2018 Ar

BNY
B
Mellon
Annual
Report
BNY Mellon
Annual Report
2018
While we are focused on driving change,
we do this with a keen eye towards preserving
much of the great culture of our company.
CHARLIE SCHARF
Chairman and Chief Executive Officer
II BNY Mellon
Companies must constantly
think about how they must
change and evolve or they risk
both short-term performance
and long-term sustainability.
This is especially true for large companies as smaller, more nimble
competitors target their margins and innovate more rapidly. At BNY Mellon,
we are challenging ourselves to evolve so as to both maximize our short– and
medium–term performance and create a path for long–term continued success.
Our rich history of success over more than two centuries is a distinct
advantage. While we are focused on driving change, we do this with a keen
eye towards preserving much of the great culture of our company. Though
we are proud of who we are and how we serve our clients, we also believe
we can deliver more for our clients, shareholders and employees by setting
higher standards of performance and pushing ourselves to create new and
differentiated solutions for our clients.
Our evolution will take time, but we have confidence that we will build
on our success.
2018 Annual Report III

2018 Financial
Performance
Our financial results for 2018 have a number of
complicating factors, but I will do my best to explain
them. On a reported basis, our earnings per share
increased 9%. These results included several notable
items in both 2018 and 2017 that make our results
difficult to compare.
In last year’s letter, I discussed why we break these items out. To

reiterate, our goal is to provide you with the necessary detail to analyze
our performance. We try and explain our results as well as provide
transparency on items that we believe do not fully represent the future
earnings power of the company. As I said last year, we are going through a
period of transition, and I am encouraging our leaders to take actions that
will add cost in the short term but will benefit us in the long term. As such,
I do not believe all items in our GAAP results represent the future earnings
profile of our company, but ultimately, our disclosures will allow you to
make your own judgment.
Excluding notable items in 2017 and 2018, earnings per share increased 18%1.
Approximately seven percentage points of this increase was due to benefits
+3%
TOTAL OPERATING REVENUE ($MM)1
2018 | $16,405
2017 | $15,863
1
For a reconciliation of these non–GAAP measures, see page XXIII.
IV BNY Mellon
$4.04 $4.21
2018 2018
$3.72
2017
+18% $3.57
+9% OPERATING EARNINGS
PER SHARE1
2017
EARNINGS PER SHARE

ON REPORTED BASIS
EXCLUDES
NOTABLE ITEMS
from changes in U.S. tax laws. Our overall revenue grew 3% as Investment
Services revenue growth of 6% was partially offset by lower Investment
Management growth of 2%. Our expenses grew 2%. We increased what we
spend on technology by approximately $350 million while reducing all other
expenses to partially offset the increase. Importantly, we continued to return
a significant amount of capital to our shareholders.
Our financial performance and franchise growth were relatively consistent

with that of prior years, but we are reorienting our expense base toward
technology. We have an opportunity to leverage our unique global franchise
and great client relationships and ultimately increase the rate of revenue and
profit growth, while also maintaining continued strong returns.
34%
2%
TOTAL OPERATING EXPENSE ($MM)1
2018 | $10,868 2018 OPERATING

PRE-TAX MARGIN1
2017 | $10,648
2018 Annual Report V

E
M
CO
IN
X I N V E S T M E N T S E RV I C E S P E R F O R M A N C E 2
TA
E–
PR
Our Investment Services revenue increased 6%, expenses were up 5% and

ES
+9%
NU
ES
pre–tax income increased 9%. Our pre–tax margin was 36%, up from 35%
NS
VE
RE
PE
in the prior year.

EX
+6%
+5% Our Clearance and Collateral Management and Depositary Receipts businesses
both achieved double–digit revenue growth, while Asset Servicing and
Corporate Trust saw mid–single–digit revenue growth. Pershing and Treasury
Services had revenue growth in the low- to mid–single–digit range.
Assets under custody and/or administration decreased by 1% as the negative

impact of market declines and the stronger U.S. dollar were partially offset
by new business.
I N V E S T M E N T M A NAG E M E N T P E R F O R M A N C E 2
E
M
CO
Investment Management’s financial performance reflected a difficult

IN
X
environment for the industry. Revenues increased 2%, expenses were down
TA
E–
1% and pre–tax income increased 10%. Pre–tax margin was 35% for the year,
PR
up from 33% in 2017. Strength in our liability–driven investment (LDI) business

+10%
was offset by weakness in our traditional active and passive strategies.
Our assets under management declined by 9%, impacted by lower equity

ES
markets and outflows, particularly in our active strategies. Changes in

NU
foreign exchange rates and declines in market values drove approximately

VE
RE
ES
60% of the decline and outflows of $84 billion from cash, index and our
NS
+2%
PE
active strategies were partially offset by $45 billion of inflows into liability–
EX
driven strategies.
(1%)
Revenues in our Wealth Management business increased 2% for the year,
driven primarily by the impact of higher equity markets throughout the year.
2
Results on an operating basis.
VI BNY Mellon
Our Business
Our business purpose is clear. We help markets function smoothly, we
help investors access a broad range of banking and investment products,
and we are viewed as one of the safest institutions that helps facilitate
investing globally.
Our business model is strong. We provide the expertise and scale others
cannot achieve on their own as we process and manage cash and securities
on our clients’ behalf. In addition, we provide value-added services to
enhance our core capabilities. We are amongst the best in the world at
what we do and we benefit from our clients’ growth and the growth of
the financial markets themselves. We are positioned to benefit from the
increasing opportunity in the wealth management space through our own
direct relationships as well as from being a core technology and solutions
provider to intermediaries through our Pershing platform. We have the
opportunity to leverage this platform to create even stronger results.
F O C U S O N O RG A N I C G ROW T H
While we are fortunate that our business benefits

from rising interest rates and from strong and growing
financial markets, we remain focused on driving growth
based on our actions.
Across our businesses, we are separating out those external factors to identify
how much of our growth is organic, meaning driven by our actions and
decisions. That discipline is forcing a different level of conversation inside
the company about what we are doing to grow the business. As I will discuss,
some businesses are ahead of others in this evolution.
We have seen organic growth in several of our businesses that either have
differentiated capabilities or in which we have been investing for a number
of years. The following graphic outlines this growth.
Businesses
seeing
organic
growth: In CLE A R A NCE A N D COLL ATER A L M A NAGEMENT, our
unique position as the sole provider of U.S. government clearing
coupled with over $3 trillion of tri–party collateral management
balances allows us to help clients optimize their funding needs in
ways that others cannot.
In our M A R K ETS business, we have been investing in our Foreign

Exchange platform and expanding the scope of our product offering. DEFINITION: Organic growth is
the expansion of our business
While our focus is primarily on serving clients who we do business with
independent of external factors
elsewhere in the company, our updated platform and product lineup such as market performance.
has enabled us to capture a greater share of our clients’ business.
Our LDI offering in Asset Management has seen strong growth. We

have differentiated capabilities and a stellar track record in delivering
tailored solutions to meet the specific needs of our pension fund and
insurance clients.
Our C A SH
A N D LIQU IDIT Y
capabilities span the entire
company and represent
more than $900 billion of
client balances.
Other businesses have shown growth, but have been
heavily reliant on external factors, like rising interest
rates and financial markets. We aren’t being complacent
about this and believe we can do more to grow
organically and are taking action.
In ASSET SERV ICING, we face continued pricing pressure for our

traditional custody and administration services. Fortunately, we have
significant scale benefits that we continue to realize and are making
investments to provide data management solutions and expand our
servicing of ETFs and alternative asset classes. These new capabilities
will allow us to both protect our core and grow in new ways.
PER SHING is an incredibly unique platform. We love our position as

the industry leader providing a complete set of technology and processing
solutions for our clients. While our recent performance has been muted due
to two large client losses (which we’ve spoken about at length), we see
a significant opportunity to accelerate organic growth in both the traditional
broker–dealer channel and in the emerging Registered Investment Advisor
(RIA) space. In fact, our pipeline of signed new clients in the process of being
onboarded is the largest in many years.
Our TR E ASU RY SERV ICE S business has benefited from the rising rate
environment but underlying franchise growth has been stagnant. We have
new leadership in place and see significant opportunity for organic growth
by reorienting the business around our differentiated payments capabilities.
In W E A LTH M A NAGEMENT, we also have new leadership in place and

see opportunities to grow our underlying franchise. We are strengthening
our client–facing teams while building out our banking and investment
offerings to provide more holistic solutions to our clients.
2018 Annual Report IX

We have other businesses that don’t necessarily benefit as much from rising
markets or are in periods of transition.
We are a market leader in In ASSET M A NAGEMEN T,

COR POR ATE TRUST. While our traditional active strategies
our business had underperformed have not been immune to the
in recent years, the new broader industry headwinds.
management team’s work in We are working on abating recent
repositioning our sales and service outflows by developing distinctive
teams has yielded incremental multi–asset capabilities that
growth in growing asset classes deliver solutions for our clients.
like insurance–linked securities Our ongoing work in further
and collateralized loan obligations consolidating our business in
(CLOs). We feel good about our North America into one multi–
efforts and are capturing additional asset company, Mellon, is a
share, which will benefit us when good example of how we are
issuance volumes are robust. repositioning the business.
As we look forward, our expectations regarding our ability to increase our

growth rates are not outsized.
Given the operating leverage in our business, small

increases in revenue growth rates should drive more
meaningful increases in our EPS growth.
X BNY Mellon
Focusing on
Quality & Efficiency
I have said several times that scale is an important driver of our ability to be
successful. We provide services and solutions for our clients where we can
gain the benefits of scale that they cannot achieve on their own, or where
we can create solutions that either they cannot or where the quality of our
solution is greater than they could create independently.
This is about us bringing our ability to execute day in and

day out, building solutions efficiently, improving them
over time and sharing those benefits with our clients.
Our focus on execution is paramount and is a necessary precursor to

executing a longer–term strategic vision. Quality and efficiency are linked
and critical for our success. Creating a more efficient organization will
improve our quality and our focus on quality will lead us to efficiency.
A simple example is where we use technology to automate something that

was previously done by people. Automation removes the possibility for
human error, and allows us to perform the task on a much timelier basis
and less expensively. The same is true for simplification of our management
processes. Removing unnecessary processes reduces our cost and will
generally lead to better and more timely answers, which allow us to be more
responsive to our clients.
2018 Annual Report XI

There are a number of areas where we have made great progress in
increasing our efficiency:
• In 2018, we cleared and settled ~88 million transactions with the

Federal Reserve, with 99.8% being fully automated.
• We settled ~$230 trillion of securities globally with ~97% fully automated.
• We process, on average, ~$2 trillion of payments each day, with

94% fully automated.
• There are a number of areas where we experienced volume increases

in 2018 and were able to significantly increase productivity.
We need to bring this level of efficiency and automation across all our
other businesses. This focus on execution is paramount and while making
progress, we still have much more opportunity.
T E C H N O L O GY
All we do is enabled by technology. Our platforms allow us to process cash

and securities and manage assets and liabilities for others. We can drive a
more efficient and a more complete product set than we have today and we
will invest in new platforms and capabilities to do so. We have increased our
technology spend to accomplish this and will continue to do so.
~$3.0 B In 2018, we increased what we spend on technology from approximately

2019
$2.4 billion to $2.75 billion. We expect this to be approximately $3.0 billion
in 2019. Remember, we expect to continue to drive efficiency elsewhere to
$2.75 B help fund much of this increased investment.
2018
$2.4 B The increase in spend is directed to hardware and software for our existing
2017 infrastructure and to building additional capabilities. While we are spending
more on infrastructure than what I would have hoped, it is not optional. We
TECHNOLOGY provide key services to our clients and we are obligated to have the strongest
INVESTMENT
platforms. Today’s strength helps us earn the right to ask for more business
as we extend our capabilities.
XII BNY Mellon

We are investing in a new data center, as well as making significant
investments in new, modern environments in our existing data centers.
These investments are critical to strengthening our core infrastructure and
resiliency, which are central to our value proposition. These investments
will also help us create a more flexible operating platform from which we
can innovate faster in the future.
While creating the best operating platform is technology priority number

one, it is not in lieu of investing in developing capabilities for clients.
We are making a significant number of investments that

are intended to differentiate us in the marketplace and
capitalize on our growth opportunities over time.
Below are some examples:
• Consolidating our remaining custody platforms.
• Improving transparency intra–day into performance for clients.
• Upgrading to a best–in–class platform for servicing traditional loan

and CLO products in Corporate Trust.
• Building new capabilities to better support alternative asset managers,

such as credit managers.
• Redesigning our client portal to offer an integrated experience across

all devices to further penetrate the RIA opportunity in Pershing.
• Building a fully integrated Wealth Management platform across

investments and banking that includes self–service capabilities.
• Continuing to extend our capabilities to service wealth managers in

the UK through Pershing.
• Increasing our investment in ETF servicing infrastructure.
• Extending LDI capabilities in the U.S.
2018 Annual Report XIII

Talent & Leadership
It takes many strong leaders to manage a company of our
size and complexity. I continue to be impressed with the
subject matter expertise, desire to serve our clients and
the proud culture within our company.
We have made significant changes to the leadership team over the past
couple of years with a goal of ensuring we have the best talent with a healthy
mix of historical context and fresh thinking.
We have promoted many from within and we have also hired great talent
from the outside. Outside hires bring different skills and experiences, and
help accelerate our evolution. This year we added a series of leaders to
our executive team who we think will complement our existing leaders.
These include: Paul Camp (Treasury Services), Catherine Keating (Wealth
Management), Emily Portney (U.S. Asset Servicing), Roman Regelman
(Digital) and Akash Shah (Strategy).
In addition, Lester Owens joined us in February to lead Operations

globally. We have also added numerous leaders in Technology across our
infrastructure, data and development teams. We expect all of these leaders
will add meaningfully to our ability to advance our efforts.
Our focus on talent goes beyond the leadership team. We are doing a series
of things to ensure we have the best talent at BNY Mellon at all levels.
We are creating more differentiation in our performance ratings, salaries and

incentive compensation. In addition, we are striving to provide even more
direct, honest and helpful feedback to our employees.
I understand there is a debate regarding performance reviews and ratings.

Some believe an annual process should be replaced with continual feedback.
I don’t disagree, but that can only be accomplished when an organization
has a level of maturity in their performance management process that we
XIV BNY Mellon

currently lack. Therefore, I firmly believe that performance reviews and
ratings are extremely important tools for us to ensure we provide clear
feedback in a consistent way to everyone at our company.
Historically we have not differentiated nearly enough in how we have

evaluated people. While this makes for an easier conversation with
employees, we are doing both them and the company a disservice. Candid
feedback is critical to helping people improve their performance and ratings
we assign should provide clarity of our conclusion—and then we can work
towards improving performance.
STRONG PER FOR M ER S SHOU LD BE R EWA R DED more than

average and underperformers. Salary changes and year–end bonuses should
both be an incentive to an employee but also recognition of performance.
I would be remiss if I didn’t address the actions behind the severance charge
we recorded in the fourth quarter of 2018. Asking people to leave the
company is one of the toughest decisions managers need to make and one
I wish we did not have to act on.
Unfortunately, for us to serve all of our stakeholders over the long term,
we must take these actions.
As I have said many times in this letter, our clients expect us to create scale
and pass on many of the benefits to them. If our costs are not competitive,
we cannot price our products to both win business and benefit BNY Mellon.
The biggest piece of our cost base is employee salary and benefits and we
must ensure that we are employing the right number of people to deliver
our services and build our capabilities for the future.
Much of what we are doing is eliminating

management layers and increasing spans of control
across the company.
2018 Annual Report XV

Through our planned actions, we reduced two layers throughout the entire
organization and increased the average span of control—or the number of
direct reports per manager—by almost 45%. While the associated changes
result in lower costs, they also help advance our culture by improving
decision making and accountability, allowing us to move more quickly and
making sure we have our best people in roles, which allow them to grow
and contribute more significantly to our growth agenda. Giving people more
responsibility is a good thing.
DIVERSITY
We believe in the power of diversity. I was taught many years ago that
most answers are waiting to be found in the facts. That means that work
must be done ahead of decisions, data must be analyzed and the work
must be presented clearly and concisely. But to arrive at the right
decision, you must have the right people around a table reviewing
the information.
The “right” people means a diverse group—in every way.

This means different skills, disciplines and backgrounds.
This includes race, ethnicity, gender and sexual orientation, as well as

different skills, disciplines and backgrounds. Without this diversity, you
will not have the experiences necessary to arrive at the right conclusion.
We are working to ensure we are advancing diversity from entry levels

all of the way to our Board of Directors. We are setting goals for ourselves
regarding representation for diverse groups, we expect our leaders to
personally be engaged with our employee resource groups and be externally
visible in advancing our efforts and we are focused on increasing diverse
representation of our senior leaders.
B OA R D O F D I R E C T O R S
I would like to thank Mark Nordenberg as he retires from our Board after
serving for more than 20 years. Mark has contributed meaningfully in many
ways, especially in his role as Chairman of our Corporate Governance and
Nominating Committee. Importantly, Mark has also represented us in the
Pittsburgh community, where we employ over 7,000 people. We are grateful
for Mark’s contributions over so many years.
XVI BNY Mellon

Capital Allocation
We continue to believe that capital management is one of the most significant
decisions we make, and we remain committed to continuing to use that
resource wisely. Our prioritization has not changed.
Our first priority will always be ensuring that our capital meets or exceeds the
requirements and expectations of our regulators, rating agencies, clients and
counterparties. We then compare the returns of investing organically in the
company, pursuing mergers and acquisitions, further increasing dividends or
buying back our common stock.
Ultimately, we will pursue the path of highest return for

our shareholders.
In recent years, we have been in a position to consistently return the majority

of the capital that we generate to shareholders. During 2018, we increased our
dividend by 17% and repurchased $3.3 billion of common stock. This included
the repurchase of an additional $830 million of common stock that was
approved and executed in the fourth quarter.
+17% $3.3B
2018 DIVIDENDS 2018 STOCK
REPURCHASE
100%+
SHAREHOLDER
PAYOUT RATIO
Longer Term
While our focus on the short and medium term is necessary for us today,
it is not sufficient.
We have to think more strategically about where our

businesses are going and what we need to do to create
differentiation in a changing world.
We are at the beginning of mapping out this journey and have a series of
initiatives underway.
In our ASSET SERV ICING business, we are building out our capabilities
in higher–growth products, including alternatives and ETFs. We are
enhancing real–time intraday reporting and providing data analytics to help
clients better manage their cash, manage risk and increase distribution.
We are also pursuing ways to simplify and improve the integration of

activities from portfolio management to accounting to custody for clients.
We believe that our clients will want choice and flexibility as they seek the
best solution based on their internal requirements and products. Their
unique needs require that we provide an open solution that integrates
with other platforms. We are actively working with external partners and
advancing our own solutions to increase quality, reduce cost and provide
more information to our clients to help them drive higher returns.
In PER SHING, we continue to help our broker–dealer clients create more

operating leverage by using our scale and platform to lower their costs
and increase the quality of the products they offer. We are allocating more
resources to the RIA marketplace as the wealth management business
shifts towards this model. We are also dedicating more resources to
other geographies such as the UK, where we think there are meaningful
opportunities for growth.
In TR E ASU RY SERV ICE S, we are investing to improve our payments
capabilities and thinking more strategically about how payments are going
to evolve in the future. We are also digitizing our core capabilities as our
clients’ expectations around the way they interact and consume our
products evolve.
We are uniquely positioned in our CLE A R A NCE A N D COLL ATER A L

M A NAGEMENT business and are investing to add capabilities to extend
the service to our market participants, help clients optimize their funding
needs and provide more options for clients.
The A SSET M A NAGEM ENT industry is going through dramatic change

as returns have not supported existing fee structures. With pressure on
performance and fees, we are working to ensure we have top–tier
performance, investment products and solutions appropriate for today’s
marketplace, as well as broad distribution capabilities and an efficient
operating infrastructure.
We have the industry–leading LI A BILIT Y–DR I V EN SOLU TIONS

business and it’s growing well. We have strong capabilities in European
credit and are expanding our CLO, loan and high–yield capabilities. We
are transforming our U.S. business into Mellon, an integrated, single multi–
asset solutions provider. We are not immune to the market environment
and expect 2019 to be a difficult year, but we remain focused on creating
differentiated capabilities.
Our W E A LTH M A NAGEM ENT business is a strong platform for us to

build from. We are becoming more targeted in our client base, strengthening
our banking and investment product set, and creating stronger technology
for both our advisors and clients.
2018 Annual Report XIX

At a recent all employee town hall, I was asked what my vision for success
was for BNY Mellon.
I responded that we should strive for our clients to think

of us as a partner they must do business with because we
are the unquestioned leader in our businesses.
This is represented by the quality of our work, but more importantly in the
value we add to them as a partner. When we achieve that, we also become
the company that the best people in the industry want to work for. We are
well on our way and I want to thank my more than 50,000 partners around
the world who work every day to achieve this goal.
Charlie Scharf
Chairman and Chief Executive Officer
XX BNY Mellon
Financial
Highlights
2018 Annual Report XXI

Financial Highlights
The Bank of New York Mellon Corporation (and its subsidiaries)
(dollar amounts in millions, except per common share amounts and unless otherwise noted) 2018 2017
Financial Results
Net income applicable to shareholders of The Bank of New York Mellon Corporation $ 4,266 $ 4,090
Preferred stock dividends (169) (175)
Net income applicable to common shareholders of

The Bank of New York Mellon Corporation $ 4,097 $ 3,915
Earnings per common share – diluted $ 4.04 $ 3.72
Key Data
Total revenue (a) $ 16,392 $ 15,543
Total expense 11,211 10,957
Fee revenue as a percentage of total revenue 78% 78%
Percentage of non-U.S. total revenue 37% 36%
Assets under custody and/or administration at year end (in trillions) (b) $ 33.1 $ 33.3
Assets under management at year end (in billions) (c) $ 1,722 $ 1,893
Balance Sheet at December 31

Total assets $ 362,873 $ 371,758
Total deposits 238,778 244,322
Total The Bank of New York Mellon Corporation common shareholders’ equity 37,096 37,709
Capital Ratios at December 31

Consolidated regulatory capital ratios (d)
Common Equity Tier 1 (“CET1”) ratio 10.7% 10.3%
Tier 1 capital ratio 12.8 12.3
Total (Tier 1 plus Tier 2) capital ratio 13.6 13.0
Tier 1 leverage ratio 6.6 6.4
Supplementary leverage ratio (“SLR”) (e) 6.0 5.9
The Bank of New York Corporation common shareholders’ equity to total assets ratio 10.2 10.1
(a) Includes fee and other revenue, net interest revenue and income from consolidated investment management funds.
(b) Includes the assets under custody and/or administration of CIBC Mellon Global Securities Services Company, a joint venture.
(c) Excludes securities lending cash management assets and assets managed in the Investment Services business.
(d) For our CET1, Tier 1 capital and Total capital ratios, our effective capital ratios under the U.S. capital rules are the lower of the ratios as calculated under the Standardized and Advanced
Approaches, which for the periods noted above was the Advanced Approaches. Beginning Jan. 1, 2018, consolidated regulatory ratios are fully phased-in. The consolidated regulatory ratios
for 2017 are presented on an estimated fully phased-in basis. For additional information on our capital ratios, see “Capital” beginning on page 45.
(e) SLR became a binding measure on Jan. 1, 2018. For additional information on our SLR, see “Capital” beginning on page 45.
XXII BNY Mellon

Supplemental Information
Explanation of GAAP and Non-GAAP financial measures
We have included in this Letter to Shareholders certain non-GAAP measures which exclude the notable items
described below. We believe that these measures provide additional useful information to investors as they align
with our strategy, are consistent with how management views the business and are used to measure the annual
performance of our executive officers.
2018 2017 2018 vs. 2017

Net Income and EPS Reconciliation Diluted Diluted Diluted
(dollars in millions, except per share amounts) Results EPS Results EPS Results EPS
Net income applicable to common shareholders of The Bank
of New York Mellon Corporation – GAAP $ 4,097 $ 4.04 $ 3,915 $ 3.72 5% 9%
Exclude the impact of notable items: (a)(b)
Total revenue (13) (320)
Total noninterest expense 343 309
Provision for income taxes (188) (789)
Net impact of notable items (168) (0.17) 160 0.15
Net income applicate to common shareholders of

The Bank of New York Mellon Corporation,
excluding notable items – Non-GAAP $ 4,265 $ 4.21 $ 3,755 $ 3.57 14% 18%
(a) 2018 includes adjustments to provisional estimates for U.S. tax legislation and other changes, severance, expenses associated with consolidating real estate and litigation expense, each
recorded in 4Q18. Also includes expenses associated with consolidating real estate recorded in 2Q18 and adjustments to provisional estimates for U.S. tax legislation and other changes and
litigation expense, both recorded in 3Q18.
(b) 2017 includes the estimated net benefit of U.S. tax legislation, severance, an asset impairment and investment securities losses related to the sale of certain securities, each recorded in
4Q17, and litigation expense recorded in 2017.

Total Revenue and Total Noninterest Expense Reconciliation 2018 vs.

(dollars in millions) 2018 2017 2017
Total revenue – GAAP $ 16,392 $ 15,543 5%
Exclude: Notable items (a)(b) (13) (320)
Total revenue, excluding notable items – Non-GAAP $ 16,405 $ 15,863 3%
Total noninterest expense – GAAP $ 11,211 $ 10,957 2%
Exclude: Notable items (a)(b) 343 309
Total noninterest expense, excluding notable items – Non-GAAP $ 10,868 $ 10,648 2%
(a) 2018 includes adjustments to provisional estimates for U.S. tax legislation and other changes, severance, expenses associated with consolidating real estate and litigation expense, each
recorded in 4Q18. Also includes expenses associated with consolidating real estate recorded in 2Q18 and adjustments to provisional estimates for U.S. tax legislation and other changes
and litigation expense, both recorded in 3Q18.
2018 Annual Report XXIII

2018 vs.
Pre-tax Operating Margin Reconciliation (dollars in millions) 2018 2017 2017
Income before taxes – GAAP $ 5,192 $ 4,610 13%
Exclude the impact of notable items: (a)(b)
Total revenue (13) (320)
Total noninterest expense 343 309
Income before taxes, excluding notable items – Non-GAAP $ 5,548 $ 5,239 6%
Exclude: Notable items (a)(b) (13) (320)
Total revenue, excluding notable items – Non-GAAP $ 16,405 $ 15,863 3%
Pre-tax operating margin – GAAP (c) 32% 30%

Pre-tax operating margin, excluding notable items – Non-GAAP (c) 34% 33%
(a) 2018 includes adjustments to provisional estimates for U.S. tax legislation and other changes, severance, expenses associated with consolidating real estate and litigation expense,
each recorded in 4Q18. Also includes expenses associated with consolidating real estate recorded in 2Q18 and adjustments to provisional estimates for U.S. tax legislation and other
changes and litigation expense, both recorded in 3Q18.
(c) Income before taxes divided by total revenue.
Investment Services Business Reconciliation 2018 vs.

Total noninterest expense – GAAP 8,058 7,747 4
Total noninterest expense, excluding notable items – Non-GAAP $ 7,888 $ 7,534 5%
Provision for credit losses 1 (7)
Income before income taxes – GAAP $ 4,239 $ 3,845 10%
Income before income taxes, excluding notable items – Non-GAAP $ 4,409 $ 4,059 9%
Pre-tax operating margin – GAAP (c) 34% 33%
(a) 2018 includes severance and litigation expense recorded in 4Q18. Also, includes litigation expense recorded in 3Q18.
(b) 2017 includes severance, and an asset impairment recorded in 4Q17 and litigation expense recorded in 2017.
Investment Management Business Reconciliation 2018 vs.

Less: Distribution and servicing expense 407 422
Total revenue, net of distribution and servicing expense $ 3,677 $ 3,575 3%
Total noninterest expense – GAAP $ 2,818 $ 2,854 (1)%
Total noninterest expense, excluding notable items – Non-GAAP $ 2,790 $ 2,819 (1)%
Provision for credit losses 3 2
Income before income taxes – GAAP $ 1,263 $ 1,141 11%
Income before income taxes, excluding notable items – Non-GAAP $ 1,291 $ 1,176 10%
Pre-tax operating margin - GAAP (c) 31% 29%
(a) 2018 includes severance and litigation expense recorded in 4Q18.

(b) 2017 includes severance recorded in 4Q17 and litigation expense recorded in 2017.
XXIV BNY Mellon

THE BANK OF NEW YORK MELLON CORPORATION
2018 Annual Report
Table of Contents
Page Page
Financial Summary 2 Financial Statements:
Consolidated Income Statement 119
Management’s Discussion and Analysis of Financial Consolidated Comprehensive Income Statement 121
Condition and Results of Operations: Consolidated Balance Sheet 122
Results of Operations: Consolidated Statement of Cash Flows 123
General 4 Consolidated Statement of Changes in Equity 124
Overview 4
Key 2018 events 4 Notes to Consolidated Financial Statements:
Summary of financial highlights 5 Note 1 - Summary of significant accounting and
Fee and other revenue 7 reporting policies 126
Net interest revenue 9 Note 2 - Accounting changes and new accounting
Noninterest expense 12 guidance 136
Income taxes 12 Note 3 - Acquisitions and dispositions 139
Review of businesses 13 Note 4 - Securities 140
International operations 21 Note 5 - Loans and asset quality 145
Critical accounting estimates 23 Note 6 - Goodwill and intangible assets 151
Consolidated balance sheet review 28 Note 7 - Other assets 152
Liquidity and dividends 39 Note 8 - Deposits 153
Commitments and obligations 44 Note 9 - Contract revenue 153
Off-balance sheet arrangements 44 Note 10 - Net interest revenue 155
Capital 45 Note 11 - Income taxes 155
Trading activities and risk management 50 Note 12 - Long-term debt 157
Asset/liability management 52 Note 13 - Variable interest entities and securitization 157
Risk Management 54 Note 14 - Shareholders’ equity 158
Supervision and Regulation 60 Note 15 - Other comprehensive income (loss) 162
Risk Factors 78 Note 16 - Stock-based compensation 163
Recent Accounting Developments 103 Note 17 - Employee benefit plans 164
Business Continuity 104 Note 18 - Company financial information (Parent
Supplemental Information (unaudited): Corporation) 171
Explanation of GAAP and Non-GAAP financial Note 19 - Fair value measurement 174
measures (unaudited) 105 Note 20 - Fair value option 183
Rate/volume analysis (unaudited) 107 Note 21 - Commitments and contingent liabilities 184
Selected Quarterly Data (unaudited) 108 Note 22 - Derivative instruments 188
Forward-looking Statements 109 Note 23 - Lines of business 195
Acronyms 111 Note 24 - International operations 198
Glossary 112 Note 25 - Supplemental information to the
Report of Management on Internal Control Over Consolidated Statement of Cash Flows 198
Financial Reporting 116
Report of Independent Registered Public Report of Independent Registered Public
Accounting Firm 117 Accounting Firm 199
Directors, Executive Committee and Other
Executive Officers 200
Performance Graph 201

Corporate Information Inside back cover
Financial Summary
(dollar amounts in millions, except per common share
amounts and unless otherwise noted) 2018 2017 2016 2015 2014
Selected income statement information:
Fee and other revenue $ 12,794 $ 12,165 $ 12,073 $ 12,082 $ 12,649
(Loss) income from consolidated investment management funds (13) 70 26 86 163
Net interest revenue 3,611 3,308 3,138 3,026 2,880
Total revenue 16,392 15,543 15,237 15,194 15,692
Provision for credit losses (11) (24) (11) 160 (48)
Noninterest expense 11,211 10,957 10,523 10,799 12,177
Income before income taxes 5,192 4,610 4,725 4,235 3,563
Provision for income taxes 938 496 1,177 1,013 912
Net income 4,254 4,114 3,548 3,222 2,651
Net loss (income) attributable to noncontrolling interests (a) 12 (24) (1) (64) (84)
Net income applicable to shareholders of The Bank of New York Mellon
Corporation 4,266 4,090 3,547 3,158 2,567
Preferred stock dividends (169) (175) (122) (105) (73)
Net income applicable to common shareholders of The Bank of New York Mellon
Corporation $ 4,097 $ 3,915 $ 3,425 $ 3,053 $ 2,494
Earnings per share applicable to common shareholders of The Bank of New York
Mellon Corporation:
Basic $ 4.06 $ 3.74 $ 3.16 $ 2.73 $ 2.17
Diluted $ 4.04 $ 3.72 $ 3.15 $ 2.71 $ 2.15
Average common shares and equivalents outstanding of The Bank of New York
Mellon Corporation (in thousands):
Basic 1,002,922 1,034,281 1,066,286 1,104,719 1,129,897
Diluted 1,007,141 1,040,290 1,072,013 1,112,511 1,137,480
Selected balance sheet information (at period-end):
Interest-earning assets $ 308,749 $ 316,261 $ 280,332 $ 338,955 $ 317,646
Total assets 362,873 371,758 333,469 393,780 385,303
Deposits 238,778 244,322 221,490 279,610 265,869
Long-term debt 29,163 27,979 24,463 21,547 20,264
Preferred stock 3,542 3,542 3,542 2,552 1,562
Total The Bank of New York Mellon Corporation common shareholders’ equity 37,096 37,709 35,269 35,485 35,879
At Dec. 31
Assets under custody and/or administration (in trillions) (b) $ 33.1 $ 33.3 $ 29.9 $ 28.9 $ 28.5
Assets under management (in billions) (c) 1,722 1,893 1,648 1,625 1,686
Market value of securities on loan (in billions) (d) 373 408 296 277 289
Selected ratios:
Return on common equity 10.8% 10.8% 9.6% 8.6% 6.8%
Return on tangible common equity – Non-GAAP (e) 22.5 23.9 21.2 19.7 16.0
Return on average assets 1.19 1.14 0.96 0.82 0.67
Pre-tax operating margin 32 30 31 28 23
Fee revenue as a percentage of total revenue 78 78 79 79 80
Percentage of non-U.S. total revenue 37 36 34 36 38
Net interest margin 1.25 1.14 1.03 0.96 0.95
(a) Primarily attributable to noncontrolling interests related to consolidated investment management funds.
(b) Includes the assets under custody and/or administration of CIBC Mellon Global Securities Services Company (“CIBC Mellon”), a joint venture with the
Canadian Imperial Bank of Commerce, of $1.2 trillion at Dec. 31, 2018, $1.3 trillion at Dec. 31, 2017, $1.2 trillion at Dec. 31, 2016, $1.0 trillion at Dec.
31, 2015 and $1.1 trillion at Dec. 31, 2014.
(d) Represents the total amount of securities on loan in our agency securities lending program managed by the Investment Services business. Excludes
securities for which BNY Mellon acts as an agent on behalf of CIBC Mellon clients, which totaled $58 billion at Dec. 31, 2018, $71 billion at Dec. 31,
2017, $63 billion at Dec. 31, 2016, $55 billion at Dec. 31, 2015 and $65 billion at Dec. 31, 2014.
(e) 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 105 for the reconciliation of the Non-GAAP measure.
2 BNY Mellon
Financial Summary (continued)
(dollar amounts in millions, except per common share
amounts and unless otherwise noted) 2018 2017 2016 2015 2014
Cash dividends per common share $ 1.04 $ 0.86 $ 0.72 $ 0.68 $ 0.66
Common dividend payout ratio 26% 23 % 23% 25% 31%
Common dividend yield 2.2% 1.6 % 1.5% 1.6% 1.6%
Closing stock price per common share $ 47.07 $ 53.86 $ 47.38 $ 41.22 $ 40.57
Market capitalization (in billions) $ 45.2 $ 54.6 $ 49.6 $ 44.7 $ 45.4
Book value per common share $ 38.63 $ 37.21 $ 33.67 $ 32.69 $ 32.09
Tangible book value per common share – Non-GAAP (a) $ 19.04 $ 18.24 $ 16.19 $ 15.27 $ 14.70
Full-time employees 51,300 52,500 52,000 51,200 50,300
Year-end common shares outstanding (in thousands) 960,426 1,013,442 1,047,488 1,085,343 1,118,228
Average total equity to average total assets 12.1% 11.7 % 10.7% 10.2% 10.2%
Capital ratios (at period-end):
Consolidated regulatory capital ratios - fully phased-in basis: (b)(c)
Advanced:
CET1 ratio 10.7% 10.3 % 9.7% 9.5% 9.8%
Tier 1 capital ratio 12.8 12.3 11.8 11.0 10.8
Total (Tier 1 plus Tier 2) capital ratio 13.6 13.0 12.1 11.1 11.0
Standardized:
CET1 ratio 11.7 11.5 11.3 10.2 10.6
Tier 1 capital ratio 14.1 13.7 13.6 11.8 11.6
Total (Tier 1 plus Tier 2) capital ratio 15.1 14.7 14.2 12.0 12.0
Tier 1 leverage ratio 6.6 6.4 N/A N/A N/A
Supplementary leverage ratio (“SLR”) 6.0 5.9 5.6 4.9 4.4
Consolidated regulatory capital ratios - transitional basis: (b)(d)

Advanced:
CET1 ratio N/A 10.7 % 10.6% 10.8% 11.2%
Tier 1 capital ratio N/A 12.7 12.6 12.3 12.2
Total (Tier 1 plus Tier 2) capital ratio N/A 13.4 13.0 12.5 12.5
Tier 1 leverage ratio N/A 6.6 6.6 6.0 5.6
SLR N/A 6.1 6.0 5.4 N/A
BNY Mellon shareholders’ equity to total assets ratio 11.2% 11.1 % 11.6% 9.7% 9.7%
BNY Mellon common shareholders’ equity to total assets ratio 10.2 10.1 10.6 9.0 9.3
(a) Tangible book value per common share – Non-GAAP excludes goodwill and intangible assets, net of deferred tax liabilities. See “Supplemental
information – Explanation of GAAP and Non-GAAP financial measures” beginning on page 105 for the reconciliation of the Non-GAAP measure.
(b) Risk-based capital ratios at Dec. 31, 2014 do not reflect the adoption of accounting guidance related to Consolidations in Accounting Standards Update
(“ASU”) 2015-02.
(c) For our Common Equity Tier 1 (“CET1”), Tier 1 and Total capital ratios, our effective capital ratios under U.S. capital rules are the lower of the ratios
as calculated under the Standardized and Advanced Approaches. Beginning Jan. 1, 2018, consolidated regulatory ratios are fully phased-in. The
consolidated regulatory ratios for all prior periods are presented on an estimated fully phased-in basis. For additional information on our regulatory
capital ratios, see “Capital” beginning on page 45.
(d) Reflects transitional adjustments to CET1, Tier 1 capital and Tier 2 capital required in period periods under U.S. capital rules.
BNY Mellon 3
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Results of Operations
General The diagram below presents our two business

segments and lines of business, with the remaining
In this Annual Report, references to “our,” “we,” operations in the Other segment.
“us,” “BNY Mellon,” the “Company” and similar
terms refer to The Bank of New York Mellon
The Bank of New
Corporation and its consolidated subsidiaries. The York Mellon
term “Parent” refers to The Bank of New York Corporation
Mellon Corporation but not its subsidiaries.
Investment Investment
Services Management
BNY Mellon’s actual results of future operations may
differ from those estimated or anticipated in certain
forward-looking statements contained herein for Asset Servicing Asset
Management
reasons which are discussed below and under the
heading “Forward-looking Statements.” When used
in this Annual Report, words such as “estimate,” Pershing Wealth
Management
“forecast,” “project,” “anticipate,” “likely,” “target,”
“expect,” “intend,” “continue,” “seek,” “believe,”
Issuer Services
“plan,” “goal,” “could,” “should,” “would,” “may,”
“might,” “will,” “strategy,” “synergies,”
“opportunities,” “trends,” “future” and words of Treasury
similar meaning, may signify forward-looking Services
statements.
Clearance and
Certain business terms and commonly used acronyms Collateral
Management
used in this Annual Report are defined in the
Glossary and Acronyms sections.
Key 2018 events
The following should be read in conjunction with the
Consolidated Financial Statements included in this Share repurchase program and increase in cash
report. Investors should also read the section titled dividend on common stock
“Forward-looking Statements.”
In June 2018, our Board of Directors approved the
Overview repurchase of up to $2.4 billion of common stock
starting in the third quarter of 2018 and continuing
Established in 1784 by Alexander Hamilton, we were through the second quarter of 2019.
the first company listed on the New York Stock
Exchange (NYSE: BK). With a more than 230-year In July 2018, our Board of Directors approved a 17%
history, BNY Mellon is a global company that increase in the quarterly cash dividend per common
manages and services assets for financial institutions, share, from $0.24 to $0.28 per share. The first
corporations and individual investors in 35 countries. payment of the increased quarterly cash dividend was
made on Aug. 10, 2018.
BNY Mellon has two business segments, Investment
Services and Investment Management, which offer a In December 2018, our Board of Directors approved
comprehensive set of capabilities and deep expertise the repurchase of $830 million of additional common
across the investment lifecycle, enabling the stock, all of which was repurchased in the fourth
Company to provide solutions to buy-side and sell- quarter of 2018. These repurchases were in addition
side market participants, as well as leading to the repurchase of $2.4 billion of common stock
institutional and wealth management clients globally. previously approved by the Board.
4 BNY Mellon
Results of Operations (continued)
Corporate headquarters the previously disclosed lost business in Pershing.

(See “Investment Services business” beginning
In July 2018, BNY Mellon relocated its corporate on page 14.)
headquarters to 240 Greenwich Street in lower
• Investment management and performance fees
Manhattan.
totaled $3.7 billion in 2018 compared with $3.6
billion in 2017, an increase of 3%, primarily
Summary of financial highlights reflecting higher market values, performance fees
and the favorable impact of a weaker U.S. dollar
We reported net income applicable to common (principally versus the British pound), partially
shareholders of BNY Mellon of $4.1 billion, or $4.04 offset by the impact of net outflows. On a
per diluted common share, in 2018, including a net constant currency basis (Non-GAAP), investment
charge of $168 million, or $(0.17) per diluted management and performance fees increased 2%
common share, related to severance, expenses compared with 2017. (See “Investment
associated with consolidating real estate and litigation Management business” beginning on page 17.)
expense, partially offset by adjustments to provisional
estimates for U.S. tax legislation. In 2017, net • Foreign exchange and other trading revenue
income applicable to common shareholders of BNY totaled $732 million in 2018 compared with $668
Mellon was $3.9 billion, or $3.72 per diluted million in 2017. Foreign exchange revenue
common share, including a net benefit of $160 totaled $663 million in 2018, an increase of 4%
million, or $0.15 per diluted common share, related to compared with $638 million in 2017. The
the estimated net benefit related to U.S. tax increase in foreign exchange revenue primarily
legislation, partially offset by severance, litigation reflects higher volumes, partially offset by
expense and other charges. foreign currency hedging. (See “Fee and other
revenue” beginning on page 7.)
Highlights of 2018 results • Net interest revenue totaled $3.6 billion in 2018
compared with $3.3 billion in 2017, an increase
• Assets under custody and/or administration
of 9%. The increase primarily reflects higher
(“AUC/A”) totaled $33.1 trillion at Dec. 31, 2018
interest rates. Net interest margin was 1.25% in
compared with $33.3 trillion at Dec. 31, 2017.
2018 compared with 1.14% in 2017. (See “Net
The 1% decrease primarily reflects lower market
interest revenue” beginning on page 9.)
values and the unfavorable impact of a stronger
U.S. dollar on a spot basis, partially offset by net • The provision for credit losses was a credit of $11
new business. (See “Investment Services million in 2018 and a credit of $24 million in
business” beginning on page 14.) 2017. (See “Asset quality and allowance for
credit losses” beginning on page 35.)
• Assets under management (“AUM”) totaled $1.7
trillion at Dec. 31, 2018 compared with $1.9 • Noninterest expense totaled $11.2 billion in 2018
trillion at Dec. 31, 2017. The 9% decrease compared with $11.0 billion in 2017. The 2%
primarily reflects the unfavorable impact of a increase primarily reflects investments in
stronger U.S. dollar (principally versus the technology, expenses associated with
British pound) on a spot basis, lower market consolidating our real estate and the unfavorable
values, net outflows, the divestiture of impact of a weaker U.S. dollar, partially offset by
CenterSquare Investment Management lower bank assessment charges. (See
(“CenterSquare”) and other changes. AUM “Noninterest expense” beginning on page 12.)
excludes securities lending cash management
• The provision for income taxes was $938 million
assets and assets managed in the Investment
(18.1% effective tax rate) in 2018, including the
Services business. (See “Investment
impact of the adjustments to provisional
Management business” beginning on page 17.)
estimates for U.S. tax legislation and the tax
• Investment services fees totaled $7.8 billion in impact of severance, expenses associated with
2018, an increase of 5% compared with $7.5 consolidating real estate and litigation expense.
billion in 2017, primarily reflecting higher equity (See “Income taxes” on page 12.)
market values, net new business, including
• The net unrealized pre-tax loss on our total
growth in collateral management and higher
securities portfolio was $907 million at Dec. 31,
Depositary Receipts revenue, partially offset by
BNY Mellon 5
2018, compared with a pre-tax loss of $85 million • The provision for credit losses was a credit of $24
at Dec. 31, 2017, including the impact of related million in 2017.
hedges. The increase in net unrealized pre-tax
• Noninterest expense totaled $11.0 billion in 2017
loss was primarily driven by an increase in
compared with $10.5 billion in 2016. The 4%
interest rates. (See “Securities” beginning on
increase primarily reflects higher staff, software,
page 29.)
and professional, legal and other purchased
• Our CET1 ratio calculated under the Advanced services expenses.
Approach was 10.7% at Dec. 31, 2018 and
• The provision for income taxes was $496 million
10.7%, on a transitional basis, at Dec. 31, 2017.
(10.8% effective tax rate), including the estimated
The ratio was unchanged compared to Dec. 31,
tax benefit related to U.S. tax legislation.
2017, reflecting capital deployed through
common stock repurchases and dividend
Results for 2016
payments, and the final phase-in requirements
under U.S. capital rules, offset by capital In 2016, we reported net income applicable to
generated through earnings and lower risk- common shareholders of BNY Mellon of $3.4 billion,
weighted assets (“RWAs”). (See “Capital” or $3.15 per diluted common share. These results
beginning on page 45.) were primarily driven by:
• Our SLR was 6.0% at Dec. 31, 2018 and 6.1%,
on a transitional basis, at Dec. 31, 2017. (See • Investment services fees totaled $7.2 billion,
“Capital” beginning on page 45.) primarily reflecting higher money market fees
and securities lending revenue, partially offset by
Results for 2017 the unfavorable impact of lost business on
clearing services fees, the unfavorable impact of
In 2017, we reported net income applicable to a stronger U.S. dollar and the downsizing of the
common shareholders of BNY Mellon of $3.9 billion, UK transfer agency business.
or $3.72 per diluted common share. These results
were primarily driven by:
totaled $3.4 billion, primarily reflecting the
unfavorable impact of a stronger U.S. dollar
• Investment services fees totaled $7.5 billion in
(principally versus the British pound), net
2017, an increase of 3% compared with $7.2
outflows of AUM and lower performance fees,
billion in 2016, primarily reflecting higher money
partially offset by higher market values and
market fees, higher equity market values and net
money market fees.
new business, including growth in collateral
management, partially offset by the previously • Foreign exchange and other trading revenue
disclosed lost business in Pershing and lower totaled $701 million, of which $687 million
volumes in certain Depositary Receipts programs. represented foreign exchange revenue. The
decrease in foreign exchange revenue primarily
reflects the impact of clients migrating to lower
totaled $3.6 billion in 2017 compared with $3.4
margin products and lower volumes.
billion in 2016, an increase of 7%, primarily
reflecting higher market values, money market • The provision for credit losses was a credit of $11
fees and performance fees, partially offset by the million.
unfavorable impact of a stronger U.S. dollar • Noninterest expense totaled $10.5 billion
(principally versus the British pound). primarily reflecting lower expenses in nearly all
• Foreign exchange and other trading revenue categories, driven by the favorable impact of a
totaled $668 million in 2017 compared with $701 stronger U.S. dollar, lower staff, other, litigation
million in 2016. Foreign exchange revenue and legal expenses and the benefit of the business
totaled $638 million in 2017, a decrease of 7%, improvement process. The decrease was partially
compared with $687 million in 2016. The offset by higher bank assessment charges,
decrease in foreign exchange revenue primarily distribution and servicing and software expenses.
reflects lower volatility, partially offset by higher • The provision for income taxes was $1.2 billion
volumes. (24.9% effective tax rate) in 2016.
6 BNY Mellon
Fee and other revenue
Fee and other revenue 2018 2017

vs. vs.
(dollars in millions, unless otherwise noted) 2018 2017 2016 2017 2016
Investment services fees:
Asset servicing (a) $ 4,608 $ 4,383 $ 4,244 5% 3%
Clearing services 1,578 1,553 1,404 2 11
Issuer services 1,099 977 1,026 12 (5)
Treasury services 554 557 547 (1) 2
Total investment services fees 7,839 7,470 7,221 5 3
Investment management and performance fees 3,685 3,584 3,350 3 7
Foreign exchange and other trading revenue 732 668 701 10 (5)
Financing-related fees 207 216 219 (4) (1)
Distribution and servicing 139 160 166 (13) (4)
Investment and other income 240 64 341 N/M N/M
Total fee revenue 12,842 12,162 11,998 6 1
Net securities (losses) gains (48) 3 75 N/M N/M
Total fee and other revenue $ 12,794 $ 12,165 $ 12,073 5% 1%
Fee revenue as a percentage of total revenue 78% 78% 79%
AUC/A at period end (in trillions) (b) $ 33.1 $ 33.3 $ 29.9 (1)% 11%
AUM at period end (in billions) (c) $ 1,722 $ 1,893 $ 1,648 (9)% 15%
(a) Asset servicing fees include securities lending revenue of $220 million in 2018, $195 million in 2017 and $207 million in 2016.
(b) Includes the AUC/A of CIBC Mellon of $1.2 trillion at Dec. 31, 2018, $1.3 trillion at Dec. 31, 2017 and $1.2 trillion at Dec. 31, 2016.
Fee and other revenue increased 5% compared with provided to clients, which reduce fee revenue and
2017. The increase primarily reflects higher asset increase net interest revenue, partially offset by
servicing fees, investment and other income, issuer higher volumes.
servicing fees and investment management and
performance fees, partially offset by net securities See the “Investment Services business” in “Review of
losses. businesses” for additional details.
Investment services fees Investment management and performance fees
Investment services fees increased 5% compared with Investment management and performance fees
2017 reflecting the following: increased 3% compared with 2017, primarily
reflecting higher market values, performance fees and
• Asset servicing fees increased 5%, primarily the favorable impact of a weaker U.S. dollar
reflecting growth in collateral management, (principally versus the British pound), partially offset
higher equity market values and securities by the impact of net outflows. On a constant
lending volumes. currency basis (Non-GAAP), investment
• Clearing services fees increased 2%, primarily management and performance fees increased 2%
driven by higher equity market values and compared with 2017. Performance fees were $144
average long-term mutual funds balances, million in 2018, $94 million in 2017 and $60 million
partially offset by the previously disclosed lost in 2016.
business.
AUM was $1.7 trillion at Dec. 31, 2018, a decrease of
• Issuer services fees increased 12%, primarily 9% compared with $1.9 trillion at Dec. 31, 2017. The
reflecting higher Depositary Receipts revenue decrease primarily reflects the unfavorable impact of
and higher volumes in Corporate Trust. a stronger U.S. dollar (principally versus the British
• Treasury services fees decreased 1%, primarily pound) on a spot basis, lower market values, net
reflecting higher compensating balance credits
BNY Mellon 7
outflows, the divestiture of CenterSquare and other Distribution and servicing fees
changes.
Distribution and servicing fees earned from mutual
See the “Investment Management business” in funds are primarily based on average assets in the
“Review of businesses” for additional details funds and the sales of funds that we manage or
regarding the drivers of investment management and administer and are primarily reported in the
performance fees, AUM and AUM flows. Investment Management business. These fees, which
include 12b-1 fees, fluctuate with the overall level of
Foreign exchange and other trading revenue net sales, the relative mix of sales between share
classes, the funds’ market values and money market
fee waivers.
Foreign exchange and other trading revenue
(in millions) 2018 2017 2016
Foreign exchange $ 663 $ 638 $ 687 Distribution and servicing fees were $139 million in
Other trading revenue 69 30 14 2018 compared with $160 million in 2017. The
Total foreign exchange and decrease primarily reflects the impact of lower fees
other trading revenue $ 732 $ 668 $ 701
from mutual funds.
Investment and other income

Foreign exchange and other trading revenue increased
10% compared with 2017. The following table provides the components of
investment and other income.
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 Investment and other income
(in millions) 2018 2017 2016
market volatility, and the impact of foreign currency Corporate/bank-owned life insurance $ 145 $ 153 $ 149
hedging activities. In 2018, foreign exchange Expense reimbursements from joint
revenue totaled $663 million, an increase of 4% venture 71 64 67
compared with 2017, primarily reflecting higher Asset-related gains (losses) 70 (1) 10
Equity investment income (loss) 4 37 (10)
volumes, partially offset by foreign currency hedging. Seed capital gains (a) 3 32 44
Foreign exchange revenue is primarily reported in the Lease-related gains 1 56 38
Investment Services business and, to a lesser extent, Other (loss) income (54) (277) 43
the Investment Management business and the Other Total investment and other income $ 240 $ 64 $ 341
segment. (a) Excludes seed capital gains related to consolidated investment
management funds, which are reflected in operations of
consolidated investment management funds.
Total other trading revenue was $69 million in 2018,
compared with $30 million in 2017. The increase
primarily reflects gains on Investment Management Investment and other income includes corporate and
hedging activities. Other trading revenue is reported bank-owned life insurance contracts, expense
in all three business segments. reimbursements from our CIBC Mellon joint venture,
gains or losses from asset-related activity, equity
investments, seed capital, lease-related activity and
Financing-related fees other (loss) income. Expense reimbursements from
our CIBC Mellon joint venture relate to expenses
Financing-related fees, which are primarily reported
incurred by BNY Mellon on behalf of the CIBC
in the Investment Services business and the Other
Mellon joint venture. Asset-related gains (losses)
segment, include capital markets fees, loan
include real estate, loan and other asset dispositions.
commitment fees and credit-related fees. Financing-
Other (loss) income primarily includes foreign
related fees totaled $207 million in 2018 compared
with $216 million in 2017, primarily reflecting lower currency remeasurement gain (loss), other
fees on standby letters of credit and underwriting. investments, including renewable energy, and various
miscellaneous revenues. Investments in renewable
energy generate losses in other income that are more
than offset by benefits and credits recorded to the
provision for income taxes.
8 BNY Mellon
Investment and other income was $240 million in The increase in investment services fees primarily
2018 compared with $64 million in 2017. The reflects higher money market fees, higher equity
increase primarily reflects the impact of U.S. tax market values and net new business, including growth
legislation on our renewable energy investments in collateral management, partially offset by
recorded in 2017. previously disclosed lost business in Pershing and
lower volumes in certain Depositary Receipts
Net securities losses programs.
Net securities losses were $48 million in 2018, The increase in investment management and
primarily reflecting the sale of debt securities. performance fees primarily reflects higher market
values, money market fees and performance fees,
2017 compared with 2016 partially offset by the unfavorable impact of a
stronger U.S. dollar on an average basis (principally
Fee and other revenue totaled $12.2 billion in 2017 versus the British pound).
compared with $12.1 billion in 2016. The increase
primarily reflects higher investment services fees and The decrease in investment and other income
investment management and performance fees, primarily reflects the impact of U.S. tax legislation on
partially offset by lower investment and other income our renewable energy investments.
and net securities gains.
Net interest revenue
Net interest revenue 2018 2017

vs. vs.
(dollars in millions) 2018 2017 2016 2017 2016
Net interest revenue $ 3,611 $ 3,308 $ 3,138 9% 5%
Add: Tax equivalent adjustment 20 47 51 N/M N/M
Net interest revenue on a fully taxable equivalent
basis (“FTE”) – Non-GAAP (a) $ 3,631 $ 3,355 $ 3,189 8% 5%
Average interest-earning assets $289,916 $ 290,522 $ 303,379 —% (4)%
Net interest margin 1.25% 1.14% 1.03% 11 bps 11 bps

Net interest margin (FTE) – Non-GAAP (a) 1.25% 1.15% 1.05% 10 bps 10 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.
Net interest revenue increased 9% compared with Average non-U.S. dollar deposits comprised
2017, primarily reflecting higher interest rates. approximately 30% of our average total deposits in
2018 and 2017. Approximately 45% of the average
Net interest margin increased 11 basis points non-U.S. dollar deposits in 2018 and 2017 were euro-
compared with 2017, primarily reflecting higher denominated.
yields on interest-earning assets, partially offset by
higher interest rates paid on interest-bearing 2017 compared with 2016
liabilities.
Net interest revenue increased 5% compared with
Average interest-earning assets were $290 billion in 2016, primarily driven by higher interest rates,
2018 compared with $291 billion in 2017. The partially offset by lower interest-earning assets driven
decrease primarily reflects lower loans and interest- by lower average deposits. The 11 basis points
bearing deposits with the Federal Reserve and other increase in the net interest margin primarily reflects
central banks, partially offset by higher trading higher yields on interest-earning assets, partially
securities. offset by higher interest rates paid on interest-bearing
liabilities.
BNY Mellon 9
Average balances and interest rates 2018

Average Average
(dollar amounts in millions, presented on an FTE basis) balance Interest rates
Assets
Interest-earning assets:
Interest-bearing deposits with banks (primarily foreign banks) $ 14,740 $ 219 1.48%
Interest-bearing deposits with the Federal Reserve and other central banks 68,408 531 0.78
Federal funds sold and securities purchased under resale agreements (a) 27,883 1,116 4.00
Margin loans 14,397 510 3.54
Non-margin loans:
Domestic offices:
Consumer 9,789 319 3.26
Commercial 19,853 701 3.53
Foreign offices 11,771 336 2.85
Total non-margin loans 41,413 1,356 (b) 3.27
Securities:
U.S. government obligations 23,908 486 2.03
U.S. government agency obligations 63,902 1,518 2.37
State and political subdivisions 2,565 69 2.69
Other securities:
Domestic offices 8,186 341 4.17
Total other securities 28,034 520 1.85
Trading securities (primarily domestic) 4,666 127 2.74
Total securities 123,075 2,720 2.21
Total interest-earning assets $ 289,916 $ 6,452 2.23%
Noninterest-earning assets 53,858
Total assets $ 343,774
Liabilities
Interest-bearing liabilities:
Interest-bearing deposits:
Domestic offices $ 59,226 $ 537 0.91%
Total interest-bearing deposits 154,701 877 0.57
Federal funds purchased and securities sold under repurchase agreements (a) 15,546 758 4.88
Trading liabilities 1,310 29 2.21
Other borrowed funds:
Domestic offices 2,122 55 2.57
Foreign offices 423 3 0.73
Total other borrowed funds 2,545 58 2.26
Commercial paper 2,607 51 1.97
Payables to customers and broker-dealers 16,353 191 1.17
Long-term debt 28,257 857 3.03
Total interest-bearing liabilities $ 221,319 $ 2,821 1.27%
Total noninterest-bearing deposits 63,814
Other noninterest-bearing liabilities 16,952
Total liabilities 302,085
Temporary equity
Redeemable noncontrolling interests 187
Permanent equity
Total The Bank of New York Mellon Corporation shareholders’ equity 41,360
Noncontrolling interests 142
Total permanent equity 41,502
Total liabilities, temporary equity and permanent equity $ 343,774
Net interest revenue (FTE) – Non-GAAP $ 3,631
Net interest margin (FTE) – Non-GAAP 1.25%
Less: Tax equivalent adjustment (c) 20
Net interest revenue - GAAP $ 3,611
Net interest margin- GAAP 1.25%
Percentage of assets attributable to foreign offices (d) 31%
Percentage of liabilities attributable to foreign offices (d) 34
Note: Interest and average rates were calculated on a taxable equivalent basis using dollar amounts in thousands and actual number of days in the year.
(a) Includes the average impact of offsetting under enforceable netting agreements of approximately $25 billion in 2018.
(b) Includes fees of $7 million in 2018. Non-accrual loans are included in average loans; the associated income, which was recognized on a cash basis, is
included in interest income.
(c) The tax equivalent adjustment relates to tax-exempt securities, primarily state and political subdivisions, and is based on the U.S. federal statutory tax
rate of 21%, adjusted for applicable state income taxes, net of the related federal tax benefit.
(d) Includes the Cayman Islands branch office.
10 BNY Mellon
Average balances and interest rates (continued) 2017 2016

Average Average Average Average
(dollar amounts in millions, presented on an FTE basis) balance Interest rates balance Interest rates
Assets
Interest-bearing deposits with banks (primarily foreign banks) $ 14,879 $ 120 0.80% $ 14,704 $ 104 0.70%
Interest-bearing deposits with the Federal Reserve and other
central banks 70,213 319 0.45 80,593 198 0.25
Federal funds sold and securities purchased under resale agreements (a) 27,192 423 1.55 25,767 233 0.91
Margin loans 14,500 343 2.36 18,201 265 1.46
Non-margin loans:
Domestic offices:
Consumer 9,548 298 3.12 8,483 259 3.05
Commercial 20,976 521 2.49 21,820 417 1.91
Foreign offices 12,915 258 2.00 13,177 197 1.50
Total non-margin loans 43,439 1,077 (b) 2.48 43,480 873 (b) 2.01
Securities:
U.S. government obligations 25,674 425 1.66 25,074 378 1.51
U.S. government agency obligations 60,268 1,195 1.98 56,384 986 1.75
State and political subdivisions 3,226 100 3.09 3,703 110 2.96
Other securities:
Domestic offices 9,141 215 2.35 12,326 210 1.71
Foreign offices 19,541 150 0.77 20,664 206 1.00
Total other securities 28,682 365 1.27 32,990 416 1.26
Trading securities (primarily domestic) 2,449 62 2.54 2,483 63 2.56
Total securities 120,299 2,147 1.79 120,634 1,953 1.62
Total interest-earning assets $ 290,522 $ 4,429 1.52% $ 303,379 $ 3,626 1.20%
Noninterest-earning assets 53,326 55,098
Total assets $ 343,848 $ 358,477
Liabilities
Domestic offices: $ 46,908 $ 107 0.23% $ 54,547 $ 41 0.08%
Foreign offices 96,215 55 0.06 102,399 (25) (0.02)
Total interest-bearing deposits 143,123 162 0.11 156,946 16 0.01
Federal funds purchased and securities sold under repurchase
agreements (a) 19,653 225 1.14 14,489 36 0.25
Trading liabilities 1,243 7 0.57 711 6 0.89
Domestic offices 1,113 21 1.86 93 4 4.15
Foreign offices 803 5 0.67 753 4 0.51
Total other borrowed funds 1,916 26 1.36 846 8 0.91
Commercial paper 2,630 29 1.08 1,337 5 0.37
Payables to customers and broker-dealers 18,984 64 0.34 16,925 12 0.07
Long-term debt 27,424 561 2.05 23,334 354 1.52
Total interest-bearing liabilities $ 214,973 $ 1,074 0.50% $ 214,588 $ 437 0.20%
Total noninterest-bearing deposits 71,664 82,712
Other noninterest-bearing liabilities 16,932 21,928
Total liabilities 303,569 319,228
Temporary equity
Redeemable noncontrolling interests 180 182
Permanent equity
Total The Bank of New York Mellon Corporation shareholders’ equity 39,687 38,489
Noncontrolling interests 412 578
Total permanent equity 40,099 39,067
Total liabilities, temporary equity and permanent equity $ 343,848 $ 358,477
Net interest revenue (FTE) – Non-GAAP $ 3,355 $ 3,189
Net interest margin (FTE) – Non-GAAP 1.15% 1.05%
Less: Tax equivalent adjustment (c) 47 51
Net interest revenue - GAAP $ 3,308 $ 3,138
Net interest margin - GAAP 1.14% 1.03%
Percentage of assets attributable to foreign offices (d) 30% 29%
Percentage of liabilities attributable to foreign offices (d) 35 36
Note: Interest and average rates were calculated on a taxable equivalent basis using dollar amounts in thousands and actual number of days in the year.
(a) Includes the average impact of offsetting under enforceable netting agreements of approximately $6 billion in 2017 and less than $350 million in 2016.
(b) Includes fees of $9 million in 2017 and $10 million in 2016. Non-accrual loans are included in the average loans; the associated income, which was
recognized on a cash basis, is included in interest income.
(c) The tax equivalent adjustment relates to tax-exempt securities, primarily state and political subdivisions, and is based on the U.S. federal statutory tax
rate of 35%, adjusted for applicable state income taxes, net of the related federal tax benefit.
(d) Includes the Cayman Islands branch office.
BNY Mellon 11
Noninterest expense
Noninterest expense 2018 2017

vs. vs.
Staff (a) $ 6,145 $ 6,033 $ 5,809 2% 4%
Professional, legal and other purchased services 1,334 1,276 1,186 5 8
Software 772 744 647 4 15
Net occupancy 630 570 592 11 (4)
Sub-custodian and clearing (b) 450 414 400 9 4
Distribution and servicing 406 419 405 (3) 3
Furniture and equipment 290 241 247 20 (2)
Business development 228 229 245 — (7)
Bank assessment charges 170 220 219 (23) —
Amortization of intangible assets 180 209 237 (14) (12)
Other (a)(b)(c) 606 602 536 1 12
Total noninterest expense $ 11,211 $ 10,957 $ 10,523 2% 4%
Full-time employees at period end 51,300 52,500 52,000 (2)% 1%

(a) In 2018, we adopted new accounting guidance included in ASU 2017-07, Compensation-Retirement Benefits: Improving the Presentation
of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost, which required the reclassification of the components of
pension and other postretirement costs, other than the service cost component. As a result, staff expense increased and other expense
decreased. Prior periods have been reclassified. See Note 2 of the Notes to Consolidated Financial Statements for additional
information.
(b) Beginning in 2018, clearing expense, which was previously included in other expense, was included with sub-custodian expense. Prior
periods have been reclassified.
(c) Beginning in 2018, merger and integration (“M&I”), litigation and restructuring charges are no longer separately disclosed. Expenses
previously reported in this line have been reclassified to existing expense categories, primarily other expense.
Total noninterest expense increased 2% compared expense primarily reflects higher incentive expense,
with 2017. The increase primarily reflects driven by stronger performance, the annual employee
investments in technology, expenses associated with merit increase and higher severance expense, partially
consolidating our real estate and the unfavorable offset by the favorable impact of a stronger U.S.
impact of a weaker U.S. dollar, partially offset by dollar. The increase in software expense primarily
lower bank assessment charges. The investments in reflects asset impairments and increased amortization.
technology are included in staff, professional, legal The increase in professional, legal and other
and other purchased services, software and furniture purchased services expense primarily reflects higher
and equipment expenses. consulting and purchased services expenses.
Our investments in technology infrastructure and Income taxes

platforms increased throughout 2018 and are
expected to continue at recent levels. As a result, we BNY Mellon recorded an income tax provision of
expect to incur higher technology-related expenses in $938 million (18.1% effective tax rate) in 2018,
2019 than in 2018. This increase is expected to be including the impact of adjusting provisional
mostly offset by decreases in other expenses as we estimates related to U.S. tax legislation and the tax
continue to manage overall expenses. impact of severance, expenses associated with
consolidating real estate and litigation expense. The
2017 compared with 2016 income tax provision was $496 million (10.8%
effective tax rate) in 2017, including the estimated tax
Total noninterest expense increased 4% compared benefit related to U.S. tax legislation. The income tax
with 2016. The increase primarily reflects higher provision was $1.2 billion (24.9% effective tax rate)
staff, software and professional, legal and other in 2016. For additional information, see Note 11 of
purchased services expenses. The increase in staff the Notes to Consolidated Financial Statements.
12 BNY Mellon
Review of businesses quarter, staff expense typically increases reflecting

the annual employee merit increase. In the fourth
We have an internal information system that produces quarter, we typically incur higher business
performance data along product and service lines for development and marketing expenses. In our
our two principal businesses, Investment Services and Investment Management business, performance fees
Investment Management, and the Other segment. are typically higher in the fourth quarter, as the fourth
quarter represents the end of the measurement period
Business accounting principles for many of the performance fee-eligible
relationships.
Our business data has been determined on an internal
management basis of accounting, rather than the The results of our businesses may also be impacted
generally accepted accounting principles used for by the translation of financial results denominated in
consolidated financial reporting. These measurement foreign currencies to the U.S. dollar. We are
principles are designed so that reported results of the primarily impacted by activities denominated in the
businesses will track their economic performance. British pound and the euro. On a consolidated basis
and in our Investment Services business, we typically
For information on the accounting principles of our have more foreign currency-denominated expenses
businesses, the primary products and services in each than revenues. However, our Investment
line of business, the primary types of revenue by Management business typically has more foreign
business and how our businesses are presented and currency-denominated revenues than expenses.
analyzed, see Note 23 of the Notes to Consolidated Overall, currency fluctuations impact the year-over-
Financial Statements. year growth rate in the Investment Management
business more than the Investment Services business.
Business results are subject to reclassification when However, currency fluctuations, in isolation, are not
organizational changes are made. There were no expected to significantly impact net income on a
significant organizational changes in 2018. The consolidated basis.
results are also subject to refinements in revenue and
expense allocation methodologies, which are Fee revenue in Investment Management, and to a
typically reflected on a prospective basis. lesser extent in Investment Services, is impacted by
the value of market indices. At Dec. 31, 2018, we
The results of our businesses may be influenced by estimate that a 5% change in global equity markets,
client and other activities that vary by quarter. In the spread evenly throughout the year, would impact fee
first quarter, incentive expense typically increases revenue by less than 1% and diluted earnings per
reflecting the vesting of long-term stock awards for common share by $0.03 to $0.05.
retirement-eligible employees. In the third quarter,
Depositary Receipts revenue is typically higher due See Note 23 of the Notes to Consolidated Financial
to an increased level of client dividend payments. Statements for the consolidating schedules which
Also in the third quarter, volume-related fees may show the contribution of our businesses to our overall
decline due to reduced client activity. In the third profitability.
BNY Mellon 13
Investment Services business
2018 2017
vs. vs.
(dollars in millions unless otherwise noted) 2018 2017 2016 2017 2016
Revenue:
Asset servicing $ 4,520 $ 4,286 $ 4,141 5% 4%
Clearing services 1,577 1,549 1,399 2 11
Issuer services 1,099 975 1,024 13 (5)
Treasury services 553 555 541 — 3
Total investment services fees 7,749 7,365 7,105 5 4
Foreign exchange and other trading revenue 665 620 663 7 (6)
Other (a) 512 542 531 (6) 2
Total fee and other revenue 8,926 8,527 8,299 5 3
Net interest revenue 3,372 3,058 2,797 10 9
Total revenue 12,298 11,585 11,096 6 4
Provision for credit losses 1 (7) 8 N/M N/M
Noninterest expense (excluding amortization of intangible assets) 7,929 7,598 7,187 4 6
Total noninterest expense 8,058 7,747 7,342 4 6
Income before taxes $ 4,239 $ 3,845 $ 3,746 10 % 3%
Pre-tax operating margin 34% 33% 34%
Securities lending revenue $ 198 $ 168 $ 170 18 % (1)%
Total revenue by line of business:

Asset Servicing $ 5,932 $ 5,603 $ 5,504 6% 2%
Pershing 2,255 2,180 1,979 3 10
Issuer Services 1,743 1,588 1,585 10 —
Treasury Services 1,302 1,251 1,136 4 10
Clearance and Collateral Management 1,066 963 892 11 8
Total revenue by line of business $ 12,298 $ 11,585 $ 11,096 6% 4%
Metrics:
Average loans $ 36,931 $ 40,142 $ 44,740 (8)% (10)%
Average deposits $ 203,279 $ 200,235 $ 217,882 2% (8)%
AUC/A at period end (in trillions) (b) $ 33.1 $ 33.3 $ 29.9 (1)% 11 %
Market value of securities on loan at period end (in billions) (c) $ 373 $ 408 $ 296 (9)% 38 %
Pershing:
Average active clearing accounts (U.S. platform) (in thousands) 6,097 6,137 5,949 (1)% 3%
Average long-term mutual fund assets (U.S. platform) $ 511,004 $ 487,845 $ 431,937 5% 13 %
Average investor margin loans (U.S. platform) $ 10,829 $ 9,810 $ 10,772 10 % (9)%
Clearance and Collateral Management:

Average tri-party collateral management balances (in billions) $ 2,918 $ 2,502 $ 2,183 17 % 15 %
(a) Other revenue includes investment management fees, financing-related fees, distribution and servicing revenue and investment and other income.
(b) Includes the AUC/A of CIBC Mellon of $1.2 trillion at Dec. 31, 2018, $1.3 trillion at Dec. 31, 2017 and $1.2 trillion at Dec. 31, 2016.
(c) Represents the total amount of securities on loan in our agency securities lending program managed by the Investment Services business.
Excludes securities for which BNY Mellon acts as agent on behalf of CIBC Mellon clients, which totaled $58 billion at Dec. 31, 2018, $71 billion
at Dec. 31, 2017 and $63 billion at Dec. 31, 2016.
14 BNY Mellon
Business description services. We are a leading provider to the debt

capital markets, providing customized and market-
BNY Mellon Investment Services provides business driven solutions to investors, bondholders and
services and technology solutions to entities including lenders. Our Depositary Receipts business drives
financial institutions, corporations, foundations and global investing by providing servicing and value-
endowments, public funds and government agencies. added solutions that enable, facilitate and enhance
Our lines of business include: Asset Servicing, cross-border trading, clearing, settlement and
Pershing, Issuer Services, Treasury Services and ownership. We are one of the largest providers of
Clearance and Collateral Management. depositary receipts services in the world, partnering
with leading companies from more than 50
We are one of the leading global investment services countries.
providers with $33.1 trillion of AUC/A at Dec. 31,
2018. Our Treasury Services business includes global
payments, liquidity management, payables/
• We are the primary provider of U.S. government receivables and trade finance services for financial
securities clearance and a provider of non-U.S. institutions, corporations and the public sector.
government securities clearance.
Our Clearance and Collateral Management
• We are a leading provider of tri-party collateral
business clears and settles equity and fixed-income
management services with an average of $2.9
transactions globally and serves as custodian for
trillion serviced globally including approximately
tri-party repo collateral worldwide. Our collateral
$2.0 trillion of the U.S. tri-party repo market.
services include collateral management,
• Our agency securities lending program is one of administration and segregation. We offer
the largest lenders of U.S. and non-U.S. innovative solutions and industry expertise which
securities, servicing a lendable asset pool of help financial institutions and institutional
approximately $3.4 trillion in 34 separate investors with their liquidity, financing, risk and
markets. balance sheet challenges.
The Asset Servicing business provides a Review of financial results

comprehensive suite of solutions. As one of the
largest global custody and fund accounting providers AUC/A decreased 1% compared with Dec. 31, 2017
and a trusted partner, we offer services for the to $33.1 trillion, primarily reflecting lower market
safekeeping of assets in capital markets globally as values and the unfavorable impact of a stronger U.S.
well as alternative investment and structured product dollar on a spot basis, partially offset by net new
strategies. We provide custody and foreign exchange business. AUC/A consisted of 33% equity securities
services, support exchange-traded funds and unit and 67% fixed-income securities at Dec. 31, 2018 and
investment trusts and provide our clients outsourcing 37% equity securities and 63% fixed-income
capabilities. We deliver securities lending and securities at Dec. 31, 2017.
financing solutions on both an agency and principal
basis. Our market leading liquidity services portal Total revenue of $12.3 billion increased 6%
enables cash investments for institutional clients and compared with 2017. Net interest revenue increased
includes fund research and analytics. compared with 2017 in all businesses, primarily
driven by higher interest rates. The drivers of fee
Pershing provides clearing, custody, business and revenue by line of business are indicated below.
technology solutions, delivering dependable
operational support to financial organizations Asset Servicing revenue of $5.9 billion increased 6%
globally. compared with 2017. The increase primarily reflects
higher net interest revenue, higher foreign exchange
The Issuer Services business includes Corporate and securities lending volumes, higher equity market
Trust and Depositary Receipts. Our Corporate values and the favorable impact of a weaker U.S.
Trust business delivers a full range of issuer and dollar.
related investor services, including trustee, paying
agency, fiduciary, escrow and other financial
BNY Mellon 15
Pershing revenue of $2.3 billion increased 3% Noninterest expense of $8.1 billion increased 4%
compared with 2017. The increase primarily reflects compared with 2017. The increase was primarily
higher net interest revenue and higher fees due to driven by investments in technology, higher volume-
growth in average long-term mutual fund balances related expenses and the unfavorable impact of a
and higher clearance volumes, partially offset by the weaker U.S. dollar.
previously disclosed lost business.
2017 compared with 2016
Issuer Services revenue of $1.7 billion increased 10%
compared with 2017. The increase primarily reflects Total revenue of $11.6 billion increased 4% compared
higher Depositary Receipts revenue driven by with 2016. Net interest revenue increased in most
corporate actions and higher volumes, higher net lines of business, primarily driven by higher interest
interest revenue and increased volumes in Corporate rates. Asset Servicing revenue increased primarily
Trust. reflecting higher net interest revenue, equity market
values and money market fees, partially offset by the
Treasury Services revenue of $1.3 billion increased downsizing of the UK transfer agency business.
4% compared with 2017. The increase primarily Pershing revenue increased primarily reflecting
reflects higher net interest revenue and higher higher net interest revenue, higher money market fees
payment volumes. and growth in long-term mutual fund assets. Issuer
Services revenue increased slightly primarily
Clearance and Collateral Management revenue of reflecting higher net interest revenue partially offset
$1.1 billion increased 11% compared with 2017. The by lost business and lower volumes from weaker
increase primarily reflects growth in collateral cross-border settlement activity in Depositary
management, clearance volumes and net interest Receipts. Treasury Services revenue increased
revenue. primarily reflecting higher net interest revenue and
higher payment volumes. Clearance and Collateral
Market and regulatory trends are driving investable Management revenue increased primarily reflecting
assets toward lower fee asset management products at growth in collateral management and higher
reduced margins for our clients. These dynamics are clearance volumes, partially offset by lower net
also negatively impacting our investment services interest revenue.
fees. However, at the same time, these trends are
providing additional outsourcing opportunities as Noninterest expense of $7.7 billion increased 6%
clients and other market participants seek to comply compared with 2016 primarily reflecting higher staff
with new regulations and reduce their operating costs. expense, including severance, higher litigation
expense, additional technology-related costs and asset
impairments.
16 BNY Mellon
Investment Management business
2018 2017
vs. vs.
Revenue:
Investment management fees (a) $ 3,488 $ 3,428 $ 3,232 2% 6%
Performance fees 144 94 60 53 57
Investment management and performance fees (b) 3,632 3,522 3,292 3 7
Distribution and servicing 190 207 192 (8) 8
Other (a) (41) (61) (60) N/M N/M
Total fee and other revenue (a) 3,781 3,668 3,424 3 7
Net interest revenue 303 329 327 (8) 1
Total revenue 4,084 3,997 3,751 2 7
Provision for credit losses 3 2 6 N/M N/M
Noninterest expense (excluding amortization of intangible assets) 2,767 2,794 2,696 (1) 4
Total noninterest expense 2,818 2,854 2,778 (1) 3
Income before taxes $ 1,263 $ 1,141 $ 967 11% 18 %
Pre-tax operating margin 31% 29% 26%

Adjusted pre-tax operating margin – Non-GAAP (c) 34% 32% 29%
Total revenue by line of business:

Asset Management $ 2,836 $ 2,775 $ 2,615 2% 6%
Wealth Management 1,248 1,222 1,136 2 8
Total revenue by line of business $ 4,084 $ 3,997 $ 3,751 2% 7%
Average balances:
Average loans $ 16,774 $ 16,565 $ 15,015 1% 10 %
Average deposits $ 14,291 $ 13,615 $ 15,650 5% (13)%
(a) Total fee and other revenue includes the impact of the consolidated investment management funds, net of noncontrolling interests. Additionally,
other revenue includes asset servicing, foreign exchange and other trading revenue, treasury services and investment and other income.
(b) On a constant currency basis, investment management and performance fees increased 2% (Non-GAAP) compared with 2017. See
“Supplemental information – Explanation of GAAP and Non-GAAP financial measures” beginning on page 105 for the reconciliation of this
Non-GAAP measure.
(c) Net of distribution and servicing expense. See “Supplemental information – Explanation of GAAP and Non-GAAP financial measures”
beginning on page 105 for the reconciliation of this Non-GAAP measure. In 2018, the adjusted pre-tax margin – Non-GAAP for prior periods
was restated to include amortization of intangible assets and the provision for credit losses.
BNY Mellon 17
AUM trends Our investment specialists deliver a highly diversified

