Deutsche Bank : Report of the Supervisory Board

Deutsche Bank

Report of the Supervisory Board 2021

At its meeting on 10 March 2022, the Supervisory Board performed the audit required pursuant to section 171 (1) of the Stock Corporation Act (AktG) and in particular audited the proposal for the appropriation of distributable profit and subsequently agreed to it. Inadvertently, the latter point remained unmentioned in the Report of the Supervisory Board. Therefore, through circulation voting procedure on 7 April 2022, the Supervisory Board resolved to amend the Report accordingly. In the following, please find the corrected Report of the Supervisory Board in which a sentence has been added directly before the section "Personnel issues".

Report of the Supervisory Board

In the 2021 financial year, the Supervisory Board performed all tasks assigned to it by law, regulatory requirements, Articles of Association and Terms of Reference.

The Management Board reported to us regularly, without delay and comprehensively on all matters with relevance for our bank, and in particular on business policies and strategy, in addition to other fundamental issues relating to the company's management and culture, corporate planning and control, compliance and compensation systems. It reported to us on the financial development, earnings and risk situation, the bank's liquidity, capital and risk management, the appropriate technical and organizational resources as well as events that were of significant importance to the bank. We were involved in decisions of fundamental importance. As in previous years, the Management Board provided us, in accordance with our requests, with enhanced reporting on several topic areas. Thus, the Management Board regularly reported to us on the prevention of money laundering and the related controls. We deliberated on these matters intensively and regularly, together with the Management Board and also with external experts. Furthermore, the Supervisory Board received reports on the progress made in the bank's sustainability strategy and its contribution to achieving global climate objectives. The Supervisory Board Chairman and the five other committee chairs maintained regular contact with the Management Board between the meetings. They also consulted each other on the agendas of the various meetings of the committees they chair and discussed topics of key strategic importance to the bank. Furthermore, upcoming decisions were deliberated on and prepared in discussions conducted regularly between the Management Board and the Chairman of the Supervisory Board as well as the chairs of the Supervisory Board committees.

There were a total of 66 meetings of the Supervisory Board and its committees. When necessary, resolutions were passed by circulation voting procedure between the meetings.

Meetings of the Supervisory Board in plenum

The Supervisory Board held seven regular and two extraordinary meetings in the 2021 financial year. At its meetings, the Supervisory Board addressed all topics with a special relevance for the bank.

Again in 2021, we attached special importance to the effective implementation of the bank's strategy, and we took sufficient time to deliberate on this and on the regular progress reports on the individual business divisions and regions with the Management Board. In this context, we also discussed the impacts of the COVID-19 pandemic on the development of business and compared developments within the framework of benchmarking. Also, our discussions regularly focused on regulatory topics that impact our business worldwide and on key litigation cases and regulatory proceedings.

At our meeting on February 3, representatives of the Joint Supervisory Team responsible for the bank reported to us on the Supervisory Review and Evaluation Process (SREP) 2020 along with the key observations from this process for our bank. We analyzed the submitted target-actual business figures and compared them with the plan figures as well as analysts' estimates and competitors' figures. Deviations were discussed in detail. Furthermore, we confirmed the preliminary proposal of the Management Board, as communicated upon the announcement of the new strategy in 2019, not to pay a dividend. We addressed the strategic financial and capital plan at the Group level for the years 2021-2025 and discussed aspects of our compliance and anti-financial crime programs. We discussed the key activities of the Human Resources area in 2020 and an outlook on the strategic priorities for the following years. We approved the report, prepared by the Nomination Committee, on the assessment to be performed annually of the Management Board and Supervisory Board in accordance with Section 25d of the German Banking Act (KWG) for the year 2020. Furthermore, we addressed the draft of the Corporate Governance Statement, reviewed the independence of the individual Supervisory Board members and determined that all shareholder representatives are independent. In addition, we adopted the diversity concept for the composition of the Management Board and the Supervisory Board. Following a review of the appropriateness of the compensation system for the Management Board - and while taking the recommendations of the Compensation Control Committee into account as well as in consultation with the bank's Compensation Officer and independent external compensation experts - we determined the level of the variable compensation for the Management Board members for the 2020 financial year. Furthermore, we discussed the new compensation system for the Management Board, which became applicable starting 2021. We also discussed the possible topics for the Supervisory Board's training measures for the ongoing financial year.

