Regulatory and Capital Adequacy

12 Months Ended

Dec. 31, 2014

Banking and Thrift [Abstract]

Regulatory and Capital Adequacy

NOTE 12—REGULATORY AND CAPITAL ADEQUACY

Regulation and Capital Adequacy

Bank holding companies and national banks are subject to capital adequacy standards adopted by the Federal Reserve and the OCC, respectively. The capital adequacy standards set forth minimum risk-based and leverage capital requirements that are based on quantitative and qualitative measures of assets and off-balance sheet items. National banks, as insured depository institutions, are also subject to Prompt Corrective Action (“PCA”) capital regulations, which require the Federal Reserve, OCC and FDIC (collectively, the “Federal Banking Agencies”) to take PCA for banks that do not meet established minimum capital requirements.

In July 2013, the Federal Banking Agencies finalized a new capital rule that implements the Basel III capital accord (the “Final Basel III Capital Rules”) developed by the Basel Committee on Banking Supervision (“Basel Committee”) and certain Dodd-Frank Act capital provisions and updates the PCA capital requirements. Prior to being revised in the Final Basel III Capital Rules, the minimum risk-based capital requirements adopted by the Federal Banking Agencies followed the Basel I framework, originally promulgated pursuant to the Basel Committee’s Basel I accord, and the advanced approaches capital rules (“Advanced Approaches”), based upon the framework originally promulgated as a result of the Basel II accord. The Final Basel III Capital Rules amended both the Basel I and Advanced Approaches frameworks, establishing a new common equity Tier 1 capital requirement and setting higher minimum capital ratio requirements. The Company refers to the amended Basel I framework as the “Basel III Standardized Approach,” and the amended Advanced Approaches framework as the “Basel III Advanced Approaches.”

At the end of 2012, the Company met one of the two independent eligibility criteria set by banking regulators for becoming subject to the Advanced Approaches capital rules. As a result, the Company has undertaken a multi-year process of implementing the Advanced Approaches regime for calculating risk-weighted assets and regulatory capital levels. Certain provisions of the Final Basel III Capital Rules began to take effect on January 1, 2014 for Advanced Approaches banking organizations, including the Company.

As of January 1, 2014, the minimum risk-based and leverage capital requirements for Advanced Approaches banking organizations include a common equity Tier 1 capital ratio of at least 4.0%, a Tier 1 risk-based capital ratio of at least 5.5%, a total risk-based capital ratio of at least 8.0%, and a Tier 1 leverage capital ratio of at least 4.0%.

Prior to 2014, we also disclosed a Tier 1 common capital ratio for our bank holding company, which is a regulatory capital measure widely used by investors, analysts, rating agencies and bank regulatory agencies to assess the capital position of financial services companies. There was no mandated minimum or well-capitalized standard for the Tier 1 common capital ratio.

The following tableprovides a comparison of our regulatory capital amounts and ratios under the Federal Banking Agencies’ capital adequacy standards as of December 31, 2014 and 2013.

Table 12.1: Capital Ratios Under Basel I⁽¹⁾⁽²⁾

	December 31, 2014								December 31, 2013
(Dollars in millions)	Capital Amount		Capital Ratio		Minimum Capital Adequacy		Well- Capitalized		Capital Amount		Capital Ratio		Minimum Capital Adequacy		Well- Capitalized
Capital One Financial Corp:
Common equity Tier 1 capital(3)	$	29,534	12.46	%	4.00	%	N/A		N/A		N/A		N/A		N/A
Tier 1 common capital(4)	N/A		N/A		N/A		N/A		$	27,375	12.19	%	N/A		N/A
Tier 1 risk-based capital(5)	$	31,355	13.23	%	5.50	%	6.00	%	28,230		12.57		4.00	%	6.00	%
Total risk-based capital(6)	35,879		15.14		8.00		10.00		32,987		14.69		8.00		10.00
Tier 1 leverage(7)	31,355		10.77		4.00		N/A		28,230		10.06		4.00		N/A
Capital One Bank (USA), N.A.:
Common equity Tier 1 capital(3)	8,503		11.33		4.00		N/A		N/A		N/A		N/A		N/A
Tier 1 risk-based capital(5)	8,503		11.33		5.50		6.00	%	$	8,103	11.47	%	4.00	%	6.00	%
Total risk-based capital(6)	10,938		14.57		8.00		10.00		10,528		14.90		8.00		10.00
Tier 1 leverage(7)	8,503		9.64		4.00		5.00		8,103		10.21		4.00		5.00
Capital One, N.A.:
Common equity Tier 1 capital(3)	21,136		12.53		4.00		N/A		N/A		N/A		N/A		N/A
Tier 1 risk-based capital(5)	21,136		12.53		5.50		6.00	%	$	19,930	12.67	%	4.00	%	6.00	%
Total risk-based capital(6)	22,881		13.57		8.00		10.00		21,645		13.76		8.00		10.00
Tier 1 leverage(7)	21,136		8.90		4.00		5.00		19,930		8.96		4.00		5.00

__________

⁽¹⁾ As of January 1, 2014, we adopted the proportional amortization method of accounting for Investments in Qualified Affordable Housing Projects. See “Note 1—Summary of Significant Accounting Policies” for additional information. Prior periods have been recast to conform to this presentation.

⁽²⁾   Capital ratios are calculated based on the Basel III Standardized Approach framework, subject to applicable transition provisions, as of December 31, 2014 and are calculated based on the Basel I capital framework as of December 31, 2013. Capital ratios that are not applicable are denoted by “N/A.”

⁽³⁾   Common equity Tier 1 capital ratio is a regulatory capital measure under Basel III calculated based on common equity Tier 1 capital divided by risk-weighted assets.

⁽⁴⁾ Tier 1 common capital ratio is a regulatory capital measure under Basel I calculated based on Tier 1 common capital divided by Basel I risk-weighted assets.

⁽⁵⁾   Tier 1 risk-based capital ratio is a regulatory capital measure calculated based on Tier 1 capital divided by risk-weighted assets.

⁽⁶⁾   Total risk-based capital ratio is a regulatory capital measure calculated based on total risk-based capital divided by risk-weighted assets.

⁽⁷⁾   Tier 1 leverage ratio is a regulatory capital measure calculated based on Tier 1 capital divided by average assets, after certain adjustments.

Capital One Financial Corporation exceeded Federal Banking Agencies’ minimum capital requirements and the Banks exceeded minimum regulatory requirements and were “well-capitalized” under PCA requirements as of December 31, 2014 and 2013.

Regulatory restrictions exist that limit the ability of the Banks to transfer funds to our bank holding company. Funds available for dividend payments from COBNA and CONA were $1.6 billion and $281 million, respectively, as of December 31, 2014. Applicable provisions that may be contained in our borrowing agreements or the borrowing agreements of our subsidiaries may limit our subsidiaries’ ability to pay dividends to us or our ability to pay dividends to our stockholders. There can be no assurance that we will declare and pay any dividends.