BNY Mellon · Risk factors

We are required to accurately process large numbers of transactions each day on a timely basis. The transactions we process or execute are operationally complex and can involve numerous parties, jurisdictions, regulations and systems, and, therefore, are subject to execution and processing errors and failures. In addition, we utilize certain manual processes, which are subject to increased risks of human and other processing error, malfeasance, fraud and other misconduct than automated processes. When errors or delays do occur, they may be difficult to detect and remediate in a timely manner. The use of automation, artificial intelligence and other emerging technologies in connection with automated processes may amplify the impact of any such error or delay, as the failure to timely discover and respond to an operational error can have dramatic consequences.

These risks are heightened in connection with automated processes and from the implementation of new products, systems or processes, which may present new risks that may not be adequately identified, or for which we may not have adequate controls. Furthermore, the risks resulting from an operational error may be heightened with respect to certain asset classes, such as some digital assets, with respect to which it may be impossible to retrieve wrongfully or erroneously transferred digital assets.

Our business, financial, accounting, data processing and other operating systems may stop operating properly, become insufficient or become disabled or damaged as a result of a number of factors, including events that are wholly or partially beyond our control. We have experienced, and in the future expect to continue to experience, operational errors and delays and disruptions to our transaction processing systems. Such operational errors, disruptions or delays could have a material and negative impact on our ability to conduct our business or service our clients, which could adversely affect our financial position, results of operations and reputation. We also recognize that service reliability and systems resilience are essential components to processing transactions and safeguarding financial assets, and an operational error impacting a large number of transactions could have unfavorable ripple effects in the financial markets, which could exacerbate the adverse effects of the error on us.

There can be no assurance that our business continuity response plans will effectively mitigate our operational risks, and any backup systems or processes may not sufficiently replace our primary systems.

Affiliates or third parties (including their downstream service providers) with which we do business or that facilitate our business activities, including by providing data, information, technology, security or infrastructure services, have been, and could in the future continue to be, sources of execution and processing errors, breaches or loss, failures or significant operational delays. See “– A communications or technology disruption or failure within our infrastructure or the infrastructure of third parties that results in a loss of information, delays our ability to access information or impacts our ability to provide services to our clients may materially adversely affect our business, financial condition and results of operations.”

Our operations must comply with complex and evolving laws and regulations, including heightened regulatory and supervisory expectations with respect to operational and information security systems. In certain jurisdictions, we may be deemed to be statutorily or criminally liable for operational errors, fraud, breakdowns or delays by affiliates or third parties with which we do business or that facilitate our business activities. Additionally, as a result of regulations, including the Alternative Investment Fund Managers Directive and the Undertakings for Collective Investment in Transferable Securities V, when we act as depositary in the European Economic Area, we could be exposed to restitution risk for, among other things, acts perpetrated by a sub-custodian resulting in a loss or delay in return of a client’s securities.

When we are not acting as a European Economic Area depositary, we may accept similar liabilities to that of a European Economic Area depositary as a matter of contract in connection with our custody services.

We extensively rely on communications and information systems to conduct our business. Our businesses are highly dependent on our ability to process large volumes of data in an accurate, complete and timely manner, which requires global capabilities and scale from our technology platforms. If our technology or communications fail, or those of industry utilities or our service providers fail, we have experienced, and could in the future experience, production and system outages or failures, or other significant operational delays. In addition, any technology disruption or failure could result in the loss of confidential or customer data, as a result of which we could incur losses, suffer reputational damage, face significant remediation expenses or find ourselves out of compliance with applicable regulatory or contractual mandates or supervisory expectations with respect to the preservation of confidential information.

Any such disruption, outage, failure or delay could adversely affect our ability to effect transactions or service our clients, which could expose us to liability for damages, result in the loss of business, damage our reputation, subject us to regulatory scrutiny or sanctions or expose us to litigation, any of which could have a material adverse effect on our business, financial condition and results of operations. Our reliance on remote access systems and digital communication technologies, accelerated by our workforce distribution and evolving client expectations, further amplifies these risks. Security or technology disruptions, failures or delays that impact our communications or information systems could also adversely affect our ability to manage our exposure to risk or expand our business.

These incidents are unpredictable and can arise from numerous sources, not all of which we control, including, among others, human error, malfeasance and other misconduct, as well as operational disruptions at a third party or third party’s downstream service provider.

Upgrading our computer systems, software and networks may be time-consuming and may subject us to the risk of disruptions, failures or delays due to the complexity and interconnectedness of our computer systems, software and networks. The failure to properly upgrade or maintain these computer systems, software and networks could result in greater susceptibility to cyberattacks, particularly in light of the greater frequency and severity of cyberattacks in recent years, as well as the growing prevalence of cyberattacks affecting third-party software and information service providers. Additionally, emerging technologies such as artificial intelligence and cloud computing are becoming increasingly critical to the operation of our systems and platforms, and, as our reliance on these technologies continues to grow, we will continue to be increasingly subject to evolving risks associated with their use.

Our new product initiatives, including in connection with digital asset services, may further expose us to new and evolving technology risks and may lead to dependencies on, and compatibility issues with, decentralized or third-party blockchains and their protocols, which we do not control. Although we have programs and processes to identify such risks, there can be no assurance that any such disruptions, failures or delays will not occur or, if they do occur, that actions taken to mitigate their impact will be timely or adequate. Although we maintain insurance covering certain technology infrastructure losses and intend to maintain such insurance coverage if it is available to us on commercially reasonable terms, there can be no assurance that liabilities or losses we may incur, including as a result of a cybersecurity incident, will be covered under such policies or that the amount of insurance will be adequate.

In addition, although we evaluate and seek opportunities to strengthen our business continuity and operational resiliency capabilities, there can be no guarantee that a technology outage will not occur, including as a result of failures related to upgrades and maintenance, that our incident response processes will be effective to efficiently identify and respond to an adverse event, or that our business continuity and operational resiliency capabilities will enable us to maintain our operations and appropriately respond to events.

Third parties with which we do business or that facilitate our business activities, including exchanges, clearing houses, financial intermediaries or vendors that provide services or security solutions for our operations, have been, and could in the future also be, sources of operational or technology risk to us, including from breakdowns, capacity constraints, attacks (including cyberattacks targeted at downstream service providers), failures or delays of their own systems or other services that impede their ability to provide products or services to us, which, in turn, could impair our ability to process and settle transactions and communicate with customers and counterparties, which could, in turn, increase our counterparty credit and other exposures.

This risk may be intensified to the extent there is a limited number of third parties offering a unique product or service, if there is concentration in third parties from a single geographic area or due to the nature of the third party’s industry and operations (e.g., firms that may have less robust scale, financial and operational resiliency standards with which to defend against a cyberattack), as well as to the extent third parties (including their downstream service providers) with which we do business have adopted artificial intelligence and other emerging technologies. As financial entities and technology systems globally become more complex and interconnected, a technology disruption or other operational event that significantly degrades, deletes or compromises the systems or data at one institution or vendor could disrupt the functioning of the overall financial system.

Such a disruptive event has in the past impaired, and could in the future impair, our ability to settle transactions. Further, we may not be able to effectively monitor or mitigate operational risks impacting our vendors or relating to the use of common and other vendors by third-party service providers, which could result in potential liability to clients and customers, regulatory fines, penalties or other sanctions, increased operational costs or harm to our reputation.

As our business areas evolve, our technological systems have become increasingly complex and rely on the continued effectiveness of the programming code and integrity of the input data. Rapid technological changes and competitive pressures require us to make significant and ongoing investments in technology not only to develop competitive new products and services or adopt new technologies, but to sustain our current businesses. Our financial performance depends in part on our ability to develop and market these new products and services in a timely manner at a competitive price and adopt or develop new technologies that differentiate our products or provide cost efficiencies. The failure to adequately review and consider critical business changes prior to and during introduction and deployment of key technological systems, or the failure to adequately align operational capabilities with evolving client commitments and expectations, subjects us to the risk of an adverse impact on our ability to service and retain customers and on our operations. The costs we incur in enhancing our technology could be substantial and may not ultimately improve our competitiveness or profitability.

We have been, and we expect to continue to be, the target of varying degrees of attempted cyberattacks and information security threats. These threats include computer viruses and other malicious software, distributed denial-of-service attacks, phishing schemes, deepfake-enabled attacks, penetration attempts and other threats aimed at gaining unauthorized access to our systems or data.

Additionally, we face risks from cyberattacks targeted at third-party service providers and their downstream service providers, which could impact our operations. Our reliance on third-party service providers, as well as our increasing adoption of artificial intelligence solutions, employees’ usage of mobile and cloud technologies and our remote access systems, leave our networks susceptible to greater access points for attackers to exploit. This further increases the risk of unauthorized access to our networks and results in greater amounts of information being available for access, all of which heightens risks relating to the frequency and severity of cyberattacks against us and our third-party service providers and their downstream service providers.

Cybersecurity incidents may occur through or as a result of system errors, lack of adequate policies and procedures, human error, software vulnerabilities (which may be unknown), potential lapses in information security practices or other irregularities, and intentional or unintentional acts by individuals or groups having authorized or unauthorized access to our systems, data-bearing devices or facilities as well as the systems, devices or facilities of our clients, counterparties or third-party service providers. Attacks can originate from a wide variety of sources, including employees, vendors and customers, as well as others who are involved with organized crime or who may be linked to terrorist organizations or state or quasi-state actors, or from cross-contamination of legitimate parties (including vendors and their service providers, clients, financial market utilities and other financial institutions).

Malicious actors, who are becoming increasingly sophisticated and may see their effectiveness enhanced by the use of artificial intelligence, quantum computing and other novel methods, may also attempt to place individuals within BNY or fraudulently induce employees, vendors, clients or other users of our systems through social engineering, such as phishing or deepfake-enabled attacks, to disclose sensitive information in order to gain access to our data or that of our clients, or to send funds or authorize the sending of funds.

Cyberattacks are expected to continue to accelerate on a global basis in both frequency and magnitude as threat actors become increasingly sophisticated. The risk of an occurrence of a cybersecurity incident is inherent to a decision to invest in our company and the financial services sector as a whole. These impacts could be costly and time-consuming and could materially adversely affect our business, financial condition and results of operations. The threat of cybersecurity incidents could impede our productivity and growth, which could cause our earnings to decline or could impact our ability to comply with regulatory obligations, leading to regulatory fines and sanctions. Disruptions to market connectivity or the loss of trading venue access resulting from a cybersecurity incident experienced by us or others in the financial services sector could materially affect our ability to conduct business.

A cybersecurity incident that results in the theft, loss, disclosure, use or alteration of information (which may include confidential, sensitive or proprietary information), or unauthorized access or loss of access to information, may require us to reconstruct lost data (which may not be possible) or reimburse clients for data and credit monitoring services, or result in the loss of customer business or damage to our systems or networks and those of our customers and counterparties. Further, vulnerabilities or other weaknesses in the application of distributed ledger technology could result in the loss of customer assets, including customer funds or custodied digital assets. Losses of certain types of assets, such as digital assets, may be distinctly difficult to recover and could subject us to customer disputes, claims for reimbursement, losses, negative publicity, reputational damage and governmental and regulatory scrutiny, investigations and enforcement actions.

Although we deploy a broad range of defenses and continue to evolve our cybersecurity capabilities to bolster these protections, there can be no assurance that these security measures will provide absolute security or prevent breaches and attacks, including because the techniques used change, develop and evolve frequently or are not recognized until after they are launched. Addressing exposures resulting from changes to the type, size and complexity of our operations, markets and products may require us to expend significant additional resources, including through the use of third parties. It is also possible that our employees or third-party service providers may not follow our policies and procedures intended to identify and mitigate the impact of cybersecurity risks and incidents.

Third parties with which we do business or that facilitate our business activities are also subject to the foregoing risks, and we cannot guarantee that they will maintain effective systems and controls to mitigate and respond to these threats, or that they will properly implement and execute the policies and processes in the manner described to us. The failure of any third-party service provider to promptly detect, respond to or report cybersecurity incidents may adversely affect our ability to effectively respond to or report cybersecurity incidents in a timely manner.

A cybersecurity incident, including one resulting from a successful cyberattack, could occur and persist for an extended period before being detected. Even after detection, we may not be able to identify and fully assess the impact of a cybersecurity incident in a timely manner. An investigation of a cybersecurity incident is inherently complex, and the source, nature and extent of the breach and harm may not be immediately clear. While such an investigation is ongoing, we may not necessarily know how best to contain the harm and remediate it, certain errors or actions could be repeated or compounded before they are discovered and remediated, and communication to the public, clients, regulators and other stakeholders may not be sufficiently timely or accurate, any or all of which could further increase the costs and consequences of a cybersecurity incident.

