UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
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
UNDER THE SECURITIES EXCHANGE ACT OF 1934
April 3, 2014
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)
(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 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: April 3, 2014
By:
/s/ Joachim Oechslin
Joachim Oechslin
Chief Risk Officer
By:
/s/ David R. Mathers
David R. Mathers
Chief Financial Officer
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In various tables, use of “–” indicates not meaningful or not applicable.
List of abbreviations
Introduction
General
Additional regulatory disclosures
Scope of application
Principles of consolidation
Restrictions on transfer of funds or regulatory capital
Capital deficiencies
Remuneration
Risk management oversight
Capital
Capital structure under Basel III
Swiss requirements
Description of regulatory approaches
Capital metrics under the Basel framework
Capital metrics under Swiss requirements
Credit risk
General
Credit risk by asset class
Securitization risk in the banking book
Equity type securities in the banking book
Credit valuation adjustment risk
Central counterparties risk
Market risk
General
Securitization risk in the trading book
Valuation process
Interest rate risk in the banking book
Overview
Major sources of interest rate risk in the banking book
Governance of models and limits
Risk measurement
Monitoring and review
Risk profile
Reconciliation requirements
Balance sheet
Composition of BIS regulatory capital
| A | ||
| ABS | Asset-backed securities | |
| ACVA | Advanced credit valuation adjustment approach | |
| A-IRB | Advanced Internal Ratings-Based Approach | |
| AMA | Advanced Measurement Approach | |
| B | ||
| BCBS | Basel Committee on Banking Supervision | |
| BFI | Banking, financial and insurance | |
| BIS | Bank for International Settlements | |
| C | ||
| CARMC | Capital Allocation Risk Management Committee | |
| CCF | Credit Conversion Factor | |
| CCO | Chief Credit Officer | |
| CCP | Central counterparties | |
| CDO | Collateralized Debt Obligation | |
| CDS | Credit Default Swap | |
| CET1 | Common equity tier 1 | |
| CLO | Collateralized Loan Obligation | |
| CMBS | Commercial mortgage-backed securities | |
| CMSC | Credit Model Steering Committee | |
| CRM | Credit Risk Management | |
| CRO | Credit Risk Officer | |
| CVA | Credit valuation adjustment | |
| E | ||
| EAD | Exposure at Default | |
| EMIR | European Market Infrastructure Regulation | |
| ERC | Economic Risk Capital | |
| F | ||
| FINMA | Swiss Financial Market Supervisory Authority FINMA | |
| G | ||
| GRR | Global Risk Review | |
| G-SIB | Global systemically important banks | |
| I | ||
| IMA | Internal Models Approach | |
| IMM | Internal Models Method | |
| IRB | Internal Ratings-Based Approach | |
| IRC | Incremental Risk Capital Charge | |
| L | ||
| LGD | Loss Given Default | |
| M | ||
| MDB | Multilateral Development Banks | |
| N | ||
| NTD | Nth-to-default | |
| O | ||
| OTC | Over-the-counter | |
| P | ||
| PD | Probability of Default | |
| R | ||
| RBA | Ratings-Based Approach | |
| RMBS | Residential mortgage-backed securities | |
| RNIV | Risks not in value-at-risk | |
| RPSC | Risk Processes and Standards Committee | |
| S | ||
| SFA | Supervisory Formula Approach | |
| SFT | Securities Financing Transactions | |
| SMM | Standardized Measurement Method | |
| SNB | Swiss National Bank | |
| SPE | Special purpose entity | |
| SRW | Supervisory Risk Weights Approach | |
| U | ||
| US GAAP | Accounting principles generally accepted in the US | |
| V | ||
| VaR | Value-at-Risk | |
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The purpose of this Pillar 3 report is to provide updated information as of December 31, 2013 on our implementation of the Basel capital 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 2013, which includes important information on regulatory capital and risk management (specific references have been made herein to this document).
Effective January 1, 2013, the Basel II.5 framework, under which we operated in 2012, was replaced by the Basel III framework, which was implemented in Switzerland along with the Swiss “Too Big to Fail” legislation and the regulations thereunder (Swiss Requirements). Our related disclosures are in accordance with our current interpretation of such requirements, including relevant assumptions. Changes in the interpretation of these requirements in Switzerland or in any of our assumptions or estimates could result in different numbers from those shown in this report. Also, our capital metrics fluctuate during any reporting period in the ordinary course of business. Our 2012 calculations of capital and ratio amounts, which are presented in order to show meaningful comparative information, use estimates as of December 31, 2012, as if the Basel III framework had been implemented in Switzerland as of such date.
The Basel III framework includes higher minimum capital requirements and conservation and countercyclical buffers, revised risk-based capital measures, a leverage ratio and liquidity standards. The framework was designed to strengthen the resilience of the banking sector. The new capital standards and capital buffers will require banks to hold more capital, mainly in the form of common equity. The new capital standards are being phased in from 2013 through 2018 and are fully effective January 1, 2019 for those countries that have adopted Basel III. Prior period metrics presented under Basel II.5 are not comparable.
> Refer to “Capital management” (pages 101 to 114) in III – Treasury, Risk, Balance sheet and Off-balance sheet in the Credit Suisse Annual Report 2013 for further information.
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 115 to 140) in III – Treasury, Risk, Balance sheet and Off-balance sheet in the Credit Suisse Annual Report 2013 for further information regarding the way we manage risk including economic capital as a 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 Swiss Financial Market Supervisory Authority FINMA (FINMA) requirements.
This report was verified and approved internally in line with our 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 2013.
In addition to the Pillar 3 disclosures also refer to our website for further information on capital ratios of certain significant subsidiaries, quarterly reconciliation requirements and capital instruments disclosures (main features template and full terms and conditions).
> Refer to “Regulatory disclosures” under https://www.credit-suisse.com/investors/en/index.jsp
The highest consolidated entity in the Group to which the Basel III framework applies is Credit Suisse Group.
> Refer to “Regulation and supervision” (pages 24 to 34) in I – Information on the company and to “Capital management” (pages 101 to 114) in III – Treasury, Risk, Balance sheet and Off-balance sheet in the Credit Suisse Annual Report 2013 for further information on regulation.
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). We have also received an exemption from FINMA not to consolidate private equity fund type vehicles. 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.
All significant equity method investments represent investments in the capital of banking, financial and insurance (BFI) entities and are subject to a threshold calculation in accordance with the Basel framework.
> Refer to “Note 39 – Significant subsidiaries and equity method investments” (pages 337 to 339) in V – Consolidated financial statements – Credit Suisse Group in the Credit Suisse Annual Report 2013 for a list of significant subsidiaries and associated entities of Credit Suisse.
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> Refer to “Note 3 – Business developments, significant shareholders and subsequent events” (page 226) in V – Consolidated financial statements – Credit Suisse Group in the Credit Suisse Annual Report 2013 for additional information on business developments in 2013.
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 “Liquidity and funding management” (pages 94 to 100) and “Capital management” (pages 101 to 114) in III – Treasury, Risk, Balance sheet and Off-balance sheet in the Credit Suisse Annual Report 2013 for information on our liquidity, funding and capital management and dividends and dividend policy.
The Group’s subsidiaries which are not included in the regulatory consolidation did not report any capital deficiencies in 2013.
> Refer to “Compensation” (pages 176 to 204) in IV – Corporate Governance and Compensation in the Credit Suisse Annual Report 2013 for further information on remuneration.
Fundamental to our business is the prudent taking of risk in line with our strategic priorities. The primary objectives of risk management are to protect our financial strength and reputation, while ensuring that capital is well deployed to support business activities and grow shareholder value. Our risk management framework is based on transparency, management accountability and independent oversight. Risk measurement models are reviewed by an independent validation function and regularly performed and approval by the relevant oversight committee is required.
> Refer to “Risk management oversight” (pages 115 to 118) in III – Treasury, Risk, Balance sheet and Off-balance sheet – Risk management in the Credit Suisse Annual Report 2013 for information on risk management oversight including risk governance, risk organization, risk types and risk appetite and risk limits.
The Group is exposed to several key banking risks such as:
– Credit risk (refer to section “Credit risk” on pages 15 to 37);
– Market risk (refer to section “Market risk” on pages 38 to 45);
– Interest rate risk in the banking book (refer to section “Interest rate risk in the banking book” on pages 46 to 47); and
– Operational risk.
> Refer to “Operational risk” (pages 139 to 140) in III – Treasury, Risk, Balance sheet and Off-balance sheet – Risk management in the Credit Suisse Annual Report 2013 for information on operational risk.
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The Basel Committee on Banking Supervision (BCBS) issued the Basel III framework, with higher minimum capital requirements and conservation and countercyclical buffers, revised risk-based capital measures, a leverage ratio and liquidity standards. The framework was designed to strengthen the resilience of the banking sector and requires banks to hold more capital, mainly in the form of common equity. The new capital standards will be phased in from 2013 through 2018 and are fully effective January 1, 2019 for those countries that have adopted Basel III.
> Refer to the table “Basel III phase-in requirements for Credit Suisse” in (page 103) in III – Treasury, Risk, Balance sheet and Off-balance sheet – Capital management – Regulatory capital framework in the Credit Suisse Annual Report 2013 for capital requirements and applicable effective dates during the phase-in period.
Under Basel III, the minimum common equity tier 1 (CET1) requirement is 4.5% of risk-weighted assets.
In addition, a 2.5% CET1 capital conservation buffer is required to absorb losses in periods of financial and economic stress. Banks that do not maintain this buffer will be limited in their ability to pay dividends or make discretionary bonus payments or other earnings distributions.
A progressive buffer between 1% and 2.5% (with a possible additional 1% surcharge) of CET1, depending on a bank’s systemic importance, is an additional capital requirement for global systemically important banks (G-SIB). The Financial Stability Board has identified us as a G-SIB and requires us to maintain a 1.5% progressive buffer.
CET1 capital is subject to certain regulatory deductions and other adjustments to common equity, including the deduction of deferred tax assets for tax-loss carry-forwards, goodwill and other intangible assets and investments in banking and finance entities.
In addition to the CET1 requirements, there is also a requirement for 1.5% additional tier 1 capital and 2% tier 2 capital. These requirements may also be met with CET1 capital. To qualify as additional tier 1 under Basel III, capital instruments must provide for principal loss absorption through a conversion into common equity or a write-down of principal feature. The trigger for such conversion or write-down must include a CET1 ratio of at least 5.125%.
Basel III further provides for a countercyclical buffer that could require banks to hold up to 2.5% of CET1 or other capital that would be available to fully absorb losses. This requirement is expected to be imposed by national regulators where credit growth is deemed to be excessive and leading to the build-up of system-wide risk. This countercyclical buffer will be phased in from January 1, 2016 through January 1, 2019.