(dollars in billions) 2018 2017 2016 portfolio of investment strategies independently, and
AUM at period end, by through our global distribution network, to
product type: (a)
Equity $ 135 $ 161 $ 153 institutional and retail clients globally. The
Fixed income 200 206 186 investment specialists offer a broad range of actively
Index 301 350 312 managed equity, fixed income, alternative and
Liability-driven liability-driven investments, along with passive
investments 659 667 554
Multi-asset and alternative products and cash management. Each investment
investments 167 214 181 specialist follows its own investment approach to
Cash 260 295 262 innovate and develop investment solutions designed
Total AUM by product
type $ 1,722 $ 1,893 $ 1,648 to deliver performance returns and outcomes that
meet the investing goals of an increasingly
Changes in AUM: (a)
sophisticated client base. Our multi-boutique model
Beginning balance of AUM $ 1,893 $ 1,648 $ 1,625
Net (outflows) inflows: of investment specialists is designed to provide the
Long-term strategies: best elements of investment focus and infrastructure
Equity (13) (14) (15) at scale for the benefit of clients.
Fixed income 4 6 (5)
Liability-driven
investments 45 50 26 In the third quarter of 2018, BNY Mellon announced
Multi-asset and the wind-down of EACM Advisors and, effective Jan.
alternative 2, 2019, Mellon Investments Corporation (“Mellon”)
investments (6) 8 12
Total long-term active
as the new name of our specialized multi-asset
strategies inflows 30 50 18 investment manager formed from the consolidation of
Index (34) (17) (32) Mellon Capital Management, Standish Mellon Asset
Total long-term
strategies (outflows) Management, and The Boston Company Asset
inflows (4) 33 (14) Management.
Short-term strategies:
Cash (35) 30 (9) In addition to the investment specialists, Investment
Total net (outflows)
inflows (39) 63 (23) Management has multiple global distribution entities
Net market impact (48) 106 181 which are responsible for distributing investment
Net currency impact (53) 76 (137) products developed and managed by the investment
Acquisition/divestiture/ specialists, as well as responsibility for management
other (31) (b) — 2
Ending balance of and distribution of our U.S. mutual funds and certain
AUM $ 1,722 $ 1,893 $ 1,648 offshore money market funds.
Wealth Management
client assets (c) $ 239 $ 262 $ 240 BNY Mellon Wealth Management provides
(a) Excludes securities lending cash management assets and investment management, custody, wealth and estate
assets managed in the Investment Services business. planning and private banking services, and conducts
(b) Primarily reflects a change in methodology beginning in business globally. BNY Mellon Wealth Management
2018 to exclude AUM related to equity method investments has $239 billion in Wealth Management client assets
as well as the CenterSquare divestiture.
as of Dec. 31, 2018, and an extensive network of
(c) Includes AUM and AUC/A in the Wealth Management
business. Prior period amounts were revised to include offices in the U.S. and internationally.
additional AUC/A.
The results of the Investment Management business
are driven by the period end, average and mix of
Business description AUM, as well as the level of activity in client
accounts. The overall level of AUM for a given
Our Investment Management business consists of two period is determined by:
lines of business, Asset Management and Wealth
Management. With AUM of $1.7 trillion, our • the beginning level of AUM;
Investment Management business is the seventh • the net flows of new assets during the period
largest global asset manager and includes our resulting from new business wins and existing
investment specialists and Wealth Management client enrichments, reduced by the loss of clients
business. and withdrawals; and
18 BNY Mellon
• the impact of market price appreciation or stronger U.S. dollar (principally versus the British
depreciation, acquisitions or divestitures and pound) on a spot basis, lower market values, net
foreign exchange rates. outflows and the divestiture of CenterSquare and
other changes. Net long-term outflows of $4 billion
The mix of AUM is determined principally by client in 2018 were a result of $34 billion of outflows from
asset allocation decisions among equity, fixed index funds and $30 billion of inflows from actively
income, passive products, cash, liability-driven managed strategies, primarily liability-driven
investments and multi-asset and alternative investments.
investments.
Total revenue of $4.1 billion increased 2% compared
Managed equity assets typically generate higher with 2017.
percentage fees than liability-driven investments and
fixed-income assets. Also, actively managed assets Asset Management revenue of $2.8 billion increased
typically generate higher management fees than 2% compared with the 2017, primarily reflecting
indexed or passively managed assets of the same higher market values, performance fees and the
type. favorable impact of a weaker U.S. dollar (principally
versus the British pound), partially offset by the
Investment management fees are dependent on the impact of net outflows. Market and regulatory trends
overall level and mix of AUM and the management have resulted in increased demand for lower fee asset
fees expressed in basis points (one-hundredth of one management products, and for performance-based
percent) charged for managing those assets. fees.
Management fees are typically subject to fee
schedules based on the overall level of assets Wealth Management revenue of $1.2 billion increased
managed for a single client or by individual asset 2% compared with 2017, primarily reflecting higher
class and style. This is most common for institutional equity market values and net new business, partially
clients where we typically manage substantial assets offset by lower net interest revenue.
for individual accounts.
Revenue generated in the Investment Management
Performance fees are generally calculated as a business included 42% from non-U.S. sources in
percentage of a portfolio’s performance in excess of a 2018, compared with 41% in 2017.
benchmark index or a peer group’s performance.
Noninterest expense of $2.8 billion decreased 1%
A key driver of organic growth in investment compared with 2017, primarily reflecting the
management and performance fees is the amount of divestiture of CenterSquare.
net new AUM flows. Overall market conditions are
also key drivers, with a significant long-term 2017 compared with 2016
economic driver being growth of global financial
assets. Total revenue of $4.0 billion increased 7% compared
with 2016. Asset Management revenue increased
Net interest revenue is determined by loan and primarily reflecting higher equity market values,
deposit volumes and the interest rate spread between money market fees and performance fees, partially
customer rates and internal funds transfer rates on offset by the unfavorable impact of a stronger U.S.
loans and deposits. Expenses in the Investment dollar (principally versus the British pound). Wealth
Management business are mainly driven by staffing management revenue increased primarily reflecting
costs, incentives and distribution and servicing higher equity market values and net interest revenue.
expense.
Noninterest expense of $2.9 billion increased 3%
Review of financial results primarily reflecting higher incentive, distribution and
servicing and severance expenses, partially offset by
AUM decreased 9% compared with Dec. 31, 2017 the favorable impact of a stronger U.S. dollar.
primarily reflecting the unfavorable impact of a
BNY Mellon 19
Other segment
(in millions) 2018 2017 2016

Fee revenue $ 133 $ 4 $ 291
Net securities (losses) gains (48) 3 75
Total fee and other revenue 85 7 366
Net interest (expense) revenue (64) (79) 14
Total revenue (loss) 21 (72) 380
Provision for credit losses (15) (19) (25)
Noninterest expense 334 347 394
(Loss) income before taxes $ (298) $ (400) $ 11
Average loans and leases $ 2,105 $ 1,232 $ 1,926
Description of segment Fee revenue increased $129 million compared with

2017, primarily reflecting the impact of U.S. tax
The Other segment primarily includes: legislation on our renewable energy investments
recorded in 2017.
• the leasing portfolio;
• corporate treasury activities, including our Net securities losses of $48 million in 2018 primarily
securities portfolio; related to the sale of debt securities.
• derivatives and other trading activity;
• corporate and bank-owned life insurance; Net interest expense decreased $15 million compared
• renewable energy investments; and with 2017, primarily resulting from lease-related
• business exits. adjustments recorded in 2017.
Revenue primarily reflects: Noninterest expense decreased $13 million compared

with 2017, primarily reflecting lower pension
• net interest revenue and lease-related gains expense and a methodological change in 2017 for
(losses) from leasing operations; allocating employee benefits expense to the business
• net interest revenue from corporate treasury segments with no impact to consolidated results,
activity; partially offset by expenses associated with relocating
• fee and other revenue from corporate and bank- our corporate headquarters.
owned life insurance and business exits; and
• gains (losses) associated with investment 2017 compared with 2016
securities and other assets, including renewable
energy. Loss before taxes was $400 million in 2017 compared
with income before taxes of $11 million in 2016.
Expenses include: Total fee and other revenue decreased primarily
reflecting the impact of U.S. tax legislation on our
• direct expenses supporting leasing, investing, and investments in renewable energy investments and
funding activities; and lower net securities gains. Net interest expense
• expenses not directly attributable to Investment increased primarily reflecting the impact of interest
Services and Investment Management operations. rate hedging activities and lease-related adjustments,
partially offset by higher interest rates. Noninterest
Review of financial results expense decreased primarily reflecting lower staff
and other expense.
Loss before taxes was $298 million in 2018 compared
with $400 million in 2017.
20 BNY Mellon
International operations issuer services, introducing other products as the

markets mature. For more established markets, our
Our primary international activities consist of asset focus is on global investment services.
servicing and global payment services in our
Investment Services business and asset management We are also a full-service global provider of foreign
in our Investment Management business. exchange services, actively trading in over 100 of the
world’s currencies. We serve clients from trading
Our clients include central banks and sovereigns, desks located in Europe, Asia and North America.
financial institutions, asset managers, insurance
companies, corporations, local authorities and high Our financial results, as well as our levels of AUC/A
net worth individuals and family offices. Through and AUM, are impacted by translation from foreign
our global network of offices, we have developed a currencies to the U.S. dollar. We are primarily
deep understanding of local requirements and cultural impacted by activities denominated in the British
needs, and we pride ourselves on providing dedicated pound and the euro. If the U.S. dollar depreciates
service through our multilingual sales, marketing and against these currencies, the translation impact is a
client service teams. higher level of fee revenue, net interest revenue,
noninterest expense and AUC/A and AUM.
At Dec. 31, 2018, we had approximately 9,100 Conversely, if the U.S. dollar appreciates, the
employees in Europe, the Middle East and Africa translated levels of fee revenue, net interest revenue,
(“EMEA”), approximately 14,500 employees in the noninterest expense and AUC/A and AUM will be
Asia-Pacific region (“APAC”) and approximately 700 lower.
employees in other global locations, primarily Brazil.
We are the seventh largest global asset manager. At Foreign exchange rates
vs. U.S. dollar 2018 2017 2016
Dec. 31, 2018, our international operations managed Spot rate (at Dec. 31):
55% of BNY Mellon’s AUM, compared with 51% at British pound $ 1.2801 $ 1.3532 $ 1.2323
Dec. 31, 2017. The proportionate increase in Euro 1.1455 1.2009 1.0538
international AUM primarily resulted from the Yearly average rate:
reduction in domestic AUM and net inflows, partially British pound $ 1.3349 $ 1.2885 $ 1.3548
Euro 1.1808 1.1390 1.1065
offset by the unfavorable impact of a stronger U.S.
dollar (principally versus the British pound).
International clients accounted for 37% of revenues
In Europe, we maintain a presence in Undertakings in 2018, compared with 36% in 2017 and 34% in
for Collective Investment in Transferable Securities 2016. Net income from international operations was
Directives (“UCITS”). In Ireland, BNY Mellon $2.2 billion in 2018, compared with $1.8 billion in
provides fund administration services across 2017 and $1.6 billion in 2016.
domiciled and non-domiciled funds. We offer a full
range of tailored solutions for investment companies, In 2018, revenues from EMEA were $4.3 billion,
financial institutions and institutional investors in compared with $4.0 billion in 2017 and $3.7 billion
Germany. 2016. Revenues from EMEA increased 7% in 2018
compared with 2017, primarily reflecting higher
We are a provider of non-U.S. government securities, revenue in the Investment Services business, driven
fixed income and equities clearance, settling by higher net interest revenue, the favorable impact
securities transactions directly in 8 different markets of a weaker U.S. dollar, growth in collateral
in Europe while for other markets using a high management and higher clearance volumes.
quality and established network of local agents. Revenues from EMEA also reflect higher revenue in
the Investment Management business, driven by the
We have extensive experience providing trade and favorable impact of a weaker U.S. dollar and higher
cash services to financial institutions and central performance fees, partially offset by net outflows.
banks outside of the U.S. In addition, we offer a Our Investment Services and Investment
broad range of servicing and fiduciary products to Management businesses generated 68% and 32% of
financial institutions, corporations and central banks EMEA revenues, respectively. Net income from
depending on the state of market development. In EMEA was $1.3 billion in 2018, compared with $1.2
emerging markets, we lead with global payments and billion in 2017 and $1.0 billion in 2016.
BNY Mellon 21
Revenues from APAC were $1.1 billion in 2018, Country risk exposure
compared with $997 million in 2017 and $922
million in 2016. Revenues from APAC increased The following table presents BNY Mellon’s top 10
11% in 2018 compared with 2017, primarily exposures by country (excluding the U.S.) as of Dec.
reflecting higher net interest revenue, securities 31, 2018, as well as certain countries with higher risk
lending volumes and growth in collateral profiles, and is presented on an internal risk
management, as well as higher revenue in the management basis. We monitor our exposure to these
Investment Management business, driven by new and other countries as part of our internal country risk
business and higher equity market values. Our management process.
Investment Services and Investment Management
businesses generated 80% and 20% of APAC The country risk exposure below reflects the
revenues, respectively. Net income from APAC was Company’s risk to an immediate default of the
$448 million in 2018, compared with $426 million in counterparty or obligor based on the country of
2017 and $389 million in 2016. residence of the entity which incurs the liability. If
there is credit risk mitigation, the country of
For additional information regarding our international residence of the entity providing the risk mitigation is
operations, including certain key subjective the country of risk. The country of risk for
assumptions used in determining the results, see Note investment securities is generally based on the
24 of the Notes to Consolidated Financial Statements. domicile of the issuer of the security.
Country risk exposure Interest-bearing deposits Investment Total

(in billions) Central banks Banks Lending (a) securities (b) Other (c) exposure
Top 10 country exposure:
UK $ 15.9 $ 0.6 $ 1.9 $ 2.9 $ 2.1 $ 23.4
Germany 18.1 0.5 0.9 2.4 0.3 22.2
Japan 8.8 1.2 0.1 — 0.2 10.3
Canada — 1.8 0.3 2.2 0.9 5.2
Luxembourg 2.9 0.2 0.2 — 1.8 5.1
China — 2.3 0.8 — 0.3 3.4
Belgium 2.4 0.3 0.1 0.3 — 3.1
France — 0.2 — 2.3 0.6 3.1
Ireland — 0.1 0.5 0.6 1.1 2.3
Netherlands — — 0.3 1.7 0.1 2.1
Total Top 10 country exposure $ 48.1 $ 7.2 $ 5.1 $ 12.4 $ 7.4 $ 80.2 (d)
Select country exposure:

Spain $ — $ 0.3 $ — $ 1.4 $ — $ 1.7
Brazil — — 1.3 0.1 — 1.4
Italy — 0.2 — 0.9 — 1.1
Turkey — — 0.2 — — 0.2
Total other country exposure $ — $ 0.5 $ 1.5 $ 2.4 $ — $ 4.4
(a) Lending includes loans, acceptances, issued letters of credit, net of participations, and lending-related commitments.
(b) Investment securities include both the available-for-sale and held-to-maturity portfolios.
(c) Other exposures include securities financing and over-the-counter (“OTC”) derivative transactions, net of collateral.
(d) The top 10 country exposures comprise approximately 80% of our total non-U.S. exposure.
Our largest country risk exposure, based on our markets, and our business and results of operations”
internal country risk management process at Dec. 31, in Risk Factors.
2018, was to the UK, which is planning to withdraw
from the EU. For additional information, see “United Select country exposure
Kingdom’s Withdrawal from the European Union
(“Brexit”)” in Supervision and Regulation and “The Events in recent years have resulted in increased
United Kingdom’s referendum decision to leave the focus on Spain, Brazil, Italy and Turkey. The country
EU has had and may continue to have negative effects risk exposure to Spain and Italy primarily consisted
on global economic conditions, global financial of investment grade sovereign debt. The country risk
22 BNY Mellon
exposure to Brazil is primarily short-term trade outside those foreign jurisdictions. The guidelines to
finance loans extended to large financial institutions. determine the cross-border outstandings in the table
We also have operations in Brazil providing below are different than how we determine and
investment services and investment management manage our country risk exposure. For example,
services. The country risk exposure to Turkey unfunded loan commitments as well as central bank
consists primarily of syndicated credit facilities. We deposits made by our foreign bank subsidiaries in
mainly provide treasury and issuer services as well as their local jurisdiction are not considered cross-border
foreign exchange products primarily to the top 10 outstandings. As a result, the cross-border
largest financial institutions in Turkey. outstandings in the table below are not comparable to
the country risk exposure in the previous section.
Cross-border outstandings
Foreign assets are subject to the general risks
Cross-border outstandings are based on the Federal attendant on the conduct of business in each foreign
Financial Institutions Examination Council’s country, including economic uncertainties and each
(“FFIEC”) regulatory guidelines for reporting cross- foreign government’s regulations. In addition, our
border risk and provides information on the foreign assets may be affected by changes in demand
distribution, by country and sector, of claims on or pricing resulting from fluctuations in currency
foreign residents held by U.S. banks. Under the exchange rates or other factors.
FFIEC guidelines, cross-border outstandings are
reported based on the domicile of the counterparty, The table below shows our cross-border outstandings
issuer of collateral or guarantor. Cross-border at Dec. 31 of each of the last three years where cross-
outstandings in the table below include claims of U.S. border exposure exceeds 1.00% of total assets
domiciled offices on foreign counterparties as well as (denoted with “*”) or exceeds 0.75% but less than or
claims of foreign offices on counterparties located equal to 1.00% of total assets (denoted with “**”).
Cross-border outstandings Banks and Commercial, Total

other financial Public industrial cross-border
(in millions) institutions (a) sector and other outstandings (b)
2018:
Canada* $ 1,888 $ 381 $ 2,263 $ 4,532
Germany** 1,655 736 1,079 3,470
China** 3,030 — 5 3,035
2017:
Germany** $ 1,530 $ 1,344 $ 600 $ 3,474
Canada** 2,256 1 1,170 3,427
France** 295 2,519 130 2,944
2016:
France* $ 1,662 $ 2,559 $ 109 $ 4,330
Germany* 2,398 1,408 357 4,163
Canada* 2,199 1 1,211 3,411
United Kingdom** 1,325 1,584 405 3,314
(a) Primarily short-term interest-bearing deposits with banks. Also includes global trade finance loans.
(b) Excludes assets of consolidated investment management funds.
Emerging markets exposure Critical accounting estimates
We determine our emerging markets exposures using Our significant accounting policies are described in
the MSCI Emerging Markets (EM) IMI Index. Our Note 1 of the Notes to Consolidated Financial
emerging markets exposures totaled $11 billion at Statements under “Summary of significant
both Dec. 31, 2018 and Dec. 31, 2017, as higher accounting and reporting policies.” Our critical
interest-bearing deposits with banks in Mexico and accounting estimates are those related to the
China were offset by lower loans to banks in India allowance for loan losses and allowance for lending-
and Turkey. related commitments, fair value of financial
instruments and derivatives, goodwill and other
intangibles, and litigation and regulatory
BNY Mellon 23
contingencies. Further information on policies The second element, higher risk-rated credits and
related to the allowance for loan losses and allowance pass-rated credits, is based on our incurred loss
for lending-related commitments can be found under model. Individual credit analyses are performed on
“Summary of significant accounting and reporting such loans before being assigned a credit rating. All
policies” in Note 1 of the Notes to Consolidated borrowers are collectively evaluated based on their
Financial Statements. Additionally, further credit rating. The loss inherent in each loan
information can be found in the Notes to incorporates the borrower’s credit rating, facility
Consolidated Financial Statements related to the rating and maturity. The loss given default, derived
following: the valuation of derivatives and securities from the facility rating, incorporates a recovery
can be found under “Fair value measurement” in Note expectation and an estimate of the use of the facility
19; and policies related to goodwill and intangible at default (usage given default). The borrower’s
assets can be found in “Goodwill and intangible probability of default is derived from the associated
assets” in Note 6. credit rating. Borrower ratings are reviewed at least
annually and are periodically mapped to third-party
Allowance for loan losses and allowance for databases, including rating agency and default and
lending-related commitments recovery databases, for ongoing consistency and
validity. Higher risk-rated credits are reviewed
The allowance for loan losses and allowance for quarterly.
lending-related commitments represent
management’s estimate of losses inherent in our The third element, the allowance for residential
credit portfolio. This evaluation process is subject to mortgage loans, is determined by segregating six
numerous estimates and judgments. mortgage pools into delinquency periods, ranging
from current through foreclosure. Each of these
We utilize a quantitative methodology and qualitative delinquency periods is assigned a probability of
framework for determining the allowance for loan default. A specific loss given default is assigned for
losses and the allowance for lending-related each mortgage pool. BNY Mellon assigns all
commitments. Within this qualitative framework, residential mortgage pools, except home equity lines
management applies judgment when assessing of credit, a probability of default and loss given
internal risk factors and environmental factors to default based on default and loss data derived from
compute an additional allowance for each component internal historical data related to our residential
of the loan portfolio. mortgage portfolio. The resulting incurred loss factor
(the probability of default multiplied by the loss given
The components of the allowance for loan losses and default) is applied against the loan balance to
the allowance for lending-related commitments are determine the allowance held for each pool. For
inclusive of the qualitative allowance framework and home equity lines of credit, probability of default and
consist of the following three elements: loss given default are based on external data from
• an allowance for impaired credits of $1 million or third-party databases due to the small size of the
greater; portfolio and insufficient internal data.
• an allowance for higher risk-rated credits and
pass-rated credits; and The qualitative framework is used to determine an
• an allowance for residential mortgage loans. additional allowance for each portfolio based on the
factors below:
Our lending is primarily to institutional customers.
As a result, our loans are generally larger than $1 Internal risk factors:
million. Therefore, the first element, impaired • Ratio of nonperforming loans to total non-margin
credits, is based on individual analysis of all impaired loans;
loans of $1 million or greater. The allowance is • Ratio of criticized assets to total loans and
measured by the difference between the recorded lending-related commitments;
value of impaired loans and their impaired value. • Borrower concentration; and
Impaired value is either the present value of the • Significant concentrations in high-risk industries
expected future cash flows from the borrower, the and countries.
market value of the loan, or the fair value of the
collateral, if the loan is collateral dependent.
24 BNY Mellon
Environmental risk factors: credit were rated one grade worse, the allowance
would have increased by $99 million. Similarly, if
• U.S. non-investment grade default rate;
the loss given default were one rating worse, the
• Unemployment rate; and
allowance would have increased by $40 million,
• Change in real gross domestic product.
while if the loss given default were one rating better,
the allowance would have decreased by $31 million.
The objective of the qualitative framework is to
For impaired credits, if the net carrying value of the
capture incurred losses that may not have been fully
loans was 10% higher or lower, the allowance would
captured in the quantitative reserve, which is based
have decreased or increased by less than $1 million,
primarily on historical data. Management determines
respectively.
the qualitative allowance each period based on
judgment informed by consideration of internal and
Fair value of financial instruments and
external risk factors and other considerations that
derivatives
may be deemed relevant during the period. Once
determined in the aggregate, our qualitative
The guidance included in Accounting Standards
allowance is then allocated to each of our loan classes
Codification (“ASC”) 820, Fair Value Measurement,
based on the respective classes’ quantitative
defines fair value, establishes a framework for
allowance balances with the allocations adjusted,
measuring fair value, and expands disclosures about
when necessary, for class specific risk factors.
assets and liabilities measured at fair value. The
standard also established a three-level hierarchy for
For each risk factor, we calculate the minimum and
fair value measurements based upon the transparency
maximum values, and percentiles in-between, to
of inputs to the valuation of an asset or liability as of
evaluate the distribution of our historical experience.
the measurement date.
The distribution of historical experience is compared
to the risk factor’s current quarter observed
Fair value - Securities
experience to assess the current risk inherent in the
portfolio and overall direction/trend of a risk factor
Level 1 - Securities: Securities where valuations are
relative to our historical experience.
based on recent quoted prices for identical securities
in actively traded markets.
Based on this analysis, we assign a risk level–no
impact, low, moderate, high and elevated–to each risk
Level 2 - Securities: For securities where quotes from
factor for the current quarter. Management assesses
recent transactions are not available for identical
the impact of each risk factor to determine an
securities, we determine fair value primarily based on
aggregate risk level. We do not quantify the impact
pricing sources with reasonable levels of price
of any particular risk factor. Management’s
transparency. The pricing sources employ financial
assessment of the risk factors, as well as the trend in
models or obtain comparisons to similar instruments
the quantitative allowance, supports management’s
to arrive at “consensus” prices.
judgment for the overall required qualitative
allowance. A smaller qualitative allowance may be
Specifically, the pricing sources obtain recent
required when our quantitative allowance has
transactions for similar types of securities (e.g.,
reflected incurred losses associated with the
vintage or position in the securitization structure) and
aggregate risk level. A greater qualitative allowance
ascertain variables such as discount rate and speed of
may be required if our quantitative allowance does
prepayment for the type of transaction and apply such
not yet reflect the incurred losses associated with the
variables to similar types of bonds. We view these as
aggregate risk level.
observable transactions in the current market place
and classify such securities as Level 2.
To the extent actual results differ from forecasts or
management’s judgment, the allowance for credit
In addition, we have significant investments in more
losses may be greater or less than future charge-offs.
actively traded agency residential mortgage-backed
securities (“RMBS”) and other types of securities
The credit rating assigned to each credit is a
such as sovereign debt. The pricing sources derive
significant variable in determining the allowance. If
the prices for these securities largely from quotes they
each credit were rated one grade better, the allowance
obtain from three major inter-dealer brokers. The
would have decreased by $62 million, while if each
BNY Mellon 25
pricing sources receive their daily observed trade See Note 19 of the Notes to Consolidated Financial
price and other information feeds from the inter- Statements for details of our securities by ASC 820,
dealer brokers. Fair Value Measurement, hierarchy level.
We obtain prices for our Level 1 and Level 2 Fair value - Derivative financial instruments
securities from multiple pricing sources. We have
designed controls to develop an understanding of the Level 1 - Derivative financial instruments: Includes
pricing sources’ securities pricing methodology and derivative financial instruments that are actively
have implemented specific internal controls over the traded on exchanges, principally listed equity options.
valuation of securities.
Level 2 - Derivative financial instruments: Includes
As appropriate, we review the quality control OTC derivative financial instruments. Derivatives
procedures and pricing methodologies used by the classified as Level 2 are valued utilizing discounted
pricing sources, including the process for obtaining cash flow analysis and financial models for which the
prices provided by the pricing sources, their valuation valuation inputs are observable or can be
methodology and controls for each class of security. corroborated, directly or indirectly, for substantially
the full term of the instrument. Valuation inputs
Prices received from pricing sources are subject to include interest rate yield curves, foreign exchange
validation checks that help determine the rates, equity prices, credit curves, option volatilities
completeness and accuracy of the prices. These and other factors.
validation checks are reviewed by management and,
based on the results, may be subject to additional Where appropriate, valuation adjustments are made to
review and investigation. We also review securities account for various factors such as creditworthiness
with no price changes (stale prices) and securities of the counterparty, creditworthiness of the Company
with zero values. and model and liquidity risks.
We have a surveillance process in place to monitor Level 3 - Derivative financial instruments: Level 3
the reasonableness of prices provided by the pricing derivatives include derivatives for which valuations
sources. We utilize a hierarchy that compares are based on inputs that are unobservable and
security prices obtained from multiple pricing sources significant to the overall fair value measurement, and
against established thresholds. Discrepancies that fall may include certain long-dated or highly structured
outside of these thresholds are challenged with the contracts. At both Dec. 31, 2018 and Dec. 31, 2017,
pricing services and adjusted if necessary. we have no derivatives included in Level 3 of the fair
value hierarchy.
If further research is required, we review and validate
these prices with the pricing sources. We also For details of our derivative financial instruments by
validate prices from pricing sources by comparing level of the valuation hierarchy, see Note 19 of the
prices received to actual observed prices from actions Notes to Consolidated Financial Statements.
such as purchases and sales, when possible.
Fair value option
At Dec. 31, 2018, approximately 99% of our
securities were valued by pricing sources with ASC 825, Financial Instruments, provides the option
reasonable levels of price transparency. to elect fair value as an alternative measurement basis
for selected financial assets and financial liabilities
Level 3 - Securities: Where we have used our own which are not subject to fair value under other
cash flow models, which included a significant input accounting standards. The changes in fair value are
into the model that was deemed unobservable, to recognized in income. See Note 20 of the Notes to
estimate the value of securities, we classify them as Consolidated Financial Statements for additional
Level 3. At both Dec. 31, 2018 and Dec. 31, 2017, disclosure regarding the fair value option.
we have no securities included in Level 3 of the fair
value hierarchy.
26 BNY Mellon
Fair value - Judgments goodwill impairment charge would not have a

significant impact on our financial condition or our
In times of illiquid markets and financial stress, regulatory capital ratios, but could have an adverse
actual prices and valuations may significantly diverge impact on our results of operations. In addition, due
from results predicted by models. In addition, other to regulatory restrictions, the Company’s subsidiary
factors can affect our estimate of fair value, including banks could be restricted from distributing available
market dislocations and unexpected correlations. The cash to the Parent, resulting in the Parent needing to
use of different methodologies or different issue additional long-term debt.
assumptions to value certain financial instruments
could result in a different estimate of fair value. See In the second quarter of 2018, we performed our
Note 1 of the Notes to Consolidated Financial annual goodwill test on all seven reporting units using
Statements. an income approach to estimate the fair values of
each reporting unit. Estimated cash flows used in the
Goodwill and other intangibles income approach were based on management’s
projections as of March 31, 2018. The discount rate
We initially record all assets and liabilities acquired applied to these cash flows ranged from 10.0% to
in purchase acquisitions, including goodwill, 10.25% and incorporated a 6.0% market equity risk
indefinite-lived intangibles and other intangibles, in premium. Estimated cash flows extend many years
accordance with ASC 805, Business Combinations. into the future, and, by their nature, are difficult to
Goodwill, indefinite-lived intangibles and other estimate over such an extended time frame.
intangibles are subsequently accounted for in
accordance with ASC 350, Intangibles - Goodwill As a result of the annual goodwill impairment test of
and Other. The initial measurement of goodwill and the seven reporting units, no goodwill impairment
intangibles requires judgment concerning estimates of was recognized. The fair value of the Asset
the fair value of the acquired assets and liabilities. Management reporting unit, which is one of the two
Goodwill ($17.4 billion at Dec. 31, 2018) and reporting units in the Investment Management
indefinite-lived intangible assets ($2.6 billion at Dec. segment, exceeded its carrying value by 34%. The
31, 2018) are not amortized but are subject to tests for Asset Management reporting unit had $7.4 billion of
impairment annually or more often if events or allocated goodwill. For the Asset Management
circumstances indicate it is more likely than not they reporting unit, in the future, changes in the
may be impaired. Other intangible assets are assumptions, such as changes in the level of AUM
amortized over their estimated useful lives and are and operating margin, could produce a non-cash
subject to impairment if events or circumstances goodwill impairment.
indicate a possible inability to realize the carrying
value. Key judgments in accounting for intangibles include
useful life and classification between goodwill and
BNY Mellon’s three business segments include seven indefinite-lived intangibles or other intangibles
reporting units for which annual goodwill impairment requiring amortization.
testing is performed in accordance with ASC 350,
Intangibles - Goodwill and Other. The Investment Indefinite-lived intangible assets are evaluated for
Management segment is comprised of two reporting impairment at least annually by comparing their fair
units; the Investment Services segment is comprised values, estimated using discounted cash flow
of four reporting units and one reporting unit is analyses, to their carrying values. Other amortizing
included in the Other segment. intangible assets ($600 million at Dec. 31, 2018) are
evaluated for impairment if events and circumstances
The goodwill impairment test compares the estimated indicate a possible impairment. Such evaluation of
fair value of the reporting unit with its carrying other intangible assets would be initially based on
amount, including goodwill. If the estimated fair undiscounted cash flow projections.
value of the reporting unit exceeds its carrying
amount, goodwill of the reporting unit is considered See Notes 1 and 6 of the Notes to Consolidated
not impaired. However, if the carrying amount of the Financial Statements for additional information
reporting unit were to exceed its estimated fair value, regarding goodwill, intangible assets and the annual
an impairment loss would be recorded. A substantial and interim impairment testing.
BNY Mellon 27
Litigation and regulatory contingencies deposits in U.S. offices. At Dec. 31, 2018, total
interest-bearing deposits were 54% of total interest-
Significant estimates and judgments are required in earning assets, compared with 51% at Dec. 31, 2017.
establishing an accrued liability for litigation and
regulatory contingencies. For additional information At Dec. 31, 2018, we had $61 billion of liquid funds
on our policy, see “Legal proceedings” in Note 21 of (which include interest-bearing deposits with banks
the Notes to Consolidated Financial Statements. and federal funds sold and securities purchased under
resale agreements) and $74 billion of cash (including
Consolidated balance sheet review $68 billion of overnight deposits with the Federal
Reserve and other central banks) for a total of $135
One of our key risk management objectives is to billion of available funds. This compares with
maintain a balance sheet that remains strong available funds of $137 billion at Dec. 31, 2017.
throughout market cycles to meet the expectations of Total available funds as a percentage of total assets
our major stakeholders, including our shareholders, were 37% at both Dec. 31, 2018 and Dec. 31, 2017.
clients, creditors and regulators. For additional information on our liquid funds and
available funds, see “Liquidity and dividends.”
We also seek to verify that the overall liquidity risk,
including intraday liquidity risk, that we undertake Securities were $119.8 billion, or 33% of total assets,
stays within our risk appetite. The objective of our at Dec. 31, 2018, compared with $120.4 billion, or
balance sheet management strategy is to maintain a 32% of total assets, at Dec. 31, 2017. The decrease
balance sheet that is characterized by strong liquidity primarily reflects lower investment in sovereign debt/
and asset quality, ready access to external funding sovereign guaranteed securities and additional
sources at competitive rates and a strong capital unrealized losses on the portfolio, partially offset by
structure that supports our risk-taking activities and is additional investments in agency commercial
adequate to absorb potential losses. In managing the mortgage-backed securities (“MBS”), supranational
balance sheet, appropriate consideration is given to securities and agency RMBS. For additional
balancing the competing needs of maintaining information on our securities portfolio, see
sufficient levels of liquidity and complying with “Securities” and Note 4 of the Notes to Consolidated
applicable regulations and supervisory expectations Financial Statements.
while optimizing profitability.
Loans were $57 billion, or 16% of total assets, at
In 2018, we continued to maintain sufficient liquidity Dec. 31, 2018, compared with $62 billion, or 17% of
and comply with applicable regulations. Our overall total assets, at Dec. 31, 2017. The decrease was
liquidity position remained strong and is managed in primarily driven by lower margin loans and loans to
accordance with the nature of our balance sheet and financial institutions. For additional information on
business model. Our liquidity coverage ratio our loan portfolio, see “Loans” and Note 5 of the
(“LCR”) averaged 118% in the fourth quarter and the Notes to Consolidated Financial Statements.
SLR was 6.0% at Dec. 31, 2018.
Long-term debt totaled $29 billion at Dec. 31, 2018
At Dec. 31, 2018, total assets were $363 billion, and $28 billion at Dec. 31, 2017. The balance reflects
compared with $372 billion at Dec. 31, 2017. The issuances of $5.2 billion, offset by maturities of $3.7
decrease in total assets was primarily driven by lower billion and a decrease in the fair value of hedged
interest-bearing deposits with the Federal Reserve long-term debt. For additional information on long-
and other central banks and loans, partially offset by term debt, see “Liquidity and dividends.”
higher federal funds sold and securities purchased
under resale agreements. Deposits totaled $239 The Bank of New York Mellon Corporation total
billion at Dec. 31, 2018, compared with $244 billion shareholders’ equity decreased to $40.6 billion from
at Dec. 31, 2017. The decrease primarily reflects $41.3 billion at Dec. 31, 2017. For additional
information on our capital, see “Capital” and Note 14
lower interest-bearing deposits in non-U.S. offices
of the Notes to Consolidated Financial Statements.
and noninterest-bearing deposits principally in U.S.
offices, partially offset by higher interest-bearing
28 BNY Mellon
Securities to which we are exposed. Significant changes in

ratings classifications for our securities portfolio
In the discussion of our securities portfolio, we have could indicate increased credit risk for us and could
included certain credit ratings information because be accompanied by a reduction in the fair value of our
the information can indicate the degree of credit risk securities portfolio.
The following table shows the distribution of our total securities portfolio.
Securities portfolio Dec. 31, Ratings (b)

2017 2018 Fair value
change in Dec. 31, 2018 as a % of BB+
Fair unrealized Amortized Fair amortized Unrealized AAA/ A+/ BBB+/ and Not
(dollars in millions) value gain (loss) cost value cost (a) gain (loss) AA- A- BBB- lower rated
Agency RMBS $ 49,746 $ (423) $ 51,101 $ 50,214 98 % $ (887) 100 % —% —% —% —%
U.S. Treasury 24,848 (22) 24,917 24,792 99 (125) 100 — — — —
Sovereign debt/sovereign
guaranteed (c) 14,128 (49) 11,496 11,577 101 81 74 5 20 1 —
Agency commercial MBS 10,083 (50) 11,031 10,947 99 (84) 100 — — — —
CLOs 2,909 (57) 3,410 3,364 99 (46) 98 — — 1 1
U.S. government agencies 2,603 (49) 3,173 3,157 99 (16) 100 — — — —
Supranational 2,108 — 3,011 3,006 100 (5) 100 — — — —
Foreign covered bonds (d) 2,615 (22) 2,970 2,959 100 (11) 100 — — — —
State and political
subdivisions 2,973 (11) 2,268 2,264 100 (4) 78 21 — — 1
Other asset-backed
securities (“ABS”) 1,043 (6) 1,776 1,773 100 (3) 99 — 1 — —
Non-agency commercial
MBS 1,368 (23) 1,491 1,470 99 (21) 96 4 — — —
Non-agency RMBS (e) 1,854 (83) 1,195 1,427 119 232 12 12 5 47 24
Corporate bonds 1,255 (26) 1,074 1,054 98 (20) 14 68 18 — —
Other (f) 2,375 (1) 1,236 1,238 100 2 94 — — — 6
Total securities $ 119,908 (g) $ (822) $ 120,149 $ 119,242 (g) 99% $ (907) (g)(h) 95% 2% 2% 1% —%
(a) Amortized cost reflects historical impairments.
(b) Represents ratings by Standard & Poor's (“S&P”) or the equivalent.
(c) Primarily consists of exposure to UK, France, Germany, Spain, Italy and the Netherlands.
(d) Primarily consists of exposure to Canada, UK, Australia and Sweden.
(e) Includes RMBS that were included in the former Grantor Trust of $1,091 million at Dec. 31, 2017 and $832 million at Dec. 31, 2018.
(f) Includes commercial paper with a fair value of $700 million and money market funds with a fair value of $963 million at Dec. 31, 2017. There was no
commercial paper or money market funds at Dec. 31, 2018. In the first quarter of 2018, we adopted the new accounting guidance included in ASU
2016-01, Financial Instruments-Overall: Recognition and Measurement of Financial Assets and Financial Liabilities. As a result, the money market fund
investments were reclassified to trading assets, primarily from available-for-sale securities.
(g) Includes net unrealized losses on derivatives hedging securities available-for-sale of $147 million at Dec. 31, 2017 and net unrealized gains of $131
million at Dec. 31, 2018.
(h) Unrealized losses of $227 million at Dec. 31, 2018 related to available-for-sale securities, net of hedges.
The fair value of our securities portfolio, including including the impact of related hedges. The increase
related hedges, was $119.2 billion at Dec. 31, 2018, in the net unrealized pre-tax loss was primarily driven
compared with $119.9 billion at Dec. 31, 2017. The by higher market interest rates.
decrease primarily reflects lower investment in
sovereign debt/sovereign guaranteed securities and The unrealized loss, net of tax, on our available-for-
additional unrealized losses on the portfolio, partially sale securities portfolio included in accumulated other
offset by additional investments in agency comprehensive income (“OCI”) was $167 million at
commercial MBS, supranational securities and Dec. 31, 2018, compared with an unrealized gain of
agency RMBS. $184 million at Dec. 31, 2017.
At Dec. 31, 2018, the total securities portfolio had a At Dec. 31, 2018, 95% of the securities in our
net unrealized loss of $907 million, compared with a portfolio were rated AAA/AA-, compared with 93%
net unrealized loss of $85 million at Dec. 31, 2017, at Dec. 31, 2017.
BNY Mellon 29
The following table presents the amortizable purchase premium (net of discount) related to the securities portfolio
and accretable discount related to the 2009 restructuring of the securities portfolio.
Net premium amortization and discount accretion of securities (a)

Amortizable purchase premium (net of discount) relating to securities:
Balance at period end $ 1,429 $ 1,987 $ 2,188
Estimated average life remaining at period end (in years) 5.0 5.0 4.9
Amortization $ 437 $ 547 $ 641
Accretable discount related to the prior restructuring of the securities portfolio:
Balance at period end $ 207 $ 274 $ 315
Estimated average life remaining at period end (in years) 6.3 6.3 6.2
Accretion $ 86 $ 100 $ 102
(a) Amortization of purchase premium decreases net interest revenue while accretion of discount increases net interest revenue. Both were
recorded on a level yield basis.
See Note 4 of the Notes to Consolidated Financial Renewable energy investments

Statements for the pre-tax net securities gains (losses)
by security type. See Note 19 of the Notes to We invest in renewable energy projects to receive an
Consolidated Financial Statements for details of expected after-tax return, which consists of allocated
securities by level in the fair value hierarchy. renewable energy tax credits, tax deductions and cash
distributions based on the operations of the project.
Equity investments The pre-tax losses on these investments are recorded
in investment and other income on the consolidated
We have several equity investments recorded in other income statement. The corresponding tax benefits
assets. These include equity method investments, and credits are recorded to the provision for income
including renewable energy, and investments in taxes on the consolidated income statement.
qualified affordable housing projects, Federal
Reserve Bank stock, seed capital, private equity and For additional information on the fair value of certain
other investments. The following table presents the seed capital investments and our private equity
carrying values at Dec. 31, 2018 and 2017. investments, see Note 7 of the Notes to Consolidated
Financial Statements.
Equity investments Dec. 31,
(in millions) 2018 2017
Renewable energy investments $ 1,264 $ 1,368
Equity in a joint venture and other
investments:
CIBC Mellon 548 580
Siguler Guff 244 246
Other equity investments 272 257
Total equity in a joint venture and other
investments $ 1,064 $ 1,083
Qualified affordable housing project
investments 999 1,014
Federal Reserve Bank stock 484 477
Seed capital 224 288
Federal Home Loan Bank stock 111 82
Private equity investments (a) 74 55
Total equity investments $ 4,220 $ 4,367
(a) Represents investments in small business investment
companies (“SBICs”), which are compliant with the Volcker
Rule.
30 BNY Mellon
Loans
Total exposure – consolidated Dec. 31, 2018 Dec. 31, 2017

Unfunded Total Unfunded Total
(in billions) Loans commitments exposure Loans commitments exposure
Non-margin loans:
Financial institutions $ 11.6 $ 34.0 $ 45.6 $ 13.1 $ 32.5 $ 45.6
Commercial 2.1 15.2 17.3 2.9 18.0 20.9
Subtotal institutional 13.7 49.2 62.9 16.0 50.5 66.5
Wealth management loans and mortgages 16.0 0.8 16.8 16.5 1.1 17.6
Commercial real estate 4.8 3.5 8.3 4.9 3.5 8.4
Lease financings 1.3 — 1.3 1.3 — 1.3
Other residential mortgages 0.6 — 0.6 0.7 — 0.7
Overdrafts 5.5 — 5.5 5.1 — 5.1
Other 1.2 — 1.2 1.2 — 1.2
Subtotal non-margin loans 43.1 53.5 96.6 45.7 55.1 100.8
Margin loans 13.5 0.1 13.6 15.8 — 15.8
Total $ 56.6 $ 53.6 $ 110.2 $ 61.5 $ 55.1 $ 116.6
At Dec. 31, 2018, total exposures of $110.2 billion Our financial institutions and commercial portfolios
decreased 5% compared with Dec. 31, 2017, comprise our largest concentrated risk. These
primarily reflecting lower exposure in the commercial portfolios comprised 57% of our total exposure at
and margin loan portfolios. both Dec. 31, 2018 and Dec. 31, 2017. Additionally,
most of our overdrafts relate to financial institutions.
Financial institutions
The financial institutions portfolio is shown below.
Financial institutions Dec. 31, 2018 Dec. 31, 2017

portfolio exposure Unfunded Total % Inv. % due Unfunded Total
(dollars in billions) Loans commitments exposure grade <1 yr. Loans commitments exposure
Securities industry $ 3.1 $ 22.5 $ 25.6 99% 99% $ 3.6 $ 19.2 $ 22.8
Banks 6.3 1.6 7.9 77 94 7.0 1.2 8.2
Asset managers 1.3 6.1 7.4 98 85 1.4 6.4 7.8
Insurance 0.1 2.5 2.6 100 8 0.1 3.5 3.6
Government 0.1 0.5 0.6 100 38 0.1 0.9 1.0
Other 0.7 0.8 1.5 96 48 0.9 1.3 2.2
Total $ 11.6 $ 34.0 $ 45.6 95% 88% $ 13.1 $ 32.5 $ 45.6
The financial institutions portfolio exposure was to financial institutions is generally short-term. Of
$45.6 billion at Dec. 31, 2018, unchanged from Dec. these exposures, 88% expire within one year and 20%
31, 2017, primarily reflecting an increase in securities expire within 90 days. In addition, 81% of the
industry exposure, offset by lower exposure in all financial institutions exposure is secured. For
other portfolios. example, securities industry clients and asset
managers often borrow against marketable securities
Financial institution exposures are high-quality, with held in custody.
95% of the exposures meeting the investment grade
equivalent criteria of our internal credit rating For ratings of non-U.S. counterparties, our internal
classification at Dec. 31, 2018. Each customer is credit rating is generally capped at a rating equivalent
assigned an internal credit rating, which is mapped to to the sovereign rating of the country where the
an equivalent external rating agency grade based counterparty resides, regardless of the internal credit
upon a number of dimensions, which are continually rating assigned to the counterparty or the underlying
evaluated and may change over time. The exposure collateral.
BNY Mellon 31
At Dec. 31, 2018, the secured intraday credit was 77% at Dec. 31, 2018, compared with 68% at
provided to dealers in connection with their tri-party Dec. 31, 2017. Our non-investment grade exposures
repo activity totaled $20.6 billion and was primarily are primarily in Brazil. These loans are primarily
included in the securities industry portfolio. Dealers trade finance loans.
secure the outstanding intraday credit with high-
quality liquid collateral having a market value in The asset manager portfolio exposure was high-
excess of the amount of the outstanding credit. quality, with 98% of the exposures meeting our
investment grade equivalent ratings criteria as of Dec.
Our bank exposure primarily relates to our global 31, 2018. These exposures are generally short-term
trade finance. These exposures are short-term in liquidity facilities, with the majority to regulated
nature, with 94% due in less than one year. The mutual funds.
investment grade percentage of our bank exposure
Commercial
The commercial portfolio is presented below.
Commercial portfolio exposure Dec. 31, 2018 Dec. 31, 2017

Unfunded Total % Inv. % due Unfunded Total
(dollars in billions) Loans commitments exposure grade <1 yr. Loans commitments exposure
Manufacturing $ 0.8 $ 5.1 $ 5.9 95% 8% $ 1.3 $ 6.1 $ 7.4
Services and other 0.7 4.8 5.5 96 25 0.9 6.0 6.9
Energy and utilities 0.5 4.1 4.6 95 12 0.7 4.4 5.1
Media and telecom 0.1 1.2 1.3 94 12 — 1.5 1.5
Total $ 2.1 $ 15.2 $ 17.3 95% 15% $ 2.9 $ 18.0 $ 20.9
The commercial portfolio exposure was $17.3 billion

at Dec. 31, 2018, a 17% decrease compared with Our credit strategy is to focus on investment grade
$20.9 billion at Dec. 31, 2017, primarily reflecting clients that are active users of our non-credit services.
lower exposure in the manufacturing and services and The following table summarizes the percentage of the
other portfolios. financial institutions and commercial portfolio
exposures that are investment grade.
Utilities-related exposure represents approximately
76% of the energy and utilities portfolio at Dec. 31,
Percentage of the portfolios Dec. 31,
2018. Included in this portfolio is unsecured funded that are investment grade 2018 2017 2016
exposure of approximately $160 million to a Financial institutions 95% 93% 92%
California utility company that filed for bankruptcy in Commercial 95% 95% 94%
the first quarter of 2019. As of Feb. 27, 2019, we
expect our exposure to this California utility company
to decrease by approximately $60 million as a result Wealth management loans and mortgages
of current sales. Our nonperforming assets are
expected to increase in the first quarter 2019 as a Our wealth management exposure was $16.8 billion
result of the bankruptcy. Based on current market at Dec. 31, 2018, compared with $17.6 billion at Dec.
conditions and facts and circumstances which may 31, 2017. Wealth management loans and mortgages
change, we also expect to record an additional primarily consist of loans to high-net-worth
provision for credit losses relating to this exposure of individuals, which are secured by marketable
$20 million - $30 million in the first quarter of 2019. securities and/or residential property. Wealth
management mortgages are primarily interest-only,
The remaining exposure in the energy and utilities adjustable-rate mortgages with a weighted-average
portfolio, which includes exposure to refining, loan-to-value ratio of 62% at origination. Less than
exploration and production companies, integrated 1% of the mortgages were past due at Dec. 31, 2018.
companies and pipelines, was 88% investment grade
at Dec. 31, 2018, and 77% at Dec. 31, 2017.
32 BNY Mellon
At Dec. 31, 2018, the wealth management mortgage cars. Assets are both domestic and foreign-based,
portfolio consisted of the following geographic with primary concentrations in the United States and
concentrations: California - 24%; New York - 18%; Germany. Approximately 48% of the portfolio is
Massachusetts - 10%; Florida - 8%; and other - 40%. additionally secured by highly rated securities and/or
secured by letters of credit from investment grade
Commercial real estate issuers. Counterparty rating equivalents at Dec. 31,
2018 were as follows:
Our commercial real estate exposure totaled $8.3
billion at Dec. 31, 2018, compared with $8.4 billion • 55% of the counterparties were A or better;
at Dec. 31, 2017. Our income-producing commercial • 42% were BBB; and
real estate facilities are focused on experienced • 3% were non-investment grade.
owners and are structured with moderate leverage
based on existing cash flows. Our commercial real Other residential mortgages
estate lending activities also include construction and
renovation facilities. Our client base consists of The other residential mortgages portfolio primarily
experienced developers and long-term holders of real consists of 1-4 family residential mortgage loans and
estate assets. Loans are approved on the basis of totaled $594 million at Dec. 31, 2018 and $708
existing or projected cash flows and supported by million at Dec. 31, 2017. Included in this portfolio at
appraisals and knowledge of local market conditions. Dec. 31, 2018 were $128 million of mortgage loans
Development loans are structured with moderate purchased in 2005, 2006 and the first quarter of 2007,
leverage, and in many instances, involve some level of which 11% of the serviced loan balance was at
of recourse to the developer. least 60 days delinquent.
At Dec. 31, 2018, 61% of our commercial real estate Overdrafts

portfolio was secured. The secured portfolio is
diverse by project type, with 43% secured by Overdrafts primarily relate to custody and securities
residential buildings, 36% secured by office clearance clients. Overdrafts occur on a daily basis
buildings, 11% secured by retail properties and 10% primarily in the custody and securities clearance
secured by other categories. Approximately 97% of business and are generally repaid within two business
the unsecured portfolio consists of real estate days.
investment trusts (“REITs”) and real estate operating
companies, which are both predominantly investment Other loans
grade.
Other loans primarily include loans to consumers that
At Dec. 31, 2018, our commercial real estate are fully collateralized with equities, mutual funds
portfolio consisted of the following concentrations: and fixed-income securities.
REITs and real estate operating companies - 38%;
New York metro - 42%; and other - 20%. Margin loans
Lease financings Margin loans are collateralized with marketable

securities, and borrowers are required to maintain a
The leasing portfolio exposure totaled $1.3 billion at daily collateral margin in excess of 100% of the value
both Dec. 31, 2018 and Dec. 31, 2017. At Dec. 31, of the loan. Margin loans included $2.6 billion at
2018, the lease financings portfolio consisted of Dec. 31, 2018 and $4.2 billion at Dec. 31, 2017
exposures backed by well-diversified assets, related to a term loan program that offers fully
including large-ticket transportation equipment, the collateralized loans to broker-dealers.
largest consisting of both passenger and freight train
BNY Mellon 33
Loans by category
The following table shows loans outstanding at year-end over the last five years.
Loans by category Dec. 31,

(in millions) 2018 2017 2016 2015 2014
Domestic:
Commercial $ 1,949 $ 2,744 $ 2,286 $ 2,115 $ 1,390
Commercial real estate 4,787 4,900 4,639 3,899 2,524
Financial institutions 5,091 5,568 6,342 6,640 5,603
Lease financings 706 772 989 1,007 1,282
Wealth management loans and mortgages 15,843 16,420 15,555 13,247 11,095
Other residential mortgages 594 708 854 1,055 1,222
Overdrafts 1,550 963 1,055 911 1,348
Other 1,181 1,131 1,202 1,137 1,113
Margin loans 13,343 15,689 17,503 19,340 20,034
Total domestic 45,044 48,895 50,425 49,351 45,611
Foreign:
Commercial 183 167 331 227 252
Commercial real estate — — 15 46 6
Financial institutions 6,492 7,483 8,347 9,259 7,716
Lease financings 551 527 736 850 889
Wealth management loans and mortgages 122 108 99 100 89
Other (primarily overdrafts) 4,031 4,264 4,418 3,637 4,569
Margin loans 141 96 87 233 —
Total foreign 11,520 12,645 14,033 14,352 13,521
Total loans (a) $ 56,564 $ 61,540 $ 64,458 $ 63,703 $ 59,132
(a) Net of unearned income of $358 million at Dec. 31, 2018, $394 million at Dec. 31, 2017, $527 million at Dec. 31, 2016, $674 million at
Dec. 31, 2015 and $866 million at Dec. 31, 2014, primarily on domestic and foreign lease financings.
Foreign loans Maturity of loan portfolio
We have credit relationships in foreign markets, The following table shows the maturity structure of
particularly in areas associated with our securities our loan portfolio at Dec. 31, 2018.
servicing and trade finance activities. Excluding
lease financings, these activities resulted in
Maturity of loan portfolio at Dec. 31, 2018 (a)
outstanding foreign loans of $11.0 billion at Dec. 31, Between
2018 and $12.1 billion at Dec. 31, 2017. The Within 1 and 5 After
(in millions) 1 year years 5 years Total
decrease primarily resulted from lower loans to
Domestic:
financial institutions and lower overdrafts. Commercial $ 463 $ 1,371 $ 115 $ 1,949
Commercial
real estate 702 2,384 1,701 4,787
Financial
institutions 4,119 940 32 5,091
Overdrafts 1,550 — — 1,550
Other 1,181 — — 1,181
Margin loans 12,843 500 — 13,343
Subtotal 20,858 5,195 1,848 27,901
Foreign 10,283 524 40 10,847
Total $ 31,141 $ 5,719 (b) $ 1,888 (b) $38,748
(a) Excludes loans collateralized by residential properties, lease
financings and wealth management loans and mortgages.
(b) Variable rate loans due after one year totaled $7.6 billion
and fixed rate loans totaled $35 million.
34 BNY Mellon
Asset quality and allowance for credit losses customer consists of funded loans, unfunded
contractual commitments to lend, standby letters of
Our credit strategy is to focus on investment grade credit (“SBLC”) and overdrafts associated with our
clients who are active users of our non-credit custody and securities clearance businesses.
services. Our primary exposure to the credit risk of a
The following table details changes in our allowance for credit losses.
Allowance for credit losses activity

(dollar amounts in millions) 2018 2017 2016 2015 2014
Non-margin loans $ 43,080 $ 45,755 $ 46,868 $ 43,708 $ 39,077
Margin loans 13,484 15,785 17,590 19,573 20,034
Total loans $ 56,564 $ 61,540 $ 64,458 $ 63,281 $ 59,111
Average loans outstanding 55,810 57,939 61,681 60,672 54,210
Balance, Jan. 1
Domestic $ 226 $ 245 $ 240 $ 236 $ 288
Foreign 35 36 35 44 56
Total allowance at Jan. 1 261 281 275 280 344
Charge-offs:
Commercial — — — — (12)
Commercial real estate — — — — (2)
Financial institutions — — — (170) —
Wealth management loans and mortgages — — — — (1)
Other residential mortgages (1) (1) (2) (2) (2)
Foreign — — — — (3)
Total charge-offs (1) (1) (2) (172) (20)
Recoveries:
Commercial — — — — 1
Financial institutions — — 13 1 1
Other residential mortgages 2 5 5 6 2
Foreign 1 — 1 — —
Total recoveries 3 5 19 7 4
Net recoveries (charge-offs) 2 4 17 (165) (16)
Provision for credit losses (11) (24) (11) 160 (48)
Balance, Dec. 31,
Domestic 220 226 245 240 236
Foreign 32 35 36 35 44
Total allowance, Dec. 31, $ 252 $ 261 $ 281 $ 275 $ 280
Allowance for loan losses $ 146 $ 159 $ 169 $ 157 $ 191
Allowance for lending-related commitments 106 102 112 118 89
Net (recoveries) charge-offs to average loans outstanding —% (0.01)% (0.03)% 0.27% 0.03%
Net (recoveries) charge-offs to total allowance for credit losses (0.79) (1.53) (6.05) 60.00 5.71
Allowance for loan losses as a percentage of total loans 0.26 0.26 0.26 0.25 0.32
Allowance for loan losses as a percentage of non-margin loans 0.34 0.35 0.36 0.36 0.49
Total allowance for credit losses as a percentage of total loans 0.45 0.42 0.44 0.43 0.47
Total allowance for credit losses as a percentage of non-margin loans 0.58 0.57 0.60 0.63 0.72
The allowance for credit losses decreased $9 million The provision for credit losses was a credit of $11
compared with Dec. 31, 2017, driven by the credit to million in 2018, a credit of $24 million in 2017 and a
provision for credit losses, partially offset by the credit of $11 million in 2016.
impact of an update to the usage given default
parameter in 2018. The usage given default We had $13.5 billion of secured margin loans on our
parameter associated with the estimate of the balance sheet at Dec. 31, 2018 compared with $15.8
probability of drawdown at default was updated in billion at Dec. 31, 2017 and $17.6 billion at Dec. 31,
2018, resulting in an $11 million increase to the 2016. We have rarely suffered a loss on these types
allowance for lending-related commitments. of loans and do not allocate any of our allowance for
credit losses to them. As a result, we believe that the
ratio of total allowance for credit losses as a
BNY Mellon 35
percentage of non-margin loans is a more appropriate Allocation of allowance Dec. 31,

metric to measure the adequacy of the reserve. 2018 2017 2016 2015 2014
Commercial 32% 30% 29% 30% 21%
Commercial real estate 30 29 26 22 18
The allowance for loan losses and allowance for Foreign 13 13 13 13 16
lending-related commitments represent Financial institutions 9 9 9 11 11
Wealth management (a) 8 8 8 7 8
management’s estimate of losses inherent in our Other residential mortgages 6 8 10 12 14
credit portfolio. This evaluation process is subject to Lease financing 2 3 5 5 12
numerous estimates and judgments. To the extent Total 100% 100% 100% 100% 100%
actual results differ from forecasts or management’s (a) Includes the allowance for wealth management mortgages.
judgment, the allowance for credit losses may be

greater or less than future charge-offs.
The allocation of the allowance for credit losses is
Based on an evaluation of the allowance for credit inherently judgmental, and the entire allowance for
losses as discussed in “Critical accounting estimates” credit losses is available to absorb credit losses
and Note 1 of the Notes to Consolidated Financial regardless of the nature of the losses.
Statements, we have allocated our allowance for
credit losses as follows.
Nonperforming assets
Nonperforming assets Dec. 31,

Nonperforming loans:
Other residential mortgages $ 67 $ 78 $ 91 $ 102 $ 112
Wealth management loans and mortgages 9 7 8 11 12
Commercial real estate — 1 — 2 1
Lease financings — — 4 — —
Financial institutions — — — 171 —
Total nonperforming loans 76 86 103 286 125
Other assets owned 3 4 4 6 3
Total nonperforming assets (a) $ 79 $ 90 $ 107 $ 292 $ 128
Nonperforming assets ratio 0.14% 0.15% 0.17% 0.46% 0.22%
Nonperforming assets ratio, excluding margin loans 0.18 0.20 0.23 0.67 0.33
Allowance for loan losses/nonperforming loans 192.1 184.9 164.1 54.9 152.8
Allowance for loan losses/nonperforming assets 184.8 176.7 157.9 53.8 149.2
Total allowance for credit losses/nonperforming loans 331.6 303.5 272.8 96.2 224.0
Total allowance for credit losses/nonperforming assets 319.0 290.0 262.6 94.2 218.8
(a) Loans of consolidated investment management funds are not part of BNY Mellon’s loan portfolio and are excluded from the
nonperforming assets table above. Included in the loans of consolidated investment management funds are nonperforming loans of $53
million at Dec. 31, 2014 which are recorded at fair value and therefore do not impact the provision for credit losses and allowance for
loan losses. In the second quarter of 2015, BNY Mellon adopted the accounting guidance included in ASU 2015-02, Consolidations. As
a result, we deconsolidated substantially all of the loans of consolidated investment management funds retrospectively to Jan. 1, 2015.
Nonperforming assets decreased $11 million

Nonperforming assets activity
(in millions) 2018 2017 compared with Dec. 31, 2017, primarily reflecting
Balance at beginning of year $ 90 $ 107 lower other residential mortgage loans driven by
Additions 10 12 paydowns and sales.
Return to accrual status (2) (5)
Charge-offs (1) (1)
As noted earlier, our nonperforming assets are
Paydowns/sales (18) (23)
Balance at end of year $ 79 $ 90 expected to increase in the first quarter of 2019 as a
result of the bankruptcy of a Californian utility
company.
36 BNY Mellon
The following table presents loans that are past due The following table shows the maturity breakdown of
90 days or more and still accruing interest. domestic time deposits of $100,000 or more at Dec.
31, 2018.
(in millions) 2018 2017 2016 2015 2014

Domestic: Certificates Other time
Consumer $ 12 $ 5 $ 7 $ 5 $ 6 (in millions) of deposit deposits Total
Commercial — — — — — 3 months or less $ 77 $ 32,247 $ 32,324
Total domestic 12 5 7 5 6 Between 3 and 6 months 36 — 36
Foreign — — — — — Between 6 and 12 months 88 — 88
Total past due loans $ 12 $ 5 $ 7 $ 5 $ 6 Over 12 months 2 — 2
Total $ 203 $ 32,247 $ 32,450
Loans past due 90 days or more at Dec. 31, 2018

primarily consisted of other residential mortgage Short-term borrowings
loans and wealth management loans and mortgages.
See Note 5 of the Notes to Consolidated Financial We fund ourselves primarily through deposits and, to
Statements for additional information on our past due a lesser extent, other short-term borrowings and long-
loans. See “Nonperforming assets” in Note 1 of the term debt. Short-term borrowings consist of federal
Notes to Consolidated Financial Statements for our funds purchased and securities sold under repurchase
policy for placing loans on nonaccrual status. agreements, payables to customers and broker-
dealers, commercial paper and other borrowed funds.
Deposits Certain other borrowings, for example, securities sold
under repurchase agreements, require the delivery of
We receive client deposits through a variety of securities as collateral.
Investment Services and Investment Management
businesses and we rely on those deposits as a low- See “Liquidity and dividends” for a discussion of
cost and stable source of funding. long-term debt and liquidity metrics that we monitor.
Total deposits were $238.8 billion at Dec. 31, 2018, a Information related to federal funds purchased and
decrease of 2% compared with $244.3 billion at Dec. securities sold under repurchase agreements is
31, 2017. The decrease primarily reflects lower presented below.
interest-bearing deposits in non-U.S. offices and
noninterest-bearing deposits principally in U.S. Federal funds purchased and securities sold under
offices, partially offset by higher interest-bearing repurchase agreements
deposits in U.S. offices. (dollars in millions) 2018 2017 2016
Maximum month-end
balance during the year $ 21,600 $ 21,850 $ 25,995
Noninterest-bearing deposits were $70.8 billion at Average daily balance (a) $ 15,546 $ 19,653 $ 14,489
Dec. 31, 2018 compared with $82.7 billion at Dec. Weighted-average rate
during the year (a) 4.88% 1.14% 0.25%
31, 2017. Interest-bearing deposits were $168.0
Ending balance (b) $ 14,243 $ 15,163 $ 9,989
billion at Dec. 31, 2018 compared with $161.6 billion Weighted-average rate at
at Dec. 31, 2017. Dec. 31 (b) 12.99% 2.33% 0.38%
(a) Includes the impact of offsetting under enforceable netting
The aggregate amount of deposits by foreign agreements of $25,203 million for 2018, $5,657 million for
2017 and less than $350 million for 2016.
customers in domestic offices was $36.4 billion and
(b) Includes the impact of offsetting under enforceable netting
$39.9 billion at Dec. 31, 2018 and Dec. 31, 2017, agreements of $76,040 million at Dec. 31, 2018, $25,848
respectively. million at Dec. 31, 2017 and $481 million at Dec. 31, 2016.
Deposits in foreign offices totaled $99.2 billion at

Dec. 31, 2018 and $114.8 billion at Dec. 31, 2017.
The majority of these deposits were in amounts in
excess of $100,000 and were primarily overnight
foreign deposits.
BNY Mellon 37
Federal funds purchased and securities sold under Payables to customers and broker-dealers
repurchase agreements Quarter ended
Quarter ended Dec. 31, Sept. 30, Dec. 31,
Dec. 31, Sept. 30, Dec. 31, (dollars in millions) 2018 2018 2017
(dollars in millions) 2018 2018 2017 Maximum month-end
Maximum month-end balance during the quarter $ 19,731 $ 19,232 $ 21,380
balance during the quarter $ 14,243 $ 13,020 $ 20,098 Average daily balance (a) $ 18,955 $ 19,073 $ 21,130
Average daily balance (a) $ 10,980 $ 14,199 $ 20,211 Weighted-average rate
Weighted-average rate during the quarter (a) 1.61% 1.23% 0.49%
during the quarter (a) 10.95% 5.33% 1.83% Ending balance $ 19,731 $ 18,683 $ 20,184
Ending balance (b) $ 14,243 $ 10,158 $ 15,163 Weighted-average rate at
Weighted-average rate at period end 1.62% 1.30% 0.56%
period end (b) 12.99% 7.33% 2.33%
(a) The weighted-average rate is calculated based on, and is
(a) Includes the impact of offsetting under enforceable netting applied to, the average interest-bearing payables to
agreements of $42,721 million for the fourth quarter of customers and broker-dealers, which were $15,727 million
2018, $25,922 million for the third quarter of 2018 and in the fourth quarter of 2018, $16,252 million in the third
$14,128 million for the fourth quarter of 2017. quarter of 2018 and $17,868 million in the fourth quarter of
(b) Includes the impact of offsetting under enforceable netting 2017.
agreements of $76,040 million at Dec. 31, 2018, $58,540
million at Sept. 30, 2018 and $25,848 million at Dec. 31,
2017.
Payables to customers and broker-dealers represent
funds awaiting re-investment and short sale proceeds
Fluctuations of federal funds purchased and securities payable on demand. Payables to customers and
sold under repurchase agreements between periods broker-dealers are driven by customer trading activity
reflect changes in overnight borrowing opportunities. levels and market volatility.
The increase in the weighted-average rates, compared
with both Sept. 30, 2018 and Dec. 31, 2017, primarily Information related to commercial paper is presented
reflects the increase in repurchase agreement activity below.
with the Fixed Income Clearing Corporation
(“FICC”), where we record interest expense gross, Commercial paper
but the average balances are reduced as a result of the (dollars in millions) 2018 2017 2016
impact of offsetting under enforceable netting Maximum month-end
agreements. The increased activity primarily relates Average daily balance $ 2,607 $ 2,630 $ 1,337
to government securities collateralized resale and Weighted-average rate
during the year 1.97% 1.08% 0.37%
repurchase agreements executed with clients that are
Ending balance at Dec. 31 $ 1,939 $ 3,075 $ —
novated to and settle with the FICC. Weighted-average rate at
Dec. 31 2.34% 1.27% —%
Information related to payables to customers and
broker-dealers is presented below.
Commercial paper Quarter ended
Dec. 31, Sept. 30, Dec. 31,
Payables to customers and broker-dealers (dollars in millions) 2018 2018 2017
(dollars in millions) 2018 2017 2016 Maximum month-end
Maximum month-end balance during the quarter $ 1,939 $ 4,422 $ 4,714
balance during the year $ 20,905 $ 21,621 $ 22,327 Average daily balance $ 353 $ 3,102 $ 3,391
Average daily balance (a) $ 19,450 $ 21,142 $ 21,149 Weighted-average rate
during the quarter 2.41% 2.10% 1.23%
Weighted-average rate
during the year (a) 1.17% 0.34% 0.07% Ending balance $ 1,939 $ 735 $ 3,075
Ending balance at Dec. 31 $ 19,731 $ 20,184 $ 20,987 Weighted-average rate at
period end 2.34% 2.06% 1.27%
Weighted-average
rate at Dec. 31 1.62% 0.56% 0.09%
(a) The weighted-average rate is calculated based on, and is
applied to, the average interest-bearing payables to
The Bank of New York Mellon, our largest bank
customers and broker-dealers, which were $16,353 million
in 2018, $18,984 million in 2017 and $16,925 million in subsidiary, issues commercial paper that matures
2016. within 397 days from date of issue and is not
redeemable prior to maturity or subject to voluntary
prepayment. The fluctuations in the commercial
paper balances, compared with prior periods,
38 BNY Mellon
primarily reflects management of overall liquidity. reasonable cost for both expected and unexpected
The increase in weighted-average rates, compared cash flow and collateral needs without adversely
with prior periods, primarily reflects increases in the affecting daily operations or our financial condition.
Fed Funds effective rate and the issuance of higher- Funding liquidity risk can arise from funding
yielding term commercial paper. mismatches, market constraints from the inability to
convert assets to cash, the inability to hold or raise
Information related to other borrowed funds is cash, low overnight deposits, deposit run-off or
presented below. contingent liquidity events.
We also manage liquidity risks on an intraday basis.

Other borrowed funds
(dollars in millions) 2018 2017 2016 Intraday liquidity risk is the risk that BNY Mellon
Maximum month-end cannot access funds during the business day to make
payments or settle immediate obligations, usually in
Average daily balance $ 2,545 $ 1,916 $ 846
real time. Intraday liquidity risk can arise from
during the year 2.26% 1.36% 0.91% timing mismatches, market constraints from the
Ending balance at Dec. 31 $ 3,227 $ 3,028 $ 754 inability to convert assets to cash, the inability to
Weighted-average rate at raise cash intraday, low overnight deposits and/or
Dec. 31 2.64% 1.48% 0.89%
adverse stress events.
Other borrowed funds Quarter ended Changes in economic conditions or exposure to

Dec. 31, Sept. 30, Dec. 31, credit, market, operational, legal and reputational
(dollars in millions) 2018 2018 2017 risks also can affect BNY Mellon’s liquidity risk
Maximum month-end
balance during the quarter $ 3,227 $ 3,269 $ 3,955 profile and are considered in our liquidity risk
Average daily balance $ 2,903 $ 2,747 $ 3,421 framework.
during the quarter 2.44% 2.33% 1.46%
Ending balance $ 3,227 $ 2,934 $ 3,028
For additional information on our liquidity policy, see
Weighted-average rate at “Risk Management - Liquidity risk.”
period end 2.64% 2.48% 1.48%
We monitor and control liquidity exposures and
funding needs within and across significant legal
Other borrowed funds primarily include borrowings entities, branches, currencies and business lines,
from the Federal Home Loan Bank (“FHLB”), taking into account, among other factors, any
overdrafts of sub-custodian account balances in our applicable restrictions on the transfer of liquidity
Investment Services businesses, capital lease among entities.
obligations and borrowings under lines of credit by
our Pershing subsidiaries. Overdrafts typically relate BNY Mellon also manages potential intraday
to timing differences for settlements. The increase in liquidity risks. We monitor and manage intraday
other borrowed funds, compared with prior periods liquidity against existing and expected intraday liquid
primarily reflects an increase in borrowings from the resources (such as cash balances, remaining intraday
FHLB partially offset by a decline in overdrafts and credit capacity, intraday contingency funding and
lower capital lease obligations due to the purchase of available collateral) to enable BNY Mellon to meet its
the leased asset. intraday obligations under normal and reasonably
severe stressed conditions.
Liquidity and dividends
The Parent’s policy is to have access to sufficient
BNY Mellon defines liquidity as the ability of the unencumbered cash and cash equivalents at each
Parent and its subsidiaries to access funding or quarter-end to cover forecasted debt redemptions, net
convert assets to cash quickly and efficiently, or to interest payments and net tax payments for the
roll over or issue new debt, especially during periods following 18-month period, and to provide sufficient
of market stress, at a reasonable cost and in order to collateral to satisfy transactions subject to Section
meet its short-term (up to one year) obligations. 23A of the Federal Reserve Act. As of Dec. 31, 2018,
Funding liquidity risk is the risk that BNY Mellon the Parent was in compliance with this policy.
cannot meet its cash and collateral obligations at a
BNY Mellon 39
We define available funds for internal liquidity bearing deposits with the Federal Reserve and other
management purposes as liquid funds (which include central banks. The following table presents our total
interest-bearing deposits with banks and federal funds available funds, including liquid funds, at period end
sold and securities purchased under resale and on an average basis.
agreements), cash and due from banks and interest-
Available and liquid funds Dec. 31, Dec. 31, Average

(in millions) 2018 2017 2018 2017 2016
Available funds:
Liquid funds:
Interest-bearing deposits with banks $ 14,148 $ 11,979 $ 14,740 $ 14,879 $ 14,704
Federal funds sold and securities purchased under resale agreements 46,795 28,135 27,883 27,192 25,767
Total liquid funds 60,943 40,114 42,623 42,071 40,471
Cash and due from banks 5,864 5,382 5,014 5,039 4,308
Interest-bearing deposits with the Federal Reserve and other central banks 67,988 91,510 68,408 70,213 80,593
Total available funds $ 134,795 $ 137,006 $ 116,045 $ 117,323 $ 125,372
Total available funds as a percentage of total assets 37% 37% 34% 34% 35%
We had $60.9 billion of liquid funds at Dec. 31, 2018 $95.5 billion for 2018, compared with $96.2 billion
and $40.1 billion at Dec. 31, 2017. Of the $60.9 for 2017. Average interest-bearing domestic deposits
billion in liquid funds held at Dec. 31, 2018, $14.1 were $59.2 billion for 2018 and $46.9 billion for
billion was placed in interest-bearing deposits with 2017. The increase primarily reflects an increase in
large, highly-rated global financial institutions with a demand deposits.
weighted-average life to maturity of approximately
13 days. Of the $14.1 billion, $1.1 billion was placed Average payables to customers and broker-dealers
with banks in the Eurozone. were $16.4 billion for 2018 and $19.0 billion for
2017. Payables to customers and broker-dealers are
Total available funds were $134.8 billion at Dec. 31, driven by customer trading activity and market
2018, compared with $137.0 billion at Dec. 31, 2017. volatility.
The decrease was primarily due to lower interest-
bearing deposits with the Federal Reserve and other Average long-term debt was $28.3 billion for 2018
central banks, partially offset by higher federal funds and $27.4 billion for 2017. The increase reflects
sold and securities purchased under resale issuances, partially offset by the maturities of long-
agreements. term debt.
Average non-core sources of funds, such as federal Average noninterest-bearing deposits decreased to
funds purchased and securities sold under repurchase $63.8 billion for 2018 from $71.7 billion for 2017,
agreements, trading liabilities, commercial paper and reflecting lower client deposits.
other borrowed funds, were $22.0 billion for 2018
and $25.4 billion for 2017. The decrease primarily A significant reduction in our Investment Services
reflects a decrease in federal funds purchased and business would reduce our access to deposits. See
securities sold under repurchase agreements. “Asset/liability management” for additional factors
that could impact our deposit balances.
Average foreign deposits, primarily from our
European-based Investment Services business, were
40 BNY Mellon
Sources of liquidity the Parent through a committed credit facility with

our intermediate holding company (“IHC”).
The Parent’s three major sources of liquidity are
access to the debt and equity markets, dividends from Our ability to access the capital markets on favorable
its subsidiaries, and cash on hand and cash otherwise terms, or at all, is partially dependent on our credit
made available in business-as-usual circumstances to ratings, which are as follows:
Credit ratings at Dec. 31, 2018

Moody’s S&P Fitch DBRS
Parent:
Long-term senior debt A1 A AA- AA (low)
Subordinated debt A2 A- A+ A (high)
Preferred stock Baa1 BBB BBB A (low)
Outlook - Parent: Stable Stable Stable Stable
The Bank of New York Mellon:
Long-term senior debt Aa2 AA- AA AA
Subordinated debt NR A NR NR
Long-term deposits Aa1 AA- AA+ AA
Short-term deposits P1 A-1+ F1+ R-1 (high)
Commercial paper P1 A-1+ F1+ R-1 (high)
BNY Mellon, N.A.:
Long-term senior debt Aa2 (a) AA- AA (a) AA
Long-term deposits Aa1 AA- AA+ AA
Short-term deposits P1 A-1+ F1+ R-1 (high)
Outlook - Banks: Stable Stable Stable Stable
(a) Represents senior debt issuer default rating.
NR - Not rated.
Long-term debt totaled $29.2 billion at Dec. 31, 2018 In the second quarter of 2018, BNY Mellon
and $28.0 billion at Dec. 31, 2017. The balance established programs for the issuance of notes and
reflects issuances of $5.2 billion, offset by maturities certificates of deposit (“CDs”) issued by The Bank of
of $3.7 billion and a decrease in the fair value of New York Mellon, our largest bank subsidiary. These
hedged long-term debt. The Parent has $4.3 billion of programs are designed to improve the diversity of our
long-term debt that will mature in 2019. funding sources and provide additional flexibility in
our liquidity planning. In December 2018, we issued
The following table presents the long-term debt $1 billion of senior bank notes maturing in 2020 at an
issued in 2018. annual interest rate of LIBOR plus 30 basis points.
At Dec. 31, 2018, $2.8 billion of CDs were
outstanding.
Debt issuances
(in millions) 2018
Senior notes:
The Bank of New York Mellon, our largest bank
3-month LIBOR + 30bps senior notes due 2020 $ 1,000 subsidiary, issues commercial paper that matures
2.95% senior notes due 2023 1,000 within 397 days from date of issue and is not
3.50% senior notes due 2023 750 redeemable prior to maturity or subject to voluntary
3.45% senior notes due 2023 750 prepayment. The average commercial paper
3.40% senior notes due 2028 750 borrowings were $2.6 billion for both 2018 and 2017.
3.85% senior notes due 2028 900
Total debt issuances $ 5,150
Commercial paper outstanding was $1.9 billion at
Dec. 31, 2018 and $3.1 billion at Dec. 31, 2017.
BNY Mellon 41
Subsequent to Dec. 31, 2018, our U.S. bank Uses of funds

subsidiaries could declare dividends to the Parent of
approximately $3.7 billion, without the need for a The Parent’s major uses of funds are payment of
regulatory waiver. In addition, at Dec. 31, 2018, non- dividends, repurchases of common stock, principal
bank subsidiaries of the Parent had liquid assets of and interest payments on its borrowings, acquisitions
approximately $1.7 billion. Restrictions on our and additional investments in its subsidiaries.
ability to obtain funds from our subsidiaries are
discussed in more detail in “Supervision and In 2018, we paid $1.2 billion in dividends on our
Regulation - Capital Planning and Stress Testing - common and preferred stock. Our common stock
Payment of Dividends, Stock Repurchases and Other dividend payout ratio was 26% for 2018.
Capital Distributions” and in Note 18 of the Notes to
Consolidated Financial Statements. In 2018, we repurchased 63.7 million common shares
at an average price of $51.29 per common share for a
Pershing LLC has uncommitted lines of credit in total cost of $3.3 billion.
place for liquidity purposes which are guaranteed by
the Parent. Pershing LLC has three separate Liquidity coverage ratio
uncommitted lines of credit amounting to $750
million in aggregate. There were no borrowings
U.S. regulators have established an LCR that requires
under these lines in 2018. Pershing Limited, an
certain banking organizations, including BNY
indirect UK-based subsidiary of BNY Mellon, has
Mellon, to maintain a minimum amount of
two separate uncommitted lines of credit amounting
unencumbered high-quality liquid assets (“HQLA”)
to $250 million in aggregate. Average borrowings
sufficient to withstand the net cash outflow under a
under these lines were $1 million, in aggregate, in
hypothetical standardized acute liquidity stress
2018.
scenario for a 30-day time horizon.
The double leverage ratio is the ratio of our equity
investment in subsidiaries divided by our The following table presents the consolidated HQLA
consolidated parent company equity, which includes at Dec. 31, 2018, and the average HQLA and average
our noncumulative perpetual preferred stock. In LCR for the fourth quarter of 2018.
short, the double leverage ratio measures the extent to
which equity in subsidiaries is financed by Parent Consolidated HQLA and LCR Dec. 31,
company debt. As the double leverage ratio (dollars in billions) 2018
increases, this can reflect greater demands on a Securities (a) $ 121
company’s cash flows in order to service interest Cash (b) 61
Total consolidated HQLA (c) $ 182
payments and debt maturities. BNY Mellon’s double
leverage ratio is managed in a range considering the Total consolidated HQLA - average (c) $ 164
high level of unencumbered available liquid assets Average LCR 118%
held in its principal subsidiaries (such as central bank (a) Primarily includes securities of U.S. government-sponsored
enterprises, U.S. Treasury, sovereign securities, U.S. agency
deposit placements and government securities), the
and investment-grade corporate debt.
Company’s cash generating fee-based business (b) Primarily includes cash on deposit with central banks.
model, with fee revenue representing 78% of total (c) Consolidated HQLA presented before adjustments. After
revenue in 2018, and the dividend capacity of our haircuts and the impact of trapped liquidity, consolidated
banking subsidiaries. Our double leverage ratio was HQLA totaled $133 billion at Dec. 31, 2018 and averaged
$121 billion for the fourth quarter of 2018.
117.7% at Dec. 31, 2018 and 122.5% at Dec. 31,
2017, and within the range targeted by management.
The U.S. LCR rule requires BNY Mellon and each of
our affected domestic bank subsidiaries to meet an
LCR of at least 100%. BNY Mellon and each of our
affected domestic bank subsidiaries were compliant
with the U.S. LCR requirements throughout 2018.
42 BNY Mellon
Statement of cash flows cash provided by investing activities of $50.3 billion

in 2016. In 2018, 2017 and 2016, net cash provided
The following summarizes the activity reflected on by or used for investing activities primarily reflects
the consolidated statement of cash flows. While this changes in interest-bearing deposits with the Federal
information may be helpful to highlight certain macro Reserve and other central banks and the net impact of
trends and business strategies, the cash flow analysis securities activity. In 2018, net cash provided by
may not be as relevant when analyzing changes in our investing activities was partially offset by changes in
net earnings and net assets. We believe that in federal funds sold and securities purchased under
addition to the traditional cash flow analysis, the resale agreements.
discussion related to liquidity and dividends and
asset/liability management herein may provide more Net cash used for financing activities was $8.1 billion
useful context in evaluating our liquidity position and in 2018, compared with net cash provided by
related activity. financing activities of $26.8 billion in 2017 and net
cash used for financing activities of $59.1 billion in
Net cash provided by operating activities was $6.0 2016. In 2018, net cash used for financing activities
billion in 2018, compared with $4.7 billion in 2017 primarily reflects repayments of long-term debt,
and $6.3 billion in 2016. In 2018, 2017 and 2016, common stock repurchases and changes in deposits,
cash flows provided by operations were principally partially offset by proceeds from the issuance of long-
the result of earnings. In 2018, cash flows provided term debt. In 2017 and 2016, net cash provided by, or
by operations was also the result of changes in used for, financing activities primarily reflects
accruals and other balances, partially offset by changes in deposits and changes in federal funds
changes in trading assets and liabilities. In 2017, purchased and securities sold under repurchase
cash flows provided by operations were partially agreements. In 2017, net cash provided by financing
offset by changes in trading assets and liabilities. In activities also reflects net proceeds from the issuance
2016, cash flows provided by operations also reflect of long-term debt, changes in commercial paper and
changes in trading assets and liabilities, partially other borrowed funds, partially offset by common
offset by changes in accruals and other balances. stock repurchases. In 2016, net cash used for
financing activities also reflects repayment of long-
Net cash provided by investing activities was $3.3 term debt and common stock repurchases, partially
billion in 2018, compared with net cash used for offset by the net proceeds from the issuance of long-
investing activities of $32.7 billion in 2017 and net term debt.
BNY Mellon 43
Commitments and obligations addition to the amounts shown in the table below, at
Dec. 31, 2018, $103 million of unrecognized tax
We have contractual obligations to make fixed and benefits have been recorded as liabilities in
determinable payments to third parties as indicated in accordance with ASC 740, Income Taxes. Related to
the table below. The table excludes certain these unrecognized tax benefits, we have also
obligations such as trade payables and trading recorded a liability for potential interest of $22
liabilities, where the obligation is short-term or million. At this point, it is not possible to determine
subject to valuation based on market factors. In when these amounts will be settled or resolved.
Contractual obligations at Dec. 31, 2018 Payments due by period

