Resolution Plan
PUBLIC SECTION
July 1, 2015
. Table of Contents
Introduction ..................................................................................................................................................................... 3
Index of Defined Terms ................................................................................................................................................. 7
SECTION I: OVERVIEW OF BNY MELLON ............................................................................................................................10
A. Material Entities ....................................................................................................................................................... 12
B. Description of Core Business Lines ...................................................................................................................... 28
SECTION II: DESCRIPTION OF RESOLUTION STRATEGY .......................................................................................................30
A. Resolution Strategy for Material Entities .............................................................................................................. 34
B.
Resolution Strategy for Core Business Lines ...................................................................................................... 39
C. Resulting Organization upon Completion of Resolution Process ..................................................................... 40
SECTION III: BNY MELLON’S SIGNIFICANT EFFORTS TO IMPROVE ITS RESOLVABILITY.........................................................42
SECTION IV: OTHER BACKGROUND INFORMATION ..............................................................................................................51
A. Summary of Financial Information Regarding Assets, Liabilities, Capital and Major Funding Sources ..... 52
.
B.
Description of Derivative and Hedging Activities ................................................................................................ 58
C. Memberships in Material Payment, Clearing and Settlement Systems ........................................................... 60
D. Description of Foreign Operations ........................................................................................................................ 62
E.
Material Supervisory Authorities ........................................................................................................................... 63
.
F. Principal Officers ...................................................................................................................................................... 65
G. Resolution Planning Corporate Governance Structure and Processes .......................................................... 66
H.
Description of Material Management Information Systems ............................................................................... 68
2
. Public Section
Introduction
BNY Mellon is proud of the vital role that it plays in the global financial markets, enabling the
markets to efficiently allocate capital by providing an infrastructure that facilitates the movement
of cash and securities through these markets. As a global systemically important financial
institution, we understand the critical function we perform for the marketplace, and embrace our
leadership responsibility in terms of capital strength, liquidity risk management and integrity. In
particular, we recognize the pivotal role that we play in the financial system with respect to
payment, clearing and settlement activities, and that it is incumbent on us to ensure that the
services we provide continue in the event that we encounter stress or, worse, fail.
BNY Mellon remains confident in its ability to withstand the impact of a wide range of severe
stress scenarios while continuing to provide services to clients and markets. BNY Mellon’s
business model is fee-based, with fees representing more than 80% of our revenues.
The vast
majority of these fees are recurring. This helps us maintain a strong, highly liquid balance sheet
with a solid capital position and strong credit ratings. Our continued investment in and focus on
compliance, risk management and control functions help us protect our strong capital position
and enhance our status as a trusted counterparty.
BNY Mellon’s credit ratings, capital ratios
and liquidity position are each among the highest in the industry. Our fee-driven businesses
create substantial liquidity, better preparing us to withstand financial stress. Equally significant:
ï‚·
We do not provide traditional banking services to retail clients, other than high net worth
clients
ï‚·
We do not lend to consumers in scale or operate consumer branches
ï‚·
We do not have material stand-alone market-making activities
ï‚·
Loans represent only 15% of our total assets
ï‚·
Our deposit liabilities are largely tied to our operational services, and this stable funding
is generally invested in highly liquid assets
ï‚·
Our low VaR FX trading business is comparatively small and principally conducted for
clients
These characteristics distinguish us from other U.S.
G-SIBs. We believe we have an inherently
safer business model that is less likely to lead to failure. Moreover, we do not believe there is
any measureable risk that losses in our non-bank businesses would create an insolvency risk to
our insured depository institutions.
Our business model, structure and size (we are
Introduction
3
. approximately ¼ of the average size of the other U.S. G-SIBs)1 provide us the flexibility to be
resolved using traditional methods that have proven to be effective.
BNY Mellon is confident that it is resolvable, in large part as a result of its relatively
straightforward corporate structure and the high level of liquidity that it maintains in its primary
operating entities. Each “material entity” is structured to maintain sufficient liquidity to continue
to operate through resolution—without disrupting the provision of critical services or requiring
government support—under our resolution strategy. In addition, several other factors contribute
to the resolvability of BNY Mellon, including:
ï‚·
The bulk of our “core business lines” and “critical operations” are conducted in The Bank
of New York Mellon, which would allow the FDIC to use its traditional, well-established
resolution powers in receivership under the Federal Deposit Insurance Act to facilitate
the orderly disposition or wind down of The Bank of New York Mellon
ï‚·
The core business lines and critical operations conducted through non-bank entities of
BNY Mellon are largely self-contained within separate legal entities, allowing for their
rapid divestiture or orderly wind-down under the U.S.
Bankruptcy Code or other
applicable insolvency regime
ï‚·
Our highly liquid balance sheet would allow us to withstand a deposit run-off
Notwithstanding all of these factors that make BNY Mellon highly resilient and resolvable, BNY
Mellon has taken key additional steps to further enhance its resiliency and resolvability. As part
of the Tri-Party Repo Infrastructure Reform, BNY Mellon has worked with several stakeholders
to “practically eliminate” the intraday credit risk within the U.S. tri-party repo market.
We have
also made significant enhancements to our ability to monitor and measure intraday risks,
including the development of a robust set of new policies that guide how we monitor and
manage current and anticipated intraday credit risks and margin requirements for each of our triparty clients. In addition, we have enhanced our infrastructure, processes, and other
capabilities associated with our capital adequacy and planning processes and liquidity risk
management practices under different financial stress scenarios, including through the CCAR
process and LCR requirements.
Furthermore, in addition to complying with the broad range of heightened regulatory
requirements taking effect across the industry, BNY Mellon has commenced new initiatives and
has completed or made significant progress towards the completion of several important
programs that will reduce the likelihood that BNY Mellon will fail and reduce the likelihood of
systemic disruption if it does fail. Key elements of our progress to enhance resolvability are
drawn together through the establishment of our comprehensive, enterprise-wide resolvability
framework, which has been designed to embed strategic resolution planning considerations into
all of our business-as-usual operations.
Through our enhanced resolvability framework, we
have made fully funded commitments to over thirty additional initiatives over the next two years.
1
Based on total assets as of December 31, 2014.
Introduction
4
. While the costs of these initiatives are significant, BNY Mellon embraces recovery and
resolution planning because it makes us a better, stronger and safer company: when we riskmanage ourselves extraordinarily well; when we have the data available at our fingertips to
make informed business decisions; when we position our capital and liquidity to withstand
shocks; and when we plan for a potential failure, we make BNY Mellon more resilient and more
resolvable, and help protect the safety and soundness of the global financial system.
This Public Section is comprised of four main sections. Section I provides an overview of BNY
Mellon, including a description of our material entities and core business lines. Section II
provides a description of the resolution strategy for BNY Mellon and each of its material entities
and core business lines. Section III describes the significant efforts that BNY Mellon is taking to
improve its ability to be resolved in an orderly way.
Finally, Section IV contains other
background information about BNY Mellon that is important for resolution planning.
***
References to “our,” “we,” “us,” and “BNY Mellon,” refer to The Bank of New York Mellon
Corporation and its consolidated subsidiaries, while references to the “Parent” refer solely to
The Bank of New York Mellon Corporation, the parent company.
Section 165(d) of the Dodd-Frank Act and implementing regulations issued by the FDIC and the
Federal Reserve require bank holding companies with assets of $50 billion or more, such as the
Parent, to submit periodically to the Federal Reserve and the FDIC a plan for resolution in the
event of material distress or failure of the bank holding company. In addition, the FDIC requires
insured depository institutions with assets of $50 billion or more, such as The Bank of New York
Mellon, to submit periodically to the FDIC a plan for resolution in the event of failure under the
Federal Deposit Insurance Act. Accordingly, we have developed our Resolution Plan in
conformity with both rules, including this Public Section which contains the information required
by the regulators to be made available publicly.
The Resolution Plan sets out a detailed description of the resolution options for the Parent and
each of its material entities, including The Bank of New York Mellon, with a focus on ensuring
their orderly resolution in a manner that preserves value, avoids systemic risk, and ensures
continuity of services, including providing depositors with timely access to their insured deposits.
The Resolution Plan is based on a series of hypothetical scenarios and assumptions about
future events and circumstances.
Accordingly, many of the statements and assessments in this
Public Section constitute “forward-looking statements” within the meaning of the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995. Words such as “estimate,”
“forecast,” “project,” “anticipate,” “target,” “expect,” “intend,” “believe,” “plan,” “goal,” “could,”
“should,” “may,” “will,” “strategy,” “opportunities,” “trends” and words of similar meaning, signify
forward-looking statements, as well as statements that relate to our future plans, objectives and
strategies and to the objectives and effectiveness of our risk management, capital and liquidity
policies. These statements are based on the current beliefs and expectations of BNY Mellon’s
management and are subject to significant risks and uncertainties that are subject to change
Introduction
5
.
based on various important factors (some of which are beyond BNY Mellon’s control). Actual
results may differ materially from those set forth in the forward-looking statements.
The Resolution Plan is not binding on a bankruptcy court, our regulators or any other resolution
authority, and in the event of the resolution of BNY Mellon, the strategies implemented by BNY
Mellon, our regulators or any other resolution authority could differ, possibly materially, from the
strategies we have described. In addition, our expectations and projections regarding the
implementation of our resolution strategies are based on scenarios and assumptions that are
hypothetical and may not reflect events to which BNY Mellon is or may become subject. As a
result, the outcomes of our resolution strategies could differ, possibly materially, from those we
have described.
We have also included information about projects we have undertaken, or are considering, in
connection with resolution planning.
Many of these projects are in process or under
development. The statements with respect to these projects and their impact and effectiveness
are forward-looking statements, based on our current expectations regarding our ability to
complete and effect those projects and any actions that third parties must take, or refrain from
taking, to permit us to complete those projects. As a result, the timing of those projects may
change, possibly materially, from what is currently expected.
All forward-looking statements
speak only as of the date on which such statements are made and BNY Mellon does not
undertake to update the forward-looking statements to reflect the impact of circumstances or
events that may arise after the date of the forward-looking statements.
The information contained in the Resolution Plan, including the designation of “material entities”
and “core business lines”, has been prepared in accordance with applicable regulatory
requirements and guidance. Differences in the presentation of information concerning our
businesses and operations contained in this Public Section, relative to how BNY Mellon
presents such information for other purposes, is solely due to our efforts to comply with the rules
governing the submission of resolution plans and does not reflect changes to our organizational
structure, business practices or strategy.
Introduction
6
. Index of Defined Terms
2014 Annual Report
BNY Mellon’s 2014 Annual Report
2014 Form 10-K
BNY Mellon’s Annual Report on Form 10-K for
the year ended December 31, 2014 (which
includes portions of the 2014 Annual Report)
‘34 Act Report(s)
BNY Mellon’s Annual Report on Form 10-K,
Quarterly Reports on Form 10-Q and Current
Reports on Form 8-K
‘40 Act
Investment Company Act of 1940
Agent Banks
Nostro banks and sub-custodians
BNY Investment Management Services
BNY Investment Management Services LLC
BNY Mellon
The Bank of New York Mellon Corporation and
its consolidated subsidiaries
BNY Mellon International Operations
India
BNY Mellon International Operations (India)
Private Limited
BNY Mellon Investment Servicing
BNY Mellon Investment Servicing (US) Inc.
BNY Mellon Trust
The Bank of New York Mellon Trust Company,
National Association
Brussels Branch
The Bank of New York Mellon – Brussels
Branch
CCAR
Comprehensive Capital Analysis and Review
CFTC
Commodity Futures Trading Commission
Dodd-Frank Act
Dodd-Frank Wall Street Reform and Consumer
Protection Act
Dreyfus
The Dreyfus Corporation
ECB
European Central Bank
EMEA
Europe, Middle East and Africa
FCA
Financial Conduct Authority
FDIC
Federal Deposit Insurance Corporation
Index of Defined Terms
7
. Federal Reserve
Board of Governors of the Federal Reserve
System
FINRA
Financial Industry Regulatory Authority
FFIEC
Federal Financial Institutions Examination
Council
FMUs
Financial market utilities
G-SIBs
Global systemically important banks
HQLA
High-Quality Liquid Assets
IDI Plan(s)
Resolution plans required for insured depository
institutions with assets of $50 billion or more
iNautix
iNautix Technologies India Private Limited
LCR
Liquidity coverage ratio
LIBOR
London Interbank Offered Rate
London Branch
The Bank of New York Mellon – London Branch
MBSC
MBSC Securities Corporation
MIS
Management Information Systems
NBB
National Bank of Belgium
NFA
National Futures Association
ORRP
Office of Recovery and Resolution Planning
Parent
The Bank of New York Mellon Corporation
Pershing
Pershing LLC
PRA
Prudential Regulation Authority
Resolution Plan
BNY Mellon’s Resolution Plan
SEC
Securities and Exchange Commission
SIPA
Securities Investor Protection Act
SIPC
Securities Investor Protection Corporation
Title I Plan(s)
Resolution plans required under Section 165(d)
of the Dodd-Frank Act
Index of Defined Terms
8
. TPC
Tennessee Processing Center LLC
TSG
Technology Services Group, Inc.
VaR
Value-at-risk
Index of Defined Terms
9
. SECTION I: OVERVIEW OF BNY MELLON
BNY Mellon is a global investments company dedicated to helping its clients manage and
service their financial assets throughout the investment lifecycle. Whether providing financial
services for institutions, corporations or individual investors, BNY Mellon delivers informed
investment management and investment services in 35 countries and more than 100 markets.
The Parent is a Delaware corporation and a bank holding company and has its executive offices
in New York, New York. With its predecessors, BNY Mellon has been in business since 1784.
We divide our businesses into two principal segments, Investment Services and Investment
Management.
Our Investment Services business provides global custody and related services, government
clearing, global collateral services, corporate trust and depositary receipt and clearing services,
as well as global payment/working capital solutions to global financial institutional clients. Our
clients include corporations, public funds and government agencies, foundations and
endowments; global financial institutions including banks, broker-dealers, asset managers,
insurance companies and central banks; financial intermediaries and independent registered
investment advisors; and private fund managers.
We help our clients service their financial
assets through a network of offices and operations centers in 35 countries across six continents.
Our Investment Management business comprises the seventh largest global asset manager and
the seventh largest U.S. wealth manager. It encompasses 13 affiliated investment management
boutiques that deliver a diversified portfolio of focused investment strategies over our
distribution network to institutional and retail clients across North America, EMEA and AsiaPacific.
Our multi-boutique model is designed to deliver the best elements of investment focus
and infrastructure scale to benefit clients. The investment management boutiques offer a broad
range of equity, fixed income, alternative/overlay and cash products. BNY Mellon Wealth
Management offers private banking, discretionary portfolio management and tax, wealth and
estate planning services to high and ultra-high net worth individuals, families and family offices
as well as to charitable gift programs, endowments and foundations.
Section I.A contains a description of our material entities and Section I.B contains a description
of our core business lines.
Additional information related to BNY Mellon is contained in BNY Mellon’s reports filed with the
SEC, including our ‘34 Act Reports.
These ‘34 Act Reports can be viewed, as they become
available, on the SEC’s website at www.sec.gov and at www.bnymellon.com. Information
contained in ‘34 Act Reports that BNY Mellon makes with the SEC subsequent to the date of
filings referenced in this document may modify, update and supersede such information
contained in this document.
Unless otherwise indicated, the information in this document concerning BNY Mellon’s assets,
liabilities, capital and funding sources contained in Section IV.A below has been extracted from
the 2014 Annual Report. Such information speaks only as of the date of the 2014 Annual
Section I: Overview of BNY Mellon
10
.