Beginning January 1, 2013, capital instruments that do not meet the strict criteria for inclusion in CET1 are excluded. Capital instruments that would no longer qualify as tier 1 or tier 2 capital will be phased out. In addition, instruments with an incentive to redeem prior to their stated maturity, if any, will be phased out at their effective maturity date, generally the date of the first step-up coupon.
As of January 1, 2013, the Basel III framework was implemented in Switzerland along with the Swiss Requirements. Together with the related implementing ordinances, the legislation includes capital, liquidity, leverage and large exposure requirements and rules for emergency plans designed to maintain systemically relevant functions in the event of threatened insolvency. Certain requirements under the legislation, including those regarding capital, are to be phased in from 2013 through 2018 and are fully effective January 1, 2019. The legislation on capital requirements builds on Basel III, but in respect of systemically relevant banks goes beyond its minimum standards, including requiring us, as a systemically relevant bank, to have the following minimum, buffer and progressive components.
> Refer to the chart “Swiss capital and leverage ratio phase-in requirements for Credit Suisse” (page 104) in III – Treasury, Risk, Balance sheet and Off-balance sheet – Capital management – Regulatory capital framework in the Credit Suisse Annual Report 2013 for Swiss capital requirements and applicable effective dates during the phase-in period.
The minimum requirement of CET1 capital is 4.5% of risk-weighted assets.
The buffer requirement is 8.5% and can be met with additional CET1 capital of 5.5% of risk-weighted assets and a maximum of 3% of high-trigger capital instruments. The high-trigger capital instruments must convert into common equity or be written off if the CET1 ratio falls below 7%.
The progressive component requirement is dependent on our size (leverage ratio exposure) and the market share of our domestic systemically relevant business. For 2014, FINMA set our progressive component requirement at 3.66%, a decrease from the 4.41% applicable in 2013, reflecting our size and market share based on data as of year-end 2012. The progressive component requirement may be met with CET1 capital or low-trigger capital instruments. In order to qualify, low-trigger capital instruments must convert into common equity or be written off if the CET1 ratio falls below a specified percentage, the lowest of which may be 5%. In addition, until the end of 2017, the progressive component requirement may also be met with high-trigger capital instruments. Both high and low-trigger capital instruments must comply with the Basel III minimum requirements for tier 2 capital (including subordination, point-of-non-viability loss absorption and minimum maturity).
Similar to Basel III, the Swiss Requirements include a supplemental countercyclical buffer of up to 2.5% of risk-weighted assets that can be activated during periods of excess credit growth. In February 2013, upon the request of the Swiss National Bank (SNB), the Swiss Federal Council activated the countercyclical
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capital buffer, which was effective September 30, 2013 and requires banks to hold CET1 capital in the amount of 1% of their risk-weighted assets pertaining to mortgage loans that finance residential property in Switzerland. As of December 31, 2013, our countercyclical buffer was CHF 144 million, which is equivalent to an additional requirement of 0.05% of CET1 capital. In January 2014, upon the request of SNB, the Swiss Federal Council further increased the countercyclical buffer from 1% to 2%, effective June 30, 2014.
We also measure Swiss Core Capital and Swiss Total Capital. Swiss Core Capital consists of CET1 capital and tier 1 participation securities, which FINMA advised may be included with a haircut of 20% until December 31, 2018 at the latest, and may include certain other Swiss adjustments. Our Swiss Total Capital consists of Swiss Core Capital, high-trigger capital instruments and low-trigger capital instruments.
> Refer to “Capital management” (pages 101 to 114) in III – Treasury, Risk, Balance sheet and Off-balance sheet in the Credit Suisse Annual Report 2013 for information on our capital structure, eligible capital and shareholders’ equity, capital adequacy and leverage ratio requirements under Basel III and Swiss requirements.
The Basel 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 most advanced approaches, which align with the way risk is internally managed. The Basel framework focuses on credit risk, market risk, operational risk 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
Credit risk by asset class
The Basel framework permits banks a choice between two broad methodologies in calculating their capital requirements for credit risk by asset class, 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 by asset class is with institutional counterparties (sovereigns, other institutions, banks and corporates) and arises from lending and trading activity in the Investment Banking and Private Banking & Wealth Management divisions. The remaining credit risk by asset class is with retail counterparties and mostly arises in the Private Banking & Wealth Management division from residential mortgage loans and other secured lending, including loans collateralized by securities.
> Refer to “Credit risk by asset class” in section “Credit risk” on pages 15 to 31 for further information.
Advanced-internal ratings-based approach
Under the IRB approach, risk weights are determined by using internal risk parameters and applying an asset value correlation multiplier uplift where exposures are to financial institutions meeting regulatory defined criteria. 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 mainly derived from models tailored to the specific business of the respective obligor. The models are calibrated to the long run average of annual internal or external default rates where applicable. For portfolios with a small number of empirical defaults (less than 20), low default portfolio techniques are used.
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 & Wealth Management 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 by asset class is determined using this approach.
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Securitization risk in the banking book
For securitizations, the regulatory capital requirements are calculated using IRB approaches (the RBA and the SFA) and the standardized approach 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.
> Refer to “Securitization risk in the banking book” in section “Credit risk” on pages 32 to 36 for further information on the IRB approaches and the standardized approach.
Equity type securities in the banking book
For equity type securities in the banking book except for significant investments in BFI entities, 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). Significant investments in BFI entities (i.e. investments in the capital of BFI entities that are outside the scope of regulatory consolidation, where the Group owns more than 10% of the issued common share capital of the entity) are subject to a threshold treatment as outlined below in the section “Exposures below 15% threshold”. Where equity type securities represent non-significant investments in BFI entities (i.e., investments in the capital of BFI entities that are outside the scope of regulatory consolidation, where the Group does not own more than 10% of the issued common share capital
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of the entity), a threshold approach is applied that compares the total amount of non-significant investments in BFI entities (considering both trading and banking book positions) to a 10% regulatory defined eligible capital amount. The amount above the threshold is phased-in as a capital deduction and the amount below the threshold continues to be risk-weighted according to the relevant trading book and banking book approaches.
> Refer to “Equity type securities in the banking book” in section “Credit risk” on pages 36 to 37 for further information.
Credit valuation adjustment risk
Basel III introduces a new regulatory capital charge designed to capture the risk associated with potential mark-to-market losses associated with the deterioration in the creditworthiness of a counterparty (Credit Value Adjustment (CVA)).
Under Basel III, banks are required to calculate capital charges for CVA under either the Standardized CVA approach or the Advanced CVA approach (ACVA). The CVA rules stipulate that where banks have permission to use market risk Value-at-Risk (VaR) and counterparty risk Internal Models Method (IMM), they are to use the ACVA unless their regulator decides otherwise. FINMA has confirmed that the ACVA should be used for both IMM and non-IMM exposures.
The regulatory CVA capital charge applies to all counterparty exposures arising from over-the-counter (OTC) derivatives, excluding those with central counterparties (CCP). Exposures arising from Securities Financing Transactions (SFT) should not be included in the CVA charge unless they could give rise to a material loss. FINMA have confirmed that Credit Suisse should not include these exposures within the regulatory capital charge.
Central counterparties risk
The Basel III framework provides specific requirements for exposures the Group has to CCP arising from OTC derivatives, exchange-traded derivative transactions and SFT. Exposures to CCPs which are considered to be qualifying CCPs by the regulator will receive a preferential capital treatment compared to exposures to non-qualifying CCPs.
The Group can incur exposures to CCPs as either a clearing member (house or client trades), or as a client of another clearing member. Where the Group acts as a clearing member of a CCP on behalf of its client (client trades), it incurs an exposure to its client as well as an exposure to the CCP. Since the exposure to the client is to be treated as a bilateral trade, the risk-weighted assets from these exposures are represented under “credit risk by asset class”. Where the Group acts as a client of another clearing member the risk-weighted assets from these exposures are also represented under “credit risk by asset class”.
The exposures to CCP (represented as “Central counterparties (CCP) risks”) consist of both the trade exposure and default fund exposure. While the trades exposure includes the current and potential future exposure of the clearing member (or a client) to a CCP arising from the underlying transaction and the initial margin posted to the CCP, the default fund exposure is arising from default fund contributions to the CCP.
Settlement risk
Regulatory fixed risk weights are applied to settlement exposures. Settlement exposures arise from unsettled or failed transactions where cash or securities are delivered without a corresponding receipt.
Exposures below 15% threshold
Significant investments in BFI entities, mortgage servicing rights and deferred tax assets that arise from temporary differences are subject to a threshold approach, whereby individual amounts are compared to a 10% threshold of regulatory defined eligible capital. In addition amounts below the individual 10% thresholds are aggregated and compared to a 15% threshold of regulatory defined eligible capital. The amount that is above the 10% threshold is phased-in as a CET1 deduction. The amount above the 15% threshold is phased-in as a CET1 deduction and the amount below is risk weighted at 250%.
Other items
Other items include risk-weighted assets related to immaterial portfolios for which we have received approval from FINMA to apply a simplified Institute Specific Direct Risk Weight as well as risk-weighted assets related to items that were risk-weighted under Basel II.5 and are phased in as capital deductions under Basel III.
Market risk
We use the advanced approach for calculating the capital requirements for market risk for the majority of our exposures. The following advanced approaches are used: the internal models approach (IMA) and the standardized measurement method (SMM).
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.
> Refer to section “Market risk” on pages 38 to 45 for further information on market risk.
Internal models approach
The market risk IMA framework includes regulatory Value-at-Risk (VaR), stressed VaR, risks not in VaR (RNIV), an incremental risk capital charge (IRC), and Comprehensive Risk Measure.
Regulatory VaR, stressed VaR and risks not in VaR
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. Stressed VaR replicates a
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VaR calculation on the Group’s current portfolio taking into account a one-year observation period relating to significant financial stress and helps to reduce the pro-cyclicality of the minimum capital requirements for market risk. The VaR model does not cover all identified market risk types and as such we have also adopted a RNIV category which was approved by FINMA in 2012.
Incremental risk capital charge
The IRC model is required to measure the aggregate risk from the exposure to issuer 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 where 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 collateralized debt obligations (CDOs), and nth-to-default (NTD) trades).
The IRC model assesses risk at 99.9% confidence level 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 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. Liquidity horizons are modelled according to the requirements imposed by Basel III 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 by an independent team in accordance with the firms validation umbrella policy and Risk Model Validation Sub-Policy for IRC and Comprehensive Risk Measure.
