total
financial
assets
78,274
-
78,274
-
(7,071)
71,203
Derivatives
trading
liabilities
(78,969) -
(78,969) -
7,071
(71,898)
Sale and
repurchase
agreements
(37,673,369)
- (37,673,369)
37,673,369
-
-
Total
financial
liabilities
(37,752,338) -
(37,752,338)
37,673,369
7,071
(71,898)
The amounts of financial assets and financial liabilities that are disclosed in the above tables are
measured in the statement of financial position on the following basis:
derivative assets and liabilities – fair value
assets and liabilities resulting from sale and repurchase agreements – amortized cost.
LLC Deutsche Bank
Notes to, and forming part of, the financial statements for the year ended 31 December 2013
47
The table below reconciles the “Net amounts of financial assets and financial liabilities presented in
the statement of financial position”, as set out above, to the line items presented in the statement of
financial position as at 31 December 2013.
RUB’000
Net
amounts
Line item in the
statement of
financial position
Carrying amount
in the statement of
financial position
Financial
asset/liability not
in the scope of
offsetting
disclosure
Note
Types of
financial
assets/liabilities
Derivatives
trading assets
990,634
Financial
instruments held for
trading (assets)
19,512,744
18,522,110
5
Derivatives
trading
liabilities
(560,758)
Financial
instruments held for
trading (liabilities)
(1,235,710)
(749,825)
5
Sale and
repurchase
agreements
(6,588,588)
Amounts payable
under repurchase
agreements with the
CBR
(6,588,588)
-
6
The table below reconciles the “Net amounts of financial assets and financial liabilities presented in
the statement of financial position”, as set out above, to the line items presented in the statement of
financial position as at 31 December 2012.
RUB’000
Net
amounts
Line item in the
statement of
financial position
Carrying amount
in the statement of
financial position
Financial
asset/liability not
in the scope of
offsetting
disclosure
Note
Types of
financial
assets/liabilities
Derivatives
trading assets
78,274
Financial
instruments held for
trading (assets)
55,980,277
55,902,003
5
Derivatives
trading
liabilities
(78,969)
Financial
instruments held for
trading (liabilities)
(246,734)
(167,765)
5
Sale and
repurchase
agreements
(37,673,369)
Amounts payable
under repurchase
agreements with the
CBR
(37,673,369)
-
6
LLC Deutsche Bank
Notes to, and forming part of, the financial statements for the year ended 31 December 2013
48
Liquidity risk
Liquidity risk is defined as the risk that the Bank will not be able to meet its current and future
payment obligations in full, or on time. It also includes the risk that, in the case of a liquidity crisis,
refinancing may only be obtained at higher market rates (funding risk) and/or that assets may only be
liquidated at a discount to market rates (market liquidity risk). Liquidity risk is not backed by risk
capital, since it is a payment risk that must be covered by assets and not a risk of loss to be covered by
capital and reserves.
The Treasury in collaboration with the Finance and Global Markets carry out daily analysis of current
liquidity which is based on exception clearing reports of the Cash and Banking Operations on cash
inflows and estimated payments. A check before the closing of the operational day of whether the
amount of liabilities on demand compared to the amount of assets on demand and the open borrowing
limit with Deutsche Bank Group provides confidence in the balance between assets and liabilities by
maturities. Analysis of changes in customer account balances and calculation of currency structure of
average constant customer accounts balance on demand are provided at the meetings of the ALCO on
a monthly basis. The ALCO also analyzes usage of the borrowing limit with the Bank.
Liquidity outflows from contingent liabilities and increased draws down on committed credit lines, as
well as claims on guarantees, are also taken into consideration.
To minimize liquidity risk the Bank takes actions to maintain a balance between the assets and
liabilities with different maturities that will allow it to achieve the liquidity level adequate to meet
obligations to clients without a negative impact on profitability. Liquidity management is performed in
accordance with the liquidity policy based on both the Deutsche Bank Group standards and Russian
legislation including control over compliance with prudential ratios set by the CBR and control over
internal liquidity limits set by Deutsche Bank Group and approved by the Supervisory Board.
Several tools have been implemented to measure liquidity risk and evaluate short and long-term
liquidity position locally.
