6-K
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form 6-K
REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR 15d-16
UNDER THE SECURITIES EXCHANGE ACT OF 1934
March 20, 2015
Commission File Number 001-15244
CREDIT SUISSE GROUP AG
(Translation of registrant’s name into English)
Paradeplatz 8, CH 8001 Zurich, Switzerland
(Address of principal executive office)

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or
Form 40-F.
   Form 20-F      Form 40-F   
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):
Note: Regulation S-T Rule 101(b)(1) only permits the submission in paper of a Form 6-K if submitted solely to provide an attached annual report to security holders.
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):
Note: Regulation S-T Rule 101(b)(7) only permits the submission in paper of a Form 6-K if submitted to furnish a report or other document that the registrant foreign private issuer must furnish and make public under the laws of the jurisdiction in which the registrant is incorporated, domiciled or legally organized (the registrant’s “home country”), or under the rules of the home country exchange on which the registrant’s securities are traded, as long as the report or other document is not a press release, is not required to be and has not been distributed to the registrant’s security holders, and, if discussing a material event, has already been the subject of a Form 6-K submission or other Commission filing on EDGAR.
Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
   Yes      No   
If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82-.






Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
 
CREDIT SUISSE GROUP AG
 (Registrant)
 
 
Date: March 20, 2015
By:
/s/ Joachim Oechslin
Joachim Oechslin
Chief Risk Officer
By:
/s/ David R. Mathers
David R. Mathers
Chief Financial Officer


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In various tables, use of “–” indicates not meaningful or not applicable.


Basel III
Pillar 3 – disclosures
2014

Introduction
General
Regulatory development
Location of disclosure
Scope of application
Principles of consolidation
Restrictions on transfer of funds or regulatory capital
Capital deficiencies
Risk management oversight
Capital
Regulatory capital framework
Capital structure under Basel III
Swiss Requirements
Description of regulatory approaches
BIS capital metrics
Swiss capital metrics
Credit risk
General
Credit risk by asset class
Securitization risk in the banking book
Equity type securities in the banking book
Central counterparties risk
Market risk
General
Securitization risk in the trading book
Valuation process
Interest rate risk in the banking book
Overview
Major sources of interest rate risk in the banking book
Governance of models and limits
Risk measurement
Monitoring and review
Risk profile
Reconciliation requirements
Balance sheet
Composition of BIS regulatory capital
List of abbreviations






Introduction
General
The purpose of this Pillar 3 report is to provide updated information as of December 31, 2014 on our implementation of the Basel capital framework and risk assessment processes in accordance with the Pillar 3 requirements. This document should be read in conjunction with the Credit Suisse Annual Report 2014, which includes important information on regulatory capital and risk management (specific references have been made herein to this document).
In addition to Pillar 3 disclosures we disclose the way we manage our risks for internal management purposes in the Annual Report.
> Refer to “Risk management” (pages 126 to 160) in III – Treasury, Risk, Balance sheet and Off-balance sheet in the Credit Suisse Annual Report 2014 for further information regarding the way we manage risk including economic capital as a Group-wide risk management tool.
Certain reclassifications may be made to prior periods to conform to the current period’s presentation.
The Pillar 3 report is produced and published semi-annually, in accordance with Swiss Financial Market Supervisory Authority FINMA (FINMA) requirements.
This report was verified and approved internally in line with our Pillar 3 disclosure policy. The Pillar 3 report has not been audited by the Group’s external auditors. However, it also includes information that is contained within the audited consolidated financial statements as reported in the Credit Suisse Annual Report 2014.
Regulatory development
On January 28, 2015, the Basel Committee on Banking Supervision (BCBS) issued the final standard for the revised Pillar 3 disclosure requirements. The revised disclosure requirements will enable market participants to compare bank’s disclosure of risk-weighted assets. The revisions focus on improving the transparency of the internal model-based approaches that banks use to calculate minimum regulatory capital requirements. The revised requirements will be effective for the year-end 2016 financial reporting.
Location of disclosure
This report provides the Basel III Pillar 3 disclosures to the extent that these required Pillar 3 disclosures are not included in the Credit Suisse Annual Report 2014.
The following table provides an overview of the location of the required Pillar 3 disclosures.
Location of disclosure   
Pillar 3 requirements Pillar 3 Report 2014 Annual Report 2014
Scope of application         
Top corporate entity "Scope of application" (p. 4)
Differences in basis of consolidation Description of differences:
"Principles of consolidation" (p. 4)



List of significant subsidiaries and associated entities:
"Note 39 - Significant subsidiaries and
equity method investments (p. 360 - 362)

Changes in scope of consolidation:
"Note 3 - Business developments" (p. 250)
Restrictions on transfer of funds or
regulatory capital
Overview:
"Restrictions on transfer of funds or
regulatory capital" (p. 4)
Detailed information:
"Liquidity and funding management" (p. 100 - 107)
Capital deficiencies "Capital deficiencies" (p. 4)
Capital structure         
   "Capital structure under Basel III" (p. 5)
"Swiss requirements" (p. 5 - 6)

Capital adequacy         
Group/Bank "Description of regulatory approaches" (p. 6 - 12)
"BIS capital metrics" (p. 13 - 14)
"Swiss capital metrics" (p. 15 - 16)


Significant subsidiaries Refer to "Regulatory disclosures" under
https://www.credit-suisse.com/investors/en/index.jsp

Risk management objectives and policies                    
General description

"Risk management oversight" (p. 127 - 130)
"Risk appetite framework" (p. 130 - 132)
"Risk coverage and management" (p. 133 - 136)
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Location of disclosure (continued)   
Pillar 3 requirements Pillar 3 Report 2014 Annual Report 2014
Credit risk         
Credit risk management overview "Credit risk" (p. 139 - 141)
Credit risk by asset classes
   Gross credit exposure,
   risk-weighted assets
   and capital requirement   
"General" (p. 17 - 20)



   Portfolios subject to
   PD/LGD approach  
"Portfolios subject to PD/LGD approach" (p. 20 - 29)

   Portfolios subject to standardized and
   supervisory risk weights approaches  
"Portfolios subject to standardized and
supervisory risk weights approaches" (p. 29)

   Credit risk mitigation used for
   A-IRB and standardized approaches      
"Credit risk mitigation used for A-IRB and
standardized approaches" (p. 30 - 31)



Netting:
"Derivative instruments" (p. 156 - 158)
"Note 1 - Summary of significant accounting
policies" (p. 241 - 242)
"Note 26 - Offsetting of financial assets and
financial liabilities" (p. 277 - 280)
   Counterparty credit risk        "Counterparty credit risk" (p. 31 - 34)





Effect of a credit downgrade:
"Credit ratings" (p. 107)

Impaired loans by industry distribution/industry distribution
of charges and write-offs:
"Note 18 - Loans, allowance for loan losses and
credit quality" (p. 266 to 269)
   Securitization risk in the
   banking book  
"Securitization risk in the banking book" (p. 35 to 39)

   Equity type securities in the
   banking book  
"Equity type securities in the banking book" (p. 39 to 40)

Market risk         
Market risk management overview Quantitative disclosures:
"General" (p. 41)
Qualitative disclosures:
"Market risk" (p. 136 to 139)
Securitization risk in the trading book "Securitization risk in the trading book" (p. 42 - 47)
Interest rate risk in the banking book                    
   Qualitative disclosures:
"Interest rate risk in the banking book" (p. 48 to 49)
Quantitative disclosures:
"Banking portfolios" (p. 151 to 152)
Operational risk         
Overview:
"Operational risk" (p. 12)
Detailed information:
"Operational risk" (p. 141 - 144)
Composition of capital         
Balance sheet under the regulatory
scope of consolidation
"Balance sheet" (p. 50 to 51)

Composition of capital "Composition of capital" (p. 52 to 54)
Capital instruments         
Main features template
and full terms and conditions
Refer to "Regulatory disclosures" under
https://www.credit-suisse.com/investors/en/index.jsp

Remuneration         
"Compensation" (p. 196 to 228)
G-SIBs indicator         
   Refer to "Regulatory disclosures" under
https://www.credit-suisse.com/investors/en/index.jsp

