Ally Bank 2011 Annual Report Download - page 190

Table of Contents
Notes to Consolidated Financial Statements
Ally Financial Inc. • Form 10−K
and its Tier 1 risk−based capital ratio equals or exceeds 6%; and for insured depository institutions, when its leverage ratio equals or exceeds 5%, unless
subject to a regulatory directive to maintain higher capital levels.
In conjunction with the Supervisory Capital Assessment Program (S−CAP) in 2009, the banking regulators have developed a new measure of capital
called “Tier 1 common” defined as Tier 1 capital less noncommon elements, including qualifying perpetual preferred stock, minority interest in subsidiaries,
trust preferred securities, and mandatory convertible preferred securities. Tier 1 common is used by banking regulators, investors and analysts to assess and
compare the quality and composition of Ally's capital with the capital of other financial services companies. Also, bank holding companies with assets of
$50 billion or more, such as Ally, must develop and maintain a capital plan annually, and among other elements, the capital plan must include a discussion
of how we will maintain a pro forma Tier 1 common ratio (Tier 1 common to risk−weighted assets) above 5% under expected conditions and certain
stressed scenarios.
On October 29, 2010, Ally, IB Finance Holding Company, LLC, Ally Bank, and the FDIC entered into a Capital and Liquidity Maintenance
Agreement (CLMA). The CLMA requires capital at Ally Bank to be maintained at a level such that Ally Bank's leverage ratio is at least 15%. For this
purpose, the leverage ratio is determined in accordance with the FDIC's regulations related to capital maintenance.
The following table summarizes our capital ratios. 2011 2010 Required
Minimum
Well−
capitalized
Minimum
December 31, ($ in millions) Amount Ratio Amount Ratio
Risk−based capital
Tier 1 (to risk−weighted assets)
Ally Financial Inc. $ 21,158 13.71% $ 22,189 15.00% 4.00% 6.00%
Ally Bank 12,920 17.39 10,738 19.23 4.00 6.00
Total (to risk−weighted assets)
Ally Financial Inc. $ 22,755 14.75% $ 24,213 16.36% 15.00% (a) 10.00%
Ally Bank 13,643 18.37 11,438 20.48 8.00 10.00
Tier 1 leverage (to adjusted quarterly average
assets) (b)
Ally Financial Inc. $ 21,158 11.50% $ 22,189 13.05% 3.00–4.00% (c)
Ally Bank 12,920 15.47 10,738 15.81 15.00 (d) 5.00%
Tier 1 common (to risk−weighted assets)
Ally Financial Inc. $ 11,676 7.57% $ 12,677 8.57% n/a n/a
Ally Bank n/a n/a n/a n/a n/a n/a
n/a = not applicable
(a) Ally was previously subject to a directive from the Board of Governors of the Federal Reserve System (FRB) to maintain a Total risk−based capital ratio of 15%. The directive
expired on December 31, 2011.
(b) Federal regulatory reporting guidelines require the calculation of adjusted quarterly average assets using a daily average methodology.
(c) There is no Tier 1 leverage component in the definition of a well−capitalized bank holding company.
(d) Ally Bank, in accordance with the CLMA is required to maintain a Tier 1 leverage ratio of at least 15%.
At December 31, 2011, Ally and Ally Bank were “well−capitalized” and met all capital requirements to which each was subject.
Basel Capital Accord and Other Regulatory Matters
The minimum risk−based capital requirements adopted by the U.S. banking regulators follow the Capital Accord (Capital Accord or Basel I) of the
Bank for International Settlements' Basel Committee on Banking Supervision (Basel Committee). The Capital Accord was published in 1988 and generally
applies to depository institutions and their holding companies in the United States. In 2004, the Basel Committee published a revision to the Capital Accord
(Basel II). The goal of the Basel II capital rules is to provide more risk−sensitive regulatory capital calculations and promote enhanced risk management
practices among large, internationally active banking organizations. U.S. banking regulators published final Basel II rules in December 2007. Ally is
required to comply with the Basel II rules as implemented by the U.S. banking regulators. Prior to full implementation of the Basel II rules, Ally is required
to complete a qualification period of four consecutive quarters during which it needs to demonstrate that it meets the requirements of the rules to the
satisfaction of its primary U.S. banking regulator. Pursuant to an extension that was granted to Ally, this qualification period, or parallel run, is required to
begin no later than October 1, 2013. During this period, capital is calculated using both Basel I and Basel II methodologies. Upon completion of this parallel
run and with the approval of its primary U.S. banking regulator, Ally and Ally Bank will begin to use Basel II to calculate regulatory capital. Basel II
contemplated a three−year transition period during which a bank holding company or bank could gradually lower its capital level below the levels required
by Basel I. However, under a final capital rule that implements a provision of the Dodd−Frank Wall Street Reform and Consumer Protection Act
(Dodd−Frank Act), Ally must continue to calculate their risk−based capital requirements under Basel I, and the capital requirements that each computes
under Basel I will serve as a floor for its risk−based capital requirement computed under Basel II.
In addition to Basel II, the Basel Committee recently adopted new capital, leverage, and liquidity guidelines under the Capital Accord
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