POLICIES RISK METHODOLOGIES
PROCESSES, SYSTEMS AND REPORTS
POLICIES Weadoptafour-stepapproachi.e.prevent,detect,escalate
andrespondtoreputationalriskevents.Asreputationalriskis aconsequencefromthefailuretomanageotherrisktypes,the
deinitionsandframeworkformanagingsuchrisksarearticulated intherespectiveriskframeworksandpolicies.Thesearereinforced
bysoundcorporatevaluesthatembedethicalbehavioursand practicesthroughoutDBS.
PoliciesareinplacetoprotectconsistencyoftheDBSbrandand toassistinsafeguardingourcorporateidentityandreputation.
RISK METHODOLOGIES Underthevariousriskframeworkspolicies,DBShasestablisheda
numberofmechanismsforongoingriskmonitoringforthevarious risktypes.Thesetaketheformofrisklimits,keyriskindicatorsand
otheroperatingmetrics,aswellastheperiodicriskandcontrol self-assessmentprocess.Apartfromobservationsderivedfrom
internalsources,alertsfromexternalpartiesstakeholdersalsoserve asanimportantsourcefordetectionofpotentialriskreputational
riskevents.Inaddition,therearepoliciesrelatingtomedia communications,socialmediaandcorporatesocialresponsibility
toprotectDBS’reputation.Therearealsoescalationandresponse mechanismsinplaceformanagingreputationalrisk.
Whiletherespectiveriskframeworksaddresstheindividual risktypes,theReputationalRiskPolicyfocusesspeciicallyon
stakeholders’perceptionofhowwellDBSmanagesitsreputational risks.Stakeholdersincludecustomers,governmentagenciesand
regulators,investors,ratingagencies,businessalliances,vendors, tradeunions,mediathegeneralpublic,Boardseniormanagement
andemployees.DBSrecognisesthatcreatingasenseofsharedvalue throughengagementwithkeystakeholdergroupsisimperativefor
itsbrandandreputation.
PROCESSES, SYSTEMS AND REPORTS Unitsareresponsiblefortheday-to-daymanagementof
reputationalriskbyensuringthatprocessesandproceduresarein placetoidentify,assessandrespondtoreputationalrisk.Eventsof
reputationalriskimpactarealsofeaturedinthereportingofrisk proilestoseniormanagementandBoard-levelcommittees.
9.2 Reputational Risk in 2014
DBS’priorityistopreventtheoccurrenceofareputationalriskeventratherthantotakemitigatingactionswhenitmaterialises. TherewerenosigniicantreputationalriskincidentswhichcouldendangertheDBSfranchisein2014.
9.1 Reputational Risk Management at DBS
DBS’ framework for reputational risk management comprises the following building blocks:
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APPENDIX
GENERAL RECOMMENDATIONS WHERE HAVE WE DISCLOSED THIS?
IN RISK SECTION UNLESS OTHERWISE STATED 1
Presentallrelatedriskinformationtogetherinanyparticularreport. Pleaserefertothetableonpage87
2 Deinethebank’sriskterminologyandriskmeasuresandpresent
keyparametervaluesused. Sections2,5.1,6.1,7.1,8.1
3 Describeanddiscusstopandemergingrisks,incorporatingrelevant
informationinthebank’sexternalreportsonatimelybasis. Section2
4 Oncetheapplicablerulesareinalised,outlineplanstomeeteach
newkeyregulatoryratio,e.g.thenetstablefundingratio,liquidity coverageratioandleverageratioand,oncetheapplicablerules
areinforce,providesuchkeyratios. Section7.4
RefertoCapitalManagement andPlanningSection
Risk Governance and Risk Management StrategiesBusiness Model
5 Summariseprominentlythebank’sriskmanagementorganisation,
processesandkeyfunctions. Section3
6 Provideadescriptionofthebank’sriskculture,andhowprocedures
andstrategiesareappliedtosupporttheculture. Section4
7 Describethekeyrisksthatarisefromthebank’sbusinessmodelsand
activities,thebank’sriskappetiteinthecontextofitsbusiness modelsandhowthebankmanagessuchrisks.
