10 Internal capital (Pillar II)

The regulatory requirements made in relation to quantitative risk management as a result of Pillar II and the consultation paper on the application of the Internal Capital Adequacy Assessment Process (ICAAP) are covered at the LLB Group, among other measures, by means of a risk-bearing-ability calculation. The aim of the risk-bearing-ability calculation is to safeguard the continued existence of the LLB Group. Accordingly, the capital adequacy of the LLB Group is tested by means of internal models. The risk results obtained from the individual risk types are aggregated in an overall loss potential, and then contrasted with the amount allocated to cover these potential losses. This enables it to be established to what extent the LLB Group is in a position to bear potential losses.

The LLB Group uses the value-at-risk approach for the risk-bearing-ability calculation with a confidence level of 99.9 percent and a holding period of one year. Correlations between the individual types of risk are not taken into consideration. To cover operational risks, the LLB Group takes over the values from the basic indicator approach from Pillar I and adjusts them by adding a risk surcharge.

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