Comerica 2014 Annual Report Download - page 28

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• Comerica must maintain adequate sources of funding and liquidity to meet regulatory expectations, support its
operations and fund outstanding liabilities.
Comerica’s liquidity and ability to fund and run its business could be materially adversely affected by a variety of
conditions and factors, including financial and credit market disruptions and volatility or a lack of market or customer
confidence in financial markets in general, which may result in a loss of customer deposits or outflows of cash or collateral
and/or ability to access capital markets on favorable terms.
Other conditions and factors that could materially adversely affect Comerica’s liquidity and funding include a lack of
market or customer confidence in, or negative news about, Comerica or the financial services industry generally which
also may result in a loss of deposits and/or negatively affect the ability to access the capital markets; the loss of customer
deposits to alternative investments; counterparty availability; interest rate fluctuations; general economic conditions; and
the legal, regulatory, accounting and tax environments governing our funding transactions. Many of the above conditions
and factors may be caused by events over which Comerica has little or no control. There can be no assurance that significant
disruption and volatility in the financial markets will not occur in the future. Further, Comerica's customers may be
adversely impacted by such conditions, which could have a negative impact on Comerica's business, financial condition
and results of operations.
In September 2014, U.S. banking regulators issued a final rule implementing a quantitative liquidity requirement in the
U.S. generally consistent with the Liquidity Coverage Ratio (LCR) minimum liquidity measure established under the
Basel III liquidity framework. Under the rule, Comerica will be required to hold a minimum level of high-quality, liquid
assets (HQLA) to fully cover modified net cash outflows under a 30-day systematic liquidity stress scenario. The rule is
effective for Comerica on January 1, 2016. During the transition year, 2016, Comerica will be required to maintain a
minimum LCR of 90 percent. Beginning January 1, 2017, and thereafter, the minimum required LCR will be 100 percent.
To reach full compliance and provide a buffer for normal volatility in balance sheet dynamics, Comerica expects to add
additional HQLA, which may be funded with additional debt, in the future. For more information regarding the LCR,
please see the “Supervision and Regulation” section of this report. The inability to access capital markets funding sources
as needed could adversely impact our level of regulatory-qualifying capital and ability to comply with the LCR framework.
Further, if Comerica is unable to continue to fund assets through customer bank deposits or access funding sources on
favorable terms or if Comerica suffers an increase in borrowing costs or otherwise fails to manage liquidity effectively,
Comerica’s liquidity, operating margins, financial condition and results of operations may be materially adversely affected.
• Compliance with more stringent capital and liquidity requirements may adversely affect Comerica.
New capital requirements in connection with Basel III and the requirements of the Dodd-Frank Act applicable to Comerica
as a bank holding company as well as to Comerica's subsidiary banks will have an effect on Comerica. Additional
information on the regulatory capital requirements applicable to Comerica is set forth in the “Supervision and Regulation”
section of this report. These requirements, and any other new laws or regulations, could adversely affect Comerica's
ability to pay dividends or make share repurchases, or could require Comerica to reduce business levels or to raise capital,
including in ways that may adversely affect its results of operations or financial condition and/or existing shareholders.
The liquidity requirements applicable to Comerica as a bank holding company as well as to our subsidiary banks are in
the process of being substantially revised, in connection with recent supervisory guidance, Basel III and the requirements
of the Dodd-Frank Act. Additional information on the liquidity requirements applicable to Comerica is set forth in the
“Supervision and Regulation” section of this report. In light of these or other new legal and regulatory requirements,
Comerica and our subsidiary banks are, and will be in the future, required to satisfy additional, more stringent, liquidity
standards, including, for the first time, quantitative standards for liquidity management.
Further, our regulators may also require us to satisfy additional, more stringent capital adequacy and liquidity standards
than those specified as part of the Dodd-Frank Act and the FRB's proposed and final rules implementing Basel III, or
comply with the requirements of these standards earlier than might otherwise be required, in connection with the annual
CCAR process.
The ultimate impact of the new capital and liquidity standards cannot be fully determined at this time and will depend
on a number of factors, including treatment and implementation by the U.S. banking regulators. However, maintaining
higher levels of capital and liquidity may reduce Comerica's profitability and otherwise adversely affect its business,
financial condition, or results of operations.
• Declines in the businesses or industries of Comerica's customers could cause increased credit losses or decreased
loan balances, which could adversely affect Comerica.
Comerica's business customer base consists, in part, of customers in volatile businesses and industries such as the energy
industry, the automotive production industry and the real estate business. These industries are sensitive to global economic