The Bank of New York Mellon Annual Report 2022

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FY2022 Annual Report · The Bank of New York Mellon

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ONWARD TO
OPPORTUNITY

ANNUAL REPORT 2022

Robin Vince,
President and
Chief Executive Officer

DEAR FELLOW
SHAREHOLDERS,

I’m writing my first
letter to you six months
into my tenure as CEO
of BNY Mellon.

It’s an honor to be leading
this institution, with its
rich history and pivotal
role in global markets.

BNY MELLONGlobal reach and scale

$44T

Assets under custody
and/or administration 1

$5.5T

Average triparty
balances 3

Leading market positions

Global custodian 5

Provider of global
collateral services 7

TOP 10

$1.8T

Assets under
management 2

$2.5T

Average daily U.S. dollar
payment value 3

$10T

Average daily
clearance value 3

$270B

Wealth Management
client assets 4

Global provider of
issuer services 6

Provider of clearing and settlement
for U.S. government securities

TOP 5

Global U.S. dollar
payments clearer 9

Clearing firm for broker-dealers
and Top 3 Registered Investment
Advisor custodian 8

TOP 10

Global asset manager 10

U.S. private bank 11

1 As of December 31, 2022. Consists of assets under custody
and/or administration (“AUC/A”), primarily from the Asset
Servicing business and, to a lesser extent, the Clearance and
Collateral Management, Issuer Services, Pershing and Wealth
Management businesses. Includes the AUC/A of CIBC Mellon

Global Securities Services Company (“CIBC Mellon”), a joint
venture with the Canadian Imperial Bank of Commerce,
of $1.5 trillion at December 31, 2022.

2 As of December 31, 2022. Excludes assets managed
outside of the Investment and Wealth Management
business segment.

3 Average for the quarter ended December 31, 2022.
4 As of December 31, 2022. Includes assets under management

and AUC/A in the Wealth Management line of business.

5 Ranking based on latest available peer group company filings.

BNY Mellon internal analysis.

Peer group included in ranking analysis: State Street,
JPMorgan Chase, Citigroup, BNP Paribas, HSBC,
Northern Trust and RBC.

6 Full-year 2022 figures by deal volume and count referenced
herein include long-term program and stand-alone bond
issuance in markets where BNY Mellon actively
participates and for which public trustee and/or paying
agent data is available. Sources include: Refinitiv,
Dealogic, Asset-Backed Alert and Concept ABS.
Transactions are credited based on trustee/paying agent
appointments, depending on the product and market in
question. Depositary Receipts ranking as of December
31, 2022. Ranked #1 based on market share sourced from

7 Finadium market analysis as of fourth quarter 2022.
8

LaRoche Research Partners, “Clearing Firm Customer
Composition 2022,” based on number of broker-dealer clients.
Registered Investment Advisor rankings sourced from “Cerulli
Report, U.S. RIA Marketplace 2022,” Cerulli Associates.
9 The Clearing House. Based on CHIPS volumes for the year

ended December 31, 2022.

10 Pensions & Investments, June 6, 2022. Ranked by total

worldwide assets under management as of December 31, 2021.
Based on company filings and The Cerulli Report, 2022. Ranked
by Wealth Management assets under management as of
December 31, 2022.

ANNUAL REPORT 2022

We are proud of the trust clients
and the industry place in us,
although I’ve never thought
of BNY Mellon as a typical
“trust” bank. We touch around
20% of the world’s investable
assets and hold many industry-
leading positions across our
broader set of complementary
businesses. These synergistic
businesses give us an end-
to-end view of the investment
lifecycle, allowing us to act
as a single point of contact
for clients looking to create,
trade, hold, manage, service,
distribute or restructure
investments. We see ourselves
as a comprehensive platform
for the financial markets of the
world, a responsibility we take
very seriously.

Since joining the firm, I’ve
met with hundreds of clients
and thousands of employees
around the world to understand
how they perceive our
challenges and opportunities.
I’ve also met with our regulators,
other stakeholders and many
of you. I’ll share a few of
my observations.

First and foremost, it’s clear that
our clients — including many
of the world’s leading financial
institutions, asset managers and
governments — trust us deeply
with some of the most sensitive
aspects of their businesses.
They value our at-scale platform,
which allows them to operate
more efficiently and focus on the
core competencies that drive
their growth.

Sources: Fortune 100: For 2022, Fortune, Time Inc. ©2022;
Investment Managers: Pensions & Investments, worldwide
assets under management as of December 31, 2021,
P&I Crain Communications Inc. ©2022; Life and Health Insurance
Companies: A.M. Best total admitted assets as of July 2022,
A.M. Best Company, Inc. ©2022; Banks: S&P Global, total assets
as of December 31, 2021, ©2022 S&P Global; client penetration
assessment based on positive 2022 revenue with client company
or parent/holding company.

Breadth of our client franchise

93% 89%

of Fortune 100
companies

of the Top 100
investment
managers
worldwide

94% 97%

of the Top 50
U.S. life/health
insurance
companies

of the Top
100 banks
worldwide

It's also clear we have a
collaborative and intensely
client-focused culture, which we
find special and differentiating.
Our employees take real pride
in delivering for our clients and
the company.

In addition, resilience is essential
to who we are. The strength and
stability of our platform present
a differentiated value proposition
to the market that may not be fully
appreciated. Clients can look to
us for our demonstrated ability to
operate through times of crisis,
as well as a strong, well-capitalized
and lower credit-risk balance
sheet. These are important
attributes, especially in turbulent
markets and challenging
environments like those we
faced in 2022.

Despite these positives, let me
be clear — our firm has not fully
lived up to the promise afforded
to us by our history, culture and
client relationships. Among
other external factors, deferred
decisions, resulting in part from
a lack of consistent execution
over the past decade, have held
our performance back. Today, we
see real potential to materially
improve the company’s operating
model and drive profitable growth.

With this as a starting point, I’ll
offer a candid assessment of the
past and an early vision for the
future. Recognizing that more work
remains for us as a management
team, I believe we are on solid
footing to begin our next chapter.

III

BNY MELLONLOOKING
BACK

Over the past decade,
we made progress across
a variety of strategic
initiatives that have
strengthened our
leading position at the
intersection of trust
and innovation.

At the same time,
we missed out on
opportunities to deliver
a stronger commercial
proposition to the market.
As a result, our track
record for revenue
and pre-tax income
growth has not met
our expectations.

ANNUAL REPORT 2022
Sales momentum
The depth and longevity of our client relationships is
a powerful advantage. More recently, we’ve elevated
client dialogue while maintaining a strong focus on
service quality, which has translated into higher-value
deals and net new asset generation that better reflect
the strength of our platform.

Innovation
Part of what attracted me to BNY Mellon a little
over two years ago was its track record as a frequent
first mover, tracing back to the company’s founding.
In the past decade alone, BNY Mellon was the first
bank to make a real-time payment in the United States
using The Clearing House’s network, the first to offer
real-time e-billing in the U.S. and, most recently, the
first global systemically important bank to provide
custody of digital assets.

First, I’ll touch on what we have done well:

Resilience
As a key service provider to the U.S. government that
plays an integral role in global markets, resilience
is both a responsibility we take seriously and an
attribute we see as highly commercial.

For these reasons, we have invested significantly
in our infrastructure to provide a strong foundation
from a security, resiliency and scalability perspective,
enabling us to provide continuity of service to clients
through the COVID-19 pandemic and the extraordinary
moves we saw more recently with several government
debt markets and volume surges. Our enhanced
contingent capabilities support this solid foundation,
which is continually tested against various stress
scenarios. A few examples:

• We have systematically reviewed and moved
over 90% of our distributed applications onto
new, modern infrastructure.

• We’ve rationalized our data-center footprint into

a limited but resilient set of state-of-the-art data
centers, each hosting our global applications.

• We leverage our sophisticated Cyber, Technology
and Operations Center that deploys advanced
monitoring, artificial intelligence and machine
learning for detection and rapid response, helping
to protect clients and their assets.

Importantly, we know we are not done — nor will we
ever be done — so we have embedded an approach for
continual improvement of our systems in support of
global market stability.

BNY MELLON

While we’ve succeeded in many areas, we’ve
also missed opportunities and fallen short of
investors’ and our own expectations in others.
Three interrelated examples come to mind:

Deepening relationships across our platform
One resounding message I hear from clients is that
they want to do more business with us. Making
this easier for them presents a meaningful growth
opportunity on which we have yet to properly
capitalize. As the beginning of that new journey, we
have launched 1BNY Mellon, a program that aims to
generate new business across different products from
existing client relationships. We have also drawn into
the core of our firm some businesses that previously
operated separately. While this is a start, there is more
opportunity here. We must do a better job connecting
the dots internally and externally, and we will.

Profitable new business growth
While sales momentum has picked up in recent
years, that business has too often come at
relatively low margins, with pricing concessions
and deals structured in bespoke, complex ways
that underestimate operating costs or do not lend
themselves to scale. An honest reckoning of the past
tells us that sometimes, we have had insufficient
focus on margin and re-engineering. Going forward,
we must do a better job of focusing crisply on the
bottom line and the true cost to serve.

Long-term financial performance
Over the past decade, excluding notable items, our
revenue and pre-tax income have grown by low
single digits annually.1 Additionally, over this period,
we incurred over $2 billion of net charges related to
notable items, which impacted our reported results.
More recently, our expenses excluding notable
items have grown by more than 5% in both 2021 and
2022 — 5% and 13%, respectively, on a reported
basis — a rate of growth we consider too high. 2
We are therefore increasing our focus on expense
accountability and driving meaningful operational
efficiency while also focusing on profitable new
business in 2023 and beyond.

Compound annual growth rate. See page XX for reconciliation of these non-GAAP measures.
On a reported basis, revenue grew by 1%, and pre-tax income was flat.
See “Supplemental Information: Explanation of GAAP and non-GAAP financial measures,”
beginning on page 104, for the reconciliations.

ANNUAL REPORT 2022

2022 FINANCIAL
PERFORMANCE

Acknowledging that the prior decade’s financial
performance has been underwhelming, we delivered
solid results in 2022 against the backdrop of a complex
operating environment. We ultimately reported EPS
of $2.90, revenue of $16.4 billion and return on common
equity (ROE) of 7%. Adjusting for the impact of notable
items, EPS increased by 8%, to $4.59 on $16.9 billion of
revenue, which was up 6% year-over-year, and return
on tangible common equity (ROTCE) was a very healthy
21%.1 Fees were up 1% excluding notable items, or flat
on a reported basis, despite significant headwinds from
both markets and a stronger U.S. dollar.1

Growth benefited from lower money market fee waivers
and we drove incremental business with new and
existing clients, saw organic growth in assets under
custody and/or administration (AUC/A) and net inflows
into assets under management (AUM).

Across our diversified portfolio of businesses,
we saw healthy underlying growth in our Securities
Services and Market and Wealth Services segments
while our Investment and Wealth Management segment
felt the strain of a continued decline in global market
values and client de-risking. Firmwide, we continuously
positioned ourselves to derive meaningful benefit from
the upward move in interest rates.

STRONG CAPITAL AND
LIQUIDITY POSITION

Over the course of the year, we returned $1.3 billion of capital to
shareholders, primarily through our quarterly cash dividends on common
stock, which we increased by 9%, to $0.37 per share beginning in the third
quarter. The sharp move upward in interest rates this past year impacted
our ability to return capital through common stock buybacks, but we
ended 2022 in a position of capital and liquidity strength.

Our Tier 1 leverage ratio of 5.8% and Common Equity Tier 1 ratio
of 11.2% were higher and flat, respectively, versus year-ago levels, and
comfortably above regulatory requirements and our more stringent
management targets. Our liquidity coverage ratio ended the year at 118%,
up from 109% a year ago. And over the course of 2022, we meaningfully
reduced the duration and improved the risk and liquidity profile of our
securities portfolio while keeping over 60% of the book designated as
available-for-sale, which we viewed as a more prudent approach given the
environment. Together, we expect these actions will provide us with ample
flexibility as we move through 2023 to adjust to changing market and
interest rate conditions, and to return a healthy amount of capital to our
shareholders this year.

1 See “Supplemental Information: Explanation of GAAP and non-GAAP financial measures,”

beginning on page 104, for the reconciliations.

BNY MELLON

VII

SECURITIES SERVICES

Our Securities Services segment includes our Asset Servicing,
Corporate Trust and Depositary Receipts businesses. We enjoy
industry-leading positions across most of the segments in which
these businesses operate.

Revenues were up 11% in 2022, reflecting the benefit from higher interest
rates as well as healthy underlying growth. Asset Servicing growth came
from existing clients and higher-value sales wins, with particular strength
in ETFs and Alternatives. In Issuer Services, the businesses mitigated stiff
headwinds from lower issuance volumes in Corporate Trust, and managed
the exceptionally complex landscape resulting from sanctions on Russia
and our decision to cease new banking business in the country.

Although we were pleased with our revenue momentum, our pre-tax
margin of 21% for this business in 2022 remains too low for some of the
reasons mentioned above. We are executing against a multiyear plan
to achieve our target of 30%-plus pre-tax margin in this business over
the medium term. It will come from a combination of higher interest
rates, driving “profitable” growth and becoming meaningfully more
efficient across our operations: consolidating and integrating technology
platforms, better standardizing middle-office and data offerings,
digitizing engagement with clients and automating onboarding.

Our Market and Wealth Services segment includes our industry-leading
Pershing and Clearance and Collateral Management businesses,
and our scaled Treasury Services business. This segment enables us
to drive multi-business solutions and equips us as a premier market
infrastructure provider, distinguishing us in the marketplace from
our closest peers.

Revenues were up 11% in 2022, with all three businesses growing
at 10%-plus. Despite a difficult environment for the wealth market,
Pershing brought in net new assets of over $120 billion, reflecting healthy
5% growth. Treasury Services added new business across strategic
payment solutions and liquidity products, and drove higher payment
volumes while also generating strong initial traction as we built our
Digital Payments and related FX and Trade businesses. Clearance and
Collateral Management revenue primarily grew on the back of higher
U.S. government clearance volumes, driven by continued demand for
U.S. Treasury securities due to elevated volatility amid evolving monetary
policy. The business also continued to drive client migration and balances
to our triparty platform, which reached a record for our business of
$5.5 trillion in the second half of 2022.

In this segment, pre-tax income improved by 10%, and pre-tax margin
remained a healthy 44%.

MARKET AND
WEALTH SERVICES

VIII

ANNUAL REPORT 2022INVESTMENT AND
WEALTH MANAGEMENT

The impact of weaker markets and a stronger U.S. dollar had a
material impact on this business segment, comprising Investment
Management — one of the world’s largest asset managers — and
Wealth Management — which ranks among the top 10 private banks
in the United States. This was felt both directly and indirectly, as the
uncertain environment caused some investors to rebalance and maintain
liquidity, ultimately moving their investments into lower-fee, risk-off
solutions. As a result, revenues declined by 12% and the business
essentially broke even with a pre-tax margin of 1%, though it was 24%
after adjusting for notable items, primarily a goodwill impairment.1

Despite these lower financial results, both Investment Management
and Wealth Management made progress against our strategic priorities
and performed well in areas under our control. In Investment Management,
our differentiated, specialist investment firms displayed resilience,
and performance was solid, improving from the prior year, with about
two-thirds of our top 30 strategies ranked in the top two quartiles versus
peers.2 AUM flows were positive, and the business impressively navigated
significant turbulence in the U.K. gilt (government securities) market.
In Wealth Management, investment performance also remained solid,
and the business acquired more clients, particularly with ultra-high-net-
worth and family-office segments, while continuing to deepen existing
relationships through our expanded banking offering.

1 See “Supplemental Information: Explanation of GAAP and non-GAAP financial measures,” beginning on page 104, for the reconciliations.
2 Rankings are relative to their respective Morningstar peer categories on a three-year basis.

BNY MELLONLOOKING
FORWARD

In 2023, a sense of
purpose, execution
and efficiency will
be key to driving
long-term profitable
growth and improved
pre-tax margins
for our company.

ANNUAL REPORT 2022Here are some of the key questions on
my mind as we consider the future:

How do we become more

How can we make better use

effective at delivering the whole

of our vast amount of data?

firm to our clients?

We recognize a need to better connect the dots for
our clients around the world, so they can leverage
the combined strength and interconnectedness of
our platform to focus on alpha generation. Through
1BNY Mellon, our focus is on training and incentivizing
our people to collaborate across the firm and developing
deliberate approaches to multiproduct solutions.
We’ve mobilized cross-business sales teams around
specific client segments to facilitate opportunities,
and we’ve established cross-functional market
leadership teams to increase client penetration.

With $48 trillion in data assets, we have access
to one of the world’s most expansive data sets.1
Each day, we track trading activity for around
$15 trillion in global equity assets and $30 trillion
in fixed-income securities. The richness of our data
enables us to translate unique insights for our clients
into opportunities and risks. Moving forward, we see
potential to better use our data-centric platform
to inform client decision-making.

Each day, we track trading activity for around

1 Data is as of December 31, 2022 unless otherwise noted.

$15 TRILLION

in global equity assets and

$30 TRILLION

in fixed-income securities

BNY MELLONWhat does it take to truly

Are we making the right

transform our operating model

investments in our future?

toward more efficiency?

Our company operations are not as streamlined
as they need to be. Like other large institutions,
we have certain legacy processes and redundant
systems overdue for a refresh. For example, we have
multiple custody, loan and deposit platforms, and we
operate numerous different call centers. Recognizing
opportunities to digitize and automate, we launched
an initiative in 2022 through which we solicited more
than 1,500 ideas from those who see items ripe for
improvement most clearly and closely — our people.
Beyond formal measures, we’re also encouraging a
culture shift to think more commercially and question
the status quo, which has the additional key benefit
of improving the client experience.

We have identified and begun shifting investment
toward calculated growth opportunities while
simultaneously continuing to invest in capabilities that
support our resilience. Our long-term growth initiatives
have clear and specific targets that we expect the
teams to hit over the course of the year. While some
investments may not see profitable growth in the
very short term, we believe early developments in the
infrastructure of the future will secure our position
as an industry leader. We are being disciplined in the
number of investments we take on, with an eye on our
ambition and what we can achieve, while also staying
grounded to a sensible expense spend. In 2022, we
made progress across the various initiatives that
follow, and we will continue these in 2023.

XII

ANNUAL REPORT 2022WEALTH
TECHNOLOGY

REIMAGINING
OF COLLATERAL

FASTER
PAYMENTS

BLOCKCHAIN AND
TOKENIZED ASSETS

There’s a productivity problem in the wealth advisory industry,
presenting a growth opportunity for firms that can solve it. Just one year
after launching Pershing X, our proprietary advisory solution that aims
to transform the marketplace, we released a preliminary version to select
clients. This is a testament to our ability to execute on a tight timeline.
We have set our sights high for 2023, with a broader rollout expected
later this year.

Three years ago, we announced the Future of Collateral, an initiative to
enhance our capabilities to meet the increasingly complex demands
of clients. Following investments in state-of-the-art technology, our
collateral platform is more resilient, supports harmonization, and helps
clients to optimize, mobilize, and connect collateral around the world.
Our enhanced capabilities, together with the complementary services we
deliver with leading fintechs, will benefit our clients and should create
opportunities in the years to come.

We see real-time payments as enabling a more efficient, transparent
and frictionless future for clients, while also saving them money and
reducing the financial industry’s carbon footprint. As the first bank to
execute a real-time payment in the United States using The Clearing
House’s network, BNY Mellon is positioned to help institutions and people
around the world make payments instantly and take ownership of their
finances. We enjoy a relatively unconflicted position in the U.S. payment
industry, without attachment to interchange fees or the bricks and mortar
that can inhibit self-disruption. We also see possibilities in the growth
of request-for-payment technology for consumers, and we intend
to continue making investments in this space.

Our teams consider the broader opportunity that exists across blockchain
technology and tokenized assets as a potential way to make financial
markets faster, more efficient and more resilient. Uncertainty in the
cryptoasset space only further highlights the need for trusted, regulated
providers in this ecosystem. We went live with our Digital Asset Custody
platform for select institutional clients in the United States in October
2022, the first global systemically important bank to do so. This is a
starting point in what we see as a decades-long journey for blockchain
and tokenization.

XIII

BNY MELLONDo we have the right talent,

How can we leverage our role in global

culture and incentives to accomplish

financial markets and our resources to

our ambitious goals?

make a positive impact on society?

Our potential as a company depends on cultivating
a high-performing and diverse culture. We are focused
on empowering employees to act as owners of their
individual roles and shareholders of the company as
a whole. We recently initiated an equity grant program
called “BK Shares” so that almost all employees
now own BNY Mellon stock, helping align the firm
with our vision. We also took a closer look at annual
compensation to commensurately reward the people
who consistently deliver commercial success, while
ensuring the appropriate shape of our workforce for
the road ahead. These changes allow us to run the
organization more efficiently and reinvest in new
benefits programs and emerging talent — and we
expect to break our record for college recruitment
in 2023.

Not only is helping more people access
wealth-generating opportunities and benefit
from our capabilities the right thing to do; it’s also
a commercial endeavor. Uplifting historically
underserved communities and finding opportunities
for collaboration with specialized market players
benefits the long-term health of our company
and the broader society around us. Over the past
year, we were proud of the impact we made on
our communities and intend to expand these
initiatives in 2023.

See our
client stories

XIV

ANNUAL REPORT 2022EXPORTING
CAPABILITIES

INCREASING
INCLUSION

SUPPORTING
TALENT

Market access for communities
Our scale and significance place us in a privileged position, but also
grant us the responsibility of helping the financial system work better
for everyone. From Treasury Services to Clearance and Collateral
Management to Pershing, we can export our industry-leading positions
and global capabilities to communities around the world through
strategic alliances with other financial firms. We are proud to work with
South Carolina-based Optus Bank to expand its capacity, market reach
and community reinvestment opportunities with BNY Mellon products,
services and infrastructure. In the months ahead, we intend to share more
about collaborations like this that bring our suite of services to communities
far removed from major centers of capital, doing our part to democratize
quality financial services to an increasing number of market participants.

Collaborations with diverse businesses
Our commitment to improving diversity and inclusion extends to
the markets in which we operate. We were fortunate to work with
joint lead bookrunners Loop Capital Markets, Ramirez & Co. and
Siebert Williams Shank — all clients that also happen to be
minority-owned investment firms — on a bond issuance in the
second quarter of 2022. In November, eight veteran-owned
broker-dealers participated in an offering of senior bank notes.
In 2023, we plan to continue making proactive and deliberate efforts
to include more communities in successful commercial outcomes.

BOLD initiative benefiting Howard University
Speaking further to our focus on recruiting high-performance talent,
we began an exciting collaboration with Howard University, one of the
leading historically Black colleges and universities in the United States,
with the launch of the Black Opportunity for Learning and Development
(BOLD) share class of the Dreyfus Government Cash Management fund.
The program helps translate our clients’ liquidity solution investments
through BOLDSM to supporting Howard University’s Graduation Retention
Access to Continued Excellence (GRACE) Grant, which aids in removing
financial obligations and improving graduation rates for at-need students.
According to Howard University, to date, recipients saw an average 15%
increase in retention and an average four-year graduation rate of 78%,
a 32% increase compared with students who did not receive these funds.

BNY MELLON“While I’m conscious of
the work that remains,
I strongly believe in our
long-term potential.

Over the near term,
executing with surgical
precision and urgency will
be critical to our success.”

XVI

ANNUAL REPORT 2022IN
CONCLUSION

Given our prominent position in
global markets, our businesses are
naturally sensitive to valuation and
activity levels to varying degrees.
I’m encouraged by the positive
long-term developments we are
seeing in the U.S. economy around
self-sufficiency, ranging from
improved energy independence
to chip development, and excited
about the innovations and new
technologies underpinning
blockchain and tokenization that
will offer benefits to the financial
system and broader economy. At
the same time, geopolitical strains,
uncertainty around inflationary
policy and the path of interest
rates, as well as liquidity concerns,
are likely to continue to temper
the near-term global outlook.

Acknowledging that these
uncertainties will carry some
challenges, it’s important to
underscore a renewed sense of
optimism running through our
company. We see opportunities
in these trends and, more broadly,
we recognize opportunities to do
more across our extensive suite
of products and services for
our clients.

While I’m conscious of the work
that remains, I strongly believe in
our long-term potential.

Over the near term, executing with
surgical precision and urgency will
be critical to our success.

We have a highly engaged Board
supporting us and appropriately
challenging our strategy, plans
and execution. Transparency will
remain a constant theme with our
management team, and we intend
to bring all stakeholders along on
our transformation journey with
regular updates demonstrating our
progress and frank assessments
of the work that remains.

I’ll conclude where I began:
BNY Mellon has a great deal of
potential, and I feel privileged to be
in the position to lead us toward our
future opportunities. I’m proud of
our people, grateful for our clients
and for all of you as our investors.
On behalf of our company, I am
excited for what comes next.

ONWARD,

Robin Vince, President and
Chief Executive Officer

XVII

BNY MELLONFINANCIAL HIGHLIGHTS

The Bank of New York Mellon Corporation (and its subsidiaries)
(dollars in millions, except per common share amounts or unless otherwise noted)

2022

2021

SELECTED INCOME STATEMENT INFORMATION
Fee and other revenue
Net interest revenue
Total revenue
Provision for credit losses
Total noninterest expense
Income before income taxes
Net income applicable to common shareholders of
The Bank of New York Mellon Corporation

Earnings per common share – diluted
Cash dividends per common share

FINANCIAL RATIOS
Pre-tax operating margin
Return on common equity
Return on tangible common equity – non-GAAP (a)

NON-GAAP MEASURES, EXCLUDING NOTABLE ITEMS (b)
Adjusted total revenue
Adjusted total noninterest expense
Adjusted earnings per common share – diluted
Adjusted pre-tax operating margin
Adjusted return on common equity
Adjusted return on tangible common equity (a)

KEY METRICS AT DECEMBER 31
Assets under custody and/or administration (“AUC/A”) (in trillions) (c)
Assets under management (in billions) (d)

BALANCE SHEET AT DECEMBER 31
Total assets
Total deposits
Total The Bank of New York Mellon Corporation common shareholders’ equity

CAPITAL RATIOS AT DECEMBER 31
Consolidated regulatory capital ratios:
Common Equity Tier 1 (“CET1”) ratio (e)
Tier 1 capital ratio (e)
Total capital ratio (e)
Tier 1 leverage ratio
Supplementary leverage ratio

MARKET INFORMATION AT DECEMBER 31
Closing stock price per common share
Market capitalization
Common shares outstanding (in thousands)

$
$

12,873
3,504
16,377
39
13,010
3,328

2,362

2.90
1.42

20%
6.5%
13.4%

16,888
11,981
4.59
29%
10.3
21.0

44.3
1,836

405,783
278,970
35,896

11.2%
14.1
14.9
5.8
6.8

$
$

13,313
2,618
15,931
(231)
11,514
4,648

3,552

4.14
1.30

29%
8.9%
17.1%

15,918
11,385
4.24
30%
9.2
17.6

46.7
2,434

444,438
319,694
38,196

11.2%
14.0
14.9
5.5
6.6

$
$

45.52
36,800
808,445

$
$

58.08
46,705
804,145

(a) Return on tangible common equity, a non-GAAP measure, excludes goodwill and intangible assets, net of deferred tax liabilities. See “Supplemental information: Explanation

of GAAP and non-GAAP financial measures” beginning on page 104 for a reconciliation.

(b) Adjusted measures exclude notable items. See “Supplemental Information: Explanation of GAAP and non-GAAP financial measures,” beginning on page 104.
(c) Consists of AUC/A, primarily from the Asset Servicing line of business and, to a lesser extent, the Clearance and Collateral Management, Issuer Services, Pershing and Wealth
Management lines of business. Includes the AUC/A of CIBC Mellon Global Securities Services Company, a joint venture.
(d) Excludes assets managed outside of the Investment and Wealth Management business segment.
(e) For our CET1, Tier 1 capital and Total capital ratios, our effective capital ratios under U.S. capital rules are the lower of the ratios as calculated under the Standardized and

Advanced Approaches, which for Dec. 31, 2022 was the Advanced Approaches, and for Dec. 31, 2021 was the Standardized Approach.

XIX

BNY MELLON

SUPPLEMENTAL INFORMATION

Explanation of GAAP and non-GAAP financial measures
We have included in this letter to shareholders certain non-GAAP measures of total revenue and total pre-tax
income. We believe that these measures provide useful information to investors for evaluating the underlying
performance of our business.

TOTAL REVENUE AND PRE-TAX INCOME RECONCILIATION
(dollars in millions)

Total revenue - GAAP
Impact of notable items1

Adjusted total revenue - non-GAAP

Total pre-tax income - GAAP

Impact of notable items1

Adjusted total pre-tax income - non-GAAP

2022

2012

16,377

14,610

(511)

–

$ 16,888

$ 14,610

3,328

(1,540)

4,868

3,357

(575)

3,932

2022 vs.
2012 (CAGR)

–

1 Notable items impacting total revenue in 2022 include the net loss from repositioning the securities portfolio, the accelerated amortization of deferred costs for depositary receipts services related to Russia

and net gains on disposals. Notable items impacting total pre-tax income in 2022 also include the goodwill impairment, severance expense and litigation reserves. Notable items impacting total pre-tax income
in 2012 include merger and integration charges, litigation reserves, restructuring charges and a charge related to investment management funds, net of incentives.

ANNUAL REPORT 2022

FINANCIAL SECTION

THE BANK OF NEW YORK MELLON CORPORATION
2022 Annual Report
Table of Contents

Financial Summary

Page
2

Financial Statements:

Page

Management’s Discussion and Analysis of
Financial Condition and Results of Operations:
Results of Operations:

General
Overview
Key 2022 events
Summary of financial highlights
Fee and other revenue
Net interest revenue
Noninterest expense
Income taxes
Review of business segments
International operations
Critical accounting estimates
Consolidated balance sheet review
Liquidity and dividends
Capital
Trading activities and risk management
Asset/liability management

Risk Management
Supervision and Regulation
Other Matters
Risk Factors
Recent Accounting Developments
Supplemental Information (unaudited):

Explanation of GAAP and Non-GAAP financial

measures (unaudited)

Rate/volume analysis (unaudited)

Forward-looking Statements
Glossary

Report of Management on Internal Control Over

Financial Reporting

Report of Independent Registered Public

Accounting Firm

3
3
3
4
6
9
12
12
13
21
23
27
36
40
45
47
49
56
73
74
103

104
109
110
112

113

114

Consolidated Income Statement
Consolidated Comprehensive Income Statement
Consolidated Balance Sheet
Consolidated Statement of Cash Flows
Consolidated Statement of Changes in Equity

Notes to Consolidated Financial Statements:

Note 1 – Summary of significant accounting and

reporting policies

Note 2 – Accounting changes and new accounting

guidance

Note 3 – Acquisitions and dispositions
Note 4 – Securities
Note 5 – Loans and asset quality
Note 6 – Leasing
Note 7 – Goodwill and intangible assets
Note 8 – Other assets
Note 9 – Deposits
Note 10 – Contract revenue
Note 11 – Net interest revenue
Note 12 – Income taxes
Note 13 – Long-term debt
Note 14 – Variable interest entities
Note 15 – Shareholders’ equity
Note 16 – Other comprehensive income (loss)
Note 17 – Stock-based compensation
Note 18 – Employee benefit plans
Note 19 – Company financial information (Parent

Corporation)

Note 20 – Fair value measurement
Note 21 – Fair value option
Note 22 – Commitments and contingent liabilities
Note 23 – Derivative instruments
Note 24 – Business segments
Note 25 – International operations
Note 26 – Supplemental information to the
Consolidated Statement of Cash Flows

Report of Independent Registered Public

Accounting Firm

Directors, Executive Committee and Other

Executive Officers

Performance Graph

116
118
119
120
121

123

135
135
136
141
146
148
150
151
151
153
154
155
155
156
160
161
162

168
171
179
180
185
191
194

195

196

201

202

The Bank of New York Mellon Corporation (and its subsidiaries)

Financial Summary

(dollars in millions, except per share amounts and unless otherwise noted)
Selected income statement information:
Fee and other revenue
Net interest revenue

Total revenue
Provision for credit losses
Noninterest expense

Income before income taxes

Provision for income taxes

Net income

Net loss (income) attributable to noncontrolling interests related to consolidated investment
management funds

Preferred stock dividends

Net income applicable to common shareholders of The Bank of New York
Mellon Corporation

Earnings per share applicable to common shareholders of The Bank of New York

Mellon Corporation:
Basic
Diluted

Average common shares and equivalents outstanding (in thousands):

Basic
Diluted
At Dec. 31
Assets under custody and/or administration (“AUC/A”) (in trillions) (a)
Assets under management (“AUM”) (in billions) (b)
) ( )
) (
(
Selected ratios:
Return on common equity
Return on tangible common equity – Non-GAAP (c)
Pre-tax operating margin
Net interest margin
g
Cash dividends per common share
Common dividend payout ratio
Common dividend yield
At Dec. 31
Closing stock price per common share
Market capitalization
Book value per common share
Tangible book value per common share – Non-GAAP (c)
Full-time employees
Common shares outstanding (in thousands)
)
g (
Regulatory capital ratios (d)
Common Equity Tier 1 (“CET1”) ratio
Tier 1 capital ratio
Total capital ratio
Tier 1 leverage ratio
Supplementary leverage ratio (“SLR”) (e)
) ( )

(

2022

2021

2020

$ 12,873
3,504
16,377
39
13,010
3,328
768
2,560

$ 13,313
2,618
15,931
(231)
11,514
4,648
877
3,771

$ 12,831
2,977
15,808
336
11,004
4,468
842
3,626

13
(211)

(12)
(207)
)
(

(9)
(194)
)
(

2,362

3,552

3,423

$
$

2.91
2.90

811,068
814,795

44.3
1,836

$
$

4.17
4.14

851,905
856,359

46.7
2,434

$
$

3.84
3.83

890,839
892,514

41.1
2,211

6.5%

8.9%

8.7%

13.4
20
0.97
1.42

49%
3.1%

17.1
29
0.68
1.30

32%
2.2%

17.0
28
0.84
1.24

33%
2.9%

$
45.52
$ 36,800
44.40
$
23.11
$
51,700
808,445

$
58.08
$ 46,705
47.50
$
24.31
$
49,100
804,145

$
42.44
$ 37,634
46.53
$
25.44
$
48,500
886,764

11.2%
14.1
14.9
5.8
6.8

11.2%
14.0
14.9
5.5
6.6

13.1%
15.8
16.7
6.3
8.6

(a) Consists of AUC/A primarily from the Asset Servicing line of business and, to a lesser extent, the Clearance and Collateral Management,
Issuer Services, Pershing and Wealth Management lines of business. Includes the AUC/A of CIBC Mellon Global Securities Services
Company (“CIBC Mellon”), a joint venture with the Canadian Imperial Bank of Commerce, of $1.5 trillion at Dec. 31, 2022, $1.7
trillion at Dec. 31, 2021 and $1.5 trillion at Dec. 31, 2020.

(b) Excludes assets managed outside of the Investment and Wealth Management business segment.
(c) Return on tangible common equity and tangible book value per common share, both Non-GAAP measures, exclude goodwill and

intangible assets, net of deferred tax liabilities. See “Supplemental Information – Explanation of GAAP and Non-GAAP financial
measures” beginning on page 104 for the reconciliation of these Non-GAAP measures.

(d) For our CET1, Tier 1 and Total capital ratios, our effective capital ratios under U.S. capital rules are the lower of the ratios as
calculated under the Standardized and Advanced Approaches. For additional information on our regulatory capital ratios, see
“Capital” beginning on page 40.

(e) The consolidated SLR at Dec. 31, 2020 reflects the temporary exclusion of U.S. Treasury securities from total leverage exposure which

increased our consolidated SLR by 72 basis points. The temporary exclusion ceased to apply beginning April 1, 2021.

2 BNY Mellon

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Results of Operations

General

In this Annual Report, references to “our,” “we,”
“us,” “BNY Mellon,” the “Company” and similar
terms refer to The Bank of New York Mellon
Corporation and its consolidated subsidiaries. The
term “Parent” refers to The Bank of New York
Mellon Corporation but not its subsidiaries.

The following should be read in conjunction with the
Consolidated Financial Statements included in this
report. BNY Mellon’s actual results of future
operations may differ from those estimated or
anticipated in certain forward-looking statements
contained herein due to the factors described under
the headings “Forward-looking Statements” and
“Risk Factors,” both of which investors should read.

Certain business terms used in this Annual Report are
defined in the Glossary.

This Annual Report generally discusses 2022 and
2021 items and comparisons between 2022 and 2021.
Discussions of 2020 items and comparisons between
2021 and 2020 that are not included in this Annual
Report can be found in our 2021 Annual Report,
which was filed as an exhibit to our Form 10-K for
the year ended Dec. 31, 2021.

Overview

Established in 1784 by Alexander Hamilton, we were
the first company listed on the New York Stock
Exchange (NYSE: BK). With a history of more than
235 years, BNY Mellon is a global company
dedicated to helping its clients manage and service
their financial assets throughout the investment life
cycle. Whether providing financial services for
institutions, corporations or individual investors,
BNY Mellon delivers informed investment and
wealth management and investment services in 35
countries.

BNY Mellon has three business segments, Securities
Services, Market and Wealth Services and Investment
and Wealth Management, which offer a
comprehensive set of capabilities and deep expertise
across the investment lifecycle, enabling the
Company to provide solutions to buy-side and sell-
side market participants, as well as leading
institutional and wealth management clients globally.

The diagram below presents our three business
segments and lines of business, with the remaining
operations in the Other segment.

The Bank of New
York Mellon
Corporation

Securities
Services

Market and Wealth
Services

Investment and
Wealth Management

Asset
Servicing

Issuer
Services

Investment
Management

Wealth
Management

Pershing

Treasury
Services

Clearance and
Collateral
Management

For additional information on our business segments,
see “Review of business segments” and Note 24 of
the Notes to Consolidated Financial Statements.

Key 2022 events

Alcentra

On Nov. 1, 2022, we completed the sale of BNY
Alcentra Group Holdings, Inc. (together with its
subsidiaries, “Alcentra”). At Oct. 31, 2022, Alcentra
had $32 billion in AUM concentrated in senior
secured loans, high yield bonds, private credit,
structured credit, special situations and multi-strategy
credit strategies.

Repositioning the securities portfolio

In the fourth quarter of 2022, we took actions to
reposition the securities portfolio to improve the
trajectory of our net interest revenue. We sold
approximately $3 billion of longer-dated lower
yielding municipal and corporate bonds. These
securities were replaced with significantly higher
yielding securities. As a result of the repositioning,
we recorded net securities losses of $449 million
(pre-tax) in investment and other revenue.

Goodwill impairment

In the third quarter of 2022, we recorded a $680
million impairment of the goodwill associated with
the Investment Management reporting unit, which

BNY Mellon 3

Results of Operations (continued)

was driven by lower market values and a higher
discount rate. This goodwill impairment represents a
non-cash charge and did not affect BNY Mellon’s
liquidity position, tangible common equity or
regulatory capital ratios. See “Critical accounting
estimates” for additional information.

Leadership succession

In March 2022, Todd Gibbons announced his
decision to retire as Chief Executive Officer (“CEO”)
and member of the Board of Directors effective Aug.
31, 2022. The Board of Directors appointed Robin
Vince to the position of President and CEO after Mr.
Gibbons retired. Since 2020, Mr. Vince had served
as Vice Chair of BNY Mellon and CEO of Global
Market Infrastructure, which includes BNY Mellon’s
Pershing, Treasury Services, and Clearance and
Collateral Management lines of business, as well as
Markets & Execution Services.

Dermot McDonogh joined BNY Mellon on Nov. 1,
2022, and effective Feb. 1, 2023, succeeded Emily
Portney as the Chief Financial Officer (“CFO”). Ms.
Portney served as the CFO since July 19, 2020, and
has assumed a new position leading the Company’s
Asset Servicing business.

Summary of financial highlights

We reported net income applicable to common
shareholders of $2.4 billion, or $2.90 per diluted
common share, in 2022, including the negative
impact of notable items. Notable items in 2022
include goodwill impairment in the Investment
Management reporting unit, a net loss from
repositioning the securities portfolio, severance
expense, litigation reserves, the accelerated
amortization of deferred costs for depositary receipts
services related to Russia and net gains on disposals
(reflected in investment and other revenue).
Excluding notable items, net income applicable to
common shareholders was $3.7 billion (Non-GAAP),
or $4.59 (Non-GAAP) per diluted common share, in
2022. In 2021, net income applicable to common
shareholders of BNY Mellon was $3.6 billion, or
$4.14 per diluted common share, including the
negative impact of notable items. Notable items in
2021 include litigation reserves, severance expense
and net gains on disposals (reflected in investment
and other revenue). Excluding notable items, net
income applicable to common shareholders was $3.6

4 BNY Mellon

billion (Non-GAAP), or $4.24 (Non-GAAP) per
diluted common share, in 2021.

The highlights below are based on 2022 compared
with 2021, unless otherwise noted.

•

Total revenue increased 3%, or 6% (Non-GAAP)
excluding notable items, primarily reflecting:
Fee revenue was essentially flat primarily
•
reflecting lower market values, the
unfavorable impact of a stronger U.S. dollar
and the accelerated amortization of deferred
costs for depositary receipts services related
to Russia, partially offset by lower money
market fee waivers. (See “Fee and other
revenue” beginning on page 6.)
Investment and other revenue decreased,
primarily reflecting the net loss from
repositioning the securities portfolio. (See
“Fee and other revenue” beginning on page
6.)

•

• Net interest revenue increased 34%, primarily
driven by higher interest rates on interest-
earning assets, partially offset by higher
funding expense. (See “Net interest revenue”
beginning on page 9.)

The provision for credit losses was $39 million
compared with a benefit of $231 million. The
increase was primarily driven by changes in the
macroeconomic environment forecast. (See
“Allowance for credit losses” beginning on page
34.)

• Noninterest expense increased 13%, primarily
reflecting the goodwill impairment in the
Investment Management reporting unit and
higher severance expense and litigation reserves.
Excluding notable items, noninterest expense
increased 5% (Non-GAAP), primarily reflecting
higher investments in growth, infrastructure and
efficiency initiatives and higher revenue-related
expenses, as well as the impact of inflation,
partially offset by an approximately 3% favorable
impact of a stronger U.S. dollar. (See
“Noninterest expense” on page 12.)
Effective tax rate of 23.1%, or 19.1% excluding
notable items (Non-GAAP), primarily goodwill
impairment, in 2022. (See “Income taxes” on
page 12.)

•

• Return on common equity (“ROE”) was 6.5% for
2022. Excluding notable items, the adjusted ROE
was 10.3% (Non-GAAP) for 2022.

Results of Operations (continued)

• Return on tangible common equity (“ROTCE”)
was 13.4% (Non-GAAP) for 2022. Excluding
notable items, the adjusted ROTCE was 21.0%
(Non-GAAP) for 2022.

See “Supplemental Information – Explanation of
GAAP and Non-GAAP financial measures”
beginning on page 104 for the reconciliation of the
Non-GAAP measures.

Metrics

• AUC/A totaled $44.3 trillion at Dec. 31, 2022
compared with $46.7 trillion at Dec. 31, 2021.
The 5% decrease primarily reflects lower market
values and the unfavorable impact of a stronger
U.S. dollar, partially offset by client inflows and
net new business. (See “Fee and other revenue”
beginning on page 6.)

• AUM totaled $1.8 trillion at Dec. 31, 2022

compared with $2.4 trillion at Dec. 31, 2021.
The 25% decrease primarily reflects lower market
values, the unfavorable impact of a stronger U.S.
dollar and the divestiture of Alcentra, partially
offset by net inflows. (See “Investment and
Wealth Management business segment”
beginning on page 18.)

Capital and liquidity

• Our CET1 ratio calculated under the Advanced
Approaches was 11.2% at Dec. 31, 2022 and
11.2% under the Standardized Approach at Dec.
31, 2021. This primarily reflects capital
generated through earnings, lower risk-weighted
assets (“RWAs”) and the impact of the Alcentra
sale, offset by the net decrease in accumulated
other comprehensive income and capital

deployed through dividends. (See “Capital”
beginning on page 40.)

• Our Tier 1 leverage ratio was 5.8% at Dec. 31,

2022, compared with 5.5% at Dec. 31, 2021. The
increase reflects lower average assets, partially
offset by a decrease in capital. (See “Capital”
beginning on page 40.)

Highlights of our principal business segments

Securities Services
•
•
•

Total revenue increased 11%.
Income before taxes increased 13%.
Pre-tax operating margin of 21%.

Market and Wealth Services
•
•
•

Total revenue increased 11%.
Income before taxes increased 10%.
Pre-tax operating margin of 44%.

Investment and Wealth Management
Total revenue decreased 12%.
•
Income before taxes decreased 96%; or 39%
•
excluding notable items (Non-GAAP).
Pre-tax operating margin of 1%; adjusted pre-tax
operating margin of 24% excluding notable items
(Non-GAAP).

•

See “Supplemental Information – Explanation of
GAAP and Non-GAAP financial measures”
beginning on page 104 for the reconciliation of the
Non-GAAP measures. See “Review of business
segments” and Note 24 of the Notes to Consolidated
Financial Statements for additional information on
our business segments.

BNY Mellon 5

Results of Operations (continued)

Fee and other revenue

)
(dollars in millions, unless otherwise noted)
(
Investment services fees
Investment management and performance fees (a)
Foreign exchange revenue
Financing-related fees
Distribution and servicing fees

Total fee revenue
Investment and other revenue

Total fee and other revenue

Fee revenue as a percentage of total revenue

AUC/A at period end (in trillions) (b)
) ( )
AUM at period end (in billions) (c)

(

2022

2021

2020

$ 8,529
3,299
822
175
130
12,955
(82)
$ 12,873

$ 8,284
3,588
799
194
112
12,977
336
$ 13,313

$ 8,047
3,367
774
212
115
12,515
316
$ 12,831

79%

81%

79%

2022
vs.
2021
3%
(8)
3
(10)
16
—
N/M

(3)%

2021
vs.
2020
3%
7
3
(8)
( )
(3)
4
N/M

$
44.3
$ 1,836

$
46.7
$ 2,434

$
41.1
$ 2,211

(5)%
(25)%

14%
10%

(a) Excludes seed capital gains (losses) related to consolidated investment management funds.
(b) Consists of AUC/A primarily from the Asset Servicing line of business and, to a lesser extent, the Clearance and Collateral Management,
Issuer Services, Pershing and Wealth Management lines of business. Includes the AUC/A of CIBC Mellon of $1.5 trillion at Dec. 31,
2022, $1.7 trillion at Dec. 31, 2021 and $1.5 trillion at Dec. 31, 2020.

Fee revenue was essentially flat compared with 2021,
primarily reflecting lower market values, the
unfavorable impact of a stronger U.S. dollar and the
accelerated amortization of deferred costs for
depositary receipts services related to Russia in the
first quarter of 2022, partially offset by lower money
market fee waivers.

Investment and other revenue decreased $418 million
in 2022 compared with 2021, primarily reflecting the
net loss from repositioning the securities portfolio.

Money market fee waivers

In recent years, low short-term interest rates resulted
in money market mutual fund fees and other similar
fees being waived to protect investors from negative
returns. The fee waivers impacted fee revenues in
most of our businesses, but also resulted in lower
distribution and servicing expense. Money market
fee waivers are highly sensitive to changes in short-
term interest rates and, due to increases in interest
rates in the second half of 2022, have abated.

The following table presents the impact of money
market fee waivers on our consolidated fee revenue,
net of distribution and servicing expense. In 2022,
the net impact of money market fee waivers was $306
million, down from $916 million in 2021, driven by
higher interest rates.

6 BNY Mellon

Money market fee waivers
(in millions)
Investment services fees (see table

below)

Investment management and

performance fees

Distribution and servicing fees

Total fee revenue

Less: Distribution and servicing

expense

Net impact of money market fee

waivers

Impact to investment services fees

by line of business (a):
Asset Servicing
Issuer Services
Pershing
Treasury Services

2022

2021

2020

(153) $

(547) $

(209)

(165)
(13)
(331)

(429)
(51)
(1,027)

(142)
(17)
(368)

111

(306) $

(916) $

(337)

(19) $
(12)
(116)
(6)

(105) $
(62)
(343)
(37)

(10)
(9)
(186)
(4)

Total impact to investment

services fees by line of business $

(153) $

(547) $

(209)

Impact to fee revenue by line of

business (a):
Asset Servicing
Issuer Services
Pershing
Treasury Services
Investment Management
Wealth Management

Total impact to fee revenue by

line of business

(29) $
(16)
(137)
(8)
(139)
(2)

(176) $
(83)
(401)
(52)
(303)
(12)

(18)
(13)
(227)
(6)
(100)
(4)

(331) $ (1,027) $

(368)

(a) The line of business revenue for management reporting

purposes reflects the impact of revenue transferred between the
businesses.

Results of Operations (continued)

Investment services fees

Investment services fees increased 3% compared with
2021, primarily reflecting lower money market fee
waivers and higher client activity, partially offset by
the impact of prior year lost business in Pershing and
Corporate Trust, the unfavorable impact of a stronger
U.S. dollar, lower market values and the accelerated
amortization of deferred costs for depositary receipts
services related to Russia in the first quarter of 2022.

AUC/A totaled $44.3 trillion at Dec. 31, 2022, a
decrease of 5% compared with Dec. 31, 2021,
primarily reflecting lower market values and the
unfavorable impact of a stronger U.S. dollar, partially
offset by client inflows and net new business.
AUC/A consisted of 33% equity securities and 67%
fixed-income securities at Dec. 31, 2022 and 37%
equity securities and 63% fixed-income securities at
Dec. 31, 2021.

See “Securities Services business segment” and
“Market and Wealth Services business segment” in
“Review of business segments” for additional details.

Investment management and performance fees

Investment management and performance fees
decreased 8% compared with 2021, primarily
reflecting lower market values, the unfavorable
impact of a stronger U.S. dollar, the mix of
cumulative net inflows, the impact of the Alcentra
divestiture and lower equity income, partially offset
by lower money market fee waivers. Performance
fees were $75 million in 2022 and $107 million in
2021. On a constant currency basis (Non-GAAP),
investment management and performance fees
decreased 4% compared with 2021. See
“Supplemental Information – Explanation of GAAP
and Non-GAAP financial measures” beginning on
page 104 for the reconciliation of Non-GAAP
measures.

AUM was $1.8 trillion at Dec. 31, 2022, a decrease of
25% compared with Dec. 31, 2021, primarily
reflecting lower market values, the unfavorable
impact of a stronger U.S. dollar and the divestiture of
Alcentra, partially offset by net inflows.

See “Investment and Wealth Management business
segment” in “Review of business segments” for
additional details regarding the drivers of investment

management and performance fees, AUM and AUM
flows.

Foreign exchange revenue

Foreign exchange revenue is primarily driven by the
volume of client transactions and the spread realized
on these transactions, both of which are impacted by
market volatility, the impact of foreign currency
hedging activities and foreign currency
remeasurement gain (loss). In 2022, foreign
exchange revenue increased 3% compared with 2021,
primarily reflecting higher volatility, partially offset
by lower volumes. Foreign exchange revenue is
primarily reported in the Securities Services business
segment and, to a lesser extent, the Market and
Wealth Services and Investment and Wealth
Management business segments and the Other
segment.

Financing-related fees

Financing-related fees, which are primarily reported
in the Market and Wealth Services and Securities
Services business segments, include capital market
fees, loan commitment fees and credit-related fees.
Financing-related fees decreased 10% in 2022
compared with 2021, primarily reflecting lower
capital market fees, including underwriting fees.

Distribution and servicing fees

Distribution and servicing fees earned from mutual
funds are primarily based on average assets in the
funds and the sales of funds that we manage or
administer, and are primarily reported in the
Investment Management business. These fees, which
include 12b-1 fees, fluctuate with the overall level of
net sales, the relative mix of sales between share
classes, the funds’ market values and money market
fee waivers.

Distribution and servicing fees were $130 million in
2022 compared with $112 million in 2021, driven by
lower money market fee waivers. The impact of
distribution and servicing fees on income in any one
period is partially offset by distribution and servicing
expense paid to other financial intermediaries to
cover their costs for distribution and servicing of
mutual funds. Distribution and servicing expense is
recorded as noninterest expense on the income
statement.

BNY Mellon 7

Results of Operations (continued)

Investment and other revenue

Investment and other revenue includes income or loss
from consolidated investment management funds,
seed capital gains or losses, other trading revenue or
loss, renewable energy investments losses, income
from corporate and bank-owned life insurance
contracts, other investment gains or losses, gains or
losses from disposals, expense reimbursements from
our CIBC Mellon joint venture, other income or loss
and net securities gains or losses. The income or loss
from consolidated investment management funds
should be considered together with the net income or
loss attributable to noncontrolling interests, which
reflects the portion of the consolidated funds for
which we do not have an economic interest and is
reflected below net income as a separate line item on
the consolidated income statement. Other trading
revenue or loss primarily includes the impact of
market-risk hedging activity related to our seed
capital investments in investment management funds,
non-foreign currency derivative and fixed income
trading, and other hedging activity. Investments in
renewable energy generate losses in investment and
other revenue that are more than offset by benefits
and credits recorded to the provision for income
taxes. Other investment gains or losses includes fair
value changes of non-readily marketable strategic
equity, private equity and other investments. Expense
reimbursements from our CIBC Mellon joint venture
relate to expenses incurred by BNY Mellon on behalf
of the CIBC Mellon joint venture. Other income
includes various miscellaneous revenues.

The following table provides the components of
investment and other revenue.

Investment and other revenue
(in millions)
)
(
(Loss) income from consolidated
investment management funds

Seed capital (losses) gains (a)
Other trading revenue
Renewable energy investment
(losses)
Corporate/bank-owned life
insurance

Other investment gains (b)
Disposal gains (losses)
Expense reimbursements from
joint venture
Other income
Net securities (losses) gains
(
Total investment and other
revenue

) g

2022

2021

2020

(42)
(37)
149

32 $
40
6

84
23
13

(164)

(201)

(129)

128
159
26

108
34
(443) (c)
( )

140
159
13

96
46
5

148
35
(61)

85
85
33

(82)

$ 336 $ 316

(a)

(b)

(c)

Includes gains (losses) on investments in BNY Mellon funds
which hedge deferred incentive awards.
Includes strategic equity, private equity and other
investments.
Includes a net loss of $449 million related to the
repositioning of the securities portfolio.

Investment and other revenue was a loss of $82
million in 2022 compared with revenue of $336
million in 2021. The decrease primarily reflects the
net loss from repositioning the securities portfolio.

8 BNY Mellon

Results of Operations (continued)

Net interest revenue

(dollars in millions)
Net interest revenue
Add: Tax equivalent adjustment

Net interest revenue on a fully taxable equivalent (“FTE”) basis – Non-
GAAP (a)

2022

2021

2020

2022
vs.
2021

3,504
11

3,515

2,618
13

2,631

2,977
9

34%
N/M

2,986

34%

(12)%

2021
vs.
2020
(12)%
N/M

Average interest-earning assets

$ 362,180

$ 387,023

$ 354,526

(6)%

Net interest margin
( )
Net interest margin (FTE) – Non-GAAP (a)

)

(

0.97%
0.97%

0.68%
0.68%

0.84% 29 bps
0.84% 29 bps

(16) bps
(16) bps

(a) Net interest revenue (FTE) – Non-GAAP and net interest margin (FTE) – Non-GAAP include the tax equivalent adjustments on tax-

exempt income which allows for comparisons of amounts arising from both taxable and tax-exempt sources and is consistent with
industry practice. The adjustment to an FTE basis has no impact on net income.

N/M – Not meaningful.
bps – basis points.

Net interest revenue increased 34% compared with
2021, primarily reflecting higher interest rates on
interest-earning assets, partially offset by higher
funding expense.

Net interest margin increased 29 basis points
compared with 2021. The increase primarily reflects
the factors mentioned above.

Average interest-earning assets decreased 6%
compared with 2021. The decrease primarily reflects
lower interest-bearing deposit assets and lower
securities balances, partially offset by higher loan
balances.

Average non-U.S. dollar deposits comprised
approximately 25% of our average total deposits in
2022 and 2021. Approximately 40% of the average
non-U.S. dollar deposits in 2022 and 2021 were euro-
denominated.

Net interest revenue in future periods will depend on
the level and mix of client deposits and deposit rates,
as well as the level and shape of the yield curve.
Based on the market implied forward interest rates as
of the reporting date, we expect net interest revenue
for the year ended Dec. 31, 2023 to increase when
compared to the year ended Dec. 31, 2022.

BNY Mellon 9

Results of Operations (continued)

Average balances and interest rates

(dollars in millions)
Assets
Interest-earning assets:

2022

2021

Average
balance Interest

Average
rate

Average
balance

Interest

Average
rate

Interest-bearing deposits with the Federal Reserve and other central banks:

Domestic offices
Foreign offices

Total 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 (a)
Loans:

$ 46,270
51,172
97,442
16,826
24,953

1.75% $ 47,070
0.41
66,276
113,346
1.05
1.31
20,757
4.81
28,530

60
(137)
(77)
48
120

0.13%
(0.21)
(0.07)
0.23
0.42

Domestic offices
Foreign offices

Total loans (b)

Securities:

U.S. government obligations
U.S. government agency obligations
State and political subdivisions (c)
Other securities:

Domestic offices (c)
Foreign offices

Total other securities (c)
Total investment securities (c)
Trading securities (primarily domestic) (c)

Total securities (c)
Total interest-earning assets (c)

Noninterest-earning assets

Total assets

Liabilities and equity
Interest-bearing liabilities:
Interest-bearing deposits:

Domestic offices
Foreign offices

Total interest-bearing deposits

Federal funds purchased and securities sold under repurchase agreements (a)
Trading liabilities
Other borrowed funds:

Domestic offices
Foreign offices

Total other borrowed funds

Commercial paper
Payables to customers and broker-dealers
Long-term debt

Total interest-bearing liabilities

Total noninterest-bearing deposits
Other noninterest-bearing liabilities

Total liabilities

Total The Bank of New York Mellon Corporation shareholders’ equity
Noncontrolling interests

Total liabilities and equity

Net interest revenue (FTE) – Non-GAAP (c)(d)
Net interest margin (FTE) – Non-GAAP (c)(d)

Less: Tax equivalent adjustment
Net interest revenue – GAAP
Net interest margin – GAAP

Percentage of assets attributable to foreign offices (e)
Percentage of liabilities attributable to foreign offices (e)

810
209
1,019
221
1,200

1,878
121
1,999

607
1,157
43

3.00
2.33
2.95

1.49
1.81
2.31

55,073
5,741
60,814

34,383
72,552
2,623

586
154
740
2,547
143
2,690
$ 7,129

3.43
17,145
0.59
30,183
1.71
47,328
1.70
156,886
2.73
6,690
1.73
163,576
1.97% $ 387,023
65,209
$ 452,232

980
607
1,587
934
68

0.88% $ 124,716
0.60
112,493
0.74
237,209
7.21
13,716
1.98
2,590

156
860
$ 3,614

7
2
9

4.12
160
0.51
223
1.80
383
— 2.06
3
0.91
16,887
3.13
25,788
1.31% $ 296,576
86,606
24,381
407,563
44,358
311
$ 452,232

62,640
5,185
67,825

40,583
64,041
1,887

17,092
26,283
43,375
149,886
5,248
155,134
$ 362,180
64,721
$ 426,901

$ 111,491
101,916
213,407
12,940
3,432

181
324
505
5
17,111
27,448
$ 274,848
85,652
25,278
385,778
41,013
110
$ 426,901

892
66
958

261
985
54

333
123
456
1,756
53
1,809
$ 2,858

1.62
1.15
1.58

0.76
1.36
2.01

1.94
0.41
0.96
1.12
0.80
1.11
0.74%

(27)
(148)
(175)
(4)
8

(0.02)%
(0.13)
(0.07)
(0.03)
0.31

5
3
8

2.99
1.48
2.11
— 0.07
(0.01)
(2)
1.52
392
0.08%
227

$ 3,515

11
$ 3,504

0.97%

$ 2,631

13
$ 2,618

0.68%

26%
30%

30%
31%

(a)

(b)

Includes the average impact of offsetting under enforceable netting agreements of approximately $43 billion in 2022 and $45 billion in 2021. On a Non-
GAAP basis, excluding the impact of offsetting, the yield on federal funds sold and securities purchased under resale agreements would have been 1.77%
for 2022 and 0.16% for 2021, and the rate on federal funds purchased and securities sold under repurchase agreements would have been 1.67% for 2022
and (0.01)% for 2021. We believe providing the rates excluding the impact of netting is useful to investors as it is more reflective of the actual rates
earned and paid.
Interest income includes fees of $2 million in 2022 and $3 million in 2021. Nonaccrual loans are included in average loans; the associated income,
which was recognized on a cash basis, is included in interest income.

See “Net interest revenue” on page 9 for the reconciliation of this Non-GAAP measure.
Includes the Cayman Islands branch office, which existed through August 2021.

10 BNY Mellon

Results of Operations (continued)

Average balances and interest rates

(dollars in millions)
Assets
Interest-earning assets:

Interest-bearing deposits with the Federal Reserve and other central banks:

Domestic offices
Foreign offices

Total 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 (a)
Loans:

Domestic offices
Foreign offices

Total loans (b)

Securities:

U.S. government obligations
U.S. government agency obligations
State and political subdivisions (c)
Other securities:

Domestic offices (c)
Foreign offices

Total other securities (c)
Total investment securities (c)
Trading securities (primarily domestic) (c)

Total securities (c)
Total interest-earning assets (c)

Noninterest-earning assets
Total assets

Liabilities and equity
Interest-bearing liabilities:
Interest-bearing deposits:

Domestic offices
Foreign offices

Total interest-bearing deposits

Federal funds purchased and securities sold under repurchase agreements (a)
Trading liabilities
Other borrowed funds:

Domestic offices
Foreign offices

Total other borrowed funds

Commercial paper
Payables to customers and broker-dealers
Long-term debt

Total interest-bearing liabilities

Total noninterest-bearing deposits
Other noninterest-bearing liabilities

Total liabilities

Total The Bank of New York Mellon Corporation shareholders’ equity
Noncontrolling interests

Total liabilities and equity

Net interest revenue (FTE) – Non-GAAP (c)(d)
Net interest margin (FTE) – Non-GAAP (c)(d)
Less: Tax equivalent adjustment
Net interest revenue – GAAP
Net interest margin – GAAP

Percentage of assets attributable to foreign offices (e)
Percentage of liabilities attributable to foreign offices (e)

2020

Average
balance

Interest

Average
rate

45,186
49,246
94,432
19,165
30,768

44,137
11,091
55,228

27,242
75,430
1,418

14,335
29,402
43,737
147,827
7,106
154,933
$ 354,526
58,792
$ 413,318

$ 105,984
106,836
212,820
14,862
2,177

849
199
1,048
1,082
17,789
26,888
$ 276,666
69,124
23,879
369,669
43,430
219
$ 413,318

30%
32%

121
(71)
50
134
545

942
200
1,142

278
1,328
36

300
212
512
2,154
93
2,247
4,118

176
(15)
161
283
15

15
1
16
7
28
622
1,132

0.27%
(0.14)
0.05
0.70
1.77

2.13
1.81
2.07

1.02
1.76
2.51

2.09
0.72
1.17
1.46
1.31
1.45
1.16%

0.17%
(0.01)
0.08
1.90
0.68

1.81
0.26
1.52
0.66
0.16
2.31
0.41%

2,986

9
2,977

0.84%

(a)

(b)

Includes the average impact of offsetting under enforceable netting agreements of approximately $57 billion in 2020. On a Non-GAAP basis, excluding
the impact of offsetting, the yield on federal funds sold and securities purchased under resale agreements would have been 0.62%, and the rate on federal
funds purchased and securities sold under repurchase agreements would have been 0.39% for 2020. We believe providing the rates excluding the impact
of netting is useful to investors as it is more reflective of the actual rates earned and paid.
Interest income includes fees of $6 million in 2020. Nonaccrual loans are included in average loans; the associated income, which was recognized on a
cash basis, is included in interest income.

(c) Average rates were calculated on an FTE basis, at tax rates of approximately 21% in 2020.
See “Net interest revenue” on page 9 for the reconciliation of this Non-GAAP measure.
(d)
Includes the Cayman Islands branch office.
(e)

BNY Mellon 11

Results of Operations (continued)

Noninterest expense

)
(dollars in millions)
(
Staff
Software and equipment
Professional, legal and other purchased services
Net occupancy
Sub-custodian and clearing
Distribution and servicing
Business development
Bank assessment charges
Goodwill impairment
Amortization of intangible assets
Other

Total noninterest expense

2022
6,800 $
1,657
1,527
514
485
343
152
126
680
67
659
13,010 $

2021
6,337 $
1,478
1,459
498
505
298
107
133
—
82
617
11,514 $

2020
5,966
1,370
1,403
581
460
336
105
124
—
104
555
11,004

2022
vs.
2021
7%

12
5
3
(4)
15
42
(5)
N/M
(18)
7
13%

2021
vs.
2020
6%
8
4
(14)
10
(11)
2
7
N/M
(21)
11
5%

p y
Full-time employees at year-end

51,700

49,100

48,500

Income taxes

BNY Mellon recorded an income tax provision of
$768 million (23.1% effective tax rate) in 2022.
Excluding notable items, the income tax provision
was $930 million (19.1% effective tax rate) (Non-
GAAP) in 2022. The income tax provision was $877
million (18.9% effective tax rate) in 2021. See
“Supplemental Information – Explanation of GAAP
and Non-GAAP financial measures” beginning on
page 104 for the reconciliation of the Non-GAAP
measure. For additional information, see Note 12 of
the Notes to Consolidated Financial Statements.

Total noninterest expense increased 13% compared
with 2021. The increase primarily reflects goodwill
impairment in the Investment Management reporting
unit and higher severance expense and litigation
reserves. Excluding notable items, noninterest
expense increased 5% (Non-GAAP), primarily
reflecting higher investments in growth, infrastructure
and efficiency initiatives and higher revenue-related
expenses, as well as the impact of inflation, partially
offset by an approximately 3% favorable impact of a
stronger U.S. dollar. The investments in growth,
infrastructure and efficiency initiatives are primarily
included in staff, software and equipment, and
professional, legal and other purchased services
expenses. See “Supplemental Information –
Explanation of GAAP and Non-GAAP financial
measures” beginning on page 104 for the
reconciliation of the Non-GAAP measure.

We expect noninterest expense for the year ended
Dec. 31, 2023 to increase, but at a slower pace when
compared with the year ended Dec. 31, 2022; the
increase is driven by higher revenue-related expenses
and higher investments in growth, infrastructure and
efficiency initiatives, as well as the impact of
inflation, partially offset by the benefit of efficiency
initiatives.

12 BNY Mellon

Results of Operations (continued)

Review of business segments

We have an internal information system that produces
performance data along product and service lines for
our three principal business segments: Securities
Services, Market and Wealth Services and Investment
and Wealth Management, and the Other segment.

Business segment accounting principles

Our business segment data has been determined on an
internal management basis of accounting, rather than
the generally accepted accounting principles
(“GAAP”) used for consolidated financial reporting.
These measurement principles are designed so that
reported results of the business will track their
economic performance.

For information on the accounting principles of our
business segments, the primary products and services
in each line of business, the primary types of revenue
by line of business and how our business segments
are presented and analyzed, see Note 24 of the Notes
to Consolidated Financial Statements.

Business segment results are subject to
reclassification when organizational changes are
made, or for refinements in revenue and expense
allocation methodologies. Refinements are typically
reflected on a prospective basis. There were no
reclassification or organizational changes in 2022.

The results of our business segments may be
influenced by client and other activities that vary by
quarter. In the first quarter, staff expense typically
increases reflecting the vesting of long-term stock
awards for retirement-eligible employees. Prior to
2022, in the third quarter, staff expense typically
increased reflecting the annual employee merit
increase. In 2022, this increase was reflected in the
second quarter. In the third quarter, volume-related
fees may decline due to reduced client activity. In the
fourth quarter, we typically incur higher business

development and marketing expenses; however, 2020
was an exception due to the impact of the coronavirus
pandemic. In our Investment and Wealth
Management business segment, performance fees are
typically higher in the fourth and first quarters, as
those quarters represent the end of the measurement
period for many of the performance fee-eligible
relationships.

