6-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549



Form 6-K


REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR 15d-16
UNDER THE SECURITIES EXCHANGE ACT OF 1934

August 29, 2012
Commission File Number 001-15244
CREDIT SUISSE GROUP AG

(Translation of registrant’s name into English)
Paradeplatz 8, CH 8001 Zurich, Switzerland
(Address of principal executive office)



Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or
Form 40-F.


   Form 20-F      Form 40-F   
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):
Note: Regulation S-T Rule 101(b)(1) only permits the submission in paper of a Form 6-K if submitted solely to provide an attached annual report to security holders.
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):
Note: Regulation S-T Rule 101(b)(7) only permits the submission in paper of a Form 6-K if submitted to furnish a report or other document that the registrant foreign private issuer must furnish and make public under the laws of the jurisdiction in which the registrant is incorporated, domiciled or legally organized (the registrant’s “home country”), or under the rules of the home country exchange on which the registrant’s securities are traded, as long as the report or other document is not a press release, is not required to be and has not been distributed to the registrant’s security holders, and, if discussing a material event, has already been the subject of a Form 6-K submission or other Commission filing on EDGAR.
Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.

   Yes      No   
If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82-.












Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



 

 

CREDIT SUISSE GROUP AG

 (Registrant)

 

 

Date: August 29, 2012





By:

/s/ Tobias Guldimann

Tobias Guldimann

Chief Risk Officer





By:

/s/ David R. Mathers

David R. Mathers

Chief Financial Officer







For purposes of this report, unless the context otherwise requires, the terms “Credit Suisse,” “the Group,” “we,” “us” and “our” mean Credit Suisse Group AG and its consolidated subsidiaries. The business of Credit Suisse AG, the Swiss bank subsidiary of the Group, is substantially similar to the Group, and we use these terms to refer to both when the subject is the same or substantially similar. We use the term “the Bank” when we are only referring to Credit Suisse AG, the Swiss bank subsidiary of the Group, and its consolidated subsidiaries.



In various tables, use of “–” indicates not meaningful or not applicable.












List of abbreviations
1. Introduction
2. Capital
3. Risk exposure and assessment
4. Credit risk
5. Securitization risk in the banking book
6. Market risk
7. Operational risk
8. Equity securities in the banking book
9. Interest rate risk in the banking book



List of abbreviations

 
ABS  Asset-backed securities
A-IRB  Advanced Internal Ratings-Based Approach
AMA  Advanced Measurement Approach
 
BCBS  Basel Committee on Banking Supervision
BIS  Bank for International Settlements
 
CCF  Credit Conversion Factor
CDO  Collateralized Debt Obligation
CDS  Credit Default Swap
CLO  Collateralized Loan Obligation
CMBS  Commercial mortgage-backed securities
CRM  Credit Risk Management
 
DLE  Derivative Loan Equivalent
 
EAD  Exposure at Default
 
FINMA  Swiss Financial Market Supervisory Authority FINMA
 
IAA  Internal Assessment Approach
IMA  Internal Models Approach
IRB  Internal Ratings-Based Approach
IRC  Incremental Risk Capital Charge
 
LGD  Loss Given Default
 
MDB  Multilateral Development Banks
 
NTD  Nth-to-default
 
OTC  Over-the-counter
 
PD  Probability of Default
 
RAR  Risk Analytics & Reporting
RBA  Ratings-Based Approach
RMBS  Residential mortgage-backed securities
RPSC  Risk Processes and Standards Committee
 
SA  Standardized Approach
SFA  Supervisory Formula Approach
SMM  Standardized Measurement Method
SPE  Special purpose entity
SRW  Supervisory Risk Weights Approach
 
US GAAP  Accounting principles generally accepted in the US
 
VaR  Value-at-Risk



1. Introduction
The purpose of this Pillar 3 report is to provide updated information as of June 30, 2012 on our implementation of the Basel II framework and risk assessment processes in accordance with the Pillar 3 requirements. This document should be read in conjunction with the Credit Suisse Annual Report 2011 and the Credit Suisse 2Q12 Financial Report, which include important information on regulatory capital and risk management (specific references have been made herein to these documents). Since January 1, 2008, Credit Suisse has operated under the international capital adequacy standards set forth by the Basel Committee on Banking Supervision (BCBS), known as Basel II, as implemented by the Swiss Financial Market Supervisory Authority (FINMA).

In addition to Pillar 3 disclosures we disclose the way we manage our risks for internal management purposes in the Annual Report.

> Refer to “Risk management” (pages 110 to 134) in III – Treasury, Risk, Balance sheet and Off-balance sheet in the Credit Suisse Annual Report 2011 for further information regarding the way we manage risk.
> Refer to “Economic capital and position risk” (pages 114 to 117) in III – Treasury, Risk, Balance sheet and Off-balance sheet – Risk management in the Credit Suisse Annual Report 2011 for further information on economic capital, our Group-wide risk management tool.

Certain reclassifications have been made to prior periods to conform to the current period’s presentation.

The Pillar 3 report is produced and published semi-annually, in accordance with FINMA requirements.

This report was verified and approved internally in line with our Basel II Pillar 3 disclosure policy. The Pillar 3 report has not been audited by the Group’s external auditors. However, it also includes information that is contained within the audited consolidated financial statements as reported in the Credit Suisse Annual Report 2011.


Scope of application

The highest consolidated entity in the Group to which Basel II applies is Credit Suisse Group.

> Refer to “Regulation and supervision” (pages 27 to 36) in I – Information on the company and to “Treasury management” (pages 105 to 107) in III – Treasury, Risk, Balance sheet and Off-balance sheet in the Credit Suisse Annual Report 2011 for further information on regulation.


Principles of consolidation

For financial reporting purposes, our consolidation principles comply with accounting principles generally accepted in the US (US GAAP). For capital adequacy reporting purposes, however, entities that are not active in banking and finance are not subject to consolidation (i.e. insurance, real estate and commercial companies). These investments, which are not material to the Group, are treated in accordance with the regulatory rules and are either subject to a risk-weighted capital requirement or a deduction from regulatory capital. FINMA has advised the Group that it may continue to include equity from special purpose entities that are deconsolidated under US GAAP as tier 1 capital. We have also received an exemption from FINMA not to consolidate private equity fund type vehicles.

> Refer to “Note 38 – Significant subsidiaries and equity method investments” (pages 341 to 343) in V – Consolidated financial statements – Credit Suisse Group in the Credit Suisse Annual Report 2011 for a list of significant subsidiaries and associated entities of Credit Suisse.


Restrictions on transfer of funds or regulatory capital

We do not believe that legal or regulatory restrictions constitute a material limitation on the ability of our subsidiaries to pay dividends or our ability to transfer funds or regulatory capital within the Group.

> Refer to “Treasury management” (pages 90 to 109) in III – Treasury, Risk, Balance sheet and Off-balance sheet in the Credit Suisse Annual Report 2011 for information on our liquidity, funding and capital management and dividends and dividend policy.


Capital deficiencies

The Group’s subsidiaries which are not included in the regulatory consolidation did not report any capital deficiencies in 6M12.


Remuneration

The BCBS requires the national implementation of Pillar 3 disclosure requirements for remuneration no later than January 1, 2012. We implemented these disclosure requirements as of December 31, 2011.

> Refer to “Compensation” (pages 173 to 208) in IV – Corporate Governance and Compensation in the Credit Suisse Annual Report 2011 for further information on remuneration.

2. Capital
> Refer to “Treasury management” (pages 95 to 104) in III – Treasury, Risk, Balance sheet and Off-balance sheet in the Credit Suisse Annual Report 2011 and “Treasury management” (pages 44 to 49) in II – Treasury, risk, balance sheet and off-balance sheet in the Credit Suisse 2Q12 Financial Report for information on our capital structure, eligible capital and shareholders’ equity and capital adequacy.

> Refer to https://www.credit-suisse.com/investors/en/sub_ financials.jsp for further information on capital ratios of certain significant subsidiaries.

Regulatory capital is calculated and managed according to Basel regulations and used to determine BIS ratios and, according to the Swiss Capital Adequacy Ordinance, the FINMA capital requirement covering ratio. In January 2011, as required by FINMA, we implemented BCBS’s “Revisions to the Basel II market risk framework” (Basel II.5), for FINMA regulatory capital purposes. The BCBS required the implementation of Basel II.5 for BIS purposes no later than December 31, 2011. The main differences between the BIS and FINMA calculations are the multipliers used for certain risk classes and additional FINMA requirements for market risk. The main impact of the multipliers is related to credit non-counterparty-related risks, for which FINMA uses a multiplier of 3.0 whereas BIS uses a multiplier of 1.0. The additional FINMA requirements for market risk are requirements for stress-test-based risk-weighted assets for hedge funds.

BIS ratios compare eligible tier 1 capital and total capital with BIS risk-weighted assets whereas the FINMA capital requirement covering ratio compares total capital with FINMA required capital.


Description of regulatory approaches

The Basel II framework provides a range of options for determining the capital requirements in order to allow banks and supervisors the ability to select approaches that are most appropriate. In general, Credit Suisse has adopted the Advanced Model Approaches, which align with the way that risk is internally managed and provide the greatest risk sensitivity. Basel II and Basel II.5 focuses on credit risk, market risk, operational risk, securitization risk in the banking book and equity and interest rate risk in the banking book. The regulatory approaches for each of these risk exposures and the related disclosures under Pillar 3 are set forth below.

Credit risk
Basel II permits banks a choice between two broad methodologies in calculating their capital requirements for credit risk, the internal ratings-based (IRB) approach or the standardized approach. Off-balance-sheet items are converted into credit exposure equivalents through the use of credit conversion factors (CCF).

The majority of our credit risk is with institutional counterparties (sovereigns, other institutions, banks and corporates) and arises from lending and trading activity in the Investment Banking and Private Banking divisions. The remaining credit risk is with retail counterparties and mostly arises in the Private Banking division from residential mortgage loans and other secured lending, including loans collateralized by securities.