The following tables show the undiscounted cash flows on financial assets and liabilities and credit-
related commitments on the basis of their earliest possible contractual maturity. The total gross inflow
and outflow disclosed in the tables is the contractual, undiscounted cash flow on the financial asset,
liability or commitment. The expected cash flows on these financial assets and liabilities and
unrecognized loan commitments can vary significantly from this analysis. For issued financial
guarantee contracts, the maximum amount of the guarantee is allocated to the earliest period in which
the guarantee can be called.
LLC Deutsche Bank
Notes to, and forming part of, the financial statements for the year ended 31 December 2013
49
The liquidity position as at 31 December 2013 is as follows:
RUB’000
Demand and
less than
1 month
From 1 to 6
months
From 6 to 12
months
More than
1 year
Total gross
amount
inflow
(outflow)
Carrying
amount
Non-derivative assets
Cash and cash
equivalents 15,852,657 - - - 15,852,657 15,852,657
Mandatory reserve
deposit with the CBR 1,173,620 - - - 1,173,620 1,173,620
Financial instruments
held for trading net of derivatives
17,939,725 - - - 17,939,725 17,939,725
Placements with banks 96,123,471 1,464,746 - - 97,588,217 97,561,400
Loans to customers 127,055 2,250,716 1,969,939 3,089,591 7,437,301 7,161,229
Financial assets
available-for-sale - - - 1,524 1,524 1,524
Other financial assets 1,641,154 10,491 10,410 2,714 1,664,769 1,664,769
Derivative assets
Net settled derivatives - - 55,712 - 55,712 55,712
Gross settled derivatives 1,517,307
- Inflow 210,330,369 4,315,498 1,146,615 23,410,413 239,202,895
- Outflow (209,586,519) (4,316,038) (1,230,325) (22,552,706) (237,685,588)
Total assets 133,601,532 3,725,413 1,952,351 3,951,536 143,230,832 142,927,943
Non-derivative
liabilities
Deposits and balances
from banks (65,512,760) - - - (65,512,760) (65,258,082)
Amounts payable under
repurchase agreements with the CBR
(6,602,686) - - - (6,602,686) (6,588,588)
Current accounts and
deposits from customers (52,571,796) (1,652,028) (10,440) (3,749) (54,238,013) (54,170,249)
Other financial
liabilities (4,718) (51,357) (1,937) (10,681) (68,693) (68,693)
Derivative liabilities
Net settled derivatives - - (55,712) - (55,712) (55,712)
Gross settled derivatives (1,179,998)
- Inflow 96,957,794 5,930,051 1,274,047 22,552,706 126,714,598
- Outflow (97,227,968) (6,065,340) (1,190,875) (23,410,413) (127,894,596)
Total liabilities (124,962,134) (1,838,674) 15,083 (872,137) (127,657,862) (127,321,322)
Net position 8,639,398 1,886,739 1,967,434 3,079,399 15,572,970 15,606,621
Credit related
commitments (34,462,176) - - - (34,462,176) (34,462,176)
LLC Deutsche Bank
Notes to, and forming part of, the financial statements for the year ended 31 December 2013
50
The liquidity position as at 31 December 2012 is as follows:
RUB’000
Demand and
less than
1 month
From 1 to 6
months
From 6 to 12
months
More than
1 year
Total gross
amount
inflow
(outflow)
Carrying
amount
Non-derivative assets
Cash and cash
equivalents 14,156,230 - - - 14,156,230 14,156,230
Mandatory reserve
deposit with the CBR 1,358,449 - - - 1,358,449 1,358,449
Financial instruments
held for trading net of derivatives
55,613,267 - - - 55,613,267 55,613,267
Placements with banks 89,276,504 1,465,939 - - 90,742,443 90,700,261
Loans to customers 116,132 1,657,198 6,192,470 1,259,611 9,225,411 8,849,410
Financial assets
available-for-sale - - - 1,698 1,698 1,698
Other financial assets 37,042 3,622 - - 40,664 40,664
Derivative assets
Net settled derivatives - 44,147 - - 44,147 44,147
Gross settled derivatives 322,863
- Inflow 45,089,166 7,468,265 2,552,921 - 55,110,352
- Outflow (44,973,684) (7,279,693) (2,534,112) - (54,787,489)
Total assets 160,673,106 3,359,478 6,211,279 1,261,309 171,505,172 171,086,989
Non-derivative
liabilities