The results of our business segments may also be
impacted by the translation of financial results
denominated in foreign currencies to the U.S. dollar.
We are primarily impacted by activities denominated
in the British pound and the euro. On a consolidated
basis and in our Securities Services and Market and
Wealth Services business segments, we typically have
more foreign currency-denominated expenses than
revenues. However, our Investment and Wealth
Management business segment typically has more
foreign currency-denominated revenues than
expenses. Overall, currency fluctuations impact the
year-over-year growth rate in the Investment and
Wealth Management business segment more than the
Securities Services and Market and Wealth Services
business segments. However, currency fluctuations,
in isolation, are not expected to significantly impact
net income on a consolidated basis.

Fee revenue in the Investment and Wealth
Management business segment, and to a lesser extent
the Securities Services and Market and Wealth
Services business segments, is impacted by the global
market fluctuations. At Dec. 31, 2022, we estimated
that a 5% change in global equity markets, spread
evenly throughout the year, would impact fee revenue
by less than 1% and diluted earnings per common
share by $0.04 to $0.07.

See Note 24 of the Notes to Consolidated Financial
Statements for the consolidating schedules which
show the contribution of our business segments to our
overall profitability.

BNY Mellon 13

Results of Operations (continued)

Securities Services business segment

(dollars in millions, unless otherwise noted)
Revenue:

2022

2021

2020

Investment services fees:
Asset Servicing
Issuer Services

Total investment services fees

Foreign exchange revenue
( )
Other fees (a)
Total fee revenue

Investment and other revenue
Total fee and other revenue

Net interest revenue
Total revenue

Provision for credit losses
Noninterest expense (excluding amortization of intangible assets)
Amortization of intangible assets

Total noninterest expense
Income before income taxes

Pre-tax operating margin

Securities lending revenue (b)

Total revenue by line of business:
Asset Servicing
Issuer Services

Total revenue by line of business

Selected average balances:
Average loans
Average deposits

2022
vs.
2021

2021
vs.
2020

1%
(5)
—
2
79
2
N/M
3
42
11
N/M
8
3
8
13%

7%
( )
(4)
4
(5)
)
(
(38)
2
N/M
2
)
(16)
(
(2)
N/M
5
(6)
5
( )
(5)%

170

5,705
1,670
7,375

11%
11
11%

—%
( )
(7)
(2)%

3,635
1,100
4,735
602
182
5,519
159
5,678
1,697
7,375
215
5,522
34
5,556
1,604

22%

3,918
1,009
4,927
584
202
5,713
291
6,004
2,028
8,032
8
6,266
33
6,299
1,725

21%

182

6,323
1,709
8,032

3,876
1,061
4,937
574
113
5,624
194
5,818
1,426
7,244
(134)
5,820
32
5,852
1,526

21%

173

5,699
1,545
7,244

$ 11,245
$ 183,990

$
8,756
$ 200,482

$
9,225
$ 177,853

28%
(8)%

(5)%
13%

Selected metrics:
AUC/A at period end (in trillions) (c)
Market value of securities on loan at period end (in billions) (d)
) ( )
p

(

$
$

31.4
449

$
$

34.6
447

$
$

30.6
435

(9)%
—%

13%
3%

(a) Other fees primarily includes financing-related fees.
(b)
(c) Consists of AUC/A primarily from the Asset Servicing line of business and, to a lesser extent, the Issuer Services line of business.

Included in investment services fees reported in the Asset Servicing line of business.

Includes the AUC/A of CIBC Mellon of $1.5 trillion at Dec. 31, 2022 and $1.7 trillion at Dec. 31, 2021 and $1.5 trillion at Dec. 31,
2020.

(d) Represents the total amount of securities on loan in our agency securities lending program. Excludes securities for which BNY Mellon
acts as agent on behalf of CIBC Mellon clients, which totaled $68 billion at Dec. 31, 2022, $71 billion at Dec. 31, 2021 and $68 billion
at Dec. 31, 2020.
N/M – Not meaningful.

Business segment description

The Securities Services business segment consists of
two distinct lines of business, Asset Servicing and
Issuer Services, which provide business solutions
across the transaction lifecycle to our global asset
owner and asset manager clients. We are one of the
leading global investment services providers with
$31.4 trillion of AUC/A at Dec. 31, 2022. For
information on the drivers of the Securities Services

14 BNY Mellon

fee revenue, see Note 10 of the Notes to Consolidated
Financial Statements.

The Asset Servicing business provides a
comprehensive suite of solutions. We are one of the
largest global custody and front-to-back outsourcing
partners. We offer services for the safekeeping of
assets in capital markets globally as well as fund
accounting services, exchange-traded funds servicing,
transfer agency, trust and depository, front-to-back

Results of Operations (continued)

capabilities as well as data and analytics solutions for
our clients. We deliver foreign exchange, and
securities lending and financing solutions, on both an
agency and principal basis. Our agency securities
lending program is one of the largest lenders of U.S.
and non-U.S. securities, servicing a lendable asset
pool of approximately $4.5 trillion in 34 separate
markets. Our market-leading liquidity services portal
enables cash investments for institutional clients and
includes fund research and analytics.

The Issuer Services business includes Corporate
Trust and Depositary Receipts. Our Corporate
Trust business delivers a full range of issuer and
related investor services, including trustee, paying
agency, fiduciary, escrow and other financial
services. We are a leading provider to the debt
capital markets, providing customized and market-
driven solutions to investors, bondholders and
lenders. Our Depositary Receipts business drives
global investing by providing servicing and value-
added solutions that enable, facilitate and enhance
cross-border trading, clearing, settlement and
ownership. We are one of the largest providers of
depositary receipts services in the world, partnering
with leading companies from more than 50
countries.

Review of financial results

AUC/A of $31.4 trillion decreased 9% compared with
Dec. 31, 2021, primarily reflecting lower market
values and the unfavorable impact of a stronger U.S.
dollar, partially offset by client inflows and net new
business.

Total revenue of $8.0 billion increased 11%
compared with 2021. The drivers of total revenue by
line of business are indicated below.

Asset Servicing revenue of $6.3 billion increased
11% compared with 2021, primarily reflecting higher
net interest revenue, lower money market fee waivers
and higher client activity, partially offset by the
unfavorable impact of a stronger U.S. dollar and
lower market values.

Issuer Services revenue of $1.7 billion increased 11%
compared with 2021, primarily reflecting higher net
interest revenue and lower money market fee waivers,
partially offset by the accelerated amortization of
deferred costs for depositary receipts services related
to Russia.

Market and regulatory trends are driving investable
assets toward lower fee asset management products at
reduced margins for our clients. These dynamics are
also negatively impacting our investment services
fees. However, at the same time, these trends are
providing additional outsourcing opportunities as
clients and other market participants seek to comply
with regulations and reduce their operating costs.

Noninterest expense of $6.3 billion increased 8%
compared with 2021, primarily reflecting higher
investments in growth, infrastructure and efficiency
initiatives, as well as the impact of inflation, partially
offset by the favorable impact of a stronger U.S.
dollar.

BNY Mellon 15

Results of Operations (continued)

Market and Wealth Services business segment

)
(dollars in millions, unless otherwise noted)
(
Revenue:

Investment services fees:
Pershing
Treasury Services
Clearance and Collateral Management

g
Total investment services fees

Foreign exchange revenue
( )
Other fees (a)
Total fee revenue

Investment and other revenue
Total fee and other revenue

Net interest revenue
Total revenue

Provision for credit losses
Noninterest expense (excluding amortization of intangible assets)
Amortization of intangible assets

Total noninterest expense
Income before income taxes

Pre-tax operating margin

Total revenue by line of business:
Pershing
Treasury Services
Clearance and Collateral Management
y
Total revenue by line of business

Selected average balances:
Average loans
Average deposits

Selected metrics:
AUC/A at period end (in trillions) (b)

Pershing:
AUC/A at period end (in trillions)
Net new assets (U.S. platform) (in billions) (c)
Average active clearing accounts (in thousands)

Treasury Services:
Average daily U.S. dollar payment volumes

Clearance and Collateral Management:
)
Average tri-party collateral management balances (in billions)

(

2022

2021

2020

1,908
689
971
3,568
88
176
3,832
40
3,872
1,410
5,282
7
2,924
8
2,932
2,343

44%

2,537
1,483
1,262
5,282

1,737
662
918
3,317
88
131
3,536
47
3,583
1,158
4,741
(67)
2,655
21
2,676
2,132

45%

2,314
1,293
1,134
4,741

1,734
641
896
3,271
79
166
3,516
62
3,578
1,228
4,806
100
2,577
37
2,614
2,092

44%

2,332
1,327
1,147
4,806

2022
vs.
2021

2021
vs.
2020

10%
4
6
8
—
34
8
N/M
8
22
11
N/M
10
(62)
10
10%

—%
3
2
1
11
)
(21)
(
1
N/M
—
( )
(6)
(1)
N/M
3
)
(43)
(
2
2%

10%
15
11
11%

(1)%
(3)
(1)
( )
( )
(1)%

$ 41,300
$ 91,749

$ 38,344
$ 102,948

$ 32,432
$ 83,442

8%
(11)%

18%
23%

$
$

12.7

2.3
121
7,483

$
$

11.8

2.6
161
7,257

$
$

10.2

16%

2.5
116
6,883

(12)%
N/M

N/M

239,630

235,971

221,755

5,285

4,260

3,566

24%

19%

(a) Other fees primarily include financing-related fees.
(b) Consists of AUC/A from the Clearance and Collateral Management and Pershing businesses.
(c) Net new assets represent net flows of assets (e.g., net cash deposits and net securities transfers, including dividends and interest) in

customer accounts in Pershing LLC, a U.S. broker-dealer.

N/M – Not meaningful.

16 BNY Mellon

Results of Operations (continued)

Business segment description

The Market and Wealth Services business segment
consists of three distinct lines of business, Pershing,
Treasury Services and Clearance and Collateral
Management, which provide business services and
technology solutions to entities including financial
institutions, corporations, foundations and
endowments, public funds and government agencies.
For information on the drivers of the Market and
Wealth Services fee revenue, see Note 10 of the
Notes to Consolidated Financial Statements.

Pershing provides execution, clearing, custody,
business and technology solutions, delivering
operational support to broker-dealers, wealth
managers and registered investment advisors
(“RIAs”) globally.

Our Treasury Services business is a leading
provider of global payments, liquidity management
and trade finance services for financial institutions,
corporations and the public sector.

Our Clearance and Collateral Management
business clears and settles equity and fixed-income
transactions globally and serves as custodian for
tri-party repo collateral worldwide. We are the
primary provider of U.S. government securities
clearance and a provider of non-U.S. government
securities clearance. Our collateral services
include collateral management, administration and
segregation. We offer innovative solutions and
industry expertise which help financial institutions
and institutional investors with their financing, risk
and balance sheet challenges. We are a leading
provider of tri-party collateral management

services with an average of $5.3 trillion serviced
globally including approximately $4.2 trillion of
the U.S. tri-party repo market at Dec. 31, 2022.

Review of financial results

AUC/A of $12.7 trillion increased 8% compared with
Dec. 31, 2021, primarily reflecting net client inflows,
partially offset by lower market values and the impact
of a stronger U.S. Dollar.

Total revenue of $5.3 billion increased 11%
compared with 2021. The drivers of total revenue by
line of business are indicated below.

Pershing revenue of $2.5 billion increased 10%
compared with 2021, primarily reflecting lower
money market fee waivers and higher fees on sweep
balances, partially offset by the impact of prior year
lost business.

Treasury Services revenue of $1.5 billion increased
15% compared with 2021, primarily reflecting higher
net interest revenue and lower money market fee
waivers.

Clearance and Collateral Management revenue of
$1.3 billion increased 11% compared with 2021,
primarily reflecting higher net interest revenue and
higher U.S. government clearance volumes.

Noninterest expense of $2.9 billion increased 10%
compared with 2021, primarily reflecting higher
investments in growth, infrastructure and efficiency
initiatives and higher revenue-related expenses, as
well as the impact of inflation, partially offset by the
impact of the stronger U.S. dollar.

BNY Mellon 17

Results of Operations (continued)

Investment and Wealth Management business segment

)
(dollars in millions)
(
Revenue:

Investment management fees
Performance fees

Investment management and performance fees (a)

Distribution and servicing fees
( )
Other fees (b)
Total fee revenue

( )
Investment and other revenue (c)
Total fee and other revenue (c)

Net interest revenue
Total revenue

Provision for credit losses
Noninterest expense (excluding goodwill impairment and
amortization of intangible assets)

Goodwill impairment
Amortization of intangible assets
Total noninterest expense
Income before income taxes

Pre-tax operating margin
Adjusted pre-tax operating margin – Non-GAAP (e)

Total revenue by line of business:
Investment Management
Wealth Management
y
Total revenue by line of business

Selected average balances:
Average loans
g
Average deposits

2022
vs.
2021

(8)%
(30)
(8)
71
N/M
(11)
N/M
(14)
18
(12)
N/M

—
N/M
(10)
24
(96)% (d)
( )

2022

2021

2020

3,261
107
3,368
137
)
(58)
(
3,447
48
3,495
197
3,692
20

2,668
—
33
2,701
971

26%
29%

3,215
75
3,290
192
(133)
3,349
(27)
3,322
228
3,550
1

2,795
680
26
3,501
48

1%
2% (f)

2,390
1,160
3,550

3,483
107
3,590
112
80
3,782
67
3,849
193
4,042
(13)

2,796
—
29
2,825
1,230

30%
33%

2,834
1,208
4,042

2,596
1,096
3,692

(16)%
(4)
(12)%

2021
vs.
2020

7%
—
7
(18)
N/M
10
N/M
10
( )
(2)
9
N/M

5
N/M
)
(12)
(
5
27%

10
9%

3%
4%

$ 14,055
$ 19,214

$ 12,120
$ 18,068

$ 11,728
$ 17,340

16%
6%

(a) On a constant currency basis, investment management and performance fees decreased 5% (Non-GAAP) compared with 2021. See

“Supplemental Information – Explanation of GAAP and Non-GAAP financial measures” beginning on page 104 for the reconciliation of
this Non-GAAP measure.

(b) Other fees primarily includes investment services fees.
(c)

Investment and other revenue and total fee and other revenue are net of income attributable to noncontrolling interests related to
consolidated investment management funds.

(d) Excluding notable items, income before income taxes decreased 39% (Non-GAAP) compared with 2021. See “Supplemental

Information – Explanation of GAAP and Non-GAAP financial measures” beginning on page 104 for the reconciliation of this Non-
GAAP measure.

(e) Net of distribution and servicing expense. See “Supplemental Information – Explanation of GAAP and Non-GAAP financial measures”

beginning on page 104 for the reconciliation of this Non-GAAP measure.

(f) Excluding notable items and net of distribution and servicing expense, the adjusted pre-tax operating margin was 24% (Non-GAAP) in
2022. See “Supplemental Information – Explanation of GAAP and Non-GAAP financial measures” beginning on page 104 for the
reconciliation of this Non-GAAP measure.

N/M – Not meaningful.

18 BNY Mellon

Results of Operations (continued)

AUM trends
(in billions)
AUM by product type (a):
Equity
Fixed income
Index
Liability-driven investments
Multi-asset and alternative investments
Cash

Total AUM

Changes in AUM (a):
Beginning balance of AUM
Net inflows (outflows):
Long-term strategies:

Equity
Fixed income
Liability-driven investments
Multi-asset and alternative

investments

Total long-term active strategies

inflows

Index

Total long-term strategies inflows

Short-term strategies:

Cash

Total net inflows

Net market impact
Net currency impact
Divestiture

Ending balance of AUM

2022

2021

2020

$ 135 $ 187 $ 170
259
393
855
209
325
$ 1,836 $ 2,434 $ 2,211

198
395
570
153
385

267
467
890
228
395

$ 2,434 $ 2,211 $ 1,910

(18)
(21)
78

(11)

28
2
30

(12)
17
36

(2)

39
(7)
32

(10)
10
22

(4)

18
6
24

(12)
18
(471)
(113)
(32)

49
73
186
42
—
$ 1,836 $ 2,434 $ 2,211

70
102
143
(22)
—

Wealth Management client

assets (b)

$ 269 $ 321 $ 286

(a) Excludes assets managed outside of the Investment and Wealth

(b)

Management business segment.
Includes AUM and AUC/A in the Wealth Management line of
business.

Business segment description

Our Investment and Wealth Management business
segment consists of two distinct lines of business,
Investment Management and Wealth Management,
which have a combined AUM of $1.8 trillion as of
Dec. 31, 2022.

BNY Mellon Investment Management is a leading
global asset manager and consists of our seven
specialist investment firms and global distribution
network to deliver a highly diversified portfolio of
investment strategies to institutional and retail clients
globally.

Our Investment Management model provides
specialized expertise from seven respected investment
firms offering solutions across every major asset
class, with backing from the proven stewardship and

global presence of BNY Mellon. Each investment
firm has its own individual culture, investment
philosophy and proprietary investment process. This
approach brings our clients clear, independent
thinking from highly experienced investment
professionals.

The investment firms offer a broad range of actively
managed equity, fixed income, alternative and
liability-driven investments, along with passive
products and cash management. Our six majority-
owned investment firms are as follows: ARX,
Dreyfus, Insight Investment, Mellon, Newton
Investment Management and Walter Scott. BNY
Mellon owns a non-controlling interest in Siguler
Guff.

In November 2022, BNY Mellon sold Alcentra. As
part of the sale agreement, Investment Management
will continue to offer Alcentra’s capabilities in BNY
Mellon’s sub-advised funds and in select regions via
its global distribution platform. BNY Mellon will
continue to provide Alcentra with ongoing asset
servicing support.

In addition to its investment firms, Investment
Management has multiple global distribution entities,
which are responsible for distributing the investment
solutions developed and managed by the investment
firms, as well as responsibility for management and
distribution of our U.S. mutual funds and certain
offshore money market funds.

BNY Mellon Wealth Management provides
investment management, custody, wealth and estate
planning, private banking services, investment
servicing and information management. BNY Mellon
Wealth Management has $269 billion in client assets
as of Dec. 31, 2022, and more than 30 offices in the
U.S. and internationally.

Wealth Management clients include individuals,
families and institutions. Institutions include family
offices, charitable gift programs and endowments and
foundations. We work with clients to build, manage
and sustain wealth across generations and market
cycles.

The wealth business differentiates itself with a
comprehensive wealth management framework called
Active Wealth that seeks to empower clients to build
and sustain long-term wealth.

BNY Mellon 19

Results of Operations (continued)

The results of the Investment and Wealth
Management business segment are driven by a blend
of daily, monthly and quarterly averages of AUM by
product type. The overall level of AUM for a given
period is determined by:

•

the beginning level of AUM;

the net flows of new assets during the period
resulting from new business wins and existing
client inflows, reduced by the loss of clients and
existing client outflows; and

the impact of market price appreciation or
depreciation, foreign exchange rates and
investment firm acquisitions or divestitures.

The mix of AUM is a result of the historical growth
rates of equity and fixed income markets and the
cumulative net flows of our investment firms as a
result of client asset allocation decisions. Actively
managed equity, multi-asset and alternative assets
typically generate higher percentage fees than fixed-
income and liability-driven investments and cash.
Also, actively managed assets typically generate
higher management fees than indexed or passively
managed assets of the same type. Market and
regulatory trends have resulted in increased demand
for lower fee asset management products and for
performance-based fees.

Investment management fees are dependent on the
overall level and mix of AUM and the management
fees expressed in basis points (one-hundredth of one
percent) charged for managing those assets.
Management fees are typically subject to fee
schedules based on the overall level of assets
managed for a single client or by individual asset
class and style. This is most common for institutional
clients where we typically manage substantial assets
for individual accounts.

Performance fees are generally calculated as a
percentage of a portfolio’s performance in excess of a
benchmark index or a peer group’s performance.

A key driver of organic growth in investment
management and performance fees is the amount of
net new AUM flows. Overall market conditions are
also key drivers, with a significant long-term
economic driver being growth of global financial
assets.

20 BNY Mellon

Net interest revenue is determined by loan and
deposit volumes and the interest rate spread between
customer rates and internal funds transfer rates on
loans and deposits. Expenses in the Investment and
Wealth Management business segment are mainly
driven by staff and distribution and servicing
expenses.

Review of financial results

AUM of $1.8 trillion decreased 25% compared with
Dec. 31, 2021, primarily reflecting lower market
values, the unfavorable impact of a stronger U.S.
dollar and the divestiture of Alcentra, partially offset
by net inflows.

Net long-term strategy inflows were $30 billion in
2022, driven by inflows of liability-driven
investments, partially offset by outflows of fixed
income, equity and multi-asset and alternative
investments. Short-term strategy outflows were $12
billion in 2022.

Total revenue of $3.6 billion decreased 12%
compared with 2021. The drivers of total revenue by
line of business are indicated below.

Investment Management revenue of $2.4 billion
decreased 16% compared with 2021, primarily
reflecting lower market values, the unfavorable
impact of a stronger U.S. dollar, the mix of
cumulative net inflows, lower seed capital results and
the impact of the Alcentra divestiture, partially offset
by lower money market fee waivers.

Wealth Management revenue of $1.2 billion
decreased 4% compared with 2021, primarily
reflecting lower market values, partially offset by
higher net interest revenue.

Revenue generated in the Investment and Wealth
Management business segment included 35% from
non-U.S. sources in 2022, compared with 38% in
2021.

Noninterest expense of $3.5 billion increased 24%
compared with 2021, primarily reflecting goodwill
impairment in the Investment Management reporting
unit and investments in growth initiatives, partially
offset by the favorable impact of a strong U.S. dollar.

Results of Operations (continued)

Other segment

(in millions)
Fee revenue
Investment and other revenue
Total fee and other revenue

Net interest expense

Total revenue
Provision for credit losses
Noninterest expense
)

(
(Loss) before income taxes

Average loans and leases

Segment description

The Other segment primarily includes:
•
•

the leasing portfolio;
corporate treasury activities, including our
securities portfolio;
derivatives and other trading activity;
corporate and bank-owned life insurance;
renewable energy and other corporate
investments; and
certain business exits.

•
•
•

•

Revenue primarily reflects:
•

net interest revenue (expense) and lease-related
gains (losses) from leasing operations;
net interest revenue (expense) and derivatives and
other corporate treasury activities;
other revenue from certain business exits;
investment and other revenue from corporate and
bank-owned life insurance, gains (losses)
associated with investment securities and other
assets, including renewable energy; and
fee revenue from the elimination of the results of
certain services provided between segments,
which are also provided to third parties.

Expenses include:
•

direct expenses supporting leasing, investing and
funding activities; and
expenses not directly attributable to Securities
Services, Market and Wealth Services and
Investment and Wealth Management operations.

•

•
•

•

Review of financial results

2022

61 $

(373)
(312)
(162)
(474)
23
278
(775) $

2021

36 $
15
51
)
(159)
(
(108)
(17)
161
)
(252) $
(

2020
34
37
71
)
(145)
(
(74)
1
133
)
(208)
(

1,225 $

1,594 $

1,843

Investment and other revenue decreased $388 million
compared with 2021, primarily reflecting a $449
million net loss from repositioning the securities
portfolio, partially offset by an impairment for a
renewable energy investment recorded in 2021.

Noninterest expense increased $117 million
compared with 2021, primarily reflecting higher
severance expense.

International operations

Our primary international activities consist of asset
servicing in our Securities Services business segment,
global payment services in our Market and Wealth
Services business segment and investment
management in our Investment and Wealth
Management business segment.

Our clients include central banks and sovereigns,
financial institutions, asset managers, insurance
companies, corporations, local authorities and high-
net-worth individuals and family offices. Through
our global network of offices, we have developed a
deep understanding of local requirements and cultural
needs, and we pride ourselves on providing dedicated
service through our multilingual sales, marketing and
client service teams.

At Dec. 31, 2022, approximately 50% of our total
employees (full-time and part-time employees) were
based outside the U.S., with approximately 10,600
employees in EMEA, approximately 16,100
employees in APAC and approximately 900
employees in other global locations, primarily Brazil.

Loss before taxes was $775 million in 2022 compared
with $252 million in 2021.

We are a leading global asset manager. Our
international operations managed 53% of BNY

BNY Mellon 21

Results of Operations (continued)

Mellon’s AUM at Dec. 31, 2022 and 60% at Dec. 31,
2021.

In Europe, we maintain capabilities to service
Undertakings for Collective Investment in
Transferable Securities and alternative investment
funds. We offer a full range of tailored solutions for
investment companies, financial institutions and
institutional investors across most European markets.

We are a provider of non-U.S. government securities,
fixed income and equities clearance, settling
securities transactions directly in European markets,
and using a high-quality and established network of
local agents in non-European markets.

We have extensive experience providing trade and
cash services to financial institutions and central
banks outside of the U.S. In addition, we offer a
broad range of servicing and fiduciary products to
financial institutions, corporations and central banks.
In emerging markets, we lead with custody, global
payments and issuer services, introducing other
products as the markets mature. For more established
markets, our focus is on global investment services.

We are also a full-service global provider of foreign
exchange services, actively trading in over 100 of the
world’s currencies. We serve clients from trading
desks located in Europe, Asia and North America.

Our financial results, as well as our levels of AUC/A
and AUM, are impacted by translation from foreign
currencies to the U.S. dollar. We are primarily
impacted by activities denominated in the British
pound and the euro. If the U.S. dollar depreciates
against these currencies, the translation impact is a
higher level of fee revenue, net interest revenue,
noninterest expense and AUC/A and AUM.
Conversely, if the U.S. dollar appreciates, the
translated levels of fee revenue, net interest revenue,
noninterest expense and AUC/A and AUM will be
lower.

Foreign exchange rates
vs. U.S. dollar
Spot rate (at Dec. 31):
British pound
Euro

Yearly average rate:

British pound
Euro

2022

2021

2020

$ 1.2096 $ 1.3543 $ 1.3663
1.2267
1.1373

1.0708

$ 1.2375 $ 1.3755 $ 1.2836
1.1414
1.1994

1.0550

22 BNY Mellon

International clients accounted for 36% of revenues in
2022, compared with 38% in 2021. Net income from
international operations was $1.7 billion in 2022,
compared with $1.8 billion in 2021.

In 2022, revenues from EMEA were $4.0 billion,
compared with $4.1 billion in 2021. The 4% decrease
primarily reflects lower revenue in the Investment
and Wealth Management business segment, partially
offset by higher revenue in the Securities Services
business segment. The decrease in revenue in the
Investment and Wealth Management business
segment primarily reflects the unfavorable impact of
a stronger U.S. dollar and lower market values. The
increase in revenue in the Securities Services business
segment primarily reflects higher net interest revenue,
partially offset by the unfavorable impact of a
stronger U.S. dollar.

The Securities Services, Investment and Wealth
Management and Market and Wealth Services
business segments generated 55%, 25% and 20% of
EMEA revenues, respectively. Net income from
EMEA was $880 million in 2022, compared with
$1.0 billion in 2021.

Revenues from APAC were $1.13 billion in 2022,
compared with $1.14 billion in 2021. The 1%
decrease primarily reflects lower revenue in the
Investment and Wealth Management business
segment, partially offset by higher revenue in the
Securities Services business segment. The decrease
in Investment and Wealth Management revenue was
primarily driven by the unfavorable impact of a
stronger U.S. dollar and lower market values.

The Securities Services, Market and Wealth Services
and Investment and Wealth Management business
segments generated 54%, 32% and 14% of APAC
revenues, respectively. Net income from APAC was
$432 million in 2022, compared with $445 million in
2021.

For additional information regarding our international
operations, including certain key subjective
assumptions used in determining the results, see Note
25 of the Notes to Consolidated Financial Statements.

Results of Operations (continued)

Country risk exposure

The following table presents BNY Mellon’s top 10
exposures by country (excluding the U.S.) as of Dec.
31, 2022, as well as certain countries with higher-risk
profiles, and is presented on an internal risk
management basis. We monitor our exposure to these
and other countries as part of our internal country risk
management process.

The country risk exposure below reflects the
Company’s risk to an immediate default of the
counterparty or obligor based on the country of
residence of the entity which incurs the liability. If
there is credit risk mitigation, the country of residence
of the entity providing the risk mitigation is the
country of risk. The country of risk for securities is
generally based on the domicile of the issuer of the
security.

Country risk exposure at Dec. 31, 2022
(in billions)
)
(
Top 10 country exposure:
Germany
United Kingdom (“UK”)
Belgium
Canada
Netherlands
Singapore
South Korea
Ireland
Luxembourg
Japan
p
Total Top 10 country exposure

Select country exposure:
Brazil
Russia

Interest-bearing deposits

Central banks

Banks

Lending (a)
g ( )

Securities (b)
( )

Other (c)
( )

14.0 $
10.9
8.2
—
3.8
0.1
0.1
0.1
0.1
1.1
38.4 $

1.0
0.1
0.7
2.2
—
1.4
0.1
0.2
0.3
0.9
6.9

— $
—

—
0.4 (e)
( )

0.8
1.2
0.1
0.9
0.2
0.1
2.3
0.9
1.0
—
7.5

0.9
—

4.2
4.3
0.1
3.9
1.0
1.0
0.1
—
0.1
0.5
15.2

0.1
—

0.2
2.4
—
1.8
0.2
0.9
0.2
1.6
1.3
0.2
8.8

0.2
—

Total
exposure

20.2
18.9
9.1
8.8
5.2
3.5
2.8
2.8
2.8
2.7
76.8 (d)
( )

1.2
0.4

(a) Lending includes loans, acceptances, issued letters of credit, net of participations, and lending-related commitments.
(b) Securities include both the available-for-sale and held-to-maturity portfolios.
(c) Other exposure includes over-the-counter (“OTC”) derivative and securities financing transactions, net of collateral.
(d) The top 10 country exposure comprises approximately 70% of our total non-U.S. exposure.
(e) Represents cash balances with exposure to Russia.

Events in recent years have resulted in increased
focus on Brazil. The country risk exposure to Brazil
is primarily short-term trade finance loans extended
to large financial institutions. We also have
operations in Brazil providing investment services
and investment management services.

The war in Ukraine has increased our focus on
Russia. The country risk exposure to Russia consists
of cash balances related to our securities services
businesses and may increase in the future to the
extent cash is received for the benefit of our clients
that is subject to distribution restrictions. BNY
Mellon has ceased new banking business in Russia
and suspended investment management purchases of
Russian securities. At Dec. 31, 2022, less than 0.1%
of our AUC/A and less than 0.01% of our AUM
consisted of Russian securities. We will continue to
work with multinational clients that depend on our
custody and record keeping services to manage their
exposures.

Critical accounting estimates

Our significant accounting policies are described in
Note 1 of the Notes to Consolidated Financial
Statements. Certain of these policies include critical
accounting estimates which require management to
make subjective or complex judgments about the
effect of matters that are inherently uncertain and
may change in subsequent periods. Our critical
accounting estimates are those related to the
allowance for credit losses, goodwill and other
intangibles and litigation and regulatory
contingencies. Management has discussed the
development and selection of the critical accounting
estimates with the Company’s Audit Committee.

Allowance for credit losses

The allowance for credit losses covers financial assets
subject to credit losses and measured at amortized
cost, including loans and lending-related

BNY Mellon 23

Results of Operations (continued)

commitments, held-to-maturity securities, certain
securities financing transactions and deposits with
banks. The allowance for credit losses is intended to
adjust the carrying value of these assets by an
estimated amount of credit losses that we expect to
incur over the life of the asset. Similarly, the
allowance for credit losses on lending-related
commitments and other off-balance sheet financial
instruments is meant to capture the credit losses that
we expect to recognize in these portfolios as of the
balance sheet date.

A quantitative methodology and qualitative
framework is used to estimate the allowance for
credit losses.

The quantitative component of our estimate uses
models and methodologies that categorize financial
assets based on product type, collateral type, and
other credit trends and risk characteristics, including
relevant information about past events, current
conditions and reasonable and supportable forecasts
of future economic conditions that affect the
collectability of the recorded amounts. For the
quantitative component, we segment portfolios into
various major components including commercial
loans and lease financing, commercial real estate,
financial institutions, residential mortgages, and
other. The segmentation of our debt securities
portfolios is by major asset class and is influenced by
whether the security is structured or non-structured
(i.e., direct obligation), as well as the issuer type. The
components of the credit loss calculation for each
major portfolio or asset class include a probability of
default, loss given default and exposure at default, as
applicable, and their values depend on the forecast
behavior of variables in the macroeconomic
environment. We utilize a multi-scenario
macroeconomic forecast which includes a weighting
of three scenarios: a baseline and upside and
downside scenarios and allows us to develop our
estimate using a wide span of economic variables.
Our baseline scenario reflects a view on likely
performance of each global region and the other two
scenarios are designed relative to the baseline
scenario. This approach incorporates a reasonable
and supportable forecast period spanning the life of
the asset, and includes both an initial estimated
economic outlook component as well as a reversion
component for each economic input variable. The
length of each of the two components depends on the
underlying financial instrument, scenario, and
underlying economic input variable. In general, the

24 BNY Mellon

initial economic outlook period for each economic
input variable under each scenario ranges between
several months and two years. The speed at which
the scenario-specific forecasts revert to long-term
historical mean is based on observed historical
patterns of mean reversion at the economic variable
input level that are reflected in our model parameter
estimates. Certain macroeconomic variables such as
unemployment or home prices take longer to revert
after a contraction, though specific recovery times are
scenario-specific. Reversion will usually take longer
the further away the scenario-specific forecast is from
the historical mean. On a quarterly basis, and within
a developed governance structure, we update these
scenarios for current economic conditions and may
adjust the scenario weighting based on our economic
outlook. The Company uses its best judgment to
assess these economic conditions and loss data in
estimating the allowance for credit losses and these
estimates are subject to periodic refinement based on
changes to underlying external or Company-specific
historical data.

In the quantitative component of our estimate, we
measure expected credit losses using an individual
evaluation method if the risk characteristics of the
asset is no longer consistent with the portfolio or class
of asset. For these assets we do not employ the
macroeconomic model calculation but consider
factors such as payment status, collateral value, the
obligor’s financial condition, guarantor support, the
probability of collecting scheduled principal and
interest payments when due, and recovery
expectations if they can be reasonably estimated. For
loans, we measure the expected credit loss as the
difference between the amortized cost basis of the
loan and the present value of the expected future cash
flows from the borrower which is generally
discounted at the loan’s effective interest rate, or the
fair value of the collateral, if the loan is collateral
dependent. We generally consider nonperforming
loans as well as loans that have been or are
anticipated to be modified and classified under a
troubled debt restructuring for individual evaluation
given the risk characteristics of such loans.

Available-for-sale debt securities are recorded at fair
value. When an available-for-sale debt security is in
an unrealized loss position, we employ a
methodology to identify and estimate the credit loss
portion of the unrealized loss position. The
measurement of expected credit losses is performed at
the security level and is based on our best single

Results of Operations (continued)

estimate of cash flows, on a discounted basis;
however, we do not specifically employ the
macroeconomic forecasting models and scenarios
summarized above.

The qualitative component of our estimate for the
allowance for credit losses is intended to capture
expected losses that may not have been fully captured
in the quantitative component. Through an
established governance structure, management
determines the qualitative allowance each period
based on an evaluation of various internal and
environmental factors which include: scenario
weighting and sensitivity risk, credit concentration
risk, economic conditions and other considerations.
We have made and may continue to make
adjustments for idiosyncratic risks.

To the extent actual results differ from forecasts or
management’s judgment, the allowance for credit
losses may be greater or less than future charge-offs
and recoveries.

Our allowance for credit losses is sensitive to a
number of inputs, most notably the credit ratings
assigned to each borrower as well as macroeconomic
forecast assumptions that are incorporated in our
estimate of credit losses through the expected life of
the loan portfolio. Thus, as the macroeconomic
environment and related forecasts change, the
allowance for credit losses may change materially.
The following sensitivity analyses do not represent
management’s expectations of the deterioration of our
portfolios or the economic environment, but are
provided as hypothetical scenarios to assess the
sensitivity of the allowance for credit losses to
changes in key inputs. If commercial real estate
property values were increased 10% and all other
credits were rated one grade better, the quantitative
allowance would have decreased by $36 million, and
if commercial real estate property values were
decreased 10% and all other credits were rated one
grade worse, the quantitative allowance would have
increased by $71 million. Our multi-scenario based
macroeconomic forecast used in determining the Dec.
31, 2022 allowance for credit losses consisted of three
scenarios. The baseline scenario reflects slowing
GDP growth through mid-2023, slightly rising
unemployment through the end of 2023, and slightly
declining commercial real estate prices through the
end of 2023. The upside scenario reflects strong
GDP growth in early 2023, declining unemployment
and higher commercial real estate prices compared

with the baseline. The downside scenario
contemplates negative GDP growth through the third
quarter of 2023, increasing unemployment through
the first quarter of 2024 and lower commercial real
estate prices than the baseline. At Dec. 31, 2022, we
placed the most weighting on our baseline and
downside scenarios, with the remaining weighting
placed on the upside scenario. From a sensitivity
perspective, at Dec. 31, 2022, if we had applied 100%
weighting to the downside scenario, the quantitative
allowance for credit losses would have been
approximately $83 million higher.

Goodwill and other intangibles

We initially record all assets and liabilities acquired
in purchase acquisitions, including goodwill,
indefinite-lived intangibles and other intangibles, in
accordance with Accounting Standards Codification
(“ASC”) 805, Business Combinations. Goodwill,
indefinite-lived intangibles and other intangibles are
subsequently accounted for in accordance with ASC
350, Intangibles – Goodwill and Other. The initial
measurement of goodwill and intangibles requires
judgment concerning estimates of the fair value of the
acquired assets and liabilities. Goodwill ($16.2
billion at Dec. 31, 2022) and indefinite-lived
intangible assets ($2.6 billion at Dec. 31, 2022) are
not amortized but are subject to tests for impairment
annually or more often if events or circumstances
indicate it is more likely than not they may be
impaired. Other intangible assets are amortized over
their estimated useful lives and are subject to
impairment if events or circumstances indicate a
possible inability to realize the carrying value.

Goodwill

BNY Mellon’s business segments include six
reporting units for which annual goodwill impairment
testing is performed in accordance with ASC 350,
Intangibles – Goodwill and Other.

The goodwill impairment test compares the estimated
fair value of the reporting unit with its carrying
amount, including goodwill. If the estimated fair
value of the reporting unit exceeds its carrying
amount, goodwill of the reporting unit is considered
not impaired. However, if the carrying amount of the
reporting unit were to exceed its estimated fair value,
an impairment loss would be recorded.

BNY Mellon 25

Results of Operations (continued)

Determining the fair value of a reporting unit is
subject to uncertainty as it is reliant on estimates of
cash flows that extend far into the future, and, by
their nature, are difficult to estimate over such an
extended time frame. In the future, changes in the
assumptions or the discount rate could produce a
material non-cash goodwill impairment.

In the second quarter of 2022, we performed our
annual goodwill impairment test on all six reporting
units using an income approach to estimate the fair
values of each reporting unit. Estimated cash flows
used in the income approach were based on
management’s projections as of April 1, 2022. The
discount rate applied to these cash flows was 10%.

As a result of the annual goodwill impairment test of
the six reporting units, no goodwill impairment was
recognized. The fair values of four of the Company’s
reporting units were substantially in excess of the
respective reporting units’ carrying value. The Issuer
Services reporting unit, with $2.4 billion of allocated
goodwill, which is one of the two reporting units in
the Securities Services business segment, exceeded its
carrying value by approximately 10%. The
Investment Management reporting unit, with $7.2
billion of allocated goodwill, which is one of the two
reporting units in the Investment and Wealth
Management segment, exceeded its carrying value by
approximately 6%.

An interim test is performed when events or
circumstances occur that may indicate that it is more
likely than not that the fair value of any reporting unit
may be less than its carrying value.

In the third quarter 2022, due to decreases in market
values and the related outlook as well as increased
market interest rates, we performed an interim
goodwill impairment test of the Investment
Management reporting unit which had $7.0 billion of
allocated goodwill. The fair value of the Investment
Management reporting unit was determined to be 7%
below its carrying value, resulting in a goodwill
impairment charge of $680 million. This goodwill
impairment represents a non-cash charge and did not
affect BNY Mellon’s liquidity position, tangible
common equity or regulatory capital ratios. The cash
flow estimates for the Investment Management
reporting unit are impacted by projections of the level
and mix of assets under management, market values,
operating margins and long-term growth rates.

26 BNY Mellon

We determined the fair value of the Investment
Management reporting unit using an income approach
based on management’s projections as of Sept. 30,
2022. The discount rate applied to these cash flows
was 10.5% compared with the 10% discount rate used
in the annual impairment test conducted in the second
quarter of 2022. The increase was driven by a higher
risk free rate. In the third quarter of 2022, we
determined it was not necessary to perform an interim
goodwill impairment test for our other reporting
units.

In the fourth quarter of 2022, due to results of the
third quarter 2022 interim impairment test and the
macroeconomic conditions, we performed an
additional interim goodwill impairment test of the
Investment Management reporting unit, which had
$6.0 billion of allocated goodwill after the sale of
Alcentra on Nov. 1, 2022. The fair value of the
Investment Management reporting unit exceeded its
carrying value by approximately 3%. We determined
the fair value of the Investment Management
reporting unit using an income approach based on
management’s projections as of Dec. 31, 2022. The
discount rate applied to these cash flows was 10.5%.

As of Dec. 31, 2022, if the discount rate applied to
the estimated cash flows was increased or decreased
by 25 basis points, the fair value of the Investment
Management reporting unit would decrease or
increase by 4%, respectively. Similarly, if the long-
term growth rate was increased or decreased by 10
basis points, the fair value of the Investment
Management reporting unit would increase or
decrease by approximately 1%, respectively.

Intangible assets

Key judgments in accounting for intangible assets
include useful life and classification between
goodwill and indefinite-lived intangible assets or
other intangible assets requiring amortization.

Indefinite-lived intangible assets ($2.6 billion at Dec.
31, 2022) are evaluated for impairment at least
annually by comparing their fair values, estimated
using discounted cash flow analyses, to their carrying
values. As a result of the annual evaluation, no
impairment was recognized, however, a $700 million
indefinite-lived intangible asset related to customer
relationships in the Investment Management business
exceeded its carrying value by approximately 3%.

Results of Operations (continued)

Other amortizing intangible assets ($329 million at
Dec. 31, 2022) are evaluated for impairment if events
and circumstances indicate a possible impairment.
Such evaluation of other intangible assets would be
initially based on undiscounted cash flow projections.

offices), interest-bearing deposits in U.S. offices and
interest-bearing deposits in Non-U.S. offices. Total
interest-bearing deposit liabilities as a percentage of
total interest-earning assets were 58% at Dec. 31,
2022 and 60% at Dec. 31, 2021.

See Notes 1 and 7 of the Notes to Consolidated
Financial Statements for additional information
regarding goodwill, intangible assets and the annual
and interim impairment testing.

Litigation and regulatory contingencies

Significant estimates and judgments are required in
establishing an accrued liability for litigation and
regulatory contingencies. For additional information
on our policy, see “Legal proceedings” in Note 22 of
the Notes to Consolidated Financial Statements.

Consolidated balance sheet review

One of our key risk management objectives is to
maintain a balance sheet that remains strong
throughout market cycles to meet the expectations of
our major stakeholders, including our shareholders,
clients, creditors and regulators.

We also seek to undertake overall liquidity risk,
including intraday liquidity risk, that stays within our
risk appetite. The objective of our balance sheet
management strategy is to maintain a balance sheet
that is characterized by strong liquidity and asset
quality, ready access to external funding sources at
competitive rates and a strong capital structure that
supports our risk-taking activities and is adequate to
absorb potential losses. In managing the balance
sheet, appropriate consideration is given to balancing
the competing needs of maintaining sufficient levels
of liquidity and complying with applicable
regulations and supervisory expectations while
optimizing profitability.

At Dec. 31, 2022, total assets were $406 billion,
compared with $444 billion at Dec. 31, 2021. The
decrease in total assets was primarily driven by lower
securities and interest-bearing deposits with the
Federal Reserve and other central banks, partially
offset by higher other assets. Deposit liabilities
totaled $279 billion at Dec. 31, 2022, compared with
$320 billion at Dec. 31, 2021. The decrease primarily
reflects lower noninterest-bearing (principally U.S.

At Dec. 31, 2022, available funds totaled $138 billion
and includes cash and due from banks, interest-
bearing deposits with the Federal Reserve and other
central banks, interest-bearing deposits with banks
and federal funds sold and securities purchased under
resale agreements. This compares with available
funds of $155 billion at Dec. 31, 2021. Total
available funds as a percentage of total assets were
34% at Dec. 31, 2022 and 35% at Dec. 31, 2021. For
additional information on our available funds, see
“Liquidity and dividends.”

Securities were $143 billion, or 35% of total assets, at
Dec. 31, 2022, compared with $159 billion, or 36%
of total assets, at Dec. 31, 2021. The decrease
primarily reflects unrealized pre-tax losses and lower
agency residential mortgage-backed securities
(“RMBS”), partially offset by higher U.S. Treasury
securities. For additional information on our
securities portfolio, see “Securities” and Note 4 of the
Notes to Consolidated Financial Statements.

Loans were $66 billion, or 16% of total assets, at Dec.
31, 2022, compared with $68 billion, or 15% of total
assets, at Dec. 31, 2021. The decrease was primarily
driven by lower margin loans, partially offset by
higher overdrafts, capital call financing and wealth
management mortgages. For additional information
on our loan portfolio, see “Loans” and Note 5 of the
Notes to Consolidated Financial Statements.

Long-term debt totaled $30 billion at Dec. 31, 2022
and $26 billion at Dec. 31, 2021. Issuances were
partially offset by redemptions and maturities and a
decrease in the fair value of hedged long-term debt.
For additional information on long-term debt, see
“Liquidity and dividends” and Note 13 of the Notes
to Consolidated Financial Statements.

The Bank of New York Mellon Corporation total
shareholders’ equity decreased to $41 billion at Dec.
31, 2022 from $43 billion at Dec. 31, 2021. For
additional information, see “Capital” and Note 15 of
the Notes to Consolidated Financial Statements.

BNY Mellon 27

Results of Operations (continued)

Securities

In the discussion of our securities portfolio, we have
included certain credit ratings information because
the information can indicate the degree of credit risk

to which we are exposed. Significant changes in
ratings classifications could indicate increased credit
risk for us and could be accompanied by an increase
in the allowance for credit losses and/or a reduction in
the fair value of our securities portfolio.

The following table shows the distribution of our total securities portfolio.

Dec. 31,
2021
Fair
value
$ 40,582
50,735

12,291

14,312
7,646

5,421
5,420
6,238

3,114

2,686
2,793

2,190

Securities portfolio

(dollars in millions)
U.S. Treasury
Agency RMBS
Agency commercial
mortgage-backed
securities (“MBS”)

Sovereign debt/sovereign

guaranteed (d)

Supranational
Collateralized loan

obligations (“CLOs”)
U.S. government agencies
Foreign covered bonds (e)
Non-agency commercial

MBS

Foreign government

agencies (f)

Non-agency RMBS
Other asset-backed
securities (“ABS”)

State and political

subdivisions
Corporate bonds
Other

Total securities

2022
change in
unrealized
gain (loss)
$

(1,462) $
(4,895)

Dec. 31, 2022

Fair
Amortized
cost (a)
value
42,966 $ 41,503
38,916
43,576

Fair value
as a % of
amortized
cost (a)

Unrealized
gain (loss)
(1,463)
(4,660)

97% $
89

Ratings (c)

%
Floating
rate (b)

A+/
A-

AAA/
AA-

Not
rated
51% 100% —% —% —% —%
15

BBB+/
BBB-

100 —

—

BB+
and
lower

(927)

12,670

11,864

(561)
(267)

(126)
(514)
(267)

(311)

(114)
(276)

(109)

12,294
8,572

11,756
8,298

6,429
6,671
6,041

6,300
6,115
5,776

3,334

3,054

2,429
2,227

2,307
2,060

1,443

1,319

96
97

98
92
96

95
93

93
—
100

(806)

(538)
(274)

(129)
(556)
(265)

(280)

(122)
(167)

(124)

(2)
—
—

94% $

(9,386) (g)(h)
) (g)( )
(

22
64

100
36
57

34
50

100 —

90
5
100 —

100 —
100 —
100 —

100 —

95
85

5
3

100 —

—

4
—

—
—
—

—

—
—

—

1
—

—
—
—

—

—
7

—

—
—

—
—
—

—

—
5

—

51
—
—
40%

1
52
1
—
— —
— —
—
99% 1% —% —% —%

46
—
—
—
— 100

2,529
2,066
1
$ 158,024 (g) $

(g)

26
33
—

25
—
1
(9,770) $ 148,678 $ 139,292 (g)
(g)
(

23
—
1

)

(a)
(b)
(c)
(d)
(e)
(f)
(g)

(h)

Amortized cost reflects historical impairments, and is net of the allowance for credit losses.
Includes the impact of hedges.
Represents ratings by Standard & Poor’s (“S&P”) or the equivalent.
Primarily consists of exposure to Germany, United Kingdom, France, Singapore, Canada and Italy.
Primarily consists of exposure to Canada, United Kingdom, Australia, Germany and Norway.
Primarily consists of exposure to Canada, Norway, Netherlands, Sweden, France and Denmark.
Includes net unrealized losses on derivatives hedging securities available-for-sale (including terminated hedges) of $590 million at Dec. 31, 2021 and net unrealized
gain (including terminated hedges) of $2,678 million at Dec. 31, 2022.
At Dec. 31, 2022, net unrealized losses of $3,184 million related to available-for-sale securities, net of hedges, and $6,202 related to held-to-maturity securities.

The fair value of our securities portfolio, including
related hedges, was $139.3 billion at Dec. 31, 2022,
compared with $158.0 billion at Dec. 31, 2021. The
decrease primarily reflects unrealized pre-tax losses
and lower agency RMBS, partially offset by an
increase in U.S. Treasury securities.

The fair value of the available-for-sale securities
totaled $89.3 billion at Dec. 31, 2022, net of hedges,
or 64% of the securities portfolio, net of hedges. The
fair value of the held-to-maturity securities totaled
$50.0 billion at Dec. 31, 2022, or 36% of the
securities portfolio.

At Dec. 31, 2022, the securities portfolio had a net
unrealized loss, including the impact of related
hedges, of $9.4 billion, compared with a net
unrealized gain, including the impact of related
hedges, of $384 million at Dec. 31, 2021. The
increase in the net unrealized loss, including the
impact of hedges, was primarily driven by higher
market interest rates.

The unrealized loss (after-tax) on our available-for-
sale securities portfolio, net of hedges, included in
accumulated other comprehensive income was $2.4
billion at Dec. 31, 2022, compared with an unrealized
gain (after-tax), net of hedges, of $362 million at Dec.
31, 2021. The increase in the unrealized loss, net of
tax, was primarily driven by higher market interest
rates.

28 BNY Mellon

Results of Operations (continued)

At Dec. 31, 2022, 99% of the securities in our
portfolio were rated AAA/AA-, compared with 96%
at Dec. 31, 2021.

See Note 4 of the Notes to Consolidated Financial
Statements for the pre-tax net securities gains (losses)
by security type. See Note 20 of the Notes to
Consolidated Financial Statements for securities by
level in the fair value hierarchy.

The following table presents the amortizable purchase
premium (net of discount) related to the securities
portfolio and accretable discount related to the 2009
restructuring of the securities portfolio.

Net premium amortization and

discount accretion of securities (a)
(dollars in millions)
Amortizable purchase premium (net
of discount) relating to securities:

Balance at year-end
Estimated average life remaining

at year-end (in years)

Amortization

Accretable discount related to the

prior restructuring of the securities
portfolio:

Balance at year-end
Estimated average life remaining

at year-end (in years)

Accretion

2022

2021

2020

$ 1,151 $ 1,972 $ 2,283

4.5
387 $

4.4
698 $

3.9
568

42 $

109 $

130

8.3
25 $

6.1
43 $

5.6
38

(a) Amortization of purchase premium decreases net interest
revenue while accretion of discount increases net interest
revenue. Both are recorded on a level yield basis.

Equity investments

We have several equity investments recorded in other
assets. These include equity method investments,
including renewable energy, investments in qualified
affordable housing projects, Federal Reserve Bank
stock, seed capital and other investments. The
following table presents the carrying values at Dec.
31, 2022 and Dec. 31, 2021.

Equity investments
(in millions)
)
(
Renewable energy investments
Qualified affordable housing project
investments

Equity method investments:

CIBC Mellon
Siguler Guff
Innocap Investment Management Inc.
p
Total equity method investments

Federal Reserve Bank stock
Other equity investments (a)
Seed capital (b)
Federal Home Loan Bank stock
Total equity investments
y

Dec. 31,

2022
2021
871 $ 1,027

1,298

1,153

545
242
16
803
478
695
218
6

687
252
—
939
472
449
357
7
$ 4,369 $ 4,404

(a)

(b)

Includes strategic equity, private equity and other
investments.
Includes investments in BNY Mellon funds which hedge
deferred incentive awards.

For additional information on the fair value of certain
seed capital investments and our private equity
investments, see Note 8 of the Notes to Consolidated
Financial Statements.

Renewable energy investments

We invest in renewable energy projects to receive an
expected after-tax return, which consists of allocated
renewable energy tax credits, tax deductions and cash
distributions based on the operations of the project.
The pre-tax losses on these investments are recorded
in investment and other revenue on the consolidated
income statement. The corresponding tax benefits
and credits are recorded to the provision for income
taxes on the consolidated income statement.

BNY Mellon 29

Results of Operations (continued)

Loans

Total exposure – consolidated

(in billions)
Financial institutions
Commercial
Wealth management loans
Wealth management mortgages
Commercial real estate
Lease financings
Other residential mortgages
Overdrafts
Capital call financing
Other
g
Margin loans
Total

Dec. 31, 2022
Unfunded
commitments

Loans

9.7 $
1.7
10.3
9.0
6.2
0.7
0.4
4.8
3.4
3.0
16.9
66.1 $

31.7 $
11.7
0.6
0.2
3.9
—
—
—
3.5
—
—
51.6 $

Total
exposure
41.4
13.4
10.9
9.2
10.1
0.7
0.4
4.8
6.9
3.0
16.9
117.7

Dec. 31, 2021
Unfunded
commitments

Loans

10.2 $
2.1
9.8
8.2
6.0
0.7
0.3
3.1
2.3
2.6
22.5
67.8 $

30.6 $
11.9
0.5
0.4
3.3
—
—
—
1.5
—
—
48.2 $

Total
exposure
40.8
14.0
10.3
8.6
9.3
0.7
0.3
3.1
3.8
2.6
22.5
116.0

Our financial institutions and commercial portfolios
comprise our largest concentrated risk. These
portfolios comprised 47% of our total exposure at
both Dec. 31, 2022 and Dec. 31, 2021. Additionally,
most of our overdrafts relate to financial institutions.

At Dec. 31, 2022, total lending-related exposure was
$117.7 billion, an increase of 1% compared with Dec.
31, 2021, primarily reflecting higher exposure in the
capital call financing portfolio, higher overdrafts and
higher exposure to the commercial real estate, wealth
management loans, wealth management mortgages
and financial institutions portfolios, partially offset by
lower margin loans.

Financial institutions

The financial institutions portfolio is shown below.

Financial institutions
portfolio exposure
(dollars in billions)
)
(
Securities industry
Asset managers
Banks
Insurance
Government
Other

Total

Unfunded
commitments

Dec. 31, 2022
Total
exposure
19.1
9.2
7.6
3.9
0.2
1.4
41.4

17.5 $
7.6
1.5
3.8
0.2
1.1
31.7 $

% Inv.
grade
96%
98
86
100
100
98
95%

Loans

% due
<1 yr.
98% $
84
97
12
49
43
85% $ 10.2 $

1.7 $
1.7
5.8
0.2
0.1
0.7

Dec. 31, 2021
Unfunded
commitments

Total
exposure
19.2
8.8
7.3
3.6
0.3
1.6
40.8

17.5 $
7.1
1.5
3.4
0.2
0.9
30.6 $

Loans

1.6 $
1.6
6.1
0.1
—
0.3
9.7 $

The financial institutions portfolio exposure was
$41.4 billion at Dec. 31, 2022, an increase of 1%
compared with Dec. 31, 2021, primarily reflecting
higher exposure in the asset managers, banks and
insurance portfolios, partially offset by lower
exposure in the other portfolio.

an equivalent external rating agency grade based
upon a number of dimensions, which are continually
evaluated and may change over time. For ratings of
non-U.S. counterparties, our internal credit rating is
generally capped at a rating equivalent to the
sovereign rating of the country where the
counterparty resides, regardless of the internal credit
rating assigned to the counterparty or the underlying
collateral.

The exposure to financial institutions is generally
short-term, with 85% of the exposures expiring

30 BNY Mellon

Results of Operations (continued)

within one year. At Dec. 31, 2022 and Dec. 31, 2021,
17% of the exposure to financial institutions had an
expiration within 90 days.

In addition, 64% of the financial institutions exposure
is secured at Dec. 31, 2022. For example, securities
industry clients and asset managers often borrow
against marketable securities held in custody.

At Dec. 31, 2022, the secured intraday credit
provided to dealers in connection with their tri-party
repo activity totaled $16.1 billion and was included in
the securities industry portfolio. Dealers secure the
outstanding intraday credit with high-quality liquid
collateral having a market value in excess of the
amount of the outstanding credit. Secured intraday
credit facilities represent approximately 39% of the

Commercial

The commercial portfolio is presented below.

Commercial portfolio exposure

exposure in the financial institutions portfolio and are
reviewed and reapproved annually.

The asset managers portfolio exposure is high-
quality, with 98% of the exposures meeting our
investment grade equivalent ratings criteria as of Dec.
31, 2022. These exposures are generally short-term
liquidity facilities, with the majority to regulated
mutual funds.

Our banks portfolio exposure primarily relates to our
global trade finance. These exposures are short-term
in nature, with 97% due in less than one year. The
investment grade percentage of our banks exposure
was 86% at Dec. 31, 2022, compared with 88% at
Dec. 31, 2021. Our non-investment grade exposures
are primarily trade finance loans in Brazil.

(dollars in billions)
Manufacturing
Energy and utilities
Services and other
Media and telecom

Total

Unfunded
commitments

Dec. 31, 2022
Total
exposure
4.6
4.0
4.0
0.8
13.4

4.1 $
3.7
3.2
0.7
11.7 $

Loans

0.5 $
0.3
0.8
0.1
1.7 $

Dec. 31, 2021
Unfunded
commitments

Loans

% Inv.
grade
96%
94
96
88
95%

% due
<1 yr.
21% $
9
29
—
19% $

0.6 $
0.4
1.0
0.1
2.1 $

Total
exposure
4.5
4.3
4.2
1.0
14.0

3.9 $
3.9
3.2
0.9
11.9 $

The commercial portfolio exposure was $13.4 billion
at Dec. 31, 2022, a decrease of 4% from Dec. 31,
2021, primarily driven by lower exposure in the
energy and utilities, media and telecom and services
and other portfolios.

Our credit strategy is to focus on investment grade
clients that are active users of our non-credit services.
The following table summarizes the percentage of the
financial institutions and commercial portfolio
exposures that are investment grade.

Investment grade percentages

Financial institutions
Commercial

Dec. 31,
2021
96%
94%

2022
95%
95%

2020
95%
92%

Wealth management loans

Our wealth management loan exposure was $10.9
billion at Dec. 31, 2022, compared with $10.3 billion
at Dec. 31, 2021. Wealth management loans

primarily consist of loans to high-net-worth
individuals, a majority of which are secured by the
customers’ investment management accounts or
custody accounts.

Wealth management mortgages

Our wealth management mortgage exposure was $9.2
billion at Dec. 31, 2022, compared with $8.6 billion
at Dec. 31, 2021. Wealth management mortgages
primarily consist of loans to high-net-worth
individuals, which are secured by residential
property. Wealth management mortgages are
primarily interest-only, adjustable-rate mortgages
with a weighted-average loan-to-value ratio of 61% at
origination. Less than 1% of the mortgages were past
due at Dec. 31, 2022.

At Dec. 31, 2022, the wealth management mortgage
portfolio consisted of the following geographic
concentrations: California – 22%; New York – 15%;
Florida – 10%; Massachusetts – 8%; and other –
45%.

BNY Mellon 31

Results of Operations (continued)

Commercial real estate

The composition of the commercial real estate portfolio by asset class, including percentage secured, is presented
below.

Composition of commercial real estate portfolio by asset class

(dollars in billions)
Residential
Office
Retail
Mixed-use
Hotels
Healthcare
Other

Total commercial real estate

(a) Represents the percentage of secured exposure in each asset class.

Our commercial real estate exposure totaled $10.1
billion at Dec. 31, 2022 and $9.3 billion at Dec. 31,
2021. Our income-producing commercial real estate
facilities are focused on experienced owners and are
structured with moderate leverage based on existing
cash flows. Our commercial real estate lending
activities also include construction and renovation
facilities. Our client base consists of experienced
developers and long-term holders of real estate assets.
Loans are approved on the basis of existing or
projected cash flows and supported by appraisals and
knowledge of local market conditions. Development
loans are structured with moderate leverage, and in
many instances, involve some level of recourse to the
developer.

At Dec. 31, 2022, the unsecured portfolio consisted
of real estate investment trusts (“REITs”) and real
estate operating companies, which are both primarily
investment grade.

At Dec. 31, 2022, our commercial real estate portfolio
consisted of the following concentrations: New York
metro – 36%; REITs and real estate operating
companies – 29%; and other – 35%.

Lease financings

The lease financings portfolio exposure totaled $657
million at Dec. 31, 2022 and $731 million at Dec. 31,
2021. At Dec. 31, 2022, approximately 99% of
leasing exposure was investment grade, or investment
grade equivalent and consisted of exposures backed
by well-diversified assets, primarily real estate and
large-ticket transportation equipment. The largest

32 BNY Mellon

Percentage
secured (a)

Dec. 31, 2022
Total
exposure
4.1
2.8
0.9
0.8
0.6
0.4
0.5
10.1

85% $
75
58
33
42
49
66
71% $

Dec. 31, 2021
Total
exposure
3.6
2.6
0.9
0.7
0.5
0.4
0.6
9.3

Percentage
secured (a)
81%
77
58
37
23
25
45
66%

components of our lease residual value exposure were
to aircraft and freight-related rail cars. Assets are
both domestic and foreign-based, with primary
concentrations in Germany and the U.S.

Approximately 78% of the portfolio is additionally
secured by highly rated securities and/or secured by
letters of credit from investment grade issuers.
Counterparty rating equivalents at Dec. 31, 2022,
were as follows:

•
•
•

40% were A or better, or equivalent;
59% were BBB; and
1% were non-investment grade.

Other residential mortgages

The other residential mortgages portfolio primarily
consists of 1-4 family residential mortgage loans and
totaled $345 million at Dec. 31, 2022 and $299
million at Dec. 31, 2021. Included in this portfolio at
Dec. 31, 2022 were $97 million of fixed rate jumbo
mortgage loans purchased in 2022 with a weighted-
average loan-to-value ratio of 70% at origination.

Overdrafts

Overdrafts primarily relate to custody and securities
clearance clients and are generally repaid within two
business days.

Capital call financing

Capital call financing includes loans to private equity
funds that are secured by the fund investors’ capital
commitments and the funds’ right to call capital.

Results of Operations (continued)

Other loans

Other loans primarily include loans to consumers that
are fully collateralized with equities, mutual funds
and fixed-income securities.

Margin loans

Margin loan exposure of $16.9 billion at Dec. 31,
2022 and $22.5 billion at Dec. 31, 2021 was

collateralized with marketable securities. Borrowers
are required to maintain a daily collateral margin in
excess of 100% of the value of the loan. Margin
loans included $6.0 billion at Dec. 31, 2022 and $7.7
billion at Dec. 31, 2021 related to a term loan
program that offers fully collateralized loans to
broker-dealers.

Maturity of loan portfolio

The following table shows the maturity structure of our loan portfolio.

Maturity of loan portfolio at Dec. 31, 2022
(in millions)
Commercial
Commercial real estate
Financial institutions
Lease financings
Wealth management loans
Wealth management mortgages
Other residential mortgages
Overdrafts
Capital call financing
Other
Margin loans
g
Total

Interest rate characteristic

Within
1 year

Between
1 and 5 years

Between
5 and 15 years

After
15 years

929 $

1,002
8,561
22
10,068
37
—
4,839
1,497
2,930
16,683
46,568 $

631 $

3,723
655
108
167
4
7
—
1,912
—
250
7,457 $

172 $

1,501
468
527
67
411
154
—
29
11
—
3,340 $

— $
—
—
—
—
8,514
184
—
—
—
—
8,698 $

The following table shows the interest rate characteristic of loans maturing after one year.

Interest rate characteristic of loan portfolio maturing > 1 year at Dec. 31, 2022
(in millions)
)
(
Commercial
Commercial real estate
Financial institutions
Lease financings
Wealth management loans
Wealth management mortgages
Other residential mortgages
Capital call financing
Other
Margin Loans
g
Total

Fixed rates

Floating rates
g

71 $

185
5
635
18
3,629
315
—
—
—
4,858 $

732 $

5,039
1,118
—
216
5,300
30
1,941
11
250
14,637 $

Total
1,732
6,226
9,684
657
10,302
8,966
345
4,839
3,438
2,941
16,933
66,063

Total
803
5,224
1,123
635
234
8,929
345
1,941
11
250
19,495

BNY Mellon 33

Results of Operations (continued)

Allowance for credit losses

Our credit strategy is to focus on investment grade clients who are active users of our non-credit services. Our
primary exposure to the credit risk of a customer consists of funded loans, unfunded contractual commitments to
lend, standby letters of credit (“SBLC”) and overdrafts associated with our custody and securities clearance
businesses.

The following table presents the changes in our allowance for credit losses.

Allowance for credit losses activity
(dollars in millions)
Beginning balance of allowance for credit losses
Provision for credit losses
Charge-offs:
Loans:

Wealth management mortgages
Other residential mortgages
Other loans

Other financial instruments
g

Total charge-offs

Recoveries:
Loans:

Financial institutions
Other residential mortgages

Other financial instruments

Total recoveries
)
Net (charge-offs)
Ending balance of allowance for credit losses

(
g

Allowance for loan losses
Allowance for lending-related commitments
( )
Allowance for financial instruments (a)
Total allowance for credit losses

Total loans
g
Average loans outstanding
g
Net (charge-offs) recoveries of loans to average loans outstanding
Net (charge-offs) recoveries of loans to total allowance for loan losses and lending-related commitments
Allowance for loan losses as a percentage of total loans
Allowance for loan losses and lending-related commitments as a percentage of total loans
Net (charge-offs) to average loans by loan category: (b)

Wealth management mortgages:

Net (charge-offs) during the year
Average loans outstanding

Other loans:

Net (charge-offs) during the year
g
Average loans outstanding

$
$
$

2022

260
39

2021
501
(231)

—
—
—
(11)
(11)

—
4
—
4
(7)
292

176
78
38
292
66,063
67,825

(0.01)%
(2.76)
0.27
0.38

N/A
N/A
N/A
N/A
N/A
N/A

$
$
$

$
$

(1)
(1)
(16)
—
)
(18)
(

2
6
—
8
)
(10)
(
260

196
45
19
260
67,787
60,814

(0.02)%
(4.15)
0.29
0.36

(0.01)%
(1)
8,046
(0.77)%
(16)
2,088

(b)

( )
(b)

(a)

Includes allowance for credit losses on federal funds sold and securities purchased under resale agreements, available-for-sale
securities, held-to-maturity securities, accounts receivable, cash and due from banks and interest-bearing deposits with banks.

(b) Average loans based on month-end balances.
N/A – Not applicable. There were no net charge-offs in 2022.

34 BNY Mellon

Results of Operations (continued)

The provision for credit losses was $39 million in
2022 compared with a benefit of $231 million in
2021. The increase was primarily driven by changes
in the macroeconomic forecast.

The allowance for loan losses and allowance for
lending-related commitments represent
management’s estimate of lifetime expected losses in
our credit portfolio. This evaluation process is
subject to numerous estimates and judgments. To the
extent actual results differ from forecasts or
management’s judgment, the allowance for credit
losses may be greater or less than future charge-offs.

