Deutsche Bank – Responsibility

Frequently asked questions (FAQ's)

Our responses to your most asked questions.

Latest update: May 23, 2013

New Compensation System for Management Board Members

1. What major changes does the new compensation system for Management Board members involve compared with the previous system?

  • In the past, the two variable compensation components were determined almost exclusively on the basis of financial key figures. The new system reflects a much stronger alignment to Deutsche Bank's strategic and business policy objectives, its values, and – very importantly – client satisfaction and the bank's reputation.
  • In this connection, the performance criteria for the two variable components have been broadened to take account of the wide-ranging goals and challenges that company managers face and to ensure that compensation is well balanced and strongly aligned to a sustainable development.
  • This includes a stronger focus on qualitative aspects so that compensation is not just linked to financial targets but also a reflection of "how" performance is achieved.
  • The revised shareholding guidelines round off the picture by requiring Management Board members to hold a certain number of Deutsche Bank shares or share awards. This fosters their long term identification with the bank and ensures that they act in the shareholders' interests.

2. Why was the compensation system adjusted at this particular point in time?

As already reported at our March 2013 press conference, the Management Board and the Supervisory Board last autumn commissioned an independent compensation review panel to conduct a detailed examination of the compensation systems in place across the Group, including a special focus on Management Board and Supervisory Board compensation, and to draw up proposals for redesigning the pay structures. Concrete recommendations have already been incorporated into the new compensation system.

The recalibration and ongoing development of the compensation system – with its strong alignment to strategic and business policy objectives and wider performance criteria – is another major step towards realizing the bank’s Strategy 2015+ and ultimately also the bank's envisaged cultural change. The Supervisory Board decided not to waste any time in putting these improvements into practice, both in the interests of the bank as a whole and its shareholders.

3. How is the new compensation system to be seen in light of the European Union’s announced regulatory changes?

Starting in 2014, the European Union will introduce a limit on the ratio between variable and fixed compensation components. According to our information, this regulation will also apply to the compensation for the Management Board of Deutsche Bank AG. However, the precise requirements have not yet been stipulated.

In view of these forthcoming regulatory reforms, the new compensation system has not made any changes to the size of Management Board base salaries.

We currently anticipate that the compensation system for the Management Board will be presented again at the next General Meeting as part of the implementation of the finalized regulatory requirements.

4. How has the level of total compensation changed in the new compensation system compared to the previous system?

The aim of the new compensation system was to implement structural changes to the previous system. By creating a stronger alignment to the bank’s strategic and business policy objectives and broadening the performance criteria, it can react very sensitively to the progress made in achieving the objectives. This ensures that compensation is well balanced and sustainable over the long term.

Furthermore, an upper limit for total compensation was introduced for 2013 that is well below the maximum total compensation formerly possible for the Co-Chairmen of the Management Board.

For more information please visit: Compensation

Progress on Cultural Change

1. What has Deutsche Bank done in the area of cultural change?

Since September 2012, we have delivered on three priorities:

  • First, we have reconfigured and continue to implement sustainable and responsible compensation practices;
  • Second, we have continued to strengthen our control environment;
  • And third, we have laid the foundations for longer-term culture change at Deutsche Bank. In September we were under no illusions – this must be a multi-year commitment. However, we were in absolutely no doubt: we must start at once. We’re convinced that the right culture, and values which are aligned with all our stakeholders, is essential to the success of our business.

2. What has Deutsche Bank done to reform compensation practices?

Our Compensation Panel, chaired by Dr. Jürgen Hambrecht, was formed in the autumn. Its recommendations already played a part in the 2012 year-end compensation process. And we have already made significant changes. We have reduced bonuses as a proportion of revenues to around half what they were pre-crisis. We have extended deferrals for our most senior leaders to 5 years – more closely aligning their rewards with long-term success. We have eliminated multi-year bonus guarantees. We have increased transparency on compensation. And we have reduced the burden on future earnings from deferred bonuses.

