KeyBank 2014 Annual Report Download - page 35

and interest and principal payments on our debt. Federal banking law and regulations limit the amount of
dividends that KeyBank (KeyCorp’s largest subsidiary) can pay. For further information on the regulatory
restrictions on the payment of dividends by KeyBank, see “Supervision and Regulation” in Item 1 of this report.
In the event KeyBank is unable to pay dividends to us, we may not be able to service debt, pay obligations or pay
dividends on our equity securities. In addition, our right to participate in a distribution of assets upon a
subsidiary’s liquidation or reorganization is subject to the prior claims of the subsidiary’s creditors.
We are subject to liquidity risk, which could negatively affect our funding levels.
Market conditions or other events could negatively affect the level of or cost of funding, affecting our ongoing
ability to accommodate liability maturities and deposit withdrawals, meet contractual obligations, or fund asset
growth and new business initiatives at a reasonable cost, in a timely manner and without adverse consequences.
Although we have implemented strategies to maintain sufficient and diverse sources of funding to accommodate
planned as well as unanticipated changes in assets, liabilities, and off-balance sheet commitments under various
economic conditions (including by reducing our reliance on wholesale funding sources), a substantial,
unexpected or prolonged change in the level or cost of liquidity could have a material adverse effect on us. If the
cost effectiveness or the availability of supply in these credit markets is reduced for a prolonged period of time,
our funding needs may require us to access funding and manage liquidity by other means. These alternatives may
include generating client deposits, securitizing or selling loans, extending the maturity of wholesale borrowings,
borrowing under certain secured wholesale facilities, using relationships developed with a variety of fixed
income investors, and further managing loan growth and investment opportunities. These alternative means of
funding may not be available under stressed conditions.
Our credit ratings affect our liquidity position.
The rating agencies regularly evaluate the securities of KeyCorp and KeyBank, and their ratings of our long-term
debt and other securities are based on a number of factors, including our financial strength, ability to generate
earnings, and other factors. Some of these factors are not entirely within our control, such as conditions affecting
the financial services industry and the economy and changes in rating methodologies as a result of the Dodd-
Frank Act. We may not be able to maintain our current credit ratings. A downgrade of the securities of KeyCorp
or KeyBank could adversely affect our access to liquidity and could significantly increase our cost of funds,
trigger additional collateral or funding requirements, and decrease the number of investors and counterparties
willing to lend to us, reducing our ability to generate income.
V. Market Risk
A reversal of the U.S. economic recovery and a return to volatile or recessionary conditions in the U.S. or
abroad could negatively affect our business or our access to capital markets.
A worsening of economic and market conditions, downside shocks, or a return to recessionary economic
conditions could result in adverse effects on Key and others in the financial services industry. Additionally, the
prolonged low-interest rate environment, despite a generally improving economy, has presented a challenge for
Key and affected our business and financial performance. The low-interest rate environment may persist for
some time even as the economy continues to improve, and may continue to have a negative impact on our
performance.
In particular, we could face some of the following risks, and other unforeseeable risks, in connection with a
downturn in the economic and market environment or in the face of downside shocks or a recession, whether in
the United States or internationally:
/A loss of confidence in the financial services industry and the equity markets by investors, placing pressure
on the price of Key’s common shares or decreasing the credit or liquidity available to Key;
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