Regulatory Matters

12 Months Ended

Dec. 31, 2011

Regulatory Matters [Abstract]

Regulatory Matters

Note 15.     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 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 accordance with regulatory accounting practices. Our capital components and their classifications are subject to qualitative judgments by the regulators about components, risk weightings and other factors.

Quantitative measures established by regulation to ensure 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 equivalents, and the tier 1 leverage ratio is tier 1 capital divided by adjusted quarterly average assets. As of December 31, 2011 and 2010, State Street and State Street Bank met all regulatory capital adequacy requirements to which they were subject.

As of December 31, 2011, 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. State Street Bank exceeded all "well capitalized" ratio guidelines as of December 31, 2011 and 2010. Management believes that no conditions or events have occurred since December 31, 2011 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			2011			2010			2011			2010
Risk-based ratios:
Tier 1 capital		4	%		6	%		18.8	%		20.5	%		17.6	%		18.1	%
Total capital		8			10			20.5			22.0			19.6			19.9
Tier 1 leverage ratio		4			5			7.3			8.2			6.7			7.1
Total shareholders' equity							$	19,398		$	17,787		$	18,494		$	16,697
Trust preferred capital securities								950			1,450			—			—
Net unrealized loss on available-for-sale securities and cash flow hedges								395			680			398			682
Deferred tax liability associated with acquisitions								757			748			737			748
Recognition of pension plan funded status								248			186			245			187
Less:
Goodwill								5,645			5,597			5,353			5,365
Other intangible assets								2,459			2,593			2,297			2,460
Other deductions(2)								—			336			—			—
Tier 1 capital								13,644			12,325			12,224			10,489
Qualifying subordinated debt								1,339			959			1,343			959
Allowances for on- and off-balance sheet credit exposures								40			116			40			117
Unrealized gain on available-for-sale equity securities								—			2			—			—
Tier 2 capital								1,379			1,077			1,383			1,076
Deduction for investments in finance subsidiaries								(181	)		(171	)		—			—
Total capital							$	14,842		$	13,231		$	13,607		$	11,565
Adjusted total risk-weighted assets and market-riskequivalents:
On-balance sheet							$	52,642		$	46,209		$	49,659		$	44,103
Off-balance sheet								19,115			13,177			19,109			13,177
Market-risk equivalents								661			791			611			750
Total							$	72,418		$	60,177		$	69,379		$	58,030
Adjusted quarterly average assets							$	186,336		$	150,770		$	183,086		$	147,908

⁽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 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%.

⁽²⁾  Amounts included deferred tax assets not eligible for inclusion in regulatory capital.

Cash, Dividend, Loan and Other Restrictions:

During 2011, our banking subsidiaries were required by the Federal Reserve to maintain average aggregate cash balances of approximately $3.6 billion to satisfy reserve requirements. Federal and state banking regulations place certain restrictions on dividends paid by banking subsidiaries to a parent company. For 2012, aggregate dividends by State Street Bank without prior regulatory approval are limited to approximately $2.26 billion of its undistributed earnings at December 31, 2011, plus an additional amount equal to its net profits, as defined, for 2012 up to the date of any dividend. In addition, the prior approval of the Federal Reserve is required for us to pay future common stock dividends.

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.

At December 31, 2011, our consolidated retained earnings included $442 million representing undistributed earnings of unconsolidated entities that are accounted for under the equity method of accounting.