Deposits and balances
from banks (62,824,224) (598,696) (3,713,991) - (67,136,911) (67,052,581)
Amounts payable under
repurchase agreements with the CBR
(37,724,567) - - - (37,724,567) (37,673,369)
Current accounts and
deposits from customers (47,463,907) (1,281,364) (18,719) (3,980) (48,767,970) (48,713,225)
Other financial
liabilities (39,140) - - - (39,140) (39,140)
Derivative liabilities
Net settled derivatives - (45,078) - - (45,078) (45,078)
Gross settled derivatives (201,656)
- Inflow 69,320,161 2,731,135 701,936 - 72,753,232
- Outflow (69,471,170) (2,777,137) (706,581) - (72,954,888)
Total liabilities (148,202,847) (1,971,140) (3,737,355) (3,980) (153,915,322) (153,725,049)
Net position 12,470,259 1,388,338 2,473,924 1,257,329 17,589,850 17,361,940
Credit related
commitments (27,512,639) - - - (27,512,639) (27,512,639)
Under Russian law, individuals can withdraw their term deposits at any time, forfeiting in most of the
cases the accrued interest. Accordingly, these deposits, excluding accrued interest, are shown in the
table above in the category of “Demand and less than 1 month”. The classification of these deposits in
accordance with their stated maturity dates as at 31 December is presented below:
LLC Deutsche Bank
Notes to, and forming part of, the financial statements for the year ended 31 December 2013
51
2013
RUB’000
2012
RUB’000
Demand and less than 1 month 90,311 200,121
From 1 to 6 months 97,499 72,940
From 6 to 12 months 16,776 -
204,586 273,061
The gross nominal inflow (outflow) disclosed in the tables above represents the contractual
undiscounted cash flows related to derivative financial assets and liabilities held for risk management
purposes. The disclosure shows a net amount for derivatives that are net settled, but a gross inflow and
outflow amount for derivative financial assets and liabilities that have simultaneous gross settlement
(e.g., forward exchange contracts and currency swaps).
The following tables show the expected maturities of assets and liabilities. Management expects that
the cash flows from certain financial assets and liabilities will be different from their contractual terms,
either because management has the discretionary ability to manage the cash flows. Management holds
a portfolio of securities that are readily marketable and can be used to meet outflows of financial
liabilities. Cash flow from these trading securities are included in the “Demand and less than 1 month”
category in liquidity and maturity analysis.
Contractual maturities of these trading securities as at 31 December are as follows:
2013
RUB’000
2012
RUB’000
Demand and less than 1 month 896,879 -
From 1 to 6 months 3,894,000 1,255,530
From 6 to 12 months 626,934 1,478,182
More than 1 year 12,521,912 52,879,555
17,939,725 55,613,267
LLC Deutsche Bank
Notes to, and forming part of, the financial statements for the year ended 31 December 2013
52
The table below shows an analysis, by expected maturities, of the amounts recognized in the statement of financial position as at 31 December 2013:
RUB’000 Demand and less
than 1 month From 1 to 6
months From 6 to 12
months More than
1 year No maturity Total
Assets
Cash and cash equivalents 15,852,657 - - - - 15,852,657
Mandatory reserve deposit with the CBR - - - - 1,173,620 1,173,620
Financial instruments held for trading 18,676,254 50,873 58,706 726,911 - 19,512,744
Placements with banks 96,116,830 1,444,570 - - - 97,561,400
Loans to customers 103,150 2,159,419 1,901,780 2,996,880 - 7,161,229
Financial assets available-for-sale - - - - 1,524 1,524
Deferred tax asset - - - - 385,179 385,179
Other assets 1,635,524 2,341,164 32,432 88,801 - 4,097,921
Property, equipment and intangible assets - - - - 557,968 557,968
Total assets 132,384,415 5,996,026 1,992,918 3,812,592 2,118,291 146,304,242
Liabilities
