COMMERZBANK

Financial Statements and Management Report

2021

Commerzbank Aktiengesellschaft

The bank at your side

Due to rounding, numbers and percentages in this report may not add up precisely to the totals provided.

4 Management report

Structure and organisation
Our employees
Details pursuant to Art. 289 of the German Commercial Code (HGB)
Business and overall conditions
Financial performance, assets, liabilities and financial position
Outlook and opportunities report
Risk report

73 Income statement

74 Balance sheet

78 Notes

78 General information
82 Notes to the income statement
84 Notes to the balance sheet
96 Other notes

120 Responsibility statement by the Board of Managing Directors

121 Independent auditor’s report

Commerzbank Aktiengesellschaft

Management report of Commerzbank Aktiengesellschaft

Structure and organisation

Commerzbank is the leading bank for SMEs (the Mittelstand) and a partner to some 28,000 corporate client groups and around 11 million private and small-business customers in Germany. The Bank offers a comprehensive portfolio of financial services in two business segments – Private and Small-Business Customers and Corporate Clients.

In its corporate client business, Commerzbank focuses on German SMEs, large companies and institutional customers. In international business, the Bank supports customers who have business links with Germany and companies in selected future-oriented sectors. Following the integration of comdirect, private and small-business customers benefit from the services of one of the most modern online banks in Germany, along with telephone support and personal advisory services at a local level.

The two segments Private and Small-Business Customers and Corporate Clients are each managed by a member of the Board of Managing Directors. All staff and management functions are contained in Group Management: Group Audit, Group Big Data & Advanced Analytics, Group Cyber Risk & Information Security, Group Communications, Group Compliance, Group Finance, Group Human Resources, Group Investor Relations, Group Legal, Group Research, Group Strategy, Transformation & Sustainability, Group Tax, Group Treasury and the central risk functions. The support functions are provided by Group Services. These include Group Client Data, Group Corporate Clients & Treasury Platforms, Group Banking & Market Operations, Group Business Platform, Group Delivery Center, Group Digital Transformation, Group Credit, Group Technology Foundations, Group Operations Credit and Group Organisation & Security. The staff, management and support functions are combined in the Others and Consolidation division for reporting purposes.

On the domestic market, Commerzbank Aktiengesellschaft is headquartered in Frankfurt am Main, from where it manages its branch network serving all customer groups. Following the merger with comdirect Bank AG, Commerz Real AG is now the biggest domestic subsidiary. Outside of Germany, as at the reporting date Commerzbank has 6 material subsidiaries, 19 operational foreign branches and 26 representative offices in just under 40 countries and is represented in all major financial centres, such as London, New York, Tokyo and Singapore. However, the focus of the Bank's international activities is on Europe.

The financial year is the calendar year.

Our employees

Our employees make a key contribution to the success of the business. Thanks to their commitment and skills, we are well placed to hold our own against the competition and achieve our economic objectives over the longer term.

The key tenet of Commerzbank's human resources policy is to maintain a corporate culture that is based on trust. Treating our employees fairly and as partners is a prerequisite for long-term success. Continuity and a focus on the future play an important role here – as does a broad range of training and development opportunities. We want to offer our employees a working environment in which they can work happily and successfully, thereby ensuring the Bank's long-term success. With this aim in mind, Commerzbank conducts regular surveys among its employees to identify their needs and incorporate them into the Bank's development. In addition to professional development, the key objectives include facilitating work-life balance and promoting employee diversity within the Bank. As such, we are committed to a culture in which all employees are appreciated. Protecting health is another important concern. We offer a host of measures designed to provide targeted health support for our employees.

The number of employees at Commerzbank Aktiengesellschaft decreased year on year in connection with the agreed headcount reduction as part of our strategy. The number of employees as at the reporting date was 31,538, as compared with 33,105 at the end of 2020.

Remuneration

The remuneration report for the Board of Managing Directors and the Supervisory Board is published as a separate report and can be found at https://www.commerzbank.com/en/hauptnavigation/aktionaere/publikationen_und_veranstaltungen/unternehmensberichterstattung_1/index.html.

As a result of the increased significance arising from greater regulation, remuneration of all employees below the level of the Board of Managing Directors is disclosed in a separate report (remuneration report pursuant to Art. 16 of the Remuneration Ordinance for Institutions (Institutsvergütungsverordnung)). It is published annually on the Commerzbank website at www.commerzbank.com.

Financial Statements and Management Report 2021
5

Details pursuant to Art. 289 of the German Commercial Code (HGB)

Information under takeover law required pursuant to Art. 289a (1) of the German Commercial Code (HGB) and explanatory report

Share capital structure

The share capital of Commerzbank totalled €1,252,357,634.00 at the end of the financial year. It is divided into 1,252,357,634 no-par-value shares. The shares are issued in bearer form. Commerzbank has issued only ordinary shares with the same rights and obligations. Each share has one vote.

Restrictions on voting rights and transfers; nature of voting control for employee shares

We are not aware of any restrictions on voting rights or the transfer of shares. In general, the voting right in cases under Art. 136 of the German Stock Corporation Act is suspended by law for the shares concerned. Pursuant to Art. 71b of the German Stock Corporation Act, rights may also not be exercised for treasury shares.

Employees who hold Commerzbank shares exercise their rights of control like any other shareholders, in accordance with the law and the Articles of Association.

Shares with special rights granting powers of control

There are no shares with special rights granting powers of control.

Appointment and removal of the members of the Board of Managing Directors; amendments to the Articles of Association

The members of the Board of Managing Directors are appointed and removed by the Supervisory Board pursuant to Art. 84 of the German Stock Corporation Act and Art. 6 (2) of the Articles of Association. Before members of the Board of Managing Directors are appointed it must be demonstrated to the German Federal Financial Supervisory Authority (BaFin), the Deutsche Bundesbank and the European Central Bank (ECB) that they are fit and proper and have sufficient time available. Being fit and proper requires them to have sufficient theoretical and practical knowledge of the Bank's business and management experience (Art. 24 (1) no. 1, Art. 25c (1) of the German Banking Act (KWG), Art. 93 of Regulation (EU) No 468/2014 (SSM Framework Regulation)). Pursuant to Art. 6 (1) of the Articles of Association, the Board of Managing Directors must comprise a minimum of two people; otherwise, the Supervisory Board defines the number of members on the Board of Managing Directors in accordance with Art. 6 (2) of the Articles of Association. If there is a vacancy on the Board of Managing Directors for a required member and the Supervisory Board has not appointed a new member, in urgent cases one will be appointed by a court pursuant to Art. 85 of the German Stock Corporation Act.

Any amendment to the Articles of Association requires a resolution of the Annual General Meeting under Art. 179 (1) sentence 1 of the German Stock Corporation Act. Unless the law mandates a majority of the share capital represented at the date of resolution, a simple majority of the capital represented, in addition to a simple majority of the votes, is sufficient to pass resolutions (Art. 19 (3) sentence 2 of the Articles of Association). The authority to amend the Articles of Association, provided such amendments affect merely the wording of an article with no change in substance, has been transferred to the Supervisory Board under Art. 10 (3) of the Articles of Association in compliance with Art. 179 (1) sentence 2 of the German Stock Corporation Act.

Powers of the Board of Managing Directors to issue and buy back shares

The Board of Managing Directors is authorised, subject to the detailed provisions of Art. 4 (3) and (4) of the Articles of Association in effect on 31 December 2021, to increase the share capital, with the approval of the Supervisory Board, on one or more occasions until 21 May 2024, but by no more than a total of €626,178,817.00 by issuing new shares:

By up to €500,943,054.00 against cash contributions (Authorised Capital 2019/I). The Board of Managing Directors is authorised, with the approval of the Supervisory Board, to exclude subscription rights in order to (i) exclude fractional amounts from the subscription rights or (ii) issue employee shares to employees up to a proportional amount of the share capital of €15,000,000.00.
By up to €125,235,763.00 against cash or non-cash contributions (Authorised Capital 2019/II). The Board of Managing Directors is authorised, with the approval of the Supervisory Board, to exclude subscription rights in order to (i) exclude fractional amounts from the subscription rights; (ii) to the extent necessary, grant subscription rights to new shares to holders of conversion or option rights; (iii) increase the share capital against contributions in kind; or (iv) issue new shares against cash contributions to the extent of no more than 10% of the Bank's share capital at the time the authorisation becomes effective or at the time the authorisation is exercised, whichever amount is lower, if the issue price of the new shares is not significantly lower than the stock market price for shares of the same class at the time the issue price is determined. For the determination of the maximum limit of 10% of the share capital, the offsetting rules set out in the Articles of Association apply.

The proportional amount of the share capital attributable to those shares issued in exchange for cash or contributions in kind

Commerzbank Aktiengesellschaft

subject to exclusion of shareholders' subscription rights must not, in aggregate, exceed 10% of the share capital of the Bank existing at the time when the Annual General Meeting adopts the resolution. If shares are issued to members of the Board of Managing Directors, members of the management or employees of Commerzbank Aktiengesellschaft and its Group companies within the meaning of Art. 18 (1) of the German Stock Corporation Act, subject to the exclusion of shareholders' subscription rights, the Board of Managing Directors may make use of the authorisation only up to a maximum total amount of 3% of the share capital existing at the time when the Annual General Meeting adopts the resolution. For the determination of this 3% limit, the offsetting rules set out in the Articles of Association apply. For details of the authorised capital, particularly regarding terms and conditions of exercise, please refer to the detailed explanations in Note 32.

The Board of Managing Directors was authorised by the Annual General Meeting on 13 May 2020 in accordance with Art. 71 (1) no. 8 of the German Stock Corporation Act to acquire own shares in a volume of up to 10% of the share capital existing at the time of the resolution or of the share capital existing at the time of the exercise of the present authorisation, whichever amount is lower, until 12 May 2025. Together with the Bank's treasury shares purchased for other reasons and held by the Bank or attributable to it pursuant to Art. 71a ff. of the German Stock Corporation Act, the shares purchased on the basis of this authorisation must at no time exceed 10% of the Bank's share capital.

At the discretion of the Board of Managing Directors, the shares may be acquired on the stock exchange or by means of a public purchase offer addressed to all shareholders. The permissible consideration for the acquisition of the shares (excluding ancillary costs) is subject to certain limits specified in the authorisation for both acquisition options. If, in the event of a public purchase offer, the volume of shares offered exceeds the intended repurchase volume, acceptance may be made in proportion to the respective shares offered. Provision may be made for preferential acceptance of small numbers of up to 50 shares of the company offered for purchase per shareholder (minimum allotment). The authorisation to acquire own shares may be exercised once or several times, in whole or in partial amounts, and in combination with the aforementioned acquisition options.

The Board of Managing Directors was authorised to use repurchased shares as follows in accordance with the resolution of the Annual General Meeting:

sale of treasury shares on the stock exchange or by means of an offer to all shareholders;
sale of treasury shares against a non-cash contribution for the purpose of acquiring companies, parts of companies or equity interests in companies as well as other assets;
in the event of the sale of treasury shares by means of an offer to all shareholders, the granting of a subscription right for holders of conversion or option rights, as would be due to them after exercising the conversion or option right or after fulfilment of a corresponding conversion or option obligation;
issue of treasury shares (i) as employee shares to employees up to a proportional amount of the share capital of €15,000,000.00 or (ii) as a component of remuneration through the granting of shares to members of the Board of Managing Directors, members of the management or employees of Commerzbank Aktiengesellschaft and its Group companies within the meaning of Art. 18 (1) of the German Stock Corporation Act;
sale of treasury shares other than on the stock exchange or by means of an offer to all shareholders, provided that the purchase price is not significantly lower than the stock market price of the shares at the time of the sale. This authorisation may be exercised only if it is ensured that the number of shares sold on the basis of this authorisation does not exceed 10% of the existing share capital of the Bank at the time the authorisation takes effect or at the time the authorisation is exercised, whichever amount is lower. For the determination of the maximum limit of 10% of the share capital, the offsetting rules set out in the authorisation apply.

The Board of Managing Directors may make use of the authorisations to exclude subscription rights for the use of treasury shares as employee shares, as a component of remuneration by providing shares to members of the Board of Managing Directors, members of management or employees and for the issue of treasury shares in return for non-cash contributions to members of the Board of Managing Directors, members of management or employees by means of the contribution of claims to variable remuneration components, bonuses or similar claims against the Bank or its Group companies only up to a total maximum of 3% of the share capital existing at the time the resolution is adopted by the Annual General Meeting. For the determination of this 3% limit, the offsetting rules set out in the authorisation apply.

The aforementioned authorisations to use treasury shares may be exercised once or several times, in whole or in part, individually or jointly. The treasury shares may be used for one or more of the aforementioned purposes. Shareholders' subscription rights in respect of resold Commerzbank shares have been excluded to the extent that these shares are used in accordance with the authorisations set out in points 2 to 5 above.

The Board of Managing Directors was further authorised to redeem shares acquired on the basis of this authorisation without the implementation of the redemption requiring a further resolution by the Annual General Meeting.

In addition to the authorisation described above, the Board of Managing Directors was authorised by the Annual General

Financial Statements and Management Report 2021
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Meeting on 13 May 2020, pursuant to Art. 71 (1) no. 8 of the German Stock Corporation Act, to acquire own shares by using put or call options and forward purchase contracts too. Accordingly, the Bank may sell put options to third parties and purchase call options from third parties for physical delivery as well as enter into forward purchase agreements for which there are more than two trading days between the conclusion of the purchase agreement for the own shares and the settlement by delivery of the shares (hereinafter collectively "derivatives"). The terms and conditions of these derivatives must ensure that the derivatives entail delivery of only shares that have themselves been acquired in compliance with the principle of equal treatment; the acquisition of shares on the stock exchange is sufficient for this purpose. Under this condition, a combination of the aforementioned derivatives may also be used. The authorisation to acquire own shares using derivatives may be exercised once or several times, in full or in partial amounts.

All share purchases using derivatives are limited to shares up to the amount of 5% of the share capital existing at the time of the adoption of the resolution by the Annual General Meeting on this authorisation or of the share capital existing at the time of the exercise of this authorisation, whichever amount is lower. The term of each derivative may not exceed 18 months and must be determined in such a way that the acquisition of shares through the exercise of the derivatives occurs no later than 12 May 2025.

The price (excluding ancillary costs) agreed in a derivative for the acquisition of a share upon the exercise of options or the settlement of forward purchases is subject to certain limits specified in the authorisation, as is the acquisition price to be paid by the Bank for options, the sales price received by the Bank for options and the forward price agreed by the Bank for forward purchases.

If own shares are acquired using derivatives in compliance with the above provisions, a right of the shareholders to enter into such derivative transactions with the Bank is excluded by analogous application of Art. 186 (3) sentence 4 of the German Stock Corporation Act. Shareholders have a right to tender their shares in the Bank only to the extent that the Bank has an obligation to them under the derivative transactions to take delivery of the shares. Any further right to tender is excluded.

The rules described above for directly repurchased shares apply to the use of shares acquired using derivatives.

Material agreements in the event of a change of control following a takeover bid

In the event of a change of control at Commerzbank due to a merger or transfer of assets, an extraordinary right of termination in favour of certain contract parties has been negotiated by Commerzbank under ISDA master agreements. In general, the right of termination is also conditional upon a material deterioration in Commerzbank's credit standing. In the event of

this type of termination, the individual agreements signed under these master agreements would have to be settled at market value, which can be determined on any stock exchange trading day. However, the possibility cannot be excluded that, if an individual customer with an especially large volume of business terminates a contract, Commerzbank's assets, liabilities, financial position and financial performance could nevertheless be heavily impacted due to the Bank's potential payment obligations.

Compensation agreements in the event of a takeover offer

There are no compensation agreements in the event of a takeover offer, either with the members of the Board of Managing Directors or with employees of Commerzbank.

Equity holdings that exceed 10% of the voting rights

According to the German Securities Trading Act (WpHG), every investor who reaches, exceeds or falls below certain proportions of voting rights through acquisition, sale or in any other way must notify us and BaFin. The lowest threshold for this notification requirement is 3%. According to the notification of voting rights dated 4 June 2013, the Financial Market Stabilisation Fund holds a stake of 17.15% in the voting capital of Commerzbank Aktiengesellschaft. Provided that the voting rights are unchanged, the Financial Market Stabilisation Fund would hold a stake of approximately 15.6% in the voting capital of Commerzbank Aktiengesellschaft following the capital increase in April 2015.

Details pursuant to Art. 289 (4) of the German Commercial Code (HGB)

The aim of the internal control and risk management system over financial reporting is to ensure that the annual financial statements of Commerzbank Aktiengesellschaft and the Commerzbank Group provide a true and fair view of the assets, liabilities, financial position and financial performance in accordance with the applicable accounting standards under the German Commercial Code and IFRS. The internal control system and the risk management system at Commerzbank are linked with each other, both with regard to financial reporting. Below, we shall therefore use the term ICS (internal control system). Details of the risk management system can be found in the risk report on page 35 ff.

The objective of proper and reliable financial reporting is endangered if material information in the financial reporting is erroneous. It is irrelevant whether this is due to one single matter or a combination of several. Risks to financial reporting may arise from errors in the accounting processes. Fraudulent behaviour can also result in the misstatement of information. The Bank therefore has to ensure it minimises the risks of incorrect statement, measurement or presentation of material information in the financial reporting. The Commerzbank ICS is designed to provide

Commerzbank Aktiengesellschaft

reasonable assurance that the relevant legal requirements are complied with, that business is conducted in a proper and cost-effective manner and that financial reporting is complete and accurate.

Legal basis and guidelines

Art. 289 (4) of the German Commercial Code requires capital market-oriented companies to describe the material features of their ICS in the management report. Commerzbank follows the principles for bank-specific organisation of the internal control system set out in the Minimum Requirements for Risk Management (MaRisk).

The Bank's internal control system is structured in line with the internationally recognised framework developed by the Committee of Sponsoring Organisations of the Treadway Commission (COSO). Commerzbank derives the following objectives from this:

that business processes be effective and efficient,
that applicable laws and regulations be observed and
that financial reporting be reliable.

As regards the risk assessment of the reporting process required by COSO in respect of the reliability of financial reporting (for example, ensuring that all transactions are fully and correctly recognised in the financial statements), the Bank follows the recommendations of the International Standard on Auditing (ISA) 315.

Organisation

The written rules of procedure form a sound basis for good corporate governance that provides strategic direction for the Group as a whole while taking account of risk elements. These rules are defined as the transparent description, to be updated on an ongoing basis, of the organisational structure and processes of a company, including powers. The binding standard required by regulation for the organisational structure is set down in the policy on the written rules of procedure and the process framework. These form the framework for descriptions and documentation of instructions, including processes. Documenting and updating the organisational structure is seen as part of the written rules of procedure and sets consistent and binding minimum requirements as a governance framework for all corporate units. The primary feature is the principle of clear allocation of responsibility, starting with the schedule of business responsibilities for the Board of Managing Directors and ending with administrative cost approval authorities at the lower management levels. The scope and structure of the governance framework follow both the legal and regulatory requirements and also the "Commerzbank corporate constitution" approved by the Board of Managing Directors. The governance framework translates the main guiding principles of

the corporate constitution into practical rules and comprises the following elements:

schedule of business responsibilities for the Board of Managing Directors,
business remits of the units,
rules of procedure,
organisational charts and
approval authorities for administrative costs.

The organisational control and monitoring units that ensure a functioning and efficient control structure are aligned in three successive levels at Commerzbank Aktiengesellschaft. The three lines of defence model is a central element in Commerzbank's corporate constitution. In addition, where tasks in the Bank by their nature cannot be combined, they are organised into different areas applying the principle of separation of functions. Strict checks are also carried out using the dual-control principle to minimise risks in financial reporting.

In accordance with MaRisk, responsibility for implementing, executing, applying, refining and reviewing the Bank-wide ICS lies with the Board of Managing Directors. The Board of Managing Directors is responsible for designing the Group-wide ICS and demonstrating that it is appropriate, while the CFO is responsible for designing the ICS over financial reporting and ensuring its operating effectiveness for this purpose. The CFO is responsible for the design of the ICS through appropriate and effective control steps and for embedding these into the various processes. The Board of Managing Directors is also responsible for ensuring that the financial statements for the parent company and Group are properly prepared.

The Supervisory Board is supported in its oversight of the financial reporting primarily by the Audit Committee set up for this purpose. It provides support in monitoring the accounting process and the effectiveness of the risk management system especially the internal control system, compliance and the internal audit function. It also provides support in monitoring the performance of the annual audit, particularly with regard to the independence of the auditor and the services provided by the auditor. The Audit Committee also monitors remediation of deficiencies identified by the auditor within the scope of the follow-up and reporting done by the internal audit function (Group Audit).

Group Audit reports to the Supervisory Board and its appointed committees in line with regulatory requirements and by means of summary quarterly reports about the work it has carried out and its material findings. Group Finance (GM-F), which reports directly to the CFO, is responsible for ensuring that the financial statements are drawn up in compliance with the relevant laws and internal and external guidelines.

Within GM-F, Accounting and Controlling Policies & Guidelines is the department responsible for drawing up accounting guidelines and publishing them on the intranet. Implementation of these accounting guidelines supports consistent and correct financial reporting across the Group. The key areas of the cluster delivery organisation located within GM-F are responsible for the operation and ongoing technical and functional development of the infrastructure for core finance processes.

Controls to minimise risk

Controls at the Bank are integrated directly into operating processes, either technically or manually (i.e. by means of organisation). Technical controls are used in the IT systems employed and consist, for example, of check sums and verification digits. Technical controls are often complemented by manual controls such as screen approvals carried out by the responsible employees. Further measures such as approval authorities, the separation of functions and the issuing of IT permissions also help increase data quality. Additional controls are in place during further processing to check that the data entered is complete and accurate.

Monitoring by Group Audit

Group Audit (GM-A) is the internal audit function and provides independent, objective and risk-oriented auditing and advisory services on behalf of the Board of Managing Directors. It supports the Bank in achieving its business objectives, using a systematic and targeted approach to evaluate the effectiveness of risk management, controls and management and monitoring processes and to help to improve them. The scope of its work encompasses all the Bank's activities, irrespective of whether they have been outsourced or not.

Group Audit is directly accountable to and reports to the full Board of Managing Directors. In performing its duties, it has a full and unrestricted right to information. It performs its duties autonomously and independently. Particularly with regard to reporting and the assessment of audit results, GM-A is not subject to any directives. GM-A's activities complement the work of the subsidiaries' internal audit departments within the framework of Group risk management. It may involve these departments in its auditing activities.

GM-A promptly prepares a written report on each audit; recipients include the responsible members of the Board of Managing Directors. On the basis of internal and external audit reports, GM-A oversees and documents the steps taken to remedy any reported deficiencies within the period of time specified for this. If the required action is not taken in time, a multi-stage escalation process comes into effect. GM-A also prepares an annual report on the audits that it has carried out during the course of the financial year, adherence to the audit plan, significant deficiencies and the corrective measures taken, and presents this report to the Board of Managing Directors.

The financial reporting process

The financial reporting processes at Commerzbank are supported by IT systems integrated into each process. The annual financial statements of Commerzbank Aktiengesellschaft in Germany are produced using a financial architecture consisting of a financial data warehouse that provides a consistent repository of basic information, and standard SAP software for the financial function. The parent company in Germany therefore has a single solution using consistent financial data for the financial statements under both IFRS and the German Commercial Code.

As part of the input process for financial reporting, all information relevant for drawing up the financial statements of Commerzbank Group under IFRS and Commerzbank Aktiengesellschaft under the German Commercial Code is submitted to GM-F by the reporting units. Data is transmitted via an online data entry functionality directly into SAP EC-CS consolidation software, which has been adapted to the Bank's requirements. Subsidiaries submit IFRS data; German and foreign branches also submit data under the German Commercial Code. Data is automatically checked for consistency before transmission to GM-F. Once the plausibility checks have been successfully completed, the individual reports can be finalised. Further plausibility checks are carried out using this data in GM-F. After these checks have been successfully completed, the Commerzbank Aktiengesellschaft annual financial statements are drawn up and all the necessary steps are taken to produce the Group financial statements. Drawing up the Group financial statements involves individual consolidation steps (e.g. consolidating equity, liabilities, income and expenses), currency translation and the elimination of intra-Group profits.

IFRS segment reporting is done on a separate IT system. This involves reconciliation with the data from accounting.

Measures to further enhance the ICS over financial reporting

The ICS over financial reporting has been adapted to meet the needs of the Commerzbank Group and it is enhanced further on an ongoing basis. To this end, Control Environment Finance (CEF) has been permanently implemented at Group Finance. CEF is based on the GM-F “process map”.

This is a top-down representation of all key processes, which is refined with descriptions of procedures and in which the risks in relation to the reliability of financial reporting are determined, applying the COSO framework. The Bank also follows the recommendations of ISA 315. This involves checking whether a risk can be assigned to one of the following three categories and their various aspects:

Commerzbank Aktiengesellschaft

assertions about classes of transactions: their occurrence, completeness, accuracy, allocation to the correct period and the correct account;
assertions about account balances at the reporting date: existence, rights and obligations, completeness, valuation and allocation;
assertions about presentation in the financial statements and about the notes to the financial statements: occurrence, rights and obligations, completeness, presentation and understandability, accuracy and measurement.

Suitable controls are implemented to minimise the risks identified, and these in turn are also assigned to the ISA 315 categories and their various aspects. With respect to the effectiveness of the ICS, the way in which the controls are designed in the form of appropriate steps and embedded into the respective processes and the way the controls are performed at the operating level are decisive factors in minimising risk.

The ICS over financial reporting is reinforced by regular assessment of the effectiveness and efficiency of key controls and regular checks on how controls are implemented.

This procedure ensures that risks are identified and minimised and that any potential negative developments on the operational side are avoided.

Other

No material changes have been made to the financial reporting ICS since the reporting date.

Details pursuant to Art. 340a (1a) in conjunction with Art. 289b (3) of the German Commercial Code (HGB)

The details pursuant to Art. 340a (1a) in conjunction with Art. 289b (3) of the German Commercial Code (HGB) can be found as a combined separate non-financial report on page 40 ff. of the Annual Report of the Commerzbank Group and online at https://www.commerzbank.com/NFR2021.

Declaration on corporate governance pursuant to Art. 289f HGB

In addition to the statutory requirements pursuant to Art. 289f of the German Commercial Code (HGB), the Board of Managing Directors and Supervisory Board must report on the Bank's corporate governance in the declaration on corporate governance. This follows from Principle 22 of the German Corporate Governance Code in the version of 16 December 2019, published

in the Federal Gazette [Bundesanzeiger] on 20 March 2020, on which this declaration is based.

Commerzbank attaches great importance to responsible and transparent corporate governance aimed at sustainable value creation. That is why the Board of Managing Directors and the Supervisory Board expressly support the German Corporate Governance Code and the goals and objectives it pursues.

Recommendations of the German Corporate Governance Code

Commerzbank declares every year whether the recommendations of the Commission regarding conduct have been and are being complied with, and explains which individual recommendations are not being implemented and the reasons why. This declaration of compliance by the Board of Managing Directors and the Supervisory Board is published on the Commerzbank website at https://www.commerzbank.de/en/hauptnavigation/aktionaere/governance_/corporate_governance_1.html. There is also an archive of all the declarations of compliance made since 2002. The declaration valid as at 31 December 2021 was made in November 2021.

As can be seen from the wording of the declaration below, Commerzbank complies with virtually all of the recommendations of the German Corporate Governance Code; it deviates from them in only a few points:

"From the time when the last declaration of compliance was made in November 2020, the recommendations of the Government Commission on the German Corporate Governance Code in the version of 16 December 2019 – published in the Federal Gazette on 20 March 2020 – have been complied with except for the following:

According to recommendation B.3 of the Code, the first-time appointment of members of the Board of Managing Directors should be made for a maximum of three years. Commerzbank Aktiengesellschaft deviated from this in the appointment of two members of the Board of Managing Directors, each of whom was appointed for five years. In addition to the appointment of the new Chairman of the Board of Managing Directors in 2020, a longer appointment than the recommended three years was also required for the new member of the Board of Managing Directors responsible for Private and Small-Business Customers in 2021. Owing to his previous long-standing position on the management board of a bank in Vienna, the longer appointment was necessary in order to be able to attract him to the Bank.
According to recommendation B.4 of the Code, any reappointment of a member of the Board of Managing Directors prior to one year before the end of the appointment period at the same time as termination of the current appointment

should only happen if special circumstances apply. In June 2021, the Chief Financial Officer was appointed Deputy Chairperson of the Board of Managing Directors by the Supervisory Board of Commerzbank Aktiengesellschaft. This appointment was accompanied by early re-appointment for five years, with the current appointment terminated at the same time. In the context of her appointment as Deputy Chairperson of the Board of Managing Directors, the early granting of a five-year appointment period was appropriate. Commerzbank Aktiengesellschaft nevertheless assumes in precautionary fashion that in making this re-appointment in the absence of special circumstances it has deviated from recommendation B.4 of the Code.According to recommendation D.5 of the Code, the Supervisory Board should establish a Nomination Committee made up exclusively of shareholder representatives. Under Art. 25d (11) sentence 2 no. 1 of the German Banking Act, the Nomination Committee is also assigned tasks for which the involvement of employee representatives is customary and necessary. For example, the nomination committee is tasked with assisting the supervisory board in identifying candidates to fill management positions at banks. In order to maintain the established practice at Commerzbank of involving both employee and shareholder representatives in the selection of candidates for the Board of Managing Directors, two members of the Commerzbank Supervisory Board's Nomination Committee are employee representatives.According to recommendation G.10 sentence 1 of the Code, the variable remuneration amounts granted to a member of the Board of Managing Directors should be predominantly invested in the company's shares or granted as share-based remuneration, with due to the respective tax burdens. Commerzbank's remuneration system provides for half of variable remuneration to be paid as share-based remuneration. This share-based portion ensures that the members of the Board of Managing Directors are sufficiently participating in the performance of Commerzbank shares. This incentivises them to align their actions with the long-term performance of Commerzbank Aktiengesellschaft.”

Suggestions of the German Corporate Governance Code

Commerzbank Aktiengesellschaft complies with all the suggestions of the German Corporate Governance Code.

Company values and governance practices at Commerzbank

Commerzbank is committed to its corporate, environmental and social responsibilities. To ensure sustainable corporate governance, it has defined extensive standards in various spheres of activity, which are published on the Commerzbank's website.

Corporate values, which we refer to as “ComWerte”, create a binding and unifying corporate culture. They lay the foundation for the entrepreneurial and individual responsibility of every employee at Commerzbank.

Based on the ComWerte corporate values, Commerzbank has set out codes of conduct for acting with integrity, which provide all Commerzbank Group employees with a binding framework for lawful and ethically appropriate conduct in the day-to-day working environment.

Both the ComWerte and the codes of conduct are reviewed as required and refined if necessary. Such a refinement was initiated in the 2021 financial year.

Commerzbank has also provided guidelines on corporate responsibility to give guidance on the sustainable orientation of its business activities. One of these six guidelines is the commitment to the principles of the UN Global Compact, an initiative set up by the United Nations together with many renowned companies, which is dedicated to active environmental protection, responsible dealings with employees, respect for human rights and the fight against corruption and bribery.

As a key financier of the German economy, Commerzbank has also defined various positions and guidelines on environmental and social issues for its core business. These are applied to the evaluation of transactions and business relationships and thus act as important points of reference. The basis for their preparation and regular review is the ongoing monitoring of media and non-governmental organisations on controversial environmental or social issues and regular discussion with non-governmental organisations. In addition, specific environmental guidelines have been formulated to guide the management of operational environmental impacts.

Board of Managing Directors

The Commerzbank Board of Managing Directors is responsible for independently managing the Bank in the company's best interest. In doing so, it must consider the interests of shareholders, customers, employees and other stakeholders, with the objective of sustainable value creation. It develops the company's strategy, discusses it with the Supervisory Board and ensures its implementation. In addition, it sees that efficient risk management and risk control measures are in place. The board conducts the Bank's business activities in accordance with the law, the Articles of Association, its rules of procedure, internal guidelines and the relevant employment contracts. It cooperates on a basis of trust with the Bank's other corporate bodies and with employee representatives.

The composition of the Board of Managing Directors and the responsibilities of its individual members are presented on page 5 of the Group Annual Report. The work of the Board of Managing Directors is specified in greater detail in its rules of procedure, which may be viewed on Commerzbank's website.

Commerzbank Aktiengesellschaft

The remuneration of the members of the Board of Managing Directors is presented in detail in the Group remuneration report, which is published on Commerzbank's website.

Supervisory Board

Commerzbank's Supervisory Board advises and monitors the Board of Managing Directors in its management of the Bank and is directly involved in decisions of fundamental importance. The Supervisory Board discharges its responsibilities in accordance with legal requirements, the Articles of Association and its rules of procedure. It cooperates closely and on a basis of trust with the Board of Managing Directors in the interests of the Bank. Taking into account the recommendations of the Presiding and Nomination Committee, the Supervisory Board decides on the appointment and dismissal of members of the Board of Managing Directors and, together with the Board of Managing Directors, ensures long-term succession planning. If necessary, external consultants are brought in.

The composition of the Supervisory Board and the members of its committees are presented on pages 19 to 21 of the Group Annual Report, in accordance with recommendation D.2 of the Code. Details of the work of the Supervisory Board, its structure and its control function can be found in the report of the Supervisory Board on pages 6 to 18 of the Group Annual Report. Further details on how the Supervisory Board and its committees work can be found in the rules of procedure of the Supervisory Board, available on Commerzbank's website.

According to recommendation C.1 of the Code, the Supervisory Board should set concrete objectives and draw up a profile of skills and expertise for the board as a whole. In doing so, it should give consideration to diversity. Appointments proposed by the Supervisory Board to the Annual General Meeting should take these objectives into account while also seeking to fulfil the profile of skills and expertise for the board as a whole. Progress in implementing the targets should be published in the declaration on corporate governance. In addition, in accordance with recommendation C.2, an age limit for members of the Supervisory Board should be specified and disclosed in the declaration on corporate governance.

The Supervisory Board of Commerzbank has approved the following concrete objectives:

The composition of the Supervisory Board should be staffed in such a way, that its members have the necessary skills, expertise, experience and knowledge to be able to perform its duties properly. In particular, the Supervisory Board should have all the expertise and experience deemed essential for the activities of the Commerzbank Group. In addition, the legal requirements with regard to special expertise and professional experience of individual members of the Supervisory Board in special areas must be met (for example, expertise in the areas of accounting and auditing as well as in the areas of risk management and risk controlling), and at least one member of the Supervisory Board should have special expertise in environmental, social and governance (ESG) issues. The members of the Supervisory Board must be able to challenge and monitor the decisions made by the Board of Managing Directors. Furthermore, the members of the Supervisory Board should also be able to devote sufficient time to the performance of their duties. Members should be reliable, and consideration should be given to their commitment, personality, professionalism, integrity and independence. The target is that the Supervisory Board should always have at least eight members elected by the Annual General Meeting who are independent as defined in recommendation C.6 of the Code, and not more than two former members of the Board of Managing Directors of Commerzbank. The length of service of the Supervisory Board members elected by the Annual General Meeting should generally not exceed a period of 12 years. The Supervisory Board has resolved a detailed profile of skills and expertise for its composition, which may be consulted on Commerzbank's website. The Supervisory Board takes account of the targets and requirements set out there in its election proposals to the Annual General Meeting and in the regular assessment of the Supervisory Board as a whole and its individual members.

All targets set by the Supervisory Board for its composition and skills profile were implemented as at 31 December 2021. With Burkhard Keese as Chairman of the Audit Committee and Robin J. Stalker, who is also a member of the Audit Committee, the Supervisory Board has two members with special expertise in the areas of accounting and auditing. Robin J. Stalker also has special expertise in environmental, social and governance (ESG) issues. In order to remain aligned with developments within Commerzbank Aktiengesellschaft in matters of sustainability and also to ensure that the growing requirements and responsibilities of the Supervisory Board in this area are properly complied with, the Supervisory Board has also resolved to add environmental and governance matters to the work of the Social Welfare Committee, rename the committee accordingly and increase the number of members. All other goals and requirements of the skills profile were also met as at 31 December 2021. None of the members of the Supervisory Board elected at the Annual General Meeting exceed the normal length of service of 12 years. The specific periods of service of the individual members of the Supervisory Board as well as the particular skills they bring to Commerzbank's Supervisory Board can be found in their CVs, which are available on Commerzbank's website.

In accordance with recommendation C.1 of the German Corporate Governance Code, the declaration on corporate governance should also provide information on what, in the view of the shareholder representatives, is the appropriate number of independent shareholder representatives on the Supervisory Board and the names of these members. According to recommendation C.6 of the Code, a Supervisory Board member is considered as independent if he or she is independent of the Bank and its Board of

Managing Directors and independent of any controlling shareholder. A Supervisory Board member is independent of the Bank and its Board of Managing Directors if he or she has no personal or business relationship with the Bank or its Board of Managing Directors that may lead to a significant, non-transient conflict of interest. When assessing the independence of their members according to the recommendation of the Code, the shareholder representatives should in particular take into account whether the Supervisory Board member him or herself or a close relative of the Supervisory Board member was a member of the Bank's Board of Managing Directors in the two years before his or her appointment; currently has or had in the year leading up to his or her appointment a material business relationship with the Bank or one of its dependent companies, either directly or as a shareholder or in a responsible function of a non-Group company; is a close relative of a member of the Board of Managing Directors; or has been a member of the Supervisory Board for more than 12 years.

Based on the above criteria, all ten shareholder representatives can be classified as “independent”, namely Helmut Gottschalk, Dr. Frank Czichowski, Sabine U. Dietrich, Dr. Jutta A. Dönges, Burkhard Keese, Daniela Mattheus, Caroline Seifert, Robin J. Stalker, Dr. Gertrude Tumpel-Gugerell and Frank Westhoff. Dr. Jutta A. Dönges and Dr. Frank Czichowski were proposed for election to the Supervisory Board of Commerzbank Aktiengesellschaft at the suggestion of the Financial Market Stabilisation Fund, represented by the Federal Republic of Germany -- Finance Agency. The Financial Market Stabilisation Fund holds 15.6% of the share capital of Commerzbank Aktiengesellschaft and is therefore not a controlling shareholder within the meaning of the German Corporate Governance Code. Nor does the Federal Republic of Germany -- Finance Agency have a material business relationship with Commerzbank.

As a result, the target of always having at least eight independent Supervisory Board members elected by the Annual General Meeting has been achieved. The Supervisory Board's own assessment that it contains an appropriate number of independent members is therefore well-founded.

In 2021, the Supervisory Board first dealt with the results of the efficiency audit carried out in the 2020 financial year. On the basis of the results, it drew up a catalogue of measures that covers topics such as Supervisory Board expertise, qualification and training measures, and optimisation of the remuneration system for the Board of Managing Directors, and implemented these measures. At the end of the 2021 financial year, in accordance with recommendation D.13 of the German Corporate Governance Code, the Supervisory Board also reviewed the effectiveness of its work in 2021 as part of the assessment required under Art. 25d (11) nos. 3 and 4 of the German Banking Act (KWG). For this purpose all members of the Supervisory Board completed various questionnaires, which were then analysed. The resulting analyses were presented to the plenary session for discussion at the start of 2022. On the basis of these discussions, a catalogue of measures was drawn up, which will be promptly addressed. The members of the Supervisory Board believe that the board and its committees work effectively and to a high standard overall.

In accordance with recommendation E.2 of the German Corporate Governance Code and Art. 3 (6) of the rules of procedure of the Supervisory Board, each member of the Supervisory Board must disclose any conflicts of interest. No member of the Supervisory Board declared such a conflict of interest during the year under review.

The remuneration of the members of Commerzbank's Supervisory Board is presented in detail in the Group remuneration report, which is published on Commerzbank's website.

In accordance with recommendation B.2 of the German Corporate Governance Code, the Supervisory Board works with the Board of Managing Directors to ensure long-term succession planning for the Board of Managing Directors, which also includes measures to ensure they can respond appropriately to any short-term changes (such as resignations for personal reasons). The Presiding and Nomination Committee of Commerzbank's Supervisory Board is responsible for succession planning. It assists the Supervisory Board in selecting applicants for positions on the Board of Managing Directors. Therefore, it takes account of the balance and range of knowledge, skills and experience of all the board members and draws up a job description with an applicant profile. In drawing up the job description, it takes account of the skills profile and suitability matrix for the Board of Managing Directors as well as other targets for its composition (such as diversity). In accordance with Art. 25 (11) no. 5 of the German Banking Act, the Presiding and Nomination Committee also reviews the principles of the Board of Managing Directors for the selection and appointment of persons at top management level. It also determines whether there are suitable succession candidates at this level for appointment to the Board of Managing Directors. The resolution of the 2020 Annual General Meeting on the system of remuneration for members of the Supervisory Board pursuant to Art. 113 (3) sentence 1 of the German Stock Corporation Act is published on Commerzbank's website. The 2022 Annual General Meeting is to vote on an adjustment to the remuneration system for the members of the Supervisory Board with regard to remuneration for serving on committees.

Diversity

Commerzbank takes diversity into account in the composition of the Board of Managing Directors, appointments to management roles and recommendations for the election of Supervisory Board members (recommendations A.1, B.1 and C.1 of the Code). The aim is to reduce the risk of prejudice and “groupthink”. In addition, diversity contributes to a broader range of experience and a greater spectrum of knowledge, capabilities and expertise.

Commerzbank Aktiengesellschaft

Diversity policy and information on the minimum proportions of women and men on the Supervisory Board

Commerzbank's Supervisory Board consists of 20 members. As already mentioned in the description of the targets for the composition of the Supervisory Board, the Supervisory Board is supposed to always have at least eight members elected by the Annual General Meeting who are independent (shareholder representatives) as defined in recommendations C.6, C.7 and C.8 of the Code and – in accordance with recommendation C.11 – not more than two former members of the Board of Managing Directors of Commerzbank Aktiengesellschaft. The Supervisory Board has also set a regular age limit of 72 and aims to have a broad range of ages represented on the board. The Supervisory Board also wants its members to have a suitable range of educational and professional backgrounds and for the board to have at least one international member at all times. The Supervisory Board also considers appropriate female and male representation when proposing candidates to the Annual General Meeting for election. The Supervisory Board is committed to fulfilling the statutory minimum requirement of at least 30 % female and male representation. Thereby it has to be considered that the only way the Supervisory Board is able to influence its composition is by the candidates it proposes to the Annual General Meeting for election. The employee representatives on the Supervisory Board are also striving to maintain female and male representation of at least 30% among employee representatives in future.

The Supervisory Board achieved all the stated goals in the 2021 financial year. As at 31 December 2021, with Dr. Gertrude Tumpel-Gugerell and Robin J. Stalker, the Supervisory Board included two international members and nine women, five of whom were shareholder representatives. The percentage of women on the Supervisory Board is therefore 45% at present.

The members of Commerzbank's Supervisory Board are between 48 and 70 years old; the average age is 56.8. The members of the Supervisory Board have a range of educational and professional backgrounds: there are banking specialists, lawyers, members with business degrees and engineers. Many members of the Supervisory Board have significant banking experience.

Diversity policy and minimum proportions on the Board of Managing Directors

In making appointments to the Board of Managing Directors, the Supervisory Board aims to increase diversity, particularly with regard to age, geographic origin, education and professional background and to give appropriate consideration to women. As a rule, the members of the Board of Managing Directors should not be over 65 years of age. In addition, the Supervisory Board ensures that the members of the Board of Managing Directors have a suitable range of educational and professional backgrounds.

The Supervisory Board had set a target of at least one female member by 31 December 2021. This target was met ahead of schedule on 1 November 2017, and has been exceeded since 1 January 2020 with two women on the Board of Managing Directors. This means that the minimum proportions under Art. 76 (3a) of the German Stock Corporation Act have been met and indeed exceeded, according to which a Board of Managing Directors consisting of more than three people must have at least one woman and at least one man among its members. The Supervisory Board will strive to continue to exceed the statutory minimum proportions in the future. The proportion of women on Commerzbank Aktiengesellschaft's Board of Managing Directors was 33.3% as at 31 December 2021.¹

Targets for the first and second levels of management

Art. 76 (4) of the German Stock Corporation Act requires Commerzbank's Board of Managing Directors to set targets for female representation at the two levels of management below the Board of Managing Directors and a deadline for achieving these targets. In accordance with Art. 25 (1) of the Introductory Act of the German Stock Corporation Act, the targets and deadlines had to be set for the first time and documented by 30 September 2015. The deadlines specified had to be no later than 30 June 2017. A maximum period of five years applies to all subsequent deadlines under Art. 76 (4) of the German Stock Corporation Act.

The Board of Managing Directors last set new targets for female representation at the first and second levels of Commerzbank's management (in Germany) in December 2021. The target is 25% for the first management level and likewise 25% for the second level. The deadline set for achieving the targets is 31 December 2026. Commerzbank has thus set itself ambitious targets despite the uncertainties resulting from the Bank's current transformation programme. It is an important objective for the Bank and the Group as a whole to further increase the number of women in management positions.

As at 31 December 2021, the first management level below Commerzbank's Board of Managing Directors consisted of 38 managers, of whom 32 were male and 6 female. The percentage of women in the first level of management below the Board of Managing Directors was therefore 15.8%.

The second management level below the Board of Managing Directors consisted of 359 people, of whom 278 were male and 81 female. The percentage of women in the second level of management below the Board of Managing Directors was thus 22.6%.

Accounting

Accounting at Commerzbank gives a true and fair view of the assets, liabilities, financial position and financial performance of

¹ With approval of the appointment of Dr. Oliveri del Castillo-Schulz by the regulatory authority, the proportion of women is 28.6%.

the Group in compliance with the respective accounting standards. The Group financial statements and Group management report are prepared in accordance with International Financial Reporting Standards as published by the International Accounting Standards Board (IASB) and applicable in the EU (IFRS) and the supplementary provisions of the German Commercial Code (HGB); the parent company financial statements and management report of Commerzbank Aktiengesellschaft are prepared in accordance with the provisions of the German Commercial Code. The Group financial statements and parent company financial statements are prepared by the Board of Managing Directors and approved by the Supervisory Board. The audit is performed by the auditor elected by the Annual General Meeting.

The management report also includes a detailed risk report, providing information on the Bank's responsible handling of the various types of risk. It may be found on pages 34 to 71 of this report.

During the financial year, shareholders and third parties receive additional information about the course of business by means of the interim report as at 30 June and interim financial information (as at 31 March and 30 September). The interim report is also prepared in accordance with IFRS. In the interim financial information as at 31 March and 30 September, the statement of comprehensive income, balance sheet and statement of changes in equity are prepared in accordance with the applicable IFRS accounting, measurement and consolidation principles for interim reporting.

Shareholder relations, transparency and communication

The Annual General Meeting of shareholders takes place once a year. It decides on the appropriation of distributable profit (if any) and approves the actions of the Board of Managing Directors and the Supervisory Board, the appointment of the auditors and any amendments to the Articles of Association.

If necessary, it authorises the Board of Managing Directors to undertake capital-raising measures and approves the conclusion of profit and loss transfer agreements. Each share entitles the holder to one vote.

In accordance with Article 120a (1) of the German Stock Corporation Act, the Supervisory Board submitted to the 2020 Annual General Meeting the remuneration system for members of the Board of Managing Directors, which had been adapted in line with the new requirements of the German Stock Corporation Act following the enactment of the German Act implementing the Second Shareholder Rights Directive (SRD II). The amendments to the German Corporate Governance Code were also taken into account when amending the system. The Annual General Meeting approved the remuneration system. The current remuneration system and the resolution of the Annual General Meeting are published on Commerzbank's website. An adjusted remuneration system for the members of the Board of Managing Directors will be submitted to the 2022 Annual General Meeting for approval.

The Bank's shareholders may submit recommendations or other statements by letter or e-mail or may present them in person. Since the 2020 financial year, there has also been an orderly process regulated in the Engagement Policy for contacting Commerzbank as a shareholder. At the Annual General Meeting, the Board of Managing Directors or the Supervisory Board comment or reply directly. Shareholders may codetermine the course of the Annual General Meeting by submitting countermotions or supplementary motions to the agenda. Shareholders may also request an Extraordinary General Meeting be convened. The reports and documents required by law for the Annual General Meeting, including the Annual Report, as well as the agenda for the Annual General Meeting and any countermotions or supplementary motions may be downloaded from the internet.

Commerzbank informs the public -- and consequently shareholders as well -- about the Bank's financial position and financial performance four times a year. Corporate news that may affect the share price is also published in the form of ad hoc releases. This ensures that all shareholders are treated equally. The Board of Managing Directors reports on the annual financial statements and the quarterly results, as well as on the Bank's future strategy, at press conferences and events for analysts and investors. Commerzbank uses the options offered by the internet for reporting purposes, providing a wealth of information about the Group at https://www.commerzbank.com. In addition to the rules of procedure of the Board of Managing Directors and the Supervisory Board, the Articles of Association of Commerzbank are also available online. The financial calendar for the current and the upcoming year is also published in the Annual Report and on the internet. It shows the dates of all the significant financial communications, notably the annual press conference and analyst conferences and the date of the Annual General Meeting.