Based on the latest recommendations from the panel we have two further initiatives ongoing: To integrate our cultural priorities and the risk management function, more closely into the compensation process; and to achieve a proper alignment of reward as between employees, retained earnings, and investors.

3. What tangible impacts has this work had?

The impact of our work has already influenced the balance of reward between our different stakeholders. The variable compensation ratio, which was over 20% pre-crisis, is now below 10%. And in absolute terms, variable compensation has come down by 11% between 2011 and 2012, and in 2012, as recommended by the Compensation Panel, we reduced our deferral rate from 61% to 47%, thus reducing the financial burden on future years’ earnings.

4. What about measures to strengthen the control environment?

  • We have very substantially strengthened the control culture in our business lines – our ‘first line’ of defense. We have massively increased our mandatory compliance training. This year we are rolling out mandatory Business Conduct and Ethics training for all employees. Our control environment is not just the responsibility of our Compliance department. It is the responsibility of every manager and every employee at Deutsche Bank.
  • We have also significantly developed our systems and processes. We have tightened our client adoption procedures. We have expanded our new product approval processes. We have strengthened our Reputational Risk Committees. We have bolstered our defenses against potential “rogue trading activities” by installing a Trade Detection Testing program, which tests the resilience of our control environment against potentially problematic trades. During the third quarter last year we created an independent Benchmark Submission Oversight function within Market Risk Management. This body commenced oversight of Deutsche Bank’s LIBOR submissions in September.
  • But good systems and procedures must be followed and enforced. We have significantly strengthened our “red flag” monitoring system which reports any breaches of compliance requirements in specific areas. We have also integrated the results of our monitoring into our governance and reporting structures.
  • We make sure there are consequences for any staff member who does not respect our control environment. The results of our monitoring are now bound into the promotion process and year-end bonus-setting process. By the end of the 4th quarter, “red flag” incidents in CB&S and GTB had fallen by nearly 50% versus end 2011.

5. Does this mean you have eliminated the risks?

No, it doesn’t. Some deliberate, calculated abuse by individuals is always a risk, in every large organization. But by constantly tightening our control environment, we are striving to lock in improvements which reduce scope for the problems of recent years, whose aftermath we are now dealing with.

6. How has Deutsche Bank laid foundations for longer-term change?

  • Immediately after concluding our strategy review, we conducted the most comprehensive dialogue in recent years – we gathered feedback from more than 52,000 employees. The results were followed by intense discussion with our leadership group in November.
  • We have also redesigned our Group performance standards around our cultural priorities, and these will form the basis for setting the objectives of each and every employee for 2013.

7. When do you expect to see results of the Bank’s work on cultural change?

We have already seen substantial results from our near-term measures in changing compensation practices and strengthening our control environment. However, we are under no illusions that deep cultural change is a process of years, not months. Nevertheless, the Management Board and Group Executive Committee are fully committed to this process.

For more informatio please visit: New corporate values and cultural change

Diversity – Female Quota

1. What is the proportion of female employees in the different corporate levels at Deutsche Bank?

Total 42.0 %*
Tariff percentage 56.0 %*
Management percentage 30.8 %*
Senior Management percentage 18.0 %*
   
Women on the Executive Board none
Women on the Supervisory Board** 6 (out of a total of 20 Supervisory Board members)
= 30 %
of which 2 shareholder representatives and 4
employee representatives

*Definition based on DAX-30 voluntary commitment: figures on full-time equivalent basis, excl. Postbank; the last 3 figures (tariff, management and senior management) do not include the acquisition of Sal Opp and BHF as no corporate titles have been introduced; as of 31.12.2012

**Effective as per close of AGM on 23 May 2013

2. What is Deutsche Bank’s position in terms of “Female Pipeline”?

Building the female pipeline across all levels is an integral part of our management agenda.

Deutsche Bank and the other 29 DAX companies made a voluntary commitment to the German Federal Government to increase the proportion of females (subject to applicable laws worldwide) in:

  • senior management positions (MD and D) to 25% by the end of 2018,
  • all officer positions (MD, D, VP, AVP and Assoc) to 35 % by the end of 2018.

