KeyBank 2015 Annual Report Download - page 23

The Basel Committee published its international liquidity standards in 2010, and revised them in January
2013, January 2014, and October 2014 (as revised, the “Basel III liquidity framework”). It established
quantitative standards for liquidity by introducing a liquidity coverage ratio (“Basel III LCR”) and a net stable
funding ratio (“Basel III NSFR”). The Basel Committee published final Basel III NSFR disclosure standards in
June 2015.
The Basel III LCR, calculated as the ratio of the stock of high-quality liquid assets divided by total net cash
outflows over 30 consecutive calendar days, must be at least 100%. The implementation of Basel III LCR began
on January 1, 2015, with minimum requirements beginning at 60%, rising in annual steps of 10% until full
implementation on January 1, 2019.
The Basel III NSFR, calculated as the ratio of the available amount of stable funding divided by the required
amount of stable funding, must be at least 100%. The Basel III NSFR becomes effective on January 1, 2018.
U.S. implementation of the Basel III capital framework
In October 2013, the federal banking regulators published the final Basel III capital framework for U.S. banking
organizations (the “Regulatory Capital Rules”), which generally implement the Basel III capital framework as
described above in the United States. Under the Regulatory Capital Rules, certain large U.S.-domiciled BHCs
and banks (each, an “advanced approaches banking organization”) must satisfy minimum qualifying criteria
using organization-specific internal risk measures and management processes for calculating risk-based capital
requirements as well as follow certain methodologies to calculate their total risk-weighted assets. Since neither
KeyCorp nor KeyBank has at least $250 billion in total consolidated assets or at least $10 billion of total on-
balance sheet foreign exposure, neither KeyCorp nor KeyBank is an advanced approaches banking organization.
Instead, each of them is a “standardized approach banking organization.”
New minimum capital and leverage ratio requirements
Under the Regulatory Capital Rules, a standardized approach banking organization, like KeyCorp, is required to
meet the minimum capital and leverage ratios set forth in the following table. At December 31, 2015, Key had an
estimated Common Equity Tier 1 Capital Ratio of 10.85% under the fully phased-in Regulatory Capital Rules.
Also at December 31, 2015, based on the fully phased-in Regulatory Capital Rules, Key estimates that its capital
and leverage ratios, after adjustment for market risk, would be as set forth in the following table.
Estimated Ratios vs. Minimum Capital Ratios Calculated Under the Fully Phased-In
Regulatory Capital Rules
Ratios (including Capital conservation buffer)
Key
December 31, 2015
Estimated
Minimum
January 1,
2015
Phase-in
Period
Minimum
January 1,
2019
Common Equity Tier 1 (a) 10.84 % 4.5 % None 4.5 %
Capital conservation buffer (b) — 1/1/16 - 1/1/19 2.5
Common Equity Tier 1 + Capital conservation buffer 4.5 1/1/16 - 1/1/19 7.0
Tier 1 Capital 11.15 6.0 None 6.0
Tier 1 Capital + Capital conservation buffer 6.0 1/1/16 - 1/1/19 8.5
Total Capital 12.85 8.0 None 8.0
Total Capital + Capital conservation buffer 8.0 1/1/16 - 1/1/19 10.5
Leverage (c) 10.59 4.0 None 4.0
(a) See Figure 4 entitled “GAAP to Non-GAAP Reconciliations,” which presents the computation for estimated Common Equity Tier 1. The
table reconciles the GAAP performance measure to the corresponding non-GAAP measure, which provides a basis for period-to-period
comparisons.
(b) Capital conservation buffer must consist of Common Equity Tier 1 capital. As a standardized approach banking organization, KeyCorp is
not subject to the countercyclical capital buffer of up to 2.5% imposed upon an advanced approaches banking organization under the
Regulatory Capital Rules.
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