We feel an obligation to communicate openly and transparently with our shareholders and all other stakeholders. We intend to continue meeting this obligation in the future.

Business and overall conditions

Economic environment

The coronavirus pandemic continued to have a huge impact on the global economy in 2021. While the incidence of infection decreased significantly in spring 2021 in many countries and the coronavirus-related restrictions were noticeably relaxed, new waves of infection began to build up in autumn, which recently gained considerable momentum with the emergence of the Omicron variant. Against this background, the coronavirus-related rules in many countries were tightened again, sometimes drastically. The closure of production facilities and logistics

bottlenecks severely disrupted global supply chains. Many companies were unable to adapt their production to meet the increased demand due to a lack of intermediate products. In the automotive industry, production even had to be significantly curtailed at times due to a lack of semiconductors.

In China, where entire cities with millions of inhabitants are locked down in the event of even small coronavirus outbreaks, economic growth slowed considerably again in 2021. More restrictive lending and problems in the real estate sector also contributed to this slowdown.

In the USA, the economy continued to recover markedly in 2021 despite sometimes high numbers of new coronavirus infections, returning to its pre-crisis level in the second quarter. Demand from private households in particular continued to grow strongly, boosted by a very extensive government aid package and a rapid recovery in the labour market. The strong demand also had a downside, however, as it drove inflation up to 7% as at the end of the year, its highest level in 40 years. At the same time, wage growth increased noticeably as a result of the largely empty labour market. Against this background, the US Federal Reserve announced in December that it would end its bond purchases in March 2022.

The eurozone economy also returned to its pre-crisis level at the end of 2021. It recovered markedly after coronavirus restrictions were eased in the spring, but the wave of coronavirus infections in the autumn meant that economic growth largely came to a standstill again. At the end of 2021, eurozone inflation rose to its highest level since the start of the monetary union. Against this background, the ECB announced in December that it intends to buy fewer government bonds. The emergency purchase programme, which runs until the end of March 2022, is not to be extended.

In Germany, the economic slump caused by the pandemic at the beginning of 2021 was particularly pronounced, although the country's GDP also grew significantly in the summer half-year. The number of new coronavirus infections rose sharply again from October onwards, however, prompting politicians to gradually tighten the coronavirus rules again. As a result, the economy shrank again in the final quarter of 2021 and will probably continue to fall in the first quarter of the current year, although the decline is unlikely to be anywhere near as severe as in the same quarter of the previous year. This is backed up by the continued recovery in industry. Sectors such as hotels and catering, event management and tourism have been hit hard once again. Thanks to the extensive government aid package, particularly for short-time work, there has been only a slight rise in unemployment as a result of the crisis. The unemployment rate is now almost back to the low level seen at the end of 2019.

The financial markets continued to benefit from the expansive monetary and financial policy, although this did not prevent yields, particularly on long-term US government bonds, from being higher at the end of 2021 than they were at the beginning of the year. The yield on ten-year German Bunds is still close to zero, however. Share prices continued to rise sharply in 2021, with indices such as the DAX, Dow Jones and Nasdaq at times reaching new highs. By contrast, the euro fell significantly against the US dollar over the course of 2021.

Sector environment

The difficult economic situation brought about primarily by the coronavirus pandemic meant 2021 was another particularly challenging year for the banking sector. While comprehensive government aid programmes prevented a larger economic downturn, the negative consequences of the pandemic for the economy and society have not yet been overcome. In particular, the risks for the banking environment's short-term prospects are still high. Nervousness has returned to the international capital markets with the emergence of the new Omicron coronavirus variant. Throughout the world, the industrial sector is suffering from supply chain problems caused in part by China's zero-Covid strategy. In addition, energy and commodity prices as well as material costs have risen significantly and are fuelling inflation worldwide. China is becoming increasingly unable to fulfil its role as the engine of the global economy: its economic growth has slowed markedly due to high levels of corporate debt, a weaker labour market and turbulence on the real estate market.

The strain on European banks' lending business has been considerably mitigated to date, primarily thanks to government support for the real economy and central bank support measures relating to liquidity and refinancing. Income losses were limited for both companies and households; employment conditions were protected and the supply of credit to the economy was guaranteed. The financial markets also recovered their initial price losses very quickly and climbed to new highs. As a result, European banks have so far been spared any major impact on earnings despite uncertainty about their risk provisioning requirements and volatility in trading income. Exposures to consumer loans and to companies and self-employed persons in sectors that have been particularly hard hit by the pandemic, such as personal services, gastronomy, tourism and event management, are still subject to high risks, however. There are also fears of loan defaults on commercial property financing if recent changes to working and shopping habits are maintained over the long term.

Germany saw a marked rise in the number of personal insolvencies last year. This was probably due in part to the law aimed at gradually reducing the length of residual debt discharge proceedings from six to three years. By contrast, the number of corporate insolvencies fell even after the expiry of a number of special regulations such as the suspension of the obligation for over-indebted companies to file for insolvency. However, there was also a marked increase in the volume of expected corporate insolvency claims. To mitigate the negative impact, the Corporate

Stabilisation and Restructuring Act (Unternehmensstabilisierungs- und Restrukturierungsgesetz, StaRUG), which came into force at the beginning of 2021, is intended to establish new rules for restructuring law upstream of insolvency law. The measures laid down in the Act are designed to significantly improve companies' restructuring prospects and thus prevent insolvencies in a targeted manner.

Even though there has recently been a significant rise in inflation, for the time being the ECB will maintain its expansive monetary policy. The period of extremely low interest rates continues to exert considerable pressure on interest margins in lending business, especially in Europe. This is severely restricting the profitability of the banking sector despite increased income from fees and commissions. The latest EBA stress test in 2021 confirms this finding: although the capital position of the European financial sector proved to be robust, a general income weakness was evident even in the baseline scenario due to the low interest rate environment. Many banks in Germany did not benefit sufficiently from the recent significant improvement in income in investment banking and trading business due to the high level of competitive pressure and their previous withdrawal from currently lucrative business areas such as investment banking.

According to the European Banking Authority (EBA), the banking sector's capital base, liquidity and profitability improved around the middle of 2021 compared with the previous year. As a result, the most important European banks currently have sufficient equity capital and are liquid. The Deutsche Bundesbank Financial Stability Review also confirms that the German financial system is currently very resilient. For example, in the event of a severe macrofinancial shock the capital buffers that have been built up can be used to prevent restrictions on the supply of credit. At the same time, however, both of the institutions mentioned above point to a marked increase in banks' vulnerability to macroeconomic risks. In its regular Risk Assessment Report, the EBA notes that banks' liquidity would look much worse without central bank support. The supervisory authorities also consider the trend towards high concentrations of government bonds in European banks' balance sheets to be a critical issue. In addition, there is a risk of losses from overvalued assets, especially on the real estate markets.

Important staffing and business policy events

A report on important staffing changes at management level and special business policy events during the past financial year is provided below.

We are on track in terms of ensuring that the headcount reduction under the “Strategy 2024” programme is as socially responsible as possible: We agreed a framework reconciliation of interests and a framework social plan with the employee representatives in May, and were able to finalise the partial reconciliations of interests for the respective divisions by November. There were changes in the composition of both the Board of Managing Directors and the Supervisory Board during the year under review. The Bank also made progress in further reducing complexity. The optimisation of the Bank's capital structure was also on the agenda. At the end of the third quarter of 2021, Commerzbank explained the ambitious key elements of its sustainability strategy at its first “Sustainability Dialogue” event. At the heart of the strategy is our commitment to achieve net zero by 2050 at the latest. The Bank also further strengthened its compliance function in 2021.

Changes in the Supervisory Board of Commerzbank

Hans-Jörg Vetter resigned his position as Chairman and member of the Supervisory Board of Commerzbank for health reasons at the close of 16 March 2021. Andreas Schmitz stepped down from the Supervisory Board of Commerzbank on 24 March 2021. At the request of the Board of Managing Directors of Commerzbank, Helmut Gottschalk was appointed by a court as a member of the Supervisory Board until the end of the 2021 Annual General Meeting by resolution dated 14 April 2021 and elected as Chairman of the Supervisory Board at the end of April until the end of the 2021 Annual General Meeting. Dr. Victoria Ossadnik, Dr. Tobias Guldimann and Dr. Rainer Hillebrand stepped down from the Supervisory Board at the close of the Annual General Meeting on 18 May 2021. The Annual General Meeting elected Daniela Mattheus, Caroline Seifert, Helmut Gottschalk, Burkhard Keese and Frank Westhoff to the Supervisory Board as shareholder representatives with simultaneous effect. Following the Annual General Meeting on 18 May 2021, the Supervisory Board elected Helmut Gottschalk again as Chairman of the Supervisory Board. On the employee representative side, Christian Höhn stepped down from the Supervisory Board on 31 December 2021. His successor Stefan Jennes has been a new member of the Supervisory Board since 1 January 2022.

Changes in the Board of Managing Directors of Commerzbank

During the 2021 financial year, the Supervisory Board of Commerzbank took staffing decisions aimed at putting the Board of Managing Directors in a position to tackle the far-reaching transformation initiated as part of the “Strategy 2024” programme.

At its meeting of 16 June 2021, the Supervisory Board appointed Dr. Bettina Orlopp as Deputy Chairperson of the Board of Managing Directors with effect from 17 June 2021, at which point the Supervisory Board also extended her appointment to the Board of Managing Directors by five years until June 2026. At the same time, Jörg Hessenmüller's contract was also extended.

At its meeting of 15 September 2021, the Supervisory Board appointed Thomas Schaufler, previously a member of the Management Board with responsibility for Retail Banking at Austria's Erste Group Bank AG, to the Board of Managing Directors.

Commerzbank Aktiengesellschaft

Thomas Schaufler assumed responsibility for Commerzbank's Private and Small-Business Customers segment on 1 December 2021. As announced in June 2021, Sabine Schmittroth will therefore concentrate fully on her duties as Director of Human Resources. This task is particularly important, both within the context of the transformation and its implementation from an HR perspective. The Supervisory Board also appointed Dr. Jörg Oliveri del Castillo-Schulz to the Board of Managing Directors as the new Chief Operating Officer (COO). Dr. Jörg Oliveri del Castillo-Schulz had already assumed responsibility for the COO department as general representative with effect from 1 October 2021 and thus succeeded Jörg Hessenmüller, who left the Bank on 30 September 2021. He was appointed to the Board of Managing Directors with effect from 20 January 2022.

Sabine Schmittroth, Commerzbank's Member of the Board of Managing Directors responsible for Group Human Resources and Director of Human Resources, informed the Supervisory Board in mid-February 2022 that for personal reasons she had decided to leave the Bank when her contract expires at the end of the year. The Supervisory Board will start the search for her successor in the near future.

Commerzbank making good progress with its restructuring

Commerzbank is making good progress towards the cost reductions targeted under the "Strategy 2024" programme. At the end of March 2021, the Bank agreed a voluntary programme with the Central Works Council for the required headcount reduction. Around 1,600 full-time employees have left the bank as at the turn of the year under the voluntary programme in Commerzbank Aktiengesellschaft in Germany.

The Bank agreed a framework reconciliation of interests and a framework social plan for the required headcount reduction at Commerzbank Aktiengesellschaft in Germany with the employee representative committees at the beginning of May 2021. The binding agreements will form the basis for ensuring that the headcount reduction is as socially responsible as possible.

Commerzbank and the employee representatives successfully concluded the negotiations on the implementation of the "Strategy 2024" programme in mid-November 2021. The agreement creates clarity regarding the structure of all Group divisions in Germany. Overall, the Bank will become significantly leaner as a result. Following completion of the partial reconciliations of interests, the framework social plan adopted in May 2021 came into force at the same time. Since then, employees have been able to use the tools designed to ensure that the headcount reduction is socially responsible.

Commerzbank streamlines its capital market business

Since 11 May 2021, Commerzbank has been working with the German-French financial group ODDO-BHF in equities business. The cooperation has enabled the Bank to align its capital market

business even more consistently with the needs of its core customers. It also enables the Bank to reduce costs and complexity without compromising on customer service. In brokerage business, ODDO-BHF now acts as an exclusive partner for Commerzbank, contributing its extensive expertise in equity sales and trading for European and North American markets. This has allowed Commerzbank to achieve significantly greater reach for its corporate clients' equity transactions and place them even more effectively. The broad geographical platform means corporate clients now enjoy strong coverage of other European countries and sectors with correspondingly greater sales power, in addition to the existing market-leading coverage of equities in the DACH region. Commerzbank itself will no longer offer institutional equity research, i.e. research on equities for professional clients. Instead, its cooperation partner ODDO-BHF will render this service. The Bank's advisory expertise in equities business, delivered through Equity Capital Markets, remains a key cornerstone of Commerzbank's corporate banking business and will continue to be available to customers without restriction. Here the Bank will continue to focus on the relevant needs of its corporate clients, including SMEs, and will continue to help them issue new equity via avenues such as IPOs, share placements, capital increases or convertible bonds.

Commerzbank successfully issues another

Additional Tier 1 bond

In mid-June 2021, Commerzbank Aktiengesellschaft successfully issued the third bond under its issuance programme for Additional Tier 1 capital (AT1). The bond has a volume of €500m and a fixed coupon of 4.25% per annum. At over €1.75bn, the order book was heavily oversubscribed, reflecting the widespread interest among investors. The new AT1 bond has a perpetual maturity and the first call date is in the period from October 2027 to April 2028. The bond terms provide for a temporary write-down in the event that the Bank's Common Equity Tier 1 ratio (CET1 ratio) drops below 5.125%. Shareholders' subscription rights were excluded. With the issue of the AT1 bond, Commerzbank is further strengthening and optimising its capital structure.

Commerzbank keeps securities settlement in-house – outsourcing project halted

On 22 July 2021, the Board of Managing Directors of Commerzbank decided to terminate the project to outsource securities settlement to HSBC Transaction Services GmbH with immediate effect due to technical implementation risks and changed market conditions. The termination of the project resulted in a charge of €200m for the second quarter of 2021 arising from the derecognition of an intangible asset. This derecognition had no impact on the Bank's liquidity or CET1 ratio. Provisions in the double-digit millions were also recognised.

With this decision, Commerzbank is reducing the complexity of the transformation and will initially focus on further modernising its own system landscape. Commerzbank's IT delivery organisation, launched two years ago, is set to make an important contribution to this, with the Bank creating a dedicated key area for securities & brokerage within the delivery organisation as part of its “Strategy 2024” programme. The market environment and technological possibilities have changed considerably since the outsourcing project was launched in 2017. The significant growth in trading volume and ongoing technological development mean that Commerzbank is now able to continue securities settlement profitably. As a result, the transfer of processes to the systems of the HSBC subsidiary, most recently planned for mid-2021, did not take place.

Commerzbank sets ambitious sustainability targets and launches sustainability dialogue

Being “sustainable” is one of the four pillars of our “Strategy 2024” programme, alongside being “customer-oriented”, “digital” and “profitable”. We see sustainable transformation as both an obligation and an opportunity, because sustainability is playing an increasingly important role for both our customers and investors alike. We set a good example and support our customers on their path toward greater sustainability. We are convinced that working together with our customers is the most effective way for us to reach climate targets. The Bank explained the ambitious key elements of its sustainability strategy at its “Sustainability Dialogue” event, which was held for the first time on 17 September 2021.

The core of the Bank's sustainability agenda is its net zero commitment. Commerzbank is fully committed to the Paris Climate Agreement. In keeping with that commitment, the Bank has pledged to reduce the carbon emissions of its entire lending and investment portfolio to net zero by 2050 at the latest. The Bank aims to help channel more capital into sustainable economic activities in order to mitigate the consequences of climate change. It follows that our primary goal is therefore to support our customers in their own transformations to becoming sustainably operating companies. The Bank will mobilise around €300bn to that end by 2025, which corresponds to a three-fold increase in sustainable business volume compared to the end of 2020. As a bank, we are financiers of the green transformation and that makes sustainability a mainstay of our business model.

Further information on this can be found on page 40 ff. in the combined separate non-financial report of the Group Annual Report.

Further strengthening of the compliance function

The Bank continued its activities in 2021 to further strengthen the compliance function. In addition to the structural changes, these also related to staff training and the successful recruitment of qualified compliance experts to work at head office and in foreign locations.

To further improve the management of compliance risks, the compliance function implemented various long-term measures in areas such as global financial crime and global markets compliance, further strengthening compliance both in Germany and abroad.

In the year under review, the Bank rigorously pressed ahead with the further development of the global compliance system landscape in line with the latest market standards. Following the global upgrade of the systems and models for monitoring transactions with regard to money laundering and terrorist financing -- completed while maintaining continuous operational stability and further improving risk coverage -- a number of legacy systems that were no longer required were removed and data paths were standardised to further improve data quality.

The quality of the established expanded sanctions compliance function is constantly maintained, in particular through active participation in banking associations (Association of German Banks and European Banking Federation). The Bank implemented a further process improvement in 2021 by linking the relevant foreign locations to the sanctions list check carried out when processing the respective domestic payment transaction.

In 2021, Global Markets Compliance continued the Global Surveillance Implementation Programme (GSIP) launched in 2018. The programme is aimed at expanding global surveillance of trade and communications. Implementation of the Behavox communications surveillance system was completed in the Shanghai, Prague and Moscow locations and new communication channels integrated into the surveillance process. The “Fixed Income” and “Commodities” asset classes were made available for the SCILA trade surveillance system, and steps were taken to ensure that coverage was in place for all relevant products under the Dodd-Frank Wall Street Reform and Consumer Protection Act.

At the same time, Commerzbank further developed existing governance structures and further expanded the global compliance processes in the business units. This included updating and further developing the compliance sub-risk strategy as part of Commerzbank's overall risk strategy, which in particular defines the strategic fields of action and the risk appetite for compliance risks. The governance processes for managing and monitoring compliance controls were also further strengthened.

For more information on compliance and on integrity and compliance at Commerzbank, please see page 66 ff. of the risk report and page 61 ff. of the combined separate non-financial report respectively.

Commerzbank Aktiengesellschaft

Financial performance, assets, liabilities and financial position

Commerzbank had access to the money and capital markets at all times during the reporting period, and its liquidity and solvency were always adequate. Furthermore, the Bank's liquidity management is always able to respond promptly to new market circumstances. Even against the background of ongoing uncertainty due to the coronavirus pandemic, the Bank's liquidity situation is comfortable.

Income statement

Commerzbank Aktiengesellschaft's earnings performance in the 2021 financial year was shaped in particular by a positive trend in customer business, significantly lower loan loss provisions and higher income from write-ups on holdings in affiliated companies. These were offset by various factors including more extensive recognition of provisions and an increase in restructuring expenses. Overall, Commerzbank Aktiengesellschaft posted a net loss of €-1,409m for the 2021 financial year, after a net loss of €-5,708m in the previous year.

The changes in the individual earnings components are set out below.

Net interest income as the balance of interest income and interest expense was €3,613m, €316m higher than in the previous year. In business with private and small-business customers, interest-bearing business recorded a significant increase in income due to the continued growth of the credit portfolio, particularly in retail mortgage financing and individual loans. This offset the further significant decline in interest income from deposit business. In business with corporate clients, net interest income was down slightly year on year. The recognition of extraordinary income totalling €264m from the targeted longer-term refinancing operations with the ECB had a positive impact.

Net commission income increased markedly by 7.5% year on year to €3,140m. In business with private and small-business customers, net commission income was the main income driver in the year under review. The increase resulted from material growth in the volumes of security accounts and the ongoing very high volume of customer transactions. In business with corporate clients, net commission income was also up compared with the previous year.

Net trading income came to €210m in the year under review (previous year: €219m). A lower mark-to-market result was offset by an improvement in net income from trading reserves.

The balance of other operating income and expenses for the reporting period was €-938m, compared with €373m in the previous year. The significant decline was attributable in particular to higher allocations to pension provisions due to a fall in the discount rate used to calculate provisions for pension obligations as at the reporting date, allocations to provisions in connection with the ruling of the Federal Court of Justice on price changes with private customers, and provisions in connection with the termination of the project to outsource securities settlement to HSBC Transaction Services GmbH.

The cost of assuming subsidiaries' losses under profit and loss transfer agreements was €-53m in the year under review. In contrast, income from profit pooling and from partial or full profit transfer agreements amounted to €317m, compared with €362m in the previous year. While a capital gain from the sale of an equity holding was recorded in the reporting year via the newly concluded profit and loss transfer agreement with Commerz Ventures, the previous year's result was related to a capital gain from the transfer of comdirect shares to Commerzbank. This resulted in net income from profit and loss transfer agreements of €264m for the 2021 financial year, compared with €348m in the previous year.

General administrative expenses rose by 5.3% to €5,652m in the year under review. Personnel expenses increased by 13.6% to €3,371m, mainly due to an increase in social security contributions, effects relating to pension schemes and higher variable remuneration components. The increase in pension expenses was mainly attributable to a change in the trend for future pension adjustments. Other operating expenses were down slightly year on year at €2,281m, as Commerzbank made use of the opportunity to meet part of its annual contribution to the European banking levy and the statutory deposit insurance scheme in the form of irrevocable payment commitments. Expenses for advertising and business travel also fell.

Depreciation, amortisation and write-downs of intangible and fixed assets increased significantly in the year under review, rising by €162m to €663m. The increase was attributable to an unscheduled write-down of €200m on self-programmed software in connection with the termination of the project to outsource securities settlement to HSBC Transaction Services GmbH, which was incurred in the first half of 2021. Scheduled amortisation of self-programmed and purchased software decreased slightly year on year.

Write-downs and valuation allowances on loans and certain securities and allocations to provisions in lending business totalling €-797m were reported for the year under review, after €-3,536m in the previous year. Loan loss provisions were significantly reduced compared with the previous year. This decline resulted because no major loan defaults occurred in 2021 and considerably lower allocations to general loan loss provisions were required than in the previous year. Net income from the

securities liquidity portfolio improved by €165m year on year to €91m, due in particular to the elimination of the provisions for contingent losses that were still recognised in 2020.

Whereas the prior-year result included expenses totalling €--1,426m related to write-downs and valuation allowances on equity holdings, holdings in affiliated companies and securities accounted for as fixed assets, corresponding income of €600m was reported in the year under review resulting primarily from valuations of equity holdings.

As a result of the income statement items described above, Commerzbank Aktiengesellschaft posted a loss on ordinary activities of €--140m in the 2021 financial year, after a loss of €--3,641m in the previous year.

An extraordinary result of €--1,081m was recorded in the period under review. The main extraordinary expenses included therein were restructuring expenses of €1,081m relating primarily to the recognition of restructuring provisions for the headcount reduction and the closure of locations as part of the “Strategy 2024” programme.

Tax expenses amounted to €188m for the year under review, compared with €134m in the previous year.

Commerzbank Aktiengesellschaft therefore made a net loss of €--1,409m for the 2021 financial year, after a net loss of €--5,708m in the previous year. The net loss for the year was offset through a withdrawal from the capital reserve.

Balance sheet

Commerzbank Aktiengesellschaft had total assets of €405.9bn as at the reporting date, down 4.1% or €17.5bn compared with the end of 2020.

Within assets, the cash reserve fell by €27.1bn to €46.3bn. The marked decrease compared with the end of 2020 was due primarily to a significant fall in demand deposits held with central banks. Claims on banks rose compared with the previous year, by €3.5bn to €30.3bn. While secured money market transactions increased by €6.0bn, credit claims and other receivables fell by a total of €2.5bn to €13.5bn. Claims on customers grew by €8.7bn to €239.3bn. This was attributable in particular to a marked rise of €3.5bn in retail property and mortgage loans and €11.1bn in other loans. By contrast, secured money market transactions decreased by €3.3bn and municipal lending by €2.2bn.

Bonds and other fixed-income securities rose by €1.2bn to €49.0bn. The increase was due to larger holdings of own bonds, which rose by €4.1bn. Bonds and notes in the liquidity portfolio, meanwhile, decreased by €2.6bn to €24.2bn. Trading assets recorded a volume of €16.5bn, compared with €20.7bn in the previous year. The decrease of €4.2bn was caused mainly by lower holdings of derivative financial instruments, particularly interest rate and foreign exchange derivatives. By contrast, equity holdings rose slightly by €0.5bn to €1.8bn. Holdings in affiliated companies increased by €0.6bn compared with the end of 2020 to €4.7bn, due in particular to positive remeasurement effects.

On the liabilities side, liabilities to banks increased by 1.8% to €75.2bn. While sight deposits fell by €2.1bn, other bank liabilities increased by €3.3bn. Liabilities to customers were €239.4bn, down €21.2bn compared with the end of the previous year. The decline was attributable to a fall in both sight and term deposits, which decreased significantly by a total of €18.5bn. Securitised liabilities were €43.3bn, up €3.1bn on the previous year. While issues of debt securities increased by €4.2bn, other securitised liabilities declined slightly by €1.1bn. Trading liabilities fell by €1.7bn year on year to €10.1bn due to a fall of €2.9bn in the fair value of derivatives, which was offset by a slight increase of €1.2bn in securitisation transactions and the volume of short sales of securities. Provisions increased by €1.3bn year on year to €4.6bn, due mainly to the restructuring provisions recognised in the reporting year as part of the “Strategy 2024” programme and higher provisions for contingent losses and for litigation and recourse risks. Subordinated liabilities totalled €6.7bn and were thus €0.7bn lower year on year.

Off-balance-sheet liabilities decreased slightly overall compared with the previous year. Although contingent liabilities rose by 6.3% year on year to €44.6bn, irrevocable lending commitments fell by €4.4bn to €77.6bn.

Equity

Commerzbank Aktiengesellschaft's reported equity as at 31 December 2021 was €15.1bn, down €1.4bn compared with the end of 2020. While retained earnings remained unchanged compared with the end of the previous year at €3.8bn, the capital reserve decreased by €1.4bn due to the offsetting of the net loss for the year. Subscribed capital was unchanged from the year-end 2020 level at €1.3bn.

Commerzbank Aktiengesellschaft

Since 2007, the Bank has made use of the waiver rule under Art. 2a KWG, which means it only reports risk-weighted assets and capital ratios for the banking group to the supervisory authority.

Risk-weighted assets were €175.2bn as at 31 December 2021 and thus €3.4bn lower than at year-end 2020. This change is mainly attributable to credit and market risk effects, primarily as a result of decreases in the corporate portfolio through active strategic management of the efficiency of risk-weighted assets. This was partially offset by increases at mBank, the implementation of the new regulatory requirements (Capital Requirements Regulation, CRR II), the model adjustment for regulatory counterparty risks and foreign currency effects. The decline in risk-weighted assets from market risks was caused by both the elimination of pandemic-related high-risk scenarios from the calculation and by changes in positions. The increase in risk-weighted assets from operational risks due to the switch from the internal model to the standardised approach had a slightly offsetting effect.

As at the reporting date, Common Equity Tier 1 capital was €23.8bn, compared with €23.6bn as at 31 December 2020. In addition to our net profit for the year, the key factor behind the increase in Common Equity Tier 1 capital was a rise in the actuarial gains made by the pension plans. These positive effects were partially offset by higher regulatory capital deductions. The Common Equity Tier 1 ratio was thus 13.6%, compared with 13.2% in the previous year. The improvement in the ratio was due in part to the increase in Common Equity Tier 1 capital, but above all to the decline in risk-weighted assets. The Tier 1 ratio (with transitional provisions) was 15.5% as at the reporting date, up from 15.0% as at the end of 2020. The increase in Tier 1 capital was chiefly attributable to the issue of an AT1 bond in the first half of 2021. Grandfathered Tier 2 capital instruments became ineligible due to regulatory transitional provisions, but this decline was offset by the issue of a subordinated bond with a nominal value of €500m. The total capital ratio (with transitional provisions) was 18.4% as at the reporting date, compared with 17.7% as at the end of 2020. Own funds increased by €0.6bn year on year to €32.2bn as at 31 December 2021.

The leverage ratio based on the CRD V/CRR II rules applicable on the reporting date, which is equal to Tier 1 capital divided by leverage ratio exposure, was 5.2%, both with transitional provisions and fully loaded.

The Bank complies with all regulatory requirements. This information includes the consolidated profit attributable to Commerzbank shareholders and eligible for regulatory purposes.

Summary of 2021 business position

The difficult economic situation in the second year of the pandemic, with severe encroachments on economic and social life, meant that 2021 was another particularly challenging year for the banking sector.

In addition to the encouraging key figures, we also made good progress in the 2021 financial year with the strategic measures we decided in February and achieved some important milestones: For example, the gross reduction of 10,000 jobs that is necessary for the planned cost decrease – to be carried out in a way that is as socially responsible as possible – is well under way. We agreed a framework reconciliation of interests and a framework social plan with the employee representatives in May, and were able to finalise the partial reconciliations of interests for the respective divisions by November.

We have also made significant progress with the optimisation of our branch network, another cornerstone of our strategy: In Germany, we have reduced the number of branches from around 800 to about 550 as at the end of 2021; most of the road on the way to the target of 450 branches has already been traversed.

In May we announced the streamlining of our capital markets business through extensive collaboration in equity trading and equity research with ODDO-BHF.

With a transformation on this scale, there are also issues that cannot be implemented right away, or where individual adjustments are necessary. For example, midway through the year the Board of Managing Directors of Commerzbank decided to terminate the project to outsource securities settlement to HSBC Transaction Services GmbH with immediate effect due to technical implementation risks and changed market conditions. Accordingly, this led to an unplanned impact on earnings.

As the Bank is managed via its segments, the information that follows is geared towards the performance of the Group. For more information on corporate management and the key figures and data used to manage the Group, please see page 68 f. of the Group Annual Report 2021.

In the Private and Small-Business Customers segment, the focus in the 2021 financial year was on implementing the central initiatives under the “Strategy 2024” programme. The main areas of focus were the expansion of its online and mobile banking channels and the digitalisation of processes and procedures. In the year under review, we once again made noticeable gains in business with private and small-business customers. The securities and lending volume in Germany increased by €50bn to €340bn. Net inflows alone accounted for some €15bn of the growth of around €42bn in the securities volume. Retail mortgage financing grew by a further 7% to around €92bn last year. The segment proved to be robust despite the challenging environment and was able to keep operating income almost stable in the 2021 financial year thanks to the high level of customer activity. It also almost completely offset the negative impact of a further rise in provisions for foreign currency loans at mBank. Without this impact, earnings were significantly higher. The risk result was much lower than we expected despite the ongoing difficult operating environment caused by the coronavirus pandemic. Costs in Germany fell slightly as expected, but this was not fully reflected in total operating expenses for the segment as a whole due to an increase in costs at mBank. We were nevertheless able to keep operating expenses at the prior-year level; this did not lead to an improvement in the cost/income ratio due to the slightly lower operating income reported. Overall, the segment's operating profit rose more strongly than forecast. The operating return on equity recorded an encouraging increase year on year.

The performance of the Corporate Clients segment was characterised by a persistently challenging operating environment in the past financial year. In addition to economic dependencies and the repercussions of the coronavirus pandemic, the negative interest rate environment continued to weigh on the interest margins attainable in German customer business in particular. Delivery bottlenecks and rising energy prices also presented challenges for our customers. By contrast, the capital markets achieved a pleasing performance thanks to low interest rates and sustained liquidity. The Mittelstand division recorded positive income growth compared with the prior-year period. While income from lending business remained stable, the division reported higher income from both transaction banking and capital market business. The International Corporates division recorded a decline in income, however, attributable in particular to the strategic reduction in lending and capital market business as part of the refocusing project. This could be offset only partially by higher income from transaction banking. The Institutionals division also saw a trend toward lower income, particularly in capital market business. By contrast, the division benefited from an increase in payment transaction income and higher deposit fees, primarily in cash management. Contrary to our expectations, the segment recorded a pleasing increase in income overall compared with the previous year. As expected, the risk result was significantly below the prior-year figure, which was impacted by the coronavirus pandemic and the default of a large individual exposure. Also as expected, operating expenses fell year on year thanks to successful cost management. Overall, the higher income and the markedly lower risk result led to a significant increase in operating profit. The cost/income ratio improved accordingly, while the operating return on equity also increased significantly compared with the previous year.

Overall, Commerzbank Aktiengesellschaft posted a net loss of €-1,409m for the year under review, after a net loss of €-5,708m in the previous year.

Outlook and opportunities report

Future economic situation

The coronavirus pandemic will continue to have a significant impact on the global economy in the current year. The currently high number of new coronavirus infections is expected to decrease sustainably in spring 2022, in a similar way to last year. While more and more countries have now started to relax their coronavirus restrictions, the materials and delivery bottlenecks are likely to persist for some time.

China is also seeing repeated coronavirus outbreaks at regional level, with the authorities responding by imposing lockdown measures. While they are only likely to affect the economy to a limited extent, these measures are nevertheless a negative factor. The economic outlook for China is also clouded by turbulence on the real estate market, the worsening situation on the labour market and high levels of corporate debt. Last but not least, China's economic performance is being overshadowed by the unresolved trade conflict with the USA, which China is responding to with a costly self-sufficiency strategy. This all points to a further slowdown in economic growth in 2022.

The US economy is set to enjoy further strong growth of 3.8% in 2022, with the sharp rise in employment increasing the incomes of working households. Private households also have high levels of savings that they have been forced to accumulate over the last few years due to limited opportunities for consumption. This money is also available for consumption. Additional growth stimulus can be expected when companies replenish their depleted inventories.

After a hard winter, the eurozone economy is likely to recover strongly from spring onwards when coronavirus restrictions may largely be lifted. As in the USA, the economy can expect to enjoy an additional boost once people start to spend some of the extensive savings they built up during the crisis while shops were closed. However, it is likely to be some time yet before contact-intensive services recover fully from the coronavirus pandemic.

Commerzbank Aktiengesellschaft

The recovery is also being supported by the continuation of the highly expansive monetary and fiscal policy. The suspension of the Stability and Growth Pact will continue into 2022, meaning that member states will still be allowed to have budget deficits that exceed 3% of GDP. EU member states will also receive increased funds from the Recovery and Resilience Facility in 2022 in the form of loans and non-repayable grants.

We are expecting annual average growth of 3.5% for the eurozone economy in 2022, and growth of 3.0% in Germany.

The escalation of the Russia-Ukraine conflict represents a significant risk for the economic outlook. If Russia were to curb or even completely stop energy exports, it would at least short-term lead to energy shortages in Western Europe. Restrictions on production, especially in energy-intensive sectors, would hardly be avoided. At the same time, energy prices would continue to rise, significantly reducing the purchasing power of households. In this case, at least in Germany, a recession would be hard to avoid.

The performance of the financial markets in 2022 will depend as rarely before on inflation and how it is perceived. In the USA, where labour costs are already rising sharply and prices are increasing across the board, the Federal Reserve will react to the

high inflation. We are expecting its key interest rate to be raised by a total of 150 basis points by the end of 2022. The ECB is also likely to end its bond purchases in the summer and raise its deposit facility rate in two steps from -0.5% to 0% during the second half of the year. This policy should enable the ECB to largely shield the euro bond market from disruptive influences from the USA in 2022. The yield on ten-year German Bunds is likely to be negative for large periods of 2022, while interest rates will remain low for another year. The DAX therefore remains attractive with a dividend yield of just under 3%. Admittedly, the approaching start of the rate hikes and the Russian-Ukraine crisis have led to some sharp falls in prices. However, starting in the spring, with economic growth likely to be strong again, gains can be expected, provided geopolitical conflicts do not escalate further. If a recession in the euro area were to occur in the wake of the Ukraine conflict, the ECB would probably delay the change in interest rates further.

The euro is likely to appreciate slightly against the US dollar in 2022, as the markets believe the ECB is now also taking more decisive action to combat inflation risks. We are anticipating a euro/US dollar exchange rate of 1.16 at the end of 2022.

Exchange rates	31.12.2021	31.12.2022^{1}
Euro/US-dollar	1.14	1.16
Euro/Sterling	0.84	0.87
Euro/Zloty	4.59	4.70

1 The figures for 2022 are Commerzbank forecasts.

Future situation in the banking sector

The outlook for the banking industry remains very challenging. Planning uncertainties and risks are still massively higher as a result of the coronavirus pandemic. The constant emergence of new variants means that infection rates worldwide have so far not been effectively reduced. For the global economy, the prospect of further waves of infection and the associated countermeasures is the central forecasting risk for the coming months. This uncertainty has led to considerably higher volatilities in the valuation of assets, placing a significant burden on the global banking sector in terms of income expectations, risk provisioning and capital requirements.

With the future course of the coronavirus pandemic still uncertain, neither industry nor the trade and service sectors are likely to be able to contribute much to economic growth in the first few months of the current year.

Business with corporate and small-business customers will therefore remain under pressure in the first half of the year. A recovery should gradually take shape in the second half of the year, however. German banks' interest and commission business will benefit from the revival of the export industry, which is so important for the country's economy. The weakness of the euro against the US dollar as a result of the interest rate differential strengthens the price competitiveness of German exporters. Retail banking business is likely to benefit from private consumption, which is set to pick up considerably again in the next few months after people largely tended to prioritise saving during the coronavirus crisis. Demand for residential mortgages is also likely to continue unabated, driven by the lack of affordable housing and the related boom in new building, and in particular by the persistently low level of interest rates. However, retail banking business continues to offer only limited income potential due to the strong national competition among banks and the narrow interest margins.

Even before the coronavirus crisis, the prospect of prolonged low interest rates was seen as one of the key challenges for the banking sector. Central banks reacted to the far-reaching economic impact of the pandemic with bond purchase programmes, extensive liquidity provision and a zero interest rate policy. This has improved banks' liquidity position and financing situation, but at the same time puts ongoing pressure on interest margins and thus adversely impacts income in the financial sector. Government lending programmes are also having a negative impact on banks' interest margins and profitability. Achievable net interest margins are therefore very low throughout Europe, but particularly in the German banking market. At the same time, refinancing costs have risen due to the growth in customer deposits.

The extremely accommodative monetary policy is reaching its limits, and the global interest rate markets are positioning themselves for a fundamental regime change. Inflation has risen sharply all over the world, and the rapid pace of this inflation is pushing more and more central banks towards abandoning their expansive monetary policy. That is why the Bank of England announced a first interest rate rise in mid-December 2021, and why the US Federal Reserve is implementing tapering measures in the form of reduced bond purchases. The Fed is also considering raising key interest rates in several small steps during the current year. By contrast, the ECB is so far anticipating only a temporary rise in inflation. It therefore intends to maintain its extremely expansive monetary policy for the time being and not raise its key interest rate in the foreseeable future. As such, the interest rate-related pressure on income in the European banking sector is set to continue. Even the two-tier system for reserve remuneration implemented by the ECB, which exempts part of banks' excess liquidity holdings from the negative deposit rate, only mitigates the negative consequences of the low interest rate environment to a limited extent. To increase revenues in the highly important interest business, banks are not only raising lending rates and fees but also introducing negative interest rates across the board in the form of custody fees on customer deposits. All in all, there is currently barely any scope for the vast majority of banks in the German market to improve their margins across the board.

Long-term loans increase the banking sector's exposure to interest rate risks and harbour the risk of losses in the value of property pledged as loan collateral. According to the Bundesbank, residential property prices in Germany -- including outside of metropolitan areas -- were up to 30% above the level justified by fundamentals even back in 2020. According to the Association of German Pfandbrief Banks, the overall residential index in Germany rose further in the first three quarters of 2021 by a cumulative 11% compared with 2020. A further significant increase in housing prices is also expected for the current year. In parallel with the rising prices, the sum of housing loans granted by German banks to domestic private households, by far the largest group of borrowers, is also likely to increase after having already risen in the first three quarters of 2021. Against this background, in its most recent Financial Stability Review published in November 2021 the ECB called for macroprudential measures in the financial sector to counter developments in the German residential real estate market. In mid-January 2022, the Bundesbank's financial stability committee then proposed stricter capital requirements for German banks. The Federal Financial Supervisory Authority is therefore planning to raise the countercyclical capital buffer from the current 0% to 0.75% by 1 February 2023 and introduce a sectoral systemic risk buffer of 2.0% of risk-weighted assets on loans secured by residential real estate.

The outlook for trading business is more favourable than for the dominant interest-bearing business, although many institutions have already withdrawn partially or even completely from this area of activity. Even the current boom in cashless payment transactions is only benefiting banks' commission-bearing payment services business to a limited extent due to strong competition from fintech companies. This market segment remains fiercely competitive, with online banks, fintech companies and big tech players such as PayPal, Apple and Google looking to further increase their market share, especially in digital payments. Services such as Klarna's “Buy now, pay later” offering are having a marked impact on consumer behaviour. Cryptocurrency custody and trading services are also becoming more important. By contrast, the outlook for banks' securities commission business is better than that for payment transactions. It is highly likely that the number of private shareholders in Germany will continue to increase over the next few years due to the lack of investment alternatives in the low interest rate environment. This will benefit direct banks in particular, as they are likely to see further significant growth in new customers. The growing popularity of digital and mobile products has also led to increased demand for individual financial advice among bank customers in recent months, however, as they are less comfortable with technology and hugely unsettled by the economic turbulence. Given the existing demand for advice on complex banking transactions such as retail mortgage financing, branch business will therefore remain part of the basic service provided by banks, albeit in a pared back form.

In view of the income problems and ongoing competitive pressure, cost reduction remains the main issue both for German banks and for their European competitors. As a result, digitalisation of business processes and the utilisation of the data generated will advance rapidly. The pandemic has already massively accelerated the trend towards digital banking services. This calls for highly automated IT processes and comprehensive data analytics measures that permit rapid adjustments in response to changing market conditions. The trends in customer behaviour that have been accelerated during the crisis -- more online banking and new payment habits -- are set to continue. Engagement

banking puts the focus on the customer, with services and solutions tailored to their requirements. Financial institutions that focus increasingly on customers' use of multimedia channels and offer a wide range of online banking tools, robo-advisory services and tailor-made financial solutions will be at an advantage in the future. This is encouraging the increasing shift away from branch-based retail banking, resulting in efficiency gains and a reduction in the range of products and services but also making it more difficult to generate commission income. In addition to ever shorter innovation cycles and faster product delivery, the new digital business models also entail the use of new technologies such as the cloud and artificial intelligence. At the same time, despite the pressure to innovate and reduce costs many traditional banks are faced with the challenge of ensuring the quality and stability of their IT systems, protecting themselves against the growing threat of cyber attacks and maintaining the integrity of their data.

Against this background, the German banking market in particular is on the brink of a major upheaval. In the longer term, the number of banks will be drastically reduced and competition will further intensify as more and more global technology groups, fintechs and foreign banks, along with market infrastructure providers such as stock exchanges, clearing houses and information service providers, offer a selection of traditional banking products. It seems unlikely that competitors from the tech segment will provide a full range of banking services, however. A significantly stricter regulatory framework for financial market players outside of the traditional banking sector, as recently advocated by the Bank for International Settlements (BIS), is also likely to limit the current competitive advantages of young fintech companies in the foreseeable future. Ultimately, European banks must continuously invest in improving their digital competitiveness to avoid losing their direct access to customers and the data advantage that goes with it. This will require a huge effort given their weak income situation. Positive returns can only be achieved through additional cost reductions and further expansion of commission-based business areas.

In the long term, the banking sector will be shaped by the further development of the European monetary union into an integrated financial market union. The aim of the European Commission's digital finance strategy is to establish a financial market that applies uniform EU-wide rules and thus ensures technology neutrality and sustainability as well as identical framework conditions for all providers. Many banking markets in Europe are still shaped by national legislation, with at times significant divergence in terms of regulations and customer requirements. There is also overcapacity almost everywhere, which reduces profitability. Although the market consolidation process is continuing, with the number of banks falling steadily both in Germany and in Europe over the past few years, this has mainly involved smaller banks being taken over or merged with one another. Greater consolidation is being prevented above all by the marked rise in the risks associated with takeovers and mergers compared with the past, which is due to the increasing importance of technology for sales channels.

For the time being, the target of European banking union remains unachieved, with the lack of an EU-wide deposit insurance scheme (EDIS) in particular preventing further market integration. This in turn means that countries still have a great deal of scope for national discretion when it comes to banking regulation. Progress is being made, however, with the completion of the Basel 3 capital rules. Basel 4 (officially Basel 3: Finalising post-crisis reforms) contains regulatory innovations that have not yet been (fully) incorporated into the Capital Requirements Regulation and Capital Requirements Directive. As these are recommendations, all EU member states need to transpose them into national law. Basel 4 introduces new standards that banks must use to calculate their capital requirements. These include enhanced risk sensitivity of the standardised approaches, a rising leverage ratio for global systemically important banks (G-SIBs), more detailed disclosure of reserves and credit risks and a standardised floor for risk-weighted assets (RWA). Under the latter, the capital requirement must not fall below 72.5% of the requirement under the standardised approach (output floor). In addition, internal models are no longer to be used to determine capital requirements for operational risks. The Basel 4 reforms were originally scheduled to come into effect in January 2022, but were postponed as a result of the coronavirus pandemic. Definitive implementation in the EU is now scheduled for 2025 onwards. The UK has also eased its timetable for implementing the Basel standards.

In addition to the way in which we will use money in the future, and the role of central bank money in this, banking regulation is focusing increasingly on the management of ESG (environmental, social and governance) risks. Climate change in particular is one of the great challenges of our time. With this in mind, the EBA intends to embed climate and environmental risks more firmly in banks' risk management processes over the next few years, including mandatory disclosure of climate risks and a climate stress test in the current year. Climate risks are also set to be a focus of future ECB stress tests, enabling banks to better assess their consequences for their business environment. According to the Bundesbank, the German financial system is well equipped to overcome the risks arising from higher taxes on fossil fuels on the journey to a climate-friendly economy. However, the financing requirements of the European Commission's planned green deal could lead to green quantitative easing. This is new, and moreover not uncontroversial, because to date none of the world's central banks have pursued a monetary policy that is explicitly oriented towards climate protection goals.

Managing opportunities at Commerzbank

The demands placed on modern, sustainable banking business and the overall framework conditions have changed markedly in the past few years. Whereas personal customer relationship management was formerly a key element of banking, these days customers expect multi-channel advisory services, digital financial offerings and individual, tailor-made products that are available at any time. We have responded to this by continuously adapting our strategic direction over the past few years. The aim of the “Strategy 2024” programme approved in February 2021 is to combine the benefits of a fully digitalised bank with personal advisory services, an unwavering customer focus and sustainability. Our mission is to become the number one digital advisory bank in Germany. With our new positioning, we want to become more efficient and create sustainable prospects for our workforce, customers and shareholders.

Going forward, the Bank will consistently put profitability before growth, particularly when it comes to the efficient use of capital or adequate pricing of products and services. mBank will continue to press ahead with its explicit growth strategy as part of the Group, while Commerzbank will continue to expand its securities and residential mortgage loans business with retail customers despite the difficult operating environment.

At the same time, we are significantly reducing our costs so that we can operate profitably again over the long term. This is to be achieved by simplifying our location network, organisational structures, products, processes and customer relationship management model.

As part of its comprehensive digitalisation, the Bank will significantly streamline its branch network and expand its range of digital services. The remaining branches will provide advice on all aspects of accounts, cards and instalment loans, while many will also offer comprehensive relationship management on all matters relating to wealth management and financing. The round-the-clock relationship management services provided via the advisory centre will be significantly expanded, and we will systematically automate our business processes across the board. Within the credit process for private customers, this includes standardised products such as instalment loans or increases in credit card limits. We are gradually introducing an innovative direct banking offering -- Mittelstandsbank Direkt -- for corporate customers who require standardised products and advisory services. Corporate customers with complex advisory requirements will continue to benefit from personalised relationship management. Advice is being combined with innovative services such as the digital bank for companies and forward-looking, sustainable products. Data-based solutions and sales analytics support sales and enable efficient relationship management.

The targeted transformation encompasses strategy, technology, competencies and culture. Our subsidiaries CommerzVentures (a venture capital fund that invests in fintech, insurtech and climate fintech companies) and Main Incubator (a research and development unit for future technologies in the areas of ventures, prototypes and community building) have also been supporting us for some time. In the Private and Small-Business Customers segment, the transformation of the business model is based around two fundamental thrusts. First, to combine comdirect's digital expertise with Commerzbank's acknowledged advisory expertise. In the future, the Bank will provide advice in the form desired by the customer -- be that virtually or in person. The advisory centre will be the central point of contact for our 11 million or so customers, bringing authentic advisory services to homes, offices or wherever customers need them. Commerzbank will also retain an extensive local presence through around 450 branches. Second, to exploit the huge growth potential in the German premium market and reposition Commerzbank's relationship management model for wealthy private individuals and small-business customers. In the future, both generalists and specialists covering a diverse range of customer requirements will be represented in premium branches at around 220 locations. By working closely with each other and with colleagues in the Corporate Clients segment, they will help the Bank ensure seamless customer service in both the private and the business sphere. Through this concept, we are laying the foundations to consolidate our position as the leading bank for German SMEs (the Mittelstand) and a strong partner to private and small-business customers. In the Corporate Clients segment, we will in future focus on offering a streamlined and digitalised product range to customers with a connection to Germany. We will continue to serve international corporate clients if they have business links with Germany or operate in selected future-oriented sectors such as mobility, sustainability, communications, life sciences and capital goods. Our international network remains an important building block.

