Bank of New York Mellon : Dodd-Frank Act Stress Test Results June 2020

The Bank of New York Mellon Corporation

The Bank of New York Mellon

Company-Run Stress Test Dodd-Frank Act Stress Test Results

June 25, 2020

Supervisory Severely Adverse Scenario

Introduction

Throughout this document The Bank of New York Mellon Corporation on a consolidated basis is referred to as "BNY Mellon," the "Firm," "we," "our" and "us." BNY Mellon and The Bank of New York Mellon (the "Institutional Bank") are required to conduct company-wide stress tests pursuant to 12 C.F.R. part 252 (the "Regulation"). A summary of those results is also required to be published under the Regulation. Accordingly, we have developed the following disclosure, which contains the information required by the Regulation to be disclosed publicly and has been prepared in accordance with the Regulation. Any differences between the presentation of information concerning BNY Mellon or the Institutional Bank in this disclosure and how we present such information for other purposes are solely due to our efforts to comply with the Regulation. The information presented in this disclosure does not, in any way, reflect changes to our organizational structure, business plans or practices, or strategy.

The projections contained herein are based on the Supervisory Severely Adverse Scenario provided by the Board of Governors of the Federal Reserve System (the "Federal Reserve") in connection with the 2020 annual Dodd-Frank Act Stress Testing ("DFAST") exercise. The Supervisory Severely Adverse Scenario is designed to be generally representative of a severe economic downturn scenario that can be described in many respects as similar to the recession beginning in 2008. The specific variables included in the Supervisory Severely Adverse Scenario such as economic activity, unemployment, exchange rates, prices, incomes, and interest rates are detailed in the document published by the Federal Reserve on February 6, 2020 titled "2020 Supervisory Scenarios for Annual Stress Tests Required under the Dodd-Frank Act Stress Testing Rules and the Capital Plan Rule." Accordingly, the Supervisory Severely Adverse Scenario projections do not reflect current market conditions, including the COVID-19 market disruption. However, though not specifically COVID-19 related, the Supervisory Severely Adverse Scenario does include components that would be stressed by recent market conditions including a higher balance sheet, higher credit losses, and higher operational losses. In addition, we performed supplemental analyses as part of our broader stress testing process on areas including balance sheet, net interest income, other comprehensive income, operational losses, and credit loss. These separate analyses were used to inform our view on capital adequacy and appropriate capital actions.

The Firm's DFAST relies on various models to forecast performance under stressed conditions. These models cover loss estimates, revenue and expense projections, scenario infrastructure, and risk-weighted asset calculations. The projections contained within this disclosure represent hypothetical estimates that involve an economic outcome that is more adverse than expected, and accordingly these estimates are not forecasts of expected losses, pre-provision net revenue ("PPNR"), net income before taxes, or capital ratios. The Federal Reserve also conducts stress testing of financial institutions, including BNY Mellon, based on its own forecasting models and methodologies for which it does not disclose all details.

The Regulation requires us, among other things, to make certain assumptions regarding capital actions ("Dodd-Frank Capital Actions") when computing pro forma capital ratios across the nine-quarter planning horizon. These Dodd-Frank Capital Actions include:

• • For the first quarter of 2020, actual capital actions;

• • For the second through ninth quarters of the planning horizon, the following capital actions:

  1. Common stock dividends equal to the quarterly average dollar amount of common stock dividends that BNY Mellon paid in the previous four quarters (that is, the first quarter of the planning horizon and the preceding three calendar quarters) plus common stock dividends

attributable to issuances related to expensed employee compensation, or in connection with a planned merger or acquisition to the extent reflected in our pro forma balance sheet estimates;

• 2. Payments on any other instrument that is eligible for inclusion in the numerator of a regulatory capital ratio equal to the stated dividend, interest, or principal due on that instrument during the quarter;

• 3. An assumption of no redemption or repurchase of any capital instrument that is eligible for inclusion in the numerator of a regulatory capital ratio; and

• 4. An assumption of no issuances of common stock or preferred stock, except for issuances related to expensed employee compensation or in connection with a planned merger or acquisition reflected in our pro forma balance sheet estimates.

In practice, if a severely adverse economic scenario were to in fact occur, we could change planned distributions and it is highly likely that we would respond with certain capital conservation actions consistent with internal policy. The stress test results summarized in this report should not be interpreted as expected or likely outcomes, but rather as a possible result under hypothetical, highly adverse economic conditions.

