KeyBank 2015 Annual Report Download - page 25

standardized hypothetical stress scenario over a 30-calendar day period, at least at 90% by January 1, 2016, and
at least at 100% by January 1, 2017. At December 31, 2015, Key’s estimated Modified LCR was above 100%. In
the future, Key may change the composition of our investment portfolio, increase the size of the overall
investment portfolio, and modify product offerings to enhance or optimize our liquidity position. Calculation of
Key’s Modified LCR is required on a monthly basis, unlike on a daily basis for those U.S. banking organizations
that are subject to the LCR rather than the Modified LCR. On December 1, 2015, the Federal Reserve published
an NPR requesting public comment on a proposed rule that would implement quarterly quantitative and
qualitative public disclosure requirements regarding the LCR. The proposed rule would require compliance with
these requirements beginning on January 1, 2018, for Modified LCR BHCs like KeyCorp. Comments on the
NPR were due by February 2, 2016.
The federal banking regulators have not yet issued any proposal to implement either the final Basel III NSFR or
the final Basel III NSFR disclosure standards.
Capital planning and stress testing
The Federal Reserve’s capital plan rule requires each U.S.-domiciled, top-tier BHC with total consolidated assets
of at least $50 billion (like KeyCorp) to develop and maintain a written capital plan supported by a robust
internal capital adequacy process. The capital plan must be submitted annually to the Federal Reserve for
supervisory review in connection with its annual CCAR. The supervisory review includes an assessment of many
factors, including Key’s ability to maintain capital above each minimum regulatory capital ratio on a pro forma
basis under expected and stressful conditions throughout the planning horizon. KeyCorp is also subject to the
Federal Reserve’s supervisory expectations for capital planning and capital positions as a large, noncomplex
BHC. These expectations are set forth in the Federal Reserve’s guidance issued on December 18, 2015 (“SR
Letter 15-19”). Under SR Letter 15-19, the Federal Reserve identifies its core capital planning expectations
regarding governance, risk management, internal controls, capital policy, capital positions, incorporating stressful
conditions and events, and estimating impact on capital positions for large and noncomplex firms building upon
the capital planning requirements under its capital plan and stress test rules. SR Letter 15-19 also provides
detailed supervisory expectations on such a firm’s capital planning processes.
The Federal Reserve’s annual CCAR is an intensive assessment of the capital adequacy of large, complex U.S.
BHCs and of the practices these BHCs use to assess their capital needs. The Federal Reserve expects BHCs
subject to CCAR to have sufficient capital to withstand a severely adverse operating environment and to be able
to continue operations, maintain ready access to funding, meet obligations to creditors and counterparties, and
serve as credit intermediaries.
KeyCorp filed its 2015 CCAR capital plan on January 5, 2015. KeyCorp is required to submit its 2016 CCAR
capital plan by April 6, 2016. The Federal Reserve has indicated that it will announce the results of its
supervisory stress tests by June 30, 2016, with the exact date to be announced before then.
As part of the annual CCAR, the Federal Reserve conducts an annual supervisory stress test on KeyCorp. As part
of this test, the Federal Reserve projects revenue, expenses, losses, and resulting post-stress capital levels and
regulatory capital ratios under conditions that affect the U.S. economy or the financial condition of KeyCorp,
including supervisory baseline, adverse, and severely adverse scenarios, that are determined annually by the
Federal Reserve. The 2015 CCAR results, which included the annual supervisory stress test methodology and
certain firm-specific results for the participating covered companies (including KeyCorp), were publicly released
by the Federal Reserve in March 2015.
In December 2015, the Federal Reserve published amendments to its capital plan and stress test rules. Under the
amendments, for a standardized approach BHC like KeyCorp, the Federal Reserve has removed the Tier 1
common capital ratio requirement as well as modified certain mandatory capital action assumptions. The
modifications to the mandatory capital action assumptions include the requirement for the BHC to assume in its
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