Less than Over
(in millions) Total 1 year 1-3 years 3-5 years 5 years
Deposits without a stated maturity $ 128,032 $ 128,032 $ — $ — $ —
Term deposits 40,592 40,543 48 — 1
Federal funds purchased and securities sold under repurchase agreements 14,243 14,243 — — —
Payables to customers and broker-dealers 19,731 19,731 — — —
Other borrowed funds (a) 3,227 3,227 — — —
Long-term debt (b) 33,614 5,080 10,883 7,650 10,001
Unfunded pension and post-retirement benefits 256 27 58 53 118
Investment commitments (c) 479 201 230 30 18
Total contractual obligations $ 240,174 $ 211,084 $ 11,219 $ 7,733 $ 10,138
(a) Includes capital leases.
(b) Includes interest.
(c) Includes Community Reinvestment Act commitments.
We have entered into fixed and determinable commitments as indicated in the table below:
Other commitments at Dec. 31, 2018 Amount of commitment expiration per period
Less than Over
(in millions) Total 1 year 1-3 years 3-5 years 5 years
Securities lending indemnifications (a) $ 401,504 $ 401,504 $ — $ — $ —
Lending commitments 50,631 29,766 6,985 13,310 570
Standby letters of credit 2,817 1,972 496 349 —
Operating leases 1,459 264 455 308 432
Purchase obligations (b) 1,374 722 465 148 39
Commercial letters of credit 165 165 — — —
Private equity commitments (c) 41 17 13 11 —
Total commitments $ 457,991 $ 434,410 $ 8,414 $ 14,126 $ 1,041
(a) Excludes the indemnifications for securities booked at BNY Mellon resulting from the CIBC Mellon joint venture, which totaled $56
billion at Dec. 31, 2018.
(b) Purchase obligations are defined as agreements to purchase goods or services that are enforceable and legally binding and specify all
significant terms.
(c) Relates to SBIC investments, which are compliant with the Volcker Rule.
See “Liquidity and dividends” and Note 21 of the unconsolidated variable interest entities (“VIEs”).
Notes to Consolidated Financial Statements for a For BNY Mellon, these items include certain
further discussion of the source of funds for our guarantees. Guarantees include SBLCs issued as part
commitments and obligations. of our corporate banking business and securities
lending indemnifications issued as part of our
Off-balance sheet arrangements Investment Services business. See Note 21 of the
Notes to Consolidated Financial Statements for a
Off-balance sheet arrangements discussed in this further discussion of our off-balance sheet
section are limited to guarantees, retained or arrangements.
contingent interests and obligations arising out of
44 BNY Mellon
Capital
Capital data
(dollars in millions except per share amounts; common shares in thousands) 2018 2017
At period end:
BNY Mellon shareholders’ equity to total assets ratio 11.2% 11.1%
BNY Mellon common shareholders’ equity to total assets ratio 10.2% 10.1%
Total BNY Mellon shareholders’ equity $ 40,638 $ 41,251
Total BNY Mellon common shareholders’ equity (a) $ 37,096 $ 37,709
BNY Mellon tangible common shareholders’ equity – Non-GAAP (a) $ 18,290 $ 18,486
Book value per common share (a) $ 38.63 $ 37.21
Tangible book value per common share – Non-GAAP (a) $ 19.04 $ 18.24
Closing stock price per common share $ 47.07 $ 53.86
Market capitalization $ 45,207 $ 54,584
Common shares outstanding 960,426 1,013,442
Full-year:
Average common equity to average assets 11.0% 10.5%
Cash dividends per common share $ 1.04 $ 0.86
Common dividend payout ratio 26% 23%
Common dividend yield 2.2% 1.6%
(a) See “Supplemental information – Explanation of GAAP and Non-GAAP financial measures” beginning on page 105 for a reconciliation
of GAAP to Non-GAAP.
The Bank of New York Mellon Corporation total capitalized.” As of Dec. 31, 2018 and Dec. 31, 2017,
shareholders’ equity decreased to $40.6 billion at BNY Mellon and our U.S. bank subsidiaries were
Dec. 31, 2018 from $41.3 billion at Dec. 31, 2017. “well capitalized.”
The decrease primarily reflects common stock
repurchases, dividend payments and unrealized losses Failure to satisfy regulatory standards, including
on securities available-for-sale, partially offset by “well capitalized” status or capital adequacy rules
earnings and the impact of stock awards and option more generally, could result in limitations on our
exercises. activities and adversely affect our financial condition.
See the discussion of these matters in “Supervision
We repurchased 63.7 million common shares at an and Regulation - Regulated Entities of BNY Mellon
average price of $51.29 per common share for a total and Ancillary Regulatory Requirements” and “Risk
of $3.3 billion in 2018 including the additional share Factors - Operational Risk - Failure to satisfy
repurchases approved in December 2018. We expect regulatory standards, including “well capitalized” and
to continue to repurchase shares in the first half of “well managed” status or capital adequacy and
2019 under the 2018 capital plan. liquidity rules more generally, could result in
limitations on our activities and adversely affect our
The unrealized loss, net of tax, on our available-for- business and financial condition.”
sale securities portfolio included in accumulated OCI
was $167 million at Dec. 31, 2018, compared with a The U.S. banking agencies’ capital rules are based on
net unrealized gain of $184 million at Dec. 31, 2017. the framework adopted by the Basel Committee on
The decrease in the unrealized gain, net of tax, was Banking Supervision (“BCBS”), as amended from
primarily driven by higher interest rates. time to time. For additional information on these
capital requirements, see “Supervision and
Capital adequacy Regulation.” BNY Mellon is subject to the U.S.
capital rules, which were gradually phased-in over a
Regulators establish certain levels of capital for bank multi-year period through Jan. 1, 2019. The phase-in
holding companies (“BHCs”) and banks, including requirements for consolidated capital were completed
BNY Mellon and our bank subsidiaries, in accordance on Jan. 1, 2018.
with established quantitative measurements. For the
Parent to maintain its status as a financial holding Our risk-based capital adequacy is determined using
company, our U.S. bank subsidiaries and BNY the higher of RWAs determined using the Advanced
Mellon must, among other things, qualify as “well Approach and Standardized Approach.
BNY Mellon 45
The table below presents our consolidated and largest bank subsidiary regulatory capital ratios.
Consolidated and largest bank subsidiary regulatory Dec. 31, 2018 Dec. 31, 2017
capital ratios Well Minimum Capital Fully
capitalized required (a) ratios phased-in Transitional (b)
Consolidated regulatory capital ratios: (c)(d)
Advanced Approach:
CET1 ratio N/A (e) 7.5% 10.7% 10.3% 10.7%
Tier 1 capital ratio 6% 9 12.8 12.3 12.7
Total capital ratio 10% 11 13.6 13.0 13.4
Standardized Approach:
CET1 ratio N/A (e) 7.5% 11.7% 11.5% 11.9%
Tier 1 capital ratio 6% 9 14.1 13.7 14.2
Total capital ratio 10% 11 15.1 14.7 15.1
Tier 1 leverage ratio N/A (e) 4 6.6 6.4 6.6
SLR (f) N/A (e) 5 6.0 5.9 6.1
The Bank of New York Mellon regulatory
capital ratios: (c)
Advanced Approach:
CET1 ratio 6.5% 6.375% 14.0% N/A 14.1%
Tier 1 capital ratio 8 7.875 14.3 N/A 14.4
Total capital ratio 10 9.875 14.7 N/A 14.7
Tier 1 leverage ratio 5 4 7.6 N/A 7.6
SLR (f) 6 3 6.8 6.7 6.9
(a) Minimum requirements for Dec. 31, 2018 include minimum thresholds plus currently applicable buffers.
(b) Reflects transitional adjustments to CET1, Tier 1 capital and Tier 2 capital required in 2017 under the U.S. capital rules.
(c) For our CET1, Tier 1 capital and Total capital ratios, our effective capital ratios under U.S. capital rules are the lower of the ratios as
calculated under the Standardized and Advanced Approaches. The Tier 1 leverage ratio is based on Tier 1 capital and quarterly average
total assets.
(d) See page 48 for the capital ratio requirements with the phase-in of the capital conservation buffer and the U.S. Global Systemically
Important Bank (“G-SIB”) surcharge, as well as the introduction of the SLR buffer.
(e) The Federal Reserve’s regulations do not establish well capitalized thresholds for these measures for BHCs.
(f) SLR became a binding measure on Jan. 1, 2018. The SLR is based on Tier 1 capital and total leverage exposure, which includes certain
off-balance sheet exposures.
Our CET1 ratio determined under the Advanced particularly those that relate to businesses in which
Approach was 10.7% at Dec. 31, 2018 and 10.7%, on we operate, and as a result external losses have
a transitional basis, at Dec. 31, 2017. The ratio was impacted and could in the future impact the amount
unchanged compared to Dec. 31, 2017, reflecting of capital that we are required to hold.
capital deployed through common stock repurchases
and dividend payments, and the final phase-in Our capital ratios are necessarily subject to, among
requirements under U.S. capital rules, offset by other things, anticipated compliance with all
capital generated through earnings and lower RWAs. necessary enhancements to model calibration,
approval by regulators of certain models used as part
Our SLR was 6.0% at Dec. 31, 2018 and 6.1%, on a of RWA calculations, other refinements, further
transitional basis, at Dec. 31, 2017. implementation guidance from regulators, market
practices and standards and any changes BNY Mellon
The Advanced Approach capital ratios are may make to its businesses. As a consequence of
significantly impacted by RWAs for operational risk. these factors, our capital ratios may materially
Our operational loss risk model is informed by change, and may be volatile over time and from
external losses, including fines and penalties levied period to period.
against institutions in the financial services industry,
46 BNY Mellon
The following table presents our capital components and RWAs.
Capital components and risk-weighted assets Dec. 31, 2017

Dec. 31, Fully Transitional
(in millions) 2018 phased-in Approach (a)
CET1:
Common shareholders’ equity $ 37,096 $ 37,709 $ 37,859
Adjustments for:
Goodwill and intangible assets (b) (18,806) (19,223) (18,684)
Net pension fund assets (320) (211) (169)
Equity method investments (361) (387) (372)
Deferred tax assets (42) (41) (33)
Other — (9) (8)
Total CET1 17,567 17,838 18,593
Other Tier 1 capital:
Preferred stock 3,542 3,542 3,542
Deferred tax assets — — (8)
Net pension fund assets — — (42)
Other (65) (41) (41)
Total Tier 1 capital $ 21,044 $ 21,339 $ 22,044
Tier 2 capital:
Subordinated debt $ 1,250 $ 1,250 $ 1,250
Allowance for credit losses 252 261 261
Other (10) (12) (12)
Total Tier 2 capital – Standardized Approach 1,492 1,499 1,499
Excess of expected credit losses 65 31 31
Less: Allowance for credit losses 252 261 261
Total Tier 2 capital – Advanced Approach $ 1,305 $ 1,269 $ 1,269
Total capital:
Standardized Approach $ 22,536 $ 22,838 $ 23,543
Advanced Approach $ 22,349 $ 22,608 $ 23,313
Risk-weighted assets:
Standardized Approach $ 149,618 $ 155,324 $ 155,621
Advanced Approach:
Credit Risk $ 92,917 $ 101,366 $ 101,681
Market Risk 3,454 3,657 3,657
Operational Risk 68,300 68,688 68,688
Total Advanced Approach $ 164,671 $ 173,711 $ 174,026
Average assets for Tier 1 leverage ratio $ 319,007 $ 330,894 $ 331,600

Total leverage exposure for SLR $ 347,943 $ 360,543 $ 361,249
(a) Reflects transitional adjustments to CET1, Tier 1 capital and Tier 2 capital required in 2017 under the U.S. capital rules.
(b) Reduced by deferred tax liabilities associated with intangible assets and tax deductible goodwill.
BNY Mellon 47
The table below presents the factors that impacted the Minimum capital ratios and capital buffers
CET1 capital.
The U.S. capital rules include a series of buffers and
surcharges over required minimums that apply to
CET1 generation Dec. 31,
(in millions) 2018 BHCs, including BNY Mellon, which are being
CET1 – Beginning of period $ 17,838 phased-in over time. Banking organizations with a
Net income applicable to common shareholders of risk-based ratio or SLR above the minimum required
The Bank of New York Mellon Corporation 4,097
level, but with a risk-based ratio or SLR below the
Goodwill and intangible assets, net of related
deferred tax liabilities 417 minimum level with buffers, will face constraints on
Gross CET1 generated 4,514 dividends, equity repurchases and discretionary
Capital deployed: executive compensation based on the amount of the
Common stock dividends (1,052)
shortfall. Different regulatory capital buffers apply to
Common stock repurchased (3,269)
Total capital deployed (4,321) our banking subsidiaries.
Other comprehensive income:
Foreign currency translation (302) The following table presents the principal minimum
Unrealized loss on assets available-for-sale (380) capital ratio requirements with buffers and
Defined benefit plans (120)
surcharges, as phased-in, applicable to the Parent and
Unrealized gain on cash flow hedges (10)
Other (2) our U.S. insured depository institutions. This table
Total other comprehensive income (814) does not include the imposition of a countercyclical
Additional paid-in capital (a) 453 capital buffer. Buffers and surcharges are not
Other (deductions) additions: applicable to the Tier 1 leverage ratio. The SLR
Net pension fund assets (109)
buffer was fully implemented on Jan. 1, 2018 and the
Deferred tax assets (1)
Embedded goodwill 26 other buffers and surcharge were fully implemented
Other (19) on Jan. 1, 2019.
Total other deductions (103)
Net CET1 deployed (271)
CET1 – End of period $ 17,567
(a) Primarily related to stock awards, the exercise of stock
options and stock issued for employee benefit plans.
Capital ratio requirements Minimum ratios with buffers,

Well Minimum as phased-in (a)
capitalized ratios 2018 2019
Capital conservation buffer (CET1) 1.875% 2.5%
U.S. G-SIB surcharge (CET1) (b)(c) 1.125% 1.5%
Consolidated:
CET1 ratio N/A 4.5% 7.5% 8.5%
Tier 1 capital ratio 6.0% 6.0% 9.0% 10.0%
Total capital ratio 10.0% 8.0% 11.0% 12.0%
Enhanced SLR buffer (Tier 1 capital) N/A 2.0% 2.0%
SLR N/A 3.0% 5.0% 5.0%
U.S. insured depository institutions: (c)

CET1 ratio 6.5% 4.5% 6.375% 7.0%
Tier 1 capital ratio 8.0% 6.0% 7.875% 8.5%
Total capital ratio 10.0% 8.0% 9.875% 10.5%
SLR 6.0% 3.0% 6.0% (d) 6.0% (d)
(a) Countercyclical capital buffer currently set to 0%.
(b) The fully phased-in U.S. G-SIB surcharge of 1.5% applicable to BNY Mellon is subject to change.
(c) The U.S. G-SIB surcharge is not applicable to the regulatory capital ratios of the bank subsidiaries.
(d) Well capitalized threshold.
48 BNY Mellon
The following table shows the impact on the Capital ratios vary depending on the size of the
consolidated capital ratios at Dec. 31, 2018 of a $100 balance sheet at year-end and the levels and types of
million increase or decrease in common equity, or a investments in assets. The balance sheet size
$1 billion increase or decrease in RWAs, quarterly fluctuates from year to year based on levels of
average assets or total leverage exposure. customer and market activity. In general, when
servicing clients are more actively trading securities,
Sensitivity of consolidated capital ratios at Dec. 31, 2018
deposit balances and the balance sheet as a whole are
Increase or decrease of higher. In addition, when markets experience
$1 billion in significant volatility or stress, our balance sheet size
RWA, quarterly may increase considerably as client deposit levels
$100 million average assets
in common or total leverage increase.
(in basis points) equity exposure
CET1:
Standardized Approach 7 bps 8 bps
Advanced Approach 6 7
Tier 1 capital:
Standardized Approach 7 9
Total capital:
Standardized Approach 7 10
Tier 1 leverage 3 2
SLR 3 2
Issuer purchases of equity securities
Share repurchases - fourth quarter of 2018 Total shares Maximum approximate dollar
repurchased as value of shares that may yet
part of a publicly be purchased under the
(dollars in millions, except per share Total shares Average price announced plan publicly announced plans or
information; common shares in thousands) repurchased per share or program programs at Dec. 31, 2018
October 2018 7,763 $ 47.30 7,763 $ 1,432
November 2018 1,479 51.14 1,479 1,356
December 2018 19,702 47.15 19,702 1,257
Fourth quarter of 2018 (a) 28,944 $ 47.40 28,944 $ 1,257 (b)
(a) Includes 14 thousand shares repurchased at a purchase price of $1 million from employees, primarily in connection with the employees’
payment of taxes upon the vesting of restricted stock. The average price per share of open market purchases was $47.39.
(b) Represents the maximum value of the shares authorized to be repurchased through the second quarter of 2019, including employee
benefit plan repurchases.
In June 2018, in connection with the Federal Board of Directors approved the additional share
Reserve’s non-objection to our 2018 capital plan, repurchases, all of which were repurchased in the
BNY Mellon announced a share repurchase plan fourth quarter of 2018. These repurchases were in
providing for the repurchase of up to $2.4 billion of addition to the Company’s repurchase of $2.4 billion
common stock starting in the third quarter of 2018 of common stock previously approved by the Board
and continuing through the second quarter of 2019. and announced in June 2018.
This new share repurchase plan replaces all
previously authorized share repurchase plans. Share repurchases may be executed through open
market repurchases, in privately negotiated
In December 2018, the Federal Reserve approved the transactions or by other means, including through
repurchase of up to $830 million of additional repurchase plans designed to comply with Rule
common stock under our repurchase program. Our 10b5-1 and other derivative, accelerated share
BNY Mellon 49
repurchase and other structured transactions. The VaR (a) 2018 Dec. 31,
timing and exact amount of any common stock (in millions) Average Minimum Maximum 2018
repurchases will depend on various factors, including Interest rate $ 4.1 $ 3.0 $ 5.5 $ 4.3
Foreign exchange 4.3 2.9 8.3 4.1
market conditions and the common stock trading Equity 0.7 — 1.2 0.8
price; the Company’s capital position, liquidity and Credit 0.9 0.6 2.6 0.6
financial performance; alternative uses of capital; and Diversification (4.2) N/M N/M (3.2)
legal and regulatory considerations. Overall portfolio 5.8 3.6 10.4 6.6
Trading activities and risk management

VaR (a) 2017 Dec. 31,
(in millions) Average Minimum Maximum 2017
Our trading activities are focused on acting as a Interest rate $ 3.6 $ 2.4 $ 4.9 $ 4.4
market-maker for our customers, facilitating customer Foreign exchange 4.1 2.6 8.6 8.6
trades and risk mitigating hedging in compliance with Equity 0.5 0.1 1.1 0.8
Credit 1.1 0.5 1.7 1.3
the Volcker Rule. The risk from market-making Diversification (5.0) N/M N/M (5.2)
activities for customers is managed by our traders and Overall portfolio 4.3 3.2 9.9 9.9
limited in total exposure through a system of position (a) VaR exposure does not include the impact of the Company’s
limits, value-at-risk (“VaR”) methodology and other consolidated investment management funds and seed capital
investments.
market sensitivity measures. VaR is the potential loss
N/M - Because the minimum and maximum may occur on different
in value due to adverse market movements over a days for different risk components, it is not meaningful to
defined time horizon with a specified confidence compute a minimum and maximum portfolio diversification
level. The calculation of our VaR used by effect.
management and presented below assumes a one-day
holding period, utilizes a 99% confidence level, and
incorporates non-linear product characteristics. VaR The interest rate component of VaR represents
facilitates comparisons across portfolios of different instruments whose values predominantly vary with
risk characteristics. VaR also captures the the level or volatility of interest rates. These
diversification of aggregated risk at the firm-wide instruments include, but are not limited to: sovereign
level. debt, swaps, swaptions, forward rate agreements,
exchange-traded futures and options, and other
VaR represents a key risk management measure and it interest rate derivative products.
is important to note the inherent limitations to VaR,
which include: The foreign exchange component of VaR represents
instruments whose values predominantly vary with
• VaR does not estimate potential losses over longer the level or volatility of currency exchange rates or
time horizons where moves may be extreme; interest rates. These instruments include, but are not
• VaR does not take account of potential variability limited to: currency balances, spot and forward
of market liquidity; and transactions, currency options, exchange-traded
• Previous moves in market risk factors may not futures and options, and other currency derivative
produce accurate predictions of all future market products.
moves.
The equity component of VaR consists of instruments
See Note 22 of the Notes to Consolidated Financial that represent an ownership interest in the form of
Statements for additional information on the VaR domestic and foreign common stock or other equity-
methodology. linked instruments. These instruments include, but
are not limited to: common stock, exchange-traded
The following tables indicate the calculated VaR funds, preferred stock, listed equity options (puts and
amounts for the trading portfolio for the designated calls), OTC equity options, equity total return swaps,
periods using the historical simulation VaR model. equity index futures and other equity derivative
products.
The credit component of VaR represents instruments

whose values predominantly vary with the credit
worthiness of counterparties. These instruments
50 BNY Mellon
include, but are not limited to, credit derivatives During 2018, interest rate risk generated 41% of
(credit default swaps and exchange-traded credit average gross VaR, foreign exchange risk generated
index instruments) and exposures from corporate 43% of average gross VaR, equity risk accounted for
credit spreads, and mortgage prepayments. Credit 7% of average gross VaR and credit risk generated
derivatives are used to hedge various credit 9% of average gross VaR. During 2018, our daily
exposures. trading loss exceeded our calculated VaR amount of
the overall portfolio on one occasion.
The diversification component of VaR is the risk
reduction benefit that occurs when combining The following table of total daily trading revenue or
portfolios and offsetting positions, and from the loss illustrates the number of trading days in which
correlated behavior of risk factor movements. our trading revenue or loss fell within particular
ranges during the past five quarters.
Distribution of trading revenue (loss) (a) Quarter ended

Dec. 31, Sept. 30, June 30, March 31, Dec. 31,
Revenue range: Number of days
Less than $(2.5) 1 — 1 — 2
$(2.5) – $0 7 6 3 2 4
$0 – $2.5 17 30 21 18 23
$2.5 – $5.0 24 20 30 32 22
More than $5.0 13 7 9 10 11
(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 the current changes in our own credit spreads, as well
and derivative assets, primarily interest rate and as those of our counterparties.
foreign exchange contracts, not designated as hedging
instruments. Trading assets were $7.0 billion at Dec. At Dec. 31, 2018, our OTC derivative assets,
31, 2018 and $6.0 billion at Dec. 31, 2017. The including those in hedging relationships, of $2.8
increase was impacted by the reclassification of billion included a credit valuation adjustment
money market fund investments of approximately $1 (“CVA”) deduction of $22 million. Our OTC
billion primarily from available-for-sale securities. derivative liabilities, including those in hedging
relationships, of $2.4 billion included a debit
Trading liabilities include debt and equity instruments valuation adjustment (“DVA”) of $1 million related to
and derivative liabilities, primarily interest rate and our own credit spread. Net of hedges, the CVA
foreign exchange contracts, not designated as hedging decreased by $4 million and the DVA increased by
instruments. Trading liabilities were $3.5 billion at less than $1 million in 2018. The net impact of these
Dec. 31, 2018 and $4.0 billion at Dec. 31, 2017. adjustments increased foreign exchange and other
trading revenue by $5 million in 2018. During 2018,
Under our fair value methodology for derivative no realized loss was charged off against CVA
contracts, an initial “risk-neutral” valuation is reserves.
performed on each position assuming time-
discounting based on a AA credit curve. In addition, At Dec. 31, 2017, our OTC derivative assets,
we consider credit risk in arriving at the fair value of including those in hedging relationships, of $3.1
our derivatives. billion included a CVA deduction of $27 million. Our
OTC derivative liabilities, including those in hedging
We reflect external credit ratings as well as relationships, of $3.6 billion included a DVA of $1
observable credit default swap spreads for both million related to our own credit spread. Net of
ourselves and our counterparties when measuring the hedges, the CVA decreased by $9 million and the
fair value of our derivative positions. Accordingly, DVA decreased by $1 million in 2017. The net
the valuation of our derivative positions is sensitive to impact of these adjustments increased foreign
BNY Mellon 51
exchange and other trading revenue by $8 million in quarters. This information indicates the degree of
2017. During 2017, no realized loss was charged off risk to which we are exposed. Significant changes in
against CVA reserves. ratings classifications for our foreign exchange and
other trading activity could result in increased risk for
The table below summarizes the risk ratings for our us.
foreign exchange and interest rate derivative
counterparty credit exposure during the past five
Foreign exchange and other trading counterparty risk rating profile (a) Quarter ended
Dec. 31, Sept. 30, June 30, March 31, Dec. 31,
2018 2018 2018 2018 2017
Rating:
AAA to AA- 50% 48% 37% 48% 44%
A+ to A- 28 30 41 27 31
BBB+ to BBB- 18 19 18 20 20
Non-investment grade (BB+ and lower) 4 3 4 5 5
Total 100% 100% 100% 100% 100%
(a) Represents credit rating agency equivalent of internal credit ratings.
Asset/liability management pricing behavior and are inherently uncertain. Actual

results may differ materially from projected results
Our diversified business activities include processing due to timing, magnitude and frequency of interest
securities, accepting deposits, investing in securities, rate changes, and changes in market conditions and
lending, raising money as needed to fund assets and management’s strategies, among other factors.
other transactions. The market risks from these
activities include interest rate risk and foreign In the table below, we use the earnings simulation
exchange risk. Our primary market risk is exposure model to run various interest rate ramp scenarios
to movements in U.S. dollar interest rates and certain from a baseline scenario. The interest rate ramp
foreign currency interest rates. We actively manage scenarios examine the impact of large interest rate
interest rate sensitivity and use earnings simulation movements. In each scenario, all currencies’ interest
and discounted cash flow models to identify interest rates are shifted higher or lower. The baseline
rate exposures. scenario is based on our quarter-end balance sheet
and the spot yield curve. The 100 basis point ramp
An earnings simulation model is the primary tool scenario assumes rates change 25 basis points above
used to assess changes in pre-tax net interest revenue. or below the yield curve in each of the next four
The model incorporates management’s assumptions quarters and the 200 basis point ramp scenario
regarding interest rates, market spreads, changes in assumes a 50 basis point per quarter change. Interest
the prepayment behavior of loans and securities and rate sensitivity is quantified by calculating the change
the impact of derivative financial instruments used in pre-tax net interest revenue between the scenarios
for interest rate risk management purposes. These over a 12-month measurement period.
assumptions have been developed through a
combination of historical analysis and future expected
The following table shows net interest revenue sensitivity for BNY Mellon.
Estimated changes in net interest revenue Dec. 31, Sept. 30, Dec. 31,
(in millions) 2018 2018 2017
Up 200 bps parallel rate ramp vs. baseline (a) $ 411 $ 362 $ 280
Up 100 bps parallel rate ramp vs. baseline (a) 198 180 148
Down 100 bps parallel rate ramp vs. baseline (a) (163) (140) (225)
Long-term up 50 bps, short-term unchanged (b) 82 83 105
Long-term down 50 bps, short-term unchanged (b) (98) (96) (122)
(a) In the parallel rate ramp, both short-term and long-term rates move in four equal quarterly increments.
(b) Long-term is equal to or greater than one year.
52 BNY Mellon
Sensitivities in the 200 bps and 100 bps parallel rate Estimated changes in EVE Dec. 31,
ramp scenarios increased in the fourth quarter of 2018 2018
from the third quarter of 2018 primarily driven by a Rate change:
Up 200 bps vs. baseline 0.8%
favorable asset and liability mix change. In the first
Up 100 bps vs. baseline 0.8%
quarter of 2018, we changed the net interest revenue
sensitivity methodology to assume static deposit
levels. Previously, our sensitivities included
assumptions about deposit runoff which were difficult The asymmetrical accounting treatment of the impact
to predict. Prior period results have been restated to of a change in interest rates on our balance sheet may
conform to the current methodology. create a situation in which an increase in interest rates
can adversely affect reported equity and regulatory
To illustrate the net interest revenue sensitivity to capital, even though economically there may be no
deposit runoff, we note that a $5 billion reduction of impact on our economic capital position. For
U.S. dollar denominated non-interest bearing deposits example, an increase in rates will result in a decline
would reduce the net interest revenue sensitivity in the value of our available-for-sale securities
results in the ramp up 100 basis point and 200 basis portfolio. In this example, there is no corresponding
point scenarios in the table above by approximately change on our fixed liabilities, even though
$150 million and approximately $185 million, economically these liabilities are more valuable as
respectively. The impact would be smaller if the rates rise.
runoff was assumed to be a mixture of interest-
bearing and noninterest-bearing deposits. These results do not reflect strategies that
management could employ to limit the impact as
For a discussion of factors impacting the growth or interest rate expectations change.
contraction of deposits, see “Risk Factors - Our
business, financial condition and results of operations To manage foreign exchange risk, we fund foreign
could be adversely affected if we do not effectively currency-denominated assets with liability
manage our liquidity.” instruments denominated in the same currency. We
utilize various foreign exchange contracts if a liability
We also project future cash flows from our assets and denominated in the same currency is not available or
liabilities over a long-term horizon and then discount desired, and to minimize the earnings impact of
these cash flows using instantaneous parallel shocks translation gains or losses created by investments in
to prevailing interest rates. This measure reflects the foreign markets. We use forward foreign exchange
structural balance sheet interest rate sensitivity by contracts to protect the value of our net investment in
discounting all future cash flows. The aggregation of foreign operations. At Dec. 31, 2018, net investments
these discounted cash flows is the economic value of in foreign operations totaled $13 billion and were
equity (“EVE”). The following table shows how the spread across 15 foreign currencies.
EVE would change in response to changes in interest
rates.
BNY Mellon 53
Risk Management
Risk management overview corporate risk appetite. The SRCC also reviews any
material breaches to our risk appetite and approves
Governance action plans required to remediate the issue. SRCC
provides oversight for the risk management,
BNY Mellon’s management is responsible for compliance and ethics framework. The Chief
execution of the Company’s risk appetite and the risk Executive Officer, Chief Risk Officer and Chief
management and compliance framework and the Financial Officer are among SRCC’s members.
governance structure that supports it, with oversight
provided by BNY Mellon’s Board of Directors and Primary risk types
two key Board committees: the Risk Committee and
the Audit Committee. The understanding, identification and management of
risk are essential elements for the successful
The Risk Committee is comprised entirely of management of BNY Mellon. Our primary risk
independent directors and meets on a regular basis to categories are:
review and assess the control processes with respect
to the Company’s inherent risks. It also reviews and Type of risk Description
assesses the risk management activities of the Operational The risk of loss resulting from inadequate or
Company and the Company’s risk policies and failed internal processes, human factors and
activities. Policy formulation and day-to-day systems, breaches of technology and
information systems, or from external events.
oversight of the Company’s risk management Also includes fiduciary risk, reputational risk,
framework is delegated to the Chief Risk Officer, and litigation risk.
who, together with the Chief Auditor and Chief Market The risk of loss due to adverse changes in the
financial markets. Our market risks are
Compliance Officer, helps ensure an effective risk primarily interest rate, foreign exchange, and
management governance structure. The roles and equity risk. Market risk particularly impacts
responsibilities of the Risk Committee are described our exposures that are fair valued such as the
securities portfolio, trading book, and equity
in more detail in its charter, a copy of which is investments.
available on our website, www.bnymellon.com. Credit The risk of loss if any of our borrowers or
other counterparties were to default on their
obligations to us. Credit risk is resident in the
The Audit Committee is also comprised entirely of majority of our assets, but primarily
independent directors. The Audit Committee meets concentrated in the loan and securities books,
as well as off-balance sheet exposures such as
on a regular basis to perform an oversight review of lending commitments, letters of credit, and
the integrity of the financial statements and financial securities lending indemnifications.
reporting process, compliance with legal and Liquidity The risk that BNY Mellon cannot meet its cash
and collateral obligations at a reasonable cost
regulatory requirements, our independent registered for both expected and unexpected cash flows,
public accountant’s qualifications and independence, without adversely affecting daily operations or
financial conditions. Liquidity risk can arise
and the performance of our registered public from cash flow mismatches, market constraints
accountant and internal audit function. The Audit from the inability to convert assets to cash, the
inability to raise cash in the markets, deposit
Committee also reviews management’s assessment of run-off, or contingent liquidity events.
the adequacy of internal controls. The functions of Strategic The risk that BNY Mellon doesn’t effectively
the Audit Committee are described in more detail in manage and protect the firm’s market
positioning and stability. This includes risks
its charter, a copy of which is available on our associated with the inability to maintain a
website, www.bnymellon.com. strong understanding of clients’ needs, provide
suitable product offerings that are financially
viable and fit within the firm’s operating model
The Senior Risk and Control Committee (“SRCC”) is and adapt to transformational change in the
industry.
the most senior management body responsible for
ensuring that emerging risks are weighed against the
54 BNY Mellon
Risk Management (continued)
The following table presents the primary types of risk competition and regulation. Our internal auditors and
typically embedded in our balance sheet and our off- internal control group monitor and test the overall
balance sheet instruments. effectiveness of our internal controls and financial
reporting systems on an ongoing basis.
On- and off-balance sheet risks
Assets:
We have also established procedures that are designed
Interest-bearing deposits with banks credit to ensure compliance with generally accepted
Federal funds sold and securities market, credit conduct, ethics and business practices which are
purchased under resale agreements defined in our corporate policies. These include
Securities market, credit, liquidity
Trading assets market, credit, liquidity
training programs, such as for our “Code of Conduct”
Loans credit, liquidity and “Know Your Customer” programs, and
Goodwill operational, market compliance training programs, such as those
Intangible assets operational, market regarding information protection and suspicious
Liabilities: activity reporting.
Deposits liquidity
Federal funds purchased and securities market, liquidity We have established operational risk management as
sold under repurchase agreements an independent risk discipline. The organizational
Trading liabilities market, liquidity
Payables to customers and broker- liquidity
framework for operational risk is based upon a strong
dealers risk culture that incorporates both governance and
Off-balance sheet instruments:
risk management activities comprising:
Lending commitments credit, liquidity
Standby letters of credit credit, liquidity • Board Oversight and Governance – The Risk
Commercial letters of credit credit, liquidity Committee of the Board oversees our operational
Securities lending indemnifications market, credit risk management strategy in addition to
overseeing our strategic management of credit
and market risk. The Risk Committee meets
Operational risk regularly to review operational risk management
initiatives, discuss key risk issues and review the
In providing a comprehensive array of products and effectiveness of the risk management systems.
services, we may be exposed to operational risk.
Operational risk may result from, but is not limited • Accountability of Businesses – Business
to, errors related to transaction processing, breaches managers are responsible for maintaining an
of internal control systems and compliance effective system of internal controls
requirements, fraud by employees or persons outside commensurate with their risk profiles and in
BNY Mellon or business interruption due to system accordance with BNY Mellon policies and
failures or other events. Operational risk may also procedures.
include breaches of our technology and information • Corporate Operational Risk Management is
systems resulting from unauthorized access to responsible for developing risk management
confidential information or from internal or external policies and tools for assessing, measuring,
threats, such as cyberattacks. Operational risk also monitoring and managing operational risk for
includes potential legal or regulatory actions that BNY Mellon. The primary objectives of
could arise as a result of noncompliance with Corporate Operational Risk Management are to
applicable laws and/or regulatory requirements. In promote effective risk management, identify
the case of an operational event, we could suffer emerging risks, create incentives for generating
financial losses as well as reputational damage. continuous improvement in controls and to
optimize capital.
To address these risks, we maintain comprehensive
policies and procedures and an internal control • Technology Risk is a subset of operational risk.
framework designed to provide a sound operational Technology Risk Management is under the
environment. These controls have been designed to leadership of the Global Chief Technology Risk
manage operational risk at appropriate levels given Officer (“CTRO”) and drives the development of
our financial strength, the business environment and global technology policies, controls and methods
markets in which we operate, and the nature of our for assessing, measuring and monitoring
businesses, and considering factors such as information and technology risk for BNY Mellon.
BNY Mellon 55
Technology Risk Management partners with the Credit risk

businesses to drive better understanding and a
more accurate assessment of operational risks The extension of credit is not considered a discrete
that can occur from technology operations. product and is not, typically, attributable to a specific
business, but instead is used as a means of supporting
Market risk our clients and our business activity more holistically.
Specifically, we extend direct credit in order to foster
Our business activity tends to minimize outright or client relationships and as a method by which to
direct exposure to market risk, with such risk generate interest income from the deposits that result
primarily limited to market volatility from trading from business activity. We extend and incur intraday
activity in support of clients. More significant direct credit exposure in order to facilitate our various
market risk is assumed in the form of interest rate and processing activities.
credit spread risk within the investment portfolio both
as a means for forward asset/liability management To balance the value of our activities with the credit
and net interest revenue generation. risk incurred in pursuing them, we set and monitor
internal credit limits for activities that entail credit
The Company has indirect market risk exposure risk, most often on the size of the exposure and the
associated with the change in the value of financial quality of the counterparty. For credit exposures
collateral underlying securities financing and driven by changing market rates and prices, exposure
derivatives positions. The Collateral Margin Review measures include an add-on for such potential
Committee reviews and approves the standards for changes.
collateral received or paid in respect of collateralized
derivative agreements and securities financing We manage credit risk at both the individual exposure
transactions. level as well as the portfolio level. Credit risk at the
individual exposure level is managed through our
In addition to the Risk Committee, oversight of credit approval system and involves four approval
market risk is performed by the SRCC and Balance levels up to and including the Chief Risk Officer of
Sheet Risk Committee (“BSRC”) and through the Company. The requisite approvals are based upon
executive review meetings. Detailed reviews of the size and relative risk of the aggregate exposure
stress tests results are conducted during the Markets under consideration. The Credit Risk Group is
Weekly Risk Review. Senior managers from Risk responsible for approving the size, terms and maturity
Management, Finance and Sales and Trading attend of all credit exposures as well as the ongoing
the review. Regarding the Corporate Treasury monitoring of the creditworthiness of the
function, oversight is provided by the Treasury Risk counterparty. In addition, they are responsible for
Committee, biweekly Portfolio Management Group assigning and maintaining the internal risk ratings on
risk meetings, Business Risk Committee and each exposure.
numerous portfolio reviews.
Credit risk management at the portfolio level is
The Business Risk Committee for the Markets supported by the Enterprise Capital Adequacy Group,
business also provides a forum for market risk within Risk Management and Compliance. The
oversight. The goal of the Business Risk Committee Enterprise Capital Adequacy Group is responsible for
meeting, which is held monthly, is to review key risk calculating two fundamental credit measures. First,
and control issues and related initiatives facing all we project a statistically probable credit loss, used to
Markets lines of business. Also addressed during the help determine the appropriate loan loss reserve and
Business Risk Committee meetings are trading VaR to measure customer profitability. Credit loss
and trading stressed VaR exposures against limits. considers three basic components: the estimated size
of the exposure whenever default might occur, the
Finally, the Risk Quantification Review Group probability of default before maturity and the severity
reviews back-testing results for the Company’s VaR of the loss we would incur, commonly called “loss
model. given default.” For institutional lending, where most
of our credit risk is created, unfunded commitments
are assigned a usage given default percentage.
Borrowers/counterparties are assigned ratings by
56 BNY Mellon
Credit Portfolio Managers on an 18-grade scale, transact with us. Changes to our liquidity can be
which translate to a scaled probability of default. caused by various factors, such as funding
Additionally, transactions are assigned loss-given- mismatches, market constraints limiting the ability to
default ratings (on a 7-grade scale) that reflect the liquidate assets, inability to issue debt, run-off of core
transactions’ structures including the effects of deposits and contingent liquidity events, such as
guarantees, collateral and relative seniority of additional collateral posting. Changes in economic
position. conditions or exposure to credit, market, operational,
legal and reputational risks can also affect our
The second fundamental measurement of credit risk liquidity. Our liquidity risk management practices are
calculated by the Enterprise Capital Adequacy Group designed to maintain a strong liquidity profile, by
is called economic capital. Our economic capital actively managing both the quality of the investment
model estimates the capital required to support the portfolio and intraday liquidity positions, and by
overall credit risk portfolio. Using a Monte Carlo having sufficient deposits and other funding to meet
simulation engine and measures of correlation among timely payment and settlement obligations under both
borrower defaults, the economic capital model normal and stressed conditions.
examines extreme and highly unlikely scenarios of
portfolio credit loss in order to estimate credit-related Our overall approach to liquidity management is to
capital, and then allocates that capital to individual have sources of liquidity that are sufficient in amount
borrowers and exposures. and diversity such that changes in funding
requirements at the Parent and at our bank and
The Enterprise Capital Adequacy Group is broker-dealer subsidiaries can be accommodated
responsible for the calculation methodologies and the routinely without material adverse impact on
estimates of the inputs used in those methodologies earnings, capital, daily operations or our financial
for the determination of expected loss and economic condition.
capital. These methodologies and input estimates are
regularly evaluated to ensure their appropriateness The Board of Directors has the responsibility for
and accuracy. As new techniques and data become oversight of liquidity risk management for the
available, the Enterprise Capital Adequacy Group Company and approves the liquidity risk tolerances.
attempts to incorporate, where appropriate, those The Asset Liability Committee (“ALCO”) is the
techniques or data. senior management committee responsible for the
oversight of liquidity management. ALCO is
BNY Mellon seeks to limit both on- and off-balance responsible for appropriately executing Board-
sheet credit risk through prudent underwriting and the approved strategies, policies and procedures for
use of capital only where risk-adjusted returns managing liquidity. Senior management is
warrant. We seek to manage risk and improve our responsible for regularly reporting the liquidity
portfolio diversification through syndications, asset position of the Company to the Board of Directors.
sales, credit enhancements and active collateralization The BSRC provides governance over independent
and netting agreements. In addition, we have a Risk oversight of liquidity risks associated with assets
separate Credit Risk Review Group, which is part of and liabilities, liquidity risk limits calibration, and the
Internal Audit, made up of experienced loan review adequacy of related control procedures. The Treasury
officers who perform timely reviews of the loan files Risk Committee, which is chaired by independent
and credit ratings assigned to the loans. risk management, is responsible for reviewing
liquidity stress tests and various liquidity metrics,
Liquidity risk including contractual cash flow gaps for liquidity,
liquidity stress metrics and ratios, LCR, net stable
Access to global capital markets and financial market funding ratio (“NSFR”) and client deposit
utilities are fundamental to both our operating model concentration. The Treasury Risk Committee
and overall strategy. Without such access, it would be validates and approves stress test methodologies and
difficult, if not impossible, to process payments as assumptions, and an independent liquidity Risk
well as settle and clear transactions on behalf of function provides ongoing review and oversight of
clients. Deterioration in our liquidity position, liquidity risk management.
whether actual or perceived, can impact our market
access by affecting participants’ willingness to
BNY Mellon 57
BNY Mellon seeks to maintain an adequate liquidity Strategic Risk

cushion in both normal and stressed environments
and seeks to diversify funding sources by line of Our strategy includes expanding our client base,
business, customer and market segment. increasing product offerings and better aligning
Additionally, we seek to maintain liquidity ratios certain business activities with market demand.
within approved limits and liquidity risk tolerance, Successful realization of our strategy requires that we
maintain a liquid asset buffer that can be liquidated, provide expertise and insight through market-leading
financed and/or pledged as necessary, and control the solutions that drive economies of scale while
levels and sources of wholesale funds. developing highly talented people and protecting our
financial strength and stability. We understand and
Potential uses of liquidity include withdrawals of meet market and client expectations with suitable
customer deposits and client drawdowns on unfunded products and offerings that are financially viable and
credit or liquidity facilities. We actively monitor leverageable and that integrate into our business
unfunded lending-related commitments, thereby model.
reducing unanticipated funding requirements.
Markets, and the manner in which our clients interact
When monitoring liquidity, we evaluate multiple and transact within markets, can evolve quickly, such
metrics in order to have sufficient liquidity for as when new or disruptive technologies are
expected and unexpected events. Metrics include introduced. Failure to either anticipate or participate
cash flow mismatches, asset maturities, debt spreads, in transformational change within a given market
peer ratios, liquid assets, unencumbered collateral, could result in poor strategic positioning and potential
funding sources and balance sheet liquidity ratios. negative financial impact.
We monitor the LCR, as well as various internal
liquidity limits as part of our standard analysis to Stress Testing
monitor depositor and market funding concentration,
liability maturity profile and potential liquidity draws It is the policy of the Company to perform Enterprise-
due to off-balance sheet exposure. wide Stress Testing at regular intervals as part of its
Internal Capital Adequacy Assessment Process
We also perform liquidity stress tests (“LSTs”) to (“ICAAP”). Additionally, the Company performs an
evaluate whether the Company and certain domestic analysis of capital adequacy in a stressed
bank subsidiaries maintain sufficient liquidity environment in its Enterprise-Wide Stress Test
resources under multiple stress scenarios. LSTs are Framework, as required by the enhanced prudential
based on scenarios that measure liquidity risks under standards issued pursuant to the Dodd-Frank Act.
unlikely but plausible conditions. We perform these
tests under various time horizons ranging from one Enterprise-Wide Stress Testing performs analyses
day to one year in a base case, as well as across the Company’s lines of business, products,
supplemental tests to determine whether the geographic areas, and risk types incorporating the
Company and certain domestic subsidiaries’ liquidity results from the different underlying models and
is sufficient for severe market events and firm- projections given alternative stress test scenarios. It
specific events. The Parent’s LST framework is an important component of assessing the adequacy
includes the Resolution Liquidity Adequacy and of capital as well as identifying any high risk touch
Positioning (“RLAP”) test. The RLAP test is points in business activities. Furthermore, by
designed to ensure that the liquidity needs of certain integrating enterprise-wide stress testing into the
key subsidiaries in a stress environment can be met Company’s capital planning process, the results
by available resources held directly within the entity provide a forward-looking evaluation of the ability to
itself or at the Parent or IHC, as applicable. Our complete planned capital actions in a more-adverse-
results indicate that we have sufficient RLAP than-anticipated economic environment.
liquidity.
58 BNY Mellon
Global compliance Internal audit
Our global compliance function provides leadership, Internal Audit is an independent, objective assurance
guidance and oversight to help our businesses function that reports directly to the Audit Committee
identify applicable laws and regulations and of the Company’s Board of Directors. It assists the
implement effective measures to meet the specific Company in accomplishing its objectives by bringing
requirements. Compliance takes a proactive a systematic, disciplined, risk-based approach to
approach by anticipating evolving regulatory evaluate and improve the effectiveness of the
standards and remaining aware of industry best Company’s risk management, control and governance
practices, legislative initiatives, competitive issues, processes. The scope of Internal Audit’s work
and public expectations and perceptions. The includes the review and evaluation of the adequacy,
function uses its global reach to disseminate effectiveness and sustainability of risk management
information about compliance-related matters procedures, internal control systems, information
throughout BNY Mellon. The Chief Compliance and systems and governance processes.
Ethics Officer reports to the Chief Risk Officer, is a
member of key committees of BNY Mellon and
provides regular updates to the Risk Committee of the
Board of Directors.
BNY Mellon 59
Supervision and Regulation
Evolving Regulatory Environment U.S. reform measures adopted or under consideration

by various policy makers that are being considered
BNY Mellon engages in banking, investment may materially adversely impact us.
advisory and other financial activities in the U.S. and
34 other countries, and is subject to extensive Political developments may result in legislative and
regulation in the jurisdictions in which it operates. regulatory changes to key aspects of the Dodd-Frank
Global supervisory authorities generally are charged Act, its implementing regulations, and related laws,
with ensuring the safety and soundness of financial including the recently enacted Economic Growth,
institutions, protecting the interests of customers, Regulatory Relief, and Consumer Protection Act (the
including depositors in banking entities and investors “Reform Act”), discussed later in this section. In
in mutual funds and other pooled vehicles, addition, the UK referendum vote to withdraw from
safeguarding the integrity of securities and other the European Union, discussed below, and the
financial markets and promoting systemic resiliency implementation of that decision have resulted in
and financial stability in the relevant country. They uncertainty as to the implementation, scope and
are not, however, generally charged with protecting timing of regulatory reforms affecting our UK and
the interests of our shareholders or non-deposit EU operations and contingency planning for our EU
creditors. This discussion outlines the material operating model.
elements of selected laws and regulations applicable
to us. The impact of certain other laws and United Kingdom’s Withdrawal from the European
regulations, such as tax law, is discussed elsewhere in Union (“Brexit”)
the Annual Report. Changes in these standards, or in
their application, cannot be predicted, but may have a The United Kingdom is scheduled to withdraw from
material effect on our businesses and results of the European Union on March 29, 2019. In
operations. anticipation of this event, BNY Mellon has assessed
the impact of this withdrawal on our businesses. Our
The financial services industry has been the subject of program currently assumes that the UK will leave the
enhanced regulatory oversight in the past decade EU without an agreement in place, meaning that,
globally, and this trend may continue in the future. among other things, UK firms will lose the benefit of
Our businesses have been subject to a significant transacting within the EU by relying on their existing
number of global reform measures. In particular, the “passport” on March 29, 2019.
Dodd-Frank Act and its implementing regulations
have significantly restructured the financial BNY Mellon maintains a presence in the UK through
regulatory regime in the U.S. and enhanced the London branch of The Bank of New York Mellon,
supervision and prudential standards for large and The Bank of New York Mellon (International)
internationally active BHCs like BNY Mellon. The Limited and a number of its investment management
implications of the Dodd-Frank Act for our subsidiaries, and in the remaining EU member states,
businesses depend to a large extent on the manner in through The Bank of New York Mellon SA/NV
which implementing regulations continue to be (“BNY Mellon SA/NV”) and through certain of its
established and interpreted by the primary U.S. investment management subsidiaries. We have
financial regulatory agencies - the Federal Reserve, undertaken, and continue to undertake, adjustments to
the Federal Deposit Insurance Corporation (“FDIC”), the operations of BNY Mellon SA/NV so that it may
the Office of the Comptroller of the Currency provide a wider range of services to clients domiciled
(“OCC”), the Securities and Exchange Commission in the EU.
(“SEC”) and the Commodity Futures Trading
Commission (“CFTC”). The implications are also Enhanced Prudential Standards
dependent on continuing changes in market practices
and structures in response to the requirements of the The Federal Reserve has adopted rules (“Final SIFI
Dodd-Frank Act and financial reforms in other Rules”) to implement liquidity requirements, stress
jurisdictions. Certain aspects of the Dodd-Frank Act testing of capital and overall risk management
remain subject to further rulemaking, take effect over requirements affecting U.S. SIFIs. BNY Mellon must
various transition periods, or contain other elements comply with enhanced liquidity and overall risk
that make it difficult to precisely anticipate their full management standards, which include maintenance of
impact. In addition, other national and global non- a buffer of highly liquid assets based on projected
60 BNY Mellon
Supervision and Regulation (continued)
funding needs for 30 days. The liquidity buffer is in for securities financing transactions (“SFTs”) that
addition to the U.S. banking agencies’ rules regarding permits the use of any method authorized under the
the LCR, discussed below, and is described by the Federal Reserve’s capital rules, including internal
Federal Reserve as being “complementary” to those models.
liquidity standards.
BNY Mellon is still evaluating the impact that the
Financial Services Regulatory Reform Legislation final rule will have, which will depend on various
factors including, for example, the Federal Reserve’s
The Reform Act became law in May 2018. interpretation of the final rule, whether interpretive
Provisions of the Reform Act that may impact BNY guidance is published and the impact of the final rule
Mellon include the elimination of the Dodd-Frank on other covered firms.
company-run stress test requirements for BHCs,
banks, and other financial companies with less than Capital Planning and Stress Testing
$250 billion in assets, including BNY Mellon, N.A.;
the elimination of the “adverse scenario” as a Payment of Dividends, Stock Repurchases and Other
required stress scenario, reducing the minimum Capital Distributions
number of supervisory scenarios from three (baseline,
adverse, and severely adverse) to two (baseline and The Parent is a legal entity separate and distinct from
severely adverse); and its direction to U.S. banking its banks and other subsidiaries. Therefore, the
agencies to exclude certain central bank deposit Parent primarily relies on dividends, interest,
placements from the total leverage exposure (the SLR distributions, and other payments from its
denominator) of custody banks, including BNY subsidiaries, including extensions of credit from the
Mellon and The Bank of New York Mellon, to the IHC, to meet its obligations, including its obligations
extent of the value of client deposits at the custody with respect to its securities, and to provide funds for
bank that are linked to fiduciary, custody or share repurchases and payment of common and
safekeeping accounts. See “Regulatory Stress-Testing preferred dividends to its stockholders, to the extent
Requirements” and “Leverage Ratios” below. declared by the Board of Directors. Various federal
and state laws and regulations limit the amount of
Single Counterparty Credit Limits dividends that may be paid to the Parent by our bank
subsidiaries without regulatory consent. If, in the
On June 14, 2018, the Federal Reserve approved a opinion of the applicable federal regulatory agency, a
final rule imposing single-counterparty credit limits depository institution under its jurisdiction is engaged
(“SCCLs”) on, among other organizations, domestic in or is about to engage in an unsafe or unsound
BHCs, including BNY Mellon, that are G-SIBs or practice (which, depending on the financial condition
that have $250 billion or more in total consolidated of the bank, could include the payment of dividends),
assets. The SCCLs apply to the credit exposure of a the regulator may require, after notice and hearing,
covered firm and all of its subsidiaries to a single that the bank cease and desist from such practice.
counterparty and all of its affiliates and connected The OCC, the Federal Reserve and the FDIC have
entities. The final rule introduces new definitions of indicated that the payment of dividends would
“subsidiary” and “affiliate” under a financial constitute an unsafe and unsound practice if the
consolidation standard that is consistent with payment would reduce a depository institution’s
accounting standards. The final rule will apply to capital to an inadequate level. Moreover, under the
BNY Mellon beginning Jan. 1, 2020. Federal Deposit Insurance Act, as amended (the “FDI
Act”), an insured depository institution (“IDI”) may
The final rule establishes two primary credit exposure not pay any dividends if the institution is
limits: (1) a covered domestic BHC may not have undercapitalized or if the payment of the dividend
aggregate net credit exposure to any unaffiliated would cause the institution to become
counterparty in excess of 25% of its tier 1 capital, and undercapitalized. In addition, the federal bank
(2) a U.S. G-SIB is further prohibited from having regulatory agencies have issued policy statements
aggregate net credit exposure in excess of 15% of its which provide that FDIC-insured depository
tier 1 capital to any “major counterparty” (defined as institutions and their holding companies should
a G-SIB or a nonbank SIFI). The final rule adopts a generally pay dividends only out of their current
risk-sensitive exposure measurement methodology operating earnings.
BNY Mellon 61
In general, the amount of dividends that may be paid the base case and stressed scenarios (including a
by our U.S. banking subsidiaries, including to the severely adverse scenario provided by the Federal
Parent, is limited to the lesser of the amounts Reserve). The capital plan rule also stipulates that we
calculated under a “recent earnings” test and an may not make a capital distribution unless after
“undivided profits” test. Under the recent earnings giving effect to the distribution it will meet all
test, a dividend may not be paid if the total of all minimum regulatory capital ratios.
dividends declared and paid by the entity in any
calendar year exceeds the current year’s net income The purpose of CCAR is to ensure that these BHCs
combined with the retained net income of the two have robust, forward-looking capital planning
preceding years, unless the entity obtains prior processes that account for their unique risks and that
regulatory approval. Under the undivided profits test, permit continued operations during times of
a dividend may not be paid in excess of the entity’s economic and financial stress. The 2018 CCAR
“undivided profits” (generally, accumulated net instructions, consistent with prior Federal Reserve
profits that have not been paid out as dividends or guidance, provide that capital plans contemplating
transferred to surplus). The ability of our bank dividend payout ratios exceeding 30% of projected
subsidiaries to pay dividends to the Parent may also after-tax net income will receive particularly close
be affected by the capital adequacy standards scrutiny. BNY Mellon’s common stock dividend
applicable to those subsidiaries, which include payout ratio was 26% for 2018. See “Capital” for
minimum requirements and buffers. information about our 2018 capital plan.
There are also limitations specific to the IHC’s ability Regulatory Stress-Testing Requirements
to make distributions or extend credit to the Parent.
The IHC is not permitted to pay dividends to the In addition to the CCAR stress testing requirements,
Parent if certain key capital, liquidity and operational Federal Reserve regulations also include
risk indicators are breached. Additionally, if our complementary Dodd-Frank Act Stress Tests
projected financial resources deteriorate so severely (“DFAST”). The CCAR and DFAST requirements
that resolution of the Parent becomes imminent, the substantially overlap, and the Federal Reserve
committed lines of credit provided by the IHC to the implements them at the BHC level on a coordinated
Parent will automatically terminate, with all basis. Under these DFAST regulations, we are
outstanding amounts becoming due. required to undergo regulatory stress tests conducted
by the Federal Reserve annually, and to conduct our
BNY Mellon’s capital distributions are subject to own internal stress tests pursuant to regulatory
Federal Reserve oversight. The major component of requirements twice annually. In addition, The Bank
that oversight is the Federal Reserve’s of New York Mellon is required to conduct its own
Comprehensive Capital Analysis and Review annual internal stress test (although the bank is
(“CCAR”), implementing its capital plan rule. That permitted to combine certain reporting and disclosure
rule requires BNY Mellon to submit an annual capital of its stress test results with the results of BNY
plan to the Federal Reserve. We are also required to Mellon). The Reform Act revised the Dodd-Frank
collect and report certain related data on a quarterly company-run stress test requirements for BHCs
basis to allow the Federal Reserve to monitor subject to enhanced prudential standards, such as
progress against the annual capital plans. Generally, BNY Mellon, to require periodic, rather than semi-
BNY Mellon and other affected BHCs may pay annual, company-run stress tests. Proposed Federal
dividends, repurchase stock and make other capital Reserve regulations would require BNY Mellon and
distributions only in accordance with a capital plan other affected BHCs to conduct an annual, but not a
that has been reviewed by the Federal Reserve and as mid-cycle, company-run stress test effective
to which the Federal Reserve has not objected. The beginning with the 2020 cycle. The Reform Act also
Federal Reserve may object to our capital plan for eliminated the Dodd-Frank company-run stress test
quantitative or qualitative reasons, including if the requirements for BHCs, banks, and other financial
plan does not show that the covered BHC will meet, companies with less than $250 billion in assets,
for each quarter throughout the nine-quarter planning including BNY Mellon, N.A. Results from our
horizon covered by the capital plan, all minimum annual company-run stress tests are reported to the
regulatory capital ratios under applicable capital rules appropriate regulators and published. The Federal
as in effect for that quarter on a pro forma basis under Reserve published the results of its most recent
62 BNY Mellon
annual 2018 DFAST stress-test on June 21, 2018. We internationally active banks such as BNY Mellon, the
published the results of our most recent company-run countercyclical capital buffer required threshold is a
annual stress test on June 21, 2018, and the results of weighted average of the countercyclical capital
our company-run mid-year stress test on Oct. 12, buffers deployed in each of the jurisdictions in which
2018. the bank has private sector credit exposures. The
Federal Reserve, in consultation with the OCC and
Capital Requirements - Generally FDIC, has affirmed the current countercyclical capital
buffer level for U.S. exposures of 0% and noted that
As a BHC, we are subject to U.S. capital rules, any future modifications to the buffer would
administered by the Federal Reserve. Our bank generally be subject to a 12-month phase-in period.
subsidiaries are subject to similar capital Any countercyclical capital buffer required threshold
requirements administered by the Federal Reserve in arising from exposures outside the United States will
the case of The Bank of New York Mellon and by the also generally be subject to a 12-month phase-in
OCC in the case of our national bank subsidiaries, period.
BNY Mellon, N.A. and The Bank of New York
Mellon Trust Company, National Association. These The U.S. capital rules’ buffers are also
requirements are intended to ensure that banking supplemented by a risk-based capital surcharge on
organizations have adequate capital given the risk G-SIBs which requires G-SIBs to calculate their
levels of their assets and off-balance sheet exposures. surcharges under two methods (referred to as
“method 1” and “method 2”) and use the higher of
Notwithstanding the detailed U.S. capital rules, the the two surcharges. The first method is based on
federal banking agencies retain significant discretion the BCBS’s framework and considers a G-SIB’s
to set higher capital requirements for categories of size, interconnectedness, cross-jurisdictional
BHCs or banks or for an individual BHC or bank as activity, substitutability and complexity. The
situations warrant. second method uses similar inputs, but is
calibrated to result in significantly higher
U.S. Capital Rules - Minimum Risk-Based Capital surcharges and replaces substitutability with a
Ratios and Capital Buffers measure of reliance on short-term wholesale
funding. Consistent with the phase-in of the
Consistent with the terms of the Basel III framework capital conservation buffer, the G-SIB capital
and the Dodd-Frank Act, as amended by the Reform surcharge began to be phased-in beginning on Jan.
Act, the U.S. capital rules require Advanced 1, 2016 and became fully effective on Jan. 1,
Approaches banking organizations, such as BNY 2019. The G-SIB surcharge applicable to BNY
Mellon, to satisfy minimum risk-based capital ratios Mellon is 1.5% on a fully phased-in basis.
using both the U.S. capital rules’ standardized
approach risk-weightings framework (the U.S. Capital Rules - Deductions from and
“Standardized Approach”) and the advanced Adjustments to Capital Elements
approaches risk-weighting framework (the
“Advanced Approaches”). See “Capital” for details The U.S. capital rules provide for a number of
on these requirements. In addition, these minimum deductions from and adjustments to CET1 capital.
ratios are supplemented by a capital conservation These include, for example, providing that unrealized
buffer required threshold that began being phased in gains and losses on all available-for-sale debt
on Jan. 1, 2016, in increments of 0.625% per year securities may not be filtered out for regulatory
until it reached 2.5% on Jan. 1, 2019. The capital capital purposes, and the requirement that mortgage
conservation buffer can only be satisfied with CET1 servicing rights, deferred tax assets dependent upon
capital. future taxable income and significant investments in
non-consolidated financial entities be deducted from
When systemic vulnerabilities are meaningfully CET1 to the extent that any one such category
above normal, the capital conservation buffer may be exceeds 10% of CET1 or all such categories in the
expanded up to an additional 2.5% through the aggregate exceed 15% of CET1.
imposition of a countercyclical capital buffer. For
BNY Mellon 63
U.S. Capital Rules - Advanced Approaches Risk- amount and the relevant risk weight for the
Based Capital Rules counterparty and collateral posted.
Under the U.S. capital rules’ Advanced Approaches Federal Reserve Proposed Changes to CCAR and its
framework, credit risk risk-weightings are generally Capital Rules
based on risk-sensitive approaches that largely rely on
the use of internal credit models and parameters, On April 10, 2018, the Federal Reserve issued a
whereas under the Standardized Approach credit risk proposed rule that would integrate its regulatory
risk-weightings are generally based on supervisory capital, capital planning, and stress test rules, as well
risk-weightings which vary primarily by counterparty as the CCAR process. The proposal would introduce
type and asset class. BNY Mellon is required to a stress capital buffer (“SCB”) that would be part of
comply with Advanced Approaches reporting and the firm’s quarterly capital requirements. The
public disclosures. Under the U.S. capital rules, this proposal would replace the current static 2.5% capital
means, among other things, for purposes of conservation buffer with an SCB requirement for
determining whether we meet minimum risk-based Standardized Approach capital ratios that would,
capital requirements, our CET1 ratio, Tier 1 capital among other things, be tied to the projected decrease
ratio, and total capital ratio is the lower of that in a firm’s common equity Tier 1 capital ratio in the
calculated under the Standardized Approach and Federal Reserve’s supervisory severely adverse
under the Advanced Approaches framework. scenario. The proposed rule would introduce a new
requirement that firms reduce their planned capital
U.S. Capital Rules - Generally Applicable Risk-Based distributions if those distributions would not be
Capital Rules: Standardized Approach consistent with the applicable buffer constraints based
on the firms’ own baseline scenario projections. In
The agencies’ generally applicable risk-based capital addition, the proposed rule would introduce a stress
rules (i.e., the Standardized Approach) calculate risk- leverage buffer (“SLB”) that is analogous to the SCB
weighted assets in the denominator of capital ratios and applies to firms’ Tier 1 leverage ratios. Under the
using a broad array of risk weighting categories that proposal, a firm’s first SCB and SLB would become
are intended to be risk sensitive. The risk-weights for effective on Oct. 1, 2019.
the Standardized Approach generally range from 0%
to 1,250%. Higher risk-weights under the Leverage Ratios
Standardized Approach apply to a variety of
exposures, including certain securitization exposures, The U.S. capital rules require a minimum 4%
equity exposures, claims on securities firms and leverage ratio for all banking organizations, as well as
exposures to counterparties on OTC derivatives. a 3% Basel III-based SLR for Advanced Approaches
banking organizations, including BNY Mellon, which
Concerning securities finance transactions, including became effective Jan. 1, 2018. Unlike the Tier 1
transactions in which we serve as agent and provide leverage ratio, the SLR includes certain off-balance
securities replacement indemnification to a securities sheet exposures in the denominator, including the
lender, the U.S. capital rules do not permit a banking potential future credit exposure of derivative
organization to use a simple VaR approach to contracts and 10% of the notional amount of
calculate exposure amounts for repo-style unconditionally cancelable commitments.
transactions or to use internal models to calculate the
exposure amount for the counterparty credit exposure The Reform Act directed the U.S. banking agencies to
for repo-style transactions under the Standardized exclude certain central bank deposit placements from
Approach (although these methodologies are allowed the total leverage exposure (the SLR denominator) of
in the Advanced Approaches). Under the custody banks, including BNY Mellon and The Bank
Standardized Approach, a banking organization may of New York Mellon. The U.S. banking agencies
use a collateral haircut approach to recognize the have not yet proposed rules implementing this
credit risk mitigation benefits of financial collateral provision. See “Federal Reserve and OCC Proposed
that secures a repo-style transaction, including an Amendments to the Enhanced Supplementary
agented securities lending transaction, among other Leverage Ratio Requirements for U.S. G-SIBs” below
transactions. To apply the collateral haircut approach, for a discussion of additional proposed amendments
a banking organization must determine the exposure to applicable SLR requirements.
64 BNY Mellon
The U.S. G-SIBs (including BNY Mellon) are subject capital ratios. Among other measures, the final
to an enhanced SLR, which requires us to maintain an revisions: (1) establish a revised Standardized
SLR of greater than 5% (composed of the current Approach for credit risk that enhances the
minimum requirement of 3% plus a greater than 2% Standardized Approach’s granularity and risk
buffer) and requires bank subsidiaries of those BHCs sensitivity; (2) adjust the internal ratings-based
to maintain at least a 6% SLR in order to qualify as approaches for credit risk by removing the use of the
“well capitalized” under the prompt corrective action advanced internal ratings-based approach for certain
regulations discussed below. The final enhanced SLR asset classes and establishing input floors for the
rule for U.S. G-SIBs, like the SLR more generally calculation of RWA; (3) replace the advanced
applicable to all Advanced Approaches banking measurement approach for operational risk with a
organizations, became effective on Jan. 1, 2018. At revised Standardized Approach for operational risk
Dec. 31, 2018, our SLR was 6.0% and the SLR for based on measures of a bank’s income and historical
our primary banking subsidiary, The Bank of New losses; (4) revise the leverage ratio exposure measure,
York Mellon, was 6.8%. establish a “leverage ratio buffer” for G-SIBs, set at
50% of a G-SIB’s risk-based capital surcharge, and
Federal Reserve and OCC Proposed Amendments to allow national discretion to exclude central bank
the Enhanced Supplementary Leverage Ratio placements in limited circumstances (see “Federal
Requirements for U.S. G-SIBs Reserve and OCC Proposed Amendments to the
Enhanced Supplementary Leverage Ratio
On April 11, 2018, the Federal Reserve and the OCC Requirements for U.S. G-SIBs” above); and (5)
issued a joint notice of proposed rule-making that introduce a new 72.5% output floor based on the
would recalibrate the enhanced SLR standards that Standardized Approach. The revised standards are
apply to U.S. G-SIBs and certain of their IDI effective Jan. 1, 2022, with the output floor phasing
subsidiaries. The proposed rule would replace the 2% in from 2022 to 2027.
SLR buffer that currently applies to all U.S. G-SIBs
with a buffer equal to 50% of the firm’s risk-based G- In January 2019, the BCBS released revised
SIB surcharge. minimum capital requirements for market risk. The
revised standards also come into effect Jan. 1, 2022.
For IDI subsidiaries of U.S. G-SIBs regulated by the There is continuing uncertainty regarding whether
Federal Reserve or the OCC, the proposal would and how the U.S. regulators will implement these
replace the current 6% SLR threshold requirement for revised Basel standards.
those institutions to be considered “well capitalized”
under the agencies’ prompt corrective action Standardized Approach for Measuring Counterparty
framework with an SLR of at least 3% plus 50% of Credit Risk Exposures
the G-SIB surcharge applicable to their top-tier
holding companies. The proposed rule would also On Oct. 30, 2018, the Federal Reserve, FDIC and
make corresponding changes to the total loss- OCC jointly issued a Notice of Proposed Rulemaking
absorbing capacity (“TLAC”) SLR buffer and long- (“NPR”), which would amend the U.S. capital rules
term debt requirements for U.S. G-SIBs, as well as to implement a new approach for calculating the
technical changes to the Federal Reserve’s TLAC exposure amount for derivative contracts, which is
rule. The Federal Reserve and OCC have not yet called the Standardized Approach for Counterparty
issued a final rule. Credit Risk (“SA-CCR”). The NPR also incorporates
SA-CCR into the determination of exposure amount
These proposed amendments are separate from the of derivatives for total leverage exposure under the
Reform Act’s change to the SLR denominator of SLR and the cleared transaction framework under the
custody banks discussed above under the heading U.S. capital rules. Further, the NPR would make
“Leverage Ratios.” technical amendments to the capital rule with respect
to cleared transactions. The effective date of the
BCBS Revisions to Components of Basel III proposed SA-CCR rule for the Advanced Approaches
Banks would be July 1, 2020. BNY Mellon is
In December 2017 the BCBS released revisions to evaluating what effect such amendments to the U.S.
Basel III intended to reduce variability of RWA and capital rules, if implemented, would have on our
improve the comparability of banks’ risk-based financial condition or results of operations.
BNY Mellon 65
Total Loss-Absorbing Capacity Foreign jurisdictions may impose internal TLAC

