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.

As required by the Dodd-Frank Act, 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, 2015, we were required to calculate our risk-based capital ratios using both the advanced approaches and the standardized approach. As a result, from January 1, 2015 going forward, our risk-based capital ratios for regulatory assessment purposes are the lower of each ratio calculated under the standardized approach and the advanced approaches.

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 December 31, 2016, State Street and State Street Bank exceeded all regulatory capital adequacy requirements to which they were subject. As of December 31, 2016, 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 December 31, 2016 that have changed the capital categorization of State Street Bank.

The following table presents the regulatory capital structure, total risk-weighted assets, related regulatory capital ratios and the minimum required 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
(In millions)					Basel III Advanced Approaches December 31, 2016⁽¹⁾			Basel III Standardized Approach December 31, 2016⁽²⁾			Basel III Advanced Approaches December 31, 2015⁽¹⁾			Basel III Standardized Approach December 31, 2015⁽²⁾			Basel III Advanced Approaches December 31, 2016⁽¹⁾			Basel III Standardized Approach December 31, 2016⁽²⁾			Basel III Advanced Approaches December 31, 2015⁽¹⁾			Basel III Standardized Approach December 31, 2015⁽²⁾
Common shareholders' equity:
Common stock and related surplus					$	10,286		$	10,286		$	10,250		$	10,250		$	11,376		$	11,376		$	10,938		$	10,938
Retained earnings					17,459			17,459			16,049			16,049			12,285			12,285			10,655			10,655
Accumulated other comprehensive income (loss)					(1,936		)	(1,936		)	(1,422		)	(1,422		)	(1,648		)	(1,648		)	(1,230		)	(1,230		)
Treasury stock, at cost					(7,682		)	(7,682		)	(6,457		)	(6,457		)	—			—			—			—
Total					18,127			18,127			18,420			18,420			22,013			22,013			20,363			20,363
Regulatory capital adjustments:
Goodwill and other intangible assets, net of associated deferred tax liabilities⁽³⁾					(6,348		)	(6,348		)	(5,927		)	(5,927		)	(6,060		)	(6,060		)	(5,631		)	(5,631		)
Other adjustments					(155		)	(155		)	(60		)	(60		)	(148		)	(148		)	(85		)	(85		)
Common equity tier 1 capital					11,624			11,624			12,433			12,433			15,805			15,805			14,647			14,647
Preferred stock					3,196			3,196			2,703			2,703			—			—			—			—
Trust preferred capital securities subject to phase-out from tier 1 capital					—			—			237			237			—			—			—			—
Other adjustments					(103		)	(103		)	(109		)	(109		)	—			—			—			—
Tier 1 capital					14,717			14,717			15,264			15,264			15,805			15,805			14,647			14,647
Qualifying subordinated long-term debt					1,172			1,172			1,358			1,358			1,179			1,179			1,371			1,371
Trust preferred capital securities phased out of tier 1 capital					—			—			713			713			—			—			—			—
ALLL and other					19			77			12			66			15			77			8			66
Other adjustments					1			1			2			2			—			—			—			—
Total capital					$	15,909		$	15,967		$	17,349		$	17,403		$	16,999		$	17,061		$	16,026		$	16,084
Risk-weighted assets:
Credit risk					$	50,900		$	98,125		$	51,733		$	93,515		$	47,383		$	94,413		$	47,677		$	89,164
Operational risk⁽⁴⁾					44,579			NA			43,882			NA			44,043			NA			43,324			NA
Market risk⁽⁵⁾					3,822			1,751			3,937			2,378			3,822			1,751			3,939			2,378
Total risk-weighted assets					$	99,301		$	99,876		$	99,552		$	95,893		$	95,248		$	96,164		$	94,940		$	91,542
Adjusted quarterly average assets					$	226,310		$	226,310		$	221,880		$	221,880		$	222,584		$	222,584		$	217,358		$	217,358

Capital Ratios:	2016 Minimum Requirements Including Capital Conservation Buffer and G-SIB Surcharge⁽⁶⁾		2015 Minimum Requirements⁽⁷⁾
Common equity tier 1 capital	5.5	%	4.5	%	11.7		%	11.6		%	12.5		%	13.0		%	16.6		%	16.4		%	15.4		%	16.0		%
Tier 1 capital	7.0		6.0		14.8			14.7			15.3			15.9			16.6			16.4			15.4			16.0
Total capital	9.0		8.0		16.0			16.0			17.4			18.1			17.8			17.7			16.9			17.6
Tier 1 leverage	4.0		4.0		6.5			6.5			6.9			6.9			7.1			7.1			6.7			6.7

NA: Not applicable.

⁽¹⁾Common equity tier 1 capital, tier 1 capital and total capital ratios as of December 31, 2016 and December 31, 2015 were calculated in conformity with the advanced approaches provisions of the Basel III final rule. Tier 1 leverage ratio as of December 31, 2016 and December 31, 2015 were calculated in conformity with the Basel III final rule.

⁽²⁾Common equity tier 1 capital, tier 1 capital and total capital ratios as of December 31, 2016 and December 31, 2015 were calculated in conformity with the standardized approach provisions of the Basel III final rule. Tier 1 leverage ratio as of December 31, 2016 and December 31, 2015 were calculated in conformity with the Basel III final rule.

⁽³⁾Amounts for State Street and State Street Bank as of December 31, 2016 consisted of goodwill, net of associated deferred tax liabilities, and 60% of other intangible assets, net of associated deferred tax liabilities. Amounts for State Street and State Street Bank as of December 31, 2015 consisted of goodwill, net of deferred tax liabilities and 40% of other intangible assets, net of associated deferred tax liabilities. Intangible assets, net of associated deferred tax liabilities is phased in as a deduction from capital, in conformity with the Basel III final rule.

⁽⁴⁾Under the current advanced approaches rules and regulatory guidance concerning operational risk models, RWA attributable to operational risk can vary substantially from period-to-period, without direct correlation to the effects of a particular loss event on our results of operations and financial condition and impacting dates and periods that may differ from the dates and periods as of and during which the loss event is reflected in our financial statements, with the timing and categorization dependent on the processes for model updates and, if applicable, model revalidation and regulatory review and related supervisory processes. An individual loss event can have a significant effect on the output of our operational risk RWA under the advanced approaches depending on the severity of the loss event and its categorization among the seven Basel-defined UOMs.

⁽⁵⁾Market risk risk-weighted assets reported in conformity with the Basel III advanced approaches included a CVA which reflected the risk of potential fair-value adjustments for credit risk reflected in our valuation of over-the-counter derivative contracts. The CVA was not provided for in the final market risk capital rule; however, it was required by the advanced approaches provisions of the Basel III final rule. We used a simple CVA approach in conformity with the Basel III advanced approaches.

⁽⁶⁾Minimum requirements will be phased in up to full implementation beginning on January 1, 2019; minimum requirements listed are as of December 31, 2016.

⁽⁷⁾Minimum requirements will be phased in up to full implementation beginning on January 1, 2019; minimum requirements listed are as of December 31, 2015.