Wells Fargo 2015 Annual Report Download - page 264

Note 26: Regulatory and Agency Capital Requirements
The Company and each of its subsidiary banks are subject to
regulatory capital adequacy requirements promulgated by
federal bank regulatory agencies. The Federal Reserve
establishes capital requirements for the consolidated financial
holding company, and the OCC has similar requirements for the
Company’s national banks, including Wells Fargo Bank, N.A.
(the Bank).
Table 26.1 presents regulatory capital information for
Wells Fargo & Company and the Bank using Basel III, which
increased minimum required capital ratios, and introduced a
minimum Common Equity Tier 1 (CET1) ratio. Beginning second
quarter 2015, our capital ratios were calculated in accordance
with the Basel III Standardized and Advanced Approaches.
Accordingly, we must report the lower of our CET1, tier 1 and
total capital ratios calculated under the Standardized Approach
and under the Advanced Approach in the assessment of our
capital adequacy. The information presented for 2015 reflects
the transition to determining risk-weighted assets (RWAs) under
the Basel III Standardized and Advanced Approaches with
Transition Requirements from RWAs determined using general
risk-based capital rules (General Approach) effective in 2014.
The Standardized and General Approaches each apply assigned
Table 26.1: Regulatory Capital Information
risk weights to broad risk categories but many of the risk
categories and/or weights were changed by Basel III for the
Standardized Approach and will generally result in higher risk-
weighted assets than from those prescribed for the General
Approach. Calculation of RWAs under the Advanced Approach
differs by requiring applicable banks to utilize a risk-sensitive
methodology, which relies upon the use of internal credit
models, and includes an operational risk component. The Basel
III revised definition of capital, and changes are being phased-in
effective January 1, 2014, through the end of 2021.
The Bank is an approved seller/servicer of mortgage loans
and is required to maintain minimum levels of shareholders’
equity, as specified by various agencies, including the United
States Department of Housing and Urban Development, GNMA,
FHLMC and FNMA. At December 31, 2015, the Bank met these
requirements. Other subsidiaries, including the Company’s
insurance and broker-dealer subsidiaries, are also subject to
various minimum capital levels, as defined by applicable
industry regulations. The minimum capital levels for these
subsidiaries, and related restrictions, are not significant to our
consolidated operations.
Advanced
Approach
Wells Fargo & Company
Standardized
Approach
General
Approach
Advanced
Approach
Wells Fargo Bank, N.A.
Standardized
Approach
General
Approach
Advanced &
Standardized
Approach
Minimum
capital
ratios (1)
December 31,
(in billions, except ratios) 2015 2015 2014 2015 2015 2014 2015
Regulatory capital:
Common equity tier 1
Tier 1
$ 144.2
164.6
144.2
164.6
137.1
154.7
126.9
126.9
126.9
126.9
119.9
119.9
Total 195.2 205.6 192.9 140.5 150.0 144.0
Assets:
Risk-weighted
Adjusted average (2)
$ 1,263.2
1,757.1
1,303.1
1,757.1
1,242.5
1,637.0
1,100.9
1,584.3
1,197.6
1,584.3
1,142.5
1,487.6
Regulatory capital ratios:
Common equity tier 1 capital
Tier 1 capital
Total capital
Tier 1 leverage (2)
11.42%
13.03
15.45 *
9.37
11.07
12.63
15.77
9.37
*
*
11.04
12.45
15.53
9.45
11.53
11.53
12.77
8.01
10.60
10.60
12.52
8.01
*
*
*
10.49
10.49
12.61
8.06
4.50
6.00
8.00
4.00
*Denotes the lowest capital ratio as determined under the Basel III Advanced and Standardized Approaches.
(1) As defined by the regulations issued by the Federal Reserve, OCC and FDIC, which apply to Wells Fargo & Company and Wells Fargo Bank, N.A.
(2) The leverage ratio consists of Tier 1 capital divided by quarterly average total assets, excluding goodwill and certain other items. The minimum leverage ratio guideline is
3% for banking organizations that do not anticipate significant growth and that have well-diversified risk, excellent asset quality, high liquidity, good earnings, effective
management and monitoring of market risk and, in general, are considered top-rated, strong banking organizations.
Wells Fargo & Company
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