Advanced internal ratings-based approach
Under the IRB approach, risk weights are determined by using internal risk parameters. We have received approval from FINMA to use, and have fully implemented, the advanced internal ratings-based (A-IRB) approach whereby we provide our own estimates for probability of default (PD), loss given default (LGD) and exposure at default (EAD). We use the A-IRB approach to determine our institutional credit risk and most of our retail credit risk.

PD parameters capture the risk of a counterparty defaulting over a one-year time horizon. PD estimates are based on time-weighted averages of historical default rates by rating grade, with low-default-portfolio estimation techniques applied for higher quality rating grades. Each PD reflects the internal rating for the relevant obligor.

LGD parameters consider seniority, collateral, counterparty industry and in certain cases fair value markdowns. LGD estimates are based on an empirical analysis of historical loss rates and are calibrated to reflect time and cost of recovery as well as economic downturn conditions. For much of the Private Banking loan portfolio, the LGD is primarily dependent upon the type and amount of collateral pledged. For other retail credit risk, predominantly loans secured by financial collateral, pool LGDs differentiate between standard and higher risks, as well as domestic and foreign transactions. The credit approval and collateral monitoring process are based on loan-to-value limits. For mortgages (residential or commercial), recovery rates are differentiated by type of property.

EAD is either derived from balance sheet values or by using models. EAD for a non-defaulted facility is an estimate of the gross exposure upon default of the obligor. Estimates are derived based on a CCF approach using default-weighted averages of historical realized conversion factors on defaulted loans by facility type. Estimates are calibrated to capture negative operating environment effects.

We have received approval from FINMA to use the internal model method for measuring counterparty risk for the majority of our derivative and secured financing exposures.

Risk weights are calculated using either the PD/LGD approach or the supervisory risk weights (SRW) approach for certain types of specialized lending.

Standardized approach
Under the standardized approach, risk weights are determined either according to credit ratings provided by recognized external credit assessment institutions or, for unrated exposures, by using the applicable regulatory risk weights. Less than 10% of our credit risk is determined using this approach.

Market risk
For calculating the capital requirements for market risk, the internal models approach (IMA), the standardized measurement method (SMM) and the standardized approach (SA) are used.

Internal models approach
We have received approval from FINMA, as well as from certain other regulators of our subsidiaries, to use our VaR model to calculate trading book market risk capital requirements under the IMA. We apply the IMA to the majority of the positions in our trading book. We continue to receive regulatory approval for ongoing enhancements to the VaR methodology, and the VaR model is subject to regular reviews by regulators and auditors.

The market risk IMA framework has been extended to include an incremental risk capital charge (IRC) and stressed VaR, to meet the Basel II.5 market risk framework. The IRC is a regulatory capital charge for default and migration risk on positions in the trading books and intended to complement additional standards being applied to the VaR modelling framework, including stressed VaR. Stressed VaR replicates a VaR calculation on the Group’s current portfolio taking into account a one-year observation period relating to significant financial stress and helps reducing the pro-cyclicality of the minimum capital requirements for market risk.

The IRC model is required to measure the aggregate risk from the exposure to default and migration risk from positions in our trading book. The positions that contribute to IRC are bond positions where we are exposed to profit or loss on default or rating migration of the bond issuer, credit defaults swaps (CDS) positions were we are exposed to credit events affecting the reference entity, and, to a lesser extent, derivatives that reference bonds and CDSs such as bond options and CDS swaptions. Equity positions are typically not included in IRC, but some exceptions exist, such as convertible instruments. Positions excluded from IRC include securitization position and credit correlation products (such as synthetic CDOs, and nth-to-default (NTD) trades).

The IRC model assesses risk at 99.9% confidence over a one year time horizon assuming that positions are sold and replaced one or more times. At the same time upon replacement, the model considers credit quality of the old position and assesses the effect of declining or upgrading of credit quality which may lead to changes in the overall assessment of IRC.

The level of capital assigned by the IRC model to a position in the trading book depends on its liquidity horizon which represents time required to sell the positions or hedge all material risk covered by the IRC model in a stressed market. The absolute liquidity horizons are imposed by Basel II guidelines. In general, positions with shorter assigned liquidity horizons will contribute less to overall IRC.

The IRC model and liquidity horizon methodology have been validated in accordance with the firms validation umbrella policy and IRC sub-policy, with focus on the modelling framework, use of data, benchmarking and documentation.

Standardized measurement method
We use the SMM which is based on the ratings-based approach (RBA) and the supervisory formula approach (SFA) for securitization purposes (see also Securitization risk in the banking book) and the standardized approach for NTD trades.

Standardized approach
We use the standardized approach to determine our market risk for a small population of positions which represent an immaterial proportion of our overall market risk exposure.

Operational risk
We have received approval from FINMA to use the advanced measurement approach (AMA) for measuring operational risk. The economic capital/AMA methodology is based upon the identification of a number of key risk scenarios that describe the major operational risks that we face. Groups of senior staff review each scenario and discuss the likelihood of occurrence and the potential severity of loss. Internal and external loss data, along with certain business environment and internal control factors, such as self-assessment results and key risk indicators, are considered as part of this process. Based on the output from these meetings, we enter the scenario parameters into an operational risk model that generates a loss distribution from which the level of capital required to cover operational risk is determined. Insurance mitigation is included in the capital assessment where appropriate, by considering the level of insurance coverage for each scenario and incorporating haircuts as appropriate.

Securitization risk in the banking book
For securitizations, the regulatory capital requirements are calculated using IRB approaches: the RBA and the SFA, applied in accordance with the prescribed hierarchy of approaches in the Basel regulations. External ratings used in regulatory capital calculations for securitization risk exposures in the banking book are obtained from Fitch, Moody’s, Standard & Poor’s or Dominion Bond Rating Service.

Other risks
For equity type securities in the banking book, risk weights are determined using the IRB Simple approach based on the equity sub-asset type (qualifying private equity, listed equity and all other equity positions).

Regulatory fixed risk weights are applied to settlement and non-counterparty-related exposures. Settlement exposures arise from unsettled or failed transactions where cash or securities are delivered without a corresponding receipt. Non-counterparty-related exposures arise from holdings of premises and equipment, real estate and investments in real estate entities.

For other items, we received approval from FINMA to apply a simplified Institute Specific Direct Risk Weight approach to immaterial portfolios.





Risk-weighted assets (Basel II.5)
  6M12 2011

end of
Ad-
vanced

Stan-
dardized


Total

Ad-
vanced

Stan-
dardized


Total

Risk-weighted assets (CHF million)  
Sovereigns  4,413 74 4,487 4,907 61 4,968
Other institutions  1,424 115 1,539 1,509 114 1,623
Banks  15,122 320 15,442 19,717 347 20,064
Corporates  76,811 157 76,968 82,108 155 82,263
Residential mortgage  10,313 10,313 11,193 11,193
Qualifying revolving retail  291 291 289 289
Other retail  9,609 8 9,617 9,307 8 9,315
Other exposures  8,298 8,298 8,054 8,054
Credit risk 1 117,983 8,972 126,955 129,030 8,739 137,769
Market risk  34,994 369 35,363 39,459 1,150 40,609
Operational risk  43,775 43,775 36,088 36,088
Equity type securities in the banking book  12,077 12,077 11,673 11,673
Securitization risk in the banking book  6,518 57 6,575 5,752 62 5,814
Settlement risk  263 263 397 397
Non-counterparty-related risk  7,334 7,334 7,819 7,819
Other items  1,363 1,363 1,584 1,584
Total risk-weighted assets  215,347 18,358 233,705 222,002 19,751 241,753
Other multipliers 2 731 15,685 16,416 713 16,676 17,389
VaR hedge fund add-on 3 1,039 1,039 1,424 1,424
Total FINMA risk-weighted assets  217,117 34,043 251,160 224,139 36,427 260,566
1    For a description of the asset classes refer to section 4 - Credit risk.   2    Primarily related to credit non-counterparty-related risk.   3    The VaR hedge fund capital add-on is stress-test-based and was introduced by the FINMA in 2008 for hedge fund exposures in the trading book. This capital add-on is required for the FINMA calculation in addition to the VaR-based market risk capital charge already included in BIS capital. For further information, refer to section 6 – Market risk.



BIS and FINMA statistics (Basel II.5)
  Group Bank
end of 6M12 2011 6M12 2011 1
BIS statistics  
Core tier 1 capital (CHF million)  29,116 25,956 26,211 24,210
Tier 1 capital (CHF million)  38,512 36,844 35,607 35,098
Total eligible capital (CHF million)  47,230 48,654 45,669 48,390
Core tier 1 ratio (%)  12.5 10.7 11.7 10.4
Tier 1 ratio (%)  16.5 15.2 15.9 15.1
Total capital ratio (%)  20.2 20.1 20.4 20.8
FINMA statistics  
FINMA required capital (CHF million) 2 20,093 20,845 19,249 20,039
Capital requirement covering ratio (%)  235.1 233.4 237.3 241.5
1    Restated to reflect the integration of Clariden Leu.   2    Calculated as 8% of total risk-weighted assets.



3. Risk exposure and assessment
The Group is exposed to several key banking risks such as credit risk (refer to section 4 – Credit risk), securitization risk in the banking book (refer to section 5 – Securitization risk in the banking book), market risk (refer to section 6 – Market risk), operational risk (refer to section 7 – Operational risk), equity risk in the banking book (refer to section 8 – Equity securities in the banking book) and interest rate risk in the banking book (refer to section 9 – Interest rate risk in the banking book.

> Refer to “Risk management” (pages 110 to 114) in III – Treasury, Risk, Balance sheet and Off-balance sheet in the Credit Suisse Annual Report 2011 for information on risk management oversight including risk governance, risk organization, risk types and risk appetite and risk limits.

4. Credit risk

General

> Refer to “Credit risk” (pages 123 to 133) in III – Treasury, Risk, Balance sheet and Off-balance sheet – Risk management in the Credit Suisse Annual Report 2011 for information on our credit risk management approach, ratings and risk mitigation and impaired exposures and allowances.