Report. Unless otherwise indicated, all other information contained in Section IV is as set forth
in our quarterly report on Form 10-Q for the period ended March 31, 2015.
Section I: Overview of BNY Mellon
11
. A. Material Entities
The entities described below (including the Parent) are deemed “material entities”2 for purposes
of the Resolution Plan. Figure 1 below is a pictorial representation of the organizational
structure of our material entities.
Figure 1: High Level Organizational Structure of Material Entities
The Bank of New
York Mellon
Corporation
DE
The Dreyfus
Corporation
Pershing LLC
DE
NY
BNY Mellon Int’l
Operations (India)
Private Limited
India
MBSC Securities
Corporation
The Bank of New
York Mellon Trust
Company, N.A.
US
London
Branch
The Bank of New
York Mellon
NY
Brussels
Branch
NY
The Bank of New
York Mellon SA/NV
Belgium
BNY Mellon
Investment
Servicing (US) Inc.
MA
Legend:
Depicts indirect subsidiary
iNautix
Technologies India
Private Limited
India
BNY Investment
Management
Services LLC
DE
Technology
Services Group, Inc.
NY
Tennessee
Processing Center
LLC
DE
2
For purposes of Title I Plans, a “material entity” is defined as: “…a subsidiary or foreign office of the covered
company that is significant to the activities of a critical operation or core business line.” 12 CFR Part 243 (Federal
Reserve) or 12 CFR Part 381 (FDIC). For purposes of IDI Plans, a “material entity” is defined as: “…a company that
is significant to the activities of a critical service or core business line.” 12 CFR Part 360 (FDIC).
Section I.A: Overview of BNY Mellon / Material Entities
12
.
The Parent
The Bank of New
York Mellon
Corporation
DE
The Bank of New York Mellon Corporation
The Dreyfus
Corporation
Pershing LLC
NY
DE
BNY Mellon Int’l
Operations (India)
Private Limited
India
MBSC Securities
Corporation
The Bank of New
York Mellon Trust
Company, N.A.
US
London
Branch
The Bank of New
York Mellon
NY
Brussels
Branch
NY
The Bank of New
York Mellon SA/NV
Belgium
BNY Mellon
Investment
Servicing (US) Inc.
MA
iNautix
Technologies India
Private Limited
India
BNY Investment
Management
Services LLC
DE
Technology
Services Group, Inc.
NY
Tennessee
Processing Center
LLC
DE
The Parent, a Delaware corporation headquartered in New York, New York, is registered as a
bank holding company and a financial holding company under the Bank Holding Company Act
of 1956, as amended by the Gramm-Leach-Bliley Act and by the Dodd-Frank Act. The Parent is
subject to supervision by the Federal Reserve.
On a standalone basis, the majority of the Parent’s assets are investments in and advances to
subsidiaries and associated companies. The Parent’s liabilities primarily consist of borrowed
funds with a remaining maturity of more than one year, affiliate borrowings and other liabilities
which are primarily accrued taxes and other expenses. For information regarding the
consolidated balance sheet of Parent, please see Section IV.A below.
The Parent had $37.4
billion in shareholder’s equity as of December 31, 2014. For the 12 months ended December
31, 2014, BNY Mellon had total revenue of $15.7 billion and net income of $2.7 billion.
For its structural funding and ongoing liquidity needs, the Parent’s major sources of liquidity
include cash on hand, dividends from subsidiaries and access to debt and equity markets. The
Parent’s major use of funds are payment of dividends, repurchases of common stock, principal
and interest payments on borrowings and additional investments in and loans to its subsidiaries.
BNY Mellon’s material entities generally do not have significant operational dependencies on
the Parent.
However, the Parent serves as a source of funding for the material entities, raising
funds in the public markets and providing those funds to the material entities in the form of loans
and equity.
Additional information related to The Bank of New York Mellon Corporation is contained in BNY
Mellon’s ’34 Act Reports, including the 2014 Form 10-K, the Quarterly Reports on Form 10-Q
and the Current Reports on Form 8-K, available at www.bnymellon.com.
Section I.A: Overview of BNY Mellon / Material Entities
13
. Banks, Broker-Dealers and Other Operating Entities
The Bank of New
York Mellon
Corporation
DE
The Dreyfus
Corporation
The Bank of New York Mellon
Pershing LLC
NY
DE
BNY Mellon Int’l
Operations (India)
Private Limited
India
MBSC Securities
Corporation
The Bank of New
York Mellon Trust
Company, N.A.
US
London
Branch
The Bank of New
York Mellon
NY
Brussels
Branch
NY
The Bank of New
York Mellon SA/NV
Belgium
BNY Mellon
Investment
Servicing (US) Inc.
MA
iNautix
Technologies India
Private Limited
India
BNY Investment
Management
Services LLC
DE
Technology
Services Group, Inc.
NY
Tennessee
Processing Center
LLC
DE
The Bank of New York Mellon, which is BNY Mellon’s largest banking subsidiary, is a New York
state chartered bank and a member of the Federal Reserve System and is subject to regulation,
supervision and examination by the Federal Reserve, the FDIC and the New York State
Department of Financial Services. The Bank of New York Mellon has 14 foreign branches and
various subsidiaries and houses our Investment Services businesses, including asset servicing,
issuer services, broker-dealer and advisor services as well as the bank-advised business of
asset management.
The Bank of New York Mellon’s material assets consist of cash, interest bearing deposits,
available-for-sale/held-to-maturity securities and loans. Its primary liabilities are deposits. For
more information regarding the balance sheet of The Bank of New York Mellon, please see
Section IV.A below.
The Bank of New York Mellon had $20 billion in total bank equity capital as
of December 31, 2014. For the 12 months ended December 31, 2014, The Bank of New York
Mellon had total interest income of $2.6 billion, total noninterest income of $7.7 billion, and net
income of $1.4 billion. The Bank of New York Mellon is largely self-funded through deposits
received from its clients.
BNY Mellon’s material entities have operational dependencies on The Bank of New York
Mellon, including the provision by The Bank of New York Mellon of (i) services to Pershing, such
as securities lending and clearance and settlement of U.S.
Government securities; and (ii) asset
servicing and corporate trust services to clients of BNY Mellon Trust. The Bank of New York
Mellon has operational dependencies on BNY Mellon’s other material entities, including the
Brussels Branch, The Bank of New York Mellon SA/NV, BNY Mellon Trust and Dreyfus, as
more fully described in the applicable material entity descriptions provided below. The Bank of
New York Mellon also relies on information technology infrastructure and support through TSG,
TPC and iNautix, as well as operational support through BNY Mellon International Operations
India.
Additional information related to the financial condition of The Bank of New York Mellon is
contained in its Report of Condition and Income (Call Report) available at the FFIEC website at
www.ffiec.gov.
Section I.A: Overview of BNY Mellon / Material Entities
14
.
Banks, Broker-Dealers and Other Operating Entities
The Bank of New
York Mellon
Corporation
DE
The Dreyfus
Corporation
The Bank of New York Mellon – Brussels Branch
Pershing LLC
NY
DE
BNY Mellon Int’l
Operations (India)
Private Limited
India
MBSC Securities
Corporation
The Bank of New
York Mellon Trust
Company, N.A.
US
The Bank of New
York Mellon
NY
London
Branch
Brussels
Branch
NY
The Bank of New
York Mellon SA/NV
Belgium
BNY Mellon
Investment
Servicing (US) Inc.
MA
iNautix
Technologies India
Private Limited
India
BNY Investment
Management
Services LLC
DE
Technology
Services Group, Inc.
NY
Tennessee
Processing Center
LLC
DE
The Brussels Branch is a branch of The Bank of New York Mellon that provides asset servicing
and global clearing primarily for non-euro zone clients. The Brussels Branch is subject to
regulation by the NBB as well as the Federal Reserve.
The Brussels Branch’s primary assets are amounts due from affiliates which exist as a result of
movements of excess deposits from the Brussels Branch to The Bank of New York Mellon
SA/NV and other branches of The Bank of New York Mellon. Generally, excess deposits of the
Brussels Branch are invested with The Bank of New York Mellon SA/NV and other branches of
The Bank of New York Mellon in demand deposit accounts. Material liabilities of the Brussels
Branch consist primarily of deposits received from its asset servicing clients.
As a branch of
The Bank of New York Mellon, the Brussels Branch has no independent equity capital. The
Brussels Branch generates sufficient revenue to cover its expenses and it has no intraday
funding requirements.
BNY Mellon’s material entities have operational dependencies on the Brussels Branch,
including (i) the provision of asset servicing, including cash services, for many non-European
clients of The Bank of New York Mellon and (ii) the provision by the Brussels Branch of cash
accounts and operational credit support to the London Branch’s clients. The Brussels Branch
has operational dependencies on BNY Mellon’s other material entities, including The Bank of
New York Mellon SA/NV, as more fully described in The Bank of New York Mellon SA/NV
material entity description provided below.
The Brussels Branch also relies on information
technology infrastructure and support through TSG, TPC and iNautix, as well as operational
support through BNY Mellon International Operations India.
Section I.A: Overview of BNY Mellon / Material Entities
15
. Banks, Broker-Dealers and Other Operating Entities
The Bank of New
York Mellon
Corporation
DE
The Dreyfus
Corporation
The Bank of New York Mellon – London Branch
Pershing LLC
NY
DE
BNY Mellon Int’l
Operations (India)
Private Limited
India
MBSC Securities
Corporation
The Bank of New
York Mellon Trust
Company, N.A.
US
London
Branch
The Bank of New
York Mellon
NY
Brussels
Branch
NY
The Bank of New
York Mellon SA/NV
Belgium
BNY Mellon
Investment
Servicing (US) Inc.
MA
iNautix
Technologies India
Private Limited
India
BNY Investment
Management
Services LLC
DE
Technology
Services Group, Inc.
NY
Tennessee
Processing Center
LLC
DE
The London Branch is a branch of The Bank of New York Mellon that extended the
geographical reach of The Bank of New York Mellon by providing services to its local and
international client base. The London Branch is subject to regulation by the PRA and FCA, as
well as the Federal Reserve. The London Branch is engaged in the corporate trust, asset
servicing, global securities operations and securities lending businesses.
The London Branch’s primary assets are interest bearing placements with banks and balances
due from affiliates. Material liabilities of the London Branch primarily consist of deposits
associated with its asset servicing, global securities operations and corporate trust activities.
The London Branch also has a material due to affiliates balance that reflects the London
Branch’s role in facilitating the flow of funds throughout BNY Mellon, acting as the EMEA
regional hub for Sterling liquidity.
As a branch of The Bank of New York Mellon, the London
Branch has no independent equity capital.
The London Branch has no intraday funding requirements. The London Branch’s excess funds
are maintained on deposit with The Bank of New York Mellon for corporate treasury centralized
management, with the amounts being repayable on demand should funds be required at short
notice. The London Branch also retains a sufficient inventory of unencumbered liquid assets.
BNY Mellon’s material entities have operational dependencies on the London Branch, including
the provision by the London Branch of (i) securities lending services and global corporate trust
services to The Bank of New York Mellon’s clients; and (ii) securities lending services for The
Bank of New York Mellon SA/NV.
The London Branch has operational dependencies on BNY
Mellon’s other material entities, including The Bank of New York Mellon SA/NV, as more fully
described in The Bank of New York Mellon SA/NV material entity description provided below.
The London Branch also relies on information technology infrastructure and support through
TSG, TPC and iNautix, as well as operational support through BNY Mellon International
Operations India.
Section I.A: Overview of BNY Mellon / Material Entities
16
. Banks, Broker-Dealers and Other Operating Entities
The Bank of New
York Mellon
Corporation
DE
The Dreyfus
Corporation
The Bank of New York Mellon SA/NV
Pershing LLC
NY
DE
BNY Mellon Int’l
Operations (India)
Private Limited
India
MBSC Securities
Corporation
The Bank of New
York Mellon Trust
Company, N.A.
US
London
Branch
The Bank of New
York Mellon
NY
Brussels
Branch
NY
The Bank of New
York Mellon SA/NV
Belgium
BNY Mellon
Investment
Servicing (US) Inc.
MA
iNautix
Technologies India
Private Limited
India
BNY Investment
Management
Services LLC
DE
Technology
Services Group, Inc.
NY
Tennessee
Processing Center
LLC
DE
The Bank of New York Mellon SA/NV is the main banking subsidiary of The Bank of New York
Mellon in continental Europe. It is authorized and regulated as a credit institution by the NBB
and is also supervised by the ECB. The Bank of New York Mellon SA/NV has its principal office
in Brussels and branches in Amsterdam, Dublin, Frankfurt, London, the City of Luxembourg,
and Paris. The Bank of New York Mellon SA/NV’s activities primarily consist of providing asset
servicing products focused on global custody and collateral management.
In addition, it
provides corporate trust services through its branch in Dublin. The Bank of New York Mellon
SA/NV is Belgium’s fifth largest bank.
The Bank of New York Mellon SA/NV plays an important part in facilitating the movement of
funds and securities settlement throughout BNY Mellon, and receives significant cash balances
from other BNY Mellon entities. Accordingly, its balance sheet reflects significant due to affiliate
liabilities as well as deposit liabilities primarily related to asset servicing activities.
Consistent
with the characteristics of its underlying liabilities, The Bank of New York Mellon SA/NV’s assets
are primarily balances due from affiliates, available-for-sale securities, and placements through
which excess funds received are invested. The Bank of New York Mellon SA/NV has access to
intra-day credit facilities amounting to €600 million.
BNY Mellon’s material entities have operational dependencies on The Bank of New York Mellon
SA/NV, including the provision by The Bank of New York Mellon SA/NV of (i) global collateral
management and global securities operations services for The Bank of New York Mellon’s
clients, including support to the London Branch’s clients; and (ii) operational activities on behalf
of the Brussels Branch. The Bank of New York Mellon SA/NV has operational dependencies on
BNY Mellon’s other material entities, including information technology infrastructure and support
through TSG, TPC and iNautix, as well as operational support through BNY Mellon International
Operations India.
Additional information related to The Bank of New York Mellon SA/NV is contained in its 2014
Pillar 3 Disclosure published in accordance with the requirements of the NBB, available at
www.bnymellon.com.
Section I.A: Overview of BNY Mellon / Material Entities
17
.
Banks, Broker-Dealers and Other Operating Entities
The Bank of New
York Mellon
Corporation
DE
The Bank of New York Mellon Trust Company, National
Association
The Dreyfus
Corporation
Pershing LLC
NY
DE
BNY Mellon Int’l
Operations (India)
Private Limited
India
MBSC Securities
Corporation
The Bank of New
York Mellon Trust
Company, N.A.
US
London
Branch
The Bank of New
York Mellon
NY
Brussels
Branch
NY
The Bank of New
York Mellon SA/NV
Belgium
BNY Mellon
Investment
Servicing (US) Inc.
MA
iNautix
Technologies India
Private Limited
India
BNY Investment
Management
Services LLC
DE
Technology
Services Group, Inc.
NY
Tennessee
Processing Center
LLC
DE
BNY Mellon Trust is chartered as a national banking association subject to primary regulation,
supervision and examination by the Office of the Comptroller of the Currency. BNY Mellon
Trust primarily performs “front office” administrative activities for fiduciary, agency and custody
accounts related to the corporate trust business and, to a much lesser extent, asset servicing.
BNY Mellon Trust is headquartered in Los Angeles, California, with offices at 26 locations within
18 states.
BNY Mellon Trust’s primary assets are available-for-sale securities, goodwill and intangibles.
