Regulatory Capital

As of December 31, 2013, we were subject to the generally applicable minimum regulatory capital requirements enforced by U.S. banking regulators, referred to as Basel I. These requirements were based on a 1988 international accord developed by the Basel Committee on Banking Supervision, or Basel Committee.

In July 2013, U.S. banking regulators jointly issued a final rule to implement the Basel III framework in the U.S., referred to as the Basel III final rule, provisions of which become effective under a transition timetable which began on January 1, 2014, with full implementation required beginning on January 1, 2019. As provided in the Basel III final rule, banking organizations in their Basel II qualification period, or parallel run, were required to complete a superseding parallel run under Basel III.

We were notified by the Federal Reserve on February 21, 2014 that we completed our parallel run and would be required to begin using the advanced approaches framework in the Basel III final rule in the determination of our risk-based capital requirements. Pursuant to this notification, we began to use the advanced approaches to calculate and disclose our risk-based capital ratios starting with the three months ended June 30, 2014.

As required by the Dodd-Frank Wall Street Reform and Consumer Protection Act, or Dodd-Frank Act, enacted in 2010, State Street and State Street Bank, as advanced approaches banking organizations, are subject to a permanent "capital floor" in the calculation and assessment of their regulatory capital adequacy by U.S. banking regulators. Beginning on January 1, 2014, this capital floor is based on the provisions of Basel I, as adjusted by the final market risk capital rule issued by U.S. banking regulators in 2012.

Beginning on January 1, 2014, we became subject to the provisions of the Basel III final rule that govern our calculation of regulatory capital, including transitional, or phase-in, provisions. Beginning with the three months ended June 30, 2014 and ending

with December 31, 2014, the lower of our regulatory capital ratios calculated under the advanced approaches provisions of the Basel III final rule and those ratios calculated under the transitional provisions of Basel III (capital calculated in conformity with Basel III and risk-weighted assets calculated in conformity with Basel I as described above) will apply in the assessment of our capital adequacy for regulatory purposes.

As of September 30, 2014, the minimum required regulatory capital ratios are as follows:


•	common equity tier 1, or

tier 1 common, risk-based capital - 4%;


•	tier 1 risk-based capital - 5.5%;


•	total risk-based capital - 8%; and


•	tier 1 leverage - 4%

The methods for the calculation of our and State Street Bank's risk-based capital ratios will change as the provisions of the Basel III final rule related to the numerator (capital) and denominator (risk-weighted assets) are phased in, and as we begin calculating our risk-weighted assets using the advanced approaches. These ongoing methodological changes will result in differences in our reported capital ratios from one reporting period to the next that are independent of applicable changes to our capital base, our asset composition, our off-balance sheet exposures or our risk profile.

As of September 30, 2014, State Street and State Street Bank exceeded all regulatory capital adequacy requirements to which they were subject. As of September 30, 2014, State Street Bank was categorized as “well capitalized” under the applicable regulatory capital adequacy framework, and exceeded all “well capitalized” ratio guidelines to which it was subject. Management believes that no conditions or events have occurred since September 30, 2014 that have changed the capital categorization of State Street Bank.

The following table presents the regulatory capital structure, total risk-weighted assets and related regulatory capital ratios for State Street and State Street Bank as of the dates indicated. As a result of changes in the methodologies used to calculate our regulatory capital ratios from period to period as the provisions of the Basel III final rule are phased in, the ratios presented in the table for each period-end are not directly comparable. Refer to the footnotes following the table.