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Scope of application
The highest consolidated entity in the Group to which the Basel III framework applies is Credit Suisse Group.
> Refer to “Regulation and supervision” (pages 26 to 38) in I – Information on the company and to “Capital management” (pages 108 to 125) in III – Treasury, Risk, Balance sheet and Off-balance sheet in the Credit Suisse Annual Report 2014 for further information on regulation.
Principles of consolidation
For financial reporting purposes, our consolidation principles comply with accounting principles generally accepted in the US (US GAAP). For capital adequacy reporting purposes, however, entities that are not active in banking and finance are not subject to consolidation (i.e. insurance, real estate and commercial companies). Also, FINMA does not require to consolidate private equity and other fund type vehicles for capital adequacy reporting. Further differences in consolidation principles between US GAAP and capital adequacy reporting relate to special purpose entities (SPEs) that are consolidated under a control-based approach for US GAAP but are assessed under a risk-based approach for capital adequacy reporting. The investments into such entities, which are not material to the Group, are treated in accordance with the regulatory rules and are either subject to a risk-weighted capital requirement or a deduction from regulatory capital.
All significant equity method investments represent investments in the capital of banking, financial and insurance (BFI) entities and are subject to a threshold calculation in accordance with the Basel framework.
Restrictions on transfer of funds or regulatory capital
We do not believe that legal or regulatory restrictions constitute a material limitation on the ability of our subsidiaries to pay dividends or our ability to transfer funds or regulatory capital within the Group.
Capital deficiencies
The Group’s subsidiaries which are not included in the regulatory consolidation did not report any capital deficiencies in 2014.
Risk management oversight
Fundamental to our business is the prudent taking of risk in line with our strategic priorities. The primary objectives of risk management are to protect our financial strength and reputation, while ensuring that capital is well deployed to support business activities and grow shareholder value. Our risk management framework is based on transparency, management accountability and independent oversight. Risk measurement models are reviewed by the Model Risk Management team, an independent validation function, and regularly presented to and approved by the relevant oversight committee.
> Refer to “Risk management oversight” (pages 127 to 130), “Risk appetite framework” (pages 130 to 132) and “Risk coverage and management” (pages 133 to 136) in III – Treasury, Risk, Balance sheet and Off-balance sheet – Risk management in the Credit Suisse Annual Report 2014 for information on risk management oversight including risk culture, risk governance, risk organization, risk types and risk appetite and risk limits.
The Group is exposed to several key banking risks such as:
Credit risk (refer to section “Credit risk” on pages 17 to 40);
Market risk (refer to section “Market risk” on pages 41 to 47);
Interest rate risk in the banking book (refer to section “Interest rate risk in the banking book” on pages 48 to 49); and
Operational risk (refer to section “Capital” on page 12).
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Capital
Regulatory capital framework
Effective January 1, 2013, the Basel III framework was implemented in Switzerland along with the Swiss “Too Big to Fail” legislation and regulations thereunder (Swiss Requirements). Our related disclosures are in accordance with our current interpretation of such requirements, including relevant assumptions. Changes in the interpretation of these requirements in Switzerland or in any of our assumptions or estimates could result in different numbers from those shown in this report. Also, our capital metrics fluctuate during any reporting period in the ordinary course of business.
> Refer to “Capital management” (pages 108 to 125) in III – Treasury, Risk, Balance sheet and Off-balance sheet in the Credit Suisse Annual Report 2014 for further information.
Capital structure under Basel III
The BCBS, the standard setting committee within the Bank for International Settlements (BIS), issued the Basel III framework, with higher minimum capital requirements and conservation and countercyclical buffers, revised risk-based capital measures, a leverage ratio and liquidity standards. The framework was designed to strengthen the resilience of the banking sector and requires banks to hold more capital, mainly in the form of common equity. The new capital standards are being phased in from 2013 through 2018 and will be fully effective January 1, 2019 for those countries that have adopted Basel III.
> Refer to the table “Basel III phase-in requirements for Credit Suisse” (page 110) in III – Treasury, Risk, Balance sheet and Off-balance sheet – Capital management – Regulatory capital framework in the Credit Suisse Annual Report 2014 for capital requirements and applicable effective dates during the phase-in period.
Under Basel III, the minimum common equity tier 1 (CET1) requirement is 4.5% of risk-weighted assets. In addition, a 2.5% CET1 capital conservation buffer is required to absorb losses in periods of financial and economic stress.
A progressive buffer between 1% and 2.5% (with a possible additional 1% surcharge) of CET1, depending on a bank’s systemic importance, is an additional capital requirement for global systemically important banks (G-SIB). The Financial Stability Board has identified us as a G-SIB and requires us to maintain a 1.5% progressive buffer.
In addition to the CET1 requirements, there is also a requirement for 1.5% additional tier 1 capital and 2% tier 2 capital. These requirements may also be met with CET1 capital. To qualify as additional tier 1 under Basel III, capital instruments must provide for principal loss absorption through a conversion into common equity or a write-down of principal feature. The trigger for such conversion or write-down must include a CET1 ratio of at least 5.125%.
Basel III further provides for a countercyclical buffer that could require banks to hold up to 2.5% of CET1 or other capital that would be available to fully absorb losses. This requirement is expected to be imposed by national regulators where credit growth is deemed to be excessive and leading to the build-up of system-wide risk.
Capital instruments that do not meet the strict criteria for inclusion in CET1 are excluded. Capital instruments that would no longer qualify as tier 1 or tier 2 capital will be phased out.
Swiss Requirements
The legislation implementing the Basel III framework in Switzerland in respect of capital requirements for systemically relevant banks goes beyond Basel III’s minimum standards, including requiring us, as a systemically relevant bank, to have the following minimum, buffer and progressive components.
> Refer to the chart “Swiss capital and leverage ratio phase-in requirements for Credit Suisse” (page 111) in III – Treasury, Risk, Balance sheet and Off-balance sheet – Capital management – Regulatory capital framework in the Credit Suisse Annual Report 2014 for Swiss capital requirements and applicable effective dates during the phase-in period.
The minimum requirement of CET1 capital is 4.5% of risk-weighted assets.
The buffer requirement is 8.5% and can be met with additional CET1 capital of 5.5% of risk-weighted assets and a maximum of 3% of high-trigger capital instruments. High-trigger capital instruments must convert into common equity or be written off if the CET1 ratio falls below 7%.
The progressive component requirement is dependent on our size (leverage ratio exposure) and the market share of our domestic systemically relevant business. Effective in 2014, FINMA set our progressive component requirement at 3.66% for 2019. In July 2014, FINMA notified us that, effective in 2015, the progressive component requirement for 2019 will be increased from 3.66% to 4.05% due to the latest assessment of our relevant market share. The progressive component requirement may be met with CET1 capital or low-trigger capital instruments. In order to qualify, low-trigger capital instruments must convert into common equity or be written off if the CET1 ratio falls below a specified percentage, the lowest of which may be 5%. In addition, until the end of 2017, the progressive component requirement may also be met with high-trigger capital instruments. Both high and low-trigger capital instruments must comply with the Basel III minimum requirements for tier 2 capital (including subordination, point-of-non-viability loss absorption and minimum maturity).
Similar to Basel III, the Swiss Requirements include a supplemental countercyclical buffer of up to 2.5% of risk-weighted assets that can be activated during periods of excess credit growth. Effective September 2013, the countercyclical capital buffer was activated and initially required banks to hold CET1 capital in the amount of 1% of their risk-weighted assets pertaining to mortgages that finance residential property in Switzerland. In January 2014, upon the request of the Swiss National Bank, the
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Swiss Federal Council further increased the countercyclical buffer from 1% to 2%, effective June 30, 2014. As of the end of 2014, our countercyclical buffer, which applies pursuant to both BIS and FINMA requirements, was CHF 297 million, which is equivalent to an additional requirement of 0.1% of CET1 capital.
In 2013, FINMA introduced increased capital charges for mortgages that finance owner occupied residential property in Switzerland (mortgage multiplier) to be phased in through January 1, 2019. The mortgage multiplier applies for purposes of both BIS and FINMA requirements.
In December 2013, FINMA issued a decree (FINMA Decree)specifying capital adequacy requirements for the Bank, on a stand-alone basis (Bank parent company), and the Bank and the Group, each on a consolidated basis, as systemically relevant institutions.
Beginning in 1Q14, we adjusted the presentation of our Swiss capital metrics and terminology and we now refer to Swiss Core Capital as Swiss CET1 capital and Swiss Total Capital as Swiss total eligible capital. Swiss Total Capital previously reflected the tier 1 participation securities, which were fully redeemed in 1Q14. Swiss CET1 capital consists of BIS CET1 capital and certain other Swiss adjustments. Swiss total eligible capital consists of Swiss CET1 capital, high-trigger capital instruments, low-trigger capital instruments, additional tier 1 instruments and tier 2 instruments subject to phase-out and deductions from additional tier 1 and tier 2 capital.
> Refer to “Capital management” (pages 108 to 125) in III – Treasury, Risk, Balance sheet and Off-balance sheet in the Credit Suisse Annual Report 2014 for information on our capital structure, eligible capital and shareholders’ equity, capital adequacy and leverage ratio requirements under Basel III and Swiss Requirements.
Description of regulatory approaches
The Basel framework provides a range of options for determining the capital requirements in order to allow banks and supervisors the ability to select approaches that are most appropriate. In general, Credit Suisse has adopted the most advanced approaches, which align with the way risk is internally managed. The Basel framework focuses on credit risk, market risk, operational risk and interest rate risk in the banking book. The regulatory approaches for each of these risk exposures and the related disclosures under Pillar 3 are set forth below.
Credit risk
Credit risk by asset class
The Basel framework permits banks a choice between two broad methodologies in calculating their capital requirements for credit risk by asset class, the internal ratings-based (IRB) approach or the standardized approach. Off-balance-sheet items are converted into credit exposure equivalents through the use of credit conversion factors (CCF).
The majority of our credit risk by asset class is with institutional counterparties (sovereigns, other institutions, banks and corporates) and arises from lending and trading activity in the Investment Banking and Private Banking & Wealth Management divisions. The remaining credit risk by asset class is with retail counterparties and mostly arises in the Private Banking & Wealth Management division from residential mortgage loans and other secured lending, including loans collateralized by securities.
> Refer to “Credit risk by asset class” in section “Credit risk” on pages 17 to 34 for further information.
Advanced-internal ratings-based approach
Under the IRB approach, risk weights are determined by using internal risk parameters and applying an asset value correlation multiplier uplift where exposures are to financial institutions meeting regulatory defined criteria. We have received approval from FINMA to use, and have fully implemented, the advanced-internal ratings-based (A-IRB) approach whereby we provide our own estimates for probability of default (PD), loss given default (LGD) and exposure at default (EAD).
PD parameters capture the risk of a counterparty defaulting over a one-year time horizon. PD estimates are mainly derived from models tailored to the specific business of the respective obligor. The models are calibrated to the long run average of annual internal or external default rates where applicable. For portfolios with a small number of empirical defaults (less than 20), low default portfolio techniques are used.
LGD parameters consider seniority, collateral, counterparty industry and in certain cases fair value markdowns. LGD estimates are based on an empirical analysis of historical loss rates and are calibrated to reflect time and cost of recovery as well as economic downturn conditions. For much of the Private Banking & Wealth Management loan portfolio, the LGD is primarily dependent upon the type and amount of collateral pledged. The credit approval and collateral monitoring process are based on loan-to-value limits. For mortgages (residential or commercial), recovery rates are differentiated by type of property.
EAD is either derived from balance sheet values or by using models. EAD for a non-defaulted facility is an estimate of the expected exposure upon default of the obligor. Estimates are derived based on a CCF approach using default-weighted averages of historical realized conversion factors on defaulted loans by facility type. Estimates are calibrated to capture negative operating environment effects.
We have received approval from FINMA to use the internal model method for measuring counterparty risk for the majority of our derivative and secured financing exposures.
Risk weights are calculated using either the PD/LGD approach or the supervisory risk weights (SRW) approach for certain types of specialized lending.
Standardized approach
Under the standardized approach, risk weights are determined either according to credit ratings provided by recognized external credit assessment institutions or, for unrated exposures, by using the applicable regulatory risk weights. Less than 10% of our credit risk by asset class is determined using this approach.
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7
Comparing standardized approach and internal ratings-based approach for calculating risk-weighted assets for credit risk
We received regulatory approval to use the A-IRB approach for calculating our Pillar 1 capital charge for credit risk. The A-IRB approach is used for the vast majority of credit risk exposures, with the standardized approach used for only a relatively small proportion of credit exposures.
The BCBS is currently consulting on policy measures that will change many of the current standardized approaches. This is aimed at improving the risk sensitivity of standardized approaches so that they align more closely with internal model approaches. Consequently, FINMA has requested that we discloses a qualitative comparison of credit risk risk-weighted assets under the A-IRB approach and the current standardized approach.
Key methodological differences
The differences between risk-weighted assets calculated under the A-IRB approach and the standardized approach are driven by the approaches used for measuring the EAD and the risk weights applied to the counterparties. Under the A-IRB approach, the maturity of a transaction, internal estimates of the PD and downturn LGD are used as inputs to a Basel risk-weight formula for calculating risk-weighted assets. Under the standardized approach, risk weights are driven by external rating agencies, and are less granular.
The following table summarizes the key differences between the standardized approach and the A-IRB approach.
Key differences between the standardized approach and the A-IRB approach
Standardized approach A-IRB approach Key impact
EAD for
derivatives   
Current Exposure Method is simplistic
(market value and add-on):
BCBS to replace it in 2017
Internal Measurement Method (IMM)
allows monte-carlo simulation to
estimate exposure
For large diversified derivatives portfolios,
standardized approach EAD is higher than
IMM modeled EAD
Differentiates add-ons by five exposure
types and three maturity buckets only
Ability to net and offset risk factors within the
portfolio (i.e. benefit from diversification)
Impact applies across all asset classes
Limited ability to net
Application of a 1.2 - 1.4 multiplier on
exposure estimate