Moreover, as a public company subject to Exchange Act reporting requirements, we are required to publicly disclose certain information about a material cybersecurity event, including the impact or reasonably likely impact. Disclosure may be required before the incident has been resolved or fully investigated. As with the determination of materiality of any other type of event, the determination regarding the materiality of any particular cybersecurity incident or series of related incidents entails a facts-and-circumstances test that takes a number of quantitative and qualitative factors into account. As a result, our management may determine that certain cybersecurity incidents are immaterial and not subject to disclosure under applicable cybersecurity regulations. As a result, investors should not assume that the absence of disclosure under the regulations means that we have not been impacted by a cyberattack directed at us or our third-party service providers.

The deployment of artificial intelligence, including generative artificial intelligence and other advanced machine learning technologies, by us, our third-party vendors, clients, counterparties and other market participants, combined with rapid advances in this emerging technology, present risks and challenges that may fundamentally alter the competitive landscape and the markets in which we operate. Artificial intelligence has the potential to transform economic and societal structures in ways that are difficult to predict or control, potentially threatening the viability of our company and the broader financial system. These risks may occur as a result of enhanced governmental or regulatory scrutiny, litigation, ethical concerns, confidentiality or other security risks, intellectual property concerns over data rights and protection, increased exposure to copyright infringement or intellectual property misappropriation claims, heightened susceptibility to cyberattacks, increased frequency and severity of cyberattacks, inaccurate or biased algorithms or underlying datasets, misuse or misappropriation as well as other factors that could adversely affect our business, reputation and financial results. In addition, poor implementation of artificial intelligence by us or our third-party service providers could subject us to additional risks that we may not adequately predict or mitigate.

The failure to strategically embrace the potential of artificial intelligence or to achieve the expected effectiveness, productivity or cost-reduction from our adoption of artificial intelligence may result in a competitive disadvantage for us. If we cannot offer new artificial intelligence-facilitated technologies as quickly as our competitors, if our competitors develop more cost-effective solutions or other product offerings, if our employees do not adopt such technologies expediently or if we are not able to source components we may require, such as artificial intelligence chips due to a supply chain shortage amid rising geopolitical uncertainty, we could experience a material adverse effect on our operating results, customer relationships and growth opportunities.

Our use and deployment of artificial intelligence, for example digital engineers and other digital employees, has introduced operational and control risks, including the risk of potential errors in automated decision-making, challenges in oversight and accountability, increased vulnerability to system failures or cyber incidents, and the risk that these digital employees may not perform as intended under complex or unforeseen circumstances, which could materially disrupt our business operations and adversely affect our financial condition and reputation.

The evolving legal, regulatory and compliance framework for artificial intelligence both in the U.S. and internationally may impact our ability to protect our own data and intellectual property against infringing use and could require changes in our implementation of artificial intelligence technology and increase our compliance costs and the risk of non-compliance. Further, our efforts to evolve our governance, risk management and control frameworks to manage the novel and amplified risks from our use of artificial intelligence may be insufficient or ineffective, which could expose us to operational disruptions, legal and regulatory sanctions, reputational harm and adverse financial impacts. Additionally, we may not be able to control how third-party artificial intelligence that we choose to use is developed or maintained including the source and quality of the data on which such models are trained or the frequency and nature of model updates.

We may also be unable to govern or protect the integrity of the data we input into such tools, with respect to how such data is retained, reused, co-mingled with other data or disclosed, even where we have sought protections with respect to these matters.

Our risk management framework seeks to identify and mitigate risk and loss to us. We have established comprehensive policies and procedures and an internal control framework designed to provide a sound operational environment for the types of risk to which we are subject, including operational risk, credit risk, market risk, liquidity risk, model risk and strategic risk. We have also established frameworks designed to mitigate risk and loss to us as a result of the actions of affiliates or third parties with which we do business (including their common and downstream service providers) or that facilitate our business activities. However, as with any risk management framework, there are inherent limitations to our current and future risk management strategies, including risks that we may not have appropriately anticipated, identified or monitored.

Our regulators remain focused on ensuring that financial institutions build and maintain robust risk management policies. Regulators’ views of the quality of our risk practices and framework affect our regulators’ evaluations of us, and we are exposed to the risk of adverse regulatory and supervisory developments, including enforcement actions and increased costs in connection with remediation efforts, if our regulators view our risk practices and framework to be insufficient or if remediation is not completed in a timely manner. If our risk management framework or governance structure proves ineffective or if our enterprise-wide management information is incomplete or inaccurate, we could suffer unexpected losses, which could materially adversely affect our results of operations and financial condition.

In addition, our businesses, technology and the markets in which we operate are continuously evolving. We may fail to fully understand the implications of changes in our businesses, technology, including the impacts of artificial intelligence, our industry or the financial markets or fail to adequately or timely enhance our risk framework to address those changes. Further, if our risk framework is ineffective because it fails to keep pace with changes in the industry, technology, financial markets, regulatory requirements, our businesses, our counterparties, clients or service providers or for other reasons, we could incur losses, suffer reputational damage, face significant remediation expenses or find ourselves out of compliance with applicable regulatory or contractual mandates or supervisory expectations.

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

If we fail to create the appropriate environment that sensitizes our employees to managing risk, our business could be adversely impacted. For more information on how we monitor and manage our risk management framework, see “Risk Management – Overview.”

We rely on quantitative and qualitative models, analytical techniques and judgment-based estimations to measure, monitor and manage various risks, including credit, market, liquidity and operational risks. These models are also used for financial and other regulatory reporting, capital planning and other critical functions. While essential for decision-making, models are inherently limited and subject to inaccuracies stemming from flawed assumptions, inaccurate data, design issues or evolving market conditions. Further, even absent flawed or inadequate model assumptions, design issues and data inaccuracies, there can be no assurance that the models we utilize will adequately mitigate risk or loss to us under all circumstances.

In addition, we rely on models to measure, monitor and predict risks, including as part of our overall asset/liability management. Our models depend on historical data, trends, correlations between various asset classes and other market indicators, assumptions, estimates and judgments, all of which may be incomplete, or inaccurate. These models may not accurately predict future conditions, particularly during periods of extreme or unanticipated market movement, severe economic downturns, geopolitical events, or other stress events such as those experienced during the 2008 financial crisis, the COVID-19 pandemic or in connection with the insolvencies of Silicon Valley Bank and Signature Bank in 2023. More specifically, in times of market stress, previously uncorrelated indicators may become correlated, or previously correlated indicators may move in different directions, while sudden illiquidity in markets or declines in prices of certain assets may make it more difficult to value certain financial instruments. These types of market movements have at times limited the effectiveness of our hedging strategies and have caused us to incur significant losses, and they may do so in the future.

Weaknesses in model design, implementation or governance, issues with data quality, and the failure of our models to fully capture interdependencies among risk factors may result in incomplete, misleading or flawed outputs. To the extent that our models utilize data provided by third parties, deficiencies in the accuracy, timeliness or completeness of third-party data or the effectiveness in our controls and validation processes could further amplify these risks. Models utilizing artificial intelligence, machine learning or other emerging technologies present additional challenges, including biases in algorithms or datasets and limitations in the transparency into the generation of outputs, potentially leading to ineffective decision-making, reporting errors or other unintended consequences.

Weaknesses in model risk management practices, including lapses in oversight, monitoring, validation and application, could negatively impact business operations and regulatory compliance. If our models fail to measure, monitor or predict risks appropriately, or if we fail to promptly identify or address deficiencies in our models, we could face financial losses, reputational harm, regulatory actions and material impacts on our business and financial results.

As a large, global financial services platforms company, we operate in a highly regulated environment, and are subject to a comprehensive statutory and regulatory regime affecting all aspects of our business and operations, including oversight by governmental agencies both inside and outside the U.S. Regulations and related regulatory guidance and supervisory oversight impact how we analyze certain business opportunities, our capital and liquidity requirements, the revenue profile of certain of our core activities, the products and services we provide, how we manage our balance sheet, how we return capital to shareholders, how we monitor and manage risk and how we promote a sound governance and control environment. Any changes to the regulatory frameworks and environment in which we operate, including the enactment of new laws, rules and regulations as well as changes to the interpretation or enforcement of existing laws, rules and regulations, including as a result of political uncertainty and developments, and the significant management attention and resources necessary to address those changes could materially adversely affect our business, financial condition and results of operations and have other negative consequences.

Due to shifting political priorities and novel focus areas of regulators and other governmental authorities, we could become subject to additional laws, rules, regulations and scrutiny relating to cybersecurity and data protection, digital assets, artificial intelligence and other emerging technologies, and financial market access.

The evolving regulatory environment and uncertainty about the timing and scope of future regulations may contribute to decisions we may make to suspend, reduce or withdraw from existing businesses, activities or initiatives, which may result in potential lost revenue or significant restructuring or related costs or exposures. We also face the risk of becoming subject to new or more stringent requirements in connection with the introduction of new regulations or modification of existing regulations, which could require us to hold more capital or liquidity, limit our ability to make distributions, restrict the development or distribution of new products and services or have other adverse effects on our businesses or profitability.

In addition, regulatory responses in connection with severe market downturns or unforeseen stress events may lead to new rules and regulations, all of which may increase our operational costs and alter or disrupt our planned future strategies and actions. We are also exposed to the risk of a special assessment, including under the FDI Act, in the event of the failure of a bank or non-bank financial institution, which has in the past adversely affected, and may in the future adversely affect, our results of operations. See “Supervision and Regulation – FDIC Deposit Insurance” for additional information.

The monetary, tax and other policies of various governments, agencies and regulatory authorities both in the U.S. and globally have a significant impact on interest rates, currencies, commodity pricing, international trade and overall financial market performance, which can impact our business, results of operations and capital. Changes in these policies, which may be rapid and may involve uncertainty with respect to implementation by the regulator, are beyond our control, can be difficult to predict, and we cannot determine the ultimate effect that any such factors would have on our business, financial condition or results of operations. For example, the outcome of the 2024 elections in the U.S. have resulted in significant changes to the operations, policies and priorities of governmental agencies in the U.S. and have given rise, and may in the future give rise, to uncertainty in the economic and regulatory landscape, as well as growing divergence among U.S. federal, state, city and non-U.S. regulatory priorities.

Overlapping and/or conflicting regulatory initiatives within and outside of the U.S. and fragmented policy implementation subjects us to additional compliance costs and regulatory risk. For example, we have faced actual and threatened litigation in Russia with respect to payments that we cannot make and are contractually excused from paying under applicable international sanctions laws. For more information, see “Legal proceedings – Lawsuits in the Russian Federation” in Note 21 of the Notes to Consolidated Financial Statements.

The regulatory and supervisory focus of U.S. banking agencies is primarily intended to protect the safety and soundness of the banking system and federally insured deposits, and not to protect investors in our securities. Regulatory and supervisory standards and expectations both within jurisdictions (in relation to national versus non-national financial services providers) and across jurisdictions may be divergent and otherwise may not be applied in a manner that is consistent and harmonized. Additionally, banking regulators have wide supervisory discretion in the ongoing examination and enforcement of applicable banking statutes, regulations and guidelines, and may restrict our ability to engage in certain activities or acquisitions or may require us to limit our capital distributions, maintain more capital or hold more highly liquid assets.

The U.S. capital rules, which may be changed from time to time, subject us and our U.S. banking subsidiaries to stringent capital requirements, which could restrict growth, activities or operations, trigger divestiture of assets or operations or limit our ability to return capital to shareholders.

The LCR and NSFR require us to maintain significant holdings of high-quality and generally lower-yielding liquid assets. In calculating the LCR and NSFR, we must also determine which deposits should be considered stable deposits. Stable deposits must meet a series of requirements and typically receive favorable treatment under the LCR and NSFR. We use qualitative and quantitative analysis to identify core stable deposits. It is possible that our LCR and NSFR could fall below applicable regulatory requirements as a consequence of the inherent uncertainties associated with this analysis, including as a result of regulatory changes or additional guidance from our regulators. In addition to facing potential regulatory consequences, which could be significant, we may be required to remedy this shortfall by liquidating assets in our investment portfolio or raising additional debt, each of which could have a material negative impact on our net interest income.

