Capital One 2013 Annual Report Download - page 54

Our Ability To Receive Dividends From Our Subsidiaries Could Affect Our Liquidity And Ability To Pay
Dividends.
We are a separate and distinct legal entity from our subsidiaries, including the Banks. Dividends to us from our
direct and indirect subsidiaries, including the Banks, have represented a major source of funds for us to pay
dividends on our common stock, make payments on corporate debt securities and meet other obligations. There
are various federal law limitations on the extent to which the Banks can finance or otherwise supply funds to us
through dividends and loans. These limitations include minimum regulatory capital requirements, federal
banking law requirements concerning the payment of dividends out of net profits or surplus, Sections 23A and
23B of the Federal Reserve Act and Regulation W governing transactions between an insured depository
institution and its affiliates, as well as general federal regulatory oversight to prevent unsafe or unsound
practices. If our subsidiaries’ earnings are not sufficient to make dividend payments to us while maintaining
adequate capital levels, our liquidity may be affected and we may not be able to make dividend payments to our
common stockholders, make payments on outstanding corporate debt securities or meet other obligations, each
and any of which could have a material adverse impact on our results of operations, financial position or
perception of financial health.
The Soundness of Other Financial Institutions Could Adversely Affect Us.
Our ability to engage in routine funding and other transactions could be adversely affected by the stability and
actions of other financial services institutions. Financial services institutions are interrelated as a result of trading,
clearing, servicing, counterparty and other relationships. We have exposure to an increasing number of financial
institutions and counterparties. These counterparties include institutions that may be exposed to various risks
over which we have little or no control, including European or U.S. sovereign debt that is currently or may
become in the future subject to significant price pressure, rating agency downgrade or default risk.
In addition, we routinely execute transactions with counterparties in the financial services industry, including
brokers and dealers, commercial banks, investment banks, mutual and hedge funds and other institutional clients,
resulting in a significant credit concentration with respect to the financial services industry overall. As a result,
defaults by, or even rumors or questions about, one or more financial services institutions, or the financial
services industry generally, have led to market-wide liquidity problems and could lead to losses or defaults by us
or by other institutions.
Likewise, adverse developments affecting the overall strength and soundness of our competitors, the financial
services industry as a whole and the general economic climate or sovereign debt could have a negative impact on
perceptions about the strength and soundness of our business even if we are not subject to the same adverse
developments. In addition, adverse developments with respect to third parties with whom we have important
relationships also could negatively impact perceptions about us. These perceptions about us could cause our
business to be negatively affected and exacerbate the other risks that we face.
Item 1B. Unresolved Staff Comments
None.
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