11.Regulatory Requirements

CSC is a savings and loan holding company and Schwab Bank, CSC’s depository institution subsidiary, is a federal savings bank. CSC is subject to supervision and regulation by the Board of Governors of the Federal Reserve System (the Federal Reserve). Schwab Bank is subject to supervision and regulation by the Office of the Comptroller of the Currency (the OCC), as its primary regulator, the Federal Deposit Insurance Corporation, as its deposit insurer, and the Consumer Financial Protection Bureau. CSC is required to serve as a source of strength for Schwab Bank. Prior to January 1, 2015, CSC, as a savings and loan holding company, was not subject to certain statutory capital requirements. Beginning on January 1, 2015, CSC is subject to new capital requirements set by the Federal Reserve.

Schwab Bank is subject to regulation and supervision and to various requirements and restrictions under federal and state laws, including regulatory capital guidelines. Among other things, these requirements also restrict and govern the terms of affiliate transactions, such as extensions of credit and repayment of loans between Schwab Bank and CSC or CSC’s other subsidiaries. In addition, Schwab Bank is required to provide notice to and may be required to obtain approval of the OCC and the Federal Reserve to declare dividends to CSC. The federal banking agencies have broad powers to enforce these regulations, including the power to terminate deposit insurance, impose substantial fines and other civil and criminal penalties, and appoint a conservator or receiver. Under the Federal Deposit Insurance Act, Schwab Bank could be subject to restrictive actions if it were to fall within one of the lowest three of five capital categories. CSC and Schwab Bank are required to maintain minimum capital levels as specified in federal banking laws and regulations. Failure to meet the minimum levels could result in certain mandatory and possibly additional discretionary actions by the regulators that, if undertaken, could have a direct material effect on CSC and Schwab Bank. At March 31, 2015, CSC and Schwab Bank met the capital level requirements.

The new regulatory capital and ratios for CSC and Schwab Bank at March 31, 2015 are as follows:


					Minimum to be				Minimum Capital
	Actual				Well Capitalized				Requirement
	Amount		Ratio		Amount		Ratio		Amount		Ratio
CSC
Common Equity Tier 1 Risk-Based Capital	$	9,611	14.6	%		N/A			$	2,960	4.5	%
Tier 1 Risk-Based Capital	$	10,484	15.9	%		N/A			$	3,947	6.0	%
Total Risk-Based Capital	$	10,523	16.0	%		N/A			$	5,262	8.0	%
Tier 1 Leverage	$	10,484	6.8	%		N/A			$	6,138	4.0	%
Schwab Bank
Common Equity Tier 1 Risk-Based Capital	$	8,099	17.9	%	$	2,939	6.5	%	$	2,035	4.5	%
Tier 1 Risk-Based Capital	$	8,099	17.9	%	$	3,617	8.0	%	$	2,713	6.0	%
Total Risk-Based Capital	$	8,138	18.0	%	$	4,522	10.0	%	$	3,617	8.0	%
Tier 1 Leverage	$	8,099	7.1	%	$	5,728	5.0	%	$	4,583	4.0	%

N/A Not applicable.

Based on its regulatory capital ratios at March 31, 2015, Schwab Bank is considered well capitalized (the highest category) pursuant to banking regulatory guidelines. There are no conditions or events since March 31, 2015, that management believes have changed Schwab Bank’s capital category.

CSC’s principal U.S. broker-dealers are Schwab and optionsXpress, Inc. Schwab and optionsXpress, Inc. are both subject to Rule 15c3-1 under the Securities Exchange Act of 1934 (the Uniform Net Capital Rule). Schwab and optionsXpress, Inc. compute net capital under the alternative method permitted by the Uniform Net Capital Rule. This method requires the maintenance of minimum net capital, as defined, of the greater of 2% of aggregate debit balances arising from client transactions or a minimum dollar requirement ($250,000), which is based on the type of business conducted by the broker-dealer. Under the alternative method, a broker-dealer may not repay subordinated borrowings, pay cash dividends, or make any unsecured advances or loans to its parent company or employees if such payment would result in a net capital amount of less than 5% of aggregate debit balances or less than 120% of its minimum dollar requirement.

optionsXpress, Inc. is also subject to Commodity Futures Trading Commission Regulation 1.17 (Reg. 1.17) under the Commodity Exchange Act, which also requires the maintenance of minimum net capital. optionsXpress, Inc., as a futures commission merchant, is required to maintain minimum net capital equal to the greater of its net capital requirement under Reg. 1.17 ($1 million), or the sum of 8% of the total risk margin requirements for all positions carried in client accounts and 8% of the total risk margin requirements for all positions carried in non-client accounts (as defined in Reg. 1.17).

Net capital and net capital requirements for Schwab and optionsXpress, Inc. at March 31, 2015 are as follows:


													Net Capital			Net Capital
				% of			Minimum			2% of			in Excess of			in Excess of 5%
				Aggregate			Net Capital			Aggregate			Required			of Aggregate
	Net Capital			Debit Balances			Required			Debit Balances			Net Capital			Debit Balances
Schwab		$	1,581		10	%		$	0.250		$	331		$	1,250		$	753
optionsXpress, Inc.		$	127		35	%		$	1		$	7		$	120		$	109