Morgan Stanley 2010 Annual Report Download - page 100

The following table reconciles the Company’s total shareholders’ equity to Tier 1 and Total capital as defined by
the regulations issued by the Federal Reserve and presents the Company’s consolidated capital ratios at
December 31, 2010 and December 31, 2009:
At
December 31,
2010
At
December 31,
2009
(dollars in millions)
Allowable capital
Tier 1 capital:
Common shareholders’ equity ............................................ $ 47,614 $ 37,091
Qualifying preferred stock ............................................... 9,597 9,597
Qualifying mandatorily convertible trust preferred securities .................... — 5,730
Qualifying restricted core capital elements .................................. 12,924 10,867
Less: Goodwill ........................................................ (6,739) (7,162)
Less: Non-servicing intangible assets ...................................... (4,526) (4,931)
Less: Net deferred tax assets ............................................. (3,984) (3,242)
Less: After-tax debt valuation adjustment ................................... (20) (554)
Other deductions ...................................................... (1,986) (726)
Total Tier 1 capital ................................................. 52,880 46,670
Tier 2 capital:
Other components of allowable capital:
Qualifying subordinated debt ............................................. 2,412 3,127
Other qualifying amounts ............................................... 82 158
Other deductions ...................................................... (897) —
Total Tier 2 capital ................................................. 1,597 3,285
Total allowable capital .......................................... $ 54,477 $ 49,955
Total risk-weighted assets .............................................. $329,560 $305,000
Capital ratios
Total capital ratio ...................................................... 16.5% 16.4%
Tier 1 capital ratio ..................................................... 16.1% 15.3%
Tier 1 leverage ratio .................................................... 6.6% 5.8%
Total allowable capital is composed of Tier 1 and Tier 2 capital. Tier 1 capital consists predominately of
common shareholders’ equity as well as qualifying preferred stock, trust preferred securities mandatorily
convertible to common equity (see “Redemption of CIC Equity Units and Issuance of Common Stock” herein for
further information) and qualifying restricted core capital elements (trust preferred securities and noncontrolling
interests) less goodwill, non-servicing intangible assets (excluding allowable mortgage servicing rights), net
deferred tax assets (recoverable in excess of one year), an after-tax debt valuation adjustment and certain other
deductions, including equity investments. The debt valuation adjustment in the above table represents the
cumulative change in fair value of certain long-term and short-term borrowings that was attributable to the
Company’s own instrument specific credit spreads and is included in retained earnings. For a further discussion
of fair value, see Note 4 to the consolidated financial statements.
In August 2010, the Company redeemed the junior subordinated debentures underlying the Equity Units and
issued 116 million shares of common stock to the CIC Entity (see “Redemption of CIC Equity Units and
Issuance of Common Stock” herein for further information). At December 31, 2010, the Company had no trust
preferred securities mandatorily convertible to common equity outstanding.
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