Variability in holding period applied to collateralized
transactions, reflecting liquidity risks

Risk
weighting   
Reliance on rating agencies: where no rating is
available a 100% risk weight is applied (i.e. for
most small and medium size enterprises and funds)
Reliance on internal ratings where each
counterparty/transaction receives a rating
A-IRB approach produces lower risk-weighted
assets for high quality short term transactions
Crude risk weight differentiation with 4 key weights:
20%, 50%, 100%, 150% (and 0% for AAA
sovereigns, 35% for mortgages, 75% for retail)
Granular risk sensitive risk weights differentiation
via individual PDs and LGDs
Standardized approach produces lower risk-weighted
assets for non-investment grade and long-term
transactions
No differentiation for transaction features
PD is floored to prevent 0% risk weight
on AAA sovereigns
Impact relevant across all asset classes

LGD captures transaction quality features
incl. collateralization

Application of a 1.06 multiplier
Risk
mitigation   
Limited recognition of risk mitigation

Risk mitigation recognized via
risk sensitive LGD or EAD
Standardized approach risk-weighted assets
higher than A-IRB approach risk-weighted assets
for most collaterals
Restricted list of eligible collateral
Wider variety of collateral types eligible
Impact particularly relevant for lombard lending
and structured finance transactions
Conservative and crude regulatory haircuts
Maturity
in risk
weight   
No differentiation for maturity of transactions,
except for interbank exposures in a coarse
manner
No internal modelling of maturity

Standardized approach risk-weighted assets
higher than A-IRB approach risk-weighted assets
for most collaterals



Regulatory risk-weighted assets function
considers maturity: the longer the maturity
the higher the risk weight
(see chart "Risk weight by maturity")
A-IRB approach produces lower risk-weighted
assets for high quality short-term transactions

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The following chart compares risk weights under the standardized approach and the A-IRB approach for counterparties across the rating spectrum. Under the standardized approach, risk weights are very crude when compared to those under the A-IRB approach. The chart also shows that the A-IRB approach produces lower risk weights than the standardized approach for high credit quality assets, with this trend reversed for low credit quality assets.
The following chart provides a comparison of the risk weights under the standardized approach and the A-IRB approach for transactions with maturities between zero and five years for counterparties with ratings ranging from A to BB.
Risk weights under the standardized approach are not sensitive to a transaction’s maturity whereas risk weights under the A-IRB approach are sensitive to the maturity. Under the A-IRB approach, low risk counterparties, such as investment grade and senior secured, receive significantly lower risk weights than under the standardized approach across the entire range of maturities. Under the A-IRB approach, high risk counterparties, such as non-investment grade and senior unsecured, receive lower risk weights only for maturities less than two years compared to the standardized approach. Note that under the A-IRB approach, the maturity sensitivity is not internally modelled and is exclusively driven by the BCBS specification of the risk weighting function.
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The following table further illustrates the risk differentiation achieved under the A-IRB approach. Low risk corporates receive lower risk weights under the A-IRB approach. High risk corporates receive higher risk weights under the A-IRB approach. The A-IRB approach risk weights have greater variability depending on maturity.
Risk differentiation of the A-IRB approach

Branch


Cash flow
to net
turnover (%)



Liquidity
ratio (%)



Equity
ratio (%)