Commerzbank is driving its cultural change with the aim of strengthening a performance culture geared to success. We also want to strengthen entrepreneurial thinking among our own employees by applying modern forms of cooperation and agile methods to develop innovative products. To support this, we have further developed Commerzbank's delivery organisation. The overarching purpose of this delivery organisation is to modernise the IT architecture while maintaining operational stability, expand capabilities and capacities, and develop new professional functionalities for our customers.

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Customers now approach the Bank via various channels – offline, online and mobile. They expect these channels to be closely interlinked and provide a compelling range of products and services. We recognised this at an early stage, leading us to create a central multi-channel platform that includes the private customer and corporate customer portals along with the ONE advisor front-end. These have all been running in the public cloud since August 2021 and enable Commerzbank to offer its customers innovative services quickly, automatically and at a high level of quality. Little by little, instant banking is becoming the new normal.

Our transformation offers both potential cost savings and growth opportunities in future markets such as digital ecosystems, embedded finance, digital assets and sustainability. Our activities in the area of sustainability, one of the four cornerstones of our "Strategy 2024" programme, are based on ESG (environmental, social and governance) criteria. Given the clear evidence of the impact of climate change, we are currently focusing more heavily on climate protection. For some time now we have been helping to manage a significant volume of our customers' green and social bond issues. We have also issued our own very successful green bonds, acted as joint lead manager in the issue of the German federal government's first green bond, expanded our range of more sustainable investments with the new klimaVest mutual fund, and are now one of the leading providers of financing for renewable energy projects in Germany and Europe. One key area of focus is the provision of financial support for the transition to tomorrow's low-carbon economy. Further information on our sustainability strategy can be found in the combined separate non-financial report on page 40 ff. of the Group Annual Report.

Overall, we are convinced that rigorous implementation of the measures already initiated and those recently adopted will enable us to create added value for our customers, employees, investors and shareholders, and for society as a whole. We have a clear goal in mind: to create a strong Commerzbank that is fit for the future.

Due to participation in TLTRO III and the optimisation of risk-weighted assets as part of the new business strategy, the funding plan for 2021 was reduced from the original volume of less than €5bn to less than €3bn. The funding plan for 2022 envisages a return to a somewhat higher volume of just under €5bn. Commerzbank's borrowing on the capital market is influenced by the TLTRO refinancing option and the optimisation of risk-weighted assets as part of the new business strategy. Commerzbank has access to the capital market through a broad range of products. In addition to unsecured funding instruments (preferred and non-preferred senior bonds, Tier 2 subordinated debt and Additional Tier 1 capital), Commerzbank can also issue secured funding instruments, in particular mortgage Pfandbriefe and public-sector Pfandbriefe for refinancing purposes. As such, Pfandbriefe are a key element of Commerzbank's funding mix. These give Commerzbank stable access to long-term funding with cost advantages compared with unsecured sources of funding. Issuance formats range from large-volume benchmark bonds to private placements.

By regularly reviewing and adjusting the assumptions used for liquidity management and the long-term funding requirement, Commerzbank will continue to respond actively to changes in the market environment and business performance in order to secure a comfortable liquidity cushion and an appropriate funding structure.

Anticipated performance of Commerzbank Aktiengesellschaft

With the "Strategy 2024" programme adopted in February 2021, Commerzbank has paved the way for a far-reaching transformation of the business model designed to place the Bank on a more efficient footing. A sustainable increase in profitability is being given a much higher priority than business growth. The goal of the transformation is to achieve a return on equity of more than 7% by 2024. The cornerstones of the strategy include the comprehensive digitalisation of business activities and internal processes along with further expansion of the Bank's strengths, such as a high level of advisory expertise and customer focus. Our ambition is to become the leading digital advisory bank in Germany, combining the benefits of a fully digitalised bank with personal advisory services in order to secure our competitive position and further strengthen it over the long term. To better comply with its social responsibility to achieve climate targets, Commerzbank has anchored sustainability as a strategic cornerstone of its banking activities. This will enable it to take advantage of the opportunities that arise from supporting corporate and small-business customers in their transformation to a sustainable economy. The Bank offers a growing number of sustainable financing and investment products for private customers. At the same time, it will be judged on its efforts to achieve a continuous and significant reduction in its own carbon footprint and to make the Bank climate-neutral in the long term.

Despite the more difficult operating environment as a result of the ongoing pandemic, Commerzbank achieved key milestones in the 2021 financial year in line with its ambitious plans. The comprehensive restructuring will be continued systematically this year, with a particular focus on maintaining the high speed of implementation and constantly reviewing the progress made in order to initiate any adjustment measures that may become necessary. The agreement reached with the employee representative committees last year on the implementation of the HR measures means that specific individual contractual agreements have already been concluded in a socially responsible manner for more than half of the employees affected by the planned headcount reduction. These will reduce the cost base to

an increasingly large extent over time. With a volume of around €2bn, mainly in the past two financial years, Commerzbank has now borne almost the entire cost of the restructuring measures required over the full period of the transformation. The impact in 2022 is likely to only be in the double-digit millions. This has created the basis for substantially reducing total operating costs by €1.3bn or around 20% by the end of 2024 compared with the starting point in 2020. More than one-third of the total journey, which aims to achieve a vastly improved cost/income ratio of 60%, will have been covered by the end of the current year. Investments of €1.7bn are also planned for the period from 2021 to 2024, targeting the development and expansion of digital expertise and structures and the comprehensive modernisation of the IT infrastructure.

Commerzbank expects the exceptionally challenging operating environment for the German banking sector to persist throughout 2022. The high degree of uncertainty, particularly with regard to the further course of the pandemic but also in relation to other aspects such as the geopolitical situation, means it is significantly more difficult to make economic forecasts. As such, we have to expect a higher range of fluctuation in the factors that influence banking business. The sharp increase in volatility in numerous segments of the international capital markets since the beginning of the year clearly demonstrates that major deviations from assumptions are possible over the course of the year with regard to expected credit demand or the forecast development of customer activity in the securities business. While future interest rate trends at both the short and long end of the yield curve, which are currently difficult to assess, should primarily result in additional income opportunities, new risks may also arise. Driven by the variation in the rate of inflation, interest rates in the two core markets of Germany and Poland have been moving at very different speeds since autumn 2021. While Poland's key interest rate has already been raised five times since last October, taking it from its low of 0.1% to 2.75%, the ECB's refinancing rate remains negative at -0.5%. Our forecast assumes that the ECB will maintain this interest rate until the end of 2022. In this difficult environment, which is still characterised by intense competition, Commerzbank nevertheless considers itself to be in a very robust position. This is due in part to the tangible progress made with the transformation process. The Bank also has an attractive risk profile by international standards that demonstrated a high degree of resilience to the pandemic-related stress test. In addition, the capital ratios reported are well above the regulatory minimum, reflecting the good risk coverage potential. The consistent and effective management of all risks will continue to be of paramount importance for Commerzbank.

As the Bank is managed via its segments, the information in the following sections of the outlook and opportunities report is geared towards the performance of the Commerzbank Group as a whole. Overall, we expect to see the following developments in 2022:

Anticipated performance of individual earnings components

Net interest income, the key source of income, is expected to be slightly higher year on year under the baseline scenario, which does not envisage any material changes in the key eurozone interest rates. In the Corporate Clients segment, the main focus during the current phase of the transformation is on making more efficient use of capital resources. Restricting activities to selective growth focusing primarily on SME customers and discontinuing non-strategic business, mostly abroad, will result in subdued lending growth and thus tend to lead to a slight decline in interest income. The Bank anticipates lending volumes in retail banking business will grow at a slightly slower pace than last year, particularly for mortgage loans and loans to business and small-business customers. Additional interest income from lending business, together with a further rise in income from passing on negative interest rates -- corporate client business is also expected to make a positive contribution here -- will probably be able to offset the once again lower interest income expected from deposit business. The extraordinary income from longer-term refinancing transactions with the ECB reported under net interest income will decrease substantially compared with the previous year and is expected to be more than halved. mBank will likely record a very positive improvement in net interest income, due in part to a significant expansion in both lending and deposit volumes. The sharp rise in key interest rates in Poland since October 2021, which most economists predict will be followed by further rate increases over the course of the year, should also open up considerable scope for margin improvements.

Net commission income is expected to decline slightly in the current financial year. This decrease is based in part on the assumption that losses in commission business will result from both customer attrition due to branch closures in retail banking business, which was expected but did not arise in 2021, and from the planned withdrawal from less attractive markets in corporate client business.

Net income from financial assets and liabilities measured at fair value through profit or loss is generally subject to increased volatility, which can be influenced only to a limited extent. This is due in part to the fundamental uncertainty regarding developments on the global capital markets. Accounting rules are a factor too.

Commerzbank Aktiengesellschaft

Sometimes they may require similar items to be presented as fair value measurements in the fair value result in one time period, whereas the interest component dominates in another. Year-on-year shifts between the income items net interest income and fair value result – and vice versa – are therefore possible. A portion of this income component is therefore directly related to net interest income. With its risk-oriented and customer-focused approach, Commerzbank, like mBank, seeks to achieve income that is as high and stable as possible. After accounting for a high proportion of total Group income in the 2021 financial year, the fair value result is expected to be significantly lower in the current year.

Experience has shown that the other income items, including realised profit or losses on financial instruments and other net income, are often affected to a large extent by one-off income and measurement effects that are usually impossible to predict. Overall, a negative figure in the triple-digit millions is again forecast for the 2022 financial year. Although further charges cannot be ruled out in respect of the provisions for legal risks in connection with mortgage loans issued in foreign currencies at mBank, whose effects are reflected under other net income, no material expense is expected for 2022 following the provisions accrued in 2021, which also took into account a voluntary settlement offer to debtors.

Commerzbank is aiming to limit the risk result to €-0.7bn in the current financial year. This forecast also reflects the ongoing high degree of uncertainty that a continuation of the coronavirus pandemic could delay and/or negatively impact the extent of the expected economic recovery. In our opinion, however, the provisions of more than €-0.5bn that continue to be recognised specifically for potential charges arising from the coronavirus pandemic will cushion the risks of a worse-than-expected economic scenario that may prevail over a longer period of time. A higher risk result is also expected at mBank, but the increase is set to be lower than the anticipated double-digit growth in lending volume.

The measures initiated last year for the far-reaching restructuring of the Group, in particular the agreements reached on implementation of the HR measures, will lead to marked cost reductions in the 2022 financial year. Accordingly, operating expenses (including compulsory contributions) are expected to be some €400m lower at around €6.3bn despite extensive investment in measures such as the comprehensive digitalisation of the service offering and foreseeable cost inflation in some areas. Within this, the amounts that can be influenced only to a limited extent, primarily for the European banking levy, the Deposit Protection Fund and the Polish bank tax, will in all likelihood increase substantially. mBank has budgeted for a significant increase in operating expenses, also due to inflation, but at a considerably lower rate than the increase in operating income.

Provisions for restructuring expenses linked to the implementation of the "Strategy 2024" programme have already been recognised almost in full in the past two financial years. An allocation in the double-digit millions is all that is planned in 2022.

Anticipated segment performance

The Private and Small-Business Customers (PSBC) segment is aiming to make further progress this year with the far-reaching restructuring of its sales model, culminating in a combination of two business models – a digital direct bank with particular expertise in securities business and a branch-based full-service bank offering a broad product range and expert, in-depth personal advisory services – that is unique in the marketplace. The next strategic steps to be taken by the end of the year include the launch of new digital applications, which will enable more banking products to be concluded online, and the provision of more opportunities for customers to resolve their own service issues quickly and easily via online and mobile banking. This goes hand in hand with the continued development of the advisory centre, through which all customers will have convenient access to personal telephone support at all times. This also includes standardised investment advice via an investment centre and mortgage advice via digital direct sales. The target structure of 450 branches throughout Germany is set to be achieved over the course of the year after the closure of around 100 further branches. Of these, 220 are premium branches that will cater to the needs of discerning small-business customers and wealthy private individuals requiring individually tailored banking products. They will also offer the self-service infrastructure of the advisory points. The objective at the end of the restructuring phase is to seamlessly link all sales channels so that all customers, whatever stage they are at in their lives, are offered the most suitable banking product at the ideal time and via the appropriate channel.

The current financial year will see a gradual change in customer relationship management, with customers responding to the ongoing reduction in the number of branches by increasingly contacting the advisory centre to seek advice, buy products and resolve service issues. These changes in the sales model mean we are cautious about the current year. We are anticipating a temporary slowdown in customer activity and a slight fall in the number of active customers. In lending business, this is expected to lead to slower growth in the credit portfolio due to lower new business volumes, particularly in mortgage lending and loans to small-business customers. In addition, maturing loans with higher interest rates will be replaced by financing at somewhat lower rates. The same applies to income from investments refinanced with modelled deposits, meaning that the low level of interest rates will once again result in a slight decline in the average interest margin in lending and deposit business. A further

significant increase in income from deposit fees is expected to offset the volume and margin effect.

In addition to the temporarily more noticeable restraint on the part of customers due to the restructuring of the sales model, we believe that the exceptionally good environment in securities business over the past two years will be considerably less favourable in the current year. Our baseline assumption is a decline in volatility on the capital markets as an end to the pandemic becomes more likely, which will probably result in significantly lower transaction figures over the course of the year. A sharp fall in transaction-related commissions is therefore likely. Portfolio-related commissions should remain at a high level, however. Ongoing initiatives to convert customer deposits into investment products delivering significantly higher yields, for example sustainable investments such as the klimaVest impact fund, offer income potential. The Bank is also targeting higher income from asset management. It will seek to expand its market position, particularly among discerning small-business and wealth management customers who require tailored premium solutions. Income from payment transactions will also grow, primarily from card business as customer mobility increases. We expect the amended pricing for account management services will translate initially into only a stabilisation of commissions realised in the current year, as it will also lead to a higher number of customer departures. Experience has shown, however, that the associated loss of income is limited and mainly affects customer relationships with very low product usage. Overall, we expect total domestic operating income to be significantly below the prior-year level.

The subsidiary mBank is aiming to continue its growth strategy of the past few years and should be able to benefit from the much improved interest rate environment this year. In contrast to the eurozone, the change in policy by the Polish central bank has resulted in a clear upward trend for interest rates since autumn 2021, with markedly positive effects for interest margins. Strong double-digit income growth is expected, primarily from lending business, even though measures to curb the high rate of inflation through further increases in the key interest rate could, depending on their extent, limit the targeted significant increase in lending. Commission-bearing business is expected to settle down following very significant growth in the past two years. Following the extensive provisions recognised in the previous year for legal risks in connection with mortgage loans issued in foreign currencies at mBank, which had a negative impact on earnings, no further charges are expected.

Thanks to the marked improvement in mBank's financial performance, total operating income in the PSBC segment is expected to significantly exceed the prior-year level.

As part of the implementation of the strategic measures, further extensive investments in the restructuring of the sales channels are planned for the current financial year. These include in particular the build-up of the advisory centre and the ongoing digitalisation of products and processes, the aim being to achieve the target structure of 450 branches -- after the closure of a further 100 branches -- with no discernible impact on customers. Measures introduced in the previous year to improve efficiency will also have an increasingly positive effect on costs over the course of the year. Total domestic operating expenses will fall significantly year on year, due in particular to the intended reduction in personnel expenses, although a small offsetting effect is expected from compulsory contributions.

At mBank, operating expenses (including compulsory contributions) are expected to increase significantly due to inflation and in connection with the planned expansion of business volume. However, this increase is set to be disproportionately lower than the growth in operating income.

We are anticipating a slight reduction in operating expenses for the PSBC segment as a whole in the 2022 financial year.

We remain cautious about the risk result and are expecting a significant year-on-year increase under the baseline scenario. This forecast reflects the high degree of uncertainty about whether or not a lengthy delay in economic recovery could have a more tangible impact on the quality of the loan portfolio, which is considered to be high. mBank is also anticipating a higher risk result, which is likely to increase on a similar, albeit somewhat smaller scale than in Germany and also reflects the comparatively larger expansion in lending volume.

We are forecasting a substantial increase in operating income and a slight decline in operating expenses for the PSBC segment as a whole, offset by a significantly higher expected risk result. Operating profit is therefore expected to improve markedly to around €1bn in the 2022 financial year. The operating return on equity is likely to increase to a similar extent, while the cost/income ratio is expected to improve markedly.

During the current financial year, the Corporate Clients (CC) segment will seek to further improve its cost/income ratio and the efficiency of capital employed without compromising its strong market position with German SME customers and international companies who have business links with Germany. Corporate clients will continue to benefit from Commerzbank's strengths such as its acknowledged high level of advisory expertise and strong presence in international trade corridors.

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However, the scope of support offered and the product range will in future be more nuanced according to customer needs in order to improve the profitability of customer relationships.

Going forward, many of the demands of corporate clients can be met much more efficiently via the digital product and service offering of a modern direct bank. After withdrawing from six European and Asian locations in 2021, the Bank will further streamline its foreign network as planned and will have closed ten locations in total by the end of the current year. As has already happened with the outsourcing of institutional equities business to ODDO-BHF, cooperations offer alternative and efficient ways of serving our corporate clients. Through our partnership with Erste Group, we are taking advantage of selective growth opportunities in five Central and Eastern European countries.

Other strategic measures in the current year include the ongoing implementation of a new lean branch concept at selected locations in Western Europe and addressing further target customers in certain promising sectors in which Commerzbank has particular expertise. Based on the planned digitalisation of the product range and of internal processes, extensive data analyses should also support the efficient use of capital resources for customers who require a high level of intensive individual support and offer corresponding income potential. They will also enable Commerzbank to identify insufficiently profitable customer relationships that only use a small part of the Bank's range of services, and to terminate these relationships where necessary. RWA efficiency therefore remains a key management metric for the implementation of strategic measures.

In the current financial year, the CC segment is seeking to achieve selective growth with a stronger focus on target regions and sectors with core customers who expect a broad range of services and a high level of advisory expertise. A more focused international presence and further optimisation of the needs-based customer approach are also likely to result in lower activity among some customers, although this is not expected to lead to a significant drop in income. Given the continuing uncertainty with regard to the economic outlook, companies' financing requirements in terms of capital expenditure are expected to remain subdued, meaning only modest credit growth. As a result of the objective to focus on income opportunities in business areas with above-average capital efficiency, income growth is expected primarily in capital market business and in transaction banking. The more intensive servicing of corporate clients in the defined future-oriented sectors is also expected to result in higher contributions to income. The forecast of a significant fall in total operating income in corporate client business in the 2022 financial year is based primarily on the cautious assessment with regard to income that is based on changes in fair value, where we are expecting a sharp decline.

Numerous measures to improve efficiency, in particular by reducing personnel expenses, have already been initiated and will have an increasingly positive impact on costs over the course of the year. Despite significant strategic investments, such as the establishment of the direct bank and the ongoing digitalisation of products and processes, the Bank is targeting a significant reduction in total operating costs for the 2022 financial year. This decrease, however, will be offset somewhat by an increase in the cost of compulsory contributions.

Following the very positive trend in the previous year, with risk provisions for corporate clients kept at a low level despite the very challenging phase of the coronavirus pandemic, we are cautious about the current year and expect the risk result to roughly double in size.

Overall, declining income and the substantially higher risk result will be offset by considerably lower operating expenses. We therefore expect a significant decrease in operating profit, which will be reflected in a lower operating return on equity. The cost/income ratio should nevertheless show a slight improvement.

General statement on the outlook for the Group

Based on our current estimates, we expect Commerzbank Aktiengesellschaft's parent company financial statements to show a net profit in the low triple-digit millions for 2022.

Commerzbank expects to achieve further milestones in the Group's transformation towards greater efficiency and profitability in the 2022 financial year and is targeting an operating profit significantly in excess of €1bn. With operating income at the prior-year level and a risk result of up to €-0.7bn, the reduction in total operating expenses to around €6.3bn is set to be the main driver of the expected marked improvement in operating profit compared with the previous year. With the Bank only planning a further expense item in the double-digit millions for future restructuring measures, a consolidated profit of more than €1bn is forecast after deductions for tax expense and non-controlling interests. The return on equity would therefore more than double compared with the previous year.

Commerzbank's target for its Common Equity Tier 1 capital ratio is based in part on the capital requirements resulting from the Supervisory Review and Evaluation Process (SREP). The ECB, as the responsible supervisory authority, has set this minimum requirement at an essentially unchanged level of 9.4% for the 2022 financial year. Commerzbank's management also calculates a capital buffer that is deemed appropriate to cover potential unexpected stress situations.

Commerzbank intends to maintain a Common Equity Tier 1 ratio of more than 13%, significantly above the regulatory requirement imposed by the ECB, for the entirety of the 2022 financial year. This target compares with the ratio of 13.6% reported as at the end of 2021. The Bank therefore believes it has a sufficient capital buffer that already comfortably covers the additional countercyclical capital buffers to be held in the future in the UK (from December 2022: 1%) and Germany (from February 2023: 0.75%; plus a systemic risk buffer of 2% for residential real estate loans), which together add up to an effect of some 70 basis points on capital. This solid capitalisation reflects the high risk-bearing capacity demonstrated during the exceptionally challenging phase of the pandemic. It also underlines the ambition to follow the intended payment of a dividend for the 2022 financial year with further attractive distributions to shareholders in subsequent years.

Nonetheless, there are numerous risk factors that could affect the 2022 profit forecast to a considerable, though not reliably quantifiable extent, should events take an unfavourable turn. These include, first and foremost, exceptionally high global economic risks. It is still not possible to reliably estimate either the duration or likely extent of the coronavirus pandemic. Geopolitical risks, which can significantly reduce existing inflationary trends through the massive increase in raw material prices, also have the potential to weaken the expected economic recovery and thus have an impact on our business development. So the war in Ukraine affects both our business with Ukraine and our business with Russia. We assume that sanctions relating to individual business partners (for example, the exclusion of large Russian financial institutions from the SWIFT banking communications network or the prohibition of US dollar clearing with large Russian banks) or entire industries (for example, the energy or raw materials sector) will also have an impact on Commerzbank. In addition, we expect Russian countersanctions to have an impact on Commerzbank's portfolios. We closely monitor further developments and continuously adapt our risk assessment and business policy. Commerzbank strictly follows the sanctions at all times. Moreover, trade disputes between the economic blocs Europe, North America and Asia, triggered by political tensions, remain possible.

Signals, chiefly from the US Federal Reserve, pointing to a turnaround in monetary policy have triggered a significant increase in volatility across numerous segments of the global capital markets since the beginning of 2022. With some valuations extraordinarily high by historical standards, especially on the bond and equity markets, the value corrections that have occurred to date could become even more pronounced as the year progresses. With their extensive toolkit, to which they have added a raft of unconventional monetary policy measures over the last few years, central banks also have a major responsibility to ensure international financial stability. A loss of confidence in their ability to effectively counter the strengthening inflationary trend and thus perform their main task of safeguarding monetary stability could therefore have adverse consequences for the stability of both the financial markets and the banking system.

Other risk factors include unfavourable trends in the regulatory or legal environment and a further tightening of the competitive situation in Germany. Along with inflation-related cost increases, a fall in margins to levels that are unattractive from a risk-return perspective could also delay and/or limit the effectiveness of the expected positive effects of the measures to increase Commerzbank's profitability over the coming years. In Poland, there is still no immediate prospect of a final supreme court ruling on the legal situation concerning lawsuits brought by private customers relating to Swiss franc real estate loans, meaning that further significant charges cannot be ruled out.

For further information on other risks, see the risk report on page 34 ff.

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Risk Report

Risk reporting takes place according to the internal risk management of Commerzbank at the Group and segment level. The basis for this is formed by the financial figures according to IFRS as well as the key risk parameters according to the regulatory requirements.

Executive summary 2021

The 2021 financial year, like the previous year, was marked by the coronavirus pandemic. However, our sound portfolio quality and the measures taken by governments mean that the effects have so far had only a limited impact on the risk ratios. The top-level adjustment (TLA) recognised for the expected coronavirus effects remains available to cover the direct and indirect effects of the pandemic.

Risk-bearing capacity ratio stood at 176% as at 31 December 2021

The risk-bearing capacity ratio remains well above the minimum requirement.
The reduction in the economically required capital compared with December 2020 is attributable in particular to lower credit and market risk.

Risk-bearing capacity

The Group's exposure at default increased

The Group's exposure at default increased from €466bn to €470bn in 2021.
The risk density declined from 21 basis points to 18 basis points over the same period.

The following Risk Report is also part of the Management Report.

Risk result for the Group amounted to €-570m in 2021

There was a considerable drop in the risk result compared to the previous year because lower loan losses were recorded for 2021 than had originally been expected and no further significant additions to the TLA had to be made.
For 2022 the Bank expects charges of less than €700m for the risk result.

Risk result

Market risk in the trading book declined in 2021

The value at risk (VaR) declined from €12m to €7m over the course of 2021.
The reason for this was that extreme scenarios relating to the coronavirus from March of the previous year no longer had an influence on the time series for the VaR calculation.

Operational risks increased year on year

In 2021 risk-weighted assets from operational risks increased from €18.3bn to €19.8bn. This rise was mainly due to the switch from the advanced measurement approach (AMA) to the standardised approach.
The total charge for OpRisk events increased from €345m to €1,136m compared with the previous year.

Risk-weighted assets from operational risks

Risk-oriented overall bank management

Commerzbank defines risk as the danger of possible losses or profits foregone due to internal or external factors. In risk management, we normally distinguish between quantifiable and non-quantifiable types of risk. Quantifiable risks are those to which a value can normally be attached in financial statements or in regulatory capital requirements, while non-quantifiable risks include compliance and reputational risk.

Risk management organisation

Commerzbank regards risk management as a task for the whole Bank. The Chief Risk Officer (CRO) is responsible for developing and implementing the Group's risk policy guidelines for quantifiable risks, laid down by the Board of Managing Directors, as well as for measuring these risks. The CRO regularly reports to the Board of Managing Directors and the Supervisory Board's Risk Committee on the overall risk situation within the Group.

Until 31 December 2020, the risk management organisation consisted of the following divisions: Group Credit Risk Management, Group Credit, Group Market Risk Management, Group Risk Controlling & Capital Management and Group Cyber Risk & Information Security.

As of 1 January 2021, Commerzbank combined the divisions Group Market Risk Management and Group Risk Controlling & Capital Management to form the new Group Risk Control division. Furthermore, the Group Big Data & Advanced Analytics division was integrated into the risk management organisation.

In addition, the CRO has assumed responsibility for Group Compliance. It is Group Compliance's responsibility to establish appropriate governance, procedures and systems to allow the Bank to avoid unintentional endangerment as a consequence of compliance risks. Group Compliance is led by the Chief Compliance Officer.

All divisions have a direct reporting line to the CRO.

The Board of Managing Directors has exclusive responsibility for fundamental strategic decisions. The Board of Managing Directors has delegated operative risk management to committees. Under the relevant rules of procedure, these are: the Group Credit Committee, the Group Market Risk Committee, the Group OpRisk Committee, the Group Cyber Risk & Information Security Committee and the Group Strategic Risk Committee, which decides on risk issues of an overarching nature. The CRO chairs all these committees and has the right of veto. The CRO is also a member of the central Asset Liability Committee. Here the CRO also has a right of veto on certain topics (e.g. liquidity risk issues).

The tasks and competencies of the respective committees are described below:

The Supervisory Board's Risk Committee is the Bank's highest risk committee. It comprises at least five Supervisory Board members. The Risk Committee's tasks include monitoring the risk management system and dealing with risks such as market, credit and operational risk, reputational risk and cyber risks (including information security at the Bank). The Risk Committee determines the type, scope, format and frequency of the information that must be presented to the Board of Managing Directors about strategy and risk.

The Group Credit Committee is the decision-making committee for operative credit risk management, comprising two representatives each from the back office and front office. The Group Credit Committee operates on the basis of the credit risk strategy. It takes decisions in line with the competencies delegated to it by the Board of Managing Directors.

The Group Market Risk Committee monitors market risk throughout the Group and manages limit requirements in line with risk-bearing capacity. To do this, all market risks from the trading and banking book are analysed to identify risks early and for active risk management purposes. The focus here is on optimising the risk/return profile.

The Group OpRisk Committee (OpRiskCo) is responsible for managing operational risks within the Group and in this regard acts as the highest escalation and decision-making committee below the Board of Managing Directors. The OpRiskCo also addresses all important regulatory issues that arise in connection with the management of operational risks within the Group. In addition, it deals with standards on governance and assessing the functioning

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of the Internal Control System (ICS) within the Commerzbank Group. Details about the ICS can be found in the section on operational risks.

The Cyber Risk & Information Security Committee (CRISCo) monitors and manages cyber and information security risks in the overall interests of the Bank. In this respect, it acts as the highest decision-making and escalation committee below the Board of Managing Directors. The CRISCo addresses all regulatory aspects relevant to cyber and information security issues and ensures appropriate risk management in this regard in accordance with internationally recognised standards.

The Group Strategic Risk Committee acts as the discussion and decision-making committee for all types of risk, and its main objective is to monitor and manage risks at portfolio level. This covers risk measurement, risk transparency and risk management.

The Group Asset Liability Committee (Group ALCO) is the Commerzbank Group committee responsible for the Group-wide and integrated management of financial resources, namely capital, liquidity and balance sheet structure as well as net interest income, in accordance with the regulatory framework. The Group ALCO monitors in particular the Group's risk-bearing capacity and as such plays an important part in the Internal Capital Adequacy Assessment Process (ICAAP). The Group ALCO resolves the recovery plan. Resolutions of the Group ALCO are presented to the Board of Managing Directors for confirmation. In case of violation of a recovery plan indicator, the Group ALCO plays a central role regarding the escalation, the estimation of the situation and the introduction of measures.

Moreover, risk issues are dealt with in other committees listed below:

The Group Risk Management Executive Committee acts as the discussion and decision-making committee within Group Risk Management and is responsible in particular for the organisation and strategic development of risk management as well as the creation and maintenance of a uniform risk culture. It also ensures that the Group risk strategy and the resolutions of the Board of Managing Directors are implemented in the risk function.

Compliance topics are dealt with in the Global Compliance Board (GCB). The GCB has been established as a forum to share updates on major compliance topics and supervisory actions regarding compliance in the Bank. Furthermore, the GCB serves as information platform for segments and functions about compliance culture, changes in compliance regulations, updates of compliance-related policies and their implications.

Risk strategy and risk management

The overall risk strategy, in line with the business strategy, governs the strategic risk focus of the Commerzbank Group. It sets the risk appetite as the maximum risk that the Bank is prepared and able to accept while following its business objectives without exposing itself to existential threats over and above the risks inherent in the business. The guiding idea is to ensure that the Group holds sufficient liquidity and capital. That also includes ensuring that the business strategy can be implemented through a risk profile that is commensurate with the leeway in the Group's capitalisation as determined by regulatory and capital market factors. Based on these requirements, suitable limits are defined for the risk resources of capital and liquidity available to the Group. The overarching limits of the overall risk strategy are consistent with the indicator thresholds of the recovery plan.

The core functions of banks as transformers of liquidity and risk give rise to inevitable threats that can in extreme cases endanger the continued existence of the institution. These depend on the bank's particular business model and are accepted in the pursuit of business objectives. The basis for Commerzbank's strategic alignment is its business strategy. In the event of a sustained change in the assessment of the inherent and existential threats to Commerzbank, the Board of Managing Directors may have to adjust the business model and thus the business and risk strategy in the medium and long term. A distinction can be made between the types of risk accepted on the basis of two fundamental threat scenarios. The occurrence of an inherent, existential threat jeopardises the continued existence of Commerzbank. In this case, rescuing Commerzbank would hardly be feasible without state measures or significant regulatory support measures (e.g. protective guarantees, tolerance of significant deviations from regulatory capital requirements, rescue merger) or activation of the Single Resolution Mechanism (SRM).

However, mitigation strategies are developed to counter these inherent existential threats, in order as far as possible to reduce the probability of damage or the extent thereof. On the other hand, if a threat materialises that is inherent in the business model but not existential, there is always the possibility of mitigation through, among other things, capital measures available on the market or the use of appropriate capital buffers. It is therefore not necessary to activate the Single Resolution Mechanism (SRM) in this threat scenario. For Commerzbank, the existential threats inherent in its business model include, for example, the default of Germany, the disintegration of the eurozone and a sovereign default of one or more of the other major European countries or a default of the United States, a collapse of the financial markets in connection with loss of the basic functionalities of the ECB, or a bank run, a collapse or a massive malfunction in global clearing houses, as well as extreme cyber attacks on states and institutions due to increasing digitalisation and geopolitical tensions.

The (non-existential) threats inherent in the business model include a deep recession lasting several years with severe effects on the German economy (e.g. triggered by a global pandemic or originating in the USA or China) and the resulting consequences such as huge loan defaults or a sharp outflow of customer deposits affecting the liquidity situation. The global economic downturn caused as a result of the outbreak of the coronavirus pandemic increased overall uncertainty. Commerzbank quickly adapted to the new pandemic scenario and adjusted the management of market, liquidity, credit and operational risks in line with the specific requirements of the pandemic. The observable effects of the pandemic on value chains and commodity prices show, however, that the effects are also still ongoing and remain difficult to assess. Increasing geopolitical tensions, including between Western countries and Russia or China, could lead to significant negative effects on economic performance. The potential for conflict, which is difficult to gauge and goes far beyond trade disputes, remains a relevant risk for Commerzbank as a bank heavily involved in financing global trade.

Climate change may pose another inherent threat. Climate change may be reflected in physical and transition risks for Commerzbank. The transitional aspects in particular harbour risks (as well as opportunities) that are difficult to assess in the short term. Identifying and mitigating this threat to Commerzbank is one of the objectives of risk strategy. Accordingly, Commerzbank has determined for each type of risk whether environmental risks are a key driver. All risk types that are material in relation to environmental risks have been adequately reflected in the risk strategy and risk management.

When pursuing its business targets, the Bank accepts these threats inherent in its business model. It may be necessary to adjust the business model and hence the business and risk strategies in the medium and long term if the Board of Managing Directors' assessment of these threats to Commerzbank changes substantially. To the extent that it is able to do so, Commerzbank makes early preparations in anticipation of forthcoming changes in regulatory requirements and accounting standards. Such changes and their (retrospective) interpretation may have lasting implications for -- and even threaten the survival of -- Commerzbank's business model. Commerzbank accepts these regulatory risks because there are many cases where there is no option to mitigate or manage them.

The overall risk strategy covers all material risks to which Commerzbank is exposed. It is updated annually or on an ad hoc basis as required and set out in further detail in the form of sub-risk strategies for the risk types which are material. These are then specified and made operational through policies, regulations and instructions/guidelines. By means of the upstream risk inventory process, Commerzbank ensures that all risk types of relevance to the Group are identified and their materiality assessed. The assessment of the materiality of a risk is based on whether its occurrence could have a major direct or indirect impact on the Bank's risk-bearing capacity.

As part of the planning process, the Board of Managing Directors decides how much of the risk coverage potential of the Group should be utilised. On that basis, individual types of quantifiable risk contributing to the capital requirements are limited in a second stage. A capital framework is allocated to the management-relevant units through the planning process. Compliance with limits and guidelines is monitored during the year, and management measures are put in place where required. In addition, further qualitative and quantitative early warning indicators are established in the overall risk strategy. Potential negative developments can be identified at an early stage with the help of these indicators.

One of the primary tasks of risk management is the avoidance of risk concentrations. These can arise from the synchronous movement of risk positions both within a single risk type (intra-risk concentrations) and across different risk types (inter-risk concentrations). The latter result from common risk drivers or from interactions between different risk drivers of different risk types.

By establishing adequate risk management and controlling processes, Commerzbank provides for the identification, assessment, management, monitoring and communication of material risks and related risk concentrations. This ensures that all Commerzbank-specific risk concentrations are taken into account in its risk management. Scenario analyses are regularly used to ensure transparency regarding risk concentrations. The structure of the scenarios and the integrated approach ensure that the impact of adverse scenarios on portfolio priorities and risk concentrations are examined in a targeted manner. Management is regularly informed about the results of the analyses so that the potential risk of losses can be avoided in good time.

The Group Risk & Capital Monitor is the monthly risk report, designed for management purposes, on capital, credit risk, market risk, liquidity risk and OpRisk topics within Commerzbank risk management. It shows all the above risk types, including economic and regulatory risk-bearing capacity, for the Commerzbank Group. The report's aims include providing the Board of Managing Directors and the Supervisory Board's Risk Committee with transparent and comprehensive information, highlighting important developments from a risk perspective and setting management measures. The report is also used in particular to monitor limits and guidelines within the overall risk strategy. Responsibility for approving the overall risk strategy and the Group Risk & Capital Monitor lies with the Board of Managing Directors.

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Commerzbank has adopted a code of conduct that defines binding minimum standards for Commerzbank's corporate responsibility, its dealings with customers, business partners and colleagues, and its day-to-day business. It goes without saying that the Bank complies with relevant laws, regulatory requirements, industry standards and internal rules, and this therefore forms a particularly important part of its risk culture. It actively requires employees to behave appropriately, courageously, with integrity and in compliance with rules, and any failure to comply with rules is penalised. Expanded procedures ensure that misconduct is evaluated in a uniform and fair manner, strengthening consequence management on a long-term basis.

The main pillar of the Bank's overall risk management and culture is the concept of three lines of defence, which is a core element of the Corporate Charter. Under the three-lines-of-defence principle, protecting against undesirable risks is an activity that is not restricted to the risk function. Each unit (segment or function) forms the first line of defence within its area of operational responsibility and is directly responsible for identifying and managing risks within it while complying with the prescribed risk standards and policies. For example, the front office forms the first line of defence in all business decisions and has to take risk aspects into account in reaching them. The second line of defence for each type of risk lays down standards for appropriate management of risks of that type, monitors this and ensures the application of such standards, and analyses and evaluates the risks. The risk function forms the second line of defence against credit and market risks associated with business decisions. Particularly for credit risk, this includes involvement in the credit decision process by means of a second vote. Units outside the risk function (e.g. Group Finance) also operate as the second line of defence for certain risk types. The third line of defence is Internal Audit.

Risk ratios

Commerzbank uses a comprehensive system of ratios and procedures for measuring, managing and limiting various types of risk. The most important of these are listed below:

Economically required capital is the amount, corresponding to a high confidence level (currently 99.90% at Commerzbank), that will cover unexpected losses arising from risk positions.

The risk-bearing capacity ratio (RBC ratio) indicates the excess coverage of the economically required capital by the risk coverage potential. Risk-bearing capacity is deemed to be assured as long as the RBC ratio is higher than 100%.

Exposure at default (EaD) is the expected exposure amount taking into account a potential (partial) drawing of open lines and contingent liabilities that will adversely affect risk-bearing capacity in the event of default. EaD is hereinafter also referred to as "exposure".

Expected loss (EL) measures the potential loss on a loan portfolio that can be expected within one year on the basis of historical loss data.

Risk density is the ratio of expected loss to exposure at default and thus represents the relative risk content of an exposure or a portfolio.

Value at risk (VaR) is a methodology for quantifying risk. It involves setting a holding period (such as one day) and a confidence level (such as 97.5%). The VaR value then denotes the relevant loss threshold that will not be exceeded within the holding period with a probability in line with the confidence level.

Credit value at risk (CVaR) is the economic capital requirement for credit risk with a confidence level of 99.90%. The term results from the application of the value at risk concept to credit risk measurement. Credit VaR is an estimate of the amount by which losses from credit risks could potentially exceed the expected loss within a single year, i.e. unexpected loss. The idea behind this approach is that expected loss simply represents the long-term average of lending losses, but this may vary (positively or negatively) from actual credit losses for the current financial year.

In relation to bulk risk, the "all-in" concept comprises all customer credit lines approved by the Bank in their full amount - irrespective of the loan utilisation to date. It is independent of statistically modelled parameters to the greatest possible extent and comprises internal as well as external credit lines.

Risk-bearing capacity and stress testing

Risk-bearing capacity analysis is a key part of overall bank management and Commerzbank's ICAAP. The purpose is to ensure that sufficient capital is held at all times. The risk-bearing capacity concept is reviewed and optimised annually.

When determining the economically required capital, allowance is made for potential unexpected fluctuations in value. Where such fluctuations exceed forecasts, they must be covered by the available economic capital to absorb unexpected losses (risk coverage potential). Only the economic value of equity components that absorb losses in the going concern approach is taken into account in determining the economic risk coverage potential.

The capital requirement for the risks taken is quantified using the internal economic capital model. All risk types of the Commerzbank Group classified as significant and quantifiable within the annual risk inventory are taken into account when determining the economically required capital. The economic risk approach therefore also comprises risk types that are not included in the regulatory requirements for banks' capital adequacy. The model also reflects diversification effects incorporating all types of risk. The confidence level for the calculation of economically required capital is 99.90% and is harmonised with the going concern approach. The quantifiable significant risks in the economic capital model are divided into default risk, market risk, operational risk and (not separately disclosed in the table on the next page) business risk and

Financial Statements and Management Report 2021
39

property value change risk. Furthermore, reserve risk is included in the risk-bearing capacity calculation by means of a corresponding risk buffer. Business risk is the risk of a potential loss resulting from deviations in actual income and expense from the respective budgeted figures. Business risk is used to substantiate a higher-level management buffer that ensures the responsiveness of capital management. Physical asset risk is the risk of an unexpected fall in the value of owned property which is either already recognised as an asset in the Group's balance sheet or which can be recognised during the next 12 months under contractually assured obligations with option character (especially real estate). Climate and environmental risks are defined as horizontal risks within Commerzbank and arise in existing risk categories, with both transition and physical risks being considered. The annual materiality assessment of climate and environmental risks, carried out for the first time in 2021, provides a holistic overview of the impact on existing material risk types identified in the risk inventory. Climate and environmental risks are appropriately reflected in Commerzbank's risk-bearing capacity analysis. Among other things, a risk buffer was implemented as at 31 December 2021 for default and market risks that are materially influenced by climate and environmental risks. Further information on climate and environmental risks can be found in the "Environmental, social and governance (ESG) risks" section on page 68 f.

The results of the risk-bearing capacity analysis are shown using the risk-bearing capacity ratio (RBC ratio), indicating the excess of the risk coverage potential in relation to the economically required capital. Risk-bearing capacity is monitored and managed monthly at Group level. Risk-bearing capacity is deemed to be assured as long as the RBC ratio is higher than 100%. In 2021, the RBC ratio was consistently above 100% and stood at 176% as at 31 December 2021. The reduction in the economically required capital compared with December 2020 is attributable in particular to lower credit and market risk. The decline in credit risk is attributable primarily to improvements in average customer credit ratings, which are reflected both in the expected loss and in the capital requirement. The decline in market risk results in particular from the fact that the coronavirus crisis figures from March 2020 are no longer included in the calculation on which the capital requirement is based, and from improved risk diversification. The RBC ratio is still well above the minimum requirement.

Risk-bearing capacity Group	€bn	31.12.2021
Economic risk coverage potential	22	22
Economically required capital^{1}	12	14
thereof for default risk	9	10
thereof for market risk^{2}	3	4
thereof for operational risk	1	1
thereof diversification effects	-2	-2
RBC ratio (%)^{3}	176	159

1 Including physical asset risk, risk of unlisted investments and the risk buffer for reserve risk, for the quantification of potential fluctuations in value of intangibles and, from December 2021, additionally for climate and environmental risks.
2 Including deposit model risk.
3 RBC ratio = economic risk coverage potential/economically required capital (including risk buffer).

Commerzbank uses macroeconomic stress tests to review the risk-bearing capacity in the event of assumed adverse changes in the economic environment. The underlying scenarios take into account the interdependence of the development of the real economy and the financial economy. They are updated quarterly and approved by the Group ALCO. The scenarios describe an extraordinary but plausible adverse development in the economy, focusing in particular on portfolio priorities (e.g. export-based sectors in Germany) and business strategies of relevance to Commerzbank. Current adverse developments (e.g. the coronavirus pandemic) are also taken into account when creating the scenarios. Stress tests in the economic perspective cover a time horizon of 12 months. The scenario simulation is run quarterly at Group level using the input parameters of the economic capital requirements calculation for all material and quantifiable risk types. In addition to the capital required, the income statement is also subjected to a stress test based on the macroeconomic scenarios. Based on this, changes in the risk coverage potential are simulated. Whereas the RBC ratio is embedded into Commerzbank's limit system, guidelines for risk-bearing capacity are set as an early warning system in the stressed environment. The ongoing monitoring of the limits and guidelines is a key part of internal reporting. Defined escalations are triggered if the limits are breached.

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The risk-bearing capacity and stress testing concept is subject to an annual internal review and is refined on an ongoing basis. The development of the regulatory environment is also taken into account. In addition to the regular stress tests, reverse stress tests are implemented annually at Group level. Unlike regular stress testing, the result of the simulation – a sustained threat to the Bank – is determined in advance. The aim of the analysis process in the reverse stress test is to improve the transparency of Bank-specific risk potential and interactions of risk by identifying and assessing extreme scenarios and events. On this basis, for instance, action fields in risk management including the regular stress tests can be

identified and taken into account in the ongoing development efforts. In 2021, an internal holistic climate risk stress test was carried out by the Bank for the first time in preparation for the ECB climate risk stress test which is to be conducted in 2022. Both transition and physical risk factors relating to default, market, operational and reputational risks were analysed on the basis of scenarios.

In 2021, the risk-weighted assets resulting from Commerzbank's business activities decreased from €179bn to €175bn.

The table below gives an overview of the distribution of risk-weighted assets, broken down by segment and risk type:

	31.12.2021				31.12.2020
Risk-weighted assets €bn	Default risk	Market risk	Operatio-nal risk	Total	Default risk	Market risk	Operatio-nal risk	Total
Private and Small-Business Customers	42	1	10	53	40	1	6	47
Corporate Clients	70	6	5	81	74	7	7	89
Others and Consolidation	33	3	5	41	34	4	5	43
Group	145	10	20	175	148	12	18	179

¹ Adjustment due to restatements.

The coronavirus pandemic will continue to have a significant impact on the global economy in 2022. The currently high number of new coronavirus infections will likely only decrease sustainably in spring 2022, as was the case in the past year.

Inflation has risen sharply all over the world, and the rapid pace of this inflation is pushing more and more central banks towards abandoning their expansive monetary policy. The performance of the financial markets in 2022 will depend as rarely before on inflation and how it is perceived.

The escalation of the Russia-Ukraine conflict represents a significant risk for the economic outlook. If Russia were to curb or even completely stop energy exports, it would at least short-term

lead to energy shortages in Western Europe. Restrictions on production, especially in energy-intensive sectors, would hardly be avoided. At the same time, energy prices would continue to rise, significantly reducing the purchasing power of households. In this case, at least in Germany, a recession would be hard to avoid.

So the war in Ukraine affects both our business with Ukraine and our business with Russia. Commerzbank's net exposure in Russia amounts to €1.3bn. On top of this exposure, the Bank has around €0.6bn Russia related exposure which consists mostly of pre-export financing of commodities. The net exposure in Ukraine is less than €0.1bn. We assume that sanctions relating to individual business partners (for example, the exclusion of large Russian financial institutions from the SWIFT banking communications network or the prohibition of US dollar clearing with large Russian banks) or entire industries (for example, the energy or raw materials sector) will also have an impact on Commerzbank. In addition, we expect Russian countersanctions to have an impact on Commerzbank's portfolios. We closely monitor further developments and continuously adapt our risk assessment and business policy. Commerzbank strictly follows the sanctions at all times.

Regulatory environment

With Basel 3, the Basel Committee on Banking Supervision published among other things comprehensive rules on the components of equity and equity ratios as well as the management of liquidity risk. The associated Capital Requirements Directive and Regulation, constituting the European implementation of Basel 3, have been in force since 1 January 2014, with the more stringent capital requirements having been phased in up to 2019. Numerous supplementary regulations have since been published, in particular by the European Banking Authority (EBA), and these are now progressively entering into force; this will continue in the years to come. The phasing in of capital buffers is a significant feature of the Basel 3 revision, which has now been completed. In accordance with the legal requirements, the buffers are subject to planned, regular supervisory review.

Commerzbank has analysed the effects of the increase in the countercyclical capital buffer in Germany, which will take effect from February 2023, and other currently foreseeable changes in the countercyclical capital buffer, as well as the possible introduction of a sectoral systemic risk buffer on loans secured by residential real estate, and reflects them in its internal capital planning.

In addition, under Basel 3 the leverage ratio has been introduced as a new and non-risk-sensitive debt ratio. Commerzbank has set internal targets for managing the leverage ratio and capital adequacy requirement. These are subject to ongoing review and consideration as part of the capital management process.

Liquidity risk is to be monitored by means of the liquidity coverage ratio (LCR) and the net stable funding ratio (NSFR). The LCR entered into force on 1 October 2015 and is binding on all European banks. The final version of the NSFR, which was approved by the Basel Committee in October 2014, was transposed into European law as part of the Capital Requirements Regulation II (CRR II) and has been binding since June 2021. Commerzbank is already calculating both ratios as part of its regulatory reporting processes, communicating them in its internal reporting and reporting them to the supervisory authority.

