Understanding Deutsche Bank Credit Risk Management

This afternoon, after receiving a most-generous invitation, I attended an in-house workshop titled, Credit Risk Management - Foundations of Risk Management. Along with 6 other young Deutsche Bank trainees/employees, I made myself comfortable in the plush black leather chairs of a small conference room on the top floor of the historic Deutsche Bank building located on the famous boulevard in Berlin: Unter den Linden.

After introducing ourselves, we brainstormed about what factors should be considered when compiling a credit rating for an organization. There were categorized by "hard" and "soft" factors. Hard factors were the quantifyable and objective measures such as financial data, ratios, historic data, forecasts, and account information. These constitute the core of ratings. Also of importance were the soft factors such as management, legal forms, market position, peer benchmarking, industry branch, and information from customers and suppliers.

Deutsche Bank, like other financial institutions, have their own credit rating system similar to the big credit rating agencies such as Fitch, Moody's, and S&P. These are comparable in that they are in part derived from the statistical likelihood of the organization's default within the year. After learning what offices use these ratings and for what they are used for, we looked at how the EBITDA (earnings before interest, taxes, depreciation, and amortization) is a key number for creditors because it represents the earnings that need to doled out to creditors, the tax authorities, and depreciation and amortization expenses. The question is, "is there sufficient cash flow to finance working capital (especially for high-growth or high-investment orgs) AND have enough left over for the creditor banks?" Further, we discussed the main drivers of income statement forecasting. (Thankfully, my Financial Statement Analysis class at GWU with Professor Kang was still more or less fresh in my mind. Thanks Prof. Kang!) Then we delved into the types of collateral and security can be negotiated to protect against the very sad and devastating consequences of forced liquidation at bankruptcy. Finally, we learned about the communication and cooperation between the risk management team and the corporate relationship managers as well as how the ratings are updated.

To do: learn more about the following topics:
- Asset trading clause
- Hedging credit risk using capital markets
- Disputing credit ratings
- Financing working capital

Along with the deeper understanding of credit risk management, I was excited about learning in this kind of format. Even though we stayed in the conference room until 8:30 pm, I felt like this interaction was so stimulating that I could have gone on for another 3 hours. I feel really lucky to be able to be looped into this great organization and get all this training in transaction banking, cash management, trade finance, mid-cap corporate relationship management, and special debt finance. Thank you Deutsche Bank and the whole Corporate and Investment Banking team in Berlin!

A weekend in Lübeck "the queen of the Hansa" and Hamburg

The weekend of March 14-15 was an ideal time to leave Berlin and the state of Schleswig Holstein was the ideal destination for a quick trip. After meeting up with Mike and taking a quick detour we left on the ICE train from the central train in Berlin, the Hauptbahnhof. The quiet train ride in the comfortable Deutsche Bahn is always a good time to leaf through travel guides and review material describing the destination city, especially when traveling the flat, dull, and uninteresting landscape of northern Germany around Berlin and Brandenburg. We had to change trains in Hamburg and we took advantage of the 20 free minutes to walk though the downtown and grab some lunch. To my surprise, looking out of the windows regional train, there were actually rolling hills! A quick stop in a suburb of Reinfeld (Holst) was all between us and the destination city of Lübeck. Upon arrival, we checked into the small but clean hotel just around the corner of the train station and immediately headed into the city of Lübeck.

Stops included the tourist information center, the Holstentor Museum, Marienkirche, Salzspeicher, and the Cafe Niederegger. For dinner, we found a traditional Lübecker kitchen named the Kartoffelkeller (potato cellar).


The next morning got started with an astoundingly-prosperous buffet breakfast in the hotel and picking up audio guides. These were the best decision so far: the narrators of the audio guide were posing as Heinrich and Thomas Mann, the two famous novelists who grew up in the city and the tour was dotted with short stories and dialogue between the two brothers. This amusing guide was very thorough in that we hit all the main sights in the city as well as hidden nooks and crannies. Stops included the Rathaus Markt, St Jakobi church, St Marienkirche, devil on stone, Buddenbrook Haus, Schabbelhaus, Hellgrüner Gang, Schiffergesellschaft, Heiligen-Geist Hospital, and Burgtor. Walking around for three hours was tiring, so we had lunch at the Fisch-Hütte on the waterfront before hopping on the train.

In Hamburg, Mike and I met up with a fellow Boschie named Arrus who is working in this city for his second stage. We had some beverages on the Alter Lake in the center of Hamburg and caught up before returning to Berlin.

It was a good weekend with lots of history and getting to know northern Germany and the state of Scchleswig Holstein. I like Germany.


