The Bank of New York Mellon Annual Report 2023

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FY2023 Annual Report · The Bank of New York Mellon

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BUILDING ON

TRUST EXECUTION GROWTH W
INNOVATION CLIENTS RESILIENCE EFFICIENCY
CULTURE SOLUTIONS TALENT TRANSFORMATION

ANNUAL REPORT 2023

Robin Vince,
President and
Chief Executive Offi cer

Last year was the fi rst full year of my tenure as CEO of BNY Mellon.

It’s a privilege to lead this fi rm with its proud history, enviable

franchise and central position in the world’s capital markets.

For 240 years, BNY Mellon has enabled much of the modern-day

fi nancial system. Founded by Alexander Hamilton with $500,000

in assets, BNY Mellon is today a global fi nancial services leader

with multiple lines of business through which we manage, move

and protect nearly $50 trillion in assets for our clients, including

governments, pension funds, mutual funds, unions, endowments,

corporations, fi nancial services fi rms and the people of the world.

BNY MELLON

GLOBAL REACH AND SCALE

$47.8T

Assets under custody
and/or administration1

$2.0T

Assets under management2

$12.5T

Average daily clearance value3

$5.7T

The unique role we play in the financial system — touching

around one-fifth of the world’s investable assets — gives us a

tremendous responsibility, and our success is critical not only

to our clients’ success, but also the global economy at large.

That responsibility motivates us every day. To help our clients

achieve their ambitions. To position them at the cutting edge

of efficiency while considering all kinds of risks — from

macroeconomic shifts to cyber threats. To improve financial

performance for the benefit of our shareholders. And to make

sure that our employees have the resources and the motivation

to feel pride in what they do, constantly pushing us forward.

Still, I share the view of many of our stakeholders in continuing

to see untapped potential buried inside us. As I’ve reflected

on the attributes that BNY Mellon brings to the table — from

industry-leading positions across our businesses, to our

expansive client roster, to our important role in advancing the

future of finance — I know there is much work ahead to make

Average triparty balances3

us the company that we can be.

$2.4T

Average daily U.S. dollar
payment value3

$312B

Wealth Management
client assets4

In last year’s letter, I contemplated a series of questions about

our company’s future, which grounded some of our leadership

team’s collective work in the past year. We’ve now more clearly

defined the areas of the company where we continue to see

strength — and more importantly, where we see opportunity

to accelerate growth and better position ourselves for

the years ahead.

1 As of December 31, 2023. Consists of assets under custody and/or administration (“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 $1.7 trillion at December 31, 2023.

2 As of December 31, 2023. Excludes assets managed outside of the Investment and Wealth Management business segment.
3 Average for the year ended December 31, 2023.
4 As of December 31, 2023. Includes AUM and AUC/A in the Wealth Management line of business.

ANNUAL REPORT 2023

One of our bodies of work was to assemble a strong bench of talent

and put them in the right seats to deliver on what is needed. While

that work is never done, we have taken some important steps

forward in filling out our roster of top talent.

Throughout 2023, we worked hard on several fronts simultaneously

because we insisted on increasing the internal tempo of the

organization and delivering the beginnings of superior financial

results while laying some of the foundation for a multi-year

transformation. As we executed this work, we introduced three

strategic pillars to guide us:

• Be More for Our Clients

• Run Our Company Better

• Power Our Culture

These pillars are not a top-down consulting exercise for what

we could do; rather, they represent an articulation of what we are,

and must be, centered on. Clients, above all; amazing execution;

and a constant reminder that our people enable our success.

We have been very pleased with the way in which our teams

have embraced these pillars, and their effect is already noticeable

inside the company.

BREADTH OF OUR
CLIENT FRANCHISE

91%

of Fortune 100
companies

92%

of the Top 100
investment managers

94%

of the Top 100
banks

Sources: Fortune 100: For 2023, Fortune, Time Inc. ©2023; Investment Managers: Pensions & Investments, worldwide assets under management as of December 31, 2022, P&I Crain Communications
Inc. ©2023; Banks: S&P Global, total assets* as of December 31, 2022, ©2023 S&P Global; client penetration assessment based on positive 2023 revenue with client company or parent/holding company.

*According to S&P Global, company assets were adjusted on a best-efforts basis for pending mergers, acquisitions and divestitures as well as M&A deals that closed after the end of the reporting period
through March 31, 2023. Assets reported by non-U.S. dollar filers were converted to dollars using period-end exchange rates. Total assets were taken on an “as-reported” basis, and no adjustments were
made to account for differing accounting standards. The majority of the banks were ranked by total assets as of December 31, 2022 and the data was compiled April 12, 2023.

BNY MELLON

III

c (b)

FINANCIAL RESULTS AND
2024 PRIORITIES

MARKET POSITIONS

Securities Services

Global
Custodian1

Global provider
of Issuer Services2

TOP 5

Market and

Wealth Services

Clearing firm for
broker-dealers and
Top 3 RIA Custodian3

Global
U.S. dollar
payments clearer4

Global provider
of Clearance and
Collateral Management5

Investment and

Wealth Management

TOP 15

Global Asset Manager6

TOP 10

U.S. Private Bank7

1 Ranking based on latest available peer group company filings. Peer group included in ranking analysis: State Street, JPMorgan Chase, Citigroup, BNP Paribas, HSBC, Northern Trust and RBC.
2 Full-year 2023 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. Depositary Receipts ranked #1 based on market share sourced
from BNY Mellon internal analysis.

3 LaRoche Research Partners, “US Broker Clearing Relationship Changes 2022,” based on number of broker-dealer clients. Registered Investment Advisor rankings sourced from “Cerulli Report,

U.S. RIA Marketplace 2023,” Cerulli Associates.

4 The Clearing House. Based on CHIPS volumes for the year ended December 31, 2023.
5 Finadium market analysis as of June 2023.
6 Pensions & Investments, October 23, 2023. Ranked by total worldwide assets under management as of December 31, 2022.
7 Based on company filings and The Cerulli Report, 2022. Ranked by Wealth Management assets under management as of December 31, 2022.

ANNUAL REPORT 2023

c (b)

Delivering on Our 2023 Goals

The past year was marked by a significant change in the path of inflation, with economists

now predicting that central banks in many developed economies will cut rates in 2024.

Markets in the United States responded enthusiastically to the prospect of this pivot,

with the S&P 500 ending 2023 up 24%.

Nonetheless, the past year presented a number of global challenges, from the turmoil in a corner

of the regional banking sector to geopolitical crises. We saw a mixed economic picture, especially

outside of the U.S. Growth was essentially flat in Europe, and China remains burdened across

several dimensions, from demographics to real estate. Around the world, the quickening pace of

generative Artificial Intelligence (AI) was another watershed moment of 2023, raising a number of

questions — from its tremendous potential to improve productivity, the need for robust governance

to consider and manage novel risks, to its potential impact on labor markets. We are embracing

these questions and have significant work underway as we explore the opportunity in AI for our

company in the years ahead.

Our results for the year not only highlight BNY Mellon’s characteristic resilience, but they also

demonstrate the strength of our execution when we are appropriately organized and focused.

We reported earnings per share of $3.87 on $17.5 billion of revenue, up 7% year-over-year;

expenses of $13.3 billion, up 2% year-over-year; and return on common equity of 9%. Adjusting for

the impact of notable items, EPS of $5.05 increased by 10% on $17.7 billion of revenue, which was

up 5% year-over-year; expenses were $12.3 billion and return on tangible common equity was 22%.1, 2

At the beginning of last year, we communicated three financial goals for 2023:

• First, we expected to generate approximately 20% net interest revenue growth

year-over-year — we delivered 24%.

• Second, we set out to halve our 2022 constant currency expense growth rate in 2023

to approximately 4% year-over-year, excluding notable items — we delivered 2.7%.3

• Third, we sought to return north of 100% of 2023 earnings to common shareholders

through dividends and buybacks — we delivered 127%.

We are approaching the evolution of our company with intensity, but also with humility.

We will not get everything right. While we are still at the beginning of our journey to maximize

the potential of our firm, early proof points this past year highlight our ability not just to deliver

on our commitments, but to exceed them, giving us confidence that we can effect meaningful

change and consistently improve our financial performance over time.

1 Adjusted (Non-GAAP) measures exclude notable items.

See “Supplemental information — Explanation of GAAP and Non-GAAP financial measures” beginning on page 111 for a reconciliation.

2 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 111 for a reconciliation.

3 Adjusted (Non-GAAP) measure of constant currency expense growth rate excludes notable items and currency translation.

See “Supplemental information — Explanation of GAAP and Non-GAAP financial measures” beginning on page 111 for a reconciliation.

BNY MELLON

SECURITIES
SERVICES

Our Securities Services segment represents the largest of our segments,

and we see further growth and profitability on the horizon. Over the past

two years, we have improved our pre-tax margin from 21% in 2021 to 25%

in 2023. We continue to aim for a 30% pre-tax margin in the medium-term,

and while we acknowledge the next phase of increase will require even

harder work, we have a clear plan to achieve it.

• Driving down the cost-to-serve: Clients depend on us to help them

become more efficient, and in doing so, we make ourselves more efficient.

In 2023, we conducted a survey of key clients which revealed the vast

majority see us as a partner toward meeting their strategic goals and

supporting their longer-term business needs. Building on this, we are

continuing to invest in uplifting several platforms that support core

services, and we are focusing on reducing inefficient processes.

• Taking a more strategic approach to deepening client relationships:

This includes using enhanced tools to better understand client behavior,

quality of service, economics and revenue opportunities to expand wallet

share and improve client outcomes.

• Accelerating underlying growth: Through significant investments in

ETF Servicing, we have become a premier provider in markets globally

and expect to maintain our strong momentum through continued innovation.

Similarly, we have established a strong position in the fast-growing area

of private markets, and we are continuing to optimize our offerings and

expand our capabilities.

MARKET AND
WEALTH SERVICES

In Market and Wealth Services, our focus is to drive growth through

deliberate investments in our client platforms without compromising

profitability. Three businesses comprise this segment: Pershing,

Treasury Services, and Clearance and Collateral Management.

Pershing benefits from a strong position in the U.S. wealth market, one

of the fastest growing segments in financial services. Notwithstanding

near-term headwinds for some of our clients, we are confident that

our investments in our core platforms and client experience will drive

further market share gains over time, including in the growing market

of $1 billion-plus RIAs and hybrid broker-dealers. In addition, our wealth

advisory platform Wove continues to gain momentum as we’re capturing

business from existing clients and new opportunities to deliver our

platform, data and investment solutions.

ANNUAL REPORT 2023

In Treasury Services, we continue to benefit from a strong position

with financial institutions. We’re one of the top five U.S. dollar

payments clearers in the world, clearing roughly $2.4 trillion of

U.S. dollar payments daily, on average. Building on this strong position,

we’re selectively expanding our reach by targeting new client,

geographic and product segments. For example, we’ve been adding

capacity to drive growth with e-commerce and non-bank financial

institutions, and the completion of the multi-year uplift of our

payments platform is expected to drive an increase to our SWIFT

market share through growth in several geographies.

Our Clearance and Collateral Management business plays a special

role in financial markets as the primary provider of settlement for

U.S. government securities trades and the largest global collateral

manager in the world. We believe that this business can maintain its

healthy growth trajectory by continuing to launch new flexible collateral

management solutions that position our clients to meet their growing

liquidity needs and by continuing to increase collateral mobility and

optimization across global client venues.

INVESTMENT AND
WEALTH MANAGEMENT

Investment and Wealth Management continues to be an important

segment for the firm. While these businesses have seen headwinds

from market conditions and client de-risking, as well as the impact

of a business divestiture in Investment Management, we have taken

action to position ourselves for future growth.

We recognize that there is real work to do in this segment, and

we’ve been laying the groundwork to improve scalability and

efficiency across our Investment Management business, with a

focus on eliminating fragmented processes and moving toward

integrated platforms and solutions.

We see significant potential in unlocking the full power of our

distribution capacity, which is why we are creating a firmwide

distribution platform that combines in-house products with offerings

from select third-party managers to provide best-in-class solutions.

Within Wealth Management, we’re further expanding capabilities for

ultra-high-net-worth and family office clients as well as expanding

into target growth markets.

BNY MELLON

VII

OUR STRATEGIC PILLARS

BE MORE
FOR OUR
CLIENTS

RUN OUR
COMPANY
BETTER

POWER
OUR
CULTURE

VIII ANNUAL REPORT 2023

One of my goals coming into this role was to set

new client solutions to the market — from Bankify

a roadmap and tangible targets to reinvigorate the

to real-time payments on FedNow to white-labeling

next phase of growth for the firm. Our team clarified

LiquidityDirect to BNY Mellon Advisors — and we

and distilled several themes into our three strategic

filed more patents than ever before in 2023.

pillars: Be More for Our Clients, Run Our Company

Better and Power Our Culture. These pillars are

not fundamentally changing the businesses we

are in, nor are they a set of isolated initiatives.

Instead, they define and drive how we operate

and serve as a framework for how we approach

all aspects of our work at BNY Mellon.

BE MORE
FOR OUR
CLIENTS

As a commercial enterprise that has

operated for nearly two-and-a-half

centuries, we are able to thrive

for only one reason — by serving

our clients.

One consistent refrain we hear from clients is that

they want to do more business with us, and it’s on us

to make that easier for them, but it has not always

been so. We aim to be a trusted partner, helping

them to achieve their ambitions — but we can do

We’re focused on finding new ways to be more for

our clients within every group. For example, our

teams are working to realize the great untapped

opportunity of putting our data into action: delivering

better insights and perspectives to clients, powered

by the millions of weekly transactions we enable.

We also continue to invest in core client platforms

including fund accounting, tax services, corporate

actions and loan administration.

Beyond new solutions, we are working to enhance

the client experience across the firm and bring more

of BNY Mellon’s comprehensive platforms to our

clients, many of which currently use us for just a

single service. We hired our first Chief Commercial

Officer who is driving our strategy to empower

existing clients with a broader range of our services

while pursuing opportunities to grow our client base.

even more to deepen those relationships and reduce

At the same time, we need to seize opportunities

barriers, so we can truly serve them across the entire

in our growth markets, continuing our push to win

financial lifecycle.

BNY Mellon has long been known for pioneering new

solutions for the financial services industry — from

making the first loan to the U.S. government to more

recently bringing real-time payments to market

in the U.S.

We launched a number of products and collaborations

in 2023 including the launch of Wove and the roll-out

of our Buy-Side Trading Solutions offering. But it goes

well beyond that. All our businesses strive to bring

over clients not currently engaged with the firm.

Our company provides services in more than

100 markets today, and nearly 40% of our revenue

is derived from outside of the U.S. This year,

our teams are increasing focus on winning market

share in new regions and client segments.

BNY MELLON

RUN OUR
COMPANY
BETTER

Next, we took meaningful steps

In addition, we recognize that AI has the potential

toward running our company

to change the nature of how we work. We are actively

better in 2023, increasing

advancing our capabilities and considering how AI

discipline with how we spend

can improve the client and employee experience and

so that our investments in the

enrich existing and new products and solutions. In

business go further. We generated

2023, we formed an enterprise AI Hub, which better

double the amount of efficiency savings compared

positions our world-class data set to transform

to the prior year, which allowed us to self-fund half

insights into actions for our clients — all within a

a billion dollars of incremental investments. In our

strong risk management and governance framework

2024 budget, we’re protecting the most important

that considers the compliant, responsible and

investments in our future, and we’re embracing new

ethical use of AI as well as the novel risks posed

technologies, while remaining firmly committed to

by the technology.

margin expansion and positive operating leverage

over time. This must not come at the expense of

client service; we are firm believers that digitizing,

and a focus on efficiency more broadly, can

improve the quality of service and help us reduce

risk — both valuable outputs for our clients.

Resilience forms the foundation for running our

company better. As a key service provider to

governments around the world, and one that

plays an essential role in global markets, it’s both

a responsibility we take seriously and an attribute

we see as highly commercial. Our clients have told

As BNY Mellon has grown over the years, our

us that our company’s resilience adds differentiated

businesses and functions have operated in a way

value for them — and we know our work is never

that was vertically integrated and became siloed.

done when it comes to safeguarding clients’ assets

To better align our capabilities and optimize results

and helping markets run smoothly. Especially in

for our clients, we laid the groundwork in 2023 for

a year marked by uncertainty, being humble and

an evolution of our operating model. This transition,

resilient mattered. We continued to prioritize

which will unify the business around the platforms

the strength and soundness of our systems, our

we deliver, is designed to serve clients more

platforms, our business model and our teams

seamlessly and help us broaden our relationships

around the world.

with them as a more integrated organization.

This new way of working will be integral to all

three of our strategic pillars. Not only will it help us

run our company better and be more for our clients,

but it will also power our culture — simplifying

complex processes, reducing risk, improving the

employee experience and enabling our people to

focus on innovating for clients.

ANNUAL REPORT 2023

POWER
OUR
CULTURE

While we focus on being more for

• Elevating Experiences and Sense of Belonging:

our clients and running our company

We want our people to feel excited and

better, everything we do depends on

supported coming to work every day, thriving

our people, and it is important that

in an environment where they can be true to

BNY Mellon is a place where people

themselves. In 2023, we proudly expanded our

are proud to work and excited to

benefits, including a zero-premium healthcare

grow their careers. Our intent is to ensure a dynamic

plan for employees earning less than $75,000

culture that is both human and high-performing.

annually and policies like caregiver leave and

Teams are focused on delivering solutions with

excellence and speed, yet at the same time, with

a sense of our shared endeavor and the spirit of

collaboration. We benefit from the scale and power

16 weeks of paid parental leave. We also launched

a new Wellbeing Support Program to provide more

targeted, personalized and quicker access to

mental health services.

of a large company while still being small enough in

• Investing in Our People: We launched our

size for business to feel personal.

Others also recognize us for this special culture.

We’re honored to be one of Fortune’s Most Admired

Companies for the 27th time, and we were also named

to JUST Capital’s “Most Just Companies” list for the

second consecutive year, ranking within the top quarter

of all companies analyzed and #1 in the Capital

Markets category.

BK Shares program last year to grant shares

to the 45,000 employees who didn’t previously

receive stock as part of their compensation.

I’m particularly proud of this initiative, which

has furthered our culture of ownership and

accountability across our company while enabling

our people to participate in the capital markets

they help serve. We are also making meaningful

investments in enhanced learning, development

• Top Talent Destination: We made strides elevating

and feedback tools to supercharge careers.

recruitment and retention programs with a special

focus on early-in-career talent. As one proof point,

we welcomed the largest class of campus analysts

in BNY Mellon’s history — a class twice the size

of the previous year, which we’re proud to be

doubling again in 2024. We also increased focus

on pay for performance and differentiation in our

compensation practices, ensuring those consistently

driving commercial outcomes were compensated

commensurately, and to improve the discipline of

compensation for those who didn’t.

BNY MELLON

COMMUNITY SOLUTIONS
AND SUSTAINABILITY

Increased participation in fi nancial markets benefi ts everyone, drives

growth and expands economies. Given our unique role and position, we

have an opportunity and responsibility to help expand access to capital,

markets and technology for people and communities around the world.

An essential part of that work is partnering alongside our clients and

empowering other fi nancial institutions, including smaller and more

specialized players. We are committed to leveraging our platforms and

expertise to help build resilient and inclusive economies,

and we have done so across several initiatives.

XII

ANNUAL REPORT 2023

Organizing a Historic Debt Issuance: In May 2023, we became

the fi rst Global Systemically Important Bank (G-SIB) to organize a

debt issuance led entirely by women-, minority- and veteran-owned

fi nancial institutions. This built upon groundwork we laid the prior

year when eight veteran-owned broker-dealers participated in a

$750 million offering of senior bank notes. In working with these

fi rms who also happened to be our clients, we understood their

expertise and capabilities, and they delivered for us while allowing

them to also build on the opportunity this role provided for them.

Empowering Better Payments: We are creating new opportunities

for institutions and the communities they serve to access the

real-time payment capabilities we’ve helped pioneer. These

innovations benefi t real people — giving them more control over the

timing and method of their payments is a meaningful development,

especially for individuals living paycheck-to-paycheck. In one

example, we are working to provide this service to Minority Deposit

Institutions (MDIs) like South Carolina-based Optus Bank, our

protégé bank under the U.S. Treasury Department program.

Aligning Impact With Commercial Success: We are also developing

innovative solutions including SPARKSM shares, which empowers

clients to align their liquidity investments with philanthropic

goals, using a portion of our revenue contributing to an eligible

non-profi t of their choice.1 This builds on the success we saw

with BOLD® shares, whereby a portion of profi t on our Dreyfus

Money Market Fund translates into support for students in

fi nancial need at Howard University.2

Furthering Sustainability: A growing priority for our global client

base is how BNY Mellon can help them achieve their sustainability

goals. Our approach to sustainability is through the lens of resilience

and focused on three primary areas: providing sustainable solutions

for our clients, promoting inclusive economies and continuing to

earn our clients’ trust through our high standards for governance

and risk management.

1 BNY Mellon Investment Adviser, Inc. (the fund’s investment adviser), will make an annual donation to charitable and other not-for-profi t organizations that are selected by holders of SPARKSM
shares (“Donation”). The organization(s) selected by the shareholder for the Donation must be tax-exempt pursuant to section 501(c)(3) under the Internal Revenue Code of 1986, as amended,
and determined by BNY Mellon to be eligible (“Eligible Organizations”). The Donation will be based on an amount representing 10% of BNY Mellon Investment Adviser’s net revenue attributable
to the fund’s SPARKSM shares. “Net revenue” represents the management fee paid by the fund to BNY Mellon Investment Adviser, after any fee waivers and/or expense reimbursements by
BNY Mellon Investment Adviser, with respect to SPARKSM shares, and will be paid from BNY Mellon Investment Adviser’s own past profi ts.

2 The BOLD® shares support Howard University’s GRACE Grant, which stands for Graduation, Retention, and Access to Continuing Education, with an annual charitable donation of 10% from past
profi ts. “Net revenue” represents the management fee paid by the Fund to BNY Mellon Investment Adviser, Inc. after any fee waivers and/or expense reimbursements by BNY Mellon Investment
Adviser and less any revenue sharing payments made by BNY Mellon Investment Adviser or its affi liates, with respect to the fund’s BOLD shares.

BNY MELLON

XIII

IN CONCLUSION

We are still early in our journey with a lot of work ahead. But if you

were to walk the halls of our company, I believe you would feel a

sense of excitement and energy around what’s possible.

With our strategic pillars in place, our people are aligning on what we

need to do. Together, strategy, culture and execution are the ingredients

for getting it done. We’re humble about the work ahead, but we have

taken the first steps toward achieving our ambitions.

We have tremendous responsibility to do so. With significant

macroeconomic uncertainty, rising geopolitical conflict and questions

around the impact of technology on humanity, our clients need us

to fulfill our mission — managing their money, moving it and

keeping it safe.

To our clients: Thank you for your support. We look forward to serving

you in even greater ways.

To our people: Thank you for your dedication and spirit of ownership

as we move forward.

And to our shareholders: Thank you for your ongoing faith and conviction

in our company.

Now, the hard work of execution continues. While we have a lot of work

ahead, what started as a theory is now beginning to show as a glimmer

of possibility in our results, and our people see the opportunity of what

we can achieve. As we celebrate our 240th year, we sincerely hope and

believe that the best is yet to come.

ONWARD,

Robin Vince,
President and Chief Executive Officer

XIV ANNUAL REPORT 2023

FINANCIAL HIGHLIGHTS

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

2023

2022

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 expenses
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 trillions) (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 (“SLR”)

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

$
$

13,157
4,345
17,502
119
13,295
4,088

3,051

3.87
1.58

23%
8.5%
16.6%

17,652
12,302
5.05
30%
11.1%
21.6%

47.8
2.0

$ 409,953
283,669
36,531

11.5%
14.2
15.0
6.0
7.3

$
$

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
1.8

405,783
278,970
35,896

11.2%
14.1
14.9
5.8
6.8

$
$

52.05
39,524
759,344

$
$

45.52
36,800
808,445

(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 111 for a reconciliation.

(b) Adjusted (Non-GAAP) measures exclude notable items. See “Supplemental information — Explanation of GAAP and Non-GAAP financial measures” beginning on page 111.

(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 was the Advanced Approaches for the periods presented.

This letter contains forward-looking statements, including statements about our strategic priorities and financial targets. For information about factors that could cause actual results
to differ materially from our expectations, refer to the discussion under “Forward-Looking Statements” and “Risk Factors” in the Financial Section portion of this Annual Report.

BNY MELLON

FINANCIAL SECTION

THE BANK OF NEW YORK MELLON CORPORATION
2023 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
Subsequent event
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
Cybersecurity
Supervision and Regulation
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
3
5
8
11
11
12
20
22
26
35
39
44
46
48
56
58
78
110

111
116
117
120

121

122

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

Note 27 – Subsequent event

Report of Independent Registered Public

Accounting Firm

Directors, Executive Committee and Other

Executive Officers

Performance Graph

124
126
127
128
129

131

143
144
145
149
155
156
158
159
159
161
162
163
163
164
168
169
170

176
179
185
186
192
198
201

202
203

204

209

210

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 (income) loss 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 trillions) (b)
Selected ratios:
Return on common equity
Return on tangible common equity – Non-GAAP (c)
Pre-tax operating margin
Net interest margin
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)
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”)

2023

2022

2021

$ 13,157
4,345
17,502
119
13,295
4,088
800
3,288

$ 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

(2)
(235)

13
(211)

(12)
(207)

3,051

2,362

3,552

$
$

3.89
3.87

784,069
787,798

47.8
2.0

8.5%
16.6
23
1.25
1.58

41%
3.0%

2.91
2.90

811,068
814,795

44.3
1.8

$
$

4.17
4.14

851,905
856,359

46.7
2.4

6.5%

8.9%

13.4
20
0.97
1.42

49%
3.1%

17.1
29
0.68
1.30

32%
2.2%

$
52.05
$ 39,524
48.11
$
25.39
$
53,400
759,344

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

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

11.5%
14.2
15.0
6.0
7.3

11.2%
14.1
14.9
5.8
6.8

11.2%
14.0
14.9
5.5
6.6

(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 $1.7 trillion at Dec. 31, 2023, $1.5
trillion at Dec. 31, 2022 and $1.7 trillion at Dec. 31, 2021.

(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 111 for the reconciliation of these Non-GAAP measures.

(d) For our CET1, Tier 1and 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 39.

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 2023 and
2022 items and comparisons between 2023 and 2022.
Discussions of 2021 items and comparisons between
2022 and 2021 that are not included in this Annual
Report can be found in our 2022 Annual Report,
which was filed as an exhibit to our Form 10-K for
the year ended Dec. 31, 2022.

Overview

Established in 1784, BNY Mellon is America’s oldest
bank and the first company listed on the New York
Stock Exchange (NYSE: BK). Today, BNY Mellon
powers capital markets around the world through
comprehensive solutions that help clients manage and
service their financial assets throughout the
investment life cycle. BNY Mellon had $47.8 trillion
in assets under custody and/or administration and
$2.0 trillion in assets under management as of Dec.
31, 2023. BNY Mellon has been named among
Fortune’s World’s Most Admired Companies and
Fast Company’s Best Workplaces for Innovators.
BNY Mellon is the corporate brand of The Bank of
New York Mellon Corporation.

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.

Subsequent event

In February 2024, BNY Mellon adjusted its financial
results for the fourth quarter and full year ended Dec.
31, 2023 to include an additional $127 million pre-tax
($97 million after-tax) increase in noninterest expense
related to arevised e stimate of the FDIC special
assessment as aresult of new information published
by the FDIC in February 2024 relating to an increase
in their estimate of losses associated with the closures
of Silicon Valley Bank and Signature Bank which are
expected to impact the FDIC special assessment. See
Note 27 of the Notes to Consolidated Financial
Statements for information on the adjustment to our
previously reported 2023 financial results.

Summary of financial highlights

We reported net income applicable to common
shareholders of $3.1 billion, or $3.87 per diluted
common share, in 2023, including the negative
impact of notable items. Notable items in 2023
include the Federal Deposit Insurance Corporation
(“FDIC”) special assessment, severance expense, the
reduction in the fair value of acontingent

BNY Mellon 3

Results of Operations (continued)

consideration receivable related to a prior year
divestiture, litigation reserves and net losses on
disposals. Excluding notable items, net income
applicable to common shareholders was $4.0 billion
(Non-GAAP), or $5.05 (Non-GAAP) per diluted
common share, in 2023. In 2022, net income
applicable to common shareholders of BNY Mellon
was $2.4 billion, or $2.90 per diluted common share,
including the negative impact of notable items.
Notable items in 2022 include goodwill impairment
in the Investment Management reporting unit, 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.
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.

The highlights below are based on 2023 compared
with 2022, unless otherwise noted.

•

• Total revenue increased 7%, primarily reflecting:
Fee revenue decreased 1%, primarily
reflecting lower foreign exchange volatility,
the mix of AUM flows and the impact of a
prior year divestiture, partially offset by the
abatement of money market fee waivers, net
new business and the accelerated
amortization of deferred costs for depositary
receipts services related to Russia in the first
quarter of 2022. (See “Fee and other
revenue” beginning on page 5.)
Investment and other revenue increased
primarily reflecting the net loss from
repositioning the securities portfolio in the
fourth quarter of 2022, partially offset by the
reduction in the fair value of acontingent
consideration receivable related to a prior
year divestiture in the fourth quarter of 2023.
(See “Fee and other revenue” beginning on
page 5.)

•

• Net interest revenue increased 24%, primarily
reflecting higher interest rates, partially offset
by changes in balance sheet size and mix.
(See “Net interest revenue” beginning on
page 8.)

• The provision for credit losses was $119 million,
primarily driven by reserve increases related to
commercial real estate exposure and changes in
the macroeconomic forecast. (See “Consolidated

4 BNY Mellon

balance sheet review – Allowance for credit
losses” beginning on page 33.)

• Noninterest expense increased 2%, primarily
reflecting the FDIC special assessment in the
fourth quarter of 2023, higher investments and
revenue-related expenses, as well as inflation,
partially offset by the impacts of the goodwill
impairment in the Investment Management
reporting unit in the third quarter of 2022,
efficiency savings and aprior y ear divestiture.
Excluding notable items, noninterest expense
increased 3% (Non-GAAP). (See “Noninterest
expense” on page 11.)

• Effective tax rate of 19.6% in 2023. (See

“Income taxes” on page 11.)

• Return on common equity (“ROE”) was 8.5% for
2023. Excluding notable items, the adjusted ROE
was 11.1% (Non-GAAP) for 2023.

• Return on tangible common equity (“ROTCE”)
was 16.6% (Non-GAAP) for 2023. Excluding
notable items, the adjusted ROTCE was 21.6%
(Non-GAAP) for 2023.

See “Supplemental Information – Explanation of
GAAP and Non-GAAP financial measures”
beginning on page 111 for reconciliations of the Non-
GAAP measures.

Metrics

• AUC/A totaled $47.8 trillion at Dec. 31, 2023
compared with $44.3 trillion at Dec. 31, 2022.
The 8% increase primarily reflects higher market
values. (See “Fee and other revenue” beginning
on page 5.)

• AUM totaled $2.0 trillion at Dec. 31, 2023

compared with $1.8 trillion at Dec. 31, 2022.
The 8% increase primarily reflects higher market
values and the favorable impact of a weaker U.S.
dollar, partially offset by cumulative net
outflows. (See “Review of business segments –
Investment and Wealth Management business
segment” beginning on page 17.)

Capital and liquidity

• Our CET1 ratio calculated under the Advanced
Approaches was 11.5% at Dec. 31, 2023 and
11.2% at Dec. 31, 2022. The increase was
primarily driven by capital generated through
earnings and anet i ncrease in accumulated other
comprehensive income, partially offset by capital

Results of Operations (continued)

deployed through common stock repurchases and
dividends. (See “Capital” beginning on page 39.)

increase was driven by lower average assets.
(See “Capital” beginning on page 39.)

• Our Tier 1 leverage ratio was 6.0% at Dec. 31,

2023, compared with 5.8% at Dec. 31, 2022. The

Fee and other revenue

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

2023
$ 8,843
3,058
631
192
148
12,872
285
$ 13,157

2022
$ 8,529
3,299
822
175
130
12,955
(82)
$ 12,873

2021
$ 8,284
3,588
799
194
112
12,977
336
$ 13,313

2023 vs. 2022 vs.

2022

2021

4%
(7)
(23)
10
14
(1)
N/M

3%
(8)
3
(10)
16
—
N/M

(3)%

Fee revenue as a percentage of total revenue

74%

79%

81%

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

$
47.8
$ 1,974

$
44.3
$ 1,836

$
46.7
$ 2,434

8%
8%

(5)%
(25)%

(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 $1.7 trillion at Dec. 31,
2023, $1.5 trillion at Dec. 31, 2022 and $1.7 trillion at Dec. 31, 2021.

Fee revenue decreased 1% compared with 2022,
primarily reflecting lower foreign exchange volatility,
the mix of AUM flows and the impact of a prior year
divestiture, partially offset by the abatement of
money market fee waivers, net new business and the
accelerated amortization of deferred costs for
depositary receipts services related to Russia in the
first quarter of 2022.

Investment and other revenue increased $367 million
in 2023 compared with 2022, primarily reflecting the
net loss from repositioning the securities portfolio in
the fourth quarter of 2022, partially offset by the
reduction in the fair value of acontingent
consideration receivable related to a prior year
divestiture in the fourth quarter of 2023.

Investment services fees

Investment services fees increased 4% compared with
2022, primarily reflecting the abatement of money
market fee waivers, net new business, the accelerated
amortization of deferred costs for depositary receipts
services related to Russia recorded in the first quarter
of 2022, higher clearance volumes and collateral
management balances and higher fees on sweep

balances, partially offset by lower client activity, and
lost business in Pershing.

AUC/A totaled $47.8 trillion at Dec. 31, 2023, an
increase of 8% compared with Dec. 31, 2022,
primarily reflecting higher market values. AUC/A
consisted of 35% equity securities and 65% fixed-
income securities at Dec. 31, 2023 and 33% equity
securities and 67% fixed-income securities at Dec.
31, 2022.

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 7% compared with 2022, primarily
reflecting the impact of a prior year divestiture and
the mix of AUM flows, partially offset by the
abatement of money market fee waivers.
Performance fees were $81 million in 2023 and $75
million in 2022. On a constant currency basis (Non-
GAAP), investment management and performance
fees decreased 7% compared with 2022. See

BNY Mellon 5

Results of Operations (continued)

“Supplemental Information – Explanation of GAAP
and Non-GAAP financial measures” beginning on
page 111 for the reconciliation of Non-GAAP
measures.

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.

AUM was $2.0 trillion at Dec. 31, 2023, an increase
of 8% compared with Dec. 31, 2022, primarily
reflecting higher market values and the favorable
impact of a weaker U.S. dollar, partially offset by
cumulative net outflows.

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 2023, foreign
exchange revenue decreased 23% compared with
2022, primarily reflecting lower volatility and
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 increased 10% in 2023
compared with 2022, primarily reflecting higher fees
on commitments and standby letters of credit,
partially offset by lower 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

6 BNY Mellon

Distribution and servicing fees were $148 million in
2023 compared with $130 million in 2022, driven by
the abatement of 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.

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.

Results of Operations (continued)

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

Investment and other revenue
(in millions)
Income (loss) from consolidated investment management funds
Seed capital gains (losses) (a)
Other trading revenue
Renewable energy investment (losses)
Corporate/bank-owned life insurance
Other investment gains (b)
Disposal (losses) gains
Expense reimbursements from joint venture
Other (loss) income
Net securities (losses) gains

Total investment and other revenue

2023
30
29
231
(167)
118
47
(6)
117
(46)
(68)
285

2022
(42)
(37)
149
(164)
128
159
26
108
34
(443) (c)
(82)

2021
32
40
6
(201)
140
159
13
96
46
5
336

(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 anet l oss of $449 million related to the repositioning of the securities portfolio.

Investment and other revenue was $285 million in
2023 compared with a loss of $82 million in 2022.
The increase primarily reflects the net loss from
repositioning the securities portfolio in the fourth
quarter of 2022, partially offset by the reduction in
the fair value of a contingent consideration receivable
related to aprior y ear divestiture in the fourth quarter
of 2023.

BNY Mellon 7

Results of Operations (continued)

Net interest revenue

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)

2023
4,345
2

4,347

2022
3,504
11

3,515

2023 vs. 2022 vs.

2021
2,618
13

2022
24%

N/M

2021
34%

N/M

2,631

24%

34%

Average interest-earning assets

$ 348,160

$ 362,180

$ 387,023

(4)%

(6)%

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

1.25%
1.25%

0.97%
0.97%

0.68% 28 bps
0.68% 28 bps

29 bps
29 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 m eaningful.
bps – basis points.

Net interest revenue increased 24% compared with
2022, primarily reflecting higher interest rates,
partially offset by changes in the balance sheet size
and mix.

Net interest margin increased 28 basis points
compared with 2022. The increase primarily reflects
the factors mentioned above.

Average interest-earning assets decreased 4%
compared with 2022. The decrease primarily reflects
lower securities and loan balances and interest-
bearing deposits with banks, partially offset by higher
interest-bearing deposits with the Federal Reserve
and other central banks.

Average non-U.S. dollar deposits comprised
approximately 25% of our average total deposits in
2023 and 2022. Approximately 45% of the average
non-U.S. dollar deposits in 2023 and 40% in 2022
were euro-denominated.

Net interest revenue in 2024 will largely depend on
the level and mix of client deposits. Based on market
implied forward interest rates as of Dec. 31, 2023, we
expect net interest revenue for 2024 to decrease when
compared with 2023.

8 BNY Mellon

Results of Operations (continued)

Average balances and interest rates

(dollars in millions)
Assets
Interest-earning assets:

2023

2022

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:

$ 59,492
44,412
103,904
13,620
26,077

$ 3,085
1,456
4,541
523

5.19% $ 46,270
3.28
51,172
4.37
97,442
3.84
16,826
7,141 27.38
24,953

Domestic offices
Foreign offices

Total loans (b)

Securities:

U.S. government obligations
U.S. government agency obligations
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
Percentage of liabilities attributable to foreign offices

59,487
4,609
64,096

33,434
60,586

17,168
23,505
40,673
134,693
5,770
140,463
$ 348,160
58,790
$ 406,950

$ 123,513
88,829
212,342
20,540
3,396

676
426
1,102
5
14,449
31,021
$ 282,855
59,227
24,106
366,188
40,701
61
$ 406,950

810
209
1,019
221
1,200

1,878
121
1,999

607
1,157

629
154
783
2,547
143
2,690
$ 7,129

1.75%
0.41
1.05
1.31
4.81

3.00
2.33
2.95

1.49
1.81

3.31
0.59
1.73
1.70
2.73
1.73
1.97%

3,663
253
3,916

1,021
1,695

6.16
5.49
6.11

3.05
2.80

62,640
5,185
67,825

40,583
64,041

803
695
1,498
4,214
315
4,529
$ 20,650

4.68
18,979
2.96
26,283
3.68
45,262
3.13
149,886
5.46
5,248
3.22
155,134
5.93% $ 362,180
64,721
$ 426,901

3.81% $ 111,491
$ 4,703
2.73
2,421
101,916
7,124
3.35
213,407
6,699 32.62
12,940
4.60
3,432

156

980
607
1,587
934
68

0.88%
0.60
0.74
7.21
1.98

6.49
44
181
0.74
3
324
47
4.27
505
— 4.81
5
3.91
566
17,111
5.51
1,711
27,448
5.76% $ 274,848
$ 16,303
85,652
25,278
385,778
41,013
110
$ 426,901

$ 4,347

2
$ 4,345

1.25%

7
2
9

4.12
0.51
1.80
— 2.06
0.91
3.13
1.31%

156
860
$ 3,614

$ 3,515

11
$ 3,504

0.97%

24%
27%

26%
30%

(a)

(b)

Includes the average impact of offsetting under enforceable netting agreements of approximately $111 billion in 2023 and $43 billion in 2022. 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 5.22%
for 2023 and 1.77% for 2022, and the rate on federal funds purchased and securities sold under repurchase agreements would have been 5.10% for 2023
and 1.67% for 2022. 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 $1 million in 2023 and $2 million in 2022. 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 8 for the reconciliation of this Non-GAAP measure.