The CRR II was published together with the Capital Requirements Directive (CRD V) as part of the Risk Reduction Package in the Official Journal of the European Union on 7 June 2019. As a European directive, CRD V requires transposition into national law within 18 months. The legislation implements, among other things, the Basel Committee's requirements on the leverage ratio, the net stable funding ratio, regulations on the trading book and large exposures, and the treatment of investment funds. In addition, numerous specifications have yet to be made by the EBA.

The CRR relief enacted by the EU in 2020 in the wake of the coronavirus pandemic (“CRR Quick Fix”), such as the early relief for risk positions with small and medium-sized enterprises, was implemented accordingly by Commerzbank.

The ECB, in its capacity as the supervisory authority for the eurozone banks directly supervised by it, conducted the annual Supervisory Review and Evaluation Process (SREP). On 3 February 2022, in its final SREP decision for 2021, the ECB informed Commerzbank of the results of the SREP and the associated supervisory requirements. It did not change the bank-specific capital requirements for the Commerzbank Group set for 2022. With effect from 1 March 2022 the SREP decision replaces the previous SREP decision of 10 December 2019.

A key aim of the ECB project is to harmonise RWA-relevant models for market, counterparty and credit risk that fall within the scope of the Single Supervisory Mechanism (SSM). In particular, the scope for interpretation permitted by the regulations or arising due to differences in national application is to be significantly reduced in future. Some future regulations have been anticipated and far-reaching independent interpretations have been made through the relevant Guides as part of an SSM-wide Targeted Review of Internal Models (TRIM) programme. Commerzbank has received the final ECB decisions with the results of the review.

The EU Bank Recovery and Resolution Directive has been in force since mid-2014. Responsibility for the drafting of resolution plans and the resolution of at-risk banks supervised by the ECB was transferred to the Single Resolution Board (SRB) in Brussels with effect from 1 January 2016. At the same time, eurozone banks started to fund the Single Resolution Fund. The SRB defines the formal minimum requirement for own funds and eligible liabilities (MREL) for the banks under its responsibility on a consolidated and individual basis.

The legal basis for setting MREL and TLAC was revised at European level and published on 7 June 2019 as part of the Risk Reduction Package in the form of the Single Resolution Mechanism Regulation (SRMR II), the Bank Recovery and Resolution Directive II (BRRD II) and the CRR II. The BRRD II as a European directive requires implementation into national law within 18 months. The amendments included, among other things, adjustments to the calculation logic and, for certain banks, a statutory subordination requirement for parts of MREL. Most of the new provisions came into force in December 2020.

The Group-wide recovery plan was updated in October 2021 to reflect the regulatory requirements. The recovery plan describes in detail for instance the courses of action and recovery potential available to the Bank in the event of a crisis and which specific recovery measures, in various stress scenarios, will enable the Bank to complete its recovery.

Commerzbank operates in markets subject to national and supranational regulation. In addition, it is subject to the overarching requirements imposed by accounting standards. Changes in regulatory requirements and accounting standards have significantly grown in frequency and materiality in recent years. They may have lasting implications for the financial industry in general and Commerzbank's business model in particular. Commerzbank continues to participate actively and at an early stage in the consultation processes aimed at preparing for the constant changes in the operat

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ing environment. It also monitors and evaluates current developments as regards future regulatory projects. Specific examples of these at global level are the final standards for revising capital requirements for market risk now published by the Basel Committee on Banking Supervision, and the revision of the framework for operational risk and credit risk, including the associated floor rules and disclosure requirements ("Basel 4"). At the European level, Commerzbank is following, among other things, the implementation of Basel 4, initiatives by the European Commission to introduce a European deposit insurance scheme and to create a capital markets union, the European Green Deal and the EBA initiative to revise the internal risk models.

The regulatory environment also remains challenging with regard to compliance risks. The focus here remains on the issues of anti-money laundering (including the implementation of the new BaFin administrative practice and the requirements of international standard-setters such as the EBA) and sanctions. In addition, antibribery and corruption (including the United Kingdom Bribery Act and the United States Foreign Corrupt Practices Act) and market compliance (among other things new EU requirements in sustainable finance, US requirements and CFTC regulations) are putting further risk types into the regulatory focus.

Default risk

Default risk is defined as the risk of losses sustained or profits foregone due to the default of a counterparty. It is a quantifiable material risk and includes the sub-risk types of credit default risk, issuer risk, counterparty risk, country and transfer risk, dilution risk and reserve risk.

Strategy and organisation

The credit risk strategy is the sub-risk strategy for default risks and is derived from the overall risk strategy. It is embedded in the ICAAP process of the Commerzbank Group and forms a link between the Bank's overall risk management across all risk types and the operationalisation of default risk management. The overriding aim is to ensure the adequate quality of the credit portfolio. To this end, the credit risk strategy defines the credit risk tolerance, specifies risk strategy priorities, provides an overview of the material credit risk management concepts and thereby plays an integral part in maintaining the Group's risk-bearing capacity. The credit risk strategy makes use of quantitative and qualitative management tools that give decision-makers clear guidance on both portfolio management and decisions in specific cases. Within the context of the requirements of the EBA guidelines on loan origination and monitoring (LOaM) implemented in 2021, sustainability aspects were defined and anchored, and expanded out-of-policy reporting was put in place.

Credit risk management is a joint task of the front office and the risk function, based on a standardised Group-wide credit risk culture. Impeccable moral and ethical conduct in compliance with the law and regulations is a key element of a culture of integrity and core to the credit risk culture. Default risks are assessed against uniform standards, regardless of segment limits. In line with the three lines of defence principle, the front office is the first line of defence and must take risk aspects into account when taking business decisions. The risk function (back office and Risk Controlling) is the second line of defence, its fundamental task being to manage, limit and monitor risks. The third line of defence is Internal Audit. It is tasked with independently auditing the Bank's processes and safeguards, and as such also assesses the activities of the first and second lines of defence.

The Group Credit Committee is the highest decision-making committee for operative credit risk management, comprising two representatives each from the back office and front office. It takes decisions in line with the competencies delegated to it by the Board of Managing Directors and is responsible for managing all credit risks. In so doing, the Group Credit Committee operates on the basis of the valid credit risk strategy. Reporting to the Group Credit Committee are sub-credit committees, which operate on the basis of their respective rules of procedure and within the competencies approved by the Board of Managing Directors. They comprise at least two representatives from the segments and two representatives from Group Risk Management. The sub-credit committees are responsible for managing all credit risks in the sub-portfolios within their respective remit and are entitled, in turn, to sub-delegate certain credit decisions within their prescribed competencies.

Discrete back-office areas are responsible for operational credit risk management at portfolio level and on a case-by-case basis. The responsibilities are separated between the performing loan area on the one hand and Intensive Care on the other. All credit decisions in the performing loan area are risk/return decisions. The front and back office take joint responsibility for risk and return from an exposure, with the front office having primary responsibility for the return, and the back office for the risk. Accordingly, neither office can be overruled in its primary responsibility in the credit decision process.

Higher-risk customers are handled by specialist Intensive Care areas. The customers are moved to these areas as soon as they meet defined criteria for assignment or mandatory transfer. The principal reasons for assignment to Intensive Care areas are criteria relating to number of days overdrawn, together with event-related criteria such as rating, third-party enforcement measures or credit fraud. The Intensive Care function decides on further action based on the circumstances of individual cases. Customers must be transferred to Intensive Care if they are in default (for example due to insolvency). This graduated approach ensures that higher-risk customers can continue to be managed promptly by specialists in a manner appropriate to the risks involved and in defined standardised processes.

Risk management

Commerzbank manages default risk using a comprehensive risk management system. The management framework comprises an organisational structure, methods and models, quantitative and qualitative management tools and regulations and processes. The risk management system ensures that the entire portfolio and the sub-portfolios, right down to individual exposure level, are managed consistently and thoroughly on a top-down basis.

The ratios and measures required for the operational process of risk management are based on the overarching Group objectives. The principle of maintaining a low-risk profile in all business decisions is closely combined here with the risk function's aim of providing the front office with appropriate support. Preference is given to transactions and products with a low level of complexity. Another focus is on the responsiveness of a credit line or exposure.

Quantitative credit risk strategy guidelines limit risks with regard to poorer credit ratings and exposures with high loss-at-default contributions (concentration management) and for selected sub-portfolios with a high risk weight or regulatory importance, and, as applicable, for individual products with a high portfolio share. Detailed arrangements for operationalising the guidelines for selected sub-portfolios are set out in separate portfolio policies. In addition, qualitative management guidelines in the form of credit policies define the target business of the Bank. At the level of individual transactions, they regulate the transaction type for which the available risk resources are to be used. These credit policies are firmly embedded in the credit process: transactions which do not meet the requirements are escalated through a fixed competence regulation.

Group-wide guiding principles are based on risk-oriented analyses of trends (e.g. of the development of weaker credit ratings over time) combined with an assessment of external framework conditions and internal rules. Risk-oriented analyses on key dates (e.g. rating profile of individual asset classes) are used in particular to derive portfolio guiding principles. Trend analyses of product-specific risk drivers are key factors for determining product guiding principles (e.g. loan-to-value of mortgage lending). In contrast, credit and portfolio policies are primarily produced through a multi-level coordination process involving the product and portfolio managers from the front and back offices, combined with an assessment of internal and external information sources.

To monitor compliance with credit risk strategic rules, continuous monitoring and reporting has also been set up at whole Group level and at segment or sub-portfolio level. Asset quality reviews by the risk function make an important contribution here to quality assurance and early risk detection. The focal points of the monitoring vary depending on the issue and target group. Ad hoc reporting processes have been established. In addition, crisis events may pose a risk to the Bank's capital and liquidity adequacy and thereby to its risk-bearing capacity. In a crisis, the Risk Mitigation Task Force will manage decisions flexibly in a coordinated, Group-wide process. For example, in the context of the ongoing pandemic the Task Force Corona (TFC) was established at the beginning of 2020 in order to identify effects on the Group portfolio as quickly as possible and to be able to take countermeasures. The TFC continued its work in 2021. As part of the process, emergency action plans ensure that risk-mitigation measures are implemented quickly and efficiently.

The avoidance of risk concentrations is a core strategy of risk management. Risk concentrations are actively managed in order to identify at an early stage and contain the increased potential for loss from the synchronous movement of risk positions. In addition to exposure-related credit risk concentrations (bulk risks), default risk also includes country and sector concentrations. Segment-specific features are taken into account here.

Management and the Supervisory Board's Risk Committee are regularly informed about the results of the analyses.

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The Task Force Corona established in 2020 as part of crisis management under the direction of the Chief Credit Risk Officer continued its work in 2021. The Board of Managing Directors was regularly informed about the results and decisions of the cross-unit meetings to ensure a coordinated vote on the effects of the crisis. These internal meetings were discontinued in February 2021, but are to be revived if necessary. The existing ad hoc reports were continued on a monthly basis. The established exchange formats with the supervisory authorities continue to take place at regular intervals. There are still bi-weekly meetings between the Joint Supervisory Team (JST) and the CFO/CRO and quarterly JST meetings with senior management. Workshops were also held with regulators to clarify specific issues.

Management of economic capital commitment

Economic capital commitment is managed in order to ensure that the Commerzbank Group holds sufficient capital. To this end, all relevant risk types in the overall risk strategy for economic risk capital are given limits on a Group-wide basis, with, in particular, a CVaR limit being specified. Due to the systematically restricted options for reducing default risk on a short-term basis, it is important to take account of expected trends (medium-term and long-term) in order to manage credit risk. For this reason, forecast values of credit risk parameters play a key role in ongoing management. At segment and business area level, changes to forecasts are monitored and adjustments made when necessary. There is no cascaded capital limit concept for credit risk below Group level.

Financial Statements and Management Report 2021
45

Overview of management instruments and levels

Risk strategies and policies	Limit and guideline systems	Portfolio monitoring and reporting
Group
Overall risk strategy plus sub-risk strategies for significant risk types
Establishment of a general risk understanding and creation of a uniform risk culture	Definition of Group limits (across all risk types) for capital and liquidity management
Additional definition of guidelines as key points of the aspired target portfolio	Group Risk & Capital Monitor plus risk type specific Group formats (including flash reporting)
Uniform, consolidated data repository as basis for Group reporting	Ensuring exchange of information and networking in committees that operate across all risk types
Retaining qualified staff in line with progressive product innovation or regulatory adjustments
Sub-portfolios
Clear formulation of risk policy in guidelines (portfolios, asset classes, etc.)
Differenciated credit authorities based on compliance of transactions with the Bank's risk policy	Performance metrics on level of risk categories and sub-portfolios
Expansion of Group-wide performance metrics using sub-portfolio-specific indicators	Portfolio batches as per established portfolio calendar*
Asset quality review and analysis of High Attention Parts (HAP)
Trigger monitoring with clear escalation and reporting lines	Interdisciplinary composition of segment committees
Ensuring uniform economic opinions
Individual exposures
Rating-dependent and bulk-sensitive credit authority regulations with clear escalation processes	Limitation of bulk risk and uniform management according to model-independent all-in definition	Limit monitoring at individual exposure level
Monthly report to the Board of Managing Directors on the development of bulk risks
Review of individual customers/exposures resulting from asset quality review or HAP analyses	Deal team structures
Institutionalized exchange within the risk function, also taking account of economic developments
Sector-wise organization of domestic corporate business

Commerzbank Aktiengesellschaft

Rating classification

The Commerzbank rating method comprises 25 rating classes for customers not in default (1.0 to 5.8) and 5 default classes (6.1 to 6.5). The Commerzbank master scale allocates precisely one rating class, stable over time, to each probability of default. The rating methods are validated annually and recalibrated where necessary so that they reflect the latest assessment based on all actual observed defaults. However, this is possible and expedient amid a pandemic only to a limited extent, which is why the associated negative developments will become apparent only with a time lag.

The probability of default ranges assigned to the ratings are the same for all portfolios. This ensures internal comparability consistent with the master scale method. For guidance and indicative purposes, the Commerzbank master scale also shows external ratings as well as credit quality steps in accordance with Article 136 CRR. However, a direct reconciliation is not possible, because external ratings of different portfolios show fluctuating default rates from year to year.

The credit approval authorities of both individual staff and the committees (Board of Managing Directors, Credit Committee, subcredit committees) are graduated by a range of factors including size of exposure and rating class.

Commerzbank master scale

Commerzbank AG rating	PD and EL mid-point %	PD and EL range %	S&P scale	Credit quality steps in accordance with Article 136 CRR¹
1.0	0	0	AAA	AAA
1.2	0.01	0–0.02	AA+	AA
1.4	0.02	0.02–0.03	AA, AA-	AA
1.6	0.04	0.03–0.05	AA, AA-	A
1.8	0.07	0.05–0.08	A+, A	A
2.0	0.11	0.08–0.13	A-
2.2	0.17	0.13–0.21	BBB+	BBB
2.4	0.26	0.21–0.31	BBB
2.6	0.39	0.31–0.47	BBB-
2.8	0.57	0.47–0.68	BBB-
3.0	0.81	0.68–0.96	BB+	BB
3.2	1.14	0.96–1.34	BB
3.4	1.56	1.34–1.81	BB-
3.6	2.10	1.81–2.40	BB-
3.8	2.74	2.40–3.10
4.0	3.50	3.10–3.90	B+	B
4.2	4.35	3.90–4.86	B
4.4	5.42	4.86–6.04	B-
4.6	6.74	6.04–7.52
4.8	8.39	7.52–9.35	B-
5.0	10.43	9.35–11.64
5.2	12.98	11.64–14.48	CCC+	CCC
5.4	16.15	14.48–18.01	CCC, CCC-	CC, C
5.6	20.09	18.01–22.41	CC, C
5.8	47.34	22.41–99.99
6.1	>90 days past due
6.2	Imminent insolvency
6.3	100	Restructuring with recapitalisation	D	Default
6.4	Termination without insolvency
6.5	Insolvency

¹ CRR = Capital Requirements Regulation (EU) No 575/2013.

Risk mitigation

The collateral taken into account in risk management changed in the period under review from €121.2bn to €123.3bn for positions in the Group's performing portfolio and from €1.2bn to €1.1bn for positions in the default portfolio.

Commerzbank mitigates credit risk through various measures including collateral and netting procedures.

Types of collateral include in particular land charges, financial collateral, guarantees, indemnities, credit derivatives, life insurance policies, other registered liens and other physical collateral.

There have been no visible effects of the coronavirus pandemic on the market values of typical loan collateral (especially real estate) to date; with the exception of aircraft, no further portfolio-based haircuts have been factored in.

The Bank takes account of credit risk mitigation effects from the acceptance of recognisable warranties (guarantees, comparable claims on third parties) by using the guarantor's risk parameters (PD and LGD) and/or, in the case of the CRSA, the regulatory risk weightings.

As at the reporting date, no loan loss provisions were created for transactions with a total volume of €5.9bn (31 December 2020: €6.0bn), as these are entirely collateralised.

Where eligible from a regulatory point of view, guarantors are subject to a creditworthiness check and rating assignment based on their sector and business as part of the assessment of their declaration of liability. The aim of the creditworthiness check is to establish the guarantor's creditworthiness and maximum solvency.

The quality of the collateralisation recognised for regulatory purposes is rigorously checked and monitored on an ongoing basis. This includes in particular checks on legal enforceability and regular measurement of the collateral, carried out at appropriate intervals depending on the type of collateral, at least annually or on an event-driven basis. Positive correlations between the debtor's creditworthiness and the value of the collateral or guaran-tee are defined in the credit and collateral processing process; collateral instruments affected are not counted. Collateral is processed and evaluated primarily outside the front office.

The Bank analyses all credit collateral (physical and personal collateral) for evidence of collateral concentrations. The analysis includes checks on various dimensions such as collateral categories, the borrower's rating classes or regional allocations of collateral. The Board of Managing Directors receives regular information in respect of the above dimensions about changes in the collateral pool and possible issues/concentrations.

The measurement and processing of collateral is governed by generally applicable standards and collateral-specific instructions (guidelines, process descriptions, IT instructions). Collateral agreements are legally reviewed; standard agreements and templates are used where possible. The standards drawn up to hedge or mitigate the risk of loans, which also take into account the regulatory requirements of the CRR, include, among other things:Legal and operational standards for documentation and data collection and measurement standards.Standards to ensure the uniformity and timeliness of collateral measurement through the definition of measurement processes, uniform measurement methods, parameters and defined collateral discounts, clear definition of competences and responsibility for the processing and measurement process, and regular re-measurement frequencies.Other standards to take account of specific risks such as operational risk, correlation and concentration risk, market price change risk (e.g. due to currency fluctuations), country risk, legal and legal change risk and the risk of inadequate insurance coverage.

Commerzbank Group

Commerzbank focuses its business on two customer segments, Private and Small-Business Customers (PSBC) and Corporate Clients (CC).

The direct and indirect consequences of the coronavirus pandemic are covered in particular by means of a top-level adjustment (TLA) in the risk result as well as adjustments of models. The TLA figure recorded in the 2020 financial statements was checked during the year on the quarterly reporting dates and recalculated if necessary. The majority of these effects are not yet perceptible in the remaining risk figures, as they will only become noticeable here with a time lag.

Commerzbank Aktiengesellschaft

Credit risk parameters

The credit risk parameters in the Commerzbank Group are distributed in the rating classes 1.0 to 5.8 over the segments as follows:

	31.12.2021				31.12.2020
Credit risk parameters	Exposure at default €bn	Expected loss €m	Risk density bp	CVaR €m	Exposure at default €bn	Expected loss €m	Risk density bp	CVaR €m
Private and Small-Business Customers	203	408	20	2,180	190	401	21	2,025
Corporate Clients	174	347	20	4,197	180	430	24	4,647
Others and Consolidation	93	114	12	2,141	96	141	15	2,721
Group	470	869	18	8,518	466	971	21	9,393

When broken down on the basis of PD ratings, 85% of the Group's portfolio is in the internal rating classes 1 and 2, which comprise investment grade.

	31.12.2021					31.12.2020
Rating breakdown EaD I %	1.0-1.8	2.0-2.8	3.0-3.8	4.0-4.8	5.0-5.8	1.0-1.8	2.0-2.8	3.0-3.8	4.0-4.8	5.0-5.8
Private and Small-Business Customers	30	55	12	2	1	32	52	13	3	1
Corporate Clients	18	62	15	3	2	20	59	16	4	2
Others and Consolidation	49	47	3	0	0	56	41	3	0	0
Group	29	56	11	2	1	32	53	12	2	1

The Group's country risk assessment covers both transfer risks and event risks driven by political and economic events which impact on the individual economic entities of a country. Country risks are managed on the basis of transfer risk limits defined at country level. Country exposures which are significant for Commerzbank due to their size are handled by the Credit Committee on a separate basis.

The regional breakdown of the exposure corresponds to the Bank's strategic direction and reflects the main areas of its global business activities.

	31.12.2021			31.12.2020
Group portfolio by region	Exposure at default €bn	Expected loss €m	Risk density bp	Exposure at default €bn	Expected loss €m	Risk density bp
Germany	257	363	14	248	415	17
Western Europe	96	198	21	102	238	23
Central and Eastern Europe	55	222	40	51	207	41
North America	37	35	9	33	46	14
Asia	15	23	16	24	34	15
Other	11	28	27	10	31	31
Group	470	869	18	466	971	21

More than half of the Bank's exposure relates to Germany, another third to other countries in Europe, 8% to North America and 3% to Asia. The rest is broadly diversified and is split among a large number of countries where we serve German exporters in particular or where Commerzbank has a local presence. The expected loss of the Group portfolio is mainly divided between Germany and the other European countries.

Risk result The risk result relating to the Group's lending business in 2021 amounted to €-570m (prior-year period: €-1,748m).

The following table shows the breakdown of the risk result by stage according to IFRS 9.

Financial Statements and Management Report 2021
49

Any fluctuations in the market values of fair value loans are not recognised in the risk result. They are recognised in the net income from financial assets and liabilities measured at fair value through profit or loss.

	31.12.2021				31.12.2020
Risk result I €m	Stage 1	Stage 2¹	Stage 3¹	Total	Stage 1	Stage 2¹	Stage 3¹	Total
Private and Small-Business Customers	-23	-1	-295	-319	-9	-183	-369	-562
Corporate Clients	8	18	-175	-149	-35	-355	-690	-1,081
Others and Consolidation	6	-35	-72	-101	-6	5	-106	-106
Group	-9	-18	-542	-570	-50	-533	-1,165	-1,748

¹ Including allocated risk result from POCI (POCI – purchased or originated credit-impaired).

There was a considerable drop in the risk result compared to the previous year because lower loan losses were recorded for 2021 than had originally been expected and no further significant additions to the TLA had to be made. The model-based parameters used to determine risk provisions do not yet fully reflect the effects of the coronavirus pandemic. As in 2020, a pandemic-related top-level adjustment was therefore required for the risk result.

The TLA figure of €-505m booked as at 31 December 2020 was checked during the year on the quarterly reporting dates and recalculated if necessary. At the end of 2021 the TLA figure was completely recalculated based on an updated macroeconomic scenario, parameter adjustments derived from it and current portfolio data. This led to an increase in the TLA in the current calendar year by €-17m. The TLA as at 31 December 2021 thus amounted to €-523m. The assumptions regarding increased probabilities of default compared with the model result were updated to take account of developments as at the reporting date. The TLA takes into account the expected effects of the coronavirus pandemic on the Commerzbank Group by the end of 2022. This is based on a macroeconomic scenario that reflects the uncertainty that increased in the fourth quarter of 2021 owing to the fourth coronavirus wave and the occurrence of new mutations, including the resulting measures and restrictions on public life, which will have a negative impact on economic performance in 2022. In addition, economic performance in 2022 is threatened by indirect and secondary effects from the pandemic, such as interruptions to production chains, scarcity of raw materials and rising energy prices in the eurozone. The adequacy of the TLA is continually reviewed.

Further drivers of the risk result in the reporting period are addressed in the following explanatory notes on the segments.

For 2022 the Bank expects charges of less than €700m for the risk result.

Default portfolio The Group's default portfolio decreased by €640m in 2021 and stood at €4,156m as at the end of the year. The decline in 2021 was attributable in the main to larger write-downs on individual exposures in the Corporate Clients segment, as well as in Others and Consolidation amid otherwise low inflows into the default portfolio.

The following breakdown of the default portfolio shows the claims in the default portfolio in the amortised cost and fair value OCI (other comprehensive income) categories. The loans are almost exclusively assigned to the amortised cost category, of which by far the greatest share of €3.9bn (31 December 2020: €4.6bn) relates to the loans and receivables class, and €244m (31 December 2020: €211m) to off-balance-sheet transactions. As at 31 December 2021 the volume of defaulted securities that can be assigned to the debt securities class was €3m (31 December 2020: €3m fair value OCI category). The collateral shown is liable to the full extent for loans in the amortised cost category, with €1,087m (31 December 2020: €1,137m) relating to loans and receivables and €27m (31 December 2020: €31m) to off-balance-sheet transactions. As at 31 December 2021 there was no default volume to be reported for credit transactions in the fair value OCI category (31 December 2020: €4m).

Commerzbank Aktiengesellschaft

	31.12.2021	31.12.2020
Default portfolio Group	€m	Loans
Default portfolio	4,152	3
LLP¹	2,055	0
Coverage ratio excluding collateral (%)²	49	–
Collateral	1,109	0
Coverage ratio including collateral (%)²	76	–
NPE ratio (%)³

¹ Loan loss provisions.
² Coverage ratio: LLP (and collateral) as a proportion of the default portfolio.
³ NPE ratio: default portfolio (non-performing exposures – NPE) as a proportion of total exposures (EaD including NPE) according to EBA Risk Dashboard.

Commerzbank uses the definition in Article 178 CRR as the criterion for default. The EBA guidelines on the application of the definition of default referred to in Article 178 of Regulation (EU) No 575/2013 are taken into account. The default portfolio is divided into the following five classes based on the nature of the default:

Rating class 6.1: Over 90 days past due.
Rating classes 6.2/6.3: Unlikely-to-pay, or the Bank is assisting in financial rescue or distressed restructuring at the customer by making concessions.
Rating classes 6.4/6.5: The Bank recalls the loan and the customer has become insolvent respectively.

The table below shows the breakdown of the default portfolio based on the five rating classes:

	31.12.2021	31.12.2020
Group rating classification	€m	6.1
Default portfolio	668	1,722
LLP	274	690
Collateral	287	441
Coverage ratio including collateral (%)	84	66

Overdrafts in the performing loan book In order to avoid an increase in the default portfolio, overdrafts are closely monitored at Commerzbank. In addition to the 90 days-past-due trigger event, IT-based management of overdrafts starts on the first day the account is overdrawn. The table below shows overdrafts outside the default portfolio based on the exposure at default as at the end of December 2021. The changes may also be due to short-term overdrafts:

	31.12.2021					31.12.2020
EaD €m	>0 ≤ 30 days	>30 ≤ 60 days	>60 ≤ 90 days	>90 days	Total	>0 ≤ 30 days	>30 ≤ 60 days	>60 ≤ 90 days	>90 days	Total
Private and Small-Business Customers	568	80	38	0	686	834	82	27	11	954
Corporate Clients	1,553	62	0	0	1,615	1,823	19	19	42	1,903
Group¹	2,121	142	38	0	2,301	2,657	101	46	53	2,857

¹ Including Others and Consolidation.

Private and Small-Business Customers segment

The Private and Small-Business Customers (PSBC) segment includes activities with private and small-business customers, in private banking and in wealth management, and with customers of the Group divisions comdirect and Commerz Real. mBank is also shown in the Private and Small-Business Customers segment.

The focus of the portfolio is on traditional owner-occupied home financing and the financing of real estate capital investments (residential mortgage loans and investment properties with a total EaD of €102bn). We provide our small-business customers with credit mainly in the form of individual loans with a volume of €27bn. In addition, we meet our customers' day-to-day demand for credit with consumer loans (overdrafts, instalment loans and credit cards, to a total of €15bn). The portfolio's expansion in recent months was largely due to residential mortgage loans.

Financial Statements and Management Report 2021
51

Compared with the previous year, the risk density of the portfolio improved slightly to 20 basis points (December 2020: 21 basis points). An increased risk due to the coronavirus pandemic is not yet visible in the portfolio, but the uncertainty about further developments remains.

	31.12.2021			31.12.2020
Credit risk parameters	Exposure at default €bn	Expected loss €m	Risk density bp	Exposure at default €bn	Expected loss €m	Risk density bp
Private Customers	83	108	13	114	149	13
Small-Business Customers	35	54	15	34	60	18
comdirect	2	5	24	2	8	44
Commerz Real	0	0	10	0	0	16
Private Banking	11	9	8	-	-	-
Wealth Management	26	25	10	-	-	-
mBank	45	207	46	41	184	45
PSBC	203	408	20	190	401	21

¹ As at 1 July 2021 the structure of the sub-portfolios was changed.

The risk result in the Private and Small-Business Customers segment was €-319m in the 2021 financial year (previous year: €-562m). The reduction was largely due to the lower impact of the coronavirus pandemic. The effects of the coronavirus crisis have not yet materialised to a large extent for the Small-Business Customers portfolio owing to support measures and a pandemic-related TLA was therefore still required for 2021. The updated TLA as at December 2021 remained almost unchanged for the portfolio and amounted to €-126m as at 31 December 2021 (31 December 2020: €-130m); the amount is almost entirely attributable to the Small-Business Customers portfolio. In addition, an amount of €-60m from the regular reassessment of the IFRS 9 parameters was added to the risk result in the fourth quarter of 2021, of which €-42m was attributable to the non-significant default portfolio.

At €-187m, risk provisioning for possible loan losses at mBank was also well below the previous year's figure of €-274m, which was due to the significantly reduced impact relating to the coronavirus pandemic compared to the previous year. The risk result of mBank resulted in part from allocations for individual cases. mBank's result also includes a reversal of loan loss provisions totaling €14m resulting from the regular reassessment of the IFRS 9 parameters.

The default portfolio in the segment declined and stood at €1,846m as at the reporting date (31 December 2020: €2,041m). The decline compared with the end of 2020 was primarily due to the low level of new defaults at both Commerzbank and mBank in 2021.

	31.12.2021	31.12.2020
Default portfolio PSBC	€m	Loans
Default portfolio	1,846	0
LLP	826	0
Coverage ratio excluding collateral (%)	45	-
Collateral	717	0
Coverage ratio including collateral (%)	84	-

Corporate Clients segment

The Corporate Clients segment (CC) comprises the Group's activities with mid-size corporate clients, the public sector, institutional customers and multinational corporates. The segment is also responsible for the Group's relationships with banks and financial institutions in Germany and abroad, as well as with central banks. The regional focus of our activities is on Germany and Western Europe. The Group's customer-oriented capital markets activities are also bundled in this segment.

The EaD of the Corporate Clients segment decreased from €180bn to €174bn compared with 31 December of the previous year. Risk density decreased from 24 basis points to 20 basis points.

For details of developments in the Financial Institutions portfolio, please see page 54.

Commerzbank Aktiengesellschaft

	31.12.2021			31.12.2020
Credit risk parameters	Exposure at default €bn	Expected loss €m	Risk density bp	Exposure at default €bn	Expected loss €m	Risk density bp
Mittelstand	77	158	20	80	189	24
International Corporates	60	120	20	64	155	24
Financial Institutions	21	47	23	20	57	28
Other	16	23	14	16	29	18
CC	174	347	20	180	430	24

The risk result for the Corporate Clients segment in the 2021 financial year was €-149m (previous year: €-1,081m). The charge for the segment was considerably reduced compared with the previous year owing to the lower impact of the coronavirus pandemic. The proportion of the TLA attributable to the segment was €-392m as at 31 December 2021, with an allocation of €-18m recognised in profit or loss being made in 2021. The need for the TLA adjustment resulted from the assumptions for sectors/subportfolios, which were checked and in part adjusted on the basis of the macroeconomic scenario, for which direct and/or indirect effects are to be expected. Tourism/ hotels and retail, which are predominantly affected by primary effects, are relevant examples here. Another example is the automotive industry, where secondary effects in particular, such as interruptions to supply chains and production cutbacks due to a lack of raw materials (e.g. semiconductors), are having a negative impact. Resulting rating migrations and defaults are expected for 2022, which are currently not yet reflected in the model-based calculation of loan loss provisions and are therefore covered by the TLA.

The risk result for the segment also includes an addition of €-21m for the fourth quarter, which results from the regular reassessment of the IFRS 9 parameters, of which €-17m relates to the non-significant default portfolio.

The default portfolio in the segment stood at €2,096m as at the end of 2021 (31 December 2020: €2,334m). The change in 2021 was mainly attributable to the write-down of a relatively large individual exposure and repayments, which continued to overcompensate for the currently low inflows to the default portfolio from new defaults.

	31.12.2021	31.12.2020
Default portfolio CC	€m	Loans
Default portfolio	2,092	3
LLP	1,076	0
Coverage ratio excluding collateral (%)	51	-
Collateral	387	0
Coverage ratio including collateral (%)	70	-

The risk result in the Others and Consolidation segment was €-101m in the 2021 financial year (previous year: €-106m) and was thus at a similar level. Drivers for risk provisions in 2021 were the negative performance of an existing exposure, which required an increase in the existing risk provision, and an increase in the risk provision in the non-defaulted portfolio in the amount of €-19m due to the regular review of the IFRS 9 parameters. The regular review of the IFRS 9 parameters did not result in any need for adjustments in the non-significant default portfolio of the segment. The TLA for the segment was €-5m, of which €-3m was added in 2021 with an effect on income.

Further portfolio analyses

The analyses below are independent of the existing segment allocation. The positions shown are already contained in full in the Group and segment presentations above.

Corporates portfolio by sector

Overall, the different sectors of German industry continue to be affected to varying degrees by the coronavirus pandemic as well as by unrelated, fundamental structural challenges. In the first half of 2021, the negative impact of the crisis decreased. An improved performance since the beginning of the pandemic was particularly noticeable in the manufacturing, construction, automotive and logistics sectors.

The tourism segment suffered significantly from the strict infection control measures in the first half of 2021. With the easing of the restrictions, partial recovery effects were observed, albeit well below the pre-crisis level. While the tourism industry is optimistic about 2022, the risks from new virus variants (e.g. Omicron) remain a latent risk that still needs to be closely observed.

In addition to the course of the coronavirus pandemic, the maintenance of the supply chains and the availability of intermediate products (e.g. semiconductors) as well as increased raw material prices will have a significant impact on the business performance of many companies. In the second half of 2021 in particular, an increase in risks was observed in some sectors (e.g. automotive suppliers). It is to be expected that the increased raw material prices and the limited availability of intermediate products will continue in 2022. The pandemic and possible other virus variants will continue to influence the risk profile.

A breakdown of the corporates exposure by sector is shown below.

Commerzbank Aktiengesellschaft

Financial Institutions portfolio

Our network of correspondent banks continued to focus on trade finance activities on behalf of our corporate customers and on capital market activities. In derivatives, we enter into trades with selected counterparties under the European Market Infrastructure Regulation (EMIR) standards.

We continue to keep a close watch on the impact of regulatory requirements on banks. In this context, we continue to pursue our strategy of holding as few exposures as possible which might absorb losses in the event of a bail-in of an affected institution.

We are keeping a close eye on developments in various countries affected by specific issues such as recessions, embargoes and economic uncertainty caused by political events (e.g. trade wars) and are responding with flexible portfolio management that is tailored to the individual situation of each country. This applies in particular to the upheavals resulting from the coronavirus pandemic and energy price developments, which are having a major impact on the operating environment of our correspondent banks in both industrialised and developing countries. Overall, our risk appetite is geared to keeping the portfolio as responsive as possible.

	31.12.2021			31.12.2020
FI portfolio by region	Exposure at default €bn	Expected loss €m	Risk density bp	Exposure at default €bn	Expected loss €m	Risk density bp
Germany	5	4	9	6	7	11
Western Europe	15	10	7	16	13	8
Central and Eastern Europe	2	9	44	2	12	60
North America	2	1	2	3	1	2
Asia	5	15	28	7	22	32
Other	6	18	31	5	18	37
Total	35	56	16	39	72	18

Non-Bank Financial Institutions portfolio

The Non-Bank Financial Institutions (NBFI) portfolio mainly comprises insurance companies, asset managers, regulated funds and central counterparties. Business activities are focused on Germany, Western Europe, the United States and Asia.

Commerzbank conducts new business with NBFIs partly in consideration of regulatory requirements (clearing via central counterparties) and partly in the interests of our institutional customers, with a focus on attractive opportunities with customers

with good credit ratings and valuable security. We manage our portfolios with the aim of ensuring their high quality and responsiveness. We are keeping a close eye on risks stemming from global events and are responding with flexible portfolio management that is tailored to the individual situation. The effects of the coronavirus pandemic on the operating environment of NBFI customers have further diminished, so that we currently do not expect any deterioration in creditworthiness.

	31.12.2021			31.12.2020
NBFI portfolio by region	Exposure at default €bn	Expected loss €m	Risk density bp	Exposure at default €bn	Expected loss €m	Risk density bp
Germany	18	18	10	17	18	10
Western Europe	13	18	14	12	23	19
Central and Eastern Europe	2	14	75	2	12	53
North America	9	5	6	9	11	11
Asia	1	1	11	2	2	12
Other	1	3	39	1	4	55
Total	44	60	14	44	71	16

Originator positions

Commerzbank has in recent years securitised receivables from loans to the Bank's customers with a current volume of €11.5bn for capital management purposes (31 December 2020: €12.3bn).

As at the reporting date 31 December 2021, risk exposures with a value of €9.8bn were retained (31 December 2020: €10.2bn). By

far the largest share of all positions was accounted for by €9.6bn (31 December 2020: €10.0bn) on senior tranches, which are almost entirely rated good to very good. Commerzbank did not issue any new transactions in 2021. In 2020, two transactions with a total issue volume of €7.9bn were issued. We do not see any impacts from the coronavirus pandemic on risk positions in the reporting period.

Financial Statements and Management Report 2021
55

Commerzbank volume¹
Securitisation pool €bn	Maturity	Senior	Mezzanine	First loss piece	Total volume¹
Corporates	2025 - 2036	9.6	< 0.1	0.2	11.5
Total 31.12.2021		9.6	< 0.1	0.2	11.5
Total 31.12.2020		10.0	< 0.1	0.2	12.3

¹ Tranches/retentions (nominal): banking and trading book.

Conduit exposure and other asset-backed exposures

The Bank provides financing to securitise receivables, in particular trade and leasing receivables, from customers in the Corporate Clients segment. In this context, Commerzbank acts mainly as an arranger of asset-backed securities transactions via the Commerzbank-sponsored multi-seller conduit Silver Tower. The volume and risk values for the securitisation of receivables in the Corporate Clients segment rose by €0.3bn to €3.9bn in 2021.

Liquidity risk subsumes the risk that Commerzbank will be unable to meet its payment obligations on a day-to-day basis. Liquidity risks from securitisations are modelled in the internal liquidity risk model on a risk-adjusted basis. In the case of transactions subject to variable utilisation, it is assumed that the pur-chase facilities provided to the special-purpose companies must be refinanced almost in full by Commerzbank for the duration of their term and until the maturity of the last financed receivable. Securitisations only qualify as liquid assets if they are eligible for rediscount at the European Central Bank. These positions are only included in the liquidity risk calculation after risk-adjusted discounts are applied.

The other asset-backed exposures mainly comprise government-guaranteed asset-backed securities (ABS) held by Commerzbank Finance & Covered Bond S.A. and Commerzbank AG in Germany. In 2021 the volume declined to €3.9bn (December 2020: €4.4bn), as did the risk values² at €3.9bn (December 2020: €4.4bn).

There are also investments in the Structured Credit area. The volume of new investments entered into since 2014 stood at €6.9bn (December 2020: €5.9bn). We have invested in bonds of senior tranches of securitisation transactions in the consumer (auto) ABS, UK RMBS and CLO asset classes, which have a robust structure and a moderate risk profile. At 31 December 2021, this portfolio solely contained AAA-rated CLO positions (also the case at the end of 2020). Remaining structured credit positions with a volume of €0.2bn were already in the portfolio prior to 2014 (December 2020: €0.3bn), while risk values stood at €0.2bn (December 2020: €0.2bn).

Forbearance portfolio

The EBA's definition of forbearance comprises two requirements, which have to be met concurrently: the debtor is in financial difficulties and the measures of the bank to help the debtor include concessions to the debtor that the bank would not have agreed to under different circumstances. Examples of concessions include deferrals, increases in limits or loans and waivers in connection with restructuring. The definition of forbearance applies independently of whether the debtor is in the performing or the non-performing portfolio.

The following tables show Commerzbank's total forbearance portfolio on the basis of the EBA definition as well as the loan loss provisions for these positions:

	31.12.2021			31.12.2020
Forbearance portfolio by segment	Forborne exposure	LLP	LLP coverage ratio	Forborne exposure	LLP	LLP coverage ratio
	€m	€m	%	€m	€m	%
Private and Small-Business Customers	920	140	15	1,091	201	18
Corporate Clients	2,240	413	18	2,215	377	17
Others and Consolidation	207	142	69	298	156	53
Group	3,367	695	21	3,604	735	20

¹ Risk value is the balance sheet value of cash instruments. For long CDS positions, it comprises the nominal value of the reference instrument less the net present value of the credit derivative.

Commerzbank Aktiengesellschaft

The forbearance portfolio by region is as follows:

	31.12.2021			31.12.2020
Forbearance portfolio by region	Forborne exposure	LLP	LLP coverage ratio	Forborne exposure	LLP	LLP coverage ratio
	€m	€m	%	€m	€m	%
Germany	1,744	390	22	1,912	376	20
Western Europe	858	183	21	745	48	6
Central and Eastern Europe	472	112	24	866	301	35
North America	8	1	7	2	0	1
Asia	220	1	1	3	2	47
Other	65	8	13	76	9	12
Group	3,367	695	21	3,604	735	20

In April 2020, the EBA established a relief regime in relation to public and private payment moratoria in the context of the coronavirus pandemic. These payment moratoria do not trigger the classification as forbearance or distressed restructuring if the measures taken are based on applicable national law or on an industry-wide private initiative agreed and widely applied by the credit institutions involved.

Commerzbank also granted its customers corresponding moratoria in the second and third quarters of 2020 with terms of three to six months. The vast majority of borrowers resumed payment of their instalments on time after the end of the deferral period.

The decline in forbearance exposure of around 7% in 2021 stems primarily from German Private and Small-Business Customers. The LLP coverage ratio at Group level increased slightly to 21%.

In addition to the LLP of €695m (31 December 2020: €735m), the risks in the forbearance portfolio are covered by collateral totalling €1,179m (31 December 2020: €1,032m).

Market risk

Market risk is the risk of potential financial losses due to changes in market prices (interest rates, commodities, credit spreads, exchange rates and equity prices) or in parameters that affect prices such as volatilities and correlations. Losses may impact profit or loss directly, e.g. in the case of trading book positions. However, for banking book positions they are reflected generally in the revaluation reserve or in hidden liabilities/reserves.

Strategy and organisation

Commerzbank's market risk strategy is derived from its overall risk strategy and the business strategies of the individual segments. It sets targets for market risk management in relation to Commerzbank's main business activities. The core market risk management tasks are the identification of all material market risks and drivers of market risk and the independent measurement and evaluation of these. The results and estimates serve as the basis for risk/return-oriented management.

The Board of Managing Directors of Commerzbank is responsible for ensuring the effective management of market risk throughout the Commerzbank Group. Specific levels of authority and responsibility in relation to market risk management have been assigned to the appropriate market risk committee.

In the Group Market Risk Committee, segment representatives, along with representatives from the risk function and finance area, discuss current risk positioning issues and decide on appropriate action. Chaired by the risk function, the Group Market Risk Committee, which meets monthly, deals with the Commerzbank Group's market risk position. Discussions centre on the monthly market risk report, which is also presented to the Board of Managing Directors for their consideration. The report summarises the latest developments on financial markets, the Bank's positioning and related risk ratios.

The risk management process involves the identification, measurement, management and monitoring of risks and reporting on them. It is the responsibility in functional terms of market risk management, which is independent of trading activities. Central market risk management is complemented by decentralised market risk management units at segment level and for regional units and subsidiaries. The close integration of central and local risk management with the business units means that the risk management process starts in the trading areas themselves. The trading units are responsible in particular for the active management of market risk positions, e.g. reduction measures or hedging.

Risk management

Commerzbank uses a wide range of quantitative and qualitative tools to manage and monitor market risk. Quantitative limits for sensitivities, value at risk, stress tests, scenario analyses and ratios on economic capital limit the market risk. Our comprehensive rulebook, in the form of market risk policies and guidelines as well as restrictions on portfolio structure, new products, maturities and minimum ratings, establishes the qualitative framework for market risk management. The market risk strategy lays down the weighting of figures in each segment by reference to their relevance. Thereby allowance is made for the varying impact of the parameters for the management of the segments in line with the business strategy.

Market risk is managed internally at Group level, segment level and in each segment's reporting units. A comprehensive internal limit system broken down to portfolio level is implemented and forms a core part of internal market risk management.

The quantitative and qualitative factors limiting market risk are determined by the market risk committees by reference to the Group's management of economic capital. The utilisation of these limits, together with the relevant net income figures, is reported daily to the Board of Managing Directors and the responsible heads of the Group divisions. Based on qualitative analyses and quantitative ratios, the market risk function identifies potential future risks, anticipates potential financial losses in collaboration with the finance function, and draws up proposals for further action, which are discussed with the front office units. Voting on the proposed measures or risk positions takes place in the above-mentioned market risk committee and is subsequently submitted to the Board of Managing Directors for approval.

Risk concentrations are restricted directly using specific limits or are indirectly avoided, for example, using stress test limits. In addition, the combination of various conventional risk measures (e.g. VaR, sensitivities) ensures the appropriate management of concentration risks. Furthermore, risk drivers are analysed on a regular basis in order to identify concentrations. The risk management of existing concentrations is also reviewed using situation-driven analyses and, where necessary, supplemented by targeted measures such as limits.

Any limits that are breached are handled in a separate escalation procedure. After a limit breach has been identified, the front office and risk units design adequate countermeasures. If the limit breach cannot be remedied within a reasonable period, it will be escalated by the market risk function to the next hierarchical level.

Regulatory risk measures that are not included in economic risk-bearing capacity are limited and managed separately. These include, for example, stressed VaR and incremental risk charge.

In internal management, all positions relevant to market risk are covered, and trading and banking book positions are jointly managed. In addition, for regulatory purposes the trading book is managed separately (in accordance with regulatory requirements, including currency and commodity risks in the banking book) and interest rate risks in the banking book are managed on a stand-alone basis. In order to provide a consistent presentation in this report, all figures relating to VaR are based on a confidence level of 99%, a holding period of one day, equally weighted market data and a 254-day history.

Trading book

Below, we show how the regulatory market risk ratios of the trading book portfolio developed. Most of Commerzbank's trading book positions derive from the Corporate Clients segment and Group Treasury division. The VaR figures comprise all risks in the internal VaR model. Commerzbank subsidiaries use standardised approaches for their regulatory capital calculation under partial use rules.

The VaR declined from €12m to €7m in 2021. The reason for this was that extreme scenarios relating to the coronavirus from March of the previous year no longer had an influence on the time series for the VaR calculation.

Commerzbank Aktiengesellschaft

The market risk profile is diversified across all asset classes.

VaR contribution by risk type in the trading book I €m	31.12.2021	31.12.2020
Credit spreads	1	2
Interest rates	2	4
Equities	0	0
FX	2	4
Commodities	2	3
Total	7	12

Further risk ratios are calculated for regulatory capital adequacy. This includes the calculation of stressed VaR. Stressed VaR is calculated using the internal model on the basis of the VaR method described above. The main difference lies in the market data used to value the assets. Stressed VaR measures the risk in the present position in the trading book by reference to market movements from a specified crisis period in the past. The crisis observation period used for this is checked regularly through model validation and approval processes and adjusted where necessary. The crisis observation period remained the same during the year.

The market risk profile in stressed VaR is also diversified across all asset classes. The dominant asset classes are interest rates and commodities. The increase in the commodities asset class results in particular from trading in emissions certificates.

Stressed VaR contribution by risk type in the trading book I €m	31.12.2021	31.12.2020
Credit spreads	7	3
Interest rates	10	8
Equities	1	1
FX	5	7
Commodities	16	9
Total	39	28

In addition, the incremental risk charge and the equity event VaR figures quantify the risk of deterioration in creditworthiness and event risks in trading book positions. The incremental risk charge rose by €11m to €31m in the course of 2021. This is mainly due to position changes in the Corporate Clients segment and in Group Treasury.

The reliability of the internal model (historical simulation) is monitored in various ways, including by backtesting, on a daily basis. The VaR calculated is set against actually occurring profits and losses. The process draws a distinction between "clean P&L"

and "dirty P&L" backtesting. In the former, exactly the same positions in the income statement are used as were used for calculating the VaR. This means that the profits and losses result only from changes in market prices (hypothetical changes in the portfolio value). In dirty P&L backtesting, by contrast, profits and losses from newly concluded and expired transactions from the day under consideration are also included (actual profits and losses induced by portfolio value changes). Profits and losses from valuation adjustments and model reserves are factored into dirty and clean P&L according to the regulatory requirements.