Listening: The audio guides were a great resource. I highly recommend them. Here I am hearning the Mann brothers talking about the neighborhood streets i am walking through.


Lübecker Rathaus / Town Hall : Mike and I in front of this famous architectual gem.


The Lübeck waterfront: this city is completely surrounded by a river and canal, making it a picture-perfect, densely populated, medieval city. The architectual trademark of this region are the crow-stepped gables that consist of a flat facade in front of the building that extends above the roof, making the house look bigger than it really is. Very cool.


Hello Helga!: On our quick layover in Hamburg on the way to Lübeck, Helga was created in the Legoland store and joined us on our trip. She was a great companion but did not talk too much.


The Devil and I: Here is the story of the devil's figure on the devil's stone (from a placard on the wall). "When the first stones of St. Mary were laid, the devil believed that this building would become a wine bar. He liked the idea, because many souls had already found their way to him after frequently visiting such a place. So he mixed with the crowd and started to help the workers. No wonder that the building grew higher and higher amazingly fast. But one day the devil had to realize what the building would really be. Full of anger he grabbed a huge boulder to smash the walls that were already standing. He was just flying near through the air when a bold fellow shouted at him: "Just stop it, Mr. Devil! Leave what has already been erected! For you we will build a wine bar just here in the neighborhood!" The devil was very pleased with this idea. He dropped the boulder beside the wall, where it is still lying until this day. One can still see the devil's claws on the stone. And just opposite the church the workers built the wine cellar of the Town Hall." - I found this amusing. Too bad we had no time to visit this infamous wine hall!


The vehicles of wealth: model ships in the Holstentor Museum.


All white: Mike in the St Petri church.


What is meant by "hansa"? The Hanseatic League (also known as the Hansa) was an alliance of trading cities and their guilds that established and maintained trade monopoly along the coast of Northern Europe, from the Baltic to the North Sea and inland, during the Late Middle Ages and Early modern period (c.13th–17th centuries). The Hanseatic cities had their own law system and furnished their own protection and mutual aid. Hansa cities such as Lübeck and Hamburg became fabulously wealthy from trading and built amazing monuments to show off their status. This resonates with my trade in trade and investment and reinforces the power of trade.



Dinner at Kartoffelkeller: delicious baked herring in rustic cellar restaurant.


Eerie and probably haunted: the Lübeck Dome at night.


"Allen zu gefallen ist unmöglich": this motto is written on the columns in front of the "Schiffergesellschaft", the lavish seaman's guild house. It means, "it is impossible to please everyone".


Organ at St Jakobs church.


Hotel Stadt Lübeck: our modest hotel just steps from the train station.


The light green passage: during the boom years, the city made use of the spacious backyards of the townhouses to build small, 1 story homes. Remember that since the city was physically restricted from expansion because it was an island, it burst at the seams when the population boomed. To access these backyards, small tunnels were made through the front house. This Hellgrüner Gang was almost impossible to find. But I'm glad we did because it opened a small world hidden from the streets.


Backyard house clusters: Lübeck's small houses behind the front townhomes are quaint and well maintained.


Buddenbrook Haus


Lachsbrötchen: a delicious lunch on the waterfront.

Where I work

On a side note, the Deutsche Bank building on Unter den Linden is likely the most intriguing building I have ever worked at. It is an elegant combination between a modern art exhibit (the walls are decorated with a rotating exhibit consisting of unconventional photography), high tech (with sophisticated security intallations and indirect, full spectrum lighting), and palace (with a generous atrium, spacious covered courtyard, and a marvelous staircase with differnt marble types on the walls). As a connoisseur of interior design, it is a real joy every day to be in this building. Because of my obvious enthusiam of my workplace, I felt the need to share this with you.

Some information about the artworks hanging just outside my office. I literally walk past these artworks every day. Really cool!: http://www.db.com/csr/en/content/6889.htm


View from across Unter den Linden: I like it. The office building consists of two formerly seperate buildings "connected". Inside, you have to use a small set of stairs on the same floor to get from one side to the other. On-the-job exercise is always good.




The courtyard: A good source of light for the offices facing inside. By the way, there is German / European law that dictates that employees must sit near a window. Wished we had that in the States. For my friends in Washington D.C., this courtyard reminds me alot of the courtyard at the National Portrait Gallery at Gallery Place.


The Deutsche Guggenheim: Yes, there is actually a museum inside the building! How great is that?

The Deutsche Guggenheim: http://www.deutsche-guggenheim.de/



Deutsche Bank: On the corner of Unter Den Linden and Charlottenstrasse.