We develop and submit plans for our rapid and orderly resolution in the event of material financial distress or failure to the Federal Reserve and the FDIC. If the agencies determine that our submissions are not credible or would not facilitate an orderly resolution under the U.S. Bankruptcy Code, and we fail to address any such deficiencies in a timely manner, we may be subject to more stringent capital or liquidity requirements or restrictions on our growth, activities or operations, or may be required to divest assets or operations, which could adversely affect our business, financial condition and results of operations.

Our global activities are also subject to extensive regulation and supervision by various non-U.S.

regulators, including governments, securities exchanges, central banks and other regulatory bodies in the jurisdictions in which we operate, relating to, among other things, the safeguarding, administration and management of client assets and client funds, regulation of markets, recovery and resolution planning and payments and financial market infrastructure.

Various laws, regulations, rules and directives effective in the jurisdictions in which we operate have an impact on our provision of many products and services. Implementation of, and revisions to, these laws, regulations, rules and directives have affected our operations and risk profile. Furthermore, we conduct business in various jurisdictions that may not have comparable levels of protection for intellectual property and proprietary information as the U.S. The protection afforded in those jurisdictions may be less established and/or predictable. As a result, there may also be heightened risks associated with the potential theft of data, proprietary information, technology and intellectual property in those jurisdictions by domestic or foreign actors, including private parties and those affiliated with or controlled by state actors.

In addition, we are subject in our global operations to rules and regulations relating to corrupt and illegal payments and money laundering, economic sanctions and embargo programs administered by the U.S. Office of Foreign Assets Control and similar bodies and governmental agencies worldwide, and laws relating to doing business with certain individuals, groups and countries, such as the U.S. Foreign Corrupt Practices Act, the Bank Secrecy Act, as amended by the USA PATRIOT Act, the Iran Threat Reduction and Syria Human Rights Act of 2012 and the UK Bribery Act. While we have invested and continue to invest significant resources in training and in compliance monitoring, the geographical diversity of our operations, employees, clients and customers, as well as the vendors and other third parties that we deal with, presents the risk that we may be found in violation of such rules, regulations or laws and any such violation could subject us to significant penalties or adversely affect our reputation.

In addition, such rules could impact our ability to engage in business with certain individuals, entities, groups and countries, which could materially adversely affect certain of our businesses and results of operations. Government sanctions and our actions in response to them have had, and in the future could continue to have, a negative impact on our revenue and business.

We are also subject to laws and regulations relating to the protection and privacy of the information of clients, employees and others, and any failure to comply with these laws and regulations could expose us to liability, increased regulatory oversight and/or reputational damage. We continue to allocate additional time and resources to comply with such laws and regulations, as our potential liability for non-compliance and reporting obligations in the case of data breaches could be significant. In addition, our businesses are increasingly subject to laws and regulations relating to privacy, surveillance, encryption and data localization in the jurisdictions in which we operate. Compliance with these laws and regulations has required us to change our policies, procedures and technology for information security and segregation of data, which, among other things, makes us more vulnerable to operational failures, and to monetary penalties for breach of such laws and regulations.

Failure to comply with laws, regulations or policies, or meet supervisory expectations, applicable to us and our businesses could result in civil or criminal sanctions or enforcement proceedings by regulatory or governmental authorities, money penalties and reputational damage, which could have a material adverse effect on our business, financial condition and results of operations. If violations of legal or regulatory requirements do occur, they could damage our reputation, increase our legal and compliance costs, including requiring us to devote substantial resources towards remediation efforts, and ultimately adversely impact our results of operations. Laws, regulations or policies currently affecting us and our subsidiaries, supervisory expectations, or regulatory and governmental authorities’ interpretation of statutes and regulations may change at any time, which may adversely impact our business and results of operations. See “Supervision and Regulation” for additional information regarding the potential impact of the regulatory environment on our business.

Like many major financial institutions, we and our affiliates are the subject of inquiries, investigations, lawsuits and proceedings by counterparties, clients, other third parties, tax authorities and regulatory and other governmental agencies in the U.S. and abroad, as well as the Department of Justice and state attorneys general. See “Legal proceedings” in Note 21 of the Notes to Consolidated Financial Statements for a discussion of material legal and regulatory proceedings in which we are involved. The number of these investigations and proceedings, as well as the amount of penalties and fines sought, has remained elevated for many firms in the financial services industry, including us. We have been, and may in the future become, subject to heightened regulatory scrutiny, inquiries or investigations, and potentially client-related inquiries or claims, relating to broad, industry-wide concerns that could lead to increased expenses or reputational damage.

Regulators and other governmental authorities may also be more likely to pursue enforcement actions, or seek admissions of wrongdoing or guilty pleas, in connection with the resolution of an inquiry or investigation to the extent a firm has previously been subject to other governmental investigations or enforcement actions. Previous high-profile settlements by other financial institutions with governmental entities may adversely affect the outcomes in future similar actions, especially where governmental officials have announced that large settlements will be used as the basis or a template for other settlements. Separately, policymakers globally continue to focus on enforcement actions related to the protection of client assets, cybersecurity and data protection, as well as tax avoidance and evasion.

The complexity of the federal and state regulatory and enforcement regimes in the U.S., coupled with the global scope of our operations and the increased aggressiveness of the tax and regulatory environment worldwide, also means that a single event may give rise to a large number of overlapping investigations and regulatory proceedings, either by multiple federal and state agencies in the U.S. or by multiple regulators and other governmental entities or tax authorities in different jurisdictions. Responding to inquiries, investigations, lawsuits and proceedings, regardless of the ultimate outcome of the matter, is time consuming and expensive and can divert the attention of our senior management from our business. The outcome of such proceedings may be difficult to predict or estimate until late in the proceedings, which may last a number of years.

Certain of our subsidiaries are subject to periodic examination, special inquiries and potential proceedings by regulatory authorities. If compliance failures or other violations are found during an examination, inquiry or proceeding, a regulatory agency could initiate actions and impose sanctions for violations, including, for example, regulatory agreements, remediation undertakings, cease and desist orders, civil monetary penalties or termination of a license and could lead to litigation by investors or clients, any of which could cause our earnings to decline. Further, we are subject to regulatory settlements, orders and feedback that have in the past contained, and in the future may continue to contain, requirements for us to undertake certain remedial measures, including enhancements to existing controls, systems and procedures.

Failure to implement these remedial measures in a timely manner could result in further adverse consequences, such as further investigations or proceedings or additional penalties, fines, judgments or additional remedial actions.

Our businesses involve the risk that clients or others may sue us, claiming that we or third parties for whom they say we are responsible have failed to perform under a contract or otherwise failed to carry out a duty perceived to be owed to them, including perceived fiduciary or contractual duties. This risk may be heightened during periods when credit, equity or other financial markets are deteriorating in value or are particularly volatile, when clients or investors are experiencing losses or as public attention on a particular issue intensifies. In some cases, additional third parties that would otherwise be defendants in such cases, or that have agreed to indemnify for such losses, may be bankrupt or in financial distress, or may not honor their obligations. As a publicly held company, we are also subject to the risk of claims under the federal securities laws. Volatility in our stock price increases this risk.

Increasingly, regulators, tax authorities, congressional bodies, private plaintiffs and courts have sought to hold financial institutions liable or otherwise accountable for the misconduct of their clients where such actors have determined that the financial institution should have detected that the client was engaged in wrongdoing, even though the financial institution had no direct knowledge of the wrongdoing.

Actions brought against us may result in lawsuits, enforcement actions, injunctions, settlements, damages, fines or penalties, which could have a material adverse effect on our results of operations and financial condition or require changes to our business. Claims for significant monetary damages are asserted in many of these legal actions, while claims for disgorgement, penalties and/or other remedial sanctions may be sought in regulatory matters. These risks may be more acute when operating in foreign jurisdictions or in instances where adversaries to such disputes are government or quasi-government actors otherwise motivated in whole or in part by non-commercial incentives. Although we establish accruals for our litigation and regulatory matters in accordance with applicable accounting guidance, our exposure to such litigation and regulatory matters can be unpredictable, and when those matters proceed to a stage where they present loss contingencies that are both probable and reasonably estimable, there may be a material exposure to loss in excess of any amounts accrued, or in excess of any loss contingencies disclosed as reasonably possible. Such loss contingencies may not be probable and reasonably estimable until the proceedings have progressed significantly, which could take several years and occur close to resolution of the matter.

Each of the risks outlined above could result in increased regulatory supervision and affect our ability to attract and retain customers or maintain access to the capital markets.

Our success depends, in large part, on our ability to attract new employees, retain, develop and motivate our existing employees, have a diverse and inclusive workplace and continue to compensate our employees competitively amid heightened regulatory restrictions. Competition for the most skilled employees in most activities in which we engage can be intense, especially in critical strategic locations, and we may not be able to recruit and retain key personnel. In addition, third-party suppliers and service providers on which we rely may face challenges in attracting and retaining their employees, which may have a negative impact on our operations and our resiliency capabilities.

We rely on certain employees with subject matter expertise to assist in the implementation of important initiatives and to support the development of new products and services, including in connection with our deployment of artificial intelligence and other technology initiatives. As focus on technology and risk management increases in the financial industry, competition for technologists, artificial intelligence engineers and risk personnel has intensified, which could constrain our ability to execute on certain of our strategic initiatives.

Our ability to attract, retain and motivate key executives and other highly qualified employees may be negatively impacted by the level and composition of our compensation and benefits programs and by continuous changes to immigration policies and other restrictions applicable to incentive and other compensation programs, including deferral, clawback requirements and other limits on incentive compensation. Some of these restrictions may not apply to some of our competitors and to other institutions with which we compete for talent, in particular as we are more often competing for personnel with financial technology providers and other entities that may not be publicly traded or regulated banking organizations and, in either case, may not have the same limitations on compensation as we do.

Furthermore, because a portion of our annual incentive compensation paid to some of our employees is deferred equity that is subject to the value of our common stock, declines in our profitability or outlook could adversely affect the ability to attract and retain employees. Additionally, changes to our executive management may create uncertainty, divert resources, be disruptive to our daily operations or impact public or market perception, any of which could result in an adverse impact on our business.

Advances in technology, such as artificial intelligence driven automation, may lead to changes in the composition of our workforce. This could require us to invest in reskilling programs and to manage impacts on morale and retention as well as employment-related litigation. Relatedly, the loss of critical employees’ skills, market knowledge and industry experience, and the cost of finding replacements, particularly in competitive labor markets, have led, and may continue to lead, to an increase in labor costs, which may hurt our business. In addition, our current or future approach to in-office and remote-work arrangements may not meet the needs or expectations of our current or prospective employees, may not be perceived as favorable as compared to the arrangements offered by competitors and may not be conducive to a collaborative working environment, which could adversely affect our ability to attract, retain, develop and motivate employees.

If we are unable to continue to attract, retain, develop and motivate highly qualified employees, or manage the workforce implications of our deployment of artificial intelligence, our performance, including our competitive position, could be adversely affected.

Management regularly reviews and updates our internal controls, disclosure controls and procedures, and corporate policies and procedures. Any system of controls, however well designed and operated, is based in part on certain assumptions and can provide only reasonable, not absolute, assurances that the objectives of the system will be met. Any failure or circumvention of our controls and procedures or failure to comply with regulations related to controls and procedures could have a material adverse effect on our business, reputation, results of operations and financial condition. Moreover, if we identify material weaknesses in our internal control over financial reporting or are otherwise required to restate our financial statements, we could be required to implement expensive and time-consuming remedial measures and could lose investor confidence in the accuracy and completeness of our financial reports.

In addition, there are risks that individuals, either employees or contractors, may circumvent established control mechanisms in order to, for example, exceed exposure, liquidity, trading or investment management limitations, or commit fraud. We are also subject to additional risks if third parties with which we do business fail to comply with our policies and procedures or fail to notify us promptly of any noncompliance.

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

As a financial institution, our businesses are particularly sensitive to economic and market conditions, including in the capital and credit markets. Further, when these markets are volatile or disruptive, we have experienced declines in our fair valued assets, including in our securities portfolio and seed capital, as well as a fair value reduction in the portfolios that we manage that generate investment and wealth management fees. Conditions in the financial markets and the economy generally, both in the U.S. and elsewhere around the world have materially affected, and may continue to affect, our results of operations, including investment management fees.