For regulatory purposes, we categorize our exposures into broad classes of assets with different underlying risk characteristics including type of counterparty, size of exposure and type of collateral. The asset class categorization is driven by Basel II regulatory rules. The credit asset classes under Basel II are set forth below and are grouped as either institutional or retail.

Institutional credit risk
Sovereigns: exposures to central governments, central banks, BIS, the International Monetary Fund, the European Central Bank and eligible Multilateral Development Banks (MDB).

Other institutions: exposures to public bodies with the right to raise taxes or whose liabilities are guaranteed by a public sector entity.

Banks: exposures to banks, securities firms, stock exchanges and those MDB that do not qualify for sovereign treatment.

Corporates: exposures to corporations (except small businesses) and public sector entities with no right to raise taxes and whose liabilities are not guaranteed by a public entity. The Corporate asset class also includes specialized lending, in which the lender looks primarily to a single source of revenues to cover the repayment obligations and where only the financed asset serves as security for the exposure (e.g., income producing real estate or commodities finance).

Retail credit risk
Residential mortgages: includes exposures secured by residential real estate collateral occupied or let by the borrower.

Qualifying revolving retail: includes credit card receivables and overdrafts.

Other retail: includes loans collateralized by securities and small business exposures.

Other credit risk
Other exposures: includes exposures with insufficient information to treat under the A-IRB approach or to allocate under the Standardized approach into any other asset class.

Gross credit exposures by regulatory approach and risk-weighted assets
     

A-IRB

Stan-
dardized


Total
Risk-
weighted
assets
  PD/LGD SRW

end of
Pre-
substitution

1
Post-
substitution









6M12 (CHF million)  
Sovereigns  101,829 101,331 7,893 109,224 4,487
Other institutions  4,456 4,374 1 542 4,917 1,539
Banks  49,452 52,598 16 1,050 53,664 15,442
Corporates  177,023 174,457 1,305 660 176,422 76,968
Total institutional credit exposures  332,760 332,760 1,322 10,145 344,227 98,436
Residential mortgage  94,761 94,761 94,761 10,313
Qualifying revolving retail  175 175 175 291
Other retail  54,978 54,978 9 54,987 9,617
Total retail credit exposures  149,914 149,914 9 149,923 20,221
Other exposures  13,885 13,885 8,298
Total gross credit exposures  482,674 482,674 1,322 24,039 508,035 126,955
2011 (CHF million)  
Sovereigns  115,834 113,659 7,783 121,442 4,968
Other institutions  5,554 5,567 538 6,105 1,623
Banks  59,349 65,090 17 1,219 66,326 20,064
Corporates  187,801 184,222 1,401 650 186,273 82,263
Total institutional credit exposures  368,538 368,538 1,418 10,190 380,146 108,918
Residential mortgage  92,820 92,820 92,820 11,193
Qualifying revolving retail  174 174 174 289
Other retail  53,993 53,993 8 54,001 9,315
Total retail credit exposures  146,987 146,987 8 146,995 20,797
Other exposures  15,515 15,515 8,054
Total gross credit exposures  515,525 515,525 1,418 25,713 542,656 137,769
1    Gross credit exposures are shown pre- and post-substitution as, in certain circumstances, credit risk mitigation is reflected by shifting the counterparty exposure from the underlying obligor to the protection provider.



Gross credit exposures and risk-weighted assets
  6M12 2011


End of



Monthly
average


Risk-
weighted
assets




End of



Monthly
average


Risk-
weighted
assets


Gross credit exposures (CHF million)  
Loans, deposits with banks and other assets 1 361,308 353,066 77,512 370,027 321,075 77,948
Guarantees and commitments  62,637 61,701 22,198 59,990 66,652 23,465
Securities financing transactions  24,873 29,930 3,007 30,664 32,179 3,716
Derivatives  59,217 71,079 24,238 81,975 86,624 32,640
Total  508,035 515,776 126,955 542,656 506,530 137,769
1    Includes interest bearing deposits with banks, banking book loans, available-for-sale debt securities and other receivables.



Geographic distribution of gross credit exposures

end of

Switzerland


EMEA


Americas

Asia
Pacific


Total

6M12 (CHF million)  
Loans, deposits with banks and other assets 1 164,183 108,625 64,104 24,396 361,308
Guarantees and commitments  14,352 18,871 27,538 1,876 62,637
Securities financing transactions  2,749 7,477 13,558 1,089 24,873
Derivatives  6,488 28,734 18,513 5,482 59,217
Total  187,772 163,707 123,713 32,843 508,035
2011 (CHF million)  
Loans, deposits with banks and other assets 1 168,961 103,947 73,285 23,834 370,027
Guarantees and commitments  13,319 17,962 27,030 1,679 59,990
Securities financing transactions  3,553 8,747 17,491 873 30,664
Derivatives  7,928 43,543 22,516 7,988 81,975
Total  193,761 174,199 140,322 34,374 542,656
The geographic distribution is based on the country of incorporation or the nationality of the counterparty, shown pre-substitution.
1    Includes interest bearing deposits with banks, banking book loans, available-for-sale debt securities and other receivables.



Industry distribution of gross credit exposures

end of
Financial
institutions


Commercial


Consumer

Public
authorities


Total

6M12 (CHF million)  
Loans, deposits with banks and other assets 1 18,417 127,022 112,313 103,556 361,308
Guarantees and commitments  3,889 53,033 3,997 1,718 62,637
Securities financing transactions  6,697 14,444 21 3,711 24,873
Derivatives  21,040 28,287 1,528 8,362 59,217
Total  50,043 222,786 117,859 117,347 508,035
2011 (CHF million)  
Loans, deposits with banks and other assets 1 16,659 131,130 109,522 112,716 370,027
Guarantees and commitments  3,292 51,141 3,582 1,975 59,990
Securities financing transactions  9,429 17,923 32 3,280 30,664
Derivatives  31,239 37,794 1,770 11,172 81,975
Total  60,619 237,988 114,906 129,143 542,656
Exposures are shown pre-substitution.
1    Includes interest bearing deposits with banks, banking book loans, available-for-sale debt securities and other receivables.



Remaining contractual maturity of gross credit exposures

end of
within
1 year

1
within
1-5 years


Thereafter


Total

6M12 (CHF million)  
Loans, deposits with banks and other assets 2 219,243 102,146 39,919 361,308
Guarantees and commitments  23,726 35,845 3,066 62,637
Securities financing transactions  24,835 27 11 24,873
Derivatives  22,810 33,674 2,733 59,217
Total  290,614 171,692 45,729 508,035
2011 (CHF million)  
Loans, deposits with banks and other assets 2 231,016 102,323 36,688 370,027
Guarantees and commitments  21,488 35,935 2,567 59,990
Securities financing transactions  30,598 57 9 30,664
Derivatives  29,837 49,475 2,663 81,975
Total  312,939 187,790 41,927 542,656
1    Includes positions without agreed residual contractual maturity.   2    Includes interest bearing deposits with banks, banking book loans, available-for-sale debt securities and other receivables.




Portfolios subject to PD/LGD approach

Rating models
Rating models are based on statistical data and are subject to a thorough review before implementation. Credit rating models are developed by Risk Analytics & Reporting (RAR) or Credit Risk Management (CRM) and independently validated by Risk Model Validation prior to use within the Basel II regulatory capital calculation, and thereafter on a regular basis. To ensure that ratings are consistent and comparable across all businesses, we have used an internal rating scale which is benchmarked to an external rating agency using the historical PD associated with external ratings.

At the time of initial credit approval and review, relevant quantitative data (such as financial statements and financial projections) and qualitative factors relating to the counterparty are used by CRM in the models and result in the assignment of a credit rating or PD, which measures the counterparty’s risk of default over a one-year period.

New or materially changed rating models are submitted for approval to the Risk Processes and Standards Committee (RPSC) prior to implementation. RPSC reviews the continued use of existing models on an annual basis.

CRM is an independent function with responsibility for approving credit ratings and limits, monitoring and managing individual exposures and assessing and managing the quality of the segment and business area’s credit portfolios. RAR is an independent function with responsibility for risk analytics, reporting, systems implementation and policies. CRM and RAR report to the Chief Risk Officer.

Descriptions of the rating processes
For the purposes of internal ratings, we have developed a set of credit rating models tailored for different internal client segments in both Investment Banking and Private Banking (e.g., international corporates, financial institutions, asset finance, small and medium-sized entities, commodity traders, residential mortgages, etc.) and transaction types.

Counterparty and transaction rating process – Corporates (excluding corporates managed on the Swiss platform), banks and sovereigns (primarily in the Investment Banking division)
Internal ratings are based on the analysis and evaluation of both quantitative and qualitative factors. The specific factors analyzed are dependent on the type of counterparty. The analysis emphasizes a forward looking approach, concentrating on economic trends and financial fundamentals. Credit officers make use of peer analysis, industry comparisons, external ratings and research and the judgment of credit experts.

For structured and asset finance deals, the approach is more quantitative. The focus is on the performance of the underlying assets, which represent the collateral of the deal. The ultimate rating is dependent upon the expected performance of the underlying assets and the level of credit enhancement of the specific transaction. Additionally, a review of the originator and/or servicer is performed. External ratings and research (rating agency and/or fixed income and equity), where available, are incorporated into the rating justification, as is any available market information (e.g., bond spreads, equity performance).

Transaction ratings are based on the analysis and evaluation of both quantitative and qualitative factors. The specific factors analyzed include seniority, industry and collateral. The analysis emphasizes a forward looking approach.

Counterparty and transaction rating process – Corporates managed on the Swiss platform, mortgages and other retail (primarily in the Private Banking division)
For corporates managed on the Swiss platform and mortgage lending, the statistically derived rating models, which are based internally compiled data comprising both quantitative factors (primarily loan-to-value ratio and the borrower’s income level for mortgage lending and balance sheet information for corporates) and qualitative factors (e.g., credit histories from credit reporting bureaus). Collateral loans, which form the largest part of “other retail”, are treated according to Basel II rules with pool PD and pool LGD based on historical loss experience. Most of the collateral loans are loans collateralized by securities.

