Regions Bank 2012 Annual Report Download - page 114

are considered to be non-GAAP financial measures and other entities may calculate them differently than
Regions’ disclosed calculations (see Table 2 “GAAP to Non-GAAP Reconciliation” for further details).
The Dodd-Frank Act requires the Federal Reserve to impose more stringent capital requirements on bank
holding companies with assets of $50 billion or more. Consequently, as part of Regions’ annual CCAR, Regions
must submit its annual capital plans to the Federal Reserve. As part of the CCAR, Regions is required to submit
five scenarios including the Company’s baseline forecast, the Federal Reserve’s baseline outlook, the Company’s
stress case and both of the Federal Reserve’s adverse stress case and severely adverse stress case. Regions is
required to maintain its capital levels above each minimum regulatory capital ratio and above a Tier 1 common
ratio of 5 percent on a pro forma basis under expected and stressful conditions throughout a certain time period
horizon. Any capital actions requested by Regions must be submitted to the Federal Reserve for approval. The
Federal Reserve has committed to responding to Regions’ capital plans by March 14, 2013. The Federal Reserve
intends to publish its results of the supervisory stress test component of CCAR for Regions and all companies
that are participating. Additionally, Regions intends to publish its own results of the Federal Reserve’s severely
adverse case stress test for both Regions Financial Corporation and its primary bank subsidiary Regions Bank.
Regions is evaluating the anticipated impact of Basel III which is expected to be phased in beginning in
2013. The Federal Reserve has announced a delay in the implementation date of the final rules; however, when
implemented there will be a phase in period of up to 6 years. The Company’s estimated Tier 1 common ratio as
of December 31, 2012, based on Regions’ current understanding of the Basel III requirements, as proposed by
the U.S. Notices of Proposed Rulemaking (“NPR”) released in June 2012, was approximately 8.9 percent and
therefore exceeded the Basel III minimum of 7 percent for Tier 1 common. In January 2013, the Basel
Committee published an update that included revisions to the liquidity coverage ratio (“LCR”) calculation.
Inclusive in this update were provisions included but not limited to, lower deposit run-off assumptions and full
implementation on a phase-in schedule. Starting in 2015, firms will be required to be at a minimum compliance
ratio of 60 percent, with equal annual increase until the 100 percent minimum requirement is reached in 2019.
Based on Regions’ understanding and interpretation of the rules for the calculation for the LCR under Basel III,
Regions is currently above the 100 percent coverage minimum. The Company anticipates being fully compliant
with the LCR requirements upon finalization and implementation. However, should Regions’ cash position or
investment mix change in the future, Regions’ ability to meet the liquidity coverage ratio may be impacted.
Additionally, there is still need for clarification of the Basel III rules as well as interpretation and implementation
by U.S. banking regulators, so the ultimate impact of Basel III on Regions is not completely known at this point.
The NPR comment period ended in October 2012; changes to the calculation resulting from the comment process
could result in materially different capital ratios from the amounts estimated. Because the Basel III capital
calculations are not formally defined by GAAP and are not currently prescribed in amount by the federal banking
regulations, these measures are considered to be non-GAAP financial measures, and other entities may calculate
them differently than Regions’ disclosed calculations (see Table 2 “GAAP to Non-GAAP Reconciliation” for
further details).
See the “Supervision and Regulation—Capital Requirements” subsection of the “Business” section and the
“Risk Factors” section for more information. As of December 31, 2012, Regions Bank had the requisite capital
levels to qualify as well capitalized.
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