BNY Mellon 9

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
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)

2021

Average
balance

Interest

Average
rate

60
(137)
(77)
48
120

892
66
958

261
985

387
123
510
1,756
53
1,809
2,858

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

5
3
8
—
(2)
392
227

0.13%
(0.21)
(0.07)
0.23
0.42

1.62
1.15
1.58

0.76
1.36

1.95
0.41
1.02
1.12
0.80
1.11
0.74%

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

2.99
1.48
2.11
0.07
(0.01)
1.52
0.08%

$ 47,070
66,276
113,346
20,757
28,530

55,073
5,741
60,814

34,383
72,552

19,768
30,183
49,951
156,886
6,690
163,576
$ 387,023
65,209
$ 452,232

$ 124,716
112,493
237,209
13,716
2,590

160
223
383
3
16,887
25,788
$ 296,576
86,606
24,381
407,563
44,358
311
$ 452,232

2,631

13
2,618

0.68%

30%
31%

(a)

(b)

Includes the average impact of offsetting under enforceable netting agreements of approximately $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 0.16%, and the rate on federal
funds purchased and securities sold under repurchase agreements would have been (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 $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.

(c) Average rates were calculated on an FTE basis, at tax rates of approximately 21% in 2021.
See “Net interest revenue” on page 8 for the reconciliation of this Non-GAAP measure.
(d)
Includes the Cayman Islands branch office, which existed through August 2021.
(e)

10 BNY Mellon

Results of Operations (continued)

Noninterest expense

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

2023
7,095 $
1,817
1,527
542
475
353
183
788
—
57
458
13,295 $

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

2023 vs. 2022 vs.

2022

2021
6,337
10
1,478
—
1,459
5
498
(2)
505
3
298
20
107
133 N/M
— N/M
(15)
82
(31)
617
11,514

2021

12
5
3
(4)
15
42
(5)

N/M

(18)
7
13%

Full-time employees at year-end

53,400

51,700

49,100

Income taxes

BNY Mellon recorded an income tax provision of
$800 million (19.6% effective tax rate) in 2023. The
income tax provision was $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. See
“Supplemental Information – Explanation of GAAP
and Non-GAAP financial measures” beginning on
page 111 for the reconciliation of the Non-GAAP
measure. For additional information on income taxes,
see Note 12 of the Notes to Consolidated Financial
Statements.

Total noninterest expense increased 2% compared
with 2022, primarily reflecting a$632 million accrual
for the FDIC special assessment, higher investments
and revenue-related expenses, as well as inflation,
partially offset by the impacts of the 2022 goodwill
impairment in the Investment Management reporting
unit, efficiency savings and aprior y ear divestiture.
Excluding notable items, noninterest expense
increased 3% (Non-GAAP). 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 “Supervision and Regulation –
Deposit Insurance” on page 69 for information on the
FDIC special assessment. See “Supplemental
Information – Explanation of GAAP and Non-GAAP
financial measures” beginning on page 111 for the
reconciliation of the Non-GAAP measure.

We expect total noninterest expense for 2024 to
decrease compared with 2023, primarily reflecting the
impact of notable expense items recorded in 2023,
including the FDIC special assessment, severance
expense and litigation reserves. Excluding the impact
of notable items, total noninterest expense is expected
to be flat in 2024 compared with 2023.

BNY Mellon 11

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. 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 aconsolidated
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 aconsolidated 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, 2023, 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.

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 2023.

The results of our business segments may be
influenced by client and other activities that vary by
quarter. In the first quarter, long-term stock awards
for retirement-eligible employees vest which
increases staff expense. The timing of our annual
employee merit increases also impacts staff expense.
In 2023, the merit increase was effective at the
beginning of the second quarter, compared with prior
years when it was effective at the beginning of the
third quarter. For 2024, the merit increase will be
effective in March, thus partially impacting the first
quarter and second quarter staff expense variances.

12 BNY Mellon

Results of Operations (continued)

Securities Services business segment

(dollars in millions, unless otherwise noted)
Revenue:

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

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

Issuer Services:
Total debt serviced at period end (in trillions)
Number of sponsored Depositary Receipts programs at period end

2023

2022

2021

2023 vs. 2022 vs.

2022

2021

3,898
1,121
5,019
488
215
5,722
333
6,055
2,569
8,624
99
6,345
31
6,376
2,149

25%

189

6,638
1,986
8,624

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

(1)%
11
2
(16)
6
—
N/M
1
27
7
N/M
1
(6)
1
25%

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

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%
11
11%

$ 11,207
$ 168,411

$ 11,245
$ 183,990

8,756
$
$ 200,482

—%
(8)%

28%
(8)%

$
$

34.2
450

13.3
543

$
$

31.4
449

12.6
589

34.6
447

12.6
656

9%
—%

(9)%
—%

6%
—%
(8)% (10)%

(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 $1.7 trillion at Dec. 31, 2023, $1.5 trillion at Dec. 31, 2022 and $1.7 trillion at Dec. 31, 2021.
(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 $63 billion at Dec. 31, 2023, $68 billion at Dec. 31, 2022 and $71 billion
at Dec. 31, 2021.
N/M –Not m eaningful.

BNY Mellon 13

Results of Operations (continued)

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
$34.2 trillion of AUC/A at Dec. 31, 2023. For
information on the drivers of the Securities Services
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, fund administrator 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 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 alendable a sset pool of approximately $4.9
trillion in 34 separate markets. Our market-leading
liquidity services portal enables cash investments for
institutional clients and includes fund research and
analytics.

Our Digital Asset Custody platform offers custody
and administration services for Bitcoin and Ether for
select U.S. institutional clients. Our Digital Assets
Funds Services provides accounting and
administration, transfer agency and ETF services to
digital asset funds. We expect to continue developing
our digital asset capabilities and to work closely with
clients to address their evolving digital asset needs.
As of and for the year ended Dec. 31, 2023, our
Digital Asset Custody platform and related initiative
had ade minimis impact on our assets, liabilities,
revenues and expenses.

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 $34.2 trillion increased 9% compared with
Dec. 31, 2022, primarily reflecting higher market
values.

Total revenue of $8.6 billion increased 7% compared
with 2022. The drivers of total revenue by line of
business are indicated below.

Asset Servicing revenue of $6.6 billion increased 5%
compared with 2022, primarily reflecting higher net
interest revenue, net new business and the abatement
of money market fee waivers, partially offset by
lower foreign exchange revenue and client activity.

Issuer Services revenue of $2.0 billion increased 16%
compared with 2022, primarily reflecting higher net
interest revenue, the accelerated amortization of
deferred costs for depositary receipts services related
to Russia recorded in 2022, net new business and the
abatement of money market fee waivers.

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.

The Issuer Services business includes Corporate
Trust and Depositary Receipts. Our Corporate
Trust business delivers afull range of issuer and
related investor services, including trustee, paying

Noninterest expense of $6.4 billion increased 1%
compared with 2022, primarily reflecting higher
investments and the impact of inflation, partially
offset by efficiency savings.

14 BNY Mellon

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

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
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

2023

2022

2021

2022

2021

2023 vs. 2022 vs.

2,007
691
1,090
3,788
81
212
4,081
63
4,144
1,712
5,856
41
3,191
6
3,197
2,618

45%

2,789
1,611
1,456
5,856

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

5%
—
12
6
(8)
20
6
N/M
7
21
11
N/M
9
(25)
9
12%

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

10%
9
15
11%

10%
15
11
11%

$ 37,502
$ 85,785

$ 41,300
$ 91,749

$ 38,344
$ 102,948

(9)%
8%
(7)% (11)%

$
$

13.3

2.5
22
7,946

$
$

12.7

2.3
121
7,483

$
$

11.8

2.6
161
7,257

N/M

(12)%
N/M

236,696

239,630

235,971

(1)%

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

5,658

5,285

4,260

24%

(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 m eaningful.

BNY Mellon 15

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 aleading
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 aprovider ofnon-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 $5.7 trillion serviced

globally including approximately $4.6 trillion of
the U.S. tri-party repo market at Dec. 31, 2023.

Review of financial results

AUC/A of $13.3 trillion increased 5% compared with
Dec. 31, 2022, primarily reflecting higher market
values and net client inflows.

Total revenue of $5.9 billion increased 11%
compared with 2022. The drivers of total revenue by
line of business are indicated below.

Pershing revenue of $2.8 billion increased 10%
compared with 2022, primarily reflecting the
abatement of money market fee waivers, higher net
interest revenue and higher fees on sweep balances,
partially offset by lower client activity and lost
business. Net new assets of $22 billion in 2023
reflects the deconversion of aregional bank client
that was acquired in May.

Treasury Services revenue of $1.6 billion increased
9% compared with 2022, primarily reflecting higher
net interest revenue.

Clearance and Collateral Management revenue of
$1.5 billion increased 15% compared with 2022,
primarily reflecting higher net interest revenue, U.S.
collateral management balances and U.S. government
clearance volumes.

Noninterest expense of $3.2 billion increased 9%
compared with 2022, primarily reflecting higher
investments and revenue-related expenses, as well as
the impact of inflation, partially offset by efficiency
savings.

16 BNY Mellon

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

2023

2022

2021

2023 vs.
2022

2022 vs.
2021

$ 2,971
81
3,052
241
(214)
3,079
(102)
2,977
166
3,143
(4)

2,746
—
20
2,766
381

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

2,795
680
26
3,501
48

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

2,796
—
29
2,825
$ 1,230

(8)%
8
(7)
26
N/M
(8)
N/M
(10)
(27)
(11)
N/M

(8)%

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

(2)
N/M
(23)
(21)
694% (d)

—
N/M
(10)
24
(96)% (d)

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

12%
14% (f)

1%
2% (f)

30%
33%

Total revenue by line of business:
Investment Management
Wealth Management

Total revenue by line of business

Selected average balances:
Average loans
Average deposits

$ 2,068
1,075
$ 3,143

$ 2,390
1,160
$ 3,550

$ 2,834
1,208
$ 4,042

(13)%
(7)
(11)%

$ 13,718
$ 14,280

$ 14,055
$ 19,214

$ 12,120
$ 18,068

(2)%
(26)%

(16)%
(4)
(12)%

16%
6%

(a) On a constant currency basis, investment management and performance fees decreased 7% (Non-GAAP) compared with 2022. See

“Supplemental Information – Explanation of GAAP and Non-GAAP financial measures” beginning on page 111 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 28% (Non-GAAP) in 2023 compared with 2022 and 39% (Non-GAAP)
in 2022 compared with 2021. See “Supplemental Information – Explanation of GAAP and Non-GAAP financial measures” beginning
on page 111 for the reconciliation of these Non-GAAP measures.

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

beginning on page 111 for the reconciliation of these Non-GAAP measures.

(f) Excluding notable items and net of distribution and servicing expense, the adjusted pre-tax operating margin was 19% (Non-GAAP) in
2023 and 24% (Non-GAAP) in 2022. See “Supplemental Information – Explanation of GAAP and Non-GAAP financial measures”
beginning on page 111 for the reconciliation of these Non-GAAP measures.

N/M –Not m eaningful.

BNY Mellon 17

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

(outflows) inflows

Index

Total long-term strategies

(outflows) inflows

Short-term strategies:

Cash

Total net (outflows) inflows

Net market impact
Net currency impact
Divestiture

Ending balance of AUM

2023

2022

2021

$ 145 $ 135 $ 187
267
467
890
228
395
$ 1,974 $ 1,836 $ 2,434

198
395
570
153
385

205
459
605
170
390

$ 1,836 $ 2,434 $ 2,211

(12)
(4)
12

(18)
(21)
78

(9)

(11)

(13)
(12)

(25)

28
2

(12)
17
36

(2)

39
(7)

5
(20)
121
37
—

70
102
143
(22)
—
$ 1,974 $ 1,836 $ 2,434

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

Wealth Management client

assets (b)

$ 312 $ 269 $ 321

(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 $2.0 trillion as of
Dec. 31, 2023.

BNY Mellon Investment Management is a leading
global asset manager and consists of seven specialist
investment firms and a global distribution platform to
deliver a diversified range of investment capabilities
to institutional and retail clients globally.

Our Investment Management model provides
specialist expertise from seven investment firms
offering solutions across major asset classes, backed
by the strength, scale and proven stewardship of BNY

18 BNY Mellon

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 abroad r ange of actively
managed equity, fixed income, multi-asset 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 anoncontrolling i nterest 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
continues to provide Alcentra with ongoing asset
servicing support. Additionally, Investment
Management exclusively distributes Alcentra
products in Japan.

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, ETFs 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 $312 billion in client assets
as of Dec. 31, 2023, 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.

Results of Operations (continued)

The results of the Investment and Wealth
Management business segment are driven by ablend
of daily, monthly and quarterly AUM by product
type. The overall level of AUM for agiven p eriod 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 apeer 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.

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 $2.0 trillion increased 8% compared with
Dec. 31, 2022, primarily reflecting higher market
values and the favorable impact of a weaker U.S.
dollar, partially offset by cumulative net outflows.

Net long-term strategy outflows were $25 billion in
2023, driven by outflows of equity, index and multi-
asset and alternative investments, partially offset by
inflows of liability-driven investments. Short-term
strategy inflows were $5 billion in 2023.

Total revenue of $3.1 billion decreased 11%
compared with 2022. The drivers of total revenue by
line of business are indicated below.

Investment Management revenue of $2.1 billion
decreased 13% compared with 2022, primarily
reflecting the reduction in the fair value of a
contingent consideration receivable and the impact of
the prior year divestiture, as well as the mix of AUM
flows, partially offset the abatement of money market
fee waivers and seed capital gains.

Wealth Management revenue of $1.1 billion
decreased 7% compared with 2022, primarily
reflecting changes in product mix and lower net
interest revenue.

Revenue generated in the Investment and Wealth
Management business segment included 33% from
non-U.S. sources in 2023, compared with 35% in
2022.

Noninterest expense of $2.8 billion decreased 21%
compared with 2022, primarily reflecting the
goodwill impairment in the Investment Management
reporting unit in 2022, the impact of a prior year
divestiture and efficiency savings, partially offset by
higher investments and revenue-related expenses, as
well as inflation.

BNY Mellon 19

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

Loss before taxes was $1.1 billion in 2023 compared
with $775 million in 2022.

20 BNY Mellon

2023

(10) $
(11)
(21)
(102)
(123)
(17)
956
(1,062) $

2022

61 $

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

2021
36
15
51
(159)
(108)
(17)
161
(252)

1,669 $

1,225 $

1,594

Investment and other revenue increased $362 million
compared with 2022, primarily reflecting the net loss
from repositioning the security portfolio recorded in
2022.

Noninterest expense increased $678 million
compared with 2022, primarily driven by the FDIC
special assessment.

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, 2023, approximately 55% of our total
employees (full-time and part-time employees) were
based outside the U.S., with approximately 11,000
employees in EMEA, approximately 18,400
employees in APAC and approximately 800
employees in other global locations, primarily Brazil.

We are a leading global asset manager. Our
international operations managed 51% of BNY

Results of Operations (continued)

Mellon’s AUM at Dec. 31, 2023 and 53% at Dec. 31,
2022.

In Europe, we maintain capabilities to service
Undertakings for Collective Investment in
Transferable Securities and alternative investment
funds. We offer afull 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 afull- 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

2023

2022

2021

$ 1.2749 $ 1.2096 $ 1.3543
1.1373
1.0708

1.1046

$ 1.2432 $ 1.2375 $ 1.3755
1.1994
1.0550

1.0813

International clients accounted for 36% of revenues in
2023 and 2022. Net income from international
operations was $2.0 billion in 2023, compared with
$1.7 billion in 2022.

In 2023, revenues from EMEA were $4.1 billion,
compared with $4.0 billion in 2022. The 4% increase
primarily reflects higher net interest revenue and net
new business in the Securities Services and Market
and Wealth Services business segments. The increase
was partially offset by lower revenue in the
Investment and Wealth Management business
segment. The decrease in revenue in the Investment
and Wealth Management business segment primarily
reflects the impact of the prior year divestiture, mix
of AUM flows and lower market values.

The Securities Services, Market and Wealth Services
and Investment and Wealth Management business
segments generated 60%, 21% and 19% of EMEA
revenues, respectively. Net income from EMEA was
$1.1 billion in 2023, compared with $880 million in
2022.

Revenues from APAC were $1.3 billion in 2023,
compared with $1.1 billion in 2022. The 14%
increase primarily reflects higher net interest revenue
in the Securities Services and Market and Wealth
Services business segments.

The Securities Services, Market and Wealth Services
and Investment and Wealth Management business
segments generated 56%, 32% and 12% of APAC
revenues, respectively. Net income from APAC was
$547 million in 2023, compared with $432 million in
2022.

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.

BNY Mellon 21

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, 2023, 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, 2023
(in billions)
Top 10 country exposure:
Germany
United Kingdom (“UK”)
Belgium
Canada
Netherlands
Japan
Luxembourg
South Korea
Australia
France

Total Top 10 country exposure

Select country exposure:
Brazil
Russia

Interest-bearing deposits

Central banks

Banks

Lending (a)

Securities (b)

Other (c)

Total
exposure

16.9 $
10.9
8.2
—
3.4
1.2
0.1
0.1
—
—
40.8 $

0.6
0.7
0.8
1.3
—
0.8
—
—
1.0
—
5.2

— $
—

0.2
0.4 (e)

0.8
1.4
0.1
0.1
0.2
0.1
1.4
2.0
0.3
0.1
6.5

0.9
—

3.8
3.0
0.8
3.9
1.1
0.4
0.1
0.1
0.7
1.9
15.8

0.1
—

0.3
2.3
—
1.2
0.2
0.3
1.2
0.5
0.5
0.5
7.0

0.1
—

22.4
18.3
9.9
6.5
4.9
2.8
2.8
2.7
2.5
2.5
75.3 (d)

1.3
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.

We are also monitoring our exposure to Israel as part
of our internal country risk management process. At
Dec. 31, 2023, our total exposure to Israel was $165
million and primarily consisted of investment grade
short-term interest-bearing deposits and OTC
derivatives maturing within six months.

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, 2023, 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.

22 BNY Mellon

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

Results of Operations (continued)

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
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 aweighting
of three scenarios: a baseline and upside and
downside scenarios and allows us to develop our
estimate using awide span of economic variables.
Our baseline scenario reflects aview 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
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 acontraction, 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 aquarterly 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 judgment to assess these
economic conditions and loss data in determining the
best estimate of 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 individually evaluate
nonperforming loans as well as loans that have been
or are anticipated to be modified given the risk
characteristics of such loans.

BNY Mellon 23

Results of Operations (continued)

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

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 macroeconomic
forecast assumptions that are incorporated into our
estimate of credit losses through the expected life of
the loan portfolio, as well as credit ratings assigned to
each borrower. 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 $47 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 $83
million. Our multi-scenario based macroeconomic
forecast used indetermining t he Dec. 31, 2023
allowance for credit losses consisted of three

24 BNY Mellon

scenarios. The baseline scenario reflects slightly
increasing GDP growth, stable unemployment and
declining commercial real estate prices through the
end of 2024. The upside scenario reflects faster GDP
growth, declining unemployment through the second
quarter of 2024 before moderating and higher
commercial real estate prices compared with the
baseline. The downside scenario contemplates
negative GDP growth through the first quarter of
2024 with subsequent stabilization through the third
quarter of 2024, as well as rapidly increasing
unemployment through 2024 and sharply lower
commercial real estate prices than the baseline. At
Dec. 31, 2023, we placed the most weight on our
downside scenario, followed by the baseline scenario,
with the remaining weighting placed on the upside
scenario. From asensitivity perspective, at Dec. 31,
2023, if we had applied 100% weighting to the
downside scenario, the quantitative allowance for
credit losses would have been approximately $88
million higher.

See Notes 1 and 5 of the Notes to Consolidated
Financial Statements for additional information
regarding the allowance for credit losses.

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 ($16.3
billion at Dec. 31, 2023) and indefinite-lived
intangible assets ($2.6 billion at Dec. 31, 2023) 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

Results of Operations (continued)

testing is performed. An interim goodwill
impairment 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.

As a result of the annual goodwill impairment test, no
goodwill impairment was recognized. The fair values
of the Company’s remaining five reporting units were
substantially in excess of the respective reporting
units’ carrying value.

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 for the
difference.

In each quarter of 2023, we completed an interim
goodwill impairment test of the Investment
Management reporting unit, which had $6.1 billion of
allocated goodwill as of Dec. 31, 2023. In all cases,
we determined the fair value of the Investment
Management reporting unit exceeded its carrying
value and no goodwill impairment was recorded.

For the Dec. 31, 2023 test, the fair value of the
Investment Management reporting unit exceeded its
carrying value by approximately 5%. We determined
the fair value of the Investment Management
reporting unit using an income approach based on
management’s projections as of Dec. 31, 2023. The
discount rate applied to these cash flows was 10.5%.

As of Dec. 31, 2023, 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.

In the second quarter of 2023, we performed our
annual goodwill impairment test on the remaining
five 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, 2023. The discount rate applied to these cash
flows was 10%.

Intangible assets

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

Indefinite-lived intangible assets ($2.6 billion at Dec.
31, 2023) are evaluated for impairment at least
annually by comparing their fair values, estimated
using discounted cash flow analyses, to their carrying
values. As aresult of the annual evaluation, no
impairment was recognized, however, a $698 million
indefinite-lived intangible asset related to customer
relationships in the Investment Management business
exceeded its carrying value by approximately 7%.

Other amortizing intangible assets ($274 million at
Dec. 31, 2023) 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.

Determining the fair value of areporting u nit or
indefinite-lived intangible assets 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 or intangible asset impairment.

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.

BNY Mellon 25

Results of Operations (continued)

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 astrong 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, 2023, total assets were $410 billion,
compared with $406 billion at Dec. 31, 2022. The
increase in total assets was primarily driven by higher
interest-bearing deposits with the Federal Reserve
and other central banks and federal funds sold and
securities purchased under resale agreements,
partially offset by lower securities and interest-
bearing deposits with banks. Deposits totaled $284
billion at Dec. 31, 2023, compared with $279 billion
at Dec. 31, 2022. The increase primarily reflects
higher interest-bearing deposits in U.S. offices and
non-U.S. offices, partially offset by lower non-
interest bearing deposits (principally U.S. offices).
Total interest-bearing deposit liabilities as a
percentage of total interest-earning assets were 66%
at Dec. 31, 2023 and 58% at Dec. 31, 2022.

At Dec. 31, 2023, available funds totaled $158 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 $138 billion at Dec. 31, 2022. Total

26 BNY Mellon

available funds as a percentage of total assets were
38% at Dec. 31, 2023 and 34% at Dec. 31, 2022. For
additional information on our available funds, see
“Liquidity and dividends.”

Securities were $126 billion, or 31% of total assets, at
Dec. 31, 2023, compared with $143 billion, or 35%
of total assets, at Dec. 31, 2022. The decrease
primarily reflects lower U.S. Treasury and non-U.S.
government securities, partially offset by unrealized
pre-tax gains. For additional information on our
securities portfolio, see “Securities” and Note 4of the
Notes to Consolidated Financial Statements.

Loans were $67 billion, or 16% of total assets, at Dec.
31, 2023, compared with $66 billion, or 16% of total
assets, at Dec. 31, 2022. Increases in nearly all loan
portfolios were partially offset by lower overdrafts
and wealth management loans. For additional
information on our loan portfolio, see “Loans” and
Note 5 of the Notes to Consolidated Financial
Statements.

Long-term debt totaled $31 billion at Dec. 31, 2023
and $30 billion at Dec. 31, 2022. The increase
primarily reflects issuances, partially offset by
maturities and repurchases. 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 totaled $41 billion at Dec. 31,
2023 and Dec. 31, 2022. For additional information,
see “Capital” and Note 15 of the Notes to
Consolidated Financial Statements.

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.

Results of Operations (continued)

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

Securities portfolio

(dollars in millions)
Agency residential
mortgage-backed
securities (“RMBS”)

U.S. Treasury

Non-U.S. government (d)
Agency commercial
mortgage-backed
securities (“MBS”)

Collateralized loan

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

MBS

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

Other

Total securities

Dec. 31,
2022

Fair
value
$ 38,916

41,503

22,361

11,864

6,300
6,115
5,776

3,054
2,060

2023
change in
unrealized
gain (loss)
$

796 $

Dec. 31, 2023

Fair
Amortized
cost (a)
value
43,197 $ 39,333

Fair value
as a %of
amortized
cost (a)

Unrealized
gain (loss)
(3,864)

91% $

Ratings (c)

%
Floating
rate (b)

AAA/
AA-

Not
rated
21% 100% —% —% —% —%

BBB+/
BBB-

A+/
A-

BB+
and
lower

623

342

214

123
137
93

32
24

27,316

21,135

26,476

20,543

11,602

11,010

7,125
7,199

6,489

3,245
1,909

7,119
6,780

6,317

2,997
1,766

100
94
97

92
92

(840)

(592)

(6)
(419)
(172)

(248)
(143)

100 —

100
42
57

53
46

100 —
100 —
100 —

100 —
3

—

—
—
—

—
—

—

—
—
—

—
6

—

—
—
—

—
6

1,319
24
$ 139,292 (f) $

41
—

1,026
13
2,425 $ 130,256 $ 123,295 (f)

943
11

92
88
95% $

(83)
(2)
(6,961) (f)(g)

18
—
44%

—
100 —
— —
—
99% 1% —% —% —%

—
—
— 100

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

(g)

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.
Includes supranational securities. Primarily consists of exposure to Germany, France, UK, Canada, the Netherlands and Belgium.
Primarily consists of exposure to Canada, UK, Australia, Germany, Singapore and Norway.
Includes net unrealized gains on derivatives hedging securities available-for-sale (including terminated hedges) of $2,678 million at Dec. 31, 2022 and net
unrealized gain (including terminated hedges) of $1,767 million at Dec. 31, 2023.
At Dec. 31, 2023, includes pre-tax net unrealized losses of $2,094 million related to available-for-sale securities, net of hedges, and $4,867 related to held-to-
maturity securities. The after-tax unrealized losses, net of hedges, related to available-for-sale securities is $1,580 million and the after-tax equivalent related to
held-to-maturity securities is $3,711 million.

The fair value of our securities portfolio, including
related hedges, was $123.3 billion at Dec. 31, 2023,
compared with $139.3 billion at Dec. 31, 2022. The
decrease primarily reflects lower U.S. Treasury and
non-U.S. government securities, partially offset by
unrealized pre-tax gains.

At Dec. 31, 2023, the securities portfolio had anet
unrealized loss, including the impact of related
hedges, of $7.0 billion, compared with $9.4 billion at
Dec. 31, 2022. The decrease in the unrealized loss,
including the impact of related hedges, primarily
reflects securities moving closer to maturity.

The fair value of the available-for-sale securities
totaled $78.6 billion at Dec. 31, 2023, net of hedges,
or 64% of the securities portfolio, net of hedges. The
fair value of the held-to-maturity securities totaled
$44.7 billion at Dec. 31, 2023, or 36% of the
securities portfolio, net of hedges.

The unrealized loss (after-tax) on our available-for-
sale securities portfolio, net of hedges, included in
accumulated other comprehensive income was $1.6
billion at Dec. 31, 2023, compared with $2.4 billion
at Dec. 31, 2022. Net unrealized loss, including the

impact of hedges, decreased as securities moved
closer to maturity.

At Dec. 31, 2023, 99% of the securities in our
portfolio were rated AAA/AA-, unchanged compared
with Dec. 31, 2022.

See Note 4of 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) and net amortization
related to the securities portfolio.

Amortizable purchase premium

(net of discount) and net
amortization of securities (a)
(in millions)
Amortizable purchase premium,
net of discount
Net amortization

2023

2022

2021

$
$

821 $ 1,109 $ 1,863
167 $
655

362 $

(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.

BNY Mellon 27

Results of Operations (continued)

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, 2023 and Dec. 31, 2022.

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

Equity method investments:

CIBC Mellon
Siguler Guff
Other

Total equity method investments

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

Dec. 31,

2023
$ 1,049 $

2022
871

1,213

1,298

607
234
32
873
480
741
232
7

545
242
16
803
478
695
218
6
$ 4,595 $ 4,369

(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 certain seed capital
investments and our private equity investments, see
“Investments valued using net asset value (“NAV”)
per share” in Note 8of 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.

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
Margin loans
Total

Dec. 31, 2023
Unfunded
commitments

Loans

$66.9

10.5 $
2.1
9.1
9.1
6.8
0.6
1.2
3.1
3.7
2.7
18.0

29.2 $
11.4
0.5
0.3
3.4
—
—
—
3.6
—
—
48.4 $

Total
exposure
39.7
13.5
9.6
9.4
10.2
0.6
1.2
3.1
7.3
2.7
18.0
115.3

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

At Dec. 31, 2023, total lending-related exposure was
$115.3 billion, a decrease of 2% compared with Dec.
31, 2022, primarily reflecting lower exposure in the
financial institutions portfolio, lower overdrafts and
lower exposure in the wealth management loans
portfolio, partially offset by higher margin loans and
other residential mortgage loans.

Our financial institutions and commercial portfolios
comprise our largest concentrated risk. These
portfolios comprised 46% of our total exposure at
Dec. 31, 2023 and 47% at Dec. 31, 2022.
Additionally, most of our overdrafts relate to
financial institutions.

28 BNY Mellon

Results of Operations (continued)

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

Dec. 31, 2022
Unfunded
commitments

Loans

Unfunded
commitments

Dec. 31, 2023
Total
exposure
17.1
9.4
7.8
4.0
0.2
1.2
39.7

14.8 $
8.0
1.4
3.9
0.2
0.9
29.2 $

% Inv.
grade
91%
97
84
100
100
98
92%

% due
<1 yr.
96% $
81
96
13
43
47
83% $

1.6 $
1.6
6.1
0.1
—
0.3
9.7 $

Loans

2.3 $
1.4
6.4
0.1
—
0.3
10.5 $

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 $

The financial institutions portfolio exposure was
$39.7 billion at Dec. 31, 2023, adecrease o f 4%
compared with Dec. 31, 2022, primarily reflecting
lower exposure in the securities industry portfolio.

Financial institution exposures are high-quality, with
92% of the exposures meeting the investment grade
equivalent criteria of our internal credit rating
classification at Dec. 31, 2023. Each customer is
assigned an internal credit rating, which is mapped to
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 aratin g 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 83% of the exposures expiring
within one year. At Dec. 31, 2023, 19% of the
exposure to financial institutions had an expiration
within 90 days, compared with 17% at Dec. 31, 2022.

In addition, 62% of the financial institutions exposure
is secured at Dec. 31, 2023. For example, securities

industry clients and asset managers often borrow
against marketable securities held in custody.

At Dec. 31, 2023, the secured intraday credit
provided to dealers in connection with their tri-party
repo activity totaled $13.5 billion and was included in
the securities industry portfolio. Dealers secure the
outstanding intraday credit with high-quality liquid
collateral having amarket value in excess of the
amount of the outstanding credit. Secured intraday
credit facilities represent 34% of the exposure in the
financial institutions portfolio and are reviewed and
reapproved annually.

The asset managers portfolio exposure is high-
quality, with 97% of the exposures meeting our
investment grade equivalent ratings criteria as of Dec.
31, 2023. 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 96% due in less than one year. The
investment grade percentage of our banks exposure
was 84% at Dec. 31, 2023, compared with 86% at
Dec. 31, 2022. Our non-investment grade exposures
are primarily trade finance loans in Brazil.

BNY Mellon 29

Results of Operations (continued)

Commercial

The commercial portfolio is presented below.

Commercial portfolio exposure

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

Total

Unfunded
commitments

Dec. 31, 2023
Total
exposure
4.6
4.1
4.1
0.7
13.5

3.4 $
3.6
3.7
0.7
11.4 $

Loans

1.2 $
0.5
0.4
—
2.1 $

Dec. 31, 2022
Unfunded
commitments

Loans

% Inv.
grade
98%
96
89
88
94%

% due
<1 yr.
41% $
19
6
3
22% $

0.8 $
0.5
0.3
0.1
1.7 $

Total
exposure
4.0
4.6
4.0
0.8
13.4

3.2 $
4.1
3.7
0.7
11.7 $

The commercial portfolio exposure was $13.5 billion
at Dec. 31, 2023, an increase of 1% from Dec. 31,
2022, primarily driven by higher exposure in the
services and other portfolios, partially offset by lower
exposure in the manufacturing portfolio.

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,
2022
95%
95%

2023
92%
94%

2021
96%
94%

Wealth management loans

Our wealth management loan exposure was $9.6
billion at Dec. 31, 2023, compared with $10.9 billion
at Dec. 31, 2022. Wealth management loans
primarily consist of loans to high-net-worth

individuals, amajority of which are secured by the
customers’ investment management accounts or
custody accounts.

Wealth management mortgages

Our wealth management mortgage exposure was $9.4
billion at Dec. 31, 2023, compared with $9.2 billion
at Dec. 31, 2022. 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, 2023.

At Dec. 31, 2023, the wealth management mortgage
portfolio consisted of the following geographic
concentrations: California – 21%; New York – 14%;
Florida –11%; M assachusetts – 8%; and other –
46%.

30 BNY Mellon

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 $10.2
billion at Dec. 31, 2023 and $10.1 billion at Dec. 31,
2022. 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, 2023, the unsecured portfolio consisted
of real estate investment trusts (“REITs”) and real
estate operating companies, which are both primarily
investment grade.

At Dec. 31, 2023, our commercial real estate portfolio
consisted of the following concentrations: New York
metro –36%; R EITs and real estate operating
companies – 27%; and other –37%.

Lease financings

The lease financings portfolio exposure totaled $599
million at Dec. 31, 2023 and $657 million at Dec. 31,
2022. At Dec. 31, 2023, nearly all of leasing
exposure was investment grade, or investment grade
equivalent, and primarily consisted of exposures
backed by well-diversified assets, primarily real
estate and large-ticket transportation equipment.

Percentage
secured (a)

Dec. 31, 2023
Total
exposure
4.3
2.6
0.8
0.8
0.6
0.5
0.6
10.2

88% $
74
63
31
40
57
71
73% $

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

Percentage
secured (a)
85%
75
58
33
42
49
66
71%

Assets are both domestic and foreign-based, with
primary concentrations in Germany and the U.S.

Other residential mortgages

The other residential mortgages portfolio primarily
consists of 1-4 family residential mortgage loans and
totaled $1.2 billion at Dec. 31, 2023 and $345 million
at Dec. 31, 2022.

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.

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 $18.0 billion at Dec. 31,
2023 and $16.9 billion at Dec. 31, 2022 was
collateralized with marketable securities. Borrowers
are required to maintain adaily collateral margin in
excess of 100% of the value of the loan. Margin

BNY Mellon 31

Results of Operations (continued)

loans included $7 billion at Dec. 31, 2023 and $6
billion at Dec. 31, 2022 related to aterm 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, 2023
(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
Total

Interest rate characteristic

Within
1 year
1,472 $
1,708
8,953
1
8,634
—
—
3,053
2,469
2,712
17,983
46,985 $

Between
1 and 5 years

Between
5 and 15 years

After
15 years

579 $

3,909
1,568
258
273
20
5
—
1,231
5
28
7,876 $

61 $

1,143
—
340
202
375
137
—
—
—
—
2,258 $

— $
—
—
—
—
8,736
1,024
—
—
—
—
9,760 $

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, 2023
(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
Total

Fixed rates

Floating rates

61 $

112
—
598
10
3,821
1,142
—
—
—
5,744 $

579 $

4,940
1,568
—
465
5,310
24
1,231
5
28
14,150 $

Total
2,112
6,760
10,521
599
9,109
9,131
1,166
3,053
3,700
2,717
18,011
66,879

Total
640
5,052
1,568
598
475
9,131
1,166
1,231
5
28
19,894

32 BNY Mellon

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 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:

Other residential mortgages

Other financial instruments

Total charge-offs

Recoveries:
Loans:

Commercial
Other residential mortgages
Other

Other financial instruments

Total recoveries
Net recoveries (charge-offs)

Ending balance of allowance for credit losses

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

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

Other residential mortgages:

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

2023
292
119

2022
260
39

(3)
(2)
(5)

1
2
5
—
8
3
414

—
(11)
(11)

—
4
—
—
4
(7)
292

303
87
24
414
66,879
64,096

— %

0.77
0.45
0.58

(0.11)%
(1)
908

(b)

$
$
$

176
78
38
292
66,063
67,825

(0.01)%
(2.76)
0.27
0.38

N/A
N/A
N/A

$
$
$

$
$

(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 a pplicable. There were no net charge-offs in 2022.

The provision for credit losses was $119 million in
2023, primarily driven by reserve increases related to
commercial real estate exposure and 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.

BNY Mellon 33

Nonperforming assets increased $128 million in 2023
compared with 2022, primarily reflecting higher
nonperforming commercial real estate loans.

See “Nonperforming assets” in Note 1of 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 $283.7 billion at Dec. 31, 2023,
an increase of 2%, compared with $279.0 billion at
Dec. 31, 2022. The increase primarily reflects higher
interest-bearing deposits in U.S. offices and non-U.S.
offices, partially offset by lower non-interest bearing
deposits (principally U.S. offices).

Noninterest-bearing deposits were $58.3 billion at
Dec. 31, 2023, compared with $78.0 billion at Dec.
31, 2022, reflecting client activity. Interest-bearing
deposits were primarily demand deposits and totaled
$225.4 billion at Dec. 31, 2023, compared with
$201.0 billion at Dec. 31, 2022.

The aggregate amount of deposits by foreign
customers in domestic offices was $55.1 billion at
Dec. 31, 2023 and $61.2 billion at Dec. 31, 2022.

Deposits in foreign offices totaled $96.6 billion at
Dec. 31, 2023 and $98.3 billion at Dec. 31, 2022.
These deposits were primarily overnight deposits.

Uninsured deposits are the portion of domestic
deposits accounts that exceed the FDIC insurance
limit. Uninsured deposits in domestic deposit
accounts are generally demand deposits and totaled
$168.4 billion at Dec. 31, 2023 and $156.6 billion at
Dec. 31, 2022.

Results of Operations (continued)

Based on an evaluation of the allowance for credit
losses as discussed in “Critical accounting estimates”
and Note 1of 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,

2023

2022

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

Total

$
$ 325
27
19

9
4
4
1
1
$ 390

%
83% $ 184
7
18
4
24

2
1
1
1
1

12
8
6
1
1
100% $ 254

%
72%
7
9

5
3
2
1
1
100%

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

other loans was insignificant at both Dec. 31, 2023 and Dec.
31, 2022. 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:

Commercial real estate
Other residential mortgages
Wealth management mortgages
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,

2023

2022

189
24
19
232
5
237
0.35%

54
31
22
107
2
109
0.16%

130.6

127.8

168.1

164.6

164.5

161.5

237.4

233.0

34 BNY Mellon

Results of Operations (continued)

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, 2023
(in millions)
Less than 3 months
3 to 6 months
6-12 months
Over 12 months

Total

Domestic

Foreign
661
5
9
—
675

331 $
161
154
1
647 $

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 on a
gross basis, 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
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.

Other borrowed funds primarily include borrowings
from the Federal Home Loan Bank, 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.

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.

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

BNY Mellon 35

Results of Operations (continued)

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

Total available funds
Total available funds as a percentage of total assets

Dec. 31,
2023

Dec. 31,
2022

Average

2023

2022

2021

4,922

5,030

5,287

5,542

5,922

111,550
12,139
28,900
$157,511

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

103,904
13,620
26,077
$148,888

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

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

38%

34%

37%

34%

37%

Total available funds were $157.5 billion at Dec. 31,
2023, compared with $138.2 billion at Dec. 31, 2022.
The increase was primarily due to higher interest-
bearing deposits with the Federal Reserve and other
central banks and federal funds sold and securities
purchased under resale agreements, partially offset by
lower interest-bearing deposits with banks.

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 $25.0 billion for 2023
and $16.9 billion for 2022. The increase primarily
reflects higher federal funds purchased and securities
sold under repurchase agreements and other borrowed
funds.

Average interest-bearing domestic deposits were
$123.5 billion for 2023 and $111.5 billion for 2022.

Average foreign deposits, primarily from our
European-based businesses included in the Securities
Services and Market and Wealth Services segments,
were $88.8 billion for 2023, compared with $101.9
billion for 2022. The decrease primarily reflects
client activity.

Average payables to customers and broker-dealers
were $14.4 billion for 2023 and $17.1 billion for

2022. Payables to customers and broker-dealers are
driven by customer trading activity and market
volatility.

Average long-term debt was $31.0 billion for 2023
and $27.4 billion for 2022.

Average noninterest-bearing deposits decreased to
$59.2 billion for 2023 from $85.7 billion for 2022,
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”).