BNY Mellon Trust has de minimis deposits and its primary liabilities include accrued taxes and
other expenses. As of December 31, 2014, BNY Mellon Trust had $2.0 billion in total assets,
$258 million in total liabilities and $1.7 billion in total bank equity capital. For the 12 months
ended December 31, 2014, BNY Mellon Trust had total interest income of $6.3 million, total
noninterest income of $403 million, and net income of $86 million.
BNY Mellon Trust does not
require significant funding in the normal course of business. As BNY Mellon Trust operates with
excess liquidity, it sells Fed Funds to The Bank of New York Mellon on a regular basis.
BNY Mellon’s material entities have operational dependencies on BNY Mellon Trust, including
the provision by BNY Mellon Trust of corporate trust document custody, sales and
administrative support services to The Bank of New York Mellon. BNY Mellon Trust has
operational dependencies on BNY Mellon’s other material entities, including The Bank of New
York Mellon, as more fully described in The Bank of New York Mellon material entity description
provided above.
BNY Mellon Trust also relies on information technology infrastructure and
support through TSG, TPC and iNautix, as well as operational support through BNY Mellon
International Operations India.
Additional information related to the financial condition of The Bank of New York Mellon Trust
Company, National Association is contained in its Report of Condition and Income (Call Report)
available at the FFIEC website at www.ffiec.gov.
Section I.A: Overview of BNY Mellon / Material Entities
18
. Banks, Broker-Dealers and Other Operating Entities
The Bank of New
York Mellon
Corporation
DE
The Dreyfus
Corporation
Pershing LLC
Pershing LLC
NY
DE
BNY Mellon Int’l
Operations (India)
Private Limited
India
MBSC Securities
Corporation
The Bank of New
York Mellon Trust
Company, N.A.
US
London
Branch
The Bank of New
York Mellon
NY
Brussels
Branch
NY
The Bank of New
York Mellon SA/NV
Belgium
BNY Mellon
Investment
Servicing (US) Inc.
MA
iNautix
Technologies India
Private Limited
India
BNY Investment
Management
Services LLC
DE
Technology
Services Group, Inc.
NY
Tennessee
Processing Center
LLC
DE
Pershing, a Delaware limited liability company and indirect, non-bank subsidiary of the Parent,
is an SEC-registered broker-dealer providing business solutions to financial organizations
globally by delivering dependable operational support; robust trading services; flexible
technology; and an expansive array of investment solutions, practice management support and
service excellence. Pershing is headquartered in Jersey City, New Jersey.
Pershing’s primary assets consist of receivables from customers, cash and securities
segregated for regulatory purposes and securities borrowed. Pershing’s primary liabilities
include customer payables, securities sold under repurchase agreements and brokerâ€dealer and
clearing organizations payables. As of December 31, 2014, Pershing had total assets of $33.6
billion, total liabilities of $31 billion and $2.6 billion in total member’s equity.
Pershing has uncommitted lines of credit with third party banks for liquidity purposes which are
guaranteed by the Parent, amounting to $1.5 billion in aggregate.
Average daily borrowing
under these lines was $4 million, in aggregate, in 2014. Pershing also has two unsecured loan
facilities with its parent company, Pershing Group LLC, amounting to $5.4 billion in aggregate.
At December 31, 2014 there were borrowings against one of these facilities of $1.2 billion.
Pershing also has loan agreements with two other affiliates. At December 31, 2014 there were
borrowings against these loans of $99 million.
Pershing also has entered into a repurchase agreement with an affiliate and at December 31,
2014 had a payable of $42.5 million under the agreement.
BNY Mellon’s material entities do not have any significant operational dependencies on
Pershing.
Pershing depends on The Bank of New York Mellon for certain services, including
securities lending and clearance and settlement of government securities, which are provided
on the same basis as they are provided to other clients of The Bank of New York Mellon.
Pershing also relies on information technology infrastructure and support through TSG, TPC
and iNautix.
Additional information related to the financial condition of Pershing is contained in its Statement
of Financial Condition filed with the SEC and available at www.sec.gov.
Section I.A: Overview of BNY Mellon / Material Entities
19
. Banks, Broker-Dealers and Other Operating Entities
The Bank of New
York Mellon
Corporation
DE
The Dreyfus
Corporation
The Dreyfus Corporation
Pershing LLC
NY
DE
BNY Mellon Int’l
Operations (India)
Private Limited
India
MBSC Securities
Corporation
The Bank of New
York Mellon Trust
Company, N.A.
US
London
Branch
The Bank of New
York Mellon
NY
Brussels
Branch
NY
The Bank of New
York Mellon SA/NV
Belgium
BNY Mellon
Investment
Servicing (US) Inc.
MA
iNautix
Technologies India
Private Limited
India
BNY Investment
Management
Services LLC
DE
Technology
Services Group, Inc.
NY
Tennessee
Processing Center
LLC
DE
Dreyfus, a New York corporation, is a subsidiary of the Parent with its principal place of
business in New York, New York. Dreyfus is registered with the SEC as an investment adviser
and is regulated under the Investment Advisers Act of 1940. Dreyfus is an investment
management company, serving as adviser and administrator to approximately $286 billion in
mutual funds and other portfolios.
As Dreyfus’ primary business is providing investment advisory and administrative services to the
Dreyfus family of funds, it does not need to fund significant assets in the normal course of
business. Dreyfus’ primary assets are cash and cash equivalents, goodwill and intangibles.
Deferred income taxes (primarily associated with goodwill and intangibles) account for most of
its liabilities.
BNY Mellon’s material entities have operational dependencies on Dreyfus, including the
provision by BNY Mellon Cash Investment Strategies, a division of Dreyfus, of cash collateral
reinvestment, accounting services and credit risk related services to BNY Mellon’s securities
lending business.
Dreyfus has operational dependencies on BNY Mellon’s other material
entities, including MBSC, as more fully described in the MBSC material entity description
provided below. Dreyfus also relies on information technology infrastructure and support
through TSG, TPC and iNautix, as well as operational support through BNY Mellon International
Operations India.
Section I.A: Overview of BNY Mellon / Material Entities
20
. Banks, Broker-Dealers and Other Operating Entities
The Bank of New
York Mellon
Corporation
DE
The Dreyfus
Corporation
MBSC Securities Corporation
Pershing LLC
NY
DE
BNY Mellon Int’l
Operations (India)
Private Limited
India
MBSC Securities
Corporation
The Bank of New
York Mellon Trust
Company, N.A.
US
London
Branch
The Bank of New
York Mellon
NY
Brussels
Branch
NY
The Bank of New
York Mellon SA/NV
Belgium
BNY Mellon
Investment
Servicing (US) Inc.
MA
iNautix
Technologies India
Private Limited
India
BNY Investment
Management
Services LLC
DE
Technology
Services Group, Inc.
NY
Tennessee
Processing Center
LLC
DE
MBSC, a New York corporation, is a subsidiary of Dreyfus, with its principal place of business in
New York, New York. MBSC is an SEC-registered broker-dealer and a member of FINRA.
MBSC provides underwriting and distribution services for the Dreyfus family of funds and
shareholder services to retail and institutional Dreyfus fund investors.
MBSC’s primary assets are cash and cash equivalents and accounts receivables. MBSC’s
primary liabilities consist of accounts payable and accrued expenses. As of December 31,
2014, MBSC had $181 million in total assets, $61 million in total liabilities, and $120 million in
total stockholder’s equity.
MBSC does not have significant balance sheet funding requirements.
BNY Mellon’s material entities have operational dependencies on MBSC, including the provision
by MBSC of distribution and sales of mutual funds sponsored/administered by Dreyfus. MBSC
has operational dependencies on BNY Mellon’s other material entities, including information
technology infrastructure and support through TSG, TPC and iNautix.
Additional information related to the financial condition of MBSC is contained in its Statement of
Financial Condition filed with the SEC and available at www.sec.gov.
Section I.A: Overview of BNY Mellon / Material Entities
21
. Banks, Broker-Dealers and Other Operating Entities
The Bank of New
York Mellon
Corporation
DE
The Dreyfus
Corporation
BNY Mellon Investment Servicing (US) Inc.
Pershing LLC
NY
DE
BNY Mellon Int’l
Operations (India)
Private Limited
India
MBSC Securities
Corporation
The Bank of New
York Mellon Trust
Company, N.A.
US
London
Branch
The Bank of New
York Mellon
NY
Brussels
Branch
NY
The Bank of New
York Mellon SA/NV
Belgium
BNY Mellon
Investment
Servicing (US) Inc.
MA
iNautix
Technologies India
Private Limited
India
BNY Investment
Management
Services LLC
DE
Technology
Services Group, Inc.
NY
Tennessee
Processing Center
LLC
DE
BNY Mellon Investment Servicing, a Massachusetts corporation and indirect subsidiary of The
Bank of New York Mellon, provides a comprehensive suite of fund accounting and
administration services in support of BNY Mellon’s asset servicing business. BNY Mellon
Investment Servicing is headquartered in Westborough, Massachusetts.
BNY Mellon Investment Servicing’s primary assets are cash and loans and its primary liabilities
consist of accounts payable and accrued taxes and other expenses.
BNY Mellon Investment Servicing does not have significant balance sheet funding
requirements.
BNY Mellon’s material entities have operational dependencies on BNY Mellon Investment
Servicing, including the provision by BNY Mellon Investment Servicing of operational support
services to BNY Mellon’s asset servicing business. BNY Mellon Investment Servicing has
operational dependencies on BNY Mellon’s other material entities, including BNY Investment
Management Services for fund accounting and fund administration. BNY Mellon Investment
Servicing also relies on information technology infrastructure and support through TSG, TPC
and iNautix, as well as operational support through BNY Mellon International Operations India.
Section I.A: Overview of BNY Mellon / Material Entities
22
.
Service Entities
The Bank of New
York Mellon
Corporation
DE
The Dreyfus
Corporation
BNY Investment Management Services LLC
Pershing LLC
NY
DE
BNY Mellon Int’l
Operations (India)
Private Limited
India
MBSC Securities
Corporation
The Bank of New
York Mellon Trust
Company, N.A.
US
London
Branch
The Bank of New
York Mellon
NY
Brussels
Branch
NY
The Bank of New
York Mellon SA/NV
Belgium
BNY Mellon
Investment
Servicing (US) Inc.
MA
iNautix
Technologies India
Private Limited
India
BNY Investment
Management
Services LLC
DE
Technology
Services Group, Inc.
NY
Tennessee
Processing Center
LLC
DE
BNY Investment Management Services, a Delaware limited liability company and subsidiary of
The Bank of New York Mellon, provides operational support to BNY Mellon’s asset servicing
and broker-dealer services businesses, as well as to BNY Mellon’s funds transfer operations.
BNY Investment Management Services is primarily located in Lake Mary and Orlando, Florida.
BNY Investment Management Services’ primary assets (other than goodwill and other intangible
assets) are accounts receivable, cash, loans and premises and equipment. BNY Investment
Management Services’ primary liabilities include accounts payable and accrued taxes and other
expenses. BNY Investment Management Services does not have significant balance sheet
funding requirements.
BNY Mellon’s material entities have operational dependencies on BNY Investment Management
Services, including the provision by BNY Investment Management Services of operational
support services to BNY Mellon’s asset servicing and broker-dealer services businesses, as
well as to BNY Mellon’s funds transfer operations. BNY Investment Management Services has
operational dependencies on BNY Mellon’s other material entities, including information
technology infrastructure and support through TSG, TPC and iNautix.
Section I.A: Overview of BNY Mellon / Material Entities
23
.
Service Entities
The Bank of New
York Mellon
Corporation
DE
The Dreyfus
Corporation
BNY Mellon International Operations (India) Private Limited
Pershing LLC
NY
DE
BNY Mellon Int’l
Operations (India)
Private Limited
India
MBSC Securities
Corporation
The Bank of New
York Mellon Trust
Company, N.A.
US
London
Branch
The Bank of New
York Mellon
NY
Brussels
Branch
NY
The Bank of New
York Mellon SA/NV
Belgium
BNY Mellon
Investment
Servicing (US) Inc.
MA
iNautix
Technologies India
Private Limited
India
BNY Investment
Management
Services LLC
DE
Technology
Services Group, Inc.
NY
Tennessee
Processing Center
LLC
DE
BNY Mellon International Operations India, a private limited company organized in India and an
indirect subsidiary of the Parent, provides operational support, primarily middle and back-office
support, to BNY Mellon’s businesses. BNY Mellon International Operations India has locations
in Chennai and Pune, India.
BNY Mellon International Operations India’s primary assets are cash, interestâ€bearing deposits
with banks, premises and equipment and accounts receivable. Other assets largely consist of
prepaid expenses related to corporate taxes, deposits and advanced payments on employee
medical insurance plans. BNY Mellon International Operations India’s primary liabilities include
accounts payable and accrued taxes and other liabilities.
BNY Mellon International Operations
India does not have external debt and is primarily equity funded. BNY Mellon International
Operations India generally relies on revenues generated from services performed for BNY
Mellon affiliates for funding.
BNY Mellon’s material entities have operational dependencies on BNY Mellon International
Operations India, as BNY Mellon International Operations India is a service entity providing
operational support, primarily middle and back-office support, to BNY Mellon’s businesses.
BNY Mellon International Operations India has operational dependencies on BNY Mellon’s other
material entities, including information technology infrastructure and support through TSG, TPC
and iNautix.
Section I.A: Overview of BNY Mellon / Material Entities
24
. Service Entities
The Bank of New
York Mellon
Corporation
DE
The Dreyfus
Corporation
iNautix Technologies India Private Limited
Pershing LLC
NY
DE
BNY Mellon Int’l
Operations (India)
Private Limited
India
MBSC Securities
Corporation
The Bank of New
York Mellon Trust
Company, N.A.
US
London
Branch
The Bank of New
York Mellon
NY
Brussels
Branch
NY
The Bank of New
York Mellon SA/NV
Belgium
BNY Mellon
Investment
Servicing (US) Inc.
MA
iNautix
Technologies India
Private Limited
India
BNY Investment
Management
Services LLC
DE
Technology
Services Group, Inc.
NY
Tennessee
Processing Center
LLC
DE
iNautix, a private limited company organized in India and an indirect subsidiary of The Bank of
New York Mellon, provides technology development, business and technology operations and
remote infrastructure management services for BNY Mellon’s businesses. iNautix also
develops and delivers comprehensive technology solutions and software development products
for clients of BNY Mellon. iNautix is located in Chennai and Pune, India.
iNautix’s primary assets are available-for-sale securities (primarily composed of highly liquid
short-term investments that hold unâ€repatriated earnings and excess cash), accounts receivable
and premises and equipment. iNautix’s liabilities include accounts payable and accrued taxes
and other liabilities.
iNautix does not have external debt and is primarily equity funded. iNautix
generally relies on revenues generated from services performed for BNY Mellon affiliates for
funding.
BNY Mellon’s material entities have operational dependencies on iNautix, as iNautix is a service
entity providing information technology infrastructure and support to BNY Mellon’s businesses.
iNautix has operational dependencies on BNY Mellon’s other material entities, including
information technology infrastructure and support through TSG and TPC.
Section I.A: Overview of BNY Mellon / Material Entities
25
. Service Entities
The Bank of New
York Mellon
Corporation
DE
The Dreyfus
Corporation
Technology Services Group, Inc.
Pershing LLC
NY
DE
BNY Mellon Int’l
Operations (India)
Private Limited
India
MBSC Securities
Corporation
The Bank of New
York Mellon Trust
Company, N.A.
US
London
Branch
The Bank of New
York Mellon
NY
Brussels
Branch
NY
The Bank of New
York Mellon SA/NV
Belgium
BNY Mellon
Investment
Servicing (US) Inc.
MA
iNautix
Technologies India
Private Limited
India
BNY Investment
Management
Services LLC
DE
Technology
Services Group, Inc.
