Regulatory Requirements

6 Months Ended

Jun. 30, 2020

Broker-Dealer, Net Capital Requirement, SEC Regulation [Abstract]

REGULATORY REQUIREMENTS

NOTE 13—REGULATORY REQUIREMENTS

Broker-Dealer and FCM Capital Requirements

The Company's US broker-dealer, E*TRADE Securities, is subject to the Uniform Net Capital 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 net capital equal to or in excess of the greater of 6 2/3% of its aggregate indebtedness, as defined, or a minimum dollar amount. E*TRADE Securities has elected the Alternative method, under which it is required to maintain net capital equal to the greater of $250,000 or 2% of aggregate debit balances arising from customer transactions.

The Company's FCM, E*TRADE Futures, is subject to CFTC net capital requirements, including the maintenance of adjusted net capital equal to or in excess of the greater of (1) $1,000,000, (2) the FCM's risk-based capital requirement, computed as 8% of the total risk margin requirements for all positions carried in customer and non-customer accounts, or (3) the amount of adjusted net capital required by the NFA.

At June 30, 2020 and December 31, 2019, all of the Company’s broker-dealer and FCM subsidiaries met applicable minimum net capital requirements. The following table presents a summary of the minimum net capital requirements and excess capital for the Company’s broker-dealer and FCM subsidiaries (dollars in millions):

	Required Net Capital		Net Capital		Excess Net Capital
June 30, 2020:
E*TRADE Securities(1)	$	212	$	1,346	$	1,134
E*TRADE Futures	4		31		27
Total	$	216	$	1,377	$	1,161
December 31, 2019:
E*TRADE Securities	$	223	$	1,251	$	1,028
E*TRADE Futures	3		28		25
Total	$	226	$	1,279	$	1,053

(1)E*TRADE Securities paid dividends of $250 million to the parent company during the six months ended June 30, 2020.

Bank Capital Requirements

E*TRADE Financial and its bank subsidiaries, E*TRADE Bank and E*TRADE Savings Bank, are subject to various regulatory capital requirements administered by federal banking agencies. 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 the financial condition and results of operations of these entities. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, these entities 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, the Company's bank subsidiaries may not pay dividends to the parent company without the non-objection, or in certain cases the approval, of their regulators, and any loans by the bank subsidiaries to the parent company or its other non-bank subsidiaries are subject to various quantitative, arm’s length, collateralization and other requirements. The capital amounts and classifications of these entities 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 these entities to meet minimum Tier 1 leverage, Common Equity Tier 1 capital, Tier 1 risk-based capital and Total risk-based capital ratios. Events beyond management's control, such as deterioration in credit markets, could adversely affect future earnings and their ability to meet future capital requirements. E*TRADE Financial, E*TRADE Bank and E*TRADE Savings Bank were categorized as "well capitalized" under the regulatory framework for prompt corrective action for the periods presented in the following table (dollars in millions):

	June 30, 2020										December 31, 2019
	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(1)
Tier 1 leverage	$	4,387	6.7	%	$	3,262	5.0	%	$	1,125	$	4,035	6.9	%	$	2,922	5.0	%	$	1,113
Common Equity Tier 1	$	3,698	29.4	%	$	817	6.5	%	$	2,881	$	3,346	31.5	%	$	692	6.5	%	$	2,654
Tier 1 risk-based	$	4,387	34.9	%	$	1,006	8.0	%	$	3,381	$	4,035	37.9	%	$	852	8.0	%	$	3,183
Total risk-based	$	4,387	34.9	%	$	1,257	10.0	%	$	3,130	$	4,060	38.2	%	$	1,064	10.0	%	$	2,996
E*TRADE Bank(1)
Tier 1 leverage	$	3,527	7.2	%	$	2,449	5.0	%	$	1,078	$	3,240	7.2	%	$	2,253	5.0	%	$	987
Common Equity Tier 1	$	3,527	34.9	%	$	656	6.5	%	$	2,871	$	3,240	36.5	%	$	577	6.5	%	$	2,663
Tier 1 risk-based	$	3,527	34.9	%	$	808	8.0	%	$	2,719	$	3,240	36.5	%	$	710	8.0	%	$	2,530
Total risk-based	$	3,527	34.9	%	$	1,009	10.0	%	$	2,518	$	3,257	36.7	%	$	888	10.0	%	$	2,369
E*TRADE Savings Bank(1)
Tier 1 leverage	$	1,510	35.6	%	$	212	5.0	%	$	1,298	$	1,480	40.7	%	$	182	5.0	%	$	1,298
Common Equity Tier 1	$	1,510	123.4	%	$	80	6.5	%	$	1,430	$	1,480	224.7	%	$	43	6.5	%	$	1,437
Tier 1 risk-based	$	1,510	123.4	%	$	98	8.0	%	$	1,412	$	1,480	224.7	%	$	53	8.0	%	$	1,427
Total risk-based	$	1,510	123.4	%	$	122	10.0	%	$	1,388	$	1,480	224.7	%	$	66	10.0	%	$	1,414

(1)Basel III includes a capital conservation buffer that limits a banking organization’s ability to make capital distributions and discretionary bonus payments to executive officers if a banking organization fails to maintain a Common Equity Tier 1 capital conservation buffer of more than 2.5%, on a fully phased-in basis, of total risk-weighted assets above each of the following minimum risk-based capital ratio requirements: Common Equity Tier 1 capital (4.5%), Tier 1 risk-based capital (6.0%), and Total risk-based capital (8.0%).