Based on an evaluation of the allowance for credit
losses as discussed in “Critical accounting estimates”
and Note 1 of the Notes to Consolidated Financial
Statements, we have allocated our allowance for
loans and lending-related commitments as presented
below.

Allocation of allowance for loan losses and

lending-related commitments (a)

Dec. 31,

2022

2021

(dollars in millions)
)
(
Commercial real estate
Financial institutions
Commercial
Other residential mortgages
Wealth management
mortgages
Capital call financing
Wealth management loans
Lease financings
g

Total

$
$ 184
24
18
8

12
6
1
1
$ 254

%
72% $ 199
9
13
7
12
3
7

5
2
1
1

6
2
1
1
100% $ 241

%
82%
5
5
3

2
1
1
1
100%

(a) The allowance allocated to margins loans, overdrafts and

other loans was insignificant at both Dec. 31, 2022 and Dec.
31, 2021. We have rarely suffered a loss on these types of
loans.

The allocation of the allowance for credit losses is
inherently judgmental, and the entire allowance for
credit losses is available to absorb credit losses
regardless of the nature of the losses.

Nonperforming assets

The table below presents our nonperforming assets.

Nonperforming assets
)
(dollars in millions)
(
Nonperforming loans:

Other residential mortgages
Wealth management mortgages
Commercial real estate

Total nonperforming loans

Other assets owned

Total nonperforming assets

Nonperforming assets ratio
Allowance for loan losses/
nonperforming loans

Allowance for loan losses/
nonperforming assets

Allowance for credit losses/
nonperforming loans

Allowance for credit losses/
nonperforming assets

Dec. 31,

2022

2021

31
22
54
107
2
109
0.16%

39
25
54
118
2
120
0.18%

164.5

161.5

237.4

233.0

166.1

163.3

204.2

200.8

Nonperforming assets decreased $11 million in 2022
compared with 2021, primarily reflecting lower other
residential mortgages and wealth management
mortgage loans.

See “Nonperforming assets” in Note 1 of the Notes to
Consolidated Financial Statements for our policy for
placing loans on nonaccrual status.

Deposits

We receive client deposits through the businesses in
the Securities Services, Market and Wealth Services
and Investment and Wealth Management segments
and we rely on those deposits as a low-cost and stable
source of funding.

Total deposits were $279.0 billion at Dec. 31, 2022, a
decrease of 13%, compared with $319.7 billion at
Dec. 31, 2021. The decrease primarily reflects lower
non-interest bearing deposits (principally U.S.
offices), interest-bearing deposits in U.S. offices and
interest-bearing deposits in non-U.S. offices.

Noninterest-bearing deposits were $78.0 billion at
Dec. 31, 2022, compared with $93.7 billion at Dec.
31, 2021. Interest-bearing deposits were primarily
demand deposits and totaled $201.0 billion at Dec.
31, 2022, compared with $226.0 billion at Dec. 31,
2021.

BNY Mellon 35

Results of Operations (continued)

The aggregate amount of deposits by foreign
customers in domestic offices was $61.2 billion at
Dec. 31, 2022 and $65.4 billion at Dec. 31, 2021.

Deposits in foreign offices totaled $98.3 billion at
Dec. 31, 2022 and $112.1 billion at Dec. 31, 2021.
These deposits were primarily overnight deposits.

broker-dealers are driven by customer trading activity
and market volatility.

The Bank of New York Mellon may issue
commercial paper that matures within 397 days from
the date of issue and is not redeemable prior to
maturity or subject to voluntary prepayment.

Uninsured deposits are the portion of domestic
deposits accounts that exceed the Federal Deposit
Insurance Corporation (“FDIC”) insurance limit.
Uninsured deposits in domestic deposit accounts are
generally demand deposits and totaled $156.6 billion
at Dec. 31, 2022 and $186.2 billion at Dec. 31, 2021.

Other borrowed funds primarily include overdrafts of
sub-custodian account balances in our Securities
Services businesses, finance lease liabilities and
borrowings under lines of credit by our Pershing
subsidiaries. Overdrafts typically relate to timing
differences for settlements.

The following table presents the amount of uninsured
domestic and foreign time deposits disaggregated by
time remaining until maturity.

Uninsured time deposits at Dec. 31, 2022
(in millions)
)
(
Less than 3 months
3 to 6 months
6-12 months
Over 12 months

Total

Domestic

Foreign
g
922
5
10
—
937

226 $
42
75
19
362 $

Short-term borrowings

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, commercial paper and other borrowed funds.
Certain short-term borrowings, for example,
securities sold under repurchase agreements, require
the delivery of securities as collateral.

Federal funds purchased and securities sold under
repurchase agreements include repurchase agreement
activity with the Fixed Income Clearing Corporation
(“FICC”), where we record interest expense gross,
but the ending and average balances reflect the
impact of offsetting under enforceable netting
agreements. This activity primarily relates to
government securities collateralized resale and
repurchase agreements executed with clients that are
novated to and settle with the FICC.

Payables to customers and broker-dealers represent
funds awaiting reinvestment and short sale proceeds
payable on demand. Payables to customers and

36 BNY Mellon

Liquidity and dividends

BNY Mellon defines liquidity as the ability of the
Parent and its subsidiaries to access funding or
convert assets to cash quickly and efficiently, or to
roll over or issue new debt, especially during periods
of market stress, at a reasonable cost, and in order to
meet its short-term (up to one year) obligations.
Funding 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 flow and collateral needs without adversely
affecting daily operations or our financial condition.
Funding liquidity risk can arise from funding
mismatches, market constraints from the inability to
convert assets into cash, the inability to hold or raise
cash, low overnight deposits, 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. For additional information, see “Risk
Management – Liquidity Risk.”

The Parent’s policy is to have access to sufficient
unencumbered cash and cash equivalents at each
quarter-end to cover maturities and other forecasted
debt redemptions, net interest payments and net tax
payments for the following 18-month period, and to
provide sufficient collateral to satisfy transactions
subject to Section 23A of the Federal Reserve Act.
As of Dec. 31, 2022, the Parent was in compliance
with this policy.

We monitor and control liquidity exposures and
funding needs within and across significant legal

Results of Operations (continued)

entities, branches, currencies and business lines,
taking into account, among other factors, any
applicable restrictions on the transfer of liquidity
among entities.

BNY Mellon also manages potential intraday
liquidity risks. 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 intraday obligations under normal and reasonably
severe stressed conditions.

We define available funds for internal liquidity
management purposes as cash and due from banks,
interest-bearing deposits with the Federal Reserve
and other central banks, interest-bearing deposits with
banks and federal funds sold and securities purchased
under resale agreements. The following table
presents our total available funds at period end and on
an average basis.

Available funds
(dollars in millions)
)
(
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
p

Total available funds

Dec. 31,
2022

Dec. 31,
2021

Average
g
2021

2022

2020

5,030

6,061

5,542

5,922

4,506

91,655
17,169
24,298
$138,152

102,467
16,630
29,607
$ 154,765

97,442
16,826
24,953
$144,763

113,346
20,757
28,530
$ 168,555

94,432
19,165
30,768
$ 148,871

Total available funds as a percentage of total assets
p

34%

35%

34%

37%

36%

Total available funds were $138.2 billion at Dec. 31,
2022, compared with $154.8 billion at Dec. 31, 2021.
The decrease was primarily due to lower interest-
bearing deposits with the Federal Reserve and other
central banks and federal funds sold and securities
purchased under resale agreements.

Average non-core sources of funds, such as federal
funds purchased and securities sold under repurchase
agreements, trading liabilities, other borrowed funds
and commercial paper, were $16.9 billion for 2022
and $16.7 billion for 2021. The increase primarily
reflects higher trading liabilities and other borrowed
funds, partially offset by lower federal funds
purchased and securities sold under repurchase
agreements.

Average interest-bearing domestic deposits were
$111.5 billion for 2022 and $124.7 billion for 2021.
Average foreign deposits, primarily from our
European-based businesses included in the Securities
Services and Market and Wealth Services segments,
were $101.9 billion for 2022, compared with $112.5
billion for 2021. The decrease primarily reflects
client activity.

Average payables to customers and broker-dealers
were $17.1 billion for 2022 and $16.9 billion for

2021. Payables to customers and broker-dealers are
driven by customer trading activity and market
volatility.

Average long-term debt was $27.4 billion for 2022
and $25.8 billion for 2021.

Average noninterest-bearing deposits decreased to
$85.7 billion for 2022 from $86.6 billion for 2021,
primarily reflecting client activity.

A significant reduction of client activity in our
Securities Services and Market and Wealth Services
business segments would reduce our access to
deposits. See “Asset/liability management” for
additional factors that could impact our deposit
balances.

Sources of liquidity

The Parent’s major sources of liquidity are access to
the debt and equity markets, dividends from its
subsidiaries, and cash on hand and cash otherwise
made available in business-as-usual circumstances to
the Parent through a committed credit facility with
our intermediate holding company (“IHC”).

BNY Mellon 37

Results of Operations (continued)

Our ability to access the capital markets on favorable terms, or at all, is partially dependent on our credit ratings,
which are as follows:

Credit ratings at Dec. 31, 2022

Parent:
Long-term senior debt
Subordinated debt
Preferred stock
Outlook – Parent

The Bank of New York Mellon:
Long-term senior debt
Subordinated debt
Long-term deposits
Short-term deposits
Commercial paper

BNY Mellon, N.A.:
Long-term senior debt
Long-term deposits
Short-term deposits

Outlook – Banks

(a) Represents senior debt issuer default rating.
NR – Not rated.

Long-term debt totaled $30.5 billion at Dec. 31, 2022
and $25.9 billion at Dec. 31, 2021. Issuances of
$10.0 billion were partially offset by redemptions and
maturities of $4.0 billion and a decrease in the fair
value of hedged long-term debt. The Parent has $5.3
billion of long-term debt that will mature in 2023.

The following table presents the long-term debt
issued in 2022.

Debt issuances
(in millions)
5.834% fixed-to-floating callable senior notes due 2033
4.414% fixed-to-floating callable senior notes due 2026
5.802% fixed-to-floating callable senior notes due 2028
3.350% fixed rate senior notes due 2025
2.050% fixed rate senior notes due 2027
4.289% fixed-to-floating callable senior notes due 2033
5.224% fixed-to-floating callable senior notes due 2025
3.430% fixed-to-floating callable senior notes due 2025
3.992% fixed-to-floating callable senior notes due 2028
4.596% fixed-to-floating callable senior notes due 2030
2.500% fixed rate senior notes due 2032
SOFR + 62bps senior notes due 2025
3.850% fixed rate senior notes due 2029

Total debt issuances

SOFR – compounded secured overnight financing rate
bps – basis points

2022
1,500
1,250
1,000
950
850
750
750
700
500
500
450
400
350
9,950

In January 2023, the Parent issued $750 million of
fixed-to-floating rate senior notes maturing in 2029.

38 BNY Mellon

Moody’s

A1
A2
Baa1
Stable

Aa2
NR
Aa1
P1
P1

Aa2 (a)
Aa1
P1

Stable

S&P

A
A-
BBB
Stable

AA-
A
AA-
A-1+
A-1+

AA-
AA-
A-1+

Stable

Fitch

AA-
A
BBB+
Stable

AA
NR
AA+
F1+
F1+

AA (a)
AA+
F1+

Stable

DBRS

AA
AA (low)
A
Stable

AA (high)
NR
AA (high)
R-1 (high)
R-1 (high)

AA (high)
AA (high)
R-1 (high)

Stable

The annual fixed interest rate is 4.543% from
issuance to, but excluding, Feb. 1, 2028, and then an
annual interest rate of SOFR plus 116.868 basis
points. The Parent also issued $750 million of fixed-
to-floating rate senior notes maturing in 2034. The
annual fixed interest rate is 4.706% from issuance to,
but excluding, Feb. 1, 2033, and then an annual
interest rate of SOFR plus 151.178 basis points.

The Bank of New York Mellon may issue notes and
CDs. At Dec. 31, 2022 and Dec. 31, 2021, $780
million and $30 million, respectively, of notes were
outstanding. At Dec. 31, 2022, $122 million of CDs
were outstanding. There were no CDs outstanding at
Dec. 31, 2021.

The Bank of New York Mellon also issues
commercial paper that matures within 397 days from
the date of issue and is not redeemable prior to
maturity or subject to voluntary prepayment. There
was no commercial paper outstanding at Dec. 31,
2022 and Dec. 31, 2021. The average commercial
paper outstanding was $5 million for 2022 and $3
million for 2021.

Subsequent to Dec. 31, 2022, our U.S. bank
subsidiaries could declare dividends to the Parent of
approximately $3.4 billion, without the need for a
regulatory waiver. In addition, at Dec. 31, 2022, non-

Results of Operations (continued)

bank subsidiaries of the Parent had liquid assets of
approximately $4.4 billion. Restrictions on our
ability to obtain funds from our subsidiaries are
discussed in more detail in “Supervision and
Regulation – Capital Planning and Stress Testing –
Payment of Dividends, Stock Repurchases and Other
Capital Distributions” and in Note 19 of the Notes to
Consolidated Financial Statements.

Pershing LLC has uncommitted lines of credit in
place for liquidity purposes which are guaranteed by
the Parent. Pershing LLC has two separate
uncommitted lines of credit amounting to $350
million in aggregate. Average borrowings under
these lines were less than $1 million, in aggregate, in
2022. Pershing Limited, an indirect UK-based
subsidiary of BNY Mellon, has two separate
uncommitted lines of credit amounting to $257
million in aggregate. Average borrowings under
these lines were $5 million, in aggregate, in 2022.

The double leverage ratio is the ratio of our equity
investment in subsidiaries divided by our
consolidated Parent company equity, which includes
our noncumulative perpetual preferred stock. In
short, the double leverage ratio measures the extent to
which equity in subsidiaries is financed by Parent
company debt. As the double leverage ratio
increases, this can reflect greater demands on a
company’s cash flows in order to service interest
payments and debt maturities. BNY Mellon’s double
leverage ratio is managed in a range considering the
high level of unencumbered available liquid assets
held in its principal subsidiaries (such as central bank
deposit placements and government securities), the
Company’s cash generating fee-based business
model, with fee revenue representing 79% of total
revenue in 2022, and the dividend capacity of our
banking subsidiaries. Our double leverage ratio was
120.5% at Dec. 31, 2022 and 119.3% at Dec. 31,
2021, and within the range targeted by management.

Uses of funds

The Parent’s major uses of funds are repurchases of
common stock, payment of dividends, principal and
interest payments on its borrowings, acquisitions and
additional investments in its subsidiaries.

In 2022, we paid $1.4 billion in dividends on our
common and preferred stock. Our common stock
dividend payout ratio was 49% for 2022.

In 2022, we repurchased 2.0 million common shares
at an average price of $61.08 per common share for a
total cost of $124 million.

Liquidity coverage ratio (“LCR”)

U.S. regulators have established an LCR that requires
certain banking organizations, including BNY
Mellon, to maintain a minimum amount of
unencumbered high-quality liquid assets (“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 BNY Mellon’s
consolidated HQLA at Dec. 31, 2022, and the average
HQLA and average LCR for the fourth quarter of
2022.

Consolidated HQLA and LCR
(dollars in billions)
Securities (a)
Cash (b)

Total consolidated HQLA (c)

Total consolidated HQLA – average (c)
Average LCR

Dec. 31,
2022

106
91
197

200
118%

(a) Primarily includes securities of U.S. government-sponsored
enterprises, U.S. Treasury, sovereign securities, and U.S.
agencies.

(b) Primarily includes cash on deposit with central banks.
(c) Consolidated HQLA presented before adjustments. After
haircuts and the impact of trapped liquidity, consolidated
HQLA totaled $133 billion at Dec. 31, 2022 and averaged
$138 billion for the fourth quarter of 2022.

BNY Mellon and each of our affected domestic bank
subsidiaries were compliant with the U.S. LCR
requirements of at least 100% throughout 2022.

Statement of cash flows

The following summarizes the activity reflected on
the consolidated statement of cash flows. While this
information may be helpful to highlight certain macro
trends and business strategies, the cash flow analysis
may not be as relevant when analyzing changes in our
net earnings and net assets. We believe that in
addition to the traditional cash flow analysis, the
discussion related to liquidity and dividends and
asset/liability management herein may provide more
useful context in evaluating our liquidity position and
related activity.

BNY Mellon 39

Results of Operations (continued)

Net cash provided by operating activities was $15.1
billion in 2022, compared with $2.8 billion in 2021.
In 2022, cash flows provided by operations primarily
resulted from changes in trading assets and liabilities,
changes in accruals and other, net and earnings. In
2021, cash flows provided by operations primarily
resulted from earnings, partially offset by changes in
trading assets and liabilities and changes in accruals
and other, net.

Net cash provided by investing activities was $19.9
billion in 2022, compared with $19.7 billion in 2021.
In 2022, net cash provided by investing activities
primarily reflects changes in interest-bearing deposits
with the Federal Reserve and other central banks, a
net decrease in the securities portfolio and change in

Capital

federal funds sold and securities purchased under
resale agreements. In 2021, net cash provided by
investing activities primarily reflects changes in
interest-bearing deposits with the Federal Reserve
and other central banks, partially offset by a net
change in loans and a net increase in the securities
portfolio.

Net cash used for financing activities was $33.7
billion in 2022, compared with $22.0 billion in 2021.
In 2022 and 2021, net cash used for financing
activities primarily reflects changes in deposits and
repayments of long-term debt, partially offset by
issuances of long-term debt. In 2021, net cash used
for financing activities also reflects common stock
repurchases.

Capital data
(dollars in millions, except per share amounts; common shares in thousands)
At Dec. 31:
BNY Mellon shareholders’ equity to total assets ratio
BNY Mellon common shareholders’ equity to total assets ratio
Total BNY Mellon shareholders’ equity
Total BNY Mellon common shareholders’ equity
BNY Mellon tangible common shareholders’ equity – Non-GAAP (a)
Book value per common share
Tangible book value per common share – Non-GAAP (a)
Closing stock price per common share
Market capitalization
Common shares outstanding

Full-year:
Cash dividends per common share
Common dividend payout ratio
Common dividend yield

2022

2021

10.0%
8.8%

9.7%
8.6%

$ 40,734
$ 35,896
$ 18,686
44.40
$
23.11
$
45.52
$
$ 36,800
808,445

$ 43,034
$ 38,196
$ 19,547
47.50
$
24.31
$
58.08
$
$ 46,705
804,145

1.42

1.30

49%
3.1%

32%
2.2%

(a) See “Explanation of GAAP and Non-GAAP financial measures” beginning on page 104 for a reconciliation of GAAP to Non-GAAP.

The Bank of New York Mellon Corporation total
shareholders’ equity decreased to $40.7 billion at
Dec. 31, 2022 from $43.0 billion at Dec. 31, 2021.
The decrease primarily reflects unrealized losses on
securities available-for-sale, dividend payments and
foreign currency translation, partially offset by
earnings.

40 BNY Mellon

We repurchased 2.0 million common shares at an
average price of $61.08 per common share for a total
of $124 million in 2022.

In June 2021, our Board of Directors authorized the
repurchase of up to $6.0 billion of common shares
over the six quarters beginning in the third quarter of
2021 and continuing through the fourth quarter of
2022.

In January 2023, we announced a share repurchase
program approved by our Board of Directors
providing for the repurchase of up to $5.0 billion of
common shares beginning Jan. 1, 2023. This new
share repurchase plan replaced all previously
authorized share repurchase plans.

Results of Operations (continued)

In July 2022, our Board of Directors approved a 9%
increase in the quarterly cash dividend on common
stock, from $0.34 to $0.37 per share. We began
paying the increased quarterly cash dividend in the
third quarter of 2022.

Capital adequacy

Regulators establish certain levels of capital for bank
holding companies (“BHCs”) and banks, including
BNY Mellon and our bank subsidiaries, in
accordance with established quantitative
measurements. For the Parent to maintain its status
as a financial holding company (“FHC”), our U.S.
bank subsidiaries and BNY Mellon must, among
other things, qualify as “well capitalized.” As of Dec.
31, 2022 and Dec. 31, 2021, BNY Mellon and our
U.S. bank subsidiaries were “well capitalized.”
Failure to satisfy regulatory standards, including

“well capitalized” status or capital adequacy rules
more generally, could result in limitations on our
activities and adversely affect our financial condition.
See the discussion of these matters in “Supervision
and Regulation – Regulated Entities of BNY Mellon
and Ancillary Regulatory Requirements” and “Risk
Factors – Capital and Liquidity Risk – Failure to
satisfy regulatory standards, including “well
capitalized” and “well managed” status or capital
adequacy and liquidity rules more generally, could
result in limitations on our activities and adversely
affect our business and financial condition.”

The U.S. banking agencies’ capital rules are based on
the framework adopted by the Basel Committee on
Banking Supervision (“BCBS”), as amended from
time to time. For additional information on these
capital requirements, see “Supervision and
Regulation.”

The table below presents our consolidated and largest bank subsidiary regulatory capital ratios.

Consolidated and largest bank subsidiary regulatory capital ratios

Consolidated regulatory capital ratios: (b)

Advanced Approaches:

CET1 ratio
Tier 1 capital ratio
Total capital ratio
Standardized Approach:

CET1 ratio
Tier 1 capital ratio
Total capital ratio
Tier 1 leverage ratio
SLR (d)

The Bank of New York Mellon regulatory capital ratios: (b)

Advanced Approaches:

CET1 ratio
Tier 1 capital ratio
Total capital ratio
Tier 1 leverage ratio
SLR (d)

Well
capitalized

Dec. 31, 2022
Minimum
required

(a)
( )

N/A (c)
6%
10

N/A (c)
6%
10
N/A (c)
N/A (c)

6.5%
8
10
5
6

8.5%
10
12

8.5%
10
12
4
5

8.5
10.5
4
3

Dec. 31,
2021
Capital
ratios

11.4%
14.2
15.0

11.2%
14.0
14.9
5.5
6.6

16.5%
16.5
16.5
6.0
7.6

Capital
ratios

11.2%
14.1
14.9

11.3%
14.4
15.3
5.8
6.8

15.6%
15.6
15.7
6.2
7.7

(a) Minimum requirements for Dec. 31, 2022 include minimum thresholds plus currently applicable buffers. The U.S. global systemically

important banks (“G-SIB”) surcharge of 1.5% is subject to change. The countercyclical capital buffer is currently set to 0%. The stress
capital buffer (“SCB”) requirement is 2.5%, equal to the regulatory minimum for Standardized Approach capital ratios.

(b) For our CET1, Tier 1 capital and Total capital ratios, our effective capital ratios under U.S. capital rules are the lower of the ratios as
calculated under the Standardized and Advanced Approaches. The Tier 1 leverage ratio is based on Tier 1 capital and quarterly
average total assets.

(c) The Federal Reserve’s regulations do not establish well capitalized thresholds for these measures for BHCs.
(d) The SLR is based on Tier 1 capital and total leverage exposure, which includes certain off-balance sheet exposures.

BNY Mellon 41

Results of Operations (continued)

Our CET1 ratio determined under the Advanced
Approaches was 11.2% at Dec. 31, 2022 and 11.2%
at Dec. 31, 2021 under the Standardized Approach.
The unchanged ratio primarily reflects capital
generated through earnings, lower RWAs and the
impact of the Alcentra sale, offset by the net decrease
in accumulated other comprehensive income and
capital deployed through dividends.

In 2022, we implemented the Standardized Approach
for Counterparty Credit Risk (“SA-CCR”), which
replaced the current exposure method used to
measure derivative counterparty exposure.

The Tier 1 leverage ratio was 5.8% at Dec. 31, 2022,
compared with 5.5% at Dec. 31, 2021. The increase
was driven by lower average assets, partially offset by
a decrease in capital.

Risk-based capital ratios vary depending on the size
of the balance sheet at period-end and the levels and
types of investments in assets, and leverage ratios
vary based on the average size of the balance sheet
over the quarter. The balance sheet size fluctuates
from period to period based on levels of customer and
market activity. 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.

Our capital ratios are necessarily subject to, among
other things, anticipated compliance with all
necessary enhancements to model calibration,
approval by regulators of certain models used as part
of RWA calculations, other refinements, further
implementation guidance from regulators, market
practices and standards and any changes BNY Mellon
may make to its businesses. As a consequence of
these factors, our capital ratios may materially
change, and may be volatile over time and from
period to period.

Under the Advanced Approaches, our operational loss
risk model is informed by external losses, including
fines and penalties levied against institutions in the

42 BNY Mellon

financial services industry, particularly those that
relate to businesses in which we operate, and as a
result external losses have impacted and could in the
future impact the amount of capital that we are
required to hold.

The following table presents our capital components
and RWAs.

Capital components and risk-

weighted assets
(in millions)
)
(
CET1:
Common shareholders’ equity

Adjustments for:
Goodwill and intangible assets (a)
Net pension fund assets
Embedded goodwill
Deferred tax assets
Other

Total CET1
Other Tier 1 capital:

Preferred stock
Other

Total Tier 1 capital

Tier 2 capital:

Subordinated debt
Allowance for credit losses
Other

Total Tier 2 capital – Standardized
Approach

Excess of expected credit losses
Less: Allowance for credit losses
Total Tier 2 capital – Advanced
Approaches

Total capital:

Standardized Approach
Advanced Approaches

Risk-weighted assets:

Standardized Approach
Advanced Approaches:
Credit Risk
Market Risk
Operational Risk

p
Total Advanced Approaches

Dec. 31,

2022

2021

$ 35,896 $ 38,196

(17,210)
(317)
(279)
(56)
(2)
18,032

(18,649)
(400)
(300)
(55)
(46)
)
(
18,746

4,838
(14)

4,838
(99)
)
(
$ 22,856 $ 23,485

1,248 $
291
(11)

1,528
50
291

1,248
250
(11)
)
(

1,487
—
250

1,287 $

1,237

$ 24,384 $ 24,972
$ 24,143 $ 24,722

$ 159,096 $ 167,608

$ 90,243 $ 98,310
3,069
63,688
$ 161,672 $ 165,067

2,979
68,450

Average assets for Tier 1 leverage
ratio

Total leverage exposure for SLR

$ 396,643 $ 430,102
$ 336,049 $ 354,033

(a) Reduced by deferred tax liabilities associated with
intangible assets and tax-deductible goodwill.

Results of Operations (continued)

The table below presents the factors that impacted
CET1 capital.

Stress capital buffer

CET1 generation
(in millions)
CET1 – Beginning of period
Net income applicable to common shareholders of
The Bank of New York Mellon Corporation
Goodwill and intangible assets, net of related
deferred tax liabilities

Gross CET1 generated

Capital deployed:

Common stock dividends (a)
Common stock repurchases
Total capital deployed
Other comprehensive loss:

Unrealized loss on assets available-for-sale
Foreign currency translation
Unrealized loss on cash flow hedges
p
Defined benefit plans
Total other comprehensive loss

Additional paid-in capital (b)
Other additions (deductions):
Net pension fund assets
Embedded goodwill
Deferred tax assets
Other

Total other additions
Net CET1 deployed
CET1 – End of period

p y
p

2022
18,746

2,362

1,439
3,801

(1,165)
(124)
(1,289)

(2,907)
(590)
(6)
(250)
(3,753)
380

83
21
(1)
44
147
(714)
18,032

(a)
Includes dividend-equivalents on share-based awards.
(b) Primarily related to stock awards, the exercise of stock
options and stock issued for employee benefit plans.

The following table shows the impact on the
consolidated capital ratios at Dec. 31, 2022 of a $100
million increase or decrease in common equity, or a
$1 billion increase or decrease in RWAs, quarterly
average assets or total leverage exposure.

Eligible external
TLAC ratios

Sensitivity of consolidated capital ratios at Dec. 31, 2022

Eligible external
LTD ratios

Increase or decrease of

$100 million
in common
equity

$1 billion in RWA,
quarterly average
assets or total
leverage exposure

(in basis points)
CET1:

Standardized Approach
Advanced Approaches

6 bps
6

7 bps
7

Tier 1 capital:

Standardized Approach
Advanced Approaches

Total capital:

Standardized Approach
Advanced Approaches

Tier 1 leverage

SLR

6
6

9
9

10
9

In August 2022, the Federal Reserve announced that
BNY Mellon’s SCB requirement would be 2.5%,
equal to the regulatory floor, effective as of Oct. 1,
2022. The SCB replaced the static 2.5% capital
conservation buffer for Standardized Approach
capital ratios for Comprehensive Capital Analysis and
Review (“CCAR”) BHCs. The SCB does not apply
to bank subsidiaries, which remain subject to the
static 2.5% capital conservation buffer. See
“Supervision and Regulation” for additional
information.

The SCB final rule generally eliminates the
requirement for prior approval of common stock
repurchases in excess of the distributions in a firm’s
capital plan, provided that such distributions are
consistent with applicable capital requirements and
buffers, including the SCB.

Total Loss-Absorbing Capacity (“TLAC”)

The following summarizes the minimum
requirements for BNY Mellon’s external TLAC and
external long-term debt (“LTD”) ratios, plus
currently applicable buffers.

As a % of total
leverage
exposure
Regulatory
minimum of
7.5% plus a
buffer (c) equal
to 2%

4.5%

As a % of RWAs (a)
Regulatory minimum of
18% plus a buffer (b)
equal to the sum of
2.5%, the method 1 G-
SIB surcharge (currently
1%), and the
countercyclical capital
buffer, if any
Regulatory minimum of
6% plus the greater of
the method 1 or method
2 G-SIB surcharge
(currently 1.5%)

(a) RWA is the greater of the Standardized Approach and

Advanced Approaches.

(b) Buffer to be met using only CET1.
(c) Buffer to be met using only Tier 1 capital.

External TLAC consists of the Parent’s Tier 1 capital
and eligible unsecured LTD issued by it that has a
remaining term to maturity of at least one year and
satisfies certain other conditions. Eligible LTD
consists of the unpaid principal balance of eligible
unsecured debt securities, subject to haircuts for
amounts due to be paid within two years, that satisfy
certain other conditions. Debt issued prior to Dec.

BNY Mellon 43

Results of Operations (continued)

31, 2016 has been permanently grandfathered to the
extent these instruments otherwise would be
ineligible only due to containing impermissible
acceleration rights or being governed by foreign law.

The following table presents our external TLAC and
external LTD ratios.

If BNY Mellon maintains risk-based ratio or leverage
TLAC measures above the minimum required level,
but with a risk-based ratio or leverage below the
minimum level with buffers, we will face constraints
on dividends, equity repurchases and discretionary
executive compensation based on the amount of the
shortfall and eligible retained income.

TLAC and LTD ratios

Eligible external TLAC:

As a percentage of RWA
As a percentage of total
leverage exposure

Eligible external LTD:

As a percentage of RWA
As a percentage of total
leverage exposure

N/A – Not applicable.

Dec. 31, 2022
Minimum
ratios
with buffers

Minimum
required

Ratios

18.0%

21.5%

30.0%

7.5%

9.5%

14.4%

7.5%

4.5%

N/A

14.4%

6.9%

Issuer purchases of equity securities

Share repurchases – fourth quarter of 2022

(dollars in millions, except per share amounts;
common shares in thousands)
October 2022
November 2022
December 2022

Fourth quarter of 2022 (a)

Total shares
repurchased
1
18
16
35

Total shares
repurchased as
part of a publicly
announced plan
or program
1
18
16
35

Maximum approximate dollar
value of shares that may yet
be purchased under the
publicly announced plans or
programs at Dec. 31, 2022
2,628
$
2,627
2,626
2,626

(b)

Average price
per share
38.52
42.43
45.88
43.81

(a)

Includes 35 thousand shares repurchased at a purchase price of $2 million from employees, primarily in connection with the employees’
payment of taxes upon the vesting of restricted stock. There were no open market repurchases in the fourth quarter of 2022.

(b) Represents the remaining dollar value of shares yet repurchased under the share repurchase program that expired on Dec. 31, 2022.
Effective Jan. 1, 2023, the maximum value of the shares to be repurchased through a new share repurchase program approved in
January 2023 is $5.0 billion.

In June 2021, in connection with the Federal
Reserve’s release of the 2021 CCAR stress tests, we
announced a share repurchase program approved by
our Board of Directors providing for the repurchase
of up to $6.0 billion of common shares beginning in
the third quarter of 2021 and continuing through the
fourth quarter of 2022.

44 BNY Mellon

Share repurchases may be executed through open
market repurchases, in privately negotiated
transactions or by other means, including through
repurchase plans designed to comply with Rule
10b5-1 and other derivative, accelerated share
repurchase and other structured transactions. The
timing and exact amount of any common stock
repurchases will depend on various factors, including
market conditions and the common stock trading
price; the Company’s capital position, liquidity and
financial performance; alternative uses of capital; and
legal and regulatory limitations and considerations.

Results of Operations (continued)

Trading activities and risk management

Our trading activities are focused on acting as a
market-maker for our customers, facilitating customer
trades and risk-mitigating hedging in compliance with
the Volcker Rule. The risk from market-making
activities for customers is managed by our traders and
limited in total exposure through a system of position
limits, value-at-risk (“VaR”) methodology and other
market sensitivity measures. VaR is the potential loss
in value due to adverse market movements over a
defined time horizon with a specified confidence
level. The calculation of our VaR used by
management and presented below assumes a one-day
holding period, utilizes a 99% confidence level and
incorporates non-linear product characteristics. VaR
facilitates comparisons across portfolios of different
risk characteristics. VaR also captures the
diversification of aggregated risk at the firm-wide
level.

VaR represents a key risk management measure and
it is important to note the inherent limitations to VaR,
which include:

• VaR does not estimate potential losses over longer

time horizons where moves may be extreme;

• VaR does not take account of potential variability

of market liquidity; and

• Previous moves in market risk factors may not

produce accurate predictions of all future market
moves.

See Note 23 of the Notes to Consolidated Financial
Statements for additional information on the VaR
methodology.

The following tables indicate the calculated VaR
amounts for the trading portfolio for the designated
periods using the historical simulation VaR model.

VaR (a)
(in millions)
Interest rate
Foreign exchange
Equity
Credit
Diversification
Overall portfolio

2022
Average Minimum Maximum

4.1 $
3.8
0.2
2.1
(5.0)
5.2

1.6 $
2.0
—
1.0
N/M
2.5

9.3 $
10.2
0.9
4.4
N/M
11.4

Dec. 31,
2022
2.3
3.0
0.1
1.8
(3.5)
3.7

VaR (a)
(in millions)
Interest rate
Foreign exchange
Equity
Credit
Diversification
Overall portfolio

2021

Average Minimum Maximum

2.1 $
2.6
0.1
1.7
(3.2)
3.3

1.5 $
1.9
—
1.1
N/M
2.4

3.5 $
4.1
0.9
2.8
N/M
5.2

Dec. 31,
2021
1.7
2.7
0.1
1.7
(2.7)
3.5

(a) VaR exposure does not include the impact of the Company’s
consolidated investment management funds and seed capital
investments.

N/M – Because the minimum and maximum may occur on different
days for different risk components, it is not meaningful to
compute a minimum and maximum portfolio diversification
effect.

The interest rate component of VaR represents
instruments whose values are predominantly driven
by interest rate levels. These instruments include, but
are not limited to, U.S. Treasury securities, swaps,
swaptions, forward rate agreements, exchange-traded
futures and options, and other interest rate derivative
products.

The foreign exchange component of VaR represents
instruments whose values predominantly vary with
the level or volatility of currency exchange rates or
interest rates. These instruments include, but are not
limited to, currency balances, spot and forward
transactions, currency options and other currency
derivative products.

The equity component of VaR consists of instruments
that represent an ownership interest in the form of
domestic and foreign common stock or other equity-
linked instruments. These instruments include, but
are not limited to, common stock, exchange-traded
funds, preferred stock, listed equity options (puts and
calls), OTC equity options, equity total return swaps,
equity index futures and other equity derivative
products.

The credit component of VaR represents instruments
whose values are predominantly driven by credit
spread levels, i.e., idiosyncratic default risk. These
instruments include, but are not limited to, single
issuer credit default swaps, and securities with
exposures from corporate and municipal credit
spreads.

The diversification component of VaR is the risk
reduction benefit that occurs when combining
portfolios and offsetting positions, and from the
correlated behavior of risk factor movements.

BNY Mellon 45

Results of Operations (continued)

During 2022, interest rate risk generated 40% of
average gross VaR, foreign exchange risk generated
37% of average gross VaR, equity risk generated 2%
of average gross VaR and credit risk generated 21%
of average gross VaR. During 2022, our daily trading
loss exceeded our calculated VaR amount of the
overall portfolio on one occasion.

The following table of total daily trading revenue or
loss illustrates the number of trading days in which
our trading revenue or loss fell within particular
ranges during the past five quarters.

Distribution of trading revenue (loss) (a)

(dollars in
millions)
Revenue range:
Less than $(2.5)
$(2.5) – $0
$0 – $2.5
$2.5 – $5.0
More than $5.0

Dec. 31,
2022

Sept. 30,
2022

March 31,
2022

Dec. 31,
2021

Quarter ended
June 30,
2022
Number of days

2
4
13
24
20

—
3
10
32
19

1
4
10
24
24

1
8
12
23
18

—
3
27
21
12

(a) Trading revenue (loss) includes realized and unrealized gains and
losses primarily related to spot and forward foreign exchange
transactions, derivatives and securities trades for our customers and
excludes any associated commissions, underwriting fees and net
interest revenue.

Trading assets include debt and equity instruments
and derivative assets, primarily foreign exchange and
interest rate contracts, not designated as hedging
instruments. Trading assets were $9.9 billion at Dec.
31, 2022 and $16.6 billion at Dec. 31, 2021.

Trading liabilities include debt and equity instruments
and derivative liabilities, primarily foreign exchange
and interest rate contracts, not designated as hedging
instruments. Trading liabilities were $5.4 billion at
Dec. 31, 2022 and $5.5 billion at Dec. 31, 2021.

Under our fair value methodology for derivative
contracts, an initial “risk-neutral” valuation is
performed on each position assuming time-
discounting based on a AA credit curve. In addition,
we consider credit risk in arriving at the fair value of
our derivatives.

We reflect external credit ratings as well as
observable credit default swap spreads for both

46 BNY Mellon

ourselves and our counterparties when measuring the
fair value of our derivative positions. Accordingly,
the valuation of our derivative positions is sensitive to
the current changes in our own credit spreads, as well
as those of our counterparties.

At Dec. 31, 2022, our OTC derivative assets,
including those in hedging relationships, of $2.9
billion included a credit valuation adjustment
(“CVA”) deduction of $18 million. Our OTC
derivative liabilities, including those in hedging
relationships, of $3.0 billion included a debit
valuation adjustment (“DVA”) of $6 million related
to our own credit spread. Net of hedges, the CVA
increased by $4 million and the DVA increased by $7
million in 2022, which increased other trading
revenue by $3 million in 2022. During 2022, no
realized loss was charged off against CVA reserves.

At Dec. 31, 2021, our OTC derivative assets,
including those in hedging relationships, of $2.8
billion included a CVA deduction of $29 million.
Our OTC derivative liabilities, including those in
hedging relationships, of $3.4 billion included a DVA
of $2 million related to our own credit spread. Net of
hedges, the CVA increased by $1 million and the
DVA was unchanged in 2021, which decreased
investment and other revenue - other trading revenue
by $1 million in 2021. During 2021, no realized loss
was charged off against CVA reserves.

The table below summarizes our exposure, net of
collateral related to our derivative counterparties, as
determined on an internal risk management basis.
Significant changes in counterparty credit ratings
could alter the level of credit risk faced by BNY
Mellon.

Foreign exchange and other trading
counterparty risk rating profile

Dec. 31, 2022

Dec. 31, 2021

(dollars in
millions)
Investment grade

Non-investment

grade

Total

Exposure,
net of
collateral
2,553
$

63
2,616

Percentage
of exposure,
net of
collateral

98% $

Exposure,
net of
collateral
2,538

Percentage
of exposure,
net of
collateral
97%

2%
100% $

88
2,626

3%
100%

Results of Operations (continued)

Asset/liability management

Our diversified business activities include processing
securities, accepting deposits, investing in securities,
lending, raising money as needed to fund assets and
other transactions. The market risks from these
activities include interest rate risk and foreign
exchange risk. Our primary market risk is exposure
to movements in U.S. dollar interest rates and certain
foreign currency interest rates. We actively manage
interest rate sensitivity and use earnings simulation
and discounted cash flow models to identify interest
rate exposures.

An earnings simulation model is the primary tool
used to assess changes in pre-tax net interest revenue
between a baseline scenario and hypothetical interest
rate scenarios. Interest rate sensitivity is quantified
by calculating the change in pre-tax net interest
revenue between the scenarios over a 12-month
measurement period.

The baseline scenario incorporates the market’s
forward rate expectations and management’s
assumptions regarding client deposit rates, credit
spreads, changes in the prepayment behavior of loans
and securities and the impact of derivative financial
instruments used for interest rate risk management
purposes as of Dec. 31, 2022. These assumptions
have been developed through a combination of
historical analysis and future expected pricing
behavior and are inherently uncertain. Actual results
may differ materially from projected results due to
timing, magnitude and frequency of interest rate
changes, and changes in market conditions and
management’s strategies, among other factors. Client
deposit levels and mix are key assumptions impacting
net interest revenue in the baseline as well as the
hypothetical interest rate scenarios. The earnings
simulation model assumes static deposit levels and
mix and it also assumes that no management actions
will be taken to mitigate the effects of interest rate
changes. Typically, the baseline scenario uses the
average deposit balances of the quarter.

In the table below, we use the earnings simulation
model to assess the impact of various hypothetical
interest rate scenarios compared to the baseline
scenario. In each of the scenarios, all currencies’
interest rates are instantaneously shifted higher or
lower at the start of the forecast. Long-term interest
rates are defined as all tenors equal to or greater than
three years and short-term interest rates are defined as

all tenors equal to or less than three months. Interim
term points are interpolated where applicable.

The following table shows net interest revenue
sensitivity for BNY Mellon.

Estimated changes in net
interest revenue

(in millions)
Up 100 bps rate shock vs.
baseline

Long-term up 100 bps, short-
term unchanged

Short-term up 100 bps, long-
term unchanged

Long-term down 50 bps, short-
term unchanged

Down 100 bp rate shock vs.
baseline

Dec. 31,
2022

Sept. 30,
2022

Dec. 31,
2021

214 $

267 $

688

184

(20)

(17)

283

204

483

(98)

(281)

(394)

392

The declines in most of the rising rate sensitivities
compared with Sept. 30, 2022 are due to higher
deposit interest expense in rising rate scenarios,
which is driven by the expectation of paying higher
rates on deposits as central banks continue their
tightening cycle.

While the net interest revenue sensitivity scenario
calculations assume static deposit balances to
facilitate consistent period-over-period comparisons,
net interest revenue is impacted by changes in deposit
balances. Noninterest-bearing deposits are
particularly sensitive to changes in short-term rates.

To illustrate the net interest revenue sensitivity to
deposit run-off, we note that a $5 billion
instantaneous reduction of U.S. dollar-denominated
noninterest-bearing deposits would reduce the net
interest revenue sensitivity results in the up 100 basis
point scenario in the table above by approximately
$290 million. The impact would be smaller if the
run-off was assumed to be a mixture of interest-
bearing and noninterest-bearing deposits.

For a discussion of factors impacting the growth or
contraction of deposits, see “Risk Factors – Capital
and Liquidity Risk – Our business, financial
condition and results of operations could be adversely
affected if we do not effectively manage our
liquidity.”

We also project future cash flows from our assets and
liabilities over a long-term horizon and then discount
these cash flows using instantaneous parallel shocks
to prevailing interest rates. This measure reflects the

BNY Mellon 47

Results of Operations (continued)

structural balance sheet interest rate sensitivity by
discounting all future cash flows. The aggregation of
these discounted cash flows is the economic value of
equity (“EVE”). The following table shows how
EVE would change in response to changes in interest
rates.

Estimated changes in EVE

Rate change:

Up 200 bps vs. baseline
Up 100 bps vs. baseline

Dec. 31,
2022

(1.8)%
2.2%

The asymmetrical accounting treatment of the impact
of a change in interest rates on our balance sheet may
create a situation in which an increase in interest rates
can adversely affect reported equity and regulatory
capital, even though economically there may be no
impact on our economic capital position. For
example, an increase in rates will result in a decline in
the value of our available-for-sale securities portfolio.
In this example, there is no corresponding change on
our fixed liabilities, even though economically these
liabilities are more valuable as rates rise.

These results do not reflect strategies that
management could employ to limit the impact as
interest rate expectations change.

To manage foreign exchange risk, we fund foreign
currency-denominated assets with liability
instruments denominated in the same currency. We
utilize various foreign exchange contracts if a liability
denominated in the same currency is not available or
desired, and to minimize the earnings impact of
translation gains or losses created by investments in
foreign markets. We use forward foreign exchange
contracts to protect the value of our net investment in
foreign operations. At Dec. 31, 2022, net investments
in foreign operations totaled $13 billion and were
spread across 18 foreign currencies.

48 BNY Mellon

Risk Management

Overview

BNY Mellon plays a vital role in the global financial
markets, and effective risk management is critical to
our success. BNY Mellon operates under the
Enterprise Risk Management Framework (“risk
management framework”) which is the foundation of
our risk management approach. Risk management
begins with a strong risk culture, and we reinforce our
culture through policies and the Code of Conduct,
which are grounded in our core values of passion for
excellence, integrity, strength in diversity and
courage to lead.

These values are critical to our success. They not
only explain what we stand for and our shared
culture, but also help us to think and act globally.
They serve as a representation of the promises we
have made to our clients, communities, shareholders
and each other.

BNY Mellon’s Risk Identification process is a core
component of BNY Mellon’s risk framework and is
the foundation for understanding and managing risk
across our six primary risk categories: Operational
Risk, Market Risk, Credit Risk, Liquidity Risk,
Model Risk and Strategic Risk. Quarterly, the
Company engages in a process designed to document
identification and assessment of its risks, and to
determine the set of risks material to BNY Mellon.
Outputs from the Risk Identification process inform
elements of our risk framework such as our Risk
Appetite as well as Enterprise-wide Stress Testing
and Capital Planning.

BNY Mellon’s Risk Appetite expresses the level of
risk we are willing to assume to meet our objectives
in a manner that balances risk and reward while
considering our risk capacity and maintaining a
balance sheet that remains resilient throughout market
cycles. This guides BNY Mellon’s risk-taking
activities and informs key decision-making processes,
including the manner by which we pursue our
business strategy and the methods by which we
manage risk. The Risk Appetite Statement and
associated key risk metrics to monitor our risk profile
are updated and approved by the Risk Committee of
the Board at least annually.

BNY Mellon conducts Enterprise-wide Stress Testing
as part of its Internal Capital Adequacy Assessment
Process in accordance with CCAR, and as required by
the enhanced prudential standards issued pursuant to

the Dodd-Frank Wall Street Reform and Consumer
Protection Act (the “Dodd-Frank Act”). Enterprise-
wide Stress Testing considers the Company’s lines of
business, products, geographic areas and risk types
incorporating the results from underlying models and
projections for a range of stress scenarios. Additional
details on Capital Planning and Stress Testing are
included in “Supervision and Regulation.”

Three Lines of Defense

BNY Mellon’s Three Lines of Defense model is a
critical component of our risk management
framework to clarify roles and responsibilities across
the organization.

BNY Mellon’s first line of defense includes senior
management and business and corporate staff,
excluding management and employees in Risk
Management, Compliance and Internal Audit. Senior
management in the first line is responsible for
maintaining and implementing an effective risk
management framework and ensuring BNY Mellon
appropriately manages risk consistent with its
strategy and risk tolerance, including establishing
clear responsibilities and accountability for the
identification, measurement, management and control
of risk.

Risk & Compliance is the independent second line of
defense. It is responsible for establishing a
framework that outlines expectations and provides
guidance for the effective management of risk at
BNY Mellon while also independently testing,
reviewing and challenging the first line. Risk &
Compliance provides independent oversight across
three views – lines of business; regions and legal
entities; and enterprise-wide risk and compliance
disciplines which apply consistent standards for each
risk or compliance type or topic across the firm.

The Chief Risk Officer has reporting lines to both the
Chief Executive Officer and the Risk Committee of
the Company’s Board of Directors.

Internal Audit is BNY Mellon’s third line of defense
and serves as an independent, objective assurance
function that reports directly to the Audit Committee
of the Company’s Board of Directors. It assists the
Company in accomplishing its objectives by bringing
a systematic, disciplined, risk-based approach to
evaluate and improve the effectiveness of the
Company’s risk management, control and governance

BNY Mellon 49

Risk Management (continued)

processes. The scope of Internal Audit’s work
includes the review and evaluation of the adequacy,
effectiveness and sustainability of risk management

procedures, internal control systems, information
systems and governance processes.

Governance

BNY Mellon’s management is responsible for execution of the Company’s risk management framework and the
governance structure that supports it, with oversight provided by BNY Mellon’s Board of Directors through two key
Board committees: the Risk Committee and the Audit Committee.

A summary of the governance structure is provided below.

BNY Mellon Board of Directors

Risk Committee

Audit Committee

Senior Risk and Control Committee (“SRCC”)

• Anti-Money Laundering Oversight

Committee

• Asset Liability Committee
• Balance Sheet Risk Committee
• Business Risk Committees
• Compliance and Ethics Oversight

Committee

• Contract Management Committee
• Credit Portfolio Management Committees
• Enterprise Insider Threat Steering

Committee

• International Senior Risk and Control

Committee

• Operational Risk Committee

• Product Approval and Review Committee
• Regulatory Oversight Committee
• Resolvability Steering Committee
• Strategic Risk Committee
• Technology Risk Committee

The Risk Committee is comprised entirely of
independent directors and meets on a regular basis to
review and assess the control processes with respect
to the Company’s inherent risks. It also reviews and
assesses the risk management activities of the
Company and the Company’s risk policies and
activities. The roles and responsibilities of the Risk
Committee are described in more detail in its charter,
a copy of which is available on our website,
www.bnymellon.com.

The Audit Committee is also comprised entirely of
independent directors. The Audit Committee meets
on a regular basis to perform an oversight review of
the integrity of the financial statements and financial
reporting process, compliance with legal and
regulatory requirements, our independent registered
public accountant’s qualifications and independence,
and the performance of our independent registered
public accountant and internal audit function. The
Audit Committee also reviews management’s
assessment of the adequacy of internal controls. The
functions of the Audit Committee are described in
more detail in its charter, a copy of which is available
on our website, www.bnymellon.com.

50 BNY Mellon

The SRCC is the most senior risk governance group
at the Company and is responsible for oversight of all
Risk Management, Compliance & Ethics activities
and processes, including the Enterprise Risk
Management Framework. The committee is chaired
by the Chief Risk Officer and its members include the
Chief Executive Officer, Chief Financial Officer and
General Counsel.

The SRCC has 15 sub-committees:

• Anti-Money Laundering Oversight Committee:
Responsible for coordinating the Company’s
compliance with Anti-Money Laundering laws
and regulations and enforcing the Company’s
Anti-Money Laundering Program.

• Asset Liability Committee (“ALCO”): The senior
management committee responsible for balance
sheet oversight, including capital, liquidity and
interest rate risk management.

• Balance Sheet Risk Committee (the “BSRC”):
Reviews and receives escalation relating to
balance sheet risk management frameworks
associated with the assets, liabilities and capital

Risk Management (continued)

of the Company. The BSRC reviews the
adequacy of associated controls and processes,
monitors risk management in the context of risk
appetite, and approves related policy documents.

• Business Risk Committees: Review and assess
risk and control issues observed from existing
business practices or activities or arising from
new business practices or activities in our various
lines of business and supporting operations.

• Compliance and Ethics Oversight Committee:
Provides governance and oversight of the
operations of the Compliance and Ethics function
and the management and reporting of compliance
risk-related issues, as well as Compliance &
Ethics processes, policies, procedures and
standards.

• Contract Management Committee: The
governance and escalation body for the
Company’s Customer Contract Management
policy across the businesses, overseeing related
policies, infrastructure, risk considerations and
operations.

• Credit Portfolio Management Committees: Seven
Portfolio Management Committees, governed by
the same charter and rules, manage, monitor and
review one of Credit Risk’s primary portfolio
segments, including underwriting criteria,
portfolio limits and composition, concentration,
credit strategy, quality and exposure.

•

Enterprise Insider Threat Steering Committee:
Provides enterprise-wide governance and
oversight related to the Enterprise Insider Threat
Program and related initiatives, as well as
provides visibility to senior leadership related to
the enterprise risk profile as it relates to insider
threat risks.

International Senior Risk and Control Committee:
Provides risk management oversight, and acts as
a point of convergence for the coordination,
transparency and communication of material
issues (live or emerging) across international
entities.

• Operational Risk Committee: Oversees the

operational risk framework and policies, reviews
and monitors program outputs and metrics, and
monitors resolution of significant operational risk
matters, including changes to the risk and control
environment.

•

Product Approval and Review Committee:
Responsible for reviewing and approving
proposals to introduce new and modify or retire
existing products.

• Regulatory Oversight Committee: Provides
strategic direction, oversight, challenge, and
coordination across regulatory remediation
initiatives within the Company’s Regulatory
Oversight Program.

• Resolvability Steering Committee: Oversees

•

recovery and resolution planning, including but
not limited to the project governance and
oversight framework for all recovery and
resolution planning requirements in relevant
jurisdictions where BNY Mellon operates.

Strategic Risk Committee: Considers for approval
proposals for major strategic initiatives
significantly impacting the risk profile of the
Company, including but not limited to
acquisitions, material changes to existing
products, material new products, significant
business process changes and complex
transactions.

Technology Risk Committee: Oversees the
review and assessment of technology risk and
control issues observed from existing business
practices or activities, or arising from new
business practices or activities in our various
lines of business and supporting operations so as
to assist business management and corporate staff
in managing and monitoring technology risk and
control issues.

BNY Mellon 51

Risk Management (continued)

Risk Types Overview

Operational Risk

The understanding, identification, measurement and
mitigation of risk are essential elements for the
successful management of BNY Mellon. Our
primary risk categories are:

Type of risk Description
Operational The risk of loss resulting from inadequate

or failed internal processes, people and
systems or from external events.
Operational risk includes compliance and
technology risks.
The potential loss in value for the BNY
Mellon financial portfolio caused by
adverse movements in market prices of
FX, fixed income and equity assets, credit
spreads, commodities and liabilities
accounted for under fair value and
equivalent methods.
The risk of loss if any of our borrowers or
other counterparties were to default on
their obligations to us. Credit risk is
present in the majority of our assets, but
primarily concentrated in the loan and
securities books, as well as foreign
exchange and off-balance sheet exposures
such as lending commitments, letters of
credit and securities lending
indemnifications.
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 financial
conditions. Liquidity risk can arise from
cash flow mismatches, market constraints
from the inability to convert assets to cash,
the inability to raise cash in the markets,
deposit run-off or contingent liquidity
events.
The potential loss arising from incorrectly
designing/applying a model approach or
inaccuracies caused by market, credit or
liquidity stress.
The risk arising from adverse business
decisions, poor implementation of
business decisions or lack of
responsiveness to changes in the financial
industry and operating environment.
Strategic and/or business risks may also
arise from the acceptance of new
businesses, the introduction or
modification of products, strategic finance
and risk management decisions, business
process changes, complex transactions,
acquisitions/divestitures/joint ventures and
major capital expenditures/investments.

Market

Credit

Liquidity

Model

Strategic

52 BNY Mellon

In providing a comprehensive array of products and
services, we are exposed to operational risk.
Operational risk may result from, but is not limited to,
errors related to transaction processing, breaches of
internal control systems and compliance
requirements, fraud by employees or persons outside
BNY Mellon or business interruption due to system
failures or other events. Operational risk may also
include breaches of our technology and information
systems resulting from unauthorized access to
confidential information or from internal or external
threats, such as cyberattacks. Operational risk also
includes potential legal or regulatory actions that
could arise. In the case of an operational event, we
could suffer financial losses as well as reputational
damage.

To address these risks, we maintain comprehensive
policies and procedures and an internal control
framework designed to provide a sound operational
environment. These controls have been designed to
manage operational risk at appropriate levels given
our financial strength, the business environment and
markets in which we operate, and the nature of our
businesses, and considering factors such as
competition and regulation.

The organizational framework for operational risk is
based upon a strong risk culture that incorporates
both governance and risk management activities
comprising:

• Accountability of Businesses – Business

managers are responsible for maintaining an
effective system of internal controls
commensurate with their risk profiles and in
accordance with BNY Mellon policies and
procedures.

• Operational Risk Management is the independent
second line function responsible for developing
risk management policies and tools for assessing,
measuring, monitoring and managing operational
risk for BNY Mellon. The primary objectives of
the Operational Risk Management Framework
are to promote effective risk management,
identify emerging risks and drive continuous
improvement in controls and to reduce
operational risk. The Operational Risk
Management function includes independent
operational risk oversight of all lines of business
and functions.

Risk Management (continued)

•

Technology risk is a subset of operational risk.
Technology Risk Management is the independent
operational risk management function that is
responsible for independent risk oversight of the
technology footprint. The function brings
together the second line independent risk
oversight of technology, resiliency and data in a
cohesive and holistic manner. These areas are
closely related, allowing expertise to be brought
to bear across some of BNY Mellon’s most
significant risk exposures. The function also
conducts integrated independent assessments on
multiple cyber and digital initiatives within the
Company. They partner with businesses and
legal entities to drive better understanding and a
more accurate assessment of operational risks that
can occur from technology operations.
Technology Risk Management also acts as a
catalyst to drive the development of global
technology policies, key controls and methods to
assess, measure and monitor information and
technology risk for BNY Mellon.

• Operational resiliency is a top priority for the
Company. Foundational to our enterprise
resiliency strategy is the Business Services
Framework, governed by the Enterprise
Resiliency Office, with second line oversight
from Resiliency Risk Management. Business
management is accountable for maintaining
effective resiliency capabilities under this
framework, while Technology and Operations are
responsible for successful execution in
coordination with the business. Elements of the
resiliency strategy include the Business Services
Framework, IT Asset Management, Application
transformation and Mainframe modernization, as
well as Disaster Recovery Testing and Business
Continuity capabilities. We are also focused on
the resiliency capabilities of our most important
service providers. These capabilities are intended
to enable the Company to deliver services to our
clients by the ability to prevent, respond and
recover from business disruptions and threats.

• Compliance and financial crimes risk is also a

subset of operational risk. It is defined as the risk
of legal or regulatory sanctions, material financial
loss, or a financial institution’s reputational loss
as a result of its failure to comply with laws,
regulations, rules, related self-regulatory
organization standards, and codes of conduct or
organizational standards of practice. We seek to
comply with all obligations through a

comprehensive, integrated Compliance and
Ethics Management Framework that is driven by
Holistic Risk Management Principles.

Market Risk

Our business activity tends to minimize outright our
direct exposure to market risk, with such risk
primarily limited to market volatility from trading
activity in support of clients. More significant direct
market risk is assumed in the form of interest rate and
credit spread risk within the investment portfolio both
as a means for forward asset/liability management
and net interest revenue generation, and also through
the interest rate risk associated with BNY Mellon’s
balance sheet position which is sensitive to adverse
movements in interest rates.

The Company has indirect market risk exposure
associated with the change in the value of financial
collateral underlying securities financing and
derivatives positions. The Collateral Margin Review
Committee reviews and approves the standards for
collateral received or paid in respect of collateralized
derivative agreements and securities financing
transactions.

Oversight of market risk is performed by the SRCC
and the BSRC and through executive review
meetings. Stress tests results for the trading portfolio
are reviewed during the Markets Weekly Risk
meeting, which is attended by senior managers from
Risk Management, Finance and Sales and Trading.
Oversight of the risk management framework
associated with the Corporate Treasury and Portfolio
Management functions is performed by the BSRC.
Detailed aspects of this oversight are conducted by
the Treasury Risk Committee, a subcommittee of the
BSRC.

The Business Risk Committee for the Markets
business reviews key risk and control issues and
related initiatives facing all Markets lines of business.
Also addressed during the Business Risk Committee
meetings are trading VaR and trading stressed VaR
exposures against limits.

Finally, the Risk Quantification Review Group
reviews back-testing results for the Company’s VaR
model.

BNY Mellon 53

Risk Management (continued)

Credit Risk

We extend direct credit in order to foster client
relationships and as a method by which to generate
interest income from the deposits that result from
business activity. We extend and incur intraday
credit exposure in order to facilitate our various
processing activities.

To balance the value of our activities with the credit
risk incurred in pursuing them, we set and monitor
internal credit limits for activities that entail credit
risk, most often on the size of the exposure and the
quality of the counterparty. For credit exposures
driven by changing market rates and prices, exposure
measures include an add-on for such potential
changes.

We manage credit risk exposure at a counterparty,
industry, country and portfolio level. Credit risk
exposure at the counterparty level is managed through
our credit approval framework and involves four
approval levels up to and including the Chief Risk
Officer of the Company. The requisite approvals are
based upon the size and relative risk of the aggregate
exposure under consideration. The Credit Risk
Group is responsible for approving the size, terms and
maturity of all credit exposures, as well as the
ongoing monitoring of the creditworthiness of the
counterparty. In addition, it is responsible for
challenging and approving the internal risk ratings on
each exposure.

The calculation of a fundamental credit measure is
based on a projection of a statistically probable credit
loss, used to help determine the appropriate loan loss
reserve and to measure customer profitability. Credit
loss considers three basic components: the estimated
size of the exposure whenever default might occur,
the probability of default before maturity and the
severity of the loss we would incur, commonly called
“loss given default.” For institutional lending, where
most of our credit risk is created, unfunded
commitments are assigned a usage given default
percentage. Borrowers/counterparties are assigned
ratings by the business and challenged, reviewed and
approved by the Credit Portfolio Managers on an 18-
grade scale, which translate to a scaled probability of
default. Additionally, transactions are assigned loss
given default ratings (on a 5-grade scale) that reflect
the transactions’ structures, including the effects of
guarantees, collateral and relative seniority of
position.

54 BNY Mellon

The Risk and Compliance Modeling and Analytics
Group is responsible for the calculation
methodologies and the estimates of the inputs used in
those methodologies for the determination of
expected loss. These methodologies and input
estimates are regularly evaluated for appropriateness
and accuracy. As new techniques and data become
available, the Risk and Compliance Modeling and
Analytics Group incorporates, where appropriate,
those techniques or data.

BNY Mellon seeks to limit both on- and off-balance
sheet credit risk through prudent underwriting and the
use of capital only where risk-adjusted returns
warrant. We seek to manage risk and improve our
portfolio diversification through syndications, asset
sales, credit enhancements and active collateralization
and netting agreements. In addition, we have a
separate Credit Risk Review Group, which is an
independent group within Internal Audit, made up of
experienced loan review officers who perform timely
reviews of the loan files and credit ratings assigned to
the loans.

Liquidity Risk

Adequate liquidity is vital to BNY Mellon’s ability to
process payments as well as settle and clear
transactions on behalf of clients. The Company’s
liquidity position can be affected by multiple factors,
including funding mismatches, market conditions that
impact our ability to convert our investment portfolio
to cash, inability to issue debt or roll over funding,
run-off of core deposits, and contingent liquidity
events such as additional collateral posting
requirements. Additionally, a downgrade in our
credit rating can not only lead to an outflow of
deposits, which are a major source of our funding, but
also increase our margin requirements on secured
transactions and have a broader adverse impact on
our overall brand that may further impair our ability
to refinance maturing liabilities. Changes in
economic conditions or exposure to other risks can
also affect our liquidity.

The Board of Directors approves liquidity risk
tolerance and is responsible for oversight of liquidity
risk management of the Company. ALCO provides
governance for the appropriate execution of Board-
approved strategies, policies and procedures for
managing liquidity. Senior management is
responsible for executing those Board-approved
strategies, policies and procedures for managing

Risk Management (continued)

liquidity which ALCO oversees, as well as regularly
reporting the liquidity position of the Company to the
Board of Directors. The BSRC provides governance
over independent risk oversight of liquidity risks
associated with assets and liabilities, and oversees the
establishment of control frameworks. The Treasury
Risk Committee, which is chaired by independent
risk management, validates and approves internal
stress testing methodologies and assumptions, and an
independent Liquidity Risk function is responsible for
providing ongoing review and oversight of liquidity
risk management.

BNY Mellon actively manages and monitors its cash
position, quality of the investment portfolio, intraday
liquidity positions and potential liquidity needs in
order to support the timely payment and settlement of
obligations under both normal and stressed
conditions. The Company adheres to a range of stress
testing measures to maintain sufficient liquidity
relative to risk appetite, including the Liquidity
Coverage Ratio and Internal Liquidity Stress Testing.

Model Risk

Models create the infrastructure for managing risk.
Among their multiple functions, models help us value
securities, rate the credit quality of obligors, establish
capital needs and monitor liquidity trends. Model
risk incidents could result from faulty design, misuse,
or environmental conditions that invalidate our
assumptions or otherwise make a model unfit for
purpose. When this happens, the Company could be
exposed to losses and other adverse consequences
resulting from operational, market, credit and
liquidity risk, as well as reputational harm. We aim
to maintain a low-risk environment.

BNY Mellon’s processes are designed to identify the
conditions under which model risk incidents will
occur and to establish controls that are designed to
minimize or prevent loss in the event of a model risk
incident. These processes include enforcement of
standards for developing models, a process to validate
new models and review the changes to existing
models, as well as monitoring of performance
throughout a model’s life.

Model Risk Management, an independent risk
management function, is responsible for executing
Board-approved strategies, policies, and procedures
for managing models. Senior management is
responsible for regularly reporting on the Company’s

modeling infrastructure to the Risk Committee of the
Board of Directors. The Board of Directors approves
risk tolerances and is responsible for oversight.

When monitoring model risk, we evaluate multiple
dimensions including the quality of design, the
robustness of controls, and indications of
underperformance. Based on these measures, we
create an overall metric that is intended to measure
the health of the Company’s modeling environment
and set thresholds around it. This allows us to
manage model risk, not only at the level of the
individual model, but also in aggregate, across all the
Company’s businesses.

Strategic Risk

Our strategy includes, but is not limited to, improving
organic growth across our businesses, driving quality
solutions and operating efficiencies, and expanding
technology-enabled solutions. Successful realization
of our strategy requires that we provide expertise and
insight through market-leading solutions that drive
economies of scale and attract, develop and retain
highly talented people capable of executing our
strategy, while protecting our sound and stable
financial profile. We must understand and meet
market and client expectations with suitable products
and offerings that are financially viable and scalable
and that integrate into our business model. Failure to
do so could impact both our growth strategy and our
ability to service our existing clients, resulting in
potential financial loss or litigation.

Changes in the markets in which we and our clients
operate can evolve quickly. The introduction of new
or disruptive technologies, geopolitical events and
slowing economies are examples of events that can
produce market uncertainty. Failure to either
anticipate or participate in transformational change
within a given market or appropriately and promptly
react to market conditions or client preferences could
result in poor strategic positioning and potential
negative financial impact. While it is essential that
we continue to innovate and respond to changing
markets and client demand, we must do so in a
manner that does not affect our financial position or
jeopardize our fundamental business strategy.

BNY Mellon 55

Supervision and Regulation

Evolving Regulatory Environment

Single Counterparty Credit Limits

BNY Mellon engages in banking, investment
advisory and other financial activities in the U.S. and
34 other countries and is subject to extensive
regulation in the jurisdictions in which it operates.
Global supervisory authorities generally are charged
with ensuring the safety and soundness of financial
institutions, protecting the interests of customers,
including depositors in banking entities and investors
in mutual funds and other pooled vehicles,
safeguarding the integrity of securities and other
financial markets and promoting systemic resiliency
and financial stability in the relevant country. They
are not, however, generally charged with protecting
the interests of our shareholders or non-depositor
creditors. This discussion outlines the material
elements of selected laws and regulations applicable
to us. The impact of certain other laws and
regulations, such as tax law, is discussed elsewhere in
this Annual Report. Changes in these standards, or in
their application, cannot be predicted, but may have a
material effect on our businesses and results of
operations.

The financial services industry has been the subject of
enhanced regulatory oversight in the past decade
globally, and this enhanced oversight environment is
likely to continue in the future. Our businesses have
been subject to a significant number of global reform
measures.

Political developments have resulted and may
continue to result in legislative and regulatory
changes to key aspects of the Dodd-Frank Act and its
implementing regulations and in laws or regulations
relating to environmental, social and governance
(“ESG”) matters.

