BOARD OF GOVERNORS 

OF' THE 

FEDERAL RESERVE SYSTEM 

Andrew S. Baer, Esq. 

Sullivan & Cromwell LLP 

WASHINGTON, D. C. 20551 

January 29,2010 

1701 Pennsylvania Avenue, NW 

Washington, D.C. 20006-5805 

Dear Mr. Baer: 

ADDRESS OFFICIAL CORRESPONDENCE 

TO THE BOARD 

This letter concerns the notice filed September 9, 2009, under 

section 4 of the Bank Holding Company Act ("BHC Act") 1 by Deutsche Bank 

AG, Frankfurt, Germany, and Taunus Corporation, New York, New York 

(together, "Deutsche Bank"), to (1) enter into physically settled tolling 

agreements with power plant owners ("Energy Tolling"); and (2) provide energy 

management services to owners of power generation facilities under energy 

management agreements ("Energy Management Services"), all in the United 

States. 

Deutsche Bank is a foreign bank organized under the laws of 

Germany and is a financial holding company ("FHC") for purposes of the BHC 

Act. In the United States, Deutsche Bank currently engages in commodity 

derivatives activities that are permissible for bank holding companies under the 

BHC Act ("Commodity Derivatives Activities")2 and also provides financial and 

investment advisory services for derivatives transactions ("Derivative Advisory 

Services") that are permissible for bank holding companies under the BHC Act. 

The Board previously authorized Deutsche Bank to engage in physical 

commodity trading activities ("Physical Commodity Trading") as an activity 

1 12 U.S.C. § 1843. 

2 See 12 U.S.C. § 1843(k)(4)(F). 
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that is complementary to Commodity Derivatives Activities. 3 Deutsche Bank 

conducts Physical Commodity Trading primarily through a nonbank subsidiary, 

DB Energy Trading LLC ("DBET"), Wilmington, Delaware. 

Deutsche Bank has requested approval to expand DBET' s activities 

to include Energy Tolling. Under the energy tolling agreements to which 

Deutsche Bank would be a party, Deutsche Bank would make periodic fixed 

payments to the owner of a power generation facility ("capacity payments") in 

exchange for the right to all or part of the plant's power output. Deutsche Bank 

would also generally supply fuel and make payments to cover the owner's 

variable costs plus a profit margin. The plant owner, however, would retain 

control over the day-to-day operations of the plant and physical plant assets at 

all times.4 

Deutsche Bank has committed to conduct Energy Tolling activities 

in accordance with the restrictions, definitions, and conditions previously 

imposed by the Board on the conduct of those activities. In connection with the 

Board's approval of Deutsche Bank's Physical Commodity Trading activities, 

Deutsche Bank committed to the Board that it will limit the aggregate market 

value of physical commodities that it and any of its subsidiaries hold at any one 

time to 5 percent ofDeutsche Bank's tier 1 capital. Deutsche Bank also has 

committed to include the present value of capacity payments associated with 

Energy Tolling contracts in that 5 percent limit. As a result, Deutsche Bank's 

potential exposure to commodity price risk would not increase by engaging in 

Energy Tolling activities. 

Deutsche Bank has also requested approval to provide Energy 

Management Services pursuant to an energy management agreement with a 

power plant owner as an activity that is complementary to its Commodity 

Derivatives Activities and Derivative Advisory Services. As an energy 

manager, Deutsche Bank proposes to provide transactional and advisory services 

to power plant owners. The transactional services would consist primarily of 

acting as a financial intermediary, substituting its credit and liquidity for those 

3 Deutsche Bank AG, 92 Federal Reserve Bulletin C54 (2005). 

4 

[The footnote has been redacted.]
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of the owner to facilitate the owner's purchase of fuel and sale of power. 

Deutsche Bank's advisory services would include providing market information 

to assist the owner in developing and refining a risk-management plan for the 

plant and providing a variety of administrative services to support these 

transactions. 

Deutsche Bank has committed to provide Energy Management 

Services in accordance with the restrictions, definitions, and conditions 

previously imposed by the Board on the conduct of those activities. Deutsche 

Bank has made all the commitments that were required in connection with the 

Board's previous approvals of Energy Management Services. Those 

commitments generally limit the scope of the activities that Deutsche Bank may 

perform as energy manager to ensure that Deutsche Bank incurs only those risks 

that are consistent with the agency nature of the Energy Management Services 

and limit the revenues attributable to Deutsche Bank's Energy Management 

Services to 5 percent of Deutsche Bank's total consolidated operating revenues.