Collateral
value
based
LTV (%)
A-IRB
approach
risk
weight
range (%)
Stan-
dardized
approach
risk
weight (%)
Low risk corporate 12 472 77 52 5 - 10 100
High risk corporate (5) 100 29 no pledged assets 120 -130 100
Actual Credit Suisse risk-weighted assets levels by regulatory asset class
Sovereign asset class: For sovereign exposures, the risk-weighted assets under the standardized approach are lower than the risk-weighted assets under the A-IRB approach. This is driven by the composition of our sovereign portfolio which is focused on AAA to AA- counterparties. These counterparties receive a risk weights of zero percent under the standardized approach and non-zero risk weights under the A-IRB approach for example when using internal PDs and LGDs.
Corporate and bank asset class: For corporate and bank exposures, the risk-weighted assets under the standardized approach are higher than the risk-weighted assets under the A-IRB approach. This is driven by the more restrictive recognition of collateral agreements allowed under the standardized approach, as well as the treatment applied to derivatives which leads to higher EAD under the standardized approach than under the A-IRB approach. The absence of external ratings for a number of corporate counterparties also contributes to the difference between risk-weighted assets as these counterparties attract risk weights of 100% under the standardized approach as opposed to lower and more risk sensitive risk weights under the A-IRB approach.
For exposures to other institutions, e.g. public sector entities, the risk-weighted assets under the standardized approach are higher than those under the risk-weighted assets under the A-IRB approach. This is driven by the absence of external ratings for a number of counterparties which receive risk weights of 100% under the standardized approach. These risk weights are higher than the more risk sensitive weights applied under the A-IRB approach.
Retail asset class: For retail residential mortgage exposures, the risk-weighted assets under the standardized approach are higher than those under the A-IRB approach This is because the majority of exposures attract risk weights of 35% under the standardized approach as opposed to lower risk weights under the A-IRB approach. For lombard lending, the risk-weighted assets under the standardized approach are lower than the risk-weighted assets under the A-IRB approach. This is because for most transactions the risk weights under the A-IRB approach are driven by internal collateral haircuts which are higher than the haircuts under the standardized approach.
Conclusion
Overall, risk-weighted assets of Credit Suisse under the standardized approach are higher than the risk-weighted assets under the A-IRB approach. However, this simple comparison of risk-weighted assets under the standardized approach and A-IRB approach, without taking into account the underlying detailed portfolio composition, maturity profile and applied risk mitigation, can be misleading when comparing capitalization across banks.
We believe benchmark analysis performed by regulators and industry associations are more useful exercises in assessing the degree of conservativeness of internal models. In the industry associations’ 2013 benchmark analysis, our calibration of internal PD and LGD models is close to the industry mean.
We believe that risk-weighted assets under the A-IRB approach are more reflective of the economic risk because the risk-weighted assets are founded in empirical evidence, regularly backtested, and provide greater risk differentiation. In addition, the A-IRB approach provides a strong link between capital requirements and business drivers. This promotes a proactive risk culture at the origination of a transaction and strong capital consciousness within the organization.
Securitization risk in the banking book
For securitizations, the regulatory capital requirements are calculated using IRB approaches (the RBA and the SFA) and the standardized approach in accordance with the prescribed hierarchy of approaches in the Basel regulations. External ratings used in regulatory capital calculations for securitization risk exposures in the banking book are obtained from Fitch, Moody’s, Standard & Poor’s or Dominion Bond Rating Service.
> Refer to “Securitization risk in the banking book” in section “Credit risk” on pages 35 to 39 for further information on the IRB approaches and the standardized approach.
10
Equity type securities in the banking book
For equity type securities in the banking book except for significant investments in BFI entities, risk weights are determined using the IRB Simple approach based on the equity sub-asset type (listed equity and all other equity positions). Significant investments in BFI entities (i.e. investments in the capital of BFI entities that are outside the scope of regulatory consolidation, where the Group owns more than 10% of the issued common share capital of the entity) are subject to a threshold treatment as outlined below in the section “Exposures below 15% threshold”. Where equity type securities represent non-significant investments in BFI entities (i.e., investments in the capital of BFI entities that are outside the scope of regulatory consolidation, where the Group does not own more than 10% of the issued common share capital of the entity), a threshold approach is applied that compares the total amount of non-significant investments in BFI entities (considering both trading and banking book positions) to a 10% regulatory defined eligible capital amount. The amount above the threshold is phased-in as a capital deduction and the amount below the threshold continues to be risk-weighted according to the relevant trading book and banking book approaches.
> Refer to “Equity type securities in the banking book” in section “Credit risk” on pages 39 to 40 for further information.
Credit valuation adjustment risk
Basel III introduced a new regulatory capital charge, Credit Valuation Adjustment (CVA), designed to capture the risk associated with potential mark-to-market losses associated with the deterioration in the creditworthiness of a counterparty. 
Under Basel III, banks are required to calculate capital charges for CVA under either the Standardized CVA approach or the Advanced CVA approach (ACVA). The CVA rules stipulate that where banks have permission to use market risk Value-at-Risk (VaR) and counterparty risk Internal Models Method (IMM), they are to use the ACVA unless their regulator decides otherwise. FINMA has confirmed that the ACVA should be used for both IMM and non-IMM exposures.
The regulatory CVA capital charge applies to all counterparty exposures arising from over-the-counter (OTC) derivatives, excluding those with central counterparties (CCP). Exposures arising from Securities Financing Transactions (SFT) are not required to be included in the CVA charge unless they could give rise to a material loss. FINMA has confirmed that Credit Suisse can exclude these exposures from the regulatory capital charge.
Central counterparties risk
The Basel III framework provides specific requirements for exposures the Group has to CCP arising from OTC derivatives, exchange-traded derivative transactions and SFT. Exposures to CCPs which are considered to be qualifying CCPs by the regulator will receive a preferential capital treatment compared to exposures to non-qualifying CCPs.
The Group can incur exposures to CCPs as either a clearing member (house or client trades), or as a client of another clearing member. Where the Group acts as a clearing member of a CCP on behalf of its client (client trades), it incurs an exposure to its client as well as an exposure to the CCP. Since the exposure to the client is to be treated as a bilateral trade, the risk-weighted assets from these exposures are represented under “credit risk by asset class”. Where the Group acts as a client of another clearing member the risk-weighted assets from these exposures are also represented under “credit risk by asset class”.
The exposures to CCP (represented as “Central counterparties (CCP) risks”) consist of trade exposure, default fund exposure and contingent exposure based on trade replacement due to a clearing member default. While the trades exposure includes the current and potential future exposure of the clearing member (or a client) to a CCP arising from the underlying transaction and the initial margin posted to the CCP, the default fund exposure is arising from default fund contributions to the CCP.
Settlement risk
Regulatory fixed risk weights are applied to settlement exposures. Settlement exposures arise from unsettled or failed transactions where cash or securities are delivered without a corresponding receipt.
Exposures below 15% threshold
Significant investments in BFI entities, mortgage servicing rights and deferred tax assets that arise from temporary differences are subject to a threshold approach, whereby individual amounts are compared to a 10% threshold of regulatory defined eligible capital. In addition amounts below the individual 10% thresholds are aggregated and compared to a 15% threshold of regulatory defined eligible capital. The amount that is above the 10% threshold is phased-in as a CET1 deduction. The amount above the 15% threshold is phased-in as a CET1 deduction and the amount below is risk weighted at 250%.
Other items
Other items include risk-weighted assets related to immaterial portfolios for which we have received approval from FINMA to apply a simplified Institute Specific Direct Risk Weight as well as risk-weighted assets related to items that were risk-weighted under Basel II.5 and are phased in as capital deductions under Basel III.
Market risk
We use the advanced approach for calculating the capital requirements for market risk for the majority of our exposures. The following advanced approaches are used: the internal models approach (IMA) and the standardized measurement method (SMM).
We use the standardized approach to determine our market risk for a small population of positions which represent an immaterial proportion of our overall market risk exposure.
> Refer to section “Market risk” on pages 40 to 47 for further information on market risk.
11
Internal models approach
The market risk IMA framework includes regulatory Value-at-Risk (VaR), stressed VaR, risks not in VaR (RNIV) and Incremental Risk Charge (IRC). In 2014 Comprehensive Risk Measure was discontinued due to the small size of the correlation trading portfolio. We now use the standard rules for this portfolio.
Regulatory VaR, stressed VaR and risks not in VaR
We have received approval from FINMA, as well as from certain other regulators of our subsidiaries, to use our VaR model to calculate trading book market risk capital requirements under the IMA. We apply the IMA to the majority of the positions in our trading book. We continue to receive regulatory approval for ongoing enhancements to the VaR methodology, and the VaR model is subject to regular reviews by regulators. Stressed VaR replicates a VaR calculation on the Group’s current portfolio taking into account a one-year observation period relating to significant financial stress and helps to reduce the pro-cyclicality of the minimum capital requirements for market risk. The VaR model does not cover all identified market risk types and as such we have also adopted a RNIV category which was approved by FINMA in 2012.
Incremental Risk Charge
The IRC capitalizes issuer default and migration risk in the trading book, such as bonds or credit default swaps (CDS), but excludes securitizations and correlation trading. We have received approval from FINMA, as well as from certain other regulators of our subsidiaries, to use our IRC model. We continue to receive regulatory approval for ongoing enhancements to the IRC methodology, and the IRC model is subject to regular reviews by regulators.
The IRC model assesses risk at 99.9% confidence level over a one year time horizon assuming that positions are sold and replaced one or more times, depending on their liquidity which is modeled by the liquidity horizon. The portfolio loss distribution is estimated using an internally developed credit portfolio model designed to the regulatory requirements.
The liquidity horizon represents time required to sell the positions or hedge all material risk covered by the IRC model in a stressed market. Liquidity horizons are modelled according to the requirements imposed by Basel III guidelines.
The IRC model and liquidity horizon methodology have been validated by the Model Risk Management team in accordance with the firms validation umbrella policy and Risk Model Validation Sub-Policy for IRC.
Standardized measurement method
We use the SMM which is based on the ratings-based approach (RBA) and the supervisory formula approach (SFA) for securitization purposes (see also Securitization risk in the banking book) and other supervisory approaches for trading book securitization positions covering the approach for nth-to-default products and portfolios covered by the weighted average risk weight approach.
> Refer to “Securitization risk in the trading book” in section “Market risk” on pages 42 to 47 for further information on the standardized measurement method and other supervisory approaches.
Operational risk
We have used an internal model to calculate the regulatory capital requirement for operational risk under the Advanced Measurement Approach (AMA) since 2008. In 2014, we introduced an enhanced internal model that incorporated recent developments regarding operational risk measurement methodology and associated regulatory guidance. FINMA approved the revised model for calculating the regulatory capital requirement for operational risk with effect from January 1, 2014. We view the revised model as a significant enhancement to our capability to measure and understand the operational risk profile of the Group that is also more conservative compared with the previous approach.
The model is based on a loss distribution approach that uses historical data on internal and relevant external losses of peers to generate frequency and severity distributions for a range of potential operational risk loss scenarios, such as an unauthorized trading incident or a material business disruption. Business experts and senior management review, and may adjust, the parameters of these scenarios to take account of business environment and internal control factors, such as risk and control self-assessment results and risk and control indicators, to provide a forward-looking assessment of each scenario. The AMA capital calculation approved by FINMA includes all litigation-related provisions and also an add-on component relating to the aggregate range of reasonably possible litigation losses that are disclosed in our financial statements but are not covered by existing provisions. Insurance mitigation is included in the regulatory capital requirement for operational risk where appropriate, by considering the level of insurance coverage for each scenario and incorporating haircuts as appropriate. The internal model then uses the adjusted parameters to generate an overall loss distribution for the Group over a one-year time horizon. The AMA capital requirement represents the 99.9th percentile of this overall loss distribution. In 2014, we introduced a more risk-sensitive approach to allocating the AMA capital requirement to businesses that is designed to be more forward looking and incentivize appropriate risk management behaviors.
> Refer to “Operational risk” (pages 141 to 144) in III – Treasury, Risk, Balance sheet and Off-balance sheet – Risk management in the Credit Suisse Annual Report 2014 for information on operational risk.
Non-counterparty-related risk
Regulatory fixed risk weights are applied to non-counterparty-related exposures. Non-counterparty-related exposures arise from holdings of premises and equipment, real estate and investments in real estate entities.
12
BIS capital metrics
Regulatory capital and ratios
Regulatory capital is calculated and managed according to Basel regulations and used to determine BIS ratios. BIS ratios compare eligible CET1 capital, tier 1 capital and total capital with BIS risk-weighted assets.
> Refer to “Risk-weighted assets” (pages 116 to 118) in III – Treasury, Risk, Balance sheet and Off-balance sheet – Capital management – BIS capital metrics in the Credit Suisse Annual Report 2014 for information on risk-weighted assets movements in 2014.
Summary of BIS risk-weighted assets and capital requirements - Basel III 
end of    2014 2013
Risk-
weighted
assets
Capital
require-
ment
1 Risk-
weighted
assets
Capital
require-
ment
1
CHF million   
Credit risk 
   Advanced-IRB  123,854 9,908 116,772 9,342
   Standardized  3,789 303 3,640 291
Credit risk by asset class 127,643 10,211 120,412 9,633
   Advanced-IRB  11,849 948 14,935 1,195
   Standardized  761 61 0 0
Securitization risk in the banking book 12,610 1,009 14,935 1,195
   Advanced – IRB Simple  15,292 1,223 9,833 787
Equity type securities in the banking book 15,292 1,223 9,833 787
   Advanced CVA  15,092 1,207 10,650 852
   Standardized CVA  38 3 56 4
Credit valuation adjustment risk 15,130 1,210 10,706 856
   Standardized - Fixed risk weights  12,640 1,011 12,500 1,000
Exposures below 15% threshold 2 12,640 1,011 12,500 1,000
   Advanced  3,427 274 1,906 152
Central counterparties (CCP) risk 3,427 274 1,906 152
   Standardized - Fixed risk weights  552 44 512 41
Settlement risk 552 44 512 41
   Advanced  1,050 84 281 22
   Standardized  4,319 346 4,546 364
Other items 3 5,369 430 4,827 386
Total credit risk  192,663 15,413 175,631 14,050
Market risk 
   Advanced  34,049 2,724 38,719 3,098
   Standardized  419 34 414 33
Total market risk  34,468 2,758 39,133 3,131
Operational risk 
   Advanced measurement  58,413 4,673 53,075 4,246
Total operational risk  58,413 4,673 53,075 4,246
Non-counterparty-related risk 
   Standardized - Fixed risk weights  5,866 469 6,007 481
Total non-counterparty-related risk  5,866 469 6,007 481
Total BIS risk-weighted assets and capital requirements  291,410 23,313 273,846 21,908
   of which advanced  263,026 21,042 246,171 19,694
   of which standardized  28,384 2,271 27,675 2,214
1
Calculated as 8% of risk-weighted assets.
2
Exposures below 15% threshold are risk-weighted at 250%. Refer to table "Additional information" in section "Reconciliation requirements" for further information.
3
Includes risk-weighted assets of CHF 3,853 million and CHF 4,158 million as of the end of 2014 and 2013, respectively, related to items that were risk-weighted under Basel II.5 and are phased in as capital deductions under Basel III. Refer to table "Additional information" in section "Reconciliation requirements" for further information.
13
BIS eligible capital - Basel III
   Group Bank
end of 2014 2013 2014 2013
Eligible capital (CHF million)   
CET1 capital 43,322 42,989 40,853 37,700
Total tier 1 capital 49,804 46,061 47,114 40,769
Total eligible capital  60,751 56,288 58,111 52,346
The following table presents the Basel III phase-in requirements for each of the relevant capital components and discloses the Group’s and the Bank’s current capital metrics against those requirements.
BIS capital ratios - Basel III - Group
end of    2014 2013
Ratio Requirement 2 Excess Ratio Requirement 2 Excess
Capital ratios (%)   
Total CET1 1 14.9 4.0 10.9 15.7 3.5 12.2
Tier 1 17.1 5.5 11.6 16.8 4.5 12.3
Total capital 20.8 8.0 12.8 20.6 8.0 12.6
1
Capital conservation buffer and G-SIB buffer requirement will be phased in from January 1, 2016 through January 1, 2019.
2
Excludes countercyclical buffer that was required as of September 30, 2013. As of the end of 2014 and 2013, our countercyclical buffer was CHF 297 million and CHF 144 million, which is equivalent to an additional requirement of 0.1% and 0.05% of CET1 capital, respectively.
BIS capital ratios - Basel III - Bank
end of    2014 2013
Ratio Requirement 2 Excess Ratio Requirement 2 Excess
Capital ratios (%)   
Total CET1 1 14.4 4.0 10.4 14.3 3.5 10.8
Tier 1 16.6 5.5 11.1 15.4 4.5 10.9
Total capital 20.5 8.0 12.5 19.8 8.0 11.8
1
Capital conservation buffer and G-SIB buffer requirement will be phased in from January 1, 2016 through January 1, 2019.
2
Excludes countercyclical buffer that was required as of September 30, 2013. As of the end of 2014 and 2013, our countercyclical buffer was CHF 246 million and CHF 121 million, which is equivalent to an additional requirement of 0.09% and 0.05% of CET1 capital, respectively.
14
Swiss capital metrics
Swiss regulatory capital and ratios
> Refer to “Swiss Requirements” for further information on Swiss regulatory requirements.
As of the end of 2014, our Swiss CET1 capital and Swiss total capital ratios were 14.8% and 20.7%, respectively, compared to the Swiss capital ratio phase-in requirements of 6.75% and 10.18%, respectively.
Swiss risk-weighted assets - Group
end of    2014 2013
Ad-
vanced
Stan-
dardized

