Discover 2010 Annual Report Download - page 95

A credit rating is not a recommendation to buy, sell or hold securities, may be subject to revision or withdrawal at any
time by the assigning rating organization, and each rating should be evaluated independently of any other rating. The
credit ratings are summarized in the following table:
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Financial
Services
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Bank
Outlook
for Senior
Unsecured Debt
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Bank
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Master Trust I
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Note Trust
Senior
Unsecured
Debt
Senior
Unsecured
Debt
Subordinated
Debt Class A(1) Class B Class A(1) Class B Class C
Moody’s Investors Service........... Ba1 Baa3 Stable Ba1 Aaa(sf) A1(sf) Aaa(sf) A1(sf) Baa1(sf)
Standard & Poor’s ..................... BBB- BBB Stable BBB- AAA(SF) AA+(SF) AAA(SF) AA+(SF) A+(SF)
Fitch Ratings ............................. BBB BBB Stable BBB- AAAsf AAsf AAAsf AA-sf A-sf
(1) An “sf” in the rating denotes an identification for structured finance product ratings that was implemented for these products by the rating agencies as of September 2010.
Several rating agencies have announced that they will be evaluating the effects of the Reform Act that was enacted in
July 2010 in order to determine the extent, if any, to which financial institutions, including us, may be negatively
impacted. While we are currently unaware of any negative actions, there is no assurance that our credit ratings could not
be downgraded in the future as a result of any such reviews. See “ – Legislative and Regulatory Developments” for
information regarding the Reform Act.
Liquidity
We seek to ensure that we have adequate liquidity to sustain business operations, fund asset growth and satisfy debt
obligations. In the assessment of our liquidity needs, we also evaluate a range of stress events that would impact our
access to normal funding sources, cash needs and/or liquidity. We maintain contingent funding sources, including our
liquidity investment portfolio, private securitizations with unused capacity, committed credit facility capacity and Federal
Reserve discount window capacity, which we could seek to utilize to satisfy liquidity needs during such stress events. We
expect to be able to satisfy all maturing obligations and fund business operations during the next 12 months by utilizing
our deposit channels and our contingent funding sources.
We maintain policies outlining the overall framework and general principles for managing liquidity risk across the
company, which is the responsibility of the Asset and Liability Committee (the “ALCO”). We seek to balance the trade-offs
between maintaining too much liquidity, which may limit financial flexibility and be costly, with having too little liquidity
that could cause financial distress. Liquidity risk is centrally managed by the ALCO, which is chaired by our CFO and has
cross-functional membership. The ALCO monitors positions and determines any actions that need to be taken.
At November 30, 2010, our liquidity investment portfolio was comprised of cash and cash equivalents and high
quality, liquid investments. Cash and cash equivalents are invested primarily in deposits with the Federal Reserve and
AAA rated government money market mutual funds. Investments included highly-rated certificates of deposit, credit card
asset-backed securities of other issuers plus U.S. Treasury, U.S. government agency and AAA-rated corporate debt
obligations issued under the Temporary Liquidity Guarantee Program that are guaranteed by the FDIC, all of which are
considered highly liquid. In addition, we have the ability to raise cash through utilizing repurchase agreements and
pledging certain of these investments. The level of our liquidity investment portfolio may fluctuate based upon the level of
expected maturities of our funding sources as well as operational requirements and market conditions.
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