Financial instruments held for trading 265,588 186,722 59,316 724,084 - 1,235,710
Deposits and balances from banks 65,258,082 - - - - 65,258,082
Amounts payable under repurchase
agreements with the CBR 6,588,588 - - - - 6,588,588
Current accounts and deposits from customers 52,529,599 1,628,655 8,246 3,749 - 54,170,249
Other liabilities 24,995 2,052,960 1,040,945 131,660 - 3,250,560
Total liabilities 124,666,852 3,868,337 1,108,507 859,493 - 130,503,189
Net position 7,717,563 2,127,689 884,411 2,953,099 2,118,291 15,801,053
LLC Deutsche Bank
Notes to, and forming part of, the financial statements for the year ended 31 December 2013
53
The table below shows an analysis, by expected maturities, of the amounts recognized in the statement of financial position as at 31 December 2012:
RUB’000 Demand and less
than 1 month From 1 to 6
months From 6 to 12
months More than
1 year No maturity Total
Assets
Cash and cash equivalents 14,156,230 - - - - 14,156,230
Mandatory reserve deposit with the CBR - - - - 1,358,449 1,358,449
Financial instruments held for trading 55,730,908 231,478 17,891 - - 55,980,277
Placements with banks 89,264,988 1,435,273 - - - 90,700,261
Loans to customers 96,555 1,512,021 6,158,123 1,082,711 - 8,849,410
Financial assets available-for-sale - - - - 1,698 1,698
Deferred tax asset - - - - 347,411 347,411
Other assets 75,753 1,457,614 520,273 89,781 - 2,143,421
Property, equipment and intangible assets - - - - 824,911 824,911
Total assets 159,324,434 4,636,386 6,696,287 1,172,492 2,532,469 174,362,068
Liabilities
Financial instruments held for trading 151,125 90,601 5,008 - - 246,734
Deposits and balances from banks 62,772,278 598,696 3,681,607 - - 67,052,581
Amounts payable under repurchase
agreements with the CBR 37,673,369 - - - - 37,673,369
Current accounts and deposits from customers 47,348,514 1,342,786 17,976 3,949 - 48,713,225
Other liabilities 217,163 626,941 2,891,333 193,752 - 3,929,189
Total liabilities 148,162,449 2,659,024 6,595,924 197,701 - 157,615,098
Net position 11,161,985 1,977,362 100,363 974,791 2,532,469 16,746,970
LLC Deutsche Bank
Notes to, and forming part of, the financial statements for the year ended 31 December 2013
54
The Bank also calculates mandatory liquidity ratios on a daily basis in accordance with the
requirements of the CBR. These ratios include:
- instant liquidity ratio (N2), which is calculated as the ratio of highly liquid assets to
liabilities payable on demand
- current liquidity ratio (N3), which is calculated as the ratio of liquid assets to liabilities
maturing within 30 calendar days
- long-term liquidity ratio (N4), which is calculated as the ratio of assets maturing after 1
year to the equity and liabilities maturing after 1 year.
The following table shows the mandatory liquidity ratios calculated as at 31 December 2013 and
2012.
Requirement
2013, %
2012, %
Instant liquidity ratio (N2) Not less than 15%
163.6%
188.2%
Current liquidity ratio (N3) Not less than 50%
175.9%
155.8%
Long-term liquidity ratio (N4) Not more than 120%
7.3%
6.7%
23 Capital management
The Bank’s lead regulator, the CBR, sets and monitors capital requirements for the Bank.
The Bank defines as capital those items defined by statutory regulation as capital. Under the
current capital requirements set by the CBR banks have to maintain a ratio of capital to risk
weighted assets (statutory capital ratio) above the prescribed minimum level. As at 31 December
2013, this minimum level is 10%. The ratio is calculated based on financial statements prepared in
accordance with Russian Banking Accounting Standards and the risk weighting is determined in
accordance with the CBR’s credit risk ratios specific for individual classes of assets. In
accordance with statutory regulations capital includes charter capital, reserve funds, retained
earnings less net book value of intangible assets and deferred expenses.
