REGULATORY MATTERS

9 Months Ended

Sep. 30, 2014

Banking and Thrift [Abstract]

REGULATORY MATTERS

REGULATORY MATTERS

As a BHC, the Company is subject to regulation and supervision by the FRB. The primary subsidiaries of Citizens are its two insured depository institutions CBNA, a national banking association whose primary federal regulator is the OCC, and CBPA, a Pennsylvania-chartered savings bank regulated by the Department of Banking of the Commonwealth of Pennsylvania and supervised by the FDIC as its primary federal regulator. Under the regulatory capital adequacy guidelines of the FDICIA, the Company and its banking subsidiaries must meet specific capital requirements. These requirements are expressed in terms of the following ratios: (1) Total Risk-Based Capital (total capital/risk-weighted on- and off-balance sheet assets); (2) Tier 1 Risk-Based Capital (Tier 1 capital/risk-weighted on- and off-balance sheet assets); and (3) Tier 1 Leverage (Tier 1 capital/adjusted average quarterly assets). To meet the regulatory capital requirements, the Company and its banking subsidiaries must maintain minimum Total Risk-Based Capital, Tier 1 Risk-Based Capital, and Tier 1 Leverage ratios. In addition, the Company must not be subject to a written agreement, order or capital directive with any of its regulators. Failure to meet minimum capital requirements can result in the initiation of certain actions that, if undertaken, could have a material effect on the Company’s Consolidated Financial Statements.

The following table presents capital and capital ratio information:

					FDIC Requirements
	Actual				Minimum Capital Adequacy				Classification as Well Capitalized
(dollars in millions)	Amount		Ratio		Amount		Ratio		Amount		Ratio
As of September 30, 2014
Total Capital to Risk-Weighted Assets		$16,612	16.1	%		$8,257	8.0	%		$10,321	10.0	%
Tier 1 Capital to Risk-Weighted Assets	13,330		12.9		4,128		4.0		6,192		6.0
Tier 1 Capital to Average Assets (Leverage)	13,330		10.9		4,901		4.0		6,126		5.0
As of December 31, 2013
Total Capital to Risk-Weighted Assets		$15,885	16.1	%		$7,891	8.0	%		$9,863	10.0	%
Tier 1 Capital to Risk-Weighted Assets	13,301		13.5		3,945		4.0		5,918		6.0
Tier 1 Capital to Average Assets (Leverage)	13,301		11.6		4,577		4.0		5,721		5.0

In accordance with federal and state banking regulations, dividends paid by the Company’s banking subsidiaries to the Company itself are generally limited to the retained earnings of the respective banking subsidiaries unless specifically approved by the appropriate bank regulator. The Company declared and paid RBS total common stock dividends of $751 million, $811 million and $1.2 billion as of September 30, 2014, September 30, 2013 and December 31, 2013, respectively.

The earnings impact of goodwill impairment recognized by CBNA has put the bank subsidiary in the position of having to request specific approval from the OCC before executing capital distributions to its parent, Citizens. This requirement will be in place through the fourth quarter of 2015. As of September 30, 2014, the unconsolidated BHC had liquid assets in excess of $501 million compared to an annual interest burden on existing subordinated debt of approximately $91 million on a non-consolidated basis.

The OCC recently determined that CBNA no longer meets both conditions necessary to own a financial subsidiary. CBNA must be both well capitalized and well managed to own a financial subsidiary. A financial subsidiary is permitted to engage in a broader range of activities, similar to those of a financial holding company, than those permissible for a national bank. CBNA has two financial subsidiaries, Citizens Securities, Inc., a registered broker-dealer, and RBS Citizens Insurance Agency, Inc., a dormant entity, although it continues to collect commissions on certain outstanding policies. CBNA has entered into an agreement with the OCC (the "OCC Agreement") pursuant to which it must develop a remediation plan, which must be submitted to the OCC, setting forth the specific actions it will take to bring itself back into compliance with the conditions to own a financial subsidiary and the schedule for achieving that objective. Until CBNA satisfactorily addresses the deficiencies, CBNA may not consolidate its assets and liabilities with those of the financial subsidiaries for purposes of determining and reporting regulatory capital. In addition, CBNA will be subject to restrictions on its ability to acquire control or hold an interest in any new financial subsidiary and to commence new activities in any existing financial subsidiary, without the prior consent of the OCC. If CBNA fails to remediate the deficiencies within 180 days from March 13, 2014, or such longer period as the OCC may permit, it may have to divest itself of its financial subsidiaries and comply with any additional limitations or conditions on its conduct as the OCC may impose. CBNA has implemented a comprehensive enterprise-wide program that seeks to address these deficiencies.