Foreign exchange trading that we execute for clients generates revenues which are primarily driven by the volume of client transactions and the spread realized on these transactions, both of which are impacted by market volatility and the impact of foreign exchange hedging activities. Our clients’ cross-border investing activity could decrease in reaction to economic and political uncertainties, including changes in laws or regulations governing cross-border transactions, such as currency controls or tariffs, as well as shifts in the global monetary system. Volumes and/or spreads in some of our products tend to benefit from currency volatility and are likely to decrease during times of lower currency volatility. Such revenues also depend on our ability to manage the risk associated with the currency transactions we execute and program pricing.

A variety of factors impact global economies and financial markets, including interest rates and their associated yield curves, commodity pricing, market and political instabilities, volatile debt and equity market values, inflation, expectations relating to inflation trends and monetary policy actions taken by central banks, the strength of the U.S. dollar, geopolitical tensions, the imposition of tariffs, counter tariffs or other limitations on international trade or travel, including changes to international trade and investment policies by the U.S., the EU or other large economies (which could disrupt world trade, lead to trade retaliation and other supply chain complications), unemployment levels, labor strikes, declining business, investor and consumer confidence, recessionary fears, the impact of volatility in digital asset markets on the broader market, governmental budget deficits (including, in the U.S., at the federal, state and municipal levels), partial or full government shutdowns (including concerns about the stability of funding for the U.S. federal government) and contagion risk from possible default on sovereign debt.

More specifically, in recent years, the U.S. government has approached its statutory debt limit, which required specific measures taken by the U.S. Treasury Department to prevent the U.S. government’s default on its payment obligations. In the future, delays to raise or suspend the federal debt ceiling in similar circumstances could have severe repercussions within the U.S. and to global credit and financial markets and could result in a variety of adverse effects for our business, results of operations, liquidity and financial condition. Additionally, global economies and financial markets may be adversely affected by widespread health emergencies, pandemics, natural disasters, climate-related incidents, conflicts, acts of war or political instability (such as in Ukraine, the Middle East and Latin America), terrorism as well as economic sanctions.

In particular, we face the following risks in connection with these factors, some of which are discussed at greater length in separate risk factors:

•Geopolitical tension and economic instability in countries around the world can at times increase the demand for low-risk investments, particularly in U.S. Treasuries and the dollar. A “flight to safety” has historically increased our balance sheet, which has negatively impacted, and could continue to negatively impact, our leverage-based regulatory capital measures. During such periods of market uncertainty, our level of client deposits has in recent years tended to increase; however, because these deposits have high potential run-off rates, we have historically deposited these so-called excess deposits with central banks and in other highly liquid and low-yielding instruments, with a negative impact on our net interest income. A sustained “flight to safety” has historically triggered a decline in trading, capital markets and cross-border activity which would likely decrease our revenue, negatively impacting our results of operations, financial condition and, if sustained in the long term, our business.

•The fees earned by our Investment Management and Wealth Management businesses are higher as assets under management and/or investment performance increase. Those fees are also impacted by the composition of the assets under management, with higher fees for some asset categories as compared to others. Uncertain and volatile capital markets, particularly declines, could result in movements from higher to lower fee products and/or reductions in our assets under management because of investors’ decisions to withdraw assets or from simple declines in the value of assets under management as markets decline.

•Market conditions resulting in lower transaction volumes could have an adverse effect on the revenues and profitability of certain of our businesses such as clearing, settlement, payments and trading.

•The discontinuation of an interest rate benchmark, and the adoption and implementation of alternative reference rates, could adversely impact our business activities and our underlying operations. We utilize reference rates in a variety of agreements and instruments and are responsible for the use of reference rates in a variety of capacities, as well as in our operational functions. We could be subject to claims from customers, counterparties, investors or regulators alleging that we did not correctly discharge our responsibilities in interpreting and implementing contractual interest rate provisions or in selecting new alternative reference rates.

•Uncertain and volatile capital markets, particularly declines in equity prices, could reduce the value of our investments in securities, including pension and other post-retirement plan assets and produce downward pressure on our stock price and credit availability without regard to our underlying financial strength.

•Derivative instruments we hold for our own account to hedge and manage our exposure to market risks, including interest rate risk, equity price risk, foreign currency risk and credit risk associated with our products and businesses might not perform as intended or expected, resulting in higher realized losses and unforeseen stresses on liquidity. Our derivatives-based hedging strategies also rely on the performance of counterparties to such derivatives. These counterparties may fail to perform for various reasons resulting in losses on under-collateralized positions.

•The process we use to estimate our expected credit losses is subject to uncertainty in that it requires use of statistical models and difficult, subjective and complex judgments, including forecasts of economic conditions and how these conditions might impair the ability of our borrowers and others to meet their obligations. In uncertain and volatile economic environments, and especially in environments that differ significantly from the historical environments upon which the models we use to estimate our expected credit losses were developed, our ability to estimate our expected credit losses may be impaired, which could adversely affect our overall profitability and results of operations.

For a discussion of our management of market risk, see “Risk Management – Risk Types Overview – Market Risk.”

Our principal commercial focus is on fee-based business, which is distinct from commercial banking institutions that earn most of their revenues from loans and other traditional interest-generating products and services. For the year ended Dec. 31, 2025, 72% of our total revenue was fee-based. Our fee-based businesses include investment and wealth management, custody, corporate trust, depositary receipts, clearing, collateral management and treasury services, which are highly competitive businesses.

Fees for many of our products and services are based on the volume of transactions processed, the market value of assets managed and/or administered, securities lending volume and spreads, and fees for other services rendered. Corporate actions, cross-border investing, global mergers and acquisitions activity, new debt and equity issuances, and secondary trading volumes, among other things, all affect the level of our fee revenue. As the volume of these activities decreases due to low client activity, weak financial markets or otherwise, our fee-based revenues also decrease, which negatively impacts our results of operations.

If our Investment and Wealth Management businesses experience poor investment returns due to weak market conditions or underperformance (relative to competitors or benchmarks), the market values of the portfolios that we manage will be lower (on a relative basis) and our ability to retain existing assets and/or attract new client assets may be impacted. Market and regulatory trends have also resulted in increased demand for lower fee investment and wealth management products and services, and lower performance-fee structures, both of which have impacted and may continue to impact our fee revenue. Some of these dynamics have also negatively impacted fees in our Market and Wealth Services and Securities Services businesses and any of these dynamics may also occur in the future.

Significant declines in the volume of capital markets activity would reduce the number of transactions we process and the amount of securities we lend and therefore would also have an adverse effect on our results of operations. Our business may be adversely impacted by decreases in the rate at which individuals invest in mutual funds and other collective funds, unit investment trusts or exchange-traded funds, or contribute to defined contribution plans. Changes in economic and market conditions, including as a result of higher market volatility, inflationary pressures, recessionary conditions or declines in equity values, could result in changes in the investment patterns of our clients or negatively impact the market value of client portfolios, each of which could have a negative impact on our results of operations.

When our investment management revenues decline, interest rates rise or other market factors affect the value of our investment management business, we have had, and may in the future have, declines in the fair value in our Investment Management reporting unit, one of the two reporting units in our Investment and Wealth Management segment. If the fair value of the Investment Management reporting unit declines below its carrying value, we would be required to take, and have previously taken, an impairment charge.

We earn revenue, known as “net interest income,” on the difference between the interest income earned on our interest-earning assets, such as the loans we make and the securities we hold in our investment securities portfolio, and the interest expense incurred on our interest-bearing liabilities, such as deposits and borrowed money. Additionally, we earn net interest income on other activities relating to interest-earning assets and interest-bearing liabilities, such as reverse repurchase agreements and repurchase agreements, respectively. Our net interest margin is sensitive to the shape of the yield curve and whether the interest rate paid or received is fixed or moves with changes in market interest rates.

Global economic challenges present uncertainties regarding monetary policy and future interest rate movements. High and rising debt levels in the U.S. and globally may contribute to interest rate volatility. Actions taken by the Federal Reserve and central banks in other jurisdictions, including changes in target rates, balance sheet management and lending facilities, are beyond our control and difficult to predict. The continued prevalence of higher rates, including unexpectedly precipitous rate increases, could adversely impact our business, financial condition and results of operations, due to:

•higher market volatility, recessionary conditions and declines in equity values, resulting in a decline in the valuation of assets under management;

•reduced liquidity in bonds and fixed-income funds, resulting in lower performance and fees;

•increased number of delinquencies, bankruptcies or defaults and more nonperforming assets and net charge-offs, as borrowers may have more difficulty making higher interest payments;

•higher redemptions from our fixed-income funds or separate accounts, as clients move funds into investments with higher rates of return;

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

•declines in deposit levels, resulting in reduced internal and regulatory liquidity buffers and lower revenues;

•reductions in the value of our fixed-income securities held for liquidity purposes;

•further increases in accumulated other comprehensive loss in our shareholders’ equity and therefore our tangible common equity due to the impact of rising long-term rates on the available-for-sale securities in our investment portfolio, which would negatively affect our risk-based and leverage based regulatory capital ratios; or •higher funding cost.

Conversely, a material decline in the short-term rate environment, and/or a flat or inverted yield curve has adversely impacted, and in the future could adversely impact, our net interest income and results of operations due to:

•compression of our net interest margin, depending on our balance sheet position and the speed and size of the interest rate decline;

•sustained weakness of our spread-based revenues, resulting in continued voluntary waiving of fees on certain money market mutual funds and related distribution fees, in order to prevent the yields on such funds from becoming uneconomic; or •adverse impacts on the value of our fixed-rate mortgage-backed securities, driven by higher mortgage prepayment speeds.

Our business activities involve investing in interest-bearing assets and incurring interest-bearing liabilities with varying durations. Changes in the direction and levels of interest rates, the relationship between short-and long-term rates and the speed of interest rate changes have impacted, and in the future are expected to continue to impact, our net interest margin, capital ratios and overall financial position. Changes in the direction and level of interest rates may also have adverse impacts on our clients and counterparties, which could adversely impact multiple aspects of our business, including our fee revenue, allowance for credit losses and deposit mix. Although we have policies and procedures in place to assess and mitigate the potential impacts of changes in the direction and level of interest rates, these policies and procedures may fail to effectively mitigate these risks.

A more detailed discussion of the interest rate and market risks we face is contained in “Risk Management – Risk Types Overview – Market Risk.”

We maintain an investment securities portfolio of various holdings, types and maturities. At Dec. 31, 2025, approximately 68% of these securities were classified as available-for-sale, which are recorded on our balance sheet at fair value with unrealized gains or losses reported as a component of accumulated other comprehensive income, net of tax. The securities in our held-to-maturity portfolio, recorded on our balance sheet at amortized cost, were approximately 32% of our securities portfolio at Dec. 31, 2025. Our available-for-sale securities portfolio, to the extent unhedged, may result in increased volatility in our accumulated other comprehensive income or earnings relative to a loan portfolio that is accounted for at amortized cost.

Our investment securities portfolio represents a greater proportion of our consolidated total assets (approximately 32% at Dec. 31, 2025), in comparison to many other major U.S. financial institutions due to our custody and trust bank business model. Accordingly, our capital levels and results of operations and financial condition are materially exposed to the risks associated with our investment securities portfolio, including interest rate-related risks.

We reserve for current expected credit losses with respect to our available-for-sale and held-to-maturity securities. Credit losses in excess of our allowance for credit losses would impact our results of operations.

Under the U.S. capital rules, after-tax changes in the fair value of available-for-sale investment securities are included in CET1 capital. Since held-to-maturity securities are not subject to fair-value accounting, changes in the fair value of these instruments (other than expected credit losses) are not similarly included in the determination of CET1 capital. As a result, we may experience increased variability in our CET1 capital relative to those major financial institutions who maintain a lower proportion of their consolidated total assets in an available-for-sale accounting classification.

Generally, the fair value of available-for-sale securities is determined based on market prices available from third-party sources. During periods of market disruption, it may be difficult to value certain of our investment securities if trading becomes less frequent and/or market data becomes less observable. As a result, valuations may include inputs and assumptions that are less observable or require greater estimation and judgment as well as valuation methods which are more complex. These values may not be ultimately realizable in a market transaction, and such values may change very rapidly as market conditions change and valuation assumptions are modified. Decreases in value may have a material adverse effect on our results of operations and financial condition.

The estimate of expected credit losses is determined in part by management’s assessment of the financial condition and prospects of a particular issuer, projections of future cash flows and recoverability of the particular security. Management’s conclusions on such assessments are highly judgmental and include assumptions and projections of future cash flows which may ultimately prove to be incorrect as assumptions, facts and circumstances change. On the other hand, we are limited in the actions we can take related to our held-to-maturity securities absent a significant deterioration in the issuer’s creditworthiness. Therefore, we may be constrained in our ability to liquidate a held-to-maturity security that is deteriorating in value. If our determinations change about our intention or ability to not sell available-for-sale securities that have experienced a reduction in fair value below their amortized cost, we could be required to recognize a loss in earnings for the entire difference between fair value and amortized cost.

