Regulatory Capital Requirements

12 Months Ended

Dec. 31, 2017

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, 2017 and 2016, 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, 2017 and 2016, 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, 2017, that management believes have adversely affected the capital categorization of any Northern Trust subsidiary bank.

The table below provides capital ratios for the Corporation and the Bank determined by Basel III phased in requirements.

TABLE 129: RISK-BASED CAPITAL AMOUNTS AND RATIOS

	December 31, 2017								December 31, 2016
($ In Millions)	ADVANCED APPROACH				STANDARDIZED APPROACH				ADVANCED APPROACH				STANDARDIZED APPROACH
	BALANCE		RATIO		BALANCE		RATIO		BALANCE		RATIO		BALANCE		RATIO
Common Equity Tier 1
Northern Trust Corporation	$	8,626.3	13.5	%	$	8,626.3	12.6	%	$	8,480.4	12.4	%	$	8,480.4	11.8	%
The Northern Trust Company	8,517.8		13.7		8,517.8		12.6		8,201.4		12.4		8,201.4		11.5
Minimum to qualify as well-capitalized
Northern Trust Corporation	4,161.2		6.5		4,460.1		6.5		4,436.7		6.5		4,681.4		6.5
The Northern Trust Company	4,032.7		6.5		4,406.8		6.5		4,296.2		6.5		4,624.8		6.5
Tier 1
Northern Trust Corporation	9,473.4		14.8		9,473.4		13.8		9,319.9		13.7		9,319.9		12.9
The Northern Trust Company	8,517.8		13.7		8,517.8		12.6		8,201.4		12.4		8,201.4		11.5
Minimum to qualify as well-capitalized:
Northern Trust Corporation	5,121.5		8.0		5,489.3		8.0		5,460.6		8.0		5,761.7		8.0
The Northern Trust Company	4,963.3		8.0		5,423.8		8.0		5,287.6		8.0		5,692.1		8.0
Total
Northern Trust Corporation	10,707.4		16.7		10,861.2		15.8		10,281.6		15.1		10,475.0		14.5
The Northern Trust Company	9,527.8		15.4		9,681.6		14.3		9,271.4		14.0		9,463.4		13.3
Minimum to qualify as well-capitalized:
Northern Trust Corporation	6,401.9		10.0		6,861.6		10.0		6,825.8		10.0		7,202.1		10.0
The Northern Trust Company	6,204.2		10.0		6,779.7		10.0		6,609.5		10.0		7,115.1		10.0
Tier 1 Leverage
Northern Trust Corporation	9,473.4		7.8		9,473.4		7.8		9,319.9		8.0		9,319.9		8.0
The Northern Trust Company	8,517.8		7.0		8,517.8		7.0		8,201.4		7.0		8,201.4		7.0
Minimum to qualify as well-capitalized:
Northern Trust Corporation	6,075.9		5.0		6,075.9		5.0		5,847.9		5.0		5,847.9		5.0
The Northern Trust Company	6,057.9		5.0		6,057.9		5.0		5,831.0		5.0		5,831.0		5.0
Supplementary Leverage(1)
Northern Trust Corporation	9,473.4		6.8		N/A		N/A		9,319.9		6.8		N/A		N/A
The Northern Trust Company	8,517.8		6.1		N/A		N/A		8,201.4		6.0		N/A		N/A
Minimum to qualify as well-capitalized:
Northern Trust Corporation	4,175.7		N/A		N/A		N/A		4,129.9		N/A		N/A		N/A
The Northern Trust Company	4,164.7		N/A		N/A		N/A		4,120.0		N/A		N/A		N/A

(1) Effective January 1, 2018, the Corporation will be subject to a minimum supplementary leverage ratio of 3 percent.

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 and the Bank are required to calculate and publicly disclose risk-based capital ratios using two methodologies: an advanced approach and a standardized approach. Under the advanced approach, credit risk weighted assets (RWA) are based on internal credit models and parameters. Additionally, the advanced approach incorporates operational risk RWA. Under the standardized approach, RWA are based on supervisory prescribed risk weights that are primarily dependent on counterparty type and asset class.

As required by the Collins Amendment of the Dodd-Frank Act, the capital adequacy of the Corporation and the Bank is assessed based on the lower of the advanced approach or standardized approach capital ratios.

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.