NY
Tennessee
Processing Center
LLC
DE
TSG, a New York corporation and subsidiary of The Bank of New York Mellon, owns and
operates technology infrastructure that supports BNY Mellon’s businesses. TSG is
headquartered in Jersey City, New Jersey with offices, data centers and support teams located
around the world.
TSG’s primary assets are accounts receivable, due from affiliates and premises and equipment.
TSG’s primary liabilities include accounts payable and accrued taxes and other expenses. TSG
generally relies on revenues generated from services performed for BNY Mellon affiliates for
funding.
BNY Mellon’s material entities have operational dependencies on TSG, as TSG is a service
entity providing information technology infrastructure and support to BNY Mellon’s businesses.
TSG has operational dependencies on BNY Mellon’s other material entities, including staff
support from iNautix, as well as staff and hardware support from TPC.
Section I.A: Overview of BNY Mellon / Material Entities
26
. Service Entities
The Bank of New
York Mellon
Corporation
DE
The Dreyfus
Corporation
Tennessee Processing Center LLC
Pershing LLC
NY
DE
BNY Mellon Int’l
Operations (India)
Private Limited
India
MBSC Securities
Corporation
The Bank of New
York Mellon Trust
Company, N.A.
US
The Bank of New
York Mellon
NY
London
Branch
Brussels
Branch
NY
The Bank of New
York Mellon SA/NV
Belgium
BNY Mellon
Investment
Servicing (US) Inc.
MA
iNautix
Technologies India
Private Limited
India
BNY Investment
Management
Services LLC
DE
Technology
Services Group, Inc.
NY
Tennessee
Processing Center
LLC
DE
TPC, a Delaware limited liability company and subsidiary of TSG, owns and operates
technology infrastructure that supports BNY Mellon’s businesses. TPC is located in Tennessee.
TPC’s primary assets are investments in premises and equipment and its primary liabilities
consist of accounts payable. TPC generally relies on revenues generated from services
performed for BNY Mellon affiliates for funding.
BNY Mellon’s material entities have operational dependencies on TPC, as TPC is a service
entity providing information technology infrastructure and support to BNY Mellon’s businesses.
TPC has operational dependencies on BNY Mellon’s other material entities, including staff
support from iNautix and TSG.
Section I.A: Overview of BNY Mellon / Material Entities
27
. B. Description of Core Business Lines
BNY Mellon considers the following businesses to be “core business lines”3 for purposes of the
Resolution Plan.
Asset Servicing
BNY Mellon Asset Servicing offers clients worldwide a broad spectrum of specialized asset
servicing capabilities, including custody and fund services, performance and analytics, and
execution services. BNY Mellon is the largest custodian for U.S. corporate and public pension
plans and services 54% of the top 50 endowments.
We are a leading custodian in the UK and
service 20% of UK pensions that require a custodian.
Corporate Trust
BNY Mellon is the leading provider of corporate trust services for all major conventional and
structured finance debt categories, and a leading provider of specialty services. Our clients
include governments and their agencies, multinational corporations, financial institutions and
other entities that access the global debt capital markets. BNY Mellon’s corporate trust
business utilizes its global footprint and expertise to deliver a full range of issuer and related
investor services and to develop customized and market-driven solutions.
Clearing Services
Pershing and its affiliates, our clearing service, provides business solutions to approximately
1,500 financial organizations globally by delivering dependable operational support; robust
trading services; flexible technology; and an expansive array of investment solutions, practice
management support and service excellence.
Asset Management
Our asset management business is the seventh largest global asset manager.
It encompasses
13 affiliated investment management boutiques that deliver a diversified portfolio of focused
investment strategies over our distribution network to institutional and retail clients across North
America, EMEA and Asia-Pacific. Our multi-boutique model is designed to deliver the best
elements of investment focus and infrastructure scale to benefit clients. The investment
management boutiques offer a broad range of equity, fixed income, alternative/overlay and cash
products.
In addition to the investment subsidiaries, this business includes foreign subsidiaries
which are responsible for managing and distributing locally registered investment products, and
Dreyfus and its affiliates, which are responsible for U.S. investment management and
distribution of retail mutual funds, separately managed accounts and annuities.
3
For purposes of Title I Plans, “core business lines” are defined as “those business lines of the covered company,
including associated operations, services, functions and support that, in the view of the covered company, upon
failure would result in a material loss of revenue, profit or franchise value.” 12 CFR Part 243 (Federal Reserve) or 12
CFR Part 381 (FDIC). For purposes of IDI Plans, “core business lines” are defined as “those business lines of the
[covered insured depository institution], including associated operations, services, functions and support that, in the
view of the [covered insured depository institution], upon failure would result in a material loss of revenue, profit or
franchise value.” 12 CFR Part 360 (FDIC).
Section I.B: Overview of BNY Mellon / Description of Core Business Lines
28
.
Additional information related to BNY Mellon’s businesses is contained in BNY Mellon’s reports
filed with the SEC, including the 2014 Form 10-K, the Quarterly Reports on Form 10-Q and the
Current Reports on Form 8-K, available at www.bnymellon.com.
Section I.B: Overview of BNY Mellon / Description of Core Business Lines
29
. SECTION II: DESCRIPTION OF RESOLUTION STRATEGY
Overview
The Resolution Plan provides a strategy for the orderly resolution of BNY Mellon in a manner
that avoids systemic risk. The key elements of the Resolution Plan include an evaluation of the
core business lines and critical operations of BNY Mellon and the design of resolution options
for the entities through which these businesses and operations are conducted to provide for
their continuity of services or orderly liquidation. Our resolution strategy reflects our recognition
of the key role that we play in the financial system (in particular, as provider of payment,
clearing and settlement functions), and provides strategies for continuity of services during
resolution.
The Resolution Plan assumes an idiosyncratic event involving capital and liquidity stresses
causes material financial distress and failure under various macroeconomic conditions,
including at a time when the ambient economic environment is experiencing severely adverse
conditions. The proposed scenario, strategy and associated assumptions are hypothetical and
do not necessarily reflect any event or events to which BNY Mellon is or may become subject.
BNY Mellon has carefully evaluated various resolution options, and due to its specialized
business model and its legal entity and operating structure, has determined that a multiple
acquirer strategy, utilizing a bridge bank, would allow an orderly resolution of BNY Mellon in a
manner that avoids taxpayer loss as well as systemic risk in the U.S.
and the other jurisdictions
in which it conducts material banking operations. While a single-point-of-entry resolution is a
promising strategy that may be appropriate for resolving BNY Mellon in certain contexts, we
believe that developing a resolution plan based on an FDIC receivership/bridge bank strategy is
a conservative approach to resolution planning since it uses an established process and
accommodates a scenario where our largest and most important bank subsidiary—The Bank of
New York Mellon—fails and enters insolvency proceedings. We will continue to evaluate the
single-point-of-entry resolution strategy and recognize the need to maintain flexibility in our
resolution planning approach, both as necessary to adapt to future changes in regulatory
demands and to reflect any changes in our assessment of how we can best be resolved.
BNY Mellon believes that it can be resolved in an orderly manner without systemic disruption
pursuant to its preferred strategy based upon the following key factors:
ï‚·
The FDIC could resolve The Bank of New York Mellon under a traditional, wellestablished regime, allowing for the resolution of the bulk of our core businesses and our
critical operations in a manner that is reasonably familiar to regulators and the
marketplace
ï‚·
The top-tier holding company structure is suitable for different resolution strategies
because of limited dependencies on the Parent, limited short-term debt and no upstream
guarantees
ï‚·
The highly liquid balance sheet of BNY Mellon provides for significant funding and
liquidity, including in resolution
Section II: Description of Resolution Strategy
30
.
ï‚·
The small number of material entities involved in BNY Mellon’s core business lines and
critical operations would result in a correspondingly small number of potentially
competing insolvencies
ï‚·
The limited derivatives activity of BNY Mellon results in a minimal number of contractual
triggers in resolution, reducing the potential instability caused by a failure of BNY Mellon
Figure 2 below is a high-level representation of the key components of BNY Mellon from a
resolution planning perspective. The Resolution Plan contemplates that if a resolution of BNY
Mellon were necessary, the Parent would seek protection under Chapter 11 of the U.S.
Bankruptcy Code and the material non-bank entities of BNY Mellon would be divested as going
concerns through the procedures available under the U.S. Bankruptcy Code, or wound down in
a rapid and orderly manner, if necessary. The Bank of New York Mellon, which represents the
bulk of the assets and liabilities of BNY Mellon and which houses our Investment Services
businesses (including asset servicing, corporate trust and broker-dealer and advisor services),
would enter into an FDIC receivership, in which the FDIC, under a traditional, well-established
regime, would use its authority to create a newly chartered bridge bank to assume and resolve
The Bank of New York Mellon’s core business lines and critical operations.
Figure 2: Illustration of Key Components of BNY Mellon for Resolution Plan
BNY Mellon recognizes the importance of global cooperation among foreign regulators prior to
and during a resolution event.
BNY Mellon believes regulators in foreign jurisdictions will
carefully balance the potential risks against the anticipated benefits of cooperation with U.S.
resolution authorities prior to initiating ring-fencing of capital and/or liquidity within host
Section II: Description of Resolution Strategy
31
. jurisdictions. While the decision to ring-fence lies with host regulators, BNY Mellon has taken
steps to lessen this likelihood. These steps include both strengthening the financial condition of
subsidiaries as well as developing a global resolution strategy that addresses the particular
concerns of host regulators for transparency and accountability. Accordingly, in addition to
providing an analysis of the feasibility of the bridge bank strategy through the resolution
planning process, we have also analyzed the possible impact of ring-fencing by host authorities
and taken steps to incorporate specific feedback from the primary regulators of our key non-US
operating entities by strengthening the balance sheets of these non-U.S.
material entities and
retooling funding flows between affiliates to reduce their financial dependency on other material
entities.
BNY Mellon believes that its Resolution Plan demonstrates that the use of a bridge bank,
followed by the disposition of the core business lines and critical operations, facilitates the
stabilization and continued operation of the core business lines and critical operations of The
Bank of New York Mellon during and immediately after the beginning of the resolution process,
and gives the FDIC, as receiver, the means to maintain these operations until they can be
transitioned to a new institution or wound down in an orderly manner. This is because, under the
circumstances described in the Resolution Plan, based on our analysis and projections:
ï‚·
The bridge bank would have, or have access to, all of the assets, personnel, shared
services, systems and other operations that it requires to continue conducting the core
business lines and critical operations
ï‚·
The bridge bank would have substantial positive equity upon its establishment, in view of
the ability of the FDIC to “leave behind” as claims in the receivership those liabilities that
are not essential to the continuation of the bridge bank’s operations
ï‚·
Drawing upon The Bank of New York Mellon’s highly liquid balance sheet, the bridge
bank would have sufficient liquidity to maintain the core business lines and critical
operations for a sufficient period of time to permit the bridge bank to transition them to
new ownership in an orderly manner, or for clients themselves to transition their
relationships to other institutions of their choice
ï‚·
It will keep The Bank of New York Mellon and its subsidiaries and branches intact and as
a result would permit The Bank of New York Mellon and its subsidiaries and branches to
continue operations in largely the same manner as prior to resolution
ï‚·
The bridge bank will be able to continue to utilize the services of its affiliates, and in
particular its material service company affiliates, pursuant to intercompany agreements,
because its affiliates are expected to have sufficient liquidity and other resources to
permit them to continue providing services as going concerns outside of insolvency
proceedings
Section II: Description of Resolution Strategy
32
. ï‚·
The bridge bank will have the resources to continue to comply with the requirements of
FMUs, like payment, clearing and settlement systems, and understands that those
systems would generally continue to provide services to a bridge bank when possible
without undue risk
Although BNY Mellon believes that the bridge bank-based resolution strategy is reasonable and
achievable, it has identified a number of ways in which the robustness of the strategy can be
strengthened. Accordingly, as described in Section III, BNY Mellon is undertaking a number of
initiatives to strengthen the feasibility of the bridge bank-based strategy and to facilitate its
execution, should the need arise.
Section II.A contains a more detailed description of the resolution strategies for each material
entity, Section II.B contains an overview of the resolution strategies for each core business line
and Section II.C describes the resulting organization upon completion of the resolution process.
Section II: Description of Resolution Strategy
33
. A. Resolution Strategy for Material Entities
Figure 3 below is a pictorial representation of the resolution strategy for each of our material
entities.
Figure 3: Resolution Strategy for Material Entities
The Bank of New
York Mellon
Corporation
DE
Sales (may be
conducted
under Section
363 of
Bankruptcy
Code)
The Dreyfus
Corporation
Pershing LLC
NY
DE
BNY Mellon Int’l
Operations (India)
Private Limited
India
MBSC Securities
Corporation
The Bank of New
York Mellon Trust
Company, N.A.
US
The Bank of New
York Mellon
NY
London
Branch
NY
Following planned
reorganization,
stock will be
transferred to
bridge bank
Chapter 11
proceeding
The Bank of New
York Mellon SA/NV
Belgium
BNY Mellon
Investment
Servicing (US) Inc.
MA
iNautix
Technologies India
Private Limited
India
Brussels
Branch
BNY Investment
Management
Services LLC
DE
Assets and
certain
liabilities
transferred
to bridge
bank
Technology
Services Group,
Inc.
NY
Tennessee
Processing Center
LLC
DE
Stock
transferred
to bridge
bank
The Parent
The Parent would seek protection under Chapter 11 of the U.S. Bankruptcy Code in order to
facilitate the orderly disposition or wind down of BNY Mellon’s businesses and operations. The
Parent would seek to sell its non-bank material subsidiaries and core business lines (including
asset management and clearing services) to third-party buyers, which sale(s) may be conducted
pursuant to Section 363 of the Bankruptcy Code under the control and direction of the
bankruptcy court, in order to maximize value to the estate and mitigate adverse effects on
financial stability in the U.S.
A bankruptcy proceeding for the Parent is feasible and appropriate
because it would preserve value, allow an orderly disposition of the various assets and
businesses of its subsidiaries, and provide a transparent method of addressing claims and
interests. The proceeds from the sale of the assets of the Parent bankruptcy estate would be
distributed or disposed of in accordance with the claims process against the Parent bankruptcy
estate.
The Chapter 11 proceeding of the Parent would be separate from the resolution of The Bank of
New York Mellon and BNY Mellon Trust. As described in more detail below, the strategy for
The Bank of New York Mellon and BNY Mellon Trust contemplates that each of these two
insured depository institutions would enter into an FDIC receivership (and that a newly-created
bridge bank would be established), causing the Parent to cease being the owner of The Bank of
Section II.A: Description of Resolution Strategy / Resolution Strategy for Material Entities
34
.
New York Mellon and BNY Mellon Trust. The Parent and its remaining subsidiaries would be
addressed through the Parent’s Chapter 11 proceeding.
Although this ceding of control to the FDIC would result in the resolution of the two insured
depository institutions being conducted separately from the disposition of the rest of the nonbank portion of BNY Mellon, it should not materially affect the operational feasibility of the
resolution of the Parent and its non-bank subsidiaries, on the one hand, or The Bank of New
York Mellon and its branches and subsidiaries and BNY Mellon Trust, on the other hand,
because of the limited financial and operational interconnectedness between these two
“resolution units” and the ability of the former affiliates to continue to provide shared services to
one another through appropriate service level agreements. Moreover, as described below,
because the bank-owned service companies on which both the banks and the non-bank
subsidiaries rely will become subsidiaries of an operating bridge bank, and, based on our
projections, are expected to have sufficient resources and liquidity at the time of resolution,
these service companies are expected to remain solvent, stay out of insolvency proceedings
and continue providing services in support of both the businesses and operations conducted by
The Bank of New York Mellon and its branches and subsidiaries and BNY Mellon Trust, as well
as the businesses and operations conducted by BNY Mellon’s non-bank entities. Furthermore,
as part of our legal entity rationalization process which is described more fully in Section III, we
are taking steps to further consolidate the provision of operational support and shared services
within The Bank of New York Mellon and its subsidiaries to further optimize continuity of shared
services in resolution.