requirements on the foreign subsidiaries of U.S. G-
On Dec. 15, 2016, the Federal Reserve issued a final SIBs. The draft Capital Requirements Regulation II
rule (the “TLAC Rule”) establishing external TLAC in the European Union would require EU material
and related requirements for U.S. G-SIBs, including subsidiaries of non-EU G-SIBs (including BNY
BNY Mellon, at the top-tier holding company level. Mellon) to maintain a minimum level of internal loss
The rule became effective on Jan. 1, 2019, and at absorbing capacity, broadly in line with the Financial
Dec. 31, 2018, we had sufficient TLAC to be Stability Board (“FSB”) TLAC term sheet,
compliant with the requirement. promulgated by the Financial Stability Board in
November 2015. The Bank of New York Mellon SA/
Under the TLAC Rule, U.S. G-SIBs are required to NV is likely to be considered an EU material
maintain a minimum eligible external TLAC equal to subsidiary for purposes of this regulation.
the greater of (a) 18% of RWAs plus a buffer (to be
met using only CET1) equal to the sum of 2.5% of Prompt Corrective Action
RWAs, the G-SIB surcharge calculated under method
1 and any applicable countercyclical buffer; and (b) The FDI Act, as amended by the Federal Deposit
7.5% of their total leverage exposure (the Insurance Corporation Improvement Act of 1991
denominator of the SLR) plus a buffer (to be met (“FDICIA”), requires the federal banking agencies to
using only Tier 1 Capital) equal to 2%. take “prompt corrective action” in respect of
depository institutions that do not meet specified
U.S. G-SIBs are also required to maintain minimum capital requirements. FDICIA establishes five capital
external eligible long-term debt (“LTD”) equal to the categories for FDIC-insured banks: “well
greater of (a) 6% of RWAs plus the G-SIB surcharge capitalized,” “adequately capitalized,”
(calculated using the greater of method 1 and method “undercapitalized,” “significantly undercapitalized,”
2), and (b) 4.5% of total leverage exposure. In order and “critically undercapitalized.” The FDI Act
to be deemed eligible LTD, debt instruments must, imposes progressively more restrictive constraints on
among other requirements, be unsecured, not be operations, management and capital distributions the
structured notes, be governed by U.S. law, and have a less capital the institution holds. While these
maturity of at least one year from the date of regulations apply only to banks, such as The Bank of
issuance. In addition, the TLAC Rule requires that New York Mellon and BNY Mellon, N.A., the
LTD issued on or after Dec. 31, 2016 (i) not have Federal Reserve is authorized to take appropriate
acceleration rights, other than in the event of non- action against the parent bank holding company, such
payment or the bankruptcy or insolvency of the issuer as the Parent, based on the under-capitalized status of
and (ii) be governed by U.S. law. However, debt any banking subsidiary. In certain circumstances, the
issued by a U.S. G-SIB prior to Dec. 31, 2016 is Parent would be required to guarantee the
permanently grandfathered to the extent these performance of the capital restoration plan if one of
securities would be ineligible only due to containing our banking subsidiaries were undercapitalized.
impermissible acceleration rights or being governed
by foreign law. The federal banking agencies’ prompt corrective
action framework (“PCA rules”) contain “well
Further, the top-tier holding companies of U.S. G- capitalized” thresholds for IDIs. Under these rules,
SIBs are not permitted to issue certain guarantees of an IDI is deemed to be “well capitalized” if it has
subsidiary liabilities, incur liabilities guaranteed by capital ratios as detailed in the “Capital” disclosure.
subsidiaries, issue short-term debt to third parties, or
enter into derivatives and certain other financial The PCA rules require an Advanced Approaches
contracts with external counterparties. Certain banking organization to maintain an SLR of at least
liabilities are capped at 5% of the value of the U.S. 3% to qualify for the “adequately capitalized” status.
G-SIB’s eligible external TLAC instruments. The In addition, the U.S. federal banking agencies’
Federal Reserve considered requiring internal TLAC revisions to the enhanced SLR establish a SLR “well
at domestic subsidiaries of U.S. G-SIBs, but has not capitalized” threshold of 6% for certain IDIs of U.S.
proposed rules regarding these instruments. G-SIBs, including The Bank of New York Mellon and
BNY Mellon N.A.
66 BNY Mellon
Current Expected Credit Losses Accounting Standard framework’s test for medium- and long-term funding
of the assets and activities of banking entities over a
In June 2016, the Financial Accounting Standards one-year time horizon. Under the proposed rule,
Board issued an update to the accounting standards BNY Mellon’s NSFR would be expressed as a ratio
for credit losses that included the “Current Expected of its available stable funding to its required stable
Credit Losses” (“CECL”) methodology, which funding amount, and BNY Mellon would be required
replaces the existing incurred loss methodology for to maintain an NSFR of 1.0. BNY Mellon continues
certain financial assets. Upon adopting CECL, a to evaluate the potential effects of this proposal on its
company will record a one-time adjustment to its operations. The proposed NSFR rule would have
credit loss allowances as of the beginning of its fiscal been effective Jan. 1, 2018 had it been finalized as
year of adoption equal to the difference between the proposed; however, final rules have not been issued.
amounts of its credit loss allowances under the
incurred loss methodology and CECL. Separately, as noted above, the Final SIFI Rules
address liquidity requirements for BHCs with $100
On Dec. 21, 2018 the Federal Reserve, the OCC and billion or more in total assets, including BNY Mellon.
the FDIC approved a final rule modifying their These enhanced liquidity requirements include an
regulatory capital rules and providing an option to independent review of liquidity risk management;
phase in over a period of three years the regulatory establishment of cash flow projections; a contingency
capital effects of adopting the CECL methodology. funding plan, and liquidity risk limits; liquidity stress
During the phase in, the agencies will continue to testing under multiple stress scenarios and time
monitor the impact of CECL adoption. The final rule horizons tailored to the specific products and profile
will take effect April 1, 2019. The Federal Reserve of the company; and maintenance of a liquidity buffer
also indicated that it would maintain the current of unencumbered highly liquid assets sufficient to
framework for calculating credit loss allowances in meet projected net cash outflows over 30 days under
CCAR, and would not incorporate CECL into a range of stress scenarios.
supervisory stress testing, through the 2021 stress test
cycle. Volcker Rule
Liquidity Standards - Basel III and U.S. Rules and The Dodd-Frank Act imposed broad prohibitions and
Proposals restrictions on proprietary trading and investments in
or sponsorship of hedge funds and private equity
BNY Mellon is subject to the Final U.S. LCR Rule, funds by banking organizations and their affiliates,
which is designed to ensure that BNY Mellon and commonly referred to as the “Volcker Rule.”
certain domestic bank subsidiaries maintain an
adequate level of unencumbered HQLA equal to The Volcker Rule, subject to certain exceptions,
their expected net cash outflow for a 30-day time prohibits “banking entities,” including BNY Mellon,
horizon under an acute liquidity stress scenario. As from engaging in proprietary trading and limits our
of Dec. 31, 2018, the Parent and its domestic bank sponsorship of, and investments in, private equity and
subsidiaries were in compliance with applicable hedge funds (“covered funds”), including our ability
LCR requirements. to own or provide seed capital to covered funds. In
addition, the Volcker Rule restricts us from engaging
The BCBS issued the final NSFR document in in certain transactions with covered funds (including,
October 2014 which contemplates an additional without limitation, certain U.S. funds for which BNY
liquidity measure, referred to as NSFR, which is Mellon acts as both sponsor/manager and custodian).
designed to promote more medium- and long-term
funding of the assets and activities of banking entities The restrictions concerning proprietary trading do not
over a one-year time horizon. In May 2016, the contain a broad exemption for asset-liability
Federal Reserve, FDIC and OCC proposed an NSFR management functions, but contain more limited
rule that would implement a quantitative long-term exceptions for, among other things, bona fide
liquidity requirement applicable to large and liquidity risk management and risk-mitigating
internationally active banking organizations, hedging activities, as well as certain classes of
including BNY Mellon. The proposed NSFR rule exempted instruments, including government
would implement a test similar to the Basel III securities. Ownership interests in covered funds that
BNY Mellon 67
banking organizations organize and offer are its OTC swap transactions. The variation margin
generally limited to 3% of the total number or value requirements of these rules already apply, and the
of the outstanding ownership interests of any initial margin requirements are expected to become
individual fund at any time more than one year after applicable in September 2019. Furthermore, various
the date of its establishment, and with respect to the BNY Mellon subsidiaries are also subject to OTC
aggregate value of all such ownership interests in derivatives regulation by local authorities in Europe
covered funds (when combined with ownership and Asia.
interests in covered funds held under the Volcker
Rule’s ABS issuer exemption and underwriting and EU Money Market Fund Reforms
market-making exemption), 3% of the banking
organization’s Tier 1 capital. Moreover, a banking The European Union’s Money Market Funds
entity relying on the Volcker Rule’s exemption for Regulation (“MMFR”) has applied since July 21,
sponsoring covered funds must deduct from its Tier 1 2018 for new MMFs and Jan. 21, 2019 for existing
capital the value of related ownership interests. MMFs. MMFR is a significant change for the money
market fund sector in the EU and aims to ensure that
The final Volcker Rule regulations also require us to MMFs can better withstand redemption pressure in
develop and maintain an extensive compliance stressed market conditions by enhancing their
program, subject to CEO attestation, addressing liquidity profile and stability. In particular, constant
proprietary trading and covered fund activities. net asset value (“CNAV”) MMFs as they currently
exist will need to convert into variable net asset value
In June 2018, the Federal Reserve, OCC, FDIC, MMFs, low volatility net asset value MMFs or public
CFTC and SEC approved a proposal to modify the debt CNAV MMFs. Other significant restrictions
current regulations implementing the Volcker Rule. would apply, such as (i) the need for MMFs to apply
The proposal would establish three categories of liquidity fees and redemption gates and diversify
institutions based on trading activity, and the scope asset portfolios, (ii) extensive valuation and reporting
and scale of compliance requirements would vary requirements and (iii) prohibitions on external
based on such categories. support.
In addition, the proposal would revise the definitions SEC Rules on Mutual Funds
applicable to the prohibition on proprietary trading so
that all financial instruments accounted for at fair On Oct. 13, 2016, the SEC adopted regulations that
value on a recurring basis would be subject to the impose new requirements on mutual funds, exchange-
prohibition, unless an exception or exemption applies. traded funds and other registered investment
The proposal would also revise certain of the companies. The new rules will require mutual funds
exceptions and exemptions. It remains uncertain (other than money market funds) to provide portfolio-
whether or when the proposal will be finalized. wide and position-level holdings data to the SEC on a
monthly basis. This data would include the pricing of
Derivatives portfolio securities, information regarding repurchase
and securities lending activities, and the terms of
Title VII of the Dodd-Frank Act imposes a derivatives contracts. Information contained in
comprehensive regulatory structure on the OTC reports for the last month of each fund’s fiscal quarter
derivatives markets in which BNY Mellon operates, would be made available to the public within 60 days
including requirements relating to the business of the end of the relevant quarter.
conduct of dealers, trade reporting, margin and
recordkeeping. Title VII also requires persons acting The rules also impose liquidity risk management
as swap dealers, including The Bank of New York requirements that are intended to reduce the risk that
Mellon, to register with the CFTC and become funds will not be able to meet shareholder
subject to the CFTC’s supervisory, examination and redemptions and to minimize the impact of
enforcement powers. redemptions on remaining shareholders. Each fund
will be required to establish a liquidity risk
In addition, because BNY Mellon is subject to management program; classify the investments in its
supervision by the Federal Reserve, we must comply portfolio into one of four liquidity categories;
with the U.S. prudential margin rules with respect to maintain a highly liquid investment minimum; and
68 BNY Mellon
limit illiquid investments to 15% of net assets. The resolution preparedness under Federal Reserve rules
rules also permit funds to use swing pricing in certain and guidance. These expectations relate to
circumstances although the SEC has delayed the capabilities critical to operational resilience and
effective date of these swing pricing provisions. The contingency planning, including: effective processes
compliance dates for the reporting requirements for managing, identifying and valuing collateral; a
depend on the applicable reporting form. Most funds comprehensive understanding of obligations and
were required to comply with the liquidity risk exposures associated with payment, clearing and
management requirements by Dec. 1, 2018. BNY settlement activities; the ability to analyze liquidity
Mellon is still evaluating the cost of compliance and and funding sources, uses and risks; demonstrated
the impact of the new regulations on its activities. management information systems capabilities on a
legal entity basis; and robust arrangements for the
Recovery and Resolution continued provision of shared and outsourced
services. The Federal Reserve incorporates reviews
As required by the Dodd-Frank Act, the Federal of these key capabilities as part of its ongoing
Reserve and FDIC have jointly issued a final rule supervision of BNY Mellon.
requiring large financial institutions, such as BNY
Mellon, to submit periodically to the Federal Reserve The European Union Bank Recovery and Resolution
and the FDIC a plan - referred to as the 165(d) Directive (“BRRD”) applies to various subsidiaries
resolution plan - for its rapid and orderly resolution in and branches of BNY Mellon. BRRD provides for
the event of material financial distress or failure. In recovery and resolution planning and a set of
addition, the FDIC requires certain large IDIs, such as harmonized powers to resolve or implement recovery
The Bank of New York Mellon, to submit of relevant institutions, including branches of non-
periodically to the FDIC a plan for resolution in the European Economic Area (“EEA”) banks operating
event of the institution’s failure. The public portions within the EEA. BRRD includes rules regarding the
of our resolution plans are available on the Federal preparation of recovery and resolution plans, giving
Reserve’s and FDIC’s websites. relevant EEA regulators powers to impose
requirements on an institution before resolution
If the Federal Reserve and FDIC jointly determine actions become necessary; a set of resolution tools
that our future submissions are not credible and the and powers to facilitate the resolution of failing
covered BHC fails to address the deficiencies in a entities, such as the power to “bail-in” the debt of an
timely manner, the FDIC and the Federal Reserve institution (including certain deposit obligations); and
may jointly impose more stringent capital, leverage or the power to require a firm to change its structure to
liquidity requirements or restrictions on our growth, remove impediments to resolvability. Certain BRRD-
activities or operations. If we continue to fail to related requirements are currently subject to review
adequately remedy any deficiencies, we could be under the EU Banking Reform Package, referred to
required to divest assets or operations that the below, and the European Commission is expected to
regulators determine necessary to facilitate our commence a broader review of BRRD during 2019.
orderly resolution.
BRRD includes a minimum requirement for own
In connection with our single point of entry resolution funds, defined as regulatory capital, and eligible
strategy, we have established the IHC to facilitate the liabilities (“MREL”) to ensure that institutions
provision of capital and liquidity resources to certain maintain enough capital capable of being written
key subsidiaries in the event of material financial down and/or bailed-in. MREL will be set on a case-
distress or failure. In 2017, we entered into a binding by-case basis for each institution subject to BRRD.
support agreement that requires the IHC to provide MREL is the EU equivalent of TLAC, and is
that support. The support agreement required the generally aligned with the FSB’s TLAC proposals. In
Parent to transfer its intercompany loans and most of contrast with TLAC, MREL will apply to all EU-
its cash to the IHC, and requires the Parent to domiciled credit institutions and certain other firms
continue to transfer cash and other liquid financial subject to BRRD (not only G-SIBs).
assets to the IHC.
In addition, BRRD requires such institutions and
BNY Mellon and the other U.S. G-SIBs are subject to firms to prepare recovery plans or group recovery
heightened supervisory expectations for recovery and plans. Under BRRD, resolution authorities (rather
BNY Mellon 69
than the institutions themselves) are responsible for variety of other requirements to protect the
drawing up resolution plans. confidentiality, integrity and availability of
information systems, as well as the annual delivery of
Final Rule on Resolution Stays for Qualified a certificate of compliance.
Financial Contracts
Insolvency of an Insured Depository Institution or a
In 2017, the Federal Reserve, OCC and FDIC Bank Holding Company; Orderly Liquidation
adopted final rules requiring U.S. G-SIBs (and their Authority
subsidiaries and controlled entities) and the U.S.
operations of foreign G-SIBs to amend their covered If the FDIC is appointed as conservator or receiver
qualified financial contracts (“QFCs”), thereby for an IDI such as The Bank of New York Mellon or
facilitating the application of U.S. special resolution BNY Mellon National Association (“BNY Mellon,
regimes as necessary. QFCs generally include N.A.”), upon its insolvency or in certain other
derivatives, repurchase agreements and securities circumstances, the FDIC has the power to:
lending arrangements, among others. The final rule
includes two key requirements. First, the final rule • Transfer any of the depository institution’s assets
requires that covered QFCs of such G-SIBs explicitly and liabilities to a new obligor, including a newly
provide for the suspension or stay of transfer formed “bridge” bank without the approval of the
restriction rights with respect to such QFCs, allowing depository institution’s creditors;
any resolution transfers under U.S. special resolution
regimes to apply to such QFCs. Second, the final rule • Enforce the terms of the depository institution’s
requires that covered QFCs of these G-SIBs be contracts pursuant to their terms without regard to
amended to stay the exercise of default or cross- any provisions triggered by the appointment of
default rights by relevant QFC counterparties. This the FDIC in that capacity; or
stay would last for a period of up to 48 hours.
• Repudiate or disaffirm any contract or lease to
The final rule allows these G-SIBs to comply with the which the depository institution is a party, the
rule by amending covered QFCs (with the consent of performance of which is determined by the FDIC
relevant counterparties) using the International Swaps to be burdensome and the disaffirmance or
and Derivatives Association (“ISDA”) 2018 U.S. repudiation of which is determined by the FDIC
Resolution Stay Protocol (the “Protocol”), ISDA to promote the orderly administration of the
2015 Universal Stay Protocol or by executing depository institution.
appropriate bilateral amendments to the covered
QFCs. BNY Mellon entities which have been In addition, under federal law, the claims of holders
confirmed to engage in covered QFC activities have of domestic deposit liabilities and certain claims for
adhered to the Protocol in compliance with the final administrative expenses against an IDI would be
rule’s first phase implementation date of Jan. 1, 2019. afforded a priority over other general unsecured
BNY Mellon is evaluating the impact of the final rule claims against such an institution, including claims of
on its activities, in particular regarding non G-SIB debt holders of the institution, in the “liquidation or
counterparty compliance by the second phase other resolution” of such an institution by any
implementation date of July 1, 2019. receiver. As a result, whether or not the FDIC ever
sought to repudiate any debt obligations of The Bank
Cybersecurity Regulation of New York Mellon or BNY Mellon, N.A., the debt
holders would be treated differently from, and could
The New York State Department of Financial receive, if anything, substantially less than, the
Services (“NYSDFS”) requires financial institutions depositors of the bank.
regulated by NYSDFS, including BNY Mellon, to
establish a cybersecurity program, adopt a written The Dodd-Frank Act created a new resolution regime
cybersecurity policy, designate a chief information (known as the “orderly liquidation authority”) for
security officer, and have policies and procedures in systemically important financial companies,
place to ensure the security of information systems including BHCs and their affiliates. Under the
and non-public information accessible to, or held by, orderly liquidation authority, the FDIC may be
third parties. The NYSDFS rule also includes a appointed as receiver for the systemically important
70 BNY Mellon
institution, and its failed nonbank subsidiaries, for amounts of transactions (including extensions of
purposes of liquidating the entity if, among other credit and asset purchases by our banking
conditions, it is determined at the time of the subsidiaries) that may take place and generally
institution’s failure that it is in default or in danger of require those transactions to be on arm’s-length
default and the failure poses a risk to the stability of terms. In general, extensions of credit by a BNY
the U.S. financial system. Mellon banking subsidiary to any nonbank affiliate,
including the Parent, must be secured by designated
If the FDIC is appointed as receiver under the orderly amounts of specified collateral and are limited in the
liquidation authority, then the powers of the receiver, aggregate to 10% of the relevant bank’s capital and
and the rights and obligations of creditors and other surplus for transactions with a single affiliate and to
parties who have dealt with the institution, would be 20% of the relevant bank’s capital and surplus for
determined under the Dodd-Frank Act’s orderly transactions with all affiliates. There are also
liquidation authority provisions, and not under the limitations on affiliate credit exposures arising from
insolvency law that would otherwise apply. The derivative transactions and securities lending and
powers of the receiver under the orderly liquidation borrowing transactions.
authority were based on the powers of the FDIC as
receiver for depository institutions under the FDI Act. Deposit Insurance
However, the provisions governing the rights of
creditors under the orderly liquidation authority were Our U.S. banking subsidiaries, including The Bank of
modified in certain respects to reduce disparities with New York Mellon and BNY Mellon, N.A., accept
the treatment of creditors’ claims under the U.S. deposits, and those deposits have the benefit of FDIC
Bankruptcy Code as compared to the treatment of insurance up to the applicable limit. The current limit
those claims under the new authority. Nonetheless, for FDIC insurance for deposit accounts is $250,000
substantial differences in the rights of creditors exist per depositor at each insured bank. Under the FDI
as between these two regimes, including the right of Act, insurance of deposits may be terminated by the
the FDIC to disregard the strict priority of creditor FDIC upon a finding that the IDI has engaged in
claims in some circumstances, the use of an unsafe and unsound practices, is in an unsafe or
administrative claims procedure to determine unsound condition to continue operations or has
creditors’ claims (as opposed to the judicial procedure violated any applicable law, regulation, rule, order or
utilized in bankruptcy proceedings), and the right of condition imposed by a bank’s federal regulatory
the FDIC to transfer assets or liabilities of the agency.
institution to a third party or a “bridge” entity.
The FDIC’s Deposit Insurance Fund (the “DIF”) is
Depositor Preference funded by assessments on IDIs. The FDIC assesses
DIF premiums based on a bank’s average
Under U.S. federal law, claims of a receiver of an IDI consolidated total assets, less the average tangible
for administrative expenses and claims of holders of equity of the IDI during the assessment period. For
U.S. deposit liabilities (including foreign deposits that larger institutions, such as The Bank of New York
are payable in the U.S. as well as in a foreign branch Mellon and BNY Mellon, N.A., assessments are
of the depository institution) are afforded priority determined based on CAMELS ratings and forward-
over claims of other unsecured creditors of the looking financial measures to calculate the
institution, including depositors in non-U.S. branches. assessment rate, which is subject to adjustments by
As a result, such depositors could receive, if the FDIC, and the assessment base.
anything, substantially less than the depositors in U.S.
offices of the depository institution. Under the FDIC’s regulations, a custody bank,
including The Bank of New York Mellon and BNY
Transactions with Affiliates Mellon, N.A., may deduct from its assessment base
100% of cash and balances due from depository
Transactions between BNY Mellon’s banking institutions, securities, federal funds sold, and
subsidiaries, on the one hand, and the Parent and its securities purchased under agreement to resell with a
nonbank subsidiaries and affiliates, on the other, are Standardized Approach risk-weight of 0% and may
subject to certain restrictions, limitations and deduct 50% of such asset types with a Standardized
requirements, which include limits on the types and Approach risk-weight of greater than 0% and up to
BNY Mellon 71
and including 20%. This assessment base deduction laundering requirements for financial institutions that
may not exceed the average value of deposits that are are applicable to BNY Mellon’s bank, broker-dealer
classified as transaction accounts and are identified and investment adviser subsidiaries and mutual funds
by the bank as being directly linked to a fiduciary or and private investment companies advised or
custodial and safekeeping account. sponsored by our subsidiaries. Those regulations
impose obligations on financial institutions to
The Dodd-Frank Act requires the DIF reserve ratio to maintain a broad anti-money laundering program that
reach a minimum of 1.35% by Sept. 30, 2020, and includes internal controls, independent testing,
authorizes the FDIC to implement special compliance management personnel, training, and
assessments on IDIs to reach the required ratio. On customer due diligence processes, as well as
Sept. 30, 2018, the FDIC announced that the DIF appropriate policies, procedures and controls to
reserve ratio had reached 1.36%. detect, prevent and report money laundering, terrorist
financing and other suspicious activity, and to verify
Source of Strength and Liability of Commonly the identity of their customers. Certain of those
Controlled Depository Institutions regulations impose specific due diligence
requirements on financial institutions that maintain
BHCs are required by law to act as a source of correspondent or private banking relationships with
strength to their bank subsidiaries. Such support may non-U.S. financial institutions or persons.
be required by the Federal Reserve at times when we
might otherwise determine not to provide it. In Financial Crimes Enforcement Network (“FinCEN”)
addition, any loans by BNY Mellon to its bank Final Customer Due Diligence Rule
subsidiaries would be subordinate in right of payment
to depositors and to certain other indebtedness of its Effective July 11, 2016, FinCEN issued final rules
banks. In the event of a BHC’s bankruptcy, any under the Bank Secrecy Act to clarify and strengthen
commitment by the BHC to a federal bank regulator customer due diligence (“CDD”) requirements,
to maintain the capital of a subsidiary bank will be including a new requirement to identify and verify the
assumed by the bankruptcy trustee and entitled to a identity of beneficial owners of legal entity
priority of payment. In addition, in certain customers. Covered financial institutions, including
circumstances, BNY Mellon’s IDI subsidiaries could The Bank of New York Mellon and BNY Mellon,
be held liable for losses incurred by another BNY N.A. must comply with these rules. The rule
Mellon IDI subsidiary. In the event of impairment of reaffirms four pillars of an effective anti-money
the capital stock of one of BNY Mellon’s national laundering (“AML”) program (development of
bank subsidiaries or The Bank of New York Mellon, internal policies, procedures and related controls;
BNY Mellon, as the banks’ stockholder, could be designation of a compliance officer; a thorough and
required to pay such deficiency. ongoing training program; and independent review
for compliance) and adds a fifth: CDD, wherein a
Incentive Compensation Arrangements Proposal covered financial institution is required to implement
and maintain risk-based procedures for conducting
Section 956 of the Dodd-Frank Act requires federal CDD that include the identification and verification
regulators to prescribe regulations or guidelines of any beneficial owner(s) of each legal entity
regarding incentive-based compensation practices at customer at the time a new account is opened on or
certain financial institutions, including BNY Mellon. after May 11, 2018.
In April 2016, a joint proposed rule was released,
replacing a previous 2011 proposal, which each of six New York State Department of Financial Services
agencies must separately approve. The timeframe for Anti-Money Laundering and Anti-Terrorism
final implementation is currently unknown. Regulations
Anti-Money Laundering and the USA PATRIOT Act Effective Jan. 1, 2017, the NYSDFS issued
regulations requiring regulated institutions, including
A major focus of governmental policy on financial The Bank of New York Mellon, to maintain a
institutions has been aimed at combating money transaction monitoring program to monitor
laundering and terrorist financing. The USA transactions for potential Bank Secrecy Act (“BSA”)
PATRIOT Act of 2001 contains numerous anti-money and AML violations and suspicious activity reporting,
72 BNY Mellon
and a watch list filtering program to interdict “CRA”), the effectiveness of the subject
transactions prohibited by applicable sanctions organizations in combating money laundering
programs. activities and the risk to the stability of the U.S.
banking or financial system. In addition, prior
The final regulations require a regulated institution to Federal Reserve approval would be required for BNY
maintain programs to monitor and filter transactions Mellon to acquire direct or indirect ownership or
for potential BSA and AML violations and prevent control of any voting shares of a company with assets
transactions with sanctioned entities. The final of $10 billion or more that is engaged in activities
regulation requires regulated institutions annually to that are “financial in nature.”
submit a Board resolution or senior officer
compliance finding confirming steps taken to New Rating System for the Supervision of Large
ascertain compliance with the regulation. Financial Institutions
Privacy and Data Protection On Nov. 2, 2018, the Federal Reserve issued a final
rule (the “LFI Rule”) that establishes a new rating
The privacy provisions of the Gramm-Leach-Bliley system for the supervision of large financial
Act generally prohibit financial institutions, including institutions (“LFIs”), including BNY Mellon. The
BNY Mellon, from disclosing nonpublic personal LFI rating system applies to, among other entities, all
financial information of consumer customers to third bank holding companies with total consolidated
parties for certain purposes (primarily marketing) assets of $100 billion or more. The LFI Rule became
unless customers have the opportunity to “opt out” of effective on Feb. 1, 2019.
the disclosure. The Fair Credit Reporting Act
restricts information sharing among affiliates for The LFI rating system includes a new four-level
marketing purposes. rating scale and three component ratings. The four
levels are: Broadly Meets Expectations;
In the EU, privacy law is primarily regulated by the Conditionally Meets Expectations; Deficient-1; and
General Data Protection Regulation (“GDPR”), Deficient-2. The component ratings are assigned for:
which has been directly binding and applicable for Capital Planning and Positions; Liquidity Risk
each EU member state since May 25, 2018. The Management and Positions; and Governance and
GDPR contains enhanced compliance obligations and Controls. A firm must be rated “Broadly Meets
increased penalties for non-compliance compared to Expectations” or “Conditionally Meets Expectations”
prior EU data protection legislation. for each of its component ratings to be considered
“well managed” in accordance with various statutes
Acquisitions/Transactions and regulations that permit additional activities,
prescribe expedited procedures or provide other
Federal and state laws impose notice and approval benefits for “well managed” firms.
requirements for mergers and acquisitions involving
depository institutions or BHCs. The Bank Holding The Federal Reserve is expected to assign initial
Company Act of 1956, as amended by the Gramm- ratings under the new rating system in 2019 for those
Leach-Bliley Act and by the Dodd-Frank Act (the bank holding companies that are subject to the Large
“BHC Act”) requires the prior approval of the Federal Institution Supervision Coordinating Committee
Reserve for the direct or indirect acquisition by a (“LISCC”) framework, including BNY Mellon.
BHC of more than 5% of any class of the voting
shares or all or substantially all of the assets of a Regulated Entities of BNY Mellon and Ancillary
commercial bank, savings and loan association or Regulatory Requirements
BHC. In reviewing bank acquisition and merger
applications, the bank regulatory authorities will BNY Mellon is registered as a financial holding
consider, among other things, the competitive effect company (“FHC”) under the BHC Act. We are
of the transaction, financial and managerial resources, subject to supervision by the Federal Reserve. In
including the capital position of the combined general, the BHC Act limits an FHC’s business
organization, convenience and needs of the activities to banking, managing or controlling banks,
community factors, including the applicant’s record performing certain servicing activities for
under the Community Reinvestment Act of 1977 (the subsidiaries, engaging in activities incidental to
BNY Mellon 73
banking, and engaging in any activity, or acquiring Certain of BNY Mellon’s public finance and advisory
and retaining the shares of any company engaged in activities are regulated by the Municipal Securities
any activity, that is either financial in nature or Rulemaking Board and are required under the SEC’s
complementary to a financial activity and does not Municipal Advisors Rule to register with the SEC if
pose a substantial risk to the safety and soundness of they provide advice to municipal entities or certain
depository institutions or the financial system other persons on the issuance of municipal securities,
generally. or about certain investment strategies or municipal
derivatives.
A BHC’s ability to maintain FHC status is dependent
on: (i) its U.S. depository institution subsidiaries Certain of BNY Mellon’s subsidiaries are registered
qualifying on an ongoing basis as “well capitalized” with the CFTC as commodity pool operators,
and “well managed” under the prompt corrective introducing brokers and/or commodity trading
regulations of the appropriate regulatory agency advisors and, as such, are subject to CFTC regulation.
(discussed above under “Prompt Corrective Action”); The Bank of New York Mellon is provisionally
(ii) the BHC itself qualifying on an ongoing basis as registered as a Swap Dealer (as defined in the Dodd-
“well capitalized” and “well managed” under Frank Act) with the CFTC, and is a member of the
applicable Federal Reserve regulations; and (iii) its National Futures Association (“NFA”) in that same
U.S. depository institution subsidiaries continuing to capacity. As a Swap Dealer, The Bank of New York
maintain at least a “satisfactory” rating under the Mellon is subject to regulation, supervision and
CRA. examination by the CFTC and NFA.
An FHC that does not continue to meet all the Certain of our subsidiaries are registered investment
requirements for FHC status will, depending on advisors under the Investment Advisers Act of 1940,
which requirements it fails to meet, lose the ability to as amended, and as such are supervised by the SEC.
undertake new activities, or make acquisitions, that They are also subject to various U.S. federal and state
are not generally permissible for BHCs without FHC laws and regulations and to the laws and regulations
status. As of Dec. 31, 2018, BNY Mellon and our of any countries in which they conduct business. Our
U.S. bank subsidiaries were “well capitalized” based subsidiaries advise both public investment companies
on the ratios and rules applicable to them. which are registered with the SEC under the
Investment Company Act of 1940 (the “‘40 Act”),
The Bank of New York Mellon, BNY Mellon’s including the Dreyfus family of mutual funds, and
largest banking subsidiary, is a New York state- private investment companies which are not
chartered bank, and a member of the Federal Reserve registered under the ‘40 Act.
System and is subject to regulation, supervision and
examination by the Federal Reserve, the FDIC and Certain of our investment management, trust and
the NYSDFS. BNY Mellon’s national bank custody operations provide services to employee
subsidiaries, BNY Mellon, N.A. and The Bank of benefit plans that are subject to the Employee
New York Mellon Trust Company, National Retirement Income Security Act of 1974, as amended
Association, are chartered as national banking (“ERISA”), administered by the U.S. Department of
associations subject to primary regulation, Labor (“DOL”). ERISA imposes certain statutory
supervision and examination by the OCC. duties, liabilities, disclosure obligations and
restrictions on fiduciaries, as applicable, related to the
We operate a number of broker-dealers that engage in services being performed and fees being paid.
securities underwriting and other broker-dealer
activities in the United States. These companies are SEC Proposal of Regulation Best Interest
SEC-registered broker-dealers and members of
Financial Industry Regulatory Authority, Inc. The SEC proposed Regulation Best Interest in May of
(“FINRA”), a securities industry self-regulatory 2018, which would require a broker-dealer to act in
organization. BNY Mellon’s nonbank subsidiaries the “best interest” of a retail customer when making a
engaged in securities-related activities are regulated recommendation of any securities transaction or
by supervisory agencies in the countries in which investment strategy to any such customer. Regulation
they conduct business. Best Interest is designed to make it clear that a
broker-dealer may not put its financial interests ahead
74 BNY Mellon
of the interests of a retail customer in making sole regulator for both prudential and conduct
recommendations. The SEC also proposed to help purposes. As a result, FCA-authorized firms must
address investor confusion about the nature of their comply with FCA prudential and conduct rules and
relationships with investment professionals through a the FCA’s Principles for Businesses, while dual-
new short-form disclosure document. Form CRS regulated firms must comply with the FCA conduct
would provide retail investors with information about rules and FCA Principles, as well as the applicable
the nature of their relationship with their investment PRA prudential rules and the PRA’s Principles for
professional, and would supplement other more Businesses.
detailed disclosures. In addition, the SEC issued
interpretive guidance for broker-dealers and The PRA regulates The Bank of New York Mellon
investment advisers and an interpretation regarding (International) Limited, our UK-incorporated bank, as
the standard of conduct for investment advisers. well as the London branch of The Bank of New York
Comments to these proposals were accepted through Mellon. Certain of BNY Mellon’s UK-incorporated
August 2018, and the SEC is expected to proceed to subsidiaries are authorized to conduct investment
final rulemaking in 2019. BNY Mellon is business in the UK. Their investment management
considering Regulation Best Interest and these related advisory activities and their sale and marketing of
developments and evaluating what material impact, if retail investment products are regulated by the FCA.
any, they may have on BNY Mellon. Certain UK investment funds, including investment
funds of BNY Mellon, are registered with the FCA
Operations and Regulations Outside the United and are offered for sale to retail investors in the UK.
States
Since the financial crisis, the European Union and its
In Europe, branches of The Bank of New York Member States have engaged in a significant
Mellon are subject to regulation in the countries in overhaul of bank regulation and supervision. To
which they are established, in addition to being increase the resilience of banks and to reduce the
subject to oversight by the U.S. regulators referred to impact of potential bank failures, new rules on capital
above. BNY Mellon SA/NV is a public limited requirements for banks and bank recovery and
liability company incorporated under the laws of resolution have been adopted.
Belgium, holds a banking license issued by the
National Bank of Belgium (“NBB”) and is authorized Aspects of the European Union’s Banking Union
to carry out all banking and savings activities as a have entered into force in most EU jurisdictions. The
credit institution. The European Central Bank UK is not participating in the Banking Union. The
(“ECB”) has responsibility for the direct supervision key components of the Banking Union include the
of significant banks and banking groups in the euro single resolution mechanism (“SRM”) and the SSM.
area, including BNY Mellon SA/NV. The ECB’s The SRM approach endorses the bail-in rules
supervision is carried out in conjunction with the established in the BRRD and is described in more
relevant national prudential regulator (NBB in BNY detail above in the section addressing Recovery and
Mellon SA/NV’s case), as part of the single Resolution.
supervisory mechanism (“SSM”). BNY Mellon SA/
NV conducts its activities in Belgium as well as In addition, the Capital Requirements Directive IV
through its branch offices in the UK, Ireland, Italy, (“CRD IV”) and Capital Requirements Regulation
Luxembourg, the Netherlands, France and Germany. (“CRR”) affect BNY Mellon’s EU subsidiaries by
implementing Basel III and other changes, including
Certain of our financial services operations in the UK the enhancement of the quality of capital, and the
are subject to regulation and supervision by the strengthening of capital requirements for counterparty
Financial Conduct Authority (“FCA”) and the credit risk, resulting in higher capital requirements.
Prudential Regulation Authority (“PRA”). The PRA In the EU Member States, CRD IV/CRR also
is responsible for the authorization and prudential introduces substantive parts of the new European
regulation of firms that carry on PRA-regulated supervisory architecture, including the development
activities, including banks. PRA-authorized firms are of a single set of harmonized prudential rules for
also subject to regulation by the FCA for conduct financial services. This set of rules replaces existing
purposes. In contrast, FCA-authorized firms (such as separately implemented rules within EU Member
investment management firms) have the FCA as their States with a harmonized approach to implementation
BNY Mellon 75
across the EU. Elements of CRD IV/CRR apply not subsidiaries may engage are subject to various
only to BNY Mellon banking branches and restrictions imposed by the Federal Reserve. Those
subsidiaries but also to investment management and foreign branches and international subsidiaries are
brokerage entities. CRD IV/CRR became effective also subject to the laws and regulatory authorities of
on Jan. 1, 2014, with certain provisions to be phased the countries in which they operate and, in the case of
in from 2014 to 2019. banking subsidiaries, may be subject to regulatory
capital requirements in the jurisdictions in which they
In December 2017, the European Commission operate.
published legislative proposals for a new harmonized
prudential regime for investment firms. Under these EU Banking Reform Package
proposals, most EU investment firms would be
subject to a more tailored, proportionate prudential In November 2016, the European Commission
regime that is separate from the CRD IV/CRR published the so-called EU Banking Reform Package.
regime. If these proposals are implemented, certain This legislative package would amend CRD IV, CRR,
of BNY Mellon’s EU investment firms would be BRRD and the Single Resolution Mechanism
expected to become subject to this new prudential Regulation (“SRMR”).
regime. The extent to which these proposals will be
advanced and implemented is uncertain. The proposed amendments to CRD IV include a
proposal for non-EU G-SIBs (such as BNY Mellon)
Our Investment Management and Investment and certain other non-EU banking groups to have up
Services businesses are subject to significant to two “EU intermediate parent undertakings” (“EU
regulation in numerous jurisdictions around the world IPUs”). All EU credit institutions and certain EU
relating to, among other things, the safeguarding, investment firms in such non-EU G-SIBs/banking
administration and management of client assets and groups would need to fall within a corporate structure
client funds. headed by one of the EU IPUs. If this proposal is
ultimately implemented, BNY Mellon would need to
Various new, revised and/or proposed European undertake some changes in its corporate structure.
Union directives and regulations have or will have a
significant impact on our provision of many of our The proposed amendments to CRR include provisions
products and services, including the Markets in relating to the leverage ratio, NSFR, MREL
Financial Instruments Directive II and Markets in (including closer alignment to the final FSB TLAC
Financial Instruments Regulations (collectively, standard), a revised Basel market risk framework,
“MiFID II”), the Alternative Investment Fund counterparty credit risk, exposures to CCPs,
Managers Directive (“AIFMD”), the Directive on exposures to collective investment undertakings,
Undertakings for Collective Investments in large exposures and reporting/disclosure
Transferable Securities (“UCITS V”), the Central requirements.
Securities Depositories Regulation (“CSDR”), the
regulation on OTC derivatives, central counterparties The EU Banking Reform Package is due to be
and trade repositories (commonly known as finalized during 2019. The time frame for
“EMIR”), the Securities Financing Transactions implementation of the various elements of the
Regulation (“SFTR”), the Payment Services Directive legislative package remains unclear at present.
II (“PSD II”) and the Benchmarks Regulation. These
European Union directives and regulations may European Deposit Insurance Scheme
impact our operations and risk profile but may also
provide new opportunities for the provision of BNY The European Commission has proposed a European
Mellon products and services. Several of these Deposit Insurance Scheme (“EDIS”) for euro area
European directives and regulations are still subject member states. Under the EDIS proposal, existing
to finalization by the legislature and/or substantial national euro area deposit guarantee schemes would
secondary legislation. This creates uncertainty as to transition over a number of years to a mutualized
business impact. deposit guarantee scheme applicable in the euro area.
The EDIS proposal has stalled and it is unclear
The types of activities in which the foreign branches whether it will be implemented in its current form, or
of our banking subsidiaries and our international at all.
76 BNY Mellon
European Financial Markets and Market Authority (“EIOPA”). In addition, the European
Infrastructure Commission wishes to enhance cross-border funds
distribution and to promote sustainable finance.
The EU continues to develop proposals and
regulations in relation to financial markets and Investment Services and Investment Management in
market infrastructures. MiFID II took effect on Jan. the European Union
3, 2018. It affects EU Member States and those
financial institutions conducting business in the EEA The AIFMD has a direct effect on our alternative fund
and has required significant change to comply with manager clients and our depository business and
relevant regulatory requirements, including extensive other products offered across Europe as well as upon
transaction reporting and market transparency our investment management business. AIFMD
obligations and a heightened focus on how financial imposes heightened obligations upon depositories,
institutions conduct business with and disclose which have operational effects.
information to their clients.
Our businesses servicing regulated funds in Europe
Capital Markets Union and our investment management businesses in Europe
are also affected by the revised directive governing
A key policy objective of the 2014-19 European UCITS V.
Commission is to develop a Capital Markets Union
(“CMU”) in the EU. Related initiatives that have On July 12, 2018, the European Commission adopted
already been substantially progressed include a new regulations for depositary safekeeping duties under
Prospectus Regulation and a new Securitization AIFMD and UCITS V. The Commission recognized
Regulation. The Prospectus Regulation applies from the use of omnibus account structures when
July 21, 2019 (with certain elements subject to an accounting for assets in a chain of custody, but
earlier phase-in period). The Securitization determined that depositaries and trustees must
Regulation has applied to securitization transactions maintain their own books and records and will no
from Jan. 1, 2019. longer be allowed to rely on a custodian’s records.
BNY Mellon has initiated a project to implement any
A number of CMU-related priorities remain to be changes necessary to comply with these regulations
addressed during 2019. The European Commission by the Commission’s deadline of April 1, 2020.
proposes to enhance the powers of the European
Supervisory Agencies (“ESAs”), including the The European Commission is expected to commence
European Banking Authority (“EBA”), the European a review of AIFMD and UCITS V legislation during
Securities and Markets Authority (“ESMA”) and the 2019, following the Commission’s initiation of an
European Insurance and Occupational Pensions industry survey on AIFMD conducted during 2018.
BNY Mellon 77
Risk Factors
Making or continuing an investment in securities interconnectedness of our systems, software and

issued by us involves certain risks that you should networks. The failure to upgrade or maintain these
carefully consider. The following discussion sets computer systems, software and networks could
forth the most significant risk factors that could affect result in greater susceptibility to attacks, unauthorized
our business, financial condition or results of access and misuse, and could also prevent us from
operations. Some of these risks are interrelated and achieving our business continuity and resiliency
the occurrence of one may exacerbate the effect of objectives. There can be no assurance that any such
others. However, factors other than those discussed disruptions, failures or delays will not occur or, if
below or in other of our reports filed with or they do occur, that they will be adequately addressed.
furnished to the SEC also could adversely affect our
business, financial condition or results of operations. Third parties with which we do business or that
We cannot assure you that the risk factors described facilitate our business activities, including exchanges,
below or elsewhere in our reports address all potential clearing houses, financial intermediaries or vendors
risks that we may face. These risk factors also serve that provide services or security solutions for our
to describe factors which may cause our results to operations, could also be sources of technology risk
differ materially from those described in forward- to us, including from breakdowns, failures or delays
looking statements included herein or in other of their own systems or capacity constraints or other
documents or statements that make reference to this services that impair our ability to process transactions
Annual Report. See “Forward-looking Statements.” and communicate with customers and counterparties.
In addition, we are exposed to the risk that a
Operational Risk technology disruption or other information security
event at a vendor common to our third-party service
A communications or technology disruption or providers could impede their ability to provide
failure that results in a loss of information, delays products or services to us. We may not be able to
our ability to access information or impacts our effectively monitor or mitigate operational risks
ability to provide services to our clients may relating to the use of common vendors by third-party
materially adversely affect our business, financial service providers.
condition and results of operations.
As our business areas evolve, whether due to the
We use communications and information systems to introduction of technology, new service offering
conduct our business. Our businesses are highly requirements for our clients, or changes in regulation
dependent on our ability to process large volumes of relative to these service offerings, unforeseen risks
data that require global capabilities and scale from materially impacting our business operations could
our technology platforms. If our technology or arise. The technology used can become increasingly
communications fail, or those of industry utilities or complex and rely on the continued effectiveness of
our service providers fail, we could experience, and the programming code and integrity of the inputted
have in the past experienced, production and system data. Rapid technological changes and competitive
outages or failures or other significant operational pressures require us to make significant and ongoing
delays. Any such outage, failure or delay could investments in technology not only to develop
adversely affect our ability to effect transactions or competitive new products and services or adopt new
service our clients, which could expose us to liability technologies, but to sustain our current businesses.
for damages, result in the loss of business, damage Our financial performance depends in part on our
our reputation, subject us to regulatory scrutiny or ability to develop and market these new products and
sanctions or expose us to litigation, any of which services in a timely manner at a competitive price and
could have a material adverse effect on our business, adopt or develop new technologies that differentiate
financial condition and results of operations. Security our products or provide cost efficiencies. The failure
or technology disruptions, failures or delays that to ensure adequate review and consideration of
impact our communications or information systems critical business changes prior to and during
could also adversely affect our ability to manage our introduction and deployment of key technological
exposure to risk or expand our business. systems or failure to adequately align evolving client
commitments and expectations with operational
Upgrading our computer systems, software and capabilities, may adversely impact our ability to
networks may also subject us to disruptions, failures service and retain customers and could have a
or delays due to the complexity and negative impact on our operations. The costs we
78 BNY Mellon
Risk Factors (continued)
incur in enhancing our technology could be Cybersecurity incidents may occur through
substantial and may not ultimately improve our intentional or unintentional acts by individuals or
competitiveness or profitability. groups having authorized or unauthorized access to
our systems or our clients’ or counterparties’
We continue to evaluate and strengthen our business information, which may include confidential
continuity and operational resiliency capabilities and information. These individuals or groups include
have increased our investments in technology to employees, vendors and customers, as well as others
steadily enhance those capabilities, including our with malicious intent. Third parties may also attempt
ability to resume and sustain our operations. There to place individuals within BNY Mellon or
can be no guarantee, however, that a technology fraudulently induce employees, vendors, customers or
outage will not occur or that our business continuity other users of our systems to disclose sensitive
and operational resiliency capabilities will enable us information in order to gain access to our data or that
to maintain our operations and appropriately respond of our clients. A cybersecurity incident that results in
to events. For a discussion of operational risk, see the theft, loss, unauthorized access to, disclosure, use
“Risk Management - Operational Risk” and or alteration of information, system or network
“Business Continuity.” failures, or loss of access to information, may require
us to reconstruct lost data (which may not be
As a result of financial entities, central agents, possible), reimburse clients for data and credit
clearing agents and houses, exchanges and monitoring services, result in loss of customer
technology systems across the globe becoming more business, or damage to our computers or systems and
interdependent and complex, a technology failure that those of our customers and counterparties. These
significantly degrades, deletes or compromises the impacts could be costly and time-consuming and
systems or data of one or more financial entities or materially negatively impact our business operations,
suppliers could have a material impact on financial condition and reputation.
counterparties or other market participants, including
us. A disruptive event or, failure or delay experienced While we seek to mitigate these risks to ensure the
by one institution could disrupt the functioning of the integrity of our systems and information and
overall financial system. continuously evolve our cybersecurity capabilities, it
is possible that we may not anticipate or implement
A cybersecurity incident, or a failure to protect our effective preventive measures against all
computer systems, networks and information and cybersecurity threats, or detect all such threats,
our clients’ information against cybersecurity especially because the techniques used change
threats, could result in the theft, loss, unauthorized frequently or are not recognized until after they are
access to, disclosure, use or alteration of launched. Moreover, attacks can originate from a
information, system or network failures, or loss of wide variety of sources, including outside third
access to information. Any such incident or failure parties who are involved with organized crime or who
could adversely impact our ability to conduct our may be linked to terrorist organizations or hostile
businesses, damage our reputation and cause losses. foreign governments, or from cross-contamination of
legitimate parties (clients, utilities, peer institutions,
Our businesses rely heavily on technology, and are etc).
vulnerable to cybersecurity threats and disruptions
that are occurring globally with greater frequency. The failure to maintain an adequate technology
Cybersecurity threats, which can include, among infrastructure and applications with effective
other things, hacker attacks, computer viruses or cybersecurity controls relative to the type, size and
other malicious software, denial of service efforts, complexity of operations, markets and products
limited availability of services, phishing attacks, traded, access to trading venues and our market
cyberattacks on our service providers, and interconnectedness could impact operations and
unauthorized access attempts, could adversely impact impede our productivity and growth, which could
our business. These cybersecurity risks are expected cause our earnings to decline or could impact our
to continue to increase and intensify. While we ability to comply with regulatory obligations leading
deploy a broad range of sophisticated defenses, it is to regulatory fines and sanctions. We may be
possible we could suffer a material adverse impact or required to expend significant additional resources to
disruption. modify, investigate or remediate vulnerabilities or
other exposures arising from cybersecurity threats.
BNY Mellon 79
A successful cyberattack could occur and persist for these affiliates or third parties. Additionally, as a
an extended period of time before being detected. In result of regulations, including the Alternative
addition, because any investigation of a cybersecurity Investment Fund Managers Directive and the
incident would be inherently unpredictable, the extent Undertakings for Collective Investment in
of a particular cybersecurity incident and the path of Transferable Securities V, where, in the European
investigating the incident may not be immediately Economic Area we act as depositary, the Company
clear. It may take a significant amount of time before could be exposed to restitution risk for, among other
such an investigation can be completed and full and things, errors or fraud perpetrated by a sub-custodian
reliable information about the incident is known. resulting in a loss or delay in return of client’s
While such an investigation is ongoing, we may not securities. Where we are not acting as a European
necessarily know the extent of the harm or how best Economic Area depositary, but where we provide
to remediate it, certain errors or actions could be custody services to a European Economic Area
repeated or compounded before they are discovered depositary, we may accept similar liabilities to that
and remediated, and communication to the public, depositary as a matter of contract.
regulators, clients and other stakeholders may be
inaccurate, any or all of which could further increase We rely on a variety of measures to protect our
the costs and consequences of a cybersecurity intellectual property and proprietary information,
incident. including copyrights, trademarks, patents and
controls on access and distribution. These measures
Our business may be materially adversely affected may not prevent misappropriation or infringement of
by operational risk. our intellectual property or proprietary information
and a resulting loss of competitive advantage.
We are required to accurately process large numbers Furthermore, if a third party were to assert a claim of
of transactions each day on a timely basis. The infringement or misappropriation of its proprietary
transactions we process or execute are operationally rights, obtained through patents or otherwise, against
complex and can involve numerous parties, us, we could be required to spend significant amounts
jurisdictions, regulations and systems, and as such, to defend such claims, develop alternative methods of
are subject to execution and processing errors and operations, pay substantial money damages, obtain a
failures. As our businesses evolve to even more license from the third party or possibly stop providing
complex and voluminous transactions, at ever one or more products or services.
increasing speeds, we must also evolve our processes,
controls, workforce and technology, to accurately and We are also subject to laws and regulations relating to
timely execute those transactions, which may result in the privacy of the information of clients, employees
an increased risk of error or significant operational or others, and any failure to comply with these laws
delay. When errors or delays do occur, they may be and regulations could expose us to liability and/or
difficult to detect and fix in a timely manner. reputational damage. As privacy-related laws and
regulations, such as the EU General Data Protection
As a result, operational errors or significant Regulation (or GDPR), the California Consumer
operational delays could materially negatively impact Privacy Act of 2018, and the New York Department
our ability to conduct our business or service our of Financial Services’ cybersecurity regulation, are
clients, which could adversely affect our results of implemented, the time and resources needed for us to
operations due to potentially higher expenses and comply with such laws and regulations, as well as our
lower revenues, could lower our capital ratios, create potential liability for non-compliance and reporting
liability for us or our clients or negatively impact our obligations in the case of data breaches, may
reputation. Recurring operational issues may raise significantly increase. In addition, our businesses are
concerns among regulators regarding our governance increasingly subject to laws and regulations relating
and control environment and culture. to privacy, surveillance, encryption and data use in
the jurisdictions in which we operate. Compliance
Affiliates or third parties with which we do business with these laws and regulations may require us to
or that facilitate our business activities could also be change our policies, procedures and technology for
sources of execution and processing errors, failures or information security and segregation of data, which
significant operational delays. In certain jurisdictions could, among other things, make us more vulnerable
we may be deemed to be statutorily liable for to operational failures, and to monetary penalties for
operational errors, fraud, breakdowns or delays by breach of such laws and regulations.
80 BNY Mellon
Our risk management framework may not be both the importance and some of the limitations of
effective in mitigating risk and reducing the managing unanticipated risks. In times of market
potential for losses. stress or other unforeseen circumstances, previously
uncorrelated indicators may become correlated, or
Our risk management framework seeks to mitigate previously correlated indicators may move in
risk and loss to us. We have established different directions. These types of market
comprehensive policies and procedures and an movements have at times limited the effectiveness of
internal control framework designed to provide a our hedging strategies and have caused us to incur
sound operational environment for the types of risk to significant losses, and they may do so in the future.
which we are subject, including operational risk,
credit risk, market risk, liquidity risk and strategic In addition, our businesses and the markets in which
risk. We have also established frameworks to we operate are continuously evolving. We may fail to
mitigate risk and loss to us as a result of the actions of fully understand the implications of changes in our
affiliates or third parties with which we do business businesses or the financial markets or fail to
or that facilitate our business activities. However, as adequately or timely enhance our risk framework to
with any risk management framework, there are address those changes. If our risk framework is
inherent limitations to our current and future risk ineffective, either because it fails to keep pace with
management strategies, including risks that we have changes in the financial markets, regulatory
not appropriately anticipated or identified. requirements, our businesses, our counterparties,
clients or service providers or for other reasons, we
Our regulators remain focused on ensuring that could incur losses, suffer reputational damage or find
financial institutions build and maintain robust risk ourselves out of compliance with applicable
management policies. If our regulators perceive the regulatory or contractual mandates or expectations.
quality of our risk models and framework to be
insufficient, it may negatively impact our regulators’ An important aspect of our risk management
evaluations of our capital plans and stress tests. framework is creating a risk culture that it is
Accurate and timely enterprise-wide risk information sustainable and appropriate to our role as a major
is necessary to enhance management’s decision- financial institution in which all employees fully
making in times of crisis. If our risk management understand that there is risk in every aspect of our
framework proves ineffective or if our enterprise- business and the importance of managing risk as it
wide management information is incomplete or relates to their job functions. If we fail to create the
inaccurate, we could suffer unexpected losses, which appropriate environment that sensitizes all of our
could materially adversely affect our results of employees to managing risk, our business could be
operations or financial condition. adversely impacted. For more information on how
we monitor and manage our risk management
In certain instances, we rely on models to measure, framework, see “Risk Management - Risk
monitor and predict risks. However, these models are management overview.”
inherently limited because they involve techniques,
including the use of historical data, trends, We are subject to extensive government rulemaking,
assumptions, and judgments that cannot anticipate policies, regulation and supervision. These rules
every economic and financial outcome in the markets and regulations have, and in the future may, compel
in which we operate, nor can they anticipate the us to change how we manage our businesses, which
specifics and timing of such outcomes, especially could have a material adverse effect on our
during severe market downturns or stress events. business, financial condition and results of
These models may not appropriately capture all operations. In addition, these rules and regulations
relevant risks or accurately predict future events or have increased our compliance and operational risk
exposures. The risk of the unsuccessful development and costs.
or implementation of our models, systems or
processes cannot be completely eliminated. The As a large, internationally active financial services
models that we use to assess and control our market company, we operate in a highly regulated
risk exposures also reflect assumptions about the environment, and are subject to a comprehensive
degree of correlation among prices of various asset statutory and regulatory regime, including oversight
classes or other market indicators. The 2008 financial by governmental agencies both inside and outside the
crisis and resulting regulatory reform highlighted U.S. Regulations and related regulatory guidance and
BNY Mellon 81
supervisory oversight impact how we analyze certain such reforms, and regulatory changes could
business opportunities, our regulatory capital and materially adversely impact us.
liquidity requirements, the revenue profile of certain
of our core activities and the products and services The regulatory and supervisory focus of U.S. banking
we provide. Any changes to the regulatory agencies is primarily intended to protect the safety
frameworks and environment in which we operate and soundness of the banking system and federally
and the significant management attention and insured deposits, and not to protect investors in our
resources necessary to address those changes could securities. Regulatory and supervisory standards and
materially adversely affect our business, financial expectations across jurisdictions may be divergent
condition and results of operations and have other and otherwise may not conform and/or may be
negative consequences. applied in a manner that is not harmonized within a
jurisdiction (in relation to national versus non-
The evolving regulatory environment and uncertainty national financial services providers) and/or across
about the timing and scope of future regulations may jurisdictions. Additionally, banking regulators have
contribute to decisions we may make to suspend, wide supervisory discretion in the ongoing
reduce or withdraw from existing businesses, examination and enforcement of applicable banking
activities or initiatives, which may result in potential statutes, regulations, and guidelines, and may restrict
lost revenue or significant restructuring or related our ability to engage in certain activities or
costs or exposures. acquisitions, or may require us to maintain more
capital or highly liquid assets.
The monetary, tax and other policies of various
governments, agencies and regulatory authorities both The U.S. capital rules subject us and our U.S.
in the U.S. and globally have a significant impact on banking subsidiaries to more stringent capital
interest rates, currencies, commodity pricing requirements, which could restrict growth, activities
(including oil), the imposition of tariffs or other or operations, trigger divestiture of assets or
limitations on international trade and travel, and operations or limit our ability to return capital to
overall financial market performance, which can shareholders. Failure to meet current or future capital
impact our business and results of operations. requirements, either at the end of each fiscal quarter
Changes in these policies are beyond our control and or under hypothetical stressed conditions during the
can be difficult to predict and we cannot determine annual CCAR exercise, could materially adversely
the ultimate effect that any such changes would have affect our financial condition. Additional impacts
upon our business, financial condition or results of relating to compliance with these rules could include,
operations. but are not limited to, potential dilution of existing
shareholders and competitive disadvantage compared
Basel III and the Dodd-Frank Act have had a to financial institutions not under the same regulatory
significant impact on the regulatory structure of the framework. In addition, the SLR subjects us to a
global financial markets and have imposed significant more stringent leverage requirement, which could
operational, compliance and risk management costs, restrict growth, activities, operations or could result
both as an initial matter, as we have had to develop in certain restrictions on capital distributions and
and integrate appropriate systems and procedures, discretionary bonus payments.
and on a recurring basis, as we monitor, support and
refine those systems and procedures. While U.S. The LCR requires us to maintain significant holdings
regulators have finalized regulations implementing of high quality and potentially lower-yielding liquid
various provisions of the Dodd-Frank Act and Basel assets. In calculating the LCR, we must also
III, additional regulations or modifications to existing determine which deposits should be considered to be
regulations are expected to continue to occur. In stable deposits. Stable deposits must meet a series of
addition, there is uncertainty about the timing and requirements and typically receive favorable outflow
scope of any changes to Basel III and Dodd-Frank treatment under the LCR. BNY Mellon uses
Act and other regulations, as well as the cost of qualitative and quantitative analysis to identify core
complying with any new regulatory regimes. The full stable deposits. It is possible that our LCR could fall
impact of these standards on us, our business below 100% as a consequence of the inherent
strategies and financial performance will remain uncertainties associated with this analysis (including
uncertain as long as regulatory reforms continue to be as a result of additional guidance from our
adopted and market practices develop in response to regulators). In addition to facing potential regulatory
82 BNY Mellon
consequences (which could be significant), we may could materially adversely affect certain of our
be required to remedy this shortfall by liquidating businesses and results of operations.
assets in our investment portfolio or raising additional
debt, each of which could materially negatively Failure to comply with laws, regulations or policies
impact our net interest revenue. applicable to our business could result in sanctions by
regulatory or governmental authorities, civil money
If and when the final rule regarding the NSFR is penalties and reputational damage, which could have
ultimately implemented in the U.S., those a material adverse effect on our business, financial
requirements could also require BNY Mellon to condition and results of operations. If violations do
further increase its holdings of high quality, and occur, they could damage our reputation, increase our
potentially lower-yielding, liquid assets, and to legal and compliance costs, and ultimately adversely
reevaluate the composition of its liabilities structure impact our results of operations. Laws, regulations or
to include more longer-dated debt. policies currently affecting us and our subsidiaries, or
regulatory and governmental authorities’
Our global activities are also subject to extensive interpretation of these statutes and regulations may
regulation by various non-U.S. regulators, including change at any time, which may adversely impact our
governments, securities exchanges, central banks and business and results of operations.
other regulatory bodies in the jurisdictions in which
we operate, relating to, among other things, the See “Supervision and Regulation” for additional
safeguarding, administration and management of information regarding the potential impact of the
client assets and client funds. regulatory environment on our business.
Various new, revised and proposed European Union Regulatory or enforcement actions or litigation
directives and regulations have an impact on our could materially adversely affect our results of
provision of many of our products and services. operations or harm our businesses or reputation.
Implementation of, and revisions to, these directives
and regulations have affected our operations and risk Like many major financial institutions, we and our
profile, including the Capital Requirements Directive/ affiliates are the subject of inquiries, investigations,
Regulation, the Bank Recovery and Resolution lawsuits and proceedings by counterparties, clients,
Directive, the Deposit Guarantee Scheme Directive, other third parties and regulatory and other
MiFID II, AIFMD, UCITS V and PSD II. governmental agencies in the U.S. and abroad, as
well as the Department of Justice (the “DOJ”) and
In addition, we are subject in our global operations to state attorneys general. See “Legal proceedings” in
rules and regulations relating to corrupt and illegal Note 21 of the Notes to Consolidated Financial
payments and money laundering, economic sanctions Statements for a discussion of material legal and
and embargo programs administered by the U.S. regulatory proceedings in which we are involved.
Office of Foreign Assets Control and similar bodies The number of these investigations and proceedings,
and governmental agencies worldwide, and laws as well as the amount of penalties and fines sought,
relating to doing business with certain individuals, has remained elevated for many firms in the financial
groups and countries, such as the U.S. Foreign services industry, including us. We may become
Corrupt Practices Act, the USA PATRIOT Act, the subject to heightened regulatory scrutiny, inquiries or
Iran Threat Reduction and Syria Human Rights Act of investigations, and potentially client-related inquiries
2012 and the UK Bribery Act. While we have or claims, relating to broad, industry-wide concerns
invested and continue to invest significant resources that could lead to increased expenses or reputational
in training and in compliance monitoring, the damage. The current trend of large settlements by
geographical diversity of our operations, employees, financial institutions with governmental entities may
clients and customers, as well as the vendors and adversely affect the outcomes for other financial
other third parties that we deal with, presents the risk institutions in similar actions, especially where
that we may be found in violation of such rules, governmental officials have announced that the large
regulations or laws and any such violation could settlements will be used as the basis or a template for
subject us to significant penalties or adversely affect other settlements. Separately, policy makers in
our reputation. In addition, such rules could impact Europe continue to focus on protection of client
our ability to engage in business with certain assets, as well as tax avoidance and evasion.
individuals, entities, groups and countries, which
BNY Mellon 83
Regulatory authorities may compel companies to Actions brought against us may result in lawsuits,
provide investigators with all relevant facts relating to enforcement actions, injunctions, settlements,
the individuals substantially involved in or damages, fines or penalties, which could have a
responsible for the alleged misconduct in order to material adverse effect on our financial condition or
qualify for any cooperation credit in criminal results of operations or require changes to our
investigations of corporate wrongdoing, or maximum business. Claims for significant monetary damages
cooperation credit in civil investigations of corporate are asserted in many of these legal actions, while
wrongdoing, resulting in increased fines and claims for disgorgement, penalties and/or other
penalties. remedial sanctions may be sought in regulatory
matters. Although we establish accruals for our
The complexity of the federal and state regulatory litigation and regulatory matters in accordance with
and enforcement regimes in the U.S., coupled with applicable accounting guidance when those matters
the global scope of our operations and the increased proceed to a stage where they present loss
aggressiveness of the regulatory environment contingencies that are both probable and reasonably
worldwide, also means that a single event may give estimable, there may be a material exposure to loss in
rise to a large number of overlapping investigations excess of any amounts accrued, or in excess of any
and regulatory proceedings, either by multiple federal loss contingencies disclosed as reasonably possible.
and state agencies in the U.S. or by multiple Such loss contingencies may not be probable and
regulators and other governmental entities in different reasonably estimable until the proceedings have
jurisdictions. Responding to inquiries, investigations, progressed significantly, which could take several
lawsuits and proceedings, regardless of the ultimate years and occur close to resolution of the matter.
outcome of the matter, is time-consuming and
expensive and can divert the attention of our senior Each of the risks outlined above could result in
management from our business. The outcome of such increased regulatory supervision and affect our ability
proceedings may be difficult to predict or estimate to attract and retain customers or maintain access to
until late in the proceedings, which may last a number the capital markets.
of years.
Our businesses may be negatively affected by
Certain of our subsidiaries are subject to periodic adverse events, publicity, government scrutiny or
examination, special inquiries and potential other reputational harm.
proceedings by regulatory authorities. If compliance
failures or other violations are found during an We are subject to reputational, legal and regulatory
examination, inquiry or proceeding, a regulatory risk in the ordinary course of our business. The
agency could initiate actions and impose sanctions for public perception of financial institutions remains
violations, including, for example, regulatory negative. Harm to our reputation can result from
agreements, cease and desist orders, civil monetary numerous sources, including adverse publicity arising
penalties or termination of a license and could lead to from events occurring at BNY Mellon or in the
litigation by investors or clients, any of which could financial markets, our perceived failure to comply
cause our earnings to decline. with legal and regulatory requirements or deliver
appropriate standards of service and quality by either
Our businesses involve the risk that clients or others us or our vendors, or a failure to appropriately
may sue us, claiming that we or third parties for describe our products and services, the purported
whom they say we are responsible have failed to actions of our employees, alleged financial reporting
perform under a contract or otherwise failed to carry irregularities involving ourselves or other large and
out a duty perceived to be owed to them, including well-known companies and perceived conflicts of
perceived fiduciary or contractual duties. This risk interest. In particular, a cybersecurity event
may be heightened during periods when credit, equity impacting us or our customers’ data could have a
or other financial markets are deteriorating in value or negative impact on our reputation and customer
are particularly volatile, or when clients or investors confidence in BNY Mellon and its cybersecurity
are experiencing losses. As a publicly held company, defenses and business continuity and resiliency
we are also subject to the risk of claims under the capabilities. Our reputation could also be harmed by
federal securities laws. Volatility in our stock price the failure of an affiliate, joint venture or a vendor or
increases this risk. other third party with which we do business to
comply with laws or regulations. Damage to our
84 BNY Mellon
reputation could affect the confidence of clients, status could lose the ability to undertake new
rating agencies, regulators, employees, stockholders activities or make acquisitions that are not generally
and other stakeholders and could in turn have an permissible without FHC status or to continue such
impact on our business and results of operations. activities.
Additionally, governmental scrutiny from regulators, The failure by one of our bank subsidiaries to
legislative bodies and law enforcement agencies with maintain its status as “well capitalized” could lead to,
respect to financial services companies has remained among other things, higher FDIC assessments and
at elevated levels. Press coverage and other public could have reputational and associated business
statements that assert some form of wrongdoing consequences.
(including, in some cases, press coverage and public
statements that do not directly involve BNY Mellon) If we or our subsidiary banks fail to meet U.S. and
often result in some type of investigation or in international minimum capital rules and other
lawsuits. Certain enforcement authorities have regulatory requirements, we may not be able to
recently required admissions of wrongdoing, and in deploy capital in the operation of our business or
some cases, criminal pleas, as part of the resolution of distribute capital to stockholders, which may
matters brought by them against financial institutions. adversely affect our business.
Any such resolution of a matter involving BNY
Mellon could lead to increased exposure to civil Failure to meet any current or future capital or
litigation, could adversely affect our reputation and liquidity requirements, including those imposed by
ability to do business in certain products and in the U.S. capital rules, the LCR, or by regulators in
certain jurisdictions and could have other negative implementing other portions of the Basel III
effects. framework, could materially adversely affect our
financial condition. The current regulatory
Failure to satisfy regulatory standards, including environment is fluid as requirements are introduced
“well capitalized” and “well managed” status or and amended. See “Supervision and Regulation.”
capital adequacy and liquidity rules more generally, Compliance with U.S. and international regulatory
could result in limitations on our activities and capital and liquidity requirements may impact our
adversely affect our business and financial ability to return capital to shareholders and may
condition. impact our operations by requiring us to liquidate
assets, increase borrowings, issue additional equity or
Under U.S. and international regulatory capital other securities, or cease or alter certain operations,
adequacy rules and other regulatory requirements, which may adversely affect our results of operations.
BNY Mellon and our subsidiary banks must meet
thresholds that include quantitative measures of Finally, our estimated regulatory capital ratios,
assets, liabilities and certain off-balance sheet items, liquidity metrics, and related components are based
subject to qualitative judgments by regulators about on our current interpretation, expectations and
components, risk weightings and other factors. As understanding of the applicable rules and are subject
discussed in “Supervision and Regulation,” BNY to, among other things, ongoing regulatory review,
Mellon is registered with the Federal Reserve as a regulatory approval of certain statistical models,
BHC and an FHC. An FHC’s ability to maintain its additional refinements, modifications or
status as an FHC is dependent upon a number of enhancements (whether required or otherwise) to our
factors, including its U.S. bank subsidiaries’ models, and further implementation guidance. Any
qualifying on an ongoing basis as “well capitalized” modifications resulting from these ongoing reviews
and “well managed” under the banking agencies’ or the continued implementation of the U.S. capital
prompt corrective action regulations as well as rules, the LCR, the resolution planning process, and
applicable Federal Reserve regulations. Failure by an related amendments could result in changes in our
FHC or one of its U.S. bank subsidiaries to qualify as risk-weighted assets, capital components, liquidity
“well capitalized” and “well managed”, if inflows and outflows, HQLA, or other elements
unremedied over a period of time, would cause it to involved in the calculation of these measures, which
lose its status as an FHC and could affect the could impact these ratios. Further, because
confidence of clients in it, compromising its operational risk is currently measured based not only
competitive position. Additionally, an FHC that does upon our historical operational loss experience but
not continue to meet all the requirements for FHC also upon ongoing events in the banking industry
BNY Mellon 85
generally, our level of operational risk-weighted cash needs, in exchange for unsecured subordinated
assets could significantly increase or otherwise funding notes issued by the IHC as well as a
remain elevated and may potentially be subject to committed line of credit to the Parent to service its
significant volatility, negatively impacting our capital near term obligations. The Parent’s and the IHC’s
and liquidity ratios. The uncertainty caused by these obligations under the support agreement are secured.
factors could ultimately impact our ability to meet our
goals, supervisory requirements, and regulatory If our projected liquidity resources deteriorate so
standards. severely that resolution of the Parent becomes
imminent, the committed line of credit the IHC
A failure or circumvention of our controls and provided to the Parent will automatically terminate,
procedures could have a material adverse effect on with all amounts outstanding becoming due and
our business, reputation, results of operations and payable, and the support agreement will require the
financial condition. Parent to transfer most of its remaining assets (other
than stock in subsidiaries and a cash reserve to fund
Management regularly reviews and updates our bankruptcy expenses) to the IHC. As a result, during
internal controls, disclosure controls and procedures, a period of severe financial stress the Parent could
and corporate governance policies and procedures. become unable to meet its debt and payment
Any system of controls, however well designed and obligations (including with respect to its securities),
operated, is based in part on certain assumptions and causing the Parent to seek protection under
can provide only reasonable, not absolute, assurances bankruptcy laws earlier than it otherwise would have.
that the objectives of the system will be met. Any
failure or circumvention of our controls and If the Parent were to become subject to a bankruptcy
procedures or failure to comply with regulations proceeding and our single point of entry strategy is
related to controls and procedures could have a successful, our material entities will not be subject to
material adverse effect on our business, reputation, insolvency proceedings and their creditors would not
results of operations and financial condition. If we be expected to suffer losses, while the Parent’s
identify material weaknesses in our internal control security holders, including unsecured debt holders,
over financial reporting or are otherwise required to could face significant losses, potentially including the
restate our financial statements, we could be required loss of their entire investment. The single point of
to implement expensive and time-consuming entry strategy - in which the Parent would be the only
remedial measures and could lose investor confidence legal entity to enter resolution proceedings - is
in the accuracy and completeness of our financial designed to result in greater risk of loss to holders of
reports. In addition, there are risks that individuals, our unsecured senior debt securities and other
either employees or contractors, may circumvent securities than would be the case under a different
established control mechanisms in order to, for resolution strategy.
example, exceed exposure, liquidity, trading or
investment management limitations, or commit fraud. Further, if the single point of entry strategy is not
successful, our liquidity and financial condition
The application of our Title I preferred resolution would be adversely affected and all security holders
strategy or resolution under the Title II orderly may, as a consequence, be in a worse position than if
liquidation authority could adversely affect the the strategy had not been implemented.
Parent’s liquidity and financial condition and the
Parent’s security holders. In addition, Title II of the Dodd-Frank Act established
an orderly liquidation process in the event of the
In 2017, in connection with our single point of entry failure of a large systemically important financial
resolution strategy under Title I of the Dodd-Frank institution, such as BNY Mellon, in order to avoid or
Act, the Parent entered into a binding support mitigate serious adverse effects on the U.S. financial
agreement with certain key subsidiaries to facilitate system. Specifically, if BNY Mellon is in default or
the provision of capital and liquidity resources to danger of default, and certain specified conditions are
them in the event of material financial distress or met, the FDIC may be appointed receiver under the
failure. The support agreement requires the Parent to orderly liquidation authority, and we would be
transfer significant excess liquid financial assets to resolved under that authority instead of the U.S.
the IHC on an ongoing basis, subject to certain Bankruptcy Code.
amounts retained by the Parent to meet its near-term
86 BNY Mellon
U.S. supervisors have indicated that a single point of other developments, including but not limited to
entry strategy may be a desirable strategy to resolve a social or political instability, changes in governmental
large financial institution such as BNY Mellon under policies or policies of central banks, sanctions,
Title II in a manner that would, similar to our expropriation, nationalization, confiscation of assets,
preferred strategy under our Title I resolution plan, price, capital and exchange controls, the imposition
impose losses on shareholders, unsecured debt of tariffs or other limitations on international trade
holders and other unsecured creditors of the Parent, and travel, and changes in laws and regulations.
while permitting the holding company’s subsidiaries
to continue to operate and remain solvent. Under While we have business continuity and disaster
such a strategy, assuming the Parent entered recovery plans in place, such events could still
resolution proceedings and its subsidiaries remained damage our facilities, disrupt or delay normal
solvent, losses at the subsidiary level would be business operations (including communications and
absorbed by the Parent and ultimately borne by the technology), result in harm or cause travel limitations
Parent’s security holders (including holders of the on our employees, with a similar impact on our
Parent’s unsecured debt securities), while third-party clients, suppliers and counterparties. Catastrophic
creditors of the Parent’s subsidiaries would not be events, including those caused by climate change,
expected to suffer losses. Accordingly, the Parent’s could also negatively impact the purchase of our
security holders (including holders of unsecured debt products and services if those events result in reduced
securities and other unsecured creditors) could face capital markets activity, lower asset price levels, or
losses in excess of what otherwise would have been disruptions in general economic activity, or in
the case. financial market settlement functions, which could
negatively impact our business and results of
If our resolution plan is determined not to be operation. In addition, catastrophic events, including
credible or not to facilitate an orderly resolution those caused by climate change, war, terror attacks,
under the U.S. Bankruptcy Code, our business, political unrest, global conflicts, efforts to combat
reputation, results of operations and financial terrorism and other potential military activities and
condition could be materially negatively impacted. outbreaks of hostilities may lead, and in some cases
have led, to an increase in delinquencies,
We must develop and submit to the Federal Reserve bankruptcies or defaults that could result in our
and the FDIC for review plans for our rapid and experiencing higher levels of non-performing assets,
orderly resolution in the event of material financial net charge-offs and provisions for credit losses,
distress or failure. If the agencies determine that our negatively impacting our business and operations.
future submissions are not credible or would not
facilitate an orderly resolution under the U.S. Market Risk
Bankruptcy Code, and we fail to address any such
deficiencies in a timely manner, the agencies may We are dependent on fee-based business for a
jointly impose more stringent capital, leverage or substantial majority of our revenue and our fee-
liquidity requirements or restrictions on our growth, based revenues could be adversely affected by
activities or operations. slowing in market activity, weak financial markets,
underperformance and/or negative trends in savings
Acts of terrorism, impacts from climate change, rates or in investment preferences.
natural disasters, pandemics, global conflicts and
other geopolitical events may have a negative impact Our principal operational focus is on fee-based
on our business and operations. business, which is distinct from commercial banking
institutions that earn most of their revenues from
In conducting our business and maintaining and loans and other traditional interest-generating
supporting our global operations, which includes products and services. In 2018, 78% of our total
vendors and other third parties, we are subject to risks revenue was fee-based. Our fee-based businesses
of loss from the outbreak of hostilities, acts of include investment management and performance
terrorism, impacts from client change, natural fees, custody, corporate trust, depositary receipts,
disasters, pandemics, global conflicts or other similar clearing, collateral management and treasury
catastrophic events that could have a negative impact services, which are highly competitive businesses.
on our business and operations. We may also be
impacted by unfavorable political, economic, legal or
BNY Mellon 87
Fees for many of our products and services are based particularly sensitive to economic and market
on the volume of transactions processed, the market conditions, including in the capital and credit
value of assets managed and administered, securities markets. When these markets are volatile or
lending volume and spreads, and fees for other disruptive, we could experience a decline in our
services rendered. Corporate actions, cross-border marked-to-market assets, including in our securities
investing, global mergers and acquisitions activity, portfolio and our equity investments, including seed
new debt and equity issuances, and secondary trading capital. Our results of operations may be materially
volumes all affect the level of our revenues. If the affected by conditions in the financial markets and
volumes of these activities decrease due to weak the economy generally, both in the U.S. and
financial markets or otherwise, our revenues will also elsewhere around the world. A variety of factors
decrease, which would negatively impact our results impact global economies and financial markets,
of operations. including interest rates and their associated yield
curves, commodity pricing, such as a continued
Poor investment returns in our investment weakness in oil prices when compared to historic
management business, due to either weak market levels, certain market and political instabilities,
conditions or underperformance (relative to our volatile debt and equity market values, the strength of
competitors or to benchmarks) by funds or accounts the U.S. dollar, the imposition of tariffs or other
that we manage or investment products that we limitations on international trade or travel, high
design or sell, could result in reduced market values unemployment and governmental budget deficits
of portfolios that we manage and/or administer and (including, in the U.S., at the federal, state and
may affect our ability to retain existing assets and to municipal level), contagion risk from possible default
attract new clients or additional assets from existing by other countries on sovereign debt, declining
clients. Market and regulatory trends have resulted in business and consumer confidence and the risk of
increased demand for lower fee asset management increased inflation. Any resulting economic pressure
products, and for performance-based fees. on consumers and lack of confidence in the financial
Significant declines in the volume of capital markets markets may adversely affect certain portions of our
activity would reduce the number of transactions we business, financial condition and results of
process and the amount of securities we lend and operations. In particular, we face the following risks
therefore would also have an adverse effect on our in connection with these factors, some of which are
results of operations. discussed at greater length in separate risk factors:
Our business generally benefits when individuals • Geopolitical tension and economic instability in
invest their savings in mutual funds and other countries around the world can at times increase
collective funds, unit investment trusts or exchange- the demand for low-risk investments, particularly
traded funds, or contribute more to defined in U.S. Treasuries and the dollar. A “flight to
contribution plans. The current shift to lower fee safety” has historically increased BNY Mellon’s
investment products has adversely impacted our fees. balance sheet, which has negatively impacted,
When our investment management revenues decline, and could continue to negatively impact, our
we may have, and in the past have had, declines in leverage-based regulatory capital measures. A
the fair value in our Asset Management reporting sustained “flight to safety” has historically
unit, one of the two reporting units in our Investment triggered a decline in trading, capital markets and
Management segment. If the fair value of the Asset cross-border activity which would likely decrease
Management reporting unit declines below its our revenue, negatively impacting our results of
carrying value, we would be required to take an operations, financial condition and, if sustained in
impairment charge. the long term, our business.
• The fees earned by our Investment Management
Weakness and volatility in financial markets and the
business are higher as assets under management
economy generally may materially adversely affect
and/or investment performance increase. Those
our business, results of operations and financial
fees are also impacted by the composition of the
condition.
assets under management, with higher fees for
some asset categories as compared to others.
As a financial institution, our Investment
Uncertain and volatile capital markets could
Management, Depositary Receipts and Markets,
result in reductions in assets under management
including Securities Lending, businesses, are
88 BNY Mellon
because of investors’ decisions to withdraw assets credit losses may be impaired, which could
or from simple declines in the value of assets adversely affect our overall profitability and
under management as markets decline. At Dec. results of operations.
31, 2018, we estimate that a 5% change in global
equity markets, spread evenly throughout the Our international clients accounted for 37% of our
year, would impact fee revenue by less than 1% revenue in 2018. Given the scope of our global
and diluted earnings per common share by $0.03 operations, clients and counterparties, persistent
to $0.05. disruptions in the global financial markets, or the
attempt of a country to abandon the euro or persistent
• Market conditions resulting in lower transaction
weakness in a leading global currency could have a
volumes could have an adverse effect on the
material adverse impact on our business or results of
revenues and profitability of certain of our
operations.
businesses such as clearing, settlement, payments
and trading.
For a discussion of our management of market risk,
• Uncertain and volatile capital markets, see “Risk Management - Market risk.”
particularly declines, could reduce the value of
our investments in securities, including pension Transitions away from, or changes in the
and other post-retirement plan assets and produce calculation of, LIBOR and other benchmark rates
downward pressure on our stock price and credit could adversely impact our business and results of
availability without regard to our underlying operations.
financial strength.
• Derivative instruments we hold to hedge and In 2017, the UK Financial Conduct Authority
manage exposure to market risks including announced that it will no longer persuade or compel
interest rate risk, equity price risk, foreign contributing banks to submit rates for the calculation
currency risk and credit risk associated with our of LIBOR after 2021. As a result, a transition is
products and businesses might not perform as underway to move away from LIBOR and other
intended or expected, resulting in higher realized interbank offered rates (“IBORs”) to transaction-
losses and unforeseen stresses on liquidity. Our based alternative risk-free rates. This transition is
derivative-based hedging strategies also rely on further supported by the requirements of the EU
the performance of counterparties to such Benchmarks Regulation (“BMR”), where IBORs
derivatives. These counterparties may fail to which are not anchored in transaction-based data and
perform for various reasons resulting in losses on rely on quotes or estimates submitted by contributing
under-collateralized positions. banks would not satisfy the relevant BMR
requirements and would either need to be reformed or
• A decline in oil prices may continue to negatively discontinued after 2019. Any change to any
impact capital markets and may impact the ability alternative rate or benchmark as a result of the move
of certain of our clients, including oil and gas away from LIBOR or other IBOR or any other
exploration and production companies and proposals for reform or other initiatives or
sovereign funds in oil-exporting countries, to investigations, further uncertainty in the timing and
continue using our services or repay outstanding manner of implementation of such changes, or a
loans. Increased defaults among oil and gas waning recognition of LIBOR or other IBOR as an
exploration and production companies may also acceptable benchmark may cause LIBOR, the
negatively impact the high-yield market and our applicable or alternative rates or benchmarks to
high-yield funds. perform differently, or have other consequences
• The process we use to estimate our projected which cannot be predicted. In the event any such
credit losses and to ascertain the fair value of benchmark or other referenced financial metric is
securities held by us is subject to uncertainty in significantly changed or discontinued (for example,
that it requires use of statistical models and in the transition away from LIBOR and other
difficult, subjective and complex judgments, IBORs), or ceases to be recognized as an acceptable
including forecasts of economic conditions and benchmark, there may be uncertainty as to the
how these conditions might impair the ability of calculation of the applicable interest rate or payment
our borrowers and others to meet their amount, depending on the terms of the governing
obligations. In uncertain and volatile capital instrument.
markets, our ability to estimate our projected
BNY Mellon 89
As a result of our business activities and our In anticipation of the UK’s withdrawal from the EU,
underlying operations, we may be adversely impacted we have executed plans adjusting our business and
by the changes involving LIBOR and other operations so we may continue providing our
benchmark rates. We are responsible for the use of products and services to our UK and EU clients. Our
benchmark rates in a variety of agency, trustee and plans have been, and continue to be, based on the UK
other fiduciary capacities, as well as in our exiting the EU on March 29, 2019 without an
operational functions and could be subject to claims agreement between the UK and EU on the terms of
alleging that notwithstanding any uncertainty around the withdrawal and therefore with no transition
the rate environment, we did not correctly discharge period. Accordingly, our plans assume that our UK
our responsibilities. subsidiaries will, on March 29, 2019, lose their EU
financial services passport and as a result will not be
Fluctuations in interest rates triggered by the able to provide regulated services into the EU without
transition away from LIBOR and other benchmark needing to obtain local authorization. BNY Mellon
rates could adversely affect the availability or cost of maintains a presence in the UK through the London
floating-rate funding. We could experience losses on branch of The Bank of New York Mellon and through
a product or have to pay more or receive less on The Bank of New York Mellon (International)
securities that we own or have issued. Mismatches Limited, which is a credit institution incorporated and
may arise between existing IBOR-based and authorized in the UK. BNY Mellon maintains a
proposed alternative benchmark rates, based on a presence in the EU through The Bank of New York
number of factors, including differences in currency Mellon SA/NV (“BNY Mellon SA/NV”), which is
denominations as between these rates, differences in headquartered in Belgium and has a branch network
the extent to which transactions that serve as the basis in a number of other EU countries. BNY Mellon SA/
for such alternative benchmark rates may be secured NV benefits from a general banking license for the
or unsecured, and differences in the tenor of provision of banking and investments services. We
transactions that serve as the basis for alternative have undertaken, and continue to undertake,
benchmark rates. Divergences between existing adjustments to the operations of BNY Mellon SA/NV
IBOR-based and proposed alternative benchmark so that it may provide a wider range of services to
rates may result in our hedges being ineffective. In clients domiciled in the EU.
addition, uncertainty relating to LIBOR or another
benchmark could result in pricing volatility, increased If the UK leaves the EU without an agreement, we,
capital requirements, loss of market share in certain including our European affiliates, may face additional
products, adverse tax or accounting consequences, operational, regulatory and compliance costs,
higher compliance, legal and operational costs, and including costs relating to the transfer of business
risks associated with client disclosures, discretionary operations and, potentially, personnel from our UK
actions taken or negotiation of fallback provisions, as operations to BNY Mellon SA/NV. The outcome of
well as business continuity and systems and model the UK’s decision to exit the EU has also created
disruption, all of which may adversely impact our uncertainty with regard to divergent regulatory
business and results of operations. standards, which may affect operational capabilities
such as the transfer of data between the UK and EU
The United Kingdom’s referendum decision to leave after the UK leaves the EU. The effects of the UK’s
the EU has had and may continue to have negative exit from the EU, including those described above,
effects on global economic conditions, global could adversely affect our business, results of
financial markets, and our business and results of operations and financial condition.
operations.
Changes in interest rates and yield curves could
On March 29, 2019, the UK is scheduled to withdraw have a material adverse effect on our profitability.
from the EU. There is a substantial risk that the UK
and EU will not have ratified any terms for the UK’s We earn revenue, known as “net interest revenue,” on
withdrawal from the EU by the scheduled withdrawal the difference between the interest income earned on
date. Further, the UK’s withdrawal from the EU, and our interest-earning assets, such as the loans we make
in particular the countries’ failure to agree to terms, and the securities we hold in our investment securities
has created an uncertain political and economic portfolio, and the interest expense incurred on our
environment in the UK, and may create such interest-bearing liabilities, such as deposits and
environments in other EU member states.
90 BNY Mellon
borrowed money. Our net interest margin, which is • continued compression of our net interest
the result of dividing net interest revenue by average spreads, depending on our balance sheet position;
interest-earning assets, and our cash flows, are
• constraining our ability to achieve a net interest
sensitive to changes in the spread between short-term
margin consistent with historical averages;
and long-term interest rates (the “yield curve”). Our
net interest margin tends to increase in a positive • sustained weakness of our spread-based revenues,
yield curve environment and decrease when the yield resulting in continued voluntary waiving of
curve flattens or inverts. A flattening of the yield particular fees on certain money market mutual
curve, on its own or together with a low interest rate funds and related distribution fees by us in order
environment, may adversely impact our revenue and to prevent the yields on such funds from
results of operations by compressing our net interest becoming uneconomic; and
spreads, particularly if we are unable to replace our • adversely impacting the value of fixed-rate
higher-yielding maturing assets with assets of mortgage-backed securities we hold if there are
comparable yields, which will constrain our ability to increases in mortgage prepayment speeds, which
achieve desired net interest margins. can be caused by refinancing activity.
The 100 basis point rise in rates in the past year, or Additionally, low short-term rates may result in
future rate rises, could trigger one or more of the excess deposits with high potential runoff rates,
following, which could adversely impact our which in turn would increase our assets and result in
business, results of operations and financial further pressure on our LCR measure.
condition, including:
A more detailed discussion of the interest rate and
• less liquidity in bonds and fixed-income funds in market risks we face is contained in “Risk
the case of a sharp rise in interest rates resulting Management.”
in lower performance, yield and fees;
• increased number of delinquencies, bankruptcies We may experience write-downs of securities that we
or defaults and more nonperforming assets and own and other losses related to volatile and illiquid
net charge-offs, as borrowers may have more market conditions, reducing our earnings and
difficulty making higher interest payments; impacting our financial condition.
• difficulty in modeling predicted deposit levels
We maintain an investment securities portfolio of
and depositor behavior, which could impact our
various holdings, types and maturities. At Dec. 31,
ability to manage liquidity and capital;
2018, these securities were primarily classified as
• decreases in deposit levels and higher available-for-sale, which are recorded on our balance
redemptions from our fixed-income funds or sheet at fair value with unrealized gains or losses
separate accounts, as clients move funds into reported as a component of accumulated other
investments with higher rates of return; comprehensive income, net of tax. The securities in
our held-to-maturity portfolio, recorded on our
• decreases in stable deposit levels, which may
balance sheet at amortized cost, were $34.0 billion
result in further pressure on our LCR measure;
and comprised approximately 28% of our investment
• a decline in our risk-based capital ratios; securities portfolio at Dec. 31, 2018. To the extent
• reduction in accumulated other comprehensive unhedged, the accounting and regulatory treatment of
income (“OCI”) in our shareholders’ equity and our investment securities portfolio in an available-for-
therefore our tangible common equity due to the sale accounting environment may have more
impact of rising long term rates on our available- volatility than a more traditional held-for-investment
for-sale securities in our investment portfolio; or loan portfolio, or a securities portfolio comprised
exclusively of U.S. Treasury securities.
• higher funding costs.
Our investment securities portfolio represents a
A declining short-term rate environment will greater proportion of our consolidated total assets
likely adversely impact our revenue and results of (approximately 33% at Dec. 31, 2018), and our loans
operations by: represent a smaller proportion of our consolidated
total assets (approximately 16% at Dec. 31, 2018), in
BNY Mellon 91
comparison to many other major U.S. financial impairment which could impact our revenue in the
institutions due to our custody and trust bank business quarter in which we recognize the losses. The
model. As such, our capital levels and results of decision on whether to record an other-than-
operations and financial condition are materially temporary impairment or write-down is determined in
exposed to the risks associated with our investment part by management’s assessment of the financial
portfolio. condition and prospects of a particular issuer,
projections of future cash flows and recoverability of
If any of our available-for-sale securities experience the particular security. Management’s conclusions on
an other-than-temporary impairment, it would such assessments are highly judgmental and include
negatively impact our earnings. If our held-to- assumptions and projections of future cash flows
maturity securities experience a loss in fair value, it which may ultimately prove to be incorrect as
would negatively impact the fair value of our assumptions, facts and circumstances change. On the
securities portfolio, although it would not impact our other hand, securities held in a held-to-maturity
earnings unless a credit event occurred. Many of accounting environment are limited in the actions we
these securities experienced significant liquidity, can take absent a significant deterioration in the
valuation and credit quality deterioration during the issuer’s creditworthiness. Therefore, we may be
2008 financial crisis and could experience a similar constrained in our ability to liquidate a held-to-
deterioration in another financial crisis. U.S. state maturity security that is deteriorating in value, which
and municipal bonds have been experiencing stress in would negatively impact the fair value of our
light of fiscal concerns. securities portfolio. If our determinations change
about our intention or ability to not sell securities that
Under the U.S. capital rules, after-tax changes in the have experienced a reduction in fair value below their
fair value of available-for-sale investment securities amortized cost, we could be required to recognize an
are included in CET1 capital. Since loans held for other-than-temporary loss in earnings for the entire
investment, or securities in a held-to-maturity difference between fair value and amortized cost.
accounting classification, are not subject to a fair-
value accounting framework, changes in the fair For information regarding our investment securities
value of these instruments (other than incurred credit portfolio, refer to “Consolidated balance sheet review
losses) are not similarly included in the determination - Investment securities” and for information regarding
of CET1 capital. As a result, we may experience the sensitivity of and risks associated with the market
increased variability in our CET1 capital relative to value of portfolio investments and interest rates, refer
those other major financial institutions who maintain to “Critical accounting estimates - Fair value -
a lower proportion of their consolidated total assets in Securities.”
an available-for-sale accounting classification.
Our FX revenue may be adversely affected by
Generally, the fair value of available-for-sale decreases in market volatility and the cross-border
securities in the securities portfolio is determined investment activity of our clients.
based upon market values available from third-party
sources. During periods of market disruption, it may Our foreign exchange trading generates revenues
be difficult to value certain of our investment which are primarily driven by the volume of client
securities if trading becomes less frequent and/or transactions and the spread realized on these
market data becomes less observable. As a result, transactions, both of which are impacted by market
valuations may include inputs and assumptions that volatility and the impact of foreign exchange hedging
are less observable or require greater estimation and activities. Our clients’ cross-border investing activity
judgment as well as valuation methods which are could decrease in reaction to economic and political
more complex. These values may not be ultimately uncertainties, including changes in laws or
realizable in a market transaction, and such values regulations governing cross-border transactions, such
may change very rapidly as market conditions change as currency controls or tariffs. Uncertainties resulting
and valuation assumptions are modified. Decreases from terrorist attacks, military actions and other
in value may have a material adverse effect on our events may also negatively affect cross-border
results of operations or financial condition. If any of investments activity, which could negatively impact
our securities suffer credit losses, as we experienced revenue.
with some of our investments in 2009, we may
recognize the credit losses as an other-than-temporary
92 BNY Mellon
Volumes and/or spreads in some of our products tend guarantee obligations and liabilities or provide
to benefit from currency volatility and are likely to financial support in the event that other members do
decrease during times of lower currency volatility. not honor their obligations or default. These
Our revenues also depend on our ability to manage obligations may be limited to members that dealt with
the risk associated with the currency transactions we the defaulting member or to the amount (or a multiple
execute and program pricing. of the amount) of our contribution to a clearing or
settlement exchange guarantee fund, or, in a few
Furthermore, a shift by custody clients from the cases, the obligation may be unlimited.
standing instruction programs to other trading options
combined with competitive market pressures on the The degree of client demand for short-term credit also
foreign exchange business may negatively impact our tends to increase during periods of market turbulence,
FX revenue. Continued growth of electronic FX exposing us to further credit-related risks. For
trading capabilities is resulting in a shift of volume to example, investors in mutual funds for which we act
lower margin channels. as custodian may engage in significant redemption
activity due to adverse market or economic
Credit and Liquidity Risk conditions. We may then extend intraday credit to
our fund clients in order to facilitate their ability to
The failure or perceived weakness of any of our pay such redemptions. This may negatively impact
significant counterparties, many of whom are major our leverage-based capital ratios, and in times of
financial institutions and sovereign entities, and our sustained market volatility, may result in significant
assumption of credit and counterparty risk, could leverage-based ratio declines.
expose us to loss and adversely affect our business.
When we provide credit to clients in connection with
We have exposure to clients and counterparties in providing cash management, clearing, custodial and
many different industries, particularly financial other services, we are exposed to potential loss if the
institutions, as a result of trading, clearing and client experiences credit difficulties. We are also
financing, providing custody services, securities generally not able to net exposures across affiliated
lending services or other relationships. We routinely clients or counterparties and may not be able to net
execute transactions with global clients and exposures to the same legal entity across multiple
counterparties in the financial industry as well as products. In addition, we may incur a loss in relation
sovereigns and other governmental or quasi- to one entity or product even though our exposure to
governmental entities. Our direct exposure consists one of the entities’ affiliates is over-collateralized.
of the extension of secured and unsecured credit to Moreover, not all of our client or counterparty
clients and use of our balance sheet. In addition to exposure is secured.
traditional credit activities, we also extend intraday
credit in order to facilitate our various processing, In our agency securities lending program, we act as
settlement and intermediation activities. Our ability lender’s agent on behalf of our clients, the lenders of
to engage in funding or other transactions could be securities, in securities lending transactions with our
adversely affected by the actions and commercial clients’ counterparties (including broker-dealers),
soundness of other financial institutions or sovereign acting as borrowers, wherein securities are lent by our
entities, as defaults or non-performance (or even clients and the securities loans are collateralized by
uncertainty concerning such default or non- cash or securities posted by such counterparties.
performance) by one or more financial institutions, or Typically, in the case of cash collateral, our clients
the financial services industry generally, have in the authorize us as their agent to invest the cash collateral
past led to market-wide liquidity problems and could in approved investments pursuant to each client’s
lead to losses or defaults by us or by other institutions investment guidelines and instructions. Such
(including our counterparties and/or clients) in the approved investments may include reverse repurchase
future. The consolidation and failures of financial transactions with repo counterparties. In many cases,
institutions during the 2008 financial crisis increased in the securities loans we enter into on behalf of our
the concentration of our client and counterparty risk. clients, we contractually agree to replace the client’s
loaned securities that the borrower failed to return
As a result of our membership in several industry due to certain defaults by the borrower, mainly the
clearing or settlement exchanges and central borrower’s insolvency. Therefore, in situations where
counterparty clearinghouses, we may be required to the market value of the loaned securities that the
BNY Mellon 93
borrower failed to return to a client (which loaned We are also subject to the risk that our rights against
securities we are obligated to replace and return to the third parties may not be enforceable in all
client) exceeds the amount of proceeds resulting from circumstances. In addition, deterioration in the credit
the liquidation of the client’s approved investments quality of third parties whose securities or obligations
and cash and non-cash collateral of such client, we we hold, including a deterioration in the value of
may be responsible for the shortfall amount necessary collateral posted by third parties to secure their
to purchase any replacement securities. In addition, obligations to us under derivatives contracts and other
in certain cases, we may also undertake the risk of agreements, could result in losses and/or adversely
loss in certain circumstances related to approved affect our ability to rehypothecate or otherwise use
investments that are reverse repurchase transactions those securities or obligations for liquidity purposes.
as described above. In these two scenarios, we, rather Disputes with clients and counterparties as to the
than our clients, are exposed to the risks of the valuation of collateral can significantly increase in
defaulting counterparty in the securities lending times of market stress and illiquidity. In addition,
transactions and, where applicable, in the reverse disruptions in the liquidity or transparency of the
repurchase transactions. For further discussion on financial markets may result in our inability to sell,
our securities lending indemnifications, see syndicate or realize the value of our positions,
“Commitments and contingent liabilities - Off- thereby leading to increased concentrations. An
balance sheet arrangements” in Note 21 of the Notes inability to reduce our positions may not only
to Consolidated Financial Statements. increase the market and credit risks associated with
such positions, but may also increase the level of
From time to time, we assume concentrated credit RWA on our balance sheet, thereby increasing our
risk at the individual obligor, counterparty or group capital requirements and funding costs, all of which
level, potentially exposing us to a single market or could adversely affect the operations and profitability
political event or a correlated set of events. For of our businesses.
example, we may be exposed to defaults by
companies located in countries with deteriorating Under evolving regulatory restrictions on credit
economic conditions or by companies in certain exposure, which include a broadening of the measure
industries. Such concentrations may be material. of credit exposure, we may be required to limit our
Our material counterparty exposures change daily, exposures to specific obligors or groups, including
and the counterparties or groups of related financial institutions, to levels that we may currently
counterparties to which our risk exposure is material exceed. These credit exposure restrictions under such
also vary during any reported period; however, our evolving regulations may adversely affect our
largest exposures tend to be to other financial businesses and may require us to modify our
institutions, clearing organizations, and governmental operating models or the policies and practices we use.
entities, both inside and outside the U.S.
Concentration of counterparty exposure presents Our business, financial condition and results of
significant risks to us and to our clients because the operations could be adversely affected if we do not
failure or perceived weakness of our counterparties effectively manage our liquidity.
(or in some cases of our clients’ counterparties) has
the potential to expose us to risk of financial loss. BNY Mellon’s operating model and overall strategy
Changes in market perception of the financial rely heavily on our access to financial market utilities
strength of particular financial institutions or and global capital markets. Without such access, it
sovereign issuers can occur rapidly, are often based would be difficult to process payments and settle and
on a variety of factors and are difficult to predict. clear transactions on behalf of our clients.
Deterioration in our liquidity position, whether actual
Although our overall business is subject to these or perceived, can impact our market access by
interdependencies, several of our businesses are affecting participants’ willingness to transact with us.
particularly sensitive to them, including our currency Changes to our liquidity can be caused by various
and other trading activities, our securities lending and factors, such as funding mismatches, market
securities finance businesses and our investment constraints disabling asset to cash conversion,
management business. If we experience any of the inability to issue debt, run-off of core deposits, and
losses described above, it may materially and contingent liquidity events such as additional
adversely affect our results of operations. collateral posting. Changes in economic conditions
94 BNY Mellon
or exposure to credit, market, operational, legal and manner that could have a negative impact on our
reputational risks can also affect our liquidity. capital ratios.
Our business is dependent in part on our ability to Under the U.S. capital rules, the size of the capital
meet our cash and collateral obligations at a surcharge that applies to U.S. G-SIBs is based in part
reasonable cost for both expected and unexpected on its reliance on short-term wholesale funding,
cash flows. We also must manage liquidity risks on including certain types of deposit funding, which may
an intraday basis, in a manner designed to ensure that increase the cost of such funding. Furthermore,
we can access required funds during the business day certain non-U.S. authorities, including the European
to make payments or settle immediate obligations, Commission, have proposed legislation or regulations
often in real time. We receive client deposits through requiring large banks to incorporate a separate
a variety of investment management and investment subsidiary in countries in which they operate, and to
servicing businesses and we rely on those deposits as maintain independent capital and liquidity at foreign
a low-cost and stable source of funding. Our ability subsidiaries. If adopted, these requirements could
to continue to receive those deposits, and other short- hinder our ability to efficiently manage our funding
term funding sources, is subject to variability based and liquidity in a centralized manner. There can be
on a number of factors, including volume and no assurances that these measures will be successful
volatility in the global securities markets, the relative in limiting BNY Mellon’s liquidity risk.
interest rates that we are prepared to pay for those
deposits, and the perception of the safety of those In addition, our cost of funding could be affected by
deposits or other short-term obligations relative to actions that we may take in order to satisfy applicable
alternative short-term investments available to our LCR and NSFR requirements, to lower our G-SIB
clients. We could lose deposits if we suffer a surcharge, to satisfy the amount of eligible long-term
significant decline in the level of our business debt outstanding under the TLAC Rule, to address
activity, our credit ratings are materially downgraded, obligations under our resolution plan or to satisfy
interest rates rise, or we are subject to significant regulatory requirements in non-U.S. jurisdictions
negative press or significant regulatory action or relating to the pre-positioning of liquidity in certain
litigation, among other reasons. If we were to lose a subsidiaries.
significant amount of deposits we may need to
replace such funding with more expensive funding If we are unable to raise funds using the methods
and/or reduce assets, which would reduce our net described above, we would likely need to finance or
interest revenue. liquidate unencumbered assets, such as our central
bank deposits and bank placements, or securities in
In addition, our access to the debt capital markets is a our investment portfolio to meet funding needs. We
significant source of liquidity. Events or may be unable to sell some of our assets, or we may
circumstances often outside of our control, such as have to sell assets at a discount from market value,
market disruptions, government fiscal and monetary either of which could adversely affect our financial
policies, or loss of confidence by securities condition and results of operations. Further, our
purchasers or counterparties in us or in the funds ability to sell assets may be impaired if other market
markets, could limit our access to capital markets, participants are seeking to sell similar assets at the
increase our cost of borrowing, adversely affect our same time, which could occur in a liquidity or other
liquidity, or impair our ability to execute our business market crisis. Additionally, if we experience cash
plan. In addition, clearing organizations, regulators, flow mismatches, deposit run-off or market
clients and financial institutions with which we constraints resulting from our inability to convert
interact may exercise the right to require additional assets to cash or access capital markets, our liquidity
collateral based on market perceptions or market could be severely impacted. During periods of
conditions, which could further impair our access to market uncertainty, our level of client deposits has in
and cost of funding. Market perception of sovereign recent years tended to increase; however, because
default risks can also lead to inefficient money these deposits have high potential run-off rates, we
markets and capital markets, which could further have historically deposited these so-called excess
impact BNY Mellon’s funding availability and cost. deposits with central banks and in other highly liquid
Conversely, if we experience excess liquidity inflows, and low-yielding instruments.
it could increase interest expense, limit our financial
flexibility, and increase the size of our total assets in a
BNY Mellon 95
If we are unable to continue to fund our assets anticipated in those estimates, which could materially
through deposits or access capital markets on affect our results of operations and financial
favorable terms or if we suffer an increase in our condition. See “Critical accounting estimates.”
borrowing costs or otherwise fail to manage our
liquidity effectively, our liquidity, net interest margin, Any material reduction in our credit ratings or the
financial results and condition may be materially credit ratings of our principal bank subsidiaries,
adversely affected. In certain cases, this could The Bank of New York Mellon or BNY Mellon,
require us to raise additional capital through the N.A., could increase the cost of funding and
issuance of preferred or common stock, which could borrowing to us and our rated subsidiaries and have
dilute the ownership of existing stockholders, and/or a material adverse effect on our results of
reduce our common stock dividend to preserve operations and financial condition and on the value
capital. of the securities we issue.
For a further discussion of our liquidity, see Our debt and preferred stock and the debt and
“Liquidity and dividends.” deposits of our principal bank subsidiaries, The Bank
of New York Mellon and BNY Mellon, N.A., are
We could incur losses if our allowance for credit currently rated investment grade by the major rating
losses, including loan and lending-related agencies. These rating agencies regularly evaluate us
commitments reserves, is inadequate. and our rated subsidiaries and their outlook on us and
our rated subsidiaries. Their credit ratings are based
When we loan money, commit to loan money or on a number of factors, including our financial
provide credit or enter into another contract with a strength, performance, prospects and operations as
counterparty, we incur credit risk, or the risk of loss if well as factors not entirely within our control,
our borrowers do not repay their loans or our including conditions affecting the financial services
counterparties fail to perform according to the terms industry generally as well as the U.S. government.
of their agreements. Our revenues and profitability Rating agencies employ different models and
are adversely affected when our borrowers default, in formulas to assess the financial strength of a rated
whole or in part, on their loan obligations to us or company, and from time to time rating agencies have,
when there is a significant deterioration in the credit in their discretion, altered these models. Changes to
quality of our loan portfolio. We reserve for potential rating agency models, general economic conditions,
future credit losses by recording a provision for credit or other circumstances outside of our control could
losses through a charge to earnings. The allowance impact a rating agency’s judgment of the rating or
for loan losses and allowance for lending-related outlook it assigns us or our rated subsidiaries. There
commitments represents management’s estimate of can be no assurance that we or our rated subsidiaries
probable losses inherent in our credit portfolio. We will maintain our respective credit ratings or outlook
use a quantitative methodology and qualitative on our securities.
framework for determining the allowance for loan
losses and the allowance for lending-related A material reduction in our credit ratings or the credit
commitments. Within this qualitative framework, ratings of our rated subsidiaries, which can occur at
management applies judgment when assessing any time without notice, could have a material
internal risk factors and environmental factors to adverse effect on our access to credit markets, the
compute an additional allowance for each component related cost of funding and borrowing, our credit
of the loan portfolio. As is the case with any such spreads, our liquidity and on certain trading revenues,
judgments, we could fail to identify these factors or particularly in those businesses where counterparty
accurately estimate their impact. We cannot provide creditworthiness is critical. In addition, in connection
any assurance as to whether charge-offs related to our with certain over-the-counter derivatives contracts
credit exposure may occur in the future. Current and and other trading agreements, counterparties may
future market and economic developments may require us or our rated subsidiaries to provide
increase default and delinquency rates and negatively additional collateral or to terminate these contracts
impact the quality of our credit portfolio, which may and agreements and collateral financing arrangements
impact our charge-offs. Although our current in the event of a credit ratings downgrade below
estimates contemplate current conditions and how we certain ratings levels. The requirement to provide
expect them to change in the future, it is reasonably additional collateral or terminate these contracts and
possible that actual conditions could be worse than agreements could impair our liquidity by requiring us
96 BNY Mellon
to find other sources of financing or to make introduction of new lines of business or new products
significant cash payments or securities movements. A or services and price and profitability targets may not
downgrade by any one rating agency, depending on be met. Furthermore, our revenues and costs may
the agency’s relative ratings of the firm at the time of fluctuate because new businesses or products and
the downgrade, may have an impact comparable to services generally require startup costs while
the impact of a downgrade by all rating agencies. If a revenues may take time to develop, which may
rating agency downgrade were to occur during adversely impact our results of operations.
broader market instability, our options for responding
to events may be more limited and more expensive. From time to time we undertake transformational or
An increase in the costs of our funding and strategic project initiatives. Significant effort and
borrowing, or an impairment of our liquidity, could resources are necessary to manage and oversee the
have a material adverse effect on our results of successful completion of these initiatives. These
operations and financial condition. A material initiatives often place significant demands on
reduction in our credit ratings also could decrease the management and a limited number of employees with
number of investors and counterparties willing or subject matter expertise and may involve significant
permitted to do business with or lend to us and costs to implement as well as increase operational
adversely affect the value of the securities we have risk as employees learn to process transactions under
issued or may issue in the future. new systems. The failure to properly execute on
these transformational or strategic initiatives could
We cannot predict what actions rating agencies may adversely impact our business, reputation and results
take, or what actions we may elect or be required to of operations.
take in response thereto, which may adversely affect
us. For further discussion on the impact of a credit Legal, regulatory and reputational risks may also
rating downgrade, see “Disclosure of contingent exist in connection with dealing with new products or
features in OTC derivative instruments” in Note 22 of markets, or clients and customers whose businesses
the Notes to Consolidated Financial Statements. focus on such products or markets, where there is
regulatory uncertainty or different or conflicting
Strategic Risk regulations depending on the regulator or the
jurisdiction.
New lines of business, new products and services or
transformational or strategic project initiatives may We are subject to competition in all aspects of our
subject us to additional risks, and the failure to business, which could negatively affect our ability to
implement these initiatives could affect our results maintain or increase our profitability.
of operations.
Many businesses in which we operate are intensely
From time to time, we may launch new lines of competitive around the world. Competitors include
business, offer new products and services within other banks, trading firms, broker-dealers, investment
existing lines of business or undertake banks, asset managers, insurance companies,
transformational or strategic projects. There are financial technology firms and a variety of other
substantial risks and uncertainties associated with financial services and advisory companies whose
these efforts. We invest significant time and products and services span the markets in which we
resources in developing and marketing new lines of operate. We compete on the basis of a number of
business, products and services and executing on our factors, including transaction execution, capital or
transformational and strategic initiatives. For access to capital, products and services, innovation,
example, we have devoted considerable resources to reputation, lending limits, rates and price. Larger and
developing new technology solutions for our clients. more geographically diverse companies, and financial
If these technology solutions are not successful, it technology firms that invest substantial resources in
could adversely impact our reputation, business and developing and designing new technology (in
results of operations. particular digital and mobile technology) and that are
not subject to the same level of regulation, may be
Regulatory requirements can affect whether able to offer financial products and services at more
initiatives are able to be brought to market in a competitive prices than we are able to offer. Pricing
manner that is timely and attractive to our customers. pressures, as a result of the willingness of competitors
Initial timetables for the development and to offer comparable or improved products or services
BNY Mellon 97
at a lower price, may result in a reduction in the price Our business may be adversely affected if we are
we can charge for our products and services, which unable to attract and retain employees.
could, and in some cases has, negatively affected our
ability to maintain or increase our profitability. Low Our success depends, in large part, on our ability to
economic growth may result in clients exiting attract new employees, retain and motivate our
markets, which could lead to a loss of business for us. existing employees, and continue to compensate our
employees competitively amid heightened regulatory
In addition, technological advances have made it restrictions. Competition for the most skilled
possible for other types of non-depository employees in most activities in which we engage can
institutions, such as financial technology firms, be intense, and we may not be able to recruit and
outsourcing companies and data processing retain key personnel.
companies, to offer a variety of products and services
competitive with certain areas of our business. In the We rely on certain employees with subject matter
future, financial technology firms may be able to expertise to assist in the implementation of important
provide additional traditional banking products and initiatives. As technology and risk management
services by obtaining a bank-like charter, such as the increase in focus in the financial industry,
OCC’s fintech charter. competition for technologists and risk personnel has
intensified, which could constrain our ability to
Markets, and the manner in which our clients interact execute on certain of our strategic initiatives.
and transact within markets, can evolve quickly,
particularly if new or disruptive technologies are Our ability to attract and retain key executives and
introduced. Our failure to either anticipate, or other employees may be negatively affected by recent
participate in, the transformational change within a legislation and other existing restrictions applicable to
given market could result in potential negative incentive and other compensation programs,
financial impact. Competitors may develop including limits on our ability to deduct for federal
technological advances that could negatively impact income tax purposes compensation in excess of $1
our transaction execution or the pricing of our million paid to certain current and former executives,
clearing, settlement, payments and trading activities. as well as deferral, clawback requirements and other
Increased competition in any of these areas may limits on incentive compensation. Some of these
require us to make additional capital investments in restrictions may not apply to some of our competitors
our businesses in order to remain competitive. For and to other institutions with which we compete for
example, along with other financial institutions, we talent, in particular as we are more often competing
are researching ways to adapt robotics and distributed for personnel with financial technology providers and
ledger technology to bank services. If we are not able other entities that are not regulated banking
to adapt these technologies as successfully as our organizations that may not have the same limitations
peers, we may become less competitive. In addition, on compensation as we do.
even if successful from a competitive standpoint, the
use and implementation of new and emerging The loss of employees’ skills, knowledge of the
technologies may increase the risk that we experience market, industry experience, and the cost of finding
cybersecurity or other information technology events. replacements may hurt our business. If we are unable
to continue to attract and retain highly qualified
Furthermore, recently implemented and proposed employees, our performance, including our
regulations may impact our ability to conduct certain competitive position, could be adversely affected.
of our businesses in a cost-effective manner or at all.
The more restrictive laws and regulations applicable
to the largest U.S. financial services institutions,
including the U.S. capital rules, can put us at a
competitive disadvantage relative to both our non-
U.S. competitors and certain U.S. competitors. See
“Supervision and Regulation.”
98 BNY Mellon
Our strategic transactions present risks and recognize goodwill on our consolidated balance
uncertainties and could have an adverse effect on sheet. Goodwill is an intangible asset that is not
our business, results of operations and financial eligible for inclusion in regulatory capital under
condition. applicable requirements. Further, if the value of the
acquisition declines, we may be required to record an
From time to time, to achieve our strategic objectives, impairment charge.
we have acquired, disposed of, or invested in
(including through joint venture relationships) Each disposition also poses challenges, including
companies and businesses, and may do so in the separating the disposed businesses, products and
future. Our ability to pursue or complete strategic systems in a way that is cost-effective and is not
transactions is in certain instances subject to disruptive to us or our customers. In addition, the
regulatory approval and we cannot be certain when or inherent uncertainty involved in the process of
if, or on what terms and conditions, any required evaluating, negotiating or executing a potential sale
regulatory approvals would be granted. Moreover, to of one of our companies or businesses may cause the
the extent we pursue a strategic transaction, there can loss of key clients, employees and business partners
be no guarantee that the transaction will close when which could have an adverse impact on our business,
anticipated, or at all. If a strategic transaction does financial condition and results of operations.
not close, or if the strategic transaction fails to
maximize shareholder value or required regulatory Joint ventures and non-controlling investments
approval is not obtained, it could have an adverse contain potentially increased financial, legal,
effect on our business, results of operations and reputational, operational, regulatory and/or
financial condition. compliance risks. We may be dependent on joint
venture partners, controlling shareholders or
Each acquisition poses integration challenges, management who may have business interests,
including successfully retaining and assimilating strategies or goals that are inconsistent with ours.
clients and key employees, capitalizing on certain Business decisions or other actions or omissions of
revenue synergies and integrating the acquired the joint venture partner, controlling shareholders or
company’s culture, control functions, systems and management may adversely affect the value of our
technology. In some cases, acquisitions involve entry investment, impacting our results of operations, result
into new businesses or new geographic or other in litigation or regulatory action against us and
markets, and these situations also present risks and otherwise damage our reputation and brand.
uncertainties in instances where we may be
inexperienced in these new areas. We may be Other Risks
required to spend a significant amount of time and
resources to integrate these acquisitions. The Tax law changes or challenges to our tax positions
anticipated integration benefits may take longer to with respect to historical transactions may adversely
achieve than projected and the time and cost needed affect our net income, effective tax rate and our
to consolidate control functions, platforms and overall results of operations and financial condition.
systems may significantly exceed our estimates. If
we fail to successfully integrate strategic acquisitions, In 2017, U.S. tax legislation was signed into law,
including doing so in a timely and cost-effective resulting in tax benefits to us. We continue to
manner, we may not realize the expected benefits, monitor the tax impacts of additional guidance
which could have an adverse impact on our business, provided by the Internal Revenue Service with
financial condition and results of operations. In respect to this and other tax laws. Future tax laws or
addition, we may incur expenses, costs, losses, the expiration of or changes in existing tax laws, or
penalties, taxes and other liabilities related to the the interpretation of those laws worldwide, could also
conduct of the acquired businesses prior to the date of have a material impact on our business or net income.
our ownership (including in connection with the Our actions taken in response to, or reliance upon,
defense and/or settlement of legal and regulatory such changes in the tax laws may impact our tax
claims, investigations and proceedings) which may position in a manner that may result in lower
not be recoverable through indemnification or earnings.
otherwise. If the purchase price we pay in an
acquisition exceeds the fair value of assets acquired In the course of our business, we receive inquiries
less the liabilities we assume, then we may need to and challenges from both U.S. and non-U.S. tax
BNY Mellon 99
authorities on the amount of taxes we owe. If we are actions, and we would not be permitted to make any
not successful in defending these inquiries and capital distributions other than those to which the
challenges, we may be required to adjust the timing Federal Reserve has indicated in writing its non-
or amount of taxable income or deductions or the objection. In addition, if there have been or will be
allocation of income among tax jurisdictions, all of changes in our risk profile (including a material
which can require a greater provision for taxes or change in business strategy or risk exposure),
otherwise negatively affect earnings. Probabilities financial condition or corporate structure, we may be
and outcomes are reviewed as events unfold, and required to resubmit our capital plan to the Federal
adjustments to the reserves are made when necessary, Reserve.
but the reserves may prove inadequate because we
cannot necessarily accurately predict the outcome of Our ability to accurately predict or explain the
any challenge, settlement or litigation or the extent to outcome of the CCAR process is influenced by
which it will negatively affect us or our business. See evolving supervisory criteria. The Federal Reserve’s
Note 11 of the Notes to Consolidated Financial annual assessment of our capital adequacy and
Statements for further information. planning process involves not only a quantitative
assessment through the Federal Reserve’s proprietary
Our ability to return capital to shareholders is stress test models but also a qualitative assessment.
subject to the discretion of our Board of Directors The qualitative assessment involves a number of
and may be limited by U.S. banking laws and factors and is expected to continue to evolve on an
regulations, including those governing capital and ongoing basis as a result of the Federal Reserve’s
the approval of our capital plan, applicable horizontal review of capital plan submissions.
provisions of Delaware law or our failure to pay full Similarly, the Federal Reserve may, as part of its
and timely dividends on our preferred stock. stated goal to continually evolve its annual stress
testing requirements, adjust several parameters of the
Holders of our common and preferred stock are only annual stress testing process, including the severity of
entitled to receive such dividends or other the stress test scenario and the addition of
distributions of capital as our Board of Directors may components deemed important by the Federal
declare out of funds legally available for such Reserve (e.g., a counterparty failure). Further,
payments. Although we have historically declared because the Federal Reserve’s proprietary stress test
cash dividends on our common and preferred stock, models and qualitative assessment may differ from
we are not required to do so. In addition to the Board the modeling techniques and capital planning
of Directors’ approval, our ability to take certain practices employed by us, it is foreseeable that our
actions, including our ability to make certain stress test results (using our own models, estimation
acquisitions, declare dividends or repurchase our methodologies and processes) may not be consistent
common stock, is dependent on, among other things, with those disclosed by the Federal Reserve. In
Federal Reserve non-objection under the annual addition, the Federal Reserve has proposed to replace
regulatory review of the results of the CCAR process the capital conservation buffer with a “stress capital
and the supervisory stress tests required under the buffer,” which would result in the integration of the
Dodd-Frank Act. These evaluations, in turn, are G-SIB surcharge with stress-based capital
dependent on, among other things, our successful requirements.
demonstration that we can maintain capital levels
above regulatory minimums in the event of a stressed The Federal Reserve’s instructions for the 2018
market environment, as well as the Federal Reserve’s CCAR provide that, for large BHCs like BNY
qualitative assessment of the robustness of our capital Mellon, common stock dividend payout ratios
adequacy process and the assumptions and analysis exceeding 30% of after-tax net income available to
underlying the capital plan. There can be no common shareholders under certain baseline
assurance that the Federal Reserve will not object to scenarios will receive particularly close scrutiny. A
our future capital plans or that we will perform failure to increase dividends along with our
adequately on our supervisory stress tests. If the competitors, or any reduction of, or elimination of,
Federal Reserve objects to our proposed capital our common stock dividend would likely adversely
actions or we underperform on our stress tests, we affect the market price of our common stock, impact
may be required to revise our stress-testing or capital our return on equity and market perceptions of BNY
management approaches, resubmit our capital plan or Mellon.
postpone, or cancel or alter our planned capital
100 BNY Mellon