Comprehensive Risk Measure
Comprehensive Risk Measure is a market risk capital model designed to capture all the price risks of credit correlation positions in the trading book. Scope is corporate correlation trades, i.e. tranches and their associated hedges and NTD baskets. Scope excludes re-securitization positions. The model is based on a Full Revaluation Monte Carlo Simulation, whereby all the relevant risk factors are jointly simulated in one year time horizon. The trading portfolio is then fully re-priced under each scenario. The model then calculates the loss at 99.9% percentile. Simulated risk factors are credit spreads, credit migration, credit default, recovery rate, credit correlation, basis between credit indices and their CDS constituents. The Comprehensive Risk Measure model has been internally approved by the relevant risk model approval committee and achieved regulatory approval by FINMA. The capital requirements calculated by the Comprehensive Risk Measure model is currently subject to a floor defined as a percentage of the standardized rules for securitized products. The Comprehensive Risk Measure model has been validated by an independent team in accordance with the firms validation umbrella policy and the Risk Model Validation Sub-Policy for IRC and Comprehensive Risk Measure.
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 other supervisory approaches for trading book securitization positions covering the approach for nth-to-default products and portfolios covered by the weighted average risk weight approach.
> Refer to “Securitization risk in the trading book” in section “Market risk” on pages 39 to 45 for further information on the standardized measurement method and other supervisory approaches.
Operational risk
We have used an internal model to calculate the regulatory capital requirement for operational risk under the Advanced Measurement Approach (AMA) since 2008. In 2012, following discussions with FINMA, we initiated a project to enhance our internal model to reflect recent developments regarding operational risk measurement methodology and associated regulatory guidance. The revised model has been approved by FINMA for calculating the regulatory capital requirement for operational risk with effect from January 1, 2014. We view the revised model as a significant enhancement to our capability to measure and understand the operational risk profile of the Group that is also more conservative compared with the previous approach.
The model is based on a loss distribution approach that uses historical data on internal and relevant external losses of peers to generate frequency and severity distributions for a range of potential operational risk loss scenarios, such as an unauthorized trading incident or a material business disruption. Business experts and senior management review, and may adjust, the parameters of these scenarios to take account of business environment and internal control factors, such as risk and control self-assessment results and risk and control indicators, to provide a forward-looking assessment of each scenario. The AMA capital calculation approved by FINMA includes all litigation-related provisions and also an add-on component relating to the aggregate range of reasonably possible litigation losses that are disclosed in our financial statements but are not covered by existing provisions. In the fourth quarter of 2013, this new approach to litigation-related provisions and reasonably possible litigation losses has been applied to the previous AMA model used to calculate regulatory capital requirements as of December 31, 2013. Insurance mitigation is included in the regulatory capital requirement for operational risk where appropriate, by considering the level of insurance coverage for each scenario and incorporating haircuts as appropriate. The internal model then uses the adjusted parameters to generate an overall loss distribution for the Group over a one-year time horizon. The
9
AMA capital requirement represents the 99.9th percentile of this overall loss distribution.
Non-counterparty-related risk
Regulatory fixed risk weights are applied to non-counterparty-related exposures. Non-counterparty-related exposures arise from holdings of premises and equipment, real estate and investments in real estate entities.
Regulatory capital and ratios
Regulatory capital is calculated and managed according to Basel regulations and used to determine Bank for International Settlements (BIS) ratios. BIS ratios compare eligible CET1 capital, tier 1 capital and total capital with BIS risk-weighted assets.
> Refer to “Capital metrics under Basel III” (pages 106 to 110) in III – Treasury, Risk, Balance sheet and Off-balance sheet – Capital management in the Credit Suisse Annual Report 2013 for information on risk-weighted assets movements.
10
| Summary of BIS risk-weighted assets and capital requirements | |||||||||
| Basel III | Basel II.5 | ||||||||
| 2013 | 2012 | ||||||||
|
end of |
Risk- weighted assets |
Capital require- ment |
1 |
Risk- weighted assets |
Capital require- ment |
1 | |||
| CHF million | |||||||||
| Credit risk | |||||||||
| Advanced-IRB | 116,772 | 9,342 | 116,563 | 9,325 | |||||
| Standardized | 3,640 | 291 | 8,517 | 681 | |||||
| Credit risk by asset class | 120,412 | 9,633 | 125,080 | 10,006 | |||||
| Advanced-IRB | 14,935 | 1,195 | 6,908 | 553 | |||||
| Standardized | – | – | 53 | 4 | |||||
| Securitization risk in the banking book | 14,935 | 1,195 | 6,961 | 557 | |||||
| IRB Simple | 9,833 | 787 | 9,877 | 790 | |||||
| Equity type securities in the banking book | 9,833 | 787 | 9,877 | 790 | |||||
| Advanced CVA | 10,650 | 852 | – | – | |||||
| Standardized CVA | 56 | 4 | – | – | |||||
| Credit valuation adjustment risk | 10,706 | 856 | – | – | |||||
| Standardized - Fixed risk weights | 12,500 | 1,000 | – | – | |||||
| Exposures below 15% threshold 2 | 12,500 | 1,000 | – | – | |||||
| Advanced | 1,906 | 152 | – | – | |||||
| Central counterparties (CCP) risk | 1,906 | 152 | – | – | |||||
| Standardized - Fixed risk weights | 512 | 41 | 305 | 24 | |||||
| Settlement risk | 512 | 41 | 305 | 24 | |||||
| Advanced | 281 | 22 | – | – | |||||
| Standardized | 4,546 | 364 | 1,456 | 116 | |||||
| Other items | 4,827 | 3 | 386 | 1,456 | 116 | ||||
| Total credit risk | 175,631 | 14,050 | 143,679 | 11,494 | |||||
| Market risk | |||||||||
| Advanced | 38,719 | 3,098 | 29,010 | 2,321 | |||||
| Standardized | 414 | 33 | 356 | 28 | |||||
| Total market risk | 39,133 | 3,131 | 29,366 | 2,349 | |||||
| Operational risk | |||||||||
| Advanced measurement | 53,075 | 4,246 | 45,125 | 3,610 | |||||
| Total operational risk | 53,075 | 4,246 | 45,125 | 3,610 | |||||
| Non-counterparty-related risk | |||||||||
| Standardized - Fixed risk weights | 6,007 | 481 | 6,126 | 490 | |||||
| Total non-counterparty-related risk | 6,007 | 481 | 6,126 | 490 | |||||
| Total BIS risk-weighted assets and capital requirements | 273,846 | 21,908 | 224,296 | 17,944 | |||||
| of which advanced | 246,171 | 19,694 | 207,483 | 16,599 | |||||
| of which standardized | 27,675 | 2,214 | 16,813 | 1,345 | |||||
|
1
Calculated as 8% of risk-weighted assets.
|
|||||||||
|
2
Exposures below 15% threshold are risk-weighted at 250%. Refer to table "Additional information" in section "Reconciliation requirements" for further information.
|
|||||||||
|
3
Includes risk-weighted assets of CHF 4,158 million related to items that were risk-weighted under Basel II.5 and are phased in as capital deductions under Basel III. Refer to table
"Additional information" in section "Reconciliation requirements" for further information. |
|||||||||
11
| BIS eligible capital - Basel III | |||||||||
| Group | Bank | ||||||||
| end of | 2013 | 2012 | 2013 | 2012 | |||||
| Eligible capital (CHF million) | |||||||||
| CET1 capital | 42,989 | 41,500 | 38,028 | 36,717 | |||||
| Total tier 1 capital | 46,061 | 44,357 | 41,105 | 40,477 | |||||
| Total eligible capital | 56,288 | 51,519 | 52,066 | 49,306 | |||||
The following table presents the Basel III phase-in requirements for each of the relevant capital components and discloses the Group’s and the Bank’s current capital metrics against those requirements.
| BIS capital ratios - Basel III | |||||||||||||||||
| Group | Bank | ||||||||||||||||
| 2013 | 2012 | 2013 | 2012 | ||||||||||||||
| end of | Ratio | Requirement | Excess | Ratio | Ratio | Requirement | Excess | Ratio | |||||||||
| Capital ratios (%) | |||||||||||||||||
| Total CET1 1 | 15.7 | 3.5 | 12.2 | 14.2 | 14.4 | 3.5 | 10.9 | 13.0 | |||||||||
| Tier 1 | 16.8 | 4.5 | 12.3 | 15.2 | 15.6 | 4.5 | 11.1 | 14.3 | |||||||||
| Total capital | 20.6 | 8.0 | 12.6 | 17.6 | 19.7 | 8.0 | 11.7 | 17.5 | |||||||||
|
1
Capital conservation buffer, countercyclical buffer and G-SIB buffer requirement is nil as of December 31, 2013.
|
|||||||||||||||||
| BIS eligible capital and ratios - Basel II.5 | |||||
| end of 2012 | Group | Bank | |||
| Eligible capital (CHF million) | |||||
| Core tier 1 capital | 34,766 | 30,879 | |||
| Tier 1 capital | 43,547 | 39,660 | |||
| Total eligible capital | 49,936 | 47,752 | |||
| Capital ratios (%) | |||||
| Core tier 1 ratio | 15.5 | 14.4 | |||
| Tier 1 ratio | 19.4 | 18.4 | |||
| Total capital ratio | 22.3 | 22.2 | |||
12
Swiss Core and Total Capital ratios
Swiss Core Capital consists of CET1 capital, tier 1 participation securities, which FINMA advised may be included with a haircut of 20% until December 31, 2018 at the latest, and may include certain other Swiss adjustments. Swiss Total Capital also includes high-trigger capital instruments and low-trigger capital instruments.