As a rule, the allocation of exposures to institutional or retail as outlined in the following tables is based on the rating models segment split, but also takes into account further explicit regulatory rules.

Relationship between PD bands and counterparty ratings
  PD bands (%) 1
6M12 2011
Counterparty ratings  
AAA  0.000-0.022 0.000-0.022
AA  0.022-0.044 0.022-0.044
A  0.044-0.097 0.044-0.097
BBB  0.097-0.487 0.097-0.487
BB  0.487-2.478 0.487-2.478
B or lower  2.478-99.999 2.478-99.999
Default (net of specific provisions) 
1    PD bands are subject to slight changes over time as a result of routine recalibrations of PD parameters, which are generally updated on an annual basis.



Institutional credit exposures by counterparty rating under PD/LGD approach

end of 6M12

Total
exposure
(CHF m)



Exposure-
weighted
average
LGD (%)



Exposure-
weighted
average risk
weight (%)



1
Undrawn
commit-
ments
(CHF m)



Sovereigns  
AAA  67,750 8.73 1.34 4
AA  25,373 4.01 0.66 15
A  4,360 52.22 33.76
BBB  2,705 55.12 34.32
BB  807 19.47 40.55
B or lower  33 44.66 167.22
Default (net of specific provisions)  303
Total credit exposure  101,331 19
Exposure-weighted average CCF (%) 2 99.90
Other institutions  
AAA 
AA  2,485 49.81 16.62 247
A  894 50.89 30.80 141
BBB  739 49.21 36.05 268
BB  174 51.48 150.41 10
B or lower  82 42.80 153.32 41
Default (net of specific provisions) 
Total credit exposure  4,374 707
Exposure-weighted average CCF (%) 2 75.66
Banks  
AAA 
AA  14,429 53.94 14.17 37
A  25,130 53.30 19.94 151
BBB  8,208 40.49 35.33 49
BB  3,483 49.69 89.84 28
B or lower  1,133 25.36 85.06 7
Default (net of specific provisions)  215
Total credit exposure  52,598 272
Exposure-weighted average CCF (%) 2 95.00
Corporates  
AAA 
AA  29,740 42.60 13.42 9,874
A  39,339 40.88 16.52 12,157
BBB  47,251 37.27 34.98 10,470
BB  44,204 35.78 67.98 6,603
B or lower  12,099 30.45 110.62 3,178
Default (net of specific provisions)  1,824 62
Total credit exposure  174,457 42,344
Exposure-weighted average CCF (%) 2 76.90
Total institutional credit exposure  332,760 43,342
1    The exposure-weighted average risk weights in percentage terms is the multiplier applied to regulatory exposures to derive risk-weighted assets, and may exceed 100%.   2    Calculated before credit risk mitigation.



Institutional credit exposures by counterparty rating under PD/LGD approach (continued)

end of 2011

Total
exposure
(CHF m)



Exposure-
weighted
average
LGD (%)



Exposure-
weighted
average risk
weight (%)



1
Undrawn
commit-
ments
(CHF m)



Sovereigns  
AAA  65,664 9.35 1.71 4
AA  40,624 5.63 1.04
A  3,752 51.55 34.76 15
BBB  2,542 56.16 32.13
BB  829 20.64 44.11
B or lower  247 46.08 241.96
Default (net of specific provisions)  1
Total credit exposure  113,659 19
Exposure-weighted average CCF (%) 2 99.81
Other institutions  
AAA 
AA  3,541 51.00 16.85 189
A  986 53.36 33.54 164
BBB  867 45.44 34.61 241
BB  88 34.64 70.37 8
B or lower  85 43.75 158.28
Default (net of specific provisions) 
Total credit exposure  5,567 602
Exposure-weighted average CCF (%) 2 81.01
Banks  
AAA  1
AA  18,224 53.79 15.19 26
A  32,133 54.14 21.26 134
BBB  9,256 44.92 39.42 7
BB  3,933 52.21 97.02 39
B or lower  1,281 27.65 99.10 11
Default (net of specific provisions)  263
Total credit exposure  65,090 218
Exposure-weighted average CCF (%) 2 95.58
Corporates  
AAA 
AA  39,909 42.50 12.22 9,206
A  41,577 47.58 19.81 12,385
BBB  45,307 41.95 39.35 9,845
BB  43,593 37.41 69.84 5,576
B or lower  11,740 34.05 116.56 3,199
Default (net of specific provisions)  2,096 10
Total credit exposure  184,222 40,221
Exposure-weighted average CCF (%) 2 78.67
Total institutional credit exposure  368,538 41,060
1    The exposure-weighted average risk weights in percentage terms is the multiplier applied to regulatory exposures to derive risk-weighted assets, and may exceed 100%.   2    Calculated before credit risk mitigation.



Retail credit exposures by expected loss band under PD/LGD approach

end of 6M12

Total
exposure
(CHF m)



Exposure-
weighted
average
LGD (%)



Exposure-
weighted
average risk
weight (%)



1
Undrawn
commit-
ments
(CHF m)



Residential mortgages  
0.00%-0.15%  86,156 16.61 7.50 1,307
0.15%-0.30%  5,288 26.79 27.52 208
0.30%-1.00%  2,878 29.65 47.91 152
1.00% and above  193 28.63 96.44 1
Defaulted (net of specific provisions)  246 0
Total credit exposure  94,761 1,668
Exposure-weighted average CCF (%) 2 97.15
Qualifying revolving retail  
0.00%-0.15% 
0.15%-0.30% 
0.30%-1.00% 
1.00% and above  174 60.00 157.31
Defaulted (net of specific provisions)  1
Total credit exposure  175
Exposure-weighted average CCF (%) 2 99.77
Other retail  
0.00%-0.15%  48,488 49.37 14.38 613
0.15%-0.30%  1,009 49.83 31.06 100
0.30%-1.00%  2,850 42.83 34.45 169
1.00% and above  2,340 21.26 32.08 17
Defaulted (net of specific provisions)  291 2
Total credit exposure  54,978 901
Exposure-weighted average CCF (%) 2 95.05
Total retail credit exposure  149,914 2,569
1    The exposure-weighted average risk weights in percentage terms is the multiplier applied to regulatory exposures to derive risk-weighted assets, and may exceed 100%.   2    Calculated before credit risk mitigation.



Retail credit exposures by expected loss band under PD/LGD approach (continued)

end of 2011

Total
exposure
(CHF m)



Exposure-
weighted
average
LGD (%)



Exposure-
weighted
average risk
weight (%)



1
Undrawn
commit-
ments
(CHF m)



Residential mortgages  
0.00%-0.15%  82,228 16.56 7.94 1,155
0.15%-0.30%  6,122 24.89 26.66 206
0.30%-1.00%  3,913 28.96 47.58 235
1.00% and above  287 28.85 94.05 1
Defaulted (net of specific provisions)  270 3
Total credit exposure  92,820 1,600
Exposure-weighted average CCF (%) 2 97.34
Qualifying revolving retail  
0.00%-0.15% 
0.15%-0.30% 
0.30%-1.00% 
1.00% and above  173 60.00 157.31
Defaulted (net of specific provisions)  1
Total credit exposure  174
Exposure-weighted average CCF (%) 2 99.84
Other retail  
0.00%-0.15%  47,765 47.66 14.35 467
0.15%-0.30%  1,095 50.29 31.33 99
0.30%-1.00%  2,589 43.14 33.53 145
1.00% and above  2,353 21.62 32.55 29
Defaulted (net of specific provisions)  191 3
Total credit exposure  53,993 743
Exposure-weighted average CCF (%) 2 95.58
Total retail credit exposure  146,987 2,343
1    The exposure-weighted average risk weights in percentage terms is the multiplier applied to regulatory exposures to derive risk-weighted assets, and may exceed 100%.   2    Calculated before credit risk mitigation.




Portfolios subject to the standardized and supervisory risk weights approaches

Standardized approach
Under the standardized approach, risk weights are determined either according to credit ratings provided by recognized external credit assessment institutions or, for unrated exposures, by using the applicable regulatory risk weights. Less than 10% of our credit risk is determined using this approach. Balances include banking book treasury liquidity positions.

Supervisory risk weights approach
For specialized lending exposures, internal rating grades are mapped to one of five supervisory categories, associated with a specific risk weight under the SRW approach.

Equity IRB Simple approach
For equity type securities in the banking book, risk weights are determined using the IRB Simple approach, which differentiates by equity sub-asset types (qualifying private equity, listed equity and all other equity positions).

Standardized and supervisory risk weighted exposures after risk mitigation by risk weighting bands

end of
Standardized
approach


SRW

Equity IRB
Simple


Total

6M12 (CHF million)  
0%  12,223 1,113 0 13,336
1%-50%  4,231 18 0 4,249
51%-100%  7,585 133 0 7,718
101%-200%  0 58 2,744 2,802
201%-400%  0 0 1,893 1,893
Total  24,039 1,322 4,637 29,998
2011 (CHF million)  
0%  13,857 1,087 0 14,944
1%-50%  4,704 19 0 4,723
51%-100%  7,152 249 0 7,401
101%-200%  0 58 2,733 2,791
201%-400%  0 5 1,757 1,762
Total  25,713 1,418 4,490 31,621




Credit risk mitigation used for A-IRB and standardized approaches

Credit risk mitigation processes used under the A-IRB and standardized approaches include on- and off-balance sheet netting and utilizing eligible collateral as defined under the IRB approach.

Netting
> Refer to “Derivative instruments” (pages 132 to 133) in III – Treasury, Risk, Balance sheet and Off-balance sheet – Risk management and to “Note 1 – Summary of significant accounting policies” (page 223) in V – Consolidated financial statements – Credit Suisse Group in the Credit Suisse Annual Report 2011 for information on policies and procedures for on- and off-balance sheet netting.