Enhanced Prudential Standards

The Federal Reserve has adopted rules (“SIFI Rules”)
to implement liquidity requirements, capital stress
testing and overall risk management requirements
affecting U.S. systemically important financial
institutions (“SIFIs”). BNY Mellon must comply
with enhanced liquidity and overall risk management
standards, which include maintenance of a buffer of
highly liquid assets based on projected funding needs
for 30 days. The liquidity buffer is in addition to the
rules regarding the LCR and net stable funding ratio
(“NSFR”), discussed below, and is described by the
Federal Reserve as being “complementary” to these
liquidity standards.

56 BNY Mellon

The Federal Reserve has adopted a final rule
imposing single-counterparty credit limits (“SCCLs”)
on, among other organizations, domestic BHCs,
including BNY Mellon, that are G-SIBs. The SCCLs
apply to the credit exposure of a covered firm and all
of its subsidiaries to a single counterparty and all of
its affiliates and connected entities.

The final rule established two primary credit exposure
limits: (i) a covered domestic BHC may not have
aggregate net credit exposure to any unaffiliated
counterparty in excess of 25% of its Tier 1 capital;
and (ii) a U.S. G-SIB is further prohibited from
having aggregate net credit exposure in excess of
15% of its Tier 1 capital to any “major
counterparty” (defined as a G-SIB or a nonbank
SIFI).

BNY Mellon has been in compliance with the two
primary exposure limits since the effective date based
on the daily monitoring process we have established.
The final rule provides a cure period of 90 days (or,
with prior notice from the Federal Reserve, a longer
or shorter period) for breaches of the SCCL rule.
During the cure period, a company may not engage in
additional credit transactions with the particular
counterparty unless the company has obtained a
temporary credit exposure limit increase from the
Federal Reserve.

Capital Planning and Stress Testing

Payment of Dividends, Stock Repurchases and Other
Capital Distributions

The Parent is a legal entity separate and distinct from
its banks and other subsidiaries. Therefore, the
Parent primarily relies on dividends, interest,
distributions and other payments from its subsidiaries,
including extensions of credit from the IHC, to meet
its obligations, including its obligations with respect
to its securities, and to provide funds for share
repurchases and payment of common and preferred
dividends to its stockholders, to the extent declared
by the Board of Directors. Various federal and state
laws and regulations limit the amount of dividends
that may be paid to the Parent by our U.S. bank
subsidiaries without regulatory consent. If, in the
opinion of the applicable federal regulatory agency, a
depository institution under its jurisdiction is engaged
in or is about to engage in an unsafe or unsound
practice (which, depending on the financial condition

Supervision and Regulation (continued)

of the bank, could include the payment of dividends),
the regulator may require, after notice and hearing,
that the bank cease and desist from such practice.
The Federal Reserve, the FDIC and the Office of the
Comptroller of the Currency (“OCC”) (together the
“Agencies”) have indicated that the payment of
dividends would constitute an unsafe and unsound
practice if the payment would reduce a depository
institution’s capital to an inadequate level. Moreover,
under the Federal Deposit Insurance Act, as amended
(the “FDI Act”), an insured depository institution
(“IDI”) may not pay any dividends if the institution is
undercapitalized or if the payment of the dividend
would cause the institution to become
undercapitalized. In addition, the Agencies have
issued policy statements which provide that FDIC-
insured depository institutions and their holding
companies should generally pay dividends only out of
their current operating earnings.

In general, the amount of dividends that may be paid
by our U.S. banking subsidiaries, including to the
Parent, is limited to the lesser of the amounts
calculated under a “recent earnings” test and an
“undivided profits” test. Under the recent earnings
test, a dividend may not be paid if the total of all
dividends declared and paid by the entity in any
calendar year exceeds the current year’s net income
combined with the retained net income of the two
preceding years, unless the entity obtains prior
regulatory approval. Under the undivided profits test,
a dividend may not be paid in excess of the entity’s
“undivided profits” (generally, accumulated net
profits that have not been paid out as dividends or
transferred to surplus). The ability of our bank
subsidiaries to pay dividends to the Parent may also
be affected by the capital adequacy standards
applicable to those subsidiaries, which include
minimum requirements and buffers.

There are also limitations specific to the IHC’s ability
to make distributions or extend credit to the Parent.
The IHC is not permitted to pay dividends to the
Parent if certain key capital or liquidity indicators are
breached. Additionally, if our projected financial
resources deteriorate so severely that resolution of the
Parent becomes imminent, the committed lines of
credit provided by the IHC to the Parent will
automatically terminate, with all outstanding amounts
becoming due.

BNY Mellon’s capital distributions are subject to
Federal Reserve oversight. The major component of

that oversight is the Federal Reserve’s CCAR,
implementing its capital plan rule. That rule requires
BNY Mellon to submit annually a capital plan to the
Federal Reserve. We are also required to collect and
report certain related data on a quarterly basis to
allow the Federal Reserve to monitor progress against
the annual capital plan.

On March 4, 2020, the Federal Reserve finalized an
SCB rule, which made changes to the capital plan
rule. The SCB rule eliminated the quantitative
grounds for objection to a firm’s CCAR capital plan
and introduced an SCB that became part of quarterly
capital requirements of CCAR firms on Oct. 1, 2020.
The final rule replaced the 2.5% capital conservation
buffer with an SCB requirement for capital ratios
under the U.S. capital rules’ standardized approach
risk-weightings framework (“Standardized
Approach”) that is based on the largest projected
decrease in a firm’s CET1 ratio in the nine-quarter
CCAR supervisory severely adverse scenario plus
four quarters of planned common stock dividends as
percentage of RWAs. The SCB is subject to a 2.5%
floor. Each CCAR firm, including BNY Mellon, will
be notified of its SCB by June 30, and the SCB will
become effective on October 1 of the applicable
calendar year. In August 2022, the Federal Reserve
announced BNY Mellon’s SCB requirement of 2.5%,
which equals the regulatory floor. The SCB rule
requires that firms reduce their planned capital
actions if those distributions would cause the firm to
fall below applicable buffer requirements based on
the firm’s own baseline scenario projections and
allows firms to increase certain planned capital
distributions if they are forecasted to be above capital
buffer constraints. The SCB rule also eliminates the
requirement for prior approval of capital distributions
in excess of the distributions in a firm’s capital plan,
provided that such distributions do not cause a breach
of the firm’s capital ratios, including applicable
buffers. In addition, the SCB rule provides that a
firm must receive prior approval for any dividend,
stock repurchase or other capital distribution, other
than a capital distribution on a newly issued capital
instrument, if a firm is required to resubmit its capital
plan. See “Capital” for information about our share
repurchase program.

The Agencies revised the definition of “eligible
retained income” in 2020 to limit the potential for
sudden and severe limitations on capital distributions
if a banking organization’s capital ratios fall below
the applicable buffer requirements. To the extent a

BNY Mellon 57

Supervision and Regulation (continued)

banking organization’s capital buffer is less than
100% of its applicable buffer requirements, its
distributions and discretionary bonus payments are
constrained by the amount of the shortfall and its
eligible retained income. Under the final rule,
eligible retained income is defined as the greater of (i)
a banking organization’s net income for the four
preceding calendar quarters, net of any distributions
and associated tax effects not already reflected in net
income, and (ii) the average of a banking
organization’s net income over the preceding four
quarters. The Federal Reserve made corresponding
changes to the definition of “eligible retained
income” in the TLAC buffer requirements. For more
information on TLAC, see “Total Loss-Absorbing
Capacity” below.

Regulatory Stress-Testing Requirements

In addition to the CCAR stress testing requirements,
Federal Reserve regulations also include
complementary Dodd-Frank Act Stress Tests
(“DFAST”). The CCAR and DFAST requirements
substantially overlap, and the Federal Reserve
implements them at the BHC level on a coordinated
basis. Under these DFAST regulations, we are
required to undergo an annual regulatory stress test
conducted by the Federal Reserve. The BHC is
required to conduct an annual company-run stress
test. In addition, The Bank of New York Mellon is
required to conduct an annual company-run stress test
(although the bank is permitted to combine certain
reporting and disclosure of its stress test results with
the results of BNY Mellon). Results from our annual
company-run stress tests are reported to the
appropriate regulators and published.

Capital Requirements – Generally

As a BHC, we are subject to U.S. capital rules,
administered by the Federal Reserve. Our bank
subsidiaries are subject to similar capital
requirements administered by the Federal Reserve in
the case of The Bank of New York Mellon and by the
OCC in the case of our national bank subsidiaries,
BNY Mellon, N.A. and The Bank of New York
Mellon Trust Company, National Association. These
requirements are intended to ensure that banking
organizations have adequate capital given the risk
levels of their assets and off-balance sheet exposures.

Notwithstanding the detailed U.S. capital rules, the
Agencies retain significant discretion to set higher

58 BNY Mellon

capital requirements for categories of BHCs or banks
or for an individual BHC or bank as warranted.

U.S. Capital Rules – Minimum Risk-Based Capital
Ratios and Capital Buffers

The U.S. capital rules require banking organizations
subject to the advanced approaches risk-weighting
framework (the “Advanced Approaches”), such as
BNY Mellon, to satisfy minimum risk-based capital
ratios using both the Standardized Approach and the
Advanced Approaches. See “Capital” for details on
these requirements. In addition, for CCAR firms,
these minimum ratios are supplemented by (i) the
SCB (which, for BNY Mellon, is 2.5%, as noted), in
the case of a firm’s Standardized Approach capital
ratios, and (ii) a capital conservation buffer of 2.5%,
in the case of a firm’s Advanced Approaches capital
ratios. The capital conservation buffer can only be
satisfied with CET1 capital.

When systemic vulnerabilities are meaningfully
above normal, the SCB and capital conservation
buffer may be expanded up to an additional 2.5%
through the imposition of a countercyclical capital
buffer. For internationally active banks such as BNY
Mellon, the countercyclical capital buffer required
threshold is a weighted average of the countercyclical
capital buffers deployed in each of the jurisdictions in
which the bank has private sector credit exposures.
The Federal Reserve, in consultation with the OCC
and FDIC, has affirmed the current countercyclical
capital buffer level for U.S. exposures of 0% and
noted that any future modifications to the buffer
would generally be subject to a 12-month phase-in
period. Any countercyclical capital buffer required
threshold arising from exposures outside the U.S. will
also generally be subject to a 12-month phase-in
period.

For G-SIBs, like BNY Mellon, the U.S. capital rules’
buffers are also supplemented by a G-SIB risk-based
capital surcharge, which is the higher of the
surcharges calculated under two methods (referred to
as “method 1” and “method 2”). Method 1 is based
on the Basel Committee on Banking Supervision
(“BCBS”) framework and considers a G-SIB’s size,
interconnectedness, cross-jurisdictional activity,
substitutability and complexity. Method 2 uses
similar inputs, but is calibrated to result in
significantly higher surcharges and replaces
substitutability with a measure of reliance on short-

Supervision and Regulation (continued)

term wholesale funding. The G-SIB surcharge
applicable to BNY Mellon for 2022 was 1.5%.

U.S. Capital Rules – Deductions from and
Adjustments to Capital Elements

The U.S. capital rules provide for a number of
deductions from and adjustments to CET1 capital.
These include, for example, providing that unrealized
gains and losses on all available-for-sale debt
securities may not be filtered out for regulatory
capital purposes, and the requirement that deferred
tax assets dependent upon future taxable income and
significant investments in non-consolidated financial
entities be deducted from CET1 to the extent that any
one such category exceeds 10% of CET1 or all such
categories in the aggregate exceed 15% of CET1.

In addition, the Agencies have adopted a final rule
that generally requires certain Advanced Approaches
banking organizations, including BNY Mellon, to
deduct from Tier 2 capital, subject to certain
exceptions, direct, indirect and synthetic exposures to
covered debt instruments, including TLAC
instruments.

Approach apply to a variety of exposures, including
certain securitization exposures, equity exposures,
claims on securities firms and exposures to
counterparties on OTC derivatives.

Securities finance transactions, including transactions
in which we serve as agent and provide securities
replacement indemnification to a securities lender, are
treated as repo-style transactions under the U.S.
capital rules. The rules do not permit a banking
organization to use a simple VaR approach to
calculate exposure amounts for repo-style
transactions or to use internal models to calculate the
exposure amount for the counterparty credit exposure
for repo-style transactions under the Standardized
Approach (although these methodologies are allowed
in the Advanced Approaches). Under the
Standardized Approach, a banking organization may
use a collateral haircut approach to recognize the
credit risk mitigation benefits of financial collateral
that secures a repo-style transaction, including an
agented securities lending transaction, among other
transactions. To apply the collateral haircut
approach, a banking organization must determine the
exposure amount and the relevant risk weight for the
counterparty and collateral posted.

U.S. Capital Rules – Advanced Approaches Risk-
Based Capital Rules

Leverage Ratios

Under the U.S. capital rules’ Advanced Approaches
framework, credit risk-weightings are generally based
on risk-sensitive approaches that largely rely on the
use of internal credit models and parameters, whereas
under the Standardized Approach credit risk-
weightings are generally based on supervisory risk-
weightings which vary primarily by counterparty type
and asset class. BNY Mellon is required to comply
with Advanced Approaches reporting and public
disclosures. For purposes of determining whether we
meet minimum risk-based capital requirements under
the U.S. capital rules, our CET1 ratio, Tier 1 capital
ratio, and total capital ratio is the lower of each ratio
as calculated under the Standardized Approach and
under the Advanced Approaches framework (based
on currently applicable buffers).

U.S. Capital Rules – Standardized Approach

The Standardized Approach calculates risk-weighted
assets in the denominator of capital ratios using a
broad array of risk-weighting categories that are
intended to be risk sensitive. The risk-weights for the
Standardized Approach generally range from 0% to
1,250%. Higher risk-weights under the Standardized

The U.S. capital rules require a minimum 4%
leverage ratio for all banking organizations, as well as
a 3% Basel III-based SLR for Advanced Approaches
banking organizations, including BNY Mellon.
Unlike the Tier 1 leverage ratio, the SLR includes
certain off-balance sheet exposures in the
denominator, including the potential future credit
exposure of derivative contracts and 10% of the
notional amount of unconditionally cancelable
commitments.

The U.S. G-SIBs (including BNY Mellon) are subject
to an enhanced SLR, which requires us to maintain an
SLR of greater than 5% (composed of the current
minimum requirement of 3% plus a greater than 2%
buffer) and requires bank subsidiaries of those BHCs
to maintain at least a 6% SLR in order to qualify as
“well capitalized” under the prompt corrective action
regulations discussed below.

The Agencies have adopted a final rule to exclude
certain central bank deposits from the total leverage
exposure, the SLR denominator, and related TLAC
and LTD measures of custody banks, including BNY

BNY Mellon 59

Supervision and Regulation (continued)

Mellon and The Bank of New York Mellon. Under
the final rule, qualifying central banks include a
Federal Reserve Bank, the European Central Bank or
a central bank of a member country of the
Organisation for Economic Co-operation and
Development (“OECD”), provided that an exposure
to the OECD member country receives a zero percent
risk-weighting and the sovereign debt of such country
is not, and has not been, in default in the past five
years. The central bank deposit exclusion from the
SLR denominator equals the average daily balance
over the applicable quarter of all deposits placed with
a qualifying central bank up to an amount equal to the
on-balance sheet deposit liabilities that are linked to
fiduciary or custodial and safekeeping accounts.

On April 11, 2018, the Federal Reserve and the OCC
issued a joint notice of proposed rule-making that
would recalibrate the enhanced SLR standards that
apply to U.S. G-SIBs and certain of their IDI
subsidiaries. The proposed rule would replace the 2%
SLR buffer that currently applies to all U.S. G-SIBs
with a buffer equal to 50% of the firm’s risk-based G-
SIB surcharge. For IDI subsidiaries of U.S. G-SIBs
regulated by the Federal Reserve or the OCC, the
proposal would replace the current 6% SLR threshold
requirement for those institutions to be considered
“well capitalized” under the prompt corrective action
framework with an SLR of at least 3% plus 50% of
the G-SIB surcharge applicable to their top-tier
holding companies. The proposed rule would also
make corresponding changes to the TLAC SLR
buffer and LTD requirements for U.S. G-SIBs. The
Federal Reserve and OCC have not yet issued a final
rule.

BCBS Revisions to Components of Basel III

In December 2017, the BCBS released revisions to
Basel III intended to reduce variability of RWA and
improve the comparability of banks’ risk-based
capital ratios. Among other measures, the final
revisions: (i) establish a revised Standardized
Approach for credit risk that enhances the
Standardized Approach’s granularity and risk
sensitivity; (ii) adjust the internal ratings-based
approaches for credit risk by removing the use of the
advanced internal ratings-based approach for certain
asset classes and establishing input floors for the
calculation of RWA; (iii) replace the advanced
measurement approach for operational risk with a
revised Standardized Approach for operational risk
based on measures of a bank’s income and historical

60 BNY Mellon

losses; (iv) revise the leverage ratio exposure
measure, establish a “leverage ratio buffer” for G-
SIBs, set at 50% of a G-SIB’s risk-based capital
surcharge, and allow national discretion to exclude
central bank placements in limited circumstances (see
“Leverage Ratios” above); and (v) introduce a new
72.5% output floor based on the Standardized
Approach.

In January 2019, the BCBS released revised
minimum capital requirements for market risk. While
the U.S. regulators have implemented or issued
proposals to implement certain aspects of these
revised Basel standards, there is continuing
uncertainty regarding the extent to which, and manner
in which, the U.S. regulators will implement them.

Standardized Approach for Measuring Counterparty
Credit Risk Exposures

The Agencies have jointly issued a final rule that
amends the U.S. capital rules to implement a new
approach for calculating the exposure amount for
derivative contracts, which is called the Standardized
Approach for Counterparty Credit Risk (“SA-CCR”).
The final rule also incorporates SA-CCR into the
determination of exposure amount of derivatives for
total leverage exposure under the SLR and the cleared
transaction framework under the U.S. capital rules.

Total Loss-Absorbing Capacity

The Federal Reserve imposes external TLAC and
related requirements for U.S. G-SIBs, including BNY
Mellon, at the top-tier holding company.

U.S. G-SIBs are required to maintain a minimum
eligible external TLAC equal to the greater of (i) 18%
of RWAs plus a buffer (to be met using only CET1)
equal to the sum of 2.5% of RWAs, the G-SIB
surcharge calculated under method 1 and any
applicable countercyclical buffer; and (ii) 7.5% of
their total leverage exposure (the denominator of the
SLR) plus a buffer (to be met using only Tier 1
Capital) equal to 2%.

U.S. G-SIBs are also required to maintain minimum
external eligible LTD equal to the greater of (i) 6% of
RWAs plus the G-SIB surcharge (calculated using the
greater of method 1 and method 2), and (ii) 4.5% of
total leverage exposure. In order to be deemed
eligible LTD, debt instruments must, among other
requirements, be unsecured, not be structured notes,
and have a maturity of at least one year from the date

Supervision and Regulation (continued)

of issuance. In addition, LTD issued on or after Dec.
31, 2016 must (i) not have acceleration rights, other
than in the event of non-payment or the bankruptcy or
insolvency of the issuer and (ii) be governed by U.S.
law. However, debt issued by a U.S. G-SIB prior to
Dec. 31, 2016 is permanently grandfathered to the
extent these securities would be ineligible only due to
containing impermissible acceleration rights or being
governed by foreign law.

Further, the top-tier holding companies of U.S. G-
SIBs are not permitted to issue certain guarantees of
subsidiary liabilities, incur liabilities guaranteed by
subsidiaries, issue short-term debt to third parties, or
enter into derivatives and certain other financial
contracts with external counterparties. Certain
liabilities are capped at 5% of the value of the U.S. G-
SIB’s eligible external TLAC instruments. The
Federal Reserve considered requiring internal TLAC
at domestic subsidiaries of U.S. G-SIBs, but has not
proposed rules regarding these instruments.

Foreign jurisdictions may impose internal TLAC
requirements on the foreign subsidiaries of U.S. G-
SIBs. The European Union’s Capital Requirements
Regulation 2 (“CRR2”) requires EU material
subsidiaries of non-EU G-SIBs (including BNY
Mellon) to maintain a minimum level of internal loss
absorbing capacity. The Bank of New York Mellon
SA/NV (“BNY Mellon SA/NV”) is considered an EU
material subsidiary for purposes of this regulation and
is, therefore, subject to an internal TLAC
requirement.

Prompt Corrective Action

The FDI Act, as amended by the Federal Deposit
Insurance Corporation Improvement Act of 1991
(“FDICIA”), requires the Agencies to take “prompt
corrective action” in respect of depository institutions
that do not meet specified capital requirements.
FDICIA establishes five capital categories for FDIC-
insured banks: “well capitalized,” “adequately
capitalized,” “undercapitalized,” “significantly
undercapitalized,” and “critically undercapitalized.”
The FDI Act imposes progressively more restrictive
constraints on operations, management and capital
distributions the less capital the institution holds.
While these regulations apply only to banks, such as
The Bank of New York Mellon and BNY Mellon,
N.A., the Federal Reserve is authorized to take
appropriate action against the parent BHC, such as
the Parent, based on the undercapitalized status of any

banking subsidiary. In certain circumstances, the
Parent would be required to guarantee the
performance of the capital restoration plan if one of
our banking subsidiaries were undercapitalized.

The Agencies’ prompt corrective action framework
contains “well capitalized” thresholds for IDIs.
Under these rules, an IDI must have the capital ratios
as detailed in the “Capital” disclosure in order to
satisfy the quantitative ratio requirements to be
deemed “well capitalized.”

Liquidity Standards – Basel III and U.S. Rules

BNY Mellon is subject to the U.S. LCR Rule, which
is designed to ensure that BNY Mellon and certain
domestic bank subsidiaries maintain an adequate
level of unencumbered HQLA equal to their expected
net cash outflow for a 30-day time horizon under an
acute liquidity stress scenario. As of Dec. 31, 2022,
the Parent and its domestic bank subsidiaries were in
compliance with applicable LCR requirements.

The Agencies have issued a final NSFR rule that
implements a quantitative long-term liquidity
requirement applicable to large and internationally
active banking organizations, including BNY Mellon.
Under the final rule, BNY Mellon’s NSFR is
expressed as a ratio of its available stable funding to
its required stable funding amount, and BNY Mellon
is required to maintain an NSFR of 1.0. The effective
date of the final NSFR rule was July 1, 2021, with the
exception of certain disclosure requirements, which
will begin to apply in 2023. As of Dec. 31, 2022,
BNY Mellon was in compliance with the NSFR rule.

Separately, as noted above, the SIFI Rules impose
additional liquidity requirements for BHCs with $100
billion or more in total assets, including BNY Mellon,
including an independent review of liquidity risk
management; establishment of cash flow projections;
a contingency funding plan and liquidity risk limits;
liquidity stress testing under multiple stress scenarios
and time horizons tailored to the specific products
and profile of the company; and maintenance of a
liquidity buffer of unencumbered highly liquid assets
sufficient to meet projected net cash outflows over 30
days under a range of stress scenarios.

Volcker Rule

The provisions of the Dodd-Frank Act commonly
referred to as the “Volcker Rule” prohibit “banking
entities,” including BNY Mellon, from engaging in

BNY Mellon 61

Supervision and Regulation (continued)

proprietary trading and limit our sponsorship of, and
investments in, private equity and hedge funds
(“covered funds”), including our ability to own or
provide seed capital to covered funds. In addition,
the Volcker Rule restricts us from engaging in certain
transactions with covered funds (including, without
limitation, certain U.S. funds for which BNY Mellon
acts as both sponsor/manager and custodian). These
restrictions are subject to certain exceptions.

The restrictions concerning proprietary trading
contain limited exceptions for, among other things,
bona fide liquidity risk management and risk-
mitigating hedging activities, as well as certain
classes of exempted instruments, including
government securities. Ownership interests in
covered funds are generally limited to 3% of the total
number or value of the outstanding ownership
interests of any individual fund at any time more than
one year after the date of its establishment. The
aggregate value of all such ownership interests in
covered funds is limited to 3% of the banking
organization’s Tier 1 capital, and such interests are
subject to a deduction from its Tier 1 capital. The
2019 amendments to the Volcker Rule (discussed
below) remove the requirements that ownership
interests in third-party covered funds held under the
underwriting and market-making exemptions be
subject to the aggregate limit and capital deduction
but preserve these requirements for ownership
interests in covered funds sponsored or organized by
BNY Mellon.

The Volcker Rule regulations also require us to
develop and maintain a compliance program. In
2019, the Agencies, the Commodity Futures Trading
Commission (the “CFTC”) and the Securities and
Exchange Commission (the “SEC”) modified the
regulations implementing the Volcker Rule. The
most impactful aspects of the revisions with respect
to BNY Mellon concern the compliance requirements
applicable to institutions with moderate exposure to
trading assets and trading liabilities, which are
institutions with less than $20 billion and more than
$1 billion of trading assets and trading liabilities.
Specifically, among other revisions, such “moderate
trading” banks are no longer required to file an annual
CEO attestation and quantitative metrics.
Furthermore, the comprehensive six-pillar
compliance program associated with the Volcker
Rule will no longer apply to “moderate trading”
banks; rather, such banks are permitted to tailor their
compliance programs to the size and nature of their

62 BNY Mellon

activities. BNY Mellon is treated as a “moderate
trading” bank under the revised Volcker Rule. The
final revisions also clarified and amended certain
definitions, requirements and exemptions.

On June 25, 2020, a second set of amendments to the
Volcker Rule was released, which is principally
focused on the restrictions on banking entities’
investments in, sponsorship of, and other
relationships with covered funds. Generally, the
changes establish new exclusions from the covered
fund definition for certain types of investment
vehicles, modify the eligibility criteria for certain
existing exclusions, and clarify and modify other
provisions with respect to investment in, sponsoring
of and transactions with covered funds.

Derivatives

Title VII of the Dodd-Frank Act imposes a
comprehensive regulatory structure on the OTC
derivatives markets in which BNY Mellon operates,
including requirements relating to the business
conduct of dealers, trade reporting, margin and
recordkeeping. Title VII also requires persons acting
as swap dealers, including The Bank of New York
Mellon, to register with the CFTC and become
subject to the CFTC’s supervisory, examination and
enforcement powers. Additionally, Title VII requires
persons acting as security-based swap dealers to
register with the SEC. The Bank of New York
Mellon is registered as a security-based swap dealer.

In addition, because BNY Mellon is subject to
supervision by the Federal Reserve, we must comply
with the U.S. prudential margin rules for variation
and initial margin with respect to its OTC swap
transactions. Furthermore, various BNY Mellon
subsidiaries are also subject to OTC derivatives
regulation by local authorities in Europe and Asia.

ESG Regulations

On March 21, 2022, the SEC proposed climate-
related disclosure requirements that would, among
other things, require disclosure of direct and indirect
greenhouse gas emissions, with certain emissions
disclosures subject to third-party attestation
requirements; climate-related scenario analysis (if the
issuer conducts scenario analyses), together with
qualitative and quantitative information about the
hypothetical future climate scenarios used in its
analysis; climate transition plans or climate-related
targets or goals, along with disclosure of progress

Supervision and Regulation (continued)

against any such plans, targets or goals; climate-
related risks over the short-, medium- and long-term;
qualitative and quantitative information regarding
climate-related risks and historical impacts in audited
financial statements; corporate governance of
climate-related risks; and climate-related risk-
management processes.

On May 25, 2022, the SEC proposed for public
comment a framework requiring certain funds that are
registered investment companies (“RICs”) under the
Investment Company Act of 1940, as amended (the
“1940 Act”), including mutual funds, closed end
funds and exchange-traded funds (“ETFs”), that
consider ESG factors in their investment process to
provide additional disclosures in their registration
statements and shareholder reports. The disclosure
requirements would vary depending on the fund’s
investment strategy. The SEC also proposed similar
amendments to the disclosure requirements for
registered investment advisers under the Investment
Advisers Act of 1940, as amended (“RIAs”) that
consider ESG factors as part of their advisory
business. Specifically, the proposal would require
RIAs to provide a description of the ESG factors they
consider in providing advisory services and how they
are incorporated when formulating investment advice.

On Dec. 2, 2022, the Federal Reserve proposed for
public comment “Principles for Climate-Related
Financial Risk Management for Large Financial
Institutions.” The principles provide a high-level
framework for the safe and sound management of
exposures to climate-related financial risks for certain
Federal Reserve-supervised financial institutions,
including BNY Mellon. The principles address
governance; policies, procedures, and limits; strategic
planning; risk management; data, risk measurement
and reporting; and scenario analysis.

Under the European Union’s Corporate Sustainability
Reporting Directive (“CSRD”), in-scope entities will
be subject to sustainability reporting requirements to
be phased in starting Jan. 1, 2024. Entities covered
by the CSRD include EU entities or parent entities of
EU groups that meet at least two of the following
criteria in the relevant financial year: (i) total assets
exceeding €20 million; (ii) net turnover exceeding
€40 million; and (iii) an average number of
employees exceeding 250. These entities will be
required to report on both the impacts of the activities
of the entity or group on people and the environment
as well as how sustainability matters affect the

financial performance of the entity or group. We are
evaluating the potential impact of the CSRD.

SEC Rules on Mutual Funds and RIAs

SEC regulations impose requirements on mutual
funds, exchange-traded funds and other RICs under
the 1940 Act. Among other things, these rules
require mutual funds (other than money market
funds) to provide portfolio-wide and position-level
holdings data to the SEC on a monthly basis.

The regulations also impose liquidity risk
management requirements that are intended to reduce
the risk that funds will not be able to meet
shareholder redemptions and to minimize the impact
of redemptions on remaining shareholders.

On May 25, 2022, the SEC proposed for comment
amendments to RIC naming convention rules. The
proposal would expand the scope of terms that the
SEC considers materially deceptive and misleading in
a RIC’s name without a corresponding policy to
invest at least 80% of the fund’s net asset value (plus
certain borrowings) in the manner suggested by the
fund’s name (“80% Policy”). The proposal would
require an 80% Policy for a RIC with a name that
indicates that the fund’s investment decisions
incorporate one or more ESG factors and for any fund
that includes “growth” or “value” in its name.

On Oct. 26, 2022, the SEC proposed for comment
new rules to prohibit RIAs from outsourcing certain
services and functions without conducting due
diligence and monitoring of the service providers.
The proposal would apply to RIAs that outsource
select “covered functions,” which include those
services or functions that are necessary for providing
advisory services in compliance with federal
securities laws and that, if not performed or
performed negligently, would result in harm to
clients. The proposal would further require RIAs to
conduct due diligence and monitoring for all third-
party recordkeepers and obtain reasonable assurances
that the recordkeepers will meet certain standards.
Finally, it would require RIAs to maintain books and
records related to the new rule’s oversight obligations
and to report census-type information about the
service providers covered under the rule.

On Nov. 2, 2022, the SEC proposed for public
comment rule amendments that would require the
adoption of “swing pricing” and a “hard close” by all

BNY Mellon 63

Supervision and Regulation (continued)

open-end RICs other than money market funds and
ETFs (“Open-End Funds”). The requirements would
alter the manner in which shares in Open-End Funds
are traded, as shareholders would no longer receive
the net asset value (“NAV”) per share for their
transactions but instead could receive a price more or
less than the NAV depending on whether a “swing
factor” was applied to their transaction. This swing
factor would be the amount by which the Open-End
Fund adjusts its per-share NAV and would represent
a good-faith estimate of the transaction costs imposed
on current shareholders of the Open-End Fund by the
transacting shareholders. To facilitate the operation
of swing pricing, the SEC also proposed to require a
“hard close” for Open-End Funds, which would make
a purchase or sale order for shares of an Open-End
Fund eligible for a given day’s price only if the Open-
End Fund or certain designated agents receive the
order before the time when the Open-End Fund
calculates its NAV, which is typically as of 4:00 PM
Eastern Time.

Recovery and Resolution Planning

As required by the Dodd-Frank Act, large financial
institutions, such as BNY Mellon, are required to
submit periodically to the Federal Reserve and the
FDIC a plan – referred to as the 165(d) resolution
plan – for their rapid and orderly resolution in the
event of material financial distress or failure. In
addition, certain large IDIs, such as The Bank of New
York Mellon, are required to submit periodically to
the FDIC a separate plan for resolution in the event of
the institution’s failure. The public portions of these
resolution plans are available on the Federal
Reserve’s and FDIC’s websites. BNY Mellon also
maintains a comprehensive recovery plan, which
describes actions it could take to avoid failure if faced
with financial stress.

In 2019, the Federal Reserve and FDIC issued a final
rule modifying certain requirements for the 165(d)
resolution plan. The final rule requires U.S. G-SIBs,
such as BNY Mellon, to file alternating full and more
limited, targeted resolution plans every two years.
BNY Mellon submitted a targeted resolution plan on
July 1, 2021. The Federal Reserve and FDIC found
no deficiencies or shortcomings in BNY Mellon’s
2021 resolution plan submission. BNY Mellon’s next
full resolution plan is due to be submitted on July 1,
2023. The final rule does not materially modify the
components or informational requirements of full
resolution plans.

64 BNY Mellon

If the Federal Reserve and FDIC jointly determine
that our 165(d) resolution plan is not credible and we
fail to address the deficiencies in a timely manner, the
FDIC and the Federal Reserve may jointly impose
more stringent capital, leverage or liquidity
requirements or restrictions on our growth, activities
or operations. If we continue to fail to adequately
remedy any deficiencies, we could be required to
divest assets or operations that the regulators
determine necessary to facilitate our orderly
resolution.

The resolution strategy set out in our 165(d)
resolution plan is a single point of entry strategy,
whereby certain key operating subsidiaries would be
provided with sufficient capital and liquidity to
operate in the event of material financial stress or
failure, and only our parent holding company would
file for bankruptcy. In connection with our single
point of entry resolution strategy, we have established
the IHC to facilitate the provision of capital and
liquidity resources to certain key subsidiaries in the
event of material financial distress or failure. In
addition, we have a binding support agreement in
place that requires the IHC to provide that support.
The support agreement required the Parent to transfer
its intercompany loans and most of its cash to the
IHC and requires the Parent to continue to transfer
cash and other liquid financial assets to the IHC on an
ongoing basis.

BNY Mellon and the other U.S. G-SIBs are also
subject to heightened supervisory expectations for
recovery and resolution preparedness under Federal
Reserve rules and guidance. The Federal Reserve
incorporates reviews of our capabilities in respect of
recovery and resolution preparedness as part of its
ongoing supervision of BNY Mellon.

In the European Economic Area (“EEA”), the
European Union Bank Recovery and Resolution
Directive (“BRRD”) provides the legal framework for
recovery and resolution planning, including a set of
harmonized powers to resolve or implement recovery
of in-scope institutions, such as EEA subsidiaries of
non-EEA banks. BRRD gives relevant EEA
regulators various powers, including (i) powers to
intervene pre-resolution to require an institution to
take remedial steps to avoid the need for resolution;
(ii) resolution tools and powers to facilitate the
resolution of failing entities, such as the power to
“bail-in” the debt of an institution (including certain
deposit obligations); (iii) the power to require a firm

Supervision and Regulation (continued)

to change its structure to remove impediments to
resolvability; and (iv) powers to require in-scope
institutions to prepare recovery plans. Under the
BRRD, resolution authorities (rather than the
institutions themselves) are responsible for drawing
up resolution plans based on information provided by
relevant institutions.

Under BRRD, in-scope institutions are required to
maintain a minimum requirement for their own funds,
(defined as regulatory capital), and eligible liabilities
(“MREL”) that can be written down or bailed-in to
absorb losses. MREL is set on a case-by-case basis
for each institution subject to BRRD and is applicable
to all EU-domiciled credit institutions and certain
other firms subject to BRRD. BNY Mellon SA/NV is
subject to MREL.

The BRRD has been amended by the Bank
Resolution and Recovery Directive 2 (“BRRD2”).
Key changes introduced by BRRD2 include
incorporation of the Financial Stability Board’s
(“FSB”) standard on TLAC into existing EU rules on
MREL, expansion of the BRRD moratorium tool and
introduction of an EU-wide requirement for
contractual recognition of resolution stay powers.

Some jurisdictions, including the UK, already had a
requirement for contractual recognition of resolution
stay powers. While the UK was a member of the EU
(and during the subsequent Brexit transition period,
which ended on Dec. 31, 2020), the UK transposed
most requirements of BRRD and BRRD2 in local
legislation and regulation.

Rules on Resolution Stays for Qualified Financial
Contracts

The Agencies’ regulations require U.S. G-SIBs (and
their subsidiaries and controlled entities) and the U.S.
operations of foreign G-SIBs to amend their covered
qualified financial contracts (“QFCs”), thereby
facilitating the application of U.S. special resolution
regimes as necessary.

The regulations allow these G-SIBs to comply by
amending covered QFCs (with the consent of relevant
counterparties) using the International Swaps and
Derivatives Association (“ISDA”) 2018 U.S.
Resolution Stay Protocol (the “Protocol”), ISDA
2015 Universal Stay Protocol or by executing
appropriate bilateral amendments to the covered
QFCs. BNY Mellon entities which have been

confirmed to engage in covered QFC activities have
adhered to the Protocol and, where necessary, have
executed bilateral amendments to cover QFCs.

Cybersecurity and Computer Security Regulation

The New York State Department of Financial
Services (“NYSDFS”) requires financial institutions
regulated by NYSDFS, including The Bank of New
York Mellon, to establish a cybersecurity program,
adopt a written cybersecurity policy, designate a chief
information security officer, and have policies and
procedures in place to ensure the security of
information systems and non-public information
accessible to, or held by, third parties. The NYSDFS
rule also includes a variety of other requirements to
protect the confidentiality, integrity and availability
of information systems, as well as the annual delivery
of a certificate of compliance.

The Agencies have adopted a final rule imposing
notification requirements for significant computer
security incidents on banking organizations. Under
the final rule, a BHC, state member bank or national
bank, including the Parent, The Bank of New York
Mellon and BNY Mellon, N.A., are required to notify
the Federal Reserve or OCC, as applicable, within 36
hours of incidents that could result in the banking
organization’s inability to deliver services to a
material portion of its customer base, disrupt the
banking organization’s lines of businesses the failure
of which would result in material losses, or disrupt
operations the failure of which would threaten the
financial stability of the U.S.

On March 9, 2022, the SEC published proposed
disclosure rules and amendments regarding
cybersecurity risk management, governance and
incident reporting by public companies. Under the
proposal, public companies, including The Bank of
New York Mellon Corporation, would be required to
file a Form 8-K within four business days of
determining that it had suffered a material
cybersecurity incident. The proposal also includes
disclosure requirements regarding policies and
procedures for the identification and management of
cybersecurity risks, oversight by the Board of
Directors and management over cybersecurity risks,
and Board member expertise in cybersecurity matters.

BNY Mellon 65

Supervision and Regulation (continued)

Insolvency of an Insured Depository Institution or a
Bank Holding Company; Orderly Liquidation
Authority

If the FDIC is appointed as conservator or receiver
for an IDI such as The Bank of New York Mellon or
BNY Mellon, N.A., upon its insolvency or in certain
other circumstances, the FDIC has the power to:
•

Transfer any of the depository institution’s assets
and liabilities to a new obligor, including a newly
formed “bridge” bank without the approval of the
depository institution’s creditors;
Enforce the terms of the depository institution’s
contracts pursuant to their terms without regard to
any provisions triggered by the appointment of
the FDIC in that capacity; or

•

• Repudiate or disaffirm any contract or lease to
which the depository institution is a party, the
performance of which is determined by the FDIC
to be burdensome and the disaffirmance or
repudiation of which is determined by the FDIC
to promote the orderly administration of the
depository institution.

In addition, under federal law, the claims of holders
of domestic deposit liabilities and certain claims for
administrative expenses against an IDI would be
afforded a priority over other general unsecured
claims against such an institution, including claims of
debt holders of the institution, in the “liquidation or
other resolution” of such an institution by any
receiver. As a result, whether or not the FDIC ever
sought to repudiate any debt obligations of The Bank
of New York Mellon or BNY Mellon, N.A., the debt
holders would be treated differently from, and could
receive, if anything, substantially less than, the
depositors of the bank.

The Dodd-Frank Act created a resolution regime
(known as the “orderly liquidation authority”) for
systemically important financial companies, including
BHCs and their affiliates. Under the orderly
liquidation authority, the FDIC may be appointed as
receiver for the systemically important institution,
and its failed nonbank subsidiaries, for purposes of
liquidating the entity if, among other conditions, it is
determined that the institution is in default or in
danger of default and the failure poses a risk to the
stability of the U.S. financial system.

If the FDIC is appointed as receiver under the orderly
liquidation authority, then the powers of the receiver,
and the rights and obligations of creditors and other

66 BNY Mellon

parties who have dealt with the institution, would be
determined under the Dodd-Frank Act’s orderly
liquidation authority provisions, and not under the
insolvency law that would otherwise apply. The
powers of the receiver under the orderly liquidation
authority were based on the powers of the FDIC as
receiver for depository institutions under the FDI Act.
However, the provisions governing the rights of
creditors under the orderly liquidation authority were
modified in certain respects to reduce disparities with
the treatment of creditors’ claims under the U.S.
Bankruptcy Code as compared to the treatment of
those claims under the new authority. Nonetheless,
substantial differences in the rights of creditors exist
between these two regimes, including the right of the
FDIC to disregard the strict priority of creditor claims
in some circumstances, the use of an administrative
claims procedure to determine creditors’ claims (as
opposed to the judicial procedure utilized in
bankruptcy proceedings), and the right of the FDIC to
transfer assets or liabilities of the institution to a third
party or a “bridge” entity.

Depositor Preference

Under U.S. federal law, claims of a receiver of an IDI
for administrative expenses and claims of holders of
U.S. deposit liabilities (including foreign deposits that
are payable in the U.S. as well as in a foreign branch
of the depository institution) are afforded priority
over claims of other unsecured creditors of the
institution, including depositors in non-U.S. branches.
As a result, such depositors could receive, if anything,
substantially less than the depositors in U.S. offices
of the depository institution.

Transactions with Affiliates

Transactions between BNY Mellon’s banking
subsidiaries, on the one hand, and the Parent and its
nonbank subsidiaries and affiliates, on the other, are
subject to certain restrictions, limitations and
requirements, which include limits on the types and
amounts of transactions (including extensions of
credit and asset purchases by our banking
subsidiaries) that may take place and generally
require those transactions to be on arm’s-length
terms. In general, extensions of credit by a BNY
Mellon banking subsidiary to any nonbank affiliate,
including the Parent, must be secured by designated
amounts of specified collateral and are limited in the
aggregate to 10% of the relevant bank’s capital and
surplus for transactions with a single affiliate and to
20% of the relevant bank’s capital and surplus for

Supervision and Regulation (continued)

transactions with all affiliates. There are also
limitations on affiliate credit exposures arising from
derivative transactions and securities lending and
borrowing transactions.

Deposit Insurance

Our U.S. banking subsidiaries, including The Bank of
New York Mellon and BNY Mellon, N.A., accept
deposits, and those deposits have the benefit of FDIC
insurance up to the applicable limit. The current limit
for FDIC insurance for deposit accounts is $250,000
per depositor at each insured bank. Under the FDI
Act, insurance of deposits may be terminated by the
FDIC upon a finding that the IDI has engaged in
unsafe and unsound practices, is in an unsafe or
unsound condition to continue operations or has
violated any applicable law, regulation, rule, order or
condition imposed by a bank’s federal regulatory
agency.

The FDIC’s Deposit Insurance Fund (the “DIF”) is
funded by assessments on IDIs. The FDIC assesses
DIF premiums based on a bank’s average
consolidated total assets, less the average tangible
equity of the IDI during the assessment period. For
larger institutions, such as The Bank of New York
Mellon and BNY Mellon, N.A., assessments are
determined based on CAMELS ratings and forward-
looking financial measures to calculate the
assessment rate, which is subject to adjustments by
the FDIC, and the assessment base.

Under the FDIC’s regulations, a custody bank,
including The Bank of New York Mellon and BNY
Mellon, N.A., may deduct from its assessment base
100% of cash and balances due from depository
institutions, securities, federal funds sold, and
securities purchased under agreement to resell with a
Standardized Approach risk-weight of 0% and may
deduct 50% of such asset types with a Standardized
Approach risk-weight of greater than 0% and up to
and including 20%. This assessment base deduction
may not exceed the average value of deposits that are
classified as transaction accounts and are identified
by the bank as being directly linked to a fiduciary or
custodial and safekeeping account.

Source of Strength and Liability of Commonly
Controlled Depository Institutions

BHCs are required by law to act as a source of
financial and managerial strength to their bank
subsidiaries. BNY Mellon has a statutory obligation

to commit resources to its bank subsidiaries in times
of financial distress. In addition, any loans by BNY
Mellon to its bank subsidiaries would be subordinate
in right of payment to depositors and to certain other
indebtedness of its banks. In the event of a BHC’s
bankruptcy, any commitment by the BHC to a federal
bank regulator to maintain the capital of a subsidiary
bank will be assumed by the bankruptcy trustee and
entitled to a priority of payment. In addition, in
certain circumstances, BNY Mellon’s IDI
subsidiaries could be held liable for losses incurred
by another BNY Mellon IDI subsidiary. In the event
of impairment of the capital stock of one of BNY
Mellon’s national bank subsidiaries or The Bank of
New York Mellon, BNY Mellon, as the banks’
stockholder, could be required to pay such deficiency.

Incentive Compensation Arrangements Proposal

Section 956 of the Dodd-Frank Act requires federal
regulators to prescribe regulations or guidelines
regarding incentive-based compensation practices at
certain financial institutions, including BNY Mellon.
In April 2016, a joint proposed rule was released,
replacing a previous 2011 proposal, which each of six
agencies must separately approve. The time frame
for final implementation, if any, is currently
unknown.

Anti-Money Laundering (“AML”) and the USA
PATRIOT Act

A major focus of governmental policy on financial
institutions has been aimed at combating money
laundering and terrorist financing. The USA
PATRIOT Act of 2001 contains numerous AML
requirements for financial institutions that are
applicable to BNY Mellon’s bank, broker-dealer and
investment adviser subsidiaries and mutual funds and
private investment companies advised or sponsored
by our subsidiaries. Those regulations impose
obligations on financial institutions to maintain a
broad AML program that includes internal controls,
independent testing, compliance management
personnel, training, and customer due diligence
processes, as well as appropriate policies, procedures
and controls to detect, prevent and report money
laundering, terrorist financing and other suspicious
activity, and to verify the identity of their customers.
Certain of those regulations impose specific due
diligence requirements on financial institutions that
maintain correspondent or private banking
relationships with non-U.S. financial institutions or
persons.

BNY Mellon 67

Supervision and Regulation (continued)

The Anti-Money Laundering Act of 2020 (“AMLA”),
which amends the Bank Secrecy Act (“BSA”), was
enacted to comprehensively reform and modernize
U.S. AML laws. Among other things, the AMLA
codifies a risk-based approach to AML compliance
for financial institutions; requires the development of
standards by the U.S. Department of the Treasury for
evaluating technology and internal processes for BSA
compliance; and expands enforcement- and
investigation-related authority, including a significant
expansion in the available sanctions for certain BSA
violations and instituting BSA whistleblower
incentives and protections. The AMLA contains
many statutory provisions that require additional
rulemakings, reports and other measures, and the
rulemaking process has begun for several of these
provisions. In June 2021, the first government-wide
priorities for anti-money laundering and countering
the financing of terrorism (“AML/CFT Priorities”)
were published. These AML/CFT Priorities will need
to be incorporated into banks’ risk-based BSA
compliance programs after completion of the
rulemaking process and on the effective date of the
final regulations. The impact of the AMLA will
depend on, among other things, the completion of the
rulemaking process and the issuing of implementation
guidance.

Financial Crimes Enforcement Network (“FinCEN”)

FinCEN has issued rules under the BSA that apply to
covered financial institutions, including The Bank of
New York Mellon and BNY Mellon, N.A., setting
forth five pillars of an effective AML program:
development of internal policies, procedures and
related controls; designation of a compliance officer;
a thorough and ongoing training program;
independent review for compliance; and customer
due diligence (“CDD”). CDD requires a covered
financial institution to implement and maintain risk-
based procedures for conducting CDD that include
the identification and verification of any beneficial
owner(s) of each legal entity customer at the time a
new account is opened.

NYSDFS Anti-Money Laundering and Anti-Terrorism
Regulations

The NYSDFS has also issued regulations requiring
regulated institutions, including The Bank of New
York Mellon, to maintain a transaction monitoring
program to monitor transactions for potential BSA
and AML violations and suspicious activity reporting,
and a watch list filtering program to interdict

68 BNY Mellon

transactions prohibited by applicable sanctions
programs.

The regulations require a regulated institution to
maintain programs to monitor and filter transactions
for potential BSA and AML violations and prevent
transactions with sanctioned entities. The regulations
also require institutions to submit annually a Board
resolution or senior officer compliance finding
confirming steps taken to ascertain compliance with
the regulation.

Privacy and Data Protection

The privacy provisions of the Gramm-Leach-Bliley
Act generally prohibit financial institutions, including
BNY Mellon, from disclosing nonpublic personal
financial information of consumer customers to third
parties for certain purposes (primarily marketing)
unless customers have the opportunity to “opt out” of
the disclosure. The Fair Credit Reporting Act
restricts information sharing among affiliates for
marketing purposes.

In the EU, privacy law is primarily regulated by the
General Data Protection Regulation (“GDPR”). The
GDPR contains enhanced compliance obligations and
increased penalties for non-compliance compared to
prior EU data protection legislation.

Acquisitions/Transactions

Federal and state laws impose notice and approval
requirements for mergers and acquisitions involving
depository institutions or BHCs. The Bank Holding
Company Act of 1956, as amended by the Gramm-
Leach-Bliley Act and by the Dodd-Frank Act (the
“BHC Act”), requires the prior approval of the
Federal Reserve for the direct or indirect acquisition
by a BHC of more than 5% of any class of the voting
shares or all or substantially all of the assets of a
commercial bank, savings and loan association or
BHC. In reviewing bank acquisition and merger
applications, the bank regulatory authorities will
consider, among other things, the competitive effect
of the transaction, financial and managerial resources,
including the capital position of the combined
organization, convenience and needs of the
community factors, including the applicant’s record
under the Community Reinvestment Act of 1977 (the
“CRA”), the effectiveness of the subject
organizations in combating money laundering
activities and the risk to the stability of the U.S.
banking or financial system. In addition, prior

Supervision and Regulation (continued)

Federal Reserve approval would be required for BNY
Mellon to acquire direct or indirect ownership or
control of any voting shares of a company with assets
of $10 billion or more that is engaged in activities
that are “financial in nature.”

basis as “well capitalized” and “well managed” under
applicable Federal Reserve regulations; and (iii) its
U.S. depository institution subsidiaries continuing to
maintain at least a “satisfactory” rating under the
CRA.

Rating System for the Supervision of Large Financial
Institutions

The Federal Reserve’s rating system for the
supervision of large financial institutions (“LFIs”)
applies to, among other entities, all BHCs with total
consolidated assets of $100 billion or more, including
BNY Mellon.

The LFI rating system includes a four-level rating
scale and three component ratings. The four levels
are: Broadly Meets Expectations; Conditionally
Meets Expectations; Deficient-1; and Deficient-2.
The component ratings are assigned for: Capital
Planning and Positions; Liquidity Risk Management
and Positions; and Governance and Controls. A firm
must be rated “Broadly Meets Expectations” or
“Conditionally Meets Expectations” for each of its
component ratings to be considered “well managed”
in accordance with various statutes and regulations
that permit additional activities, prescribe expedited
procedures or provide other benefits for “well
managed” firms.

Regulated Entities of BNY Mellon and Ancillary
Regulatory Requirements

BNY Mellon is registered as an FHC under the BHC
Act. We are subject to supervision by the Federal
Reserve. In general, the BHC Act limits an FHC’s
business activities to banking, managing or
controlling banks, performing certain servicing
activities for subsidiaries, engaging in activities
incidental to banking, and engaging in any activity, or
acquiring and retaining the shares of any company
engaged in any activity, that is either financial in
nature or complementary to a financial activity and
does not pose a substantial risk to the safety and
soundness of depository institutions or the financial
system generally.

A BHC’s ability to maintain FHC status is dependent
on: (i) its U.S. depository institution subsidiaries
qualifying on an ongoing basis as “well capitalized”
and “well managed” under the prompt corrective
action regulations of the appropriate regulatory
agency (discussed above under “Prompt Corrective
Action”); (ii) the BHC itself qualifying on an ongoing

An FHC that does not continue to meet all the
requirements for FHC status will, depending on
which requirements it fails to meet, lose the ability to
undertake new activities, continue current activities,
or make acquisitions, that are not generally
permissible for BHCs without FHC status. As of
Dec. 31, 2022, BNY Mellon and our U.S. bank
subsidiaries were “well capitalized” based on the
ratios and rules applicable to them.

The Bank of New York Mellon, 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 NYSDFS. BNY Mellon’s national bank
subsidiaries, BNY Mellon, N.A. and The Bank of
New York Mellon Trust Company, National
Association, are chartered as national banking
associations subject to primary regulation,
supervision and examination by the OCC.

We operate a number of broker-dealers that engage in
securities underwriting and other broker-dealer
activities in the U.S. These companies are SEC-
registered broker-dealers and members of Financial
Industry Regulatory Authority, Inc. (“FINRA”), a
securities industry self-regulatory organization. BNY
Mellon’s nonbank 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 and are required under the SEC’s
Municipal Advisors Rule to register with the SEC if
they provide advice to municipal entities or certain
other persons on the issuance of municipal securities,
or about certain investment strategies or municipal
derivatives.

Certain of BNY Mellon’s subsidiaries are registered
with the CFTC as commodity pool operators,
introducing brokers and/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-

BNY Mellon 69

Supervision and Regulation (continued)

Frank Act) with the CFTC and is a member of the
National Futures Association (“NFA”) in that same
capacity. As a swap dealer, The Bank of New York
Mellon is subject to regulation, supervision and
examination by the CFTC and NFA.

Certain of our subsidiaries are RIAs, 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 RICs, including the BNY Mellon Family of
Funds and BNY Mellon ETF Funds, and private
investment companies which are not registered under
the 1940 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
(“ERISA”), administered by the U.S. Department of
Labor. ERISA imposes certain statutory duties,
liabilities, disclosure obligations and restrictions on
fiduciaries, as applicable, related to the services being
performed and fees being paid.

SEC Regulation Best Interest (“Reg BI”) requires a
broker-dealer to act in the “best interest” of a retail
customer when making a recommendation of any
securities transaction or investment strategy to any
such customer. The Form CRS Relationship
Summary (“Form CRS”) requires registered
investment advisers and broker-dealers to provide
retail investors with a brief summary about the nature
of their relationship with their investment
professional and supplements other more detailed
disclosures.

On Feb. 9, 2022, the SEC proposed rule amendments
to shorten the standard settlement cycle for certain
broker-dealer securities transactions to T+1. The
proposal included additional amendments designed to
accelerate the confirmation of such trades. The SEC
adopted a final rule on Feb. 15, 2023. We are
assessing the potential impacts of the final rule.

On Dec. 14, 2022, the SEC proposed four
rulemakings related to market structure, including a
proposed Regulation Best Execution, which would
establish a best execution regulatory framework for
broker-dealers, and proposals regarding order
competition and disclosure of order execution
information. We are assessing the potential impacts
of the proposals.

70 BNY Mellon

On Feb. 15, 2023, the SEC proposed amendments to
the custody rule under the Investment Advisers Act of
1940, which generally requires registered investment
advisers having custody of client funds or securities
to maintain client funds or securities with a qualified
custodian. The proposal would expand the types of
investments covered by the custody rule to include
any client “assets.” It would also require registered
investment advisers to enter into a written agreement
with, and obtain reasonable assurances from, the
qualified custodian that the custodian will comply
with protections in the proposed rule, including with
respect to indemnification of the client, responsibility
for subcustodians and central securities depositaries,
asset segregation, and no liens. In addition, the SEC
proposed amendments to the investment adviser
recordkeeping rule to require advisers to keep
additional, more detailed records. We are evaluating
the potential impact of the proposals.

Exchange-Traded Funds Rule

SEC Rule 6c-11 (the “ETF Rule”) under the 1940 Act
permits ETFs that satisfy certain conditions to
organize and operate without first obtaining an
exemptive order from the SEC and requires an ETF to
make certain disclosures, including historical data on
an ETF’s premiums, discounts and bid-ask spread
information, as well as the ETF’s daily portfolio
holdings. The ETF Rule also requires ETFs using
custom baskets to put written policies and procedures
in place establishing that the custom baskets are in the
best interests of the ETF and its shareholders.
Pursuant to the ETF Rule, BNY Mellon has launched
a number of ETFs.

Post-Brexit UK Regulatory Framework

The UK left the EU on Jan. 31, 2020, and the
transition period ended on Dec. 31, 2020 (“Brexit
Transition Period”). Existing EU regulations that
were in force and applicable in the UK on Dec. 31,
2020, were “on-shored” into the UK regulatory
framework (and adapted as appropriate for the UK
context) as “retained EU law.” EU rules and
regulations that came into effect on or after Jan. 1,
2021, do not apply to financial activities within the
UK. The UK and EU financial services regulatory
frameworks have started diverging from each other
after the conclusion of the Brexit Transition Period.

Under the EU-UK Trade and Cooperation Agreement
(“EU-UK Agreement”), which became fully effective
in April 2021, the EU and UK have agreed to make

Supervision and Regulation (continued)

their best endeavors to ensure that internationally
agreed standards in the financial services sector for
regulation and supervision are implemented and
applied in their territory and establish a framework
for structured regulatory cooperation on financial
services.

The Financial Services Act 2021 made several
changes to the UK financial services regulatory
framework, including the prudential frameworks for
credit institutions and investment firms. In particular,
the Financial Services Act 2021 grants substantial
prudential rulemaking powers to the Prudential
Regulatory Authority (“PRA”) with respect to UK
credit institutions, and the Financial Conduct
Authority (“FCA”) with respect to UK investment
firms. The UK’s version of the EU Capital
Requirements Regulation (“UK CRR2”) for credit
institutions and the UK Investment Firms Prudential
Regime (“UK IFPR”) came into effect on Jan. 1,
2022. For more information regarding the UK IFPR,
see “Investment Firms Directive and Investment
Firms Regulation” below.

We maintain a presence in the UK through the
London branch of The Bank of New York Mellon,
The Bank of New York Mellon (International)
Limited, a credit institution incorporated and
authorized in the UK, and a number of our investment
firms. We maintain a presence in the EU through the
Frankfurt branch of The Bank of New York Mellon,
BNY Mellon SA/NV, which is headquartered in
Belgium and has a branch network in a number of
other EU countries, and through certain of our
investment firms. BNY Mellon SA/NV has a general
banking license for the provision of banking and
investment services.

Operations and Regulations Outside the U.S.

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 U.S. regulators referred to
above. BNY Mellon SA/NV is a public limited
liability company incorporated under the laws of
Belgium, holds a banking license issued by the
National Bank of Belgium and is authorized to carry
out all banking and savings activities as a credit
institution. The European Central Bank (the “ECB”)
has responsibility for the direct supervision of
significant banks and banking groups in the Euro
area, including BNY Mellon SA/NV. The ECB’s
supervision is carried out in conjunction with the

relevant national prudential regulator (the National
Bank of Belgium in BNY Mellon SA/NV’s case), as
part of the Single Supervisory Mechanism. BNY
Mellon SA/NV conducts its activities in Belgium as
well as through its branch offices in Denmark,
France, Germany, UK, Ireland, Italy, Luxembourg,
the Netherlands and Spain.

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. 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 of The Bank of New York
Mellon. 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 investment
funds of BNY Mellon, are registered with the FCA
and are offered for sale to retail investors 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 and, in the case of
banking subsidiaries, may be subject to regulatory
capital requirements in the jurisdictions in which they
operate.

The primary prudential framework in the EU is
provided by the Capital Requirements Directive 5
(“CRD5”) and the Capital Requirements Regulation 2
(“CRR2”), both of which implement many elements
of the Basel III framework.

BNY Mellon 71

Supervision and Regulation (continued)

Among other things, CRD5 includes a requirement
for certain non-EU banking groups with more than
€40 billion of assets in the EU to establish a single
“EU intermediate parent undertaking” (“EU IPU”) to
serve as an EU holding company for all EU credit
institutions and certain EU investment firms in the
group. Following review, BNY Mellon is currently
not required to establish an EU IPU structure on the
basis of its existing legal entity structure and
operations.

CRR2 includes provisions relating to the leverage
ratio, NSFR, MREL (including closer alignment to
the final FSB TLAC standard), a revised Basel
market risk framework, counterparty credit risk,
exposures to central counterparties, exposures to
collective investment undertakings, large exposures
and reporting/disclosure requirements.

The lines of business included in our Securities
Services, Market and Wealth Services and Investment
and Wealth Management business segments are
subject to significant regulation in numerous
jurisdictions around the world relating to, among
other things, the safeguarding, administration and
management of client assets and client funds.

Various existing and/or proposed EU directives and
regulations have or will have a significant impact on
the provision of many of our products and services,
including the revised Markets in Financial
Instruments Directive II and Markets in Financial
Instruments Regulation (collectively, “MiFID II”),
the Alternative Investment Fund Managers Directive
(“AIFMD”), the Directive on Undertakings for
Collective Investment in Transferable Securities
(“UCITS V”), the Central Securities Depositories
Regulation, the revised regulation on OTC
derivatives, central counterparties and trade
repositories (commonly known as “EMIR”), the
Payment Services Directive II and the Benchmarks
Regulation. These EU directives and regulations may
impact our operations and risk profile but may also
provide new opportunities for the provision of BNY
Mellon products and services. Some of these EU
directives and regulations are subject to review, and
the outcome of these reviews is not yet certain.

Investment Firms Directive and Investment Firms
Regulation

In the EU, the Investment Firms Directive/Investment
Firms Regulation (“IFD/IFR”), previously referred to

72 BNY Mellon

as the “new prudential regime for investment firms,”
is a more tailored, proportionate prudential regime for
investment firms. BNY Mellon has several UK-
domiciled investment firms that are subject to UK
IFPR.

The main change under both IFD/IFR and UK IFPR
is that capital requirements for most investment firms
are no longer based on Basel standards for banks such
as credit risk, market risk or operational risk. Instead,
the capital requirements are based on factors that are
more tailored to the risks that investment firms face.

European Financial Markets and Market
Infrastructure

The EU continues to develop proposals and
regulations in relation to financial markets and market
infrastructures. MiFID II applies to financial
institutions conducting business in the EEA and has
required significant changes to comply with relevant
regulatory requirements, including extensive
transaction reporting and market transparency
obligations and a heightened focus on how financial
institutions conduct business with and disclose
information to their clients. A set of revisions to EU
MiFID II rules (the so-called quick fix) came into
effect on Feb. 28, 2022 and include changes to cost
and charges disclosures and means of client
communication. In the UK, a similar set of revisions
became effective in July 2021 for most of the
amended rules.

Funds Regulation in Europe

The AIFMD has a direct effect on our alternative
fund manager clients and our depository business and
other products offered across Europe as well as upon
our Investment Management business. AIFMD
imposes heightened obligations upon depositories,
which have operational effects.

Our businesses servicing regulated funds in Europe
and our Investment Management businesses in
Europe are also affected by the revised directive
governing UCITS V.

Under the regulations for depositary safekeeping
duties under AIFMD and UCITS V, the Commission
recognizes the use of omnibus account structures
when accounting for assets in a chain of custody, but
requires that depositaries and trustees, such as BNY
Mellon, maintain their own books and records.

Other Matters

Replacement of Interbank Offered Rates (“IBORs”),
including LIBOR

The UK Financial Conduct Authority (the “FCA”)
and the administrator for LIBOR have announced that
the publication of the most commonly used U.S.
dollar LIBOR settings will cease to be published or
cease to be representative after June 30, 2023. The
publication of all other LIBOR settings ceased to be
published or to be representative as of Dec. 31, 2021.
In addition, the U.S. bank regulators had also issued
guidance strongly encouraging banking organizations
to cease using U.S. dollar LIBOR as a reference rate
in new contracts by Dec. 31, 2021. As a result,
financial market participants have begun to transition
away from LIBOR and other IBORs to alternative
reference rates. The transition event on Dec. 31,
2021 had minimal impact across BNY Mellon’s
businesses, however the remaining U.S. dollar
LIBOR transition will impact assets and liabilities on
our balance sheet that reference IBORs, investments
that we manage linked to IBORs in our Investment
Management business and the operational servicing
of products that reference IBORs in our Market and
Wealth Services and Securities Services business
segments.

In March 2022, the Adjustable Interest Rate (LIBOR)
Act (the “LIBOR Act”) was enacted. The LIBOR
Act provides a statutory framework to replace U.S.
dollar LIBOR with a benchmark rate based on the
Secured Overnight Financing Rate (“SOFR”) for

contracts governed by U.S. law that have no fallbacks
or fallbacks that would require the use of a poll or
LIBOR-based rate. In December 2022, the Federal
Reserve adopted final rules to identify the SOFR-
based replacement rate and conforming changes for
legacy LIBOR-linked contracts.

We are working to facilitate an orderly transition
from IBORs to alternative reference rates for us and
our clients. Accordingly, we have created a global
transition program with senior management oversight
that focuses on, among other things, evaluating and
monitoring the impacts of the discontinuance of
reference IBORs and the transition to replacement
benchmarks on our business operations and financial
condition; identifying and evaluating the scope of
impacted financial instruments and contracts and the
attendant risks; and implementing technology
systems, models and analytics to support the
transition. In addition, we continue to actively
engage with our regulators and clients and participate
in central bank and sector working groups.

Despite the proximity of the June 30, 2023 cessation
date, there remain, however, a number of unknown
factors regarding the transition from the IBORs and/
or interest rate benchmark reforms that could impact
our business. For a further discussion of the various
risks, see “Risk Factors – Market Risk – Transitions
away from and the replacement of LIBOR and other
IBORs could adversely impact our business, financial
condition and results of operations.”

BNY Mellon 73

Risk Factors

An investment in securities issued by us involves
certain risks that you should carefully consider. The
following discussion sets forth the most material risk
factors that could affect our business, financial
condition or results of operations. Some of these
risks are interrelated and the occurrence of one may
exacerbate the effect of others. Additionally, factors
other than those discussed below or in our other
reports filed with or furnished to the SEC could also
adversely affect our business, financial condition or
results of operations. We cannot assure you that the
risk factors described below or elsewhere in our
reports address all potential risks that we may face.
These risk factors also serve to describe
considerations which may cause our results to differ
materially from those described in forward-looking
statements included herein or in other documents or
statements that make reference to this Annual Report.
See “Forward-looking Statements.”

Summary

Our business, financial condition and results of
operations may be materially and adversely affected
by various risk types and considerations, including
operational risk, market risk, credit risk, capital and
liquidity risk, strategic risk and additional risks,
including as a result of the following:

Operational Risk

•

Errors or delays in our operational and
transaction processing, or those of third parties.

• Our risk management framework, models and

processes may not be effective in identifying or
mitigating risk and reducing the potential for
losses.

•

Failure to attract, retain, develop and motivate
employees.

• A communications or technology disruption or

failure within our infrastructure or the
infrastructure of third parties that results in a loss
of information, delays our ability to access
information or impacts our ability to provide
services to our clients.

• A cybersecurity incident, or a failure in our

computer systems, networks and information, or
those of third parties, could result in the theft,
loss, unauthorized access to, disclosure, use or

74 BNY Mellon

alteration of information, system or network
failures, or loss of access to information.

• We are subject to extensive government

• Regulatory or enforcement actions or litigation.

• A failure or circumvention of our controls and

procedures.

Market Risk

• We are dependent on fee-based business for a

substantial majority of our revenue and our fee-
based revenues could be adversely affected by
slowing in market activity, weak financial
markets, underperformance and/or negative
trends in savings rates or in investment
preferences.

• Weakness and volatility in financial markets and

the economy generally.

•

Levels of and changes in interest rates have
impacted, and will in the future continue to
impact, our profitability and capital levels, at
times adversely.

• We have experienced, and may continue to
experience, unrealized or realized losses on
securities related to volatile and illiquid market
conditions, reducing our capital levels and/or
earnings.

•

Transitions away from and the replacement of
LIBOR and other IBORs.

Credit Risk

•

The failure or perceived weakness of any of our
significant clients or counterparties, many of
whom are major financial institutions or
sovereign entities, and our assumption of credit,
counterparty and concentration risk, could expose
us to loss.