Each year we identify annual goals based on promotion, hiring and attrition and we report internally on progress.

We believe that this voluntary commitment is a sound basis for building the female pipeline across all levels, particularly at the senior management level.

3. What are Deutsche Bank’s key initiatives to promote advancement of female employees?

Global:

  • Our Award winning ATLAS (Accomplished Top Leaders Advancement Strategy) initiative was launched in 2009 by the Chairman of the Management Board and Group Executive Committee, with the goal of increasing the number of women in senior management positions. Participants are provided with direct sponsorship from Senior Management. Since inception, 50% of ATLAS participants have moved into larger roles (4 women have moved into larger roles twice, one woman is now in her third bigger role).
  • Deutsche Bank Women Global Leaders (DB WGL) at INSEAD launched in 2010. It is a one week program designed to accelerate the progress of high performing female Directors into Managing Director positions.
  • Since 1995, Deutsche Bank has hosted the annual Women in Business Conferences in Frankfurt, London, New York, Singapore and Sydney attracting more than 5000 clients, industry leaders and employees globally. This year in Frankfurt marked our 50th Conference and in May, for the first time, we’ll host a Conference in Milan in cooperation with an external partner.
  • Twelve established Women’s Network Groups across all 5 regions with senior business women chairing.

Germany:

  • The Women on Boards initiative aims to increase the proportion of females in the supervisory boards of our operational subsidiaries in Germany and in the regional advisory boards.
  • Diversity Leadership Training on unconscious bias covering various diversity topics including gender
  • Work life balance initiatives e.g. through flexible work arrangements, childcare facilities, (300 kindergarten places at 6 different locations) cooperation with pme Familienservice, Leistungskontensystem “db Zeitinvest” etc.
  • Deutsche Bank has established policies around work and life (e.g. flexible working, return to work and part time arrangements etc).

4. What are Deutsche Bank’s main achievements with regard to female advancement?

  • Deutsche Bank selected as one of Catalyst’s 2013 Recognized Practices for ATLAS. This is a new initiative for Catalyst to recognize organizational programs that help make real change for women and other diverse groups (Feb 2013).
  • UK: “Global Award” for the Opportunity Now Excellence in Practice Award 2012 for ATLAS (April 2012).
  • UK: Deutsche Bank included in the Times Top 50 Employers for Women list (April 2012).
  • USA: Traders Magazine selected DB to receive “Diversity Achievement Award”. Award cited quantitative and qualitative achievements in improving gender diversity in the executive ranks (October 2011).
  • UK: “Best for Mothers Award” at the Top Employers for Working Families Benchmark and Awards (June 2011).
  • Germany: Recertification of our family-aware HR policies under Hertie Foundation’s job and family audit (August 2010).
  • Germany: One of the first companies to sign the Diversity Charta for Companies in Germany (December 2006), since 2010 a member of the newly established association, since December 2012 board member of the association.

Investments in Agricultural Commodities

The agricultural commodities sector has been the subject of controversial discussions for some time now. Deutsche Bank set up a working group to analyze the role financial investors play on the commodity futures markets already in 2011. In March of last year, the Bank decided to temporarily halt the launch of new staples-based exchange-traded products.

After evaluating numerous studies on the matter, the working group established that there is little empirical evidence to support the notion that the growth of agricultural-based financial products has caused price increases or volatility. At the same time, it confirmed that agricultural commodity-based futures markets offer substantial benefits to farmers and processors.

Thus, Deutsche Bank's Management Board decided to continue to offer financial instruments based on agricultural staples. The following Q&As provide more details on this decision as well as a summary of the working group's findings.

