Regulatory Matters

12 Months Ended

Dec. 31, 2023

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

REGULATORY MATTERS

REGULATORY MATTERS

We are subject to various regulatory capital requirements administered by federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory — and possibly additional discretionary — actions by regulators that, if undertaken, could have a direct material effect on our financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, we must meet specific capital guidelines that involve quantitative measures of our assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. At December 31, 2023 and 2022, we exceeded all capital adequacy requirements under the Basel III capital rules.

Quantitative measures established by regulation to ensure capital adequacy require us to maintain minimum amounts and ratios of common equity Tier 1 (“CET1”) to risk-weighted assets, Tier 1 capital (as defined in the regulations), Total capital, and Tier 1 capital to average assets (Tier 1 leverage ratio). “Well-capitalized” levels are also published as a guideline to evaluate capital positions. At December 31, 2023 and 2022, all of our capital ratios exceeded the “well-capitalized” levels under the regulatory framework for prompt corrective action.

Dividends declared by us may not exceed specified criteria unless otherwise approved by our regulators. When determining dividends, we consider current and historical earning levels, retained earnings, and risk-based and other regulatory capital requirements and limitations.

Our internal stress tests seek to comprehensively measure all risks to which we are exposed, the losses that could result from those risk exposures under adverse scenarios, and our resulting capital levels. These stress tests have both a qualitative and a quantitative component. The qualitative component evaluates our risk identification processes, stress risk modeling, policies, capital planning, governance processes, and other components of a capital adequacy process. The quantitative process subjects our balance sheet and other risk characteristics to stress testing by using our own models.

The following schedule presents our capital amounts and ratios and the minimum requirements to be well-capitalized under Basel III at December 31, 2023 and 2022:

(Dollar amounts in millions)	December 31, 2023				Minimum requirement to be “well-capitalized”
	Amount		Ratio		Amount		Ratio
Basel III Regulatory Capital Amounts and Ratios
Common equity Tier 1 capital (to risk-weighted assets)	$	6,863	10.3	%	$	4,351	6.5	%
Tier 1 capital (to risk-weighted assets)	7,303		10.9		5,355		8.0
Total capital (to risk-weighted assets)	8,553		12.8		6,693		10.0
Tier 1 leverage ratio	7,303		8.3		4,379		5.0

	December 31, 2022				Minimum requirement to be “well-capitalized”
(Dollar amounts in millions)	Amount		Ratio		Amount		Ratio
Basel III Regulatory Capital Amounts and Ratios
Common equity Tier 1 capital (to risk-weighted assets)	$	6,481	9.8	%	$	4,297	6.5	%
Tier 1 capital (to risk-weighted assets)	6,921		10.5		5,289		8.0
Total capital (to risk-weighted assets)	8,077		12.2		6,611		10.0
Tier 1 leverage ratio	6,921		7.7		4,472		5.0

The Basel III capital rules require us to maintain certain minimum capital ratios, as well as a 2.5% “capital conservation buffer,” which is designed to absorb losses during periods of economic stress, composed entirely of CET1, and in excess of the minimum risk-based capital ratios. The following schedule presents the minimum capital ratios and capital conservation buffer requirements, compared with our capital ratios at December 31, 2023:

	December 31, 2023
	Minimum capital requirement		Capital conservation buffer		Minimum capital ratio requirement with capital conservation buffer		Current capital ratio
CET1 to risk-weighted assets	4.5	%	2.5	%	7.0	%	10.3	%
Tier 1 capital (i.e., CET1 plus additional Tier 1 capital) to risk-weighted assets	6.0		2.5		8.5		10.9
Total capital (i.e., Tier 1 capital plus Tier 2 capital) to risk-weighted assets	8.0		2.5		10.5		12.8
Tier 1 capital to average consolidated assets (known as the “Tier 1 leverage ratio”)	4.0		N/A		4.0		8.3

Financial institutions with a ratio of CET1 to risk-weighted assets above the minimum but below the capital conservation buffer may face constraints on dividends, equity repurchases, and compensation based on the amount of the shortfall. Our internal triggers and limits under actual conditions and baseline projections are more restrictive than the capital conservation buffer requirements.