• We could incur losses if our allowance for credit

losses, including loan and lending-related
commitment reserves, is inadequate or if our

Risk Factors (continued)

expectations of future economic conditions
deteriorate.

Capital and Liquidity Risk

•

Failure to effectively manage our liquidity.

Failure to satisfy regulatory standards, including
“well capitalized” and “well managed” status or
capital adequacy and liquidity rules more
generally.

The Parent is a non-operating holding company
and, as a result, is dependent on dividends from
its subsidiaries and extensions of credit from its
IHC to meet its obligations, including with
respect to its securities, and to provide funds for
share repurchases and payment of dividends to its
stockholders.

• Our ability to return capital to shareholders is

subject to the discretion of our Board of Directors
and may be limited by U.S. banking laws and
regulations, including those governing capital and
capital planning, applicable provisions of
Delaware law and our failure to pay full and
timely dividends on our preferred stock.

• Any material reduction in our credit ratings or the
credit ratings of our principal bank subsidiaries,
The Bank of New York Mellon or BNY Mellon,
N.A., could increase the cost of funding and
borrowing to us and our rated subsidiaries.

•

The application of our Title I preferred resolution
strategy or resolution under the Title II orderly
liquidation authority could adversely affect the
Parent’s liquidity and financial condition and the
Parent’s security holders.

Strategic Risk

• New lines of business, new products and services
or transformational or strategic project initiatives
subject us to new or additional risks, and the
failure to implement these initiatives.

• We are subject to competition in all aspects of
our business, which could negatively affect our
ability to maintain or increase our profitability.

• Our strategic transactions present risks and

uncertainties.

Additional Risks

• Adverse events, publicity, government scrutiny or

other reputational harm.

• Climate change concerns could adversely affect
our business, affect client activity levels and
damage our reputation.

•

Impacts from natural disasters, climate change,
acts of terrorism, pandemics, global conflicts and
other geopolitical events.

Tax law changes or challenges to our tax
positions with respect to historical transactions
may adversely affect our net income and effective
tax rate.

• Changes in accounting standards governing the

preparation of our financial statements and future
events could have a material impact on our
reported financial condition, results of operations,
cash flows and other financial data.

Operational Risk

Errors or delays in our operational and transaction
processing, or those of third parties, may materially
adversely affect our business, financial condition,
results of operations and reputation.

We are required to accurately process large numbers
of transactions each day on a timely basis. The
transactions we process or execute are operationally
complex and can involve numerous parties,
jurisdictions, regulations and systems, and, therefore,
are subject to execution and processing errors and
failures. In situations reliant upon manual processes,
the risk of execution and processing errors and
failures is heightened. Manual processes are
inherently more prone to human and other processing
error, malfeasance, fraud and other misconduct than
automated processes. With more complex and
voluminous transactions at ever increasing speeds,
which present an increased risk of error or significant
operational delay, we must continuously evolve our
processes, controls, systems and workforce in a
manner designed to achieve accurate and timely
execution of these transactions. When errors or
delays do occur, they may be difficult to detect and
remediate in a timely manner. The use of automation,
artificial intelligence and other emerging technologies
in connection with automated processes may amplify
the impact of any such error or delay, as the failure to

BNY Mellon 75

Risk Factors (continued)

timely discover and respond to an operational error
relating to an automated process can have dramatic
consequences in light of the speed and volume of
transactions involved. Furthermore, the risks
resulting from an operational error may be heightened
with respect to certain asset classes, such as some
digital assets, with respect to which it may be
impossible to retrieve wrongfully or erroneously
transferred digital assets.

Operational errors or significant operational delays
could have a material and negative impact on our
ability to conduct our business or service our clients,
which could adversely affect our results due to
potentially higher expenses and lower revenues,
lower our capital ratios, create liability for us or our
clients or negatively impact our reputation. We also
recognize that service reliability and systems
resilience are essential components to processing
transactions and safeguarding financial assets, and an
operational error impacting a large number of
transactions could have unfavorable ripple effects in
the financial markets, which could exacerbate the
adverse effects of the error on us.

Affiliates or third parties with which we do business
or that facilitate our business activities could also be
sources of execution and processing errors, failures or
significant operational delays. In certain
jurisdictions, we may be deemed to be statutorily or
criminally liable for operational errors, fraud,
breakdowns or delays by these affiliates or third
parties. Additionally, as a result of regulations,
including the Alternative Investment Fund Managers
Directive and the Undertakings for Collective
Investment in Transferable Securities V, when we act
as depositary in the European Economic Area, we
could be exposed to restitution risk for, among other
things, errors or fraud perpetrated by a sub-custodian
resulting in a loss or delay in return of client’s
securities. When we are not acting as a European
Economic Area depositary, but where we provide
custody services to a European Economic Area
depositary, we may accept similar liabilities to that of
a European Economic Area depositary as a matter of
contract.

Our risk management framework, models and
processes may not be effective in identifying or
mitigating risk and reducing the potential for losses.

Our risk management framework seeks to identify
and mitigate risk and loss to us. We have established

76 BNY Mellon

comprehensive policies and procedures and an
internal control framework designed to provide a
sound operational environment for the types of risk to
which we are subject, including operational risk,
credit risk, market risk, liquidity risk, model risk and
strategic risk. We have also established frameworks
to mitigate risk and loss to us as a result of the actions
of affiliates or third parties with which we do
business or that facilitate our business activities.
However, as with any risk management framework,
there are inherent limitations to our current and future
risk management strategies, including risks that we
may not have appropriately anticipated or identified.

Our regulators remain focused on ensuring that
financial institutions build and maintain robust risk
management policies. Regulators’ views of the
quality of our risk models and framework affect our
regulators’ evaluations of us, and we are exposed to
the risk of adverse regulatory and supervisory
developments, including enforcement actions and
increased costs in connection with remediation
efforts, if our regulators view our risk models and
framework to be insufficient or if remediation is not
completed in a timely manner. Accurate and timely
enterprise-wide risk information is necessary to
enhance management’s decision-making in times of
crisis. If our risk management framework or
governance structure proves ineffective or if our
enterprise-wide management information is
incomplete or inaccurate, we could suffer unexpected
losses, which could materially adversely affect our
results of operations or financial condition.

In certain instances, we rely on models to measure,
monitor and predict risks. However, these models are
inherently limited because they involve techniques,
including the use of historical data, trends,
assumptions and judgments that cannot anticipate
every economic and financial outcome in the markets
in which we operate, nor can they anticipate the
specifics and timing of such outcomes, especially
during severe market downturns or stress events, such
as those experienced in March 2020 and other times
during the COVID-19 pandemic. These models may
not appropriately capture all relevant risks or
accurately predict future events or exposures. The
risk of the unsuccessful development or
implementation of our models, systems or processes,
as well as risk associated with oversight, monitoring
and application of models, cannot be completely
eliminated. We may experience unexpected losses if
our models, estimates or judgments used or applied in

Risk Factors (continued)

connection with our risk management activities or in
the preparation of our financial statements prove to
have been inadequate or incorrect. All models have
some degree of inaccuracy, which can be further
exacerbated when environmental conditions or stress
conditions push theory beyond its limits. The models
that we use to assess and control our market risk
exposures also reflect assumptions about the degree
of correlation among prices of various asset classes or
other market indicators. The 2008 financial crisis and
resulting regulatory reform highlighted both the
importance and some of the limitations of managing
unanticipated risks. In times of market stress or other
unforeseen circumstances, previously uncorrelated
indicators may become correlated, or previously
correlated indicators may move in different
directions. These types of market movements have at
times limited the effectiveness of our hedging
strategies and have caused us to incur significant
losses, and they may do so in the future.

In addition, our businesses and the markets in which
we operate are continuously evolving. We may fail
to fully understand the implications of changes in our
businesses or the financial markets or fail to
adequately or timely enhance our risk framework to
address those changes. If our risk framework is
ineffective because it fails to keep pace with changes
in the financial markets, regulatory requirements, our
businesses, our counterparties, clients or service
providers or for other reasons, we could incur losses,
suffer reputational damage, face significant
remediation expenses or find ourselves out of
compliance with applicable regulatory or contractual
mandates or supervisory expectations.

An important aspect of our risk management
framework is creating a risk culture that is sustainable
and appropriate to our role as a major financial
institution in which all employees fully understand
that there is risk in every aspect of our business and
the importance of managing risk as it relates to their
job functions. If we fail to create the appropriate
environment that sensitizes all of our employees to
managing risk, our business could be adversely
impacted. For more information on how we monitor
and manage our risk management framework, see
“Risk Management – Overview.”

Our business may be adversely affected if we are
unable to attract, retain, develop and motivate
employees.

Our success depends, in large part, on our ability to
attract new employees, retain, develop and motivate
our existing employees, have a diverse and inclusive
workplace and continue to compensate our employees
competitively amid heightened regulatory restrictions
and an inflationary environment. Competition for the
most skilled employees in most activities in which we
engage can be intense, and we may not be able to
recruit and retain key personnel. In addition, third-
party suppliers and service providers on which we
rely may face challenges in attracting and retaining
their employees, which may have a negative impact
on our operations and our resiliency capabilities.

We rely on certain employees with subject matter
expertise to assist in the implementation of important
initiatives and to support the development of new
products and services, including in connection with
our digital assets initiatives. As focus on technology
and risk management increases in the financial
industry, competition for technologists and risk
personnel has intensified, which could constrain our
ability to execute on certain of our strategic
initiatives.

Our ability to attract, retain and motivate key
executives and other employees may be negatively
affected by continuous changes to immigration
policies and restrictions applicable to incentive and
other compensation programs, including deferral,
clawback requirements and other limits on incentive
compensation. Some of these restrictions may not
apply to some of our competitors and to other
institutions with which we compete for talent, in
particular as we are more often competing for
personnel with financial technology providers and
other entities that may not be publicly traded or
regulated banking organizations and, in either case,
may not have the same limitations on compensation
as we do.

The loss of employees’ skills, knowledge of the
market, industry experience, and the cost of finding
replacements, particularly in a protracted inflationary
environment with a competitive labor market, have
led, and we expect will continue to lead, to an
increase in labor costs and hurt our business. In
addition, our current or future approach to in-office
and remote-work arrangements may not meet the

BNY Mellon 77

Risk Factors (continued)

needs or expectations of our current or prospective
employees, may not be perceived as favorable as
compared to the arrangements offered by competitors
and may not be conducive to a collaborative working
environment, which could adversely affect our ability
to attract, retain, develop and motivate employees. If
we are unable to continue to attract, retain, develop
and motivate highly qualified employees, our
performance, including our competitive position,
could be adversely affected.

A communications or technology disruption or
failure within our infrastructure or the
infrastructure of third parties that results in a loss
of information, delays our ability to access
information or impacts our ability to provide
services to our clients may materially adversely
affect our business, financial condition and results
of operations.

We use communications and information systems to
conduct our business. Our businesses are highly
dependent on our ability to process large volumes of
data that require global capabilities and scale from
our technology platforms. If our technology or
communications fail, or those of industry utilities or
our service providers fail, we have in the past
experienced, and could in the future experience,
production and system outages or failures, or other
significant operational delays. Any such outage,
failure or delay could adversely affect our ability to
effect transactions or service our clients, which could
expose us to liability for damages, result in the loss of
business, damage our reputation, subject us to
regulatory scrutiny or sanctions or expose us to
litigation, any of which could have a material adverse
effect on our business, financial condition and results
of operations. The continued prevalence of remote
work arrangements has increased our reliance on
remote access systems and video conferencing
services, and, as a result, we are exposed to similar
risks if the technology and communications systems
our employees or employees of third parties use while
working remotely fail. Security or technology
disruptions, failures or delays that impact our
communications or information systems could also
adversely affect our ability to manage our exposure to
risk or expand our business. These incidents are
unpredictable and can arise from numerous sources,
not all of which are in our control, including, among
others, human error, malfeasance and other
misconduct, as well as operational disruptions at third
parties.

78 BNY Mellon

Upgrading our computer systems, software and
networks subjects us to the risk of disruptions,
failures or delays due to the complexity and
interconnectedness of our computer systems, software
and networks. The failure to properly upgrade or
maintain these computer systems, software and
networks could result in greater susceptibility to
cyberattacks, particularly in light of the greater
frequency and severity of cyberattacks in recent
years, as well as the growing prevalence of
cyberattacks affecting third-party software and
information service providers. Additionally, cloud
technologies are becoming increasingly critical to the
operation of our systems and platforms, and, as our
reliance on this technology continues to grow, we will
continue to be increasingly subject to evolving risks
relating to the use of cloud technologies. Our new
product initiatives, including in connection with
digital asset services, may further expose us to new
evolving technology risks and may lead to
dependencies on, and compatibility issues with,
decentralized or third-party blockchains and their
protocols, which we do not control. Although we
have programs and processes to identify such risks,
there can be no assurance that any such disruptions,
failures or delays will not occur or, if they do occur,
that actions taken to mitigate their impact will be
timely or adequate. Although we maintain insurance
covering certain technology infrastructure losses,
there can be no assurance that liabilities or losses we
may incur will be covered under such policies or that
the amount of insurance will be adequate.

We continue to evaluate and strengthen our business
continuity and operational resiliency capabilities and
have increased our investments in technology to
steadily enhance those capabilities, including our
ability to resume and sustain our operations. There
can be no guarantee, however, that a technology
outage will not occur, including as a result of failures
related to upgrades and maintenance, or that our
business continuity and operational resiliency
capabilities will enable us to maintain our operations
and appropriately respond to events. For a discussion
of operational risk, see “Risk Management – Risk
Types Overview – Operational Risk.”

Third parties with which we do business or that
facilitate our business activities, including exchanges,
clearing houses, financial intermediaries or vendors
that provide services or security solutions for our
operations, could also be sources of technology risk
to us, including from breakdowns, capacity

Risk Factors (continued)

constraints, attacks (including cyberattacks targeted at
third-party service providers), failures or delays of
their own systems or other services that impair our
ability to process transactions and communicate with
customers and counterparties. This risk may be
intensified to the extent that there is concentration in
a single unique product or service provided by a
single vendor, or to the extent we rely on service
providers from a single geographic area. In addition,
we are exposed to the risk that a technology
disruption or other information security event at a
vendor common to our third-party service providers
could impede their ability to provide products or
services to us. We may not be able to effectively
monitor or mitigate operational risks relating to the
use of common vendors by third-party service
providers, which could result in potential liability to
clients and customers, regulatory fines, penalties or
other sanctions, increased operational costs or harm
to our reputation.

As our business areas evolve, whether due to the
introduction of technology, new service offering
requirements for our clients, or changes in regulation
relative to these service offerings, unforeseen risks
materially impacting our business operations could
arise. The technology used could become
increasingly complex and rely on the continued
effectiveness of the programming code and integrity
of the inputted data. Rapid technological changes and
competitive pressures require us to make significant
and ongoing investments in technology not only to
develop competitive new products and services or
adopt new technologies, but to sustain our current
businesses. Our financial performance depends in
part on our ability to develop and market these new
products and services in a timely manner at a
competitive price and adopt or develop new
technologies that differentiate our products or provide
cost efficiencies. The failure to adequately review
and consider critical business changes prior to and
during introduction and deployment of key
technological systems or the failure to adequately
align operational capabilities with evolving client
commitments and expectations, subjects us to the risk
of an adverse impact on our ability to service and
retain customers and on our operations. The costs we
incur in enhancing our technology could be
substantial and may not ultimately improve our
competitiveness or profitability.

As a result of financial entities, central agents,
clearing agents and houses, exchanges and

technology systems across the globe becoming more
interdependent and complex, a technology failure that
significantly degrades, deletes or compromises the
systems or data of one or more financial entities or
suppliers could have a material impact on
counterparties or other market participants, including
us. A disruptive event or, failure or delay
experienced by one institution could disrupt the
functioning of the overall financial system.

A cybersecurity incident, or a failure in our
computer systems, networks and information, or
those of third parties, could result in the theft, loss,
unauthorized access to, disclosure, use or alteration
of information, system or network failures, or loss of
access to information. Any such incident or failure
could adversely impact our ability to conduct our
businesses, damage our reputation and cause losses.

We have been, and we expect to continue to be, the
target of attempted cyberattacks, computer viruses or
other malicious software, denial of service efforts,
phishing attacks and other information security
threats, including unauthorized access attempts and
cyberattacks targeted at third-party service providers.
The continued reliance on remote working
arrangements, as well as our employees’
corresponding usage of mobile and cloud
technologies, subjects us to a number of cyber risks,
including attempted cyberattacks targeting remote
workers, as well as mobile and cloud technologies.
Although we deploy a broad range of sophisticated
defenses, we could suffer a material adverse impact
or disruption as a result of a cybersecurity incident.

Cybersecurity incidents may occur through
intentional or unintentional acts by individuals or
groups having authorized or unauthorized access to
our systems or our clients’ or counterparties’
information, which may include confidential or
proprietary information. These individuals or groups
may include employees, vendors and customers, as
well as others with malicious intent. Malicious actors
may also attempt to place individuals within BNY
Mellon or fraudulently induce employees, vendors,
customers or other users of our systems to disclose
sensitive information in order to gain access to our
data or that of our clients. A cybersecurity incident
that results in the theft, loss, unauthorized access to,
disclosure, use or alteration of information, system or
network failures, or loss of access to information,
may require us to reconstruct lost data (which may
not be possible), reimburse clients for data and credit

BNY Mellon 79

Risk Factors (continued)

monitoring services, or result in loss of customer
business or damage to our computers or systems and
those of our customers and counterparties. A
cybersecurity incident could also result in the loss of
customer digital assets, including custodied digital
assets, which may be distinctly difficult to recover
and could subject us to customer disputes, claims for
reimbursement, losses, negative publicity,
reputational damage and governmental and regulatory
scrutiny, investigations and enforcement actions.
These impacts could be costly and time-consuming
and could materially adversely affect our business,
financial condition and results of operations.

While we seek to mitigate these risks to ensure the
integrity of our systems and information and
continuously evolve our cybersecurity capabilities, it
is possible that we may not anticipate or implement
effective preventive measures against all
cybersecurity threats, or detect all such threats,
especially because the techniques used change
frequently or are not recognized until after they are
launched. Moreover, attacks can originate from a
wide variety of sources, including malicious actors
who are involved with organized crime or who may
be linked to terrorist organizations or hostile foreign
governments, or from cross-contamination of
legitimate parties (including vendors, clients,
financial market utilities, and other financial
institutions). Risks relating to attacks on our vendors,
including supply chain attacks affecting our software
and information technology service providers, have
been rising as such attacks become increasingly
frequent and severe and as financial entities and
technology systems have become increasingly
consolidated, interdependent and complex.

The failure to maintain an adequate technology
infrastructure and applications with effective
cybersecurity controls relative to the type, size and
complexity of operations, markets and products
traded, access to trading venues and our market
interconnectedness could impact operations and
impede our productivity and growth, which could
cause our earnings to decline or could impact our
ability to comply with regulatory obligations, leading
to regulatory fines and sanctions. We may be
required to expend significant additional resources to
modify, investigate or remediate vulnerabilities or
other exposures arising from cybersecurity threats.
Despite our capabilities for identifying and
attempting to mitigate the impact of cyberattacks, a
successful cyberattack could occur and persist for an

80 BNY Mellon

extended period of time before being detected. In
addition, because any investigation of a cybersecurity
incident would be inherently unpredictable, the extent
of a particular cybersecurity incident and the path of
investigating the incident may not be immediately
clear. It may take a significant amount of time before
such an investigation can be completed and reliable
information about the incident is known. While such
an investigation is ongoing, we may not necessarily
know the extent of the harm or how best to remediate
it, certain errors or actions could be repeated or
compounded before they are discovered and
remediated, and communication to the public, clients,
regulators, and other stakeholders may not be
sufficiently timely or accurate, any or all of which
could further increase the costs and consequences of a
cybersecurity incident. Moreover, potential new
regulations may require us to publicly disclose
information about a cybersecurity event before the
incident has been resolved or fully investigated.

In addition, we rely on a variety of measures to
protect our intellectual property and proprietary
information, including copyrights, trademarks,
patents and controls on access and distribution.
These measures may not prevent misappropriation or
infringement of our intellectual property or
proprietary information and a resulting loss of
competitive advantage. Furthermore, if a third party
were to assert a claim of infringement or
misappropriation of its proprietary rights, obtained
through patents or otherwise, against us, we could be
required to spend a significant amount of resources to
defend such claims, develop alternative methods of
operations, pay substantial money damages, obtain a
license from the third party or possibly stop providing
one or more products or services. In addition, we
conduct business in various jurisdictions that may not
have comparable levels of protection for intellectual
property and proprietary information as the U.S. The
protection afforded in those jurisdictions may be less
established and/or predictable. As a result, there may
also be heightened risks associated with the potential
theft of data, proprietary information, technology and
intellectual property in those jurisdictions by
domestic or foreign actors, including private parties
and those affiliated with or controlled by state actors.
Any theft of data, proprietary information, technology
or intellectual property may negatively impact our
operations and reputation, including disrupting our
business activities in those jurisdictions.

Risk Factors (continued)

We are also subject to laws and regulations relating to
the protection and privacy of the information of
clients, employees and others, and any failure to
comply with these laws and regulations could expose
us to liability, increased regulatory oversight and/or
reputational damage.

We are subject to extensive government rulemaking,
policies, regulation and supervision that impact our
operations. Changes to and introduction of new
rules and regulations have compelled, and in the
future may compel, us to change how we manage
our businesses, which could have a material adverse
effect on our business, financial condition and
results of operations.

As a large, internationally active financial services
company, we operate in a highly regulated
environment, and are subject to a comprehensive
statutory and regulatory regime affecting all aspects
of our business and operations, including oversight by
governmental agencies both inside and outside the
U.S. Regulations and related regulatory guidance and
supervisory oversight impact how we analyze certain
business opportunities, our regulatory capital and
liquidity requirements, the revenue profile of certain
of our core activities, the products and services we
provide, how we monitor and manage operational risk
and how we promote a sound governance and control
environment. Any changes to the regulatory
frameworks and environment in which we operate
and the significant management attention and
resources necessary to address those changes could
materially adversely affect our business, financial
condition and results of operations and have other
negative consequences. Although these risks apply to
our businesses generally, at the present time they are
particularly relevant for our digital asset activities and
the evolving expectations associated with ESG
matters. This reflects the pace of developments
relating to digital assets and ESG regulation,
including the increased focus by regulators and other
governmental authorities on these topics and the
relatively uncertain, distinct and novel nature of the
associated principles.

The evolving regulatory environment and uncertainty
about the timing and scope of future regulations may
contribute to decisions we may make to suspend,
reduce or withdraw from existing businesses,
activities or initiatives, which may result in potential
lost revenue or significant restructuring or related
costs or exposures. We also face the risk of

becoming subject to new or more stringent
requirements in connection with the introduction of
new regulations or modification of existing
regulations, which could require us to hold more
capital or liquidity or have other adverse effects on
our businesses or profitability. In addition, regulatory
responses in connection with severe market
downturns or unforeseen stress events may alter or
disrupt our planned future strategies and actions.

The monetary, tax and other policies of various
governments, agencies and regulatory authorities both
in the U.S. and globally have a significant impact on
interest rates, currencies, commodity pricing
(including oil), the imposition of tariffs or other
limitations on international trade and travel, and
overall financial market performance, which can
impact our business, results of operations and capital.
Changes in these policies are beyond our control and
can be difficult to predict and we cannot determine
the ultimate effect that any such changes would have
upon our business, financial condition or results of
operations. Legal or regulatory changes affecting
access to financial markets can also adversely affect
us. For example, under the Holding Foreign
Companies Accountable Act, the SEC must prohibit
trading in the securities of companies identified by
the SEC for three consecutive years as having
retained an auditor located in a foreign jurisdiction
that the Public Company Accounting Oversight
Board (“PCAOB”) has determined it is unable to
inspect or investigate completely. In December 2022,
the PCAOB vacated an earlier determination with
respect to mainland China and Hong Kong.
However, the PCAOB has indicated it expects to
continue to have complete access going forward and
will consider the need to issue a new determination if
needed. As a result of this legislation, companies
located in mainland China, Hong Kong or potentially
other jurisdictions may decide, or eventually be
required, to delist or otherwise remove their securities
from U.S. financial markets, which would adversely
affect our businesses, particularly our Issuer Services
line of business.

The regulatory and supervisory focus of U.S. banking
agencies is primarily intended to protect the safety
and soundness of the banking system and federally
insured deposits, and not to protect investors in our
securities. Regulatory and supervisory standards and
expectations across jurisdictions may be divergent
and otherwise may not conform and/or may be
applied in a manner that is not harmonized within a

BNY Mellon 81

Risk Factors (continued)

jurisdiction (in relation to national versus non-
national financial services providers) and/or across
jurisdictions. Additionally, banking regulators have
wide supervisory discretion in the ongoing
examination and enforcement of applicable banking
statutes, regulations, and guidelines, and may restrict
our ability to engage in certain activities or
acquisitions or may require us to limit our capital
distributions, maintain more capital or hold more
highly liquid assets.

The U.S. capital rules subject us and our U.S. banking
subsidiaries to stringent capital requirements, which
could restrict growth, activities or operations, trigger
divestiture of assets or operations or limit our ability
to return capital to shareholders.

The LCR and NSFR require us to maintain significant
holdings of high-quality and generally lower-yielding
liquid assets. In calculating the LCR and NSFR, we
must also determine which deposits should be
considered stable deposits. Stable deposits must meet
a series of requirements and typically receive
favorable treatment under the LCR and NSFR. We
use qualitative and quantitative analysis to identify
core stable deposits. It is possible that our LCR and
NSFR could fall below applicable regulatory
requirements as a consequence of the inherent
uncertainties associated with this analysis (including
as a result of regulatory changes or additional
guidance from our regulators). In addition to facing
potential regulatory consequences (which could be
significant), we may be required to remedy this
shortfall by liquidating assets in our investment
portfolio or raising additional debt, each of which
could have a material negative impact on our net
interest revenue.

We develop and submit plans for our rapid and
orderly resolution in the event of material financial
distress or failure to the Federal Reserve and the
FDIC. If the agencies determine that our future
submissions are not credible or would not facilitate an
orderly resolution under the U.S. Bankruptcy Code,
and we fail to address any such deficiencies in a
timely manner, we may be subject to more stringent
capital or liquidity requirements or restrictions on our
growth, activities or operations, or may be required to
divest assets or operations, which could adversely
affect our business, financial condition and results of
operations.

82 BNY Mellon

Our global activities are also subject to extensive
regulation by various non-U.S. regulators, including
governments, securities exchanges, central banks and
other regulatory bodies in the jurisdictions in which
we operate, relating to, among other things, the
safeguarding, administration and management of
client assets and client funds, regulation of markets,
recovery and resolution planning and payments and
financial market infrastructure.

Various laws, regulations, rules and directives
effective in the jurisdictions in which we operate have
an impact on our provision of many products and
services. Implementation of, and revisions to, these
laws, regulations, rules and directives have affected
our operations and risk profile. For example, the key
regulatory frameworks impacting our operations in
the EU and UK continue to diverge in a number of
respects. Further divergence in the nature and scope
of these regulations could have an adverse impact on
our results of operations and business prospects.

In addition, we are subject in our global operations to
rules and regulations relating to corrupt and illegal
payments and money laundering, economic sanctions
and embargo programs administered by the U.S.
Office of Foreign Assets Control and similar bodies
and governmental agencies worldwide, and laws
relating to doing business with certain individuals,
groups and countries, such as the U.S. Foreign
Corrupt Practices Act, the USA PATRIOT Act, the
Iran Threat Reduction and Syria Human Rights Act
of 2012 and the UK Bribery Act. While we have
invested and continue to invest significant resources
in training and in compliance monitoring, the
geographical diversity of our operations, employees,
clients and customers, as well as the vendors and
other third parties that we deal with, presents the risk
that we may be found in violation of such rules,
regulations or laws and any such violation could
subject us to significant penalties or adversely affect
our reputation. In addition, such rules could impact
our ability to engage in business with certain
individuals, entities, groups and countries, which
could materially adversely affect certain of our
businesses and results of operations. For example,
following Russia’s invasion of Ukraine in the first
quarter of 2022, we ceased new banking business in
Russia and suspended investment management
purchases of Russian securities. Government
sanctions and our actions in response to the ongoing
war in Ukraine have had and could continue to have a
negative impact on our revenue and our business.

Risk Factors (continued)

As a result of the recent implementation of data
protection-related laws and regulations, including the
EU GDPR, the California Consumer Privacy Act of
2018 and the New York Department of Financial
Services’ cybersecurity regulation, we need to
allocate additional time and resources to comply with
such laws and regulations, and our potential liability
for non-compliance and reporting obligations in the
case of data breaches has significantly increased. In
addition, our businesses are increasingly subject to
laws and regulations relating to privacy, surveillance,
encryption and data localization in the jurisdictions in
which we operate. Compliance with these laws and
regulations has required us to change our policies,
procedures and technology for information security
and segregation of data, which, among other things,
makes us more vulnerable to operational failures, and
to monetary penalties for breach of such laws and
regulations.

Failure to comply with laws, regulations or policies,
or meet supervisory expectations, applicable to us and
our businesses could result in civil or criminal
sanctions or enforcement proceedings by regulatory
or governmental authorities, money penalties and
reputational damage, which could have a material
adverse effect on our business, financial condition
and results of operations. If violations of legal or
regulatory requirements do occur, they could damage
our reputation, increase our legal and compliance
costs, including requiring us to devote substantial
resources towards remediation efforts, and ultimately
adversely impact our results of operations. Laws,
regulations or policies currently affecting us and our
subsidiaries, supervisory expectations, or regulatory
and governmental authorities’ interpretation of
statutes and regulations may change at any time,
which may adversely impact our business and results
of operations.

See “Supervision and Regulation” for additional
information regarding the potential impact of the
regulatory environment on our business.

Regulatory or enforcement actions or litigation
could materially adversely affect our results of
operations or harm our businesses or reputation.

Like many major financial institutions, we and our
affiliates are the subject of inquiries, investigations,
lawsuits and proceedings by counterparties, clients,
other third parties, tax authorities and regulatory and
other governmental agencies in the U.S. and abroad,

as well as the Department of Justice and state
attorneys general. See “Legal proceedings” in Note
22 of the Notes to Consolidated Financial Statements
for a discussion of material legal and regulatory
proceedings in which we are involved. The number
of these investigations and proceedings, as well as the
amount of penalties and fines sought, has remained
elevated for many firms in the financial services
industry, including us. We have in the past been, and
may in the future become, subject to heightened
regulatory scrutiny, inquiries or investigations, and
potentially client-related inquiries or claims, relating
to broad, industry-wide concerns that could lead to
increased expenses or reputational damage.
Regulators and other governmental authorities may
also be more likely to pursue enforcement actions, or
seek admissions of wrongdoing or guilty pleas, in
connection with the resolution of an inquiry or
investigation to the extent a firm has previously been
subject to other governmental investigations or
enforcement actions. The current trend of large
settlements by financial institutions with
governmental entities may adversely affect the
outcomes for other financial institutions in similar
actions, especially where governmental officials have
announced that the large settlements will be used as
the basis or a template for other settlements.
Separately, policymakers globally continue to focus
on protection of client assets, as well as tax avoidance
and evasion.

The complexity of the federal and state regulatory
and enforcement regimes in the U.S., coupled with
the global scope of our operations and the increased
aggressiveness of the tax and regulatory environment
worldwide, also means that a single event may give
rise to a large number of overlapping investigations
and regulatory proceedings, either by multiple federal
and state agencies in the U.S. or by multiple
regulators and other governmental entities or tax
authorities in different jurisdictions. Responding to
inquiries, investigations, lawsuits and proceedings,
regardless of the ultimate outcome of the matter, is
time consuming and expensive and can divert the
attention of our senior management from our
business. The outcome of such proceedings may be
difficult to predict or estimate until late in the
proceedings, which may last a number of years.

Certain of our subsidiaries are subject to periodic
examination, special inquiries and potential
proceedings by regulatory authorities. If compliance
failures or other violations are found during an

BNY Mellon 83

Risk Factors (continued)

examination, inquiry or proceeding, a regulatory
agency could initiate actions and impose sanctions for
violations, including, for example, regulatory
agreements, remediation undertakings, cease and
desist orders, civil monetary penalties or termination
of a license and could lead to litigation by investors
or clients, any of which could cause our earnings to
decline.

Our businesses involve the risk that clients or others
may sue us, claiming that we or third parties for
whom they say we are responsible have failed to
perform under a contract or otherwise failed to carry
out a duty perceived to be owed to them, including
perceived fiduciary or contractual duties. This risk
may be heightened during periods when credit, equity
or other financial markets are deteriorating in value or
are particularly volatile, or when clients or investors
are experiencing losses. As a publicly held company,
we are also subject to the risk of claims under the
federal securities laws. Volatility in our stock price
increases this risk.

Increasingly, regulators, tax authorities and courts
have sought to hold financial institutions liable for the
misconduct of their clients where such regulators and
courts have determined that the financial institution
should have detected that the client was engaged in
wrongdoing, even though the financial institution had
no direct knowledge of the wrongdoing.

Actions brought against us may result in lawsuits,
enforcement actions, injunctions, settlements,
damages, fines or penalties, which could have a
material adverse effect on our financial condition or
results of operations or require changes to our
business. Claims for significant monetary damages
are asserted in many of these legal actions, while
claims for disgorgement, penalties and/or other
remedial sanctions may be sought in regulatory
matters. Although we establish accruals for our
litigation and regulatory matters in accordance with
applicable accounting guidance, our exposure to such
litigation and regulatory matters can be unpredictable,
and when those matters proceed to a stage where they
present loss contingencies that are both probable and
reasonably estimable, there may be a material
exposure to loss in excess of any amounts accrued, or
in excess of any loss contingencies disclosed as
reasonably possible. Such loss contingencies may not
be probable and reasonably estimable until the
proceedings have progressed significantly, which

84 BNY Mellon

could take several years and occur close to resolution
of the matter.

Each of the risks outlined above could result in
increased regulatory supervision and affect our ability
to attract and retain customers or maintain access to
the capital markets.

A failure or circumvention of our controls and
procedures could have a material adverse effect on
our business, financial condition, results of
operations and reputation.

Management regularly reviews and updates our
internal controls, disclosure controls and procedures,
and corporate governance policies and procedures.
Any system of controls, however well designed and
operated, is based in part on certain assumptions and
can provide only reasonable, not absolute, assurances
that the objectives of the system will be met. Any
failure or circumvention of our controls and
procedures or failure to comply with regulations
related to controls and procedures could have a
material adverse effect on our business, reputation,
results of operations and financial condition.
Moreover, if we identify material weaknesses in our
internal control over financial reporting or are
otherwise required to restate our financial statements,
we could be required to implement expensive and
time-consuming remedial measures and could lose
investor confidence in the accuracy and completeness
of our financial reports. In addition, there are risks
that individuals, either employees or contractors, may
circumvent established control mechanisms in order
to, for example, exceed exposure, liquidity, trading or
investment management limitations, or commit fraud.

Market Risk

We are dependent on fee-based business for a
substantial majority of our revenue and our fee-
based revenues could be adversely affected by
slowing in market activity, weak financial markets,
underperformance and/or negative trends in savings
rates or in investment preferences.

Our principal operational focus is on fee-based
business, which is distinct from commercial banking
institutions that earn most of their revenues from
loans and other traditional interest-generating
products and services. In 2022, 79% of our total
revenue was fee-based. Our fee-based businesses
include investment and wealth management, custody,

Risk Factors (continued)

corporate trust, depositary receipts, clearing,
collateral management and treasury services, which
are highly competitive businesses.

Fees for many of our products and services are based
on the volume of transactions processed, the market
value of assets managed and/or administered,
securities lending volume and spreads, and fees for
other services rendered. Corporate actions, cross-
border investing, global mergers and acquisitions
activity, new debt and equity issuances, and
secondary trading volumes, among other things, all
affect the level of our fee revenue. As the volume of
these activities decreases due to low client activity,
weak financial markets or otherwise, our fee-based
revenues also decrease, which negatively impacts our
results of operations.

If our Investment and Wealth Management
businesses experience poor investment returns due to
weak market conditions or underperformance
(relative to competitors or benchmarks), the market
values of the portfolios that we manage will be lower
(on a relative basis) and our ability to retain existing
assets and/or attract new client assets may be
impacted. Market and regulatory trends have also
resulted in increased demand for lower fee investment
and wealth management products and services, and
lower performance-fee structures, both of which have
impacted and may continue to impact our fee
revenue. Some of these dynamics have also
negatively impacted fees in our Market and Wealth
Services and Securities Services businesses and any
of these dynamics may also occur in the future.
Significant declines in the volume of capital markets
activity would reduce the number of transactions we
process and the amount of securities we lend and
therefore would also have an adverse effect on our
results of operations. Our business may be adversely
impacted by decreases in the rate at which individuals
invest in mutual funds and other collective funds, unit
investment trusts or exchange-traded funds, or
contribute to defined contribution plans. Changes in
economic and market conditions, including as a result
of higher market volatility, inflationary pressures,
recessionary conditions or declines in equity values,
could result in changes in the investment patterns of
our clients or negatively impact the market value of
client portfolios, each of which could have a negative
impact on our results of operations.

When our investment management revenues decline,
interest rates rise rapidly or other market factors

affect the value of our investment management
business, we may have, and in the past have had,
declines in the fair value in our Investment
Management reporting unit, one of the two reporting
units in our Investment and Wealth Management
segment. If the fair value of the Investment
Management reporting unit declines below its
carrying value, we would be required to take, and in
the past have taken, an impairment charge.

Weakness and volatility in financial markets and the
economy generally may materially adversely affect
our business, financial condition and results of
operations.

As a financial institution, our Investment
Management, Wealth Management, Pershing,
Depositary Receipts and Markets, including
Securities Lending, businesses are particularly
sensitive to economic and market conditions,
including in the capital and credit markets. When
these markets are volatile or disruptive, we have
experienced declines in our fair valued assets,
including in our securities portfolio and seed capital,
as well as a fair value reduction in the portfolios that
we manage that generate investment and wealth
management fees. Conditions in the financial
markets and the economy generally, both in the U.S.
and elsewhere around the world have materially
affected, and may continue to affect, our results of
operations, including investment management fees.

Foreign exchange trading that we execute for clients
generates revenues which are primarily driven by the
volume of client transactions and the spread realized
on these transactions, both of which are impacted by
market volatility and the impact of foreign exchange
hedging activities. Our clients’ cross-border
investing activity could decrease in reaction to
economic and political uncertainties, including
changes in laws or regulations governing cross-border
transactions, such as currency controls or tariffs.
Volumes and/or spreads in some of our products tend
to benefit from currency volatility and are likely to
decrease during times of lower currency volatility.
Such revenues also depend on our ability to manage
the risk associated with the currency transactions we
execute and program pricing.

A variety of factors impact global economies and
financial markets, including interest rates and their
associated yield curves, commodity pricing, market
and political instabilities, volatile debt and equity

BNY Mellon 85

Risk Factors (continued)

market values, inflation and expectations relating to
inflation trends, the strength of the U.S. dollar, the
imposition of tariffs or other limitations on
international trade or travel, high unemployment and
governmental budget deficits (including, in the U.S.,
at the federal, state and municipal levels), and
contagion risk from possible default on sovereign
debt, declining business and consumer confidence.
Any resulting economic pressure on consumers and
lack of confidence in the financial markets may
adversely affect our business, financial condition and
results of operations. Additionally, global economies
and financial markets may be adversely affected by
widespread health emergencies or pandemics
(including the further spread of SARS-CoV-2 or its
variants), natural disasters, climate-related incidents,
acts of war (such as the war in Ukraine), economic
sanctions or other geopolitical events (or concerns
over the possibility of such events). In particular, we
face the following risks in connection with these
factors, some of which are discussed at greater length
in separate risk factors:

• Geopolitical tension and economic instability in
countries around the world can at times increase
the demand for low-risk investments, particularly
in U.S. Treasuries and the dollar. A “flight to
safety” has historically increased our balance
sheet, which has negatively impacted, and could
continue to negatively impact, our leverage-based
regulatory capital measures. A sustained “flight
to safety” has historically triggered a decline in
trading, capital markets and cross-border activity
which would likely decrease our revenue,
negatively impacting our results of operations,
financial condition and, if sustained in the long
term, our business.

•

The fees earned by our Investment Management
and Wealth Management businesses are higher as
assets under management and/or investment
performance increase. Those fees are also
impacted by the composition of the assets under
management, with higher fees for some asset
categories as compared to others. Uncertain and
volatile capital markets, particularly declines,
could result in movements from higher to lower
fee products and/or reductions in our assets under
management because of investors’ decisions to
withdraw assets or from simple declines in the
value of assets under management as markets
decline.

• Market conditions resulting in lower transaction
volumes could have an adverse effect on the

86 BNY Mellon

revenues and profitability of certain of our
businesses such as clearing, settlement, payments
and trading.

• Uncertain and volatile capital markets,

particularly declines in equity prices, could
reduce the value of our investments in securities,
including pension and other post-retirement plan
assets and produce downward pressure on our
stock price and credit availability without regard
to our underlying financial strength.

• Derivative instruments we hold for our own

account to hedge and manage our exposure to
market risks, including interest rate risk, equity
price risk, foreign currency risk and credit risk
associated with our products and businesses
might not perform as intended or expected,
resulting in higher realized losses and unforeseen
stresses on liquidity. Our derivatives-based
hedging strategies also rely on the performance of
counterparties to such derivatives. These
counterparties may fail to perform for various
reasons resulting in losses on under-collateralized
positions.

The process we use to estimate our expected
credit losses is subject to uncertainty in that it
requires use of statistical models and difficult,
subjective and complex judgments, including
forecasts of economic conditions and how these
conditions might impair the ability of our
borrowers and others to meet their obligations. In
uncertain and volatile economic environments,
our ability to estimate our estimated credit losses
may be impaired, which could adversely affect
our overall profitability and results of operations.

•

For a discussion of our management of market risk,
see “Risk Management – Risk Types Overview –
Market Risk.”

Levels of and changes in interest rates have
impacted, and will in the future continue to impact,
our profitability and capital levels, at times
adversely.

We earn revenue, known as “net interest revenue,” on
the difference between the interest income earned on
our interest-earning assets, such as the loans we make
and the securities we hold in our investment securities
portfolio, and the interest expense incurred on our
interest-bearing liabilities, such as deposits and
borrowed money. Additionally, we earn net interest
revenue on other activities relating to interest-earning

Risk Factors (continued)

assets and interest-bearing liabilities, such as reverse
repurchase agreements and repurchase agreements,
respectively. Our net interest margin, which is the
result of dividing net interest revenue by average
interest-earning assets, is sensitive to whether the
interest rate paid or received is fixed or moves with
changes in market interest rates.

The recent rise in rates, and any future rate increases,
could adversely impact our business, financial
condition and results of operations, due to:

•

higher market volatility, recessionary conditions
and declines in equity values, resulting in a
decline in the valuation of assets under
management;

reduced liquidity in bonds and fixed-income
funds, resulting in lower performance and fees;

increased number of delinquencies, bankruptcies
or defaults and more nonperforming assets and
net charge-offs, as borrowers may have more
difficulty making higher interest payments;

higher redemptions from our fixed-income funds
or separate accounts, as clients move funds into
investments with higher rates of return;

declines in deposit levels, resulting in reduced
internal and regulatory liquidity buffers and lower
revenues;

reductions in the value of our fixed-income
securities held for liquidity purposes;

further increases in accumulated other
comprehensive loss in our shareholders’ equity
and therefore our tangible common equity due to
the impact of rising long-term rates on the
available-for-sale securities in our investment
portfolio, which would negatively affect our risk-
based and leverage based regulatory capital
ratios; or

•

higher funding cost.

A declining short-term rate environment would likely
adversely impact, and has in the past adversely
impacted, our net interest revenue and results of
operations due to:

•

compression of our net interest margin,
depending on our balance sheet position;

constraints on our ability to achieve net interest
revenue consistent with historical averages;

•

sustained weakness of our spread-based revenues,
resulting in continued voluntary waiving of fees
on certain money market mutual funds and
related distribution fees, in order to prevent the
yields on such funds from becoming uneconomic;
or

adverse impacts on the value of our fixed-rate
mortgage-backed securities, driven by higher
mortgage prepayment speeds.

A more detailed discussion of the interest rate and
market risks we face is contained in “Risk
Management.”

We have experienced, and may continue to
experience, unrealized or realized losses on
securities related to volatile and illiquid market
conditions, reducing our capital levels and/or
earnings.

We maintain an investment securities portfolio of
various holdings, types and maturities. At Dec. 31,
2022, approximately 61% of these securities were
classified as available-for-sale, which are recorded on
our balance sheet at fair value with unrealized gains
or losses reported as a component of accumulated
other comprehensive income, net of tax. The
securities in our held-to-maturity portfolio, recorded
on our balance sheet at amortized cost, were
approximately 39% of our securities portfolio at Dec.
31, 2022. Our available-for-sale securities portfolio,
to the extent unhedged, may have more volatility to
accumulated other comprehensive income or earnings
than a portfolio comprised exclusively of, for
example, U.S. Treasury securities or, alternatively, a
loan portfolio that is accounted for at amortized cost.

Our investment securities portfolio represents a
greater proportion of our consolidated total assets
(approximately 35% at Dec. 31, 2022), in comparison
to many other major U.S. financial institutions due to
our custody and trust bank business model.
Accordingly, our capital levels and results of
operations and financial condition are materially
exposed to the risks associated with our investment
securities portfolio.

We reserve for current expected credit losses with
respect to our available-for-sale and held-to-maturity
securities. Credit losses in excess of our allowance
for credit losses would impact our results of
operations.

BNY Mellon 87

Risk Factors (continued)

Under the U.S. capital rules, after-tax changes in the
fair value of available-for-sale investment securities
are included in CET1 capital. Since held-to-maturity
securities are not subject to fair-value accounting,
changes in the fair value of these instruments (other
than expected credit losses) are not similarly included
in the determination of CET1 capital. As a result, we
may experience increased variability in our CET1
capital relative to those major financial institutions
who maintain a lower proportion of their consolidated
total assets in an available-for-sale accounting
classification.

Generally, the fair value of available-for-sale
securities is determined based on market prices
available from third-party sources. During periods of
market disruption, it may be difficult to value certain
of our investment securities if trading becomes less
frequent and/or market data becomes less observable.
As a result, valuations may include inputs and
assumptions that are less observable or require greater
estimation and judgment as well as valuation methods
which are more complex. These values may not be
ultimately realizable in a market transaction, and such
values may change very rapidly as market conditions
change and valuation assumptions are modified.
Decreases in value may have a material adverse effect
on our results of operations or financial condition.
The estimate of expected credit losses is determined
in part by management’s assessment of the financial
condition and prospects of a particular issuer,
projections of future cash flows and recoverability of
the particular security. Management’s conclusions on
such assessments are highly judgmental and include
assumptions and projections of future cash flows
which may ultimately prove to be incorrect as
assumptions, facts and circumstances change. On the
other hand, we are limited in the actions we can take
related to our held-to-maturity securities absent a
significant deterioration in the issuer’s
creditworthiness. Therefore, we may be constrained
in our ability to liquidate a held-to-maturity security
that is deteriorating in value, which would negatively
impact the fair value of our securities portfolio. If our
determinations change about our intention or ability
to not sell available-for-sale securities that have
experienced a reduction in fair value below their
amortized cost, we could be required to recognize a
loss in earnings for the entire difference between fair
value and amortized cost.

88 BNY Mellon

For information regarding our investment securities
portfolio, refer to “Consolidated balance sheet review
– Securities.”

Transitions away from and the replacement of
LIBOR and other IBORs could adversely impact
our business, financial condition and results of
operations.

The FCA and the administrator for LIBOR have
announced that the publication of the most commonly
used U.S. dollar LIBOR settings will cease to be
published or cease to be representative after June 30,
2023. The publication of all other LIBOR settings
ceased to be published or to be representative as of
Dec. 31, 2021. In addition, the U.S. bank regulators
had also issued guidance strongly encouraging
banking organizations to cease using U.S. dollar
LIBOR as a reference rate in new contracts by Dec.
31, 2021. As a result, financial market participants
have begun to transition away from IBORs. This
transition is further supported by the requirements of
the EU Benchmarks Regulation, which no longer
permits IBORs that rely on quotes or estimates
submitted by contributing banks that are not anchored
in transaction-based data.

Various regulators, industry bodies and other market
participants in the U.S. and other countries are
engaged in initiatives to develop, introduce and
encourage the use of alternative rates to replace
certain benchmarks. However, the introduction of,
and adoption of, successor rates had been slow until
late 2021. In the U.S., SOFR has been identified by
the Alternate Reference Rates Committee convened
by the Federal Reserve as the alternative benchmark
rate to U.S. dollar LIBOR, and the LIBOR Act, which
was enacted in March 2022, provides a statutory
framework to replace U.S. dollar LIBOR with a
benchmark rate based on SOFR for certain contracts
governed by U.S. law. However, there continues to
be substantial uncertainty as to the ultimate effects of
LIBOR transition, including with respect to the
acceptance and use of SOFR or other alternative
benchmark rates or the effectiveness of legislative
initiatives, such as the LIBOR Act. The
characteristics of these new rates are not identical to
the benchmarks they seek to replace, will not produce
the exact economic equivalent as those benchmarks,
and may perform differently in a variety of market
conditions compared to those benchmarks. For
example, during the early stages of the COVID-19

Risk Factors (continued)

pandemic, there was more volatility in SOFR as
compared to LIBOR.

Transitions to SOFR and other alternative rates or
benchmarks may cause LIBOR (in the case of
LIBOR-linked instruments that have not yet
transitioned) or the applicable alternative benchmark
rates to perform differently, or have other
consequences which cannot be predicted. In the
event any such benchmark or other referenced
financial metric is significantly changed or
discontinued (for example, when LIBOR and other
IBORs cease to be published), or are no longer
recognized as an acceptable benchmark, there may be
uncertainty as to the calculation of the applicable
interest rate or payment amount for certain financial
instruments or contracts, depending on the terms of
the governing instrument. In addition, even if the
method of calculation of a fallback rate is clear, the
resulting interest rate or payment amount may be
different than the interest rate or payment amount that
would have applied based on the original benchmark.

We may be adversely impacted by the changes
involving LIBOR and other benchmark rates as a
result of our business activities and our underlying
operations. We utilize benchmark rates in a variety
of agreements and instruments and are responsible for
the use of benchmark rates in a variety of capacities,
as well as in our operational functions. We could be
subject to claims from customers, counterparties,
investors or regulators alleging that, notwithstanding
any uncertainty around the rate environment, we did
not correctly discharge our responsibilities. We could
also face claims in connection with the interpretation
and implementation of fallback provisions. The
LIBOR transition presents various challenges related
to contractual mechanics of existing floating rate
financial instruments and contracts that reference
LIBOR and mature after the applicable setting ceases
to be published or regarded as representative. Certain
of these instruments and contracts do not provide for
alternative benchmark rates, which makes it unclear
what the future benchmark rates would be after
LIBOR’s cessation. Although the LIBOR Act has
provided clarity on the replacement of U.S. dollar
LIBOR for certain contracts, significant uncertainty
remains for contracts not covered by the LIBOR Act.
Moreover, particular contracts may require fallback
rates that are different from the most widely used
alternative to LIBOR.

Fluctuations in interest rates triggered by the
transition away from LIBOR and other IBORs could
adversely affect the availability or cost of floating-
rate funding. We could experience losses on a
product or have to pay more or receive less on
securities that we own or have issued. We may also
not be able to successfully amend or renegotiate
IBOR-based agreements and instruments, including
as a result of a failure to receive the requisite consent
from counterparties, which could have adverse
impacts. Such impacts include, in some cases,
agreements and instruments effectively bearing
interest at a fixed rate (rather than a floating rate)
based on the last IBOR rate that was able to be
determined under the document. A variety of factors
may affect the transition from existing IBOR-based
rates to alternative benchmark rates, including, for
example, whether transactions that serve as the basis
for alternative benchmark rates and IBOR-based rates
are similarly secured (or unsecured) transactions, or
are of a similar tenor.

Divergences between existing IBOR-based and
alternative benchmark rates (or rates fixed at the last
determined IBOR rate) may result in our hedges
being ineffective. In addition, uncertainty relating to
LIBOR or another benchmark could result in, and in
some cases have resulted in, pricing volatility,
increased capital requirements, loss of market share
in certain products, adverse tax or accounting
consequences, higher compliance, legal and
operational costs, increased difficulty in estimating
our net interest revenue, and risks associated with
client disclosures, discretionary actions taken or
negotiation of fallback provisions, and disruption of
business continuity, systems and models, all of which
may adversely impact our business and results of
operations. Use of alternative benchmark rates may
also, in some cases, be limited or prohibited by
contract, law or regulation.

There can be no assurance that we, other market
participants, clients and vendors will be adequately
prepared for an actual discontinuation of IBORs, that
existing assets and liabilities based on or linked to
IBORs will transition successfully to alternative
benchmark rates or that appropriate systems and
analytics would be developed for one or more
alternative benchmark rates, any of which could
adversely impact our business, financial condition
and results of operations.

BNY Mellon 89

Risk Factors (continued)

Credit Risk

The failure or perceived weakness of any of our
significant clients or counterparties, many of whom
are major financial institutions or sovereign entities,
and our assumption of credit, counterparty and
concentration risk, could expose us to loss and
adversely affect our business.

We have exposure to clients and counterparties in
many different industries, particularly financial
institutions, as a result of trading, clearing and
financing, providing custody services, securities
lending services or other relationships. We routinely
execute transactions with global clients and
counterparties in the financial industry as well as
sovereigns and other governmental or quasi-
governmental entities. Our direct exposure consists
of extensions of secured and unsecured credit to
clients and use of our balance sheet. In addition to
traditional credit activities, we also extend intraday
credit in order to facilitate our various processing,
settlement and intermediation activities. Our ability
to engage in funding or other transactions could be
adversely affected by the actions and commercial
soundness of other financial institutions or sovereign
entities, as defaults or non-performance (or even
uncertainty concerning such default or non-
performance) by one or more financial institutions, or
the financial services industry generally, have in the
past led to market-wide liquidity problems and could
lead to losses or defaults by us or by other institutions
(including our counterparties and/or clients) in the
future. The consolidation and failures of financial
institutions during the 2008 financial crisis increased
the concentration of our client and counterparty risk.

As a result of our membership in several industry
clearing or settlement exchanges and central
counterparty clearinghouses, we may be required to
guarantee obligations and liabilities or provide
financial support in the event that other members do
not honor their obligations or default. These
obligations may be limited to members that dealt with
the defaulting member or to the amount (or a multiple
of the amount) of our contribution to a clearing or
settlement exchange guarantee fund, or, in a few
cases, the obligation may be unlimited.

When we provide credit to clients in connection with
providing cash management, clearing, custodial and
other services, we are exposed to potential loss if the
client experiences credit difficulties. Higher market

90 BNY Mellon

volatility, inflationary pressures, recessionary
conditions or declines in equity values could
negatively affect the creditworthiness of our clients,
which, in turn, would increase our credit risk. We are
also generally not able to net exposures across
affiliated clients or counterparties and may not be
able to net exposures to the same legal entity across
multiple products. In addition, we may incur a loss in
relation to one entity or product even though our
exposure to one of the entity’s affiliates is over-
collateralized. Moreover, not all of our client or
counterparty exposure is secured.

In our agency securities lending program, we act as
agent on behalf of our clients, the lenders of
securities, in securities lending transactions with our
clients’ counterparties (including broker-dealers),
acting as borrowers, wherein securities are lent by our
clients and the securities loans are collateralized by
cash or securities posted by such counterparties.
Typically, in the case of cash collateral, our clients
authorize us as their agent to invest the cash collateral
in approved investments pursuant to each client’s
investment guidelines and instructions. Such
approved investments may include reverse repurchase
transactions with repo counterparties. In many cases,
in the securities loans we enter into on behalf of our
clients, we agree to replace the client’s loaned
securities that the borrower fails to return due to
certain defaults by the borrower, mainly the
borrower’s insolvency. Therefore, in situations
where the market value of the loaned securities that
the borrower fails to return to a client (which loaned
securities we are obligated to replace and return to the
client) exceeds the amount of proceeds resulting from
the liquidation of the client’s approved investments
and cash and non-cash collateral of such client, we
may be responsible for the shortfall amount necessary
to purchase any replacement securities. In addition,
in certain cases, we may also assume the risk of loss
related to approved investments that are reverse
repurchase transactions as described above. In these
two scenarios, we, rather than our clients, are exposed
to the risks of the defaulting counterparty in the
securities lending transactions and, where applicable,
in the reverse repurchase transactions. For further
discussion on our securities lending indemnifications,
see “Commitments and contingent liabilities – Off-
balance sheet arrangements” in Note 22 of the Notes
to Consolidated Financial Statements.

From time to time, we assume concentrated credit
risk at the individual obligor, counterparty or group

Risk Factors (continued)

level, potentially exposing us to a single market or
political event or a correlated set of events. For
example, we may be exposed to defaults by
companies located in countries with deteriorating
economic conditions or by companies in certain
industries. Our commercial real estate portfolio also
exposes us to concentrated credit risk, including to
the New York metro market. Such concentrations
may be material. Our material counterparty
exposures change daily, and the counterparties or
groups of related counterparties to which our risk
exposure is material also vary during any reported
period; however, our largest exposures tend to be to
other financial institutions, clearing organizations,
and governmental entities, both inside and outside the
U.S. Concentration of counterparty exposure
presents significant risks to us and to our clients
because the failure or perceived weakness of our
counterparties (or in some cases of our clients’
counterparties) has the potential to expose us to risk
of financial loss. Changes in market perception of the
financial strength of particular financial institutions or
sovereign issuers can occur rapidly, are often based
on a variety of factors and are difficult to predict.

Although our overall business is subject to these
interdependencies, several of our businesses are
particularly sensitive to them, including our currency
and other trading activities, our securities lending and
securities finance businesses and our investment
management business. If we experience any of the
losses described above, it may materially and
adversely affect our results of operations.

We are also subject to the risk that our rights against
third parties may not be enforceable in all
circumstances. In addition, deterioration in the credit
quality of third parties whose securities or obligations
we hold, including a deterioration in the value of
collateral posted by third parties to secure their
obligations to us under derivatives contracts and other
agreements, could result in losses and/or adversely
affect our ability to rehypothecate or otherwise use
those securities or obligations for liquidity purposes.
Disputes with clients and counterparties as to the
valuation of collateral can significantly increase in
times of market stress and illiquidity. In addition,
disruptions in the liquidity or transparency of the
financial markets may result in our inability to sell,
syndicate or realize the value of our positions, thereby
leading to increased concentrations. An inability to
reduce our positions may not only increase the market
and credit risks associated with such positions, but

may also increase the level of RWA on our balance
sheet, thereby increasing our capital requirements and
funding costs, all of which could adversely affect the
operations and profitability of our businesses.

Under U.S. regulatory restrictions on credit exposure,
which include a broadening of the measure of credit
exposure, we are required to limit our exposures to
specific obligors or groups, including financial
institutions. These regulatory credit exposure
restrictions may adversely affect our businesses and
may require us to modify our operating models or the
policies and practices we use.

We could incur losses if our allowance for credit
losses, including loan and lending-related
commitment reserves, is inadequate or if our
expectations of future economic conditions
deteriorate.

When we loan money, commit to loan money or
provide credit or enter into another contract with a
counterparty, we incur credit risk, or the risk of loss if
our borrowers do not repay their loans or our
counterparties fail to perform according to the terms
of their agreements. Our revenues and profitability
are adversely affected when our borrowers default, in
whole or in part, on their loan obligations to us or
when there is a significant deterioration in the credit
quality of our loan portfolio. We reserve for potential
future credit losses by recording a provision for credit
losses through earnings. The allowance for loan
losses and allowance for lending-related
commitments represents management’s estimate of
current expected credit losses over the lifetime of the
related credit exposure taking into account relevant
information about past events, current conditions and
reasonable and supportable forecasts of future
economic conditions that affect the collectability of
our loans and lending commitments. We use a
quantitative methodology and qualitative framework
for determining the allowance for loan losses and the
allowance for lending-related commitments. Within
this qualitative framework, management applies
judgment when assessing internal risk factors and
environmental factors to compute an additional
allowance for each component of the loan portfolio.
As is the case with any such judgments, we could fail
to identify these factors or accurately estimate their
impact. We cannot provide any assurance as to
whether charge-offs related to our credit exposure
may occur in the future. Current and future market
and economic developments may increase default and

BNY Mellon 91

Risk Factors (continued)

delinquency rates and negatively impact the quality of
our credit portfolio, which may impact our charge-
offs. Although our estimates contemplate current
conditions and how we expect them to change over
the life of the portfolio, it is reasonably possible that
actual conditions could be worse than anticipated in
those estimates, which could materially affect our
results of operations and financial condition. See
“Critical accounting estimates.”

Capital and Liquidity Risk

Our business, financial condition and results of
operations could be adversely affected if we do not
effectively manage our liquidity.

Our operating model and overall strategy rely heavily
on our access to financial market utilities and global
capital markets. Without such access, it would be
difficult to process payments and settle and clear
transactions on behalf of our clients. Deterioration in
our liquidity position, whether actual or perceived,
can impact our market access by affecting
participants’ willingness to transact with us. Changes
to our liquidity can be caused by various factors, such
as funding mismatches, market constraints disabling
asset to cash conversion, inability to issue debt, run-
offs of core deposits, and contingent liquidity events
such as additional collateral posting. Changes in
economic conditions or exposure to credit, market,
operational, legal and reputational risks can also
affect our liquidity.

Our business is dependent in part on our ability to
meet our cash and collateral obligations at a
reasonable cost for both expected and unexpected
cash flows. We also must manage liquidity risks on
an intraday basis, in a manner designed to ensure that
we can access required funds during the business day
to make payments or settle immediate obligations,
often in real time. We receive client deposits through
a variety of investment management and investment
servicing businesses and we rely on those deposits as
a low-cost and stable source of funding. Our ability
to continue to receive those deposits, and other short-
term funding sources, is subject to variability based
on a number of factors, including volume and
volatility in the global securities markets, the relative
interest rates that we are prepared to pay for those
deposits, and the perception of the safety of those
deposits or other short-term obligations relative to
alternative short-term investments available to our
clients. We could lose deposits if we suffer a

92 BNY Mellon

significant decline in the level of our business
activity, our credit ratings are materially downgraded,
interest rates continue to rise, or we are subject to
significant negative press or significant regulatory
action or litigation, among other reasons. Our
liquidity could also be adversely affected by
customers’ withdrawal of deposits in response to
volatility and disruptions in the financial market or a
stress event. If we were to lose a significant amount
of deposits, we may need to replace such funding
with more expensive funding and/or reduce assets,
which would reduce our net interest revenue.

The degree of client demand for short-term credit
tends to increase during periods of market turbulence.
For example, investors in mutual funds for which we
act as custodian may engage in significant redemption
activity due to adverse market or economic
conditions. We may then extend intraday credit to
our fund clients in order to facilitate their ability to
pay such redemptions. In addition, during periods of
market turbulence, draws under committed revolving
credit facilities that we provide to our institutional
clients may increase substantially, as occurred in
March 2020. Such client demand may negatively
impact our leverage-based capital ratios, and in times
of sustained market volatility, may result in
significant leverage-based ratio declines.

In addition, our access to the debt and equity capital
markets is a significant source of liquidity. Events or
circumstances often outside of our control, such as
market disruptions, government fiscal and monetary
policies, uncertainty over the U.S. government debt
ceiling or loss of confidence by securities purchasers
or counterparties in us or in the funds markets, could
limit our access to capital markets, increase our cost
of borrowing, adversely affect our liquidity, or impair
our ability to execute our business plan. In addition,
clearing organizations, regulators, clients and
financial institutions with which we interact may
exercise the right to require additional collateral
based on market perceptions or market conditions,
which could further impair our access to and cost of
funding. Market perception of sovereign default risks
can also lead to inefficient money markets and capital
markets, which could further impact our funding
availability and cost. Conversely, excess liquidity
inflows could increase interest expense, limit our
financial flexibility, and increase the size of our total
assets in a manner that could have a negative impact
on our capital ratios.

Risk Factors (continued)

Under the U.S. capital rules, the size of the capital
surcharge that applies to U.S. G-SIBs is based in part
on its reliance on short-term wholesale funding,
including certain types of deposit funding, which may
increase the cost of such funding. Furthermore,
certain non-U.S. authorities require large banks to
incorporate a separate subsidiary in countries in
which they operate, and to maintain independent
capital and liquidity at foreign subsidiaries. These
requirements could hinder our ability to efficiently
manage our funding and liquidity in a centralized
manner, requiring us to hold more capital and
liquidity overall.

In addition, our cost of funding could be affected by
actions that we may take in order to satisfy applicable
LCR and NSFR requirements, to lower our G-SIB
score, to satisfy the amount of eligible long-term debt
outstanding under the TLAC rule, to address
obligations under our resolution plan or to satisfy
regulatory requirements in non-U.S. jurisdictions
relating to the pre-positioning of liquidity in certain
subsidiaries.

If we are unable to raise funds using the methods
described above, we would likely need to finance,
reduce or liquidate unencumbered assets, such as our
central bank deposits and bank placements, or
securities in our investment portfolio to meet funding
needs. We may be unable to sell some of our assets,
or we may have to sell assets at a discount from
market value, either of which could adversely affect
our business, financial condition and results of
operations. Further, our ability to sell assets may be
impaired if other market participants are seeking to
sell similar assets at the same time, which could occur
in a liquidity or other market crisis. Additionally, if
we experience cash flow mismatches, deposit run-off
or market constraints resulting from our inability to
convert assets to cash or access capital markets, our
liquidity could be severely impacted. During periods
of market uncertainty, our level of client deposits has
in recent years tended to increase; however, because
these deposits have high potential run-off rates, we
have historically deposited these so-called excess
deposits with central banks and in other highly liquid
and low-yielding instruments.

If we are unable to continue to fund our assets
through deposits or access capital markets on
favorable terms or if we suffer an increase in our
borrowing costs or otherwise fail to manage our
liquidity effectively, our liquidity, net interest margin,

financial results and condition may be materially
adversely affected. In certain cases, this could
require us to raise additional capital through the
issuance of preferred or common stock, which could
dilute the ownership of existing stockholders, and/or
reduce common stock repurchases or our common
stock dividend to preserve capital. For a further
discussion of our liquidity, see “Liquidity and
dividends.”

Failure to satisfy regulatory standards, including
“well capitalized” and “well managed” status or
capital adequacy and liquidity rules more generally,
could result in limitations on our activities and
adversely affect our business and financial
condition.

Under U.S. and international regulatory capital
adequacy rules and other regulatory requirements, we
and our subsidiary banks must meet thresholds that
include quantitative measures of assets, liabilities,
and certain off-balance sheet items, subject to
qualitative judgments by regulators about
components, risk weightings and other factors. As
discussed in “Supervision and Regulation,” BNY
Mellon is registered with the Federal Reserve as a
BHC and an FHC. An FHC’s ability to maintain its
status as an FHC is dependent upon a number of
factors, including its U.S. bank subsidiaries
qualifying on an ongoing basis as “well capitalized”
and “well managed” under the banking agencies’
prompt corrective action regulations as well as
applicable Federal Reserve regulations. Failure by an
FHC or one of its U.S. bank subsidiaries to qualify as
“well capitalized” and “well managed,” if unremedied
over a period, would cause it to lose its status as an
FHC and could affect the confidence of clients in it,
compromising its competitive position. Additionally,
an FHC that does not continue to meet all the
requirements for FHC status could lose the ability to
undertake new activities or make acquisitions that are
not generally permissible without FHC status or to
continue such activities.

The failure by one of our U.S. bank subsidiaries to
maintain its status as “well capitalized” could lead to,
among other things, higher FDIC assessments and
could have reputational and associated business
consequences.

If we or our subsidiary banks fail to meet U.S. and
international minimum capital rules and other
regulatory requirements, we may not be able to

BNY Mellon 93

Risk Factors (continued)

deploy capital in the operation of our business or
distribute capital to stockholders, which may
adversely affect our business.