Our ability to declare or pay dividends on, or preferred dividends to its stockholders, to the extent
purchase, redeem or otherwise acquire, shares of our declared by the Board of Directors.
common stock or any of our shares that rank junior to
preferred stock as to the payment of dividends and/or There are various limitations on the extent to which
the distribution of any assets on any liquidation, our bank and other subsidiaries can finance or
dissolution or winding-up of BNY Mellon will be otherwise supply funds to the Parent (by dividend or
prohibited, subject to certain exceptions, in the event otherwise) and certain of our affiliates. Each of these
that we do not declare and pay in full dividends for restrictions can reduce the amount of funds available
the then-current dividend period of our Series A to meet the Parent’s obligations. Many of our
preferred stock or the last preceding dividend period subsidiaries, including our bank subsidiaries, are
of our Series C, Series D, Series E or Series F subject to laws and regulations that restrict dividend
preferred stock. payments or authorize regulatory bodies to block or
reduce the flow of funds from those subsidiaries to
In addition, regulatory capital rules that are or will be the Parent or other subsidiaries. In addition, our bank
applicable to us including the U.S. capital rules risk- subsidiaries would not be permitted to distribute a
based capital requirements, the SLR, enhanced SLR, dividend if doing so would constitute an unsafe and
the TLAC Rule and the U.S. G-SIB surcharge may unsound practice or if the payment would reduce their
limit or otherwise restrict how we utilize our capital, capital to an inadequate level. Our subsidiaries may
including common stock dividends and stock also choose to restrict dividend payments to the
repurchases, and may require us to increase or alter Parent in order increase their own capital or liquidity
the mix of our outstanding regulatory capital levels. Our bank subsidiaries are also subject to
instruments. restrictions on their ability to lend to or transact with
non-bank affiliates, minimum regulatory capital and
Any requirement to increase our regulatory capital liquidity requirements, and restrictions on their ability
ratios or alter the composition of our capital could to use funds deposited with them in bank or
require us to liquidate assets or otherwise change our brokerage accounts to fund their businesses. See
business and/or investment plans, which may “Supervision and Regulation” and “Liquidity and
negatively affect our financial results. Further, any dividends” and Note 18 of the Notes to Consolidated
requirement to maintain higher levels of capital may Financial Statements. Further, we evaluate and
constrain our ability to return capital to shareholders manage liquidity on a legal entity basis, which may
either in the form of common stock dividends or place legal and other limitations on our ability to
stock repurchases. utilize liquidity from one legal entity to satisfy the
liquidity requirements of another, including the
The Parent is a non-operating holding company, Parent.
and as a result, is dependent on dividends from its
subsidiaries and extensions of credit from its IHC to There are also limitations specific to the IHC’s ability
meet its obligations, including with respect to its to make distributions or extend credit to the Parent.
securities, and to provide funds for share The IHC is not permitted to pay dividends to the
repurchases and payment of dividends to its Parent if certain key capital, liquidity and operational
stockholders. risk indicators are breached, and if the resolution of
the Parent is imminent, the committed lines of credit
The Parent is a non-operating holding company, provided by the IHC to the Parent will automatically
whose principal assets and sources of income are its terminate, with all outstanding amounts becoming
principal U.S. bank subsidiaries - The Bank of New due. See “The application of our Title I preferred
York Mellon and BNY Mellon, N.A. - and its other resolution strategy or resolution under the Title II
subsidiaries, including the IHC. The Parent is a legal orderly liquidation authority could adversely affect
entity separate and distinct from the IHC, as well as the Parent’s liquidity and financial condition and the
its banks and other subsidiaries. Therefore, the Parent’s security holders.”
Parent primarily relies on dividends, interest,
distributions, and other payments from its Because the Parent is a holding company, its rights
subsidiaries, including extensions of credit from the and the rights of its creditors, including the holders of
IHC, to meet its obligations, including its obligations its securities, to a share of the assets of any subsidiary
with respect to its securities, and to provide funds for upon the liquidation or recapitalization of the
share repurchases and payment of common and subsidiary will be subject to the prior claims of the
BNY Mellon 101

subsidiary’s creditors (including, in the case of our Additionally, our accounting policies and methods are
banking subsidiaries, their depositors) except to the fundamental to how we record and report our
extent that the Parent may itself be a creditor with financial condition and results of operations. The
recognized claims against the subsidiary. The rights preparation of financial statements in conformity with
of holders of securities issued by the Parent to benefit U.S. GAAP requires management to make estimates
from those distributions will also be junior to those based upon assumptions about future economic and
prior claims. Consequently, securities issued by the market conditions which affect reported amounts and
Parent will be effectively subordinated to all existing related disclosures in our financial statements.
and future liabilities of our subsidiaries. Amounts subject to estimates are items such as the
allowance for loan losses and lending-related
Changes in accounting standards governing the commitments, the fair value of financial instruments
preparation of our financial statements and future and derivatives, goodwill and other intangibles and
events could have a material impact on our reported litigation and regulatory contingencies. Among other
financial condition, results of operations, cash flows effects, such changes in estimates could result in
and other financial data. future impairments of, goodwill and intangible assets
and establishment of allowances for loan losses and
From time to time, the FASB, the SEC and bank lending-related commitments as well as litigation and
regulators change the financial accounting and regulatory contingencies. If subsequent events occur
reporting standards governing the preparation of our that are materially different than the assumptions and
financial statements or the interpretation of those estimates we used, our reported financial condition,
standards. These changes are difficult to predict and results of operation and cash flows may be materially
can materially impact how we record and report our negatively impacted. See “Recent Accounting
financial condition, results of operations, cash flows Developments” for a discussion of recent
and other financial data. In some cases, we may be developments to our accounting standards.
required to apply a new or revised standard
retrospectively or to apply an existing standard
differently, also retrospectively, in each case
potentially resulting in the restatement of our prior
period financial statements and our related
disclosures.
102 BNY Mellon

Recent Accounting Developments
Recently issued accounting standards statutory tax rate which was enacted by the U.S. tax
legislation. BNY Mellon adopted this guidance in the
The following ASUs issued by the Financial first quarter of 2019, which resulted in a $90 million
Accounting Standards Board (“FASB”) have not yet reclassification from accumulated other
been adopted. comprehensive income to retained earnings.
ASU 2016-02, Leases ASU 2016-13, Financial Instruments – Credit Losses:

Measurement of Credit Losses on Financial
In February 2016, the FASB issued an ASU, Leases. Instruments
The primary objective of this ASU is to increase
transparency and comparability by recognizing lease In June 2016, the FASB issued an ASU, Financial
assets and liabilities on the balance sheet and expand Instruments – Credit Losses: Measurement of Credit
related disclosures. This ASU requires a “right-of- Losses on Financial Instruments. This ASU
use” asset and a payment obligation liability on the introduces a new current expected credit losses
balance sheet for most leases and subleases. model, which will apply to financial assets subject to
Additionally, depending on the lease classification credit losses and measured at amortized cost,
under the standard, it may result in different expense including held-to-maturity securities and certain off-
recognition patterns and classification than under balance sheet credit exposures. The guidance will
existing accounting principles. For leases classified also change current practice for the impairment
as finance leases, it will result in higher expense model for available-for-sale debt securities. The
recognition in the earlier periods and lower expense available-for-sale debt securities model will require
in the later periods of the lease. the use of an allowance to record estimated credit
losses and subsequent recoveries.
The Company adopted this guidance on Jan. 1, 2019
using the alternative transition method, which allows The standard requires a cumulative effect of initial
the adoption of the accounting standard prospectively application to be recognized in retained earnings at
without adjusting comparative prior period financial the date of initial application. BNY Mellon has
information. We recognized right-of-use assets of developed expected credit loss models and
$1.3 billion and lease liabilities of $1.5 billion on the approaches that include forecasting and other
consolidated balance sheet, both based on the present methodologies, and our focus for the remainder of
value of the expected remaining lease payments. 2019 is on model validation as well as business
process refinements and testing to ensure the
ASU 2018-02, Income Statement—Reporting expected credit losses are calculated in accordance
Comprehensive Income: Reclassification of Certain with the standard. We are continuing to assess the
Tax Effects from Accumulated Other Comprehensive impact of the standard on our consolidated financial
Income statements, disclosures and internal control. The
adoption impact will depend on several factors
In February 2018, the FASB issued an ASU, Income including the composition and remaining expected
Statement—Reporting Comprehensive Income: lives of financial instruments at the time of adoption,
Reclassification of Certain Tax Effects from the establishment of an allowance for expected credit
Accumulated Other Comprehensive Income. This losses on held-to-maturity securities, and the
ASU permits a reclassification from accumulated macroeconomic conditions and forecasts that exist at
other comprehensive income to retained earnings for that date. We plan to adopt the new standard on Jan.
the tax effects of items within accumulated other 1, 2020.
comprehensive income that do not reflect the lower
BNY Mellon 103

Business Continuity
Business continuity and operational resiliency are

priorities for the Company. Core elements of our
business continuity and operational resiliency
strategies include advance planning, maintaining
multiple data centers, testing our capabilities,
maintaining diversity of business operations and
telecommunications infrastructure, and reviewing the
business continuity and information security
capabilities of our service providers. These
capabilities are intended to enable the Company to
maintain its operations and appropriately respond to
events that could damage our physical facilities,
cause delays or disruptions to operational functions
(including telecommunications networks), or impair
the ability of our employees to work, of our vendors
to provide services to us, or of our clients and
counterparties to communicate and transact with us.
Those events include information security incidents,
technology disruptions, acts of terrorism, natural
disasters, pandemics and global conflicts.
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.
104 BNY Mellon

Supplemental Information (unaudited)
Explanation of GAAP and Non-GAAP currency basis permits investors to assess the
financial measures significance of changes in foreign currency exchange
rates. Growth rates on a constant currency basis were
BNY Mellon has included in this Annual Report determined by applying the current period foreign
certain Non-GAAP financial measures on a tangible currency exchange rates to the prior period revenue.
basis, as a supplement to generally accepted BNY Mellon believes that this presentation, as a
accounting principles (“GAAP”) information. supplement to GAAP information, gives investors a
Tangible common shareholders’ equity excludes clearer picture of the related revenue results without
goodwill and intangible assets, net of deferred tax the variability caused by fluctuations in foreign
liabilities. BNY Mellon believes that the return on currency exchange rates.
tangible common equity measure is an additional
useful measure for investors because it presents a BNY Mellon has presented the operating margin for
measure of those assets that can generate income. the Investment Management business net of
BNY Mellon has provided a measure of tangible book distribution and servicing expense that was passed to
value per common share, which it believes provides third parties who distribute or service our managed
additional useful information as to the level of funds. BNY Mellon believes that this measure is
tangible assets in relation to shares of common stock useful when evaluating the performance of the
outstanding. Investment Management business relative to industry
competitors.
The presentation of the growth rates of investment
management and performance fees on a constant
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

Net income applicable to common shareholders of The Bank of New York
Mellon Corporation – GAAP $ 4,097 $ 3,915 $ 3,425 $ 3,053 $ 2,494
Add: Amortization of intangible assets 180 209 237 261 298
Less: Tax impact of amortization of intangible assets 42 72 81 89 104
Adjusted net income applicable to common shareholders of The Bank of
New York Mellon Corporation, excluding amortization of intangible assets
– Non-GAAP $ 4,235 $ 4,052 $ 3,581 $ 3,225 $ 2,688
Average common shareholders’ equity $ 37,818 $ 36,145 $ 35,504 $ 35,564 $ 36,618

Less: Average goodwill 17,458 17,441 17,497 17,731 18,063
Average intangible assets 3,314 3,508 3,737 3,992 4,305
Add: Deferred tax liability – tax deductible goodwill (a) 1,072 1,034 1,497 1,401 1,340
Deferred tax liability – intangible assets (a) 692 718 1,105 1,148 1,216
Average tangible common shareholders’ equity – Non-GAAP $ 18,810 $ 16,948 $ 16,872 $ 16,390 $ 16,806
Return on common shareholders’ equity – GAAP 10.8% 10.8% 9.6% 8.6 % 6.8%
Return on tangible common shareholders’ equity – Non-GAAP 22.5% 23.9% 21.2% 19.7 % 16.0%
(a) Deferred tax liabilities are based on fully phased-in U.S. capital rules.
BNY Mellon 105

Supplemental Information (unaudited) (continued)
The following table presents the reconciliation of book value and tangible book value per common share.
Book value and tangible book value per common share reconciliation Dec. 31,
(dollars in millions, unless otherwise noted) 2018 2017 2016 2015 2014
BNY Mellon shareholders’ equity at year end – GAAP $ 40,638 $ 41,251 $ 38,811 $ 38,037 $ 37,441
Less: Preferred stock 3,542 3,542 3,542 2,552 1,562
BNY Mellon common shareholders’ equity at year end – GAAP 37,096 37,709 35,269 35,485 35,879
Less: Goodwill 17,350 17,564 17,316 17,618 17,869
Intangible assets 3,220 3,411 3,598 3,842 4,127
Add: Deferred tax liability – tax deductible goodwill (a) 1,072 1,034 1,497 1,401 1,340
Deferred tax liability – intangible assets (a) 692 718 1,105 1,148 1,216
BNY Mellon tangible common shareholders’ equity at year
end – Non-GAAP $ 18,290 $ 18,486 $ 16,957 $ 16,574 $ 16,439
Year-end common shares outstanding (in thousands) 960,426 1,013,442 1,047,488 1,085,343 1,118,228
Book value per common share – GAAP $ 38.63 $ 37.21 $ 33.67 $ 32.69 $ 32.09
Tangible book value per common share – Non-GAAP $ 19.04 $ 18.24 $ 16.19 $ 15.27 $ 14.70
(a) Deferred tax liabilities are based on fully phased-in U.S. capital rules.
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 2018 vs.

Investment management and performance fees $ 3,685 $ 3,584 3%
Impact of changes in foreign currency exchange rates — 34
Adjusted investment management and performance fees – Non-GAAP $ 3,685 $ 3,618 2%
The following table presents the impact of changes in foreign currency exchange rates on investment management
and performance fees reported in the Investment Management business.
Constant currency reconciliation - Investment Management business 2018 vs.

Investment management and performance fees $ 3,632 $ 3,522 3%
Impact of changes in foreign currency exchange rates — 34
Adjusted investment management and performance fees – Non-GAAP $ 3,632 $ 3,556 2%
The following table presents the reconciliation of the pre-tax operating margin for the Investment Management
business.
Pre-tax operating margin reconciliation - Investment Management business

Income before income taxes – GAAP $ 1,263 $ 1,141 $ 967
Total revenue – GAAP $ 4,084 $ 3,997 $ 3,751

Less: Distribution and servicing expense 407 422 404
Adjusted total revenue, net of distribution and servicing expense – Non-GAAP $ 3,677 $ 3,575 $ 3,347
Pre-tax operating margin – GAAP (a) 31% 29% 26%

Adjusted pre-tax operating margin, net of distribution and servicing expense – Non-GAAP (a) 34% 32% 29%
(a) Income before taxes divided by total revenue.
106 BNY Mellon

Supplemental Information (unaudited) (continued)
Rate/volume analysis
Rate/volume analysis (a) 2018 over (under) 2017 2017 over (under) 2016
Due to change in Due to change in
Average Average Net Average Average Net
(dollar amounts in millions, presented on an FTE basis) balance rate change balance rate change
Interest revenue
Interest-bearing deposits with banks (primarily foreign banks) $ (1) $ 100 $ 99 $ 1 $ 15 $ 16
Interest-bearing deposits with the Federal Reserve and other central banks (9) 221 212 (28) 149 121
Federal funds sold and securities purchased under resale agreements 11 682 693 14 176 190
Margin loans (2) 169 167 (62) 140 78
Non-margin loans:
Domestic offices:
Consumer 8 13 21 33 6 39
Commercial (29) 209 180 (17) 121 104
Foreign offices (25) 103 78 (4) 65 61
Total non-margin loans (46) 325 279 12 192 204
Securities:
U.S. government obligations (31) 92 61 9 38 47
U.S. government agency obligations 76 247 323 71 138 209
State and political subdivisions - tax exempt (19) (12) (31) (15) 5 (10)
Other securities:
Domestic offices (25) 151 126 (62) 67 5
Foreign offices 3 26 29 (11) (45) (56)
Total other securities (22) 177 155 (73) 22 (51)
Trading securities (primarily domestic) 60 5 65 (1) — (1)
Total securities 64 509 573 (9) 203 194
Total interest revenue $ 17 $ 2,006 $ 2,023 $ (72) $ 875 $ 803
Interest expense
Domestic offices $ 35 $ 395 $ 430 $ (1) $ 67 $ 66
Foreign offices — 285 285 3 77 80
Total interest-bearing deposits 35 680 715 2 144 146
Federal funds purchased and securities sold under repurchase agreements (56) 589 533 17 172 189
Trading liabilities — 22 22 4 (3) 1
Domestic offices 24 10 34 20 (3) 17
Foreign offices (2) — (2) — 1 1
Total other borrowed funds 22 10 32 20 (2) 18
Commercial paper — 22 22 8 16 24
Payables to customers and broker-dealers (10) 137 127 2 50 52
Long-term debt 18 278 296 69 138 207
Total interest expense $ 9 $ 1,738 $ 1,747 $ 122 $ 515 $ 637
Changes in net interest revenue $ 8 $ 268 $ 276 $ (194) $ 360 $ 166
(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.
BNY Mellon 107

Selected Quarterly Data (unaudited)
Selected Quarterly Data Quarter ended

(dollar amounts in millions, 2018 2017
except per share amounts) Dec. 31 Sept. 30 June 30 March 31 Dec. 31 Sept. 30 June 30 March 31
Consolidated income statement
Fee and other revenue $ 3,146 $ 3,168 $ 3,210 $ 3,270 $ 2,860 $ 3,167 $ 3,120 $ 3,018
(Loss) income from consolidated investment
management funds (24) 10 12 (11) 17 10 10 33
Net interest revenue 885 891 916 919 851 839 826 792
Total revenue 4,007 4,069 4,138 4,178 3,728 4,016 3,956 3,843
Provision for credit losses — (3) (3) (5) (6) (6) (7) (5)
Noninterest expense 2,987 2,738 2,747 2,739 3,006 2,654 2,655 2,642
Income before taxes 1,020 1,334 1,394 1,444 728 1,368 1,308 1,206
Provision (benefit) for income taxes 150 220 286 282 (453) 348 332 269
Net income 870 1,114 1,108 1,162 1,181 1,020 976 937
Net loss (income) attributable to noncontrolling
interests 11 (3) (5) 9 (6) (2) (1) (15)
Net income applicable to shareholders of The
Bank of New York Mellon Corporation 881 1,111 1,103 1,171 1,175 1,018 975 922
Preferred stock dividends (49) (36) (48) (36) (49) (35) (49) (42)
Net income applicable to common shareholders
of The Bank of New York Mellon Corporation $ 832 $ 1,075 $ 1,055 $ 1,135 $ 1,126 $ 983 $ 926 $ 880
Basic earnings per common share $ 0.84 $ 1.07 $ 1.04 $ 1.11 $ 1.09 $ 0.94 $ 0.88 $ 0.83
Diluted earnings per common share 0.84 1.06 1.03 1.10 1.08 0.94 0.88 0.83
Average balances
Interest-bearing deposits with banks $ 78,582 $ 75,907 $ 85,424 $ 92,918 $ 89,029 $ 86,329 $ 84,148 $ 80,757
Securities 118,904 118,505 117,761 118,459 120,225 119,089 117,227 114,786
Trading securities 5,543 4,261 3,784 4,183 2,723 2,359 2,455 2,254
Loans 53,834 53,807 57,066 58,606 56,772 55,944 58,793 60,312
Total interest-earning assets 285,706 279,218 292,086 302,069 297,166 291,841 289,496 283,421
Total assets 338,591 332,341 346,328 358,175 350,786 345,709 342,515 336,200
Deposits 220,635 209,313 217,567 226,709 216,874 212,658 216,222 213,375
Long-term debt 28,201 28,074 28,349 28,407 28,245 28,138 27,398 25,882
Preferred stock 3,542 3,542 3,542 3,542 3,542 3,542 3,542 3,542
Total The Bank of New York Mellon Corporation
common shareholders’ equity 37,886 38,036 37,750 37,593 36,952 36,780 35,862 34,965
Net interest margin 1.24% 1.27% 1.26% 1.22% 1.14% 1.15% 1.14% 1.13%
Annualized return on common equity 8.7% 11.2% 11.2% 12.2% 12.1% 10.6% 10.4% 10.2%
Pre-tax operating margin 25% 33% 34% 35% 20% 34% 33% 31%
Common stock data (a)
Closing price per share $ 47.07 $ 50.99 $ 53.93 $ 51.53 $ 53.86 $ 53.02 $ 51.02 $ 47.23
Cash dividends per share 0.28 0.28 0.24 0.24 0.24 0.24 0.19 0.19
Market capitalization (b) 45,207 50,418 53,927 52,080 54,584 54,294 52,712 49,113
(a) At Dec. 31, 2018, there were 27,805 shareholders registered with our stock transfer agent, compared with 29,472 at Dec. 31, 2017 and 28,015 at Dec. 31,
2016. In addition, there were 45,395 of BNY Mellon’s current and former employees at Dec. 31, 2018 who participate in BNY Mellon’s 401(k) Retirement
Savings Plan. All shares of BNY Mellon’s common stock held by the Plan for its participants are registered in the name of The Bank of New York Mellon,
as trustee.
(b) At period end.
108 BNY Mellon

Forward-looking Statements
Some statements in this document are forward- • our business may be materially adversely affected
looking. These include all statements about the by operational risk;
usefulness of Non-GAAP measures, the future results • our risk management framework may not be
of BNY Mellon, our businesses, financial, liquidity effective in mitigating risk and reducing the
and capital condition, results of operations, liquidity, potential for losses;
risk and capital management and processes, goals, • we are subject to extensive government
strategies, outlook, objectives, expectations rulemaking, regulation and supervision; these
(including those regarding our performance results, rules and regulations have, and in the future may,
expenses, nonperforming assets, seasonality in our compel us to change how we manage our
businesses, impacts of currency fluctuations, impacts businesses, which could have a material adverse
of trends on our businesses, regulatory, technology, effect on our business, financial condition and
market, economic or accounting developments, legal results of operations; in addition, these rules and
proceedings and other contingencies), effective tax regulations have increased our compliance and
rate, estimates (including those regarding expenses, operational risk and costs;
losses inherent in our credit portfolios, capital ratios • regulatory or enforcement actions or litigation
and the tax benefit related to U.S. tax legislation), could materially adversely affect our results of
intentions (including those regarding our capital operations or harm our businesses or reputation;
returns and investment in technology), targets, • our businesses may be negatively affected by
opportunities, growth and initiatives. adverse events, publicity, government scrutiny or
other reputational harm;
In this report, any other report, any press release or • failure to satisfy regulatory standards, including
any written or oral statement that BNY Mellon or its “well capitalized” and “well managed” status or
executives may make, words, such as “estimate,” capital adequacy and liquidity rules more
“forecast,” “project,” “anticipate,” “likely,” “target,” generally, could result in limitations on our
“expect,” “intend,” “continue,” “seek,” “believe,” activities and adversely affect our business and
“plan,” “goal,” “could,” “should,” “would,” “may,” financial condition;
“might,” “will,” “strategy,” “synergies,” • a failure or circumvention of our controls and
“opportunities,” “trends,” “future” and words of procedures could have a material adverse effect
similar meaning, may signify forward-looking on our business, reputation, results of operations
statements. and financial condition;
• the application of our Title I preferred resolution
Actual results may differ materially from those strategy or resolution under the Title II orderly
expressed or implied as a result of a number of liquidation authority could adversely affect the
factors, including those discussed in “Risk Factors,” Parent’s liquidity and financial condition and the
such as: Parent’s security holders;
• if our resolution plan is determined not to be
• a communications or technology disruption or credible or not to facilitate an orderly resolution
failure that results in a loss of information, delays under the U.S. Bankruptcy Code, our business,
our ability to access information or impacts our reputation, results of operations and financial
ability to provide services to our clients may condition could be materially negatively
materially adversely affect our business, financial impacted;
condition and results of operations; • acts of terrorism, impacts from climate change,
• a cybersecurity incident, or a failure to protect natural disasters, pandemics, global conflicts and
our computer systems, networks and information other geopolitical events may have a negative
and our clients’ information against cybersecurity impact on our business and operations;
threats, could result in the theft, loss, • we are dependent on fee-based business for a
unauthorized access to, disclosure, use or substantial majority of our revenue and our fee-
alteration of information, system or network based revenues could be adversely affected by
failures, or loss of access to information; any slowing in market activity, weak financial
such incident or failure could adversely impact markets, underperformance and/or negative
our ability to conduct our businesses, damage our trends in savings rates or in investment
reputation and cause losses; preferences;
BNY Mellon 109

Forward-looking Statements (continued)
• weakness and volatility in financial markets and • we are subject to competition in all aspects of our
the economy generally may materially adversely business, which could negatively affect our
affect our business, results of operations and ability to maintain or increase our profitability;
financial condition; • our business may be adversely affected if we are
• transitions away from, or changes in the unable to attract and retain employees;
calculation of, LIBOR and other benchmark rates • our strategic transactions present risks and
could adversely impact our business and results uncertainties and could have an adverse effect on
of operations; our business, results of operations and financial
• the United Kingdom’s referendum decision to condition;
leave the EU has had and may continue to have • tax law changes or challenges to our tax positions
negative effects on global economic conditions, with respect to historical transactions may
global financial markets, and our business and adversely affect our net income, effective tax rate
results of operations; and our overall results of operations and financial
• changes in interest rates and yield curves could condition;
have a material adverse effect on our • our ability to return capital to shareholders is
profitability; subject to the discretion of our Board of Directors
• we may experience write-downs of securities that and may be limited by U.S. banking laws and
we own and other losses related to volatile and regulations, including those governing capital and
illiquid market conditions, reducing our earnings the approval of our capital plan, applicable
and impacting our financial condition; provisions of Delaware law or our failure to pay
• our FX revenue may be adversely affected by full and timely dividends on our preferred stock;
decreases in market volatility and the cross- • the Parent is a non-operating holding company,
border investment activity of our clients; and as a result, is dependent on dividends from its
• the failure or perceived weakness of any of our subsidiaries and extensions of credit from its IHC
significant counterparties, many of whom are to meet its obligations, including with respect to
major financial institutions and sovereign entities, its securities, and to provide funds for share
and our assumption of credit and counterparty repurchases and payment of dividends to its
risk, could expose us to loss and adversely affect stockholders; and
our business; • changes in accounting standards governing the
• our business, financial condition and results of preparation of our financial statements and future
operations could be adversely affected if we do events could have a material impact on our
not effectively manage our liquidity; reported financial condition, results of operations,
• we could incur losses if our allowance for credit cash flows and other financial data.
losses, including loan and lending-related
commitments reserves, is inadequate; Investors should consider all risk factors discussed in
• any material reduction in our credit ratings or the our 2018 Annual Report and any subsequent reports
credit ratings of our principal bank subsidiaries, filed with the SEC by BNY Mellon pursuant to the
The Bank of New York Mellon or BNY Mellon, Securities Exchange Act of 1934, as amended (the
N.A., could increase the cost of funding and “Exchange Act”). All forward-looking statements
borrowing to us and our rated subsidiaries and speak only as of the date on which such statements
have a material adverse effect on our results of are made, and BNY Mellon undertakes no obligation
operations and financial condition and on the to update any statement to reflect events or
value of the securities we issue; circumstances after the date on which such forward-
• new lines of business, new products and services looking statement is made or to reflect the occurrence
or transformational or strategic project initiatives of unanticipated events. The contents of BNY
may subject us to additional risks, and the failure Mellon’s website or any other websites referenced
to implement these initiatives could affect our herein are not part of this report.
results of operations;
110 BNY Mellon

Acronyms
ABS Asset-backed security LCR Liquidity coverage ratio

APAC Asia-Pacific region LIBOR London Interbank Offered Rate
ASC Accounting Standards Codification LTD External eligible long-term debt
ASU Accounting Standards Update M&I Merger and integration
AUC/A Assets under custody and/or administration MBS Mortgage-backed security
AUM Assets under management MMF Money market funds
BCBS Basel Committee on Banking Supervision N/A Not applicable or Not available
BHCs Bank holding companies NAV Net asset value
bps basis points N/M Not meaningful
CCAR Comprehensive Capital Analysis and Review NSFR Net stable funding ratio
CDs Certificates of deposit NYSE New York Stock Exchange
CET1 Common Equity Tier 1 capital OCC Office of the Comptroller of the Currency
CFTC Commodity Futures Trading Commission OCI Other comprehensive income
CLO Collateralized loan obligation OTC Over-the-counter
CVA Credit valuation adjustment OTTI Other-than-temporary impairment
DVA Debit valuation adjustment PRA Prudential Regulation Authority
EMEA Europe, the Middle East and Africa PSUs Performance share units
ERISA Employee Retirement Income Security Act of REIT Real estate investment trust
1974 RMBS Residential mortgage-backed security
ESOP Employee Stock Ownership Plan RSUs Restricted stock units
EVE Economic value of equity RWAs Risk-weighted assets
FASB Financial Accounting Standards Board S&P Standard & Poor’s
FCA Financial Conduct Authority SBIC Small business investment company
FDIC Federal Deposit Insurance Corporation SBLC Standby letters of credit
FHC Financial holding company SEC Securities and Exchange Commission
FINRA Financial Industry Regulatory Authority, Inc. SIFIs Systemically important financial institutions
FTE Fully taxable equivalent SLR Supplementary Leverage Ratio
FX Foreign exchange TDR Troubled debt restructuring
GAAP Generally accepted accounting principles TLAC Total loss-absorbing capacity
G-SIBs Global systemically important banks VaR Value-at-risk
HQLA High-quality liquid assets VIE Variable interest entity
IDI Insured depository institution VME Voting model entity
IHC Intermediate holding company
BNY Mellon 111

Glossary
Accumulated benefit obligation - The actuarial Collective trust fund - An investment fund formed
present value of benefits (vested and non-vested) from the pooling of investments by investors.
attributed to employee services rendered.
Common Equity Tier 1 capital (“CET1”) - The
Alternative investments - Usually refers to sum of surplus (net of treasury stock), retained
investments in hedge funds, leveraged loans, earnings, accumulated other comprehensive income
subordinated and distressed debt, real estate and (loss), and common equity Tier 1 minority interest
foreign currency overlay. Examples of alternative subject to certain limitations, minus certain regulatory
investment strategies are: long-short equity, event- adjustments and deductions.
driven, statistical arbitrage, fixed-income arbitrage,
convertible arbitrage, short bias, global macro and Counterparty risk (default risk) - The risk that a
equity market neutral. counterparty will not pay as obligated on a contract,
trade or transaction.
Asset-backed security (“ABS”) - A financial
security backed by a loan, lease or receivables against Credit derivatives - Contractual agreements that
assets other than real estate and mortgage-backed provide insurance against a credit event of one or
securities. more referenced credits. Such events include
bankruptcy, insolvency and failure to meet payment
Assets under custody and/or administration obligations when due.
(“AUC/A”) - Assets that we hold directly or
indirectly on behalf of clients under a safekeeping or Credit risk - The risk of loss due to borrower or
custody arrangement or for which we provide counterparty default.
administrative services for clients. The following
types of assets under administration are not and Credit valuation adjustment (“CVA”) - The market
historically have not been included in AUC/A: value of counterparty credit risk on OTC derivative
performance and risk analytics, transfer agency and transactions.
asset aggregation services. To the extent that we
provide more than one AUC/A service for a client’s Currency swaps - An agreement to exchange
assets, the value of the asset is only counted once in stipulated amounts of one currency for another
the total amount of AUC/A. currency.
Assets under management (“AUM”) - Includes Debit valuation adjustment (“DVA”) - The market
assets beneficially owned by our clients or customers value of our credit risk on OTC derivative
which we hold in various capacities that are either transactions.
actively or passively managed, as well as the value of
hedges supporting customer liabilities. These assets Depositary Receipts - A negotiable security that
and liabilities are not on our balance sheet. generally represents a non-U.S. company’s publicly
traded equity.
Book value per share - The per share value of a
company based on common shareholders’ equity. Derivative - A contract or agreement whose value is
derived from changes in interest rates, foreign
CAMELS - An international bank-rating system exchange rates, prices of securities or commodities,
where bank supervisory authorities rate institutions credit worthiness for credit default swaps or financial
according to six factors. The six factors are Capital or commodity indices.
adequacy, Asset quality, Management quality,
Earnings, Liquidity and Sensitivity to Market Risk. Earnings allocated to participating securities -
Amount of undistributed earnings, after payment of
Collateral management - A comprehensive program taxes, preferred stock dividends and the required
designed to simplify collateralization and expedite adjustment for common stock dividends declared,
securities transfers for buyers and sellers. that is allocated to securities that are eligible to
receive a portion of the Company’s earnings.
Collateralized loan obligation (“CLO”) - A debt
security backed by a pool of commercial loans.
112 BNY Mellon

Glossary (continued)
Economic capital - The amount of capital required to Fully taxable equivalent (“FTE”) - Basis for
absorb potential losses and reflects the probability of comparison of yields on assets having ordinary
remaining solvent with a target debt rating over a taxability with assets for which special tax
one-year time horizon. exemptions apply. The FTE adjustment reflects an
increase in the interest yield or return on a tax-exempt
Economic value of equity (“EVE”) - An asset to a level that would be comparable had the
aggregation of discounted future cash flows of assets asset been fully taxable.
and liabilities over a long-term horizon.
Generally accepted accounting principles
Eurozone - Formed by European Union Member (“GAAP”) - Accounting rules and conventions
States whose currency is the euro (€) and in which a defining acceptable practices in preparing financial
single monetary policy is conducted under the statements in the U.S. The FASB is the primary
responsibility of the Governing Council of the source of accounting rules.
European Central Bank. The Eurozone currently
includes Germany, France, Belgium, the Netherlands, Global systemically important bank (“G-SIB”) - A
Luxembourg, Austria, Finland, Italy, Ireland, Spain, financial institution whose distress or disorderly
Portugal, Greece, Estonia, Cyprus, Malta, Slovenia, failure, because of its size, complexity and systemic
Slovakia, Latvia and Lithuania. interconnectedness, would cause significant
disruption to the wider financial system and
Fiduciary risk - The risk arising from our role as economic activity.
trustee, executor, investment agent or guardian in
accordance with governing documents, prudent Grantor Trust - A legal, passive entity through
person principles and applicable laws, rules and which pass-through securities are sold to investors.
regulations.
Hedge fund - A fund which is allowed to use diverse
Fixed Income Clearing Corporation (“FICC”) - strategies that are unavailable to mutual funds,
An agency that deals with the confirmation, including selling short, leverage, program trading,
settlement and delivery of fixed-income assets in the swaps, arbitrage and derivatives.
U.S. The agency ensures the systematic and efficient
settlement of U.S. government securities and High-quality liquid assets (“HQLA”) -
mortgage-backed security transactions in the market. Unencumbered assets of the types identified in the
U.S. LCR rule, which the U.S. banking agencies
Foreign currency options - Similar to interest rate describe as able to be convertible into cash with little
options except they are based on foreign exchange or no expected loss of value during a period of
rates. Also, see interest rate options in this glossary. liquidity stress.
Foreign currency swaps - An agreement to exchange Impairment - When an asset’s market value is less
stipulated amounts of one currency for another than its carrying value.
currency at one or more future dates.
Interest rate options - Contracts to modify interest
Foreign exchange contracts - Contracts that provide rate risk in exchange for the payment of a premium
for the future receipt or delivery of foreign currency when the contract is initiated. As a writer of interest
at previously agreed-upon terms. rate options, we receive a premium in exchange for
bearing the risk of unfavorable changes in interest
Forward rate agreements - Contracts to exchange rates. Conversely, as a purchaser of an option, we
payments on a specified future date, based on a pay a premium for the right, but not the obligation, to
market change in interest rates from trade date to buy or sell a financial instrument or currency at
contract settlement date. predetermined terms in the future.
BNY Mellon 113

Interest rate sensitivity - The exposure of net Performance fees - Fees received by an investment
interest revenue to interest rate movements. advisor based upon the fund’s performance for the
period relative to various predetermined benchmarks.
Interest rate swaps - Contracts in which a series of
interest rate flows in a single currency are exchanged Pre-tax operating margin - Income before taxes for
over a prescribed period. Interest rate swaps are the a period divided by total revenue for that period.
most common type of derivative contract that we use
in our asset/liability management activities. Private equity/venture capital - Investment in start-
up companies or those in the early processes of
Investment grade - Represents Moody’s long-term developing products and services with perceived,
rating of Baa3 or better; and/or a Standard & Poor’s, long-term growth potential.
Fitch or DBRS long-term rating of BBB- or better; or
if unrated, an equivalent rating using our internal risk Projected benefit obligation - The actuarial present
ratings. Instruments that fall below these levels are value of all benefits accrued on employee service
considered to be non-investment grade. rendered prior to the calculation date, including
allowance for future salary increases if the pension
Joint venture - A company or entity owned and benefit is based on future compensation levels.
operated by a group of companies for a specific
business purpose, no one of which has a majority Rating agency - An independent agency that assesses
interest. the credit quality and likelihood of default of an issue
or issuer and assigns a rating to that issue or issuer.
Liquidity coverage ratio (“LCR”) - A Basel III
framework requirement for banks and BHCs to Real estate investment trust (“REIT”) - An
measure liquidity. It is designed to ensure that certain investor-owned corporation, trust or association that
banking organizations, including BNY Mellon, sells shares to investors and invests in income-
maintain a minimum amount of unencumbered producing property.
HQLA sufficient to withstand the net cash outflow
under a hypothetical standardized acute liquidity Repurchase agreement (“Repo”) - An instrument
stress scenario for a 30-day time horizon. used to raise short-term funds whereby securities are
sold with an agreement for the seller to buy back the
Litigation risk - Arises when, in the ordinary course securities at a later date.
of business, we are named as defendants or made
parties to legal actions. Reputational risk - Arises when events or actions
that negatively impact our reputation lead to a loss of
Master netting agreement - An agreement between existing clients and could make it more challenging to
two counterparties that have multiple contracts with acquire new business.
each other that provides for the net settlement of all
contracts through a single payment in the event of Residential mortgage-backed security (“RMBS”) -
default or termination of any one contract. An asset-backed security whose cash flows are
backed by principal and interest payments of a set of
Mortgage-backed security (“MBS”) - An asset- residential mortgage loans.
backed security whose cash flows are backed by the
principal and interest payments of a set of mortgage Restricted cash and/or securities - Cash and/or
loans. securities that are segregated under federal and other
regulatory requirements and consists of excess client
Net interest margin - The result of dividing net funds held by our broker-dealer entities.
interest revenue by average interest-earning assets.
Return on average assets - Net income applicable to
Other-than-temporary impairment (“OTTI”) - An common shareholders divided by average assets.
impairment charge taken on a security whose fair
value has fallen below the carrying value on the Return on common equity - Net income applicable
balance sheet and its value is not expected to recover to common shareholders divided by average common
through the holding period of the security. shareholders’ equity.
114 BNY Mellon

Return on tangible common equity - Net income Tangible common shareholders’ equity - Common
applicable to common shareholders, excluding equity less goodwill and intangible assets adjusted for
amortization of intangible assets, divided by average deferred tax liabilities associated with non-tax
tangible common shareholders’ equity. deductible intangible assets and tax deductible
goodwill.
Reverse repurchase agreement - The purchase of
securities with the agreement to sell them at a higher Tier 1 leverage ratio - Tier 1 capital divided by
price at a specific future date. quarterly average total assets, as defined by the
regulators.
Securities lending transaction - A fully
collateralized transaction in which the owner of a Unfunded commitments - Legally binding
security agrees to lend the security typically through agreements to provide a defined level of financing
an agent (such as The Bank of New York Mellon) to a until a specified future date.
borrower, usually a broker-dealer or bank, on an
open, overnight or term basis, under the terms of a Value-at-risk (“VaR”) - A measure of the dollar
prearranged contract. amount of potential loss in value due to adverse
market movements over a defined time horizon with a
Sub-custodian - A local provider (e.g., a bank) specified confidence level.
contracted to provide specific custodial-related
services in a selected country or geographic area. Variable interest entity (“VIE”) - An entity that:
(1) lacks enough equity investment at risk to permit
Supplementary Leverage Ratio (“SLR”) - An the entity to finance its activities without additional
Advanced Approach banking organization’s Basel III financial support from other parties; (2) has equity
SLR is the simple arithmetic mean of the ratio of its owners that lack the right to make significant
Tier 1 capital to total leverage exposure (which is decisions affecting the entity’s operations; and/or (3)
broadly defined to capture both on- and off-balance has equity owners that do not have an obligation to
sheet exposures). absorb, or the right to receive, the entity’s losses or
returns.
Tangible book value per share - Amount per share
that common shareholders can expect to receive if the
company goes bankrupt and all of its tangible assets
are liquidated at their book value.
BNY Mellon 115

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,
2018. 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, 2018, 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 2018
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 appears on page 117.
116 BNY Mellon

Report of Independent Registered Public Accounting Firm
To the Stockholders 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, 2018, based on criteria established in Internal Control - Integrated
Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our
opinion, BNY Mellon maintained, in all material respects, effective internal control over financial reporting as of
December 31, 2018, based on criteria established in Internal Control - Integrated Framework (2013) issued by the
Committee of Sponsoring Organizations of the Treadway Commission.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States) (PCAOB), the consolidated balance sheets of BNY Mellon as of December 31, 2018 and 2017, the related
consolidated statements of income, comprehensive income, changes in equity, and cash flows for each of the years
in the three-year period ended December 31, 2018, and the related notes (collectively, the consolidated financial
statements), and our report dated February 27, 2019 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 a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. A company’s internal control over financial reporting
includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable
assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that receipts and expenditures of the 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.
BNY Mellon 117

Report of Independent Registered Public Accounting Firm (continued)
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may
become inadequate because of changes in conditions, or that the degree of compliance with the policies or
procedures may deteriorate.
New York, New York

February 27, 2019
118 BNY Mellon

Consolidated Income Statement
Year ended Dec. 31,

(in millions) 2018 2017 2016
Fee and other revenue
Asset servicing $ 4,608 $ 4,383 $ 4,244
Clearing services 1,578 1,553 1,404
Issuer services 1,099 977 1,026
Treasury services 554 557 547
Total investment services fees 7,839 7,470 7,221
Investment management and performance fees 3,685 3,584 3,350
Foreign exchange and other trading revenue 732 668 701
Financing-related fees 207 216 219
Distribution and servicing 139 160 166
Investment and other income 240 64 341
Total fee revenue 12,842 12,162 11,998
Net securities (losses) gains — including other-than-temporary impairment (47) 6 79
Noncredit-related portion of other-than-temporary impairment (recognized in other comprehensive income) 1 3 4
Net securities (losses) gains (48) 3 75
Total fee and other revenue 12,794 12,165 12,073
Operations of consolidated investment management funds
Investment (loss) income (12) 74 35
Interest of investment management fund note holders 1 4 9
(Loss) income from consolidated investment management funds (13) 70 26
Net interest revenue
Interest revenue 6,432 4,382 3,575
Interest expense 2,821 1,074 437
Net interest revenue 3,611 3,308 3,138
Total revenue 16,392 15,543 15,237
Noninterest expense
Staff (a) 6,145 6,033 5,809
Professional, legal and other purchased services 1,334 1,276 1,186
Software 772 744 647
Net occupancy 630 570 592
Sub-custodian and clearing (b) 450 414 400
Distribution and servicing 406 419 405
Furniture and equipment 290 241 247
Business development 228 229 245
Bank assessment charges 170 220 219
Amortization of intangible assets 180 209 237
Other (a)(b)(c) 606 602 536
Total noninterest expense 11,211 10,957 10,523
Income
Income before income taxes 5,192 4,610 4,725
Provision for income taxes 938 496 1,177
Net income 4,254 4,114 3,548
Net loss (income) attributable to noncontrolling interests (includes $12, $(33) and $(10) related to
consolidated investment management funds, respectively) 12 (24) (1)
Net income applicable to shareholders of The Bank of New York Mellon Corporation 4,266 4,090 3,547
Preferred stock dividends (169) (175) (122)
Net income applicable to common shareholders of The Bank of New York Mellon Corporation $ 4,097 $ 3,915 $ 3,425
(a) In 2018, we adopted new accounting guidance included in ASU 2017-07, Compensation-Retirement Benefits: Improving the Presentation of Net
Periodic Pension Cost and Net Periodic Postretirement Benefit Cost, which required the reclassification of the components of pension and other
postretirement costs, other than the service cost component. As a result, staff expense increased and other expense decreased. Prior periods
have been reclassified. See Note 2 of the Notes to Consolidated Financial Statements for additional information.
(b) Beginning in 2018, clearing expense, which was previously included in other expense, was included with sub-custodian expense. Prior periods
have been reclassified.
(c) Beginning in 2018, M&I, litigation and restructuring charges are no longer separately disclosed. Expenses previously reported in this line have
been reclassified to existing expense categories, primarily other expense.
BNY Mellon 119

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 Year ended Dec. 31,
(in millions) 2018 2017 2016
Net income applicable to common shareholders of The Bank of New York Mellon Corporation $ 4,097 $ 3,915 $ 3,425
Less: Earnings allocated to participating securities 27 43 52
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 $ 4,070 $ 3,872 $ 3,373
Average common shares and equivalents outstanding of The Bank of New York Mellon Corporation Year ended Dec. 31,
(in thousands) 2018 2017 2016
Basic 1,002,922 1,034,281 1,066,286
Common stock equivalents 6,801 13,030 15,672
Less: Participating securities (2,582) (7,021) (9,945)
Diluted 1,007,141 1,040,290 1,072,013
Anti-dilutive securities (a) 6,804 12,383 31,695
Earnings per share applicable to common shareholders of The Bank of New York Mellon Corporation Year ended Dec. 31,
(in dollars) 2018 2017 2016
Basic $ 4.06 $ 3.74 $ 3.16
Diluted $ 4.04 $ 3.72 $ 3.15
(a) Represents stock options, restricted stock, restricted stock units and participating securities outstanding but not included in the computation of
diluted average common shares because their effect would be anti-dilutive.
See accompanying Notes to Consolidated Financial Statements.
120 BNY Mellon

Consolidated Comprehensive Income Statement
Year ended Dec. 31,

(in millions) 2018 2017 2016
Net income $ 4,254 $ 4,114 $ 3,548
Other comprehensive income, net of tax:
Foreign currency translation adjustments (313) 853 (850)
Unrealized (loss) gain on assets available-for-sale:
Unrealized (loss) gain arising during the period (416) 153 (242)
Reclassification adjustment 36 (3) (49)
Total unrealized (loss) gain on assets available-for-sale (380) 150 (291)
Defined benefit plans:
Net (loss) gain arising during the period (189) 342 (108)
Foreign exchange adjustment — 1 —
Amortization of prior service credit, net loss and initial obligation included in net periodic
benefit cost 69 68 57
Total defined benefit plans (120) 411 (51)
Net unrealized (loss) gain on cash flow hedges (10) 9 (4)
Total other comprehensive (loss) income, net of tax (a) (823) 1,423 (1,196)
Total comprehensive income 3,431 5,537 2,352
Net loss (income) attributable to noncontrolling interests 12 (24) (1)
Other comprehensive loss (income) attributable to noncontrolling interests 11 (15) 31
Comprehensive income applicable to shareholders of The Bank of New York Mellon
Corporation $ 3,454 $ 5,498 $ 2,382
(a) Other comprehensive (loss) income attributable to The Bank of New York Mellon Corporation shareholders was $(812) million for the
year ended Dec. 31, 2018, $1,408 million for the year ended Dec. 31, 2017 and $(1,165) million for the year ended Dec. 31, 2016.
BNY Mellon 121

Consolidated Balance Sheet
Dec. 31,
(dollars in millions, except per share amounts) 2018 2017
Assets
Cash and due from:
Banks $ 5,864 $ 5,382
Interest-bearing deposits with the Federal Reserve and other central banks 67,988 91,510
Interest-bearing deposits with banks ($2,394 and $1,751 is restricted) 14,148 11,979
Federal funds sold and securities purchased under resale agreements 46,795 28,135
Securities:
Held-to-maturity (fair value of $33,302 and $40,512) 33,982 40,827
Available-for-sale 85,809 79,543
Total securities 119,791 120,370
Trading assets 7,035 6,022
Loans 56,564 61,540
Allowance for loan losses (146) (159)
Net loans 56,418 61,381
Premises and equipment 1,832 1,634
Accrued interest receivable 671 610
Goodwill 17,350 17,564
Intangible assets 3,220 3,411
Other assets (includes $742 and $791, at fair value) 21,298 23,029
Subtotal assets of operations 362,410 371,027
Assets of consolidated investment management funds, at fair value 463 731
Total assets $ 362,873 $ 371,758
Liabilities
Deposits:
Noninterest-bearing (principally U.S. offices) $ 70,783 $ 82,716
Interest-bearing deposits in U.S. offices 74,904 52,294
Interest-bearing deposits in non-U.S. offices 93,091 109,312
Total deposits 238,778 244,322
Federal funds purchased and securities sold under repurchase agreements 14,243 15,163
Trading liabilities 3,479 3,984
Payables to customers and broker-dealers 19,731 20,184
Commercial paper 1,939 3,075
Other borrowed funds 3,227 3,028
Accrued taxes and other expenses 5,669 6,225
Other liabilities (including allowance for lending-related commitments of $106 and $102, also includes $88
and $800, at fair value) 5,774 6,050
Long-term debt (includes $371 and $367, at fair value) 29,163 27,979
Subtotal liabilities of operations 322,003 330,010
Liabilities of consolidated investment management funds, at fair value 2 2
Temporary equity
Redeemable noncontrolling interests 129 179
Permanent equity
Preferred stock – par value $0.01 per share; authorized 100,000,000 shares; issued 35,826 and 35,826 shares 3,542 3,542
Common stock – par value $0.01 per share; authorized 3,500,000,000 shares; issued 1,364,877,915 and
1,354,163,581 shares 14 14
Additional paid-in capital 27,118 26,665
Retained earnings 28,652 25,635
Accumulated other comprehensive loss, net of tax (3,171) (2,357)
Less: Treasury stock of 404,452,246 and 340,721,136 common shares, at cost (15,517) (12,248)
Total The Bank of New York Mellon Corporation shareholders’ equity 40,638 41,251
Nonredeemable noncontrolling interests of consolidated investment management funds 101 316
Total permanent equity 40,739 41,567
Total liabilities, temporary equity and permanent equity $ 362,873 $ 371,758
122 BNY Mellon

Consolidated Statement of Cash Flows
Year ended Dec. 31,

(in millions) 2018 2017 2016
Operating activities
Net income $ 4,254 $ 4,114 $ 3,548
Net loss (income) attributable to noncontrolling interests 12 (24) (1)
Net income applicable to shareholders of The Bank of New York Mellon Corporation 4,266 4,090 3,547
Adjustments to reconcile net income to net cash provided by operating activities:
Pension plan contributions (55) (114) (108)
Depreciation and amortization 1,339 1,474 1,502
Deferred tax (benefit) expense (525) 133 (126)
Net securities losses (gains) 48 (3) (75)
Change in trading assets and liabilities (574) (694) 1,522
Originations of loans held-for-sale — — (350)
Proceeds from the sales of loans originated for sale — — 831
Change in accruals and other, net (a) 1,508 (195) (465)
Net cash provided by operating activities (a) 5,996 4,667 6,267
Investing activities
Change in interest-bearing deposits with banks (a) (2,011) 2,199 (1,225)
Change in interest-bearing deposits with the Federal Reserve and other central banks 21,954 (29,613) 53,347
Purchases of securities held-to-maturity (5,055) (8,329) (6,673)
Paydowns of securities held-to-maturity 4,346 4,448 4,907
Maturities of securities held-to-maturity 6,317 3,992 3,738
Purchases of securities available-for-sale (32,404) (26,151) (27,470)
Sales of securities available-for-sale 8,247 6,001 7,580
Paydowns of securities available-for-sale 7,716 9,129 8,826
Maturities of securities available-for-sale 9,063 6,319 11,347
Net change in loans 4,620 2,794 (1,483)
Sales of loans and other real estate 263 392 173
Change in federal funds sold and securities purchased under resale agreements (a) (18,662) (2,334) (1,407)
Net change in seed capital investments 59 (124) (114)
Purchases of premises and equipment/capitalized software (1,108) (1,197) (825)
Proceeds from the sale of premises and equipment 23 — 65
Acquisitions, net of cash — — (42)
Dispositions, net of cash 84 — 1
Other, net (a) (153) (231) (461)
Net cash provided by (used for) investing activities (a) 3,299 (32,705) 50,284
Financing activities
Change in deposits (2,874) 17,069 (54,738)
Change in federal funds purchased and securities sold under repurchase agreements (920) 5,174 (5,013)
Change in payables to customers and broker-dealers (433) (813) (911)
Change in other borrowed funds 164 1,852 225
Change in commercial paper (1,136) 3,075 —
Net proceeds from the issuance of long-term debt 5,143 4,738 6,229
Repayments of long-term debt (3,650) (1,046) (2,953)
Proceeds from the exercise of stock options 80 431 438
Issuance of common stock 40 34 27
Issuance of preferred stock — — 990
Treasury stock acquired (3,269) (2,686) (2,398)
Common cash dividends paid (1,052) (901) (778)
Preferred cash dividends paid (169) (175) (122)
Other, net (22) 26 (46)
Net cash (used for) provided by financing activities (8,098) 26,778 (59,050)
Effect of exchange rate changes on cash (72) 189 (114)
Change in cash and due from banks and restricted cash (a)
Change in cash and due from banks and restricted cash 1,125 (1,071) (2,613)
Cash and due from banks and restricted cash at beginning of period 7,133 8,204 10,817
Cash and due from banks and restricted cash at end of period $ 8,258 $ 7,133 $ 8,204
Cash and due from banks and restricted cash: (a)
Cash and due from banks at end of period (unrestricted cash) $ 5,864 $ 5,382 $ 4,822
Restricted cash at end of period 2,394 1,751 3,382
Cash and due from banks and restricted cash at end of period $ 8,258 $ 7,133 $ 8,204
Supplemental disclosures
Interest paid $ 2,711 $ 1,033 $ 406
Income taxes paid 983 498 1,010
Income taxes refunded 175 20 307
(a) Reflects the impact of adopting new accounting guidance included in ASU 2016-15 and ASU 2016-18. Prior periods have been restated. See Note 2 of
the Notes to Consolidated Financial Statements for additional information.
BNY Mellon 123

Consolidated Statement of Changes in Equity
The Bank of New York Mellon Corporation shareholders Non-redeemable

noncontrolling Redeemable
Accumulated interests of non-
other consolidated controlling
Additional comprehensive investment Total interests/
(in millions, except per Preferred Common paid-in Retained (loss), net Treasury management permanent temporary
share amount) stock stock capital earnings of tax stock funds equity equity
Balance at Dec. 31, 2017 $ 3,542 $ 14 $ 26,665 $ 25,635 $ (2,357) $(12,248) $ 316 $ 41,567 (a) $ 179
Adjustment for the cumulative
effect of applying ASU
2014-09 for contract revenue — — — (55) — — — (55) —
Adjustment for the cumulative
effect of applying ASU
2017-12 for derivatives and
hedging — — — 27 (2) — — 25 —
Adjusted balance at Jan. 1,
2018 3,542 14 26,665 25,607 (2,359) (12,248) 316 41,537 179
Shares issued to shareholders of
noncontrolling interests — — — — — — — — 61
Redemption of subsidiary shares
from noncontrolling interests — — — — — — — — (92)
Other net changes in
noncontrolling interests — — 12 — — — (203) (191) (8)
Net income (loss) — — — 4,266 — — (12) 4,254 —
Other comprehensive (loss) — — — — (812) — — (812) (11)
Dividends:
Common stock at $1.04 per
share — — — (1,052) — — — (1,052) —
Preferred stock — — — (169) — — — (169) —
Repurchase of common stock — — — — — (3,269) — (3,269) —
Common stock issued under:
Employee benefit plans — — 31 — — — — 31 —
Direct stock purchase and
dividend reinvestment plan — — 30 — — — — 30 —
Stock awards and options
exercised — — 380 — — — — 380 —
Balance at Dec. 31, 2018 $ 3,542 $ 14 $ 27,118 $ 28,652 $ (3,171) $(15,517) $ 101 $ 40,739 (a) $ 129
(a) Includes total The Bank of New York Mellon Corporation common shareholders’ equity of $37,709 million at Dec. 31, 2017 and $37,096 million at Dec.
31, 2018.
124 BNY Mellon

Consolidated Statement of Changes in Equity (continued)

(in millions, except per Preferred Common paid-in Retained (loss) income, Treasury management permanent temporary
share amount) stock stock capital earnings net of tax stock funds equity equity
Balance at Dec. 31, 2016 $ 3,542 $ 13 $ 25,962 $ 22,621 $ (3,765) $ (9,562) $ 618 $ 39,429 (a) $ 151
noncontrolling interests — — (35) — — — (335) (370) 36
Net income (loss) — — — 4,090 — — 33 4,123 (9)
Other comprehensive income — — — — 1,408 — — 1,408 15
Dividends:
share — — — (901) — — — (901) —
Preferred stock — — — (175) — — — (175) —
exercised — 1 684 — — — — 685 —
Balance at Dec. 31, 2017 $ 3,542 $ 14 $ 26,665 $ 25,635 $ (2,357) $(12,248) $ 316 $ 41,567 (a) $ 179
31, 2017.