5 

The authority to act as energy manager should not expand Deutsche Bank's 

ability to engage in physical commodity trading beyond what it is currently 

allowed to do under its Physical Commodity Trading authority. 

As noted, the Board previously has determined pursuant to 

Regulation Y that Energy Tolling and Energy Management Services 

complement the financial activity of engaging in Commodity Derivatives 

Activities and Derivatives Advisory Services. 6 The Board has delegated its 

authority to the Director of the Division of Banking Supervision and Regulation 

("Director"), with the concurrence of the General Counsel, to approve proposals 

by an FHC to engage in Energy Tolling and to provide Energy Management 

Services when the proposal meets the conditions imposed by the Board in 

approving previous proposals and raises no significant legal, policy, or . . supervisory Issues. 

5 "Total operating revenues" is defined as net interest income and all 

non-interest revenue, including net securities gains but excluding extraordinary 

items. 

6 See The Royal Bank of Scotland Group PLC, 94 Federal Reserve Bulletin C60 

(2008), and Fortis S.A./N.V., 94 Federal Reserve Bulletin C20 (2008). 
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As noted, Deutsche Bank has committed to conduct Energy Tolling 

and provide Energy Management Services in accordance with the restrictions, 

definitions, and conditions previously relied on by the Board in authorizing 

those activities. Deutsche Bank also has established and maintained policies and 

systems for monitoring and controlling the risks associated with Energy Tolling 

and Energy Management Services and is expected to continue to maintain 

effective risk-management policies and systems for each of those activities. 

Approval of the request to engage in Energy Tolling and Energy Management 

Services likely would benefit Deutsche Bank's customers by enhancing 

Deutsche Bank's ability to provide efficiently a full range of commodity-related 

services consistent with existing market practice. Approval also would enable 

Deutsche Bank to improve its understanding of physical commodity and 

commodity derivatives markets and its ability to serve as an effective competitor 

in physical commodity and commodity derivatives markets. 

Based on the record, including all the commitments made to the 

Board in connection with the notice and the conditions imposed by the Board in 

previous cases, the Director, with the concurrence of the General Counsel, has 

determined that (1) the proposed Energy Tolling is complementary to Deutsche 

Bank's Commodity Derivatives Activities and (2) the proposed Energy 

Management Services are complementary to Deutsche Bank's Commodity 

Derivatives Activities and Derivatives Advisory Services. In approving the 

proposed Energy Tolling and Energy Management Services, the Director, with 

the concurrence of the General Counsel, also has determined that the proposed 

activities do not pose a substantial risk to the safety or soundness of Deutsche 

Bank, its depository institutions, or the financial system generally and can 

reasonably be expected to produce benefits to the public that outweigh any 

potential adverse effects. 

In making these determinations, the Director relied on all the 

information, representations, and commitments provided by Deutsche Bank to 

the Board in connection with the notice. These commitments and conditions 

imposed are critical to the determination that Energy Tolling and Energy 

Management Services would not pose a substantial risk to the safety and 

soundness of Deutsche Bank, other financial institutions, or the financial system 

generally. These determinations also are subject to all the conditions set forth in 
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Regulation Y, including those in section 225.7, 7 and to the conditions contained 

in the Board's previous decisions noted above. These commitments and 

conditions shall be deemed to be conditions imposed in writing in connection 

with the notice and this approval and, as such, may be enforced in proceedings 

under applicable law. 

These determinations should not be construed as granting relief 

from any other conditions or commitments to which Deutsche Bank may be 

subject. In addition, these determinations are subject to the Board's authority to 

require modification or termination of the activities of a bank holding company 

or any of its subsidiaries as the Board finds necessary to ensure compliance 

with, or to prevent evasion of, the provisions and purposes of the BHC Act and 

the Board's regulations and orders issued thereunder. 

Sincerely yours, 

Robert deV. Frierson 

Deputy Secretary of the Board 

cc: Federal Reserve Bank ofNew York 

7 12 CFR 225.7.