36 BNY Mellon

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, 2023

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

Moody’s

A1
A2
Baa1
Positive

Aa2
NR
Aa1
P-1
P-1

Aa2 (a)
Aa1
P-1

Negative
(multiple) (b)

S&P

A
A-
BBB
Stable

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

AA-
AA-
A-1+

Fitch

AA-
A
BBB+
Stable

AA
NR
AA+
F1+
F1+

AA (a)
AA+
F1+

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

(a) Represents senior debt issuer default rating.
(b) Positive outlook on long-term senior debt ratings. Negative outlook on long-term deposits ratings. Positive outlook on senior unsecured

rating for The Bank of New York Mellon.

NR – Not rated.

In November 2023, Moody’s Investor Service
(“Moody’s”) confirmed the long-term issuer ratings,
debt ratings, counterparty risk ratings and
counterparty risk assessments of the Parent and our
rated subsidiaries. Following the confirmation, the
rating outlook for the Parent and The Bank of New
York Mellon’s issuer and senior unsecured ratings is
positive. In August 2023, Moody’s affirmed all
Prime-1 short-term ratings of the Parent and rated
subsidiaries as well as the long-term deposit ratings
for The Bank of New York Mellon and BNY Mellon,
N.A.

Long-term debt totaled $31.3 billion at Dec. 31, 2023
and $30.5 billion at Dec. 31, 2022. Issuances of $6.5
billion and an increase in the fair value of hedged
long-term debt were partially offset by maturities and
repurchases of $6.1 billion. The Parent has $4.9
billion of long-term debt that will mature in 2024.

The following table presents the long-term debt
issued in 2023.

Debt issuances
(in millions)
4.947% fixed-to-floating callable senior notes due 2027
6.474% fixed-to-floating callable senior notes due 2034
4.967% fixed-to-floating callable senior notes due 2034
6.317% fixed-to-floating callable senior notes due 2029
4.706% fixed-to-floating callable senior notes due 2034
4.543% fixed-to-floating callable senior notes due 2029
5.148% fixed-to-floating callable senior bank notes due
2026

Total debt issuances

2023
1,500
1,100
1,000
900
750
750

500
6,500

In December 2023, the Parent redeemed all
outstanding shares of its Series DNoncumulative
Perpetual Preferred Stock. See Note 15 of the Notes
to Consolidated Financial Statements for additional
information on the Parent’s preferred stock.

The Bank of New York Mellon may issue notes and
CDs. At Dec. 31, 2023 and Dec. 31, 2022, $1.3
billion and $780 million, respectively, of notes were
outstanding. At Dec. 31, 2023 and Dec. 31, 2022,
$397 million and $122 million of CDs were
outstanding, respectively.

BNY Mellon 37

Results of Operations (continued)

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,
2023 and Dec. 31, 2022. The average commercial
paper outstanding was $5 million for 2023 and 2022.

Subsequent to Dec. 31, 2023, our U.S. bank
subsidiaries could declare dividends to the Parent of
approximately $1.7 billion, without the need for a
regulatory waiver. In addition, at Dec. 31, 2023, non-
bank subsidiaries of the Parent had liquid assets of
approximately $3.2 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 one uncommitted line of credit in
place for liquidity purposes which is guaranteed by
the Parent for $300 million. Average borrowings
under this line were less than $1 million in 2023.
Pershing Limited, an indirect UK-based subsidiary of
BNY Mellon, has two separate uncommitted lines of
credit amounting to $261 million in aggregate.
Average borrowings under these lines were $16
million, in aggregate, in 2023.

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 arange 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 74% of total
revenue in 2023, and the dividend capacity of our
banking subsidiaries. Our double leverage ratio was
120.5% at Dec. 31, 2023 and Dec. 31, 2022, and
within the range targeted by management.

38 BNY Mellon

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 2023, we paid $1.5 billion in dividends on our
common and preferred stock. Our common stock
dividend payout ratio was 41% for 2023.

In 2023, we repurchased 55.8 million common shares
at an average price of $46.66 per common share for a
total cost of $2.6 billion.

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 a30-day t ime horizon.

The following table presents BNY Mellon’s
consolidated HQLA at Dec. 31, 2023, and the average
HQLA and average LCR for the fourth quarter of
2023.

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

Total consolidated HQLA (c)

Dec. 31,
2023

$ 111
72
$ 183

Total consolidated HQLA –average (c) $ 192
Average consolidated LCR

117%

Sept. 30,
2023
107
70
177

180
121%

(a) Primarily includes cash on deposit with central banks.
(b) Primarily includes securities of U.S. government-sponsored

enterprises, U.S. Treasury, sovereigns and U.S. agencies.
(c) Consolidated HQLA presented before adjustments. After
haircuts and the impact of trapped liquidity, consolidated
HQLA totaled $153 billion at Dec. 31, 2023 and $140 billion
at Sept. 30, 2023, and averaged $143 billion for the fourth
quarter of 2023 and $129 billion for the third quarter of
2023.

BNY Mellon and each of our affected domestic bank
subsidiaries were compliant with the U.S. LCR
requirements of at least 100% throughout 2023.

Results of Operations (continued)

Net stable funding ratio (“NSFR”)

The NSFR is a liquidity requirement applicable to
large U.S. banking organizations, including BNY
Mellon. The NSFR is expressed as aratio of the
available stable funding to the required stable funding
amount over aone-year horizon. Our average
consolidated NSFR was 135% for the fourth quarter
of 2023 and 136% for the third quarter of 2023.

BNY Mellon and each of our affected domestic bank
subsidiaries were compliant with the NSFR
requirement of at least 100% throughout the fourth
quarter of 2023.

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.

Net cash provided by operating activities was $5.9
billion in 2023, compared with $15.1 billion in 2022.
In 2023, cash flows provided by operations primarily

Capital

resulted from earnings and changes in accruals and
other, net. In 2022, cash flows provided by
operations primarily resulted from changes in trading
assets and liabilities, changes in accruals and other,
net and earnings.

Net cash used for investing activities was $5.8 billion
in 2023, compared with net cash provided by
investing activities of $19.9 billion in 2022. In 2023,
net cash used for investing activities primarily reflects
changes in interest-bearing deposits with the Federal
Reserve and other central banks and changes in
federal funds sold and securities purchased under
resale agreements, partially offset by a decrease in the
securities portfolio. In 2022, net cash provided by
investing activities primarily reflects changes in
interest-bearing deposits with the Federal Reserve
and other central banks, anet d ecrease in the
securities portfolio and change in federal funds sold
and securities purchased under resale agreements.

Net cash used for financing activities was $3.5 billion
in 2023, compared with $33.7 billion in 2022. In
2023, net cash used for financing activities primarily
reflects repayments of long-term debt, changes in
payables to customers and broker-dealers and
common stock repurchases, partially offset by
issuances of long-term debt and changes in deposits.
In 2022, 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.

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

2023

2022

10.0%
8.9%

10.0%
8.8%

$ 40,874
$ 36,531
$ 19,278
48.11
$
25.39
$
52.05
$
$ 39,524
759,344

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

$1.58

1.42

41%
3.0%

49%
3.1%

(a) See “Supplemental Information – Explanation of GAAP and Non-GAAP financial measures” beginning on page 111 for the

reconciliation of these Non-GAAP measures.

BNY Mellon 39

Results of Operations (continued)

The Bank of New York Mellon Corporation total
shareholders’ equity increased to $40.9 billion at Dec.
31, 2023 from $40.7 billion at Dec. 31, 2022. The
increase primarily reflects earnings and unrealized
gain on securities available-for-sale, partially offset
by common stock repurchase activity and dividend
payments.

We repurchased 55.8 million common shares at an
average price of $46.66 per common share for a total
of $2.6 billion in 2023.

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.

In July 2023, our Board of Directors approved a14%
increase in the quarterly cash dividend on common
stock, from $0.37 to $0.42 per share. We began
paying the increased quarterly cash dividend in the
third quarter of 2023.

In December 2023, the Parent redeemed all
outstanding shares of its Series D Noncumulative
Perpetual Preferred Stock. See Note 15 of the Notes

to Consolidated Financial Statements for additional
information on the Parent’s preferred stock.

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, 2023 and Dec. 31, 2022, 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 a nd 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.”

40 BNY Mellon

Results of Operations (continued)

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

Consolidated and largest bank subsidiary regulatory capital ratios

Well
capitalized

Dec. 31, 2023
Minimum
required

(a)

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)

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,
2022
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

Capital
ratios

11.5%
14.2
15.0

11.9%
14.7
15.7
6.0
7.3

16.2%
16.2
16.3
6.6
8.6

(a) Minimum requirements for Dec. 31, 2023 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 1capital a nd 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 1leverage 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.
N/A -Not a pplicable.

Our CET1 ratio determined under the Advanced
Approaches was 11.5% at Dec. 31, 2023 and 11.2%
at Dec. 31, 2022. The increase was primarily driven
by capital generated through earnings and anet
increase in accumulated other comprehensive income,
partially offset by capital deployed through common
stock repurchases and dividends.

The Tier 1leverage ratio was 6.0% at Dec. 31, 2023,
compared with 5.8% at Dec. 31, 2022. The increase
was driven by lower average assets.

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
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

BNY Mellon 41

Results of Operations (continued)

future impact the amount of capital that we are
required to hold.

The table below presents the factors that impacted
CET1 capital.

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 1capital:

Preferred stock
Other

Total Tier 1capital

Tier 2 capital:

Subordinated debt
Allowance for credit losses
Other

Total Tier 2capital –Standardized
Approach

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

2023

2022

$ 36,531 $ 35,896

(17,253)
(297)
(275)
(62)
(6)
18,638

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

4,343
(14)

4,838
(14)
$ 22,967 $ 22,856

1,148 $
414
(11)

1,551
85
414

1,248
291
(11)

1,528
50
291

1,222 $

1,287

$ 24,518 $ 24,384
$ 24,189 $ 24,143

$ 156,254 $ 159,096

$ 87,299 $ 90,243
2,979
68,450
$ 161,604 $ 161,672

3,380
70,925

Average assets for Tier 1leverage
ratio

Total leverage exposure for SLR

$ 383,899 $ 396,643
$ 313,749 $ 336,049

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

42 BNY Mellon

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 repurchases
Common stock dividends (a)
Total capital deployed

Other comprehensive gain (loss):

Unrealized gain on assets available-for-sale
Foreign currency translation
Unrealized gain on cash flow hedges
Defined benefit plans

Total other comprehensive gain

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

Total other (deductions)
Net CET1 generated
CET1 – End of period

2023
18,032

3,051

(43)
3,008

(2,604)
(1,262)
(3,866)

881
272
6
(86)
1,073
400

20
4
(6)
(27)
(9)
606
18,638

(a)
Includes dividend-equivalents on share-based awards.
(b) Primarily related to stock awards and stock issued for

employee benefit plans.

The following table shows the impact on the
consolidated capital ratios at Dec. 31, 2023 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.

Sensitivity of consolidated capital ratios at Dec. 31, 2023

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

8 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

Results of Operations (continued)

Stress capital buffer

In July 2023, the Federal Reserve announced that
BNY Mellon’s SCB requirement would remain at
2.5%, equal to the regulatory floor, for the period
from Oct. 1, 2023 through Sept. 30, 2024. 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.

Eligible external
TLAC ratios

Eligible external
LTD ratios

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%)

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

4.5%

(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 1capital.

External TLAC consists of the Parent’s Tier 1capital
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.
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.

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 a pplicable.

Dec. 31, 2023
Minimum
ratios
with buffers

Minimum
required

Ratios

18.0%

21.5%

30.3%

7.5%

9.5%

15.6%

7.5%

4.5%

N/A

15.0%

7.7%

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.

BNY Mellon 43

Results of Operations (continued)

Issuer purchases of equity securities

Share repurchases – fourth quarter of 2023

(dollars in millions, except per share amounts;
common shares in thousands)
October 2023
November 2023
December 2023

Maximum approximate dollar
value of shares that may yet
be purchased under the
publicly announced plans or
programs at Dec. 31, 2023
2,700
$
2,483
2,396
2,396 (b)
Includes 64 thousand shares repurchased at a purchase price of $3 million from employees, primarily in connection with the employees’
payment of taxes upon the vesting of restricted stock. The average price of open market share repurchases was $44.83.

Total shares
repurchased as
part of a publicly
announced plan
or program
3,450
4,823
1,763
10,036

Average price
per share
42.28
45.09
49.26
44.85

Total shares
repurchased
3,450
4,823
1,763
10,036

Fourth quarter of 2023 (a)

(a)

(b) Represents the maximum value of the shares to be repurchased under the share repurchase plan announced in January 2023 and

includes shares repurchased in connection with employee benefit plans.

diversification of aggregated risk at the firm-wide
level.

VaR represents akey r isk 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 into account the 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

2023
Average Minimum Maximum

3.2 $
2.9
0.2
1.5
(5.0)
2.8

1.9 $
2.0
—
0.7
N/M
1.3

7.6 $
5.7
1.5
3.5
N/M
8.9

Dec. 31,
2023
2.6
2.9
0.1
1.3
(4.7)
2.2

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.

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 aone-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

44 BNY Mellon

Results of Operations (continued)

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

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

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

During 2023, interest rate risk generated 41% of
average gross VaR, foreign exchange risk generated
37% of average gross VaR, equity risk generated 3%
of average gross VaR and credit risk generated 19%
of average gross VaR. During 2023, our daily trading
loss did not exceed our calculated VaR amount of the
overall portfolio.

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)

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.

(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,
2023

Sept. 30,
2023

March 31,
2023

Dec. 31,
2022

Quarter ended
June 30,
2023
Number of days

2
3
18
25
15

—
5
14
24
20

—
2
15
37
9

—
1
20
26
15

2
4
13
24
20

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.

(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 $10.1 billion at
Dec. 31, 2023 and $9.9 billion at Dec. 31, 2022.

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 $6.2 billion at
Dec. 31, 2023 and $5.4 billion at Dec. 31, 2022.

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
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.

BNY Mellon 45

Results of Operations (continued)

At Dec. 31, 2023, our OTC derivative assets,
including those in hedging relationships, of $2.3
billion included acredit valuation adjustment
(“CVA”) deduction of $16 million. Our OTC
derivative liabilities, including those in hedging
relationships, of $3.8 billion included adebit
valuation adjustment (“DVA”) of $4 million related
to our own credit spread. Net of hedges, the CVA
increased by $1 million and the DVA increased by $1
million in 2023, which increased other trading
revenue by less than $1 million in 2023. During
2023, no realized loss was charged off against CVA
reserves.

At Dec. 31, 2022, our OTC derivative assets,
including those in hedging relationships, of $2.9
billion included aCVA d eduction of $18 million.
Our OTC derivative liabilities, including those in
hedging relationships, of $3.0 billion included aDVA
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.

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, 2023

Dec. 31, 2022

(dollars in
millions)
Investment grade

Non-investment

grade

Total

Exposure,
net of
collateral
2,062
$

103
2,165

Percentage
of exposure,
net of
collateral

95% $

Exposure,
net of
collateral
2,553

Percentage
of exposure,
net of
collateral
98%

5%
100% $

63
2,616

2%
100%

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

46 BNY Mellon

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 a12-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 each respective quarter-end. 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
impact of interest rate shifts may not be linear. The
results of this earnings simulation should therefore
not be extrapolated for more severe interest rate
scenarios than those presented in the table below.

Results of Operations (continued)

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 100 bps,
short-term unchanged (a)
Short-term down 100 bps,
long-term unchanged
Down 100 bp rate shock vs.

baseline

Dec. 31,
2023

Sept. 30,
2023

Dec. 31,
2022

254 $

166 $

214

183

153

184

(73)

(14)

(30)

(270)

(214)

(251)

(343)

(228)

(281)

(a) The sensitivity for Dec. 31, 2022 has been updated to reflect
the impact of a100 basis point decrease in long-term rates
while short-term rates were unchanged.

At Dec. 31, 2023, the impact of a 100 basis point
upward shift in rates on net interest revenue increased
compared with Sept. 30, 2023 primarily due to higher
cash and deposit balances in the most recent quarter,
which increased the benefit of rising interest rates.
The impact of a 100 basis point downward shift in
rates on net interest revenue worsened compared with
Sept. 30, 2023 primarily due higher cash and deposit
balances.

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 estimate that a $5 billion
instantaneous reduction or increase in U.S. dollar-
denominated noninterest-bearing deposits would
reduce or increase 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.

Additionally, during periods of low short-term
interest rates, money market mutual fund fees and
other similar fees are typically waived to protect
investors from negative returns.

For adiscussion 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 along-term horizon and then discount
these cash flows using instantaneous parallel shocks
to prevailing interest rates. This measure reflects the
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
Down 100 bps vs. baseline
Down 200 bps vs. baseline

Dec. 31,
2023

2.5%
2.2%
(2.7)%
(6.1)%

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 aliability
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, 2023, net investments
in foreign operations totaled $14 billion and were
spread across 19 foreign currencies.

BNY Mellon 47

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 principle-based policies including 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 arepresentation o f 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.
We utilize a common risk language, our Risk
Taxonomy, to identify risks across our six primary
risk categories: Operational Risk, Market Risk, Credit
Risk, Liquidity Risk, Model Risk and Strategic Risk.
Quarterly, the Company engages in aprocess
designed to document identification and assessment
of its risks, and todetermine t he 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 tolerate to meet our strategic
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

48 BNY Mellon

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 arange 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 appropriately managing
risk consistent with its strategy and risk tolerance,
including establishing clear responsibilities and
accountability for the identification, measurement,
management and control of risk.

Risk and Compliance is the independent second line
of defense, reporting to the Chief Risk Officer. The
Chief Risk Officer reports to both the Chief
Executive Officer and the Risk Committee of the
Company’s Board of Directors. Risk and
Compliance 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. To facilitate
the comprehensive global application of consistent
standards for each risk or compliance topic,
independent oversight is provided by Risk and
Compliance across three perspectives – lines of
business; legal entities; and enterprise-wide risk and
compliance disciplines.

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

Risk Management (continued)

Company’s risk management, control and governance
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

• Enterprise Risk Committee
• International Senior Risk and Control

Committee

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

The Risk Committee is comprised entirely of
independent directors and meets on aregular basis to
review and assess the control processes with respect
to the Company’s inherent risks. It also reviews and
assesses the Company’s risk management policies
and practices. 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, the Company’s independent
registered public accountant’s qualifications and
independence, and the performance of our internal
audit function and the independent registered public
accountant. 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.

The SRCC is the most senior management level 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.

Subcommittees of the SRCC include:

• Anti-Money Laundering Oversight Committee:
Oversees the systems and controls relating to all
aspects of anti-money laundering and terrorist
financing compliance (including Know Your
Customer, suspicious activity reporting and
sanctions) within the Company.

• 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

BNY Mellon 49

Risk Management (continued)

associated with the assets, liabilities and capital
of the Company. There is afocus o n treasury
risk topics, including matters related to liquidity
risk, capital management, investment portfolio
risk, and interest rate risk in the banking book.

• 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 and determines the client contract
management policies and infrastructure for the
Company.

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

•

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.

•

Enterprise Risk Committee: Oversees the
Enterprise Risk Management Framework and
related activities, including comprehensive
discussions, deliberations and collaboration on
material and emerging risks, limit setting, risk
reporting, issues management, escalation and
relevant decision making.

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 profile and is responsible for
monitoring and managing the appropriateness of
the operational risk framework, policy design,
adherence tracking and mitigating controls.

•

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.

•

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 the Company in managing and
monitoring technology risk and control issues.

50 BNY Mellon

Risk Management (continued)

Risk Types Overview

The understanding, identification, measurement and mitigation of risk are essential elements for the successful
management of BNY Mellon. We leverage a comprehensive risk taxonomy to support consistent language for
defining and understanding risks. The primary categories in our risk taxonomy are:

Type of risk
Operational

Market

Credit

Liquidity

Model

Strategic

Description
The risk of loss resulting from inadequate or failed internal processes, people and systems or from external
events. Operational risk includes risks, such as compliance and financial crimes, technology risks and third
party risks.
The risk of financial loss or adverse change to the economic condition of BNY Mellon resulting from
movements in market risk factors. Market risk factors include but are not limited to interest rates, credit
spreads, foreign exchanges rates, commodity prices, and equity prices. The potential loss in value for the
BNY Mellon financial portfolio caused by adverse movements in market prices of foreign exchange, fixed
income and equity assets, credit spreads, commodities and liabilities accounted for under fair value and
equivalent methods.
Credit risk denotes a broad category of adverse financial outcomes arising from credit events (default,
bankruptcy, ratings migration) associated with obligor/counterparty not meeting (inability/unwilling) its
contractual obligations. 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 arising from an inability to access funding, convert assets to cash quickly and efficiently, or to roll
over or issue new debt, especially during periods of market stress. Liquidity risk includes the inability to
access funding sources or manage fluctuations in funding levels. 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/using amo del or stress conditions that invalidate the
assumptions of a model.
The risk arising from the flawed design, decision or implementation of abusin ess strategy, and potential
disruption to business strategy by external factors and/or internal decisions. More specifically, the risks
arising from adverse business decisions, poor implementation of business decisions or lack of
responsiveness to changes in the financial industry and operating environment. Strategic 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.

Operational Risk

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 totransaction p rocessing, failure of
internal control systems and meeting 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 in 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 the business risk profiles and
in accordance with BNY Mellon policies and
procedures.

BNY Mellon 51

Risk Management (continued)

• 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 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, as well as specialist
oversight of areas such as data risk, fraud risk,
and third party risk.

•

Technology risk is a subset of operational risk.
Technology Risk Management is the independent
second line function that is responsible for
independent risk oversight of the technology
footprint, bringing expertise 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 amore accurate
assessment of operational risks that can occur
from technology operations. Technology Risk
Management also acts as acatalyst t o 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 atop p riority for the
Company. Foundational to our enterprise
resiliency strategy is the Business Services
Framework, governed by the first line Enterprise
Resiliency Office, with second line oversight
from Resiliency Risk Management. First line
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

52 BNY Mellon

clients by the ability to prevent, respond to and
recover from business disruptions and threats.

• Compliance and financial crimes risk is also a
subset of operational risk with second line
Compliance and Ethics and Financial Crime
Compliance (“FCC”) teams. Compliance and
financial crimes risk 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.

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 market
risk is assumed in the form of interest rate and credit
spread risk within the investment portfolio as a means
for 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,
BSRC, ALCO 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.

Risk Management (continued)

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.

Credit Risk

We extend direct credit in order to foster client
relationships and as amethod 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 acounterparty,
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 proposed by the
business, 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 afundamental credit measure is
based on aprojection o f astatistic ally 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 ausage g iven default
percentage. Borrowers/counterparties are assigned
ratings by the business and reviewed, challenged 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 a5-grade s cale) that reflect
the transactions’ structures, including the effects of
guarantees, collateral and relative seniority of
position.

The Risk 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
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, composed
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, adowngrade i n 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

BNY Mellon 53

Risk Management (continued)

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
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, 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 uses arange of stress
testing measures in connection with its efforts to
maintain sufficient liquidity relative to risk appetite,
including the Liquidity Coverage Ratio and Internal
Liquidity Stress Testing.

Model Risk

Models support our infrastructure for managing risk.
Among their functions, models help us value
securities, rate the quality of an obligor’s credit,
establish capital needs and monitor liquidity trends.
Model failure might stem from faulty design, misuse,
or environmental conditions that invalidate our
assumptions. 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 could
occur and to establish controls that are designed to
minimize or prevent loss in case of such an event.
These processes include enforcement of standards for

54 BNY Mellon

developing models, aprocess t o validate new models,
change controls for existing models, and a monitoring
system to assess performance throughout a model’s
life.

When evaluating the degree of model risk, we
consider 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.

Model Risk Management, an independent risk
management function, is responsible for executing
Board-approved strategies, policies, and procedures
for managing model risk. 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.

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 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

Risk Management (continued)

negative financial impact. While it is essential that
we continue to innovate and respond to changing
markets and client demand, we seek to do so in a
manner that does not affect our financial position or
jeopardize our fundamental business strategy.

Other Risk Considerations

In addition to the primary risk categories and sub-
categories noted above, we consider risks that have
thematic significance and may manifest across
multiple categories of risk. These risk considerations
include data risk, environmental, social and
governance risk and reputational risk.

Data Risk

We are exposed to data risk when we fail to
consistently manage and control our data assets
through the entire lifecycle, including managing the
production, confidentiality, quality, integrity,
availability, and retention of data information.

Our risk management approach considers data risks
within our business activities. Our enterprise data
framework and supporting policies address
management of data in key areas of data architecture,
data governance, data quality management, data
protection, data usage and ethics.

We also consider data risks in the execution of our
business objectives and processes, including the
development of new products and services, including
AI applications. We remain committed to increasing
the effectiveness of our data management practices
which are designed to enable us to deliver products
and services to our clients across the investment
lifecycle.

Environmental, Social and Governance

We are exposed to environmental, social and
governance (“ESG”) risks factors that may lead to

increased risk levels across one or more enterprise
risk categories and may impact our risk management
frameworks. For example, climate risks include
physical risks from acute and chronic weather-related
effects as well as transition risks from changes such
as fiscal policy, legislation and regulation,
technological development, and investor and
customer preference changes. Social and governance
risks could also impact our risk categories and risk
management frameworks.

ESG effects may be wide-ranging with potential
financial and operational resilience implications that
could negatively impact the Company’s strategic
objectives and financial performance, reputation,
business operations, ability to service clients and
broad stakeholder relationships. Potential risk
outcomes include, but are not limited to, adverse
publicity, loss of business, financial loss, litigation,
employee impacts, and other operational impacts.
For example, key climate-related impacts have been
identified across our credit portfolios, strategic
positioning, operational resiliency, and the pace and
volume of regulatory change, with the potential for
reputational impacts across these areas. ESG is
considered when managing risk within appetite and
limits across the enterprise risk categories.

Reputational Risk

We are exposed to Reputational Risk as aresult of
negative stakeholder perception which may result
from any decision, action, or inaction by BNY
Mellon, any of our employees, or through other
associated parties, such as clients, strategic partners,
and third parties. Reputational impacts can result in
risks to current or anticipated earnings, capital,
liquidity, brand, and enterprise value, and can stem
from any line of business, corporate function, legal
entity, product, or service.

BNY Mellon 55

Cybersecurity

BNY Mellon maintains a broad range of defenses
aimed at remaining abreast of and responding to
evolving cybersecurity threats impacting the
Company, its operations, its clients, its third-party
service providers and the broader financial services
sector. During 2023, cybersecurity threats did not
have a material effect on the Company’s business
strategy or operations. However, the financial
services sector is prone to cybersecurity threats, and
there can be no assurance that the Company will be
able to successfully protect its information systems
against material cybersecurity incidents in the future.
Given the increasing prevalence and severity of
cybersecurity incidents affecting financial
institutions, other companies and governmental
agencies as well as the evolving and adaptive nature
of cybersecurity threats, cybersecurity risk
management is a priority for the Company that
impacts its allocation of resources, operations and
risk management strategy. For afurther d iscussion of
the various risks related to cybersecurity threats and
the potential impact on the Company’s business
strategy, results of operations or financial condition,
see “Risk Factors –Risk Types Overview –
Operational Risk.”

Risk Management strategy and procedures

BNY Mellon has implemented policies and
procedures designed to detect, prevent and respond to
malicious and accidental disruptions to the delivery of
critical technology services. BNY Mellon’s
cybersecurity strategy and procedures are embedded
in the Company’s Three Lines of Defense model.

As part of its first line of defense, the Company
maintains adedicated Information Security Division
(“ISD”), led by the Chief Information Security
Officer (the “CISO”), that is responsible for the day-
to-day management of risks from cybersecurity
threats. ISD’s responsibilities include cyber threat
intelligence, incident response and other
cybersecurity operations aimed at enabling the
Company to identify, assess and manage existing and
emerging cybersecurity threats. ISD monitors for
potential threats and communicates relevant risks to
the CISO and other members of executive
management. Additionally, ISD maintains a
cybersecurity incident response and reporting process
pursuant to which cybersecurity incidents are
classified according to their severity based upon an
assessment of multiple factors. Certain cybersecurity
incidents may activate enterprise-wide resiliency

56 BNY Mellon

processes, which include, among other things,
escalation through the management and Board
committee structures described below. The Company
also has standing arrangements with third parties to
assist the Company in identifying, assessing and
managing cybersecurity threats, including in
connection with risk assessments, penetration testing,
legal advice and other aspects of the Company’s
cybersecurity risk management and incident response
processes.

BNY Mellon has a defined third-party governance
framework to help manage the risk posed to the
Company by the use of third-party service providers.
The Company evaluates the risk posed by third-party
service engagements based on multiple factors. The
Company has protocols that seek to mitigate
cybersecurity risks associated with third-party service
providers based on the risk level assigned to such
third party, which may include mandatory contractual
obligations or the implementation of additional
controls by the Company and/or the applicable
service provider.

ISD is subject to ongoing review and challenge from
Technology Risk Management, which is a part of the
independent second line of defense risk function.
Technology Risk Management, together with the
broader Risk &Compliance group, is responsible for
and manages the Company’s risk management
framework and establishes guidance for ISD and
management designed to help identify, assess and
manage cybersecurity risk. For more information on
how we monitor and manage our risk management
framework, see “Risk Management –Overview.”

Internal Audit serves as the third line of defense and
provides an independent view on how effectively the
organization as awhole m anages cybersecurity risk.

For afurther d iscussion of BNY Mellon’s Three
Lines of Defense model, see “Risk Management –
Three Lines of Defense.”

Risk Management oversight and governance

The Company’s management is responsible for
assessing and managing the Company’s material risks
from cybersecurity threats with oversight provided by
the Parent’s Board of Directors and the Board
committees. The Risk Committee of the Board has
primary responsibility for oversight of the overall
operation of the Company’s risk management

Cybersecurity (continued)

framework, including policies and practices
addressing cybersecurity risk, and is responsible for
the oversight of the second line of defense with
respect to its cybersecurity risk management
responsibilities. The Technology Committee of the
Board and the full Board regularly receive reports and
briefings from management concerning cybersecurity
matters, including any significant changes to the
Company’s cybersecurity program. The Company
also has protocols for escalating cybersecurity threats
and incidents to the Technology Committee of the
Board and the full Board. In addition, the Audit
Committee monitors and oversees the performance of
Internal Audit, including with respect to its
cybersecurity risk management responsibilities.

At the management level, the Technology Oversight
Committee, which is the senior management
committee responsible for the governance and
oversight of the Company’s significant technology
projects and initiatives, reviews reports from
management concerning ISD and is responsible for,
among other things, escalating issues, including
significant cybersecurity threats and incidents, to the
Technology Committee of the Board. The
Technology Oversight Committee is chaired by the
Chief Information Officer (the “CIO”) and its
members include the CISO.

Risk Committee receives reports from management
and has protocols for escalating certain issues and
risks to the SRCC and the Risk Committee of the
Board of Directors. The Technology Risk Committee
is co-chaired by the Head of Technology Risk and
Control and the Chief Technology Risk Officer, and
the CISO is amember.

BNY Mellon’s CIO, CISO and Chief Technology
Risk Officer each have extensive experience in
assessing and managing risks from cybersecurity
threats. The Company’s CISO joined BNY Mellon in
2022 and previously served as head of information
security at a Fortune 500 biopharmaceutical company
and an information technology company, as well as
the Global Chief Technology Officer at a large
cybersecurity company. The Company’s CIO has
served in that position since 2017 and previously held
roles as Chief Information Officer, Chief Technology
Officer, and numerous other technology management
positions at other large financial institutions. The
Company’s Chief Technology Risk Officer joined
BNY Mellon in 2021 and previously served as Global
Head of Technology Risk Management, Chief
Information Security Officer, Global Head of Cyber
Risk and Operational Resilience and Chief Risk
Officer for Technology and Operations at other large
financial institutions.

The Technology Risk Committee is responsible for,
among other things, overseeing and reviewing
significant cybersecurity incidents. The Technology

For afurther d iscussion of BNY Mellon’s risk
management governance structure, see “Risk
Management – Governance.”

BNY Mellon 57

Supervision and Regulation

Evolving Regulatory Environment

Capital Planning and Stress Testing

BNY Mellon engages in banking, investment
advisory and other financial activities across the
globe 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 15 years
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. Moreover, political developments have
resulted and may continue to result in legislative and
regulatory changes to key aspects of laws and
regulations affecting large banking and financial
institutions 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 abuffer 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.

58 BNY Mellon

Payment of Dividends, Stock Repurchases and Other
Capital Distributions

The Parent is alegal e ntity 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
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,” and 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 FDI Act, an insured depository institutions
(“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 e arnings” test and an
“undivided profits” test. Under the recent earnings
test, adividend 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

Supervision and Regulation (continued)

profits that have not been paid out as dividends or
transferred to surplus). The ability of our U.S. 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 aquarterly 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 afirm’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 afirm’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 August 31, and the SCB
will become effective on October 1of the applicable
calendar year. In July 2023, the Federal Reserve
announced BNY Mellon’s SCB requirement of 2.5%,
which equals the regulatory floor. The SCB
requirement was confirmed via further announcement
from the Federal Reserve in August 2023. 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 anewly i ssued capital
instrument, if afirm is required to resubmit its capital
plan. See “Results of Operations – 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
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 Total Loss-Absorbing Capacity
(“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

BNY Mellon 59

Supervision and Regulation (continued)

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
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 “Results of Operations –
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 afirm’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 acountercyclical capital
buffer. For internationally active banks such as BNY
Mellon, the countercyclical capital buffer required
threshold is aweighted average o f 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

60 BNY Mellon

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 aG-SIB r isk-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 aG-SIB’s s ize,
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-
term wholesale funding. The G-SIB surcharge
applicable to BNY Mellon for 2023 was 1.5%.

U.S. Capital Rules – Deductions from and
Adjustments to Capital Elements

The U.S. capital rules provide for anumber 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 adopted a final rule that
generally requires certain Advanced Approaches
banking organizations, including BNY Mellon, to
deduct from Tier 2capital, subject to certain
exceptions, direct, indirect and synthetic exposures to
covered debt instruments, including TLAC
instruments.

U.S. Capital Rules – Advanced Approaches Risk-
Based Capital Rules

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-

Supervision and Regulation (continued)

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 1capital
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
Approach apply to avariety o f 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 asecurities l ender, 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, abanking organization m ay
use a collateral haircut approach to recognize the
credit risk mitigation benefits of financial collateral
that secures arepo-style t ransaction, including an
agented securities lending transaction, among other
transactions. To apply the collateral haircut
approach, abanking organizatio n must determine the
exposure amount and the relevant risk weight for the
counterparty and collateral posted.

Standardized Approach for Measuring Counterparty
Credit Risk Exposures for Derivatives

The Agencies jointly issued the Standardized
Approach for Counterparty Credit Risk (“SA-CCR”)
in January 2020 amending the U.S. capital rules to
implement a modified approach for calculating the

exposure amount for derivative contracts. 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. SA-CCR was
implemented in the first quarter of 2022.

Leverage Ratios

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 a6% SLR in order to qualify as
“well capitalized” under the prompt corrective action
regulations discussed below.

The Agencies 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
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 a0% 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 rulemaking 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%

BNY Mellon 61

Supervision and Regulation (continued)

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 and U.S.
Implementation

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. In January 2019, the BCBS released
revised minimum capital requirements for market
risk.

On July 27, 2023, the Federal Reserve, the OCC, and
the FDIC proposed for comment substantial revisions
to the capital requirements applicable to large
banking organizations and to banking organizations
with significant trading activity, including BNY
Mellon, to implement the international capital
standards issued by the BCBS. Large banking
organizations would be required to calculate risk-
based capital ratios under both anew E xpanded Risk-
based Approach (replacing the current Advanced
Approaches framework) and the current Standardized
Approach. A large banking organization’s capital
ratios would be the lower of each ratio calculated
under the Standardized Approach and Expanded
Risk-Based Approach. All applicable capital buffer
requirements, including the stress capital buffer,
would apply regardless of which approach produces
the lower result.

The proposal would replace existing models-based
Advanced Approaches for calculating RWA for credit
risk and operational risk with new standardized
approaches that are part of the Expanded Risk-based
approach. Under the proposed Expanded Risk-based
Approach, RWAs would be calculated using: (i) a
new standardized approach for credit risk; (ii) one of
two non-models-based approaches for credit
valuation adjustment risk; (iii) a new standardized
approach for operational risk that is not based on

62 BNY Mellon

internal models; and (iv) a revised approach to market
risk. For market risk, the proposal would implement
a standardized approach, adopt a new models-based
approach and would allow use of internal models for
certain risks subject to enhanced requirements for
model approval and performance.

The proposal would also indirectly impact several
other regulations, including the requirements for total
loss-absorbing capacity, long-term debt requirements,
and the surcharge for G-SIBs. It would remove the
option of using internal models in the calculation of
derivatives exposure amounts under single-
counterparty credit limit rules. Under the proposal,
the revisions would become effective on July 1, 2025,
subject to a three-year transition period for
calculating RWAs under the Expanded Risk-based
Approach. We are assessing the potential impact of
the proposal.

Risk-Based Capital Surcharges for Global
Systemically Important Bank Holding Companies

On July 27, 2023, the Federal Reserve proposed for
comment amendments to its rule regarding risk-based
capital surcharges for G-SIBs, including BNY
Mellon. For certain systemic indicators currently
measured only as of year-end, the proposal would
change to measurement of average daily or monthly
values over the full year. The proposal would also
revise various aspects of the systemic indicators and
measure G-SIB surcharges in 10-basis point
increments rather than 50-basis point increments.
The proposal provides the amendments would
become effective two calendar quarters after adoption
of a final rule. We are assessing the potential impact
of the proposal.

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 aminimum
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%.

Supervision and Regulation (continued)

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
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.

On Aug. 29, 2023, the Federal Reserve proposed for
comment amendments to TLAC rule applicable to
U.S. G-SIBs, including BNY Mellon. Among other
requirements, the proposal would: (i) require a
$400,000 minimum denomination for newly issued
long-term debt of G-SIBs used to satisfy TLAC and
LTD requirements; (ii) allow only 50% of the amount
of eligible long-term debt with a maturity of one year
or more but less than two years to count towards
TLAC requirements; and (iii) subject to notice and
comment procedures, require a G-SIB to maintain an
amount of eligible TLAC or long-term debt
instruments greater or less than generally required
under the rule. The proposal would also exempt
certain agreements from the scope of the TLAC rule’s
clean holding company prohibitions with respect to
qualified financial contracts with third parties. We
are evaluating the potential impact of the proposed
rule.

Certain foreign jurisdictions impose internal TLAC
requirements on the foreign subsidiaries of U.S. G-
SIBs. The European Union’s Capital Requirements
Regulation 2 (“EU CRR2”) requires EU material
subsidiaries of non-EU G-SIBs (including BNY
Mellon) to maintain a minimum level of internal loss
absorbing capacity; this requirement will continue

under the EU’s proposed Capital Requirements
Regulation 3 (“EU CRR3). The 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 a30-day t ime horizon under an
acute liquidity stress scenario. As of Dec. 31, 2023,
the Parent and its domestic bank subsidiaries were in
compliance with applicable LCR requirements.

The Agencies have issued a final NSFR rule that
implements aquantitativ e 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 aratio of its available stable funding to

BNY Mellon 63

Supervision and Regulation (continued)

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
began to apply in 2023. As of Dec. 31, 2023, 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 arange 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
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 1capital, 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

64 BNY Mellon

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 (“CFTC”) and 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
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

Supervision and Regulation (continued)

shareholder redemptions and to minimize the impact
of redemptions on remaining shareholders.

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.

Single Counterparty Credit Limits

The Federal Reserve adopted a rule in June 2018
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 acovered f irm and all
of its subsidiaries to a single counterparty and all of
its affiliates and connected entities.

The 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). The rule provides acure period of 90 days (or,
with prior notice from the Federal Reserve, alonger
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.

SEC Rules on Mutual Funds and Registered
Investment Advisers

SEC regulations impose requirements on mutual
funds, exchange-traded funds and other registered
investment companies (“RICs”) under the Investment
Company Act of 1940, as amended (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

On July 12, 2023, the SEC adopted amendments to
rules that govern money market funds. The
amendments became effective Oct. 2, 2023, with
tiered compliance dates. The amendments include,
among other things: (i) amandatory liquidity fee for
institutional prime and institutional tax-exempt
money market funds, which will apply when afund
experiences daily net redemptions that exceed 5% of
net assets (effective Oct. 2, 2023); (ii) maintenance of
a fund board’s ability to impose liquidity fees (not to
exceed 2% of the value of the shares redeemed) on a
discretionary basis for non-government money
market funds (effective April 2, 2024); (iii)
substantially increasing the required minimum levels
of daily and weekly liquid assets for all money
market funds from 10% and 30%, to 25% and 50%,
respectively (effective April 2, 2024); and (iv)
removal of amoney m arket fund’s ability to impose
temporary “gates” to suspend redemptions in order to
prevent dilution and remove the link between a
money market fund’s liquidity level and its
imposition of liquidity fees (effective Oct. 2, 2023).