The calculation of capital adequacy based on requirements set by the CBR as at 31 December is
as follows:
2013
2012
RUB’000
RUB’000
Primary capital 13,135,378
13,135,378
Additional capital 1,617,949 2,930,717
Total capital 14,753,327 16,066,095
Risk weighted assets 77,156,408 80,260,153
Capital adequacy ratio 19.1% 20.0%
Starting from 1 April 2013 the Bank calculates the amount of capital and capital adequacy ratios
in accordance with the CBR requirements based on Basel III requirements. The amount of capital
and capital adequacy ratios were used by the CBR in 2013 for information purposes and not for
supervision purposes. Beginning 1 January 2014 the new ratios will be used for supervision
purpose. The calculation of capital adequacy ratios (N1.0, N1.1, N1.2) based on requirements set
by the CBR using Russian Banking Accounting Standards as at 31 December 2013 is as follows:
LLC Deutsche Bank
Notes to, and forming part of, the financial statements for the year ended 31 December 2013
55
2013
RUB’000
Core capital 13,135,396
Additional capital -
Tier I capital 13,135,396
Unaudited profit for the period 1,617,949
Tier II capital 14,753,345
Risk weighted assets 80,693,639
Base capital adequacy ratio (N1.1, not less than 5%) 16.3%
Primary capital adequacy ratio (N1.2, not less than 6%) 16.3%
Equity capital adequacy ratio (N1.0, not less than 6%) 18.3%
The comparative information is not presented because the ratios were not calculated for periods
earlier than 1 April 2013.
24 Contingencies
Litigation
Management is unaware of any significant actual, pending or threatened claims against the Bank.
Taxation contingencies
The taxation system in the Russian Federation continues to evolve and is characterised by
frequent changes in legislation, official pronouncements and court decisions, which are sometimes
contradictory and subject to varying interpretation by different tax authorities. Taxes are subject to
review and investigation by a number of authorities who have the authority to impose severe
fines, penalties and interest charges. A tax year remains open for review by the tax authorities
during the three subsequent calendar years; however, under certain circumstances a tax year may
remain open longer. Recent events within the Russian Federation suggest that the tax authorities
are taking a more assertive position in their interpretation and enforcement of tax legislation.
These circumstances may create tax risks in the Russian Federation that are substantially more
significant than in other countries. Management believes that it has provided adequately for tax
liabilities based on its interpretations of applicable Russian tax legislation, official
pronouncements and court decisions. However, the interpretations of the relevant authorities
could differ and the effect on the financial position of the Bank, if the authorities were successful
in enforcing their interpretations, could be significant.
Starting from 1 January 2012 new transfer pricing rules came into force in Russia. These provide
the possibility for tax authorities to make transfer pricing adjustments and impose additional tax
liabilities in respect of controllable transactions if their prices deviate from the market range or
profitability range. According to the provisions of transfer pricing rules, the taxpayer should
sequentially apply five market price determination methods prescribed by the Tax Code.
Tax liabilities arising from transactions between companies are determined using actual
transaction prices. It is possible, with the evolution of the interpretation of transfer pricing rules in
the Russian Federation and changes in the approach of the Russian tax authorities, that such
transfer prices could be challenged. Since the current Russian transfer pricing rules became
effective relatively recently, the impact of any such challenge cannot be reliably estimated;
however, it may be significant to the financial position of the Bank and/or the overall operations
of the Bank.
LLC Deutsche Bank
Notes to, and forming part of, the financial statements for the year ended 31 December 2013
56
Based on the facts available, no provision for potential tax liabilities is made in these financial
statements, as management believes it is not likely that an outflow of funds will be required to
settle such obligations.
Operating leases
Future lease payments (net of VAT and operating costs) under operating leases are detailed
below:
2013 2012
RUB’000 RUB’000
Less than 1 year 448,214 490,861
Between 1 and 5 years 1,959,969 1,976,130
More than 5 years - 274,685
Total operating lease rentals payable 2,408,183 2,741,676
The Bank leases a number of premises under operating leases. The leases typically run for an
initial period of one to six years, with an option to renew the lease after that date. Lease payments
are usually increased annually to reflect market rentals.
During 2013 RUB 398,769 thousand is recognized as an expense in profit or loss in respect of
operating leases (2012: RUB 335,579 thousand).
