State Street : Liquidity Coverage Ratio Public Disclosure

U.S. Liquidity Coverage Ratio ("LCR") Disclosure

August 12 2022

Main Drivers of Quarterly Average LCR

State Street Corporation's ("SSC") LCR has remained reasonably stable and above regulatory requirements over the past two years, primarily as a result of our liquid balance sheet structure and stable funding sources. As set forth in table 1 below, SSC's LCR was stable at 106% in 2Q22 relative to 1Q22.State Street Bank and Trust Company's ("SSBT") LCR decreased to 122% in 2Q22 from 127% in 1Q22, largely driven by a decrease in client deposits and increase in liquidity consumption from loans and securities financing transactions.

State Street retains the majority of its liquidity resources at SSBT, as we have limited business activity at SSC. This differs from many other banking organizations which may have considerable business lines directly held at the corporate holding company level. SSBT's LCR is significantly higher than SSC's LCR, primarily due to application of the transferability restriction in the U.S. LCR Final Rule to the calculation of SSC's LCR. This restriction limits the amount of HQLA available for the calculation of SSC's LCR to the amount of net cash outflows of SSC's principal banking subsidiary, SSBT. This transferability restriction does not apply in the calculation of SSBT's LCR, and therefore SSBT's LCR reflects the full benefit of all of its HQLA holdings The LCR is expressed as a ratio: the deno minator (net cash outflows), increases as deposits rise, while the numerator (HQLA) is restricted for SSC by the cap on recognizing the HQLA held at SSBT, thereby resulting in a lower percentage.

Relative to pre-pandemic levels, SSC deposits remain elevated driven by increases in client custodial balances and accommodative global monetary policy in response to the COVID -19 pandemic. However, as global central banks have increased short-term interest rates, we have begun to see slight decreases in deposit balances in the first half of 2022, in line with our expectations. A significant portion of these elevated deposits is related to increased custodial balances, a portion of which is considered to be operational in nature and therefore a stable source of funding, drawing only a 25% outflow rate under the LCR Rule. We treat the remaining "excess" deposits as non-operational. These excess deposits increase on a one-to-one basis both the LCR numerator (High Quality Liquid Assets, or "HQLA"), due to our investment of these deposits in HQLA, and the LCR denominator (net cash outflows), due to a 100% outflow rate, in the calculation of the LCR; subject, in the case of SSC, to the transferability restriction mentioned above.

For additional information about State Street's HQLA, see State Street's 2021 Form 10-K.

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Table 1:

The below table includes the SSBT and SSC LCR for the last 5 quarters:

Amount in $M , except where otherwise noted	Average	Average	Average	Average	Average
	2Q22	1Q22	4Q21	3Q21	2Q21
SSC
Total Deposits	227,814	233,017	239,600	232,986	242,016
Total Client Deposits	217,669	222,755	229,215	222,351	231,318
Operational Deposits	172,618	173,624	172,907	171,172	172,677
State Street Corporation LCR	106%	106%	105%	105%	104%
State Street Corporation LCR Buffer	5,257	5,941	5,369	4,415	4,734
State Street Bank and Trust LCR	122%	127%	129%	127%	131%
State Street Bank and Trust LCR Buffer	21,137	27,598	31,419	28,068	34,711

Notes:

• The LCR Buffer is calculated as the excess stock of Liquid Assets that the entity holds over and above the required Net Cash Outflows over the hypothetical 30 days stress period.
• Deposit balances as reported to the Federal Reserve for the LCR calculation. Balances may differ from the re ported deposit balances in other published materials due to period-end adjustments made after the LCR filing date .

In order to articulate the impact that changes in client deposits can have on the SSC and SSBT LCR calculation, we have included a sensitivity analysis to provide a hypothetical pro forma impact analysis under specified deposit scenarios holding all other LCR drivers constant for 2Q22. The sensitivity analysis uses 2Q22 average client deposit levels as the baseline and then reflects the different pro forma impacts of hypothetical changes (increases or decreases) to average client deposits from the baseline.

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Table 2:

The below table provides 2Q22 Hypothetical LCR Client Deposit Sensitivity Analysis

Amount in $B's, except where otherwise noted	Pro Forma Decrease in Avg. Client	Actual Baseline	Pro Forma Increase in Avg. Client
	Deposits from Actual Baseline	Average 2Q22	Deposits from Actual Baseline
			Deposits
	$25B	$15B		$15B	$25B
SSC
Total Client Deposits (Unweighted)	193	203	218	233	243
Operational Deposits (Unweighted)*	153	161	173	184	192
SSC
High Quality Liquid Assets	90	93	98	103	106
Net Cash Outflows	85	88	93	97	100
LCR	106%	106%	106%	105%	105%
LCR Buffer	5	5	5	5	5
State Street Bank and Trust
High Quality Liquid Assets	100	108	119	131	139
Net Cash Outflows	90	93	98	103	106
LCR	111%	115%	122%	127%	131%
LCR Buffer	10	14	21	28	33

*Operational Deposits represents line 10 in Table 3: 2Q22 SSC Quarterly Average LCR Quantitative Disclosure.

