Coverage ratio of unsecured non-performing loans (NPLs)

As mentioned above, exposures classified as non-performing loans are those in rating categories 8–, 9 and 10. The unsecured volume declined from € 4.8 bn (pro-forma figure as at year-end 2003) to € 4.4 bn at the end of 2004. The coverage ratio (loan loss provisions as a percentage of risk exposure) rose by 2 percentage points from 75% (pro-forma figure for 2003) to 77% at the end of 2004.

No loan loss provisions are required for exposures in rating category 8–. When there is a need to make a loan loss provision, the exposure is automatically assigned a rating of 9 or 10.

In preparation for Basel II, from April 2005, the rating system will automatically reclassify loans on which the customer is more than 90 days in default as category 8– exposures. For this reason exposures which we classify as non-performing loans will probably increase in the course of 2005. But this will not automatically lead to an increase in the net charge for losses on loans and advances because – as mentioned before – no loan loss provisions are required for exposures in rating category 8–.