On Sept. 20, 2023, the SEC adopted amendments
expanding the scope of terms that the SEC considers
materially deceptive and misleading in a fund’s name
without a corresponding policy and related controls 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”), including names that
reference “growth” or “value,” or aname indicating
that investment decisions incorporate any
environmental, social and governance factors. The
amendments became effective Dec. 10, 2023 and
fund groups will have either 24 months or 30 months
to come into compliance, depending upon their net
asset size.

On Oct. 26, 2022, the SEC proposed for comment
new rules to prohibit registered investment advisers
(“RIAs”) from outsourcing certain services and
functions without first meeting certain threshold
requirements, including conducting due diligence,
and thereafter requiring ongoing 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 potential harm
to clients. The proposal would further require RIAs

BNY Mellon 65

Supervision and Regulation (continued)

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. We
continue to evaluate the impact of the proposed rule.

On Nov. 2, 2022, the SEC proposed for public
comment rule amendments that would require the
adoption of “swing pricing” and a“hard c lose” by all
open-end RICs other than money market funds and
exchange-traded funds (“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 agiven d ay’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. We continue to evaluate the impact of
the proposed rule.

Exchange-Traded Funds Rule

SEC Rule 6c-11 (the “ETF Rule”) under the 1940 Act
permits exchange traded funds (“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 anumber of E TFs.

66 BNY Mellon

Recovery and Resolution Planning

As required by the Dodd-Frank Act, large domestic
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 aseparate 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 acomprehensive r ecovery plan, which
describes actions it could take to seek to avoid failure
if faced with financial stress.

On Aug. 29, 2023, the FDIC proposed for comment
revisions to the resolution plan rule applicable to
covered IDIs. The proposed amendment would
expand certain IDI resolution plan content
requirements, adjust the frequency of resolution plan
submissions from a3-year cycle t o a2-year cycle,
and require supplemental submissions of information
in the interim period between filing years. We are
evaluating the potential impact of the proposed rule.

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 atargeted 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
submitted a full resolution plan dated July 1, 2023.
The final rule does not materially modify the
components or informational requirements of full
resolution plans.

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.

Supervision and Regulation (continued)

The resolution strategy set out in our 165(d)
resolution plan is asingle p oint 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”) and in the
UK, the Bank Recovery and Resolution Directive, as
amended by the Bank Resolution and Recovery
Directive 2(“BRRD”), p rovides 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 and
UK subsidiaries of third country banks. The UK
transposed most requirements of BRRD into local
legislation and regulation following the UK exit from
the EU on Dec. 31, 2020.

BRRD gives relevant EEA and UK 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 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 acase-by-case b asis
for each institution subject to BRRD and is applicable
to certain EU and UK domiciled credit institutions
and certain other firms subject to BRRD. BNY
Mellon SA/NV is subject to MREL. The EU is
legislating further revisions to the BRRD to amend
internal MREL requirements in bank resolution
groups. BNY Mellon will assess the potential impact
of the final rules.

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, 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.

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 anew o bligor, 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

•

BNY Mellon 67

Supervision and Regulation (continued)

• 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 aresolution r egime
(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
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

68 BNY Mellon

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 athird
party or a“bridge” e ntity.

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 aforeign b ranch
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.

2023 Bank Failures

On March 12 and 13, 2023, following the closures of
Silicon Valley Bank (“SVB”) and Signature Bank,
respectively, and the appointment of the FDIC as the
receiver for those banks, the FDIC announced that,
under the systemic risk exception set forth in the
Federal Deposit Insurance Act, as amended (the “FDI
Act”), all insured and uninsured deposits of those
banks were transferred to the respective bridge banks
for SVB and Signature Bank.

On May 1, 2023, the FDIC released acomprehensive
overview of the deposit insurance system and options
for reform to address financial stability concerns
stemming from recent bank failures. The FDIC
evaluated three primary options: limited coverage,
unlimited coverage and targeted coverage. The
proposed options would require Congressional action,
though some aspects of the report lie within the scope
of the FDIC’s rulemaking authority. We are
evaluating the impact of the proposed reforms.

In addition, also on May 1, 2023, the FDIC was
appointed as receiver for First Republic Bank. The
FDIC has indicated that the estimated losses to the
DIF of resolving First Republic Bank are expected to
be $13 billion. These recent bank failures and other
related developments in the banking industry, such as
the acquisition of Credit Suisse by UBS in 2023, has
resulted and may continue to result in increased
regulatory activity, supervisory focus, and related
restrictions on banking organizations.

Supervision and Regulation (continued)

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 DIF is funded by assessments on IDIs.
The FDIC assesses DIF premiums based on abank’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, acustody 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 afiduciary or
custodial and safekeeping account.

Following the closures of SVB and Signature Bank in
March 12 and 13, 2023, the FDIC announced that, as
required by the FDI Act, any losses to the DIF to
support uninsured depositors would be recovered by a
special assessment prescribed through regulation.
Under the FDI Act, the FDIC has discretion with
respect to the design and timeframe for any special
assessment, which may be on insured depository
institutions, depository institution holding companies
(with the concurrence of the Treasury Secretary), or
both, as the FDIC determines to be appropriate. The
FDIC may consider the types of entities that benefit

from the action taken, economic conditions, the
effects on the industry, and such other factors as the
FDIC deems appropriate.

On Nov. 16, 2023, the FDIC adopted a final rule,
effective April 1, 2024, implementing aspecial
assessment on IDIs to recover losses to the DIF
associated with the closures of SVB and Signature
Bank. When the rule was adopted, the FDIC
estimated that the assessed losses would total
approximately $16.3 billion. Under the rule, the
FDIC will collect from each IDI aspecial assessment
at a quarterly rate of 3.36 basis points (or an annual
rate of approximately 13.4 basis points) of the IDI’s
estimated uninsured deposits (excluding the first $5
billion of estimated uninsured deposits) as of Dec. 31,
2022. For an IDI that is part of a holding company
containing multiple IDIs, the $5 billion deduction
would be apportioned based on the IDI’s estimated
uninsured deposits as a percentage of total estimated
uninsured deposits held by all IDI affiliates in the
consolidated banking organization. The special
assessment will be collected during an initial special
assessment period of eight quarters, with the first
quarterly assessment period beginning on Jan. 1,
2024, subject to potential extension and apotential
one-time final special assessment for any shortfall to
the DIF. In February 2024, the FDIC estimated the
assessed losses would total approximately $20.4
billion. We recorded an accrual to noninterest
expense of approximately $632 million in the fourth
quarter of 2023 for this special assessment.

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 aBHC’s
bankruptcy, any commitment by the BHC to a federal
bank regulator to maintain the capital of asubsidiary
bank will be assumed by the bankruptcy trustee and
entitled to apriority 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

BNY Mellon 69

Supervision and Regulation (continued)

New York Mellon, BNY Mellon, as the banks’
stockholder, could be required to pay such deficiency.

Anti-Money Laundering (“AML”) and the USA
PATRIOT Act

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
transactions with all affiliates. There are also
limitations on affiliate credit exposures arising from
derivative transactions and securities lending and
borrowing transactions.

Incentive Compensation Arrangements

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.

On Oct. 22, 2022, the SEC adopted a final rule
requiring national securities exchanges and national
securities associations to adopt listing standards
requiring issuers listed on an exchange or an
association to establish apolicy f or recovering
erroneously awarded incentive-based compensation
paid to executive officers under certain
circumstances. Accordingly, in June 2023, the New
York Stock Exchange adopted listing standards,
effective Oct. 2, 2023, requiring listed issuers,
including BNY Mellon, to adopt a policy on recovery
of erroneously awarded compensation by Dec. 1,
2023. The policy would apply to executive incentive
compensation received on or after Oct. 2, 2023. BNY
Mellon adopted apolicy d esigned to comply with the
listing standards.

70 BNY Mellon

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.

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.

Supervision and Regulation (continued)

Financial Crimes Enforcement Network (“FinCEN”)

FinCEN 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 acompliance o fficer;
a thorough and ongoing training program;
independent review for compliance; and customer
due diligence (“CDD”). CDD requires acovered
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 New York State Department of Financial
Services (“NYSDFS”) 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 awatch l ist filtering program to interdict
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.

Cybersecurity and Computer Security Regulation

The NYSDFS requires financial institutions regulated
by NYSDFS, including The Bank of New York
Mellon, to establish acybersecurity 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 avariety o f 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, aBHC, 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 July 26, 2023, the SEC adopted rules, effective on
Sept. 5, 2023, requiring public companies, including
the Parent, to disclose cybersecurity incidents and
details regarding their cybersecurity risk
management, strategy and governance. Under the
rules, public companies must disclose material
cybersecurity incidents on Form 8-K. Disclosure of
material incidents generally is due within four
business days after a public company determines that
a cybersecurity incident is material. On an annual
basis, public companies must describe in their annual
report on Form 10-K their processes for assessing,
identifying, and managing, and management’s role
and expertise in assessing and managing, material
cybersecurity risks; whether any cybersecurity risks
have materially affected or are reasonably likely to
material affect the company; and the board of
directors’ oversight of cybersecurity risks.

On March 15, 2023, the SEC proposed a new rule
regarding cybersecurity risk management for entities
including broker-dealers, security-based swap
dealers, and transfer agents. The proposed rule would
require such entities to maintain written policies and
procedures to address their cybersecurity risk,
immediately notify the SEC of significant
cybersecurity incidents, and publicly disclose
descriptions of their cybersecurity risks and
significant cybersecurity incidents.

In addition, also on March 15, 2023, the SEC also
proposed amendments to Regulation S-P, including a
requirement for broker-dealers, investment
companies, RIAs, and transfer agents to adopt written
policies and procedures for an incident response
program with respect to unauthorized access to or use
of customer information. The proposal would require
these entities to notify individuals whose sensitive
customer information was accessed or used without

BNY Mellon 71

Supervision and Regulation (continued)

authorization not later than 30 days after becoming
aware that the information has been compromised.
BNY Mellon is evaluating the potential impact of the
proposals.

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
Federal Reserve approval would be required for BNY
Mellon to acquire direct or indirect ownership or
control of any voting shares of acompany w ith assets
of $10 billion or more that is engaged in activities
that are “financial in nature.”

72 BNY Mellon

Climate and ESG Regulations

As the global regulatory framework for Climate and
ESG disclosure and risk management practices
continues to evolve, we continue to evaluate the
impacts of new regulations on our business and
operations.

In the U.S., the SEC proposed rules to enhance
consistency of climate-related disclosures among
registered companies. On March 21, 2022, the SEC
proposed climate-related disclosure requirements that
would require SEC reporting companies to disclose,
among other things and as applicable, direct and
indirect greenhouse gas emissions, climate-related
scenario analysis, climate transition plans or climate-
related targets or goals and related progress, 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. Further, on May 25, 2022,
the SEC proposed rule and form amendments that
would require certain funds, including RICs such as
mutual funds, closed end funds and ETFs, that
consider ESG factors in their investment process to
provide additional ESG disclosures in their fund
prospectuses and annual shareholder reports. These
proposed amendments would also require certain
advisers, including RIAs, that consider ESG factors
as part of their advisory business to disclose the ESG
factors they consider in providing advisory services
and how they are incorporated when formulating
investment advice.

A number of states have proposed or enacted laws
and regulations addressing climate disclosure. For
example, on Oct. 7, 2023, California enacted three
statutes imposing extensive new climate-related
disclosure obligations, which became effective on
Jan. 1, 2024. The Climate Corporate Data
Accountability Act (“SB 253”) requires U.S.
companies with total annual revenues in excess of $1
billion that do business in California to disclose
annually their Scope 1 (owned and controlled
sources) and Scope 2 (from energy purchased and
used) greenhouse gas emissions beginning in 2026,
and Scope 3 (up and down value chain) greenhouse
gas emissions beginning in 2027. The Climate-
Related Financial Risk Act (“SB 261”) requires U.S.
companies (other than insurance companies) with
total annual revenues in excess of $500 million that
do business in California to publish biennial reports

Supervision and Regulation (continued)

disclosing climate-related financial risks and the
measures adopted to mitigate the disclosed risks
beginning on Jan. 1, 2026. The California State Air
Resources Board is authorized to adopt implementing
regulations under SB 253 and SB 261. The
Voluntary Carbon Market Disclosures Act (“AB
1305”) requires, among other things, companies
operating within California to disclose certain
information on accuracy of claims made, including
regarding carbon neutrality, net zero emissions or
reduction of greenhouse gas emissions, interim
progress measures, third-party verification and, if
applicable, certain information on the voluntary
carbon offsets marketed, used, purchased or sold.

In Europe, EU entities in-scope for the Corporate
Sustainability Reporting Directive will soon be
subject to new requirements to disclose information
about sustainability matters, including information on
BNY Mellon’s impact on the environment and
information on related financial risks and
opportunities to BNY Mellon. Five EU subsidiaries
of BNY Mellon are subject to these requirements,
with BNY Mellon SA/NV required to report in 2025
and the remaining four subsidiaries required to report
in 2026. In addition, EU lawmakers are in the
process of adopting the Corporate Sustainability Due
Diligence Directive (“CS3D”), which will likely
impose new due diligence obligations on our global
operations, including in relation to our supply chains.
The CS3D will also require us to adopt and put into
effect a transition plan for climate change mitigation.
Our regulated banking subsidiary in the EU is also
subject to supervisory expectations and potential
enforcement actions for the prudent management of
climate-related and environmental risks and related
disclosure.

In addition, our UK supervisory authorities have
adopted new disclosure requirements and supervisory
expectations that currently apply or will apply to our
subsidiaries and branches that are regulated by the
UK Financial Conduct Authority (“FCA”) and the
UK Prudential Regulation Authority (“PRA”). For
example, since the end of 2021 our PRA regulated
branch and banking subsidiary have been subject to
the PRA’s supervisory expectations for the
management of climate-related financial risks,
including as regards governance, risk management,
scenario analysis and disclosure. Further, new FCA
rules on anti-greenwashing will require that from
May 31, 2024, any sustainability-related claims made
about our products and services by our FCA regulated
entities are consistent with the sustainability

characteristics of such products or services and are
fair, clear and not misleading.

In addition, recent published guidance from our
regulators, including the Agencies and NYSDFS, has
primarily focused on climate-related financial risk
management, including with respect to, among other
things, governance, policies and procedures, strategy,
risk management, data and reporting, and scenario
analysis. We continue to assess guidance from
regulators and its potential impact.

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 afour-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 afinancial a ctivity and
does not pose a substantial risk to the safety and
soundness of depository institutions or the financial
system generally.

BNY Mellon 73

Supervision and Regulation (continued)

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
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.

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 aNew Y ork state-
chartered bank, and amember 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.

On Aug. 8, 2023, the Federal Reserve issued a
Supervision and Regulation Letter (SR 23-7)
announcing the establishment of its Novel Activities
Supervision Program (“NASP”) to complement its
existing supervision and oversight of supervised
banking organizations, including BNY Mellon. The
NASP will encompass risk-based monitoring and
examination and focus on novel activities related to
crypto-assets, distributed ledger technology, and
complex, technology-driven partnerships with
nonbank providers of banking products and services
to customers. The Federal Reserve will also evaluate
the concentrated provision of banking services to
crypt-asset-related entities and fintechs. We are
evaluating the potential impact of the NASP.

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-

74 BNY Mellon

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, where required.

Certain of BNY Mellon’s public finance and advisory
activities are regulated by the Municipal Securities
Rulemaking Board and the relevant BNY Mellon
affiliates have registered with the SEC, as required
under the SEC’s Municipal Advisors Rule 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 registered as a
swap dealer (as defined in the Dodd-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.

On Dec. 13, 2023, the SEC approved afinal r ule
requiring covered clearing agencies that clear
transactions in U.S. Treasuries (“CCPs”) to establish
policies requiring their direct participants, including
BNY Mellon, to submit for clearing all “eligible
secondary market transactions” in U.S. Treasuries to
which such direct participant is acounterparty, which
include all repurchase and reverse repurchase
agreements collateralized by U.S. Treasuries and all
inter-dealer cash market trades. Eligible secondary
market transactions, however, exclude (i) transactions
with affiliates (under certain conditions), central
banks, sovereign entities, and CCPs, (ii) cash market
transactions with hedge funds, and (iii) securities
lending transactions involving U.S. Treasuries.
Implementation of the rules will be phased beginning
March 2025 through June 2026.

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

Supervision and Regulation (continued)

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 aretail
customer when making a recommendation of any
securities transaction or investment strategy to any
such customer. The Form CRS Relationship
Summary (“Form CRS”) requires RIAs 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. 15, 2023, the SEC adopted final rule
amendments to shorten the standard settlement cycle
for certain broker-dealer securities transactions to
T+1. The rule includes additional amendments
designed to accelerate the confirmation of such
trades. We continue to assess 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 abest execution regulatory framework for
broker-dealers, and proposals regarding order
competition and disclosure of order execution
information. We continue to assess the potential
impacts of the proposals.

On Feb. 15, 2023, the SEC proposed amendments to
the custody rule under the 1940 Act, which generally
requires RIAs deemed to have custody of client funds
or securities to, among other requirements, 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 RIAs 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 not subjecting client assets to
any liens. In addition, the SEC proposed
amendments to the investment adviser recordkeeping
rule to require advisers to keep additional, more
detailed records. We continue to evaluate the
potential impact of the proposals.

On July 26, 2023, the SEC proposed new rules
intended to address certain conflicts of interest
associated with the use of “Covered Technology” by
broker-dealers and investment advisers (“Firms”) in
investor interactions (“Proposed AI Rules”). Covered
Technology is generally described as applying to
“artificial intelligence” or “AI” and is broadly defined
under the Proposed AI Rules to include the use of
analytical, technological, or computational functions,
algorithms, models, correlation matrices, or similar
methods or processes that optimize for, predict,
guide, forecast, or direct investment-related behaviors
or outcomes of an investor. If adopted, the Proposed
AI Rules would: (i) generally apply when aFirm uses
a Covered Technology in engaging or communicating
with an investor, including by exercising discretion
with respect to an investor’s account, providing an
investor with information, or soliciting an investor
and (ii) require Firms to (among other things) identify
conflicts of interests when using Covered Technology
in interactions with investors, and adopt policies and
procedures to eliminate or neutralize those conflicts
of interest. We are evaluating the potential impact of
the proposed rules.

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.

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

BNY Mellon 75

Supervision and Regulation (continued)

prudential rulemaking powers to the Prudential
Regulatory Authority (“PRA”) with respect to UK
credit institutions, and the FCA with respect to UK
investment firms.

In December 2022, the UK Chancellor of the
Exchequer announced the Edinburgh Reforms, a
series of measures to promote stability and
competitive growth in the UK financial markets post-
Brexit. As part of the Edinburgh Reforms, HM
Treasury published ‘Building aSmarter F inancial
Services Framework for the UK,’ apolicy s tatement
on the government’s approach to replacing EU law on
financial services with regulations tailored to the UK,
and set out measures to determine structuring of a
post-Brexit UK financial services regulatory
framework. Following up on its statement of
approach, in July 2023, HM Treasury published
‘Building aSmarter F inancial Services Regulatory
Framework for the UK,’ detailing its plan on how the
government will deliver this approach in practice. To
further the post-Brexit transition, the UK enacted the
Financial Services and Markets Act 2023 (FSMA 23)
on June 29, 2023, implementing the Edinburgh
Reforms, including a framework for revoking and
replacing retained EU law for financial services,
delegating rulemaking authority to UK regulators,
strengthening the regulatory accountability
framework, and establishing a new Designated
Activities Regime regulating financial market related
activities. We continue to evaluate the potential
impact of these measures.

Operations and Regulations Outside the U.S.

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 anumber of o ur 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 abranch network in anumber of
other EU countries, and through certain of our
investment firms.

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 acredit institutio n. The
European Central Bank (the “ECB”) has
responsibility for the direct supervision of significant

76 BNY Mellon

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,
Ireland, Italy, Luxembourg, the Netherlands, Poland
and Spain. 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 BNY Mellon’s U.S.
regulators.

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 aresult, 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.

Supervision and Regulation (continued)

The primary prudential framework in the EU is
provided by the Capital Requirements Directive 5
(“CRD5”) and EU CRR2, both of which implement
many elements of the Basel III framework. Aspects
of EU CRD5 and EU CRR2 are currently proposed to
be amended as part of the EU’s plans to implement
the Basel 3.1 standards and to enhance the
harmonization of banking supervision in the EU. The
final regulations, to be known as the Capital
Requirements Directive 6and E U CRR3 are due to be
published in 2024 and set to apply from Jan. 1, 2025.

The UK’s version of the EU Capital Requirements
Regulation (“UK CRR”) provides the prudential
framework for credit institutions in the UK. Aspects
of UK CRR are currently proposed to be amended as
part of the PRA’s plans to implement the Basel 3.1
standards in the UK. The final regulations are due to
be published in 2024 and set to apply from Jan. 7,
2025.

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 revised Alternative Investment Fund Managers
Directive (“AIFMD”), the Directive on Undertakings
for Collective Investment in Transferable Securities
(“UCITS V”), the revised 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 revised
Benchmarks Regulation. These EU directives and
regulations may impact our operations and risk
profile. 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

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 and UK Financial Markets and Market
Infrastructure

The EU and UK continue to develop and implement
changes in relation to their existing financial markets
and market infrastructure regulations. EU and UK
MiFID II/MIFIR apply to financial institutions
conducting investment business in the EEA and UK
respectively and have historically required and
continue to require significant changes to comply
with relevant regulatory requirements, including
extensive transaction reporting and market
transparency obligations and aheightened focus on
how financial institutions conduct business with and
disclose information to their clients.

Funds Regulation in Europe

The AIFMD has adirect 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 European
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.

BNY Mellon 77

Risk Factors

An investment in securities issued by us involves
certain risks that you should carefully consider and
evaluate both at the time of initial purchase and
throughout the holding period of such securities. 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

Investing in our securities and in the securities of
banks and financial services companies more broadly
is inherently risky. 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:

disclosure, use or alteration of information,
unauthorized access to or loss of information, or
system or network failures.

•

Extensive government rulemaking, policies,
regulation and supervision that impact our
operations, and changes to and introduction of
new rules and regulations compelling us to
change how we manage our businesses.

• Regulatory or enforcement actions or litigation.

•

Failure to attract, retain, develop and motivate
employees.

Failure or circumvention of our controls, policies
and procedures.

Market Risk

• Weakness and volatility in financial markets and

the economy generally.

• Dependence on fee-based business and fee-based
revenues, which could be adversely affected by
slowing market activity, weak financial markets,
underperformance and/or negative trends in
savings rates or in investment preferences.

•

Levels of and changes in interest rates impacting
our profitability and capital levels.

• Unrealized or realized losses on securities related

to volatile and illiquid market conditions,
reducing our capital levels and/or earnings.

• Reform of interest rate benchmarks and the use of
alternative reference rates by us and our clients.

Operational Risk

Credit Risk

•

Errors or delays in our operational and
transaction processing, or those of third parties.

• Our risk management framework, models and
processes not being effective in identifying or
mitigating risk and reducing the potential for
losses and any inadequacy or lapse in our risk
management framework, models and processes
exposing us to unexpected losses.

• 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 failure in our

computer systems, networks and information, or
those of third parties, resulting in the theft, loss,

78 BNY Mellon

•

Failure or perceived weakness of any of our
significant clients or counterparties, and our
assumption of credit, counterparty and
concentration risk.

Inadequacy in our allowance for credit losses,
including loan and lending-related commitment
reserves and adeterioration in o ur expectations of
future economic conditions.

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.

Risk Factors (continued)

•

The Parent’s dependence 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, payment of income taxes and
payment of dividends to its stockholders.

• Ability to return capital to shareholders, which 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, BNY Mellon,
N.A. or The Bank of New York Mellon SA/NV,
which 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.

Strategic Risk

• New lines of business, new products and services
or transformational or strategic project initiatives,
and the failure to implement these initiatives.

• Competition in all aspects of our business.

• Our strategic transactions.

Additional Risks

• Adverse events, publicity, government scrutiny or

other reputational harm.

•

ESG concerns, including climate change, which
could adversely affect our business, affect client
activity levels, subject us to additional regulatory
requirements and damage our reputation.

Impacts from geopolitical events, acts of
terrorism, natural disasters, the physical effects of
climate change, pandemics and other similar
events.

Tax law changes or challenges to our tax
positions with respect to historical transactions.

• Changes in accounting standards governing the

preparation of our financial statements and future
events.

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 atimely 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 atimely 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
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 alarge n umber of
transactions could have unfavorable ripple effects in
the financial markets, which could exacerbate the
adverse effects of the error on us.

BNY Mellon 79

Risk Factors (continued)

Affiliates or third parties (including their downstream
service providers) with which we do business or that
facilitate our business activities, including by
providing data, information, technology or
infrastructure services, could also be sources of
execution and processing errors, failures or
significant operational delays. These risks are
heightened to the extent that we rely on alimited, or
otherwise concentrated, set of third parties with
respect to certain processes or business activities. 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 aresult 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 aloss or delay in return of client’s
securities. When we are not acting as aEu ropean
Economic Area depositary, we may accept similar
liabilities to that of aEu ropean Economic Area
depositary as a matter ofcontract in connection with
our custody services.

Our risk management framework, models and
processes may not be effective in identifying or
mitigating risk and reducing the potential for losses
and any inadequacy or lapse in our risk
management framework, models and processes
could expose us to unexpected losses that could
materially adversely affect our results of operations
or financial condition.

Our risk management framework seeks to identify
and mitigate risk and loss to us. We have established
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
designed to mitigate risk and loss to us as a result of
the actions of affiliates or third parties with which we
do business (including their downstream service
providers) 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.

80 BNY Mellon

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 atimely 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 including as part of our
overall asset/liability management. However, these
models are inherently limited because they involve
techniques, including the use of historical data and
trends, assumptions, estimates, judgments and
forecasts, which may be incomplete or may not prove
to be accurate. Further, these models 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, sudden
geopolitical events or other stress events, such as
those experienced during the COVID-19 pandemic or
in connection with the insolvencies of Silicon Valley
Bank and Signature Bank in the first half of 2023.
These models may not appropriately capture all
relevant risks or accurately predict future events or
exposures. The risk of the unsuccessful design,
development or implementation of our models,
systems or processes, as well as the risk associated
with oversight, monitoring and application of models,
cannot be completely eliminated. Inaccuracies in the
input data or parameters used in our models may
further increase the risks to which we are subject. We
may also experience unexpected losses if our models,
estimates or judgments used or applied in 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

Risk Factors (continued)

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, limited
liquidity or other unforeseen circumstances,
previously uncorrelated indicators may become
correlated, or previously correlated indicators may
move in different directions. Additionally, sudden
illiquidity in markets or declines in prices of certain
assets may make it more difficult to value certain
financial instruments. 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.

Our control environment and related systems, from
time to time, have in the past not sufficiently
detected, and may in the future not sufficiently detect,
each error, omission, or other mistake made by us.
These have in the past included, and may in the future
include, calculation errors, errors in software or
model development or implementation, data or
informational errors or incompleteness, or errors in
judgment. Human errors, malfeasance, failure to
follow applicable policies, laws, rules or procedures
and other misconduct in connection with our risk
management framework, models and processes, even
if promptly discovered and remediated, may result in
reputational damage and losses and liabilities for us.

An important aspect of our risk management
framework is creating arisk culture that is sustainable
and appropriate to our role as a major financial
institution in which our employees 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 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.”

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 extensively rely on communications and
information systems to conduct our business. Our
businesses are highly dependent on our ability to
process large volumes of data in an accurate,
complete and timely manner, which requires 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. In
addition, any technology disruption or failure could
result in the loss of confidential or customer data, as a
result of which 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 with respect to the
preservation of confidential information. Any such
disruption, 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. Remote
work arrangements have 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

BNY Mellon 81

Risk Factors (continued)

others, human error, malfeasance and other
misconduct, as well as operational disruptions at a
third party or third party’s downstream service
provider.

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 atechnology
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 R isk.”

Third parties with which we do business or that
facilitate our business activities, including exchanges,

82 BNY Mellon

clearing houses, financial intermediaries or vendors
that provide services or security solutions for our
operations, have in the past been, and could in the
future also be, sources of technology risk to us,
including from breakdowns, capacity 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 asingle
unique product or service provided by asingle
vendor, or to the extent we rely on service providers
from asingle g eographic area or due to the nature of
the third-party’s industry and operations (e.g., firms
that may have less robust scale, financial and
operational resiliency standards with which to defend
against acyberatta ck). In addition, we are exposed to
the risk that atechnology disruption o r other
information security event at our vendor, or a
downstream service provider or other 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 impacting our vendors or
relating to the use of common and other 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, interactions with third-
party service providers, or changes in regulation
relative to these service offerings, unforeseen risks
materially impacting our business operations could
arise. For example, we have begun to incorporate
artificial intelligence technologies, including
generative artificial intelligence, into some of our
products, services and processes, and we may in the
future expand such offerings. The use of artificial
intelligence may expose us to new risks and greater
potential liabilities including as a result of enhanced
governmental or regulatory scrutiny, litigation, ethical
concerns, confidentiality or other security risks,
intellectual property concerns and data rights and
protection concerns, as well as other factors that
could adversely affect our business, reputation and
financial results. Additionally, the technology used
has become increasingly complex and relies on the
continued effectiveness of the programming code and
integrity of the inputted data. Rapid technological
changes and competitive pressures require us to make

Risk Factors (continued)

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, atechnology failure or
other operational incident 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, failure
or delay experienced by one institution could disrupt
the functioning of the overall financial system and
has in the past impaired, and could in the future
impair, our ability to settle transactions, which could,
in turn, increase our counterparty credit and other
exposures.

A cybersecurity incident, or afailure in our
computer systems, networks and information, or
those of third parties, could result in the theft, loss,
disclosure, use or alteration of information,
unauthorized access to or loss of information, or
system or network failures. 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 varying degrees of attempted cyberattacks,
computer viruses or other malicious software, denial
of service efforts, phishing attacks, penetration
attempts and other information security threats
intended to disrupt our operations, including
unauthorized access attempts and cyberattacks
targeted at third-party service providers and their

downstream service providers. Remote working
arrangements, our employees’ usage of mobile and
cloud technologies and our reliance on third-party
service providers leave our networks susceptible to
greater access points for attackers to exploit. This
further increases the risk of unauthorized access to
our networks and results in greater amounts of
information being available for access. Although we
deploy a broad range of sophisticated defenses and
continue to expend significant resources to bolster
these protections, there can be no assurance that these
security measures will provide absolute security or
prevent breaches and attacks, and we could suffer a
material adverse impact or disruption as aresult of a
cybersecurity incident.

Cybersecurity incidents may occur through or as a
result of system errors, lack of adequate policies and
procedures, human error, software vulnerabilities
(which may be unknown), potential lapses in
information security practices or other irregularities,
and intentional or unintentional acts by individuals or
groups (including employees, vendors, customers and
state actors, as well as others with malicious intent)
having authorized or unauthorized access to our
systems, data-bearing devices or facilities as well as
the systems, devices or facilities of our clients,
counterparties or third-party service providers.
Malicious actors may also attempt to place
individuals within BNY Mellon or fraudulently
induce employees, vendors, customers or other users
of our systems through social engineering, such as
phishing, to disclose sensitive information in order to
gain access to our data or that of our clients, or to
send funds or authorize the sending of funds. A
cybersecurity incident that results in the theft, loss,
disclosure, use or alteration of information (which
may include confidential or proprietary information),
system or network failures, or unauthorized access or
loss of access to information, may require us to
reconstruct lost data (which may not be possible) or
reimburse clients for data and credit monitoring
services, or result in loss of customer business or
damage to our computers or systems and those of our
customers and counterparties. Further, although the
application of distributed ledger technology is
growing, such technology is nascent and may be
vulnerable to cyberattacks or have other weaknesses,
which could result in the loss of customer assets,
including customer funds or custodied digital assets.
Losses of certain types of assets, such as digital
assets, may be distinctly difficult to recover and could
subject us to customer disputes, claims for
reimbursement, losses, negative publicity,

BNY Mellon 83

Risk Factors (continued)

reputational damage and governmental and regulatory
scrutiny, investigations and enforcement actions.

The risk of an occurrence of acybersecurity incident
is inherent to a decision to invest in our company and
the financial services sector as a whole. 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,
there can be no assurance that our mitigation
strategies will be effective against all forms of
cyberattacks. It is possible that employees or services
providers may not follow our policies and procedures
and we may not anticipate or implement effective
preventive measures against all cybersecurity threats,
or detect all such threats, including because the
techniques used change, develop and evolve
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 foreign
governments, or from cross-contamination of
legitimate parties (including vendors and their service
providers, 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 risks and
threats. Despite our procedures intended to identify
and mitigate the impact of cybersecurity incidents, a
cybersecurity incident, including as a result of a

84 BNY Mellon

successful cyberattack, could occur and persist for an
extended period of time before being detected. In
addition, we may not be able to identify and fully
assess the impact of a cybersecurity incident in a
timely manner. An investigation of acybersecurity
incident is inherently unpredictable and 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 source and extent of the harm or how best
to contain and 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,
recently adopted cybersecurity regulations by the
SEC require us, as apublic company subject to
Exchange Act reporting requirements, to publicly
disclose certain information about a material
cybersecurity event, including the impact or
reasonably likely impact. Disclosure may be required
before the incident has been resolved or fully
investigated. As with the determination of materiality
of any other type of event, the determination
regarding the materiality of any particular
cybersecurity incident or series of related incidents
entails a facts and circumstances test that takes a
number of quantitative and qualitative factors into
account. As aresult, our management may determine
that certain cybersecurity incidents are immaterial
and not subject to disclosure under the new SEC
cybersecurity regulations. For example, depending
on the particular facts and circumstances, our
management may reach such a determination if,
among other things, the incident (or a series of related
incidents) does not substantially disrupt our ability to
operate normally, or deliver our products and services
to our clients and the market on atimely basis, or
result in the loss or compromise of asignificant
amount of data or potentially significant expenses or
liabilities. As a result, investors should not assume
that the absence of disclosure under the new
regulations means that our defenses have been
successful in preventing and defending every
cyberattack directed at us or our third-party service
providers.

In addition, we rely on a variety of measures to
protect our intellectual property and proprietary

Risk Factors (continued)

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 athird p arty
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. Furthermore, given
intellectual property ownership and license rights
surrounding artificial intelligence, such as generative
artificial intelligence, are currently not fully
addressed by courts or regulators, the use or adoption
of artificial intelligence into our products or services
may result in exposure to claims by third parties of
copyright infringement or other intellectual property
misappropriation, which may require us to pay
compensation or license fees to third parties. The
evolving legal, regulatory and compliance framework
for artificial intelligence may also impact our ability
to protect our own data and intellectual property
against infringing use. 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.

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 capital and liquidity
requirements, the revenue profile of certain of our
core activities, the products and services we provide,
how we manage our balance sheet, how we return
capital to shareholders, how we monitor and manage
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.

In the future, we could become subject to additional
laws, rules and regulations, including related to the
safekeeping of client assets, cybersecurity and data
protection, digital assets, artificial intelligence and
other emerging technologies, climate risk
management and ESG governance and reporting,
including additional disclosure requirements with
respect to sustainability-related goals, investment
strategies, risk management and emissions. In
addition, certain regulatory initiatives within and
outside of the U.S. may overlap and/or conflict with
each other, which could subject us to additional
compliance costs and regulatory risk. This reflects
the pace of developments relating to cybersecurity,
digital assets, artificial intelligence and climate
regulation, including the increased focus globally 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

BNY Mellon 85

Risk Factors (continued)

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 aresult 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 both within jurisdictions (in relation to
national versus non-national financial services
providers) and across jurisdictions may be divergent
and otherwise may not be applied in amanner t hat is
consistent and harmonized. Additionally, banking

86 BNY Mellon

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 aconsequence o f 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 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.

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

Risk Factors (continued)

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 anumber 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 Bank Secrecy Act, as
amended by 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.
Government sanctions and our actions in response to
them have had, and in the future could continue to
have, anegativ e impact on our revenue and business.
For example, following Russia’s invasion of Ukraine
in 2022, we ceased new banking business in Russia.

As a result of the 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.

Additionally, our settlement-related activities and
obligations are also subject to regulatory risk,
including the risk of regulators globally accelerating
the timeline to settlement, such as the SEC’s recent
rule to shorten the standard settlement cycle for
securities transactions in the U.S. from trade date plus
two business days (T+2) to trade date plus one
business day (T+1) for compliance in 2024. This rule
presents the risk of non-compliance, and heightens
the need for careful coordination with and
dependencies on other industry participants as well as
additional risks associated with technology
development and implementation, change
management and operational errors, any of which
could be material in light of the magnitude and
volume of our settlement-related activities and
obligations.

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.

BNY Mellon 87

Risk Factors (continued)

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 adiscussion 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, cybersecurity and data
protection, the improper use of electronic
communications 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 asingle e vent 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

88 BNY Mellon

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 anumber of y ears.

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
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 acontract 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, when clients or investors are
experiencing losses or as public attention on issues
such as climate change or other ESG matters
intensifies. 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. These risks may be more acute when
operating in foreign jurisdictions or in instances

Risk Factors (continued)

where adversaries to such disputes are government or
quasi-government actors otherwise motivated in
whole or in part by non-commercial incentives.
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
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.

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 technology 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. Furthermore, because a portion of our
annual incentive compensation paid to some of our
employees is deferred equity that is subject to the
value of our common stock, declines in our
profitability or outlook could adversely affect the
ability to attract and retain employees.

The loss of employees’ skills, knowledge of the
market, industry experience, and the cost of finding
replacements, particularly in aprotracted 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
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 acollaborative w orking
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 failure or circumvention of our controls, policies
and procedures could have amaterial 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 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

BNY Mellon 89

Risk Factors (continued)

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.

Additionally, although we have policies and
procedures prohibiting the use of unauthorized
personal devices and applications by our employees
and contractors, we are subject to inquiries by
regulators with respect to recordkeeping obligations
and are subject to additional risks related to the use of
personal devices and non-approved platforms,
applications and tools by our employees or by third
parties with which we do business for work-related
activities, including risks related to information
security and potential violations of record retention,
reporting and other requirements. Any failure to
comply with such policies and procedures could
adversely affect our business.

Market Risk

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. Further,
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

90 BNY Mellon

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
market values, inflation, expectations relating to
inflation trends and monetary policy actions taken by
central banks, the strength of the U.S. dollar,
geopolitical tensions, the imposition of tariffs or other
limitations on international trade or travel, including
changes to international trade and investment policies
by the U.S. the EU or other large economies (which
could disrupt world trade and lead to trade
retaliation), unemployment levels, labor strikes,
declining business, investor and consumer
confidence, recessionary fears, the impact of
volatility in digital asset markets on the broader
market, governmental budget deficits (including, in
the U.S., at the federal, state and municipal levels),
partial or full government shutdowns (including
concerns about the stability of funding for the U.S.
federal government), and contagion risk from
possible default on sovereign debt. More specifically,
in January 2023, the outstanding national debt of the
U.S. government reached its statutory limit. Before
the U.S. government suspended the debt ceiling, the
U.S. Treasury Department used extraordinary
measures to prevent the U.S. government’s default on
its payment obligations. Future delays to raise or
suspend the federal debt ceiling could have severe
repercussions within the U.S. and to global credit and
financial markets and could result in avariety of
adverse effects for our business, results of operations,
liquidity and financial condition.

Any resulting economic pressure on market
participants 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

Risk Factors (continued)

adversely affected by widespread health emergencies,
pandemics, natural disasters, climate-related
incidents, conflicts and acts of war (such as the
conflicts in Ukraine and in the Middle East),
terrorism, economic sanctions, other geopolitical
events or concerns over the possibility of such events,
for example, the economic and geopolitical
challenges related to China, including developing
tensions between China and Taiwan and/or between
China and the U.S. 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 adecline 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
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,
and especially in environments that differ
significantly from the historical environments
upon which the models we use to estimate our
expected credit losses were developed, our ability
to estimate our expected credit losses may be
impaired, which could adversely affect our
overall profitability and results of operations.

For adiscussion of our management of market risk,
see “Risk Management – Risk Types Overview –
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 market activity, weak financial markets,
underperformance and/or negative trends in savings
rates or in investment preferences.

Our principal commercial 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. For the year ended Dec. 31,
2023, 74% of our total revenue was fee-based. Our
fee-based businesses include investment and wealth
management, custody, corporate trust, depositary
receipts, clearing, collateral management and treasury
services, which are highly competitive businesses.