As of the end of 2013, our Swiss Core Capital and Swiss Total Capital ratios were 16.2% and 21.2%, respectively, compared to the Swiss capital ratio phase-in requirements of 6.0% and 8.1%, respectively.
| Swiss risk-weighted assets - Group | |||||||||||||
| Basel III | Basel II.5 | ||||||||||||
| 2013 | 2012 | ||||||||||||
|
end of |
Ad- vanced |
Stan- dardized |
Total |
Ad- vanced |
Stan- dardized |
Total |
|||||||
| Risk-weighted assets (CHF million) | |||||||||||||
| Total BIS risk-weighted assets | 246,171 | 27,675 | 273,846 | 207,483 | 16,813 | 224,296 | |||||||
| Impact of differences in thresholds 1 | (17) | 415 | 398 | – | – | – | |||||||
| Other multipliers | 617 | – | 617 | 2 | 1,737 | 13,226 | 14,963 | 3 | |||||
| VaR hedge fund add-on | – | – | – | 738 | 4 | – | 738 | ||||||
| Total Swiss risk-weighted assets | 246,771 | 28,090 | 274,861 | 209,958 | 30,039 | 239,997 | |||||||
|
1
Represents the impact on risk-weighted assets of increased regulatory thresholds resulting from additional Swiss Core Capital.
|
|||||||||||||
|
2
Primarily related to equity IRB multiplier.
|
|||||||||||||
|
3
Primarily related to credit non-counterparty-related risk.
|
|||||||||||||
|
4
The VaR hedge fund capital add-on was stress-test-based and was introduced by FINMA in 2008 for hedge fund exposures in the trading book. This is no longer applied following the implementation of the RNIV framework.
|
|||||||||||||
| Swiss Core and Total Capital ratios | |||||||||
| Group | Bank | ||||||||
| end of | 2013 | 2012 | 2013 | 2012 | |||||
| Capital development (CHF million) | |||||||||
| CET1 capital | 42,989 | 41,500 | 38,028 | 36,717 | |||||
| Swiss regulatory adjustments 1 | 1,658 | 2,481 | 1,711 | 2,864 | |||||
| Swiss Core Capital | 44,647 | 43,981 | 39,739 | 39,581 | |||||
| High-trigger capital instruments 2 | 7,743 | 4,084 | 7,743 | 4,084 | |||||
| Low-trigger capital instruments 3 | 6,005 | – | 5,164 | – | |||||
| Swiss Total Capital | 58,395 | 48,065 | 52,646 | 43,665 | |||||
| Capital ratios (%) | |||||||||
| Swiss Core Capital ratio | 16.2 | 15.0 | 15.0 | 14.0 | |||||
| Swiss Total Capital ratio | 21.2 | 16.4 | 19.8 | 15.4 | |||||
|
1
Consists of tier 1 participation securities of CHF 1.3 billion, additional tier 1 deductions for which there is not enough tier 1 capital available and is therefore deducted from Swiss Core Capital and other Swiss regulatory adjustments.
|
|||||||||
|
2
Consists of CHF 5.2 billion additional tier 1 instruments and CHF 2.5 billion tier 2 instruments.
|
|||||||||
|
3
Consists of CHF 2.3 billion additional tier 1 instruments and CHF 3.7 billion tier 2 instruments.
|
|||||||||
13
The following table presents the Swiss requirements for each of the relevant capital components and discloses our current capital metrics against those requirements.
| Swiss capital requirements and coverage | |||||||||||||||||||||
| Group | Bank | ||||||||||||||||||||
| Capital requirements | Capital requirements | ||||||||||||||||||||
|
end of |
Minimum component |
Buffer component |
Progressive component |
Excess |
2013 |
Minimum component |
Buffer component |
Progressive component |
Excess |
2013 |
|||||||||||
| Risk-weighted assets (CHF billion) | |||||||||||||||||||||
| Swiss risk-weighted assets | – | – | – | – | 274.9 | – | – | – | – | 265.3 | |||||||||||
| 2013 Swiss capital requirements 1 | |||||||||||||||||||||
| Minimum Swiss Total Capital ratio | 3.5% | 3.5% | 1.1% | – | 8.1% | 3.5% | 3.5% | 1.1% | – | 8.1% | |||||||||||
| Minimum Swiss Total Capital (CHF billion) | 9.6 | 9.6 | 3.0 | – | 22.3 | 9.3 | 9.3 | 2.9 | – | 21.5 | |||||||||||
| Swiss capital coverage (CHF billion) | |||||||||||||||||||||
| Swiss Core Capital | 9.6 | 1.9 | – | 33.2 | 44.6 | 9.3 | 1.5 | – | 28.9 | 39.7 | |||||||||||
| High-trigger capital instruments | – | 7.7 | – | – | 7.7 | – | 7.7 | – | – | 7.7 | |||||||||||
| Low-trigger capital instruments | – | – | 3.0 | 3.0 | 6.0 | – | – | 2.9 | 2.2 | 5.2 | |||||||||||
| Swiss Total Capital | 9.6 | 9.6 | 3.0 | 36.1 | 58.4 | 9.3 | 9.3 | 2.9 | 31.1 | 52.6 | |||||||||||
| Capital ratios (%) | |||||||||||||||||||||
| Swiss Total Capital ratio | 3.5% | 3.5% | 1.1% | 13.1% | 21.2% | 3.5% | 3.5% | 1.1% | 11.7% | 19.8% | |||||||||||
|
Rounding differences may occur.
|
|||||||||||||||||||||
|
1
The Swiss capital requirements are based on a percentage of risk-weighted assets.
|
|||||||||||||||||||||
| Swiss capital requirements - Basel II.5 | |||||
| end of 2012 | Group | Bank | |||
| Swiss capital requirements | |||||
| Required capital (CHF million) 1 | 19,200 | 18,388 | |||
| Capital requirement covering ratio (%) | 260.1 | 259.7 | |||
|
1
Calculated as 8% of total risk-weighted assets.
|
|||||
14
Credit risk consists of the following categories:
– Credit risk by asset class
– Securitization risk in the banking book
– Equity type securities in the banking book
– CVA risk
– Exposures below 15% threshold
– CCP risk
– Settlement risk
– Other items
> Refer to “Credit risk” (pages 128 to 139) in III – Treasury, Risk, Balance sheet and Off-balance sheet – Risk management in the Credit Suisse Annual Report 2013 for information on our credit risk management approach, ratings and risk mitigation and impaired exposures and allowances.
General
For regulatory purposes, we categorize our exposures into asset classes with different underlying risk characteristics including type of counterparty, size of exposure and type of collateral. The asset class categorization is driven by regulatory rules from the Basel framework.
The following table presents the description of credit risk by asset class under the Basel framework (grouped as either institutional or retail) and the related regulatory approaches used.
| Credit risk by asset class - Overview | |||||
| Asset class | Description | Approaches | |||
| Institutional credit risk (mostly in the Investment Banking division) | |||||
| Sovereigns |
Exposures to central governments, central banks, BIS, the International Monetary Fund, the European Central Bank and eligible Multilateral Development Banks (MDB). |
PD/LGD for most portfolios Standardized for banking book treasury liquidity positions and other assets |
|||
| Other institutions |
Exposures to public bodies with the right to raise taxes or whose liabilities are guaranteed by a public sector entity. |
PD/LGD for most portfolios Standardized for banking book treasury liquidity positions and other assets |
|||
| Banks |
Exposures to banks, securities firms, stock exchanges and those MDB that do not qualify for sovereign treatment. |
PD/LGD for most portfolios SRW for unsettled trades Standardized for banking book treasury liquidity positions and other assets |
|||
| 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). |
PD/LGD for most portfolios SRW for Investment Banking specialized lending exposures Standardized for banking book treasury liquidity positions and other assets |
|||
| Retail credit risk (mostly in the Private Banking & Wealth Management division) | |||||
| Residential mortgages |
Includes exposures secured by residential real estate collateral occupied or let by the borrower. |
PD/LGD |
|||
| Qualifying revolving retail | Includes credit card receivables and overdrafts. | PD/LGD | |||
| Other retail |
Includes loans collateralized by securities, consumer loans, leasing and small business exposures. |
PD/LGD Standardized for other assets |
|||
| 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. |
Standardized |
|||
15
Gross credit exposures , risk-weighted assets and capital requirement
The following table presents the derivation of risk-weighted assets from the gross credit exposures (pre- and post-substitution), broken down by regulatory approach and by the credit asset class under the Basel framework.
| Gross credit exposures and risk-weighted assets by regulatory approach | |||||||||||||||||
| 2013 | 2012 | ||||||||||||||||
|
Exposure |
Risk- weighted assets |
1 |
Capital require- ment |
2 |
Exposure |
Risk- weighted assets |
1 |
Capital require- ment |
2 | ||||||||
|
end of |
Pre- substitution |
3 |
Post- substitution |
|
|
Pre- substitution |
3 |
Post- substitution |
|
|
|||||||
| A-IRB (CHF million) | |||||||||||||||||
| PD/LGD | |||||||||||||||||
| Sovereigns | 71,220 | 68,539 | 3,567 | 285 | 64,930 | 63,378 | 4,764 | 381 | |||||||||
| Other institutions | 1,875 | 1,866 | 388 | 31 | 5,737 | 5,431 | 1,294 | 104 | |||||||||
| Banks | 32,676 | 38,398 | 10,510 | 841 | 46,403 | 50,822 | 14,019 | 1,122 | |||||||||
| Corporates | 174,997 | 171,965 | 79,912 | 6,393 | 177,115 | 174,554 | 76,205 | 6,096 | |||||||||
| Total institutional | 280,768 | 280,768 | 94,377 | 7,550 | 294,185 | 294,185 | 96,282 | 7,703 | |||||||||
| Residential mortgage | 98,800 | 98,800 | 10,525 | 842 | 96,425 | 96,425 | 10,148 | 812 | |||||||||
| Qualifying revolving retail | 699 | 699 | 246 | 20 | 156 | 156 | 261 | 20 | |||||||||
| Other retail | 63,056 | 63,056 | 11,100 | 888 | 57,768 | 57,768 | 9,815 | 785 | |||||||||
| Total retail | 162,555 | 162,555 | 21,871 | 1,750 | 154,349 | 154,349 | 20,224 | 1,617 | |||||||||
| Total PD/LGD | 443,323 | 443,323 | 116,248 | 9,300 | 448,534 | 448,534 | 116,506 | 9,320 | |||||||||
| Supervisory risk weights (SRW) | |||||||||||||||||
| Banks | 27 | 27 | 6 | 1 | 23 | 23 | 5 | 1 | |||||||||
| Corporates | 998 | 998 | 518 | 41 | 1,014 | 1,014 | 52 | 4 | |||||||||
| Total institutional | 1,025 | 1,025 | 524 | 42 | 1,037 | 1,037 | 57 | 5 | |||||||||
| Total SRW | 1,025 | 1,025 | 524 | 42 | 1,037 | 1,037 | 57 | 5 | |||||||||
| Total A-IRB | 444,348 | 444,348 | 116,772 | 9,342 | 449,571 | 449,571 | 116,563 | 9,325 | |||||||||
| Standardized (CHF million) | |||||||||||||||||
| Sovereigns | 5,497 | 5,497 | 79 | 6 | 6,165 | 6,165 | 66 | 5 | |||||||||
| Other institutions | 245 | 245 | 55 | 5 | 433 | 433 | 93 | 7 | |||||||||
| Banks | 727 | 727 | 301 | 24 | 1,122 | 1,122 | 358 | 29 | |||||||||
| Corporates | 863 | 863 | 501 | 40 | 505 | 505 | 116 | 9 | |||||||||
| Total institutional | 7,332 | 7,332 | 936 | 75 | 8,225 | 8,225 | 633 | 50 | |||||||||
| Other retail | 47 | 47 | 21 | 2 | 8 | 8 | 8 | 1 | |||||||||
| Total retail | 47 | 47 | 21 | 2 | 8 | 8 | 8 | 1 | |||||||||
| Other exposures | 6,107 | 6,107 | 2,683 | 214 | 14,164 | 14,164 | 7,876 | 630 | |||||||||
| Total standardized | 13,486 | 13,486 | 3,640 | 291 | 22,397 | 22,397 | 8,517 | 681 | |||||||||
| Total | 457,834 | 457,834 | 120,412 | 9,633 | 471,968 | 471,968 | 125,080 | 10,006 | |||||||||
| of which counterparty credit risk 4 | 75,629 | 75,629 | 25,282 | 2,023 | 80,389 | 80,389 | 25,463 | 2,037 | |||||||||
|
1
2013 risk-weighted assets are based on Basel III whereas 2012 risk-weighted assets are based on Basel II.5.