Collateral valuation and management
The policies and processes for collateral valuation and management are driven by:

a legal document framework that is bilaterally agreed with our clients; and

a collateral management risk framework enforcing transparency through self-assessment and management reporting.

For collateralized portfolio by marketable securities, the valuation is performed daily. Exceptions are governed by the calculation frequency described in the legal documentation. The mark-to-market prices used for valuing collateral are a combination of firm and market prices sourced from trading platforms and service providers, where appropriate. The management of collateral is standardized and centralized to ensure complete coverage of traded products.

For the Private Banking mortgage lending portfolio, real estate property is valued at the time of credit approval and periodically afterwards, according to our internal directives and controls, depending on the type of loan (e.g., residential, commercial) and loan-to-value ratio.

Primary types of collateral
The primary types of collateral are described below.



Collateral securing foreign exchange transactions and over-the-counter (OTC) trading activities primarily includes:

Cash and US Treasury instruments;

G-10 government securities; and

Gold or other precious metals.

Collateral securing loan transactions primarily includes:

Financial collateral pledged against loans collateralized by securities of Private Banking clients (primarily cash and marketable securities);

Real estate property for mortgages, mainly residential, but also multi-family buildings, offices and commercial properties; and

Other types of lending collateral, such as accounts receivable, inventory, plant and equipment.

Concentrations within risk mitigation
Our Investment Banking division is an active participant in the credit derivatives market and trades with a variety of market participants, principally commercial banks and broker dealers. Credit derivatives are primarily used to mitigate investment grade counterparty exposures.

Concentrations in our Private Banking lending portfolio arise due to a significant volume of mortgages in Switzerland. The financial collateral used to secure loans collateralized by securities worldwide is generally diversified and the portfolio is regularly analyzed to identify any underlying concentrations, which may result in lower loan-to-value ratios.

> Refer to “Credit risk” (pages 123 to 133) in III – Treasury, Risk, Balance sheet and Off-balance sheet – Risk management in the Credit Suisse Annual Report 2011 for further information on risk mitigation.

Credit risk mitigation used for A-IRB and standardized approaches

end of

Eligible
financial
collateral



Other
eligible
IRB
collateral



Eligible
guarantees
/credit
derivatives



6M12 (CHF million)  
Sovereigns  501 0 1,150
Other institutions  10 134 478
Banks  3,843 0 1,289
Corporates  6,983 27,601 19,543
Residential mortgages  3,442 72,081 20
Other retail  45,187 1,874 97
Total  59,966 101,690 22,577
2011 (CHF million)  
Sovereigns  570 0 2,617
Other institutions  116 136 462
Banks  3,724 0 1,439
Corporates  9,365 26,196 22,594
Residential mortgages  3,321 70,496 25
Other retail  45,434 1,007 74
Total  62,530 97,835 27,211
Excludes collateral used to adjust EAD (e.g. as applied under the internal models method).




Counterparty credit risk

Counterparty exposure
Counterparty credit risk arises from OTC derivatives, repurchase agreements, securities lending and borrowing and other similar products and activities. The subsequent credit risk exposures depend on the value of underlying market factors (e.g., interest rates and foreign exchange rates), which can be volatile and uncertain in nature.

We have received approval from FINMA to use the internal model method for measuring counterparty risk for the majority of our derivative and secured financing exposures.

Credit limits
All credit exposure is approved, either by approval of an individual transaction/facility (e.g., lending facilities), or under a system of credit limits (e.g., OTC derivatives). Credit exposure is monitored daily to ensure it does not exceed the approved credit limit. These credit limits are set either on a potential exposure basis or on a notional exposure basis. Secondary debt inventory positions are subject to separate limits that are set at the issuer level.

> Refer to “Credit risk” (pages 123 to 133) in III – Treasury, Risk, Balance sheet and Off-balance sheet – Risk management in the Credit Suisse Annual Report 2011 for further information on counterparty credit risk, including and transaction rating, credit approval process and provisioning.

Wrong-way exposures
Correlation risk arises when we enter into a financial transaction where market rates are correlated to the financial health of the counterparty. In a wrong-way trading situation, our exposure to the counterparty increases while the counterparty’s financial health and its ability to pay on the transaction diminishes.

Capturing wrong-way risk requires the establishment of basic assumptions regarding correlations for a given trading product. We have multiple processes that allow us to capture and estimate wrong-way risk.

Credit approval and reviews
A primary responsibility of CRM is to monitor counterparty exposure and the creditworthiness of a counterparty, both at the initiation of the relationship and on an ongoing basis. Part of the review and approval process is an analysis and discussion to understand the motivation of the client and to identify the directional nature of the trading in which the client is engaged. Credit limits are agreed in line with the Group’s risk appetite framework taking into account the strategy of the counterparty, the level of disclosure of financial information and the amount of risk mitigation that is present in the trading relationship (e.g., level of collateral).

Exposure adjusted risk calculation
Material trades that feature specific wrong-way risk have higher risk weighting built into the exposure calculation process compared to “right-way” trades.

Purchased credit default swaps, equity puts and other derivatives – Specific wrong-way risk exists where the counterparty and the underlying reference asset belong to the same group. In these cases, exposure is calculated assuming counterparty default and applying the recovery value of the underlying reference asset.

Equity finance – If there is a high relatedness between the counterparty and the underlying equity, exposure is calculated as full notional (i.e., zero equity recovery).

Reverse repurchase agreements – Specific wrong-way risk exists where the underlying issuer and the counterparty are affiliated. In these cases, collateral used as an offset in the exposure calculation process is lowered to its recovery value.

Wrong-way risk monitoring
Wrong-way risk at both the individual trade and portfolio level is regularly reported to allow corrective action to be taken by CRM in the case of heightened concern.

Country exposure reporting – Exposure is reported against country limits established for emerging market countries. As part of the exposure reporting process, wrong-way risk exposures are given a higher risk weighting versus non-correlated transactions.

Counterparty exposure reporting – Transactions that contain specific wrong-way risk (e.g., repurchase agreements, equity finance) are risk-weighted as part of the daily exposure calculation process and utilize more of the credit limit.

Correlated repurchase and foreign exchange reports – Monthly reports produced by CRM capture correlated finance and foreign exchange positions for information and review by credit officers.

Scenario analysis – In order to capture wrong-way risk at the industry level, a set of defined scenarios are run on the credit portfolio each month. The scenarios are determined by CRM and involve stressing the underlying risk drivers to determine where portfolios are sensitive to these stressed parameters.

Scenario reporting also covers client groups, particularly hedge funds, which are exposed to particular risk sensitivities and also may have collateral concentrations due to the direction and strategy of the fund.

Effect of a credit rating downgrade
On a daily basis, we monitor the level of incremental collateral that would be required by derivative counterparties in the event of a Credit Suisse ratings downgrade. Collateral triggers are maintained by our collateral management department and vary by counterparty.

> Refer to “Credit ratings” (page 44) in II – Treasury, risk, balance sheet and off-balance sheet – Treasury management in the Credit Suisse 2Q12 Financial Report for further information on the effect of a one, two or three notch downgrade as of June 30, 2012.

The impact of downgrades in the Bank’s long-term debt ratings are considered in the stress assumptions used to determine the conservative funding profile of our balance sheet and would not be material to our liquidity and funding needs.

> Refer to “Liquidity and funding management” (pages 90 to 95) in III – Treasury, Risk, Balance sheet and Off-balance sheet – Treasury management in the Credit Suisse Annual Report 2011 for further information on liquidity and funding management.

Credit exposures on derivative instruments
We enter into derivative contracts in the normal course of business for market making, positioning and arbitrage purposes, as well as for our own risk management needs, including mitigation of interest rate, foreign currency and credit risk. Derivative exposure also includes economic hedges, where the Group enters into derivative contracts for its own risk management purposes but where the contracts do not qualify for hedge accounting under US GAAP. Derivative exposures are calculated according to regulatory methods, using either the current exposures method or approved internal models method. These regulatory methods take into account potential future movements and as a result generate risk exposures that are greater than the net replacement values disclosed for US GAAP.

As of the end of 2011, no credit derivatives were utilized that qualify for hedge accounting under US GAAP.

> Refer to “Credit risk” (pages 132 to 133) in III – Treasury, Risk, Balance sheet and Off-balance sheet – Risk management and “Note 30 – Derivatives and hedging activities” (pages 285 to 293) in V – Consolidated financial statements – Credit Suisse Group in the Credit Suisse Annual Report 2011 and “Note 23 – Derivatives and hedging activities” (pages 105 to 112) in III – Condensed consolidated financial statements in the Credit Suisse 2Q12 Financial Report for further information on derivative instruments.

Derivative exposure at default after netting
end of 6M12 2011
Derivative exposure at default (CHF million)  
Internal models method  32,281 49,255
Current exposure method  26,936 32,720
Total derivative exposure  59,217 81,975



Collateral used for risk mitigation
end of 6M12 2011
Collateral used for risk mitigation for the internal models method (CHF million)  
Financial collateral - cash / securities  43,619 44,623
Other eligible IRB collateral  774 668
Total collateral used for the internal models method  44,393 45,291
Collateral used for risk mitigation for the current exposure method (CHF million)  
Financial collateral - cash / securities  3,690 5,193
Other eligible IRB collateral  125 43
Total collateral used for the current exposure method  3,815 5,236



Credit derivatives that create exposures to counterparty credit risk (notional value) 
  6M12 2011

end of
Protection
bought

Protection
sold

Protection
bought

Protection
sold

Credit derivatives that create exposures to counterparty credit risk (CHF billion)  
Credit default swaps  981.3 936.0 1,024.4 985.9
Total return swaps  3.8 0.0 3.8 1.0
First-to-default swaps  0.5 0.0 0.3 0.0
Other credit derivatives  17.3 13.3 15.2 12.1
Total  1,002.9 949.3 1,043.7 999.0



Allowances and impaired loans
The following tables provide additional information on allowances and impaired loans by geographic distribution and changes in the allowances for impaired loans.

