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Regulatory and Capital Adequacy
 12 Months Ended
Dec. 31, 2020
Mortgage Banking [Abstract]  
Regulatory and Capital Adequacy
NOTE 11—REGULATORY AND CAPITAL ADEQUACY
Regulation and Capital Adequacy
Bank holding companies (“BHCs”) and national banks are subject to capital adequacy standards adopted by the Federal Reserve, Office of the Comptroller of the Currency (“OCC”) and Federal Deposit Insurance Corporation (collectively, the “Federal Banking Agencies”), including rules of the Federal Reserve and the OCC “Basel III Capital Rules” to implement certain capital liquidity requirements published by the Basel Committee on Banking Supervision, along with certain Dodd-Frank Act and other provisions. Moreover, the Banks, as insured depository institutions, are subject to prompt corrective action (“PCA”) capital regulations, which require the Federal Banking Agencies to take prompt corrective action for banks that do not meet PCA capital requirements.
In July 2019, the Federal Banking Agencies finalized certain changes to the Basel III Capital Rules for institutions not subject to the Basel III Advanced Approaches (“Capital Simplification Rule”). These changes, effective January 1, 2020, generally raised the threshold above which a covered institution such as the Company must deduct certain assets from its common equity Tier 1 capital, including certain deferred tax assets, mortgage servicing assets, and investments in unconsolidated financial institutions.
In October 2019, the Federal Banking Agencies amended the Basel III Capital Rules to provide for tailored application of certain capital requirements across different categories of banking institutions (“Tailoring Rules”). As a BHC with total consolidated assets of at least $250 billion that does not exceed any of the applicable risk-based thresholds, we are a Category III institution under the Tailoring Rules. As such, we are no longer subject to the Basel III Advanced Approaches and certain associated capital requirements and have the option of excluding certain elements of AOCI from our regulatory capital. Effective in the first quarter of 2020, we excluded certain elements of AOCI from our regulatory capital as permitted by the Tailoring Rules. The Tailoring Rules and Capital Simplification Rule have, taken together, decreased our capital requirements.
As part of their response to the COVID-19 pandemic, the Federal Banking Agencies adopted the 2020 CECL Transition Rule which provides banking institutions an optional five-year transition period to phase in the impact of the CECL standard on their regulatory capital.
Pursuant to the 2020 CECL Transition Rule, a banking institution may elect to delay the estimated impact of adopting CECL on its regulatory capital through December 31, 2021 and then phase in the estimated cumulative impact from January 1, 2022 through December 31, 2024. For the “day 2” ongoing impact of CECL during the initial two years, the Federal Banking Agencies use a uniform “scaling factor” of 25% as an approximation of the increase in the allowance under the CECL standard compared to the prior incurred loss methodology. Accordingly, from January 1, 2020 through December 31, 2021, electing banking institutions are permitted to add back to their regulatory capital an amount equal to the sum of the after-tax “day 1” CECL adoption impact and 25% of the increase in the allowance since the adoption of the CECL standard. Beginning January 1, 2022 through December 31, 2024, the after-tax “day 1” CECL adoption impact and the cumulative “day 2” ongoing impact will be phased in to regulatory capital at 25% per year. The following table summarizes the capital impact delay and phase in period on our regulatory capital from years 2020 to 2025.
Capital Impact Delayed
Phase In Period
202020212022202320242025
“Day 1” CECL adoption impactCapital impact delayed to 202225% Phased In50% Phased In75% Phased InFully Phased In
Cumulative “day 2” ongoing impact25% scaling factor as an approximation of the increase in allowance under CECL
We adopted the CECL standard (for accounting purposes) as of January 1, 2020, and made the 2020 CECL Transition Election (for regulatory capital purposes) in the first quarter of 2020. Therefore, the applicable amounts presented in this Report reflect such election.
Under the Basel III Capital Rules, our regulatory minimum risk-based and leverage capital requirements include a common equity Tier 1 capital ratio of at least 4.5%, a Tier 1 capital ratio of at least 6.0%, a total capital ratio of at least 8.0%, a Tier 1 leverage capital ratio of at least 4.0% and a supplementary leverage ratio of at least 3.0%.