Failure to meet any current or future capital or
liquidity requirements, including those imposed by
the U.S. capital rules, the LCR, the NSFR, or by
regulators in implementing other portions of the Basel
III framework, could materially adversely affect our
financial condition. Compliance with U.S. and
international regulatory capital and liquidity
requirements may impact our ability to return capital
to shareholders and may impact our operations by
requiring us to liquidate assets, increase borrowings,
issue additional equity or other securities, or cease or
alter certain operations, which may adversely affect
our results of operations.

Finally, our regulatory capital ratios, liquidity
metrics, and related components are based on our
current interpretation, expectations, and
understanding of the applicable rules and are subject
to, among other things, ongoing regulatory review,
regulatory approval of certain statistical models,
additional refinements, modifications or
enhancements (whether required or otherwise) to our
models, and further implementation guidance. Any
modifications resulting from these ongoing reviews
or the continued implementation of the U.S. capital
rules, the LCR, the NSFR, the resolution planning
process, and related amendments could result in
changes in our risk-weighted assets, capital
components, liquidity inflows and outflows, HQLA,
or other elements involved in the calculation of these
measures, which could impact regulatory capital and
liquidity ratios. Further, because operational risk is
currently measured based not only upon our historical
operational loss experience but also upon ongoing
events in the banking industry generally, our level of
operational risk-weighted assets could significantly
increase or otherwise remain elevated and may
potentially be subject to significant volatility,
negatively impacting our capital ratios. The
uncertainty caused by these factors could ultimately
impact our ability to meet our goals, supervisory
requirements, and regulatory standards.

The Parent is a non-operating holding company
and, as a result, is dependent on dividends from its
subsidiaries and extensions of credit from its IHC to
meet its obligations, including with respect to its
securities, and to provide funds for share

94 BNY Mellon

repurchases and payment of dividends to its
stockholders.

The Parent is a non-operating holding company,
whose principal assets and sources of income are its
principal U.S. bank subsidiaries—The Bank of New
York Mellon and BNY Mellon, N.A.—and its other
subsidiaries, including Pershing and the IHC. The
Parent is a legal entity separate and distinct from its
banks, the IHC and other subsidiaries. Therefore, the
Parent primarily relies on dividends, interest,
distributions, and other payments from its
subsidiaries, including extensions of credit from the
IHC, to meet its obligations, including with respect to
its securities, and to provide funds for share
repurchases and payment of common and preferred
dividends to its stockholders, to the extent declared
by the Board of Directors.

There are various limitations on the extent to which
our banks and other subsidiaries can finance or
otherwise supply funds to the Parent (by dividend or
otherwise) and certain of our affiliates. Each of these
restrictions can reduce the amount of funds available
to meet the Parent’s obligations. Many of our
subsidiaries, including our bank subsidiaries, are
subject to laws and regulations that restrict dividend
payments or authorize regulatory bodies to block or
reduce the flow of funds from those subsidiaries to
the Parent or other subsidiaries. In addition, our bank
subsidiaries would not be permitted to distribute a
dividend if doing so would constitute an unsafe and
unsound practice or if the payment would reduce their
capital to an inadequate level. Our subsidiaries may
also choose to restrict dividend payments to the
Parent in order to increase their own capital or
liquidity levels. Our bank subsidiaries are also
subject to restrictions on their ability to lend to or
transact with non-bank affiliates, minimum regulatory
capital and liquidity requirements, and restrictions on
their ability to use funds deposited with them in bank
or brokerage accounts to fund their businesses. See
“Supervision and Regulation” and “Liquidity and
dividends” and Note 19 of the Notes to Consolidated
Financial Statements. Further, we evaluate and
manage liquidity on a legal entity basis, which may
place legal and other limitations on our ability to
utilize liquidity from one legal entity to satisfy the
liquidity requirements of another, including the
Parent.

There are also limitations specific to the IHC’s ability
to make distributions or extend credit to the Parent.

Risk Factors (continued)

The IHC is not permitted to pay dividends to the
Parent if certain key capital and liquidity indicators
are breached, and if the resolution of the Parent is
imminent, the committed lines of credit provided by
the IHC to the Parent will automatically terminate,
with all outstanding amounts becoming due.

Reserve, and imposed temporary limitations on
capital distributions and share repurchases by such
banking institutions. The Federal Reserve is also
able, outside the CCAR process, to restrict our ability
to make capital distributions and subject us to other
supervisory or enforcement actions.

Because the Parent is a holding company, its rights
and the rights of its creditors, including the holders of
its securities, to a share of the assets of any subsidiary
upon the liquidation or recapitalization of the
subsidiary, will be subject to the prior claims of the
subsidiary’s creditors (including, in the case of our
banking subsidiaries, their depositors) except to the
extent that the Parent may itself be a creditor with
recognized claims against the subsidiary. The rights
of holders of securities issued by the Parent to benefit
from those distributions will also be junior to those
prior claims. Consequently, securities issued by the
Parent will be effectively subordinated to all existing
and future liabilities of our subsidiaries.

Our ability to return capital to shareholders is
subject to the discretion of our Board of Directors
and may be limited by U.S. banking laws and
regulations, including those governing capital and
capital planning, applicable provisions of Delaware
law and our failure to pay full and timely dividends
on our preferred stock.

Holders of our common and preferred stock are only
entitled to receive such dividends or other
distributions of capital as our Board of Directors may
declare out of funds legally available for such
payments. Although we have historically declared
cash dividends on our common and preferred stock,
we are not required to do so. In addition to the Board
of Directors’ approval, our ability to take certain
actions, including our ability to declare dividends or
repurchase our common stock, may be subject to
limitations in connection with the CCAR process and
the buffers under the Federal Reserve’s capital and
TLAC rules. Through the CCAR process, we may be
required to resubmit our capital plan in the event of a
deterioration in the general financial markets or
economy or changes in our risk profile (including a
material change in business strategy or risk
exposure), financial condition or corporate structure.
For example, in connection with the onset of the
COVID-19 pandemic in 2020, the Federal Reserve
required all banking institutions subject to CCAR,
including us, to resubmit their capital plans based on
updated supervisory scenarios released by the Federal

A Federal Reserve determination that our capital
planning processes were weak or otherwise fail to
meet supervisory expectations could have a variety of
adverse consequences, including, without limitation,
ratings downgrades, ongoing heightened supervisory
scrutiny, expenses associated with remediation
activities, and potentially an enforcement action.

A failure to increase dividends along with our
competitors, or any reduction of, or elimination of,
our common stock dividend would likely adversely
affect the market price of our common stock, impact
our return on equity and market perceptions of BNY
Mellon.

Our ability to declare or pay dividends on, or
purchase, redeem or otherwise acquire, shares of our
common stock will be prohibited, subject to certain
exceptions, in the event that we do not declare and
pay in full dividends for the then-current dividend
period (in the case of dividends) or most recently
completed dividend period (in the case of
repurchases) of our Series A preferred stock or the
last preceding dividend period (in the case of
dividends) or most recently completed dividend
period (in the case of repurchases) of our Series D,
Series F, Series G, Series H or Series I preferred
stock.

In addition, regulatory capital rules that are or will be
applicable to us including the U.S. capital rules risk-
based capital requirements, the SLR, the stress capital
buffer, the enhanced SLR, the TLAC rule and the
U.S. G-SIB surcharge may limit or otherwise restrict
how we utilize our capital, including common stock
dividends and stock repurchases, and may require us
to increase or alter the mix of our outstanding
regulatory capital instruments. Changes in the
composition of our balance sheet, including as a
result of changing economic conditions and market
values, may further require us to increase or alter the
mix of our outstanding regulatory capital, which in
turn could impact our ability to return capital to
shareholders.

BNY Mellon 95

Risk Factors (continued)

Any requirement to increase our regulatory capital
ratios or alter the composition of our capital could
require us to liquidate assets or otherwise change our
business and/or investment plans, which may
negatively affect our financial results. Further, any
requirement to maintain higher levels of capital may
constrain our ability to return capital to shareholders
either in the form of common stock dividends or
stock repurchases.

Any material reduction in our credit ratings or the
credit ratings of our principal bank subsidiaries,
The Bank of New York Mellon or BNY Mellon,
N.A., could increase the cost of funding and
borrowing to us and our rated subsidiaries and have
a material adverse effect on our business, financial
condition and results of operations and on the value
of the securities we issue.

Our debt and preferred stock and the debt and
deposits of our principal bank subsidiaries, The Bank
of New York Mellon and BNY Mellon, N.A., are
currently rated investment grade by the major rating
agencies. These rating agencies regularly evaluate us
and our rated subsidiaries. Their credit ratings are
based on a number of factors, including our financial
strength, performance, prospects and operations, as
well as factors not entirely within our control,
including conditions affecting the financial services
industry generally and the U.S. government. Rating
agencies employ different models and formulas to
assess the financial strength of a rated company, and
from time to time rating agencies have, in their
discretion, altered these models. Changes to rating
agency models, general economic conditions,
regulatory developments or other circumstances
outside our control could negatively impact a rating
agency’s judgment of the rating or outlook it assigns
to us or our rated subsidiaries. As a result, we or our
rated subsidiaries may not be able to maintain our
respective credit ratings or outlook on our securities.

A material reduction in our credit ratings or the credit
ratings of our rated subsidiaries, which can occur at
any time without notice, could have a material
adverse effect on our access to credit markets, the
related cost of funding and borrowing, our credit
spreads, our liquidity and on certain trading revenues,
particularly in those businesses where counterparty
creditworthiness is critical. In addition, in connection
with certain over-the-counter derivatives contracts
and other trading agreements, counterparties may
require us or our rated subsidiaries to provide

96 BNY Mellon

additional collateral or to terminate these contracts
and agreements and collateral financing arrangements
in the event of a credit ratings downgrade below
certain ratings levels, which could impair our
liquidity. If a rating agency downgrade were to occur
during broader market instability, our options for
responding to events may be more limited and more
expensive, possibly significantly. An increase in the
costs of our funding and borrowing, or an impairment
of our liquidity, could have a material adverse effect
on our results of operations and financial condition.
A material reduction in our credit ratings also could
decrease the number of investors and counterparties
willing or permitted to do business with or lend to us
and adversely affect the value of the securities we
have issued or may issue in the future.

We cannot predict what actions rating agencies may
take, or what actions we may elect or be required to
take in response thereto, which may adversely affect
us. For further discussion on the impact of a credit
rating downgrade, see “Disclosure of contingent
features in OTC derivative instruments” in Note 23 of
the Notes to Consolidated Financial Statements.

In 2017, in connection with our single point of entry
resolution strategy under Title I of the Dodd-Frank
Act, the Parent entered into a binding support
agreement with certain key subsidiaries to facilitate
the provision of capital and liquidity resources to
them in the event of material financial distress or
failure. The support agreement requires the Parent to
transfer cash and other liquid financial assets to the
IHC on an ongoing basis, subject to certain amounts
retained by the Parent to meet its near-term cash
needs, in exchange for unsecured subordinated
funding notes issued by the IHC as well as a
committed line of credit to the Parent to service its
near-term obligations. The Parent’s and the IHC’s
obligations under the support agreement are secured.

If our projected liquidity resources deteriorate so
severely that resolution of the Parent becomes
imminent, the committed line of credit the IHC
provided to the Parent will automatically terminate,
with all amounts outstanding becoming due and
payable, and the support agreement will require the

Risk Factors (continued)

Parent to transfer most of its remaining assets (other
than stock in subsidiaries and a cash reserve to fund
bankruptcy expenses) to the IHC. As a result, during
a period of severe financial stress, the Parent could
become unable to meet its debt and payment
obligations (including with respect to its securities),
causing the Parent to seek protection under
bankruptcy laws earlier than it otherwise would have.

If the Parent were to become subject to a bankruptcy
proceeding and our single point of entry strategy is
successful, our material entities will not be subject to
insolvency proceedings and their creditors would not
be expected to suffer losses, while the Parent’s
security holders, including unsecured debt holders,
could face significant losses, potentially including the
loss of their entire investment. The single point of
entry strategy, in which the Parent would be the only
legal entity to enter resolution proceedings, is
designed to result in greater risk of loss to holders of
the Parent’s unsecured senior debt securities and
other securities than would be the case under a
different resolution strategy.

Further, if the single point of entry strategy is not
successful, our liquidity and financial condition
would be adversely affected and all security holders
may, as a consequence, be in a worse position than if
the strategy had not been implemented.

In addition, Title II of the Dodd-Frank Act
established an orderly liquidation process in the event
of the failure of a large systemically important
financial institution, such as BNY Mellon, in order to
avoid or mitigate serious adverse effects on the U.S.
financial system. Specifically, if BNY Mellon is in
default or danger of default, and certain specified
conditions are met, the FDIC may be appointed
receiver under the orderly liquidation authority, and
we would be resolved under that authority instead of
the U.S. Bankruptcy Code.

U.S. supervisors have indicated that a single point of
entry strategy may be a desirable strategy to resolve a
large financial institution such as BNY Mellon under
Title II in a manner that would, similar to our
preferred strategy under our Title I resolution plan,
impose losses on shareholders, unsecured debt
holders and other unsecured creditors of the Parent,
while permitting the holding company’s subsidiaries
to continue to operate and remain solvent. Under
such a strategy, assuming the Parent entered
resolution proceedings and its subsidiaries remained

solvent, losses at the subsidiary level would be
absorbed by the Parent and ultimately borne by the
Parent’s security holders (including holders of the
Parent’s unsecured debt securities), while third-party
creditors of the Parent’s subsidiaries would not be
expected to suffer losses. Accordingly, the Parent’s
security holders (including holders of unsecured debt
securities and other unsecured creditors) could face
losses in excess of what otherwise would have been
the case.

Strategic Risk

New lines of business, new products and services or
transformational or strategic project initiatives
subject us to new or additional risks, and the failure
to implement these initiatives could affect our
results of operations.

From time to time, we have launched new lines of
business, offered new products and services within
existing lines of business or undertaken
transformational or strategic projects. There are
substantial risks and uncertainties associated with
these efforts. We invest significant time and
resources in developing and marketing new lines of
business, products and services and executing on our
transformational and strategic initiatives. For
example, we have devoted considerable resources to
developing new technology solutions for our clients,
including our initiatives related to real-time electronic
payments and global collateral management. If these
technology solutions are not successful, it could
adversely impact our reputation, business and results
of operations. In 2021, we announced a strategic
initiative to develop a multi-asset digital custody and
administration platform designed to simultaneously
support both traditional and digital assets, including
cryptocurrencies. As part of this initiative, we have
started to provide custody services for a limited
number of cryptocurrencies for select U.S.
institutional clients. Developing and providing new
products and services, including those relating to
digital assets, increases our operational risk
exposures. These risks are often heightened in
connection with asset classes, such as digital assets,
that are not only new for BNY Mellon but also
relatively new to the financial markets more broadly.
Compared with our activities involving traditional
assets, digital asset-related products or services may
introduce incremental or unique risks, particularly
those associated with cybersecurity exposures and

BNY Mellon 97

Risk Factors (continued)

third-party dependencies, as well as reputational,
technology, legal and regulatory risks.

Regulatory requirements can affect whether
initiatives are able to be brought to market in a
manner that is timely and attractive to our customers.
Initial timetables for the development and
introduction of new lines of business or new products
or services and price and profitability targets may not
be met. Furthermore, our revenues and costs may
fluctuate because new businesses or products and
services generally require startup costs while
revenues may take time to develop, which may
adversely impact our results of operations.

Significant effort and resources are necessary to
manage and oversee the successful completion of
transformational or strategic project initiatives. These
initiatives often place significant demands on
management and a limited number of employees with
subject matter expertise and may involve significant
costs to implement, as well as increase operational
risk as we develop and implement related controls
and procedures and employees learn to process
transactions and operate under new systems, controls
and procedures. The failure to properly execute on
these transformational or strategic initiatives could
adversely impact our business, reputation and results
of operations.

Legal, regulatory and reputational risks may also
exist in connection with dealing with new products or
markets, or clients and customers whose businesses
focus on such products or markets, where there is
regulatory uncertainty or different or conflicting
regulations depending on the regulator or the
jurisdiction. We may invest significant time and
resources into the expansion of existing or creation of
new compliance and risk management systems with
respect to new products or markets.

We are subject to competition in all aspects of our
business, which could negatively affect our ability to
maintain or increase our profitability.

The businesses in which we operate are intensely
competitive around the world. Larger and more
geographically diverse companies, and financial
technology firms that invest substantial resources in
developing and designing new technology and that
are not subject to the same level of regulation, may be
able to offer financial products and services at more
competitive prices than we are able to offer. We have

98 BNY Mellon

also experienced, and anticipate that we will continue
to experience, pricing pressure in many of our
businesses, particularly our Asset Servicing business
due to trends in the market for custodial services and
the considerable market influence exerted by clients
in that business. Pricing pressures, as a result of the
willingness of competitors to offer comparable or
improved products or services at a lower price, may
result in a reduction in the price we can charge for our
products and services, which could, and in some
cases has, negatively affected our ability to maintain
or increase our profitability.

In addition, technological advances have made it
possible for other types of non-depository
institutions, such as financial technology firms,
outsourcing companies and data processing
companies, to offer a variety of products and services
competitive with certain areas of our business,
including with respect to our clearing, settlement,
payments and trading activities. In the future,
financial technology firms may be able to provide
traditional banking products and services by
obtaining a bank-like charter, such as the OCC’s
fintech charter, or offer cryptocurrencies.

Moreover, new or disruptive technologies may
quickly impact markets, and the manner in which our
clients interact and transact within markets. For
example, the emergence, adoption and evolution of
new technologies that do not require intermediation,
including distributed ledgers, as well as advances in
robotic process automation, could significantly affect
the competition for payments processing and other
financial services. Our failure to either anticipate, or
participate in, the transformational change within a
given market or adapt these technologies as
successfully as our peers, could make us less
competitive and result in potential negative financial
impact. Increased competition in any of these areas
may require us to make additional capital investments
in our businesses in order to remain competitive.

Furthermore, regulations could impact our ability to
conduct certain of our businesses in a cost-effective
manner or at all. The more restrictive laws and
regulations applicable to the largest U.S. financial
services institutions, including the U.S. capital rules,
can put us at a competitive disadvantage relative to
both our non-U.S. competitors and U.S. competitors
not subject to the same laws and regulations. See
“Supervision and Regulation.”

Risk Factors (continued)

Our strategic transactions present risks and
uncertainties and could have an adverse effect on
our business, financial condition and results of
operations.

From time to time, to achieve our strategic objectives,
we have acquired, disposed of, or invested in
(including through joint venture relationships)
companies and businesses and have entered into
strategic alliances or other collaborations with third-
party service providers to deliver products and
services to clients, and may do so in the future. Our
ability to pursue or complete strategic transactions is
in certain instances subject to regulatory approval and
we cannot be certain when or if, or on what terms and
conditions, any required regulatory approvals would
be granted. Moreover, to the extent we pursue a
strategic transaction, there can be no guarantee that
the transaction will close when anticipated, or at all.
If a strategic transaction does not close, or if the
strategic transaction fails to maximize shareholder
value or required regulatory approval is not obtained,
it could have an adverse effect on our business,
financial condition and results of operations.

Each acquisition poses integration challenges,
including successfully retaining and assimilating
clients and key employees, capitalizing on certain
revenue synergies and integrating the acquired
company’s employees, culture, control functions,
systems and technology. In some cases, acquisitions
involve entry into new businesses or new geographic
or other markets, and these situations also present
risks and uncertainties in instances where we may be
inexperienced in these new areas. We may be
required to spend a significant amount of time and
resources to integrate these acquisitions. The
anticipated integration benefits may take longer to
achieve than projected and the time and cost needed
to consolidate control functions, platforms and
systems may significantly exceed our estimates. If
we fail to successfully integrate strategic acquisitions,
including doing so in a timely and cost-effective
manner, we may not realize the expected benefits,
which could have an adverse impact on our business,
financial condition and results of operations. In
addition, we may incur expenses, costs, losses,
penalties, taxes and other liabilities related to the
conduct of the acquired businesses prior to the date of
our ownership (including in connection with the
defense and/or settlement of legal and regulatory
claims, investigations and proceedings) which may
not be recoverable through indemnification or

otherwise. If the purchase price we pay in an
acquisition exceeds the fair value of assets acquired
less the liabilities we assume, then we may need to
recognize goodwill on our consolidated balance sheet.
Goodwill is an intangible asset that is not eligible for
inclusion in regulatory capital under applicable
requirements. Further, if the value of the acquisition
declines, we may be required to record an impairment
charge.

Each disposition also poses challenges, including
separating the disposed businesses, products and
systems in a way that is cost-effective and is not
disruptive to us or our customers. The inherent
uncertainty involved in the process of evaluating,
negotiating or executing a potential sale of one of our
companies or businesses may cause the loss of key
clients, employees, vendors and other business
partners, which could have an adverse impact on our
business, financial condition and results of
operations. In addition, a portion of the purchase
price we expect to receive in a disposition may be
contingent or based on an earnout (e.g., dependent on
the profitability or results of operation of the business
over a period of time after the sale is completed). In
such cases, we may not realize all, or any, contingent
or earnout payments we anticipate receiving if the
future performance of the business does not meet our
expectations or if other contingent payment
conditions are not satisfied.

Joint ventures, non-controlling investments, strategic
alliances and other collaborations contain potentially
increased financial, legal, reputational, operational,
regulatory and/or compliance risks. We may be
dependent on joint venture partners, firms with which
we collaborate, controlling shareholders or
management who may have business interests,
strategies or goals that are inconsistent with ours.
Such dependencies, particularly in the case of
establishing de novo joint ventures, may delay the
launch of a new venture and result in the loss of a
market opportunity. Business decisions or other
actions or omissions of the joint venture partner, the
firms with which we collaborate, controlling
shareholders or management may adversely affect the
value of our investment (or, in the case of strategic
alliances or other collaborations, the value of our
products or services), impact our results of
operations, result in litigation or regulatory action
against us and otherwise damage our reputation and
brand.

BNY Mellon 99

Risk Factors (continued)

Additional Risks

Our businesses may be negatively affected by
adverse events, publicity, government scrutiny or
other reputational harm.

We are subject to reputational, legal, compliance and
regulatory risk in the ordinary course of our business.
Harm to our reputation can result from numerous
sources, including adverse publicity or negative
information, whether or not true, arising from events
occurring at BNY Mellon, other financial institutions
or in the financial markets, perceived failure to
comply with legal and regulatory requirements or
deliver appropriate standards of service and quality,
or a failure to appropriately describe our products and
services, how we address social and sustainability
concerns in our business activities or in our
relationships with clients, the purported actions of our
employees or the use of social media by our
employees, alleged financial reporting irregularities
involving ourselves or other large and well-known
companies and perceived conflicts of interest. For
example, a cybersecurity event impacting us or our
customers’ data could have a negative impact on our
reputation and customer confidence in BNY Mellon
and our cybersecurity defenses and business
continuity and resiliency capabilities. Our reputation
could also be harmed by the failure of an affiliate,
joint venture or a vendor or other third party with
which we do business to comply with laws or
regulations. Our reputation may be significantly
damaged by adverse publicity or negative information
regarding BNY Mellon, whether or not true, that may
be published or broadcast by the media or posted on
social media, non-mainstream news services or other
internet forums. The speed and pervasiveness with
which information can be disseminated through these
channels, in particular social media, may magnify
risks relating to negative publicity. Damage to our
reputation could affect the confidence of clients,
rating agencies, regulators, employees, stockholders
and other stakeholders and could in turn have an
impact on our business and results of operations.

Additionally, governmental scrutiny from regulators,
tax authorities, legislative bodies and law
enforcement agencies with respect to financial
services companies has remained at elevated levels.
Press coverage and other public statements, including
information posted on social media or other internet
forums, that allege some form of wrongdoing
(including, in some cases, press coverage and public

100 BNY Mellon

statements that do not directly involve BNY Mellon)
often result in some type of investigation or in
lawsuits. Certain enforcement authorities have
recently required admissions of wrongdoing, and in
some cases, criminal pleas, as part of the resolution of
matters brought by them against financial institutions.
Any such resolution of a matter involving BNY
Mellon could lead to increased exposure to civil
litigation, could adversely affect our reputation and
ability to do business in certain products and in
certain jurisdictions and could have other negative
effects.

Climate change concerns could adversely affect our
business, affect client activity levels and damage our
reputation.

Climate change represents a key risk driver that may
have significant impacts on the global economy, the
finance sector and the diverse network of our
stakeholders over the short, medium and long term.
Such concerns have led and are likely to continue to
lead to governmental efforts around the world to
mitigate the impacts of climate change. Consumers
and businesses are also changing their behavior and
business preferences as a result of these concerns.
New governmental regulations or guidance relating to
climate change, as well as changes in consumers’ and
businesses’ behaviors and business preferences, may
affect whether and on what terms and conditions we
will engage in certain activities or offer certain
products or services. The governmental and
supervisory focus on climate change could also result
in our becoming subject to new or heightened
regulatory requirements relating to climate change,
such as requirements relating to operational resiliency
or stress testing for various climate stress scenarios,
or additional, potentially costly, reporting
requirements. Any such new or heightened
requirements could result in increased regulatory,
compliance or other costs or higher capital
requirements, and may subject us to different and
potentially conflicting requirements in the various
jurisdictions in which we operate. In connection with
the targeted transition to a lower carbon economy,
legislative or public policy changes and changes in
consumer sentiment could negatively impact the
businesses and financial condition of our clients,
which may decrease revenues from those clients and
increase the credit risk associated with loans and
other credit exposures to those clients. In addition,
our reputation may be damaged as a result of our
involvement, or our clients’ involvement, in certain

Risk Factors (continued)

industries or projects associated with climate change
and we could face pressure from the public sector,
individuals or other groups to cease doing business in
such industries or projects. At the same time, certain
financial institutions have also been subject to
criticism and other negative publicity as a result of
their decisions to reduce their involvement in certain
industries or projects perceived to be associated with
climate change. Our business, reputation and ability
to attract and retain employees may also be harmed if
our response to climate change is perceived to be
ineffective, insufficient or otherwise inappropriate.

Impacts from natural disasters, climate change, acts
of terrorism, pandemics, global conflicts and other
geopolitical events may have a negative impact on
our business and operations.

In conducting our business and maintaining and
supporting our global operations, which includes
clients, counterparties, vendors and other third
parties, we are subject to risks of loss from the
outbreak of war, escalation of hostilities, acts of
terrorism, natural disasters, climate change,
pandemics (including the further spread of SARS-
CoV-2 or its variants), global conflicts or other
similar catastrophic events that could have a negative
impact on our business and operations. We may also
be impacted by unfavorable political, economic, legal
or other developments, including but not limited to
social or political instability, changes in governmental
policies or policies of central banks, sanctions,
expropriation, nationalization, confiscation of assets,
price, capital and exchange controls, the imposition of
tariffs or other limitations on international trade and
travel, and changes in laws and regulations.

For example, as a result of Russia’s invasion of
Ukraine in the first quarter of 2022, we ceased
originating new banking business in Russia and
suspended investment management purchases of
Russian securities. An escalation of hostilities, or the
imposition of additional sanctions or other laws
prohibiting or limiting operations in certain
jurisdictions, as a result of the conflict in Ukraine or
conflicts in other regions could lead to unexpected
disruptions to our businesses and could adversely
affect the global economy and financial markets
generally, diminish levels of economic activity and
increase volatility in commodity prices, credit and
capital markets. The extent and duration of any such
military action, and the responses to such action by
governments, central banks and the markets, may

magnify the impact of other risks described in this
section.

While we have business continuity and disaster
recovery plans in place, such events could still
damage our facilities, disrupt or delay normal
business operations (including communications,
technology and physical access to our facilities),
result in harm or cause travel limitations on our
employees, with a similar impact on our clients,
suppliers and counterparties. Notwithstanding our
efforts to maintain business continuity and disaster
recovery plans, to the extent a catastrophic event
occurs and our remote work arrangements fail or are
otherwise impaired, our ability to service and interact
with our clients may suffer. If we are unable to
implement and maintain remote work arrangements,
including, for example, because of an internal or
external failure of our information technology
infrastructure or increased rates of employee illness
or unavailability, our business continuity status would
be adversely impacted and there would be a
disruption to our businesses.

Catastrophic events, including those caused by
climate change, could also negatively impact the
purchase of our products and services if those events
result in reduced capital markets activity, lower asset
price levels, or disruptions in general economic
activity, or in financial market settlement functions,
which could negatively impact our business and
results of operations. In addition, such catastrophic
events may lead, and in some cases have led, to
higher market volatility, as well as an increase in
delinquencies, bankruptcies or defaults that could
result in our experiencing higher levels of non-
performing assets, net charge-offs and provisions for
credit losses, negatively impacting our business and
operations. Furthermore, we invest in renewable
energy projects, which have been and may in the
future be adversely affected by extreme weather
events, natural disasters and other catastrophic events.

Tax law changes or challenges to our tax positions
with respect to historical transactions may adversely
affect our net income, effective tax rate and our
overall results of operations and financial condition.

In the course of our business, we receive inquiries
and challenges from both U.S. and non-U.S. tax
authorities on the amount of taxes we owe. If we are
not successful in defending these inquiries and
challenges, we may be required to adjust the timing

BNY Mellon 101

Risk Factors (continued)

or amount of taxable income or deductions or the
allocation of income among tax jurisdictions, all of
which can require a greater provision for taxes or
otherwise negatively affect earnings. Probabilities
and outcomes are reviewed as events unfold, and
adjustments to the reserves are made when necessary,
but the reserves may prove inadequate because we
cannot necessarily accurately predict the outcome of
any challenge, settlement or litigation or the extent to
which it will negatively affect us or our business.
Future tax laws or the expiration of or changes in
existing tax laws, or the interpretation of those laws
worldwide, could also have a material impact on our
business or net income. Our actions taken in
response to, or reliance upon, such changes in the tax
laws may impact our tax position in a manner that
may result in lower earnings. In addition, upon any
change in tax law, we must recognize the effect of the
change on our deferred tax assets and liabilities. An
increase in the U.S. tax rate would likely result in an
increase in our net deferred tax liabilities and a
reduction in our net income in the period of
enactment of the change. In addition, changes in tax
rates or tax law could also impact the method and
amount of capital that we return to shareholders. See
Note 12 of the Notes to Consolidated Financial
Statements for further information.

Changes in accounting standards governing the
preparation of our financial statements and future
events could have a material impact on our reported
financial condition, results of operations, cash flows
and other financial data.

From time to time, the Financial Accounting
Standards Board (“FASB”), the SEC and bank
regulators change the financial accounting and
reporting standards governing the preparation of our
financial statements or the interpretation of those
standards. These changes are difficult to predict and
can materially impact how we record and report our
financial condition, results of operations, cash flows
and other financial data. In some cases, the FASB,
the SEC and bank regulators may change financial
accounting and reporting standards governing the
preparation of our financial statements or the
interpretation of those standards that may require us

102 BNY Mellon

to apply a new or revised standard retrospectively,
potentially resulting in the restatement of our prior
period financial statements and our related
disclosures.

Additionally, our accounting policies and methods are
fundamental to how we record and report our
financial condition and results of operations. The
preparation of financial statements in conformity with
U.S. GAAP requires management to make estimates
based upon assumptions and use judgments about
future economic and market conditions which affect
reported amounts and related disclosures in our
financial statements. Amounts subject to estimates
are items such as the allowance for credit losses,
goodwill and other intangibles and litigation and
regulatory contingencies. Among other effects, such
changes in estimates could result in further
impairments of goodwill and intangible assets and
establishment of allowances for credit losses as well
as litigation and regulatory contingencies. In
performing our annual and interim goodwill
impairment tests, we may use an income approach to
estimate the fair values of each reporting unit.
Estimated cash flows used in the income approach are
based on management’s projections. Estimated cash
flows extend far into the future, and, by their nature,
are difficult to estimate over such an extended time
frame. Factors that may significantly affect the cash
flow estimates include, among others, market values
of assets we manage, the level and mix of those
assets, customer behaviors and attrition, operating
margins, changes in revenue growth trends, certain
money market fee waiver practices, cost structures
and technology, regulatory and legislative changes,
specific industry or market sector conditions,
competition and changes in interest rates. In the
future, small changes in the assumptions, such as
changes in the cash flow estimates, discount rate or
long-term growth rate, or a prolonged
macroeconomic downturn may produce a material
non-cash goodwill impairment. If actual or
subsequent events occur that are materially different
than the assumptions, judgments and estimates we
used, our results of operation may be materially and
negatively impacted.

Recent Accounting Developments

Recently issued accounting standards

The following accounting guidance issued by FASB
has not yet been adopted as of Dec. 31, 2022.

Accounting Standards Update (“ASU”) 2022-01,
Derivatives and Hedging (Topic 815): Fair Value
Hedging – Portfolio Layer Method

In March 2022, the FASB issued ASU 2022-01,
Derivatives and Hedging (Topic 815): Fair Value
Hedging – Portfolio Layer Method, which provides
guidance that expands the ability to hedge interest
rate risk by permitting the use of multiple hedged
layers of a single closed portfolio of assets and will
(1) Allow multiple layer hedging within the same
closed portfolio, (2) Expand the scope of the portfolio
layer method to include non-prepayable assets, (3)
Expand the eligible hedging instruments to be utilized
in a single-layer hedge, and (4) Permit held-to-
maturity debt securities to be transferred to available-
for-sale at the date of adoption, provided such
transferred securities are designated in a portfolio
layer method hedge within 30 days of the adoption
date.

The standard also provides further guidance and
disclosure requirements with respect to hedge basis
adjustments related to portfolio layer method hedges.

We will consider utilizing the updated guidance in
future hedging strategies. This ASU was effective
Jan. 1, 2023.

ASU 2022-02, Financial Instruments – Credit Losses
(Topic 326): Troubled Debt Restructurings and
Vintage Disclosures

In March 2022, the FASB issued ASU 2022-02,
Financial Instruments – Credit Losses (Topic 326):
Troubled Debt Restructurings and Vintage
Disclosures, which provides post-implementation
guidance related to the adoption of ASU 2016-13,
Financial Instruments – Credit Losses: Measurement
of Credit Losses on Financial Instruments, which was
effective Jan. 1, 2020. This ASU amends the
guidance related to two issues: Troubled Debt
Restructurings (“TDRs”) and disclosure requirements
for the credit profile of the loan portfolio. This ASU
eliminates the accounting guidance for TDRs by
creditors, while enhancing disclosure requirements
for certain loan refinancings and restructurings by
creditors when a borrower is experiencing financial
difficulty. An entity must apply the loan refinancing
and restructuring guidance to determine whether a
modification results in a new loan or a continuation of
an existing loan.

This ASU also requires that an entity disclose
current-period gross write-offs by year of origination
for financing receivables and net investments in
leases within the scope of Subtopic 326-20, Financial
Instruments – Credit Losses – Measured at Amortized
Cost.

We do not expect the impact of the revised guidance
on accounting for loan modification to be material
and will apply the updated disclosure requirements in
the first quarter 2023. The ASU was effective Jan. 1,
2023.

BNY Mellon 103

Supplemental Information (unaudited)

Explanation of GAAP and Non-GAAP
financial measures

BNY Mellon has included in this Annual Report
certain Non-GAAP financial measures on a tangible
basis as a supplement to GAAP information, which
exclude goodwill and intangible assets, net of
deferred tax liabilities. We believe that the return on
tangible common equity – Non-GAAP is additional
useful information for investors because it presents a
measure of those assets that can generate income, and
the tangible book value per common share – Non-
GAAP is additional useful information because it
presents the level of tangible assets in relation to
shares of common stock outstanding.

BNY Mellon has presented revenue measures
excluding notable items, including a net loss from
repositioning the securities portfolio, disposal gains
and losses and the accelerated amortization of
deferred costs for depositary receipts related to
Russia. Expense measures, excluding notable items,
including goodwill impairment, severance expense,
litigation reserves and real estate charges, are also
presented. Litigation reserves represent accruals for
loss contingencies that are both probable and
reasonably estimable, but exclude standard business-
related legal fees. Income before taxes, net income
applicable to common shareholders of The Bank of
New York Mellon Corporation, diluted earnings per
share, operating leverage, return on common equity,

return on tangible common equity, pre-tax operating
margin and the effective tax rate, excluding the
notable items mentioned above, are also provided.
These measures have been provided to permit
investors to view the financial measures on a basis
consistent with how management views the
businesses.

The presentation of the growth rates of investment
management and performance fees on a constant
currency basis permits investors to assess the
significance of changes in foreign currency exchange
rates. Growth rates on a constant currency basis were
determined by applying the current period foreign
currency exchange rates to the prior period revenue.
We believe that this presentation, as a supplement to
GAAP information, gives investors a clearer picture
of the related revenue results without the variability
caused by fluctuations in foreign currency exchange
rates.

BNY Mellon has also included the adjusted pre-tax
operating margin – Non-GAAP, which is the pre-tax
operating margin for the Investment and Wealth
Management business segment, net of distribution
and servicing expense that was passed to third parties
who distribute or service our managed funds. We
believe that this measure is useful when evaluating
the performance of the Investment and Wealth
Management business segment relative to industry
competitors.

104 BNY Mellon

Supplemental Information (unaudited) (continued)

Reconciliation of Non-GAAP measures, excluding notable items
(dollars in millions)
)
(
Fee revenue – GAAP
Impact of notable items (a)
( )

p
Adjusted fee revenue – Non-GAAP

Total revenue – GAAP
Impact of notable items (a)
( )

p
Adjusted total revenue – Non-GAAP

Total noninterest expense – GAAP
Impact of notable items (a)
( )
p
Adjusted total noninterest expense – Non-GAAP

Net income applicable to common shareholders of The Bank of New York Mellon Corporation –
GAAP

Impact of notable items (a)
( )

Adjusted net income applicable to common shareholders of The Bank of New York Mellon

Corporation – Non-GAAP

Diluted earnings per share – GAAP
Impact of notable items (a)
( )

p
Adjusted diluted earnings per share – Non-GAAP
g p

2022
12,955 $
(88)
13,043 $

16,377 $
(511)
16,888 $

13,010 $
1,029
11,981 $

2021
12,977
—
12,977

15,931
13
15,918

11,514
129
11,385

2022 vs.
2021

—%

13%

2,362 $

3,552

(34)%

(1,378)

(85)
)
(

3,740 $

3,637

2.90 $
(1.69)
4.59 $

4.14
(0.10)
)
(
4.24

(30)%

(a) Notable items in 2022 include the goodwill impairment, the net loss from repositioning the securities portfolio, severance expense,

litigation reserves, the accelerated amortization of deferred costs for depositary receipts services related to Russia and net gains on
disposals (reflected in investment and other revenue). Notable items in 2021 include litigation reserves, severance expense and gains on
disposals (reflected in investment and other revenue).

The following table presents the reconciliation of noninterest expense growth rates.

Noninterest expense reconciliation
)
(dollars in millions)
(
Noninterest expense – GAAP
( )
Impact of notable items (a)
p
Adjusted total noninterest expense – Non-GAAP

2021
11,514 $
129
11,385 $

2020
11,004
165
10,839

2021 vs.
2020
5%

(a) Notable items in 2021 include litigation reserves and severance expense. Notable items in 2020 include litigation reserves, severance

expense and real estate charges recorded in the fourth quarter of 2020.

The following table presents the reconciliation of the pre-tax operating margin.

Pre-tax operating margin reconciliation
)
(dollars in millions)
(
Income before taxes – GAAP
( )
Impact of notable items (a)

p
Adjusted income before taxes, excluding notable items – Non-GAAP

Total revenue – GAAP
( )
Impact of notable items (a)

p
Adjusted total revenue, excluding notable items – Non-GAAP

Pre-tax operating margin – GAAP (b)
( )
Adjusted pre-tax operating margin – Non-GAAP (b)
g
p

2022
$ 3,328
(1,540)
$ 4,868

2021
$ 4,648
)
(116)
(
$ 4,764

$16,377
(511)
$16,888

$ 15,931
13
$ 15,918

20%
29%

29%
30%

(a) Notable items in 2022 include the goodwill impairment, the net loss from repositioning the securities portfolio, severance expense,

(b)

BNY Mellon 105

Supplemental Information (unaudited) (continued)

The following table presents the reconciliation of effective tax rate.

Effective tax rate reconciliation
)
(dollars in millions)
(
Provision for income taxes
( )
Impact of notable items (a)

p
Adjusted provision for income taxes, excluding notable items – Non-GAAP

Income before taxes – GAAP
( )
Impact of notable items (a)

p
Adjusted income before taxes, excluding notable items – Non-GAAP

Effective tax rate – GAAP
Adjusted effective tax rate – Non-GAAP

2022
768
(162)
930

$ 3,328
(1,540)
$ 4,868

23.1%
19.1%

(a) Notable items in 2022 include the goodwill impairment, the net loss from repositioning the securities portfolio, severance expense,

litigation reserves, the accelerated amortization of deferred costs for depositary receipts services related to Russia and net gains on
disposals (reflected in investment and other revenue).

The following table presents the reconciliation of the return on common equity and tangible common equity.

Return on common equity and tangible common equity reconciliation
)
(
(dollars in millions)
Net income applicable to common shareholders of The Bank of New York Mellon
Corporation – GAAP
Add: Amortization of intangible assets
Less: Tax impact of amortization of intangible assets

Adjusted net income applicable to common shareholders of The Bank of New York Mellon

Corporation, excluding amortization of intangible assets – Non-GAAP

Impact of notable items (a)

Adjusted net income applicable to common shareholders of The Bank of New York Mellon
Corporation, excluding amortization of intangible assets and notable items – Non-GAAP

Average common shareholders’ equity
Less: Average goodwill

Average intangible assets

Add: Deferred tax liability – tax deductible goodwill
y
Deferred tax liability – intangible assets

Average tangible common shareholders’ equity – Non-GAAP

Return on common shareholders’ equity – GAAP
Adjusted return on common shareholders’ equity – Non-GAAP

Return on tangible common shareholders’ equity – Non-GAAP
Adjusted return on tangible common shareholders’ equity – Non-GAAP

2022

2021

2020

2,362
67
16

2,413
(1,378)

3,791

$ 36,175
17,060
2,939
1,181
660
$ 18,017

3,423
104
25

3,502

3,552
82
20

3,614
)
(85)
(

3,699

$ 39,695
17,492
2,979
1,178
676
$ 21,078

$ 39,200
17,331
3,051
1,144
667
$ 20,629

6.5%
10.3%

13.4%
21.0%

8.9%
9.2%

17.1%
17.6%

8.7%

17.0%

(a) Notable items in 2022 include the goodwill impairment, the net loss from repositioning the securities portfolio, severance expense, litigation

reserves, the accelerated amortization of deferred costs for depositary receipts services related to Russia and net gains on disposals (reflected in
investment and other revenue). Notable items in 2021 include litigation reserves, severance expense and gains on disposals (reflected in
investment and other revenue).

106 BNY Mellon

Supplemental Information (unaudited) (continued)

The following table presents the reconciliation of book value and tangible book value per common share.

Book value and tangible book value per common share reconciliation
)
(dollars in millions, except per share amounts and unless otherwise noted)
p p
(
BNY Mellon shareholders’ equity at year end – GAAP
Less: Preferred stock

BNY Mellon common shareholders’ equity at year end – GAAP

Less: Goodwill

Intangible assets

Add: Deferred tax liability – tax deductible goodwill
y
Deferred tax liability – intangible assets

BNY Mellon tangible common shareholders’ equity at year end – Non-GAAP

Year-end common shares outstanding (in thousands)

Book value per common share – GAAP
Tangible book value per common share – Non-GAAP

Dec. 31,

2022
40,734 $
4,838
35,896
16,150
2,901
1,181
660
18,686 $

2021
43,034 $
4,838
38,196
17,512
2,991
1,178
676
19,547 $

2020
45,801
4,541
41,260
17,496
3,012
1,144
667
22,563

808,445

804,145

886,764

44.40 $
23.11 $

47.50 $
24.31 $

46.53
25.44

$
$

The following table presents the impact of changes in foreign currency exchange rates on our consolidated
investment management and performance fees.

Constant currency reconciliation – Consolidated
(dollars in millions)
)
(
Investment management and performance fees – GAAP
Impact of changes in foreign currency exchange rates
g

y
p
Adjusted investment management and performance fees – Non-GAAP

2022
3,299 $
—
3,299 $

2021
3,588
(135)
)
(
3,453

2022 vs.
2021
(8)%

(4)%

The following table presents the impact of changes in foreign currency exchange rates on investment management
and performance fees reported in the Investment and Wealth Management business segment.

Constant currency reconciliation – Investment and Wealth Management business segment
(dollars in millions)
)
(
Investment management and performance fees – GAAP
Impact of changes in foreign currency exchange rates
g

y
p
Adjusted investment management and performance fees – Non-GAAP

2022
3,290 $
—
3,290 $

2021
3,590
(135)
)
(
3,455

2022 vs.
2021
(8)%

(5)%

BNY Mellon 107

Supplemental Information (unaudited) (continued)

The following table presents the reconciliation of the pre-tax operating margin for the Investment and Wealth
Management business segment.

Pre-tax operating margin reconciliation – Investment and Wealth Management
business segment
(dollars in millions)
Income before income taxes – GAAP
( )
Impact of notable items (a)

p
Adjusted income before income taxes – Non-GAAP

Total revenue – GAAP
Less: Distribution and servicing expense

Adjusted total revenue, net of distribution and servicing expense – Non-GAAP

2022 vs.
2021
(96)%

(39)%

2022
48
(709)
757

2021

$ 1,230
(5)
$ 1,235

2020
971

$ 3,550
345
$ 3,205

$ 4,042
300
$ 3,742

$ 3,692
338
$ 3,354

Pre-tax operating margin – GAAP (b)
Adjusted pre-tax operating margin, net of distribution and servicing expense – Non-

GAAP (b)

Adjusted pre-tax operating margin, net of distribution and servicing expense and
( )
excluding notable items – Non-GAAP (b)

24%

30%

33%

26%

29%

(a) Notable items in 2022 include the goodwill impairment, severance expense, losses on disposals (reflected in investment and other

revenue) and litigation reserves. Notable items in 2021 include litigation reserves, losses on disposals (reflected in investment and other
revenue) and severance expense.
Income before taxes divided by total revenue.

(b)

108 BNY Mellon

Supplemental Information (unaudited) (continued)

Rate/volume analysis

Rate/volume analysis (a)

(in millions)
Interest revenue
Interest-earning assets:

2022 over (under) 2021

2021 over (under) 2020

Due to change in
Average
balance

Average
rate

Net
change

Due to change in
Average
balance

Average
rate

Net
change

Interest-bearing deposits with the Federal Reserve and other central banks:

Domestic offices
Foreign offices

(1) $
25

751 $
321

750
346

Total 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
Loans:

Domestic offices
Foreign offices

Total loans

Securities:

U.S. government obligations
U.S. government agency obligations
State and political subdivisions (b)
Other securities:

Domestic offices (b)
Foreign offices

Total other securities (b)
Total investment securities (b)
Trading securities (primarily domestic) (b)
Total securities (b)

Total interest revenue (b)

Interest expense
Interest-bearing liabilities:
Interest-bearing deposits:
Domestic offices
Foreign offices

Total interest-bearing deposits

Federal funds purchased and securities sold under repurchase agreements
Trading liabilities
Other borrowed funds:
Domestic offices
Foreign offices

Total other borrowed funds

Commercial paper
Payables to customers and broker-dealers
Long-term debt

Total interest expense

Changes in net interest revenue (b)

24
(11)
(17)

137
(7)
130

54
(125)
(17)

—
(18)
(18)
(106)
(14)
(120)

6 $

2 $

12
14
1
3

—
1
1
—
—
26
45 $
(39) $

$
$

1,072
184
1,097

849
62
911

292
297
6

1,096
173
1,080

986
55
1,041

346
172
(11)

253
253
49
31
302
284
897
791
104
90
881
1,001
4,265 $ 4,271

1,005 $ 1,007
755
1,762
938
60

743
1,748
937
57

2
(2)
—
—
158
442

2
(1)
1
—
158
468
3,342 $ 3,387
884

923 $

5 $

(29)

(24)
10
(37)

205
(76)
129

64
(49)
26

(66)
(37)

(103)
(96)
(388)

(255)
(58)
(313)

(81)
(294)
(8)

55
6
61
102
(5)
97

(22)
(95)
(117)
(500)
(35)
(535)
175 $ (1,435)

26 $
(1)
25
(21)
2

(16)
—
(16)
(4)
(1)
(24)
(39) $
214 $

(229)
(132)
(361)
(266)
(9)

6
2
8
(3)
(29)
(206)
(866)
(569)

$
$

(61)
(66)

(127)
(86)
(425)

(50)
(134)
(184)

(17)
(343)
18

33
(89)
(56)
(398)
(40)
(438)
$ (1,260)

$
$

(203)
(133)
(336)
(287)
(7)

(10)
2
(8)
(7)
(30)
(230)
(905)
(355)

(a) Changes which are solely due to balance changes or rate changes are allocated to such categories on the basis of the respective percentage changes in

average balances and average rates. Changes in interest revenue or interest expense arising from the combination of rate and volume variances are
allocated proportionately to rate and volume based on their relative absolute magnitudes.

(b) Presented on an FTE basis.

BNY Mellon 109

Forward-looking Statements

Some statements in this Annual Report are forward-
looking. These include statements about the
usefulness of Non-GAAP measures, the future results
of BNY Mellon, our businesses, financial, liquidity
and capital condition, results of operations, liquidity,
risk and capital management and processes, goals,
strategies, outlook, objectives, expectations
(including those regarding our performance results,
expenses, nonperforming assets, products, impacts of
currency fluctuations, impacts of securities portfolio
repositioning, impacts of trends on our businesses,
regulatory, technology, market, economic or
accounting developments and the impacts of such
developments on our businesses, legal proceedings
and other contingencies), human capital management
(including related ambitions, objectives, aims and
goals), effective tax rate, net interest revenue,
estimates (including those regarding expenses, losses
inherent in our credit portfolios and capital ratios),
intentions (including those regarding our capital
returns and expenses, including our investments in
technology and pension expense), targets,
opportunities, potential actions, growth and
initiatives, including the potential effects of the
coronavirus pandemic on any of the foregoing.

In this report, any other report, any press release or
any written or oral statement that BNY Mellon or its
executives may make, words, such as “estimate,”
“forecast,” “project,” “anticipate,” “likely,” “target,”
“expect,” “intend,” “continue,” “seek,” “believe,”
“plan,” “goal,” “could,” “should,” “would,” “may,”
“might,” “will,” “strategy,” “synergies,”
“opportunities,” “trends,” “ambition,” “objective,”
“aim,” “future,” “potentially,” “outlook” and words
of similar meaning, may signify forward-looking
statements.

Actual results may differ materially from those
expressed or implied as a result of a number of
factors, including those discussed in “Risk Factors,”
such as:
•

errors or delays in our operational and transaction
processing, or those of third parties, may
materially adversely affect our business, financial
condition, results of operations and reputation;
our risk management framework, models and
processes may not be effective in identifying or
mitigating risk and reducing the potential for
losses;

•

110 BNY Mellon

•

our business may be adversely affected if we are
unable to attract, retain, develop and motivate
employees;
a communications or technology disruption or
failure within our infrastructure or the
infrastructure of third parties that results in a loss
of information, delays our ability to access
information or impacts our ability to provide
services to our clients may materially adversely
affect our business, financial condition and
results of operations;
a cybersecurity incident, or a failure in our
computer systems, networks and information, or
those of third parties, could result in the theft,
loss, unauthorized access to, disclosure, use or
alteration of information, system or network
failures, or loss of access to information. Any
such incident or failure could adversely impact
our ability to conduct our businesses, damage our
reputation and cause losses;

• we are subject to extensive government

rulemaking, policies, regulation and supervision
that impact our operations. Changes to and
introduction of new rules and regulations have
compelled, and in the future may compel, us to
change how we manage our businesses, which
could have a material adverse effect on our
business, financial condition and results of
operations;
regulatory or enforcement actions or litigation
could materially adversely affect our results of
operations or harm our businesses or reputation;
a failure or circumvention of our controls and
procedures could have a material adverse effect
on our business, financial condition, results of
operations and reputation;

•

• we are dependent on fee-based business for a

• weakness and volatility in financial markets and
the economy generally may materially adversely
affect our business, financial condition and
results of operations;
levels of and changes in interest rates have
impacted, and will in the future continue to
impact, our profitability and capital levels, at
times adversely;

•

Forward-looking Statements (continued)

•

• we have experienced, and may continue to
experience, unrealized or realized losses on
securities related to volatile and illiquid market
conditions, reducing our capital levels and/or
earnings;
transitions away from and the replacement of
LIBOR and other IBORs could adversely impact
our business, financial condition and results of
operations;
the failure or perceived weakness of any of our
significant clients or counterparties, many of
whom are major financial institutions or
sovereign entities, and our assumption of credit,
counterparty and concentration risk, could expose
us to loss and adversely affect our business;
• we could incur losses if our allowance for credit
losses, including loan and lending-related
commitment reserves, is inadequate or if our
expectations of future economic conditions
deteriorate;
our business, financial condition and results of
operations could be adversely affected if we do
not effectively manage our liquidity;
failure to satisfy regulatory standards, including
“well capitalized” and “well managed” status or
capital adequacy and liquidity rules more
generally, could result in limitations on our
activities and adversely affect our business and
financial condition;
the Parent is a non-operating holding company
and, as a result, is dependent on dividends from
its subsidiaries and extensions of credit from its
IHC to meet its obligations, including with
respect to its securities, and to provide funds for
share repurchases and payment of dividends to its
stockholders;
our ability to return capital to shareholders is
subject to the discretion of our Board of Directors
and may be limited by U.S. banking laws and
regulations, including those governing capital and
capital planning, applicable provisions of
Delaware law and our failure to pay full and
timely dividends on our preferred stock;
any material reduction in our credit ratings or the
credit ratings of our principal bank subsidiaries,
The Bank of New York Mellon or BNY Mellon,
N.A., could increase the cost of funding and
borrowing to us and our rated subsidiaries and
have a material adverse effect on our business,
financial condition and results of operations and
on the value of the securities we issue;

•

the application of our Title I preferred resolution
strategy or resolution under the Title II orderly
liquidation authority could adversely affect the
Parent’s liquidity and financial condition and the
Parent’s security holders;
new lines of business, new products and services
or transformational or strategic project initiatives
subject us to new or additional risks, and the
failure to implement these initiatives could affect
our results of operations;

•

• we are subject to competition in all aspects of our
business, which could negatively affect our
ability to maintain or increase our profitability;
our strategic transactions present risks and
uncertainties and could have an adverse effect on
our business, financial condition and results of
operations;
our businesses may be negatively affected by
adverse events, publicity, government scrutiny or
other reputational harm;
climate change concerns could adversely affect
our business, affect client activity levels and
damage our reputation;
impacts from natural disasters, climate change,
acts of terrorism, pandemics, global conflicts and
other geopolitical events may have a negative
impact on our business and operations;
tax law changes or challenges to our tax positions
with respect to historical transactions may
adversely affect our net income, effective tax rate
and our overall results of operations and financial
condition; and
changes in accounting standards governing the
preparation of our financial statements and future
events could have a material impact on our
reported financial condition, results of operations,
cash flows and other financial data.

•

Investors should consider all risk factors discussed in
the 2022 Annual Report and any subsequent reports
filed with the SEC by BNY Mellon pursuant to the
Exchange Act. All forward-looking statements speak
only as of the date on which such statements are
made, and BNY Mellon undertakes no obligation to
update any statement to reflect events or
circumstances after the date on which such forward-
looking statement is made or to reflect the occurrence
of unanticipated events. The contents of BNY
Mellon’s website or any other website referenced
herein are not part of this report.

BNY Mellon 111

Global systemically important bank (“G-SIB”) – A
financial institution whose distress or disorderly
failure, because of its size, complexity and systemic
interconnectedness, would cause significant
disruption to the wider financial system and economic
activity.

High-quality liquid assets (“HQLA”) –
Unencumbered assets of the types identified in the
U.S. LCR rule, which the U.S. banking agencies
describe as able to be convertible into cash with little
or no expected loss of value during a period of
liquidity stress.

Investment grade – Represents Moody’s long-term
rating of Baa3 or better; and/or a Standard & Poor’s,
Fitch or DBRS long-term rating of BBB- or better; or
if unrated, an equivalent rating using our internal risk
ratings. Instruments that fall below these levels are
considered to be non-investment grade.

Real estate investment trust (“REIT”) – An
investor-owned corporation, trust or association that
sells shares to investors and invests in income-
producing property.

Repurchase agreement (“Repo”) – An instrument
used to raise short-term funds whereby securities are
sold with an agreement for the seller to buy back the
securities at a later date.

Reverse repurchase agreement – The purchase of
securities with the agreement to sell them at a higher
price at a specific future date.

Sub-custodian – A local provider (e.g., a bank)
contracted to provide specific custodial-related
services in a selected country or geographic area.

Glossary

Assets under custody and/or administration
(“AUC/A”) – Assets that we hold directly or
indirectly on behalf of clients under a safekeeping or
custody arrangement or for which we provide
administrative services for clients. The following
types of assets under administration are not and
historically have not been included in AUC/A:
performance and risk analytics, transfer agency and
asset aggregation services. To the extent that we
provide more than one AUC/A service for a client’s
assets, the value of the asset is only counted once in
the total amount of AUC/A.

Assets under management (“AUM”) – Includes
assets beneficially owned by our clients or customers
which we hold in various capacities that are either
actively or passively managed, as well as the value of
hedges supporting customer liabilities. These assets
and liabilities are not on our balance sheet.

CAMELS – An international bank-rating system
where bank supervisory authorities rate institutions
according to six factors. The six factors are Capital
adequacy, Asset quality, Management quality,
Earnings, Liquidity and Sensitivity to market risk.

Collateral management – A comprehensive program
designed to simplify collateralization and expedite
securities transfers for buyers and sellers.

Credit valuation adjustment (“CVA”) – The
market value of counterparty credit risk on OTC
derivative transactions.

Debit valuation adjustment (“DVA”) – The market
value of our credit risk on OTC derivative
transactions.

Depositary receipt – A negotiable security that
generally represents a non-U.S. company’s publicly
traded equity.

Economic capital – The amount of capital required
to absorb potential losses and reflects the probability
of remaining solvent with a target debt rating over a
one-year time horizon.

112 BNY Mellon

Report of Management on Internal Control Over Financial Reporting

Management of BNY Mellon is responsible for
establishing and maintaining adequate internal control
over financial reporting for BNY Mellon, as such
term is defined in Rule 13a-15(f) under the Exchange
Act.

BNY Mellon’s management, including its principal
executive officer and principal financial officer, has
assessed the effectiveness of BNY Mellon’s internal
control over financial reporting as of December 31,
2022. In making this assessment, management used
the criteria set forth by the Committee of Sponsoring
Organizations of the Treadway Commission in
Internal Control – Integrated Framework (2013).
Based upon such assessment, management believes
that, as of December 31, 2022, BNY Mellon’s
internal control over financial reporting is effective
based upon those criteria.

KPMG LLP, the independent registered public
accounting firm that audited BNY Mellon’s 2022
financial statements included in this Annual Report
under “Financial Statements” and “Notes to
Consolidated Financial Statements,” has issued a
report with respect to the effectiveness of BNY
Mellon’s internal control over financial reporting.
This report begins on page 114.

BNY Mellon 113

KPMG LLP
345 Park Avenue
New York, NY 10154-0102

Report of Independent Registered Public Accounting Firm

To the Shareholders and Board of Directors
The Bank of New York Mellon Corporation›

Opinion on Internal Control Over Financial Reporting

We have audited The Bank of New York Mellon Corporation and subsidiaries' (BNY Mellon) internal control
over financial reporting as of December 31, 2022, based on criteria established in Internal Control – Integrated
Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our
opinion, BNY Mellon maintained, in all material respects, effective internal control over financial reporting as of
December 31, 2022, based on criteria established in Internal Control – Integrated Framework (2013) issued by
the Committee of Sponsoring Organizations of the Treadway Commission.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board
(United States) (PCAOB), the consolidated balance sheets of BNY Mellon as of December 31, 2022 and 2021,
the related consolidated statements of income, comprehensive income, cash flows, and changes in equity for
each of the years in the three-year period ended December 31, 2022, and the related notes (collectively, the
consolidated financial statements), and our report dated February 27, 2023 expressed an unqualified opinion
on those consolidated financial statements.

Basis for Opinion

BNY Mellon’s management is responsible for maintaining effective internal control over financial reporting and
for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying
Œeport of Management on Internal Control Over Financial Œeporting. Our responsibility is to express an opinion
on BNY Mellon’s internal control over financial reporting based on our audit. We are a public accounting firm
registered with the PCAOB and are required to be independent with respect to BNY Mellon in accordance with
the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange
Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether effective internal control over financial
reporting was maintained in all material respects. Our audit of internal control over financial reporting included
obtaining an understanding of internal control over financial reporting, assessing the risk that a material
weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on
the assessed risk. Our audit also included performing such other procedures as we considered necessary in
the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. A company’s internal control over financial reporting
includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide
reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements
in accordance with generally accepted accounting principles, and that receipts and expenditures of the

KPMG LLP, a Delaware limited liability partnership and a member firm of
the KPMG global organization of independent member firms affiliated with
KPMG International Limited, a private English company limited by guarantee.

company are being made only in accordance with authorizations of management and directors of the company;
and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use,
or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.

New York, New York
February 27, 2023

The Bank of New York Mellon Corporation (and its subsidiaries)

Consolidated Income Statement

(in millions)
Fee and other revenue
Investment services fees
Investment management and performance fees
Foreign exchange revenue
Financing-related fees
Distribution and servicing fees

Total fee revenue

Investment and other revenue
Total fee and other revenue

Net interest revenue
Interest revenue
Interest expense

Net interest revenue
Total revenue

Provision for credit losses
Noninterest expense
Staff
Software and equipment
Professional, legal and other purchased services
Net occupancy
Sub-custodian and clearing
Distribution and servicing
Business development
Bank assessment charges
Goodwill impairment
Amortization of intangible assets
Other

Total noninterest expense

Income
Income before income taxes
Provision for income taxes

Net income

Net loss (income) attributable to noncontrolling interests related to consolidated investment
management funds

Net income applicable to shareholders of The Bank of New York Mellon Corporation

Preferred stock dividends

Net income applicable to common shareholders of The Bank of New York

Mellon Corporation

Year ended Dec. 31,

2022

2021

2020

8,529 $
3,299
822
175
130
12,955
(82)
12,873

8,284 $
3,588
799
194
112
12,977
336
13,313

7,118
3,614
3,504
16,377
39

6,800
1,657
1,527
514
485
343
152
126
680
67
659
13,010

3,328
768
2,560

13
2,573
(211)

2,845
227
2,618
15,931
(231)

6,337
1,478
1,459
498
505
298
107
133
—
82
617
11,514

4,648
877
3,771

(12)
3,759
(207)

8,047
3,367
774
212
115
12,515
316
12,831

4,109
1,132
2,977
15,808
336

5,966
1,370
1,403
581
460
336
105
124
—
104
555
11,004

4,468
842
3,626

(9)
3,617
(194)

2,362 $

3,552 $

3,423

116 BNY Mellon

The Bank of New York Mellon Corporation (and its subsidiaries)

Consolidated Income Statement (continued)

Net income applicable to common shareholders of The Bank of New York Mellon
Corporation used for the earnings per share calculation

(in millions)
Net income applicable to common shareholders of The Bank of New York Mellon Corporation
Less: Earnings allocated to participating securities

Net income applicable to common shareholders of The Bank of New York Mellon Corporation
after required adjustment for the calculation of basic and diluted earnings per common share

Year ended Dec. 31,

2022
2,362 $
—

2021
3,552 $
2

2020
3,423
6

2,362 $

3,550 $

3,417

Average common shares and equivalents outstanding of The Bank of New York

Mellon Corporation

(in thousands)
Basic
Common stock equivalents
Less: Participating securities
Diluted

Anti-dilutive securities (a)

Year ended Dec. 31,

2022
811,068
3,904
(177)
814,795

2021
851,905
4,900
(446)
856,359

2020
890,839
2,425
(750)
892,514

3,142

642

4,968

(a) Represents stock options, restricted stock, restricted stock units and participating securities outstanding but not included in the

computation of diluted average common shares because their effect would be anti-dilutive.

Earnings per share applicable to common shareholders of The Bank of New York

Mellon Corporation

(in dollars)
Basic
Diluted

Year ended Dec. 31,

2022
2.91 $
2.90 $

2021
4.17 $
4.14 $

2020
3.84
3.83

$
$

See accompanying Notes to Consolidated Financial Statements.

BNY Mellon 117

The Bank of New York Mellon Corporation (and its subsidiaries)

Consolidated Comprehensive Income Statement

(in millions)
Net income
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments
Unrealized (loss) gain on assets available-for-sale:
Unrealized (loss) gain arising during the period
Reclassification adjustment

Total unrealized (loss) gain on assets available-for-sale

Defined benefit plans:

Net (loss) gain arising during the period
Amortization of prior service credit, net loss and initial obligation included in net periodic benefit

cost
Total defined benefit plans

Net unrealized (loss) gain on cash flow hedges

Total other comprehensive (loss) income, net of tax (a)
Total comprehensive (loss) income

Net loss (income) attributable to noncontrolling interests
Other comprehensive loss (income) attributable to noncontrolling interests

Year ended Dec. 31,

2022
2,560 $

2021
3,771 $

2020
3,626

(603)

(376)

508

(3,245)
338
(2,907)

(1,147)
(4)
(1,151)

1,202
(25)
1,177

(306)

219

(107)

56
(250)
(6)
(3,766)
(1,206)
13
13

88
307
(6)
(1,226)
2,545
(12)
(2)

77
(30)
5
1,660
5,286
(9)
(2)

Comprehensive (loss) income applicable to shareholders of The Bank of New York Mellon

Corporation

(1,180) $

2,531 $

5,275

(a) Other comprehensive (loss) income attributable to The Bank of New York Mellon Corporation shareholders was $(3,753) million for the
year ended Dec. 31, 2022, $(1,228) million for the year ended Dec. 31, 2021 and $1,658 million for the year ended Dec. 31, 2020.

See accompanying Notes to Consolidated Financial Statements.

118 BNY Mellon

The Bank of New York Mellon Corporation (and its subsidiaries)

Consolidated Balance Sheet

p p

)
(dollars in millions, except per share amounts)
(
Assets
Cash and due from banks, net of allowance for credit losses of $29 and $3
Interest-bearing deposits with the Federal Reserve and other central banks
Interest-bearing deposits with banks, net of allowance for credit losses of $4 and $2 (includes restricted of
$6,499 and $3,822)
Federal funds sold and securities purchased under resale agreements
Securities:

Held-to-maturity, at amortized cost, net of allowance for credit losses of less than $1 and less than $1 (fair
value of $49,992 and $56,775)
Available-for-sale, at fair value (amortized cost of $92,484 and $100,774, net of allowance for credit losses of
$1 and $10)
Total securities

Trading assets
Loans
Allowance for credit losses

Net loans

Premises and equipment
Accrued interest receivable
Goodwill
Intangible assets
Other assets, net of allowance for credit losses on accounts receivable of $4 and $4 (includes $971 and $1,187, at
fair value)

Total assets

Liabilities
Deposits:

Noninterest-bearing (principally U.S. offices)
Interest-bearing deposits in U.S. offices
p
Interest-bearing deposits in non-U.S. offices

g
Total deposits

Federal funds purchased and securities sold under repurchase agreements
Trading liabilities
Payables to customers and broker-dealers
Other borrowed funds
Accrued taxes and other expenses
Other liabilities (including allowance for credit losses on lending-related commitments of $78 and $45, also

includes $221 and $496, at fair value)

Long-term debt

g
Total liabilities
Temporary equity
Redeemable noncontrolling interests
Permanent equity
Preferred stock – par value $0.01 per share; authorized 100,000,000 shares; issued 48,826 and 48,826 shares
Common stock – par value $0.01 per share; authorized 3,500,000,000 shares; issued 1,395,725,198 and

1,389,397,912 shares
Additional paid-in capital
Retained earnings
Accumulated other comprehensive loss, net of tax
Less: Treasury stock of 587,280,598 and 585,252,546 common shares, at cost
Total The Bank of New York Mellon Corporation shareholders’ equity
g

Nonredeemable noncontrolling interests of consolidated investment management funds

y
Total permanent equity
y
Total liabilities, temporary equity and permanent equity
y q

See accompanying Notes to Consolidated Financial Statements.

