Morgan Stanley 2014 Annual Report Download - page 116

from Additional Tier 1 capital. Over the next several years, this deduction from Common Equity Tier 1 capital will incrementally
increase, and the amount deducted from Additional Tier 1 capital will correspondingly decrease, until fully phased-in by 2018.
(2) The aggregate balance of net after-tax debt valuation adjustment includes an approximate $69 million reconciling adjustment related to a
prior period.
(3) For purposes of calculating capital ratios under the Advanced Approach, the allowance for loan losses cannot be included in Tier 2
capital. Instead, an Advanced Approach banking organization may include in Tier 2 capital any eligible credit reserves that exceed its
total expected credit losses to the extent that the excess reserve amount does not exceed 0.6% of its Advanced Approach credit risk
RWAs. The allowance for loan losses may continue to be included in Tier 2 capital for purposes of calculating capital ratios under U.S.
Basel I and Basel 2.5 and under the Standardized Approach, up to 1.25% of credit risk RWAs.
The following represents a roll-forward of the Company’s RWAs based on pro forma estimates of RWAs under
the Advanced Approach from December 31, 2013 to December 31, 2014.
2014(1)
(dollars in millions)
Credit risk RWAs:
Balance under U.S. Basel I rules at December 31, 2013 ............................... $256,606
Change related to U.S. Basel III Advanced Approach transitional rules(2) ................. (72,792)
Change related to the following items:
Derivatives .............................................................. 250
Securities financing transactions ............................................. (6,090)
Other counterparty credit risk ................................................ (264)
Securitizations ........................................................... (1,068)
Credit valuation adjustment ................................................. (4,158)
AFS debt securities ........................................................ 1,264
Loans ................................................................... 7,689
Cash ................................................................... (2,245)
Equity investments ........................................................ 2,571
Other credit risk(3) ........................................................ 2,882
Total change in credit risk RWAs ................................................ (71,961)
Balance at December 31, 2014 ................................................... $184,645
Market risk RWAs:
Balance under U.S. Basel 2.5 rules at December 31, 2013 ............................. $133,760
Change related to U.S. Basel III Advanced Approach rules(2) .......................... 12,369
Change related to the following items:
Regulatory VaR .......................................................... (1,191)
Regulatory stressed VaR .................................................... (150)
Incremental risk charge .................................................... (5,289)
Comprehensive risk measure ................................................ (6,768)
Specific risk: .............................................................
Non-securitizations .................................................... (6,465)
Securitizations ....................................................... (4,903)
Total change in market risk RWAs ............................................... (12,397)
Balance at December 31, 2014 ................................................... $121,363
Operational risk RWAs:
Balance under U.S. Basel I rules at December 31, 2013 ............................... $ N/A
Change related to U.S. Basel III Advanced Approach rules(2) .......................... 150,000
Balance at December 31, 2014 ................................................... $150,000
N/A—Not Applicable.
112