Regulatory Requirements

6 Months Ended

Jun. 30, 2024

Regulatory Capital Framework and Requirements

For a discussion of the Firm’s regulatory capital framework, see Note 16 to the financial statements in the 2023 Form 10-K.

The Firm is required to maintain minimum risk-based and leverage-based capital ratios under regulatory capital requirements. A summary of the calculations of regulatory capital and RWA follows.

Risk-Based Regulatory Capital. Risk-based capital ratio requirements apply to Common Equity Tier 1 (“CET1”) capital, Tier 1 capital and Total capital (which includes Tier 2 capital), each as a percentage of RWA, and consist of regulatory minimum required ratios plus the Firm’s capital buffer requirement. Capital requirements require certain adjustments to, and deductions from, capital for purposes of determining these ratios. At June 30, 2024 and December 31, 2023, the differences between the actual and required ratios were lower under the Standardized Approach.

CECL Deferral. Beginning on January 1, 2020, the Firm elected to defer the effect of the adoption of CECL on its risk-based and leverage-based capital amounts and ratios, as well as RWA, adjusted average assets and supplementary leverage exposure calculations, over a five-year transition period. The deferral impacts began to phase in at 25% per year from January 1, 2022 and are phased-in at 75% from January 1,

2024. The deferral impacts will become fully phased-in beginning on January 1, 2025.

Capital Buffer Requirements


	At June 30, 2024 and December 31, 2023
	Standardized	Advanced
Capital buffers
Capital conservation buffer	—	2.5%
SCB	5.4%	N/A
G-SIB capital surcharge	3.0%	3.0%
CCyB1	0%	0%
Capital buffer requirement	8.4%	5.5%

1.The CCyB can be set up to 2.5%, but is currently set by the Federal Reserve at zero.

The capital buffer requirement represents the amount of Common Equity Tier 1 capital the Firm must maintain above the minimum risk-based capital requirements in order to avoid restrictions on the Firm’s ability to make capital distributions, including the payment of dividends and the repurchase of stock, and to pay discretionary bonuses to executive officers. The Firm’s capital buffer requirement computed under the standardized approaches for calculating credit risk and market risk RWA (“Standardized Approach”) is equal to the sum of the SCB, G-SIB capital surcharge and CCyB, and the capital buffer requirement computed under the applicable advanced approaches for calculating credit risk, market risk and operational risk RWA (“Advanced Approach”) is equal to the sum of the 2.5% capital conservation buffer, G-SIB capital surcharge and CCyB.

Risk-Based Regulatory Capital Ratio Requirements


	Regulatory Minimum		At June 30, 2024 and December 31, 2023
			Standardized	Advanced
Required ratios1
CET1 capital ratio	4.5	%	12.9%	10.0%
Tier 1 capital ratio	6.0	%	14.4%	11.5%
Total capital ratio	8.0	%	16.4%	13.5%

1.Required ratios represent the regulatory minimum plus the capital buffer requirement.

The Firm’s Regulatory Capital and Capital Ratios

Risk-based capital


	Standardized
$ in millions	At June 30, 2024			At December 31, 2023
Risk-based capital
CET1 capital	$	71,791		$	69,448
Tier 1 capital	80,513			78,183
Total capital	92,240			88,874
Total RWA	472,102			456,053
Risk-based capital ratio
CET1 capital	15.2		%	15.2		%
Tier 1 capital	17.1		%	17.1		%
Total capital	19.5		%	19.5		%
Required ratio1
CET1 capital	12.9		%	12.9		%
Tier 1 capital	14.4		%	14.4		%
Total capital	16.4		%	16.4		%

1.Required ratios are inclusive of any buffers applicable as of the date presented.

Leveraged-based capital


$ in millions	At June 30, 2024			At December 31, 2023
Leveraged-based capital
Adjusted average assets1	$	1,185,506		$	1,159,626
Supplementary leverage exposure2	1,473,391			1,429,552
Leveraged-based capital ratio
Tier 1 leverage	6.8		%	6.7		%
SLR	5.5		%	5.5		%
Required ratio3
Tier 1 leverage	4.0		%	4.0		%
SLR	5.0		%	5.0		%

1.Adjusted average assets represents the denominator of the Tier 1 leverage ratio and is composed of the average daily balance of consolidated on-balance sheet assets for the quarters ending on the respective balance sheet dates, reduced by disallowed goodwill, intangible assets, investments in covered funds, defined benefit pension plan assets, after-tax gain on sale from assets sold into securitizations, investments in our own capital instruments, certain deferred tax assets and other capital deductions.

2.Supplementary leverage exposure is the sum of Adjusted average assets used in the Tier 1 leverage ratio and other adjustments, primarily: (i) for derivatives, potential future exposure and the effective notional principal amount of sold credit protection offset by qualifying purchased credit protection; (ii) the counterparty credit risk for repo-style transactions; and (iii) the credit equivalent amount for off-balance sheet exposures.

3.Required ratios are inclusive of any buffers applicable as of the date presented.