|
|||||||||||||||||
|
2
Calculated as 8% of risk-weighted assets.
|
|||||||||||||||||
|
3
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.
|
|||||||||||||||||
|
4
Includes derivatives and securities financing transactions.
|
|||||||||||||||||
16
| Gross credit exposures and risk-weighted assets | |||||||||||||
| 2013 | 2012 | ||||||||||||
|
End of |
Monthly average |
Risk- weighted assets (Basel III) |
End of |
Monthly average |
Risk- weighted assets (Basel II.5) |
||||||||
| Gross credit exposures (CHF million) | |||||||||||||
| Loans, deposits with banks and other assets 1 | 323,102 | 319,025 | 70,693 | 323,411 | 351,806 | 75,371 | |||||||
| Guarantees and commitments | 59,103 | 63,849 | 24,437 | 68,168 | 63,919 | 24,246 | |||||||
| Securities financing transactions | 30,521 | 36,949 | 7,204 | 26,445 | 28,358 | 4,435 | |||||||
| Derivatives | 45,108 | 53,307 | 18,078 | 53,944 | 64,382 | 21,028 | |||||||
| Total | 457,834 | 473,130 | 120,412 | 471,968 | 508,465 | 125,080 | |||||||
|
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 |
||||||
| 2013 (CHF million) | |||||||||||
| Loans, deposits with banks and other assets 1 | 155,868 | 77,044 | 63,758 | 26,432 | 323,102 | ||||||
| Guarantees and commitments | 13,304 | 16,786 | 27,089 | 1,924 | 59,103 | ||||||
| Securities financing transactions | 2,349 | 10,234 | 15,824 | 2,114 | 30,521 | ||||||
| Derivatives | 3,885 | 24,311 | 12,537 | 4,375 | 45,108 | ||||||
| Total | 175,406 | 128,375 | 119,208 | 34,845 | 457,834 | ||||||
| 2012 (CHF million) | |||||||||||
| Loans, deposits with banks and other assets 1 | 154,942 | 84,140 | 60,326 | 24,003 | 323,411 | ||||||
| Guarantees and commitments | 15,562 | 20,185 | 28,424 | 3,997 | 68,168 | ||||||
| Securities financing transactions | 2,165 | 10,431 | 12,114 | 1,735 | 26,445 | ||||||
| Derivatives | 5,400 | 28,599 | 15,093 | 4,852 | 53,944 | ||||||
| Total | 178,069 | 143,355 | 115,957 | 34,587 | 471,968 | ||||||
|
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 |
||||||
| 2013 (CHF million) | |||||||||||
| Loans, deposits with banks and other assets 1 | 11,872 | 123,330 | 120,955 | 66,945 | 323,102 | ||||||
| Guarantees and commitments | 3,387 | 51,501 | 2,538 | 1,677 | 59,103 | ||||||
| Securities financing transactions | 6,738 | 19,650 | 27 | 4,106 | 30,521 | ||||||
| Derivatives | 10,726 | 23,963 | 1,980 | 8,439 | 45,108 | ||||||
| Total | 32,723 | 218,444 | 125,500 | 81,167 | 457,834 | ||||||
| 2012 (CHF million) | |||||||||||
| Loans, deposits with banks and other assets 1 | 15,768 | 128,172 | 115,779 | 63,692 | 323,411 | ||||||
| Guarantees and commitments | 4,280 | 55,923 | 3,815 | 4,150 | 68,168 | ||||||
| Securities financing transactions | 9,167 | 13,717 | 24 | 3,537 | 26,445 | ||||||
| Derivatives | 17,741 | 25,045 | 1,461 | 9,697 | 53,944 | ||||||
| Total | 46,956 | 222,857 | 121,079 | 81,076 | 471,968 | ||||||
|
Exposures are shown pre-substitution.
|
|||||||||||
|
1
Includes interest bearing deposits with banks, banking book loans, available-for-sale debt securities and other receivables.
|
|||||||||||
17
| Remaining contractual maturity of gross credit exposures | |||||||||
|
end of |
within 1 year |
1 |
within 1-5 years |
Thereafter |
Total |
||||
| 2013 (CHF million) | |||||||||
| Loans, deposits with banks and other assets 2 | 186,323 | 90,024 | 46,755 | 323,102 | |||||
| Guarantees and commitments | 23,060 | 34,546 | 1,497 | 59,103 | |||||
| Securities financing transactions | 30,170 | 336 | 15 | 30,521 | |||||
| Derivatives | 15,239 | 17,003 | 12,866 | 45,108 | |||||
| Total | 254,792 | 141,909 | 61,133 | 457,834 | |||||
| 2012 (CHF million) | |||||||||
| Loans, deposits with banks and other assets 2 | 188,017 | 91,884 | 43,510 | 323,411 | |||||
| Guarantees and commitments | 30,920 | 35,245 | 2,003 | 68,168 | |||||
| Securities financing transactions | 26,430 | 0 | 15 | 26,445 | |||||
| Derivatives | 19,317 | 32,159 | 2,468 | 53,944 | |||||
| Total | 264,684 | 159,288 | 47,996 | 471,968 | |||||
|
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
The majority of the credit rating models used in Credit Suisse are developed internally by Credit Analytics, a specialized unit in Credit Risk Management (CRM). These models are independently validated by Model Risk Management prior to use in the Basel III regulatory capital calculation, and thereafter on a regular basis. Credit Suisse also use models purchased from recognized data and model providers (e.g. credit rating agencies). These models are owned by Credit Analytics and are validated internally and follow the same governance process as models developed internally.
All new or material changes to rating models are subject to a robust governance process. Post development and validation of a rating model or model change, the model is taken through a number of committees where model developers, validators and users of the models discuss the technical and regulatory aspects of the model. The relevant committees opine on the information provided and decide to either approve or reject the model or model change. The ultimate decision making committee is the Risk Processes and Standards Committee (RPSC). The responsible Executive Board Member for the RPSC is the Chief Risk Officer (CRO). The RPSC sub-group responsible for rating models is the Credit Model Steering Committee (CMSC). RPSC or CMSC also review and monitor the continued use of existing models on an annual basis.
Model development
The techniques to develop models are carefully selected by Credit Analytics to meet industry standards in the banking industry as well as regulatory requirements. The models are developed to exhibit “through-the-cycle” characteristics, reflecting a probability of default in a 12 month period across the credit cycle.
All models have clearly defined model owners who have primary responsibility for development, enhancement, review, maintenance and documentation. The models have to pass statistical performance tests, where feasible, followed by usability tests by designated CRM experts to proceed to formal approval and implementation. The development process of a new model is thoroughly documented and foresees a separate schedule for model updates.
The level of calibration of the models is based on a range of inputs, including internal and external benchmarks where available. Additionally, the calibration process ensures that the estimated calibration level accounts for variations of default rates through the economic cycle and that the underlying data contains a representative mix of economic states. Conservatism is incorporated in the model development process to compensate for any known or suspected limitations and uncertainties.
Model validation
Model validation within Credit Suisse is performed by an independent function subject to clear and objective internal standards as outlined in the Validation Policy. This ensures a consistent and meaningful approach for the validation of models across the bank and over time, allowing comparison of model performance over the years. All models whose outputs fall into the scope of the Basel internal model framework are in scope of the model validation governance framework. Externally developed models are subject to the same governance and validation standards as internal models.
The validation process requires each in scope model to be validated and approved before go-live; the same process is followed for model changes to an existing model. Existing models are part of a regular review process which requires each model to be periodically validated and the performance to be monitored annually. Each validation review is a comprehensive quantitative and qualitative assessment with the goal:
– to confirm that the model remains conceptually sound and the model design is suitable for its intended purpose;
– to verify that the assumptions are still valid and weaknesses and limitations are known and mitigated;
– to determine that the model outputs are accurate compared to realized outcome;
18
– to establish whether the model is accepted by the users and used as intended with appropriate data governance;
– to check whether a model is implemented correctly;
– to ensure that the model is fully transparent and sufficiently documented.
To meet these goals, models are validated against a series of quantitative and qualitative criteria which have been approved by the model governing committees. Quantitative analyses include a review of model performance (comparison of model output against realized outcome), calibration accuracy against the longest time series available, assessment of a model’s ability to rank order risk and performance against available benchmarks. Qualitative assessment includes a review of the appropriateness of the key model assumptions, the identification of the model limitations and their mitigation, and model use. The modeling approach is re-assessed in light of developments in the academic literature and industry practice.
Results and conclusions are presented to senior risk management; shortcomings and required improvements identified by Validation must be remediated within an agreed deadline. Validation is independent and has the final say on the content of each validation report.
Stress testing of parameters
The potential biases in PD estimates in unusual market conditions are accounted for by the use of long run average estimates. Credit Suisse additionally uses stress-testing when back-testing PD models. When predefined thresholds are breached during back-testing, a review of the calibration level is undertaken. For LGD/CCF calibration stress testing is applied in defining Downturn LGD/CCF values, reflecting potentially increased losses during stressed periods.
Descriptions of the rating processes
All counterparties that Credit Suisse is exposed to are assigned an internal credit rating. 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.
Counterparty and transaction rating process – Corporates (excluding corporates managed on the Swiss platform), banks and sovereigns (primarily in the Investment Banking division)
Where rating models are used, the models are an integral part of the rating process, and the outputs from the models are complemented with other relevant information by credit officers via a robust model-override framework where information not captured by the models is taken into account by experienced credit officers. In addition to the information captured by the rating models, credit officers make use of peer analysis, industry comparisons, external ratings and research and the judgment of credit experts to complement the model ratings. This analysis emphasizes a forward looking approach, concentrating on economic trends and financial fundamentals. Where rating models are not used the assignment of credit ratings is based on a well-established expert judgment based process which captures key factors specific to the type of counterparty.
