REGULATORY MATTERS

6 Months Ended

Jun. 30, 2015

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 the Company 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 Basel III capital framework that took effect on January 1, 2015, the Company and its banking subsidiaries must meet specific capital requirements. Basel III requirements are expressed in terms of the following ratios: (1) common equity tier 1 capital (common equity tier 1 capital/risk-weighted on- and off-balance sheet assets); (2) tier 1 capital (tier 1 capital/risk-weighted on- and off-balance sheet assets); (3) total capital (total capital/risk-weighted on- and off-balance sheet assets); and (4) 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 regulatory levels for each ratio. 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 evidencing the Company’s transition from Basel I regulatory accounting as of December 31, 2014 to Basel III regulatory accounting as of June 30, 2015. Basel I requirements did not include the common equity tier I capital ratio. Certain Basel III requirements are subject to phase-in through 2018, and these phase-in rules are used in this report of actual regulatory ratios. In addition, the Company has declared itself as an “AOCI opt-out” institution, which means that the Company will not be required to change its methodology for recognizing in regulatory capital only a subset of unrealized gains and losses that are classified as AOCI. As an AOCI opt-out institution, the Company is not required to recognize within regulatory capital the impacts of net unrealized gains and losses on securities AFS, accumulated net gains and losses on cash-flow hedges included in AOCI, net gains and losses on certain defined benefit pension plan assets, and net unrealized gains and losses on securities held to maturity that are included in AOCI.

	Transitional Basel III
										FDIC Requirements
		Actual				Minimum Capital Adequacy				Classification as Well-capitalized
(dollars in millions)		Amount		Ratio		Amount		Ratio		Amount		Ratio
As of June 30, 2015	Basel III
Common equity tier 1 capital			$13,270	11.8	%		$5,046	4.5	%		$7,289	6.5	%
Tier 1 capital to risk-weighted assets		13,517		12.1		6,728		6.0		8,970		8.0
Total capital to risk-weighted assets		17,123		15.3		8,970		8.0		11,213		10.0
Tier 1 capital to average assets (leverage)		13,517		10.4		5,180		4.0		6,475		5.0
As of December 31, 2014	Basel I
Tier 1 common equity			$13,173	12.4	%	Not Applicable		Not Applicable		Not Applicable		Not Applicable
Tier 1 capital to risk-weighted assets		13,173		12.4			$4,239	4.0	%		$6,358	6.0	%
Total capital to risk-weighted assets		16,781		15.8		8,477		8.0		10,596		10.0
Tier 1 capital to average assets (leverage)		13,173		10.6		4,982		4.0		6,227		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. Common dividends paid in 2014 included a $333 million special dividend, which was paid to RBS concurrently with issuance of tier 2 subordinated debt in the same amount. The Company undertook these paired transactions to reduce excess common equity without impacting the level of total regulatory capital or the total risk-based capital ratio.

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, CFG. This requirement will be in place through the fourth quarter of 2015. However, irrespective of the ability of the subsidiary banks to pay dividends, the Company had liquid assets as of June 30, 2015 that were in excess of $383 million on a non-consolidated basis, compared to an annual interest burden on existing subordinated debt of approximately $104 million.

On March 13, 2014, the OCC determined that CBNA no longer meets the condition to own a financial subsidiary — namely that CBNA must be both well capitalized and well managed. 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 itself. 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 insurance policies. CBNA has entered into an agreement with the OCC (the “OCC Agreement”) pursuant to which the Company has developed and submitted to the OCC a remediation plan, that set 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 addresses the deficiencies to the OCC’s satisfaction, 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. The OCC Agreement provides that if CBNA fails to remediate the deficiencies 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.