Dec. 31,

2022

2021

5,030 $
91,655

6,061
102,467

17,169
24,298

16,630
29,607

56,194

56,866

86,622
142,816
9,908
66,063
(176)
65,887
3,256
858
16,150
2,901

101,839
158,705
16,577
67,787
)
(196)
(
67,591
3,431
457
17,512
2,991

25,855
405,783 $

22,409
444,438

78,017 $
108,362
92,591
278,970
12,335
5,385
23,435
397
5,410

8,543
30,458
364,933

93,695
120,903
105,096
319,694
11,566
5,469
25,150
749
5,767

6,721
25,931
401,047

109

161

4,838

14
28,508
37,864
(5,966)
(24,524)
40,734
7
40,741
405,783 $

14
28,128
36,667
(2,213)
)
(
(24,400)
43,034
196
43,230
444,438

BNY Mellon 119

The Bank of New York Mellon Corporation (and its subsidiaries)

Consolidated Statement of Cash Flows

(in millions)
Operating activities
Net income
Net loss (income) attributable to noncontrolling interests
Net income applicable to shareholders of The Bank of New York Mellon Corporation
Adjustments to reconcile net income to net cash provided by (used for) operating activities:

Provision for credit losses
Pension plan contributions
Depreciation and amortization
Goodwill impairment
Deferred tax (benefit)
Net securities losses (gains)

Change in trading assets and liabilities
Change in accruals and other, net

Net cash provided by operating activities

Investing activities

Change in interest-bearing deposits with banks
Change in interest-bearing deposits with the Federal Reserve and other central banks
Purchases of securities held-to-maturity
Paydowns of securities held-to-maturity
Maturities of securities held-to-maturity
Purchases of securities available-for-sale
Sales of securities available-for-sale
Paydowns of securities available-for-sale
Maturities of securities available-for-sale
Net change in loans
Sales of loans and other real estate
Change in federal funds sold and securities purchased under resale agreements
Net change in seed capital investments
Purchases of premises and equipment/capitalized software
Proceeds from the sale of premises and equipment
Acquisitions, net of cash
Dispositions, net of cash
Other, net

Net cash provided by (used for) investing activities

Financing activities

Change in deposits
Change in federal funds purchased and securities sold under repurchase agreements
Change in payables to customers and broker-dealers
Change in other borrowed funds
Change in commercial paper
Net proceeds from the issuance of long-term debt
Repayments of long-term debt
Proceeds from the exercise of stock options
Issuance of common stock
Issuance of preferred stock
Treasury stock acquired
Preferred stock redemption
Common cash dividends paid
Preferred cash dividends paid
Amortization of preferred stock discount
Other, net

Net cash (used for) provided by financing activities

g
Effect of exchange rate changes on cash
Change in cash and due from banks and restricted cash
Change in cash and due from banks and restricted cash
Cash and due from banks and restricted cash at beginning of period
Cash and due from banks and restricted cash at end of period

Cash and due from banks and restricted cash

Cash and due from banks at end of period (unrestricted cash)
Restricted cash at end of period

Cash and due from banks and restricted cash at end of period

Supplemental disclosures

Interest paid
Income taxes paid
Income taxes refunded

See accompanying Notes to Consolidated Financial Statements.

120 BNY Mellon

Year ended Dec. 31,

2022

2021

2020

2,560 $
13
2,573

3,771 $
(12)
3,759

39
(7)
1,636
680
155
443
7,015
2,534
15,068

1,540
7,812
(2,497)
7,168
1,610
(32,336)
14,990
5,215
11,573
1,423
—
5,294
64
(1,346)
45
—
446
(1,127)
19,874

(37,009)
790
(1,488)
(344)
—
9,929
(4,000)
9
14
—
(124)
—
(1,165)
(211)
—
(55)
(33,654)
358

(231)
(6)
1,867
—
257
(5)
(1,898)
(905)
2,838

1,225
35,073
(8,921)
11,339
1,872
(54,239)
13,545
12,775
17,221
(11,350)
1
1,233
171
(1,215)
34
(170)
8
1,070
19,672

(17,896)
418
128
397
—
5,186
(4,650)
50
13
1,287
(4,567)
(1,000)
(1,126)
(197)
10
(15)
(21,962)
)
(
(84)

1,646
9,883
,
11,529 $

5,030 $
6,499
,
11,529 $

3,307 $
449
11

464
9,419
,
9,883 $

6,061 $
3,822
,
9,883 $

233 $
473
42

3,626
(9)
3,617

336
(25)
1,630
—
(193)
(33)
(496)
202
5,038

(1,393)
(42,857)
(29,651)
9,291
7,097
(68,430)
13,316
10,476
27,592
(1,271)
15
(708)
18
(1,222)
—
—
—
(728)
(78,455)

77,523
(361)
5,977
(270)
(3,959)
2,993
(5,200)
46
12
1,567
(989)
(583)
(1,117)
(179)
15
33
75,508
61

2,152
7,267
,
9,419

6,252
3,167
,
9,419

1,236
1,341
60

The Bank of New York Mellon Corporation (and its subsidiaries)

Consolidated Statement of Changes in Equity

The Bank of New York Mellon Corporation shareholders

Preferred
stock
$ 4,838 $

Common
stock

14 $

Additional
paid-in
capital
28,128 $ 36,667 $

Retained
earnings

Accumulated
other
comprehensive
(loss), net
of tax
(2,213) $(24,400) $

Treasury
stock

Nonredeemable
noncontrolling
interests of
consolidated
investment
management
funds

Total
permanent
equity
196 $ 43,230 (a) $

Redeemable
non-
controlling
interests/
temporary
equity
161

—

—
—
—

—

—
—

$ 4,838 $

—

—
—
—

—

—
—
14 $

—

44
—
—

—

—
2,573
—

— (1,165)
(211)
—
—
—

316
—

—

—
—

—

—
—
(3,753)

—
—
—

—

—
—

—

—
—
—

—
—
(124)

—

—
—

28,508 $ 37,864 $

(5,966) $(24,524) $

—

(176)
(13)
—

—
—
—

—

(132)
2,560
(3,753)

(1,165)
(211)
(124)

—
—
7 $ 40,741 (a) $

316
—

(31)

(37)
—
(13)

—
—
—

—

—
(2)
109

(in millions, except per
share amount)
Balance at Dec. 31, 2021
Shares issued to shareholders of

noncontrolling interests

Redemption of subsidiary shares
from noncontrolling interests

Other net changes in

noncontrolling interests

Net income (loss)
Other comprehensive (loss)
Dividends:

Common stock at $1.42 per

share (b)

Preferred stock

Repurchase of common stock
Common stock issued under
employee benefit plans
Stock awards and options

exercised

Other
Balance at Dec. 31, 2022

(a)

(b)

Includes total The Bank of New York Mellon Corporation common shareholders’ equity of $38,196 million at Dec. 31, 2021 and $35,896 million at Dec.
31, 2022.
Includes dividend-equivalents on share-based awards.

(in millions, except per
share amount)
Balance at Dec. 31, 2020
Shares issued to shareholders of

noncontrolling interests

Redemption of subsidiary shares
from noncontrolling interests

Other net changes in

noncontrolling interests

Net income
Other comprehensive (loss)

income
Dividends:

Common stock at $1.30 per

share (b)

Preferred stock

Repurchase of common stock
Common stock issued under
employee benefit plans
Preferred stock redemption
Preferred stock issued
Stock awards and options

exercised

Amortization of preferred stock

discount

The Bank of New York Mellon Corporation shareholders

Preferred
stock
$ 4,541 $

Common
stock

14 $

Additional
paid-in
capital
27,823 $ 34,241 $

Retained
earnings

Accumulated
other
comprehensive
(loss), net
of tax
(985) $(19,833) $

Treasury
stock

Nonredeemable
noncontrolling
interests of
consolidated
investment
management
funds

Total
permanent
equity
143 $ 45,944 (a) $

Redeemable
non-
controlling
interests/
temporary
equity
176

—

—
—

—

—
—
—

—
(1,000)
1,287

—

—
—

—

—
—
—

—

—
14 $

—

(36)
—

—

—
3,759

—

—
—

—

(1,228)

—

—
—

—

— (1,126)
(197)
—
—
—

—
—
—
—
— (4,567)

18
—
—

323

—

—
—
—

—

(10)

—
—
—

—

—
—
—

—

28,128 $ 36,667 $

(2,213) $(24,400) $

—

41
12

—

—
—
—

—

5
3,771

(1,228)

(1,126)
(197)
(4,567)

18
(1,000)
1,287

323

(94)

29
—

—
—
—

—

—
196 $ 43,230 (a) $

—

—
161

Balance at Dec. 31, 2021

$ 4,838 $

(a)

(b)

Includes total The Bank of New York Mellon Corporation common shareholders’ equity of $41,260 million at Dec. 31, 2020 and $38,196 million at Dec.
31, 2021.
Includes dividend-equivalents on share-based awards.

BNY Mellon 121

The Bank of New York Mellon Corporation (and its subsidiaries)

Consolidated Statement of Changes in Equity (continued)

The Bank of New York Mellon Corporation shareholders

Preferred
stock
$ 3,542 $

Common
stock

14 $

Additional
paid-in
capital
27,515 $ 31,894 $

Retained
earnings

Accumulated
other
comprehensive
(loss), net
of tax
(2,638) $(18,844) $

Treasury
stock

Nonredeemable
noncontrolling
interests of
consolidated
investment
management
funds

Total
permanent
equity
102 $ 41,585 (a) $

Redeemable
non-
controlling
interests/
temporary
equity
143

—
3,542

—

—
—
—

—
(583)
1,567

—

15
—

$ 4,541 $

—
14

—

—
—
—

—

—
—
14 $

—
27,515

45
31,939

(5)
(2,643)

—
(18,844)

—
102

40
41,625

—

12
—
—

—

—
3,617
—

— (1,117)
(179)
—
—
—

26
—
—

270

—
—

—
—
—

—

(15)
(4)

—

—
—
1,654

—
—
—

—

—
4

—

—
—
—

—
—
(989)

—
—
—

—

—
—

27,823 $ 34,241 $

(985) $(19,833) $

—

32
9
—

—
—
—

—

44
3,626
1,654

(1,117)
(179)
(989)

26
(583)
1,567

270
—

—
—
143 $ 45,944 (a) $

—

—
143

(31)

(18)
—
2

—
—
—

—

—
—
176

(in millions, except per
share amount)
Balance at Dec. 31, 2019
Impact of adopting ASU 2016-13,
Financial Instruments – Credit
Losses
Adjusted balance at Jan. 1, 2020
Shares issued to shareholders of

noncontrolling interests

Redemption of subsidiary shares
from noncontrolling interests

Other net changes in

noncontrolling interests

Net income
Other comprehensive income
Dividends:

Common stock at $1.24 per

share (b)

Preferred stock

Repurchase of common stock
Common stock issued under
employee benefit plans
Preferred stock redemption
Preferred stock issued
Stock awards and options

exercised

Amortization of preferred stock

discount

Other
Balance at Dec. 31, 2020

(a)

(b)

Includes total The Bank of New York Mellon Corporation common shareholders’ equity of $37,941 million at Dec. 31, 2019 and $41,260 million at Dec.
31, 2020.
Includes dividend-equivalents on share-based awards.

See accompanying Notes to Consolidated Financial Statements.

122 BNY Mellon

Notes to Consolidated Financial Statements

Note 1–Summary of significant accounting
and reporting policies

in those estimates, which could materially affect our
results of operations and financial condition.

Nature of operations

BNY Mellon is a global leader in providing a broad
range of financial products and services in domestic
and international markets. Through our three
principal business segments, Securities Services,
Market and Wealth Services and Investment and
Wealth Management, we serve institutions,
corporations and high-net-worth individuals. See
Note 24 for the primary products and services of our
lines of business and other information.

Basis of presentation

The accounting and financial reporting policies of
BNY Mellon, a global financial services company,
conform to U.S. generally accepted accounting
principles (“GAAP”) and prevailing industry
practices.

In the opinion of management, all adjustments
necessary for a fair presentation of financial position,
results of operations and cash flows for the periods
presented have been made. Certain immaterial
reclassifications have been made to prior periods to
place them on a basis comparable with current period
presentation.

Use of estimates

The preparation of financial statements in conformity
with U.S. GAAP requires management to make
estimates based upon assumptions about future
economic and market conditions which affect
reported amounts and related disclosures in our
financial statements. Our most significant estimates
pertain to our allowance for credit losses, goodwill
and other intangibles and litigation and regulatory
contingencies. Although our current estimates
contemplate current conditions and how we expect
them to change in the future, it is reasonably possible
that actual conditions could be worse than anticipated

Foreign currency translation

Assets and liabilities denominated in foreign
currencies are translated to U.S. dollars at the rate of
exchange on the balance sheet date. Translation gains
and losses on investments in foreign entities with
functional currencies that are not the U.S. dollar are
recorded as foreign currency translation adjustments
in other comprehensive income (“OCI”). Revenue
and expense transactions are translated at the
applicable daily rate or the weighted average monthly
exchange rate when applying the daily rate is not
practical. For transactions that are denominated in a
currency other than the functional currency, the
effects of exchange rate changes are included in
foreign exchange revenue in the income statement.

Acquired businesses

The income statement and balance sheet include
results of acquired businesses accounted for under the
acquisition method of accounting pursuant to
Accounting Standards Codification (“ASC”) 805,
Business Combinations, and equity investments from
the dates of acquisition. Contingent purchase
consideration is measured at its fair value and
recorded on the purchase date. Any subsequent
changes in the fair value of a contingent consideration
liability are recorded through the income statement.

Consolidation

We evaluate an entity for possible consolidation in
accordance with ASC 810, Consolidation. We first
determine whether or not we have variable interests
in the entity, which are investments or other interests
that absorb portions of an entity’s expected losses or
receive portions of the entity’s expected returns. Our
variable interests may include decision-maker or
service provider fees, direct and indirect investments
and investments made by related parties, including
related parties under common control. If it is
determined that we do not have a variable interest in
the entity, no further analysis is required and the
entity is not consolidated.

If we hold a variable interest in the entity, further
analysis is performed to determine if the entity is a
variable interest entity (“VIE”) or a voting model
entity (“VME”).

BNY Mellon 123

Notes to Consolidated Financial Statements (continued)

We consider the underlying facts and circumstances
of individual entities when assessing whether or not
an entity is a VIE. An entity is determined to be a
VIE if the equity investors:
•

do not have sufficient equity at risk for the entity
to finance its activities without additional
subordinated financial support; or
lack one or more of the following characteristics
of a controlling financial interest:
•

•

the power, through voting rights or similar
rights, to direct the activities of an entity that
most significantly impact the entity’s
economic performance;
the obligation to absorb the expected losses
of the entity; and
the right to receive the expected residual
returns of the entity.

•

We reconsider and reassess whether or not we are the
primary beneficiary of a VIE when governing
documents or contractual arrangements are changed
that would reallocate the obligation to absorb
expected losses or receive expected residual returns
between BNY Mellon and the other investors. This
could occur when BNY Mellon disposes of any
portion of its variable interests in the VIE, when we
acquire additional variable interests in the VIE, when
additional variable interests are issued to other
investors or when other investors liquidate their
variable interest in the VIE.

We consolidate a VIE if it is determined that we have
a controlling financial interest in the entity. We have
a controlling financial interest in a VIE when we have
both (1) the power to direct the activities of the VIE
that most significantly impact the VIE’s economic
performance and (2) the obligation to absorb losses or
the right to receive benefits of the VIE that could
potentially be significant to that VIE.

For entities that do not meet the definition of a VIE,
the entity is considered a VME. We consolidate these
entities if we can exert control over the financial and
operating policies of an investee, which can occur if
we have a 50% or more voting interest in the entity.

See Note 14 for additional disclosures related to our
variable interests.

124 BNY Mellon

Equity method investments, including renewable
energy investments

Equity investments of less than a majority but at least
20% ownership or where we are deemed to have
significant influence are accounted for by the equity
method and included in other assets. Earnings on
these investments are reflected as investment services
fees, investment management and performance fees
or investment and other revenue, as appropriate, in
the period earned.

A loss in value of an equity investment that is
determined to be other-than-temporary is recognized
by reducing the carrying value of the equity
investment to its fair value.

Renewable energy investment projects through
limited liability companies are accounted for using
the equity method of accounting. The hypothetical
liquidation at book value (“HLBV”) methodology is
used to determine the pre-tax loss that is recognized
in each period. HLBV estimates the liquidation value
at the beginning and end of each period, with the
difference recognized as the amount of loss under the
equity method.

The pre-tax losses are reported in investment and
other revenue on the income statement. The
corresponding tax benefits and credits are recorded as
a reduction to provision for income taxes on the
income statement.

See Note 8 for the amount of our renewable energy
investments. Below are our most significant equity
method investments, other than the investments in
renewable energy.

Equity method investments at Dec. 31, 2022

(dollars in millions)
CIBC Mellon Global Securities Services
Company (“CIBC Mellon”)

Siguler Guff
p
Innocap Investment Management Inc.

Percentage
ownership

Book
value

50% $
20% $
18.75% $

545
242
16

Restricted cash and securities

Cash and securities may be segregated under federal
and other regulatory requirements and primarily
consists of excess client funds held by our broker-
dealer entities. Restricted cash is included in interest-
bearing deposits with banks on the balance sheet and

Notes to Consolidated Financial Statements (continued)

with cash and due from banks when reconciling the
beginning and end-of-period balances on the
consolidated statement of cash flows.

identification method. Held-to-maturity securities are
measured at amortized cost, net of expected credit
loss, if any.

Securities purchased under resale agreements and
securities sold under repurchase agreements

Securities purchased under resale agreements and
securities sold under repurchase agreements are
accounted for as collateralized financings. Generally,
these agreements are recorded at the amounts at
which the securities will be subsequently resold or
repurchased, plus accrued interest.

Securities purchased under resale agreements are
fully collateralized with high-quality liquid securities.
Collateral requirements are monitored and additional
collateral is received or provided, as required. As
such, these transactions carry minimal credit risk and
are generally not allocated an allowance for credit
losses.

Where an enforceable netting agreement exists, resale
and repurchase agreements executed with the same
counterparty and the same maturity date are reported
on a net basis on the balance sheet.

Securities – Debt

Debt securities are classified as available-for-sale,
held-to-maturity or trading securities when they are
purchased. Debt securities are classified as available-
for-sale securities when we intend to hold the
securities for an indefinite period of time or when the
securities may be used for tactical asset/liability
purposes and may be sold from time to time to
effectively manage interest rate exposure, prepayment
risk and liquidity needs. Debt securities are classified
as held-to-maturity securities when we intend and
have the ability to hold them until maturity. Debt
securities are classified as trading securities when our
intention is to resell the securities.

Available-for-sale securities are measured at fair
value. The difference between fair value and
amortized cost representing unrealized gains or losses
on assets classified as available-for-sale is recorded
net of tax as an addition to, or deduction from, OCI,
unless an expected credit loss is recognized. Realized
gains and losses on sales of available-for-sale
securities are reported in investment and other
revenue on the income statement. The cost of debt
securities sold is determined on a specific

The Company’s policy for recognition of expected
credit losses for securities available-for-sale and
securities held-to-maturity is contained within
“Allowance for credit losses – Securities – Debt” and
“Allowance for credit losses – Other” below.

Trading securities are measured at fair value and
included in trading assets on the balance sheet.
Trading revenue includes both realized and
unrealized gains and losses. The liability incurred on
short-sale transactions, representing the obligation to
deliver securities, is included in trading liabilities at
fair value.

Income on securities purchased is adjusted for
amortization of premium and accretion of discount on
a level yield basis, generally over their contractual
life.

For debt securities that are beneficial interests in
securitized financial assets and are not high credit
quality, ASC 325, Investments – Other, provides that
cash flows be discounted at the current yield used to
accrete the beneficial interest. A credit loss is
recognized when there is an adverse change in
expected cash flows.

If we intend to sell a debt security or it is more likely
than not that we will be required to sell a debt
security prior to recovery of its cost basis, the security
is written down to fair value and the credit and non-
credit components of the unrealized loss are
recognized in earnings and subsequently accreted to
interest income on an effective yield basis over the
life of the security. Subsequent increases in the fair
value of the security after the write-down are
included in OCI.

Securities – Equity

Investments in equity securities that do not result in
consolidation and are not accounted for under the
equity method are measured at fair value with
changes in the fair value recognized through earnings,
unless one of two available exceptions applies. The
first exception, a scope exception, allows Federal
Reserve Bank stock, Federal Home Loan Bank stock
and exchange memberships to remain accounted for
at cost, less impairment. The second practicability

BNY Mellon 125

Notes to Consolidated Financial Statements (continued)

exception is an election available for equity
investments that do not have readily determinable fair
values. For certain investments where the Company
has chosen the practicability exception, such
investments are accounted for in other assets on the
balance sheet at cost adjusted for impairment, if any,
plus or minus observable price changes in orderly
transactions for an identical or similar investment of
the same issuer with any such changes reflected in
investment and other revenue. Equity securities with
readily determinable fair values are classified in
trading assets with changes in fair value reflected in
other trading revenue, which is included in
investment and other revenue in the consolidated
income statement.

Loans

Loans are reported at amortized cost, net of any
unearned income and deferred fees and costs. Certain
loan origination and upfront commitment fees, as
well as certain direct loan origination and
commitment costs, are deferred and amortized as a
yield adjustment over the lives of the related loans.
Loans held for sale are carried at the lower of cost or
fair value.

Troubled debt restructurings/loan modifications

A modified loan is considered a troubled debt
restructuring (“TDR”) if the debtor is experiencing
financial difficulties and the creditor grants a
concession to the debtor that would not otherwise be
considered. A TDR may include a transfer of real
estate or other assets from the debtor to the creditor,
or a modification of the term of the loan. Credit
losses related to TDRs are accounted for under an
individual evaluation methodology (see “Allowance
for credit losses” below). Credit losses for
anticipated TDRs are generally accounted for
similarly to TDRs and are identified when there is a
reasonable expectation that a TDR will be executed
with the borrower and when we expect the
modification to affect the timing or amount of
payments and/or the payment term.

Due to the coronavirus pandemic, there have been
two forms of relief provided for classifying loans as
TDRs: The Coronavirus Aid, Relief, and Economic
Security Act (the “CARES Act”) and the Interagency
Guidance (as defined below). Financial institutions
may account for eligible loan modifications either
under the CARES Act or the Interagency Guidance.

126 BNY Mellon

The Company has elected to apply both the CARES
Act and the Interagency Guidance, as applicable, in
providing borrowers with loan modification relief in
response to the coronavirus pandemic.

The CARES Act, which became law on March 27,
2020, provides that financial institutions may, subject
to certain conditions, elect to temporarily suspend the
U.S. GAAP requirements with respect to loan
modifications related to the coronavirus pandemic
that were current as of Dec. 31, 2019 and that would
otherwise be identified and treated as TDRs. On Dec.
27, 2020, the Consolidated Appropriations Act, 2021
was signed into law and extended the period
established by the CARES Act under which
consideration of TDR identification and accounting
triggered by effects of the coronavirus pandemic are
suspended. That extension period ended on Jan. 1,
2022.

Various banking regulators issued guidance in the
April 7, 2020 “Interagency Statement on Loan
Modifications and Reporting for Financial Institutions
Working with Customers Affected by the
Coronavirus (revised)” (“Interagency Guidance”) on
loan modification treatment pursuant to which
financial institutions can apply the U.S. GAAP
requirements for loan modifications. In accordance
with this guidance, a loan modification is not
considered a TDR if the modification is related to the
coronavirus pandemic, the borrower had been current
when the modification program was implemented,
and the modification includes payment deferrals for
not more than six months.

Nonperforming assets

Commercial loans are placed on nonaccrual status
when principal or interest is past due 90 days or more,
or when there is reasonable doubt that interest or
principal will be collected.

When a first or second lien residential mortgage loan
reaches 90 days delinquent, it is subject to an
individual evaluation of credit loss and placed on
nonaccrual status.

When a loan is placed on nonaccrual status,
previously accrued and uncollected interest is
reversed against current period interest revenue.
Interest receipts on nonaccrual loans are recognized
as interest revenue or are applied to principal when
we believe the ultimate collectability of principal is in

Notes to Consolidated Financial Statements (continued)

doubt. Nonaccrual loans generally are restored to an
accrual basis when principal and interest become
current and remain current for a specified period.

“Allowance for credit losses” below provides
additional information regarding the individual
evaluation of credit losses for nonperforming loans.

Allowance for credit losses

The accounting policy for determining the allowances
has been identified as a “critical accounting estimate”
as it requires us to make numerous complex and
subjective estimates and assumptions relating to
amounts which are judgmental and inherently
uncertain.

Credit quality is monitored by management and is
reflected within the allowance for credit losses. The
allowance represents management’s estimate of
expected credit losses over the expected contractual
life of the financial instruments as of the balance
sheet date. The allowance methodology is designed
to provide procedural discipline in assessing the
appropriateness of the allowance.

A quantitative methodology and qualitative
framework is used to estimate the allowance for
credit losses. The qualitative framework is described
in further detail within “Allowance for credit losses –
Other” below. The quantitative component of our
estimate uses models and methodologies that
categorize financial assets based on product type,
collateral type, and other credit trends and risk
characteristics, including relevant information about
past events, current conditions and reasonable and
supportable forecasts of future economic conditions
that affect the collectability of the recorded amounts.
The allowance may be determined using various
methods, including discounted cash flow methods,
loss-rate methods, probability of default methods or
other methods that we determine to be appropriate.
We estimate our expected credit losses using the
probability of default method for the majority of our
financial assets. We measure expected credit losses
of financial assets on a collective (pool) basis when
similar risk characteristics exist. For a financial asset
that does not share risk characteristics with other
assets, expected credit losses are measured based on
an individual evaluation method.

In our estimate, with the exception of our small home
equity line of credit portfolio, available-for-sale debt

securities, and individually evaluated financial assets,
we utilize a multi-scenario macroeconomic forecast
which includes a weighting of three scenarios: a
baseline and upside and downside scenarios and
allows us to develop our estimate using a wide span
of economic variables. Our baseline scenario reflects
a view on likely performance of each global region
and the other two scenarios are designed relative to
the baseline scenario. This approach incorporates a
reasonable and supportable forecast period spanning
the life of the asset, and this period includes both an
initial estimated economic outlook component as well
as a reversion component for each economic input
variable. The length of each of the two components
depends on the underlying financial instrument,
scenario and underlying economic input variable. In
general, the initial economic outlook period for each
economic input variable under each scenario ranges
between several months and two years. The speed at
which the scenario-specific forecasts revert to long-
term historical mean is based on observed historical
patterns of mean reversion at the economic variable
input level that are reflected in our model parameter
estimates. Certain macroeconomic variables such as
unemployment or home prices take longer to revert
after a contraction, though specific recovery times are
scenario-specific. Reversion will usually take longer
the further away the scenario-specific forecast is from
the historical mean. On a quarterly basis, within a
developed governance structure, we update these
scenarios for current economic conditions and may
adjust the scenario weighting based on our economic
outlook.

Allowance for credit losses – Loans and lending-
related commitments

The allowance for credit losses on loans is presented
as a valuation allowance to loans, and the allowance
for credit losses on lending-related commitments is
recorded in other liabilities. The components of the
allowance for credit losses on loans and lending-
related commitments consist of the following three
elements:

•

a pooled allowance component for higher risk-
rated and pass-rated commercial and institutional
credits and loans secured by commercial real
estate;
a pooled allowance component for residential
mortgage loans; and

BNY Mellon 127

Notes to Consolidated Financial Statements (continued)

•

an asset-specific allowance component involving
individually evaluated credits of $1 million or
greater.

using a baseline, upside and downside
macroeconomic scenario to generate projected
property values and incomes.

The first element, a pooled allowance component for
higher risk-rated and pass-rated commercial and
institutional credits and loans secured by commercial
real estate, is based on our expected credit loss model
using the probability of default method, which has
been adjusted for the forecast of economic conditions.
Individual credit analyses are performed on such
loans before being assigned a credit rating.
Segmentation is established based on risk
characteristics of the loans and how risk is monitored.
In estimating the terms of the exposures and resulting
effect on the measurement of expected credit loss, we
consider the impact of potential prepayments as well
as the effect of borrower extension options. Borrower
ratings are reviewed at least annually and are mapped
to third-party databases, including rating agency and
default and recovery databases, to support ongoing
consistency and validity. Higher risk-rated loans and
lending-related commitments are reviewed quarterly.

For the higher-risk rated and pass-rated commercial
and institutional credits, the loss expected in each
loan incorporates the borrower’s credit rating, facility
rating and maturity. The loss given default, derived
from the facility rating, incorporates a recovery
expectation, and for unfunded lending exposures, an
estimate of the use of the facility at default (usage
given default). The borrower’s probability of default
is derived from the associated credit rating. The
probability of default and the loss given default are
applied to the estimated facility amount at default to
determine the quantitative component of the
allowance. For each of the different parameters,
specific credit models are developed for each segment
of our portfolio, including commercial loans and
lease financing, financial institutions and other. We
use both internal and external data in the development
of these parameters.

For loans secured by commercial real estate, a
separate modeled approach is used that considers
collateral specific data and loan maturity, as well as
commercial real estate market factors by geographical
region and property type under different
macroeconomic scenarios. A statistical method is
used to simulate the property value and income of
each property, and to estimate the probability of
default, loss given default and expected credit loss for
each loan. The model outputs are established by

128 BNY Mellon

The second element, a pooled allowance component
for residential mortgage loans, is determined by first
segregating our mortgage pools into two categories:
(i) our wealth management mortgages and (ii) our
legacy mortgage portfolio disclosed as other
residential mortgages. We then apply models to each
portfolio to predict prepayments, default rates and
loss severity. We consider historical loss experience
and use a loan-level, multi-period default model
which further segments each portfolio by product
type, including first lien fixed rate mortgages, first
lien adjustable rate mortgages, second lien mortgages
and interest-only mortgages. We calculate the
mortgage loss up to loan contractual maturity and
embed a reasonable and supportable forecast and
macroeconomic variable inputs which are described
above. For home equity lines of credit, probability of
default and loss given default are based on external
data from third-party databases due to the small size
of the portfolio and limited internal data. Our legacy
mortgage portfolio and home equity line of credit
portfolios represent small sub-segments of our
mortgage loans.

The third element, individually evaluated credits, is
based on individual analysis of loans of $1 million
and greater which no longer share the risk
characteristics with other loans. Factors we consider
in measuring the extent of expected credit loss
include the payment status, collateral value, the
borrower’s financial condition, guarantor support, the
probability of collecting scheduled principal and
interest payments when due, anticipated
modifications of payment structure or term for
troubled borrowers, and recoveries if they can be
reasonably estimated. We measure the expected
credit loss as the difference between the amortized
cost basis of the loan and the present value of the
expected future cash flows from the borrower which
is generally discounted at the loan’s effective interest
rate, or the fair value of the collateral, if the loan is
collateral dependent. We generally consider
nonperforming loans as well as loans that have been
or are anticipated to be modified and classified under
a troubled debt restructuring for individual evaluation
given the risk characteristics of such loans.

Notes to Consolidated Financial Statements (continued)

Allowance for credit losses – Securities – Debt

When estimating expected credit losses, we segment
our available-for-sale and held-to-maturity debt
securities portfolios by major asset class. This is
influenced by whether the security is structured or
non-structured (i.e., direct obligation), as well as the
issuer type.

For available-for-sale debt securities with an
unrealized loss at the balance sheet date, if we
determine that a credit loss exists, the amount is
recognized as an allowance for credit losses in
securities – available-for-sale, with a corresponding
adjustment to the provision for credit losses. We
evaluate credit losses at the individual security level
and do not recognize credit losses if the fair value
exceeds amortized cost, and if we determine that a
credit loss exists, we limit the recognition of the loss
to the difference between fair value and amortized
cost. In our determination of whether an expected
credit loss exists, we routinely conduct periodic
reviews and examine various quantitative and
qualitative factors that are unique to each portfolio,
including the severity of the unrealized loss position,
agency rating, credit enhancement, cash flow
deterioration and other factors. The measurement of
an expected credit loss is then based on the best
estimate of the present value of cash flows to be
collected from the debt security. Generally, cash
flows are discounted at the effective interest rate
implicit in the debt security. Changes to the present
value of cash flows due to the passage of time are
recognized within the allowance for credit losses.

We estimate expected credit losses for held-to-
maturity debt securities using a similar methodology
as described in the first allowance element within
“Allowance for credit losses – Loans and lending-
related commitments” above. The allowance for
credit losses on held-to-maturity debt securities is
recorded in securities – held-to-maturity. The
components of the credit loss calculation for each
major portfolio or asset class include a probability of
default and loss given default and their values depend
on the forecast behavior of variables in the
macroeconomic environment. For structured debt
securities, we estimated expected credit losses at the
individual security level and use a cash flow model to
project principal losses. Generally, cash flows are
discounted at the effective interest rate implicit in the
debt security. The difference is reflected in the
allowance for credit losses, and changes to the present

value of cash flows due to the passage of time are
recognized within the allowance for credit losses.

We currently do not require an estimate of expected
credit losses to be measured and recorded for U.S.
Treasury securities, agency debt securities, and other
debt securities that meet certain conditions that are
based on a combination of factors such as guarantees,
credit ratings and other credit quality factors. These
assets are monitored within our established
governance structure on a recurring basis to
determine if any changes are warranted.

Allowance for credit losses – Other financial
instruments

We also estimate expected credit losses associated
with margin loans, reverse repurchase agreements,
security lending indemnifications, and deposits with
third-party financial institutions using a similar risk
rating-based modeling approach as described in the
first allowance element within “Allowance for credit
losses – Loans and lending-related commitments”
above. The allowance for credit losses on reverse
repurchase agreements is recorded in federal funds
sold and securities purchased under resale
agreements; the allowance for credit losses on
securities lending indemnifications is recorded in
other liabilities and the allowance for credit losses on
deposits with third-party financial institutions is
recorded in cash and due from banks or interest-
bearing deposits with banks. Our reverse repurchase
agreements are short-term and subject to continuous
over-collateralization by our counterparties and
timely collateral replenishment, when necessary. As
a result, we estimate the expected credit loss related
to the uncollateralized portion of the asset at the
balance sheet date, if any, and when there is a
reasonable expectation that the counterparty will not
replenish the collateral in compliance with the terms
of the repurchase agreement. This method is also
applied to margin lending arrangements and securities
lending indemnifications.

Allowance for credit losses – Other

We do not apply our credit loss measurement
methodologies to accrued interest receivable balances
related to our loan, debt securities and deposits with
third-party financial institution assets given our
nonaccrual policy that requires charge-off of interest
receivable when deemed uncollectible. Accrued
interest receivable related to these instruments, along

BNY Mellon 129

Notes to Consolidated Financial Statements (continued)

with other interest-bearing instruments, is included on
the consolidated balance sheet. Accrued interest
receivable related to each major loan class is
disclosed within our credit quality disclosure in Note
5.

Our policy for credit losses related to purchased
financial assets requires an evaluation to be
performed prior to the effective purchase date to
determine if more than an insignificant decline in
credit quality has occurred during the period between
the origination and purchase date, or, in the case of
debt securities, the period between the issuance and
purchase date. If we purchase a financial asset with
more than insignificant deterioration in credit quality,
the measurement of expected credit loss is performed
using the methodologies described above, and the
credit loss is recorded as an allowance for credit
losses on the purchase date. Subsequent to purchase,
changes (favorable and unfavorable) in expected cash
flows are recognized immediately in net income by
adjusting the allowance. We evaluate various factors
in the determination of whether a more than an
insignificant decline in credit quality has occurred
and these factors vary depending upon the type of
asset purchased. Such factors include changes in risk
rating and/or agency rating, collateral deterioration,
payment status, purchase price, credit spreads and
other factors. We did not purchase any such assets in
2022 or 2021 and did not own such assets as of Dec.
31, 2022 or Dec. 31, 2021.

We apply a separate credit loss methodology to
accounts receivables to estimate the expected credit
losses associated with these short-term receivables
which historically have not resulted in significant
credit losses. The allowance for credit losses on
accounts receivables is reflected in other assets.

The qualitative component of our estimate for the
allowance for credit losses is intended to capture
expected losses that may not have been fully captured
in the quantitative component. Through an
established governance structure, management
determines the qualitative allowance each period
based on an evaluation of various internal and
environmental factors which include: scenario
weighting and sensitivity risk, credit concentration
risk, economic conditions and other considerations.
We may also make adjustments for idiosyncratic
risks. Once determined in the aggregate, our
qualitative allowance is then allocated to each of our
financial instrument portfolios except for debt

130 BNY Mellon

securities and those instruments carried in other assets
based on the respective instruments’ quantitative
allowance balances. The allocation of this additional
allowance for credit losses is inherently judgmental,
and the entire allowance for credit losses is available
to absorb credit losses regardless of the nature of the
loss.

Premises and equipment

Premises and equipment are carried at cost less
accumulated depreciation and amortization.
Depreciation and amortization is computed using the
straight-line method over the estimated useful life of
the owned asset and, for leasehold improvements,
over the lesser of the remaining term of the leased
facility or the estimated economic life of the
improvement. For owned and capitalized assets,
estimated useful lives range from two to 40 years.
Maintenance and repairs are charged to expense as
incurred, while major improvements are capitalized
and amortized to operating expense over their
identified useful lives.

Leasing

We determine if an arrangement is a lease at
inception. Right-of-use (“ROU”) assets represent our
right to use an underlying asset for the lease term and
lease liabilities represent our obligation to make lease
payments. The ROU assets and lease liabilities are
recognized based on the present value of the future
minimum lease payments over the lease term at
commencement date or at lease modification date for
certain lease modifications. For all leases, we use a
discount rate that represents a collateralized
borrowing rate based on similar terms and
information available at lease commencement date or
at the modification date for certain lease
modifications in determining the present value of
lease payments. In addition to the lease payments,
the determination of an ROU asset may also include
certain adjustments related to lease incentives and
initial direct costs incurred. Options to extend or
terminate a lease are included in the determination of
the ROU asset and lease liability only when it is
reasonably certain that we will exercise that option.

Lease expense for operating leases is recognized on a
straight-line basis over the lease term, while the lease
expense for finance leases is recognized using the
effective interest method. ROU assets are reviewed
for impairment when events or circumstances indicate

Notes to Consolidated Financial Statements (continued)

that the carrying amount may not be recoverable. For
operating leases, if deemed impaired, the ROU asset
is written down and the remaining balance is
subsequently amortized on a straight-line basis which
results in lease expense recognition that is similar to
finance leases.

For all leases, we have elected to account for the
contractual lease and non-lease components as a
single lease component and include them in the
calculation of the lease liability. The non-lease
variable components, such as maintenance expense
and other variable costs, including non-index or rate
escalations, have been excluded from the calculation
and disclosed separately. Additionally, for certain
equipment leases, we apply a portfolio approach to
account for the operating lease ROU assets and
liabilities.

For subleasing activities, the rental income is reported
as part of net occupancy expense, as this activity is
not a significant business activity and is part of the
Company’s customary business practice.

For direct finance leases, unearned revenue is
accreted over the lives of the leases in decreasing
amounts to provide a constant rate of return on the net
investment in the leases. We have leveraged lease
transactions that were entered into prior to Dec. 31,
2018. These leases are grandfathered under ASC
842, Leases, which became effective Jan. 1, 2019,
and will continue to be accounted for under the prior
guidance unless the leases are subsequently modified.
Revenue on leveraged leases is recognized on a basis
to achieve a constant yield on the outstanding
investment in the lease, net of the related deferred tax
liability, in the years in which the net investment is
positive. Gains and losses on residual values of
leased equipment sold are included in investment and
other revenue. Impairment of leveraged lease
residual values that is deemed other-than-temporary
is reflected in net interest revenue. Considering the
nature of these leases and the number of significant
assumptions, there is risk associated with the income
recognition on these leases should any of the
assumptions change materially in future periods.

Software

We capitalize costs relating to acquired software and
internal-use software development projects that
provide new or significantly improved functionality.
We capitalize projects that are expected to result in

longer-term operational benefits, such as replacement
systems or new applications that result in
significantly increased operational efficiencies or
functionality. All other costs incurred in connection
with an internal-use software project are expensed as
incurred. Capitalized software is recorded in other
assets on the balance sheet. We record amortization
of capitalized software in software and equipment
expense on the income statement.

Identified intangible assets and goodwill

Identified intangible assets with estimable lives are
amortized in a pattern consistent with the assets’
identifiable cash flows or using a straight-line method
over their remaining estimated benefit periods if the
pattern of cash flows is not estimable. Intangible
assets with estimable lives are reviewed for possible
impairment when events or changed circumstances
may affect the underlying basis of the asset.
Goodwill and intangibles with indefinite lives are not
amortized, but are assessed annually for impairment,
or more often if events and circumstances indicate it
is more likely than not they may be impaired and to
determine if the lives are no longer indefinite and
should be amortized. The amount of goodwill
impairment, if any, is determined by the excess of the
carrying value of the reporting unit over its fair value.
The accounting policy for valuing and impairment
testing of identified intangible assets and goodwill
has been identified as a “critical accounting estimate”
as it requires us to make numerous complex and
subjective estimates. See Note 7 for additional
disclosures related to goodwill and intangible assets.

Investments in qualified affordable housing projects

Investments in qualified affordable housing projects
through a limited liability entity are accounted for
utilizing the proportional amortization method.
Under the proportional amortization method, the
initial cost of the investment is amortized to the
provision for income taxes in proportion to the tax
credits and other tax benefits received. The net
investment performance, including tax credits and
other benefits received, is recognized in the income
statement as a component of the provision for income
taxes. Additionally, the value of the commitments to
fund qualified affordable housing projects is included
in other assets on the balance sheet and a liability is
recorded for the unfunded portion.

BNY Mellon 131

Notes to Consolidated Financial Statements (continued)

Seed capital

Seed capital investments are generally classified as
other assets and carried at fair value unless we are
required to consolidate the investee due to having a
controlling financial interest. Unrealized gains and
losses on seed capital investments are recorded in
investment and other revenue. Certain risk retention
investments in our collateralized loan obligations
(“CLOs”) are classified as available-for-sale
securities. As of Dec. 31, 2022, we no longer held
any such risk retention CLOs.

Noncontrolling interests

Noncontrolling interests represent the portion of
consolidated entities that are owned by parties other
than BNY Mellon. Noncontrolling interests included
in permanent equity are adjusted for the income or
loss attributable to the noncontrolling interest holders
and any distributions to those shareholders.
Redeemable noncontrolling interests are reported as
temporary equity and represent the redemption value
resulting from equity-classified share-based payment
arrangements that are currently redeemable or are
expected to become redeemable. We recognize
changes in the redemption value of the redeemable
noncontrolling interests as they occur and adjust the
carrying value to be equal to the redemption value.

Fee revenue

Investment services fee revenue and investment
management and performance fee revenue are based
on terms specified in a contract with a customer and
are shown net of fee waivers and exclude any
amounts collected on behalf of third parties. Revenue
is recognized when, or as, a performance obligation is
satisfied by transferring control of a good or service
to a customer. A performance obligation may be
satisfied over time or at a point in time. Revenue
from a performance obligation satisfied over time is
recognized by measuring our progress in satisfying
the performance obligation in a manner that reflects
the transfer of goods and services to the customer.
Revenue from a performance obligation satisfied at a
point in time is recognized at the point in time the
customer obtains control of the promised good or
service. The amount of revenue recognized reflects
the consideration we expect to be entitled to in
exchange for the promised goods and services. Taxes
assessed by a governmental authority, that are both
imposed on, and concurrent with, a specific revenue-

132 BNY Mellon

producing transaction, are collected from a customer
and are excluded from revenue.

Performance fees are recognized in the period in
which the performance fees are earned and become
determinable. Performance fees are constrained until
all uncertainties are resolved and reversal of
previously recorded amounts is not probable.
Performance fees are generally calculated as a
percentage of the applicable portfolio’s performance
in excess of a benchmark index or a peer group’s
performance. When a portfolio underperforms its
benchmark or fails to generate positive performance,
subsequent years’ performance must generally exceed
this shortfall prior to fees being earned. Amounts
billable, which are subject to a clawback if future
performance thresholds in current or future years are
not met, are not recognized since the fees are
potentially uncollectible. These fees are recognized
when it is determined that they will be collected.
When a multi-year performance contract provides
that fees earned are billed ratably over the
performance period, only the portion of the fees
earned that are non-refundable are recognized.

Additionally, we recognize revenue from non-
refundable, implementation fees under outsourcing
contracts using a straight-line method, commencing
in the period the ongoing services are performed
through the expected term of the contractual
relationship. Incremental direct set-up costs of
implementation, up to the related customer margin or
minimum fee revenue amount, are deferred and
amortized over the same period that the related
implementation fees are recognized. If a client
terminates an outsourcing contract prematurely, the
unamortized deferred incremental direct set-up costs
and the unamortized deferred implementation fees
related to that contract are recognized in the period
the contract is terminated.

We record foreign exchange revenue, financing-
related fees and other revenue when the services are
provided and earned based on contractual terms,
when amounts are determined and collectability is
reasonably assured.

Net interest revenue

Revenue on interest-earning assets and expense on
interest-bearing liabilities are recognized based on the
effective yield of the related financial instrument.
The amortization of premiums and accretion of

Notes to Consolidated Financial Statements (continued)

discounts are included in interest revenue and are
adjusted for prepayments when they occur, such that
the effective yield remains constant throughout the
contractual life of the security. Negative interest
incurred on assets or charged on liabilities is
presented as contra interest revenue and contra
interest expense, respectively.

Pension

The measurement date for BNY Mellon’s pension
plans is December 31. Plan assets are determined
based on fair value generally representing observable
market prices. The projected benefit obligation is
determined based on the present value of projected
benefit distributions at an assumed discount rate. The
discount rate utilized is based on the yield curves of
high-quality corporate bonds available in the
marketplace. The net periodic pension expense or
credit includes service costs (if applicable), interest
costs based on an assumed discount rate, an expected
return on plan assets based on an actuarially derived
market-related value, amortization of prior service
cost and amortization of prior years’ actuarial gains
and losses.

Actuarial gains and losses include gains or losses
related to changes in the amount of the projected
benefit obligation or plan assets resulting from
demographic or investment experience different than
assumed, changes in the discount rate or other
assumptions. To the extent an actuarial gain or loss
exceeds 10% of the greater of the projected benefit
obligation or the market-related value of plan assets,
the excess is generally recognized over the future
service periods of active employees. Benefit accruals
under the U.S. pension plans and the largest foreign
pension plan in the UK are frozen. Future
unrecognized actuarial gains and losses for these
frozen plans that exceed a threshold amount are
amortized over the average future life expectancy of
plan participants with a maximum of 15 years.

Our expected long-term rate of return on plan assets
is based on anticipated returns for each applicable
asset class. Anticipated returns are weighted for the
expected allocation for each asset class and are based
on forecasts for prospective returns in the equity and
fixed-income markets, which should track the long-
term historical returns for these markets. We also
consider the growth outlook for U.S. and global
economies, as well as current and prospective interest
rates.

The market-related value utilized to determine the
expected return on plan assets is based on the fair
value of plan assets adjusted for the difference
between expected returns and actual performance of
plan assets. The difference between actual
experience and expected returns on plan assets is
included as an adjustment in the market-related value
over a five-year period.

See Note 18 for additional disclosures related to
pensions.

Stock-based compensation

Compensation expense relating to share-based
payments is recognized in staff expense on the
income statement, on a straight-line basis, over the
applicable vesting period.

Certain stock compensation grants vest when the
employee retires. New grants with this feature are
expensed by the first date the employee is eligible to
retire. We estimate forfeitures when recording
compensation cost related to share-based payment
awards.

Severance

BNY Mellon provides separation benefits for U.S.-
based employees through The Bank of New York
Mellon Corporation Supplemental Unemployment
Benefit Plan. These benefits are provided to eligible
employees separated from their jobs for business
reasons not related to individual performance. Basic
separation benefits are generally based on the
employee’s years of continuous benefited service.
Severance for employees based outside of the U.S. is
determined in accordance with local agreements and
legal requirements. Severance expense is recorded
when management commits to an action that will
result in separation and the amount of the liability can
be reasonably estimated.

Income taxes

We record current tax liabilities or assets through
charges or credits to the current tax provision for the
estimated taxes payable or refundable for the current
year. Deferred tax assets and liabilities are recorded
for future tax consequences attributable to differences
between the financial statement carrying amounts of
assets and liabilities and their respective tax bases.
Deferred tax assets and liabilities are measured using

BNY Mellon 133

Notes to Consolidated Financial Statements (continued)

enacted tax rates expected to apply to taxable income
in the years in which those temporary differences are
expected to be recovered or settled. A deferred tax
valuation allowance is established if it is more likely
than not that all or a portion of the deferred tax assets
will not be realized. A tax position that fails to meet
a more-likely-than-not recognition threshold will
result in either reduction of current or deferred tax
assets, and/or recording of current or deferred tax
liabilities. Interest and penalties related to income
taxes are recorded as income tax expense.

Derivative financial instruments

Derivatives are recorded on the balance sheet at fair
value and include futures, forwards, interest rate
swaps, foreign currency swaps and options and
similar products. Derivatives in an unrealized gain
position are recognized as assets while derivatives in
unrealized loss position are recognized as liabilities.
Derivatives are reported net by counterparty and after
consideration of cash collateral, to the extent subject
to legally enforceable netting agreements.
Derivatives designated and effective in qualifying
hedging relationships are classified in other assets or
other liabilities on the balance sheet. All other
derivatives are classified within trading assets or
trading liabilities on the balance sheet. Gains and
losses on trading derivatives are generally included in
foreign exchange revenue or investment and other
revenue, as applicable.

We enter into various derivative financial instruments
for non-trading purposes primarily as part of our
asset/liability management process. These non-
trading derivatives are designated as one of three
types of hedge activities: fair value, cash flow or net
investment hedges.

To qualify for hedge accounting, each hedge
relationship is required to be highly effective at
reducing the risk associated with the exposure being
hedged, both prospectively and retrospectively. We
formally document all relationships, including
hedging instruments and hedged items, as well as our
risk management objectives and strategy for
undertaking each hedging transaction. At inception,
the potential cause of ineffectiveness related to each
of our hedges is assessed to determine if we can
expect the hedge to be highly effective over the life of
the transaction. At hedge inception, we document the
methodology to be utilized for evaluating

134 BNY Mellon

effectiveness on an ongoing basis, and we monitor
ongoing hedge effectiveness at least quarterly.

For qualifying fair value hedges, changes in the fair
value of the derivative, and changes in the value of
the hedged item associated with the designated risks
being hedged, are recognized in earnings. Certain
amounts excluded from the assessment of
effectiveness are recorded in OCI and recognized in
earnings through an amortization approach over the
life of the derivative. We discontinue hedge
accounting prospectively when we determine that the
hedge is no longer effective or the derivative expires,
is sold, or management discontinues the derivative’s
hedge designation. Subsequent gains and losses on
these derivatives are included in foreign exchange
revenue or other trading revenue, as applicable. For
discontinued fair value hedges, the accumulated gain
or loss on the hedged item is amortized on a yield
basis over the remaining life of the hedged item.

For qualifying cash flow hedges, changes in the fair
value of the derivative are recorded in OCI, until
reclassified into earnings in the same period the
hedged item impacts earnings. If the hedge
relationship is terminated, then the change in value
will be reclassified from OCI to earnings when the
cash flows that were previously hedged affect
earnings. If cash flow hedge accounting is
discontinued as a result of a forecasted transaction no
longer being probable to occur, then the amount
reported in OCI is immediately reclassified to current
earnings.

Derivative amounts affecting earnings are recognized
in the same income statement line as the hedged item
affects earnings, principally interest revenue, interest
expense, foreign exchange revenue and staff expense.

Foreign currency transaction gains and losses related
to qualifying hedges of net investments in a foreign
operation are recorded with cumulative foreign
currency translation adjustments within OCI net of
their tax effect. The Company evaluates
effectiveness of its foreign currency derivatives
designated as hedges of its net investments utilizing
the forward rate method.

See Note 23 for additional disclosures related to
derivative financial instruments.

Notes to Consolidated Financial Statements (continued)

Earnings per common share

Earnings per common share is calculated using the
two-class method under which earnings are allocated
to common shareholders and holders of participating
securities. Unvested stock-based compensation
awards that contain non-forfeitable rights to
dividends or dividend equivalents are considered
participating securities under the two-class method.

Basic earnings per share is calculated by dividing net
income allocated to common shareholders of BNY
Mellon by the average number of common shares
outstanding and vested stock-based compensation
awards where recipients have satisfied either the
explicit vesting terms or retirement-eligibility
requirements.

Diluted earnings per common share is computed
under the more dilutive of either the treasury stock
method or the two-class method. We increase the
average number of shares of common stock
outstanding by the assumed number of shares of
common stock that would be issued assuming the
exercise of stock options and the issuance of shares
related to stock-based compensation awards using the
treasury stock method, if dilutive. Diluted earnings
per share is calculated by dividing net income
allocated to common shareholders of BNY Mellon by
the adjusted average number of common shares
outstanding.

Statement of cash flows

We have defined cash as cash and due from banks.
Distributions received from equity method investees
are classified as cash inflows from operating activities
on the statement of cash flows. Excess returns on
investments of equity method investments are
classified as cash flows from investing activities on
the statement of cash flows.

Note 2–Accounting changes and new
accounting guidance

The following accounting guidance was adopted in
2022.

Staff Accounting Bulletin No. 121

In March 2022, the SEC staff released Staff
Accounting Bulletin No. 121 (“SAB 121”). SAB 121
expresses the staff’s views regarding the accounting

for entities that have obligations to safeguard “crypto-
assets” held for their platform users. SAB 121
provides that these entities should present a liability
and corresponding asset in respect of the crypto-
assets safeguarded for their platform users, with the
liability and asset measured at the fair value of the
crypto-assets. This differs from the accounting
treatment of non-crypto-assets held in custody, which
does not result in assets recorded on a custodian’s
balance sheet. We adopted the guidance in the third
quarter of 2022. As of Dec. 31, 2022, we have
recorded a de minimis asset and liability related to
digital assets we safeguard.

Note 3–Acquisitions and dispositions

We sometimes structure our acquisitions and
divestitures with both an initial payment or receipt
and later contingent payments or receipts tied to post-
closing revenue or income growth. There were no
contingent payments or receipts in 2022. At Dec. 31,
2022, we are potentially obligated to pay additional
consideration which, using reasonable assumptions
and estimates, could range from $27 million to $45
million over the next two years. At Dec. 31, 2022,
we could potentially receive additional consideration
which, using reasonable assumptions and estimates,
could be up to $390 million over the next five years.

Transactions in 2022

On Nov. 1, 2022, BNY Mellon completed the sale of
BNY Alcentra Group Holdings, Inc. (together with its
subsidiaries, “Alcentra”) for $350 million cash
consideration at close and contingent consideration
dependent on the achievement of certain performance
thresholds. We recorded an $11 million pre-tax loss
and a $40 million after-tax loss on this transaction.
At Oct. 31, 2022, Alcentra had $32 billion in assets
under management (“AUM”) concentrated in senior
secured loans, high yield bonds, private credit,
structured credit, special situations and multi-strategy
credit strategies. In addition, goodwill related to
Alcentra of $434 million was removed from the
consolidated balance sheet as a result of this sale.

On Aug. 1, 2022, BNY Mellon completed the sale of
HedgeMark Advisors, LLC (“HedgeMark”), and
recorded a $37 million pre-tax gain. As part of the
sale, BNY Mellon received an equity interest in the
acquiring firm. In addition, goodwill related to
HedgeMark of $13 million was removed from the
consolidated balance sheet as result of this sale.

BNY Mellon 135

Notes to Consolidated Financial Statements (continued)

Transactions in 2021

Securities at Dec. 31, 2022

On Oct. 1, 2021, BNY Mellon completed the
acquisition of Milestone Group Pty Ltd., a business
solutions provider for the funds industry, which is
included in the Securities Services business segment.

On Oct. 29, 2021, BNY Mellon completed the
acquisition of the depositary and custody activities of
Nykredit, which is included in the Securities Services
business segment.

On Dec. 23, 2021, BNY Mellon completed the
acquisition of Optimal Asset Management, an
investment advisor that developed patented software
to deliver customized investment solutions for
investors, particularly direct indexing solutions,
which is included in the Market and Wealth Services
business segment.

Goodwill and intangible assets related to the 2021
acquisitions totaled $99 million and $70 million,
respectively.

Transactions in 2020

In the fourth quarter of 2020, BNY Mellon entered
into agreements to sell two legal entities. Those sales
closed in the first and third quarters of 2021. BNY
Mellon recorded a total after-tax loss of $34 million
on these transactions in the fourth quarter of 2020 and
a $4 million gain in the third quarter of 2021.

Note 4–Securities

The following tables present the amortized cost, the
gross unrealized gains and losses and the fair value of
securities at Dec. 31, 2022 and Dec. 31, 2021.

(in millions)
Available-for-sale:
U.S. Treasury
Sovereign debt/sovereign

guaranteed

Agency residential
mortgage-backed
securities (“RMBS”)

Agency commercial
mortgage-backed
securities (“MBS”)

Supranational
Foreign covered bonds
Collateralized loan

obligations (“CLOs”)
Non-agency commercial

MBS

U.S. government agencies
Foreign government

agencies

Non-agency RMBS
Other asset-backed
securities (“ABS”)

State and political

subdivisions

Other debt securities
Total securities

available-for-sale
(a)(b)
( )( )

Held-to-maturity:
Agency RMBS
U.S. Treasury
U.S. government agencies
Agency commercial MBS
Sovereign debt/sovereign

guaranteed

CLOs
Supranational
Foreign government

agencies

Non-agency RMBS
State and political

subdivisions
Total securities held-to-

maturity
Total securities

Amortized
cost

Gross
unrealized
Gains Losses

Fair
value

32,103 $

93 $2,663 $ 29,533

10,906

547

10,364

9,388

113

544

8,957

8,656
8,129
6,041

5,446

3,334
2,465

2,363
2,197

1,443

12
1

89
4
3

—
52

1
43

—

—
—

685
399
286

104

357
223

123
211

124

—
—

8,060
7,734
5,758

5,343

2,977
2,294

2,241
2,029

1,319

12
1

92,484 $ 404 $6,266 $ 86,622

34,188 $
10,863
4,206
4,014

1 $4,229 $ 29,960
9,968
—
3,672
—
3,603
—

895
534
411

1,388
983
443

66
30

—
—
—

—
2

—

76
26
25

6
1

1,312
957
418

60
31

56,194 $

$
3 $6,205 $ 49,992
$ 148,678 $ 407 $12,471 $ 136,614

(a) The amortized cost of available-for-sale securities is net of the

(b)

allowance for credit loss of $1 million. The allowance for credit
loss primarily relates to non-agency RMBSs.
Includes gross unrealized gains of $347 million and gross
unrealized losses of $179 million recorded in accumulated other
comprehensive income related to securities that were
transferred from available-for-sale to held-to-maturity. The
unrealized gains primarily relate to agency RMBS, U.S.
Treasury securities and agency commercial MBS. The
unrealized losses primarily relate to agency RMBS and U.S.
Treasury securities. The unrealized gains and losses will be
amortized into net interest revenue over the contractual lives of
the securities.

136 BNY Mellon

Notes to Consolidated Financial Statements (continued)

Amortized
cost

Gross
unrealized
Gains Losses

Fair
value

The following table presents pre-tax net securities
(losses) gains by type.

Securities at Dec. 31, 2021

(in millions)
Available-for-sale:
U.S. Treasury
Agency RMBS
Sovereign debt/sovereign

guaranteed

Agency commercial MBS
Supranational
Foreign covered bonds
CLOs
Non-agency commercial

MBS

Non-agency RMBS
Foreign government

agencies

U.S. government agencies
State and political

subdivisions

Other ABS
Corporate bonds
Other debt securities
Total securities

available-for-sale
(a)(b)

28,966 $ 771 $ 328 $ 29,409
14,530
14,333

270

13,367
8,102
7,599
6,236
4,441

3,083
2,641

2,694
2,464

2,543
2,205
2,099
1

79
345
24
25
3

65
132

9
99

11
7
19
—

67
42
50
23
5

23
25

17
27

40
22
52
—

13,379
8,405
7,573
6,238
4,439

3,125
2,748

2,686
2,536

2,514
2,190
2,066
1

$ 100,774 $1,859 $ 794 $ 101,839

Held-to-maturity:
Agency RMBS
U.S. Treasury
Agency commercial MBS
U.S. government agencies
CLOs
Sovereign debt/sovereign

guaranteed
Supranational
Non-agency RMBS
State and political

subdivisions
Total securities held-to-

36,167 $ 428 $ 388 $ 36,207
11,550
11,617
4,057
4,068
2,927
2,998
982
983

103
52
71
1

36
41
—
—

922
54
43

18
—
2

2
—
—

—

938
54
45

maturity
Total securities

56,866 $ 526 $ 617 $ 56,775
$
$ 157,640 $2,385 $1,411 $ 158,614

(b)

(a) The amortized cost of available-for-sale securities is net of the
allowance for credit loss of $10 million. The allowance for
credit loss primarily relates to CLOs.
Includes gross unrealized gains of $455 million and gross
unrealized losses of $75 million recorded in accumulated other
comprehensive income related to securities that were
transferred from available-for-sale to held-to-maturity. The
unrealized gains primarily relate to U.S. Treasury securities,
agency RMBS and agency commercial MBS. The unrealized
losses primarily relate to U.S. Treasury securities and agency
RMBS. The unrealized gains and losses will be amortized into
net interest revenue over the contractual lives of the securities.

The following table presents the realized gains and
losses, on a gross basis.

Net securities gains (losses)
(in millions)
)
(
Realized gross gains
Realized gross losses
g

Total net securities (losses) gains $ (443) $

) g

(

2022

2021

92 $

(535)

2020
46
(13)
)
(
33

28 $
(23)
)
(
5 $

Net securities gains (losses)
)
(in millions)
(
State and political subdivisions
Corporate bonds
Non-agency RMBS
U.S. Treasury
Supranational
Foreign government agencies
Other

2022

2021

2020
$ (337) $ — $ —
1
(1)
8
7
8
10
33

(3)
2
(3)
1
1
7
5 $

(177)
49
12
(2)
(5)
17

Total net securities (losses) gains $ (443) $

) g

(

In 2022, agency RMBS, U.S. government agencies
and agency commercial MBS with an aggregate
amortized cost of $6.2 billion and fair value of $6.1
billion were transferred from available-for-sale
securities to held-to-maturity securities.

In 2021, U.S. Treasury securities, agency RMBS,
agency commercial MBS, CLOs and U.S.
government agencies with an aggregate amortized
cost of $13.4 billion and fair value of $13.8 billion
were transferred from available-for-sale securities to
held-to-maturity securities.

The above transfers reduced the impact of changes in
interest rates on accumulated other comprehensive
income.

Allowance for credit losses – Securities

The allowance for credit losses related to securities
was $1 million at Dec. 31, 2022 and related to non-
agency RMBS. The allowance for credit losses
related to securities was $10 million at Dec. 31, 2021,
and primarily related to the available-for-sale CLO
portfolio.

Credit quality indicators – Securities

At Dec. 31, 2022, the gross unrealized losses on the
securities portfolio were primarily attributable to an
increase in interest rates from the date of purchase,
and for certain securities that were transferred from
available-for-sale to held-to-maturity, an increase in
interest rates through the date they were transferred.
Specifically, $179 million of the unrealized losses at
Dec. 31, 2022 and $75 million at Dec. 31, 2021
reflected in the tables below relate to certain
securities that were previously transferred from
available-for-sale to held-to-maturity. The unrealized

BNY Mellon 137

Notes to Consolidated Financial Statements (continued)

losses will be amortized into net interest revenue over
the contractual lives of the securities. The transfer
created a new cost basis for the securities. As a
result, if these securities have experienced unrealized
losses since the date of transfer, the corresponding

unrealized losses would be reflected in the held-to-
maturity securities portfolio in the following tables.
We do not intend to sell these securities, and it is not
more likely than not that we will have to sell these
securities.

The following tables show the aggregate fair value of available-for-sale securities with a continuous unrealized loss
position for less than 12 months and those that have been in a continuous unrealized loss position for 12 months or
more without an allowance for credit losses.

Available-for-sale securities in an unrealized loss
position without an allowance for credit losses at
Dec. 31, 2022

(in millions)
U.S. Treasury
Agency RMBS
Agency commercial MBS
Sovereign debt/sovereign guaranteed
Supranational
CLOs
Foreign covered bonds
Non-agency commercial MBS
Foreign government agencies
U.S. government agencies
Non-agency RMBS
Other ABS
State and political subdivisions
p

Total securities available-for-sale (a)
( )

Less than 12 months

12 months or more

Total

Fair
value
14,058 $
7,929
6,088
4,176
3,451
4,806
2,830
1,914
1,148
1,710
588
333
—
49,031 $

Unrealized
losses
824
376
389
184
109
94
83
201
43
186
16
18
—
2,523

Fair
value
15,236 $
789
1,878
3,788
2,571
403
1,977
932
1,013
208
1,148
876
12
30,831 $

Unrealized
losses
1,839
168
296
363
290
10
203
156
80
37
193
106
—
3,741

Fair
value
29,294 $
8,718
7,966
7,964
6,022
5,209
4,807
2,846
2,161
1,918
1,736
1,209
12
79,862 $

Unrealized
losses
2,663
544
685
547
399
104
286
357
123
223
209
124
—
6,264

(a)

Includes $120 million of gross unrealized losses for less than 12 months and $59 million of gross unrealized losses for 12 months or
more recorded in accumulated other comprehensive income related to securities that were transferred from available-for-sale to held-to-
maturity. The unrealized losses are primarily related to agency RMBS and U.S. Treasury securities and will be amortized into net
interest revenue over the contractual lives of the securities.

Available-for-sale securities in an unrealized loss
position without an allowance for credit losses at
Dec. 31, 2021

(in millions)
U.S. Treasury
Sovereign debt/sovereign guaranteed
Agency RMBS
Supranational
Agency commercial MBS
Foreign covered bonds
CLOs
Non-agency RMBS
State and political subdivisions
U.S. government agencies
Other ABS
Foreign government agencies
Corporate bonds
Non-agency commercial MBS

( )
Total securities available-for-sale (a)

Less than 12 months

12 months or more

Total

Fair
value
16,855 $
6,040
4,089
3,093
2,233
2,694
1,808
1,573
1,848
1,780
1,383
1,446
1,247
947
47,036 $

Unrealized
losses
235
66
44
44
39
23
3
20
40
27
20
17
42
16
636

Fair
value
1,944 $
58
457
305
585
—
318
345
13
—
201
15
198
222
4,661 $

Unrealized
losses
93
1
29
6
3
—
2
5
—
—
2
—
10
7
158

Fair
value
18,799 $
6,098
4,546
3,398
2,818
2,694
2,126
1,918
1,861
1,780
1,584
1,461
1,445
1,169
51,697 $

Unrealized
losses
328
67
73
50
42
23
5
25
40
27
22
17
52
23
794

(a)

Includes $47 million of gross unrealized losses for less than 12 months and $28 million of gross unrealized losses for 12 months or more
recorded in accumulated other comprehensive income related to securities that were transferred from available-for-sale to held-to-
maturity. The unrealized losses are primarily related to U.S. Treasury securities and agency RMBS and will be amortized into net
interest revenue over the contractual lives of the securities.

138 BNY Mellon

Notes to Consolidated Financial Statements (continued)

The following tables show the credit quality of the held-to-maturity securities. We have included certain credit
ratings information because the information can indicate the degree of credit risk to which we are exposed.
Significant changes in ratings classifications could indicate increased credit risk for us and could be accompanied by
an increase in the allowance for credit losses and/or a reduction in the fair value of our securities portfolio.

Held-to-maturity securities portfolio at Dec. 31, 2022

Ratings (a)
g ( )

(dollars in millions)
Agency RMBS
U.S. Treasury
U.S. government agencies
Agency commercial MBS
Sovereign debt/sovereign guaranteed (b)
CLOs
Supranational
Foreign government agencies
Non-agency RMBS
State and political subdivisions
p

Total held-to-maturity securities

Amortized
cost
34,188
10,863
4,206
4,014
1,388
983
443
66
30
13
56,194

(a) Represents ratings by Standard & Poor’s (“S&P”) or the equivalent.
(b) Primarily consists of exposure to Germany, UK and France.

