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STATE STREET CORPORATION

(STT)
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Delayed Nyse  -  04:04 2022-09-23 pm EDT
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State Street : Liquidity Coverage Ratio Public Disclosure

08/12/2022 | 10:25am EDT

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.

1

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.

2

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.

3

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).

4

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.

5

This is an excerpt of the original content. To continue reading it, access the original document here.

Disclaimer

State Street Corporation published this content on 12 August 2022 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 12 August 2022 14:24:01 UTC.


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Ronald Philip O'Hanley Chairman & Chief Executive Officer
Louis D. Maiuri President, COO & Head-Investment Services
Eric W. Aboaf Vice Chairman-Management Board & CFO
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