Credit related commitments
The Bank issues guarantees and letters of credit on behalf of its customers. These instruments bear
a credit risk similar to that of loans granted. The amounts outstanding are as follows:
2013 2012
RUB’000 RUB’000
Guarantees issued maturing within 12 months 8,969,567 8,158,123
Rated from iAAA to iAAA- 67,454 7,025
Rated from iAA+ to iAA- 500,396 4,399,858
Rated from iA+ to iA- 1,335,649 1,304,147
Rated from iBBB+ to iBBB- 4,262,791 1,489,773
Rated from iBB+ to iBB- 946,534 488,507
Rated from iB+ to iB- 591,783 394,815
Rated below iCCC+ 1,257,505 67,935
Individuals 2,455 1,063
Not rated 5,000 5,000
Guarantees issued maturing after 12 months 4,915,833 3,700,825
Rated from iAAA to iAAA- - 76,673
Rated from iAA+ to iAA- 128,955 277,827
Rated from iA+ to iA- 867,678 331,779
Rated from iBBB+ to iBBB- 593,458 2,667,650
LLC Deutsche Bank
Notes to, and forming part of, the financial statements for the year ended 31 December 2013
57
2013 2012
RUB’000 RUB’000
Rated from iBB+ to iBB- 3,294,212 265,734
Rated from iB+ to iB- 31,531 28,482
Rated below iCCC+ - 50,000
Individuals - 2,680
Import letters of credit maturing within 12 months 8,643,561 5,432,902
Rated from iAA+ to iAA- 16,089 76,966
Rated from iA+ to iA- 844,387 240,989
Rated from iBBB+ to iBBB- 247,796 -
Rated from iBB+ to iBB- 471,261 263,418
Rated from iB+ to iB- 6,933,299 4,805,636
Rated below iCCC+ 130,729 45,893
Import letters of credit maturing after 12 months 46,074 846,791
Rated from iA+ to iA- - 758,908
Rated from iBBB+ to iB- 46,074 87,883
22,575,035 18,138,641
As at 31 December 2013, the Bank had RUB 11,887,140 thousand (31 December 2012:
RUB 9,373,998 thousand) in undrawn loan commitments.
The total outstanding contractual amount of undrawn loan lines, undrawn guarantee lines,
gurantees and import letter of credit does not necessarily represent future cash requirements, as
many of these commitments may expire or terminate without being funded.
Custody activities
The Bank provides custody services to its customers, whereby it holds securities on behalf of
customers and receives fee income for providing these services. These securities are not assets of
the Bank and are not recognized in the statement of financial position.
Trust activities
The Bank provides trust services to individuals, trusts, retirement benefit plans and other
institutions, whereby it holds and manages assets or invests funds received in various financial
instruments at the direction of the customer. The Bank receives fee income for providing these
services. Trust assets are not assets of the Bank and are not recognized in the statement of
financial position. The Bank is not exposed to any credit risk relating to such placements, as it
does not guarantee these investments.
25 Related party transactions
Deutsche Bank AG Frankfurt is the sole participant of the Bank and the party with ultimate
control over the Bank. Deutsche Bank AG Frankfurt prepares publicly available financial
statements.
For the purposes of these financial statements the following are considered to be related parties:
LLC Deutsche Bank
Notes to, and forming part of, the financial statements for the year ended 31 December 2013
58
the Bank’s participant
key management of the Deutsche Bank Group and the Bank and their immediate families
enterprises in which the participant, Deutsche Bank Group companies, management of
Deutsche Bank Group and the Bank or their immediate families have control or significant
influence (Deutsche Bank Group companies).
In considering each possible related party relationship, attention is directed to the substance of the
relationship, not merely the legal form.
Related party transactions are based on market prices.