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

We have credit exposure to clients and counterparties in many different industries, particularly financial institutions, as a result of trading, clearing and financing, providing custody services, securities lending services or other relationships. Our direct credit exposure consists of extensions of secured and unsecured credit to clients and use of our balance sheet. In addition to traditional credit activities, we also extend intraday credit in order to facilitate our various processing, settlement and intermediation activities. We could be adversely affected by the actions and commercial soundness of organizations to whom we have lent funds, as defaults or non-performance (or even uncertainty concerning such default or non-performance) by one or more of these institutions, or the markets generally, have led to market-wide liquidity problems and could lead to losses or defaults by us or by other institutions (including our counterparties and/or clients) in the future.

As a result of our membership in several industry clearing or settlement exchanges and central counterparty clearinghouses, we may be required to guarantee obligations and liabilities or provide financial support in the event that other members do not honor their obligations or default. These obligations may be limited to members that dealt with the defaulting member or to the amount (or a multiple of the amount) of our contribution to a clearing or settlement exchange guarantee fund, or, in a few cases, the obligation may be unlimited. Additionally, we are exposed to settlement risks, particularly in our payments and foreign exchange activities. Those activities may lead to extensions of credit and consequent losses in the event of a counterparty breach or an operational error, including the failure to provide credit.

We are exposed to risk of short-term credit extensions to, or overdrafts by, our clients in connection with the process to facilitate settlement of trades and related foreign exchange activities, particularly when contractual settlement has been agreed with our clients. The occurrence of overdrafts at peak volatility could create significant credit exposure to our clients depending upon the value of such clients’ collateral pledged to us at the time. This risk may be heightened during periods of market volatility, during which collateral values may decrease suddenly.

When we provide credit to clients in connection with providing cash management, clearing, custodial and other services, we are exposed to potential loss if the client experiences credit difficulties. Higher market volatility, inflationary pressures, tariffs, recessionary conditions or declines in equity values could negatively affect the creditworthiness of our clients, which, in turn, would increase our credit risk. As a growing number of our clients are active in more than one of our products and services, credit difficulties experienced by a small number of clients, or a loss of their business, could lead to larger losses across multiple lines of business. We are also generally not able to net exposures across affiliated clients or counterparties and may not be able to net exposures to the same legal entity across multiple products.

In addition, we may incur a loss in relation to one entity or product even though our exposure to one of the entity’s affiliates is over-collateralized. Moreover, not all of our client or counterparty credit exposure is secured.

In our agency securities lending program, we act as agent on behalf of our clients, the lenders of securities, in securities lending transactions with our clients’ counterparties (including broker-dealers), acting as borrowers, wherein securities are lent by our clients and the securities loans are collateralized by cash or securities posted by such counterparties. Typically, in the case of cash collateral, our clients authorize us as their agent to invest the cash collateral in approved investments pursuant to each client’s investment guidelines and instructions. Such approved investments may include reverse repurchase transactions with repo counterparties. In many cases, in the securities loans we enter into on behalf of our clients, we agree to replace the client’s loaned securities that the borrower fails to return due to certain defaults by the borrower, mainly the borrower’s insolvency.

Therefore, in situations where the market value of the loaned securities that the borrower fails to return to a client (which loaned securities we are obligated to replace and return to the client) exceeds the amount of proceeds resulting from the liquidation of the client’s approved investments and cash and non-cash collateral of such client, we may be responsible for the shortfall amount necessary to purchase any replacement securities. In addition, in certain cases, we may also assume the risk of loss related to approved investments that are reverse repurchase transactions as described above. In these two scenarios, we, rather than our clients, are exposed to the risks of the defaulting counterparty in the securities lending transactions and, where applicable, in the reverse repurchase transactions.

For further discussion on our securities lending indemnifications, see “Commitments and contingent liabilities – Off-balance sheet arrangements” in Note 21 of the Notes to Consolidated Financial Statements.

From time to time, we assume concentrated credit risk at the individual obligor, counterparty or group level, potentially exposing us to a single market or political event or a correlated set of events. For example, we may be exposed to defaults by companies located in countries with deteriorating economic conditions or by companies in certain industries. Our commercial real estate portfolio also exposes us to concentrated credit risk, including to the New York metro market. Such concentrations may be material. Our counterparty exposures change daily, and the counterparties or groups of related counterparties to which our risk exposure is material also vary during any reported period; however, our largest exposures tend to be to other financial institutions, clearing organizations and governmental entities, both inside and outside the U.S.

Concentration of counterparty exposure presents significant risks to us and to our clients because the failure or perceived weakness of our counterparties (or in some cases of our clients’ counterparties) has the potential to expose us to risk of financial loss. Changes in market perception of the financial strength of particular financial institutions or sovereign issuers can occur rapidly, are often based on a variety of factors and are difficult to predict.

Although our overall business is subject to these interdependencies, several of our businesses are particularly sensitive to them, including our currency and other trading activities, our securities lending and securities finance businesses and our investment management business. If we experience any of the losses described above, it may materially and adversely affect our results of operations.

We are also subject to the risk that our contractual rights against third parties may not be enforceable in all circumstances. In addition, deterioration in the credit quality of third parties whose securities or obligations we hold, including a deterioration in the value of collateral posted by third parties to secure their obligations to us under derivatives contracts and other agreements, could result in losses and/or adversely affect our ability to rehypothecate or otherwise use those securities or obligations for liquidity purposes. Disputes with clients and counterparties as to the valuation of collateral can significantly increase in times of market stress and illiquidity. In addition, disruptions in the liquidity or transparency of the financial markets may result in our inability to sell, syndicate or realize the value of our positions, thereby leading to increased concentrations.

An inability to reduce our positions may not only increase the market and credit risks associated with such positions but may also increase the level of RWA on our balance sheet, thereby increasing our capital requirements and funding costs, all of which could adversely affect the operations and profitability of our businesses.

Under U.S. regulatory restrictions on credit exposure, which include a broadening of the measure of credit exposure, we are required to limit our exposures to specific obligors or groups, including financial institutions. These regulatory credit exposure restrictions may adversely affect our businesses and may require us to modify our operating models or the policies and practices we use.

Further, we maintain sub-custodian relationships in certain jurisdictions, including emerging and other underdeveloped markets. Our use of sub-custodians exposes us to operational, reputational and regulatory risk, as we are dependent upon such sub-custodians to perform certain services to clients in those markets. The risks of maintaining custody services in such markets are amplified due to evolving regulatory and sanctions requirements, which may increase our financial exposures, in the event those sub-custodians, or we, are unable to return, transfer or reinvest clients’ assets. Under certain regulatory regimes, we may be held responsible for resulting losses suffered by our clients, and we may agree to similar or more stringent standards with clients that are not subject to such regulations.

Where we have client deposit liabilities related to non-U.S. currencies in jurisdictions where we maintain sub-custodian relationships, we generally maintain a corresponding amount of cash on deposit with the relevant sub-custodian or clearing agency, which increases our credit exposure to that entity and can accumulate over time based upon distributions on, or other activities related to, our clients’ assets. If the sub-custodian or clearing agency were to become insolvent in circumstances not involving expropriation of assets or other circumstances that may excuse performance under relevant client agreements, the risk of loss on such cash on deposit could be ours rather than the clients’.

When we loan money, commit to loan money or provide credit or enter into another contract with a counterparty, we incur credit risk, or the risk of loss if our borrowers do not repay their loans or our counterparties fail to perform according to the terms of their agreements. Our profitability is adversely affected when our borrowers default, in whole or in part, on their loan obligations to us or when there is a significant deterioration in the credit quality of our loan portfolio. We reserve for potential future credit losses by recording a provision for credit losses through earnings. The allowance for loan losses and allowance for lending-related commitments represents management’s estimate of current expected credit losses over the lifetime of the related credit exposure taking into account relevant information about past events, current conditions and reasonable and supportable forecasts of future economic conditions that affect the collectability of our loans and lending commitments.

We use a quantitative methodology and qualitative framework for determining the allowance for loan losses and the allowance for lending-related commitments. Within this qualitative framework, management applies judgment when assessing internal risk factors and environmental factors to compute an additional allowance for each component of the loan portfolio. As is the case with any such judgments, we could fail to identify these factors or accurately estimate their impact. We cannot provide any assurance as to whether charge-offs related to our credit exposure may occur in the future. Current and future market and economic developments may increase default and delinquency rates and negatively impact the quality of our credit portfolio, which may impact our charge-offs.

Although our estimates contemplate current conditions and how we expect them to change over the life of the portfolio, it is reasonably possible that actual conditions could be worse than anticipated in those estimates, which could materially adversely affect our results of operations and financial condition. See “Results of Operations – Critical accounting estimates.”

Our operating model and overall strategy rely heavily on our access to financial market utilities and global capital markets. Without such access, it would be difficult to process payments and settle and clear transactions on behalf of our clients. Deterioration in our liquidity position, whether actual or perceived, can impact our market access by affecting participants’ willingness to transact with us. Changes to our liquidity can be caused by various factors, such as funding mismatches, a failure in our asset/liability management, market constraints disabling asset to cash conversion, inability to issue debt on terms acceptable to us, run-offs of core deposits and contingent liquidity events such as additional collateral posting. Changes in economic conditions or exposure to credit, market, reputational, operational and legal risks can also affect our liquidity.

Our business is dependent in part on our ability to meet our cash and collateral obligations at a reasonable cost for both expected and unexpected cash flows. We also must manage liquidity risks on an intraday basis, in a manner designed to ensure that we can access required funds during the business day to make payments or settle immediate obligations, often in real time. We receive client deposits through a variety of investment management and investment servicing businesses and we rely on those deposits as a low-cost and stable source of funding. Our ability to continue to receive those deposits, and other short-term funding sources, is subject to variability based on a number of factors, including volume and volatility in the global securities markets, the relative interest rates that we are prepared to pay for those deposits and the perception of the safety of those deposits or other short-term obligations relative to alternative short-term investments available to our clients.

We could lose deposits if we suffer a significant decline in the level of our business activity, our credit ratings are materially downgraded, interest rates rise or remain at elevated levels, or if we or our peers become subject to significant negative press or significant regulatory action or litigation, among other reasons. Our liquidity could also be adversely affected by clients’ withdrawal of deposits in response to volatility and disruptions in the financial markets or a stress event. Such stress events may impact certain industries in which our depositors may be concentrated or correlated and may consequently disproportionally affect our liquidity. Further, deposit outflows could increase if our clients with uninsured or nonoperational deposits look for alternative placements for their funds amidst market and financial industry volatility.

A perceived loss of confidence in BNY as a depository institution may be additionally exacerbated by the speed and pervasiveness with which information, which may be inaccurate or incomplete, is disseminated through social media or other internet forums. If we were to lose a significant amount of deposits, we may need to replace such funding with more expensive funding and/or reduce assets, which would reduce our net interest income.

The degree of client demand for short-term credit tends to increase during periods of market turbulence, which, for example, may result in us extending intraday credit to our fund clients to facilitate their ability to pay increased redemptions. In addition, during periods of market turbulence, draws under committed revolving credit facilities that we provide to our institutional clients have increased, and may in the future increase, substantially. Such client demand may negatively impact our leverage-based capital ratios, and in times of sustained market volatility, may result in significant leverage-based ratio declines.

In addition, our access to the debt and equity capital markets and credit markets is a significant source of liquidity. Events or circumstances often outside of our control could limit our access to capital markets and credit markets, increase our cost of borrowing, adversely affect our liquidity or impair our ability to execute our business plan. The factors include, among others: market disruptions; lack of liquidity in the markets; changes in government fiscal and monetary policies; uncertainty related to U.S. sovereign funding (including sustained fiscal deficits, debt ceiling constraints or downgrades of U.S. government credit ratings); a sustained decline in demand for U.S. Treasuries; and loss of confidence by securities purchasers or counterparties in us or in the funds markets.

In addition, clearing organizations, regulators, clients and financial institutions with which we interact may exercise the right to require additional collateral based on market perceptions or market conditions, which could further impair our access to and cost of funding. Market perception of sovereign default risks can also lead to inefficient money markets and capital markets, which could further impact our funding availability and cost. Conversely, excess liquidity inflows could increase our interest expense, limit our financial flexibility and increase our total assets in a manner that could negatively impact our capital ratios.