Notes:

• The analysis in the above table presents hypothetical pro forma effects for 2Q22, based upon actual data for 2Q22 (varying only client deposit levels, as noted). The analysis is for illustrative purposes only and does not represent a forecast or forward-looking statement. Figures in the table may not sum due to rounding.
• All other drivers of the LCR such as derivative exposures, placements and nostro balances etc. are held constant at the 2Q22 quarterly average and relies on several assumptions, also held constant, regarding the operational value of deposits and the legal entities in which they reside.
• LCR Buffer is the excess stock of Liquid Assets that the entity holds over and above the required Net Cash Outflows over the hypothetical 30 days stress period.

Eligible HQLA Composition: For 2Q22, SSC's average HQLA was $141.7 billion, of which $97.9 billion was eligible to be included in SSC's LCR. $43.8 billion of HQLA held at subsidiaries was ineligible for inclusion in SSC's LCR calculation due to the transferability restriction under the LCR Final Rule, relative to $49.4 billion of HQLA that was ineligible in 1Q22. SSC's HQLA excludes the amount of HQLA at SSBT that is in excess of its standalone 100% minimum LCR requirement and that is not transferable to non-bank affiliates.

Outflow Drivers: Deposits are the most significant driver of SSC's net cash outflows. The deposit outflow rates prescribed in the LCR Final Rule are based on deposit types and requirements for the recognition of operational deposits which may vary from period to period based on client investment and related activities. These variances can be significant and have a corresponding effect on SSC's LCR from period to period. SSC uses a quantitative modeling approach to identify which deposits meet the operational requirements and characteristics as prescribed in the LCR Final Rule. During 2Q22, calculated weighted average outflows of $125.4 billion were primarily driven by deposit outflows of approximately $89.2 billion, outflows related to derivative exposures and other collateral requirements totaling $15.5 billion, and outflows of undrawn committed credit and liquidity facilities of approximately $16.1 billion.

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Inflow Drivers: SSC's calculated weighted average inflows of $32.9 billion for 2Q22 were primarily driven by the overnight contractual unwind of securities borrowing and lending transactions as cash and securities were returned to SSC. Placements and nostro balances held at unaffiliated banks and loans maturing within 30 days make up the remaining calculated inflows.

Quantitative Disclosure of SSC 2Q22 Quarterly Average LCR

The data presented in the quantitative disclosure below are averages of daily observations over 2Q22 and are consistent with the LCR Final Rule. In 2Q22, SSC had an average LCR of 106%, with average HQLA of $141.7 billion, of which $97.9 billion was eligible to be included in SSC's LCR numerator, and weighted average total net cash outflows of $92.7 billion (including maturity mismatch add-on of $232 million).

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Table 3: 2Q22 SSC Quarterly Average LCR Quantitative Disclosure

LCR Public Disclosure

		Average	Average
01/04/2022 to 30/06/2022	Unweighted	Weighted
In millions of U.S. Dollars	Amount	Amount
HIGH-QUALITY LIQUID ASSETS
1	Total eligible high-quality liquid assets (HQLA), of which	104,692.00	97,924.00
2	Eligible level 1 liquid assets	64,915.00	64,915.00
3	Eligible level 2A liquid assets	37,489.00	31,865.00
4	Eligible level 2B liquid assets	2,288.00	1,144.00
CASH OUTFLOW AMOUNTS
	Deposit outflow from retail customers and
5	counterparties, of which:	10,145.00	2,536.00
6	Stable retail deposit outflow	0.00	0.00
7	Other retail funding	0.00	0.00
8	Brokered deposit outflow	10,145.00	2,536.00
9	Unsecured wholesale funding outflow, of which:	218,403.00	86,806.00
10	Operational deposit outflow	172,618.00	43,014.00
11	Non-operational funding outflow	45,678.00	43,685.00
12	Unsecured debt outflow	107.00	107.00
13	Secured wholesale funding and asset exchange outflow	17,253.00	3,948.00
14	Additional outflow requirements, of which:	51,587.00	31,608.00
	Outflow related to derivative exposures and other
15	collateral requirements	15,756.00	15,459.00
	Outflow related to credit and liquidity facilities
	including unconsolidated structured transactions and
16	mortgage commitments	35,831.00	16,149.00
17	Other contractual funding obligation outflow	472.00	472.00
18	Other contingent funding obligations outflow	0.00	0.00
19	TOTAL CASH OUTFLOW	297,860.00	125,370.00
CASH INFLOW AMOUNTS
20	Secured lending and asset exchange cash inflow	30,733.00	13,588.00
21	Retail cash inflow	1.00	1.00
22	Unsecured wholesale cash inflow	11,094.00	10,881.00
23	Other cash inflows, of which:	8,464.00	8,464.00
24	Net derivative cash inflow	8,415.00	8,415.00
25	Securities cash inflow	49.00	49.00
26	Broker-dealer segregated account inflow	0.00	0.00
27	Other cash inflow	0.00	0.00
28	TOTAL CASH INFLOW	50,292.00	32,934.00
			Average
			Amount1
29	HQLA AMOUNT		97,925.00
	TOTAL NET CASH OUTFLOW AMOUNT
30	EXCLUDING THE MATURITY MISMATCH ADD-ON		92,436.00
31	MATURITY MISMATCH ADD-ON		232.00
32	TOTAL UNADJUSTED NET CASH OUTFLOW
	AMOUNT		92,668.00
33	OUTFLOW ADJUSTMENT PERCENTAGE		1.00
34	TOTAL ADJUSTED NET CASH OUTFLOW
	AMOUNT		92,668.00
35	LIQUIDITY COVERAGE RATIO (%)		106%

1 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 and the total inflow cap.

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