Capital One 2004 Annual Report Download - page 75

of the underlying forecast assumptions. The measurement of interest rate sensitivity also does not consider the
effects of changes in the overall level of economic activity associated with various interest rate scenarios or
reflect the ability of management to take action to further mitigate exposure to changes in interest rates. This
action may include, within legal and competitive constraints, the repricing of interest rates on outstanding credit
card loans.
Table 14 reflects the interest rate repricing schedule for earning assets and interest-bearing liabilities as of
December 31, 2004.
Table 14: Interest Rate Sensitivity
As of December 31,
2004—Subject to Repricing
(Dollars in Millions)
Within
180 Days
>180 Days-
1Year
>1 Year-
5 Years
Over
5 Years
Earning assets:
Federal funds sold and resale agreements $ 774 $ — $ — $ —
Interest-bearing deposits at other banks 310 — — —
Securities available for sale 74 414 7,695 1,117
Other 175 28 120 137
Consumer loans 14,539 2,357 9,950 11,370
Total earning assets 15,872 2,799 17,765 12,624
Interest-bearing liabilities:
Interest-bearing deposits 3,669 4,013 16,724 1,231
Senior and subordinated notes 1,457 — 3,521 1,897
Other borrowings 3,237 999 4,181 1,220
Total interest-bearing liabilities 8,363 5,012 24,426 4,348
Non-rate related net assets — — — (6,911)
Interest sensitivity gap 7,509 (2,213) (6,661) 1,365
Impact of swaps 2,016 (413) (1,603) —
Impact of consumer loan securitizations (3,318) (334) (6,193) 9,845
Interest sensitivity gap adjusted for impact of securitizations and
swaps $ 6,207 $(2,960) $(14,457) $11,210
Adjusted gap as a percentage of managed assets 6.55 % (3.12) % (15.25) % 11.82%
Adjusted cumulative gap $ 6,207 $ 3,247 $(11,210) $ —
Adjusted cumulative gap as a percentage of managed assets 6.55 % 3.43 % (11.82) % 0.00%
Foreign Exchange Risk
The Company is exposed to changes in foreign exchange rates which may impact translated income and expense
associated with foreign operations. In order to limit earnings exposure to foreign exchange risk, the Company’s
Asset/Liability Management Policy requires that all material foreign currency denominated transactions be
hedged. As of December 31, 2004, the estimated reduction in 12-month earnings due to adverse foreign exchange
rate movements corresponding to a 95% probability is less than 1%. The precision of this estimate is also limited
due to the inherent uncertainty of the underlying forecast assumptions.
Capital Adequacy
Effective October 1, 2004, the Corporation registered as a bank holding company (“BHC”) with the Federal
Reserve Bank of Richmond and became subject to the requirements of the Bank Holding Company Act of 1956,
as amended. As a result of becoming a BHC, the Bank has amended its Virginia charter which removes
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