Capital One 2014 Annual Report Download - page 53

restrictions than other institutions and companies with whom we compete for talent. If we are unable to retain
talented senior leadership, our business could be negatively affected.
Our Businesses Are Subject To The Risk Of Increased Litigation.
Our businesses are subject to increased litigation risks as a result of a number of factors and from various sources,
including the highly regulated nature of the financial services industry, the focus of state and federal prosecutors on
banks and the financial services industry, the structure of the credit card industry and business practices in the
mortgage lending business. Given the inherent uncertainties involved in litigation, and the very large or indeterminate
damages sought in some matters asserted against us, there can be significant uncertainty as to the ultimate liability we
may incur from litigation matters. The finding, or even the assertion, of substantial legal liability against us could have
a material adverse effect on our business and financial condition and could cause significant reputational harm to us,
which could seriously harm our business.
We Face Risks From Unpredictable Catastrophic Events.
Despite our substantial business contingency plans, the impact from natural disasters and other catastrophic events,
including terrorist attacks, may have a negative effect on our business and infrastructure, including our information
technology systems. In addition, if a natural disaster or other catastrophic event occurs in certain regions where our
business and customers are concentrated, such as the mid-Atlantic and New York metropolitan area, we could be
disproportionately impacted as compared to our competitors. The impact of such events and other catastrophes on
the overall economy may also adversely affect our financial condition and results of operations.
We Face Risks From The Use Of Or Changes To Estimates In Our Financial Statements.
Pursuant to generally accepted accounting principles in the U.S. (“U.S. GAAP”), we are required to use certain
assumptions and estimates in preparing our financial statements, including, but not limited to, estimating our
allowance for loan and lease losses and the fair value of certain assets and liabilities. In addition, the FASB, the
SEC and other regulatory bodies may change the financial accounting and reporting standards, including those
related to assumptions and estimates we use to prepare our financial statements, in ways that we cannot predict and
that could impact our financial statements. If actual results differ from the assumptions or estimates underlying our
financial statements or if financial accounting and reporting standards are changed, we may experience unexpected
material losses. For a discussion of our use of estimates in the preparation of our consolidated financial statements,
see “Note 1—Summary of Significant Accounting Policies.”
Our Ability To Receive Dividends From Our Subsidiaries Could Affect Our Liquidity And Ability To Pay Dividends
And Repurchase Common Stock.
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 and preferred stock, repurchase 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 or preferred stockholders, repurchase our common stock, 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.
31 Capital One Financial Corporation (COF)