Recovery Planning at State Street Bank GmbH As of December 31, 2014 - PowerPoint PPT Presentation

Recovery Planning at State Street Bank GmbH As of December 31, 2014

Regulator Aims to Minimize Risks for Clients and Taxpayers The presentation is focusing on Recovery Planning in regards to the requirements SSB GmbH has to fulfil within Germany Risk minimization for clients and taxpayers (esp. through • involvement / participation of the banks’ creditors) Implementation of coherent recovery standards within Germany • as well as the European Union Significant strengthening of the authorities • Regulatory Regulatory Regulatory Regulatory Aims Aims Avoidance of a bankruptcy of a bank due to an early initiation of Aims Aims • recovery measures Supply of instruments for the recovery of banks in order to avoid • knock-on effects on other institutions or the financial system in general Legal Implementation Germany KWG* (German Banking Act) and MaSan (Minimum Requirements for the Design of Recovery Plans) � binding for State Street Bank GmbH as of December 31, 2014 Europe Bank Recovery and Resolution Directive (effective since January 1, 2015) in conjunction with the respective EBA Standards * The relevant KWG were replaced by the SAG (German Recovery and Resolution Planning Act), which came 2 into force on January 1, 2015.

Strategic Business & Scenario Analysis as the Basis for Increased Viability of Banks • Recovery Planning is based upon the following principles – Identification of key commercial as well as critical activities that will need to be preserved in the event that an institution is under financial distress – Institution must develop appropriate governance and measurement criteria to identify financial distress and to determine when necessary actions need to be taken – Recovery activities should have both a meaningful impact and should be achievable within a reasonable period – Scenarios should consider both idiosyncratic and systemic stress conditions – Scenarios should cover two time horizons: short-term (sudden occurrence) and long-term (gradual occurrence exceeding 6 months) – The planned actions should result in the restoration of the institution’s capital and liquidity position to appropriate regulatory levels Recovery Plans must be kept confidential must be kept confidential and may only be disclosed to third parties that are involved must be kept confidential must be kept confidential in the development and implementation of the Recovery Plan (§ 47i para. 4 KWG or § 21 SAG) 3

Recovery Planning for Preparation Purposes SSB GmbH has developed a Recovery Plan in order to protect the viability of the institution (Current) Normal Zone (Current) Normal Zone (Current) Normal Zone (Current) Normal Zone Recovery Zone Recovery Zone Recovery Zone Recovery Zone Resolution Zone Resolution Zone Resolution Zone Resolution Zone Business Monitoring Business Monitoring Business Monitoring Business Monitoring Being Prepared Being Prepared Being Prepared Being Prepared Business Recovery Business Recovery Business Recovery Business Recovery Authority Coordination Authority Coordination Authority Coordination Authority Coordination • Based on internal early Recovery Planning • Decision which potential • No responsibilities Institution Institution Institution Institution warning indicators (more • Preparation / update of a Recovery Option/s will be restrictive than official Recovery Plan on a stand- chosen restrictions) a threshold alone level • Provide information to the violation would lead to Resolution Planning competent authority about undertaking • Provide information for the the situation and selected counteractions creation of the Resolution Recovery Option/s Responsibility Responsibility Responsibility Responsibility Plan on request of the resolution authority • No responsibilities Recovery Planning • No responsibilities • Potential options: • Assessment of the Authority Authority Authority Authority − Sell or transfer assets institution‘s Recovery Plan into a special interim / (competent authority) bridge institution Resolution Planning − Extraction of assets • Development of a institution specific − Usage of “Bail-In“ Resolution Plan instruments (resolution authority) 4

SSB GmbH Ownership SSB GmbH is a wholly owned indirect subsidiary of State Street Bank and Trust Company (“SSBT”), which is a wholly owned subsidiary of State Street Corporation (“SSC”). SSC and all of its subsidiaries are collectively referred to as State Street. SSC is a publicly listed (NYSE: STT) bank holding company and a financial holding company headquartered in Boston, United States of America. SSC is subject to the supervision and regulation of the Board of Governors of the Federal Reserve System in the United States SSBT is the principal banking subsidiary of SSC and is a direct wholly-owned subsidiary of SSC. SSBT’s primary federal banking regulator is the Board of Governors of the Federal Reserve System in the United States. In addition, SSBT is subject to the supervision and regulation of the Massachusetts Division of Banks and the Federal Deposit Insurance Corporation State Street has been identified as systemically important by the Financial Stability Board and the Basel Committee on Banking Supervision 5

The State Street Group is Characterized by its Strong Financial Situation Comparison of Major Capital Figures as of December 31, 2014 Potential differences of the underlying calculation methods between divergent jurisdictions may affect the presented capital figures State Street Bank GmbH State Street Eligible Capital Total 1,309M EUR 14,711M EUR Tier 1 Capital 1,245M EUR 12,984M EUR Total Capital Ratio 26.4% 19.8% Tier 1 Capital Ratio 25.2% 17.4% State Street is characterized by a strong capital basis. State Street is characterized by a strong capital basis. State Street is characterized by a strong capital basis. State Street is characterized by a strong capital basis. 6

State Street Bank GmbH‘s Recovery Plan Structure (1/2) State Street Bank GmbH Recovery State Street Bank GmbH Recovery Plan Plan State Street Bank State Street Bank GmbH Recovery GmbH Recovery Plan Plan in accordance with KWG and MaSan Executive summary Executive summary Executive summary of Executive summary of the Recovery Plan of of the Recovery Plan the Recovery Plan the Recovery Plan Part 1 Part 1 Part 1 Part 1 the Recovery the Recovery Plan the Recovery the Recovery Plan Plan Plan Strategic Strategic Strategic Strategic Analysis Analysis Analysis Analysis Description of the credit institution including legal and organizational structure, key figures, business • activities, interconnectedness • Identification of business activities that are key commercial activity and/or critical activity: Key Commercial Activity: Identification of services that have a significant impact on the net assets, financial position and profit Part 2 Part 2 Part 2 Part 2 situation � focus on SSB GmbH / internal impact. Critical Activity: Identification of services where in case of an inability of SSB GmbH to provide these a considerable impact on the financial market infrastructure is expected � focus on financial markets / external impact. Recovery Recovery Recovery Recovery Options & Stress Testing Options & Stress Testing Options & Stress Testing Options & Stress Testing � For detailed information regarding the requirements, please refer to next slide Part 3 Part 3 Part 3 Part 3 Implementation of identified additional Recovery Options Implementation Implementation Implementation of identified additional Recovery Options of identified additional Recovery Options of identified additional Recovery Options Identification of additional recovery measures and detailed steps to implement such. Part 4 Part 4 Part 4 Part 4 7 7