At our meeting on March 11 we extensively discussed the proposal from the shareholder representatives on the Nomination Committee to nominate Mr. Frank Witter at the General Meeting for election to the Supervisory Board. Mr. Alexander Schütz had previously informed us that he would resign effective at the end of the General Meeting on May 27. We received a detailed market and competitor analysis, which also comprised a strategic benchmarking. Following reporting by the Management Board, and based on the Audit Committee's recommendation as well as after a discussion with the auditor, we approved the Consolidated Financial Statements and Annual Financial Statements for 2020. Also in accordance with the recommendationof the Audit Committee and the recommended resolution proposal of the Audit Committee specified above, we determined that there are no objections to be raised regarding the Group's separate Non-Financial Report in accordance with section 315b of the German Commercial Code (HGB) and the Non-Financial Statement in accordance with section 289b HGB, also based on the final results of the Supervisory Board's own inspections. We discussed and approved the Report of the Supervisory Board and received a follow-up report from the Management Board about the bank's Russia franchise, including an assessment of the business and risk. The Management Board also presented to us the design of the compensation systems, the Human Resources Report for 2020, which was prepared for the first time in accordance with International Organization for Standardization (ISO) standard 30414, and the results of a survey on the future of work and a hybrid working model. Furthermore, we addressed the topics for the General Meeting, approved proposals for the agenda and for accommodating shareholder rights.

At an extraordinary meeting on March 29, we addressed the realignment of the Management Board in depth, which was also accompanied by the launch of the next phase of the bank's transformation: With effect from May 1, we transferred responsibility for the Corporate Bank and Investment Bank divisions from Mr. Christian Sewing to Mr. Fabrizio Campelli. We also resolved to extend Mr. Christian Sewing's appointment as member and Chairperson of the Management Board until the end of April 2026. With effect from the end of April 30, 2021, Mr. Frank Kuhnke resigned from his Management Board mandate and left Deutsche Bank. Furthermore, we appointed Ms. Rebecca Short as member of the Management Board for three years with functional responsibility for the Chief Transformation Office, with effect from May 1, 2021. These resolutions were taken on the basis of the preliminary work and recommendations of our Chairman's Committee and Nomination Committee. In addition, Mr. Stuart Lewis informed us of his wish to step down from the Management Board effective at the end of the General Meeting 2022, which we will comply with. The search process for a successor was subsequently launched. Furthermore, we discussed the possible issuance of Additional Tier 1 capital instruments on the basis of the authorization granted by the General Meeting on May 24, 2018.

At our meeting on May 26, we discussed all of the topics of the pending General Meeting with the Management Board. Furthermore, we noted the report of the Management Board on changes in the regional advisory councils in Germany in accordance with Section 8 of the Articles of Association and we addressed various regulatory and legal topics.

On July 29, the Management Board reported on the financial performance for the second quarter and on the reactions of the bank's different stakeholders to the progress of its transformation. In addition, we extensively discussed a detailed report on the strategy to combat financial crime risks, including the regulatory requirements and technological support and the required data infrastructure. Furthermore, we deliberated on and approved several amendments to our Terms of Reference.

At our meeting on September 16, we discussed the Environmental, Social and Governance (ESG) disclosure allegations involving DWS. We discussed the possible issuance of Additional Tier 1 capital instruments and received a detailed overview of the medium-term macroeconomic outlook. We also discussed various internal investigations. Furthermore, we addressed the Audit Tender in depth and resolved to recommend Ernst & Young (EY) at the General Meeting as the financial statements auditor for the 2022 financial year.

At our meeting on October 28 and 29, we intensively addressed the bank's strategy and the status of the transformation from the perspective of the individual business divisions, regions and central strategic measures. We discussed the current global economic situation, the medium-term outlook and the impacts on the bank. We received a report on the progress made in implementing the strategy and on the positive feedback from stakeholders, along with an outlook on further progress in the ongoing execution of the bank's transformation. We discussed the key regulatory development around the world and what they mean for the bank's individual regions. Furthermore, we received a report on the technology strategy and deliberated in this context on trends in technology, such as blockchain and the potential areas of use. We also addressed our bank's sustainability strategy. As periodically scheduled, we resolved to approve the Declaration of Conformity.

At another extraordinary meeting on November 21, we addressed the succession for the Chairman of the Supervisory Board and for the Chief Risk Officer. The Nomination Committee had intensively addressed these personnel matters in advance, based on our internal position descriptions and profile of requirements, and prepared candidate proposals in each case. We deliberated on the candidates selected on the basis of the approved selection process. Following the meeting we resolved through circulation voting procedure to propose Mr. Alexander Wynaendts for election as member of the Supervisory Board at the next Ordinary General Meeting on May 19, 2022. Furthermore, we intend to elect him as our Chairperson. We also resolved to submit a proposal at the next Ordinary General Meeting on May 19, 2022, to create the function of a second Deputy Chairperson and we appointed Mr. Olivier Vigneron as member of the Management Board for the period of three years with effect from May 20, 2022.