The Bank of New York Mellon
The resolution strategy for The Bank of New York Mellon and its subsidiaries and branches
contemplates transferring the assets and certain liabilities of The Bank of New York Mellon,
including the stock of The Bank of New York Mellon’s subsidiaries, to a newly-created bridge
bank chartered by the Office of the Comptroller of the Currency and owned and operated by the
FDIC.
Immediately following its appointment as receiver for The Bank of New York Mellon, the
FDIC would take a number of specific actions and make a number of critical decisions (all of
which will be facilitated by our resolution planning efforts) including, for example:
ï‚·
Establishing new management structure for the bridge bank
ï‚·
Identifying which assets and liabilities of The Bank of New York Mellon should be
transferred to the bridge bank and which should remain in the receivership estate
ï‚·
Obtaining the agreement of FMUs to continue their services to the bridge bank
ï‚·
Obtaining the agreement of non-U.S. regulators to allow the FDIC to implement the
preferred resolution strategy in their jurisdictions
ï‚·
Communicating to the key employees that the bridge bank is validating their retention
contracts
Section II.A: Description of Resolution Strategy / Resolution Strategy for Material Entities
35
. ï‚·
Communicating with clients and external stakeholders that the FDIC will stabilize
operations in order to stem client and deposit attrition while immediately commencing
the marketing of the bridge bank’s businesses to acquirers who will assume its functions
A bridge bank, which is designed to permit the FDIC to take control of a bank’s business, permit
the FDIC to stabilize the business and give the FDIC additional time to implement a satisfactory
sale of all or parts of the businesses of that bank, will allow for the continuity of The Bank of
New York Mellon’s core business lines (including asset servicing and corporate trust) and
critical operations pending the ultimate disposition and resolution of the bridge bank because,
as discussed above:
ï‚·
The bridge bank would have, or have access to, all of the assets, personnel, shared
services, systems and other operations that it requires to continue conducting the core
business lines and critical operations
ï‚·
The bridge bank would have substantial positive equity upon its establishment, in view of
the ability of the FDIC to “leave behind” as claims in the receivership those liabilities that
are not essential to the continuation of the bridge bank’s operations
ï‚·
Drawing upon The Bank of New York Mellon’s highly liquid balance sheet, the bridge
bank would have sufficient liquidity to maintain the core business lines and critical
operations for a sufficient period of time to permit the bridge bank to transition them to
new ownership in an orderly manner, or for clients themselves to transition their
relationships to other institutions of their choice
ï‚·
It will keep The Bank of New York Mellon and its subsidiaries and branches intact and as
a result would permit The Bank of New York Mellon and its subsidiaries and branches to
continue operations in largely the same manner as prior to resolution
ï‚·
The bridge bank will be able to continue to utilize the services of its affiliates, and in
particular its material service company affiliates, pursuant to intercompany agreements,
because its affiliates are expected to have sufficient liquidity and other resources to
permit them to continue providing services as going concerns outside of insolvency
proceedings
ï‚·
The bridge bank will have the resources to continue to comply with the requirements of
FMUs, like payment, clearing and settlement systems, and understands that those
systems would generally continue to provide services to a bridge bank when possible
without undue risk
Section II.A: Description of Resolution Strategy / Resolution Strategy for Material Entities
36
. Bank Branches and Subsidiaries (Brussels Branch, the London Branch, The Bank of New
York Mellon SA/NV, TSG, TPC, iNautix, BNY Investment Management Services and BNY
Mellon Investment Servicing)
The assets and liabilities of The Bank of New York Mellon’s branches, including the Brussels
Branch and the London Branch, will be transferred to the bridge bank. In addition, it is
anticipated that all subsidiaries of The Bank of New York Mellon will be transferred to the bridge
bank, including The Bank of New York Mellon SA/NV, TSG, TPC, iNautix, BNY Investment
Management Services and BNY Mellon Investment Servicing. BNY Mellon believes that
keeping The Bank of New York Mellon and its subsidiaries and branches intact via a transfer to
a bridge bank would maximize recovery values and minimize systemic risk and depositor
concerns because it would permit The Bank of New York Mellon and its subsidiaries and
branches to continue operations in largely the same manner as prior to resolution and allow for
the continuity of core business lines and critical operations previously conducted as more fully
described above. Moreover, as each of the bank-owned service companies—TSG, TPC,
iNautix and BNY Investment Management Services—support various core business lines and
critical operations, transferring these entities to an operating bridge bank will allow for these
service companies to remain solvent, stay out of resolution proceedings and continue providing
services.
BNY Mellon Trust
While BNY Mellon Trust is not a subsidiary of The Bank of New York Mellon, the corporate trust
business conducted within The Bank of New York Mellon and BNY Mellon Trust are closely
related, and therefore it is anticipated that BNY Mellon Trust would enter into an FDIC
receivership and be resolved in the same manner as The Bank of New York Mellon.
Accordingly, it is expected that the assets and certain liabilities of BNY Mellon Trust would be
transferred to the same bridge bank to which the assets and liabilities of The Bank of New York
Mellon are transferred.
Once in the bridge bank, the corporate trust business previously
conducted out of BNY Mellon Trust would continue during the pendency of the bridge bank and
would ultimately be resolved together with the corporate trust business previously conducted out
of The Bank of New York Mellon.
BNY Mellon International Operations India
BNY Mellon International Operations India, an indirect subsidiary of the Parent, provides
operational support to BNY Mellon’s business. Pursuant to service level agreements with the
recipients of its services, BNY Mellon International Operations India would be expected to
continue to provide operational support and receive payments for the services it provides,
thereby remaining solvent and avoiding separate local insolvency proceedings in India.
While BNY Mellon is confident that BNY Mellon International Operations India would be
positioned to continue to provide services to the bridge bank during and even after the
conclusion of the Parent’s Chapter 11 proceeding, BNY Mellon has plans to reorganize the
ownership structure of BNY Mellon International Operations India such that it would become an
indirect subsidiary of The Bank of New York Mellon. This would allow BNY Mellon International
Operations India to be transferred to the bridge bank along with the other subsidiaries of The
Section II.A: Description of Resolution Strategy / Resolution Strategy for Material Entities
37
.
Bank of New York Mellon. We believe that this reorganization will result in the optimal structure
for maintaining services in resolution. See also Figure 6 in Section III.
Pershing
The preferred resolution option for Pershing involves a prompt sale of its shares to either an
existing competitor or a new market participant. If Pershing is not sold promptly, it would
continue operating through an orderly wind down as a going concern under the close
supervision of the SEC, FINRA and SIPC, and with the cooperation of the relevant
clearinghouses and exchanges.
Based on our projections, in the circumstances contemplated
by the Resolution Plan, Pershing has sufficient capital and access to sufficient funding to
continue to provide the necessary liquidity to support its operations, and any information
technology infrastructure and support services provided to Pershing by The Bank of New York
Mellon or its subsidiaries could continue to be provided, as necessary, by the bridge bank
during the pendency of Pershing’s resolution. Accordingly, Pershing is expected to remain
solvent, remain in compliance with applicable capital requirements and be able to continue to
comply with the requirements applicable to the protection of customer assets, and as a result
would not present the conditions that would call for the commencement of a proceeding under
SIPA. The Resolution Plan reflects BNY Mellon’s belief that the resources of Pershing and its
operational arrangements would allow for an orderly wind down through attrition and selfliquidation outside of a SIPA proceeding.
Dreyfus and MBSC
The preferred resolution option for Dreyfus (including its subsidiary MBSC), as well as the other
BNY Mellon asset management companies, would involve sales of the stock of such legal
entities to existing competitors or new market participants conducted pursuant to Section 363 of
the Bankruptcy Code.
It is not expected that Dreyfus or our other asset management
companies would be required to enter into insolvency proceedings following the Parent’s
bankruptcy given that these companies are principally investment advisors that receive fees and
have limited funding or other liquidity needs, and any information technology infrastructure and
support services provided to Dreyfus (including its subsidiary MBSC) and our other asset
management companies by The Bank of New York Mellon or its subsidiaries could continue to
be provided, as necessary, by the bridge bank during the pendency of Dreyfus’ resolution.
Section II.A: Description of Resolution Strategy / Resolution Strategy for Material Entities
38
. B. Resolution Strategy for Core Business Lines
Asset Servicing
The Resolution Plan contemplates that the asset servicing business, which is primarily
conducted out of The Bank of New York Mellon, the London Branch, the Brussels Branch, and
The Bank of New York Mellon SA/NV, would continue to operate through the bridge bank and
ultimately be sold in one or more private sales to either existing competitors or new entrants into
existing markets. Because essentially all of the assets, liabilities, operations, personnel and
other resources necessary to conduct this business line could be retained by the bridge bank for
as long as the FDIC considered necessary, as discussed above, this strategy would provide for
the continuation of this business line until the bridge bank sells the business line.
Corporate Trust
The Resolution Plan contemplates that the corporate trust business, which is primarily
conducted out of The Bank of New York Mellon and BNY Mellon Trust, would continue to
operate through the bridge bank and ultimately be sold in one or more private sales to either
existing competitors or new entrants into existing markets. Because essentially all of the assets,
liabilities, operations, personnel and other resources necessary to conduct this business line
could be retained by the bridge bank for as long as the FDIC considered necessary, as
discussed above, this strategy would provide for the continuation of this business line until the
bridge bank sells the business line.
Clearing Services
As discussed above, the preferred resolution option for Pershing, which operates our clearing
services business, involves a prompt sale to either an existing competitor or a new market
participant.
If Pershing is not sold promptly, it would continue operating through an orderly wind
down as a going concern under the close supervision of the SEC, FINRA and SIPC, and in
cooperation with the relevant clearinghouses and exchanges.
Asset Management
The preferred resolution option for BNY Mellon’s asset management companies would involve
sales of the stock of such legal entities to existing competitors or new market participants
conducted pursuant to Section 363 of the Bankruptcy Code. It is not expected that our asset
management companies would be required to enter into insolvency proceedings following the
Parent’s bankruptcy given that these companies are principally investment advisors that receive
fees and have limited funding or other liquidity needs.
Section II.B: Description of Resolution Strategy / Resolution Strategy for Core Business Lines
39
. C. Resulting Organization upon Completion of Resolution Process
Once the bridge bank has been established, there are a number of options regarding the
ultimate disposition and resolution of the businesses that were conducted by The Bank of New
York Mellon and its subsidiaries and branches. We believe that, in the circumstances and
under the assumptions reflected in the Resolution Plan, sales of particular business lines to
either existing competitors or new entrants into our existing markets will be the most efficient
way of disposing of our operations while maintaining continuity and that it would be feasible to
disaggregate and sell the businesses of the bridge bank separately without systemic impact. As
required, the Resolution Plan also describes, in addition to our preferred strategy reflecting
separate sales of core business lines or critical operations via one or more purchase and
assumption transactions, strategies reflecting a solvent wind-down of our operations, a
liquidation of The Bank of New York Mellon and a pay-off of our deposits, and a public offering
of a bank formed to acquire or operate a subset of our businesses.
Figure 4 below illustrates the
various strategies potentially available to resolve BNY Mellon.
Figure 4: Overview of Alternative Resolution Strategies
The disposition of various core business lines and critical operations housed within the bridge
bank (including those housed within The Bank of New York Mellon’s branches and
subsidiaries—the London Branch, the Brussels Branch, The Bank of New York Mellon SA/NV,
BNY Mellon Investment Servicing, BNY Mellon Investment Management, iNautix, TSG and
TPC—together with BNY Mellon Trust, which would form part of the bridge bank) is expected to
occur at various points after the establishment of the bridge bank. It is expected that the FDIC
Section II.C: Description of Resolution Strategy / Resulting Organization upon Completion of Resolution Process
40
. will begin the disposition process as quickly as possible after creation of the bridge bank, and
that the timing of the process will be dictated primarily by market demand under the
circumstances. As noted above, our projections indicate that, in the circumstances and
assumptions on which the Resolution Plan is based, the bridge bank will have the resources to
maintain these operations until they can be sold or wound down in an orderly manner.
As discussed above, it is anticipated that Pershing and the asset management companies
(including Dreyfus and MBSC) will be sold, which sale(s) may be conducted pursuant to Section
363 of the Bankruptcy Code under the control and direction of the bankruptcy court. If Pershing
is not sold promptly, the Resolution Plan also contemplates an orderly wind down of Pershing
through attrition and self-liquidation outside of a SIPA proceeding.
Because our preferred strategy contemplates disposition or wind down of our core business
lines and critical operations, it is anticipated that nothing will remain of BNY Mellon upon
completion of the resolution process. Rather, BNY Mellon’s core business lines and critical
operations will either, in the case of disposition, be continued by the successor institution or, in
the case of wind down, continue for a period of time to allow for orderly wind down and
transition to other market participants.
In either case, we believe that the market has sufficient
capacity to absorb the activities that we perform without creating either the risk of taxpayer loss
or systemic disruptions in either the U.S. or other jurisdictions in which we conduct operations.
Section II.C: Description of Resolution Strategy / Resulting Organization upon Completion of Resolution Process
41
. SECTION III: BNY MELLON’S SIGNIFICANT EFFORTS TO IMPROVE ITS RESOLVABILITY
BNY Mellon has consistently focused on maintaining a strong foundation of capital and liquidity
across all market conditions. We have a resilient capital base that continues to grow and a
highly liquid balance sheet. We were better prepared than many other firms during the financial
crisis in 2008. Our level of deposits increased during this period of market turmoil, an indication
of the strength and reputation of our company particularly during times of uncertainty.
Since the
financial crisis, we have further strengthened our capital and liquidity practices, while
continuously improving our internal processes, procedures, and controls to meet current and
anticipated market and regulatory requirements.
Notwithstanding our financial strength, we understand the critical importance of resolution and
recovery preparedness, and we are taking significant action and have mobilized significant
resources to ensure we are sufficiently prepared for recovery and resolution contingencies.
Ultimately, our preparation is designed to ensure that we can be resolved without creating
systemic disruption or risk of taxpayer loss. We have made fully funded commitments to over
thirty additional initiatives over the next two years. While the costs of these initiatives are
significant, our actions to further hone our corporate structure and expand and refine our data
and analysis capabilities across key areas of the firm will enhance our ability to holistically
manage our business on a continuous basis, and make us stronger, faster and more adaptable
in all financial conditions.
In short, our goal is to simultaneously become more resilient, to
become more resolvable, and to operate better.
BNY Mellon has commenced new initiatives and has completed or has made significant
progress towards the completion of important initiatives and programs that will reduce the
likelihood that BNY Mellon will fail and reduce the likelihood of systemic disruption in the event
of failure. The initiatives to enhance our resolvability are wide-ranging, from targeted steps
focused solely on improving our resolvability to broader efforts to reduce risk and complexity
that have benefits in the context of BNY Mellon’s business-as-usual activities and the health and
resiliency of BNY Mellon and the financial system. These efforts, taken together, support our
view that BNY Mellon could be resolved in an orderly manner in the event of its failure.
Embedding Strategic Planning Resolution Considerations into our Business-as-Usual
Operations
We have developed and implemented an enterprise-wide resolvability framework that embeds
strategic resolution planning considerations into all of our business-as-usual operations.
