Morgan Stanley 2014 Annual Report Download - page 115

The following is a roll-forward of the Company’s Common Equity Tier 1 capital, Additional Tier 1 capital and
Tier 2 capital calculated under U.S. Basel III on a transitional basis from December 31, 2013 to December 31,
2014.
2014
(dollars in millions)
Common Equity Tier 1 capital:
Tier 1 Common capital under U.S. Basel I rules at December 31, 2013 ........................... $49,917
Change in the value of shareholders’ common equity ......................................... 2,179
New items subject to deduction and adjustments under U.S. Basel III Advanced Approach transitional
rules:
Credit spread premium over risk-free rate for derivative liabilities ........................... (161)
Expected credit loss that exceeds eligible credit reserves(1) ................................ (10)
Other new deductions and adjustments ................................................. (181)
Modification of existing deductions under U.S. Basel III Advanced Approach transitional rules:
Net goodwill ..................................................................... (17)
Net intangible assets (other than goodwill and mortgage servicing assets) ..................... 2,647
Net deferred tax assets .............................................................. 2,299
Net after-tax debt valuation adjustment(2) .............................................. (1,117)
Adjustments related to accumulated other comprehensive income ............................ 184
U.S. Basel I deductions that are no longer applicable under U.S. Basel III Advanced Approach
transitional rules .................................................................... 1,584
Common Equity Tier 1 capital under U.S. Basel III Advanced Approach transitional rules at
December 31, 2014 .................................................................. $57,324
Additional Tier 1 capital:
Additional Tier 1 capital under U.S. Basel I rules at December 31, 2013 .......................... $11,090
New issuance of qualifying preferred stock ................................................. 2,800
Modification of treatment of Additional Tier 1 capital components under U.S. Basel III Advanced
Approach transitional rules:
Trust preferred securities ............................................................ (2,327)
Nonredeemable noncontrolling interests ................................................ (2,105)
New items subject to deduction and adjustments under U.S. Basel III Advanced Approach transitional
rules:
Net deferred tax assets .............................................................. (2,318)
Credit spread premium over risk-free rate for derivative liabilities ........................... (644)
Net after-tax debt valuation adjustment(2) .............................................. 630
Expected credit loss that exceeds eligible credit reserves ................................... (39)
Other adjustments and deductions ..................................................... (229)
Additional Tier 1 capital at December 31, 2014 .............................................. $ 6,858
Tier 1 capital (Common Equity Tier 1 capital plus Additional Tier 1 capital) at December 31, 2014 ..... $64,182
Tier 2 capital:
Tier 2 capital under U.S. Basel I rules at December 31, 2013 ................................... $ 4,993
Change in subordinated debt ............................................................. 2,780
De-recognition of allowance for loan and lease losses under Basel III Advanced Approach transitional
rules(3) ............................................................................ (284)
New capital components subject to recognition under U.S. Basel III Advanced Approach transitional
rules:
Trust preferred securities ............................................................ 2,434
Nonredeemable noncontrolling interests ................................................ 27
New items subject to deduction and adjustments under U.S. Basel III Advanced Approach transitional
rules .............................................................................. (10)
U.S. Basel I deductions that are no longer applicable under U.S. Basel III Advanced Approach
transitional rules .................................................................... 850
Tier 2 capital at December 31, 2014 ....................................................... $10,790
Total capital at December 31, 2014 ........................................................ $74,972
(1) In 2014, as a result of the Company’s and the Company’s U.S. Subsidiary Banks’ completion of the Advanced Approach parallel run, the
amount of expected credit loss that exceeded eligible credit reserves was deducted 20% from Common Equity Tier 1 capital and 80%
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