BNY Mellon 91

Risk Factors (continued)

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 arelative b asis) 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 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

92 BNY Mellon

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.

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
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 the shape of the
yield curve and whether the interest rate paid or
received is fixed or moves with changes in market
interest rates.

The continued prevalence of higher rates, and any
future rate increases, including unexpectedly
precipitous 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;

lower net interest revenue and net interest margin
due to lower non-interest bearing deposit levels,
as non-interest bearing deposits leave or shift to
interest-bearing deposits;

Risk Factors (continued)

•

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.

Conversely, a material decline in the short-term rate
environment, and/or a flat or inverted yield curve, in
the future could 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 and the
speed and size of the interest rate decline;

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 – Risk Types Overview –Market Risk.”

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,
2023, 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 acomponent 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, 2023. Our available-for-sale securities portfolio,
to the extent unhedged, may result in increased
volatility in our accumulated other comprehensive
income or earnings than a loan portfolio that is
accounted for at amortized cost.

Our investment securities portfolio represents a
greater proportion of our consolidated total assets
(approximately 31% at Dec. 31, 2023), 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, including interest rate-related
risks.

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.

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 alower p roportion 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

BNY Mellon 93

Risk Factors (continued)

in part by management’s assessment of the financial
condition and prospects of aparticular 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. 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.

For information regarding our investment securities
portfolio, refer to “Results of Operations –
Consolidated balance sheet review – Securities.”

Reform of interest rate benchmarks and the use of
alternative reference rates by us and our clients
could adversely affect our business, financial
condition and results of operations.

Regulators, industry groups and market participants
in the U.S. and other countries continue to engage in
initiatives to introduce and encourage the use of
alternative reference rates to replace certain interest
rates that were used as benchmarks in debt securities,
loans and other financial instruments. Certain of the
alternative reference rates appear to have gained
acceptance among market participants. However,
interest rate benchmark reforms may have unexpected
adverse consequences that could be contrary to
market expectations. Alternative reference rates may
be based upon indices, and may have characteristics,
different from the benchmarks they replace. In some
cases, financial instruments may perform less
predictably after alternative reference rates have
replaced the original benchmarks. Further, given the
limited performance and historical data of new
alternative rates, there can be no assurance that:

•

any of the new rates will be similar to, perform
the same as, produce the economic equivalent of,
or be an adequate substitute for the benchmarks
that they replace;

94 BNY Mellon

•

a particular alternative reference rate will be
widely accepted or adopted by market
participants;

• market participants will effectively implement

operational and other arrangements to transition
from historical benchmarks, such as LIBOR, to
new alternative reference rates;

• market acceptance of an alternative reference rate

will not be hindered by the introduction of other
reference rates; or

•

any particular use of hedges will be effective.

In addition, we may be adversely impacted by the use
of alternative reference rates as aresult of our
business activities and our underlying operations. We
utilize reference rates in avariety o f agreements and
instruments and are responsible for the use of
reference 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 we did not correctly discharge
our responsibilities in interpreting and implementing
contractual interest rate provisions or in selecting new
alternative reference rates. These types of claims
could subject us to increased legal and operational
expenses and could damage our reputation.

Uncertainty relating to alternative reference rates
could result 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.

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 credit losses
and adversely affect our business.

We have credit exposure to clients and counterparties
in many different industries, particularly financial
institutions, as aresult of trading, clearing and
financing, providing custody services, securities

Risk Factors (continued)

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 credit 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. We could be
adversely affected by the actions and commercial
soundness of organizations to whom we have lent
funds, as defaults or non-performance (or even
uncertainty concerning such default or non-
performance) by one or more of these institutions, or
the markets 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 orto the a mount (or amultiple
of the amount) of our contribution to aclearing or
settlement exchange guarantee fund, or, in afew
cases, the obligation may be unlimited. Additionally,
we are exposed to settlement risks, particularly in our
payments and foreign exchange activities. Those
activities may lead to extensions of credit and
consequent losses in the event of acounterparty
breach or an operational error, including the failure to
provide credit. We are exposed to risk of short-term
credit extensions to, or overdrafts by, our clients in
connection with the process to facilitate settlement of
trades and related foreign exchange activities,
particularly when contractual settlement has been
agreed with our clients. The occurrence of overdrafts
at peak volatility could create significant credit
exposure to our clients depending upon the value of
such clients’ collateral pledged to us at the time. This
risk may be heightened during periods of market
volatility, during which collateral values may
decrease suddenly.

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
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 credit 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.

BNY Mellon 95

Risk Factors (continued)

From time to time, we assume concentrated credit
risk at the individual obligor, counterparty or group
level, potentially exposing us to asingle m arket or
political event or acorrelated 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 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

96 BNY Mellon

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.

Further, we maintain sub-custodian relationships in
certain jurisdictions, including emerging and other
underdeveloped markets. Our use of sub-custodians
exposes us to operational, reputational and regulatory
risk, as we are dependent upon such sub-custodians to
perform certain services to clients in those markets.
The risks of maintaining custody services in such
markets are amplified due to evolving regulatory and
sanctions requirements, which may increase our
financial exposures, in the event those sub-
custodians, or we, are unable to return, transfer or
reinvest clients’ assets. Under certain regulatory
regimes, we may be held responsible for resulting
losses suffered by our clients, and we may agree to
similar or more stringent standards with clients that
are not subject to such regulations. Where we have
client deposit liabilities related to non-U.S. currencies
in jurisdictions where we maintain sub-custodian
relationships, we generally maintain a corresponding
amount of cash on deposit with the relevant sub-
custodian or clearing agency, which increases our
credit exposure to that entity and can accumulate over
time based upon distributions on, or other activities
related to, our clients’ assets. If the sub-custodian or
clearing agency were to become insolvent in
circumstances not involving expropriation of assets or
other circumstances that may excuse performance
under relevant client agreements, the risk of loss on
such cash on deposit could be ours rather than the
clients’.

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

Risk Factors (continued)

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 profitability is 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 aprovision 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
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
“Results of Operations – 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, afailu re in our asset/liability
management, 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
significant decline in the level of our business
activity, our credit ratings are materially downgraded,
interest rates continue to rise or remain at elevated
levels, or if we or our peers become 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 markets or a
stress event such as that experienced by regional
depository institutions in the first half of 2023.
Further, deposit outflows could increase if our clients
and customers with uninsured deposits look for
alternative placements for their funds amidst market
and financial industry volatility. Aperceived l oss of
confidence in the BNY Mellon as adepository
institution may be additionally exacerbated by the
speed and pervasiveness with which inaccurate or
incomplete information is disseminated through
social media or other internet forums. If we were to
lose a significant amount of deposits, we may need to
replace such funding with more expensive funding

BNY Mellon 97

Risk Factors (continued)

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, and have in the past increased,
substantially. 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 and credit markets is asignificant s ource of
liquidity. Events or circumstances often outside of
our control, such as market disruptions, lack of
liquidity in the markets, 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 and credit 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.

Under the U.S. capital rules, the size of the capital
surcharge that applies to aU.S. G-SIB 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

98 BNY Mellon

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. Further, the regulatory or stress test
liquidity value associated with the securities we hold
subject to a held-to-maturity accounting designation
could be reduced in the future through regulatory or
supervisory action, exposing us to relatively greater
capital ratio volatility attributable to interest rate
movements to the extent we designate a relatively
larger percentage of our securities portfolio as
available-for-sale going forward in response to such
regulatory or supervisory changes.

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

Risk Factors (continued)

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 afurther
discussion of our liquidity, see “Results of Operations
– 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 or exceed
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 aperiod, 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
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 or 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,
the adoption of new or heightened prudential
regulatory requirements, or the continued
implementation of the U.S. capital rules (such as the
proposed revisions in the third quarter of 2023 by the
Federal Reserve, the OCC and the FDIC to
implement and finalize the Basel III reforms and the
revised standard for market risk capital requirements),
the LCR, the NSFR, the resolution planning process
and related amendments, could result in changes in
our RWAs, 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
RWAs could significantly increase or otherwise
remain elevated and may potentially be subject to
significant volatility, negatively impacting our capital
ratios. Additionally, our liquidity position could be
significantly impacted by changes to the liquidity
framework itself, as regulators may seek to evaluate
potential changes to the regulatory framework
following the regional bank failures in the first half of
2023. The uncertainty caused by these factors could

BNY Mellon 99

Risk Factors (continued)

ultimately impact our ability to meet our goals,
supervisory requirements, and regulatory standards.

The Parent is anon-operating h olding 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, payment of income taxes and payment
of dividends to its stockholders.

The Parent is anon-operating h olding 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 payment obligations, including with
respect to its securities, and to provide funds for share
repurchases, the payment of income taxes 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 “Results of
Operations – Liquidity and dividends,” as well as
Note 19 of the Notes to Consolidated Financial

100 BNY Mellon

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.
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.

Because the Parent is aholding 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 the
buffers under the Federal Reserve’s capital and
TLAC rules. The buffers under the capital rules are
affected by the results of CCAR. Through the CCAR
process, we may be, and have in the past been,
required to resubmit our capital plan in the event of a
deterioration in the general financial markets or

Risk Factors (continued)

economy or changes in our risk profile (including a
material change in business strategy or risk
exposure), financial condition or corporate structure.
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.

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.

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, 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 F,
Series G, Series H or Series Ipreferred s tock.

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.

Any requirement to increase our regulatory capital
ratios or alter the composition of our capital could

Any material reduction in our credit ratings or the
credit ratings of our principal bank subsidiaries,
The Bank of New York Mellon, BNY Mellon, N.A.
or The Bank of New York Mellon SA/NV, 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, BNY Mellon, N.A. and The
Bank of New York Mellon SA/NV, 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 arated c ompany, 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 aresult, we or our rated
subsidiaries may not be able to maintain our
respective credit ratings or outlook on our securities.
For further discussion of our and our principal bank
subsidiaries’ credit ratings, see “Results of Operations
– Liquidity and dividends.”

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 certain trading revenues,
particularly in those businesses where counterparty
creditworthiness is critical. In addition, in connection
with certain over-the-counter derivatives contracts

BNY Mellon 101

Risk Factors (continued)

and other trading agreements, counterparties may
require us or our rated subsidiaries to provide
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. A downgrade by any one rating agency,
depending on the agency’s relative ratings of the
entity at the time of the downgrade, may have an
impact comparable to the impact of a downgrade by
all rating agencies. If a rating agency downgrade or a
review for 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.

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.

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.

102 BNY Mellon

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
Parent to transfer most of its remaining assets (other
than stock in subsidiaries and acash r eserve 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
certain 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

Risk Factors (continued)

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, as well
as Wove, our integrative wealth management
advisory platform. If these technology solutions are
not successful, it could adversely impact our
reputation, business and results of operations. In
2022, we announced the launch of our Digital Asset
Custody platform for select U.S. institutional clients
to hold and transfer Bitcoin and Ether. 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 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. If
management makes choices about these initiatives
that prove to be incorrect, are based on incomplete,
inaccurate or fraudulent information, fail to
accurately assess the competitive landscape and
industry trends or are unable to address the
expectations of various stakeholders, then the value
and growth prospects of our business may be
affected. Further, these initiatives often place
significant demands on management and alimited
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, processes and procedures
and employees learn to operate under new systems,
controls, processes and procedures. The failure to
successfully 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

BNY Mellon 103

Risk Factors (continued)

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
also experienced, and anticipate that we will continue
to experience, pricing and other competitive pressures
in several of our businesses. 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 areduction in t he 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 avariety o f 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 acost-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

104 BNY Mellon

not subject to the same laws and regulations. See
“Supervision and Regulation.”

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.
Anticipated challenges in obtaining any required
governmental approvals, or uncertainty as to the
prospects for obtaining such approvals, could also
prevent us from pursuing astrategic t ransaction we
may otherwise view as attractive.

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. These risks may be
heightened if we are unable to, or fail to, conduct
sufficient or appropriate due diligence in connection
with a potential acquisition. 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

Risk Factors (continued)

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 away t hat is cost-effective and is not
disruptive to us or our customers. The inherent
uncertainty involved in the process of evaluating,
negotiating or executing apotentia l 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 aperiod 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, noncontrolling 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 anew v enture 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.

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 environmental, social and
sustainability concerns in our business activities or in
our relationships with clients, the purported
inappropriate or unlawful actions of our employees or
the use of social media by our employees, the
consequences of using emerging technologies, such
as generative artificial intelligence or blockchain
technology, 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, misinformation or rumors can be
disseminated through these channels, in particular
social media, may magnify risks relating to negative
publicity or media scrutiny. Damage to our
reputation could affect the confidence of clients,

BNY Mellon 105

Risk Factors (continued)

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
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 amatter i nvolving 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.

ESG concerns, including climate change, could
adversely affect our business, affect client activity
levels, subject us to additional regulatory
requirements and damage our reputation.

Global efforts to mitigate climate damage, support
climate adaptation, slow the loss of biodiverse natural
ecosystems, and promote other ESG causes and
standards have led and are likely to continue to lead
to new legislative and regulatory requirements,
heightened expectations among regulators and
supervisors, and changes in consumers’ and
businesses’ behaviors and business preferences. As a
result, we may face heightened regulatory, legal and
reputational scrutiny in the U.S., the E.U. and other
jurisdictions in which we operate, and our business
and financial condition may be adversely impacted.

The governmental and supervisory focus on these and
other ESG-related issues has resulted and could
continue to result in our becoming subject to new or
heightened regulatory requirements or supervisory
guidance, such as requirements relating to risk
management, operational resiliency or stress testing
for various climate stress scenarios, or additional,
potentially costly, reporting requirements. In
particular, financial institutions have come under
increased scrutiny regarding the management and
disclosure of climate risks, both directly and

106 BNY Mellon

indirectly, and new regulations may expand required
disclosure of actual and potential climate-related
impact on suppliers, clients and other third parties in
our value chain. For example, in October 2023, the
Federal Reserve, the OCC and the FDIC jointly
issued interagency guidance for large financial
institutions, including BNY Mellon, on principles for
climate-related financial risk management and
California enacted three climate-related bills
imposing extensive new climate-related disclosure
obligations applicable to companies doing business in
California. In addition, in March 2022, the SEC
proposed expansive climate-related disclosure rules.
Any such new or heightened requirements could
result in increased regulatory, compliance or other
costs or higher capital requirements, and may subject
us to diverging and evolving requirements in the
various jurisdictions in which we operate. Moreover,
we may face conflicting ESG and anti-ESG initiatives
from local, state and national governments that may
impact our ability to conduct certain business within
those jurisdictions.

Our Investment Management line of business offers a
range of solutions and advice for professional and
personal investors to better manage risk-adjusted
returns and, where applicable, achieve their
sustainable investment goals and invest responsibly.
Certain lawmakers and public officials have
suggested that ESG-related investing practices may
result in violations of antitrust laws and breaches of
fiduciary duty. In addition, we face compliance risks
presented by the SEC’s recent adoption of new
naming conventions for ESG-related funds and other
regulations that are intended to address
“greenwashing” that may be promulgated in the
future. We have in the past been, and may in the
future become, subject to enforcement actions by the
SEC and other regulators regarding our ESG
investing practices. Governmental enforcement
action could also lead to civil litigation claims by
clients, fund shareholders and other third parties
asserting violations of law or breaches of fiduciary
duties and contractual obligations.

Further, as some regulators seek to mandate
additional disclosure of climate-related information,
our ability to comply with such requirements and to
conduct more robust climate-related risk analyses
may be hampered by lack of information and reliable
data. Climate data, particularly greenhouse gas
emissions for clients and direct and indirect
counterparties, may be limited in availability, based
on estimated or unverified figures, which may have

Risk Factors (continued)

been derived from information or factors released by
third-party sources, collected and reported on alag,
and variable in quality. Moreover, the methodologies
and standards used to measure and report such data
are still in early stages, rapidly evolving and subject
to change. In addition, modeling capabilities to
analyze climate-related risks remain incomplete and
there can be no assurance that accurate predictive
tools or capabilities will be developed. These and
other factors could cause results to differ materially
from those expressed in the estimates and beliefs
made by third parties and by us, which could also
impact our management of risk in this area and could
result in us amending or restating our sustainability
targets or baselines, including those related to
greenhouse gas emissions, carbon neutrality,
diversion of waste from landfills, paper neutrality and
water consumption.

In the transition to alow c arbon economy, changes in
public policy, regulatory environment, stakeholder
preferences, market pressures and advancements in
technology may affect our business practices or result
in additional costs or other adverse consequences to
our business operations. Such changes could affect
whether and on what terms and conditions we will
engage in certain activities or offer certain products
or services. Failure to adequately consider transition
risks in developing and executing on our business
strategy could lead to aloss of market share, lower
revenues, decreased asset values and higher credit
costs.

Views about ESG are diverse and changing, and our
business, reputation and ability to attract and retain
clients and employees may be harmed if our actions
are perceived to be ineffective, insufficient or
otherwise inappropriate, or ifwe are unable to
achieve our stated objectives and commitments.
Moreover, our reputation may be damaged as aresult
of our association with certain industries, individuals
or products perceived to be causing or exacerbating
climate change or contributing to other ESG issues, as
well as any decisions we make to continue to conduct
or change our activities in response to considerations
relating to climate change or other ESG issues. At
the same time, certain financial institutions have also
been subject to criticism and negative publicity as a
result of their decisions to reduce their involvement in
certain industries or projects perceived to be causing
or exacerbating climate change or contributing to
other ESG issues. Further, political pressure may be
placed upon governmental clients not to use certain
providers, such as us, if the legislators or

governmental officials in such jurisdictions believe
our positions are not consistent with the views of
such legislators or officials. The continuously
evolving societal and political perspectives on ESG
make the ultimate impact on us difficult to predict,
identify and monitor and may be detrimental to us.

Impacts from geopolitical events, acts of terrorism,
natural disasters, the physical effects of climate
change, pandemics and other similar 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 or continuation of
hostilities, global conflicts, acts of terrorism, natural
disasters, the physical effects of climate change,
pandemics and 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 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, which could disrupt
world trade and lead to trade retaliation, and changes
in laws and regulations.

For example, as aresult 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 or continuation of
hostilities, the imposition of additional sanctions or
other laws prohibiting or limiting operations in
certain jurisdictions or an elevated volume and
complexity of cyberattacks as aresult of the conflict
in Ukraine, or conflicts or tensions in other regions
such as the Middle East, 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, are
difficult to predict and may magnify the impact of
other risks described in this section.

BNY Mellon 107

Risk Factors (continued)

Our operations, business, clients, supply chain and
other stakeholders, as well as the finance sector and
the global economy, could be adversely affected by
the physical manifestations of climate change.
Climate-related physical risks include the increased
frequency or severity of acute weather events, such as
hurricanes, floods, heatwaves and wildfires, and
chronic shifts in the climate, such as increases in
average global temperatures, rising sea levels,
persistent changes in precipitation levels, prolonged
drought, food and water insecurity, and any resulting
population migration. Such changes could have
adverse financial, operational and other impacts on
us, both directly on our business, operations and
employees, and indirectly as a result of impacts to our
clients, vendors and other third parties on which we
rely or as a result of market volatility. Climate
change risks can also lead to a deterioration in our
credit risk exposures, for example, in our wealth
management mortgage and commercial real estate
portfolios. Our headquarters is located in New York
near the Hudson River waterfront. Such location and
the location of our other properties may subject us to
more frequent or severe weather events, which could
lead to declines in the asset values of our properties
and the reduced availability or increased cost of
insurance.

While we have business continuity and disaster
recovery plans in place, catastrophic events, whether
or not caused by climate change, could damage our
facilities, disrupt or delay for prolonged periods
normal business operations (including
communications, technology and physical access to
our facilities), or result in harm to 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

108 BNY Mellon

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, reduced availability or
increased cost of insurance for our clients, 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
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

Risk Factors (continued)

Consolidated Financial Statements for further
information.

Changes in accounting standards governing the
preparation of our financial statements and future
events could have amaterial 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
to apply anew o r 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 and
models 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 aprolonged
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.

BNY Mellon 109

Recent Accounting Developments

The following accounting guidance issued by FASB
has not yet been adopted as of Dec. 31, 2023.

ASU 2023-07, Segment Reporting (Topic 280):
Improvements to Reportable Segment Disclosures

In November 2023, the FASB issued ASU 2023-07,
Improvements to Reportable Segment Disclosures,
which requires apublic entity to disclose, on an
annual and interim basis, significant segment
expenses that are regularly provided to the chief
operating decision maker (“CODM”) and included
within each reported measure of segment profit or
loss (collectively referred to as the “significant
expense principle”). In addition, disclosure will be
required of the title and position of CODM, and how
the CODM uses the reported measure of segment
profit or loss in assessing segment performance and
deciding how to allocate resources.

This ASU is effective for annual periods beginning
after Dec. 15, 2023 with early adoption permitted.
BNY Mellon is currently evaluating this guidance and
the impact on the business segment disclosures.

ASU 2023-09, Income Taxes (Topic 740):
Improvements to Income Tax Disclosures

In December 2023, the FASB issued ASU 2023-09,
Improvements to Income Tax Disclosures, which
requires acompany to d isclose, on an annual basis,
additional disaggregated information related to the
existing disclosures for the effective income tax rate
reconciliation and income taxes paid.

This ASU is effective on aprospective b asis, with a
retrospective option, for annual periods beginning
after Dec. 15, 2024, and interim periods within fiscal
years beginning after Dec. 15, 2025. BNY Mellon is
currently evaluating this guidance and the impact on
the income tax disclosures.

Accounting Standards Update (“ASU”) 2023-02,
Investments—Equity Method and Joint Ventures
(Topic 323): Accounting for Investments in Tax
Credit Structures Using the Proportional
Amortization Method

In March 2023, the FASB issued ASU 2023-02,
Accounting for Investments in Tax Credit Structures
Using the Proportional Amortization Method, which
permits reporting entities to elect to account for their
tax equity investments, regardless of the tax credit
program from which the income tax credits are
received, using the proportional amortization method
if certain conditions are met. Under the proportional
amortization method, an entity amortizes the initial
cost of the investment in proportion to the income tax
credits and other income tax benefits received, and
recognizes the net amortization and income tax
credits and other income tax benefits in the income
statement as acomponent of the provision for income
taxes.

We will adopt the new standard as of Jan. 1, 2024 on
a retrospective basis for our investments in renewable
energy projects that have met the eligibility criteria.
When we report our 2024 results, the comparative
results for 2023 and 2022 will be updated to reflect
the application of the requirements of the new
standard to these periods. We do not expect the
impact to our consolidated restated net income or
earnings per share for 2022 and 2023 to be material.
We estimate that the impact of adopting this standard
will result in an after-tax decrease to retained
earnings through Dec. 31, 2023 of approximately
$100 million, but that impact is expected to be
recovered through positive impacts to net income
over future periods. Based on our current investment
portfolio, we estimate the impact of adopting this new
guidance to increase investment and other revenue
and the provision for income taxes on the
consolidated income statement by $40 million to $50
million per quarter in 2024.

Prior to Jan 1, 2024, these investments generated
losses in investment and other revenue that were
more than offset by benefits and credits recorded to
the provision for income taxes.

110 BNY Mellon

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 asupplement t o 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 included revenue measures excluding
notable items, including a net loss from repositioning
the securities portfolio, the reduction in the fair value
of a contingent consideration receivable related to a
prior year divestiture, disposal gains and losses and
the revenue reduction related to Russia, primarily
accelerated amortization of deferred costs for
depositary receipts services. Expense measures,
excluding notable items, including goodwill
impairment, FDIC special assessment, severance
expense and litigation reserves, 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, return
on common equity, return on tangible common
equity, pre-tax operating margin and effective tax
rate, excluding the notable items mentioned above,
are also provided. These measures are 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 and noninterest

expense on aconstant 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 aclearer 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.

Forward-looking Non-GAAP financial measures

From time to time we may present or discuss
forward-looking Non-GAAP financial measures, such
as targets for expenses excluding notable items. We
are unable to provide a reconciliation of forward-
looking Non-GAAP financial measures to the
comparable GAAP financial measures because we are
unable to provide, without unreasonable effort, a
meaningful or accurate estimation of amounts that
would be necessary for the reconciliation effort, a
meaningful or accurate calculation or estimation of
amounts that would be necessary for the
reconciliation due to the inherent difficulty
quantifying future amounts or when they may occur.
Such unavailable information could be significant to
future results.

BNY Mellon 111

Supplemental Information (unaudited) (continued)

Reconciliation of Non-GAAP measures, excluding notable items
(dollars in millions)
Total revenue – GAAP
Less: Reduction in the fair value of acontingent consideration receivable related to a

prior year divestiture (a)
Disposal (loss) gain (a)
Revenue reduction related to Russia, primarily accelerated amortization of
deferred costs for depositary receipts services (b)
Net loss from repositioning the securities portfolio (a)

Adjusted total revenue – Non-GAAP

Total noninterest expense – GAAP
Less: Severance (c)

Litigation reserves (c)
FDIC special assessment (c)
Goodwill impairment

Adjusted total noninterest expense –Non-GAAP

Net income applicable to common shareholders of The Bank of New York Mellon
Corporation – GAAP
Less: Reduction in the fair value of acontingent consideration receivable related to a

prior year divestiture (a)

Disposal (loss) gain (a)
Revenue reduction related to Russia, primarily accelerated amortization of
deferred costs for depositary receipts services (b)
Net loss from repositioning the securities portfolio (a)
Severance (c)
Litigation reserves (c)
FDIC special assessment (c)
Goodwill impairment

Adjusted net income applicable to common shareholders of The Bank of New York

Mellon Corporation – Non-GAAP

Diluted earnings per share – GAAP
Less: Reduction in the fair value of acontingent consideration receivable related to a

Total diluted earnings per common share impact of notable items
Adjusted diluted earnings per share – Non-GAAP

2023
17,502

2022
16,377

2023 vs.
2022

(144)
(6)

—
—
17,652

13,295
267
94
632
—
12,302

3,051

(144)
(5)

—
—
(205)
(91)
(482)
—

3,978

3.87

(0.18)
(0.01)

—
—
(0.26)
(0.12)
(0.61)
—
(1.18)
5.05

$
$

—
26

(88)
(449)
16,888

13,010
215
134
—
680
11,981

2.7% (d)

2,362

29%

—
(12)

(67)
(343)
(166)
(125)
—
(665)

3,740

2.90

—
(0.01)

(0.08)
(0.42)
(0.20)
(0.15)
—
(0.82)
(1.69) (e)
4.59

33%

10%

$
$

(a) Reflected in Investment and other revenue.
(b) Primarily reflected in Investment services fees.
(c) Severance is reflected in Staff expense, Litigation reserves in Other expense, and FDIC special assessment in Bank assessment charges,

respectively.

(d) The growth rate was not significantly impacted by changes in foreign currency exchange rates.
(e) Does not foot due to rounding.

112 BNY Mellon

Supplemental Information (unaudited) (continued)

The following table presents the reconciliation of noninterest expense excluding notable items and changes in
foreign currency exchange rates.

Noninterest expense reconciliation, excluding notable items and the impact of changes
in foreign currency exchange rates
(dollars in millions)
Total noninterest expense – GAAP
Less: Severance (a)

Litigation reserves (a)
Goodwill impairment
Impact of changes in foreign currency exchange rates

2022 vs.
2021

13%

2022
13,010
215
134
680
—

2021
11,514
31
98
—
292

Adjusted total noninterest expense, excluding notable items and impact of changes in

foreign exchange rates – Non-GAAP

11,981

11,093

(a) Severance is reflected in Staff expense and Litigation reserves in Other expense, respectively.

The following table presents the reconciliation of the pre-tax operating margin.

Pre-tax operating margin reconciliation
(dollars in millions)
Income before taxes –GAAP
Less: Impact of notable items (a)

Adjusted income before taxes, excluding notable items – Non-GAAP

Total revenue – GAAP
Less: Impact of notable items (a)

Adjusted total revenue, excluding notable items – Non-GAAP

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

(a) See page 112 for details of notable items and line items impacted.
(b)

Income before taxes divided by total revenue.

The following table presents the reconciliation of effective tax rate.

Effective tax rate reconciliation
(dollars in millions)
Provision for income taxes - GAAP
Less: Impact of notable items (a)

Adjusted provision for income taxes, excluding notable items – Non-GAAP

Income before taxes –GAAP
Less: Impact of notable items (a)

Adjusted income before taxes, excluding notable items – Non-GAAP

Effective tax rate – GAAP
Adjusted effective tax rate – Non-GAAP

(a) See page 112 for details of notable items and line items impacted.

2023

$4,088

(1,143)
$ 5,231

2022
$ 3,328
(1,540)
$ 4,868

$17,502
(150)
$17,652

$ 16,377
(511)
$ 16,888

23%
30%

20%
29%

2022
768
(162)
930

$ 3,328
(1,540)
$ 4,868

23.1%
19.1%

BNY Mellon 113

Supplemental Information (unaudited) (continued)

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

Less: 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
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

2023

2022

2021

3,051
57
14

3,094
(927)

4,021

$ 35,880
16,204
2,880
1,205
657
$ 18,658

2,362
67
16

2,413
(1,378)

3,791

$ 36,175
17,060
2,939
1,181
660
$ 18,017

3,552
82
20

3,614
(85)

3,699

$ 39,695
17,492
2,979
1,178
676
$ 21,078

8.5%
11.1%

16.6%
21.6%

6.5%
10.3%

13.4%
21.0%

8.9%
9.2%

17.1%
17.6%

(a) See page 112 for details of notable items and line items impacted in 2023 and 2022. 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 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)
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
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,

2023
40,874 $
4,343
36,531
16,261
2,854
1,205
657
19,278 $

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

759,344

808,445

804,145

48.11 $
25.39 $

44.40 $
23.11 $

47.50
24.31

$
$

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

Adjusted investment management and performance fees – Non-GAAP

2023
3,058 $
—
3,058 $

2022
3,299
(4)
3,295

2023 vs.
2022
(7)%

(7)%

114 BNY Mellon

Supplemental Information (unaudited) (continued)

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

Adjusted investment management and performance fees – Non-GAAP

2023
3,052 $
—
3,052 $

2022
3,290
(4)
3,286

2023 vs.
2022
(7)%

(7)%

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
Less: Reduction in the fair value of acontingent consideration receivable related

to a prior year divestiture (a)
Disposal (loss) (a)
Revenue reduction related to Russia (b)
Severance (c)
Litigation reserves (c)
Goodwill impairment

Adjusted income before income taxes –Non-GAAP

2023

381

2022
48

2021

$ 1,230

(144)
—
—
(19)
(1)
—
545

—
(11)
(6)
(12)
—
(680)
757

—

(1)
—
—
(4)
—
$ 1,235

2023 vs.
2022
694%

2022 vs.
2021
(96)%

(28)% (39)%

Total revenue – GAAP
Less: Distribution and servicing expense

$ 3,143
355
Adjusted total revenue, net of distribution and servicing expense –Non-GAAP $ 2,788

$ 3,550
345
$ 3,205

$ 4,042
300
$ 3,742

Less: Reduction in the fair value of acontingent consideration receivable related

to a prior year divestiture (a)
Disposal (loss) (a)
Revenue reduction related to Russia (b)

(144)
—
—

—
(11)
(6)

—
(1)
—

Adjusted total revenue, excluding notable items and net of distribution and

servicing expense –Non-GAAP

$ 2,932

$ 3,222

$ 3,743

Pre-tax operating margin – GAAP (d)
Adjusted pre-tax operating margin, net of distribution and servicing expense –

Non-GAAP (d)

Adjusted pre-tax operating margin, net of distribution and servicing expense and
excluding notable items – Non-GAAP (d)

(a) Reflected in Investment and other revenue.
(b) Primarily reflected in Investment management and performance fees.
(c) Severance is reflected in Staff expense and Litigation reserves in Other expense.
(d)

Income before taxes divided by total revenue.

12%

14%

19%

24%

30%

33%

BNY Mellon 115

Supplemental Information (unaudited) (continued)

Rate/volume analysis

Rate/volume analysis (a)

(in millions)
Interest revenue
Interest-earning assets:

2023 over (under) 2022

2022 over (under) 2021

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

289 $
(31)

1,986 $ 2,275
1,247
1,278

(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
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)

258
(50)
57

(99)
(15)
(114)

(123)
(65)

3,264
352
5,884

1,884
147
2,031

537
603

3,522
302
5,941

1,785
132
1,917

414
538

174
239
(65)
541
559
(18)
715
798
(83)
1,667
1,938
(271)
172
156
16
(255)
1,839
2,094
(104) $ 13,625 $ 13,521

117 $
(87)
30
824
(1)

3,606 $ 3,723
1,814
1,901
5,537
5,507
5,765
4,941
88
89

37
7
30
1
1
—
38
8
30
—
—
—
410
438
(28)
125
851
726
980 $ 11,709 $ 12,689
832

1,916 $

$
$ (1,084) $

24
(11)
(17)

137
(7)
130

54
(125)

1,072
184
1,097

849
62
911

292
297

(17)
(18)
(35)
(106)
(14)
(120)

259
49
308
897
104
1,001
6 $ 4,265

2 $ 1,005
743
1,748
937
57

12
14
1
3

2
—
(2)
1
—
1
—
—
158
—
26
442
45 $ 3,342
923
(39) $

$
$

1,096
173
1,080

986
55
1,041

346
172

242
31
273
791
90
881
$ 4,271

$ 1,007
755
1,762
938
60

2
(1)
1
—
158
468
$ 3,387
884
$

(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.

116 BNY Mellon

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.

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,” “aspiration,”
“objective,” “aim,” “future,” “potentially,” “outlook”
and words of similar meaning, may signify forward-
looking statements.

These forward-looking statements, and other forward-
looking statements contained in other public
disclosures of BNY Mellon, are not guarantees of
future results or occurrences, are inherently uncertain
and are based upon current beliefs and expectations
of future events, many of which are, by their nature,
difficult to predict, outside of our control and subject
to change. By identifying these statements in this
manner, we are alerting investors to the possibility
that our actual results may differ, possibly materially,
from the anticipated results expressed or implied in
these forward-looking statements as a result of a
number of important factors, including those factors
described 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 and any inadequacy or lapse in our risk
management framework, models and processes
could expose us to unexpected losses that could
materially adversely affect our results of
operations or financial condition;
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 afailure i n our
computer systems, networks and information, or
those of third parties, could result in the theft,
loss, disclosure, use or alteration of information,
unauthorized access to or loss of information, or
system or network failures. 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;
our business may be adversely affected if we are
unable to attract, retain, develop and motivate
employees;
a failure or circumvention of our controls,
policies and procedures could have a material
adverse effect on our business, financial
condition, results of operations and reputation;

•

• weakness and volatility in financial markets and
the economy generally may materially adversely
affect our business, financial condition and
results of operations;

BNY Mellon 117

Forward-looking Statements (continued)

• 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 market activity, weak financial markets,
underperformance and/or negative trends in
savings rates or in investment preferences;
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;
reform of interest rate benchmarks and the use of
alternative reference rates by us and our clients
could adversely affect 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 credit losses 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, payment of income taxes 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

•

118 BNY Mellon

•

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, BNY Mellon,
N.A. or The Bank of New York Mellon SA/NV,
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;
ESG concerns, including climate change, could
adversely affect our business, affect client
activity levels, subject us to additional regulatory
requirements and damage our reputation;
impacts from geopolitical events, acts of
terrorism, natural disasters, the physical effects of
climate change, pandemics and other similar
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.

•

Forward-looking Statements (continued)

Investors should not place undue reliance on any
forward-looking statement and should consider all
risk factors discussed in the 2023 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 119

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 aperiod 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 alater d ate.

Reverse repurchase agreement – The purchase of
securities with the agreement to sell them at ahigher
price at aspecific f uture date.

Sub-custodian – Alocal 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 asafekeeping 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 – Acomprehensive p rogram
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 – Anegotiable s ecurity 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.

120 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,
2023. 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, 2023, 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 2023
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 122.

BNY Mellon 121

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, 2023, based on criteria established in Internal Control –Inte grated
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, 2023, based on criteria established in Internal Control –Inte grated 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, 2023 and 2022, 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, 2023, and the related notes (collectively, the consolidated financial
statements), and our report dated February 28, 2024, 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 Report of
Management on Internal Control Over Financial Reporting. 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 areasonable 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 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.

122 BNY Mellon

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 28, 2024

BNY Mellon 123

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 (income) loss 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,

2023

2022

2021

8,843 $
3,058
631
192
148
12,872
285
13,157

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

20,648
16,303
4,345
17,502
119

7,095
1,817
1,527
542
475
353
183
788
—
57
458
13,295

4,088
800
3,288

(2)
3,286
(235)

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)

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

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)

3,051 $

2,362 $

3,552

124 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,

2023
3,051 $
—

2022
2,362 $
—

2021
3,552
2

3,051 $

2,362 $

3,550

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,

2023
784,069
3,821
(92)
787,798

2022
811,068
3,904
(177)
814,795

2021
851,905
4,900
(446)
856,359

1,334

3,142

642

(a) Represents stock options, 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,

2023
3.89 $
3.87 $

2022
2.91 $
2.90 $

2021
4.17
4.14

$
$

See accompanying Notes to Consolidated Financial Statements.

BNY Mellon 125

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 gain (loss) on assets available-for-sale:
Unrealized gain (loss) arising during the period
Reclassification adjustment

Total unrealized gain (loss) on assets available-for-sale

Defined benefit plans:

Net (loss) gain arising during the period
Foreign exchange adjustment
Amortization of prior service credit, net loss and initial obligation included in net periodic benefit

cost
Total defined benefit plans

Net unrealized gain (loss) on cash flow hedges

Total other comprehensive income (loss), net of tax (a)
Total comprehensive income (loss)

Net (income) loss attributable to noncontrolling interests
Other comprehensive loss (income) attributable to noncontrolling interests

Year ended Dec. 31,

2023
3,288 $

2022
2,560 $

2021
3,771

272

829
52
881

(75)
(1)

(10)
(86)
6
1,073
4,361
(2)
—

(603)

(376)

(3,245)
338
(2,907)

(306)
—

56
(250)
(6)
(3,766)
(1,206)
13
13

(1,147)
(4)
(1,151)

219
—

88
307
(6)
(1,226)
2,545
(12)
(2)

Comprehensive income (loss) applicable to shareholders of The Bank of New York Mellon

Corporation

4,359 $

(1,180) $

2,531

(a) Other comprehensive income (loss) attributable to The Bank of New York Mellon Corporation shareholders was $1,073 million for the
year ended Dec. 31, 2023, $(3,753) million for the year ended Dec. 31, 2022 and $(1,228) million for the year ended Dec. 31, 2021.

See accompanying Notes to Consolidated Financial Statements.

126 BNY Mellon

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

Consolidated Balance Sheet

(dollars in millions, except per share amounts)
Assets
Cash and due from banks, net of allowance for credit losses of $18 and $29
Interest-bearing deposits with the Federal Reserve and other central banks
Interest-bearing deposits with banks, net of allowance for credit losses of $2 and $4 (includes restricted of
$3,420 and $6,499)
Federal funds sold and securities purchased under resale agreements
Securities:

Held-to-maturity, at amortized cost, net of allowance for credit losses of $1 and less than $1 (fair value of
$44,711 and $49,992)
Available-for-sale, at fair value (amortized cost of $80,678 and $92,484, net of allowance for credit losses of
less than $1 and $1)
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 $3 and $4 (includes $1,261 and $971, at
fair value)

Total assets

Liabilities
Deposits:

Noninterest-bearing (principally U.S. offices)
Interest-bearing deposits in U.S. offices
Interest-bearing deposits in non-U.S. offices
Total deposits

Federal funds purchased and securities sold under repurchase agreements
Trading liabilities
Payables to customers and broker-dealers
Other borrowed funds
Accrued taxes and other expenses
Other liabilities (including allowance for credit losses on lending-related commitments of $87 and $78, also

includes $195 and $221, at fair value)

Long-term debt

Total liabilities
Temporary equity
Redeemable noncontrolling interests
Permanent equity
Preferred stock – par value $0.01 per share; authorized 100,000,000 shares; issued 43,826 and 48,826 shares
Common stock – par value $0.01 per share; authorized 3,500,000,000 shares; issued 1,402,429,447 and

1,395,725,198 shares
Additional paid-in capital
Retained earnings
Accumulated other comprehensive loss, net of tax
Less: Treasury stock of 643,085,355 and 587,280,598 common shares, at cost
Total The Bank of New York Mellon Corporation shareholders’ equity

Nonredeemable noncontrolling interests of consolidated investment management funds

Total permanent equity
Total liabilities, temporary equity and permanent equity

See accompanying Notes to Consolidated Financial Statements.