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.
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Counterparty and transaction rating process – Corporates managed on the Swiss platform, mortgages and other retail (primarily in the Private Banking & Wealth Management division)
For corporates managed on the Swiss platform and mortgage lending, the statistically derived rating models, which are based on 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 III rules with pool PD and pool LGD based on historical loss experience. Most of the collateral loans are loans collateralized by securities.
The internal rating grades are mapped to the Credit Suisse Internal Masterscale. The PDs assigned to each rating grade are reflected in the following table.
| Credit Suisse counterparty ratings | |||||||||||||
| Ratings | PD bands (%) | Definition | S&P | Fitch | Moody's | Details | |||||||
| AAA |
0.000 - 0.021 |
Substantially risk free |
AAA |
AAA |
Aaa |
Extremely low risk, very high long-term stability, still solvent under extreme conditions |
|||||||
|
AA+ AA AA- |
0.021 - 0.027 0.027 - 0.034 0.034 - 0.044 |
Minimal risk |
AA+ AA AA- |
AA+ AA AA- |
Aa1 Aa2 Aa3 |
Very low risk, long-term stability, repayment sources sufficient under lasting adverse conditions, extremely high medium-term stability |
|||||||
|
A+ A A- |
0.044 - 0.056 0.056 - 0.068 0.068 - 0.097 |
Modest risk |
A+ A A- |
A+ A A- |
A1 A2 A3 |
Low risk, short- and mid-term stability, small adverse developments can be absorbed long term, short- and mid-term solvency preserved in the event of serious difficulties |
|||||||
|
BBB+ BBB BBB- |
0.097 - 0.167 0.167 - 0.285 0.285 - 0.487 |
Average risk |
BBB+ BBB BBB- |
BBB+ BBB BBB- |
Baa1 Baa2 Baa3 |
Medium to low risk, high short-term stability, adequate substance for medium-term survival, very stable short term |
|||||||
|
BB+ BB BB- |
0.487 - 0.839 0.839 - 1.442 1.442 - 2.478 |
Acceptable risk |
BB+ BB BB- |
BB+ BB BB- |
Ba1 Ba2 Ba3 |
Medium risk, only short-term stability, only capable of absorbing minor adverse developments in the medium term, stable in the short term, no increased credit risks expected within the year |
|||||||
|
B+ B B- |
2.478 - 4.259 4.259 - 7.311 7.311 - 12.550 |
High risk |
B+ B B- |
B+ B B- |
B1 B2 B3 |
Increasing risk, limited capability to absorb further unexpected negative developments |
|||||||
|
CCC+ CCC CCC- CC |
12.550 - 21.543 21.543 - 100.00 21.543 - 100.00 21.543 - 100.00 |
Very high risk |
CCC+ CCC CCC- CC |
CCC+ CCC CCC- CC |
Caa1 Caa2 Caa3 Ca |
High risk, very limited capability to absorb further unexpected negative developments |
|||||||
|
C D1 D2 |
100 Risk of default has materialized |
Imminent or actual loss |
C D |
C D |
C |
Substantial credit risk has materialized, i.e. counterparty is distressed and/or non-performing. Adequate specific provisions must be made as further adverse developments will result directly in credit losses. |
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|
Transactions rated C are potential problem loans; those rated D1 are non-performing assets and those rated D2 are non-interest earning.
|
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Use of internal ratings
Internal ratings play an essential role in the decision-making and the credit approval processes. The portfolio credit quality is set in terms of the proportion of investment and non-investment grade exposures. Investment/non-investment grade is determined by the internal rating assigned to a counterparty.
Internal counterparty ratings (and associated PDs), transaction ratings (and associated LGDs) and CCF for loan commitments are inputs to risk-weighted assets and Economic Risk Capital (ERC) calculations. Model outputs are the basis for risk-adjusted-pricing or assignment of credit competency levels.
The internal ratings are also integrated into the risk management reporting infrastructure and are reviewed in senior risk management committees. These committees include the Chief Executive Officer, Chief Credit Officer (CCO), Regional CCO, RPSC and Capital Allocation Risk Management Committee (CARMC).
To ensure ratings are assigned in a robust and consistent basis, the Global Risk Review Function (GRR) perform periodic portfolio reviews which cover, amongst other things:
– accuracy and consistency of assigned counterparty/transaction ratings;
– transparency of rating justifications (both the counterparty rating and transaction rating);
– quality of the underlying credit analysis and credit process;
– adherence to Credit Suisse policies, guidelines, procedures, and documentation checklists.
The GRR function is an independent control function within the CRM which reports to the head of Global Credit Control.
20
| Institutional credit exposures by counterparty rating under PD/LGD approach | |||||||||
|
end of 2013 |
Total exposure (CHF m) |
Exposure- weighted average LGD (%) |
Exposure- weighted average risk weight (%) |
1 |
Undrawn commit- ments (CHF m) |
||||
| Sovereigns | |||||||||
| AAA | 27,171 | 6.01 | 0.93 | 19 | |||||
| AA | 33,173 | 6.41 | 1.79 | 79 | |||||
| A | 925 | 43.53 | 13.25 | 30 | |||||
| BBB | 6,431 | 46.95 | 24.86 | 1 | |||||
| BB | 185 | 34.98 | 68.09 | 3 | |||||
| B or lower | 376 | 29.24 | 104.84 | – | |||||
| Default (net of specific provisions) | 278 | – | – | – | |||||
| Total credit exposure | 68,539 | – | – | 132 | |||||
| Exposure-weighted average CCF (%) 2 | 99.77 | – | – | – | |||||
| Other institutions | |||||||||
| AAA | – | – | – | – | |||||
| AA | 1,084 | 41.30 | 10.12 | 448 | |||||
| A | 147 | 44.16 | 14.58 | 63 | |||||
| BBB | 499 | 41.08 | 28.96 | 134 | |||||
| BB | 44 | 43.11 | 69.47 | 8 | |||||
| B or lower | 92 | 18.33 | 64.35 | 1 | |||||
| Default (net of specific provisions) | – | – | – | – | |||||
| Total credit exposure | 1,866 | – | – | 654 | |||||
| Exposure-weighted average CCF (%) 2 | 57.40 | – | – | – | |||||
| Banks | |||||||||
| AAA | – | – | – | – | |||||
| AA | 6,883 | 48.74 | 11.10 | 894 | |||||
| A | 20,843 | 48.72 | 17.32 | 2,010 | |||||
| BBB | 6,458 | 40.23 | 35.46 | 294 | |||||
| BB | 3,512 | 38.67 | 72.19 | 144 | |||||
| B or lower | 553 | 34.23 | 102.64 | 16 | |||||
| Default (net of specific provisions) | 149 | – | – | – | |||||
| Total credit exposure | 38,398 | – | – | 3,358 | |||||
| Exposure-weighted average CCF (%) 2 | 93.63 | – | – | – | |||||
| Corporates | |||||||||
| AAA | – | – | – | – | |||||
| AA | 32,560 | 46.10 | 11.57 | 6,655 | |||||
| A | 32,436 | 42.23 | 18.57 | 8,851 | |||||
| BBB | 46,770 | 37.54 | 36.27 | 11,283 | |||||
| BB | 43,171 | 35.82 | 66.58 | 5,056 | |||||
| B or lower | 15,927 | 35.40 | 117.94 | 5,113 | |||||
| Default (net of specific provisions) | 1,101 | – | – | 8 | |||||
| Total credit exposure | 171,965 | – | – | 36,966 | |||||
| Exposure-weighted average CCF (%) 2 | 76.33 | – | – | – | |||||
| Total institutional credit exposure | 280,768 | – | – | 41,110 | |||||
|
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%.
|
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|
2
Calculated before credit risk mitigation.
|
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21
| Institutional credit exposures by counterparty rating under PD/LGD approach (continued) | |||||||||
|
end of 2012 |
Total exposure (CHF m) |
Exposure- weighted average LGD (%) |
Exposure- weighted average risk weight (%) |
1 |
Undrawn commit- ments (CHF m) |
||||
| Sovereigns | |||||||||
| AAA | 28,379 | 13.54 | 2.66 | 16 | |||||
| AA | 25,923 | 9.47 | 1.58 | 15 | |||||
| A | 4,876 | 52.11 | 30.68 | – | |||||
| BBB | 3,614 | 54.57 | 33.42 | – | |||||
| BB | 141 | 42.74 | 89.79 | – | |||||
| B or lower | 98 | 42.46 | 154.80 | – | |||||
| Default (net of specific provisions) | 347 | – | – | – | |||||
| Total credit exposure | 63,378 | – | – | 31 | |||||
| Exposure-weighted average CCF (%) 2 | 98.99 | – | – | – | |||||
| Other institutions | |||||||||
| AAA | – | – | – | – | |||||
| AA | 4,044 | 50.99 | 14.81 | 1,800 | |||||
| A | 597 | 44.56 | 24.60 | 128 | |||||
| BBB | 555 | 47.97 | 36.21 | 782 | |||||
| BB | 53 | 50.79 | 84.48 | 10 | |||||
| B or lower | 182 | 34.42 | 125.90 | – | |||||
| Default (net of specific provisions) | – | – | – | – | |||||
| Total credit exposure | 5,431 | – | – | 2,720 | |||||
| Exposure-weighted average CCF (%) 2 | 69.23 | – | – | – | |||||
| Banks | |||||||||
| AAA | – | – | – | – | |||||
| AA | 10,677 | 47.76 | 11.32 | 56 | |||||
| A | 27,032 | 49.53 | 19.03 | 705 | |||||
| BBB | 8,766 | 40.47 | 34.37 | 191 | |||||
| BB | 3,315 | 47.50 | 82.79 | 153 | |||||
| B or lower | 841 | 33.65 | 109.95 | 12 | |||||
| Default (net of specific provisions) | 191 | – | – | – | |||||
| Total credit exposure | 50,822 | – | – | 1,117 | |||||
| Exposure-weighted average CCF (%) 2 | 93.66 | – | – | – | |||||
| Corporates | |||||||||
| AAA | – | – | – | – | |||||
| AA | 29,728 | 43.42 | 12.04 | 8,578 | |||||
| A | 36,684 | 38.51 | 15.64 | 12,543 | |||||
| BBB | 47,125 | 37.08 | 34.61 | 11,830 | |||||
| BB | 45,937 | 36.17 | 66.37 | 6,906 | |||||
| B or lower | 13,403 | 31.20 | 105.20 | 3,922 | |||||
| Default (net of specific provisions) | 1,677 | – | – | 44 | |||||
| Total credit exposure | 174,554 | – | – | 43,823 | |||||
| Exposure-weighted average CCF (%) 2 | 75.60 | – | – | – | |||||
| Total institutional credit exposure | 294,185 | – | – | 47,691 | |||||
|
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%.