This
new governance framework creates a paradigm whereby resolution considerations are
integrated into the management and oversight of all of our operations. BNY Mellon’s
resolvability framework is designed to identify ways to improve the organization’s resolvability,
including its operational and infrastructure capabilities to support its resolvability, while also
enhancing its resiliency, business efficiencies, and overall risk management capabilities. Upon
its launch earlier this year, the framework provided the structure within which potential
enhancements to BNY Mellon’s resolvability were identified and implemented.
Moving forward,
the framework is designed to institutionalize resolvability considerations into all of our businessas-usual decision making. Our resolvability framework is comprised of the following seven key
disciplines of enhanced resolvability:
Section III: BNY Mellon’s Significant Efforts to Improve its Resolvability
42
. ï‚·
Collateral Management
ï‚·
Payment, Clearing and Settlement Activities
ï‚·
Liquidity and Funding
ï‚·
Management Information Systems
ï‚·
Shared and Outsourced Services
ï‚·
Legal Entity Structure
ï‚·
Continuity Planning
Each discipline has dedicated owners and management committees that ensure resolvability
and resiliency considerations, including identifying ways that we can make our company more
resolvable, are evaluated and addressed on an ongoing basis. Figure 5 below provides an
overview of the framework.
Figure 5: Overview of Enterprise Resolvability Framework
Section III: BNY Mellon’s Significant Efforts to Improve its Resolvability
43
. Ensuring that Critical Operations and Core Business Lines have Sufficient Liquidity and
Funding to Conduct their Operations
We have taken steps designed to ensure that the entities that perform critical operations or are
engaged in core business lines have sufficient liquidity and funding to continue to provide
services in any financial condition, including in resolution. To achieve this, we have:
ï‚·
Developed a liquidity dashboard that provides an updated summary of key liquidity
metrics daily, and implemented a set of indicators for significant liquidity events
ï‚·
Modified the funding structure of certain of our material entities conducting core
businesses and critical operations to ensure continued access to sufficient funding to
avoid insolvency proceedings
ï‚·
Enhanced our contingency funding plans for critical operations to ensure they could
withstand stress scenarios
ï‚·
Developed a methodology for estimating the likely liquidity needs of each material entity
during resolution as well as a projection of the liquidity available to each material entity
at the point of resolution
Simplifying and Rationalizing our Legal Entity Structure
Over the course of the past year, BNY Mellon has taken meaningful steps to simplify and
rationalize our legal entity structure to ensure it facilitates orderly resolution. We created a
Legal Entity Oversight Committee tasked with the strategic oversight of our legal entity structure,
which has developed and adopted criteria to support a rational and less complex legal entity
structure. These criteria focus on:
ï‚·
Establishing entities only where there is an identifiable rationale
ï‚·
Housing similar businesses in the same group of entities
ï‚·
Ensuring availability of critical services and continuity of inter-affiliate services and other
intercompany dependencies
ï‚·
Alignment of key personnel to material entities
ï‚·
Protecting the operating subsidiaries in the event of the Parent’s failure
ï‚·
Appropriate capitalization and funding resources of material entities to support
continuity of operations
The Legal Entity Oversight Committee, comprised of senior representatives from various
disciplines and businesses within our organization, is identifying and overseeing efforts to
rationalize our existing structure consistent with this criterion.
We are evaluating and pursuing
various initiatives to better align legal entities and businesses, eliminate redundant entities
created for similar business, regulatory or legal purposes, and reduce our legal entity footprint
by eliminating low activity and dormant entities. As discussed above, BNY Mellon has plans to
Section III: BNY Mellon’s Significant Efforts to Improve its Resolvability
44
. reorganize the ownership structure of BNY Mellon International Operations India—currently an
indirect subsidiary of the Parent—such that it would become an indirect subsidiary of The Bank
of New York Mellon. We believe that this reorganization will result in the optimal structure for
maintaining services in resolution, allowing for BNY Mellon International Operations India to be
transferred to the bridge bank along with the other subsidiaries of The Bank of New York Mellon
in the event of failure. Following this reorganization, all key dedicated service companies will be
direct or indirect subsidiaries of The Bank of New York Mellon as depicted in Figure 6 below.
Figure 6: Planned Reorganization
The Bank of New
York Mellon
Corporation
DE
The Dreyfus
Corporation
Pershing LLC
NY
DE
BNY Mellon Int’l
Operations (India)
Private Limited
India
The Bank of New
York Mellon Trust
Company, N.A.
US
MBSC Securities
Corporation
London
Branch
The Bank of New
York Mellon
NY
Brussels
Branch
NY
BNY Mellon Int’l
Operations (India)
Private Limited
India
The Bank of New
York Mellon SA/NV
Belgium
BNY Mellon
Investment
Servicing (US) Inc.
MA
iNautix
Technologies India
Private Limited
India
Legend:
Depicts indirect subsidiary
BNY Investment
Management
Services LLC
DE
Technology
Services Group, Inc.
NY
Tennessee
Processing Center
LLC
DE
Dedicated service company
Expanding the Scope and Capabilities of Our Risk Management, Reporting, and Data
Systems
We have made significant investments in technologies and systems that enable both an
organization-wide and material entity-level view of risks, exposures, liquidity and funding needs,
and collateral. We have completed—or are implementing—several initiatives in this regard,
including:
ï‚·
Continuous enhancements to our risk management capabilities through BNY Mellon’s
Enterprise Risk Integration program
ï‚·
Upgrading our collateral tracking capabilities through the development of new platforms
and reporting processes
ï‚·
Development of material entity liquidity stress testing capabilities to enable more
granular analysis of downside scenarios
Section III: BNY Mellon’s Significant Efforts to Improve its Resolvability
45
.
ï‚·
Upgrading our liquidity management system to provide reporting capabilities with respect
to nostro banks and sub-custodians
Enhancing Our Tools to Understand Intraday Credit Exposures and Liquidity Needs
Across BNY Mellon
In light of the importance of intraday credit and liquidity, we have developed tools to better
monitor intraday activity and funding needs and taken steps to reduce intraday dependencies.
Specific enhancements in this regard include:
ï‚·
Implementation of early-warning liquidity indicators, providing a set of internal and
external market indicators for early identification of potential liquidity issues
ï‚·
Implementation of the first phase of an intraday liquidity monitoring and reporting system
centralized across payment systems and that provides alerts for deviations from normal
activity patterns
ï‚·
Initiation of an intraday liquid asset buffer and contingency funding program to identify
and measure relevant and liquid intraday sources of assets
ï‚·
Modification of funding flows between legal entities to reduce intraday dependencies
Developing Plans to Ensure Continued Operation of Critical Operations and Core
Business Lines
We have developed detailed plans to provide for the continuity of BNY Mellon’s critical
operations and core business lines in resolution. These efforts include the development of
employee retention plans to support critical operations and core business lines from stress to
resolution scenarios, as well as continuity strategies for the continuation of shared and
outsourced services. In addition, we have established a Financial Market Infrastructure
Oversight Committee and associated governance framework to oversee the ongoing
development of actionable plans to maintain access to FMUs and Agent Banks or otherwise
continue the relevant payment, clearing and settlement activity through alternative methods
during stress scenarios and resolution.
Enhancing Governance Mechanisms to Facilitate Execution of Required Actions in
Recovery and Resolution
BNY Mellon has undertaken several initiatives to enhance its governance structure and
processes to monitor risk exposures and to provide for appropriate escalation, oversight and
decision-making at all levels within BNY Mellon. Leveraging its existing risk management
framework, BNY Mellon has created a crisis continuum playbook which identifies pre-action
triggers and describes targeted escalation measures at various levels of stress (from businessas-usual through resolution).
In addition, we have supplemented the crisis continuum playbook
by creating specific governance playbooks for the boards of directors of key material entities.
The governance playbooks describe the major considerations the boards would need to
evaluate in connection with a potential resolution event, and sets forth the logistical processes
under which the boards will make such decisions. Although the actual decisions made by the
relevant boards of directors will be made in light of facts and circumstances at the time of the
Section III: BNY Mellon’s Significant Efforts to Improve its Resolvability
46
. decision, the governance playbooks will enhance the existing governance processes by
providing an outline of potential considerations, expected actions and a framework for decisionmaking.
Enhancing our Operational Capabilities for Resolution Preparedness
We have made and continue to make significant investments to enhance our operational
capabilities in ways that augment our overall operational readiness and would, if necessary,
support an orderly resolution. In addition to enhancements that we have already identified, we
continue to proactively evaluate other areas where we can enhance our operational capabilities
to support resolvability. As previously noted, our enterprise-wide resolvability framework is
designed to embed resolvability considerations into our business-as-usual decision making.
Five capabilities that are critical to our operational resilience and contingency planning include
effective processes for managing, identifying, and valuing collateral; the ability to analyze
liquidity and funding sources, uses, and risks; a comprehensive understanding of obligations
and exposures associated with payment, clearing, and settlement activities; demonstrated
management information systems capabilities on a legal entity basis; and robust arrangements
for the continued provision of shared and outsourced services. We have initiated key projects
that will enhance our risk management, infrastructure and other efficiencies associated with
these capabilities.
In this regard, we have undertaken initiatives to enhance our management of collateral that are
designed to improve day-to-day risk management and efficiency of business operations, as well
as taking into account resolvability considerations, including:
ï‚·
Enhanced collateral risk management reporting, which will aggregate enterprise-wide
data and provide a platform to holistically measure enterprise-wide collateral risk
exposure; and
ï‚·
Enterprise collateral management reporting, which will be designed to provide an
enhanced enterprise-wide view of collateral holdings in each jurisdiction, by legal entity,
and by line of business.
We have also significantly enhanced our liquidity risk management framework in recent years to
increase the granularity, timeliness and depth of our liquidity data and analysis.
We are planning
to implement new tools for the management of intraday liquidity and continue to enhance our
framework to monitor intra-company transactions and funding flows on a more granular basis.
We are building towards a future state of liquidity risk management enhancements that will
include:
ï‚·
Expansion of our automated data collection and analysis platform with the capability to
monitor liquidity reserves, and sources and uses of funding enterprise-wide, on a daily
basis, and by key material entity and by jurisdiction; and
Section III: BNY Mellon’s Significant Efforts to Improve its Resolvability
47
. ï‚·
Monitoring in real-time all intraday liquidity metrics at the consolidated company and the
individual entity level, allowing for greater visibility into intraday activity trends, thus
improving information available for business and risk management decision-making.
We have also completed significant steps to enhance our payment, clearing and settlement
capabilities both in business-as-usual conditions and in resolution, and have undertaken
additional initiatives to more efficiently manage these matters. We serve as an important
intermediary in the financial services industry and have worked diligently to improve our
operational infrastructure both to address industry-wide concerns and enhance our own
capabilities. Some of these key planned enhancements include:
ï‚·
Custody platform enhancements designed to centralize custody management and
enhance reporting capabilities, including more granular reporting by BNY Mellon legal
entity; and
ï‚·
Expanded intraday real-time monitoring, data capture, and reporting capabilities (through
both process enhancements and internal technology development) for all material
currencies (i.e., U.S. dollar, Euro and British pound) where BNY Mellon is a direct
clearer.
We have projects currently in flight to improve our ability to produce key management
information necessary in a resolution scenario.
We are creating enhanced capabilities that
include greater scalability, aggregation, simplification and transparency. These enhanced
management information systems capabilities will include:
ï‚·
Improved reporting of inter-affiliate exposures, and the generation of key risk reports on
a material entity basis; and
ï‚·
Creating a comprehensive system to catalogue key legal agreement information,
including from qualified financial contracts and other identified agreements (including
netting and re-hypothecation agreements), across the firm’s material entities, thus
allowing search capabilities by agreement type, parties, key terms and conditions – such
as change in control, collateralization, governing law, cross default, termination, down
grade triggers – and other key elements for each material entity.
Finally, we have completed significant steps to enhance the continuity in resolution of our
shared and outsourced services, and undertaken additional ongoing initiatives to expand on
these enhancements to improve day-to-day risk management and efficiency of business
operations. We have analyzed and documented key dependencies among legal entities and
with outside vendors, and have enhanced our centralization of, and access to, external supplier
contracts through the creation of a central repository hosting these agreements.
We will
continue to enhance our shared and outsourced service model to address operational
capabilities in resolution, including by:
Section III: BNY Mellon’s Significant Efforts to Improve its Resolvability
48
. ï‚·
Documenting arms-length service level agreements to manage inter-affiliate
arrangements for services provided to key critical operations to ensure continuity of
services in resolution;
ï‚·
Creating a framework for intra-group service agreement documentation to clearly identify
and document services provided by one affiliate to another, and to ensure continuity of
shared services during resolution; and
ï‚·
Revising standard external contract templates to include provisions in future contracts
for continuity of services during resolution, along with efforts to amend contracts with
existing key external suppliers to provide for continuity of services in resolution.
Improving our Resiliency and Reducing Risk to the Broader Market
In addition to the more targeted steps to enhance resolvability identified above, our firm has
made significant progress in the recent past to eliminate risks and complexity in the broader
financial system, and has done this in scale. We have successfully accomplished multiple
material de-risking goals associated with our financial intermediation activities, have done so in
markets where BNY Mellon is an, or the, market leader, and have done so without creating any
market, or meaningful client, disruptions. These changes enhance our resolvability, reduce both
systemic and idiosyncratic risks, and allow us to operate better. Accordingly, we understand
how to make the types of changes required to enhance our resiliency and resolvability.
While
there are many examples of this type of success, our accomplishments in the area of tri-party
repo reform and U.S. Government securities clearance are particularly noteworthy.
We understand the importance of a stable and well-functioning tri-party market, and how critical
it is to the health of the global financial system. BNY Mellon offers tri-party repo collateral
agency services to its securities clearing clients and cash investors active in the tri-party
repurchase, or repo, market and currently has approximately 86% of the market share of the
U.S.
tri-party repo market. As a result, we have worked with the public sector, the U.S. Tri-Party
Repo Infrastructure Reform Task Force formed under the auspices of the Federal Reserve Bank
of New York, and various other stakeholders to reengineer our processes to reduce the reliance
on intraday credit provided by BNY Mellon.
Through a combination of public and private sector
initiatives, we have achieved the “practical elimination” of intraday credit risk within the U.S. triparty repo market. Equally important, we accomplished this without stimulating any market
disruption.
BNY Mellon has also worked to reduce the risk in the process by which U.S.
Government
securities are issued and settled. BNY Mellon is a leader in U.S. Government securities
clearance, acting as a clearing agent for 18 of the 22 primary dealers and handling most of the
transactions cleared through the Federal Reserve Bank of New York (by volume).
Over the
past several years, in order to manage the intraday liquidity and credit risks associated with this
activity, we have developed a framework for identifying strategies to materially reduce the
demand for intraday credit and made numerous improvements to our U.S. Government
securities clearance activities, including greater and clearer communication with our clients.
Our efforts have contributed to a significant de-risking of the U.S. Government securities
Section III: BNY Mellon’s Significant Efforts to Improve its Resolvability
49
.
clearance business and market and facilitated the availability of intraday liquidity and funding.
Again, and equally importantly, all of this change and de-risking, both of ourselves and of the
markets more broadly, was successfully accomplished without stimulating any market disruption
or material client concern.