If the actual loss exceeds the VaR, it is described as a negative backtesting outlier. Analysing the results of backtesting provides an informative basis for checking parameters and for potential improvement to the market risk model. In 2021 two negative clean P&L outliers and one negative dirty P&L outlier were measured. The clean P&L outliers are mainly due to extraordinary price fluctuations related to trading in $\mathrm{CO}_{2}$ emissions certificates. The dirty P&L outlier was mainly caused by market movements in interest rates and foreign currencies.

Checks were carried out to verify that none of the observed backtesting outliers were caused by model weaknesses. Backtesting is also used by the supervisory authorities for evaluating internal risk models. Negative outliers are classified by means of a traffic-light system laid down by the supervisory authorities. All negative backtesting outliers at Group level (from both clean P&L and dirty P&L) must be reported to the supervisory authorities, citing their extent and cause.

As the VaR concept gives a prediction of potential losses assuming normal market conditions, it is supplemented by stress tests. These stress tests measure the risk to which Commerzbank is exposed, based on unlikely but still plausible events. These events may be simulated using extreme movements on various financial markets. The key scenarios relate to major changes in credit spreads, interest rates and yield curves, exchange rates, share prices and commodities prices. Examples of events simulated in stress tests include all stock prices falling by $15\%$, a parallel shift in the yield curve and changes to the curve's gradient.

Extensive Group-wide stress tests and scenario analyses are carried out as part of risk monitoring.

The internal model's individual components are independently validated at regular intervals to assess their appropriateness for risk measurement. The identification and elimination of model weaknesses are of particular importance in this.

Banking book

The key drivers of market risk in the banking book are the Group Treasury portfolios, with their credit spread, interest rate and basis risks.

In market risk management, credit spread sensitivities in the banking and trading books are considered together. Credit spread sensitivities (downshift of 1 basis point) for all securities and derivative positions (excluding loans) were at €50m as at the end of 2021 (31 December 2020: €53m).

Most credit spread sensitivities related to securities positions measured at amortised cost. Changes in market price have no impact on the revaluation reserve or the income statement for these positions.

The impact of an interest rate shock on the economic value of the Group's banking book is simulated monthly in compliance with regulatory requirements. In accordance with the EU Banking Directive, the German Federal Financial Supervisory Authority and the European Central Bank have prescribed two scenarios of uniform, sudden and unexpected changes in interest rates (+/-200 basis points) to be used by all banks, which have to report on the results of this stress test every quarter. In the scenario 200 basis points, the yield curve is floored at 0 (negative sections of the yield curve are left unchanged).

As a result of the scenario +200 basis points, a potential economic loss of €2,523m as at 31 December 2021 (31 December 2020: €2,776m potential economic loss) was determined, and in the scenario -200 basis points a potential economic profit of €746m (31 December 2020: €343m potential economic profit). Commerzbank does not, therefore, need to be classified as a bank with elevated interest rate risk, as the decline in net present value represents less than 20% of its regulatory capital.

The interest rate sensitivity of the overall banking book (excluding pension funds) amounted to €7.3m as at 31 December 2021 (31 December 2020: €9.0m) per basis point of falling interest rates due to position changes in Group Treasury.

At the end of 2021 the first major milestone in the Interest Rate Benchmark Reform was reached. The publication of EONIA and of the LIBOR rates in UK pounds (GBP), Japanese yen (JPY) and Swiss francs (CHF) was discontinued; the US dollar (USD) LIBOR for 1-month, 3-month, 6-month and 12-month maturities can still be used for existing business until mid-2023. For new business, the procedural and technical prerequisites for using the new alternative reference interest rates have been put in place. With a few exceptions, the underlying LIBOR contracts have been adjusted in line with the new market conventions. The Strategic Initiative IBOR (Interbank Offered Rates) Transition launched to implement the benchmark reform was completed as planned in December 2021. The Bank has set up a smaller project to complete the pending tasks, in particular preparations for replacing the remaining USD LIBORs as at June 2023.

Pension fund risk is also part of market risk in the banking book. Our pension fund portfolio comprises a well-diversified investment section and a section comprising insurance-related liabilities. The duration of the liabilities is extremely long (cash outflows modelled over almost 90 years), and the main portion of the overall portfolio's present value risk is in maturities of 15 years and over. The main risk drivers are long-term euro interest rates, credit spreads and expected euro inflation due to anticipated pension dynamics. Equity, volatility and foreign exchange risk also need to be taken into consideration. Diversification effects between individual risks reduce the overall risk. The extremely long maturities of these liabilities represent the greatest challenge, particularly for hedging credit spread risk. This is because there is insufficient liquidity in the market for corresponding hedging products.

Market liquidity risk

Market liquidity risk is the risk of the Bank not being able to liquidate or hedge risky positions in a timely manner, to the desired extent and on acceptable terms as a result of insufficient liquidity in the market.

Market liquidity risk is taken into account in Commerzbank's risk-bearing capacity concept by scaling the value at risk to one year, i.e. the implicitly recognised liquidation period. Additional valuation adjustments for market liquidity risk are also reflected in the calculation of the risk coverage capital

Liquidity risk

We define liquidity risk in the narrower sense as the risk that Commerzbank will be unable to meet its payment obligations on a day-to-day basis. In a broader sense, liquidity risk describes the risk that future payments cannot be funded for the full amount, in the required currency or at standard market conditions, as and when they are due.

Strategy and organisation

The Board of Managing Directors adopts the business strategy and the Bank's risk tolerance, which is associated with it. Liquidity risk tolerance is then operationalised by defining the liquidity reserve period and the limit framework. In order to ensure an appropriate liquidity risk management process, the Board of Managing Directors delegates certain competences and responsibilities in connection with the Group-wide liquidity risk strategy to the Risk and Treasury functions.

The Group Asset Liability Committee (ALCO) is responsible for limiting, analysing and monitoring liquidity risk and for strategic liquidity positioning. The Group ALCO is supported by various sub-committees in this.

Risk management

Commerzbank uses a wide range of tools to manage and monitor liquidity risks on the basis of its own liquidity risk model. The stress scenario within the Bank that underlies the model and is relevant for management purposes allows for the impact of both a bank-specific stress event and a broader market crisis. Binding regulatory requirements are an integral component of the management mechanism.

Group Treasury is responsible for the Group's liquidity management operations. Group Treasury is represented in all major locations of the Group in Germany and abroad and has reporting lines into all subsidiaries. Commerzbank manages its global liquidity centrally using cash pooling. This approach ensures that liquidity resources are used efficiently and that this occurs across all time zones, as Group Treasury units are located in Frankfurt, London, New York and Singapore. Liquidity risk is monitored on the basis of the Bank's own liquidity risk model by the independent risk function.

The Bank has established early warning indicators for the purpose of managing liquidity risk. These ensure that appropriate steps can be taken in good time to secure long-term financial solidity.

Risk concentrations can lead to increased outflows of liquidity, particularly in a stress situation, and thus to increased liquidity risk. They can, for example, occur with regard to maturities, large individual creditors or currencies. By means of ongoing monitoring and reporting, emerging risk concentrations in funding can be recognised in a timely manner and mitigated through suitable measures.

This also applies to payment obligations in foreign currencies. The Bank also mitigates concentration by continuously using its access to broadly diversified sources of funding, in particular diverse customer deposits and capital market instruments.

Commerzbank also ensures that it monitors foreign exchange risks and fulfils the currency matching requirements for highly liquid assets and net liquidity outflows.

In the event of a market-driven and/or idiosyncratic liquidity crisis, the liquidity contingency plan provides for certain measures which, depending on the nature of the crisis, can be initiated either through Treasury's extended authority to act or through the recovery process of the recovery plan. The liquidity contingency plan is an independent part of emergency planning and upstream of the recovery plan. Both the liquidity contingency plan and the recovery plan at Commerzbank are updated at least once a year; the individual liquidity emergency measures are checked regularly during the year for plausibility. The liquidity contingency plan also defines a clear allocation of responsibilities for the processes to be followed in emergency situations and gives details of any action that may need to be taken.

Liquidity risk model

A key component of liquidity risk management is the daily calculation of the liquidity gap profile. The liquidity gap profile shows the deterministic or stochastic inflows and outflows expected in the future on a given reporting date and across all portfolios. This forms the basis for calculating liquidity requirements or excess liquidity per maturity band. This also includes modelling the proportion of customer deposits that will be permanently available, known as the core deposit base.

The liquidity gap profile is also used to set the issuance strategy of the Commerzbank Group, which is operationalised by the Group Treasury division. The Group Finance division is responsible for calculating and allocating liquidity costs on the basis of the liquidity gap profile, which are then incorporated in the management of the segments' business activities.

Based on the liquidity gap profile, management mechanisms such as recovery and early warning indicators are limited and monitored accordingly. The liquidity gap profile is limited in all maturity bands. The Group limits are broken down into individual Group units and currencies. The internal liquidity risk model is complemented by the regular analysis of additional adverse, reverse and historical stress scenarios.

Quantification and stress testing

Commerzbank uses a wide range of tools to manage and monitor liquidity risks on the basis of its own liquidity risk model. In addition to internal economic considerations, liquidity risk modelling also factors in the binding regulatory requirements under the Capital Requirements Regulation (CRR) and the Minimum Requirements for Risk Management (MaRisk). Commerzbank incorporates this within its liquidity risk framework, thereby quantifying the liquidity risk appetite established by the Board of Managing Directors.

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The stress scenarios within the Bank that underlie the model and are relevant for management purposes allow for the impact of both a bank-specific stress event and a broader market crisis. The Commerzbank-specific idiosyncratic scenario simulates a stress situation arising from a rating downgrade of two notches, whereas the market-wide scenario is derived from experience of the subprime crisis and simulates an external market-wide shock. The main liquidity risk drivers of both scenarios are a markedly increased outflow of short-term customer deposits, above-average drawdown of credit lines, prolongations of lending business regarded as commercially necessary, the need to provide additional collateral for secured transactions and the application of higher risk discounts to the liquidation values of assets.

As a complement to the individual scenarios, the Bank also simulates the impact on the liquidity gap profile (net liquidity position) of a scenario that combines idiosyncratic and market-specific effects. The liquidity gap profile is shown for the whole of the modelling horizon across the full spectrum of maturities and follows a multi-level concept. This allows for a nuanced presentation – deterministic and modelled cash flows in existing business on the one hand and the inclusion of prolongations on the other.

The table below shows the liquidity gap profile values after application of the respective stress scenarios for periods of one and three months as at the end of the year. Significantly more liquidity flows out in a combined scenario compared with the individual scenarios. As at the end of 2021, in the one-month and three-month periods, the combined stress scenario leaves net liquidity of €12.8bn and €14.7bn respectively.

Net liquidity in the stress scenario	€bn	31.12.2021	31.12.2020
Idiosyncratic scenario	1 month	20.8	21.1
3 months	24.1	16.8
Market-wide scenario	1 month	24.1	23.3
3 months	26.0	16.9
Combined scenario	1 month	12.8	14.7
3 months	14.7	8.4

Liquidity reserves

Significant factors in the liquidity risk appetite include the reserve period, the size of the liquidity reserve portfolio held to compensate for unexpected short-term liquidity outflows, and the limits in the various maturity bands. As the liquidity reserve portfolio consists of highly liquid assets, it functions as a buffer in stress situations. The liquidity reserve portfolio is funded in line with the liquidity risk appetite to ensure that it is kept at the required size throughout the entire reserve period stipulated by the Board of Managing Directors.

As at the end of 2021, the Bank had highly liquid assets of €60.0bn. This liquidity reserve is funded in line with the liquidity risk appetite to ensure that it is kept at the required size throughout the entire reserve period stipulated by the Board of Managing Directors.

Part of this liquidity reserve is held in a separate stress liquidity reserve portfolio managed by Group Treasury to cover liquidity outflows should a stress event occur and to ensure solvency at all times. The amount of the stress liquidity reserve portfolio is checked and, if necessary, adjusted as part of the daily liquidity risk calculation.

The Bank also holds an intraday liquidity reserve portfolio. As at the reporting date, the total value of this portfolio was €6.1bn (31 December 2020: €6.1bn).

The liquidity reserves comprising highly liquid assets are made up of the following three components:

Liquidity reserves from highly liquid assets	€bn	31.12.2021
Highly liquid assets	60.0	94.8
of which level 1	56.3	85.6
of which level 2A	3.4	8.6
of which level 2B	0.3	0.6

Liquidity ratios

Throughout the 2021 financial year, Commerzbank's internal liquidity ratios, including the regulatory liquidity coverage ratio (LCR), were above the limits set at least annually by the Board of Managing Directors. The same is true of compliance with the survival period calculation set down by MaRisk.

The LCR is calculated as the ratio of liquid assets to net liquidity outflows under stressed conditions. It is used to measure whether a bank has a large enough liquidity buffer to independently withstand any potential imbalance between inflows and outflows of liquidity under stressed conditions over a period of 30 calendar days.

In 2021, Commerzbank significantly exceeded the minimum ratio of 100% stipulated for that year on every reporting date. As at the end of 2021, the average month-end value of the LCR over the last 12 months was 145.1% (as at the end of 2020: 135.7%).

The Bank has established corresponding limits and early warning indicators to ensure the LCR minimum requirements are met.

Commerzbank Aktiengesellschaft

Operational risk

Based on the Capital Requirements Regulation (CRR), Commerzbank defines operational risk (OpRisk) as the risk of loss resulting from the inadequacy or failure of internal processes, people and systems or from external events. This definition includes, among other things, legal risk, human resources risk, IT risk, outsourcing risk or tax risk, as well as product risk, conduct risk and environmental risk in the area of social governance (ESG). In this definition the focus is not on strategic or reputational risk. In view of their increased economic significance, compliance risk and cyber risk are managed as separate risk types. However, losses from compliance risks and cyber risks are still incorporated into the model for determining the economic capital required for operational risks.

Strategy and organisation

Within Commerzbank, OpRisk and governance issues of the Internal Control System (ICS) are closely connected in terms of both organisational structure and methodology and are continuously being enhanced. This is because many OpRisk cases are closely linked with failures in the control mechanisms. A properly functioning ICS thereby helps to reduce or avoid losses from operational risks and thus to low-er the amount of economic capital required to cover operational risks in the medium to long term. Conversely, the operational risk management systems enable the ICS to adapt itself consistently to them. The further development of the ICS structure is an essential aspect of the proactive reduction or prevention of operational risks where possible.

Chaired by the CRO, the Group OpRisk Committee meets at least four times a year and deals with the management of operational risks within the Commerzbank Group. It also acts as the escalation and decision-making committee for key OpRisk topics that span all areas. The Management Boards and/or the Segment Committees with responsibility for operational risk deal with the management of operational risk in the relevant units. They analyse OpRisk issues that affect them, such as loss events, and define subsequent measures or recommend action.

Commerzbank's OpRisk strategy is approved on an annual basis by the Board of Managing Directors after it has been discussed and voted upon in the Group OpRisk Committee. The OpRisk strategy describes the risk profile, key elements of the desired risk culture,

its management framework and measures to be taken by Commerzbank to manage operational risk.

OpRisk management is based on three consecutive levels (three lines of defence) which, when taken together, are crucial for reaching the given strategic aims.

Risk management

Commerzbank takes an active approach to managing operational risk, aiming to systematically identify OpRisk profiles and risk concentrations and to define, prioritise and implement risk mitigation measures.

Operational risks are characterised by asymmetric distribution of losses. This means that most of the losses are relatively small, while isolated losses with a very low probability of occurrence have the potential to be large and devastating. This makes it necessary, where possible, not only to limit high loss potential but also to proactively manage losses that can be expected to occur frequently.

To do this, Commerzbank has set up a multi-stage system that brings together the defined limits on economic capital (risk capacity) and those set for operative risk management during the year (risk ap-petite/tolerance), complemented by rules on the transparent and conscious acceptance and approval of individual risks (risk acceptance).

OpRisk management includes an annual evaluation of the Bank's ICS key controls and a risk scenario assessment. Furthermore, OpRisk loss events are subjected to ongoing analysis and to ICS backtesting on an event-driven basis if relevant. Lessons learned activities are carried out after all material loss events.

Since the fourth quarter of 2021 Commerzbank has measured regulatory capital using the standardised approach (SA), while economic capital for operational risks continues to be measured using a dedicated internal model. Risk-weighted assets for operational risks on this basis came to €19.8bn at the end of the fourth quarter of 2021 (31 December 2020: €18.3bn). This rise was mainly due to the switch from the advanced measurement approach (AMA) to the standardised approach. The economically required capital was €1.5bn. The internal model used for this corresponds to the AMA previously in use. A comparison with the prior year (31 December 2020: €1.5bn) shows a stable trend.

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The following table gives an overview of risk-weighted assets (RWA) and the economically required capital (ErC) by segment:

	31.12.2021		31.12.2020
€bn	RWA	ErC	RWA	ErC
Private and Small-Business Customers	10.3	0.8	6.1	0.5
Corporate Clients	4.9	0.3	7.4	0.6
Others and Consolidation	4.6	0.4	4.8	0.4
Group	19.8	1.5	18.3	1.5

The total charge for OpRisk events as at the end of the fourth quarter of 2021 was approximately €1,136m (full-year 2020: €345m). The events mainly related to losses in the "Products and business practices" category. These primarily include the provision of mBank for legal risks related to Swiss franc loan agreements, which is a key driver of the increase compared to the previous year. In addition, process-related risks materialised in the context of projects.

Realised losses from operational risks due to the coronavirus only include cost items. The Bank has still not incurred any damage due to a disruption of its core banking processes. In accordance with regulatory requirements, the recognition of these recurring cost items was discontinued in 2021. They are part of a "new normal", which was taken into account in the multi-year plan.

OpRisk events¹) €m	31.12.2021	31.12.2020
Internal fraud	-1	1
External fraud	35	9
Damage and IT failure	2	29
Products and business practices	738	277
Process related	352	29
HR related	9	0
Group	1,136	345

¹ Losses incurred and provisions, less OpRisk-based income and repayments.

A structured, centralised and decentralised reporting system ensures that the management of the Bank and its segments, members of the OpRisk Committee and the supervisory bodies are informed regularly, promptly and fully about operational risk. OpRisk reports are pro-duced quarterly. They contain changes in OpRisk losses, the segments' main loss events, current risk analyses, changes in the capital requirement and the status of measures implemented. Operational risks are also part of the regular risk reporting process to the Board of Managing Directors and to the Supervisory Board's Risk Committee.

Other risks

To meet the requirements of the Basel framework, MaRisk requires an integrated approach to risk that also includes unquantifiable risk categories. At Commerzbank, these are subjected to a qualitative management and control process. The following risk types except compliance risk, model risk and cyber risk are outside the responsibility of the CRO.

Legal risk

According to the CRR, legal risk falls within the definition of operational risk. It primarily arises for the Commerzbank Group when the Bank's claims cannot be enforced for legal reasons or when claims can be made against the Bank because the underlying law was not observed or has changed since a transaction was concluded.

The operation of banking and financial services transactions that are subject to regulatory provisions may also result in legal risk. This risk may also take the form of orders or sanctions issued or imposed by one or more authorities whose supervision Commerzbank is subject to anywhere in the world. Legal risk also arises in realised losses or provisions due to or in connection with court cases brought against Commerzbank (passive proceedings). Cases brought by Commerzbank (active proceedings) generally represent a credit risk rather than an operational risk, so the risk of loss is already taken into account through write-downs. However, the costs of legal action (court and lawyers' costs) for active proceedings are classified as legal risk.

Organisation Within Commerzbank, the functional management of legal risk throughout the Group is the responsibility of Group Legal. All legal staff at the various Group Legal locations including the foreign branches as well as the legal staff of the legal departments of the domestic and foreign subsidiaries are as legal risk managers operationally responsible for the identification and management of the Group-wide legal risk within Commerzbank.

Risk management The task of the Group's legal risk managers is to detect legal risks and all losses potentially resulting from them at an early stage, to highlight possible solutions that might avoid or minimise such losses, and to play an active part in reaching decisions concerning legal risks. They must ensure that they are always up to date with all legal changes or new findings within their area of responsibility and inform the business units affected about the impact on legal risk and any action that needs to be taken as a result.

The legal risk managers are responsible for arranging or adjusting legal provisions and look after and monitor new and ongoing court proceedings.

In the case of passive proceedings, provisions are recognised on the basis of the risk assessment carried out by the responsible legal risk manager. The expected risk of loss for proceedings generally corresponds to the size of the provisions to be recognised. To estimate the expected loss, the amount that the Bank would reasonably have to pay to settle the dispute at the current point in time is calculated after each significant stage in the proceedings. In the case of active proceedings, provisions are usually only recognised for the expected court and lawyers' costs.

Group Legal provides information about all major court proceedings and risk trends in a quarterly litigation report. This report is sent to the Bank's management and Supervisory Board, the supervisory authority and the OpRisk Committee.

Current developments

Commerzbank and its subsidiaries are involved in a variety of court and arbitration cases, claims and official investigations (legal proceedings) in connection with a broad range of issues. They include, for example, allegations of defective advice, disputes in connection with credit finance or payment transactions, entitlements to occupational pensions, allegedly false accounting and incorrect financial statements, enforcement of claims due to tax issues, allegedly incorrect prospectuses in connection with underwriting transactions, alleged violations of competition laws, and cases brought by shareholders and other investors as well as investigations by supervisory authorities. In addition, changes to rulings by supreme courts, which may render them more restrictive, as well as to legal conditions, e.g. in the private customer business, may result in more claims being brought against Commerzbank or its subsidiaries. In these court cases, claimants are mostly asking for the payment of compensation, claims on account of unjust enrichment or the reversal of agreements already entered into. If the courts were to find in favour of one or more of the claimants in these cases, Commerzbank could be liable to pay compensation, which could in some cases be substantial, or could incur the expense of reversing agreements or of other cost-intensive measures. Regulatory authorities and governmental institutions in various countries in which Commerzbank and its subsidiaries are or have been active have for some years been investigating irregularities in connection with the fixing of foreign exchange rates and with foreign exchange business in general. In the course of these investigations, regulatory authorities and governmental institutions have also sought checks on Commerzbank or have approached the company with requests for information. Commerzbank has cooperated fully with these bodies and also looked into the relevant matters on the basis of its own comprehensive investigations. The cases are no longer active with the exception of one case in which the investigating authority transferred the matter to the national competition tribunal. Financial consequences cannot be ruled out.

The public prosecutor's office in Frankfurt is investigating equity transactions conducted by Commerzbank and the former Dresdner Bank around the dividend record date (cum-ex transactions). Commerzbank had already initiated a forensic analysis of cum-ex transactions at the end of 2015, which was concluded at the start of 2018 in respect of Commerzbank's equity transactions and in September 2019 in respect of the equity transactions of the former Dresdner Bank. All back taxes demanded by the tax authorities have been paid.

The public prosecutor's office in Cologne has been conducting investigations at Commerzbank since September 2019 in connection with a separate case concerning cum-ex transactions. It is investigating on suspicion that the Bank (including Dresdner Bank) was involved in cum-ex transactions in various roles, including by supplying shares to third parties who were allegedly acting as short sellers. According to the current understanding, these proceedings do not involve Commerzbank's own tax credit claims with regard to capital gains tax and the solidarity surcharge on dividends.

The Bank is cooperating fully with authorities conducting investigations into cum-ex transactions. It is currently not possible to predict whether this will give rise to a burden or the amount thereof.

Based on the circular on cum/cum transactions published by the Federal Ministry of Finance (BMF) in 2017, the tax auditors commented on the treatment of these transactions in the form of audit notes. The tax office reduced the credit for capital gains taxes accordingly. In response, Commerzbank Aktiengesellschaft made value adjustments to tax credits shown in the balance sheet and set up additional provisions for possible repayment claims in order to reflect the changed risk situation fully and appropriately. The BMF published a revised version of its circular on cum/cum transactions on 9 July 2021. In view of the potential impact of the BMF circular, the provision was adjusted in the second quarter of 2021. Based on current knowledge, adequate provisions are now in place for the tax risks arising from this issue. The possibility of further charges over and above the provisions recognised by the Bank cannot be completely ruled out.

With respect to cum-cum securities lending transactions, Commerzbank is exposed to compensation claims from third parties for crediting entitlements that have been denied. Based on the analyses performed, Commerzbank considers it rather unlikely that such claims could be enforced. However, it cannot be ruled out. Under these circumstances, Commerzbank estimates the potential financial impact in the upper double-digit million range, plus interest on arrears. The possibility that this conclusion could alter as developments unfold, for example in connection with assessments made by the tax authorities and fiscal/civil courts, cannot be completely ruled out.

In May 2017, a Polish court admitted a class action lawsuit against a subsidiary of Commerzbank alleging the ineffectiveness of

index clauses in loan agreements denominated in Swiss francs. A total of 1,731 plaintiffs have joined the class action. The court of appeal partially overturned and referred back the judgement of the court of first instance, which dismissed the class action in its entirety; the court of first instance has meanwhile dismissed the claim, legal remedies are still possible.

Independently of this, numerous borrowers have also filed individual lawsuits for the same reasons. In addition to the class action, 13,036 other individual proceedings were pending as at 31 December 2021 (31 December 2020: 6,870). The subsidiary is defending itself against all of the claims. In some cases, the subsidiary has filed counterclaims for compensation for the provision of capital.

The case law of the Polish courts on loans with indexation clauses has so far been inconsistent overall. As at 31 December 2021, there were 473 final rulings in individual proceedings against the subsidiary, of which 82 were decided in favour of the subsidiary and 391 were decided against the subsidiary. A total of 227 proceedings before courts of second instance have been suspended because of legal issues that are being considered by the Polish Supreme Court and the European Court of Justice (ECJ).

In a non-public session on 7 May 2021, the Polish Supreme Court (via a panel of seven judges) ruled on referral questions from an ombudsman of the Polish banking regulator relating to the nature of the parties' mutual claims and to limitation. In the Bank's view, the judgement does not change the current risk assessment.

The session of the Civil Chamber of the Polish Supreme Court examining loan agreements in Swiss francs with index clauses was held on 2 September 2021. The questions referred by the President of the Supreme Court were not answered; instead, questions on the legality of the process for appointing new judges were referred to the ECJ. The further course of the proceedings and the outcome remain to be seen.

On 29 April 2021, the European Court of Justice (ECJ) delivered a judgement (C-19/20) on five questions referred for a preliminary ruling by a Polish court in proceedings against another bank. In the Bank's view, the judgement does not change the current risk assessment. Other preliminary ruling proceedings on loans with indexation clauses are pending before the European Court of Justice, two of which concern proceedings against the subsidiary. Decisions are not expected until the second half of 2022.

In December 2020, a proposal by the local supervisory authority to convert foreign currency loans into local currency loans was announced.

In December 2021, the subsidiary made settlement offers to a representative group of 1,278 customers with active contracts. The maximum hypothetical cost would be €645.5m if all customers with active loans accepted the offer. The subsidiary will evaluate the results of the pilot project and analyse further options for action.

Against the background of the inconsistent case law to date, the small number of rulings in the last instance and outstanding decisions in principle from the Supreme Court and the ECJ, the amount of the provision on the balance sheet for this set of issues is highly discretionary. Until 31 December 2020, legal risks in connection with Swiss franc loan agreements with indexation clauses were accounted for in their entirety in accordance with IAS 37. Swiss franc loans that have not been fully repaid are now primarily shown in accordance with IFRS 9. The accounting policy was not adjusted for loans that have already been fully repaid and legal costs; these are still accounted for in accordance with IAS 37. In the case of loans that have not yet been fully repaid, the legal risks are taken into account in the gross carrying amounts of the receivables directly when estimating the cash flows. Recognition in accordance with IFRS 9 is standard market practice in the subsidiary's domestic market and thus increases comparability with the financial statements of other market participants and comparability for the Polish regulator. Applying IFRS 9 rather than IAS 37 therefore provides more relevant information. The measurement method used to estimate the impact on the cash flows expected to arise from the loans remained largely unchanged compared with the previous measurement method.

As at 31 December 2021, the portfolio of loans denominated in Swiss francs that have not been fully repaid had a carrying amount of 9.1bn Polish zloty; the portfolio that had already been repaid amounted to 7.3bn Polish zloty when it was disbursed. Overall, the Group recognised a provision of €899m for the risks arising from the matter, including potential settlement payments and the class action lawsuit. The provision for individual lawsuits amounted to €312.9m in the previous year. In addition, costs for active claims totalling €18.7m were recorded in the financial year.

The methodology used to calculate the provision and remeasurement effect is based on parameters that are varied, discretionary and in some cases associated with considerable uncertainty. Key parameters are the estimated total number of plaintiffs, the probability of losing a lawsuit in the last instance, the amount of the loss and the development of the exchange rate. Fluctuations in the parameters and the interdependencies between them may mean that the amount of the provision has to be adjusted significantly in the future.

Another component in determining the provision is the expectation regarding the development of the settlement discussions. As at the reporting date, the subsidiary had accounted for risks in connection with future settlement payments in the amount of €219.7m. This amount corresponds to 34 % of the maximum cost of the settlements based on the calculation method used in the pilot project. To determine the provision for the settlement programme, the subsidiary assumes that the maximum acceptance rate will not exceed 34% of active contracts. If the acceptance rate changes by +/-1 percentage point and all other relevant assumptions remain unchanged, the provision for the settlement programme would change by +/-€6.5m.

Commerzbank Aktiengesellschaft

As at the reporting date, the subsidiary estimated the risk of defeat on the basis of expert assessments, which are supported by legal opinions on future case law trends.

Assuming otherwise unchanged parameters, the following sensitivities result for the main parameters underlying the recognition of provisions or remeasurement effects for the individual lawsuits:

The number of future claimants increases by 1% of borrowers: change of €+15m.
The probability of a ruling by the court of last instance that is unfavourable to the subsidiary changes by +/-1 percentage point: change of €+/-12m.
The assumed weighted average loss changes by +/-1 percentage point: change of €+/-8m.

In April 2021, the German Federal Court of Justice ruled on the mechanism for changes to banks' general terms and conditions (AGB Banken) in a case against another bank and declared the relevant clauses of the general terms and conditions to be void. This mechanism stipulated that the customer's consent to certain changes in the contract was given after a certain period of time if the customer had not objected. The Bank has examined the impact of this case law on its business units and products, as the charges introduced or increased for consumers as a result of the mechanism for changes to banks' general terms and conditions may be void. The Bank has set up a central unit to deal with the issues arising from the judgement on a consolidated basis. As a result, clear and understandable information for affected customers was ensured and a customer interface was created for the reimbursement of unjustly charged fees. The necessary new agreement of the general terms and conditions in existing customer business is also being coordinated. The Bank has created a provision for customer claims.

Some of these cases could also have an impact on the reputation of Commerzbank and its subsidiaries. The Group recognises provisions for such proceedings if liabilities are likely to result from them and the amounts to which the Group is likely to be liable can be determined with sufficient accuracy. Since there are considerable uncertainties as to how such proceedings will develop, the possibility cannot be ruled out that some of the provisions recognised for them may prove to be inadequate once the courts' final rulings are known. As a result, substantial additional expense may be incurred. This is also true in the case of legal proceedings for which the Group did not consider it necessary to recognise provisions. The eventual outcome of some legal proceedings might have an impact on Commerzbank's results and cash flow in a given reporting period; in the worst case, it cannot be fully ruled out that the liabilities which might result from them may also have a significant impact on Commerzbank's earnings performance, assets and financial position.

Compliance risk

Compliance risk falls within the definition of operational risk according to the Capital Requirements Regulation (CRR). Commerzbank acknowledges and understands the existence of inherent compliance risk in its areas of business, which are subject to the risk of abuse in general and in particular by financial crime. Compliance risk includes the risks associated with money laundering, terrorist financing, sanctions and embargoes, markets compliance, fraud, bribery and corruption.

In order to actively promote a compliance culture in the Bank, the Board of Managing Directors of Commerzbank has laid down and communicated corresponding values in the Code of Conduct.

Organisation

Group Compliance is led by the division head of Group Compliance, who reports directly to the Board of Managing Directors. Pursuant to Art. 87 (5) of the German Securities Trading Act (WpHG) and BT 1.1 MaComp (minimum requirements of the compliance function), the division head of Group Compliance is both the Group's Compliance Officer and, under Art. 25 h (7) of the German Banking Act (KWG) and Arts 7 and 9 of the German Anti-Money Laundering Act (GwG), the Anti-Money Laundering Officer; this person is super-vised as such by the Federal Financial Supervisory Authority (BaFin).

Group Compliance is responsible for:

A. The four types/areas of compliance risk:

1) anti money laundering/combating terrorism financing
2) sanctions and embargoes
3) combating fraud, bribery and corruption
4) markets compliance

as well as

B. Further responsibilities:

coordination of the requirements under MaRisk section 4.4.2 ("MaRisk compliance function"),
independent implementation of internal special investigations with compliance relevance.

The responsibilities based on the obligations under the QI (Qualified Intermediary), FATCA (Foreign Account Tax Compliance Act) and CRS (Common Reporting Standard) regimes as well as in relation to the prevention of the aiding and abetting of tax evasion (ATEF, Anti-Tax Evasion Facilitation) were bundled within the Group Tax function in October 2020 and have therefore no longer been part of the other tasks of Group Compliance since that date within Germany. The corresponding role of the QI and FATCA Responsible Officer will also be transferred to Group Tax in 2022. In the foreign locations, the roles and responsibilities with regard to ATEF-related tasks under the overall responsibility of Group Tax remain unaffected by this structural change and will continue to be carried out there by the local Group Compliance function.

Risk management

To prevent compliance risks, Commerzbank has implemented security systems and controls for its transactions, customers, products and processes. These procedures for ensuring compliance with material legal provisions and requirements are referred to in their entirety as a compliance management system. Commerzbank's compliance management system is based on inter-national market standards and the regulatory requirements in the various countries which are relevant for Commerzbank's business activities. Commerzbank is constantly developing its compliance management system in order to meet its responsibilities and address the growing complexity and increasing regulatory requirements. Under the three lines of defence principle, protecting against undesirable compliance risks is an activity that is not restricted to the compliance function (Group Compliance). Instead, the organisational control and monitoring elements are aligned in three sequential levels. The units in the first line of defence (1st LoD) assume responsibility as part of their operational activities for identifying and managing risks and for complying with their own business rules; they are also responsible for setting up process-oriented control mechanisms. Group Compliance, the second line of defence (2nd LoD), sets standards for appropriate risk management, oversees the appropriateness and effectiveness of the procedures and controls in the first line of defence, and assesses and communicates any deficiencies found. In addition, Group Compliance carries out analyses and assessments of compliance risks and ensures that the risk management framework is implemented. Internal Audit, the third line of defence (3rd LoD), uses regular and independent audits to check that compliance in both the 1st LoD and 2nd LoD is appropriate and effective.

Compliance risks are managed in a control circuit with interacting elements. Commerzbank constantly monitors relevant regulatory requirements and ensures the definition and/or adjustment of corresponding internal standards intended to make sure it complies with the requirements. Regular internal training measures and consulting services from the compliance function support the effective implementation of these standards in the Group. Implementation encompasses setting up and carrying out suitable processes and controls in daily work, assuring their quality and testing their effectiveness in the 1st and 2nd LoD. Compliance risks are monitored and are the subject of regular internal reporting. Where necessary, matters are escalated according to their urgency and severity.

The compliance sub-risk strategy, as part of the overall risk strategy of Commerzbank, sets the risk strategy framework for dealing with compliance risks and contains a detailed description of compliance risk management in addition to strategic and organisational elements. In particular, the risk appetite per compliance risk type is specified and the strategic fields of action are defined.

The risk analysis (compliance risk analysis) is one of the core elements of risk management. It assesses the inherent risk arising from doing business with different customer groups and products and compares this in the Control Assessment with an evaluation of the corresponding control environment for mitigating the inherent risk. A residual risk is determined as the outcome. The Bank defines measures to further enhance risk management (e.g. introducing additional controls) as necessary and tracks implementation closely.

Current developments

In recent years, Commerzbank has worked through the majority of the findings from the settlements with various US authorities regarding violations of US sanctions and anti-money laundering provisions. The US monitor submitted its final report dated 15 October 2018, thus concluding its on-site investigations. In accordance with the terms of the engagement letter between the Bank and the monitor, the monitorship ended on 24 June 2019. The Bank has made good progress in carrying out the agreed implementation programmes and has executed most of the measures. Commerzbank continues to provide quarterly reports to the DFS (Department of Financial Services) on the progress of implementation plans.

In line with the requirements of the UK Financial Services and Markets Act 2000 (FSMA), in 2017 Commerzbank London mandated a consulting company as a “skilled person”. The consulting company carried out a review of existing structures and processes (especially with regard to money laundering/financing of terrorism as well as sanctions/embargoes) and prepared a report for the UK Financial Conduct Authority (FCA). Commerzbank London subsequently launched a comprehensive remediation project, the implementation of which was evaluated by the “skilled person”, with half-yearly reports sent to the FCA. In May 2021 the FCA officially declared the skilled person programme to be completed.

Commerzbank Aktiengesellschaft

Reputational risk

Reputational risk is the risk that stakeholders may lose confidence in Commerzbank or that its reputation may be damaged as a result of negative events in its business activities. Commerzbank's stakeholder groups include in particular the public and the media, nongovernmental organisations and its customers. In the present-day competitive environment, a company's reputation is becoming more and more important. The main factor determining this is how companies handle sustainability considerations (environmental, ethical or social risks) in the market segments' customer business (intrinsic reputational risks). Companies are judged not only on the basis of people's personal experiences of them, but also on reports reaching the public, especially through the media. Reputational risk therefore goes hand in hand with communication risk.

Strategy and organisation All employees and managers have a fundamental duty to protect and reinforce Commerzbank's good reputation as a significant element of its enterprise value. The segments and significant subsidiaries bear direct responsibility for reputational risk resulting from their particular business activity. The Reputational Risk Management department is part of the central Group Communications division of the Commerzbank Group and focuses on intrinsic reputational risk that may directly lead to reputational damage among stakeholder groups. The department maintains close links with the relevant front office units. Management of intrinsic reputational risk is the responsibility of the Chairman of the Board of Managing Directors. It is a component of Commerzbank's overall risk strategy. Reputational Risk Management's tasks include identifying, evaluating and addressing intrinsic reputational risk in systematic processes at an early stage and suggesting or implementing appropriate measures (early warning function).

Risk management Managing intrinsic reputational risk means identifying and reacting to potential environmental, social and ethical risks at an early stage, thereby reducing any potential communication risk or even preventing it completely. Intrinsic reputational risk is managed by means of a qualitative approach. As part of a structured process, transactions, products and customer relationships in connection with sensitive areas are assessed with reference to environmental, social and ethical risks on a qualitative five-point scale. This assessment can contain conditions and in some cases a negative verdict, which could lead to a rejection.

The sensitive areas regularly and comprehensively analysed in Reputational Risk Management include armaments exports and transactions, products and customer relationships relating to power generation and commodities extraction. Commerzbank's attitude towards these areas is laid down in positions and guidelines that are binding for all employees. Commerzbank's Reputational Risk Management department regularly observes and analyses new environmental, ethical and social issues and informs the relevant parts of the Bank about these. The reputational risks identified and addressed by the department are incorporated into the quarterly reputational risk report - part 1: non-quantifiable risks; part 2: high and major intrinsic reputational risks (sustainability issues) - which is prepared for the Board of Managing Directors and the Risk Committee of the Supervisory Board.

Environmental, social and governance (ESG) risks

The integration of non-financial aspects into the Bank's risk management processes is hugely important for sustainable finance. In particular, these include risks resulting from climate change. We do not see climate-related risks as a separate, "new" type of risk, but as a cross-sectional driver (what is known as a horizontal risk) that can materialise in the known types of risk - especially in credit risk. The new course steered by companies and society towards acting sustainably gives rise to transition risks. Physical risks will increase if the shift to a climate-preserving future is not made quickly and rigorously enough. Physical risks include, for example, rising sea levels and flooding for the real estate sector, along with crop failures in agriculture because of heatwaves, or low water levels in rivers, with implications for the transport and chemical industries. Companies encounter transition risks, for example, as a result of changes in energy policy, changes in market demand or technological changes.

We have examined the possible future impact of physical and transition risks on the loan portfolio as part of scenario analyses. To this end, we tested our portfolio in various scientific climate scenarios of the International Energy Agency (IEA, 1.8°C scenario for transition risks) and the Intergovernmental Panel on Climate Change (IPCC, 3-4°C scenario for physical risks). In the future, we will also use the scenarios of the Network for Greening the Financial System (NGFS).

The analyses were carried out using a specific model that holistically translates the relevant parameters of a scenario into economic effects (changes in balance sheet ratios). With regard to transition risks, changes in regulation, price changes, changes in supply and demand and the effects of technological changes are considered, among other things; in the case of physical risks, the effects of all relevant events (storm/hurricane, drought, heat, flood, sea level rise) are taken into account. Periods up to at least 2050 were considered.

Transition risks are industry-specific, with sometimes significant differences in the sub-sectors within an industry (e.g. mechanical engineering). There is also a connection between the degree of adaptation of a company, i.e. its progress in the transition, and the risk. In the case of physical risks, the regional/geographical distribution of the portfolio is relevant, too.

As a major financier of the German economy, we are also active in sectors that are particularly exposed to climate-related risks. However, we have little exposure to some of the hardest-hit sectors (agriculture, for example). Climate-risk-sensitive sectors with significant exposure include the energy sector, the automotive sector and mechanical engineering. Owing to the geographical focus of our portfolio in Germany and Europe, we are less affected by physical risks associated with some events (e.g. hurricanes, sea level rise) than other regions. As a result, we consider the transition risks to be more relevant to our portfolio.

In order to proactively manage the effects of climate-related risks in the lending business, we are systematically optimising our risk management processes and methods. Lending decisions for corporate and institutional customers therefore take into account not only an individual risk assessment but also -- where relevant -- climate-related risk affectedness and resilience. In this, we are progressively combining the specific findings from the scenario analyses with the individual risk analysis at customer level. We take a portfolio-specific approach and thus take appropriate account of the differences in terms of affectedness and the risk drivers. In the particularly relevant portfolios (large companies, special financing and commercial real estate finance), we have supplemented the qualitative risk analysis in the individual loan decisions with specific aspects for the analysis of climate-related risks. In the future, the results of the analyses will be aggregated in a structured evaluation (“score”), which will be integrated into the decision-making process and can also be used in the context of portfolio analysis and management. In our target state, we want to integrate climate-related risks -- as far as possible -- into the quantitative credit risk analysis and thus fully reflect them across the process chain (including pricing, reporting).

Sustainability risks also play a major role in Commerz Real's asset management, for example when examining the potential effects of physical risks and evaluating new regulations. For this reason, Commerz Real introduced the first stage of a risk management tool in 2021, which is used to assess the real estate portfolio with regard to physical and transition risks. Scenario analyses are also a central component of the analysis when purchasing real estate, and are used to estimate the point in time of “stranding” with regard to different climate scenarios. The results feed into the risk assessment and the sustainability assessment of the real estate transaction and are taken into account accordingly in the management phase. In taking this approach, Commerz Real is following the recommendations of the TCFD for the management of climate-related risks through scenario analyses. The basis of climate risk management is collecting all consumption and emissions data in a way that is as reliable as possible. To this end, Commerz Real started implementing an integrated sustainability data management system in 2021 and also uses external partners to collect data on a global level.

Furthermore, in 2021 we carried out a comprehensive, cross-risk-type materiality analysis for climate-related and environmental risks for the first time. The risk type owners examined all types within the risk inventory that are regarded as fundamentally material for the Commerzbank Group and assessed the materiality of transition risks and physical risks for the respective risk type. Depending on the risk type, the assessment was made on a qualitative and/or quantitative basis. As a result of the analysis, the influence of climate-related and environmental risks for the risk types credit risk, market risk, operational risk (including compliance and cyber risk), reputational risk and business risk was assessed as material. The findings of the materiality analysis feed into the creation of the business strategy, the overall risk strategy and the sub-risk strategies as well as into other core elements of the Bank's internal process to ensure an adequate capital position (Internal Capital Adequacy Assessment Process -- ICAAP), such as the internal stress test framework and the risk-bearing capacity concept. The materiality analysis for climate-related and environmental risks is therefore an integral part of the Commerzbank Group's risk governance.

Commerzbank Aktiengesellschaft

IT risk is a form of operational risk. In our internal definition, we define IT risk as risks to the security of information processed in our systems in terms of meeting the four IT security objectives set out below:

Confidentiality: Information is confidential if it is not accessible to, or capable of being reconstructed by, unauthorised persons, business processes or IT systems.

Integrity: Information possesses integrity if it has not been modified or destroyed by any unauthorised means. An information-processing system (IT system) possesses integrity if it can perform its intended functions without hindrance and free of unauthorised manipulations, whether deliberate or accidental.

Traceability: Actions and technologies applied to information are traceable if they themselves and their source can be traced back without any ambiguity.

Availability: Information is available if it is always capable of being used to a predefined extent by authorised persons, business processes and IT systems when it is required.

Commerzbank attaches great importance to the protection and security of its own information, of that entrusted to it by customers, and of the business processes and systems used to process it. They form a permanent core element in our digital strategy. The processing of information is based increasingly on information technologies. As such, our IT security requirements are at the heart of information security management. IT security requirements are based on the IT security objectives referred to above and are set down in policies and procedural instructions.

IT risks are identified, evaluated and regularly reviewed as part of IT governance processes. IT risk is covered in the quarterly IT risk report. Information security is also established as a principal objective for our Internal Control System. In the context of the coronavirus pandemic, consideration of the four IT security objectives for home office technologies became a more central focus. For this purpose, the outsourced services were considered in particular.

Relevant IT risks are also evaluated as part of operational risk management through risk scenarios and considered in the Bank's RWA calculation. This includes the risk of a breakdown of critical IT, the risk of external attack on the Bank's systems or data and, since 2021, the risks of modern cloud sourcing (cyber crime, advanced persistent threat (APT)¹ and cloud scenarios), the theft of corporate data or the default of service providers and vendors. See also the description of cyber risk.

Given the major importance of IT security to Commerzbank, it is further developed and improved on an ongoing basis by means of strategic initiatives. We have taken into account the significance of the "human" factor in IT security and cyber security by introducing additional training and awareness-raising measures.

Cyber risk

Cyber risk comprises risks with direct relevance to security and risks that lead to relevance to security (with respect to cyber space). The part of cyber space of relevance to Commerzbank is all connected IT environments within the Bank and those outside the Bank that lead to customers, business partners and service providers. Cyber risk is therefore concerned with the digital representation of the Bank's assets (data, information) within cyber space.

The strategic guidelines from the overall risk strategy and the cyber and information security strategy apply without limitation to cyber risk.

In recent years, there have been a number of serious security incidents – not involving Commerzbank – in the financial sector, leading many of the world's key regulators and standard setters, such as the DFS500 (Department of Financial Services, Section 500, Cyber-security Requirements for Financial Services Companies), NIST (National Institute of Standards and Technology) in the USA and MAS (Monetary Authority of Singapore) in Singapore, to place increasing emphasis on cyber security and publish additional requirements for the management of cyber risks. Within Europe and Germany, the EBA and BaFin are also focusing intensively on this topic.

Commerzbank manages cyber and information security risks via the Group division "Group Risk Management – Cyber Risk & Information Security" (GRM-CRIS), which reports to the Group Chief Information Security Officer (CISO). In addition to established security functions such as the Information Security Management System (ISMS) as well as risk reporting on key risk indicators, GRM-CRIS focuses on managing cyber risk appropriately and on strengthening Commerzbank's cyber-resilience (including its information security incident management capabilities). It also addresses the interaction between cyber and information security risks and other types of risk relating to areas such as human resources, procurement, business continuity management and physical security.

There are currently no concrete attack patterns or other anomalies specifically related to the coronavirus pandemic to which our institution, other financial service providers or financial market infrastructures are exposed. In addition, we are not currently aware of any additional methods used for attacking our employees or an expansion of our attack surface due to the increased remote use of Bank resources, e.g. in connection with split operations or working from home.

However, there are a range of attack vectors that try to engage in criminal activity by capitalising on public fears. This approach is known in the media as fearware and refers specifically to the most common form of its implementation, namely a combination of malware and social engineering powered by the fear of the person being targeted.

¹ An advanced persistent threat is a special form of cyber attack. The intention of an APT attack is to remain undetected for as long as possible in order to procure sensitive information (internet espionage) or cause other types of damage over a longer period.

In addition to the above-mentioned fearware activities, the increasing spread of ransomware in cyber crime has to be emphasised, even if Commerzbank has not been affected by this so far. Ransomware is a special type of malware that blocks access to or encrypts data on IT devices and then requires the victim to pay a ransom for its recovery. The significant damage potential of such attacks is illustrated by a number of recent incidents in which supply chains were disrupted. By closely interlinking the 1st and 2nd line of defence (LoD) activities in the field of cyber threat analysis, including corresponding safeguards and incident management processes, the Bank will continue to be adequately protected against ransomware attacks.