U.S. Bank Subsidiaries’ Regulatory Capital and Capital Ratios

The OCC establishes capital requirements for the U.S. Bank Subsidiaries, and evaluates their compliance with such capital requirements. Regulatory capital requirements for the U.S. Bank Subsidiaries are calculated in a similar manner to the Firm’s regulatory capital requirements, although G-SIB capital surcharge and SCB requirements do not apply to the U.S. Bank Subsidiaries.

The OCC’s regulatory capital framework includes Prompt Corrective Action (“PCA”) standards, including “well-capitalized” PCA standards that are based on specified regulatory capital ratio minimums. For the Firm to remain an FHC, its U.S. Bank Subsidiaries must remain well-capitalized in accordance with the OCC’s PCA standards. In addition,

failure by the U.S. Bank Subsidiaries to meet minimum capital requirements may result in certain mandatory and discretionary actions by regulators that, if undertaken, could have a direct material effect on the U.S. Bank Subsidiaries’ and the Firm’s financial statements.

At June 30, 2024 and December 31, 2023, MSBNA and MSPBNA risk-based capital ratios are based on the Standardized Approach rules. Beginning on January 1, 2020, MSBNA and MSPBNA elected to defer the effect of the adoption of CECL on risk-based capital amounts and ratios, as well as RWA, adjusted average assets and supplementary leverage exposure calculations, over a five-year transition period. The deferral impacts began to phase in at 25% per year from January 1, 2022 and are phased-in at 75% from January 1, 2024. The deferral impacts will become fully phased-in beginning on January 1, 2025.

MSBNA’s Regulatory Capital


	Well-Capitalized Requirement		Required Ratio1		At June 30, 2024				At December 31, 2023
$ in millions					Amount		Ratio		Amount		Ratio
Risk-based capital
CET1 capital	6.5	%	7.0	%	$	23,263	22.2	%	$	21,925	21.7	%
Tier 1 capital	8.0	%	8.5	%	23,263		22.2	%	21,925		21.7	%
Total capital	10.0	%	10.5	%	24,163		23.0	%	22,833		22.6	%
Leverage-based capital
Tier 1 leverage	5.0	%	4.0	%	$	23,263	11.2	%	$	21,925	10.6	%
SLR	6.0	%	3.0	%	23,263		8.4	%	21,925		8.2	%

MSPBNA’s Regulatory Capital


	Well-Capitalized Requirement		Required Ratio1		At June 30, 2024				At December 31, 2023
$ in millions					Amount		Ratio		Amount		Ratio
Risk-based capital
CET1 capital	6.5	%	7.0	%	$	16,541	26.9	%	$	15,388	25.8	%
Tier 1 capital	8.0	%	8.5	%	16,541		26.9	%	15,388		25.8	%
Total capital	10.0	%	10.5	%	16,844		27.4	%	15,675		26.3	%
Leverage-based capital
Tier 1 leverage	5.0	%	4.0	%	$	16,541	8.1	%	$	15,388	7.5	%
SLR	6.0	%	3.0	%	16,541		7.8	%	15,388		7.2	%

1.Required ratios are inclusive of any buffers applicable as of the date presented. Failure to maintain the buffers would result in restrictions on the ability to make capital distributions, including the payment of dividends.

Additionally, MSBNA is conditionally registered with the SEC as a security-based swap dealer and is registered with the CFTC as a swap dealer. However, as MSBNA is prudentially regulated as a bank, its capital requirements continue to be determined by the OCC.

Other Regulatory Capital Requirements

MS&Co. Regulatory Capital


$ in millions	At June 30, 2024		At December 31, 2023
Net capital	$	18,298	$	18,121
Excess net capital	13,791		13,676

MS&Co. is registered as a broker-dealer and a futures commission merchant with the SEC and the CFTC,

respectively, and is registered as a swap dealer with the CFTC.

As an Alternative Net Capital broker-dealer, and in accordance with Securities Exchange Act of 1934 (“Exchange Act”) Rule 15c3-1, Appendix E, MS&Co. is subject to minimum net capital and tentative net capital requirements and operates with capital in excess of its regulatory capital requirements. As a futures commission merchant and registered swap dealer, MS&Co. is subject to CFTC capital requirements. In addition, MS&Co. must notify the SEC if its tentative net capital falls below certain levels. At June 30, 2024 and December 31, 2023, MS&Co. exceeded its net capital requirement and had tentative net capital in excess of the minimum and notification requirements.

Other Regulated Subsidiaries

Certain other subsidiaries are also subject to various regulatory capital requirements. Such subsidiaries include the following, each of which operated with capital in excess of their respective regulatory capital requirements as of June 30, 2024 and December 31, 2023, as applicable:

•MSSB,

•MSIP,

•MSESE,

•MSMS,

•MSCS, and

•MSCG

See Note 16 to the financial statements in the 2023 Form 10-K for further information.

- Definition

The entire disclosure for regulatory capital requirement for depository and lending institutions. Institutions include, but not are not limited to, finance company, insured depository institution, bank holding company, savings and loan association holding company, bank and savings institution not federally insured, mortgage company, foreign financial institution and credit union.

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