Section III: BNY Mellon’s Significant Efforts to Improve its Resolvability
50
. SECTION IV: OTHER BACKGROUND INFORMATION
This Section IV contains the following information regarding BNY Mellon:
ï‚·
ï‚·
ï‚·
ï‚·
ï‚·
ï‚·
ï‚·
ï‚·
A: Summary of Financial Information Regarding Assets, Liabilities, Capital and Major
Funding Sources
B: Description of Derivative and Hedging Activities
C: Memberships in Material Payment, Clearing and Settlement Systems
D: Description of Foreign Operations
E: Material Supervisory Authorities
F: Principal Officers
G: Resolution Planning Corporate Governance Structure and Processes
H: Description of Material Management Information Systems
Section IV: Other Background Information
51
. A. Summary of Financial Information Regarding Assets, Liabilities, Capital and Major
Funding Sources
The table below provides a consolidated balance sheet for The Bank of New York Mellon
Corporation as of December 31, 2014.
(dollar amounts in millions, except per share amounts)
Assets
Cash and due from:
Banks
Interest-bearing deposits with the Federal Reserve and other central banks
Interest-bearing deposits with banks
Federal funds sold and securities purchased under resale agreements
Securities:
Held-to-maturity (fair value of $21,127)
Available-for-sale
Total securities
Trading assets
Loans (includes $21 at fair value)
Allowance for loan losses
Net loans
Premises and equipment
Accrued interest receivable
Goodwill
Intangible assets
Other assets (includes $1,916 at fair value)
Subtotal assets of operations
Assets of consolidated investment management funds, at fair value:
Trading assets
Other assets
Subtotal assets of consolidated investment management funds, at fair value
Total assets
Liabilities
Deposits:
Noninterest-bearing (principally U.S. offices)
Interest-bearing deposits in U.S. offices
Noninterest-bearing deposits in Non-U.S.
offices
Total deposits
Federal funds purchased and securities sold under repurchase agreements
Trading liabilities
Payables to customers and broker-dealers
Commercial paper
Other borrowed funds
Accrued taxes and other expenses
Other liabilities (including allowance for lending-related commitments of $89, also
includes $451, at fair value)
Long-term debt (includes $347 at fair value)
Subtotal liabilities of operations
Liabilities of consolidated investment management funds, at fair value:
Trading liabilities
Other liabilities
Subtotal liabilities of consolidated investment management funds, at fair value
Total liabilities
Temporary equity
Redeemable noncontrolling interests
Permanent equity
Preferred stock – par value $0.01 per share; authorized 100,000,000 preferred shares;
issued 15,826 shares
Common stock – par value $0.01 per share; authorized 3,500,000,000 common shares;
issued 1,290,222,821 shares
Section IV.A: Other Background Information / Summary of Financial Information
$6,970
96,682
19,495
20,302
20,933
98,330
119,263
9,881
59,132
(191)
58,941
1,394
607
17,869
4,127
20,490
376,021
8,678
604
9,282
$385,303
$104,240
53,236
108,393
265,869
11,469
7,434
21,181
—
786
6,903
5,025
20,264
338,931
7,660
9
7,669
346,600
229
1,562
13
52
. (dollar amounts in millions, except per share amounts)
Permanent Equity – Continued
Additional paid-in capital
Retained earnings
Accumulated other comprehensive loss, net of tax
Less: Treasury stock of 171,995,262 common shares, at cost
Total The Bank of New York Mellon Corporation shareholders’ equity
Non-redeemable noncontrolling interests of consolidated investment management
funds
Total permanent equity
Total liabilities, temporary equity and permanent equity
24,626
17,683
(1,634)
(4,809)
37,441
1,033
38,474
$385,303
Source: 2014 Annual Report.
The table below provides a consolidated balance sheet for The Bank of New York Mellon as of
December 31, 2014.
(dollar amounts in millions)
Assets
Cash and due from depository institutions:
Noninterest-bearing balances and currency and coin
Interest-bearing balances
Securities:
Held-to-maturity securities
Available-for-sale securities
Federal funds sold and securities purchased under agreements to resell:
Federal funds sold in domestic offices
Securities purchased under agreements to resell
Loans and lease financing receivables:
Loans and leases held for sale
Loans and leases, net of unearned income
Less: Allowance for loan and lease losses
Loans and leases, net of unearned income and allowance
Trading assets
Premises and fixed assets (including capitalized leases)
Other real estate owned
Investments in unconsolidated subsidiaries and associated companies
Direct and indirect investments in real estate ventures
Intangible assets:
Goodwill
Other intangible assets
Other assets
Total assets
Liabilities
Deposits:
In domestic offices
Noninterest-bearing
Interest-bearing
In foreign offices, Edge and Agreement subsidiaries, and IBFs
Noninterest-bearing
Interest-bearing
Federal funds purchased and securities sold under agreements to repurchase:
Federal funds purchased in domestic offices
Securities sold under agreements to repurchase
Trading liabilities
Other borrowed money (includes mortgage indebtedness and obligations under capitalized
leases)
Subordinated notes and debentures
Other liabilities
Total liabilities
Section IV.A: Other Background Information / Summary of Financial Information
$6,317
105,168
20,186
95,176
70
10,534
21
35,904
168
35,736
7,279
1,043
3
556
0
6,405
1,152
14,520
$304,166
$137,928
95,930
41,998
119,551
8,281
111,270
2,155
3,490
6,798
5,925
765
6,882
283,494
53
. (dollar amounts in millions)
Equity Capital
Perpetual preferred stock and related surplus
Common stock
Surplus (excludes all surplus related to preferred stock)
Retained earnings
Accumulated other comprehensive income
Other equity capital components
Total bank equity capital
Noncontrolling (minority) interests in consolidated subsidiaries
Total equity capital
Total liabilities and equity capital
0
1,135
10,061
10,254
(1,128)
0
20,322
350
20,672
$304,166
Source: FFIEC Call Report, December 2014.
Capital
The table below provides regulatory capital ratios for The Bank of New York Mellon Corporation
and The Bank of New York Mellon, as of December 31, 2014.
Well
Capitalized
Consolidated regulatory capital ratios: (a)
CET1 ratio
Tier 1 capital ratio
Total (Tier 1 plus Tier 2) capital ratio
Leverage capital ratio
Selected regulatory capital ratios — fully phased-in — NonGAP: (b)
Estimated CET1 ratio:
Standardized Approach
Advanced Approach
Estimated SLR (e)
The Bank of New York Mellon regulatory capital ratios:
Tier 1 capital ratio
Total (Tier 1 plus Tier 2) capital ratio
Leverage capital ratio
Adequately
Capitalized
N/A (c)
6%
10%
N/A (c)
4%
5.5%
8%
4%
(d)
(d)
N/A
6%
10%
5%
11.2% (b)
12.2% (b)
12.5% (b)
5.6%
(d)
(d)
3% (f)
10.6%
9.8%
4.4%
4%
8%
3-4% (g)
13.0%
13.2%
5.2%
Source: 2014 Annual Report.
(a) Risk-based capital ratios at Dec. 31, 2014 include the net impact of the total consolidated assets of certain consolidated
investment management funds in risk-weighted assets.
(b) See “Supplemental Information –Explanation of GAAP and Non-GAAP financial measures” beginning on page 128 of our 2014
Annual Report for a reconciliation of these ratios.
(c) Applicable capital rules do not apply a CET1 or leverage capital standard for determining whether a bank holding company is
well capitalized.
(d) On a fully phased-in basis, we expect to satisfy a minimum CET1 ratio of at least 7%, expected to rise to 8% or more, assuming
an additional G-SIB buffer of at least 1%.
(e) The estimated fully phased-in SLR as of Dec. 31, 2014 is based on our interpretation of the Final Capital Rules, as
supplemented by the Federal Reserve’s final rules on the SLR.
(f) When fully phased-in, we expect to maintain an SLR of over 5%, 3% attributable to the minimum required SLR, and greater than
2% attributable to a buffer applicable to U.S. G-SIBs.
(g) The required leverage capital ratio for state member banks to be adequately capitalized is 3% or 4%, depending on factors
specified in regulations.
Section IV.A: Other Background Information / Summary of Financial Information
54
.
The following table presents the amount of capital by which The Bank of New York Mellon
Corporation and The Bank of New York Mellon exceeded the capital thresholds determined
under the transitional rules at Dec. 31, 2014.
Capital above thresholds at Dec. 31, 2014
(in millions)
Consolidated
CET1
Tier 1 capital (b)
Total capital (b)
Leverage capital
$12,153 (a)
10,405
4,130
5,776 (a)
The Bank of New York
Mellon
N/A
$8,305
3,834
551 (b)
Source: 2014 Annual Report.
(a) Based on 4.0% respective minimum required ratios under the Final Capital Rules.
(b) Based on well capitalized standards.
Capital ratios vary depending on the size and composition of the balance sheet at quarter-end
(and quarterly average). The balance sheet size fluctuates from quarter to quarter based on
levels of customer and market activity, including the level of deposits.
In general, when
servicing clients are more actively trading securities, deposit balances and the balance sheet as
a whole are higher. In addition, when markets experience significant volatility or stress, our
balance sheet size may increase considerably as client deposit levels increase.
Funding and Liquidity
We fund ourselves primarily through deposits and, to a lesser extent, other short-term
borrowings and long-term debt. Short-term borrowings consist of federal funds purchased and
securities sold under repurchase agreements, payables to customers and broker-dealers and
other borrowed funds.
Certain other borrowings, for example, securities sold under repurchase
agreements, require the delivery of securities as collateral.
BNY Mellon defines liquidity as the ability of the Parent and its subsidiaries to access funding or
convert assets to cash quickly and efficiently, especially during periods of market stress and in
order to meet its short term (up to one year) obligations. Liquidity risk is the risk that BNY
Mellon cannot meet its cash and collateral obligations at a reasonable cost for both expected
and unexpected cash flows, without adversely affecting daily operations or our financial
condition. Liquidity risk can arise from cash flow mismatches, market constraints from the
inability to convert assets to cash, inability to raise cash in the markets, deposit run-off or
contingent liquidity events.
Changes in economic conditions or exposure to credit, market,
operational, legal, and reputational risks also can affect BNY Mellon’s liquidity risk profile and
are considered in our liquidity risk framework.
Our overall approach to liquidity management is to ensure that sources of liquidity are sufficient
in amount and diversity such that changes in funding requirements at the Parent and at the
various bank subsidiaries can be accommodated routinely without material adverse impact on
earnings, daily operations or our financial condition.
Section IV.A: Other Background Information / Summary of Financial Information
55
. BNY Mellon seeks to maintain an adequate liquidity cushion in both normal and stressed
environments and seeks to diversify funding sources by line of business, customer and market
segment.
Additionally, we seek to maintain liquidity ratios within approved limits and liquidity risk
tolerance, maintain a liquid asset buffer that can be liquidated, financed and/or pledged as
necessary, and control the levels and sources of wholesale funds. Moreover, BNY Mellon also
manages potential intraday liquidity risks, which are the risks that the firm cannot fund or settle
obligations during the business day. Sources of intraday liquidity risks include timing
mismatches of inflows and outflows, inability to hold or raise intraday cash, and unexpected
market or idiosyncratic events. We monitor and manage intraday liquidity against existing and
expected intraday liquid resources (such as cash balances, remaining intraday credit capacity,
intraday contingency funding, and available collateral) to enable BNY Mellon to meet its
obligations under normal and reasonably severe stressed conditions.
Potential uses of liquidity include withdrawals of customer deposits and client drawdowns on
unfunded credit or liquidity facilities.
We actively monitor unfunded lending-related
commitments, thereby reducing unanticipated funding requirements.
When monitoring liquidity, we evaluate multiple metrics in order to have ample liquidity for
expected and unexpected events. Metrics include cash flow mismatches, asset maturities, debt
spreads, peer ratios, liquid assets, unencumbered collateral, funding sources and balance sheet
liquidity ratios. We also maintain various internal liquidity limits as part of our standard analysis
to monitor depositor and market funding concentration, liability maturity profile and potential
liquidity draws due to off-balance sheet exposure.
Our performance with our internal liquidity
limits demonstrates our strong ongoing liquidity.
U.S. regulators have established a LCR requirement that requires certain banking
organizations, including BNY Mellon, to maintain a minimum amount of unencumbered HQLA
sufficient to withstand the net cash outflow under a hypothetical standardized acute liquidity
stress scenario for a 30-day time horizon.
The following table presents the estimated consolidated HQLA as of the December 31, 2014.
Estimated consolidated HQLA
(in billions)
Securities (a)
Cash (b)
Total estimated consolidated HQLA
Dec. 31, 2014
$97
89
$186
Source: 2014 Annual Report.
(a) Primarily includes U.S.
Treasury, U.S. agency, sovereign and U.S. GSE securities, investment-grade corporate debt and
publicly traded common equity.
(b) Primarily includes cash on deposit with central banks.
We also perform liquidity stress tests to ensure BNY Mellon maintains sufficient liquidity
resources under multiple stress scenarios.
Additional information related to BNY Mellon’s assets, liabilities, capital and major funding
sources is contained in BNY Mellon’s reports filed with the SEC, including the 2014 Form 10-K,
Section IV.A: Other Background Information / Summary of Financial Information
56
.
the Quarterly Reports on Form 10-Q and the Current Reports on Form 8-K, available at
www.bnymellon.com.
Section IV.A: Other Background Information / Summary of Financial Information
57
. B. Description of Derivative and Hedging Activities
We use derivatives to manage various risk exposure including interest rate, equity price, foreign
currency and credit risk.
Hedging derivatives
We utilize interest rate swap agreements to manage our exposure to interest rate fluctuations.
For hedges of available-for-sale investment securities, deposits and long-term debt, the hedge
documentation specifies the terms of the hedged items and the interest rate swaps and
indicates that the derivative is hedging a fixed rate item and is a fair value hedge, that the hedge
exposure is to the changes in the fair value of the hedged item due to changes in benchmark
interest rates, and that the strategy is to eliminate fair value variability by converting fixed-rate
interest payments to LIBOR.
The available-for-sale investment securities hedged consist of sovereign debt, U.S. Treasury
bonds, agency commercial mortgage-backed securities and covered bonds that had original
maturities of 30 years or less at initial purchase. The swaps on all of these investment
securities are not callable.
All of these securities are hedged with “pay fixed rate, receive
variable rate” swaps of similar maturity, repricing and fixed rate coupon.
The fixed rate long-term debt instruments hedged generally have original maturities of five to 30
years. We issue both callable and non-callable debt. The non-callable debt is hedged with
“receive fixed rate, pay variable rate” swaps with similar maturity, repricing and fixed rate
coupon.
Callable debt is hedged with callable swaps where the call dates of the swaps exactly
match the call dates of the debt.
In addition, we enter into foreign exchange hedges. We use forward foreign exchange contracts
with maturities of nine months or less to hedge our British Pound, Euro, Hong Kong Dollar,
Indian Rupee and Singapore Dollar foreign exchange exposure with respect to foreign currency
forecasted revenue and expense transactions in entities that have the U.S. dollar as their
functional currency.
We use forward foreign exchange contracts with remaining maturities of nine months or less as
hedges against our foreign exchange exposure to various foreign currencies with respect to
certain interest-bearing assets and their associated forecasted interest revenue.
These hedges
are designated as cash flow hedges. These hedges are effected such that their maturities and
notional values match those of the corresponding transaction.
Forward foreign exchange contracts are also used to hedge the value of our net investments in
foreign subsidiaries. These forward foreign exchange contracts have maturities of less than two
years.
The derivatives employed are designated as hedges of changes in value of our foreign
investments due to exchange rates. Changes in the value of the forward foreign exchange
contracts offset the changes in value of the foreign investments due to changes in foreign
exchange rates.
Section IV.B: Other Background Information / Description of Derivative and Hedging Activities
58
. Trading activities (including trading derivatives)
BNY Mellon provides a client-driven market making capability for interest rate and equity
derivatives. We manage trading risk through a system of position limits, a VaR methodology
based on Monte Carlo simulations, stop loss advisory triggers, and other market sensitivity
measures. Risk is monitored and reported to senior management by a separate unit on a daily
basis. Based on certain assumptions, the VaR methodology is designed to capture the potential
overnight pre-tax dollar loss from adverse changes in fair values of all trading positions.