The outstanding balances and the related average effective interest rates as at 31 December 2013
and related profit or loss amounts of transactions for the year ended 31 December 2013 with
related parties are as follows:
Participant Deutsche Bank Group companies
RUB’000
Average effective
interest rate, % RUB’000
Average effective
interest rate, %
Statement of financial position
Assets
Cash and cash equivalents
- RUB 61,279 - - -
- EUR 2,130,536 - - -
- USD 160,443 - 208,512 -
- other 43,021 - - -
Financial instruments held for trading
- RUB - - 277,586 -
- EUR - - 34,849 -
- USD - - 258,377 -
Placements with banks
- USD - - 89,940,591 0.30%
Other assets
- RUB - - 4,457 -
- EUR 100,025 - 1,847,087 -
- USD 941 - 626 -
Liabilities
Financial instruments held for
trading
-- RUB - - 44,100 -
- EUR - - 340,986 -
-- USD - - 145,397 -
Deposits and balances from banks
-- RUB 4 010 382 2.85% 34,867,704 0.00%
-- EUR - - 3,302,557 -
LLC Deutsche Bank
Notes to, and forming part of, the financial statements for the year ended 31 December 2013
59
Participant Deutsche Bank Group companies
RUB’000
Average effective
interest rate, % RUB’000
Average effective
interest rate, %
- USD - - 3,868,427 -
Other liabilities
- EUR 175,273 - 1,018,490 -
- other - - 754 -
Items not recognized in the
statement of financial position
-- Guarantees issued 17,388 - 2,203,253 -
-- Guarantees received 403,101 - 7,728,022 -
Profit (loss)
Interest income 6 190 - 312 402 -
Interest expense (59 727) - (23 113) -
Net gain on financial instruments
held for trading 235 - (2,350,122) -
Fee and commission income 25 206 - 889 564 -
Fee and commission expense (21 988) - (22 633) -
Other income 216,026 - 4,031,514 -
General and administrative
expenses (84,516) - (621,321) -
LLC Deutsche Bank
Notes to, and forming part of, the financial statements for the year ended 31 December 2013
60
The outstanding balances and the related average effective interest rates as at 31 December 2012
and related profit or loss amounts of transactions for the year ended 31 December 2012 with
related parties are as follows:
Participant Deutsche Bank Group companies
RUB’000
Average effective
interest rate, % RUB’000
Average effective
interest rate, %
Statement of financial position
Assets
Cash and cash equivalents
- RUB 60,696 - - -
- EUR 1,822,908 - 161 -
- USD 83,698 - 2,064 -
- other 190,337 - - -
Financial instruments held for trading
- RUB - - 52,917 -
- EUR - - 128 -
- USD - - 5,434 -
Placements with banks
- RUB - - - -
- EUR - - 3,218,422 0.50%
- USD - - 79,732,860 0.37%
- other - - - -
Other assets
- RUB - - 1,304 -
- EUR 21,142 - 1,414,392 -
- USD 18 - 58,942 -
Liabilities
Financial instruments held for
trading
-- RUB - - 43,664 -
- EUR - - 499 -
-- USD - - 82,830 -
Deposits and balances from banks
-- RUB 3,425,922 2.85% 25,632,908 -
-- EUR - - 2,218,175 0.74%
- -USD 45,306 - 396,177 1.02%
LLC Deutsche Bank
Notes to, and forming part of, the financial statements for the year ended 31 December 2013
61
Participant Deutsche Bank Group companies
RUB’000
Average effective
interest rate, % RUB’000
Average effective
interest rate, %
Other liabilities
- EUR 188,651 - 982,085 -
-- USD - - 58,819 -
- other - - 22,095 -
Items not recognized in the
statement of financial position
-- Guarantees issued 16,090 3,898,268
-- Guarantees received 147,258 5,423,157
Profit (loss)
Interest income - - 399,263 -
Interest expense (185) - (81,616) -
Net gain on financial instruments
held for trading 715 - 1,461,393 -
Fee and commission income 28,691 - 617,480 -
Fee and commission expense 7,977 - 5,364 -
Other income 135,322 - 3,980,558 -
General and administrative
expenses (259,491) - (468,951) -
Transactions with the members of the Supervisory Board and the Management
Board
Total remuneration included in personnel expenses for the years ended 31 December 2013 and
2012 is as follows:
2013
RUB’000
2012
RUB’000
Short-term employee benefits 878,744 857,313
Long-term benefits 335,526 373,042
1,214,270 1,230,355
26 Financial assets and liabilities: fair values and
accounting classifications
As at 31 December 2013 and 2012, management concluded that the fair values of all financial
assets and financial liabilities are not materially different from their carrying values because of
their short term nature and market interest rates.