With regard to our customers, we are paying even more attention than usual to transactional anomalies, especially in the context of coronavirus-related fraud.

In December 2021, a security vulnerability was discovered in certain versions of the widely used Java logging library Log4j. This allows attackers to run malicious code on vulnerable systems. Commerzbank did not experience any production disruptions or any exploitation of the Log4j vulnerability at any time.

The task force, which was set up immediately after the vulnerability became known, continues to monitor the situation in order to be able to react promptly to any new attack patterns or new developments.

Human resources risk

Human resources risk falls within the definition of operational risk referred to in the Capital Requirements Regulation (CRR). The internal, management-oriented interpretation of this definition at Commerzbank includes the following elements in human resources risk:

Adjustment risk: Adjustment risk results when organisational and operational circumstances change (for example, restructuring, changes in management culture, qualification needs), these changes impact employees' scope of responsibilities and therefore require a greater willingness to change on the part of the staff. We offer selected internal and external training, continuing education and change programmes to ensure that the qualification levels of our employees keep pace with the current requirements, guidance is provided for structural changes and our employees can fulfil their duties and responsibilities.

Motivation risk: Motivation risk arises when demotivating factors are not eliminated and employees do not adequately perceive motivating factors such as management or remuneration. The effects (such as withheld performance by employees) can have a direct impact on the working environment and the organisation's productivity. Employee surveys enable us to respond as quickly as possible to potential changes in our employees' level of corporate loyalty and to initiate adequate measures.

Departure risk: Departure risk takes into account the consequences of undesired employee departures (for example, if an employee resigns voluntarily), particularly when high performers are involved. We take great care to ensure that the absence or departure of employees does not result in long-term disruptions to our operations. We also monitor staff turnover on a regular basis from both a quantitative and a qualitative perspective.

Supply risk: Supply risk reflects the consequences of insufficient staffing (for example, inadequate development of young staff) and the resulting consequences (operating bottlenecks, increased workload, lower productivity and illness). Appropriate quantitative and qualitative staffing aims to ensure that internal operating requirements, business activities and Commerzbank's strategy can be implemented.

Employees are a key resource for Commerzbank. Human resources risk is systematically managed by Group Human Resources with the aim of identifying, assessing and managing risks, for instance by applying selected personnel tools. The Board of Managing Directors is regularly informed about human resources risk.

Overall, the Bank will continue to monitor human resources risk. There is a risk that the human resources risk situation will deteriorate as a result of frequent structural changes due to a change in Group strategy. Change and organisational measures have already been initiated to counter human resources risk.

Commerzbank Aktiengesellschaft

Business strategy risk

Business strategy risk is the medium- to long-term risk of negative influences on the achievement of Commerzbank's strategic goals, for example as a result of changes in the market or competitive environment, capital market requirements, regulatory/political factors or the inadequate implementation of the Group strategy (primary risk drivers).

Group strategy is developed further in a process that takes both external and internal factors into account. On the basis of these factors, the Board of Managing Directors sets out a sustainable business strategy describing the major business activities and steps required to meet the targets. To ensure proper implementation of the Group strategy to achieve the business targets, strategic controls are carried out through regular monitoring of quantitative and qualitative targets in the Group and the segments.

Responsibility for strategic corporate management lies with the Board of Managing Directors. Specific business policy decisions (acquisition and sale of equity holdings > €300m) also require the authorisation of the Supervisory Board's Risk Committee. In addition, all major initiatives and projects are decided by the Board of Managing Directors.

Model risk

Model risk is the risk of incorrect management decisions based on an inaccurate depiction of reality by the models used. With regard to the causes of model risk we distinguish between model risk from exceeding model boundaries and model risk from model errors (manual errors in model development/implementation). In line with the focus of the Group risk strategy, namely to ensure that the Bank has adequate capital and liquidity, the models for assessing risk-bearing capacity (capital requirements under the Basel framework and economic capital requirements, respectively) and liquidity resources are central for risk management.

The basic principles of model risk management are the identification and avoidance of model risks and appropriate consideration of known model risks (e.g. through conservative calibration or consideration of margins of conservatism or model reserves). Model risks that are unknown and hence cannot be mitigated are accepted as an inherent risk in the complexity of the Commerzbank business model. In respect of the governance of model risk management, requirements relating to model validation and model changes are established.

The ongoing coronavirus pandemic, with its considerable economic and social impact as well as the mitigating support provided by the governments, poses challenges for the risk models used. Commerzbank has introduced a series of measures to counter the increased model risk and to ensure appropriate management even in the current phase.

The management of model risks is currently being further strengthened. This concerns both aspects of governance and the scope of monitoring and validation activities. In addition, strategically relevant models are currently being revised fundamentally (various credit risk models). In this context, high standards in model development and initial validation play a major role.

Disclaimer Commerzbank's internal risk measurement methods and models which form the basis for the calculation of the figures shown in this report are state-of-the-art and based on banking sector practice. The risk models produce results appropriate to the management of the Bank. The measurement approaches are regularly reviewed by Risk Controlling and Internal Audit as well as by German and European supervisory authorities. Despite being carefully developed and regularly checked, models cannot cover all the influencing factors that have an impact in reality or illustrate their complex behaviour and interactions. These limits to risk modelling apply in particular in extreme situations. Supplementary stress tests and scenario analyses can only show examples of the risks to which a portfolio may be exposed in extreme market situations; stress-testing all imaginable scenarios is not feasible. They cannot definitively estimate the maximum loss should an extreme event occur.

Financial Statements and Management Report 2021 73

Income statement of Commerzbank Aktiengesellschaft for the period from 1 January to 31 December 2021

€m		2021	2020
Interest income from
a) Lending and money market transactions	4,289		4,837
less negative interest from money market transactions	– 652		– 392
	3,637		4,445
b) Fixed-income securities and debt register claims	479		482
		4,116	4,928
Interest expenses			–
Interest expenses from banking business	– 1,680		– 2,267
less positive interest from banking business	1,177		637
		– 503	– 1,630
		3,613	3,297
Current income from
a) Equities and other non-fixed-income securities		0	0
b) Equity holdings		5	4
c) Holdings in affiliated companies		78	26
		83	30
Income from profit-pooling and from partial or full profit-transfer agreements		317	362
Commission income		3,582	3,312
Commission expenses		– 442	– 390
		3,140	2,921
Net trading income/expense		210	219
of which: allocations as defined by Art. 340 q (2) HGB	– 23		– 24
Other operating income		151	666
General administrative expenses
a) Personnel expense
aa) Wages and salaries	– 2,377		– 2,406
ab) Compulsory social-security contributions, expenses for pensions and other employee benefits	– 994		– 560
of which: for pensions	– 616		– 175
		– 3,371	– 2,967
b) Other administrative expenses		– 2,281	– 2,401
		– 5,652	– 5,368
Depreciation, amortisation and write-downs of intangible and fixed assets		– 663	– 501
Other operating expenses		– 1,089	– 293
Write-downs and valuation allowances on loans and certain securities and allocations to provisions in lending business		– 797	– 3,536
Income from write-ups on loans and certain securities and from the release of provisions in lending business		–	–
Write-downs and valuation allowances on equity holdings, holdings in affiliated companies and securities accounted for as fixed assets		–	– 1,426
Income from write-ups on equity holdings, holdings in affiliated companies and securities accounted for as fixed assets		600	–
Expenses from the transfer of losses		– 53	– 14
Profit or loss on ordinary activities		– 140	– 3,641
Extraordinary income		–	–
Extraordinary expenses		– 1,081	– 1,932
Profit or loss on extraordinary activities		– 1,081	– 1,932
Taxes on income		– 165	– 108
Other taxes		– 23	– 26
		– 188	– 134
Net profit/loss		– 1,409	– 5,708
Withdrawals from capital reserve		1,409	5,708
Transfer to other retained earnings		–	–
Distributable profit		–	–

Commerzbank Aktiengesellschaft

Balance sheet of Commerzbank Aktiengesellschaft as at 31 December 2021

Assets	€m	31.12.2021	31.12.2020
Cash reserve
a) Cash on hand	8,894		8,949
b) Balances with central banks	37,396		64,404
of which: with Deutsche Bundesbank	28,107		53,545
		46,290	73,353
Debt issued by public-sector borrowers, and bills of exchange
rediscountable at central banks
a) Treasury bills and discountable treasury notes,
as well as similar debt issues by public-sector borrowers	2,027		2,628
		2,027	2,628
Claims on banks
a) Payable on demand	6,688		4,570
b) Other claims	23,627		22,246
of which: public-sector loans	903		874
		30,315	26,816
Claims on customers	239,276	230,567
of which: secured by mortgages on real estate	68,393		64,918
of which: secured by mortgages on ships	-		-
of which: public-sector loans	14,763		15,239
Bonds and other fixed-income securities
a) Money market instruments	-		-
aa) Issued by public-sector borrowers	-		92
of which: rediscountable at Deutsche Bundesbank	-		80
ab) Issued by other borrowers	-		-
of which: rediscountable at Deutsche Bundesbank	-		-
		-	92
b) Bonds and notes
ba) Issued by public-sector borrowers	16,393		17,834
of which: rediscountable at Deutsche Bundesbank	13,723		15,348
bb) Issued by other borrowers	20,626		22,037
of which: rediscountable at Deutsche Bundesbank	13,297		22,669
		37,019	39,871
c) Own bonds	12,013		7,896
Nominal amount €11,759m
		49,032	47,859

Financial Statements and Management Report 2021 75

Assets I €m	31.12.2021	31.12.2020
Equities and other non-fixed-income securities	28	44
Trading assets	16,503	20,747
Equity holdings	96	81
of which: investments in banks	14	14
of which: investments in financial services companies	20	5
Holdings in affiliated companies	4,689	4,089
of which: investments in banks	1,809	1,306
of which: investments in financial services companies	1,307	1,297
Fiduciary assets	2,490	1,856
of which: loans at third-party risk	1,888	1,142
Intangible assets
a) Proprietary intellectual property rights and similar rights and assets	774	932
b) Purchased concessions, industrial property rights and similar rights and assets as well as licences relating to such rights and assets	167	191
	941	1,123
Fixed assets	401	441
Other assets	9,266	8,267
Accrued and deferred items
a) From issuing and lending business	189	240
b) Other	3,447	3,395
	3,635	3,635
Excess of plan assets over liabilities	949	1,935
Total assets	405,936	423,443

Commerzbank Aktiengesellschaft

Balance sheet of Commerzbank Aktiengesellschaft as at 31 December 2021

Liabilities and shareholders’ equity	€m	31.12.2021	31.12.2020
Liabilities to banks
a) Payable on demand	11,484		18,420
b) With agreed term or notice period	63,680		55,444
of which: issued registered mortgage Pfandbriefe	366		223
of which: issued registered public Pfandbriefe	565		380
of which: issued registered ship Pfandbriefe	-		-
		75,164	73,864
Liabilities to customers
a) Savings deposits
aa) With agreed notice period of three months	9,377		9,319
ab) With agreed notice period of more than three months	9		10
	9,386		9,329
b) Other liabilities		-
ba) Payable on demand	194,094		205,938
bb) With agreed term or notice period	35,914		45,358
	230,008		251,296
of which: issued registered mortgage Pfandbriefe	1,968		2,386
of which: issued registered public Pfandbriefe	4,407		4,758
of which: issued registered ship Pfandbriefe	120		213
		239,394	260,624
Securitised liabilities
a) Bonds and notes issued	43,327		39,113
aa) Mortgage Pfandbriefe	19,558		17,222
ab) Public Pfandbriefe	7,082		6,226
ac) Ship Pfandbriefe	-		-
ad) Other bonds	16,687		15,665
b) Other securitised liabilities	21		1,147
ba) Money market instruments	-		1,089
bb) Own acceptances and promissory notes outstanding	21		58
		43,348	40,260
Trading liabilities	10,091	11,826
Fiduciary liabilities	2,490	1,856
of which: loans at third-party risk	1,888		1,142
Other liabilities	5,147	4,557
Accrued and deferred items
a) From issuing and lending business	10		9
b) Other	462		367
		472	376

Financial Statements and Management Report 2021 77

Liabilities and shareholders’ equity	€m	31.12.2021	31.12.2020
Provisions
a) Provisions for pensions and similar commitments	33		32
b) Provisions for taxes	589		413
c) Other provisions	3,981		2,842
		4,604	3,287
Subordinated liabilities	6,674	7,386
Profit-sharing certificates outstanding	–	80
of which: maturing in less than two years	–		80
Additional Tier 1 Instruments	3,268	2,657
Fund for general banking risks	182	158
of which: special item pursuant to Art. 340e (4) HGB	182		158
Equity
a) Subscribed capital
aa) Share capital	1,252		1,252
Treasury shares	–		–
(conditional capital €0m)	1,252		1,252
ab) Silent participations	–		–
	1,252		1,252
b) Capital reserve	10,075		11,484
c) Retained earnings¹	3,775		3,775
d) Distributable profit	–		–
		15,102	16,511
Liabilities and shareholders’ equity	405,936	423,443
1. Contingent liabilities
a) Contingent liabilities from rediscounted bills of exchange credited to borrowers	0		1
b) Liabilities from guarantees and indemnity agreements	44,601		41,955
		44,601	41,956
2. Other commitments
a) Irrevocable lending commitments		77,552	81,912

¹ Other retained earnings only.

Commerzbank Aktiengesellschaft

Notes

General information

(1) Basis of preparation

Commerzbank Aktiengesellschaft is headquartered in Frankfurt am Main and is registered in the Commercial Register at the District Court of Frankfurt am Main under registration no. HRB 32000. The financial statements of Commerzbank Aktiengesellschaft as at 31 December 2021 have been prepared in accordance with the provisions of the German Commercial Code (Handelsgesetzbuch, HGB) and the Regulation on the Accounting of Credit Institutions and Financial Services Institutions (RechKredV) and in accordance with the provisions of the German Stock Corporation Act (Aktiengesetz, AktG) and the German Pfandbrief Act (Pfandbriefgesetz, PfandBG). In order to appropriately reflect the universal nature of Commerzbank Aktiengesellschaft's banking business, the structuring rules for Pfandbrief banks were taken into account by including „Of which“ sub-headings under the relevant items. In order to make the financial statements clearer, we have expanded the details of mortgages on ships and of ship Pfandbriefe.

In addition to the financial statements – consisting of the income statement, the balance sheet and the notes – a management report has been prepared in accordance with Art. 289 HGB.

(2) Accounting and measurement policies

The cash reserve is stated at nominal value. Debt issued by public-sector borrowers is shown at net present value. Claims on banks and customers are reported at amortised cost, less any valuation allowances that have been recognised. Ancillary costs are added to the acquisition cost of claims, while fees received are the main deduction. Differences between acquisition cost and the nominal amount are recognised in net interest income over the life of the claim at a constant effective interest rate.

Loan loss provisions are calculated in three stages for all significant on-balance-sheet claims, all significant off-balance-sheet transactions at individual transaction level and all insignificant loans on a portfolio basis using internal parameters and models. Provision is also made for country risks in these calculations. The Bank recognises a valuation allowance in the amount of the expected credit losses within 12 months or, if shorter, within the remaining time to maturity after the reporting date, using a parameter-based expected loss calculation, if the credit risk has not materially increased since it

unless otherwise indicated, all amounts are shown in millions of euros. In the income statement and balance sheet, amounts under €500,000.00 are shown as €0m; where an item is €0.00, this is denoted by a dash. Due to rounding, in some cases the individual figures presented may not add up precisely to the totals provided.

Commerzbank Aktiengesellschaft publishes quarterly disclosures in accordance with Art. 28 PfandBG on mortgage Pfandbriefe, public-sector Pfandbriefe and ship Pfandbriefe on its website.

In the notes on Pfandbriefe the amounts in millions of euro are quoted to one decimal place. Small differences may occur in totals and percentage figures due to rounding.

The annual financial statements were drawn up by the Board of Managing Directors on 1 March 2022. In note (28) Subordinated liabilities, a change in the contents of the table was subsequently made. Against this background, the annual financial statements were redrawn up on 18 March 2022, after only this note was amended.

was first recognised (stage 1). A loan loss provision is recognised in the amount of the expected credit loss over the remaining time to maturity (lifetime expected credit loss) for those financial assets for which a material increase in credit risk has been identified since initial recognition (stage 2). The level of the provision for each individual default risk is based on the difference between the carrying amount of the claim and the net present value of the expected future cash inflows on the claim (stage 3), calculated using the discounted cash flow method and allowing for any collateral held. The increase in net present value due to the decreased discounting effect over time is shown under interest income in the income statement. General loan loss provisions are estimated using models. Commerzbank changed the calculation of the general loan loss provision as at 31 December 2020, thereby implementing the adjustments required by IDW (Institute of Public Auditors in Germany) Accounting Principle IDW AcP BFA 7 for loan loss provisions for foreseeable counterparty risks in lending business that have not yet been

individually specified. In doing so, the Bank made use of its option, to include the loan loss provisions calculated according to the three-stage model under IFRS 9 in its HGB financial statements as well.

An adjustment to the results of the model was deemed still necessary in the 2021 financial year due to the consequences of the coronavirus pandemic. Against the background of the economic upheavals that continued to occur in the reporting year as a result of the infection control precautions aimed at containing the coronavirus pandemic, the resulting disruptions to the supply chains as well as the government support and assistance measures, the Bank made adjustments to the parameters used to determine loan loss provisions. These have led to an increase in loan loss provisions in the form of a top level adjustment (TLA). The methodology used for determining the need for adjustments to the model result has remained essentially unchanged since 2020. The assumptions incorporated into this were assessed at the interim reporting dates and in the course of preparing the financial statements as at 31 December 2021 with regard to the current development of the pandemic as well as the economic effects, and the TLA was re-calculated as at 31 December 2021.

Securities in the liquidity reserve are shown according to the rules for current assets at the lower of acquisition cost or fair value with the strict lower-of-cost-or-market value principle applied, unless they are reported as a hedge relationship. Securities held as fixed assets are treated in accordance with the modified lower-of-cost-or-market principle.

Equity holdings and holdings in affiliated companies are carried at amortised cost, in accordance with the rules for fixed assets. If the impairment of a holding is expected to be permanent, the carrying amount of the asset is written down. If the reasons for an impairment cease to exist, the asset is written up to a maximum of the amortised cost.

Write-downs and valuation allowances are shown net of write-ups in the income statement. Securities in the liquidity reserve are reported according to type either under write-downs and valuation allowances on loans and certain securities and allocations to provisions in lending business or under income from write-ups on loans and certain securities and from reversals of provisions in lending business. Securities held as fixed assets are reported under write-downs and valuation allowances on equity holdings, holdings in affiliated companies and securities accounted for as fixed assets.

We use derivative financial instruments both to hedge the fair value of positions and for trading purposes and measure them individually as at the reporting date. Hedge relationships including derivative hedging transactions are recognised in accordance with the principles of Art. 254 HGB. We predominantly use the gross hedge presentation method for the hedge accounting of micro hedges in the liquidity reserve, with the net hedge presentation method used for a small number of selected portfolios. The underlying and hedging transactions in micro hedges on the liabilities side and portfolio hedges are accounted for using the net hedge presentation method, with the gross hedge presentation method used for one selected portfolio. Internal transactions are accounted for using the arm's length principle.

We measure the trading portfolio at fair value minus a risk charge in accordance with Art. 340 e (3) HGB. In accordance with Art. 255 (4) HGB, the fair value corresponds to the market price. For listed products, market prices are used; for unlisted products, comparable prices and indicative prices from pricing service providers or other banks as well as valuation models are used. If mathematical valuation models are used to determine fair value, we use parameters available on the market as far as possible (for example yield curves, volatilities and spreads), including further discounts and premiums to take into account risk, liquidity, funding and administrative costs and the cost of capital. The risk discount is calculated on the basis of the regulatory value-at-risk approach in such a way that the anticipated maximum loss from the trading books will not be exceeded with a 99% probability over a holding period of 10 days. A historical observation period of one year is used. The value-at-risk is calculated centrally for the entire portfolio and deducted from trading assets on the balance sheet. If an addition to the fund for general banking risks is required in the reporting year in accordance with Art. 340 e (4) HGB, this is deducted from net trading income. In accordance with Art. 340 e (4) sentence 2 no. 1 HGB, we reverse the fund for general banking risks wholly or in part to offset a net trading expense. Variation margins payable and due on exchange-traded derivatives are reported on a net basis within other assets and other liabilities. We report collateral to be provided in advance for exchange-traded unconditional forward transactions on a gross basis within other assets and other liabilities.

Commerzbank Aktiengesellschaft offsets positive and negative fair values and the associated margin payments (cash collateral) of OTC derivatives with both central counterparties and non-central counterparties in the trading portfolio. In order for offsetting to be carried out with non-central counterparties, a framework agreement must be in place containing an enforceable credit support annex with the daily exchange of cash collateral and only insignificant residual credit or liquidity risk. In a first step, positive fair values of derivative financial instruments are offset against negative fair values. In a second step, margin payments relating to the fair values -- contained within liabilities to banks -- are offset against positive fair values of derivative financial instruments. Moreover, collateral paid -- which is contained in the claims on banks item -- is offset against negative fair values of derivative financial instruments. The amounts thus offset from the margins and fair values are reported in the trading assets or liabilities on a net basis.

The fair value of securities and derivative financial instruments is based either on prices available on a market or valuation models. If fair value cannot be determined, the amortised cost is used in accordance with Art. 255 (4) HGB. If mathematical valuation models are used to determine fair value, we use parameters

Commerzbank Aktiengesellschaft

available on the market as far as possible (for example yield curves, volatilities and spreads), including further discounts and premiums to take into account risk, liquidity, funding and administrative costs and the cost of capital.

The fair value of derivative financial instruments is closely linked to the performance of the underlying instruments. The underlying instruments for derivatives are, in particular, shares, bonds, foreign currencies, precious metals and commodities as well as indices and interest rates. Future expected fluctuations in value of the underlying and the term of the derivative itself also have an impact on the fair value.

Where no market prices are available on an active market, fair value is determined by various methods, including valuation models. Both the valuation models selected and the parameters used depend on the individual product and are in line with market standards.

As far as possible, forward transactions are concluded to cover interest rate, exchange rate and market price fluctuations. The fair value for forward transactions and swaps is determined using discounted cash flow methodology based on the yield curve for the relevant currency.

In principle, the Bank measures standard options using analytical methods. Such methods are usually not available for exotic options. In this case, the Bank applies numeric methods (e.g. Monte-Carlo) to determine the net present value of the expected future payment.

For non-exchange-traded derivatives held in the trading portfolio, counterparty default risk is accounted for by recognising credit valuation adjustments (CVAs), with Commerzbank Aktiengesellschaft's non-performance risk accounted for by recognising debit valuation adjustments (DVAs). In the case of funding valuation adjustments (FVAs), the funding costs or benefits of uncollateralised derivatives, as well as collateralised derivatives where there is only partial collateral or the collateral cannot be used for funding purposes, are recognised at fair value. The FVA takes account of the funding costs of Commerzbank Aktiengesellschaft. In order to determine fair value, CVAs, DVAs and FVAs are based on observable market data (for example credit default swap spreads) where available. Changes in the fair value of the trading portfolio are netted and shown in net trading income. Own issues which have been bought back in the trading portfolio and own bonds are shown net where there is no longer a debt outstanding.

Repurchase agreements are stated in accordance with the regulations of Art. 340 b HGB. Securities lent continue to be recognised on the balance sheet of Commerzbank Aktiengesellschaft as the title is retained, while securities borrowed are not recognised on the balance sheet. Claims and liabilities from repos and reverse repos with central and bilateral counterparties and the same maturity are offset and reported on a net basis.

Intangible assets and fixed assets are stated at acquisition or production cost, less scheduled amortisation and depreciation if applicable. The amortisation and depreciation rates are based on the useful economic life of the asset. If an asset is expected to be permanently impaired, it is written down to the impaired value.

Intangible assets developed in-house are recognised at the value of development costs incurred. Low-value assets are recognised in accordance with the relevant local tax simplification rules.

Liabilities are stated at their settlement amount. Premiums and discounts are reported as accrued liabilities and deferred income or accrued income and deferred charges respectively and are recognised over their life in net interest income at a constant effective interest rate. Non-current discounted liabilities (zero bonds) are recognised at net present value.

Pension provisions are calculated annually by independent actuaries using the projected unit credit method. The calculation parameters can be found in the note on provisions. Plan assets to cover pension obligations are measured at fair value and netted against the provisions created for this purpose in accordance with Art. 246 (2) sentence 2 HGB. In the case of obligations for age-related short-time working, the plan assets are netted against the payment arrears in accordance with IDW AcP HFA 3. If an asset surplus arises from offsetting plan assets against the provisions for pensions and obligations for age-related short-time working, this is shown on the balance sheet under excess of plan assets over liabilities. The contribution required for provisions for pensions under Art. 67 (1) of the Introductory Law of the German Commercial Code (Einführungsgesetz zum Handelsgesetzbuch, EGHGB) was completely provided in the financial year.

Provisions for taxes and other provisions are recognised at the settlement amount estimated as necessary using reasonable commercial judgement. Provisions with a residual term of more than one year are discounted to their present value.

Interest-related financial instruments in the non-trading portfolio are examined annually in their entirety for excess liabilities. Commerzbank Aktiengesellschaft has used a simplified step-by-step procedure for this purpose, based on a present value calculated for interest rate risk management. The valuation did not show any need to recognise a provision for contingent losses.

Net interest from derivatives in the non-trading portfolio (including negative interest) is recognised in interest income or interest expense, depending on the net balance. We report negative interest on financial instruments held as assets and positive interest on financial instruments held as liabilities as deductions in interest income and interest expenses respectively.

As part of the interbank offered rate reform (IBOR reform), the IBOR reference rates and EONIA will be replaced by other reference rates called risk-free rates (RFR). After the conversion of the discount rates in 2020, positions with reference to EONIA, GBP LIBOR, CHF LIBOR and JPY LIBOR were converted in the 2021 financial year. The conversion was mainly based on the proposals

from the various international working groups. The change in reference interest rates had no material impact on the financial statements.

Deferred taxes are recognised for temporary differences between the accounting values of assets, liabilities and accrued and deferred items and their tax values, as well as for tax loss carryforwards. Deferred tax liabilities arising from the differences between the accounting and tax value of trading liabilities, liabilities to customers, securitised liabilities and intangible assets were netted against deferred tax assets arising from differences between the accounting and tax value of loan loss provisions, trading assets, claims on customers, fixed assets, equities and other non-fixed-income securities, pension provisions and tax loss carryforwards. Deferred tax assets remaining after this netting process are not reported, in accordance with the option set out in Art. 274 (1) sentence 2 HGB.

Commerzbank Aktiengesellschaft values the deferred taxes on the basis of the tax rates applying to each individual entity. The income tax rate of the domestic entities is 31.5% (previous year: 31.5%). This is made up of the German corporate income tax rate of 15.0%, plus the solidarity surcharge of 5.5% and an average rate of 15.7% for trade tax. Deferred taxes in the foreign branches are measured using the tax rates applicable in these countries, which range between 0.0% and 33.1%.

(3) Currency translation

We translate assets and liabilities and income and expenses denominated in foreign currencies and pending spot market transactions at the spot mid-rate on the reporting date. This also applies to the translation of the principal amounts in cross-currency swaps outside the trading book. By way of exception, gains and losses in foreign currency are translated into euro immediately on realisation, so that their level is then fixed. The Bank reports exchange rate fluctuations from the trading portfolios in net trading income/net trading expense. Currency-related forward transactions in the trading book are measured at fair value. Due to the special cover in the same currency, profits and losses from currency translation are recognised through profit or loss.

(4) Changes in accounting policies

In the first quarter of 2021, the Bank adjusted the relevant criteria for the stage allocation for the calculation of the general loan loss provision so that, in the future, the option for allocating transactions with a low default risk to stage 1 (low credit risk exemption) will generally be applied only to securities. The implementation led to an increase in the general loan loss provision in the amount of €23m. The largely regular review and reassessment of the parameters relevant for loan loss provisions led to an adjustment of the general loan loss provisions by €49m and an adjustment of the portfolio-based specific loan loss provision by €59m.

Apart from this matter, we have applied the same accounting policies to the 2021 financial year as to the previous financial year.

(5) Report on events after the reporting period

The war in Ukraine has ramifications for our business with both Ukraine and Russia. We assume that sanctions relating to individual business partners (e.g. the exclusion of large Russian financial institutions from the bank's communication network SWIFT or US dollar clearing with major Russian banks) and entire industries (e.g. the energy and commodities sectors) will affect Commerzbank too. In addition, we expect that Russian counter-sanctions may also have an impact on Commerzbank's portfolios. We are closely monitoring further developments and continuously adjusting our risk assessment and business policy. Impacts are to be expected, in particular with respect to risk provisions. A reliable estimate of the quantitative effects on Commerzbank's future Group financial statements is not possible at the present time, since they will depend greatly on the exact form of the sanctions and countermeasures and on their duration.

Commerzbank Aktiengesellschaft

Notes to the income statement

(6) Breakdown of revenues by geographic markets

€m	2021	2020
Germany	6,872	7,881
Europe without Germany	726	807
America	255	271
Asia	288	195
Total	8,141	9,155

The total amount includes the items interest income, current income from equities and other non-fixed-income securities, equity holdings, holdings in affiliated companies, commission income and other operating income. As in the previous year, there was likewise a net income in the trading volume.

(7) Auditors' fee

The fees for audit services include the audit of the annual financial statements of Commerzbank Aktiengesellschaft and the performance of reviews of the interim financial statements as well as statutory and voluntary audits of the annual financial statements of controlled companies. The audit-related services mainly comprise fees for legally required, contractually agreed or voluntarily commissioned audit and attest services. They also include reviews of reporting obligations pursuant to Art. 89 of the German Securities Trading Act (WpHG), the audit of the non-financial report in accordance with Art. 340a HGB in connection with Art. 298b HGB, the audit of the remuneration report in accordance with Art. 162 of the German Stock Corporation Act (AktG) and comfort letter issuance. The fees for other services are mainly for advisory services on quality assurance in connection with external inspections. We report the auditors' fee in the Group financial statements in accordance with Art. 285 no. 17 HGB.

(8) Other operating income and expenses

Other operating income of €151m (previous year: €666m) mainly comprises interest refunds from back taxes of €46m (previous year: €30m), reversals of provisions of €29m (previous year: €51m) and rental income of €19m (previous year: €20m). Income from currency translation of €0m (previous year: €3m) is also included in the current reporting year.

Other operating expenses of €1,089m (previous year: €293m) are primarily comprised of a net expense from the offsetting of expenses and income from discounting and from plan assets offset against pension obligations of €538m (previous year: net income of €351m) as well as expenses from allocations to provisions for the BGH (German Federal Court of Justice) judgement on price measures of €99m and for the termination of an outsourcing project. In addition expenses for interest on back taxes in the amount of €120m (previous year: €41m) as well as €2m (previous year: €0m) of expenses from currency translation are also included.

(9) Non-periodic income and expenses

Non-periodic income includes €6m (previous year: €28m) from the reversal of various provisions. In addition, non-periodic tax expenses of €134m (previous year: €87m) are shown in the financial year, which mainly resulted from the provisioning of domestic tax in the amount of €152m. On the other hand, tax income in the amount of €18m resulted mainly from tax refunds relating to previous years.

Financial Statements and Management Report 2021
83

(10) Depreciation, amortisation and write-downs of intangible and fixed assets

In the current financial year, amortisation of intangible assets includes an unscheduled write-down of assets totalling €212m. The main reason for this is an unscheduled write-down of €206m due to Commerzbank's decision to end the project to outsource securities settlement to HSBC Transaction Services GmbH.

(11) Extraordinary income

The Bank did not realise any extraordinary income in the financial year, as in the previous year.

Extraordinary expenses include restructuring expenses in the amount of €1,081m (previous year: €811m), particularly for the recognition of restructuring provisions for staff reductions and the closure of locations as part of "Strategy 2024".

In the previous year, extraordinary expenses also included a merger loss from the merger with comdirect bank in the amount of €1,084m and a necessary allocation to pension provisions pursuant to Art. 67 (1) sentence 1 of the Introductory Act to the German Commercial Code of €37m.

(12) Administrative and agency services

The following material administrative and agency services were provided for third parties:

Custody account administration
Agency services for insurance and home loan savings plans
Asset management
Management of fiduciary assets
Securities commission business
Processing of payment transactions
Agency services for mortgage loans

The income from these services is included in commission income.

Commerzbank Aktiengesellschaft

Notes to the balance sheet

(13) Maturity structure of claims and liabilities

€m	31.12.2021	31.12.2020
Other claims on banks	23,627	22,246
with a residual term of
less than three months	14,189	11,213
over three months up to one year	4,072	4,891
over one year up to five years	3,214	4,041
over five years	2,152	2,101
Claims on customers	239,276	230,567
with an indefinite term	18,099	14,702
with a residual term of
less than three months	27,754	28,360
over three months up to one year	23,962	23,740
over one year up to five years	75,465	73,678
over five years	93,996	90,086
€m	31.12.2021	31.12.2020
---	---	---
Liabilities to banks with an agreed term or notice period	63,680	55,444
with a residual term of
less than three months	5,458	1,610
over three months up to one year	4,914	4,236
over one year up to five years	45,602	41,508
over five years	7,706	8,090
Savings deposits with an agreed notice period of more than three months	9	10
with a residual term of
over three months up to one year	9	10
Other liabilities to customers with an agreed term or notice period	35,914	45,358
with a residual term of
less than three months	18,227	25,098
over three months up to one year	4,296	4,880
over one year up to five years	6,019	6,733
over five years	7,372	8,647
Other securitised liabilities	21	1,147
with a residual term of
less than three months	21	1,099
over three months up to one year	–	49
over one year up to five years	–	–

Of the €43,327m in bonds and notes issued within securitised liabilities (previous year: €39,113m), €4,833m is due in 2022.

Financial Statements and Management Report 2021
85

(14) Cover assets for bonds issued by the Bank

€m	31.12.2021	31.12.2020
Claims on banks	496	285
Claims on customers	47,318	42,606
Bonds and other fixed-income securities	3,072	3,068
Total	50,886	45,960

(15) Securities

As at 31 December 2021 the breakdown of marketable securities was as follows:

	Listed on a stock exchange		Not listed
€m	31.12.2021	31.12.2020	31.12.2021	31.12.2020
Bonds and other fixed-income securities	44,861	44,418	4,171	3,442
Equities and other non-fixed-income securities	0	0	23	35
Equity holdings	1	1	-	-
Holdings in affiliated companies	1,603	1,157	190	148

Of the bonds and other fixed-income securities of €49,032m (previous year: €47,859m), €5,201m will be due in the 2022 financial year.

For bonds and other fixed-income marketable securities held in the investment portfolio with a book value of €2,247m, write-downs in the amount of €493m (previous year: €436m) were not recognised in accordance with the modified lower-of-cost-or-market principle, pursuant to Art. 253 (3) sentence 5 of the HGB, as the impairments are only temporary.

(16) Trading securities

The criteria laid down within the Bank for the inclusion of financial instruments in the trading portfolio did not change during the financial year.

In 2021, Commerzbank Aktiengesellschaft allocated an amount of €23m (previous year: €24m) from net trading income to the fund for general banking risks.

€m	31.12.2021	31.12.2020
Trading assets	16,503	20,747
Derivative financial instruments	9,457	14,643
Claims	2,371	2,325
Bonds and other fixed-income securities	2,939	2,601
Equities and other non-fixed-income securities	1,759	1,223
Risk charge value at risk	-23	-45
€m	31.12.2021	31.12.2020
---	---	---
Trading liabilities	10,091	11,826
Derivative financial instruments	8,727	11,618
Liabilities	1,364	208

Commerzbank Aktiengesellschaft

(17) Hedge relationships

Micro and portfolio hedge relationships are recognised to offset opposing changes in value, with both the gross and net hedge presentation methods being used. In the gross hedge presentation method, the effective and ineffective portions of the contrary changes in the underlying and hedging transactions are recognised in income. In the net hedge presentation method, contrary changes in the underlying and hedging transactions are not recognised in income.

The gross hedge presentation method is used for the overwhelming majority of securities in the liquidity reserve where the general risk of a change in interest rates is hedged. Interest-rate-induced changes in the value of the securities are almost entirely compensated by the change in the value of the associated hedges. The prospective and retrospective effectiveness of the hedge relationships is demonstrated using regression analysis. The average term to maturity of these hedge relationships is four years (previous year: five years).

For a small number of selected portfolios in the liquidity reserve, hedge relationships are accounted for on the basis of the net hedge presentation method. In this method, interest rate-related changes in the value of the securities are hedged in full, while non-interest-rate-related changes are reported in income. The effectiveness of the interest rate hedges is measured on the basis of a portfolio-based value-at-risk approach. The average term to maturity of these hedge relationships is eight years (previous year: eight years).

In addition, certain securities and receivables forming part of fixed assets and derivatives for hedging against interest rate risks have been designated as a portfolio hedge relationship that is accounted for using the net hedge presentation method. The effectiveness is determined on the basis of the dollar-offset method. The average term to maturity of this hedge relationship is 39 years (previous year: 41 years).

Furthermore, fixed asset securities and derivatives for hedging against interest rate and inflation risks have been designated as a portfolio hedge relationship that is accounted for using the net hedge presentation method.

hedge presentation method. The effectiveness is determined on the basis of the dollar-offset method. The average term to maturity of these hedge relationships is 22 years (previous year: 23 years).

In addition, a micro net hedge relationship was added in the year under review for a banking book containing bonds where the full change in their market value is hedged with derivatives. The effectiveness is determined on the basis of the dollar-offset method. The average term to maturity of these hedge relationships is eight years (previous year: eight years).

Under the net hedge presentation method, the effectiveness of hedge relationships for own issues in the non-trading portfolio is measured using a simplified test based on a portfolio-based sensitivity analysis or a qualitative comparison of the characteristics of the hedged transaction and the hedging instrument. The average term to maturity of these hedge relationships is five years (previous year: five years).

In addition, interest rate and inflation risks from derivatives with corresponding offsetting hedging derivatives were designated as micro hedge relationships that are likewise accounted for using the net hedge presentation method. The effectiveness is determined on the basis of the dollar-offset method. From these hedge relationships, positive and negative changes in the amount of €1,922m (previous year: €1,734m) were netted as of 31 December 2021. The average term to maturity of the derivatives was 23 years (previous year: 25 years)

Furthermore, CO2 certificates and the related hedging derivatives were grouped together in portfolio hedge relationships that are accounted for using the gross hedge presentation method. The effectiveness is determined on the basis of the dollar-offset method.

The table below shows the assets and liabilities included in hedge relationships. The amount of the hedged risk represents the changes in value of the underlying transactions, which are offset within effective hedge relationships by contrary changes in the hedging transactions. Positive amounts are to be understood here as an increase in the value of assets and liabilities.

	Book values		Nominal values		Level of hedged risk
€m	31.12.2021	31.12.2020	31.12.2021	31.12.2020	31.12.2021	31.12.2020
Securities of liquidity reserve	20,439	21,698	20,116	20,840	-27	404
Securities and receivables of the non-trading portfolio	5,930	5,652	4,431	4,180	1,113	1,635
Other assets	3,541	1,524	-	-	949	46
Issues of the non-trading portfolio	61,546	60,080	64,841	63,218	3,072	4,977

Financial Statements and Management Report 2021
87

(18) Relationships with affiliated companies and equity holdings

	Affiliated companies		Equity holdings
€m	31.12.2021	31.12.2020	31.12.2021	31.12.2020
Claims on banks	4,486	4,500	0	1
Claims on customers	18,697	16,836	134	212
Bonds and other fixed-income securities	1,746	1,693	–	–
Trading assets excluding derivative financial instruments	2	2	14	5
Liabilities to banks	1,471	1,024	2	0
Liabilities to customers	8,019	7,175	212	165
Securitised liabilities	–	–	–	–
Trading liabilities excluding derivative financial instruments	–	–	6	13
Subordinated liabilities	1,000	936	–	–

(19) Fiduciary transactions

€m	31.12.2021	31.12.2020
Claims on banks	7	7
Claims on customers	1,881	1,135
Other fiduciary assets	602	714
Fiduciary assets	2,490	1,856
of which loans at third-party risk	1,888	1,142
Liabilities to banks	1,681	784
Liabilities to customers	207	358
Other fiduciary liabilities	602	714
Fiduciary liabilities	2,490	1,856
of which loans at third-party risk	1,888	1,142

Commerzbank Aktiengesellschaft

(20) Changes in book value of fixed assets

€m	Intangible assets	Fixed assets	Securities/promissory note loans held as fixed assets	Equity holdings	Holdings in affiliated companies
Residual book values as at 1.1.2021	1,123	441	13,235	81	4,089
Cost of acquisition/production as at 1.1.2021	3,862	1,764	13,292	107	7,314
Additions	408	65	3,667	17	234
Disposals	87	168	4,476	0	273
Transfers	0	– 12	– 9	–	8
Exchange rate changes	5	11	439	–	145
Cost of acquisition/production as at 31.12.2021	4,189	1,661	12,913	124	7,429
Cumulative write-downs as at 1.1.2021	2,739	1,323	57	26	3,225
Write-downs in the financial year	588	100	0	2	65
Additions	–	–	–	–	–
Disposals	84	161	1	–	– 0
Transfers	0	– 12	–	–	– 25
Exchange rate changes	5	10	3	–	46
Cumulative write-downs as at 31.12.2021	3,248	1,260	60	28	3,311
Write-ups	–	–	0	–	572
Residual book values as at 31.12.2021	941	401	12,854	96	4,689

Of the land and buildings with an overall book value of €143m (previous year: €154m), €134m (previous year: €144m) are used by Commerzbank Aktiengesellschaft. Office furniture and equipment included in fixed assets amounted to €257m (previous year: €287m). As at 31 December 2021, development costs for intangible assets developed in-house were capitalised in the amount of €774m (previous year: €932m). Commerzbank Aktiengesellschaft does not undertake research in connection with the in-house development of intangible assets. As a result, the Bank did not incur any costs in this respect.

In the financial year, intangible assets include an unscheduled write-down in the amount of €212m.

Write-downs of fixed assets include a €24m increase in write-downs from restructuring activities due to the reduced remaining useful life of the office furniture and equipment at locations due to close which is shown in extraordinary income.

Financial Statements and Management Report 2021
89

(21) Other assets

Other assets amounted to €9,266m (previous year: €8,267m). They were mainly comprised of emissions allowances of €3,541m (previous year: €1,524m), claims from collateral to be provided in advance for forward transactions amounting to €980m (previous year: €1,048m), interest accruals on non-trading derivatives of €385m (previous year: €358m), amounts due under profit and loss transfer agreements of €317m (previous year: €162m), claims on tax authorities of €281m (previous year: €289m), initial/variation margins receivable of €277m (previous year: €611m) as well as precious metals in the non-trading portfolio of €80m (previous year: €82m).

(22) Subordinated assets

€m	31.12.2021	31.12.2020
Claims on banks	30,315	26,816
of which: subordinated	259	249
Claims on customers	239,276	230,567
of which: subordinated	288	303
Bonds and other fixed-income securities	49,032	47,859
a) Money market instruments	–	92
of which: subordinated	–	–
b) Bonds and notes issued by other borrowers	37,019	39,871
of which: subordinated	–	–
c) Own bonds	12,013	7,896
of which: subordinated	6	6
Equities and other non-fixed-income securities	28	44
of which: subordinated	–	–
Trading assets	16,503	20,747
of which: subordinated	80	58
Total subordinated assets	634	616

(23) Repurchase agreements

As at 31 December 2021, the carrying amount recorded in the balance sheet for assets transferred under repurchase agreements amounted to €5,317m (previous year: €3,959m).

(24) The Bank's foreign currency position

As at 31 December 2021, the Bank had €83,806m (previous year: €83,695m) in foreign currency assets and €48,477m (previous year: €46,847m) in foreign currency liabilities.

Commerzbank Aktiengesellschaft

(25) Collateral pledged for own liabilities

€m	31.12.2021	31.12.2020
Liabilities to banks	23,430	23,297
Liabilities to customers	9,690	9,530
Securitised liabilities	–	–
Other commitments	2,659	2,621
Total	35,779	35,449

As in the previous year, no bonds issued by the Bank are backed by collateral which, although legally sold, remains under the beneficial ownership of Commerzbank Aktiengesellschaft.

(26) Other liabilities

Other liabilities of €5,147m (previous year: €4,557m) were mainly comprised of liabilities from collateral to be provided in advance for forward transactions amounting to €1,865m (previous year: €1,368m), derivatives from CO2 certificates in the amount of €1,486m (in the previous year: €720m), interest accruals on non-trading derivatives of €346m (previous year: €433m), liabilities to tax authorities of €232m (previous year: €283m), liabilities attributable to film funds of €192m (previous year: €320m) and liabilities from profit and loss transfer agreements of €53m (previous year: €14m).

(27) Provisions

a) Provisions for pensions and similar commitments

Pension provisions are calculated on the basis of actuarial principles using an average discount rate, set by the Deutsche Bundesbank, over ten years, applying the projected unit credit method on the basis of the Heubeck 2018 G mortality tables.

The discount rate used is based on the information published by the Deutsche Bundesbank as at 31 December 2021. In accordance with Art. 253 (6) sentence 1 HGB, provisions for pension obligations are discounted using the average annual interest rate over ten years of 1.87% (previous year: 2.30%), instead of over seven years at 1.35% (previous year: 1.60%). The resulting difference as at 31 December 2021 was €689m (previous year: €812m), thus increasing the non-distributable amounts.

This assumes an expected general salary and wage increase including assumed career trends of 2.50% per annum (previous year: 2.50% per annum), and we have set an interest rate of 2.00% per annum (previous year: 1.40% per annum) for pension increases. An increase of 2.00% per annum (previous year: 2.00% per annum) is assumed for the income threshold for assessing contributions. At year-end, the shortfall due to unrecognised pension obligations within the meaning of Art. 28 (2) EGHGB amounted to €9m (previous year: €6m).

In accordance with the option under Art. 67 (1) sentence 1 EGHGB, Commerzbank Aktiengesellschaft is increasing the provisions for the difference that has arisen due to the change in pension valuations following the German Accounting Law Modernisation Act (BilMoG) from 1 January 2010 on a pro rata basis, which was fully allocated as of 31 December 2020.

In accordance with Art. 246 (2) sentence 2 HGB, the plan assets held to cover pension obligations are netted against the provisions created for this purpose. As at 31 December 2021, the following values were recorded for these items before offsetting:

Financial Statements and Management Report 2021
91

€m	31.12.2021	31.12.2020
Fair value of the plan assets	8,524	8,658
Settlement amount	7,610	6,768

In accordance with Art. 246 (2) sentence 2 HGB, changes in the value of the plan assets are netted against the time value of money effects from the remeasurement of the pension obligation. Prior to offsetting, the interest expense from unwinding the discount on provisions for pensions covered by plan assets amounted to €656m (previous year: €582m). Prior to offsetting, income from plan assets amounted to €118m (previous year: €944m).

The historical cost of the plan assets amounted to €6,530m (previous year: €6,559m). The plan assets are mainly invested in special funds focusing on fixed-income securities, equities and derivatives.

b) Other provisions

Other provisions largely consist of provisions for restructuring, for potential losses, for personnel, for the lending business and for litigation and recourse risks.

The restructuring provisions of €1492m (previous year: €1052m) relate primarily to personnel and – to a lesser extent – real estate. The additions of around €1bn are offset by reclassifications to other liabilities and other provisions for age-related short-time working, and utilisations amounting to about €0.6bn.

The allocations in the 2021 reporting year were related to “Strategy 2024”, which includes a headcount reduction in Germany and abroad by 2024, a reduction of the number of domestic branches and the closure of locations or relocation of functions abroad.

The additions mainly relate to personnel provisions, particularly in connection with an early voluntary program including the planned reduction of around 1,700 full-time positions at Commerzbank AG in Germany, as well as to the framework reconciliation of interests and framework social plan concluded with the employee representative committees in May 2021 for the implementation of the Strategy 2024 program to ensure that the job cuts in Germany will be as socially responsible as possible. Some of the provisions for the job cuts planned until 2024 were already recognized in previous years.

The plan assets to cover obligations for age-related short-time working of €146m (previous year: €117m) were offset against the settlement amount of €145m (previous year: €103m). Prior to offsetting, the interest expense from unwinding the discount on provisions for age-related short-time working covered by plan assets amounted to €3m (previous year: €2m). Prior to offsetting, there were expenses of €2m from cover assets in the current reporting year (previous year: €0m). The historical cost of the plan assets for age-related short-time working amounted to €144m (previous year: €114m).

(28) Subordinated liabilities

Subordinated liabilities, which amount to €6,674m (previous year: €7,386m), may not, in the event of insolvency or winding-up, be repaid until the claims of all non-subordinated creditors have been satisfied. There is no obligation to repay early the liabilities or right to claim interest until this condition has been met.

The obligations arising from the bonds and notes are subordinated obligations of the issuer which rank pari passu with all the issuer's other subordinated liabilities. The bearer may not put bonds and notes. The terms and conditions for subordinated liabilities apply. Conversion into equity or another form of debt is not stipulated in the contractual agreements.