(in millions, except per Preferred Common paid-in Retained (loss) income, Treasury management permanent temporary
share amounts) stock stock capital earnings net of tax stock funds equity equity
Balance at Dec. 31, 2015 $ 2,552 $ 13 $ 25,262 $ 19,974 $ (2,600) $ (7,164) $ 738 $ 38,775 (a) $ 200
noncontrolling interests — — (24) — — — (130) (154) 38
Net income (loss) — — — 3,547 — — 10 3,557 (9)
Other comprehensive (loss) — — — — (1,165) — — (1,165) (31)
Dividends:
share — — — (778) — — — (778) —
Preferred stock — — — (122) — — — (122) —
Preferred stock issued 990 — — — — — — 990 —
exercised — — 676 — — — — 676 —
Balance at Dec. 31, 2016 $ 3,542 $ 13 $ 25,962 $ 22,621 $ (3,765) $ (9,562) $ 618 $ 39,429 (a) $ 151
31, 2016.
See accompanying unaudited Notes to Consolidated Financial Statements.
BNY Mellon 125

Notes to Consolidated Financial Statements
Note 1–Summary of significant accounting Use of estimates

and reporting policies
The preparation of financial statements in conformity
Nature of operations with U.S. GAAP requires management to make
estimates based upon assumptions about future
BNY Mellon is a global leader in providing a broad economic and market conditions which affect
range of financial products and services in domestic reported amounts and related disclosures in our
and international markets. Through our two principal financial statements. Although our current estimates
businesses, Investment Management and Investment contemplate current conditions and how we expect
Services, we serve the following major classes of them to change in the future, it is reasonably possible
customers - institutions, corporations and high net that actual conditions could be worse than anticipated
worth individuals. For institutions and corporations, in those estimates, which could materially affect our
we provide the following services: results of operations and financial condition.
Amounts subject to estimates are items such as
• investment management; allowance for loan losses and lending-related
• custody; commitments, fair value of financial instruments and
• foreign exchange; derivatives, goodwill and other intangibles and
• fund services; litigation and regulatory contingencies. Among other
• broker-dealer services; effects, such changes in estimates could result in
• securities finance; future impairments of investment securities, goodwill
• collateral and liquidity services; and intangible assets and establishment of allowances
• clearing services; for loan losses and lending-related commitments as
• depositary receipts; well as accruals for litigation and regulatory
• corporate trust; contingencies.
• global payments;
• trade finance; and Changes in accounting
• cash management.
See Note 2 for the new accounting standards adopted
For individuals, we provide mutual funds, separate in 2018.
accounts, wealth management and private banking
services. BNY Mellon’s investment management Effective Oct. 1, 2016, we changed the accounting
businesses provide investment products in many asset method for the amortization of premiums and
classes and investment styles on a global basis. accretion of discounts on mortgage-backed securities
from the prepayment method (also referred to as the
Basis of presentation retrospective method) to the contractual method,
which are both acceptable methods under ASC 310,
The accounting and financial reporting policies of Receivables. The calculation performed under the
BNY Mellon, a global financial services company, prepayment method was based on estimating
conform to U.S. GAAP and prevailing industry principal prepayment assumptions, principally driven
practices. by interest rates, and estimating the remaining lives
of securities. This method resulted in retrospective
In the opinion of management, all adjustments adjustments each period to reflect changes in those
necessary for a fair presentation of financial position, estimates as if the updated estimated lives had been
results of operations and cash flows for the periods applied since the acquisition of the securities. Under
presented have been made. Certain immaterial the contractual method, no assumption is made
reclassifications have been made to prior periods to concerning prepayments. As principal prepayments
place them on a basis comparable with current period occur, a portion of the unamortized premium or
presentation. discount is recorded in interest revenue such that the
effective yield of a security remains constant
throughout the life of the security.
126 BNY Mellon

Notes to Consolidated Financial Statements (continued)
We have determined that the contractual method is investment services fees, investment management and
the preferable method of accounting as it is more performance fees or investment and other income, as
aligned with our approach to asset/liability appropriate, in the period earned.
management, it reduces reliance on complex
estimates and judgments, and it is consistent with the A loss in value of an equity investment that is
method predominantly used by our peers. The impact determined to be other-than-temporary is recognized
of this change was not considered material to prior by reducing the carrying value of the equity
periods and, as a result, the cumulative effect of the investment down to its fair value.
change of approximately $15 million was reflected as
a positive adjustment to net interest revenue in the Renewable energy investment projects through
fourth quarter of 2016. We estimate that net interest limited liability companies are accounted for using
revenue for 2016 would have been higher had we the equity method of accounting. The hypothetical
continued to use the prepayment method, but have liquidation at book value (“HLBV”) methodology is
not specifically quantified the impact subsequent to used to determine the loss that is recognized in each
the effective date, as the estimated amortization is quarter. HLBV estimates the liquidation value at the
also immaterial. beginning and end of each quarter, with the difference
recognized as the amount of loss under the equity
Parent financial statements method.
The Parent financial statements in Note 18 include The pre-tax losses are reported in investment and
the accounts of the Parent; those of a wholly owned other income section of the income statement. The
financing subsidiary that functions as a financing corresponding tax benefits and credits are recorded as
entity for BNY Mellon and its subsidiaries; and a reduction to provision for income taxes on the
MIPA, LLC, a single-member limited liability income statement. The pre-tax losses, tax benefits
company, created to hold and administer corporate- and credits are included in our projected annual
owned life insurance. Financial data for the Parent, effective tax rate.
the financing subsidiary and the single-member
limited liability company are combined for financial See Note 7 for the amount of our renewable energy
reporting purposes because of the limited function of investments. Below are our most significant equity
these entities and the unconditional guarantee by method investments, other than the investments in
BNY Mellon of their obligations. renewable energy.
Acquired businesses
Equity method investments at Dec. 31, 2018
Percentage
The income statement and balance sheet include (dollars in millions) ownership Book value
results of acquired businesses accounted for under the CIBC Mellon 50.0% $ 548
acquisition method of accounting pursuant to ASC Siguler Guff 20.0% $ 244
805, Business Combinations and equity investments
from the dates of acquisition. Contingent purchase
consideration was measured at its fair value and Variable interest and voting model entities
recorded on the purchase date. Any subsequent
changes in the fair value of a contingent consideration We evaluate an entity for possible consolidation in
liability are recorded through the income statement. accordance with ASC 810, Consolidation. We first
determine whether or not we have variable interests
Equity method investments, including renewable in the entity, which are investments or other interests
energy investments that absorb portions of an entity’s expected losses or
receive portions of the entity’s expected returns. Our
The consolidated financial statements include the variable interests may include decision-maker or
accounts of BNY Mellon and its subsidiaries. Equity service provider fees, direct and indirect investments
investments of less than a majority but at least 20% and investments made by related parties, including
ownership are accounted for by the equity method related parties under common control. If it is
and classified as other assets. Earnings on these determined that we do not have a variable interest in
investments are reflected in fee and other revenue as
BNY Mellon 127

the entity, no further analysis is required and the Restricted cash and securities
entity is not consolidated.
Cash and securities may be segregated under federal
If we hold a variable interest in the entity, further and other regulatory requirements and consists of
analysis is performed to determine if the entity is a excess client funds held by our broker-dealer entities.
VIE or a voting model entity (“VME”). Restricted cash is included in interest-bearing
deposits with banks on the consolidated balance sheet
We consider the underlying facts and circumstances and with cash and due from banks when reconciling
of individual entities when assessing whether or not the beginning and end-of-period balances on the
an entity is a VIE. An entity is determined to be a consolidated statement of cash flows.
VIE if the equity investors:
Securities purchased under resale agreements and
• do not have sufficient equity at risk for the entity securities sold under repurchase agreements
to finance its activities without additional
subordinated financial support; or Securities purchased under resale agreements and
• lack one or more of the following characteristics securities sold under repurchase agreements are
of a controlling financial interest: accounted for as collateralized financings. Generally,
these agreements are recorded at the amounts at
• the power, through voting rights or similar
which the securities will be subsequently resold or
rights, to direct the activities of an entity that
repurchased, plus accrued interest.
most significantly impact the entity’s
economic performance;
Securities purchased under resale agreements are
• the obligation to absorb the expected losses fully collateralized with high-quality liquid securities.
of the entity; and Collateral requirements are monitored and additional
• the right to receive the expected residual collateral is received or provided, as required. As
returns of the entity. such, these transactions carry minimal credit risk and
are not allocated an allowance for credit losses.
We reconsider and reassess whether or not we are the
primary beneficiary of a VIE when governing Where an enforceable netting agreement exists, resale
documents or contractual arrangements are changed and repurchase agreements executed with the same
that would reallocate the obligation to absorb counterparty and the same maturity date are reported
expected losses or receive expected residual returns on a net basis.
between BNY Mellon and the other investors. This
could occur when BNY Mellon disposes of its Available-for-sale securities and held-to-maturity
variable interests in the fund, when additional securities and trading securities
variable interests are issued to other investors or
when we acquire additional variable interests in the Securities are classified as trading, available-for-sale
VIE. or held-to-maturity securities when they are
purchased. Securities are classified as available-for-
We consolidate a VIE if it is determined that we have sale securities when we intend to hold the securities
a controlling financial interest in the entity. We have for an indefinite period of time or when the securities
a controlling financial interest in a VIE when we have may be used for tactical asset/liability purposes and
both (1) the power to direct the activities of the VIE may be sold from time to time to effectively manage
that most significantly impact the VIE’s economic interest rate exposure, prepayment risk and liquidity
performance and (2) the obligation to absorb losses or needs. Securities are classified as held-to-maturity
the right to receive benefits of the VIE that could securities when we intend and have the ability to hold
potentially be significant to that VIE. them until maturity. Securities are classified as
trading securities when our intention is to resell the
For entities that do not meet the definition of a VIE, securities.
the entity is considered a VME. We consolidate these
entities if we can exert control over the financial and Trading securities are measured at fair value and
operating policies of an investee, which can occur if included in trading assets on the balance sheet.
we have a 50% or more voting interest in the entity. Trading revenue includes both realized and unrealized
128 BNY Mellon

gains and losses. The liability incurred on short-sale When we do not intend to sell the security and it is
transactions, representing the obligation to deliver more likely than not that we will not be required to
securities, is included in trading liabilities at fair sell the security prior to recovery of its cost basis, the
value. credit component of an OTTI of a debt security is
recognized in earnings and the non-credit component
Available-for-sale securities are measured at fair is recognized in OCI.
value. The difference between fair value and
amortized cost representing unrealized gains or losses The determination of whether a credit loss exists is
on assets classified as available-for-sale, are recorded based on the best estimate of the present value of cash
net of tax as an addition to or deduction from OCI, flows to be collected from the debt security.
unless a security is deemed to have other-than- Generally, cash flows are discounted at the effective
temporary impairment (“OTTI”). Gains and losses interest rate implicit in the debt security at the time of
on sales of available-for-sale securities are reported in acquisition. For debt securities that are beneficial
the income statement. The cost of debt and equity interests in securitized financial assets and are not
securities sold is determined on a specific high credit quality, ASC 325, Investments - Other,
identification and average cost method, respectively. provides that cash flows be discounted at the current
Held-to-maturity securities are measured at amortized yield used to accrete the beneficial interest.
cost.
If we intend to sell the security or it is more likely
Income on securities purchased is adjusted for than not that we will be required to sell the security
amortization of premium and accretion of discount on prior to recovery of its cost basis, the non-credit
a level yield basis, generally over their contractual component of OTTI is recognized in earnings and
life. subsequently accreted to interest income on an
effective yield basis over the life of the security.
We routinely conduct periodic reviews to identify and
evaluate each security to determine whether OTTI For held-to-maturity debt securities, the amount of
has occurred. We examine various factors when OTTI recorded in OCI for the non-credit portion of a
determining whether an impairment, representing the previous OTTI is amortized prospectively, as an
fair value of a security being below its amortized increase to the carrying amount of the security, over
cost, is other-than-temporary. The following are the remaining life of the security on the basis of the
examples of factors that we consider: timing of future estimated cash flows of the
securities.
• The length of time and the extent to which the
fair value has been less than the amortized cost The accounting policy for the determination of the
basis; fair value of financial instruments has been identified
• Whether management has an intent to sell the as a “critical accounting estimate” as it requires us to
security; make numerous assumptions based on available
market data. See Note 4 for these disclosures.
• Whether the decline in fair value is attributable to
specific conditions, such as conditions in an
Loans and leases
industry or in a geographic area, affecting a
particular investment;
Loans are reported net of any unearned income and
• Whether a debt security has been downgraded by deferred fees and costs. Certain loan origination and
a rating agency; upfront commitment fees, as well as certain direct
• Whether a debt security exhibits cash flow loan origination and commitment costs, are deferred
deterioration; and and amortized as a yield adjustment over the lives of
• For each non-agency RMBS, we compare the the related loans. Loans held for sale are carried at
remaining credit enhancement that protects the the lower of cost or fair value.
individual security from losses against the
projected losses of principal and/or interest Unearned revenue on direct financing leases is
expected to come from the underlying mortgage accreted over the lives of the leases in decreasing
collateral, to determine whether such credit losses amounts to provide a constant rate of return on the net
might directly impact the relevant security. investment in the leases. Revenue on leveraged
BNY Mellon 129

leases is recognized on a basis to achieve a constant interest become current and remain current for a
yield on the outstanding investment in the lease, net specified period.
of the related deferred tax liability, in the years in
which the net investment is positive. Gains and A loan is considered to be impaired when it is
losses on residual values of leased equipment sold are probable that we will be unable to collect all principal
included in investment and other income. and interest amounts due according to the contractual
Impairment of leveraged lease residual values is terms of the loan agreement. An impairment
reflected in net interest revenue. Considering the allowance is measured based upon the loan’s market
nature of these leases and the number of significant value, the present value of expected future cash
assumptions, there is risk associated with the income flows, discounted at the loan’s initial effective interest
recognition on these leases should any of the rate, or at fair value of the collateral if the loan is
assumptions change materially in future periods. collateral dependent. If the loan valuation is less than
the recorded value of the loan, an impairment
A modified loan is considered a troubled debt allowance is established by a provision for credit loss.
restructuring (“TDR”) if the debtor is experiencing Impairment allowances are not needed when the
financial difficulties and the creditor grants a recorded investment in an impaired loan is less than
concession to the debtor that would not otherwise be the loan valuation.
considered. A TDR may include a transfer of real
estate or other assets from the debtor to the creditor, Allowance for loan losses and allowance for lending-
or a modification of the term of the loan. TDRs are related commitments
accounted for as impaired loans (see the
Nonperforming assets policy). The allowance for loan losses, shown as a valuation
allowance to loans, and the allowance for lending-
Nonperforming assets related commitments recorded in other liabilities, are
referred to as BNY Mellon’s allowance for credit
Commercial loans are placed on nonaccrual status losses. The accounting policy for the determination
when principal or interest is past due 90 days or of the adequacy of the allowances has been identified
more, or when there is reasonable doubt that interest as a “critical accounting estimate” as it requires us to
or principal will be collected. make numerous complex and subjective estimates
and assumptions relating to amounts which are
When a first lien residential mortgage loan reaches 90 inherently uncertain.
days delinquent, it is subject to an impairment test
and may be placed on nonaccrual status. At 180 days The allowance for loan losses is maintained to absorb
delinquent, the loan is subject to further impairment losses inherent in the loan portfolio as of the balance
testing. The loan will remain on accrual status if the sheet date based on our judgment. The allowance
realizable value of the collateral exceeds the unpaid determination methodology is designed to provide
principal balance plus accrued interest. If the loan is procedural discipline in assessing the appropriateness
impaired, a charge-off is taken and the loan is placed of the allowance. Credit losses are charged against
on nonaccrual status. At 270 days delinquent, all first the allowance. Recoveries are added to the
lien mortgages are placed on nonaccrual status. allowance.
Second lien mortgages are automatically placed on
nonaccrual status when they reach 90 days The methodology for determining the allowance for
delinquent. lending-related commitments considers the same
factors as the allowance for loan losses, as well as an
When a loan is placed on nonaccrual status, estimate of the probability of drawdown at default.
previously accrued and uncollected interest is We utilize a quantitative methodology and qualitative
reversed against current period interest revenue. framework for determining the allowance for loan
Interest receipts on nonaccrual and impaired loans are losses and the allowance for lending-related
recognized as interest revenue or are applied to commitments. Within this qualitative framework,
principal when we believe the ultimate collectability management applies judgment when assessing
of principal is in doubt. Nonaccrual loans generally internal risk factors and environmental factors to
are restored to an accrual basis when principal and compute an additional allowance for each component
of the loan portfolio.
130 BNY Mellon

The components of the allowance for loan losses and mortgage portfolio. The resulting incurred loss factor
the allowance for lending-related commitments are (the probability of default multiplied by the loss given
inclusive of the qualitative allowance framework and default) is applied against the loan balance to
consist of the following three elements: determine the allowance held for each pool. For
home equity lines of credit, probability of default and
• an allowance for impaired credits of $1 million or loss given default are based on external data from
greater; third-party databases due to the small size of the
• an allowance for higher risk-rated credits and portfolio and insufficient internal data.
pass-rated credits; and
• an allowance for residential mortgage loans. The qualitative framework is used to determine an
additional allowance for each portfolio based on the
Our lending is primarily to institutional customers. factors below:
As a result, our loans are generally larger than $1
million. Therefore, the first element, impaired Internal risk factors:
credits, is based on individual analysis of all impaired
• Ratio of nonperforming loans to total non-margin
loans of $1 million and greater. The allowance is
loans;
measured by the difference between the recorded
• Ratio of criticized assets to total loans and
value of impaired loans and their impaired value.
lending-related commitments;
Impaired value is either the present value of the
• Borrower concentration; and
expected future cash flows from the borrower, the
• Significant concentrations in high risk industries
market value of the loan, or the fair value of the
and countries.
collateral, if the loan is collateral dependent.
Environmental risk factors:
The second element, higher risk-rated credits and
pass-rated credits, is based on our incurred loss • U.S. non-investment grade default rate;
model. Individual credit analyses are performed on • Unemployment rate; and
such loans before being assigned a credit rating. All • Change in real gross domestic product.
borrowers are collectively evaluated based on their
credit rating. The loss inherent in each loan The objective of the qualitative framework is to
incorporates the borrower’s credit rating, facility capture incurred losses that may not have been fully
rating and maturity. The loss given default, derived captured in the quantitative reserve, which is based
from the facility rating, incorporates a recovery primarily on historical data. Management determines
expectation and an estimate of the use of the facility the qualitative allowance for each period based on
at default (usage given default). The borrower’s judgment informed by consideration of internal and
probability of default is derived from the associated external risk factors and other considerations that
credit rating. Borrower ratings are reviewed at least may be deemed relevant during the period. Once
annually and are periodically mapped to third-party determined in the aggregate, our qualitative
databases, including rating agency and default and allowance is then allocated to each of our loan classes
recovery databases, to ensure ongoing consistency based on the respective classes’ quantitative
and validity. Higher risk-rated credits are reviewed allowance balances with the allocations adjusted,
quarterly. when necessary, for class specific risk factors.
The third element, the allowance for residential For each risk factor, we calculate the minimum and
mortgage loans, is determined by segregating six maximum values, and percentiles in-between, to
mortgage pools into delinquency periods ranging evaluate the distribution of our historical experience.
from current through foreclosure. Each of these The distribution of historical experience is compared
delinquency periods is assigned a probability of to the risk factor’s current quarter observed
default. A specific loss given default is assigned for experience to assess the current risk inherent in the
each mortgage pool. BNY Mellon assigns all portfolio and overall direction/trend of a risk factor
residential mortgage pools, except home equity lines relative to our historical experience.
of credit, a probability of default and loss given
default based on default and loss data derived from Based on this analysis, we assign a risk level - no
internal historical data related to our residential impact, low, moderate, high and elevated - to each
BNY Mellon 131

risk factor for the current quarter. Management Identified intangible assets and goodwill
assesses the impact of each risk factor to determine
an aggregate risk level. We do not quantify the Identified intangible assets with estimable lives are
impact of any particular risk factor. Management’s amortized in a pattern consistent with the assets’
assessment of the risk factors, as well as the trend in identifiable cash flows or using a straight-line method
the quantitative allowance, supports management’s over their remaining estimated benefit periods if the
judgment for the overall required qualitative pattern of cash flows is not estimable. Intangible
allowance. A smaller qualitative allowance may be assets with estimable lives are reviewed for possible
required when our quantitative allowance has impairment when events or changed circumstances
reflected incurred losses associated with the may affect the underlying basis of the asset.
aggregate risk level. A greater qualitative allowance Goodwill and intangibles with indefinite lives are not
may be required if our quantitative allowance does amortized, but are assessed annually for impairment,
not yet reflect the incurred losses associated with the or more often if events and circumstances indicate it
aggregate risk level. is more likely than not they may be impaired and to
determine if the lives are no longer indefinite and
The allocation of the allowance for credit losses is should be amortized. The amount of goodwill
inherently judgmental, and the entire allowance for impairment is determined by the excess of the
credit losses is available to absorb credit losses carrying value of the reporting unit over its fair value.
regardless of the nature of the loss. The accounting policy for valuing and impairment
testing of identified intangible assets and goodwill
Premises and equipment has been identified as a “critical accounting estimate”
as it requires us to make numerous complex and
Premises and equipment are carried at cost less subjective estimates. See Note 6 for additional
accumulated depreciation and amortization. disclosures related to goodwill and intangible assets.
Depreciation and amortization is computed using the
straight-line method over the estimated useful life of Investments in qualified affordable housing projects
the owned asset and, for leasehold improvements,
over the lesser of the remaining term of the leased Investments in qualified affordable housing projects
facility or the estimated economic life of the through a limited liability entity are accounted for
improvement. For owned and capitalized assets, utilizing the proportional amortization method.
estimated useful lives range from 2 to 40 years. Under the proportional amortization method, the
Maintenance and repairs are charged to expense as initial cost of the investment is amortized to the
incurred, while major improvements are capitalized provision for income taxes in proportion to the tax
and amortized to operating expense over their credits and other tax benefits received. The net
identified useful lives. investment performance, including tax credits and
other benefits received, is recognized in the income
Software statement as a component of income tax expense.
Additionally, the value of the commitments to fund
BNY Mellon capitalizes costs relating to acquired qualified affordable housing projects is included in
software and internal-use software development other assets on the balance sheet and a liability is
projects that provide new or significantly improved recorded for the unfunded portion.
functionality. We capitalize projects that are expected
to result in longer-term operational benefits, such as Seed capital
replacement systems or new applications that result in
significantly increased operational efficiencies or Seed capital investments are generally classified as
functionality. All other costs incurred in connection other assets and carried at fair value. Unrealized
with an internal-use software project are expensed as gains and losses on seed capital investments are
incurred. Capitalized software is recorded in other recorded in investment and other income. Certain
assets. risk retention investments in our collateralized loan
obligations (“CLOs”) are classified as available-for-
sale securities. Any unrealized gains and losses are
recorded net of tax as an addition to or deduction
132 BNY Mellon

from other comprehensive income, unless the performance thresholds in current or future years are
investment is deemed to have OTTI. not met, are not recognized since the fees are
potentially uncollectible. These fees are recognized
Noncontrolling interests when it is determined that they will be collected.
When a multi-year performance contract provides
Noncontrolling interests included in permanent equity that fees earned are billed ratably over the
are adjusted for the income or (loss) attributable to performance period, only the portion of the fees
the noncontrolling interest holders and any earned that are non-refundable are recognized.
distributions to those shareholders. Redeemable
noncontrolling interests are reported as temporary Additionally, we recognize revenue from non-
equity. BNY Mellon recognizes changes in the refundable, implementation fees under outsourcing
redemption value of the redeemable noncontrolling contracts using a straight-line method, commencing
interests as they occur and adjusts the carrying value in the period the ongoing services are performed
to be equal to the redemption value. through the expected term of the contractual
relationship. Incremental direct set-up costs of
Fee revenue implementation, up to the related customer margin or
minimum fee revenue amount, are deferred and
Investment Services and Investment Management amortized over the same period that the related
revenue is based on terms specified in a contract with implementation fees are recognized. If a client
a customer, and excludes any amounts collected on terminates an outsourcing contract prematurely, the
behalf of third parties. Revenue is recognized when, unamortized deferred incremental direct set-up costs
or as, a performance obligation is satisfied by and the unamortized deferred implementation fees
transferring control of a good or service to a related to that contract are recognized in the period
customer. A performance obligation may be satisfied the contract is terminated.
over time or at a point in time. Revenue from a
performance obligation satisfied over time is We record foreign exchange and other trading
recognized by measuring our progress in satisfying revenue, financing-related fees and other revenue
the performance obligation in a manner that reflects when the services are provided and earned based on
the transfer of goods and services to the customer. contractual terms, when amounts are determined and
Revenue from a performance obligation satisfied at a collectability is reasonably assured.
point in time is recognized at the point in time the
customer obtains control of the promised good or Net interest revenue
service. The amount of revenue recognized reflects
the consideration we expect to be entitled to in Revenue on interest-earning assets and expense on
exchange for the promised goods and services. Taxes interest-bearing liabilities are recognized based on the
assessed by a governmental authority, that are both effective yield of the related financial instrument.
imposed on, and concurrent with, a specific revenue- The amortization of premiums and accretion of
producing transaction, are collected from a customer discounts are included in interest revenue and are
and are excluded from revenue. adjusted for prepayments when they occur, such that,
the effective yield remains constant throughout the
Performance fees are recognized in the period in contractual life of the security. Negative interest
which the performance fees are earned and become incurred on assets or charged on liabilities is
determinable. Performance fees are constrained until presented as contra interest income and contra
all uncertainties are resolved and reversal of expense, respectively.
previously recorded amounts is not probable.
Performance fees are generally calculated as a Foreign currency translation
percentage of the applicable portfolio’s performance
in excess of a benchmark index or a peer group’s Assets and liabilities denominated in foreign
performance. When a portfolio underperforms its currencies are translated to U.S. dollars at the rate of
benchmark or fails to generate positive performance, exchange on the balance sheet date. Transaction
subsequent years’ performance must generally exceed gains and losses are included in the income statement.
this shortfall prior to fees being earned. Amounts Translation gains and losses on investments in foreign
billable, which are subject to a clawback if future entities with functional currencies that are not the
BNY Mellon 133

U.S. dollar are recorded as foreign currency value of plan assets adjusted for the difference
translation adjustments in OCI. Revenue and expense between expected returns and actual performance of
transactions are translated at the applicable daily rate plan assets. The difference between actual experience
or the weighted average monthly exchange rate when and expected returns on plan assets is included as an
applying the daily rate is not practical. adjustment in the market-related value over a five-
year period.
Pension
See Note 17 for additional disclosures related to
The measurement date for BNY Mellon’s pension pensions.
plans is December 31. Plan assets are determined
based on fair value generally representing observable Severance
market prices. The projected benefit obligation is
determined based on the present value of projected BNY Mellon provides separation benefits for U.S.-
benefit distributions at an assumed discount rate. The based employees through The Bank of New York
discount rate utilized is based on the yield curves of Mellon Corporation Supplemental Unemployment
high-quality corporate bonds available in the Benefit Plan. These benefits are provided to eligible
marketplace. The net periodic pension expense or employees separated from their jobs for business
credit includes service costs (if applicable), interest reasons not related to individual performance. Basic
costs based on an assumed discount rate, an expected separation benefits are generally based on the
return on plan assets based on an actuarially derived employee’s years of continuous benefited service.
market-related value, amortization of prior service Severance for employees based outside of the U.S. is
cost and amortization of prior years’ actuarial gains determined in accordance with local agreements and
and losses. legal requirements. Severance expense is recorded
when management commits to an action that will
Actuarial gains and losses include gains or losses result in separation and the amount of the liability can
related to changes in the amount of the projected be reasonably estimated.
benefit obligation or plan assets resulting from
demographic or investment experience different than Income taxes
assumed, changes in the discount rate or other
assumptions. To the extent an actuarial gain or loss We record current tax liabilities or assets through
exceeds 10% of the greater of the projected benefit charges or credits to the current tax provision for the
obligation or the market-related value of plan assets, estimated taxes payable or refundable for the current
the excess is generally recognized over the future year. Deferred tax assets and liabilities are recorded
service periods of active employees. Benefit accruals for future tax consequences attributable to differences
under the U.S. pension plans are frozen. Future between the financial statement carrying amounts of
unrecognized actuarial gains and losses for the U.S. assets and liabilities and their respective tax bases.
plans that exceed a threshold amount are amortized Deferred tax assets and liabilities are measured using
over the average future life expectancy of plan enacted tax rates expected to apply to taxable income
participants with a maximum of 15 years. in the years in which those temporary differences are
expected to be recovered or settled. A deferred tax
Our expected long-term rate of return on plan assets valuation allowance is established if it is more likely
is based on anticipated returns for each applicable than not that all or a portion of the deferred tax assets
asset class. Anticipated returns are weighted for the will not be realized. A tax position that fails to meet a
expected allocation for each asset class and are based more-likely-than-not recognition threshold will result
on forecasts for prospective returns in the equity and in either reduction of current or deferred tax assets,
fixed-income markets, which should track the long- and/or recording of current or deferred tax liabilities.
term historical returns for these markets. We also Interest and penalties related to income taxes are
consider the growth outlook for U.S. and global recorded as income tax expense.
economies, as well as current and prospective interest
rates. Derivative financial instruments
The market-related value utilized to determine the Derivatives are recorded on the balance sheet at fair
expected return on plan assets is based on the fair value and include futures, forwards, interest rate
134 BNY Mellon

swaps, foreign currency swaps and options and amounts excluded from the assessment of
similar products. Derivatives in an unrealized gain effectiveness are recorded in OCI and recognized in
position are recognized as assets while derivatives in earnings through an amortization approach over the
unrealized loss position are recognized as liabilities. life of the derivative. We discontinue hedge
Derivatives are reported net by counterparty and after accounting prospectively when we determine that the
consideration of cash collateral, to the extent subject hedge is no longer effective or the derivative expires,
to legally enforceable netting agreements. is sold, or management discontinues the derivative’s
Derivatives designated and effective in qualifying hedge designation. Subsequent gains and losses on
hedging relationships are classified in other assets or these derivatives are included in foreign exchange
other liabilities on the balance sheet. All other and other trading revenue. For discontinued fair
derivatives are classified within trading assets or value hedges, the accumulated gain or loss on the
trading liabilities on the balance sheet. Gains and hedged item is amortized on a yield basis over the
losses on trading derivatives are generally included in remaining life of the hedged item.
foreign exchange and other trading revenue.
For qualifying cash flow hedges, changes in the fair
We enter into various derivative financial instruments value of the derivative are recorded in OCI, until
for non-trading purposes primarily as part of our reclassified into earnings in the same period the
asset/liability management process. These hedged item impacts earnings. If the hedge
derivatives are designated as either fair value or cash relationship is terminated, then the change in value
flow hedges of certain assets and liabilities or will be reclassified from OCI to earnings when the
forecasted transactions when we enter into the cash flows that were previously hedged affect
derivative contracts. Gains and losses associated with earnings. If cash flow hedge accounting is
fair value hedges are recorded in income as well as discontinued as a result of a forecasted transaction no
any change in the value of the related hedged item longer being probable to occur, then the amount
associated with the designated risks being hedged. reported in OCI is immediately reclassified to current
Gains and losses on cash flow hedges are recorded in earnings.
OCI, until reclassified into earnings in the same
period the hedged item impacts earnings. Foreign Derivative amounts affecting earnings are recognized
currency transaction gains and losses related to a in the same income statement line as the hedged item
hedged net investment in a foreign operation, net of affects earnings, principally interest income, interest
their tax effect, are recorded with cumulative foreign expense and other revenue.
currency translation adjustments within OCI.
Foreign currency transaction gains and losses related
To qualify for hedge accounting each hedge to qualifying hedges of net investments in a foreign
relationship is required to be highly effective at operation are recorded with cumulative foreign
reducing the risk associated with the exposure being currency translation adjustments within OCI net of
hedged, both prospectively and retrospectively. We their tax effect. The Company evaluates effectiveness
formally document all relationships between hedging of its foreign currency derivatives designated as
instruments and hedged items, as well as our risk- hedges of its net investments utilizing the forward
management objectives and strategy for undertaking rate method.
various hedging transactions. At inception, the
potential cause of ineffectiveness related to each of The determination of fair value of derivative financial
our hedges is assessed to determine if we can expect instruments has been identified as a “critical
the hedge to be highly effective over the life of the accounting estimate.” See Note 22 for additional
transaction. At hedge inception, we document the disclosures related to derivative financial instruments.
methodology to be utilized for evaluating
effectiveness on an ongoing basis, and we monitor Earnings per common share
ongoing hedge effectiveness at least quarterly.
Earnings per common share is calculated using the
For qualifying fair value hedges, changes in the fair two-class method under which earnings are allocated
value of the derivative, and changes in the value of to common shareholders and holders of participating
the hedged item associated with the designated risks securities. Unvested stock-based compensation
being hedged, are recognized in earnings. Certain awards that contain non-forfeitable rights to
BNY Mellon 135

dividends or dividend equivalents are considered Note 2–Accounting changes and new
participating securities under the two-class method. accounting guidance
Basic earnings per share is calculated by dividing net The following accounting changes and new
income allocated to common shareholders of BNY accounting guidance were adopted in 2018.
Mellon by the average number of common shares
outstanding and vested stock-based compensation ASU 2017-12, Derivatives and Hedging: Targeted
awards where recipients have satisfied either the Improvements to Accounting for Hedging Activities
explicit vesting terms or retirement-eligibility
requirements. In August 2017, the FASB issued an ASU,
Derivatives and Hedging: Targeted Improvements to
Diluted earnings per common share is computed Accounting for Hedging Activities. The objective of
under the more dilutive of either the treasury stock this ASU is to improve the financial reporting of
method or the two-class method. We increase the hedging relationships to better portray the economic
average number of shares of common stock results of an entity’s risk management activities and
outstanding by the assumed number of shares of to simplify the application of hedge accounting
common stock that would be issued assuming the guidance.
exercise of stock options and the issuance of shares
related to stock-based compensation awards using the The most significant impact of the new guidance to
treasury stock method, if dilutive. Diluted earnings the Company relates to the new accounting
per share is calculated by dividing net income alternatives for fair value hedges of interest rate risk,
allocated to common shareholders of BNY Mellon by specifically, the ability to hedge only the benchmark
the adjusted average number of common shares component of the contractual cash flows and partial-
outstanding. term hedging. The guidance also changed
presentation and disclosure requirements and made
Statement of cash flows changes to how the shortcut method is applied, which
resulted in the Company using that method going
We have defined cash as cash and due from banks. forward for certain hedging relationships.
Cash flows from hedging activities are classified in
the same category as the items hedged. Distributions BNY Mellon elected to early adopt this ASU on Jan.
received from equity method investees are classified 31, 2018, which is the “as of” date for which the
as cash inflows from operating activities on the Company was permitted to make certain elections
consolidated statement of cash flows. Excess returns and the measurement date for recording the adoption
on investments of equity method investments are impact for certain hedge modifications. As part of the
classified as cash flows from investing activities on adoption, we elected to reclassify approximately $1.1
the consolidated statement of cash flows. billion of debt securities from held-to-maturity to
available-for-sale which resulted in a decrease of $47
Stock-based compensation million pre-tax to accumulated other comprehensive
income. The Company also elected to modify certain
Compensation expense relating to share-based hedge relationships as of the adoption date primarily
payments is recognized in the income statement, on a to utilize the benchmark component method of
straight-line basis, over the applicable vesting period. measuring hedge effectiveness, as such method is
deemed to more closely match risk management
Certain of our stock compensation grants vest when objectives with accounting results. The Company
the employee retires. New grants with this feature are recognized a $27 million after-tax increase in retained
expensed by the first date the employee is eligible to earnings as of Jan. 1, 2018 associated with the
retire. We estimate forfeitures when recording adoption impact of these hedge modifications.
compensation cost related to share-based payment
awards.
136 BNY Mellon

ASU 2017-07, Compensation - Retirement Benefits: ASU 2016-15, Statement of Cash Flows:
Improving the Presentation of Net Periodic Pension Classification of Certain Cash Receipts and Cash
Cost and Net Periodic Postretirement Benefit Cost Payments
In March 2017, the FASB issued an ASU, In August 2016, the FASB issued an ASU, Statement
Compensation - Retirement Benefits: Improving the of Cash Flows: Classification of Certain Cash
Presentation of Net Periodic Pension Cost and Net Receipts and Cash Payments. This ASU provides
Periodic Postretirement Benefit Cost. This ASU guidance on eight specific cash flow presentation
requires the disaggregation of the service cost issues. The most significant impact for BNY Mellon
component from the other components of the net relates to distributions received from equity method
benefit cost in the consolidated income statement. investees. For equity method investments, BNY
This ASU also permits only the service cost Mellon elected to report distributions received from
component of net benefit cost to be eligible for equity method investees using the cumulative
capitalization. BNY Mellon adopted this ASU in the earnings approach. Distributions received are
first quarter of 2018, and applied the guidance considered returns on investment and classified as
retrospectively for the presentation of the service cost cash inflows from operating activities on the
component and the other components in the consolidated statement of cash flows. To the extent
consolidated income statement, and prospectively for the returns on investment exceeded the cumulative
the capitalization of the service cost component in equity in earnings recognized, the excess would be
assets. The adoption of this standard increased staff considered a return of investment and classified as
expense and decreased other expense by $62 million cash inflows from investing activities on the
in 2017 and $75 million in 2016. consolidated statement of cash flows. We adopted the
guidance in this ASU retrospectively. As a result, the
ASU 2016-18, Statement of Cash Flows: Restricted change in accruals and other, net, which is included in
Cash operating activities on the consolidated statement of
cash flows, was restated to reflect distributions
In November 2016, the FASB issued an ASU, received of $24 million in 2017 and $17 million in
Statement of Cash Flows: Restricted Cash. This ASU 2016. The distributions were previously included in
provides guidance on the presentation of restricted other, net in investing activities on the consolidated
cash or restricted cash equivalents in the consolidated statement of cash flows. Distributions received in
statement of cash flows. Restricted cash consists of 2018 were $24 million. The remaining seven specific
excess client funds held by our broker-dealer business cash flow presentation issues do not materially
and totaled $2.4 billion at Dec. 31, 2018 and $1.8 impact BNY Mellon.
billion at Dec. 31, 2017. Restricted cash is included
in interest-bearing deposits with banks on the ASU 2014-09, Revenue from Contracts with
consolidated balance sheet and with cash and due Customers
from banks when reconciling the beginning and end-
of-period balances on the consolidated statement of In May 2014, the FASB issued an ASU, Revenue
cash flows. from Contracts with Customers. This ASU, as
amended, provides guidance on the recognition of
We adopted the guidance in this ASU retrospectively. revenue related to the transfer of promised goods or
As a result, the change in interest-bearing deposits services to customers and guidance on accounting for
with banks, which is included in investing activities certain contract costs. The standard provides a single
on the consolidated statement of cash flows, was revenue model to be applied by reporting companies
restated to reflect the decrease in restricted cash of under U.S. GAAP and supersedes most existing
$1,631 million in 2017 and $898 million in 2016. revenue recognition guidance.
The increase in restricted cash was $643 million in
2018. The Company adopted the guidance on Jan. 1, 2018
using the cumulative effect transition method applied
to contracts not completed as of Dec. 31, 2017, which
resulted in a $55 million after-tax reduction to
retained earnings. The comparative financial
information for 2017 and 2016 has not been restated
BNY Mellon 137

and continues to be reported under the accounting ASU 2016-01, Financial Instruments - Overall:
standards in effect for that period. Recognition and Measurement of Financial Assets
and Financial Liabilities
Although the impact of the adoption of this ASU was
not material, the most significant changes and In January 2016, the FASB issued an ASU, Financial
quantitative impact of the changes are disclosed Instruments—Overall: Recognition and Measurement
below. of Financial Assets and Financial Liabilities. This
ASU requires investments in equity securities that do
Payments to customers not result in consolidation and are not accounted for
under the equity method to be measured at fair value
The timing of recognizing the reduction in revenue with changes in the fair value recognized through net
for certain payments made to depositary receipts income, unless one of two available exceptions
customers has changed. Prior to adoption, annual applies. The first exception, a scope exception,
payments to customers were capitalized and allows Federal Reserve Bank stock, FHLB stock and
amortized as contra revenue over the remaining exchange memberships to remain accounted for at
contract period, subject to impairment reviews. cost, less impairment. The second practicability
exception is an election available for equity
Under the new guidance, annual payments are investments that do not have readily determinable fair
recorded as a reduction in revenue in proportion to values. For certain investments where the Company
the expected annual revenue generated from the has chosen the practicability exception, such
related customer contract. investments are accounted for at cost adjusted for
impairment, if any, plus or minus observable price
Costs to obtain a customer contract changes.
Prior to adoption, costs to obtain a customer contract, The Company adopted this guidance in the first
primarily sales incentives, were expensed as incurred. quarter of 2018 using the cumulative effect method of
Under the new guidance, an asset is recognized for adoption, with a de minimis impact to retained
the incremental sales incentives that are considered earnings. As part of the adoption, we reclassified
costs of obtaining a contract with a customer, if those money market fund investments of approximately $1
costs are expected to be recovered. billion to trading assets, primarily from available-for-
sale securities.
The table below presents the cumulative effect of the
adoption of the new guidance on the consolidated We have non-readily marketable equity securities
balance sheet as of Dec. 31, 2017. where we are utilizing the practicability exception of
$55 million at Dec. 31, 2018. We recognized $27
million of net upward adjustments on these securities
Impact on the consolidated balance sheet
Dec. 31, Impact of Jan. 1, in 2018, driven by activity that resulted in observable
(in millions) 2017 adoption 2018 price changes.
Assets
Other assets $ 23,029 $ (9) $ 23,020
ASU 2018-13, Fair Value Measurement: Disclosure
Liabilities Framework - Changes to the Disclosure
Accrued tax and other Requirements for Fair Value Measurement
expenses $ 6,225 $ (18) $ 6,207
Other liabilities 6,050 64 6,114
In August 2018, the FASB issued an ASU, Fair Value
Equity Measurement: Disclosure Framework - Changes to
Retained earnings $ 25,635 $ (55) $ 25,580 the Disclosure Requirements for Fair Value
Measurement. This ASU requires disclosure of the
changes in unrealized gains or losses included in OCI
The impact of the new guidance on the consolidated for Level 3 assets or liabilities held at the end of the
income statement for 2018 and the consolidated period and the range and weighted-average of the
balance sheet as of Dec. 31, 2018 was de minimis. significant unobservable inputs used in determining
See Note 9 for additional revenue and contract costs the fair value of Level 3 assets and liabilities. This
disclosures. ASU removes the requirement to disclose the
138 BNY Mellon

transfers between Level 1 and Level 2 of the fair At Dec. 31, 2018, we are potentially obligated to pay
value hierarchy and the valuation process for additional consideration which, using reasonable
determining Level 3 fair value measurements. BNY assumptions, could range from $4 million to $21
Mellon adopted this ASU in the third quarter of 2018 million over the next three years, but could be higher
and applied the guidance prospectively for the new as certain of the arrangements do not contain a
disclosure requirements and retrospectively for contractual maximum.
disclosure requirements that have been removed.
The transactions described below did not have a
ASU 2018-14, Compensation - Retirement Benefits - material impact on BNY Mellon’s results of
Defined Benefit Plans - General: Disclosure operations.
Framework - Changes to the Disclosure
Requirements for Defined Benefit Plans Transactions in 2018
In August 2018, the FASB issued an ASU, On Jan. 2, 2018, BNY Mellon completed the sale of
Compensation - Retirement Benefits - Defined Benefit CenterSquare, one of our Investment Management
Plans - General: Disclosure Framework - Changes to boutiques, and recorded a gain on this transaction.
the Disclosure Requirements for Defined Benefit CenterSquare had approximately $10 billion in AUM
Plans. This ASU added the requirement to disclose in U.S. and global real estate and infrastructure
the weighted-average interest crediting rates for cash investments. In addition, goodwill of $52 million
balance plans and an explanation of the reasons for was removed from the consolidated balance sheet as a
significant gains and losses related to changes in the result of this sale.
benefit obligation for the period. This ASU clarified
the requirement to disclose the projected benefit On June 29, 2018, BNY Mellon completed the
obligation (“PBO”) and fair value of plan assets for exchange of its majority equity interest in Amherst
plans with PBOs in excess of plan assets, and the Capital Management LLC for a minority equity stake
accumulated benefit obligation (“ABO”) and fair in Amherst Holdings LLC. Goodwill of $13 million
value of plan assets for plans with ABOs in excess of was removed from the consolidated balance sheet and
plan assets. Additionally, this ASU removed the a gain was recorded as a result of this sale.
requirement to disclose the amounts in accumulated
Transactions in 2016
OCI expected to be recognized as components of net
periodic benefit cost over the next year and the
On April 1, 2016, BNY Mellon acquired the assets of
sensitivity analysis of changes in the assumed health
Atherton Lane Advisers, LLC, a U.S.-based
care cost trend rate. BNY Mellon early adopted this
investment manager with approximately $2.45 billion
ASU in the fourth quarter of 2018 and applied the
in AUM and servicer for approximately 700 high-net-
guidance retrospectively.
worth clients, for cash of $38 million, plus contingent
payments measured at $22 million. Goodwill related
Note 3–Acquisitions and dispositions
to this acquisition totaled $29 million and is included
in the Investment Management business. The
We sometimes structure our acquisitions with both an
customer relationship intangible asset related to this
initial payment and later contingent payments tied to
acquisition is included in the Investment Management
post-closing revenue or income growth. There were
business, with an estimated life of 14 years, and
no contingent payments in 2018.
totaled $30 million at acquisition.
BNY Mellon 139

Note 4–Securities Securities at Dec. 31, 2017 Gross

Amortized unrealized Fair
The following tables present the amortized cost, the (in millions) cost Gains Losses value
gross unrealized gains and losses and the fair value of Available-for-sale:
Agency RMBS $ 24,002 $ 108 $ 291 $ 23,819
securities at Dec. 31, 2018, Dec. 31, 2017 and Dec. U.S. Treasury 15,159 264 160 15,263
31, 2016, respectively. Sovereign debt/sovereign
guaranteed 12,405 175 23 12,557
Agency commercial MBS 8,793 36 67 8,762
Securities at Dec. 31, 2018 Gross State and political
Amortized unrealized Fair subdivisions 2,949 31 23 2,957
(in millions) cost Gains Losses value
CLOs 2,898 12 1 2,909
Available-for-sale: Foreign covered bonds 2,520 18 9 2,529
Agency RMBS $ 25,594 $ 83 $ 369 $ 25,308 Supranational 2,085 5 11 2,079
U.S. Treasury 20,190 96 210 20,076 Non-agency RMBS (a) 1,265 317 4 1,578
Sovereign debt/sovereign Non-agency commercial
guaranteed 10,663 108 21 10,750 MBS 1,360 6 6 1,360
Agency commercial MBS 9,836 16 161 9,691 Corporate bonds 1,249 17 11 1,255
CLOs 3,410 — 46 3,364 Other ABS 1,040 3 — 1,043
Supranational 2,985 7 8 2,984 U.S. government agencies 917 1 10 908
Foreign covered bonds 2,890 7 19 2,878 Other RMBS 152 3 6 149
State and political Other debt securities 1,409 4 1 1,412
subdivisions 2,251 18 22 2,247
Money market funds 963 — — 963
Other ABS 1,776 1 4 1,773
Total securities
U.S. government available-for-sale (b) $ 79,166 $1,000 $ 623 $ 79,543
agencies 1,676 5 24 1,657
Held-to-maturity:
MBS 1,491 1 28 1,464 Agency RMBS $ 26,208 $ 51 $ 332 $ 25,927
U.S. Treasury 9,792 6 56 9,742
Non-agency RMBS (a) 1,095 241 11 1,325
U.S. government agencies 1,653 — 12 1,641
Corporate bonds 1,074 6 26 1,054
Sovereign debt/sovereign
Other debt securities 1,236 6 4 1,238 guaranteed 1,593 30 — 1,623
Total securities
available-for-sale (b) $ 86,167 $ 595 $ 953 $ 85,809 Agency commercial MBS 1,324 2 9 1,317
Foreign covered bonds 84 2 — 86
Held-to-maturity:
Other RMBS 65 — 1 64
Agency RMBS $ 25,507 $ 32 $ 632 $ 24,907
Non-agency RMBS 57 5 — 62
U.S. Treasury 4,727 3 77 4,653
Supranational 28 — — 28
U.S. government
agencies 1,497 — 10 1,487 State and political
subdivisions 17 — 1 16
Agency commercial MBS 1,195 — 26 1,169
Sovereign debt/sovereign MBS 6 — — 6
guaranteed 833 26 — 859
Total securities held-to-
Non-agency RMBS 100 4 2 102 maturity $ 40,827 $ 96 $ 411 $ 40,512
Foreign covered bonds 80 1 — 81
Total securities $ 119,993 $1,096 $1,034 $ 120,055
Supranational 26 1 — 27
(a) Includes $1,091 million that was included in the former Grantor
State and political
subdivisions 17 — — 17 Trust.
(b) Includes gross unrealized gains of $50 million and gross
maturity $ 33,982 $ 67 $ 747 $ 33,302 unrealized losses of $144 million recorded in accumulated other
$ 120,149 $ 662 $1,700 $ 119,111 comprehensive income related to securities that were transferred
Total securities
from available-for-sale to held-to-maturity. The unrealized
(a) Includes $832 million that was included in the former Grantor gains and losses are primarily related to Agency RMBS and will
Trust.
be amortized into net interest revenue over the contractual lives
of the securities.
unrealized losses of $87 million recorded in accumulated other
comprehensive income related to securities that were transferred
from available-for-sale to held-to-maturity. The unrealized
gains and losses are primarily related to Agency RMBS and will
be amortized into net interest revenue over the contractual lives
of the securities.
140 BNY Mellon

Securities at Dec. 31, 2016 Gross The following table presents the realized gains, losses
Amortized unrealized Fair and impairments, on a gross basis.
(in millions) cost Gains Losses value
Available-for-sale:
Agency RMBS $ 22,929 $ 148 $ 341 $ 22,736 Net securities (losses) gains
U.S. Treasury 14,373 115 181 14,307 (in millions) 2018 2017 2016
Sovereign debt/sovereign Realized gross gains $ 8 $ 47 $ 86
guaranteed 12,248 261 20 12,489 Realized gross losses (55) (40) (4)
Agency commercial MBS 6,505 28 84 6,449 Recognized gross impairments (1) (4) (7)
State and political Total net securities (losses) gains $ (48) $ 3 $ 75
subdivisions 3,392 38 52 3,378
CLOs 2,593 6 1 2,598
Foreign covered bonds 2,126 24 9 2,141
Non-agency RMBS (a) 1,700 317 22 1,995 In 2018, we adopted the new accounting guidance
Other ABS 1,729 4 6 1,727 included in ASU 2016-01, Financial Instruments—
Corporate bonds 1,391 22 17 1,396
Overall: Recognition and Measurement of Financial
MBS 931 8 11 928 Assets and Financial Liabilities. As a result, money
Other RMBS 517 4 8 513 market fund investments were reclassified to trading
U.S. government agencies 366 2 9 359 assets, primarily from available-for-sale securities.
Other debt securities 1,952 19 10 1,961
Equity securities 2 1 — 3
Money market funds 842 — — 842 In 2018, certain debt securities with an aggregate
Total securities amortized cost of $1,117 million and fair value of
available-for-sale (b) $ 73,596 $ 997 $ 771 $ 73,822 $1,070 million were transferred from held-to-maturity
Held-to-maturity:
securities to available-for-sale securities as part of the
Agency RMBS $ 25,221 $ 57 $ 299 $ 24,979
U.S. Treasury 11,117 22 41 11,098
adoption of ASU 2017-12, Derivatives and Hedging:
Sovereign debt/sovereign Targeted Improvements to Accounting for Hedging
guaranteed 1,911 42 — 1,953 Activities.
U.S. government agencies 1,589 — 6 1,583
Agency commercial MBS 721 1 10 712
Other RMBS 142 — 4 138
In 2017, other RMBS with an aggregate amortized
Non-agency RMBS 78 4 2 80 cost of $74 million and fair value of $76 million were
Foreign covered bonds 74 1 — 75 transferred from held-to-maturity securities to
State and political
19 — 1 18
available-for-sale securities. Due to ratings
subdivisions
downgrades, the Company no longer intends to hold
MBS 7 — — 7 these securities to maturity.
Other debt securities 26 — — 26
maturity $ 40,905 $ 127 $ 363 $ 40,669
Total securities $ 114,501 $1,124 $1,134 $ 114,491
(a) Includes $1,357 million that was included in the former Grantor
Trust.
unrealized losses of $190 million recorded in accumulated other
comprehensive income related to investment securities that were
transferred from available-for-sale to held-to-maturity. The
unrealized gains and losses are primarily related to Agency
RMBS and will be amortized into net interest revenue over the
contractual lives of the securities.
BNY Mellon 141

Temporarily impaired securities Agency RMBS) that were transferred in prior periods
from available-for-sale to held-to-maturity. The
At Dec. 31, 2018, the unrealized losses on the unrealized losses will be amortized into net interest
securities portfolio were primarily attributable to an revenue over the contractual lives of the securities.
increase in interest rates from date of purchase, and The transfer created a new cost basis for the
for certain securities that were transferred from securities. As a result, if these securities have
available-for-sale to held-to-maturity, an increase in experienced unrealized losses since the date of
interest rates through the date they were transferred. transfer, the corresponding fair value and unrealized
Specifically, $87 million of the unrealized losses at losses would be reflected in the held-to-maturity
Dec. 31, 2018 and $144 million at Dec. 31, 2017 sections of the following tables. We do not intend to
reflected in the available-for-sale sections of the sell these securities, and it is not more likely than not
tables below relate to certain securities (primarily that we will have to sell these securities.
The following tables show the aggregate fair value of 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.
Temporarily impaired securities at Dec. 31, 2018 Less than 12 months 12 months or more Total
Fair Unrealized Fair Unrealized Fair Unrealized
(in millions) value losses value losses value losses
Available-for-sale:
Agency RMBS $ 6,678 $ 30 $ 9,250 $ 339 $ 15,928 $ 369
U.S. Treasury 6,126 23 6,880 187 13,006 210
Sovereign debt/sovereign guaranteed 2,185 8 988 13 3,173 21
Agency commercial MBS 4,505 50 3,082 111 7,587 161
CLOs 3,280 46 2 — 3,282 46
Supranational 974 2 481 6 1,455 8
Foreign covered bonds 1,058 7 736 12 1,794 19
State and political subdivisions 316 1 668 21 984 22
Other ABS 1,289 4 23 — 1,312 4
U.S. government agencies 513 4 673 20 1,186 24
Non-agency commercial MBS 1,015 14 362 14 1,377 28
Non-agency RMBS (a) 94 1 157 10 251 11
Corporate bonds 685 24 50 2 735 26
Other debt securities 397 1 256 3 653 4
Total securities available-for-sale (b) $ 29,115 $ 215 $ 23,608 $ 738 $ 52,723 $ 953
Held-to-maturity:
Agency RMBS $ 4,602 $ 56 $ 17,107 $ 576 $ 21,709 $ 632
U.S. Treasury 157 2 4,343 75 4,500 77
U.S. government agencies — — 1,111 10 1,111 10
Agency commercial MBS 477 7 654 19 1,131 26
Non-agency RMBS 22 1 31 1 53 2
Total securities held-to-maturity $ 5,258 $ 66 $ 23,246 $ 681 $ 28,504 $ 747
Total temporarily impaired securities $ 34,373 $ 281 $ 46,854 $ 1,419 $ 81,227 $ 1,700
(a) Includes $22 million with an unrealized loss of less than $1 million for less than 12 months and $3 million with an unrealized loss of less
than $1 million for 12 months or more that were included in the former Grantor Trust.
(b) Includes gross unrealized losses of $87 million 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 will be amortized into net interest revenue over the contractual lives of the securities. There were no gross unrealized losses for less
than 12 months.
142 BNY Mellon

Temporarily impaired securities at Dec. 31, 2017 Less than 12 months 12 months or more Total
Fair Unrealized Fair Unrealized Fair Unrealized
(in millions) value losses value losses value losses
Available-for-sale:
Agency RMBS $ 8,567 $ 66 $ 5,834 $ 225 $ 14,401 $ 291
U.S. Treasury 7,429 131 2,175 29 9,604 160
Sovereign debt/sovereign guaranteed 1,880 12 559 11 2,439 23
Agency commercial MBS 3,077 28 1,332 39 4,409 67
State and political subdivisions 732 3 518 20 1,250 23
CLOs 260 1 — — 260 1
Foreign covered bonds 953 7 116 2 1,069 9
Supranational 700 6 333 5 1,033 11
Non-agency RMBS (a) 20 — 149 4 169 4
Non-agency commercial MBS 476 3 122 3 598 6
Corporate bonds 274 2 288 9 562 11
U.S. government agencies 588 6 160 4 748 10
Other RMBS 71 4 45 2 116 6
Other debt securities 1,155 1 35 — 1,190 1
Total securities available-for-sale (b) $ 26,182 $ 270 $ 11,666 $ 353 $ 37,848 $ 623
Held-to-maturity:
Agency RMBS $ 9,458 $ 81 $ 12,305 $ 251 $ 21,763 $ 332
U.S. Treasury 6,389 41 2,909 15 9,298 56
U.S. government agencies 791 4 850 8 1,641 12
Agency commercial MBS 737 7 60 2 797 9
Other RMBS — — 50 1 50 1
State and political subdivisions — — 4 1 4 1
Total securities held-to-maturity $ 17,375 $ 133 $ 16,178 $ 278 $ 33,553 $ 411
Total temporarily impaired securities $ 43,557 $ 403 $ 27,844 $ 631 $ 71,401 $ 1,034
(a) Includes $7 million with an unrealized loss of less than $1 million for less than 12 months and $12 million with an unrealized loss of $1
million for 12 months or more that were included in the former Grantor Trust.
(b) Includes gross unrealized losses of $144 million 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 will be amortized into net interest revenue over the contractual lives of the securities. There were no gross unrealized losses for less
than 12 months.
The following table shows the maturity distribution by carrying amount and yield (on a tax equivalent basis) of our
securities portfolio.
Maturity distribution and yields U.S. government State and political Other bonds, notes Mortgage/
on securities at Dec. 31, 2018 U.S. Treasury agencies subdivisions and debentures asset-backed
(dollars in millions) Amount Yield (a) Amount Yield (a) Amount Yield (a) Amount Yield (a) Amount Yield (a) Total
Securities available-for-sale:
One year or less $ 7,682 2.14% $ 245 1.88% $ 402 2.54% $ 6,032 1.50% $ — —% $ 14,361
Over 1 through 5 years 6,753 2.07 317 2.54 1,121 2.97 10,761 1.29 — — 18,952
Over 5 through 10 years 2,460 2.25 1,095 2.78 531 2.23 1,930 0.88 — — 6,016
Over 10 years 3,181 3.12 — — 193 3.06 181 1.68 — — 3,555
Mortgage-backed securities — — — — — — — — 37,788 3.23 37,788
Asset-backed securities — — — — — — — — 5,137 3.35 5,137
Total $ 20,076 2.28% $ 1,657 2.60% $ 2,247 2.73% $ 18,904 1.32% $ 42,925 3.25% $ 85,809
Securities held-to-maturity:
One year or less $ 936 1.41% $ 597 1.26% $ — —% $ 57 0.38% $ — —% $ 1,590
Over 1 through 5 years 3,480 1.83 900 2.52 3 5.66 373 0.47 — — 4,756
Over 5 through 10 years 311 2.18 — — — — 509 0.85 — — 820
Over 10 years — — — — 14 4.76 — — — — 14
Mortgage-backed securities — — — — — — — — 26,802 2.92 26,802
Total $ 4,727 1.77% $ 1,497 2.01% $ 17 4.95% $ 939 0.67% $ 26,802 2.92% $ 33,982
(a) Yields are based upon the amortized cost of securities.
BNY Mellon 143

Other-than-temporary impairment If there has been no borrowing at the Federal Reserve

Discount Window, the Federal Reserve generally
For each security in the securities portfolio, a allows banks to freely move assets in and out of their
quarterly review is conducted to determine if an pledged assets account to sell or repledge the assets
OTTI has occurred. See Note 1 for a discussion of for other purposes. BNY Mellon regularly moves
the determination of OTTI. assets in and out of its pledged assets account at the
Federal Reserve.
The following table reflects securities credit losses
recorded in earnings. The beginning balance At Dec. 31, 2017, BNY Mellon had pledged assets of
represents the credit loss component for which OTTI $111 billion, including $92 billion pledged as
occurred on debt securities in the prior year. The collateral for potential borrowing at the Federal
additions represent the first time a debt security was Reserve Discount Window and $5 billion pledged as
credit impaired or when subsequent credit collateral for borrowing at the FHLB. The
impairments have occurred. The deductions represent components of the assets pledged at Dec. 31, 2017
credit losses on securities that have been sold, are included $96 billion of securities, $13 billion of loans
required to be sold, or for which it is our intention to and $2 billion of trading assets.
sell.
At Dec. 31, 2018 and Dec. 31, 2017, pledged assets
included $13 billion and $10 billion, respectively, for
Debt securities credit loss roll forward which the recipients were permitted to sell or
repledge the assets delivered.
Beginning balance as of Dec. 31 $ 84 $ 88
Add: Subsequent OTTI credit losses 1 4
Less: Realized losses for securities sold 7 8 We also obtain securities as collateral, including
Ending balance as of Dec. 31 $ 78 $ 84 receipts under resale agreements, securities borrowed,
derivative contracts and custody agreements on terms
which permit us to sell or repledge the securities to
The following table presents pre-tax net securities others. At Dec. 31, 2018 and Dec. 31, 2017, the
(losses) gains by type. market value of the securities received that can be
sold or repledged was $151 billion and $86 billion,
respectively. We routinely sell or repledge these
Net securities (losses) gains
securities through delivery to third parties. As of
(in millions) 2018 2017 2016
Agency RMBS $ (42) $ (12) $ 22 Dec. 31, 2018 and Dec. 31, 2017, the market value of
U.S. Treasury (4) (16) 4 securities collateral sold or repledged was $101
Foreign covered bonds (1) — 10 billion and $49 billion, respectively.
Non-agency RMBS — 4 8
Other (1) 27 31 Restricted cash and securities
Total net securities (losses) gains $ (48) $ 3 $ 75
Cash and securities may be segregated under federal

and other regulations or requirements. At Dec. 31,
Pledged assets 2018 and Dec. 31, 2017, cash segregated under
federal and other regulations or requirements was $2
At Dec. 31, 2018, BNY Mellon had pledged assets of billion and $2 billion, respectively. Restricted cash is
$120 billion, including $96 billion pledged as included in interest-bearing deposits with banks on
collateral for potential borrowings at the Federal the consolidated balance sheet. Securities segregated
Reserve Discount Window and $7 billion pledged as for these purposes were $2 billion at Dec. 31, 2018
collateral for borrowing at the FHLB. The and $1 billion at Dec. 31, 2017. Restricted securities
components of the assets pledged at Dec. 31, 2018 were sourced from securities purchased under resale
included $100 billion of securities, $15 billion of agreements at Dec. 31, 2018 and Dec. 31, 2017 and
loans, $4 billion of trading assets and $1 billion of are included in federal funds sold and securities
interest-bearing deposits with banks. purchased under resale agreements on the
consolidated balance sheet.
144 BNY Mellon

Note 5–Loans and asset quality Our loan portfolio consists of three portfolio
segments: commercial, lease financings and
Loans mortgages. We manage our portfolio at the class
level, which consists of six classes of financing
The table below provides the details of our loan receivables: commercial, commercial real estate,
portfolio and industry concentrations of credit risk at financial institutions, lease financings, wealth
Dec. 31, 2018 and Dec. 31, 2017. management loans and mortgages, and other
residential mortgages.
Loans Dec. 31,
(in millions) 2018 2017 The following tables are presented for each class of
Domestic: financing receivable and provide additional
Commercial $ 1,949 $ 2,744 information about our credit risks and the adequacy
Commercial real estate 4,787 4,900 of our allowance for credit losses.
Financial institutions 5,091 5,568
Lease financings 706 772
Wealth management loans and
mortgages 15,843 16,420
Other residential mortgages 594 708
Overdrafts 1,550 963
Other 1,181 1,131
Margin loans 13,343 15,689
Total domestic 45,044 48,895
Foreign:
Commercial 183 167
Financial institutions 6,492 7,483
Wealth management loans and
mortgages 122 108
Other (primarily overdrafts) 4,031 4,264
Margin loans 141 96
Total foreign 11,520 12,645
Total loans (a) $ 56,564 $ 61,540
(a) Net of unearned income of $358 million at Dec. 31, 2018
and $394 million at Dec. 31, 2017 primarily related to
domestic and foreign lease financings.
BNY Mellon 145

Allowance for credit losses
Activity in the allowance for credit losses is summarized as follows.
Allowance for credit losses activity for the year ended Dec. 31, 2018 Wealth
management Other
Commercial Financial Lease loans and residential All
(in millions) Commercial real estate institutions financings mortgages mortgages other Foreign Total
Beginning balance $ 77 $ 76 $ 23 $ 8 $ 22 $ 20 $ — $ 35 $ 261
Charge-offs — — — — — (1) — — (1)
Recoveries — — — — — 2 — 1 3
Net recoveries — — — — — 1 — 1 2
Provision 4 (1) (1) (3) (1) (5) — (4) (11)
Ending balance $ 81 $ 75 $ 22 $ 5 $ 21 $ 16 $ — $ 32 $ 252
Allowance for:
Loan losses $ 24 $ 56 $ 7 $ 5 $ 18 $ 16 $ — $ 20 $ 146
Lending-related commitments 57 19 15 — 3 — — 12 106
Individually evaluated for
impairment:
Loan balance $ — $ — $ — $ — $ 4 $ — $ — $ — $ 4
Allowance for loan losses — — — — — — — — —
Collectively evaluated for
impairment:
Loan balance $ 1,949 $ 4,787 $ 5,091 $ 706 $ 15,839 $ 594 $ 16,074 (a) $ 11,520 $ 56,560
Allowance for loan losses 24 56 7 5 18 16 — 20 146
(a) Includes $1,550 million of domestic overdrafts, $13,343 million of margin loans and $1,181 million of other loans at Dec. 31, 2018.
management Other
Charge-offs — — — — — (1) — — (1)
Recoveries — — — — — 5 — — 5
Net recoveries — — — — — 4 — — 4
Provision (5) 3 (3) (5) (1) (12) — (1) (24)
Ending balance $ 77 $ 76 $ 23 $ 8 $ 22 $ 20 $ — $ 35 $ 261
Allowance for:
Loan losses $ 24 $ 58 $ 7 $ 8 $ 18 $ 20 $ — $ 24 $ 159
Lending-related commitments 53 18 16 — 4 — — 11 102
impairment:
Loan balance $ — $ — $ 1 $ — $ 5 $ — $ — $ — $ 6
Allowance for loan losses — — — — 1 — — — 1
impairment:
Loan balance $ 2,744 $ 4,900 $ 5,567 $ 772 $ 16,415 $ 708 $ 17,783 (a) $ 12,645 $ 61,534
(a) Includes $963 million of domestic overdrafts, $15,689 million of margin loans and $1,131 million of other loans at Dec. 31, 2017.
146 BNY Mellon

management Other
Charge-offs — — — — — (2) — — (2)
Recoveries — — 13 — — 5 — 1 19
Net recoveries — — 13 — — 3 — 1 17
Provision — 14 (18) (2) 4 (9) — — (11)
Ending balance $ 82 $ 73 $ 26 $ 13 $ 23 $ 28 $ — $ 36 $ 281
Allowance for:
Loans losses $ 25 $ 52 $ 8 $ 13 $ 19 $ 28 $ — $ 24 $ 169
Unfunded commitments 57 21 18 — 4 — — 12 112
impairment:
Loan balance $ — $ — $ — $ 4 $ 5 $ — $ — $ — $ 9
Allowance for loan losses — — — 2 3 — — — 5
impairment:
Loan balance $ 2,286 $ 4,639 $ 6,342 $ 985 $ 15,550 $ 854 $ 19,760 (a) $ 14,033 $ 64,449
(a) Includes $1,055 million of domestic overdrafts, $17,503 million of margin loans and $1,202 million of other loans at Dec. 31, 2016.
Nonperforming assets Lost interest
The table below presents our nonperforming assets. The table below presents the amount of lost interest
income.
Nonperforming assets Dec. 31,
(in millions) 2018 2017 Lost interest
Nonperforming loans: (in millions) 2018 2017 2016
Other residential mortgages $ 67 $ 78 Amount by which interest income recognized
Wealth management loans and on nonperforming loans exceeded reversals
mortgages 9 7 Total $ — $ — $ —
Commercial real estate — 1 Foreign — — —
Total nonperforming loans 76 86 Amount by which interest income would have
Other assets owned 3 4 increased if nonperforming loans at year-
end had been performing for the entire year
Total nonperforming assets $ 79 $ 90
Total $ 5 $ 5 $ 6
Foreign — — —
At Dec. 31, 2018, undrawn commitments to

borrowers whose loans were classified as nonaccrual
or reduced rate were not material.
BNY Mellon 147

Impaired loans
The tables below present information about our impaired loans. We use the discounted cash flow method as the
primary method for valuing impaired loans.
Impaired loans 2018 2017 2016

Average Interest Average Interest Average Interest
recorded income recorded income recorded income
(in millions) investment recognized investment recognized investment recognized
Impaired loans with an allowance:
Commercial real estate $ — $ — $ — $ — $ 1 $ —
Financial institutions — — 1 — — —
Wealth management loans and mortgages 1 — 2 — 5 —
Lease financings — — 1 — 3 —
Total impaired loans with an allowance 1 — 4 — 9 —
Impaired loans without an allowance:
Commercial real estate — — — — 1 —
Financial institutions — — — — 102 —
Wealth management loans and mortgages 4 — 3 — 2 —
Total impaired loans without an allowance (a) 4 — 3 — 105 —
Total impaired loans $ 5 $ — $ 7 $ — $ 114 $ —
(a) When the discounted cash flows, collateral value or market price equals or exceeds the carrying value of the loan, then the loan does not
require an allowance under the accounting standard related to impaired loans.
Impaired loans Dec. 31, 2018 Dec. 31, 2017

Unpaid Unpaid
Recorded principal Related Recorded principal Related
(in millions) investment balance allowance (a) investment balance allowance (a)
Impaired loans with an allowance:
Commercial real estate $ — $ — $ — $ — $ 3 $ —
Financial institutions — — — 1 1 —
Wealth management loans and mortgages — — — 1 1 1
Total impaired loans with an allowance — — — 2 5 1
Impaired loans without an allowance:
Wealth management loans and mortgages 4 4 N/A 4 4 N/A
Total impaired loans without an allowance (b) 4 4 N/A 4 4 N/A
Total impaired loans (c) $ 4 $ 4 $ — $ 6 $ 9 $ 1
(a) The allowance for impaired loans is included in the allowance for loan losses.
(b) When the discounted cash flows, collateral value or market price equals or exceeds the carrying value of the loan, then the loan does not
require an allowance under the accounting standard related to impaired loans.
(c) Excludes an aggregate of less than $1 million of impaired loans in amounts individually less than $1 million at both Dec. 31, 2018 and
Dec. 31, 2017, respectively. The allowance for loan losses associated with these loans totaled less than $1 million at both Dec. 31, 2018
and Dec. 31, 2017, respectively.
Past due loans
The table below presents our past due loans.
Past due loans and still accruing interest Dec. 31, 2018 Dec. 31, 2017
Days past due Total Days past due Total
(in millions) 30-59 60-89 past due 30-59 60-89 past due
Wealth management loans and mortgages $ 22 $ 1 $ 5 $ 28 $ 39 $ 5 $ — $ 44
Other residential mortgages 12 6 7 25 18 5 5 28
Commercial real estate 1 — — 1 44 — — 44
Financial institutions 3 3 — 6 1 — — 1
Total past due loans $ 38 $ 10 $ 12 $ 60 $ 102 $ 10 $ 5 $ 117
148 BNY Mellon

Troubled debt restructurings otherwise be considered. A TDR may include a

transfer of real estate or other assets from the debtor
A modified loan is considered a TDR if the debtor is to the creditor, or a modification of the term of the
experiencing financial difficulties and the creditor loan. Not all modified loans are considered TDRs.
grants a concession to the debtor that would not
The following table presents our TDRs.
TDRs 2018 2017

Number of Outstanding recorded investment Number of Outstanding recorded investment
(dollars in millions) contracts Pre-modification Post-modification contracts Pre-modification Post-modification
Other residential mortgages 17 $ 4 $ 4 50 $ 13 $ 14
Wealth management loans and mortgages — — — 2 6 6
Total TDRs 17 $ 4 $ 4 52 $ 19 $ 20
The modifications of the other residential mortgage a TDR during the previous 12 months and
loans in 2018 and 2017 consisted of reducing the subsequently defaulted in 2018.
stated interest rates and, in certain cases, a
forbearance of default and extending the maturity Credit quality indicators
dates. The modified loans are primarily collateral
dependent for which the value is based on the fair Our credit strategy is to focus on investment-grade
value of the collateral. clients that are active users of our non-credit services.
Each customer is assigned an internal credit rating,
TDRs that subsequently defaulted which is mapped to an external rating agency grade
equivalent, if possible, based upon a number of
There were six residential mortgage loans and one dimensions, which are continually evaluated and may
wealth management loan, with an aggregate recorded change over time.
investment of $1 million, which were restructured in
The following tables present information about credit quality indicators.
Commercial loan portfolio
Commercial loan portfolio – Credit risk profile Commercial Commercial real estate Financial institutions
by creditworthiness category Dec. 31, Dec. 31, Dec. 31,
(in millions) 2018 2017 2018 2017 2018 2017
Investment grade $ 2,036 $ 2,685 $ 4,184 $ 4,277 $ 9,586 $ 10,021
Non-investment grade 96 226 603 623 1,997 3,030
Total $ 2,132 $ 2,911 $ 4,787 $ 4,900 $ 11,583 $ 13,051
The commercial loan portfolio is divided into Customers with ratings consistent with BBB- (S&P)/
investment grade and non-investment grade Baa3 (Moody’s) or better are considered to be
categories based on the assigned internal credit investment grade. Those clients with ratings lower
ratings, which are generally consistent with those of than this threshold are considered to be non-
the public rating agencies. investment grade.
BNY Mellon 149

Wealth management loans and mortgages Other residential mortgages
The other residential mortgage portfolio primarily