Under the U.S. capital rules, the size of the capital surcharge that applies to a U.S. G-SIB is based in part on its reliance on short-term wholesale funding, including certain types of deposit funding, which may increase the cost of such funding. Furthermore, certain non-U.S. authorities require large banks to incorporate a separate subsidiary in countries in which they operate and to maintain independent capital and liquidity at foreign subsidiaries. These requirements could hinder our ability to efficiently manage our funding and liquidity in a centralized manner, requiring us to hold more capital and liquidity overall.

In addition, our cost of funding could be affected by actions that we may take in order to satisfy applicable LCR and NSFR requirements, to lower our G-SIB score, to satisfy the amount of eligible long-term debt outstanding under the TLAC rule, to address obligations under our resolution plan or to satisfy regulatory requirements in non-U.S. jurisdictions relating to the pre-positioning of liquidity in certain subsidiaries. Further, the regulatory or stress test liquidity value associated with the securities we hold subject to a held-to-maturity accounting designation could be reduced in the future through regulatory or supervisory action, exposing us to relatively greater capital ratio volatility attributable to interest rate movements to the extent we designate a relatively larger percentage of our securities portfolio as available-for-sale going forward in response to such regulatory or supervisory changes.

If we are unable to raise funds using the methods described above, we would likely need to finance, reduce or liquidate unencumbered assets, such as our central bank deposits and bank placements, or securities in our investment portfolio to meet funding needs. We may be unable to sell some of our assets, or we may have to sell assets at a discount from market value, either of which could adversely affect our business, financial condition and results of operations. Further, our ability to sell assets may be impaired if other market participants are seeking to sell similar assets at the same time, which could occur in a liquidity or other market crisis.

Additionally, if we experience cash flow mismatches, deposit run-off or market constraints resulting from our inability to convert assets to cash or access capital markets, our liquidity could be severely impacted.

If we are unable to continue to fund our assets through deposits or access capital markets on favorable terms or if we suffer an increase in our borrowing costs or otherwise fail to manage our liquidity effectively, our liquidity, net interest margin, financial results and condition may be materially adversely affected. In certain cases, this could require us to raise additional capital through the issuance of preferred or common stock, which could dilute the ownership of existing stockholders, and/or reduce common stock repurchases or our common stock dividend to preserve capital. For a further discussion of our liquidity, see “Results of Operations – Liquidity and dividends.”

Under U.S. and international regulatory capital adequacy rules and other regulatory requirements, we and our subsidiary banks must meet or exceed thresholds that include quantitative measures of assets, liabilities and certain off-balance sheet items, subject to qualitative judgments by regulators about components, risk weightings and other factors. As discussed in “Supervision and Regulation,” BNY is registered with the Federal Reserve as a BHC and an FHC. An FHC’s ability to maintain its status as an FHC is dependent upon a number of factors, including its U.S. bank subsidiaries qualifying on an ongoing basis as “well capitalized” and “well managed” under the banking agencies’ prompt corrective action regulations as well as applicable Federal Reserve regulations.

Failure by an FHC or one of its U.S. bank subsidiaries to qualify as “well capitalized” and “well managed,” if unremedied over a period, would cause it to lose its status as an FHC and could affect the confidence of clients in it, compromising its competitive position. Additionally, an FHC that does not continue to meet all the requirements for FHC status could lose the ability to undertake new activities or make acquisitions that are not generally permissible without FHC status or to continue such activities.

The failure by one of our U.S. bank subsidiaries to maintain its status as “well capitalized” could lead to, among other things, higher FDIC assessments and could have reputational and associated business consequences.

If we or our subsidiary banks fail to meet U.S. and international minimum capital rules and other regulatory requirements, we may not be able to deploy capital in the operation of our business or distribute capital to stockholders.

Failure to meet any current or future capital or liquidity requirements, including those imposed by the U.S. capital rules, the LCR or the NSFR, or by regulators in implementing other portions of the Basel III framework, could materially adversely affect our financial condition. Compliance with U.S. and international regulatory capital and liquidity requirements may impact our ability to return capital to shareholders and may impact our operations by requiring us to liquidate assets, increase borrowings, issue additional equity or other securities, or cease or alter certain operations, which may adversely affect our results of operations.

Finally, our regulatory capital ratios, liquidity metrics and related components are based on our current interpretation, expectations and understanding of the applicable rules and are subject to, among other things, ongoing regulatory review, regulatory approval of certain statistical models, additional refinements, modifications or enhancements (whether required or otherwise) to our models and further implementation guidance. Any modifications resulting from these ongoing reviews, the adoption of new or heightened prudential regulatory requirements, or the continued implementation of the U.S. capital rules (such as the implementation of Basel III reforms), the LCR, the NSFR, the resolution planning process and related amendments, could result in changes in our RWAs, capital components, liquidity inflows and outflows, HQLA, or other elements involved in the calculation of these measures, which could impact regulatory capital and liquidity ratios.

Further, because operational risk is currently measured based not only upon our historical operational loss experience but also upon ongoing events in the banking industry generally, our level of operational RWAs could significantly increase or otherwise remain elevated and may potentially be subject to significant volatility, negatively impacting our capital ratios. The uncertainty caused by these factors could ultimately impact our ability to meet our goals, supervisory requirements and regulatory standards.

The Parent is a non-operating holding company, whose principal assets and sources of income are its principal U.S. bank subsidiaries—The Bank of New York Mellon and BNY Mellon, N.A.—and its other subsidiaries, including Pershing and the IHC. The Parent is a legal entity separate and distinct from its banks, the IHC and other subsidiaries. Therefore, the Parent primarily relies on dividends, interest, distributions and other payments from its subsidiaries, including extensions of credit from the IHC, to meet its payment obligations, including with respect to its securities, and to provide funds for share repurchases, the payment of income taxes and payment of common and preferred dividends to its stockholders, to the extent declared by the Board of Directors.

There are various limitations on the extent to which our banks and other subsidiaries can finance or otherwise supply funds to the Parent (by dividend or otherwise) and certain of our affiliates. Each of these restrictions can reduce the amount of funds available to meet the Parent’s obligations. Many of our subsidiaries, including our bank subsidiaries, are subject to laws and regulations that restrict dividend payments or authorize regulatory bodies to block or reduce the flow of funds from those subsidiaries to the Parent or other subsidiaries. In addition, our bank subsidiaries would not be permitted to distribute a dividend if doing so would constitute an unsafe and unsound practice or if the payment would reduce their capital to an inadequate level.

Our subsidiaries may also choose to restrict dividend payments to the Parent in order to increase their own capital or liquidity levels. Our bank subsidiaries are also subject to restrictions on their ability to lend to or transact with non-bank affiliates, minimum regulatory capital and liquidity requirements, and restrictions on their ability to use funds deposited with them in bank or brokerage accounts to fund their businesses. See “Supervision and Regulation” and “Results of Operations – Liquidity and dividends,” as well as Note 18 of the Notes to Consolidated Financial Statements. Further, we evaluate and manage liquidity on a legal entity basis, which may place legal and other limitations on our ability to utilize liquidity from one legal entity to satisfy the liquidity requirements of another, including the Parent.

There are also limitations specific to the IHC’s ability to make distributions or extend credit to the Parent. The IHC is not permitted to make distributions to the Parent if certain key capital and liquidity indicators are breached, and if the resolution of the Parent is imminent, the committed lines of credit provided by the IHC to the Parent will automatically terminate, with all outstanding amounts becoming due.

Because the Parent is a holding company, its rights and the rights of its creditors, including the holders of its securities, to a share of the assets of any subsidiary upon the liquidation or recapitalization of the subsidiary, will be subject to the prior claims of the subsidiary’s creditors (including, in the case of our banking subsidiaries, their depositors) except to the extent that the Parent may itself be a creditor with recognized claims against the subsidiary. The rights of holders of securities issued by the Parent to benefit from those distributions will also be junior to those prior claims. Consequently, securities issued by the Parent will be effectively subordinated to all existing and future liabilities of our subsidiaries.

Holders of our common and preferred stock are only entitled to receive such dividends or other distributions of capital as our Board of Directors may declare out of funds legally available for such payments. Although we have historically declared cash dividends on our common and preferred stock, we are not required to do so. In addition to the Board of Directors’ approval, our ability to take certain actions, including our ability to declare dividends or repurchase our common stock, may be subject to the buffers under the Federal Reserve’s capital and TLAC rules, including the firm-specific SCB. The buffers and our ongoing capital requirements under the capital rules are affected by the results of CCAR and any required changes to or resubmissions of our capital plan.

The Federal Reserve is also able, outside the CCAR process, to restrict our ability to make capital distributions and subject us to other supervisory or enforcement actions. A Federal Reserve determination that our capital planning processes were weak or otherwise fail to meet supervisory expectations could have a variety of adverse consequences, including, without limitation, ratings downgrades, ongoing heightened supervisory scrutiny, expenses associated with remediation activities and potentially an enforcement action. In addition, regulatory capital rules, which are subject to change, may limit or otherwise restrict how we utilize our capital, including common stock dividends and stock repurchases, and may require us to increase or alter the mix of our outstanding regulatory capital instruments.

Changes in the composition of our balance sheet, including as a result of changing economic conditions and market values, may further require us to increase or alter the mix of our outstanding regulatory capital, which in turn could impact our ability to return capital to shareholders. Any requirement to increase our regulatory capital ratios or alter the composition of our capital could require us to liquidate assets or otherwise change our business and/or investment plans, which may negatively affect our financial results.

A failure or inability to increase dividends along with our competitors, or any reduction of, or elimination of, our common stock dividend would likely adversely affect the market price of our common stock, our return on equity and market perceptions of BNY.

Our ability to declare or pay dividends on, or purchase, redeem or otherwise acquire, shares of our common stock will be prohibited, subject to certain exceptions, in the event that we do not declare and pay in full dividends as required on our outstanding preferred stock.

Our debt and preferred stock and the debt and deposits of our principal bank subsidiaries, The Bank of New York Mellon, BNY Mellon, N.A. and The Bank of New York Mellon SA/NV, are currently rated investment grade by the major rating agencies. These rating agencies regularly evaluate us and our rated subsidiaries. Their credit ratings are based on several factors, including our financial strength, performance, prospects and operations, as well as factors not entirely within our control, including conditions affecting the financial services industry generally and the U.S. government. Rating agencies employ different models and formulas to assess the financial strength of a rated company, and from time to time rating agencies have, in their discretion, altered these models.

Changes to rating agency models, general economic conditions, regulatory developments or other circumstances outside our control could negatively impact a rating agency’s judgment of the rating or outlook it assigns to us or our rated subsidiaries. As a result, we or our rated subsidiaries may not be able to maintain our respective credit ratings or outlook on our securities. For further discussion of our and our principal bank subsidiaries’ credit ratings, see “Results of Operations – Liquidity and dividends.”

A material reduction in our credit ratings or the credit ratings of our rated subsidiaries, which can occur at any time without notice, could have a material adverse effect on our access to credit markets, the related cost of funding and borrowing, our credit spreads, our liquidity and certain trading revenues, particularly in those businesses where counterparty creditworthiness is critical. In addition, in connection with certain over-the-counter derivatives contracts and other trading agreements, counterparties may require us or our rated subsidiaries to provide additional collateral or to terminate these contracts and agreements and collateral financing arrangements in the event of a credit ratings downgrade below certain ratings levels, which could impair our liquidity.

A downgrade by one rating agency, depending on the agency’s relative ratings of the entity at the time of the downgrade, may have an impact comparable to the impact of a downgrade by all rating agencies. In addition, if a rating agency downgrade or a review for downgrade were to occur during broader market instability, our options for responding to events may be more limited and more expensive, possibly significantly. A material reduction in our credit ratings also could decrease the number of investors and counterparties willing or permitted to do business with or lend to us and adversely affect the value of the securities we have issued or may issue in the future.

We cannot predict what actions rating agencies may take, or what actions we may elect or be required to take in response thereto, which may adversely affect us. For further discussion on the impact of a credit rating downgrade, see “Disclosure of contingent features in OTC derivative instruments” in Note 22 of the Notes to Consolidated Financial Statements.

