Regions Financial Corporation. Liquidity Coverage Ratio Disclosure

Transcription

1 Regions Financial Corporation Liquidity Coverage Ratio Disclosure As of and for the quarter ended December 31, 2018

2 Table of Contents Introduction 3 Main Drivers of LCR 3 High Quality Liquid Assets 4 Net Cash Outflows 4 LCR Quantitative Disclosure 5 Funding Sources 6 Liquidity Management 6 Derivatives Exposure and Potential Collateral Calls 6 Forward Looking Statement 6 2

3 Introduction Regions Financial Corporation (Regions) is a financial holding company headquartered in Birmingham, Alabama and one of the nation s largest full-service providers of consumer and commercial banking, wealth management, mortgage and insurance products and services. Regions serves customers across the South, Midwest and Texas, and through its subsidiary, Regions Bank, operates approximately 1,500 banking offices and 1,900 ATMs. Regions is subject to the Liquidity Coverage Ratio (LCR) rule issued by the Board of Governors of the Federal Reserve System, which requires that Regions disclose publicly, on a quarterly basis, quantitative and qualitative information about certain components of its LCR. The LCR rule requires that covered banking organizations maintain an adequate level of unencumbered high-quality liquid assets (HQLA) under a 30-day liquidity stress scenario. The LCR rule currently applies in a modified, less stringent, form to bank holding companies, such as Regions, having $50 billion or more but less than $250 billion in total consolidated assets and less than $10 billion in total on-balance sheet foreign exposure. The modified LCR rule requires that Regions hold an amount of unencumbered HQLA that equals or exceeds 70% of its net cash outflows over a 30 calendar-day liquidity stress scenario. The disclosures below should be read in conjunction with Regions Securities and Exchange Commission (SEC) filings, include the Annual Report on Form 10-K for the year ended December 31, These filings are available at This document contains our LCR disclosure for the quarterly period ended December 31, 2018 and has been prepared in accordance with the requirements of the LCR rule. Main Drivers of LCR In the stressed scenario, Regions average weighted LCR totaled 111% for the three-month period ended December 31, 2018, above the 100% regulatory minimum set forth in the LCR rule. The weighted average HQLA for the quarter totaled approximately $13.3 billion, while net cash outflows for the quarter totaled approximately $17.6 billion, or approximately $12.3 billion after giving effect to the 70% modification to total net cash outflows. The main drivers of Regions LCR include the portion of HQLA represented by Federal Reserve Bank balances and the portion of net cash outflows represented by deposits and unfunded commitments. It is important to note that changes in LCR may occur over time due to fluctuations in the Bank s balance sheet, which will be reflected in the calculated HQLA and estimated net cash outflows. 3

4 High-Quality Liquid Assets Under the LCR rule, assets may qualify as HQLA if they are liquid, readily marketable, unencumbered and are able to be monetized. HQLA eligible assets are categorized as Level 1, Level 2A and Level 2B liquid assets. Level 1 assets are the highest quality and most liquid assets. There is no limit on the amount of Level 1 assets that can be included without haircuts in a covered banking organization s eligible HQLA calculation. Level 1 assets generally include certain balances held at a Federal Reserve Bank, U.S. Treasury securities as well as securities issued or unconditionally guaranteed by a U.S. government agency whose obligations are fully and explicitly guaranteed by the full faith and credit of the U.S. government. Level 2A assets are made up of securities issued or guaranteed by certain U.S. government-sponsored enterprises and Level 2B assets are comprised of eligible corporate securities. Total Level 2 assets, made up of the combined amount of Level 2A and 2B assets, are limited to 40% of the total HQLA amount and Level 2B assets are limited to 15% of the total HQLA amount. In the fourth quarter of 2018, Regions weighted average HQLA totaled $15.7 billion, $2.4 billion of which exceeded the Level 2 cap and are therefore excluded from the total HQLA amount. Level 1 assets comprised approximately $8 billion of Regions HQLA with the majority held in U.S. Treasury and securities issued or guaranteed by the Government National Mortgage Association and cash balances held at the Federal Reserve Bank. Regions held Level 2A assets totaling approximately $7.3 billion (prior to application of the Level 2 cap). Level 2B assets totaled $448 million,. Net Cash Outflows Total net cash outflows comprise the denominator of the LCR. It is calculated by subtracting the total expected cash inflows from the total expected cash outflows during a 30-day liquidity stress period. Cash inflows included in the LCR calculation are capped at 75% of total cash outflows. Regions average weighted cash outflows in the fourth quarter totaled approximately $17.6 billion. Cash inflows for this period totaled approximately $430 million on an average weighted basis. Regions largest source of cash outflows during the fourth quarter of 2018 was its Unsecured Wholesale Funding Outflow, contributing approximately $5.3 billion of the total cash outflows on an average weighted basis (after giving effect to the 70% modification to total net cash outflows). Unfunded commitments also contributed substantially to the cash outflow total with approximately $3.7 billion of the total cash outflows on an average weighted basis (after giving effect to the 70% modification to total net cash outflows). 4