Dec. 31,

2023

4,922 $

111,550

12,139
28,900

2022

5,030
91,655

17,169
24,298

49,578

56,194

76,817
126,395
10,058
66,879
(303)
66,576
3,163
1,150
16,261
2,854

86,622
142,816
9,908
66,063
(176)
65,887
3,256
858
16,150
2,901

25,985
409,953 $

25,855
405,783

58,274 $
132,616
92,779
283,669
14,507
6,226
18,395
479
5,567

8,844
31,257
368,944

78,017
108,362
92,591
278,970
12,335
5,385
23,435
397
5,410

8,543
30,458
364,933

109

4,343

4,838

14
28,908
39,653
(4,893)
(27,151)
40,874
50
40,924
409,953 $

14
28,508
37,864
(5,966)
(24,524)
40,734
7
40,741
405,783

BNY Mellon 127

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

Consolidated Statement of Cash Flows

(in millions)
Operating activities
Net income
Net (income) loss 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 (used for) provided by 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
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) financing activities

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.

128 BNY Mellon

Year ended Dec. 31,

2023

2022

2021

3,288 $
(2)
3,286

2,560 $
13
2,573

119
(6)
1,748
—
(423)
68
436
684
5,912

1,943
(18,730)
(341)
4,675
1,766
(23,422)
11,229
3,898
19,748
(801)
49
(4,597)
25
(1,220)
—
—
—
(32)
(5,810)

3,456
2,148
(5,030)
73
6,487
(6,059)
—
16
—
(2,604)
(500)
(1,262)
(225)
5
(24)
(3,519)
230

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

(3,187)
11,529
8,342 $

4,922 $
3,420
8,342 $

16,021 $
882
17

1,646
9,883
11,529 $

5,030 $
6,499
11,529 $

3,307 $
449
11

3,771
(12)
3,759

(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)

464
9,419
9,883

6,061
3,822
9,883

233
473
42

Preferred
stock
$ 4,838 $

Common
stock

14 $

Additional
paid-in
capital
28,508 $ 37,864 $

Retained
earnings

Accumulated
other
comprehensive
(loss) income,
net of tax

Nonredeemable
noncontrolling
interests of
consolidated
investment
management
funds

Redeemable
non-
controlling
interests/
temporary
equity
109

Total
permanent
equity
7 $ 40,741 (a) $

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

Consolidated Statement of Changes in Equity

The Bank of New York Mellon Corporation shareholders

(in millions, except per
share amount)
Balance at Dec. 31, 2022
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 $1.58 per

share (b)

Preferred stock

Repurchase of common stock
Common stock issued under
employee benefit plans
Preferred stock redemption
Stock-based compensation
Amortization of preferred stock

discount

Excise tax on share repurchases
Excise tax on preferred stock

redemption

Other
Balance at Dec. 31, 2023

—

—
—
—

—
(500)
—

5
—

—
—

$ 4,343 $

—

—
—
—

—
—

—
—
14 $

—

16
—
—

—

—
3,286
—

— (1,262)
(225)
—
—
—

20
—
364

—
—

—
—
—

(5)
—

Treasury
stock

(5,966) $(24,524) $

—

—
—
1,073

—

—
—
—

—
—
—
—
— (2,604)

—
—
—

—
—

—
—
—

—
(23)

—
—

—

41
2
—

—
—
—

—
—

—

57
3,288
1,073

(1,262)
(225)
(2,604)

20
(500)
364

—
(23)

—
—
50 $ 40,924 (a) $

(5)
—

(54)

(12)
—
—

—
—
—

—
—

—
4
85

28,908 $ 39,653 $

(4,893) $(27,151) $

(a)

(b)

Includes total The Bank of New York Mellon Corporation common shareholders’ equity of $35,896 million at Dec. 31, 2022 and $36,531 million at Dec.
31, 2023.
Includes dividend-equivalents on share-based awards.

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.

BNY Mellon 129

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

(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

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.

See accompanying Notes to Consolidated Financial Statements.

130 BNY Mellon

Notes to Consolidated Financial Statements

Note 1–Summary of significant accounting
and reporting policies

Foreign currency translation

Nature of operations

BNY Mellon is aglobal l eader 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 afair presentation of financial position,
results of operations and cash flows for the periods
presented have been made.

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
in those estimates, which could materially affect our
results of operations and financial condition.

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.

Acquisitions and divestitures

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 acontingent consideration
liability are recorded to other noninterest expense.
Gains or losses on divested business are reflected in
investment and other revenue. For businesses that are
determined to be held-for-sale and the fair value less
costs to sell is less than its carrying value, aloss is
recognized for that difference. Contingent
consideration received is measured at fair value and
recorded at the date of sale. Any subsequent changes
in the fair value of a contingent consideration
receivable are recorded to investment and other
revenue.

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

BNY Mellon 131

Notes to Consolidated Financial Statements (continued)

the entity, no further analysis is required and the
entity is not consolidated.

If we hold avariable interest in the entity, further
analysis is performed to determine if the entity is a
variable interest entity (“VIE”) or avoting m odel
entity (“VME”).

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 aVIE w hen 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 aVIE,
the entity is considered a VME. We consolidate these
entities if we can exert control over the financial and

132 BNY Mellon

operating policies of an investee, which typically
occurs if we have a 50% or more voting interest in the
entity.

See Note 14 for additional disclosures related to our
variable interests.

Equity method investments, including renewable
energy investments

Equity investments of less than amajority 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.

Investments in renewable energy 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 8for t he 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, 2023

(dollars in millions)
CIBC Mellon Global Securities Services
Company (“CIBC Mellon”)
Siguler Guff

Percentage
ownership

Book
value

50% $
20% $

607
234

Notes to Consolidated Financial Statements (continued)

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
with cash and due from banks when reconciling the
beginning and end-of-period balances on the
consolidated statement of cash flows.

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 when we intend to hold them for an indefinite
period of time or when they 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 when we intend and
have the ability to hold them until maturity. Debt
securities are classified as trading when we intend to
resell them.

Available-for-sale securities are measured at fair
value. The difference between fair value and
amortized cost representing unrealized gains or losses
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 identification method. Held-
to-maturity securities are measured at amortized cost,
net of expected credit loss, if any.

From time to time our intention to hold available-for-
sale securities has changed such that we intend, and
have the ability to, hold the securities to maturity.
Transfers of securities from available-for-sale to held-
to-maturity are accounted for at fair value and creates
a new cost basis. The unrealized gains or losses at
date of transfer continue to be recorded in
accumulated other comprehensive income and are
subsequently amortized into net interest revenue over
the contractual lives of the securities.

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 –Securitie s –Debt” a nd
“Allowance for credit losses –Other” below.

Trading securities are measured at fair value and
included in trading assets on the balance sheet.
Trading revenue, which is reflected in investment and
other 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.

Debt securities that are beneficial interests in
securitized financial assets and are not high credit
quality are 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 adebt
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

BNY Mellon 133

Notes to Consolidated Financial Statements (continued)

interest revenue 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
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.

Loan modifications

A loan may be modified if the debtor is experiencing
financial difficulties and the modification results in
more than an insignificant delay in payment. A
determination of whether a debtor is experiencing
financial difficulty is based on payment status, and
for commercial borrowers, the determination also
considers debtor risk ratings. The determination of
whether the modification results in more than an

134 BNY Mellon

insignificant delay in payment is based on analysis of
the payment amount subject to delay, the time span of
the modified terms, and well as a review of
modification activity in the previous 12-month
period.

Credit losses related to modified loans are generally
accounted for under an individual evaluation
methodology (see “Allowance for credit losses”
below).

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
doubt. Nonaccrual loans generally are restored to an
accrual basis when principal and interest become
current and remain current for aspecified 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 e stimate”
as it requires us to make numerous complex and
subjective estimates and assumptions relating to
amounts which are judgmental and inherently
uncertain.

The allowance for credit losses 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.

Notes to Consolidated Financial Statements (continued)

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 aweighting o f three scenarios: a
baseline and upside and downside scenarios and
allows us to develop our estimate using awide 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 acontraction, 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 aquarterly 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
an asset-specific allowance component involving
individually evaluated credits of $1 million or
greater which no longer share risk characteristics
with other loans.

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 acredit 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

BNY Mellon 135

Notes to Consolidated Financial Statements (continued)

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
using abaselin e, upside and downside
macroeconomic scenario to generate projected
property values and incomes.

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 other
residential mortgages purchased primarily in 2023
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 areasonable a nd 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

136 BNY Mellon

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 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 individually evaluate nonperforming loans
as well as loans that have been or are anticipated to be
modified given the risk characteristics of such loans.

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 acredit 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 for anon-structured security, 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. For astructured security, acredit loss model
is utilized and the components of the credit loss

Notes to Consolidated Financial Statements (continued)

calculation for each major portfolio or asset class
include a probability of default and loss given default
(severity). These values depend on forecasted
behavior of variables in the macroeconomic
environment that are incorporated into our baseline
forecast scenario described in “Allowance for credit
losses” above. 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 multi-scenario
macroeconomic forecast methodology as described in
“Allowance for credit losses” above. The allowance
for credit losses on held-to-maturity debt securities is
recorded in securities –held-to-maturity. T he
components of the modeled 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 acombination o f factors such as guarantees,
credit ratings and other credit quality factors. These
assets are monitored within our established
governance structure on arecurring basis to
determine if any changes are warranted.

Allowance for credit losses –Other f inancial
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 asimilar r isk
rating-based modeling approach as described in the
first allowance element within “Allowance for credit
losses –Lo ans 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
with other interest-bearing instruments, is included on
the consolidated balance sheet. Accrued interest
receivable related to each major loan class is
disclosed in 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

BNY Mellon 137

Notes to Consolidated Financial Statements (continued)

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
2023 or 2022 and did not own such assets as of Dec.
31, 2023 or Dec. 31, 2022.

We apply aseparate 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
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.

138 BNY Mellon

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
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 aportfolio 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.

Notes to Consolidated Financial Statements (continued)

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 astraight-line m ethod
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 e stimate”
as it requires us to make numerous complex and
subjective estimates.

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 acomponent 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 aliability is
recorded for the unfunded portion.

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.

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.

BNY Mellon 139

Notes to Consolidated Financial Statements (continued)

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 agood or service
to a customer. A performance obligation may be
satisfied over time or at a point in time. Revenue
from aperformance obligation satisfied over time is
recognized by measuring our progress in satisfying
the performance obligation in amanner t hat reflects
the transfer of goods and services to the customer.
Revenue from aperformance 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 agovernmental authority , that are both
imposed on, and concurrent with, aspecific r evenue-
producing transaction, are collected from acustomer
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 abenchmark i ndex or apeer 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

140 BNY Mellon

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 aclient
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
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

Notes to Consolidated Financial Statements (continued)

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.

Stock-based compensation

Compensation expense relating to share-based
payments is generally recognized in staff expense on
the income statement, on astraight-line b asis, 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.

discretion. A portion of performance share unit
awards contain market conditions. The grant date fair
value of this portion of the awards is recognized on a
straight-line-basis to staff expense unless the requisite
service period is not rendered.

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
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 aportion o f 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

A portion of performance share unit awards are
granted with performance conditions and for which
the ultimate payout is subject to the discretion of the
Human Resources and Compensation Committee.
These awards are classified as equity and marked-to-
market to earnings over the vesting period due to this

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.

BNY Mellon 141

Notes to Consolidated Financial Statements (continued)

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
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.

142 BNY Mellon

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 aresult 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 aforeign
operation are recorded with cumulative foreign
currency translation adjustments within OCI net of
their tax effect. We evaluate the effectiveness of
foreign currency derivatives designated as hedges of
net investments utilizing the forward rate method.

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

Notes to Consolidated Financial Statements (continued)

per share is calculated by dividing net income
allocated to common shareholders of BNY Mellon by
the adjusted average number ofcommo n 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
2023.

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 aportfolio
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 adopted this guidance as of Jan. 1, 2023. The
Company did not choose to make the one-time
election to reclassify securities classified as held-to-
maturity to available-for-sale as of Jan. 1, 2023 and
can choose to prospectively apply portfolio layer
method hedging.

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 adopted the revised guidance related to loan
modifications on Jan. 1, 2023. The impact was
immaterial.

BNY Mellon 143

Notes to Consolidated Financial Statements (continued)

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.

At Dec. 31, 2023, we are potentially obligated to pay
additional consideration which is recorded at a fair
value totaling approximately $20 million and, using
reasonable assumptions and estimates, could range
from $20 million to $25 million over the next year.
During 2023, we made contingent payments that
totaled $15 million and recorded $7 million of
increases to contingent earnout payables reflected in
other expense.

At Dec. 31, 2023, we could potentially receive
additional consideration which is recorded at fair
value totaling approximately $30 million and, using
reasonable assumptions and estimates, could range
from $20 million to $45 million over the next four
years. During 2023, there were no contingent
receipts and we recorded approximately $140 million
of net decreases to contingent earnout receivables as a
reduction of investment and other revenue based on
reduced expectations of collecting future earnouts.

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.

Transactions in 2021

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.

144 BNY Mellon

Notes to Consolidated Financial Statements (continued)

Note 4–Securities

Securities at Dec. 31, 2022

The following tables present the amortized cost, the
gross unrealized gains and losses and the fair value of
securities at Dec. 31, 2023 and Dec. 31, 2022.

Securities at Dec. 31, 2023

(in millions)
Available-for-sale:
Non-U.S. government (a) $
U.S. Treasury
Agency residential
mortgage-backed
securities (“RMBS”)

Agency commercial
mortgage-backed
securities (“MBS”)
Foreign covered bonds
Collateralized loan

obligations (“CLOs”)
Non-agency commercial

MBS

U.S. government agencies
Non-agency RMBS
Other asset-backed
securities (“ABS”)
Other debt securities
Total securities

available-for-sale
(b)(c)

Held-to-maturity:
Agency RMBS
U.S. Treasury
U.S. government agencies
Agency commercial MBS
Non-U.S. government (a)
CLOs
Non-agency RMBS
Other debt securities

Total securities held-to-

Amortized
cost

Gross
unrealized
Gains Losses

Fair
value

18,998 $
18,193

68 $ 684 $ 18,382
16,604
63

1,652

13,457

119

465

13,111

8,191
6,489

6,142

3,245
3,053
1,883

1,026
1

69
25

1
42
32

1
—

531
180

7,729
6,334

6,137

311
194
175

84
—

2,935
2,901
1,740

943
1

80,678 $ 425 $ 4,286 $ 76,817

29,740 $
9,123
4,146
3,411
2,137
983
26
12

1 $ 3,493 $ 26,248
8,511
—
3,745
—
3,116
1
2,073
3
982
—
26
1
10
—

612
401
296
67
1
1
2

maturity
Total securities

49,578 $

$
6 $ 4,873 $ 44,711
$ 130,256 $ 431 $ 9,159 $ 121,528

Includes supranational securities.

(a)
(b) The amortized cost of available-for-sale securities is net of the

(c)

allowance for credit loss of less than $1 million. The allowance
for credit loss primarily relates to non-agency RMBSs.
Includes gross unrealized gains of $250 million and gross
unrealized losses of $146 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, agency
commercial MBS and U.S. Treasury securities. 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.

(in millions)
Available-for-sale:
U.S. Treasury
Non-U.S. government (a)
Agency RMBS
Agency commercial MBS
Foreign covered bonds
CLOs
Non-agency commercial

MBS

U.S. government agencies
Non-agency RMBS
Other ABS
Other debt securities
Total securities

available-for-sale
(b)(c)

Held-to-maturity:
Agency RMBS
U.S. Treasury
U.S. government agencies
Agency commercial MBS
Non-U.S. government (a)
CLOs
Non-agency RMBS
Other debt securities

Total securities held-to-

Amortized
cost

Gross
unrealized
Gains Losses

Fair
value

$ 32,103 $
21,398
9,388
8,656
6,041
5,446

93 $ 2,663 $ 29,533
20,339
10
8,957
113
8,060
89
5,758
3
5,343
1

1,069
544
685
286
104

3,334
2,465
2,197
1,443
13

—
52
43
—
—

357
223
211
124
—

2,977
2,294
2,029
1,319
13

$ 92,484 $ 404 $ 6,266 $ 86,622

$ 34,188 $
10,863
4,206
4,014
1,897
983
30
13

1 $ 4,229 $ 29,960
9,968
—
3,672
—
3,603
—
1,790
—
957
—
31
2
11
—

895
534
411
107
26
1
2

maturity
Total securities

3 $ 6,205 $ 49,992
$ 56,194 $
$ 148,678 $ 407 $12,471 $ 136,614

Includes supranational securities.

(a)
(b) The amortized cost of available-for-sale securities is net of the

(c)

allowance for credit loss of $1 million. The allowance for credit
loss primarily relates to non-agency RMBS.
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.

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

Total net securities (losses) gains $

2023

2022

92 $

20 $
(88)
(68) $ (443) $

(535)

2021
28
(23)
5

BNY Mellon 145

Notes to Consolidated Financial Statements (continued)

The following table presents pre-tax net securities
gains (losses) by type.

Allowance for credit losses –Securities

Net securities gains (losses)
(in millions)
U.S. Treasury
Non-agency RMBS
Non-U.S. government
Other

Total net securities (losses)
gains

2023

(76) $
2
2
4

2022
12
49
3
(507) (a)

2021
(3)
2
3
3

(68) $ (443)

(a)

Includes net securities losses from repositioning the
securities portfolio which was comprised of $337 million
related to state and political subdivisions and $177 million
related to corporate bonds.

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. This transfer
reduced the impact of changes in interest rates on
accumulated other comprehensive income.

The allowance for credit losses related to securities
was $1 million at Dec. 31, 2023 and $1 million at
Dec. 31, 2022, and relates to other debt securities and
non-agency RMBS securities.

Credit quality indicators – Securities

At Dec. 31, 2023, 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, $146 million of the unrealized losses at
Dec. 31, 2023 and $179 million at Dec. 31, 2022
reflected in the tables below relate to certain
securities that were previously transferred from
available-for-sale to held-to-maturity. As the
transfers created a new cost basis for the securities, 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.

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, 2023
(in millions)
U.S. Treasury
Non-U.S. government (a)
Agency RMBS
Agency commercial MBS
CLOs
Foreign covered bonds
Non-agency commercial MBS
U.S. government agencies
Non-agency RMBS
Other ABS

Total securities available-for-sale (b)

Less than 12 months

12 months or more

Total

Fair
value

694 $

2,756
2,753
328
784
268
187
573
30
—
8,373 $

Unrealized
losses
48
24
27
5
—
1
2
4
1
—
112

Fair
value
14,862 $
11,767
6,793
7,060
3,158
3,603
2,607
1,779
1,300
832
53,761 $

Unrealized
losses
1,604
660
438
526
10
179
309
190
174
84
4,174

Fair
value
15,556 $
14,523
9,546
7,388
3,942
3,871
2,794
2,352
1,330
832
62,134 $

Unrealized
losses
1,652
684
465
531
10
180
311
194
175
84
4,286

(a)
(b)

Includes supranational securities.
Includes $146 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. There were no gross unrealized losses for less than 12
months. 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.

146 BNY Mellon

Notes to Consolidated Financial Statements (continued)

Available-for-sale securities in an unrealized loss
position without an allowance for credit losses at
Dec. 31, 2022
(in millions)
U.S. Treasury
Non-U.S. government (a)
Agency RMBS
Agency commercial MBS
CLOs
Foreign covered bonds
Non-agency commercial MBS
U.S. government agencies
Non-agency RMBS
Other ABS
Other debt securities

Total securities available-for-sale (b)

Less than 12 months

12 months or more

Total

Fair
value
14,058 $
8,775
7,929
6,088
4,806
2,830
1,914
1,710
588
333
—
49,031 $

Unrealized
losses
824
336
376
389
94
83
201
186
16
18
—
2,523

Fair
value
15,236 $
7,372
789
1,878
403
1,977
932
208
1,148
876
12
30,831 $

Unrealized
losses
1,839
733
168
296
10
203
156
37
193
106
—
3,741

Fair
value
29,294 $
16,147
8,718
7,966
5,209
4,807
2,846
1,918
1,736
1,209
12
79,862 $

Unrealized
losses
2,663
1,069
544
685
104
286
357
223
209
124
—
6,264

(a)
(b)

Includes supranational securities.
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.

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, 2023

Ratings (a)

(dollars in millions)
Agency RMBS
U.S. Treasury
U.S. government agencies
Agency commercial MBS
Non-U.S. government (b)(c)
CLOs
Non-agency RMBS
Other debt securities

Total held-to-maturity securities

Amortized
cost
29,740
9,123
4,146
3,411
2,137
983
26
12
49,578

(a) Represents ratings by Standard &Poor’s (“S&P”) o r the equivalent.
(b)
(c) Primarily consists of exposure to Germany, France, UK and the Netherlands.

Includes supranational securities.

A+/
A-

BB+
and
lower

Net
Not
BBB+/
AAA/
unrealized
AA-
rated
BBB-
gain (loss)
100% —% —% —% —%
(3,492)
—
100
(612)
—
100
(401)
—
100
(295)
—
100
(64)
—
100
(1)
2
—
25
—
(2) —
100% —% —% —% —%

—
—
—
—
—
2
100

—
—
—
—
—
17
—

—
—
—
—
—
54
—

(4,867)

BNY Mellon 147

Notes to Consolidated Financial Statements (continued)

Held-to-maturity securities portfolio at Dec. 31, 2022

Ratings (a)

(dollars in millions)
Agency RMBS
U.S. Treasury
U.S. government agencies
Agency commercial MBS
Non-U.S. government (b)(c)
CLOs
Non-agency RMBS
Other debt securities

Total held-to-maturity securities

Amortized
cost
34,188
10,863
4,206
4,014
1,897
983
30
13
56,194

Net
unrealized
gain (loss)
(4,228)
(895)
(534)
(411)
(107)
(26)
1
(2)
(6,202)

(a) Represents ratings by S&P or the equivalent.
(b)
(c) Primarily consists of exposure to Germany, UK and France.

Includes supranational securities.

Maturity distribution

BB+
and
lower

A+/
A-

Not
BBB+/
AAA/
AA-
rated
BBB-
100% —% —% —% —%
—
100
—
100
—
100
—
100
—
100
2
22
3
2
100% —% —% —% —%

—
—
—
—
—
1
93

—
—
—
—
—
17
—

—
—
—
—
—
58
2

The following table shows the maturity distribution by carrying amount and yield (on atax e quivalent 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)

$ 2,142
4,198
807
25
—

1.32% $ 10,617
11,470
2.04
5,187
2.83
1,671
1.74
—
—

1.23% $ 1,818
2,679
2.54
3.39
340
1,091
3.49
—
—

2.37% $ 2,027
35
2.57
—
1.41
114
2.90
1
—

2.92% $ 16,604
18,382
3.42
6,334
—
2,901
2.73
1
4.85

Total securities available-for-sale

7,172

1.91% $ 28,945

2.24% $ 5,928

2.50% $ 2,177

$ 3,176
470
704
—

1.56% $ 5,032
2,877
1.31
1,357
1.15
—
—

1.18% $
1.45
1.16
—

915
586
76
12

1.24% $
1.73
0.59
4.75

—
213
—
—

—% $ 9,123
4,146
2,137
12

1.99
—
—

Total securities held-to-maturity
Total securities

$ 4,350
$ 11,522

1.47% $ 9,266
1.74% $ 38,211

1.26% $ 1,589
2.01% $ 7,517

213
1.42% $
2.29% $ 2,390

(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.
Includes supranational securities.

(b)

148 BNY Mellon

Maturity distribution and yields on

securities at Dec. 31, 2023

(dollars in millions)
Available-for-sale:
U.S. Treasury
Non-U.S. government (b)
Foreign covered bonds
U.S. government agencies
Other debt securities
Mortgage-backed securities:

Agency RMBS
Non-agency RMBS
Agency commercial MBS
Non-agency commercial MBS

CLOs
Other ABS

Held-to-maturity:
U.S. Treasury
U.S. government agencies
Non-U.S. government (b)
Other debt securities
Mortgage-backed securities:

Agency RMBS
Non-agency RMBS
Agency commercial MBS

CLOs

1.59%
2.43
3.20
3.21
4.85

5.15
4.53
3.08
3.53
6.89
2.43
3.29%

1.32%
1.50
1.14
4.75

2.32
2.71
2.43
6.81
2.12%
2.84%

13,111
1,740
7,729
2,935
6,137
943
2.91% $ 76,817

29,740
26
3,411
983
1.99% $ 49,578
2.84% $126,395

Notes to Consolidated Financial Statements (continued)

Pledged assets

At Dec. 31, 2023, BNY Mellon had pledged assets of
$134 billion, including $93 billion pledged as
collateral for potential borrowings at the Federal
Reserve Discount Window and $9 billion pledged as
collateral for borrowing at the Federal Home Loan
Bank. The components of the assets pledged at Dec.
31, 2023 included $116 billion of securities, $13
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
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, 2022, BNY Mellon had pledged assets of
$138 billion, including $106 billion pledged as
collateral for potential borrowing 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.

At Dec. 31, 2023 and Dec. 31, 2022, 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, 2023 and Dec. 31, 2022, the
market value of the securities received that can be
sold or repledged was $212 billion and $115 billion,
respectively. We routinely sell or repledge these
securities through delivery to third parties. As of
Dec. 31, 2023 and Dec. 31, 2022, the market value of
securities collateral sold or repledged was $180
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,
2023 and Dec. 31, 2022, cash segregated under

federal and other regulations or requirements was $3
billion and $7 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, 2023 and $3
billion at Dec. 31, 2022. 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

Total loans (a)

Dec. 31,

2023
2,112 $
6,760
10,521
599
9,109
9,131
1,166
3,700
2,717
3,053
18,011
66,879 $

2022
1,732
6,226
9,684
657
10,302
8,966
345
3,438
2,941
4,839
16,933
66,063

(a) Net of unearned income of $268 million at Dec. 31, 2023

and $225 million at Dec. 31, 2022, 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 149

Notes to Consolidated Financial Statements (continued)

Allowance for credit losses activity for the year ended Dec. 31, 2023

Commercial
real estate

Financial
institutions

Lease
financings

Wealth
management
loans

Wealth
management
mortgages

Other
residential
mortgages

Capital
call

financing Other

(in millions)
Beginning balance

Charge-offs
Recoveries

Net recoveries (charge-
offs)

Provision (a)
Ending balance
Allowance for:
Loan losses
Lending-related
commitments

Individually evaluated for

impairment:
Loan balance (b)
Allowance for loan losses

Commercial
$

18 $
—
1
1

8
27 $

184 $
—
—
—

141
325 $

24 $
—
—
—

(5)
19 $

1 $

—
—
—

—

1 $

1 $
—
—
—

—
1 $

12 $
—
—
—

(3)
9 $

8 $
(3)
2
(1)

(3)
4 $

6 $ — $

—
—
—

—
5
5

Total
254
(3)
8
5

(5)

(2)
4 $ — $

131
390

12 $

266 $

9 $

1 $

8 $

4 $

2 $ — $

303

—

— $
—

290 $
76

— $
—

12 $
—

1 $

—

— $ — $
—

—

303
76

(a) Does not include provision for credit losses benefit related to other financial instruments of $12 million for the year ended Dec. 31, 2023.
(b)

Includes collateral dependent loans of $303 million with $348 million of collateral at fair value.

Allowance for credit losses activity for the year ended Dec. 31, 2022 (a)

Commercial
real estate

Financial
institutions

Lease
financings

Wealth
management
loans

Wealth
management
mortgages

Other
residential
mortgages

Capital
call
financing

Commercial
$

(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

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 $
—

Total
241
—
4
4
9
254

2 $
—
—
—
4
6 $

4 $
2

176
78

— $
—

79
—

(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.

Allowance for credit losses activity for the year ended Dec. 31, 2021

(in millions)
Beginning balance

Charge-offs
Recoveries

Net recoveries (charge-

offs)
Provision (a)
Ending balance
Allowance for:
Loan losses
Lending-related
commitments

Individually evaluated for

impairment:
Loan balance (b)
Allowance for loan losses

Commercial
$

Commercial
real estate

Financial
institutions

Lease
financing

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 $

— $ — $
—
—
—

(16)
—
(16)

2
2 $ — $

Total
479
(18)
8
(10)

(228)
241

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.

150 BNY Mellon

Notes to Consolidated Financial Statements (continued)

Nonperforming assets

The table below presents our nonperforming assets.

Nonperforming assets

(in millions)
Nonperforming loans:

Commercial real estate
Other residential mortgages
Wealth management mortgages
Total nonperforming loans

Other assets owned
Total nonperforming assets

Dec. 31, 2023
Recorded investment
Without an
allowance

With an
allowance

189 $
23
7
219
—
219 $

— $
1
12
13
5
18 $

Total

189
24
19
232
5
237

Dec. 31, 2022
Recorded investment
Without an
allowance

With an
allowance

— $
30
8
38
—
38 $

54 $
1
14
69
2
71 $

Total

54
31
22
107
2
109

Past due loans

The table below presents our past due loans.

Past due loans and still accruing interest

Dec. 31, 2023

Dec. 31, 2022

(in millions)
Financial institutions
Wealth management loans
Wealth management mortgages
Commercial real estate
Other residential mortgages

Total past due loans

Days past due
60-89

30-59

339 (a) $
52
26
9
7
433

— $
—
3
3
1
7 $

≥90
— $
—
—
—
—
— $

Total
past due
339
52
29
12
8
440

Days past due

30-59

60-89

— $
43
54
11
5
113 $

— $
1
1
—
—
2 $

≥90
— $
—
—
—
—
— $

Total
past due
—
44
55
11
5
115

(a) The past due financial institutions loans have been collected since Dec. 31, 2023.

Loan modifications

Modified loans are evaluated to determine whether a
modification or restructuring with a borrower
experiencing financial difficulty results in principal
forgiveness, an interest rate reduction, an other-than-
insignificant payment delay, or a term extension. The
modification could result in a new loan or a
continuation of the existing loan.

In 2023, we modified two commercial real estate
loans, with an aggregate recorded investment of
$71 million and an unfunded lending commitment of
$15 million, by extending the maturity dates. One of
these loans matured in 2023 after the modification.

Also in 2023, we modified six other residential
mortgage loans, with an aggregate recorded
investment of $2 million, by providing payment

modifications, extending maturity dates, reducing the
interest rate, or acombination o f these modifications.

Loans modified prior to 2023 are considered to be
TDRs if the debtor is experiencing financial
difficulties and the creditor grants aconcession 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.

BNY Mellon 151

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, 2023

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 (b)
Capital call financing
Other loans
Margin loans

Total loans

Originated, at amortized cost

2023

2022

2021

2020

2019

Prior to
2019

Amortized
cost

Converted to
term loans –
Amortized
cost

Accrued
interest
receivable

Total (a)

193 $
52
245

114 $
18
132

70 $
—
70

— $
—
—

45 $
—
45

1,483 $
137
1,620

— $
—
—

1,905
207
2,112 $

1,518
1,172
2,690

864
685
1,549

616
134
750

39
—

74
10
84

30
2

585
154
739

57
—
57

110
—

39
850
230
184
10
—
7,283
$ 12,281 $

32
1,689
—
561
—
—
—
4,047 $

110
1,909

—40

200
—
—
—
3,085 $

152
43
195

—
—
—

26
—

26
863

5
—
—
—
1,129 $

271
47
318

—
—
—

7
—

875
152
1,027

10
—
10

167
—

136
84
220

6,948
2,672
9,620

8,542
85

7
736
7
—
—
—
—
1,068 $

167
3,066
322
216
—
—
—
4,853 $

8,627
18
—
—
3,690
2,717
10,728
37,240 $

22
—
22

—
—
—

101
—

101
—
—
—
—
—
—

4,423
2,337
6,760

7,705
2,816
10,521

9,022
87

9,109
9,131
599
1,166
3,700
2,717
18,011

123 $ 63,826 $

120

57
22
—
5
15
7
41
300

(a) Excludes overdrafts of $3,053 million. Overdrafts occur on a daily basis primarily in the custody and securities clearance business and are generally

repaid within two business days.

(b) The gross write-offs primarily related to other residential mortgage loans were $3 million in 2023.

152 BNY Mellon

Notes to Consolidated Financial Statements (continued)

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.

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
92% of the exposures meeting the investment grade
equivalent criteria of our internal credit rating
classification at Dec. 31, 2023. In addition, 62% 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 83% 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 153

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 akey i ndicator of
credit quality in the wealth management portfolio. At
Dec. 31, 2023, less than 1% of the mortgages were
past due.

Lease financings

At Dec. 31, 2023, the lease financings portfolio
consisted of exposures backed by well-diversified
assets. At Dec. 31, 2023, nearly all of leasing
exposure was investment grade, or investment grade
equivalent and primarily consisted of exposures
backed by well-diversified assets, primarily real
estate and large-ticket transportation equipment.
Assets are both domestic and foreign-based, with
primary concentrations in Germany and the U.S.

Other residential mortgages

The other residential mortgage portfolio primarily
consists of 1-4 family residential mortgage loans and

totaled $1.2 billion at Dec. 31, 2023 and $345 million
at Dec. 31, 2022. These loans are not typically
correlated to external ratings.

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 $18.0 billion of secured margin loans at Dec.
31, 2023, compared with $16.9 billion at Dec. 31,
2022. 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 $3.1 billion at Dec. 31,
2023 and $4.8 billion at Dec. 31, 2022. Overdrafts
occur on adaily basis and are generally repaid within
two business days.

Reverse repurchase agreements

Reverse repurchase agreements at Dec. 31, 2023 and
Dec. 31, 2022 were fully secured with high-quality
collateral. As a result, there was no allowance for
credit losses related to these assets at Dec. 31, 2023
and Dec. 31, 2022.

154 BNY Mellon

Notes to Consolidated Financial Statements (continued)

Note 6–Leasing

We have operating and finance leases for corporate offices, data centers and certain equipment. Our leases have
remaining lease terms up to 15 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.

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)

Dec. 31, 2023
Finance
leases

Operating
leases

$ 1,125
$ 1,356

$
$

— $
— $

Total
1,125
1,356

Operating
leases

$ 1,152
$ 1,336

Dec. 31, 2022
Finance
leases
$
$
11
$ — $

Total
1,163
1,336

9.4 years
3.11%

N/A
N/A

10.0 years
2.68%

0.8 years
1.27%

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.

N/A -Not a pplicable.

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,
2023
215 $
43
(34)

2022
224 $
36
(33)

2021
236
39
(33)

—
224 $

6
233 $

3
245

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,
2023

2022

2021

224 $

260

— $

23 $

The table below presents the maturities of lease
liabilities.

Maturities of lease liabilities
(in millions)
For the year ended Dec. 31,

2024
2025
2026
2027
2028
2029 and thereafter

Total lease payments

Less: Imputed interest

Total

Operating
leases

196
192
185
158
133
692
1,556
200
1,356

BNY Mellon 155

Notes to Consolidated Financial Statements (continued)

Note 7–Goodwill and intangible assets

Goodwill

The table below provides abreakdown o f goodwill by business segment.

Goodwill by business segment

(in millions)
Balance at Dec. 31, 2022

Goodwill
Accumulated impairment losses

Net goodwill

Foreign currency translation
Balance at Dec. 31, 2023

Goodwill
Accumulated impairment losses

Net goodwill

Goodwill by business segment

(in millions)
Balance at Dec. 31, 2021
Impairment loss
Dispositions
Foreign currency translation
Balance at Dec. 31, 2022

Goodwill
Accumulated impairment losses

Net goodwill

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. An
interim goodwill impairment 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.

156 BNY Mellon

Securities
Services

Market and
Wealth
Services

Investment
and Wealth
Management

Consolidated

6,973 $
—
6,973 $
31

7,004
—
7,004 $

1,424 $
—
1,424 $
5

1,429
—
1,429 $

8,433 $
(680)
7,753 $
75

8,508
(680)
7,828 $

16,830
(680)
16,150
111

16,941
(680)
16,261

Securities
Services
7,062
—
(13)
(76)

6,973 $
—
6,973 $

Market and
Wealth
Services

Investment
and Wealth
Management

1,435 $
—
—
(11)

1,424 $
—
1,424 $

9,015 $
(680)
(434)
(148)

8,433 $
(680)
7,753 $

Consolidated
17,512
(680)
(447)
(235)

16,830
(680)
16,150

management’s projections as of Dec. 31, 2023. The
discount rate applied to these cash flows was 10.5%.

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.

Notes to Consolidated Financial Statements (continued)

Determining the fair value of areporting u nit 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.

Intangible assets

In the third quarter 2022, based on results of an
interim goodwill impairment test we recorded an
impairment charge of $680 million. This goodwill
impairment represents anon-cash c harge and did not
affect BNY Mellon’s liquidity position, tangible
common equity or regulatory capital ratios.

The table below provides abreakdown o f intangible assets by business segment.

Intangible assets – net carrying amount by
business segment
(in millions)
Balance at Dec. 31, 2021
Disposition
Amortization
Foreign currency translation
Balance at Dec. 31, 2022

Amortization
Foreign currency translation
Balance at Dec. 31, 2023

Securities
Services

Market and
Wealth
Services

Investment
and Wealth
Management

230 $
—
(33)
(4)
193 $
(31)
2
164 $

392 $
—
(8)
—
384 $
(6)
—
378 $

1,520 $
(1)
(26)
(18)
1,475 $
(20)
8
1,463 $

Other Consolidated
2,991
(1)
(67)
(22)
2,901
(57)
10
2,854

849 $
—
—
—
849 $
—
—
849 $

Intangible assets decreased in 2023 compared with 2022, primarily reflecting amortization, partially offset by
foreign currency translation.

The table below provides abreakdown o f intangible assets by type.

Intangible assets

Dec. 31, 2023

Dec. 31, 2022

(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

Not subject to amortization: (b)

Tradenames
Customer relationships

Total not subject to amortization
Total intangible assets

Gross
carrying
amount

Accumulated
amortization

Net
carrying
amount

Remaining
weighted-
average
amortization
period

Gross
carrying
amount

Accumulated
amortization

Net
carrying
amount

731 $

(567) $

164

10 years

731 $

(539) $

192

280

553
41
1,605

(273)

(479)
(12)
(1,331)

74
29
274

3 years

280

(267)

8 years
13 years
10 years

553
41
1,605

(461)
(9)
(1,276)

92
32
329

1,292
1,288
2,580
4,185 $

N/A
N/A
N/A
(1,331) $

1,292
1,288
2,580
2,854

N/A
N/A
N/A
N/A $ 4,177 $

1,290
1,282
2,572

N/A
N/A
N/A

1,290
1,282
2,572
(1,276) $ 2,901

(a) Excludes fully amortized intangible assets.
(b)
N/A –Not a pplicable.

Intangible assets not subject to amortization have an indefinite life.

BNY Mellon 157

Notes to Consolidated Financial Statements (continued)

Estimated annual amortization expense for current
intangibles for the next five years is as follows:

Non-readily marketable equity securities

For the year ended
Dec. 31,
2024
2025
2026
2027
2028

Estimated amortization expense
(in millions)
49
43
34
28
24

Intangible asset impairment testing

Intangible assets not subject to amortization are tested
for impairment annually or more often if events or
circumstances indicate they may be impaired.

Note 8–Other assets

The following table provides the components of other
assets presented on the consolidated balance sheet.

Other assets
(in millions)
Accounts receivable (a)
Corporate/bank-owned life insurance
Software
Prepaid pension assets
Fails to deliver
Qualified affordable housing project
investments
Renewable energy investments
Equity method investments
Other equity investments (b)
Prepaid expense
Cash collateral receivable on derivative
transactions

Assets of consolidated investment
management funds
Federal Reserve Bank stock
Income taxes receivable
Fair value of hedging derivatives
Seed capital (c)
Other (d)

Dec. 31,

2023
6,567 $
5,480
2,430
1,818
1,514

1,213
1,049
873
741
737

621

2022
4,924
5,417
2,260
1,651
2,569

1,298
871
803
695
764

1,014

526
480
270
236
232
1,198
25,985 $

209
478
481
319
218
1,884
25,855

Total other assets

(a)

(b)

(c)

Includes receivables for securities sold or matured that have
not yet settled.
Includes strategic equity, private equity and other
investments.
Includes investments in BNY Mellon funds which hedge
deferred incentive awards.

(d) At Dec. 31, 2023 and Dec. 31, 2022, other assets include $7
million and $6 million, respectively, of Federal Home Loan
Bank stock, at cost.