In connection with our single point of entry resolution strategy under Title I of the Dodd-Frank Act, the Parent has entered into a binding support agreement with certain key subsidiaries to facilitate the provision of capital and liquidity resources to them in the event of material financial distress or failure. The support agreement requires the Parent to transfer cash and other liquid financial assets to the IHC on an ongoing basis, subject to certain amounts retained by the Parent to meet its near-term cash needs, in exchange for unsecured subordinated funding notes issued by the IHC as well as a committed line of credit to the Parent to service its near-term obligations. The Parent’s and the IHC’s obligations under the support agreement are secured.

If our projected liquidity resources deteriorate so severely that resolution of the Parent becomes imminent, the committed line of credit the IHC provided to the Parent will automatically terminate, with all amounts outstanding becoming due and payable, and the support agreement will require the Parent to transfer most of its remaining assets (other than stock in subsidiaries and a cash reserve to fund bankruptcy expenses) to the IHC. As a result, during a period of severe financial stress, the Parent could become unable to meet its debt and payment obligations (including with respect to its securities), causing the Parent to seek protection under bankruptcy laws earlier than it otherwise would have.

If the Parent were to become subject to a bankruptcy proceeding and our single point of entry strategy is successful, our material entities will not be subject to insolvency proceedings and their creditors would not be expected to suffer losses, while the Parent’s security holders, including unsecured debt holders, could face significant losses, potentially including the loss of their entire investment. The single point of entry strategy, in which the Parent would be the only legal entity to enter resolution proceedings, may result in greater risk of loss to holders of the Parent’s unsecured senior debt securities and certain other securities than would be the case under a different resolution strategy.

In addition, Title II of the Dodd-Frank Act established an orderly liquidation process in the event of the failure of a large systemically important financial institution, such as BNY, in order to avoid or mitigate serious adverse effects on the U.S. financial system. Specifically, if the Parent is in default or danger of default and certain specified conditions are met, the FDIC may be appointed receiver under the orderly liquidation authority, and we would be resolved under that authority instead of the U.S. Bankruptcy Code.

U.S. supervisors have indicated that a single point of entry strategy may be a desirable strategy to resolve a large financial institution such as BNY under Title II in a manner that would, similar to our preferred strategy under our Title I resolution plan, impose losses on shareholders, unsecured debt holders and other unsecured creditors of the Parent, while permitting the holding company’s subsidiaries to continue to operate and remain solvent. Under such a strategy, assuming the Parent entered resolution proceedings and its subsidiaries remained solvent, losses at the subsidiary level would be absorbed by the Parent and ultimately borne by the Parent’s security holders (including holders of the Parent’s unsecured debt securities), while third-party creditors of the Parent’s subsidiaries would not be expected to suffer losses. Accordingly, the Parent’s security holders (including holders of unsecured debt securities and other unsecured creditors) could face losses in excess of what otherwise would have been the case.

From time to time, we have launched new lines of business, offered new products and services within existing lines of business or undertaken transformational or strategic projects. There are substantial risks and uncertainties associated with these efforts, including with respect to projects that involve the adoption of new and evolving technologies such as artificial intelligence. For example, we have devoted significant resources to building and integrating artificial intelligence solutions into our daily operations, as well as developing new technology solutions for our clients, including our initiatives related to real-time electronic payments and global collateral management, as well as Wove, our integrative wealth management advisory platform. If these technology solutions do not operate or perform as expected, are not successful, or do not produce the anticipated efficiencies, it could adversely impact our reputation, business and results of operations.

Developing and providing new products and services, including those relating to digital assets, increases our operational risk exposures. These risks are often heightened for projects that rely on third-party service providers, or in connection with new technologies and asset classes, such as digital assets, that are not only new for BNY but also relatively new to the financial markets more broadly. Compared with our activities involving traditional assets, digital asset-related products or services may introduce incremental or unique risks, particularly those associated with cybersecurity exposures and third-party dependencies, as well as reputational, technology, legal and regulatory risks.

Regulatory requirements can affect whether initiatives are able to be brought to market in a manner that is timely and attractive to our customers. Initial timetables for the development and introduction of new lines of business or new products or services and price and profitability targets may not be met. Furthermore, our revenues and costs may fluctuate because new businesses or products and services generally require startup costs while revenues may take time to develop, which may adversely impact our results of operations. The introduction of new accounting or regulatory requirements, or changes in those requirements, can also limit our ability to pursue strategic initiatives or result in significant costs.

Significant effort and resources are necessary to manage and oversee the successful completion of transformational or strategic project initiatives. If management makes choices about these initiatives that prove to be incorrect, are based on incomplete, inaccurate or fraudulent information, fail to accurately assess the competitive landscape and industry trends or are unable to address the expectations of various stakeholders, then the value and growth prospects of our business may be affected. Further, these initiatives often place significant demands on management and a limited number of employees with subject matter expertise and may involve significant costs to implement, as well as increase operational risk as we develop and implement related controls, processes and procedures and employees learn to operate under new systems, controls, processes and procedures. The failure to successfully execute or monitor these transformational or strategic initiatives could adversely impact our business, reputation and results of operations.

In addition, the successful implementation of our products, lines of business and processes is supported by our ability to protect our intellectual property assets. We rely on a variety of measures to protect our intellectual property and proprietary information, including copyrights, trademarks, patents, trade secrets and controls on access and distribution. However, these measures may not prevent misappropriation or infringement of our intellectual property or proprietary information and a resulting loss of competitive advantage. Furthermore, if a third party were to assert a claim of infringement or misappropriation of its proprietary rights, obtained through patents or otherwise, against us, we could be required to spend a significant amount of resources to defend such claims, develop alternative methods of operations, pay substantial money damages, obtain a license from the third party or possibly stop providing one or more products or services.

Legal, reputational and regulatory risks may also exist in connection with dealing with new products, technologies or markets, or clients and customers whose businesses focus on such products, technologies or markets, where there is regulatory uncertainty or different or conflicting regulations depending on the regulator or the jurisdiction. We may invest significant time and resources into the expansion of existing or creation of new compliance and risk management systems with respect to new products, technologies or markets.

From time to time, to achieve our strategic objectives, we have acquired, disposed of or invested in (including through joint venture relationships) companies and businesses and have entered into strategic alliances or other collaborations with third-party service providers to deliver products and services to clients, and may do so in the future. Our ability to pursue or complete strategic transactions is in certain instances subject to regulatory approval and we cannot be certain when or if, or on what terms and conditions, any required regulatory approvals would be granted. Moreover, to the extent we pursue a strategic transaction, there can be no guarantee that the transaction will close when anticipated, or at all.

If a strategic transaction does not close (including due to failure to obtain regulatory approval), or if the strategic transaction fails to deliver anticipated results, it could have an adverse effect on our business, financial condition and results of operations. Anticipated challenges in obtaining any required governmental approvals, or uncertainty as to the prospects for obtaining such approvals, could also prevent us from pursuing a strategic transaction we may otherwise view as attractive. In certain circumstances, governmental authorities could seek to acquire ownership interests in the Company, or influence over its operations, including, for example, in connection with regulatory approvals, which could materially affect our governance, operations and shareholder interests.

Each acquisition poses integration challenges, including successfully retaining and assimilating clients and key employees, capitalizing on certain revenue synergies and integrating the acquired company’s employees, culture, control functions, systems and technology. These risks may be heightened if we are unable to, or fail to, conduct sufficient or appropriate due diligence in connection with a potential acquisition. In some cases, acquisitions involve entry into new businesses or new geographic or other markets, and these situations also present risks and uncertainties in instances where we may be inexperienced in these new areas. We may be required to spend a significant amount of time and resources to integrate these acquisitions. The anticipated integration benefits may take longer to achieve than projected and the time and cost needed to consolidate control functions, platforms and systems may significantly exceed our estimates.

If we fail to successfully integrate strategic acquisitions, including doing so in a timely and cost-effective manner, we may not realize the expected benefits, which could have an adverse impact on our business, financial condition and results of operations. In addition, we may incur expenses, costs, losses, penalties, taxes and other liabilities related to the conduct of the acquired businesses prior to the date of our ownership (including in connection with the defense and/or settlement of legal and regulatory claims, investigations and proceedings) which may not be recoverable through insurance, indemnification or otherwise.

Each disposition also poses challenges, including separating the disposed businesses, products and systems in a way that is cost-effective and is not disruptive to us or our clients. The inherent uncertainty involved in the process of evaluating, negotiating or executing a potential sale of one of our companies or businesses may cause the loss of key clients, employees, vendors and other business partners, which could have an adverse impact on our business, financial condition and results of operations. In addition, a portion of the purchase price we expect to receive in a disposition may be contingent or based on an earnout (e.g., dependent on the profitability or results of operations of the business over a period of time after the sale is completed).

In such cases, we may not realize all, or any, contingent or earnout payments we anticipate receiving if the future performance of the business does not meet our expectations or if other contingent payment conditions are not satisfied.

Joint ventures, noncontrolling investments, strategic alliances and other collaborations contain potentially increased financial, legal, reputational, operational, regulatory and/or compliance risks. We may be dependent on joint venture partners, firms with which we collaborate, controlling shareholders or management who may have business interests, strategies or goals that are inconsistent with ours. Such dependencies, particularly in the case of establishing de novo joint ventures, may delay the launch of a new venture and result in the loss of a market opportunity. Business decisions or other actions or omissions of the joint venture partner, the firms with which we collaborate, controlling shareholders or management may adversely affect the value of our investment (or, in the case of strategic alliances or other collaborations, the value of our products or services), impact our results of operations, result in litigation or regulatory action against us and otherwise damage our reputation and brand.

We are executing on a plan to transition our organization to a platforms operating model. We expect such transition to lead to operating efficiencies, process simplification, cost savings, an increased focus on clients and improvements to the client experience, and infrastructure improvements to technology and other systems, among other benefits. Implementing these changes to our operating model involves various execution challenges, complexities and uncertainties, may be costly and disruptive to our business, may result in litigation, regulatory scrutiny, or other negative financial, strategic or reputational impacts. Projections regarding the benefits of the transition are based on current business operations, market conditions and management expectations, among other factors, and are subject to change.

We may not be able to obtain the anticipated benefits, cost savings and operational improvements within the projected timing or at all. Additionally, we may experience unintended and unforeseen consequences as a result of such transition, including a loss of continuity, increased complexity, issues concerning employee retention, labor disputes, decreased employee morale and loss of institutional knowledge and expertise of departing employees. Such unintended consequences may increase as the final phase of our transition is implemented or if we are unsuccessful in executing organizational change management. If we are unable to successfully implement our transition to a platforms operating model, or fail to successfully operate under the new model, our business, financial condition and results of operations could be adversely affected.

The businesses in which we operate are intensely competitive around the world. Larger and more geographically diverse companies, and financial technology firms that invest substantial resources in developing and designing new technology and that are not subject to the same level of regulation, may be able to offer financial products and services at more competitive prices than we are able to offer. We have also experienced, and anticipate that we will continue to experience, pricing and other competitive pressures in several of our businesses. Pricing pressures, as a result of the willingness of competitors to offer comparable or improved products or services at a lower price, may result in a reduction in the price we can charge for our products and services, which could, and in some cases has negatively affected our ability to maintain or increase our profitability.

In addition, technological advances have made it possible for other types of non-depository institutions, such as financial technology firms, stablecoin issuers, outsourcing companies and data processing companies, to offer a variety of products and services competitive with certain areas of our business, including with respect to our clearing, settlement, payments and trading activities. In the future, financial technology firms may be able to provide traditional banking products and services by obtaining a bank-like charter or offering stablecoins or cryptocurrencies.

Moreover, new or disruptive technologies, such as blockchain and other distributed ledgers, as well as the introduction of new financial products such as stablecoins or advances in artificial intelligence, automation and quantum computing, may quickly impact markets and the manner in which our clients interact and transact within markets. Increased competition in any of these areas may require us to make additional capital investments in our businesses in order to remain competitive. Our failure to either anticipate, or participate in, the transformational change within a given market or adapt these technologies as successfully as our peers could make us less competitive and result in potential negative financial impact.

Furthermore, regulations could impact our ability to conduct certain of our businesses in a cost-effective manner or at all. The more restrictive laws and regulations applicable to the largest U.S. financial services institutions, including the U.S. capital rules, can put us at a competitive disadvantage relative to both our non-U.S. competitors and our U.S. competitors not subject to the same laws and regulations. See “Supervision and Regulation.”

We are subject to reputational, legal, compliance and regulatory risk in the ordinary course of our business. Damage to our reputation could affect the confidence of clients, rating agencies, regulators, employees, stockholders and other stakeholders and could in turn have an adverse impact on our business and results of operations.

