REGULATORY REQUIREMENTS

Broker-Dealer Capital Requirements

The Company’s U.S. broker-dealer subsidiaries are subject to the Uniform Net Capital Rule (the "Rule") under the Securities Exchange Act of 1934 administered by the SEC and FINRA, which requires the maintenance of minimum net capital. The minimum net capital requirements can be met under either the Aggregate Indebtedness method or the Alternative method. Under the Aggregate Indebtedness method, a broker-dealer is required to maintain minimum net capital of the greater of 6²/3% of its aggregate indebtedness, as defined, or a minimum dollar amount. Under the Alternative method, a broker-dealer is required to maintain net capital equal to the greater of $250,000 or 2% of aggregate debit balances arising from customer transactions. The method used depends on the individual U.S. broker-dealer subsidiary. The Company’s other broker-dealers, including its international broker-dealer subsidiaries, are subject to capital requirements determined by their respective regulators.

At March 31, 2016 and December 31, 2015, all of the Company’s broker-dealer subsidiaries met minimum net capital requirements. The tables below summarize the minimum capital requirements and excess capital for the Company’s broker-dealer subsidiaries at March 31, 2016 and December 31, 2015 (dollars in millions):



	Required Net Capital		Net Capital		Excess Net Capital
March 31, 2016:
E*TRADE Clearing⁽¹⁾⁽²⁾	$	139	$	911	$	772
E*TRADE Securities⁽¹⁾⁽³⁾	—		59		59
Other broker-dealers	—		11		11
Total	$	139	$	981	$	842
December 31, 2015:
E*TRADE Clearing⁽¹⁾	$	161	$	1,007	$	846
E*TRADE Securities⁽¹⁾	—		49		49
Other broker-dealers	1		15		14
Total	$	162	$	1,071	$	909


(1)	Elected to use the Alternative method to compute net capital. The net capital requirement was $250,000 for E*TRADE Securities for both periods presented.


(2)	E*TRADE Clearing paid a dividend of $124 million to the parent company during the first quarter of 2016 and $75 million in April 2016.


(3)	E*TRADE Securities paid a dividend of $24 million to the parent company during the first quarter of 2016 and $27 million in April 2016.

Bank Capital Requirements

E*TRADE Financial and E*TRADE Bank are subject to various regulatory capital requirements administered by federal banking agencies. Beginning January 1, 2015, both E*TRADE Financial and E*TRADE Bank calculate regulatory capital under the Basel III framework using the Standardized Approach, subject to transition provisions. Failure to meet minimum capital requirements can trigger certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on E*TRADE Financial’s and E*TRADE Bank’s financial condition and results of operations. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, E*TRADE Financial and E*TRADE Bank must meet specific capital guidelines that involve quantitative measures of assets, liabilities and certain off-balance sheet items as calculated under regulatory accounting practices. In addition, E*TRADE Bank may not pay dividends to the parent company without the non-objection, or in certain cases the approval, of its regulators, and any loans by E*TRADE Bank to the parent company and its other non-bank subsidiaries are subject to various quantitative, arm’s length, collateralization and other requirements. E*TRADE Financial’s and E*TRADE Bank’s capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings and other factors.

Quantitative measures established by regulation to ensure capital adequacy require E*TRADE Financial and E*TRADE Bank to meet minimum Common equity Tier 1 capital, Tier 1 risk-based capital, Total risk-based capital, and Tier 1 leverage ratios. Events beyond management's control, such as deterioration in credit markets, could adversely affect future earnings and E*TRADE Financial’s and E*TRADE Bank’s ability to meet future capital requirements and, in the case of E*TRADE Bank, its ability to pay dividends to the parent company. E*TRADE Financial and E*TRADE Bank were categorized as "well capitalized" under the regulatory framework for prompt corrective action for the periods presented in the table below (dollars in millions):



	March 31, 2016										December 31, 2015
	Actual				Well Capitalized Minimum Capital				Excess Capital		Actual				Well Capitalized Minimum Capital				Excess Capital
	Amount		Ratio		Amount		Ratio		Amount		Amount		Ratio		Amount		Ratio		Amount
E*TRADE Financial:
Tier 1 leverage	$	3,410	7.8	%	$	2,177	5.0	%	$	1,233	$	3,747	9.0	%	$	2,093	5.0	%	$	1,654
Common equity Tier 1 capital	$	3,410	34.5	%	$	642	6.5	%	$	2,768	$	3,747	39.3	%	$	620	6.5	%	$	3,127
Tier 1 risk-based capital	$	3,410	34.5	%	$	791	8.0	%	$	2,619	$	3,747	39.3	%	$	763	8.0	%	$	2,984
Total risk-based capital	$	3,956	40.0	%	$	988	10.0	%	$	2,968	$	4,186	43.9	%	$	954	10.0	%	$	3,232



	March 31, 2016										December 31, 2015
	Actual				Well Capitalized Minimum Capital				Excess Capital		Actual				Well Capitalized Minimum Capital				Excess Capital
	Amount		Ratio		Amount		Ratio		Amount		Amount		Ratio		Amount		Ratio		Amount
E*TRADE Bank⁽¹⁾
Tier 1 leverage	$	2,895	8.6	%	$	1,691	5.0	%	$	1,204	$	3,075	9.7	%	$	1,579	5.0	%	$	1,496
Common equity Tier 1 capital	$	2,895	33.3	%	$	565	6.5	%	$	2,330	$	3,075	36.5	%	$	548	6.5	%	$	2,527
Tier 1 risk-based capital	$	2,895	33.3	%	$	696	8.0	%	$	2,199	$	3,075	36.5	%	$	674	8.0	%	$	2,401
Total risk-based capital	$	3,009	34.6	%	$	869	10.0	%	$	2,140	$	3,185	37.8	%	$	842	10.0	%	$	2,343


(1)	E*TRADE Bank paid $248 million in dividends to the parent company during the first quarter of 2016.