For additional information about the capital adequacy guidelines we are subject to, see “Part I —Item 1. Business—Supervision and Regulation.”
The following table provides a comparison of our regulatory capital amounts and ratios under the Basel III Standardized Approach subject to the applicable transition provisions, the regulatory minimum capital adequacy ratios and the PCA well-capitalized level for each ratio, where applicable, as of December 31, 2020 and 2019.
Table 11.1: Capital Ratios Under Basel III(1)
 December 31, 2020December 31, 2019
(Dollars in millions)Capital AmountCapital
Ratio		Minimum
Capital
Adequacy		Well-
Capitalized		Capital AmountCapital
Ratio		Minimum
Capital
Adequacy		Well-
Capitalized
Capital One Financial Corp:
Common equity Tier 1 capital(2)
$40,736 13.7 %4.5 %N/A$38,162 12.2 %4.5 %N/A
Tier 1 capital(3)
45,583 15.3 6.0 6.0 %43,015 13.7 6.0 6.0 %
Total capital(4)
52,788 17.7 8.0 10.0 50,348 16.1 8.0 10.0 
Tier 1 leverage(5)
45,583 11.2 4.0 N/A43,015 11.7 4.0 N/A
Supplementary leverage(6)
45,583 10.7 3.0 N/A43,015 9.9 3.0 N/A
COBNA:
Common equity Tier 1 capital(2)
19,924 21.5 4.5 6.5 17,883 16.1 4.5 6.5 
Tier 1 capital(3)
19,924 21.5 6.0 8.0 17,883 16.1 6.0 8.0 
Total capital(4)
21,708 23.4 8.0 10.0 20,109 18.1 8.0 10.0 
Tier 1 leverage(5)
19,924 18.3 4.0 5.0 17,883 14.8 4.0 5.0 
Supplementary leverage(6)
19,924 14.7 3.0 N/A17,883 12.1 3.0 N/A
CONA:
Common equity Tier 1 capital(2)
26,671 12.4 4.5 6.5 28,445 13.4 4.5 6.5 
Tier 1 capital(3)
26,671 12.4 6.0 8.0 28,445 13.4 6.0 8.0 
Total capital(4)
29,369 13.7 8.0 10.0 30,852 14.5 8.0 10.0 
Tier 1 leverage(5)
26,671 7.6 4.0 5.0 28,445 9.2 4.0 5.0 
Supplementary leverage(6)
26,671 6.9 3.0 N/A28,445 8.2 3.0 N/A
__________
(1)Capital requirements that are not applicable are denoted by “N/A.”
(2)Common equity Tier 1 capital ratio is a regulatory capital measure calculated based on common equity Tier 1 capital divided by risk-weighted assets.
(3)Tier 1 capital ratio is a regulatory capital measure calculated based on Tier 1 capital divided by risk-weighted assets.
(4)Total capital ratio is a regulatory capital measure calculated based on total capital divided by risk-weighted assets.
(5)Tier 1 leverage ratio is a regulatory capital measure calculated based on Tier 1 capital divided by adjusted average assets.
(6)Supplementary leverage ratio is a regulatory capital measure calculated based on Tier 1 capital divided by total leverage exposure.
We exceeded the minimum capital requirements and each of the Banks exceeded the minimum regulatory requirements and were well-capitalized under PCA requirements as of both December 31, 2020 and 2019.
Regulatory restrictions exist that limit the ability of the Banks to transfer funds to our BHC. As of December 31, 2020, funds available for dividend payments from COBNA and CONA were $4.0 billion and $1.8 billion, respectively. Applicable provisions that may be contained in our borrowing agreements or the borrowing agreements of our subsidiaries may limit our subsidiaries’ ability to pay dividends to us or our ability to pay dividends to our stockholders.
The reserve requirement the Federal Reserve requires depository institutions to maintain against specified deposit liabilities was $1.7 billion for us as of December 31, 2019, before being reduced to zero for all depository institutions in March 2020.