1. To what extent is Deutsche Bank involved in transactions in the agricultural sector?

  • The agricultural sector is a key component of the global economy. In developing countries alone, more than USD 80 billion need to be invested every year in order to increase productivity levels to meet the increasing demand for food in the coming decades.
  • We support these investment needs. We offer a variety of funds so our clients are able to invest in the entire value chain in agriculture, including in innovations and technology. These investments can take the form of shares or direct investments or, as in the case of the Africa Agriculture and Trade Investment Fund (AATIF), financing that the fund provides directly to farmers and processors or indirectly via local banking systems.
  • Of course, we also offer credit facilities and financing for farm operators, trading companies and food processors. Our clients operate around the world.
  • And last but not least, we also provide our clients with hedging services for agricultural commodities as well as exchange-traded funds (ETFs).

2. Why is Deutsche Bank continuing to offer its clients staples-based financial products?

  • We have carefully reviewed the causes of rising and volatile food prices. The vast majority of studies agree that the fundamental cause of rising food prices is sharply rising demand that is not yet matched by supply. Demand is surging because of population and income growth in developing countries while production is limited by water scarcity, climate change, lack of infrastructure and harvest waste.
  • The review of numerous studies revealed that there is no convincing evidence that the growth of agricultural-based financial products has led to either higher or more volatile prices.
  • At the same time, commodity derivative markets offer farmers and processors a number of benefits. Firstly, these markets allow producers and processors to hedge against fluctuating prices. Second, they provide strong price signals that enable farmers to better judge and plan supply within the constraints of the growing season. Finally, they give farmers the certainty they need to make long-term investments in infrastructure and farming technologies. Financial investors inject liquidity into these markets.
  • After a period of intensive consultation and reflection, we have lifted our temporary halt on launching new exchange-traded products based on agricultural staples. And in the future, when new products are launched, our approval process will make sure that the investment strategies which underpin our investor products do not facilitate price spikes.

3. Are financial investors responsible for increased food prices that lead to so many people suffering from hunger?

  • Food demand is substantially outpacing the limited supply: as a result commodity prices are rising. Without significant investments in agriculture, rising prices will become a permanent fixture.
  • The world is expected to have nine billion people to feed. Furthermore, most of the population growth is expected in developing countries, in which the middle class is growing rapidly. As a result of shifting consumption trends, this growth pattern has a significant impact on the demand for meat. Meat generally requires two to five times more grain to produce the same calorific value of the grain itself.
  • At the same time, food supply is challenged in much of the developing world because of constraints on production and distribution, such as outdated farming techniques, severe weather events, the impact of climate change and an weak storage and distribution infrastructure.
  • Agricultural production could be raised substantially by adopting improved farming technologies. If farmers were to generate more revenue from their crops, they could buy the tools to increase output still further and help satisfy demand.
  • The price of a commodity in isolation is meaningless; it is affordability that is important. Poverty makes food less affordable and leads to hunger. Increasing the supply of food to meet demand should help push down prices and reduce poverty.

4. What role do speculators play? Is there a risk of excessive speculation?

  • Speculators are indispensable for the functioning of commodities markets. They are the investors, market-makers and traders who provide the liquidity that the producers and processing industry need to insure themselves.
  • The role of speculation in the commodities markets has been extensively examined and there is no conclusive evidence nor consensus that it is excessive or is adversely impacting prices.
  • The greater the number of participants in the market and the broader the range, the more likely the market is to generate optimal liquidity, efficiency and transparency and to produce prices that most accurately reflect fundamentals.
  • Farmers need a proper and robust price signal in order to make investment decisions, such as implementing more advanced farming methods to boost production. And farmers need futures markets to insure against the risk of changing prices within the growing season.

5. Are commodity prices disconnected from supply and demand?

  • Pricing on all markets, agricultural markets included, is a search process during which prices may temporarily overreact.
  • It is also clear that an increase in financial investments in the derivatives markets can only result in price spikes on the spot markets if the demand for the physical commodity rises.
  • In actual fact, evidence suggests that financial investors have not created additional demand. This largely reflects the fact that agricultural commodity-based index funds or exchange-traded funds (ETFs) are not backed by physical commodities.

