Ally Bank 2014 Annual Report Download - page 141

Table of Contents
Notes to Consolidated Financial Statements
Ally Financial Inc. • Form 10-K
129
The U.S. banking regulators also have established minimum leverage capital ratio requirements. The Tier 1 leverage ratio is defined as
Tier 1 capital divided by adjusted quarterly average total assets (which reflect adjustments for disallowed goodwill and certain intangible
assets). Under U.S. Basel I, the minimum U.S. Tier 1 leverage ratio was 3% or 4% depending on factors specified in the regulations.
In order for Ally to maintain its status as a FHC, Ally and its bank subsidiary, Ally Bank, must remain “well-capitalized” and “well-
managed,” as defined under applicable law. Under the regulations in effect as of December 31, 2014, in order to be “well-capitalized,” a
BHC, such as Ally, must have a Tier 1 risk-based capital ratio of at least 6% and a Total risk-based capital ratio of at least 10%, while an
insured depository institution was “well-capitalized” if it had a Tier 1 risk-based capital ratio of at least 6%, a Total risk-based capital ratio of
at least 10%, and a Tier 1 leverage ratio of at least 5%, unless subject to a regulatory directive to maintain higher capital levels. Effective
January 1, 2015, the “well-capitalized” standard for insured depository institutions, such as Ally Bank, was revised to reflect the new and
higher capital requirements in the U.S. Basel III final rules.
In the context of capital planning and stress testing, the U.S. banking regulators have also developed a measure of capital called “Tier 1
common,” which is 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,
BHCs with total consolidated assets of $50 billion or more, such as Ally, must develop and maintain a capital plan annually, and among other
elements, the capital plan must include a discussion of how we will maintain a pro forma Tier 1 common risk-based capital ratio (Tier 1
common to risk-weighted assets) above 5% under expected conditions and certain stressed scenarios.
During 2010, Ally, IB Finance Holding Company, LLC, Ally Bank, and the FDIC entered into a Capital and Liquidity Maintenance
Agreement (CLMA). The effective date of the CLMA was August 24, 2010. The CLMA requires capital at Ally Bank to be maintained at a
level such that Ally Bank's leverage ratio is at least 15%. For this purpose, the leverage ratio is determined in accordance with the FDIC's
regulations related to capital maintenance.
The following table summarizes our capital ratios under the U.S. Basel I capital framework.
2014 2013 Required
minimum
Well-
capitalized
minimum
December 31, ($ in millions)Amount Ratio Amount Ratio
Risk-based capital
Tier 1 (to risk-weighted assets)
Ally Financial Inc. $ 16,389 12.55% $ 15,165 11.79% 4.00% 6.00%
Ally Bank 16,022 16.89 15,159 16.73 4.00 6.00
Total (to risk-weighted assets)
Ally Financial Inc. $ 17,294 13.24% $ 16,405 12.76% 8.00% 10.00%
Ally Bank 16,468 17.36 15,809 17.45 8.00 10.00
Tier 1 leverage (to adjusted quarterly average
assets) (a)
Ally Financial Inc. $ 16,389 10.94% $ 15,165 10.23% 3.00–4.00% (b)
Ally Bank 16,022 15.44 15,159 15.77 15.00 (c) 5.00%
Tier 1 common (to risk-weighted assets)
Ally Financial Inc. $ 12,588 9.64% $ 11,366 8.84% n/a n/a
Ally Bank 16,022 16.89 15,159 16.73 n/a n/a
n/a = not applicable
(a) Federal regulatory reporting guidelines require the calculation of adjusted quarterly average assets using a daily average methodology.
(b) Currently, there is no Tier 1 leverage component in the definition of "well-capitalized" for a BHC.
(c) Ally Bank, in accordance with the CLMA, is required to maintain a Tier 1 leverage ratio of at least 15%.
At December 31, 2014, Ally and Ally Bank were “well-capitalized” and met all capital requirements to which each was subject.
Basel III Capital Framework and Other Regulatory Matters
In December 2010, the Basel Committee reached an agreement on the Basel III capital framework, which was designed to increase the
quality and quantity of regulatory capital by introducing new risk-based and leverage capital standards. In July 2013, the U.S. banking
regulators finalized rules implementing the Basel III capital framework and related Dodd-Frank Act provisions (U.S. Basel III). U.S. Basel III
represents substantial revisions to the existing regulatory capital standards for U.S. banking organizations. Ally became subject to U.S. Basel
III beginning on January 1, 2015. Certain aspects of U.S. Basel III, including the new capital buffers and regulatory capital deductions, will be
phased in over several years.
U.S. Basel III subjects Ally to a minimum Common Equity Tier 1 risk-based capital ratio of 4.5%, a minimum Tier 1 risk-based capital
ratio of 6%, and a minimum Total risk-based capital ratio of 8%. In addition to these minimum requirements, Ally will also be subject to a