					State Street									State Street Bank
(Dollars in millions)					Basel III Advanced Approach September 30, 2014⁽¹⁾			Basel III Transitional September 30, 2014⁽²⁾			December 31, 2013⁽³⁾			Basel III Advanced Approach September 30, 2014⁽¹⁾			Basel III Transitional September 30, 2014⁽²⁾			December 31, 2013⁽³⁾
Common shareholders' equity:
Common stock and related surplus					$	10,284		$	10,284		$	10,280		$	10,840		$	10,840		$	10,786
Retained earnings					14,531			14,531			13,395			9,500			9,500			9,064
Accumulated other comprehensive income (loss)					(264		)	(264		)	215			(220		)	(220		)	209
Treasury stock, at cost					(4,785		)	(4,785		)	(3,693		)	—			—			—
Total					19,766			19,766			20,197			20,120			20,120			20,059
Regulatory capital adjustments:
Goodwill and other intangible assets, net of associated deferred tax liabilities⁽⁴⁾					(5,942		)	(5,942		)	(7,743		)	(5,672		)	(5,672		)	(7,341		)
Other adjustments					(43		)	(43		)	—			(132		)	(132		)	—
Tier 1 common capital					13,781			13,781			12,454			14,316			14,316			12,718
Preferred stock					1,233			1,233			491			—			—			—
Trust preferred capital securities subject to phase-out from tier 1 capital					475			475			950			—			—			—
Other adjustments					(171		)	(171		)	—			—			—			—
Tier 1 capital					15,318			15,318			13,895			14,316			14,316			12,718
Qualifying subordinated long-term debt					1,738			1,738			1,918			1,754			1,754			1,936
Trust preferred capital securities phased out of tier 1 capital					475			475			NA			—			—			NA
Other adjustments					3			3			(26		)	—			—			45
Total capital					$	17,534		$	17,534		$	15,787		$	16,070		$	16,070		$	14,699

Risk-weighted assets:
Credit risk					$	67,915		$	90,377		$	78,864		$	60,610		$	87,150		$	76,197
Operational risk					35,960			NA			NA			35,530			NA			NA
Market risk					4,203			1,423			1,262			3,707			1,423			1,262
Total risk-weighted assets					$	108,078		$	91,800		$	80,126		$	99,847		$	88,573		$	77,459
Adjusted quarterly average assets					$	240,529		$	240,529		$	202,801		$	236,340		$	236,340		$	199,301

Capital Ratios:	Minimum Requirements⁽⁵⁾₂₀₁₄		Minimum Requirements⁽⁶⁾₂₀₁₃
Tier 1 common risk-based capital	4.0	%	NA		12.8		%	15.0		%	15.5		%	14.3		%	16.2		%	16.4		%
Tier 1 risk-based capital	5.5		4.0	%	14.2			16.7			17.3			14.3			16.2			16.4
Total risk-based capital	8.0		8.0		16.2			19.1			19.7			16.1			18.1			19.0
Tier 1 leverage	4.0		4.0		6.4			6.4			6.9			6.1			6.1			6.4

NA: Not applicable.

⁽¹⁾Tier 1 common capital, tier 1 capital and total capital ratios as of September 30, 2014 were calculated in conformity with the advanced approaches provisions of the Basel III final rule. Tier 1 leverage ratio as of September 30, 2014 was calculated in conformity with the Basel III final rule.

⁽²⁾Tier 1 common capital, tier 1 capital, total capital and tier 1 leverage ratios as of September 30, 2014 were calculated in conformity with the transitional provisions of the Basel III final rule. Specifically, these ratios reflect tier 1 common, tier 1 and total capital (the numerator) calculated in conformity with the provisions of the Basel III final rule, and total risk-weighted assets or, with respect to the tier 1 leverage ratio, quarterly average assets (in both cases, the denominator), calculated in conformity with the provisions of Basel I.

⁽³⁾Tier 1 common capital, tier 1 capital, total capital and tier 1 leverage ratios as of December 31, 2013 were calculated in conformity with the provisions of Basel I.

⁽⁴⁾Amounts for State Street and State Street Bank as of September 30, 2014 consisted of goodwill, net of associated deferred tax liabilities, and 20% of other intangible assets, net of associated deferred tax liabilities, the latter phased in as a deduction from capital, in conformity with the Basel III final rule.

⁽⁵⁾Minimum requirements will be phased in up to full implementation beginning on January 1, 2019; minimum requirements listed are as of September 30, 2014.

⁽⁶⁾Minimum requirements listed, governed by Basel I, are as of December 31, 2013.