US Bank 2011 Annual Report Download - page 54

The average, high and low VaR amounts for 2011 were
$2 million, $4 million and $1 million, respectively, compared
with $2 million, $5 million and $1 million, respectively, for
2010. There have been no incidents where the actual trading
losses exceeded the bank-wide one-day VaR during 2011 and
2010.
Liquidity Risk Management The Company’s liquidity risk
management process is designed to identify, measure, and
manage the Company’s funding and liquidity risk to meet its
daily funding needs and to address expected and unexpected
changes in its funding requirements. The Company engages in
various activities to manage its liquidity risk. These include
diversifying its funding sources, stress testing, and holding
readily-marketable assets which can be used as a source of
liquidity if needed. In addition, the Company’s profitable
operations, sound credit quality and strong capital position
have enabled it to develop a large and reliable base of core
deposit funding within its market areas and in domestic and
global capital markets.
The Risk Management Committee of the Company’s
Board of Directors oversees the Company’s liquidity risk
management process and approves the Company’s liquidity
policy and contingency funding plan. The ALCO reviews and
approves the Company’s liquidity policies and guidelines, and
regularly assesses the Company’s ability to meet funding
requirements arising from adverse company-specific or market
events.
The Company’s liquidity policies require it to maintain
diversified wholesale funding sources to avoid maturity, name
and market concentrations. The Company operates a Grand
Cayman branch for issuing Eurodollar time deposits. In
addition, the Company has relationships with dealers to issue
national market retail and institutional savings certificates and
short-term and medium-term notes. The Company also
maintains a significant correspondent banking network and
relationships. Accordingly, the Company has access to
national federal funds, funding through repurchase
agreements and sources of stable, regionally-based certificates
of deposit and commercial paper.
The Company regularly projects its funding needs under
various stress scenarios and maintains contingency plans
consistent with the Company’s access to diversified sources of
contingent funding. The Company maintains a substantial
level of total available liquidity in the form of on- and
off-balance sheet funding sources. These include cash at the
Federal Reserve, unencumbered liquid assets, such as U.S.
Treasury and government agency mortgage-backed securities,
and capacity to borrow at the Federal Home Loan Bank
(“FHLB”) and the Federal Reserve Discount Window.
Unencumbered liquid assets in the Company’s
available-for-sale and held-to-maturity investment portfolios
provide asset liquidity through the Company’s ability to sell
the securities or pledge and borrow against them. At
December 31, 2011, unencumbered available-for-sale and
held-to-maturity investment securities totaled $48.7 billion,
compared with $22.6 billion at December 31, 2010. Refer to
Table 13 and “Balance Sheet Analysis” for further
information on investment securities maturities and trends.
Asset liquidity is further enhanced by the Company’s ability to
pledge loans to access secured borrowing facilities through the
FHLB and Federal Reserve Bank. At December 31, 2011, the
Company could have borrowed an additional $56.4 billion at
the FHLB and Federal Reserve Bank based on collateral
available for additional borrowings.
The Company’s diversified deposit base provides a
sizeable source of relatively stable and low-cost funding, while
reducing the Company’s reliance on the wholesale markets.
Total deposits were $230.9 billion at December 31, 2011,
compared with $204.3 billion at December 31, 2010,
TABLE 20 Debt Ratings
Moody’s
Standard &
Poor’s Fitch
Dominion
Bond
Rating Service
U.S. Bancorp
Short-term borrowings .............................................................. F1+ R-1 (middle)
Senior debt and medium-term notes ................................................ Aa3 A AA- AA
Subordinated debt .................................................................. A1 A- A+ AA (low)
Preferred stock ...................................................................... A3 BBB+ A A
Commercial paper .................................................................. P-1 A-1 F1+ R-1 (middle)
U.S. Bank National Association
Short-term time deposits ........................................................... P-1 A-1 F1+ R-1 (high)
Long-term time deposits ............................................................ Aa2 A+ AA AA (high)
Bank notes .......................................................................... Aa2/P-1 A+/A-1 AA-/F1+ AA (high)
Subordinated debt .................................................................. Aa3 A A+ AA
Senior unsecured debt .............................................................. Aa2 A+ AA- AA (high)
Commercial paper .................................................................. P-1 A-1 F1+ R-1 (high)
52 U.S. BANCORP