In general, we describe our Group-wide approach related to the aspects in this chapter. In those instances, in which we follow business-specific approaches, we additionally report on these. Where there is no Group-wide approach, we describe the approach of the respective business division.
Product Suitability and Appropriateness
In the ordinary course of its business, Deutsche Bank enters into transactions with, or offers products or services to clients. These activities are subject to local laws and regulations, which impose requirements in respect to appropriateness and suitability. It is our policy only to undertake activities where the bank is satisfied that a particular product or service is appropriate and suitable for a particular client. Prior to engaging in any activity, we take reasonable steps to determine the appropriateness and suitability.
On January 3, 2018, the Markets in Financial Instruments Directive (MiFID II)—in its relevant national transposition—and the Markets in Financial Instruments Regulation (MiFIR) came into effect. The new regulations affect the entire bank and all of our client groups. Deutsche Bank has trained its staff, provided timely information to its clients, and has made the necessary changes to its technology.
In accordance with the MiFID II regulation, we conduct broad market screenings of products to identify those that best match our specific customer needs. Our products have to comply with a set of defined requirements, for example relating to risk, complexity, transparency, and after-sales support. We assess the individual product quality and select the product that matches the desired customer demand and the customer investment profile. As a basic principle our rules state, that there should be no sales when it becomes obvious that the customer
- does not need the product,
- cannot afford the product mid- to long-term,
- has not understood the product, or
- the risk profile of the underlying does not match to the customer.
Before starting business with a new external product provider, a thorough due diligence of the company is conducted to ensure a high standard of quality in line with our own standards and customer needs.
The quality of our investment product offering range is reviewed on an ongoing basis.
We keep records of appropriateness assessments undertaken for specific client groups, including the result, and of whether the client was given a warning that a product or service is not appropriate for them or they have not provided sufficient information to enable an appropriateness assessment to take place, and, in those instances, whether the transaction was still executed.
The New Product Approval (NPA) and Systematic Product Review (SPR) processes, collectively the “Product Life Cycle” framework, provide the basis for ensuring that we can confidently offer clients our products and services. The framework has been established to manage the risks associated with the implementation of new products and services, changes in products and services during their life cycles, and, the process by which they are systematically reviewed, to ensure they remain fit for purpose and consistent with the needs, characteristics, and objectives of their intended market(s) throughout their lifespans. Applicable globally across all divisions, the respective processes cover different stages of the product life cycle review, with the NPA process focusing on pre-implementation and the SPR process on periodic review, post-implementation.
In addition to the above, the New Transaction Approval (NTA) process, applicable to the Corporate & Investment Bank (CIB) division, provides a framework for the coordination, documentation, and management of risks associated with entering into a subset of transactions, including the restructure of existing transactions, meeting certain pre-defined, risk-based escalation criteria. Such qualifying transactions, referred to as “structured transactions”, are subjected to enhanced levels of due diligence via the framework.
Clearly defined roles and responsibilities—together with standards to measure adherence—training, and a Red Flag process to take corrective action support consistent quality control. Our product and structured transaction frameworks bring together appropriate subject matter experts from various departments in order to identify the correct accounting and regulatory standards, as well as the legal, compliance, and control structure. All product developments must be approved by key control functions, including Compliance and Anti-Financial Crime. NPA councils at the regional and divisional levels must review product developments considered “material”, including new risk factors or businesses. In addition, any features causing concern, such as a potential reputational impact on the bank, are referred to the relevant management approval committees, such as the Regional or Group Reputational Risk Committees.
The provisions described apply to all our business divisions. In addition, we have developed product principles to provide particular protection for our clients in Private & Commercial Bank.
Private & Commercial Bank
Both in our home market of Germany and internationally, Private & Commercial Bank (PCB) offers our clients high-quality advice and a wide range of financial services from a single source, ranging from comprehensive services for retail clients, to solutions for demanding clients in Private Banking and Wealth Management, to business and commercial client coverage.
We have developed principles in Private & Commercial Clients (PCC) that define minimum standards for our product lines. They commit us to exclusively offering ethically justifiable and transparent products and services. In addition, we want to offer our clients responsible and foresighted advice that meets their needs and clearly shows them the respective benefits and risks.
- Our products relate to the real economy.
- They are transparent and easy to understand.
- They create benefits.
- They serve the individual without being detrimental to the world at large or the common good, i. e. the product actively advised should not be connected with:
- speculation on food scarcity or bottlenecks that might affect the availability of food;
- betting on death, illness, disability, or insolvency;
- the manufacture and sale of nuclear weapons, cluster munitions, and land mines;
- the promotion or use of child labor;
- criminal acts such as drug trafficking, money laundering, and corruption; and
- the violation of human rights.
Processes and principles are designed in a way that ensures compliance with legal and regulatory requirements (incl. product bans).
Within Postbank, the Customer Advisory Council has the mission to check Postbank’s services and products critically and to provide suggestions for improvements, and thus it helps to develop new products and services. In this way, the customer perspective can contribute decisively to Postbank’s products and services becoming continuously better, easier to understand, and less complicated, thereby raising the quality of the customer experience. The council exclusively consists of Postbank customers and is under the patronage of the member of the Management Board responsible for private clients. Proposals from the council in 2017 resulted, for instance, in new booths for customer counseling at 30 branches, to be built from November 2017 on. The booths are air-conditioned and soundproof to enhance comfort and privacy while counseling.
Within the Investment Advisory Business, we both offer and advise in-house (manufactured by Deutsche Bank) and third-party products (open architecture), which allows us to conduct a broad market screening of products to identify those that best match our specific customer needs. We assess the individual product quality and select the product that matches the desired customer demand and the customer investment profile. Our Product Guidelines for Investment and Insurance Products also explicitly define products that are not allowed to be advised to clients; for example, we do not advise or structure products or include those products in the Discretionary Portfolio Management (DPM) that invest in soft commodities (agricultural goods), and we do not advise Contract for Difference (CFD) to clients.
 A CFD is a contract between two parties, typically described as buyer and seller, stipulating that the seller will pay to the buyer the difference between the current value of an asset and its value at contract time (if the difference is negative, then the buyer pays instead to the seller). In effect, CFDs are financial derivatives that allow traders to take advantage of prices moving up (long positions) or prices moving down (short positions) on underlying financial instruments and are often used to speculate on those markets.