At our last meeting of the year on December 16 we deliberated with our Management Board Chairman on key people and succession planning for the Management Board. The Supervisory Board discussed the key milestones of the planning process 2022-2026 and received a report on the new "Future of Work" model. We extensively reviewed our internal policies and procedures as well as the position descriptions for the Management Board and Supervisory Board. In addition, we resolved to extend Mr. Fabrizio Campelli's Management Board appointment by three years to October 31, 2025. We determined whoour financial experts and compensation experts are as well as the independence of our Audit Committee members, and we amended the Terms of Reference for the Audit Committee to reflect changes from the Act to Strengthen Financial Market Integrity (FISG).

Committees of the Supervisory Board

The members of the individual committees and the changes during the year 2021 are specified in the Annual Report in the Corporate Governance Statement (see page 429).

The Chairman's Committee held thirteen meetings in 2021. The Committee addressed Management Board and Supervisory Board matters in depth, in addition to ongoing topics between the meetings of the Supervisory Board as well as the preparations for them. These include, among other things, the preparatory handling of the re-alignment of the Management Board's functional responsibilities and the personnel changes on the Management Board in cooperation with the Nomination Committee. The Committee deliberated on topics in connection with the bank's corporate governance and in preparation for the General Meeting as well as a few special issues. These included individual regulatory topics, such as the specification of details during the issuance of capital instruments by the bank. The Committee also addressed the mandates, honorary offices or special tasks of the individual Management Board members outside the Group as well as the review of the pending expirations of the statute of limitations periods (time barring) for possible claims to compensation for damages subsequent to the compensation settlement concluded in July 2017. As necessary, resolutions were approved in this context.

At its seven meetings in 2021, the Risk Committee focused on the topics: the risk appetite aligned to the bank's strategy and conditions in client business. In this context, besides the Group risk appetite, the Committee addressed in particular the business units of the International Private Bank, the Corporate Bank's Correspondent Banking and Cash Management businesses and the Investment Bank's Leveraged Lending business. In terms of regional perspective, the Committee focused on the Middle East and Africa region. Against the backdrop of the ongoing COVID-19 pandemic in 2021, the Risk Committee addressed the management, accounting treatment and valuation of credit risks with a special focus on the management and liquidation of collateral and the development of credit loss provisions. In addition, the Committee also focused on the general risk appetite framework for non-financial risks and the following specific non-financial risks: model risks, product governance, third-party risk management, business continuity and physical safety, employment practices risks, transaction processing risks and reputational risks.

The Committee regularly addressed reports on key transformation projects with a connection to risk management. In 2021, the Committee received reports on the programs for the further development of credit risk management, liquidity management and the management of interest rate risks in the banking book. It also intensively addressed the impacts of the compensation framework on the bank's capital, risk, liquidity and profitability situation.

In light of the still changing risk environment due to the ongoing pandemic and the change in the inflation situation, the Committee addressed the potential effects on the bank and the measures taken in response by the bank. This covered the impacts on the bank's capital, risk, liquidity and profitability situation while taking into account, among other things, adverse scenarios within the framework of internal stress testing. The Committee also received reports on the European Union-wide stress tests conducted by the European Banking Authority and European Central Bank.

The Audit Committee met seven times in 2021. The Audit Committee supported us in monitoring the financial reporting process and intensively addressed the Annual Financial Statements and Consolidated Financial Statements, the interim and earnings reports well as the Annual Report on Form 20-F for the U.S. Securities and Exchange Commission. Furthermore, it supported us on the basis of the financial reporting process in the assessment of the bank's transformation and the COVID-19 pandemic, in particular with regard to the recognition of credit loss provisions. The Audit Committee also dealt with the valuation of various financial instruments and the bank's pension liabilities as well as tax-related topics. The Audit Committee had the Management Board report regularly on the "available distributable items" and the capacity to service the coupons on the Additional Tier 1 capital instruments.

The Audit Committee monitored the effectiveness of the risk management system, in particular with regard to the internal control system and Group Audit, while also taking into account the impacts from the COVID-19 pandemic and the bank's transformation. This also again covered, among other things, the reporting on the ongoing development of controls to combat money laundering and to prevent financial crime, transaction monitoring, payments systems and the key initiatives for the further strengthening of the risk management system, compliance and the internal control system. The Audit Committee was kept up-to-date on the work of Group Audit, its audit plan and its resources. It addressed measures taken by the Management Board to remediate deficiencies identified by the auditor, Group Audit and regulatory authorities and regularly received updates on internal findings management as well as the status of and progress on the remediation of findings.