Regulatory Matters

12 Months Ended

Dec. 31, 2013

Regulatory Capital Requirements [Abstract]

Regulatory Matters

Regulatory Matters

Regulatory Capital:

We are subject to various regulatory capital requirements administered by federal banking agencies. Failure to meet minimum regulatory capital requirements can initiate certain mandatory and discretionary actions by regulators that, if undertaken, could have a direct material effect on our consolidated financial condition. Under current regulatory capital adequacy guidelines, we must meet specified capital requirements that involve quantitative measures of our consolidated assets, liabilities and off-balance sheet exposures calculated in conformity with regulatory accounting practices. Our capital components and their classifications are subject to qualitative judgments by regulators about components, risk weightings and other factors.

Quantitative measures established by regulation with respect to capital adequacy require State Street and State Street Bank to maintain minimum risk-based capital and leverage ratios as set forth in the following table. The risk-based capital ratios are tier 1 capital and total capital, each divided by adjusted total risk-weighted assets and market risk equivalent assets, and the tier 1 leverage ratio is tier 1 capital divided by adjusted quarterly average assets. As of December 31, 2013 and 2012, State Street and State Street Bank exceeded all regulatory capital adequacy requirements to which they were subject.

As of December 31, 2013, State Street Bank was categorized as “well capitalized” under the regulatory capital adequacy framework. To be categorized as “well capitalized,” State Street Bank must meet or exceed the minimum ratios for “well capitalized,” as set forth in the following table, and meet certain other requirements. As of December 31, 2013 and 2012, State Street Bank exceeded all “well capitalized” ratio guidelines to which it was subject. Management believes that no conditions or events have occurred since December 31, 2013 that have changed the capital categorization of State Street Bank.

The following table presents regulatory capital ratios and related components as of December 31:

	Regulatory Guidelines(1)				State Street						State Street Bank
(Dollars in millions)	Minimum		Well Capitalized		2013			2012			2013			2012
Risk-based ratios:
Tier 1 capital	4	%	6	%	17.3		%	19.1		%	16.4		%	17.3		%
Total capital	8		10		19.7			20.6			19.0			19.1
Tier 1 leverage ratio	4		5		6.9			7.1			6.4			6.3
Total shareholders’ equity					$	20,378		$	20,869		$	19,755		$	19,681
Trust preferred capital securities					950			950			—			—
Net unrealized (gains) losses on available-for-sale securities and cash flow hedges					107			(525		)	112			(523		)
Net unrealized losses on retirement plans					203			283			192			277
Goodwill					(6,036		)	(5,977		)	(5,740		)	(5,679		)
Other intangible assets					(2,360		)	(2,539		)	(2,239		)	(2,392		)
Deferred tax liabilities associated with acquisitions					653			699			638			680
Tier 1 capital					13,895			13,760			12,718			12,044
Qualifying subordinated debt					1,918			1,219			1,936			1,223
Allowances for on- and off-balance sheet credit exposures					45			39			45			39
Unrealized gains on available-for-sale equity securities					3			2			—			—
Tier 2 capital					1,966			1,260			1,981			1,262
Deduction for investments in finance subsidiaries					(74		)	(191		)	—			—
Total capital					$	15,787		$	14,829		$	14,699		$	13,306
Adjusted total risk-weighted assets and market risk equivalent assets:
On-balance sheet assets					$	60,277		$	58,238		$	57,599		$	55,949
Off-balance sheet equivalent assets					18,587			13,155			18,598			13,144
Market risk equivalent assets					1,262			519			1,262			445
Total					$	80,126		$	71,912		$	77,459		$	69,538
Adjusted quarterly average assets					$	202,801		$	192,817		$	199,301		$	189,780

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⁽¹⁾ State Street Bank must comply with the regulatory guideline for “well capitalized” in order for the parent company to maintain its status as a financial holding company, including maintaining a minimum tier 1 risk-based capital ratio of 6%, a minimum total risk-based capital ratio of 10%, and a minimum tier 1 leverage ratio of 5%. The “well capitalized” guideline requires us to maintain a minimum tier 1 risk-based capital ratio of 6% and a minimum total risk-based capital ratio of 10%.

Cash, Dividend, Loan and Other Restrictions:

In 2013, our banking subsidiaries were required by the Federal Reserve to maintain average aggregate cash balances of approximately $4.39 billion to satisfy reserve requirements. Federal and state banking regulations place certain restrictions on dividends paid by banking subsidiaries to a parent company. For 2014, aggregate dividend payments by State Street Bank to the parent company without prior regulatory approval are limited to approximately $401 million of its undistributed earnings as of December 31, 2013, plus an additional amount equal to its net profits, as defined by the aforementioned banking regulations, for 2014 up to the date of any dividend payment. Currently, the payment of future common stock dividends by the parent company to its shareholders is subject to the review of our capital plan by the Federal Reserve in connection with its Comprehensive Capital Analysis and Review process.

The Federal Reserve Act requires that extensions of credit by State Street Bank to certain affiliates, including the parent company, be secured by specific collateral, that the extension of credit to any one affiliate be limited to 10% of State Street Bank’s capital and surplus, as defined, and that extensions of credit to all such affiliates be limited to 20% of State Street Bank’s capital and surplus.

As of December 31, 2013, our consolidated retained earnings included $474 million representing undistributed earnings of unconsolidated entities that are accounted for under the equity method of accounting.