Interest paid on subordinated liabilities amounted to €367m in the financial year (previous year: €413m). The following borrowings exceeded 10% of the subordinated liabilities as at 31 December 2021:

Securities identification no.1	Currency	€m	Interest rate %	Due date
DE000CZ40LD5	EUR	1,031	4.00	23.3.2026
XS00977729652	USD	884	8.15	30.6.2031
DE000CZ4SV25	EUR	752	4.00	5.12.2030
US20259BAA98	USD	688	8.13	19.9.2023
DE000CZ40LW5	EUR	669	4.00	30.3.2027

1 Content of the table has been adapted subsequently.
2 ISIN represents the trust certificates of Dresdner Funding Trust I. This capital was passed through Dresdner Capital LLC I to Commerzbank Aktiengesellschaft in the form of a subordinated loan.

Commerzbank Aktiengesellschaft

(29) Profit-sharing certificates

Currently, Commerzbank Aktiengesellschaft does not have any profit-sharing certificates. The last two outstanding certificates matured as planned on 31 December 2020 and were repaid during the financial year.

(30) Additional Tier 1 instruments

In the second quarter of 2020, Commerzbank Aktiengesellschaft launched an issuance programme for additional core capital (Additional Tier 1 capital, AT1), which will enable it to successively issue subordinated bonds with a nominal value of up to €3bn.

An AT-1 bond with a volume of €1.25bn and a fixed coupon of 6.125% per annum was already issued in the second quarter of 2020. The instrument has a perpetual maturity and the first call date is in October 2025.

In September 2020, Commerzbank successfully issued a second AT-1 bond. The bond has a volume of €500m and a fixed coupon of 6.5% per annum up to April 2030. The bond has no fixed final maturity date and the first call date is in the period from October 2029 to April 2030.

The third AT1 bond under the issuance programme was successfully issued in the second quarter of 2021. The bond has a volume of €500m and a fixed coupon of 4.25% per annum. The instrument has a perpetual maturity and the first call date is in the period from October 2027 to April 2028.

In contrast to their treatment under IFRS, the bonds referred to and accrued interest are not classified as equity under the German Commercial Code.

Therefore, together with the AT1 bond issued in the third quarter of 2019, AT1 bonds with a nominal value of €3,250m have been issued. As at 31 December 2021, the bonds had a carrying amount of €3,268m. The decline in the carrying amount is attributable to exchange rate effects. The interest expense attributable to the bonds was € 183 m in the financial year.

(31) Equity

€	31.12.2021	31.12.2020
Equity	15,102,374,508.76	16,511,223,815.83
a) Subscribed capital	1,252,357,634.00	1,252,357,634.00
Share capital	1,252,357,634.00	1,252,357,634.00
Silent participations	-	-
b) Capital reserve	10,075,129,096.63	11,483,978,403.70
c) Retained earnings	3,774,887,778.13	3,774,887,778.13
d) Distributable profit	-	-

a) Subscribed capital

As at 31 December 2020, the share capital of Commerzbank Aktiengesellschaft of €1,252,357,634 was divided into 1,252,357,634 no-par-value bearer shares (accounting value per share €1.00). On the reporting date, there were no silent participations.

b) Capital reserve

In the capital reserve, premiums from the issue of Commerzbank Aktiengesellschaft shares are shown. Additional cash payments from the issue of conversion and option rights entitling holders to purchase Commerzbank Aktiengesellschaft shares are also recognised here. Commerzbank offset the net loss for the year as at 31 December 2021 through a withdrawal from the capital reserve as part of the appropriation of profits. The capital reserve as at 31 December 2021 amounted to €10,075,129,097 (previous year: €11,483,978,404).

Financial Statements and Management Report 2021
93

c) Retained earnings

€
As at 31.12.2020	3,774,887,778.13
Allocation to retained earnings	–
of which addition from distributable profit of prior year	–
As at 31.12.2021	3,774,887,778.13

The retained earnings of Commerzbank Aktiengesellschaft consist of other retained earnings.

The proposal to be put to the Annual General Meeting of Commerzbank Aktiengesellschaft is not to distribute a dividend for the 2021 financial year.

(32) Authorised capital

Date of AGM resolution	€	Original authorised capital	Remaining authorised capital	Date of expiry
2020	626,178,817	626,178,817	21.5.2024	Art. 4 (3) and (4)
As at 31.12.2020	626,178,817	626,178,817
As at 31.12.2021	626,178,817	626,178,817

The conditions for capital increases from authorised capital as at 31 December 2021 are stipulated in the Articles of Association of Commerzbank Aktiengesellschaft dated 17 September 2020.

The Board of Managing Directors is authorised, with the approval of the Supervisory Board, to increase the Company's share capital until 21. May 2024 through the issuance of new shares with no par value in exchange for cash, in either one or several tranches, but not exceeding a maximum amount of €500,943,054.00 (Authorised Capital 2019/I). In principle, shareholders shall be offered subscription rights; the statutory subscription right may also be granted in such manner that the new shares are underwritten by one or more banks or enterprises equivalent to a bank pursuant to Art. 186 (5) sentence 1 of the German Stock Corporation Act under an obligation to offer them for subscription to shareholders of Commerzbank Aktiengesellschaft. However, the Board of Managing Directors is authorised, with the approval of the Supervisory Board, to exclude subscription rights in the following circumstances:

in order to exclude fractional amounts from subscription rights;
in order to issue shares to employees of Commerzbank Aktiengesellschaft or of companies in which Commerzbank Aktiengesellschaft directly or indirectly holds a majority interest (Group companies as defined in Art. 18 (1) of the German Stock Corporation Act) up to a proportional amount of the share capital of €15,000,000.00.

If shares are issued against cash to employees of the Company or of its Group companies within the meaning of Art. 18 (1) of the German Stock Corporation Act subject to the exclusion of shareholders' subscription rights, the proportional amount of the

share capital attributable to them may not exceed a total of 3% of the share capital of the Company existing at the time of the resolution of the Annual General Meeting. This 3% limit shall take into account the proportional share capital issued against cash or contributions in kind or sold during the term of this authorisation under another authorisation subject to the exclusion of shareholders' subscription rights to members of the Board of Managing Directors, members of the management or employees of the Company or of its Group companies within the meaning of Art. 18 (1) of the German Stock Corporation Act. The Board of Managing Directors is authorised to determine the further details of the capital increase and its implementation.

The Board of Managing Directors is authorised, with the approval of the Supervisory Board, to increase the Company's share capital until 21 May 2024 through the issuance of new shares with no par value in exchange for cash or contributions in kind, in either one or several tranches, but not exceeding a maximum amount of €125,235,763.00 (Authorised Capital 2019/II). In principle, shareholders shall be offered subscription rights; the statutory subscription right may also be granted in such manner that the new shares are underwritten by one or more banks or enterprises equivalent to a bank pursuant to Art. 186 (5) sentence 1 of the German Stock Corporation Act under an obligation to offer them for subscription to shareholders of Commerzbank Aktiengesellschaft. However, the Board of Managing Directors is authorised, with the approval of the Supervisory Board, to exclude subscription rights in the following circumstances:

in order to exclude fractional amounts from subscription rights;

Commerzbank Aktiengesellschaft

to the extent necessary, to grant the holders of conversion or option rights, either already issued or still to be issued by Commerzbank Aktiengesellschaft or by companies in which Commerzbank Aktiengesellschaft directly or indirectly holds a majority interest (Group companies as defined in Art. 18 (1) of the German Stock Corporation Act), subscription rights in the amount to which they would be entitled after exercising their conversion or option rights or fulfilling their corresponding conversion or option obligation;
in order to increase the share capital in exchange for contributions in kind;
in the event of capital increases for cash, if the issue price of the new shares is not significantly lower than the market price for identical shares of the Company at the time the issue price is determined. The shares issued with the exclusion of subscription rights pursuant to Art. 203 (1) and Art. 186 (3) sentence 4 of the German Stock Corporation Act on the basis of this authorisation may not exceed a total of 10% of the share capital of the Company, either at the time the authorisation becomes effective or at the time the authorisation is exercised, whichever amount is lower. The upper limit of 10% of the share capital is reduced by the proportional amount of share capital corresponding to those of the Company's treasury shares that are sold during the period of validity of Authorised Capital 2019/II, while excluding shareholders' subscription rights in accordance with Art. 71 (1) no. 8 sentence 5 and Art. 186 (3) sentence 4 of the German Stock Corporation Act. The upper limit is further reduced by the proportional amount of share capital corresponding to those shares that must be issued to service bonds with warrants or convertible bonds with option or conversion rights or with option or conversion obligations, provided such bonds are issued during the period of validity of Authorised Capital 2019/II, while excluding subscription rights subject to appropriate application of Art. 186 (3) sentence 4 of the German Stock Corporation Act.

The proportional amount of the share capital attributable to those shares issued in exchange for cash or contributions in kind with exclusion of the shareholders' subscription right must not, in aggregate, exceed 10% of the share capital of the Company existing at the time when the Annual General Meeting adopts the resolution. Regarding the above limit, those shares shall be taken into account - subject to any renewed authorisation to exclude subscription rights that may be adopted as a resolution by a subsequent Annual General Meeting - which are issued subject to exclusion of the subscription right during the term of this authorisation under another authorisation, or on which financial instruments with conversion or option rights or obligations are based which are issued subject to exclusion of the subscription right of the shareholders during the term of the authorisation under another authorisation. If shares are issued to members of the Board of Managing Directors, members of the management or employees of Commerzbank Aktiengesellschaft and its Group companies within the meaning of Art. 18 (1) of the German Stock Corporation Act with the exclusion of shareholders' subscription rights against contributions in kind by contributing claims for variable remuneration components, bonuses or similar claims against the Company or its Group companies, the Board of Managing Directors may only make use of the authorisation up to a maximum total amount of 3% of the share capital existing at the time of the resolution by the Annual General Meeting. This 3% limit shall take into account the proportional share capital issued against cash or contributions in kind or sold during the term of this authorisation under another authorisation with the exclusion of shareholders' subscription rights to members of the Board of Managing Directors, members of the management or employees of the Company or of its Group companies within the meaning of Art. 18 (1) of the German Stock Corporation Act. The Board of Managing Directors is authorised to determine the further details of the capital increase and its implementation.

The resolution of the Annual General Meeting of 30 April 2015 (Conditional Capital 2015) has been revoked.

€	Remaining authorised capital 31.12.2020	Added in financial year	Used in financial year	Expired in financial year	Remaining authorised capital 31.12.2021
Total	626,178,817	-	-	-	626,178,817

(33) Conditional capital

of which:

€	Conditional capital 31.12.2020	Added in financial year	Used in financial year	Expired in financial year	Conditional capital 31.12.2021	Used conditional capital	still available
Total	-	-	-	-	-	-	-

The authorisation of the Board of Managing Directors adopted by resolution of the Annual General Meeting on 30 April 2015 to issue convertible bonds or bonds with warrants, profit-sharing certificates and other hybrid debt instruments (the profit-sharing

certificates and hybrid debt instruments with or without conversion or option rights or obligations) was revoked by resolution of the Annual General Meeting on 22 May 2019.

Financial Statements and Management Report 2021
95

(34) Non-distributable amounts

€m	31.12.2021	31.12.2020
In-house developed intangible assets^{1}	774	932
Difference arising from the recognition of plan assets at fair value^{1}	2,161	2,123
Difference between an average 10-year and 7-year market interest rate for the discounting of provisions for pension obligations^{2}	689	812
Non-distributable amount	3,624	3,867

1 Details pursuant to Art. 268 (8) of the HGB.
2 Details pursuant to Art. 253 (6) of the HGB.

(35) Significant shareholder voting rights

As at 31 December 2021, Commerzbank Aktiengesellschaft had received the following notifications of voting rights:

Company required to report	Registered office	Total %	Report date
Federal Republic of Germany	Berlin	15.60	4.6.2013
The Capital Group Companies	Los Angeles, USA	5.31	6.10.2020
BlackRock Inc.	Wilmington, Delaware, USA	5.26	22.12.2021
Cerberus Capital Management, L.P.	New York, USA	5.01	26.7.2017
Wellington Management Group LLP	Boston, USA	3.89	25.11.2021
Ministry of Finance on behalf of the state of Norway	Oslo, Norway	3.04	30.8.2021

1 Voting rights held directly and indirectly.

(36) Treasury shares

On 18. May 2021, the Annual General Meeting authorised the Board of Managing Directors to purchase and sell treasury shares for purposes other than trading until 12- May 2025 pursuant to Art. 71 (1) no. 8 of the German Stock Corporation Act. The possible uses for the treasury shares were specified in the resolution. The Bank's treasury shares held by it or attributable to it pursuant to Arts. 71a ff. of the German Stock Corporation Act must at no time exceed 10% of Commerzbank's share capital. The shares may also be acquired using derivatives (put or call options and forward purchase contracts). All share purchases using derivatives are limited to shares in the amount of 5% of the share capital existing at the time of the adoption of the resolution by the Annual General Meeting on this authorisation or - if this amount is lower - of the share capital existing at the time of the exercise of this authorisation. The term of each derivative may not exceed 18

months and must be determined in such a way that the acquisition of shares through the exercise of the derivatives occurs no later than 12 May 2025.

No treasury shares were acquired during the financial year and Commerzbank Aktiengesellschaft held no treasury shares as at the reporting date. Customers pledged 1,742,906 shares as collateral (previous year: 2,358,653 shares).

The Bank has given an undertaking to the Financial Market Stabilisation Fund (SoFFin), represented by the Federal Republic of Germany - Finanzagentur GmbH (Deutsche Finanzagentur), that neither it nor any of its affiliated companies will buy back shares or other components of its liable equity capital, except as specified under Art. 71 (1) no. 2 and no. 4 (purchase on behalf of another party) or no. 7 of the German Stock Corporation Act.

Commerzbank Aktiengesellschaft

Other notes

(37) Off-balance-sheet transactions

a) Contingent liabilities

€m	31.12.2021	31.12.2020
Contingent liabilities from rediscounted bills of exchange credited to borrowers	0	1
Liabilities from guarantees and indemnity agreements¹	44,601	41,955
Other guarantees	34,093	32,566
Letters of credit	6,125	4,546
Credit guarantees	4,383	4,843
Total	44,601	41,956

¹ See the information on letter of comfort in note 37 d) Other financial commitments.

Contingent liabilities from guarantees and indemnity agreements are mainly related to retail banking with customers which generates commission income. Commerzbank Aktiengesellschaft runs the risk that a claim will be made under its contractual obligations due to the deteriorating credit quality of the borrower Credit risks are reflected in the balance sheet by creating provisions. The risk of a claim under contingent liabilities is estimated on the basis of credit risk parameters. These parameters are in line with EU Regulation 575/2013, which implements the supervisory regulations of the Basel 3 regulatory framework at European level.

b) Other commitments

€m	31.12.2021	31.12.2020
Irrevocable lending commitments	77,552	81,912
Loans to customers	74,825	79,249
Loans to banks	1,025	1,132
Acceptance credits and letters of credit	1,702	1,531

Irrevocable lending commitments are part of Commerzbank Aktiengesellschaft's lending business and are reported outside the balance sheet. Risks may arise due to the deterioration of a customer's credit quality, for which a corresponding provision is created on the balance sheet.

Commerzbank Aktiengesellschaft arranges securitisations of the Bank's own receivables as well as of customers' receivables portfolios via special purpose entities. The transactions serve to procure liquidity or to tap new sources of funding for customers or for Commerzbank Aktiengesellschaft.

The liquidity facilities and back-up credit lines provided to the securitisation vehicles are also shown under irrevocable lending commitments. Liquidity or back-up lines may be used if the risks relating to the underlying financial instruments increase, or the securitised paper can no longer be sold on the market as planned.

c) Securities lending transactions

Commerzbank Aktiengesellschaft carries out securities lending transactions with the aim of ensuring that its securities trading operations are able to meet delivery obligations and generate income from lending securities held in our trading portfolios. Securities borrowed are not recognised in the balance sheet because beneficial ownership remains with the lender due to the structure of the transactions. Securities lent out therefore continue to be recognised in the balance sheet. A key benefit for Commerzbank Aktiengesellschaft is the lease, economic ownership is retained by the lessor and the lease asset is therefore not shown in the balance sheet of Commerzbank Aktiengesellschaft. Commerzbank Aktiengesellschaft's liabilities under operating leases are mainly related to buildings, office furniture and equipment. As at 31 December 2021, existing commitments from rental, tenancy and leasing agreements amounted to €1,614 m (previous year: €1,772m); €133m of this amount relates to affiliated companies (previous year: €145m).

Payment commitments for shares, shareholdings in limited companies and other shareholdings amounted to €6m on the reporting date (previous year: €9m).

In accordance with Art. 5 (10) of the statutes of the German Deposit Protection Fund, we have undertaken to indemnify the Association of German Banks for any losses incurred through support provided for banks in which Commerzbank Aktiengesellschaft holds a majority interest.

The Commerzbank made use of the opportunity to meet part of its obligations with regard to the banking levy and the Compensation Scheme of German Private Banks (EdB) in the form of irrevocable payment commitments (IPCs). It assumed IPCs amounting to €33m (previous year: €0m) for the banking levy and €43m for the EdB (previous year: €3m). These amounts are included in the balance sheet item other liabilities. Cash collateral was deposited for these amounts, which is reported in the balance sheet item other assets.

Securities with a book value of €10,920m (previous year: €12,441m) were furnished as collateral for obligations on futures exchanges and clearing houses.

Based on the circular on cum/cum transactions published by the Federal Ministry of Finance (BMF) in 2017, the tax auditors commented on the treatment of these transactions in the form of audit notes. The tax office reduced the credit for capital gains taxes accordingly. In response, Commerzbank Aktiengesellschaft made value adjustments to tax credits shown in the balance sheet and set up additional provisions for possible repayment claims in order to reflect the changed risk situation fully and appropriately. Commerzbank Aktiengesellschaft is the additional income generated by lending our securities holdings. As at the reporting date, the fair value of securities lent amounted to €1,624m (previous year: €1,525m), while the fair value of securities borrowed amounted to €8,363m (previous year: €7,207m).

As part of these securities transactions, collateral for securities lent amounted to €1,624m (previous year: €1,524m) and that for securities borrowed to €3,607m (previous year: €3,817m).

The BMF published a revised version of its circular on cum/cum transactions on 9 July 2021. In view of the potential impact of the BMF circular, the provision was adjusted in the second quarter of 2021. Based on current knowledge, the tax risks arising from this issue have thereby been adequately covered. The possibility of further charges over and above the provisions recognised by the Bank cannot be completely ruled out.

With respect to cum‐cum securities lending transactions, Commerzbank is exposed to compensation claims from third parties for crediting entitlements that have been denied. Based on the analyses performed, Commerzbank considers it unlikely that such claims could be enforced. However, it cannot be ruled out. Under these circumstances, Commerzbank estimates the potential financial impact in the upper double‐digit million range, plus interest on arrears. The possibility that this conclusion could alter as developments unfold, for example in connection with assessments made by the tax authorities and fiscal/civil courts, cannot be completely ruled out.

The public prosecutor's office in Frankfurt is investigating equity transactions conducted by Commerzbank and the former Dresdner Bank around the dividend record date (cum‐ex transactions). Commerzbank had already initiated a forensic analysis of cum‐ex transactions at the end of 2015, which was concluded at the start of 2018 in respect of Commerzbank's equity transactions and in September 2019 in respect of the equity transactions of the former Dresdner Bank. All back taxes demanded by the tax authorities have been paid.

The public prosecutor's office in Cologne has been conducting investigations at Commerzbank since September 2019 in connection with a separate case concerning cum‐ex transactions. It is investigating on suspicion that the Bank (including Dresdner Bank) was involved in cum‐ex transactions in various roles, including by supplying shares to third parties who were allegedly acting as short sellers. According to the current understanding, these proceedings do not involve Commerzbank's own tax credit claims with regard to capital gains tax and the solidarity surcharge on dividends.

Commerzbank Aktiengesellschaft

The Bank is cooperating fully with authorities conducting investigations into cum-ex transactions. It is currently not possible to predict whether this will result in a burden, whether it will occur, or the amount of any resulting burden.

Commerzbank Aktiengesellschaft has given an undertaking to the Polish Financial Supervision Authority that it will provide its affiliated companies mBank S. A., Warsaw and mBank Hipoteczny

S. A., Warsaw with sufficient liquidity and capital to ensure that they are in a position to meet their financial obligations at all times.

In respect of the subsidiaries listed below and included in the Group financial statements, Commerzbank Aktiengesellschaft is obliged to ensure that, except in the case of political risks, they are able to meet their contractual liabilities ("letter of comfort").

Name	Registered office
Commerzbank (Eurasija) AO	Moscow
Commerzbank Brasil S.A. - Banco Múltiplo	São Paulo
Commerzbank Inlandsbanken Holding GmbH	Frankfurt/Main
Commerzbank Finance & Covered Bond S.A.	Luxembourg
CommerzTrust GmbH	Frankfurt/Main
Commerz Markets LLC	New York
LSF Loan Solutions Frankfurt GmbH	Eschborn

Financial Statements and Management Report 2021
99

(38) Forward transactions

As at 31 December 2021, forward transactions entered into by Commerzbank Aktiengesellschaft could be broken down as follows:

€m	Nominal values	Fair value
		positive	negative
Foreign-currency-based forward transactions
OTC products	557,430	6,487	6,562
Foreign exchange spot and forward contracts	326,486	736	757
Interest rate and currency swaps	214,123	5,438	5,529
Currency call options	43	313	–
Currency put options	2	–	276
Other foreign exchange contracts	16,776	–	–
Exchange-traded products	1,347	–	–
Currency futures	1,347	–	–
Currency options	–	–	–
Total	558,777	6,487	6,562
of which trading securities	1,014,887	6,316	6,210
Interest-based forward transactions
OTC products	3,606,729	87,578	84,468
Forward rate agreements	807,992	50	46
Interest rate swaps	2,299,459	85,616	82,037
Interest rate call options	22,634	1,872	–
Interest rate put options	21,187	–	2,371
Other interest rate contracts	455,457	40	14
Exchange-traded products	141,719	1	1
Interest rate futures	141,715	1	1
Interest rate options	4	–	–
Total	3,748,448	87,579	84,469
of which trading securities	6,199,586	77,260	77,507
Other forward transactions
OTC products	36,754	1,522	1,088
Structured equity/index products	5,359	1,047	303
Equity call options	192	89	–
Equity put options	420	–	91
Credit derivatives	23,159	245	356
Precious metal contracts	186	4	2
Other transactions	7,438	137	336
Exchange-traded products	13,462	294	200
Equity futures	2,044	2	6
Equity options	3,730	140	138
Other futures	5,900	1	3
Other options	1,788	151	53
Total	50,216	1,816	1,288
of which trading securities	82,126	1,580	1,111
Total pending forward transactions
OTC products	4,200,913	95,587	92,118
Exchange-traded products	156,528	295	201
Total	4,357,441	95,882	92,319
Net position		20,183	16,219
of which trading securities		9,457	8,727

The total effect of netting on the assets and on the liabilities side amounted to €84,462m as at 31 December 2021 (previous year: €164,962m). On the assets side, this included positive fair values of €75,699m (previous year: €151,832m), claims on banks of €3,937m (previous year: €7,199m) and other assets of €4,827m (previous year: €5,931m). On the liabilities side, negative fair

Commerzbank Aktiengesellschaft

values of €76,100m (previous year: €152,449m), liabilities to banks of €2,898m (previous year: €4,534m) and other liabilities of €5,464m (previous year: €7,979m) were netted.

In accordance with Art. 249 (1) HGB, a provision for impending losses for derivative financial instruments in the non-trading portfolio was created in the amount of €647m (previous year: €381m).

(39) Employees

The figures for the average annual number of employees at Commerzbank Aktiengesellschaft include both full-time and part-time personnel, but not apprentices.

	2021			2020
	Total	male	female	Total	male	female
Employees (number)	31,032	15,763	15,269	32,376	16,342	16,034
in Germany	27,528	13,524	14,004	28,938	14,173	14,765
outside Germany	3,504	2,239	1,265	3,438	2,169	1,269

(40) Remuneration and loans to board members

The interest rate and collateralisation of loans to members of the Board of Managing Directors and the Supervisory Board are at normal market terms. If necessary, the loans are secured through land charges or rights of lien. The Bank did not grant any advances to members of the Board of Managing Directors and the Supervisory Board during the year under review. In addition, the companies of the Commerzbank Group did not have any material contingent liabilities in connection with these persons.

Claims on members of the Board of Managing Directors as at 31 December 2021 amounted to €7,165 thousand (previous year: €2,116 thousand) and those on members of the Supervisory Board to €284 thousand (previous year: €1,719 thousand). In the reporting year, members of the Board of Managing Directors repaid €79 thousand, and members of the Supervisory Board repaid €38 thousand.

Excluding the interest-rate-adjusted change in the net present value of pension entitlements included in the calculation of pension liabilities, the total remuneration of the members of the Board of Managing Directors and Supervisory Board in accordance with Art. 285 no. 9a HGB was as follows:

€1,000	31.12.2021	31.12.2020
Board of Managing Directors	11,371	9,058
Supervisory Board	3,283	3,465
Total	14,654	12,523

The total remuneration in accordance with Art. 285 no. 9a of the German Commercial Code for the members of the Board of Managing Directors does not include any payments of long-term components of the remuneration for the 2021 financial year, as these can be granted by the Supervisory Board in a legally binding manner only after a retention period of 5 to 7 years and the completion of a retrospective performance evaluation. The total remuneration therefore also includes the payment of long-term components of the remuneration for the 2015 and 2016 financial years, since these were legally binding in the year under review. Total remuneration also includes 256,554 (previous year: 13,530) virtual shares with a total value of €1,897 thousand (previous year: €74 thousand), which will not be paid out until spring or the end of 2023 at the share price valid prior to the respective payment. These virtual shares were included in the total remuneration in accordance with German Accounting Standard No. 17 (DRS 17) at the share price on the day they were granted by the Supervisory Board plus any dividend adjustments for the dividends in the 2015 and 2018 financial years.

The assets backing the Bank's retirement benefit plan for present and former members of the Board of Managing Directors or their surviving dependants have been transferred to Commerzbank Pensions-Trust e.V. as part of a contractual trust arrangement.

The net present value of pension entitlements for active members of the Board of Managing Directors as at 31 December 2021 was €7,550 thousand (previous year: €16,348 thousand).

Payments to former members of the Board of Managing Directors of Commerzbank Aktiengesellschaft and their surviving dependants in the financial year came to €12,724 thousand

Financial Statements and Management Report 2021 101

(previous year: €8,223 thousand). The pension liabilities for these persons amounted to €127,794 thousand (previous year: €101,661 thousand). Payments to former board members of merged companies and their surviving dependants were €10,712 thousand (previous year: €10,459 thousand). There were also outstanding pension obligations to these persons, which amounted to €147,227 thousand (previous year: €141,699 thousand). Commerzbank Aktiengesellschaft has recognised provisions for all of the above pension obligations.

(41) Corporate Governance Code

We have issued our declaration of compliance with the German Corporate Governance Code pursuant to Art. 161 of the German Stock Corporation Act (AktG). It forms part of the corporate governance declaration and has been published on the internet (https://www.commerzbank.de/de/hauptnavigation/aktionaere/governance_/corporate_governance_1.html).

(42) Investment funds

The disclosable investment fund units are included in the liquidity reserve and the trading portfolio and are measured at fair value. The data for the fair value therefore correspond to the carrying amount. In some cases restrictions may apply to daily redemptions. In the year under review, there were no distributions from the index funds subject to disclosure (previous year: €0 m). The distributions from the balanced funds subject to disclosure amounted to €0 m (previous year: €0m).

The table below shows the value of domestic and foreign investment funds in which Commerzbank Aktiengesellschaft had holdings of more than 10% as at 31 December 2021 by category:

€m	31.12.2021	31.12.2020
Index funds	-	-
Balanced funds	34	30
Bonds and other fixed-income funds	-	-
Equity funds	-	-
Total	34	30

Commerzbank Aktiengesellschaft

(43) Mortgage Pfandbriefe

Commerzbank Aktiengesellschaft publishes quarterly disclosures in accordance with Art. 28 PfandBG on mortgage Pfandbriefe, public-sector Pfandbriefe and ship Pfandbriefe on its website.

Art. 28 (1) no. 1, 2, 3 PfandBG	€m	31.12.2021	31.12.2020
Cover calculation mortgage Pfandbriefe	Nominal value	Net present value	Risk-adjusted net present value¹
Liabilities to be covered	21,815.7	22,686.7	21,917.0
of which: Pfandbriefe outstanding	21,815.7	22,686.7	21,917.0
of which: derivatives	–	–	–
Cover assets	36,976.0	39,771.9	37,804.9
of which: cover loans	35,907.1	38,571.5	36,662.1
of which: cover assets
Art. 19 (1) no. 1, 2, 3 PfandBG	1,068.9	1,200.4	1,142.8
of which: derivatives	–	–	–
Risk-adjusted net present value after interest rate stress test			15,887.9
Loss from currency stress test			–
Cover surplus	15,160.3	17,085.2	15,887.9

¹ Risk-adjusted net present value including currency stress test.

Art. 28 (1) no. 2 PfandBG	€m	31.12.2021
Mortgage Pfandbriefe outstanding with a residual term of
up to 6 months	1,127.2	748.9
over 6 months up to 12 months	2,737.0	57.0
over 12 months up to 18 months	1,140.0	1,125.0
over 18 months up to 2 years	1,668.0	2,737.0
over 2 years up to 3 years	2,244.5	2,808.0
over 3 years up to 4 years	3,371.5	2,249.5
over 4 years up to 5 years	4,040.0	2,376.5
over 5 years up to 10 years	4,076.5	6,211.5
over 10 years	1,411.0	1,411.0
Total	21,815.7	19,724.4
Cover assets mortgage Pfandbriefe with a residual fixed interest period of
up to 6 months	1,294.5	1,091.9
over 6 months up to 12 months	1,200.9	959.0
over 12 months up to 18 months	1,848.8	1,335.7
over 18 months up to 2 years	1,444.2	1,273.5
over 2 years up to 3 years	4,045.0	3,404.7
over 3 years up to 4 years	3,954.5	4,043.0
over 4 years up to 5 years	4,172.2	3,744.8
over 5 years up to 10 years	16,355.1	15,344.3
over 10 years	2,660.8	2,325.5
Total	36,976.0	33,522.5

Financial Statements and Management Report 2021 103

Art. 28 (1) no. 4, 5, 6 PfandBG Other cover assets	€m	31.12.2021	31.12.2020
Equalisation claims as defined by Art. 19 (1) no. 1 PfandBG
Germany	-	-
Total	-	-
Loans as defined by Art. 19 (1) no. 2 PfandBG
Germany	-	-
of which: covered bonds as defined by Art. 129 of EU Regulation 575/2013	-	-
Total	-	-
Loans as defined by Art. 19 (1) no. 3 PfandBG
Germany	490.0	490.0
Italy	339.9	343.3
Austria	109.0	69.0
Spain	130.0	90.0
Total	1,068.9	992.3
Total	1,068.9	992.3
Art. 28 (2) no. 1 a PfandBG Size categories	€m	31.12.2021	31.12.2020
---	---	---	---
up to €0.3m	27,299.9	24,942.8
over €0.3m up to €1m	6,514.6	5,815.0
over €1m up to €10m	1,153.2	1,093.6
over €10m	939.3	678.8
Total	35,907.1	32,530.2
Art. 28 (2) no. 1 b and c PfandBG Mortgage Pfandbriefe by property and type of use	€m	31.12.2021	31.12.2020
---	---	---	---
Germany	Commercial	Residential	Commercial
Flats	-	10,025.9	-
Single family houses	-	21,123.8	-
Multi-dwellings	-	3,921.3	-
Office buildings	585.1	-	466.4
Retail buildings	179.0	-	186.9
Industrial buildings	0.2	-	0.2
Other commercially used real estate	71.9	-	136.6
Unfinished new buildings not yet generating income	-	0.1	-
Building sites	-	-	-
Total	836.2	35,070.9	790.1
Art. 28 (1) no. 10 PfandBG Foreign currency	€m	31.12.2021	31.12.2020
---	---	---	---
Net present value	-	-
Art. 28 (1) no. 9 PfandBG Interest structure	%	31.12.2021	31.12.2020
---	---	---	---
Share of fixed-income cover assets	98.3	98.7
Share of fixed-income Pfandbriefe	77.1	89.4

Commerzbank Aktiengesellschaft

Art. 28 (1) no. 8 PfandBG Limit breaches	€m	31.12.2021	31.12.2020
Total amount of loans that exceed the limits defined by Art. 13 (1) PfandBG	-	-
Total amount of loans that exceed the limits defined by Art. 19 (1) PfandBG	-	-
Art. 28 (1) no. 11 PfandBG Other structural data	31.12.2021	31.12.2020
---	---	---
Average age of the loans weighted by value, in years (seasoning)	4.9	4.7
Average weighted loan-to-value ratio in %	52.2	52.6
Art. 28 (2) no. 2 PfandBG Payments in arrears Germany	€m	31.12.2021	31.12.2020
---	---	---	---
Total payments overdue by at least 90 days	-	-
Total amount of interest in arrears	-	-
Total amount of these receivables where the arrears represent at least 5% of the receivable concerned	-	-

Foreclosure sales

There were no foreclosure sales in 2021. No foreclosures are currently pending.

Acquisition of properties

No properties were acquired as a loss prevention measure in 2021.

Financial Statements and Management Report 2021 105

(44) Public Pfandbriefe

Art. 28 (1) no. 1 and 3 PfandBG	€m	31.12.2021	31.12.2020
Cover calculation public Pfandbriefe	Nominal value	Net present value	Risk-adjusted net present value¹
Liabilities to be covered	11,963.9	13,894.0	13,354.7
of which Pfandbriefe outstanding	11,963.9	13,894.0	13,354.7
of which derivatives	–	–	–
Cover assets	13,765.1	17,484.0	15,547.5
of which export finance loan	2,459.5	2,570.3	2,488.9
of which cover assets Art. 20 (1) PfandBG	13,692.1	17,394.1	15,461.8
of which cover assets Art. 20 (2) PfandBG	73.0	89.9	85.7
of which derivatives	–	–	–
Risk-adjusted net present value after interest rate stress test			2,533.9
Loss from currency stress test			– 341.0
Cover surplus	1,801.2	3,590.0	2,192.8

¹ Risk-adjusted net present value including currency stress test.

Art. 28 (1) no. 2 PfandBG	€m	31.12.2021
Public Pfandbriefe outstanding with a residual term of
up to 6 months	149.9	112.9
over 6 months up to 12 months	273.0	231.8
over 12 months up to 18 months	3,040.0	147.5
over 18 months up to 2 years	128.7	273.0
over 2 years up to 3 years	1,607.5	3,167.3
over 3 years up to 4 years	2,454.3	1,607.5
over 4 years up to 5 years	1,407.2	2,446.5
over 5 years up to 10 years	1,438.7	1,564.7
over 10 years	1,464.7	1,730.0
Total	11,963.9	11,281.2
Cover assets public Pfandbriefe with a residual fixed interest period of
up to 6 months	752.0	559.5
over 6 months up to 12 months	702.0	287.3
over 12 months up to 18 months	448.7	519.7
over 18 months up to 2 years	461.1	582.0
over 2 years up to 3 years	1,118.1	767.5
over 3 years up to 4 years	1,073.2	992.2
over 4 years up to 5 years	1,039.2	781.0
over 5 years up to 10 years	3,480.8	3,288.6
over 10 years	4,690.1	4,346.3
Total	13,765.1	12,124.1

Commerzbank Aktiengesellschaft

Art. 28 (1) no. 4 and 5 PfandBG Other cover assets	€m	31.12.2021	31.12.2020
Equalisation claims as defined by Art. 20 (2) no. 1 PfandBG
Germany	-	-
Total	-	-
Equalisation claims as defined by Art. 20 (2) no. 2 PfandBG
Germany	73.0	74.7
of which covered bonds as defined by Art. 129 of EU Regulation 575/2013	-	-
Total	73.0	74.7
Total	73.0	74.7
Art. 28 (3) no.1 PfandBG Size categories	€m	31.12.2021	31.12.2020
up to €10m	931.8	575.4
over €10m up to €100m	4,129.6	3,843.7
over €100m	8,630.7	7,630.3
Total	13,692.1	12,049.4
Art. 28 (1) no. 10 PfandBG Foreign currency	€m	31.12.2021	31.12.2020
Net present value in Swiss francs	500.2	575.7
Net present value in British pounds	2,701.4	3,124.0
Net present value in Australian dollars	1,259.2	-
Art. 28 (1) no. 9 PfandBG Interest structure	%	31.12.2021	31.12.2020
Share of fixed-income cover assets	72.4	71.2
Share of fixed-income Pfandbriefe	39.1	43.7
Art. 28 (1) no. 8 PfandBG Limit breaches	€m	31.12.2021	31.12.2020
Total amount of loans that exceed the limits defined by Art. 20 (2) PfandBG	-	-
Art. 28 (3) no. 3 PfandBG Payments in arrears	€m	31.12.2021	31.12.2020
Total payments overdue by at least 90 days	-	-
Total amount of these receivables where the arrears represent at least 5% of the receivable concerned	-	-

Financial Statements and Management Report 2021 107

Art. 28 (3) no. 2 PfandBG Registered office of borrowers or guarantors	€m	31.12.2021
Total	13,692.1	12,049.4
of which borrowers have a registered office in
Countries	934.2	896.2
Greece	160.0	31.1
Great Britain/North Ireland/Channel Islands/Isle of Man	–	26.3
Iceland	44.1	90.7
Italy	44.9	44.0
Canada	15.2	14.0
Austria	325.0	365.0
Portugal	120.0	100.0
Spain	225.0	225.0
Regional authorities	4,224.6	4,155.8
Germany	2,993.8	2,864.2
France including Monaco	23.9	29.7
Italy	256.5	257.8
Japan	42.0	42.0
Canada	16.8	16.9
Switzerland	646.5	700.0
Spain	245.1	245.1
Local authorities	5,475.2	4,121.3
Germany	3,126.1	1,783.1
Estonia	–	1.4
Finland	64.9	69.8
France including Monaco	13.8	15.7
Great Britain/North Ireland/Channel Islands/Isle of Man	1,580.8	1,575.5
Italy	333.5	334.5
Switzerland	96.5	93.2
USA	259.7	248.1
Other borrowers with a registered office in	223.3	222.0
Germany	195.0	195.0
USA	28.3	27.0
Total	10,857.3	9,395.2
of which guarantors have a registered office in
Countries	2,459.5	2,176.6
Germany	1,707.2	1,779.4
of which receivables from export credit agencies	1,707.2	1,779.4
Belgium	23.9	–
of which receivables from export credit agencies	23.9	–
Denmark	84.8	44.7
of which receivables from export credit agencies	84.8	44.7
Finland	21.5	28.6
of which receivables from export credit agencies	21.5	28.6
France including Monaco	143.7	45.8
of which receivables from export credit agencies	143.7	45.8
Great Britain/North Ireland/Channel Islands/Isle of Man	104.9	107.6
of which receivables from export credit agencies	104.9	107.6
Austria	23.5	–
of which receivables from export credit agencies	23.5	–
Sweden	9.8	17.7
of which receivables from export credit agencies	9.8	17.7
Switzerland	163.7	152.9
of which receivables from export credit agencies	163.7	152.9
International organisations	176.5	–
of which receivables from export credit agencies	176.5	–
Regional authorities	66.1	72.1
Belgium	66.1	72.1
Local authorities	–	–
Germany	–	–
Other borrowers	309.1	405.5
Germany	309.1	405.5
Total	2,834.8	2,654.2
Other cover assets as defined by Art. 20 (2) PfandBG	73.0	74.7
Total	13,765.1	12,124.1

Commerzbank Aktiengesellschaft

(45) Ship Pfandbriefe

Commerzbank Aktiengesellschaft returned the licence to operate the ship Pfandbriefe business with effect as of 31 May 2017. The Federal Financial Supervisory Authority has granted an exemption from the limitation stipulated in Art. 26 (1) no. 4 of the German Pfandbrief Act for additional cover assets as of 1 June 2017. The ship Pfandbriefe issued are fully collateralised by other cover assets that meet the requirements for covering public Pfandbriefe and – insofar as they exceed the limitation stipulated in the Pfandbrief Act for additional cover assets – the additional creditworthiness criteria set out by the Federal Financial Supervisory Authority.

Art. 28 (1) no. 1 and 3	€m	31.12.2021	31.12.2020
Cover calculation ship Pfandbriefe	Nominal value	Net present value	Risk-adjusted net present value¹
Liabilities to be covered	119.0	130.5	127.9
of which Pfandbriefe outstanding	119.0	130.5	127.9
of which derivatives	–	–	–
Cover assets	145.0	184.2	168.5
of which cover loans	–	–	–
of which cover assets as defined by Art. 26 (1) no. 2, 3, 4 PfandBG	145.0	184.2	168.5
of which derivatives	–	–	–
Risk-adjusted net present value after interest rate stress test			40.6
Loss from currency stress test			–
Cover surplus	26.0	53.7	40.6

¹ Risk-adjusted net present value including currency stress test.

Art. 28 (1) no. 2 PfandBG	€m	31.12.2021
Ship Pfandbriefe outstanding with a residual term of
up to 6 months	10.0	41.5
over 6 months up to 12 months	50.0	50.0
over 12 months up to 18 months	–	10.0
over 18 months up to 2 years	10.0	50.0
over 2 years up to 3 years	5.0	10.0
over 3 years up to 4 years	42.0	5.0
over 4 years up to 5 years	2.0	42.0
over 5 years up to 10 years	–	2.0
over 10 years	–	–
Total	119.0	210.5
Cover assets ship Pfandbriefe with a residual fixed interest period of
up to 6 months	–	70.0
over 6 months up to 12 months	40.0	–
over 12 months up to 18 months	–	48.0
over 18 months up to 2 years	–	75.0
over 2 years up to 3 years	5.0	–
over 3 years up to 4 years	–	–
over 4 years up to 5 years	–	–
over 5 years up to 10 years	–	–
over 10 years	100.0	120.0
Total	145.0	313.0

Financial Statements and Management Report 2021 109

Art. 28 (1) no. 4, 5 and 6 PfandBG Other cover assets	€m	31.12.2021	31.12.2020
Germany
Equalisation claims as defined by Art. 26 (1) no. 2 PfandBG	–	–
Loans as defined by Art. 26 (1) no. 3 PfandBG	–	–
of which covered bonds as defined by Art. 129 of EU Regulation 575/2013	–	–
Loans as defined by Art. 26 (1) no. 4 PfandBG	40.0	193.0
Austria
Equalisation claims as defined by Art. 26 (1) no. 2 PfandBG	–	–
Loans as defined by Art. 26 (1) no. 3 PfandBG	–	–
of which covered bonds as defined by Art. 129 of EU Regulation 575/2013	–	–
Loans as defined by Art. 26 (1) no. 4 PfandBG	100.0	100.0
Portugal
Equalisation claims as defined by Art. 26 (1) no. 2 PfandBG	–	–
Loans as defined by Art. 26 (1) no. 3 PfandBG	–	–
of which covered bonds as defined by Art. 129 of EU Regulation 575/2013	–	–
Loans as defined by Art. 26 (1) no. 4 PfandBG	5.0	20.0
Total	145.0	313.0
Art. 28 (4) no. 1 a PfandBG Size categories	€m	31.12.2021	31.12.2020
---	---	---	---
up to €0.5m	–	–
over €0.5m up to €5m	–	–
over €5m	–	–
Total	–	–
Art. 28 (4) no. 1 b PfandBG Country in which the mortgaged vessel or vessel under construction is registered	€m	31.12.2021	31.12.2020
---	---	---	---
Ocean going vessels	–	–
Inland waterway vessels	–	–
Total	–	–
Art. 28 (1) no. 10 PfandBG Foreign currency	€m	31.12.2021	31.12.2020
---	---	---	---
Net present value in Swiss francs	–	–
Net present value in Japanese yen	–	–
Net present value in US dollars	–	–
Total	–	–

Commerzbank Aktiengesellschaft

Art. 28 (1) no. 9 PfandBG Interest structure	%	31.12.2021	31.12.2020
Share of fixed-income cover assets	72.4	76.0
Share of fixed-income Pfandbriefe	100.0	100.0
Art. 28 (1) no. 8 PfandBG Limit breaches	€m	31.12.2021	31.12.2020
Total amount of loans that exceed the limits defined by Art. 26 (1) PfandBG	-	-

Foreclosure sales

There were no foreclosure sales in 2021. No foreclosures are currently pending.

Acquisition of ships or of ships under construction

As in the previous year, Commerzbank Aktiengesellschaft did not acquire any ships as a loss prevention measure.

Payments in arrears

The nominal value of the loan receivables used to cover for ship Pfandbriefe was €0m; as a consequence, there were also no payments in arrears.

In the previous year the nominal value of the loan receivables used to cover for ship Pfandbriefe was also €0m, as a consequence, there were also no payments in arrears in the previous year.