Supervisory Severely Adverse Scenario Projections for BNY Mellon and the Institutional Bank

As demonstrated by BNY Mellon's DFAST results, which are detailed below, we maintain excess capital above regulatory minimums in every quarter, for every ratio, over the entire planning horizon throughout the Supervisory Severely Adverse Scenario. This success is driven by a number of factors, including the Firm's strong capital generation and its risk profile.

[Remainder of page left blank intentionally.]

BNY Mellon - Tables of Statistical Results

ANNUAL FIRM-RUN RESULTS

Dodd-Frank Act Stress Testing Results

The capital ratios are calculated using the Dodd-Frank Capital Actions. These projections represent hypothetical estimates that involve an economic outcome that is more adverse than expected. These estimates are not forecasts of expected losses, revenues, net income before taxes, or capital ratios. The minimum capital ratio presented is for the period from the first quarter of 2020 through the first quarter of 2022.

Table 1: Projected Stressed Capital Ratios Through the First Quarter of 2022 Under the Supervisory Severely Adverse Scenario

Actual1	Stressed Capital Ratios
4Q2019	Ending	Minimum
Common Equity Tier 1 capital ratio (%)	12.5%	13.8%	9.2%
Tier 1 capital ratio (%)	14.8%	16.3%	11.3%
Total capital ratio (%)	15.8%	17.5%	12.4%
Tier 1 leverage ratio (%)	6.6%	5.9%	4.9%
Supplementary leverage ratio (%)	6.1%	6.7%	4.7%

1Actual fourth quarter 2019 Common Equity Tier 1, Tier 1 and Total capital ratios are calculated using the Standardized Approach (as hereinafter defined). At December 31, 2019 BNY Mellon's reported Common Equity Tier 1, Tier 1 capital, and Total capital ratios were 11.5%, 13.7%, and 14.4%, respectively, based on the U.S capital rules' advanced approaches risk weighting framework ("Advanced Approaches"), which was the Firm's constraining measure for that quarter.

Table 2: Projected Risk-Weighted Assets ("RWA")

Actual 4Q 2019	Projected 1Q 2022
RWA1 ($ in Millions)	$148,695	$135,167

1RWA calculated using the U.S. capital rules' Standardized Approach methodology.

Table 3: Projected Loan Losses by Type of Loan for the First Quarter of 2020 through the First Quarter of 2022 Under the Supervisory Severely Adverse Scenario

Millions of Dollars	Portfolio Loss Rates (%)1
Loan Losses	$1,576	3.3%
First-lien mortgages, domestic	$13	0.2%
Junior liens and HELOCs, domestic	$0	0%
Commercial real estate, domestic	$288	6.8%
Credit cards	$0	0%
Commercial and industrial	$51	3.7%
Other consumer	$22	0.7%
Other loans	$1,202	4.0%

1Average loan balance used to calculate portfolio loss rates excludes loans held for sale and loans held for investment under the fair value option, and are calculated over nine quarters. Portfolio loss rates are rounded to the nearest tenth of a percentage point.

Table 4: Projected PPNR, Losses and Net Income Before Taxes for the First Quarter of 2020 Through the First Quarter of 2022 Under the Supervisory Severely Adverse Scenario

Millions of Dollars	Percent of Average Assets4
PPNR1 Less	$7,310	1.9%
Provisions	$2,117	0.5%
Realized losses/(gains) on securities Available-for-Sale/Held-to-Maturity ("AFS/HTM")	$0	0.0%
Trading and counterparty losses2	$1,268	0.3%
Other losses/(gains)3	$104	0.0%
Equals
Net income before taxes	$3,821	1.0%
Other Comprehensive Income	$(375)
Other effects on capital	Actual 4Q 2019	1Q 2022
Accumulated other comprehensive income included in capital (Billions of dollars)	$(2,638)	$(3,013)

1PPNR includes losses from operational risk events.

2Trading and counterparty losses include mark-to-market and credit valuation adjustments losses and losses arising from the counterparty default scenario component applied to derivatives, securities lending, and repurchase agreement activities.

3Other losses/(gains) includes projected change in Funding Value Adjustments/Overnight Index Swaps, as well as non-collateralized loan obligation ("CLO") and CLO Impairment losses.

4Average assets are averaged over the nine-quarter planning horizon. Amounts are rounded to the nearest tenth of a percentage point.