TCF Bank 2015 Annual Report Download - page 68

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Liquidity Risk
Liquidity risk is defined as the risk to earnings or capital arising from the Company's inability to meet its obligations
when they come due without incurring unacceptable losses.
ALCO and the Finance Committee of TCF Financial's Board of Directors have adopted a Holding Company Investment
and Liquidity Management Policy, which establishes a minimum target amount of cash or liquid investments TCF
Financial will hold. TCF Financial's primary source of cash flow is capital distributions from TCF Bank. TCF Bank may
be required to receive regulatory approval prior to making any such distributions in the future and such distributions
may be restricted by its regulatory authorities. TCF Bank's ability to make any such distributions will also depend on
its earnings and ability to meet minimum regulatory capital requirements in effect during future periods. See Note 14,
Regulatory Capital Requirements of Notes to Consolidated Financial Statements for further information.
ALCO and the Finance Committee of TCF Financial's Board of Directors have adopted a Liquidity Management Policy
for TCF Bank to direct management of the Company's liquidity risk. The objective of the Liquidity Management Policy
is to ensure that TCF meets its cash and collateral obligations promptly, in a cost-effective manner and with the highest
degree of reliability. The maintenance of adequate levels of asset and liability liquidity will provide TCF with the ability
to meet both expected and unexpected cash flows and collateral needs. Key liquidity ratios, asset liquidity levels and
the amount available from funding sources are reported to ALCO on a monthly basis. TCF's Liquidity Management
Policy defines liquidity stress scenarios and establishes asset liquidity target ranges based upon those stress scenarios
that are deemed appropriate for its risk profile.
TCF's asset liquidity may be held in the form of on-balance sheet cash invested with the Federal Reserve Bank or
other highly liquid marketable securities that are not pledged and can be sold or pledged to various counterparties
under established agreements. At December 31, 2015, TCF had asset liquidity of $1.3 billion.
Deposits are TCF's primary source of funding. TCF also maintains secured sources of funding, which primarily include
$2.4 billion of additional borrowing capacity at the FHLB of Des Moines, as well as access to the Federal Reserve
Discount Window. Collateral pledged by TCF to the FHLB and the Federal Reserve Bank consists primarily of consumer
and commercial real estate loans and mortgage-backed securities. The FHLB relies upon its own internal credit analysis
of TCF when determining TCF's secured borrowing capacity. In addition to the above, TCF maintains a diversified set
of unsecured and uncommitted funding sources, including access to overnight federal funds purchased lines, brokered
deposits and capital markets. TCF has developed and maintains a contingency funding plan should certain liquidity
needs arise.
Foreign Currency Risk
The Company is also exposed to foreign currency risk as changes in foreign exchange rates may impact the Company's
investment in TCFCFC or results of other transactions in countries outside of the United States. Beginning in 2011,
TCF entered into forward foreign exchange contracts in order to minimize the risk of changes in foreign exchange
rates on its investment in and loans to TCFCFC. The values of forward foreign exchange contracts vary over their
contractual lives as the related currency exchange rates fluctuate. TCF may also experience realized and unrealized
gains or losses on forward foreign exchange contracts as a result of changes in foreign exchange rates. See Note 18,
Derivative Instruments of Notes to Consolidated Financial Statements for further information.