Wealth management loans and mortgages – Credit risk
profile by internally assigned grade consists of 1-4 family residential mortgage loans and
Dec. 31, totaled $594 million at Dec. 31, 2018 and $708
(in millions) 2018 2017 million at Dec. 31, 2017. These loans are not
Wealth management loans: typically correlated to external ratings. Included in
Investment grade $ 6,901 $ 7,042
Non-investment grade 106 185
this portfolio at Dec. 31, 2018 were $128 million of
Wealth management mortgages 8,958 9,301 mortgage loans purchased in 2005, 2006 and the first
Total $ 15,965 $ 16,528 quarter of 2007, of which, 11% of the serviced loan
balance was at least 60 days delinquent.
Wealth management non-mortgage loans are not Overdrafts

typically rated by external rating agencies. A
majority of the wealth management loans are secured Overdrafts primarily relate to custody and securities
by the customers’ investment management accounts clearance clients and totaled $5.5 billion at Dec. 31,
or custody accounts. Eligible assets pledged for these 2018 and $5.1 billion at Dec. 31, 2017. Overdrafts
loans are typically investment grade fixed-income occur on a daily basis primarily in the custody and
securities, equities and/or mutual funds. Internal securities clearance business and are generally repaid
ratings for this portion of the wealth management within two business days.
portfolio, therefore, would equate to investment-
grade external ratings. Wealth management loans are Other loans
provided to select customers based on the pledge of
other types of assets, including business assets, fixed Other loans primarily include loans to consumers that
assets or a modest amount of commercial real estate. are fully collateralized with equities, mutual funds
For the loans collateralized by other assets, the credit and fixed-income securities.
quality of the obligor is carefully analyzed, but we do
not consider this portfolio of loans to be investment Margin loans
grade.
We had $13.5 billion of secured margin loans on our
consolidated balance sheet at Dec. 31, 2018
Credit quality indicators for wealth management
compared with $15.8 billion at Dec. 31, 2017.
mortgages are not correlated to external ratings.
Margin loans are collateralized with marketable
Wealth management mortgages are typically loans to
securities, and borrowers are required to maintain a
high-net-worth individuals, which are secured
daily collateral margin in excess of 100% of the value
primarily by residential property. These loans are
of the loan. We have rarely suffered a loss on these
primarily interest-only, adjustable rate mortgages types of loans and do not allocate any of our
with a weighted-average loan-to-value ratio of 62% at allowance for credit losses to margin loans.
origination. In the wealth management portfolio, less
than 1% of the mortgages were past due at Dec. 31, Reverse repurchase agreements
2018.
Reverse repurchase agreements are transactions fully
At Dec. 31, 2018, the wealth management mortgage collateralized with high-quality liquid securities.
portfolio consisted of the following geographic These transactions carry minimal credit risk and
concentrations: California - 24%; New York - 18%; therefore are not allocated an allowance for credit
Massachusetts - 10%; Florida - 8%; and other - 40%. losses.
150 BNY Mellon

Note 6–Goodwill and intangible assets
Goodwill
The table below provides a breakdown of goodwill by business.
Goodwill by business Investment Investment

(in millions) Services Management Other Consolidated
Balance at Dec. 31, 2016 $ 8,269 $ 9,000 $ 47 $ 17,316
Foreign currency translation 120 128 — 248
Balance at Dec. 31, 2017 $ 8,389 $ 9,128 $ 47 $ 17,564
Dispositions — (65) — (65)
Foreign currency translation (56) (93) — (149)
Balance at Dec. 31, 2018 $ 8,333 $ 8,970 $ 47 $ 17,350
Total goodwill decreased in 2018 compared with 2017 reflecting the impact of foreign exchange translation on non-
U.S. dollar denominated goodwill and dispositions in the Investment Management business.
Intangible assets
The table below provides a breakdown of intangible assets by business.
Intangible assets – net carrying amount by business Investment Investment

(in millions) Services Management Other Consolidated
Balance at Dec. 31, 2016 $ 1,032 $ 1,717 $ 849 $ 3,598
Amortization (149) (60) — (209)
Foreign currency translation 5 17 — 22
Balance at Dec. 31, 2017 $ 888 $ 1,674 $ 849 $ 3,411
Amortization (129) (51) — (180)
Foreign currency translation (1) (10) — (11)
Balance at Dec. 31, 2018 $ 758 $ 1,613 $ 849 $ 3,220
Intangible assets decreased in 2018 compared with 2017 primarily reflecting amortization.
The table below provides a breakdown of intangible assets by type.
Intangible assets Dec. 31, 2018 Dec. 31, 2017

Remaining
weighted-
Gross Net average Gross Net
carrying Accumulated carrying amortization carrying Accumulated carrying
(in millions) amount amortization amount period amount amortization amount
Subject to amortization: (a)
Customer contracts—Investment Services $ 1,572 $ (1,186) $ 386 10 years $ 2,260 $ (1,744) $ 516
Customer relationships—Investment
Management 899 (699) 200 11 years 1,262 (1,015) 247
Other 26 (12) 14 4 years 42 (23) 19
Total subject to amortization 2,497 (1,897) 600 10 years 3,564 (2,782) 782
Not subject to amortization: (b)
Tradenames 1,332 N/A 1,332 N/A 1,334 N/A 1,334
Customer relationships 1,288 N/A 1,288 N/A 1,295 N/A 1,295
Total not subject to amortization 2,620 N/A 2,620 N/A 2,629 N/A 2,629
Total intangible assets $ 5,117 $ (1,897) $ 3,220 N/A $ 6,193 $ (2,782) $ 3,411
(a) Excludes fully amortized intangible assets.
(b) Intangible assets not subject to amortization have an indefinite life.
BNY Mellon 151

Estimated annual amortization expense for current Qualified affordable housing project investments
intangibles for the next five years is as follows:
We invest in affordable housing projects primarily to
satisfy the Company’s requirements under the
For the year ended Estimated amortization expense
Dec. 31, (in millions) Community Reinvestment Act. Our total investment
2019 $ 115 in qualified affordable housing projects totaled $1.0
2020 102 billion at Dec. 31, 2018 and $1.0 billion at Dec. 31,
2021 78 2017. Commitments to fund future investments in
2022 60
2023 50
qualified affordable housing projects totaled $479
million at Dec. 31, 2018 and $486 million at Dec. 31,
2017 and are recorded in other liabilities. A summary
Impairment testing
of the commitments to fund future investments is as
follows: 2019 – $201 million; 2020 – $108 million;
The goodwill impairment test is performed at least
2021 – $122 million; 2022 – $29 million; 2023 – $1
annually at the reporting unit level. Intangible assets
million; and 2024 and thereafter – $18 million.
not subject to amortization are tested for impairment
annually or more often if events or circumstances
Tax credits and other tax benefits recognized were
indicate they may be impaired.
$163 million in 2018, $156 million in 2017 and $155
million in 2016.
BNY Mellon’s three business segments include seven
reporting units for which goodwill impairment testing
Amortization expense included in the provision for
is performed on an annual basis. The Investment
income taxes was $136 million in 2018, $153 million
Services segment is comprised of four reporting
in 2017 and $115 million in 2016.
units; the Investment Management segment is
comprised of two reporting units and one reporting
Investments valued using net asset value per share
unit is included in the Other segment. As a result of
the annual goodwill impairment test of the seven
In our Investment Management business, we manage
reporting units conducted in the second quarter of
investment assets, including equities, fixed income,
2018, no goodwill impairment was recognized.
money market and multi-asset and alternative
investment funds for institutions and other investors.
Note 7–Other assets
As part of that activity, we make seed capital
The following table provides the components of other investments in certain funds. We also hold private
assets presented on the consolidated balance sheet. equity investments, specifically SBICs, which are
compliant with the Volcker Rule, and certain other
corporate investments. Seed capital, private equity
Other assets Dec. 31, and other corporate investments are included in other
Corporate/bank-owned life insurance $ 4,937 $ 4,857
assets on the consolidated balance sheet. The fair
Accounts receivable 3,692 4,590 value of these investments was estimated using the
Fails to deliver 2,274 2,817 net asset value (“NAV”) per share for BNY Mellon’s
Software 1,652 1,499 ownership interest in the funds.
Prepaid pension assets 1,357 1,416
Renewable energy investments 1,264 1,368
Income taxes receivable 1,125 1,533
Equity in a joint venture and other
investments 1,064 1,083
Qualified affordable housing project
investments 999 1,014
Federal Reserve Bank stock 484 477
Prepaid expense 385 395
Fair value of hedging derivatives 289 323
Seed capital 224 288
Other (a) 1,552 1,369
Total other assets $ 21,298 $ 23,029
(a) At Dec. 31, 2018 and Dec. 31, 2017, other assets include
$111 million and $82 million, respectively, of Federal Home
Loan Bank stock, at cost.
152 BNY Mellon

The table below presents information on our investments valued using NAV.
Other assets valued using NAV

Dec. 31, 2018 Dec. 31, 2017
Fair Unfunded Redemption Redemption Fair Unfunded Redemption Redemption
(dollars in millions) value commitments frequency notice period value commitments frequency notice period
Daily- Daily-
Seed capital $ 54 $ — quarterly 1-90 days $ 40 $ 1 quarterly 1-90 days
Private equity investments (SBICs) (a) 74 41 N/A N/A 55 42 N/A N/A
Daily- Daily-
Other (b) 87 — quarterly 1-95 days 59 — quarterly 1-95 days
Total $ 215 $ 41 $ 154 $ 43
(a) Private equity investments include Volcker Rule-compliant investments in SBICs that invest in various sectors of the economy. Private equity
investments do not have redemption rights. Distributions from such investments will be received as the underlying investments in the private
equity investments, which have a life of 10 years, are liquidated.
(b) Primarily relates to investments in funds that relate to deferred compensation arrangements with employees.
Note 8–Deposits and are delivered at a point-in-time. These

transaction-based fees are generally recognized on
Total time deposits in denominations of $250,000 or trade date. Other contractual clearing services fees
more were $32.1 billion at Dec. 31, 2018 and $37.3 are driven by the amount of AUC/A or the number of
billion at Dec. 31, 2017. At Dec. 31, 2018, the accounts or securities positions and are billed on a
scheduled maturities of all time deposits are as monthly or quarterly basis.
follows: 2019 – $40.5 billion; 2020 – $47 million;
2021 – $1 million; 2022 – $- million; 2023 – $- Investment management fees are dependent on the
million; and 2024 and thereafter – $1 million. overall level and mix of AUM. The management
fees, expressed in basis points, are charged for
Note 9–Contract revenue managing those assets. Management fees are
typically subject to fee schedules based on the overall
Nature of services and revenue recognition level of assets managed and products in which those
assets are invested.
Fee revenue in Investment Services and Investment
Management is primarily variable, based on levels of Investment management fee revenue also includes
AUC/A, AUM and the level of client-driven transactional- and account-based fees. These fees
transactions, as specified in fee schedules. along with distribution and servicing fees are
recognized when the services have been completed.
Investment Services fees are based primarily on the Clients are generally billed for services performed on
market value of AUC/A; client accounts, balances a monthly or quarterly basis.
and the volume of transactions; securities lending
volume and spreads; and fees for other services. Performance fees are generally calculated as a
Certain fees based on the market value of assets are percentage of the applicable portfolio’s performance
calculated in arrears on a monthly or quarterly basis. in excess of a benchmark index or a peer group’s
performance. Performance fees are recognized at the
Substantially all services within the Investment end of the measurement period when they are
Services business are provided over time. Revenue determinable.
on these services is recognized using the time elapsed
method, equal to the expected invoice amount, which See Note 23 for additional information on our
typically represents the value provided to the principal businesses, Investment Services and
customer for our performance completed to date. Investment Management, and the primary services
provided.
Clearing services revenue includes multiple types of
fees, some of which are driven by customer actions
BNY Mellon 153

Disaggregation of contract revenue Contract assets represent accrued revenues that have
not yet been billed to the customers due to certain
Contract revenue is included in fee revenue on the contractual terms other than the passage of time and
consolidated income statement. The following table were $30 million at Jan. 1, 2018 and $36 million at
presents fee revenue related to contracts with Dec. 31, 2018. Accrued revenues recorded as
customers, disaggregated by type, for each business contract assets are usually billed on an annual basis.
segment. There were no impairments recorded on contract
assets in 2018.
Disaggregation of contract revenue by business segment (a)
Year ended Dec. 31, 2018 Both receivables from customers and contract assets
Investment Investment are included in other assets on the consolidated
(in millions) Services Management Other Total
balance sheet.
Fee revenue - contract
revenue:
Investment services Contract liabilities represent payments received in
fees:
advance of providing services under certain contracts
Asset servicing $ 4,395 $ 88 $ 1 $ 4,484
Clearing services 1,577 — — 1,577
and were $167 million at Jan. 1, 2018 and $171
Issuer services 1,099 — — 1,099 million at Dec. 31, 2018. Contract liabilities are
Treasury services 553 1 — 554 included in other liabilities on the consolidated
Total investment
7,624 89 1 7,714
balance sheet. Revenue recognized in 2018 relating
services fees
Investment to contract liabilities as of Jan. 1, 2018 was $96
management and
54 3,619 — 3,673
million.
performance fees
Financing-related fees 61 1 (2) 60
Distribution and Changes in contract assets and liabilities primarily
servicing (51) 191 — 140
relate to either party’s performance under the
Investment and other
income 279 (202) 2 79 contracts.
Total fee revenue -
contract revenue 7,967 3,698 1 11,666
Contract costs
Fee and other revenue -
not in scope of
ASC 606 (b)(c) 959 83 84 1,126
Incremental costs for obtaining contracts that are
Total fee and other
revenue $ 8,926 $ 3,781 $ 85 $12,792 deemed recoverable are capitalized as contract costs.
(a) Business segment data has been determined on an internal Such costs result from the payment of sales
management basis of accounting, rather than the generally accepted incentives, primarily in the Wealth Management
accounting principles used for consolidated financial reporting.
(b) Primarily includes foreign exchange and other trading revenue, business, and totaled $98 million at Dec. 31, 2018.
investment and other income, financing-related fees and net Capitalized sales incentives are amortized based on
securities losses, all of which are accounted for using other
accounting guidance.
the transfer of goods or services to which the assets
(c) The Investment Management business includes a loss from relate and typically average nine years. The
consolidated investment management funds, net of noncontrolling amortization of capitalized sales incentives, which is
interests of $1 million in 2018.
primarily included in staff expense, totaled $22
million in 2018.
Contract balances
Costs to fulfill a contract are capitalized when they
relate directly to an existing contract or specific
Our clients are billed based on fee schedules that are
anticipated contract, generate or enhance resources
agreed upon in each customer contract. Receivable
that will be used to fulfill performance obligations
from customers were $3.9 billion at Jan. 1, 2018 and
and are recoverable. Such costs generally represent
$2.5 billion at Dec. 31, 2018. An allowance is
set-up costs, which include any direct cost incurred at
maintained for accounts receivables which is
inception of a contract which enables the fulfillment
generally based on the number of days outstanding.
of the performance obligation and totaled $20 million
Adjustments to the allowance are recorded in other
at Dec. 31, 2018. These capitalized costs are
expense in the consolidated income statement. A
amortized on a straight-line basis over the expected
provision of $11 million was recorded in 2018.
contract period which generally range from seven to
nine years. The amortization is included in other
expense and totaled $5 million in 2018.
154 BNY Mellon

There were no impairments recorded on capitalized Note 11–Income taxes

contract costs in 2018.
The components of the income tax provision are as
Unsatisfied performance obligations follows:
We do not have any unsatisfied performance

Provision for income taxes Year ended Dec. 31,
obligations other than those that are subject to a (in millions) 2018 2017 2016
practical expedient election under ASC 606, Revenue Current tax expense (benefit):
From Contracts With Customers. The practical Federal $ 902 $ (99) $ 823
expedient election applies to (i) contracts with an Foreign 442 388 327
State and local 119 74 153
original expected length of one year or less, and (ii)
Total current tax expense 1,463 363 1,303
contracts for which we recognize revenue at the Deferred tax (benefit) expense:
amount to which we have the right to invoice for Federal (556) 36 (75)
services performed. Foreign 9 14 (14)
State and local 22 83 (37)
Total deferred tax (benefit)
Note 10–Net interest revenue expense: (525) 133 (126)
Provision for income taxes $ 938 $ 496 $ 1,177
The following table provides the components of net
interest revenue presented on the consolidated income
statement. In December 2017, the Tax Cuts and Jobs Act of 2017
(“U.S. tax legislation”) was signed into law in the
Net interest revenue Year ended Dec. 31, United States. U.S. GAAP requires companies to
(in millions) 2018 2017 2016 recognize the effect of tax law changes on deferred
Interest revenue tax assets and liabilities and other recognized assets
Deposits with banks $ 219 $ 120 $ 104
Deposits with the Federal
in the period of enactment. Also in December 2017,
Reserve and other central banks 531 319 198 the Securities and Exchange Commission staff issued
Federal funds sold and securities Staff Accounting Bulletin No.118 (“SAB 118”). SAB
purchased under resale
agreements 1,116 423 233 118 allows the recording of a provisional estimate to
Margin loans 510 343 265 reflect the income tax impact of the U.S. tax
Non-margin loans 1,356 1,077 873 legislation and provides a measurement period up to
Securities: one year from the enactment date. Due to the timing
Taxable 2,520 1,977 1,772 of the enactment and the complexity involved in
Exempt from federal income
taxes 54 64 70 applying the provisions of the U.S. tax legislation, we
Total securities 2,574 2,041 1,842 recorded a provisional tax benefit of $710 million in
Trading securities 126 59 60 the fourth quarter of 2017.
Total interest revenue 6,432 4,382 3,575
Interest expense
Deposits in domestic offices 537 107 41 In 2018, we completed our analysis of the U.S. tax
Deposits in foreign offices 340 55 (25) legislation and filed our 2017 income tax returns,
Federal funds purchased and taking into account new Internal Revenue Service
securities sold under repurchase
agreements 758 225 36 (“IRS”) guidance. Accordingly we recorded an
Trading liabilities 29 7 6 additional $70 million tax benefit for remeasurement
Other borrowed funds 58 26 8 of our net deferred tax liability.
Commercial paper 51 29 5
Customer payables 191 64 12 The U.S. tax legislation provided a one-time deemed
Long-term debt 857 561 354
Total interest expense 2,821 1,074 437
repatriation tax on undistributed foreign earnings and
Net interest revenue 3,611 3,308 3,138 profits (“repatriation tax”). In 2017, we recorded
Provision for credit losses (11) (24) (11) $723 million provisional repatriation tax. In 2018,
Net interest revenue after we completed our analysis of foreign earnings taking
provision for credit losses $ 3,622 $ 3,332 $ 3,149
into account new IRS guidance and reduced the
repatriation tax by $36 million.
BNY Mellon 155

The components of U.S. tax legislation are as The statutory federal income tax rate is reconciled to
follows: our effective income tax rate below:
Income tax (benefit) expense Effective tax rate Year ended Dec. 31,
(estimated in millions) 2018 2017 2018 2017 2016
Remeasurement of net deferred tax Federal rate 21.0% 35.0% 35.0%
liabilities $ (70) $ (1,472) State and local income taxes, net of
Repatriation tax (36) 723 federal income tax benefit 2.1 1.8 1.6
Other items — 39 Foreign operations 0.5 (4.2) (5.6)
Net income tax (benefit) $ (106) $ (710) Tax credits (3.3) (3.7) (2.2)
Tax-exempt income (0.8) (1.9) (1.8)
Leverage lease adjustment — (1.4) (0.9)
FDIC Assessment 0.5 — —
The components of income before taxes are as Stock compensation (0.6) (1.1) —
follows: U.S. tax legislation (1.7) (13.3) —
Other – net 0.4 (0.4) (1.2)
Effective tax rate 18.1% 10.8% 24.9%
Income before taxes Year ended Dec. 31,
(in millions) 2018 2017 2016
Domestic $ 3,008 $ 2,699 $ 3,147
Foreign 2,184 1,911 1,578
Unrecognized tax positions
Income before taxes $ 5,192 $ 4,610 $ 4,725
(in millions) 2018 2017 2016
Beginning balance at Jan. 1, – gross $ 128 $ 146 $ 649
Prior period tax positions:
The components of our net deferred tax liability are Increases 6 20 8
Decreases (8) (4) (40)
as follows:
Current period tax positions 9 10 16
Settlements (32) (44) (477)
Net deferred tax liability Dec. 31, Statute expiration — — (10)
(in millions) 2018 2017 Ending balance at Dec. 31, – gross $ 103 $ 128 $ 146
Depreciation and amortization $ 2,060 $ 1,960
Pension obligation 300 283
Renewable energy investment 295 278
Our total tax reserves as of Dec. 31, 2018 were $103
Equity investments 65 65 million compared with $128 million at Dec. 31, 2017.
Repatriation — 617 If these tax reserves were unnecessary, $103 million
Securities valuation (15) 11 would affect the effective tax rate in future periods.
Credit losses on loans (54) (55) We recognize accrued interest and penalties, if
Reserves not deducted for tax (143) (103)
applicable, related to income taxes in income tax
Employee benefits (266) (287)
Other assets (65) (85) expense. Included in the balance sheet at Dec. 31,
Other liabilities 189 186 2018 is accrued interest, where applicable, of $22
Net deferred tax liability $ 2,496 $ 3,021 million. The additional tax expense related to interest
for the year ended Dec. 31, 2018 was $8 million,
compared with $12 million for the year ended Dec.
We believe it is more likely than not that we will fully 31, 2017.
realize our deferred tax assets. This conclusion is
based on financial results and profit forecasts. It is reasonably possible the total reserve for uncertain
tax positions could decrease within the next 12
We have completed our analysis of the U.S. tax months by approximately $20 million as a result of
legislation’s impact to foreign earnings and the adjustments related to tax years that are still subject
amount of foreign earnings considered permanently to examination.
reinvested abroad. As of Dec. 31, 2018, we had
approximately $250 million of earnings attributable Our federal income tax returns are closed to
to foreign subsidiaries that have been permanently examination through 2013. Our New York State,
reinvested abroad and for which no local distribution New York City and UK income tax returns are closed
tax provision has been recorded. If these earnings to examination through 2012.
were to be repatriated, the estimated tax liability as of
Dec. 31, 2018 would be up to $50 million.
156 BNY Mellon

Note 12–Long-term debt
Long-term debt Dec. 31, 2018 Dec. 31, 2017

(in millions) Rate Maturity Amount Rate Amount
Senior debt:
Fixed rate 2.05 - 5.45% 2019 - 2028 $ 24,995 1.30 - 5.45% $ 23,329
Floating rate 2.61 - 3.86% 2019 - 2038 2,628 1.49 - 2.74% 2,829
Subordinated debt (a) 3.00 - 7.50% 2021 - 2029 1,540 3.00 - 7.50% 1,821
Total $ 29,163 $ 27,979
(a) Fixed rate.
Total long-term debt maturing during the next five and may also provide start-up capital for its new
years for BNY Mellon is as follows: 2019 – $4.3 funds. The funds are primarily financed by our
billion, 2020 – $5.0 billion, 2021 – $4.6 billion, 2022 customers’ investments in the funds’ equity or debt.
– $1.3 billion and 2023 – $5.5 billion.
Additionally, BNY Mellon invests in qualified
Note 13–Variable interest entities and affordable housing and renewable energy projects,
securitization which are designed to generate a return primarily
through the realization of tax credits by the Company.
BNY Mellon has variable interests in VIEs, which The projects, which are structured as limited
include investments in retail, institutional and partnerships and LLCs, are also VIEs, but are not
alternative investment funds, including CLO consolidated.
structures in which we provide asset management
services, some of which are consolidated. The The following table presents the incremental assets
investment funds are offered to our retail and and liabilities included in BNY Mellon’s consolidated
institutional clients to provide them with access to financial statements as of Dec. 31, 2018 and Dec. 31,
investment vehicles with specific investment 2017. The net assets of any consolidated VIE are
objectives and strategies that address the client’s solely available to settle the liabilities of the VIE and
investment needs. to settle any investors’ ownership liquidation
requests, including any seed capital invested in the
BNY Mellon earns management fees from these VIE by BNY Mellon.
funds as well as performance fees in certain funds
Consolidated investments
Dec. 31, 2018 Dec. 31, 2017
Investment Total Investment Total
Management consolidated Management consolidated
(in millions) funds Securitization investments funds Securitization investments
Securities - Available-for-sale $ — $ — $ — $ — $ 400 $ 400
Trading assets 243 400 643 516 — 516
Other assets 220 — 220 215 — 215
Total assets $ 463 (a) $ 400 $ 863 $ 731 (b) $ 400 $ 1,131
Other liabilities $ 2 $ 371 $ 373 $ 2 $ 367 $ 369
Total liabilities $ 2 (a) $ 371 $ 373 $ 2 (b) $ 367 $ 369
Nonredeemable noncontrolling interests $ 101 (a) $ — $ 101 $ 316 (b) $ — $ 316
(a) Includes VMEs with assets of $253 million, liabilities of $2 million and nonredeemable noncontrolling interests of less than $1 million.
(b) Includes VMEs with assets of $84 million, liabilities of $1 million and nonredeemable noncontrolling interests of $1 million.
BNY Mellon has 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 157

Non-consolidated VIEs relate to accounting for our investments in qualified

affordable housing and renewable energy projects.
As of Dec. 31, 2018 and Dec. 31, 2017, the following
assets and liabilities related to the VIEs where BNY The maximum loss exposure indicated in the table
Mellon is not the primary beneficiary are included in below relates solely to BNY Mellon’s investments in,
our consolidated financial statements and primarily and unfunded commitments to, the VIEs.
Non-consolidated VIEs
Dec. 31, 2018 Dec. 31, 2017
Maximum Maximum
(in millions) Assets Liabilities loss exposure Assets Liabilities loss exposure
Securities - Available-for-sale (a) $ 214 $ — $ 214 $ 203 $ — $ 203
Other 2,450 479 2,929 2,592 486 3,078
(a) Includes investments in the Company’s sponsored CLOs.
Note 14–Shareholders’ equity million of additional common stock. Our Board of

Directors approved the additional share repurchases,
Common stock which were completed in the fourth quarter of 2018.
These repurchases were in addition to the Company’s
BNY Mellon has 3.5 billion authorized shares of repurchase of $2.4 billion of common stock
common stock with a par value of $0.01 per share. previously approved by the Board and announced in
At Dec. 31, 2018, 960,425,669 shares of common June 2018.
stock were outstanding.
Share repurchases may be executed through open
Common stock repurchase program market repurchases, in privately negotiated
transactions or by other means, including through
In June 2017, in connection with the Federal repurchase plans designed to comply with Rule
Reserve’s non-objection to our 2017 capital plan, 10b5-1 and other derivative, accelerated share
BNY Mellon announced a share repurchase plan repurchase and other structured transactions. In
providing for the repurchase of up to $2.6 billion of 2018, we repurchased 63.7 million common shares at
common stock. The 2017 capital plan began in the an average price of $51.29 per common share for a
third quarter of 2017 and continued through the total of $3.3 billion. At Dec. 31, 2018, the maximum
second quarter of 2018. In June 2018, in connection dollar value of shares that may yet be purchased
with the Federal Reserve’s non-objection to our 2018 under the June 2018 program, including employee
capital plan, BNY Mellon announced a share benefit plan repurchases, totaled $1.3 billion.
repurchase plan providing for the repurchase of up to
$2.4 billion of common stock starting in the third Preferred stock
quarter of 2018 and continuing through the second
quarter of 2019. This new share repurchase plan BNY Mellon has 100 million authorized shares of
replaces all previously authorized share repurchase preferred stock with a par value of $0.01 per share.
plans. The following table summarizes BNY Mellon’s
preferred stock issued and outstanding at Dec. 31,
In December 2018, BNY Mellon announced that the 2018 and Dec. 31, 2017.
Federal Reserve approved the repurchase of $830
158 BNY Mellon

Preferred stock summary (a) Total shares issued and Carrying value (b)
outstanding (in millions)
Dec. 31, Dec. 31,
Per annum dividend rate 2018 2017 2018 2017
Series A Greater of (i) three-month LIBOR plus 0.565% for the related
distribution period; or (ii) 4.000% 5,001 5,001 $ 500 $ 500
Series C 5.2% 5,825 5,825 568 568
Series D 4.50% to but excluding June 20, 2023, then a floating rate equal to the
three-month LIBOR plus 2.46% 5,000 5,000 494 494
Series E 4.95% to and including June 20, 2020, then a floating rate equal to the
three-month LIBOR plus 3.42% 10,000 10,000 990 990
Series F 4.625% to and including Sept. 20, 2026, then a floating rate equal to
the three-month LIBOR plus 3.131% 10,000 10,000 990 990
Total 35,826 35,826 $ 3,542 $ 3,542
(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 C, Series D, Series E and Series F preferred stock is recorded net of issuance costs.
Holders of both the Series A and Series C preferred purchase, redeem or otherwise acquire, shares of our
stock are entitled to receive dividends on each common stock or any of our shares that rank junior to
dividend payment date (March 20, June 20, the preferred stock as to the payment of dividends
September 20 and December 20 of each year), if and/or the distribution of any assets on any
declared by BNY Mellon’s Board of Directors. liquidation, dissolution or winding-up of BNY
Holders of the Series D preferred stock are entitled to Mellon will be prohibited, subject to certain
receive dividends, if declared by BNY Mellon’s restrictions, in the event that we do not declare and
Board of Directors, on each June 20 and December pay in full preferred dividends for the then current
20, to but excluding June 20, 2023; and on each dividend period of the Series A preferred stock or the
March 20, June 20, September 20 and December 20, last preceding dividend period of the Series C, Series
from and including June 20, 2023. Holders of the D, Series E and Series F preferred stock.
Series E preferred stock are entitled to receive
dividends, if declared by BNY Mellon’s Board of All of the outstanding shares of the Series A preferred
Directors, on each June 20 and December 20, to and stock are owned by Mellon Capital IV, which will
including June 20, 2020; and on each March 20, June pass through any dividend on the Series A preferred
20, September 20 and December 20, from and stock to the holders of its Normal Preferred Capital
including Sept. 20, 2020. Holders of the Series F Securities. All of the outstanding shares of the Series
preferred stock are entitled to receive dividends, if C, Series D, Series E and Series F preferred stock are
declared by BNY Mellon’s Board of Directors, on held by the depositary of the depositary shares, which
each March 20 and September 20, commencing will pass through the applicable portion of any
March 20, 2017, to and including Sept. 20, 2026; and dividend on the Series C, Series D, Series E and
on each March 20, June 20, September 20 and Series F preferred stock to the holders of record of
December 20, commencing Dec. 20, 2026. BNY their respective depositary shares.
Mellon’s ability to declare or pay dividends on, or
The table below presents the dividends paid on our preferred stock.
Dividend paid per preferred share

Depositary
shares 2018 2017 2016
per share per share in millions per share in millions per share in millions
Series A 100 (a) $ 4,055.55 $ 20 $ 4,055.55 $ 20 $ 4,055.55 $ 20
Series C 4,000 5,200.00 31 5,200.00 31 5,200.00 30
Series D 100 4,500.00 22 4,500.00 22 4,500.00 22
Series E 100 4,950.00 50 4,950.00 50 4,950.00 50
Series F 100 4,625.00 46 5,254.51 52 N/A —
Total $ 169 $ 175 $ 122
(a) Represents Normal Preferred Capital Securities.
BNY Mellon 159

The preferred stock is not subject to the operation of a As of Dec. 31, 2018 and Dec. 31, 2017, BNY Mellon
sinking fund and is not convertible into, or and our U.S. bank subsidiaries were “well
exchangeable for, shares of our common stock or any capitalized.”
other class or series of our other securities. We may
redeem the Series A or Series C preferred stock, in Our consolidated and largest bank subsidiary, The
whole or in part, at our option. We may also, at our Bank of New York Mellon, regulatory capital ratios
option, redeem the shares of the Series D preferred are shown below.
stock, in whole or in part, on or after the dividend
payment date in June 2023, the Series E preferred
Consolidated and largest bank
stock, in whole or in part, on or after the dividend subsidiary regulatory capital Dec. 31,
payment date in June 2020, and the Series F preferred ratios (a) 2018 2017 (b)
stock, in whole or in part, on or after the dividend Consolidated regulatory capital
ratios:
payment date in September 2026. The Series C, CET1 ratio 10.7% 10.7%
Series D, Series E or Series F preferred stock can be Tier 1 capital ratio 12.8 12.7
redeemed, in whole but not in part, at any time within Total capital ratio 13.6 13.4
90 days following a regulatory capital treatment event Tier 1 leverage ratio 6.6 6.6
SLR (c) 6.0 N/A
(as defined in each of the Series C, Series D, Series E
and Series F’s Certificates of Designation). The Bank of New York Mellon
regulatory capital ratios:
Redemption of the preferred stock is subject to the
CET1 ratio 14.0% 14.1%
prior approval of the Federal Reserve. Tier 1 capital ratio 14.3 14.4
Total capital ratio 14.7 14.7
Terms of the Series A, Series C, Series D, Series E Tier 1 leverage ratio 7.6 7.6
and Series F preferred stock are more fully described SLR (c) 6.8 N/A
in each of their Certificates of Designations, each of (a) For our CET1, Tier 1 capital and Total capital ratios, our
effective capital ratios under U.S. capital rules are the lower
which is filed as an Exhibit to BNY Mellon’s Annual
of the ratios as calculated under the Standardized and
Report on Form 10-K for the year ended Dec. 31, Advanced Approaches, which for the periods noted above
2018. was the Advanced Approaches. The Tier 1 leverage ratio is
based on Tier 1 capital and quarterly average total assets.
Temporary equity 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
Temporary equity was $129 million at Dec. 31, 2018 largest bank subsidiary, to qualify as “well capitalized,” its
and $179 million at Dec. 31, 2017. Temporary equity CET1, Tier 1 capital, Total capital and Tier 1 leverage ratios
represents the redemption value recorded for must be at least 6.5%, 8%, 10% and 5%, respectively.
(b) Reflects transitional adjustments required in 2017 under the
redeemable noncontrolling interests resulting from
U.S. capital rules.
equity-classified share-based payment arrangements (c) The SLR is based on Tier 1 capital and total leverage
that are currently redeemable or are expected to exposure, which includes certain off-balance sheet exposures
become redeemable. and became a binding measure on Jan. 1, 2018. For The
Bank of New York Mellon to qualify as “well capitalized,”
its SLR must be at least 6%.
Capital adequacy
Regulators establish certain levels of capital for

BHCs and banks, including BNY Mellon and our Failure to satisfy regulatory standards, including
bank subsidiaries, in accordance with established “well capitalized” status or capital adequacy rules
quantitative measurements. For the Parent to more generally, could result in limitations on our
maintain its status as a FHC, our bank subsidiaries activities and adversely affect our financial condition.
and BNY Mellon must, among other things, qualify If a BHC such as BNY Mellon or bank such as The
as “well capitalized.” Bank of New York Mellon or BNY Mellon, N.A. fails
to qualify as “adequately capitalized,” regulatory
sanctions and limitations are imposed.
160 BNY Mellon

The following table presents our capital components The following table presents the amount of capital by
and RWAs determined under the Standardized and which BNY Mellon and our largest bank subsidiary,
Advanced Approaches and the average assets used for The Bank of New York Mellon, exceeded the capital
leverage capital purposes. thresholds determined under U.S. capital rules.
Capital components and risk- Capital above thresholds at Dec. 31, 2018
weighted assets Dec. 31, The Bank of
(in millions) 2018 2017 (a) New York
CET1: (in millions) Consolidated (a) Mellon (b)
Common shareholders’ equity $ 37,096 $ 37,859 CET1 $ 5,217 $ 10,036
Adjustments for: Tier 1 capital 6,224 8,372
Goodwill and intangible assets (b) (18,806) (18,684) Total capital 4,235 6,273
Net pension fund assets (320) (169) Tier 1 leverage ratio 8,284 6,441
Equity method investments (361) (372) SLR (c) 3,647 2,336
Deferred tax assets (42) (33) (a) Based on minimum required standards, with applicable
Other — (8) buffers.
Total CET1 17,567 18,593 (b) Based on well capitalized standards.
Other Tier 1 capital: (c) SLR became a binding measure on Jan. 1, 2018.
Preferred stock 3,542 3,542
Deferred tax assets — (8)
Net pension fund assets — (42)
Other (65) (41)
Total Tier 1 capital $ 21,044 $ 22,044
Tier 2 capital:
Subordinated debt $ 1,250 $ 1,250
Allowance for credit losses 252 261
Other (10) (12)
Total Tier 2 capital –
Standardized Approach 1,492 1,499
Excess of expected credit losses 65 31
Less: Allowance for credit losses 252 261
Total Tier 2 capital – Advanced
Approach $ 1,305 $ 1,269
Total capital:
Standardized Approach $ 22,536 $ 23,543
Advanced Approach $ 22,349 $ 23,313
Risk-weighted assets:
Standardized Approach $ 149,618 $ 155,621
Advanced Approach:
Credit Risk $ 92,917 $ 101,681
Market Risk 3,454 3,657
Operational Risk 68,300 68,688
Total Advanced Approach $ 164,671 $ 174,026
Average assets for Tier 1 leverage

ratio $ 319,007 $ 331,600
Total leverage exposure for SLR
purposes (c) $ 347,943 N/A
(a) Reflects transitional adjustments to CET1, Tier 1 capital and
Tier 2 capital required in 2017 under the U.S. capital rules.
(b) Reduced by deferred tax liabilities associated with intangible
assets and tax deductible goodwill.
(c) SLR became a binding measure on Jan. 1, 2018.
BNY Mellon 161

Note 15–Other comprehensive income (loss)
Components of other comprehensive

income (loss) Year ended Dec. 31,
2018 2017 2016
Tax Tax Tax
Pre-tax (expense) After-tax Pre-tax benefit After-tax Pre-tax (expense) After-tax
(in millions) amount benefit amount amount (expense) amount amount benefit amount
Foreign currency translation:
Foreign currency translation adjustments arising
during the period (a) $ (157) $ (156) $ (313) $ 659 $ 194 $ 853 $ (518) $ (332) $ (850)
Total foreign currency translation (157) (156) (313) 659 194 853 (518) (332) (850)
Unrealized (loss) gain on assets available-for-sale:
Unrealized (loss) gain arising during period (542) 126 (416) 237 (84) 153 (388) 146 (242)
Reclassification adjustment (b) 48 (12) 36 (3) — (3) (75) 26 (49)
Net unrealized (loss) gain on assets available-
for-sale (494) 114 (380) 234 (84) 150 (463) 172 (291)
Defined benefit plans:
Net (loss) gain arising during the period (244) 55 (189) 454 (112) 342 (151) 43 (108)
Foreign exchange adjustment — — — 1 — 1 (1) 1 —
Amortization of prior service credit, net loss and
initial obligation included in net periodic
benefit cost (b) 93 (24) 69 100 (32) 68 88 (31) 57
Total defined benefit plans (151) 31 (120) 555 (144) 411 (64) 13 (51)
Unrealized (loss) gain on cash flow hedges:
Unrealized hedge (loss) gain arising during
period (15) 4 (11) 33 (9) 24 (52) 18 (34)
Reclassification of net (gain) loss to net income:
FX contracts - trading revenue — — — (2) 1 (1) 16 (6) 10
FX contracts - other revenue (2) — (2) (8) 2 (6) — — —
FX contracts - net interest revenue — — — — — — 18 (6) 12
FX contracts - staff expense 4 (1) 3 (10) 2 (8) 11 (3) 8
Total reclassifications to net income (b) 2 (1) 1 (20) 5 (15) 45 (15) 30
Net unrealized (loss) gain on cash flow
hedges (13) 3 (10) 13 (4) 9 (7) 3 (4)
Total other comprehensive (loss) income $ (815) $ (8) $ (823) $ 1,461 $ (38) $ 1,423 $ (1,052) $ (144) $ (1,196)
(a) Includes the impact of hedges of net investments in foreign subsidiaries. See Note 22 for additional information.
(b) The reclassification adjustment related to the unrealized gain (loss) on assets available-for-sale is recorded as net securities gains 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 staff expense
on the consolidated income statement. See Note 22 for the location of the reclassification adjustment related to cash flow hedges on the consolidated
income statement.
Changes in accumulated other comprehensive income (loss) attributable to The Bank of New York Mellon Corporation shareholders
ASC 820 Adjustments Unrealized gain Unrealized Total accumulated
Foreign Other post- (loss) on assets gain (loss) on other comprehensive
currency retirement available-for- cash flow income (loss),
(in millions) translation Pensions benefits sale hedges net of tax
2015 ending balance $ (1,632) $ (1,250) $ (47) $ 327 $ 2 $ (2,600)
Change in 2016 (819) (56) 5 (291) (4) (1,165)
2016 ending balance $ (2,451) $ (1,306) $ (42) $ 36 $ (2) $ (3,765)
Change in 2017 838 419 (8) 150 9 1,408
2017 ending balance $ (1,613) $ (887) $ (50) $ 186 $ 7 $ (2,357)
Adjustment for the cumulative effect of applying
ASU 2017-12 for derivatives and hedging — — — (2) — (2)
Adjusted balance at Jan. 1, 2018 (1,613) (887) (50) 184 7 (2,359)
Change in 2018 (302) (118) (2) (380) (10) (812)
2018 ending balance $ (1,915) $ (1,005) $ (52) $ (196) $ (3) $ (3,171)
162 BNY Mellon

Note 16–Stock-based compensation Stock options
Our Long-Term Incentive Plans provide for the Our Long-Term Incentive Plans provide for the
issuance of stock options, restricted stock, restricted issuance of stock options at fair market value at the
stock units (“RSUs”) and other stock-based awards to date of grant to officers and employees of BNY
employees and directors of BNY Mellon. At Dec. 31, Mellon. Generally, each option granted is exercisable
2018, under the Long-Term Incentive Plan approved between one and 10 years from the date of grant. No
in April 2014, we may issue 23,524,349 new stock- stock options were granted in 2018, 2017 and 2016.
based awards. Of this amount, 8,761,715 shares
(subject to potential increase as provided in the Long- Compensation costs that were charged against income
Term Incentive Plan) may be issued as restricted were less than $1 million in both 2018 and 2017 and
stock or RSUs. Stock-based compensation expense $2 million in 2016. The income tax benefit
related to retirement eligibility vesting totaled $93 recognized in the consolidated income statement
million in 2018, $109 million in 2017 and $106 related to compensation costs was less than $1
million in 2016. million in 2018 and 2017 and $1 million in 2016.
A summary of the status of our options as of Dec. 31, 2018, and changes during the year, is presented below:
Stock option activity Weighted-average

Shares subject Weighted-average remaining contractual
to option exercise price term (in years)
Balance at Dec. 31, 2017 9,302,140 $ 27.27 2.7
Granted — —
Exercised (2,539,135) 31.29
Canceled/Expired (48,722) 37.56
Balance at Dec. 31, 2018 6,714,283 $ 25.67 2.0
Vested and expected to vest at Dec. 31, 2018 6,714,283 25.67 2.0
Exercisable at Dec. 31, 2018 6,714,283 25.67 2.0
Stock options outstanding at Dec. 31, 2018

Options outstanding Options exercisable (a)
Weighted-average
remaining contractual Weighted-average Weighted-average
Range of exercise prices Outstanding life (in years) exercise price Exercisable exercise price
$ 18 to 31 6,714,283 2.0 $ 25.67 6,714,283 $ 25.67
(a) At Dec. 31, 2017 and Dec. 31, 2016, 9,302,140 and 21,241,568 options were exercisable at a weighted-average price per common share
of $27.27 and $32.57, respectively.
$3 million in 2016. Consistent with the adoption of

Aggregate intrinsic value of options
(in millions) 2018 2017 2016 ASU 2016-09, the tax benefits in 2018 and 2017 were
Outstanding at Dec. 31, $ 144 $ 247 $ 315 recognized in the provision for income taxes and in
Exercisable at Dec. 31, $ 144 $ 247 $ 315 2016 were recorded to additional paid-in capital.
Restricted stock, RSUs and Performance share units

The total intrinsic value of options exercised was $61
million in 2018, $159 million in 2017 and $122 Restricted stock and RSUs are granted under our
million in 2016. long-term incentive plans at no cost to the recipient.
These awards are subject to forfeiture until certain
Cash received from option exercises totaled $80 restrictions have lapsed, including continued
million in 2018, $431 million in 2017 and $438 employment, for a specified period. The recipient of
million in 2016. The actual excess tax benefit a share of restricted stock is entitled to voting rights
realized for the tax deductions from options exercised and generally is entitled to dividends on the common
totaled $10 million in 2018, $16 million in 2017 and
BNY Mellon 163

stock. An RSU entitles the recipient to receive a As of Dec. 31, 2018, $207 million of total
share of common stock after the applicable unrecognized compensation costs related to non-
restrictions lapse. The recipient generally is entitled vested PSUs, restricted stock and RSUs is expected to
to receive cash payments equivalent to any dividends be recognized over a weighted-average period of 2.1
paid on the underlying common stock during the years.
period the RSU is outstanding but does not receive
voting rights. The total fair value of restricted stock, RSUs and
PSUs that vested was $289 million in 2018, $260
The fair value of restricted stock and RSUs is equal to million in 2017 and $236 million in 2016. The actual
the fair market value of our common stock on the excess tax benefit realized for the tax deductions from
date of grant. The expense is recognized over the shares vested totaled $26 million in 2018, $34 million
vesting period, which is generally zero to four years. in 2017 and $8 million in 2016. Consistent with the
The total compensation expense recognized for adoption of ASU 2016-09, the tax benefits in 2018
restricted stock and RSUs was $270 million in 2018, and 2017 were recognized in the provision for income
$273 million in 2017 and $256 million in 2016. The taxes and in 2016 were recorded to additional paid-in
total income tax benefit recognized in the capital.
consolidated income statement related to
compensation costs was $65 million in 2018, $66 Subsidiary Long-Term Incentive Plans
million in 2017 and $91 million in 2016.
BNY Mellon also has several subsidiary Long-Term
BNY Mellon’s Executive Committee members were Incentive Plans which have issued restricted
granted a target award of 362,798 performance share subsidiary shares to certain employees. These share
units (“PSUs”) in 2018, 793,847 in 2017 and 548,391 awards are subject to forfeiture until certain
in 2016. The 2018 awards cliff vest in 3 years based restrictions have lapsed, including continued
on average revenue growth and average operating employment for a specified period of time. The
margin, both as adjusted. These awards are classified shares are non-voting and non-dividend paying.
as equity and marked-to-market to earnings as the Once the restrictions lapse, which generally occurs in
earnout percentages are determined at the discretion three to five years, the shares can only be sold, at the
of the Human Resources Compensation Committee option of the employee, to BNY Mellon at a price
based on a payout table. The 2017 and 2016 awards based generally on the fair value of the subsidiary at
cliff vest in 3 years based on operating earnings per the time of repurchase. In certain instances BNY
share with the potential of a risk modifier based on Mellon has an election to call the shares.
appropriate growth in RWAs. These awards are
liability classified as they contain an interest rate Note 17–Employee benefit plans
condition that is not linked to performance or market
and marked-to-market to earnings as the earnout BNY Mellon has defined benefit and/or defined
percentages are determined at the discretion of the contribution retirement plans and other post-
Human Resources Compensation Committee based retirement plans providing healthcare benefits.
on a payout table.
The defined benefit pension plans cover
The following table summarizes our non-vested PSU, approximately 12,400 U.S. employees and
restricted stock and RSU activity for 2018. approximately 14,700 non-U.S. employees.
BNY Mellon has one qualified and several non-

Non-vested PSU, restricted stock Weighted-
and RSU activity average fair qualified defined benefit pension plans in the U.S.
Number of value at grant and several pension plans overseas.
shares date
Non-vested PSUs, restricted stock
and RSUs at Dec. 31, 2017 16,731,332 $ 42.42 Effective June 30, 2015, the benefit accruals under
Granted 5,125,001 57.67 the U.S. qualified and nonqualified defined benefit
Vested (7,005,313) 39.06 plans were frozen. This change resulted in no
Forfeited (639,308) 45.90 additional benefits being earned by participants in
Non-vested PSUs, restricted
stock and RSUs at Dec. 31, 2018 14,211,712 $ 49.43 those plans based on service or pay after June 30,
2015. These plans were previously closed to new
164 BNY Mellon

participants effective Dec. 31, 2010, at which time a certain UK employees. This change results in no
non-elective contribution was added to the additional benefits being earned by participants in
Company’s defined contribution plan for employees that plan based on service or pay after Dec. 31, 2018.
not eligible to join the pension plan. Employees Most UK employees currently earn benefits only on a
previously participating in the pension plan received defined contribution basis. UK employees impacted
this non-elective contribution starting July 1, 2015. by the pension plan freeze will begin earning benefits
on a defined contribution basis in 2019.
Effective Dec. 31, 2018, the benefit accruals were
frozen under our largest foreign plan, which covers
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.
Pension Benefits Healthcare Benefits

Domestic Foreign Domestic Foreign
(dollar amounts in millions) 2018 2017 2018 2017 2018 2017 2018 2017
Weighted-average assumptions used to determine benefit
obligations
Discount rate 4.45% 3.97% 2.95% 2.45% 4.45% 3.97% 3.10% 2.50%
Rate of compensation increase N/A N/A 2.98 3.02 3.00 3.00 N/A N/A
Cash balance interest crediting rate 4.00 4.00 N/A N/A N/A N/A N/A N/A
Change in benefit obligation (a)
Benefit obligation at beginning of period $ (4,405) $ (4,274) $ (1,322) $ (1,248) $ (175) $ (169) $ (4) $ (2)
Service cost — — (28) (31) (1) (1) — —
Interest cost (169) (180) (32) (33) (7) (7) — —
Employee contributions — — — (1) — — — —
Actuarial gain (loss) 219 (165) 173 88 22 (10) (1) (1)
Curtailments — — 11 — — — — —
Benefits paid 232 214 25 31 12 12 — —
Foreign exchange adjustment N/A N/A 69 (128) N/A N/A — (1)
Benefit obligation at end of period (4,123) (4,405) (1,104) (1,322) (149) (175) (5) (4)
Change in fair value of plan assets
Fair value at beginning of period 5,496 4,906 1,393 1,090 107 97 — —
Actual return on plan assets (257) 783 1 128 (8) 10 — —
Employer contributions 33 21 22 93 12 12 — —
Employee contributions — — — 1 — — — —
Benefit payments (232) (214) (25) (31) (12) (12) — —
Foreign exchange adjustment N/A N/A (75) 112 N/A N/A — —
Fair value at end of period 5,040 5,496 1,316 1,393 99 107 — —
Funded status at end of period $ 917 $ 1,091 $ 212 $ 71 $ (50) $ (68) $ (5) $ (4)
Amounts recognized in accumulated other comprehensive
loss (income) consist of:
Net loss (gain) $ 1,598 $ 1,294 $ 105 $ 255 $ 84 $ 97 $ — $ (1)
Prior service cost (credit) — — 1 1 (40) (49) — —
Total (before tax effects) $ 1,598 $ 1,294 $ 106 $ 256 $ 44 $ 48 $ — $ (1)
(a) The benefit obligation for pension benefits is the projected benefit obligation, and for healthcare benefits, it is the accumulated benefit obligation.
A number of key assumptions and measurement date The discount rate for U.S. pension plans was
values determine pension expense. The key elements determined after reviewing equivalent rates obtained
include the long-term rate of return on plan assets, the by discounting the pension plans’ expected cash flows
discount rate, the market-related value of plan assets using various high-quality, long-term corporate bond
and the price used to value stock in the Employee yield curves. We also reviewed the results of several
Stock Ownership Plan (“ESOP”). models that matched bonds to our pension cash flows.
After reviewing the various indices and models, we
selected a discount rate of 4.45% as of Dec. 31, 2018.
BNY Mellon 165

The discount rates for foreign pension plans are based Actuarial gains (loss) on the benefit obligation for
on high-quality corporate bond rates in countries that both the domestic and foreign pension plans in 2018,
have an active corporate bond market. In those as well as the domestic pension plans in 2017, were
countries with no active corporate bond market, primarily attributable to changes in discount rates.
discount rates are based on local government bond The actuarial gain on the benefit obligation for
rates plus a credit spread. foreign pension plans in 2017 was primarily
attributable to a decrease in assumed inflation rates
for pension plans in the UK.
Net periodic benefit (credit) cost Pension Benefits Healthcare Benefits

Domestic Foreign Domestic Foreign
(dollar amounts in millions) 2018 2017 2016 2018 2017 2016 2018 2017 2016 2018 2017 2016
Weighted-average assumptions as
of Jan. 1:
Market-related value of plan assets $ 5,238 $ 5,026 $ 4,830 $ 1,266 $ 994 $ 994 $ 108 $ 102 $ 97 N/A N/A N/A
Discount rate 3.97% 4.35% 4.48% 2.45% 2.53% 3.45% 3.97% 4.35% 4.48% 2.50% 2.60% 3.60%
Expected rate of return on plan assets 6.625 6.625 7.00 4.56 4.61 5.35 6.625 6.625 7.00 N/A N/A N/A
Rate of compensation increase N/A N/A N/A 3.02 3.60 3.51 3.00 3.00 3.00 N/A N/A N/A
Cash balance interest crediting rate 4.00 4.00 4.00 N/A N/A N/A N/A N/A N/A N/A N/A N/A
Components of net periodic benefit
(credit) cost :
Service cost $ — $ — $ — $ 28 $ 31 $ 29 $ 1 $ 1 $ 1 $ — $ — $ —
Interest cost 169 180 182 32 33 36 7 7 8 — — —
Expected return on assets (339) (325) (330) (57) (50) (51) (8) (7) (7) — — —
Amortization of:
Prior service cost (credit) — — — — — 1 (9) (10) (10) — — —
Net actuarial loss 68 67 69 22 35 17 7 6 8 — — —
Settlement loss 5 2 2 — — 1 — — — — — —
Net periodic benefit (credit) cost $ (97) $ (76) $ (77) $ 25 $ 49 $ 33 $ (2) $ (3) $ — $ — $ — $ —
Changes in other comprehensive loss (income) in 2018 Pension Benefits Healthcare Benefits
(in millions) Domestic Foreign Domestic Foreign
Net loss (gain) arising during period $ 377 $ (128) $ (6) $ 1
Recognition of prior years’ net (loss) (73) (22) (7) —
Recognition of prior years’ service credit — — 9 —
Total recognized in other comprehensive (income) loss (before tax effects) $ 304 $ (150) $ (4) $ 1
Domestic Foreign
(in millions) 2018 2017 2018 2017
Pension benefits:
Prepaid benefit cost $ 1,077 $ 1,282 $ 280 $ 134
Accrued benefit cost (160) (191) (68) (63)
Total pension benefits $ 917 $ 1,091 $ 212 $ 71
Healthcare benefits:
Accrued benefit cost $ (50) $ (68) $ (5) $ (4)
Total healthcare benefits $ (50) $ (68) $ (5) $ (4)
166 BNY Mellon

The accumulated benefit obligation for all defined benefit plans was $5.2 billion at Dec. 31, 2018 and $5.7 billion at
Dec. 31, 2017.
Plans with obligations in excess of plan Pension Benefits Healthcare Benefits

assets Domestic Foreign Domestic Foreign
(in millions) 2018 2017 2018 2017 2018 2017 2018 2017
Projected benefit obligation $ 160 $ 191 $ 245 $ 244 (a) N/A N/A N/A N/A
Fair value of plan assets — — 177 181 (a) N/A N/A N/A N/A
Accumulated benefit obligation 160 191 67 61 80 88 5 4
Fair value of plan assets — — 27 25 — — — —
(a) Amounts reported in 2017 have been revised based on the clarification provided in ASU 2018-14.
Assumed healthcare cost trend Plan contributions
The assumed healthcare cost trend rate used in BNY Mellon expects to make cash contributions to
determining domestic benefit expense for 2019 is fund its defined benefit pension plans in 2019 of $14
6.00%, decreasing to 4.75% in 2024 for pre-Medicare million for the domestic plans and $19 million for the
costs and 5.50% decreasing to 4.75% in 2022 for foreign plans.
Medicare costs. This projection is based on various
economic models that forecast a decreasing growth BNY Mellon expects to make cash contributions to
rate of healthcare expenses over time. The fund its post-retirement healthcare plans in 2019 of
underlying assumption is that healthcare expense $11 million for the domestic plans and less than $1
growth cannot outpace gross national product growth million for the foreign plans.
indefinitely, and over time a lower equilibrium
growth rate will be achieved. Further, the ultimate Investment strategy and asset allocation
growth rate of 4.75% bears a reasonable relationship
to the discount rate. In addition, 2020 costs are BNY Mellon is responsible for the administration of
assumed to increase beyond the assumed health care various employee pension and healthcare post-
cost trend rate for 2019 due to the assumed retirement benefits plans, both domestically and
reinstatement of the health insurer fee which was internationally. The domestic plans are administered
waived. by BNY Mellon’s Benefits Administration
Committee, a named fiduciary. Subject to the
The following benefit payments for BNY Mellon’s following, at all relevant times, BNY Mellon’s
pension and healthcare plans, which reflect expected Benefits Investment Committee, another named
future service as appropriate, are expected to be paid fiduciary to the domestic plans, is responsible for the
over the next 10 years: investment of plan assets. The Benefits Investment
Committee’s responsibilities include the investment
of all domestic defined benefit plan assets, as well as
Expected benefit payments
(in millions) Domestic Foreign
the determination of investment options offered to
Pension benefits: participants in all domestic defined contribution
Year 2019 $ 265 $ 19 plans. The Benefits Investment Committee conducts
2020 266 20 periodic reviews of investment performance, asset
2021 264 20 allocation and investment manager suitability. In
2022 261 22
2023 266 24
addition, the Benefits Investment Committee has
2024-2028 1,297 130 oversight of the Regional Governance Committees
Total pension benefits $ 2,619 $ 235 for the foreign defined benefit plans.
Healthcare benefits:
Year 2019 $ 11 $ — Our investment objective for U.S. and foreign plans is
2020 12 —
2021 12 —
to maximize total return while maintaining a broadly
2022 11 — diversified portfolio for the primary purpose of
2023 11 — satisfying obligations for future benefit payments.
2024-2028 50 1
Total healthcare benefits $ 107 $ 1
BNY Mellon 167

Equities are the main holding of the plans. Cash and currency
Alternative investments (including private equities)
and fixed-income securities provide diversification This category consists primarily of foreign currency
and, in certain cases, lower the volatility of returns. balances and is included in Level 1 of the valuation
In general, equity securities and alternative hierarchy. Foreign currency is translated monthly
investments within any domestic plan’s portfolio can based on current exchange rates.
be maintained in the range of 30% to 70% of total
plan assets, fixed-income securities can range from Common and preferred stock and mutual funds
20% to 50% of plan assets and cash equivalents can
be held in amounts ranging from 0% to 5% of plan These investments include equities and mutual funds
assets. Actual asset allocation within the approved and are valued at the closing price reported in the
ranges varies from time to time based on economic active market in which the individual securities are
conditions (both current and forecast) and the advice traded, if available. Where there are no readily
of professional advisors. available market quotations, we determine fair value
primarily based on pricing sources with reasonable
Our pension assets were invested as follows at Dec. levels of price transparency. Common and preferred
31, 2018 and Dec. 31, 2017: stock and mutual funds are included in Level 1 of the
valuation hierarchy.
Asset allocations Domestic Foreign
2018 2017 2018 2017 Collective trust funds
Equities 52% 63% 48% 51%
Fixed income 45 33 36 33 Collective trust funds include commingled and U.S.
Alternative investment 2 2 9 9 equity funds that have no readily available market
Private equities 1 1 — —
quotations. The fair value of the funds is based on
Real estate — — 4 4
Cash — 1 3 3 the securities in the portfolio, which typically are the
Total pension benefits 100% 100% 100% 100% 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
We held no The Bank of New York Mellon monthly basis. Collective trust funds are included in
Corporation stock in our pension plans at Dec. 31, Level 2 of the valuation hierarchy.
2018 and Dec. 31, 2017. Assets of the U.S. post-
retirement healthcare plan are invested in an Fixed-income investments
insurance contract.
Fixed-income investments include U.S. Treasury
Fair value measurement of plan assets securities, U.S. government agencies, sovereign
government obligations, U.S. corporate bonds and
In accordance with ASC 715, Compensation - foreign corporate debt funds. U.S. Treasury securities
Retirement Benefits, BNY Mellon has established a are valued at the closing price reported in the active
three-level hierarchy for fair value measurements of market in which the individual security is traded and
its pension plan assets based upon the transparency of included as Level 1 of the valuation hierarchy. U.S.
inputs to the valuation of an asset as of the government agencies, sovereign government
measurement date. The valuation hierarchy is obligations, U.S. corporate bonds and foreign
consistent with guidance in ASC 820, Fair Value corporate debt funds are valued based on quoted
Measurement, which is detailed in Note 19. prices for comparable securities with similar yields
and credit ratings. When quoted prices are not
The following is a description of the valuation available for identical or similar bonds, the bonds are
methodologies used for assets measured at fair value, valued using discounted cash flows that maximize
as well as the general classification of such assets observable inputs, such as current yields of similar
pursuant to the valuation hierarchy. instruments, but includes adjustments for certain risks
that may not be observable, such as credit and
liquidity risks. U.S. government agencies, sovereign
government obligations, U.S. corporate bonds and
168 BNY Mellon

foreign corporate debt funds are primarily included in Plan assets measured at fair value on a recurring basis—
foreign plans at Dec. 31, 2018
Level 2 of the valuation hierarchy.
Total fair
(in millions) Level 1 Level 2 Level 3 value
Other assets measured at NAV Equity funds $ — $ 194 $ — $ 194
Sovereign/government
obligation funds — 126 — 126
Other assets measured at NAV include funds of funds Corporate debt funds — 418 — 418
and venture capital and partnership interests, property Cash and currency 356 — — 356
funds and other funds. There are no readily available Total foreign plan assets in
$ 356 $ 738 $ — $ 1,094
the fair value hierarchy
market quotations for these funds. The fair value of Other assets measured at NAV 222
the funds of funds is based on NAVs of the funds in Total foreign plan assets, at
fair value $ 1,316
the portfolio, which reflects the value of the
underlying securities. The fair value of the
underlying securities is typically the amount that the
fund might reasonably expect to receive upon selling Plan assets measured at fair value on a recurring basis—
those hard to value or illiquid securities within the domestic plans at Dec. 31, 2017
portfolios. These funds are either valued on a daily or (in millions) Level 1 Level 2 Level 3
Total fair
value
monthly basis. The fair value of the venture capital Common and preferred stock:
and partnership interests is based on the pension U.S. equity $ 1,815 $ — $ — $ 1,815
plan’s ownership percentage of the fair value of the Non-U.S. equity 243 — — 243
underlying funds as provided by the fund managers. Collective trust funds:
Commingled — 193 — 193
These funds are typically valued on a quarterly basis. U.S. equity — 1,389 — 1,389
The pension plan’s venture capital and partnership Fixed income:
interests are valued at NAV as a practical expedient U.S. Treasury securities 452 — — 452
for fair value. U.S. government agencies — 48 — 48
Sovereign government
obligations 5 6 — 11
The following tables present the fair value of each U.S. corporate bonds — 910 — 910
major category of plan assets as of Dec. 31, 2018 and Other — 100 — 100
Dec. 31, 2017, by captions and by ASC 820, Fair Mutual funds 163 — — 163
Total domestic plan assets in
Value Measurement, valuation hierarchy. the fair value hierarchy $ 2,678 $ 2,646 $ — $ 5,324
Other assets measured at NAV:
Funds of funds 129
Plan assets measured at fair value on a recurring basis—
domestic plans at Dec. 31, 2018 Venture capital and
partnership interests 43
Total fair
(in millions) Level 1 Level 2 Level 3 value Total domestic plan assets, at
fair value $ 5,496
Common and preferred stock:
U.S. equity $ 1,514 $ — $ — $ 1,514
Non-U.S. equity 160 — — 160
Collective trust funds:
Plan assets measured at fair value on a recurring basis—
Commingled — 435 — 435 foreign plans at Dec. 31, 2017
U.S. equity — 934 — 934 Total fair
Fixed income: (in millions) Level 1 Level 2 Level 3 value
U.S. Treasury securities 630 — — 630 Equity funds $ 434 $ 277 $ — $ 711
U.S. government agencies — 44 — 44 Sovereign/government
obligation funds — 104 — 104
Sovereign government
obligations 3 5 — 8 Corporate debt funds — 345 — 345
U.S. corporate bonds — 972 — 972 Cash and currency 41 — — 41
Other — 69 — 69 Total foreign plan assets in
the fair value hierarchy $ 475 $ 726 $ — $ 1,201
Mutual funds 114 — — 114
Total domestic plan assets in Other assets measured at NAV 192
the fair value hierarchy $ 2,421 $ 2,459 $ — $ 4,880 Total foreign plan assets, at fair
value $ 1,393
Other assets measured at NAV:
Funds of funds 130
Venture capital and
partnership interests 30
Total domestic plan assets, at
fair value $ 5,040
BNY Mellon 169

Changes in Level 3 fair value measurements Assets valued using NAV at Dec. 31, 2017
Redemption
(dollar amounts Fair Unfunded Redemption notice
The table below presents a rollforward of the plan in millions) value commitments frequency period
assets, for the year ended Dec. 31, 2017 (including Funds of funds (a) $ 152 $ — Monthly 30-45 days
the change in fair value), for financial instruments Venture capital and
partnership
classified in Level 3 of the valuation hierarchy. interests (b) 128 49 N/A N/A
Property funds (c) 51 — Monthly 0-90 days
Corporate debt 20 — N/A N/A
Fair value measurements using significant unobservable Other contracts (d) 13 — N/A N/A
inputs—foreign plans—for the year ended Dec. 31, 2017 Total $ 364 $ 49
Corporate (a) Funds of funds include multi-strategy hedge funds that utilize
(in millions) debt funds investment strategies that invest over both long-term investment and
Fair value at Dec. 31, 2016 $ 17 short-term investment horizons.
Transfers out of Level 3 (20) (b) Venture capital and partnership interests do not have redemption
Total gains included in plan assets 3 rights. Distributions from such funds will be received as the
Fair value at Dec. 31, 2017 $ — underlying investments are liquidated.
Change in unrealized gains or (losses) for the (c) Property funds include funds invested in regional real estate
period included in earnings for assets held at the vehicles that hold direct interest in real estate properties.
end of the reporting period $ — (d) Other contracts include assets invested in pooled accounts at
insurance companies that are privately valued by the asset manager.
Funds of funds and venture capital and partnership Defined contribution plans
interests valued using NAV per share
BNY Mellon sponsors defined contribution plans in
BNY Mellon had pension and post-retirement plan the U.S. and in certain non-U.S. locations, all of
assets invested in funds of funds, venture capital and which are administered in accordance with local laws.
partnership interests, property funds and other The most significant defined contribution plan is The
contracts valued using NAV. The funds of funds Bank of New York Mellon Corporation 401(k)
investments are redeemable at NAV under agreements Savings Plan sponsored by the Company in the U.S.
with the funds of funds managers. and covers substantially all U.S. employees.
Assets valued using NAV at Dec. 31, 2018 Under The Bank of New York Mellon Corporation
(dollar amounts Fair Unfunded Redemption
Redemption 401(k) Savings Plan, the Company matched 100% of
notice
in millions) value commitments frequency period the first 4% of an employee’s eligible base pay plus
Funds of funds (a) $ 147 $ — Monthly 30-45 days 50% of the next 2% of eligible pay contributed by the
Venture capital and participant for a maximum matching contribution of
partnership
interests (b) 148 — N/A N/A 5% for 2018, 2017 and 2016, subject to statutory
Property funds (c) 52 — Monthly 0-90 days limits.
Corporate debt 19 — N/A N/A
Other contracts (d) 16 — N/A N/A
Total $ 382 $ —
The U.S. qualified and nonqualified defined benefit
plans were closed to new participants effective Dec.
31, 2010, at which time an annual non-elective
contribution equal to 2% of eligible base pay was
added to The Bank of New York Mellon Corporation
401(k) Savings Plan.
At Dec. 31, 2018 and Dec. 31, 2017, The Bank of

New York Mellon Corporation 401(k) Savings Plan
owned 12.7 million and 13.2 million shares of our
common stock, respectively. The fair value of total
assets was $6.2 billion at Dec. 31, 2018 and $6.6
billion at Dec. 31, 2017. We recorded expense of
$244 million in 2018, $232 million in 2017 and $224
million in 2016 primarily for contributions to our
defined contribution plans.
170 BNY Mellon

We also have an ESOP covering certain domestic Parent becomes imminent, the committed line of
full-time employees hired on or before July 1, 2008. credit the IHC provided to the Parent will
The ESOP works in conjunction with the defined automatically terminate, with all amounts outstanding
benefit pension plan. Employees are entitled to the becoming due and payable, and the support
higher of their benefit under the ESOP or such agreement will require the Parent to transfer most of
defined benefit pension plan at retirement. Benefits its remaining assets (other than stock in subsidiaries
payable under the defined benefit pension plan are and a cash reserve to fund bankruptcy expenses) to
offset by the equivalent value of benefits earned the IHC. As a result, during a period of severe
under the ESOP. financial stress, the Parent could become unable to
meet its debt and payment obligations (including with
At Dec. 31, 2018 and Dec. 31, 2017, the ESOP respect to its securities), causing the Parent to seek
owned 5.0 million and 5.4 million shares of our protection under bankruptcy laws earlier than it
common stock, respectively. The fair value of total otherwise would have.
ESOP assets was $236 million at Dec. 31, 2018 and
$293 million at Dec. 31, 2017. The Company is not Our bank subsidiaries are subject to dividend
permitted to make contributions to the ESOP. limitations under the Federal Reserve Act, as well as
national and state banking laws. Under these statutes,
The Benefits Investment Committee appointed prior regulatory consent is required for dividends in
Fiduciary Counselors, Inc. to serve as the any year that would exceed the bank’s net profits for
independent fiduciary to (i) make all fiduciary such year combined with retained net profits for the
decisions related to the continued prudence of prior two years. Additionally, such bank subsidiaries
offering the common stock of BNY Mellon or its may not declare dividends in excess of net profits on
affiliates as an investment option under the plans, hand, as defined, after deducting the amount by
other than plan sponsor decisions, and (ii) select and which the principal amount of all loans, on which
monitor any actively or passively managed interest is past due for a period of six months or more,
investments of BNY Mellon or its affiliates to be exceeds the allowance for credit losses.
offered to participants as investment options under
the plans, excluding self-directed accounts. The payment of dividends also is limited by
minimum capital requirements imposed on banks. As
Note 18–Company financial information of Dec. 31, 2018, BNY Mellon’s bank subsidiaries
(Parent Corporation) exceeded these minimum requirements.
In connection with our single point of entry resolution Subsequent to Dec. 31, 2018, our U.S. bank
strategy, we have established an IHC to facilitate the subsidiaries could declare dividends to the Parent of
provision of capital and liquidity resources to certain approximately $3.7 billion, without the need for a
key subsidiaries in the event of material financial regulatory waiver. In addition, at Dec. 31, 2018, non-
distress or failure. In 2017, we entered into a binding bank subsidiaries of the Parent had liquid assets of
support agreement with those key subsidiaries and approximately $1.7 billion.
other related entities that requires the IHC to provide
that support. The support agreement requires the The bank subsidiaries declared dividends of $3.8
Parent to transfer cash and other liquid financial billion in 2018, $1.3 billion in 2017 and $160 million
assets to the IHC, subject to certain amounts retained in 2016. The Federal Reserve and the OCC have
by the Parent to meet its near-term cash needs. The issued additional guidelines that require BHCs and
Parent’s and the IHC’s obligations under the support national banks to continually evaluate the level of
agreement are secured. The IHC has provided the cash dividends in relation to their respective
Parent with a committed line of credit that allows the operating income, capital needs, asset quality and
Parent to draw funds necessary to service near-term overall financial condition.
obligations. As a result, during business-as-usual
circumstances, the Parent is expected to continue to The Federal Reserve policy with respect to the
have access to the funds necessary to pay dividends, payment of cash dividends by BHCs provides that, as
repurchase common stock, service its debt and satisfy a matter of prudent banking, a BHC should not
its other obligations. If our projected liquidity maintain a rate of cash dividends unless its net
resources deteriorate so severely that resolution of the income available to common shareholders has been
BNY Mellon 171

sufficient to fully fund the dividends, and the subsidiary banks to BNY Mellon and certain of its
prospective rate of earnings retention appears to be non-bank affiliates. Also, there are restrictions on the
consistent with the holding company’s capital needs, amounts of investments by such banks in stock and
asset quality and overall financial condition. The other securities of BNY Mellon and such affiliates,
Federal Reserve can also prohibit a dividend if and restrictions on the acceptance of their securities
payment would constitute an unsafe or unsound as collateral for loans by such banks. Extensions of
banking practice. Any increase in BNY Mellon’s credit by the banks to each of our affiliates are limited
ongoing quarterly dividends would require approval to 10% of such bank’s regulatory capital, and in the
from the Federal Reserve. aggregate for BNY Mellon and all such affiliates to
20%, and collateral must be between 100% and 130%
BNY Mellon and other affected BHCs may pay of the amount of the credit, depending on the type of
dividends, repurchase stock, and make other capital collateral.
distributions only in accordance with a capital plan
that has been reviewed by the Federal Reserve and as Our insured subsidiary banks are required to maintain
to which the Federal Reserve has not objected. The reserve balances with Federal Reserve Banks under
Federal Reserve may object to a capital plan if the the Federal Reserve Act and Regulation D. Required
plan does not show that the covered BHC will meet, balances averaged $6.1 billion and $5.6 billion for the
for each quarter throughout the nine-quarter planning years 2018 and 2017, respectively.
horizon covered by the capital plan, all minimum
regulatory capital ratios under applicable capital rules In the event of impairment of the capital stock of one
as in effect for that quarter on a pro forma basis under of the Parent’s national banks or The Bank of New
the base case and stressed scenarios (including a York Mellon, the Parent, as the banks’ stockholder,
severely adverse scenario provided by the Federal could be required to pay such deficiency.
Reserve). The capital plan rules also stipulate that a
covered BHC may not make a capital distribution The Parent guarantees the debt issued by Mellon
unless after giving effect to the distribution it will Funding Corporation, a wholly owned financing
meet all minimum regulatory capital ratios. As part subsidiary of the Company. The Parent also
of this process, BNY Mellon also provides the guarantees committed and uncommitted lines of
Federal Reserve with estimates of the composition credit of Pershing LLC and Pershing Limited
and levels of regulatory capital, RWAs and other subsidiaries. The Parent guarantees described above
measures under Basel III under an identified scenario. are full and unconditional and contain the standard
provisions relating to parent guarantees of subsidiary
In June 2018, in connection with the Federal debt. Additionally, the Parent guarantees or
Reserve’s non-objection to our 2018 capital plan, indemnifies obligations of its consolidated
BNY Mellon announced a share repurchase plan subsidiaries as needed. Generally, there are no stated
providing for the repurchase of up to $2.4 billion of notional amounts included in these indemnifications
common stock starting in the third quarter of 2018 and the contingencies triggering the obligation for
and continuing through the second quarter of 2019. indemnification are not expected to occur. As a
This new share repurchase plan replaces all result, we are unable to develop an estimate of the
previously authorized share repurchase plans. maximum payout under these indemnifications.
However, we believe the possibility is remote that we
On Dec. 10, 2018, BNY Mellon announced that the will have to make any material payment under these
Federal Reserve approved the repurchase of up to guarantees and indemnifications.
$830 million of additional common stock. Our Board
of Directors approved the additional share The condensed financial statements of the Parent
repurchases, all of which were repurchased in the include the accounts of the Parent; Mellon Funding
fourth quarter of 2018. These repurchases were in Corporation and MIPA, LLC, a single-member
addition to the Company’s repurchase of $2.4 billion limited liability company, created to hold and
of common stock previously approved by the Board administer corporate-owned life insurance. Financial
and announced in June 2018. data for the Parent, the financing subsidiary and the
single-member limited liability company are
The Federal Reserve Act limits, and requires combined for financial reporting purposes because of
collateral for, extensions of credit by our insured the limited function of these entities and the
172 BNY Mellon

unconditional guarantee by BNY Mellon of their Condensed Statement of Cash Flows—The Bank
obligations. of New York Mellon Corporation (Parent
Corporation)
The Parent’s condensed financial statements are as
follows: Year ended Dec. 31,
(in millions) 2018 2017 2016
Condensed Income Statement—The Bank of New Operating activities:
York Mellon Corporation (Parent Corporation) Net income $ 4,266 $ 4,090 $ 3,547
Adjustments to reconcile net income to
net cash provided by operating activities:
Year ended Dec. 31, Equity in undistributed net loss (income)
of subsidiaries 795 (2,431) (2,750)
(in millions) 2018 2017 2016
Dividends from bank subsidiaries $ 3,874 $ 1,405 $ 125 Change in accrued interest receivable 27 (6) 2
Dividends from nonbank subsidiaries 1,869 382 798 Change in accrued interest payable 29 42 4
Interest revenue from bank subsidiaries 13 25 70 Change in taxes payable (a) 224 (600) 452
Interest revenue from nonbank Other, net (257) 38 (31)
subsidiaries 200 171 121 Net cash provided by operating
Gain on securities held for sale 1 — — activities 5,084 1,133 1,224
Other revenue 36 67 39 Investing activities:
Total revenue 5,993 2,050 1,153 Purchases of securities — (991) (1,739)
Interest (including, $59, $73, $88, to Proceeds from sales of securities 13 2,729 —
subsidiaries, respectively) 658 663 427 Change in loans — 7 13
Other expense 439 254 262 Acquisitions of, investments in, and
Total expense 1,097 917 689 advances to subsidiaries (b) (53) (7,208) (317)
Income before income taxes and equity Other, net 1 — —
in undistributed net income of Net cash (used for) investing activities (39) (5,463) (2,043)
subsidiaries 4,896 1,133 464
Financing activities:
(Benefit) for income taxes (165) (526) (333)
Proceeds from issuance of long-term debt 4,144 4,738 6,229
Equity in undistributed net income:
Repayments of long-term debt (3,650) (997) (2,700)
Bank subsidiaries (508) 1,524 2,474
Change in advances from subsidiaries (1,561) (3,930) (1,136)
Nonbank subsidiaries (287) 907 276
Issuance of common stock 120 465 465
Net income 4,266 4,090 3,547
Treasury stock acquired (3,269) (2,686) (2,398)
Preferred stock dividends (169) (175) (122)
Issuance of preferred stock — — 990
Net income applicable to common
shareholders of The Bank of New York Cash dividends paid (1,221) (1,076) (900)
Mellon Corporation $ 4,097 $ 3,915 $ 3,425 Tax benefit realized on share-based
payment awards — — 3
Net cash (used for) provided by
financing activities (5,437) (3,486) 553
Condensed Balance Sheet—The Bank of New Change in cash and due from banks (392) (7,816) (266)
York Mellon Corporation (Parent Corporation) Cash and due from banks at beginning of
year 1,301 9,117 9,383
Cash and due from banks at end of year $ 909 $ 1,301 $ 9,117
Dec. 31, Supplemental disclosures
(in millions) 2018 2017 Interest paid $ 629 $ 705 $ 409
Assets: Income taxes paid 12 61 1
Cash and due from banks $ 909 $ 1,301 Income taxes refunded 7 15 12
Securities 27 40 (a) Includes payments received from subsidiaries for taxes of $837
Investment in and advances to subsidiaries and million in 2018, $189 million in 2017 and $189 million in 2016.
associated companies: (b) Includes $2,807 million of cash outflows, net of $2,754 million of
Banks 31,285 32,967 cash inflows in 2018 and $10,296 million of cash outflows, net of
Other 37,986 37,660 $3,088 million of cash inflows in 2017.
Subtotal 69,271 70,627
Corporate-owned life insurance 761 756
Other assets 740 1,135
Total assets $ 71,708 $ 73,859
Liabilities:
Deferred compensation $ 445 $ 476
Affiliate borrowings 1,616 3,177
Other liabilities 1,246 1,373
Long-term debt 27,763 27,582
Shareholders’ equity 40,638 41,251
Total liabilities and shareholders’ equity $ 71,708 $ 73,859
BNY Mellon 173

Note 19–Fair value measurement market data and employ standard market pricing
theory for their valuations. Valuation models
Fair value is defined as the price that would be incorporate counterparty credit risk by discounting
received to sell an asset, or paid to transfer a liability, each trade’s expected exposures to the counterparty
in an orderly transaction between market participants using the counterparty’s credit spreads, as implied by
at the measurement date. A three-level hierarchy for the credit default swap market. We also adjust
fair value measurements is utilized based upon the expected liabilities to the counterparty using BNY
transparency of inputs to the valuation of an asset or Mellon’s own credit spreads, as implied by the credit
liability as of the measurement date. BNY Mellon’s default swap market. Accordingly, the valuation of
own creditworthiness is considered when valuing our derivative positions is sensitive to the current
liabilities. changes in our own credit spreads as well as those of
our counterparties.
Fair value focuses on exit price in an orderly
transaction (that is, not a forced liquidation or In certain cases, recent prices may not be observable
distressed sale) between market participants at the for instruments that trade in inactive or less active
measurement date under current market conditions. markets. Upon evaluating the uncertainty in valuing
If there has been a significant decrease in the volume financial instruments subject to liquidity issues, we
and level of activity for the asset or liability, a change make an adjustment to their value. The determination
in valuation technique or the use of multiple valuation of the liquidity adjustment includes the availability of
techniques may be appropriate. In such instances, external quotes, the time since the latest available
determining the price at which willing market quote and the price volatility of the instrument.
participants would transact at the measurement date
under current market conditions depends on the facts Certain parameters in some financial models are not
and circumstances and requires the use of significant directly observable and, therefore, are based on
judgment. The objective is to determine from management’s estimates and judgments. These
weighted indicators of fair value a reasonable point financial instruments are normally traded less
within the range that is most representative of fair actively. We apply valuation adjustments to mitigate
value under current market conditions.
the possibility of error and revision in the model
based estimate value. Examples include products
Determination of fair value
where parameters such as correlation and recovery
rates are unobservable.
We have established processes for determining fair
values. Fair value is based upon quoted market prices
The methods described above for instruments that
in active markets, where available. For financial
trade in inactive or less active markets may produce a
instruments where quotes from recent exchange
current fair value calculation that may not be
transactions are not available, we determine fair value
indicative of net realizable value or reflective of
based on discounted cash flow analysis, comparison
future fair values. We believe our methods of
to similar instruments and the use of financial
determining fair value are appropriate and consistent
models. Discounted cash flow analysis is dependent
with other market participants. However, the use of
upon estimated future cash flows and the level of
different methodologies or different assumptions to
interest rates. Model-based pricing uses inputs of
value certain financial instruments could result in a
observable prices, where available, for interest rates,
different estimate of fair value.
foreign exchange rates, option volatilities and other
factors. Models are benchmarked and validated by an
Valuation hierarchy
independent internal risk management function. Our
valuation process takes into consideration factors
A three-level valuation hierarchy is used for
such as counterparty credit quality, liquidity,
disclosure of fair value measurements based upon the
concentration concerns and observability of model
transparency of inputs to the valuation of an asset or
parameters. Valuation adjustments may be made to
liability as of the measurement date. The three levels
record financial instruments at fair value.
are described below.
Most derivative contracts are valued using internally
developed models which are calibrated to observable
174 BNY Mellon

