Company: KEY-PI
Filing Date: 2025-02-21
Form Type: 10-K
Source: 0000091576-25-000038
Chunk: 19

Company: KEYCORP /NEW/
Filing Date: 2025-02-21
Form: 10-K
Item: Item 1
Chunk 19
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 testing framework in order to improve the transparency of the stress tests and reduce the volatility of the resulting capital 

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requirements. The Federal Reserve said that it plans to, among other things, disclose and seek public comment on the models and scenarios used in the stress tests and to average results over two years to reduce year-over-year changes in capital requirements. Changes to the stress testing framework would apply to KeyCorp.  

On December 24, 2024, five trade associations filed a lawsuit against the Federal Reserve in the United States District Court for the Southern District of Ohio to challenge the stress testing framework on the basis that the current framework violates the Administrative Procedures Act and the Due Process Clause of the United States Constitution. The parties bringing the lawsuit indicated that they do not object to the use of stress tests to set stress capital buffer requirements but that they want to ensure that the Federal Reserve subjects the stress tests to public notice and comment and complies with other applicable legal requirements. KeyCorp is monitoring developments in this case. 

Dividend restrictions

Federal law and regulation impose limitations on the payment of dividends by our national bank subsidiaries, like KeyBank. Historically, dividends paid by KeyBank have been an important source of cash flow for KeyCorp to pay dividends on its equity securities and interest on its debt. Dividends by our national bank subsidiaries are limited to the lesser of the amounts calculated under an earnings retention test and an undivided profits test. Under the earnings retention test, without the prior approval of the OCC, a dividend may not be paid if the total of all dividends declared by a bank in any calendar year is in excess of the current year’s net income combined with the retained net income of the two preceding years. Under the undivided profits test, a dividend may not be paid in excess of a bank’s undivided profits. Moreover, under the FDIA, an insured depository institution may not pay a dividend if the payment would cause it to be less than “adequately capitalized” under the prompt corrective action framework or if the institution is in default in the payment of an assessment due to the FDIC. Similarly, under the Regulatory Capital Rules, a banking organization that fails to satisfy the minimum capital conservation buffer requirement will be subject to certain limitations, which include restrictions on capital distributions. For more information about the payment of dividends by KeyBank to KeyCorp, please see Note 3 (“Restrictions on Cash, Dividends, and Lending Activities”) in this report.

FDIA, Resolution Authority and Financial Stability