KeyBank 2014 Annual Report Download - page 34

Severe weather, natural disasters, acts of war or terrorism and other external events could significantly
impact our business.
Natural disasters, including severe weather events of increasing strength and frequency, acts of war or terrorism
and other adverse external events could have a significant impact on our ability to conduct business or upon our
customers. Such events could affect the stability of our deposit base, impair the ability of borrowers to repay
outstanding loans, impair the value of collateral securing loans, cause significant property damage, result in lost
revenue or cause us to incur additional expenses.
IV. Capital and Liquidity Risk
Capital and liquidity requirements imposed by the Dodd-Frank Act require banks and BHCs to maintain
more and higher quality capital and higher quality, lower-yielding liquid assets than has historically been
the case.
New and evolving capital standards resulting from the Dodd-Frank Act and the Regulatory Capital Rules adopted
by our regulators will have a significant impact on banks and BHCs, including Key. For a detailed explanation of
the new capital and liquidity rules that became effective for us on a phased-in basis on January 1, 2015, see the
section titled “Regulatory capital and liquidity” under the heading “Supervision and Regulation” in Item 1 of this
report.
The Federal Reserve’s new capital standards will require Key to maintain more and higher quality capital and
could limit our business activities (including lending) and our ability to expand organically or through
acquisitions. They could also result in our taking steps to increase our capital that may be dilutive to shareholders
or limit our ability to pay dividends or otherwise return capital to shareholders.
In addition, the new liquidity standards will require us to increase our holdings of higher-quality, lower-yielding
liquid assets, may require us to change our mix of investment alternatives, and may impact business relationships
with certain customers. They could reduce our ability to invest in longer-term assets even if more desirable from
a balance sheet management perspective.
In addition, the Federal Reserve requires bank holding companies to obtain approval before making a “capital
distribution,” such as paying or increasing dividends, implementing common stock repurchase programs, or
redeeming or repurchasing capital instruments. The Federal Reserve has detailed the processes that bank holding
companies should maintain to ensure they hold adequate capital under severely adverse conditions and have
ready access to funding before engaging in any capital activities. These rules could limit Key’s ability to make
distributions, including paying out dividends or buying back shares. For more information, see “Supervision and
Regulation” in Item 1 of this report.
Federal agencies may take actions that disrupt the stability of the U.S. financial system.
Since 2008, the federal government has taken unprecedented steps to provide stability to and confidence in the
financial markets. For example, the Federal Reserve maintains a variety of stimulus policy measures designed to
maintain a low interest rate environment. In light of recent moderate improvements in the U.S. economy, federal
agencies may no longer support such initiatives. The discontinuation of such initiatives may have a negative
impact, perhaps severe, on the financial markets. These effects could include a sudden move to higher debt
yields, which could have a chilling effect on borrowing. In addition, new initiatives or legislation may not be
implemented, or, if implemented, may not be adequate to counter any negative effects of discontinuing programs
or, in the event of an economic downturn, to support and stabilize a troubled economy.
We rely on dividends by our subsidiaries for most of our funds.
We are a legal entity separate and distinct from our subsidiaries. With the exception of cash that we may raise
from debt and equity issuances, we receive substantially all of our cash flow from dividends by our subsidiaries.
Dividends by our subsidiaries are the principal source of funds for the dividends we pay on our equity securities
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