The estimates of fair value are intended to approximate the price that would be received to sell an
asset or paid to transfer a liability in an orderly transaction between market participants at the
measurement date. However given the uncertainties and the use of subjective judgment, the fair
value should not be interpreted as being realisable in an immediate sale of the assets or transfer of
liabilities.
Fair values of financial assets and financial liabilities that are traded in active markets are based
on quoted market prices or dealer price quotations.
LLC Deutsche Bank
Notes to, and forming part of, the financial statements for the year ended 31 December 2013
62
The Bank uses valuation techniques to establish the fair value of instruments where prices, quoted
in active markets, are not available. Valuation techniques used for financial instruments include
modeling techniques, the use of indicative quotes for proxy instruments, quotes from less recent
and less regular transactions and broker quotes.
For some financial instruments a rate or other parameter, rather than a price, is quoted. Where this
is the case then the market rate or parameter is used as an input to a valuation model to determine
fair value. For some instruments, modeling techniques follow industry standard models for
example, discounted cash flow analysis and standard option pricing models. These models are
dependent upon estimated future cash flows, discount factors and volatility levels.
Frequently, valuation models require multiple parameter inputs. Where possible, parameter inputs
are based on observable data or are derived from the prices of relevant instruments traded in
active markets. Where observable data is not available for parameter inputs then other market
information is considered, for example, indicative broker quotes and consensus pricing
information.
Fair value hierarchy
The Bank measures fair values using the following fair value hierarchy that reflects the
significance of the inputs used in making the measurements:
Level 1: quoted market price (unadjusted) in an active market for an identical instrument.
Level 2: inputs other than quotes prices included within Level 1 that are observable either
directly (i.e, as prices) or indirectly (i.e, derived from prices). This category includes
instruments valued using: quoted market prices in active markets for similar instruments;
quoted prices for similar instruments in markets that are considered less than active; or
other valuation techniques where all significant inputs are directly or indirectly
observable from market data.
Level 3: inputs that are unobservable. This category includes all instruments where the
valuation technique includes inputs not based on observable data and the unobservable
inputs have a significant effect on the instrument’s valuation. This category includes
instruments that are valued based on quoted prices for similar instruments where
significant unobservable adjustments or assumptions are required to reflect differences
between the instruments.
The table below analyses financial instruments measured at fair value on reccuring basis at
31 December 2013, by the level in the fair value hierarchy into which the fair value measurement
is categorized. The amounts are based on the values recognized in the statement of financial
position:
RUB ’000 Level 1 Level 2 Level 3 Total
Assets
Financial instruments held for trading
- Debt and other fixed income
instruments 16,373,825 1,565,900 - 17,939,725
- Derivative assets - 1,573,019 - 1,573,019
16,373,825 3,138,919 - 19,512,744
LLC Deutsche Bank
Notes to, and forming part of, the financial statements for the year ended 31 December 2013
63
RUB ’000 Level 1 Level 2 Level 3 Total
Liabilities
Financial instruments held for trading
- Derivative liabilities - 1,235,710 - 1,235,710
- 1,235,710 - 1,235,710
The table below analyses financial instruments measured at fair value on recurring basis at
31 December 2012, by the level in the fair value hierarchy into which the fair value measurement
is categorized. The amounts are based on the values recognized in the statement of financial
position:
RUB ’000 Level 1 Level 2 Level 3 Total
Assets
Financial instruments held for trading
- Debt and other fixed income
instruments 53,233,005 2,380,262 - 55,613,267
- Derivative assets - 367,010 - 367,010
53,233,005 2,747,272 - 55,980,277
Liabilities
Financial instruments held for trading
- Derivative liabilities - 246,734 - 246,734
- 246,734 - 246,734
For all financial instruments measured at fair value categorized in Level 2, discounted cash flow
techniques are used to estimate fair values, except for structured derivatives contracts included in
derivative assets and liabilities. Fair values for these instruments are estimated using stochastic
volatility option pricing models. All inputs to the valuation models are directly observable or
derived from similar traded contracts.
The carrying values of all financial instruments not measured at fair value on a recurring basis
approximates their fair values.
________________________________ _____________________________
Joerg Bongartz Alexander Kirejev
Chairman of the Board Chief Accounant