Sections1,2and4
8 Describetheuseofstresstestingwithinthebank’sriskgovernance
andcapitalframeworks.Stresstestingdisclosuresshouldprovide anarrativeoverviewofthebank’sinternalstresstestingprocess
andgovernance. Sections4.2,5.1,6.1,7.1
Capital Adequacy and Risk-Weighted Assets
9 ProvideminimumPillar1capitalrequirements,includingcapital
surchargesforG-SIBsandtheapplicationofcounter-cyclicaland capitalconservationbuffersortheminimuminternalratioestablished
bymanagement. RefertoCapitalManagementandPlanningsection
andPillar3disclosurespublishedonDBSwebsite
10 Summariseinformationcontainedinthecompositionofcapital
templatesadoptedbytheBaselCommitteetoprovideanoverview ofthemaincomponentsofcapital,includingcapitalinstrumentsand
regulatoryadjustments.Areconciliationoftheaccountingbalance sheettotheregulatorybalancesheetshouldbedisclosed.
RefertoPillar3disclosurespublished onDBSwebsite
11 Presentalowstatementofmovementssincethepriorreporting
dateinregulatorycapital,includingchangesincommonequitytier1, tier1andtier2capital.
RefertoCapitalManagement andPlanningsection
12 Qualitativelyandquantitativelydiscusscapitalplanningwithinamore
generaldiscussionofmanagement’sstrategicplanning,includinga descriptionofmanagement’sviewoftherequiredortargetedlevelof
capitalandhowthiswillbeestablished. RefertoCapitalManagement
andPlanningsection
13 Providegranularinformationtoexplainhowrisk-weightedassets
RWAsrelatetobusinessactivitiesandrelatedrisks. Section1
GENERAL RECOMMENDATIONS WHERE HAVE WE DISCLOSED THIS?
IN RISK SECTION UNLESS OTHERWISE STATED 14
Presentatableshowingthecapitalrequirementsforeachmethod usedforcalculatingRWAsforcreditrisk,includingcounterparty
creditrisk,foreachBaselassetclassaswellasformajorportfolios withinthoseclasses.Formarketriskandoperationalrisk,presenta
tableshowingthecapitalrequirementsforeachmethodusedfor calculatingthem.
RefertoPillar3disclosurespublished onDBSwebsite
15 Tabulatecreditriskinthebankingbookshowingaverageprobability
ofdefaultPDandLGDaswellasexposureatdefaultEAD,total RWAsandRWAdensityforBaselassetclassesandmajorportfolios
withintheBaselassetclassesatasuitablelevelofgranularitybased oninternalratingsgrades.
RefertoPillar3disclosurespublished onDBSwebsite
16 PresentalowstatementthatreconcilesmovementsinRWAsforthe
periodforeachRWArisktype. Notimplemented
17 ProvideanarrativeputtingBaselPillar3back-testingrequirements
intocontext,includinghowthebankhasassessedmodel performanceandvalidateditsmodelsagainstdefaultandloss.
Section6.1,6.2
Liquidity
18 Describehowthebankmanagesitspotentialliquidityneedsand
provideaquantitativeanalysisofthecomponentsoftheliquidity reserveheldtomeettheseneeds,ideallybyprovidingaveragesas
wellasperiod-endbalances. Sections7.1,7.3
Funding
19 Summariseencumberedandunencumberedassetsinatabular
formatbybalancesheetcategories,includingcollateralreceivedthat canberehypothecatedorotherwiseredeployed.Thisistofacilitate
anunderstandingofavailableandunrestrictedassetstosupport potentialfundingandcollateralneeds.
Section7.3
20 Tabulateconsolidatedtotalassets,liabilitiesandoff-balancesheet
commitmentsbyremainingcontractualmaturityatthebalancesheet date.Presentseparatelyiseniorunsecuredborrowingiisenior
securedborrowingseparatelyforcoveredbondsandreposandiii subordinatedborrowing.Banksshouldprovideanarrativediscussion
ofmanagement’sapproachtodeterminingthebehavioural characteristicsofinancialassetsandliabilities.