Total
Ad-
vanced
Stan-
dardized

Total
Risk-weighted assets (CHF million)   
Total BIS risk-weighted assets  263,026 28,384 291,410 246,171 27,675 273,846
Impact of differences in thresholds 1 1 (33) (32) (17) 415 398
Other multipliers 2 1,090 1,090 617 617
Total Swiss risk-weighted assets  264,117 28,351 292,468 246,771 28,090 274,861
1
Represents the impact on risk-weighted assets of differences in regulatory thresholds resulting from Swiss regulatory CET1 adjustments.
2
Primarily includes differences in credit risk multiplier.
Swiss statistics - Basel III
   Group Bank
end of 2014 2013 2014 2013
Capital development (CHF million)   
CET1 capital 43,322 42,989 40,853 37,700
Swiss regulatory adjustments 1 (133) 1,658 (111) 1,711
Swiss CET1 capital 2 43,189 44,647 40,742 39,411
High-trigger capital instruments 8,893 3 7,743 8,944 3 7,743
Low-trigger capital instruments 9,406 4 6,005 8,480 5 5,163
Additional tier 1 and tier 2 instruments subject to phase-out 6 6,663 6,669
Deductions from additional tier 1 and tier 2 capital 6 (7,533) (6,835)
Swiss total eligible capital 2 60,618 58,395 58,000 52,317
Capital ratios (%)   
Swiss CET1 ratio 14.8 16.2 14.3 14.9
Swiss total capital ratio 20.7 21.2 20.4 19.7
1
Includes adjustments for certain unrealized gains outside the trading book and, in 2013, also included tier 1 participation securities, which were redeemed in 1Q14.
2
Previously referred to as Swiss Core Capital and Swiss Total Capital, respectively.
3
Consists of CHF 6.2 billion additional tier 1 instruments and CHF 2.7 billion tier 2 instruments.
4
Consists of CHF 5.1 billion additional tier 1 instruments and CHF 4.3 billion tier 2 instruments.
5
Consists of CHF 4.2 billion additional tier 1 instruments and CHF 4.3 billion tier 2 instruments.
6
Reflects the FINMA Decree, which was effective in 1Q14.
15
The following table presents the Swiss Requirements for each of the relevant capital components and discloses our current capital metrics against those requirements.
Swiss capital requirements and coverage
   Group Bank
   Capital requirements Capital requirements

end of
Minimum
component
Buffer
component
Progressive
component

Excess

2014
Minimum
component
Buffer
component
Progressive
component

Excess

2014
Risk-weighted assets (CHF billion)   
Swiss risk-weighted assets  292.5 284.0
2014 Swiss capital requirements   1
Minimum Swiss total capital ratio 4.0% 4.5% 2 1.68% 10.18% 4.0% 4.5% 1.68% 10.18%
Minimum Swiss total eligible capital (CHF billion) 11.7 13.2 4.9 29.8 11.4 12.8 4.8 28.9
Swiss capital coverage (CHF billion)   
Swiss CET1 Capital 11.7 8.0 23.4 43.2 11.4 7.8 21.6 40.7
High-trigger capital instruments 5.1 3.8 8.9 5.0 4.0 8.9
Low-trigger capital instruments 4.9 4.5 9.4 4.8 3.7 8.5
Additional tier 1 and tier 2 instruments subject to phase-out 6.7 6.7 6.7 6.7
Deductions from additional tier 1 and tier 2 capital (7.5) (7.5) (6.8) (6.8)
Swiss total eligible capital  11.7 13.2 4.9 30.9 60.6 11.4 12.8 4.8 29.1 58.0
Capital ratios (%)   
Swiss total capital ratio 4.0% 4.5% 1.68% 10.5% 20.7% 4.0% 4.5% 1.68% 10.2% 20.4%
Rounding differences may occur.
1
The Swiss capital requirements are based on a percentage of risk-weighted assets.
2
Excludes countercyclical buffer that was required as of September 30, 2013.
16
Credit risk
General
Credit risk consists of the following categories:
Credit risk by asset class
Securitization risk in the banking book
Equity type securities in the banking book
CVA risk
Exposures below 15% threshold
CCP risk
Settlement risk
Other items
> Refer to “Credit risk” (pages 139 to 141 and pages 152 to 160) in III – Treasury, Risk, Balance sheet and Off-balance sheet – Risk management in the Credit Suisse Annual Report 2014 for information on our credit risk management approach, ratings and risk mitigation and impaired exposures and allowances.
Credit risk by asset class
General
For regulatory purposes, we categorize our exposures into asset classes with different underlying risk characteristics including type of counterparty, size of exposure and type of collateral. The asset class categorization is driven by regulatory rules from the Basel framework.
The following table presents the description of credit risk by asset class under the Basel framework (grouped as either institutional or retail) and the related regulatory approaches used.
Credit risk by asset class - Overview
Asset class Description Approaches
Institutional credit risk (mostly in the Investment Banking division)   
Sovereigns Exposures to central governments, central banks, BIS, the International
Monetary Fund, the European Central Bank and eligible Multilateral
Development Banks (MDB).
PD/LGD for most portfolios
Standardized for banking book treasury liquidity positions
and other assets
Other institutions Exposures to public bodies with the right to raise taxes or whose
liabilities are guaranteed by a public sector entity.
PD/LGD for most portfolios
Standardized for banking book treasury liquidity positions
and other assets
Banks Exposures to banks, securities firms, stock exchanges and those MDB
that do not qualify for sovereign treatment.

