Capital One 2012 Annual Report Download - page 105

unconsolidated VIEs was $2.8 billion and $521 million, respectively, as of December 31, 2012, and our
maximum exposure to loss was $2.8 billion. We provide a discussion of our activities related to these VIEs in
“Note 7—Variable Interest Entities and Securitizations.”
CAPITAL MANAGEMENT
The level and composition of our equity capital are determined by multiple factors, including our consolidated
regulatory capital requirements and an internal risk-based capital assessment, and may also be influenced by
rating agency guidelines, subsidiary capital requirements, the business environment, conditions in the financial
markets and assessments of potential future losses due to adverse changes in our business and market
environments.
Capital Standards and Prompt Corrective Action
Bank holding companies and national banks are subject to capital adequacy standards adopted by the Federal
Reserve and the Office of the Comptroller of the Currency (“OCC”), respectively. The capital adequacy
standards set forth minimum risk-based and leverage capital requirements that are based on quantitative and
qualitative measures of assets and off-balance sheet items. Under the capital adequacy standards, bank holding
companies and banks currently are required to maintain a total risk-based capital ratio of at least 8%, a Tier 1
risk-based capital ratio of at least 4%, and a Tier 1 leverage capital ratio of at least 4% (3% for banks that meet
certain specified criteria, including excellent asset quality, high liquidity, low interest rate exposure and the
highest regulatory rating) in order to be considered adequately capitalized.
National banks also are subject to prompt corrective action capital regulations. Under prompt corrective action
regulations, a bank is considered to be well capitalized if it maintains a Tier 1 risk-based capital ratio of at least
6% (200 basis points higher than the above minimum capital standard), a total risk-based capital ratio of at least
10% (200 basis points higher than the above minimum capital standard), a Tier 1 leverage capital ratio of at least
5% and is not subject to any supervisory agreement, order or directive to meet and maintain a specific capital
level for any capital reserve. A bank is considered to be adequately capitalized if it meets these minimum capital
ratios and does not otherwise meet the well capitalized definition. Currently, prompt corrective action capital
requirements do not apply to bank holding companies.
We also disclose a Tier 1 common ratio for our bank holding company, which is a regulatory capital measure
widely used by investors, analysts, rating agencies and bank regulatory agencies to assess the capital position of
financial services companies. There is currently no mandated minimum or “well capitalized” standard for the
Tier 1 common ratio; instead the risk-based capital rules state that voting common stockholders’ equity should be
the dominant element within Tier 1 common capital. In addition, we disclose a non-GAAP TCE ratio in “Item 6.
Selected Financial Data.” While the Tier 1 common and TCE ratios are capital measures widely used by
investors, analysts and bank regulatory agencies to assess the capital position of financial services companies,
they may not be comparable to similarly titled measures reported by other companies. We provide information
on the calculation of these ratios in “Supplemental Tables—Table F: Reconciliation of Non-GAAP Measures and
Calculation of Regulatory Capital Measures Under Basel I.”
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