Advanced (Internal Ratings Based) Approach
Method to determine a borrower’s counterparty credit risk. Instead of relying on external ratings (as prescribed by the standardised approach), the Advanced Approach permits a bank to determine the risk on the basis of its in-house rating system – provided that this system fulfils the requirements defined by banking regulators for internal rating systems (also refer to ”Internal Rating Model“).
Product description denoting a range of advisory services DVB provides to Shipping Finance, Aviation Finance and Land Transport Finance clients, covering consultancy related to corporate acquisitions and divestments, strategic decision-making on finance and capital structure, loan restructuring, and the funding of acquisitions
A person (either a natural person or a legal entity) acting on behalf of a third party (the principal). In the context of a syndicated loan, the agent acts on behalf of all lenders in the syndicate. The agent is responsible for loan administration and assumes the function of central payment agent.
Anchor Handling Tug and Supply Vessel (AHTS)
Vessel used for offshore operations and primarily aimed at supporting offshore platforms during towage to destination and anchoring operations
Bank or financial institution that is responsible for originating and syndicating a transaction. Arrangers always have a leading role in the syndicate and often also assume the agent function.
Specifically, a transport asset to be financed
Asset & Market Research
Product description for generating in-depth analyses of transport assets and markets – DVB’s Asset & Market Research provides the fundamental basis for the activities of the Bank’s business divisions.
Baltic Exchange Dry Index (BDI)
This price index tracks the costs for the maritime shipping of commodities. The index is used as a leading indicator for global economic developments: a rising BDI index indicates a growing level of global trade activity, whereas a falling BDI index reflects shrinking worldwide commerce.
In 2004, the Basel Committee on Banking Supervision issued the Basel II Framework containing international standards for risk-adjusted capital adequacy of banks and financial services providers. Basel II has replaced the capital adequacy rules of its predecessor, Basel I.
Type of syndication where the arranger does not assume the liquidity and placement risks associated with placing the syndicated loan
Threat of losses from earnings fluctuations which may occur without any change in business strategy, and which are due to changed external circumstances (such as the general economic business climate, the product environment, client behaviour, and the competitive environment)
Financial indicator measuring a company’s business performance. The business volume of a bank comprises its total assets plus irrevocable loan commitments.
Cash and cash equivalents paid and received during a given accounting period
Class I railroad
The US Surface Transportation Board (STB) currently defines a Class I railroad in the United States as ”having annual carrier operating revenues of US$250 million or more“.
A transaction underwritten by a group of banks (usually a minimum of three and a maximum of 20–30 institutions) without the intention to subsequently reduce their exposure by way of syndication
Corporate Governance Code
The German Corporate Governance Code (the ”Code“) provides rules designed to safeguard the efficiency and transparency of corporate governance and control, and to ensure that they are geared towards the long-term growth of enterprise value. The Government commission ”German Corporate Governance Code“ reviews the Code once a year, against the background of ongoing national and international developments, and amends the wording if necessary.
Financial indicator used for the purposes of a company’s cost efficiency management; the cost/income ratio expresses the ratio of operating expenses to operating income.
Counterparty credit risk
Potential losses arising from an unexpected default, or a deterioration in our counterparties’ credit quality. Comprising lending, issuer, counterparty default and country risks, it represents DVB’s most significant individual risk exposure – this reflects the Bank’s business profile.
Country risk is defined as the risk of loan losses or other monetary losses in a particular country, as a result of social/political and/or macro-economic developments or events. This comprises risk traditionally associated with the concept of country risk (conversion and transfer risk, payment freeze or moratorium), plus political and economic policy risks. DVB determines country risks on the basis of primary obligor groups.
Customer lending volume (nominal)
The aggregate of loans and advances to customers, guarantees and indemnities, irrevocable loan commitments, and derivatives. This figure is determined by way of consolidation in line with regulatory rules.
Dead Weight Tonnes (dwt)
Measure for a ship’s carrying capacity, used to specify the maximum permissible displacement (deadweight, usually metric tonnes) when the vessel is loaded to capacity
A recession where a brief recovery is followed by a renewed downturn
DZ BANK Group is part of the German Cooperative Financial Services Network which comprises approximately 1,100 individual cooperative banks. Within the Network, DZ BANK acts as the central institution, and as a commercial bank in its own right.
Export credit agency (ECA)
Organised in a similar way to insurance companies, export credit agencies provide cover for specific export transactions – usually on a statutory basis – and extend loans.
The portion of a transaction allocated to a specific bank, which it retains on its own books. In the event of oversubscription, the final take may be lower than that bank’s commitment.
Purpose-built or converted passenger planes for the transport of air cargo. Examples include the long-haul Boeing 777-200LRF and the short-haul Boeing 737-300SF.