Financial Statements and Management Report 2021 111

(46) Holdings in affiliated and other companies

We provide the following information pursuant to Art. 271 (1) and Art. 285 no. 11, 11a and 11b HGB. Footnotes and comments on the tables below appear at the end of this note.

a) Equity holdings

Name	Registered office	Share of capital held %	Currency	Equity* 1,000	Net profit or loss* 1,000
AKA Ausfuhrkredit-Gesellschaft mbH	Frankfurt/Main, Germany	31.6	EUR	253,193	8,372
ALWIGA Netzbeteiligungen GmbH	Düsseldorf, Germany	100.0	EUR	96	– a)
Asekum Sp. z o.o.	Warsaw, Poland	100.0	PLN	32,005	–
Atlas Vermögensverwaltungsgesellschaft mbH	Frankfurt/Main, Germany	100.0	EUR	126	– a)
Bridge Re Limited	Hamilton, Bermuda	100.0	USD	620	241
CBG Commerz Beteiligungsgesellschaft Holding mbH	Frankfurt/Main, Germany	100.0	EUR	2,137	– a)
CBG Commerz Beteiligungsgesellschaft mbH & Co. KG	Frankfurt/Main, Germany	100.0	EUR	24,656	–
CBG Commerz Beteiligungskapital GmbH & Co. KG	Frankfurt/Main, Germany	100.0	EUR	16,735	2,315
CERI International Sp. z o.o.	Lódz, Poland	100.0	PLN	78,198	12,574
Coba Vermögensverwaltungsgesellschaft mbH	Düsseldorf, Germany	100.0	EUR	26	– a)
Commerz (East Asia) Limited	Hong Kong, Hong Kong	100.0	EUR	4,063	– 197
Commerz Business Consulting GmbH	Frankfurt/Main, Germany	100.0	EUR	199	– a)
Commerz Direktservice GmbH	Duisburg, Germany	100.0	EUR	1,534	– a)
Commerz Grundbesitz Beteiligungsgesellschaft mbH & Co. KG	Frankfurt/Main, Germany	90.0	EUR	17,202	–
Commerz Markets LLC	Wilmington, Delaware, USA	100.0	USD	206,990	36,152
Commerz Real AG	Wiesbaden, Germany	100.0	EUR	408,394	– a)
Commerz Real Fonds Beteiligungsgesellschaft mbH	Düsseldorf, Germany	100.0	EUR	151	– a)
Commerz Real Fund Management S.à r.l.	Luxembourg, Luxembourg	100.0	EUR	2,863	– 5,216
Commerz Real Investmentgesellschaft mbH	Wiesbaden, Germany	100.0	EUR	21,968	– a)
Commerz Real Kapitalverwaltungsgesellschaft mbH	Düsseldorf, Germany	100.0	EUR	5,000	– a)
Commerz Real Mobilienleasing GmbH	Düsseldorf, Germany	100.0	EUR	41,000	– a)
Commerz Real Verwaltung und Treuhand GmbH	Düsseldorf, Germany	100.0	EUR	26	– a)
Commerz Service-Center Intensive GmbH	Düsseldorf, Germany	100.0	EUR	1,664	– a)
Commerz Services Holding GmbH	Frankfurt/Main, Germany	100.0	EUR	15,979	– a)
Commerzbank (Eurasija) AO	Moscow, Russia	100.0	RUB	11,439,412	812,662
Commerzbank Brasil S.A. - Banco Múltiplo	São Paulo, Brazil	100.0	BRL	137,529	– 32,217
Commerzbank Finance & Covered Bond S.A.	Luxembourg, Luxembourg	100.0	EUR	1,176,590	– 34,918
Commerzbank Finance 3 S.à r.l.	Luxembourg, Luxembourg	100.0	EUR	641	– 24
Commerzbank Finance BV	Amsterdam, Netherlands	100.0	EUR	1,142	– 35
Commerzbank Finance Limited	London, United Kingdom	100.0	GBP	155,171	80,042
Commerzbank Holdings (UK) Limited	London, United Kingdom	100.0	GBP	12,970	1,872
Commerzbank Holdings France	Paris, France	100.0	EUR	17,022	– 439
Commerzbank Immobilien- und Vermögensverwaltungsgesellschaft mbH	Frankfurt/Main, Germany	100.0	EUR	462,597	– a)
Commerzbank Inlandsbanken Holding GmbH	Frankfurt/Main, Germany	100.0	EUR	279,468	– a)
Commerzbank Leasing 6 S.à r.l.	Luxembourg, Luxembourg	100.0	GBP	98	– 2
Commerzbank Leasing December (3) Limited	London, United Kingdom	100.0	GBP	31	125

Commerzbank Aktiengesellschaft

Name	Registered office	Share of capital held %	Currency	Equity* 1,000	Net profit or loss* 1,000
Commerzbank Leasing Limited	London, United Kingdom	100.0	GBP	61	–
Commerzbank Leasing September (5) Limited	London, United Kingdom	100.0	GBP	– 12	30
Commerzbank U.S. Finance, Inc.	Wilmington, Delaware, USA	100.0	USD	363	4
Commerzbank Zrt.	Budapest, Hungary	100.0	HUF	30,396,000	230,000
CommerzFactoring GmbH	Mainz, Germany	50.1	EUR	1,099	– 47
CommerzVentures Beteiligungs GmbH & Co. KG	Frankfurt/Main, Germany	99.5	EUR	– 12,319	60,388
CommerzVentures GmbH	Frankfurt/Main, Germany	100.0	EUR	75,299	– 47
CommerzVentures II Beteiligungs GmbH & Co. KG	Frankfurt/Main, Germany	33.3	EUR	30,313	– 3,039
ComTS Finance GmbH	Halle (Saale), Germany	100.0	EUR	1,550	– 47
ComTS Logistics GmbH	Magdeburg, Germany	100.0	EUR	1,550	– 47
ComTS Mitte GmbH	Erfurt, Germany	100.0	EUR	2,714	– 47
ComTS Nord GmbH	Magdeburg, Germany	100.0	EUR	1,492	– 47
ComTS Ost GmbH	Halle (Saale), Germany	100.0	EUR	1,550	– 47
ComTS Rhein-Ruhr GmbH	Duisburg, Germany	100.0	EUR	1,050	– 47
ComTS West GmbH	Hamm, Germany	100.0	EUR	1,256	– 47
Coubag Unternehmensbeteiligungsgesellschaft mbH	Frankfurt/Main, Germany	40.0	EUR	78,283	8,827
CR Hotel Target Pty Ltd	Sydney, Australia	50.0	AUD	20,327	– 7,569
Dr. Gubelt Grundstücks-Vermietungsgesellschaft mbH & Co. Objekt Schwabing KG	Düsseldorf, Germany	100.0	EUR	–	2
Dresdner Capital LLC I	Wilmington, Delaware, USA	100.0	USD	1,950	42
Dresdner Capital LLC IV	Wilmington, Delaware, USA	100.0	JPY	17,880	2
Dresdner Kleinwort Luminary Inc.	Wilmington, Delaware, USA	100.0	USD	25,342	2,197
Dresdner Lateinamerika Aktiengesellschaft	Hamburg, Germany	100.0	EUR	39,567	– 47
DSB Vermögensverwaltungsgesellschaft mbH	Frankfurt/Main, Germany	100.0	EUR	25	– 47
DTE Energy Center, LLC	Wilmington, Delaware, USA	50.0	USD	58,768	8,831
FABA Vermietungsgesellschaft mbH	Frankfurt/Main, Germany	100.0	EUR	2,026	– 47
Frega Vermögensverwaltungsgesellschaft mbH	Frankfurt/Main, Germany	100.0	EUR	366	– 63
Future Tech Fundusz Inwestycyjny Zamkniety	Warsaw, Poland	99.0	PLN	192,266	7,065
FV Holding S.A.	Brussels, Belgium	60.0	EUR	1,153	– 24
Gesellschaft für Kreditsicherung mbH	Berlin, Germany	63.3	EUR	2,067	5,240
G-Invest Sp. z o.o.	Warsaw, Poland	100.0	PLN	6,603	– 91 1)
Greene Elm Trading VII LLC	Wilmington, Delaware, USA	100.0	USD	1,809	23
ILV Immobilien-Leasing Verwaltungsgesellschaft Düsseldorf mbH	Düsseldorf, Germany	50.0	EUR	36,956	9,342
KENSTONE GmbH	Eschborn, Germany	100.0	EUR	1,195	– 47
Kira Vermögensverwaltungsgesellschaft mbH	Munich, Germany	100.0	EUR	74,830	– 47
Kommanditgesellschaft MS "CPO ALICANTE" Offen Reederei GmbH & Co.	Hamburg, Germany	90.0	EUR	29,835	6,779
Kommanditgesellschaft MS "CPO ANCONA" Offen Reederei GmbH & Co.	Hamburg, Germany	77.2	EUR	45,967	11,232
Kommanditgesellschaft MS "CPO BILBAO" Offen Reederei GmbH & Co.	Hamburg, Germany	90.0	EUR	28,728	6,906
Kommanditgesellschaft MS "CPO MARSEILLE" Offen Reederei GmbH & Co.	Hamburg, Germany	77.2	EUR	38,063	8,875
Kommanditgesellschaft MS "CPO PALERMO" Offen Reederei GmbH & Co.	Hamburg, Germany	73.9	EUR	57,695	8,295
Kommanditgesellschaft MS "CPO TOULON" Offen Reederei GmbH & Co.	Hamburg, Germany	90.0	EUR	40,958	8,159
Kommanditgesellschaft MS "CPO VALENCIA" Offen Reederei GmbH & Co.	Hamburg, Germany	90.0	EUR	28,924	6,878

Financial Statements and Management Report 2021 113

Name	Registered office	Share of capital held %	Currency	Equity* 1,000	Net profit or loss* 1,000
LeaseLink Sp. z o.o.	Warsaw, Poland	100.0	PLN	9,073	3,413
LSF Loan Solutions Frankfurt GmbH	Eschborn, Germany	100.0	EUR	163,995	–^{a)}
Main Incubator GmbH	Frankfurt/Main, Germany	100.0	EUR	22,809	–^{a)}
mBank Hipoteczny S.A.	Warsaw, Poland	100.0	PLN	1,285,362	4,878
mBank S.A.	Warsaw, Poland	69.3	PLN	16,153,305	511,548
mElements S.A.	Warsaw, Poland	100.0	PLN	14,437	3
mFaktoring S.A.	Warsaw, Poland	100.0	PLN	105,564	22,244
mFinanse S.A.	Lódz, Poland	100.0	PLN	156,006	25,049
mLeasing Sp. z o.o.	Warsaw, Poland	100.0	PLN	480,489	2,129
MOLARIS Verwaltungs- und Vermietungsgesellschaft mbH	Düsseldorf, Germany	75.0	EUR	6,986	– 1,762
NAVIPOS Schiffsbeteiligungsgesellschaft mbH	Hamburg, Germany	100.0	EUR	107,752	–^{a)}
NOVELLA Grundstücks-Vermietungsgesellschaft mbH	Düsseldorf, Germany	100.0	EUR	11,176	–^{a)}
onvista media GmbH	Cologne, Germany	100.0	EUR	1,662	1,330
REFUGIUM Beteiligungsgesellschaft mbH	Grünwald, Germany	100.0	EUR	330	–^{a)}
SECUNDO Grundstücks-Vermietungsgesellschaft mbH	Düsseldorf, Germany	100.0	EUR	5,811	–^{a)}
TOMO Vermögensverwaltungsgesellschaft mbH	Frankfurt/Main, Germany	100.0	EUR	22,779	–^{a)}
Zelos Luxembourg S.C.S.	Luxembourg, Luxembourg	100.0	EUR	– 32,567	34,453

Commerzbank Aktiengesellschaft

b) Equity holdings in permanently-linked companies where the investment exceeds 5% of the voting rights

Name	Registered Office	Share of capital held %
BTG Beteiligungsgesellschaft Hamburg mbH	Hamburg, Germany	13.3
BÜRGSCHAFTSBANK BRANDENBURG GmbH	Potsdam, Germany	10.8
Bürgschaftsbank Mecklenburg-Vorpommern GmbH	Schwerin, Germany	12.0
Bürgschaftsbank Sachsen-Anhalt GmbH	Magdeburg, Germany	10.4
Bürgschaftsbank Thüringen GmbH	Erfurt, Germany	12.3
Bürgschaftsgemeinschaft Hamburg GmbH	Hamburg, Germany	17.8
Interessengemeinschaft Frankfurter Kreditinstitute GmbH	Frankfurt/Main, Germany	16.9
Kreditgarantiegemeinschaft des Hotel- und Gaststättengewerbes in Bayern Gesellschaft mit beschränkter Haftung	Munich, Germany	9.7
Bürgschaftsbank Schleswig-Holstein Gesellschaft mit beschränkter Haftung	Kiel, Germany	5.0
Mittelständische Beteiligungsgesellschaft Mecklenburg-Vorpommern mbH	Schwerin, Germany	18.4
Mittelständische Beteiligungsgesellschaft Thüringen mbH	Erfurt, Germany	16.5
Mittelständische Beteiligungsgesellschaft Sachsen mbH	Dresden, Germany	16.4
Mittelständische Beteiligungsgesellschaft Sachsen-Anhalt (MBG) mbH	Magdeburg, Germany	17.5
Mittelständische Beteiligungsgesellschaft Berlin-Brandenburg GmbH	Potsdam, Germany	18.2
Mittelständische Beteiligungsgesellschaft Niedersachsen (MBG) mit beschränkter Haftung	Hanover, Germany	12.4
Niedersächsische Bürgschaftsbank (NBB) Gesellschaft mit beschränkter Haftung	Hanover, Germany	5.6
Bürgschaftsbank Sachsen GmbH	Dresden, Germany	10.6
MBG Mittelständische Beteiligungsgesellschaft Schleswig-Holstein mbH	Kiel, Germany	7.3
BBB Bürgschaftsbank zu Berlin-Brandenburg GmbH	Berlin, Germany	7.9
Bürgschaftsbank Bremen GmbH	Bremen, Germany	8.3
BGG Bayerische Garantiegesellschaft mit beschränkter Haftung für mittelständische Beteiligungen	Munich, Germany	5.3
Saarländische Kapitalbeteiligungsgesellschaft mit beschränkter Haftung	Saarbrücken, Germany	8.5
MBG Mittelständische Beteiligungsgesellschaft Rheinland-Pfalz mbH	Mainz, Germany	11.1
True Sale International GmbH	Frankfurt/Main, Germany	25.0
Alma Atlas Investments Limited	Lathom, Lancashire, United Kingdom	12.0
Mittelstandsfonds Schleswig-Holstein GmbH	Kiel, Germany	9.2
LiquidityMatch LLC	Wilmington, Delaware, USA	13.6
paydirekt GmbH	Frankfurt/Main, Germany	16.7
Gini GmbH	Munich, Germany	13.4
OptioPay GmbH	Berlin, Germany	7.5
Grover Group GmbH	Berlin, Germany	5.2
Pinova GmbH & Co. Beteiligungs 2 KG	Munich, Germany	11.1
Bilendo GmbH	Munich, Germany	12.9
Userlane GmbH	Munich, Germany	5.8
Candis GmbH	Berlin, Germany	5.3
TransFICC Limited	London, United Kingdom	14.1
Tillhub GmbH	Berlin, Germany	6.7
HSBC Operational Services GmbH	Düsseldorf, Germany	20.0
AUTHADA GmbH	Darmstadt, Germany	12.4
Open as App GmbH	Munich, Germany	10.1
Conpend B.V.	Amsterdam, Netherlands	16.7
BERGFÜRST AG	Berlin, Germany	24.9
Finality International Limited	London, United Kingdom	6.7
Scompler Technologies GmbH	Munich, Germany	10.0
21strategies GmbH	Zolling, Germany	9.1
Valsight GmbH	Berlin, Germany	12.8

Financial Statements and Management Report 2021 115

c) Equity holdings in large corporations where the investment exceeds 5% of the voting rights

Name	Registered Office	Share of capital held %	Deviating Voting Rights %
Deutsche Börse Commodities GmbH	Frankfurt/Main, Germany	16.2	14.5
EURO Kartensysteme GmbH	Frankfurt/Main, Germany	15.4	–
SCHUFA Holding AG	Wiesbaden, Germany	18.6	–

Footnotes

1) Renamed: from Garbary Sp. z o.o. to G-Invest Sp. z o.o.

Comments and explanations

a) Control and/or profit transfer agreement.
* Financial figures as of last year’s annual report.

Foreign exchange rates for €1 as at 31.12.2021

Australia	AUD	1.5615
Brazil	BRL	6.3101
United Kingdom	GBP	0.8403
Japan	JPY	130.3800
Poland	PLN	4.5969
Russia	RUB	85.3004
Switzerland	CHF	1.0331
Hungary	HUF	369.1900
USA	USD	1.1326

116 Commerzbank Aktiengesellschaft

(47) Boards of Commerzbank Aktiengesellschaft

Supervisory Board

Helmut Gottschalk
Chairman
(since 14.4.2021)

Hans-Jörg Vetter
Chairman
(until 16.3.2021)

Uwe Tschäge¹
Deputy Chairman
Banking professional
Commerzbank Aktiengesellschaft

Heike Anscheit¹
Banking professional
Commerzbank Aktiengesellschaft

Alexander Boursanoff¹
Banking professional
Commerzbank Aktiengesellschaft

Gunnar de Buhr¹
Banking professional
Commerzbank Aktiengesellschaft

Stefan Burghardt¹
Branch Manager
Mittelstandsbank Bremen
Commerzbank Aktiengesellschaft

Dr. Frank Czichowski
Former Senior Vice President / Treasurer
KfW Banking Group

Sabine U. Dietrich
Former Member of the Management Board
BP Europa SE

¹ Elected by the Bank’s employees.

Board of Managing Directors

Dr. Manfred Knof
Chairman
(since 1.1.2021)

Jörg Hessenmüller
(until 30.9.2021)

Thomas Schaufler
(since 1.12.2021)

Dr. Bettina Orlopp
Deputy Chairwoman

Michael Kotzbauer
(since 14.1.2021)

Sabine Schmittroth

Daniela Mattheus
(since 18.5.2021)
Lawyer and corporate advisor,
Co-managing partner
European Center for Board Efficiency

Dr. Victoria Ossadnik
(until 18.5.2021)
Member of the Management Board
E.ON SE

Andreas Schmitz
(from 1.1.2021 until 24.3.2021)
Former speaker of the Board
HSBC Trinkaus & Burkhardt AG

Caroline Seifert
(since 18.5.2021)
Corporate advisor for transformation

Robin J. Stalker
Former Member of the Management Board
adidas AG

Dr. Gertrude Tumpel-Gugerell
Former Member of the Executive Board
European Central Bank

Frank Westhoff
(since 18.5.2021)
Former Member of the Management Board
DZ Bank AG

Stefan Wittmann¹
Trade Union Secretary
ver.di National Administration

Klaus-Peter Müller
Honorary Chairman

Daniele Schmittroth

Dr. Marcus Chromik

Dr. Jörg Oliveri del Castillo-Schulz
(since 20.1.2022)

Financial Statements and Management Report 2021 117

(48) Seats on supervisory boards and similar bodies

Members of the Board of Managing Directors of Commerzbank Aktiengesellschaft

Information pursuant to Art. 285 no. 10 of the HGB

a) Seats on other mandatory supervisory boards (in Germany)
b) Seats in similar national and international bodies

Dr. Manfred Knof

(since 1.1.2021)

a) Commerz Real AG¹
Chairman
(since 14.4.2021)

b) Commerz Real Investmentgesellschaft mbH¹
Chairman
(since 14.4.2021)

Dr. Bettina Orlopp

b) CommerzVentures GmbH¹
Chairwoman

EIS Einlagensicherungsbank GmbH
Chairwoman

EUREX Deutschland AöR
(since 10.11.2021)

Frankfurter Wertpapierbörse AöR
(since 10.11.2021)

mBank S.A.¹
Deputy Chairwoman

Dr. Marcus Chromik

a) Commerz Real AG¹
Deputy Chairman
(since 1.1.2021)

b) Commerz Real Investmentgesellschaft mbH¹
Deputy Chairman
(since 1.1.2021)

mBank S.A.¹
Verlagsbeteiligungs- und Verwaltungsgesellschaft mit beschränkter Haftung
(since 21.1.2021)

Jörg Hessenmüller

(until 30.9.2021)

b) Commerz Services Holding GmbH¹
Chairman
(until 30.9.2021)

CommerzVentures GmbH¹
Chairman
(until 30.9.2021)

EPI Interim Company
(until 30.9.2021)

EUREX Deutschland AöR
(until 30.9.2021)

Frankfurter Wertpapierbörse AöR
(until 30.9.2021)

Main Incubator GmbH¹
Chairman
(until 30.9.2021)

mBank S.A.¹
Deputy Chairman
(until 30.9.2021)

Michael Kotzbauer

(since 14.1.2021)

b) Collegium Glashütten Zentrum für Kommunikation GmbH¹
(until 31.3.2021)

CommerzVentures GmbH¹
Deputy Chairman
(since 1.1.2021)

Dr. Jörg Oliveri del Castillo-Schulz

(since 20.1.2022)

b) Commerz Services Holding GmbH¹
Chairman
(since 1.10.2021)

CommerzVentures GmbH¹
(since 1.10.2021)

EPI Interim Company
(since 1.10.2021)

Main Incubator GmbH¹
Chairman
(since 1.10.2021)

Thomas Schaufler

(since 1.12.2021)

a) Commerz Real AG¹
Deputy Chairman
(from 31.3.2022)

b) Commerz Real Investmentgesellschaft mbH¹
(from 31.3.2022)

Sabine Schmittroth

a) Commerz Real AG¹
b) Commerz Real Investmentgesellschaft mbH¹

mBank S.A.¹
(until 24.3.2021)

¹ Group mandate.

Commerzbank Aktiengesellschaft

Members of the Supervisory Board of Commerzbank Aktiengesellschaft

Information pursuant to Art. 285 no. 10 of the HGB

a) Seats on other mandatory supervisory boards (in Germany)
b) Seats in similar national and international bodies

Helmut Gottschalk

(since 14.4.2021)

a) IBB – Internationales Bankhaus Bodensee AG, Friedrichshafen Chairman (until 8.12.2021)

Hans-Jörg Vetter

(until 16.3.2021)

a) Herrenknecht AG, Schwanau Chairman

Uwe Tschäge

Heike Anscheit

Alexander Boursanoff

Gunnar de Buhr

a) BVV Pensionsfonds des Bankgewerbes AG, Berlin
BVV Versicherungsverein des Bankgewerbes a.G., Berlin
b) BVV Versorgungskasse des Bankgewerbes e.V., Berlin

Stefan Burghardt

Dr. Frank Czichowski

Sabine U. Dietrich

a) H&R GmbH und Co. KGaA, Salzbergen
MVV Energie AG, Mannheim

Dr. Jutta A. Dönges

a) Deutsche Pfandbriefbank AG, Garching (until 24.3.2021)
TUI AG, Hanover (since 25.3.2021)
b) FMS Wertmanagement AöR, München
Deputy Chairwoman of the Board of Directors

Monika Fink

Dr. Tobias Guldimann

(until 18.5.2021)

b) Edmond de Rothschild (Suisse) S.A., Geneva (Switzerland)
Fedafin AG, Widnau (Switzerland)
Chairman

Dr. Rainer Hillebrand

(until 18.5.2021)

b) Vorwerk & Co. KG, Wuppertal
Otto Group (Otto GmbH & Co. KG), Hamburg

Christian Höhn

(until 31.12.2021)

Stefan Jennes

(since 1.1.2022)

Kerstin Jerchel

a) Allianz Deutschland AG, Munich

Burkhard Keese

(since 18.5.2021)

Alexandra Krieger

a) AbbVie Komplementär GmbH, Wiesbaden
Evonik Operations GmbH, Essen

Daniela Mattheus

(since 18.5.2021)

a) Die Autobahn GmbH des Bundes, Berlin

Dr. Victoria Ossadnik

(until 18.5.2021)

b) Linde plc, Guildford (UK)

Andreas Schmitz

(from 1.1.2021 until 24.3.2021)

a) E.ON SE, Essen
b) Scheidt & Bachmann GmbH, Mönchengladbach
Chairman

Caroline Seifert

(since 18.5.2021)

Robin J. Stalker

a) Schaeffler AG, Herzogenaurach
Schmitz Cargobull AG, Horstmar
Deputy Chairman
Hugo Boss AG, Metzingen

Dr. Gertrude Tumpel-Gugerell

b) OMV Aktiengesellschaft, Vienna (Austria)
Vienna Insurance Group AG, Vienna (Austria)
AT & S AG, Leoben (Austria)

Frank Westhoff

(since 18.5.2021)

Stefan Wittmann

1 Group mandate.

Financial Statements and Management Report 2021 119

Employees of Commerzbank Aktiengesellschaft

In accordance with Art. 340a (4) no. 1 HGB

as at reporting date: 31.12.2021

Volker Ergler
Stadtwerke Viernheim GmbH

Gerold Fahr
Stadtwerke Ratingen GmbH
Chairman

Klaus Greger
Commerz Real AG¹

Christoph Heins
Commerz Real AG¹

Dr. Alena Kretzberg
Commerz Direktservice GmbH¹
Chairwoman
EUWAX Aktiengesellschaft

Stefan Nodewald
SCHWÄLBCHEN MOLKEREI Jakob Berz
Aktiengesellschaft
Chairman

Mario Peric
Commerz Direktservice GmbH¹

Andreas Schimmele
Commerz Direktservice GmbH¹

Arno Walter
Commerz Direktservice GmbH¹
Deputy Chairman

¹ Group mandate.

Commerzbank Aktiengesellschaft

Responsibility statement by the Board of Managing Directors

To the best of our knowledge, and in accordance with the applicable reporting principles, the financial statements give a true and fair view of the net assets, financial position and results of operations of the Company, and the management report includes a fair review of the development and performance of the business

and the position of the Company, together with a description of the principal opportunities and risks associated with the expected development of the Company.

Frankfurt/Main, 1 March 2022,

as far the amended information of note (28) is concerned, 18 March 2022,

The Board of Managing Directors

Financial Statements and Management Report 2021 121

„Translation from the German language of Independent auditor’s report“

To COMMERZBANK Aktiengesellschaft, Frankfurt am Main

Report on the audit of the annual financial statements and of the management report

Opinions

We have audited the annual financial statements of COMMERZBANK Aktiengesellschaft, Frankfurt am Main, which comprise the balance sheet as at 31 December 2021, and the income statement for the financial year from 1 January to 31 December 2021, and notes to the financial statements, including the recognition and measurement policies presented therein. In addition, we have audited the management report of COMMERZBANK Aktiengesellschaft for the financial year from 1 January to 31 December 2021. In accordance with the German legal requirements, we have not audited the content of the declaration pursuant to Sec.161 AktG (“Aktiengesetz”: German Stock Corporation Act) on the German Corporate Governance Code included in the “Details pursuant to Art. 289 of the German Commercial Code (HGB)” section of the management report or the declaration on corporate governance pursuant to Sec. 289f HGB (“Handelsgesetzbuch”: German Commercial Code). Furthermore, we have not audited the content of the disclosures extraneous to management reports contained in the “Remuneration” section of the management report. Disclosures extraneous to management reports are such disclosures that are not required pursuant to Secs. 289, 289a HGB or Secs. 289b to 289f HGB.

In our opinion, on the basis of the knowledge obtained in the audit,

the accompanying annual financial statements comply, in all material respects, with the requirements of German commercial law applicable to institutions and give a true and fair view of the assets, liabilities and financial position of the Institution as at 31 December 2021 and of its financial performance for the financial year from 1 January to 31 December 2021 in compliance with German legally required accounting principles, and
the accompanying management report as a whole provides an appropriate view of the Institution’s position. In all material respects, this management report is consistent with the annual financial statements, complies with German legal requirements and appropriately presents the opportunities and risks of future development. Our opinion on the management report does not cover the content of the declaration pursuant to Sec. 161 AktG on the German Corporate Governance Code included in the “Details pursuant to Art. 289 of the German Commercial Code (HGB)” section of the management report, the abovementioned declaration on corporate governance pursuant to Sec. 289f HGB and the abovementioned “Remuneration” section of the management report.

Pursuant to Sec. 322 (3) Sentence 1 HGB, we declare that our audit has not led to any reservations relating to the legal compliance of the annual financial statements and of the management report.

Basis for the opinions

We conducted our audit of the annual financial statements and of the management report in accordance with Sec. 317 HGB and the EU Audit Regulation (No 537/2014, referred to subsequently as “EU Audit Regulation”) and in compliance with German Generally Accepted Standards for Financial Statement Audits promulgated by the Institut der Wirtschaftsprüfer (Institute of Public Auditors in Germany) (IDW). Our responsibilities under those requirements and principles are further described in the “Auditor’s responsibilities for the audit of the annual financial statements and of the management report” section of our auditor’s report. We are independent of the Institution in accordance with the requirements of European law and German commercial and professional law, and we have fulfilled our other German professional responsibilities in accordance with these requirements. In addition, in accordance with Art. 10 (2) f) of the EU Audit Regulation, we declare that we have not provided non-audit services prohibited under Art. 5 (1) of the EU Audit Regulation. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinions on the annual financial statements and on the management report.

Key audit matters in the audit of the annual financial statements

Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the annual financial statements for the financial year from 1 January to 31 December 2021. These matters were addressed in the context of our audit of the annual financial statements as a whole, and in forming our opinion thereon; we do not provide a separate opinion on these matters.

Commerzbank Aktiengesellschaft

Below, we describe what we consider to be the key audit matters:

Recognition and measurement of the restructuring provisions set up in financial year 2021

Reasons why the matter was determined to be a key audit matter

On 3 February 2021, the Board of Managing Directors adopted the “Strategy 2024” programme, whose aims include a headcount reduction in Germany and abroad by 2024 as well as the reduction of the number of branches in Germany and closure of foreign locations. In March 2021, the Board of Managing Directors decided to bring forward the voluntary programme 2021 as part of the socially responsible headcount reduction by around 1,700 full-time positions at Commerzbank AG in Germany, with a standard employment termination date of 31 December 2021, and concluded a corresponding works agreement with the Central Works Council. Furthermore, in May 2021, the Board of Managing Directors concluded a central works agreement with the employee representative committees on a framework reconciliation of interests for the implementation of the “Strategy 2024” programme for Commerzbank AG in Germany and a framework social plan. Against this backdrop, the Board of Managing Directors recognised restructuring provisions in financial year 2021.

In light of the scope of the restructuring programmes, the recognition requirements to be met and the judgement exercised for the measurement, the recognition and measurement of the restructuring provisions set up in financial year 2021 was a key audit matter.

Auditor’s response

As part of our audit procedures, we assessed whether the requirements for the recognition of provisions for uncertain liabilities in accordance with Sec. 249 (1) Sentence 1 HGB were met and an obligation to third parties had therefore been established.

On the basis of the restructuring plans available, we assessed whether the measures included therein were specifically defined and, among others, the affected units and locations as well as the number of affected employees were determined. To assess whether the measures were specifically defined in the restructuring plan, we inspected, among other things, the decision documents and minutes of the Board of Managing Directors meetings in which the restructuring measures were discussed and adopted. Additionally, we assessed the minutes of the committees with regard to the implementation status of the restructuring measures.

To assess the impact on employees and the expectation that the restructuring measures will be implemented, we examined the works agreements concluded with the Central Works Council on the design of the headcount reduction models as well as the communication to the employees. Furthermore, we obtained an overview of the agreements signed in connection with the voluntary programme 2021 brought forward and completed as of the reporting date and compared the significant information contained therein with the information from the signed agreements on a sample basis. We also reconciled the total amount of contractual payments with the total amount of reclassifications to other liabilities.

We also assessed the measurement of the restructuring provisions in relation to the requirements of Sec. 253 (1) Sentence 2 and (2) Sentence 1 HGB. For this purpose, we analysed the assumptions used in the measurement such as the planned utilisation and expected costs for each headcount reduction model and compared them with the Bank’s experience from previous restructuring programmes. We also reperformed the calculations for determining the restructuring provisions set up in financial year 2021 based on the underlying assumptions.

Our procedures did not lead to any reservations relating to the recognition and measurement of the restructuring provisions set up in financial year 2021.

Reference to related disclosures

Information on the recognition and measurement of the restructuring provisions set up is provided in the “Other provisions” section of Note 27 of the notes to the financial statements.

Identification and calculation of allowances for defaulted loan exposures in the corporate loans business in portfolios exhibiting pandemic-related risk characteristics

Reasons why the matter was determined to be a key audit matter

Identification of defaulted loan exposures in the corporate loans business in portfolios exhibiting pandemic-related risk characteristics constitutes a significant area of management judgement. As a result of the coronavirus pandemic, this applies in particular to the loan exposures in Commerzbank’s tourism, retail and automotive portfolios. Further, the procedure for calculating allowances for defaulted loan exposures involves various assumptions and estimation inputs, particularly with regard to the financial situation of the companies, expectations of future cash flows, observable market prices and expected proceeds from the realization of collateral. These uncertainties increased in the financial year owing to the ongoing impact of the global coronavirus pandemic and the related economic problems for numerous borrowers.

Even minimal changes in the assumptions and estimation inputs can lead to an incomplete identification, significantly different measurements and thus to a change in allowances. In light of the significance for the assets, liabilities and financial performance, we considered the identification and calculation of allowances for defaulted loan exposures in the corporate loans business in portfolios exhibiting pandemic-related risk characteristics to be a key audit matter.

Auditor's response

As part of our audit, we examined the processes for identifying and monitoring borrowers exhibiting pandemic-related risk characteristics. To this end, we assessed in particular the monitoring processes for the occurrence of early warning indicators, the application of default criteria and the correct allocation to the relevant risk status.

We also examined the process for calculating allowances, which included testing the operating effectiveness of the controls implemented for the calculation of allowances.

As part of our credit file review, we selected a risk-based sample and analysed the allowance requirements determined for exposures exhibiting pandemic-related risk characteristics in particular.

We performed substantive audit procedures, assessing whether the significant assumptions concerning the estimated future cash flows from the loan exposures including the carrying amount of the collateral held were consistent with the financial situation of the borrower and the publicly available market and industry forecasts. We also checked the arithmetical accuracy of the allowances calculated for default risks.

Our audit procedures did not give rise to any reservations with respect to the identification and calculation of allowances for defaulted loan exposures in the corporate loans business in portfolios exhibiting pandemic-related risk characteristics.

Reference to related disclosures

The Institution's disclosures on the valuation of the loan portfolio are included in section 2 of the notes to the financial statements and in the “Default risk” section of the management report accompanying the annual financial statements.

Calculation of the general loan loss provision

Reasons why the matter was determined to be a key audit matter

The Bank calculates the general loan loss provision under German commercial law based on the requirements of IFRS 9

The estimate of the credit risk parameters underlying the calculation of the general loan loss provisions is based on historical information, obligor characteristics, current economic developments and forward-looking macroeconomic assumptions. Some of these parameters can only be observed with a time lag and are subject to estimation uncertainty.

In light of the economic upheavals continuing in the financial year, especially as a result of the coronavirus pandemic and related increased estimation uncertainties for determining credit risk parameters, management applied a top-level adjustment (TLA) as in the previous year. The TLA led to a significant increase in general loan loss provisions, in particular for the tourism, retail and automotive portfolios. The determination of the TLA was based on assumptions related to changes in borrowers' probabilities of default, which were derived from estimated general industry-specific deteriorations of borrower ratings within the existing rating system based on the impact on the relevant industries.

Given the judgement involved in the determination of the TLA, we consider the calculation of the general loan loss provision to be a key audit matter.

Auditor's response

We assessed the design and operating effectiveness of the internal control system with regard to the calculation of the general loan loss provision.

We examined the calculation of the TLA by assessing the underlying assumptions regarding the impact of the coronavirus pandemic and the related economic upheavals and their impact on the tourism, retail and automotive portfolios. We evaluated in particular the determination of the affected industries and the estimates related to general industry-specific deteriorations of borrower ratings using external sources of information. In addition, we checked the arithmetical accuracy of the Bank's TLA calculation. Based on a data excerpt from the relevant portfolios, we also evaluated the currentness of the credit risk parameters and the changes already observed in the financial year using substantive analytical procedures related to the TLA.

As part of the audit, we consulted internal specialists who have particular expertise in the area of credit risk management.

Our procedures did not lead to any reservations relating to the calculation of the general loan loss provision.

Reference to related disclosures

Disclosures concerning the calculation of the allowance for financial instruments are included in section 2 of the notes to the financial statements and in the “Default risk” section of the management report accompanying the annual financial statements.

Commerzbank Aktiengesellschaft

Other information

The executive directors and the Supervisory Board are responsible for the declaration pursuant to Sec. 161 AktG on the German Corporate Governance Code included in the declaration on corporate governance and for the remuneration report pursuant to Sec. 162 AktG referred to in the "Remuneration" section of the management report. In all other respects, the executive directors are responsible for the other information. The other information comprises the combined separate non-financial report pursuant to Sec. 340a in conjunction with Sec. 289b HGB and Secs. 340i in conjunction with Sec. 315b HGB, the declaration on the German Corporate Governance Code and declaration on corporate governance pursuant to Sec. 289f HGB included in the "Details pursuant to Art. 289 of the German Commercial Code (HGB)" section of the management report and the abovementioned information extraneous to management reports included in the "Remuneration" section of the management report. In addition, the other information comprises other parts of the annual financial statements and the management report, of which we obtained a version prior to issuing this auditor's report, in particular the "Significant Group companies," "2022 financial calendar" and "Responsibility statement by the Board of Managing Directors" sections.

Our opinions on the annual financial statements and on the management report do not cover the other information, and consequently we do not express an opinion or any other form of assurance conclusion thereon.

In connection with our audit, our responsibility is to read the other information and, in so doing, to consider whether the other information

is materially inconsistent with the annual financial statements, with the management report or our knowledge obtained in the audit, or
otherwise appears to be materially misstated

If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

Responsibilities of the executive directors and the Supervisory Board for the annual financial statements and the management report

The executive directors are responsible for the preparation of the annual financial statements that comply, in all material respects, with the requirements of German commercial law applicable to institutions, and that the annual financial statements give a true and fair view of the assets, liabilities, financial position and financial performance of the Institution in compliance with German legally required accounting principles. In addition, the executive directors are responsible for such internal control as

they, in accordance with German legally required accounting principles, have determined necessary to enable the preparation of annual financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the annual financial statements, the executive directors are responsible for assessing the Institution's ability to continue as a going concern. They also have the responsibility for disclosing, as applicable, matters related to going concern. In addition, they are responsible for financial reporting based on the going concern basis of accounting, provided no actual or legal circumstances conflict therewith.

Furthermore, the executive directors are responsible for the preparation of the management report that, as a whole, provides an appropriate view of the Institution's position and is, in all material respects, consistent with the annual financial statements, complies with German legal requirements and appropriately presents the opportunities and risks of future development. In addition, the executive directors are responsible for such arrangements and measures (systems) as they have considered necessary to enable the preparation of a management report that is in accordance with the applicable German legal requirements, and to be able to provide sufficient appropriate evidence for the assertions in the management report.

The Supervisory Board is responsible for overseeing the Institution's financial reporting process for the preparation of the annual financial statements and of the management report.

Auditor's responsibilities for the audit of the annual financial statements and of the management report

Our objectives are to obtain reasonable assurance about whether the annual financial statements as a whole are free from material misstatement, whether due to fraud or error, and whether the management report as a whole provides an appropriate view of the Institution's position and, in all material respects, is consistent with the annual financial statements and the knowledge obtained in the audit, complies with the German legal requirements and appropriately presents the opportunities and risks of future development, as well as to issue an auditor's report that includes our opinions on the annual financial statements and on the management report.

Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Sec. 317 HGB and the EU Audit Regulation and in compliance with German Generally Accepted Standards for Financial Statement Audits promulgated by the Institut der Wirtschaftsprüfer (IDW) will always detect a material misstatement. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these annual financial statements and this management report.

We exercise professional judgement and maintain professional scepticism throughout the audit. We also:Identify and assess the risks of material misstatement of the annual financial statements and of the management report, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinions. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.Obtain an understanding of internal control relevant to the audit of the annual financial statements and of arrangements and measures (systems) relevant to the audit of the management report in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of these systems of the Institution.Evaluate the appropriateness of accounting policies used by the executive directors and the reasonableness of estimates made by the executive directors and related disclosures.Conclude on the appropriateness of the executive directors' use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Institution's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in the auditor's report to the related disclosures in the annual financial statements and in the management report or, if such disclosures are inadequate, to modify our respective opinions. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Institution to cease to be able to continue as a going concern.Evaluate the overall presentation, structure and content of the annual financial statements, including the disclosures, and whether the annual financial statements present the underlying transactions and events in a manner that the annual financial statements give a true and fair view of the assets, liabilities, financial position and financial performance of the Institution in compliance with German legally required accounting principles.Evaluate the consistency of the management report with the annual financial statements, its conformity with IGermanI law, and the view of the Institution's position it provides.Perform audit procedures on the prospective information presented by the executive directors in the management report. On the basis of sufficient appropriate audit evidence we evaluate, in particular, the significant assumptions used by the executive directors as a basis for the prospective information, and evaluate the proper derivation of the prospective information from these assumptions. We do not express a separate opinion on the prospective information and on the assumptions used as a basis. There is a substantial unavoidable risk that future events will differ materially from the prospective information.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with the relevant independence requirements, and communicate with them all relationships and other matters that may reasonably be thought to bear on our independence and where applicable, the related safeguards.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the annual financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter.

Other legal and regulatory requirements

Report on the assurance on the electronic rendering of the annual financial statements and the management report prepared for publication purposes in accordance with Sec. 317 (3a) HGB

Opinion

We have performed assurance work in accordance with Sec. 317 (3a) HGB to obtain reasonable assurance about whether the rendering of the annual financial statements and the management report (hereinafter the “ESEF documents”) contained in the file “Commerzbank_AG_IA+LB_ESEF-2021-12-31.zip” (SHA-256

Commerzbank Aktiengesellschaft

e297aa35f84080771b9eb6d3477221707ea31a92094b4e6d26a95850476aa641) and prepared for publication purposes complies in all material respects with the requirements of Sec. 328 (1) HGB for the electronic reporting format ("ESEF format"). In accordance with German legal requirements, this assurance work extends only to the conversion of the information contained in the annual financial statements and the management report into the ESEF format and therefore relates neither to the information contained within these renderings nor to any other information contained in the file identified above.

In our opinion, the rendering of the annual financial statements and the management report contained in the file identified above and prepared for publication purposes complies in all material respects with the requirements of Sec. 328 (1) HGB for the electronic reporting format. Beyond this assurance opinion and our audit opinions on the accompanying annual financial statements and the accompanying management report for the financial year from 1 January to 31 December 2021 contained in the "Report on the audit of the annual financial statements and of the management report" above, we do not express any assurance opinion on the information contained within these renderings or on the other information contained in the file identified above.

Basis for the opinion

We conducted our assurance work on the rendering of the annual financial statements and the management report contained in the file identified above in accordance with Sec. 317 (3a) HGB and the IDW Assurance Standard: Assurance on the Electronic Rendering of Financial Statements and Management Reports Prepared for Publication Purposes in Accordance with Sec. 317 (3a) HGB (IDW AsS 410) (10.2021) and the International Standard on Assurance Engagements 3000 (Revised). Our responsibility in accordance therewith is further described in the "Auditor's responsibilities for the assurance work on the ESEF documents" section. Our audit firm applies the IDW Standard on Quality Management 1: Requirements for Quality Management in the Audit Firm (IDW QS 1).

Responsibilities of the executive directors and the Supervisory Board for the ESEF documents

The executive directors of the Institution are responsible for the preparation of the ESEF documents including the electronic rendering of the annual financial statements and the management report in accordance with Sec. 328 (1) Sentence 4 No. 1 HGB.

In addition, the executive directors of the Institution are responsible for such internal control as they have determined necessary to enable the preparation of ESEF documents that are free from material intentional or unintentional non-compliance with the requirements of Sec. 328 (1) HGB for the electronic reporting format.

The Supervisory Board is responsible for overseeing the process for preparing the ESEF documents as part of the financial reporting process.

Auditor's responsibilities for the assurance work on the ESEF documents

Our objective is to obtain reasonable assurance about whether the ESEF documents are free from material intentional or unintentional non-compliance with the requirements of Sec. 328 (1) HGB. We exercise professional judgement and maintain professional scepticism throughout the assurance work. We also:

Identify and assess the risks of material intentional or unintentional non-compliance with the requirements of Sec. 328 (1) HGB, design and perform assurance procedures responsive to those risks, and obtain assurance evidence that is sufficient and appropriate to provide a basis for our assurance opinion.
Obtain an understanding of internal control relevant to the assurance on the ESEF documents in order to design assurance procedures that are appropriate in the circumstances, but not for the purpose of expressing an assurance opinion on the effectiveness of these controls.
Evaluate the technical validity of the ESEF documents, i.e., whether the file containing the ESEF documents meets the requirements of Commission Delegated Regulation (EU) 2019/815, in the version in force at the date of the financial statements, on the technical specification for this file.
Evaluate the technical validity of the ESEF documents, i.e., whether the file containing the ESEF documents meets the requirements of Commission Delegated Regulation (EU) 2019/815, in the version in force at the date of the financial statements, on the technical specification for this file
Evaluate whether the ESEF documents enable an XHTML rendering with content equivalent to the audited annual financial statements and to the audited management report

Financial Statements and Management Report 2021 127

Further information pursuant to Art. 10 of the EU Audit Regulation

We were elected as auditor by the Annual General Meeting on 18 May 2021. We were engaged by the Supervisory Board on 1 June 2021. We have been the auditor of COMMERZBANK Aktiengesellschaft without interruption since financial year 2018.

We declare that the opinions expressed in this auditor's report are consistent with the additional report to the audit committee pursuant to Art. 11 of the EU Audit Regulation (long-form audit report).

Other matter – Use of the auditor’s report

Our auditor’s report must always be read together with the audited annual financial statements and the audited management report as well as the assured ESEF documents. The annual financial statements and the management report converted to the ESEF format – including the versions to be published in the Bundesanzeiger [German Federal Gazette] – are merely electronic renderings of the audited annual financial statements and the audited management report and do not take their place. In particular, the ESEF report and our assurance opinion contained therein are to be used solely together with the assured ESEF documents made available in electronic form.

Note on supplementary audit

We issue this auditor’s report on the amended annual financial statements and the management report on the basis of our audit, duly completed as of 2 March 2022, and our supplementary audit completed as of 18 March 2022, which related to the change in note “(28) Subordinated liabilities”. See note “(1) Basis of preparation” of the amended notes to the financial statements for the executive directors’ presentation of the change.

German Public Auditor responsible for the engagement

The German Public Auditor responsible for the engagement is Claus-Peter Wagner.

Eschborn/Frankfurt am Main, 2 March 2022 /

with regard to the change stated in the note on the supplementary audit only: 18 March 2022

Ernst & Young GmbH

Wirtschaftsprüfungsgesellschaft

Claus-Peter Wagner

Wirtschaftsprüfer

(German Public Auditor)

Marcus Binder

Wirtschaftsprüfer

(German Public Auditor)

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Significant Group companies

The German version of this Financial Statements and Management Report is the authoritative version and only the German version of the Management Report and the Financial Statements were audited by the auditors.

For the sake of improved readability, we refrain from any linguistic differentiation between gender forms. Instead, we adopt the masculine form, but understand the use of this form and our gender policy explicitly and completely as gender-neutral.

Germany

Commerz Real AG, Wiesbaden

Abroad

Commerzbank Brasil S.A. – Banco Múltiplo, São Paulo

Commerzbank (Eurasija) AO, Moscow

Commerzbank Finance & Covered Bond S.A., Luxembourg

Commerzbank Zrt., Budapest

Commerz Markets LLC, New York

mBank S.A., Warsaw

Operative foreign branches

Amsterdam, Bratislava, Beijing, Brno (office), Brussels, Dubai, Hong Kong, London, Luxembourg, Madrid, Milan, New York, Paris, Prague, Shanghai, Singapore, Tokyo, Vienna, Zurich

Representative Offices and Financial Institutions Desks

Abidjan, Addis Abeba, Almaty, Aschgabat, Bangkok, Beijing (FI Desk), Beirut, Brussels (Liaison Office to the European Union), Buenos Aires, Cairo, Caracas, Dhaka, Dubai (FI Desk), Ho Chi Minh City, Istanbul, Johannesburg, Kiev, Lagos, Luanda, Melbourne, Milan (FI Desk), Minsk, Moscow (FI Desk), Mumbai, New York (FI Desk), Panama City, São Paulo (FI Desk), Seoul, Shanghai (FI Desk), Singapore (FI Desk), Taipei, Tashkent, Tbilisi, Tokyo (FI Desk), Zagreb

Disclaimer

Reservation regarding forward-looking statements

This Financial Statements and Management Report contains forward-looking statements on Commerzbank's business and earnings performance, which are based upon our current plans, estimates, forecasts and expectations. The statements entail risks and uncertainties, as there are a variety of factors which influence our business and to a great extent lie beyond our sphere of influence. Above all, these include the economic situation, the state of the financial markets worldwide and possible loan losses. Actual results and developments may, therefore, diverge considerably from our current assumptions, which, for this reason, are valid only at the time of publication. We undertake no obligation to revise our forward-looking statements in the light of either new information or unexpected events.

COMMERZBANK

2022 Financial calendar

11 May 2022	Annual General Meeting
12 May 2022	Interim financial information as at 31 March 2022
3 August 2022	Interim Report as at 30 June 2022
9 November 2022	Interim financial information as at 30 September 2022

Commerzbank AG
Head Office
Kaiserplatz
Frankfurt am Main
www.commerzbank.com

Postal address
60261 Frankfurt am Main
Tel.: +49 69 136-20
[email protected]

Investor Relations
Tel.: +49 69 136-21331
[email protected]

The Group annual report
(in accordance with the International Financial Reporting Standards)
appears in German and English.

AI assistant

Commerzbank AG — Annual Report 2021

81_10-k_2022-03-27_8ee9632e-12c3-4975-bd31-8b351896f5ea.pdf

Financial Statements and Management Report

Contents

4 Management report

73 Income statement

74 Balance sheet

78 Notes

120 Responsibility statement by the Board of Managing Directors

121 Independent auditor’s report

Management report of Commerzbank Aktiengesellschaft

Structure and organisation

Our employees

Remuneration

Details pursuant to Art. 289 of the German Commercial Code (HGB)

Information under takeover law required pursuant to Art. 289a (1) of the German Commercial Code (HGB) and explanatory report

Share capital structure

Restrictions on voting rights and transfers; nature of voting control for employee shares

Shares with special rights granting powers of control

Appointment and removal of the members of the Board of Managing Directors; amendments to the Articles of Association

Powers of the Board of Managing Directors to issue and buy back shares

Material agreements in the event of a change of control following a takeover bid

Compensation agreements in the event of a takeover offer

Equity holdings that exceed 10% of the voting rights

Details pursuant to Art. 289 (4) of the German Commercial Code (HGB)

Legal basis and guidelines

Organisation

Controls to minimise risk

Monitoring by Group Audit

The financial reporting process

Measures to further enhance the ICS over financial reporting

Other

Details pursuant to Art. 340a (1a) in conjunction with Art. 289b (3) of the German Commercial Code (HGB)

Declaration on corporate governance pursuant to Art. 289f HGB

Recommendations of the German Corporate Governance Code

Suggestions of the German Corporate Governance Code

Company values and governance practices at Commerzbank

Board of Managing Directors

Supervisory Board

Diversity

Diversity policy and information on the minimum proportions of women and men on the Supervisory Board

Diversity policy and minimum proportions on the Board of Managing Directors

Targets for the first and second levels of management

Accounting

Shareholder relations, transparency and communication

Business and overall conditions

Economic environment

Sector environment

Important staffing and business policy events

Changes in the Supervisory Board of Commerzbank

Changes in the Board of Managing Directors of Commerzbank

Commerzbank making good progress with its restructuring

Commerzbank streamlines its capital market business

Commerzbank successfully issues another

Additional Tier 1 bond

Commerzbank keeps securities settlement in-house – outsourcing project halted

Commerzbank sets ambitious sustainability targets and launches sustainability dialogue

Further strengthening of the compliance function

Financial performance, assets, liabilities and financial position

Income statement

Balance sheet

Equity

Summary of 2021 business position

Outlook and opportunities report

Future economic situation

Future situation in the banking sector

Anticipated performance of Commerzbank Aktiengesellschaft

Anticipated performance of individual earnings components

Anticipated segment performance

General statement on the outlook for the Group

Risk Report

Executive summary 2021

Risk-bearing capacity ratio stood at 176% as at 31 December 2021

The Group's exposure at default increased

Risk result for the Group amounted to €-570m in 2021

Market risk in the trading book declined in 2021

Operational risks increased year on year

Risk management organisation

Risk strategy and risk management

Commerzbank AG Annual Report 2021