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SunTrust's Estimation of Basel III Tier 1 Common, pursuant to BCBS's June 2011 Revision to the Basel III
Framework
(Dollars in millions)
Basel I Tier 1 Common
Calculation adjustments:
Net unrealized gains/(losses) on AFS securities
Unrealized losses on pension and post-retirement plan held in AOCI
Disallowed NOL DTA
Disallowed servicing assets
Overfunded pension asset (net of DTL)
Total calculation adjustments
Basel III Tier 1 Common Capital
Basel I RWA
Calculation Adjustments:
Unrealized losses on pension and post-retirement plan held in AOCI - additional RWA no longer
required
Tier 2 capital credit from unrealized gains on AFS equity securities - additional RWA no longer
required
Additional Market Risk RWA
Additional MSR RWA
Additional DTA RWA
Disallowed servicing assets - RWA adjustment no longer required
Adjustment to excess ALLL (based on new RWA)
Total calculation adjustments
Basel III RWA
Basel III Tier 1 common ratio
Table 25
As of December 31, 2011
$12,254
1,135
(683)
(112)
87
(22)
405
$12,659
$132,940
(683)
(368)
1,880
563
182
87
21
1,682
$134,622
9.40%
These rules have not been finalized, so certain assumptions regarding their ultimate implementation have been made. Key
assumptions are as follows:
Adjustments to RWA for Unrealized Gains/(Losses) on AFS Portfolio: Pursuant to its definition of Tier 1 common equity,
the Basel III proposals no longer apply an adjustment to remove unrealized gains or losses recognized on the balance sheet,
except those specifically mentioned relating to the cash flow hedge reserve. Under Basel I, consistent with the removal of
these unrealized gains and losses from Tier 1 capital, the asset account reflecting these gains and losses (though they are
reflected pre-tax) is not subject to risk weighting; only the book values of the assets are risk-weighted. The Basel III proposals
do not state whether the asset account reflecting the gains should now be risk-weighted, and we make no assumptions or
adjustments for this when estimating Basel III RWA.
Risk-weighting for MSR Assets: We anticipate that Basel III as applied to U.S. banks will use the current value of the MSR
asset net of any associated DTL to calculate the threshold deduction in the estimation of both Basel III Tier 1 common and
Basel III RWA. We believe this method of calculation is consistent with other large U.S. banks.
Cash Flow Hedge Reserve Adjustment: The Basel III proposals state that the amount of cash flow hedge reserve that relates
to the hedging of items that are not fair valued on the balance sheet should not be considered in calculating Tier 1 common.
We hold a portfolio of receive fixed/pay variable swaps, which we use to hedge the cash-flow volatility on pools of floating-
rate loans. The unrealized gains on these positions are reflected on the balance sheet within Shareholders' Equity in the AOCI
account, and we remove them (as we do under Basel I) in the calculation of Tier 1 common (for Basel III purposes). It is
unclear whether the unrealized gains on terminated positions, which are amortized through earnings based on the derivative's
original maturity, could be included in Tier 1 common immediately. We exclude all of these unrealized gains when estimating
Basel III capital levels.