The
calculation assumes a one-day holding period for most instruments, utilizes a 99% confidence
level, and incorporates the non-linear characteristics of options. The VaR model is one of
several statistical models used to develop economic capital results, which is allocated to lines of
business for computing risk-adjusted performance.
As the VaR methodology does not evaluate risk attributable to extraordinary financial, economic
or other occurrences, the risk assessment process includes a number of stress scenarios based
upon the risk factors in the portfolio and management’s assessment of market conditions.
Additional stress scenarios based upon historic market events are also performed. Stress tests,
by their design, incorporate the impact of reduced liquidity and the breakdown of observed
correlations.
The results of these stress tests are reviewed weekly with senior management.
Counterparty credit risk and collateral
We assess the credit risk of our counterparties through regular examination of their financial
statements, confidential communication with the management of those counterparties and
regular monitoring of publicly available credit rating information. This and other information is
used to develop proprietary credit rating metrics used to assess credit quality. Collateral
requirements are determined after a comprehensive review of the credit quality of each
counterparty.
Collateral is generally held or pledged in the form of cash or highly liquid
government securities. Collateral requirements are monitored and adjusted daily.
Additional information related to BNY Mellon’s use of derivative instruments is contained in BNY
Mellon’s ’34 Act Reports, including the 2014 Form 10-K, the Quarterly Reports on Form 10-Q
and the Current Reports on Form 8-K, available at www.bnymellon.com.
Section IV.B: Other Background Information / Description of Derivative and Hedging Activities
59
. C. Memberships in Material Payment, Clearing and Settlement Systems
BNY Mellon engages with various FMUs and Agent Banks to provide payment, clearing and
settlement services to clients of its core business lines and critical operations. Together, FMUs
and Agent Banks make up the financial market infrastructure that enables BNY Mellon to
conduct payment, clearing and settlement activities:
ï‚·
FMUs allow BNY Mellon to provide payment services to clients and facilitate the clearing
and settlement of customer security, derivative and cash transactions
ï‚·
BNY Mellon maintains a network of Agent Banks for the purposes of currency payments,
settlements and custody activities
As discussed in Section III above, we have established a Financial Market Infrastructure
Oversight Committee and an associated governance framework to oversee the ongoing
development of actionable plans to maintain access to FMUs and Agent Banks or otherwise
continue the relevant payment, clearing and settlement activity through alternative methods
during stress scenarios and resolution. The following is a list of BNY Mellon’s relationships with
material payment, clearing and settlement systems:
Name
Type
BNP Paribas
Citigroup
Agent Bank
Agent Bank
Clearing House Automated Payments System (CHAPS)
Payment Processing & Cash Settlement
Clearing House Interbank Payments System (CHIPS)
Payment Processing & Cash Settlement
Clearstream Banking Frankfurt (CBF)
Clearing & Depositories
Clearstream Banking Luxembourg (CBL)
Clearing & Depositories
CLS Bank International (CLS Bank)
Payment Processing & Cash Settlement
Depository Trust Company (DTC)
Clearing & Depositories
Deutsche Bank
Agent Bank
Electronic Payments Network (EPN)
Payment Processing & Cash Settlement
Euroclear UK & Ireland (CREST)
Clearing & Depositories
Eurex Clearing AG (ECAG)
Clearing & Depositories
Euroclear Bank SA/NV (Euroclear Bank)
Clearing & Depositories
FedACH Services (FedACH)
Payment Processing & Cash Settlement
Fedwire Funds Service (Fedwire Funds)
Payment Processing & Cash Settlement
Fedwire Securities Service (Fedwire Securities)
Clearing & Depositories
Fixed Income Clearing Corporation – Government Backed
Securities Division (FICC – GSD)
Clearing & Depositories
Fixed Income Clearing Corporation – Mortgage Backed
Securities Division (FICC – MBSD)
Clearing & Depositories
HSBC
Agent Bank
LCH.Clearnet Limited (LCH)
Clearing & Depositories
Mizuho Corporation Bank LTD
Agent Bank
National Securities Clearing Corporation (NSCC)
Clearing & Depositories
Options Clearing Corporation (OCC)
Clearing & Depositories
Section IV.C: Other Background Information / Memberships in Material Payment, Clearing and Settlement Systems
60
.
Name
Type
Skandinaviska Enskilda Banken
Agent Bank
Society for Worldwide Interbank Financial Telecommunication
(SWIFT)
Interbank Financial Telecommunication
The Bank of Tokyo-Mitsubishi UFJ LTD
Agent Bank
Trans-European Automated Real-time Gross Settlement Express
Transfer System (TARGET2)
Payment Processing & Cash Settlement
Section IV.C: Other Background Information / Memberships in Material Payment, Clearing and Settlement Systems
61
. D. Description of Foreign Operations
Our primary international activities consist of securities services and global payment services in
our Investment Services business, and asset management in our Investment Management
business.
We conduct business through subsidiaries, branches, and representative offices in 35 countries.
We have operational centers based in Brussels, Cork, Dublin, Wexford, Luxembourg,
Singapore, Wroclaw, throughout the United Kingdom including London, Manchester,
Brentwood, Edinburgh and Poole, and Chennai and Pune in India.
At December 31, 2014, we had approximately 9,000 employees in Europe, the Middle East and
Africa, approximately 12,500 employees in the Asia-Pacific region and approximately 700
employees in other global locations, primarily Brazil.
Additional information related to BNY Mellon’s international operations is contained in BNY
Mellon’s reports filed with the SEC, including the 2014 Form 10-K, the Quarterly Reports on
Form 10-Q and the Current Reports on Form 8-K, available at www.bnymellon.com.
Section IV.D: Other Background Information / Description of Foreign Operations
62
. E. Material Supervisory Authorities
BNY Mellon is registered as a bank holding company and a financial holding company under the
Bank Holding Company Act of 1956, as amended by the Gramm-Leach-Bliley Act and by the
Dodd-Frank Act. We are subject to supervision by the Federal Reserve.
The Bank of New York Mellon, which is BNY Mellon’s largest banking subsidiary, is a New York
state chartered bank, and a member of the Federal Reserve System and is subject to
regulation, supervision and examination by the Federal Reserve, the FDIC and the New York
State Department of Financial Services. BNY Mellon’s national bank subsidiaries, BNY Mellon,
National Association and BNY Mellon Trust, are chartered as national banking associations and
subject to primary regulation, supervision and examination by the Office of the Comptroller of
the Currency.
We operate a number of broker-dealers that engage in securities underwriting and other brokerdealer activities in the U.S.
These companies are broker-dealers registered with the SEC and
members of FINRA. BNY Mellon’s non-bank subsidiaries engaged in securities-related
activities are regulated by supervisory agencies in the countries in which they conduct business.
Certain of BNY Mellon’s public finance and advisory activities are regulated by the Municipal
Securities Rulemaking Board.
Certain of BNY Mellon’s subsidiaries are registered with the CFTC as commodity pool operators
or commodity trading advisors and, as such, are subject to CFTC regulation. The Bank of New
York Mellon is provisionally registered as a swap dealer (as defined in the Dodd-Frank Act) with
the CFTC, through the NFA.
As a swap dealer, The Bank of New York Mellon is subject to
regulation, supervision and examination by the CFTC and the NFA.
Certain of our subsidiaries are registered investment advisors under the Investment Advisers
Act of 1940, as amended, and as such are supervised by the SEC. They are also subject to
various U.S. federal and state laws and regulations and to the laws and regulations of any
countries in which they conduct business.
Our subsidiaries advise both public investment
companies, which are registered with the SEC under the ‘40 Act, including the Dreyfus family of
mutual funds, and private investment companies which are not registered under the ‘40 Act.
Certain of our investment management, trust and custody operations provide services to
employee benefit plans that are subject to the Employee Retirement Income Security Act of
1974, as amended, administered by the U.S. Department of Labor.
In Europe, branches of The Bank of New York Mellon are subject to regulation in the countries
in which they are established, in addition to being subject to oversight by the US regulators
referred to above. The Bank of New York Mellon SA/NV is a public limited liability company
incorporated under the laws of Belgium.
The Bank of New York Mellon SA/NV, which has been
granted a banking license by the NBB, is authorized to carry out all banking and savings
activities as a credit institution. On November 4, 2014, the ECB assumed responsibility for the
supervision of 120 significant banks and banking groups in the euro area, including The Bank of
Section IV.E: Other Background Information / Material Supervisory Authorities
63
. New York Mellon SA/NV. The ECB’s supervision is performed in conjunction with the relevant
national prudential regulator (NBB, in the case of The Bank of New York Mellon SA/NV).
Certain of our financial services operations in the UK are subject to regulation and supervision
by the FCA and the PRA. The PRA is responsible for the authorization and prudential
regulation of firms that carry on PRA-regulated activities, including banks. PRA-authorized firms
are also subject to regulation by the FCA for conduct purposes.
In contrast, FCA-authorized
firms (such as investment management firms) have the FCA as their sole regulator for both
prudential and conduct purposes although subject to the residual overarching jurisdiction of the
PRA, if matters of systemic significance are in issue. As a result, FCA-authorized firms must
comply with FCA prudential and conduct rules and the FCA’s Principles for Businesses, while
dual-regulated firms must comply with the FCA conduct rules and FCA Principles, as well as the
applicable PRA prudential rules and the PRA’s Principles for Businesses.
The PRA regulates The Bank of New York Mellon (International) Limited, our UK incorporated
bank, as well as the London Branch and, to a more limited extent, The Bank of New York Mellon
SA/NV. Certain of BNY Mellon’s UK incorporated subsidiaries are authorized to conduct
investment business in the UK.
Their investment management advisory activities and their sale
and marketing of retail investment products are regulated by the FCA. Certain UK investment
funds, including BNY Mellon Investment Funds, are registered with the FCA and are offered for
retail sale in the UK.
The types of activities in which the foreign branches of our banking subsidiaries and our
international subsidiaries may engage are subject to various restrictions imposed by the Federal
Reserve. Those foreign branches and international subsidiaries are also subject to the laws
and regulatory authorities of the countries in which they operate.
Additional information related to BNY Mellon’s supervision and regulation is contained in BNY
Mellon’s ’34 Act reports, including the 2014 Form 10-K, the Quarterly Reports on Form 10-Q
and the Current Reports on Form 8-K, available at www.bnymellon.com.
Section IV.E: Other Background Information / Material Supervisory Authorities
64
.
F. Principal Officers
The Executive Committee and Other Executive Officers of the Parent are:
Gerald L. Hassell *
Chairman and Chief
Executive Officer
Stephen D. Lackey
Chairman,
Asia Pacific
Curtis Y.
Arledge *
Chief Executive Officer,
Investment Management and BNY Mellon Markets Group
J. Kevin McCarthy *
General Counsel
Richard F. Brueckner *
Chief of Staff
John A.
Park *
Controller
Michael Cole-Fontayn
Chairman,
Europe, the Middle East and Africa
Karen B. Peetz *
President
Thomas P. (Todd) Gibbons *
Chief Financial Officer
Brian T.
Shea *
Chief Executive Officer,
Investment Services
Mitchell E. Harris
President,
Investment Management
Douglas H. Shulman
Head of Client Service Delivery
Monique Herena*
Chief Human Resources Officer
James S.
Wiener *
Chief Risk Officer
Kurtis R. Kurimsky *
Acting Controller
Kurt D. Woetzel
President of BNY Mellon Markets Group
Suresh Kumar
Chief Information Officer
*Designated as an Executive Officer
Section IV.F: Other Background Information / Principal Officers
65
.
G. Resolution Planning Corporate Governance Structure and Processes
Overview
BNY Mellon has a robust governance framework to ensure that all aspects of resolution
planning receive appropriate attention by designated management committees and the Board of
Directors. The governance framework leverages established roles and responsibilities and
committee charters for the global management of risk and incorporates enhancements designed
to address resolution planning specifically, including the ORRP, which is embedded within our
Corporate Treasury group and principally responsible for oversight, development, maintenance,
implementation, filing and compliance of recovery and resolution plans. During the past year,
BNY Mellon enhanced its corporate governance structure by developing and implementing a
new enterprise-wide resolvability framework that embeds strategic resolution planning
considerations into all of our business-as-usual operations.
The new governance framework
creates a paradigm whereby resolution considerations are integrated into the management and
oversight of all of our operations. Figure 7 below is an illustration of the governance structure
overseeing our enterprise-wide resolvability framework.
Figure 7: Governance Structure for Resolvability Framework
Resolution Plan Development Governance
Board of Directors
The Board of Directors has ultimate responsibility for approving our resolution plan and the
Audit Committee of the Board is the primary committee designated to oversee resolution
planning. The following bodies are integrally involved in our resolution planning processes and
Section IV.G: Other Background Information / Resolution Planning Corporate Governance Structure and Processes
66
.
together with the ORRP, the Board and the Audit Committee establish the foundation for our
resolution planning governance structure.
Executive Committee
In its capacity as the most senior management committee of BNY Mellon, the Executive
Committee provides strategic oversight with respect to resolution planning. The Executive
Committee consists of the senior leadership of BNY Mellon and, among many other
responsibilities, leads BNY Mellon strategically.
Senior Risk Management Committee
As the most senior management body responsible for evaluating emerging risk issues, the
Senior Risk Management Committee directly oversees the Global Recovery and Resolution
Planning Steering Committee, described below.
Global Recovery and Resolution Planning Steering Committee
The Steering Committee has primary responsibility for oversight of recovery and resolution
planning at BNY Mellon. Among other responsibilities, it is tasked with establishing the project
governance and oversight framework for recovery and resolution plans required by regulators in
all jurisdictions where BNY Mellon operates.
Corporate Treasury
The head of our Corporate Treasury group is the senior management official responsible for
overseeing the ORRP.
Section IV.G: Other Background Information / Resolution Planning Corporate Governance Structure and Processes
67
. H. Description of Material Management Information Systems
BNY Mellon utilizes MIS for risk management, accounting, financial, and regulatory reporting, as
well as internal management reporting and analysis. These systems are primarily platform and
mainframe technologies with interface applications that are used to collect, maintain, and report
information to management and externally for regulatory compliance. The MIS are also used by
BNY Mellon and its core business lines and critical operations to perform the functions
necessary to run these businesses and operations.
BNY Mellon’s MIS generate and distribute
reports that are utilized by senior management to monitor the financial health, risks, and
operation of BNY Mellon and its core business lines and critical operations. As discussed in
Section III, we have devoted significant resources to upgrading our technology and MIS to
ensure that reliable information is available on a timely basis at the appropriate level of
granularity, including efforts to provide common data repositories and new or upgraded systems
for automated reporting, tracking and monitoring of key metrics across a number of business
lines.
Systems and applications at BNY Mellon are essential to smooth and effective operations and
are managed through a best practices Business Continuity approach. The program is built on
the guiding principles of geographic diversification, separation of technology from operations,
redundant and resilient telecommunications and an extensive testing program.
Recovery
planning is considered an integral part of BNY Mellon’s approach to risk management and BNY
Mellon has established formal policies, procedures, and programs for analyzing, developing,
maintaining, and testing recovery plans for all of its lines of business.
The majority of the MIS software used by BNY Mellon has been developed internally and is
supplemented with third party vendor developed applications. Governance, control and
maintenance of critical applications are critical components of the BNY Mellon technology
process, which emphasizes minimal recovery times in the event of material financial distress or
disruption.
Section IV.H: Other Background Information / Description of Material Management Information Systems
68
.