Section7.2 FinancialStatementsNote42.1
21 Discussthebank’sfundingstrategy,includingkeysourcesandany
fundingconcentrations,toenableeffectiveinsightintoavailable fundingsources,relianceonwholesalefunding,anygeographical
orcurrencyrisksandchangesinthosesourcesovertime. Section7.1
Market Risk
22 Provideinformationthatfacilitatesusers’understandingofthe
linkagesbetweenlineitemsinthebalancesheetandtheincome statementwithpositionsincludedinthetradedmarketrisk
disclosuresusingthebank’sprimaryriskmanagementmeasures suchasValueatRiskVaRandnon-tradedmarketriskdisclosures
suchasriskfactorsensitivities,economicvalueandearningsscenarios andorsensitivities.
Section6.1
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GENERAL RECOMMENDATIONS WHERE HAVE WE DISCLOSED THIS?
IN RISK SECTION UNLESS OTHERWISE STATED 23
Providefurtherqualitativeandquantitativebreakdownsofsigniicant tradingandnon-tradingmarketriskfactorsthatmayberelevantto
thebank’sportfoliosbeyondinterestrates,foreignexchange, commodityandequitymeasures.
Sections6.1,6.2
24 Providequalitativeandquantitativedisclosuresthatdescribe
signiicantmarketriskmeasurementmodellimitations,assumptions, validationprocedures,useofproxies,changesinriskmeasuresand
modelsthroughtimeanddescriptionsofthereasonsforback-testing exceptions,andhowtheseresultsareusedtoenhancethe
parametersofthemodel. Sections6.1,6.2
25 Provideadescriptionoftheprimaryriskmanagementtechniques
employedbythebanktomeasureandassesstheriskoflossbeyond reportedriskmeasuresandparameters,suchasVaR,earningsor
economicvaluescenarioresults,throughmethodssuchasstress tests,expectedshortfall,economiccapital,scenarioanalysis,stressed
VaRorotheralternativeapproaches.Thedisclosureshoulddiscuss howmarketliquidityhorizonsareconsideredandappliedwithin
suchmeasures. Sections6.1,6.2
Credit Risk
26 Provideinformationthatfacilitatesusers’understandingofthebank’s
creditriskproile,includinganysigniicantcreditriskconcentrations. Section5.4
FinancialStatementsNote41.4 27
Describethepoliciesforidentifyingimpairedornon-performing loans,includinghowthebankdeinesimpairedornon-performing,
restructuredandreturned-to-performingcuredloansaswellas explanationsofloanforbearancepolicies.
Section5.1
28 Provideareconciliationoftheopeningandclosingbalancesof
non-performingorimpairedloansintheperiodandtheallowance forloanlosses.Disclosuresshouldincludeanexplanationofthe
effectsofloanacquisitionsonratiotrends,andqualitativeand quantitativeinformationaboutrestructuredloans.
Sections5.1,5.4 FinancialStatementsNote41.2
29 Provideaquantitativeandqualitativeanalysisofthebank’s
counterpartycreditriskthatarisesfromitsderivativestransactions. Section5.1,5.4
30 Providequalitativeinformationoncreditriskmitigation,including
collateralheldforallsourcesofcreditriskandquantitative informationwheremeaningful.
Section5.2,5.4
Other Risks
31 Describe‘otherrisk’typesbasedonmanagement’sclassiications
anddiscusshoweachoneisidentiied,governed,measuredand managed.Inadditiontoriskssuchasoperationalrisk,reputational
risk,fraudriskandlegalrisk,itmayberelevanttoincludetopical riskssuchasbusinesscontinuity,regulatorycompliance,technology,
andoutsourcing. Section2,8.1,9
32 Discusspubliclyknownriskeventsrelatedtootherrisks,including
operational,regulatorycomplianceandlegalrisks,wherematerial orpotentiallymateriallosseventshaveoccurred.Suchdisclosures
shouldconcentrateontheeffectonthebusiness,thelessonslearned andtheresultingchangestoriskprocessesalreadyimplementedor
inprogress. Section8.2
OBJECTIVE
Thecapitalmanagementandplanningprocessisoverseenby theCapitalCommitteewhichischairedbytheChiefFinancial
Oficer.QuarterlyupdatesontheGroup’scapitalpositionare providedtotheBoardofDirectorswhichisresponsibleforour
capitalmanagementobjectiveandcapitalstructure.Ourcapital managementobjectiveistomaintainastrongcapitalposition
consistentwithregulatoryrequirementsundertheMAS’Notice toBanksNo.637“NoticeonRiskBasedCapitalAdequacy
RequirementsforBanksIncorporatedinSingapore”MASNotice 637andtheexpectationsofvariousstakeholders,e.g.,customers,
investorsandratingagencies.Thisobjectiveispursuedwhile deliveringreturnstoshareholdersandensuringthatadequate
capitalresourcesareavailableforbusinessgrowthandinvestment opportunitiesaswellasadversesituations.Weseektopay
sustainabledividendsovertime,inlinewithourcapitalmanagement objective,long-termgrowthprospectsandtheneedtomaintain
prudentcapitallevelsinviewofforthcomingregulatorychanges. TheBoardhasrecommendedainaldividendofSGD0.30per
ordinaryshare,towhichtheScripDividendSchemeisbeingapplied, bringingthetotalordinarydividendfortheyeartoSGD0.58.