6. But is it not true that speculating on commodities drives up the price in local markets?

  • First, prices are determined by fundamental factors such as consumer demand and demand of the processing industries on the one hand and, on the other, by crop harvests (actual and anticipated) and existing stocks. Price discrepancies at the local level are mostly the result of trading barriers and other distortions.
  • Unlike for corn and wheat, there is no liquid market in rice futures. And yet rice prices have been just as volatile as corn and wheat prices with the difference being that producers and processors are unable to insure themselves against these fluctuations.

7. Do we need more regulation in these derivative markets? Should we ban financial investments in commodities markets?

  • The G20 has articulated a five-point Action Plan on Food Price Volatility and Agriculture which aims to address many of the structural deficiencies in the sector. It also promotes appropriate regulatory reform to limit market abuse and increase transparency. We firmly support these proposals.
  • Functioning markets require a solid regulatory framework. This is as true for derivative markets as for any other. Greater transparency will ensure market integrity.
  • We do have concerns, however, about proposals to introduce position limits in the European Union under the Markets in Financial Instruments Directive (MiFID). Such measures would restrict a bank's ability to execute customized trades tailored to the needs of its clients.
  • In the US, rules on position limits introduced by the Commodity Futures Trading Commission (CFTC) have been vacated by the court because the CFTC did not provide evidence that these rules are necessary for limiting "excessive speculation". The CFTC has appealed the decision.

For more information please visit: Agricultural commodities and food prices  

Nuclear Power

1. Deutsche Bank has been criticized for supporting the nuclear industry. Why does Deutsche Bank continue to be involved?

  • Deutsche Bank supports a well-balanced energy mix that takes economics as well as ecology into account and is, at the same time, future-oriented.
  • That is why we provide financing also for the development and utilization of renewable energies. In this field, Deutsche Bank is among the most important investors and providers of financing worldwide. However, it is still not possible to meet the substantial global energy demand solely through renewable energy sources. For this reason, we will continue to finance a diversified range of energy.
  • Given the increasing energy demand, we believe that nuclear power will remain one of
    the key sources of low-carbon electricity generation.

2. Has the incident in Fukushima had any impact on Deutsche Bank’s position on nuclear power?

  • After the nuclear accident in Fukushima in March 2011, the public perception of nuclear power safety in Germany changed considerably. Even before Fukushima, Deutsche Bank refused financing opportunities in earth quake-prone areas, nevertheless an explicit guidance related to civil nuclear energy was introduced in 2012.
  • Our sustainability check ensures that specific country and project-related criteria are thoroughly reviewed. These criteria apply to any type of financial involvement by DB and refer to adherence to international conventions and treaties as well as environmental, safety, and social assessments.

3. Can you specify how these specific criteria can be found in your day to day decisions on business with the nuclear industry?

  • Enhanced due diligence with regards to project specifics and country of operation includes questions regarding the ratification of key international conventions and treaties such as:
    • Convention on Nuclear Safety (NS) (IAEA, Vienna 1994),
    • Joint Convention on the Safety of Spent Fuel Management and on the Safety of Radioactive Waste Management (RADW) (IAEA, Vienna 1997),
    • Convention on Early Notification of a Nuclear Accident (ENC) (IAEA, Vienna 1986),
    • Nuclear Non-Proliferation Treaty (NPT) (UNO, New York 1968).
  • On the project side, the evaluation of significant seismic or flood risks, the impact on and protection of communities, and the adherence of the project design, construction, and operation to the minimum health and safety standards by International Atomic Energy Authority receive special attention. 

4. Is there any type of transaction related to the civil nuclear sector that you generally would object to support?

  • Potential business opportunities are reviewed on a case by case basis by applying our internal criteria as above. The decision to pursue or to withdraw from a particular business opportunity is based on the due diligence results.

