Capital One 2013 Annual Report Download - page 106

requirements under the OCC’s applicable capital adequacy guidelines and were “well capitalized” under PCA
requirements as of December 31, 2013.
Recent Developments in Capital Requirements
As described above, the U.S. federal banking agencies recently adopted the Final Rule, which increases the
minimum capital that we and other institutions are required to hold. Prior to being revised in the Final Rule, the
minimum risk-based capital requirements adopted by the U.S. federal banking agencies followed Basel I as noted
in Table 14 above and the Advanced Approaches for applicable banks and bank holding companies. Currently,
we are subject to Basel I and are in the Advanced Approaches qualification process but are not formally subject
to its capital requirements.
The Final Rule modified both Basel I and the Advanced Approaches (as modified, referred to respectively as
“Basel III Standardized” and the “Basel III Advanced Approaches”). Under the Final Rule, beginning on
January 1, 2014, as an Advanced Approaches banking organization that has yet to enter or exit parallel run, we
must use Basel III Standardized for calculating our regulatory capital, including as used in our capital ratios,
subject to transition periods. In 2014, however, we will continue to use Basel I for calculating our risk-weighted
assets in our regulatory capital ratios. Beginning on January 1, 2015, we must use Basel III Standardized for
calculating our risk-weighted assets in our regulatory capital ratios.
Basel III Standardized Common Equity Tier 1 capital under the Final Rule includes additional adjustments and
deductions not included in Basel I Tier 1 common capital, such as the inclusion of accumulated other
comprehensive income from available for sale securities, and the deduction of assets related to defined benefit
pension and other post-retirement employee benefit plans.
The following table compares our Tier 1 common capital and risk weighted assets as of December 31, 2013,
calculated under Basel I, to our estimated Common Equity Tier I capital and risk weighted assets as of December
31, 2013, calculated under Basel III Standardized, as it applies on January 1, 2014, January 1, 2015 and when
fully phased-in. Our estimate of the Common Equity Tier 1 capital ratio under Basel III Standardized is a non-
GAAP financial measure. However, we believe this measure provides useful information to investors and others
by measuring our progress against regulatory capital standards that will be applicable to the Company beginning
in 2014. See the table and notes below for further discussion on our interpretations, expectations and assumptions
used in calculating this ratio.
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