Regulatory Requirements and Matters

12 Months Ended

Dec. 31, 2017

Banking and Thrift [Abstract]

Regulatory Requirements and Matters

Regulatory Requirements and Matters

Capital Adequacy — The Company and the Bank are subject to regulatory capital adequacy requirements administered by the federal banking agencies. The Bank is a member bank of the Federal Reserve System and the Federal Reserve Bank is the Bank’s primary regulator. Effective January 1, 2015, the Company and the Bank are required to comply with the Basel III Capital Rules adopted by the Federal Reserve Bank. The capital requirements under the Basel III framework, among other things, prescribed a new standardized approach for determining risk-weighted assets used in calculating capital ratios, increased minimum required capital ratios, and introduced a minimum Common Equity Tier 1 (“CET1”) capital ratio to ensure that banking organizations hold sufficient high quality regulatory capital that is available to absorb losses on a going-concern basis. The Basel III Capital Rule requires that banking organizations maintain a minimum CET1 capital ratio of 4.5%, a Tier 1 capital ratio of 6.0%, and a total capital ratio of 8.0% to be considered adequately capitalized. Failure to meet minimum capital requirements can result in certain mandatory actions and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company’s Consolidated Financial Statements.

The Federal Deposit Insurance Corporation Improvement Act of 1991 requires that the federal regulatory agencies adopt regulations defining capital categories for banks: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized and critically undercapitalized. Consistent with the Basel III Capital Rules, the capital categories were augmented by including the CET1 capital measure, and revised risk-based capital measures to reflect the rule changes to the minimum risk-based capital ratios.

As of December 31, 2017 and 2016, the Company and the Bank were both categorized as well capitalized based on applicable U.S. regulatory capital ratio requirements in accordance with Basel III standardized approaches, as set forth in the table below. The Company believes that no changes in conditions or events have occurred since December 31, 2017, which would result in changes that would cause the Company or the Bank to fall below the well capitalized level. The following table presents the regulatory capital information of the Company and the Bank as of December 31, 2017 and 2016:

	Basel III
	December 31, 2017								December 31, 2016
($ in thousands)	Actual				Minimum Requirement		Well Capitalized Requirement		Actual				Minimum Requirement		Well Capitalized Requirement
	Amount		Ratio		Ratio		Ratio		Amount		Ratio		Ratio		Ratio
Total capital (to risk-weighted assets)
Company	$	3,838,516	12.9	%	8.0	%	10.0	%	$	3,400,642	12.4	%	8.0	%	10.0	%
East West Bank	$	3,679,261	12.4	%	8.0	%	10.0	%	$	3,371,885	12.3	%	8.0	%	10.0	%
Tier 1 capital (to risk-weighted assets)
Company	$	3,390,070	11.4	%	6.0	%	8.0	%	$	2,976,002	10.9	%	6.0	%	8.0	%
East West Bank	$	3,378,815	11.4	%	6.0	%	8.0	%	$	3,095,245	11.3	%	6.0	%	8.0	%
CET1 capital(to risk-weighted assets)
Company	$	3,390,070	11.4	%	4.5	%	6.5	%	$	2,976,002	10.9	%	4.5	%	6.5	%
East West Bank	$	3,378,815	11.4	%	4.5	%	6.5	%	$	3,095,245	11.3	%	4.5	%	6.5	%
Tier 1 leverage capital (to adjusted average assets)
Company	$	3,390,070	9.2	%	4.0	%	5.0	%	$	2,976,002	8.7	%	4.0	%	5.0	%
East West Bank	$	3,378,815	9.2	%	4.0	%	5.0	%	$	3,095,245	9.1	%	4.0	%	5.0	%
Risk-weighted assets
Company	$	29,669,251	N/A		N/A		N/A		$	27,357,753	N/A		N/A		N/A
East West Bank	$	29,643,711	N/A		N/A		N/A		$	27,310,540	N/A		N/A		N/A
Adjusted quarterly average total assets (1)
Company	$	37,307,975	N/A		N/A		N/A		$	34,209,827	N/A		N/A		N/A
East West Bank	$	37,283,273	N/A		N/A		N/A		$	34,163,667	N/A		N/A		N/A

(1) Reflects adjusted average total assets for the years ended December 31, 2017 and 2016.

N/A — Not applicable.

Reserve Requirement — The Bank is required to maintain a percentage of its deposits as reserves at the Federal Reserve Bank of San Francisco (the “FRB”). The daily average reserve requirement was approximately $699.4 million and $503.8 million as of December 31, 2017 and 2016, respectively.

Regulatory Matters — The Bank entered into a Written Agreement, dated November 9, 2015, with the Federal Reserve Bank of San Francisco (the “Written Agreement”), to correct less than satisfactory Bank Secrecy Act (“BSA”) and Anti-Money Laundering (“AML”) programs detailed in a joint examination by the FRB and the California Department of Business Oversight (“DBO”). The Bank also entered into a related MOU with the DBO in 2015. The Written Agreement, among other things, requires the Bank to enhance the compliance programs related to the BSA and AML and Office of Foreign Assets Control (“OFAC”) laws, rules and regulations and retain an independent firm to conduct a review of the account and transaction activity covering a six-month period to determine whether any suspicious activity was properly identified and reported in accordance with applicable regulatory requirements.

The Company believes that it is making progress in executing the compliance plans and programs required by the Written Agreement and MOU, although there can be no assurances that our plans and progress will be found to be satisfactory by our regulators. To date, the Company has added significant resources to comply with the Written Agreement and MOU, and to address any additional findings or recommendations by the regulators.

If additional compliance issues are identified or if the regulators determine that the Bank has not satisfactorily complied with the terms of the Written Agreement, the regulators could take further actions with respect to the Bank and, if such further actions were taken, such actions could have a material adverse effect on the Bank. The operating and other conditions in the BSA and AML program and the auditing and oversight of the program that led to the Written Agreement and MOU could also lead to an increased risk of being subject to additional actions by the FRB and DBO, an increased risk of future examinations that may downgrade the regulatory ratings of the Bank, and an increased risk investigations by other government agencies may result in fines, penalties, increased expenses or restrictions on operations.