PD/LGD for most portfolios
SRW for unsettled trades
Standardized for banking book treasury liquidity positions
and other assets
Corporates Exposures to corporations (except small businesses) and public sector
entities with no right to raise taxes and whose liabilities are not
guaranteed by a public entity. The Corporate asset class also includes
specialized lending, in which the lender looks primarily to a single source
of revenues to cover the repayment obligations and where only the
financed asset serves as security for the exposure (e.g., income producing
real estate or commodities finance).
PD/LGD for most portfolios
SRW for Investment Banking specialized lending exposures
Standardized for banking book treasury liquidity positions
and other assets


Retail credit risk (mostly in the Private Banking & Wealth Management division)   
Residential mortgages Includes exposures secured by residential real estate collateral occupied
or let by the borrower.
PD/LGD
Qualifying revolving retail Includes credit card receivables and overdrafts. PD/LGD
Other retail Includes loans collateralized by securities, consumer loans,
leasing and small business exposures.
PD/LGD
Standardized for other assets
Other credit risk   
Other exposures Includes exposures with insufficient information to treat under the
A-IRB approach or to allocate under the Standardized approach into
any other asset class.
Standardized

17
Gross credit exposures, risk-weighted assets and capital requirement
The following table presents the derivation of risk-weighted assets from the gross credit exposures (pre- and post-substitution), broken down by regulatory approach and by the credit asset class under the Basel framework.
Gross credit exposures and risk-weighted assets by regulatory approach
end of    2014 2013
        

Exposure
Risk-
weighted
assets
Capital
require-
ment
1

Exposure
Risk-
weighted
assets
Capital
require-
ment
1
Pre-
substitution
2 Post-
substitution


Pre-
substitution
2 Post-
substitution


A-IRB (CHF million)   
PD/LGD 
   Sovereigns  83,167 77,037 3,714 297 71,220 68,539 3,567 285
   Other institutions  2,306 2,381 532 43 1,875 1,866 388 31
   Banks  33,324 38,062 10,608 849 32,676 38,398 10,510 841
   Corporates  202,960 204,277 83,192 6,655 174,997 171,965 79,912 6,393
   Total institutional  321,757 321,757 98,046 7,844 280,768 280,768 94,377 7,550
   Residential mortgage  101,350 101,350 11,117 889 98,800 98,800 10,525 842
   Qualifying revolving retail  672 672 238 19 699 699 246 20
   Other retail  78,449 78,449 11,509 921 63,056 63,056 11,100 888
   Total retail  180,471 180,471 22,864 1,829 162,555 162,555 21,871 1,750
Total PD/LGD  502,228 502,228 120,910 9,673 443,323 443,323 116,248 9,300
Supervisory risk weights (SRW) 
   Banks  26 26 5 0 27 27 6 1
   Corporates  3,516 3,516 2,939 236 998 998 518 41
   Total institutional  3,542 3,542 2,944 236 1,025 1,025 524 42
Total SRW  3,542 3,542 2,944 236 1,025 1,025 524 42
Total A-IRB  505,770 505,770 123,854 9,908 444,348 444,348 116,772 9,342
Standardized (CHF million)   
   Sovereigns  7,306 7,306 453 36 5,497 5,497 79 6
   Other institutions  175 175 35 3 245 245 55 5
   Banks  319 319 74 6 727 727 301 24
   Corporates  115 115 92 7 863 863 501 40
   Total institutional  7,915 7,915 654 52 7,332 7,332 936 75
   Other retail  184 184 149 12 47 47 21 2
   Total retail  184 184 149 12 47 47 21 2
   Other exposures  7,704 7,704 2,986 239 6,107 6,107 2,683 214
Total standardized  15,803 15,803 3,789 303 13,486 13,486 3,640 291
Total  521,573 521,573 127,643 10,211 457,834 457,834 120,412 9,633
   of which counterparty credit risk 3 99,099 99,099 25,916 2,073 75,629 75,629 25,282 2,023
1
Calculated as 8% of risk-weighted assets.
2
Gross credit exposures are shown pre- and post-substitution as, in certain circumstances, credit risk mitigation is reflected by shifting the counterparty exposure from the underlying obligor to the protection provider.
3
Includes derivatives and securities financing transactions.
18
Gross credit exposures and risk-weighted assets
   2014 2013


End of

Monthly
average
Risk-
weighted
assets


End of

Monthly
average
Risk-
weighted
assets
Gross credit exposures (CHF million)   
Loans, deposits with banks and other assets 1 361,177 337,904 75,807 323,102 319,025 70,693
Guarantees and commitments 61,297 61,307 25,920 59,103 63,849 24,437
Securities financing transactions 35,131 35,399 6,495 30,521 36,949 7,204
Derivatives 63,968 63,666 19,421 45,108 53,307 18,078
Total  521,573 498,276 127,643 457,834 473,130 120,412
1
Includes interest bearing deposits with banks, banking book loans, available-for-sale debt securities and other receivables.
Geographic distribution of gross credit exposures

end of

Switzerland

EMEA

Americas
Asia
Pacific

Total
2014 (CHF million)   
Loans, deposits with banks and other assets 1 165,629 86,004 78,004 31,540 361,177
Guarantees and commitments 12,509 14,584 31,931 2,273 61,297
Securities financing transactions 2,182 11,857 16,965 4,127 35,131
Derivatives 6,818 31,675 19,462 6,013 63,968
Total  187,138 144,120 146,362 43,953 521,573
2013 (CHF million)   
Loans, deposits with banks and other assets 1 155,868 77,044 63,758 26,432 323,102
Guarantees and commitments 13,304 16,786 27,089 1,924 59,103
Securities financing transactions 2,349 10,234 15,824 2,114 30,521
Derivatives 3,885 24,311 12,537 4,375 45,108
Total  175,406 128,375 119,208 34,845 457,834
The geographic distribution is based on the country of incorporation or the nationality of the counterparty, shown pre-substitution.
1
Includes interest bearing deposits with banks, banking book loans, available-for-sale debt securities and other receivables.
Industry distribution of gross credit exposures

end of
Financial
institutions

Commercial

Consumer
Public
authorities

Total
2014 (CHF million)   
Loans, deposits with banks and other assets 1 10,921 140,659 131,581 78,016 361,177
Guarantees and commitments 6,885 51,319 2,058 1,035 61,297
Securities financing transactions 7,599 23,929 9 3,594 35,131
Derivatives 12,269 41,968 2,928 6,803 63,968
Total  37,674 257,875 136,576 89,448 521,573
2013 (CHF million)   
Loans, deposits with banks and other assets 1 11,872 123,330 120,955 66,945 323,102
Guarantees and commitments 3,387 51,501 2,538 1,677 59,103
Securities financing transactions 6,738 19,650 27 4,106 30,521
Derivatives 10,726 23,963 1,980 8,439 45,108
Total  32,723 218,444 125,500 81,167 457,834
Exposures are shown pre-substitution.
1
Includes interest bearing deposits with banks, banking book loans, available-for-sale debt securities and other receivables.
19
Remaining contractual maturity of gross credit exposures

end of
within
1 year
1 within
1-5 years

Thereafter

Total
2014 (CHF million)   
Loans, deposits with banks and other assets 2 204,879 105,497 50,801 361,177
Guarantees and commitments 19,514 39,686 2,097 61,297
Securities financing transactions 34,690 434 7 35,131
Derivatives 22,420 18,940 22,608 63,968
Total  281,503 164,557 75,513 521,573
2013 (CHF million)   
Loans, deposits with banks and other assets 2 186,323 90,024 46,755 323,102
Guarantees and commitments 23,060 34,546 1,497 59,103
Securities financing transactions 30,170 336 15 30,521
Derivatives 15,239 17,003 12,866 45,108
Total  254,792 141,909 61,133 457,834
1
Includes positions without agreed residual contractual maturity.
2
Includes interest bearing deposits with banks, banking book loans, available-for-sale debt securities and other receivables.
Portfolios subject to PD/LGD approach
Rating models
The majority of the credit rating models used in Credit Suisse are developed internally by Credit Analytics, a specialized unit in Credit Risk Management (CRM). These models are independently validated by Model Risk Management team prior to use in the Basel III regulatory capital calculation, and thereafter on a regular basis. Credit Suisse also use models purchased from recognized data and model providers (e.g. credit rating agencies). These models are owned by Credit Analytics and are validated internally and follow the same governance process as models developed internally.
All new or material changes to rating models are subject to a robust governance process. Post development and validation of a rating model or model change, the model is taken through a number of committees where model developers, validators and users of the models discuss the technical and regulatory aspects of the model. The relevant committees opine on the information provided and decide to either approve or reject the model or model change. The ultimate decision making committee is the Risk Processes and Standards Committee (RPSC). The responsible Executive Board Member for the RPSC is the Chief Risk Officer. The RPSC sub-group responsible for rating models is the Credit Model Steering Committee (CMSC). RPSC or CMSC also review and monitor the continued use of existing models on an annual basis.
20
The following table provides an overview of the main PD and LGD models used by Credit Suisse. It reflects the portfolio segmentation from a credit risk model point of view, showing the risk-weighted assets, type and number of the most significant models, and the loss period available for model development by portfolio. As the table follows an internal risk segmentation and captures the most significant models only, these figures do not match regulatory asset class or other A-IRB based segmentation.
Main PD and LGD models used by Credit Suisse
   PD    LGD   

Portfolio


Asset class
Risk-weighted
assets (in CHF
billion)
Number
of years
loss data

No. of
models


Model comment

No. of
models


Model comment
Statistical and hybrid models using e.g. industry and counterparty segmentation, collateral types and amounts, seniority and other transaction specific factors with granularity enhancements by public research and expert judgement
Corporates Corporates, retail 39.0 >15 years 5 Statistical scorecards using e.g. balance sheet, profit & loss data and qualitative factors 3
Banks and other financial institutions Banks, corporates 7.6 >30 years 2 Statistical scorecard and constrained expert judgement using e.g. balance sheet, profit & loss data and qualitative factors
Funds Corporates

15.4

>10 years

5

Statistical scorecards using e.g. net
asset value, volatility of returns and
qualitative factors


Statistical model using e.g. counterparty segmentation, collateral types and amounts
Residential mortgages Retail 6.6 >10 years 1 Statistical scorecard using e.g. loan-to-value, affordability, assets and qualitative factors 1
Income producing real estate Specialized lending, retail 12.1 >10 years 2 Statistical scorecards using e.g. loan-to-value, debt service coverage and qualitative factors
Commodity traders Corporates,
specialized lending
3.7

>10 years

1

Statistical scorecard using e.g.
volume, liquidity and duration of
financed commodity transactions


Sovereign and
public entities
Sovereign,
corporates


2.7



>10 years



3



Statistical scorecards and
constrained expert judgement
using e.g. GDP, financials and
qualitative factors
2



Statistical models using e.g. industry
and counterparty segmentation,
collateral types and amounts,
seniority and other transaction
specific factors
Ship finance Specialized
lending