Geographic distribution of allowances and impaired loans 

end of


Specific
allowances




Inherent
credit loss
allowances





Total
allowances




Loans with
specific
allowances



Loans with
inherent
credit loss
allowances




Total
impaired
loans



6M12 (CHF million)  
Switzerland  556 203 759 1,161 254 1,415
EMEA  42 16 58 54 62 116
Americas  42 20 62 110 68 178
Asia Pacific  42 7 49 65 0 65
Total  682 246 928 1,390 384 1,774
2011 (CHF million)  
Switzerland  529 199 728 1,253 154 1,407
EMEA  54 17 71 111 4 115
Americas  39 26 65 122 13 135
Asia Pacific  28 18 46 61 0 61
Total  650 260 910 1,547 171 1,718
The geographic distribution of impaired loans is based on the location of the office recording the transaction. This presentation does not reflect the way the Group is managed.



Changes in the allowances for impaired loans 
  6M12 6M11

in

Specific
allowances


Inherent
credit loss
allowances




Total



Specific
allowances


Inherent
credit loss
allowances




Total


Changes in the allowances for impaired loans (CHF million)  
Balance at beginning of period  650 260 910 749 268 1,017
Net additions/(releases) charged to income statement  65 (14) 51 30 (15) 15
   Gross write-offs  (87) 0 (87) (108) 0 (108)
   Recoveries  31 0 31 23 0 23
Net write-offs  (56) 0 (56) (85) 0 (85)
Provisions for interest  12 0 12 5 0 5
Foreign currency translation impact and other adjustments, net  11 0 11 (31) (5) (36)
Balance at end of period  682 246 928 668 248 916



> Refer to “Note 16 – Loans, allowance for loan losses and credit quality” (pages 91 to 99) in III – Condensed consolidated financial statements in the Credit Suisse 2Q12 Financial Report for further information on allowances and impaired loans by industry distribution and the industry distribution of charges and write-offs.

5. Securitization risk in the banking book
The following disclosures, which also considers the “Industry good practice guidelines on Pillar 3 disclosure requirements for securitization”, refer to traditional and synthetic securitizations held in the banking book and regulatory capital on these exposures calculated according to the Basel II IRB approach to securitization exposures. As of January 1, 2011, Basel II.5 amended and expanded the disclosure requirements on banking book securitization exposures but did not require retrospective application.

> Refer to “Note 32 – Transfers of financial assets and variable interest entities” (pages 299 to 310) in V – Consolidated financial statements – Credit Suisse Group in the Credit Suisse Annual Report 2011 and “Note 25 – Transfers of financial assets and variable interest entities” (pages 117 to 124) in III – Condensed consolidated financial statements in the Credit Suisse 2Q12 Financial Report for further information on securitization, the various roles, the use of SPEs, the involvement of the Group in consolidated and non-consolidated SPEs and the accounting policies for securitization activities.
> Refer to “Securitization risk in the banking book” in section 2 – Capital – Description of regulatory approaches for further information.

A traditional securitization is a structure where an underlying pool of assets is sold to a special purpose entity (SPE) which in return issues tranched securities that are collateralized by, and which pay a return based on the return on, the underlying asset pool. A synthetic securitization is a tranched structure where the credit risk of an underlying pool of exposures is transferred, in whole or in part, through the use of credit derivatives or guarantees that serve to hedge the credit risk of the portfolio. Many synthetic securitizations are not accounted for as securitizations under US GAAP. In both traditional and synthetic securitizations, risk is dependent on the seniority of the retained interest and the performance of the underlying asset pool.

The Group has both securitization and re-securitization transactions in the banking book referencing different types of underlying assets including real estate loans (commercial and residential), commercial loans and credit card loans. The key risks retained are related to the performance of the underlying assets. These risks are summarized in the securitization pool level attributes: PDs of underlying loans (default rate), severity of loss (LGD) and prepayment speeds. The transactions may also be exposed to general market risk, credit spread and counterparty credit risk.

The Group classifies securities within the transactions by the nature of the collateral (prime, sub-prime, Alt-A, commercial, etc.) and the seniority each security has in the capital structure (i.e. seniors, mezzanine, subordinate etc.), which in turn will be reflected in the transaction rating. The Group’s internal risk methodology is designed such that risk charges are based on the place the particular security holds in the capital structure, the less senior the bond the higher the risk charges.

For re-securitization risk, the Group’s risk management models take a 'look through' approach where the behavior of the underlying securities or constituent counterparties are modeled based on their own particular collateral positions. These are then transmitted to the re-securitized position. No additional risk factors are considered within the re-securitization portfolios in addition to those identified and measured within securitization risk.

The Group is active in various roles in connection with securitization, including originator, investor and sponsor. As originator, the Group creates or purchases financial assets (e.g., residential mortgages or corporate loans) and then securitizes them in a traditional or synthetic transaction that achieves significant risk transfer to third party investors. The Group acts as liquidity provider to Alpine Securitization Corp. (Alpine), a multi-seller commercial paper conduit administered by Credit Suisse.

In addition, the Group invests in securitization-related products created by third parties and provides interest rate and currency swaps to SPEs involved in securitization activity.

Retained banking book exposures for mortgage, ABS and CDO transactions are risk managed on the same basis as similar trading book transactions. Other transactions will be managed in line with their individual structural or parameter requirements. The Group has also put in place a set of key risk limits for the purpose of managing the Group's risk appetite framework in relation to securitizations and re-securitizations. Re-securitization transactions are put through the same risk management process as securitizations but with the focus on the risk of the underlying securities. The internal risk capital measurement is both consistent with securitization transactions and with similar structures in the trading book.

There are no instances where we have applied credit risk mitigation approaches where the underlying exposures are banking book securitizations or re-securitizations.

In the normal course of business it is possible for the Group’s managed separate account portfolios and the Group’s controlled investment entities, such as mutual funds, fund of funds, private equity funds and other fund linked products to invest in the securities issued by other vehicles sponsored by the Group engaged in securitization and re-securitization activities. To address potential conflicts, standards governing investments in affiliated products and funds have been adopted.

Securitization exposures purchased or retained – banking book
  On-balance sheet Off-balance sheet
end of Traditional Synthetic Traditional Synthetic Total
6M12 (CHF million)  
Commercial mortgages  1,897 0 0 0 1,897
Residential mortgages  115 0 0 0 115
CDO/CLO  2,297 22,288 0 0 24,585
Other ABS  1,057 2 9,634 0 10,693
Total  5,366 22,290 9,634 0 37,290
   of which subject to capital requirements  36,417
   of which subject to deductions  873
2011 (CHF million)  
Commercial mortgages  2,348 0 0 0 2,348
Residential mortgages  124 0 794 0 918
CDO/CLO  1,409 8,335 0 0 9,744
Other ABS  1,048 1 10,928 0 11,977
Total  4,929 8,336 11,722 0 24,987
   of which subject to capital requirements  24,603
   of which subject to deductions  384



Synthetic structures predominantly represent structures where the Group has mitigated its risk by selling the mezzanine tranche of a reference portfolio. Amounts disclosed, however, are the gross exposures securitized including retained senior notes.

The following table represents the total amounts of banking book loans securitized by the Group that fall within the Basel II Securitization Framework and where the Group continues to retain at least some interests. As of the end of June 30, 2012 and December 31, 2011, the Group's economic interests in these securitizations were CHF 34.3 billion and CHF 21.0 billion, respectively.

Exposures securitized by Credit Suisse Group in which the Group has retained interests – banking book
  6M12 2011
  Traditional Synthetic Traditional Synthetic
end of Sponsor Other role Other role Total Sponsor Other role Other role Total
Commercial mortgages  0 4,355 0 4,355 0 4,632 0 4,632
Residential mortgages  0 387 0 387 0 1,178 0 1,178
CDO/CLO  0 520 26,298 26,818 0 2,075 12,001 14,076
Other ABS  9,492 1,511 0 11,003 10,580 1,105 0 11,685
Total  9,492 6,773 26,298 42,563 10,580 8,990 12,001 31,571
   of which retained interests  34,349 21,029



Losses related to securitizations recognized during the period – banking book
  Traditional Synthetic
in Sponsor Other role Other role Total
6M12 (CHF million)  
Commercial mortgages  0 89 0 89
Total  0 89 0 89
6M11 (CHF million)  
CDO/CLO  0 0 0 0
Total  0 0 0 0



Impaired or past due assets securitized – banking book
  6M12 2011 1
  Other role Other role
end of Traditional Synthetic Total Traditional Synthetic Total
CHF million  
Commercial mortgages  3,806 0 3,806 3,363 0 3,363
Residential mortgages  28 0 28 28 0 28
CDO/CLO  0 1,946 1,946 0 1,558 1,558
Total  3,834 1,946 5,780 3,391 1,558 4,949
1    Updated for certain transactions not included in previous disclosures.



