Capital markets and taxes
A currency risk arises from our international business. This risk, however, is largely limited to the so-called translation risk since there is usually a high regional congruence between the production and sales markets. We use primary and derivative financial instruments as one means of countering interest rate and currency risks from our operating business. Their use is only permitted for hedging purposes in DB Group. There is a risk that these hedging measures will not pay off, or not in the way expected.
To prevent counterparty default risk from financial and energy derivatives, we conclude credit support agreements (CSA) for all longer-term hedges.
Due to the long-term capital employed, we also use long-term, fixed-interest financial instruments. As a result, only new issues are exposed to the risk of rising interest rates. We apply a conservative planning approach to deal with risks arising from capital market performance or a deterioration in credit ratings.
Liabilities from pensions and similar retirement benefit obligations are partially covered by plan assets from stocks, real estate, fixed-interest securities and other investments. Losses of value in these assets reduce the cover of pension obligations by plan assets, potentially resulting in DB Group having to provide additional cover.
In addition, there are potential risks from back-tax payments from tax audits that are in progress and from amendments to tax laws. In order to minimize tax risks as much as possible, we pursue the prompt processing of tax audits and implement a tax compliance management system within DB Group.