Held-to-maturity securities portfolio at Dec. 31, 2021

(dollars in millions)
Agency RMBS
U.S. Treasury
Agency commercial MBS
U.S. government agencies
CLOs
Sovereign debt/sovereign guaranteed (b)
Supranational
Non-agency RMBS
State and political subdivisions
p

Total held-to-maturity securities

Amortized
cost
36,167
11,617
4,068
2,998
983
922
54
43
14
56,866

(a) Represents ratings by S&P or the equivalent.
(b) Primarily consists of exposure to France, UK and Germany.

Net
unrealized
gain (loss)
(4,228)
(895)
(534)
(411)
(76)
(26)
(25)
(6)
1
(2)
( )
(6,202)

BB+
and
lower

A+/
A-

Not
BBB+/
AAA/
AA-
rated
BBB-
100% —% —% —% —%
—
100
—
100
—
100
—
100
—
100
—
100
—
100
2
22
3
2
100% —% —% —% —%

—
—
—
—
—
—
—
58
2

—
—
—
—
—
—
—
17
—

—
—
—
—
—
—
—
1
93

Ratings (a)
g ( )

A+/
A-

BB+
and
lower

Net
Not
BBB+/
AAA/
unrealized
rated
BBB-
AA-
gain (loss)
100% —% —% —% —%
40
—
100
(67)
—
100
(11)
—
100
(71)
—
100
(1)
—
16
100
—
— 100
2
23
2
5
5
1
(91)
100% —% —% —% —%
)
(

—
—
—
—
—
—
59
2

—
—
—
—
—
—
15
—

—
—
—
—
—
—
1
88

BNY Mellon 139

Notes to Consolidated Financial Statements (continued)

Maturity distribution

The following table shows the maturity distribution by carrying amount and yield (on a tax equivalent basis) of our
securities portfolio.

Within 1 year
Amount Yield (a)

1-5 years
Amount Yield (a)

5-10 years
Amount Yield (a)

After 10 years
Amount Yield (a)

Total
Amount Yield (a)

$ 9,221
1.35% $ 11,658
3,718
5,875
2.51
1,392
4,860
1.85
1,219
4,085
2.02
1,660
513
1.70
1,164
2.99
20
—
— 5.75
—
—
—

1.52% $ 6,632
1.36
771
1,469
2.45
454
2.41
68
1.82
947
2.87
—
—
—
—

1.24% $ 2,022
—
0.47
13
2.60
—
0.26
—
1.50
163
2.80
12
—
1
—

Maturity distribution and yields on

securities at Dec. 31, 2022

(dollars in millions)
Available-for-sale:
U.S. Treasury
Sovereign debt/sovereign guaranteed
Supranational
Foreign covered bonds
Foreign government agencies
U.S. government agencies
State and political subdivisions
Other debt securities
Mortgage-backed securities:

Agency RMBS
Non-agency RMBS
Agency commercial MBS
Non-agency commercial MBS

CLOs
Other ABS

Total securities available-for-sale

$ 16,083

1.72% $ 29,302

1.83% $ 10,341

1.46% $ 2,211

Held-to-maturity:
U.S. Treasury
U.S. government agencies
Sovereign debt/sovereign guaranteed
Foreign government agencies
Supranational
State and political subdivisions
Mortgage-backed securities:

Agency RMBS
Non-agency RMBS
Agency commercial MBS

CLOs

$ 1,728
50
36
—
48
1

1.71% $ 7,737
2,605
0.74
1,250
0.03
66
—
395
0.54
—
5.59

1.34% $ 1,398
1,290
1.38
102
0.88
—
0.79
—
1.01
4
—

1.20% $
1.66
1.06
—
—
4.65

—
261
—
—
—
8

Total securities held-to-maturity
Total securities

$ 1,863
$ 17,946

1.62% $ 12,053
1.71% $ 41,355

1.28% $ 2,794
1.68% $ 13,135

1.41% $
269
1.45% $ 2,480

(a) Yields are based upon the amortized cost of securities and consider the contractual coupon, amortization of premiums and accretion of discounts,

excluding the effect of related hedging derivatives.

Pledged assets

At Dec. 31, 2022, BNY Mellon had pledged assets of
$138 billion, including $106 billion pledged as
collateral for potential borrowings at the Federal
Reserve Discount Window and $8 billion pledged as
collateral for borrowing at the Federal Home Loan
Bank. The components of the assets pledged at Dec.
31, 2022 included $121 billion of securities, $12
billion of loans, $4 billion of trading assets and $1
billion of interest-bearing deposits with banks.

If there has been no borrowing at the Federal Reserve
Discount Window, the Federal Reserve generally
allows banks to freely move assets in and out of their

140 BNY Mellon

pledged assets account to sell or repledge the assets
for other purposes. BNY Mellon regularly moves
assets in and out of its pledged assets account at the
Federal Reserve.

At Dec. 31, 2021, BNY Mellon had pledged assets of
$144 billion, including $112 billion pledged as
collateral for potential borrowing at the Federal
Reserve Discount Window and $7 billion pledged as
collateral for borrowing at the Federal Home Loan
Bank. The components of the assets pledged at Dec.
31, 2021 included $126 billion of securities, $12
billion of loans, $5 billion of trading assets and $1
billion of interest-bearing deposits with banks.

2.92% $ 29,533
10,364
7,734
5,758
2,241
2,294
12
1

—
2.82
—
—
2.54
4.78
3.42

8,957
2,029
8,060
2,977
5,343
1,319
2.90% $ 86,622

—% $ 10,863
4,206
1,388
66
443
13

1.90
—
—
—
4.80

34,188
30
4,014
983
1.98% $ 56,194
2.81% $142,816

1.51%
1.68
2.38
2.13
1.78
2.82
4.79
3.42

4.08
3.79
2.82
3.24
5.44
2.14
2.43%

1.38%
1.49
0.87
0.79
0.96
4.83

2.31
2.41
2.34
5.34
2.07%
2.30%

Notes to Consolidated Financial Statements (continued)

At Dec. 31, 2022 and Dec. 31, 2021, pledged assets
included $24 billion and $24 billion, respectively, for
which the recipients were permitted to sell or
repledge the assets delivered.

We also obtain securities as collateral, including
receipts under resale agreements, securities borrowed,
derivative contracts and custody agreements, on terms
which permit us to sell or repledge the securities to
others. At Dec. 31, 2022 and Dec. 31, 2021, the
market value of the securities received that can be
sold or repledged was $115 billion and $122 billion,
respectively. We routinely sell or repledge these
securities through delivery to third parties. As of
Dec. 31, 2022 and Dec. 31, 2021, the market value of
securities collateral sold or repledged was $78 billion
and $78 billion, respectively.

Restricted cash and securities

Cash and securities may be segregated under federal
and other regulations or requirements. At Dec. 31,
2022 and Dec. 31, 2021, cash segregated under
federal and other regulations or requirements was $7
billion and $4 billion, respectively. Restricted cash is
primarily included in interest-bearing deposits with
banks on the consolidated balance sheet. Securities
segregated under federal and other regulations or
requirements were $3 billion at Dec. 31, 2022 and $4
billion at Dec. 31, 2021. Restricted securities were
sourced from securities purchased under resale
agreements and are included in federal funds sold and
securities purchased under resale agreements on the
consolidated balance sheet.

Note 5–Loans and asset quality

Loans

The table below provides the details of our loan
portfolio.

Loans
(in millions)
)
(
Commercial
Commercial real estate
Financial institutions
Lease financings
Wealth management loans
Wealth management mortgages
Other residential mortgages
Capital call financing
Other
Overdrafts
Margin loans
g

Total loans (a)
( )

Dec. 31,

2022
1,732 $
6,226
9,684
657
10,302
8,966
345
3,438
2,941
4,839
16,933
66,063 $

2021
2,128
6,033
10,232
731
9,792
8,200
299
2,284
2,541
3,060
22,487
67,787

(a) Net of unearned income of $225 million at Dec. 31, 2022

and $240 million at Dec. 31, 2021, primarily related to lease
financings.

We disclose information related to our loans and asset
quality by the class of financing receivable in the
following tables.

Allowance for credit losses

Activity in the allowance for credit losses on loans
and lending-related commitments is presented below.
This does not include activity in the allowance for
credit losses related to other financial instruments,
including cash and due from banks, interest-bearing
deposits with banks, federal funds sold and securities
purchased under resale agreements, held-to-maturity
securities, available-for-sale securities and accounts
receivable.

BNY Mellon 141

Total
241
—
4
4
9
254

176
78

79
—

Total
479
(18)
8
(10)
(228)
241

Notes to Consolidated Financial Statements (continued)

Allowance for credit losses activity for the year ended Dec. 31, 2022 (a)

(in millions)
Beginning balance

Charge-offs
Recoveries

Net recoveries

Provision (b)
Ending balance
Allowance for:
Loan losses
Lending-related commitments

Individually evaluated for impairment:

Loan balance (c)
Allowance for loan losses

Commercial
$

Commercial
real estate

Financial
institutions

Lease
financings

Wealth
management
loans

Wealth
management
mortgages

Other
residential
mortgages

Capital
call
financing

12 $
—
—
—
6
18 $

4 $

— $
—

199 $
—
—
—
(15)
184 $

137 $
47

62 $
—

13 $
—
—
—
11
24 $

10 $
14

— $
—

1 $

—
—
—
—

1 $

1 $
—

— $
—

1 $

—

— $
—

6 $

—
—
—
6
12 $

11 $
1

16 $
—

7 $

—
4
4
(3)
8 $

8 $
—

1 $

—

2 $

—
—
—
4
6 $

4 $
2

— $
—

(a) There was no activity in the other loan portfolio.
(b) Does not include provision for credit losses related to other financial instruments of $30 million for the year ended Dec. 31, 2022.
(c)

Includes collateral dependent loans of $79 million with $126 million of collateral at fair value.

(in millions)
Beginning balance

Charge-offs
Recoveries

Net recoveries

Provision (a)
Ending balance
Allowance for:
Loan losses
Lending-related
commitments

Individually evaluated for

impairment:
Loan balance (b)
Allowance for loan losses

Allowance for credit losses activity for the year ended Dec. 31, 2021

Commercial
$

Commercial
real estate

Financial
institutions

Lease
financings

Wealth
management
loans

Wealth
management
mortgages

Other
residential
mortgages

Capital
call

financing Other

16 $
—
—
—
(4)
12 $

430 $
—
—
—
(231)
199 $

10 $
—
2
2
1
13 $

2 $

—
—
—
(1)
1 $

1 $

—
—
—
—
1 $

7 $
(1)
—
(1)
—

6 $

13 $
(1)
6
5
(11)

7 $

— $ — $
—
—
—
2
2 $ — $

(16)
—
(16)
16

3 $

171 $

6 $

1 $

5 $

7 $

2 $ — $

196

—

— $
—

111 $
5

— $
—

18 $
—

1 $

—

— $ — $
—

—

130
5

(a) Does not include provision for credit losses benefit related to other financial instruments of $3 million for the year ended Dec. 31, 2021.
(b)

Includes collateral dependent loans of $130 million with $149 million of collateral at fair value.

Allowance for credit losses activity for the year ended Dec. 31, 2020 (a)

Commercial
real estate

Financial
institutions

Lease
financing

Wealth
management
loans

Wealth
management
mortgages

Other
residential
mortgages Foreign (b)

Commercial
$

(in millions)
Beginning at Dec. 31, 2019

Impact of adopting ASU 2016-13

Balance at Jan. 1, 2020

Charge-offs
Recoveries

Net (charge-offs) recoveries

Provision
Ending balance
Allowance for:
Loan losses
Lending-related commitments

Individually evaluated for

impairment:
Loan balance (d)
Allowance for loan losses

60 $
(43)
17
—
—
—
(1)
16 $

6 $

— $
—

76 $
14
90
—
—
—
340
430 $

324 $
106

— $
—

20 $
(6)
14
—
—
—
(4)
10 $

6 $
4

— $
—

3 $

—
3
—
—
—
(1)
2 $

2 $

—

— $
—

5 $
(5)
—
—
—
—
1
1 $

1 $
—

— $
—

15 $
(7)
8
—
—
—
(1)
7 $

6 $
1

20 $
—

13 $
2
15
(1)
5
4
(6)
13 $

13 $
—

— $
—

Total
216
(69)
147
(1)
5
4
328
479

24 $
(24)
—
—
—
—
—
— $

— $
—

358
121

— $
—

20
—

(a) There was no activity in the capital call and other loan portfolios.
(b) The allowance related to foreign exposure has been reclassified to financial institutions ($10 million), commercial ($10 million) and lease financings

($4 million).

(c) Does not include provision for credit losses related to other financial instruments of $8 million for the year ended Dec. 31, 2020.
(d)

Includes collateral dependent loans of $20 million with $30 million of collateral at fair value.

142 BNY Mellon

Notes to Consolidated Financial Statements (continued)

Nonperforming assets

The table below presents our nonperforming assets.

Nonperforming assets

(in millions)
Nonperforming loans:

Other residential mortgages
Wealth management mortgages
Commercial real estate

Total nonperforming loans

Other assets owned
p
Total nonperforming assets

Dec. 31, 2022
Recorded investment
Without an
allowance

With an
allowance

30 $
8
—
38
—
38 $

1 $

14
54
69
2
71 $

Total

31
22
54
107
2
109

Dec. 31, 2021
Recorded investment
Without an
allowance

With an
allowance

38 $
8
12
58
—
58 $

1 $

17
42
60
2
62 $

Total

39
25
54
118
2
120

Past due loans

The table below presents our past due loans.

Past due loans and still accruing interest

Dec. 31, 2022

Dec. 31, 2021

Days past due

30-59

60-89

54 $
43
11
5
—
113 $

1 $
1
—
—
—
2 $

≥90
— $
—
—
—
—
— $

Total
past due
55
44
11
5
—
115

Days past due

30-59

60-89

24 $
33
3
2
31
93 $

— $
—
—
1
—
1 $

≥90
— $
—
—
—
—
— $

Total
past due
24
33
3
3
31
94

(in millions)
Wealth management mortgages
Wealth management loans
Commercial real estate
Other residential mortgages
Financial institutions
Total past due loans

Loan modifications

A modified loan is considered a troubled debt
restructuring (“TDR”) if the debtor is experiencing
financial difficulties and the creditor grants a
concession to the debtor that would not otherwise be
considered. A TDR may include a transfer of real
estate or other assets from the debtor to the creditor,
or a modification of the term of the loan. Not all
modified loans are considered TDRs. We modified
10 loans in 2022 with an aggregate recorded
investment of $14 million. The modifications of the
other residential and commercial real estate loans in
2022 consisted of reducing the stated interest rates
and, in certain cases, forbearance of default and
extending the maturity dates.

Due to the coronavirus pandemic, there were two
forms of relief provided for classifying loans as
TDRs: The Coronavirus Aid, Relief, and Economic
Security Act (the “CARES Act”), the relevant
provisions of which were extended by the
Consolidated Appropriations Act, 2021, and the
Interagency Guidance. The extension period ended
Jan. 1, 2022. See Note 1 for additional details.
During 2021 and 2020, we modified loans under the
CARES Act or Interagency Guidance by providing
short-term loan payment forbearances or modified
principal and/or interest payments. These loans were
primarily residential mortgage and commercial real
estate loans. We did not identify any of the
modifications as TDRs. The unpaid principal balance
of the loans modified under the CARES Act or
Interagency Guidance was $73 million at Dec. 31,
2022 and $150 million at Dec. 31, 2021.

BNY Mellon 143

Notes to Consolidated Financial Statements (continued)

Credit quality indicators

Our credit strategy is to focus on investment-grade clients that are active users of our non-credit services. Each
customer is assigned an internal credit rating, which is mapped to an external rating agency grade equivalent, if
possible, based upon a number of dimensions, which are continually evaluated and may change over time.

The tables below provide information about the credit profile of the loan portfolio by the period of origination.

Credit profile of the loan portfolio

Dec. 31, 2022

Revolving loans

(in millions)
Commercial:

Investment grade
Non-investment grade
Total commercial
Commercial real estate:
Investment grade
Non-investment grade

Total commercial real estate

Financial institutions:
Investment grade
Non-investment grade

Total financial institutions

Wealth management loans

Investment grade
Non-investment grade

Total wealth management

loans

Wealth management mortgages
Lease financings
Other residential mortgages
Capital call financing
Other loans
Margin loans

Total loans

Originated, at amortized cost

2022

2021

2020

2019

2018

Prior to
2018

Amortized
cost

Converted to
term loans –
Amortized
cost

Accrued
interest
receivable

Total (a)

379 $
78
457

148 $
6
154

— $
—
—

43 $
—
43

45 $
—
45

963 $
70
1,033

— $
—
—

1,578
154
1,732 $

1,265
431
1,696

973
511
1,484

126
20
146

45
—

389
—
389

57
—

407
145
552

—
—
—

22
—

739
323
1,062

—
—
—

45
—

204
93
297

—
—
—

—
—

904
6
910

25
—
25

217
—

183
20
203

7,216
1,896
9,112

9,887
29

45
1,775
17
27
—
—
5,984
$ 10,147 $

57
1,976
—
70
—
—
—
4,130 $

22
918
49
—
—
—
—
1,541 $

45
775
11
—
—
—
—
1,893 $

—
485
7
—
—
—
—
832 $

217
3,012
573
248
—
—
—
5,030 $

9,916
25
—
—
3,438
2,941
10,949
37,617 $

—
22
22

—
12
12

—
—

4,675
1,551
6,226

7,756
1,928
9,684

10,273
29

10,302
8,966
657
345
3,438
2,941
16,933

—
—
—
—
—
—
—
34 $ 61,224 $

49
20
—
1
17
6
33
231

(a) Excludes overdrafts of $4,839 million. Overdrafts occur on a daily basis primarily in the custody and securities clearance business and are generally

repaid within two business days.

144 BNY Mellon

Notes to Consolidated Financial Statements (continued)

Credit profile of the loan portfolio

Dec. 31, 2021

Revolving loans

(in millions)
Commercial:

Investment grade
Non-investment grade
Total commercial
Commercial real estate:
Investment grade
Non-investment grade

Total commercial real estate

Financial institutions:
Investment grade
Non-investment grade

Total financial institutions

Wealth management loans

Investment grade
Non-investment grade

Total wealth management

loans

Wealth management mortgages
Lease financings
Other residential mortgages
Capital call financing
Other loans
Margin loans

Total loans

Originated, at amortized cost

2021

2020

2019

2018

2017

Prior to
2017

Amortized
cost

Converted to
term loans –
Amortized
cost

Accrued
interest
receivable

Total (a)

145 $
—
145

— $
—
—

1,450 $
76
1,526

— $
—
—

1,971
157
2,128 $

348 $
81
429

20 $
—
20

— $
—
—

1,577
660
2,237

705
20
725

117
1

528
97
625

—
—
—

18
—

683
568
1,251

—
—
—

73
—

8 $

—
8

173
351
524

—
—
—

6
—

298
50
348

—
—
—

104
—

601
95
696

60
—
60

122
—

205
121
326

8,015
1,432
9,447

9,320
31

118
2,058
25
—
—
—
7,697
$ 13,289 $

18
1,008
67
—
—
—
—
1,738 $

73
855
15
—
—
—
—
2,194 $

6
542
10
—
—
—
—
1,090 $

104
885
2
—
—
—
—
1,484 $

122
2,838
612
299
—
—
—
4,627 $

9,351
14
—
—
2,284
2,541
14,790
40,279 $

—
26
26

—
—
—

—
—

4,065
1,968
6,033

8,780
1,452
10,232

9,760
32

9,792
8,200
731
299
2,284
2,541
22,487

—
—
—
—
—
—
—
26 $ 64,727 $

12
14
—
1
3
2
10
61

(a) Excludes overdrafts of $3,060 million. Overdrafts occur on a daily basis primarily in the custody and securities clearance business and are generally

repaid within two business days.

Commercial loans

Financial institutions

The commercial loan portfolio is divided into
investment grade and non-investment grade
categories based on the assigned internal credit
ratings, which are generally consistent with those of
the public rating agencies. Customers with ratings
consistent with BBB- (S&P)/Baa3 (Moody’s) or
better are considered to be investment grade. Those
clients with ratings lower than this threshold are
considered to be non-investment grade.

Commercial real estate

Our income-producing commercial real estate
facilities are focused on experienced owners and are
structured with moderate leverage based on existing
cash flows. Our commercial real estate lending
activities also include construction and renovation
facilities.

Financial institution exposures are high-quality, with
95% of the exposures meeting the investment grade
equivalent criteria of our internal credit rating
classification at Dec. 31, 2022. In addition, 64% of
the financial institutions exposure is secured. For
example, securities industry clients and asset
managers often borrow against marketable securities
held in custody. The exposure to financial
institutions is generally short-term, with 85% expiring
within one year.

Wealth management loans

Wealth management loans are not typically rated by
external rating agencies. A majority of the wealth
management loans are secured by the customers’
investment management accounts or custody
accounts. Eligible assets pledged for these loans are
typically investment grade fixed-income securities,
equities and/or mutual funds. Internal ratings for this
portion of the wealth management loan portfolio,
therefore, would equate to investment grade external

BNY Mellon 145

Notes to Consolidated Financial Statements (continued)

ratings. Wealth management loans are provided to
select customers based on the pledge of other types of
assets. For the loans collateralized by other assets,
the credit quality of the obligor is carefully analyzed,
but we do not consider this portion of wealth
management loan portfolio to be investment grade.

Wealth management mortgages

Credit quality indicators for wealth management
mortgages are not correlated to external ratings.
Wealth management mortgages are typically loans to
high-net-worth individuals, which are secured
primarily by residential property. These loans are
primarily interest-only, adjustable rate mortgages
with a weighted-average loan-to-value ratio of 61% at
origination. Delinquency rate is a key indicator of
credit quality in the wealth management portfolio. At
Dec. 31, 2022, less than 1% of the mortgages were
past due.

Lease financings

At Dec. 31, 2022, the lease financings portfolio
consisted of exposures backed by well-diversified
assets, primarily real estate and large-ticket
transportation equipment. The largest components of
our lease residual value exposure were to aircraft and
freight-related rail cars. Assets are both domestic and
foreign-based, with primary concentrations in
Germany and the U.S.

Capital call financing

Capital call financing includes loans to private equity
funds that are secured by the fund investors’ capital
commitments and the funds’ right to call capital.

Other loans

Other loans primarily include loans to consumers that
are fully collateralized with equities, mutual funds
and fixed-income securities.

Margin loans

We had $16.9 billion of secured margin loans at Dec.
31, 2022, compared with $22.5 billion at Dec. 31,
2021. Margin loans are collateralized with
marketable securities, and borrowers are required to
maintain a daily collateral margin in excess of 100%
of the value of the loan. We have rarely suffered a
loss on these types of loans.

Overdrafts

Overdrafts primarily relate to custody and securities
clearance clients and totaled $4.8 billion at Dec. 31,
2022 and $3.1 billion at Dec. 31, 2021. Overdrafts
occur on a daily basis and are generally repaid within
two business days.

Reverse repurchase agreements

Reverse repurchase agreements at Dec. 31, 2022 and
Dec. 31, 2021 were fully secured with high-quality
collateral. As a result, there was no allowance for
credit losses related to these assets at Dec. 31, 2022
and Dec. 31, 2021.

Other residential mortgages

Note 6–Leasing

The other residential mortgage portfolio primarily
consists of 1-4 family residential mortgage loans and
totaled $345 million at Dec. 31, 2022 and $299
million at Dec. 31, 2021. Included in this portfolio at
Dec. 31, 2022 were $97 million of fixed rate jumbo
mortgage loans purchased in 2022 with a weighted-
average loan-to-value ratio of 70% at origination.
These loans are not typically correlated to external
ratings.

We have operating and finance leases for corporate
offices, data centers and certain equipment. Our
leases have remaining lease terms up to 16 years,
some of which include options to extend or terminate
the lease. In some of our corporate office locations,
we may enter into sublease arrangements for portions
or all of the space and/or lease term.

146 BNY Mellon

Notes to Consolidated Financial Statements (continued)

The table below presents the consolidated balance sheet information related to operating and finance leases.

Balance sheet information

(dollars in millions)
ROU assets (a)
Lease liability (b)

Weighted average:

Remaining lease term
)
Discount rate (annualized)
(

Operating
leases

$ 1,152
$ 1,336

Dec. 31, 2022
Finance
leases
$
11
$
$ — $

Dec. 31, 2021

Operating
leases

$ 1,250
$ 1,461

$
$

Finance
leases
34
24

$
$

Total
1,163
1,336

Total
1,284
1,485

10.0 years 0.8 years
1.27%

2.68%

10.5 years
2.62%

0.9 years
0.97%

Included in premises and equipment on the consolidated balance sheet.

(a)
(b) Operating lease liabilities are included in other liabilities and finance lease liabilities are included in other borrowed funds, both on the

consolidated balance sheet.

The table below presents the components of lease
expense.

See Note 26 for information on non-cash operating
and/or finance lease transactions.

Lease expense
(in millions)
Operating lease expense
Variable lease expense
Sublease income
Finance lease expense:

Amortization of ROU assets

Total lease expense

Year ended Dec. 31,
2022
224 $
36
(33)

2021
236 $
39
(33)

2020
263
47
(35)

6
233 $

3
245 $

1
276

The table below presents cash flow information
related to leases.

Cash flow information
(in millions)
Cash paid for amounts
included in measurement of
liabilities:
Operating cash flows from
operating leases

Financing cash flows from

finance leases

Year ended Dec. 31,
2022

2021

2020

224 $

260 $

284

23 $

13 $

The table below presents the maturities of lease
liabilities.

Maturities of lease liabilities
(in millions)
For the year ended Dec. 31,

2023
2024
2025
2026
2027
2028 and thereafter

Total lease payments

Less: Imputed interest

Total

Operating
leases

202
163
155
156
140
708
1,524
188
1,336

BNY Mellon 147

Notes to Consolidated Financial Statements (continued)

Note 7–Goodwill and intangible assets

Goodwill

The table below provides a breakdown of goodwill by business segment.

Goodwill by business segment

(in millions)
Balance at Dec. 31, 2020
Acquisitions (dispositions)
Foreign currency translation
Balance at Dec. 31, 2021

Impairment losses
Dispositions
g
Foreign currency translation
Balance at Dec. 31, 2022

Goodwill
p
Accumulated impairment losses

Net goodwill

Total goodwill decreased in 2022 compared with
2021 primarily reflecting the goodwill impairment
loss recorded in the third quarter of 2022, dispositions
and foreign currency translation.

Goodwill impairment testing

The goodwill impairment test is performed at least
annually at the reporting unit level. BNY Mellon’s
business segments include six reporting units for
which goodwill impairment testing is performed. As
a result of the annual goodwill impairment test
conducted in the second quarter of 2022, no goodwill
impairment was recognized.

An interim test is performed when events or
circumstances occur that may indicate that it is more
likely than not that the fair value of any reporting unit
may be less than its carrying value.

148 BNY Mellon

Securities
Services
7,033
87
)
(58)
(
7,062 $
—
(13)
)
(76)
(

6,973
—
6,973 $

Market and
Wealth
Services

Investment
and Wealth
Management

1,423 $
12
—
1,435 $
—
—
(11)

1,424
—
1,424 $

9,040 $
(5)
)
(
(20)
9,015 $
(680)
(434)
)
(148)
(

8,433
)
(680)
(
7,753 $

Consolidated
17,496
94
)
(78)
(
17,512
(680)
(447)
)
(235)
(

16,830
)
(680)
(
16,150

allocated goodwill. The fair value of the Investment
Management reporting unit was determined to be 7%
below its carrying value, resulting in a goodwill
impairment charge of $680 million. This goodwill
impairment represents a non-cash charge and did not
affect BNY Mellon’s liquidity position, tangible
common equity or regulatory capital ratios. The cash
flow estimates for the Investment Management
reporting unit are impacted by projections of the level
and mix of assets under management, market values,
operating margins and long-term growth rates.

We determined the fair value of the Investment
Management reporting unit using an income approach
based on management’s projections as of Sept 30,
2022. The discount rate applied to these cash flows
was 10.5% compared with the 10% discount rate used
in the annual impairment test conducted in the second
quarter of 2022. The increase was driven by a higher
risk free rate. In the third quarter of 2022, we
determined it was not necessary to perform an interim
goodwill impairment test for our other reporting
units.

Notes to Consolidated Financial Statements (continued)

Intangible assets

The table below provides a breakdown of intangible assets by business segment.

Intangible assets – net carrying amount by

business segment
(in millions)
Balance at Dec. 31, 2020
Acquisitions (dispositions)
Amortization
g
Foreign currency translation
Balance at Dec. 31, 2021

Disposition
Amortization
g
Foreign currency translation
Balance at Dec. 31, 2022

Securities
Services

Market and
Wealth
Services

Investment
and Wealth
Management

194 $
70
(32)
( )
(2)
230 $
—
(33)
( )
(4)
193 $

414 $
—
(21)
( )
(1)
392 $
—
(8)
—
384 $

1,555 $
(6)
(29)
—
1,520 $
(1)
(26)
)
(
(18)
1,475 $

Other Consolidated
3,012
64
(82)
( )
(3)
2,991
(1)
(67)
)
(
(22)
2,901

849 $
—
—
—
849 $
—
—
—
849 $

Intangible assets decreased in 2022 compared with 2021, primarily reflecting amortization and foreign currency
translation.

The table below provides a breakdown of intangible assets by type.

Intangible assets

Dec. 31, 2022

Dec. 31, 2021

(dollars in millions)
Subject to amortization: (a)

Customer contracts—Securities Services
Customer contracts—Market and Wealth
Services

Customer relationships—Investment and
Wealth Management
Other

Total subject to amortization

j
Not subject to amortization: (b)

Tradenames
Customer relationships
p

Total not subject to amortization
Total intangible assets
g

Gross
carrying
amount

Accumulated
amortization

Net
carrying
amount

Remaining
weighted-
average
amortization
period

Gross
carrying
amount

Accumulated
amortization

Net
carrying
amount

731 $

(539) $

192

11 years $

747 $

(518) $

229

280

553
41
1,605

(267)

(461)
(9)
(1,276)

92
32
329

3 years

378

(356)

8 years
14 years
10 years

568
47
1,740

(456)
(8)
( )
(1,338)
)
(

112
39
402

1,290
1,282
2,572
4,177 $

N/A
N/A
N/A
(1,276) $

1,290
1,282
2,572
2,901

N/A
N/A
N/A
N/A $ 4,329 $

1,294
1,295
2,589

1,294
1,295
2,589
(1,338) $ 2,991
(

N/A
N/A
N/A
)

(a) Excludes fully amortized intangible assets.
(b)
N/A – Not applicable.

Intangible assets not subject to amortization have an indefinite life.

Estimated annual amortization expense for current
intangibles for the next five years is as follows:

Intangible asset impairment testing

For the year ended
Dec. 31,
2023
2024
2025
2026
2027

Estimated amortization expense
(in millions)
57
49
43
34
28

Intangible assets not subject to amortization are tested
for impairment annually or more often if events or
circumstances indicate they may be impaired.

BNY Mellon 149

Notes to Consolidated Financial Statements (continued)

Note 8–Other assets

Non-readily marketable equity securities

The following table provides the components of other
assets presented on the consolidated balance sheet.

Other assets
(in millions)
)
(
Corporate/bank-owned life insurance
Accounts receivable
Fails to deliver
Software
Prepaid pension assets
Qualified affordable housing project
investments
Cash collateral receivable on derivative
transactions
Renewable energy investments
Equity method investments
Prepaid expense
Other equity investments (a)
Income taxes receivable
Federal Reserve Bank stock
Fair value of hedging derivatives
Seed capital (b)
Assets of consolidated investment
management funds
Other (c)
( )

Total other assets

Dec. 31,

2022
5,417 $
4,924
2,569
2,260
1,651

2021
5,359
4,178
1,561
2,096
1,946

1,298

1,153

1,014
871
803
764
695
481
478
319
218

304
1,027
939
476
449
538
472
206
357

209
1,884
25,855 $

462
886
22,409

(a)

(b)

Includes strategic equity, private equity and other
investments.
Includes investments in BNY Mellon funds which hedge
deferred incentive awards.

(c) At Dec. 31, 2022 and Dec. 31, 2021, other assets include $6
million and $7 million, respectively, of Federal Home Loan
Bank stock, at cost.

150 BNY Mellon

Non-readily marketable equity securities do not have
readily determinable fair values. These investments
are valued using a measurement alternative where the
investments are carried at cost, less any impairment,
and plus or minus changes resulting from observable
price changes in orderly transactions for an identical
or similar investment of the same issuer. The
observable price changes are recorded in investment
and other revenue on the consolidated income
statement. Our non-readily marketable equity
securities totaled $445 million at Dec. 31, 2022 and
$264 million at Dec. 31, 2021 and are included in
other equity investments in the table above.

The following table presents the adjustments on the
non-readily marketable equity securities.

Adjustments on non-readily marketable equity

securities
(in millions)
)
(
Upward adjustments
Downward adjustments

Net adjustments
j

2022
125 $
(8)
117 $

2021
105 $
—
105 $

2020

Life-to-
date
283
(12)
)
(
271

21 $
—
21 $

Qualified affordable housing project investments

We invest in affordable housing projects primarily to
satisfy the Company’s requirements under the
Community Reinvestment Act. Our total investment
in qualified affordable housing projects totaled $1.3
billion at Dec. 31, 2022 and $1.2 billion at Dec. 31,
2021. Commitments to fund future investments in
qualified affordable housing projects totaled $614
million at Dec. 31, 2022 and $543 million at Dec. 31,
2021 and are recorded in other liabilities on the
consolidated balance sheet. A summary of the
commitments to fund future investments is as
follows: 2023 – $239 million; 2024 – $135 million;
2025 – $172 million; 2026 – $24 million; 2027 – $1
million; and 2028 and thereafter – $43 million.

Tax credits and other tax benefits recognized were
$145 million in 2022, $148 million in 2021 and $137
million in 2020.

Amortization expense included in the provision for
income taxes was $123 million in 2022, $124 million
in 2021 and $113 million in 2020.

Notes to Consolidated Financial Statements (continued)

Investments valued using net asset value (“NAV”) per
share

In our Investment and Wealth Management business
segment, we make seed capital investments in certain
funds we manage. We also hold private equity
investments, primarily small business investment
companies (“SBICs”), which are compliant with the

Volcker Rule, and certain other corporate
investments. Seed capital, private equity and other
corporate investments are included in other assets on
the consolidated balance sheet. The fair value of
certain of these investments was estimated using the
NAV per share for our ownership interest in the
funds.

The table below presents information on our investments valued using NAV.

Investments valued using NAV

Dec. 31, 2022

Dec. 31, 2021

(in millions)
Seed capital (a) (b)
Private equity investments (c)
Other

Total

Fair value
3
130
5
138

Unfunded
commitments

$ — $
53
—
53

Fair value
101
113
4
218

Unfunded
commitments
21
$
61
—
82

(a) Seed capital investments at Dec. 31, 2022 are generally redeemable on request. Distributions are received as the underlying

investments in the funds, which have redemption notice periods of seven days, are liquidated. At Dec. 31, 2021, seed capital investments
primarily include leveraged loans and structured credit funds, which are generally not redeemable. Distributions from such investments
will be received as the underlying investments in the funds, which have lives of three to 11 years, are liquidated.
Includes investments in funds that relate to deferred compensation arrangements with employees.

(b)
(c) Private equity investments primarily include Volcker Rule-compliant investments in SBICs that invest in various sectors of the economy.
Private equity investments do not have redemption rights. Distributions from such investments will be received as the underlying
investments in the private equity investments, which have a life of 10 years, are liquidated.

Note 9–Deposits

Time deposits in denominations of $250,000 or more
totaled $1.4 billion at Dec. 31, 2022 and $549 million
at Dec. 31, 2021.

At Dec. 31, 2022, the scheduled maturities of total
time deposits are $1.4 billion in 2023, $143 million in
2024 and less than $1 million in 2025. No time
deposits are scheduled to mature after 2025.

Note 10–Contract revenue

Fee and other revenue in the Securities Services,
Market and Wealth Services and Investment and
Wealth Management business segments is primarily
variable, based on levels of assets under custody and/
or administration (“AUC/A”), AUM and the level of
client-driven transactions, as specified in fee
schedules.

Investment services fees are based primarily on the
market value of AUC/A; client accounts, balances
and the volume of transactions; securities lending
volume and spreads; and fees for other services.
Certain fees based on the market value of assets are
calculated in arrears on a monthly or quarterly basis.

Investment services fees also include transaction-
based fees, which are driven by customer actions and
are delivered at a point-in-time. These transaction-
based fees are generally recognized on trade date.
Other contractual investment services fees are driven
by the amount of AUC/A or the number of accounts
or securities positions and are billed on a monthly or
quarterly basis.

Substantially all services within the Securities
Services and Market and Wealth Services business
segments are provided over time. Revenue on these
services is recognized using the time elapsed method,
equal to the expected invoice amount, which typically
represents the value provided to the customer for our
performance completed to date.

Investment management fees are dependent on the
overall level and mix of AUM. The management
fees, expressed in basis points, are charged for
managing those assets. Management fees are
typically subject to fee schedules based on the overall
level of assets managed and products in which those
assets are invested.

Investment management fee revenue also includes
transactional- and account-based fees. These fees,

BNY Mellon 151

Notes to Consolidated Financial Statements (continued)

along with distribution and servicing fees, are
recognized when the services have been completed.
Clients are generally billed for services performed on
a monthly or quarterly basis.

Performance fees are generally calculated as a
percentage of the applicable portfolio’s performance
in excess of a benchmark index or a peer group’s
performance. Performance fees are recognized at the

end of the measurement period when they are
determinable.

See Note 24 for additional information on our
principal business segments, Securities Services,
Market and Wealth Services and Investment and
Wealth Management, and the primary services
provided.

Disaggregation of contract revenue

Contract revenue is included in fee and other revenue on the consolidated income statement. The following tables
present fee and other revenue related to contracts with customers, disaggregated by type of fee revenue, for each
business segment. Business segment data has been determined on an internal management basis of accounting,
rather than GAAP which is used for consolidated financial reporting.

Disaggregation of contract revenue by business segment

2022

2021

Year ended Dec. 31,

Securities
Services

Market and
Wealth
Services

Investment
and Wealth
Management

Other

Total

Securities
Services

Market and
Wealth
Services

Investment
and Wealth
Management

Other

Total

4,890 $

3,564 $

99 $

(65) $ 8,488

4,919 $

3,284 $

100 $

(70) $ 8,233

—
30
4
215

23
23
(66)
143

3,290
1
192
(245)

(14)
1
—
1

3,299
55
130
114

—
19
5
132

18
48
(5)
4

3,553
—
113
(35)

(19)
1
(1)
—

3,552
68
112
101

5,139

3,687

3,337

(77)

12,086

5,075

3,349

3,731

(89)

12,066

(in millions)
Fee and other revenue – contract

revenue:

Investment services fees
Investment management and

performance fees

Financing-related fees
Distribution and servicing fees
Investment and other revenue
Total fee and other revenue

– contract revenue

Fee and other revenue – not in

scope of ASC 606 (a)(b)

Total fee and other revenue

865
6,004 $

185
3,872 $

(15)

800
(235)
3,322 $ (312) $ 12,886

743
5,818 $

234
3,583 $

118
3,849 $

1,235
140
51 $ 13,301

(a) Primarily includes investment services fees, foreign exchange revenue, financing-related fees and investment and other revenue, all of which are

accounted for using other accounting guidance.

(b) The Investment and Wealth Management business segment is net of (loss) income attributable to noncontrolling interests related to consolidated

investment management funds of $(13) million in 2022 and $12 million in 2021.

Disaggregation of contract revenue by business segment

Year ended Dec. 31, 2020

(in millions)
Fee and other revenue – contract revenue:

Investment services fees
Investment management and performance fees
Financing-related fees
Distribution and servicing fees
Investment and other revenue

Total fee other revenue – contract revenue

Fee and other revenue – not in scope of ASC 606 (a)(b)

Total fee and other revenue

Securities
Services

Market and
Wealth
Services

Investment
and Wealth
Management

Other

Total

4,681 $
—
18
4
160
4,863
815
5,678 $

3,262 $
17
59
(26)
79
3,391
187
3,578 $

96 $

3,373
2
137
(148)
3,460
35
3,495 $

7,986
(53) $
3,373
(17)
80
1
115
—
92
1
11,646
(68)
139
1,176
71 $ 12,822

(a) Primarily includes investment services fees, foreign exchange revenue, financing-related fees and investment and other revenue, all of which are

accounted for using other accounting guidance.

(b) The Investment and Wealth Management business segment is net of income attributable to noncontrolling interests related to consolidated investment

management funds of $9 million in 2020.

152 BNY Mellon

Notes to Consolidated Financial Statements (continued)

Contract balances

Our clients are billed based on fee schedules that are
agreed upon in each customer contract. Receivables
from customers were $2.6 billion at Dec. 31, 2022
and $2.5 billion at Dec. 31, 2021.

Contract assets represent accrued revenues that have
not yet been billed to the customers due to certain
contractual terms other than the passage of time and
were $48 million at Dec. 31, 2022 and $42 million at
Dec. 31, 2021. Accrued revenues recorded as
contract assets are usually billed on an annual basis.

Both receivables from customers and contract assets
are included in other assets on the consolidated
balance sheet.

Contract liabilities represent payments received in
advance of providing services under certain contracts
and were $164 million at Dec. 31, 2022 and $163
million at Dec. 31, 2021. Contract liabilities are
included in other liabilities on the consolidated
balance sheet. Revenue recognized in 2022 relating
to contract liabilities as of Dec. 31, 2021 was $115
million.

Changes in contract assets and liabilities primarily
relate to either party’s performance under the
contracts.

Contract costs

Incremental costs for obtaining contracts that are
deemed recoverable are capitalized as contract costs.
Such costs result from the payment of sales
incentives, primarily in the Wealth Management
business, and totaled $58 million at Dec. 31, 2022
and $64 million at Dec. 31, 2021. Capitalized sales
incentives are amortized based on the transfer of
goods or services to which the assets relate. The
amortization of capitalized sales incentives, which is
primarily included in staff expense on the
consolidated income statement, totaled $19 million in
2022, $20 million in 2021 and $21 million in 2020.

Costs to fulfill a contract are capitalized when they
relate directly to an existing contract or a specific
anticipated contract, generate or enhance resources
that will be used to fulfill performance obligations,
and are recoverable. Such costs generally represent
set-up costs, which include any direct cost incurred at
the inception of a contract which enables the

fulfillment of the performance obligation, and totaled
$77 million at Dec. 31, 2022 and $23 million at Dec.
31, 2021. These capitalized costs are amortized on a
straight-line basis over the expected contract period.

Unsatisfied performance obligations

We do not have any unsatisfied performance
obligations other than those that are subject to a
practical expedient election under ASC 606, Revenue
From Contracts With Customers. The practical
expedient election applies to (i) contracts with an
original expected length of one year or less, and (ii)
contracts for which we recognize revenue at the
amount to which we have the right to invoice for
services performed.

Note 11–Net interest revenue

The following table provides the components of net
interest revenue presented on the consolidated income
statement.

Net interest revenue
(in millions)
Interest revenue
Deposits with the Federal Reserve
and other central banks

Deposits with banks
Federal funds sold and securities
purchased under resale
agreements

Loans
Securities:
Taxable
Exempt from federal income
taxes
Total securities
Trading securities
Total interest revenue
Interest expense
Deposits in domestic offices
Deposits in foreign offices
Federal funds purchased and
securities sold under repurchase
agreements

Trading liabilities
Other borrowed funds
Commercial paper
Customer payables
Long-term debt

g
Total interest expense
Net interest revenue
Provision for credit losses

Year ended Dec. 31,
2022

2021

2020

$ 1,019 $
221

(77) $
48

50
134

1,200
1,999

120
958

545
1,142

2,502

1,702

2,118

35
2,537
142
7,118

42
1,744
52
2,845

28
2,146
92
4,109

980
607

(27)
(148)

176
(15)

934
68
9
—
156
860
3,614
3,504
39

(4)
8
8
—
(2)
392
227
2,618
(231)
)
(

283
15
16
7
28
622
1,132
2,977
336

Net interest revenue after
provision for credit losses

$ 3,465 $ 2,849 $ 2,641

BNY Mellon 153

Notes to Consolidated Financial Statements (continued)

Note 12–Income taxes

The components of the income tax provision are as
follows:

Provision for income taxes
(in millions)
Current tax expense:

Federal
Foreign
State and local

Total current tax expense
Deferred tax expense (benefit):

Federal
Foreign
State and local

Total deferred tax expense
(benefit)
Provision for income taxes $

Year ended Dec. 31,
2022

2021

2020

190 $
404
19
613

160 $
353
107
620

465
407
163
1,035

104
(5)
56

208
22
27

(145)
16
(64)

155
768 $

257
877 $

(193)
842

The components of income before taxes are as
follows:

Income before taxes
(in millions)
Domestic
Foreign

Income before taxes

2021

Year ended Dec. 31,
2022

2020
$ 1,697 $ 2,965 $ 2,698
1,770
$ 3,328 $ 4,648 $ 4,468

1,683

1,631

The components of our net deferred tax liability are
as follows:

Net deferred tax liability
)
(in millions)
(
Depreciation and amortization
Pension obligation
Other liabilities
Renewable energy investment
Securities valuation
Equity investments
Leasing
Other assets
Credit losses on loans
Reserves not deducted for tax
Tax credit carryforward
Employee benefits
U.S. foreign tax credits
Valuation allowance

Net deferred tax liability
y

Dec. 31,

2022

2021
$ 2,063 $ 2,149
451
260
238
81
58
(2)
(36)
(61)
(126)
—
(281)
(83)
83
$ 2,056 $ 2,731

374
145
205
(31)
57
(25)
(31)
(70)
(154)
(224)
(253)
(100)
100

As of Dec. 31, 2022, BNY Mellon had $100 million
of U.S. foreign tax credit carryforwards which will
begin to expire in 2029. We believe it is more likely
than not that the benefit from these foreign tax credits
will not be realized. Accordingly, we have recorded a

154 BNY Mellon

valuation allowance of $100 million. We believe it is
more likely than not that we will fully realize our
remaining deferred tax assets. This conclusion is
based on historical financial results and profit
forecasts.

As of Dec. 31, 2022, we had approximately $1.1
billion of earnings attributable to foreign subsidiaries
that have been permanently reinvested abroad and for
which no local distribution tax provision has been
recorded. If these earnings were to be repatriated, the
estimated tax liability as of Dec. 31, 2022 would be
up to $132 million.

The statutory federal income tax rate is reconciled to
our effective income tax rate below:

Effective tax rate

Federal rate
State and local income taxes, net of
federal income tax benefit

Foreign operations
Tax credits
Tax-exempt income
Federal Deposit Insurance
Corporation (“FDIC”) assessment
Stock compensation
Goodwill impairment
Divestiture of stock in subsidiary
Other – net

Effective tax rate

Year ended Dec. 31,
2022

2021
2020
21.0% 21.0% 21.0%

1.8
2.1
(6.1)
(1.0)

2.3
0.8
(4.6)
(1.0)

1.8
1.5
(4.1)
(1.0)

0.3
0.3
0.4
(0.6)
—
(0.1)
—
3.9
—
—
1.0
—
0.6
(0.7)
0.2
)
(
23.1% 18.9% 18.8%

Unrecognized tax positions
(in millions)
Beginning balance at Jan. 1, – gross $
Prior period tax positions:

Increases
Decreases

Current period tax positions
Settlements
Statute expiration

Ending balance at Dec. 31, – gross $

2022
138 $

2021
119 $

2020
173

—
(11)
8
(16)
(13)
106 $

18
(3)
9
(5)
—
138 $

45
(14)
15
(100)
—
119

Our total tax reserves as of Dec. 31, 2022 were $106
million compared with $138 million at Dec. 31, 2021.
If these tax reserves were unnecessary, $106 million
would affect the effective tax rate in future periods.
We recognize accrued interest and penalties, if
applicable, related to income taxes in income tax
expense. Included in the balance sheet at Dec. 31,
2022 is accrued interest, where applicable, of $33
million. The additional tax expense related to interest
for the year ended Dec. 31, 2022 was $5 million,

Notes to Consolidated Financial Statements (continued)

compared with $12 million for the year ended Dec.
31, 2021.

It is reasonably possible the total reserve for uncertain
tax positions could decrease within the next 12
months by approximately $5 million as a result of
adjustments related to tax years that are still subject to
examination.

Note 13–Long-term debt

Our federal income tax returns are closed to
examination through 2016. Our New York State and
New York City income tax returns are closed to
examination through 2014. Our UK income tax
returns are closed to examination through 2020.

Long-term debt
(dollars in millions)
)
(
Senior debt:
Fixed rate
Floating rate

Subordinated debt (a)
( )

Total

(a) Fixed rate.

Dec. 31, 2022

Rate

Maturity

Amount

Dec. 31, 2021
Rate

Amount

0.35 - 5.83%
4.50 - 4.92%
3.00 - 3.30%

2023 - 2033 $
2024 - 2038
2028 - 2029

28,108
1,229
1,121
30,458

0.35 - 3.95% $
0.01 - 1.26%
3.00 - 3.30%

23,053
1,579
1,299
25,931

Total long-term debt maturing during the next five
years is as follows: 2023 – $5.3 billion; 2024 – $4.9
billion; 2025 – $5.2 billion; 2026 – $4.0 billion; and
2027 – $1.6 billion.

Note 14–Variable interest entities

We have variable interests in variable interest entities
(“VIEs”), which include investments in retail,
institutional and alternative investment funds,
including, through Nov. 1, 2022, CLO structures in
which we provide asset management services, some
of which are consolidated.

We earn management fees from these funds, as well
as performance fees in certain funds, and may also
provide start-up capital for new funds. The funds are
primarily financed by our customers’ investments in
the funds’ equity or debt.

Additionally, we invest in qualified affordable
housing and renewable energy projects, which are
designed to generate a return primarily through the
realization of tax credits. The projects, which are
structured as limited partnerships and limited liability
companies, are also VIEs, but are not consolidated.

The following table presents the incremental assets
and liabilities included in the consolidated balance
sheet as of Dec. 31, 2022 and Dec. 31, 2021. The net
assets of any consolidated VIE are solely available to
settle the liabilities of the VIE and to settle any

investors’ ownership liquidation requests, including
any seed capital we invested in the VIE.

Consolidated investment management funds

(in millions)
Trading assets
Other assets

Total assets (a)

Other liabilities

Total liabilities (b)

Nonredeemable noncontrolling
interests (c)

Dec. 31,

2022
203 $
6
209 $
1 $
1 $

2021
443
19
462
3
3

7 $

196

$
$
$

(a)

(b)

(c)

Includes VMEs with assets of $86 million at Dec. 31, 2022
and $187 million at Dec. 31, 2021.
Includes VMEs with liabilities of $1 million at Dec. 31, 2022
and $2 million at Dec. 31, 2021.
Includes VMEs with nonredeemable noncontrolling interests
of $7 million at Dec. 31, 2022 and $43 million at Dec. 31,
2021.

We have not provided financial or other support that
was not otherwise contractually required to be
provided to our VIEs. Additionally, creditors of any
consolidated VIEs do not have any recourse to the
general credit of BNY Mellon.

Non-consolidated VIEs

As of Dec. 31, 2022 and Dec. 31, 2021, the following
assets and liabilities related to the VIEs where we are
not the primary beneficiary were included in our
consolidated balance sheets and primarily related to
accounting for our investments in qualified affordable
housing and renewable energy projects.

BNY Mellon 155

Notes to Consolidated Financial Statements (continued)

The maximum loss exposure indicated in the following table relates solely to our investments in, and unfunded
commitments to, the VIEs.

Non-consolidated VIEs

(in millions)
Securities – Available-for-sale (a)
Other

Dec. 31, 2022

Assets

Liabilities

Maximum
loss exposure

Dec. 31, 2021

Assets

Liabilities

— $

2,235

— $

614

— $

2,850

189 $

2,385

— $

543

Maximum
loss exposure
189
2,946

(a)

Includes investments in the Company’s sponsored CLOs.

Note 15–Shareholders’ equity

Common stock

BNY Mellon has 3.5 billion authorized shares of
common stock with a par value of $0.01 per share.
At Dec. 31, 2022, 808,444,600 shares of common
stock were outstanding.

In July 2022, our Board of Directors approved a 9%
increase in the quarterly cash dividend on common
stock, from $0.34 to $0.37 per share.

Common stock repurchase program

In June 2021, in connection with the Federal
Reserve’s release of the 2021 Comprehensive Capital
Analysis and Review (“CCAR”) stress tests, we
announced a share repurchase program approved by
our Board of Directors providing for the repurchase
of up to $6.0 billion of common shares beginning in

the third quarter of 2021 and continuing through the
fourth quarter of 2022.

In 2022, we repurchased 2.0 million common shares
at an average price of $61.08 per common share for a
total of $124 million.

156 BNY Mellon

Notes to Consolidated Financial Statements (continued)

Preferred stock

The Parent has 100 million authorized shares of preferred stock with a par value of $0.01 per share. The following
table summarizes the Parent’s preferred stock issued and outstanding at Dec. 31, 2022 and Dec. 31, 2021.

Preferred stock summary (a)

Per annum dividend rate
Greater of (i) three-month LIBOR plus 0.565% for the related

distribution period; or (ii) 4.000%

4.50% to but excluding June 20, 2023, then a floating rate equal to the
three-month LIBOR plus 2.46%

4.625% to but excluding Sept. 20, 2026, then a floating rate equal to
the three-month LIBOR plus 3.131%

4.700% to but excluding Sept. 20, 2025, then a floating rate equal to
the five-year treasury rate plus 4.358%

3.700% to but excluding March 20, 2026, then a floating rate equal to
the five-year treasury rate plus 3.352%
3.750% to but excluding Dec. 20, 2026, then a floating rate equal to
the five-year treasury rate plus 2.630%

Series A

Series D

Series F

Series G

Series H

Series I

Total

Total shares issued and
outstanding

Carrying value (b)
(in millions)

Dec. 31,
2022

Dec. 31,
2021

Dec. 31,
2022

Dec. 31,
2021

5,001

500 $

5,001

5,000

10,000

5,825

500

494

990

577

494

990

577

13,000
48,826

1,287
4,838 $

1,287
4,838

(a) All outstanding preferred stock is noncumulative perpetual preferred stock with a liquidation preference of $100,000 per share.
(b) The carrying value of the Series D, Series F, Series G, Series H and Series I preferred stock is recorded net of issuance costs.

Holders of the Series A preferred stock are entitled to
receive dividends, if declared by the Parent’s Board
of Directors, on each March 20, June 20,
September 20 and December 20. Holders of the
Series D preferred stock are entitled to receive
dividends, if declared by the Parent’s Board of
Directors, on each June 20 and December 20, to but
excluding June 20, 2023; and on each March 20, June
20, September 20 and December 20, from and
including June 20, 2023. Holders of the Series F
preferred stock are entitled to receive dividends, if
declared by the Parent’s Board of Directors, on each
March 20 and September 20, to and including Sept.
20, 2026; and on each March 20, June 20, September
20 and December 20, from and including Dec. 20,
2026. Holders of the Series G preferred stock are
entitled to receive dividends, if declared by the
Parent’s Board of Directors, on each March 20 and
September 20. Holders of the Series H preferred
stock are entitled to receive dividends, if declared by
the Parent’s Board of Directors, on each March 20,
June 20, September 20 and December 20,
commencing on March 20, 2021. Holders of the
Series I preferred stock are entitled to receive
dividends, if declared by the Parent’s Board of
Directors, on each March 20, June 20, September 20
and December 20, commencing on March 20, 2022.

BNY Mellon’s ability to declare or pay dividends on,
or purchase, redeem or otherwise acquire, shares of
our common stock or any of our shares that rank

junior to the preferred stock as to the payment of
dividends and/or the distribution of any assets on any
liquidation, dissolution or winding-up of the Parent
will be prohibited, subject to certain restrictions, in
the event that we do not declare and pay in full
preferred dividends for the then current dividend
period (in the case of dividends) or most recently
completed dividend period (in the case of
repurchases) of the Series A preferred stock or the
last preceding dividend period (in the case of
dividends) or most recently completed dividend
period (in the case of repurchases) of the Series D,
Series F, Series G, Series H and Series I preferred
stock.

All of the outstanding shares of the Series A preferred
stock are owned by Mellon Capital IV, a 100%
owned financing subsidiary of the Parent, which will
pass through any dividend on the Series A preferred
stock to the holders of its Normal Preferred Capital
Securities. The Parent’s obligations under the trust
and other agreements relating to Mellon Capital IV
have the effect of providing a full and unconditional
guarantee, on a subordinated basis, of payments due
on the Normal Preferred Capital Securities. No other
subsidiary of the Parent guarantees the securities of
Mellon Capital IV. All of the outstanding shares of
the Series D, Series F, Series G, Series H and Series I
preferred stock are held by the depositary of the
depositary shares, which will pass through the
applicable portion of any dividend on the Series D,

BNY Mellon 157

Notes to Consolidated Financial Statements (continued)

Series F, Series G, Series H and Series I preferred
stock to the holders of record of their respective
depositary shares.

In December 2021, the Parent redeemed all
outstanding shares of its Series E preferred stock,
100,000 liquidation preference per share. Deferred
fees of approximately $10 million were realized as
preferred stock dividends upon redemption.

The table below presents the Parent’s preferred dividends.

In December 2020, the Parent redeemed all
outstanding shares of its Series C preferred stock,
100,000 liquidation preference per share. Deferred
fees of approximately $15 million were realized as
preferred stock dividends upon redemption.

Preferred dividends

(dollars in millions, except
per share amounts)
Series A
Series C
Series D
Series E
Series F
Series G
Series H
Series I

Total

Depositary
shares
per share

100 (a)

4,000
100
100
100
100
100
100

2022

Per share
4,088.49 $

N/A
4,500.00
N/A
4,625.00
4,700.00
3,700.00
4,083.33

Total
dividend
20
N/A
23
N/A
46
47
22
53
211

2021

Per share
4,044.44 $

N/A
4,500.00
3,630.34
4,625.00
4,700.00
4,183.06
N/A

Total
dividend
20
N/A
23
47 (c)
46
47
24
N/A
207

2020

Per share
4,055.55 $
5,200.00
4,500.00
4,359.63
4,625.00
1,579.72
N/A
N/A

Total
dividend
20
46 (b)
22
44
46
16
N/A
N/A
194

(a) Represents Normal Preferred Capital Securities.
(b)
(c)
N/A – Not applicable.

Includes deferred fees of approximately $15 million related to the redemption of the Series C preferred stock.
Includes deferred fees of approximately $10 million related to the redemption of the Series E preferred stock.

The preferred stock is not subject to the operation of a
sinking fund and is not convertible into, or
exchangeable for, shares of our common stock or any
other class or series of our other securities. We may
redeem the Series A preferred stock, in whole or in
part, at our option. We may also, at our option,
redeem the shares of the Series D preferred stock on
any dividend payment date, in whole or in part, on or
after the dividend payment date in June 2023, the
Series F preferred stock on any dividend payment
date, in whole or in part, on or after the dividend
payment date in September 2026, the Series G
preferred stock on any dividend payment date, in
whole or in part, on or after the dividend payment
date in September 2025, the Series H preferred stock
on any dividend payment date, in whole or in part, on
or after the dividend payment date in March 2026 and
the Series I preferred stock on any dividend payment
date, in whole or in part, on or after the dividend
payment date in December 2026. The Series D,
Series F, Series G, Series H or Series I preferred
stock can be redeemed, in whole but not in part, at
any time within 90 days following a regulatory
capital treatment event. Redemption of the preferred

158 BNY Mellon

stock is subject to the prior approval of the Federal
Reserve.

Temporary equity

Temporary equity was $109 million at Dec. 31, 2022
and $161 million at Dec. 31, 2021. Temporary equity
represents the redemption value recorded for
redeemable noncontrolling interests resulting from
equity-classified share-based payment arrangements
that are currently redeemable or are expected to
become redeemable.

Capital adequacy

Regulators establish certain levels of capital for bank
holding companies (“BHCs”) and banks, including
BNY Mellon and our bank subsidiaries, in
accordance with established quantitative
measurements. For the Parent to maintain its status
as a financial holding company, our U.S. bank
subsidiaries and BNY Mellon must, among other
things, qualify as “well capitalized.” As of Dec. 31,

Notes to Consolidated Financial Statements (continued)

2022 and Dec. 31, 2021, BNY Mellon and our U.S.
bank subsidiaries were “well capitalized.”

The regulatory capital ratios of our consolidated and
largest bank subsidiary, The Bank of New York
Mellon, are shown below.

Consolidated and largest bank

subsidiary regulatory capital ratios (a)

Consolidated regulatory capital ratios:
Common Equity Tier 1 (“CET1”) ratio
Tier 1 capital ratio
Total capital ratio
Tier 1 leverage ratio
Supplementary leverage ratio (“SLR”) (b)

The Bank of New York Mellon
regulatory capital ratios:
CET1 ratio
Tier 1 capital ratio
Total capital ratio
Tier 1 leverage ratio
SLR (b)
( )

Dec. 31,

2022

2021

11.2% 11.2%
14.1
14.9
5.8
6.8

14.0
14.9
5.5
6.6

15.6% 16.5%
15.6
15.7
6.2
7.7

16.5
16.5
6.0
7.6

(a) For our CET1, Tier 1 capital and Total capital ratios, our

effective capital ratios under U.S. capital rules are the lower
of the ratios as calculated under the Standardized and
Advanced Approaches. The Tier 1 leverage ratio is based
on Tier 1 capital and quarterly average total assets. For
BNY Mellon to qualify as “well capitalized,” its Tier 1
capital and Total capital ratios must be at least 6% and
10%, respectively. For The Bank of New York Mellon, our
largest bank subsidiary, to qualify as “well capitalized,” its
CET1, Tier 1 capital, Total capital and Tier 1 leverage
ratios must be at least 6.5%, 8%, 10% and 5%, respectively.

(b) The SLR is based on Tier 1 capital and total leverage
exposure, which includes certain off-balance sheet
exposures. For The Bank of New York Mellon to qualify as
“well capitalized,” its SLR must be at least 6%.

Failure to satisfy regulatory standards, including
“well capitalized” status or capital adequacy rules
more generally, could result in limitations on our
activities and adversely affect our financial condition.
If a BHC such as BNY Mellon, or a bank such as The
Bank of New York Mellon or BNY Mellon, N.A.,
fails to satisfy minimum capital requirements or
qualify as “adequately capitalized,” regulatory
sanctions and limitations will be imposed.

The following table presents our capital components
and risk-weighted assets determined under the
Standardized and Advanced Approaches, the average
assets used for leverage capital purposes and leverage
exposure used for SLR purposes.

Capital components and risk-

weighted assets

(in millions)
CET1:

Common shareholders’ equity
Adjustments for:

Goodwill and intangible assets (a)
Net pension fund assets
Embedded goodwill
Deferred tax assets
Other

Total CET1
Other Tier 1 capital:

Preferred stock
Other

Total Tier 1 capital

Tier 2 capital:

Subordinated debt
Allowance for credit losses
Other

Total Tier 2 capital – Standardized
Approach

Excess of expected credit losses
Less: Allowance for credit losses

Total Tier 2 capital – Advanced
Approaches

Total capital:
Standardized Approach
Advanced Approaches

Risk-weighted assets:

Standardized Approach
Advanced Approaches:

Credit Risk
Market Risk
Operational Risk

Total Advanced Approaches

Dec. 31,

2022

2021

$ 35,896 $ 38,196

(17,210)
(317)
(279)
(56)
(2)
18,032

(18,649)
(400)
(300)
(55)
(46)
18,746

4,838
(14)

4,838
(99)
$ 22,856 $ 23,485

1,248 $
291
(11)

1,528
50
291

1,248
250
(11)

1,487
—
250

1,287 $

1,237

$ 24,384 $ 24,972
$ 24,143 $ 24,722

$ 159,096 $ 167,608

$ 90,243 $ 98,310
3,069
63,688
$ 161,672 $ 165,067

2,979
68,450

Average assets for Tier 1 leverage
ratio

Total leverage exposure for SLR

$ 396,643 $ 430,102
$ 336,049 $ 354,033

(a) Reduced by deferred tax liabilities associated with
intangible assets and tax deductible goodwill.

The following table presents the amount of capital by
which BNY Mellon and our largest bank subsidiary,
The Bank of New York Mellon, exceeded the capital
thresholds determined under U.S. capital rules.

Capital above thresholds at Dec. 31, 2022

(in millions)
CET1
Tier 1 capital
Total capital
Tier 1 leverage ratio
SLR

Consolidated (a)
$

4,290
6,689
4,742
6,990
6,054

The Bank of
New York
Mellon
11,175 (a)
9,236 (a)
6,751 (a)
4,033 (b)
4,442 (b)

(a) Based on minimum required standards, with applicable

buffers.

(b) Based on well capitalized standards.

BNY Mellon 159

Notes to Consolidated Financial Statements (continued)

Note 16–Other comprehensive income (loss)

Components of other comprehensive

income (loss)

(in millions)
Foreign currency translation:

Foreign currency translation adjustments arising

during the period (a)

Total foreign currency translation

Unrealized (loss) gain on assets available-for-sale:
Unrealized (loss) gain arising during the period
Reclassification adjustment (b)

Net unrealized (loss) gain on assets available-

for-sale

Defined benefit plans:

Net (loss) gain arising during the period
Amortization of prior service credit, net loss and

initial obligation included in net periodic benefit
cost (b)
Total defined benefit plans

Unrealized (loss) gain on cash flow hedges:

Unrealized hedge (loss) gain arising during the

period

Reclassification of net (gain) loss to net income:

Foreign exchange (“FX”) contracts – staff

expense

FX contracts – investment and other revenue

Total reclassifications to net income
Net unrealized (loss) gain on cash flow hedges
Total other comprehensive (loss) income

2022

Tax
(expense)
benefit

Pre-tax
amount

Year ended Dec. 31,
2021

After-tax
amount

Pre-tax
amount

Tax
(expense)
benefit

After-tax
amount

Pre-tax
amount

2020

Tax
(expense)
benefit

After-tax
amount

(455) $
(455)

(148) $
(148)

(603) $
(603)

(313) $
(313)

(63) $
(63)

(376) $
(376)

441 $
441

67 $
67

508
508

(4,292)
443

1,047
(105)

(3,245)
338

(1,515)
(5)

368
1

(1,147)
(4)

1,573
(33)

(371)
8

1,202
(25)

(3,849)

942

(2,907)

(1,520)

369

(1,151)

1,540

(363)

1,177

(400)

(306)

296

(77)

219

(138)

(107)

68
(332)

(12)
82

56
(250)

113
409

(25)
(102)

88
307

95
(43)

(18)
13

77
(30)

(16)

(12)

—

(1)

9
(1)
8
(8)

$ (4,644) $

(2)
—
(2)
2

7
(1)
6
(6)
878 $ (3,766) $ (1,433) $

(12)
—
(12)
(9)

3
—
3
3

(9)
—
(9)
(6)
207 $ (1,226) $ 1,944 $

1
—
1
6

—
—
—
(1)

1
—
1
5
(284) $ 1,660

Includes the impact of hedges of net investments in foreign subsidiaries. See Note 23 for additional information.

(a)
(b) The reclassification adjustment related to the unrealized gain (loss) on assets available-for-sale is recorded as net securities gains (losses) in investment
and other revenue on the consolidated income statement. The amortization of prior service credit, net loss and initial obligation included in net periodic
benefit cost is recorded as other expense on the consolidated income statement.

Changes in accumulated other comprehensive income (loss) attributable to The Bank of New York Mellon Corporation shareholders

(in millions)
2019 ending balance
Impact of adopting ASU 2016-03, Financial

Instruments – Credit Losses
Adjusted balance at Jan. 1, 2020

Change in 2020

2020 ending balance

Change in 2021

2021 ending balance

Change in 2022

2022 ending balance

Foreign
currency
translation
(1,652)
$

Pensions
(1,275)

—
(1,652)
506
(1,146)
(378)
(1,524)
(590)
(2,114)

—
(1,275)
(24)
(1,299)
283
(1,016)
(240)
(1,256)