Level 1: Inputs to the valuation methodology are securities with similar characteristics or discounted
quoted prices (unadjusted) for identical assets or cash flows. Examples of such instruments, which
liabilities in active markets. Level 1 assets and would generally be classified within Level 2 of the
liabilities include certain debt and equity securities, valuation hierarchy, include mortgage-backed
derivative financial instruments actively traded on securities, state and political subdivisions, certain
exchanges and highly liquid government bonds. sovereign debt, corporate bonds and foreign covered
bonds.
Level 2: Observable inputs other than Level 1 prices,
for example, quoted prices for similar assets and Specifically, the pricing sources obtain recent
liabilities in active markets, quoted prices for transactions for similar types of securities (e.g.,
identical or similar assets or liabilities in markets that vintage, position in the securitization structure) and
are not active, and inputs that are observable or can ascertain variables such as discount rate and speed of
be corroborated, either directly or indirectly, for prepayment for the types of transaction and apply
substantially the full term of the financial instrument. such variables to similar types of bonds. We view
Level 2 assets and liabilities include debt instruments these as observable transactions in the current
that are traded less frequently than exchange-traded marketplace and classify such securities as Level 2.
securities and derivative financial instruments whose Pricing sources discontinue pricing any specific
model inputs are observable in the market or can be security whenever they determine there is insufficient
corroborated by market-observable data. Examples observable data to provide a good faith opinion on
in this category are mortgage-backed securities, price.
corporate debt securities and OTC derivative
contracts. In certain cases where there is limited activity or less
transparency around inputs to the valuation, we
Level 3: Inputs to the valuation methodology are classify those securities in Level 3 of the valuation
unobservable and significant to the fair value hierarchy. We have no instruments included in Level
measurement. 3 of the valuation hierarchy.
A financial instrument’s categorization within the At Dec. 31, 2018, approximately 99% of our
valuation hierarchy is based upon the lowest level of securities were valued by pricing sources with
input that is significant to the fair value measurement. reasonable levels of price transparency. Additional
disclosures of securities are provided in Note 4.
Valuation methodology
Derivative financial instruments
Following is a description of the valuation
methodologies used for instruments measured at fair We classify exchange-traded derivative financial
value, as well as the general classification of such instruments valued using quoted prices in Level 1 of
instruments pursuant to the valuation hierarchy. the valuation hierarchy. Examples include exchange-
traded equity and foreign exchange options. Since
Securities few other classes of derivative contracts are listed on
an exchange, most of our derivative positions are
We determine fair value primarily based on pricing valued using internally developed models that use as
sources with reasonable levels of price transparency. their basis readily observable market parameters, and
Where quoted prices are available in an active we classify them in Level 2 of the valuation
market, we classify the securities within Level 1 of hierarchy. Such derivative financial instruments
the valuation hierarchy. Securities include both long include swaps and options, foreign exchange spot and
and short positions. Level 1 securities include U.S. forward contracts and credit default swaps.
Treasury and certain sovereign debt securities that are
actively traded in highly liquid OTC markets, money Derivatives valued using models with significant
market funds and exchange-traded equities. unobservable market parameters in markets that lack
two-way flow are classified in Level 3 of the
If quoted market prices are not available, fair values valuation hierarchy. Examples may include long-
are primarily determined using pricing models using dated swaps and options, where parameters may be
observable trade data, market data, quoted prices of unobservable for longer maturities; and certain highly
BNY Mellon 175

structured products, where correlation risk is finance charges related to the securitized assets,
unobservable. As of Dec. 31, 2018 we have no Level estimated net credit losses, prepayment assumptions
3 derivatives. Additional disclosures of derivative and estimates of payments to third-party investors.
instruments are provided in Note 22. When available, we compare our fair value estimates
and assumptions to market activity and to the actual
Seed capital results of the securitized portfolio.
In our Investment Management business, we manage Other assets measured at NAV

investment assets, including equities, fixed income,
money market and multi-asset and alternative BNY Mellon holds private equity investments,
investment funds for institutions and other investors. specifically SBICs, which are compliant with the
As part of that activity, we make seed capital Volcker Rule. There are no readily available market
investments in certain funds. Seed capital is quotations for these investment partnerships. The fair
generally included in other assets on the consolidated value of the SBICs is based on our ownership
balance sheet. When applicable, we value seed percentage of the fair value of the underlying
capital based on the published NAV of the fund. investments as provided by the partnership managers.
These investments are typically valued on a quarterly
For other types of investments in funds, we consider basis. Our SBIC private equity investments are
all of the rights and obligations inherent in our valued at NAV as a practical expedient for fair value.
ownership interest, including the reported NAV as
well as other factors that affect the fair value of our The following tables present the financial instruments
interest in the fund. carried at fair value at Dec. 31, 2018 and Dec. 31,
2017, by caption on the consolidated balance sheet
Interests in securitizations and by the three-level valuation hierarchy. We have
included credit ratings information in certain of the
For the interests in securitizations that are classified tables because the information indicates the degree of
in securities available-for-sale, trading assets and credit risk to which we are exposed, and significant
long-term debt, we use discounted cash flow models, changes in ratings classifications could result in
which generally include assumptions of projected increased risk for us.
176 BNY Mellon

Assets measured at fair value on a recurring basis at Dec. 31, 2018 Total carrying
(dollars in millions) Level 1 Level 2 Level 3 Netting (a) value
Available-for-sale securities:
Agency RMBS $ — $ 25,308 $ — $ — $ 25,308
U.S. Treasury 20,076 — — — 20,076
Sovereign debt/sovereign guaranteed 6,613 4,137 — — 10,750
Agency commercial MBS — 9,691 — — 9,691
CLOs — 3,364 — — 3,364
Supranational — 2,984 — — 2,984
Foreign covered bonds — 2,878 — — 2,878
State and political subdivisions — 2,247 — — 2,247
Other asset-backed securities — 1,773 — — 1,773
U.S. government agencies — 1,657 — — 1,657
Non-agency commercial MBS — 1,464 — — 1,464
Non-agency RMBS (b) — 1,325 — — 1,325
Corporate bonds — 1,054 — — 1,054
Other debt securities — 1,238 — — 1,238
Total available-for-sale securities 26,689 59,120 — — 85,809
Trading assets:
Debt instruments 801 2,594 — — 3,395
Equity instruments (c) 1,114 — — — 1,114
Derivative assets not designated as hedging:
Interest rate 7 3,583 — (2,202) 1,388
Foreign exchange — 4,807 — (3,724) 1,083
Equity and other contracts 9 59 — (13) 55
Total derivative assets not designated as hedging 16 8,449 — (5,939) 2,526
Total trading assets 1,931 11,043 — (5,939) 7,035
Other assets:
Derivative assets designated as hedging:
Interest rate — 23 — — 23
Foreign exchange — 266 — — 266
Total derivative assets designated as hedging — 289 — — 289
Other assets (d) 68 170 — — 238
Other assets measured at NAV (d) 215
Total other assets 68 459 — — 742
Subtotal assets of operations at fair value 28,688 70,622 — (5,939) 93,586
Percentage of assets of operations prior to netting 29% 71% —%
Assets of consolidated investment management funds 210 253 — — 463
Total assets $ 28,898 $ 70,875 $ — $ (5,939) $ 94,049
Percentage of total assets prior to netting 29% 71% —%
BNY Mellon 177

Liabilities measured at fair value on a recurring basis at Dec. 31, 2018 Total carrying
Trading liabilities:
Debt instruments $ 1,006 $ 118 $ — $ — $ 1,124
Equity instruments 75 — — — 75
Derivative liabilities not designated as hedging:
Interest rate 12 3,104 — (2,508) 608
Equity and other contracts 1 118 — (36) 83
Total derivative liabilities not designated as hedging 13 8,437 — (6,170) 2,280
Total trading liabilities 1,094 8,555 — (6,170) 3,479
Long-term debt (c) — 371 — — 371
Other liabilities – derivative liabilities designated as hedging:
Total other liabilities – derivative liabilities designated as
hedging — 88 — — 88
Subtotal liabilities of operations at fair value 1,094 9,014 — (6,170) 3,938
Percentage of liabilities of operations prior to netting 11% 89% —%
Liabilities of consolidated investment management funds 2 — — — 2
Total liabilities $ 1,096 $ 9,014 $ — $ (6,170) $ 3,940
Percentage of total liabilities prior to netting 11% 89% —%
(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.
(b) Includes $832 million in Level 2 that was included in the former Grantor Trust.
(c) Includes certain interests in securitizations.
(d) Includes seed capital, private equity investments and other assets.
178 BNY Mellon

Assets measured at fair value on a recurring basis at Dec. 31, 2017 Total carrying
Available-for-sale securities:
Agency RMBS $ — $ 23,819 $ — $ — $ 23,819
U.S. Treasury 15,263 — — — 15,263
Sovereign debt/sovereign guaranteed 9,919 2,638 — — 12,557
Agency commercial MBS — 8,762 — — 8,762
State and political subdivisions — 2,957 — — 2,957
CLOs — 2,909 — — 2,909
Foreign covered bonds — 2,529 — — 2,529
Supranational — 2,079 — — 2,079
Non-agency RMBS (b) — 1,578 — — 1,578
Non-agency commercial MBS — 1,360 — — 1,360
Corporate bonds — 1,255 — — 1,255
Other asset-backed securities — 1,043 — — 1,043
U.S. government agencies — 908 — — 908
Other RMBS — 149 — — 149
Other debt securities — 1,412 — — 1,412
Money market funds (c) 963 — — — 963
Total available-for-sale securities 26,145 53,398 — — 79,543
Trading assets:
Debt instruments 690 1,910 — — 2,600
Equity instruments (c) 654 — — — 654
Derivative assets not designated as hedging:
Interest rate 9 6,430 — (5,075) 1,364
Equity and other contracts — 70 — (50) 20
Total derivative assets not designated as hedging 9 11,604 — (8,845) 2,768
Total trading assets 1,353 13,514 — (8,845) 6,022
Other assets:
Derivative assets designated as hedging:
Total derivative assets designated as hedging — 323 — — 323
Other assets (d) 144 170 — — 314
Other assets measured at NAV (d) 154
Total other assets 144 493 — — 791
Subtotal assets of operations at fair value 27,642 67,405 — (8,845) 86,356
Percentage of assets of operations prior to netting 29% 71% —%
Assets of consolidated investment management funds 322 409 — — 731
Total assets $ 27,964 $ 67,814 $ — $ (8,845) $ 87,087
Percentage of total assets prior to netting 29% 71% —%
BNY Mellon 179

Liabilities measured at fair value on a recurring basis at Dec. 31, 2017 Total carrying
Trading liabilities:
Debt instruments $ 979 $ 80 $ — $ — $ 1,059
Equity instruments 149 — — — 149
Derivative liabilities not designated as hedging:
Interest rate 4 6,349 — (5,495) 858
Equity and other contracts — 153 — (81) 72
Total derivative liabilities not designated as hedging 4 11,569 — (8,797) 2,776
Total trading liabilities 1,132 11,649 — (8,797) 3,984
Long-term debt (c) — 367 — — 367
Other liabilities – derivative liabilities designated as hedging:
Total other liabilities – derivative liabilities designated as
hedging — 800 — — 800
Subtotal liabilities of operations at fair value 1,132 12,816 — (8,797) 5,151
Percentage of liabilities of operations prior to netting 8% 92% —%
Liabilities of consolidated investment management funds 1 1 — — 2
Total liabilities $ 1,133 $ 12,817 $ — $ (8,797) $ 5,153
Percentage of total liabilities prior to netting 8% 92% —%
(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.
(b) Includes $1,091 million in Level 2 that was included in the former Grantor Trust.
(c) Includes certain interests in securitizations.
(d) Includes private equity investments and seed capital.
180 BNY Mellon

Details of certain available-for-sale securities Dec. 31, 2018 Dec. 31, 2017
measured at fair value on a recurring basis Ratings (a) Ratings (a)
Total Total
carrying AAA/ A+/ BBB+/ BB+ and carrying AAA/ A+/ BBB+/ BB+ and
(dollars in millions) value (b) AA- A- BBB- lower value (b) AA- A- BBB- lower
Non-agency RMBS (c), originated in:
2007 $ 315 15% 2% 3% 80% $ 419 13% 3% —% 84%
2006 363 — 19 — 81 467 — 17 — 83
2005 396 9 1 7 83 509 6 2 6 86
2004 and earlier 251 16 24 11 49 332 3 2 31 64
Total non-agency RMBS $ 1,325 9% 11% 5% 75% $ 1,727 (d) 6% 6% 8% 80%
Non-agency commercial MBS, originated in:
2009-2018 $ 1,464 96% 4% —% —% $ 1,309 94% 6% —% —%
2005 — — — — — 51 100 — — —
Total non-agency commercial MBS $ 1,464 96% 4% —% —% $ 1,360 94% 6% —% —%
Foreign covered bonds:
Canada $ 1,524 100% —% —% —% $ 1,659 100% —% —% —%
United Kingdom 529 100 — — — 103 100 — — —
Australia 333 100 — — — 265 100 — — —
Sweden 187 100 — — — 136 100 — — —
Other 305 100 — — — 366 100 — — —
Total foreign covered bonds $ 2,878 100% —% —% —% $ 2,529 100% —% —% —%
Sovereign debt/sovereign guaranteed:
United Kingdom $ 2,153 100% —% —% —% $ 3,052 100% —% —% —%
Germany 1,826 100 — — — 1,586 100 — — —
France 1,548 100 — — — 2,046 100 — — —
Spain 1,365 — — 100 — 1,635 — — 100 —
Italy 939 — — 100 — 1,292 — — 100 —
Netherlands 875 100 — — — 1,027 100 — — —
Ireland 625 — 100 — — 843 — 100 — —
Hong Kong 450 100 — — — — — — — —
Canada 378 100 — — — — — — — —
Belgium 260 100 — — — 803 100 — — —
Other (e) 331 68 — — 32 273 50 — — 50
Total sovereign debt/sovereign guaranteed $ 10,750 72% 6% 21% 1% $ 12,557 69% 7% 23% 1%
(a) Represents ratings by S&P or the equivalent.
(b) At Dec. 31, 2018 and Dec. 31, 2017, sovereign debt/sovereign guaranteed 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.
(c) Includes $832 million at Dec. 31, 2018 and $1,091 million at Dec. 31, 2017 that were included in the former Grantor Trust.
(d) Includes other RMBS.
(e) Includes non-investment grade sovereign debt/sovereign guaranteed securities related to Brazil of $107 million at Dec. 31, 2018 and $136 million at Dec.
31, 2017.
Assets and liabilities measured at fair value on a readily marketable equity securities carried at cost
nonrecurring basis with upward or downward adjustments.
Under certain circumstances, we make adjustments to The following table presents the financial instruments
fair value our assets, liabilities and unfunded lending- carried on the consolidated balance sheet by caption
related commitments although they are not measured and level in the fair value hierarchy as of Dec. 31,
at fair value on an ongoing basis. Examples would be 2018 and Dec. 31, 2017, for which a nonrecurring
the recording of an impairment of an asset and non- change in fair value has been recorded in the
respective year.
Assets measured at fair value on a Dec. 31, 2018 Dec. 31, 2017
nonrecurring basis Total carrying Total carrying
(in millions) Level 1 Level 2 Level 3 value Level 1 Level 2 Level 3 value
Loans (a) $ — $ 64 $ 4 $ 68 $ — $ 73 $ 6 $ 79
Other assets (b) — 57 — 57 — 4 — 4
Total assets at fair value on a nonrecurring
basis $ — $ 121 $ 4 $ 125 $ — $ 77 $ 6 $ 83
(a) The fair value of these loans decreased $1 million in both 2018 and 2017, based on the fair value of the underlying collateral, as required by
guidance in ASC 310, Receivables, with an offset to the allowance for credit losses.
(b) Includes non-readily marketable equity securities carried at cost with upward or downward adjustments and other assets received in satisfaction
of debt.
BNY Mellon 181

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, 2018 and Dec. 31, 2017, by caption on the consolidated
balance sheet and by the valuation hierarchy.
Summary of financial instruments Dec. 31, 2018

Total
estimated Carrying
(in millions) Level 1 Level 2 Level 3 fair value amount
Assets:
Interest-bearing deposits with the Federal Reserve and other central banks $ — $ 67,988 $ — $ 67,988 $ 67,988
Interest-bearing deposits with banks — 14,168 — 14,168 14,148
Federal funds sold and securities purchased under resale agreements — 46,795 — 46,795 46,795
Securities held-to-maturity 5,512 27,790 — 33,302 33,982
Loans (a) — 55,142 — 55,142 55,161
Other financial assets 5,864 1,383 — 7,247 7,247
Total $ 11,376 $ 213,266 $ — $ 224,642 $ 225,321
Liabilities:
Noninterest-bearing deposits $ — $ 70,783 $ — $ 70,783 $ 70,783
Interest-bearing deposits — 165,914 — 165,914 167,995
Federal funds purchased and securities sold under repurchase agreements — 14,243 — 14,243 14,243
Payables to customers and broker-dealers — 19,731 — 19,731 19,731
Commercial paper — 1,939 — 1,939 1,939
Borrowings — 3,584 — 3,584 3,584
Long-term debt — 28,347 — 28,347 28,792
Total $ — $ 304,541 $ — $ 304,541 $ 307,067
(a) Does not include the leasing portfolio.
Summary of financial instruments Dec. 31, 2017

Total
estimated Carrying
(in millions) Level 1 Level 2 Level 3 fair value amount
Assets:
Interest-bearing deposits with the Federal Reserve and other central banks $ — $ 91,510 $ — $ 91,510 $ 91,510
Interest-bearing deposits with banks — 11,982 — 11,982 11,979
Federal funds sold and securities purchased under resale agreements — 28,135 — 28,135 28,135
Securities held-to-maturity 11,365 29,147 — 40,512 40,827
Loans (a) — 60,219 — 60,219 60,082
Other financial assets 5,382 1,244 — 6,626 6,626
Total $ 16,747 $ 222,237 $ — $ 238,984 $ 239,159
Liabilities:
Noninterest-bearing deposits $ — $ 82,716 $ — $ 82,716 $ 82,716
Interest-bearing deposits — 160,042 — 160,042 161,606
Federal funds purchased and securities sold under repurchase agreements — 15,163 — 15,163 15,163
Payables to customers and broker-dealers — 20,184 — 20,184 20,184
Commercial paper — 3,075 — 3,075 3,075
Borrowings — 2,931 — 2,931 2,931
Long-term debt — 27,789 — 27,789 27,612
Total $ — $ 311,900 $ — $ 311,900 $ 313,287
(a) Does not include the leasing portfolio.
182 BNY Mellon

The table below summarizes the carrying amount of the hedged financial instruments, the notional amount of the
hedge and the unrealized gain (loss) (estimated fair value) of the derivatives.
Hedged financial instruments Notional

Carrying amount of Unrealized (a)
(in millions) amount hedge Gain (Loss)
Dec. 31, 2018
Securities available-for-sale (b) $ 19,349 $ 19,437 $ 24 $ (74)
Long-term debt 16,147 16,600 — —
Dec. 31, 2017
Securities available-for-sale $ 12,307 $ 12,365 $ 102 $ (301)
Long-term debt 23,821 23,950 175 (233)
(a) Unrealized gain/loss amounts reflect the fact that certain of the derivatives are cleared and settled through central clearing
counterparties where cash collateral received and paid is deemed a settlement of the derivative.
(b) Includes foreign exchange fair value hedges with a carrying value of $148 million, a notional amount of $147 million and unrealized
gains of $1 million.
Note 20–Fair value option of the assets and liabilities are recorded in the
consolidated income statement as investment income
We elected fair value as an alternative measurement of consolidated investment management funds and in
for selected financial assets and liabilities. The the interest of investment management fund note
following table presents the assets and liabilities of holders, respectively.
consolidated investment management funds, at fair
value. We have elected the fair value option on $240 million
of long-term debt. The fair value of this long-term
Assets and liabilities of consolidated debt was $371 million at Dec. 31, 2018 and $367
investment management funds, at fair value Dec. 31, million at Dec. 31, 2017. The long-term debt is
Assets of consolidated investment management
valued using observable market inputs and is
funds: included in Level 2 of the valuation hierarchy.
Trading assets $ 243 $ 516
Other assets 220 215
The following table presents the changes in fair value
Total assets of consolidated investment
management funds $ 463 $ 731 of long-term debt and certain loans for which we
Liabilities of consolidated investment elected the fair value option that we previously held
management funds:
Other liabilities $ 2 $ 2
in 2016, and the location of the changes in the
Total liabilities of consolidated investment consolidated income statement. There were no loans
management funds $ 2 $ 2 valued under the fair value option election at Dec. 31,
2018, Dec. 31, 2017 and Dec. 31, 2016.
BNY Mellon values the assets and liabilities of its Impact of changes in fair value in the income statement (a)
consolidated investment management funds using Year ended Dec. 31,
quoted prices for identical assets or liabilities in (in millions) 2018 2017 2016
active markets or observable inputs such as quoted Loans:
prices for similar assets or liabilities. Quoted prices Investment and other income $ — $ — $ 12
Long-term debt:
for either identical or similar assets or liabilities in Foreign exchange and other trading
inactive markets may also be used. Accordingly, fair revenue $ (4) $ (4) $ (4)
value best reflects the interests BNY Mellon holds in (a) The changes in fair value of the loans and long-term debt are
approximately offset by economic hedges included in foreign
the economic performance of the consolidated exchange and other trading revenue.
investment management funds. Changes in the value
BNY Mellon 183

Note 21–Commitments and contingent year, $20.3 billion in one to five years and $570
liabilities million over five years.
Off-balance sheet arrangements SBLCs principally support obligations of corporate

clients and were collateralized with cash and
In the normal course of business, various securities of $223 million at Dec. 31, 2018 and $160
commitments and contingent liabilities are million at Dec. 31, 2017. At Dec. 31, 2018, $2.0
outstanding that are not reflected in the billion of the SBLCs will expire within one year and
accompanying consolidated balance sheets. $845 million in one to five years.
Our significant trading and off-balance sheet risks are We must recognize, at the inception of an SBLC and
securities, foreign currency and interest rate risk foreign and other guarantees, a liability for the fair
management products, commercial lending value of the obligation undertaken in issuing the
commitments, letters of credit and securities lending guarantee. The fair value of the liability, which was
indemnifications. We assume these risks to reduce recorded with a corresponding asset in other assets,
interest rate and foreign currency risks, to provide was estimated as the present value of contractual
customers with the ability to meet credit and liquidity customer fees. The estimated liability for losses
needs and to hedge foreign currency and interest rate related to SBLCs and foreign and other guarantees, if
risks. These items involve, to varying degrees, credit, any, is included in the allowance for lending-related
foreign currency and interest rate risks not recognized commitments. The allowance for lending-related
on the balance sheet. Our off-balance sheet risks are commitments was $106 million at Dec. 31, 2018 and
managed and monitored in manners similar to those $102 million at Dec. 31, 2017.
used for on-balance sheet risks.
Payment/performance risk of SBLCs is monitored
The following table presents a summary of our off- using both historical performance and internal ratings
balance sheet credit risks. criteria. BNY Mellon’s historical experience is that
SBLCs typically expire without being funded.
Off-balance sheet credit risks Dec. 31,
SBLCs below investment grade are monitored closely
(in millions) 2018 2017 for payment/performance risk. The table below
Lending commitments $ 50,631 $ 51,467 shows SBLCs by investment grade:
Standby letters of credit (a) 2,817 3,531
Commercial letters of credit 165 122
Securities lending indemnifications (b)(c) 401,504 432,084 Standby letters of credit Dec. 31,
(a) Net of participations totaling $163 million at Dec. 31, 2018 2018 2017
and $672 million at Dec. 31, 2017. Investment grade 89% 84%
(b) Excludes the indemnification for securities for which BNY Non-investment grade 11% 16%
Mellon acts as an agent on behalf of CIBC Mellon clients,
which totaled $56 billion at Dec. 31, 2018 and $69 billion at
Dec. 31, 2017.
(c) Includes cash collateral, invested in indemnified repurchase A commercial letter of credit is normally a short-term
agreements, held by us as securities lending agent of $35 instrument used to finance a commercial contract for
billion at Dec. 31, 2018 and $33 billion at Dec. 31, 2017. the shipment of goods from a seller to a buyer.
Although the commercial letter of credit is contingent
upon the satisfaction of specified conditions, it
The total potential loss on undrawn lending represents a credit exposure if the buyer defaults on
commitments, standby and commercial letters of the underlying transaction. As a result, the total
credit, and securities lending indemnifications is contractual amounts do not necessarily represent
equal to the total notional amount if drawn upon, future cash requirements. Commercial letters of
which does not consider the value of any collateral. credit totaled $165 million at Dec. 31, 2018 and $122
million at Dec. 31, 2017.
Since many of the lending commitments are expected
to expire without being drawn upon, the total amount We expect many of the lending commitments and
does not necessarily represent future cash letters of credit to expire without the need to advance
requirements. A summary of lending commitment any cash. The revenue associated with guarantees
maturities is as follows: $29.8 billion in less than one frequently depends on the credit rating of the obligor
184 BNY Mellon

and the structure of the transaction, including Financial institutions Dec. 31, 2018
collateral, if any. portfolio exposure Unfunded Total
(in billions) Loans commitments exposure
Securities industry $ 3.1 $ 22.5 $ 25.6
A securities lending transaction is a fully Banks 6.3 1.6 7.9
collateralized transaction in which the owner of a Asset managers 1.3 6.1 7.4
security agrees to lend the security (typically through Insurance 0.1 2.5 2.6
an agent, in our case, The Bank of New York Government 0.1 0.5 0.6
Other 0.7 0.8 1.5
Mellon), to a borrower, usually a broker-dealer or
Total $ 11.6 $ 34.0 $ 45.6
bank, on an open, overnight or term basis, under the
terms of a prearranged contract.
Commercial portfolio Dec. 31, 2018
We typically lend securities with indemnification exposure Unfunded Total
(in billions) Loans commitments exposure
against borrower default. We generally require the Manufacturing $ 0.8 $ 5.1 $ 5.9
borrower to provide collateral with a minimum value Services and other 0.7 4.8 5.5
of 102% of the fair value of the securities borrowed, Energy and utilities 0.5 4.1 4.6
which is monitored on a daily basis, thus reducing Media and telecom 0.1 1.2 1.3
credit risk. Market risk can also arise in securities Total $ 2.1 $ 15.2 $ 17.3
lending transactions. These risks are controlled
through policies limiting the level of risk that can be
undertaken. Securities lending transactions are Major concentrations in securities lending are
generally entered into only with highly rated primarily to broker-dealers and are generally
counterparties. Securities lending indemnifications collateralized with cash and/or securities.
were secured by collateral of $420 billion at Dec. 31,
2018 and $451 billion at Dec. 31, 2017. Operating leases
CIBC Mellon, a joint venture between BNY Mellon Net rent expense for premises and equipment was
and the Canadian Imperial Bank of Commerce $295 million in 2018, $285 million in 2017 and $301
(“CIBC”), engages in securities lending activities. million in 2016.
CIBC Mellon, BNY Mellon and CIBC jointly and
severally indemnify securities lenders against specific At Dec. 31, 2018, we were obligated under various
types of borrower default. At Dec. 31, 2018 and Dec. noncancelable lease agreements, some of which
31, 2017, $56 billion and $69 billion, respectively, of provide for additional rents based upon real estate
borrowings at CIBC Mellon, for which BNY Mellon taxes, insurance and maintenance and for various
acts as agent on behalf of CIBC Mellon clients, were renewal options. A summary of the future minimum
secured by collateral of $59 billion and $73 billion, rental commitments under noncancelable operating
respectively. If, upon a default, a borrower’s leases, net of related sublease revenue, is as follows:
collateral was not sufficient to cover its related 2019—$264 million; 2020—$244 million; 2021—
obligations, certain losses related to the $211 million; 2022—$172 million; 2023—$136
indemnification could be covered by the indemnitors. million and 2024 and thereafter—$432 million.
Industry concentrations Exposure for certain administrative errors
We have significant industry concentrations related to In connection with certain offshore tax-exempt funds
credit exposure at Dec. 31, 2018. The tables below that we manage, we may be liable to the funds for
present our credit exposure in the financial certain administrative errors. The errors relate to the
institutions and commercial portfolios. resident status of such funds, potentially exposing the
Company to a tax liability related to the funds’
earnings. The Company is in discussions with tax
authorities regarding the funds. We believe we are
appropriately accrued and the additional reasonably
possible exposure is not significant.
BNY Mellon 185

Indemnification arrangements Legal proceedings
We have provided standard representations for In the ordinary course of business, BNY Mellon and
underwriting agreements, acquisition and divestiture its subsidiaries are routinely named as defendants in
agreements, sales of loans and commitments, and or made parties to pending and potential legal actions.
other similar types of arrangements and customary We also are subject to governmental and regulatory
indemnification for claims and legal proceedings examinations, information-gathering requests,
related to providing financial services that are not investigations and proceedings (both formal and
otherwise included above. Insurance has been informal). Claims for significant monetary damages
purchased to mitigate certain of these risks. are often asserted in many of these legal actions,
Generally, there are no stated or notional amounts while claims for disgorgement, restitution, penalties
included in these indemnifications and the and/or other remedial actions or sanctions may be
contingencies triggering the obligation for sought in governmental and regulatory matters. It is
indemnification are not expected to occur. inherently difficult to predict the eventual outcomes
Furthermore, often counterparties to these of such matters given their complexity and the
transactions provide us with comparable particular facts and circumstances at issue in each of
indemnifications. We are unable to develop an these matters. However, on the basis of our current
estimate of the maximum payout under these knowledge and understanding, we do not believe that
indemnifications for several reasons. In addition to judgments, settlements or orders, if any, arising from
the lack of a stated or notional amount in a majority these matters (either individually or in the aggregate,
of such indemnifications, we are unable to predict the after giving effect to applicable reserves and
nature of events that would trigger indemnification or insurance coverage) will have a material adverse
the level of indemnification for a certain event. We effect on the consolidated financial position or
believe, however, that the possibility that we will liquidity of BNY Mellon, although they could have a
have to make any material payments for these material effect on our results of operations in a given
indemnifications is remote. At Dec. 31, 2018 and period.
Dec. 31, 2017, we have not recorded any material
liabilities under these arrangements. In view of the inherent unpredictability of outcomes
in litigation and regulatory matters, particularly
Clearing and settlement exchanges where (i) the damages sought are substantial or
indeterminate, (ii) the proceedings are in the early
We are a noncontrolling equity investor in, and/or stages, or (iii) the matters involve novel legal theories
member of, several industry clearing or settlement or a large number of parties, as a matter of course
exchanges through which foreign exchange, there is considerable uncertainty surrounding the
securities, derivatives or other transactions settle. timing or ultimate resolution of litigation and
Certain of these industry clearing and settlement regulatory matters, including a possible eventual loss,
exchanges require their members to guarantee their fine, penalty or business impact, if any, associated
obligations and liabilities and/or to provide liquidity with each such matter. In accordance with applicable
support in the event other members do not honor their accounting guidance, BNY Mellon establishes
obligations. We believe the likelihood that a clearing accruals for litigation and regulatory matters when
or settlement exchange (of which we are a member) those matters proceed to a stage where they present
would become insolvent is remote. Additionally, loss contingencies that are both probable and
certain settlement exchanges have implemented loss reasonably estimable. In such cases, there may be a
allocation policies that enable the exchange to possible exposure to loss in excess of any amounts
allocate settlement losses to the members of the accrued. BNY Mellon regularly monitors such
exchange. It is not possible to quantify such mark-to- matters for developments that could affect the amount
market loss until the loss occurs. Any ancillary costs of the accrual, and will adjust the accrual amount as
that occur as a result of any mark-to-market loss appropriate. If the loss contingency in question is not
cannot be quantified. In addition, we also sponsor both probable and reasonably estimable, BNY Mellon
clients as members on clearing and settlement does not establish an accrual and the matter continues
exchanges and guarantee their obligations. At Dec. to be monitored for any developments that would
31, 2018 and Dec. 31, 2017, we have not recorded make the loss contingency both probable and
any material liabilities under these arrangements. reasonably estimable. BNY Mellon believes that its
186 BNY Mellon

accruals for legal proceedings are appropriate and, in and those cases are on appeal. A series of FINRA
the aggregate, are not material to the consolidated arbitration proceedings also have been initiated by
financial position of BNY Mellon, although future alleged purchasers asserting similar claims.
accruals could have a material effect on the results of
operations in a given period. Brazilian Postalis Litigation
BNY Mellon Servicos Financeiros DTVM S.A.
For certain of those matters described here for which (“DTVM”), a subsidiary that provides asset services
a loss contingency may, in the future, be reasonably in Brazil, acts as administrator for certain investment
possible (whether in excess of a related accrued funds in which a public pension fund for postal
liability or where there is no accrued liability), BNY workers called Postalis-Instituto de Seguridade Social
Mellon is currently unable to estimate a range of dos Correios e Telégrafos (“Postalis”) invested. On
reasonably possible loss. For those matters described Aug. 22, 2014, Postalis sued DTVM in Rio de
here where BNY Mellon is able to estimate a Janeiro, Brazil for losses related to a Postalis fund for
reasonably possible loss, the aggregate range of such which DTVM is administrator. Postalis alleges that
reasonably possible loss is up to $900 million in DTVM failed to properly perform duties, including to
excess of the accrued liability (if any) related to those conduct due diligence of and exert control over the
matters. manager. On March 12, 2015, Postalis filed a lawsuit
in Rio de Janeiro against DTVM and BNY Mellon
The following describes certain judicial, regulatory Administração de Ativos Ltda. (“Ativos”) alleging
and arbitration proceedings involving BNY Mellon: failure to properly perform duties relating to another
fund of which DTVM is administrator and Ativos is
Mortgage-Securitization Trusts Proceedings manager. On Dec. 14, 2015, Associacão dos
The Bank of New York Mellon has been named as a Profissionais dos Correiros (“ADCAP”), a Brazilian
defendant in a number of legal actions brought by postal workers association, filed a lawsuit in São
MBS investors alleging that the trustee has expansive Paulo against DTVM and other defendants alleging
duties under the governing agreements, including the that DTVM improperly contributed to Postalis
duty to investigate and pursue breach of investment losses. On March 20, 2017, the lawsuit
representation and warranty claims against other was dismissed without prejudice, and ADCAP has
parties to the MBS transactions. These actions appealed that decision. On Dec. 17, 2015, Postalis
include a lawsuit brought in New York State court on filed three lawsuits in Rio de Janeiro against DTVM
June 18, 2014, and later re-filed in federal court, by a and Ativos alleging failure to properly perform duties
group of institutional investors who purport to sue on with respect to investments in several other funds.
behalf of 233 MBS trusts. On Feb. 4, 2016, Postalis filed a lawsuit in Brasilia
against DTVM, Ativos and BNY Mellon Alocação de
Matters Related to R. Allen Stanford Patrimônio Ltda., an investment management
In late December 2005, Pershing LLC (“Pershing”) subsidiary, alleging failure to properly perform duties
became a clearing firm for Stanford Group Co. and liability for losses with respect to investments in
(“SGC”), a registered broker-dealer that was part of a various funds of which the defendants were
group of entities ultimately controlled by R. Allen administrator and/or manager. On Jan. 16, 2018, the
Stanford (“Stanford”). Stanford International Bank Brazilian Federal Prosecution Service (“MPF”) filed
(“SIB”), also controlled by Stanford, issued a civil lawsuit in São Paulo against DTVM alleging
certificates of deposit (“CDs”). Some investors liability for Postalis losses based on alleged failures
allegedly wired funds from their SGC accounts to to properly perform certain duties as administrator to
purchase CDs. In 2009, the SEC charged Stanford certain funds in which Postalis invested or controller
with operating a Ponzi scheme in connection with the of Postalis’s own investment portfolio. On April 18,
sale of CDs, and SGC was placed into receivership. 2018, the court dismissed the lawsuit without
Alleged purchasers of CDs have filed 15 lawsuits prejudice, and the MPF has appealed that decision.
against Pershing that are pending in Texas, including On Oct. 31, 2018, Postalis filed an application in
two putative class actions. The purchasers allege that federal court in the Southern District of New York
Pershing, as SGC’s clearing firm, assisted Stanford in seeking an order authorizing it to take discovery from
a fraudulent scheme and assert contractual, statutory The Bank of New York Mellon Corporation and its
and common law claims. On July 12, 2018, a federal U.S. subsidiaries, purportedly for use in the Brazilian
district court dismissed six of the individual lawsuits
BNY Mellon 187

proceedings. On Dec. 20, 2018, the court denied maker for our customers and facilitating customer
Postalis’s application in its entirety. trades in compliance with the Volcker Rule.
Depositary Receipt Litigation The notional amounts for derivative financial

Between late December 2015 and February 2016, instruments express the dollar volume of the
four putative class action lawsuits were filed against transactions; however, credit risk is much smaller.
BNY Mellon asserting claims relating to BNY We perform credit reviews and enter into netting
Mellon’s foreign exchange pricing when converting agreements and collateral arrangements to minimize
dividends and other distributions from non-U.S. the credit risk of derivative financial instruments. We
companies in its role as depositary bank to Depositary enter into offsetting positions to reduce exposure to
Receipt issuers. The claims are for breach of contract foreign currency, interest rate and equity price risk.
and violations of ERISA. The lawsuits have been
consolidated into two suits that are pending in federal Use of derivative financial instruments involves
court in the Southern District of New York. The reliance on counterparties. Failure of a counterparty
parties in the lawsuits have entered into settlement to honor its obligation under a derivative contract is a
agreements to resolve the suits, which are subject to risk we assume whenever we engage in a derivative
court approval. contract. There were no counterparty default losses
recorded in 2018 or 2017.
Brazilian Silverado Litigation
DTVM acts as administrator for the Fundo de Hedging derivatives
Investimento em Direitos Creditórios Multisetorial
Silverado Maximum (“Silverado Maximum Fund”), We utilize interest rate swap agreements to manage
which invests in commercial credit receivables. On our exposure to interest rate fluctuations. We enter
June 2, 2016, the Silverado Maximum Fund sued into fair value hedges as an interest rate risk
DTVM in its capacity as administrator, along with management strategy to reduce fair value variability
Deutsche Bank S.A. - Banco Alemão in its capacity by converting certain fixed rate interest payments
as custodian and Silverado Gestão e Investimentos associated with available-for-sale securities and long-
Ltda. in its capacity as investment manager. The term debt to LIBOR.
Fund alleges that each of the defendants failed to
fulfill its respective duty, and caused losses to the
The available-for-sale securities hedged consist of
Fund for which the defendants are jointly and
U.S. Treasury bonds, agency and non-agency
severally liable.
commercial MBS, sovereign debt, corporate bonds
and covered bonds that had original maturities of 30
Depositary Receipt Pre-Release Inquiry
years or less at initial purchase. At Dec. 31, 2018,
In March 2014, the Staff of the U.S. Securities and
$19.2 billion face amount of available-for-sale
Exchange Commission’s Enforcement Division (the
securities were hedged with interest rate swaps
“Staff”) commenced an investigation into certain
designated as fair value hedges that had notional
issuers of American Depositary Receipts (“ADRs”),
including BNY Mellon, for the period of 2011 to values of $19.3 billion.
2015. The Staff issued several requests to BNY
Mellon for information relating to the pre-release of The fixed rate long-term debt instruments hedged
ADRs. BNY Mellon fully cooperated with the generally have original maturities of five to 30 years.
investigation. On Dec. 17, 2018, the SEC announced We issue both callable and non-callable debt. The
that BNY Mellon had settled an administrative debt is hedged with “receive fixed rate, pay variable
proceeding to resolve the investigation of BNY rate” swaps. At Dec. 31, 2018, $16.6 billion par
Mellon’s pre-release activity, in which BNY Mellon value of debt was hedged with interest rate swaps
did not admit or deny the SEC’s findings. designated as fair value hedges that had notional
values of $16.6 billion.
Note 22–Derivative instruments
In addition, we utilize forward foreign exchange
We use derivatives to manage exposure to market contracts as hedges to mitigate foreign exchange
risk, including interest rate risk, equity price risk and exposures. We use forward foreign exchange
foreign currency risk, as well as credit risk. Our contracts as cash flow hedges to convert certain
trading activities are focused on acting as a market- forecasted non-U.S. dollar revenue and expenses into
188 BNY Mellon

U.S. dollars. We use forward foreign exchange Forward foreign exchange contracts are also used to
contracts with maturities of 15 months or less as cash hedge the value of our net investments in foreign
flow hedges to hedge our foreign exchange exposure subsidiaries. These forward foreign exchange
to Indian rupee, British pound, Hong Kong dollar, contracts have maturities of less than one year. The
Singapore dollar and Polish zloty revenue and derivatives employed are designated as hedges of
expense transactions in entities that have the U.S. changes in value of our foreign investments due to
dollar as their functional currency. As of Dec. 31, exchange rates. Changes in the value of the forward
2018, the hedged forecasted foreign currency foreign exchange contracts offset the changes in value
transactions and designated forward foreign exchange of the foreign investments due to changes in foreign
contract hedges were $234 million (notional), with a exchange rates. The change in fair market value of
pre-tax loss of $1 million recorded in accumulated these forward foreign exchange contracts is reported
OCI. This loss will be reclassified to earnings over within foreign currency translation adjustments in
the next 12 months. shareholders’ equity, net of tax. At Dec. 31, 2018,
forward foreign exchange contracts with notional
We also utilize forward foreign exchange contracts as amounts totaling $5.9 billion were designated as net
fair value hedges of the foreign exchange risk investment hedges.
associated with available-for-sale securities. Forward
points are designated as an excluded component, and In addition to forward foreign exchange contracts, we
amortized into earnings over the hedge period. The also designate non-derivative financial instruments as
unamortized derivative value associated with the hedges of our net investments in foreign subsidiaries.
excluded component is recognized in accumulated Those non-derivative financial instruments
OCI. At Dec. 31, 2018, $147 million face amount of designated as hedges of our net investments in
available-for-sale securities were hedged with foreign foreign subsidiaries were all long-term liabilities of
currency forward contracts that had a notional value BNY Mellon in various currencies, and, at Dec. 31,
of $147 million. 2018, had a combined U.S. dollar equivalent value of
$175 million.
The following table presents the gains (losses) related to our hedging derivative portfolio recognized in the
consolidated income statement.
Income statement impact of fair value and cash flow hedges Year ended Dec. 31,
Location of
(in millions) gains (losses) 2018 2017 2016
Interest rate fair value hedges of available-for-sale securities
Derivative Interest income $ 284 $ 82 $ 49
Hedged item Interest income (273) (97) (50)
Interest rate fair value hedges of long-term debt
Derivative Interest expense (328) (197) (323)
Hedged item Interest expense 330 190 320
Foreign exchange fair value hedges of available-for-sale securities
Derivative (a) Other revenue (2) — —
Hedged item Other revenue 2 — —
Cash flow hedges of forecasted FX exposures
Gain (loss) reclassified from OCI into income Trading revenue — 2 (16)
Gain reclassified from OCI into income Other revenue 2 8 —
(Loss) reclassified from OCI into income Net interest revenue — — (18)
(Loss) gain reclassified from OCI into income Staff expense (4) 10 (11)
Gains (losses) recognized in the consolidated income statement due to fair value and
cash flow hedging relationships $ 11 $ (2) $ (49)
(a) Includes $1 million associated with the amortization of the excluded component. At Dec. 31, 2018, the remaining accumulated OCI balance associated
with the excluded component was de minimis.
BNY Mellon 189

The following table presents the impact of hedging derivatives used in net investment hedging relationships in the
consolidated income statement.
Impact of derivative instruments used in net investment hedging relationships in the income statement
(in millions) Gain or (loss) recognized in Gain or (loss) reclassified from
accumulated OCI on derivatives accumulated OCI into income
Derivatives in net investment hedging Year ended Dec. 31, Location of gain or (loss) reclassified Year ended Dec. 31,
relationships 2018 2017 2016 from accumulated OCI into income 2018 2017 2016
FX contracts $ 535 $ (625) $ 652 Net interest revenue $ — $ — $ —
The following table presents information on the hedged items in fair value hedging relationships.
Hedged items in fair value hedging relationships at Dec. 31, 2018 Carrying amount of hedged Hedge accounting basis
(in millions) asset or liability adjustment (decrease)
Available-for-sale securities (a) $ 19,201 $ (125)
Long-term debt 16,147 (453) (b)
(a) Excludes hedged items where only foreign currency risk is the designated hedged risk, as the basis adjustments related to foreign currency hedges will not
reverse through the consolidated income statement in future periods. The carrying amount excluded for available-for-sale securities was $148 million at
Dec. 31, 2018.
(b) Includes $284 million of basis adjustment on long-term debt associated with terminated hedges.
The following table summarizes the notional amount and credit exposure of our total derivative portfolio at Dec. 31,
2018 and Dec. 31, 2017.
Impact of derivative instruments on the balance sheet Asset derivatives Liability derivatives
Notional value fair value fair value
Dec. 31, Dec. 31, Dec. 31,
(in millions) 2018 2017 2018 2017 2018 2017
Derivatives designated as hedging instruments: (a)(b)
Interest rate contracts $ 35,890 $ 36,315 $ 23 $ 278 $ 74 $ 534
Foreign exchange contracts 6,330 8,923 266 45 14 266
Total derivatives designated as hedging instruments $ 289 $ 323 $ 88 $ 800
Derivatives not designated as hedging instruments: (b)(c)
Interest rate contracts $ 248,534 $ 267,485 $ 3,590 $ 6,439 $ 3,116 $ 6,353
Foreign exchange contracts 831,730 767,999 4,807 5,104 5,215 5,067
Equity contracts 927 1,698 68 70 118 149
Credit contracts 150 180 — — 1 4
Total derivatives not designated as hedging instruments $ 8,465 $ 11,613 $ 8,450 $ 11,573
Total derivatives fair value (d) $ 8,754 $ 11,936 $ 8,538 $ 12,373
Effect of master netting agreements (e) (5,939) (8,845) (6,170) (8,797)
Fair value after effect of master netting agreements $ 2,815 $ 3,091 $ 2,368 $ 3,576
(a) The fair value of asset derivatives and liability derivatives designated as hedging instruments is recorded as other assets and other
liabilities, respectively, on the consolidated balance sheet.
(b) Pursuant to a rule change at a clearing organization in 2018, cash collateral exchanged is deemed a settlement of the derivative each
day. The impact of the change reduced the gross fair value of derivative assets and liabilities and a corresponding decrease in effect of
master netting agreements, with no impact to the consolidated balance sheet.
(c) The fair value of asset derivatives and liability derivatives not designated as hedging instruments is recorded as trading assets and
trading liabilities, respectively, on the consolidated balance sheet.
(d) Fair values are on a gross basis, before consideration of master netting agreements, as required by ASC 815, Derivatives and Hedging.
(e) Effect of master netting agreements includes cash collateral received and paid of $809 million and $1,040 million, respectively, at Dec.
31, 2018, and $925 million and $877 million, respectively, at Dec. 31, 2017.
190 BNY Mellon

Trading activities (including trading derivatives) overnight pre-tax dollar loss from adverse changes in
fair values of all trading positions. The calculation
Our trading activities are focused on acting as a assumes a one-day holding period, utilizes a 99%
market-maker for our customers, facilitating customer confidence level and incorporates non-linear product
trades and risk mitigating economic hedging in characteristics. The VaR model is one of several
compliance with the Volcker Rule. The change in the statistical models used to develop economic capital
fair value of the derivatives utilized in our trading results, which are allocated to lines of business for
activities is recorded in foreign exchange and other computing risk-adjusted performance.
trading revenue on the consolidated income
statement. VaR methodology does not evaluate risk attributable
to extraordinary financial, economic or other
The following table presents our foreign exchange occurrences. As a result, the risk assessment process
and other trading revenue. includes a number of stress scenarios based upon the
risk factors in the portfolio and management’s
assessment of market conditions. Additional stress
Foreign exchange and other
trading revenue Year ended Dec. 31, scenarios based upon historical market events are also
(in millions) 2018 2017 2016 performed. Stress tests may incorporate the impact of
Foreign exchange $ 663 $ 638 $ 687 reduced market liquidity and the breakdown of
Other trading revenue 69 30 14 historically observed correlations and extreme
Total foreign exchange and other scenarios. VaR and other statistical measures, stress
trading revenue $ 732 $ 668 $ 701
testing and sensitivity analysis are incorporated in
other risk management materials.
Foreign exchange revenue includes income from
Counterparty credit risk and collateral
purchasing and selling foreign currencies and
currency forwards, futures and options. Other trading
We assess credit risk of our counterparties through
revenue reflects results from trading in cash
regular examination of their financial statements,
instruments including fixed income and equity
confidential communication with the management of
securities and non-foreign exchange derivatives.
those counterparties and regular monitoring of
We also use derivative financial instruments as risk publicly available credit rating information. This and
mitigating economic hedges, which are not formally other information is used to develop proprietary
designated as accounting hedges. This includes credit rating metrics used to assess credit quality.
hedging the foreign currency, interest rate or market
risks inherent in some of our balance sheet exposures, Collateral requirements are determined after a
such as seed capital investments and deposits, as well comprehensive review of the credit quality of each
as certain investment management fee revenue counterparty. Collateral is generally held or pledged
streams. We also use total return swaps to in the form of cash and/or highly liquid government
economically hedge obligations arising from the securities. Collateral requirements are monitored and
company’s deferred compensation plan whereby the adjusted daily.
participants defer compensation and earn a return
linked to the performance of investments they select. Additional disclosures concerning derivative financial
The gains or losses on these total return swaps are instruments are provided in Note 19.
recorded in staff expense on the consolidated income
statement and was a loss of $20 million in 2018, a Disclosure of contingent features in OTC derivative
gain of $26 million in 2017 and a gain of $14 million instruments
in 2016.
Certain OTC derivative contracts and/or collateral
We manage trading risk through a system of position agreements contain credit-risk contingent features
limits, a VaR methodology based on historical triggered upon a rating downgrade in which the
simulation and other market sensitivity measures. counterparty has the right to request additional
Risk is monitored and reported to senior management collateral or the right to terminate the contracts in a
by a separate unit, independent from trading, on a net liability position.
daily basis. Based on certain assumptions, the VaR
methodology is designed to capture the potential
BNY Mellon 191

The following table shows the aggregate fair value of The following table shows the fair value of contracts
OTC derivative contracts in net liability positions that falling under early termination provisions that were in
contained credit-risk contingent features and the net liability positions for three key ratings triggers.
value of collateral that has been posted.
Potential close-out exposures (fair value) (a)
Dec. 31, Dec. 31, Dec. 31,
If The Bank of New York Mellon’s
Aggregate fair value of OTC derivatives rating changed to: (b)
in net liability positions (a) $ 2,877 $ 2,393
A3/A- $ 15 $ 92
Collateral posted $ 2,801 $ 2,115
Baa2/BBB $ 116 $ 748
(a) Before consideration of cash collateral.
Ba1/BB+ $ 1,041 $ 2,007
(a) The amounts represent potential total close-out values if The
Bank of New York Mellon’s long-term issuer rating were to
The aggregate fair value of OTC derivative contracts immediately drop to the indicated levels, and do not reflect
containing credit-risk contingent features can collateral posted.
(b) Represents rating by Moody’s/S&P.
fluctuate from quarter to quarter due to changes in
market conditions, composition of counterparty
trades, new business or changes to the contingent
features. If The Bank of New York Mellon’s debt rating had
fallen below investment grade on Dec. 31, 2018 and
The Bank of New York Mellon, our largest banking Dec. 31, 2017, existing collateral arrangements would
subsidiary, enters into the substantial majority of our have required us to post additional collateral of $100
OTC derivative contracts and/or collateral million and $102 million, respectively.
agreements. As such, the contingent features may be
triggered if The Bank of New York Mellon’s long-
term issuer rating was downgraded.
Offsetting assets and liabilities
The following tables present derivative instruments and financial instruments that are either subject to an
enforceable netting agreement or offset by collateral arrangements. There were no derivative instruments or
financial instruments subject to a legally enforceable netting agreement for which we are not currently netting.
Offsetting of derivative assets and financial assets at Dec. 31, 2018

Gross Net assets Gross amounts not offset
amounts recognized in the balance sheet
offset in the in the Cash
Gross assets balance balance Financial collateral Net
(in millions) recognized sheet (a) sheet instruments received amount
Derivatives subject to netting arrangements:
Interest rate contracts $ 2,654 $ 2,202 $ 452 $ 133 $ — $ 319
Foreign exchange contracts 4,409 3,724 685 70 — 615
Equity and other contracts 38 13 25 — — 25
Total derivatives subject to netting arrangements 7,101 5,939 1,162 203 — 959
Total derivatives not subject to netting arrangements 1,653 — 1,653 — — 1,653
Total derivatives 8,754 5,939 2,815 203 — 2,612
Reverse repurchase agreements 112,245 76,040 (b) 36,205 36,205 — —
Securities borrowing 10,588 — 10,588 10,286 — 302
Total $ 131,587 $ 81,979 $ 49,608 $ 46,694 $ — $ 2,914
(a) Includes the effect of netting agreements and net cash collateral received. The offset related to the OTC derivatives was allocated to the
various types of derivatives based on the net positions.
(b) Offsetting of reverse repurchase agreements relates to our involvement in the FICC, where we settle government securities transactions
on a net basis for payment and delivery through the Fedwire system.
192 BNY Mellon

Offsetting of derivative assets and financial assets at Dec. 31, 2017

Gross Net assets Gross amounts not offset
offset in the in the Cash
Gross assets balance balance Financial collateral Net
(in millions) recognized sheet (a) sheet instruments received amount
Foreign exchange contracts 4,666 3,720 946 116 — 830
Equity and other contracts 67 50 17 — — 17
Total derivatives subject to netting arrangements 10,648 8,845 1,803 294 — 1,509
Total derivatives not subject to netting arrangements 1,288 — 1,288 — — 1,288
Reverse repurchase agreements 42,784 25,848 (b) 16,936 16,923 — 13
Securities borrowing 11,199 — 11,199 10,858 — 341
Total $ 65,919 $ 34,693 $ 31,226 $ 28,075 $ — $ 3,151
(a) Includes the effect of netting agreements and net cash collateral received. The offset related to the OTC derivatives was allocated to the
(b) Offsetting of reverse repurchase agreements relates to our involvement in the FICC, where we settle government securities transactions
on a net basis for payment and delivery through the Fedwire system.
Offsetting of derivative liabilities and financial liabilities at Dec. 31, 2018 Net
Gross liabilities Gross amounts not offset
Gross offset in the in the Cash
liabilities balance balance Financial collateral Net
(in millions) recognized sheet (a) sheet instruments pledged amount
Foreign exchange contracts 4,747 3,626 1,121 187 — 934
Equity and other contracts 75 36 39 37 — 2
Total derivatives subject to netting arrangements 7,966 6,170 1,796 771 — 1,025
Total derivatives not subject to netting arrangements 572 — 572 — — 572
Repurchase agreements 84,665 76,040 (b) 8,625 8,625 — —
Securities lending 997 — 997 937 — 60
Total $ 94,200 $ 82,210 $ 11,990 $ 10,333 $ — $ 1,657
(a) Includes the effect of netting agreements and net cash collateral paid. The offset related to the OTC derivatives was allocated to the
(b) Offsetting of repurchase agreements relates to our involvement in the FICC, where we settle government securities transactions on a net
basis for payment and delivery through the Fedwire system.
BNY Mellon 193

Offsetting of derivative liabilities and financial liabilities at Dec. 31, 2017 Net
Gross liabilities Gross amounts not offset
Gross offset in the in the Cash
liabilities balance balance Financial collateral Net
(in millions) recognized sheet (a) sheet instruments pledged amount
Interest rate contracts $ 6,810 $ 5,495 $ 1,315 $ 1,222 $ — $ 93
Foreign exchange contracts 4,765 3,221 1,544 177 — 1,367
Equity and other contracts 143 81 62 58 — 4
Total derivatives subject to netting arrangements 11,718 8,797 2,921 1,457 — 1,464
Total derivatives not subject to netting arrangements 655 — 655 — — 655
Total derivatives 12,373 8,797 3,576 1,457 — 2,119
Repurchase agreements 33,908 25,848 (b) 8,060 8,059 — 1
Securities lending 2,186 — 2,186 2,091 — 95
Total $ 48,467 $ 34,645 $ 13,822 $ 11,607 $ — $ 2,215
(a) Includes the effect of netting agreements and net cash collateral paid. The offset related to the OTC derivatives was allocated to the
(b) Offsetting of repurchase agreements relates to our involvement in the FICC, where we settle government securities transactions on a net
basis for payment and delivery through the Fedwire system.
Secured borrowings
The following table presents the contract value of repurchase agreements and securities lending transactions
accounted for as secured borrowings by the type of collateral provided to counterparties.
Repurchase agreements and securities lending transactions accounted for as secured borrowings
Dec. 31, 2018 Dec. 31, 2017
Remaining contractual maturity Remaining contractual maturity
Overnight and Up to 30 30 days or Overnight and Up to 30 30 days or
(in millions) continuous days more Total continuous days more Total
Repurchase agreements:
U.S. Treasury $ 76,822 $ — $ — $ 76,822 $ 26,883 $ 11 $ — $ 26,894
U.S. government agencies 759 — — 759 570 180 — 750
Agency RMBS 3,184 — 4 3,188 2,574 109 — 2,683
Corporate bonds 416 — 1,413 1,829 373 — 1,052 1,425
Other debt securities 271 — 1,106 1,377 253 — 731 984
Equity securities 163 — 527 690 655 — 517 1,172
Total $ 81,615 $ — $ 3,050 $ 84,665 $ 31,308 $ 300 $ 2,300 $ 33,908
Securities lending:
U.S. government agencies $ 7 $ — $ — $ 7 $ 72 $ — $ — $ 72
Other debt securities 294 — — 294 316 — — 316
Equity securities 696 — — 696 1,798 — — 1,798
Total $ 997 $ — $ — $ 997 $ 2,186 $ — $ — $ 2,186
Total borrowings $ 82,612 $ — $ 3,050 $ 85,662 $ 33,494 $ 300 $ 2,300 $ 36,094
BNY Mellon’s repurchase agreements and securities additional collateral to the counterparty, therefore
lending transactions primarily encounter risk decreasing the amount of assets available for other
associated with liquidity. We are required to pledge liquidity needs that may arise. BNY Mellon also
collateral based on predetermined terms within the offers tri-party collateral agency services in the tri-
agreements. If we were to experience a decline in the party repo market where we are exposed to credit
fair value of the collateral pledged for these risk. In order to mitigate this risk, we require dealers
transactions, we could be required to provide to fully secure intraday credit.
194 BNY Mellon

Note 23–Lines of business
We have an internal information system that produces performance data along product and service lines for our two
principal businesses and the Other segment. The primary products and services and types of revenue for our
principal businesses and a description of the Other segment are presented below.
Investment Services business
Line of business Primary products and services Primary types of revenue

Asset Servicing Custody, accounting, ETF services, - Asset servicing fees (includes
middle-office solutions, transfer agency, securities lending revenue)
services for private equity and real estate - Foreign exchange revenue
funds, foreign exchange, securities - Net interest revenue
lending, liquidity/lending services, prime - Financing-related fees
brokerage and data analytics
Pershing Clearing and custody, investment, wealth - Clearing services fees

and retirement solutions, technology and - Net interest revenue
enterprise data management, trading
services and prime brokerage
Issuer Services Corporate Trust (trustee, administration - Issuer services fees

and agency services and reporting and - Net interest revenue
transparency) and Depositary Receipts - Foreign exchange revenue
(issuer services and support for brokers
and investors)
Treasury Services Integrated cash management solutions - Treasury services fees

including payments, foreign exchange, - Net interest revenue
liquidity management, receivables
processing and payables management
and trade finance and processing
Clearance and Collateral Management U.S. government clearing, global - Asset servicing fees
collateral management and tri-party repo - Net interest revenue
Investment Management business
Line of business Primary products and services Primary types of revenue

Asset Management Diversified investment management - Investment management fees
strategies and distribution of investment - Performance fees
products - Distribution and servicing fees
Wealth Management Investment management, custody, wealth - Investment management fees

and estate planning and private banking - Net interest revenue
services
Other segment Description Primary types of revenue

Includes leasing portfolio, corporate - Net interest revenue
treasury activities, including our - Investment and other income
securities portfolio, derivatives and other - Net gain (loss) on securities
trading activity, corporate and bank- - Other trading revenue
owned life insurance, renewable energy
investments and business exits
BNY Mellon 195

Business accounting principles • The provision for credit losses associated with the
respective credit portfolios is reflected in each
Our business data has been determined on an internal business segment.
management basis of accounting, rather than the • Incentives expense related to restricted stock is
generally accepted accounting principles used for allocated to the businesses.
consolidated financial reporting. These measurement
• Support and other indirect expenses are allocated
principles are designed so that reported results of the
to businesses based on internally developed
businesses will track their economic performance.
methodologies.
Business results are subject to reclassification when • Recurring FDIC expense is allocated to the
organizational changes are made. There were no businesses based on average deposits generated
significant organizational changes in 2018. The within each business.
results are also subject to refinements in revenue and • Litigation expense is generally recorded in the
expense allocation methodologies, which are business in which the charge occurs.
typically reflected on a prospective basis. • Management of the securities portfolio is a shared
service contained in the Other segment. As a
The accounting policies of the businesses are the result, gains and losses associated with the
same as those described in Note 1. valuation of the securities portfolio are included
in the Other segment.
The results of our businesses are presented and • Client deposits serve as the primary funding
analyzed on an internal management reporting basis. source for our securities portfolio. We typically
allocate all interest revenue to the businesses
• Revenue amounts reflect fee and other revenue generating the deposits. Accordingly, accretion
generated by each business. Fee and other related to the portion of the securities portfolio
revenue transferred between businesses under restructured in 2009 has been included in the
revenue transfer agreements is included within results of the businesses.
other revenue in each business.
• Balance sheet assets and liabilities and their
• Revenues and expenses associated with specific related income or expense are specifically
client bases are included in those businesses. For assigned to each business. Businesses with a net
example, foreign exchange activity associated liability position have been allocated assets.
with clients using custody products is included in
Investment Services. • Goodwill and intangible assets are reflected
within individual businesses.
• Net interest revenue is allocated to businesses
based on the yields on the assets and liabilities Total revenue includes approximately $2.6 billion in
generated by each business. We employ a funds 2018, $2.4 billion in 2017 and $2.2 billion in 2016 of
transfer pricing system that matches funds with international operations domiciled in the UK which
the specific assets and liabilities of each business comprised 16%, 15% and 14% of total revenue,
based on their interest sensitivity and maturity respectively.
characteristics.
196 BNY Mellon

The following consolidating schedules present the contribution of our businesses to our overall profitability.
For the year ended Dec. 31, 2018 Investment Investment

(dollars in millions) Services Management Other Consolidated
Total fee and other revenue $ 8,926 $ 3,781 (a) $ 85 $ 12,792 (a)
Net interest revenue (expense) 3,372 303 (64) 3,611
Total revenue 12,298 4,084 (a) 21 16,403 (a)
Provision for credit losses 1 3 (15) (11)
Noninterest expense 8,058 2,818 334 11,210 (b)
Income (loss) before taxes $ 4,239 $ 1,263 (a) $ (298) $ 5,204 (a)(b)
Pre-tax operating margin (c) 34% 31% N/M 32%
Average assets $ 262,747 $ 31,446 $ 49,581 $ 343,774
(a) Both total fee and other revenue and total revenue include a net loss from consolidated investment management funds of $1 million,
representing $13 million of losses and a loss attributable to noncontrolling interests of $12 million. Income before taxes is net of a loss
attributable to noncontrolling interests of $12 million.
(b) Noninterest expense includes a loss attributable to noncontrolling interests of $1 million related to other consolidated subsidiaries.

Net interest revenue (expense) 3,058 329 (79) 3,308
Total revenue (loss) 11,585 3,997 (a) (72) 15,510 (a)
Provision for credit losses (7) 2 (19) (24)
Income (loss) before taxes $ 3,845 $ 1,141 (a) $ (400) $ 4,586 (a)(b)
Average assets $ 254,646 $ 31,450 $ 57,752 $ 343,848
(a) Both total fee and other revenue and total revenue include net income from consolidated investment management funds of $37 million,
representing $70 million of income and noncontrolling interests of $33 million. Income before taxes is net of noncontrolling interests of
$33 million.
(b) Noninterest expense includes a loss attributable to noncontrolling interest of $9 million related to other consolidated subsidiaries.

Net interest revenue 2,797 327 14 3,138
Total revenue 11,096 3,751 (a) 380 15,227 (a)
Provision for credit losses 8 6 (25) (11)
Income before taxes $ 3,746 $ 967 (a) $ 11 $ 4,724 (a)(b)
Average assets $ 273,808 $ 30,169 $ 54,500 $ 358,477
(a) Both total fee and other revenue and total revenue include net income from consolidated investment management funds of $16 million,
representing $26 million of income and noncontrolling interests of $10 million. Income before taxes is net of noncontrolling interests of
$10 million.
(b) Noninterest expense includes a loss attributable to noncontrolling interest of $9 million related to other consolidated subsidiaries.
BNY Mellon 197

Note 24–International operations domiciled customers. As a result, it is necessary to

make certain subjective assumptions such as:
International activity includes Investment Services
and Investment Management fee revenue generating • Income from international operations is
businesses, foreign exchange trading activity, loans determined after internal allocations for interest
and other revenue producing assets and transactions revenue, taxes, expenses and provision for credit
in which the customer is domiciled outside of the losses.
United States and/or the international activity is • Expense charges to international operations
resident at an international entity. Due to the nature include those directly incurred in connection with
of our international and domestic activities, it is not such activities, as well as an allocable share of
possible to precisely distinguish our international general support and overhead charges.
operations between internationally and domestically
Total assets, total revenue, income before income taxes and net income of our international operations are shown in
the table below.
International operations International Total Total

(in millions) EMEA APAC Other International Domestic Total
2018
Total assets at period end (a) $ 74,982 (b) $ 23,199 $ 1,483 $ 99,664 $ 263,209 $ 362,873
Total revenue 4,252 (b) 1,103 684 6,039 10,353 16,392
Income before income taxes 1,694 564 455 2,713 2,479 5,192
Net income 1,345 448 361 2,154 2,100 4,254
2017
Total revenue 3,982 (b) 997 610 5,589 9,954 15,543
Net income 1,186 426 234 1,846 2,268 4,114
2016
Total revenue 3,744 (b) 922 549 5,215 10,022 15,237
Net income 1,013 389 229 1,631 1,917 3,548
(a) Total assets include long-lived assets, which are not considered by management to be significant in relation to total assets. Long-lived
assets are primarily located in the United States.
(b) Includes assets of approximately $30.6 billion, $32.9 billion and $29.6 billion and revenue of approximately $2.6 billion, $2.4 billion and
$2.2 billion in 2018, 2017 and 2016, respectively, of international operations domiciled in the UK, which is 8%, 9% and 9% of total
assets and 16%, 15% and 14% of total revenue, respectively.
Note 25–Supplemental information to the Consolidated Statement of Cash Flows
Non-cash investing and financing transactions that, appropriately, are not reflected in the consolidated statement of
cash flows are listed below.
Non-cash investing and financing transactions Year ended Dec. 31,

(in millions) 2018 2017 2016
Transfers from loans to other assets for other real estate owned $ 2 $ 3 $ 4
Change in assets of consolidated VIEs 268 500 170
Change in liabilities of consolidated VIEs — 313 69
Change in nonredeemable noncontrolling interests of consolidated investment management funds 215 302 120
Securities purchased not settled 227 112 75
Securities sold not settled 187 587 —
Securities matured not settled — 70 —
Available-for-sale securities transferred to trading assets 963 — —
Held-to-maturity securities transferred to available-for-sale 1,087 74 10
Premises and equipment/capitalized software funded by capital lease obligations 26 347 13
198 BNY Mellon

Report of Independent Registered Public Accounting Firm
To the Stockholders and Board of Directors

The Bank of New York Mellon Corporation:
Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of The Bank of New York Mellon Corporation and
subsidiaries (BNY Mellon) as of December 31, 2018 and 2017, the related consolidated statements of income,
comprehensive income, changes in equity, and cash flows for each of the years in the three-year period ended
December 31, 2018, and the related notes (collectively, the consolidated financial statements). In our opinion, the
consolidated financial statements present fairly, in all material respects, the financial position of BNY Mellon as of
December 31, 2018 and 2017, and the results of its operations and its cash flows for each of the years in the three-
year period ended December 31, 2018, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States) (PCAOB), BNY Mellon’s internal control over financial reporting as of December 31, 2018, based on
criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring
Organizations of the Treadway Commission, and our report dated February 27, 2019 expressed an unqualified
opinion on the effectiveness of BNY Mellon’s internal control over financial reporting.
Basis for Opinion

These consolidated financial statements are the responsibility of BNY Mellon’s management. Our responsibility is
to express an opinion on these consolidated financial statements based on our audits. 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 audits in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of
material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks
of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing
procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the
amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the
accounting principles used and significant estimates made by management, as well as evaluating the overall
presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our
opinion.
We have served as BNY Mellon’s auditor since 2007.
New York, New York

February 27, 2019
BNY Mellon 199

Directors, Executive Committee and Other Executive Officers
Effective February 27, 2019
Directors
Steven D. Black Jeffrey A. Goldstein Mark A. Nordenberg
Co-Chief Executive Officer Chairman Chancellor Emeritus,
Bregal Investments SpringHarbor Holding Company LLC and a Chair of the Institute of Politics and
Private equity firm Senior Advisor, Hellman & Friedman LLC Distinguished Service Professor of Law
Private equity firm University of Pittsburgh
Linda Z. Cook Major public research university
Partner, Managing Director and Member of the John M. Hinshaw
Executive Committee of EIG Global Energy Former Executive Vice President and Elizabeth E. Robinson
Partners, an investment firm, and Chief Chief Customer Officer at Former Global Treasurer, Partner and
Executive Officer of Harbour Energy, Ltd., Hewlett Packard Enterprise Company Managing Director of
an energy investment vehicle Global provider of IT, technology and enterprise The Goldman Sachs Group, Inc.
products and solutions Global financial services company
Joseph J. Echevarria
Retired Chief Executive Officer Edmund F. (Ted) Kelly Charles W. Scharf
Deloitte LLP Retired Chairman Chairman and Chief Executive Officer
Global provider of audit, consulting, financial Liberty Mutual Group The Bank of New York Mellon Corporation
advisory, risk management, tax and related Multi-line insurance company
services Samuel C. Scott III
Jennifer B. Morgan Retired Chairman, President and
Edward P. Garden Executive Board Member of SAP and Chief Executive Officer
Chief Investment Officer and a founding partner, President of SAP Americas and Asia Pacific Japan, Ingredion Incorporated (formerly Corn
Trian Fund Management, L.P. Global Customer Operations Products International, Inc.)
Alternative investment management firm Global software company Global ingredient solutions provider
Executive Committee and Other Executive Officers

Paul Camp Hani A. Kablawi * Roman Regelman *
Chief Executive Officer, Treasury Services Chief Executive Officer, Global Asset Servicing Head of Digital
and Chairman, Europe, Middle East and Africa
Lisa Dolly Brian Ruane
Chief Executive Officer, Pershing LLC Catherine Keating Chief Executive Officer, BNY Mellon
Chief Executive Officer, BNY Mellon Wealth Government Securities Services Corp.
Bridget E. Engle * Management
Chief Information Officer Michael P. Santomassimo *
Kurtis R. Kurimsky * Chief Financial Officer
Thomas P. (Todd) Gibbons * Corporate Controller
Chief Executive Officer, Clearing, Markets Charles W. Scharf *
and Client Management Francis (Frank) La Salla * Chairman and Chief Executive Officer
Chief Executive Officer, Issuer Services
Mitchell E. Harris * Akash A. Shah *
Chief Executive Officer, Investment Management J. Kevin McCarthy * Head of Strategy
General Counsel
Monique R. Herena * James S. Wiener *
Chief Human Resources Officer Michelle M. Neal Chief Risk Officer
Chief Executive Officer, BNY Mellon Markets
Lester J. Owens *
Head of Operations
* Designated as an Executive Officer.
200 BNY Mellon

Performance Graph
Cumulative shareholder returns (a) Dec. 31,

(in dollars) 2013 2014 2015 2016 2017 2018
The Bank of New York Mellon Corporation $ 100.0 $ 118.3 $ 122.2 $ 143.0 $ 165.4 $ 147.5
S&P 500 Financials Index 100.0 115.2 113.4 139.3 170.2 148.0
S&P 500 Index 100.0 113.7 115.3 129.1 157.2 150.3
Peer Group 100.0 115.5 115.3 139.3 168.8 141.0
(a) Returns are weighted by market capitalization at the beginning of the measurement period.
This graph shows The Bank of New York Mellon Corporation’s cumulative total shareholder returns over the five-
year period from Dec. 31, 2013 to Dec. 31, 2018. Our peer group is composed of financial services companies
which provide investment management and investment servicing. We also utilize the S&P 500 Financials Index as a
benchmark against our performance. The graph shows the cumulative total returns for the same five-year period of
the S&P 500 Financials Index, the S&P 500 Index as well as our peer group listed below. The comparison assumes
a $100 investment on Dec. 31, 2013 in The Bank of New York Mellon Corporation common stock, in the S&P 500
Financials Index, in the S&P 500 Index and in the peer group detailed below and assumes that all dividends were
reinvested.
Peer Group
BlackRock, Inc. Morgan Stanley State Street Corporation
The Charles Schwab Corporation Northern Trust Corporation U.S. Bancorp
Franklin Resources, Inc. The PNC Financial Services Group, Inc. Wells Fargo & Company
JPMorgan Chase & Co. Prudential Financial, Inc.
BNY Mellon 201

Corporate Information
BNY Mellon is a global investments company dedicated to helping its clients manage and service their financial assets
throughout the investment lifecycle. Whether providing financial services for institutions, corporations or individual
investors, BNY Mellon delivers informed investment services and investment management in 35 countries. As of
December 31, 2018, BNY Mellon had $33.1 trillion in assets under custody and/or administration, and $1.7 trillion in
assets under management. BNY Mellon can act as a single point of contact for clients looking to create, trade, hold,
manage, service, distribute or restructure investments. BNY Mellon is the corporate brand of The Bank of New York
Mellon Corporation (NYSE: BK). Additional information is available on www.bnymellon.com. Follow us on
Twitter @BNYMellon or visit our newsroom at www.bnymellon.com/newsroom for the latest company news.
CORPORATE HEADQUARTERS TRANSFER AGENT AND REGISTRAR

240 Greenwich Street, New York, NY 10286 EQ Shareowner Services
+ 1 212 495 1784
www.bnymellon.com SHAREHOLDER SERVICES
EQ Shareowner Services maintains the records for our registered
ANNUAL MEETING shareholders and can provide a variety of services such as those involving:
The Annual Meeting of Shareholders will be held in New York at
240 Greenwich Street at 9 a.m. on Tuesday, April 9, 2019. • Change of name or address
• Consolidation of accounts
EXCHANGE LISTING • Duplicate mailings
BNY Mellon’s common stock is traded on the New York Stock Exchange • Dividend reinvestment enrollment
under the trading symbol BK. Mellon Capital IV’s 6.244% Fixed-to-Floating • Direct deposit of dividends
Rate Normal Preferred Capital Securities fully and unconditionally • Transfer of stock to another person
guaranteed by BNY Mellon (symbol BK/P) and depositary shares, each
For assistance from EQ Shareowner Services,
representing a 1/4,000th interest in a share of BNY Mellon’s Series C
visit www.shareowneronline.com or call +1 800 205 7699.
Noncumulative Perpetual Preferred Stock (symbol BK PrC), also are listed
on the New York Stock Exchange.
DIRECT STOCK PURCHASE AND DIVIDEND
REINVESTMENT PLAN
STOCK PRICES The Direct Stock Purchase and Dividend Reinvestment Plan provides a
Prices for BNY Mellon’s common stock can be viewed at
way to purchase shares of common stock directly from BNY Mellon at the
www.bnymellon.com/investorrelations.
current market value. Non-shareholders may purchase their first shares of
BNY Mellon’s common stock through the Plan, and shareholders may increase
CORPORATE GOVERNANCE their shareholding by reinvesting cash dividends and through optional cash
Corporate governance information is available at
investments. Plan details are in a prospectus, which may be viewed online
www.bnymellon.com/governance.
at www.shareowneronline.com, or obtained in printed form by calling
+1 800 205 7699.
CORPORATE SOCIAL RESPONSIBILITY
Information about BNY Mellon’s commitment to corporate social ELECTRONIC DEPOSIT OF DIVIDENDS
responsibility is available at www.bnymellon.com/csr. BNY Mellon’s Registered shareholders may have quarterly dividends paid on
Corporate Social Responsibility (CSR) Report, which includes our BNY Mellon’s common stock deposited electronically to their checking
Equal Employment Opportunity/Affirmative Action policies, can be or savings accounts. To have dividends deposited electronically, go to
viewed and printed at www.bnymellon.com/csr. www.shareowneronline.com to set up your account(s) for direct deposit.
If you prefer, you may also send a request by mail to EQ Shareowner
INVESTOR RELATIONS Services, Shareholder Relations, P.O. Box 64874, St. Paul, MN 55164-0874.
Visit www.bnymellon.com/investorrelations or For more information, call +1 800 205 7699.
call +1 212 635 8529.
SHAREHOLDER ACCOUNT ACCESS
COMMON STOCK DIVIDEND PAYMENTS
Subject to approval of the Board of Directors, dividends are paid BY INTERNET
on BNY Mellon’s common stock quarterly in February, May, August www.shareowneronline.com
and November. Shareholders can register to receive shareholder information electronically.
To enroll, visit www.shareowneronline.com.
FORM 10-K AND SHAREHOLDER PUBLICATIONS
For a free copy of BNY Mellon’s Annual Report on Form 10-K, including the BY PHONE
financial statements and the financial statement schedules, or quarterly Toll-free in the U.S. +1 800 205 7699
reports on Form 10-Q as filed with the Securities and Exchange Commission, Outside the U.S. +1 651 450 4064
send a request by email to investorrelations@bnymellon.com, or by
mail to Investor Relations at The Bank of New York Mellon Corporation, BY MAIL
240 Greenwich Street, New York, NY 10286. The 2018 Annual Report, as well EQ Shareowner Services
as Forms 10-K, 10-Q and 8-K and quarterly earnings and other news releases P.O. Box 64874
can be found at www.bnymellon.com/investorrelations. St. Paul, MN 55164-0874
The contents of the listed Internet sites are not incorporated in this Annual Report.
The Bank of New York Mellon Corporation
240 Greenwich Street
New York, NY 10286
United States
+1 212 495 1784
bnymellon.com

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BNY

2018 Annual Report III

In last year’s letter, I discussed why we break these items out. To

EARNINGS PER SHARE

Our financial performance and franchise growth were relatively consistent

2018 | $10,868 2018 OPERATING

2018 Annual Report V

Our Investment Services revenue increased 6%, expenses were up 5% and

in the prior year.

Assets under custody and/or administration decreased by 1% as the negative

Investment Management’s financial performance reflected a difficult

up from 33% in 2017. Strength in our liability–driven investment (LDI) business

Our assets under management declined by 9%, impacted by lower equity

markets and outflows, particularly in our active strategies. Changes in

foreign exchange rates and declines in market values drove approximately

While we are fortunate that our business benefits

In our M A R K ETS business, we have been investing in our Foreign

Our LDI offering in Asset Management has seen strong growth. We

In ASSET SERV ICING, we face continued pricing pressure for our

PER SHING is an incredibly unique platform. We love our position as

In W E A LTH M A NAGEMENT, we also have new leadership in place and

2018 Annual Report IX

We are a market leader in In ASSET M A NAGEMEN T,

As we look forward, our expectations regarding our ability to increase our

Given the operating leverage in our business, small

This is about us bringing our ability to execute day in and

Our focus on execution is paramount and is a necessary precursor to

A simple example is where we use technology to automate something that

2018 Annual Report XI

• In 2018, we cleared and settled ~88 million transactions with the

• We settled ~$230 trillion of securities globally with ~97% fully automated.

• We process, on average, ~$2 trillion of payments each day, with

• There are a number of areas where we experienced volume increases

All we do is enabled by technology. Our platforms allow us to process cash

~$3.0 B In 2018, we increased what we spend on technology from approximately

XII BNY Mellon

While creating the best operating platform is technology priority number

We are making a significant number of investments that

• Consolidating our remaining custody platforms.

• Improving transparency intra–day into performance for clients.

• Upgrading to a best–in–class platform for servicing traditional loan

• Building new capabilities to better support alternative asset managers,

• Redesigning our client portal to offer an integrated experience across

• Building a fully integrated Wealth Management platform across

• Continuing to extend our capabilities to service wealth managers in

• Increasing our investment in ETF servicing infrastructure.

• Extending LDI capabilities in the U.S.

2018 Annual Report XIII

In addition, Lester Owens joined us in February to lead Operations

We are creating more differentiation in our performance ratings, salaries and

I understand there is a debate regarding performance reviews and ratings.

XIV BNY Mellon

Historically we have not differentiated nearly enough in how we have

STRONG PER FOR M ER S SHOU LD BE R EWA R DED more than

Much of what we are doing is eliminating

2018 Annual Report XV

The “right” people means a diverse group—in every way.

This includes race, ethnicity, gender and sexual orientation, as well as

We are working to ensure we are advancing diversity from entry levels