Reputational harm may arise from numerous sources such as: events occurring at BNY, other financial institutions or in the financial markets; the perceived failure to comply with legal and regulatory requirements or deliver appropriate standards of service and quality; the failure to appropriately describe our products and services; the way we address sustainability concerns in our business activities or in our relationships with clients; public commentary or scrutiny against us; the purported inappropriate or unlawful actions of our employees or the use of social media by our employees; the consequences of using emerging technologies, such as blockchain technology or generative artificial intelligence; alleged financial reporting irregularities involving ourselves or other large and well-known companies; perceived or actual conflicts of interest; any cybersecurity event impacting us or our customers’ data and our cybersecurity defenses and business continuity and resiliency capabilities; our association with third-party service providers that attract heightened public attention; and the failure of an affiliate, joint venture, vendor or other third party with which we do business or that facilitates our business activities to comply with laws or regulations.

Adverse publicity, speculation or negative information about us, whether or not true, may be published or broadcast by the media or posted on social media, non-mainstream news services or other internet forums. The speed and pervasiveness with which information, misinformation or rumors can be disseminated through such channels, in particular social media, may magnify the risks relating to negative publicity or media scrutiny.

Additionally, governmental scrutiny from regulators, tax authorities, legislative bodies and law enforcement agencies with respect to financial services companies has remained at elevated levels. Press coverage and other public statements, including information posted on social media or other internet forums, that allege some form of wrongdoing (including, in some cases, press coverage and public statements that do not directly involve BNY) often result in some type of investigation or in lawsuits. Certain enforcement authorities have recently required admissions of wrongdoing, and in some cases, criminal pleas, as part of the resolution of matters brought by them against financial institutions. Any such resolution of a matter involving BNY could lead to increased exposure to civil litigation, could adversely affect our reputation and ability to do business in certain products and in certain jurisdictions and could have other negative effects.

In conducting our business and maintaining and supporting our global operations, we are subject to risks of loss from the outbreak of war, escalation or continuation of hostilities, global conflicts, acts of terrorism, extreme weather and other natural disasters, pandemics and other similar unpredictable or catastrophic events that could have a negative impact on our business and operations. We may also be impacted by unfavorable political, economic, legal or other developments, in addition to social or political instability, changes in governmental policies or policies of central banks, sanctions, expropriation, nationalization, confiscation of assets, price, capital and exchange controls, taxes, the imposition of tariffs, counter tariffs or other limitations on international trade and travel, which could disrupt world trade and lead to trade retaliation and other supply chain complications, and changes in laws and regulations.

These risks may be heightened as a result of uncertainties about changing rules, regulations and policies during periods of transition between political administrations following elections. An escalation or continuation of hostilities, the imposition of additional sanctions or other laws prohibiting or limiting operations in certain jurisdictions or an elevated volume and complexity of cyberattacks as a result of geopolitical conflicts or tensions, could lead to unexpected disruptions to our businesses and could adversely affect the global economy and financial markets generally, diminish levels of economic activity and increase volatility in commodity prices, credit and capital markets. The extent and duration of any such military action, and the responses to such action by governments, central banks and the markets, are difficult to predict and may magnify the impact of other risks described in this section.

Our operations, business, clients, supply chain and other stakeholders, as well as the finance sector and the global economy, could be adversely affected by climate-related physical risks. Those risks include the increased frequency or severity of acute weather events, such as hurricanes, floods, heatwaves and wildfires, and shifts in the climate, such as increases in average global temperatures, rising sea levels, persistent changes in precipitation levels, prolonged drought, food and water insecurity, and any resulting population migration. Such changes could have adverse financial, operational and other impacts on us, both directly on our business, operations and employees, and indirectly as a result of impacts to our clients, vendors and other third parties on which we rely or as a result of market volatility.

These risks, and the impact on our business and the business of our clients and counterparties, are often difficult to predict or quantify. Climate-related physical and transitions risks can also lead to a deterioration in our credit risk exposures. Further, the location of our headquarters near the Hudson River waterfront in New York and the location of our other properties may subject us to more frequent or severe weather events, which could lead to declines in the asset values of our properties and the reduced availability or increased cost of insurance.

While we have business continuity and disaster recovery plans in place, catastrophic events could damage our facilities, disrupt or delay for prolonged periods normal business operations (including communications, technology and physical access to our facilities) or result in harm to or cause travel limitations on our employees, with a similar impact on our clients, suppliers and counterparties. Notwithstanding our efforts to maintain business continuity and disaster recovery plans, to the extent a catastrophic event occurs and our business continuity and disaster recovery plans fail or are otherwise impaired, for example, because of an internal or external failure of our information technology infrastructure or increased rates of employee illness or unavailability, our business continuity status would be adversely impacted, our ability to service and interact with our clients may suffer and there would be a disruption to our businesses.

Catastrophic events could also negatively impact the purchase of our products and services if those events result in reduced capital markets activity, lower asset price levels or disruptions in general economic activity or in financial market settlement functions, which could negatively impact our business and results of operations. In addition, such catastrophic events may lead, and in some cases have led, to higher market volatility, reduced availability or increased cost of insurance for our clients, as well as an increase in delinquencies, bankruptcies or defaults that could result in our experiencing higher levels of nonperforming assets, net charge-offs and provisions for credit losses, negatively impacting our business and operations.

Efforts across certain jurisdictions to address climate-related physical and transition risks, slow the loss of biodiverse natural ecosystems and promote other sustainability causes and standards have led and are likely to continue to lead to new legislative and regulatory requirements, heightened expectations among regulators and supervisors, and changes in consumers’ and businesses’ behaviors and business preferences in those jurisdictions. Conversely, there has been increasing sentiment against these types of initiatives in certain jurisdictions, leading to new policies, requirements and public pressure discouraging or prohibiting these initiatives. In particular, financial institutions have come under increased scrutiny in certain jurisdictions regarding the management and disclosure of climate risks, both directly and indirectly.

On the other hand, certain other jurisdictions in which we operate have enacted, or have proposed to enact, statutes that prohibit financial institutions from denying or canceling products or services to a person, or otherwise discriminating against a person in making available products or services, on the basis of social credit scores and certain other factors. This divergence has resulted and may continue to result in our becoming subject to new, differing or heightened legislative or regulatory requirements or supervisory guidance in the various jurisdictions in which we operate that may impact our ability to conduct certain business within those jurisdictions.

Our Investment Management line of business offers a range of solutions and advice for professional and personal investors designed to manage risk-adjusted returns and, where applicable, achieve their sustainable investment goals. Certain lawmakers and public officials have suggested that sustainability-related investing practices may result in violations of antitrust laws and breaches of fiduciary duty. In addition, we may face compliance risks presented by regulations that are intended to address “greenwashing”, including the EU’s SFDR and other regulations that may be promulgated in the future. We have been, and may in the future become, subject to enforcement actions and investigations by regulators and government officials, including state Attorneys General, regarding our sustainability-related investing practices.

Governmental enforcement action could also lead to civil litigation claims by clients, fund shareholders and other third parties asserting violations of law or breaches of fiduciary duties and contractual obligations.

Further, as some regulators seek to mandate additional disclosure of sustainability-related information, our ability to comply with such requirements and to conduct more robust risk-related analyses may be hampered by lack of information and reliable data. Various factors could cause results to differ materially from those expressed in the estimates and beliefs made by third parties and by us, which could also impact our management of risk in this area and adversely affect us.

Views about sustainability are diverse, complex and changing, and our business, reputation and ability to attract and retain clients and employees may be harmed because of our actual or perceived actions or inactions with respect to sustainability matters. For example, clients are increasingly requesting information about our sustainability initiatives as part of their procurement and sourcing processes, and we may suffer reputational harm, lose business opportunities and face challenges in certain markets if our sustainability initiatives are perceived to be ineffective or inappropriate, or if we are unable to achieve our stated objectives and commitments. Moreover, our reputation may be damaged as a result of our association, whether actual or perceived, with, among others, certain industries, companies, individuals or products perceived to be contributing to sustainability issues.

We are exposed to the risk of damage to our reputation and business resulting from potential allegations of discrimination against companies in certain sectors, as well as any decisions we may make to continue to conduct or change our activities. At the same time, certain industries, financial institutions and public sector entities have also been subject to criticism and negative publicity as a result of their decisions to reduce their involvement in certain industries or projects perceived to be contributing to sustainability issues. Further, governmental clients may choose not to use certain providers, such as us, if the legislators or governmental officials in such jurisdictions believe our positions are not consistent with the views of such legislators or officials. The continuously evolving societal, policy and political perspectives on sustainability make the ultimate impact on us difficult to predict, identify and monitor and may be detrimental to us.

In the course of our business, we receive inquiries and challenges from both U.S. and non-U.S. tax authorities on the amount of taxes we owe. If we are not successful in defending these inquiries and challenges, we may be required to adjust the timing or amount of taxable income or deductions, adjust the allocation of income among tax jurisdictions, or pay additional taxes, penalties or interest, any of which can require a greater provision for taxes or otherwise negatively affect earnings. Reserves may prove inadequate because we cannot necessarily accurately predict the outcome of any challenge, settlement or litigation or the extent to which it will negatively affect us or our business.

Future tax laws or the expiration of or changes in existing tax laws or the interpretation of those laws worldwide, including those governing withholding, stamp, service, and other non‑income taxes, could also have a material impact on our business or net income and may reduce certain tax benefits, or require adjustments to amounts previously recorded. Further, recent political developments globally, including at the local level, have added additional uncertainty with respect to new tax laws and regulations. Our actions taken in response to, or reliance upon, such changes in the tax laws may impact our tax position in a manner that may result in lower earnings and could adversely affect our results of operations.

In addition, upon any change in income tax law, we must recognize the effect of the change on our deferred tax assets and liabilities. Increases in the U.S. tax rate would likely result in increases in our net deferred tax liabilities and a reduction in our net income in the period of enactment of the change. In addition, changes in tax rates or tax law could also impact the method and amount of capital that we return to shareholders. See Note 11 of the Notes to Consolidated Financial Statements for further information.

Additionally, the Company makes tax‑advantaged investments designed to generate after-tax returns primarily through federal and state income tax credits and other tax benefits over specified time periods. The Company is subject to the risk that previously recorded tax credits, some of which remain subject to recapture by taxing authorities based on compliance features required to be met at the project level, may not be realized. The inability to realize these tax credits and other tax benefits could negatively impact the Company’s financial results. The risk of non‑realization depends on certain factors outside of the Company’s control, including changes in the applicable tax code, or the interpretation of the tax code, and the performance of the investments.

From time to time, the Financial Accounting Standards Board (“FASB”), the SEC and bank regulators change the financial accounting and reporting standards governing the preparation of our financial statements or the interpretation of those standards. These changes are difficult to predict and can materially impact how we record and report our financial condition, results of operations, cash flows and other financial data. In some cases, the FASB, the SEC and bank regulators may change financial accounting and reporting standards governing the preparation of our financial statements or the interpretation of those standards that may require us to apply a new or revised standard retrospectively, potentially resulting in the restatement of our prior period financial statements and our related disclosures.

Additionally, our accounting policies and methods are fundamental to how we record and report our financial condition and results of operations. The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates based upon assumptions and use judgments and models about future economic and market conditions, which affect reported amounts and related disclosures in our financial statements. Amounts subject to estimates are items such as the allowance for credit losses, goodwill and other intangibles and litigation and regulatory contingencies. Among other effects, such changes in estimates could result in further impairments of goodwill and intangible assets and establishment of allowances for credit losses as well as litigation and regulatory contingencies.

In performing our annual and interim goodwill impairment tests, we may use an income approach to estimate the fair values of each reporting unit. Estimated cash flows used in the income approach are based on management’s projections. Estimated cash flows extend far into the future, and, by their nature, are difficult to estimate over such an extended time frame. Factors that may significantly affect the cash flow estimates include, among others, market values of assets we manage, the level and mix of those assets, customer behaviors and attrition, operating margins, changes in revenue growth trends, certain money market fee waiver practices, cost structures and technology, regulatory and legislative changes, specific industry or market sector conditions, competition and changes in interest rates.

In the future, small changes in the assumptions, such as changes in the cash flow estimates, discount rate or long-term growth rate, or a prolonged macroeconomic downturn may produce a material non-cash goodwill impairment. If actual or subsequent events occur that are materially different than the assumptions, judgments and estimates we used, our results of operations may be materially and negatively impacted.