Securitization and re-securitization exposures by regulatory capital approach – banking book
  Securitization exposure Re-securitization exposure Total

end of
EAD
purchased/
retained


Risk-
weighted
assets


EAD
purchased/
retained


Risk-
weighted
assets


EAD
purchased/
retained


Risk-
weighted
assets


6M12 (CHF million)  
Ratings-based approach (RBA)  4,988 598 11,190 2,637 16,178 3,235
Supervisory formula approach (SFA)  17,559 1,965 2,680 1,375 20,239 3,340
Total  22,547 2,563 13,870 4,012 36,417 6,575
2011 (CHF million)  
Ratings-based approach (RBA)  6,057 717 11,477 3,035 17,534 3,752
Supervisory formula approach (SFA)  4,180 659 2,889 1,403 7,069 2,062
Total  10,237 1,376 14,366 4,438 24,603 5,814



Securitization and re-securitization exposures under RBA by rating grade – banking book
  Securitization exposure Re-securitization exposure Total

end of
EAD
purchased/
retained


Risk-
weighted
assets


EAD
purchased/
retained


Risk-
weighted
assets


EAD
purchased/
retained


Risk-
weighted
assets


6M12 (CHF million)  
AAA  4,228 321 10,274 2,091 14,502 2,412
AA  449 39 733 85 1,182 124
A  231 77 41 25 272 102
BBB  56 45 87 137 143 182
BB  24 116 55 299 79 415
Total  4,988 598 11,190 2,637 16,178 3,235
2011 (CHF million)  
AAA  4,911 405 10,915 2,182 15,826 2,587
AA  466 41 276 53 742 94
A  597 109 58 32 655 141
BBB  59 48 135 217 194 265
BB  24 114 93 551 117 665
Total  6,057 717 11,477 3,035 17,534 3,752



Securitization and re-securitization exposures under SFA by risk weight band – banking book
  Securitization exposure Re-securitization exposure Total

end of
EAD
purchased/
retained


Risk-
weighted
assets


EAD
purchased/
retained


Risk-
weighted
assets


EAD
purchased/
retained


Risk-
weighted
assets


6M12 (CHF million)  
0%-10%  17,071 1,195 686 137 17,757 1,332
11%-50%  157 18 1,120 475 1,277 493
51%-100%  208 145 349 177 557 322
101%-650%  41 51 310 481 351 532
651%-1250%  82 556 215 105 297 661
Total  17,559 1,965 2,680 1,375 20,239 3,340
2011 (CHF million)  
0%-10%  3,573 250 0 0 3,573 250
11%-50%  485 138 2,338 731 2,823 869
51%-100%  0 0 0 0 0 0
101%-650%  119 228 369 672 488 900
651%-1250%  3 43 182 0 185 43
Total  4,180 659 2,889 1,403 7,069 2,062



Deductions from eligible capital related to securitization and re-securitization exposures – banking book
  6M12 2011

end of
Credit
enhancing
interest only
strips





Other
exposures






Total



Credit
enhancing
interest only
strips





Other
exposures






Total



CHF million  
CDO/CLO  0 538 538 0 99 99
Other ABS  0 335 335 0 285 285
Total  0 873 873 0 384 384




Securitization activity

The Group securitized CHF 13.0 billion of counterparty exposures (categorized as synthetic CDO/CLO) in connection with its 2011 Partner Asset Facility. In addition, the Group securitized a CHF 442 million portfolio of low rated mortgage tranches in connection with the extension of the 2008 Partner Asset Facility.

The aggregate outstanding amount of securitized revolving retail exposures is CHF 826 million of which CHF 441 million represents the originator's interest and CHF 385 million (categorized as other ABS) the investor’s interest. The associated capital charges incurred by the Group under the standardized approach are CHF 18 million and zero, respectively.

The following table represents new securitization activity during the period.

Securitization activity – banking book
  6M12 6M11

in
Amount of
exposures
securitized


Recognized
gain/(loss)
on sale


Amount of
exposures
securitized


Recognized
gain/(loss)
on sale


CHF million  
Residential mortgages - traditional  0 0 375 0
CDO/CLO - traditional  264 0 0 0
CDO/CLO - synthetic  15,160 0 2,043 0
Other ABS - traditional  385 6 0 0
Total  15,809 6 2,418 0



6. Market risk
Market risk is managed under the IMA approach and under the approved securitization methodologies.

> Refer to “Market risk” (pages 117 to 123) in III – Treasury, Risk, Balance sheet and Off-balance sheet – Risk management in the Credit Suisse Annual Report 2011 and “Market risk” (pages 56 to 59) in II – Treasury, risk, balance sheet and off-balance sheet – Risk management in the Credit Suisse 2Q12 Financial Report for further information on market risk, including information on risk measurement and VaR.
> Refer to “Market risk” in section 2 – Capital – Description of regulatory approaches for further information on the incremental risk capital charge, stressed VaR and securitization risk in the trading book.

The following table shows risk-weighted assets for all market risk measures including the standardized approach.

Risk-weighted assets for market risk
end of 6M12 2011
Risk-weighted assets for market risk (CHF million)  
Total internal models approach  31,198 35,271
   of which incremental risk capital charge  8,253 13,391
   of which stressed VaR  16,872 15,053
   of which regulatory VaR  6,073 6,827
Total standardized measurement method  3,796 4,188
   of which ratings-based approach  3,226 3,636
   of which standardized approach  229 380
   of which supervisory formula approach  341 172
Total standardized approach  369 1,150
Total risk-weighted assets for market risk  35,363 40,609



Regulatory VaR, stressed VaR and incremental risk capital charge

in / end of
Regulatory
VaR

1
Stressed
VaR

1

IRC

2
6M12 (CHF million)  
Average  49 149 496
Minimum  37 64 284
Maximum  69 248 847
End of period  44 195 487
2011 (CHF million)  
Average  54 120 798
Minimum  37 82 363
Maximum  80 175 1,254
End of period  65 174 792
Excludes trading book securitizations, in line with BIS guidance.
1    For regulatory and stressed VaR, one-day VaR based on a 99% confidence level is presented, which is a ten-day VaR adjusted to a one-day holding period.   2    Based on daily calculations.




Securitization risk in the trading book

The following disclosures on trading book securitization exposures were adopted prospectively as of January 1, 2011 in connection with the implementation of Basel II.5.

> Refer to “Note 25 – Transfers of financial assets and variable interest entities” (pages 117 to 124) in III – Condensed consolidated financial statements in the Credit Suisse 2Q12 Financial Report for further information on securitization, the various roles, the use of SPEs, the involvement of the Group in consolidated and non-consolidated SPEs, the accounting policies for securitization activities and gains/losses relating to RMBS and CMBS securitization activity in 6M12.
> Refer to “Market risk” in section 2 – Capital – Description of regulatory approaches for further information.

Roles in connection with trading book securitization
Within our mortgage business there are four key roles that we undertake within securitization markets: issuer, underwriter, market maker and financing counterparty and the Group is actively involved in all four activities. The Group holds one of the top trading franchises in market making in all major securitized product types and are a top issuer and underwriter in the re-securitization market in the US as well as being one of the top underwriters in ABS securitization in the US. In addition the Group also has a relatively small correlation trading portfolio, having decided to exit the correlation trading market.

Securitization and re-securitization activities
The Group’s key objective in relation to trading book securitization is to meet clients’ investment and divestment needs by making markets in securitized products across all major collateral types, including residential mortgages, commercial mortgages, asset finance (i.e. auto loans, credit card receivables, etc.) and corporate loans. The Group focuses on opportunities to intermediate transfers of risk between sellers and buyers.

The Group is also active in new issue securitization and re-securitization. The Group’s Asset Finance team provides short-term secured warehouse financing to clients who originate credit card, auto loan and other receivables, and the Group sells asset-backed securities collateralized by these receivables to provide its clients long-term financing that matches the lives of their assets.

The Group purchases loans and bonds for the purpose of securitization and sells these assets to sponsored SPEs which in turn issue new securities. Re-securitizations of previously issued RMBS securities occur when certificates issued out of an existing securitization vehicle are sold into a newly created and separate securitization vehicle. Often, these re-securitizations are initiated in order to repackage an existing security to give the investor a higher rated tranche.

Risks assumed and retained
Key risks retained while securities or loans remain in inventory are related to the performance of the underlying assets (real estate loans, commercial loans, credit card loans, etc.). These risks are summarized in the securitization pool level attributes: PD of underlying loans (default rate), the severity of loss and prepayment speeds. The Group maintains models for both government-guaranteed and private label products. These models project the above risk drivers based on market interest rates and volatility as well as macro-economic variables such as housing price index, projected GDP and inflation, unemployment etc.

In its role as a market maker, the Group actively trades in and out of positions. Both Front Office and Risk Management continuously monitor liquidity risk as reflected in trading spreads and trading volumes. To address liquidity concerns a specific set of limits on the size of aged positions are in place for the securitized positions we hold.

The Group classifies securities by the nature of the collateral (prime, sub-prime, Alt-A, commercial, etc.) and the seniority each security has in the capital structure (i.e. seniors, mezzanine, subordinate etc.), which in turn will be reflected in the transaction risk assessment. Risk Management monitors portfolio composition by capital structure and collateral type on a daily basis with subordinate exposure and each collateral type subject to separate risk limits. In addition, the internal risk methodology is designed such that risk charges are based on the place the particular security holds in the capital structure, the less senior the bond the higher the risk charges.

For re-securitization risk, the Groups risk management models take a 'look through' approach where they model the behavior of the underlying securities based on their own collateral and then transmit that to the re-securitized position. No additional risk factors are considered within the re-securitization portfolios in addition to those identified and measured within securitization risk.

With respect to both the wind-down corporate correlation trading portfolio and the on-going transactions the key risks that need to be managed includes default risk, counterparty credit risk, correlation risk and cross effects between spread and correlation. The impacts of liquidity risk for securitization products is embedded within the firm’s historical simulation model through the incorporation of market data from stressed periods, and in the scenario framework through the calibration of price shocks to the same period.

Both correlation and first-to-default trades including any re-securitized transactions are valued using a correlation model which uses the market implied correlation and detailed market data such as constituent spread term structure and constituent recovery. The risks embedded in securitization and re-securitizations are similar and include spread risk, recovery risk, default risk and correlation risk. The risks for different seniority of tranches will be reflected in the tranche price sensitivities to each constituent in the pools. The complexity of the correlation portfolio’s risk lies in the level of convexity and cross risk inherent, for example, the risks to large spread moves and the risks to spread and correlation moving together. The risk limit framework is carefully designed to address the key risks for the correlation trading portfolio.

Monitoring of changes in credit and market risk of securitization exposures
The Group has in place a comprehensive risk management process whereby the front office and Risk Management work together to monitor positions and position changes, portfolio structure and trading activity and calculate a set of risk measures on a daily basis using risk sensitivities and loss modeling methodologies.

For the mortgage business the Group also uses monthly remittance reports (available from public sources) to get up to date information on collateral performance (delinquencies, defaults, pre-payment etc.).