5 LCR Quantitative Disclosure The following disclosure template includes Regions average month end LCR for the fourth quarter of 2018 as well as its average HQLA, cash outflows, and cash inflows as prescribed in the LCR rule. For the three month period ending: 12/31/2018 Dollars in millions 3 month Average Description Average Unweighted Amount¹ Average Weighted Amount² HIGH-QUALITY LIQUID ASSETS 1 Total Eligible High-Quality Liquid Assets (HQLA), Of Which: $17,461 $15,725 2 Eligible Level 1 Liquid Assets $7,978 $7,978 3 Eligible Level 2a Liquid Assets $8,586 $7,298 4 Eligible Level 2b Liquid Assets $897 $448 CASH OUTFLOW AMOUNTS 5 Deposit Outflow From Retail Customers And Counterparties, Of Which: $65,413 6 Stable Retail Deposit Outflow $50,160 7 Other Retail Funding $14,336 8 Brokered Deposit Outflow $917 9 Unsecured Wholesale Funding Outflow, Of Which: $21, Operational Deposit Outflow $12, Non-Operational Funding Outflow $8, Unsecured Debt Outflow 13 Secured Wholesale Funding And Asset Exchange Outflow $6, Additional Outflow Requirements, Of Which: $46, Outflow Related To Derivative Exposures And Other Collateral Requirements $ Outflow Related To Credit And Liquidity Facilities Including Unconsolidated Stru $45, Other Contractual Funding Obligation Outflow $95 18 Other Contingent Funding Obligations Outflow 19 CASH OUTFLOW $139,524 $3,225 $1,505 $1,503 $217 $7,566 $3,049 $4,516 $1,009 $5,709 $444 $5,265 $95 $17,603 CASH INFLOW AMOUNTS 20 Secured Lending And Asset Exchange Cash Inflow 21 Retail Cash Inflow $ Unsecured Wholesale Cash Inflow $ Other Cash Inflows, Of Which: $ Net Derivative Cash Inflow $2 25 Securities Cash Inflow $ Broker-Dealer Segregated Account Inflow 27 Other Cash Inflow 28 CASH INFLOW $1, HQLA⁴ 30 TOTAL NET CASH OUTFLOW AMOUNT EXCLUDING THE MATURITY MISMATCH ADD-ON 31 MATURITY MISMATCH ADD-ON 32 TOTAL NET CASH OUTFLOW AMOUNT 33 LIQUIDITY COVERAGE RATIO (%) $261 $158 $11 $2 $9 $430 Average Amount³ $13,297 $12, % ¹ Represents the average unweighted amount before applying HQLA haircuts and cash outflow and inflow rates as prescribed by the LCR rule. ² Represents the average weighted amount after applying HQLA haircuts and cash outflow and inflow rates as prescribed by the LCR rule. ³ The amounts reported in this column may not equal the calculation of those amounts using component amounts reported in rows 1-28 due to technical factors such as the application of the level 2 liquid asset caps, the total inflow cap, and for depository institution holding companies subject to subpart G, the application of the modification to total net cash outflows. ⁴ HQLA amount excludes eligible HQLA above the Level 2 cap as prescribed by the LCR rule. 5