2.2


>10 years


1


Simulation model using e.g. freight
rates, time charter agreements,
operational expenses and debt
service coverage
1


Simulation model using e.g. freight
rates, time charter agreements,
operational expenses and debt
service coverage
Lombard Retail

6.7

>10 years

1

Merton type model using e.g.
loan-to-value, collateral volatility
and counterparty attributes
1

Merton type model using e.g.
loan-to-value, collateral volatility
and counterparty attributes
Model development
The techniques to develop models are carefully selected by Credit Analytics to meet industry standards in the banking industry as well as regulatory requirements. The models are developed to exhibit “through-the-cycle” characteristics, reflecting a probability of default in a 12 month period across the credit cycle.
All models have clearly defined model owners who have primary responsibility for development, enhancement, review, maintenance and documentation. The models have to pass statistical performance tests, where feasible, followed by usability tests by designated CRM experts to proceed to formal approval and implementation. The development process of a new model is thoroughly documented and foresees a separate schedule for model updates.
The level of calibration of the models is based on a range of inputs, including internal and external benchmarks where available. Additionally, the calibration process ensures that the estimated calibration level accounts for variations of default rates through the economic cycle and that the underlying data contains a representative mix of economic states. Conservatism is incorporated in the model development process to compensate for any known or suspected limitations and uncertainties.
Model validation
Model validation for risk capital models is performed by the Model Risk Management function. Model governance is subject to clear and objective internal standards as outlined in the Model Risk Management policy and the Risk Model Validation Policy. The governance framework ensures a consistent and meaningful approach for the validation of models in scope across the bank. All models whose outputs fall into the scope of the Basel internal model framework are subject to full independent validation. Externally developed models are subject to the same governance and validation standards as internal models.
The governance process requires each in scope model to be validated and approved before go-live; the same process is followed for material changes to an existing model. Existing models
21
are subject to an ongoing governance process which requires each model to be periodically validated and the performance to be monitored annually. The validation process is a comprehensive quantitative and qualitative assessment with goals that include:
to confirm that the model remains conceptually sound and the model design is suitable for its intended purpose;
to verify that the assumptions are still valid and weaknesses and limitations are known and mitigated;
to determine that the model outputs are accurate compared to realized outcome;
to establish whether the model is accepted by the users and used as intended with appropriate data governance;
to check whether a model is implemented correctly;
to ensure that the model is fully transparent and sufficiently documented.
To meet these goals, models are validated against a series of quantitative and qualitative criteria. Quantitative analyses may include a review of model performance (comparison of model output against realized outcome), calibration accuracy against the longest time series available, assessment of a model’s ability to rank order risk and performance against available benchmarks. Qualitative assessment typically includes a review of the appropriateness of the key model assumptions, the identification of the model limitations and their mitigation, and ensuring appropriate model use. The modeling approach is re-assessed in light of developments in the academic literature and industry practice.
Results and conclusions are presented to senior risk management including the RPSC; shortcomings and required improvements identified during validation must be remediated within an agreed deadline. The Model Risk Management function is independent of model developers and users and has the final say on the content of each validation report.
Stress testing of parameters
The potential biases in PD estimates in unusual market conditions are accounted for by the use of long run average estimates. Credit Suisse additionally uses stress-testing when back-testing PD models. When predefined thresholds are breached during back-testing, a review of the calibration level is undertaken. For LGD/CCF calibration stress testing is applied in defining Downturn LGD/CCF values, reflecting potentially increased losses during stressed periods.
Descriptions of the rating processes
All counterparties that Credit Suisse is exposed to are assigned an internal credit rating. The rating is assigned at the time of initial credit approval and subsequently reviewed and updated on an ongoing basis. Rating determination is based on relevant quantitative data (such as financial statements and financial projections) and qualitative factors relating to the counterparty which is used by CRM by employing a quantitative model which incorporates expert judgement through a well governed model override process in the assignment of a credit rating or PD, which measures the counterparty’s risk of default over a one-year period.
Counterparty and transaction rating process – Corporates (excluding corporates managed on the Swiss platform), banks and sovereigns (primarily in the Investment Banking division)
Where rating models are used, the models are an integral part of the rating process, and the outputs from the models are complemented with other relevant information by credit officers via a robust model-override framework where information not captured by the models is taken into account by experienced credit officers. In addition to the information captured by the rating models, credit officers make use of peer analysis, industry comparisons, external ratings and research and the judgment of credit experts to complement the model ratings. This analysis emphasizes a forward looking approach, concentrating on economic trends and financial fundamentals. Where rating models are not used the assignment of credit ratings is based on a well-established expert judgment based process which captures key factors specific to the type of counterparty.
For structured and asset finance deals, the approach is more quantitative. The focus is on the performance of the underlying assets, which represent the collateral of the deal. The ultimate rating is dependent upon the expected performance of the underlying assets and the level of credit enhancement of the specific transaction. Additionally, a review of the originator and/or servicer is performed. External ratings and research (rating agency and/or fixed income and equity), where available, are incorporated into the rating justification, as is any available market information (e.g., bond spreads, equity performance).
Transaction ratings are based on the analysis and evaluation of both quantitative and qualitative factors. The specific factors analyzed include seniority, industry and collateral. The analysis emphasizes a forward looking approach.
22
Counterparty and transaction rating process – Corporates managed on the Swiss platform, mortgages and other retail (primarily in the Private Banking & Wealth Management division)
For corporates managed on the Swiss platform and mortgage lending, the PD is calculated directly by proprietary statistical rating models, which are based on internally compiled data comprising both quantitative factors (primarily loan-to-value ratio and the borrower’s income level for mortgage lending and balance sheet information for corporates) and qualitative factors (e.g., credit histories from credit reporting bureaus). In this case, an equivalent rating is assigned for reporting purposes, based on the PD band associated with each rating. Collateral loans, which form the largest part of “other retail”, are treated according to Basel III rules with pool PD and pool LGD based on historical loss experience. Most of the collateral loans are loans collateralized by securities.
The internal rating grades are mapped to the Credit Suisse Internal Masterscale. The PDs assigned to each rating grade are reflected in the following table.
Credit Suisse counterparty ratings
Ratings PD bands (%) Definition S&P Fitch Moody's Details
AAA 0.000 - 0.021
Substantially
risk free
AAA
AAA
Aaa
Extremely low risk, very high long-term
stability, still solvent under extreme conditions
AA+
AA
AA-
0.021 - 0.027
0.027 - 0.034
0.034 - 0.044
Minimal risk

AA+
AA
AA-
AA+
AA
AA-
Aa1
Aa2
Aa3
Very low risk, long-term stability, repayment
sources sufficient under lasting adverse
conditions, extremely high medium-term stability
A+
A
A-
0.044 - 0.056
0.056 - 0.068
0.068 - 0.097
Modest risk


A+
A
A-
A+
A
A-
A1
A2
A3
Low risk, short- and mid-term stability, small adverse
developments can be absorbed long term, short- and
mid-term solvency preserved in the event of serious
difficulties
BBB+
BBB
BBB-
0.097 - 0.167
0.167 - 0.285
0.285 - 0.487
Average risk

BBB+
BBB
BBB-
BBB+
BBB
BBB-
Baa1
Baa2
Baa3
Medium to low risk, high short-term stability, adequate
substance for medium-term survival, very stable short
term
BB+
BB
BB-
0.487 - 0.839
0.839 - 1.442
1.442 - 2.478
Acceptable risk


BB+
BB
BB-
BB+
BB
BB-
Ba1
Ba2
Ba3
Medium risk, only short-term stability, only capable of
absorbing minor adverse developments in the medium term,
stable in the short term, no increased credit risks expected
within the year
B+
B
B-
2.478 - 4.259
4.259 - 7.311
7.311 - 12.550
High risk

B+
B
B-
B+
B
B-
B1
B2
B3
Increasing risk, limited capability to absorb
further unexpected negative developments
CCC+
CCC
CCC-
CC
12.550 - 21.543
21.543 - 100.00
21.543 - 100.00
21.543 - 100.00
Very high
risk

CCC+
CCC
CCC-
CC
CCC+
CCC
CCC-
CC
Caa1
Caa2
Caa3
Ca
High risk, very limited capability to absorb
further unexpected negative developments

C
D1
D2
100
Risk of default
has materialized
Imminent or
actual loss

C
D

C
D

C


Substantial credit risk has materialized, i.e. counterparty
is distressed and/or non-performing. Adequate specific
provisions must be made as further adverse developments
will result directly in credit losses.
Transactions rated C are potential problem loans; those rated D1 are non-performing assets and those rated D2 are non-interest earning.
Use of internal ratings
Internal ratings play an essential role in the decision-making and the credit approval processes. The portfolio credit quality is set in terms of the proportion of investment and non-investment grade exposures. Investment/non-investment grade is determined by the internal rating assigned to a counterparty.
Internal counterparty ratings (and associated PDs), transaction ratings (and associated LGDs) and CCF for loan commitments are inputs to risk-weighted assets and Economic Risk Capital (ERC) calculations. Model outputs are the basis for risk-adjusted-pricing or assignment of credit competency levels.
The internal ratings are also integrated into the risk management reporting infrastructure and are reviewed in senior risk management committees. These committees include the Chief Executive Officer, Chief Credit Officer (CCO), Regional CCO, RPSC and Capital Allocation Risk Management Committee (CARMC).
To ensure ratings are assigned in a robust and consistent basis, the Global Risk Review Function (GRR) perform periodic portfolio reviews which cover, amongst other things:
accuracy and consistency of assigned counterparty/transaction ratings;
transparency of rating justifications (both the counterparty rating and transaction rating);
quality of the underlying credit analysis and credit process;
adherence to Credit Suisse policies, guidelines, procedures, and documentation checklists.
The GRR function is an independent control function within the CRM which reports to the head of Global Credit Control.
23
Institutional credit exposures by counterparty rating under PD/LGD approach