For more information please visit Nuclear power

Cluster Munitions

1. Has Deutsche Bank stopped financing Cluster Munitions?

  • Deutsche Bank has not provided direct funding for cluster munitions since 2009. An expanded Cluster Munitions Policy has been in effect since autumn 2011 following the decision of the Management Board in September 2011 to exit relationships and not engage in new business.
  • Deutsche Bank Group Policy on Cluster Munitions reflects the complexity of the issue and goes beyond our previous approach. The Policy prohibits doing business with conglomerates that manufacture or distribute cluster munitions, including its key components banned under the Oslo Convention on Cluster Munitions.

2. Does this policy apply to all transactions?

  • The Cluster Munitions Policy applies to all types of transactions.
  • Deutsche Bank has already exited relationships with several conglomerates. At the same time we honour prior contracts in cases where committed credit lines exist. However, we do not engage in new business with such companies.
  • We consider doing business with clients in this segment only if we obtain a written statement confirming the termination of its cluster munitions-related business. In cases when clients have existing contracts, we may accept the time-bound intent to terminate production.

3. How does Deutsche Bank evaluate companies?

  • Deutsche Bank’s evaluation of potential cluster munitions conglomerates is supported by three independent research institutes: Ethix SRI research, Sustainalytics and Oekom Research. Additionally, the companies have the possibility to react to the allegations.
  • On a quarterly basis Group Sustainability reports to the Group Reputational Risk Committee on the implementation of the policy.

4. How is Asset Management covered by the Cluster Munitions Policy?

  • The Deutsche Bank Policy on Cluster Munitions reflects the independent fiduciary obligations of the business unit Asset & Wealth Management (AWM).
  • AWM is putting in place policies and procedures that are consistent with the Group approach, but there will be a transition period due to the fiduciary nature of this business.
  • AWM Active Europe has implemented an ESG Policy which also includes statements on companies involved in Cluster Munitions. Generally, there will be no investments in such companies.

For more information please visit Cluster munitions

Coal and Coal-fired Power

1. What are your consequences after being flagged as “Climate Killer No. 1 amongst German Banks” by the NGO Urgewald?

  • Deutsche Bank is not a Climate Killer.
  • Deutsche Bank supports a well-balanced overall energy mix that takes economics as well as ecology into account and is, at the same time, future-oriented.
  • Renewable Energy is a crucial component in combating global warming and we support various activities in this business area.
  • However, it is currently not possible to fulfill the substantial energy requirements worldwide solely with renewable energies. That is why we finance a diversified range of energy.

2. How can Deutsche Bank justify doing business with mining companies given the negative environmental and social impacts?

  • Deutsche Bank’s Environmental and Social Reputational Risk Framework is an important part of our Reputational Risk Management program. It requires environmental and social due diligence as an integral part of the approval process for doing business in sectors such as the extractive industry.
  • Potential business opportunities are reviewed on a case by case basis by applying our internal standards. The decision to pursue or to withdraw from the considered business opportunity is based on the due diligence results.
  • Potential transactions are escalated to divisional or group-wide Reputational Risk Committees.
  • Given the increasing energy demand, we have to admit that in some regions of the world coal cannot be avoided. In those transactions that we are involved in, we make sure that the latest technology will be used and the highest efficiency levels are met.

3. Why does Deutsche Bank do business with companies involved in Mountain Top Removal?

  • DB offers a range of financing services to coal clients.
  • Deutsche Bank does not provide direct financing for and is not directly involved in Mountain Top Removal, apart from providing credit support to reclamation bonds that are issued to guarantee financing for the reconstitution of disturbed land.

4. Are you really convinced that the environmental damages caused by Mountain Top Removal can be offset by the issuance of reclamation bonds?

  • The credit support provided to the issuance of reclamation bonds to the State where the mine is located, insures that the legally required financial resources for the rehabilitation of the specific landscape is achieved. Through these transactions we ensure that the client can comply with the important pre-requirements for getting permission for the Mountain Top Removal project and provide compensation for any environmental implications.

For further information, please read pages 13 to 21 of our Corporate Responsibility Report available under the following link: PDF, 3.8 MB