PROCESS
Thecapitalmanagementobjectiveisarticulatedconcretelyas capitaltargetsthatareconsistentwiththeneedtosupportorganic
andinorganicbusinessgrowthinlinewithourstrategicplansand riskappetite.AkeytoolforcapitalplanningistheannualInternal
CapitalAdequacyAssessmentProcessICAAP.Throughthe ICAAP,weassessourforecastcapitalsupplyanddemandrelative
toregulatoryandinternalcapitaltargets,undervariousscenarios, includingstressscenariosofdifferingscopeandseverity,overa
three-yearhorizon.
Capitalcapacityisallocatedontwodimensions:bybusinessline andbyentity.Capitalallocationsbybusinesslinearesetaspart
ofthebudgetprocessandmonitoredduringtheyear.Returnon regulatorycapitalisoneofseveralmetricsusedtomeasurebusiness
performance.Capitalallocationsbyentityseektooptimisethe distributionofcapitalresourcesacrossentities,takingintoaccount
thecapitaladequacyrequirementsimposedoneachsubsidiaryin itsrespectivejurisdiction.Capitalisallocatedtoensurethateach
subsidiaryisabletocomplywithregulatoryrequirementsasit executesitsbusinessstrategiesinlinewithourstrategy.During
thecourseoftheyear,thesesubsidiariesdidnotexperience anyimpedimentstothedistributionofdividends.
CAPITAL STRUCTURE
Thecapitalstructureismanagedwithinregulatorynormsin ordertooptimisethecostandlexibilityofferedbyvarious
capitalresources.Inordertoachievethis,weassesstheneed andtheopportunitytoraisecapitalfromtheinancialmarkets.
Duringtheyear,approximately28millionordinaryshareswere issuedpursuanttotheScripDividendScheme.Thisadded
SGD489milliontosharecapital.RefertoNote32tothe FinancialStatementsfordetailsonthemovementofshare
capitalandtreasurysharesduringtheyear.
DBSBankLtd.on21March2014redeemedtheSGD1,700million 4.70ClassNPreferenceSharesinaccordancewithitsArticles
ofAssociation.
DBSBankLtd.on15November2014redeemedtheUSD750 million5.00SubordinatedNotesdue2019Callablewith
Step-upin2014inaccordancewiththetermsandconditions ofthenotes.
On19November2014,DBSBankLtd.offeredtopurchasefor cashuptoUSD550millionoftheUSD900millionFloatingRate
SubordinatedNotesdue2021CallablewithStep-upin2016. Thetransactionwascompletedon8January2015,when
USD550millionofthenoteswerepurchasedandsubsequently cancelled.TheremainingUSD350millionofnotesthatwere
notrepurchasedaresubjecttotheoriginaltermsandconditions ofthenotes.