|
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|
2
Calculated before credit risk mitigation.
|
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22
| Retail credit exposures by expected loss band under PD/LGD approach | |||||||||
|
end of 2013 |
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% | 91,837 | 15.83 | 7.82 | 1,195 | |||||
| 0.15%-0.30% | 4,355 | 29.06 | 29.31 | 145 | |||||
| 0.30%-1.00% | 2,226 | 28.71 | 49.38 | 45 | |||||
| 1.00% and above | 162 | 23.87 | 91.49 | – | |||||
| Defaulted (net of specific provisions) | 220 | – | – | 1 | |||||
| Total credit exposure | 98,800 | – | – | 1,386 | |||||
| Exposure-weighted average CCF (%) 2 | 97.89 | – | – | – | |||||
| Qualifying revolving retail | |||||||||
| 0.00%-0.15% | – | – | – | – | |||||
| 0.15%-0.30% | – | – | – | – | |||||
| 0.30%-1.00% | 515 | 50.00 | 23.35 | – | |||||
| 1.00% and above | 183 | 20.00 | 60.59 | – | |||||
| Defaulted (net of specific provisions) | 1 | – | – | – | |||||
| Total credit exposure | 699 | – | – | – | |||||
| Exposure-weighted average CCF (%) 2 | 99.98 | – | – | – | |||||
| Other retail | |||||||||
| 0.00%-0.15% | 57,924 | 54.15 | 13.42 | 1,218 | |||||
| 0.15%-0.30% | 503 | 47.03 | 29.61 | 60 | |||||
| 0.30%-1.00% | 2,284 | 39.25 | 46.02 | 111 | |||||
| 1.00% and above | 2,143 | 40.79 | 60.44 | 41 | |||||
| Defaulted (net of specific provisions) | 202 | – | – | 2 | |||||
| Total credit exposure | 63,056 | – | – | 1,432 | |||||
| Exposure-weighted average CCF (%) 2 | 93.68 | – | – | – | |||||
| Total retail credit exposure | 162,555 | – | – | 2,818 | |||||
|
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%.
|
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|
2
Calculated before credit risk mitigation.
|
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23
| Retail credit exposures by expected loss band under PD/LGD approach (continued) | |||||||||
|
end of 2012 |
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% | 88,421 | 16.46 | 7.39 | 1,433 | |||||
| 0.15%-0.30% | 4,946 | 26.49 | 27.39 | 137 | |||||
| 0.30%-1.00% | 2,575 | 28.81 | 46.88 | 40 | |||||
| 1.00% and above | 251 | 29.82 | 96.97 | 2 | |||||
| Defaulted (net of specific provisions) | 232 | – | – | 1 | |||||
| Total credit exposure | 96,425 | – | – | 1,613 | |||||
| Exposure-weighted average CCF (%) 2 | 97.45 | – | – | – | |||||
| Qualifying revolving retail | |||||||||
| 0.00%-0.15% | – | – | – | – | |||||
| 0.15%-0.30% | – | – | – | – | |||||
| 0.30%-1.00% | – | – | – | – | |||||
| 1.00% and above | 155 | 60.00 | 157.31 | – | |||||
| Defaulted (net of specific provisions) | 1 | – | – | – | |||||
| Total credit exposure | 156 | – | – | – | |||||
| Exposure-weighted average CCF (%) 2 | 99.78 | – | – | – | |||||
| Other retail | |||||||||
| 0.00%-0.15% | 51,782 | 48.45 | 14.28 | 1,095 | |||||
| 0.15%-0.30% | 576 | 46.71 | 29.67 | 92 | |||||
| 0.30%-1.00% | 2,889 | 41.88 | 34.84 | 120 | |||||
| 1.00% and above | 2,247 | 21.55 | 32.43 | 14 | |||||
| Defaulted (net of specific provisions) | 274 | – | – | 2 | |||||
| Total credit exposure | 57,768 | – | – | 1,323 | |||||
| Exposure-weighted average CCF (%) 2 | 93.93 | – | – | – | |||||
| Total retail credit exposure | 154,349 | – | – | 2,936 | |||||
|
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%.
|
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|
2
Calculated before credit risk mitigation.
|
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24
Loss analysis – regulatory expected loss vs. cumulative actual loss
The following table shows the regulatory expected loss as of the beginning of the years compared with the cumulative actual loss incurred during the year ended December 31, 2013 and 2012, respectively, for those portfolios where credit risk is calculated using the IRB approach.
| Analysis of expected loss vs. cumulative actual loss | |||||||||
| 2013 | 2012 | ||||||||
|
Expected loss (beginning of year) |
Cumulative actual loss |
Expected loss (beginning of year) |
Cumulative actual loss |
||||||
| Losses (CHF million) | |||||||||
| Sovereigns | 13 | 108 | 43 | 201 | |||||
| Banks | 360 | 226 | 393 | 243 | |||||
| Other institutions | 4 | 163 | 3 | 263 | |||||
| Corporates | 1,297 | 965 | 1,212 | 917 | |||||
| Residential mortgages | 108 | 42 | 111 | 52 | |||||
| Other retail (including qualifying revolving retail) | 322 | 324 | 271 | 330 | |||||
| Total losses | 2,104 | 1,828 | 2,033 | 2,006 | |||||
|
The methodology for assigning actual losss to regulatory asset classes has been refined. Prior period balances have been restated in order to show comparable numbers.
|
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Regulatory expected loss
Regulatory expected loss is a Basel III measure based on Pillar 1 metrics which is an input to the capital adequacy calculation. Regulatory expected loss can be seen as an expectation of average future loss as derived from our IRB models, and is not a prediction of future impairment. For non-defaulted assets, regulatory expected loss is calculated using PD and downturn estimates of LGD and EAD CCF. For the calculation of regulatory expected loss for defaulted accrual accounted assets, PD is 100% and LGD is based on an estimate of likely recovery levels for each asset.
Cumulative actual loss
Cumulative actual loss comprises two parts: the opening impairment balance and the net specific impairment losses for loans held at amortized cost and actual value charges providing an equivalent impairment measure for both fair value loans and counterparty exposures as if these were loans held at amortized cost (excluding any realized credit default swap gains). The actual value charges may not necessarily be the same as the fair value movements recorded through the consolidated statements of operations.
Cumulative actual loss can also include charges against assets that were originated during the year and were therefore outside of the scope of the regulatory expected loss calculated at the beginning of the year. Cumulative actual loss does not include the effects on the impairment balance of amounts written off during the year.
The average cumulative actual loss over the last two years is below the expected loss estimates reflecting a level of conservatism in the corporate and residential mortgage rating models. The Other Retail asset class models were recalibrated upwards in 2013 resulting in a higher expected loss as of the year end.
The following table presents the components of the cumulative actual loss.
| Cumulative actual loss | |||||||||||||||||
| 2013 | 2012 | ||||||||||||||||
|
Opening impairment balance |
Specific impairment losses |
Actual value charges |
Total actual loss |
Opening impairment balance |
Specific impairment losses |
Actual value charges |
Total actual loss |
||||||||||
| CHF million | |||||||||||||||||
| Sovereigns | 196 | 0 | (88) | 108 | 8 | 0 | 193 | 201 | |||||||||
| Banks | 220 | 0 | 6 | 226 | 261 | 0 | (18) | 243 | |||||||||
| Other institutions | 166 | 1 | (4) | 163 | 262 | 17 | (16) | 263 | |||||||||
| Corporates | 779 | 89 | 97 | 965 | 673 | 64 | 180 | 917 | |||||||||
| Residential mortgages | 38 | 4 | 0 | 42 | 47 | 5 | 0 | 52 | |||||||||
| Other retail | 241 | 83 | 0 | 324 | 186 | 144 | 0 | 330 | |||||||||
| Total | 1,640 | 177 | 11 | 1,828 | 1,437 | 230 | 339 | 2,006 | |||||||||
|
The methodology for assigning actual losss to regulatory asset classes has been refined. Prior period balances have been restated in order to show comparable numbers.
|
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25
Credit Model Performance – estimated vs. actual
The following tables present the forecast and actual PD, LGD and EAD CCF for assets under the IRB approach. Estimated values of PD, LGD and CCF reflect probable long-run average values, allowing for possible good and bad outcomes in different years. Because they represent long-run averages, PD, LGD and CCF shown are not intended to predict outcomes in any particular year, and cannot be regarded as predictions of the corresponding actual reported results.
| Analysis of expected credit model performance vs. actual results – Private Banking & Wealth Management | |||||||||
|
PD of total portfolio (%) |
LGD of defaulted assets (%) |
||||||||
| Estimated | Actual | Estimated | Actual | ||||||
| Corporates | 0.74 | 0.42 | 41 | 34 | |||||
| Residential mortgages | 0.47 | 0.18 | 20 | 9 | |||||
| Other retail | 0.55 | 0.33 | 49 | 45 | |||||
|
CCF of defaulted assets only disclosed on a total Private Banking & Wealth Management basis. Estimated CCF: 28%; actual CCF:22%.
|
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Private Banking & Wealth Management
Estimated PD, LGD and CCF for Private Banking & Wealth Management are derived from a counterparty-weighted average from each model, and then mapped to the regulatory asset class directly or mapped using an exposure-weighted (model to asset class) average.
In the table above, the comparison between actual and estimated parameters for Private Banking & Wealth Management is derived from the latest available internal portfolio reviews used within the model performance and validation framework and where possible, multi-year analysis is applied.
Actual PDs for Corporate, Residential mortgage and Other asset classes are below the estimate as the through-the-cycle-model-calibration includes a margin of conservatism.
Actual LGDs results for Residential mortgage clients are materially below estimated LGD, reflecting a relatively cautious model calibration.
| Analysis of expected credit model performance vs. actual results – Investment Banking | |||||||||||||
|
PD of total portfolio (%) |
LGD of defaulted assets (%) |
CCF of defaulted assets (%) |
|||||||||||
| Estimated | Actual | Estimated | Actual | Estimated | Actual | ||||||||
| Sovereigns | 0.86 | 0.69 | 44 | 39 | – | – | |||||||
| Banks | 1.41 | 0.52 | 51 | 16 | – | – | |||||||
| Corporates and other institutions | 2.06 | 0.58 | 41 | 31 | 58 | 59 | |||||||
Investment Banking
Estimated and actual PD, LGD and CCF for Investment Banking are counterparty-weighted averages in the year of default, and then for the multi-year based disclosure, we use a simple average PD, whereas for the calculation of LGD and CCF a counterparty-weighted average across all years is used.