The Group has implemented a Comprehensive Risk Measure model for its corporate correlation and first-to-default trading positions which incorporates a number of risk factors including hazard rate, default, migration and recovery rates, and correlation measures.

The Group has also put in place a set of limits for the purpose of managing the Group's risk appetite framework in relation to securitizations and re-securitizations. These limits will cover exposure measures, risk sensitivities, VaR and capital measures with the majority monitored on a daily basis. In addition within the Group’s risk management framework an extensive scenario analysis framework is in place whereby all underlying risk factors are stressed to determine portfolio sensitivity.

Re-securitized products in both the mortgage and credit businesses go through the same risk management process but looking through the structures with the focus on the risk of the underlying securities or constituent names.

Risk mitigation
In addition to the strict exposure limits noted above, the Group uses a number of different risk mitigation approaches to manage risk appetite for its securitization and re-securitization exposures. Where true counterparty credit risk exposure is identified for a particular transaction, there is a requirement for it to be approved through normal credit risk management processes with collateral taken as required. The Group also may use various proxies including corporate single name and index hedges to mitigate the price and spread risks to which it is exposed. Hedging decisions are made by the trading desk based on current market conditions with any key hedging decision are made in consultation with Risk Management and requiring approval under the Group’s new Product Approval governance process. International investment banks are the main counterparties to the hedges that are used across these business areas.

In the normal course of business, we may hold tranches which have a monoline guarantee. No benefit from these guarantees is currently included in the calculation of regulatory capital. There are no further instances where we have applied credit risk mitigation approaches where the underlying exposures are securitizations or re-securitizations positions.

Affiliated entities
In the normal course of business it is possible for the Group’s managed separate account portfolios and the Group’s controlled investment entities, such as mutual funds, fund of funds, private equity funds and other fund linked products to invest in the securities issued by other vehicles sponsored by the Group engaged in securitization and re-securitization activities. To address potential conflicts, standards governing investments in affiliated products and funds have been adopted.

Securitization exposures purchased or retained – trading book
  On-balance sheet Off-balance sheet
  Traditional Synthetic Synthetic
end of 6M12 Long Short Long Short Long Short
CHF million  
CMBS  2,953 480 0 0 715 1,020
RMBS  6,711 97 0 0 48 202
CDO/CLO  984 0 5 11 82 1,918
Nth-to-default  0 0 0 0 73 946
Other ABS  757 0 0 0 9 0
Total  11,405 577 5 11 927 4,086



Securitization exposures purchased or retained – trading book (continued)
  On-balance sheet Off-balance sheet
  Traditional Synthetic Synthetic
end of 2011 Long Short Long Short Long Short
CHF million  
CMBS  2,355 485 0 0 511 1,887
RMBS  5,873 108 0 0 104 393
CDO/CLO  803 0 44 2 97 1,263
Nth-to-default  0 0 0 0 144 785
Other ABS  884 163 0 0 9 0
Total  9,915 756 44 2 865 4,328



Outstanding exposures securitized by the Group - trading book
  Traditional Synthetic Total
end of 6M12 Sponsor 1 Originator 1 Sponsor 1 Originator 1
CHF million  
CMBS  7,953 5,916 0 0 13,869
RMBS  3,716 77,698 0 0 81,414
Total  11,669 83,614 0 0 95,283
Amounts disclosed from January 1, 2010 onwards following the publication of the Pillar 3 requirements in 2009.
1    Where the Group is both the sponsor and sole originator, amount will only be shown under originator. Originator is defined as the entity that transfers collateral into an SPE, including third party collateral transferred into the SPE via the entity's balance sheet.



Outstanding exposures securitized by the Group - trading book (continued)
  Traditional Synthetic Total
end of 2011 Sponsor 1 Originator 1 Sponsor 1 Originator 1
CHF million  
CMBS  6,047 4,568 0 0 10,615
RMBS  3,141 71,933 0 0 75,074
Total  9,188 76,501 0 0 85,689
Amounts disclosed from January 1, 2010 onwards following the publication of the Pillar 3 requirements in 2009.
1    Where the Group is both the sponsor and sole originator, amount will only be shown under originator. Originator is defined as the entity that transfers collateral into an SPE, including third party collateral transferred into the SPE via the entity's balance sheet.



Outstanding exposures securitized in which the Group has retained interests - trading book
  Exposures securitized Total
end of 6M12 Traditional Synthetic
CHF million  
CMBS  47,528 988 48,516
RMBS  70,473 0 70,473
CDO/CLO  13,571 0 13,571
Other ABS  102 0 102
Total  131,674 988 132,662
   of which subject to capital requirements (refer to table "Exposures under standardized measurement method - trading book")  10,877
   of which subject to deductions (refer to table "Deductions from eligible capital related to securitization exposures - trading book")  1,460



Outstanding exposures securitized in which the Group has retained interests - trading book (continued)
  Exposures securitized Total
end of 2011 Traditional Synthetic
CHF million  
CMBS  48,069 0 48,069
RMBS  89,366 0 89,366
CDO/CLO  12,263 0 12,263
Other ABS  194 0 194
Total  149,892 0 149,892
   of which subject to capital requirements (refer to table "Exposures under standardized measurement method - trading book")  8,454
   of which subject to deductions (refer to table "Deductions from eligible capital related to securitization exposures - trading book")  2,370



Exposures under standardized measurement method – trading book
  Securitization exposure Re-securitization exposure Total

end of 6M12
EAD
purchased/
retained


Risk-
weighted
assets


EAD
purchased/
retained


Risk-
weighted
assets


EAD
purchased/
retained


Risk-
weighted
assets


CHF million  
Ratings-based approach (RBA) 
CMBS  3,056 1,526 195 150 3,251 1,676
RMBS  5,840 714 186 94 6,026 808
CDO/CLO  185 150 493 407 678 557
Other ABS  665 166 74 19 739 185
Total RBA  9,746 2,556 948 670 10,694 3,226
Standardized approach 
Nth-to-default  73 170 0 0 73 170
RMBS  68 59 0 0 68 59
Total standardized approach  141 229 0 0 141 229
Supervisory formula approach (SFA) 
CDO/CLO  42 341 0 0 42 341
Total SFA  42 341 0 0 42 341
Total  9,929 3,126 948 670 10,877 3,796



Exposures under standardized measurement method – trading book (continued)
  Securitization exposure Re-securitization exposure Total

end of 2011
EAD
purchased/
retained


Risk-
weighted
assets


EAD
purchased/
retained


Risk-
weighted
assets


EAD
purchased/
retained


Risk-
weighted
assets


CHF million  
Ratings-based approach (RBA) 
CMBS  2,306 1,628 108 71 2,414 1,699
RMBS  4,387 670 310 178 4,697 848
CDO/CLO  181 352 232 410 413 762
Other ABS  745 323 6 4 751 327
Total RBA  7,619 2,973 656 663 8,275 3,636
Standardized approach 
Nth-to-default  144 380 0 0 144 380
Total standardized approach  144 380 0 0 144 380
Supervisory formula approach (SFA) 
CDO/CLO  35 172 0 0 35 172
Total SFA  35 172 0 0 35 172
Total  7,798 3,525 656 663 8,454 4,188



Securitization and re-securitization exposures under RBA by rating grade – trading book
  Securitization exposure Re-securitization exposure Total

end of 6M12
EAD
purchased/
retained


Risk-
weighted
assets


EAD
purchased/
retained


Risk-
weighted
assets


EAD
purchased/
retained


Risk-
weighted
assets


CHF million  
AAA  7,911 621 294 67 8,205 688
AA  350 44 272 77 622 121
A  484 98 261 204 745 302
BBB  692 483 86 144 778 627
BB  309 1,310 35 178 344 1,488
Total  9,746 2,556 948 670 10,694 3,226



Securitization and re-securitization exposures under RBA by rating grade – trading book (continued)
  Securitization exposure Re-securitization exposure Total

end of 2011
EAD
purchased/
retained


Risk-
weighted
assets


EAD
purchased/
retained


Risk-
weighted
assets


EAD
purchased/
retained


Risk-
weighted
assets


CHF million  
AAA  5,551 404 233 54 5,784 458
AA  396 46 152 57 548 103
A  549 114 147 89 696 203
BBB  637 468 74 149 711 617
BB  486 1,941 50 314 536 2,255
Total  7,619 2,973 656 663 8,275 3,636



Securitization exposures under SFA by risk weight band – trading book
  6M12 2011
  Securitization exposure Securitization exposure

end of
EAD
purchased/
retained


Risk-
weighted
assets


EAD
purchased/
retained


Risk-
weighted
assets


CHF million  
0%-10%  4 0 8 0
11%-50%  1 0 2 0
51%-100%  0 0 1 1
101%-650%  6 20 7 27
651%-1250%  31 321 17 144
Total  42 341 35 172



Exposures under standardized approach by risk weight band – trading book
  6M12 2011
  Securitization exposure Securitization exposure

end of
EAD
purchased/
retained


Risk-
weighted
assets


EAD
purchased/
retained


Risk-
weighted
assets


CHF million  
0%-100%  68 59 19 2
100%-200%  30 42 25 34
200%-300%  19 48 49 120
300%-400%  24 80 9 29
400%-500%  0 0 23 100
500%-600%  0 0 19 95
Total  141 229 144 380



Deductions from eligible capital related to securitization exposures – trading book
  6M12 2011

end of
Credit
enhancing
interest only
strips





Other
exposures






Total



Credit
enhancing
interest only
strips





Other
exposures






Total



CHF million  
CMBS  0 417 417 0 451 451
RMBS  0 664 664 0 1,280 1,280
CDO/CLO  0 352 352 0 497 497
Other ABS  0 27 27 0 142 142
Total  0 1,460 1,460 0 2,370 2,370



Securitization activity – trading book
    Original amount of
exposures securitized
Recognized gain/(loss)
on sale
in 6M12 Traditional Synthetic Traditional Synthetic
CHF million  
CMBS  5,165 0 23 0