6 Funding Sources Regions assets are primarily funded organically with retail and wholesale deposits. The remainder is funded using a mix of long-term and short-term products available through the wholesale markets. In addition, Regions maintains a relationship with the Federal Home Loan Bank of Atlanta, with mortgage loans pledged to create borrowing availability. Concentration limits are used to ensure diversity in the funding portfolio by both product and maturity. Liquidity Management The Funding and Liquidity team within Corporate Treasury manages the day-to-day liquidity position to ensure that the bank is adequately funded on each business day. This team works in conjunction with the Asset Liability Management, Investment Portfolio, and Capital teams within Corporate Treasury in its approach to funding and liquidity with input from the lines of businesses. The Asset/Liability Committee (ALCO) is responsible for establishing and maintaining liquidity risk exposure within limits set forth in Regions Liquidity Management Policy. The Liquidity Risk Oversight Committee (LROC) reports to ALCO. LROC is responsible for overseeing liquidity by establishing tolerance levels, limits, and indicators. It provides a forum for discussion of emerging and acute liquidity risks and their impact on Regions liquidity metrics. LROC monitors potential risks that could become meaningful to liquidity management and evaluates risk in accordance with Regions Risk Appetite Statement. Regions has a Market, Liquidity, Capital, and Strategic Risk Management team that manages the identification, measurement, monitoring, mitigating, and reporting of market and liquidity risks. This group continuously monitors day-to-day activities to provide a risk assessment to the Chief Risk Officer (CRO) and the Board Risk Committee. This team is also engaged in an annual independent review of liquidity risks. The Internal Audit team also provides oversight, review, and challenge related to liquidity issues. Derivatives Exposure and Potential Collateral Calls Regions enters into derivative transactions primarily to facilitate customer activity to manage their interest rate, currency, and commodity risk. In addition, the Company enters into derivative transactions with third parties and between affiliated legal entities to enable management of risk across the enterprise. This includes bilateral transactions that are over-the-counter (OTC) and transactions settled via exchanges with central counterparties. For LCR purposes, the Company s funding requirements with respect to its derivative exposure do not constitute a material portion of net outflows. 6

7 Forward Looking Statement This report may include forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995, which reflect Regions current views with respect to future events and financial performance. The terms Regions, the Company, we, us and our as used herein mean collectively Regions Financial Corporation, a Delaware corporation, together with its subsidiaries when or where appropriate. The words future, anticipates, assumes, intends, plans, seeks, believes, predicts, potential, objectives, estimates, expects, targets, projects, outlook, forecast, would, will, may, might, could, should, can, and similar terms and expressions often signify forwardlooking statements. Forward-looking statements are not based on historical information, but rather are related to future operations, strategies, financial results or other developments. Forward-looking statements are based on management s current expectations as well as certain assumptions and estimates made by, and information available to, management at the time the statements are made. Those statements are based on general assumptions and are subject to various risks, and because they also relate to the future they are likewise subject to inherent uncertainties and other factors that may cause actual results to differ materially from the views, beliefs and projections expressed in such statements. Therefore, we caution you against relying on any of these forward-looking statements. These risks, uncertainties and other factors include, but are not limited to, the risks identified in Item 1A. Risk Factors and Forward-Looking Statements of our 2018 Annual Report on Form 10-K. You should not place undue reliance on any forward-looking statements, which speak only as of the date made. Factors or events that could cause our actual results to differ may emerge from time to time, and it is not possible to predict all of them. We assume no obligation and do not intend to update or revise any forward-looking statements that are made from time to time, either as a result of future developments, new information or otherwise, except as may be required by law. 7