OTHER REGULATORY MATTERS
|12 Months Ended|
Dec. 31, 2017
|Banking and Thrift [Abstract]|
|OTHER REGULATORY MATTERS||
OTHER REGULATORY MATTERS
Huntington and the Bank are subject to certain risk-based capital and leverage ratio requirements adopted by the Federal Reserve, for Huntington, and the OCC, for the Bank, to implement the U.S. Basel III capital rules. These quantitative calculations are minimums, and the Federal Reserve and OCC may determine that a banking organization, based on its size, complexity or risk profile, must maintain a higher level of capital in order to operate in a safe and sound manner.
Under the U.S. Basel III capital rules, Huntington’s and the Bank’s assets, exposures and certain off-balance sheet items are subject to risk weights used to determine the institutions’ risk-weighted assets. These risk-weighted assets are used to calculate the following minimum capital ratios for Huntington and the Bank:
To be well-capitalized, the Bank must maintain the following capital ratios: CET1 Risk-Based Capital Ratio of 6.5% or greater; Tier 1 Risk-Based Capital Ratio of 8.0% or greater; Total Risk-Based Capital Ratio of 10.0% or greater; and Tier 1 Leverage Ratio of 5.0% or greater.
Failure to be well-capitalized or to meet minimum capital requirements could result in certain mandatory and possible additional discretionary actions by regulators that, if undertaken, could have an adverse material effect on our operations or financial condition. Failure to be well-capitalized or to meet minimum capital requirements could also result in restrictions on Huntington’s or the Bank’s ability to pay dividends or otherwise distribute capital or to receive regulatory approval of applications. In addition to meeting the minimum capital requirements, under the U.S. Basel III capital rules Huntington and the Bank must also maintain the required Capital Conservation Buffer to avoid becoming subject to restrictions on capital distributions and certain discretionary bonus payments to management. The Capital Conservation Buffer is calculated as a ratio of CET1 capital to risk-weighted assets, and it effectively increases the required minimum risk-based capital ratios. The Capital Conservation Buffer requirement is being phased in over a three-year period that began on January 1, 2016. When the phase-in period is complete on January 1, 2019, the Capital Conservation Buffer will be 2.5%. Throughout 2017, the required Capital Conservation Buffer was 1.25%, and the required Capital Conservation Buffer throughout 2018 will be 1.875%.
As of December 31, 2017, Huntington’s and the Bank’s regulatory capital ratios were above the well-capitalized standards and met the then-applicable Capital Conservation Buffer. Please refer to the table below for a summary of Huntington’s and the Bank’s regulatory capital ratios as of December 31, 2017, calculated using the regulatory capital methodology applicable to us during 2017.
Huntington and its subsidiaries are also subject to various regulatory requirements that impose restrictions on cash, debt, and dividends. The Bank is required to maintain cash reserves based on the level of certain of its deposits. This reserve requirement may be met by holding cash in banking offices or on deposit at the FRB. During 2017 and 2016, the average balances of these deposits were $0.4 billion and $0.3 billion, respectively.
Under current Federal Reserve regulations, the Bank is limited as to the amount and type of loans it may make to the parent company and nonbank subsidiaries. At December 31, 2017, the Bank could lend $1.1 billion to a single affiliate, subject to the qualifying collateral requirements defined in the regulations.
Dividends from the Bank are one of the major sources of funds for the Company. These funds aid the Company in the payment of dividends to shareholders, expenses, and other obligations. Payment of dividends and/or return of capital to the parent company is subject to various legal and regulatory limitations. During 2017, the Bank paid dividends and returned capital of $723.7 million to the holding company. Also, there are statutory and regulatory limitations on the ability of national banks to pay dividends or make other capital distributions.
The entire disclosure for banks, savings institutions, and credit unions, for regulatory capital requirements imposed by the Federal Reserve System (FRB), the Federal Deposit Insurance Corporation (FDIC), the Office of Thrift Supervision (OTS) or for any state imposed capital requirements, as applicable. The disclosure may include (1) a description of regulatory capital requirements (a) for capital adequacy purposes and (b) established by the prompt corrective action provisions of Section 38 of the Federal Depository Insurance Act; (2) the actual or possible material effects of noncompliance with such requirements; (3) whether the entity is in compliance with the regulatory capital requirements including (a) required and actual ratios and amounts of Tier 1 leverage, Tier 1 risk-based, and total risk-based capital, tangible capital (for savings institutions), and Tier 3 capital for market risk (for certain banks and bank holding companies), (b) factors that may significantly affect capital adequacy; (4) the prompt corrective action category in which the entity was classified as of its most recent notification; (5) whether management believes any conditions or events since notification have changed the entity's category. Also may include additional information that might be disclosed in situations where substantial doubt about the entity's ability to continue as a going concern for a reasonable period of time.
Reference 1: http://www.xbrl.org/2003/role/presentationRef