end of 2014

Total
exposure
(CHF m)
Exposure-
weighted
average
LGD (%)
Exposure-
weighted
average risk
weight (%)
1 Undrawn
commit-
ments
(CHF m)
Sovereigns   
AAA 33,353 5.56 0.79 21
AA 36,154 6.36 1.72 137
A 1,185 38.52 14.36
BBB 5,349 44.82 29.03 2
BB 711 26.91 56.96
B or lower 281 42.48 173.03
Default (net of specific provisions) 4
Total credit exposure  77,037 160
Exposure-weighted average CCF (%) 2 99.79
Other institutions   
AAA
AA 1,538 45.21 10.82 227
A 174 40.42 16.81 39
BBB 536 43.41 38.93 101
BB 47 43.73 75.48 6
B or lower 86 27.37 72.76 4
Default (net of specific provisions)
Total credit exposure  2,381 377
Exposure-weighted average CCF (%) 2 75.27
Banks   
AAA
AA 7,577 51.00 11.75 930
A 20,779 51.76 17.85 2,599
BBB 6,603 45.39 41.00 278
BB 2,364 49.70 77.06 74
B or lower 587 40.17 124.04 46
Default (net of specific provisions) 152
Total credit exposure  38,062 3,927
Exposure-weighted average CCF (%) 2 94.46
Corporates   
AAA
AA 46,771 48.29 12.97 8,522
A 46,692 38.79 16.28 10,783
BBB 49,069 35.93 34.05 10,280
BB 43,584 33.60 67.54 6,515
B or lower 17,312 30.47 102.92 6,181
Default (net of specific provisions) 849 20
Total credit exposure  204,277 42,301
Exposure-weighted average CCF (%) 2 75.87
Total institutional credit exposure  321,757 46,765
1
The exposure-weighted average risk weights in percentage terms is the multiplier applied to regulatory exposures to derive risk-weighted assets, and may exceed 100%.
2
Calculated before credit risk mitigation.
24
Institutional credit exposures by counterparty rating under PD/LGD approach (continued)

end of 2013

Total
exposure
(CHF m)
Exposure-
weighted
average
LGD (%)
Exposure-
weighted
average risk
weight (%)
1 Undrawn
commit-
ments
(CHF m)
Sovereigns   
AAA 27,171 6.01 0.93 19
AA 33,173 6.41 1.79 79
A 925 43.53 13.25 30
BBB 6,431 46.95 24.86 1
BB 185 34.98 68.09 3
B or lower 376 29.24 104.84
Default (net of specific provisions) 278
Total credit exposure  68,539 132
Exposure-weighted average CCF (%) 2 99.77
Other institutions   
AAA
AA 1,084 41.30 10.12 448
A 147 44.16 14.58 63
BBB 499 41.08 28.96 134
BB 44 43.11 69.47 8
B or lower 92 18.33 64.35 1
Default (net of specific provisions)
Total credit exposure  1,866 654
Exposure-weighted average CCF (%) 2 57.40
Banks   
AAA
AA 6,883 48.74 11.10 894
A 20,843 48.72 17.32 2,010
BBB 6,458 40.23 35.46 294
BB 3,512 38.67 72.19 144
B or lower 553 34.23 102.64 16
Default (net of specific provisions) 149
Total credit exposure  38,398 3,358
Exposure-weighted average CCF (%) 2 93.63
Corporates   
AAA
AA 32,560 46.10 11.57 6,655
A 32,436 42.23 18.57 8,851
BBB 46,770 37.54 36.27 11,283
BB 43,171 35.82 66.58 5,056
B or lower 15,927 35.40 117.94 5,113
Default (net of specific provisions) 1,101 8
Total credit exposure  171,965 36,966
Exposure-weighted average CCF (%) 2 76.33
Total institutional credit exposure  280,768 41,110
1
The exposure-weighted average risk weights in percentage terms is the multiplier applied to regulatory exposures to derive risk-weighted assets, and may exceed 100%.
2
Calculated before credit risk mitigation.
25
Retail credit exposures by expected loss band under PD/LGD approach

end of 2014

Total
exposure
(CHF m)
Exposure-
weighted
average
LGD (%)
Exposure-
weighted
average risk
weight (%)
1 Undrawn
commit-
ments
(CHF m)
Residential mortgages   
0.00%-0.15% 95,468 15.74 8.46 1,298
0.15%-0.30% 3,695 28.75 29.50 102
0.30%-1.00% 1,820 28.97 52.53 26
1.00% and above 148 24.98 100.87
Defaulted (net of specific provisions) 219 1
Total credit exposure  101,350 1,427
Exposure-weighted average CCF (%) 2 97.94
Qualifying revolving retail   
0.00%-0.15%
0.15%-0.30%
0.30%-1.00% 491 50.00 23.35
1.00% and above 180 20.00 60.59
Defaulted (net of specific provisions) 1
Total credit exposure  672
Exposure-weighted average CCF (%) 2 99.98
Other retail   
0.00%-0.15% 72,559 53.58 10.55 1,192
0.15%-0.30% 924 60.79 31.91 73
0.30%-1.00% 2,406 44.30 48.46 73
1.00% and above 2,407 46.39 65.96 48
Defaulted (net of specific provisions) 153 3
Total credit exposure  78,449 1,389
Exposure-weighted average CCF (%) 2 94.91
Total retail credit exposure  180,471 2,816
1
The exposure-weighted average risk weights in percentage terms is the multiplier applied to regulatory exposures to derive risk-weighted assets, and may exceed 100%.
2
Calculated before credit risk mitigation.
26
Retail credit exposures by expected loss band under PD/LGD approach (continued)

end of 2013

Total
exposure
(CHF m)
Exposure-
weighted
average
LGD (%)
Exposure-
weighted
average risk
weight (%)
1 Undrawn
commit-
ments
(CHF m)
Residential mortgages   
0.00%-0.15% 91,837 15.83 7.82 1,195
0.15%-0.30% 4,355 29.06 29.31 145
0.30%-1.00% 2,226 28.71 49.38 45
1.00% and above 162 23.87 91.49
Defaulted (net of specific provisions) 220 1
Total credit exposure  98,800 1,386
Exposure-weighted average CCF (%) 2 97.89
Qualifying revolving retail   
0.00%-0.15%
0.15%-0.30%
0.30%-1.00% 515 50.00 23.35
1.00% and above 183 20.00 60.59
Defaulted (net of specific provisions) 1
Total credit exposure  699
Exposure-weighted average CCF (%) 2 99.98
Other retail   
0.00%-0.15% 57,924 54.15 13.42 1,218
0.15%-0.30% 503 47.03 29.61 60
0.30%-1.00% 2,284 39.25 46.02 111
1.00% and above 2,143 40.79 60.44 41
Defaulted (net of specific provisions) 202 2
Total credit exposure  63,056 1,432
Exposure-weighted average CCF (%) 2 93.68
Total retail credit exposure  162,555 2,818
1
The exposure-weighted average risk weights in percentage terms is the multiplier applied to regulatory exposures to derive risk-weighted assets, and may exceed 100%.
2
Calculated before credit risk mitigation.
Loss analysis – regulatory expected loss vs. cumulative actual loss
The following table shows the regulatory expected loss as of the beginning of the years compared with the cumulative actual loss incurred during the year ended December 31, 2014 and 2013, respectively, for those portfolios where credit risk is calculated using the IRB approach.
Analysis of expected loss vs. cumulative actual loss
   2014 2013
Expected
loss
(beginning
of year)


Cumulative
actual loss
Expected
loss
(beginning
of year)


Cumulative
actual loss
Losses (CHF million)   
Sovereigns 13 0 13 108
Banks 275 221 360 226
Other institutions 2 260 4 163
Corporates 1 1,496 903 1,297 965
Residential mortgages 93 23 108 42
Other retail (including qualifying revolving retail) 315 272 322 324
Total losses  2,194 1,679 2,104 1,828
1
Excludes specialized lending portfolios that are not subject to the PD/LGD approach.
27
Regulatory expected loss
Regulatory expected loss is a Basel III measure based on Pillar 1 metrics which is an input to the capital adequacy calculation. Regulatory expected loss can be seen as an expectation of average future loss as derived from our IRB models, and is not a prediction of future impairment. For non-defaulted assets, regulatory expected loss is calculated using PD and downturn estimates of LGD and CCF. For the calculation of regulatory expected loss for defaulted accrual accounted assets, PD is 100% and LGD is based on an estimate of likely recovery levels for each asset.
Cumulative actual loss
Cumulative actual loss comprises two parts: the opening impairment balance and the net specific impairment losses for loans held at amortized cost and actual value charges providing an equivalent impairment measure for both fair value loans and counterparty exposures as if these were loans held at amortized cost (excluding any realized CDS gains). The actual value charges may not necessarily be the same as the fair value movements recorded through the consolidated statements of operations.
Cumulative actual loss can also include charges against assets that were originated during the year and were therefore outside of the scope of the regulatory expected loss calculated at the beginning of the year. Cumulative actual loss does not include the effects on the impairment balance of amounts written off during the year.
The average cumulative actual loss over the last two years is below the expected loss estimates reflecting a level of conservatism in the corporate and residential mortgage rating models. The Other Retail asset class models were recalibrated upwards in 2013 resulting in a higher expected loss as of the year end.
The following table presents the components of the cumulative actual loss.
Cumulative actual loss
   2014 2013
Opening
impairment
balance
Specific
impairment
losses
Actual
value
charges
Total
actual
loss
Opening
impairment
balance
Specific
impairment
losses
Actual
value
charges
Total
actual
loss
CHF million   
Sovereigns 77 0 (77) 0 196 0 (88) 108
Banks 221 0 0 221 220 0 6 226
Other institutions 187 (3) 76 260 166 1 (4) 163
Corporates 1 611 124 168 903 779 89 97 965
Residential mortgages 25 (2) 0 23 38 4 0 42
Other retail 196 76 0 272 241 83 0 324
Total  1,317 195 167 </