Regulatory Capital Requirements

12 Months Ended

Dec. 31, 2015

Banking and Thrift [Abstract]

Regulatory Capital Requirements

Regulatory Capital Requirements

Northern Trust and the Bank are subject to various regulatory capital requirements administered by the federal bank regulatory authorities. Under these requirements, banks must maintain specific ratios of total and Tier 1 capital to risk-weighted assets and of Tier 1 capital to adjusted average quarterly assets in order to be classified as “well-capitalized.” The regulatory capital requirements impose certain restrictions upon banks that meet minimum capital requirements but are not “well-capitalized” and obligate the federal bank regulatory authorities to take “prompt corrective action” with respect to banks that do not maintain such minimum ratios. Such prompt corrective action could have a direct material effect on a bank’s financial statements.

As of December 31, 2015 and 2014, the Bank had capital ratios above the levels required for classification as a “well-capitalized” institution and had not received any regulatory notification of a lower classification. Additionally, Northern Trust’s subsidiary banks located outside the U.S. are subject to regulatory capital requirements in the jurisdictions in which they operate. As of December 31, 2015 and 2014, Northern Trust’s non-U.S. banking subsidiaries had capital ratios above their specified minimum requirements. There were no conditions or events since December 31, 2015, that management believes have adversely affected the capital categorization of any Northern Trust subsidiary bank.

The table below provides capital ratios for Northern Trust Corporation and The Northern Trust Company determined by Basel III phased in requirements.

TABLE 125: RISK-BASED CAPITAL AMOUNTS AND RATIOS

	December 31, 2015								December 31, 2014
($ In Millions)	ADVANCED APPROACH				STANDARDIZED APPROACH(1)				ADVANCED APPROACH				STANDARDIZED APPROACH(1)
	BALANCE		RATIO		BALANCE		RATIO		BALANCE		RATIO		BALANCE		RATIO
Common Equity Tier 1
Northern Trust Corporation	$	8,012.6	11.9	%	$	8,012.6	10.8	%	$	7,813.3	12.4	%	$	7,813.3	12.5	%
The Northern Trust Company	7,591.7		11.6		7,591.7		10.4		7,327.3		12.0		7,327.3		11.8
Minimum to qualify as well-capitalized
Northern Trust Corporation	4,376.7		6.5		4,807.6		6.5		N/A		N/A		N/A		N/A
The Northern Trust Company	4,245.5		6.5		4,755.9		6.5		N/A		N/A		N/A		N/A
Tier 1
Northern Trust Corporation	8,431.3		12.5		8,431.3		11.4		8,318.0		13.2		8,317.6		13.3
The Northern Trust Company	7,591.7		11.6		7,591.7		10.4		7,327.3		12.0		7,327.3		11.8
Minimum to qualify as well-capitalized:
Northern Trust Corporation	5,386.8		8.0		5,917.0		8.0		3,773.8		6.0		3,759.1		6.0
The Northern Trust Company	5,225.2		8.0		5,853.4		8.0		3,665.8		6.0		3,738.0		6.0
Total
Northern Trust Corporation	9,529.7		14.2		9,767.7		13.2		9,449.2		15.0		9,723.0		15.5
The Northern Trust Company	8,538.1		13.1		8,771.4		12.0		8,420.4		13.8		8,695.1		14.0
Minimum to qualify as well-capitalized:
Northern Trust Corporation	6,733.5		10.0		7,396.3		10.0		6,289.7		10.0		6,265.1		10.0
The Northern Trust Company	6,531.5		10.0		7,316.8		10.0		6,109.7		10.0		6,229.9		10.0
Tier 1 Leverage
Northern Trust Corporation	8,431.3		7.5		8,431.3		7.5		N/A		N/A		8,317.6		7.8
The Northern Trust Company	7,591.7		6.7		7,591.7		6.7		N/A		N/A		7,327.3		6.9
Minimum to qualify as well-capitalized:
Northern Trust Corporation	5,655.0		5.0		5,655.0		5.0		N/A		N/A		5,340.7		5.0
The Northern Trust Company	5,639.0		5.0		5,639.0		5.0		N/A		N/A		5,324.9		5.0
Supplementary Leverage(2)
Northern Trust Corporation	8,431.3		6.2		N/A		N/A		N/A		N/A		N/A		N/A
The Northern Trust Company	7,591.7		5.6		N/A		N/A		N/A		N/A		N/A		N/A
Minimum to qualify as well-capitalized:
Northern Trust Corporation	4,085.0		N/A		N/A		N/A		N/A		N/A		N/A		N/A
The Northern Trust Company	4,075.3		N/A		N/A		N/A		N/A		N/A		N/A		N/A

(1) In 2014, Standardized Approach risk-weighted assets were determined by Basel I requirements. Effective with the first quarter of 2015, risk-weighted assets are calculated in accordance with the Basel III Standardized Approach final rules.

(2) Beginning with the first quarter of 2015, advanced approaches banking organizations must calculate and report their supplementary leverage ratio. Effective January 1, 2018, the Corporation will be subject to a minimum supplementary leverage ratio of 3 percent.

As of January 1, 2015, the risk-based capital guidelines that apply to the Corporation and the Bank, commonly referred to as Basel III, are based upon the 2011 capital accord of the Basel Committee. The Basel III rules are currently being phased in, and will come into full effect by January 1, 2022.

Under the final Basel III rules, the Corporation is one of a small number of “core” banking organizations. The rules require core banking organizations to have rigorous processes for assessing overall capital adequacy in relation to their total risk profiles, and to publicly disclose certain information about their risk profiles and capital adequacy. In order to implement the capital rules, a core banking organization, such as the Corporation, is required to satisfactorily complete a parallel run, in which it calculates capital requirements under both the Basel III rules and previously effective regulations. On February 21, 2014, the Corporation was notified by the Federal Reserve Board that both the Corporation and the Bank would be permitted to exit parallel run. Accordingly, the Corporation and the Bank were required to use the advanced approaches methodologies to calculate and publicly disclose their risk-based capital ratios beginning with the second quarter of 2014. The parallel run of the risk-based capital framework demonstrated that the use of the advanced approaches methodologies, inclusive of commitments the Corporation provided to the Federal Reserve Board regarding the Corporation’s approach to the calculation of risk-weighted assets, did not result in the Tier 1 or total risk-based capital ratios falling below the levels required for categorization as “well-capitalized.”

The U.S.’s implementation of Basel III has increased the minimum capital thresholds for banking organizations and tightened the standards for what qualifies as capital. The Corporation and the Bank believe their capital strength, balance sheets and business models leave them well positioned for the continued U.S. implementation of Basel III.