Counterparty Credit Risk Management Project Status Update

1. Counterparty Credit Risk ManagementProject Status Update April 8, 2013 PPlease consider the impact on the environment before printing this document.

2. Agenda • Executive Summary – Status Update • Systems and Reporting • Customer Relationship Hierarchy / Single Name • Policy & Procedures • Next Steps • Appendix 1 – Reports and Process Flow Chart.

3. I. Executive Summary – Status Update • Systems and Reporting • Received final approval from business stakeholders for reporting requirements. • Finalized a two-pronged approach to addressing reporting needs: • Near Term Solution - Limited number of reports (13) on monthly basis in business Objects environment. Reports to be available in two releases in 2013. • Long Term Solution - Facilitate reporting from ICRS, which provides greater flexibility and daily updates. • Developed a plan for implementation of the Near Term Solution with estimated costs. We will be seeking funding approval very soon. • Plan for Long Term Solution under development with expected completion by May 2013. • Aggregation – relationship structures • Confirmed that the existing guidance to business units for building relationship structures in RCIF is appropriate for meeting the ISG requirements (guidance provided by Customer Information Program (CIP) / Customer Due Diligence Program (CDD) ). • Developed approach for working with business to review and validate relationship hierarchies established in RCIF using “Parent/Subsidiary” links. • Policy and Procedure • Gap Assessment by KPMG completed on 3/28, and final document to be delivered by 4/12/13. • Project team will work with CCRM representatives to develop and implement plan to close the gaps.

4. II. Systems and Reporting • Near Term Solution • Limited to monthly reports only. • Data extraction and report development will be in 2 phases (reports and data flows in Appendix 1] • First set of 8 reports will be ready in first week Oct 2013 • Second set of 5 reports will be ready in mid Nov 2013 • Phase 1 reports will not have data in few columns till Phase 2 is complete , as data extraction is in two stages [ ex. Regulatory capital, CAT III limits, CDS, some collateral related data] • The work effort around validating, remediating or building out relationship structures for all Cat II exposures will have to be completed prior to the release of the reports or will result in inaccurate aggregated data. Plan outlined in the following slides. • Total estimated cost for this work effort is $450,000. We will be seeking funding approval after reviewing this plan with business stakeholders today, so that we can meet the timeline outlined above.

5. II. Systems and Reporting Near Term Solution Please refer to Appendix 1 for list of reports and a more detailed Process Flow chart.

6. II. Systems and Reporting • Long Term Solution • This solution will move required Cat II and Cat III data to the Data Warehouse so it can be accessed in both the Data Warehouse the ICRS environment [and allow CCRM reporting off of ICRS platform]. • This would allow for reporting based on daily data. • Provide greater flexibility for the CCRM user – they can generate and customize their reports. • Reconciliation/Validation requirements for daily data is to be finalized in discussion with Business. • Results in all Wholesale credit reporting being available from one data mart. • The details of the requirements of this solution are still being developed, with expected delivery of an implementation plan by May 2013.

7. III. Relationship Hierarchy • ISG Guidance – key requirement:Exposure aggregation must occur for “affiliated legal entities at the parent entity level”. • Proposed approach • For a group of legal entities identify a “Relationship Head”. • Link individual legal entities to the “Relationship Head” on RCIF. • Base linkage on CIP/CDD guideline for RCIF linking: ownership >25%. • Validation of current relationships • 3 areas of analysis and line review: • Comparison of relationships reported to our parent through the Large Lending Relationship Report (LRR), and the Global Top 50 Financial Counterparties (GT50). Completeness of relationships on RCIF checked against these reports. • Relationships and stand alone entities not on LRR or GT50 reports that need to be validated by the line as correct. • Entities with CAT I or CAT II exposure • that may be: • Duplicate records that should be merged. • Related entities that should be linked. • Next Steps • Prepare relationship review package for senior line managers. (Completion: April 30). • Conduct line outreach and relationship validation. (May through July)

8. III. Relationship Hierarchy: Analysis Examples • Morgan Stanley is the relationship on the Global Top 50 report. • The report has 4 entities in the relationship. • None of the entities is linked on RCIF. • Action is needed to create the links. • Pacific Development Group is the relationship on the Large Lending Relationship Report • The report has 9 entities in the relationship. • All the entities are linked on RCIF. • Line should confirm the relationship is correct.

9. III. Relationship Hierarchy: Duplicate Analysis • Match run against “Customer Name” for all entities with either CAT I or CAT II exposure. • 154 “clusters” found with one or more candidate duplicate records. Different scenarios to review: • Are the records duplicates? If so, the line needs to initiate a merge. • If the records are separate legal entities, are they linked? If not, the line should assess if they need to be linked.

10. IV. Policy and Procedures • Conducted final Policy and Procedure gap review with KPMG on 3/28/13. • KPMG has to complete the following: • Incorporate CVA and Wrong-Way risk gap analysis into deliverable. • Discuss next steps with UB for incorporating review of desktop procedures associated with 7 requirements. • Incorporate final UB comments. • Review of updated gap analysis with UBand delivery of final product by April 12, 2013. • Project Team • Upon receipt of the final project Deliverable from KPMG, project team will schedule a meeting with the larger stakeholder group to review the final results of the project and plans to address gaps. • Project team will work with CCRM team to define and implement a plan to address the closure of the identified gaps as deemed appropriateby the business. This plan will be completed by May 2013.

11. VI. Next Steps • Kick-off the Interim Reporting project and begin Design Phase in May. • Develop work plan to address KPMG P&P recommendations by end of May. • Schedule update meeting with larger stakeholder working group to provide an update. • Begin work effort around validation/remediation/building of relationship structures for all Cat II exposures.

12. Appendix 1 – Reports by Phase

13. Appendix 1[cont’d] – proposed data flow