158 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 $479 million at Dec. 31, 2023 and
$445 million at Dec. 31, 2022 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

2023

2022
125 $
(8)
117 $

52 $
(41)
11 $

Net adjustments

Life-to-
date
335
(53)
282

2021
105 $
—
105 $

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 $1.2
billion at Dec. 31, 2023 and $1.3 billion at Dec. 31,
2022. Commitments to fund future investments in
qualified affordable housing projects totaled $596
million at Dec. 31, 2023 and $614 million at Dec. 31,
2022 and are recorded in other liabilities on the
consolidated balance sheet. A summary of the
commitments to fund future investments is as
follows: 2024 – $297 million; 2025 – $184 million;
2026 – $44 million; 2027 – $28 million; 2028 – $1
million; and 2029 and thereafter – $42 million.

Tax credits and other tax benefits recognized were
$185 million in 2023, $145 million in 2022 and $148
million in 2021.

Amortization expense included in the provision for
income taxes was $154 million in 2023, $123 million
in 2022 and $124 million in 2021.

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, 2023

Dec. 31, 2022

(in millions)
Seed capital (a) (b)
Private equity investments (c)
Other

Total

Fair value
3
143
7
153

Unfunded
commitments

$ — $
42
—
42

Fair value
3
130
5
138

Unfunded
commitments
$ —
53
—
53

(a) Seed capital investments at Dec. 31, 2023 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.
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 alife of 10 years, are liquidated.

Note 9–Deposits

Time deposits in denominations of $250,000 or more
totaled $1.5 billion at Dec. 31, 2023 and $1.4 billion
at Dec. 31, 2022.

At Dec. 31, 2023, the scheduled maturities of total
time deposits are $1.9 billion in 2024, $277 million in
2025, $143 million in 2026, $94 million in 2027 and
$78 million in 2028. No time deposits are scheduled
to mature after 2028.

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 amonthly o r 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 amonthly 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,
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.

BNY Mellon 159

Notes to Consolidated Financial Statements (continued)

Performance fees are generally calculated as a
percentage of the applicable portfolio’s performance
in excess of abenchmark i ndex or apeer 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

2023

2022

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

4,959 $

3,805 $

99 $

(63) $ 8,800

4,890 $

3,564 $

99 $

(65) $ 8,488

—
37
6
236

18
14
(98)
207

3,057
1
241
(323)

(12)
—
—
1

3,063
52
149
121

—
30
4
215

23
23
(66)
143

3,290
1
192
(245)

(14)
1
—
1

3,299
55
130
114

5,238

3,946

3,075

(74)

12,185

5,139

3,687

3,337

(77)

12,086

(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

817
6,055 $

198
4,144 $

(98)
2,977 $

53
970
(21) $ 13,155

865
6,004 $

185
3,872 $

(15)

(235)
800
3,322 $ (312) $ 12,886

(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 (loss) attributable to noncontrolling interests related to consolidated

investment management funds of $2 million in 2023 and $(13) million in 2022.

Disaggregation of contract revenue by business segment

Year ended Dec. 31, 2021

(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

4,919 $
—
19
5
132
5,075
743
5,818 $

3,284 $
18
48
(5)
4
3,349
234
3,583 $

100 $

3,553
—
113
(35)
3,731
118
3,849 $

8,233
(70) $
3,552
(19)
68
1
112
(1)
101
—
12,066
(89)
140
1,235
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 income attributable to noncontrolling interests related to consolidated investment

management funds of $12 million in 2021.

160 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, 2023
and Dec. 31, 2022.

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 $27 million at Dec. 31, 2023 and $48 million at
Dec. 31, 2022. 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 $172 million at Dec. 31, 2023 and $164
million at Dec. 31, 2022. Contract liabilities are
included in other liabilities on the consolidated
balance sheet. Revenue recognized in 2023 relating
to contract liabilities as of Dec. 31, 2022 was $114
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 $46 million at Dec. 31, 2023
and $58 million at Dec. 31, 2022. 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 $16 million in
2023, $19 million in 2022 and $20 million in 2021.

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 acontract which enables the

fulfillment of the performance obligation, and totaled
$90 million at Dec. 31, 2023 and $77 million at Dec.
31, 2022. 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
Customer payables
Long-term debt

Total interest expense
Net interest revenue
Provision for credit losses

Year ended Dec. 31,
2023

2022

2021

$ 4,541 $ 1,019 $

523

221

7,141
3,916

1,200
1,999

(77)
48

120
958

4,213

2,502

1,702

1
4,214
313
20,648

4,703
2,421

6,699
156
47
566
1,711
16,303
4,345
119

35
2,537
142
7,118

42
1,744
52
2,845

980
607

(27)
(148)

934
68
9
156
860
3,614
3,504
39

(4)
8
8
(2)
392
227
2,618
(231)

Net interest revenue after
provision for credit losses

$ 4,226 $ 3,465 $ 2,849

BNY Mellon 161

Notes to Consolidated Financial Statements (continued)

Note 12–Income taxes

The components of the income tax provision are as
follows:

Year ended Dec. 31,
2023

2022

2021

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

588 $
443
192
1,223

190 $
404
19
613

(379)
31
(75)

104
(5)
56

Total deferred tax expense
(benefit)
Provision for income taxes $

(423)
800 $

155
768 $

160
353
107
620

208
22
27

257
877

The deferred tax benefit for 2023 is primarily driven
by depreciation and amortization, the accrual for the
FDIC special assessment and unrealized gains on
securities.

The components of income before taxes are as
follows:

Income before taxes
(in millions)
Domestic
Foreign

Income before taxes

2022

Year ended Dec. 31,
2023

2021
$ 2,001 $ 1,697 $ 2,965
1,683
$ 4,088 $ 3,328 $ 4,648

1,631

2,087

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
Equity investments
Securities valuation
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

162 BNY Mellon

Dec. 31,

2023

2022
$ 1,811 $ 2,063
374
145
205
57
(31)
(25)
(31)
(70)
(154)
(224)
(253)
(100)
100
$ 1,797 $ 2,056

388
149
156
56
(29)
(41)
(55)
(106)
(314)
—
(252)
(96)
130

As of Dec. 31, 2023, BNY Mellon had $96 million of
U.S. foreign tax credit carryforwards which will
begin to expire in 2029. In addition, we have an
unrealized capital loss of $34 million. We believe it
is more likely than not that the benefit from these
items will not be realized. Accordingly, we have
recorded a valuation allowance of $130 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, 2023, we had approximately $1.2
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, 2023 would be
up to $150 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,
2023

2022
2021
21.0% 21.0% 21.0%

2.3
1.1
(5.6)
(0.7)

1.8
2.1
(6.1)
(1.0)

2.3
0.8
(4.6)
(1.0)

0.5
0.4
(0.2)
(0.6)
—
3.9
0.7
1.0
0.5
0.6
19.6% 23.1% 18.9%

0.3
(0.1)
—
—
0.2

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 $

2023
106 $

2022
138 $

2021
119

—
(5)
8
—
—
109 $

—
(11)
8
(16)
(13)
106 $

18
(3)
9
(5)
—
138

Our total tax reserves as of Dec. 31, 2023 were $109
million compared with $106 million at Dec. 31, 2022.
If these tax reserves were unnecessary, $109 million
would affect the effective tax rate in future periods.
We recognize accrued interest and penalties, if

Notes to Consolidated Financial Statements (continued)

applicable, related to income taxes in income tax
expense. Included in the balance sheet at Dec. 31,
2023 is accrued interest, where applicable, of $39
million. The additional tax expense related to interest
for the year ended Dec. 31, 2023 was $6 million,
compared with $5 million for the year ended Dec. 31,
2022.

It is reasonably possible the total reserve for uncertain
tax positions could decrease within the next 12

Note 13–Long-term debt

The table below presents information on our long-term debt.

months by approximately $9 million as aresult of
adjustments related to tax years that are still subject to
examination.

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, 2023

Rate

Maturity

Amount

Dec. 31, 2022
Rate

Amount

0.50 - 6.47%
5.39 - 6.00%
3.00 - 3.30%

2024 - 2034 $
2024 - 2038
2028 - 2029

28,886
1,226
1,145
31,257

0.35 - 5.83% $
4.50 - 4.92%
3.00 - 3.30%

28,108
1,229
1,121
30,458

Total long-term debt maturing during the next five
years is as follows: 2024 – $4.9 billion; 2025 – $4.4
billion; 2026 – $4.5 billion; 2027 – $3.1 billion; and
2028 – $5.2 billion.

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.

Note 14–Variable interest entities

Consolidated investment management funds

We have variable interests in variable interest entities
(“VIEs”), which include investments in retail,
institutional and alternative investment funds.

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, 2023 and Dec. 31, 2022. The net

(in millions)
Trading assets
Other assets

Total assets (a)

Other liabilities

Total liabilities (b)

Nonredeemable noncontrolling
interests (c)

Dec. 31,

2023
510 $
16
526 $
1 $
1 $

2022
203
6
209
1
1

50 $

$
$
$

(a)

(b)

(c)

Includes VMEs with assets of $91 million at Dec. 31, 2023
and $86 million at Dec. 31, 2022.
Includes VMEs with liabilities of $1 million at Dec. 31, 2023
and $1 million at Dec. 31, 2022.
Includes VMEs with nonredeemable noncontrolling interests
of $12 million at Dec. 31, 2023 and $7 million at Dec. 31,
2022.

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.

BNY Mellon 163

Notes to Consolidated Financial Statements (continued)

Non-consolidated VIEs

As of Dec. 31, 2023 and Dec. 31, 2022, 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.

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)
Other assets
Other liabilities
Maximum loss exposure

Dec. 31,
2023
2,337 $
596
2,934

Dec. 31,
2022
2,235
614
2,850

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, 2023, 759,344,092 shares of common
stock were outstanding.

In July 2023, our Board of Directors approved a 14%
increase in the quarterly cash dividend on common
stock, from $0.37 to $0.42 per share.

Common stock repurchase program

In 2023, we repurchased 55.8 million common shares
at an average price of $46.66 per common share for a
total of $2.6 billion.

164 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, 2023 and Dec. 31, 2022.

Preferred stock summary (a)

Per annum dividend rate (c)
Greater of (i) SOFR plus 0.565% and (ii) 4.000%
SOFR plus 2.46%
4.625% to but excluding Sept. 20, 2026, then SOFR 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

Dec. 31,
2023
5,001
—
10,000

Dec. 31,
2022
5,001
5,000
10,000

Carrying value (b)
(in millions)

Dec. 31,
2023
500 $
—
990

Dec. 31,
2022
500
494
990

10,000

5,825

990

576

990

577

13,000
43,826

13,000
48,826

1,287
4,343 $

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 Hand Series I preferred stock is recorded net of issuance costs.
(c) References to SOFR are to a floating rate equal to the three-month CME Term SOFR (plus aspread adjustment of 0 .26161% per

annum).

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 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 F,
Series G, Series H and Series I preferred stock.

All of the outstanding shares of the Series Apreferred
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 F, Series G, Series Hand S eries Ipreferred
stock are held by the depositary of the depositary
shares, which will pass through the applicable portion
of any dividend on the Series F, Series G, Series H
and Series Ipreferred s tock to the holders of record of
their respective depositary shares.

BNY Mellon 165

Notes to Consolidated Financial Statements (continued)

In December 2023, the Parent redeemed all
outstanding shares of its Series D preferred stock,
$100,000 liquidation preference per share. Deferred
fees of approximately $10 million were realized as
preferred stock dividends upon redemption.

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.

Preferred dividends

(dollars in millions, except
per share amounts)
Series A
Series D
Series E
Series F
Series G
Series H
Series I

Total

Depositary
shares
per share

100 (a)
100
100
100
100
100
100

2023

Per share
5,866.23 $
6,339.20
N/A
4,625.00
4,700.00
3,700.00
3,750.00

Total
dividend
29
42 (b)
N/A
46
47
22
49
235

2022

Per share
4,088.49 $
4,500.00
N/A
4,625.00
4,700.00
3,700.00
4,083.33

Total
dividend
20
23
N/A
46
47
22
53
211

2021

Per share
4,044.44 $
4,500.00
3,630.34
4,625.00
4,700.00
4,186.06
N/A

Total
dividend
20
23
47 (c)
46
47
24
N/A
207

(a) Represents Normal Preferred Capital Securities.
(b)
(c)
N/A –Not a pplicable.

Includes deferred fees of approximately $10 million related to the redemption of the Series D 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 Apreferred s tock, in whole or in
part, at our option. We may also, at our option,
redeem the shares of 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 Gpreferred s tock 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 Ipreferred s tock
on any dividend payment date, in whole or in part, on
or after the dividend payment date in December 2026.
The Series F, Series G, Series Hor 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
stock is subject to the prior approval of the Federal
Reserve.

Temporary equity

Temporary equity was $85 million at Dec. 31, 2023
and $109 million at Dec. 31, 2022. 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

166 BNY Mellon

Notes to Consolidated Financial Statements (continued)

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,

2023

2022

11.5% 11.2%
14.2
15.0
6.0
7.3

14.1
14.9
5.8
6.8

16.2% 15.6%
16.2
16.3
6.6
8.6

15.6
15.7
6.2
7.7

(a) For our CET1, Tier 1capital a nd 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 1leverage 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 1capital, 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 1capital:

Preferred stock
Other

Total Tier 1capital

Tier 2 capital:

Dec. 31,

2023

2022

$ 36,531 $ 35,896

(17,253)
(297)
(275)
(62)
(6)
18,638

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

4,343
(14)

4,838
(14)
$ 22,967 $ 22,856

Subordinated debt
Allowance for credit losses
Other

Total Tier 2capital –Standardized
Approach

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

1,148 $
414
(11)

1,551
85
414

1,248
291
(11)

1,528
50
291

1,222 $

1,287

Total capital:
Standardized Approach
Advanced Approaches

Risk-weighted assets:

Standardized Approach
Advanced Approaches:

Credit Risk
Market Risk
Operational Risk

Total Advanced Approaches

Average assets for Tier 1leverage
ratio

Total leverage exposure for SLR

$ 24,518 $ 24,384
$ 24,189 $ 24,143

$ 156,254 $ 159,096

$ 87,299 $ 90,243
2,979
68,450
$ 161,604 $ 161,672

3,380
70,925

$ 383,899 $ 396,643
$ 313,749 $ 336,049

(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, 2023

(in millions)
CET1
Tier 1 capital
Total capital
Tier 1 leverage ratio
SLR

Consolidated (a)
$

4,902
6,807
4,797
7,611
7,280

The Bank of
New York
Mellon
11,962 (a)
10,017 (a)
7,572 (a)
5,158 (b)
6,286 (b)

(a) Based on minimum required standards, with applicable

buffers.

(b) Based on well capitalized standards.

BNY Mellon 167

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 gain (loss) on assets available-for-sale:
Unrealized gain (loss) arising during the period
Reclassification adjustment (b)

Net unrealized gain (loss) on assets available-

for-sale

Defined benefit plans:

Net (loss) gain arising during the period
Foreign exchange adjustment
Amortization of prior service credit, net loss and

initial obligation included in net periodic benefit
cost (b)
Total defined benefit plans

Unrealized gain (loss) on cash flow hedges:

Unrealized hedge gain (loss) arising during the

period

Reclassification of net loss (gain) to net income:
Foreign exchange (“FX”) contracts –investment

and other revenue

FX contracts –staff e xpense

Total reclassifications to net income
Net unrealized gain (loss) on cash flow hedges
Total other comprehensive income (loss)

2023

Tax
(expense)
benefit

Pre-tax
amount

Year ended Dec. 31,
2022

After-tax
amount

Pre-tax
amount

Tax
(expense)
benefit

After-tax
amount

Pre-tax
amount

2021

Tax
(expense)
benefit

After-tax
amount

204 $
204

68 $
68

272
272

829
52

881

(75)
(1)

(10)
(86)

(455) $
(455)

(148) $
(148)

(603) $
(603)

(313) $
(313)

(63) $
(63)

(376)
(376)

(4,292)
443

1,047
(105)

(3,245)
338

(1,515)
(5)

368
1

(1,147)
(4)

(3,849)

942

(2,907)

(1,520)

369

(1,151)

(400)
—

68
(332)

94
—

(12)
82

(306)
—

56
(250)

296
—

113
409

(77)
—

(25)
(102)

219
—

88
307

(271)
(16)

(287)

32
—

8
40

(2)

(16)

(12)

—

(1)
—
(1)
(3)

1
—
1
6
(182) $ 1,073

(1)
9
8
(8)

$ (4,644) $

—
(2)
(2)
2

(1)
7
6
(6)
878 $ (3,766) $ (1,433) $

—
(12)
(12)
(9)

—
3
3
3

—
(9)
(9)
(6)
207 $ (1,226)

1,100
68

1,168

(107)
(1)

(18)
(126)

2
—
2
9

$ 1,255 $

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

Other post-
retirement
benefits
(55)
24
(31)
(10)
(41)
1
(40)

Unrealized gain
(loss) on assets
available-for-
sale
1,508
(1,151)
357
(2,907)
(2,550)
881
(1,669)

Unrealized
gain (loss) on
cash flow
hedges
7
(6)
1
(6)
(5)
6
1

Total accumulated
other comprehensive
(loss) income,
net of tax
(985)
(1,228)
(2,213)
(3,753)
(5,966)
1,073
(4,893)

(in millions)

2020 ending balance

Change in 2021

2021 ending balance

Change in 2022

2022 ending balance

Change in 2023

2023 ending balance

Foreign
currency
translation
(1,146)
$
(378)
(1,524)
(590)
(2,114)
272
(1,842)

Pensions
(1,299)
283
(1,016)
(240)
(1,256)
(87)
(1,343)

168 BNY Mellon

Notes to Consolidated Financial Statements (continued)

Note 17–Stock-based compensation

Our Long-Term Incentive Plans provide for the
issuance of restricted stock, restricted stock units
(“RSUs”) and other stock-based awards, including
options, to employees and directors of BNY Mellon.
At Dec. 31, 2023, under the Long-Term Incentive
Plan approved in April 2023, we may issue
44,948,591 new stock-based awards, all of which
may be issued as restricted stock or RSUs. Stock-
based compensation expense related to retirement
eligibility vesting totaled $81 million in 2023, $72
million in 2022 and $64 million in 2021.

RSUs and Performance share units

RSUs are granted under our long-term incentive plans
at no cost to the recipient. These awards are subject
to forfeiture until certain restrictions have lapsed,
including continued employment, for aspecified
period. An RSU entitles the recipient to receive a
share of common stock after the applicable
restrictions lapse. The recipient generally is entitled
to receive cash payments equivalent to any dividends
paid on the underlying common stock during the
period the RSU is outstanding but does not receive
voting rights. The cash dividends are paid at the time
of vesting.

The fair value of RSUs is equal to the fair market
value of our common stock on the date of grant. The
expense is recognized over the vesting period, which
is generally zero to four years. The total
compensation expense recognized for RSUs was
$332 million in 2023, $293 million in 2022 and $260
million in 2021. The total income tax benefit
recognized in the consolidated income statement
related to compensation costs was $79 million in
2023, $69 million in 2022 and $62 million in 2021.

BNY Mellon’s Executive Committee members were
granted atarget award o f 577,549 performance share
units (“PSUs”) in 2023, 513,101 in 2022 and 648,973
in 2021. The Executive Committee PSUs will vest
based on two separate and distinct measurements, a
performance condition and a market condition split
70% based on return on tangible common
shareholders’ equity (“ROTCE”) and 30% on Total
Shareholder Return (“TSR”). The TSR portion was
valued using aMonte C arlo simulation method, while
the ROTCE portion was measured based on the fair
market value on the date of grant. Each condition
only impacts its applicable portion (70%/30%) of the

total PSU award. The performance and market
conditions are measured after three years to determine
the final percentage of the total PSUs to vest. The
final total amount of vested PSUs will be the sum of
the two separate and distinct performance and
market-based portions of the PSU awards, but will be
capped at 150% of the total PSUs awarded. The
ultimate payout is subject to the discretion of the
Human Resources and Compensation Committee.
These awards are classified as equity and the ROTCE
portion is marked-to-market to earnings as a result of
this discretion. The TSR portion of the award
contains a market condition, and as aresult the g rant
date fair value is recognized over the service period
unless the requisite service is not rendered.

The following table summarizes our non-vested PSU
and RSU activity for 2023.

Non-vested PSU and RSU activity

Non-vested PSUs and RSUs at
Dec. 31, 2022
Granted
Vested
Forfeited
Non-vested PSUs and RSUs at
Dec. 31, 2023

Weighted-
average fair
value at
grant date

Number of
shares (a)

15,086,135 $
8,295,173
(6,238,671)
(685,921)

50.38
50.71
48.74
49.70

16,456,716 $

51.20

(a)

Includes dividend shares earned on the Executive Committee
PSUs and Board of Director’s stock awards.

As of Dec. 31, 2023, $350 million of total
unrecognized compensation costs related to non-
vested PSUs and RSUs is expected to be recognized
over aweighted-average period of 2.3 years.

The total fair value of RSUs and PSUs that vested
was $305 million in 2023, $264 million in 2022 and
$240 million in 2021. The actual excess tax benefit
(expense) realized for the tax deductions from shares
vested totaled $3 million in 2023, $16 million in 2022
and $(8) million in 2021. The tax impacts were
recognized in the provision for income taxes.

Subsidiary Long-Term Incentive Plans

BNY Mellon also has several subsidiary Long-Term
Incentive Plans which have issued restricted
subsidiary shares to certain employees. These share
awards are subject to forfeiture until certain
restrictions have lapsed, including continued
employment for a specified period of time. The
shares are generally non-voting and non-dividend

BNY Mellon 169

Notes to Consolidated Financial Statements (continued)

paying. Once the restrictions lapse, which generally
occurs in three to five years, the shares can only be
sold, at the option of the employee, to BNY Mellon at
a price based generally on the fair value of the
subsidiary at the time of repurchase. In certain
instances, BNY Mellon has an election to call the
shares.

Stock options

Our Long-Term Incentive Plans provide for the
issuance of stock options at fair market value at the
date of grant to officers and employees of BNY
Mellon. No stock options were granted in 2023 or
2022, and no stock options were outstanding at Dec.
31, 2023 or Dec. 31, 2022. At Dec. 31, 2021,
407,905 options were exercisable at aweighted-
average price per common share of $22.03 and
aggregate intrinsic value of $15 million.

The total intrinsic value of options exercised was $15
million in 2022 and $48 million in 2021. Cash
received from option exercises totaled $9 million in
2022 and $50 million in 2021. The actual excess tax
benefit realized for the tax deductions from options
exercised totaled $3 million in 2022 and $8 million in
2021 and was recognized in the provision for income
taxes.

Note 18–Employee benefit plans

BNY Mellon has defined benefit and/or defined
contribution retirement plans and other post-
retirement plans providing healthcare benefits.

The defined benefit pension plans cover
approximately 7,400 U.S. employees and
approximately 18,000 non-U.S. employees.

BNY Mellon has one qualified and several non-
qualified defined benefit pension plans in the U.S.
and several pension plans overseas.

Effective June 30, 2015, the benefit accruals under
the U.S. qualified and non-qualified defined benefit
plans were frozen. This change resulted in no
additional benefits being earned by participants in
those plans based on service or pay after June 30,
2015. These plans were previously closed to new
participants effective Dec. 31, 2010.

Effective Dec. 31, 2018, the benefit accruals were
frozen under our largest foreign plan, which covers
certain UK employees. This change resulted in no
additional benefits being earned by participants in
that plan based on service or pay after Dec. 31, 2018.
Most UK employees currently earn benefits only on a
defined contribution basis. UK employees impacted
by the pension plan freeze began earning benefits on
a defined contribution basis on Jan. 1, 2019.

170 BNY Mellon

Notes to Consolidated Financial Statements (continued)

Pension and post-retirement healthcare plans

The following tables report the combined data for our domestic and foreign defined benefit pension and post-
retirement healthcare plans.

(dollars in millions)
Weighted-average assumptions used to determine benefit

obligations
Discount rate
Rate of compensation increase
Cash balance interest crediting rate
Change in benefit obligation (a)
Benefit obligation at beginning of period
Service cost
Interest cost
Actuarial (loss) gain
Curtailments
Benefits paid
Foreign exchange adjustment

Benefit obligation at end of period
Change in fair value of plan assets
Fair value at beginning of period
Actual return on plan assets
Employer contributions
Benefit payments
Foreign exchange adjustment
Fair value at end of period
Funded status at end of period

Amounts recognized in accumulated other comprehensive

loss (income) consist of:

Net (gain) loss
Prior service (credit) cost

Total loss (gain) (before tax effects)

Pension Benefits

Healthcare Benefits

Domestic
2023

Foreign

2022

2023

2022

Domestic
2023

Foreign

2022

2023

2022

5.25%
N/A
4.00

5.61%
N/A
4.00

4.44%
3.71
N/A

4.62%
3.72
N/A

5.25%
3.00
N/A

5.61%
3.00
N/A

4.65%
N/A
N/A

4.75%
N/A
N/A

$(3,527)
—
(190)
(122)
—
237
N/A
(3,602)

4,806
501
19
(237)
N/A
5,089
$ 1,487

$(4,747)
—
(140)
1,105
—
255
N/A
(3,527)

6,129
(1,082)
14
(255)
N/A
4,806
$ 1,279

$ 1,637
—
$ 1,637

$ 1,645
—
$ 1,645

$ (768)
(10)
(36)
(67)
1
26
(35)
(889)

975
43
11
(26)
49
1,052
163

243
(1)
242

$(1,456)
(11)
(28)
554
—
30
143
(768)

1,807
(631)
10
(30)
(181)
975
207

109
4
113

(95)
(1)
(5)
(2)
—
11
N/A
(92)

116
19
11
(11)
N/A
135
43

38
(6)
32

$ (134)
(1)
(4)
35
—
9
N/A

(95)

144
(28)
9
(9)

N/A
116
21

41
(13)
28

(2)
—
—
(1)
—
—
1
(2)

—
—
—
—
—
—
(2)

(1)
—
(1)

(3)
—
—
1
—
—
—
(2)

—
—
—
—
—
—
(2)

(2)
—
(2)

(a) The benefit obligation for pension benefits is the projected benefit obligation, and for healthcare benefits, it is the accumulated benefit obligation.
N/A – Not applicable.

A number of key assumptions and measurement date
values determine pension expense. The key elements
include the long-term rate of return on plan assets, the
discount rate, the market-related value of plan assets
and the price used to value stock in the Employee
Stock Ownership Plan (“ESOP”).

The discount rates for foreign pension plans are based
on high-quality corporate bond rates in countries that
have an active corporate bond market. In those
countries with no active corporate bond market,
discount rates are based on local government bond
rates plus acredit spread.

The discount rate for U.S. pension plans was
determined after reviewing equivalent rates obtained
by discounting the pension plans’ expected cash
flows using various high-quality, long-term corporate
bond yield curves. We also reviewed the results of
several models that matched bonds to our pension
cash flows. After reviewing the various indices and
models, we selected a discount rate of 5.25% as of
Dec. 31, 2023.

Actuarial losses on the benefit obligation for the
domestic pension plans in 2023 are primarily
attributable to decreases in discount rates. Actuarial
losses on the benefit obligation for the foreign
pension plans in 2023 are primarily attributable to
decreases in discount rates and increases in assumed
inflation rates. Actuarial gains on the benefit
obligation for the domestic and foreign pension plans
in 2022 are primarily attributable to increases in
discount rates.

BNY Mellon 171

Notes to Consolidated Financial Statements (continued)

Net periodic benefit (credit)

cost

(dollars in millions)
Weighted-average

assumptions as of Jan. 1:
Market-related value of plan

assets

Discount rate
Expected rate of return on plan

assets

Rate of compensation increase
Cash balance interest crediting

rate

Components of net periodic

benefit (credit) cost:

Service cost
Interest cost
Expected return on assets
Amortization of:

Prior service cost (credit)
Net actuarial loss (gain)

Settlement (gain) loss
Curtailment (gain)

Net periodic benefit (credit)

cost

N/A – Not applicable.

Pension Benefits

Healthcare Benefits

Domestic
2022

2023

2021

2023

Foreign
2022

2021

2023

Domestic
2022

2021

2023

Foreign
2022

2021

$5,757

$ 5,924

$ 5,710

$1,358

$ 1,627

$ 1,586

5.61% 3.03%

2.80%

4.62% 2.11%

1.59%

$ 135

$ 133

N/A
5.61% 3.03% 2.80% 4.75% 2.15% 1.65%

$123

N/A

6.75

N/A

5.375
N/A

4.00

$ — $ — $ —
137
(300)

190
(380)

140
(312)

—
8
1
—

—
69
—
—

—
98
—
—

6.38
3.72

N/A

10
36
(89)

—
(14)
(1)
(1)

2.40
3.43

N/A

2.17
3.12

N/A

6.75
3.00

5.375
3.00

N/A
N/A

N/A

11
28
(35)

14
25
(34)

—
3
—
—

1
5
(9)

(7)
(5)
—
—

1
4
(7)

(7)
3
—
—

$ 1
4
(7)

$ — $ — $ —
—
—
—
—

—
—

(6)
6
—
—

—
—
—
—

$ (181)

$ (103)

(65)

(59)

$ (15)

$ (6)

$ (2)

$ — $ — $ —

Changes in other comprehensive (income) loss in 2023
(in millions)
Net loss (gain) arising during period
Recognition of prior years’ net (loss) gain
Recognition of prior years’ service credit
Foreign exchange adjustment

Total recognized in other comprehensive (income) loss (before tax effects)

(in millions)
Pension benefits:
Prepaid benefit cost
Accrued benefit cost

Total pension benefits

Healthcare benefits:
Accrued benefit cost

Total healthcare benefits

Pension Benefits

Domestic

1 $
(9)
—
N/A

(8) $

Foreign
113
15
—
1
129

Domestic
2023

1,599 $
(112)
1,487 $

2022

1,399
(120)
1,279

43 $
43 $

21
21

$
$

Healthcare Benefits
Domestic

Foreign
1
—
—
—
1

(8) $
5
7
N/A

4 $

Foreign

2023

2022

219 $
(56)
163 $

(2) $
(2) $

252
(45)
207

(2)
(2)

The accumulated benefit obligation for all defined benefit plans was $4.5 billion at Dec. 31, 2023 and $4.3 billion at
Dec. 31, 2022.

Plans with obligations in excess of plan

assets

(in millions)
Projected benefit obligation
Fair value of plan assets
Accumulated benefit obligation
Fair value of plan assets

N/A –Not a pplicable.

172 BNY Mellon

Pension Benefits

Healthcare Benefits

Domestic
2023
112 $
—
112
—

2022
120
—
120
—

Foreign

2023
172 $
116
55
17

2022
64
19
50
18

Domestic
2023
N/A
N/A
62 $
—

2022
N/A
N/A
62
—

Foreign

2023
N/A
N/A

2 $
—

2022
N/A
N/A
2
—

1
13
1
—

$
$

Notes to Consolidated Financial Statements (continued)

Assumed healthcare cost trend

Investment strategy and asset allocation

The assumed healthcare cost trend rate used in
determining domestic benefit expense for 2024 is
7.00%, decreasing to 4.04% in 2075 for pre-Medicare
costs and 6.60% decreasing to 4.04% in 2075 for
Medicare costs. The initial trend rate assumption
represents an estimate of short term cost increases
based on recent health care marketplace experience,
and taking into consideration the cost characteristics
of plans available to retirees. The long-term
assumptions and trends were developed using the
Getzen Model of Long-Run Medical Cost Trends and
consider expectations of long-term health care costs
and various other economic assumptions.

The following benefit payments for the pension and
healthcare plans, which reflect expected future
service as appropriate, are expected to be paid over
the next 10 years:

Expected benefit payments
(in millions)
Pension benefits:
Year 2024
2025
2026
2027
2028
2029-2033
Total pension benefits

Healthcare benefits:
Year 2024
2025
2026
2027
2028
2029-2033

Total healthcare benefits

Plan contributions

Domestic

Foreign

274
271
270
268
266
1,279
2,628

8
8
8
8
8
33
73

32
32
34
36
40
226
400

—
—
—
—
—
1
1

We expect to make cash contributions to fund our
defined benefit pension plans in 2024 of $12 million
for the domestic plans and $9 million for the foreign
plans.

We expect to make cash contributions to fund our
post-retirement healthcare plans in 2024 of $8 million
for the domestic plans and less than $1 million for the
foreign plans.

We are responsible for the administration of various
employee pension and healthcare post-retirement
benefits plans, both domestically and internationally.
The domestic plans are administered by BNY
Mellon’s Benefits Administration Committee, a
named fiduciary. Subject to the following, at all
relevant times, BNY Mellon’s Benefits Investment
Committee, another named fiduciary to the domestic
plans, is responsible for the investment of plan assets.
The Benefits Investment Committee’s responsibilities
include the investment of all domestic defined benefit
plan assets, as well as the determination of investment
options offered to participants in all domestic defined
contribution plans. The Benefits Investment
Committee conducts periodic reviews of investment
performance, asset allocation and investment
manager suitability. In addition, the Benefits
Investment Committee has oversight of the Regional
Governance Committees for the foreign defined
benefit plans.

Our investment objective for U.S. and foreign plans is
to maximize total return while maintaining a broadly
diversified portfolio for the primary purpose of
satisfying obligations for future benefit payments.
Our plans are primarily invested in fixed income and
equity securities. In general, for the domestic plan’s
portfolio, fixed income securities can range from 35%
to 100% of plan assets, equity securities and
alternative investments can range from 0% to 65% of
plan assets and cash equivalents can be held in
amounts ranging from 0% to 10% of plan assets.
Actual asset allocation within the approved ranges
varies from time to time based on economic
conditions (both current and forecast), the timing of
transitional reallocations and the advice of
professional advisors.

Our pension assets were invested as follows:

Asset allocations

Fixed income
Equities
Alternative investments
Cash

Domestic
2023
2022
62% 60%
34
3
1

36
3
1

Foreign

2023
2022
74% 74%
13
11
2

12
12
2

Total pension assets

100% 100% 100% 100%

BNY Mellon 173

Notes to Consolidated Financial Statements (continued)

We held no The Bank of New York Mellon
Corporation stock in our pension plans at Dec. 31,
2023 and Dec. 31, 2022. Assets of the U.S.
postretirement healthcare plan are invested in an
insurance contract.

Fair value measurement of plan assets

We have established athree-level h ierarchy for fair
value measurements of our pension plan assets based
upon the transparency of inputs to the valuation of an
asset as of the measurement date.

The following is a description of the valuation
methodologies used for assets measured at fair value,
as well as the general classification of such assets
pursuant to the valuation hierarchy.

Cash and currency

This category consists primarily of foreign currency
balances and is included in Level 1 of the valuation
hierarchy. Foreign currency is translated monthly
based on current foreign exchange rates.

Common and preferred stock and exchange-traded
funds

These investments include equities and are valued at
the closing price reported in the active market in
which the individual securities are traded, if available.
Common and preferred stock and exchange-traded
funds are included in Level 1 of the valuation
hierarchy.

Collective trust funds

Collective trust funds include commingled and U.S.
equity funds that have no readily available market
quotations. The fair value of the funds is based on
the securities in the portfolio, which typically are the
amount that the fund might reasonably expect to
receive for the securities upon a sale. These funds are
valued using observable inputs on either a daily or
monthly basis. Collective trust funds are included in
Level 2of the valuation hierarchy.

174 BNY Mellon

Fixed-income investments

Fixed-income investments include U.S. Treasury
securities, U.S. government agencies, non-U.S.
government securities, sovereign government
obligations, state and political subdivisions, U.S.
corporate bonds and foreign corporate debt funds.
U.S. Treasury and certain non-U.S. government
securities that are actively traded in highly liquid
over-the-counter (“OTC”) markets are valued at the
closing price reported in the active market in which
the individual security is traded and included as Level
1 of the valuation hierarchy. U.S. government
agencies, non-U.S. government securities, sovereign
government obligations, state and political
subdivisions, U.S. corporate bonds and foreign
corporate debt funds are valued based on quoted
prices for comparable securities with similar yields
and credit ratings. When quoted prices are not
available for identical or similar bonds, the bonds are
valued using discounted cash flows that maximize
observable inputs, such as current yields of similar
instruments, but includes adjustments for certain risks
that may not be observable, such as credit and
liquidity risks. U.S. government agencies, non-U.S.
government securities, sovereign government
obligations, state and political subdivisions, U.S.
corporate bonds and foreign corporate debt funds are
primarily included in Level 2 of the valuation
hierarchy.

Other assets measured at NAV per share, as a
practical expedient

Other assets measured at NAV, as apractical
expedient, include funds of funds, venture capital and
partnership interests and other funds. There are no
readily available market quotations for these funds.
The fair value of the funds of funds is based on
NAVs of the funds in the portfolio, which reflects the
value of the underlying investments held by the fund,
less its liabilities. The fair value of the underlying
investments is typically the amount that the fund
might reasonably expect to receive upon selling those
hard to value or illiquid investments within the
portfolios. These funds are either valued on a daily or
monthly basis. The fair value of the venture capital
and partnership interests is based on the pension
plan’s ownership percentage of the fair value of the
underlying funds as provided by the fund managers.
These funds are typically valued on a quarterly basis.

Notes to Consolidated Financial Statements (continued)

The following tables present the fair value of each
major category of plan assets as of Dec. 31, 2023 and
Dec. 31, 2022, by captions and by ASC 820, Fair
Value Measurement, valuation hierarchy.

Plan assets measured at fair value on a recurring basis—

domestic plans at Dec. 31, 2023

(in millions)
Common and preferred stock:

U.S. equity
Non-U.S. equity

Collective trust funds:

U.S. equity
Commingled
Fixed income:

U.S. corporate bonds
U.S. Treasury securities
State and political

subdivisions

Non-U.S. government
U.S. government agencies
Other

Exchange-traded funds

Total domestic plan assets in

the fair value hierarchy
Other assets measured at NAV:

Funds of funds
Venture capital and

partnership interests
Total domestic plan assets, at

fair value

Level 1 Level 2 Level 3

Total fair
value

920 $ — $ — $

373

—

—
—

116
530

— 2,539
—

233

—
3
—
—
8

110
27
26
35
—

—

—
—

—
—
—
—
—

920

373

116
530

2,539
233

110
30
26
35
8

$ 1,537 $ 3,383 $ — $ 4,920

164

$ 5,089

Plan assets measured at fair value on a recurring basis—

foreign plans at Dec. 31, 2023

(in millions)
Corporate debt funds
Equity funds
Sovereign/government

obligation funds
Cash and currency

Total foreign plan assets in
the fair value hierarchy
Other assets measured at NAV
Total foreign plan assets, at

fair value

Level 1 Level 2 Level 3
$ — $
—

659 $ — $
137

—

Total fair
value
659
137

—
19

123
—

—
—

19 $

919 $ — $

123
19

938
114

$ 1,052

Plan assets measured at fair value on a recurring basis—

domestic plans at Dec. 31, 2022

(in millions)
Common and preferred stock:

U.S. equity
Non-U.S. equity
Collective trust funds:

U.S. equity
Commingled
Fixed income:

U.S. corporate bonds
U.S. Treasury securities
State and political

subdivisions

Non-U.S. government
U.S. government agencies
Other

Exchange-traded funds

Total domestic plan assets in

the fair value hierarchy
Other assets measured at NAV:

Funds of funds
Venture capital and

partnership interests

Total domestic plan assets, at

fair value

Level 1 Level 2 Level 3

Total fair
value

897 $ — $ — $
—
351

—

—
—

169
493

— 2,333
—

214

—
6
—
—
8

88
38
21
28
—

—
—

—
—
—
—
—

897
351

169
493

2,333
214

88
44
21
28
8

$ 1,476 $ 3,170 $ — $ 4,646

154

$ 4,806

Plan assets measured at fair value on a recurring basis—

foreign plans at Dec. 31, 2022

(in millions)
Corporate debt funds
Equity funds
Sovereign/government

obligation funds
Cash and currency

Total foreign plan assets in
the fair value hierarchy
Other assets measured at NAV
Total foreign plan assets, at

fair value

Level 1 Level 2 Level 3
$ — $
—

611 $ — $
117

—

Total fair
value
611
117

—
16

111
—

—
—

16 $

839 $ — $

111
16

855
120

975

Other assets measured at NAV per share, as a
practical expedient

Certain pension and post-retirement plan assets are
invested in funds of funds, venture capital and
partnership interests and other contracts valued using
NAV, as a practical expedient. The funds of funds
investments are redeemable at NAV under
agreements with the funds of funds managers.

