REGULATORY MATTERS

6 Months Ended

Jun. 30, 2017

Banking and Thrift [Abstract]

REGULATORY MATTERS

REGULATORY MATTERS

As a bank holding company, 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 U.S. Basel III capital framework, the Company and its banking subsidiaries must meet specific minimum requirements for the following ratios: common equity tier 1 capital, tier 1 capital, total capital, and tier 1 leverage. 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 the Company’s capital and capital ratios under U.S. Basel III Standardized Transitional rules. Certain Basel III requirements are subject to phase-in through 2019, and were applied to this report of actual regulatory ratios. In addition, the Company has declared itself as an “AOCI opt-out” institution, which means the Company is not required to recognize within regulatory capital the impacts of net unrealized gains and losses included within AOCI for available for sale securities, accumulated net gains and losses on cash-flow hedges, net gains and losses on certain defined benefit pension plan assets, and net unrealized gains and losses on securities held to maturity.

	Transitional Basel III
									FDIA Requirements
	Actual				Minimum Capital Adequacy				Classification as Well-capitalized(6)
(dollars in millions)	Amount		Ratio		Amount		Ratio (5)		Amount		Ratio
As of June 30, 2017
Common equity tier 1 capital (1)		$14,057	11.2	%		$7,232	5.750	%		$8,175	6.5	%
Tier 1 capital (2)	14,304		11.4		9,119		7.250		10,062		8.0
Total capital (3)	17,586		14.0		11,634		9.250		12,577		10.0
Tier 1 leverage (4)	14,304		9.9		5,776		4.000		7,220		5.0
As of December 31, 2016
Common equity tier 1 capital (1)		$13,822	11.2	%		$6,348	5.125	%		$8,051	6.5	%
Tier 1 capital (2)	14,069		11.4		8,206		6.625		9,909		8.0
Total capital (3)	17,347		14.0		10,683		8.625		12,386		10.0
Tier 1 leverage (4)	14,069		9.9		5,667		4.000		7,084		5.0

⁽¹⁾ “Common equity tier 1 capital ratio” represents CET1 capital divided by total risk-weighted assets as defined under U.S. Basel III Standardized approach.

⁽²⁾ “Tier 1 capital ratio” is tier 1 capital, which includes CET1 capital plus non-cumulative perpetual preferred equity that qualifies as additional tier 1 capital, divided by total risk-weighted assets as defined under U.S. Basel III Standardized approach.

⁽³⁾ “Total capital ratio” is total capital divided by total risk-weighted assets as defined under U.S. Basel III Standardized approach.

⁽⁴⁾ “Tier 1 leverage ratio” is tier 1 capital divided by quarterly average total assets as defined under U.S. Basel III Standardized approach.

⁽⁵⁾ “Minimum Capital ratio” includes capital conservation buffer of 1.250% for 2017 and 0.625% for 2016; N/A to Tier 1 leverage.

⁽⁶⁾ Presented for informational purposes. Prompt corrective action provisions apply only to the Company’s insured depository institutions - CBNA and CBPA.

Under the Capital Plan Rule, the Company may only make capital distributions, including payment of dividends, in accordance with a capital plan that has been reviewed by the FRB with no objection.

Per the 2016 Capital Plan, which received a non-objection from the FRB, for the three months ended June 30, 2017, the Company paid common dividends of $71 million and repurchased $130 million of its outstanding common shares. For the six months ended June 30, 2017, the Company paid common dividends of $143 million, a semi-annual preferred dividend of $7 million and repurchased $260 million of its outstanding common shares. For the three and six months ended June 30, 2016, the Company paid common dividends of $64 million and $117 million, respectively. The Company also paid a semi-annual preferred dividend of $7 million in the six months ended June 30, 2016.

On April 5, 2017, the Company submitted its 2017 Capital Plan to the Federal Reserve under the annual CCAR process.On June 28, 2017, the FRB did not object to the Company’s 2017 Capital Plan or to its proposed capital actions in the period beginning July 1, 2017 and ending June 30, 2018. The Company’s 2017 Capital Plan includes proposed quarterly common dividends of$0.18per share through the end of 2017 and$0.22per share in 2018, and also includes a share repurchase plan of up to$850 millionthrough second quarter 2018. The timing and exact amount of future dividends and share repurchases will depend on various factors, including capital position, financial performance and market conditions.

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.

A financial subsidiary of a national bank is permitted to engage in a broader range of activities, similar to those of a financial holding company. CBNA has two financial subsidiaries, Citizens Securities, Inc., a registered broker-dealer, and RBS Citizens Insurance Agency, Inc., a dormant entity. On March 13, 2014, the OCC determined that CBNA no longer met the conditions to own a financial subsidiary — namely that CBNA must be both well capitalized and well managed. CBNA has entered into an agreement with the OCC pursuant to which it has developed and submitted to the OCC a remediation plan setting forth the specific actions it will take to bring itself back into compliance with the conditions to own a financial subsidiary. CBNA has completed its undertakings under the plan, which have been validated by the Company’s internal audit team and submitted to the OCC for review and validation. However, until the OCC has completed their validation efforts, 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.