RefertoNotes31,32,33and35totheFinancialStatementsas wellasthePillar3MainFeaturesofCapitalInstrumentsdisclosure
www.dbs.cominvestorcapital-instrumentsdefault.page forthetermsofthecapitalinstrumentsthatareincludedin
EligibleTotalCapital.
and Planning
Capital Management
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The table below analyses the movement in Common Equity Tier 1, Additional Tier 1 and Tier 2 Capital during the year STATEMENT OF CHANGES IN REGULATORY CAPITAL
FOR THE YEAR ENDED 31 DECEMBER 2014
In millions
Common Equity Tier 1 CET1 Capital Openingamount
32,648 Dividendspaid
1,468 IssueofsharespursuanttoScripDividendScheme
489 Issueofsharesuponexerciseofshareoptions
13 Purchaseoftreasuryshares
79 Costofshare-basedpayments
88 Proitfortheyearattributabletoshareholders
4,046 Movementsinothercomprehensiveincome,includingavailable-for-salerevaluationreserves
386 Others,includingregulatoryadjustmentsandtransitionalarrangements
1,420 ClosingAmount
34,703 CET1Capital
34,703
Additional Tier 1 Capital Openingamount
– MovementsinAdditionalTier1capitalinstrumentsissuedbyfully-consolidatedsubsidiariesthatmeetcriteriaforinclusion
949 Others,includingregulatoryadjustmentsandtransitionalarrangements
949 Closingamount
– Tier1Capital
34,703
Tier 2 Capital Openingamount
6,171 MovementsinTier2capitalinstrumentsissuedbyfully-consolidatedsubsidiariesthatmeetcriteriaforinclusion
651 MovementsinprovisionseligibleasTier2Capital
137 Closingamount
5,657 TotalCapital
40,360
CAPITAL ADEQUACY RATIOS
TheGroup’sCommonEquityTier1CapitalAdequacyRatioCAR,Tier1CARandTotalCARasat31December2014,werewellabovethe MAS’minimumrequirementsof5.5,7.0and10.0respectively.Thetablebelowsetsoutthecapitalresourcesandcapitaladequacy
ratiosasat31December2014.
Referto‘Five-YearSummary’forthehistoricaltrendofTier1andTotalCAR.Refertowww.dbs.cominvestorinancial-performancedefault. pagefortheGroup’sPillar3QuantitativeDisclosureswhichsetoutdetailsontheGroup’srisk-weightedassetsRWA.
In millions, as at 31 December 2014
2013
Sharecapital 10,113
9,607 Disclosedreservesandothers
26,814 23,918
TotalregulatoryadjustmentstoCommonEquityTier1 1,080
1 RegulatoryadjustmentsduetoinsuficientAdditionalTier1capital
1,144 876
CommonEquityTier1 34,703
32,648 AdditionalTier1capitalinstruments
1
3,179
4,144 TotalregulatoryadjustmentstoAdditionalTier1capital
3,179 4,144
Tier1capital 34,703
32,648 ProvisionseligibleasTier2capital
1,354 1,217
Tier2capitalinstruments
1
4,304
4,955 TotalregulatoryadjustmentstoTier2capital
1 1
Totalcapital 40,360
38,819
Risk-Weighted Assets RWA
CreditRWA 206,423
188,124 MarketRWA
41,813 35,092
OperationalRWA 15,950
14,865 TotalRWA
264,186 238,081
Capital Adequacy Ratio CAR
CommonEquityTier1 13.1
13.7
Tier1 13.1
13.7 Total
15.3 16.3
ProformaCommonEquityTier1underinalruleseffective1January2018 11.9
11.9
Minimum CAR
CommonEquityTier1 5.5
4.5 Tier1
7.0 6.0
Total 10.0
10.0
Note: 1
As part of the Basel III transition arrangements, regulatory capital recognition of outstanding Tier 1 and Tier 2 capital instruments that no longer meet the minimum criteria is gradually being phased out. Fixing the base at the nominal amount of such instruments outstanding on 1 January 2013, their recognition was capped
at 90 in 2013, with this cap decreasing by 10 percentage points in each subsequent year. To the extent a capital instrument is redeemed or amortised after 1 January 2013, the nominal amount serving as the base will not be reduced
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The chart below analyses the drivers of the movement in Common Equity Tier 1 CAR during the year Group Common Equity Tier 1 CAR
Dec2013 CET1
Transition NetProit
Attributable to
Shareholders Dividends
Paid Scrip
Dividend Scheme
Other CET1
movements 2014
BaselIII Phase-in
Credit RWA
Market RWA
Operational RWA
Dec2014 CET1
Transition BaselIII
Phase-in Dec2014
CET1Pro formaFinal
13.7 13.1