The table above shows that realized LGD and PD rates are below model estimates for Sovereigns, Banks and Corporate and Other Institutions. This is a reflection of conservatism within parameter settings, together with year-on-year variation in realized values of these parameters.
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).
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| Standardized and supervisory risk weighted exposures after risk mitigation by risk weighting bands | |||||||||
|
end of |
Standardized approach |
SRW |
Equity IRB Simple |
Total |
|||||
| 2013 (CHF million) | |||||||||
| 0% | 8,699 | 131 | 0 | 8,830 | |||||
| >0%-50% | 1,592 | 607 | 0 | 2,199 | |||||
| >50%-100% | 3,195 | 287 | 0 | 3,482 | |||||
| >100%-200% | 0 | 0 | 1,562 | 1,562 | |||||
| >200%-400% | 0 | 0 | 1,871 | 1,871 | |||||
| Total | 13,486 | 1,025 | 3,433 | 17,944 | |||||
| 2012 (CHF million) | |||||||||
| 0% | 11,477 | 966 | 0 | 12,443 | |||||
| >0%-50% | 3,740 | 23 | 0 | 3,763 | |||||
| >50%-100% | 7,180 | 34 | 0 | 7,214 | |||||
| >100%-200% | 0 | 14 | 2,208 | 2,222 | |||||
| >200%-400% | 0 | 0 | 1,562 | 1,562 | |||||
| Total | 22,397 | 1,037 | 3,770 | 27,204 | |||||
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 135 to 136) in III – Treasury, Risk, Balance sheet and Off-balance sheet – Risk management – Credit risk and to “Note 1 – Summary of significant accounting policies” (pages 217 to 218) in V – Consolidated financial statements – Credit Suisse Group in the Credit Suisse Annual Report 2013 for information on policies and procedures for on- and off-balance sheet netting.
> Refer to “Note 26 – Offsetting of financial assets and financial liabilities” (pages 254 to 257) in V – Consolidated financial statements – Credit Suisse Group in the Credit Suisse Annual Report 2013 for further information on the offsetting of derivatives, reverse repurchase and repurchase agreements, and securities lending and borrowing transactions.
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 & Wealth Management mortgage lending portfolio, real estate property is valued at the time of credit approval and periodically afterwards, according to our internal policies 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 OTC trading activities primarily includes:
– Cash and US Treasury instruments;
– G-10 government securities; and
– Corporate bonds.
Collateral securing loan transactions primarily includes:
– Financial collateral pledged against loans collateralized by securities of Private Banking & Wealth Management 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 & Wealth Management 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
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portfolio is regularly analyzed to identify any underlying concentrations, which may result in lower loan-to-value ratios.
> Refer to “Credit risk” (pages 128 to 139) in III – Treasury, Risk, Balance sheet and Off-balance sheet – Risk management in the Credit Suisse Annual Report 2013 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 |
||||
| 2013 (CHF million) | |||||||
| Sovereigns | 345 | 0 | 3,100 | ||||
| Other institutions | 10 | 136 | 97 | ||||
| Banks | 2,611 | 0 | 994 | ||||
| Corporates | 4,119 | 31,206 | 16,088 | ||||
| Residential mortgages | 3,750 | 79,453 | 52 | ||||
| Other retail | 51,816 | 3,436 | 233 | ||||
| Total | 62,651 | 114,231 | 20,564 | ||||
| 2012 (CHF million) | |||||||
| Sovereigns | 241 | 0 | 1,929 | ||||
| Other institutions | 10 | 131 | 565 | ||||
| Banks | 5,303 | 0 | 1,673 | ||||
| Corporates | 6,667 | 28,456 | 16,282 | ||||
| Residential mortgages | 3,565 | 73,441 | 38 | ||||
| Other retail | 47,195 | 2,778 | 160 | ||||
| Total | 62,981 | 104,806 | 20,647 | ||||
|
Excludes collateral used to adjust EAD (e.g. as applied under the internal models method).
|
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Counterparty credit risk
Counterparty exposure
Counterparty credit risk arises from OTC and exchange-traded 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. Potential exposure means the possible future value that would be lost upon default of the counterparty on a particular future date, and is taken as a high percentile of a distribution of possible exposures computed by our internal exposure models. Secondary debt inventory positions are subject to separate limits that are set at the issuer level.
> Refer to “Credit risk” (pages 128 to 139) in III – Treasury, Risk, Balance sheet and Off-balance sheet – Risk management in the Credit Suisse Annual Report 2013 for further information on counterparty credit risk, including 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
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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 are applied a conservative treatment for the purpose of calculating exposure profiles. The wrong-way risk framework applies to OTC, securities financing transactions and centrally cleared trades.
Wrong-way risk arises if the exposure the Group has against a counterparty is expected to be high when the probability of default of that counterparty is also high. Wrong-way risk can affect the exposure against a counterparty in two ways:
– The mark-to-market of a trade can be large if the counterparty’s PD is high.
– The value of collateral pledged by that counterparty can be low if the counterparty’s PD is high.
Two main types of wrong-way risk are distinguished:
– “General wrong-way risk” arises when the likelihood of default by counterparties is positively correlated with general market risk factors.
– “Specific wrong-way risk” arises when potential exposure to a specific counterparty is positively correlated with the counterparty’ probability of default due to the nature of the transactions with the counterparty.
There are two variants of specific wrong-way risk:
– If there is a legal connection between the counterparty and the exposure, e.g. the Group buying a put from a counterparty on shares of that counterparty or a parent/subsidiary of that counterparty or a counterparty pledging its own shares or bonds as collateral.
– More general correlation driven specific wrong-way risk.
The presence of wrong-way risk is detected via automated checks for legal connection and via means of stress scenarios and historical time series analyses for correlation.
For those instances where a material wrong-way risk presence is detected, limit utilization and default capital are accordingly adjusted.
Regular reporting of wrong-way risk at both the individual trade and portfolio level allows wrong-way risk to be identified and corrective action taken in the case of heightened concern by CRM. Reporting occurs at various levels:
– Country exposure reporting – Exposure is reported against country limits established for emerging market countries. Exposures that exhibit wrong-way characteristics are given higher risk weighting versus non-correlated transactions, resulting in a greater amount of country limit usage for these trades.
– Counterparty exposure reporting – Transactions that contain wrong-way risk are risk-weighted as part of the daily exposure calculation process, as defined in the credit analytics exposure methodology document. This ensures that correlated transactions utilize more credit limit.
– Correlated repurchase and foreign exchange reports – Monthly reports produced by CRM capturing correlated repurchase and foreign exchange transactions. This information is reviewed by relevant CRM credit officers.
– Scenario risk reporting – In order to identify areas of potential wrong-way risk within the portfolio, a set of defined scenarios are run monthly by Risk Analytics and Reporting. The scenarios are determined by CRM and involve combining existing scenario drivers with specific industries to determine where portfolios are sensitive to these stressed parameters, e.g. construction companies / rising interest rates.
– Scenario analysis is also produced for hedge funds which are exposed to particular risk sensitivities and also may have collateral concentrations due to a specific direction and strategy.
– In addition, and where required, CRM may prepare periodic trade level scenario analysis, in order to review the risk drivers and directionality of the exposure to a counterparty.
The Front Office is responsible for identifying and escalating trades that could potentially give rise to wrong-way risk.
Any material wrong-way risk at portfolio or trade level should be escalated to senior CRM executives and risk committees.
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 100) in III – Treasury, Risk, Balance sheet and Off-balance sheet – Liquidity and funding management in the Credit Suisse Annual Report 2013 for further information on the effect of a one, two or three notch downgrade as of December 31, 2013.
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 94 to 100) in III – Treasury, Risk, Balance sheet and Off-balance sheet in the Credit Suisse Annual Report 2013 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
29
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 2013, no credit derivatives were utilized that qualify for hedge accounting under US GAAP.
> Refer to “Derivative instruments” (pages 135 to 136) in III – Treasury, Risk, Balance sheet and Off-balance sheet – Risk management – Credit risk for further information on derivative instruments, including counterparties and their creditworthiness.
> Refer to “Note 31 – Derivative and hedging activities” (pages 281 to 286) in V – Consolidated financial statements – Credit Suisse Group in the Credit Suisse Annual Report 2013 for further information on the fair value of derivative instruments and the distribution of current credit exposures by types of credit exposures.
> Refer to “Note 26 – Offsetting of financial assets and financial liabilities” (pages 254 to 257) in V – Consolidated financial statements – Credit Suisse Group in the Credit Suisse Annual Report 2013 for further information on netting benefits, netted current credit exposures, collateral held and net derivatives credit exposure.
| Derivative exposure at default after netting | |||||
| end of | 2013 | 2012 | |||
| Derivative exposure at default (CHF million) | |||||
| Internal models method | 37,755 | 32,717 | |||
| Current exposure method | 7,353 | 21,227 | |||
| Total derivative exposure | 45,108 | 53,944 | |||
| Collateral used for risk mitigation | |||||
| end of | 2013 | 2012 | |||
| Collateral used for risk mitigation for the internal models method (CHF million) | |||||
| Financial collateral - cash / securities | 24,911 | 36,896 | |||
| Other eligible IRB collateral | 407 | 794 | |||
| Total collateral used for the internal models method | 25,318 | 37,690 | |||
| Collateral used for risk mitigation for the current exposure method (CHF million) | |||||
| Financial collateral - cash / securities | 2,489 | 4,620 | |||
| Other eligible IRB collateral | 277 | 358 | |||
| Total collateral used for the current exposure method | 2,766 | 4,978 | |||
| Credit derivatives that create exposures to counterparty credit risk (notional value) | |||||||||
| 2013 | 2012 | ||||||||
|
end of |
Protection bought |
Protection sold |
Protection bought |
Protection sold |
|||||
| Credit derivatives that create exposures to counterparty credit risk (CHF billion) | |||||||||
| Credit default swaps | 717.3 | 675.6 | 851.0 | 808.1 | |||||
| Total return swaps | 7.3 | 0.1 | 4.9 | 1.1 | |||||
| First-to-default swaps | 0.0 | 0.0 | 0.4 | 0.0 | |||||
| Other credit derivatives | 60.8 | 22.2 | 20.0 | 8.9 | |||||
| Total | 785.4 | 697.9 | 876.3 | 818.1 | |||||
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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 |
|||||||
| 2013 (CHF million) | |||||||||||||
| Switzerland | 531 | 174 | 705 | 1,142 | 68 | 1,210 | |||||||
| EMEA | 21 | 15 | 36 | 39 | 1 | 40 | |||||||
| Americas | 56 | 20 | 76 | 180 | 8 | 188 | |||||||
| Asia Pacific | 46 | 6 | 52 | 51 | 0 | ||||||||