American Express 2015 Annual Report Download - page 84

CONSOLIDATED CAPITAL RESOURCES AND LIQUIDITY
Our balance sheet management objectives are to maintain:
• A solid and flexible equity capital profile;
• A broad, deep and diverse set of funding sources to finance our assets and meet operating requirements; and
• Liquidity programs that enable us to continuously meet expected future financing obligations and business
requirements for at least a 12-month period, even in the event we are unable to continue to raise new funds
under our traditional funding programs during a substantial weakening in economic conditions.
CAPITAL STRATEGY
Our objective is to retain sufficient levels of capital generated through earnings and other sources to maintain a
solid equity capital base and to provide flexibility to support future business growth. We believe capital allocated to
growing businesses with a return on risk-adjusted equity in excess of our costs will generate shareholder value.
The level and composition of our consolidated capital position are determined through our internal capital
adequacy assessment process, which takes into account our business activities, as well as marketplace conditions and
requirements or expectations of credit rating agencies, regulators and shareholders, among others. Our consolidated
capital position is also influenced by subsidiary capital requirements. As a bank holding company, we are also subject
to regulatory requirements administered by the U.S. federal banking agencies. The Federal Reserve has established
specific capital adequacy guidelines that involve quantitative measures of assets, liabilities and certain off-balance
sheet items.
We report our capital ratios using the Basel III capital definitions, inclusive of transition provisions, and the Basel III
Standardized Approach for calculating risk-weighted assets (see section on Transitional Basel III). The Basel III
standards will be fully phased-in by January 1, 2019 (see section on Fully Phased-in Basel III).
We also report capital adequacy standards on a parallel basis to regulators under Basel requirements for
Advanced Approaches institutions. The parallel period will continue until we receive regulatory approval to exit parallel
reporting, at which point we will begin publicly disclosing regulatory risk-based capital ratios using both the
Standardized and Advanced Approaches, and will be required to use the lower of the regulatory risk-based capital
ratios based on the Standardized or Advanced Approaches to determine whether we are in compliance with minimum
capital requirements.
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