BNY Mellon 175

Notes to Consolidated Financial Statements (continued)

Assets valued using NAV at Dec. 31, 2023

(dollars in millions)
Funds of funds (a)
Venture capital and

partnership
interests (b)

Other contracts (c)

Total

Fair
value
$ 164 $

Unfunded
commitments
—

Redemption
frequency
Monthly

Redemption
notice
period
30-45 days

83
36
$ 283 $

—
—
—

N/A
N/A

Assets valued using NAV at Dec. 31, 2022

(dollars in millions)
Funds of funds (a)
Venture capital and

partnership
interests (b)

Other contracts (c)

Total

Fair
value
$ 154 $

Unfunded
commitments
—

Redemption
frequency
Monthly

Redemption
notice
period
30-45 days

91
35
$ 280 $

—
—
—

N/A
N/A

(a) Funds of funds includes multi-strategy hedge funds that utilize

investment strategies that invest over both long-term investment and
short-term investment horizons.

(b) Venture capital and partnership interests do not have redemption
rights. Distributions from such funds will be received as the
underlying investments are liquidated.

insurance companies that are privately valued by the asset manager.

N/A – Not applicable.

Defined contribution plans

We sponsor defined contribution plans in the U.S.
and in certain non-U.S. locations, all of which are
administered in accordance with local laws. The
most significant defined contribution plan is The
Bank of New York Mellon Corporation 401(k)
Savings Plan sponsored by the Company in the U.S.
and covers substantially all U.S. employees.

Under The Bank of New York Mellon Corporation
401(k) Savings Plan for 2023, 2022 and 2021, the
Company matched 100% of participant contributions
up to 7% of an employee’s eligible base pay with a
monetary limit of $16,000 per participant. In
addition, an annual non-elective contribution of $750
was made in 2023, 2022 and 2021 to each participant
with eligible base pay of less than $100,000 a year
and who are credited with at least one year of service.

At Dec. 31, 2023 and Dec. 31, 2022, The Bank of
New York Mellon Corporation 401(k) Savings Plan
owned 8.7 million and 9.2 million shares of our
common stock, respectively. The fair value of total
assets was $8.8 billion at Dec. 31, 2023 and $7.8
billion at Dec. 31, 2022. We recorded expenses of
$282 million in 2023, $276 million in 2022 and $258

176 BNY Mellon

million in 2021, primarily for contributions to our
defined contribution plans.

We also have an ESOP covering certain domestic
full-time employees hired on or before July 1, 2008.
The ESOP works in conjunction with the defined
benefit pension plan. Employees are entitled to the
higher of their benefit under the ESOP or such
defined benefit pension plan at retirement. Benefits
payable under the defined benefit pension plan are
offset by the equivalent value of benefits earned
under the ESOP.

At Dec. 31, 2023 and Dec. 31, 2022, the ESOP
owned 3.5 million and 3.7 million shares of our
common stock, respectively. The fair value of total
ESOP assets was $185 million at Dec. 31, 2023 and
$171 million at Dec. 31, 2022. The Company is not
permitted to make contributions to the ESOP.

The Benefits Investment Committee appointed
Fiduciary Counselors Inc. to serve as the independent
fiduciary to (i) make all fiduciary decisions related to
the continued prudence of offering the common stock
of BNY Mellon or its affiliates as an investment
option under the plans, other than plan sponsor
decisions, and (ii) select and monitor any actively or
passively managed investments that are managed by
BNY Mellon or its affiliates to be offered to
participants as investment options under the plans,
excluding self-directed accounts.

Note 19–Company financial information
(Parent Corporation)

In connection with our single point of entry resolution
strategy, we have established an intermediate holding
company (“IHC”) to facilitate the provision of capital
and liquidity resources to certain key subsidiaries in
the event of material financial distress or failure. In
2017, we entered into abinding support agreement
with those key subsidiaries and other related entities
that requires the IHC to provide that support. 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. The
Parent’s and the IHC’s obligations under the support
agreement are secured. The IHC has provided
unsecured subordinated funding notes to the Parent as
well as a committed line of credit that allows the
Parent to draw funds necessary to service near-term
obligations. As aresult, during business-as-usual

Notes to Consolidated Financial Statements (continued)

circumstances, the Parent is expected to continue to
have access to the funds necessary to pay dividends,
repurchase common stock, service its debt and satisfy
its other obligations. If our projected financial
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 Parent to transfer most of
its remaining assets (other than stock in subsidiaries
and acash r eserve to fund bankruptcy expenses) to
the IHC. As aresult, during aperiod 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.

Our bank subsidiaries are subject to dividend
limitations under the federal and state banking laws.
Under these statutes, prior regulatory consent is
required for dividends in any year that would exceed
the bank’s net profits for such year combined with
retained net profits for the prior two years.
Additionally, such bank subsidiaries may not declare
dividends in excess of net profits on hand, as defined,
after deducting the amount by which the principal
amount of all loans, on which interest is past due for a
period of six months or more, exceeds the allowance
for credit losses.

The payment of dividends also is limited by
minimum capital requirements and buffers imposed
on banks. As of Dec. 31, 2023, our bank subsidiaries
exceeded these requirements.

The bank subsidiaries declared dividends of $3.5
billion in 2023, $1.0 billion in 2022 and $2.5 billion
in 2021. The Federal Reserve and the Office of the
Comptroller of the Currency have issued additional
guidelines that require BHCs and national banks to
continually evaluate the level of cash dividends in
relation to their respective operating income, capital
needs, asset quality and overall financial condition.

The Federal Reserve policy with respect to the
payment of cash dividends by BHCs provides that, as
a matter of prudent banking, a BHC should not
maintain a rate of cash dividends unless its net
income available to common shareholders has been
sufficient to fully fund the dividends, and the
prospective rate of earnings retention appears to be
consistent with the holding company’s capital needs,
asset quality and overall financial condition. The
Federal Reserve can also prohibit adividend if
payment would constitute an unsafe or unsound
banking practice.

The Federal Reserve Act limits, and requires
collateral for, extensions of credit by our insured
subsidiary banks to the Parent and certain of its non-
bank affiliates. Also, there are restrictions on the
amounts of investments by such banks in stock and
other securities of BNY Mellon and such affiliates,
and restrictions on the acceptance of their securities
as collateral for loans by such banks. Extensions of
credit by the banks to each of our affiliates are limited
to 10% of such bank’s regulatory capital, and in the
aggregate for BNY Mellon and all such affiliates to
20%, and collateral must be between 100% and 130%
of the amount of the credit, depending on the type of
collateral.

In the event of impairment of the capital stock of one
of the Parent’s national banks or The Bank of New
York Mellon, the Parent, as the banks’ stockholder,
could be required to pay such deficiency.

The Parent guarantees the uncommitted lines of credit
of Pershing LLC and Pershing Limited subsidiaries.
The Parent guarantees described above are full and
unconditional and contain the standard provisions
relating to parent guarantees of subsidiary debt.
Additionally, the Parent guarantees or indemnifies
obligations of its consolidated subsidiaries as needed.
Generally, there are no stated notional amounts
included in these indemnifications and the
contingencies triggering the obligation for
indemnification are not expected to occur. As a
result, we are unable to develop an estimate of the
maximum payout under these indemnifications.

BNY Mellon 177

Notes to Consolidated Financial Statements (continued)

However, we believe the possibility is remote that we
will have to make any material payment under these
guarantees and indemnifications.

Condensed Statement of Cash Flows—The Bank
of New York Mellon Corporation (Parent
Corporation)

(in millions)
Operating activities:
Net income
Adjustments to reconcile net income to net

cash provided by (used for) operating
activities:
Equity in undistributed net (income) of

subsidiaries

Change in accrued interest receivable
Change in accrued interest payable
Change in taxes payable (a)
Other, net

Net cash provided by operating

activities
Investing activities:
Acquisitions of, investments in, and

advances to subsidiaries (b)

Net cash provided by (used for)

investing activities

Financing activities:
Proceeds from issuance of long-term debt
Repayments of long-term debt
Change in advances from subsidiaries
Issuance of common stock
Issuance of preferred stock
Treasury stock acquired
Redemption of preferred stock
Cash dividends paid

Net cash (used for) provided by

financing activities

Change in cash and due from banks
Cash and due from banks at beginning of

year

Cash and due from banks at end of year
Supplemental disclosures
Interest paid
Income taxes refunded

Year ended Dec. 31,
2023

2022

2021

$ 3,286 $ 2,573 $ 3,759

(276)
24
24
395
86

(1,664)
(8)
78
(3)
221

(477)
75
(15)
(142)
(260)

3,539

1,197

2,940

592

(1,962)

870

592

(1,962)

870

5,988
(6,055)
364
16
—
(2,604)
(500)
(1,487)

(4,278)
(147)

5,186
9,179
(4,250)
(4,000)
820
(2,917)
23
63
— 1,287
(4,567)
— (1,000)
(1,323)

(1,376)

(124)

785
20

(3,784)
26

376
229 $

356
376 $

330
356

$ 1,693 $

774 $
—

354
1

(a)

(b)

Includes payments received from subsidiaries for taxes of $986
million in 2023, $70 million in 2022 and $21 million in 2021.
Includes $1,963 million of cash outflows, net of $2,555 million of
cash inflows in 2023, $2,778 million of cash outflows, net of $816
million of cash inflows in 2022 and $10 million of cash outflows, net
of $880 million of cash inflows in 2021.

The Parent’s condensed financial statements are as
follows:

Condensed Income Statement—The Bank of New
York Mellon Corporation (Parent Corporation)

(in millions)
Dividends from bank subsidiaries
Dividends from nonbank subsidiaries
Interest revenue from bank subsidiaries
Interest revenue from nonbank

subsidiaries

(Loss) on securities held for sale
Other revenue

Total revenue

Interest expense (including $23, $10 and

$6, to subsidiaries, respectively)

Other expense

Total expense

Income before income taxes and equity

in undistributed net income of
subsidiaries

(Benefit) for income taxes
Equity in undistributed net income:

Bank subsidiaries
Nonbank subsidiaries

Net income
Preferred stock dividends and

redemption charge

2022

Year ended Dec. 31,
2023

2021
$ 3,472 $ 1,006 $ 2,490
1,106
—

1,070
71

880
25

64
(1)
83
4,759

1,716
291
2,007

2,752
(258)

(313)
589
3,286

37
—
57
2,005

853
433
1,286

30
—
56
3,682

339
153
492

719
(190)

3,190
(92)

1,696
(32)
2,573

282
195
3,759

(235)

(211)

(207)

Net income applicable to common

shareholders of The Bank of New York
Mellon Corporation

$ 3,051 $ 2,362 $ 3,552

Condensed Balance Sheet—The Bank of New
York Mellon Corporation (Parent Corporation)

(in millions)
Assets:
Cash and due from banks
Securities
Investment in and advances to subsidiaries and

associated companies:

Banks
Other

Subtotal

Corporate-owned life insurance
Other assets

Total assets

Liabilities:
Deferred compensation
Affiliate borrowings
Other liabilities
Long-term debt

Total liabilities

Shareholders’ equity

Total liabilities and shareholders’ equity

178 BNY Mellon

Dec. 31,

2023

2022

229 $
—

376
1

34,184
38,838
73,022
796
363

33,795
38,119
71,914
793
610
$ 74,410 $ 73,694

367 $

372
914
1,995
29,679
32,960
40,734
$ 74,410 $ 73,694

1,294
1,889
29,986
33,536
40,874

Notes to Consolidated Financial Statements (continued)

Note 20–Fair value measurement

Fair value is defined as the price that would be
received to sell an asset, or paid to transfer a liability,
in an orderly transaction between market participants
at the measurement date. A three-level hierarchy for
fair value measurements is utilized based upon the
transparency of inputs to the valuation of an asset or
liability as of the measurement date. BNY Mellon’s
own creditworthiness is considered when valuing
liabilities.

Fair value focuses on exit price in an orderly
transaction (that is, not a forced liquidation or
distressed sale) between market participants at the
measurement date under current market conditions.
If there has been a significant decrease in the volume
and level of activity for the asset or liability, achange
in valuation technique or the use of multiple valuation
techniques may be appropriate. In such instances,
determining the price at which willing market
participants would transact at the measurement date
under current market conditions depends on the facts
and circumstances and requires the use of significant
judgment. The objective is to determine from
weighted indicators of fair value a reasonable point
within the range that is most representative of fair
value under current market conditions.

Determination of fair value

We have established processes for determining fair
values. Fair value is based upon quoted market prices
in active markets, where available. For financial
instruments where quotes from recent exchange
transactions are not available, we determine fair value
based on discounted cash flow analysis, comparison
to similar instruments and the use of financial models.
Discounted cash flow analysis is dependent upon
estimated future cash flows and the level of interest
rates. Model-based pricing uses inputs of observable
prices, where available, for interest rates, foreign
exchange rates, option volatilities and other factors.
Models are benchmarked and validated by an
independent internal risk management function. Our
valuation process takes into consideration factors
such as counterparty credit quality, liquidity,
concentration concerns and observability of model
parameters. Valuation adjustments may be made to
record financial instruments at fair value.

employ standard market pricing theory for their
valuations. Valuation models incorporate
counterparty credit risk by discounting each trade’s
expected exposures to the counterparty using the
counterparty’s credit spreads, as implied by the credit
default swap market. We also adjust expected
liabilities to the counterparty using BNY Mellon’s
own credit spreads, as implied by the credit default
swap market. 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.

In certain cases, recent prices may not be observable
for instruments that trade in inactive or less active
markets. Upon evaluating the uncertainty in valuing
financial instruments subject to liquidity issues, we
make an adjustment to their value. The determination
of the liquidity adjustment includes the availability of
external quotes, the time since the latest available
quote and the price volatility of the instrument.

Certain parameters in some financial models are not
directly observable and, therefore, are based on
management’s estimates and judgments. These
financial instruments are normally traded less
actively. We apply valuation adjustments to mitigate
the possibility of error and revision in the model-
based estimate value. Examples include products
where parameters such as correlation and recovery
rates are unobservable.

The methods described above for instruments that
trade in inactive or less active markets may produce a
current fair value calculation that may not be
indicative of net realizable value or reflective of
future fair values. We believe our methods of
determining fair value are appropriate and consistent
with other market participants. However, the use of
different methodologies or different assumptions to
value certain financial instruments could result in a
different estimate of fair value.

Valuation hierarchy

A three-level valuation hierarchy is used for
disclosure of fair value measurements based upon the
transparency of inputs to the valuation of an asset or
liability as of the measurement date. The three levels
are described below.

Most derivative contracts are valued using models
which are calibrated to observable market data and

Level 1: Inputs to the valuation methodology are
quoted prices (unadjusted) for identical assets or

BNY Mellon 179

Notes to Consolidated Financial Statements (continued)

liabilities in active markets. Level 1 assets and
liabilities include certain debt and equity securities,
derivative financial instruments actively traded on
exchanges and highly liquid government bonds.

Level 2: Observable inputs other than Level 1prices,
for example, quoted prices for similar assets and
liabilities in active markets, quoted prices for
identical or similar assets or liabilities in markets that
are not active, and inputs that are observable or can
be corroborated, either directly or indirectly, for
substantially the full term of the financial instrument.
Level 2assets and liabilities include debt instruments
that are traded less frequently than exchange-traded
securities and derivative financial instruments whose
model inputs are observable in the market or can be
corroborated by market-observable data.

Level 3: Inputs to the valuation methodology are
unobservable and significant to the fair value
measurement.

A financial instrument’s categorization within the
valuation hierarchy is based upon the lowest level of
input that is significant to the fair value measurement.

Valuation methodology

Following is a description of the valuation
methodologies used for instruments measured at fair
value, as well as the general classification of such
instruments pursuant to the valuation hierarchy.

Securities

We determine fair value primarily based on pricing
sources with reasonable levels of price transparency.
Where quoted prices are available in an active
market, we classify the securities within Level 1of
the valuation hierarchy. Securities include both long
and short positions. Level 1 securities include U.S.
Treasury and certain non-U.S. government debt
securities that are actively traded in highly liquid
OTC markets, money market funds and exchange-
traded equities.

If quoted market prices are not available, fair values
are primarily determined using pricing models using
observable trade data, market data, quoted prices of
securities with similar characteristics or discounted
cash flows. Examples of such instruments, which
would generally be classified within Level 2of the
valuation hierarchy, include RMBS, MBS, certain

180 BNY Mellon

non-U.S. government debt, foreign covered bonds
and CLOs.

Specifically, the pricing sources obtain recent
transactions for similar types of securities (e.g.,
vintage, position in the securitization structure) and
ascertain variables such as discount rate and speed of
prepayment for the types of transaction and apply
such variables to similar types of bonds. We view
these as observable transactions in the current
marketplace and classify such securities as Level 2.
Pricing sources discontinue pricing any specific
security whenever they determine there is insufficient
observable data to provide a good-faith opinion on
price.

At Dec. 31, 2023, approximately 99% of our
securities were valued by pricing sources with
reasonable levels of price transparency. The
remaining securities were generally valued using
observable inputs. Additional disclosures of
securities are provided in Note 4.

In certain cases where there is limited activity or less
transparency around inputs to the valuation, we
classify those securities in Level 3 of the valuation
hierarchy. As of Dec. 31, 2023, we have no
instruments included in Level 3 of the valuation
hierarchy.

Derivative financial instruments

We classify exchange-traded derivative financial
instruments valued using quoted prices in Level 1of
the valuation hierarchy. Examples include exchange-
traded equity and foreign exchange options. Since
few other classes of derivative contracts are listed on
an exchange, most of our derivative positions are
valued using models that use as their basis readily
observable market parameters, and we classify them
in Level 2of the valuation hierarchy. Such derivative
financial instruments include swaps and options,
foreign exchange spot and forward contracts and
credit default swaps.

Derivatives valued using models with significant
unobservable market parameters in markets that lack
two-way flow are classified in Level 3of the
valuation hierarchy. Examples may include long-
dated swaps and options, where parameters may be
unobservable for longer maturities; and certain highly
structured products, where correlation risk is
unobservable. As of Dec. 31, 2023, we have no

Notes to Consolidated Financial Statements (continued)

Level 3derivativ es. Additional disclosures of
derivative instruments are provided in Note 23.

Seed capital

In our Investment and Wealth Management business
segment, we make seed capital investments in certain
funds we manage. Seed capital is generally included
in other assets on the consolidated balance sheet.
When applicable, we value seed capital based on the
published NAV of the fund.

For other types of investments in funds, we consider
all of the rights and obligations inherent in our
ownership interest, including the reported NAV as
well as other factors that affect the fair value of our
interest in the fund.

Other assets measured at NAV

We hold private equity investments, primarily SBICs,
which are compliant with the Volcker Rule. There

are no readily available market quotations for these
investment partnerships. The fair value of the SBICs
is based on our ownership percentage of the fair value
of the underlying investments as provided by the
partnership managers. These investments are
typically valued on a quarterly basis. Our SBIC
private equity investments are valued at NAV as a
practical expedient for fair value.

The following tables present the financial instruments
carried at fair value at Dec. 31, 2023 and Dec. 31,
2022, by caption on the consolidated balance sheet
and by the three-level valuation hierarchy. We have
included credit ratings information in certain of the
tables because the information indicates the degree of
credit risk to which we are exposed, and significant
changes in ratings classifications could result in
increased risk for us.

BNY Mellon 181

Notes to Consolidated Financial Statements (continued)

Assets and liabilities measured at fair value on a recurring basis at Dec. 31, 2023
Level 1
(dollars in millions)
Assets
Available-for-sale securities:

Level 2

Level 3 Netting (a)

Total carrying
value

U.S. Treasury
Non-U.S. government (b)
Agency RMBS
Agency commercial MBS
Foreign covered bonds
CLOs
Non-agency commercial MBS
U.S. government agencies
Non-agency RMBS
Other ABS
Other debt securities

Total available-for-sale securities

Trading assets:

Debt instruments
Equity instruments
Derivative assets not designated as hedging:

Interest rate
Foreign exchange
Equity and other contracts

Total derivative assets not designated as hedging
Total trading assets

Other assets:
Derivative assets designated as hedging:

Interest rate
Foreign exchange

Total derivative assets designated as hedging

Other assets (c)

Total other assets

Assets measured at NAV (c)
Total assets
Percentage of total assets prior to netting

Liabilities
Trading liabilities:
Debt instruments
Equity instruments
Derivative liabilities not designated as hedging:

Interest rate
Foreign exchange
Equity and other contracts

Total derivative liabilities not designated as hedging
Total trading liabilities

Other liabilities

Derivative liabilities designated as hedging:

Interest rate
Foreign exchange

Total derivative liabilities designated as hedging

Other liabilities

Total other liabilities
Total liabilities
Percentage of total liabilities prior to netting

$ 16,604
2,439
—
—
—
—
—
—
—
—
—
19,043

1,246
4,518

7
—
—
7
5,771

—
—
—
486
486

$ — $ — $

15,943
13,111
7,729
6,334
6,137
2,935
2,901
1,740
943
1
57,774

2,255
—

1,053
9,227
8
10,288
12,543

214
22
236
386
622

—
—
—
—
—
—
—
—
—
—
—

—
—

—
—
—
—
—

— $
—
—
—
—
—
—
—
—
—
—
—

—
—

(751)
(7,498)
(7)
(8,256)
(8,256)

—
—
—
—
—

$ 25,300

$ 70,939

$ — $

(8,256) $

26%

74%

—%

$ 2,508
23

12
—

$ — $
—

— $
—

8
—
9
17
2,548

1,339
9,282
135
10,756
10,768

—
—
—
—
—

—
—
—
—
—
$ 2,548

—
173
173
22
195
$ 10,963

—
—
—
—
—
$ — $

19%

81%

—%

(635)
(6,341)
(114)
(7,090)
(7,090)

—
—
—
—
—
(7,090) $

16,604
18,382
13,111
7,729
6,334
6,137
2,935
2,901
1,740
943
1
76,817

3,501
4,518

309
1,729
1
2,039
10,058

214
22
236
872
1,108
153
88,136

2,520
23

712
2,941
30
3,683
6,226

—
173
173
22
195
6,421

(a) ASC 815, Derivatives and Hedging, permits the netting of derivative receivables and derivative payables under legally enforceable
master netting agreements and permits the netting of cash collateral. Netting is applicable to derivatives not designated as hedging
instruments included in trading assets or trading liabilities and derivatives designated as hedging instruments included in other assets or
other liabilities. Netting is allocated to the derivative products based on the net fair value of each product.
Includes supranational securities.
Includes seed capital, private equity investments and other assets.

(b)
(c)

182 BNY Mellon

Notes to Consolidated Financial Statements (continued)

Assets and liabilities measured at fair value on a recurring basis at Dec. 31, 2022
Level 1
(dollars in millions)
Assets
Available-for-sale securities:

Level 2

Level 3 Netting (a)

Total carrying
value

U.S. Treasury
Non-U.S. government (b)
Agency RMBS
Agency commercial MBS
Foreign covered bonds
CLOs
Non-agency commercial MBS
U.S. government agencies
Non-agency RMBS
Other ABS
Other debt securities

Total available-for-sale securities

Trading assets:

Debt instruments
Equity instruments
Derivative assets not designated as hedging:

Interest rate
Foreign exchange
Equity and other contracts

Total derivative assets not designated as hedging
Total trading assets

Other assets:

Derivative assets designated as hedging:

Interest rate
Foreign exchange

Total derivative assets designated as hedging

Other assets (c)

Total other assets
Assets measured at NAV (c)

Total assets
Percentage of total assets prior to netting

Liabilities
Trading liabilities:
Debt instruments
Equity instruments
Derivative liabilities not designated as hedging:

Interest rate
Foreign exchange
Equity and other contracts

Total derivative liabilities not designated as hedging
Total trading liabilities

Other liabilities:

Derivative liabilities designated as hedging:

Foreign exchange

Total derivative liabilities designated as hedging

Other liabilities

Total other liabilities
Total liabilities
Percentage of total liabilities prior to netting

$ 29,533
4,237
—
—
—
—
—
—
—
—
—
33,770

1,590
3,791

10
—
4
14
5,395

—
—
—
294
294

— $ — $

16,102
8,957
8,060
5,758
5,343
2,977
2,294
2,029
1,319
13
52,852

1,901
—

1,287
9,433
98
10,818
12,719

205
114
319
220
539

—
—
—
—
—
—
—
—
—
—
—

—
—

—
—
—
—
—

— $
—
—
—
—
—
—
—
—
—
—
—

—
—

(986)
(7,215)
(5)
(8,206)
(8,206)

—
—
—
—
—

$ 39,459

$ 66,110

$ — $

(8,206) $

37%

63%

—%

$ 2,373
97

101
—

$ — $
—

— $
—

6
—
—
6
2,476

1,578
9,456
17
11,051
11,152

—
—
—
—
—

—
—
—
—
$ 2,476

220
220
1
221
$ 11,373

—
—
—
—
$ — $

18%

82%

—%

(798)
(7,444)
(1)
(8,243)
(8,243)

—
—
—
—
(8,243) $

29,533
20,339
8,957
8,060
5,758
5,343
2,977
2,294
2,029
1,319
13
86,622

3,491
3,791

311
2,218
97
2,626
9,908

205
114
319
514
833
138
97,501

2,474
97

786
2,012
16
2,814
5,385

220
220
1
221
5,606

(b)
(c)

BNY Mellon 183

Notes to Consolidated Financial Statements (continued)

Details of certain available-for-
sale securities measured at fair
value on a recurring basis

(dollars in millions)
Non-agency RMBS, originated in:

2008-2023
2007 and earlier

Total non-agency RMBS
Non-agency commercial MBS

originated in:
2009-2023

Foreign covered bonds:

Canada
UK
Australia
Germany
Other

Total foreign covered bonds

Non-U.S. government:

Germany
France
Canada
UK
Belgium
Japan
Norway
Netherlands
Singapore
Spain
Finland
Other (c)
Supranational

Total non-U.S. government

Dec. 31, 2023

Dec. 31, 2022

Total
carrying
value (b)

AAA/
AA-

A+/
A-

Ratings (a)
BBB+/
BBB-

BB+ and
lower

Not
rated

Total
carrying
value (b)

AAA/
AA-

A+/
A-

Ratings (a)
BBB+/
BBB-

BB+ and
lower

Not
rated

$ 1,487
253
$ 1,740

100% —%

5
86% 2%

—%
1
—%

—% —% $ 1,728
40
301
6% 6% $ 2,029

100% —%

5
86%

—%
1
—%

—% —%
45
7%

$ 2,935

100% —%

—%

—% —% $ 2,977

100% —%

—%

—% —%

$ 2,473
1,035
689
664
1,473
$ 6,334

$ 2,658
1,562
1,336
1,316
511
410
374
334
302
293
282
1,348
7,656
$ 18,382

100% —%
100
100
100
100
100% —%

—
—
—
—

100% —%
100
95
100
100

—
5
—
—
— 100
—
—
—
17
—
3
—

100
100
100
—
100
70
100
94% 3%

—%
—
—
—
—
—%

—%
—
—
—
—
—
—
—
—
83
—
17
—
2%

—% —% $ 2,384
—
1,215
—
696
—
542
—
921
—% —% $ 5,758

—
—
—
—

—% —% $ 3,103
—
1,905
—
1,354
—
2,225
—
9
—
475
—
427
—
416
—
797
—
214
—
194
10
1,486
—
7,734
1% —% $ 20,339

—
—
—
—
—
—
—
—
—
—
—
—

100% —%
100
100
100
100
100% —%

—
—
—
—

100% —%
—
100
8
92
—
100
100
—
— 100
—
100
—
100
—
100
40
—
—
100
2
64
—
100
3%
93%

—%
—
—
—
—
—%

—%
—
—
—
—
—
—
—
—
60
—
26
—
3%

—% —%
—
—
—
—
—% —%

—
—
—
—

—% —%
—
—
—
—
—
—
—
—
—
—
8
—
1% —%

—
—
—
—
—
—
—
—
—
—
—
—

(a) Represents ratings by S&P or the equivalent.
(b) At Dec. 31, 2023 and Dec. 31, 2022, non-U.S. government securities were included in Level 1 and Level 2 in the valuation hierarchy. All other assets in

the table are Level 2 assets in the valuation hierarchy.
Includes non-investment grade non-U.S. government securities related to Brazil of $140 million at Dec. 31, 2023 and $123 million at Dec. 31, 2022.

(c)

Assets and liabilities measured at fair value on a nonrecurring basis

Under certain circumstances, we make adjustments to the fair value of our assets, liabilities and unfunded lending-
related commitments, although they are not measured at fair value on an ongoing basis. The following table
presents the carrying value as of Dec. 31, 2023 and Dec. 31, 2022 of financial instruments for which nonrecurring
adjustments to fair value have been recorded during 2023 and/or 2022 and all non-readily marketable equity
securities carried at cost with upward or downward adjustments by balance sheet caption and level in the fair value
hierarchy.

Assets measured at fair value on a

nonrecurring basis

(in millions)
Loans (a)
Other assets (b)

Total assets at fair value on anonrecurring

basis

Dec. 31, 2023

Dec. 31, 2022

Level 1

Level 2

Level 3

Level 1

Level 2

Level 3

— $
—

28 $
481

— $
—

33 $
448

Total carrying
value
28
481

— $
—

Total carrying
value
33
448

— $
—

— $

509 $

— $

509

— $

481 $

— $

481

(a) The fair value of these loans decreased $3 million in 2023 and was unchanged in 2022, based on the fair value of the underlying collateral, as

(b)

required by guidance in ASC 326, Financial Instruments – Credit Losses, with an offset to the allowance for credit losses.
Includes non-readily marketable equity securities carried at cost with upward or downward adjustments and other assets received in satisfaction
of debt.

184 BNY Mellon

Notes to Consolidated Financial Statements (continued)

Estimated fair value of financial instruments

The following tables present the estimated fair value and the carrying amount of financial instruments not carried at
fair value on the consolidated balance sheet at Dec. 31, 2023 and Dec. 31, 2022, by caption on the consolidated
balance sheet and by the valuation hierarchy.

Summary of financial instruments

Dec. 31, 2023

(in millions)
Assets:

Interest-bearing deposits with the Federal Reserve and other central banks
Interest-bearing deposits with banks
Federal funds sold and securities purchased under resale agreements
Securities held-to-maturity
Loans (a)
Other financial assets

Total
Liabilities:

Noninterest-bearing deposits
Interest-bearing deposits
Federal funds purchased and securities sold under repurchase agreements
Payables to customers and broker-dealers
Borrowings
Long-term debt

Total

(a) Does not include the leasing portfolio.

Summary of financial instruments

(in millions)
Assets:

Total
Liabilities:

Noninterest-bearing deposits
Interest-bearing deposits
Federal funds purchased and securities sold under repurchase agreements
Payables to customers and broker-dealers
Borrowings
Long-term debt

Total

(a) Does not include the leasing portfolio.

Level 1

Level 2

Level 3

Total
estimated
fair value

Carrying
amount

— $ 111,550 $
—
—
9,545
—
4,922

12,134
28,900
35,166
65,026
2,149

14,467 $ 254,925 $

58,274 $

— $
— 221,463
14,507
—
18,395
—
1,274
—
—
30,596
— $ 344,509 $

— $ 111,550 $ 111,550
12,139
—
28,900
—
49,578
—
65,977
—
—
7,071
— $ 269,392 $ 275,215

12,134
28,900
44,711
65,026
7,071

58,274 $

58,274
— $
225,395
— 221,463
14,507
14,507
—
18,395
18,395
—
1,274
1,274
—
—
31,257
30,596
— $ 344,509 $ 349,102

Dec. 31, 2022

Level 1

Level 2

Level 3

Total
estimated
fair value

Carrying
amount

— $
—
—
10,948
—
5,030

91,655 $
17,167
24,298
39,044
64,668
1,817

15,978 $ 238,649 $

78,017 $

— $
— 196,258
12,335
—
23,435
—
911
—
—
28,977
— $ 339,933 $

91,655 $
17,167
24,298
49,992
64,668
6,847

91,655
— $
17,169
—
24,298
—
56,194
—
65,230
—
—
6,847
— $ 254,627 $ 261,393

78,017 $

78,017
— $
200,953
— 196,258
12,335
12,335
—
23,435
23,435
—
911
911
—
—
30,458
28,977
— $ 339,933 $ 346,109

Note 21–Fair value option

We elected fair value as an alternative measurement
for selected financial assets and liabilities that are not
otherwise required to be measured at fair value,
including the assets and liabilities of consolidated

investment management funds and subordinated notes
associated with certain equity investments.

The following table presents the assets and liabilities
of consolidated investment management funds, at fair
value.

BNY Mellon 185

Notes to Consolidated Financial Statements (continued)

Assets and liabilities of consolidated investment

management funds, at fair value

(in millions)
Assets of consolidated investment

management funds:
Trading assets
Other assets

Total assets of consolidated
investment management funds
Liabilities of consolidated investment

management funds:
Other liabilities

Total liabilities of consolidated
investment management funds

Dec. 31,

2023

2022

510 $
16

526 $

1 $

203
6

209

The assets and liabilities of the consolidated
investment management funds are included in other
assets and other liabilities on the consolidated balance
sheet. We value the assets and liabilities of
consolidated investment management funds using
quoted prices for identical assets or liabilities in
active markets or observable inputs such as quoted
prices for similar assets or liabilities. Quoted prices
for either identical or similar assets or liabilities in
inactive markets may also be used. Accordingly, fair
value best reflects the interests BNY Mellon holds in
the economic performance of the consolidated
investment management funds. Changes in the fair
value of the assets and liabilities are recorded as
income (loss) from consolidated investment
management funds, which is included in investment
and other revenue in the consolidated income
statement.

We elected the fair value option on subordinated
notes associated with certain equity investments. The
fair value of these subordinated notes was $4 million
at Dec. 31, 2023 and $10 million at Dec. 31, 2022,
and are included in other assets on the consolidated
balance sheet. The subordinated notes were valued
using observable market inputs and included in Level
2 of the valuation hierarchy.

Note 22–Commitments and contingent
liabilities

Off-balance sheet arrangements

In the normal course of business, various
commitments and contingent liabilities are
outstanding that are not reflected in the
accompanying consolidated balance sheets.

186 BNY Mellon

Our significant trading and off-balance sheet risks are
securities, foreign currency and interest rate risk
management products, commercial lending
commitments, letters of credit and securities lending
indemnifications. We assume these risks to reduce
interest rate and foreign currency risks, to provide
customers with the ability to meet credit and liquidity
needs and to hedge foreign currency and interest rate
risks. These items involve, to varying degrees, credit,
foreign currency and interest rate risks not recognized
on the balance sheet. Our off-balance sheet risks are
managed and monitored in manners similar to those
used for on-balance sheet risks.

The following table presents asummary o f our off-
balance sheet credit risks.

Off-balance sheet credit risks
(in millions)
Lending commitments
Standby letters of credit (“SBLC”) (a)
Commercial letters of credit
Securities lending indemnifications (b)(c)

Dec. 31,
2023

Dec. 31,
2022
$ 46,518 $ 49,750
1,918
19
491,043

1,816
41
492,739

(a) Net of participations totaling $163 million at Dec. 31, 2023

and $175 million at Dec. 31, 2022.

(b) Excludes the indemnification for securities for which BNY
Mellon acts as an agent on behalf of CIBC Mellon clients,
which totaled $59 billion at Dec. 31, 2023 and $64 billion at
Dec. 31, 2022.
Includes cash collateral, invested in indemnified repurchase
agreements, held by us as securities lending agent of $45
billion at Dec. 31, 2023 and $43 billion at Dec. 31, 2022.

(c)

The total potential loss on undrawn lending
commitments, standby and commercial letters of
credit, and securities lending indemnifications is
equal to the total notional amount if drawn upon,
which does not consider the value of any collateral.

Since many of the lending commitments are expected
to expire without being drawn upon, the total amount
does not necessarily represent future cash
requirements. A summary of lending commitment
maturities is as follows: $27.2 billion in less than one
year, $18.9 billion in one to five years and $421
million over five years.

SBLCs principally support obligations of corporate
clients and were collateralized with cash and
securities of $158 million at Dec. 31, 2023 and $144
million at Dec. 31, 2022. At Dec. 31, 2023, $1.3
billion of the SBLCs will expire within one year,
$512 million in one to five years and $8 million over
five years.

Notes to Consolidated Financial Statements (continued)

We must recognize, at the inception of an SBLC and
foreign and other guarantees, aliability for the fair
value of the obligation undertaken in issuing the
guarantee. The fair value of the liability, which was
recorded with a corresponding asset in other assets,
was estimated as the present value of contractual
customer fees. The estimated liability for losses
related to SBLCs and foreign and other guarantees, if
any, is included in the allowance for lending-related
commitments.

Payment/performance risk of SBLCs is monitored
using both historical performance and internal ratings
criteria. BNY Mellon’s historical experience is that
SBLCs typically expire without being funded.
SBLCs below investment grade are monitored closely
for payment/performance risk. The table below
shows SBLCs by investment grade:

Standby letters of credit

Investment grade
Non-investment grade

Dec. 31,
2023
74%
26%

Dec. 31,
2022
75%
25%

A commercial letter of credit is normally a short-term
instrument used to finance a commercial contract for
the shipment of goods from a seller to abuyer.
Although the commercial letter of credit is contingent
upon the satisfaction of specified conditions, it
represents a credit exposure if the buyer defaults on
the underlying transaction. As a result, the total
contractual amounts do not necessarily represent
future cash requirements. Commercial letters of
credit totaled $41 million at Dec. 31, 2023 and $19
million at Dec. 31, 2022.

We expect many of the lending commitments and
letters of credit to expire without the need to advance
any cash. The revenue associated with guarantees
frequently depends on the credit rating of the obligor
and the structure of the transaction, including
collateral, if any. The allowance for lending-related
commitments was $87 million at Dec. 31, 2023 and
$78 million at Dec. 31, 2022.

A securities lending transaction is afully
collateralized transaction in which the owner of a
security agrees to lend the security (typically through
an agent, in our case, The Bank of New York Mellon)
to a borrower, usually a broker-dealer or bank, on an
open, overnight or term basis, under the terms of a
prearranged contract.

We typically lend securities with indemnification
against borrower default. We generally require the
borrower to provide collateral with a minimum value
of 102% of the fair value of the securities borrowed,
which is monitored on a daily basis, thus reducing
credit risk. Market risk can also arise in securities
lending transactions. These risks are controlled
through policies limiting the level of risk that can be
undertaken. Securities lending transactions are
generally entered into only with highly rated
counterparties. Securities lending indemnifications
were secured by collateral of $518 billion at Dec. 31,
2023 and $515 billion at Dec. 31, 2022.

CIBC Mellon, a joint venture between BNY Mellon
and the Canadian Imperial Bank of Commerce
(“CIBC”), engages in securities lending activities.
CIBC Mellon, BNY Mellon and CIBC jointly and
severally indemnify securities lenders against specific
types of borrower default. At Dec. 31, 2023 and Dec.
31, 2022, $59 billion and $64 billion, respectively, of
borrowings at CIBC Mellon, for which BNY Mellon
acts as agent on behalf of CIBC Mellon clients, were
secured by collateral of $62 billion and $68 billion,
respectively. If, upon a default, aborrower’s
collateral was not sufficient to cover its related
obligations, certain losses related to the
indemnification could be covered by the indemnitors.

Unsettled repurchase and reverse repurchase
agreements

In the normal course of business, we enter into
repurchase agreements and reverse repurchase
agreements that settle at a future date. In repurchase
agreements, BNY Mellon receives cash from and
provides securities as collateral to acounterparty at
settlement. In reverse repurchase agreements, BNY
Mellon advances cash to and receives securities as
collateral from the counterparty at settlement. These
transactions are recorded on the consolidated balance
sheet on the settlement date. At Dec. 31, 2023, we
had no unsettled repurchase agreements and $77.9
billion of unsettled reverse repurchase agreements.
At Dec. 31, 2022, we had $4.0 billion of unsettled
repurchase agreements and $11.3 billion of unsettled
reverse repurchase agreements.

Industry concentrations

We have significant industry concentrations related to
credit exposure at Dec. 31, 2023. The tables below

BNY Mellon 187

Notes to Consolidated Financial Statements (continued)

present our credit exposure in the financial
institutions and commercial portfolios.

Indemnification arrangements

Dec. 31, 2023
Unfunded
commitments

Loans

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

Total

Commercial portfolio
exposure
(in billions)
Services and other
Manufacturing
Energy and utilities
Media and telecom

Total

2.3 $
1.4
6.4
0.1
—
0.3
10.5 $

1.2 $
0.5
0.4
—
2.1 $

Total
exposure
17.1
9.4
7.8
4.0
0.2
1.2
39.7

14.8 $
8.0
1.4
3.9
0.2
0.9
29.2 $

Total
exposure
4.6
4.1
4.1
0.7
13.5

3.4 $
3.6
3.7
0.7
11.4 $

Dec. 31, 2023
Unfunded
commitments

Loans

Major concentrations in securities lending are
primarily to broker-dealers and are generally
collateralized with cash and/or securities.