The largest, dominating railway company in a specific market or geographic area
Internal Rating Model (IRM)
Statistical model used to estimate the probability of default associated with a given client, the expected loss given default for the unsecured portion of a loan, and the anticipated extent of the claim at the time of default – the exposure at default
International Financial Reporting Standards (IFRS)/
International Accounting Standards (IAS)
International accounting standards published by the International Accounting Standards Board (IASB). The purpose of IFRS is to provide investors with relevant information about an enterprise – on the financial position and financial performance – to make investment decisions. Moreover, IFRS enhance transparency and improve the comparability of financial statements on an international level.
Also referred to as ”Mandated Lead Arranger and Bookrunner“ – a bank with the mandate for originating, syndicating and executing a transaction. The mandate may also include underwriting the transaction.
DVB’s lending standards
The risk that current and future payment obligations may not be met within the specified time, or to the specified extent
Denotes the business activities of DVB’s subsidiary ITF International Transport Finance Suisse AG, which is actively participating in international senior asset-based lending
Loan-to-value ratio (LTV)
Ratio of the loan amount to the market value of the financed asset, expressed as a percentage. The lower the LTV ratio, the lower the potential risk exposure for the lender in the event of the borrower’s default (in which case the lender would need to realise collateral).
Abbreviation of Minimum Requirements for Risk Management in Banks – a set of rules and regulations issued by the German Federal Financial Supervisory Authority (BaFin) to define the requirements for the risk management systems of German financial institutions
Market price risk
The potential loss that the Bank might incur on its positions through price fluctuations in the equity, foreign exchange and interest rate markets (including associated derivatives)
Medium-term notes (MTN)
Listed medium-term debt securities
Short- to medium-haul aircraft with between 130 and 200 seats, used on routes such as Frankfurt–Amsterdam. It is the most popular category in terms of fleet size. Typical examples are the Airbus A320 and the Boeing 737.
Object Finance Administration and Security Information System: DVB’s proprietary database application for analysing and managing credit portfolios
A lease where the lessor retains all the material risks and rewards incidental to ownership of the leased assets
In accordance with the German Solvency Regulation, DVB defines operational risk (OpRisk) as the risk of losses resulting from inadequate or failed internal processes or systems, from human error, or from external events.
A bank committing to the most junior level of participation in a transaction
The number of kilometres travelled by passenger trains
Measure for the transport performance an operator provides to passengers
Platform Supply Vessel (PSV)
Vessel used for offshore operations and dedicated to the transport of goods and personnel to offshore platforms
Political risk insurance
Insurance cover to protect against political risks
Private Equity Sourcing and Investments
Product description for funds initiated and managed by DVB’s Investment Management division providing the Bank’s clients with equity products to finance their investment projects
Smaller aircraft with between 50 and 110 seats, used on shorter routes with less demand or for off-peak services. Examples include the Bombardier CRJ200 and the Embraer E170.
Return on equity (ROE)
Calculated as the ratio of consolidated net income before taxes to weighted capital, return on equity expresses the return achieved by the owners (shareholders) on their capital invested during a given accounting period
Partial syndication of large-sized loans on the international interbank market, for the purposes of transferring risks and raising liquidity
Special form of leasing, where an asset (for example, a transport asset) is sold and immediately leased back for continued use
An agreement between a large airline and its pilots, to regulate which aircraft may be used by regional partner airlines
Semi-submersible drilling rig (semi-sub)
An offshore platform equipped with a drilling rig which is partly submerged in order to gain in stability
Ship covered bond
Debt security under German law which is backed by long-term lending exposures collateralised by ship mortgages
A small or mid-sized railroad company that operates over a relatively short distance relative to larger, national railroad networks
Risk of future (erroneous) strategic management decisions, which lead to a change in the Group structure or sizeable capital investments, and which are taken in response to, or to counter business risk or other types of risk. The concept of strategic risk also encompasses failure to adapt to a changing business environment.
Banks use stress tests to analyse potential losses which may arise in a crisis environment, in order to take adequate countermeasures in good time.
Structured Asset Financing
Product description, comprising traditional asset finance, as well as tailor-made structured and tax-optimised solutions for complex financing projects in the Shipping Finance, Aviation Finance and Land Transport Finance divisions
The transport of one tonne of goods over a distance of one kilometre.
Generic term for DVB’s Shipping Finance, Aviation Finance and Land Transport Finance divisions
A lender giving a firm commitment – prior to drawdown – to underwrite a portion of the aggregate loan facility, with the intention to place a part of the underwritten portion with one or several third-party banks, by way of syndication
Value at risk
Measure indicating the maximum potential loss which may arise within a given time period, with a given probability (the confidence interval or confidence level)
Value maintenance clause (VMC)
A standard clause included in loan agreements, which comes into effect if the value of collateral falls below a certain share of the outstanding loan amount, thus exceeding the maximum permitted loan-to-value ratio. In these cases, the Bank can request the borrower to make an early repayment of a part of the loan principal, or to furnish additional collateral.
Larger aircraft with between 250 and 450 seats, often used on longer flights such as Frankfurt–Hong Kong. Typical examples are the Airbus A330, the Boeing 747, as well as the new Boeing 787 and Airbus A380.